THE PROVINCE OF NORTH COTABATO ET AL
VS GOVERNMENT OF RP (2008)
Facts: On August 5, 2008, the Government of the
Republic of the Philippines (GRP) and the MILF,
through the Chairpersons of their respective peace
negotiating panels, were scheduled to sign a
Memorandum of Agreement on the Ancestral
Domain (MOA-AD) Aspect of the GRP-MILF Tripoli
Agreement on Peace of 2001 in Kuala Lumpur,
Malaysia. The MILF is a rebel group which was
established in March 1984 when, under the
leadership of the late Salamat Hashim, it splintered
from the Moro National Liberation Front (MNLF) then
headed by Nur Misuari, on the ground, among others,
of what Salamat perceived to be the manipulation of
the MNLF away from an Islamic basis towards
Marxist-Maoist orientations.[1] The signing of the
MOA-AD between the GRP and the MILF was not to
materialize, however, for upon motion of petitioners,
specifically those who filed their cases before the
scheduled signing of the MOA-AD, this Court issued
a Temporary Restraining Order enjoining the GRP
from signing the same. The MOA-AD was preceded
by a long process of negotiation and the concluding
of several prior agreements between the two parties
beginning in 1996, when the GRP-MILF peace
negotiations began. On July 18, 1997, the GRP and
MILF Peace Panels signed the Agreement on
General Cessation of Hostilities. The following year,
they signed the General Framework of Agreement of
Intent on August 27, 1998. The Solicitor General,
who represents respondents, summarizes the
MOA-AD by stating that the same contained, among
others, the commitment of the parties to pursue
peace negotiations, protect and respect human
rights, negotiate with sincerity in the resolution and
pacific settlement of the conflict, and refrain from the
use of threat or force to attain undue advantage
while the peace negotiations on the substantive
agenda are on-going.[2] Early on, however, it was
evident that there was not going to be any smooth
sailing in the GRP-MILF peace process. Towards the
end of 1999 up to early 2000, the MILF attacked a
number of municipalities in Central Mindanao and, in
March 2000, it took control of the town hall of
Kauswagan, Lanao del Norte.[3] In response, then
President Joseph Estrada declared and carried out
an "all-out-war" against the MILF. When President
Gloria Macapagal-Arroyo assumed office, the
military offensive against the MILF was suspended
and the government sought a resumption of the
peace talks. The MILF, according to a leading MILF
member, initially responded with deep reservation,
but when President Arroyo asked the Government of
Malaysia through Prime Minister Mahathir
Mohammad to help convince the MILF to return to
the negotiating table, the MILF convened its Central
Committee to seriously discuss the matter and,
eventually, decided to meet with the GRP. The
parties met in Kuala Lumpur on March 24, 2001, with
the talks being facilitated by the Malaysian
government, the parties signing on the same date
the Agreement on the General Framework for the
Resumption of Peace Talks Between the GRP and
the MILF. The MILF thereafter suspended all its
military actions. Formal peace talks between the
parties were held in Tripoli, Libya from June 20-22,
2001, the outcome of which was the GRP-MILF
Tripoli Agreement on Peace (Tripoli Agreement 2001)
containing the basic principles and agenda on the
following aspects of the negotiation: Security Aspect,
Rehabilitation Aspect, and Ancestral Domain Aspect.
With regard to the Ancestral Domain Aspect, the
parties in Tripoli Agreement 2001 simply agreed
"that the same be discussed further by the Parties in
their next meeting." A second round of peace talks
was held in Cyberjaya, Malaysia on August 5-7,
2001 which ended with the signing of the
Implementing Guidelines on the Security Aspect of
the Tripoli Agreement 2001 leading to a ceasefire
status between the parties. This was followed by the
Implementing Guidelines on the Humanitarian
Rehabilitation and Development Aspects of the
Tripoli Agreement 2001, which was signed on May 7,
2002 at Putrajaya, Malaysia. Nonetheless, there
were many incidence of violence between
government forces and the MILF from 2002 to 2003.
Meanwhile, then MILF Chairman Salamat Hashim
passed away on July 13, 2003 and he was replaced
by Al Haj Murad, who was then the chief peace
negotiator of the MILF. Murad's position as chief
peace negotiator was taken over by Mohagher
Iqbal.[6] In 2005, several exploratory talks were held
between the parties in Kuala Lumpur, eventually
leading to the crafting of the draft MOA-AD in its final
form, which, as mentioned, was set to be signed last
August 5, 2008.
Held: The Memorandum of Agreement on the
Ancestral Domain Aspect of the GRP-MILF Tripoli
Agreement on Peace of 2001 is declared contrary to
law and the Constitution.
Ratio: The petitions are ripe for adjudication. The
failure of respondents to consult the local
government units or communities affected
constitutes a departure by respondents from their
mandate under E.O. No. 3. Moreover, respondents
exceeded their authority by the mere act of
guaranteeing amendments to the Constitution. Any
alleged violation of the Constitution by any branch of
government is a proper matter for judicial review. As
the petitions involve constitutional issues which are
of paramount public interest or of transcendental
importance, the Court grants the petitioners,
petitioners-in-intervention and intervening
respondents the requisite locus standi in keeping
with the liberal stance adopted in David v.
Macapagal-Arroyo. Contrary to the assertion of
respondents that the non- signing of the MOA-AD
and the eventual dissolution of the GRP Peace
Panel mooted the present petitions, the Court finds
that the present petitions provide an exception to the
"moot and academic" principle in view of (a) the
grave violation of the Constitution involved; (b) the
exceptional character of the situation and paramount
public interest; (c) the need to formulate controlling
principles to guide the bench, the bar, and the public;
and (d) the fact that the case is capable of repetition
yet evading review. The MOA-AD is a significant part
of a series of agreements necessary to carry out the
GRP-MILF Tripoli Agreement on Peace signed by
the government and the MILF back in June 2001.
Hence, the present MOA-AD can be renegotiated or
another one drawn up that could contain similar or
significantly dissimilar provisions compared to the
original. The Court, however, finds that the prayers
for mandamus have been rendered moot in view of
the respondents' action in providing the Court and
the petitioners with the official copy of the final draft
of the MOA-AD and its annexes. The people's right
to information on matters of public concern under
Sec. 7, Article III of the Constitution is in
splendid symmetry with the state policy of full public
disclosure of all its transactions involving public
interest under Sec. 28, Article II of the Constitution.
The right to information guarantees the right of the
people to demand information, while Section 28
recognizes the duty of officialdom to give information
even if nobody demands. The complete and effective
exercise of the right to information necessitates that
its complementary provision on public disclosure
derive the same self-executory nature, subject only
to reasonable safeguards or limitations as may be
provided by law. The contents of the MOA-AD is a
matter of paramount public concern involving public
interest in the highest order. In declaring that the
right to information contemplates steps and
negotiations leading to the consummation of the
contract, jurisprudence finds no distinction as to the
executory nature or commercial character of the
agreement. An essential element of these twin
freedoms is to keep a continuing dialogue or process
of communication between the government and the
people. Corollary to these twin rights is the design for
feedback mechanisms. The right to public
consultation was envisioned to be a species of these
public rights. At least three pertinent laws animate
these constitutional imperatives and justify the
exercise of the people's right to be consulted on
relevant matters relating to the peace agenda.
One, E.O. No. 3 itself is replete with mechanics for
continuing consultations on both national and local
levels and for a principal forum for
consensus-building. In fact, it is the duty of the
Presidential Adviser on the Peace Process to
conduct regular dialogues to seek relevant
information, comments, advice, and
recommendations from peace partners and
concerned sectors of society.
Two, Republic Act No. 7160 or the Local
Government Code of 1991 requires all national
offices to conduct consultations before any project or
program critical to the environment and human
ecology including those that may call for the eviction
of a particular group of people residing in such
locality, is implemented therein. The MOA-AD is one
peculiar program that unequivocally and unilaterally
vests ownership of a vast territory to the
Bangsamoro people, which could pervasively and
drastically result to the diaspora or displacement of a
great number of inhabitants from their total
environment.
Three, Republic Act No. 8371 or the Indigenous
Peoples Rights Act of 1997 provides for clear-cut
procedure for the recognition and delineation of
ancestral domain, which entails, among other things,
the observance of the free and prior informed
consent of the Indigenous Cultural
Communities/Indigenous Peoples. Notably, the
statute does not grant the Executive Department or
any government agency the power to delineate and
recognize an ancestral domain claim by mere
agreement or compromise. The invocation of the
doctrine of executive privilege as a defense to the
general right to information or the specific right to
consultation is untenable. The various explicit legal
respondents effectively waived such defense after it
unconditionally disclosed the official copies of the
final draft of the MOA-AD, for judicial compliance and
public scrutiny. In sum, the Presidential Adviser on
the Peace Process committed grave abuse of
discretion when he failed to carry out the pertinent
consultation process, as mandated by E.O. No. 3,
Republic Act No. 7160, and Republic Act No. 8371.
The furtive process by which the MOA-AD was
designed and crafted runs contrary to and in excess
of the legal authority, and amounts to a whimsical,
capricious, oppressive, arbitrary and despotic
exercise thereof. It illustrates a gross evasion of
positive duty and a virtual refusal to perform the duty
enjoined. The MOA-AD cannot be reconciled with
the present Constitution and laws. Not only its
specific provisions but the very concept underlying
them, namely, the associative relationship
envisioned between the GRP and the BJE, are
unconstitutional , for the concept presupposes that
the associated entity is a state and implies that the
same is on its way to independence. While there is a
clause in the MOA-AD stating that the provisions
thereof inconsistent with the present legal framework
will not be effective until that framework is amended,
the same does not cure its defect. The inclusion of
provisions in the MOA-AD establishing an
associative relationship between the BJE and the
Central Government is, itself, a violation of the
Memorandum of Instructions From The President
dated March 1, 2001, addressed to the government
peace panel. Moreover, as the clause is worded, it
virtually guarantees that the necessary amendments
to the Constitution and the laws will eventually be put
in place. Neither the GRP Peace Panel nor the
President herself is authorized to make such a
guarantee. Upholding such an act would amount to
authorizing a usurpation of the constituent powers
vested only in Congress, a Constitutional Convention,
or the people themselves through the process of
initiative, for the only way that the Executive can
ensure the outcome of the amendment process is
through an undue influence or interference with that
process. While the MOA-AD would not amount to an
international agreement or unilateral declaration
binding on the Philippines under international law,
respondents' act of guaranteeing amendments is, by
itself, already a constitutional violation that renders
the MOA-AD fatally defective.
PRINCIPLES OF LOCAL AUTONOMY
1. Principle of Local Authority
Basco vs. PAGCOR
Facts:
 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."
 Petitioners filed an instant petition seeking to an
nul the Philippine Amusement and Gaming
Corporation (PAGCOR) Charter — PD 1869,
because it is allegedly contrary to morals, public
policy and order
 Petitioners claim 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 in violation of the
principle of local autonomy.
 Section 13 par. (2) of P.D. 1869 exempts
PAGCOR, as the franchise holder from paying
any"tax of any kind or form, income or otherwise,
as well as fees, charges or levies of
whatever nature, whether National or Local."
Issue1:
Does the local Government of Manila have the
power to impose taxes on PAGCOR?
Held
 No, the court rules that The City government of
Manila has no power to impose taxes
on PAGCOR.
Reason:
 The principle of Local autonomy does not make
local governments sovereign within the state;
the principle of local autonomy within the
constitution simply means decentralization. It
cannot be an “Imperium in imperio” it can only
act intra sovereign, or as an arm of the National
Government.
 PAGCOR has a dual role, to operate and
to regulate gambling casinos. The latter role is
governmental,which places it in the category
of an agency or instrumentality of the
Government. Being an instrumentality of the
Government, PAGCOR should be and actually
is exempt from local taxes.
 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.
Issue2:
Whether or not PD 1869 violates the local autonomy
clause.
Held:
No. Section 5, Article 10 of the 1987 Constitution
provides:
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.
A close reading of the above provision does not
violate local autonomy (particularly on taxing powers)
as it was clearly stated that the taxing power of LGUs
are subject to such guidelines and limitation as
Congress may provide.
Further, the City of Manila, being a mere Municipal
corporation has no inherent right to impose taxes.
The Charter of the City of Manila is subject to control
by Congress. It should be stressed that “municipal
corporations are mere creatures of Congress” which
has the power to “create and abolish municipal
corporations” due to its “general legislative powers”.
Congress, therefore, has the power of control over
Local governments. And if Congress can grant the
City of Manila the power to tax certain matters, it can
also provide for exemptions or even take back the
power.
Further still, local governments have no power to tax
instrumentalities of the National Government.
PAGCOR is a government owned or controlled
corporation with an original charter, PD 1869. All of
its shares of stocks are owned by the National
Government. Otherwise, its operation might be
burdened, impeded or subjected to control by a mere
Local government.
This doctrine emanates from the “supremacy” of the
National Government over local governments.
Limbona vs. Mangelin
Facts: Petitioner, Sultan Alimbusar Limbona, was
elected Speaker of the Regional Legislative
Assembly or Batasang Pampook of Central
Mindanao (Assembly). On October 21, 1987
Congressman Datu Guimid Matalam, Chairman of
the Committee on Muslim Affairs of the House of
Representatives, invited petitioner in his capacity as
Speaker of the Assembly of Region XII in a
consultation/dialogue with local government officials.
Petitioner accepted the invitation and informed the
Assembly members through the Assembly Secretary
that there shall be no session in November as his
presence was needed in the house committee
hearing of Congress. However, on November 2,
1987, the Assembly held a session in defiance of the
Limbona's advice, where he was unseated from his
position. Petitioner prays that the session's
proceedings be declared null and void and be it
declared that he was still the Speaker of the
Assembly. Pending further proceedings of the case,
the SC received a resolution from the Assembly
expressly expelling petitioner's membership
therefrom. Respondents argue that petitioner had
"filed a case before the Supreme Court against some
members of the Assembly on a question which
should have been resolved within the confines of the
Assembly," for which the respondents now submit
that the petition had become "moot and academic"
because its resolution.
Issue: Whether or not the courts of law have
jurisdiction over the autonomous governments or
regions. What is the extent of self-government given
to the autonomous governments of Region XII?
Held: 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". At
the same time, it relieves the central government of
the burden of managing local affairs and enables it to
concentrate on national concerns. The President
exercises "general supervision" over them, but only
to "ensure that local affairs are administered
according to law." He has no control over their acts
in the sense that he can substitute their judgments
with his own. Decentralization of power, on the other
hand, involves an abdication of political power in the
favor of local governments 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.
An autonomous government that enjoys autonomy of
the latter category [CONST. (1987), Art. X, Sec. 15.]
is subject alone to the decree of the organic act
creating it and accepted principles on the effects and
limits of "autonomy." On the other hand, an
autonomous government of the former class is, as
we noted, under the supervision of the national
government acting through the President (and the
Department of Local Government). If the
Sangguniang Pampook (of Region XII), then, is
autonomous in the latter sense, its acts are,
debatably beyond the domain of this Court in
perhaps the same way that the internal acts, say, of
the Congress of the Philippines are beyond our
jurisdiction. But if it is autonomous in the former
category only, it comes unarguably under our
jurisdiction. An examination of the very Presidential
Decree creating the autonomous governments of
Mindanao persuades us that they were never meant
to exercise autonomy in the second sense
(decentralization of power). PD No. 1618, in the first
place, mandates that "[t]he President shall have the
power of general supervision and control over
Autonomous Regions." Hence, we assume
jurisdiction. And if we can make an inquiry in the
validity of the expulsion in question, with more
reason can we review the petitioner's removal as
Speaker.
This case involves the application of a most
important constitutional policy and principle, that of
local autonomy. We have to obey the clear mandate
on local autonomy.
Where a law is capable of two interpretations, one in
favor of centralized power in Malacañang and the
other beneficial to local autonomy, the scales must
be weighed in favor of autonomy.
Upon the facts presented, we hold that the
November 2 and 5, 1987 sessions were invalid. It is
true that under Section 31 of the Region XII
Sanggunian Rules, "[s]essions shall not be
suspended or adjourned except by direction of the
Sangguniang Pampook". But while this opinion is in
accord with the respondents' own, we still invalidate
the twin sessions in question, since at the time the
petitioner called the "recess," it was not a settled
matter whether or not he could do so. In the second
place, the invitation tendered by the Committee on
Muslim Affairs of the House of Representatives
provided a plausible reason for the intermission
sought. Also, assuming that a valid recess could not
be called, it does not appear that the respondents
called his attention to this mistake. What appears is
that instead, they opened the sessions themselves
behind his back in an apparent act of mutiny. Under
the circumstances, we find equity on his side. For
this reason, we uphold the "recess" called on the
ground of good faith.
Batangas CATV, Inc. v. Court of Appeals
FACTS: On July 28, 1986, respondent Sangguniang
Panlungsod enacted Resolution No. 210 granting
petitioner a permit to construct, install, and operate a
CATV system in Batangas City. Section 8 of the
Resolution provides that petitioner is authorized to
charge its subscribers the maximum rates specified
therein, †œprovided, however, that any increase of
rates shall be subject to the approval of the
Sangguniang Panlungsod. Sometime in November
1993, petitioner increased its subscriber rates from
P88.00 to P180.00 per month. As a result,
respondent Mayor wrote petitioner a letter
threatening to cancel its permit unless it secures the
approval of respondent Sangguniang Panlungsod,
pursuant to Resolution No. 210. Petitioner then filed
with the RTC, Branch 7, Batangas City, a petition for
injunction alleging that respondent Sangguniang
Panlungsod has no authority to regulate the
subscriber rates charged by CATV operators
because under Executive Order No. 205, the
National Telecommunications Commission (NTC)
has the sole authority to regulate the CATV
operation in the Philippines.
ISSUE: May a local government unit (LGU) regulate
the subscriber rates charged by CATV operators
within its territorial jurisdiction?
HELD: No. E.O. No. 436, the NTC exercises
regulatory power over CATV operators to the
exclusion of other bodies.
xxx
Like any other enterprise, CATV operation maybe
regulated by LGUs under the general welfare clause.
This is primarily because the CATV system commits
the indiscretion of crossing public properties. (It uses
public properties in order to reach subscribers.) The
physical realities of constructing CATV system – the
use of public streets, rights of ways, the founding of
structures, and the parceling of large regions – allow
an LGU a certain degree of regulation over CATV
operators.
xxx
But, while we recognize the LGUs’ power under the
general welfare clause, we cannot sustain
Resolution No. 210. We are convinced that
respondents strayed from the well recognized limits
of its power. The flaws in Resolution No. 210 are: (1)
it violates the mandate of existing laws and (2) it
violates the State’s deregulation policy over the
CATV industry.
LGUs must recognize that technical matters
concerning CATV operation are within the exclusive
regulatory power of the NTC.
2. Power of the President over LGUs
Judge Dadole v. Commission on Audit
FACTS: Petitioners RTC Judges Dadole et al and
MTC judges Temistocles et al stationed in Mandaue
City received amonthly allowance of P1,260 each
pursuant to the yearly appropriation ordinance.
Eventually, in 1991, it wasincreased to P1,500
for each judge. However, the Department of Budget
and Management (DBM) then issuedLocal Budget
Circular No. 55 which provides that the additional
monthly allowances to be given by a
localgovernment unit should not exceed P1,000 in
provinces and cities and P700 in municipalities.
Acting on the saidDBM directive, the Mandaue
City Auditor issued notices of disallowance to herein
petitioners in excess of theamount authorized by
LBC 55. Thus, petitioners filed with the Office of
the City Auditor a protest. However, it wastreated as
a motion for reconsideration and was endorsed to
the Commission on Audit Regional Office. In turn,
theCOA Regional Office referred the said motion to
their Head Office with recommendation that
the same should bedenied. Accordingly, it was
denied by the COA. Hence, petitioners filed the
instant petition. They argued, amongothers, that LBC
55 is void for infringing on the local autonomy of
Mandaue City by dictating a uniform amountthat a
local government unit can disburse as additional
allowances to judges stationed therein.
ISSUE: Whether or not LBC 55 is void for infringing
the local autonomy of Mandaue City
HELD: Yes. We recognize that, although
our Constitution guarantees autonomy to local
government units, the exercise of local autonomy
remains subject to the power of control by Congress
and the power of supervision by the President.
Section 4 of Article X of the 1987 Philippine
Constitution provides that: "Sec. 4. The President of
the Philippines shall exercise general supervision
over local governments. . . . "
Under Section 458, of RA 7160, the law that
supposedly serves as the legal basis of LBC 55,
allows the grant of additional allowances to judges
"when the finances of the city government allow."
The said provision does not authorize setting a
definite maximum limit to the additional allowances
granted to judges. Thus, this Court need not belabor
the point that the finances of a city government may
allow the grant of additional allowances higher than
P1,000 if the revenues of the said city government
exceed its annual expenditures. Setting a uniform
amount for the grant of additional allowances is an
inappropriate way of enforcing the criterion found in
Section 458, par. (a)(l)(xi), of RA 7160. The DBM
over-stepped its power of supervision over local
government units by imposing a prohibition that did
not correspond with the law it sought to implement.
In other words, the prohibitory nature of the circular
had no legal basis.
The President can only interfere in the affairs and
activities of a local government unit if he or she finds
that the latter has acted contrary to law. This is
the scope of the President's supervisory powers over
local government units. Hence, the President or any
of his or her alter egos cannot interfere in local affairs
as long as the concerned local government unit acts
within the parameters of the law and the Constitution.
Any directive therefore by the President or any of his
or her alter egos seeking to alter the wisdom of a
law-conforming judgment on local affairs of a local
government unit is a patent nullity because it violates
the principle of local autonomy and separation of
powers of the executive and legislative departments
in governing municipal corporations.
Pimentel v. Aguirre, et al.
FACTS:
 On Dec. 27, 1997, Pres. Ramos issued AO
372,with the following assailed provisions:
SECTION 1. All government departments and
agencies, including state universities and colleges,
government-owned and controlled corporations and
local governments units will identify and implement
measures in FY 1998 that will reduce total
expenditures for the year by at least 25% of
authorized regular appropriations for non-personal
services items, along the following suggested areas
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
revenueallotment to local government units shall be
withheld.
 PIMENTEL contends that the President, in
issuing AO 372, was exercising the power of
control over LGUs contrary to the Constitution’s
provision which vests in the President only the
power of general supervision over LGUs
 PIMENTEL further argues that the directive to
withhold 10% of LGUs 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 of LGUs’
share in the national internal revenue
ISSUES:
1.WON Section 1 of AO 372, insofar as it "directs"
LGUs to reduce their expenditures by 25%is valid –
YES
2. WON Section 4 of AO 372 which withholds 10%
of LGUs IRA is valid – NO
RATIO:
Section 1 of the AO does not violate local fiscal
autonomy. Local fiscal autonomy does not 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. AO 372 is merely directory and has
been issued by the President consistent with his
powers of supervision over local governments. A
directory order cannot be characterized as an
exercise of the power of control. The AO is intended
only to advise all government agencies and
instrumentalities to undertake cost-reduction
measures that will help maintain economic stability in
the country. It does not contain any sanction in case
of noncompliance.
The Local Government Code also allows the
President to interfere in local fiscal matters, provided
that certain requisites are met: (1) an unmanaged
public sector deficit of the national government; (2)
consultations with the presiding officers of the
Senate and the House of Representatives and the
presidents of the various local leagues; (3) the
corresponding recommendation of the secretaries of
the Department of Finance, Interior and Local
Government, and Budget and Management; and (4)
any adjustment in the allotment shall in no case be
less than 30% of the collection of national internal
revenue taxes of the third fiscal year preceding the
current one.

Section 4 of AO 372 cannot be upheld. A basic
feature of local fiscal autonomy is the automatic
release of the shares of LGUs in the national internal
revenue. This is mandated by the Constitution and
the Local Government Code. Section 4 which orders
the withholding of 10% of the LGU’s IRA clearly
contravenes the Constitution and the law.
Province of Batangas v. Romulo
FACTS:
In 1998, then President Estrada issued EO No. 48
establishing the “Program for Devolution
Adjustment and Equalization” to enhance the
capabilities of LGUs in the discharge of the
functions and services devolved to them through the
LGC.
The Oversight Committee under Executive Secretary
Ronaldo Zamora passed Resolutions No.
OCD-99-005, OCD-99-006 and OCD-99-003 which
were approved by Pres. Estrada on October 6, 1999.
The guidelines formulated by the Oversight
Committee required the LGUs to identify the projects
eligible for funding under the portion of LGSEF and
submit the project proposals and other requirements
to the DILG for appraisal before the Committee
serves notice to the DBM for the subsequent release
of the corresponding funds.
Hon. Herminaldo Mandanas, Governor of Batangas,
petitioned to declare unconstitutional and void
certain provisos contained in the General
Appropriations Acts (GAAs) of 1999, 2000, and
2001, insofar as they uniformly earmarked for each
corresponding year the amount of P5billion for the
Internal Revenue Allotment (IRA) for the Local
Government Service Equalization Fund (LGSEF) &
imposed conditions for the release thereof.
ISSUE:
Whether the assailed provisos in the GAAs of 1999,
2000, and 2001, and the OCD resolutions infringe
the Constitution and the LGC of 1991.
HELD:
Yes. The assailed provisos in the GAAs of 1999,
2000, and 2001, and the OCD resolutions constitute
a “withholding” of a portion of the IRA – they
effectively encroach on the fiscal autonomy
enjoyed by LGUs and must be struck down.
According to Art. II, Sec.25 of the Constitution, “the
State shall ensure the local autonomy of local
governments“. Consistent with the principle of local
autonomy, the Constitution confines the President’s
power over the LGUs to one of general supervision,
which has been interpreted to exclude the power of
control. Drilon v. Lim distinguishes supervision from
control: control lays down the rules in the doing of an
act – the officer has the discretion to order his
subordinate to do or redo the act, or decide to do it
himself; supervision merely sees to it that the rules
are followedbut has no authority to set down the
rules or the discretion to modify/replace them.
The entire process involving the distribution &
release of the LGSEF is constitutionally
impermissible. The LGSEF is part of the IRA or “just
share” of the LGUs in the national taxes. Sec.6, Art.X
of the Constitution mandates that the “just share”
shall be automatically released to the LGUs. Since
the release is automatic, the LGUs aren’t required to
perform any act to receive the “just share” – it shall
be released to them “without need of further action“.
To subject its distribution & release to the vagaries of
the implementing rules & regulations as sanctioned
by the assailed provisos in the GAAs of 1999-2001
and the OCD Resolutions would violate this
constitutional mandate.
The only possible exception to the mandatory
automatic release of the LGUs IRA is if the national
internal revenue collections for the current fiscal year
is less than 40% of the collections of the 3rd
preceding fiscal year. The exception does not apply
in this case.
The Oversight Committee’s authority is limited to the
implementation of the LGC of 1991 not to supplant or
subvert the same, and neither can it exercise control
over the IRA of the LGUs.
Congress may amend any of the provisions of the
LGC but only through a separate law and not
through appropriations laws or GAAs. Congress
cannot include in a general appropriations bill
matters that should be more properly enacted in a
separate legislation.

A general appropriations bill is a special type of

legislation, whose content is limited to specified
sums of money dedicated to a specific purpose or a
separate fiscal unit –any provision therein which is
intended to amend another law is considered an
“inappropriate provision“. Increasing/decreasing the
IRA of LGUs fixed in the LGC of 1991 are matters of
general & substantive law. To permit the Congress to
undertake these amendments through the GAAs
would unduly infringe the fiscal autonomy of the
LGUs.

The value of LGUs as institutions of democracy is

measured by the degree of autonomy they enjoy.
Our national officials should not only comply with the
constitutional provisions in local autonomy but
should also appreciate the spirit and liberty upon
which these provisions are based.