MANDANAS VS.

OCHOA

JULY 3, 2018

G.R. No. 199802

CONGRESSMAN HERMILANDO I. MANDANAS; MAYOR EFREN B. DIONA; MAYOR ANTONINO A. AURELIO;

KAGA WAD MARIOILAGAN;BARANGAY CHAIR PERLITO MANALO; BARANGA Y CHAIR MEDEL
MEDRANO;BARANGAY KAGA WAD CRIS RAMOS; BARANGA Y KAGA WAD ELISA D. BALBAGO, and
ATTY. JOSE MALVAR VILLEGAS, Petitioners
vs.
EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.; SECRETARY CESAR PURISIMA, Department of
Finance; SECRETARY FLORENCIO H. ABAD, Department of Budget and Management; COMMISSIONER KIM
JACINTO-HENARES, Bureau of Internal Revenue; and NATIONAL TREASURER ROBERTO TAN, Bureau of
the Treasury, Respondents

G.R. No. 208488

HONORABLE ENRIQUE T. GARCIA, JR., in his personal and official capacity as Representative of the
2nd District of the Province of Bataan, Petitioner
vs.
HONORABLE [PAQUITO) N. OCHOA, JR., Executive Secretary; HONORABLE CESAR V. PURISIMA,
Secretary, Department of Finance; HONORABLE FLORENCIO H. ABAD, Secretary, Department of Budget
and Management; HONORABLE KIM S. JACINTO-HENARES, Commissioner, Bureau of Internal Revenue;
and HONORABLE ROZZANO RUFINO B. BIAZON, Commissioner, Bureau of Customs, Respondents

DECISION

BERSAMIN, J.:

The petitioners hereby challenge the manner in which the just share in the national taxes of the local government
units (LGUs) has been computed.

Antecedents

One of the key features of the 1987 Constitution is its push towards decentralization of government and local
autonomy. Local autonomy has two facets, the administrative and the fiscal. 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.  Such autonomy is as indispensable to the viability of the policy of decentralization as the
1

other.

Implementing the constitutional mandate for decentralization and local autonomy, Congress enacted Republic Act
No. 7160, otherwise known as the Local Government Code (LGC), in order to guarantee the fiscal autonomy of the
LGUs by specifically providing that:

SECTION 284. Allotment of Internal Revenue Taxes. - Local government units shall have a share in the national
internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year as follows:

(a) On the first year of the effectivity of this Code, thirty percent (30%); (b) On the second year, thirty-five percent
(35%); and

(c) On the third year and thereafter, forty percent (40%).

Provided, That in the event that the National Government incurs an unmanageable public sector deficit, the
President of the Philippines is hereby authorized, upon the recommendation of Secretary of Finance, Secretary of
Interior and Local Government, and Secretary of Budget and Management, and subject to consultation with the
presiding officers of both Houses of Congress and the presidents of the "liga", to make the necessary adjustments in
the internal revenue allotment of local government units but in no case shall the allotment be less than thirty percent
(30%) of the collection of national internal revenue taxes of the third fiscal year preceding the current fiscal year:
Provided, further, That in the first year of the effectivity of this Code, the local government units shall, in addition to
the thirty percent (30%) internal revenue allotment which shall include the cost of devolved functions for essential
public services, be entitled to receive the amount equivalent to the cost of devolved personal services.

The share of the LGUs, heretofore known as the Internal Revenue Allotment (IRA), has been regularly released to
the LGUs. According to the implementing rules and regulations of the LGC, the IRA is determined on the basis of
the actual collections of the National Internal Revenue Taxes (NIRTs) as certified by the Bureau of Internal Revenue
(BIR).2

G.R. No. 199802 (Mandanas, et al.) is a special civil action for certiorari, prohibition and mandamus assailing the
manner the General Appropriations Act (GAA) for FY 2012 computed the IRA for the LGUs.

Mandanas, et al. allege herein that certain collections of NIR Ts by the Bureau of Customs (BOC) - specifically:
excise taxes, value added taxes (VATs) and documentary stamp taxes (DSTs) - have not been included in the base
amounts for the computation of the IRA; that such taxes, albeit collected by the BOC, should form part of the base
from which the IRA should be computed because they constituted NIRTs; that, consequently, the release of the
additional amount of ₱60,750,000,000.00 to the LGUs as their IRA for FY 2012 should be ordered; and that for the
same reason the LGUs should also be released their unpaid IRA for FY 1992 to FY 2011, inclusive, totaling
₱438,103,906,675.73.

In G.R. No. 208488, Congressman Enrique Garcia, Jr., the lone petitioner, seeks the writ of mandamus to compel
the respondents thereat to compute the just share of the LGUs on the basis of all national taxes. His petition insists
on a literal reading of Section 6, Article X of the 1987 Constitution. He avers that the insertion by Congress of the
words internal revenue in the phrase national taxes found in Section 284 of the LGC caused the diminution of the
base for determining the just share of the LGUs, and should be declared unconstitutional; that, moreover, the
exclusion of certain taxes and accounts pursuant to or in accordance with special laws was similarly constitutionally
untenable; that the VA Ts and excise taxes collected by the BOC should be included in the computation of the IRA;
and that the respondents should compute the IRA on the basis of all national tax collections, and thereafter
distribute any shortfall to the LGUs.

It is noted that named as common respondents were the then incumbent Executive Secretary, Secretary of Finance,
the Secretary of the Department of Budget and Management (DBM), and the Commissioner of Internal Revenue. In
addition, Mandanas, et al. impleaded the National Treasurer, while Garcia added the Commissioner of Customs.

The cases were consolidated on October 22, 2013.   In the meanwhile, Congressman Garcia, Jr. passed away. Jose
3

Enrique Garcia III, who was subsequently elected to the same congressional post, was substituted for Congressman
Garcia, Jr. as the petitioner in G.R. No. 208488 under the resolution promulgated on August 23, 2016. 4

In response to the petitions, the several respondents, represented by the Office of the Solicitor General (OSG),
urged the dismissal of the petitions upon procedural and substantive considerations.

Anent the procedural considerations, the OSG argues that the petitions are procedurally defective because,
firstly, mandamus does not lie in order to achieve the reliefs sought because Congress may not be compelled to
appropriate the sums allegedly illegally withheld for to do so will violate the doctrine of separation of powers; and,
secondly, mandamus does not also lie to compel the DBM to release the amounts to the LGUs because such
disbursements will be contrary to the purposes specified in the GAA; that Garcia has no clear legal right to sustain
his suit for mandamus; that the filing of Garcia's suit violates the doctrine of hierarchy of courts; and that Garcia's
petition seeks declaratory relief but the Court cannot grant such relief in the exercise of its original jurisdiction.

On the substantive considerations, the OSG avers that Article 284 of the LGC is consistent with the mandate of
Section 6, Article X of the 1987 Constitution to the effect that the LGUs shall have a just share in the national taxes;
that the determination of the just share is within the discretion of Congress; that the limitation under the LGC of the
basis for the just share in the NIRTs was within the powers granted to Congress by the 1987 Constitution; that the
LGUs have been receiving their just share in the national taxes based on the correct base amount; that Congress
has the authority to exclude certain taxes from the base amount in computing the IRA; that there is a distinction
between the VA Ts, excise taxes and DSTs collected by the BIR, on one hand, and the VA Ts, excise taxes and
DSTs collected by the BOC, on the other, thereby warranting their different treatment; and that Development Budget
Coordination Committee (DBCC) Resolution No. 2003-02 dated September 4, 2003 has limited the base amount for
the computation of the IRA to the "cash collections based on the BIR data as reconciled with the Bureau of
Treasury;" and that the collection of such national taxes by the BOC should be excluded.

Issues

The issues for resolution are limited to the following, namely:

I.

Whether or not Mandamus is the proper vehicle to assail the constitutionality of the relevant provisions of the GAA
and the LGC;

II.

Whether or not Section 284 of the LGC is unconstitutional for being repugnant to Section 6, Article X of the 1987
Constitution;

III.

Whether or not the existing shares given to the LGUs by virtue of the GAA is consistent with the constitutional
mandate to give LGUs a 'just share" to national taxes following Article X, Section 6 of the 1987 Constitution;

IV.

Whether or not the petitioners are entitled to the reliefs prayed for.

Simply stated, the petitioners raise the novel question of whether or not the exclusion of certain national taxes from
the base amount for the computation of the just share of the LGUs in the national taxes is constitutional.

Ruling of the Court

The petitions are partly meritorious.

I
Mandamus is an improper remedy

Mandanas, et al. seek the writs of certiorari, prohibition and mandamus, while Garcia prays for the writ
of mandamus. Both groups of petitioners impugn the validity of Section 284 of the LGC.

The remedy of mandamus is defined in Section 3, Rule 65 of the Rules of Court, which provides:

Section 3. Petition for mandamus. - When any tribunal, corporation, board, officer or person unlawfully neglects the
performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or
unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, and there
is no other plain, speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby may file
a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered
commanding the respondent, immediately or at some other time to be specified by the court, to do the act required
to be done to protect the rights of the petitioner, and to pay the damages sustained by the petitioner by reason of
the wrongful acts of the respondent.

The petition shall also contain a sworn certification of non-forum shopping as provided in the third paragraph of
section 3, Rule 46.
For the writ of mandamus to issue, the petitioner must show that the act sought to be performed or compelled is
ministerial on the part of the respondent. An act is ministerial when it does not require the exercise of judgment and
the act is performed pursuant to a legal mandate. The burden of proof is on the mandamus petitioner to show that
he is entitled to the performance of a legal right, and that the respondent has a corresponding duty to perform the
act. The writ of mandamus may not issue to compel an official to do anything that is not his duty to do, or that is his
duty not to do, or to obtain for the petitioner anything to which he is not entitled by law. 
5

Considering that its determination of what constitutes the just share of the LGUs in the national taxes under the
1987 Constitution is an entirely discretionary power, Congress cannot be compelled by writ of mandamus to act
either way. The discretion of Congress thereon, being exclusive, is not subject to external direction; otherwise, the
delicate balance underlying our system of government may be unduly disturbed. This conclusion should at once
then demand the dismissal of the Garcia petition in G.R. No. 208488, but we do not dismiss it. Garcia has attributed
the non-release of some portions of their IRA balances to an alleged congressional indiscretion - the diminution of
the base amount for computing the LGU's just share. He has asserted that Congress altered the constitutional base
not only by limiting the base to the NIRTs instead of including therein all national taxes, but also by excluding some
national taxes and revenues that only benefitted a few LGUs to the detriment of the rest of the LGUs.

Garcia's petition, while dubbed as a petition for mandamus, is also a petition for certiorari because it alleges that
Congress thereby committed grave abuse of discretion amounting to lack or excess of jurisdiction. It is worth
reminding that the actual nature of every action is determined by the allegations in the body of the pleading or the
complaint itself, not by the nomenclature used to designate the same.   Moreover, neither should the prayer for relief
6

be controlling; hence, the courts may still grant the proper relief as the facts alleged in the pleadings and the
evidence introduced may warrant even without a prayer for specific remedy. 7

In this regard, Garcia's allegation of the unconstitutionality of the insertion by Congress of the words internal
revenue in the phrase national taxes justifies treating his petition as one for certiorari. It becomes our duty, then, to
assume jurisdiction over his petition. In Araullo v. Aquino III,  the Court has emphatically opined that the
8

Court's certiorari jurisdiction under the expanded judicial power as stated in the second paragraph of Section 1,
Article VIII of the Constitution can be asserted:

xxxx to set right and undo any act of grave abuse of discretion amounting to lack or excess of jurisdiction by any
branch or instrumentality of the Government, the Court is not at all precluded from making the inquiry provided the
challenge was properly brought by interested or affected parties. The Court has been thereby entrusted expressly or
by necessary implication with both the duty and the obligation of determining, in appropriate cases, the validity of
any assailed legislative or executive action. This entrustment is consistent with the republican system of checks and
balances. 9

Further, observing that one of the reliefs being sought by Garcia is identical to the main relief sought by
Mandanas, et al., the Court should rightly dwell on the substantive arguments posited by Garcia to the extent that
they are relevant to the ultimate resolution of these consolidated suits.

II.
Municipal corporations and their relationship with Congress

The correct resolution and fair disposition of the issues interposed for our consideration require a review of the basic
principles underlying our system of local governments, and of the extent of the autonomy granted to the LGUs by
the 1987 Constitution.

Municipal corporations are now commonly known as local governments. They are the bodies politic established by
law partly as agencies of the State to assist in the civil governance of the country. Their chief purpose has been to
regulate and administer the local and internal affairs of the cities, municipalities or districts. They are legal
institutions formed by charters from the sovereign power, whereby the populations within communities living within
prescribed areas have formed themselves into bodies politic and corporate, and assumed their corporate names
with the right of continuous succession and for the purposes and with the authority of subordinate self-government
and improvement and the local administration of the affairs of the State.  10

Municipal corporations, being the mere creatures of the State, are subject to the will of Congress, their creator. Their
continued existence and the grant of their powers are dependent on the discretion of Congress. On this matter,
Judge John F. Dillon of the State of Iowa in the United States of America enunciated in Merriam v. Moody's
Executors  the rule of statutory construction that came to be oft-mentioned as Dillon's Rule, to wit:
11

[A] municipal corporation possesses and can exercise the following powers and no others: First, those granted in
express words; second, those necessarily implied or necessarily incident to the powers expressly granted; third,
those absolutely essential to the declared objects and purposes of the corporation-not simply convenient but
indispensible; fourth, any fair doubt as to the existence of a power is resolved by the courts against the corporation-
against the existence of the powers.  12

The formulation of Dillon's Rule has since undergone slight modifications. Judge Dillon himself introduced some of
the modifications through his post-Merriam writings with the objective of alleviating the original formulation's
harshness. The word fairly was added to the second proviso; the word absolutely was deleted from the third proviso;
and the words reasonable and substantial were added to the fourth proviso, thusly:

x x x second, those necessarily or fairly implied in or incident to the powers expressly granted; third, those essential
to x x x. Any fair, reasonable, doubt. 
13

The modified Dillon's Rule has been followed in this jurisdiction, and has remained despite both the 1973
Constitution and the 1987 Constitution mandating autonomy for local governments. This has been made evident in
several rulings of the Court, one of which was that handed down in Magtajas v. Pryce Properties Corporation, lnc.:  14

In light of all the above considerations, we see no way of arriving at the conclusion urged on us by the petitioners
that the ordinances in question are valid. On the contrary, we find that the ordinances violate P.D. 1869, which has
the character and force of a statute, as well as the public policy expressed in the decree allowing the playing of
certain games of chance despite the prohibition of gambling in general.

The rationale of the requirement that the ordinances should not contravene a statute is obvious. Municipal
governments are only agents of the national government. Local councils exercise only delegated legislative
powers conferred on 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 so great 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 to the corporation themselves are concerned. They are, so
to phrase it, the mere tenants at will of the legislature.

This 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 are certain notable innovations in the Constitution, like the direct conferment on the local
government units of the power to tax, 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. [Bold underscoring supplied for emphasis]

Also, in the earlier ruling in Ganzon v. Court of Appeals,   the Court has pointed out that the 1987 Constitution, in
15

mandating autonomy for the LGUs, did not intend to deprive Congress of its authority and prerogatives over the
LGUs.
Nonetheless, the LGC has tempered the application of Dillon's Rule in the Philippines by providing a norm of
interpretation in favor of the LGUs in its Section 5(a), to wit:

xxxx

(a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of
doubt, any question thereon shall be resolved in favor of devolution of powers and of the local government unit. Any
fair and reasonable doubt as to the existence of the power shall be interpreted in favor of the local
government unit concerned; [Bold underscoring supplied for emphasis]

xxxx

III.
The extent of local autonomy in the Philippines

Regardless, there remains no question that Congress possesses and wields plenary power to control and direct the
destiny of the LGUs, subject only to the Constitution itself, for Congress, just like any branch of the Government,
should bow down to the majesty of the Constitution, which is always supreme.

The 1987 Constitution limits Congress' control over the LGUs by ordaining in Section 25 of its Article II that: "The
State shall ensure the autonomy of local governments." The autonomy of the LGUs as thereby ensured does not
contemplate the fragmentation of the Philippines into a collection of mini-states,   or the creation of imperium in
16

imperio.   The grant of autonomy simply means that Congress will allow the LGUs to perform certain functions and
17

exercise certain powers in order not for them to be overly dependent on the National Government subject to the
limitations that the 1987 Constitution or Congress may impose.   Local autonomy recognizes the wholeness of the
18

Philippine society in its ethnolinguistic, cultural, and even religious diversities.

19

The constitutional mandate to ensure local autonomy refers to decentralization.  In its broad or general sense,
20

decentralization has two forms in the Philippine setting, namely: the decentralization of power and the
decentralization of administration. The decentralization of power involves the abdication of political power in favor of
the autonomous LGUs as to grant them the freedom to chart their own destinies and to shape their futures with
minimum intervention from the central government. This amounts to self-immolation because the autonomous LGUs
thereby become accountable not to the central authorities but to their constituencies. On the other hand, the
decentralization of administration occurs when the central government delegates administrative powers to the LGUs
as the means of broadening the base of governmental powers and of making the LGUs more responsive and
accountable in the process, and thereby ensure their fullest development as self-reliant communities and more
effective partners in the pursuit of the goals of national development and social progress. This form of
decentralization further relieves the central government of the burden of managing local affairs so that it can
concentrate on national concerns. 21

Two groups of LGUs enjoy decentralization in distinct ways. The decentralization of power has been given to the
regional units (namely, the Autonomous Region for Muslim Mindanao [ARMM] and the constitutionally-mandated
Cordillera Autonomous Region [CAR]). The other group of LGUs (i.e., provinces, cities, municipalities and
barangays) enjoy the decentralization of administration.  The distinction can be reasonably understood. The
22

provinces, cities, municipalities and barangays are given decentralized administration to make governance at the
local levels more directly responsive and effective. In turn, the economic, political and social developments of the
smaller political units are expected to propel social and economic growth and development.   In contrast, the
23

regional autonomy of the ARMM and the CAR aims to permit determinate groups with common traditions and
shared social-cultural characteristics to freely develop their ways of life and heritage, to exercise their rights, and to
be in charge of their own affairs through the establishment of a special governance regime for certain member
communities who choose their own authorities from within themselves, and exercise the jurisdictional authority
legally accorded to them to decide their internal community affairs.  24

It is to be underscored, however, that the decentralization of power in favor of the regional units is not unlimited but
involves only the powers enumerated by Section 20, Article X of the 1987 Constitution and by the acts of Congress.
For, with various powers being devolved to the regional units, the grant and exercise of such powers should always
be consistent with and limited by the 1987 Constitution and the national laws.   In other words, the powers are
25

guardedly, not absolutely, abdicated by the National Government.

Illustrative of the limitation is what transpired in Serna v. Commission on Elections,  where the Court struck down
26

Section 19, Article VI of Republic Act No. 9054 (An Act to Strengthen and Expand the Organic Act for the
Autonomous Region in Muslim Mindanao, Amending for the Purpose Republic Act No. 6734, entitled "An Act
Providing for the Autonomous Region in Muslim Mindanao," as Amended) insofar as the provision granted to the
ARMM the power to create provinces and cities, and consequently declared as void Muslim Mindanao Autonomy
Act No. 201 creating the Province of Shariff Kabunsuan for being contrary to Section 5, Article VI and Section 20,
Article X of the 1987 Constitution, as well as Section 3 of the Ordinance appended to the 1987 Constitution. The
Court clarified therein that only Congress could create provinces and cities. This was because the creation of
provinces and cities necessarily entailed the creation of legislative districts, a power that only Congress could
exercise pursuant to Section 5, Article VI of the 1987 Constitution and Section 3 of the Ordinance appended to the
Constitution; as such, the ARMM would be thereby usurping the power of Congress to create legislative districts and
national offices.
27

The 1987 Constitution has surely encouraged decentralization by mandating that a system of decentralization be
instituted through the LGC in order to enable a more responsive and accountable local government structure.  It has
28

also delegated the power to tax to the LGUs by authorizing them to create their own sources of income that would
make them self-reliant.  It further ensures that each and every LGU will have a just share in national taxes as well in
29

the development of the national wealth. 30

The LGC has further delineated in its Section 3 the different operative principles of decentralization to be adhered to
consistently with the constitutional policy on local autonomy, viz.:

Sec. 3. Operative Principles of Decentralization-

The formulation and implementation of policies and measures on local autonomy shall be guided by the following
operative principles:

(a) There shall be an effective allocation among the different local government units of their respective
powers, functions, responsibilities, and resources;

(b) There shall be established in every local government unit an accountable, efficient, and dynamic
organizational structure and operating mechanism that will meet the priority needs and service requirements
of its communities;

(c) Subject to civil service law, rules and regulations, local officials and employees paid wholly or mainly
from local funds shall be appointed or removed, according to merit and fitness, by the appropriate appointing
authority;

(d) The vesting of duty, responsibility, and accountability in local government units shall be accompanied
with provision for reasonably adequate resources to discharge their powers and effectively carry out their
functions: hence, they shall have the power to create and broaden their own sources of revenue and the
right to a just share in national taxes and an equitable share in the proceeds of the utilization and
development of the national wealth within their respective areas;

(e) Provinces with respect to component cities and municipalities, and cities and municipalities with respect
to component barangays, shall ensure that the acts of their component units are within the scope of their
prescribed powers and functions;

(f) Local government units may group themselves, consolidate or coordinate their efforts, services, and
resources commonly beneficial to them;

(g) The capabilities of local government units, especially the municipalities and barangays, shall be
enhanced by providing them with opportunities to participate actively in the implementation of national
programs and projects;

(h) There shall be a continuing mechanism to enhance local autonomy not only by legislative enabling acts
but also by administrative and organizational reforms;
 (i) Local government units shall share with the national government the responsibility in the management
and maintenance of ecological balance within their territorial jurisdiction, subject to the provisions of this
Code and national policies;

(j) Effective mechanisms for ensuring the accountability of local government units to their respective
constituents shall be strengthened in order to upgrade continually the quality of local leadership;

(k) The realization of local autonomy shall be facilitated through improved coordination of national
government policies and programs an extension of adequate technical and material assistance to less
developed and deserving local government units;

(l) The participation of the private sector in local governance, particularly in the delivery of basic services,
shall be encouraged to ensure the viability of local autonomy as an alternative strategy for sustainable
development; and

(m) The national government shall ensure that decentralization contributes to the continuing improvement of
the performance of local government units and the quality of community life.

Based on the foregoing delineation, decentralization can be considered as the decision by the central government to
empower its subordinates, whether geographically or functionally constituted, to exercise authority in certain areas.
It involves decision-making by subnational units, and is typically a delegated power, whereby a larger government
chooses to delegate authority to more local governments.  It is also a process, being the set of policies, electoral or
31

constitutional reforms that transfer responsibilities, resources or authority from the higher to the lower levels of
government.  It is often viewed as a shift of authority towards local governments and away from the central
32

government, with total government authority over society and economy imagined as fixed. 33

As a system of transferring authority and power from the National Government to the LGUs, decentralization in the
Philippines may be categorized into four, namely: (1) political decentralization or devolution; (2) administrative
decentralization or deconcentration; (3) fiscal decentralization; and (4) policy or decision-making decentralization.

Political decentralization or devolution occurs when there is a transfer of powers, responsibilities, and resources
from the central government to the LOU s for the performance of certain functions. It is a more liberal form of
decentralization because there is an actual transfer of powers and responsibilities. It aims to grant greater autonomy
to the LGUs in cognizance of their right to self-government, to make them self-reliant, and to improve their
administrative and technical capabilities.  It is an act by which the National Government confers power and authority
34

upon the various LGUs to perform specific functions and responsibilities.  It encompasses reforms to open sub-
35

national representation and policies to "devolve political authority or electoral capacities to sub-national actors.
"  Section 16 to Section 19 of the LGC characterize political decentralization in the LGC as different LGUs
36

empowered to address the different needs of their constituents. In contrast, devolution in favor of the regional units
is more expansive because they are given the authority to regulate a wider array of subjects, including personal,
family and property relations.

Administrative decentralization or deconcentration involves the transfer of functions or the delegation of authority
and responsibility from the national office to the regional and local offices.   Consistent with this concept, the LGC
37

has created the Local School Boards,  the Local Health Boards  and the Local Development Councils,  and has
38 39 40

transferred some of the authority from the agencies of the National Government, like the Department of Education
and the Department of Health, to such bodies to better cope up with the needs of particular localities.

Fiscal decentralization means that the LGUs have the power to create their own sources of revenue in addition to
their just share in the national taxes released by the National Government. It includes the power to allocate their
resources in accordance with their own priorities. It thus extends to the preparation of their budgets, so that the local
officials have to work within the constraints of their budgets. The budgets are not formulated at the national level
and imposed on local governments, without regard as to whether or not they are relevant to local needs and
resources. Hence, the necessity of a balancing of viewpoints and the harmonization of proposals from both local
and national officials, who in any case are partners in the attainment of national goals, is recognized and
addressed. 41
Fiscal decentralization emanates from a specific constitutional mandate that is expressed in several provisions of
Article X (Local Government) of the 1987 Constitution, specifically: Section 5;  Section 6;  and Section 7.
42 43 44

The constitutional authority extended to each and every LGU to create its own sources of income and revenue has
been formalized from Section 128 to Section 133 of the LGC. To implement the LGUs' entitlement to the just share
in the national taxes, Congress has enacted Section 284 to Section 288 of the LGC. Congress has further enacted
Section 289 to Section 294 of the LGC to define the share of the LGUs in the national wealth. Indeed, the
requirement for the automatic release to the LGUs of their just share in the national taxes is but the consequence of
the constitutional mandate for fiscal decentralization.  45

For sure, fiscal decentralization does not signify the absolute freedom of the LGUs to create their own sources of
revenue and to spend their revenues unrestrictedly or upon their individual whims and caprices. Congress has
subjected the LGUs' power to tax to the guidelines set in Section 130 of the LGC and to the limitations stated in
Section 133 of the LGC. The concept of local fiscal autonomy does not exclude any manner of intervention by the
National Government in the form of supervision if only to ensure that the local programs, fiscal and otherwise, are
consistent with the national goals. 46

Lastly, policy- or decision-making decentralization exists if at least one sub-national tier of government has exclusive
authority to make decisions on at least one policy issue. 47

In fine, certain limitations are and can be imposed by Congress in all the forms of decentralization, for local
autonomy, whether as to power or as to administration, is not absolute. The LGUs remain to be the tenants of the
will of Congress subject to the guarantees that the Constitution itself imposes.

IV.
Section 284 of the LGC deviates from the plain language
of Section 6 of Article X of the 1987 Constitution

Section 6, Article X the 1987 Constitution textually commands the allocation to the LGUs of a just share in the
national taxes, viz.:

Section 6. Local government units shall have a just share, as determined by law, in the national taxes which shall be
automatically released to them.

Section 6, when parsed, embodies three mandates, namely: (1) the LGUs shall have a just share in the national
taxes; (2) the just share shall be determined by law; and (3) the just share shall be automatically released to the
LGUs. 48

Congress has sought to carry out the second mandate of Section 6 by enacting Section 284, Title III (Shares of
Local Government Units in the Proceeds of National Taxes), of the LGC, which is again quoted for ready reference:

Section 284. Allotment of Internal Revenue Taxes. - Local government units shall have a share in the national
internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year as follows:

(a) On the first year of the effectivity of this Code, thirty percent (30%);

(b) On the second year, thirty-five percent (35%); and

(c) On the third year and thereafter, forty percent (40%).

Provided, That in the event that the national government incurs an unmanageable public sector deficit, the President
of the Philippines is hereby authorized, upon the recommendation of Secretary of Finance, Secretary of Interior and
Local Government and Secretary of Budget and Management, and subject to consultation with the presiding officers
of both Houses of Congress and the presidents of the "liga", to make the necessary adjustments in the internal.
revenue allotment of local government units but in no case shall the allotment be less than thirty percent (30%) of
the collection of national internal revenue taxes of the third fiscal year preceding the current fiscal year: Provided,
further, That in the first year of the effectivity of this Code, the local government units shall, in addition to the thirty
percent (30%) internal revenue allotment which shall include the cost of devolved functions for essential public
services, be entitled to receive the amount equivalent to the cost of devolved personal services.

There is no issue as to what constitutes the LGUs' just share expressed in percentages of the national
taxes (i.e., 30%, 35% and 40% stipulated in subparagraphs (a), (b), and (c) of Section 284 ). Yet, Section
6, supra, mentions national taxes as the source of the just share of the LGUs while Section 284 ordains that
the share of the LG Us be taken from national internal revenue taxes instead.

Has not Congress thereby infringed the constitutional provision?

Garcia contends that Congress has exceeded its constitutional boundary by limiting to the NIRTs the base from
which to compute the just share of the LGUs.

We agree with Garcia's contention.

Although the power of Congress to make laws is plenary in nature, congressional lawmaking remains subject to the
limitations stated in the 1987 Constitution.  The phrase national internal revenue taxes engrafted in Section 284 is
49

undoubtedly more restrictive than the term national taxes written in Section 6. As such, Congress has actually
departed from the letter of the 1987 Constitution stating that national taxes should be the base from which the just
share of the LGU comes. Such departure is impermissible. Verba legis non est recedendum (from the words of a
statute there should be no departure).   Equally impermissible is that Congress has also thereby curtailed the
50

guarantee of fiscal autonomy in favor of the LGUs under the 1987 Constitution.

Taxes are the enforced proportional contributions exacted by the State from persons and properties pursuant to its
sovereignty in order to support the Gove1nment and to defray all the public needs. Every tax has three elements,
namely: (a) it is an enforced proportional contribution from persons and properties; (b) it is imposed by the State by
virtue of its sovereignty; and (c) it is levied for the support of the Government.  Taxes are classified into national and
51

local. National taxes are those levied by the National Government, while local taxes are those levied by the LGUs. 52

What the phrase national internal revenue taxes as used in Section 284 included are all the taxes enumerated in
Section 21 of the National Internal Revenue Code (NIRC), as amended by R.A. No. 8424, viz.:

Section 21. Sources of Revenue. - The following taxes, fees and charges are deemed to be national internal
revenue taxes:

(a) Income tax;

(b) Estate and donor's taxes;

(c) Value-added tax;

(d) Other percentage taxes;

(e) Excise taxes;

(f) Documentary stan1p taxes; and

(g) Such other taxes as arc or hereafter may be imposed and collected by the Bureau of Internal Revenue.

In view of the foregoing enumeration of what are the national internal revenue taxes, Section 284 has effectively
deprived the LGUs from deriving their just share from other national taxes, like the customs duties.

Strictly speaking, customs duties are also taxes because they are exactions whose proceeds become public funds.
According to Garcia v. Executive Secretary,  customs duties is the nomenclature given to taxes imposed on the
53

importation and exportation of commodities and merchandise to or from a foreign country. Although customs duties
have either or both the generation of revenue and the regulation of economic or social activity as their moving
purposes, it is often difficult to say which of the two is the principal objective in a particular instance, for, verily,
customs duties, much like internal revenue taxes, are rarely designed to achieve only one policy objective.  We 54

further note that Section 102(00) of R.A. No. 10863 (Customs Modernization and Tariff Act) expressly includes all
fees and charges imposed under the Act under the blanket term of taxes.

It is clear from the foregoing clarification that the exclusion of other national taxes like customs duties from the base
for determining the just share of the LG Us contravened the express constitutional edict in Section 6, Article X the
1987 Constitution.

Still, the OSG posits that Congress can manipulate, by law, the base of the allocation of the just share in the
national taxes of the LGUs.

The position of the OSG cannot be sustained. Although it has the primary discretion to determine and fix the just
share of the LGUs in the national taxes (e.g., Section 284 of the LGC), Congress cannot disobey the express
mandate of Section 6, Article X of the 1987 Constitution for the just share of the LGUs to be derived from
the national taxes. The phrase as determined by law in Section 6 follows and qualifies the phrase just share, and
cannot be construed as qualifying the succeeding phrase in the national taxes. The intent of the people in respect of
Section 6 is really that the base for reckoning the just share of the LGUs should includes all national taxes. To read
Section 6 differently as requiring that the just share of LGUs in the national taxes shall be determined by law is
tantamount to the unauthorized revision of the 1987 Constitution.

V.
Congress can validly exclude taxes that will constitute the base amount for
the computation of the IRA only if a Constitutional provision allows such exclusion

Garcia submits that even assuming that the present version of Section 284 of the LGC is constitutionally valid, the
implementation thereof has been erroneous because Section 284 does not authorize any exclusion or deduction
from the collections of the NIRTs for purposes of the computation of the allocations to the LGUs. He further submits
that the exclusion of certain NIRTs diminishes the fiscal autonomy granted to the LGUs. He claims that the following
NIRTs have been illegally excluded from the base for determining the fair share of the LGUs in the IRA, to wit:

(1) NIRTs collected by the cities and provinces and divided exclusively among the LGUs of the Autonomous
Region for Muslim Mindanao (ARMM), the regional government and the central government, pursuant to
Section 15  in relation to Section 9,  Article IX of R.A. No. 9054 (An Act to Strengthen and Expand the
55 56

Organic Act for the Autonomous Region in Muslim Mindanao, amending for the purpose Republic Act No.
6734, entitled An Act providing for an Organic Act for the Autonomous Region in Muslim Mindanao);

(2) The shares in the excise taxes on mineral products of the different LG Us, as provided in Section 287 of
the NIRC  in relation to Section 290 of the LGC;
57 58

(3) The shares of the relevant LGUs in the franchise taxes paid by Manila Jockey Club, Inc.  and Philippine
59

Racing Club, Inc.; 60

(4) The shares of various municipalities in VAT collections under R.A. No. 7643 (An Act to Empower the
Commissioner of Internal Revenue to Require the Payment of the Value Added Tax Every Month and to
Allow Local Government Units to Share in VAT Revenue, Amending for this Purpose Certain Sections of the
National Internal Revenue Code) as embodied in Section 283 of the NIRC; 61

(5) The shares of relevant LGUs in the proceeds of the sale and conversion of former military bases in
accordance with R.A. No. 7227 (Bases Conversion and Development Act of 1992); 62

(6) The shares of different LGUs in the excise taxes imposed on locally manufactured Virginia tobacco
products as provided in Section 3 of R.A. No. 7171 (An Act to Promote the Development of the Farmers in
the Virginia Tobacco Producing Provinces), and as now provided in Section 289 of the NIRC; 63
 (7) The shares of different LGUs in the incremental revenues from Burley and native tobacco products under
Section 8 of R.A. No. 8240 (An Act Amending Sections 138, 140 and 142 of the National Internal Revenue
Code as Amended and for Other Purposes) and as now provided in Section 288 of the NIRC;  and 64

(8) The share of the Commission of Audit (COA) in the NIRTs as provided in Section 24p) of P.D. No.
1445 (Government Auditing Code of the Philippines)   in relation to Section 284 of the NIRC.
65 66

Garcia insists that the foregoing taxes and revenues should have been included by Congress and, by extension, the
BIR in the base for computing the IRA on the strength of the cited provisions; that the LGC did not authorize such
exclusion; and that the continued exclusion has undermined the fiscal autonomy guaranteed by the 1987
Constitution.

The insistence of Garcia is valid to an extent.

An examination of the above-enumerated laws confirms that the following have been excluded from the base for
reckoning the just share of the LGUs as required by Section 6, Article X of the 1987 Constitution, namely:

(a) The share of the affected LGUs in the proceeds of the sale and conversion of former military bases in
accordance with R.A. No. 7227;

(b) The share of the different LGUs in the excise taxes imposed on locally manufactured Virginia tobacco products
as provided for in Section 3, R.A. No. 7171, and as now provided in Section 289 of the NIRC;

(c) The share of the different LGU s in incremental revenues from Burley and native tobacco products under Section
8 of R.A. No. 8240, and as now provided for in Section 288 of the NIRC;

(d) The share of the COA in the NIRTs as provided in Section 24(3) of P.D. No. 1445  in relation to Section 284 of
67

the NIRC;

(e) The shares of the different LGUs in the excise taxes on mineral products, as provided in Section 287 of the NIRC
in relation to Section 290 of the LGC;

(f) The NIRTs collected by the cities and provinces and divided exclusively among the LGUs of the ARMM, the
regional government and the central government, pursuant to Section 15  in relation to Section 9,  Article IX of R. A.
68 69

No. 9054; and

(g) The shares of the relevant LG Us in the franchise taxes paid by Manila Jockey Club, Inc., and the Philippine
Racing Club, Inc.

Anent the share of the affected LG Us in the proceeds of the sale and conversion of the former military bases
pursuant to R.A. No. 7227, the exclusion is warranted for the reason that such proceeds do not come from a tax, fee
or exaction imposed on the sale and conversion.

As to the share of the affected LGUs in the excise taxes imposed on locally manufactured Virginia tobacco products
under R.A. No. 7171 (now Section 289 of the NIRC); the share of the affected LGUs in incremental revenues from
Burley and native tobacco products under Section 8, R.A. No. 8240 (now Section 288 of the NIRC); the share of the
COA in the NIRTs pursuant to Section 24(3) of P.D. No. 1445 in relation to Section 284 of the NIRC; and the share
of the host LGUs in the franchise taxes paid by the Manila Jockey Club, Inc., and Philippine Racing Club, Inc., under
Section 6 of R.A. No. 6631 and Section 8 of R:A. No. 6632, respectively, the exclusion is also justified. Although
such shares involved national taxes as defined under the NIRC, Congress had the authority to exclude them by
virtue of their being taxes imposed for special purposes. A reading of Section 288 and Section 289 of the NIRC and
Section 24(3) of P.D. No. 1445 in relation to Section 284 of the NIRC reveals that all such taxes are levied and
collected for a special purpose.   The same is true for the franchise taxes paid under Section 6 of R.A. No. 6631 and
70

Section 8 of R.A. No. 6632, inasmuch as certain percentages of the franchise taxes go to different beneficiaries. The
exclusion conforms to Section 29(3), Article VI of the 1987 Constitution, which states:

Section 29. x x x
 xxxx

(3) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid
out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned,
the balance, if any, shall be transferred to the general funds of the Government. [Bold emphasis supplied]

The exclusion of the share of the different LGUs in the excise taxes imposed on mineral products pursuant to
Section 287 of the NIRC in relation to Section 290 of the LGC is premised on a different constitutional provision.
Section 7, Article X of the 1987 Constitution allows affected LGUs to have an equitable share in the proceeds of the
utilization of the nation's national wealth "within their respective areas," to wit:

Section 7. Local governments shall be entitled to an equitable share in the proceeds of the utilization and
development of the national wealth within their respective areas, in the manner provided by law, including sharing
the same with the inhabitants by way of direct benefits.

This constitutional provision is implemented by Section 287 of the NIRC and Section 290 of the LGC thusly:

SEC. 287. Shares of Local Government Units in the Proceeds from the Development and Utilization of the National
Wealth. - Local Government units shall have an equitable share in the proceeds derived from the utilization and
development of the national wealth, within their respective areas, including sharing the same with the inhabitants by
way of direct benefits.

(A) Amount of Share of Local Government Units. - Local government units shall, in addition to the internal revenue
allotment, have a share of forty percent (40'Yo) of the gross collection derived by the national government from the
preceding fiscal year from excise taxes on mineral products, royalties, and such other taxes, fees or charges,
including related surcharges, interests or fines, and from its share in any co-production, joint venture or production
sharing agreement in the utilization and development of the national wealth within their territorial jurisdiction.

(B) Share of the Local Governments from Any Government Agency or Government-owned or - Controlled
Corporation. - Local Government Units shall have a share, based on the preceding fiscal year, from the proceeds
derived by any government agency or government-owned or controlled corporation engaged in the utilization and
development of the national wealth based on the following formula, whichever will produce a higher share for the
local government unit:

(1) One percent (l %) of the gross sales or receipts of the preceding calendar year, or

(2) Forty percent (40%) of the excise taxes on mineral products, royalties, and such other taxes, fees or charges,
including related surcharges, interests or fines the government agency or government-owned or -controlled
corporations would have paid if it were not otherwise exempt. [Bold emphasis supplied]

SEC. 290. Amount of Share of Local Government Units. - Local government units shall, in addition to the internal
revenue allotment, have a share of forty percent ( 40%) of the gross collection derived by the national government
from the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and such other taxes, fees,
or charges, including related surcharges, interests, or fines, and from its share in any co-production, joint venture or
production sharing agreement in the utilization and development of the national wealth within their territorial
jurisdiction. [Bold emphasis supplied]

Lastly, the NIRTs collected by the provinces and cities within the ARMM whose portions are distributed to the
ARMM's provincial, city and regional governments are also properly excluded for such taxes are intended to truly
enable a sustainable and feasible autonomous region as guaranteed by the 1987 Constitution. The mandate under
Section 15 to Section 21, Article X of the 1987 Constitution is to allow the separate development of peoples with
distinctive cultures and traditions in the autonomous areas.  The grant of autonomy to the autonomous regions
71

includes the right of self-determination-which in turn ensures the right of the peoples residing therein to the
necessary level of autonomy that will guarantee the support of their own cultural identities, the establishment of
priorities by their respective communities' internal decision-making processes and the management of collective
matters by themselves.  As such, the NIRTs collected by the provinces and cities within the ARMM will ensure local
72
autonomy and their very existence with a continuous supply of funding sourced from their very own areas. The
ARMM will become self-reliant and dynamic consistent with the dictates of the 1987 Constitution.

The shares of the municipalities in the VATs collected pursuant to R.A. No. 7643 should be included in determining
the base for computing the just share because such VATs are national taxes, and nothing can validly justify their
exclusion.

In recapitulation, the national taxes to be included in the base for computing the just share the LGUs shall
henceforth be, but shall not be limited to, the following:

1. The NIRTs enumerated in Section 21 of the NIRC, as amended, to be inclusive of the VA Ts, excise taxes, and
DSTs collected by the BIR and the BOC, and their deputized agents;

2. Tariff and customs duties collected by the BOC;

3. 50% of the VATs collected in the ARMM, and 30% of all other national taxes collected in the ARMM; the
remaining 50% of the VA Ts and 70% of the collections of the other national taxes in the ARMM shall be the
exclusive share of the ARMM pursuant to Section 9 and Section 15 of R.A. No. 9054;

4. 60% of the national taxes collected from the exploitation and development of the national wealth; the remaining
40% will exclusively accrue to the host LGUs pursuant to Section 290 of the LGC;

5. 85% of the excise taxes collected from locally manufactured Virginia and other tobacco products; the remaining
15% shall accrue to the special purpose funds pursuant created in R.A. No. 7171 and R.A. No. 7227;

6. The entire 50% of the national taxes collected under Section 106, Section 108 and Section 116 of the NIRC in
excess of the increase in collections for the immediately preceding year; and

7. 5% of the franchise taxes in favor of the national government paid by franchise holders in accordance with
Section 6 of R.A. No. 6631 and Section 8 of R.A. No. 6632.

VI.
Entitlement to the reliefs sought

The petitioners' prayer for the payment of the arrears of the LGUs' just share on the theory that the computation of
the base amount had been unconstitutional all along cannot be granted.

It is true that with our declaration today that the IRA is not in accordance with the constitutional determination of the
just share of the LGUs in the national taxes, logic demands that the LGUs should receive the difference between
the just share they should have received had the LGC properly reckoned such just share from all national taxes, on
the one hand, and the share - represented by the IRA- the LGUs have actually received since the effectivity of the
IRA under the LGC, on the other. This puts the National Government in arrears as to the just share of the LGUs. A
legislative or executive act declared void for being unconstitutional cannot give rise to any right or obligation. 
73

Yet, the Court has conceded in Arau/lo v. Aquino III that:

74

x x x the generality of the rule makes us ponder whether rigidly applying the rule may at times be
impracticable or wasteful. Should we not recognize the need to except from the rigid application of the rule
the instances in which the void law or executive act produced an almost irreversible result?

The need is answered by the doctrine of operative fact. The doctrine, definitely not a novel one, has been
exhaustively explained in De Agbayani v. Philippine National Bank:

The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an executive
order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of any legal rights or
duties. Nor can it justify any official act taken under it. Its repugnancy to the fundamental law once judicially declared
results in its being to all intents and purposes a mere scrap of paper. As the new Civil Code puts it: 'When the courts
declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern.'
Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of
the Constitution. It is understandable why it should be so, the Constitution being supreme and paramount. Any
legislative or executive act contrary to its terms cannot survive.

Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently
realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This is so as until after the judiciary, in
an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted
under it and may have changed their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative or executive act was in operation and
presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the
judiciary is the governmental organ which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that
may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then,
if there be no recognition of what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: ‘The actual existence of a statute, prior to such a
determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, with respect to particular relations, individual and corporate,
and particular conduct, private and official.'

The doctrine of operative fact recognizes the existence of the law or executive act prior to the determination of its
unconstitutionality as an operative fact that produced consequences that cannot always be erased, ignored or
disregarded. In short, it nullifies the void law or executive act but sustains its effects. It provides an exception to the
general rule that a void or unconstitutional law produces no effect.  But its use must be subjected to great scrutiny
75

and circumspection, and it cannot be invoked to validate an unconstitutional law or executive act, but is resorted to
only as a matter of equity and fair play.   It applies only to cases where extraordinary circumstances exist, and only
76

when the extraordinary circumstances have met the stringent conditions that will permit its application.

Conformably with the foregoing pronouncements in Araullo v. Aquino III, the effect of our declaration through this
decision of the unconstitutionality of Section 284 of the LGC and its related laws as far as they limited the source of
the just share of the LGUs to the NIRTs is prospective. It cannot be otherwise.

VII.
Automatic release of the LGUs' just share in the National Taxes

Section 6, Article X of the 1987 Constitution commands that the just share of the LGUs in national taxes shall
be automatically released to them. The term automatic connotes something mechanical, spontaneous and
perfunctory; and, in the context of this case, the LGUs are not required to perform any act or thing in order to
receive their just share in the national taxes.77

Before anything, we must highlight that the 1987 Constitution includes several provisions that actually deal with and
authorize the automatic release of funds by the National Government.

To begin with, Section 3 of Article VIII favors the Judiciary with the automatic and regular release of its
appropriations:

Section 3. The Judiciary shall enjoy fiscal autonomy. Appropriations for the Judiciary may not be reduced by the
legislature below the amount appropriated for the previous year and, after approval, shall be automatically and
regularly released.

Then there is Section 5 of Article IX(A), which contains the common provision in favor of the Constitutional
Commissions:
Section 5. The Commission shall enjoy fiscal autonomy. Their approved annual appropriations shall be
automatically and regularly released.

Section 14 of Article XI extends to the Office of the Ombudsman a similar privilege:

Section 14. The Office of the Ombudsman shall enjoy fiscal autonomy. Its approved annual appropriations shall be
automatically and regularly released.

Section 17(4) of Article XIII replicates the privilege in favour of the Commission on Human Rights:

Section 17(4) The approved annual appropriations of the Commission shall be automatically and regularly released.

The foregoing constitutional provisions share two aspects. The first relates to the grant of fiscal autonomy, and the
second concerns the automatic release of funds.   The common denominator of the provisions is that the automatic
78

release of the appropriated amounts is predicated on the approval of the annual appropriations of the offices or
agencies concerned.

Directly contrasting with the foregoing provisions is Section 6, Article X of the 1987 Constitution because the latter
provision forthrightly ordains that the "(l)ocal government units shall have a just share, as determined by law, in the
national taxes which shall be automatically released to them." Section 6 does not mention of appropriation as a
condition for the automatic release of the just share to the LGUs. This is because Congress not only already
determined the just share through the LGC's fixing the percentage of the collections of the NIRTs to constitute
such fair share subject to the power of the President to adjust the same in order to manage public sector deficits
subject to limitations on the adjustments, but also explicitly authorized such just share to be "automatically
released" to the LGUs in the proportions and regularity set under Section 285  of the LGC without need of annual
79

appropriation. To operationalize the automatic release without need of appropriation, Section 286 of the LGC clearly
provides that the automatic release of the just share directly to the provincial, city, municipal or barangay treasurer,
as the case may be, shall be "without need of any further action," viz.:

Section 286. Automatic Release of Shares. - (a) The share of each local government unit shall be released,
without need of any further action; directly to the provincial, city, municipal or barangay treasurer, as the
case may be, on a quarterly basis within five (5) days after the end of each quarter, and which shall not be
subject to any lien or holdback that may be imposed by the National Government for whatever purpose. x x
x (Bold emphasis supplied)

The 1987 Constitution is forthright and unequivocal in ordering that the just share of the LGUs in the national taxes
shall be automatically released to them. With Congress having established the just share through the LGC, it seems
to be beyond debate that the inclusion of the just share of the LGUs in the annual GAAs is unnecessary, if not
superfluous. Hence, the just share of the LGUs in the national taxes shall be released to them without need of
yearly appropriation.

1. DECLARES the phrase "internal revenue" appearing in Section 284 of Republic Act No. 7160 (Local Government
Code) UNCONSTITUTIONAL, and DELETES the phrase from Section 284.

Section 284, as hereby modified, shall henceforth read as follows:

Section 284. Allotment of Taxes. - Local government units shall have a share in the national taxes based on the
collection of the third fiscal year preceding the current fiscal year as follows:

(a) On the first year of the effectivity of this Code, thirty percent (30%);

(b) On the second year, thirty-five percent (35%); and

(c) On the third year and thereafter, forty percent (40%).

Provided, That in the event that the national government incurs an unmanageable public sector deficit, the President
of the Philippines is hereby authorized, upon the recommendation of Secretary of Finance, Secretary of Interior and
Local Government and Secretary of Budget and Management, and subject to consultation with the presiding officers
of both Houses of Congress and the presidents of the "liga", to make the necessary adjustments in the allotment of
local government units but in no case shall the allotment be less than thirty percent (30%) of the collection of
national taxes of the third fiscal year preceding the current fiscal year; Provided, further, That in the first year of the
effectivity of this Code, the local government units shall, in addition to the thirty percent (30%) allotment which shall
include the cost of devolved functions for essential public services, be entitled to receive the amount equivalent to
the cost of devolved personal services.

The phrase "internal revenue" is likewise hereby DELETED from the related sections of Republic Act No.
7160 (Local Government Code), specifically Section 285, Section 287, and Section 290, which provisions shall
henceforth read as follows:

Section 285. Allocation to Local Government Units. - The share of local government units in the allotment shall be
collected in the following manner:

(a) Provinces - Twenty-three percent (23%);

(b) Cities - Twenty-three percent (23%);

(c) Municipalities - Thirty-four percent (34%); and

(d) Barangays - Twenty percent (20%)

Provided, however, That the share of each province, city, and municipality shall be determined on the basis of the
following formula:

(a) Population -- Fifty percent (50%);

(b) Land Area-· Twenty-five percent (25%); and

(c) Equal sharing--Twenty-five percent (25%)

Provided, further. That the share of each barangay with a population of not less than one hundred (100) inhabitants
shall not be less than Eighty thousand (₱80,000.00) per annum chargeable against the twenty percent (20%) share
of the barangay from the allotment, and the balance to be allocated on the basis of the following formula:

(a) On the first year of the effoctivity of this Code:

(1) Population - Forty percent (40%); and

(2) Equal sharing - Sixty percent (50%)

(b) On the second year:

(1) Population - Fifty percent (50%); and

(2) Equal sharing - Fifty percent (50%)

(c) On the third year and thereafter.

(1) Population - Sixty percent (60%); and

(2) Equal sharing - Forty percent (40%).

Provided, finally, That the financial requirements of barangays created by local government units after the effectivity
of this Code shall be the responsibility of the local government unit concerned.
 xxxx

Sectfon 287. Local Development Projects. - Each local government unit shall appropriate in its annual budget no
less than twenty percent (20%) of its annual allotment for development projects. Copies of the development plans of
local government units shall be furnished the Department of Interior and Local Government.

xxxx

Section 290. Amount of Share of Local Government Units. - Local government units shall, in addition to the
allotment, have a share of forty percent (40%) of the gross collection derived by the national government from the
preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and such other taxes, fees, or
charges, including related surcharges, interests, or fines, and from its share in any co-production, joint venture or
production sharing agreement in the utilization and development of the national wealth within their territorial
jurisdiction.

Article 378, Article 379, Article 380, Article 382, Article 409, Article 461, and related provisions of the Implementing
Rules and Regulations of R.A. No. 7160 are hereby MODIFIED to reflect the deletion of the phrase "internal
revenue" as directed herein.

Henceforth, any mention of "Internal Revenue Allotment" or "IRA" in Republic Act No. 7160 (Local Government
Code) and its Implementing Rules and Regulations shall be understood as pertaining to the allotment of the Local
Government Units derived from the national taxes;

2. ORDERS the SECRETARY OF THE DEPARTMENT OF FINANCE; the SECRETARY OF THE DEPARTMENT
OF BUDGET AND MANAGEMENT; the COMMISSIONER OF INTERNAL REVENUE; the COMMISSIONER OF
CUSTOMS; and the NATIONAL TREASURER to include ALL COLLECTIONS OF NATIONAL TAXES in the
computation of the base of the just share of the Local Government Units according to the ratio provided in the now-
modified Section 284 of Republic Act No. 7160 (Local Government Code) except those accruing to special purpose
funds and special allotments for the utilization and development of the national wealth.

For this purpose, the collections of national taxes for inclusion in the base of the just share the Local Government
Units shall include, but shall not be limited to, the following:

(a) The national internal revenue taxes enumerated in Section 21 of the National Internal Revenue Code, as
amended, collected by the Bureau of Internal Revenue and the Bureau of Customs;

(b) Tariff and customs duties collected by the Bureau of Customs;

(c) 50% of the value-added taxes collected in the Autonomous Region in Muslim Mindanao, and 30% of all
other national tax collected in the Autonomous Region in Muslim Mindanao.

The remaining 50% of the collections of value-added taxes and 70% of the collections of the other national
taxes in the Autonomous Region in Muslim Mindanao shall be the exclusive share of the Autonomous
Region in Muslim Mindanao pursuant to Section 9 and Section 15 of Republic Act No. 9054.

(d) 60% of the national taxes collected from the exploitation and development of the national wealth.

The remaining 401% of the national taxes collected from the exploitation and development of the national
wealth shall exclusively accrue to the host Local Government Units pursuant to Section 290 of Republic Act
No. 7160 (Local Government Code);

(e) 85% of the excise taxes collected from locally manufactured Virginia and other tobacco products.

The remaining 15% shall accrue to the special purpose funds created by Republic Act No. 7171 and
Republic Act No. 7227;
 (f) The entire 50% of the national taxes collected under Sections 106, 108 and 116 of the NIRC as provided
under Section 283 of the NIRC; and

(g) 5% of the 25% franchise taxes given to the National Government under Section 6 of Republic Act No.
6631 and Section 8 of Republic Act No. 6632.

3. DECLARES that:

(a) The apportionment of the 25% of the franchise taxes collected from the Manila Jockey Club and
Philippine Racing Club, Inc. - that is, five percent (5%) to the National Government; five percent (5%) to the
host municipality or city; seven percent (7%) to the Philippine Charity Sweepstakes Office; six percent (6%)
to the Anti-Tuberculosis Society; and two percent (2%) to the White Cross pursuant to Section 6 of Republic
Act No. 6631 and Section 8 of Republic Act No. 6632 - is VALID;

(b) Section 8 and Section 12 of Republic Act No. 7227 are VALID; and, ACCORDINGLY, the proceeds from
the sale of the former military bases converted to alienable lands thereunder are EXCLUDED from the
computation of the national tax allocations of the Local Government Units; and

(c) Section 24(3) of Presidential Decree No. 1445, in relation to Section 284 of the National Internal
Revenue Code, apportioning one-half of one percent (1/2of1%) of national tax collections as the auditing fee
of the Commission on Audit is VALID;

4. DIRECTS the Bureau of Internal Revenue and the Bureau of Customs and their deputized collecting agents to
certify all national tax collections, pursuant to Article 3 78 of the Implementing Rules and Regulations of R.A. No.
7160;

5. DISMISSES the claims of the Local Government Units for the settlement by the National Government of arrears
in the just share on the ground that this decision shall have PROSPECTIVE APPLICATION; and

6. COMMANDS the AUTOMATIC RELEASE WITHOUT NEED OF FURTHER ACTION of the just shares of the
Local Government Units in the national taxes, through their respective provincial, city, municipal, or barangay
treasurers, as the case may be, on a quarterly basis but not beyond five (5) days from the end of each quarter, as
directed in Section 6, Article X of the 1987 Constitution and Section 286 of Republic Act No. 7160 (Local
Government Code), and operationalized by Article 383 of the Implementing Rules and Regulations of RA 7160.

Let a copy of this decision be furnished to the President of the Republic of the Philippines, the President of the
Senate, and the Speaker of the House of Representatives for their information and guidance.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
PIMENTEL VS OCHOA AND SOLIMAN

G.R. No. 195770               July 17, 2012

AQUILINO Q. PIMENTEL, JR., SERGIO TADEO and NELSON ALCANTARA, Petitioners,

vs.
EXECUTIVE SECRETARY PAQUITO N. OCHOA and SECRETARY CORAZON JULIANO-SOLIMAN OF THE
DEPARTMENT OF SOCIAL WELFARE and DEVELOPMENT (DSWD), Respondents.

DECISION

PERLAS-BERNABE, J.:

The Case

For the Court’s consideration in this Petition for Certiorari and Prohibition is the constitutionality of certain provisions
of Republic Act No. 10147 or the General Appropriations Act (GAA) of 2011 which provides a P21 Billion budget
1 

allocation for the Conditional Cash Transfer Program (CCTP) headed by the Department of Social Welfare &
Development (DSWD). Petitioners seek to enjoin respondents Executive Secretary Paquito N. Ochoa and DSWD
Secretary Corazon Juliano-Soliman from implementing the said program on the ground that it amounts to a
"recentralization" of government functions that have already been devolved from the national government to the
local government units.

The Facts

In 2007, the DSWD embarked on a poverty reduction strategy with the poorest of the poor as target
beneficiaries. Dubbed "Ahon Pamilyang Pilipino," it was pre-pilot tested in the municipalities of Sibagat and
2 

Esperanza in Agusan del Sur; the municipalities of Lopez Jaena and Bonifacio in Misamis Occidental, the Caraga
Region; and the cities of Pasay and Caloocan upon the release of the amount of P50 Million Pesos under a Special
3 

Allotment Release Order (SARO) issued by the Department of Budget and Management. 4

On July 16, 2008, the DSWD issued Administrative Order No. 16, series of 2008 (A.O. No. 16, s. 2008), setting the
5 

implementing guidelines for the project renamed "Pantawid Pamilyang Pilipino Program" (4Ps), upon the following
stated objectives, to wit:

1. To improve preventive health care of pregnant women and young children

2. To increase enrollment/attendance of children at elementary level

3. To reduce incidence of child labor

4. To raise consumption of poor households on nutrient dense foods

5. To encourage parents to invest in their children's (and their own) future

6. To encourage parent's participation in the growth and development of young children, as well as
involvement in the community. 6
This government intervention scheme, also conveniently referred to as CCTP, "provides cash grant to extreme poor
households to allow the members of the families to meet certain human development goals." 7

Eligible households that are selected from priority target areas consisting of the poorest provinces classified by the
National Statistical Coordination Board (NCSB) are granted a health assistance of P500.00/month, or
8 

P6,000.00/year, and an educational assistance of P300.00/month for 10 months, or a total of P3,000.00/year, for
each child but up to a maximum of three children per family. Thus, after an assessment on the appropriate
9 

assistance package, a household beneficiary could receive from the government an annual subsidy for its basic
needs up to an amount of P15,000.00, under the following conditionalities:

a) Pregnant women must get pre natal care starting from the 1st trimester, child birth is attended by
skilled/trained professional, get post natal care thereafter

b) Parents/guardians must attend family planning sessions/mother's class, Parent Effectiveness Service and
others

c) Children 0-5 years of age get regular preventive health check-ups and vaccines

d) Children 3-5 years old must attend day care program/pre-school

e) Children 6-14 years of age are enrolled in schools and attend at least 85% of the time 10

Under A.O. No. 16, s. 2008, the DSWD also institutionalized a coordinated inter-agency network among the
Department of Education (DepEd), Department of Health (DOH), Department of Interior and Local Government
(DILG), the National Anti-Poverty Commission (NAPC) and the local government units (LGUs), identifying specific
roles and functions in order to ensure effective and efficient implementation of the CCTP. As the DSWD takes on
the role of lead implementing agency that must "oversee and coordinate the implementation, monitoring and
evaluation of the program," the concerned LGU as partner agency is particularly tasked to –

a. Ensure availability of the supply side on health and education in the target areas.

b. Provide necessary technical assistance for Program implementation

c. Coordinate the implementation/operationalization of sectoral activities at the City/Municipal level to better

execute Program objectives and functions

d. Coordinate with various concerned government agencies at the local level, sectoral representatives and
NGO to ensure effective Program implementation

e. Prepare reports on issues and concerns regarding Program implementation and submit to the Regional
Advisory Committee, and

f. Hold monthly committee meetings 11

A Memorandum of Agreement (MOA) executed by the DSWD with each participating LGU outlines in detail the
12 

obligation of both parties during the intended five-year implementation of the CCTP.

Congress, for its part, sought to ensure the success of the CCTP by providing it with funding under the GAA of 2008
in the amount of Two Hundred Ninety-Eight Million Five Hundred Fifty Thousand Pesos (P298,550,000.00). This
budget allocation increased tremendously to P5 Billion Pesos in 2009, with the amount doubling to P10 Billion
Pesos in 2010. But the biggest allotment given to the CCTP was in the GAA of 2011 at Twenty One Billion One
Hundred Ninety-Four Million One Hundred Seventeen Thousand Pesos (P21,194,117,000.00). 13 
1âwphi1

Petitioner Aquilino Pimentel, Jr., a former Senator, joined by Sergio Tadeo, incumbent President of the Association
of Barangay Captains of Cabanatuan City, Nueva Ecija, and Nelson Alcantara, incumbent Barangay Captain of
Barangay Sta. Monica, Quezon City, challenges before the Court the disbursement of public funds and the
implementation of the CCTP which are alleged to have encroached into the local autonomy of the LGUs.

The Issue

THE P21 BILLION CCTP BUDGET ALLOCATION UNDER THE DSWD IN THE GAA FY 2011 VIOLATES ART. II,
SEC. 25 & ART. X, SEC. 3 OF THE 1987 CONSTITUTION IN RELATION TO SEC. 17 OF THE LOCAL
GOVERNMENT CODE OF 1991 BY PROVIDING FOR THE RECENTRALIZATION OF THE NATIONAL
GOVERNMENT IN THE DELIVERY OF BASIC SERVICES ALREADY DEVOLVED TO THE LGUS.

Petitioners admit that the wisdom of adopting the CCTP as a poverty reduction strategy for the Philippines is with
the legislature. They take exception, however, to the manner by which it is being implemented, that is, primarily
through a national agency like DSWD instead of the LGUs to which the responsibility and functions of delivering
social welfare, agriculture and health care services have been devolved pursuant to Section 17 of Republic Act No.
7160, also known as the Local Government Code of 1991, in relation to Section 25, Article II & Section 3, Article X
of the 1987 Constitution.

Petitioners assert that giving the DSWD full control over the identification of beneficiaries and the manner by which
services are to be delivered or conditionalities are to be complied with, instead of allocating the P21 Billion CCTP
Budget directly to the LGUs that would have enhanced its delivery of basic services, results in the "recentralization"
of basic government functions, which is contrary to the precepts of local autonomy and the avowed policy of
decentralization.

Our Ruling

The Constitution declares it a policy of the State to ensure the autonomy of local governments and even devotes a
14 

full article on the subject of local governance which includes the following pertinent provisions:
15 

Section 3. The Congress shall enact a local government code which shall provide for a more responsive and
accountable local government structure instituted through a system of decentralization with effective mechanisms of
recall, initiative, and referendum, allocate among the different local government units their powers, responsibilities,
and resources, and provide for the qualifications, election, appointment and removal, term, salaries, powers and
functions and duties of local officials, and all other matters relating to the organization and operation of the local
units.

xxx

Section 14. The President shall provide for regional development councils or other similar bodies composed of local
government officials, regional heads of departments and other government offices, and representatives from non-
governmental organizations within the regions for purposes of administrative decentralization to strengthen the
autonomy of the units therein and to accelerate the economic and social growth and development of the units in the
region. (Underscoring supplied)

In order to fully secure to the LGUs the genuine and meaningful autonomy that would develop them into self-reliant
communities and effective partners in the attainment of national goals, Section 17 of the Local Government Code
16 

vested upon the LGUs the duties and functions pertaining to the delivery of basic services and facilities, as follows:

SECTION 17. Basic Services and Facilities. –

(a) Local government units shall endeavor to be self-reliant and shall continue exercising the powers and
discharging the duties and functions currently vested upon them. They shall also discharge the functions
and responsibilities of national agencies and offices devolved to them pursuant to this Code. Local
government units shall likewise exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and effective provision of the basic
services and facilities enumerated herein.

(b) Such basic services and facilities include, but are not limited to, x x x.
 While the aforementioned provision charges the LGUs to take on the functions and responsibilities that have
already been devolved upon them from the national agencies on the aspect of providing for basic services
and facilities in their respective jurisdictions, paragraph (c) of the same provision provides a categorical
exception of cases involving nationally-funded projects, facilities, programs and services, thus:

(c) Notwithstanding the provisions of subsection (b) hereof, public works and infrastructure projects and
other facilities, programs and services funded by the National Government under the annual General
Appropriations Act, other special laws, pertinent executive orders, and those wholly or partially funded from
foreign sources, are not covered under this Section, except in those cases where the local government unit
concerned is duly designated as the implementing agency for such projects, facilities, programs and
services. (Underscoring supplied)

The essence of this express reservation of power by the national government is that, unless an LGU is particularly
designated as the implementing agency, it has no power over a program for which funding has been provided by the
national government under the annual general appropriations act, even if the program involves the delivery of basic
services within the jurisdiction of the LGU.

The Court held in Ganzon v. Court of Appeals that while it is through a system of decentralization that the State
17 

shall promote a more responsive and accountable local government structure, the concept of local autonomy does
not imply the conversion of local government units into "mini-states." We explained that, with local autonomy, the
18 

Constitution did nothing more than "to break up the monopoly of the national government over the affairs of the local
government" and, thus, did not intend to sever "the relation of partnership and interdependence between the central
administration and local government units." In Pimentel v. Aguirre, the Court defined the extent of the local
19  20 

government's autonomy in terms of its partnership with the national government in the pursuit of common national
goals, referring to such key concepts as integration and coordination. Thus:

Under the Philippine concept of local autonomy, the national government has not completely relinquished all its
powers over local governments, including autonomous regions. Only administrative powers over local affairs are
delegated to political subdivisions. The purpose of the delegation is to make governance more directly responsive
and effective at the local levels. In turn, economic, political and social development at the smaller political units are
expected to propel social and economic growth and development. But to enable the country to develop as a whole,
the programs and policies effected locally must be integrated and coordinated towards a common national goal.
Thus, policy-setting for the entire country still lies in the President and Congress.

Certainly, to yield unreserved power of governance to the local government unit as to preclude any and all
involvement by the national government in programs implemented in the local level would be to shift the tide of
monopolistic power to the other extreme, which would amount to a decentralization of power explicated in Limbona
v. Mangelin as beyond our constitutional concept of autonomy, thus:
21 

Now, autonomy is either decentralization of administration or decentralization of power.  There is decentralization of

1âwphi1

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’ and ‘ensure their fullest development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress.’ 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 [sic] favor of local
governments [sic] 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

Indeed, a complete relinquishment of central government powers on the matter of providing basic facilities and
services cannot be implied as the Local Government Code itself weighs against it. The national government is, thus,
not precluded from taking a direct hand in the formulation and implementation of national development programs
especially where it is implemented locally in coordination with the LGUs concerned.
Every law has in its favor the presumption of constitutionality, and to justify its nullification, there must be a clear and
unequivocal breach of the Constitution, not a doubtful and argumentative one. Petitioners have failed to discharge
23 

the burden of proving the invalidity of the provisions under the GAA of 2011. The allocation of a P21 billion budget
for an intervention program formulated by the national government itself but implemented in partnership with the
local government units to achieve the common national goal development and social progress can by no means be
an encroachment upon the autonomy of local governments.

WHEREFORE, premises considered, the petition is hereby DISMISSED.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice
GENSAN VS COA

G.R. No. 199439               April 22, 2014

CITY OF GENERAL SANTOS, represented by its Mayor, HON. DARLENE MAGNOLIA R. ANTONINO-
CUSTODIO Petitioner,
vs.
COMMISSION ON AUDIT, Respondent.

DECISION

LEONEN, J.:

In order to be able to deliver more effective and efficient services, the law allows local government units the power
to reorganize. In doing so, they should be given leeway to entice their employees to avail of severance benefits that
the local government can afford. However, local government units may not provide such when it amounts to a
supplementary retirement benefit scheme.

In this special civil action for certiorari,  the city of General Santos asks us to find grave abuse of discretion on the
1

part of the Commission on Audit (COA). On January 20, 2011, respondent Commission on Audit affirmed the
findings of its Legal Services Sector in its Opinion No. 2010-021 declaring Ordinance No. 08, series of 2009, as
illegal. This was reiterated in respondent Commission’s resolution denying the motion for reconsideration dated
October 17, 2011. 2

Ordinance No. 08, series of 2009, was enacted by the city of General Santos on August 13, 2009. It is entitled An
Ordinance Establishing the GenSan Scheme on Early Retirement for Valued Employees Security (GenSan
SERVES). 3

It is important to view this ordinance in its proper context.

Then mayor of General Santos City, Pedro B. Acharon, Jr., issued Executive Order No. 40, series of 2008, creating
management teams pursuant to its organization development program. This was patterned after Executive Order
No. 366 dated October 4, 2004 entitled Directing a Strategic Review of the Operations and Organizations of the
Executive Branch and Providing Options and Incentives for Government Employees who may be Affected by the
Rationalization of the Functions and Agencies of the Executive Branch and its implementing rules and regulations. 4

Mayor Pedro B. Acharon, Jr. declared the city’s byword of "Total Quality Service" in his state of the city address in
2005. This was followed by the conduct of a process and practice review for each department, section, and unit of
the local government. The product was an organization development masterplan adopted as Executive Order No.
13, series of 2009. 5

This was followed by Resolution No. 004, series of 2009, requesting for the mayor’s support for GenSan SERVES,
an early retirement program to be proposed to the Sangguniang Panlungsod.

Consequently, Ordinance No. 08, series of 2009, was passed together with its implementing rules and regulations,
designed "to entice those employees who were unproductive due to health reasons to avail of the incentives being
offered therein by way of early retirement package." 6

This contextual background in the passing of Ordinance No. 08, series of 2009, was not contested by respondent
Commission on Audit.
The ordinance, as amended, provides that qualified employees below sixty (60) years of age but not less than fifty
(50) years and sickly employees below fifty (50) years of age but not less than forty (40) years may avail of the
incentives under the program.  In other words, the ordinance "provides for separation benefits for sickly employees
7

who have not yet reached retirement age."  Section 5 of the ordinance states:
8

Section 5. GenSan SERVES Program Incentives On Top of Government Service Insurance System (GSIS) and
PAG-IBIG Benefits – Any personnel qualified and approved to receive the incentives of this program shall be entitled
to whatever retirement benefits the GSIS or PAG-IBIG is granting to a retiring government employee.

Moreover, an eligible employee shall receive an early retirement incentive provided under this program at the rate of
one and one-half (1 1/2) months of the employee’s latest basic salary for every year of service in the City
Government. 9

Also, the ordinance provides:

Section 6. GenSan SERVES Post-Retirement Incentives – Upon availment of early retirement, a qualified employee
shall enjoy the following in addition to the above incentives:

(a) Cash gift of Fifty Thousand Pesos (₱50,000.00) for the sickly employees;

(b) Lifetime free medical consultation at General Santos City Hospital;

(c) Annual aid in the maximum amount of Five Thousand Pesos (₱5,000.00), if admitted at General Santos
City Hospital; and

(d) 14 karat gold ring as a token. 10

As provided, payment would be made in two tranches: 50% paid in January 2010 and the remainder in July
2010.  Petitioner city alleged that out of its 1,361 regular employees, 50 employees applied, from which 39
11

employees qualified to avail of the incentives provided by the ordinance.  The first tranche of benefits was released
12

in January 2010. 13

In a letter dated February 10, 2010, the city’s audit team leader, through its supervising auditor, sent a query on the
legality of the ordinance to respondent Commission on Audit’s director for Regional Office No. XII, Cotabato City. 14

In his second indorsement dated March 15, 2010, respondent Commission’s regional director agreed that the grant
lacked legal basis and was contrary to the Government Service Insurance System (GSIS) Act. He forwarded the
matter to respondent Commission’s Office of General Counsel, Legal Services Sector, for a more authoritative
opinion. 15

The Office of General Counsel issued COA-LSS Opinion No. 2010-021 on March 25, 2010. The opinion explained
that Ordinance No. 08, series of 2009, partakes of a supplementary retirement benefit plan. In its view, Section 28,
paragraph (b) of Commonwealth Act No. 186, as amended, prohibits government agencies from establishing
supplementary retirement or pension plans from the time the Government Service Insurance System charter took
effect while those plans already existing when the charter was enacted were declared abolished. 16

The opinion discussed that this prohibition was reiterated in Conte v. Commission on Audit.  Laraño v. Commission
17

on Audit,  on the other hand, ruled that an early retirement program should be by virtue of a valid reorganization
18

pursuant to law in order to be valid. The opinion concludes as follows:

In fine, since Ordinance No. 08 is in the nature of an ERP [Early Retirement Program] of the City Government of
General Santos, a law authorizing the same is a requisite for its validity. In the absence, however, of such law, the
nullity of Ordinance No. 08 becomes a necessary consequence.

It is hoped that the foregoing sufficiently answers the instant query. 19

Petitioner city, through then mayor, Pedro B. Acharon, Jr., filed a letter-reconsideration dated June 7, 2010. They
followed through with two letters addressed to respondent Commission’s chairman dated July 26, 2010 and October
6, 2010, respectively, for the reconsideration of COA-LSS Opinion No. 2010-021. 20

Respondent Commission on Audit treated these letters as an appeal. On January 20, 2011, it rendered its decision
denying the appeal and affirming COA-LSS Opinion No. 2010-021.  It also denied reconsideration by resolution
21

dated October 17, 2011.  The dispositive portion of its decision reads:
22

WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of merit and COA-LSS Opinion
No. 2010-021 dated March 25, 2010 of the OGC, this Commission is hereby AFFIRMED. Accordingly, the ATL of
General Santos City is hereby directed to issue a Notice of Disallowance on the illegal disbursements made under
the Gen[S]san SERVES. 23

Respondent Commission on Audit agreed that Ordinance No. 08, series of 2009, partakes of the nature of a
supplementary retirement benefit plan proscribed by Section 28, paragraph (b) of Commonwealth Act No. 186 as
amended. It also cited Conte v. Commission on Audit  and Laraño v. Commission on Audit.
24 25

In its opinion, respondent Commission on Audit observed that GenSan SERVES was not based on a law passed by
Congress but on ordinances and resolutions passed and approved by the Sangguniang Panlungsod and Executive
Orders by the city mayor.  Moreover, nowhere in Section 76 of Republic Act No. 7160, otherwise known as the
26

Local Government Code, does it provide a specific power for local government units to establish an early retirement
program.

Mayor Acharon, Jr. submitted that other local government units such as Cebu in 2005 and 2008 have adopted their
own early retirement programs. The resolutions of the Sangguniang Panlungsod of Cebu invoked Republic Act No.
6683 dated December 2, 1988, which provided for early retirement and voluntary separation. The questioned
decision mentioned that respondent Commission on Audit would look into this program supposedly adopted by
Cebu.  Assuming Cebu’s invocation of Republic Act No. 6683 was proper, respondent Commission on Audit
27

explained that this has already been amended by Republic Act No. 8291, otherwise known as the GSIS Act of 1997.
Moreover, Section 9 of Republic Act No. 6683  provides for limited application.
28 29

The present petition raises this sole issue:

WHETHER RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT

CONSIDERED ORDINANCE NO. 08, SERIES OF 2009, IN THE NATURE OF AN EARLY RETIREMENT
PROGRAM REQUIRING A LAW AUTHORIZING IT FOR ITS VALIDITY

This court has consistently held that findings of administrative agencies are generally respected, unless found to
have been tainted with unfairness that amounted to grave abuse of discretion:

It is the general policy of the Court to sustain the decisions of administrative authorities, especially one which is
constitutionally-created not only on the basis of the doctrine of separation of powers but also for their presumed
expertise in the laws they are entrusted to enforce. Findings of administrative agencies are accorded not only
respect but also finality when the decision and order are not tainted with unfairness or arbitrariness that would
amount to grave abuse of discretion. It is only when the COA has acted without or in excess of jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, that this Court entertains a petition questioning
its rulings. There is grave abuse of discretion when there is an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law
and evidence but on caprice, whim and despotism.  (Emphasis supplied, citations omitted)
30

We have ruled that "not every error in the proceedings, or every erroneous conclusion of law or fact, constitutes
grave abuse of discretion."  Grave abuse of discretion has been defined as follows:
31

By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and
so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at
all in contemplation of law. x x x.
32

In Yap v. Commission on Audit,  this court explained that the Commission on Audit has the duty to make its own
33

assessment of the merits of the disallowance and need not be limited to a review of the grounds relied upon by the
auditor of the agency concerned:

x x x we rule that, in resolving cases brought before it on appeal, respondent COA is not required to limit its review
only to the grounds relied upon by a government agency’s auditor with respect to disallowing certain disbursements
of public funds. In consonance with its general audit power, respondent COA is not merely legally permitted, but is
also duty-bound to make its own assessment of the merits of the disallowed disbursement and not simply restrict
itself to reviewing the validity of the ground relied upon by the auditor of the government agency concerned. To hold
otherwise would render COA’s vital constitutional power unduly limited and thereby useless and ineffective. 34

Moreover, Article IX-A, Section 7 of the Constitution provides that "unless otherwise provided by this Constitution or
by law, any decision, order, or ruling of each Commission may be brought to the Supreme Court on certiorari by the
aggrieved party within thirty days from receipt of a copy thereof." Rule 64, Section 2 of the Revised Rules of Civil
Procedure also provides that "a judgment or final order or resolution of the Commission on Elections and the
Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65,
except as hereinafter provided."

Thus, we proceed to determine whether respondent Commission on Audit acted with grave abuse of discretion in
affirming the opinion of its Legal Services Sector and finding that the entire Ordinance No. 08, series of 2009,
partakes of the nature of a proscribed supplementary retirement benefit plan.

II

According to petitioner city, GenSan SERVES does not provide for supplementary retirement benefits, and Conte
does not apply. 35

Petitioner city explains that unlike the facts in Conte, Ordinance No. 08, series of 2009, was designed to entice
employees who are unproductive due to health reasons to avail of the incentives by way of an early retirement
package. In essence, the incentives are severance pay. Those who have reached retirement age are disqualified. 36

Petitioner city adds that GenSan SERVES is a one-time offer. It is available only to qualified employees who applied
within two months from the ordinance’s effectivity. In fact, out of its 1,361 regular employees, 50 employees applied.
Out of all that applied, only 39 employees qualified to avail of the incentives provided by the ordinance. 37

These incentives are independent and distinct from the Government Service Insurance System retirement
package. 38

Section 5 of Ordinance No. 08, series of 2009, was amended by Ordinance No. 11, series of 2009, "to exclude
those GSIS and PAG-IBIG benefits the payment[s] of which are passed on [to] the employer."  This was to remove
39

any doubt as to its coverage and applicability and to ensure that no employee will be paid twice.  The amended
40

provision reads:

Section 5. Gen[S]an SERVES Program Incentives On Top of Government Service Insurance System (GSIS) and
PAG-IBIG Benefits – Any personnel qualified and approved to receive the incentives of this program shall be entitled
to whatever retirement benefits the GSIS or PAG-IBIG is granting to a retiring government employee, except those
benefits the payment of which are passed on to the employer. In which case, the benefits granted under this
ordinance shall only be considered as one of the options available to a retiring city employee.

Moreover, an eligible employee shall receive an early retirement incentive provided under this program at the rate of
one and one-half (1 1/2) months of the employee’s latest basic salary for every year of service in the City
Government. (Emphasis supplied)
According to petitioner city, GenSan SERVES is an initial step pursuant to its organization development
masterplan,  which began with the city mayor’s issuance of Executive Order No. 40, series of 2008, creating change
41

management teams. 42

Petitioner city cites Sections 16 and 76 of the Local Government Code as its authority to reorganize. It argues that
these provisions necessarily imply the authority of petitioner city to provide retirement benefits, separation pay, and
other incentives to those affected by the reorganization.43

Petitioner city also cites Republic Act No. 6656, otherwise known as An Act to Protect the Security of Tenure of Civil
Service Officers and Employees in the Implementation of Government Reorganization.  According to petitioner city,
44

this not only requires good faith in the implementation of reorganization but mandates the payment of appropriate
separation pay, retirement, and other benefits under existing laws within 90 days from effectivity date of separation. 45

Even President Gloria Macapagal-Arroyo issued Executive Order No. 184 entitled Directing the Reorganization and
Streamlining of the National Development Company on March 10, 2003. In Section 4, it provides for a separation
package anchored on Republic Act No. 6656.  Petitioner city submits that if the President can reorganize in the
46

absence of any law authorizing her to do so and provide compensation based on Republic Act No. 6656, with more
reason that a local government unit can reorganize as its power to reorganize is expressly provided in the Local
Government Code. 47

Respondent Commission on Audit counters that it correctly found Ordinance No. 08, series of 2009, as invalid in the
absence of a law passed by Congress specifically authorizing the enactment of an ordinance granting an early
retirement scheme. 48

Respondent Commission on Audit contends that Sections 16 and 76 of the Local Government Code do not confer
authority upon any local government unit to create a separate or supplementary retirement benefit plan.  As for
49

Republic Act No. 6656, this contemplates situations where a government position has been abolished, or rendered
redundant, or a need to merge, divide or consolidate positions for lawful causes allowed by the Civil Service Law
exists.
50

According to respondent Commission on Audit, petitioner city failed to demonstrate arbitrariness on its part as it
merely observed the proscription under Section 28, paragraph (b) of Commonwealth Act No. 186 when it found the
ordinance a nullity.
51

We agree with respondent Commission on Audit but only insofar as Section 5 of the ordinance is concerned. We
declare Section 6 on post-retirement incentives as valid.

III

The constitutional mandate for local autonomy supports petitioner city’s issuance of Executive Order No. 40, series
of 2008, creating change management teams  as an initial step for its organization development masterplan.
52

Local autonomy also grants local governments the power to streamline and reorganize. This power is inferred from
Section 76 of the Local Government Code on organizational structure and staffing pattern, and Section 16 otherwise
known as the general welfare clause:

Section 76. Organizational Structure and Staffing Pattern. - Every local government unit shall design and implement
its own organizational structure and staffing pattern taking into consideration its service requirements and financial
capability, subject to the minimum standards and guidelines prescribed by the Civil Service Commission.

Section 16. General Welfare. - Every local government unit shall 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. Within their respective territorial
jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment
of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and
support the development of appropriate and self-reliant scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain
peace and order, and preserve the comfort and convenience of their inhabitants.

Section 5, paragraph (a) of the Local Government Code states that "any provision on a power of a local government
unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor or
devolution of powers x x x."

Section 5, paragraph (c) also provides that "the general welfare provisions in this Code shall be liberally interpreted
to give more powers to local government units in accelerating economic development and upgrading the quality of
life for the people in the community." These rules of interpretation emphasize the policy of local autonomy and the
devolution of powers to the local government units.

Designing and implementing a local government unit’s own "organizational structure and staffing pattern" also
implies the power to revise and reorganize. Without such power, local governments will lose the ability to adjust to
the needs of its constituents. Effective and efficient governmental services especially at the local government level
require rational and deliberate changes planned and executed in good faith from time to time.

This was implied in Province of Negros Occidental v. Commissioners, Commission on Audit.  In that case, this court
53

declared as valid the ordinance passed by the province granting and releasing hospitalization and health care
insurance benefits to its officials and employees. This court held that Section 2 of Administrative Order No.
103  requiring the President’s prior approval before the grant of any allowance or benefit is applicable only to offices
54

under the executive branch.  Section 2 does not mention local government units, thus, the prohibition does not
55

apply to them.  This court then referred to the policy of local autonomy as follows:
56

Thus, consistent with the state policy of local autonomy as guaranteed by the 1987 Constitution, under Section 25,
Article II and Section 2, Article X, and the Local Government Code of 1991, we declare that the grant and release of
the hospitalization and health care insurance benefits given to petitioner’s officials and employees were validly
enacted through an ordinance passed by petitioner’s Sangguniang Panlalawigan. 57

Local autonomy allows an interpretation of Sections 76 and 16 as granting petitioner city the authority to create its
organization development program.

Petitioner city’s vision in 2005 of "Total Quality Service" for "the improvement of the quality of services delivered by
the city to the delight of its internal and external customers"  is a matter within its discretion. It then conducted a
58

process and practice review for each and every unit within the city, resulting in the formulation of an organization
development masterplan adopted as Executive Order No. 13, series of 2009. 59

Resolution No. 004, series of 2009, was later passed requesting for the mayor’s support for GenSan SERVES. The
third preambular clause states that in order "to transform the bureaucracy into [an] effective and result[s]-oriented
structure, redounding to improved governance, there is a need to entice employees aged 50-59 years old, to retire
earlier than [age] 65 for them to enjoy their retirement while they are still healthy."  Consequently, Ordinance No.
60

08, series of 2009, was passed creating the GenSan SERVES program.

In Betoy v. The Board of Directors, NAPOCOR,  this court explained that a streamlining of organization for a more
61

efficient system must pass the test of good faith in order to be valid:

A reorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of
economy or redundancy of functions.  It could result in the loss of one's position through removal or abolition of an
62

office. However, for a reorganization for the purpose of economy or to make the bureaucracy more efficient to be
valid, it must pass the test of good faith; otherwise, it is void ab initio.  (Emphasis supplied)
63

There are indicia of bad faith, none of which are present in this case.

Republic Act No. 6656 invoked by petitioner city as authority for the creation of GenSan SERVES, for example,
enumerates situations considered as bad faith when employees are removed as a result of any reorganization:
SECTION 2. No officer or employee in the career service shall be removed except for a valid cause and after due
notice and hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has
been abolished or rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet
the exigencies of the service, or other lawful causes allowed by the Civil Service Law. The existence of any or some
of the following circumstances may be considered as evidence of bad faith in the removals made as a result of
reorganization, giving rise to a claim for reinstatement or reappointment by an aggrieved party:

a) Where there is a significant increase in the number of positions in the new staffing pattern of the
department or agency concerned;

b) Where an office is abolished and another performing substantially the same functions in created;

c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance
and merit;

d) Where there is a reclassification of offices in the department or agency concerned and the reclassified
offices perform substantially the same functions as the original offices; and

e) Where the removal violates the order of separation provided in Section 3 hereof. (Emphasis supplied)

None of these badges of bad faith exist in this case.

Petitioner city followed the order of priority under Section 4 of its ordinance.  It required applicants to undergo
64

medical examination with the local hospital and considered the hospital chief’s recommendations. 65

Unfortunately, these allegations showing good faith is not enough to declare the program created by petitioner city
as a reorganization that justifies the creation of a retirement benefit plan.

Petitioner city alleged that the positions occupied by those who qualified for GenSan SERVES remained vacant, and
it would neither hire replacements nor promote employees earlier than June 30, 2011.  This means the positions left
66

by those who availed of the program will eventually be filled up by others. Their positions were not abolished or
merged with other positions for streamlining in the service.

IV

The assailed decision by respondent Commission on Audit was anchored on Section 28, paragraph (b) of
Commonwealth Act No. 186, otherwise known as the Government Service Insurance Act,  as amended by Republic
67

Act No. 4968.  This proscribes all supplementary retirement or pension plans for government employees:
68

(b) Hereafter no insurance or retirement plan for officers or employees shall be created by any employer. All
supplementary retirement or pension plans heretofore in force in any government office, agency, or instrumentality
or corporation owned and controlled by the government, are hereby declared inoperative or abolished: Provided,
That the rights of those who are already eligible to retire thereunder shall not be affected.

Jurisprudence has discussed the nature and purpose of retirement benefits and pension plans as follows:

Retirement benefits are, after all, a form of reward for an employee’s loyalty and service to the employer, and are
intended to help the employee enjoy the remaining years of his life, lessening the burden of worrying about his
financial support or upkeep. On the other hand, a pension partakes of the nature of "retained wages" of the retiree
for a dual purpose: to entice competent people to enter the government service, and to permit them to retire from
the service with relative security, not only for those who have retained their vigor, but more so for those who have
been incapacitated by illness or accident.  (Emphasis supplied)
69

In Conte v. Commission on Audit,  this court discussed the purpose behind the proscription found in Section 28,
70

paragraph (b), as amended. It was to address the need to prevent the proliferation of inequitous plans:
x x x Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the creation of any insurance or retirement
plan – other than the GSIS – for government officers and employees, in order to prevent the undue and inequitous
proliferation of such plans. x x x. To ignore this and rule otherwise would be tantamount to permitting every other
government office or agency to put up its own supplementary retirement benefit plan under the guise of such
"financial assistance.71

Section 2 of the ordinance, as amended, defined "applicants" as referring to "qualified employees below sixty (60)
years of age but not less than fifty (50) years and sickly employees below fifty (50) years of age but not less than
forty (40) years old from the effectivity of this Ordinance and shall have rendered service in the City government for
at least 15 years."

This means that even employees other than those who are unproductive due to health reasons may apply under the
ordinance. Albeit last in priority, they may still qualify to avail of the incentives pursuant to Section 4, paragraph (d),
as amended:

Section 4. Prioritization. – The following applicants shall be prioritized in availing the program:

a) First – Employees below sixty (60) years of age but not less than fifty (50) years who are determined by
the Chief of General Santos City Hospital to be qualified to avail of the program;

b) Second – Employees below sixty (60) years of age but not less than fifty (50) years who are under
continuous medication as determined by the Chief of General Santos City Hospital;

c) Third – Employees below fifty (50) years of age but not less than forty (40) years who are determined by
the Chief of General Santos City Hospital to be physically or mentally incapacitated to further continue
rendering service with the City Government and recommended to avail of the program; and

d) Fourth – Employees below sixty (60) years of age but not less than fifty (50) years who are desirous to
avail of the program.

Moreover, Section 3 of the ordinance, as amended, enumerates those who are covered by the program and may
thus apply under the ordinance:

Section 3. Coverage. – GenSan SERVES program covers the following employees of the City Government:

(a) personnel occupying permanent positions;

(b) those who are below sixty (60) years of age but not less than fifty (50) years on the date of application;

(c) those who are below fifty (50) years of age but not less than forty (40) years on the date of application
but confirmed by the Chief of General Santos City Hospital to be sickly and recommended to avail early
retirement; and

(d) those who must have served the City Government of General Santos a minimum of fifteen (15)
continuous years.

Under paragraph (d), employees should have served for a minimum of 15 years to qualify. This requirement is
consistent with the definition of a retirement plan as a form of reward for an employee’s loyalty and service to the
employer. Moreover, pension plans as defined permit employees to retire with relative security, especially for those
who have been incapacitated by illness. 72

Section 5 states that "an eligible employee shall receive an early retirement incentive provided under this program at
the rate of 1 1/2 months of the employee’s latest basic salary for every year of service in the City Government." This
may be more than the amount of annuity provided in Section 11, paragraph (a) of Commonwealth Act No. 186 as
amended,  considering that an applicant must have rendered at least 15 years of service in the city government to
73

qualify.
74
Section 5 refers to an "early retirement incentive," the amount of which is pegged on the beneficiary’s years of
service in the city government. The ordinance provides that only those who have rendered service to the city
government for at least 15 years may apply.  Consequently, this provision falls under the definition of a retirement
75

benefit. Applying the definition in Conte, it is a form of reward for an employee’s loyalty and service to the city
government, and it is intended to help the employee enjoy the remaining years of his or her life by lessening his or
her financial worries.

In any case, those who availed of the GenSan SERVES were separated from the service. Those who are separated
from the service, whether compulsorily for lawful cause,  or voluntarily when incentivized to retire early for
76

streamlining purposes,  should consequently be entitled to a form of separation or severance pay.

77

Petitioner city invoked Republic Act No. 6656, which provides that employees separated from the service as a result
of any reorganization shall be entitled to separation pay, retirement, and other benefits:

Section 9. All officers and employees who are found by the Civil Service Commission to have been separated in
violation of the provisions of this Act, shall be ordered reinstated or reappointed as the case may be without loss of
seniority and shall be entitled to full pay for the period of separation. Unless also separated for cause, all officers
and employees, who have been separated pursuant to reorganization shall, if entitled thereto, be paid the
appropriate separation pay and retirement and other benefits under existing laws within ninety (90) days from the
date of the effectivity of their separation or from the date of the receipt of the resolution of their appeals as the case
may be: Provided, That application for clearance has been filed and no action thereon has been made by the
corresponding department or agency. Those who are not entitled to said benefits shall be paid a separation gratuity
in the amount equivalent to one (1) month salary for every year of service. Such separation pay and retirement
benefits shall have priority of payment out of the savings of the department or agency concerned. (Emphasis
supplied)

Separation or severance pay has been defined as "an allowance usually based on length of service that is payable
to an employee on severance x x x, or as compensation due an employee upon the severance of his employment
status with the employer." 78

Section 6 of the ordinance on post-retirement incentives provides for benefits that are not computed based on years
of service. They are lump sum amounts and healthcare benefits:

Section 6. GenSan SERVES Post-Retirement Incentives – Upon availment of early retirement, a qualified employee
shall enjoy the following in addition to the above incentives:

(e) Cash gift of Fifty Thousand Pesos (₱50,000.00) for the sickly employees;

(f) Lifetime free medical consultation at General Santos City Hospital;

(g) Annual aid in the maximum amount of Five Thousand Pesos (₱5,000.00), if admitted at General Santos
City Hospital; and

(h) 14 karat gold ring as token.

The text of the ordinance indicates its purpose of encouraging employees, especially those who are unproductive
due to health reasons, to avail of the program even before they reach the compulsory retirement age. Section 6
provides for a form of severance pay to those who availed of GenSan SERVES, which was executed in good faith.

We should not be misled by the use of the term "retirement" in Section 6 in determining the nature of the benefits it
provides. Labels are not determinative of substantive content. It is the purpose behind these incentives, as read
from the text of the ordinance and as inferred from the effect of the ordinance as applied, which must govern.

The purpose of Section 6 is also different from the benefits proscribed in Conte v. Commission on Audit,  and the
79

nature of its benefits must be taken in the context of its rationale. The benefits provided in Section 6 serve its
purpose of inducing petitioner city’s employees, who are unproductive due to health reasons, to retire early.
Respondent Commission on Audit’s observation that the benefit provided is broader than that provided in Conte v
Commission on Audit fails to take this rationale into consideration. Furthermore, the benefits under GenSan
SERVES were only given to a select few—the sickly and unproductive due to health reasons. Certainly, this negates
the position that the benefits provide for supplementary retirement benefits that augment existing retirement laws.

In Conte v. Commission on Audit  cited by respondent Commission on Audit, this court held that the "financial
80

assistance" option for the difference of benefits under Republic Act No. 660 and Republic Act No. 1616 violated
Section 28, paragraph (b) as amended. Social Security System (SSS) Resolution No. 56 subject of that case
provides in part:

NOW, THEREFORE, BE IT RESOLVED, That all the SSS employees who are simultaneously qualified for
compulsory retirement at age 65 or for optional retirement at a lower age be encouraged to avail for themselves the
life annuity under R.A. 660, as amended; x x x. 81

The fifth preambular clause of Resolution No. 56 also states that "it is the policy of the Social Security Commission
to promote and to protect the interest of all SSS employees, with a view to providing for their well-being during both
their working and retirement years."  The financial assistance provides benefits to all Social Security System
82

employees who are retirable under existing laws and who are qualified to apply. It is available to all present and
future Social Security System employees upon reaching retirement age. 83

Without doubt, this financial assistance of Conte augments the retirement benefits provided under existing laws, in
violation of Section 28, paragraph (b), as amended.

On the other hand, Section 3 of Ordinance No. 08, series of 2009 limits its coverage.  Only qualified employees
1a\^/phi1

below sixty (60) years of age but not less than fifty (50) years and sickly employees below fifty (50) years of age but
not less than forty (40) years from the effectivity of the ordinance, with at least 15 years of service, are considered.
Out of 1,361 regular employees of petitioner city, only 50 employees applied, from which only 39 employees
qualified to avail of the ordinance benefits.  Petitioner city alleged that there was one more applicant who was
84

supposed to qualify, but she had died of acute renal failure secondary to diabetes nephropathy before her
application was acted upon. 85

Furthermore, unlike in Conte, Ordinance No. 08, series of 2009, was a one-time limited offer.  The availment period
86

was only within two months from the ordinance’s effectivity. 87

In any case, petitioner city is authorized by the Local Government Code to approve ordinances to provide for the
care of the sick:

SECTION 458. – Powers, Duties, Functions and Compensation. – (a) The Sangguniang Panlungsod, as the
legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general
welfare of the city and its inhabitants pursuant to section 16 of this Code and in the proper exercise of the corporate
powers of the city as provided for under section 22 of this Code, and shall:

xxxx

(5) Approve 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, shall:

xxxx

(xiv) Provide for the care of disabled persons, paupers, the aged, the sick, persons of unsound mind, abandoned
minors, juvenile delinquents, drug dependents, abused children and other needy and disadvantaged persons,
particularly children and youth below eighteen (18) years of age; and, subject to availability of funds, establish and
provide for the operation of centers and facilities for said needy and disadvantaged persons[.] (Emphasis supplied)

This is also consistent with the constitutional mandate for a comprehensive approach to health development, with
priority for the needs of the sick:
 ARTICLE XIII
Social Justice and Human Rights

HEALTH

Section 11. The State shall adopt an integrated and comprehensive approach to health development which shall
endeavor to make essential goods, health and other social services available to all the people at affordable cost.
There shall be priority for the needs of the underprivileged, sick, elderly, disabled, women, and children. The State
shall endeavor to provide free medical care to paupers.

Thus, the cash gift for the sickly employees, lifetime free medical consultation in petitioner city's hospital, and other
similar benefits under Section 6 of the ordinance are valid.

The proscription under Section 28, paragraph (b) of Commonwealth Act No. 186, as amended, does not apply to
Section 6 of the ordinance.  Consequently, the Commission on Audit acted with grave abuse of discretion when it
1âwphi1

declared the entire ordinance void and of no effect.

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Commission on Audit decision dated January
20, 2011 and resolution dated October 17, 2011 are AFFIRMED with MODIFICATION insofar as Section 6 of
Ordinance No. 08, series of 2009, as amended by Ordinance No. 11, series of 2009, is declared as VALID.

SO ORDERED.

MARVIC MARIO VICTOR F. LEONEN

Associate Justice
LTO VS CITY OF BUTUAN

G.R. No. 131512           January 20, 2000

LAND TRANSPORTATION OFFICE [LTO], represented by Assistant Secretary Manuel F. Bruan, LTO
Regional Office, Region X represented by its Regional Director, Timoteo A. Garcia; and LTO Butuan
represented by Rosita G. Sadiaga, its Registrar, petitioners,
vs.
CITY OF BUTUAN, represented in this case by Democrito D. Plaza II, City Mayor, respondents.

VITUG, J.:

The 1987 Constitution enunciates the policy that the territorial and political subdivisions shall enjoy local
autonomy. In obedience to that mandate of the fundamental law, Republic Act ("R.A.") No. 7160, otherwise known
1 

as the Local Government Code, expresses that the territorial and political subdivisions of the State shall enjoy
2 

genuine and meaningful local autonomy in order to enable them to attain their fullest development as self-reliant
communities and make them more effective partners in the attainment of national goals, and that it is a basic aim of
the State to provide for a more responsive and accountable local government structure instituted through a system
of decentralization whereby local government units shall be given more powers, authority, responsibilities and
resources.

While the Constitution seeks to strengthen local units and ensure their viability, clearly, however, it has never been
the intention of that organic law to create an imperuim in imperio and install an infra sovereign political subdivision
independent of a single sovereign state.

The Court is asked in this instance to resolve the issue of whether under the present set up the power of the Land
Registration Office ("LTO") to register, tricycles in particular, as well as to issue licenses for the driving thereof, has
likewise devolved to local government units.

The Regional Trial Court (Branch 2) of Butuan City held that the authority to register tricycles, the grant of the
3 

corresponding franchise, the issuance of tricycle drivers' license, and the collection of fees therefor had all been
vested in the Local Government Units ("LGUs"). Accordingly, it decreed the issuance of a permanent writ of
injunction against LTO, prohibiting and enjoining LTO, as well as its employees and other persons acting in its
behalf, from (a) registering tricycles and (b) issuing licenses to drivers of tricycles. The Court of Appeals, on appeal
to it, sustained the trial court.
1âwphi1.nêt

The adverse rulings of both the court a quo and the appellate court prompted the LTO to file the instant petition for
review on certiorari to annul and set aside the decision, dated 17 November 1997, of the Court of Appeals affirming
4 

the permanent injunctive writ order of the Regional Trial Court (Branch 2) of Butuan City.

Respondent City of Butuan asserts that one of the salient provisions introduced by the Local Government Code is in
the area of local taxation which allows LGUs to collect registration fees or charges along with, in its view, the
corresponding issuance of all kinds of licenses or permits for the driving of tricycles.

The 1987 Constitution provides:

Each local government unit shall have the power to create its own sources of revenues and to levy taxes,
fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with
the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local
governments. 5

Sec. 129 and Section 133 of the Local Government Code read:
 Sec. 129. Power to Create Sources or 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. 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:

xxx     xxx     xxx

(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.

Relying on the foregoing provisions of the law, the Sangguniang Panglungsod ("SP") of Butuan, on 16 August 1992,
passed SP Ordinance No. 916-92 entitled "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.

In order to settle the variant positions of the parties, the City of Butuan, represented by its City Mayor Democrito D.
Plaza, filed on 28 June 1994 with the trial court a petition for "prohibition, mandamus, injunction with a prayer for
preliminary restraining order ex-parte" seeking the declaration of the validity of SP Ordinance No. 962-93 and the
prohibition of the registration of tricycles-for-hire and the issuance of licenses for the driving thereof by the LTO.

LTO opposed the prayer in the petition.

On 20 March 1995, the trial court rendered a resolution; the dispositive portion read:

In view of the foregoing, let a permanent injunctive writ be issued against the respondent Land
Transportation Office and the other respondents, prohibiting and enjoining them, their employees, officers,
attorney's or other persons acting in their behalf from forcing or compelling Tricycles to be registered with,
and drivers to secure their licenses from respondent LTO or secure franchise from LTFRB and from
collecting fees thereon. It should be understood that the registration, franchise of tricycles and driver's
license/permit granted or issued by the City of Butuan are valid only within the territorial limits of Butuan City.

No pronouncement as to costs. 6

Petitioners timely moved for a reconsideration of the above resolution but it was to no avail. Petitioners then
appealed to the Court of Appeals. In its now assailed decision, the appellate court, on 17 November 1997, sustained
the trial court. It ruled:

WHEREFORE, the petition is hereby DISMISSED and the questioned permanent injunctive writ issued by
the court a quo dated March 20, 1995 AFFIRMED. 7

Coming up to this Court, petitioners raise this sole assignment of error, to wit:

The Court of Appeals [has] erred in sustaining the validity of the writ of injunction issued by the trial court
which enjoined LTO from (1) registering tricycles-for-hire and (2) issuing licenses for the driving thereof
since the Local Government Code devolved only the franchising authority of the LTFRB. Functions of the
LTO were not devolved to the LGU's. 8
The petition is impressed with merit.

The Department of Transportation and Communications ("DOTC"), through the LTO and the LTFRB, has since
9 

been tasked with implementing laws pertaining to land transportation. The LTO is a line agency under the DOTC
whose powers and functions, pursuant to Article III, Section 4 (d) [1], of R.A. No. 4136, otherwise known as Land
10 

Transportation and Traffic Code, as amended, deal primarily with the registration of all motor vehicles and the
licensing of drivers thereof. The LTFRB, upon the other hand, is the governing body tasked by E.O. No. 202, dated
19 June 1987, to regulate the operation of public utility or "for hire" vehicles and to grant franchises or certificates of
public convenience ("CPC"). Finely put, registration and licensing functions are vested in the LTO while franchising
11 

and regulatory responsibilities had been vested in the LTFRB.

Under the Local Government Code, certain functions of the DOTC were transferred to the LGUs, thusly:

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. (Emphasis supplied).

LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to grant franchises for the
operation thereof. "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. A franchise is defined to be a special
12 

privilege to do certain things conferred by government on an individual or corporation, and which does not belong to
citizens generally of common right. On the other hand, "to register" means to record formally and exactly, to enroll,
13 

or to enter precisely in a list or the like, and a "driver's license" is the certificate or license issued by the government
14 

which authorizes a person to operate a motor vehicle. The devolution of the functions of the DOTC, performed by
15 

the LTFRB, to the LGUs, as so aptly observed by the Solicitor General, is aimed at curbing the alarming increase of
accidents in national highways involving tricycles. It has been the perception that local governments are in good
position to achieve the end desired by the law-making body because of their proximity to the situation that can
enable them to address that serious concern better than the national government.

It may not be amiss to state, nevertheless, that under Article 458 (a)[3-VI] of the Local Government Code, the power
of LGUs to regulate the operation of tricycles and to grant franchises for the operation thereof is still subject to the
guidelines prescribed by the DOTC. In compliance therewith, the Department of Transportation and
Communications ("DOTC") issued "Guidelines to Implement the Devolution of LTFRBs Franchising Authority over
Tricycles-For-Hire to Local Government units pursuant to the Local Government Code." Pertinent provisions of the
guidelines state:

In lieu of the Land Transportation Franchising and Regulatory Board (LTFRB) in the DOTC, the
Sangguniang Bayan/Sangguniang Panglungsod (SB/SP) shall perform the following:

(a) Issue, amend, revise, renew, suspend, or cancel MTOP and prescribe the appropriate terms and
conditions therefor;

xxx     xxx     xxx

Operating Conditions:
 1. For safety reasons, no tricycles should operate on national highways utilized by 4 wheel vehicles
greater than 4 tons and where normal speed exceed 40 KPH. However, the SB/SP may provide
exceptions if there is no alternative route.

2. Zones must be within the boundaries of the municipality/city. However, existing zones within more
than one municipality/city shall be maintained, provided that operators serving said zone shall
secure MTOP's from each of the municipalities/cities having jurisdiction over the areas covered by
the zone.

3. A common color for tricycles-for-hire operating in the same zone may be imposed. Each unit shall
be assigned and bear an identification number, aside from its LTO license plate number.

4. An operator wishing to stop service completely, or to suspend service for more than one month,
should report in writing such termination or suspension to the SB/SP which originally granted the
MTOP prior thereto. Transfer to another zone may be permitted upon application.

5. The MTOP shall be valid for three (3) years, renewable for the same period. Transfer to another
zone, change of ownership of unit or transfer of MTOP shall be construed as an amendment to an
MTOP and shall require appropriate approval of the SB/SP.

6. Operators shall employ only drivers duly licensed by LTO for tricycles-for-hire.

7. No tricycle-for-hire shall be allowed to carry more passengers and/or goods than it is designed for.

8. A tricycle-for-hire shall be allowed to operate like a taxi service, i.e., service is rendered upon
demand and without a fixed route within a zone. 16

Such as can be gleaned from the explicit language of the statute, as well as the corresponding guidelines issued by
DOTC, the newly delegated powers pertain to the franchising and regulatory powers theretofore 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. 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. Thus —

Sec. 5. All motor vehicles and other vehicles must be registered. — (a) No motor vehicle shall be used or
operated on or upon any public highway of the Philippines unless the same is properly registered for the
current year in accordance with the provisions of this Act (Article 1, Chapter II, R.A. No. 4136).

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
17 

repository and custodian of all records of all motor vehicles. 18

The Court shares the apprehension of the Solicitor General if the above functions were to likewise devolve
to local government units; he states:

If the tricycle registration function of respondent LTO is decentralized, the incidence of theft of
tricycles will most certainly go up, and stolen tricycles registered in one local government could be
registered in another with ease. The determination of ownership thereof will also become very
difficult.

Fake driver's licenses will likewise proliferate. This likely scenario unfolds where a tricycle driver, not
qualified by petitioner LTO's testing, could secure a license from one municipality, and when the
same is confiscated, could just go another municipality to secure another license.
 Devolution will entail the hiring of additional personnel charged with inspecting tricycles for road
worthiness, testing drivers, and documentation. Revenues raised from tricycle registration may not
be enough to meet salaries of additional personnel and incidental costs for tools and equipment. 19

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 an 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)
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(8)(3)(VI)
20 

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. 21

The Court cannot end this decision without expressing its own serious concern over the seeming laxity in the grant
of franchises for the operation of tricycles-for-hire and in allowing the indiscriminate use by such vehicles on public
highways and principal thoroughfares. Senator Aquilino C. Pimentel, Jr., the principal author and sponsor of the bill
that eventually has become to be known as the Local Government Code, has aptly remarked:

Tricycles are a popular means of transportation, specially in the countryside. They are, unfortunately, being
allowed to drive along highways and principal thoroughfares where they pose hazards to their passengers
arising from potential collisions with buses, cars and jeepneys.

The operation of tricycles within a municipality may be regulated by the Sangguniang Bayan. In this
connection, the Sangguniang concerned would do well to consider prohibiting the operation of tricycles
along or across highways invite collisions with faster and bigger vehicles and impede the flow of traffic. 22

The need for ensuring public safety and convenience to commuters and pedestrians alike is paramount. It
might be well, indeed, for public officials concerned to pay heed to a number of provisions in our laws that
can warrant in appropriate cases an incurrence of criminal and civil liabilities. Thus —

The Revised Penal Code —

Art. 208. Prosecution of offenses; negligence and tolerance. — The penalty of prision correccional in its
minimum period and suspension shall be imposed upon any public officer, or officer of the law, who, in
dereliction of the duties of his office, shall maliciously refrain from instituting prosecution for the punishment
of violators of the law, or shall tolerate the commission of offenses.

The Civil Code —

Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or
neglects, without just cause, to perform his official duty may file an action for damages and other relief
against the latter, without prejudice to any disciplinary administrative action that may be taken. 1âwphi1.nêt
 Art. 34. When a member of a city or municipal police force refuses or fails to render aid or protection to any
person in case of danger to life or property, such peace officer shall be primarily liable for damages, and the
city or municipality shall be subsidiarily responsible therefor. The civil action herein recognized shall be
independent of any criminal proceedings, and a preponderance of evidence shall suffice to support such
action.

Art. 2189. Provinces, cities and municipalities shall be liable for damages for the death of, or injuries
suffered by, any person by reason of the defective condition of roads, streets, bridges, public buildings, and
other public works under their control or supervision.

The Local Government Code —

Sec. 24. Liability for Damages. — Local government units and their officials are not exempt from liability for
death or injury to persons or damage to property.

WHEREFORE, the assailed decision which enjoins the Land Transportation Office from requiring the due
registration of tricycles and a license for the driving thereof is REVERSED and SET ASIDE.

No pronouncements on costs.

Let copies of this decision be likewise furnished the Department of Interior and Local Governments, the Department
of Public Works and Highways and the Department of Transportation and Communication.

SO ORDERED.

Melo, Panganiban, Purisima and Gonzaga-Reyes, JJ., concur.

FERRER VS. BAUTISTA

G.R. No. 210551               June 30, 2015

JOSE J. FERRER, JR., Petitioner,

vs.
CITY MAYOR HERBERT BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY TREASURER OF QUEZON
CITY, and CITY ASSESSOR OF QUEZON CITY, Respondents.

DECISION

PERALTA, J.:

Before this Court is a petition for certiorari under Rule 65 of the Rules of Court with prayer for the issuance of a
temporary restraining order (TRO) seeking to declare unconstitutional and illegal Ordinance Nos. SP-2095, S-2011
and SP-2235, S-2013 on the Socialized Housing Tax and Garbage Fee, respectively, which are being imposed by
the respondents.

The Case

On October 17, 2011,  respondent Quezon City Council enacted Ordinance No. SP-2095, S-2011,  or the Socialized
1 2

Housing Tax of Quezon City, Section 3 of which provides:

SECTION 3. IMPOSITION. A special assessment equivalent to one-half percent (0.5%) on the assessed value of
land in excess of One Hundred Thousand Pesos (Php100,000.00) shall be collected by the City Treasurer which
shall accrue to the Socialized Housing Programs of the Quezon City Government. The special assessment shall
accrue to the General Fund under a special account to be established for the purpose.

Effective for five (5) years, the Socialized Housing Tax ( SHT ) shall be utilized by the Quezon City Government for
the following projects: (a) land purchase/land banking; (b) improvement of current/existing socialized housing
facilities; (c) land development; (d) construction of core houses, sanitary cores, medium-rise buildings and other
similar structures; and (e) financing of public-private partners hip agreement of the Quezon City Government and
National Housing Authority ( NHA ) with the private sector. 3

Under certain conditions, a tax credit shall be enjoyed by taxpayers regularly paying the special assessment:

SECTION 7. TAX CREDIT. Taxpayers dutifully paying the special assessment tax as imposed by this ordinance
shall enjoy a tax credit. The tax credit may be availed of only after five (5) years of continue[d] payment. Further, the
taxpayer availing this tax credit must be a taxpayer in good standing as certified by the City Treasurer and City
Assessor.

The tax credit to be granted shall be equivalent to the total amount of the special assessment paid by the property
owner, which shall be given as follows:

1. 6th year - 20%

2. 7th year - 20%

3. 8th year - 20%

 4. 9th year - 20%

5. 10th year - 20%

Furthermore, only the registered owners may avail of the tax credit and may not be continued by the subsequent
property owners even if they are buyers in good faith, heirs or possessor of a right in whatever legal capacity over
the subject property.4

On the other hand, Ordinance No. SP-2235, S-2013  was enacted on December 16, 2013 and took effect ten days
5

after when it was approved by respondent City Mayor.  The proceeds collected from the garbage fees on residential
6

properties shall be deposited solely and exclusively in an earmarked special account under the general fund to be
utilized for garbage collections.  Section 1 of the Ordinance se t forth the schedule and manner for the collection of
7

garbage fees:

SECTION 1. The City Government of Quezon City in conformity with and in relation to Republic Act No. 7160,
otherwise known as the Local Government Code of 1991 HEREBY IMPOSES THE FOLLOWING SCHEDULE AND
MANNER FOR THE ANNUAL COLLECTION OF GARBAGE FEES, AS FOLLOWS: On all domestic households in
Quezon City;

LAND AREA IMPOSABLE FEE

Less than 200 sq. m. PHP 100.00
201 sq. m. – 500 sq. m. PHP 200.00
501 sq. m. – 1,000 sq. m. PHP 300.00
1,001 sq. m. – 1,500 sq. m. PHP 400.00
1,501 sq. m. – 2,000 sq. m. or more PHP 500.00

On all condominium unit and socialized housing projects/units in Quezon City;

FLOOR AREA IMPOSABLE FEE

Less than 40 sq. m. PHP 25.00
41 sq. m. – 60 sq. m. PHP 50.00
61 sq. m. – 100 sq. m. PHP 75.00
101 sq. m. – 150 sq. m. PHP 100.00
151 sq. m. – 200 sq. [m.] or more PHP 200.00

On high-rise Condominium Units

a) High-rise Condominium – The Homeowners Association of high- rise condominiums shall pay the annual
garbage fee on the total size of the entire condominium and socialized Housing Unit and an additional
garbage fee shall be collected based on area occupied for every unit already so ld or being amortized.

b) High-rise apartment units – Owners of high-rise apartment units shall pay the annual garbage fee on the
total lot size of the entire apartment and an additional garbage fee based on the schedule prescribed herein
for every unit occupied.

The collection of the garbage fee shall accrue on the first day of January and shall be paid simultaneously with the
payment of the real property tax, but not later than the first quarter installment.  In case a household owner refuses
8
to pay, a penalty of 25% of the garbage fee due, plus an interest of 2% per month or a fraction thereof, shall be
charged. 9

Petitioner alleges that he is a registered co-owner of a 371-square-meter residential property in Quezon City which
is covered by Transfer Certificate of Title (TCT ) No. 216288, and that, on January 7, 2014, he paid his realty tax
which already included the garbage fee in the sum of

Php100.00. 10

The instant petition was filed on January 17, 2014. We issued a TRO on February 5, 2014, which enjoined the
enforcement of Ordinance Nos. SP-2095 and SP-2235 and required respondents to comment on the petition without
necessarily giving due course thereto. 11

Respondents filed their Comment  with urgent motion to dissolve the TRO on February 17, 2014. Thereafter,
12

petitioner filed a Reply and a Memorandum on March 3, 2014 and September 8, 2014, respectively.

Procedural Matters

A. Propriety of a Petition for Certiorari

Respondents are of the view that this petition for certiorari is improper since they are not tribunals, boards or officers
exercising judicial or quasi-judicial functions. Petitioner, however, counters that in enacting Ordinance Nos. SP-2095
and SP-2235, the Quezon City Council exercised quasi-judicial function because the ordinances ruled against the
property owners who must pay the SHT and the garbage fee, exacting from them funds for basic essential public
services that they should not be held liable. Even if a Rule 65 petition is improper, petitioner still asserts that this
Court, in a number of cases like in Rosario v. Court of Appeals,  has taken cognizance of an improper remedy in the
13

interest of justice.

We agree that respondents neither acted in any judicial or quasi-judicial capacity nor arrogated unto themselves any
judicial or quasi-judicial prerogatives.

A respondent is said to be exercising judicial function where he has the power to determine what the law is and
what the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon the
rights of the parties.

Quasi-judicial function, on the other hand, is "a term which applies to the actions, discretion, etc., of public
administrative officers or bodies … required to investigate facts or ascertain the existence of facts, hold hearings,
and draw conclusions from them as a basis for their official action and to exercise discretion of a judicial nature."

Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there be a law that
gives rise to some specific rights of person s or property under which adverse claims to such rights are made, and
the controversy en suing therefrom is brought before a tribunal, board, or officer clothed with power and authority to
determine the law and adjudicate the respective rights of the contending parties. 14

For a writ of certiorari to issue, the following requisites must concur: (1) it must be directed against a tribunal, board,
or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have acted without or in
excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no
appeal or any plain, speedy, and adequate remedy in the ordinary course of law. The enactment by the Quezon City
Council of the assailed ordinances was done in the exercise of its legislative, not judicial or quasi-judicial, function.
Under Republic Act (R.A.) No.7160, or the Local Government Code of 1991 (LGC), local legislative power shall be
exercised by the Sangguniang Panlungsod for the city. Said law likewise is specific in providing that the power to
15

impose a tax, fee, or charge , or to generate revenue shall be exercised by the sanggunian of the local government
unit concerned through an appropriate ordinance. 16

Also, although the instant petition is styled as a petition for certiorari, it essentially seeks to declare the
unconstitutionality and illegality of the questioned ordinances. It, thus, partakes of the nature of a petition for
declaratory relief, over which this Court has only appellate, not original, jurisdiction. 17
Despite these, a petition for declaratory relief may be treated as one for prohibition or mandamus, over which we
exercise original jurisdiction, in cases with far-reaching implications or one which raises transcendental issues or
questions that need to be resolved for the public good. The judicial policy is that this Court will entertain direct resort
18

to it when the redress sought cannot be obtained in the proper courts or when exceptional and compelling
circumstances warrant availment of a remedy within and calling for the exercise of Our primary jurisdiction. 19

Section 2, Rule 65 of the Rules of Court lay down under what circumstances a petition for prohibition may be filed:

SEC. 2. Petition for prohibition. - When the proceedings of any tribunal, corporation, board, officer or person,
whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or
with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain,
speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the
respondent to desist from further proceeding in the action or matter specified therein, or otherwise granting such
incidental reliefs as law and justice may require.

In a petition for prohibition against any tribunal, corporation, board, or person – whether exercising judicial, quasi-
judicial, or ministerial functions – who has acted without or in excess of jurisdiction or with grave abuse of discretion,
the petitioner prays that judgment be rendered, commanding the respondents to desist from further proceeding in
the action or matter specified in the petition. In this case, petitioner's primary intention is to prevent respondents
from implementing Ordinance Nos. SP-2095 and SP-2235. Obviously, the writ being sought is in the nature of a
prohibition, commanding desistance.

We consider that respondents City Mayor, City Treasurer, and City Assessor are performing ministerial functions. A
ministerial function is one that an officer or tribunal performs in the context of a given set of facts, in a prescribed
manner and without regard for the exercise of his or its own judgment, upon the propriety or impropriety of the act
done.  Respondent Mayor, as chief executive of the city government, exercises such powers and performs such
20

duties and functions as provided for by the LGC and other laws.  Particularly, he has the duty to ensure that all
21

taxes and other revenues of the city are collected, and that city funds are applied to the payment of expenses and
settlement of obligations of the city, in accordance with law or ordinance.  On the other hand, under the LGC, all
22

local taxes, fees, and charges shall be collected by the provincial, city, municipal, or barangay treasurer, or their
duly-authorized deputies, while the assessor shall take charge, among others, of ensuring that all laws and policies
governing the appraisal and assessment of real properties for taxation purposes are properly executed.  Anent the
23

SHT, the Department of Finance (DOF) Local Finance Circular No. 1-97, dated April 16, 1997, is more specific:

6.3 The Assessor’s office of the Identified LGU shall:

a. immediately undertake an inventory of lands within its jurisdiction which shall be subject to
the levy of the Social Housing Tax (SHT) by the local sanggunian concerned;

b. inform the affected registered owners of the effectivity of the SHT; a list of the lands and
registered owners shall also be posted in 3 conspicuous places in the city/municipality;

c. furnish the Treasurer’s office and the local sanggunian concerned of the list of lands
affected;

6.4 The Treasurer’s office shall:

a. collect the Social Housing Tax on top of the Real Property Tax, SEF Tax and other special
assessments;

b. report to the DOF, thru the Bureau of Local Government Finance, and the Mayor’s office
the monthly collections on Social Housing Tax (SHT). An annual report should likewise be
submitted to the HUDCC on the total revenues raised during the year pursuant to Sec. 43,
R.A. 7279 and the manner in which the same was disbursed.
Petitioner has adduced special and important reasons as to why direct recourse to us should be allowed. Aside from
presenting a novel question of law, this case calls for immediate resolution since the challenged ordinances
adversely affect the property interests of all paying constituents of Quezon City. As well, this petition serves as a test
case for the guidance of other local government units (LGUs).Indeed, the petition at bar is of transcendental
importance warranting a relaxation of the doctrine of hierarchy of courts. In Social Justice Society (SJS) Officers, et
al. v. Lim , the Court cited the case of Senator Jaworski v. Phil. Amusement & Gaming Corp.,  where We
24 25

ratiocinated:

Granting arguendo that the present action cannot be properly treated as a petition for prohibition, the transcendental
importance of the issues involved in this case warrants that we set aside the technical defects and take primary
jurisdiction over the petition at bar . x x x This is in accordance with the well entrenched principle that rules of
procedure are not inflexible tools designed to hinder or delay, but to facilitate and promote the administration of
justice. Their strict and rigid application, which would result in technicalities that tend to frustrate, rather than
promote substantial justice, must always be eschewed. 26

B. Locus Standi of Petitioner

Respondents challenge petitioner’s legal standing to file this case on the ground that, in relation to Section 3 of
Ordinance No. SP-2095, petitioner failed to allege his ownership of a property that has an assessed value of more
than Php100,000.00 and, with respect to Ordinance No. SP-2335, by what standing or personality he filed the case
to nullify the same. According to respondents, the petition is not a class suit, and that, for not having specifically
alleged that petitioner filed the case as a taxpayer, it could only be surmised whether he is a party-in-interest who
stands to be directly benefited or injured by the judgment in this case.

It is a general rule that every action must be prosecuted or defended in the name of the real party-in-interest, who
stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.

Jurisprudence defines interest as "material interest, an interest in issue and to be affected by the decree, as
distinguished from mere interest in the question involved, or a mere incidental interest. By real interest is meant a
present substantial interest, as distinguished from a mere expectancy or a future, contingent, subordinate, or
consequential interest." "To qualify a person to be a real party-in-interest in whose name an action must be
prosecuted, he must appear to be the present real owner of the right sought to be enforced." 27

"Legal standing" or locus standi calls for more than just a generalized grievance.  The concept has been define d as
28

a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a
result of the government al act that is being challenged.  The gist of the question of standing is whether a party
29

alleges such personal stake in the outcome of the controversy as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional
questions.30

A party challenging the constitutionality of a law, act, or statute must show "not only that the law is invalid, but also
that he has sustained or is in immediate, or imminent danger of sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby in some indefinite way." It must be shown that he has been, or
is about to be, denied some right or privilege to which he is lawfully entitled, or that he is about to be subjected to
some burdens or penalties by reason of the statute complained of. 31

Tested by the foregoing, petitioner in this case clearly has legal standing to file the petition. He is a real party-in-
interest to assail the constitutionality and legality of Ordinance Nos. SP-2095 and SP-2235 because respondents
did not dispute that he is a registered co-owner of a residential property in Quezon City an d that he paid property
tax which already included the SHT and the garbage fee. He has substantial right to seek a refund of the payments
he made and to stop future imposition. While he is a lone petitioner, his cause of action to declare the validity of the
subject ordinances is substantial and of paramount interest to similarly situated property owners in Quezon City.

C. Litis Pendentia

Respondents move for the dismissal of this petition on the ground of litis pendentia. They claim that, as early as
February 22, 2012, a case entitled Alliance of Quezon City Homeowners, Inc., et al., v. Hon. Herbert Bautista, et al. ,
docketed as Civil Case No. Q-12- 7-820, has been pending in the Quezon City Regional Trial Court, Branch 104,
which assails the legality of Ordinance No. SP-2095. Relying on City of Makati, et al. v. Municipality (now City) of
Taguig, et al.,  respondents assert that there is substantial identity of parties between the two cases because
32

petitioner herein and plaintiffs in the civil case filed their respective cases as taxpayers of Quezon City.

For petitioner, however, respondents’ contention is untenable since he is not a party in Alliance and does not even
have the remotest identity or association with the plaintiffs in said civil case. Moreover, respondents’ arguments
would deprive this Court of its jurisdiction to determine the constitutionality of laws under Section 5, Article VIII of the
1987 Constitution. 33

Litis pendentia is a Latin term which literally means "a pending suit" and is variously referred to in some decisions as
lis pendens and auter action pendant.  While it is normally connected with the control which the court has on a
34

property involved in a suit during the continuance proceedings, it is more interposed as a ground for the dismissal of
a civil action pending in court.  In Film Development Council of the Philippines v. SM Prime Holdings, Inc.,36 We
35

elucidated:

Litis pendentia, as a ground for the dismissal of a civil action, refers to a situation where two actions are pending
between the same parties for the same cause of action, so that one of them becomes unnecessary and vexatious. It
is based on the policy against multiplicity of suit and authorizes a court to dismiss a case motu proprio.

xxxx

The requisites in order that an action may be dismissed on the ground of litis pendentia are: (a) the identity of
parties, or at least such as representing the same interest in both actions; (b) the identity of rights asserted and relief
prayed for, the relief being founded on the same facts, and (c) the identity of the two cases such that judgment in
one, regardless of which party is successful, would amount to res judicata in the other.

The underlying principle of litis pendentia is the theory that a party is not allowed to vex another more than once
regarding the same subject matter and for the same cause of action. This theory is founded on the public policy that
the same subject matter should not be the subject of controversy in courts more than once, in order that possible
conflicting judgments may be avoided for the sake of the stability of the rights and status of persons, and also to
avoid the costs and expenses incident to numerous suits.

Among the several tests resorted to in ascertaining whether two suits relate to a single or common cause of action
are: (1) whether the same evidence would support and sustain both the first and second causes of action; and (2)
whether the defenses in one case may be used to substantiate the complaint in the other.

The determination of whether there is an identity of causes of action for purposes of litis pendentia is inextricably
linked with that of res judicata , each constituting an element of the other. In either case, both relate to the sound
practice of including, in a single litigation, the disposition of all issues relating to a cause of action that is before a
court.37

There is substantial identity of the parties when there is a community of interest between a party in the first case and
a party in the second case albeit the latter was not impleaded in the first case.  Moreover, the fact that the positions
38

of the parties are reversed, i.e., the plaintiffs in the first case are the defendants in the second case or vice-versa,
does not negate the identity of parties for purposes of determining whether the case is dismissible on the ground of
litis pendentia . 39

In this case, it is notable that respondents failed to attach any pleading connected with the alleged civil case
pending before the Quezon City trial court.  Granting that there is substantial identity of parties between said case
1âwphi1

and this petition, dismissal on the ground of litis pendentia still cannot be had in view of the absence of the second
and third requisites. There is no way for us to determine whether both cases are based on the same set of facts that
require the presentation of the same evidence. Even if founded on the same set of facts, the rights asserted and
reliefs prayed for could be different. Moreover, there is no basis to rule that the two cases are intimately related
and/or intertwined with one another such that the judgment that may be rendered in one, regardless of which party
would be successful, would amount to res judicata in the other.
D. Failure to Exhaust Administrative Remedies

Respondents contend that petitioner failed to exhaust administrative remedies for his non-compliance with Section
187 of the LGC, which mandates:

Section 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory Public
Hearings. – The procedure for approval of local tax ordinances and revenue measures shall be in accordance with
the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the
enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of
Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however,
That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and
payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the
decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved
party may file appropriate proceedings with a court of competent jurisdiction.

The provision, the constitutionality of which was sustained in Drilon v. Lim ,  has been construed as
40

mandatory  considering that –

41

A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax is the most effective
instrument to raise needed revenues to finance and support the myriad activities of local government units for the
delivery of basic services essential to the promotion of the general welfare and enhancement of peace, progress,
and prosperity of the people. Consequently, any delay in implementing tax measures would be to the detriment of
the public. It is for this reason that protests over tax ordinances are required to be done within certain time frames. x
x x.
42

The obligatory nature of Section 187 was underscored in Hagonoy Market Vendor Asso. v. Municipality of
Hagonoy: 43

x x x [T]he timeframe fixed by law fo r parties to avail of their legal remedies before competent courts is not a "mere
technicality" that can be easily brushed aside. The periods stated in Section 187 of the Local Government Code are
mandatory. x x x Being its lifeblood, collection of revenues by the government is of paramount importance. The
funds for the operation of its agencies and provision of basic services to its inhabitants are largely derived from its
revenues and collections. Thus, it is essential that the validity of revenue measures is not left uncertain for a
considerable length of time. Hence, the law provided a time limit for an aggrieved party to assail the legality of
revenue measures and tax ordinances." 44

Despite these cases, the Court, in Ongsuco, et al. v. Hon. Malones, held that there was no need for petitioners
45

therein to exhaust administrative remedies before resorting to the courts, considering that there was only a pure
question of law, the parties did not dispute any factual matter on which they had to present evidence. Likewise, in
Cagayan Electric Power and Light Co., Inc. v. City of Cagayan de Oro,  We relaxed the application of the rules in
46

view of the more substantive matters. For the same reasons, this petition is an exception to the general rule.

Substantive Issues

Petitioner asserts that the protection of real properties from informal settlers and the collection of garbage are basic
and essential duties and functions of the Quezon City Government. By imposing the SHT and the garbage fee, the
latter has shown a penchant and pattern to collect taxes to pay for public services that could be covered by its
revenues from taxes imposed on property, idle land, business, transfer, amusement, etc., as well as the Internal
Revenue Allotment (IRA ) from the National Government. For petitioner, it is noteworthy that respondents did not
raise the issue that the Quezon City Government is in dire financial state and desperately needs money to fund
housing for informal settlers and to pay for garbage collection. In fact, it has not denied that its revenue collection in
2012 is in the sum of ₱13.69 billion.

Moreover, the imposition of the SHT and the garbage fee cannot be justified by the Quezon City Government as an
exercise of its power to create sources of income under Section 5, Article X of the 1987 Constitution.  According to
47
petitioner, the constitutional provision is not a carte blanche for the LGU to tax everything under its territorial and
political jurisdiction as the provision itself admits of guidelines and limitations.

Petitioner further claims that the annual property tax is an ad valorem tax, a percentage of the assessed value of the
property, which is subject to revision every three (3) years in order to reflect an increase in the market value of the
property. The SHT and the garbage fee are actually increases in the property tax which are not based on the
assessed value of the property or its reassessment every three years; hence, in violation of Sections 232 and 233 of
the LGC. 48

For their part, respondents relied on the presumption in favor of the constitutionality of Ordinance Nos. SP-2095 and
SP-2235, invoking Victorias Milling Co., Inc. v. Municipality of Victorias, etc.,  People v. Siton, et al.,  and Hon.
49 50

Ermita v. Hon. Aldecoa-Delorino .  They argue that the burden of establishing the invalidity of an ordinance rests
51

heavily upon the party challenging its constitutionality. They insist that the questioned ordinances are proper
exercises of police power similar to Telecom. & Broadcast Attys. of the Phils., Inc. v. COMELEC52 and Social
Justice Society (SJS), et al. v. Hon. Atienza, Jr.  and that their enactment finds basis in the social justice principle
53

enshrined in Section 9,  Article II of the 1987 Constitution.

54

As to the issue of publication, respondents argue that where the law provides for its own effectivity, publication in the
Official Gazette is not necessary so long as it is not punitive in character, citing Balbuna, et al. v. Hon. Secretary of
Education, et al.  and Askay v. Cosalan .[56]] Thus, Ordinance No. SP-2095 took effect after its publication, while
55

Ordinance No. SP-2235 became effective after its approval on December 26, 2013.

Additionally, the parties articulate the following positions:

On the Socialized Housing Tax

Respondents emphasize that the SHT is pursuant to the social justice principle found in Sections 1 and 2, Article
XIII  of the 1987 Constitution and Sections 2 (a)  and 43  of R.A. No. 7279, or the "Urban Development and
57 58 59

Housing Act of 1992 ( UDHA ).

Relying on Manila Race Horse Trainers Assn., Inc. v. De La Fuente, and Victorias Milling Co., Inc. v. Municipality of
60

Victorias, etc., respondents assert that Ordinance No. SP-2095 applies equally to all real property owners without
61

discrimination. There is no way that the ordinance could violate the equal protection clause because real property
owners and informal settlers do not belong to the same class.

Ordinance No. SP-2095 is also not oppressive since the tax rate being imposed is consistent with the UDHA. While
the law authorizes LGUs to collect SHT on properties with an assessed value of more than ₱50,000.00, the
questioned ordinance only covers properties with an assessed value exceeding ₱100,000.00. As well, the ordinance
provides for a tax credit equivalent to the total amount of the special assessment paid by the property owner
beginning in the sixth (6th) year of the effectivity of the ordinance.

On the contrary, petitioner claims that the collection of the SHT is tantamount to a penalty imposed on real property
owners due to the failure of respondent Quezon City Mayor and Council to perform their duty to secure and protect
real property owners from informal settlers, thereby burdening them with the expenses to provide funds for housing.
For petitioner, the SHT cannot be viewed as a "charity" from real property owners since it is forced, not voluntary.

Also, petitioner argues that the collection of the SHT is a kind of class legislation that violates the right of property
owners to equal protection of the laws since it favors informal settlers who occupy property not their own and pay no
taxes over law-abiding real property owners w ho pay income and realty taxes.

Petitioner further contends that respondents’ characterization of the SHT as "nothing more than an advance
payment on the real property tax" has no statutory basis. Allegedly, property tax cannot be collected before it is due
because, under the LGC, chartered cities are authorized to impose property tax based on the assessed value and
the general revision of assessment that is made every three (3) years.

As to the rationale of SHT stated in Ordinance No. SP-2095, which, in turn, was based on Section 43 of the UDHA,
petitioner asserts that there is no specific provision in the 1987 Constitution stating that the ownership and
enjoyment of property bear a social function. And even if there is, it is seriously doubtful and far-fetched that the
principle means that property owners should provide funds for the housing of informal settlers and for home site
development. Social justice and police power, petitioner believes, does not mean imposing a tax on one, or that one
has to give up something, for the benefit of another. At best, the principle that property ownership and enjoyment
bear a social function is but a reiteration of the Civil Law principle that property should not be enjoyed and abused to
the injury of other properties and the community, and that the use of the property may be restricted by police power,
the exercise of which is not involved in this case.

Finally, petitioner alleges that 6 Bistekvilles will be constructed out of the SHT collected. Bistek is the monicker of
respondent City Mayor. The Bistekvilles makes it clear, therefore, that politicians will take the credit for the tax
imposed on real property owners.

On the Garbage Fee

Respondents claim that Ordinance No. S-2235, which is an exercise of police power, collects on the average from
every household a garbage fee in the meager amount of thirty-three (33) centavos per day compared with the sum
of ₱1,659.83 that the Quezon City Government annually spends for every household for garbage collection and
waste management. 62

In addition, there is no double taxation because the ordinance involves a fee. Even assuming that the garbage fee is
a tax, the same cannot be a direct duplicate tax as it is imposed on a different subject matter and is of a different
kind or character. Based on Villanueva, et al. v. City of Iloilo  and Victorias Milling Co., Inc. v. Municipality of
63

Victorias, etc.,  there is no "taxing twice" because the real property tax is imposed on ownership based on its
64

assessed value, while the garbage fee is required on the domestic household. The only reference to the property is
the determination of the applicable rate and the facility of collection.

Petitioner argues, however, that Ordinance No. S-2235 cannot be justified as an exercise of police power. The
cases of Calalang v. Williams,  Patalinghug v. Court of Appeals,  and Social Justice Society (SJS), et al. v. Hon.
65 66

Atienza, Jr.,  which were cited by respondents, are inapplicable since the assailed ordinance is a revenue measure
67

and does not regulate the disposal or other aspect of garbage.

The subject ordinance, for petitioner, is discriminatory as it collects garbage fee only from domestic households and
not from restaurants, food courts, fast food chains, and other commercial dining places that spew garbage much
more than residential property owners.

Petitioner likewise contends that the imposition of garbage fee is tantamount to double taxation because garbage
collection is a basic and essential public service that should be paid out from property tax, business tax, transfer tax,
amusement tax, community tax certificate, other taxes, and the IRA of the Quezon City Government. To bolster the
claim, he states that the revenue collection of the Quezon City Government reached Php13.69 billion in 2012. A
small portion of said amount could be spent for garbage collection and other essential services.

It is further noted that the Quezon City Government already collects garbage fee under Section 47  of R.A. No.
68

9003, or the Ecological Solid Waste Management Act of 2000, which authorizes LGUs to impose fees in amounts
sufficient to pay the costs of preparing, adopting, and implementing a solid waste management plan, and that LGUs
have access to the Solid Waste Management (SWM) Fund created under Section 46  of the same law. Also,
69

according to petitioner, it is evident that Ordinance No. S2235 is inconsistent with R.A. No. 9003 for whil e the law
encourages segregation, composting, and recycling of waste, the ordinance only emphasizes the collection and
payment of garbage fee; while the law calls for an active involvement of the barangay in the collection, segregation,
and recycling of garbage, the ordinance skips such mandate. Lastly, in challenging the ordinance, petitioner avers
that the garbage fee was collected even if the required publication of its approval had not yet elapsed. He notes that
on January 7, 2014, he paid his realty tax which already included the garbage fee.

The Court's Ruling

Respondents correctly argued that an ordinance, as in every law, is presumed valid.

An ordinance carries with it the presumption of validity. The question of reasonableness though is open to judicial
inquiry. Much should be left thus to the discretion of municipal authorities. Courts will go slow in writing off an
ordinance as unreasonable unless the amount is so excessive as to be prohibitive, arbitrary, unreasonable,
oppressive, or confiscatory. A rule which has gained acceptance is that factors relevant to such an inquiry are the
municipal conditions as a whole and the nature of the business made subject to imposition. 70

For an ordinance to be valid though, it must not only be within the corporate powers of the LGU to enact and must
be passed according to the procedure prescribed by law, it should also conform to the following requirements: (1)
not contrary to the Constitution or any statute; (2) not unfair or oppressive; (3) not partial or discriminatory; (4) not
prohibit but may regulate trade; (5) general and consistent with public policy; and (6) not unreasonable.  As
71

jurisprudence indicates, the tests are divided into the formal (i.e., whether the ordinance was enacted within the
corporate powers of the LGU and whether it was passed in accordance with the procedure prescribed by law), and
the substantive ( i.e., involving inherent merit, like the conformity of the ordinance with the limitations under the
Constitution and the statutes, as well as with the requirements of fairness and reason, and its consistency with
public policy).
72

An ordinance must pass muster under the test of constitutionality and the test of consistency with the prevailing
laws.  If not, it is void.
73 74

Ordinance should uphold the principle of the supremacy of the Constitution.  As to conformity with existing statutes,
75

Batangas CATV, Inc. v. Court of Appeals  has this to say:

76

It is a fundamental principle that municipal ordinances are inferior in status and subordinate to the laws of the state.
An ordinance in conflict with a state law of general character and statewide application is universally held to be
invalid. The principle is frequently expressed in the declaration that municipal authorities, under a general grant of
power, cannot adopt ordinances which infringe the spirit of a state law or repugnant to the general policy of the
state. In every power to pass ordinances given to a municipality, there is an implied restriction that the ordinances
shall be consistent with the general law. In the language of Justice Isagani Cruz (ret.), this Court, in Magtajas vs.
Pryce Properties Corp., Inc., ruled that:

The rationale of the requirement that the ordinances should not contravene a statute is obvious. Municipal
governments are only agents of the national government. Local councils exercise only delegated legislative powers
conferred on 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 so great 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 to the corporation themselves are concerned. They are so to phrase it, the mere tenants at will of the
legislature.

This 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 are certain notable innovations in the
Constitution, like the direct conferment on the local government units of the power to tax, 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.77

LGUs must be reminded that they merely form part of the whole; that the policy of ensuring the autonomy of local
governments was never intended by the drafters of the 1987 Constitution to create an imperium in imperio and
install an intra-sovereign political subdivision independent of a single sovereign state. 78
"[M]unicipal corporations are bodies politic and corporate, created not only as local units of local self-government,
but as governmental agencies of the state. The legislature, by establishing a municipal corporation, does not divest
the State of any of its sovereignty; absolve itself from its right and duty to administer the public affairs of the entire
state; or divest itself of any power over the inhabitants of the district which it possesses before the charter was
granted."79

LGUs are able to legislate only by virtue of a valid delegation of legislative power from the national legislature; they
are mere agents vested with what is called the power of subordinate legislation.  "Congress enacted the LGC as the
80

implementing law for the delegation to the various LGUs of the State’s great powers, namely: the police power, the
power of eminent domain, and the power of taxation. The LGC was fashioned to delineate the specific parameters
and limitations to be complied with by each LGU in the exercise of these delegated powers with the view of making
each LGU a fully functioning subdivision of the State subject to the constitutional and statutory limitations." 81

Specifically, with regard to the power of taxation, it is indubitably the most effective instrument to raise needed
revenues in financing and supporting myriad activities of the LGUs for the delivery of basic services essential to the
promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.  As this
82

Court opined in National Power Corp. v. City of Cabanatuan: 83

In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has
become a tool to realize social justice and the equitable distribution of wealth, economic progress and the protection
of local industries as well as public welfare and similar objectives. Taxation assume s even greater significance with
the ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer vested exclusively on Congress;
local legislative bodies are now given direct authority to levy taxes, fees and other charges pursuant to Article X,
Section 5 of the 1987 Constitution, viz: "Section 5. Each Local Government unit shall have the power to create its
own sources of revenue, to levy taxes, fees and charges subject to such guidelines and limitations as the Congress
may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local governments."

This paradigm shift results from the realization that genuine development can be achieved only by strengthening
local autonomy and promoting decentralization of governance. For a long time, the country’s highly centralized
government structure has bred a culture of dependence among local government leaders upon the national
leadership. It has also "dampened the spirit of initiative, innovation and imaginative resilience in matters of local
development on the part of local government leaders." The only way to shatter this culture of dependence is to give
the LGUs a wider role in the delivery of basic services, and confer them sufficient powers to generate their own
sources for the purpose. To achieve this goal, Section 3 of Article X of the 1987 Constitution mandates Congress to
enact a local government code that will, consistent with the basic policy of local autonomy , set the guidelines and
limitations to this grant of taxing powers x x x
84

Fairly recently, We also stated in Pelizloy Realty Corporation v. Province of Benguet  that:
85

The rule governing the taxing power of provinces, cities, municipalities and barangays is summarized in Icard v. City
Council of Baguio :

It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of taxation. The
charter or statute must plainly show an intent to confer that power or the municipality, cannot assume it. And the
power when granted is to be construed in strictissimi juris . Any doubt or ambiguity arising out of the term used in
granting that power must be resolved against the municipality. Inferences, implications, deductions – all these –
have no place in the interpretation of the taxing power of a municipal corporation. [Underscoring supplied]

xxxx

Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer vested exclusively on Congress;
local legislative bodies are now given direct authority to levy taxes, fees and other charges." Nevertheless, such
authority is "subject to such guidelines and limitations as the Congress may provide."

In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic Act No. 7160, otherwise
known as the Local Government Code of 1991. Book II of the LGC governs local taxation and fiscal matters. 86
Indeed, LGUs have no inherent power to tax except to the extent that such power might be delegated to them either
by the basic law or by the statute.  "Under the now prevailing Constitution , where there is neither a grant nor a
87

prohibition by statute , the tax power must be deemed to exist although Congress may provide statutory limitations
and guidelines. The basic rationale for the current rule is to safeguard the viability and self-sufficiency of local
government units by directly granting them general and broad tax powers. Nevertheless, the fundamental law did
not intend the delegation to be absolute and unconditional; the constitutional objective obviously is to ensure that,
while the local government units are being strengthened and made more autonomous , the legislature must still see
to it that (a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions; (b) each
local government unit will have its fair share of available resources; (c) the resources of the national government will
not be unduly disturbed; and (d) local taxation will be fair, uniform, and just."
88

Subject to the provisions of the LGC and consistent with the basic policy of local autonomy, every LGU is now
empowered and authorized to create its own sources of revenue and to levy taxes, fees, and charges which shall
accrue exclusively to the local government unit as well as to apply its resources and assets for productive,
developmental, or welfare purposes, in the exercise or furtherance of their governmental or proprietary powers and
functions.  The relevant provisions of the LGC which establish the parameters of the taxing power of the LGUs are
89

as follows:

SECTION 130. Fundamental Principles. – The following fundamental principles shall govern th e exercise of the
taxing and other revenue-raising powers of local government units:

(a) Taxation shall be uniform in each local government unit;

(b) Taxes, fees, charges and other impositions shall:

(1) be equitable and based as far as practicable on the taxpayer’s ability to pay;

(2) be levied and collected only for public purposes;

(3) not be unjust, excessive, oppressive, or confiscatory;

(4) not be contrary to law, public policy, national economic policy, or in restraint of trade;

(c) The collection of local taxes, fees, charges and other impositions shall in no case be left to any private
person;

(d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be
subject to the disposition by, the local government unit levying the tax, fee, charge or other imposition unless
otherwise specifically provided herein; and,

(e) Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

SECTION 133. 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 wharage 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 "Cooperative Code of the Philippines" respectively; and

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

SECTION 151. Scope of Taxing Powers. – Except as otherwise provided in this Code, the city, may levy the taxes,
fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and
charges levied and collected by highly urbanized and independent component cities shall accrue to them and
distributed in accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by
not more than fifty percent (50%) except the rates of professional and amusement taxes.

SECTION 186. Power to Levy Other Taxes, Fees or Charges. – Local government units may exercise the power to
levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the
provisions of the National Internal Revenue Code, as amended, or other applicable laws: Provided, That the taxes,
fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy:
Provided, further, That the ordinance levying such taxes, fees or charges shall not be enacted without any prior
public hearing conducted for the purpose.

On the Socialized Housing Tax

Contrary to petitioner’s submission, the 1987 Constitution explicitly espouses the view that the use of property bears
a social function and that all economic agents shall contribute to the common good.  The Court already recognized
90

this in Social Justice Society (SJS), et al. v. Hon. Atienza, Jr.:

91

Property has not only an individual function, insofar as it has to provide for the needs of the owner, but also a social
function insofar as it has to provide for the needs of the other members of society. The principle is this:
Police power proceeds from the principle that every holder of property, however absolute and unqualified may be
his title, holds it under the implied liability that his use of it shall not be injurious to the equal enjoyment of others
having an equal right to the enjoyment of their property, no r injurious to the right of the community. Rights of
property, like all other social and conventional rights, are subject to reasonable limitations in their enjoyment as shall
prevent them from being injurious, and to such reasonable restraints and regulations established by law as the
legislature, under the governing an d controlling power vested in them by the constitution, may think necessary and
expedient. 92

Police power, which flows from the recognition that salus populi est suprema lex (the welfare of the people is the
supreme law), is the plenary power vested in the legislature to make statutes and ordinances to promote the health,
morals, peace, education, good order or safety and general welfare of the people.  Property rights of individuals
93

may be subjected to restraints and burdens in order to fulfill the objectives of the government in the exercise of
police power.   In this jurisdiction, it is well-entrenched that taxation may be made the implement of the state’s police
94

power. 95

Ordinance No. SP-2095 imposes a Socialized Housing Tax equivalent to 0.5% on the assessed value of land in
excess of Php100,000.00. This special assessment is the same tax referred to in R.A. No. 7279 or the UDHA.  The 96

SHT is one of the sources of funds for urban development and housing program.  Section 43 of the law provides:
97

Sec. 43. Socialized Housing Tax . – Consistent with the constitutional principle that the ownership and enjoyment of
property bear a social function and to raise funds for the Program, all local government units are hereby authorized
to impose an additional one-half percent (0.5%) tax on the assessed value of all lands in urban areas in excess of
Fifty thousand pesos (₱50,000.00).

The rationale of the SHT is found in the preambular clauses of the subject ordinance, to wit:

WHEREAS, the imposition of additional tax is intended to provide the City Government with sufficient funds to
initiate, implement and undertake Socialized Housing Projects and other related preliminary activities;

WHEREAS, the imposition of 0.5% tax will benefit the Socialized Housing Programs and Projects of the City
Government, specifically the marginalized sector through the acquisition of properties for human settlements;

WHEREAS, the removal of the urban blight will definitely increase fair market value of properties in the city[.]

The above-quoted are consistent with the UDHA, which the LGUs are charged to implement in their respective
localities in coordination with the Housing and Urban Development Coordinating Council, the national housing
agencies, the Presidential Commission for the Urban Poor, the private sector, and other non-government
organizations.  It is the declared policy of the State to undertake a comprehensive and continuing urban
98

development and housing program that shall, among others, uplift the conditions of the underprivileged and
homeless citizens in urban areas and in resettlement areas, and provide for the rational use and development of
urban land in order to bring a bout, among others, reduction in urban dysfunctions, particularly those that adversely
affect public health, safety and ecology, and access to land and housing by the underprivileged and homeless
citizens.  Urban renewal and resettlement shall include the rehabilitation and development of blighted and slum
99

areas  and the resettlement of program beneficiaries in accordance with the provisions of the UDHA.  Under the
100 101

UDHA, socialized housing  shall be the primary strategy in providing shelter for the underprivileged and
102

homeless.  The LGU or the NHA, in cooperation with the private developers and concerned agencies, shall provide
103

socialized housing or re settlement areas with basic services and facilities such as potable water, power and
electricity, and an adequate power distribution system, sewerage facilities, and an efficient and adequate solid
waste disposal system; and access to primary roads and transportation facilities.  The provisions for health,
104

education, communications, security, recreation, relief and welfare shall also be planned and be given priority for
implementation by the LGU and concerned agencies in cooperation with the private sector and the beneficiaries
themselves. 105

Moreover, within two years from the effectivity of the UDHA, the LGUs, in coordination with the NHA, are directed to
implement the relocation and resettlement of persons living in danger areas such as esteros , railroad tracks,
garbage dumps, riverbanks, shorelines, waterways, and other public places like sidewalks, roads, parks, and
playgrounds.  In coordination with the NHA, the LG Us shall provide relocation or resettlement sites with basic
106
services and facilities and access to employment and livelihood opportunities sufficient to meet the basic needs of
the affected families.107

Clearly, the SHT charged by the Quezon City Government is a tax which is within its power to impose. Aside from
the specific authority vested by Section 43 of the UDHA, cities are allowed to exercise such other powers and
discharge such other functions and responsibilities as are necessary, appropriate, or incidental to efficient and
effective provision of the basic services and facilities which include, among others, programs and projects for low-
cost housing and other mass dwellings.  The collections made accrue to its socialized housing programs and
108

projects.

The tax is not a pure exercise of taxing power or merely to raise revenue; it is levied with a regulatory purpose. The
levy is primarily in the exercise of the police power for the general welfare of the entire city. It is greatly imbued with
public interest. Removing slum areas in Quezon City is not only beneficial to the underprivileged and homeless
constituents but advantageous to the real property owners as well. The situation will improve the value of the their
property investments, fully enjoying the same in view of an orderly, secure, and safe community, and will enhance
the quality of life of the poor, making them law-abiding constituents and better consumers of business products.

Though broad and far-reaching, police power is subordinate to constitutional limitations and is subject to the
requirement that its exercise must be reasonable and for the public good.  In the words of City of Manila v. Hon.
109

Laguio, Jr.:
110

The police power granted to local government units must always be exercised with utmost observance of the rights
of the people to due process and equal protection of the law. Such power cannot be exercised whimsically,
arbitrarily or despotically as its exercise is subject to a qualification, limitation or restriction demanded by the respect
and regard due to the prescription of the fundamental law, particularly those forming part of the Bill of Rights.
Individual rights, it bears emphasis, may be adversely affected only to the extent that may fairly be required by the
legitimate demands of public interest or public welfare. Due process requires the intrinsic validity of the law in
interfering with the rights of the person to his life, liberty and property.

xxxx

To successfully invoke the exercise of police power as the rationale for the enactment of the Ordinance, and to free
it from the imputation of constitutional infirmity, not only must it appear that the interests of the public generally, as
distinguished from those of a particular class, require an interference with private rights, but the means adopted
must be reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. It
must be evident that no other alternative for the accomplishment of the purpose less intrusive of private rights can
work. A reasonable relation must exist between the purposes of the police measure and the means employed for its
accomplishment, for even under the guise of protecting the public interest, personal rights and those pertaining to
private property will not be permitted to be arbitrarily invaded.

Lacking a concurrence of these two requisites, the police measure shall be struck down as an arbitrary intrusion into
private rights – a violation of the due process clause. 111

As with the State, LGUs may be considered as having properly exercised their police power only if there is a lawful
subject and a lawful method or, to be precise, if the following requisites are met: (1) the interests of the public
generally, as distinguished from those of a particular class, require its exercise and (2) the mean s employed are
reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. 112

In this case, petitioner argues that the SHT is a penalty imposed on real property owners because it burdens them
with expenses to provide funds for the housing of informal settlers, and that it is a class legislation since it favors the
latter who occupy properties which is not their own and pay no taxes.

We disagree.

Equal protection requires that all persons or things similarly situated should be treated alike, both as to rights
conferred and responsibilities imposed.  The guarantee means that no person or class of persons shall be denied
113

the same protection of laws which is enjoyed by other persons or other classes in like circumstances.  Similar
114
subjects should not be treated differently so as to give undue favor to some and unjustly discriminate against
others.  The law may, therefore, treat and regulate one class differently from another class provided there are real
115

and substantial differences to distinguish one class from another. 116

An ordinance based on reasonable classification does not violate the constitutional guaranty of the equal protection
of the law. The requirements for a valid and reasonable classification are: (1) it must rest on substantial distinctions;
(2) it must be germane to the purpose of the law; (3) it must not be limited to existing conditions only; and (4) it must
apply equally to all members of the same class. For the purpose of undertaking a comprehensive and continuing
117

urban development and housing program, the disparities between a real property owner and an informal settler as
two distinct classes are too obvious and need not be discussed at length. The differentiation conforms to the
practical dictates of justice and equity and is not discriminatory within the meaning of the Constitution. Notably, the
public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to
favor one over another.  It is inherent in the power to tax that a State is free to select the subjects of
118

taxation.  Inequities which result from a singling out of one particular class for taxation or exemption infringe no
119

constitutional limitation. 120

Further, the reasonableness of Ordinance No. SP-2095 cannot be disputed. It is not confiscatory or oppressive
since the tax being imposed therein is below what the UDHA actually allows. As pointed out by respondents, while
the law authorizes LGUs to collect SHT on lands with an assessed value of more than ₱50,000.00, the questioned
ordinance only covers lands with an assessed value exceeding ₱100,000.00. Even better, on certain conditions, the
ordinance grants a tax credit equivalent to the total amount of the special assessment paid beginning in the sixth
(6th) year of its effectivity. Far from being obnoxious, the provisions of the subject ordinance are fair and just.

On the Garbage Fee

In the United States of America, it has been held that the authority of a municipality to regulate garbage falls within
its police power to protect public health, safety, and welfare.  As opined, the purposes and policy underpinnings of
121

the police power to regulate the collection and disposal of solid waste are: (1) to preserve and protect the public
health and welfare as well as the environment by minimizing or eliminating a source of disease and preventing and
abating nuisances; and (2) to defray costs and ensure financial stability of the system for the benefit of the entire
community, with the sum of all charges marshalled and designed to pay for the expense of a systemic refuse
disposal scheme. 122

Ordinances regulating waste removal carry a strong presumption of

validity.  Not surprisingly, the overwhelming majority of U.S. cases addressing a city's authority to impose
123

mandatory garbage service and fees have upheld the ordinances against constitutional and statutory challenges. 124

A municipality has an affirmative duty to supervise and control the collection of garbage within its corporate
limits.  The LGC specifically assigns the responsibility of regulation and oversight of solid waste to local governing
125

bodies because the Legislature determined that such bodies were in the best position to develop efficient waste
management programs.  To impose on local governments the responsibility to regulate solid waste but not grant
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them the authority necessary to fulfill the same would lead to an absurd result."  As held in one U.S. case:
127

x x x When a municipality has general authority to regulate a particular subject matter, the manner and means of
exercising those powers, where not specifically prescribed by the legislature, are left to the discretion of the
municipal authorities. x x x Leaving the manner of exercising municipal powers to the discretion of municipal
authorities "implies a range of reasonableness within which a municipality's exercise of discretion will not be
interfered with or upset by the judiciary."
128

In this jurisdiction, pursuant to Section 16 of the LGC and in the proper exercise of its corporate powers under
Section 22 of the same, the Sangguniang Panlungsod of Quezon City, like other local legislative bodies, is
empowered to enact ordinances, approve resolutions, and appropriate funds for the genera l welfare of the city and
its inhabitants. Section 16 of the LGC provides:
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SECTION 16. General Welfare . – Every local government unit shall 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. Within their respective territorial
jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment
of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and
support the development of appropriate and self-reliant scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain
peace and order, and preserve the comfort and convenience of their inhabitants.

The general welfare clause is the delegation in statutory form of the police power of the State to LGUs.  The
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provisions related thereto are liberally interpreted to give more powers to LGUs in accelerating economic
development and upgrading the quality of life for the people in the community.  Wide discretion is vested on the
131

legislative authority to determine not only what the interests of the public require but also what measures are
necessary for the protection of such interests since the Sanggunian is in the best position to determine the needs of
its constituents.
132

One of the operative principles of decentralization is that, subject to the provisions of the LGC and national policies,
the LGUs shall share with the national government the responsibility in the management and maintenance of
ecological balance within their territorial jurisdiction.  In this regard, cities are allowed to exercise such other powers
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and discharge such other functions and responsibilities as are necessary, appropriate, or incidental to efficient and
effective provision of the basic services and facilities which include, among others, solid waste disposal system or
environmental management system and services or facilities related to general hygiene and sanitation.  R.A. No.
134

9003, or the Ecological Solid Waste Management Act of 2000,  affirms this authority as it expresses that the LGUs
135

shall be primarily responsible for the implementation and enforcement of its provisions within their respective
jurisdictions while establishing a cooperative effort among the national government, other local government units,
non-government organizations, and the private sector. 136

Necessarily, LGUs are statutorily sanctioned to impose and collect such reasonable fees and charges for services
rendered.  "Charges" refer to pecuniary liability, as rents or fees against persons or property, while "Fee" means a
137

charge fixed by law or ordinance for the regulation or inspection of a business or activity. 138

The fee imposed for garbage collections under Ordinance No. SP-2235 is a charge fixed for the regulation of an
activity. The basis for this could be discerned from the foreword of said Ordinance, to wit:

WHEREAS, Quezon City being the largest and premiere city in the Philippines in terms of population and urban
geographical areas, apart from being competent and efficient in the delivery of public service, apparently requires a
big budgetary allocation in order to address the problems relative and connected to the prompt and efficient delivery
of basic services such as the effective system of waste management, public information programs on proper garb
age and proper waste disposal, including the imposition of waste regulatory measures;

WHEREAS, to help augment the funds to be spent for the city’s waste management system, the City Government
through the Sangguniang Panlungsod deems it necessary to impose a schedule of reasonable fees or charges for
the garbage collection services for residential (domestic household) that it renders to the public.

Certainly, as opposed to petitioner’s opinion, the garbage fee is not a tax. In Smart Communications, Inc. v.
Municipality of Malvar, Batangas , the Court had the occasion to distinguish these two concepts:
139

In Progressive Development Corporation v. Quezon City, the Court declared that "if the generating of revenue is the
primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose,
the fact that incidentally revenue is also obtained does not make the imposition a tax."

In Victorias Milling Co., Inc. v. Municipality of Victorias, the Court reiterated that the purpose and effect of the
imposition determine whether it is a tax or a fee, and that the lack of any standards for such imposition gives the
presumption that the same is a tax.

We accordingly say that the designation given by the municipal authorities does not decide whether the imposition is
properly a license tax or a license fee.  The determining factors are the purpose and effect of the imposition as may
1awp++i1

be apparent from the provisions of the ordinance. Thus, "[w]hen no police inspection, supervision, or regulation is
provided, nor any standard set for the applicant to establish, or that he agrees to attain or maintain, but any and all
persons engaged in the business designated, without qualification or hindrance, may come, and a license on
payment of the stipulated sum will issue, to do business, subject to no prescribed rule of conduct and under no
guardian eye, but according to the unrestrained judgment or fancy of the applicant and licensee, the presumption is
strong that the power of taxation, and not the police power, is being exercised."

In Georgia, U.S.A., assessments for garbage collection services have been consistently treated as a fee and not a
tax.
140

In another U.S. case,  the garbage fee was considered as a "service charge" rather than a tax as it was actually a
141

fee for a service given by the city which had previously been provided at no cost to its citizens.

Hence, not being a tax, the contention that the garbage fee under Ordinance No. SP-2235 violates the rule on
double taxation  must necessarily fail.
142

Nonetheless, although a special charge, tax, or assessment may be imposed by a municipal corporation, it must be
reasonably commensurate to the cost of providing the garbage service.  To pass judicial scrutiny, a regulatory fee
143

must not produce revenue in excess of the cost of the regulation because such fee will be construed as an illegal
tax when the revenue generated by the regulation exceeds the cost of the regulation. 144

Petitioner argues that the Quezon City Government already collects garbage fee under Section 47 of R.A. No. 9003,
which authorizes LGUs to impose fees in amounts sufficient to pay the costs of preparing, adopting, and
implementing a solid waste management plan, and that it has access to the SWM Fund under Section 46 of the
same law. Moreover, Ordinance No. S-2235 is inconsistent with R.A. No. 9003, because the ordinance emphasizes
the collection and payment of garbage fee with no concern for segregation, composting and recycling of wastes. It
also skips the mandate of the law calling for the active involvement of the barangay in the collection, segregation,
and recycling of garbage.

We now turn to the pertinent provisions of R.A. No. 9003.

Under R.A. No. 9003, it is the declared policy of the State to adopt a systematic, comprehensive and ecological solid
waste management program which shall, among others, ensure the proper segregation, collection, transport,
storage, treatment and disposal of solid waste through the formulation and adoption of the best environmental
practices in ecological waste management.  The law provides that segregation and collection of solid waste shall
145

be conducted at the barangay level, specifically for biodegradable, compostable and reusable wastes, while the
collection of non-recyclable materials and special wastes shall be the responsibility of the municipality or
city.  Mandatory segregation of solid wastes shall primarily be conducted at the source, to include household,
146

institutional, industrial, commercial and agricultural sources.  Segregation at source refers to a solid waste
147

management practice of separating, at the point of origin, different materials found in soli d waste in order to
promote recycling and re-use of resources and to reduce the volume of waste for collection and disposal.  Based
148

on Rule XVII of the Department of Environment and Natural Resources (DENR) Administrative Order No. 2001-34,
Series of 2001,  which is the Implementing Rules and Regulations ( IRR ) of R.A. No. 9003, barangays shall be
149

responsible for the collection, segregation, and recycling of biodegradable, recyclable , compostable and reusable
wastes. 150

For the purpose, a Materials Recovery Facility (MRF), which shall receive biodegradable wastes for composting and
mixed non-biodegradable wastes for final segregation, re-use and recycling, is to be established in every barangay
or cluster of barangays. 151

According to R.A. 9003, an LGU, through its local solid waste management board, is mandated by law to prepare a
10-year solid waste management plan consistent with the National Solid Waste Management Framework.  The 152

plan shall be for the re-use, recycling and composting of wastes generated in its jurisdiction; ensure the efficient
management of solid waste generated within its jurisdiction; and place primary emphasis on implementation of all
feasible re-use, recycling, and composting programs while identifying the amount of landfill and transformation
capacity that will be needed for solid waste which cannot be re-used, recycled, or composted.  One of the
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components of the so lid waste management plan is source reduction:

(e) Source reduction – The source reduction component shall include a program and implementation schedule
which shows the methods by which the LGU will, in combination with the recycling and composting components,
reduce a sufficient amount of solid waste disposed of in accordance with the diversion requirements of Section 20.

The source reduction component shall describe the following:

(1) strategies in reducing the volume of solid waste generated at source;

(2) measures for implementing such strategies and the resources necessary to carry out such activities;

(3) other appropriate waste reduction technologies that may also be considered, provide d that such
technologies conform with the standards set pursuant to this Act;

(4) the types of wastes to be reduced pursuant to Section 15 of this Act;

(5) the methods that the LGU will use to determine the categories of solid wastes to be diverted from
disposal at a disposal facility through re-use , recycling and composting; and

(6) new facilities and of expansion of existing facilities which will be needed to implement re-use, recycling
and composting.

The LGU source reduction component shall include the evaluation and identification of rate structures and fees for
the purpose of reducing the amount of waste generated, and other source reduction strategies, including but not
limited to, program s and economic incentives provided under Sec. 45 of this Act to reduce the use of non-
recyclable materials, replace disposable materials and products with reusable materials and products, reduce
packaging, and increase the efficiency of the use of paper, cardboard, glass, metal, and other materials. The waste
reduction activities of the community shall al so take into account, among others, local capability, economic viability,
technical requirements, social concerns, disposition of residual waste and environmental impact: Provided , That,
projection of future facilities needed and estimated cost shall be incorporated in the plan. x x x
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The solid waste management pl an shall also include an implementation schedule for solid waste diversion:

SEC. 20. Establishing Mandatory Solid Waste Diversion. – Each LGU plan shall include an implementation schedule
which shows that within five (5) years after the effectivity of this Act, the LGU shall divert at least 25% of all solid
waste from waste disposal facilities through re-use, recycling, and composting activities and other resource recovery
activities: Provided , That the waste diversion goals shall be increased every three (3) years thereafter: Provided ,
further, That nothing in this Section prohibits a local government unit from implementing re-use, recycling, and
composting activities designed to exceed the goal.

The baseline for the twenty-five percent (25%) shall be derived from the waste characterization result  that each
155

LGU is mandated to undertake. In accordance with Section 46 of R.A. No. 9003, the LGUs are entitled to avail of
156

the SWM Fund on the basis of their approved solid waste management plan. Aside from this, they may also impose
SWM Fees under Section 47 of the law, which states:

SEC. 47. Authority to Collect Solid Waste Management Fees – The local government unit shall impose fees in
amounts sufficient to pay the costs of preparing, adopting, and implementing a solid waste management plan
prepared pursuant to this Act. The fees shall be based on the following minimum factors:

(a) types of solid waste;

(b) amount/volume of waste; and

(c) distance of the transfer station to the waste management facility.

The fees shall be used to pay the actual costs incurred by the LGU in collecting the local fees. In determining the
amounts of the fees, an LGU shall include only those costs directly related to the adoption and implementation of
the plan and the setting and collection of the local fees.

Rule XVII of the IRR of R.A. No. 9003 sets forth the details:

Section 1. Power to Collect Solid Waste Management Fees . – The Local SWM Board/Local SWM Cluster Board
shall impose fees on the SWM services provided for by the LGU and/or any authorized organization or unit. In
determining the amounts of the fees, a Local SWM Board/Local SWM Cluster Board shall include only those costs
directly related to the adoption and implementation of the SWM Plan and the setting and collection of the local fees.
This power to impose fees may be ceded to the private sector and civil society groups which have been duly
accredited by the Local SWM Boar d/Local SWM Cluster Board; provided, the SWM fees shall be covered by a
Contract or Memorandum of Agreement between the respective boa rd and the private sector or civil society group.

The fees shall pay for the costs of preparing, adopting and implementing a SWM Plan prepared pursuant to the Act.
Further, the fees shall also be used to pay the actual costs incurred in collecting the local fees and for project
sustainability.

Section 2. Basis of SWM Service Fees

Reasonable SWM service fees shall be computed based on but not limited to the following minimum factors:

a) Types of solid waste to include special waste

b) amount/volume of waste

c) distance of the transfer station to the waste management facility

d) capacity or type of LGU constituency

e) cost of construction

f) cost of management

g) type of technology

Section 3. Collection of Fees. – Fees may be collected corresponding to the following levels:

a) Barangay – The Barangay may impose fees for collection and segregation of biodegradable, compostable
and reusable wastes from households, commerce, other sources of domestic wastes, and for the use of
Barangay MRFs. The computation of the fees shall be established by the respective SWM boards. The
manner of collection of the fees shall be dependent on the style of administration of respective Barangay
Councils. However, all transactions shall follow the Commission on Audit rules on collection of fees.

b) Municipality – The municipal and city councils may impose fees on the barangay MRFs for the collection
and transport of non-recyclable and special wastes and for the disposal of these into the sanitary landfill.
The level and procedure for exacting fees shall be defined by the Local SWM Board/Local SWM Cluster
Board and supported by LGU ordinances; however, payments shall be consistent with the accounting
system of government.

c) Private Sector/Civil Society Group – On the basis of the stipulations of contract or Memorandum of
Agreement, the private sector or civil society group shall impose fees for collection, transport and tipping in
their SLFs. Receipts and invoices shall be issued to the paying public or to the government.

From the afore-quoted provisions, it is clear that the authority of a municipality or city to impose fees is limited to the
collection and transport of non-recyclable and special wastes and for the disposal of these into the sanitary landfill.
Barangays, on the other hand, have the authority to impose fees for the collection and segregation of
biodegradable, compostable and reusable wastes from households, commerce, other sources of domestic wastes,
and for the use of barangay MRFs. This is but consistent with

Section 10 of R.A. No. 9003 directing that segregation and collection of biodegradable, compostable and reusable
wastes shall be conducted at the barangay level, while the collection of non-recyclable materials and special wastes
shall be the responsibility of the municipality or city.

In this case, the alleged bases of Ordinance No. S-2235 in imposing the garbage fee is the volume of waste
currently generated by each person in Quezon City, which purportedly stands at 0.66 kilogram per day, and the
increasing trend of waste generation for the past three years.  Respondents
157

did not elaborate any further. The figure presented does not reflect the specific types of wastes generated – whether
residential, market, commercial, industrial, construction/demolition, street waste, agricultural, agro-industrial,
institutional, etc. It is reasonable, therefore, for the Court to presume that such amount pertains to the totality of
wastes, without any distinction, generated by Quezon City constituents. To reiterate, however, the authority of a
municipality or city to impose fees extends only to those related to the collection and transport of non-recyclable and
special wastes.

Granting, for the sake of argument, that the 0.66 kilogram of solid waste per day refers only to non-recyclable and
special wastes, still, We cannot sustain the validity of Ordinance No. S-2235. It violates the equal protection clause
of the Constitution and the provisions of the LGC that an ordinance must be equitable and based as far as
practicable on the taxpayer’s ability to pay, and not unjust, excessive, oppressive, confiscatory.
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In the subject ordinance, the rates of the imposable fee depend on land or floor area and whether the payee is an
occupant of a lot, condominium, social housing project or apartment. For easy reference, the relevant provision is
again quoted below:

On all domestic households in Quezon City;

LAND AREA IMPOSABLE FEE

Less than 200 sq. m. PHP 100.00
201 sq. m. – 500 sq. m. PHP 200.00
501 sq. m. – 1,000 sq. m. PHP 300.00
1,001 sq. m. – 1,500 sq. m. PHP 400.00
1,501 sq. m. – 2,000 sq. m. or more PHP 500.00

On all condominium unit and socialized housing projects/units in Quezon City;

FLOOR AREA IMPOSABLE FEE

Less than 40 sq. m. PHP 25.00
41 sq. m. – 60 sq. m. PHP 50.00
61 sq. m. – 100 sq. m. PHP 75.00
101 sq. m. – 150 sq. m. PH₱100.00
151 sq. m. – 200 sq. [m.] or more PHP 200.00

On high-rise Condominium Units

 a) High-rise Condominium – The Homeowners Association of high rise condominiums shall pay the annual
garbage fee on the total size of the entire condominium and socialized Housing Unit and an additional
garbage fee shall be collected based on area occupied for every unit already so ld or being amortized.

b) High-rise apartment units – Owners of high-rise apartment units shall pay the annual garbage fee on the
total lot size of the entire apartment and an additional garbage fee based on the schedule prescribed herein
for every unit occupied.

For the purpose of garbage collection, there is, in fact, no substantial distinction between an occupant of a lot, on
one hand, and an occupant of a unit in a condominium, socialized housing project or apartment, on the other hand.
Most likely, garbage output produced by these types of occupants is uniform and does not vary to a large degree;
thus, a similar schedule of fee is both just and equitable.
159

The rates being charged by the ordinance are unjust and inequitable: a resident of a 200 sq. m. unit in a
condominium or socialized housing project has to pay twice the amount than a resident of a lot similar in size; unlike
unit occupants, all occupants of a lot with an area of 200 sq. m. and less have to pay a fixed rate of Php100.00; and
the same amount of garbage fee is imposed regardless of whether the resident is from a condominium or from a
socialized housing project.

Indeed, the classifications under Ordinance No. S-2235 are not germane to its declared purpose of "promoting
shared responsibility with the residents to attack their common mindless attitude in over-consuming the present
resources and in generating waste."  Instead of simplistically categorizing the payee into land or floor occupant of a
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lot or unit of a condominium, socialized housing project or apartment, respondent City Council should have
considered factors that could truly measure the amount of wastes generated and the appropriate fee for its
collection. Factors include, among others, household age and size, accessibility to waste collection, population
density of the barangay or district, capacity to pay, and actual occupancy of the property. R.A. No. 9003 may also be
looked into for guidance. Under said law, WM service fees may be computed based on minimum factors such as
type s of solid waste to include special waste, amount/volume of waste, distance of the transfer station to the waste
management facility, capacity or type of LGU constituency, cost of construction, cost of management, and type of
technology. With respect to utility rates set by municipalities, a municipality has the right to classify consumers under
reasonable classifications based upon factors such as the cost of service, the purpose for which the service or the
product is received, the quantity or the amount received, the different character of the service furnished, the time of
its use or any other matter which presents a substantial difference as a ground of distinction. [A] lack of uniformity
161

in the rate charged is not necessarily unlawful discrimination. The establishment of classifications and the charging
of different rates for the several classes is not unreasonable and does not violate the requirements of equality and
uniformity. Discrimination to be unlawful must draw an unfair line or strike an unfair balance between those in like
circumstances having equal rights and privileges. Discrimination with respect to rates charged does not vitiate
unless it is arbitrary and without a reasonable fact basis or justification.
162

On top of an unreasonable classification, the penalty clause of Ordinance No. SP-2235, which states:

SECTION 3. Penalty Clause – A penalty of 25% of the garbage fee due plus an interest of 2% per month or a
fraction thereof (interest) shall be charged against a household owner who refuses to pay the garbage fee herein
imposed. lacks the limitation required by Section 168 of the LGC, which provides:

SECTION 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. – The sanggunian may impose a
surcharge not exceeding twenty-five (25%) of the amount of taxes, fees or charges not paid on time and an interest
at the rate not exceeding two percent (2%) per month of the unpaid taxes, fees or charges including surcharges,
until such amount is fully paid but in no case shall the total interest on the unpaid amount or portion thereof exceed
thirty-six (36) months. (Emphasis supplied)

Finally, on the issue of publication of the two challenged ordinances.

Petitioner argues that the garbage fee was collected even if the required publication of its approval had not yet
elapsed. He notes that he paid his realty tax on January 7, 2014 which already included the garbage fee.
Respondents counter that if the law provides for its own effectivity, publication in the Official Gazette is not
necessary so long as it is not penal in nature. Allegedly, Ordinance No. SP-2095 took effect after its publication
while Ordinance No. SP-2235 became effective after its approval on December 26, 2013.
The pertinent provisions of the LGC state:

SECTION 59. Effectivity of Ordinances or Resolutions. – (a) Unless otherwise stated in the ordinance or the
resolution approving the local development plan and public investment program, the same shall take effect after ten
(10) days from the date a copy thereof is posted in a bulletin board at the entrance of the provincial capital or city,
municipal, or barangay hall, as the case may be, and in at least two (2) other conspicuous places in the local
government unit concerned.

(b) The secretary to the sanggunian concerned shall cause the posting of an ordinance or resolution in the
bulletin board at the entrance of the provincial capital and the city, municipal, or barangay hall in at least two

(2) conspicuous places in the local government unit concerned not later than five (5) days after approval
thereof.

The text of the ordinance or resolution shall be disseminated and posted in Filipino or English and in the
language or dialect understood by the majority of the people in the local government unit concerned, and the
secretary to the sanggunian shall record such fact in a book kept for the purpose, stating the dates of
approval and posting.

(c) The gist of all ordinances with penal sanctions shall be published in a newspaper of general circulation
within the province where the local legislative body concerned belongs. In the absence of any newspaper of
general circulation within the province, posting of such ordinances shall be made in all municipalities and
cities of the province where the sanggunian of origin is situated.

(d) In the case of highly urbanized and independent component cities, the main features of the ordinance or
resolution duly enacted or adopted shall, in addition to being posted, be published once in a local newspaper
of general circulation within the city: Provided, That in the absence thereof the ordinance or resolution shall
be published in any newspaper of general circulation.

SECTION 188. Publication of Tax Ordinances and Revenue Measures. – Within ten (10) days after their approval,
certified true copies of all provincial, city, and municipal tax ordinances or revenue measures shall be published in
full for three (3) consecutive days in a newspaper of local circulation: Provided, however, That in provinces, cities
and municipalities where there are no newspapers of local circulation, the same may be posted in at least two (2)
conspicuous and publicly accessible places. (Emphasis supplied)

On October 17, 2011, respondent Quezon City Council enacted Ordinance No. SP-2095, which provides that it
would take effect after its publication in a newspaper of general circulation.  On the other hand, Ordinance No. SP-
163

2235, which was passed by the City Council on December 16, 2013, provides that it would be effective upon its
approval.164

Ten (10) days after its enactment, or on December 26, 2013, respondent City Mayor approved the same. 165

The case records are bereft of any evidence to prove petitioner’s negative allegation that respondents did not
comply with the posting and publication requirements of the law. Thus, We are constrained not to give credit to his
unsupported claim.

WHEREFORE, the petition is PARTIALLY GRANTED. The constitutionality and legality of Ordinance No. SP-2095,
S-2011, or the "Socialized Housing Tax of Quezon City," is· SUSTAINED for being consistent ·with Section·43 of
Republic Act No. ·7279. On the other hand, Ordinance No. SP-2235, S-2013, which collects an annual garbage fee
on all domestic households in Quezon City, is hereby declared as UNCONSTITUTIONAL AND ILLEGAL.
Respondents are DIRECTED to REFUND with reasonable dispatch the sums of money collected relative to its
enforcement. The temporary restraining order issued by the Court on February 5, 2014 is LIFTED with respect to
Ordinance No. SP-2095. In contrast, respondents are PERMANENTLY ENJOINED from taking any further action to
enforce Ordinance No. SP. 2235.

SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice