Province of Batangas vs. Romulo

GR 152774
May 27, 2004

In 1998, then President Estrada issued EO No. 48 establishing the “Program for Devolution Adjustment and Equalization” to enhance the capabilities of LGUs in the discharge of the functions and services devolved to them through the LGC.

The Oversight Committee under Executive Secretary Ronaldo Zamora passed Resolutions No. OCD-99-005, OCD-99-006 and OCD-99-003 which were approved by Pres. Estrada on October 6, 1999. The guidelines formulated by the Oversight Committee required the LGUs to identify the projects eligible for funding under the portion of LGSEF and submit the project proposals and other requirements to the DILG for appraisal before the Committee serves notice to the DBM for the subsequent release of the corresponding funds.

Hon. Herminaldo Mandanas, Governor of Batangas, petitioned to declare unconstitutional and void certain provisos contained in the General Appropriations Acts (GAAs) of 1999, 2000, and 2001, insofar as they uniformly earmarked for each corresponding year the amount of P5billion for the Internal Revenue Allotment (IRA) for the Local Government Service Equalization Fund (LGSEF) & imposed conditions for the release thereof.

Whether the assailed provisos in the GAAs of 1999, 2000, and 2001, and the OCD resolutions infringe the Constitution and the LGC of 1991.

The assailed provisos in the GAAs of 1999, 2000, and 2001, and the OCD resolutions constitute a “withholding” of a portion of the IRA – they effectively encroach on the fiscal autonomy enjoyed by LGUs and must be struck down.

According to Art. II, Sec.25 of the Constitution, “the State shall ensure the local autonomy of local governments“. Consistent with the principle of local autonomy, the Constitution confines the President’s power over the LGUs to one of general supervision, which has been interpreted to exclude the power of control. Drilon v. Lim distinguishes supervision from control: control lays down the rules in the doing of an act – the officer has the discretion to order his subordinate to do or redo the act, or decide to do it himself; supervision merely sees to it that the rules are followed but has no authority to set down the rules or the discretion to modify/replace them.

The entire process involving the distribution & release of the LGSEF is constitutionally impermissible. The LGSEF is part of the IRA or “just share” of the LGUs in the national taxes. Sec.6, Art.X of the Constitution mandates that the “just share” shall be automatically released to the LGUs. Since the release is automatic, the LGUs aren’t required to perform any act to receive the “just share” – it shall be released to them “without need of further action“. To subject its distribution & release to the vagaries of the implementing rules & regulations as sanctioned by the assailed provisos in the GAAs of 1999-2001 and the OCD Resolutions would violate this constitutional mandate.

The only possible exception to the mandatory automatic release of the LGUs IRA is if the national internal revenue collections for the current fiscal year is less than 40% of the collections of the 3rd preceding fiscal year. The exception does not apply in this case.

The Oversight Committee’s authority is limited to the implementation of the LGC of 1991 not to supplant or subvert the same, and neither can it exercise control over the IRA of the LGUs.

Congress may amend any of the provisions of the LGC but only through a separate law and not through appropriations laws or GAAs. Congress cannot include in a general appropriations bill matters that should be more properly enacted in a separate legislation.

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

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

Basco vs PAGCOR GR 91649 (May 14, 1991)

GR 91649
197 SCRA 52, 65
May 14, 1991

Petitioners seek to annul the PAGCOR charter – PD 1869 – for being allegedly contrary to morals, public policy and order, monopolistic & tends toward “crony economy”, waiving the Manila City government’s right to impose taxes & license fees, and violating the equal protection clause, local autonomy and other state policies in the Constitution.

Whether PD 1869 is valid.

Every law has in its favor the presumption of constitutionality. For a law to be nullified, it must be shown that there is a clear & unequivocal breach of the Constitution. The grounds for nullity must be clear and beyond reasonable doubt. The question of wether PD 1869 is a wise legislation is up for Congress to determine.

The power of LGUs to regulate gambling through the grant of franchises, licenses or permits was withdrawn by PD 771, and is now vested exclusively on the National Government. Necessarily, the power to demand/collect license fees is no longer vested in the City of Manila.

LGUs have no power to tax Government instrumentalities. PAGCOR, being a GOCC, is therefore exempt from local taxes. The National Government is supreme over local governments. As such, mere creatures of the State cannot defeat national policies using the power to tax as a “tool for regulation”. The power to tax cannot be allowed to defeat an instrumentality of the very entity which has the inherent power to wield it. The power of LGUs to impose taxes & fees is always subject to limitation provided by Congress.

The principle of local autonomy does not make LGUs sovereign within a state, it simply means decentralization.

A law doesn’t have to operate in equal force on all persons/things. The equal protection clause doesn’t preclude classification of individuals who may be accorded different treatment under the law as long as the classification is not unreasonable/arbitrary. The mere fact that some gambling activities are legalized under certain conditions, while others are prohibited, does not render the applicable laws unconstitutional.

Nagrampa vs People

G.R. No. 146211
August 6, 2002

In this petition for review on certiorari, petitioner assails his conviction for estafa in Criminal Case No. Q-90-15797 and for 2 counts of violation of Batas Pambansa Blg. 22 (Bouncing Checks Law) in Criminal Cases Nos. Q-90-15798 and Q-90-15799.

On July 28, 1989, Manuel Nagrampa purchased a Yutani Poclain Backhoe Excavator Equipment for P200,000 from FEDCOR & paid the down payment of P50,000 in cash. To cover the balance, he issued Check No. 473477 postdated August 31, 1989 and Check No. 473478 postdated September 30, 1989 in the amount of P75,000 each. The checks were drawn against the Security Bank and Trust Company. Upon the assurance of FEDCOR’s salesman that the checks were good, FEDCOR delivered the equipment to Nagrampa.

FEDCOR presented the checks for payment on February 22, 1990; however, they were dishonored on the ground that petitioner’s account had already been closed. FEDCOR demanded payment from petitioner in a letter dated March 19, 1990; but the latter failed to pay.

Hence, the above cases were filed against petitioner with the trial court. During his cross-examination, Santander denied that the equipment was returned to FEDCOR.

Felix Mirano testified that he had been a signature verifier of Security Bank for 12 years. He brought with him the signature card for petitioner’s account, the same account against which the subject checks were drawn. He identified the signatures appearing on Checks Nos. 473477 and 473478 to be those of the petitioner, and explained that petitioner’s account had been closed in May 1985.

For his part, petitioner testified that he had an agreement with Corseno Bote wherein he would replace the 2 checks with cash if the backhoe would be in good running condition. However, after 5-7 days of use, the backhoe broke down. Such fact was reported to Ronnie Bote, and the backhoe was thus repaired. After 1 day of using it, the backhoe broke down again. Petitioner again reported the matter to Ronnie Bote, who told him that the equipment should be brought to the latter’s office for repair. As evidence of the return of the equipment, petitioner presented a letter dated October 3, 1989 addressed to Electrobus Consolidated, Inc., requesting the release of the backhoe to Ronnie Bote for repair, with the latter’s alleged signature appearing at the bottom thereof. After a week, petitioner demanded from Ronnie Bote the return of the backhoe, the P50,000 cash and the 2 postdated checks, but to no avail. On cross-examination, he admitted that during the pendency of the case he paid, upon the advice of his counsel, the amount of P15,000, which he handed to FEDCOR’s counsel Atty. Orlando Paray.

On September 30, 1993, the trial court found petitioner guilty of 2 counts of violation of B.P. Blg. 22.

Petitioner appealed the decision to the CA. Upon noticing that the trial court did not resolve the issue of petitioner’s liability for estafa, the CA issued a resolution ordering the return of the entire records of the case to the trial court for the latter to decide the estafa case against petitioner.

On February 8, 1999, the trial court found petitioner guilty beyond reasonable doubt of estafa. Thus, petitioner also appealed said decision to the CA.

On July 21, 2000, the CA affirmed in toto the decision of the trial court finding petitioner guilty of estafa and violations of B.P. Blg. 22.


1. WON petitioner is guilty of violating B.P. Blg. 22.

2. If so, may the penalty be modified by retroactively applying Vaca v. CA and Lim v. People so that petitioner only need to pay a fine instead of serving imprisonment?

3. WON petitioner should be convicted for estafa.


1. Two distinct acts are punished under Sec.1 of B.P. Blg. 22:

(a)The making or drawing & issuance of any check to apply on account or for value, knowing at the time of issue that the drawer does not have sufficient funds in, or credit with, the drawee bank; and

(b)The failure to keep sufficient funds or to maintain a credit to cover the full amount of the check if presented within a period of 90 days from the date appearing thereon, for which reason it is dishonored by the drawee bank.

In the 1st situation, the drawer knows of the insufficiency of funds to cover the check at the time of its issuance. The check involved is worthless at the time of issuance, since the drawer has neither sufficient funds in, nor credit with, the drawee bank at the time.

While in the 2nd situation, the drawer has sufficient funds at the time of issuance but fails to keep sufficient funds or maintain credit within 90 days from the date appearing on the check. The check involved in the second offense is good when issued, as the drawer has sufficient funds in, or credit with, the drawee bank when issued.

In both instances, the offense is consummated by the dishonor of the check for insufficiency of funds or credit.

It is clear from the allegations in the information that petitioner is charged with the 1st type of offense under B.P. Blg. 22. Its elements are as follows:

(a) The making, drawing and issuance of any check to apply for account or for value;

(b) The knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in, or credit with, the drawee bank for the payment of such check in full upon its presentment; and

(c) The subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.

The fact that the checks were presented beyond the 90-day period provided in Sec. 2, B.P. Blg. 22 is of no moment. It was held in Wong vs CA that the 90-day period is not an element of the offense but merely a condition for the prima facie presumption of knowledge of the insufficiency of funds:

Neither does it discharge petitioner from his duty to maintain sufficient funds in the account within a reasonable time thereof. Under Sec.186 of the Negotiable Instruments Law, “a check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay.” By current banking practice, a check becomes stale after more than 6 months (180 days).

In Bautista v. Court of Appeals, it was ruled that such prima facie presumption is intended to facilitate proof of knowledge, and not to foreclose admissibility of other evidence that may also prove such knowledge; thus, the only consequence of the failure to present the check for payment within the 90-day period is that there arises no prima facie presumption of knowledge of insufficiency of funds. The prosecution may still prove such knowledge through other evidence.

In this case, FEDCOR presented the checks for encashment within the 6-month period from the date of issuance of the checks, and would not therefore have been considered stale had petitioner’s account been existing. Although the presumption of knowledge of insufficiency of funds did not arise, such knowledge was sufficiently proved by the unrebutted testimony of Mirano to the effect that petitioner’s account with the Security Bank was closed for more than 4 years prior to the issuance of the 2 checks in question.

Thus, the CA did not err in its affirmation of the trial court’s decision convicting petitioner of violations of B.P. Blg.22.

2. No.

According to Administrative Circular No. 13-2001 clarifying AC No. 12-2000; thus:

The clear tenor and intention of Administrative Circular No. 12-2000 is not to remove imprisonment as an alternative penalty, but to lay down a rule of preference in the application of the penalties provided for in B.P. Blg. 22.

The pursuit of this purpose does not foreclose the possibility of imprisonment for violators of B.P. Blg. 22.

AC No. 12-2000 establishes a rule of preference in the application of the penal provisions of B.P. Blg. 22 such that where the circumstances of both the offense and the offender clearly indicate good faith or a clear mistake of fact without taint of negligence, the imposition of a fine alone should be considered as the more appropriate penalty. Needless to say, the determination of whether the circumstances warrant the imposition of a fine alone rests solely upon the Judge. Should the Judge decide that imprisonment is the more appropriate penalty, AC No. 12-2000 ought not be deemed a hindrance.

In this case, petitioner manifested utter lack of good faith or wanton bad faith when he issued the subject postdated checks even though he had no more account with the drawee bank, having closed it more than 4 years before he drew and delivered the checks. Hence, he cannot avail himself of the benefits under AC No. 12-2000.

3. Yes.

The crime of estafa under paragraph 2(d) of Art. 315 of the RPC, as amended, has the following elements:

(a) postdating or issuance of a check in payment of an obligation contracted at the time the check was issued;

(b) lack or insufficiency of funds to cover the check; and

(c) damage to the payee thereof.

Settled is the rule that, to constitute estafa, the act of postdating or issuing a check in payment of an obligation must be the efficient cause of defraudation and it should be either prior to, or simultaneous with, the act of fraud. The offender must be able to obtain money or property from the offended party because of the issuance of the check, or the person to whom the check was delivered would not have parted with his money or property had there been no check issued to him.

The existence of the first two elements in the case at bar is not disputed.

Damage as an element of estafa may consist in (1) the offended party being deprived of his money or property as a result of the defraudation; (2) disturbance in property right; or (3) temporary prejudice.

In this case, the deprivation of the property of FEDCOR is apparent. Undoubtedly, the reason why FEDCOR delivered the backhoe to petitioner was that the latter paid the P50,000 down payment and issued 2 postdated checks in the amount of P75,000 each.

Petitioner’s claim that he returned the equipment was not duly proved; he never presented as witness the agent who allegedly received the equipment from him. Moreover, he admitted that he never wrote FEDCOR about the return of the allegedly defective backhoe to Ronnie Bote; neither did he go to FEDCOR to claim the return of the equipment or of the cash down payment and the two checks. Such admissions belie his allegation that he returned the equipment to FEDCOR. Besides, on cross-examination he admitted that during the pendency of the case, he paid Santander, through FEDCOR’s lawyer, on two separate occasions in the total amount of P15,000 upon the advice of his own lawyer that he had to pay because he was guilty.

Such payment to FEDCOR negates his claim that he returned the backhoe; it may even be tantamount to an offer of compromise. Under Sec. 27 of Rule 130 of the Rules on Evidence, an offer of compromise in criminal cases is an implied admission of guilt.

MMDA v Bel-Air Village Association, Inc.

GR 135962
March 27, 2000

On December 30, 1995, respondent received from petitioner a notice requesting the former to open its private road, Neptune Street, to public vehicular traffic starting January 2, 1996. On the same day, respondent was apprised that the perimeter separating the subdivision from Kalayaan Avenue would be demolished.
Respondent instituted a petition for injunction against petitioner, praying for the issuance of a TRO and preliminary injunction enjoining the opening of Neptune Street and prohibiting the demolition of the perimeter wall.

WON MMDA has the authority to open Neptune Street to public traffic as an agent of the state endowed with police power.

A ‘local government’ is a “political subdivision of a nation or state which is constituted by law and has substantial control of local affairs”. It is a “body politic and corporate” – one endowed with powers as a political subdivision of the National Government and as a corporate entity representing the inhabitants of its territory (LGC of 1991).

Our Congress delegated police power to the LGUs in Sec.16 of the LGC of 1991. It empowers the sangguniang panlalawigan, panlungsod and bayan to “enact ordinances, approve resolutions and appropriate funds for the general welfare of the [province, city or municipality] and its inhabitants pursuant to Sec.16 of the Code and in the proper exercise of the [LGU’s corporate powers] provided under the Code.”

There is no syllable in RA 7924 that grants the MMDA police power, let alone legislative power. Unlike the legislative bodies of the LGUs, there is no grant of authority in RA 7924 that allows the MMDA to enact ordinances and regulations for the general welfare of the inhabitants of Metro Manila. The MMDA is merely a “development authority” and not a political unit of government since it is neither an LGU or a public corporation endowed with legislative power. The MMDA Chairman is not an elective official, but is merely appointed by the President with the rank and privileges of a cabinet member.

In sum, the MMDA has no power to enact ordinances for the welfare of the community. It is the LGUs, acting through their respective legislative councils, that possess legislative power and police power.

The Sangguniang Panlungsod of Makati City did not pass any ordinance or resolution ordering the opening of Neptune Street, hence, its proposed opening by the MMDA is illegal.

Laguna Lake Development Authority vs. Court of Appeals

G.R.No. 120865-71
December 7, 1995

The Laguna Lake Development Authority (LLDA) was created through RA No. 4850 in order to execute the policy towards environmental protection and sustainable development so as to accelerate the development and balanced growth of the Laguna Lake area and the surrounding provinces and towns.
PD No. 813 amended certain sections of RA 4850 since water quality studies have shown that the lake will deteriorate further if steps are not taken to check the same.
EO 927 further defined and enlarged the functions and powers of the LLDA and enumerated the towns, cities and provinces encompassed by the term “Laguna de Bay Region”.
Upon implementation of RA 7160 (Local Government Code of 1991), the municipalities assumed exclusive jurisdiction & authority to issue fishing privileges within their municipal waters since Sec.149 thereof provides: “Municipal corporations shall have the authority to grant fishery privileges in the municipal waters and impose rental fees or charges therefore…”
Big fishpen operators took advantage of the occasion to establish fishpens & fish cages to the consternation of the LLDA.
The implementation of separate independent policies in fish cages & fish pen operation and the indiscriminate grant of fishpen permits by the lakeshore municipalities have saturated the lake with fishpens, thereby aggravating the current environmental problems and ecological stress of Laguna Lake.
The LLDA then served notice to the general public that (1) fishpens, cages & other aqua-culture structures unregistered with the LLDA as of March 31, 1993 are declared illegal; (2) those declared illegal shall be subject to demolition by the Presidential Task Force for Illegal Fishpen and Illegal Fishing; and (3) owners of those declared illegal shall be criminally charged with violation of Sec.39-A of RA 4850 as amended by PD 813.
A month later, the LLDA sent notices advising the owners of the illegally constructed fishpens, fishcages and other aqua-culture structures advising them to dismantle their respective structures otherwise demolition shall be effected.

1.Which agency of the government – the LLDA or the towns and municipalities comprising the region – should exercise jurisdiction over the Laguna lake and its environs insofar as the issuance of permits for fishery privileges is concerned?
2. Whether the LLDA is a quasi-judicial agency?

1. Sec.4(k) of the charter of the LLDA, RA 4850, the provisions of PD 813,and Sec.2 of EO No.927, specifically provide that the LLDA shall have exclusive jurisdiction to issue permits for the use of all surface water for any projects or activities in or affecting the said region. On the other hand, RA 7160 has granted to the municipalities the exclusive authority to grant fishery privileges on municipal waters. The provisions of RA 7160 do not necessarily repeal the laws creating the LLDA and granting the latter water rights authority over Laguna de Bay and the lake region.

Where there is a conflict between a general law and a special statute, latter should prevail since it evinces the legislative intent more clearly than the general statute. The special law is to be taken as an exception to the general law in the absence of special circumstances forcing a contrary conclusion. Implied repeals are not favored and, as much as possible, effect must be given to all enactments of the legislature. A special law cannot be repealed, amended or altered by a subsequent general law by mere implication.

The power of LGUs to issue fishing privileges was granted for revenue purposes. On the other hand, the power of the LLDA to grant permits for fishpens, fish cages, and other aqua-culture structures is for the purpose of effectively regulating & monitoring activities in the Laguna de Bay region and for lake control and management. It partakes of the nature of police power which is the most pervasive, least limitable and most demanding of all state powers including the power of taxation. Accordingly, the charter of the LLDA which embodies a valid exercise of police power should prevail over the LGC of 1991 on matters affecting Laguna de Bay.

2. The LLDA has express powers as a regulatory and quasi-judicial body in respect to pollution cases with authority to issue a “cease and desist order” and on matters affecting the construction of illegal fishpens, fish cages and other aqua-culture structures in Laguna de Bay.

Sec.149 of RA 7160 has not repealed the provisions of the charter of the LLDA, RA 4850, as amended. Thus, the LLDA has the exclusive jurisdiction to issue permits for enjoyment of fishery privileges in Laguna de Bay to the exclusion of municipalities situated therein and the authority to exercise such powers as are by its charter vested on it.

Andaya vs RTC

319 SCRA 696 (G.R. No. 126661)
February 13, 2004

On January 3, 1996, the position of City Director, Cebu City Police Command (chief of police) became vacant after P/Supt. Antonio Enteria was relieved of command.
Thereafter, petitioner Andaya submitted to the City Mayor of Cebu a list of 5 eligibles from which the latter would choose and appoint as the new chief of police. However, the mayor did not choose anyone from the list because P/Chief Inspector Andres Sarmiento was not included therein.
Petitioner Andaya refused the Mayor’s request to include Major Andres Sarmiento in the list of police officers for appointment since he was not qualified for the position under NAPOLCOM Memorandum Circular No. 95-04.

WON Mayor of Cebu City may require the inclusion of his protégé in the list of 5 eligibles to be recommended to him by the Regional Police Dir., Regional Police Command No.7, for his selection of the the City Director, City Police Command (chief of police)

RA 6975
Sec.51 – deputizes the Mayor of Cebu City as representative of the National Police Commission in his territorial jurisdiction
– grants the Mayor of Cebu City authority to choose the chief of police from a list of five (5) eligibles recommended by the Regional Director, Regional Police Command No. 7
The City Police Station of Cebu City is under the direct command & control of the PNP Regional Director, and is equivalent to a provincial office.

It is the prerogative of the Regional Police Director to name the 5 eligibles from a pool of eligible officers, screened by the Senior Officers Promotion and Selection Board, without interference from local executives.
The National Police Commission issued Memorandum Circular No. 95-04 to implement RA 6975.
Memorandum Circular 95-04 – provides qualifications for Chief of Police of highly urbanized cities:
(1) completion of the Officers’ Senior Executive Course (OSEC)
(2) holding the rank of Police Superintendent

In case of disagreement between the Regional Police Director and the Mayor, the question shall be elevated to the Regional Director, National Police Commission, who shall resolve the issue within 5 working days from receipt and whose decision on the choice of the Chief of Police shall be final and executory.

As deputy of the Commission, the authority of the mayor is very limited. In reality, he has no power of appointment; he has only the limited power of selecting one from among the list of 5 eligibles to be named the chief of police. The actual power to appoint the Chief of Police is vested in the Regional Director.
As such, the mayor cannot require the Regional Director to include the name of any officer, no matter how qualified, in the list of 5 to be submitted to him. This is to enhance police professionalism and to isolate the police service from political domination.

Ortigas & Co., Limited Partnership vs. Feati Bank and Trust Co. L-24670 (December 14, 1979)

G.R. No. L-24670
94 SCRA 533
December 14, 1979

Plaintiff is engaged in real estate business, developing and selling lots to the public, particularly the Highway Hills Subdivision along EDSA, Mandaluyong, Rizal.
On March 4, 1952, plaintiff entered into separate agreements of sale with Augusto Padilla y Angeles and Natividad Angeles over 2 parcels of land (Lots Nos. 5 and 6, Block 31, of the Highway Hills Subdivision). On July 19, 1962 the vendees transferred their rights and interests over the said lots to Emma Chavez. The plaintiff executed the corresponding deeds of sale in favor of Emma Chavez upon payment of the purchase price. Both the agreements and the deeds of sale thereafter executed contained the stipulation that the parcels of land subject of the deeds of sale “shall be used by the Buyer exclusively for residential purposes”. The restrictions were later annotated in the Transfer Certificates of Titles covering the said lots issued in the name of Chavez.
Eventually, defendant-appellee acquired Lots No. 5 and 6 with the building restrictions also annotated in their corresponding TCTs. Lot No.5 was bought directly from Chavez “free from all liens and encumbrances” while Lot No.6 was acquired through a “Deed of Exchange” from Republic Flour Mills.
Plaintiff claims that the restrictions were imposed as part of its general building scheme designed for the beautification and development of the Highway Hills Subdivision which forms part of its big landed estate where commercial and industrial sites are also designated or established.
Defendant maintains that the area along the western part of EDSA from Shaw Boulevard to the Pasig River, has been declared a commercial and industrial zone, per Resolution No.27 of the Municipal Council of Mandaluyong. It alleges that plaintiff “completely sold and transferred to third persons all lots in said subdivision facing EDSA” and the subject lots thereunder were acquired by it “only on June 23, 1962 or more than 2 years after the area xxx had been declared a commercial and industrial zone”.
On or about May 5, 1963, defendant-appellee began construction of a building devoted to banking purposes but which it claims could also be used exclusively for residential purposes. The following day, the plaintiff demanded in writing that the construction of the commercial building be stopped but the defendant refused to comply contending that the construction was in accordance with the zoning regulations.

1. Whether Resolution No. 27 s-1960 is a valid exercise of police power.
2. Whether the said Resolution can nullify or supersede the contractual obligations assumed by defendant-appellee.

1. Yes. The validity of Resolution No.27 was never questioned. In fact, it was impliedly admitted in the stipulation of facts, when plaintiff-appellant did not dispute the same. Having admitted the validity of the subject resolution, plaintiff-appellant cannot now change its position on appeal.
However, assuming that it is not yet too late to question the validity of the said resolution, the posture is unsustainable.
Municipalities are empowered by law through Sec.3 of RA 2264 (Local Autonomy Act) to to adopt zoning and subdivision ordinances or regulations for the municipality. The law does not restrict the exercise of the power through an ordinance. Therefore, granting that Resolution No.27 is not an ordinance, it certainly is a regulatory measure within the intendment of the word “regulation” under the provision.
An examination of Sec.12 of the same law reveals that the implied power of a municipality should be “liberally construed in its favor” and that “any fair and reasonable doubt as to the existence of the power should be interpreted in favor of the local government and it shall be presumed to exist.” An exception to the general welfare powers delegated to municipalities is when the exercise of its powers will conflict with vested rights arising from contracts. The exception does not apply to the case at bar.

2. While non-impairment of contacts is constitutionally guaranteed, the rule is not absolute since it has to be reconciled with the legitimate exercise of police power. Invariably described as the “most essential, insistent and illimitable of powers” and the “greatest and most powerful attribute of government”, the exercise of police power may be judicially inquired into and corrected only if it is capricious, whimsical, unjust or unreasonable, there having been a denial of due process or a violation of any other applicable constitutional guarantee.

Resolution No.27, S-1960 declaring the western part of EDSA from Shaw Boulevard to the Pasig River as an industrial or commercial zone was passed by the Municipal Council of Mandaluyong in the exercise of police power to safeguard/promote the health, safety, peace, good order and general welfare of the people in the locality. Judicial notice may be taken of the conditions prevailing in the area, especially where Lots Nos. 5 and 6 are located. EDSA supports an endless stream of traffic and the resulting activity, noise and pollution which are hardly conducive to the health, safety or welfare of the residents in its route. The Municipality of Mandaluyong was reasonably justified under the circumstances in passing the subject resolution.

Thus, the state, in order to promote the general welfare, may interfere with personal liberty, with property, and with business and occupations. Persons may be subjected to all kinds of restraint and burdens, in order to secure the general comfort, health and prosperity of the state, and to this fundamental aim of the Government, the rights of the individual are subordinated.

Surigao Electric Co., Inc.vs. Municipality of Surigao

No. L-22766 August 30, 1968

On June 18,1960, Congress amended the Public Service Act and introduced doing away with the requirement of a certificate of public convenience and necessity from the Public Service Commission for “public services owned or operated by government entities or government-owned and controlled corporations (GOCC),” but at the same time affecting its power of regulation which while exempting public services owned or operated by any instrumentality of the government or any GOCC from its supervision, jurisdiction and control stops short of including “the fixing of rates”.
Surigao Electric Co., and Arturo Lumanlan filed a petition for review challenging the validity of the order of respondent Public Service Commission, dated July 11, 1963, wherein it held that it had “no alternative but to approve the tentative schedule of rates submitted by the applicant”, the Municipality of Surigao.

Whether or not a municipal government can directly maintain & operate an electric plant without obtaining a specific franchise for the purpose and without a certificate of public convenience and necessity duly issued by the PSC.

The Municipality of Surigao is not a GOCC. However, it cannot be said that it is not a government entity.
As early as 1916, in Mendoza v. de Leon (33 Phil. 508), the dual character of a municipal corporation has long been recognized: (1) as Governmental, being a branch of the general administration of the State, and (2) as Quasi-Private and Corporate.

It is an undeniable fact that “legislative and government powers” are “conferred upon a municipality…to enable it to aid a state in properly governing that portion of the people residing within its municipality, such powers (being) in their nature public, xxx (1 Dilon, Commentaries on the Law of Municipal Corporations, 5th ed., p.68 [1911]).

“Governmental affairs do not lose their governmental character by being delegated to the municipal governments…to preserve the peace, protect the morals and health of the community and so on is to administer government, whether it be done by the central government itself or is shifted to a local organization.” (Mendoza v. de Leon).

A municipal corporation is a government entity and functions as an extension of the national government, and, therefore, it is an instrumentality of the latter. By express provisions of Sec.14(e) of RA 2677, an instrumentality of the national government is exempted from the jurisdiction of the PSC except with respect to the fixing of rates.

A legislative franchise cannot override the specific constitutional restriction that no franchise or right shall be granted to any individual or corporation except under a condition that it shall be subject to amendment, alteration or repeal by Congress (Art.XIV, Sec.8, Constitution). Such amendment/alteration may be implied from a latter act of general applicability.

A legislative franchise cannot be availed of to defeat the proper exercise of police power. In the American case of Charles River Bridge v. Warren Bridge (1837): “the continued existence of a government would be of no great value if…it was disarmed of the powers necessary to accomplish the ends of its creation; and the functions it was designed to perform, transferred to the hands of privileged corporations. xxx while the rights of private property are sacredly guarded…the community also have rights, and that the happiness and well-being of every citizen depends on their faithful preservation.”

Batangas Power Corporation vs. Batangas City

Batangas Power Corporation vs. Batangas City
GR 152675
April 28, 2004

In the early 1990’s, the country suffered from a crippling power crisis. The government, through the National Power Corporation (NPC), sought to attract investors in power plant operations by providing them with incentives, one of which was the NPC’s assumption of their tax payments in the Build Operate and Transfer (BOT) Agreement.
On June 29, 1993, Enron Power Development Corporation (Enron) and NPC entered into a Fast Track BOT Project. Enron agreed to supply a power station to NPC & transfer its plant to the latter after 10 years of operation. The BOT Agreement provided that NPC shall be responsible for the payment of all taxes imposed on the power station except income & permit fees. Subsequently, Enron assigned its obligation under the BOT Agreement to Batangas Power Corporation (BPC).
On September 23, 1992, the BOI issued a certificate of registration to BPC as a pioneer enterprise entitled to a tax holiday of 6 years. On October 12, 1998, Batangas City sent a letter to BPC demanding payment of business taxes & penalties. BPC refused to pay citing its tax exemption as a pioneer enterprise for 6 years under Sec.133(g) of the LGC. The city’s tax claim was modified and it demanded payment of business taxes for the years 1998-1999. BPC still refused to pay the tax, insisting that the 6-year tax holiday commenced from the date of its commercial operation on July 16, 1993, not from the date of its BOI registration in September 1992.
In the alternative, BPC asserted that the city should collect the taxes from NPC since the latter assumed responsibility for their payment under the BOT Agreement. The NPC intervened that while it admitted assumption of the BPC’s tax obligations under the BOT Agreement, it refused to pay BPC’s business tax as it allegedly constituted an indirect tax on NPC which is a tax-exempt corporation under its Charter.
BPC filed a petition for declaratory relief with the Makati RTC against Batangas City & NPC alleging that under the BOT Agreement, NPC is responsible for the payment of such taxes but since it is exempt from such, both the BPC and NPC aren’t liable for its payment.

1. Whether BPC’s 6-year tax holiday commenced on the day of its registration or on the date of its actual commercial operation as certified by the BOI.
2. Whether NPC’s tax exemption privileges under its Charter were withdrawn by Sec.193 of the LGC.

1. Sec.133(g) of the LGC applies specifically to taxes imposed by the local government. The provision of the LGC should apply on the tax claim of Batangas City against the BPC. The 6-years tax claim should thus commence from the date of BPC’s registration with the BOI on July 16, 1993 and end on July 15, 1999.

2. In the case of NPC vs. City of Cabanatuan, the removal of the blanket exclusion of government instrumentalities from local taxation is recognized as one of the most significant provisions of the 1991 LGC. Sec.193 of the LGC withdrew the sweeping tax privileges previously enjoined by the NPC under its Charter.
The power to tax is no longer exclusively vested on Congress; local legislative bodies are now given authority to levy taxes, fees and other charges pursuant to Art.X, Sec.5 of the 1987 Constitution. The LGC effectively deals with the fiscal constraints faced by the LGUs. It widens the tax base of LGUs to include taxes which were prohibited by previous laws.
When NPC assumed tax liabilities of the BPC under their 1992 BOT Agreement, the LGC which removed NPC’s tax exemption privileges had already been in effect for 6 months. Thus, while the BPC remains to be the entity doing business in the city, it is the NPC that is ultimately liable to pay said taxes under the provisions of both the 1992 BOT Agreement & the 1991 LGC.

Magtajas vs Pryce

G.R. No. 111097

July 20, 1994



PAGCOR decided to expand its operations to Cagayan de Oro City. It leased a portion of a building belonging to Pryce Properties Corporations, Inc., renovated & equipped the same, and prepared to inaugurate its casino during the Christmas season.

Civil organizations angrily denounced the project. Petitioners opposed the casino’s opening and enacted Ordinance No. 3353, prohibiting the issuance of business permit and cancelling existing business permit to the establishment for the operation of the casino, and Ordinance No. 3375-93, prohibiting the operation of the casino and providing a penalty for its violation.

Respondents assailed the validity of the ordinances on the ground that they both violated Presidential Decree No. 1869. Petitioners contend that, pursuant to the Local Government Code, they have the police power authority to prohibit the operation of casino for the general welfare.



WON the Ordinance Nos. 3353 and 3375-93 are valid.




CdeO is empowered to enact ordinances for the purposes indicated in the LGC. However, ordinances should not contravene a statute. Municipal governments are merely agents of the National Government. Local Councils exercise only delegated powers conferred by Congress. The delegate cannot be superior to the principal powers higher than those of the latter. PD 1869 authorized casino gambling. As a statute, it cannot be amended/nullified by a mere ordinance.