G.R. No.

88979 February 7, 1992

LYDIA O. CHUA, petitioner,

vs.
THE CIVIL SERVICE COMMISSION, THE NATIONAL IRRIGATION
ADMINISTRATION and THE DEPARTMENT OF BUDGET AND
MANAGEMENT, respondents.

PADILLA, J.:

Pursuant to the policy of streamlining and trimming the bureaucracy, Republic

Act No. 6683 was approved on 2 December 1988 providing for benefits for early
retirement and voluntary separation from the government service as well as for
involuntary separation due to reorganization. Deemed qualified to avail of its
benefits are those enumerated in Sec. 2 of the Act, as follows:

Sec. 2. Coverage. — This Act shall cover all appointive officials and
employees of the National Government, including government-
owned or controlled corporations with original charters, as well as
the personnel of all local government units. The benefits
authorized under this Act shall apply to all regular, temporary,
casual and emergency employees, regardless of age, who have
rendered at least a total of two (2) consecutive years of government
service as of the date of separation. Uniformed personnel of the
Armed Forces of the Philippines including those of the PC-INP are
excluded from the coverage of this Act.

Petitioner Lydia Chua believing that she is qualified to avail of the benefits of
the program, filed an application on 30 January 1989 with respondent National
Irrigation Administration (NIA) which, however, denied the same; instead, she
was offered separation benefits equivalent to one half (1/2) month basic pay for
every year of service commencing from 1980. A recourse by petitioner to the
Civil Service Commission yielded negative results. 1 Her letter for
reconsideration dated 25 April 1989 pleaded thus:

xxx xxx xxx

With due respect, I think the interpretation of the Honorable

Commissioner of RA 6683 does not conform with the beneficent
purpose of the law. The law merely requires that a government
employee whether regular, temporary, emergency, or casual,
should have two consecutive years of government service in order
to be entitled to its benefits. I more than meet the requirement.
Persons who are not entitled are consultants, experts and
 contractual(s). As to the budget needed, the law provides that the
Department of Budget and Management will shoulder a certain
portion of the benefits to be allotted to government corporations.
Moreover, personnel of these NIA special projects art entitled to the
regular benefits, such (sic) leaves, compulsory retirement and the
like. There is no reason why we should not be entitled to RA 6683.

xxx xxx xxx 2

Denying the plea for reconsideration, the Civil Service Commission (CSC)
emphasized:

xxx xxx xxx

We regret to inform you that your request cannot be granted. The

provision of Section 3.1 of Joint DBM-CSC Circular Letter No. 89-1
does not only require an applicant to have two years of satisfactory
service on the date of separation/retirement but further requires
said applicant to be on a casual, emergency, temporary or regular
employment status as of December 2, 1988, the date of enactment
of R.A. 6683. The law does not contemplate contractual employees
in the coverage.

Inasmuch as your employment as of December 31, 1988, the date

of your separation from the service, is co-terminous with the NIA
project which is contractual in nature, this Commission shall
sustain its original decision.

xxx xxx xxx3

In view of such denial, petitioner is before this Court by way of a special civil
action for certiorari, insisting that she is entitled to the benefits granted under
Republic Act No. 6683. Her arguments:

It is submitted that R.A. 6683, as well as Section 3.1 of the Joint

DBM-CSC Circular Letter No. 89-1 requires an applicant to be on a
casual, emergency, temporary or regular employment status.
Likewise, the provisions of Section 23 (sic) of the Joint DBM-CSC
Circular Letter No. 88-1, implementing guidelines of R.A. No. 6683,
provides:

"2.3 Excluded from the benefits under R.A. No. 6683

are the following:

a) Experts and Consultants hired by agencies for a

limited period to perform specific activities or services
 with a definite expected output: i.e. membership in
Task Force, Part-Time, Consultant/Employees.

b) Uniformed personnel of the Armed Forces of the

Philippines including those of the Philippine
Constabulary and Integrated National Police (PC-INP).

c) Appointive officials and employees who retire or elect

to be separated from the service for optional retirement
with gratuity under R.A. No. 1616, 4968 or with
pension under R.A. No. 186, as amended by R.A. No.
6680 or P.D. No. 1146, an amended, or vice- versa.

d) Officials and employees who retired voluntarily prior

to the enactment of this law and have received the
corresponding benefits of that retirement/separation.

e) Officials and employees with pending cases

punishable by mandatory separation from the service
under existing civil service laws, rules and regulations;
provided that if such officials and employees apply in
writing within the prescriptive period for the availment
of the benefits herein authorized, shall be allowed only
if acquitted or cleared of all charges and their
application accepted and approved by the head of
office concerned."

Based on the above exclusions, herein petitioner does not belong to

any one of them. Ms. Chua is a full time employee of NIA entitled
to all the regular benefits provided for by the Civil Service
Commission. She held a permanent status as Personnel Assistant
A, a position which belongs to the Administrative Service. . . . If
casuals and emergency employees were given the benefit of R.A.
6683 with more reason that this petitioner who was holding a
permanent status as Personnel Assistant A and has rendered
almost 15 years of faithful, continuous service in the government
should be similarly rewarded by the beneficient (sic) purpose of the
law. 4

The NIA and the Civil Service Commission reiterate in their comment
petitioner's exclusion from the benefits of Republic Act No. 6683, because:

1. Petitioner's employment is co-terminous with the project per appointment

papers kept by the Administrative Service in the head office of NIA (the service
record was issued by the Watershed Management and Erosion Control Project
(WMECP), Pantabangan, Nueva Ecija). The project, funded by the World Bank,
was completed as of 31 December 1988, after which petitioner's position
became functus officio.

2. Petitioner is not a regular and career employee of NIA — her position is not
included in its regular plantilla. She belongs to the non-career service (Sec. 6,
P.D. No. 807) which is inherently short-lived, temporary and transient; on the
other hand, retirement presupposes employment for a long period. The most
that a non-career personnel can expect upon the expiration of his employment
is financial assistance. Petitioner is not even qualified to retire under the GSIS
law.

3. Assuming arguendo that petitioner's appointment is permanent, security of

tenure is available only for the term of office (i.e., duration of project).

4. The objective of Republic Act No. 6683 is not really to grant separation or
retirement benefits but reorganization 5to streamline government functions.
The application of the law must be made consistent with the purpose for which
it was enacted. Thus, as the expressed purpose of the law is to reorganize the
government, it will not have any application to special projects such as the
WMECP which exists only for a short and definite period. This being the nature
of special projects, there is no necessity for offering its personnel early
retirement benefits just to induce voluntary separation as a step to
reorganization. In fact, there is even no need of reorganizing the WMECP
considering its short and limited life-span. 6

5. The law applies only to employees of the national government, government-

owned or controlled corporations with original charters and local government
units.

Due to the impossibility of reconciling the conflicting interpretations of the

parties, the Court is called upon to define the different classes of employees in
the public sector (i.e. government civil servants).

Who are regular employees? The Labor Code in Art. 280 (P.D. No. 492, as
amended) deems an employment regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual
business or trade of the employer. No equivalent definition can be found in
P.D.No. 807 (promulgated on 6 October 1975, which superseded the Civil
Service Act of 1965 — R.A. No. 2260) or in the Administrative Code of 1987
(Executive Order No. 292 promulgated on 25 July 1987). The Early Retirement
Law itself (Rep. Act No. 6683) merely includes such class of employees (regular
employees) in its coverage, unmindful that no such specie is employed in the
public sector.

The appointment status of government employees in the career service is

classified as follows:
1. permanent — one issued to a person who has met the requirements of the
position to which appointment is made, in accordance with the provisions of
the Civil Service Act and the Rules and Standards promulgated in pursuance
thereof; 7

2. temporary — In the absence of appropriate eligibles and it becomes

necessary in the public interest to fill a vacancy, a temporary appointment
should be issued to a person who meets all the requirements for the position to
which he is being appointed except the appropriate civil service eligibility:
Provided, That such temporary appointment shall not exceed twelve months,
but the appointee may be replaced sooner if a qualified civil service eligible
becomes available. 8

The Administrative Code of 1987 characterizes the Career Service as:

(1) Open Career positions for appointment to which prior

qualification in an appropriate examination is required;

(2) Closed Career positions which are scientific, or highly technical

in nature; these include the faculty and academic staff of state
colleges and universities, and scientific and technical positions in
scientific or research institutions which shall establish and
maintain their own merit systems;

(3) Positions in the Career Executive Service; namely,

Undersecretary, Assistant Secretary, Bureau Director, Assistant
Bureau Director, Regional Director, Assistant Regional Director,
Chief of Department Service and other officers of equivalent rank
as may be identified by the Career Executive Service Board, all of
whom are appointed by the President.

(4) Career officers, other than those in the Career Executive

Service, who are appointed by the President, such as the Foreign
Service Officers in the Department of Foreign Affairs;

(5) Commission officers and enlisted men of the Armed Forces

which shall maintain a separate merit system;

(6) Personnel of government-owned or controlled corporations,

whether performing governmental or proprietary functions, who do
not fall under the non-career service; and

(7) Permanent laborers, whether skilled, semi-skilled, or

unskilled. 9

The Non-Career Service, on the other hand, is characterized by:

 . . . (1) entrance on bases other than those of the usual tests of
merit and fitness utilized for the career service; and (2) tenure
which is limited to a period specified by law, or which is
coterminous with that of the appointing authority or subject to his
pleasure, or which is limited to the duration of a particular project
for which purpose employment was made.

Included in the non-career service are:

1. elective officials and their personal or confidential staff;

2. secretaries and other officials of Cabinet rank who hold their

positions at the pleasure of the President and their personal
confidential staff(s);

3. Chairman and Members of Commissions and boards with fixed

terms of office and their personal or confidential staff;

4. contractual personnel or those whose employment in the

government is in accordance with a special contract to undertake a
specific work or job requiring special or technical skills not
available in the employing agency, to be accomplished within a
specific period, which in no case shall exceed one year and
performs or accomplishes the specific work or job, under his own
responsibility with a minimum of direction and supervision from
the hiring agency.

5. emergency and seasonal personnel. 10

There is another type of non-career employee:

Casual — where and when employment is not permanent but

occasional, unpredictable, sporadic and brief in nature (Caro v.
Rilloroza, 102 Phil. 70; Manuel v. P.P. Gocheco Lumber Co., 96
Phil. 945)

Consider petitioner's record of service:

Service with the government commenced on 2 December 1974

designated as a laborer holding emergency status with the NIA —
Upper Pampanga River Project, R & R Division. 11 From 24 March
1975 to 31 August 1975, she was a research aide
with temporary status on the same project. On 1 September 1975
to 31 December 1976, she was with the NIA-FES III; R & R
Division, then on 1 January 1977 to 31 May 1980, she was with
NIA — UPR IIS (Upper Pampanga River Integrated Irrigation
 Systems) DRD. On 1 June 1980, she went to NIA — W.M.E.C.P.
(Watershed Management & Erosion Control Project) retaining the
status of temporary employee. While with this project, her
designation was changed to personnel assistant on 5 November
1981; starting 9 July 1982, the status became permanent until the
completion of the project on 31 December 1988. The appointment
paper 12attached to the OSG's comment lists her status as co-
terminus with the Project.

The employment status of personnel hired under foreign — assisted projects is

considered co-terminous, that is, they are considered employees for the
duration of the project or until the completion or cessation of said project (CSC
Memorandum Circular No. 39, S. 1990, 27 June 1990).

Republic Act No. 6683 seeks to cover and benefits regular, temporary,
casual and emergency employees who have rendered at least a total of two (2)
consecutive years government service.

Resolution No. 87-104 of the CSC, 21 April 1987, provides:

WHEREAS, pursuant to Executive Order No. 966 dated June 22,

1984, the Civil Service Commission is charged with the function of
determining creditable services for retiring officers and employees
of the national government;

WHEREAS, Section 4 (b) of the same Executive Order No. 966

provides that all previous services by an officer/employee pursuant
to a duly approved appointment to a position in the Civil Service
are considered creditable services, while Section 6 (a) thereof states
that services rendered on contractual, emergency or casual status
are non-creditable services;

WHEREAS, there is a need to clarify the aforesaid provisions

inasmuch as some contractual, emergency or casual employment
are covered by contracts or appointments duly approved by the
Commission.

NOW, therefore, the Commission resolved that services rendered on

contractual, emergency or casual status, irrespective of the mode or
manner of payment therefor shall be considered as creditable for
retirement purposes subject to the following conditions: (emphasis
provided)

1. These services are supported by approved

appointments, official records and/or other competent
 evidence. Parties/agencies concerned shall submit the
necessary proof of said services;

2. Said services are on full time basis and rendered

prior to June 22, 1984, the effectivity date of Executive
Order No. 966; and

3. The services for the three (3) years period prior to

retirement are continuous and fulfill the service
requirement for retirement.

What substantial differences exist, if any, between casual, emergency,

seasonal, project, co-terminous or contractual personnel? All are tenurial
employees with no fixed term, non-career, and temporary. The 12 May 1989
CSC letter of denial 13 characterized herein petitioner's employment as co-
terminous with the NIA project which in turn was contractual in nature. The
OSG says petitioner's status is co-terminous with the Project. CSC
Memorandum Circular No. 11, series of 1991 (5 April 1991) characterizes the
status of a co-terminous employee —

(3) Co-terminous status shall be issued to a person whose entrance

in the service is characterized by confidentiality by the appointing
authority or that which is subject to his pleasure or co-existent
with his tenure.

The foregoing status (co-terminous) may be further classified into

the following:

a) co-terminous with the project — When the

appointment is co-existent with the duration of a
particular project for which purpose employment was
made or subject to the availability of funds for the
same;

b) co-terminous with the appointing authority — when

appointment is co-existent with the tenure of the
appointing authority.

c) co-terminous with the incumbent — when

appointment is co-existent with the appointee, in that
after the resignation, separation or termination of the
services of the incumbent the position shall be deemed
automatically abolished; and

d) co-terminous with a specific period, e.g. "co-

terminous for a period of 3 years" — the appointment
 is for a specific period and upon expiration thereof, the
position is deemed abolished.

It is stressed, however, that in the last two classifications (c) and

(d), what is termed co-terminous is the position, and not the
appointee-employee. Further, in (c) the security of tenure of the
appointee is guaranteed during his incumbency; in (d) the security
of tenure is limited to a specific period.

A co-terminous employee is a non-career civil servant,

like casual and emergency employees. We see no solid reason why the latter are
extended benefits under the Early Retirement Law but the former are not. It
will be noted that Rep. Act No. 6683 expressly extends its benefits for early
retirement to regular, temporary, casual and emergency employees. But
specifically excluded from the benefits are uniformed personnel of the AFP
including those of the PC-INP. It can be argued that, expressio unius est
exclusio alterius. The legislature would not have made a specific enumeration
in a statute had not the intention been to restrict its meaning and confine its
terms and benefits to those expressly mentioned 14 or casus omissus pro omisso
habendus est — A person, object or thing omitted from an enumeration must
be held to have been omitted intentionally. 15 Yet adherence to these legal
maxims can result in incongruities and in a violation of the equal protection
clause of the Constitution.

The case of Fegurin, et al. v. NLRC, et al., 16 comes to mind where, workers
belonging to a work pool, hired and re-hired continuously from one project to
another were considered non-project-regular and permanent employees.

Petitioner Lydia Chua was hired and re-hired in four (4) successive projects
during a span of fifteen (15) years. Although no proof of the existence of a work
pool can be assumed, her service record cannot be disregarded.

Art. III, Sec. 1 of the 1987 Constitution guarantees: "No person shall be
deprived of life, liberty, or property without due process of law, nor shall any
person be denied the equal protection of the laws."

. . . In Felwa vs. Salas, L-26511, Oct. 29, 1966, We ruled that the
equal protection clause applies only to persons or things identically
situated and does not bar a reasonable classification of the subject
of legislation, and a classification is reasonable where (1) it is
based on substantial distinctions which make real differences; (2)
these are germane to the purpose of the law; (3) the classification
applies not only to present conditions but also to future conditions
which are substantially identical to those of the present; (4) the
classification applies only to those who belong to the same class. 17
Applying the criteria set forth above, the Early Retirement Law would violate
the equal protection clause were we to sustain respondents' submission that
the benefits of said law are to be denied a class of government employees who
are similarly situated as those covered by said law. The maxim of Expressio
unius est exclusio alterius should not be the applicable maxim in this case but
the doctrine of necessary implication which holds that:

No statute can be enacted that can provide all the details involved
in its application. There is always an omission that may not meet a
particular situation. What is thought, at the time of enactment, to
be an all-embracing legislation may be inadequate to provide for
the unfolding events of the future. So-called gaps in the law
develop as the law is enforced. One of the rules of statutory
construction used to fill in the gap is the doctrine of necessary
implication. The doctrine states that what is implied in a statute is
as much a part thereof as that which is expressed. Every statute is
understood, by implication, to contain all such provisions as may
be necessary to effectuate its object and purpose, or to make
effective rights, powers, privileges or jurisdiction which it grants,
including all such collateral and subsidiary consequences as may
be fairly and logically inferred from its terms. Ex necessitate legis.
And every statutory grant of power, right or privilege is deemed to
include all incidental power, right or privilege. This is so because
the greater includes the lesser, expressed in the Maxim, in eo plus
sit, simper inest et minus. 18

During the sponsorship speech of Congressman Dragon (re: Early Retirement

Law), in response to Congressman Dimaporo's interpellation on coverage
of state university employees who are extended appointments for one (1) year,
renewable for two (2) or three (3) years, 19 he explained:

This Bill covers only those who would like to go on early retirement
and voluntary separation. It is irrespective of the actual status or
nature of the appointment one received, but if he opts to retire
under this, then he is covered.

It will be noted that, presently Pending in Congress, is House Bill No. 33399 (a
proposal to extend the scope of the Early Retirement Law). Its wording supports
the submission that Rep. Act No. 6683 indeed overlooked a qualified group of
civil servants. Sec. 3 of said House bill, on coverage of early retirement, would
provide:

Sec. 3. Coverage. — It will cover all employees of the national

government, including government-owned or controlled
corporations, as well as the personnel of all local government
units. The benefits authorized under this Act shall apply to
 all regular, temporary, casual, emergency and contractual
employees, regardless of age, who have rendered at least a total of
two (2) consecutive years government service as of the date of
separation. The term "contractual employees" as used in this Act
does not include experts and consultants hired by agencies for a
limited period to perform specific activities or services with definite
expected output.

Uniformed personnel of the Armed Forces of the Philippines,

including those of the PC-INP are excluded from the coverage of
this Act. (emphasis supplied)

The objective of the Early Retirement or Voluntary Separation Law is to trim

the bureaucracy, hence, vacated positions are deemed abolished upon
early/voluntary retirement of their occupants. Will the inclusion of co-
terminous personnel (like the petitioner) defeat such objective? In their case,
upon termination of the project and separation of the project personnel from
the service, the term of employment is considered expired, the officefunctus
officio. Casual, temporary and contractual personnel serve for shorter periods,
and yet, they only have to establish two (2) years of continuous service to
qualify. This, incidentally, negates the OSG's argument that co-terminous or
project employment is inherently short-lived, temporary and transient,
whereas, retirement presupposes employment for a long period. Here, violation
of the equal protection clause of the Constitution becomes glaring because
casuals are not even in the plantilla, and yet, they are entitled to the benefits of
early retirement. How can the objective of the Early Retirement Law of
trimming the bureaucracy be achieved by granting early retirement benefits to
a group of employees (casual) without plantilla positions? There would, in such
a case, be no abolition of permanent positions or streamlining of functions; it
would merely be a removal of excess personnel; but the positions remain, and
future appointments can be made thereto.

Co-terminous or project personnel, on the other hand, who have rendered

years of continuous service should be included in the coverage of the Early
Retirement Law, as long as they file their application prior to the expiration of
their term, and as long as they comply with CSC regulations promulgated for
such purpose. In this connection, Memorandum Circular No. 14, Series of
1990 (5 March 1990) implementing Rep. Act No. 6850, 20 requires, as a
condition to qualify for the grant of eligibility, an aggregate or total of seven (7)
years of government service which need not be continuous, in the career or
non-career service, whether appointive, elective, casual, emergency, seasonal,
contractual or co-terminous including military and police service, as evaluated
and confirmed by the Civil Service Commission. 21 A similar regulation should
be promulgated for the inclusion in Rep. Act No. 6683 of co-terminous
personnel who survive the test of time. This would be in keeping with the
coverage of "all social legislations enacted to promote the physical and mental
well-being of public servants"22 After all, co-terminous personnel, are also
obligated to the government for GSIS contributions, medicare and income tax
payments, with the general disadvantage of transience.

In fine, the Court believes, and so holds, that the denial by the respondents
NIA and CSC of petitioner's application for early retirement benefits under Rep.
Act No. 6683 is unreasonable, unjustified, and oppressive, as petitioner had
filed an application for voluntary retirement within a reasonable period and she
is entitled to the benefits of said law. While the application was filed after
expiration of her term, we can give allowance for the fact that she originally
filed the application on her own without the assistance of counsel. In the
interest of substantial justice, her application must be granted; after all she
served the government not only for two (2) years — the minimum requirement
under the law but for almost fifteen (15) years in four (4) successive
governmental projects.

WHEREFORE, the petition is GRANTED.

Let this case be remanded to the CSC-NIA for a favorable disposition of

petitioner's application for early retirement benefits under Rep. Act No. 6683,
in accordance with the pronouncements in this decision.

SO ORDERED.

G.R. No. L-28055 October 30, 1967

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
PROVINCIAL GOVERNOR DELFIN MONTANO, ET AL., respondents.

Office of the Solicitor General for petitioner.

Sarmiento and Remulla for respondents.

CASTRO, J.:

The parties are agreed that the Cavite Department of Public Safety possesses
the nature, attributes, powers and functions of a police force. The issue here is
whether a provincial government has the power, by necessary implication from
certain express powers granted to it, to create a provincial police force, the
parties admitting that there is no express or explicit statutory grant of power.
Neither the need for such a body nor the wisdom of its creation is in question.
The issue is simply one of implied power.

In 1964 the provincial board of Cavite passed Resolution 27 creating a

Department of Safety "to be manned by trained technicians and investigators
who shall be agents of a person in authority (the Provincial Governor)" and
authorizing the appropriation of funds for its operation. The resolution did not
define the powers and functions of the department. This was done by means of
an administrative order of the respondent Governor which is hereunder quoted
in full:

PROVINCIAL ADMINISTRATIVE ORDER 65-1

DEFINING THE GENERAL PURPOSES, POWERS AND FUNCTIONS OF

THE CAVITE DEPARTMENT OF PUBLIC SAFETY

To insure the effective implementation of the Provincial Board Resolution

No. 27, series of 1964, creating the Cavite Department of Public Safety as
the main law-enforcement arm of the province, this Administrative Order
is hereby promulgated.

Sec. 1. The Agency. — The agency shall be officially known as the

CAVITE DEPARTMENT OF PUBLIC SAFETY (CDPS) or, in Pilipino,
KAGAWARAN NG KALIGTASAN BAYAN; and its members, who are
agents of the Provincial Governor to be known as Public Safety Officers.

Sec. 2. General Purposes and Functions. — To better insure the safety of

residents of Cavite and the well-being of both public and private interests
therein, the Cavite Department of Public Safety is established with the
following purposes and functions:

a. Technical Assistance to Local Police Units. The CDPS shall make

readily available to the different local police forces technical
assistance availing of modern and scientific methods of crime
detection.

b. Elevation of Standard of Police Performance. It shall aspire to

elevate the standard of police performance, not only by the quality
of the services it would render, but also by assisting in the
implementation of a police training program for local police forces.

c. Focus on Crimes against Persons and Property. In order to make

the operation of the Agency more effective, considering that the
main problem in the maintenance of peace and order involves the
security of persons and property, its law-enforcement activities
shall more or less be confined to the investigation and assistance
in the prosecution of crimes against persons and property and
violation of traffic laws.

d. Central Record System. The CDPS shall establish and maintain

a central provincial record of personal and criminal identification
and court and police documents. It shall also make available to
 municipalities that have enacted ordinances; requiring the
fingerprinting and/or photographing of all able bodied citizens the
personnel, materials and equipment needed for said purpose.

e. Civil Defense. The CDPS shall also constitute the main civil
defense arm in the province, responsible to the Governor, and shall
undertake such measures as it would be required in emergencies
in coordination with the National Civil Defense Administration.

f. Loose Firearms. The CDPS shall also give emphasis on the

detection and collection of loose firearm and the collection and
control of "misused" weapons, the root causes of most piece and
order problems.

g. Fire protection. The CDPS shall be responsible for the

coordinated utilization and maintenance of all firefighting
equipment within this jurisdiction.

h. Search and Rescue. In times of disaster and distress the CDPS

shall conduct search and rescue operations.

i. Civic Action Projects. The Public Safety Officers, whenever

circumstances would allow, shall also undertake such civic action
projects as the Provincial Governor may assign.

j. Public Safety and Preventive Measures. The CDPS shall also

undertake from time to time other public safety measured assigned
to it by the Provincial Governor, including accident prevention,
elimination of fire and traffic hazards, mob control, and the
enforcement of safety measures requirements in resorts, recreation
areas and other public places.

Sec. 3. Organizational Setup, Central Office and Sector Stations. The

organizational setup of the CDPS shall be made in a manner that would
make its services readily available and accessible to the local police
forces and residents of the provinces.

It shall maintain its central office in Trece Martires City and establish at
least three (3) sector station in strategically located places in the
province.

Sec. 4. Scope of Activities and Relations with Other Law-Enforcement

Agencies. The CDPS has been created, not for the purpose of usurping
the functions of local law-enforcement agencies, but to assist and to
make available to city and municipal police units its facilities and the
benefit of the intensive training of its members of police science and if
 possible to "contaminate" other peace officers with their technical know-
how.

The CDPS shall also establish liaison with the NBI and the PC in order to
achieve their common goal of combating crime effectively.

Public Safety Officers may only involve themselves in a case already

being handled by other police agencies (a) upon request of the mayor or
chief of police concerned; (b) when the culprit flees outside the boundary
of the municipality where the crime was committed; or (c) upon direction
of the Provincial Governor.

Done in the City of Trece Martires, this 1st day of March, in the year of
our Lord, Nineteen hundred and sixty-five.

The organizational structure of the department was not outlined or delineated,

obviously because this was already done in the budget of the province for
1963-1964.

Thereafter the respondent Governor appointed the other respondents as public

safety officers, making them his special agents.

On September 20, 1967 the Solicitor General, in behalf of the Government,

filed a petition for quo warranto, assailing the legality of the Department of
Public Safety on the ground that the province of Cavite has no authority to
create public officers with police functions. It is alleged that despite the
demand of the President of the Philippines the respondent Governor and the
members of the provincial board of Cavite have refused to dissolve and disband
the public safety department, and that the exercise of police functions by the
agency "affects the lives and liberties" of the people.

On September 25, 1967 this Court issued a temporary restraining order

enjoining the respondent Governor from carrying out the disputed resolution
and the rest of the respondents from discharging the functions of public safety
officers.

In their answer, the respondents maintain that the power of the province to
create agency is necessary implied from section 3 of the Local Autonomy Act of
19591 especially the portion thereof which provides that "Provincial Boards of
the respective provinces shall have authority (a) To appropriate money for
purposes not specified by law, having in view the general welfare of the
province and the inhabitants." In support of the existence of such implied
power, they invoke section 12 of the same Act which reads as follows:

Rules for the interpretation of the local Autonomy Act. —

 1. Implied power of a province, a city or municipality shall be liberally
construed in its favor. 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.

2. The general welfare clause shall be liberally interpreted in case of

doubt so as to give more power to local governments in promoting the
economic condition, social welfare and material progress of the people in
the community.

They further contend that the power to create the police agency is recognized in
the following provisions of the Police Act of 1966:2

Sec. 9. General Qualifications for Appointment. — No person shall be

appointed to a local police agency unless he possesses the following
qualifications:

xxx xxx xxx

(4) For appointment in the municipalities he must have at least

completed high school, and for provinces and cities at least completed
two years college;

xxx xxx xxx

(8) He must be at least five feet, five inches in height in the case
of provinces and chartered cities and five feet four inches in the case of
municipalities; and

xxx xxx xxx

Persons who at the time of the approval of this Act have rendered at least
five years of satisfactory service inprovincial, city or municipal police
agency although they have not qualified in an appropriate civil service
examination are considered as civil service eligibles for the purpose of
this Act.

The power of provincial governments to appropriate money for the welfare of

their inhabitants is not at all of recent vintage. As early as 1906, this was
granted to provincial boards by Act 15483 which amended section 13 of the
Organic Act of the Provinces4 by providing that the provincial boards of
provinces shall have the power "(nn) . . . To appropriate moneys from [their]
funds, except those the use of which is otherwise specifically fixed by law, for
other purposes having in view the general welfare of the province and its
inhabitants." Similarly, the Administrative Code of 1916, reenacting with
modification this provision of the Organic Act of the Provinces, provided that
"Upon approval of the Department Head of the particular resolution by which
such action shall be taken, the provincial boards of the respective provinces
shall have authority: a) To appropriate money for purposes not specified by
law, having in view the general welfare of the province and its inhabitants. . .
."5 This provision was in turn reenacted in section 2106(a) of the Revised
Administrative Code.6 In truth, section 3(a) of the Local Autonomy Act is
nothing but a copy of section 2106(a) of the Revised Administrative Code, with
the only difference that prior approval of the Department Head has been
dispensed with, in line with the legislative policy of granting greater autonomy
to local governments. In a sense, the elimination of the requisite approval is a
return to the original provision of the old Organic Act of the Provinces.7 It is in
this sense that section 3 of the Local Autonomy Act is entitled "Additional
powers of provincial boards . . .," and rightly so, for it removed the fetters that
once bound local governments to the national government.

Not once, since 1906, has the power to create public offices been asserted. But
this power is now urged as a necessary corollary of the power to appropriate,
this because section 12(1) (2) of the Local Autonomy Act commands that the
implied powers of municipal corporations shall be liberally construed and that
all doubts as to the existence of the power must be resolved in their favor.

We cannot accept this view.

The case of Fred v. Mayor and Council of Borough of Old Tappan8 indicates the
proper construction that should be placed on a provision like section 12(1) (2).
There a similar provision of the New Jersey Constitution of 1947 was invoked
to justify the validity of a municipal ordinance regulating the removal of soil.
The Constitutional provision states:

The provisions of this Constitution and of any law concerning municipal

corporations formed for local government, or concerning counties, shall
be liberally construed in their favor. The powers of counties and such
municipal corporations shall include not only those granted in express
terms but also those of necessary or fair implication, or incident to the
powers expressly conferred, or essential thereto, and not inconsistent
with or prohibited by this Constitution or by-law.

It was argued that this clause of the Constitution, which had no counterpart in
its predecessor constitution, introduced a new concept of home rule, being in
effect a direct grant of the police power to all municipalities. This contention
was rejected (although the ordinance was upheld on other grounds), the
Supreme Court of New Jersey stating:

We find no merit in this contention of the defendant. The quoted

provision of the Constitution on its face does not purport to be a grant of
general police powers to all municipalities, its plain language is not
 susceptible of being so construed the proceedings of the Constitutional
Convention referred to do not indicate that it was so intended, and
during the five years since its adoption our courts have never so
interpreted it. On the contrary, it is well settled in this State that a
municipality has only those powers granted to it by statute, albeit by
virtue of the constitutional provision here under discussion those powers
are to be liberally construed in favor of the municipality and express
grants of power are deemed to include "those of necessary or fair
implication, or incident to the powers expressly conferred, or essential
thereto." . . .9

It bears strong emphasis to state here that provincial governments, like other
municipal corporations, are governments of enumerated powers.10 The
assumption, although historically inaccurate,11 is that municipal corporations
are mere creatures of the state with no inherent powers of their own.12This
same assumption underlies the grant of autonomy to local governments,13 for
implicit in the grant is precisely the recognition that they exercise only
delegated powers which should be enlarged and, in case of "fair and reasonable
doubt," should be resolved in their favor.

Section 12(1) (2) of the Local Autonomy Act, which is reproduced in section 23
of the Decentralization Act of 1967, did not alter the basic nature of municipal
governments as governments of limited power. What it changed was the
prevailing rule at the time of its enactment that the grant of powers to
municipal corporations must be strictly construed against them.14 As a rule of
interpretation it does not purport to supply power where none exists, not even
by necessary implication.

Here the power to create a provincial police force appears to be denied to

provincial governments.15 Thus, whereas Section 2105(c) of the Revised
Administrative Code gives them the power to appropriate money "for the
organization, equipment and maintenance of a police force in any municipality
or municipal district of the province where local funds are insufficient to bear
such expenses," nothing is said of their power to provide for the organization of
their own police. Again, while cities16 and municipalities17 are authorized to
provide uniforms for their police forces no such authority is conferred on
provinces. This power given to cities and municipalities is in addition to their
power "to appropriate money for purposes not specified by law, having in view
the general welfare of the city and its inhabitants,"18 undoubtedly because the
former cannot be fairly embraced in the latter. Section 2081 cannot be invoked
because that provision authorizes the appointment of subordinate employees in
existing offices, not he creation of the offices themselves.

Indeed, municipal offices can be created only by legislative authority. This

creative act must be either immediate or delegated.19 In the Philippines,
national and local police bodies are directly created by statute. Thus the
Philippine Constabulary was constituted as a national police force by virtue of
a statute.20 So is the organization of police forces in cities and municipalities
specifically provided for by an Act of Congress.21 Even the formation of posses
comitatus in towns to assist the police in the apprehension of criminals is a
matter of express statutory enactment.22Thus there is a national police force
and there are city and municipal police forces, but the remarkable thing is that
there is no provision for provincial police forces.

This lack of statutory basis for the creation of provincial police forces stands in
sharp contrast to the proliferation of statutory materials on municipal and city
police forces. Not that peace and order are less a responsibility of the
provinces. The reason is simply that the Governors are already clothed with
ample powers and resources. They can temporarily transfer policemen from
one municipality to another when public interest so requires.23 They can call
on the Philippine Constabulary or even on the Armed Forces of the Philippines
to quell any "disorder, riot, lawless violence or rebelious or petitions conspiracy
or to apprehend violators of law."24

It seems quite clear indeed that the legislature intended to reserve for itself the
field of legislation on this matter and thereby exclude from it like actions by
local governments. Precedents in support of this view are not wanting. In
Fluker v. City of Union Point25 it was held that where the charter authorizes
the appointment of a marshal and, in case of "special emergencies," of a special
police, the city could not create an office of a night watchman with powers to
arrest persons violating the laws and ordinances. Not even the plea that the
office was necessary for the preservation of peace and order justified the
creation of the office. Similarly, in Stout v. Stinnett26 it was held that a statute
creating the office of "the Chief of the Police" did not authorize a city to appoint
a day chief of police and a night chief of police and that an ordinance so
providing was invalid.

The power of provinces to create provincial police forces cannot be inferred.

Neither can the existence of such bodies be implied from the fact that in
prescribing the qualifications of members of local police agencies, section 9 of
the Police Act of 1966 mentions "provincial police agencies" and the like. The
reference to such bodies is a misnomer as is evident from the following
discussion27 on the bill which became the Police Act:

MR. PEREZ (L.). This bill carries phrases like "police agencies of a
province or chartered city or municipality." Under the present set-up,
what would you consider as constituting the police agencies of a
province?

MR. AMANTE. That is a misnomer here. The original bill includes the
organization of the provincial guards; hence it is suggested here that they
be included in this bill. Even at the conference called by the President in
 connection with the peace and order condition, he suggested that the
provincial guards be included under the supervision of the Commission.

MR. PEREZ (L.). I support such proposal. This bill should state the
number of provincial guards which each province, in accordance with its
class, can employ; and also provide additional powers, because today
such provincial guards only keep the security of the provincial jail.

MR. AMANTE. They guard prisoners.

MR. PEREZ (L.). Will these guards enjoy the police powers of other police
agencies contemplated under this bill?

MR. AMANTE. No, they are only guards. However, their qualifications
and their discipline shall be governed by this bill. In connection with the
inclusion of provincial guards in the proposed measure, the Committee
will welcome amendments.

MR. PEREZ (L.). I will propose some amendments to that effect.

MR. AMANTE. Thank you.

In fact, the term is used in other legislation before the enactment of the Police
Act of 1966 and it has always been understood to refer to provincial guards
assigned to provincial jails. It is used in Commonwealth Act 343 which
constituted the Philippine Constabulary as a national police force28 and
returned to the control of the Governors the "provincial . . . police bodies or
provincial guards"29 who earlier, had been organized into a State Police, along
with the police forces of the cities and municipalities.30 President Quezon's
Executive Order 15331 as well as Executive Order 175,32 issued to implement
Commonwealth Act 343, likewise spoke of "local police bodies in each province"
and "provincial police service" but that the term meant no more than provincial
guards is evident from the text thereof.

Like the power to appropriate money for the general welfare, the reference in
statutes to provincial police agencies is nothing new.

Apart from this, since a municipal office can be created only by legislative
authority exercised either directly or through a grant of the power to municipal
corporation, the existence of such an office as a fact cannot be inferred. This is
the thrust of the rulings in City of Metropolis v. Industrial Commission33 and
in Murphy v. Industrial Commission.34 In the first case, the Cities and Villages
Act provided that offices must be created by ordinance. It was argued that
certain provisions of the Municipal Code of the City of Metropolis prescribed
the powers and duties of policemen and hence that the office of night
policeman "necessarily exists in that city." In disposing of this contention, the
Illinois Supreme Court held that "neither provision of that character nor an
appropriation of public money to pay the salary or compensation of a person
acting as a policeman can operate, standing alone, to create the particular
office."

In the second case, an ordinance, enacted under the same Cities and Villages
Act, provided that "The mayor shall, with the advice and consent of the city
council, appoint for the term of one year, and until their respective successors
in office are appointed and qualified, additional police officers in such number
as said mayor and city council may deem expedient, to assist the chief of police
in his official duty." In denying that an office was thereby created, the same
court said: "That section does not purport to create the office of policeman or
assistant chief of police. The provision that the mayor shall appoint additional
police officer cannot be construed as an ordinance to create the office of
policeman."

Upon all the foregoing, it follows ineluctably that the creation of the Cavite
Department of Public Safety is an unlawful exercise of power, and is without
basis in law.

ACCORDINGLY, Resolution 27, dated January 27, 1964, of the Provincial

Board of Cavite and Administrative Order 65-1 of the respondent-Governor
dated March 1, 1965 are declared void, the Cavite Department of Public Safety
is ordered dissolved, and the respondent public safety officers are ousted from
their positions. No pronouncement as to costs.

G.R. No. 191667 April 17, 2013

LAND BANK OF THE PHILIPPINES, Petitioner,

vs.
EDUARDO M. CACAYURAN, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this Petition for Review on Certiorari1 is the March 26, 2010
Decision2 of the Court of Appeals (CA) in CA-G.R. CV. No. 89732 which
affirmed with modification the April 10, 2007 Decision3 of the Regional Trial
Court (RTC) of Agoo, La Union, Branch 31, declaring inter alia the nullity of the
loan agreements entered into by petitioner Land Bank of the Philippines (Land
Bank) and the Municipality of Agoo, La Union (Municipality).

The Facts
From 2005 to 2006, the Municipality’s Sangguniang Bayan (SB) passed certain
resolutions to implement a multi-phased plan (Redevelopment Plan) to
redevelop the Agoo Public Plaza (Agoo Plaza) where the Imelda Garden and Jose
Rizal Monument were situated.

To finance phase 1 of the said plan, the SB initially passed Resolution No. 68-
20054 on April 19, 2005, authorizing then Mayor Eufranio Eriguel (Mayor
Eriguel) to obtain a loan from Land Bank and incidental thereto, mortgage a
2,323.75 square meter lot situated at the southeastern portion of the Agoo
Plaza (Plaza Lot) as collateral. To serve as additional security, it further
authorized the assignment of a portion of its internal revenue allotment (IRA)
and the monthly income from the proposed project in favor of Land Bank.5 The
foregoing terms were confirmed, approved and ratified on October 4, 2005
through Resolution No. 139-2005.6 Consequently, on November 21, 2005, Land
Bank extended a ₱4,000,000.00 loan in favor of the Municipality (First
Loan),7 the proceeds of which were used to construct ten (10) kiosks at the
northern and southern portions of the Imelda Garden. After completion, these
kiosks were rented out.8

On March 7, 2006, the SB passed Resolution No. 58-2006,9 approving the

construction of a commercial center on the Plaza Lot as part of phase II of the
Redevelopment Plan. To finance the project, Mayor Eriguel was again
authorized to obtain a loan from Land Bank, posting as well the same
securities as that of the First Loan. All previous representations and warranties
of Mayor Eriguel related to the negotiation and obtention of the new loan10were
ratified on September 5, 2006 through Resolution No. 128-2006.11 In
consequence, Land Bank granted a second loan in favor of the Municipality on
October 20, 2006 in the principal amount of ₱28,000,000.00 (Second Loan).12

Unlike phase 1 of the Redevelopment Plan, the construction of the commercial

center at the Agoo Plaza was vehemently objected to by some residents of the
Municipality. Led by respondent Eduardo Cacayuran (Cacayuran), these
residents claimed that the conversion of the Agoo Plaza into a commercial
center, as funded by the proceeds from the First and Second Loans (Subject
Loans), were "highly irregular, violative of the law, and detrimental to public
interests, and will result to wanton desecration of the said historical and public
park."13 The foregoing was embodied in a Manifesto,14 launched through a
signature campaign conducted by the residents and Cacayuran.

In addition, Cacayuran wrote a letter15 dated December 8, 2006 addressed to

Mayor Eriguel, Vice Mayor Antonio Eslao (Vice Mayor Eslao), and the members
of the SB namely, Violeta Laroya-Balbin, Jaime Boado, Jr., Rogelio De Vera,
James Dy, Crisogono Colubong, Ricardo Fronda, Josephus Komiya, Erwina
Eriguel, Felizardo Villanueva, and Gerard Mamuyac (Implicated Officers),
expressing the growing public clamor against the conversion of the Agoo Plaza
into a commercial center. He then requested the foregoing officers to furnish
him certified copies of various documents related to the aforementioned
conversion including, among others, the resolutions approving the
Redevelopment Plan as well as the loan agreements for the sake of public
information and transparency.

Unable to get any response, Cacayuran, invoking his right as a taxpayer, filed a
Complaint16 against the Implicated Officers and Land Bank, assailing, among
others, the validity of the Subject Loans on the ground that the Plaza Lot used
as collateral thereof is property of public dominion and therefore, beyond the
commerce of man.17

Upon denial of the Motion to Dismiss dated December 27, 2006,18 the
Implicated Officers and Land Bank filed their respective Answers.

For its part, Land Bank claimed that it is not privy to the Implicated Officers’
acts of destroying the Agoo Plaza. It further asserted that Cacayuran did not
have a cause of action against it since he was not privy to any of the Subject
Loans.19

During the pendency of the proceedings, the construction of the commercial

center was completed and the said structure later became known as the Agoo’s
People Center (APC).

On May 8, 2007, the SB passed Municipal Ordinance No. 02-2007,20 declaring

the area where the APC stood as patrimonial property of the Municipality.

The Ruling of the RTC

In its Decision dated April 10, 2007,21 the RTC ruled in favor of Cacayuran,
declaring the nullity of the Subject Loans.22 It found that the resolutions
approving the said loans were passed in a highly irregular manner and thus,
ultra vires; as such, the Municipality is not bound by the same.23 Moreover, it
found that the Plaza Lot is proscribed from collateralization given its nature as
property for public use.24

Aggrieved, Land Bank filed its Notice of Appeal on April 23, 2007.25 On the
other hand, the Implicated Officers’ appeal was deemed abandoned and
dismissed for their failure to file an appellants’ brief despite due notice.26 In
this regard, only Land Bank’s appeal was given due course by the CA.

Ruling of the CA

In its Decision dated March 26, 2010,27 the CA affirmed with modification the
RTC’s ruling, excluding Vice Mayor Eslao from any personal liability arising
from the Subject Loans.28
It held, among others, that: (1) Cacayuran had locus standi to file his
complaint, considering that (a) he was born, raised and a bona fide resident of
the Municipality; and (b) the issue at hand involved public interest of
transcendental importance;29 (2) Resolution Nos. 68-2005, 139-2005, 58-2006,
128-2006 and all other related resolutions (Subject Resolutions) were invalidly
passed due to the SB’s non-compliance with certain sections of Republic Act
No. 7160, otherwise known as the "Local Government Code of 1991" (LGC); (3)
the Plaza Lot, which served as collateral for the Subject Loans, is property of
public dominion and thus, cannot be appropriated either by the State or by
private persons;30 and (4) the Subject Loans are ultra vires because they were
transacted without proper authority and their collateralization constituted
improper disbursement of public funds.

Dissatisfied, Land Bank filed the instant petition.

Issues Before the Court

The following issues have been raised for the Court’s resolution: (1) whether
Cacayuran has standing to sue; (2) whether the Subject Resolutions were
validly passed; and (3) whether the Subject Loans are ultra vires.

The Court’s Ruling

The petition lacks merit.

A. Cacayuran’s standing to sue

Land Bank claims that Cacayuran did not have any standing to contest the
construction of the APC as it was funded through the proceeds coming from
the Subject Loans and not from public funds. Besides, Cacayuran was not even
a party to any of the Subject Loans and is thus, precluded from questioning the
same.

The argument is untenable.

It is hornbook principle that a taxpayer is allowed to sue where there is a claim

that public funds are illegally disbursed, or that public money is being
deflected to any improper purpose, or that there is wastage of public funds
through the enforcement of an invalid or unconstitutional law. A person suing
as a taxpayer, however, must show that the act complained of directly involves
the illegal disbursement of public funds derived from taxation. In other words,
for a taxpayer’s suit to prosper, two requisites must be met namely, (1) public
funds derived from taxation are disbursed by a political subdivision or
instrumentality and in doing so, a law is violated or some irregularity is
committed; and (2) the petitioner is directly affected by the alleged act.31
Records reveal that the foregoing requisites are present in the instant case.

First, although the construction of the APC would be primarily sourced from
the proceeds of the Subject Loans, which Land Bank insists are not taxpayer’s
money, there is no denying that public funds derived from taxation are bound
to be expended as the Municipality assigned a portion of its IRA as a security
for the foregoing loans. Needless to state, the Municipality’s IRA, which serves
as the local government unit’s just share in the national taxes,32 is in the
nature of public funds derived from taxation. The Court believes, however, that
although these funds may be posted as a security, its collateralization should
only be deemed effective during the incumbency of the public officers who
approved the same, else those who succeed them be effectively deprived of its
use.

In any event, it is observed that the proceeds from the Subject Loans had
already been converted into public funds by the Municipality’s receipt thereof.
Funds coming from private sources become impressed with the characteristics
of public funds when they are under official custody.33

Accordingly, the first requisite has been clearly met.

Second, as a resident-taxpayer of the Municipality, Cacayuran is directly

affected by the conversion of the Agoo Plaza which was funded by the proceeds
of the Subject Loans. It is well-settled that public plazas are properties for
public use34 and therefore, belongs to the public dominion.35 As such, it can be
used by anybody and no one can exercise over it the rights of a private
owner.36 In this light, Cacayuran had a direct interest in ensuring that the
Agoo Plaza would not be exploited for commercial purposes through the APC’s
construction. Moreover, Cacayuran need not be privy to the Subject Loans in
order to proffer his objections thereto. In Mamba v. Lara, it has been held that
a taxpayer need not be a party to the contract to challenge its validity; as long
as taxes are involved, people have a right to question contracts entered into by
the government.37

Therefore, as the above-stated requisites obtain in this case, Cacayuran has

standing to file the instant suit.

B. Validity of the Subject Resolutions

Land Bank avers that the Subject Resolutions provided ample authority for
Mayor Eriguel to contract the Subject Loans. It posits that Section 444(b)(1)(vi)
of the LGC merely requires that the municipal mayor be authorized by the SB
concerned and that such authorization need not be embodied in an
ordinance.38
A careful perusal of Section 444(b)(1)(vi) of the LGC shows that while the
authorization of the municipal mayor need not be in the form of an ordinance,
the obligation which the said local executive is authorized to enter into must be
made pursuant to a law or ordinance, viz:

Sec. 444. The Chief Executive: Powers, Duties, Functions and Compensation. -

xxxx

(b) For efficient, effective and economical governance the purpose of which is
the general welfare of the municipality and its inhabitants pursuant to Section
16 of this Code, the municipal mayor shall:

xxxx

(vi) Upon authorization by the sangguniang bayan, represent the municipality

in all its business transactions and sign on its behalf all bonds, contracts, and
obligations, and such other documents made pursuant to law or ordinance;
(Emphasis and underscoring supplied)

In the present case, while Mayor Eriguel’s authorization to contract the Subject
Loans was not contained – as it need not be contained – in the form of an
ordinance, the said loans and even the Redevelopment Plan itself were not
approved pursuant to any law or ordinance but through mere resolutions. The
distinction between ordinances and resolutions is well-perceived. While
ordinances are laws and possess a general and permanent character,
resolutions are merely declarations of the sentiment or opinion of a lawmaking
body on a specific matter and are temporary in nature.39 As opposed to
ordinances, "no rights can be conferred by and be inferred from a
resolution."40 In this accord, it cannot be denied that the SB violated Section
444(b)(1)(vi) of the LGC altogether.

Noticeably, the passage of the Subject Resolutions was also tainted with other
irregularities, such as (1) the SB’s failure to submit the Subject Resolutions to
the Sangguniang Panlalawigan of La Union for its review contrary to Section 56
of the LGC;41 and (2) the lack of publication and posting in contravention of
Section 59 of the LGC.42

In fine, Land Bank cannot rely on the Subject Resolutions as basis to validate
the Subject Loans.

C. Ultra vires nature of the Subject

Loans
Neither can Land Bank claim that the Subject Loans do not constitute ultra
vires acts of the officers who approved the same.

Generally, an ultra vires act is one committed outside the object for which a
corporation is created as defined by the law of its organization and therefore
beyond the powers conferred upon it by law.43 There are two (2) types of ultra
vires acts. As held in Middletown Policemen's Benevolent Association v.
Township of Middletown:44

There is a distinction between an act utterly beyond the jurisdiction of a

municipal corporation and the irregular exercise of a basic power under the
legislative grant in matters not in themselves jurisdictional. The former are
ultra vires in the primary sense and void; the latter, ultra vires only in a
secondary sense which does not preclude ratification or the application of the
doctrine of estoppel in the interest of equity and essential justice. (Emphasis
and underscoring supplied)

In other words, an act which is outside of the municipality’s jurisdiction is

considered as a void ultra vires act, while an act attended only by an
irregularity but remains within the municipality’s power is considered as an
ultra vires act subject to ratification and/or validation. To the former belongs
municipal contracts which (a) are entered into beyond the express, implied or
inherent powers of the local government unit; and (b) do not comply with the
substantive requirements of law e.g., when expenditure of public funds is to be
made, there must be an actual appropriation and certificate of availability of
funds; while to the latter belongs those which (a) are entered into by the
improper department, board, officer of agent; and (b)do not comply with the
formal requirements of a written contract e.g., the Statute of Frauds.45

Applying these principles to the case at bar, it is clear that the Subject Loans
belong to the first class of ultra vires acts deemed as void.

Records disclose that the said loans were executed by the Municipality for the
purpose of funding the conversion of the Agoo Plaza into a commercial center
pursuant to the Redevelopment Plan. However, the conversion of the said plaza
is beyond the Municipality’s jurisdiction considering the property’s nature as
one for public use and thereby, forming part of the public dominion.
Accordingly, it cannot be the object of appropriation either by the State or by
private persons.46 Nor can it be the subject of lease or any other contractual
undertaking.47 In Villanueva v. Castañeda, Jr.,48 citing Espiritu v. Municipal
Council of Pozorrubio,49 the Court pronounced that:

x x x Town plazas are properties of public dominion, to be devoted to public use

and to be made available to the public in general. They are outside the
commerce of man and cannot be disposed of or even leased by the municipality
to private parties.1âwphi1
In this relation, Article 1409(1) of the Civil Code provides that a contract whose
purpose is contrary to law, morals, good customs, public order or public policy
is considered void50 and as such, creates no rights or obligations or any
juridical relations.51 Consequently, given the unlawful purpose behind the
Subject Loans which is to fund the commercialization of the Agoo Plaza
pursuant to the Redevelopment Plan, they are considered as ultra vires in the
primary sense thus, rendering them void and in effect, non-binding on the
Municipality.

At this juncture, it is equally observed that the land on which the Agoo Plaza is
situated cannot be converted into patrimonial property – as the SB tried to
when it passed Municipal Ordinance No. 02-200752 – absent any express grant
by the national government.53 As public land used for public use, the foregoing
lot rightfully belongs to and is subject to the administration and control of the
Republic of the Philippines.54 Hence, without the said grant, the Municipality
has no right to claim it as patrimonial property.

Nevertheless, while the Subject Loans cannot bind the Municipality for being
ultra vires, the officers who authorized the passage of the Subject Resolutions
are personally liable. Case law states that public officials can be held
personally accountable for acts claimed to have been performed in connection
with official duties where they have acted ultra vires,55 as in this case.

WHEREFORE, the petition is DENIED. Accordingly, the March 26, 2010

Decision of the Court of Appeals in CA-G.R. CV. No. 89732 is hereby
AFFIRMED.

SO ORDERED.

G.R. No. 141386 November 29, 2001

THE COMMISSION ON AUDIT OF THE PROVINCE OF CEBU, Represented

by Provincial Auditor ROY L. URSAL, petitioner,
vs.
PROVINCE OF CEBU, Represented by Governor PABLO P.
GARCIA, respondent.

YNARES-SANTIAGO, J.:

May the salaries and personnel-related benefits of public school teachers

appointed by local chief executives in Connection with the establishment and
maintenance of extension classes; as well as the expenses for college
scholarship grants, be charged to the Special Education Fund (SEF) of the local
government unit concerned?
The instant petition for review, which raises a pure question of law, seeks to
annul and set aside the decision1 of the Regional Trial Court of Cebu, Branch
20, in a petition for declaratory relief, docketed as Civil Case No. CEB-24422.

The provincial governor of the province of Cebu, as chairman of the local school
board, under Section 98 of the Local Government Code, appointed classroom
teachers who have no items in the DECS plantilla to handle extension classes
that would accommodate students in the public schools.

In the audit of accounts conducted by the Commission on Audit (COA) of the

Province of Cebu, for the period January to June 1998, it appeared that the
salaries and personnel-related benefits of the teachers appointed by the
province for the extension classes were charged against the provincial SEF.
Likewise charged to the SEF were the college scholarship grants of the
province. Consequently, the COA issued Notices of Suspension to the province
of Cebu,2 saying that disbursements for the salaries of teachers and
scholarship grants are not chargeable to the provincial SEF.

Faced with the Notices of Suspension issued by the COA, the province of Cebu,
represented by its governor, filed a petition for declaratory relief with the trial
court.

On December 13, 1999, the court a quo rendered a decision declaring the
questioned expenses as authorized expenditures of the SEF. The dispositive
portion thereof reads:

WHEREFORE, in view of all the foregoing premises considered, judgment

is hereby rendered giving due course to this instant petition for
declaratory relief declaring and confirming that petitioner is vested with
the authority to disburse the proceeds from the Special Educational
Fund [SEF] for the payment of salaries, allowances or honoraria for
teachers and non-teaching personnel in the public schools in the
Province of Cebu and its component cities, and, municipalities, as well as
the expenses for scholarship grants of petitioners specially to poor but
deserving students therein.

Declaring, further, respondents audit findings on pages 36 and 37 in the

Annual Audit Report on the Province of Cebu: for the year ending
December 31, 1999 as null and void.3

Hence, the instant petition by the Commission on Audit.

The Special Education Fund was created by virtue of R.A. No. 5447, which is
An act creating a special education fund to be constituted from the proceeds of
an additional real property tax and a certain portion of the taxes on Virginia-
type cigarettes and duties on imported leaf tobacco, defining the activities to be
financed, creating school boards for the purpose, and appropriating funds
therefrom, which took effect on January 1, 1969. Pursuant thereto, P.D. No.
464, also known as the Real Property Tax Code of the Philippines, imposed an
annual tax of 1% on real property which shall accrue to the SEF.4

Under R.A. No. 5447, the SEF may be expended exclusively for the following
activities of the DECS —

(a) the organization and operation of such number of extension classes as

may be needed to accommodate all children of school age desiring to enter
Grade I, including the creation of positions of classroom teachers, head
teachers and principals for such extension classes x x x;

(b) the programming of the construction and repair of elementary school

buildings, acquisition of sites, and the construction and repair of
workshops and similar buildings and accessories thereof to house
laboratory, technical and similar equipment and apparatus needed by
public schools offering practical arts, home economics and vocational
courses, giving priority to elementary schools on the basis of the actual
needs and total requirements of the country x x x;

(c) the payment and adjustment of salaries of public school teachers under
and by virtue of Republic Act Numbered Five Thousand One Hundred
Sixty-Eight and all the benefits in favor of public school teachers provided
under Republic Act Numbered Four Thousand Six Hundred Seventy;

(d) preparation, printing and/or purchase of textbooks, teacher's guides.

forms and pamphlets x x x;

(e) the purchase and/or improvement, repair and refurbishing of

machinery, laboratory, technical and similar equipment and apparatus,
including spare parts needed by the Bureau of Vocational Education and
secondary schools offering courses;

(f) the establishment of printing plant to be used exclusively for the

printing needs of the Department of Education and the improvement of
regional printing plants in the vocational schools;

(g) the purchase of teaching materials such as work books, atlases, flip
charts, science and mathematics teaching aids, and simple laboratory
devices for elementary and secondary classes;

(h) the implementation of the existing program for citizenship

development in barrio high schools, folk schools and adult education
classes;
 (i) the undertaking of education research, including that of the Board of
National Education;

(j) the granting of government scholarships to poor but deserving students

under Republic Act Numbered Four Thousand Ninety; and

(k) the promotion of physical education, such as athletic meets.

(Emphasis supplied)

With the effectivity of the Local Government Code of 1991, petitioner contends
that R.A. No. 5447 was repealed, leaving Sections 235, 272 and 100 (c) of the
Code to govern the disposition of the SEF, to wit:

SEC. 235. Additional Levy on Real Property for the Special Education
Fund (SEF). — A province or city or a municipality within the
Metropolitan Manila Area, may levy and collect an annual tax of one
percent (1%) on the assessed value of real property which shall be in
addition to the basic real property tax. The proceeds thereof shall
exclusively accrue to the Special Education Fund (SEF).

SEC. 272. Application of Proceeds of the Additional One Percent SEF Tax.
— The proceeds from the additional one percent (1%) tax on real properly
accruing to the SEF shall be automatically released to the local school
boards: Provided, That, in case of provinces, the proceeds shall be
divided equally between the provincial and municipal school
boards: Provided, however, That the proceeds shall be allocated for the
operation and maintenance of public schools, construction and repair of
school buildings, facilities and equipment, educational research, purchase
of books and periodicals, and sports development as determined and
approved by the local school board. (Emphasis supplied)

SEC. 100. Meeting and Quorum; Budget

xxx xxx xxx

(c) The annual school board budget shall give priority to the following:

(1) Construction, repair, and maintenance of school buildings and other

facilities of public elementary and secondary schools;

(2) Establishment and maintenance of extension classes where

necessary; and

(3) Sports activities at the division, district, municipal, and barangay

levels. (Emphasis supplied)
Invoking the legal maxim "expressio unius est exclusio alterius," petitioner
alleges that since salaries, personnel-related benefits and scholarship grants
are not among those authorized as lawful expenditures of the SEF under the
Local Government Code, they should be deemed excluded therefrom.

Moreover, petitioner claims that since what is allowed for local school boards to
determine under Section 995 of the Local Government Code is only the
"annual supplementary budgetary needs; for the operation and maintenance of
public schools," as well as the "supplementary local cost to meet such needs,"
the budget of the local school boards for the establishment and maintenance of
extension classes should be construed to refer only to the upkeep and
maintenance of public school building, facilities and similar expenses other
than personnel-related benefits. This is because, petitioner argued, the
maintenance and operation of public schools pertain principally to the DECS.

The contentions are without merit. It is a basic precept in statutory

construction that the intent of the legislature is the controlling factor in the
interpretation of a statute.6 In this connection, the following portions of the
deliberations of the Senate on the second reading of the Local Government
Code on July 30, 1990 are significant:

Senator Guingona. Mr. President.

The President. Senator Guingona is recognized.

Senator Guingona. Just for clarification, Mr. President. In this transfer,

will it include everything eventually — lock, stock and barrel, including
curriculum?

Senator Pimentel. Mr. President, our stand in the Committee is to respect

the decision of the National Government in terms of curriculum.

Senator Guingona. But, supposing the Local Education Board wishes to

adopt a certain curriculum for that particular region?

Senator Pimentel. Mr. President, pursuant to the wording of the proposed

transfer of this elementary school system to local government units, what
are specifically covered here are merely the construction, repair, and
maintenance of elementary school buildings and other structures
connected with public elementary school education, payment of salaries,
emoluments, allowances et cetera, procurement of books, other teaching
materials and equipment needed for the proper implementation of the
program. There is nothing here that will indicate that the local
government will have any right to- alter the curriculum. (Emphasis
supplied)
 Senator Guingona. Thank you, Mr. President.

Similarly instructive are the foregoing deliberations in the House of

Representatives on August 16, 1990:

INTERPELLATION OF MS. RAYMUNDO

(Continuation)

Continuing her interpellation, Ms. Raymundo then adverted to

subsection 4 of Section 101 [now Section 100, paragraph (c)] and asked if
the budget is limited only to the three priority areas mentioned. She also
asked what is meant by the phrase "maintenance of extension classes."

In response, Mr. De Pedro clarified that the provision is not limited to the
three activities, to which may be added other sets of priorities at the
proper time. As to extension classes, he pointed out that the school boards
may provide out of its own funds, for additional teachers or other
requirements if the national government cannot provide funding therefor.
Upon Ms. Raymundo's query, Mr. de Pedro further explained that
support for teacher tools could fall under the priorities cited and is
covered by certain circulars.

Undoubtedly, the aforecited exchange of views clearly demonstrates that the

legislature intended the SEF to answer for the compensation of teachers
handling extension classes.

Furthermore, the pertinent portion of the repealing clause of the Local

Government Code, provides:

SEC. 534. Repealing Clause. — x x x

(c) The provisions of . . . Sections 3, a (3) and b (2) of Republic Act No.
5447, regarding the Special Education Fund . . . are hereby repealed and
rendered of no force and effect.

Evidently, what was expressly repealed by the Local Government Code was only
Section 3, of R.A. No. 5447, which deals with the "Allocation of taxes on
Virginia type cigarettes and duties on imported leaf tobacco." The legislature is
presumed to know the existing laws, such that whenever it intends to repeal a
particular or specific provision of law, it does so expressly. The failure to add a
specific repealing clause particularly mentioning the statute to be repealed
indicates that the intent was not to repeal any existing law on the matter,
unless an irreconcilable inconsistency and repugnancy exists in the terms of
the new and the old laws.7 Hence, the provisions allocating funds for the
salaries of teachers under Section 1, of R.A. No. 5447, which are not
inconsistent with Sections 272 and 100 (c) of the Local Government Code,
remain in force and effect.

Even under the doctrine of necessary implication, the allocation of the SEF for
the establishment and maintenance of extension classes logically implies the
hiring of teachers who should, as a matter of course be compensated for their
services. Every statute is understood, by implication, to contain all such
provisions as may be necessary to effectuate its object and purpose, or to make
effective rights, powers, privileges or jurisdiction which it grants, including all
such collateral and subsidiary consequences as may be fairly and logically
inferred from its terms. Ex necessitate legis.8 Verily, the services and the
corresponding compensation of these teachers are necessary and indispensable
to the establishment and maintenance of extension classes.

Indeed, the operation and maintenance of public schools is lodged principally

with the DECS. This is the reason why only salaries of public school teachers
appointed in connection with the establishment and maintenance of extension
classes, inter alia, pertain to the supplementary budget of the local school
boards. Thus, it should be made clear that not every kind of personnel-related
benefits of public school teachers may be charged to the SEF. The SEF may be
expended only for the salaries and personnel-related benefits of teachers
appointed by the local school boards in connection with the establishment and
maintenance of extension classes. Extension classes as referred to mean
additional classes needed to accommodate all children of school age desiring to
enter in public schools to acquire basic education.9

With respect, however, to college scholarship grants, a reading of the pertinent

laws of the Local Government Code reveals that said grants are not among the
projects for which the proceeds of the SEF may be appropriated. It should be
noted that Sections 100 (c) and 272 of the Local Government Code
substantially reproduced Section 1, of R.A. No. 5447. But, unlike payment of
salaries of teachers which falls within the ambit of "establishment and
maintenance of extension classes" and "operation and maintenance of public
schools," the "granting of government scholarship to poor but deserving
students" was omitted in Sections 100 (c) and 272 of the Local Government
Code. Casus omissus pro omisso habendus est. A person, object, or thing
omitted from an enumeration in a statute must be held to have been omitted
intentionally. It is not for this Court to supply such grant of scholarship where
the legislature has omitted it.10

In the same vein, however noble the intention of the province in extending said
scholarship to deserving students, we cannot apply the doctrine of necessary
implication inasmuch as the grant of scholarship is neither necessary nor
indispensable to the operation and maintenance of public schools. Instead,
such scholarship grants may be charged to the General Funds of the province.
Pursuant to Section 1, Rule 6311 of the 1997 Rules of Civil Procedure, a
petition for declaratory relief may be filed before there is a breach or violation.
The Solicitor General claims that the Notices of Suspension issued by the COA
to the respondent province amounted to a breach or violation, and therefore,
the petition for declaratory relief should have been denied by the trial court.

We are not convinced. As held in Shell Company of the Philippines, Ltd. v.

Municipality of Sipocot,12 my breach of the statute subject of the controversy
will not affect the case; the action for declaratory relief will prosper because the
applicability of the statute in question to future transactions still remains to be
resolved. Absent a definite ruling in the instant case for declaratory relief,
doubts as to the disposition of the SEF will persist. Hence, the trial court did
not err in giving due course to the petition for declaratory relief filed by the
province of Cebu.

WHEREFORE, in view of all the foregoing, the Decision of the Regional Trial
Court of Cebu City, Branch 20, in Civil Case No. CEB-24422, is AFFIRMED
with MODIFICATION. The salaries and personnel-related benefits of the
teachers appointed by the provincial school board of Cebu in connection with
the establishment and maintenance of extension classes, are declared
chargeable against the Special Education Fund of the province. However, the
expenses incurred by the provincial government for the college scholarship
grants should not be charged against the Special Education Fund, but against
the General Funds of the province of Cebu.

SO ORDERED.