1
SENATOR HEHERSON T. ALVAREZ, et. al. v. HON. TEOFISTO T. GUINGONA,
JR., in his capacity as Executive Secretary, et al.
January 31, 1996| Hermosisima, J. |Powers and Attributes of Local Government
Units; Income
Digester: Roa, Annamhel Monique
SUMMARY: Petitioners challenge the validity of RA 7720 converting the municipality
of Santiago, Isabela into an Independent Component City to be known as the City of
Santiago, for the reasons that the Act allegedly did not originate exclusively in the
HOR as required by the Constitution, and that the subject municipality does not meet
the minimum average annual income required under the Local Government code for it
to be converted into a component city. In arguing for the latter issue, petitioners
contend that the Internal Revenue Allotments must not be included in the computation
of the average annual income, as defined in the Code. The Court disagrees with
them, and rules in favor of the validity of the law.
DOCTRINE: The IRAs are items of income because they form part of the gross
accretion of the funds of the LGU. The IRAs regularly and automatically accrue to the
local treasury without need of any further action on the part of the LGU. Also, Sec.
450 (c) of the LGC provides that the average annual income shall include the income
accruing to the general fund, exclusive of special funds, transfers, and non-recurring
income. IRAs are a regular, recurring item of income; nil is there a basis, too, to
classify the same as a special fund or transfer, since IRAs have a technical definition
and meaning all its own as used in the LGC that unequivocally makes it distinct from
special funds or transfers.
FACTS:
 Petitioners filed this Petition for Prohibition with prayer for TRO and Preliminary
Prohibitory Injunction, assailing the validity of RA 7720, entitled, An Act
Converting the Municipality of Santiago, Isabela into an Independent Component
City to be known as the City of Santiago, mainly because the Act allegedly did
not originate exclusively in the House of Representatives as mandated by Sec.
24, Article VI of the 1987 Constitution, and, (pertinent to the topic) according to
them, the Municipality of Santiago has not met the minimum average annual
income required under Sec. 450 of the LGC of 1991 in order to be converted into
a component city.
- Development of the Bill in Congress -
 April 18, 1993 – House Bill (HB) No. 8817, An Act Converting
the Municipality of Santiago into an Independent Component City to be known as
the City of Santiago, was filed in the HOR with Rep. Abaya as principal author.
Other sponsors included Reps. Alfelor, Albano, Respicio and Dy. The bill was
referred to the House Committee on Local Government and the House
Committee on Appropriations.
 May 19, June 1, November 28, and December 1, 1993 - Public hearings on the
HB were conducted by the House Committee on Local Government. The
committee submitted to the House a favorable report, with amendments,
on December 9.
 December 13, 1993 - HB No. 8817 was passed by the HOR on Second Reading
and was approved on Third Reading four days later.
 January 28, 1994 - HB No. 8817 was transmitted to the Senate.
 Meanwhile, a counterpart of the bill, Senate Bill (SB) No. 1243, entitled, An Act
Converting the Municipality of Santiago into an Independent Component City to
be Known as the City of Santiago, was filed in the Senate. It was introduced by
Sen. Sotto as principal sponsor, just after the House of Representatives had
conducted its first public hearing on HB No. 8817 (May 19, 1993).
 February 23, 1994 - A little less than a month after HB No. 8817 was transmitted
to the Senate, the Senate Committee on Local Government conducted public
hearings on SB No. 1243.
 March 1, 1994 - The said committee submitted Committee Report No. 378 on HB
No. 8817, with the recommendation that it be approved without amendment,
taking into consideration the reality that H.B. No. 8817 was on all fours with SB
No. 1243. Sen. Alvarez, one of the herein petitioners, indicated his approval
thereto by signing said report as member of the Committee on Local
Government.
 March 3, 1994 - Committee Report No. 378 was passed by the Senate on
Second Reading and was approved on Third Reading eleven days later.
On March 22, the HOR, upon being apprised of the action of the Senate,
approved the amendments proposed by the Senate.
- End of Development of Bill in Congress –
 May 5, 1994 - The enrolled bill was signed by the Chief Executive as RA 7720. A
plebiscite on the Act was held on July 13, 1994, with a great majority of the
registered voters of Santiago voting in favor of the conversion of Santiago into a
city.
RULING: The instant petition is DISMISSED for lack of merit.
Whether or not the Internal Revenue Allotments (IRAs) are to be included in the
computation of the average annual income of a municipality for purposes of its
conversion into an independent component city – YES.
 PETITIONERS: Santiago could not qualify into a component city because its
average annual income for the last two (2) consecutive years based on 1991
constant prices, at P13,109,560.47, falls below the required annual income of
Twenty Million Pesos (P20,000,000.00) for its conversion into a city. (SEE Notes
for their computation; basically, they deducted the IRA’s, excluding it from the
computation of the average annual income). The certification issued by the
Bureau of Local Government Finance of the DOF indicating Santiago’s average
annual income to be P20,974,581.97, is not accurate as the IRAs were not
excluded from the computation. The IRAs are not actually income but transfers
and/or budgetary aid from the national government; they fluctuate, increase or
decrease, depending on factors like population, land and equal sharing.
 COURT: IRAs form part of the income of LGU’s.
 Resolution of the controversy regarding compliance by
the Municipality of Santiago with the aforecited income requirement hinges on a
correlative and contextual explication of the meaning of IRAs vis-a-vis the notion
of income of a LGU and the principles of local autonomy and decentralization
underlying the institutionalization and intensified empowerment of the local
government system.
 LGU = a political subdivision of the State which is constituted by law and
possessed of substantial control over its own affairs. It is autonomous in the
sense that it is given more powers, authority, responsibilities and resources.

Power which used to be highly centralized in Manila, is thereby deconcentrated,
enabling especially the peripheral local government units to develop not only at
their own pace and discretion but also with their oWn resources and assets.
 The practical side to development through a decentralized local government
system certainly concerns the matter of financial resources. Understandably, the
vesting of duty, responsibility and accountability in every LGU is accompanied
with a provision for reasonably adequate resources to discharge its powers and
effectively carry out its functions. Availment of such resources is effectuated
through the vesting in every unit of (1) the right to create and broaden its own
source of revenue; (2) the right to be allocated a just share in national taxes,
such share being in the form of internal revenue allotments (IRAs); and (3) the
right to be given its equitable share in the proceeds of the utilization and
development of the national wealth, if any, within its territorial boundaries.
 The funds generated from local taxes, IRAs and national wealth utilization
proceeds accrue to the general fund of the local government and are used to
finance its operations subject to specified modes of spending the same as
provided for in the Local Government Code and its implementing rules and
regulations. For instance, not less than twenty percent (20%) of the IRAs must be
set aside for local development projects. As such, for purposes of budget
preparation, which budget should reflect the estimates of the income of the local
government unit, among others, the IRAs and the share in the national wealth
utilization proceeds are considered items of income.
 “Income” is defined in the LGC to be all revenues and receipts collected or
received forming the gross accretions of funds of the local government unit.
 The IRAs are items of income because they form part of the gross accretion of
the funds of the LGU. The IRAs regularly and automatically accrue to the local
treasury without need of any further action on the part of the LGU.
 Also, Sec. 450 (c) of the LGC provides that the average annual income shall
include the income accruing to the general fund, exclusive of special funds,
transfers, and non-recurring income. IRAs are a regular, recurring item of
income; nil is there a basis, too, to classify the same as a special fund or transfer,
since IRAs have a technical definition and meaning all its own as used in the
LGC that unequivocally makes it distinct from special funds or transfers.
 Thus, DOF Order No. 3593 correctly encapsulates (case says
“encapsulizes”???) the full import of the above disquisition when it defined
ANNUAL INCOME to be revenues and receipts realized by provinces, cities and
municipalities from regular sources of the Local General Fund “including the
internal revenue allotment and other shares” provided for in Sections 284, 290
and 291 of the Code, but exclusive of non-recurring receipts, such as other
national aids, grants, financial assistance, loan proceeds, sales of fixed assets,
and similar others. Such order, constituting executive or contemporaneous
construction of a statute by an administrative agency charged with the task of
interpreting and applying the same, is entitled to full respect and should be
accorded great weight by the courts, unless such construction is clearly shown to
be in sharp conflict with the Constitution, the governing statute, or other laws.
Whether or not, considering that the Senate passed SB No. 1243, its own
version of HB No. 8817, RA 7720 can be said to have originated in the House of
Representatives.
– NO.
2
 PETITIONERS: RA 7720 did not originate exclusively in the HOR because a bill
of the same import, SB No. 1243, was passed in the Senate.
 COURT: Although a bill of local application like HB No. 8817 should, by
constitutional prescription, originate exclusively in the HOR, the claim of
petitioners is untenable because it cannot be denied that HB No. 8817 was filed
in the HOR first before SB No. 1243 was filed in the Senate. Petitioners
themselves cannot disavow their own admission of the facts of the filing. HB No.
8817, was the bill that initiated the legislative process that culminated in the
enactment of RA 7720. No violation of Sec. 24, Article VI, of the 1987
Constitution is perceptible.
 Furthermore, petitioners themselves acknowledge [the development of the bill as
stipulated]. The filing in the Senate of a substitute bill in anticipation of its receipt
of the bill from the House, does not contravene the constitutional requirement
that a bill of local application should originate in the House of Representatives,
for as long as the Senate does not act thereupon until it receives the House bill.
 Tolentino v. Sec. of Finance - It is not the law-but the revenue bill-which is
required by the Constitution to originate exclusively in the House of
Representatives. A bill originating in the House may undergo such extensive
changes in the Senate that the result may be a rewriting of the whole. As a result
of the Senate action, a distinct bill may be produced. To insist that a revenue
statute-and not only the bill which initiated the legislative process culminating in
the enactment of the law-must substantially be the same as the House bill would
be to deny the Senates power not only to concur with amendments but also to
propose amendments. It would be to violate the coequality of legislative power of
the two houses of Congress and in fact make the House superior to the Senate.
 Lastly, as with every law, RA 7720 enjoys the presumption of constitutionality.
For it to be nullified, it must be shown that there is a clear and unequivocal
breach of the Constitution, not merely a doubtful and equivocal one; in other
words, the grounds for nullity must be clear and beyond reasonable doubt.
NOTES:
Total income (at 1991 constant prices) for 1991 P20,379,057.07
Total income (at 1991 constant prices) for 1992 P21,570,106.87
Total income for 1991 and 1992 P41,949,163.94
Minus:
IRAs for 1991 and 1992 P15,730,043.00
Total income for 1991 and 1992 P26,219,120.94
Average Annual Income P13,109,960.4

BASCO v. PAGCOR
May 14, 1991 | Paras, J. | Local government, decentralization, and autonomy
Digester: Valena, Maria Patricia S.
SUMMARY: Petitioners seek to annul the PAGCOR Charter (PD 1869), because it
waived the Manila City government’s right to impose taxes and license fees, which is
recognized by law, and intruded into the local government’s right to impose local
taxes and license fees, in contravention of the constitutionally enshrined principle of
local autonomy, among other reasons. The Court denied the petition and ruled that
PD 1869 does not violate the principle of local autonomy or infringe on the rights of
local governments. The principle of local autonomy under the Constitution simply
means decentralization. Furthermore, Manila, being a city, has no inherent power to
tax, and has no authority to tax instrumentalities of national government.
DOCTRINE: Local Government has been described as a political subdivision of a
nation or state which is constituted by law and has substantial control of local affairs.
In a unitary system of government, such as the government under the Philippine
Constitution, local governments can only be an intra sovereign subdivision of one
sovereign nation, it cannot be an imperium in imperio . Local government in such a
system can only mean a measure of decentralization of the function of government.
FACTS:
 Petition seeking to annul the Philippine Amusement and Gaming Corporation
(PAGCOR) Charter —PD 1869, because it is allegedly contrary to morals, public
policy and order, and because
1. It constitutes a waiver of a right prejudicial to a third person with a right
recognized by law. It waived the Manila City government’s right to
impose taxes and license fees, which is recognized by law;
2. The law has intruded into the local government’s right to impose local
taxes and license fees, in contravention of the constitutionally
enshrined principle of local autonomy;
 power.
3. It violates the equal protection clause of the constitution in that it legalizes
PAGCOR— conducted gambling, while most other forms of gambling are
outlawed, together with prostitution, drug trafficking and other vices;
 gambling thru the grant of “franchise, licenses or permits” was withdrawn by
4. It violates the avowed trend of the Cory government away from monopolistic
and crony economy, and toward free enterprise and privatization.
5. PD 1869 is contrary to the declared national policy of the “new restored
democracy” and the people’s will as expressed in the 1987 Constitution. The
decree is said to have a “gambling objective” and therefore is contrary to
Sections 11, 12 and 13 of Article II, Sec. 1 of Article VIII and Section 3 (2) of
Article XIV
RULING: Petition denied.
Whether petitioners, as taxpayers and practicing lawyers (petitioner Basco
being also the Chairman of the Committee on Laws of the City Council of
Manila) have standing – technicality which the Court brushed aside.
1 Section 1. Any provision of law to the contrary notwithstanding, the authority of chartered cities
and other local governments to issue license, permit or other form of franchise to operate,
maintain and establish horse and dog race tracks, jai-alai and other forms of gambling is hereby
revoked.
3
Whether PD 1869 is unconstitutional – NO.
[TOPIC] On PD 1869 and the principle of local autonomy
 Section 13 par. (2), P.D. 1869 exempts PAGCOR, as the franchise holder from
paying any “tax of any kind or form, income or otherwise, as well as fees,
charges or levies of whatever nature, whether National or Local.”
Income and other taxes.—(a) Franchise Holder: No tax of any kind or form,
income or otherwise as well as fees, charges or levies of whatever nature,
whether National or Local, shall be assessed and collected under this franchise
from the Corporation; nor shall any form of tax or charge attach in any way to the
earnings of the Corporation, except a franchise tax of five (5%) percent of the
gross revenues or earnings derived by the Corporation from its operations under
this franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lieu of all kinds of taxes, levies, fees or assessments
of any kind, nature or description, levied, established or collected by any
municipal, provincial or national government authority” (Section 13 [2]).
 PD 1869 does not violate the principle of local autonomy because
1. The City of Manila, being a mere Municipal corporation has no inherent right
to impose taxes. Thus, “the Charter or statute must plainly show an intent to
confer that power or the municipality cannot assume it.” Its “power to tax”
therefore must always yield to a legislative act which is superior having been
passed upon by the state itself which has the “inherent power to tax”
2. The Charter of the City of Manila is subject to control by Congress. Municipal
corporations are mere creatures of Congress, which has the power to
“create and abolish municipal corporations” due to its “general legislative
powers”. Congress, therefore, has the power of control over Local
governments. And if Congress can grant the City of Manila the power to tax
certain matters, it can also provide for exemptions or even take back the


3. The City of Manila’s power to impose license fees on gambling, has long
been revoked. As early as 1975, the power of local governments to regulate
P.D. No. 771 and was vested exclusively on the National Government.1
Necessarily, the power to demand or collect license fees which is a
consequence of the issuance of “licenses or permits” is no longer vested in
the City of Manila.
4. Local governments have no power to tax instrumentalities of the National
Government. PAGCOR is a government owned or controlled corporation
with an original charter, PD 1869. All of its shares of stocks are owned by the
National Government. In addition to its corporate powers, it also exercises
“Section 2. Hereafter, all permits or franchises to operate, maintain and establish, horse and dog
race tracks, jai-alai and other forms of gambling shall be issued by the national government upon
proper application and verification of the qualification of the applicant x x x.”

regulatory powers.2 PAGCOR thus has a dual role, to operate and to
regulate gambling casinos. The latter role is governmental, which places it in
the category of an agency or instrumentality of the Government. Being an
instrumentality of the Government, PAGCOR should be and actually is
exempt from local taxes. Otherwise, its operation might be burdened,
impeded or subjected to control by a mere Local government. This doctrine
emanates from the “supremacy” of the National Government over local
governments.
 Petitioners also argue that the Local Autonomy Clause of the Constitution
will be violated by P.D. 1869. This is incorrect. Article X provides:
Sec. 5. Each local government unit shall have the power to create its own
source of revenue and to levy taxes, fees, and other charges subject to
such guidelines and limitation as the congress may provide, consistent
with the basic policy on local autonomy. Such taxes, fees and charges shall
accrue exclusively to the local government
 The power of local government to “impose taxes and fees” is always subject
to “limitations” which Congress may provide by law. Since PD 1869 remains
an “operative” law until “amended, repealed or revoked” (Sec. 3, Art. XVIII,
1987 Constitution), its “exemption clause” remains as an exception to the
exercise of the power of local governments to impose taxes and fees. It
cannot therefore be violative but rather is consistent with the principle of
local autonomy.
 Besides, the principle of local autonomy under the 1987 Constitution
simply means “decentralization” (III Records of the 1987 Constitutional
Commission, pp. 435-436, as cited in Bernas, The Constitution of the
Republic of the Philippines, Vol. II, First Ed., 1988, p. 374). It does not make
local governments sovereign within the state or an “imperium in imperio.”
“Local Government has been described as a political subdivision of a nation
or state which is constituted by law and has substantial control of local
affairs. In a unitary system of government, such as the government under
the Philippine Constitution, local governments can only be an intra sovereign
subdivision of one sovereign nation, it cannot be an imperium in imperio .
Local government in such a system can only mean a measure of
decentralization of the function of government.”
 As to what state powers should be “decentralized” and what may be
delegated to local government units remains a matter of policy, which
concerns wisdom. It is therefore a political question.
PD 1869 is a valid exercise of police power
 P.D. 1869 was enacted pursuant to the policy of the government to “regulate and
centralize thru an appropriate institution all games of chance authorized by
existing franchise or permitted by law” (1st whereas clause, PD 1869). As was
subsequently proved, regulating and centralizing gambling operations in one
corporate entity—the PAGCOR, was beneficial not just to the Government but to
society in general. It is a reliable source of much needed revenue for the cash
2 Sec. 9. Regulatory Power.—The Corporation shall maintain a Registry of the affiliated entities, and
shall exercise all the powers, authority and the responsibilities vested in the Securities and
Exchange Commission over such affiliating entities mentioned under the preceding section,
including, but not limited to amendments of Articles of Incorporation and By-Laws, changes in
corporate term, structure, capitalization and other matters concerning the operation of the
4
strapped Government. It provided funds for social impact projects and subjected
gambling to “close scrutiny, regulation, supervision and control of the
Government” (4th Whereas Clause, PD 1869). With the creation of PAGCOR and
the direct intervention of the Government, the evil practices and corruptions that
go with gambling will be minimized if not totally eradicated. Public welfare, then,
lies at the bottom of the enactment of PD 1896.
PD 1869 does not violate the equal protection clause
 The “equal protection clause” does not prohibit the Legislature from establishing
classes of individuals or objects upon which different rules shall operate. The
Constitution does not require situations which are different in fact or opinion to be
treated in law as though they were the same.
 Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of
the equal protection is not clearly explained in the petition. The mere fact that
some gambling activities like cockfighting (P.D 449) horse racing (R.A. 306 as
amended by RA 983), sweepstakes, lotteries and races (RA 1169 as amended
by B.P. 42) are legalized under certain conditions, while others are prohibited,
does not render the applicable laws, P.D. 1869 for one, unconstitutional.
On monopoly and crony economy
 Policy issue - it is for the Executive Department to recommend to Congress its
repeal or amendment.
 Re monopoly: Article XII provides:
Sec. 19. The State shall regulate or prohibit monopolies when public interest so
requires. No combinations in restraint of trade or unfair competition shall be
allowed.
 It should be noted that, as the provision is worded, monopolies are not
necessarily prohibited by the Constitution. The state must still decide whether
public interest demands that monopolies be regulated or prohibited. Again, this is
a matter of policy for the Legislature to decide.
On Sections 11 (Personality Dignity) 12 (Family) and 13 (Role of Youth) of Article II;
Section 13 (Social Justice) of Article XIII and Section 2 (Educational Values) of Article
XIV
 Suffice it to state also that these are merely statements of principles and policies.
As such, they are basically not self-executing, meaning a law should be passed
by Congress to clearly define and effectuate such principles.
In conclusion
 Every law has in its favor the presumption of constitutionality. Therefore, for PD
1869 to be nullified, it must be shown that there is a clear and unequivocal
breach of the Constitution, not merely a doubtful and equivocal one. In other
words, the grounds for nullity must be clear and beyond reasonable doubt. Those
who petition this Court to declare a law, or parts thereof, unconstitutional must
affiliated entities, the provisions of the Corporation Code of the Philippines to the contrary
notwithstanding, except only with respect to original incorporation.”

clearly establish the basis for such a declaration. Based on the grounds raised by
petitioners to challenge the constitutionality of P.D. 1869, the Court finds that
petitioners have failed to overcome the presumption.
 The mere fact that some persons may have lost their material fortunes, mental
control, physical health, or even their lives does not necessarily mean that the
same are directly attributable to gambling. Gambling may have been the
antecedent, but certainly not necessarily the cause. For the same consequences
could have been preceded by an overdose of food, drink, exercise, work, and
even sex (lolz)
NOTES:
History of PAGCOR
 The Philippine Amusements and Gaming Corporation (PAGCOR) was created by
P.D. 1067-A dated January 1, 1977 and granted a franchise under P.D 1067-B
also dated January 1, 1977 “to establish, operate and maintain gambling casinos
on land or water within the territorial jurisdiction of the Philippines.” Its operation
was originally conducted in the well known floating casino “Philippine Tourist.”
The operation was considered a success for it proved to be a potential source of
revenue to fund infrastructure and socioeconomic projects, thus, P.D. 1399 was
passed on June 2, 1978 for PAGCOR to fully attain this objective.
 July 11, 1983: PAGCOR was created under P.D. 1869 to enable the Government
to regulate and centralize all games of chance authorized by existing franchise or
permitted by law.
 To attain these objectives PAGCOR is given territorial jurisdiction all over the
Philippines. Under its Charter’s repealing clause, all laws, decrees, executive
orders, rules and regulations, inconsistent therewith, are accordingly repealed,
amended or modified.
 It is reported that PAGCOR is the third largest source of government revenue,
next to the Bureau of Internal Revenue and the Bureau of Customs. In 1989
alone, PAGCOR earned P3.43 Billion, and directly remitted to the National
Government a total of P2.5 Billion in form of franchise tax, government’s income
share, the President’s Social Fund and Host Cities’ share. In addition, PAGCOR
sponsored other sociocultural and charitable projects on its own or in cooperation
with various governmental agencies, and other private associations and
organizations. In its 3 1/2 years of operation under the present administration,
PAGCOR remitted to the government a total of P6.2 Billion. As of December 31,
1989, PAGCOR was employing 4,494 employees in its nine (9) casinos
nationwide, directly supporting the livelihood of 4,494 families.
Definition of police power
 The concept of police power is well-established in this jurisdiction. It has been
defined as the “state authority to enact legislation that may interfere with personal
liberty or property in order to promote the general welfare.” (Edu v. Ericta, 35
SCRA 481, 487) As defined, it consists of (1) an imposition or restraint upon
liberty or property, (2) in order to foster the common good. It is not capable of an
exact definition but has been, purposely, veiled in general terms to underscore its
all-comprehensive embrace.
ilas v. Manila, 220 U.S. 345 (1911)
Vilas v. Manila
5
No. 53, 54, 207
Argued February 24, 27, 1911
Decided April 3, 1911
220 U.S. 345
ERROR TO AND APPEALS FROM THE SUPREME COURT
OF THE PHILIPPINE ISLANDS
Syllabus
Even if there is no remedy adequate to the collection of a claim against a
governmental subdivision when reduced to judgment, a plaintiff having a valid claim is
entitled to maintain an action thereon and reduce it to judgment.
Where the case turned below on the consequence of a change in sovereignty by
reason of the cession of the Philippine Islands, the construction of the Treaty with
Spain of 1898 is involved, and this Court has jurisdiction of an appeal from the
Supreme Court of the Philippine
Page 220 U. S. 346
Islands under § 10 of the Act of July 1, 1902, c. 1369, 32 Stat. 691, 695.
While military occupation or territorial cession may work a suspension of the
governmental functions of municipal corporations, such occupation or cession does
not result in their dissolution.
While there is a total abrogation of the former political relations of inhabitants of ceded
territory, and an abrogation of laws in conflict with the political character of the
substituted sovereign, the great body of municipal law regulating private and domestic
rights continues in force until abrogated or changed by the new ruler.
Although the United States might have extinguished every municipality in the territory
ceded by Spain under the Treaty of 1898, it will not, in view of the practice of nations
to the contrary, be presumed to have done so.
The legal entity of the City of Manila survived both its military occupation by, and its
cession to, the United States, and, as in law, the present city, as the successor of the
former city, is entitled to the property rights of its predecessor, it is also subject to its
liabilities.
The cession in the Treaty of 1898 of all the public property of Spain in the Philippine
Islands did not include property belonging to municipalities, and the agreement
against impairment of property and private property rights in that treaty applied to the
property of municipalities and claims against municipalities.
One supplying goods to a municipality does so, in the absence of specific provision,
on its general faith and credit, and not as against special funds in its possession, and
even if such goods are supplied for a purpose for which the special funds are held, no
specific lien is created thereon.
The facts, which involve the liability of the present City of Manila in the Philippine
Islands for claims against the City of Manila as it existed prior to the cession under the
Treaty of 1898, are stated in the opinion.
Page 220 U. S. 351
MR. JUSTICE LURTON delivered the opinion of the Court.
The plaintiffs in error, who were plaintiffs below, are creditors of the City of Manila as
it existed before the cession of the Philippine Islands to the United States by the
Treaty of Paris, December 10, 1898. Upon the theory that the city, under its present
charter from the government of the Philippine Islands, is the same juristic person and
liable upon the obligations of the old city, these actions were brought against it. The
Supreme Court of the Philippine Islands denied relief, holding that the present
municipality is a totally different corporate entity, and in no way liable for the debts of
the Spanish municipality.
Page 220 U. S. 352

The fundamental question is whether, notwithstanding the cession of the Philippine
Islands to the United States, followed by a reincorporation of the city, the present
municipality is liable for the obligations of the city incurred prior to the cession to the
United States.
We shall confine ourselves to the question whether the plaintiffs in error are entitled to
judgments against the city upon their several claims. Whether there is a remedy
adequate to the collection when reduced to judgment is not presented by the record.
But whether there is or is not a remedy affords no reason why the plaintiffs in error
may not reduce their claims to judgment. Mt. Pleasant v. Beckwith, 100 U. S.
514, 100 U. S. 530. The city confessedly may be sued under its existing charter, and
that implies at least a right to judgment if they establish their demands.
The city as now incorporated has succeeded to all of the property rights of the old city
and to the right to enforce all of its causes of action. There is identity of purpose
between the Spanish and American charters and substantial identity of municipal
powers. The area and the inhabitants incorporated are substantially the same. But for
the change of sovereignty which has occurred under the Treaty of Paris, the question
of the liability of the city under its new charter for the debts of the old city would seem
to be of easy solution. The principal question would therefore seem to be the legal
consequence of the cession referred to upon the property rights and civil obligations
of the city incurred before the cession. And so the question was made to turn in the
court below upon the consequence of a change in sovereignty and a reincorporation
of the city by the substituted sovereignty.
This disposes of the question of the jurisdiction of this Court, grounded upon the
absence from the petition of the plaintiffs of any distinct claim under the Treaty of
Paris, since, under § 10 of the Philippine Organic Act
Page 220 U. S. 353
of July 1, 1902, this Court is given jurisdiction to review any final decree or judgment
of the Supreme Court of the Philippine Islands where any Treaty of the United States
"is involved." That treaty was necessarily "involved," since neither the court below nor
this Court can determine the continuity of the municipality nor the liability of the city as
it now exists for the obligation of the old city without considering the effect of the
change of sovereignty resulting from that treaty. See Reavis v. Fianza, 215 U. S.
16, 215 U. S. 22.
The historical continuity of a municipality embracing the inhabitants of the territory
now occupied by the City of Manila is impressive. Before the conquest of the
Philippine Islands by Spain, Manila existed. The Spaniards found on the spot now
occupied a populous and fortified community of Moros. In 1571, they occupied what
was then and is now known as Manila, and established it as a municipal corporation.
In 1574, there was conferred upon it the title of "Illustrious and ever loyal City of
Manila." From time to time, there occurred amendments, and, on January 19, 1894,
there was a reorganization of the city government under a royal decree of that date.
Under that charter, there was power to incur debts for municipal purposes and power
to sue and be sued. The obligations here in suit were incurred under the charter
referred to, and are obviously obligations strictly within the provision of the municipal
power. To pay judgments upon such debts, it was the duty of the ayuntamiento of
Manila, which was the corporate name of the old city, to make provision in its budget.
The contention that the liability of the city upon such obligations was destroyed by a
mere change of sovereignty is obviously one which is without a shadow of moral
force, and, if true, must result from settled principles of rigid law. While the contracts
from which the claims in suit resulted were in progress, war between the United
Page 220 U. S. 354
6
States and Spain ensued. On August 13, 1898, the city was occupied by the forces of
this government, and its affairs conducted by military authority. On July 31, 1901, the
present incorporating act was passed, and the city since that time has been an
autonomous municipality. The charter in force is Act 183 of the Philippine
Commission, and now may be found as chapters 68 to 75 of the Compiled Acts of the
Philippine Commission. The first section of the charter of 1901 reads as follows:
"The inhabitants of the City of Manila, residing within the territory described in section
2 of this act, are hereby constituted a municipality, which shall be known as the City of
Manila, and by that name shall have perpetual succession, and shall possess all the
rights of property herein granted or heretofore enjoyed and possessed by the City of
Manila as organized under Spanish sovereignty."
The boundaries described in § 2 include substantially the area and inhabitants which
had theretofore constituted the old city.
By § 4 of the same act, the government of the city was invested in a municipal board.
Section 16 grants certain legislative powers to the board, and provides that it shall
"take possession of all lands, buildings, offices, books, papers, records, moneys,
credits, securities, assets, accounts, or other property or rights belonging to the
former City of Manila, or pertaining to the business or interests thereof, and, subject to
the provisions herein set forth, shall have control of all its property except the building
known as the ayuntamiento, provision for the occupation and control of which is made
in § 15 of this act; shall collect taxes and other revenues, and apply the same in
accordance with appropriations, as hereinbefore provided, to the payment of the
municipal expenses; shall supervise and control the discharge of official duties by
subordinates; shall institute judicial proceedings to recover property and
Page 220 U. S. 355
funds of the city wherever found, or otherwise to protect the interests of the city, and
shall defend all suits against the city,"
etc.
Section 69 of the charter expressly preserved "all city ordinances and orders in force
at the time of the passage of this act, and not inconsistent herewith," until modified or
repealed by ordinances passed under this act.
Section 72 is the repealing clause, and provides for the repeal of "all acts, orders, and
regulations" which are inconsistent with the provisions of the act.
The charter contains no reference to the obligations or contracts of the old city.
If we understand the argument against the liability here asserted, it proceeds mainly
upon the theory that, inasmuch as the predecessor of the present city,
the ayuntamiento of Manila, was a corporate entity created by the Spanish
government, when the sovereignty of Spain in the islands was terminated by the
treaty of cession, if not by the capitulation of August 13, 1898, the municipality ipso
facto disappeared for all purposes. This conclusion is reached upon the supposed
analogy to the doctrine of principal and agent, the death of the principal ending the
agency. So complete is the supposed death and annihilation of a municipal entity by
extinction of sovereignty of the creating state that it was said in one of the opinions
below that all of the public property of Manila passed to the United States, "for a
consideration, which was paid," and that the United States was therefore justified in
creating an absolutely new municipality, and endowing it with all of the assets of the
defunct city, free from any obligation to the creditors of that city. And so the matter
was dismissed in the Trigas case by the Court of First Instance, by the suggestion
that
"the plaintiff may have a claim against the Crown of Spain, which has received from
the United States payment for that done by the plaintiff. "
Page 220 U. S. 356

We are unable to agree with the argument. It loses sight of the dual character of
municipal corporations. They exercise powers which are governmental and powers
which are of a private or business character. In the one character, a municipal
corporation is a governmental subdivision, and for that purpose exercises by
delegation a part of the sovereignty of the state. In the other character, it is a mere
legal entity or juristic person. In the latter character, it stands for the community in the
administration of local affairs wholly beyond the sphere of the public purposes for
which its governmental powers are conferred.
The distinction is observed in South Carolina v. United States, 199 U. S. 437, 199 U.
S. 461, where Lloyd v. New York, 5 N.Y. 369, 374, and Western Sav. Fund Soc. v.
Philadelphia, 31 Pa. 175, are cited and approved. In Lloyd v. New York, supra, it is
said:
"The corporation of the City of New York possesses two kinds of powers: one
governmental and public, and to the extent they are held and exercised, is clothed
with sovereignty; the other private, and to the extent they are held and exercised, is a
legal individual. The former are given and used for public purposes, the latter for
private purposes. While in the exercise of the former, the corporation is a municipal
government, and while in the exercise of the latter, is a corporate legal individual."
See also Dillon, Mun.Corp., 4th ed. 66; City of Petersburg v. Applegarth's
Administrator, 28 Gratt. 321, 343, and Oliver v. Worcester, 102 Mass. 489.
In view of the dual character of municipal corporations, there is no public reason for
presuming their total dissolution as a mere consequence of military occupation or
territorial cession. The suspension of such governmental functions as are obviously
incompatible with the new political relations thus brought about may be presumed.
Page 220 U. S. 357
But no such implication may be reasonably indulged beyond that result.
Such a conclusion is in harmony with the settled principles of public law as declared
by this and other courts and expounded by the textbooks upon the laws of war and
international law. Taylor, International Public Law, § 578.
That there is a total abrogation of the former political relations of the inhabitants of the
ceded region is obvious. That all laws theretofore in force which are in conflict with the
political character, constitution, or institutions of the substituted sovereign lose their
force is also plain. Alvarez y Sanchez v. United States, 216 U. S. 167. But it is equally
settled in the same public law that that great body of municipal law which regulates
private and domestic rights continues in force until abrogated or changed by the new
ruler. In Chicago, Rock Island & Pacific Railway Co. v. McGlinn, 114 U. S. 542, 114
U. S. 546, it was said:
"It is a general rule of public law, recognized and acted upon by the United States,
that whenever political jurisdiction and legislative power over any territory are
transferred from one nation or sovereign to another, the municipal laws of the country
-- that is, laws which are intended for the protection of private rights -- continue in
force until abrogated or changed by the new government or sovereign. By the
cession, public property passes from one government to the other, but private
property remains as before, and with it those municipal laws which are designed to
secure its peaceful use and enjoyment. As a matter of course, all laws, ordinances,
and regulations in conflict with the political character, institutions, and constitution of
the new government are at once displaced. Thus, upon a cession of political
jurisdiction and legislative power -- and the latter is involved in the former -- to the
United States, the laws of the country in support of an established religion, or
abridging the freedom of the
Page 220 U. S. 358
7
press, or authorizing cruel and unusual punishments, and the like, would at once
cease to be of obligatory force without any declaration to that effect, and the laws of
the country on other subjects would necessarily be superseded by existing laws of the
new government upon the same matters. But with respect to other laws affecting the
possession, use, and transfer of property, and designed to secure good order and
peace in the community and promote its health and prosperity, which are strictly of a
municipal character, the rule is general that a change of government leaves them in
force until, by direct action of the new government, they are altered or repealed."
The above language was quoted with approval in Downes v. Bidwell, 182 U. S.
244, 182 U. S. 298.
That the United States might, by virtue of its situation under a treaty ceding full title,
have utterly extinguished every municipality which it found in existence in the
Philippine Islands may be conceded. That it did so, in view of the practice of nations
to the contrary, is not to be presumed, and can only be established by cogent
evidence.
That during military occupation the affairs of the city were in a large part administered
by officials put in place by military order did not operate to dissolve the corporation, or
relieve it from liability upon obligations incurred before the occupation, nor those
created for municipal purposes by the administrators of its affairs while its old officials
were displaced. New Orleans v. Steamship Co., 20 Wall. 387, 87 U. S. 394. During
that occupation and military administration, the business of the city was carried on as
usual. Taxes were assessed and taxes collected and expended for local purposes,
and many of the officials carrying on the government were those found in office when
the city was occupied. The continuity of the corporate city was not inconsistent with
military occupation or the constitution or institutions of the occupying power. This
Page 220 U. S. 359
is made evident by the occurrences at the time of capitulation. Thus, the articles of
capitulation concluded in these words:
"This city, its inhabitants, . . . and its private property of all descriptions, are placed
under the special safeguard of the faith and honor of the American Army."
This was quoted in President McKinley's instructions of April 7, 1900, to the Philippine
Commission, and touching this he said: "I believe that this pledge has been faithfully
kept." And the commission was directed to labor for the full performance of this
obligation. This instruction was in line with and in fulfillment of the eighth article of the
Treaty of Paris of December 10, 1898. Under the third article of that treaty, the
archipelago known as the Philippine Islands was ceded to the United States, the latter
agreeing to pay to Spain the sum of $20,000,000. Under the first paragraph of the
eighth article, Spain relinquished to the United States
"all the buildings, wharves, barracks, forts, structures, public highways, and other
immovable property which, in conformity with law, belong to the public domain, and as
such belong to the Crown of Spain."
It is under this clause, in connection with the clause agreeing to pay to Spain
$20,000,000 for the cession of the Philippine group, that the contention that all of the
public rights of the City of Manila were acquired by the United States, which country
was therefore justified, as absolute owner, in granting the property rights so acquired
to what is called the "absolutely new corporation" created thereafter. But the
qualifying words touching property rights relinquished by Spain limit the
relinquishment to "property which, in conformity with law, belonging to the public
domain, and as such belong to the Crown of Spain." It did not affect property which
did not, in "conformity with law, belong to the Crown of Spain." That it was not
intended to apply to property which, "in conformity with law," belonged to the City of
Manila as a municipal corporation,

Page 220 U. S. 360
is clear. This is demonstrated by the second paragraph of the same article, which
reads:
"And it is hereby declared that the relinquishment or cession, as the case may be, to
which the preceding paragraph refers, cannot in any respect impair the property or
rights which by law belong to the peaceful possession of property of all kinds, of
provinces, municipalities, public or private establishments . . . having legal capacity to
acquire and possess property in the aforesaid territories renounced or ceded, or of
private individuals."
Thus, the property and property rights of municipal corporations were protected and
safeguarded precisely as were the property and property rights of individuals.
That the cession did not operate as an extinction or dissolution of corporations is
herein recognized, for the stipulation against impairment of their property rights has
this plain significance.
The conclusion we reach, that the legal entity survived both the military occupation
and the cession which followed, finds support in the cases which hold that the
Pueblos of San Francisco and Los Angeles, which existed as municipal organizations
prior to the cession of California by Mexico, continued to exist with their community
and property rights intact. Cohas v. Raisin, 3 Cal. 443; Hart v. Burnett, 15 Cal.
530; Townsend v. Greeley, 5 Wall. 326; Merryman v. Bourne, 9 Wall. 592, 76 U. S.
602; Moore v. Steinbach, 127 U. S. 70; Los Angeles Farming & Mill. Co. v. Los
Angeles, 217 U. S. 217.
Were corporate identity and corporate liability extinguished as a necessary legal
result of the new charter granted in 1901 by the Philippine Commission? The
inhabitants of the old city are the incorporators of the new. There is substantially
identity of area. There are some changes in the form of government and some
changes in corporate powers and methods of administration. The new corporation is
endowed with all of the property and
Page 220 U. S. 361
property rights of the old. It has the same power to sue and be sued which the former
corporation had. There is not the slightest suggestion that the new corporation shall
not succeed to the contracts and obligations of the old corporation. Laying out of view
any question of the constitutional guaranty against impairment of the obligation of
contracts, there is, in the absence of express legislative declaration of a contrary
purpose, no reason for supposing that the reincorporation of an old municipality is
intended to permit an escape from the obligations of the old, to whose property and
rights it has succeeded. The juristic identity of the corporation has been in no wise
affected, and, in law, the present city is, in every legal sense, the successor of the old.
As such, it is entitled to the property and property rights of the predecessor
corporation, and is, in law, subject to all of its liabilities. Broughton v. Pensacola, 93 U.
S. 266; Mt. Pleasant v. Beckwith, 100 U. S. 520; Mobile v. Watson, 116 U. S.
289; Shapleigh v. San Angelo, 167 U. S. 646, 167 U. S. 655; O'Connor v. Memphis, 6
Lea, 730; Colchester v. Seaber, 3 Burr. 1866, 1870, in which case, when a
municipality became disabled to act and obtained a new charter, in an action upon an
obligation of the old corporation, there was judgment for the creditor, Lord Mansfield
saying:
"Many corporations, for want of legal magistrates, have lost their activity, and
obtained new charters. Maidstone, Radnor, Carmarthen, and many more are in the
same case with Colchester. And yet it has never been disputed but that the new
charters revive and give activity to the old corporation; except, perhaps, in that case in
Levinz, where the corporation had a new name, and even there the court made no
8
doubt. Where the question has arisen upon any remarkable metamorphosis, it has
always been determined that they remain the same as to debts and 'rights.'"
Morris v. State, 62 Tex. 728, 730.
Page 220 U. S. 362
In Shapleigh v. San Angelo, supra, this Court said in a similar case:
"The state's plenary power over its municipal corporations to change their
organization, to modify their method of internal government, or to abolish them
altogether, is not restricted by contracts entered into by the municipality with its
creditors or with private parties. An absolute repeal of a municipal charter is therefor
effectual so far as it abolishes the old corporate organization; but when the same or
substantially the same inhabitants are erected into a new corporation, whether with
extended or restricted territorial limits, such new corporation is treated as in law the
successor of the old one, entitled to its property rights, and subject to its liabilities."
The cases of Trigas and Vilas went off upon demurrers, and no question of remedy
arises here.
The appeal of Aguado is from a decree upon a final hearing denying him all relief.
That all three of the plaintiffs in error are entitled to proceed to judgment when they
shall establish their several claims is obvious from what we have said. But in
the Aguado case, it is sought to establish his claim as a charge against certain
property and funds held by the city as trustee, known as the Carriedo fund. In 1734,
one Don Francisco Carriedo y Perodo bequeathed to the city a fund for the
establishment of waterworks, to be kept as a separate fund and devoted to the
erection and maintenance of the works. This fund was loyally kept and greatly
increased, and was enlarged by a special tax upon meat devoted to that purpose. The
works were finally completed in 1878, and have been since operated by the city, the
income and special tax going to maintenance. Certain securities belonging to the fund
are now held by the city, the income being applied to the operation of the works.
Aguado took a contract to supply coal for the use of the
Page 220 U. S. 363
Carriedo works, and made a deposit to guarantee the contract. When the city was
occupied by the American Army, it was indebted to him for coal so supplied, as well
as for the deposit so made. That the coal was bought for and used in the operation of
the Carriedo works is not denied. But there is no evidence that the credit was given to
the Carriedo fund so held in trust under the will of Carriedo. The contract was made
with the ayuntamiento of Manila, just as all other contracts for city supplies or works
were made. The contract not having been made with special reference to the liability
of the fund held in trust by the city, but apparently upon the general credit of the city,
we are not disposed to reverse the judgment of the court below, holding that the claim
of Aguado did not constitute a charge upon the Carriedo fund.
Aguado is nevertheless entitled to a judgment. The designation of the city in the
petition as trustee may be regarded as descriptive. The debt having been incurred by
the city, it must be regarded as a city liability. Taylor v. Davis, 110 U. S. 330, 110 U.
S. 336.
Our conclusion is that the decree in the Aguado case must be reversed and the case
remanded, with direction to render judgment and such other relief as may seem in
conformity with law. The judgments in the Trigas and Vilas cases will be reversed,
and the cases remanded with direction to overrule the respective demurrers, and for
such other action as may be consistent with law, and consistent with this opinion.
LIDASAN v. COMMISSION ON ELECTIONS
October 25, 1967 | Sanchez, J. | Political and Corporate Nature of LGUs
Digester: Fausto, Jaime Manuel A.

SUMMARY: RA 4790 was entitled “An Act Creating the Municipality of Dianaton in
the Province of Lanao del Sur. This law mandated the transfer of some barrios from
the province of Cotabato and combined with the barrios in the province of Lanao del
Sur to create the Municipality of Dianaton. Comelec issued resolutions pursuant to
this law. Petitioner assailed the law and the resolutions’ constitutionality, as RA 4790
violated the one bill, one subject requirement under the constitution. The SC agreed
with petitioner, and held that since the subject of the statute was not expressed in the
title, i.e. it did not mention the transfer of Cotabato Barriors to Dianaton, RA 4790 was
null and void. Also, the Court held that the law would still be unconstitutional even if
the provisions on the transfer of the Cotabato barrios were separated and removed.
This is because it was doubtful whether the new municipality could properly function
as a municipal corporation if it is reduced to 9 barrios from the intended 21. The Court
cannot assume this as this is within the realm of congressional will or intent.
DOCTRINE: Municipal corporations perform twin functions: Firstly, they serve as an
instrumentality of the State in carrying out the functions of government. Secondly,
they act as an agency of the community in the administration of local affairs. This
makes the municipal corporation a separate entity acting for its own purpose and not
a subdivision of the state.
FACTS:
 June 18, 1966 - The Chief Executive signed into law house Bill 1247, known as
RA 4790, or “An Act Creating the Municipality of Dianaton in the Province of
Lanao del Sur,” now in dispute (NOTES).
 Prompted by the coming elections, Comelec adopted Resolution of Aug. 15,
1967, which determined which barrios would be included in the new municipality
of Dianaton, pursuant to RA 4790 (SEE NOTES AGAIN).
 Pursuant to this, 12 barriors - in 2 municipalities in the province of Cotabato -
are transferred to the province of Lanao Del Sur and thus brought a change
in the boundaries of the two provinces.
 Sept 7, 1967 - Office of the President recommended that Comelec suspend the
operation of the resolution until “clarified by correcting legislation.”
 Comelec, through its Resolution of Sept. 20, 1967, declared that the statute/ Aug.
15 resolution should be implemented unless declared unconstitutional by the SC.
 Thus the original action for certiorari and prohibition by Petitioner Bara Lidasan, a
resident and taxpayer of the detached portion of Parang, Cotabato, and a
qualified voter for the 1967 elections, praying that RA 4790 be declared
unconstitutional and that the two Comelec resolutions be nullified.
RULING: Petition granted.
Whether RA 4790, which is entitled “An Act Creating the Municipality of
Dianaton in the Province of Lanao del Sur”, but which includes barrios located
in another province—Cotabato—to be spared from attack planted upon the
constitutional mandate that “No bill which may be enacted into law shall
embrace more than one subject which shall be expressed in the title of the
bill?”
– NO.
 PETITIONER: relied on the above constitutional mandate.
 COURT: This constitutional provision contains dual limitations upon legislative
power.
9
 1. Congress is to refrain from conglomeration, under one statute, of
heterogeneous subjects.
 2. The title of the bill is to be couched in a language sufficient to notify the
legislators and the public and those concerned of the import of the single
subject thereof.
 About the second directive, the subject of the statute must be “expressed in the
title” of the bill; it “breathes the spirit of command.” Compliance is imperative, as
the Constitution doesn’t obligate Congress to read the entire text of the bill during
deliberations.
 Of Course, the Constitution doesn’t require Congress to use such precise
language in the title as to fully index all the contents and minute details of the bill.
It suffices if the title should serve the purpose of the constitutional demand that it
inform the legislators, the persons interested in the subject of the bill, and the
public, of the nature, scope and consequences of the proposed law and its
operation, which would lead them to inquire into the full bill and study the same.
 In determining WON a statute conforms to the constitutional requirement, the
Court provided the following guidelines:
 “The test of the sufficiency of a title is whether or not it is misleading… a title
which is so uncertain that the average person reading it would not be
informed of the purpose of the enactment or put on inquiry as to its contents,
or which is misleading, either in referring to or indicating one subject where
another or different one is really embraced in the act, or in omitting any
expression or indication of the real subject or scope of the act, is bad.”
 “Its substance rather than its form should be considered, and the purpose of
the constitutional requirement, of giving notice to all persons interested,
should be kept in mind by the court.”
 AS APPLIED: The title of RA 4790 projects the impression that solely the
province of Lanao del Sur is affected by the creation of Dianaton; it doesn’t give
any indication that communities in the adjacent province of Cotabato are
incorporated into the new Lanao del Sur town.
 The phrase “in the province of Lanao del Sur,” in the title is misleading and
deceptive, as the two-pronged purpose in the said law is (1) the creation of the
municipality of Dianaton from 21 barrios in the province of Lanao del Sur, and (2)
dismembers 2 municipalities in Cotabato (Parang and Buldon), a different
province.
 The baneful effect of the title is that it neither informed Congress, nor the public
as to the full impact of the law; that the towns of Buldon and Parang in Cotabatois
being taken away and added to the adjacent province of Lanao del Sur.
 RESPONDENT: (1)the change in boundaries resulting in the substantial
diminution of territorial limits is merely the incidental legal results of the definition
of the boundary if Dianaton, and thus that portions are taken away from Cotabato
need not be expressed in the title.
 COURT: The transfer of a sizable portion of territory involves reduction of
area, population, and income of that province and is important in the creation
of a municipality, and yet the title did not reflect this.
 (2) In Felwa v Salas, the Law creating the privinces of Benguet and Kalinga-
Apayao (RA4695), was constitutional even if the title did not refer to the
provisions in the law concerning elective officials.
 COURT: but this is different from the present case because in Felwa, the SC
ruled that an act creating province must be expected to provide for the
officers in the provinces. The lumping together of barrios from separate

provinces in this case, is not a natural or logical consequence of the creation
of the municipality of Dianaton; a change in boundaries may be made
without creating a new municipality.
 The Court referred to Hume v Village of Fruitport, which concerned “an Act to
Incorporate the Village of Fruitport, in the County of Muskegon. The court pointed
out that the provisions of said law included not only Muskegon, but Ottawa as
well, but the title was insufficient as in only included “Muskegon.” The Court
pointed out that a court couldn’t reject a part of the title (ex. take out “Muskegon”
so the title isn’t restrictive) for the purpose of saving the act. The purpose of the
One Subject Requirement is to challenge the attention of those affected by the
act to its provisions.
 For these reasons the Court held that RA 4790 is null and void.
Whether RA 4790 may still be salvaged with reference to the 9 barrios in Lanao
del Sur, by nullifying only the portion that took away the barrios from Cotabato
– NO.
 True, the general rule is that where a portion of a statute is rendered
unconstitutional and the remainder valid, the parts will be separated, and the
constitutional portion upheld.
 HOWEVER, the Court cited “Black, Interpretation of Laws” for an exception - that
when the parts of the statute are so mutually dependent and connected as to
warrant a belief that the legislature intended them as a whole, and that legislature
would not pass the residue independently if some parts are unconstitutional, all
provisions that are dependent, connected or conditional must fall with them.
 The exception is also found in jurisprudence (same idea but reworded), adding
that the valid portion must be so far independent from the invalid portion as to
presume that legislature would have enacted it by itself. Also, what remains must
express the legislative will independently of the void part, since the court has no
power to legislate.
 AS APPLIED: Did Congress intend that the 9 barrios in Lanao still create
Dianaton, if the 12 barriors in Cotabato were to be exlcluded?
 [TOPIC] Municipal corporations perform twin functions:
 (1) They serve as an instrumentality of the State in carrying out the functions
of government.
 (2) They act as an agency of the community in the administration of local
affairs. This makes the municipal corporation a separate entity acting for its
own purpose and not a subdivision of the state.
 Population, territory and income are factors that should be considered in
determining whether a group of barrios is capable of maintaining itself as an
independent municipality.
 These factors were considered when the said law was still a House Bill. When
the bill was presented in Congress, the totality of the 21 barrios was in the mind
of the proponent. The seat of government was meant to be in Togaig (see again
the law in NOTES), which is in Cotabato.
 The reduced area poses a number of questions, which the court cannot answer
as it would impute to Congress an undeclared will (e.g. can we assume that the
remaining barrios would have formed a municipality? Would their cinome be
enough? Could the factors above still be sustained if applied to 9 instead of 21
municipalities?).
 Thus, to say that Congress intended to create Dianaton with only 9 of the original
21 barrios, with a seat of government still left to be conjectured, would unduly
10
stretch the judicial interpretation of congressional intent beyond credibility point. It
is the function of the congress to spell out such congressional will.
 Thus, RA 4790 is indivisible and is accordingly null and void in its totality.
Whether petitioner has substantial legal interest adversely affected by the
implementation of RA 4790/ whether he is a real party in interest - YES.
 As the statute is challenged on the ground of the one bill, one title requirement,
capacity to sue, therefore, hinges on whether petitioner’s substantial rights or
interests are impaired by lack of notification in the title that the barrio in Parang,
Cotabato, where he is residing has been transferred to a different provincial
hegemony.
 Petitioner is a qualified voter; the right to vote in his own barrio is affected by the
annexation of his town. He may not want to vote in a town different from his
actual residence, and he may not even know the candidates in the new town.
 Since by constitutional direction the purpose of a bill must be shown in its title for
the benefit, amongst others, of the community affected thereby, it stands to
reason to say that when the constitutional right to vote on the part of any citizen
of that community is affected, he may become a suitor to challenge the
constitutionality of the Act as passed by Congress.
FERNANDO, J., DISSENTING
 The mere fact that in the body of such statute barrios found in two other
municipalities of another province were included does not of itself suffice for a
finding of nullity by virtue of the constitutional provision invoked.
 The one bill, one subject requirement is not to be narrowly construed as to cripple
or impede proper legislation. The construction must be reasonable and not
technical. It is sufficient if the title be comprehensive enough reasonably to
include the general object which the statute seeks to effect without expressing
each and every end and means necessary for the accomplishment of that object.
The constitutional provision is satisfied if all parts of an act, which relates to its
subject find expression in its title.
 He used jurisprudence to bolster this, citing Government v HSBC, which
contained a similar issue, where he explained that the present trend was that the
one bill, one subject requirement is to be given the liberal test as indicated in the
majority decision in that case, and not the strict test as enunciated in Justice
Laurel’s dissent (which is more akin to the majority in this case). This trend
continued on to Sumulong v COMELEC up to Felwa v Salas (1966).
 Even if the Court decided against the constitutionality of RA 3836 for the same
reason in Philconsa v Gimenez, where the law subject to controversy, being an
amendment, was not germane to the law it amended, the Court in that case still
mentioned that there was no abandonment of the principle/ trend of liberality.
 In this case, RA 4790 should not have been held to violate the requirement. The
subject was the creation of the municipality of Dianaton. This was embodied in
the title.
 The several barrios outside Lanao that were included in Dianaton should not in
itself have raised the constitutional question considering the broad, well-high
plenary powers possessed by Congress to alter provincial and municipal
boundaries. What justified the majority to resort to this was Congress’ faulre to
make explicit that 2 municipalities were taken away from Cotabato.
 RA 4790 must be instead construed to exclude all barrios mentioned, but not
found inside Lanao, pursuant to the title (as in automatically exclude them without

invalidating the law). He cited Radiowealth v Agregado where the Court gave a
“construction which would be more in harmony with the tenets of the fundamental
law.”
 He also cited American SC decisions, wherein the main theme is that “(i)t is our
(the Court’s) duty in the interpretation of federal statutes to reach conclusion
which will avoid serious doubt of their constitutionality.”
 Thus according to Philippine and American decisions, legislative measures
should not be given a construction which will imperil its validity where it is
reasonably open to construction free from such peril.
 Such doctrine should be applied in construing RA 4790.
NOTES:
RA 4790
 SECTION 1. Barrios Togaig, Madalum, Bayanga, Langkong, Sarakan, Kat-bo,
Digakapan, Magabo, Tabangao, Tiongko, Colodan, Kabamakawan, Kapatagan,
Bongabong, Aipang, Dagowan, Bakikis, Bungabung, Losain, Matimos and
Magolatung, in the Municipalities of Butig and Balabagan, Province of Lanao del
Sur are separated from said municipalities and constituted into a distinct
and independent municipality of the same province to be known as the
Municipality of Dianaton, Province of Lanao del Sur. The seat of government of
the municipality shall be in Togaig.
 SEC. 2. The first mayor, vice-mayor and councilors of the new municipality shall
be elected in the nineteen hundred sixty-seven general elections for local
officials.
 SEC. 3. This Act shall take effect upon its approval.
Comelec Resoultion of Aug. 15, 1967
 For purposes of establishment of precincts, registration of voters and for other
election purposes, the Commission RESOLVED that pursuant to RA 4790, the
new municipality of Dianaton, Lanao del Sur shall comprise the barrios of:
 Kapatagan, Bongabong, Aipang, Dagowan, Bakikis, Bungabung, Losain,
Matimos and Magolatung situated in the municipality of Balabagan, Lanao
del Sur,
 the barrios of Togaig and Madalum situated in the municipality of Buldon,
Cotabato, the barrios of Bayanga, Langkong, Sarakan Kat-bo, Digakapan,
Magabo, Tabangao, Tiongko, Colodan and Kabamakawan situated in the
municipality of Parang, also of Cotabato.
 Dome;
[G.R. No. 148622. September 12, 2002]
REPUBLIC OF THE PHILIPPINES, represented by HON. HEHERSON T.
ALVAREZ, in his capacity as Secretary of the DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES (DENR), CLARENCE L.
BAGUILAT, in his capacity as the Regional Executive Director of DENR-
Region XI and ENGR. BIENVENIDO L. LIPAYON, in his capacity as the
Regional Director of the DENR-ENVIRONMENTAL MANAGEMENT
BUREAU (DENR-EMB), Region XI, petitioners, vs. THE CITY OF
DAVAO, represented by BENJAMIN C. DE GUZMAN, City
Mayor, respondent.
DECISION
YNARES-SANTIAGO, J.:
11
Before us is a petition for review[1] on certiorari assailing the decision[2] dated
May 28, 2001 of the Regional Trial Court of Davao City, Branch 33, which granted the
writ of mandamus and injunction in favor of respondent, the City of Davao, and
against petitioner, the Republic, represented by the Department of Environment and
Natural Resources (DENR). The trial court also directed petitioner to issue a
Certificate of Non-Coverage in favor of respondent.
The antecedent facts of the case are as follows:
On August 11, 2000, respondent filed an application for a Certificate of Non-
Coverage (CNC) for its proposed project, the Davao City Artica Sports Dome, with the
Environmental Management Bureau (EMB), Region XI. Attached to the application
were the required documents for its issuance, namely, a) detailed location map of the
project site; b) brief project description; and c) a certification from the City Planning
and Development Office that the project is not located in an environmentally critical
area (ECA). The EMB Region XI denied the application after finding that the proposed
project was within an environmentally critical area and ruled that, pursuant to Section
2, Presidential Decree No. 1586, otherwise known as the Environmental Impact
Statement System, in relation to Section 4 of Presidential Decree No, 1151, also
known as the Philippine Environment Policy, the City of Davao must undergo the
environmental impact assessment (EIA) process to secure an Environmental
Compliance Certificate (ECC), before it can proceed with the construction of its
project.
Believing that it was entitled to a Certificate of Non-Coverage, respondent filed a
petition for mandamus and injunction with the Regional Trial Court of Davao,
docketed as Civil Case No. 28,133-2000. It alleged that its proposed project was
neither an environmentally critical project nor within an environmentally critical area;
thus it was outside the scope of the EIS system. Hence, it was the ministerial duty of
the DENR, through the EMB-Region XI, to issue a CNC in favor of respondent upon
submission of the required documents.
The Regional Trial Court rendered judgment in favor of respondent, the
dispositive portion of which reads as follows:
WHEREFORE, finding the petition to be meritorious, judgment granting the writ of
mandamus and injunction is hereby rendered in favor of the petitioner City of Davao
and against respondents Department of Environment and Natural Resources and the
other respondents by:
1) directing the respondents to issue in favor of the petitioner City of Davao a
Certificate of Non-Coverage, pursuant to Presidential Decree No. 1586 and related
laws, in connection with the construction by the City of Davao of the Artica Sports
2) making the preliminary injunction issued on December 12, 2000 permanent.
Costs de oficio.
SO ORDERED.[3]
The trial court ratiocinated that there is nothing in PD 1586, in relation to PD
1151 and Letter of Instruction No. 1179 (prescribing guidelines for compliance with
the EIA system), which requires local government units (LGUs) to comply with the EIS
law. Only agencies and instrumentalities of the national government, including
government owned or controlled corporations, as well as private corporations, firms
and entities are mandated to go through the EIA process for their proposed projects
which have significant effect on the quality of the environment. A local government
unit, not being an agency or instrumentality of the National Government, is deemed
excluded under the principle of expressio unius est exclusio alterius.
The trial court also declared, based on the certifications of the DENR-
Community Environment and Natural Resources Office (CENRO)-West, and the data

gathered from the Philippine Institute of Volcanology and Seismology (PHIVOLCS),
that the site for the Artica Sports Dome was not within an environmentally critical
area. Neither was the project an environmentally critical one. It therefore becomes
mandatory for the DENR, through the EMB Region XI, to approve respondents
application for CNC after it has satisfied all the requirements for its
issuance. Accordingly, petitioner can be compelled by a writ of mandamus to issue
the CNC, if it refuses to do so.
Petitioner filed a motion for reconsideration, however, the same was
denied. Hence, the instant petition for review.
With the supervening change of administration, respondent, in lieu of a
comment, filed a manifestation expressing its agreement with petitioner that, indeed, it
needs to secure an ECC for its proposed project. It thus rendered the instant petition
moot and academic. However, for the guidance of the implementors of the EIS law
and pursuant to our symbolic function to educate the bench and bar, [4] we are inclined
to address the issue raised in this petition.
Section 15 of Republic Act 7160,[5] otherwise known as the Local Government
Code, defines a local government unit as a body politic and corporate endowed with
powers to be exercised by it in conformity with law. As such, it performs dual
functions, governmental and proprietary. Governmental functions are those that
concern the health, safety and the advancement of the public good or welfare as
affecting the public generally.[6] Proprietary functions are those that seek to obtain
special corporate benefits or earn pecuniary profit and intended for private advantage
and benefit.[7] When exercising governmental powers and performing governmental
duties, an LGU is an agency of the national government. [8] When engaged in
corporate activities, it acts as an agent of the community in the administration of local
affairs.[9]
Found in Section 16 of the Local Government Code is the duty of the LGUs to
promote the peoples right to a balanced ecology.[10] Pursuant to this, an LGU, like the
City of Davao, can not claim exemption from the coverage of PD 1586. As a body
politic endowed with governmental functions, an LGU has the duty to ensure the
quality of the environment, which is the very same objective of PD 1586.
Further, it is a rule of statutory construction that every part of a statute must be
interpreted with reference to the context, i.e., that every part must be considered with
other parts, and kept subservient to the general intent of the enactment. [11] The trial
court, in declaring local government units as exempt from the coverage of the EIS
law, failed to relate Section 2 of PD 1586[12] to the following provisions of the same
law:
WHEREAS, the pursuit of a comprehensive and integrated environmental protection
program necessitates the establishment and institutionalization of a system whereby
the exigencies of socio-economic undertakings can be reconciled with the
requirements of environmental quality; x x x.
Section 1. Policy. It is hereby declared the policy of the State to attain and maintain a
rational and orderly balance between socio-economic growth and environmental
protection.
xxxxxxxxx
Section 4. Presidential Proclamation of Environmentally Critical Areas and
Projects. The President of the Philippines may, on his own initiative or upon
recommendation of the National Environmental Protection Council, by proclamation
declare certain projects, undertakings or areas in the country as environmentally
critical. No person, partnership or corporation shall undertake or operate any such
declared environmentally critical project or area without first securing an
Environmental Compliance Certificate issued by the President or his duly authorized
12
representative. For the proper management of said critical project or area, the
President may by his proclamation reorganize such government offices, agencies,
institutions, corporations or instrumentalities including the realignment of government
personnel, and their specific functions and responsibilities.
Section 4 of PD 1586 clearly states that no person, partnership or corporation
shall undertake or operate any such declared environmentally critical project or area
without first securing an Environmental Compliance Certificate issued by the
President or his duly authorized representative.[13] The Civil Code defines a person as
either natural or juridical. The state and its political subdivisions, i.e., the local
government units[14] are juridical persons.[15] Undoubtedly therefore, local government
units are not excluded from the coverage of PD 1586.
Lastly, very clear in Section 1 of PD 1586 that said law intends to implement the
policy of the state to achieve a balance between socio-economic development and
environmental protection, which are the twin goals of sustainable development. The
above-quoted first paragraph of the Whereas clause stresses that this can only be
possible if we adopt a comprehensive
and integrated environmental protection program where all the sectors of the
community are involved, i.e., the government and the private sectors. The local
government units, as part of the machinery of the government, cannot therefore be
deemed as outside the scope of the EIS system.[16]
The foregoing arguments, however, presuppose that a project, for which an
Environmental Compliance Certificate is necessary, is environmentally critical or
within an environmentally critical area. In the case at bar, respondent has sufficiently
shown that the Artica Sports Dome will not have a significant negative environmental
impact because it is not an environmentally critical project and it is not located in an
environmentally critical area. In support of this contention, respondent submitted the
following:
1. Certification from the City Planning and Development Office that the project is not
located in an environmentally critical area;
2. Certification from the Community Environment and Natural Resources Office
(CENRO-West) that the project area is within the 18-30% slope, is outside the scope
of the NIPAS (R.A. 7586), and not within a declared watershed area; and
3. Certification from PHILVOCS that the project site is thirty-seven (37) kilometers
southeast of the southernmost extension of the Davao River Fault and forty-five (45)
kilometers west of the Eastern Mindanao Fault; and is outside the required minimum
buffer zone of five (5) meters from a fault zone.
The trial court, after a consideration of the evidence, found that the Artica Sports
Dome is not within an environmentally critical area. Neither is it an environmentally
critical project. It is axiomatic that factual findings of the trial court, when fully
supported by the evidence on record, are binding upon this Court and will not be
disturbed on appeal.[17]This Court is not a trier of facts.[18]
There are exceptional instances when this Court may disregard factual findings
of the trial court, namely: a) when the conclusion is a finding grounded entirely on
speculations, surmises, or conjectures; b) when the inference made is manifestly
mistaken, absurd, or impossible; c) where there is a grave abuse of discretion; d)
when the judgment is based on a misapprehension of facts; e) when the findings of
fact are conflicting; f) when the Court of Appeals, in making its findings, went beyond
the issues of the case and the same are contrary to the admissions of both appellant
and appellee; g) when the findings of the Court of Appeals are contrary to those of the
trial court; h) when the findings of fact are conclusions without citation of specific
evidence on which they are based; i) when the finding of fact of the Court of Appeals
is premised on the supposed absence of evidence but is contradicted by the evidence

on record; and j) when the Court of Appeals manifestly overlooked certain relevant
facts not disputed by the parties and which, if properly considered, would justify a
different conclusion.[19] None of these exceptions, however, obtain in this case.
The Environmental Impact Statement System, which ensures environmental
protection and regulates certain government activities affecting the environment, was
established by Presidential Decree No. 1586. Section 2 thereof states:
There is hereby established an Environmental Impact Statement System founded and
based on the environmental impact statement required under Section 4 of
Presidential Decree No. 1151, of all agencies and instrumentalities of the national
government, including government-owned or controlled corporations, as well as
private corporations, firms and entities, for every proposed project and undertaking
which significantly affect the quality of the environment.
Section 4 of PD 1151, on the other hand, provides:
Environmental Impact Statements. Pursuant to the above enunciated policies and
goals, all agencies and instrumentalities of the national government, including
government-owned or controlled corporations, as well as private corporations, firms
and entities shall prepare, file and include in every action, project or undertaking
which significantly affects the quality of the environment a detailed statement on
(a) the environmental impact of the proposed action, project or undertaking
(b) any adverse environmental effect which cannot be avoided should the proposal be
implemented
(c) alternative to the proposed action
(d) a determination that the short-term uses of the resources of the environment are
consistent with the maintenance and enhancement of the long-term productivity of the
same; and
(e) whenever a proposal involves the use of depletable or nonrenewable resources, a
finding must be made that such use and commitment are warranted.
Before an environmental impact statement is issued by a lead agency, all agencies
having jurisdiction over, or special expertise on, the subject matter involved shall
comment on the draft environmental impact statement made by the lead agency
within thirty (30) days from receipt of the same.
Under Article II, Section 1, of the Rules and Regulations Implementing PD 1586,
the declaration of certain projects or areas as environmentally critical, and which shall
fall within the scope of the Environmental Impact Statement System, shall be by
Presidential Proclamation, in accordance with Section 4 of PD 1586 quoted above.
Pursuant thereto, Proclamation No. 2146 was issued on December 14, 1981,
proclaiming the following areas and types of projects as environmentally critical and
within the scope of the Environmental Impact Statement System established under
PD 1586:
A. Environmentally Critical Projects
I. Heavy Industries
a. Non-ferrous metal industries
b. Iron and steel mills
c. Petroleum and petro-chemical industries including oil and gas
d. Smelting plants
II. Resource Extractive Industries
a. Major mining and quarrying projects
b. Forestry projects
1. Logging
2. Major wood processing projects
3. Introduction of fauna (exotic-animals) in
public/private forests
13
4. Forest occupancy
5. Extraction of mangrove products
6. Grazing
c. Fishery Projects
1. Dikes for/and fishpond development projects
III. Infrastructure Projects
a. Major dams
b. Major power plants (fossil-fueled, nuclear fueled,
hydroelectric or geothermal)
c. Major reclamation projects
d. Major roads and bridges
B. Environmentally Critical Areas
1. All areas declared by law as national parks, watershed reserves,
wildlife preserves and sanctuaries;
2. Areas set aside as aesthetic potential tourist spots;
3. Areas which constitute the habitat for any endangered or
threatened species of indigenous Philippine Wildlife (flora and
fauna);
4. Areas of unique historic, archaeological, or scientific interests;
5. Areas which are traditionally occupied by cultural communities or tribes;
6. Areas frequently visited and/or hard-hit by natural calamities
(geologic hazards, floods, typhoons, volcanic activity, etc.);
7. Areas with critical slopes;
8. Areas classified as prime agricultural lands;
9. Recharged areas of aquifers;
10. Water bodies characterized by one or any combination of the following conditions;
a. tapped for domestic purposes
b. within the controlled and/or protected areas declared by
appropriate authorities
c. which support wildlife and fishery activities
11. Mangrove areas characterized by one or any combination of the following
conditions:
a. with primary pristine and dense young growth;
b. adjoining mouth of major river systems;
c. near or adjacent to traditional productive fry or fishing
grounds;
d. which act as natural buffers against shore erosion,
strong winds and storm floods;
e. on which people are dependent for their livelihood.
12. Coral reefs, characterized by one or any combinations of the following conditions:
a. with 50% and above live coralline cover;
b. spawning and nursery grounds for fish;
c. which act as natural breakwater of coastlines.
In this connection, Section 5 of PD 1586 expressly states:
Environmentally Non-Critical Projects. All other projects, undertakings and areas not
declared by the President as environmentally critical shall be considered as non-
critical and shall not be required to submit an environmental impact statement. The
National Environmental Protection Council, thru the Ministry of Human Settlements
may however require non-critical projects and undertakings to provide additional
environmental safeguards as it may deem necessary.
The Artica Sports Dome in Langub does not come close to any of the projects or
areas enumerated above. Neither is it analogous to any of them. It is clear, therefore,
 14

that the said project is not classified as environmentally critical, or within an

environmentally critical area. Consequently, the DENR has no choice but to issue the
Certificate of Non-Coverage. It becomes its ministerial duty, the performance of which
can be compelled by writ of mandamus, such as that issued by the trial court in the
case at bar.
WHEREFORE, in view of the foregoing, the instant petition is DENIED. The
decision of the Regional Trial Court of Davao City, Branch 33, in Civil Case No.
28,133-2000, granting the writ of mandamus and directing the Department of
Environment and Natural Resources to issue in favor of the City of Davao a
Certificate of Non-Coverage, pursuant to Presidential Decree No. 1586 and related
laws, in connection with the construction of the Artica Sports Dome, is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, and Carpio, JJ., concur.