Basco v.

PAGCOR (197 SCRA 52)

SALIENT POINTS OF THE CASE:

1. Local Autonomy Clause of the Constitution (Sec. 5, Article X of the 1987

Constitution):

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.

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."

2. 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.

FACTS:
On July 11, 1983, PAGCOR was created under Presidential Decree 1869, pursuant to
the policy of the government, “ to regulate and centralize through an appropriate
institution all games of chance authorized by existing franchise or permitted by law.”
This was subsequently proven to be beneficial not just to the government but also to
the society in general. It is a reliable source of much needed revenue for the cash-
strapped Government.
Petitioners filed an instant petition seeking to annul the PAGCOR because it is
allegedly contrary to morals, public policy and public order, among others.

ISSUE: Is the exemption clause in P.D. 1869 is violative of the principle of local
autonomy

RULING:

“…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.”

DETAILED VIEW OF THE RULING:

PETITIONER’s CONTENTION:

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 levies of
whatever nature, whether National or Local."

(2) Income and other taxes. — a) Franchise Holder: No tax of any kind or form,
income or otherwise as well as fees, charges or levies of whatever nature, whether
National or Local, shall be assessed and collected under this franchise from the
Corporation; nor shall any form or tax or charge attach in any way to the 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 under 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 assessments of any kind, nature or
description, levied, established or collected by any municipal, provincial or national
government authority (Section 13 [2]).

RULING OF THE SC:

Their contention stated hereinabove is without merit for the following reasons:
(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 Iloilo v. Villanueva, 105
Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or
statute must plainly show an intent to confer that power or the municipality
cannot assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax"
therefore must always yield to a legislative act which is superior having 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. It should be
stressed that "municipal corporations are mere creatures of Congress" (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 (Hebron v. Reyes, G.R. No. 9124,
July 2, 1950). 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.

(c) The City of Manila's power to impose license fees on gambling, has long been
revoked. As early as 1975, the power of local governments to regulate gambling
thru the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771
and was vested exclusively on the National Government, thus:

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

chartered cities and other local governments to issue license, permit or other form
of franchise to operate, maintain and establish horse and dog race tracks, jai-alai and
other forms of gambling is hereby revoked.

Sec. 2. Hereafter, all permits or franchises to operate, maintain and establish, horse
and dog race tracks, jai-alai and other forms of gambling shall be issued by the
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 corporation 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 the
affiliated entities, and shall exercise all the powers, authority and the responsibilities
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 the Philippines to the contrary
notwithstanding, except only with respect to original incorporation.

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. Otherwise, its operation might be burdened,
impeded or subjected to control by a mere Local government.

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

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
local 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 least,
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
instrumentality 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

local 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)
 Province of Rizal v. Executive Secretary (477 SCRA 463)

SALIENT FEATURES OF THE CASE:

1. Section 2(c) of the Local Government Code declares that it is the policy of the
state "to require all national agencies and offices to conduct periodic consultation
with appropriate local government units, non-governmental and people's
organization, and other concerned sectors of the community before any project or
program is implemented in their respective jurisdiction." Likewise Section 27 requires
prior consultations before a program shall be implemented by government
authorities and the prior approval of the Sanggunian is obtained." Corollarily as held
in Lina , Jr. v. Paño, 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.

Briefly stated, under the Local Government Code, two requisites must be met before
a national project that affects the environmental and ecological balance of local
communities can be implemented:

(1) prior consultation with the affected local communities, and

(2)prior approval of the project by the appropriate sanggunian.

Facts:

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, 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.

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
[President Ramos], through Proclamation No. 635, for use as a sanitary landfill and
similar waste disposal applications.

The petioners opposed the implementation of said order since the creation of
dump site under the territorial jurisdiction would compromise the health of their
constutents. Moreso, the the dump site is to be constructed in Watershed
reservation.

Through their concerted efforts of the officials and residents of Province of Rizal
and Municipality of San Mateo, the dump site was closed. However, during the term
of President Estrada in 2003, the dumpsite was re-opened.
 A temporary restraining order was then filed. Although petitioners did not raised
the question that the project was not consulted and approved by their appropriate
Sanggunian, the court take it into consideration since a mere MOA does not
guarantee the dump site’s permanent closure.

Issue:

Whether or not the consultation and approval of the Province of Rizal and
municipality of San Mateo is needed before the implementation of the project..

Ruling:

The court reiterated again that "the earth belongs in usufruct to the living."

Yes, as lucidly explained by the court: contrary to the averment of the

respondents, Proclamation No. 635, which was passed on 28 August 1995, is subject
to the provisions of the Local Government 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 require all
national agencies and offices to conduct periodic consultation with appropriate local
government units, non-governmental and people's organization, and other
concerned sectors of the community before any project or program is implemented
in their respective jurisdiction." Likewise Section 27 requires prior consultations
before a program shall be implemented by government authorities and the prior
approval of the Sanggunian is obtained." Corollarily as held in Lina , Jr. v. Paño,
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.

Relative to the case, 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
consultations. However, the ambivalence of his reply was brought to the fore when
at the height of the protest rally and barricade made by the residents of petitioners
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.

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 in
consonance with the approved comprehensive land use plan, subject to existing
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 this 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 this Code, and in
addition to said services and facilities, …providing for the establishment,
maintenance, protection, and conservation of communal forests and watersheds,
tree parks, greenbelts, mangroves, and other similar forest development
projects ….and, subject to existing laws, establishing and providing for the
maintenance, repair and operation of an efficient waterworks system to supply
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 supply of the municipality
and, for this purpose, extending the coverage of appropriate ordinances over all
territory within the drainage area of said water supply and within one hundred (100)
meters of the reservoir, conduit, canal, aqueduct, pumping station, or watershed
used in connection with the water service; and regulating the consumption, use or
wastage of water.”[Section 447 (5)(i) & (vii)]

Briefly stated, under the Local Government Code, two requisites must be met
before a national project that affects the environmental and ecological balance of
local communities can be implemented:

(1) prior consultation with the affected local communities, and

(2)prior approval of the project by the appropriate sanggunian.

Absent either of these mandatory requirements, the project’s implementation is

illegal.
DETAILED VIEW OF THE RULING OF THE COURT:

The Local Government Code Gives to Local Government Units All the Necessary
Powers to Promote the General Welfare of Their Inhabitants

The circumstances under which Proclamation No. 635 was passed also violates Rep.
Act No. 7160, or the Local Government Code.

Contrary to the averment of the respondents, Proclamation No. 635, which was
passed on 28 August 1995, is subject to the provisions of the Local Government
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 require all
national agencies and offices to conduct periodic consultations with appropriate
local government units, non-governmental and people's organizations, and other
concerned sectors of the community before any project or program is implemented
in their respective jurisdictions." Likewise, Section 27 requires prior consultations
before a program shall be implemented by government authorities 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 consultations. However,
he added that "(t)his is the problem, sir, the officials we may have been talking with
at the time this was established may no longer be incumbent and this 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 implied 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 their inhabitants. "
In 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 local
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 implementation
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 be interpreted 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 in
consonance with the approved comprehensive land use plan, subject to existing
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 this 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 this Code, and in
addition to said services and facilities, …providing for the establishment,
maintenance, protection, and conservation of communal forests and watersheds,
tree parks, greenbelts, mangroves, and other similar forest development
projects ….and, subject to existing laws, establishing and providing for the
maintenance, repair and operation of an efficient waterworks system to supply
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 supply of the
municipality and, for this purpose, extending the coverage of appropriate
ordinances over all territory within the drainage area of said water supply and
within one hundred (100) meters of the reservoir, conduit, canal, aqueduct,
pumping station, or watershed used in connection with the water service; and
regulating the consumption, use or wastage of water." [Section 447 (5)(i) & (vii)]

Under the Local Government Code, therefore, two requisites must be met before a
national project that affects the environmental and ecological balance of local
communities can be implemented: prior consultation with the affected local
communities, and prior approval of the project by the appropriate sanggunian.
Absent either of these mandatory requirements, the project’s implementation is
illegal.

SEC. 129 LGC states:

Power to Create Sources of Revenue. - Each local government unit shall exercise its
power to create its own sources of revenue and to levy taxes, fees, and charges
subject to the provisions herein, consistent with the basic policy of local autonomy.
Such taxes, fees, and charges shall accrue exclusively to the local government units.

SEC. 133 LGC states:

Common Limitations on the Taxing Powers of Local Government Units - Unless

otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:

(a) Income tax, except when levied on banks and other financial institutions;

(b) Documentary stamp tax;

(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa,
except as otherwise provided herein;

(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage
dues, and all other kinds of customs fees, charges and dues except wharfage on
wharves constructed and maintained by the local government unit concerned;
(e) Taxes, fees and charges and other impositions upon goods carried into or out of,
or passing through, the territorial jurisdictions of local government units in the guise
of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or
charges in any form whatsoever upon such goods or merchandise; (f) Taxes, fees or
charges on agricultural and aquatic products when sold by marginal farmers or
fishermen; (g) Taxes on business enterprises certified to by the Board of Investments
as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively from
the date of registration;

(h) Excise taxes on articles enumerated under the National Internal Revenue Code,
as amended, and taxes, fees or charges on petroleum products;

(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar

transactions on goods or services except as otherwise provided herein; (j) Taxes on
the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or
water, except as provided in this Code;

(k) Taxes on premiums paid by way of reinsurance or retrocession;

(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance
of all kinds of licenses or permits for the driving thereof, except tricycles;

(m) Taxes, fees, or other charges on Philippine products actually exported, except as
otherwise provided herein; (n) Taxes, fees, or charges, on Countryside and Barangay
Business Enterprises and cooperatives duly registered under R.A. No. 6810 and
Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise
known as the "Cooperatives Code of the Philippines" respectively; and cralaw

(o) Taxes, fees or charges of any kind on the National Government , its agencies and
instrumentalities, and local government units.

LTO v. City of Butuan

SALIENT FEATURES OF THE CASE:

1. Sec. 458. Powers, Duties, Functions and Compensation. —

xxx xxx xxx

(3) Subject to the provisions of Book II of this Code, enact ordinances granting
franchises and authorizing the issuance of permits or licenses, upon such conditions
and for such purposes intended to promote the general welfare of the inhabitants of
the city and pursuant to this legislative authority shall:

xxx xxx xxx

(VI) Subject to the guidelines prescribed by the Department of Transportation and

Communications, regulate the operation of tricycles and grant franchises for the
operation thereof within the territorial jurisdiction of the city.

"To regulate" means to fix, establish, or control; to adjust by rule, method, or

established mode; to direct by rule or restriction; or to subject to governing
principles or laws

"to register" means to record formally and exactly, to enroll, or to enter precisely in
a list or the like, and a "driver's license" is the certificate or license issued by the
government which authorizes a person to operate a motor vehicle.

Facts:
Relying on the fiscal autonomy granted to LGU's by the Constittuion and the
provisons of the Local Government Code, the Sangguniang Panglunsod of the City of
Butuan enacted an ordinance "Regulating the Operation of Tricycles-for-Hire,
providing mechanism for the issuance of Franchise, Registration and Permit, and
Imposing Penalties for Violations thereof and for other Purposes." The ordinance
provided for, among other things, the payment of franchise fees for the grant of the
franchise of tricycles-for-hire, fees for the registration of the vehicle, and fees for the
issuance of a permit for the driving thereof.

Petitioner LTO explains that one of the functions of the national government that,
indeed, has been transferred to local government units is the franchising authority
over tricycles-for-hire of the Land Transportation Franchising and Regulatory Board
("LTFRB") but not, it asseverates, the authority of LTO to register all motor vehicles
and to issue to qualified persons of licenses to drive such vehicles.

The RTC and CA ruled that the power to give registration and license for driving
tricycles has been devolved to LGU's.

Issue:
Whether or not, the registration of tricycles was given to LGU's, hence the
ordinance is a valid exercise of police power.

Ruling:
No, based on the-"Guidelines to Implement the Devolution of LTFRBs Franchising
Authority over Tricycles-For-Hire to Local Government units pursuant to the Local
Government Code"- the newly delegated powers to LGU's pertain to the franchising
and regulatory powers exercised by the LTFRB and not to the functions of the LTO
relative to the registration of motor vehicles and issuance of licenses for the driving
thereof. Corollarily, the exercised of a police power must be through a valid
delegation. In this case the police power of registering tricycles was not delegated to
the LGU’s, but remained in the LTO.

Clearly unaffected by the Local Government Code are the powers of LTO under
R.A. No.4136 requiring the registration of all kinds of motor vehicles "used or
operated on or upon any public highway" in the country.

The Commissioner of Land Transportation and his deputies are empowered at

anytime to examine and inspect such motor vehicles to determine whether said
vehicles are registered, or are unsightly, unsafe, improperly marked or equipped, or
otherwise unfit to be operated on because of possible excessive damage to
highways, bridges and other infrastructures. The LTO is additionally charged with
being the central repository and custodian of all records of all motor vehicles.
 Adds the Court, the reliance made by respondents on the broad taxing power of
local government units, specifically under Section 133 of the Local Government
Code, is tangential.

Police power and taxation, along with eminent domain, are inherent powers of
sovereignty which the State might share with local government units by delegation
given under a constitutional or a statutory fiat. All these inherent powers are for a
public purpose and legislative in nature but the similarities just about end there. The
basic aim of police power is public good and welfare. Taxation, in its case, focuses on
the power of government to raise revenue in order to support its existence and carry
out its legitimate objectives. Although correlative to each other in many respects,
the grant of one does not necessarily carry with it the grant of the other. The two
powers are, by tradition and jurisprudence, separate and distinct powers, varying in
their respective concepts, character, scopes and limitations.

To construe the tax provisions of Section 133 (1) of the LGC indistinctively would
result in the repeal to that extent of LTO's regulatory power which evidently has not
been intended. If it were otherwise, the law could have just said so in Section 447
and 458 of Book III of the Local Government Code in the same manner that the
specific devolution of LTFRB's power on franchising of tricycles has been provided.
Repeal by implication is not favored.

The power over tricycles granted under Section 458(a)(3)(VI) of the Local
Government Code to LGUs is the power to regulate their operation and to grant
franchises for the operation thereof. The exclusionary clause contained in the tax
provisions of Section 133 (1) of the Local Government Code must not be held to have
had the effect of withdrawing the express power of LTO to cause the registration of
all motor vehicles and the issuance of licenses for the driving thereof. These
functions of the LTO are essentially regulatory in nature, exercised pursuant to the
police power of the State, whose basic objectives are to achieve road safety by
insuring the road worthiness of these motor vehicles and the competence of drivers
prescribed by R. A. 4136. Not insignificant is the rule that a statute must not be
construed in isolation but must be taken in harmony with the extant body of laws.

LGUs indubitably now have the power to regulate the operation of tricycles-for-
hire and to grant franchises for the operation thereof, and not to issue registration.

National Liga ng mga Barangay v. Hon. Judge Paredes (G.R. NO. 130775 :
September 27, 2004)
Salient Features of the Case:

1. “Supervision means overseeing or the power or authority of an officer to see that

subordinate officers perform their duties. If the latter fail or neglect to fulfill them,
the former may take such action or step as prescribed by law to make them perform
their duties. Control, on the other hand, means the power of an officer to alter or
modify or nullify or set aside what a subordinate officer ha[s] done in the
performance of his duties and to substitute the judgment of the former for that of
the latter.” (G.R. 125350, December 3, 2002 - Judge Dadole et. al v. Comission On
Audit)

2. In the Local Government Code, the barangay is positioned to influence and direct
the development of the entire country. This was heralded by the adoption of the
bottom-to-top approach process of development which requires the development
plans of the barangay to be considered in the development plans of the municipality,
city or province, whose plans in turn are to be taken into account by the central
government in its plans for the development of the entire country. The Liga is the
vehicle assigned to make this new development approach materialize and produce
results.

The presidents of the Liga at the municipal, city and provincial levels, automatically
become ex-officio members of the Sangguniang Bayan, Sangguniang Panlungsod and
Sangguniang Panlalawigan, respectively. They shall serve as such only during their
term of office as presidents of the Liga chapters, which in no case shall be beyond
the term of office of the sanggunian concerned.

The Liga ng mga Barangay has one principal aim: to promote the development of
barangays and secure the general welfare of their inhabitants. In line with this, the
Liga is granted the following functions and duties: a) Give priority to programs
designed for the total development of the barangays and in consonance with the
policies, programs and projects of the national government; b) Assist in the
education of barangay residents for people’s participation in local government
administration in order to promote untied and concerted action to achieve country-
wide development goals; c) Supplement the efforts of government in creating gainful
employment within the barangay; d) Adopt measures to promote the welfare of
barangay officials; e) Serve as forum of the barangays in order to forge linkages with
government and non-governmental organizations and thereby promote the social,
economic and political well-being of the barangays; and f) Exercise such other
powers and perform such other duties and functions which will bring about stronger
ties between barangays and promote the welfare of the barangay inhabitants.

The Ligas are primarily governed by the provisions of the Local Government Code.
However, they are empowered to make their own constitution and by-laws to
govern their operations. Sec. 507 of the Code provides:

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

Local Government Code provides that the corporate powers of the Liga, expressed or
implied, shall be vested in the board of directors of each level of the Liga which shall:
a) Have jurisdiction over all officers, directors and committees of the said Liga;
including the power of appointment, assignment and delegation;
b) Have general management of the business, property, and funds of said Liga;
c) Prepare and approve a budget showing anticipated receipts and expenditures
for the year, including the plans or schemes for funding purposes; and
d) Have the power to suspend or remove from office any officer or member of
the said board on grounds cited and in the manner provided in hereinunder
provisions.

SUMMARY: David, representing Liga ng mga Barangay, filed a case to assail the
decision of Judge Paredes appointing DILG as an interim caretaker of the Liga. The
problem started when Rayos contested the Presidency of David in the Liga, alleging
irregularities in the election. Because of the chaos in the affairs of the Liga, DILG
through its Secretary deemed it wise to take over the management of the Liga. DILG
asked the court under Judge Paredes to appoint it as an interim caretaker of the Liga.
Judge Paredes’ decision appointing DILG as such and various acts and memorandum
circulars issued by DILG is being assailed in this case. SC ruled that Liga ng mga
barangay is under the supervision of the President. Hence, also of the DILG Secretary
as the alter ego of the President. However, DILG, in this case, went beyond
supervision and exercised control in its actions and issuance of memorandum
circulars.
DOCTRINE: The President’s power of the general supervision, as exercised by the
DILG Secretary as his alter ego, extends to the Liga ng mga Barangay

(detailed discussion of the case is attached. This is a long case…)

SEC. 23. LGC states:

Authority to Negotiate and Secure Grants. - Local chief executives may, upon
authority of the sanggunian, negotiate and secure financial grants or donations in
kind, in support of the basic services or facilities enumerated under Section 17
hereof, from local and foreign assistance agencies without necessity of securing
clearance or approval therefor from any department, agency, or office of the
national government or from any higher local government unit: Provided, That
projects financed by such grants or assistance with national security implications
shall be approved by the national agency concerned: Provided, further, That when
such national agency fails to act on the request for approval within thirty (30) days
from receipt thereof, the same shall be deemed approved.

The local chief executive shall, within thirty (30) days upon signing of such grant
agreement or deed of donation, report the nature, amount, and terms of such
assistance to both Houses of Congress and the President.