G.R. No.

209287
ARAULLO VS. AQUINO III

This case is a consolidation of nine (9) cases, assailing the constitutionality of the Disbursement
Acceleration Program (DAP) of the Department of Budget and Management (DBM) and in relation to this,
National Budget Circular (NBC) No. 541 and related issuances of the DBM in the implementation of DAP.
This issue exploded when the topic of the Congressional pork barrel was still fresh in the public mind.
Belgica vs. Executive Secretary was just filed with the Supreme Court [which is subsequently declared
unconstitutional (November 19, 2013)].

IMPORTANT PEOPLE
 Sen. Jinggoy Ejercito Estrada – delivered the privilege speech on September 25, 2013 which
prompted the DBM to issue a public statement and bring to the public consciousness the DAP
 Araullo, Maria Carolina – Chairperson of Bagong Alyansang Makabayan; G.R. No. 2092871
 Secretary Florencio Abad – Secretary of the Department of Budget and Management (DBM)

FACTS

1. September 3, 2013 – Belgica, et. al. and Villegas filed an Urgent Petition for Certiorari and
Prohibition with Prayer for the Immediate issuance of a Temporary Restraining Order and/or
Writ of Preliminary Injunction seeking that the annual "Pork Barrel System," presently
embodied in the provisions of the GAA of 2013 which provided for the 2013 PDAF, and the
Executive‘s lump-sum, discretionary funds, such as the Malampaya Funds and the
Presidential Social Fund, be declared unconstitutional and null and void for being acts
constituting grave abuse of discretion

2. September 25, 2013 – Sen. Jinggoy Estrada delivered his privilege speech stating that some
senators received Php 50 Million each as incentive for impeaching Chief Justice Corona.

3. Secretary Abad responded through a public statement explaining that the funds released
were based on the Senators’ letters of request for funding and explained further that these
funds were part of the DAP designed by the DBM to ramp up spending to accelerate
economic expansion (they also made claims in their website regarding DAP and where it
comes from).

4. DBM cited the following as legal bases for DAP’s use for savings:
a. Section 25(5) Article VI, 1987 Constitution
b. Section 39 (Authority to use Savings for Certain Purposes) and Section 38
(Suspension of Expenditure Appropriations, Chapter 5, Book VI of EO 292
(Administrative Code of 1987)
c. General Appropriations Acts of 2011, 2012 and 2013 provisions on the following:
i. Use of savings
ii. Meaning of savings
iii. Priority in the use of savings
d. For the use of the unprogrammed funds, DBM cited provisions in the GAA 2011-2013
as legal bases

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5. Nine (9) petitions assailing the constitutionality are filed within days.
6. The Court consolidated these cases to form the case at hand.
7. Oral arguments were held on November 19, 2013 and the Court directed DBM Sec. Abad to
submit the following:
a. List of savings brought under DAP sourced from:
i. Completed programs
ii. Discontinued or abandoned programs
iii. Unpaid appropriations for compensation
b. Certified copy of the President’s directive dated June 27, 2012 referred to in NBC 541
c. All circulars and orders issued in relation to DAP
8. In compliance, the Office of the Solicitor General (OSG) (government’s counsel) submitted
seven (7) evidence packets (please see Other Notes for the complete list of packets)

ISSUES
I. PROCEDURAL ISSUES

A. WHETHER OR NOT CERTIORARI, PROHIBITION AND MANDAMUS ARE

PROPER REMEDIES TO ASSAIL THE CONSTITUTIONALITY AND VALIDITY OF
DAP, NBC 541 AND ALL OTHER EXECUTIVE ISSUANCES ALLEGEDLY
IMPLEMENTING DAP

 YES. COURT SAYS ALL PETITIONS UNDER RULE 65 ARE PROPER

REMEDIES (CERTIORARI, PROHIBITION AND MANDAMUS)
 The remedies of certiorari and prohibition are broader in scope and reach
and may be issued to correct errors of jurisdiction as well as set right, undo,
and restrain any act of grave abuse of discretion amounting to excess or lack
of jurisdiction by any branch or instrumentality of Government even if the
latter does not exercise judicial, quasi-judicial or ministerial functions.
 This is expressly authorized by Section 1, Rule 65 of the rules of court.
 Thus, petitions for certiorari and prohibition are appropriate remedies to raise
constitutional issues and to review and/or prohibit or nullify the acts of
legislative and executive officials

B. WHETHER OR NOT THERE IS A CONTROVERSY RIPE FOR JUDICIAL

DETERMINATION

 YES. THERE IS AN ACTUAL CONTROVERSY RIPE FOR JUDICIAL

DETERMINATION.
 The Court quotes Belgica vs. ES Ochoa
O xxx is one which involves a conflict of legal rights, an assertion of
opposite legal claims…there must be a contrariety of legal rights that
can be interpreted and enforced on the basis of existing law and
jurisprudence…a question is ripe for adjudication when the act being
challenged has had a direct adverse effect on the individual
challenging it…”
  The incompatibility of the perspectives of the parties on the constitutionality
of DAP and its relevant issuances satisfy the requirement for a conflict
between legal rights.
 They meet the “ripeness” requirement since these allegedly unconstitutional
acts acts were already being implemented by the DBM. Moreover, DAP
entailed the allocation and expenditure of huge sums of public funds.
 In addition, the fact that funds have been allocated or utilized give rise to an
actual controversy
 Respondents claim that since DAP has been discontinued, the challenges
are now moot and academic. The Court says: the discontinuing of DAP
did not moot the challenges to its constitutionality. because it falls under
all exceptions for mootness to be disregarded: (1) there was a grave violation
of the constitution, (2) the case involves a paramount public interest, (3) the
constitutional issue raised here requires formulation of controlling principles
to guide the Bench, the Bar and the public and (4) this case is capable of
repetition yet evading review (there is nothing to stop the DBM from re-
implementing DAP).

C. WHETHER OR NOT THE PETITIONERS HAVE STANDING

 YES PETITIONERS HAVE LOCUS STANDI. THE ISSUANCE AND

IMPLEMENTATION OF DAP AND ISSUANCES INVOLVED ILLEGAL
DISBURSEMENTS OF PUBLIC FUNDS.
 Except for PHILCONSA, the petitioners have invoked their capacities as tax
payers and thus have an interest in further dissipation of public funds.
 PHILCONSA simply reminds that the Court has long recognized its legal
standing to bring cases upon constitutional issues.
 IBP stands by its avowed duty to work for the rule of law and civic duty as the
official association of lawyers in this country.
 In any case, the Court adds that these cases pose issues that are of
transcendental importance to the entire nation (so procedural technicalities
can be waived).

II. SUBSTANTIVE ISSUES

A. WHETHER OR NOT DAP VIOLATES SECTION 29 ARTICLE VI OF THE 1987

CONSTITUTION

• NO. DAP WAS NOT AN APPROPRIATION MEASURE HENCE, NO

APPROPRIATION LAW WAS REQUIRED TO ADOPT OR IMPLEMENT IT.
• DAP was only a program or an administrative system of prioritizing spending
the adoption of which was by virtue of the authority of the President to ensure
laws are properly executed.
• It is the Executive playing its role as the main actor during the Budget Execution
Stage under its constitutional mandate to faithfully execute laws including GAAs
• Congress did not need to legislate to adopt or implement DAP
 • Thus Executive did not usurp the power vested in Congress under Section
29(1) Article VI of the Constitution

B. WHETHER OR NOT DAP, NBC 541 AND ALL OTHER EXECUTIVE ISSUANCES IMPLEMENTING
DAP VIOLATE SECTION 25(5) ARTICLE VI OF THE 1987 CONSTITUTION :

• YES THE VIOLATED SECTION 25(5) ARTICLE VI OF THE CONSTITUTION.

• To discuss this, we follow the three (3) requisites set out in Section 25(5) of Article VI:
(1) There is a law authorizing the President, the President of the Senate, the Speaker of
the House of Representatives, the Chief Justice of the Supreme Court, and the heads of
the Constitutional Commissions to transfer funds within their respective offices.
(2) The funds to be transferred are savings generated from the appropriations of their
respective offices; and
(3) The purpose of the transfer is to augment an item in the general appropriations law for
their respective offices.

(1) FIRST REQUISITE: THERE IS A LAW AUTHORIZING THE PRESIDENT TO TRANSFER FUNDS
WITHIN HIS OFFICE

• THIS REQUISITE IS NOT MET. GAA OF 2011 AND 2012 LACKED VALID (FAITHFUL TO THE
CONSITUTION) PROVISIONS TO AUTHORIZE TRANSFER OF FUNDS UNDER THE DAP,
HENCE THE TRANSFERS WERE UNCONSTITUTIONAL.
• Section 25(5) is not a self-executing provision and must have a law implementing it. Generally
this is the GAA.
• A reading of the 2011 and 2012 GAAs show that its provisions were textually unfaithful (hehe) to
the Constitution for not carrying the phrase “for their respective offices ” and literally allowed the
transfer of funds from savings to augment any item in the GAAs even if the item belonged to
another office and thus contravene the Constitution
• Thus these provisions cannot be used by the Executive to claim authority to transfer
appropriations.
• The missing phrase was inserted in the 2013 GAA, however, even with a valid law for the
authorization of transfer of funds, there are still two more requisites to be met

(2) SECOND REQUISITE: THE FUNDS TO BE TRANSFERRED ARE SAVINGS GENERATED FROM
THE APPROPRIATIONS OF THEIR RESPECTIVE OFFICES – WHERE THERE ACTUALLY
SAVINGS?

• Petitioners claim that the unreleased appropriations and withdrawn unobligated allotments were not
ACTUAL savings within the context of Section 25(5) Art. 6 of the Constitution.
• Petitioners also argue that “savings” should be understood to refer to the excess money after the items
that needed to be funded have been funded, or those that needed to be paid have been paid and they
insist that savings cannot be realized with certainty in the middle of the fiscal year.
• Petitioners also say that “slow-moving” PAPs could not be savings as they actually have not been
abandoned yet (remember the note earlier in NBC 541)
• The OSG represents that “savings” meant “appropriations balances” – the difference between the
appropriation authorized by Congress (the Program Amount in the GAA) and the actual amount allotted
for the appropriation.
 To ascertain the meaning of savings, there are four principles:
(1) Congress wields the power of the purse and therefore chooses
how the budget shall be spent.
(2) The Executive is expected to faithfully implement the PAPs
which Congress allocated for.
(3) To make the power of the President to augment operative under
the GAA, Congress recognizes the need for flexibility in budget
execution.
(4) Savings should be actual, something real and substantial. Not
possible, potential or hypothetical.
 This interpretation prevents the Executive from transgressing Congress’
power of the purse.
 Definition of savings in the GAAs reflected this interpretation. Savings
are any programmed appropriation in the GAA free from any obligation
which are:
(1) Still available after the completion/ final discontinuance/
abandonment for which the appropriation is authorized
(2) Appropriation balances from unpaid compensation and vacant
positions/ LOA without pay
(3) Appropriations balances realized from improved systems/
measures in implementation
 The DBM declares that part of the savings brought under DAP came
from “pooling unreleased appropriations such as unreleased Personnel
Services which will lapse at the end of the year, unreleased
appropriations of slow moving projects, and discontinued projects per
Zero-Based Budgeting findings.”
 There is no clear legal basis for this declaration of DBM and their
treatment of unreleased or unallotted appropriations as savings.
 THUS THE SECOND REQUISITE IS NOT MET. THE COURT SAYS:
THESE ITEMS HAVE NOT YET RIPENED INTO CATEGORIES OF
ITEMS FROM WHICH SAVINGS CAN BE GENERATED – THEY
HAVEN’T EVEN REACHED THE AGENCY TO WHICH THEY WERE
ALLOTTED TO UNDER THE GAA. THESE DO NOT FALL UNDER
THE DEFINITION OF SAVINGS REFLECTED IN THE GAA (ITEMS 1
TO 3 AFOREMENTIONED).
 Thus, unobligated allotments cannot be indiscriminately declared as
savings without first determining whether any of the three instances
stated earlier existed. This means that DBM’s withdrawal of the
unobligated allotments disregarded the definition of savings under
the GAAs.
 The GAA has a 2-year validity, however DBM declared that 2013 shall
have a one year validity to force the agencies to plan properly and
expedite expenditures. This means that DBM’s withdrawal of unobligated
allotments of agencies with low levels of obligations to fund fast-moving
projects meant a complete disregard for the 2-year validity of the
budgets for 2011 and 2012 (and the 1-year validity for the 2013
budget). This is because if you’re an agency, and you wanted to use the
unobligated budget you have left from last year to fund a project for this
 year, you can’t anymore because DBM has withdrawn it and distributed it
to faster moving projects.
 The respondents insist that these were being withdrawn upon the
instance of the implementing agencies based on their own assessment
that they could not obligate these allotments. However, the Court states
that the withdrawals were upon the initiative of the DBM itself,
based on the text of NBC 541. (Personal Note: I guess the DBM was
not able to show evidence to back up their claim because this is isn’t
entirely true, the agency always has a chance not to allow DBM to
withdraw their unobligated funds – and can always write a letter to get
back the funds that DBM has withdrawn – as long as they do it as early
as possible)
 The petitioners claim that the retention of these funds were akin to
impoundment and that there was no law authorizing the withdrawal of the
unobligated allotments.
 The Court says: The withdrawal and transfer of unobligated
allotments and pooling of unreleased appropriations were invalid
for being bereft of legal support. Nonetheless, such withdrawal
cannot be considered as impoundment as they entitled only the
transfer of funds and not the retention or reduction of
appropriations
 The Court adds: relevant to remind that the balances of
appropriations that remained unused at the end of the year are to
be reverted to the General Fund (Treasury). This is the mandate of
Section 28, Chapter IV, Book VI of EO 292.
 The Executive cannot circumvent this provision by declaring unreleased
appropriations
 and unobligated allotments as savings prior to the end of the fiscal year.

(1) THIRD REQUISITE: THE PURPOSE OF THE TRANSFER IS TO

AUGMENT AN ITEM IN THE GENERAL APPROPRIATIONS LAW FOR
THEIR RESPECTIVE OFFICES

 THIS REQUISITE IS NOT MET AS SOME OF THE SAVINGS POOLED

UNDER DAP WERE ALLOCATED TO PAPS THAT WERE NOT
COVERED BY ANY APPROPRIATION IN THE PERTINENT GAA. This
means that the Executive seemed to be specifying the PAPs where the
money shall be spent – which is the power of the purse that resides in
Congress alone.
 An example was the Disaster Risk, Exposure, Assessment and
Mitigation (DREAM) Project under the DOST which when broken down
did not have an item for personnel services and capital outlays, only for
MOOE.
 Aside from transferring funds to the DREAM project exceeding by almost
300%, DAP allotted funds for personnel services and capital outlays
which Congress did not appropriate for in the first place.
 AGAIN, PROOF OF NON-COMPLIANCE TO THIS REQUISITE ARE
THE CROSS BORDER AUGENTATIONS FROM SAVINGS WHICH
 ARE CLEARLY PROHIBITED BY THE CONSTITUTION. SECTION
25(5) ARTICLE VI ONLY ALLOWS AUGMENTATION WITHIN THE
RESPECTIVE OFFICES STATED THEREIN.

 During the oral arguments, Secretary Abad stated the following instances
wherein cross-border transfers/ augmentations transpired:
(1) Request from the House of Representatives for e-library funds
(Legislative Library and Archives Building/ Congressional e-
library) (they lacked 43 Million). The HoR were constrained to
finish this project because COA informed them that failure to do
so will cause serious deterioration of the building and
equipments therein. They wrote to the President requesting
for an augmentation of that item, which was granted.
(2) Request from the Commission on Audit for their good
governance programs. The COA needed IT equipment and
consultants and litigators to help with their audit work and they
requested funds form the Executive Department. When the
President saw that it was important for the Commission to
be provided those equipment, the request was granted.
(3) President made available to the Commission on Elections the
savings of his department upon their request for funds.

B. WHETHER OR NOT THE RELEASE OF UNPROGRAMMED FUNDS UNDER DAP

WAS IN ACCORD WITH THE GAAS2

 DBM avers that there are three instances wherein unprogrammed funds
can be availed of:
(1) Revenue collections exceeded original revenue targets
proposed in the BESF submitted by the president to congress
(2) New revenues were collected or realized from sources not
originally considered in the BESF
(3) Newly approved loans for foreign assisted projects secured
 NO. THE RELEASE OF UNPROGRAMMED FUNDS WERE NOT IN
ACCORD WITH THE GAAS. THE COURT RULES THAT THERE ARE
ONLY TWO INSTANCES WHEN THE UNPROGRAMMED FUNDS
CAN BE RELEASED (WHICH ARE BOLSTERED BY THE TEXTS IN
THE 2011 AND 2012 GAA AND MORE CLEARLY BY GAA 2013)3
 The controversy arises due to the difference in the interpretation of the
phrase “revenue collections must exceed the original revenue targets.”
DBM construes this as to refer only to the collections for each source
of revenue in the BESF, the condition is complied as long as one
source of revenue exceeds its target

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  The petitioners, on the other hand (and the Court sides with them on
this) take the phrase to mean the total revenue collections must
exceed the total revenue target in the BESF.
 This requirement should be construed in light of the purpose of the
unprogrammed funds – as standby appropriations to support additional
expenditures. In the even that the revenue collections exceed targets,
the government shall have more than enough to cover additional
expenditures – thus the unprogrammed funds can be dispensed with
and disbursed.
 Following the DBM’s definition would create “fake surplus” since
exceeding targets in one revenue stream did not necessarily mean that
the government indeed had exceeded revenue targets as a whole.

C. WHETHER OR NOT DAP VIOLATES:

(1) EQUAL PROTECTION CLAUSE

 Petitioners say that DAP practiced undue favoritism in favor of select
legislators in contravention of this clause when it released funds upon
their request.
 They add that no reasonable classification was used in distributing
funds under DAP.
 COURT: THIS ALLEGATION LACKS FACTUAL BASIS. Claims are
unsupported with relevant data. On the discrimination against
legislators: cannot warrant a finding of contravention of the equal
protection clause. The denial of equal protection can only be raised by
the parties who suffer it, and in these cases, none of the legislators
brought to the fore when and how the denial of equal protection
occurred and explain why there was a denial in their situation. Ruling on
this will cause the Court to speculate. Guesswork and speculation
cannot overcome the presumption of the constitutionality of the assailed
executive act.

(2) SYSTEM OF CHECKS AND BALANCES

 Petitioners claim that the system of checks and balances was
compromised because some legislators were forced to be silent about
the issues and anomalies surrounding DAP when they were given funds
from it
 The President arrogated unto himself the power of appropriation vested
in the Congress because of NBC No. 541
 COURT: EARLIER DISCUSSIONS ON THE INFRIGEMENT OF THE
DOCTRINE OF SEPARATION OF POWERS HAVE RESOLVED THIS
ISSUE.

(3) PRINCIPLE OF PUBLIC ACCOUNTABILITY

 Petitioners insist that DAP is repugnant to this principle because the
legislators relinquished the power of appropriation to the Executive and
exhibited a reluctance to inquire into DAP’s legality
 
COURT: WE HAVE HELD THAT DAP AND ITS IMPLEMENTING
ISSUANCES WERE POLICIES AND ACTS THAT THE EXECUTIVE
COULD PROPERLY ADOPT AND DO IN THE EXECUTION OF GAAs
to the extent that they sought to implement strategies to ramp up
and accelerate the economy of the country.
D. WHETHER OR NOT FACTUAL AND LEGAL JUSTIFICATION EXISTS TO ISSUE
A TEMPORARY RESTRAINING ORDER (TRO) TO RESTRAIN
IMPLEMENTATION OF DAP, NBC 541 AND ALL OTHER EXECUTIVE
ISSUANCES IMPLEMENTING DAP

 COURT: THE DOCTRINE OF OPERATIVE FACT SHALL APPLY. A

blanket TRO should not be applied.
 It is said that a legislative or executive act is declared void for being
unconstitutional cannot give rise to any right or obligation. But the Court
asks: should we not recognize the need to except from the rigid
application of the rule the instances in which the void law or
executive act produced an almost irreversible result? This is
answered by the doctrine of operative fact.
 This doctrine recognizes the existence of the law or act prior to the
determination of its constitutionality as an operative fact that produced
consequences that cannot always be erased. The past cannot always be
erased by a new judicial declaration.
 This doctrine’s application to DAP proceeds from equity and fair play.
 The Court cites the following cases to support its position:
O Hacienda Luisita, Inc. v. Presidential Agrarian Reform Council
 “Prior to the declaration of unconstitutionality of the said
executive act, certain acts or transactions were made in
good faith…which cannot be just set aside or
invalidated by its subsequent invalidation.”
O Tan v. Barrios – court held that despite invalidity of military
courts over civilians, certain operative facts should be
acknowledged to have existed so as not to trample upon the
rights of the accused
O Olaguer v. Military Commisssion
 “The operative fact doctrine is not confined to statutes and rules and
regulations, but can also be applied by analogy to decisions made by the
President or agencies under the executive department. In the interest of
justice and equity, this doctrine can be applied liberally and in a broad
sense to encompass said decisions of the executive branch. It can be
applied to acts and consequences resulting from the reliance not only on
a law or executive act which is quasi-legislative in nature but also on
decision or orders from the executive branch which were later nullified.
This Court is not mindful that such acts and consequences must be
recognized in the higher interest of justice, equity and fairness.”
 DAP yielded undeniable positive results that enhanced the economic
welfare of the country. Not applying this doctrine would result in the
undoing of worthy results such as infrastructure and would result in the
most undesirable wastefulness.
 Justice Brion: Operative fact can only apply to the PAPs that can no
longer be undone whose beneficiaries relied in good faith on the validity
of the DAP but not to the authors, proponents, and implementors of DAP
unless there are concrete findings of good faith in their favor by the
proper tribunals.