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ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN ANDLORENZO SANCHEZ, petitioners,

vs.PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR),

respondent.

PARAS, J.:p

A TV ad proudly announces:

"The new PAGCOR — responding through responsible gaming."

But the petitioners think otherwise, that is why, they filed the instant petition

seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR)Charter — PD 1869, because it is allegedly contrary to morals, public policy and

order, and because —

A. It constitutes a waiver of a right prejudicial to a third person with a

right recognized by law. It waived the Manila City government's right to impose

taxes and license fees, which is recognized by law;

B. For the same reason stated in the immediately preceding paragraph,

the law has intruded into the local government's right to impose local taxes and

icense fees. This, in contravention of the constitutionally enshrined principle of

ocal autonomy;

C. It violates the equal protection clause of the constitution in that it

egalizes PAGCOR — conducted gambling, while most other forms of gambling

are outlawed, together with prostitution, drug trafficking and other vices;

D. It violates the avowed trend of the Cory government away from

monopolistic and crony economy, and toward free enterprise and privatization.

(p. 2, Amended Petition; p. 7, Rollo)

n their Second Amended Petition, petitioners also claim that PD 1869 is contrary

to the declared national policy of the "new restored democracy" and the people's

will as expressed in the 1987 Constitution. The decree is said to have a "gambling

objective" and therefore is contrary to Sections 11, 12 and 13 of Article II, Sec. 1

of Article VIII and Section 3 (2) of Article XIV, of the present Constitution (p. 3,

Second Amended Petition; p. 21, Rollo).

The procedural issue is whether petitioners, as taxpayers and practicing lawyers

(petitioner Basco being also the Chairman of the Committee on Laws of the City

Council of Manila), can question and seek the annulment of PD 1869 on the

alleged grounds mentioned above.

The Philippine Amusements and Gaming Corporation (PAGCOR) was created by

virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under

P.D. 1067-B also dated January 1, 1977 "to establish, operate and maintain

gambling casinos on land or water within the territorial jurisdiction of the

Philippines." Its operation was originally conducted in the well known floating

casino "Philippine Tourist." The operation was considered a success for it proved

to be a potential source of revenue to fund infrastructure and socio-economic

projects, thus, P.D. 1399 was passed on June 2, 1978 for PAGCOR to fully attain

this objective.

Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable

the Government to regulate and centralize all games of chance authorized by

existing franchise or permitted by law, under the following declared policy —

Sec. 1. Declaration of Policy. — It is hereby declared to be the policy of theState to centralize and integrate all games of chance not heretofore authorized

by existing franchises or permitted by law in order to attain the following

objectives:

(a) To centralize and integrate the right and authority to operate and

conduct games of chance into one corporate entity to be controlled,

administered and supervised by the Government.

(b) To establish and operate clubs and casinos, for amusement and

recreation, including sports gaming pools, (basketball, football, lotteries, etc.) and

such other forms of amusement and recreation including games of chance, which

may be allowed by law within the territorial jurisdiction of the Philippines and

which will: (1) generate sources of additional revenue to fund infrastructure and

socio-civic projects, such as flood control programs, beautification, sewerage and

sewage projects, Tulungan ng Bayan Centers, Nutritional Programs, Population

Control and such other essential public services; (2) create recreation and

integrated facilities which will expand and improve the country's existing tou

attractions; and (3) minimize, if not totally eradicate, all the evils, malpractice

and corruptions that are normally prevalent on the conduct and operation of

gambling clubs and casinos without direct government involvement. (Section

P.D. 1869)

To attain these objectives PAGCOR is given territorial jurisdiction all over the

Philippines. Under its Charter's repealing clause, all laws, decrees, executive

orders, rules and regulations, inconsistent therewith, are accordingly repeale

amended or modified.

It is reported that PAGCOR is the third largest source of government revenue

next to the Bureau of Internal Revenue and the Bureau of Customs. In 1989alone, PAGCOR earned P3.43 Billion, and directly remitted to the National

Government a total of P2.5 Billion in form of franchise tax, government's inco

share, the President's Social Fund and Host Cities' share. In addition, PAGCOR

sponsored other socio-cultural and charitable projects on its own or in

cooperation with various governmental agencies, and other private associati

and organizations. In its 3 1/2 years of operation under the present

administration, PAGCOR remitted to the government a total of P6.2 Billion. A

December 31, 1989, PAGCOR was employing 4,494 employees in its nine (9)

casinos nationwide, directly supporting the livelihood of Four Thousand Four

Hundred Ninety-Four (4,494) families.

But the petitioners, are questioning the validity of P.D. No. 1869. They allege

the same is "null and void" for being "contrary to morals, public policy and pu

order," monopolistic and tends toward "crony economy", and is violative of t

equal protection clause and local autonomy as well as for running counter to

state policies enunciated in Sections 11 (Personal Dignity and Human Rights),

(Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article

and Section 2 (Educational Values) of Article XIV of the 1987 Constitution.

This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny a

the most deliberate consideration by the Court, involving as it does the exerc

of what has been described as "the highest and most delicate function which

belongs to the judicial department of the government." (State v. Manuel, 20

144; Lozano v. Martinez, 146 SCRA 323).

As We enter upon the task of passing on the validity of an act of a co-equal a

coordinate branch of the government We need not be reminded of the time-

honored principle, deeply ingrained in our jurisprudence, that a statute is

presumed to be valid. Every presumption must be indulged in favor of its

constitutionality. This is not to say that We approach Our task with diffidence

timidity. Where it is clear that the legislature or the executive for that matterover-stepped the limits of its authority under the constitution, We should not

hesitate to wield the axe and let it fall heavily, as fall it must, on the offending

statute (Lozano v. Martinez, supra).

In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court th

Mr. Justice Zaldivar underscored the —

. . . thoroughly established principle which must be followed in all cases wher

questions of constitutionality as obtain in the instant cases are involved. All

presumptions are indulged in favor of constitutionality; one who attacks a sta

alleging unconstitutionality must prove its invalidity beyond a reasonable dou

that a law may work hardship does not render it unconstitutional; that if any

reasonable basis may be conceived which supports the statute, it will be uph

and the challenger must negate all possible basis; that the courts are not

concerned with the wisdom, justice, policy or expediency of a statute and tha

liberal interpretation of the constitution in favor of the constitutionality oflegislation should be adopted. (Danner v. Hass, 194 N.W. 2nd 534, 539; Spurb

v. Statton, 106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio,

SCRA 734, 739 [1970]; Peralta v. Commission on Elections, 82 SCRA 30, 55 [19

and Heirs of Ordona v. Reyes, 125 SCRA 220, 241-242 [1983] cited in Citizens

Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA 521,

Of course, there is first, the procedural issue. The respondents are questionin

the legal personality of petitioners to file the instant petition.

Considering however the importance to the public of the case at bar, and in

keeping with the Court's duty, under the 1987 Constitution, to determine

whether or not the other branches of government have kept themselves with

the limits of the Constitution and the laws and that they have not abused the

discretion given to them, the Court has brushed aside technicalities of proced



and has taken cognizance of this petition. (Kapatiran ng mga Naglilingkod sa

Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA 371)

With particular regard to the requirement of proper party as applied in the cases

before us, We hold that the same is satisfied by the petitioners and intervenors

because each of them has sustained or is in danger of sustaining an immediate

njury as a result of the acts or measures complained of. And even if, strictly

speaking they are not covered by the definition, it is still within the wide

discretion of the Court to waive the requirement and so remove the impediment

to its addressing and resolving the serious constitutional questions raised.

n the first Emergency Powers Cases, ordinary citizens and taxpayers were

allowed to question the constitutionality of several executive orders issued by

President Quirino although they were involving only an indirect and generalnterest shared in common with the public. The Court dismissed the objection

that they were not proper parties and ruled that "the transcendental importance

to the public of these cases demands that they be settled promptly and definitely,

brushing aside, if we must technicalities of procedure." We have since then

applied the exception in many other cases. (Association of Small Landowners in

the Philippines, Inc. v. Sec. of Agrarian Reform, 175 SCRA 343).

Having disposed of the procedural issue, We will now discuss the substantive

ssues raised.

Gambling in all its forms, unless allowed by law, is generally prohibited. But the

prohibition of gambling does not mean that the Government cannot regulate it in

the exercise of its police power.

The concept of police power is well-established in this jurisdiction. It has been

defined as the "state authority to enact legislation that may interfere with

personal liberty or property in order to promote the general welfare." (Edu v.

Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition or restraint

upon liberty or property, (2) in order to foster the common good. It is not capable

of an exact definition but has been, purposely, veiled in general terms to

underscore its all-comprehensive embrace. (Philippine Association of Service

Exporters, Inc. v. Drilon, 163 SCRA 386).

ts scope, ever-expanding to meet the exigencies of the times, even to anticipate

the future where it could be done, provides enough room for an efficient and

flexible response to conditions and circumstances thus assuming the greatest

benefits. (Edu v. Ericta, supra)

t finds no specific Constitutional grant for the plain reason that it does not owe

ts origin to the charter. Along with the taxing power and eminent domain, it is

nborn in the very fact of statehood and sovereignty. It is a fundamental attributeof government that has enabled it to perform the most vital functions of

governance. Marshall, to whom the expression has been credited, refers to it

succinctly as the plenary power of the state "to govern its citizens". (Tribe,

American Constitutional Law, 323, 1978). The police power of the State is a

power co-extensive with self-protection and is most aptly termed the "law of

overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39 Phil. 660, 708)

t is "the most essential, insistent, and illimitable of powers." (Smith Bell & Co. v.

National, 40 Phil. 136) It is a dynamic force that enables the state to meet the

agencies of the winds of change.

What was the reason behind the enactment of P.D. 1869?

P.D. 1869 was enacted pursuant to the policy of the government to "regulate and

centralize thru an appropriate institution all games of chance authorized by

existing franchise or permitted by law" (1st whereas clause, PD 1869). As was

subsequently proved, regulating and centralizing gambling operations in onecorporate entity — the PAGCOR, was beneficial not just to the Government but

to society in general. It is a reliable source of much needed revenue for the cash

strapped Government. It provided funds for social impact projects and subjected

gambling to "close scrutiny, regulation, supervision and control of the

Government" (4th Whereas Clause, PD 1869). With the creation of PAGCOR and

the direct intervention of the Government, the evil practices and corruptions that

go with gambling will be minimized if not totally eradicated. Public welfare, then,

ies at the bottom of the enactment of PD 1896.

Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of

Manila to impose taxes and legal fees; that the exemption clause in P.D. 1869 is

violative of the principle of local autonomy. They must be referring to Section 13

par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying

any "tax of any kind or form, income or otherwise, as well as fees, charges or

evies of whatever nature, whether National or Local."

(2) Income and other taxes. — a) Franchise Holder: No tax of any kind

form, income or otherwise as well as fees, charges or levies of whatever natu

whether National or Local, shall be assessed and collected under this franchis

from the Corporation; nor shall any form or tax or charge attach in any way t

earnings of the Corporation, except a franchise tax of five (5%) percent of the

gross revenues or earnings derived by the Corporation from its operations un

this franchise. Such tax shall be due and payable quarterly to the National

Government and shall be in lieu of all kinds of taxes, levies, fees or assessme

of any kind, nature or description, levied, established or collected by any

municipal, provincial or national government authority (Section 13 [2]).

Their contention stated hereinabove is without merit for the following reason

(a) The City of Manila, being a mere Municipal corporation has no

inherent right to impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Ilo

Villanueva, 105 Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643). Th

"the Charter or statute must plainly show an intent to confer that power or t

municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "po

to tax" therefore must always yield to a legislative act which is superior havin

been passed upon by the state itself which has the "inherent power to tax"

(Bernas, the Revised [1973] Philippine Constitution, Vol. 1, 1983 ed. p. 445).

(b) The Charter of the City of Manila is subject to control by Congress

should be stressed that "municipal corporations are mere creatures of Congr

(Unson v. Lacson, G.R. No. 7909, January 18, 1957) which has the power to

"create and abolish municipal corporations" due to its "general legislative

powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541

Congress, therefore, has the power of control over Local governments (Hebro

Reyes, G.R. No. 9124, July 2, 1950). And if Congress can grant the City of Man

the power to tax certain matters, it can also provide for exemptions or even t

back the power.

(c) The City of Manila's power to impose license fees on gambling, ha

long been revoked. As early as 1975, the power of local governments to regu

gambling thru the grant of "franchise, licenses or permits" was withdrawn by

No. 771 and was vested exclusively on the National Government, thus:

Sec. 1. Any provision of law to the contrary notwithstanding, the authorit

chartered cities and other local governments to issue license, permit or other

form of franchise to operate, maintain and establish horse and dog race track

jai-alai and other forms of gambling is hereby revoked.

Sec. 2. Hereafter, all permits or franchises to operate, maintain and estab

horse and dog race tracks, jai-alai and other forms of gambling shall be issuedthe national government upon proper application and verification of the

qualification of the applicant . . .

Therefore, only the National Government has the power to issue "licenses or

permits" for the operation of gambling. Necessarily, the power to demand or

collect license fees which is a consequence of the issuance of "licenses or

permits" is no longer vested in the City of Manila.

(d) Local governments have no power to tax instrumentalities of the

National Government. PAGCOR is a government owned or controlled corpora

with an original charter, PD 1869. All of its shares of stocks are owned by the

National Government. In addition to its corporate powers (Sec. 3, Title II, PD

1869) it also exercises regulatory powers thus:

Sec. 9. Regulatory Power. — The Corporation shall maintain a Registry of

affiliated entities, and shall exercise all the powers, authority and theresponsibilities vested in the Securities and Exchange Commission over such

affiliating entities mentioned under the preceding section, including, but not

limited to amendments of Articles of Incorporation and By-Laws, changes in

corporate term, structure, capitalization and other matters concerning the

operation of the affiliated entities, the provisions of the Corporation Code of

Philippines to the contrary notwithstanding, except only with respect to origi

incorporation.

PAGCOR has a dual role, to operate and to regulate gambling casinos. The lat

role is governmental, which places it in the category of an agency or

instrumentality of the Government. Being an instrumentality of the Governm

PAGCOR should be and actually is exempt from local taxes. Otherwise, its

operation might be burdened, impeded or subjected to control by a mere Loc

government.



The states have no power by taxation or otherwise, to retard, impede, burden or

n any manner control the operation of constitutional laws enacted by Congress

to carry into execution the powers vested in the federal government. (MC Culloch

v. Marland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over

ocal governments.

Justice Holmes, speaking for the Supreme Court, made reference to the entire

absence of power on the part of the States to touch, in that way (taxation) at

east, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51)

and it can be agreed that no state or political subdivision can regulate a federal

nstrumentality in such a way as to prevent it from consummating its federal

responsibilities, or even to seriously burden it in the accomplishment of them.(Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)

Otherwise, mere creatures of the State can defeat National policies thru

extermination of what local authorities may perceive to be undesirable activities

or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez,

340 US 42).

The power to tax which was called by Justice Marshall as the "power to destroy"

(Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality

or creation of the very entity which has the inherent power to wield it.

(e) Petitioners also argue that the Local Autonomy Clause of the

Constitution will be violated by P.D. 1869. This is a pointless argument. Article X

of the 1987 Constitution (on Local Autonomy) provides:

Sec. 5. Each local government unit shall have the power to create its own

source of revenue and to levy taxes, fees, and other charges subject to such

guidelines and limitation as the congress may provide, consistent with the basic

policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to

the local government. (emphasis supplied)

The power of local government to "impose taxes and fees" is always subject to

"limitations" which Congress may provide by law. Since PD 1869 remains an

"operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987

Constitution), its "exemption clause" remains as an exception to the exercise of

the power of local governments to impose taxes and fees. It cannot therefore be

violative but rather is consistent with the principle of local autonomy.

Besides, the principle of local autonomy under the 1987 Constitution simply

means "decentralization" (III Records of the 1987 Constitutional Commission, pp.

435-436, as cited in Bernas, The Constitution of the Republic of the Philippines,Vol. II, First Ed., 1988, p. 374). It does not make local governments sovereign

within the state or an "imperium in imperio."

Local Government has been described as a political subdivision of a nation or

state which is constituted by law and has substantial control of local affairs. In a

unitary system of government, such as the government under the Philippine

Constitution, local governments can only be an intra sovereign subdivision of one

sovereign nation, it cannot be an imperium in imperio. Local government in such

a system can only mean a measure of decentralization of the function of

government. (emphasis supplied)

As to what state powers should be "decentralized" and what may be delegated to

ocal government units remains a matter of policy, which concerns wisdom. It is

therefore a political question. (Citizens Alliance for Consumer Protection v.

Energy Regulatory Board, 162 SCRA 539).

What is settled is that the matter of regulating, taxing or otherwise dealing with

gambling is a State concern and hence, it is the sole prerogative of the State to

retain it or delegate it to local governments.

As gambling is usually an offense against the State, legislative grant or express

charter power is generally necessary to empower the local corporation to deal

with the subject. . . . In the absence of express grant of power to enact, ordinance

provisions on this subject which are inconsistent with the state laws are void.

(Ligan v. Gadsden, Ala App. 107 So. 733 Ex-Parte Solomon, 9, Cals. 440, 27 PAC

757 following in re Ah You, 88 Cal. 99, 25 PAC 974, 22 Am St. Rep. 280, 11 LRA

480, as cited in Mc Quinllan Vol. 3 Ibid, p. 548, emphasis supplied)

Petitioners next contend that P.D. 1869 violates the equal protection clause of

the Constitution, because "it legalized PAGCOR — conducted gambling, while

most gambling are outlawed together with prostitution, drug trafficking and

other vices" (p. 82, Rollo).

We, likewise, find no valid ground to sustain this contention. The petitioners'

posture ignores the well-accepted meaning of the clause "equal protection o

laws." The clause does not preclude classification of individuals who may be

accorded different treatment under the law as long as the classification is not

unreasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law does

have to operate in equal force on all persons or things to be conformable to

Article III, Section 1 of the Constitution (DECS v. San Diego, G.R. No. 89572,

December 21, 1989).

The "equal protection clause" does not prohibit the Legislature from establis

classes of individuals or objects upon which different rules shall operate (LauMisa, 43 O.G. 2847). The Constitution does not require situations which are

different in fact or opinion to be treated in law as though they were the same

(Gomez v. Palomar, 25 SCRA 827).

Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative o

equal protection is not clearly explained in the petition. The mere fact that so

gambling activities like cockfighting (P.D 449) horse racing (R.A. 306 as amen

by RA 983), sweepstakes, lotteries and races (RA 1169 as amended by B.P. 42

legalized under certain conditions, while others are prohibited, does not rend

the applicable laws, P.D. 1869 for one, unconstitutional.

If the law presumably hits the evil where it is most felt, it is not to be overthr

because there are other instances to which it might have been applied. (Gom

Palomar, 25 SCRA 827)

The equal protection clause of the 14th Amendment does not mean that all

occupations called by the same name must be treated the same way; the sta

may do what it can to prevent which is deemed as evil and stop short of thos

cases in which harm to the few concerned is not less than the harm to the pu

that would insure if the rule laid down were made mathematically exact.

(Dominican Hotel v. Arizona, 249 US 2651).

Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the

Cory Government away from monopolies and crony economy and toward fre

enterprise and privatization" suffice it to state that this is not a ground for thi

Court to nullify P.D. 1869. If, indeed, PD 1869 runs counter to the governmen

policies then it is for the Executive Department to recommend to Congress it

repeal or amendment.

The judiciary does not settle policy issues. The Court can only declare what th

law is and not what the law should be. Under our system of government, polissues are within the domain of the political branches of government and of t

people themselves as the repository of all state power. (Valmonte v. Belmont

Jr., 170 SCRA 256).

On the issue of "monopoly," however, the Constitution provides that:

Sec. 19. The State shall regulate or prohibit monopolies when public intere

so requires. No combinations in restraint of trade or unfair competition shall

allowed. (Art. XII, National Economy and Patrimony)

It should be noted that, as the provision is worded, monopolies are not

necessarily prohibited by the Constitution. The state must still decide whethe

public interest demands that monopolies be regulated or prohibited. Again, t

a matter of policy for the Legislature to decide.

On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dig12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of A

XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution

suffice it to state also that these are merely statements of principles and, pol

As such, they are basically not self-executing, meaning a law should be passe

Congress to clearly define and effectuate such principles.

In general, therefore, the 1935 provisions were not intended to be self-execu

principles ready for enforcement through the courts. They were rather direct

addressed to the executive and the legislature. If the executive and the

legislature failed to heed the directives of the articles the available remedy w

not judicial or political. The electorate could express their displeasure with th

failure of the executive and the legislature through the language of the ballot

(Bernas, Vol. II, p. 2)



Every law has in its favor the presumption of constitutionality (Yu Cong Eng v.

Trinidad, 47 Phil. 387; Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82 SCRA

30; Abbas v. Comelec, 179 SCRA 287). Therefore, for PD 1869 to be nullified, it

must be shown that there is a clear and unequivocal breach of the Constitution,

not merely a doubtful and equivocal one. In other words, the grounds for nullity

must be clear and beyond reasonable doubt. (Peralta v. Comelec, supra) Those

who petition this Court to declare a law, or parts thereof, unconstitutional must

clearly establish the basis for such a declaration. Otherwise, their petition must

fail. Based on the grounds raised by petitioners to challenge the constitutionality

of P.D. 1869, the Court finds that petitioners have failed to overcome the

presumption. The dismissal of this petition is therefore, inevitable. But as to

whether P.D. 1869 remains a wise legislation considering the issues of "morality,

monopoly, trend to free enterprise, privatization as well as the state principles on

social justice, role of youth and educational values" being raised, is up forCongress to determine.

As this Court held in Citizens' Alliance for Consumer Protection v. Energy

Regulatory Board, 162 SCRA 521 —

Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in any

case, in its favor the presumption of validity and constitutionality which

petitioners Valmonte and the KMU have not overturned. Petitioners have not

undertaken to identify the provisions in the Constitution which they claim to have

been violated by that statute. This Court, however, is not compelled to speculate

and to imagine how the assailed legislation may possibly offend some provision

of the Constitution. The Court notes, further, in this respect that petitioners have

n the main put in question the wisdom, justice and expediency of the

establishment of the OPSF, issues which are not properly addressed to this Court

and which this Court may not constitutionally pass upon. Those issues should be

addressed rather to the political departments of government: the President and

the Congress.

Parenthetically, We wish to state that gambling is generally immoral, and this is

precisely so when the gambling resorted to is excessive. This excessiveness

necessarily depends not only on the financial resources of the gambler and his

family but also on his mental, social, and spiritual outlook on life. However, the

mere fact that some persons may have lost their material fortunes, mental

control, physical health, or even their lives does not necessarily mean that the

same are directly attributable to gambling. Gambling may have been the

antecedent, but certainly not necessarily the cause. For the same consequences

could have been preceded by an overdose of food, drink, exercise, work, and

even sex.

WHEREFORE, the petition is DISMISSED for lack of merit.

AQUILINO Q. PIMENTEL JR., petitioner, vs. Hon. ALEXANDER AGUIRRE in hiscapacity as Executive Secretary, Hon. EMILIA BONCODIN in her capacity as

Secretary of the Department of Budget and Management, respondents.

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

ssue 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

nternal revenue allotments.

On November 17, 1998, Roberto Pagdanganan, through Counsel Alberto C. Agra,

filed a Motion for Intervention/Motion to Admit Petition for Intervention,[1]

attaching thereto his Petition in Intervention[2] joining petitioner in the reliefs

sought. At the time, intervenor was the provincial governor of Bulacan, national

president of the League of Provinces of the Philippines and chairman of the

League of Leagues of Local Governments. In a Resolution dated December 15,

1998, the Court noted said Motion and Petition.

The Facts and the Arguments

On December 27, 1997, the President of the Philippines issued AO 372. Its fu

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 f iscal management

maintain economic stability and sustain the country's growth momentum;

WHEREAS, it is imperative that all government agencies adopt cash managem

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 here

order and direct:

SECTION 1. All government departments and agencies, including state

universities and colleges, government-owned and controlled corporations an

local governments units will identify and implement measures in FY 1998 tha

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 wh

have already been contracted out;

b. Acquisition of new equipment and motor vehicles;

c. All foreign travels of government personnel, except those associated w

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 reg

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 involvi

regular competitions/events;

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

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

specifically authorized by law; and

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

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 ofBudget 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

nternal revenue allotment (IRA) to be withheld from the LGUs.

Petitioner contends that the President, in issuing AO 372, was in effect exercising

the power of control over LGUs. The Constitution vests in the President,

however, only the power of general supervision over LGUs, consistent with the

principle of local autonomy. Petitioner further argues that the directive to

withhold ten percent (10%) of their IRA is in contravention of Section 286 of the

Local Government Code and of Section 6, Article X of the Constitution, providing

for the automatic release to each of these units its share in the national internal

revenue.

The solicitor general, on behalf of the respondents, claims on the other hand that

AO 372 was issued to alleviate the "economic difficulties brought about by the

peso devaluation" and constituted merely an exercise of the President's power of

supervision over LGUs. It allegedly does not violate local fiscal autonomy,

because it merely directs local governments to identify measures that will reduce

their total expenditures for non-personal services by at least 25 percent.

Likewise, the withholding of 10 percent of the LGUs’ IRA does not violate the

statutory prohibition on the imposition of any lien or holdback on their revenue

shares, because such withholding is "temporary in nature pending the

assessment and evaluation by the Development Coordination Committee of the

emerging fiscal situation."

The Issues

The Petition[3] submits the following issues for the Court's resolution:

"A. Whether or not the president committed grave abuse of discretion [in]

ordering all LGUS to adopt a 25% cost reduction program in violation of the

LGU[']S fiscal autonomy

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

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

n 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

ssuance, 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

ocus standi to bring this suit, despite respondents' failure to raise the issue.[4]

However, the intervention of Roberto Pagdanganan has rendered academic a

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 de

certain crucial concepts: (1) the scope of the President's power of general

supervision over local governments and (2) the extent of the local governme

autonomy.

Scope of President's Power of Supervision Over LGUs

Section 4 of Article X of the Constitution confines the President's power over

governments to one of general supervision. It reads as follows:

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

local governments. x x x"

This provision has been interpreted to exclude the power of control. In Mon

v. Silvosa,[5] the Court contrasted the President's power of supervision over

government officials with that of his power of control over executive officials

the national government. It was emphasized that the two terms -- supervisio

and control -- differed in meaning and extent. The Court distinguished them

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.

latter fail or neglect to fulfill them, the former may take such action or step a

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

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 m

authority than that of checking whether local governments or their officials w

performing their duties as provided by the fundamental law and by statutes.

cannot interfere with local governments, so long as they act within the scope

their authority. "Supervisory power, when contrasted with control, is the pow

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 t

performance or accomplishment of an act. If these rules are not followed, th

may, in their discretion, order the act undone or redone by their subordinate

even decide to do it themselves. On the other hand, supervision does not co

such authority. Supervising officials merely see to it that the rules are follow

but they themselves do not lay down such rules, nor do they have the discret

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 presc

their own manner of execution of the act. They have no discretion on this m

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 thePresident, at whose will and behest they can be removed from office; or thei

actions and decisions changed, suspended or reversed.[11] In contrast, the h

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 legitimat

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

governments is the state policy of ensuring local autonomy.[12]



n Ganzon v. Court of Appeals,[13] we said that local autonomy signified "a more

responsive and accountable local government structure instituted through a

system of decentralization." The grant of autonomy is intended to "break up the

monopoly of the national government over the affairs of local governments, x x x

not x x x to end the relation of partnership and interdependence between the

central administration and local government units x x x." Paradoxically, local

governments are still subject to regulation, however limited, for the purpose of

enhancing self-government.[14]

Decentralization simply means the devolution of national administration, not

power, to local governments. Local officials remain accountable to the central

government as the law may provide.[15] The difference between decentralization

of administration and that of power was explained in detail in Limbona v.

Mangelin[16] as follows:

"Now, autonomy is either decentralization of administration or decentralization

of power. There is decentralization of administration when the central

government delegates administrative powers to political subdivisions in order to

broaden the base of government power and in the process to make local

governments 'more responsive and accountable,'[17] and 'ensure their fullest

development as self-reliant communities and make them more effective partners

n the pursuit of national development and social progress.'[18] At the same time,

t 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

ntegrated and coordinated towards a common national goal. Thus, policy-setting for the entire country still lies in the President and Congress. As we stated

n 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

ooming 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

n 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. Significan

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 d

unilaterally.

Consequently, the Local Government Code provides:[27]

"x x x [ I]n the event the national government incurs an unmanaged public sec

deficit, the President of the Philippines is hereby authorized, upon therecommendation of [the] Secretary of Finance, Secretary of the Interior and

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 reve

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

the third fiscal year preceding the current fiscal year x x x."

There are therefore several requisites before the President may interfere in l

fiscal matters: (1) an unmanaged public sector deficit of the national

government; (2) consultations with the presiding officers of the Senate and t

House of Representatives and the presidents of the various local leagues; and

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 th

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, the

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 ha

been issued by the President consistent with his power of supervision over lo

governments. It is intended only to advise all government agencies and

instrumentalities to undertake cost-reduction measures that will help mainta

economic stability in the country, which is facing economic difficulties. Besiddoes 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, a

while we agree with petitioner that the requirements of Section 284 of the Lo

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 n

constitute a mandatory or binding order that interferes with local autonomy.

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 torecognize the need for fiscal restraint in a period of economic difficulty. Inde

all concerned would do well to heed the President's call to unity, solidarity an

teamwork to help alleviate the crisis. It is understood, however, that no lega

sanction may be imposed upon LGUs and their officials who do not follow suc

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 fisc

autonomy is the automatic release of the shares of LGUs in the national inter

revenue. This is mandated by no less than the Constitution.[28] The Local

Government Code[29] specifies further that the release shall be made directl

the LGU concerned within five (5) days after every quarter of the year and "sh

not be subject to any lien or holdback that may be imposed by the national



government for whatever purpose."[30] As a rule, the term "shall" is a word of

command that must be given a compulsory meaning.[31] The provision is,

therefore, imperative.

Section 4 of AO 372, however, orders the withholding, effective January 1, 1998,

of 10 percent of the LGUs' IRA "pending the assessment and evaluation by the

Development Budget Coordinating Committee of the emerging fiscal situation" in

the country. Such withholding clearly contravenes the Constitution and the law.

Although temporary, it is equivalent to a holdback, which means "something held

back or withheld, often temporarily."[32] Hence, the "temporary" nature of the

retention by the national government does not matter. Any retention is

prohibited.

n sum, while Section 1 of AO 372 may be upheld as an advisory effected in timesof 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,

audable 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

n 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

mmediate 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

aw 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 controversyeven 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

nterpretation 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]

x x x x x x x x x

"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."

n 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

nstrumentality 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 become

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 pre

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 a

chief fiscal officer, who allegedly "is clothed by law with certain powers to en

the observance of safeguards and auditing requirements, as well as the legal

prerequisites in the release and use of IRAs, taking into account the constitut

and statutory mandates."[39] He cites instances when the President may law

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 Constituti

On the other hand, Section 4 of AO 372, as explained earlier, contravenes ex

provisions of the Local Government Code (LGC) and the Constitution. In othe

words, the acts alluded to in the Dissent are indeed authorized by law; but, q

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 do

Section 4 of AO 372, this Court is not ruling out any form of reduction in the I

of LGUs. Indeed, as the President may make necessary adjustments in case o

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 --

such reduction is subject to consultation with the presiding officers of both

Houses of Congress and, more importantly, with the presidents of the league

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 t

"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 aprovincial governor and at the same time president of the League of Province

the Philippines and chairman of the League of Leagues of Local Governments

have protested and instituted this action. Significantly, respondents do not d

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 complian

with certain requirements. Even a cursory reading of the provision reveals th

is totally inapplicable to the issue at bar. It directs LGUs to appropriate in the

annual budgets 20 percent of their respective IRAs for development projects

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 ar

hereby permanently PROHIBITED from implementing Administrative Order N

372 and 43, respectively dated December 27, 1997 and December 10, 1998,insofar as local government units are concerned.

SOCIAL JUSTICE SOCIETY (SJS), VLADIMIR ALARIQUE T. CABIGAO, andBONIFACIO S. TUMBOKON, Petitioners,

vs.HON. JOSE L. ATIENZA, JR., in his capacity as Mayor of the City of Manila

Respondent.

D E C I S I O N

CORONA, J.:

In this original petition for mandamus,1 petitioners Social Justice Society (SJS

Vladimir Alarique T. Cabigao and Bonifacio S. Tumbokon seek to compel



respondent Hon. Jose L. Atienza, Jr., mayor of the City of Manila, to enforce

Ordinance No. 8027.

The antecedents are as follows.

On November 20, 2001, the Sangguniang Panlungsod of Manila enacted

Ordinance No. 8027.2 Respondent mayor approved the ordinance on November

28, 2001.3 It became effective on December 28, 2001, after its publication.4

Ordinance No. 8027 was enacted pursuant to the police power delegated to local

government units, a principle described as the power inherent in a government

to enact laws, within constitutional limits, to promote the order, safety, health,

morals and general welfare of the society.5 This is evident from Sections 1 and 3

thereof which state:

SECTION 1. For the purpose of promoting sound urban planning and ensuring

health, public safety, and general welfare of the residents of Pandacan and Sta.

Ana as well as its adjoining areas, the land use of [those] portions of land

bounded by the Pasig River in the north, PNR Railroad Track in the east, Beata St.

n the south, Palumpong St. in the southwest, and Estero de Pancacan in the

west[,] PNR Railroad in the northwest area, Estero de Pandacan in the

[n]ortheast, Pasig River in the southeast and Dr. M.L. Carreon in the southwest.

The area of Punta, Sta. Ana bounded by the Pasig River, Marcelino Obrero St.,

Mayo 28 St., and F. Manalo Street, are hereby reclassified from Industrial II to

Commercial I.

xxx xxx xxx

SEC. 3. Owners or operators of industries and other businesses, the operation of

which are no longer permitted under Section 1 hereof, are hereby given a period

of six (6) months from the date of effectivity of this Ordinance within which to

cease and desist from the operation of businesses which are hereby in

consequence, disallowed.

Ordinance No. 8027 reclassified the area described therein from industrial to

commercial and directed the owners and operators of businesses disallowed

under Section 1 to cease and desist from operating their businesses within six

months from the date of effectivity of the ordinance. Among the businesses

situated in the area are the so-called "Pandacan Terminals" of the oil companies

Caltex (Philippines), Inc., Petron Corporation and Pilipinas Shell Petroleum

Corporation.

However, on June 26, 2002, the City of Manila and the Department of Energy

(DOE) entered into a memorandum of understanding (MOU)6 with the oil

companies in which they agreed that "the scaling down of the PandacanTerminals [was] the most viable and practicable option." Under the MOU, the oil

companies agreed to perform the following:

Section 1. - Consistent with the objectives stated above, the OIL COMPANIES

shall, upon signing of this MOU, undertake a program to scale down the

Pandacan Terminals which shall include, among others, the immediate

removal/decommissioning process of TWENTY EIGHT (28) tanks starting with the

LPG spheres and the commencing of works for the creation of safety buffer and

green zones surrounding the Pandacan Terminals. xxx

Section 2. – Consistent with the scale-down program mentioned above, the OIL

COMPANIES shall establish joint operations and management, including the

operation of common, integrated and/or shared facilities, consistent with

nternational and domestic technical, safety, environmental and economic

considerations and standards. Consequently, the joint operations of the OIL

COMPANIES in the Pandacan Terminals shall be limited to the common andntegrated areas/facilities. A separate agreement covering the commercial and

operational terms and conditions of the joint operations, shall be entered into by

the OIL COMPANIES.

Section 3. - The development and maintenance of the safety and green buffer

zones mentioned therein, which shall be taken from the properties of the OIL

COMPANIES and not from the surrounding communities, shall be the sole

responsibility of the OIL COMPANIES.

The City of Manila and the DOE, on the other hand, committed to do the

following:

Section 1. - The City Mayor shall endorse to the City Council this MOU for its

appropriate action with the view of implementing the spirit and intent thereof.

Section 2. - The City Mayor and the DOE shall, consistent with the spirit and

intent of this MOU, enable the OIL COMPANIES to continuously operate in

compliance with legal requirements, within the limited area resulting from th

joint operations and the scale down program.

Section 3. - The DOE and the City Mayor shall monitor the OIL COMPANIES’

compliance with the provisions of this MOU.

Section 4. - The CITY OF MANILA and the national government shall protect t

safety buffer and green zones and shall exert all efforts at preventing future

occupation or encroachment into these areas by illegal settlers and other

unauthorized parties.

The Sangguniang Panlungsod ratified the MOU in Resolution No. 97.7 In the sresolution, the Sanggunian declared that the MOU was effective only for a pe

of six months starting July 25, 2002.8 Thereafter, on January 30, 2003, the

Sanggunian adopted Resolution No. 139 extending the validity of Resolution

97 to April 30, 2003 and authorizing Mayor Atienza to issue special business

permits to the oil companies. Resolution No. 13, s. 2003 also called for a

reassessment of the ordinance.10

Meanwhile, petitioners filed this original action for mandamus on December

2002 praying that Mayor Atienza be compelled to enforce Ordinance No. 802

and order the immediate removal of the terminals of the oil companies.11

The issues raised by petitioners are as follows:

1. whether respondent has the mandatory legal duty to enforce Ordinance N

8027 and order the removal of the Pandacan Terminals, and

2. whether the June 26, 2002 MOU and the resolutions ratifying it can amend

repeal Ordinance No. 8027.12

Petitioners contend that respondent has the mandatory legal duty, under Sec

455 (b) (2) of the Local Government Code (RA 7160),13 to enforce Ordinance

8027 and order the removal of the Pandacan Terminals of the oil companies.

Instead, he has allowed them to stay.

Respondent’s defense is that Ordinance No. 8027 has been superseded by th

MOU and the resolutions.14 However, he also confusingly argues that the

ordinance and MOU are not inconsistent with each other and that the latter

not amended the former. He insists that the ordinance remains valid and in f

force and effect and that the MOU did not in any way prevent him from enfo

and implementing it. He maintains that the MOU should be considered as a m

guideline for its full implementation.15

Under Rule 65, Section 316 of the Rules of Court, a petition for mandamus m

be filed when any tribunal, corporation, board, officer or person unlawfully

neglects the performance of an act which the law specifically enjoins as a dut

resulting from an office, trust or station. Mandamus is an extraordinary writ t

is employed to compel the performance, when refused, of a ministerial duty

is already imposed on the respondent and there is no other plain, speedy and

adequate remedy in the ordinary course of law. The petitioner should have a

well-defined, clear and certain legal right to the performance of the act and i

must be the clear and imperative duty of respondent to do the act required t

done.17

Mandamus will not issue to enforce a right, or to compel compliance with a d

which is questionable or over which a substantial doubt exists. The principal

function of the writ of mandamus is to command and to expedite, not to inqu

and to adjudicate; thus, it is neither the office nor the aim of the writ to seculegal right but to implement that which is already established. Unless the righ

the relief sought is unclouded, mandamus will not issue.18

To support the assertion that petitioners have a clear legal right to the

enforcement of the ordinance, petitioner SJS states that it is a political party

registered with the Commission on Elections and has its offices in Manila. It

claims to have many members who are residents of Manila. The other

petitioners, Cabigao and Tumbokon, are allegedly residents of Manila.

We need not belabor this point. We have ruled in previous cases that when a

mandamus proceeding concerns a public right and its object is to compel a p

duty, the people who are interested in the execution of the laws are regarded

the real parties in interest and they need not show any specific interest.19

Besides, as residents of Manila, petitioners have a direct interest in the



enforcement of the city’s ordinances. Respondent never questioned the right of

petitioners to institute this proceeding.

On the other hand, the Local Government Code imposes upon respondent the

duty, as city mayor, to "enforce all laws and ordinances relative to the

governance of the city.">20 One of these is Ordinance No. 8027. As the chief

executive of the city, he has the duty to enforce Ordinance No. 8027 as long as it

has not been repealed by the Sanggunian or annulled by the courts.21 He has no

other choice. It is his ministerial duty to do so. In Dimaporo v. Mitra, Jr.,22 we

stated the reason for this:

These officers cannot refuse to perform their duty on the ground of an alleged

nvalidity of the statute imposing the duty. The reason for this is obvious. It might

seriously hinder the transaction of public business if these officers were to bepermitted in all cases to question the constitutionality of statutes and ordinances

mposing duties upon them and which have not judicially been declared

unconstitutional. Officers of the government from the highest to the lowest are

creatures of the law and are bound to obey it.23

The question now is whether the MOU entered into by respondent with the oil

companies and the subsequent resolutions passed by the Sanggunian have made

the respondent’s duty to enforce Ordinance No. 8027 doubtful, unclear or

uncertain. This is also connected to the second issue raised by petitioners, that is,

whether the MOU and Resolution Nos. 97, s. 2002 and 13, s. 2003 of the

Sanggunian can amend or repeal Ordinance No. 8027.

We need not resolve this issue. Assuming that the terms of the MOU were

nconsistent with Ordinance No. 8027, the resolutions which ratified it and made

t binding on the City of Manila expressly gave it full force and effect only until

April 30, 2003. Thus, at present, there is nothing that legally hinders respondent

from enforcing Ordinance No. 8027.24

Ordinance No. 8027 was enacted right after the Philippines, along with the rest of

the world, witnessed the horror of the September 11, 2001 attack on the Twin

Towers of the World Trade Center in New York City. The objective of the

ordinance is to protect the residents of Manila from the catastrophic devastation

that will surely occur in case of a terrorist attack25 on the Pandacan Terminals.

No reason exists why such a protective measure should be delayed.

WHEREFORE, the petition is hereby GRANTED. Respondent Hon. Jose L. Atienza,

Jr., as mayor of the City of Manila, is directed to immediately enforce Ordinance

No. 8027.

Province of Rizal v Exec Sec

The earth belongs in usufruct to the living.[1]

At the height of the garbage crisis plaguing Metro Manila and its environs, parts

of the Marikina Watershed Reservation were set aside by the Office of the

President, through Proclamation No. 635 dated 28 August 1995, for use as a

sanitary landfill and similar waste disposal applications. In fact, this site,

extending to more or less 18 hectares, had already been in operation since 19

February 1990[2] for the solid wastes of Quezon City, Marikina, San Juan,

Mandaluyong, Pateros, Pasig, and Taguig.[3]

This is a petition filed by the Province of Rizal, the municipality of San

Mateo, and various concerned citizens for review on certiorari of the Decision of

the Court of Appeals in CA-G.R. SP No. 41330, denying, for lack of cause of action,

the petition for certiorari, prohibition and mandamus with application for a

temporary restraining order/writ of preliminary injunction assailing the legality

and constitutionality of Proclamation No. 635.

The facts are documented in painstaking detail.

On 17 November 1988, the respondent Secretaries of the Department of Public

Works and Highways (DPWH) and the Department of Environment and Natural

Resources (DENR) and the Governor of the Metropolitan Manila Commission

(MMC) entered into a Memorandum of Agreement (MOA),[4] which provides in

part:

1. The DENR agrees to immediately allow the

utilization by the Metropolitan Manila Commission of its land property located at

Pintong Bocaue in San Mateo, Rizal as a sanitary landfill site, subject to whatever

restrictions that the government impact assessment might require.

2. Upon signing of this Agreement, the DPWH shall

commence the construction/development of said dumpsite.

3. The MMC shall: a) take charge of the relocati

of the families within and around the site; b) oversee the development of the

areas as a sanitary landfill; c) coordinate/monitor the construction of

infrastructure facilities by the DPWH in the said site; and d) ensure that the

necessary civil works are properly undertaken to safeguard against any negat

environmental impact in the area.

On 7, 8 and 10 February 1989, the Sangguniang Bayan of San Mateo wrote G

Elfren Cruz of the MMC, Sec. Fiorello Estuar of the DPWH, the Presidential Ta

Force on Solid Waste Management, Executive Secretary Catalino Macaraig, a

Sec. Fulgencio Factoran, Jr., pointing out that it had recently passed a Resolutbanning the creation of dumpsites for Metro Manila garbage within its

jurisdiction, asking that their side be heard, and that the addressees “suspen

and temporarily hold in abeyance all and any part of your operations with res

to the San Mateo Landfill Dumpsite.” No action was taken on these letters.

It turns out that the land subject of the MOA of 17 November 1988 and owne

the DENR was part of the Marikina Watershed Reservation Area. Thus, on 31

May 1989, forest officers of the Forest Engineering and Infrastructure Unit of

Community Environment and Natural Resource Office, (CENRO) DENR-IV, Riz

Province, submitted a Memorandum[5+ on the “On-going Dumping Site

Operation of the MMC inside (the) Upper Portion of Marikina Watershed

Reservation, located at Barangay Pintong Bocaue, San Mateo, Rizal, and near

localities.” Said Memorandum reads in part:

Observations:

3.1 The subject area is arable and agricultural in nature;

3.2 Soil type and its topography are favorable for agricultural and fore

productions;

. . .

3.5 Said Dumping Site is observed to be confined within the said Watersh

Reservation, bearing in the northeastern part of Lungsod Silangan Townsite

Reservation. Such illegal Dumping Site operation inside (the) Watershed

Reservation is in violation of P.D. 705, otherwise known as the Revised Forest

Code, as amended. . .

Recommendations:

5.1 The MMC Dumping Site Inside Marikina Watershed Reservation, particu

at Brgy. Pintong Bocaue, San Mateo, Rizal and at Bo. Pinugay, Baras/AntipoloRizal which are the present garbage zones must totally be stopped and

discouraged without any political intervention and delay in order to save our

healthy ecosystems found therein, to avoid much destruction, useless efforts

lost (sic) of millions of public funds over the land in question; (Emphasis ours)

On 19 June 1989, the CENRO submitted another Investigation Report[6] to th

Regional Executive Director which states in part that:

1. About two (2) hectares had been excavated by bulldozers and garbage

dumping operations are going on.

2. The dumping site is without the concurrence of the Provincial Governo

Rizal Province and without any permit from DENR who has functional jurisdic

over the Watershed Reservation; and

3. About 1,192 families residing and cultivating areas covered by four (4)

Barangays surrounding the dumping site will adversely be affected by the

dumping operations of MMC including their sources of domestic water suppl

x x x

On 22 January 1990, the CENRO submitted still another Investigation Report[

the Regional Executive Director which states that:

Findings show that the areas used as Dumping Site of the MMC are found to

within the Marikina Watershed which are part of the Integrated Social Forest

Project (ISF) as per recorded inventory of Forest Occupancy of this office.

It also appears that as per record, there was no permit issued to the MMC to

utilize these portions of land for dumping purposes.



t is further observed that the use of the areas as dumping site greatly affects the

ecological balance and environmental factors in this community.

On 19 February 1990, the DENR Environmental Management Bureau, through

Undersecretary for Environment and Research Celso R. Roque, granted the Metro

Manila Authority (MMA [formerly MMC]) an Environmental Compliance

Certificate (ECC) for the operation of a two-and-a-half-hectare garbage dumpsite.

The ECC was sought and granted to comply with the requirement of Presidential

Decree No. 1586 “Establishing an Environmental Impact Statement System,”

Section 4 of which states in part that, “No persons, partnership or corporationshall undertake or operate any such declared environmentally critical project or

area without first securing an Environmental Compliance Certificate.”

Proclamation No. 2146, passed on 14 December 1981, designates “all areas

declared by law as national parks, watershed reserves, wildlife preserves, and

sanctuaries” as “Environmentally Critical Areas.”

On 09 March 1990, respondent Laguna Lake Development Authority (LLDA),

through its Acting General Manager, sent a letter[8] to the MMA, which reads in

part:

Through this letter we would like to convey our reservation on the choice of the

sites for solid waste disposal inside the watershed of Laguna Lake. As you may

already know, the Metropolitan Waterworks and Sewerage System (MWSS) has

scheduled the abstraction of water from the lake to serve the needs of about 1.2

million residents of Muntinlupa, Paranaque, Las Pinas and Bacoor, Cavite by

1992. Accordingly, the Laguna Lake Development Authority (LLDA) is accelerating

ts environmental management program to upgrade the water quality of the lake

n order to make it suitable as a source of domestic water supply the whole year

round. The said program regards dumpsites as incompatible within the

watershed because of the heavy pollution, including the risk of diseases,

generated by such activities which would negate the government’s efforts to

upgrade the water quality of the lake. Consequently, please consider our

objection to the proposed location of the dumpsites within the watershed.

(Emphasis supplied by petitioners)

On 31 July 1990, less than six months after the issuance of the ECC,

Undersecretary Roque suspended the ECC in a letter[9] addressed to the

respondent Secretary of DPWH, stating in part that:

Upon site investigation conducted by Environmental Management Bureau staff

on development activities at the San Mateo Landfill Site, it was ascertained thatground slumping and erosion have resulted from improper development of the

site. We believe that this will adversely affect the environmental quality in the

area if the proper remedial measures are not instituted in the design of the

andfill site. This is therefore contradictory to statements made in the

Environmental Impact Statement (EIS) submitted that above occurrences will be

properly mitigated.

n view of this, we are forced to suspend the Environmental Compliance

Certificate (ECC) issued until appropriate modified plans are submitted and

approved by this Office for implementation. (Emphasis ours)

On 21 June 1993, the Acting Mayor of San Mateo, Enrique Rodriguez, Jr.,

Barangay Captain Dominador Vergara, and petitioner Rolando E. Villacorte,

Chairman of the Pintong Bocaue Multipurpose Cooperative (PBMC) wrote[10]

then President Fidel V. Ramos expressing their objections to the continuedoperation of the MMA dumpsite for causing “unabated pollution and degradation

of the Marikina Watershed Reservation.”

On 14 July 1993, another Investigation Report[11] submitted by the Regional

Technical Director to the DENR Undersecretary for Environment and Research

contained the following findings and recommendations:

Remarks and Findings:

. . .

5. Interview with Mr. Dayrit, whose lot is now being endangered because soil

erosion have (sic) caused severe siltation and sedimentation of the Dayrit Creek

which water is greatly polluted by the dumping of soil bulldozed to the creek;

6. Also interview with Mrs. Vilma Montajes, the multi-grade teacher of

Pintong Bocaue Primary School which is located only about 100 meters from

landfill site. She disclosed that bad odor have (sic) greatly affected the pupils

who are sometimes sick with respiratory illnesses. These odors show that M

have (sic) not instituted/sprayed any disinfectant chemicals to prevent air

pollution in the area. Besides large flies (Bangaw) are swarming all over the

playground of the school. The teacher also informed the undersigned that p

debris are being blown whenever the wind blows in their direction.

7. As per investigation report … there are now 15 hectares being used as

landfill disposal sites by the MMA. The MMA is intending to expand its opera

within the 50 hectares.

8. Lots occupied within 50 hectares are fully planted with fruit bearing trlike Mangoes, Santol, Jackfruit, Kasoy, Guyabano, Kalamansi and Citrus which

now bearing fruits and being harvested and marketed to nearby San Mateo

Market and Masinag Market in Antipolo.

. . . .

Recommendations:

1. As previously recommended, the undersigned also strongly recommen

that the MMA be made to relocate the landfill site because the area is within

Marikina Watershed Reservation and Lungsod Silangan. The leachate treatm

plant ha(s) been eroded twice already and contaminated the nearby creeks w

is the source of potable water of the residents. The contaminated water also

flows to Wawa Dam and Boso-boso River which also flows to Laguna de Bay.

2. The proposed Integrated Social Forestry Project be pushed through or

approved. ISF project will not only uplift the socio-economic conditions of th

participants but will enhance the rehabilitation of the Watershed considering

fruit bearing trees are vigorously growing in the area. Some timber producin

species are also planted like Mahogany and Gmelina Arboiea. There are also

portions where dipterocarp residuals abound in the area.

3. The sanitary landfill should be relocated to some other area, in order t

avoid any conflict with the local government of San Mateo and the nearby

affected residents who have been in the area for almost 10-20 years.

On 16 November 1993, DENR Secretary Angel C. Alcala sent MMA Chairman

Ismael A. Mathay, Jr. a letter*12+ stating that “after a series of investigations

field officials” of the DENR, the agency realized that the MOA entered into onNovember 1988 “is a very costly error because the are a agreed to be a garba

dumpsite is inside the Marikina Watershed Reservation.” He then strongly

recommended that all facilities and infrastructure in the garbage dumpsite in

Pintong Bocaue be dismantled, and the garbage disposal operations be

transferred to another area outside the Marikina Watershed Reservation to

protect “the health and general welfare of the residents of San Mateo in

particular and the residents of Metro Manila in general.”

On 06 June 1995, petitioner Villacorte, Chairman of the PBMC, wrote[13]

President Ramos, through the Executive Secretary, informing the President o

issues involved, that the dumpsite is located near three public elementary

schools, the closest of which is only fifty meters away, and that its location

“violates the municipal zoning ordinance of San Mateo and, in truth, the Hou

and Land Use Regulatory Board had denied the then MMA chairman’s applica

for a locational clearance on this ground.”

On 21 August 1995, the Sangguniang Bayan of San Mateo issued a Resolution

“expressing a strong objection to the planned expansion of the landfill operat

in Pintong Bocaue and requesting President Ramos to disapprove the draft

Presidential Proclamation segregating 71.6 Hectares from Marikina Watershe

Reservation for the landfill site in Pintong Bocaue, San Mateo, Rizal.”

Despite the various objections and recommendations raised by the governme

agencies aforementioned, the Office of the President, through Executive

Secretary Ruben Torres, signed and issued Proclamation No. 635 on 28 Augus

1995, “Excluding from the Marikina Watershed Reservation Certain Parcels o

Land Embraced Therein for Use as Sanitary Landfill Sites and Similar Waste

Disposal Under the Administration of the Metropolitan Manila Development

Authority.” The pertinent portions thereof state:

WHEREAS, to cope with the requirements of the growing population in Metro

Manila and the adjoining provinces and municipalities, certain developed and



open portions of the Marikina Watershed Reservation, upon the

recommendation of the Secretary of the Department of Environment and Natural

Resources should now be excluded form the scope of the reservation;

WHEREAS, while the areas delineated as part of the Watershed Reservations are

ntended primarily for use in projects and/or activities designed to contain and

preserve the underground water supply, other peripheral areas had been

ncluded within the scope of the reservation to provide for such space as may be

needed for the construction of the necessary structures, other related facilities,

as well as other priority projects of government as may be eventually

determined;

WHEREAS, there is now an urgent need to provide for, and develop, the

necessary facilities for the disposal of the waste generated by the population ofMetro Manila and the adjoining provinces and municipalities, to ensure their

sanitary and /or hygienic disposal;

WHEREAS, to cope with the requirements for the development of the waste

disposal facilities that may be used, portions of the peripheral areas of the

Marikina Watershed Reservation, after due consideration and study, have now

been identified as suitable sites that may be used for the purpose;

WHEREAS, the Secretary of the Department of Environment and Natural

Resources has recommended the exclusion of these areas that have been so

dentified from the Marikina Watershed Reservation so that they may then be

developed for the purpose;

NOW, THEREFORE, for and in consideration of the aforecited premises, I, Fidel V.

Ramos, President of the Philippines, by virtue of the powers vested in me by law,

do hereby ordain:

Section 1. General – That certain parcels of land, embraced by the Marikina

Watershed Reservation, were found needed for use in the solid waste disposal

program of the government in Metropolitan Manila, are hereby excluded from

that which is held in reserve and are now made available for use as sanitary

andfill and such other related waste disposal applications.

Section 2. Purpose – The areas being excluded from the Marikina Watershed

Reservation are hereby placed under the administration of the Metropolitan

Manila Development Authority, for development as Sanitary Landfill, and/or for

use in the development of such other related waste disposal facilities that may be

used by the cities and municipalities of Metro Manila and the adjoining province

of Rizal and its municipalities.

Section 3. Technical Description – Specifically, the areas being hereby excludedfrom the Marikina Watershed Reservation consist of two (2) parcels, with an

aggregate area of approximately ONE MILLION SIXTY THOUSAND FIVE HUNDRED

TWENTY NINE (1,060,529) square meters more or less, as follows: x x x x

Section 4. Reservations – The development, construction, use and/or operation

of any facility that may be established within the parcel of land herein excluded

from the Marikina Watershed Reservation shall be governed by existing laws,

rules and regulations pertaining to environmental control and management.

When no longer needed for sanitary landfill purposes or the related waste

disposal activities, the parcels of land subject of this proclamation shall revert

back as part of the Marikina Watershed Reservation, unless otherwise

authorized.

On 06 September 1995, Director Wilfrido S. Pollisco of the Protected Areas andWildlife Bureau wrote the DENR Secretary to express the bureau’s stand against

the dumpsite at Pintong Bocaue, and that “it is our view . . . t hat the mere

presence of a garbage dumpsite inside a watershed reservation is definitely not

compatible with the very purpose and objectives for which the reservation was

established.”

On 24 November 1995, the petitioners Municipality of San Mateo and the

residents of Pintong Bocaue, represented by former Senator Jovito Salonga, sent

a letter to President Ramos requesting him to reconsider Proclamation No. 635.

Receiving no reply, they sent another letter on 02 January 1996 reiterating their

previous request.

On 04 March 1996, then chairman of the Metro Manila Development Authority

(MMDA [formerly MMA]) Prospero I. Oreta addressed a letter to Senator Salonga,

stating in part that:

….

2. Considering the circumstances under which we are pursuing the proje

we are certain you will agree that, unless we are prepared with a better

alternative, the project simply has to be pursued in the best interest of the

greater majority of the population, particularly their health and welfare.”

2.1 The San Mateo Sanitary Landfill services, at least, 38% of the waste dis

site requirements of Metro Manila where an estimated 9 million population

reside.

2.2 Metro Manila is presently estimated to be generating, at least, 15,700

meters of household or municipal waste, a 1.57 hectare of land area will be f

in a month’s time with a pile 31 meters high of garbage, or in a year, theaccumulated volume will require 18.2 hectares.

. . . .

4. The sanitary landfill projects are now on their fifth year of implementation

The amount of effort and money already invested in the project by the

government cannot easily be disregarded, much more set aside in favor of th

few settlers/squatters who chose to ignore the earlier notice given to them t

the area would be used precisely for the development of waste disposal sites

and are now attempting to arouse opposition to the project.

4.2 There is no place within the jurisdiction of Metro Manila, with an area big

enough to accommodate at least 3 to 5 years of waste disposal requirements

x x

4.21 The present site at San Mateo was selected because, at the time

consideration was being made, and up to the present, it is found to have the

attributes that positively respond to the criteria established:

4.21.1 The site was a government property and would not require any outlay

it to be acquired.

4.21.2 It is far from any sizeable community/settlements that could be affect

by the development that would be introduced and yet, was within economic

hauling distance from the areas they are designed to serve.

4.21.21 At the time it was originally decided to locate the landfills at the pr

site, there were not more that fifteen (15) settlers in the area and they had h

established themselves. The community settlements were located far from t

site.

4.21.22 The area was hardly accessible, especially to any public transport. T

area was being served by a public utility jeep that usually made only two (2) t

daily. During the rainy season, it could only be reached by equipping the veh

with tire chains to traverse the slippery muddy trail roads.

4.21.3 There was, at least, seventy-three (73) hectares available at the site.

4.3 While the site was within the Marikina Watershed Reservation under the

administration of the DENR, the site was located at the lower periphery of th

buffer zone; was evaluated to be least likely to affect the underground water

supply; and could, in fact, be excluded from the reservation.

4.31 It was determined to be far from the main water containment area for it

pose any immediate danger of contaminating the underground water, in case

failure in any of the mitigating measures that would be installed.

4.32 It was likewise too far f rom the nearest body of water, the Laguna Lake,

the distance, plus the increasing accumulation of water from other tributarie

toward the lake, would serve to dilute and mitigate any contamination it may

emit, in case one happened.

4.33 To resolve the recurring issue regarding its being located within t

Marikina Watershed Reservation, the site had been recommended by the DE

and approved by the President, to already be excluded from the Marikina

Watershed reservation and placed under the administration of MMDA, since

site was deemed to form part of the land resource reserve then commonly

referred to as buffer zone.

5. Contrary to the impression that you had been given, relocating the sit

this point and time would not be easy, if not impracticable, because aside fro



the investments that had been made in locating the present site, further

nvestments have been incurred in:

5.1 The conduct of the technical studies for the development being implemented.

Through a grant-in-aid from the World Bank, US$600,000 was initially spent for

the conduct of the necessary studies on the area and the design of the landfill.

This was augmented by, at least, another P1.5 million from the government for

the studies to be completed, or a total cost at the time (1990) of approximately

P20 million.

5.2. Additionally, the government has spent approximately P33 million in

mproving on the roadway to make the site accessible from the main

road/highway.

5.3 To achieve the necessary economies in the development of the site, the

utilities had been planned so that their use could be maximized. These include

the access roads, the drainage system, the leacheate collection system, the gas

collection system, and the waste water treatment system. Their construction are

designed so that instead of having to construct independent units for each area,

the use of existing facilities can be maximized through a system of

nterconnection. On the average, the government is spending P14.8 million to

develop a hectare of sanitary landfill area.

6. Despite the preparations and the investments that are now being made on

the project, it is estimated that the total available area, at an accelerated rate of

disposal, assuming that all open dump sites were to be closed, will only last for 39

months.

6.1 We are still hard pressed to achieve advanced development on the sites to

assure against any possible crisis in garbage from again being experienced in

Metro Manila, aside from having to look for the additional sites that may be used

after the capacities shall have been exhausted.

6.2 Faced with the prospects of having the 15,700 cubic meters of garbage

generated daily strewn all over Metro Manila, we are certain you will agree that it

would be futile to even as much as consider a suspension of the waste disposal

operations at the sanitary landfills.

On 22 July 1996, the petitioners filed before the Court of Appeals a civil action for

certiorari, prohibition and mandamus with application for a temporary restraining

order/writ of preliminary injunction. The hearing on the prayer for preliminary

njunction was held on 14 August 1996.

On 13 June 1997, the court a quo rendered a Decision,[15] the dispositive part of

which reads:

WHEREFORE, the petition for certiorari, prohibition and mandamus with

application for a temporary restraining order/writ of preliminary injunction for

ack of cause of action, is hereby DENIED.[16]

Hence, this petition for review on certiorari of the above decision on the

following grounds:

THE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN DELIBERATELY

GNORING THE SIGNIFICANT FACT THAT PRESIDENTIAL PROCLAMATION NO. 635

WAS BASED ON A BRAZEN FORGERY – IT WAS SUPPOSEDLY ISSUED, AS STATED INTHE PROCLAMATION ITSELF AND REPEATEDLY ASSERTED BY RESPONDENTS IN

THEIR COMMENT, ON THE BASIS OF THE ALLEGED RECOMMENDATION OF THE

DENR SECRETARY DATED JUNE 26, 1995 BUT WHICH ASSERTION WAS

DENOUNCED BY THE THEN SECRETARY ANGEL C. ALCALA HIMSELF – IN A SWORN

STATEMENT DATED SEPTEMBER 18, 1996 AND AGAIN DURING THE SPECIAL

HEARING OF THE CASE IN THE COURT OF APPEALS ON NOVEMBER 13, 1996 – AS

A FORGERY SINCE HIS SIGNATURE ON THE ALLEGED RECOMMENDATION HAD

BEEN FALSIFIED, AS NOW ADMITTED BY RESPONDENTS THEMSELVES IN THEIR

COMMENT FILED WITH THE COURT OF APPEALS, THROUGH THE OFFICE OF THE

SOLICITOR GENERAL.

I

THE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN COMPLETEL

IGNORING THE SIGNIFICANT FACT THAT THE RESPONDENTS ARE OPERATING

LANDFILL BASED ON A SPURIOUS ENVIRONMENTAL COMPLIANCE CERTIFICAT

III

THE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENTS DID NOT

VIOLATE R.A. 7586 WHEN THEY ISSUED AND IMPLEMENTED PROCLAMATION

635 CONSIDERING THAT THE WITHDRAWAL OR DISESTABLISHMENT OF A

PROTECTED AREA OR THE MODIFICATION OF THE MARIKINA WATERSHED CA

ONLY BE DONE BY AN ACT OF CONGRESS.

IV

THE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION WHEN IT

DELIBERATELY AND WILLFULLY BRUSHED ASIDE THE UNANIMOUS FINDINGS A

ADVERSE RECOMMENDATIONS OF RESPONSIBLE GOVERNMENT AGENCIES A

NON-PARTISAN OFFICIALS CONCERNED WITH ENVIRONMENTAL PROTECTION

FAVOR OF THE SELF-SERVING, GRATUITOUS ASSERTIONS FOUND IN THE

UNSOLICITED, PARTISAN LETTER OF FORMER MALABON MAYOR, NOW

CHAIRMAN PROSPERO ORETA OF THE MMDA WHO IS AN INTERESTED PARTY

THIS CASE.

V

THE COURT OF APPEALS ERRED WHEN IT READILY SWALLOWED RESPONDEN

ASSERTION THAT THE SAN MATEO DUMPSITE “IS LOCATED IN THE ‘BUFFER Z

OF THE RESERVATION” AND IS THEREFORE OUTSIDE OF ITS BOUNDARIES, AN

EVEN DECLARED IN ITS DECISION THAT IT TOOK “SERIOUS NOTE” OF THIS

PARTICULAR ARGUMENT.

VI

THE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION WHEN IT

ENCROACHED ON THE FUNCTION OF CONGRESS BY EXPRESSING ITS UNJUSTI

FEAR OF MINI-SMOKEY MOUNTAINS PROLIFERATING IN METRO MANILA AND

JUSTIFYING ITS DECISION IN FAVOR OF “AN INTEGRATED SYSTEM OF SOLID

WASTE MANAGEMENT LIKE THE SAN MATEO LANDFILL.

On 05 January 1998, while the appeal was pending, the petitioners filed a Mo

for Temporary Restraining Order,[17] pointing out that the effects of the El N

phenomenon would be aggravated by the relentless destruction of the MarikWatershed Reservation. They noted that respondent MMDA had, in the

meantime, continued to expand the area of the dumpsite inside the Marikina

Watershed Reservation, cutting down thousands of mature fruit trees and fo

trees, and leveling hills and mountains to clear the dumping area. Garbage

disposal operations were also being conducted on a 24-hour basis, with hund

of metric tons of wastes being dumped daily, including toxic and infectious

hospital wastes, intensifying the air, ground and water pollution.[18]

The petitioners reiterated their prayer that respondent MMDA be temporari

enjoined from further dumping waste into the site and from encroaching into

area beyond its existing perimeter fence so as not to render the case moot a

academic.

On 28 January 1999, the petitioners filed a Motion for Early Resolution,[19]

calling attention to the continued expansion of the dumpsite by the MMDA t

caused the people of Antipolo to stage a rally and barricade the Marcos Highto stop the dump trucks from reaching the site for five successive days from 1

January 1999. On the second day of the barricade, all the municipal mayors o

the province of Rizal openly declared their full support for the rally, and notif

the MMDA that they would oppose any further attempt to dump garbage in

province.[20]

As a result, MMDA officials, headed by then Chairman Jejomar Binay, agreed

abandon the dumpsite after six months. Thus, the municipal mayors of Rizal

particularly the mayors of Antipolo and San Mateo, agreed to the use of the

dumpsite until that period, which would end on 20 July 1999.[21]

On 13 July 1999, the petitioners filed an Urgent Second Motion for Early

Resolution[22] in anticipation of violence between the conflicting parties as t

date of the scheduled closure of the dumpsite neared.



On 19 July 1999, then President Joseph E. Estrada, taking cognizance of the

gravity of the problems in the affected areas and the likelihood that violence

would erupt among the parties involved, issued a Memorandum ordering the

closure of the dumpsite on 31 December 2000.[23] Accordingly, on 20 July 1999,

the Presidential Committee on Flagship Programs and Projects and the MMDA

entered into a MOA with the Provincial Government of Rizal, the Municipality of

San Mateo, and the City of Antipolo, wherein the latter agreed to further extend

the use of the dumpsite until its permanent closure on 31 December 2000.[24]

On 11 January 2001, President Estrada directed Department of Interior and Local

Government Secretary Alfredo Lim and MMDA Chairman Binay to reopen the San

Mateo dumpsite “in view of the emergency situation of uncollected garbage in

Metro Manila, resulting in a critical and imminent health and sanitation

epidemic.”*25+

Claiming the above events constituted a “clear and present danger of violence

erupting in the affected areas,” the petitioners filed an Urgent Petition for

Restraining Order[26] on 19 January 2001.

On 24 January 2001, this Court issued the Temporary Restraining Order prayed

for, “effective immediately and until further orders.”*27+

Meanwhile, on 26 January 2001, Republic Act No. 9003, otherwise known as “The

Ecological Solid Waste Management Act of 2000,” was signed into law by

President Estrada.

Thus, the petitioners raised only two issues in their Memorandum[28] of 08

February 2005: 1) whether or not respondent MMDA agreed to the permanent

closure of the San Mateo Landfill as of December 2000, and 2) whether or not the

permanent closure of the San Mateo landfill is mandated by Rep. Act No. 9003.

We hold that the San Mateo Landfill will remain permanently closed.

Although the petitioners may be deemed to have waived or abandoned the

ssues raised in their previous pleadings but not included in the

memorandum,[29] certain events we shall relate below have inclined us to

address some of the more pertinent issues raised in the petition for the guidance

of the herein respondents, and pursuant to our symbolic function to educate the

bench and bar.[30]

The law and the facts indicate that a mere MOA does not guarantee the

dumpsite’s permanent closure.

The rally and barricade staged by the people of Antipolo on 28 January 1999, with

the full support of all the mayors of Rizal Province caused the MMDA to agree

that it would abandon the dumpsite after six months. In return, the municipalmayors allowed the use of the dumpsite until 20 July 1999.

On 20 July 1999, with much fanfare and rhetoric, the Presidential Committee on

Flagship Programs and Projects and the MMDA entered into a MOA with the

Provincial Government of Rizal, the Municipality of San Mateo, and the City of

Antipolo, whereby the latter agreed to an extension for the use of the dumpsite

until 31 December 2000, at which time it would be permanently closed.

Despite this agreement, President Estrada directed Department of Interior and

Local Government Secretary Alfredo Lim and MMDA Chairman Binay to reopen

the San Mateo dumpsite on 11 January 2001, “in view of the emergency situation

of uncollected garbage in Metro Manila, resulting in a critical and imminent

health and sanitation epidemic;” our issuance of a TRO on 24 January 2001

prevented the dumpsite’s reopening.

Were it not for the TRO, then President Estrada’s instructions would have beenawfully carried out, for as we observed in Oposa v. Factoran, the freedom of

contract is not absolute. Thus:

….. In Abe vs. Foster Wheeler Corp., this Court stated: "The freedom of contract,

under our system of government, is not meant to be absolute. The same is

understood to be subject to reasonable legislative regulation aimed at the

promotion of public health, moral, safety and welfare. In other words, the

constitutional guaranty of non-impairment of obligations of contract is limited by

the exercise of the police power of the State, in the interest of public health,

safety, moral and general welfare." The reason for this is emphatically set forth in

Nebia vs. New York, quoted in Philippine American Life Insurance Co. vs. Auditor

General, to wit: "'Under our form of government the use of property and the

making of contracts are normally matters of private and not of public concern.

The general rule is that both shall be free of governmental interference. But

neither property rights nor contract rights are absolute; for government cannot

exist if the citizen may at will use his property to the detriment of his fellows,

exercise his freedom of contract to work them harm. Equally fundamental w

the private right is that of the public to regulate it in the common interest.'"

short, the non-impairment clause must yield to the police power of the state

(Citations omitted, emphasis supplied)

We thus feel there is also the added need to reassure the residents of the

Province of Rizal that this is indeed a final resolution of this controversy, for a

brief review of the records of this case indicates two self-evident facts. First,

San Mateo site has adversely affected its environs, and second, sources of wa

should always be protected.

As to the first point, the adverse effects of the site were reported as early as

June 1989, when the Investigation Report of the Community Environment anNatural Resources Officer of DENR-IV-1 stated that the sources of domestic w

supply of over one thousand families would be adversely affected by the dum

operations.[31] The succeeding report included the observation that the use

the areas as dumping site greatly affected the ecological balance and

environmental factors of the community.[32] Respondent LLDA in fact inform

the MMA that the heavy pollution and risk of disease generated by dumpsite

rendered the location of a dumpsite within the Marikina Watershed Reservat

incompatible with its program of upgrading the water quality of the Laguna L

[33]

The DENR suspended the site’s ECC after investigations revealed ground slum

and erosion had resulted from improper development of the site.[34] Anoth

Investigation Report[35] submitted by the Regional Technical Director to the

DENR reported respiratory illnesses among pupils of a primary school located

approximately 100 meters from the s ite, as well as the constant presence of

flies and windblown debris all over the school’s playground. It further reitera

reports that the leachate treatment plant had been eroded twice already,

contaminating the nearby creeks that were sources of potable water for the

residents. The contaminated water was also found to flow to the Wawa Dam

Boso-boso River, which in turn empties into Laguna de Bay.

This brings us to the second self-evident point. Water is life, and must be sav

at all costs. In Collado v. Court of Appeals,[36] we had occasion to reaffirm o

previous discussion in Sta. Rosa Realty Development Corporation v. Court of

Appeals,[37+ on the primordial importance of watershed areas, thus: “The m

important product of a watershed is water, which is one of the most importa

human necessities. The protection of watersheds ensures an adequate supp

water for future generations and the control of flashfloods that not only dam

property but also cause loss of lives. Protection of watersheds is an

“intergenerational” responsibility that needs to be answered now.*38+

Three short months before Proclamation No. 635 was passed to avert the

garbage crisis, Congress had enacted the National Water Crisis Act*39+ to “ad

urgent and effective measures to address the nationwide water crisis which

adversely affects the health and well-being of the population, food productio

and industrialization process. One of the issues the law sought to address wa

the “protection and conservation of watersheds.”*40+

In other words, while respondents were blandly declaring that “the rea

for the creation of the Marikina Watershed Reservation, i.e., to protect Marik

River as the source of water supply of the City of Manila, no longer exists,” th

rest of the country was gripped by a shortage of potable water so serious, it

necessitated its own legislation.

Respondents’ actions in the face of such grave environmental consequences

all logic. The petitioners rightly noted that instead of providing solutions, the

have, with unmitigated callousness, worsened the problem. It is this readinewreak irrevocable damage on our natural heritage in pursuit of what is exped

that has compelled us to rule at length on this issue. We ignore the unrelent

depletion of our natural heritage at our peril.

I.

THE REORGANIZATION ACT OF THE DENR DEFINES AND

LIMITS ITS POWERS OVER THE COUNTRY’S NATURAL RESOURCES

The respondents next point out that the Marikina Watershed Reservation, an

thus the San Mateo Site, is located in the public domain. They allege that as

neither the Province of Rizal nor the municipality of San Mateo has the powe



control or regulate its use since properties of this nature belong to the national,

and not to the local governments.

t is ironic that the respondents should pursue this line of reasoning.

n Cruz v. Secretary of Environment and Natural Resources,[41] we had occasion

to observe that “(o)ne of the fixed and dominating objectives of the 1935

Constitutional Convention was the nationalization and conservation of the

natural resources of the country. There was an overwhelming sentiment in the

convention in favor of the principle of state ownership of natural resources and

the adoption of the Regalian doctrine. State ownership of natural resources was

seen as a necessary starting point to secure recognition of the state’s power to

control their disposition, exploitation, development, or utilization.”*42+

The Regalian doctrine was embodied in the 1935 Constitution, in Section 1 of

Article XIII on “Conservation and Utilization of Natural Resources.” This was

reiterated in the 1973 Constitution under Article XIV on the “National Economy

and the Patrimony of the Nation,” and reaffirmed in the 1987 Constitution in

Section 2 of Article XII on “National Economy and Patrimony,” to wit:

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and

other mineral oils, all forces of potential energy, fisheries, forests or timber,

wildlife, flora and fauna, and other natural resources are owned by the State.

With the exception of agricultural lands, all other natural resources shall not be

alienated. The exploration, development and utilization of natural resources shall

be under the full control and supervision of the State. The State may directly

undertake such activities or it may enter into co-production, joint venture, or

production-sharing agreements with Filipino citizens, or corporations or

associations at least sixty per centum of whose capital is owned by such citizens.

Such agreements may be for a period not exceeding twenty-five years, renewable

for not more than twenty-five years, and under such terms and conditions as may

be provided by law. In cases of water rights for irrigation, water supply, fisheries,

or industrial uses other than the development of water power, beneficial use may

be the measure and limit of the grant.[43]

Clearly, the state is, and always has been, zealous in preserving as much of our

natural and national heritage as it can, enshrining as it did the obligation to

preserve and protect the same within the text of our fundamental law.

t was with this objective in mind that the respondent DENR was mandated by

then President Corazon C. Aquino, under Section 4 of Executive Order No. 192,

*44+ otherwise known as “The Reorganization Act of the Department of

Environment and Natural Resources,” to be “the primary government agency

responsible for the conservation, management, development and proper use ofthe country’s environment and natural resources, specifically forest and grazing

ands, mineral resources, including those in reservation and watershed areas, and

ands of the public domain. It is also responsible for the licensing and regulation

of all natural resources as may be provided for by law in order to ensure

equitable sharing of the benefits derived therefrom for the welfare of the present

and future generations of Filipinos.”

We expounded on this matter in the landmark case of Oposa v. Factoran,[45]

where we held that the right to a balanced and healthful ecology is a

fundamental legal right that carries with it the correlative duty to refrain from

mpairing the environment. This right implies, among other things, the judicious

management and conservation of the country’s resources, which duty is reposed

n the DENR under the aforequoted Section 4 of Executive Order No. 192.

Moreover:

Section 3 (of E. O. No. 192) makes the following statement of policy:

SEC. 3. Declaration of Policy. - It is hereby declared the policy of the State to

ensure the sustainable use, development, management, renewal, and

conservation of the country's forest, mineral, land, off-shore areas and other

natural resources, including the protection and enhancement of the quality of the

environment, and equitable access of the different segments of the population to

the development and use of the country's natural resources, not only for the

present generation but for future generations as well. It is also the policy of the

state to recognize and apply a true value system including social and

environmental cost implications relative to their utilization; development and

conservation of our natural resources. (Emphasis ours)

This policy declaration is substantially re-stated in Title XIV, Book IV of the

Administrative Code of 1987, specifically in Section 1 thereof which reads:

SEC. 1. Declaration of Policy. - (1) The State shall ensure, for the benefit of th

Filipino people, the full exploration and development as well as the judicious

disposition, utilization, management, renewal and conservation of the count

forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other nat

resources, consistent with the necessity of maintaining a sound ecological

balance and protecting and enhancing the quality of the environment and th

objective of making the exploration, development and utilization of such natu

resources equitably accessible to the different segments of the present as we

future generations.

(2) The State shall likewise recognize and apply a true value system that take

into account social and environmental cost implications relative to the utiliza

development and conservation of our natural resources.

The above provision stresses “the necessity of maintaining a sound ecologica

balance and protecting and enhancing the quality of the environment.”*46+

(Emphasis ours.)

In sum, the Administrative Code of 1987 and Executive Order No. 192 entrust

DENR with the guardianship and safekeeping of the Marikina Watershed

Reservation and our other natural treasures. However, although the DENR, a

agency of the government, owns the Marikina Reserve and has jurisdiction ov

the same, this power is not absolute, but is defined by the declared policies o

state, and is subject to the law and higher authority. Section 2, Title XIV, Boo

of the Administrative Code of 1987, while specifically referring to the mandat

the DENR, makes particular reference to the agency’s being subject to law an

higher authority, thus:

SEC. 2. Mandate. - (1) The Department of Environment and Natural

Resources shall be primarily responsible for the implementation of the forego

policy.

(2) It shall, subject to law and higher authority, be in charge of carrying out t

State's constitutional mandate to control and supervise the exploration,

development, utilization, and conservation of the country's natural resources

With great power comes great responsibility. It is the height of irony that the

public respondents have vigorously arrogated to themselves the power to co

the San Mateo site, but have deftly ignored their corresponding responsibilit

guardians and protectors of this tormented piece of land.

II.

THE LOCAL GOVERNMENT CODE GIVES TO LOCAL GOVERNMENT UNITS ALL T

NECESSARY POWERS TO PROMOTE THE GENERAL WELFARE OF THEIR

INHABITANTS

The circumstances under which Proclamation No. 635 was passed also violate

Rep. Act No. 7160, or the Local Government Code.

Contrary to the averment of the respondents, Proclamation No. 635, which w

passed on 28 August 1995, is subject to the provisions of the Local Governme

Code, which was approved four years earlier, on 10 October 1991.

Section 2(c) of the said law declares that it is the policy of the state “to requirnational agencies and offices to conduct periodic consultations with appropr

local government units, non-governmental and people's organizations, and o

concerned sectors of the community before any project or program is

implemented in their respective jurisdictions.” Likewise, Section 27 requires

consultations before a program shall be implemented by government author

and the prior approval of the sanggunian is obtained.

During the oral arguments at the hearing for the temporary restraining order

Director Uranza of the MMDA Solid Waste Management Task Force declared

before the Court of Appeals that they had conducted the required consultatio

However, he added that “(t)his is the problem, sir, the officials we may have

talking with at the time this was established may no longer be incumbent and

is our difficulty now. That is what we are trying to do now, a continuing

dialogue.”*47+



The ambivalent reply of Director Uranza was brought to the fore when, at the

height of the protest rally and barricade along Marcos Highway to stop dump

trucks from reaching the site, all the municipal mayors of the province of Rizal

openly declared their full support for the rally and notified the MMDA that they

would oppose any further attempt to dump garbage in their province.[48]

The municipal mayors acted within the scope of their powers, and were in fact

fulfilling their mandate, when they did this. Section 16 allows every local

government unit to “exercise the powers expressly granted, those necessarily

mplied therefrom, as well as powers necessary, appropriate, or incidental for its

efficient and effective governance, and those which are essential to the

promotion of the general welfare,” which involve, among other things,

“promot(ing) health and safety, enhance(ing) the right of the people to a

balanced ecology, and preserv(ing) the comfort and convenience of theirnhabitants.”

n Lina , Jr. v. Paño,[49] we held that Section 2 (c), requiring consultations with

the appropriate local government units, should apply to national government

projects affecting the environmental or ecological balance of the particular

community implementing the project. Rejecting the petitioners’ contention that

Sections 2(c) and 27 of the Local Government Code applied mandatorily in the

setting up of lotto outlets around the country, we held that:

From a careful reading of said provisions, we find that these apply only to

national programs and/or projects which are to be implemented in a particular

ocal community. Lotto is neither a program nor a project of the national

government, but of a charitable institution, the PCSO. Though sanctioned by the

national government, it is far fetched to say that lotto falls within the

contemplation of Sections 2 (c) and 27 of the Local Government Code.

Section 27 of the Code should be read in conjunction with Section 26

thereof. Section 26 reads:

SECTION 26. Duty of National Government Agencies in the Maintenance of

Ecological Balance. It shall be the duty of every national agency or government-

owned or controlled corporation authorizing or involved in the planning and

mplementation of any project or program that may cause pollution, climatic

change, depletion of non-renewable resources, loss of crop land, range-land, or

forest cover, and extinction of animal or plant species, to consult with the local

government units, nongovernmental organizations, and other sectors concerned

and explain the goals and objectives of the project or program, its impact upon

the people and the community in terms of environmental or ecological balance,

and the measures that will be undertaken to prevent or minimize the adverse

effects thereof.

Thus, the projects and programs mentioned in Section 27 should benterpreted to mean projects and programs whose effects are among those

enumerated in Section 26 and 27, to wit, those that: (1) may cause pollution; (2)

may bring about climatic change; (3) may cause the depletion of non-renewable

resources; (4) may result in loss of crop land, range-land, or forest cover; (5) may

eradicate certain animal or plant species from the face of the planet; and (6)

other projects or programs that may call for the eviction of a particular group of

people residing in the locality where these will be implemented. Obviously, none

of these effects will be produced by the introduction of lotto in the province of

Laguna. (emphasis supplied)

We reiterated this doctrine in the recent case of Bangus Fry Fisherfolk v.

Lanzanas,[50] where we held that there was no statutory requirement for the

sangguniang bayan of Puerto Galera to approve the construction of a mooring

facility, as Sections 26 and 27 are inapplicable to projects which are not

environmentally critical.

Moreover, Section 447, which enumerates the powers, duties and functions of

the municipality, grants the sangguniang bayan the power to, among other

things, “enact ordinances, approve resolutions and appropriate funds for the

general welfare of the municipality and its inhabitants pursuant to Section 16 of

th(e) Code.” These include:

(1) Approving ordinances and passing resolutions to protect the environment

and impose appropriate penalties for acts which endanger the environment, such

as dynamite fishing and other forms of destructive fishing, illegal logging and

smuggling of logs, smuggling of natural resources products and of endangered

species of flora and fauna, slash and burn farming, and such other activities which

result in pollution, acceleration of eutrophication of rivers and lakes, or of

ecological imbalance; [Section 447 (1)(vi)]

(2) Prescribing reasonable limits and restraints on the use of property within

the jurisdiction of the municipality, adopting a comprehensive land use plan for

the municipality, reclassifying land within the jurisdiction of the city, subject to

the pertinent provisions of this Code, enacting integrated zoning ordinances

consonance with the approved comprehensive land use plan, subject to exist

laws, rules and regulations; establishing fire limits or zones, particularly in

populous centers; and regulating the construction, repair or modification of

buildings within said fire limits or zones in accordance with the provisions of t

Code; [Section 447 (2)(vi-ix)]

(3) Approving ordinances which shall ensure the efficient and effective

delivery of the basic services and facilities as provided for under Section 17 of

Code, and in addition to said services and facilities, …providing for the

establishment, maintenance, protection, and conservation of communal fore

and watersheds, tree parks, greenbelts, mangroves, and other similar forest

development projects ….and, subject to existing laws, establishing and provid

for the maintenance, repair and operation of an efficient waterworks systemsupply water for the inhabitants and purifying the source of the water supply

regulating the construction, maintenance, repair and use of hydrants, pumps

cisterns and reservoirs; protecting the purity and quantity of the water suppl

the municipality and, for this purpose, extending the coverage of appropriate

ordinances over all territory within the drainage area of said water supply an

within one hundred (100) meters of the reservoir, conduit, canal, aqueduct,

pumping station, or watershed used in connection with the water service; an

regulating the consumption, use or wastage of water.” *Section 447 (5)(i) & (v

Under the Local Government Code, therefore, two requisites must be met be

a national project that affects the environmental and ecological balance of lo

communities can be implemented: prior consultation with the affected local

communities, and prior approval of the project by the appropriate sanggunia

Absent either of these mandatory requirements, the project’s implementatio

illegal.

III.

WASTE DISPOSAL IS REGULATED BY THE ECOLOGICAL

SOLID WASTE MANAGEMENT ACT OF 2000

The respondents would have us overlook all the abovecited laws because the

Mateo site is a very expensive - and necessary - fait accompli. The responden

cite the millions of pesos and hundreds of thousands of dollars the governme

has already expended in its development and construction, and the lack of an

viable alternative sites.

The Court of Appeals agreed, thus:

During the hearing on the injunction, questions were also asked. “What will

happen if the San Mateo Sanitary Landfill is closed? Where will the daily

collections of garbage be disposed of and dumped?” Atty. Mendoza, one of t

lawyers of the petitioners, answered that each city/municipality ‘must take c

of its own.’ Reflecting on that answer, we are troubled: will not the prolifera

of separate open dumpsites be a more serious health hazard (which ha(s) to

addressed) to the residents of the community? What with the galloping

population growth and the constricting available land area in Metro Manila?

There could be a ‘mini-Smokey Mountain’ in each of the ten cities…comprisin

Metro Manila, placing in danger the health and safety of more people. Dama

to the environment could be aggravated by the increase in number of open

dumpsites. An integrated system of solid waste management, like the San M

Sanitary Landfill, appears advisable to a populous metropolis like the Greater

Metro Manila Area absent access to better technology.[51]

We acknowledge that these are valid concerns. Nevertheless, the lower cou

should have been mindful of the legal truism that it is the legislature, by its ve

nature, which is the primary judge of the necessity, adequacy, wisdom,

reasonableness and expediency of any law.[52]

Moreover, these concerns are addressed by Rep. Act No. 9003. Approved on

January 2001, “The Ecological Solid Waste Management Act of 2000” was

enacted pursuant to the declared policy of the state “to adopt a systematic,

comprehensive and ecological solid waste management system which shall

ensure the protection of public health and environment, and utilize

environmentally sound methods that maximize the utilization of valuable

resources and encourage resource conservation and recovery.”*53+ It requir

the adherence to a Local Government Solid Waste Management Plan with re

to the collection and transfer, processing, source reduction, recycling, compo



and final disposal of solid wastes, the handling and disposal of special wastes,

education and public information, and the funding of solid waste management

projects.

The said law mandates the formulation of a National Solid Waste Management

Framework, which should include, among other things, the method and

procedure for the phaseout and the eventual closure within eighteen months

from effectivity of the Act in case of existing open dumps and/or sanitary landfills

ocated within an aquifer, groundwater reservoir or watershed area.[54] Any

andfills subsequently developed must comply with the minimum requirements

aid down in Section 40, specifically that the site selected must be consistent with

the overall land use plan of the local government unit, and that the site must be

ocated in an area where the landfill’s operation will not detrimentally affect

environmentally sensitive resources such as aquifers, groundwater reservoirs orwatershed areas.[55]

This writes finis to any remaining aspirations respondents may have of reopening

the San Mateo Site. Having declared Proclamation No. 635 illegal, we see no

compelling need to tackle the remaining issues raised in the petition and the

parties’ respective memoranda.

A final word. Laws pertaining to the protection of the environment were

not drafted in a vacuum. Congress passed these laws fully aware of the perilous

state of both our economic and natural wealth. It was precisely to minimize the

adverse impact humanity’s actions on all aspects of the natural world, at the

same time maintaining and ensuring an environment under which man and

nature can thrive in productive and enjoyable harmony with each other, that

these legal safeguards were put in place. They should thus not be so lightly cast

aside in the face of what is easy and expedient.

WHEREFORE, the petition is GRANTED. The Decision of the Court of

Appeals in CA-G.R. SP No. 41330, dated 13 June 1997, is REVERSED and SET

ASIDE. The temporary restraining order issued by the Court on 24 January 2001 is

hereby made permanent.

ALVAREZ V PICOP RESOUCES

On the line are three consolidated Petitions, all arising from the 11 October 2002

Quezon City Regional Trial Court (RTC) Decision1 granting the Petition for

Mandamus filed by Paper Industries Corporation of the Philippines (PICOP). The

Court of Appeals affirmed the 11 October 2002 RTC Decision, with modification,

n a 19 February 2004 Decision.2

n G.R. No. 162243, then Department of Environment and Natural Resources(DENR) Secretary Heherson T. Alvarez, who was later successively substituted by

subsequent DENR Secretaries Elisea G. Gozun and Angelo T. Reyes, assails the 19

February 2004 Decision insofar as it granted the Petition for Mandamus. In G.R.

No. 164516, PICOP assails the same Decision insofar as it deleted the imposition

of damages against then Secretary Alvarez. Secretary Reyes filed a third Petition

docketed as G.R. No. 171875, assailing the 16 December 2004 Amended

Decision3 of the Court of Appeals lifting the Writ of Preliminary Injunction that

enjoined the enforcement of the 11 October 2002 Decision and 10 February 2003

Orders of the RTC.

FACTS

The facts, culled from the records of the three consolidated petitions, are as

follows:

On 24 May 1952, PICOP’s predecessor, Bislig Bay Lumber Co., Inc. (BBLCI) wasgranted Timber License Agreement (TLA) No. 43.4 The TLA was amended on 26

April 1953 and 4 March 1959. As amended, TLA No. 43 covers an area of 75,545

hectares in Surigao del Sur, Agusan del Sur, Compostela Valley, and Davao

Oriental.

Allegedly sometime in 1969, the late President Ferdinand E. Marcos issued a

presidential warranty to BBLCI, confirming that TLA No. 43 "definitely establishes

the boundary lines of *BBLCI’s+ concession area."5

TLA No. 43, as amended, expired on 26 April 1977. It was renewed on 7 October

1977 for another 25 years to "terminate on April 25, 2002."6

On 23 December 1999, then DENR Secretary Antonio H. Cerilles promulgated

DENR Administrative Order (DAO) No. 99-53 which had for its subject, the

"Regulations Governing the Integrated Forest Management Program (IFMP)."7

In a 28 August 2000 letter to the Community Environment and Natural Resou

Office (CENRO), DENR-Region XIII-D4, Bislig, Surigao del Sur, PICOP signified i

intention to convert its TLA No. 43 into an Integrated Forest Management

Agreement (IFMA) invoking the provisions of Section 9, Chapter III of DAO No

53.8

Acting on the said letter, Forester III Trifino M. Peregrino, In-Charge, Office of

CENRO, wrote a letter dated 1 September 2000 to PICOP’s resident manager

Tabon, Bislig, Surigao del Sur, informing PICOP "that we will consider said lett

an advance notice considering that it is yet premature to act on your request

since we are yet in CY 2000."9

In a 24 January 2001 letter, Neolito Frondozo, Group Manager, Forest OperatManager of PICOP, requested for a favorable indorsement of their letter of in

from the CENRO of the DENR, Region XIII-D4 in Bislig City. This was followed

another letter dated 25 January 2001 of Wilfredo D. Fuentes, Vice President a

Resident Manager of PICOP, to the Regional Executive Director (RED), DENR,

Caraga Region XIII in Ambago, Butuan City, likewise, requesting for a favorabl

indorsement of their letter of intent to the DENR Secretary.10

The Officer-In-Charge (OIC), Regional Executive Director Constantino A. Paye

in a 6 March 2001 Memorandum, forwarded PICOP’s letter of intent dated 28

August 2000 to the DENR Secretary informing the latter that the DENR Carag

Region XIII in Ambago, Butuan City, had created a team tasked to conduct a

performance evaluation on PICOP on the said TLA pursuant to DAO No. 99-53

Subsequently, Elias R. Seraspi, Jr., RED, DENR, Caraga Region XIII in Ambago,

Butuan City, submitted a 31 July 2001 Memorandum to the DENR Secretary o

the performance evaluation of PICOP on its TLA No. 43. Paragraph 11 of the s

Memorandum reads:

Hence, it is imperative to chart a good forest policy direction for the

management, development and protection of TLA No. 43 after it expires on A

26, 2002 for the purpose of sustainable forest management of the area in sup

of national development. With this vision, the proper evaluation to consider

request for automatic conversion of TLA No. 43 to IFMA pursuant to Section 9

DENR A.O. No. 99-53, upon its expiration on April 26, 2002 is hereby

recommended.12

Attached to said Memorandum, inter alia, were the 11 July 2001 Report and

July 2001 Supplemental Report of the Performance Evaluation Team created

conduct such performance evaluation indicating violations by PICOP of existi

DENR Rules and Regulations governing TLA No. 43, such as the non-submissio

its five-year forest protection plan and seven-year reforestation plan as requiby the DENR rules and regulations. The said 31 July 2001 Memorandum was

forwarded to the Forest Management Bureau (FMB) for appropriate action a

recommendation.13

Sometime in September 2001, the DENR Secretary was furnished a copy of Fo

Management Specialist II (FMS II) Teofila L. Orlanes’ 24 September 2001

Memorandum concerning alleged unpaid and overdue forest charges of

respondent on TLA No. 43. Attached thereto was a 19 September 2001

Memorandum of Amelia D. Arayan, Bill Collector of the DENR R13-14, Bislig C

likewise indicating purported unpaid and overdue forest charges by PICOP on

TLA No. 43.14

Said Memorandum was referred to FMB Director Romeo T. Acosta, who dire

FMB Senior Forest Management Specialist (SFMS) Ignacio Evangelista to proc

to Region 13 to gather forestry-related data and validate the report containe

the respective Memoranda of Orlanes and Arayan.15 SFMS Evangelista foundthat the 8 May 2001 to 7 July 2001 forest charges adverted to in the Orlanes

Arayan Memoranda was belatedly filed. He also found that PICOP had not pa

regular forest charges covering the period of 22 September 2001 to 26 April 2

in the total amount of P15,056,054.05.16 Moreso, he discovered that from 1

to 30 August 2002, PICOP was late in paying some of its forest charges in 199

and was consistently late in paying all its forestry charges from 1997 onwards

The overdue and unpaid forest charges (including penalties, interests and

surcharges) of PICOP total P150,169,485.02. Its silvicultural fees amount to

P2,366,901.00 from 1996 up to 30 August 2002. In all, PICOP has an outstand

and overdue total obligation on its forest charges in the amount of

P167,592,440.90 as of 30 August 2002.18



Thus, FMB Director Acosta submitted a 5 October 2001 Memorandum to the

DENR Secretary concerning PICOP’s application for conversion of its TLA No. 43

nto an IFMA, viz:

RECOMMENDATION

The conversion of the TLA into IFMA is primarily aimed at sustaining the raw

materials for the continuous operation of the integrated wood processing plant

of the company. However, the very complex issues presented cannot just be

gnored and have to be fully addressed to before further appropriate action is

taken on the application for conversion. In the absence of categorical comments

and recommendation of the regional office to resolve the issue, it is

recommended that a transition team composed of the following be created: x x

x.19

n lieu of a transition team, the DENR Secretary constituted a negotiating team by

virtue of Special Order No. 2001-698 dated 23 October 2001 composed of

Undersecretary Ramon J.P. Paje as chairman, with the following as members:

Undersecretary Gregorio V. Cabantac and FMB Assistant Director Neria A. Andin.

The team was authorized to negotiate for such terms and conditions as are

advantageous to the Government.20

The DENR Secretary sent a 25 October 2001 letter to PICOP, through its

president, requesting him to designate its representative/s to discuss with the

DENR negotiating team "the conditions and details of the said IFMA including the

production sharing arrangement between PICOP and the government."21

Since PICOP failed to send a representative, and considering that TLA No. 43 was

about to expire, DENR Undersecretary Paje called for a meeting on 21 March

2002. It was only then, or almost five months from the receipt of the 25 October

2001 letter from the DENR Secretary, that PICOP sent its representatives to the

DENR.22

On 9 April 2002, the DENR Negotiating Team issued Resolution No. 1, series of

2002, creating a Technical Working Committee (TWC) to provide technical

assistance to the negotiating team composed of representatives from both DENR

and PICOP.23 On 10 April 2002, the members of the TWC met and discussed the

findings of the Performance Evaluation Team that PICOP has neither submitted

ts Five-Year Forest Protection Plan nor presented its Seven-Year Reforestation

Plan, both being required by DENR rules and regulations. In the same meeting,

PICOP agreed to secure and submit a clearance from the National Commission on

ndigenous Peoples (NCIP) as required by Section 59 of the Indigenous Peoples’

Rights Act (IPRA).24

On 15 April 2002, another TWC meeting was conducted, wherein the proposedvalidation of PICOP’s overall performance "as part of the evaluation process for

the conversion of the TLA into an IFMA" was discussed with PICOP

representatives being given copies of the performance evaluation of PICOP on its

TLA No. 43.25 PICOP’s representatives were subsequently requested to prepare a

map showing by categories the area planted with trees in compliance with

PICOP’s reforestation requirements.26

n the next TWC meeting on 19 April 2002, PICOP’s representatives were asked of

their compliance with their agreement during the 10 April 2002 meeting that they

should have submitted a list of stockholders on 15 April 2002. The PICOP

representatives did not submit such list and instead inquired on the TWC’s

nterpretation of the 25 October 2001 letter of the DENR Secretary to PICOP,

which provides in full, thus:

25 October 2001

MR. TEODORO G. BERNARDINO

President

PICOP Resources Incorporated

2nd Flr, Moredel Building

2280 Pasong Tamo Extension

Makati City

Dear Mr. Bernardino:

Consistent with our attached Memorandum to Her Excellency, the President,

dated 17 October 2001 and in response to your Letter of Intent dated 25

February 2001, we wish to inform you that, pursuant to DENR Administrative

Order No. 99-53, we have cleared the conversion of PICOP’s Timber License

Agreement (TLA) No. 43 to Integrated Forest Management Agreement (IFMA

effective from the expiration of said TLA on April 26, 2002.

In this regard, you are hereby requested to designate PICOP’s representative

discuss with the DENR Team, created under Special Order No. 2001-638, the

conditions and details of the said IFMA, including the production sharing

agreement between PICOP and the government.

For your information and guidance.

Very truly yours,

(sgd)

HEHERSON T. ALVAREZ

Secretary27

It was the position of the DENR members of the TWC that PICOP’s application

the IFMA conversion should undergo the process as provided in DAO No. 99-

PICOP representative Atty. Caingat, however, claimed that "the TLA has been

converted" and suggested the suspension of the meeting as they would subm

written position on the matter the following day.28

On 22 April 2002, the TWC members of the DENR received a letter from PICO

dated 18 April 2002 insisting that "the conversion of TLA No. 43 into IFMA ha

already been completed" and indicated that they had "no choice except to

decline participation in the ongoing meeting and bring our issues to the prop

public and legal forum."29

On 24 April 2002, the TWC submitted a Memorandum dated 22 April 2002 to

Undersecretary for Operations and Undersecretary for Legal, Lands and

International Affairs of the DENR, enumerating the salient points taken up du

the TWC meetings. This includes the performance evaluation report of the DE

Regional Office covering the period from 24 June 1999 to 23 June 2000. The

report states that PICOP has not submitted its 5-Year Forest Protection Plan a

7-Year Reforestation Plan; that it has unpaid and overdue forest charges; and

failure to secure a clearance from the Regional Office of the NCIP considering

presence of Indigenous Peoples (IPs) in the area and Certificate of Ancestral

Domain Claims issued within the area.

The DENR Secretary instructed the RED, Caraga Region, to coordinate with PI

and reiterate the requirements for conversion of TLA No. 43 into IFMA.

Thereafter, the FMB Director received a letter dated 6 August 2002 from NCI

Chairperson Atty. Evelyn S. Dunuan informing him that, based on their record

no certification has been issued to PICOP concerning its application for

conversion of its TLA No. 43 into IFMA, "as there has never been an applicatio

endorsement of such application to our office."30

On 12 August 2002, a meeting was held at the Office of the President of the

Philippines presided by Undersecretary Jose Tale and Undersecretary Jake

Lagonera of the Office of the Executive Secretary. PICOP’s representatives

committed to submit the following, to wit:

1. Certificate of Filing of Amended Articles of Incorporation issued on 12 Aug

2002 that extended PICOP’s corporate term for another fifty (50) years;

2. Proof of Payment of forest charges;

3. Proof of Payment of Reforestation Deposit;

4. Response to social issues, particularly clearance from the NCIP; and

5. Map showing reforestation activities on an annual basis.31

PICOP submitted its purported compliance with aforesaid undertaking throug

letter dated 21 August 2002 to the DENR Secretary. Upon evaluation of the

documents submitted by PICOP, the TWC noted that:

a) PICOP did not submit the required NCIP clearance;

b) The proof of payments for forest charges covers only the production perio

from 1 July 2001 to 21 September 2001;



c) The proof of payment of reforestation deposits covers only the period from the

first quarter of CY 1999 to the second quarter of CY 2001;

d) The map of the areas planted through supplemental planting and social

forestry is not sufficient compliance per Performance Evaluation Team’s 11 July

2001 report on PICOP’s performance on its TLA No. 43, pursuant to Section 6.6 of

DAO 79-87; and

e) PICOP failed to respond completely to all the social issues raised.32

Accordingly, the Secretary of DENR claims that further processing of PICOP’s

application for the conversion of TLA No. 43 cannot proceed until PICOP complies

with the requirements.

nsisting that the conversion of its TLA No. 43 had been completed, PICOP filed a

Petition for Mandamus against then DENR Secretary Heherson T. Alvarez before

the RTC of Quezon City, which was raffled to Branch 220, presided by Hon. Jose

G. Paneda. The petition was docketed as Civil Case No. Q-02-47764 (hereinafter

referred to as the MANDAMUS CASE).

On 11 October 2002, the RTC rendered a Decision granting PICOP’s Petition for

Mandamus, thus:

WHEREFORE, premises considered, the Petition for Mandamus is hereby

GRANTED.

The Respondent DENR Secretary Hon. Heherson Alvarez is hereby ordered:

1. to sign, execute and deliver the IFMA contract and/or documents to PICOP and

ssue the corresponding IFMA assignment number on the area covered by the

FMA, formerly TLA No. 43, as amended;

2. to issue the necessary permit allowing petitioner to act and harvest timber

from the said area of TLA No. 43, sufficient to meet the raw material

requirements of petitioner’s pulp and paper mills in accordance with the

warranty and agreement of July 29, 1969 between the government and PICOP’s

predecessor-in-interest; and

3. to honor and respect the Government Warranties and contractual obligations

to PICOP strictly in accordance with the warranty and agreement dated July 29,

1999 (sic) between the government and PICOP’s predecessor-in-interest (Exhibits

"H", "H-1" to "H-5", particularly the following:

a) the area coverage of TLA No. 43, which forms part and parcel of thegovernment warranties;

b) PICOP tenure over the said area of TLA No. 43 and exclusive right to cut, collect

and remove sawtimber and pulpwood for the period ending on April 26, 1977;

and said period to be renewable for [an]other 25 years subject to compliance

with constitutional and statutory requirements as well as with existing policy on

timber concessions; and

c) The peaceful and adequate enjoyment by PICOP of the area as described and

specified in the aforesaid amended Timber License Agreement No. 43.

The Respondent Secretary Alvarez is likewise ordered to pay petitioner the sum

of P10 million a month beginning May 2002 until the conversion of TLA No. 43, as

amended, to IFMA is formally effected and the harvesting from the said area is

granted.33

On 25 October 2002, the DENR Secretary filed a Motion for Reconsideration.34

PICOP filed an Urgent Motion for Issuance of Writ of Mandamus and/or Writ of

Mandatory Injunction.35

On 12 November 2002, then DENR Secretary Alvarez filed a Motion to Inhibit

Hon. Jose G. Paneda from further trying the case, attaching to said motion an

administrative complaint against the latter which was filed by the former before

the Office of the Court Administrator.36 The Motion was denied in an Order

dated 10 December 2002.

On 19 December 2002, PICOP filed a Manifestation and Motion to Implead Hon.

Elisea Gozun as respondent,37 which was granted. Elisea Gozun was, thus,

substituted as respondent in her official capacity as the new DENR Secretary.38

On 6 November 2002, then NCIP Chairperson Atty. Evelyn S. Dunuan sent a le

to the DENR (1) informing the DENR Secretary that after validation by the NC

was found out that the area of 47,420 hectares covered by PICOP’s TLA No. 4

conflicts with the ancestral domains of the Manobos; and (2) reiterating the

information that no NCIP certification was sought by PICOP to certify that the

area covered by TLA No. 43, subject of its IFMA conversion, does not overlap

any ancestral domain. Accordingly, she "strongly urge[d] the revocation of th

one-year permit granted to PICOP until the full provisions of [the] IPRA are

followed and the rights of our Indigenous Peoples over their ancestral land cl

are respected."39

On 25 November 2002, President Gloria Macapagal-Arroyo issued Proclamat

No. 297, "EXCLUDING A CERTAIN AREA FROM THE OPERATION OF

PROCLAMATION NO. 369 DATED FEBRUARY 27, 1931, AND DECLARING THE SAS MINERAL RESERVATION AND AS ENVIRONMENTALLY CRITICAL AREA." The

excluded area consists of 8,100 hectares, more or less, which formed part of

PICOP’s expired TLA No. 43, subject of its application for IFMA conversion.40

On 21 January 2003, PICOP filed a Petition for the Declaration of Nullity of th

aforesaid presidential proclamation as well as its implementing DENR

Administrative Order No. 2002-35 (DAO No. 2002-35) which was raffled to Br

78 of the RTC in Quezon City. The Petition was docketed as Special Civil Actio

No. Q-03-48648 (hereinafter referred to as the NULLITY CASE).

In said NULLITY CASE, the RTC issued a Temporary Restraining Order (TRO)

enjoining respondents therein41 from implementing the questioned issuance

The DENR Secretary and her co-respondents in said case filed on 6 February 2

an Omnibus Motion (1) To Dissolve the Temporary Restraining Order dated 3

February 2003; and (2) To Dismiss (With Opposition to the Issuance of a Writ

Preliminary Injunction).42

The trial court issued a Resolution dated 19 February 2003 granting the Motio

Dismiss on the ground that the Petition does not state a cause of action.43 P

filed a Motion for Reconsideration as well as a Motion to Inhibit. On 24 Marc

2003, the presiding judge of Branch 78 inhibited himself from hearing the cas

Accordingly, the NULLITY CASE was re-raffled to Branch 221 of the RTC of Qu

City, which granted PICOP’s Motion for Reconsideration by setting for hearing

PICOP’s application for preliminary injunction.

Meanwhile, in the MANDAMUS CASE, the RTC denied the DENR Secretary’s

Motion for Reconsideration and granted the Motion for the Issuance of Writ

Mandamus and/or Writ of Mandatory Injunction via a 10 February 2003 Orde

The fallo of the 11 October 2002 Decision was practically copied in the 10

February 2003 Order, although there was no mention of the damages impose

against then Secretary Alvarez.46 The DENR Secretary filed a Notice of Appeafrom the 11 October 2002 Decision and the 10 February 2003 Order.

On 28 February 2003, the DENR Secretary filed before the Court of Appeals, a

Petition for Certiorari With a Most Urgent Prayer for the Issuance of a Tempo

Restraining Order and/or Writ of Preliminary Injunction insofar as the trial co

ordered the execution of its 11 October 2002 Decision pending appeal. The

petition (hereinafter referred to as the INJUNCTION CASE) was docketed as C

G.R. SP No. 75698, which was assigned to the Special 13th Division thereof.

On 11 March 2003, the Court of Appeals issued a 60-day TRO48 enjoining the

enforcement of the 11 October 2002 Decision and the 10 February 2003 Ord

the RTC. On 30 April 2003, the Court of Appeals issued a Writ of Preliminary

Injunction.49

On 30 October 2003, the Court of Appeals rendered its Decision50 in the

INJUNCTION CASE granting the Petition and annulling the Writ of Mandamusand/or Writ of Mandatory Injunction issued by the trial court. PICOP filed a

Motion for Reconsideration.51

On 19 February 2004, the Seventh Division of the Court of Appeals rendered

Decision52 on the MANDAMUS CASE, affirming the Decision of the RTC, to w

WHEREFORE, the appealed Decision is AFFIRMED with modification that the

order directing then DENR Secretary Alvarez "to pay petitioner-appellee the s

of P10 million a month beginning May, 2002 until the conversion to IFMA of T

No. 43, as amended, is formally effected and the harvesting from the said are

granted" is hereby deleted. 53

PICOP filed a Motion for Partial Reconsideration54 of this Decision, which wa

denied by the Court of Appeals in a 20 July 2004 Resolution.55



Meanwhile, in a 22 March 2004 Resolution,56 the Special Thirteenth Division of

the Court of Appeals held in abeyance the ruling on the Motion for

Reconsideration of the INJUNCTION CASE pending the Seventh Division’s

resolution of the Motion for Reconsideration of the 19 February 2004 Decision in

the MANDAMUS CASE.

The DENR Secretary and PICOP filed with this Court separate Petitions for Review

on the 19 February 2004 Court of Appeals Decision in the MANDAMUS CASE.

These Petitions were docketed as G.R. No. 162243 and 164516, respectively.

On 16 December 2004, the Special Thirteenth Division of the Court of Appeals

rendered an Amended Decision57 on the INJUNCTION CASE lifting the Writ of

Preliminary Injunction it had previously issued, to wit:

WHEREFORE, the Resolution dated March 22, 2004 holding in abeyance the

resolution of the motion for reconsideration of Our October 30, 2003 decision is

set aside and the Decision dated October 30, 2003 reconsidered.

The Writ of Preliminary Injunction dated 30 April 2003 is hereby lifted and

dissolved and the Order dated 10 February 2003 allowing execution pending

appeal and authorizing the issuance of the writ of mandamus and/or writ of

mandatory injunction is hereby affirmed. The Petition dated February 27, 2003 is

herewith dismissed.58

Upon denial of its Motion for Reconsideration in a 9 March 2006 Resolution,59

the DENR Secretary filed with this Court, a Petition for Review60 of the

NJUNCTION CASE. The Petition was docketed as G.R. No. 171875.

On 5 July 2006, this Court resolved61 to consolidate G.R. No. 162243, 164516,

and 171875.

SSUES

n G.R. No. 162243, the DENR Secretary brought forth the following issues for our

consideration:

WHETHER THE PRESIDENTIAL WARRANTY IS A CONTRACT WHICH CONSTITUTES A

LEGAL BAR TO THE EXERCISE BY THE STATE OF ITS FULL CONTROL AND

SUPERVISION REGARDING THE EXPLORATION DEVELOPMENT AND UTILIZATION

OF ITS NATURAL RESOURCES.

I

WHETHER [PICOP] HAD ACQUIRED A VESTED RIGHT OVER ITS FOREST

CONCESSION AREA BY VIRTUE OF THE AFORESAID PRESIDENTIAL WARRANTY.

II

WHETHER THE TRIAL COURT HAD JURISDICTION TO TAKE COGNIZANCE OF THIS

CASE BECAUSE THE SUBJECT MATTER THEREOF PERTAINS TO THE EXCLUSIVE

ADMINISTRATIVE DOMAIN OF [THE DENR SECRETARY].

V

WHETHER *PICOP’S+ PETITION FOR MANDAMUS SHOULD HAVE BEEN DISMISSED

(1) FOR LACK OF CAUSE OF ACTION; AND (2) BECAUSE THE SUBJECT MATTER

THEREOF IS NOT CONTROLLABLE BY CERTIORARI.

V

WHETHER [PICOP] HAS FAITHFULLY COMPLIED WITH ALL THE ADMINISTRATIVE

AND OTHER STATUTORY REQUIREMENTS ENTITLING IT TO AN IFMA

CONVERSION.

VI

WHETHER [PRESIDENTIAL DECREE NO. 605]62 HAS BEEN PARTLY REPEALED BY

[REPUBLIC ACT NO. 8975].63

n G.R. No. 164516, PICOP submits the sole issue:

WHETHER THE COURT OF APPEALS PROPERLY DELETED THE AWARD OF

DAMAGES TO PETITIONER BY THE TRIAL COURT.64

Finally, in G.R. No. 171875, the DENR Secretary submits the following argume

A. [PICOP] DID NOT ACTUALLY FILE A MOTION FOR EXECUTION PENDING APP

B. THERE ARE NO GOOD REASONS FOR THE GRANT OF EXECUTION PENDING

APPEAL.65

THIS COURT’S RULING

Whether or not outright dismissal was proper

Since the third, fourth and sixth issues raised by the DENR Secretary, if

determined in favor of the DENR Secretary, would have warranted an outrigh

dismissal of the MANDAMUS CASE as early as the trial court level, it is properresolve these issues first.

The DENR Secretary alleges that the jurisdiction over the subject matter of th

MANDAMUS CASE pertains to the exclusive administrative domain of the DEN

and therefore, the RTC had been in error in taking cognizance thereof. The D

Secretary adds that, assuming arguendo that the RTC properly took cognizan

the MANDAMUS CASE, it committed a reversible error in not dismissing the s

(1) for lack of cause of action; and (2) because the subject matter thereof is n

controllable by mandamus.

The Petition filed before the trial court was one for mandamus with prayer fo

the issuance of a writ of preliminary prohibitory and mandatory injunction w

damages. Specifically, it sought to compel the DENR Secretary to: (1) sign,

execute and deliver the IFMA documents to PICOP; (2) issue the correspondin

IFMA number assignment; and (3) approve the harvesting of timber by PICOP

from the area of TLA No. 43. The DENR Secretary contends that these acts re

to the licensing regulation and management of forest resources, which task

belongs exclusively to the DENR66 as conveyed in its mandate:

SECTION 4. Mandate. – The Department shall be the primary government age

responsible for the conservation, management, development and proper use

the country’s environment and natural resources, specifically forest and graz

lands, mineral resources, including those in reservation and watershed areas

lands of the public domain, as well as the licensing and regulation of all natur

resources as may be provided for by law in order to ensure equitable sharing

the benefits derived therefrom for the welfare of the present and future

generations of Filipinos.67

The Court of Appeals ruled:

The contention does not hold water. In its petition for mandamus, [PICOP]asserted that "DENR Secretary Alvarez acted with grave abuse of discretion o

excess of his jurisdiction in refusing to perform his ministerial duty to sign,

execute and deliver the IFMA contract and to issue the corresponding IFMA

number to it." The cited jurisdiction of the DENR on licencing regulation and

management of our environment and natural resources is not disputed. In fa

the petition seeks to compel it to properly perform its said functions in relati

[PICOP]. What is at stake is not the scope of the DENR jurisdiction but the ma

by which it exercises or refuses to exercise that jurisdiction.

The courts have the duty and power to strike down any official act or omissio

tainted with grave abuse of discretion. The 1987 Constitution is explicit in

providing that judicial power includes not only the duty of the courts of justic

settle actual controversies involving rights which are legally demandable and

enforceable, but also to determine whether or not there has been grave abu

discretion amounting to lack or in excess of jurisdiction on the part of any bra

or instrumentality of the government.68

The Court of Appeals is correct. Since PICOP alleges grave abuse of discretion

the part of the DENR Secretary, it behooves the court to determine the same

outright dismissal of the case would have prevented such determination.

For the same reason, the MANDAMUS CASE could not have been dismissed

outright for lack of cause of action. A motion to dismiss based on lack of caus

action hypothetically admits the truth of the allegations in the complaint.69 I

ruling upon the DENR Secretary’s Motion to Dismiss, PICOP’s allegation that i

a contract with the government should, thus, be hypothetically admitted.

Necessarily, the DENR Secretary’s argument that there was no such contract

should be considered in the trial of the case and should be disregarded at thi

stage of the proceedings.



The DENR Secretary, however, counters that he/she has not yet exercised his/her

exclusive jurisdiction over the subject matter of the case, i.e., either to approve or

disapprove PICOP’s application for IFMA conversion. Hence, it is argued that

PICOP’s immediate resort to the trial court was precipitate based on the doctrine

of exhaustion of administrative remedies.70

The Court of Appeals ruled that the doctrine of exhaustion of administrative

remedies is disregarded when there are circumstances indicating the urgency of

udicial intervention,71 which are averred to be extant in this case, citing PICOP’s

employment of a sizable number of workers and its payment of millions in taxes

to the government.72 The Court of Appeals appends:

Moreover, contrary to *the DENR Secretary’s+ claim, the approval of an

application for IFMA conversion is not purely discretionary on the part of theDENR Secretary since the approval of an IFMA conversion depends upon

compliance with the requirements provided under DAO No. 99-53.

Of course, as earlier intimated, even assuming, arguendo, that the approval of an

FMA conversion involves the exercise of discretion by the DENR Secretary, the

writ of mandamus may be issued to compel the proper exercise of that discretion

where it is shown that there was grave abuse of discretion, manifest injustice, or

palpable excess of authority.73

While the Court of Appeals is correct in making such rulings, such accuracy

applies only insofar as the RTC assessment that the MANDAMUS CASE should not

have been subjected to outright dismissal. The issue of whether there was indeed

an urgency of judicial intervention (as to warrant the issuance of a writ of

mandamus despite the exclusive jurisdiction of the DENR) is ultimately connected

to the truth of PICOP’s assertions, which were hypothetically admitted in the

motion to dismiss stage. In other words, it all boils down to whether the DENR

Secretary committed grave abuse of discretion in not executing the IFMA

documents and in not approving PICOP’s harvesting of timber from the area of

TLA No. 43. The sixth issue raised by the DENR Secretary concerns Section 1 of

Presidential Decree No. 605 which, according to the Court of Appeals had been

partly repealed by Republic Act No. 8975. Section 1 of Presidential Decree No.

605 provides:

SECTION 1. No court of the Philippines shall have jurisdiction to issue any

restraining order, preliminary injunction or preliminary mandatory injunction in

any case involving or growing out of the issuance, approval or disapproval,

revocation or suspension of, or any action whatsoever by the proper

administrative official or body on concessions, licenses, permits, patents, or

public grants of any kind in connection with the disposition, exploitation,

utilization, exploration and/or development of the natural resources of the

Philippines.

According to the Court of Appeals,

Section 1 of PD 605 has been partly repealed by RA No. 8975, enacted on

November 7, 2002. Section 3 of the said law limits the prohibition on the issuance

of restraining orders and injunctions to the following:

"(a) Acquisition, clearance and development of the right-of-way and/or site of

ocation of any national government project;

"(b) Bidding or awarding of contract/project of the national government as

defined under Section 2 hereof;

"(c) Commencement, prosecution, execution, implementation, operation of any

such contract or project;

"(d) Termination or rescission of any such contract/project; and

"(e) The undertaking or authorization of any other lawful activity necessary for

such contract/project."

Noticeably, the subject coverage on concessions, licenses and the like

contemplated in Section 1 of PD 605 is not reproduced in the foregoing

enumeration under Section 3 of R.A. 8975. The effect of the non-reenactment is a

partial repeal of Section 1 of PD 605. It is a rule of legal hermenuetics (sic) that an

act which purports to set out in full all that it intends to contain operates as a

repeal of anything omitted which was contained in the old act and not included in

the act as revised. As the repealing clause of R.A. 8975 states:

"Sec. 9. Repealing Clause – All laws, decrees including Presidential Decree Nos.

605, 1818 and Republic Act No. 7160, as amended, orders, rules and regulations

or parts thereof inconsistent with this act are hereby repealed or amended

accordingly."74

The DENR Secretary claims that since Republic Act No. 8975 simply declares t

Presidential Decree No. 605 or parts thereof "inconsistent with this Act are

hereby repealed or amended accordingly," then, there should be an inconsist

between Presidential Decree No. 605 and Republic Act No. 8975 before there

be a partial repeal of Presidential Decree No. 605.

We agree with the DENR Secretary. Republic Act No. 8975 was not intended t

set out in full all laws concerning the prohibition against temporary restrainin

orders, preliminary injunctions and preliminary mandatory injunctions. Repu

Act No. 8975 prohibits lower courts from issuing such orders in connection w

the implementation of government infrastructure projects, while PresidentiaDecree No. 605 prohibits the issuance of the same, in any case involving licen

concessions and the like, in connection with the natural resources of the

Philippines. This can be further seen from the respective titles of these two la

which, of course, should express the subjects thereof:75

REPUBLIC ACT NO. 8975

AN ACT TO ENSURE THE EXPEDITIOUS IMPLEMENTATION AND COMPLETION

GOVERNMENT INFRASTRUCTURE PROJECTS BY PROHIBITING LOWER COURTS

FROM ISSUING TEMPORARY RESTRAINING ORDERS, PRELIMINARY INJUNCTIO

OR PRELIMINARY MANDATORY INJUNCTIONS, PROVIDING PENALTIES FOR

VIOLATIONS THEREOF, AND FOR OTHER PURPOSES.

PRESIDENTIAL DECREE NO. 605

BANNING THE ISSUANCE BY COURTS OF PRELIMINARY INJUNCTIONS IN CASE

INVOLVING CONCESSIONS, LICENSES, AND OTHER PERMITS ISSUED BY PUBLIC

ADMINISTRATIVE OFFICIALS OR BODIES FOR THE EXPLOITATION OF NATURAL

RESOURCES.

However, when the licenses, concessions and the like also entail government

infrastructure projects, the provisions of Republic Act No. 8975 should be

deemed to apply,76 and, thus, Presidential Decree No. 605 had been modifie

this sense.

Nevertheless, despite the fact that Presidential Decree No. 605 subsists, the

DENR Secretary must have missed our ruling in Datiles and Co. v. Sucaldito,77

wherein we held that the prohibition in Presidential Decree No. 605 "pertain

the issuance of injunctions or restraining orders by courts against administrat

acts in controversies involving facts or the exercise of discretion in technical

cases, because to allow courts to judge these matters could disturb the smoofunctioning of the administrative machinery. But on issues definitely outside

this dimension and involving questions of law, courts are not prevented by

Presidential Decree No. 605 from exercising their power to restrain or prohib

administrative acts."

While there are indeed questions of facts in the present Petitions, the overrid

controversy involved herein is one of law: whether the Presidential Warranty

issued by former President Marcos are contracts within the purview of the

Constitution’s Non-Impairment Clause. Accordingly, the prohibition in

Presidential Decree No. 605 against the issuance of preliminary injunction in

cases involving permits for the exploitation of natural resources does not app

this case.

Moreover, as we held in Republic v. Nolasco,78 statutes such as Presidential

Decree No. 605, Presidential Decree No. 1818 and Republic Act No. 8975 me

proscribe the issuance of temporary restraining orders and writs of preliminainjunction and preliminary mandatory injunction. They cannot, under pain of

violating the Constitution, deprive the courts of authority to take cognizance

the issues raised in the principal action, as long as such action and the relief

sought are within their jurisdiction. We further held in Nolasco:

However, it must be clarified that Republic Act No. 8975 does not ordinarily

warrant the outright dismissal of any complaint or petition before the lower

courts seeking permanent injunctive relief from the implementation of natio

government infrastructure projects. What is expressly prohibited by the statu

the issuance of the provisional reliefs of temporary restraining orders,

preliminary injunctions, and preliminary mandatory injunctions. It does not

preclude the lower courts from assuming jurisdiction over complaints or peti

that seek as ultimate relief the nullification or implementation of a national

government infrastructure project. A statute such as Republic Act No. 8975

cannot diminish the constitutionally mandated judicial power to determine



whether or not there has been a grave abuse of discretion amounting to lack or

excess of jurisdiction on the part of any branch or instrumentality of government.

x x x.79

As the disposition of these consolidated Petitions will be dispositions of the

principal actions, any applicability of the prohibitions in Presidential Decree No.

605 will be mooted.

Whether or not the presidential warranty was a contract

PICOP’s ground for the issuance of a writ of mandamus is the supposed contract

entered into by the government in the form of a Presidential Warranty, dated 29

July 1969 issued by then President Ferdinand E. Marcos to PICOP. The DENR

Secretary refutes this claim, and alleges that the RTC and the Court of Appealserred in declaring the Presidential Warranty a valid and subsisting contract under

the Constitution’s Non-Impairment Clause.

The Court of Appeals has this brief statement concerning the main issue of the

MANDAMUS CASE:

The questioned warranty is a valid contract. It was freely entered into by the

government and [PICOP]. Mutual considerations were taken into account in the

execution of that contract. [PICOP] invested billions of pesos in its concession

areas. In return, the government assured [PICOP] of its tenurial rights over TLA

No. 43, as amended, as well as its exclusive right to cut, collect and saw timber

and pulpwood therein. The DENR must perforce honor and respect the warranty

by maintaining the area alloted (sic) to [PICOP] under TLA No. 43, as amended.80

We are constrained to disagree. In unequivocal terms, we have consistently held

that such licenses concerning the harvesting of timber in the country’s forests

cannot be considered contracts that would bind the Government regardless of

changes in policy and the demands of public interest and welfare.81 Such

unswerving verdict is synthesized in Oposa v. Factoran, Jr.,82 where we held:

n the first place, the respondent Secretary did not, for obvious reasons, even

nvoke in his motion to dismiss the non-impairment clause. If he had done so, he

would have acted with utmost infidelity to the Government by providing undue

and unwarranted benefits and advantages to the timber license holders because

he would have forever bound the Government to strictly respect the said licenses

according to their terms and conditions regardless of changes in policy and the

demands of public interest and welfare. He was aware that as correctly pointed

out by petitioners, into every timber license must be read Section 20 of the

Forestry Reform Code (P.D. No. 705) which provides:

"x x x Provided, that when the national interest so requires, the President mayamend, modify, replace or rescind any contract, concession, permit, licenses or

any other form of privilege granted herein x x x."

Needless to say, all licenses may thus be revoked or rescinded by executive

action. It is not a contract, property or a property right protected by the due

process clause of the constitution. In Tan vs. Director of Forestry, [125 SCRA 302,

325 (1983)] this Court held:

"x x x A timber license is an instrument by which the State regulates the

utilization and disposition of forest resources to the end that public welfare is

promoted. A timber license is not a contract within the purview of the due

process clause; it is only a license or privilege, which can be validly withdrawn

whenever dictated by public interest or public welfare as in this case.

"A license is merely a permit or privilege to do what otherwise would be

unlawful, and is not a contract between the authority, federal, state, ormunicipal, granting it and the person to whom it is granted; neither is it property

or a property right, nor does it create a vested right; nor is it taxation (37 C.J.

168). Thus, this Court held that the granting of license does not create irrevocable

rights, neither is it property or property rights. (People vs. Ong Tin, 54 O.G. 7576).

x x x"

We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy

Executive Secretary [190 SCRA 673, 684 (1990)] :

"x x x Timber licenses, permits and license agreements are the principal

nstruments by which the State regulates the utilization and disposition of forest

resources to the end that public welfare is promoted. And it can hardly be

gainsaid that they merely evidence a privilege granted by the State to qualified

entities, and do not vest in the latter a permanent or irrevocable right to the

particular concession area and the forest products therein. They may be validly

amended, modified, replaced or rescinded by the Chief Executive when natio

interests so require. Thus, they are not deemed contracts within the purview

the due process of law clause [See Sections 3(ee) and 20 of Pres. Decree No.

as amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October 27,

1983, 125 SCRA 302]."

Since timber licenses are not contracts, the non-impairment clause, which re

"SEC. 10. No law impairing, the obligation of contracts shall be passed."

cannot be invoked.

PICOP, however, argues that these rulings laid down in Tan v. Director of

Forestry,83 Felipe Ysmael, Jr. & Co., Inc. v. Deputy Executive Secretary84 andOposa do not find application in the present case allegedly because the issue

is the unlawful refusal of then DENR Secretary Alvarez to issue an IFMA to PIC

and not the matter of a timber license being merely a license or privilege.85

We are not persuaded. PICOP filed the MANDAMUS CASE against then DENR

Secretary Alvarez on the ground that Secretary Alvarez’s refusal to issue an IF

in its favor allegedly violated its vested right over the area covered by its TLA

43 and presidential warranty, and impaired the obligation of contract under s

agreement and warranty.86

The argument that the Presidential Warranty is a contract on the ground that

there were mutual considerations taken into account consisting in investmen

on PICOP’s part is preposterous. All licensees put up investments in pursuing

businesses. To construe these investments as consideration in a contract wou

be to stealthily render ineffective the settled jurisprudence that "a license or

permit is not a contract between the sovereignty and the licensee or permitt

and is not a property in the constitutional sense, as to which the constitution

proscription against the impairment of contracts may extend."87 Neither sha

allow a circumvention of such doctrine by terming such permit as a "warranty

Whether or not there was compliance with the requirements for the convers

of TLA No. 43 as amended into an IFMA

DAO No. 99-53 enumerates the requirements for the grant of the IFMA

conversion:

Sec. 9. Qualifications of Applicants. The applicants for IFMA shall be:

(a) A Filipino citizen of legal age; or

(b) Partnership, cooperative or corporation whether public or private, dulyregistered under Philippine laws.

However, in the case of application for conversion of TLA into IFMA, an autom

conversion after proper evaluation shall be allowed, provided the TLA holder

have signified such intention prior to the expiry of the TLA, PROVIDED furthe

TLA holder has shown satisfactory performance and have complied with the

terms and conditions of the TLA and pertinent rules and regulations.

Therefore, the following are the requisites for the automatic conversion of th

TLA into an IFMA, to wit:

1. The TLA holder had signified its intent to convert its TLA into an IFMA prior

the expiration of its TLA;

2. Proper evaluation was conducted on the application; and

3. The TLA holder has satisfactorily performed and complied with the terms a

conditions of the TLA and the pertinent rules and regulations.

The Court of Appeals held:

From the foregoing provision, it can be gleaned that as long as an applicant-

corporation has signified its intention to convert its TLA into an IFMA prior to

expiration of its TLA, has shown satisfactory performance as a TLA holder and

complied with the terms and conditions of the TLA and pertinent rules and

regulations, conversion follows as a matter of course. It becomes automatic.

[PICOP] has complied with the administrative requirements. In its letter dated

August 28, 2000 to the Community Environment and Natural Resources Offic

(CENRO) for DENR-RXIII-D4, Bislig, Surigao del Sur, it signified its intention to

convert its TLA into an IFMA. It has also shown satisfactory performance as a



holder as evidenced by the July 31, 2001 Report of Director Elias Seraspi, Jr. The

said report states that [PICOP] was able to hold on its management and

protection of its concession areas.

x x x x

Apparently, [the DENR Secretary] refuses to sign the documents on the grounds

that [PICOP] has not secured and submitted a clearance from the National

Commission on Indigenous Peoples (NCIP) showing that its TLA areas do not

overlap with existing ancestral domains: and that [PICOP] has outstanding and

overdue obligation in forest charges.

The two reasons last cited by the Secretary for refusing to sign and deliver the

FMA documents are not real nor valid.

Section 59 of RA 8371, which requires prior certification from the NCIP that the

areas affected do not overlap with any ancestral domain before any IFMA can be

entered into by the government, should be read in conjunction with Sections 3 (a)

and 56 of the same law.

Section 3 (a) of RA 8371 describes ancestral domains as "areas generally

belonging to ICCs/IPs comprising lands, inland waters, coastal areas, and natural

resources therein, held under a claim of ownership, occupied or possessed by

CCs/IPs, by themselves or through their ancestors, communally or individually

since time immemorial, continuously to the present xxx." On the other hand,

Section 56 of the same law provides:

"Sec. 56. Existing Property Rights Regimes. – Property rights within the ancestral

domains already existing and/or vested upon effectivity of this Act, shall be

recognized and respected."

t can thus be deduced that Section 59 can only be interpreted to refer to

ancestral domains which have been duly established as such (i.e., the concerned

ndigenous people must have been in continuous possession or occupation of the

area concerned since time immemorial up to the present). Too, existing property

rights over the areas sought to be declared as part of an ancestral domain must

be recognized and respected.

[PICOP] has already acquired property rights over its concession areas. It has

been in exclusive, continuous and uninterrupted possession and occupation of

TLA No. 43 areas since 1952 to present. From the time it managed and operated

TLA No. 43, it has made huge investments on its concession areas. These include

the planting of millions of trees and the scientific silvicultural treatment of the

forest to make it more productive. Having acquired property rights over TLA No.

43 areas, [PICOP] need not be required to secure clearance from the NCIPpursuant to Section 59 of RA 8371.

*The DENR Secretary’s+ claim that *PICOP+ failed to settle its outstanding

obligations to the government in the form of unpaid forest charges do not inspire

belief. Under Sec. 3 (3.5) of DENR Memorandum Circular No. 96-04 dated March

14, before an Integrated Annual Operations Plan (IAOP) can be issued, it is a

condition precedent that the licensee has no pending forestry accounts. If it were

true that [PICOP] had unpaid forest charges, why was it issued IAOP for calendar

year 2001-2002 by Secretary Alvarez himself?88

Upon close scrutiny of the records, this Court observes that these findings of

compliance by PICOP are negated by the very evidence on which they are

supposedly moored.

As clearly shown by the 31 July 2001 Memorandum of Regional Executive

Director Elias D. Seraspi, Jr., DENR Caraga Region, RED Seraspi neither made acategorical finding of PICOP’s satisfactory performance on its TLA No. 43 nor

favorably recommended approval of PICOP’s application for IFMA conversion.

Rather, RED Seraspi recommended the proper evaluation of PICOP’s request for

the automatic conversion of TLA No. 43 into an IFMA:

Hence, it is imperative to chart a good forest policy direction for the

management, development and protection of TLA No. 43 after it expires on April

26, 2002 for the purpose of sustainable forest management of the area in support

of national development. With this vision, the proper evaluation to consider the

request for automatic conversion of TLA No. 43 to IFMA pursuant to Section 9,

DENR A.O. No. 99-53, upon its expiration on April 26, 2002 is hereby

recommended.89

Administrative Requirements

There was actually no way by which RED Seraspi could have come up with a

satisfactory performance finding since the very Performance Evaluation Team

tasked to make the evaluation found PICOP to have violated existing DENR ru

and regulations. According to the 11 July 2002 Memorandum Report of the

Performance Evaluation Team, PICOP has not submitted its Five-Year Forest

Protection Plan and its Seven-Year Reforestation Plan.90

Forest charges are, on the other hand, due and payable within 30 days from

removal of the forest products from the cutting area when timber and other

forest products are removed for domestic sales pursuant to Sections 6 and 6

DAO No. 80, series of 1987. Thus:

Section 6. Payment of Forest Charges. – x x x In such a case, the forest charge

shall be due and payable as follows:

6.1 When timber and other forest products are intended for export. – x x x x

6.2 When timber and other forest products are to be removed for domestic s

– The forest charges shall be due and payable within thirty (30) days from

removal thereof at the cutting area, or where the forest products are gathere

Provided, that such date of removal shall in no case be beyond thirty (30) day

when the products are cut, gathered and removed.

As testified to by FMB SFMS Ignacio M. Evangelista, PICOP failed to pay its re

forest charges covering the period from 22 September 2001 to 26 April 2002

the total amount of P15,056,054.05.91 PICOP was also late in paying most of

forest charges from 1996 onwards for which it is liable for a surcharge of 25%

annum on the tax due and interest of 20% per annum which now amounts to

P150,169,485.02.92 Likewise, it has overdue and unpaid silvicultural fees in t

amount of P2,366,901.00 as of 30 August 2002.93 In all, PICOP has unpaid an

overdue forest charges in the sum of P167,592,440.90 as of 10 August 2002.9

PICOP’s failure to pay its regular forest charges, interests, penalties and

surcharges and silvicultural fees amounting to P167,592,440.90 as of 30 Augu

2002 is further evidenced by the collection letters sent to PICOP and the abse

of official receipts in the DENR records in Bislig City evidencing payment of th

overdue amounts stated in the said collection letters.95 As can be gleaned fr

SFMS Evangelista’s tabulation, all the official receipts evidencing payments o

PICOP with their corresponding periods are indicated. However, there are no

similar official receipts for the period covering 22 September 2001 to 26 Apri

2002, which indicate that no payment has been made for the same period.

With the DENR Secretary’s presentation of its positive and categorical eviden

showing PICOP’s failure to pay its forest charges amounting to P167,592,440.

as of 10 August 2002, the burden of evidence has been shifted to PICOP to protherwise. PICOP should have, thus, presented official receipts as proof of th

payment of such forest charges, but failed to do so.

Despite the foregoing evidence, the Court of Appeals declared that if it were

that PICOP has unpaid forest charges, it should not have been issued an IAOP

the year 2001-2002 by Secretary Alvarez himself.96 In doing so, the Court of

Appeals disregarded the part of the very evidence presented by PICOP itself,

which shows that the IAOP was approved subject to several conditions, not t

least of which was the submission of proof of updated payment of forest cha

from April 2001 to June 2001.97

Neither was this the only evidence presented by PICOP which showed that it

unpaid forest charges. PICOP presented the certification of CENRO Calunsag

which refers only to its alleged payment of regular forest charges covering th

period from 14 September 2001 to 15 May 2002.98 The certification does no

mention similar payment of the penalties, surcharges and interests which itincurred in paying late several forest charges, which fact it did not rebut.

The 27 May 2002 Certification by CENRO Calunsag, on the other hand, specifi

only the period covering 14 September 2001 to 15 May 2002 and the amoun

P53,603,719.85 paid by PICOP without indicating the corresponding volume a

date of production of the logs. This is in contrast to the findings of SFMS

Evangelista which cover the period from CY 1996 to 30 August 2002 which

includes penalties, interests, and surcharges for late payment pursuant to DA

80, series of 1987.

Per request of PICOP, a certification dated 21 August 2002 was issued by Bill

Collector Amelia D. Arayan, and attested to by CENRO Calunsag, showing tha

PICOP paid only regular forest charges of its log production covering 1 July 20

to 21 September 2001. However, there being log productions after 21 Septem

2001, PICOP failed to pay the corresponding regular forest charges amountin



P15,056,054.05.99 The same certification also shows delayed payment of forest

charges, thereby corroborating the testimony of SFMS Evangelista and

substantiating the imposition of penalties and surcharges.

Finally, even if we consider for the sake of argument that the IAOP should not

have been issued if PICOP had existing forestry accounts, the issuance of the IAOP

cannot be considered proof that PICOP has paid the same. Firstly, the best

evidence of payment is the receipt thereof. PICOP has not presented any

evidence that such receipts had been lost or destroyed or cannot be produced in

court.100 Secondly, it is a well known and settled rule in our jurisdiction that the

Republic, or its government, is usually not estopped by mistake or error on the

part of its officials or agents.101 If PICOP had been issued an IAOP in violation of

the law allegedly because it may not be issued if PICOP had existing forestry

accounts, the government cannot be estopped from collecting such amounts andproviding the necessary sanctions therefor, including the withholding of the IFMA

until such amounts are paid.

Statutory Requirements

To recap, the Court of Appeals had relied on RED Seraspi’s certification in

concluding that there was satisfactory performance on the part of PICOP as a TLA

holder, despite said certification showing non-compliance with the required Five-

Year Forest Protection Plan and Seven-Year Reforestation Plan. The Court of

Appeals also declared that PICOP has paid its outstanding obligations based on an

nference that the IAOP would not have been issued if PICOP had unpaid forest

charges, contrary to the conditions laid down in the IAOP itself, and in violation of

the Best Evidence Rule and the doctrine disallowing the estoppel of the

government from the acts of its officers.

On the statutory requirement of procuring a clearance from the NCIP, the Court

of Appeals held that PICOP need not comply with the same at all. As quoted

above, the Court of Appeals held that Section 59 of Republic Act No. 8371, which

requires prior certification from the NCIP that the areas affected do not overlap

with any ancestral domain before any IFMA can be entered into by government,

should be interpreted to refer to ancestral domains which have been duly

established as such by the continuous possession and occupation of the area

concerned by indigenous peoples since time immemorial up to the present.

According to the Court of Appeals, PICOP has acquired property rights over the

TLA No. 43 areas, being in exclusive, continuous and uninterrupted possession

and occupation of TLA No. 43 areas since 1952 up to the present.

This ruling defies the settled jurisprudence we have mentioned earlier, including

that of Oposa and Tan which held that "[a] license is merely a permit or privilege

to do what otherwise would be unlawful, and is not a contract between the

authority, federal, state or municipal, granting it and the person to whom it isgranted; neither is it property or a property right, nor does it create a vested

right; x x x."102

The Court of Appeals’ resort to statutory construction is, in itself, misplaced.

Section 59 of Republic Act No. 8371 is clear and unambiguous:

SEC. 59. Certification Precondition. – All departments and other governmental

agencies shall henceforth be strictly enjoined from issuing, renewing or granting

any concession, license or lease, or entering into any production-sharing

agreement, without prior certification from the NCIP that the area affected does

not overlap with any ancestral domain. Such certification shall only be issued

after a field-based investigation is conducted by the Ancestral Domains Office of

the area concerned: Provided, That no certification shall be issued by the NCIP

without the free and prior informed and written consent of the ICCs/IPs

concerned: Provided, further, That no department, government agency or

government-owned or controlled corporation may issue new concession, license,ease, or production sharing agreement while there is a pending application for a

CADT: Provided, finally, That the ICCs/IPs shall have the right to stop or suspend,

n accordance with this Act, any project that has not satisfied the requirement of

this consultation process.

The court may not construe a statute that is clear and free from doubt. Time and

again, it has been repeatedly declared by this Court that where the law speaks in

clear and categorical language, there is no room for interpretation. There is only

room for application.103 PICOP’s intent to put a cloud of ambiguity in Section 59

of Republic Act No. 8371 by invoking Section 3(a) thereof fails miserably. Section

3(a) of Republic Act No. 8371 defines ancestral domain as follows:

a) Ancestral domains – Subject to Section 56 hereof, refers to all areas generally

belonging to ICCs/IPs comprising lands, inland waters, coastal areas, and natural

resources therein, held under a claim of ownership, occupied or possessed by

ICCs/IPs, by themselves or through their ancestors, communally or individual

since time immemorial, continuously to the present except when interrupted

war, force majeure or displacement by force, deceit, stealth or as a conseque

of government projects or any other voluntary dealings entered into by

government and private individuals/corporations, and which are necessary to

ensure their economic, social and cultural welfare. It shall include ancestral la

forests, pasture, residential, agricultural, and other lands individually owned

whether alienable and disposable or otherwise, hunting grounds, burial grou

worship areas, bodies of water, mineral and other natural resources, and land

which may no longer be exclusively occupied by ICCs/IPs but from which they

traditionally had access to for their subsistence and traditional activities,

particularly the home ranges of ICCs/IPs who are still nomadic and/or shifting

cultivators;

Ancestral domains remain as such even when possession or occupation of the

area has been interrupted by causes provided under the law such as voluntar

dealings entered into by the government and private individuals/corporation

Therefore, the issuance of TLA No. 43 in 1952 did not cause the Indigenous

Cultural Communities or Indigenous Peoples to lose their possession or

occupation over the area covered by TLA No. 43.

The issuance of a Certificate of Ancestral Domain Title is merely a formal

recognition of the ICCs/IPs’ rights of possession and ownership over their

ancestral domain identified and delineated in accordance with the Indigenou

Peoples Rights Act,104 and therefore, cannot be considered a condition

precedent for the need for an NCIP certification. In the first place, it is manife

absurd to claim that the subject lands must first be proven to be part of ance

domains before a certification that they are not part of ancestral domains ca

required. In Cruz v. Secretary of DENR,105 where no single member of the Co

penned a majority opinion (since the petition to declare Republic Act No. 837

unconstitutional was dismissed for the reason that the votes were equally

divided), Mr. Justice Reynato Puno, who voted to dismiss the petition, wrote

his separate opinion:

As its subtitle suggests, [Section 59 of R.A. No. 8371] requires as a preconditi

for the issuance of any concession, license or agreement over natural resourc

that a certification be issued by the NCIP that the area subject of the agreem

does not lie with any ancestral domain. The provision does not vest the NCIP

power over the other agencies of the State as to determine whether to grant

deny any concession or license or agreement. It merely gives the NCIP the

authority to ensure that the ICCs/IPs have been informed of the agreement a

that their consent thereto has been obtained. Note that the certification app

to agreements over natural resources that do not necessarily lie within the

ancestral domains. For those that are found within the said domains, Section

7(b) and 57 of the IPRA apply.

Another requirement determined by the Court of Appeals to have been comp

with by PICOP, albeit impliedly this time by not mentioning it at all, is the

requirement posed by Sections 26 and 27 of the Local Government Code:

SEC. 26. Duty of National Government Agencies in the Maintenance of Ecolog

Balance. – It shall be the duty of every national agency or government-owne

controlled corporation authorizing or involved in the planning and

implementation of any project or program that may cause pollution, climatic

change, depletion of non-renewable resources, loss of crop land, rangeland,

forest cover, and extinction of animal or plant species, to consult with the loc

government units, nongovernmental organizations, and other sectors concer

and explain the goals and objectives of the project or program, its impact upo

the people and the community in terms of environmental or ecological balan

and the measures that will be undertaken to prevent or minimize the advers

effects thereof.

SEC. 27. Prior Consultation Required. – No project or program shall be

implemented by government authorities unless the consultations mentioned

Sections 2 (c) and 26 hereof are complied with, and prior approval of the

sanggunian concerned is obtained: Provided, That occupants in areas where s

projects are to be implemented shall not be evicted unless appropriate reloc

sites have been provided, in accordance with the provisions of the Constitutio

These provisions are clear: the prior approval of local government units affec

by the proposed conversion of a TLA into an IFMA is necessary before any pr

or program can be implemented by the government authorities that may cau

"depletion of non-renewable resources, loss of crop land, rangeland or forest

cover, and extinction of animal or plant species."



The common evidence of the DENR Secretary and PICOP, namely the 31 July 2001

Memorandum of RED Seraspi, enumerates the local government units and other

groups which had expressed their opposition to PICOP’s application for IFMA

conversion:

7. During the conduct of the performance evaluation of TLA No. 43

ssues/complaints against PRI were submitted thru Resolutions and letters. It is

mportant that these are included in this report for assessment of what are their

worth, viz:

x x x x

7.2 Joint Resolution (unnumbered), dated March 19, 2001 of the Barangay

Council and Barangay Tribal Council of Simulao, Boston, Davao Oriental (ANNEXF) opposing the conversion of TLA No. 43 into IFMA over the 17,112 hectares

allegedly covered with CADC No. 095.

7.3 Resolution Nos. 10, s-2001 and 05, s-2001 (ANNEXES G & H) of the Bunawan

Tribal Council of Elders (BBMTCE) strongly demanding none renewal of PICOP

TLA. They claim to be the rightful owner of the area it being their alleged

ancestral land.

7.4 Resolution No. 4, S-2001 of Sitio Linao, San Jose, Bislig City (ANNEX I)

requesting not to renew TLA 43 over the 900 hectares occupied by them.

7.5 Resolution No. 22, S-2001 (ANNEX J) of the Sanguniang Bayan, Lingig, Surigao

del Sur not to grant the conversion of TLA 43 citing the plight of former

employees of PRI who were forced to enter and farm portion of TLA No. 43, after

they were laid off.

7.6 SP Resolution No. 2001-113 and CDC Resolution Nos. 09-2001 of the

Sanguniang Panglungsod of Bislig City (ANNEXES K & L) requesting to exclude the

area of TLA No. 43 for watershed purposes.

7.7 Resolution No. 2001-164, dated June 01, 2001 (ANNEX M) Sanguniang

Panglungsod of Bislig City opposing the conversion of TLA 43 to IFMA for the

reason that IFMA do not give revenue benefits to the City.106

As stated in RED Seraspi’s 31 July 2001 Memorandum,107 several indigenous

groups and some affected local government units have expressly opposed

PICOP’s application for IFMA conversion of its TLA No. 43.

PICOP merely submitted a purported resolution108 of the Province of Surigao del

Sur indorsing the approval of PICOP’s application for IFMA conversion. But

Surigao del Sur is not the only province affected by the area covered by theproposed IFMA. As even the Court of Appeals found, PICOP’s TLA No. 43 traverses

the length and breadth not only of Surigao del Sur but also Agusan del Sur,

Compostela Valley and Davao Oriental.109 How then can PICOP claim that it

complied with the Local Government Code requirement of obtaining prior

approval of the Sangunian concerned when only one out of the four affected local

government units has purportedly signified its concurrence to the proposed IFMA

conversion?

Finally, the DENR, by withholding the conversion of PICOP’s TLA No. 43 into an

FMA, has made a factual finding that PICOP has not yet complied with the

requirements for such a conversion. Findings of facts of administrative agencies

are generally accorded great respect, if not finality, by the courts because of the

special knowledge and expertise over matters falling under their jurisdiction.110

Such finality of the DENR’s factual finding, supported as it is by substantial

evidence, can only be overcome by grave abuse of discretion amounting to lack

or excess in jurisdiction, which is even more pronounced in a Petition forMandamus.

Whether or not there has already been a conversion of TLA No. 43 into an IFMA

The Court of Appeals declared that there exists no legal impediment to the

conversion of respondent’s TLA No. 43 into an IFMA as evidenced by petitioner’s

etters dated 26 October 2002 and 26 April 2002:

Moreover, *the DENR Secretary’s+ own letters to *PICOP+ confirm that it has

established a clear right to the automatic conversion of TLA No. 43 to IFMA. Thus,

on October 26, 2002, [the DENR Secretary] stated in his letter to [PICOP] "that

pursuant to DAO-99-53, we have cleared the conversion on PICOP’s TLA No. 43 to

FMA effective from the expiration of said TLA on April 26, 2002." Too, in its April

24, 2002 letter to [PICOP], [the DENR Secretary+ granted PICOP’s TDMP

"[p]ending the formal approval of [its] IFMA xxx." It could thus be deduced that

there exists no legal impediment to the conversion of PICOP’s TLA 43 to IFMA

approval remains a formality.

We disagree. Then DENR Secretary Alvarez’s 25 October 2001 letter is

reproduced herein for reference:

Dear Mr. Bernardino:

Consistent with your attached Memorandum to her Excellency, the President

dated 17 October 2001 and in response to your Letter of Intent dated 25 Janu

2001, we wish to inform you that, pursuant to DENR Administrative Order No

53, we have cleared the conversion of PICOP’s Timber License Agreement (TL

No. 43 to Integrated Forest Management Agreement (IFMA) effective from th

expiration of said TLA on April 26, 2002.

In this regard, you are hereby requested to designate PICOP’s representative

discuss with the DENR Team, created under Special Order No. 2001-638, the

conditions and details of the said IFMA, including the production sharing

arrangement between PICOP and the government.111

By giving this clearance for the conversion of PICOP’s TLA into an IFMA, the D

Secretary cannot, by any stretch of imagination, be claimed to have granted t

conversion itself. The letter is clear that the "conversion" could not be final si

its conditions and details still have to be discussed as stated in the second

paragraph of said letter; hence, the same letter could not have reduced to a m

formality the approval of the conversion of PICOP’s TLA No. 43 into an IFMA.

Likewise, then DENR Secretary Alvarez’s 26 April 2002 letter approving PICOP

Transition Development and Management Plan (TDMP) cannot be considered

an approval of PICOP’s application for IFMA conversion. Again, the aforesaid

letter is quoted in full:

April 24, 2002

MR. WILFREDO D. FUENTES

Vice President – Resident Manager

PICOP Resources, Incorporated

2nd Floor, Moredel Building

2280 Pasong Tamo Extension

Makati City

Dear Mr. Fuentes:

This refers to your request for approval of the submitted Two-year Transition

Development and Management Plan of PICOP Resources, Inc. (PRI) for the ar

under TLA No. 43 which expires on April 26, 2002.

Pending the formal approval of your IFMA and consistent with our letter to th

PRI President dated 25 October 2002, we hereby grant your Transition

Development and Management Plan (TDMP) for a period of one (1) year,

effective 26 April 2002.

Within such period we expect PRI to submit/comply with all the necessary

requisites for the final conversion of TLA 43 into IFMA, as provided for under

DENR Administrative Order No. 99-53, including the settlement of certainobligations such as taxes, if any, and submission of plans and programs for

evaluation and approval of item number 1 of your proposal contained in your

letter dated February 4, 2002.

All other proposed activities in your TDMP, particularly items 2 – 7 of your let

dated February 4, 2002, are hereby approved.

For your information and guidance.

Very truly yours,

(sgd)

HEHERSON T. ALVAREZ

Secretary



Cc: Mr. Teodoro G. Bernardino

President

The Director, FMB

The aforesaid letter speaks for itself. PICOP’s application for IFMA conversion is

still pending approval. Indeed, there could have been no approval of PICOP’s

application for IFMA conversion because DAO No. 99-53 (which governs

application for IFMA conversion) requires full and complete compliance with the

requirements for conversion before it may be approved. As stated in the letter

tself of then DENR Secretary Alvarez, PICOP has yet to "submit/comply with all

the necessary requisites for final conversion of TLA No. 43 into IFMA."

Even assuming, however, that the IFMA has already been converted, this is allpurely academic because of the above-discussed settled jurisprudence that

ogging permits are not contracts within the Non-Impairment Clause and thus,

can be amended, modified, replaced or rescinded when the national interest so

requires. If the DENR Secretary, therefore, finds that the IFMA would be in

violation of statutes, rules and regulations, particularly those protecting the rights

of the local governments and the indigenous peoples within the IFMA area, then

t behooves the DENR Secretary to revoke such IFMA. These same statutes, rules

and regulations are the very same requirements mentioned above for the

conversion of the TLA No. 43 into an IFMA.

Whether or not it is proper to determine the constitutionality of Proclamation

No. 297 in these consolidated petitions

Another reason why the DENR Secretary wishes to further withhold the

conversion of PICOP’s TLA No. 43 into an IFMA is the 25 November 2002

Proclamation No. 297 excluding an area of 8,100 hectares, more or less, from the

coverage of TLA No. 43, as amended, and which declared the same as a mineral

reservation and as an environmentally critical area. The DENR Secretary claims

that said Presidential Proclamation is rendered nugatory by the Court of Appeals’

disposition that the DENR should honor and respect the area allotted to PICOP

under TLA No. 43.112

PICOP claims that Proclamation No. 297 is a new matter which the DENR

Secretary cannot raise before this Court without offending the basic rules of fair

play, justice and due process.113

The DENR Secretary counters that it did not take up the issue of Proclamation No.

297 before the trial court precisely because said proclamation was issued more

than one month after the trial court rendered its 11 October 2002 Decision. The

DENR Secretary claims that PICOP cannot claim a violation of its right to due

process because it raised the issue before the Court of Appeals in itsMemorandum.

While not giving in to the DENR Secretary’s argument, PICOP claims that

Proclamation No. 297 is violative of the Constitution and an encroachment on the

egislative powers of Congress.114

We agree with PICOP that this constitutional issue cannot be decided upon in this

case. This Court will not touch the issue of unconstitutionality unless it is the very

is mota. It is a well-established rule that a court should not pass upon a

constitutional question and decide a law to be unconstitutional or invalid, unless

such question is raised by the parties and that when it is raised, if the record also

presents some other ground upon which the court may raise its judgment, that

course will be adopted and the constitutional question will be left for

consideration until such question will be unavoidable.115

The constitutional question presented by PICOP is not the very lis mota in theseconsolidated cases, as the preceding discussions very well give us adequate

grounds to grant the Petition in G.R. No. 162243, deny the Petition in G.R. No.

164516, and dismiss the Petition in G.R. No. 171875. Moreover, PICOP has filed a

separate petition for the declaration of nullity of Proclamation No. 297, wherein

the issue of the constitutionality of Proclamation No. 297 is properly ventilated.

Consequently, all actions and reliefs sought by either PICOP or the DENR

Secretary which has Proclamation No. 297 as its ground or subject should be

ventilated either in the pending petition for the declaration of its nullity, or in

another proper suit instituted for that matter.

EPILOGUE AND DISPOSITION

n sum, the DENR Secretary has adequately proven that PICOP has, at this time,

failed to comply with the administrative and statutory requirements for the

conversion of TLA No. 43 into an IFMA. The Petition in G.R. No. 162243 shoul

therefore be granted.

On the other hand, as PICOP is not yet entitled to such conversion, then Secre

Alvarez had been correct in withholding the same and thus cannot be held lia

for damages therefor. Thus, the Petition in G.R. No. 164516 should be dismiss

Finally, the DENR Secretary’s Petition in G.R. No. 171875, assailing the lifting

the Court of Appeals of the Preliminary Injunction in its favor, is now mooted

PICOP’s noncompliance with the requirements for the conversion of their TLA

so glaring, that we almost see a reluctance to uphold the law in light of PICOP

sizeable investments in its business, a fact repeatedly stressed by PICOP in its

pleadings. In applying the judicial policy of nurturing prosperity, consideratioshould also be given to the long-term effects of the judicial evaluations involv

particularly to our nation’s greatest wealth, our vast natural resources.1âwph

Our country has been blessed with rich, lush and verdant rain forests in whic

varied, rare and unique species of flora and fauna may be found.116 The

legislative policy has been to preserve and nourish these natural resources as

they are not only for our benefit but more so for the countless future genera

to which we are likewise responsible. It has also been legislative policy to let

citizens of this country reap their benefits, foremost the citizens in close

proximity to such resources, through the local governments and the NCIP.

In working for the legislative policy of environmental preservation, the

requirements of a five-year forest protection plan and seven-year reforestati

plan had been laid down, together with the levy of forest charges for the

regulation of forestry activities. In pursuing, on the other hand, the benefit

distribution policy, the Local Government Code requires prior Sanggunian

approval to ensure that local communities partake in the fruits of their own

backyard, while R.A. No. 8371 provides for the rights of the indigenous peopl

who have been living in, managing, and nourishing these forests since time

immemorial.

PICOP has been fortunate to have been awarded an enormous concession ar

and thus, a huge chunk of the benefits of this country’s natural resources.

Attached to this fortune is the responsibility to comply with the laws and

regulations implementing the stated legislative policies of environmental

preservation and benefit distribution. These laws and regulations should not

ignored, and the courts should not condone such blatant disregard by those w

believe they are above the law because of their sizable investments and

significant number of workers employed. PICOP has only itself to blame for th

withholding of the conversion of its TLA. But while this disposition confers

another chance to comply with the foregoing requirements, the DENR Secretcan rightfully grow weary if the persistence on noncompliance will continue.

judicial policy of nurturing prosperity would be better served by granting suc

concessions to someone who will abide by the law.

WHEREFORE, the Petition in G.R. No. 162243 is GRANTED. The Decision of th

Court of Appeals insofar as it affirmed the RTC Decision granting the Petition

Mandamus filed by Paper Industries Corporation of the Philippines (PICOP) is

hereby REVERSED and SET ASIDE. The Petition in G.R. No. 164516 seeking the

reversal of the same Decision insofar as it nullified the award of damages in f

of PICOP is DENIED for lack of merit. The Petition in G.R. No. 171875, assailin

lifting of the Preliminary Injunction in favor of the Secretary of Environment a

Natural Resources is DISMISSED on the ground of mootness.



HON. JOSE D. LINA, JR., SANGGUNIANG PANLALAWIGAN OF LAGUNA, and HON.CALIXTO CATAQUIZ, petitioners, vs. HON. FRANCISCO DIZON PAÑO and TONY

CALVENTO, respondents.

For our resolution is a petition for review on certiorari seeking the reversal of the

decision[1] dated February 10, 1997 of the Regional Trial Court of San Pedro,

Laguna, Branch 93, enjoining petitioners from implementing or enforcing

Kapasiyahan Bilang 508, Taon 1995, of the Sangguniang Panlalawigan of Laguna

and its subsequent Order[2] dated April 21, 1997 denying petitioners’ motion for

reconsideration.

On December 29, 1995, respondent Tony Calvento was appointed agent by the

Philippine Charity Sweepstakes Office (PCSO) to install Terminal OM 20 for the

operation of lotto. He asked Mayor Calixto Cataquiz, Mayor of San Pedro,Laguna, for a mayor’s permit to open the lotto outlet. This was denied by Mayor

Cataquiz in a letter dated February 19, 1996. The ground for said denial was an

ordinance passed by the Sangguniang Panlalawigan of Laguna entitled

Kapasiyahan Blg. 508, T. 1995 which was issued on September 18, 1995. The

ordinance reads:

SANG KAPASIYAHAN TINUTUTULAN ANG MGA “ILLEGAL GAMBLING” LALO NA

ANG LOTTO SA LALAWIGAN NG LAGUNA

SAPAGKA’T, ang sugal dito sa lalawigan ng Laguna ay talamak na;

SAPAGKA’T, ang sugal ay nagdudulot ng masasamang impluwensiya lalo’t higit sa

mga kabataan;

KUNG KAYA’T DAHIL DITO, at sa mungkahi nina Kgg. Kgd. Juan M. Unico at Kgg.

Kgd. Gat-Ala A. Alatiit, pinangalawahan ni Kgg. Kgd. Meliton C. Larano at buong

pagkakaisang sinangayunan ng lahat ng dumalo sa pulong;

PINASIYA, na tutulan gaya ng dito ay mahigpit na TINUTUTULAN ang ano mang

uri ng sugal dito sa lalawigan ng Laguna lalo’t higit ang Lotto;

PINASIYA PA RIN na hilingin tulad ng dito ay hinihiling sa Panlalawigang pinuno

ng Philippine National Police (PNP) Col. [illegible] na mahigpit na pag- ibayuhin

ang pagsugpo sa lahat ng uri ng illegal na sugal sa buong lalawigan ng Laguna lalo

na ang “Jueteng”.*3+

As a result of this resolution of denial, respondent Calvento filed a complaint for

declaratory relief with prayer for preliminary injunction and temporary

restraining order. In the said complaint, respondent Calvento asked the Regional

Trial Court of San Pedro Laguna, Branch 93, for the following reliefs: (1) a

preliminary injunction or temporary restraining order, ordering the defendants torefrain from implementing or enforcing Kapasiyahan Blg. 508, T. 1995; (2) an

order requiring Hon. Municipal Mayor Calixto R. Cataquiz to issue a business

permit for the operation of a lotto outlet; and (3) an order annulling or declaring

as invalid Kapasiyahan Blg. 508, T. 1995.

On February 10, 1997, the respondent judge, Francisco Dizon Paño, promulgated

his decision enjoining the petitioners from implementing or enforcing resolution

or Kapasiyahan Blg. 508, T. 1995. The dispositive portion of said decision reads:

WHEREFORE, premises considered, defendants, their agents and representatives

are hereby enjoined from implementing or enforcing resolution or kapasiyahan

blg. 508, T. 1995 of the Sangguniang Panlalawigan ng Laguna prohibiting the

operation of the lotto in the province of Laguna.

SO ORDERED.[4]

Petitioners filed a motion for reconsideration which was subsequently denied in

an Order dated April 21, 1997, which reads:

Acting on the Motion for Reconsideration filed by defendants Jose D. Lina, Jr. and

the Sangguniang Panlalawigan of Laguna, thru counsel, with the opposition filed

by plaintiff’s counsel and the comment thereto filed by counsel for the

defendants which were duly noted, the Court hereby denies the motion for lack

of merit.

SO ORDERED.[5]

On May 23, 1997, petitioners filed this petition alleging that the following errors

were committed by the respondent trial court:

THE TRIAL COURT ERRED IN ENJOINING THE PETITIONERS FROM IMPLEMENT

KAPASIYAHAN BLG. 508, T. 1995 OF THE SANGGUNIANG PANLALAWIGAN OF

LAGUNA PROHIBITING THE OPERATION OF THE LOTTO IN THE PROVINCE OF

LAGUNA.

II

THE TRIAL COURT FAILED TO APPRECIATE THE ARGUMENT POSITED BY THE

PETITIONERS THAT BEFORE ANY GOVERNMENT PROJECT OR PROGRAM MAY

IMPLEMENTED BY THE NATIONAL AGENCIES OR OFFICES, PRIOR CONSULTAT

AND APPROVAL BY THE LOCAL GOVERNMENT UNITS CONCERNED AND OTHE

CONCERNED SECTORS IS REQUIRED.

Petitioners contend that the assailed resolution is a valid policy declaration o

Provincial Government of Laguna of its vehement objection to the operation

lotto and all forms of gambling. It is likewise a valid exercise of the provincia

government’s police power under the General Welfare Clause of Republic Ac

7160, otherwise known as the Local Government Code of 1991.[6] They also

maintain that respondent’s lotto operation is illegal because no prior

consultations and approval by the local government were sought before it wa

implemented contrary to the express provisions of Sections 2 (c) and 27 of R.

7160.[7]

For his part, respondent Calvento argues that the questioned resolution is, in

effect, a curtailment of the power of the state since in this case the national

legislature itself had already declared lotto as legal and permitted its operati

around the country.[8] As for the allegation that no prior consultations and

approval were sought from the sangguniang panlalawigan of Laguna, respond

Calvento contends this is not mandatory since such a requirement is merely

stated as a declaration of policy and not a self-executing provision of the Loca

Government Code of 1991.[9] He also states that his operation of the lotto

system is legal because of the authority given to him by the PCSO, which in tu

had been granted a franchise to operate the lotto by Congress.[10]

The Office of the Solicitor General (OSG), for the State, contends that the

Provincial Government of Laguna has no power to prohibit a form of gamblin

which has been authorized by the national government.[11] He argues that t

based on the principle that ordinances should not contravene statutes as

municipal governments are merely agents of the national government. The l

councils exercise only delegated legislative powers which have been conferre

them by Congress. This being the case, these councils, as delegates, cannot b

superior to the principal or exercise powers higher than those of the latter. T

OSG also adds that the question of whether gambling should be permitted is

Congress to determine, taking into account national and local interests. SincCongress has allowed the PCSO to operate lotteries which PCSO seeks to con

in Laguna, pursuant to its legislative grant of authority, the province’s

Sangguniang Panlalawigan cannot nullify the exercise of said authority by

preventing something already allowed by Congress.

The issues to be resolved now are the following: (1) whether Kapasiyahan Blg

508, T. 1995 of the Sangguniang Panlalawigan of Laguna and the denial of a

mayor’s permit based thereon are valid; and (2) whether prior consultations

approval by the concerned Sanggunian are needed before a lotto system can

operated in a given local government unit.

The entire controversy stemmed from the refusal of Mayor Cataquiz to issue

mayor’s permit for the operation of a lotto outlet in favor of private responde

According to the mayor, he based his decision on an existing ordinance

prohibiting the operation of lotto in the province of Laguna. The ordinance,

however, merely states the “objection” of the council to the said game. It is mere policy statement on the part of the local council, which is not self-

executing. Nor could it serve as a valid ground to prohibit the operation of th

lotto system in the province of Laguna. Even petitioners admit as much whe

they stated in their petition that:

5.7. The terms of the Resolution and the validity thereof are express and cle

The Resolution is a policy declaration of the Provincial Government of Laguna

its vehement opposition and/or objection to the operation of and/or all form

gambling including the Lotto operation in the Province of Laguna.[12]

As a policy statement expressing the local government’s objection to the lott

such resolution is valid. This is part of the local government’s autonomy to a

views which may be contrary to that of the national government’s. However

freedom to exercise contrary views does not mean that local governments m

actually enact ordinances that go against laws duly enacted by Congress. Giv



this premise, the assailed resolution in this case could not and should not be

nterpreted as a measure or ordinance prohibiting the operation of lotto.

The game of lotto is a game of chance duly authorized by the national

government through an Act of Congress. Republic Act 1169, as amended by

Batas Pambansa Blg. 42, is the law which grants a franchise to the PCSO and

allows it to operate the lotteries. The pertinent provision reads:

Section 1. The Philippine Charity Sweepstakes Office.- The Philippine Charity

Sweepstakes Office, hereinafter designated the Office, shall be the principal

government agency for raising and providing for funds for health programs,

medical assistance and services and charities of national character, and as such

shall have the general powers conferred in section thirteen of Act Numbered One

thousand four hundred fifty-nine, as amended, and shall have the authority:

A. To hold and conduct charity sweepstakes races, lotteries, and other similar

activities, in such frequency and manner, as shall be determined, and subject to

such rules and regulations as shall be promulgated by the Board of Directors.

This statute remains valid today. While lotto is clearly a game of chance, the

national government deems it wise and proper to permit it. Hence, the

Sangguniang Panlalawigan of Laguna, a local government unit, cannot issue a

resolution or an ordinance that would seek to prohibit permits. Stated otherwise,

what the national legislature expressly allows by law, such as lotto, a provincial

board may not disallow by ordinance or resolution.

n our system of government, the power of local government units to legislate

and enact ordinances and resolutions is merely a delegated power coming from

Congress. As held in Tatel vs. Virac,[13] ordinances should not contravene an

existing statute enacted by Congress. The reasons for this is obvious, as

elucidated in Magtajas v. Pryce Properties Corp.[14]

Municipal governments are only agents of the national government. Local

councils exercise only delegated legislative powers conferred upon them by

Congress as the national lawmaking body. The delegate cannot be superior to

the principal or exercise powers higher than those of the latter. It is a heresy to

suggest that the local government units can undo the acts of Congress, from

which they have derived their power in the first place, and negate by mere

ordinance the mandate of the statute.

Municipal corporations owe their origin to, and derive their powers and rights

wholly from the legislature. It breathes into them the breath of life, without

which they cannot exist. As it creates, so it may destroy. As it may destroy, it

may abridge and control. Unless there is some constitutional limitation on the

right, the legislature might, by a single act, and if we can suppose it capable of sogreat a folly and so great a wrong, sweep from existence all of the municipal

corporations in the state, and the corporation could not prevent it. We know of

no limitation on the right so far as the corporation themselves are concerned.

They are, so to phrase it, the mere tenants at will of the legislature (citing Clinton

vs. Ceder Rapids, etc. Railroad Co., 24 Iowa 455).

Nothing in the present constitutional provision enhancing local autonomy

dictates a different conclusion.

The basic relationship between the national legislature and the local government

units has not been enfeebled by the new provisions in the Constitution

strengthening the policy of local autonomy. Without meaning to detract from

that policy, we here confirm that Congress retains control of the local

government units although in significantly reduced degree now than under our

previous Constitutions. The power to create still includes the power to destroy.

The power to grant still includes the power to withhold or recall. True, there arecertain notable innovations in the Constitution, like the direct conferment on the

ocal government units of the power to tax (citing Art. X, Sec. 5, Constitution),

which cannot now be withdrawn by mere statute. By and large, however, the

national legislature is still the principal of the local government units, which

cannot defy its will or modify or violate it.[15]

Ours is still a unitary form of government, not a federal state. Being so, any form

of autonomy granted to local governments will necessarily be limited and

confined within the extent allowed by the central authority. Besides, the

principle of local autonomy under the 1987 Constitution simply means

“decentralization”. It does not make local governments sovereign within the

state or an “imperium in imperio”.*16+

To conclude our resolution of the first issue, respondent mayor of San Pedro,

cannot avail of Kapasiyahan Bilang 508, Taon 1995, of the Provincial Board of

Laguna as justification to prohibit lotto in his municipality. For said resolution

nothing but an expression of the local legislative unit concerned. The Board’

enactment, like spring water, could not rise above its source of power, the

national legislature.

As for the second issue, we hold that petitioners erred in declaring that Secti

(c) and 27 of Republic Act 7160, otherwise known as the Local Government C

of 1991, apply mandatorily in the setting up of lotto outlets around the count

These provisions state:

Section 2. Declaration of Policy. x x x

(c) It is likewise the policy of the State to require all national agencies and off

to conduct periodic consultations with appropriate local government units, ngovernmental and people’s organizations, and other concerned sectors of the

community before any project or program is implemented in their respective

jurisdictions.

Section 27. Prior Consultations Required. No project or program shall be

implemented by government authorities unless the consultations mentioned

Section 2 (c) and 26 hereof are complied with, and prior approval of the

sanggunian concerned is obtained; Provided, that occupants in areas where s

projects are to be implemented shall not be evicted unless appropriate reloc

sites have been provided, in accordance with the provisions of the Constitutio

From a careful reading of said provisions, we find that these apply only to

national programs and/or projects which are to be implemented in a particul

local community. Lotto is neither a program nor a project of the national

government, but of a charitable institution, the PCSO. Though sanctioned by

national government, it is far fetched to say that lotto falls within the

contemplation of Sections 2 (c) and 27 of the Local Government Code.

Section 27 of the Code should be read in conjunction with Section 26 thereof

Section 26 reads:

Section 26. Duty of National Government Agencies in the Maintenance of

Ecological Balance. It shall be the duty of every national agency or governme

owned or controlled corporation authorizing or involved in the planning and

implementation of any project or program that may cause pollution, climatic

change, depletion of non-renewable resources, loss of crop land, range-land,

forest cover, and extinction of animal or plant species, to consult with the loc

government units, nongovernmental organizations, and other sectors concer

and explain the goals and objectives of the project or program, its impact upo

the people and the community in terms of environmental or ecological balan

and the measures that will be undertaken to prevent or minimize the adverseffects thereof.

Thus, the projects and programs mentioned in Section 27 should be interpret

to mean projects and programs whose effects are among those enumerated

Section 26 and 27, to wit, those that: (1) may cause pollution; (2) may bring a

climatic change; (3) may cause the depletion of non-renewable resources; (4

may result in loss of crop land, range-land, or forest cover; (5) may eradicate

certain animal or plant species from the face of the planet; and (6) other proj

or programs that may call for the eviction of a particular group of people resi

in the locality where these will be implemented. Obviously, none of these ef

will be produced by the introduction of lotto in the province of Laguna.

Moreover, the argument regarding lack of consultation raised by petitioners

clearly an afterthought on their part. There is no indication in the letter of M

Cataquiz that this was one of the reasons for his refusal to issue a permit. Th

refusal was predicated solely but erroneously on the provisions of KapasiyahBlg. 508, Taon 1995, of the Sangguniang Panlalawigan of Laguna.

In sum, we find no reversible error in the RTC decision enjoining Mayor Cataq

from enforcing or implementing the Kapasiyahan Blg. 508, T. 1995, of the

Sangguniang Panlalawigan of Laguna. That resolution expresses merely a pol

statement of the Laguna provincial board. It possesses no binding legal force

requires any act of implementation. It provides no sufficient legal basis for

respondent mayor’s refusal to issue the permit sought by private respondent

connection with a legitimate business activity authorized by a law passed by

Congress.

WHEREFORE, the petition is DENIED for lack of merit. The Order of the Regio

Trial Court of San Pedro, Laguna enjoining the petitioners from implementing

enforcing Resolution or Kapasiyahan Blg. 508, T. 1995, of the Provincial Board

Laguna is hereby AFFIRMED. No costs.



PLAZA II. V CASSIONRepublic Act No. 7160, otherwise known as The Local Government Code of 1991,

aims to transform local government units into self-reliant communities and active

partners of the national government in the attainment of effective services to the

people. As a result of the devolution of concerned personnel from the national

government to the various local government units pursuant to the same Code,

the interest of the service demands that their working relations with the local

employees should be harmonious.

This is a petition for review on certiorari[1] assailing the Decision[2] of the Court

of Appeals dated February 14, 1996 and its Resolution dated December 9, 1998 inCA-G.R. SP No. 55052, “Carolina M. Cassion, et al. vs. Civil Service Commission, et

al.”

Before the passage of Republic Act No. 7160, the task of delivering basic social

services was dispensed by the national government through the Department of

Social Welfare and Development (DSWD). Upon the promulgation and

mplementation of the Local Government Code, some of the functions of the

DSWD were transferred to the local government units.

The City of Butuan, through its Sangguniang Panglungsod (Sanggunian) passed SP

Resolution 427-92,*3+ entitled “Resolution Authorizing the City Mayor, Honorable

Democrito D. Plaza II, to Sign the Memorandum of Agreement for the Devolution

of the DSWD to the City of Butuan.”

Pursuant to the Memorandum of Agreement (MOA)[4] entered into between the

City of Butuan, through then Mayor Democrito Plaza II, petitioner, and the DSWD,

the latter’s services, personnel, assets and liabilities, and technical support

systems were transferred to its city counterpart.

By virtue of the same MOA, Mayor Plaza issued Executive Order (EO) No. 06-92[5]

dated October 5, 1992 reconstituting the City Social Services Development Office

(CSSDO), devolving or adding thereto 19 national DSWD employees headed by

petitioner Virginia Tuazon, Social Welfare Officer V. Mayor Plaza designated her

Officer-in-Charge of the reconstituted CSSDO. Its office was transferred from the

original CSSDO building to the DSWD building.

The CSSDO was originally composed of herein respondents, headed by Carolina

M. Cassion, Social Welfare Officer IV. Aggrieved by such development, they

refused to recognize petitioner Tuazon as their new head and to report at the

DSWD building. They contended that the issuance of EO No. 06-92 by Mayor

Plaza and the designation of petitioner Tuazon as Officer-in-charge of the CSSDOare illegal.

Despite Mayor Plaza’s series of orders to respondents to report for work at the

DSWD building, they failed to do so.

On January 18, 1993, Mayor Plaza issued a memorandum to the City Legal Officer

directing him to conduct an administrative investigation against respondents.

They then submitted their respective explanations. Thereafter, they were

charged administratively for grave misconduct and insubordination and were

preventively suspended for 60 days. This prompted them to file with the Civil

Service Regional Office No. 10 a complaint against Mayor Plaza for violation of

the Civil Service Law. However, their complaint was dismissed for lack of merit.

Upon expiration of their preventive suspension, respondents informed Mayor

Plaza that they are willing to return to work, but to their old office, not to the

DSWD building.

For the last time, or on April 14, 1993, Mayor Plaza notified respondents to report

to petitioner Tuazon at the new office in the DSWD building, but they remained

obstinate.

On February 9, 1994, Mayor Plaza inquired from the Civil Service Commission

(CSC) on what appropriate action could be taken against respondents for their

continued refusal to report for work since April 1993. In turn, the CSC, through

Atty. Lorea, Director II, informed the Mayor that respondents could be dropped

from the rolls pursuant to CSC Memorandum Circular No. 38, Series of 1993.

On February 16, 1994, Mayor Plaza issued an Order dropping respondents from

the rolls pursuant to the said CSC Memorandum Circular.

Forthwith, respondents appealed to the CSC.

On August 22, 1994, the CSC issued Resolution Nos. 94-4626 and 94-6243

dismissing respondents’ appeal. In affirming Mayor Plaza’s Order dropping

respondents from the rolls, the CSC held:

“CSC Memorandum Circular No. 38, series of 1993 dated September 10, 1993

provides as follows:

‘Officers and employees who are absent for at least thirty (30) days without

approved leave are considered on Absence Without Official Leave (AWOL) an

may be dropped from the service without prior notice.

‘A notice or order of the dropping from the rolls of an employee shall be issue

by the appointing authority and submitted to the CSC Office concerned for repurposes.’

“Based on the above-quoted provision, it is undeniable that the appointing

authority has the legal right to drop from the rolls a civil service officer or

employee. Nowhere in the quoted provision is it stated that only the Commi

has the exclusive authority to drop from the rolls civil service officers or

employees. Hence, contrary to the first contention of the appellants, Mayor

Plaza acted in conformity with the law when he ordered the dropping from th

rolls of herein appellants. The records of the case show the fact that appella

did not report for work from April 1993 up to the time they were dropped fro

the rolls. Although they manifested intention to return to work upon expirat

of their preventive suspension, still they adamantly insisted that they would

report only in their old office and not in the new one created by Executive Or

No. 06-92. The legal excuse being given by the appellants is highly untenable

The Executive Order issued by the Mayor is presumed valid until annulled by

proper authorities. The same presumption shall also apply insofar as the

designation of Mrs. Tuazon as OIC is concerned. The proper course of action

the appellants is to comply with the Mayor’s directives and then challenge th

questioned Executive Order before the proper forum, otherwise, the appella

should suffer the consequence of their acts.

“We find without merit the contention of the appellants that they were denie

due process for lack of notice and opportunity to be heard before they were

dropped from the rolls. The separation of an employee who is dropped from

rolls is a non-disciplinary action wherein the respondent is entitled to notice

hearing. In the above-quoted provision, an officer or employee may be drop

from the rolls if he was continuously absent without official leave for a period

at least thirty days. Prior notice is not necessary.

“As to the last contention of the appellants that it was really the intention of t

mayor to systematically remove them, the Commission likewise finds it withomerit. No evidence was submitted by the appellants to support such

contention.”

Respondents then filed with the Court of Appeals a petition for review.

On February 14, 1996, the Appellate Court rendered its Decision setting aside

assailed CSC Resolutions and EO No. 06-92 issued by Mayor Plaza and reinsta

respondents to their former positions without loss of seniority rights and

emoluments with full back wages and other benefits corresponding to the pe

from January 1993 up to actual reinstatement. Petitioners filed a motion for

reconsideration but was denied.

The Court of Appeals ratiocinated as follows:

“The fundamental rule of due process, on the other hand, requires that a per

be accorded notice and opportunity to be heard (Rebuena v. Civil ServiceCommission, G.R. No. 115942, 31 May 1995; Klaveness Maritime Agency, Inc

Palmos, 232 SCRA 448 *1994+). ‘Ample opportunity’ contemplated by law

connotes every kind of assistance which must be accorded to the employee t

enable him to prepare adequately for his defense including legal representat

(Segismundo v. NLRC, G.R. No. 112203, 13 December 1994, 329 SCRA 167, cit

Abiera v. NLRC, 215 SCRA 476 [1992]). Non-compliance with the twin

requirements of notice and hearing is fatal because these requirements are

conditions sine qua non before a dismissal may be validly effected (Maneho v

NLRC, 229 SCRA 240 [1994], citing Tiu v. NLRC, 215 SCRA 540 [1992]). In fact

notice and hearing must be accorded an employee even though the employe

does not affirmatively demand it (Century Textile Mills v. NLRC, 161 SCRA 528

[1988]).

“A circumspect scrutiny of the record leaves Us unconvinced that petitioners

were accorded this opportunity to be heard when they sought relief before



respondent CSC’s Regional Office No. X which dismissed their complaint,

docketed as ADM. Case No. ND 93-023, against respondents City Mayor and

Virginia V. Tuazon for violation of the Civil Service Law and its implementing rules

and regulations. x x x

x x x

“As regards the validity of the issuance of E.O. No. 06-92, there can be no dispute

over the power of the government to reorganize, whether traditional, progressive

or whatever adjective is appended to it. However, the essence of constitutional

government is adherence to basic rules. The rule of law requires that no

government official should feel free to do as he pleases using only his avowedly

sincere intentions and conscience to guide him. The fundamental standards of

fairness embodied in the bona fide rule can not be disregarded (Mendoza v.Quisumbing, 186 SCRA 108 [1990]; see also Romualdez-Yap v. CSC, 225 SSCRA

285 *1993+.”

n the main, petitioners contend that the Court of Appeals erred in setting aside

the CSC Resolutions dropping respondents from the rolls and EO No. 06-92

directing the devolution of 19 national DSWD employees to the local or city

DSWD to be headed by petitioner Virginia Tuazon.

Private respondents, on the other hand, aver that their refusal to report for work

s justified since EO No. 06-92 is not valid as it was issued without prior approval

by the Sanggunian in violation of Article 164, Rule XXII of the Rules and

Regulations Implementing the Local Government Code.

Section 17 of the Local Government Code authorizes the devolution of personnel,

assets and liabilities, records of basic services, and facilities of a national

government agency to local government units. Under this Code, the term

“devolution” refers to the act by which the national government confers power

and authority upon the various local government units to perform specific

functions and responsibilities.

As a consequence of the devolution of national agencies, Executive Order No. 503

was enacted by then President Corazon C. Aquino to govern and ensure the

efficient transfer of responsibilities to the local government unit concerned.

Section 2 (g) provides:

“The local chief executive shall be responsible for all devolved functions. He may

delegate such powers and functions to his duly authorized representative whose

position shall preferably not be lower than the rank of a local government

department head. In all cases of delegated authority, the local chief executive

shall at all times observe the principle of command responsibility.”

Section 2 (a) states that:

“Except as herein otherwise provided, devolved permanent personnel shall be

automatically reappointed by the local chief executive concerned immediately

upon their transfer which shall not go beyond June 30, 1992.”

Likewise, Section 22 of CSC Memorandum Circular No. 19, Series of 1992,

specifies that:

“The positions absorbed by the local government units from the national

government agencies shall be automatically created upon transfer of their

corresponding budgetary allocation.

“Devolved permanent personnel shall be automatically reappointed by the local

chief executive concerned immediately upon their transfer.

“However, pending the completion of the new organizational structure and

staffing pattern, the local government executives may assign devolved personnel

to divisions/sections/units where their qualifications are best suited or

appropriate.”

t is thus clear that Mayor Plaza is empowered to issue EO No. 06-92 in order to

give effect to the devolution decreed by the Local Government Code. As the local

chief executive of Butuan City, Mayor Plaza has the authority to reappoint

devolved personnel and may designate an employee to take charge of a

department until the appointment of a regular head, as was done by the Mayor

here.

CSC Memorandum Circular No. 19, Series of 1992, provides further that heads of

departments appointed by the local chief executive must have the concurrence of

the majority of all the members of the Sanggunian concerned. While initially, the

Sanggunian rejected petitioner Tuazon’s appointment as the City Governmen

Department Head II of the CSSDO, however, it later confirmed her appointme

The Court Appeals erred in ruling that EO No. 06-92 violated respondents’

security of tenure as they were transferred to another office without their

consent. There was no such transfer. Transfer is a movement from one posi

to another which is of equivalent rank, level or salary without break in service

may be imposed as an administrative penalty.*6+ The change of respondents’

place of work from the original CSSDO office to the DSWD building is not a

transfer. It was only a physical transfer of their office to a new one done in t

interest of public service. There were no new movements or appointments f

one position to another.

Private respondents argue that they were denied due process when they werdropped from the rolls.

CSC Memorandum Circular No. 38, Series of 1993, provides:

“VI. Requirements For Certain Mode of Separation.

Dropping from the Rolls – Non-disciplinary in nature, executory but appealab

the CSC office concerned within fifteen (15) days from receipt of the order or

notice.

Officers and employees who are absent for at least thirty (30) days without

approved leave are considered on Absence Without Leave (AWOL) and may b

dropped from the service without prior notice.

A notice or order of the dropping from the rolls of an employee shall be issue

the appointing authority and submitted to the CSC office concerned for recor

purposes.”

Pursuant to the above provisions and as ruled by the CSC, the dropping from

rolls of private respondents is not disciplinary in nature. Thus, their assertion

they were denied due process is untenable. Since the dropping from the roll

not an administrative sanction, they need not be notified or be heard.

WHEREFORE, the Decision dated February 14, 1996 of the Court of Appeals is

REVERSED. The CSC Resolution No. 94-4626 dated August 22, 1994, and

Resolution No. 94-6243 dated November 17, 1994 dropping private responde

from the rolls are AFFIRMED.

SENATOR HEHERSON T. ALVAREZ vs. HON. TEOFISTO T. GUINGONA, JR., incapacity as Executive Secretary

Of main concern to the petitioners is whether Republic Act No. 7720, just rec

passed by Congress and signed by the President into law, is constitutionally

infirm.

Indeed, in this Petition for Prohibition with prayer for Temporary Restraining

Order and Preliminary Prohibitory Injunction, petitioners assail the validity of

Republic Act No. 7720, entitled, “An Act Converting the Municipality of Santia

Isabela into an Independent Component City to be known as the City of

Santiago,” mainly because the Act allegedly did not originate exclusively in th

House of Representatives as mandated by Section 24, Article VI of the 1987

Constitution.

Also, petitioners claim that the Municipality of Santiago has not met the

minimum average annual income required under Section 450 of the Local

Government Code of 1991 in order to be converted into a component city.

Undisputed is the following chronicle of the metamorphosis of House Bill No.

8817 into Republic Act No. 7720:

On April 18, 1993, HB No. 8817, entitled “An Act Converting the Municipality

Santiago into an Independent Component City to be known as the City of

Santiago,” was filed in the House of Representatives with Representative Ant

Abaya as principal author. Other sponsors included Representatives Ciriaco

Alfelor, Rodolfo Albano, Santiago Respicio and Faustino Dy. The bill was refer

to the House Committee on Local Government and the House Committee on

Appropriations on May 5, 1993.

On May 19, 1993, June 1, 1993, November 28, 1993, and December 1, 1993,

public hearings on HB No. 8817 were conducted by the House Committee on

Local Government. The committee submitted to the House a favorable repor

with amendments, on December 9, 1993.



On December 13, 1993, HB No. 8817 was passed by the House of Representatives

on Second Reading and was approved on Third Reading on December 17, 1993.

On January 28, 1994, HB No. 8817 was transmitted to the Senate.

Meanwhile, a counterpart of HB No. 8817, Senate Bill No. 1243, entitled, “An Act

Converting the Municipality of Santiago into an Independent] Component City to

be Known as the City of Santiago,” was filed in the Senate. It was introduced by

Senator Vicente Sotto III, as principal sponsor, on May 19, 1993. This was just

after the House of Representatives had conducted its first public hearing on HB

No. 8817.

On February 23, 1994, or a little less than a month after HB No. 8817 was

transmitted to the Senate, the Senate Committee on Local Governmentconducted public hearings on SB No. 1243. On March 1, 1994, the said committee

submitted Committee Report No. 378 on HB No. 8817, with the recommendation

that it be approved without amendment, taking into consideration the reality

that H.B. No. 8817 was on all fours with SB No. 1243. Senator Heherson T.

Alvarez, one of the herein petitioners, indicated his approval thereto by signing

said report as member of the Committee on Local Government.

On March 3, 1994, Committee Report No. 378 was passed by the Senate on

Second Reading and was approved on Third Reading on March 14, 1994. On

March 22, 1994, the House of Representatives, upon being apprised of the action

of the Senate, approved the amendments proposed by the Senate.

The enrolled bill, submitted to the President on April 12, 1994, was signed by the

Chief Executive on May 5, 1994 as Republic Act No. 7720. When a plebiscite on

the Act was held on July 13, 1994, a great majority of the registered voters of

Santiago voted in favor of the conversion of Santiago into a city.

The question as to the validity of Republic Act No. 7720 hinges on the following

twin issues: (I) Whether or not the Internal Revenue Allotments (IRAs) are to be

ncluded in the computation of the average annual income of a municipality for

purposes of its conversion into an independent component city, and (II) Whether

or not, considering that the Senate passed SB No. 1243, its own version of HB No.

8817, Republic Act No. 7720 can be said to have originated in the House of

Representatives.

The annual income of a local

government unit includes the IRAs

-----------------------------------------------------------

Petitioners claim that Santiago could not qualify into a component city because

ts average annual income for the last two (2) consecutive years based on 1991

constant prices falls below the required annual income of Twenty Million Pesos

(P20,000,000.00) for its conversion into a city, petitioners having computed

Santiago’s average annual income in the following manner:

Total income (at 1991 constant prices) for 1991 P20,379,057.07

Total income (at 1991 constant prices) for 1992 P21,570,106.87

Total income for 1991 and 1992 P41,949,163.94

Minus:

RAs for 1991 and 1992 P15,730,043.00

Total income for 1991 and 1992 P26,219,120.94

Average Annual Income P13,109,960.47

By dividing the total income of Santiago for calendar years 1991 and 1992, after

deducting the IRAs, the average annual income arrived at would only be

P13,109,560.47 based on the 1991 constant prices. Thus, petitioners claim that

Santiago’s income is far below the aforesaid Twenty Million Pesos average annual

ncome requirement.

The certification issued by the Bureau of Local Government Finance of the

Department of Finance, which indicates Santiago’s average annual income to be

P20,974,581.97, is allegedly not accurate as the Internal Revenue Allotments

were not excluded from the computation. Petitioners asseverate that the IRAs

are not actually income but transfers and! or budgetary aid from the national

government and that they fluctuate, increase or decrease, depending on fact

like population, land and equal sharing.

In this regard, we hold that petitioners’ asseverations are untenable because

Internal Revenue Allotments form part of the income of Local Government U

It is true that for a municipality to be converted into a component city, it mus

among others, have an average annual income of at least Twenty Million Pes

for the last two (2) consecutive years based on 1991 constant prices.1 Such

income must be duly certified by the Department of Finance.2

Resolution of the controversy regarding compliance by the Municipality of

Santiago with the aforecited income requirement hinges on a correlative and

contextual explication of the meaning of internal revenue allotments (IRAs) vvis the notion of income of a local government unit and the principles of loca

autonomy and decentralization underlying the institutionalization and intens

empowerment of the local government system.

A Local Government Unit is a political subdivision of the State which is

constituted by law and possessed of substantial control over its own affairs.3

Remaining to be an intra sovereign subdivision of one sovereign nation, but n

intended, however, to be an imperium in imperio,4 the local government uni

autonomous in the sense that it is given more powers, authority, responsibili

and resources.5 Power which used to be highly centralized in Manila, is there

deconcentrated, enabling especially the peripheral local government units to

develop not only at their own pace and discretion but also with their oWn

resources and assets.6

The practical side to development through a decentralized local government

system certainly concerns the matter of financial resources. With its broaden

powers and increased responsibilities, a local government unit must now ope

on a much wider scale. More extensive operations, in turn, entail more expen

Understandably, the vesting of duty, responsibility and accountability in ever

local government unit is accompanied with a provision for reasonably adequ

resources to discharge its powers and effectively carry out its functions.7

Availment of such resources is effectuated through the vesting in every local

government unit of (1) the right to create and broaden its own source of reve

(2) the right to be allocated a just share in national taxes, such share being in

form of internal revenue allotments (IRAs); and (3) the right to be given its

equitable share in the proceeds of the utilization and development of the

national wealth, if any, within its territorial boundaries.8.

The funds generated from local taxes, IRAs and national wealth utilization

proceeds accrue to the general fund of the local government and are used to

finance its operations subject to specified modes of spending the same asprovided for in the Local Government Code and its implementing rules and

regulations. For instance, not less than twenty percent (20%) of the IRAs mus

set aside for local development projects.9 As such, for purposes of budget

preparation, which budget should reflect the estimates of the income of the

government unit, among others, the IRAs and the share in the national wealt

utilization proceeds are considered items of income. This is as it should be, si

income is defined in the Local Government Code to be all revenues and recei

collected or received forming the gross accretions of funds of the local

government unit.10

The IRAs are items of income because they form part of the gross accretion o

funds of the local government unit. The IRAs regularly and automatically accr

to the local treasury without need of any further action on the part of the loc

government unit.11 They thus constitute income which the local governmen

invariably rely upon as the source of much needed funds.

For purposes of converting the Municipality of Santiago into a city, the

Department of Finance certified, among others, that the municipality had an

average annual income of at least Twenty Million Pesos for the last two (2)

consecutive years based on 1991 constant prices. This, the Department of

Finance did after including the IRAs in its computation of said average annua

income.

Furthermore, Section 450 (c) of the Local Government Code provides that “th

average annual income shall include the income accruing to the general fund

exclusive of special funds, transfers, and non-recurring income.” To reiterate

IRAs are a regular, recurring item of income; nil is there a basis, too, to classif

the same as a special fund or transfer, since IRAs have a technical definition a

meaning all its own as used in the Local Government Code that unequivocally

makes it distinct from special funds or transfers referred to when the Code



speaks of “funding support from the national government, its instrumentalities

and government-owned-or-controlled corporations.”12

Thus, Department of Finance Order No. 359313 correctly encapsulizes the full

mport of the above disquisition when it defined ANNUAL INCOME to be

“revenues and receipts realized by provinces, cities and municipalities from

regular sources of the Local General Fund including the internal revenue

allotment and other shares provided for in Sections 284, 290 and 291 of the

Code, but exclusive of non-recurring receipts, such as other national aids, grants,

financial assistance, loan proceeds, sales of fixed assets, and similar others”

(Italics ours).14 Such order, constituting executive or contemporaneous

construction of a statute by an administrative agency charged with the task of

nterpreting and applying the same, is entitled to full respect and should be

accorded great weight by the courts, unless such construction is clearly shown tobe in sharp conflict with the Constitution, the governing statute, or other laws.15

I

n the enactment of RA No. 7720,

there was compliance with Section 24,

Article VI of the 1987 Constitution

-----------------------------------------------------------

Although a bill of local application like HB No. 8817 should, by constitutional

prescription,16 originate exclusively in the House of Representatives, the claim of

petitioners that Republic Act No. 7720 did not originate exclusively in the House

of Representatives because a bill of the same import, SB No. 1243, was passed in

the Senate, is untenable because it cannot be denied that HB No. 8817 was filed

n the House of Representatives first before SB No. 1243 was filed in the Senate.

Petitioners themselves cannot disavow their own admission that HB No. 8817

was filed on April 18, 1993 while SB No. 1243 was filed on May 19, 1993. The

filing of HB No. 8817 was thus precursive not only of the said Act in question but

also of SB No. 1243. Thus, HB No. 8817, was the bill that initiated the legislative

process that culminated in the enactment of Republic Act No. 7720. No violation

of Section 24, Article VI, of the 1987 Constitution is perceptible under the

circumstances attending the instant controversy.

Furthermore, petitioners themselves acknowledge that HB No. 8817 was already

approved on Third Reading and duly transmitted to the Senate when the Senate

Committee on Local Government conducted its public hearing on HB No. 8817.

HB No. 8817 was approved on the Third Reading on December 17, 1993 and

transmitted to the Senate on January 28, 1994; a little less than a month

thereafter, or on February 23, 1994, the Senate Committee on Local Government

conducted public hearings on SB No. 1243. Clearly, the Senate held in abeyance

any action on SB No. 1243 until it received HB No. 8817, already approved on theThird Reading, from the House of Representatives. The filing in the Senate of a

substitute bill in anticipation of its receipt of the bill from the House, does not

contravene the constitutional requirement that a bill of local application should

originate in the House of Representatives, for as long as the Senate does not act

thereupon until it receives the House bill.

We have already addressed this issue in the case of Tolentino vs. Secretary of

Finance.17 There, on the matter of the Expanded Value Added Tax (EVAT) Law,

which, as a revenue bill, is nonetheless constitutionally required to originate

exclusively in the House of Representatives, we explained:

“x x x To begin with, it is not the law-but the revenue bill-which is required by the

Constitution to ‘originate exclusively’ in the House of Representatives. It is

mportant to emphasize this, because a bill originating in the House may undergo

such extensive changes in the Senate that the result may be a rewriting of the

whole. x x x as a result of the Senate action, a distinct bill may be produced. Tonsist that a revenue statute-and not only the bill which initiated the legislative

process culminating in the enactment of the law-must substantially be the same

as the House bill would be to deny the Senate’s power not only to ‘concur with

amendments’ but also to ‘propose amendments.’ It would be to violate the

coequality of legislative power of the two houses of Congress and in fact make

the House superior to the Senate.

xxx xxx xxx

t is insisted, however, that S. No. 1630 was passed not in substitution of H. No.

11197 but of another Senate bill (S. No. 1129) earlier filed and that what the

Senate did was merely to ‘take *H. No. 11197+ into consideration’ in enacting S.

No. 1630. There is really no difference between the Senate preserving H. No.

11197 up to the enacting clause and then writing its own version following the

enacting clause (which, it would seem petitioners admit is an amendment by

substitution), and, on the other hand, separately presenting a bill of its own o

the same subject matter. In either case the result are two bills on the same

subject.

Indeed, what the Constitution simply means is that the initiative for filing

revenue, tariff, or tax bills, bills authorizing an increase of the public debt, pri

bills and bills of local application must come from the House of Representativ

on the theory that, elected as they are from the districts, the members of the

House can be expected to be more sensitive to the local needs and problems

the other hand, the senators, who are elected at large, are expected to appro

the same problems from the national perspective. Both views are thereby ma

to bear on the enactment of such laws.

Nor does the Constitution prohibit the filing in the Senate of a substitute bill anticipation of its receipt of the bill from the House, so long as action by the

Senate as a body is withheld pending receipt of the House bill. x x x”18

III

Every law, including RA No. 7720,

has in its favor the presumption

of constitutionality

--------------------------------------------------------------------

It is a well-entrenched jurisprudential rule that on the side of every law lies th

presumption of constitutionality.19 Consequently, for RA No. 7720 to be null

it must be shown that there is a clear and unequivocal breach of the Constitu

not merely a doubtful and equivocal one; in other words, the grounds for nul

must be clear and beyond reasonable doubt.20 Those who petition this court

declare a law to be unconstitutional must clearly and fully establish the basis

will justify such a declaration; otherwise, their petition must fail. Taking into

consideration the justification of our stand on the immediately preceding gro

raised by petitioners to challenge the constitutionality of RA No. 7720, the Co

stands on the holding that petitioners have failed to overcome the presumpt

The dismissal of this petition is, therefore, inevitable.

WHEREFORE, the instant petition is DISMISSED for lack of merit with costs ag

petitioners.

REYNALDO O. MALONZO, in his capacity as City Mayor of Caloocan vs. HORONALDO B. ZAMORA, in his capacity as Executive Secretary

On March 15, 1999, the Office of the President (OP) through Executive Secre

Ronaldo Zamora, rendered a Decision[1] the dispositive portion of which rea

viz.:

"WHEREFORE, herein respondents Mayor Reynaldo Malonzo, Vice-Mayor Os

G. Malapitan and Councilors Chito Abel, Benjamin Manlapig, Edgar Erice, Den

Padilla, Zaldy Dolatre, Susana Punzalan, Henry Cammayo, and Luis Tito Varela

of Caloocan city are hereby adjudged guilty of misconduct and each is meted

penalty of SUSPENSION from office for a period of three (3) months without

to commence upon receipt of this Decision. This Decision is immediately

executory.

SO ORDERED." Rtcspped

On March 22, 1999, petitioners Mayor Reynaldo Malonzo, Vice-Mayor Oscar

Malapitan and councilors Chito Abel, Benjamin Manlapig, Edgar Erice Dennis

Padilla, Zaldy Dolatre, Luis tito Varela, Susana Punzalan, and Henry Cammayo

of the City of Caloocan, filed a petition assailing the OP decision.

On July 27, 1999, We granted the petition and accordingly annulled and set athe OP decision for having been rendered with grave abuse of discretion and/

excess of jurisdiction. We held:

"x x x [T]he instant petition has been properly brought before us in the light o

the importance of the subject matter and the transcendental nature of the is

raised. Realignment of [items in the annual budget] is a common practice bor

of necessity and sanctioned by law. Just how such a common practice may be

carried out within the bounds of law, considering the fact that public funds a

stake, is, we believe, an issue that is not only one of first impression, but likew

of considerable significance as a guide to local governance . x x x

"x x x The OP found petitioners guilty of misconduct on the ground that x x x

"x x x the P39,352,047.75 appropriated in Ordinance 0254 to fund the

expropriation of Lot 26 of the Maysilo Estate was merely a portion of the P50



million included and appropriated in the 1998 Annual Budget for expropriation

purpose and x x x the judicial action for expropriation x x x is still pending with the

court. This being so, the amount allocated for the expropriation cannot be

reverted to or be deemed as savings to serve as funds actually available for the

supplemental budget. x x x

"We cannot, however, agree x x x. Xlaw

"The OP’s premise, in our opinion, rests upon an erroneous appreciation of facts

on record. The OP seems to have been confused as to the figures and amounts

actually involved. A meticulous analysis of the records would show that there

really is no basis to support the OP’s contention that the amount of

P39,352,047.75 was appropriated under Ordinance No. 0254, S. 1998, since in

truth and in fact, what was appropriated in said ordinance was the amount ofP39,343,028.00. The allocation of P39,352,047.75 is to be found in the earlier

Ordinance no. 0246,S.1997 which is a separate and distinct ordinance. x x x

"x x x

"Section 322 of the Code upon which the OP anchored its opinion that petitioners

breached a statutory mandate provides: Xsc

"SEC. 322. Reversion of Unexpended Balances of Appropriations, Continuing

Appropriations – Unexpended balances of appropriations authorized in the

annual appropriations ordinance shall revert to the unappropriated surplus of the

general funds at the end of the fiscal year and shall not thereafter be available for

expenditure except by subsequent enactment. However, appropriations for

capital outlays shall continue and remain valid until fully spent, reverted or the

project is completed. Reversions of continuing appropriations shall not be

allowed unless obligations therefor have been fully paid or settled."

"Based on the above provision, the OP reached the determination that Ordinance

No. 0254, S. 1998 could not have lawfully realigned the amount of

P39,352,047.75 which was previously appropriated for the expropriation of Lot

26 of the Maysilo Estate s ince such appropriation was in the nature of a capital

outlay until fully spent, reverted, or the project for which it is earmarked is

completed.

"The question, however, is not whether the appropriation of P39,352,047.75

could fall under the definitions of continuing appropriation and capital outlays,

considering that such amount was not the subject of realignment made by

Ordinance No. 0254, Series of 1998. Rather, the issue is whether petitioners are

iable for their actions in regard to said ordinance which actually realigned a

position of the P50 million which was simply denominated in a general manner as

"Expropriation of Properties" and classified under "Current OperatingExpenditures" in the 1998 Annual Budget of Caloocan City. Clearly, these are two

distinct amounts separate from each other. x x x [T]he P50 million was NOT

appropriated for the purpose of purchasing Lot 26 of the Maysilo Estate but

rather for expenses incidental to expropriation such as relocation of squatters,

appraisal fee, expenses for publication, mobilization fees and expenses for

preliminary studies. x x x The appropriation of P39,352,047.75 under Ordinance

No. 0246, S. 1997 is, we believe, still a subsisting appropriation that has never

been lumped together with other funds to arrive at the sum of P50 million

allocated in the 1998 budget. To be sure, denomination of the P50 million

amount as "Expropriation of Properties left much to be desired and would have

been confused with the appropriation for expropriation under Ordinance No.

0246, S. 1997, but had respondents probed deeper into the actual intention for

which said amount was allocated then they would have reached an accurate

characterization of the P50 million. Misspped

Bearing in mind, therefore, the fact that it is the P50 million which is now beingrealigned, the next logical question to ask is whether such amount is capable of

being lawfully realigned. To this we answer in the affirmative.

"x x x [R]espondents x x x argued x x x that realignment shall not be allowed when

what is involved are continuing appropriations or capital outlays. But this

argument becomes clearly inapplicable in view of our disquisition above x x x. The

realignment x x x pertained to the P50 million which was classified as "Current

Operating Expenditures" x x x

"x x x [W]hat is being realigned is the P50 million appropriation which is classified,

neither as a capital outlay nor a continuing appropriation x x x

As to the alleged violation of Sections 50 and 52 of the Code requiring the

adoption of house rules and the organization of the council, we believe that the

same hardly merits even cursory consideration. We cannot infer x x x that no

other business [like the enactment of the ordinance] may be transacted on th

first regular session except to the take up the matter of adopting or updating

rules. Sc

"The foregoing explanation leads us to the ineluctable conclusion that, indee

respondents committed grave abuse of discretion. Not only [is] their reasoni

flawed bit [it is] likewise lacking in factual and legal support. Misconduct, bei

grave administrative offense for which petitioners stood charged, cannot be

treated cavalierly. There must be clear and convincing proof on record that

petitioners were motivated by wrongful intent, committed unlawful behavio

relation to their offices, or transgressed some established and definite rules o

action. But, as we have stressed above, petitioners were acting within legal

bounds."

The dispositive portion of Our Decision of March 22, 1999, reads, thus:

"WHEREFORE, the instant petition is hereby GRANTED. The assailed decision

the office of the president in O.P. Case No. 98-H-8520 dated March 15, 1999

ANNULLED and SET ASIDE for having been rendered with grave abuse of

discretion amounting to lack and/or excess of jurisdiction. Consequently,

respondents, their subordinates, agents, representatives, and successors-in-

interest are permanently enjoined from enforcing or causing the execution in

manner of the aforesaid decision against petitioners."

On August 12, 1999, the Office of the Solicitor General filed a Motion for

Reconsideration[2] contending that:

I. The OP did not err in its appreciation of facts; Scmis

II. Ordinance No. 0254, Series of 1998 was passed without funds actually

available;

III. Ordinance No. 0254, Series of 1998 was also enacted without sufficient

compliance with Section 50, Chapter 3, Title II of the Local Government Code

1991;

IV. Petitioners’ failure to observe the stricture in the enactment of the

Supplemental Budget Ordinance constitutes misconduct; and

V. Assuming arguendo that the OP did err in its appreciation of the facts on

record, still this does not constitute grave abuse of discretion which can be

reviewed by this Court through a special civil action for certiorari.

On October 20, 1999, petitioners filed their Comment and/or Opposition to

Motion for Reconsideration.[3]

These issues have already been discussed in Our Decision of July 27, 1999. As

respondents persist in their stance, we must also thus restate our position to

dispel any and all doubts on the matter. Missc

First. Respondents aver that in their Consolidated Answer which petitioners f

before the OP[4], petitioners admitted that the sum of P39,352,047.75 under

Ordinance No. 0246, Series of 1997 was included in the P50,000,000.00

denominated in a general manner as "Expropriation of Properties" and classif

under "Current Operating Expenditures" in the 1998 Budget of Caloocan City

Petitioners however allegedly only took a different position in their pleadings

appeal and during the oral argument before the Court as they clarified that th

sum of P39,352,047.75 under Ordinance No. 0246 Series of 1997 is separate

distinct from and not part of the sum of P50,000,000.00 categorized as "Curr

Operating Expenditures" in the 1998 Budget of Caloocan City. Respondents in

that petitioners may not change their theory for the first time on appeal sincetheir admissions before the OP bind them, and to do so would be offensive to

basic rules of fair play and justice.

We disagree.

There is nothing in the records to indicate that the sum of P39,352,047.75

appropriated under Ordinance No. 0246, Series of 1997 is actually part of the

P50,000,000.00 allotted for "Expropriation of Properties," under the "Current

Operating Expenditures" of the 1998 Annual Budget of Caloocan City.

Ordinance No. 0246, Series of 1997[5] appropriated P39,352,047.75 for the

expropriation of Lot 26 of the Maysilo Estate. It is, however, not this but the s

of P39,343,028.00 appropriated under Ordinance No. 0254, Series of 1998[6]

which was sourced from the P50,000,000,00 allotted for "Current Operating

Expenditures". It should be noted that the P50,000,000.00 under "Current



Operating Expenditures" of the 1998 Annual Budget was denominated as for

"Expropriation of Properties" but the particular properties subject of

expropriation were not specified. In fact, petitioners, in the same consolidated

answer cited by respondents, have unequivocally stated that "as will be noted

from the budget, the expropriation of properties does not refer to any particular

property."[7] Thus, it can be said that petitioners, as early as when the case was

pending before the OP, were already arguing about the character of the

P50,000,000.00 as proper subject of realignment. Spped

The source of confusion lies in the denomination of P50,000,000.00 as money for

"Expropriation of Properties" under "Current Operating Expenditures". As such, it

was to be spent for the expropriation of various properties, including incidental

expenses for expropriation. What was exclusively appropriated for the

expropriation of the Maysilo Lot was the P39, 352,047.75 under Ordinance No.0246, Series of 1997. It is significant to note that this is a 1997 ordinance while

the P39,343,028.00 which was originally intended for incidental expenses for

expropriation of the Maysilo Lot was under a 1998 ordinance.

That what was being realigned was the P50,000,000.00 under "Current Operating

Expenditures" to fund the P39,343,028.00 expense under Ordinance No. 0254,

Series of 1998, and not the P39,352,047.75 under Ordinance No. 0247, Series of

1997, was further clarified by petitioners during their oral argument before this

Court on April 20, 1999.[8] Jospped

Second. Respondents insist that Ordinance No. 0254, Series of 1998 was passed

without funds actually available. In support of their contention, they cite the

dissenting opinion of Justice Kapunan that "there was no "unavoidable

discontinuance" or an "abandonment of the work or activity" as contemplated

under Section 321 of the Local Government Code since the records do not

ndicate that the expropriation case before the Regional Trial Court was actually

withdrawn, suspended, discontinued or abandoned by the City of Caloocan.

This argument however is wrongfully premised as it presupposes the identity,

which does not however exist, between the P39,352,047.75 appropriated under

Ordinance No. 0246, Series of 1997, and the P39,343,028.00 appropriated under

Ordinance No. 0254, Series of 1998. The former which was a 1997 appropriation

was never touched for the expropriation of the Maysilo Lot and did not

materialize, while the latter was sourced from the 1998 Annual Budget under

"Current Operating Expenditures" by realigning the allocation of P50,000,000.00

therefrom to fund the items in Ordinance No. 0254, Series of 1998. Since the

P50,000,000.00 appropriation is classified neither as capital outlay nor as a

continuing appropriation[9] but as "Current Operating Expenditures," it could be

a valid subject of realignment. Sppedjo

Third. Respondents maintain that Ordinance No. 0254, Series of 1998 wasenacted without sufficient compliance with the requirement of Section 50 of the

Local Government Code requiring that house rules be adopted or updated.

The records satisfactorily show, however, that the Sanggunnian took up the

matter of adopting a set of house rules in its general meeting entitled, "Katitikan

ng Karaniwang Pulong ng Sangguniang Panlungsod na ginanap noong ika –2 ng

Hulyo 1998 sa Bagong Gusali ng Pamahalaang Lungsod ng Caloocan."[10] During

said meeting, the Sanggunian created an Ad Hoc Committee composed of seven

(7) members to study the existing house rules. Thereafter, it enacted Ordinance

No. 0254, Series of 1998.

As we have held in our Decision dated July 27, 1999, such succession of events is

egally permissible. The law does not require the completion of the updating or

adoption of the internal rules of procedure before the Sanggunian could act on

any other matter like the enactment of an ordinance. It simply requires that the

matter of adopting or updating the internal rules of procedure be taken up duringthe first day of session. It would be inequitable to read something more into the

requirement of the law and use it as a basis for finding petitioners guilty of

misconduct, especially when the charge is serious enough to warrant a penalty of

suspension from office for three (3) months without pay. Miso

Fourth. Respondents maintain that assuming that the Sanggunian can legally take

up matters pertaining to the supplemental budget even before the adoption or

updating of its existing rules of procedure, the circumstances that preceded the

enactment of the supplemental budget were irregular since there was undue

haste in conducting the three readings of Ordinance No. 0254, Series of 1998, in

the councilors were not given ample time for reflection and circumspection

before the passage of the proposed ordinance by conducting the three readin

in just one day considering that it was a certain Eduardo Tibor, by himself as

taxpayer, and not the councilors themselves, who raised such complaint. It m

not be amiss to point out that the salaries of the city employees were to be

funded by the said ordinance which embodied the supplemental budget for 1

hence, the urgency for its passage. Even the five (5) councilors[11] who absta

from voting for the passage of Ordinance 0254, Series of 1998 took advantag

its benefits by submitting to the office of petitioner Malonzo the names of th

employees assigned to their respective offices for salary and accounting

purposes.[12] Nexold

Finally. Respondents assert that assuming that the OP erred in its appreciatio

the facts on record, no grave abuse of discretion correctible by a special civilaction for certiorari may be attributed thereto.

But there was grave abuse of discretion on the part of the OP. Its findings are

totally devoid of support in the record. Hence, the Decision of respondent

Executive Secretary, suspending the petitioners, on the basis of the said findi

constitutes grave abuse of discretion amounting to an act done in excess of

jurisdiction.

WHEREFORE, the respondents’ motion for reconsideration is DENIED with

FINALITY.

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