G.R. No.

138810 September 29, 2004

BATANGAS CATV, INC., petitioner,
vs.
THE COURT OF APPEALS, THE BATANGAS CITY SANGGUNIANG PANLUNGSOD
and BATANGAS CITY MAYOR, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
In the late 1940s, John Walson, an appliance dealer in Pennsylvania, suffered a decline
in the sale of television (tv) sets because of poor reception of signals in his community.
Troubled, he built an antenna on top of a nearby mountain. Using coaxial cable lines, he
distributed the tv signals from the antenna to the homes of his customers. Walson’s
innovative idea improved his sales and at the same time gave birth to a new
telecommunication system -- the Community Antenna Television (CATV) or Cable
Television.1
This technological breakthrough found its way in our shores and, like in its country of
origin, it spawned legal controversies, especially in the field of regulation. The case at
bar is just another occasion to clarify a shady area. Here, we are tasked to resolve the
inquiry --a may a local government unit (LGU) regulate the subscriber rates charged by
CATV operators within its territorial jurisdiction?
This is a petition for review on certiorari filed by Batangas CATV, Inc. (petitioner herein)
against the Sangguniang Panlungsod and the Mayor of Batangas City (respondents
herein) assailing the Court of Appeals (1) Decision2 dated February 12, 1999
and (2) Resolution3 dated May 26, 1999, in CA-G.R. CV No. 52361.4 The Appellate
Court reversed and set aside the Judgment5 dated October 29, 1995 of the Regional
Trial Court (RTC), Branch 7, Batangas City in Civil Case No. 4254,6 holding that neither
of the respondents has the power to fix the subscriber rates of CATV operators, such
being outside the scope of the LGU’s power.
The antecedent facts are as follows:
On July 28, 1986, respondent Sangguniang Panlungsod enacted Resolution No.
2107 granting petitioner a permit to construct, install, and operate a CATV system in
Batangas City. Section 8 of the Resolution provides that petitioner is authorized to
charge its subscribers the maximum rates specified therein, "provided, however, that
any increase of rates shall be subject to the approval of the Sangguniang Panlungsod."8
Sometime in November 1993, petitioner increased its subscriber rates from ₱88.00 to
₱180.00 per month. As a result, respondent Mayor wrote petitioner a letter9 threatening

1
to cancel its permit unless it secures the approval of respondent Sangguniang
Panlungsod, pursuant to Resolution No. 210.
Petitioner then filed with the RTC, Branch 7, Batangas City, a petition for injunction
docketed as Civil Case No. 4254. It alleged that respondent Sangguniang
Panlungsod has no authority to regulate the subscriber rates charged by CATV
operators because under Executive Order No. 205, the National Telecommunications
Commission (NTC) has the sole authority to regulate the CATV operation in the
Philippines.
On October 29, 1995, the trial court decided in favor of petitioner, thus:
"WHEREFORE, as prayed for, the defendants, their representatives, agents, deputies
or other persons acting on their behalf or under their instructions, are hereby
enjoined from canceling plaintiff’s permit to operate a Cable Antenna
Television (CATV) system in the City of Batangas or its environs or in any
manner, from interfering with the authority and power of the National
Telecommunications Commission to grant franchises to operate CATV
systems to qualified applicants, and the right of plaintiff in fixing its service
rates which needs no prior approval of the Sangguniang Panlungsod of
Batangas City.
The counterclaim of the plaintiff is hereby dismissed. No pronouncement as to costs.
IT IS SO ORDERED."10
The trial court held that the enactment of Resolution No. 210 by respondent violates the
State’s deregulation policy as set forth by then NTC Commissioner Jose Luis A. Alcuaz in
his Memorandum dated August 25, 1989. Also, it pointed out that the sole agency of
the government which can regulate CATV operation is the NTC, and that the LGUs
cannot exercise regulatory power over it without appropriate legislation.
Unsatisfied, respondents elevated the case to the Court of Appeals, docketed as CA-
G.R. CV No. 52361.
On February 12, 1999, the Appellate Court reversed and set aside the trial court’s
Decision, ratiocinating as follows:
"Although the Certificate of Authority to operate a Cable Antenna Television
(CATV) System is granted by the National Telecommunications Commission
pursuant to Executive Order No. 205, this does not preclude the Sangguniang
Panlungsod from regulating the operation of the CATV in their locality under
the powers vested upon it by Batas Pambansa Bilang 337, otherwise known
as the Local Government Code of 1983. Section 177 (now Section 457
paragraph 3 (ii) of Republic Act 7160) provides:

2
‘Section 177. Powers and Duties – The Sangguniang Panlungsod shall:
a) Enact such ordinances as may be necessary to carry into effect and discharge the
responsibilities conferred upon it by law, and such as shall be necessary and proper to
provide for health and safety, comfort and convenience, maintain peace and order,
improve the morals, and promote the prosperity and general welfare of the community
and the inhabitants thereof, and the protection of property therein;
xxx
d) Regulate, fix the license fee for, and tax any business or profession being carried on
and exercised within the territorial jurisdiction of the city, except travel agencies, tourist
guides, tourist transports, hotels, resorts, de luxe restaurants, and tourist inns of
international standards which shall remain under the licensing and regulatory power of
the Ministry of Tourism which shall exercise such authority without infringement on the
taxing and regulatory powers of the city government;’
Under cover of the General Welfare Clause as provided in this section, Local
Government Units can perform just about any power that will benefit their
constituencies. Thus, local government units can exercise powers that
are: (1) expressly granted; (2) necessarily implied from the power that is expressly
granted; (3) necessary, appropriate or incidental for its efficient and effective
governance; and (4) essential to the promotion of the general welfare of their
inhabitants. (Pimentel, The Local Government Code of 1991, p. 46)
Verily, the regulation of businesses in the locality is expressly provided in the
Local Government Code. The fixing of service rates is lawful under the
General Welfare Clause.
Resolution No. 210 granting appellee a permit to construct, install and operate a
community antenna television (CATV) system in Batangas City as quoted earlier in this
decision, authorized the grantee to impose charges which cannot be increased except
upon approval of the Sangguniang Bayan. It further provided that in case of violation by
the grantee of the terms and conditions/requirements specifically provided therein, the
City shall have the right to withdraw the franchise.
Appellee increased the service rates from EIGHTY EIGHT PESOS (₱88.00) to ONE
HUNDRED EIGHTY PESOS (₱180.00) (Records, p. 25) without the approval of
appellant. Such act breached Resolution No. 210 which gives appellant the
right to withdraw the permit granted to appellee."11
Petitioner filed a motion for reconsideration but was denied.12
Hence, the instant petition for review on certiorari anchored on the following
assignments of error:

3
"I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE GENERAL WELFARE
CLAUSE of the LOCAL GOVERNMENT CODE AUTHORIZES RESPONDENT
SANGGUNIANG PANLUNGSOD TO EXERCISE THE REGULATORY FUNCTION
SOLELY LODGED WITH THE NATIONAL TELECOMMUNICATIONS
COMMISSION UNDER EXECUTIVE ORDER NO. 205, INCLUDING THE
AUTHORITY TO FIX AND/OR APPROVE THE SERVICE RATES OF CATV
OPERATORS; AND
II
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION APPEALED
FROM AND DISMISSING PETITIONER’S COMPLAINT."13
Petitioner contends that while Republic Act No. 7160, the Local Government Code of
1991, extends to the LGUs the general power to perform any act that will benefit their
constituents, nonetheless, it does not authorize them to regulate the CATV operation.
Pursuant to E.O. No. 205, only the NTC has the authority to regulate the CATV
operation, including the fixing of subscriber rates.
Respondents counter that the Appellate Court did not commit any reversible error in
rendering the assailed Decision. First, Resolution No. 210 was enacted pursuant to
Section 177(c) and (d) of Batas Pambansa Bilang 337, the Local Government Code of
1983, which authorizes LGUs to regulate businesses. The term "businesses" necessarily
includes the CATV industry. And second, Resolution No. 210 is in the nature of a
contract between petitioner and respondents, it being a grant to the former of a
franchise to operate a CATV system. To hold that E.O. No. 205 amended its terms
would violate the constitutional prohibition against impairment of contracts.14
The petition is impressed with merit.
Earlier, we posed the question -- may a local government unit (LGU) regulate the
subscriber rates charged by CATV operators within its territorial jurisdiction? A review of
pertinent laws and jurisprudence yields a negative answer.
President Ferdinand E. Marcos was the first one to place the CATV industry under the
regulatory power of the national government.15 On June 11, 1978, he
issued Presidential Decree (P.D.) No. 151216 establishing a monopoly of the
industry by granting Sining Makulay, Inc., an exclusive franchise to operate CATV
system in any place within the Philippines. Accordingly, it terminated all franchises,
permits or certificates for the operation of CATV system previously granted by local
governments or by any instrumentality or agency of the national
government.17 Likewise, it prescribed the subscriber rates to be charged by Sining
Makulay, Inc. to its customers.18

4
On July 21, 1979, President Marcos issued Letter of Instruction (LOI) No. 894 vesting
upon the Chairman of the Board of Communications direct supervision over the
operations of Sining Makulay, Inc. Three days after, he issued E.O. No. 54619 integrating
the Board of Communications20 and the Telecommunications Control Bureau21 to form a
single entity to be known as the "National Telecommunications Commission." Two of its
assigned functions are:
"a. Issue Certificate of Public Convenience for the operation of communications utilities
and services, radio communications systems, wire or wireless telephone or telegraph
systems, radio and television broadcasting system and other similar public utilities;
b. Establish, prescribe and regulate areas of operation of particular operators of public
service communications; and determine and prescribe charges or rates pertinent to the
operation of such public utility facilities and services except in cases where charges or
rates are established by international bodies or associations of which the Philippines is a
participating member or by bodies recognized by the Philippine Government as the
proper arbiter of such charges or rates;"
Although Sining Makulay Inc.’s exclusive franchise had a life term of 25 years, it was cut
short by the advent of the 1986 Revolution. Upon President Corazon C. Aquino’s
assumption of power, she issued E.O. No. 20522 opening the CATV industry to all
citizens of the Philippines. It mandated the NTC to grant Certificates of Authority
to CATV operators and to issue the necessary implementing rules and
regulations.
On September 9, 1997, President Fidel V. Ramos issued E.O. No. 43623 prescribing
policy guidelines to govern CATV operation in the Philippines. Cast in more definitive
terms, it restated the NTC’s regulatory powers over CATV operations, thus:
"SECTION 2. The regulation and supervision of the cable television industry in the
Philippines shall remain vested solely with the National Telecommunications
Commission (NTC).
SECTION 3. Only persons, associations, partnerships, corporations or cooperatives,
granted a Provisional Authority or Certificate of Authority by the Commission may
install, operate and maintain a cable television system or render cable television service
within a service area."
Clearly, it has been more than two decades now since our national government,
through the NTC, assumed regulatory power over the CATV industry. Changes in the
political arena did not alter the trend. Instead, subsequent presidential issuances further
reinforced the NTC’s power. Significantly, President Marcos and President Aquino, in the
exercise of their legislative power, issued P.D. No. 1512, E.O. No. 546 and E.O. No. 205.
Hence, they have the force and effect of statutes or laws passed by Congress.24 That

5
the regulatory power stays with the NTC is also clear from President Ramos’ E.O. No.
436 mandating that the regulation and supervision of the CATV industry shall remain
vested "solely" in the NTC. Black’s Law Dictionary defines "sole" as "without another or
others."25 The logical conclusion, therefore, is that in light of the above laws
and E.O. No. 436, the NTC exercises regulatory power over CATV operators to
the exclusion of other bodies.
But, lest we be misunderstood, nothing herein should be interpreted as to strip LGUs of
their general power to prescribe regulations under the general welfare clause of the
Local Government Code. It must be emphasized that when E.O. No. 436 decrees that
the "regulatory power" shall be vested "solely" in the NTC, it pertains to the "regulatory
power" over those matters which are peculiarly within the NTC’s competence, such as,
the: (1) determination of rates, (2) issuance of "certificates of authority, (3)
establishment of areas of operation, (4) examination and assessment of the legal,
technical and financial qualifications of applicant operators, (5) granting of permits for
the use of frequencies, (6) regulation of ownership and operation, (7) adjudication of
issues arising from its functions, and (8) other similar matters.26 Within these areas, the
NTC reigns supreme as it possesses the exclusive power to regulate -- a power
comprising varied acts, such as "to fix, establish, or control; to adjust by rule, method
or established mode; to direct by rule or restriction; or to subject to governing
principles or laws."27
Coincidentally, respondents justify their exercise of regulatory power over petitioner’s
CATV operation under the general welfare clause of the Local Government Code of
1983. The Court of Appeals sustained their stance.
There is no dispute that respondent Sangguniang Panlungsod, like other local legislative
bodies, has been empowered to enact ordinances and approve resolutions under the
general welfare clause of B.P. Blg. 337, the Local Government Code of 1983. That it
continues to posses such power is clear under the new law, R.A. No. 7160 (the Local
Government Code of 1991). Section 16 thereof provides:
"SECTION 16. General Welfare. – Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among others, the
preservation and enrichment of culture, promote health and safety, enhance the right of
the people to a balanced ecology, encourage and support the development of
appropriate and self-reliant, scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full employment
among their residents, maintain peace and order, and preserve the comfort and
convenience of their inhabitants."

6
In addition, Section 458 of the same Code specifically mandates:
"SECTION 458. Powers, Duties, Functions and Compensation. — (a) The Sangguniang
Panlungsod, as the legislative body of the city, shall enact ordinances, approve
resolutions and appropriate funds for the general welfare of the city and its inhabitants
pursuant to Section 16 of this Code and in the proper exercise of the corporate powers
of the city as provided for under Section 22 of this Code, x x x:"
The general welfare clause is the delegation in statutory form of the police
power of the State to LGUs.28 Through this, LGUs may prescribe regulations to
protect the lives, health, and property of their constituents and maintain peace and
order within their respective territorial jurisdictions. Accordingly, we have upheld
enactments providing, for instance, the regulation of gambling,29 the occupation of rig
drivers,30 the installation and operation of pinball machines,31 the maintenance and
operation of cockpits,32 the exhumation and transfer of corpses from public burial
grounds,33 and the operation of hotels, motels, and lodging houses34 as valid exercises
by local legislatures of the police power under the general welfare clause.
Like any other enterprise, CATV operation maybe regulated by LGUs under the general
welfare clause. This is primarily because the CATV system commits the indiscretion of
crossing public properties. (It uses public properties in order to reach subscribers.) The
physical realities of constructing CATV system – the use of public streets, rights of ways,
the founding of structures, and the parceling of large regions – allow an LGU a certain
degree of regulation over CATV operators.35 This is the same regulation that it exercises
over all private enterprises within its territory.
But, while we recognize the LGUs’ power under the general welfare clause, we cannot
sustain Resolution No. 210. We are convinced that respondents strayed from the well
recognized limits of its power. The flaws in Resolution No. 210 are: (1) it violates the
mandate of existing laws and (2) it violates the State’s deregulation policy over the
CATV industry.
I.
Resolution No. 210 is an enactment of an LGU acting only as agent of the national
legislature. Necessarily, its act must reflect and conform to the will of its principal. To
test its validity, we must apply the particular requisites of a valid ordinance as laid down
by the accepted principles governing municipal corporations.36
Speaking for the Court in the leading case of United States vs. Abendan,37 Justice
Moreland said: "An ordinance enacted by virtue of the general welfare clause is valid,
unless it contravenes the fundamental law of the Philippine Islands, or an Act of the
Philippine Legislature, or unless it is against public policy, or is unreasonable,
oppressive, partial, discriminating, or in derogation of common right." In De la Cruz vs.

7
Paraz,38 we laid the general rule "that ordinances passed by virtue of the implied power
found in the general welfare clause must be reasonable, consonant with the general
powers and purposes of the corporation, and not inconsistent with the laws or policy of
the State."
The apparent defect in Resolution No. 210 is that it contravenes E.O. No. 205 and E.O.
No. 436 insofar as it permits respondent Sangguniang Panlungsod to usurp a power
exclusively vested in the NTC, i.e., the power to fix the subscriber rates charged by
CATV operators. As earlier discussed, the fixing of subscriber rates is definitely one of
the matters within the NTC’s exclusive domain.
In this regard, it is appropriate to stress that where the state legislature has made
provision for the regulation of conduct, it has manifested its intention that the subject
matter shall be fully covered by the statute, and that a municipality, under its general
powers, cannot regulate the same conduct.39 In Keller vs. State,40 it was held that:
"Where there is no express power in the charter of a municipality authorizing it to adopt
ordinances regulating certain matters which are specifically covered by a general
statute, a municipal ordinance, insofar as it attempts to regulate the subject which is
completely covered by a general statute of the legislature, may be rendered invalid. x x
x Where the subject is of statewide concern, and the legislature has appropriated the
field and declared the rule, its declaration is binding throughout the State." A reason
advanced for this view is that such ordinances are in excess of the powers granted to
the municipal corporation.41
Since E.O. No. 205, a general law, mandates that the regulation of CATV operations
shall be exercised by the NTC, an LGU cannot enact an ordinance or approve a
resolution in violation of the said law.
It is a fundamental principle that municipal ordinances are inferior in status and
subordinate to the laws of the state. An ordinance in conflict with a state law of general
character and statewide application is universally held to be invalid.42 The principle is
frequently expressed in the declaration that municipal authorities, under a general grant
of power, cannot adopt ordinances which infringe the spirit of a state law or repugnant
to the general policy of the state.43 In every power to pass ordinances given to a
municipality, there is an implied restriction that the ordinances shall be consistent with
the general law.44 In the language of Justice Isagani Cruz (ret.), this Court, in Magtajas
vs. Pryce Properties Corp., Inc.,45 ruled that:
"The rationale of the requirement that the ordinances should not contravene a statute is
obvious. Municipal governments are only agents of the national government. Local
councils exercise only delegated legislative powers conferred on them by Congress as
the national lawmaking body. The delegate cannot be superior to the principal or
exercise powers higher than those of the latter. It is a heresy to suggest that the local

8
government units can undo the acts of Congress, from which they have derived their
power in the first place, and negate by mere ordinance the mandate of the statute.
‘Municipal corporations owe their origin to, and derive their powers and rights wholly
from the legislature. It breathes into them the breath of life, without which they cannot
exist. As it creates, so it may destroy. As it may destroy, it may abridge and control.
Unless there is some constitutional limitation on the right, the legislature might, by a
single act, and if we can suppose it capable of so great a folly and so great a wrong,
sweep from existence all of the municipal corporations in the State, and the corporation
could not prevent it. We know of no limitation on the right so far as to the corporation
themselves are concerned. They are, so to phrase it, the mere tenants at will of the
legislature.’
This basic relationship between the national legislature and the local government units
has not been enfeebled by the new provisions in the Constitution strengthening the
policy of local autonomy. Without meaning to detract from that policy, we here confirm
that Congress retains control of the local government units although in significantly
reduced degree now than under our previous Constitutions. The power to create still
includes the power to destroy. The power to grant still includes the power to withhold
or recall. True, there are certain notable innovations in the Constitution, like the direct
conferment on the local government units of the power to tax, which cannot now be
withdrawn by mere statute. By and large, however, the national legislature is
still the principal of the local government units, which cannot defy its will or
modify or violate it."
Respondents have an ingenious retort against the above disquisition. Their theory is
that the regulatory power of the LGUs is granted by R.A. No. 7160 (the Local
Government Code of 1991), a handiwork of the national lawmaking authority. They
contend that R.A. No. 7160 repealed E.O. No. 205 (issued by President Aquino).
Respondents’ argument espouses a bad precedent. To say that LGUs exercise the same
regulatory power over matters which are peculiarly within the NTC’s competence is to
promote a scenario of LGUs and the NTC locked in constant clash over the appropriate
regulatory measure on the same subject matter. LGUs must recognize that
technical matters concerning CATV operation are within the exclusive
regulatory power of the NTC.
At any rate, we find no basis to conclude that R.A. No. 7160 repealed E.O. No. 205,
either expressly or impliedly. It is noteworthy that R.A. No. 7160 repealing clause, which
painstakingly mentions the specific laws or the parts thereof which are repealed, does
not include E.O. No. 205, thus:

9
"SECTION 534. Repealing Clause. — (a) Batas Pambansa Blg. 337, otherwise known
as the Local Government Code." Executive Order No. 112 (1987), and Executive Order
No. 319 (1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders,
instructions, memoranda and issuances related to or concerning the barangay are
hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital
fund; Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the Special
Education Fund; Presidential Decree No. 144 as amended by Presidential Decree Nos.
559 and 1741; Presidential Decree No. 231 as amended; Presidential Decree No. 436 as
amended by Presidential Decree No. 558; and Presidential Decree Nos. 381, 436, 464,
477, 526, 632, 752, and 1136 are hereby repealed and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded
projects.
(e) The following provisions are hereby repealed or amended insofar as they are
inconsistent with the provisions of this Code: Sections 2, 16, and 29 of Presidential
Decree No. 704; Section 12 of Presidential Decree No. 87, as amended; Sections 52, 53,
66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree No. 463, as amended; and
Section 16 of Presidential Decree No. 972, as amended, and
(f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly."
Neither is there an indication that E.O. No. 205 was impliedly repealed by R.A. No.
7160. It is a settled rule that implied repeals are not lightly presumed in the absence of
a clear and unmistakable showing of such intentions. In Mecano vs. Commission on
Audit,46 we ruled:
"Repeal by implication proceeds on the premise that where a statute of later date
clearly reveals an intention on the part of the legislature to abrogate a prior act on the
subject, that intention must be given effect. Hence, before there can be a repeal, there
must be a clear showing on the part of the lawmaker that the intent in enacting the
new law was to abrogate the old one. The intention to repeal must be clear and
manifest; otherwise, at least, as a general rule, the later act is to be construed as a
continuation of, and not a substitute for, the first act and will continue so far as the two
acts are the same from the time of the first enactment."
As previously stated, E.O. No. 436 (issued by President Ramos) vests upon the NTC the
power to regulate the CATV operation in this country. So also Memorandum Circular No.

10
8-9-95, the Implementing Rules and Regulations of R.A. No. 7925 (the "Public
Telecommunications Policy Act of the Philippines"). This shows that the NTC’s regulatory
power over CATV operation is continuously recognized.
It is a canon of legal hermeneutics that instead of pitting one statute against another in
an inevitably destructive confrontation, courts must exert every effort to reconcile them,
remembering that both laws deserve a becoming respect as the handiwork of
coordinate branches of the government.47 On the assumption of a conflict between E.O.
No. 205 and R.A. No. 7160, the proper action is not to uphold one and annul the other
but to give effect to both by harmonizing them if possible. This recourse finds
application here. Thus, we hold that the NTC, under E.O. No. 205, has exclusive
jurisdiction over matters affecting CATV operation, including specifically the fixing of
subscriber rates, but nothing herein precludes LGUs from exercising its general power,
under R.A. No. 7160, to prescribe regulations to promote the health, morals, peace,
education, good order or safety and general welfare of their constituents. In effect,
both laws become equally effective and mutually complementary.
The grant of regulatory power to the NTC is easily understandable. CATV system is not
a mere local concern. The complexities that characterize this new technology demand
that it be regulated by a specialized agency. This is particularly true in the area of rate-
fixing. Rate fixing involves a series of technical operations.48 Consequently, on the hands
of the regulatory body lies the ample discretion in the choice of such rational processes
as might be appropriate to the solution of its highly complicated and technical
problems. Considering that the CATV industry is so technical a field, we believe that the
NTC, a specialized agency, is in a better position than the LGU, to regulate it. Notably, in
United States vs. Southwestern Cable Co.,49 the US Supreme Court affirmed the Federal
Communications Commission’s (FCC’s) jurisdiction over CATV operation. The Court held
that the FCC’s authority over cable systems assures the preservation of the local
broadcast service and an equitable distribution of broadcast services among the various
regions of the country.
II.
Resolution No. 210 violated the State’s deregulation policy.
Deregulation is the reduction of government regulation of business to permit freer
markets and competition.50 Oftentimes, the State, through its regulatory agencies,
carries out a policy of deregulation to attain certain objectives or to address certain
problems. In the field of telecommunications, it is recognized that many areas in the
Philippines are still "unserved" or "underserved." Thus, to encourage private sectors to
venture in this field and be partners of the government in stimulating the growth and
development of telecommunications, the State promoted the policy of deregulation.

11
In the United States, the country where CATV originated, the Congress observed, when
it adopted the Telecommunications Act of 1996, that there was a need to provide a pro-
competitive, deregulatory national policy framework designed to accelerate rapidly
private sector deployment of advanced telecommunications and information
technologies and services to all Americans by opening all telecommunications markets
to competition. The FCC has adopted regulations to implement the requirements of the
1996 Act and the intent of the Congress.
Our country follows the same policy. The fifth Whereas Clause of E.O. No. 436 states:
"WHEREAS, professionalism and self-regulation among existing operators, through a
nationally recognized cable television operator’s association, have enhanced the growth
of the cable television industry and must therefore be maintained along with minimal
reasonable government regulations;"
This policy reaffirms the NTC’s mandate set forth in the Memorandum dated August 25,
1989 of Commissioner Jose Luis A. Alcuaz, to wit:
"In line with the purpose and objective of MC 4-08-88, Cable Television System or
Community Antenna Television (CATV) is made part of the broadcast media to promote
the orderly growth of the Cable Television Industry it being in its developing stage.
Being part of the Broadcast Media, the service rates of CATV are likewise considered
deregulated in accordance with MC 06-2-81 dated 25 February 1981, the implementing
guidelines for the authorization and operation of Radio and Television Broadcasting
stations/systems.
Further, the Commission will issue Provisional Authority to existing CATV operators to
authorize their operations for a period of ninety (90) days until such time that the
Commission can issue the regular Certificate of Authority."
When the State declared a policy of deregulation, the LGUs are bound to follow. To rule
otherwise is to render the State’s policy ineffective. Being mere creatures of the State,
LGUs cannot defeat national policies through enactments of contrary measures. Verily,
in the case at bar, petitioner may increase its subscriber rates without respondents’
approval.
At this juncture, it bears emphasizing that municipal corporations are bodies politic and
corporate, created not only as local units of local self-government, but as governmental
agencies of the state.51 The legislature, by establishing a municipal corporation, does
not divest the State of any of its sovereignty; absolve itself from its right and duty to
administer the public affairs of the entire state; or divest itself of any power over the
inhabitants of the district which it possesses before the charter was granted.52

12
Respondents likewise argue that E.O. No. 205 violates the constitutional prohibition
against impairment of contracts, Resolution No. 210 of Batangas City Sangguniang
Panlungsod being a grant of franchise to petitioner.
We are not convinced.
There is no law specifically authorizing the LGUs to grant franchises to operate CATV
system. Whatever authority the LGUs had before, the same had been withdrawn when
President Marcos issued P.D. No. 1512 "terminating all franchises, permits or certificates
for the operation of CATV system previously granted by local governments." Today,
pursuant to Section 3 of E.O. No. 436, "only persons, associations, partnerships,
corporations or cooperatives granted a Provisional Authority or Certificate of Authority
by the NTC may install, operate and maintain a cable television system or render cable
television service within a service area." It is clear that in the absence of constitutional
or legislative authorization, municipalities have no power to grant
franchises.53 Consequently, the protection of the constitutional provision as to
impairment of the obligation of a contract does not extend to privileges, franchises and
grants given by a municipality in excess of its powers, or ultra vires.54
One last word. The devolution of powers to the LGUs, pursuant to the Constitutional
mandate of ensuring their autonomy, has bred jurisdictional tension between said LGUs
and the State. LGUs must be reminded that they merely form part of the whole. Thus,
when the Drafters of the 1987 Constitution enunciated the policy of ensuring the
autonomy of local governments,55 it was never their intention to create an imperium in
imperio and install an intra-sovereign political subdivision independent of a single
sovereign state.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals
dated February 12, 1999 as well as its Resolution dated May 26, 1999 in CA-G.R. CV No.
52461, are hereby REVERSED. The RTC Decision in Civil Case No. 4254 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Davide, Jr., Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez,
Corona, Carpio Morales, Callejo, Sr., Azcuna, Tinga, and Chico-Nazario*, JJ., concur.

13
G.R. No. 150763 July 2, 2004
RURAL BANK OF MAKATI, INC., ESTEBAN S. SILVA and MAGDALENA V.
LANDICHO, petitioners,
vs.
MUNICIPALITY OF MAKATI and ATTY. VICTOR A. L. VALERO, respondents.

DECISION

QUISUMBING, J.:
In its decision1 dated July 17, 2001, in CA-G.R. CV No. 58214, the Court of Appeals
affirmed the decision2 dated October 22, 1996 of the Regional Trial Court of Makati City,
Branch 134, in Civil Case No. 91-2866 dismissing petitioners’ complaint for recovery of a
sum of money and damages. Petitioners now assail said CA decision as well as the
Resolution3 dated November 9, 2001, which denied their Motion for Reconsideration.
The facts are as follows:
Sometime in August 1990, Atty. Victor A.L. Valero, then the municipal attorney of the
Municipality of Makati, upon request of the municipal treasurer, went to the Rural Bank
of Makati to inquire about the bank’s payments of taxes and fees to the municipality. He
was informed, however, by petitioner Magdalena V. Landicho, corporate secretary of the
bank, that the bank was exempt from paying taxes under Republic Act No. 720, as
amended.4
On November 19, 1990, the municipality lodged a complaint with the Prosecutor’s
Office, charging petitioners Esteban S. Silva, president and general manager of the bank
and Magdalena V. Landicho for violation of Section 21(a), Chapter II, Article 3 in relation
to Sections 105 and 169 of the Metropolitan Tax Code.
On April 5, 1991, an Information docketed as Criminal Case No. 140208, for violation of
Municipal Ordinance Nos. 122 and 39 for non-payment of the mayor’s permit fee, was
filed with the Metropolitan Trial Court (MeTC) of Makati against petitioners. Another
Information, docketed as Criminal Case No. 140209, for non-payment of annual
business tax, in violation of Metro Manila Commission Ordinance No. 82-03, Section
21(a), Chapter II, Article 3, was likewise filed with the MeTC.
While said cases were pending with the municipal court, respondent municipality
ordered the closure of the bank. This prompted petitioners to pay, under protest, the
mayor’s permit fee and the annual fixed tax in the amount of P82,408.66.
14
On October 18, 1991, petitioners filed with the RTC of Makati a Complaint for Sum of
Money and Damages, docketed as Civil Case No. 91-2866. Petitioners alleged that they
were constrained to pay the amount of P82,408.66 because of the closure order, issued
despite the pendency of Criminal Cases Nos. 140208-09 and the lack of any notice or
assessment of the fees to be paid. They averred that the collection of the taxes/fees
was oppressive, arbitrary, unjust and illegal. Additionally, they alleged that respondent
Atty. Valero had no power to enforce laws and ordinances, thus his action in enforcing
the collection of the permit fees and business taxes was ultra vires. Petitioners claimed
that the bank lost expected earnings in the amount of P19,778. Petitioners then
assailed the municipal ordinances of Makati as invalid for want of the requisite
publication.
In its Answer, respondent municipality asserted that petitioners’ payment of P82,408.66
was for a legal obligation because the payment of the mayor’s permit fee as well as the
municipal business license was required of all business concerns. According to
respondent, said requirement was in furtherance of the police power of the municipality
to regulate businesses.
For his part, Atty. Valero filed an Answer claiming that there was no coercion committed
by the municipality, that payment was a legal obligation of the bank, and that its claim
of exemption had no legal basis. He further alleged that petitioners’ action was clearly
intended to harass and humiliate him and as counterclaim, he asked for moral and
other damages.
On October 22, 1996, the RTC decided Civil Case No. 91-2866 as follows:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered dismissing the
complaint.
On the counterclaim, the plaintiffs are hereby ordered jointly and severally to pay to
defendant Victor Valero the sum of P200,000.00 as moral damages and the amount
of P50,000.00 as attorney’s fees.
The counterclaim of defendant Municipality is dismissed.
Cost against the plaintiffs.
SO ORDERED.5
In finding for respondents, the RTC ruled that the bank was engaged in business as a
rural bank. Hence, it should secure the necessary permit and business license, as well
as pay the corresponding charges and fees. It found that the municipality had authority
to impose licenses and permit fees on persons engaging in business, under its police
power embodied under the general welfare clause. Also, the RTC declared
unmeritorious petitioners’ claim for exemption under Rep. Act No. 720 since said

15
exemption had been withdrawn by Executive Order No. 936 and the Rural Bank Act of
1992.7 These statutes no longer exempted rural banks from paying corporate income
taxes and local taxes, fees and charges. It also found petitioners’ claim of lack of
publication of MMC Ordinance Nos. 82-03 and Municipal Ordinance No. 122 to be mere
allegations unsupported by clear and convincing evidence.
In awarding damages to Atty. Valero, the RTC found that he had been maliciously
impleaded as defendant. It noted that Atty. Valero, as a municipal legal officer, was
tasked to enforce municipal ordinances. In short, he was merely an agent of the local
chief executive and should not be faulted for performing his assigned task.
Petitioners seasonably moved for reconsideration, but this was denied by the RTC in its
Order dated January 10, 1997.8
Petitioners appealed to the Court of Appeals in CA-G.R. CV No. 58214. The appellate
court sustained the lower court in this wise:
WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED in toto.
SO ORDERED.9
The Court of Appeals found the order of closure of the bank valid and justified since the
bank was operating without any permit and without having paid the requisite permit
fee. Thus, declared the Court of Appeals, "it is not merely a matter of enforcement and
collection of fees, as the appellants would have it, but a violation of the municipality’s
authority to regulate the businesses operating within its territory."10
The appellate court also brushed aside petitioners’ claim that the general welfare clause
is limited only to legislative action. It declared that the exercise of police power by the
municipality was mandated by the general welfare clause, which authorizes the local
government units to enact ordinances, not only to carry into effect and discharge such
duties as are conferred upon them by law, but also those for the good of the
municipality and its inhabitants. This mandate includes the regulation of useful
occupations and enterprises.
Petitioner moved for reconsideration, but the appellate court in its Resolution11 of
November 9, 2001 denied the same.
Hence, this instant petition alleging that the Honorable Court of Appeals seriously erred
in:
1) ….HOLDING THAT THE CLOSURE BY THE APPELLEE, VICTOR VALERO, OF THE
APPELLANT BANK WAS A LEGITIMATE EXERCISE OF POLICE POWER BY THE
MUNICIPALITY OF MAKATI;

16
2) ….NOT CONSIDERING THE FACT THAT MAKATI ORDINANCE 122 REQUIRING
MAYOR’S PERMIT FOR OPERATION OF AN ESTABLISHMENT AND MMC ORDINANCE NO.
82-03 WERE ADMITTED AS NOT PUBLISHED AS REQUIRED IN TAÑADA, ET AL., vs.
TUVERA, NO. L-63915, DECEMBER 29, 1986 AND THAT NO TAX ASSESSMENT WAS
PRESENTED TO THE BANK;
3) ….AWARDING MORAL DAMAGES TO APPELLEE VICTOR VALERO IN THE AMOUNT OF
P200,000.00 AND ATTORNEY’S FEES IN THE SUM OF P50,000.00;
4) ….NOT AWARDING TO THE APPELLANT BANK, THE AMOUNT OF P57,854.00
REPRESENTING THE AMOUNT UNJUSTLY AND ILLEGALLY COLLECTED FROM THE
APPELLANT BANK;
5) ….NOT AWARDING THE AMOUNT OF P10,413.75 YEARLY REPRESENTING THE
UNREALIZED PROFIT WHICH THE APPELLANT BANK IS BEING DEPRIVED OF IN THE
USE OF THE AFORESAID AMOUNT PLUS LEGAL INTEREST ALLOWED IN JUDGMENT
FROM THE TIME OF THE EXTRAJUDICIAL DEMAND. (DEMAND LETTER, DATED
OCTOBER 4, 1991, EXHIBIT "O" FOR THE APPELLANTS);
6) ….NOT GRANTING TO APPELLANTS ESTEBAN S. SILVA AND MAGDALENA LANDICHO
MORAL DAMAGES IN THE AMOUNT OF P15,000.00;
7) ….NOT AWARDING TO APPELLANTS, P1,000,000.00 EXEMPLARY DAMAGES; 25% OF
THE APPELLANTS CLAIM AS AND FOR ATTORNEYS’ FEE AND COSTS OF SUIT.12
Essentially, the following are the relevant issues for our resolution:
1. Whether or not petitioner bank is liable to pay the business taxes and mayor’s permit
fees imposed by respondent;
2. Whether or not the closure of petitioner bank is valid;
3. Whether or not petitioners are entitled to an award of unrealized profit and damages;
4. Whether or not respondent Atty. Victor Valero is entitled to damages.
On the first issue, petitioner bank claims that of the P82,408.66 it paid under protest, it
is actually liable only for the amount of P24,154, representing taxes, fees and charges
due beginning 1987, or after the issuance of E.O. No. 93. Prior to said year, it was
exempt from paying any taxes, fees, and charges by virtue of Rep. Act No. 720.
We find the bank’s claim for refund untenable now.
Section 14 of Rep. Act No. 720, as amended by Republic Act No. 4106,13 approved on
July 19, 1964, had exempted rural banks with net assets not exceeding one million
pesos (P1,000,000) from the payment of all taxes, charges and fees. The records show
that as of December 29, 1986, petitioner bank’s net assets amounted only

17
to P745,432.2914 or below the one million ceiling provided for in Section 14 of the old
Rural Banking Act. Hence, under Rep. Act No. 720, petitioner bank could claim to be
exempt from payment of all taxes, charges and fees under the aforementioned
provision.
However, on December 17, 1986, Executive Order No. 93 was issued by then President
Corazon Aquino, withdrawing all tax and duty incentives with certain exceptions.
Notably, not included among the exceptions were those granted to rural banks under
Rep. Act No. 720. With the passage of said law, petitioner could no longer claim any
exemption from payment of business taxes and permit fees.
Now, as to the refund of P57,854 claimed by petitioners allegedly because of
overpayment of taxes and fees, we note that petitioners have not adequately
substantiated their claim. As found by the Court of Appeals:
As to the computation of the payable fees, the plaintiffs-appellants claim an
overpayment and pray for a refund. It is not clearly shown from their argument that
such overpayment exists. And from their initial complaint, they even asked for the
refund of the whole P82,408.66 paid, which complaint was instituted in 1991. They
claim having paid the fees and charges due since 1991, which is irrelevant, since
the P82,408.66 was paid for the period before 1991, and thus no deduction can be
made for payments after that period. It is not clear where their computation
of P57,854.00 owed them came from, and lacking solid support, their prayer for a
partial refund must fail. Plaintiffs-appellants have failed to show that the payment of
fees and charges even covered the period before their exemption was withdrawn.15
Factual findings of the Court of Appeals, which are supported on record, are binding
and conclusive upon this Court. As repeatedly held, such findings will not be disturbed
unless they are palpably unsupported by the evidence on record or unless the judgment
itself is based on misapprehension of facts.16 Moreover, in a petition for review, only
questions of law are properly raised. On this score, the refund sought by petitioners
could not be entertained much less granted.
Anent the second issue, petitioner bank claims that the closure of respondent bank was
an improper exercise of police power because a municipal corporation has no inherent
but only delegated police power, which must be exercised not by the municipal mayor
but by the municipal council through the enactment of ordinances. It also assailed the
Court of Appeals for invoking the General Welfare Clause embodied in Section 1617 of
the Local Government Code of 1991, which took effect in 1992,18 when the closure of
the bank was actually done on July 31, 1991.
Indeed the Local Government Code of 1991 was not yet in effect when the municipality
ordered petitioner bank’s closure on July 31, 1991. However, the general welfare clause
invoked by the Court of Appeals is not found on the provisions of said law alone. Even

18
under the old Local Government Code (Batas Pambansa Blg. 337)19 which was then in
effect, a general welfare clause was provided for in Section 7 thereof. Municipal
corporations are agencies of the State for the promotion and maintenance of local self-
government and as such are endowed with police powers in order to effectively
accomplish and carry out the declared objects of their creation.20 The authority of a local
government unit to exercise police power under a general welfare clause is not a recent
development. This was already provided for as early as the Administrative Code of
1917.21 Since then it has been reenacted and implemented by new statutes on the
matter. Thus, the closure of the bank was a valid exercise of police power pursuant to
the general welfare clause contained in and restated by B.P. Blg. 337, which was then
the law governing local government units. No reversible error arises in this instance
insofar as the validity of respondent municipality’s exercise of police power for the
general welfare is concerned.
The general welfare clause has two branches. The first, known as the general legislative
power, authorizes the municipal council to enact ordinances and make regulations not
repugnant to law, as may be necessary to carry into effect and discharge the powers
and duties conferred upon the municipal council by law. The second, known as
the police power proper, authorizes the municipality to enact ordinances as may be
necessary and proper for the health and safety, prosperity, morals, peace, good order,
comfort, and convenience of the municipality and its inhabitants, and for the protection
of their property.22
In the present case, the ordinances imposing licenses and requiring permits for any
business establishment, for purposes of regulation enacted by the municipal council of
Makati, fall within the purview of the first branch of the general welfare clause.
Moreover, the ordinance of the municipality imposing the annual business tax is part of
the power of taxation vested upon local governments as provided for under Section 8 of
B.P. Blg. 337,23 to wit:
Sec. 8. Authority to Create Sources of Revenue. – (1) Each local government unit shall
have the power to create its own sources of revenue and to levy taxes, subject to such
limitations as may be provided by law.
...
Implementation of these ordinances is vested in the municipal mayor, who is the chief
executive of the municipality as provided for under the Local Government Code, to wit:
Sec. 141. Powers and Duties. –
(1) The mayor shall be the chief executive of the municipal government and shall
exercise such powers, duties and functions as provided in this Code and other laws.
(2) He shall:

19
...
(k) Grant licenses and permits in accordance with existing laws or municipal
ordinances and revoke them for violation of the conditions upon which they have been
granted;
...
(o) Enforce laws, municipal ordinances and resolutions and issue necessary orders for
their faithful and proper enforcement and execution;
(p) Ensure that all taxes and other revenues of the municipality are collected,
and that municipal funds are spent in accordance with law, ordinances and regulations;
...
(t) Cause to be instituted judicial proceedings in connection with the violation of
ordinances, for the collection of taxes, fees and charges, and for the recovery of
property and funds of the municipality, and otherwise to protect the interest of the
municipality; 24 (Emphasis supplied)
...
Consequently, the municipal mayor, as chief executive, was clothed with authority to
create a Special Task Force headed by respondent Atty. Victor A.L. Valero to enforce and
implement said ordinances and resolutions and to file appropriate charges and
prosecute violators.25 Respondent Valero could hardly be faulted for performing his
official duties under the cited circumstances.
Petitioners contend that MMC Ordinance No. 82-03 and Municipal Ordinance No. 122
are void for lack of publication. This again raises a factual issue, which this Court may
not look into. As repeatedly held, this Court is not a trier of facts.26 Besides, both the
Court of Appeals and the trial court found lack of sufficient evidence on this point to
support petitioners’ claim, thus:
And finally the matter of the lack of publication is once again alleged by the plaintiffs-
appellants, claiming that the matter was skirted by the trial court. This argument must
fail, in the light of the trial court’s squarely finding lack of evidence to support the
allegation of the plaintiffs-appellants. We quote from the trial court’s decision:
The contention that MMC Ordinance No. 82-03 and Municipal Ordinance No. 122 of
Makati are void as they were not publishced (sic) is untenable. The mere allegation of
the plaintiff is not sufficient to declare said ordinances void. The plaintiffs failed to
adduce clear, convincing and competent evidence to prove said Ordinances void.
Moreover, in this jurisdiction, an ordinance is presumed to be valid unless declared

20
otherwise by a Court in an appropriate proceeding where the validity of the ordinance is
directly put in issue.27
On the issue of the closure of the bank, we find that the bank was not engaged in any
illegal or immoral activities to warrant its outright closure. The appropriate remedies to
enforce payment of delinquent taxes or fees are provided for in Section 62 of the Local
Tax Code, to wit:
SEC. 62. Civil Remedies. – The civil remedies available to enforce payment of delinquent
taxes shall be by distraint of personal property, and by legal action. Either of these
remedies or both simultaneously may be pursued at the discretion of the proper
authority.
The payment of other revenues accruing to local governments shall be enforced by
legal action.28
Said Section 62 did not provide for closure. Moreover, the order of closure violated
petitioner’s right to due process, considering that the records show that the bank
exercised good faith and presented what it thought was a valid and legal justification
for not paying the required taxes and fees. The violation of a municipal ordinance does
not empower a municipal mayor to avail of extrajudicial remedies.29 It should have
observed due process before ordering the bank’s closure.
Finally, on the issue of damages, we agree with both the trial and the appellate courts
that the bank is not entitled to any damages. The award of moral damages cannot be
granted to a corporation, it being an artificial person that exists only in legal
contemplation and cannot, therefore, experience physical suffering and mental anguish,
which can be experienced only by one having a nervous system.30 There is also no
sufficient basis for the award of exemplary damages. There being no moral damages,
exemplary damages could not be awarded also. As to attorney’s fees, aside from lack of
adequate support and proof on the matter, these fees are not recoverable as a matter
of right but depend on the sound discretion of the courts.31
Under the circumstances of this case, the award of damages to Atty. Valero is also
baseless. We cannot ascribe any illegal motive or malice to the bank for impleading
Atty. Valero as an officer of respondent municipality. The bank filed the case against
respondent municipality in the honest belief that it is exempt from paying taxes and
fees. Since Atty. Valero was the official charged with the implementation of the
ordinances of respondent municipality, he was rightly impleaded as a necessary party in
the case.
WHEREFORE, the assailed Decision dated July 17, 2001, of the Court of Appeals in CA-
G.R. CV No. 58214 is AFFIRMED with MODIFICATIONS, so that (1) the order denying
any claim for refunds and fees allegedly overpaid by the bank, as well as the denial of

21
any award for damages and unrealized profits, is hereby SUSTAINED; (2) the order
decreeing the closure of petitioner bank is SET ASIDE; and (3) the award of moral
damages and attorney’s fees to Atty. Victor A.L. Valero is DELETED. No pronouncement
as to costs.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., and Tinga, JJ., concur.
Austria-Martinez, J., on leave.

22
[G.R. No. 110249. August 21, 1997]
ALFREDO TANOPetitioners, vs. GOV. SALVADOR P. SOCRATESRespondents.
.
DECISION
DAVIDE, JR., J.:
Petitioners caption their petition as one for Certiorari, Injunction With Preliminary
Mandatory Injunction,with Prayer for Temporary Restraining Order and pray that this
Court: (1) declare as unconstitutional: (a) Ordinance No. 15-92, dated 15 December
1992, of the Sangguniang Panlungsod of Puerto Princesa; (b) Office Order No. 23,
Series of 1993, dated 22 January 1993, issued by Acting City Mayor Amado L. Lucero of
Puerto Princesa City; and (c) Resolution No. 33, Ordinance No. 2, Series of 1993, dated
19 February 1993, of the Sangguniang Panlalawigan of Palawan; (2) enjoin the
enforcement thereof; and (3) restrain respondents Provincial and City Prosecutors of
Palawan and Puerto Princesa City and Judges of Regional Trial Courts, Metropolitan Trial
Courts1 and Municipal Circuit Trial Courts in Palawan from assuming jurisdiction over
and hearing cases concerning the violation of the Ordinances and of the Office Order.
More appropriately, the petition is, and shall be treated as, a special civil action
for certiorari and prohibition.
The following is petitioners summary of the factual antecedents giving rise to the
petition:
1. On December 15, 1992, the Sangguniang Panlungsod ng Puerto Princesa City
enacted Ordinance No. 15-92 which took effect on January 1, 1993 entitled: AN
ORDINANCE BANNING THE SHIPMENT OF ALL LIVE FISH AND LOBSTER OUTSIDE
PUERTO PRINCESA CITY FROM JANUARY 1, 1993 TO JANUARY 1, 1998 AND
PROVIDING EXEMPTIONS, PENALTIES AND FOR OTHER PURPOSES THEREOF, the full
text of which reads as follows:
Section 1. Title of the Ordinance. - This Ordinance is entitled: AN ORDINANCE
BANNING THE SHIPMENT OF ALL LIVE FISH AND LOBSTER OUTSIDE PUERTO
PRINCESA CITY FROM JANUARY 1, 1993 TO JANUARY 1, 1998 AND PROVIDING
EXEMPTIONS, PENALTIES AND FOR OTHER PURPOSES THEREOF.
Section 2. Purpose, Scope and Coverage. - To effectively free our City Sea Waters from
Cyanide and other Obnoxious substance, and shall cover all persons and/or entities
operating within and outside the City of Puerto Princesa who is are [sic] directly or
indirectly in the business or shipment of live fish and lobster outside the City.

23
Section 3. Definition of terms. - For purpose of this Ordinance the following are hereby
defined:
A. SEA BASS - A kind of fish under the family of Centropomidae, better known as
APAHAP;
B. CATFISH - A kind of fish under the family of Plotosidae, better known as HITO-HITO;
C. MUDFISH - A kind of fish under the family of Orphicaphalisae better known as
DALAG
D. ALL LIVE FISH - All alive, breathing not necessarily moving of all specie[s] use for
food and for aquarium purposes.
E. LIVE LOBSTER - Several relatively, large marine crustaceans of the genus Homarus
that are alive and breathing not necessarily moving.
Section 4. It shall be unlawful [for] any person or any business enterprise or company
to ship out from Puerto Princesa City to any point of destination either via aircraft or
seacraft of any live fish and lobster except SEA BASS, CATFISH, MUDFISH, AND
MILKFISH FRIES.
Section 5. Penalty Clause. - Any person/s and or business entity violating this Ordinance
shall be penalized with a fine of not more than P5,000.00 or imprisonment of not more
than twelve (12) months, cancellation of their permit to do business in the City of
Puerto Princesa or all of the herein stated penalties, upon the discretion of the court.
Section 6. If the owner and/or operator of the establishment found vilating the
provisions of this ordinance is a corporation or a partnership, the penalty prescribed in
Section 5 hereof shall be imposed upon its president and/or General Manager or
Managing Partner and/or Manager, as the case maybe [sic].
Section 7. Any existing ordinance or any provision of any ordinance inconsistent to [sic]
this ordinance is deemed repealed.
Section 8. This Ordinance shall take effect on January 1, 1993.
SO ORDAINED.
xxx
2. To implement said city ordinance, then Acting City Mayor Amado L. Lucero issued
Office Order No. 23, Series of 1993 dated January 22, 1993 which reads as follows:
In the interest of public service and for purposes of City Ordinance No. PD426-14-74,
otherwise known as AN ORDINANCE REQUIRING ANY PERSON ENGAGED OR
INTENDING TO ENGAGE IN ANY BUSINESS, TRADE, OCCUPATION, CALLING OR
PROFESSION OR HAVING IN HIS POSSESSION ANY OF THE ARTICLES FOR WHICH A

24
PERMIT IS REQUIRED TO BE HAD, TO OBTAIN FIRST A MAYORS PERMIT and City
Ordinance No. 15-92, AN ORDINANCE BANNING THE SHIPMENT OF ALL LIVE FISH
AND LOBSTER OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993 TO
JANUARY 1, 1998, you are hereby authorized and directed to check or conduct
necessary inspections on cargoes containing live fish and lobster being shipped out
from the Puerto Princesa Airport, Puerto Princesa Wharf or at any port within the
jurisdiction of the City to any point of destinations [sic] either via aircraft or seacraft.
The purpose of the inspection is to ascertain whether the shipper possessed the
required Mayors Permit issued by this Office and the shipment is covered by invoice or
clearance issued by the local office of the Bureau of Fisheries and Aquatic Resources
and as to compliance with all other existing rules and regulations on the matter.
Any cargo containing live fish and lobster without the required documents as stated
herein must be held for proper disposition.
In the pursuit of this Order, you are hereby authorized to coordinate with the PAL
Manager, the PPA Manager, the local PNP Station and other offices concerned for the
needed support and cooperation. Further, that the usual courtesy and diplomacy must
be observed at all times in the conduct of the inspection.
Please be guided accordingly.
xxx
3. On February 19, 1993, the Sangguniang Panlalawigan, Provincial Government of
Palawan enacted Resolution No. 33 entitled: A RESOLUTION PROHIBITING THE
CATCHING, GATHERING, POSSESSING, BUYING, SELLING AND SHIPMENT OF LIVE
MARINE CORAL DWELLING AQUATIC ORGANISMS, TO WIT:
FAMILY: SCARIDAE (MAMENG), EPINE PHELUS FASCIATUS (SUNO). CROMILEPTES
ALTIVELIS (PANTHER OR SENORITA), LOBSTER BELOW 200 GRAMS AND
SPAWNING, TRADACNA GIGAS (TAKLOBO), PINCTADA MARGARITEFERA (MOTHER
PEARL, OYSTERS, GIANT CLAMS AND OTHER SPECIES), PENAEUS MONODON (TIGER
PRAWN-BREEDER SIZE OR MOTHER), EPINEPHELUS SUILLUS (LOBA OR GREEN
GROUPER) AND FAMILY: BALISTIDAE (TROPICAL AQUARIUM FISHES) FOR A PERIOD
FIVE (5) YEARS IN AND COMING FROM PALAWAN WATERS, the full text of which reads
as follows:
WHEREAS, scientific and factual researches [sic] and studies disclose that only five (5)
percent of the corals of our province remain to be in excellent condition as [a] habitat
of marine coral dwelling aquatic organisms;
WHEREAS, it cannot be gainsaid that the destruction and devastation of the corals of
our province were principally due to illegal fishing activities like dynamite fishing,
sodium cyanide fishing, use of other obnoxious substances and other related activities;

25
WHEREAS, there is an imperative and urgent need to protect and preserve the
existence of the remaining excellent corals and allow the devastated ones to
reinvigorate and regenerate themselves into vitality within the span of five (5) years;
WHEREAS, Sec. 468, Par. 1, Sub-Par. VI of the [sic] R.A. 7160 otherwise known as the
Local Government Code of 1991 empowers the Sangguniang Panlalawigan to protect
the environment and impose appropriate penalties [upon] acts which endanger the
environment such as dynamite fishing and other forms of destructive fishing, among
others.
NOW, THEREFORE, on motion by Kagawad Nelson P. Peneyra and upon unanimous
decision of all the members present;
Be it resolved as it is hereby resolved, to approve Resolution No. 33, Series of 1993 of
the Sangguniang Panlalawigan and to enact Ordinance No. 2 for the purpose, to wit:
ORDINANCE NO. 2
Series of 1993
BE IT ORDAINED BY THE SANGGUNIANG PANLALAWIGAN IN SESSION ASSEMBLED:
Section 1. TITLE - This Ordinance shall be known as an Ordinance Prohibiting the
catching, gathering, possessing, buying, selling and shipment of live marine coral
dwelling aquatic organisms, to wit: 1. Family: Scaridae (Mameng), 2. Epinephelus
Fasciatus (Suno), 3. Cromileptes altivelis (Panther or Senorita), lobster below 200 grams
and spawning), 4. Tridacna Gigas (Taklobo), 5. Pinctada Margaretefera (Mother Pearl,
Oysters, Giant Clams and other species), 6. Penaeus Monodon (Tiger Prawn-breeder
size or mother), 7. Epinephelus Suillus (Loba or Green Grouper) and 8. Family:
Balistidae (Topical Aquarium Fishes) for a period of five (5) years in and coming from
Palawan Waters.
Section II. PRELIMINARY CONSIDERATIONS
1. Sec. 2-A (Rep. Act 7160). It is hereby declared, the policy of the state that the
territorial and political subdivisions of the State shall enjoy genuine and meaningful local
autonomy to enable them to attain their fullest development as self reliant communities
and make them more effective partners in the attainment of national goals. Toward this
end, the State shall provide for [a] more responsive and accountable local government
structure instituted through a system of decentralization whereby local government
units shall be given more powers, authority, responsibilities and resources.
2. Sec. 5-A (R.A. 7160). Any provision on a power of [a] local Government Unit shall be
liberaly interpreted in its favor, and in case of doubt, any question thereon shall be
resolved in favor of devolution of powers and of the lower government units. Any fair

26
and reasonable doubts as to the existence of the power shall be interpreted in favor of
the Local Government Unit concerned.
3. Sec. 5-C (R.A. 7160). The general welfare provisions in this Code shall be liberally
interpreted to give more powers to local government units in accelerating economic
development and upgrading the quality of life for the people in the community.
4. Sec. 16 (R.A. 7160). General Welfare. - Every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as powers
necessary, appropriate, or incidental for its efficient and effective governance; and
those which are essential to the promotion of the general welfare.
Section III. DECLARATION OF POLICY. - It is hereby declared to be the policy of the
Province of Palawan to protect and conserve the marine resources of Palawan not only
for the greatest good of the majority of the present generation but with [the] proper
perspective and consideration of [sic] their prosperity, and to attain this end, the
Sangguniang Panlalawigan henceforth declares that is [sic] shall be unlawful for any
person or any business entity to engage in catching, gathering, possessing, buying,
selling and shipment of live marine coral dwelling aquatic organisms as enumerated in
Section 1 hereof in and coming out of Palawan Waters for a period of five (5) years;
Section IV. PENALTY CLAUSE. - Any person and/or business entity violating this
Ordinance shall be penalized with a fine of not more than Five Thousand Pesos
(P5,000.00), Philippine Currency, and/or imprisonment of six (6) months to twelve (12)
months and confiscation and forfeiture of paraphernalias [sic] and equipment in favor of
the government at the discretion of the Court;
Section V. SEPARABILITY CLAUSE. - If for any reason, a Section or provision of this
Ordinance shall be held as unconditional [sic] or invalid, it shall not affect the other
provisions hereof.
Section VI. REPEALING CLAUSE. - Any existing Ordinance or a provision of any
ordinance inconsistent herewith is deemed modified, amended or repealed.
Section VII. EFFECTIVITY. - This Ordinance shall take effect ten (10) days after its
publication.
SO ORDAINED.
xxx
4. The respondents implemented the said ordinances, Annexes A and C hereof thereby
depriving all the fishermen of the whole province of Palawan and the City of Puerto
Princesa of their only means of livelihood and the petitioners Airline Shippers
Association of Palawan and other marine merchants from performing their lawful
occupation and trade;

27
5. Petitioners Alfredo Tano, Baldomero Tano, Teocenes Midello, Angel de Mesa, Eulogio
Tremocha, and Felipe Ongonion, Jr. were even charged criminally under criminal case
no. 93-05-C in the 1st Municipal Circuit Trial Court of Cuyo-Agutaya-Magsaysay, an
original carbon copy of the criminal complaint dated April 12, 1993 is hereto attached as
Annex D; while xerox copies are attached as Annex D to the copies of the petition;
6. Petitioners Robert Lim and Virginia Lim, on the other hand, were charged by the
respondent PNP with the respondent City Prosecutor of Puerto Princesa City, a xerox
copy of the complaint is hereto attached as Annex E;
Without seeking redress from the concerned local government units, prosecutors office
and courts, petitioners directly invoked our original jurisdiction by filing this petition on
4 June 1993. In sum, petitioners contend that:
First, the Ordinances deprived them of due process of law, their livelihood, and unduly
restricted them from the practice of their trade, in violation of Section 2, Article XII and
Sections 2 and 7 of Article XIII of the 1987 Constitution.
Second, Office Order No. 23 contained no regulation nor condition under which the
Mayors permit could be granted or denied; in other words, the Mayor had the absolute
authority to determine whether or not to issue permit.
Third, as Ordinance No. 2 of the Province of Palawan altogether prohibited the catching,
gathering, possession, buying, selling and shipping of live marine coral dwelling
organisms, without any distinction whether it was caught or gathered through lawful
fishing method, the Ordinance took away the right of petitioners-fishermen to earn their
livelihood in lawful ways; and insofar as petitioners-members of Airline Shippers
Association are concerned, they were unduly prevented from pursuing their vocation
and entering into contracts which are proper, necessary, and essential to carry out their
business endeavors to a successful conclusion.
Finally, as Ordinance No. 2 of the Sangguniang Panlalawigan is null and void, the
criminal cases based thereon against petitioners Tano and the others have to be
dismissed.
In the Resolution of 15 June 1993 we required respondents to comment on the petition,
and furnished the Office of the Solicitor General with a copy thereof.
In their comment filed on 13 August 1993, public respondents Governor Socrates and
Members of the Sangguniang Panlalawigan of Palawan defended the validity of
Ordinance No.2, Series of 1993, as a valid exercise of the Provincial Governments power
under the general welfare clause (Section 16 of the Local Government Code of 1991
[hereafter, LGC]), and its specific power to protect the environment and impose
appropriate penalties for acts which endanger the environment, such as dynamite
fishing and other forms of destructive fishing under Section 447 (a) (1) (vi), Section 458

28
(a) (1) (vi), and Section 468 (a) (1) (vi), of the LGC. They claimed that in the exercise
of such powers, the Province of Palawan had the right and responsibilty to insure that
the remaining coral reefs, where fish dwells [sic], within its territory remain healthy for
the future generation. The Ordinance, they further asserted, covered only live marine
coral dwelling aquatic organisms which were enumerated in the ordinance and excluded
other kinds of live marine aquatic organisms not dwelling in coral reefs; besides the
prohibition was for only five (5) years to protect and preserve the pristine coral and
allow those damaged to regenerate.
Aforementioned respondents likewise maintained that there was no violation of due
process and equal protection clauses of the Constitution. As to the former, public
hearings were conducted before the enactment of the Ordinance which, undoubtedly,
had a lawful purpose and employed reasonable means; while as to the latter, a
substantial distinction existed between a fisherman who catches live fish with the
intention of selling it live, and a fisherman who catches live fish with no intention at all
of selling it live, i.e., the former uses sodium cyanide while the latter does not. Further,
the Ordinance applied equally to all those belonging to one class.
On 25 October 1993 petitioners filed an Urgent Plea for the Immediate Issuance of a
Temporary Restraining Order claiming that despite the pendency of this case, Branch 50
of the Regional Trial Court of Palawan was bent on proceeding with Criminal Case No.
11223 against petitioners Danilo Tano, Alfredo Tano, Eulogio Tremocha, Romualdo Tano,
Baldomero Tano, Andres Lemihan and Angel de Mesa for violation of Ordinance No. 2 of
the Sangguniang Panlalawigan of Palawan. Acting on said plea, we issued on 11
November 1993 a temporary restraining order directing Judge Angel Miclat of said court
to cease and desist from proceeding with the arraignment and pre-trial of Criminal Case
No. 11223.
On 12 July 1994, we excused the Office of the Solicitor General from filing a comment,
considering that as claimed by said office in its Manifestation of 28 June 1994,
respondents were already represented by counsel.
The rest of the respondents did not file any comment on the petition.
In the resolution of 15 September 1994, we resolved to consider the comment on the
petition as the Answer, gave due course to the petition and required the parties to
submit their respective memoranda.2chanroblesvirtuallawlibrary
On 22 April 1997 we ordered impleaded as party respondents the Department of
Agriculture and the Bureau of Fisheries and Aquatic Resources and required the Office
of the Solicitor General to comment on their behalf. But in light of the latters motion of
9 July 1997 for an extension of time to file the comment which would only result in
further delay, we dispensed with said comment.

29
After due deliberation on the pleadings filed, we resolved to dismiss this petition for
want of merit, on 22 July 1997, and assigned it to the ponente for the writing of the
opinion of the Court.
I
There are actually two sets of petitioners in this case. The first is composed of Alfredo
Tano, Baldomero Tano, Danilo Tano, Romualdo Tano, Teocenes Midello, Angel de Mesa,
Eulogio Tremocha, Felipe Ongonion, Jr., Andres Linijan, and Felimon de Mesa, who were
criminally charged with violating Sangguniang Panlalawigan Resolution No. 33 and
Ordinance No. 2, Series of 1993, of the Province of Palawan, in Criminal Case No. 93-
05-C of the 1st Municipal Circuit Trial Court (MCTC) of Palawan;3 and Robert Lim and
Virginia Lim who were charged with violating City Ordinance No. 15-92 of Puerto
Princesa City and Ordinance No. 2, Series of 1993, of the Province of Palawan before
the Office of the City Prosecutor of Puerto Princesa.4 All of them, with the exception of
Teocenes Midello, Felipe Ongonion, Jr., Felimon de Mesa, Robert Lim and Virginia Lim,
are likewise the accused in Criminal Case No. 11223 for the violation of Ordinance No. 2
of the Sangguniang Panlalawigan of Palawan, pending before Branch 50 of the Regional
Trial Court of Palawan.5chanroblesvirtuallawlibrary
The second set of petitioners is composed of the rest of the petitioners numbering
seventy-seven (77), all of whom, except the Airline Shippers Association of Palawan --
an alleged private association of several marine merchants -- are natural persons who
claim to be fishermen.
The primary interest of the first set of petitioners is, of course, to prevent the
prosecution, trial and determination of the criminal cases until the constitutionality or
legality of the Ordinances they allegedly violated shall have been resolved. The second
set of petitioners merely claim that they being fishermen or marine merchants, they
would be adversely affected by the ordinances.
As to the first set of petitioners, this special civil for certiorari must fail on the ground of
prematurity amounting to a lack of cause of action. There is no showing that the said
petitioners, as the accused in the criminal cases, have filed motions to quash the
informations therein and that the same were denied. The ground available for such
motions is that the facts charged therein do not constitute an offense because the
ordinances in question are unconstitutional.6 It cannot then be said that the lower
courts acted without or in excess of jurisdiction or with grave abuse of discretion to
justify recourse to the extraordinary remedy of certiorari or prohibition. It must further
be stressed that even if the petitioners did file motions to quash, the denial thereof
would not forthwith give rise to a cause of action under Rule 65 of the Rules of Court.
The general rule is that where a motion to quash is denied, the remedy therefrom is
not certiorari, but for the party aggrieved thereby to go to trial without prejudice to

30
reiterating special defenses involved in said motion, and if, after trial on the merits of
adverse decision is rendered, to appeal therefrom in the manner authorized by
law.7 And, even where in an exceptional circumstance such denial may be the subject of
a special civil action for certiorari, a motion for reconsideration must have to be filed to
allow the court concerned an opportunity to correct its errors, unless such motion may
be dispensed with because of existing exceptional circumstances.8 Finally, even if a
motion for reconsideration has been filed and denied, the remedy under Rule 65 is still
unavailable absent any showing of the grounds provided for in Section 1 thereof.9 For
obvious reasons, the petition at bar does not, and could not have, alleged any of such
grounds.
As to the second set of petitioners, the instant petition is obviously one for
DECLARATORY RELIEF, i.e., for a declaration that the Ordinances in question are a
nullity... for being unconstitutional.10 As such, their petition must likewise fail, as this
Court is not possessed of original jurisdiction over petitions for declaratory relief even if
only questions of law are involved,11 it being settled that the Court merely exercises
appellate jurisdiction over such petitions.12chanroblesvirtuallawlibrary
II
Even granting arguendo that the first set of petitioners have a cause of action ripe for
the extraordinary writ of certiorari, there is here a clear disregard of the hierarchy of
courts, and no special and important reason or exceptional or compelling circumstance
has been adduced why direct recourse to us should be allowed. While we have
concurrent jurisdiction with Regional Trial courts and with the Court of Appeals to issue
writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction,
such concurrence gives petitioners no unrestricted freedom of choice of court forum, so
we held in People v. Cuaresma:13chanroblesvirtuallawlibrary
This concurrence of jurisdiction is not to be taken as according to parties seeking any of
the writs an absolute unrestrained freedom of choice of the court to which application
therefor will be directed. There is after all hierarchy of courts. That hierarchy is
determinative of the venue of appeals, and should also serve as a general determinant
of the appropriate forum for petitions for the extraordinary writs. A becoming regard for
that judicial hierarchy most certainly indicates that petitions for the issuance of
extraordinary writs against first level (inferior) courts should be filed with the Regional
Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of
the Supreme Courts original jurisdiction to issue these writs should be allowed only
when there are special and important reasons therefor, clearly and specifically set out in
the petition. This is established policy. It is a policy necessary to prevent inordinate
demands upon the Courts time and attention which are better devoted to those matters
within its exclusive jurisdiction, and to prevent further over-crowding of the Courts
docket.

31
The Court feels the need to reaffirm that policy at this time, and to enjoin strict
adherence thereto in the light of what it perceives to be a growing tendency on the part
of litigants and lawyers to have their applications for the so-called extraordinary writs,
and sometimes even their appeals, passed upon and adjudicated directly and
immediately by the highest tribunal of the land.
In Santiago v. Vasquez,14 this Court forcefully expressed that the propensity of litigants
and lawyers to disregard the hierarchy of courts must be put to a halt, not only because
of the imposition upon the precious time of this Court, but also because of the
inevitable and resultant delay, intended or otherwise, in the adjudication of the case
which often has to be remanded or referred to the lower court, the proper forum under
the rules of procedure, or as better equipped to resolve the issues since this Court is
not a trier of facts. We reiterated the judicial policy that this Court will not entertain
direct resort to it unless the redress desired cannot be obtained in the appropriate
courts or where exceptional and compelling circumstances justify availment of a remedy
within and calling for the exercise of [its] primary jurisdiction.
III
Notwithstanding the foregoing procedural obstacles against the first set of petitioners,
we opt to resolve this case on its merits considering that the lifetime of the challenged
Ordinances is about to end. Ordinance No. 15-92 of the City of Puerto Princesa is
effective only up to 1 January 1998, while Ordinance No. 2 of the Province of Palawan,
enacted on 19 February 1993, is effective for only five (5) years. Besides, these
Ordinances were undoubtedly enacted in the exercise of powers under the new LGC
relative to the protection and preservation of the environment and are thus novel and of
paramount importance. No further delay then may be allowed in the resolution of the
issues raised.
It is of course settled that laws (including ordinances enacted by local government
units) enjoy the presumption of constitutionality.15 To overthrow this presumption, there
must be a clear and unequivocal breach of the Constitution, not merely a doubtful or
argumentative contradiction. In short, the conflict with the Constitution must be shown
beyond reasonable doubt.16 Where doubt exists, even if well founded, there can be no
finding of unconstitutionality. To doubt is to sustain.17chanroblesvirtuallawlibrary
After a scrunity of the challenged Ordinances and the provisions of the Constitution
petitioners claim to have been violated, we find petitioners contentions baseless and so
hold that the former do not suffer from any infirmity, both under the Constitution and
applicable laws.
Petitioners specifically point to Section 2, Article XII and Sections 2 and 7, Article XIII of
the Constitution as having been transgressed by the Ordinances.

32
The pertinent portion of Section 2 of Article XII reads:
SEC. 2. x x x
The State shall protect the nation's marine wealth in its archipelagic waters, territorial
sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to
Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources by Filipino
citizens, as well as cooperative fish farming, with priority to subsistence fishermen and
fishworkers in rivers, lakes, bays, and lagoons.
Sections 2 and 7 of Article XIII provide:
Sec. 2. The promotion of social justice shall include the commitment to create economic
opportunities based on freedom of initiative and self-reliance.
xxx
SEC. 7. The State shall protect the rights of subsistence fishermen, especially of local
communities, to the preferential use of the communal marine and fishing resources,
both inland and offshore. It shall provide support to such fishermen through appropriate
technology and research, adequate financial, production, and marketing assistance, and
other services. The State shall also protect, develop, and conserve such resources. The
protection shall extend to offshore fishing grounds of subsistence fishermen against
foreign intrusion. Fishworkers shall receive a just share from their labor in the utilization
of marine and fishing resources.
There is absolutely no showing that any of the petitioners qualifies as a subsistence or
marginal fisherman. In their petition, petitioner Airline Shippers Association of Palawan
is described as a private association composed of Marine Merchants; petitioners Robert
Lim and Virginia Lim, as merchants; while the rest of the petitioners claim to be
fishermen, without any qualification, however, as to their status.
Since the Constitution does not specifically provide a definition of the terms subsistence
or marginal fishermen,18 they should be construed in their general and ordinary sense.
A marginal fisherman is an individual engaged in fishing whose margin of return or
reward in his harvest of fish as measured by existing price levels is barely sufficient to
yield a profit or cover the cost of gathering the fish,19 while a subsistence fisherman is
one whose catch yields but the irreducible minimum for his livelihood.20 Section 131(p)
of the LGC (R.A. No. 7160) defines a marginal farmer or fisherman as an individual
engaged in subsistence farming or fishing which shall be limited to the sale, barter or
exchange of agricultural or marine products produced by himself and his immediate
family. It bears repeating that nothing in the record supports a finding that any
petitioner falls within these definitions.

33
Besides, Section 2 of Article XII aims primarily not to bestow any right to subsistence
fishermen, but to lay stress on the duty of the State to protect the nations marine
wealth. What the provision merely recognizes is that the State may allow, by law,
cooperative fish farming, with priority to subsistence fishermen and fishworkers in
rivers, lakes, bays, and lagoons. Our survey of the statute books reveals that the only
provision of law which speaks of the preferential right of marginal fishermen is Section
149 of the LGC of 1991 which pertinently provides:
SEC. 149. Fishery Rentals, Fees and Charges. -- x x x
(b) The sangguniang bayan may:
(1) Grant fishery privileges to erect fish corrals, oyster, mussels or other aquatic beds or
bangus fry areas, within a definite zone of the municipal waters, as determined by
it: Provided, however, That duly registered organizations and cooperatives of marginal
fishermen shall have preferential right to such fishery privileges....
In a Joint Administrative Order No. 3, dated 25 April 1996, the Secretary of the
Department of Agriculture and the Secretary of the Department of Interior and Local
Government prescribed the guidelines on the preferential treatment of small fisherfolk
relative to the fishery right mentioned in Section 149. This case, however, does not
involve such fishery right.
Anent Section 7 of Article XIII, it speaks not only of the use of communal marine and
fishing resources, but of their protection, development, and conservation. As hereafter
shown, the ordinances in question are meant precisely to protect and conserve our
marine resources to the end that their enjoyment by the people may be guaranteed not
only for the present generation, but also for the generations to come.
The so-called preferential right of subsistence or marginal fishermen to the use of
marine resources is not at all absolute. In accordance with the Regalian Doctrine,
marine resources belong to the State, and, pursuant to the first paragraph of Section 2,
Article XII of the Constitution, their exploration, development and utilization... shall be
under the full control and supervision of the State. Moreover, their mandated protection,
development, and conservation as necessarily recognized by the framers of the
Constitution, imply certain restrictions on whatever right of enjoyment there may be in
favor of anyone. Thus, as to the curtailment of the preferential treatment of marginal
fisherman, the following exchange between Commissioner Francisco Rodrigo and
Commissioner Jose F.S. Bengzon, Jr., took place at the plenary session of the
Constitutional Commission:
MR. RODRIGO:
Let us discuss the implementation of this because I would not raise the hopes of our
people, and afterwards fail in the implementation. How will this be implemented? Will

34
there be a licensing or giving of permits so that government officials will know that one
is really a marginal fisherman? Or if policeman say that a person is not a marginal
fisherman, he can show his permit, to prove that indeed he is one.
MR. BENGZON:
Certainly, there will be some mode of licensing insofar as this is concerned and this
particular question could be tackled when we discuss the Article on Local Governments
-- whether we will leave to the local governments or to Congress on how these things
will be implemented. But certainly, I think our Congressmen and our local officials will
not be bereft of ideas on how to implement this mandate.
xxx
MR. RODRIGO:
So, once one is licensed as a marginal fisherman, he can go anywhere in the Philippines
and fish in any fishing grounds.
MR. BENGZON:
Subject to whatever rules and regulations and local laws that may be passed, may be
existing or will be passed.21 (underscoring supplied for emphasis).
What must likewise be borne in mind is the state policy enshrined in the Constitution
regarding the duty of the State to protect and advance the right of the people to a
balanced and healthful ecology in accord with the rhythm and harmony of nature.22 On
this score, in Oposa v. Factoran,23 this Court declared:
While the right to balanced and healthful ecology is to be found under the Declaration
of Principles the State Policies and not under the Bill of Rights, it does not follow that it
is less important than any of the civil and political rights enumerated in the latter. Such
a right belongs to a different category of rights altogether for it concerns nothing less
than self-preservation and self-perpetuation - aptly and fittingly stressed by the
petitioners - the advancement of which may even be said to predate all governments
and constitutions. As a matter of fact, these basic rights need not even be written in the
Constitution for they are assumed to exist from the inception of humankind. If they are
now explicitly mentioned in the fundamental charter, it is because of the well-founded
fear of its framers that unless the rights to a balanced and healthful ecology and to
health are mandated as state policies by the Constitution itself, thereby highlighting
their continuing importance and imposing upon the state a solemn obligation to
preserve the first and protect and advance the second, the day would not be too far
when all else would be lost not only for the present generation, but also for those to
come - generations which stand to inherit nothing but parched earth incapable of
sustaining life.

35
The right to a balanced and healthful ecology carries with it a correlative duty to refrain
from impairing the environment...
The LGC provisions invoked by private respondents merely seek to give flesh and blood
to the right of the people to a balanced and healthful ecology. In fact, the General
Welfare Clause, expressly mentions this right:
SEC. 16. General Welfare.-- Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among other things, the
preservation and enrichment of culture, promote health and safety, enhance the right of
the people to a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full employment
among their residents, maintain peace and order, and preserve the comfort and
convenience of their inhabitants. (underscoring supplied).
Moreover, Section 5(c) of the LGC explicitly mandates that the general welfare
provisions of the LGC shall be liberally interpreted to give more powers to the local
government units in accelerating economic development and upgrading the quality of
life for the people of the community.
The LGC vests municipalities with the power to grant fishery privileges in municipal
waters and to impose rentals, fees or charges therefor; to penalize, by appropriate
ordinances, the use of explosives, noxious or poisonous substances, electricity, muro-
ami, and other deleterious methods of fishing; and to prosecute any violation of the
provisions of applicable fishery laws.24 Further, the sangguniang bayan,
the sangguniang panlungsod and the sangguniang panlalawigan are directed to enact
ordinances for the general welfare of the municipality and its inhabitants, which shall
include, inter alia, ordinances that [p]rotect the environment and impose appropriate
penalties for acts which endanger the environment such as dynamite fishing and other
forms of destructive fishing... and such other activities which result in pollution,
acceleration of eutrophication of rivers and lakes or of ecological
imbalance.25chanroblesvirtuallawlibrary
Finally, the centerpiece of LGC is the system of decentralization26 as expressly mandated
by the Constitution.27 Indispensable thereto is devolution and the LGC expressly
provides that [a]ny provision on a power of a local government unit shall be liberally
interpreted in its favor, and in case of doubt, any question thereon shall be resolved in
favor of devolution of powers and of the lower local government unit. Any fair and
reasonable doubt as to the existence of the power shall be interpreted in favor of the

36
local government unit concerned,28 Devolution refers to the act by which the National
Government confers power and authority upon the various local government units to
perform specific functions and responsibilities.29chanroblesvirtuallawlibrary
One of the devolved powers enumerated in the section of the LGC on devolution is the
enforcement of fishery laws in municipal waters including the conservation of
mangroves.30 This necessarily includes enactment of ordinances to effectively carry out
such fishery laws within the municipal waters.
The term municipal waters, in turn, include not only streams, lakes, and tidal waters
within the municipality, not being the subject of private ownership and not comprised
within the national parks, public forest, timber lands, forest reserves, or fishery
reserves, but also marine waters included between two lines drawn perpendicularly to
the general coastline from points where the boundary lines of the municipality or city
touch the sea at low tide and a third line parallel with the general coastline and fifteen
kilometers from it.31 Under P.D. No. 704, the marine waters included in municipal waters
is limited to three nautical miles from the general coastline using the above
perpendicular lines and a third parallel line.
These fishery laws which local government units may enforce under Section 17(b), (2),
(i) in municipal waters include: (1) P.D. No. 704; (2) P.D. No. 1015 which, inter alia,
authorizes the establishment of a closed season in any Philippine water if necessary for
conservation or ecological purposes; (3) P.D. No. 1219 which provides for the
exploration, exploitation, utilization, and conservation of coral resources; (4) R.A. No.
5474, as amended by B.P. Blg. 58, which makes it unlawful for any person, association,
or corporation to catch or cause to be caught, sell, offer to sell, purchase, or have in
possession any of the fish specie called gobiidae or ipon during closed season; and (5)
R.A. No. 6451 which prohibits and punishes electrofishing, as well as various issuances
of the BFAR.
To those specifically devolved insofar as the control and regulation of fishing in
municipal waters and the protection of its marine environment are concerned, must be
added the following:
1. Issuance of permits to construct fish cages within municipal waters;
2. Issuance of permits to gather aquarium fishes within municipal waters;
3. Issuance of permits to gather kapis shells within municipal waters;
4. Issuance of permits to gather/culture shelled mollusks within municipal waters;
5. Issuance of licenses to establish seaweed farms within municipal waters;
6. Issuance of licenses to establish culture pearls within municipal waters;

37
7. Issuance of auxiliary invoice to transport fish and fishery products; and
8. Establishment of closed season in municipal waters.
These functions are covered in the Memorandum of Agreement of 5 April 1994 between
the Department of Agriculture and the Department of Interior and Local Government.
In light then of the principles of decentralization and devolution enshrined in the LGC
and the powers granted to local government units under Section 16 (the General
Welfare Clause), and under Sections 149, 447 (a) (1) (vi), 458 (a) (1) (vi) and 468 (a)
(1) (vi), which unquestionably involve the exercise of police power, the validity of the
questioned Ordinances cannot be doubted.
Parenthetically, we wish to add that these Ordinances find full support under R.A. No.
7611, otherwise known as the Strategic Environmental Plan (SEP) for Palawan Act,
approved on 19 July 1992. This statute adopts a comprehensive framework for the
sustainable development of Palawan compatible with protecting and enhancing the
natural resources and endangered environment of the province, which shall serve to
guide the local government of Palawan and the government agencies concerned in the
formulation and implementation of plans, programs and projects affecting said
province.32chanroblesvirtuallawlibrary
At this time then, it would be appropriate to determine the relation between the
assailed Ordinances and the aforesaid powers of the Sangguniang Panlungsod of the
City of Puerto Princesa and the Sangguniang Panlalawigan of the Province of Palawan to
protect the environment. To begin, we ascertain the purpose of the Ordinances as set
forth in the statement of purposes or declaration of policies quoted earlier.
It is clear to the Court that both Ordinances have two principal objectives or purposes:
(1) to establish a closed season for the species of fish or aquatic animals covered
therein for a period of five years, and (2) to protect the corals of the marine waters of
the City of Puerto Princesa and the Province of Palawan from further destruction due to
illegal fishing activities.
The accomplishment of the first objective is well within the devolved power to enforce
fishery laws in municipal waters, such as P.D. No. 1015, which allows the establishment
of closed seasons. The devolution of such power has been expressly confirmed in the
Memorandum of Agreement of 5 April 1994 between the Department of Agriculture and
the Department of Interior and Local Government.
The realization of the second objective falls within both the general welfare clause of
the LGC and the express mandate thereunder to cities and provinces to protect the
environment and impose appropriate penalties for acts which endanger the
environment.33chanroblesvirtuallawlibrary

38
The destruction of the coral reefs results in serious, if not irreparable, ecological
imbalance, for coral reefs are among the natures life-support systems.34 They collect,
retain, and recycle nutrients for adjacent nearshore areas such as mangroves, seagrass
beds, and reef flats; provide food for marine plants and animals; and serve as a
protective shelter for aquatic organisms.35 It is said that [e]cologically, the reefs are to
the oceans what forests are to continents: they are shelter and breeding grounds for
fish and plant species that will disappear without them.36chanroblesvirtuallawlibrary
The prohibition against catching live fish stems, in part, from the modern phenomenon
of live-fish trade which entails the catching of so-called exotic tropical species of fish not
only for aquarium use in the West, but also for the market for live banquet fish [which]
is virtually insatiable in ever more affluent Asia.37 These exotic species are coral-
dwellers, and fishermen catch them by diving in shallow water with corraline habitats
and squirting sodium cyanide poison at passing fish directly or onto coral crevices; once
affected the fish are immobilized [merely stunned] and then scooped by hand.38 The
diver then surfaces and dumps his catch into a submerged net attached to the skiff.
Twenty minutes later, the fish can swim normally. Back on shore, they are placed in
holding pens, and within a few weeks, they expel the cyanide from their system and are
ready to be hauled. Then they are placed in saltwater tanks or packaged in plastic bags
filled with seawater for shipment by air freight to major markets for live food
fish.39 While the fish are meant to survive, the opposite holds true for their former home
as [a]fter the fisherman squirts the cyanide, the first thing to perish is the reef algae,
on which fish feed. Days later, the living coral starts to expire. Soon the reef loses its
function as habitat for the fish, which eat both the algae and invertebrates that cling to
the coral. The reef becomes an underwater graveyard, its skeletal remains brittle,
bleached of all color and vulnerable to erosion from the pounding of the waves.40 It has
been found that cyanide fishing kills most hard and soft corals within three months of
repeated application.41chanroblesvirtuallawlibrary
The nexus then between the activities barred by Ordinance No. 15-92 of the City of
Puerto Princesa and the prohibited acts provided in Ordinance No. 2, Series of 1993 of
the Province of Palawan, on one hand, and the use of sodium cyanide, on the other, is
painfully obvious. In sum, the public purpose and reasonableness of the Ordinances
may not then be controverted.
As to Office Order No. 23, Series of 1993, issued by Acting City Mayor Amado L. Lucero
of the City of Puerto Princesa, we find nothing therein violative of any constitutional or
statutory provision. The Order refers to the implementation of the challenged ordinance
and is not the Mayors Permit.
The dissenting opinion of Mr. Justice Josue N. Bellosillo relies upon the lack of authority
on the part of the Sangguniang Panlungsod of Puerto Princesa to enact Ordinance No.
15, Series of 1992, on the theory that the subject thereof is within the jurisdiction and

39
responsibility of the Bureau of Fisheries and Aquatic Resources (BFAR) under P.D. No.
704, otherwise known as the Fisheries Decree of 1975; and that, in any event, the
Ordinance is unenforceable for lack of approval by the Secretary of the Department of
Natural Resources (DNR), likewise in accordance with P.D. No. 704.
The majority is unable to accommodate this view. The jurisdiction and responsibility of
the BFAR under P. D. no. 704, over the management, conservation, development,
protection, utilization and disposition of all fishery and aquatic resources of the country
is not all-encompassing. First, Section 4 thereof excludes from such jurisdiction and
responsibility municipal waters, which shall be under the municipal or city government
concerned, except insofar as fishpens and seaweed culture in municipal in municipal
centers are concerned. This section provides, however, that all municipal or city
ordinances and resolutions affecting fishing and fisheries and any disposition thereunder
shall be submitted to the Secretary of the Department of Natural Resources for
appropriate action and shall have full force and effect only upon his
approval.42chanroblesvirtuallawlibrary
Second, it must at once be pointed out that the BFAR is no longer under the
Department of Natural Resources (now Department of Environment and Natural
Resources). Executive Order No. 967 of 30 June 1984 transferred the BFAR from the
control and supervision of the Minister (formerly Secretary) of Natural Resources to the
Ministry of Agriculture and Food (MAF) and converted it into a mere staff agency
thereof, integrating its functions with the regional offices of the MAF.
In Executive Order No. 116 of 30 January 1987, which reorganized the MAF, the BFAR
was retained as an attached agency of the MAF. And under the Administrative Code of
1987,43 the BFAR is placed under the Title concerning the Department of
Agriculture.44chanroblesvirtuallawlibrary
Therefore, it is incorrect to say that the challenged Ordinance of the City of Puerto
Princesa is invalid or unenforceable because it was not approved by the Secretary of the
DENR. If at all, the approval that should be sought would be that of the Secretary of
the Department of Agriculture (not DENR) of municipal ordinances affecting fishing and
fisheries in municipal waters has been dispensed with in view of the following reasons:
(1) Section 534 (Repealing Clause) of the LGC expressly repeals or amends Section 16
and 29 of P.D. No. 70445 insofar that they are inconsistent with the provisions of the
LGC.
(2) As discussed earlier, under the general welfare clause of the LGC, local government
units have the power, inter alia, to enact ordinances to enhance the right of the people
to a balanced ecology. It likewise specifically vests municipalities with the power to
grant fishery privileges in municipal waters, and impose rentals, fees or charges
therefor; to penalize, by appropriate ordinances, the use of explosives, noxious or

40
poisonous substances, electricity, muro-ami, and other deleterious methods of fishing;
and to prosecute other methods of fishing; and to prosecute any violation of the
provisions of applicable fishing laws.46 Finally, it imposes upon the sangguniang
bayan, the sangguniang panlungsod, and the sangguniang panlalawigan the duty to
enact ordinances to [p]rotect the environment and impose appropriate penalties for
acts which endanger the environment such as dynamite fishing and other forms of
destructive fishing and such other activities which result in pollution, acceleration of
eutrophication of rivers and lakes or of ecological
imbalance.47chanroblesvirtuallawlibrary
In closing, we commend the Sangguniang Panlungsod of the City of Puerto Princesa
and Sangguniang Panlalawigan of the Province of Palawan for exercising the requisite
political will to enact urgently needed legislation to protect and enhance the marine
environment, thereby sharing in the herculean task of arresting the tide of ecological
destruction. We hope that other local government units shall now be roused from their
lethargy and adopt a more vigilant stand in the battle against the decimation of our
legacy to future generations. At this time, the repercussions of any further delay in their
response may prove disastrous, if not, irreversible.
WHEREFORE, the instant petition is DISMISSED for lack of merit and the temporary
restraining order issued on 11 November 1993 is LIFTED.
No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Padilla, Vitug, Panganiban, and Torres, Jr., JJ., concur.
Romero, Melo, Puno, and Francisco, JJ., joined the ponencias of Justices
Davide and Mendoza.
Bellosillo, J., see dissenting opinion.
Kapunan and Hermosisima, Jr., JJ., join Justice Bellosillo in his dissenting
opinion.
Mendoza, see concurring opinion.
Regalado, J., on official leave.
Endnotes:
G.R. No. 111097 July 20, 1994
MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners,
vs.

41
PRYCE PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT AND
GAMING CORPORATION, respondents.
Aquilino G. Pimentel, Jr. and Associates for petitioners.
R.R. Torralba & Associates for private respondent.

CRUZ, J.:
There was instant opposition when PAGCOR announced the opening of a casino in
Cagayan de Oro City. Civic organizations angrily denounced the project. The religious
elements echoed the objection and so did the women's groups and the youth.
Demonstrations were led by the mayor and the city legislators. The media trumpeted
the protest, describing the casino as an affront to the welfare of the city.
The trouble arose when in 1992, flush with its tremendous success in several cities,
PAGCOR decided to expand its operations to Cagayan de Oro City. To this end, it leased
a portion of a building belonging to Pryce Properties Corporation, Inc., one of the herein
private respondents, renovated and equipped the same, and prepared to inaugurate its
casino there during the Christmas season.
The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift and
hostile. On December 7, 1992, it enacted Ordinance No. 3353 reading as follows:
ORDINANCE NO. 3353
AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND CANCELLING
EXISTING BUSINESS PERMIT TO ANY ESTABLISHMENT FOR THE USING AND
ALLOWING TO BE USED ITS PREMISES OR PORTION THEREOF FOR THE OPERATION
OF CASINO.
BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayan de Oro, in
session assembled that:
Sec. 1. — That pursuant to the policy of the city banning the operation of casino within
its territorial jurisdiction, no business permit shall be issued to any person, partnership
or corporation for the operation of casino within the city limits.
Sec. 2. — That it shall be a violation of existing business permit by any persons,
partnership or corporation to use its business establishment or portion thereof, or allow
the use thereof by others for casino operation and other gambling activities.
Sec. 3. — PENALTIES. — Any violation of such existing business permit as defined in
the preceding section shall suffer the following penalties, to wit:

42
a) Suspension of the business permit for sixty (60) days for the first offense and a fine
of P1,000.00/day
b) Suspension of the business permit for Six (6) months for the second offense, and a
fine of P3,000.00/day
c) Permanent revocation of the business permit and imprisonment of One (1) year, for
the third and subsequent offenses.
Sec. 4. — This Ordinance shall take effect ten (10) days from publication thereof.
Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-93
reading as follows:
ORDINANCE NO. 3375-93
AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING PENALTY
FOR VIOLATION THEREFOR.
WHEREAS, the City Council established a policy as early as 1990 against CASINO under
its Resolution No. 2295;
WHEREAS, on October 14, 1992, the City Council passed another Resolution No. 2673,
reiterating its policy against the establishment of CASINO;
WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353, prohibiting
the issuance of Business Permit and to cancel existing Business Permit to any
establishment for the using and allowing to be used its premises or portion thereof for
the operation of CASINO;
WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of the Local
Government Code of 1991 (Rep. Act 7160) and under Art. 99, No. (4), Paragraph VI of
the implementing rules of the Local Government Code, the City Council as the
Legislative Body shall enact measure to suppress any activity inimical to public morals
and general welfare of the people and/or regulate or prohibit such activity pertaining to
amusement or entertainment in order to protect social and moral welfare of the
community;
NOW THEREFORE,
BE IT ORDAINED by the City Council in session duly assembled that:
Sec. 1. — The operation of gambling CASINO in the City of Cagayan de Oro is hereby
prohibited.
Sec. 2. — Any violation of this Ordinance shall be subject to the following penalties:

43
a) Administrative fine of P5,000.00 shall be imposed against the proprietor, partnership
or corporation undertaking the operation, conduct, maintenance of gambling CASINO in
the City and closure thereof;
b) Imprisonment of not less than six (6) months nor more than one (1) year or a fine in
the amount of P5,000.00 or both at the discretion of the court against the manager,
supervisor, and/or any person responsible in the establishment, conduct and
maintenance of gambling CASINO.
Sec. 3. — This Ordinance shall take effect ten (10) days after its publication in a local
newspaper of general circulation.
Pryce assailed the ordinances before the Court of Appeals, where it was joined by
PAGCOR as intervenor and supplemental petitioner. Their challenge succeeded. On
March 31, 1993, the Court of Appeals declared the ordinances invalid and issued the
writ prayed for to prohibit their enforcement. 1 Reconsideration of this decision was
denied on July 13, 1993. 2
Cagayan de Oro City and its mayor are now before us in this petition for review under
Rule 45 of the Rules of Court. 3 They aver that the respondent Court of Appeals erred in
holding that:
1. Under existing laws, the Sangguniang Panlungsod of the City of Cagayan de Oro does
not have the power and authority to prohibit the establishment and operation of a
PAGCOR gambling casino within the City's territorial limits.
2. The phrase "gambling and other prohibited games of chance" found in Sec. 458, par.
(a), sub-par. (1) — (v) of R.A. 7160 could only mean "illegal gambling."
3. The questioned Ordinances in effect annul P.D. 1869 and are therefore invalid on that
point.
4. The questioned Ordinances are discriminatory to casino and partial to cockfighting
and are therefore invalid on that point.
5. The questioned Ordinances are not reasonable, not consonant with the general
powers and purposes of the instrumentality concerned and inconsistent with the laws or
policy of the State.
6. It had no option but to follow the ruling in the case of Basco, et al. v. PAGCOR, G.R.
No. 91649, May 14, 1991, 197 SCRA 53 in disposing of the issues presented in this
present case.
PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulate all
games of chance, including casinos on land and sea within the territorial jurisdiction of
the Philippines. In Basco v. Philippine Amusements and Gaming Corporation, 4 this Court

44
sustained the constitutionality of the decree and even cited the benefits of the entity to
the national economy as the third highest revenue-earner in the government, next only
to the BIR and the Bureau of Customs.
Cagayan de Oro City, like other local political subdivisions, is empowered to enact
ordinances for the purposes indicated in the Local Government Code. It is expressly
vested with the police power under what is known as the General Welfare Clause now
embodied in Section 16 as follows:
Sec. 16. — General Welfare. — Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among other things, the
preservation and enrichment of culture, promote health and safety, enhance the right of
the people to a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full employment
among their residents, maintain peace and order, and preserve the comfort and
convenience of their inhabitants.
In addition, Section 458 of the said Code specifically declares that:
Sec. 458. — Powers, Duties, Functions and Compensation. — (a) The Sangguniang
Panlungsod, as the legislative body of the city, shall enact ordinances, approve
resolutions and appropriate funds for the general welfare of the city and its inhabitants
pursuant to Section 16 of this Code and in the proper exercise of the corporate powers
of the city as provided for under Section 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and effective city
government, and in this connection, shall:
xxx xxx xxx
(v) Enact ordinances intended to prevent, suppress and impose appropriate penalties
for habitual drunkenness in public places, vagrancy, mendicancy, prostitution,
establishment and maintenance of houses of ill repute, gambling and other prohibited
games of chance, fraudulent devices and ways to obtain money or property, drug
addiction, maintenance of drug dens, drug pushing, juvenile delinquency, the printing,
distribution or exhibition of obscene or pornographic materials or publications, and such
other activities inimical to the welfare and morals of the inhabitants of the city;
This section also authorizes the local government units to regulate properties and
businesses within their territorial limits in the interest of the general welfare. 5

45
The petitioners argue that by virtue of these provisions, the Sangguniang Panlungsod
may prohibit the operation of casinos because they involve games of chance, which are
detrimental to the people. Gambling is not allowed by general law and even by the
Constitution itself. The legislative power conferred upon local government units may be
exercised over all kinds of gambling and not only over "illegal gambling" as the
respondents erroneously argue. Even if the operation of casinos may have been
permitted under P.D. 1869, the government of Cagayan de Oro City has the authority to
prohibit them within its territory pursuant to the authority entrusted to it by the Local
Government Code.
It is submitted that this interpretation is consonant with the policy of local autonomy as
mandated in Article II, Section 25, and Article X of the Constitution, as well as various
other provisions therein seeking to strengthen the character of the nation. In giving the
local government units the power to prevent or suppress gambling and other social
problems, the Local Government Code has recognized the competence of such
communities to determine and adopt the measures best expected to promote the
general welfare of their inhabitants in line with the policies of the State.
The petitioners also stress that when the Code expressly authorized the local
government units to prevent and suppress gambling and other prohibited games of
chance, like craps, baccarat, blackjack and roulette, it meant all forms of gambling
without distinction. Ubi lex non distinguit, nec nos distinguere debemos. 6 Otherwise, it
would have expressly excluded from the scope of their power casinos and other forms
of gambling authorized by special law, as it could have easily done. The fact that it did
not do so simply means that the local government units are permitted to prohibit all
kinds of gambling within their territories, including the operation of casinos.
The adoption of the Local Government Code, it is pointed out, had the effect of
modifying the charter of the PAGCOR. The Code is not only a later enactment than P.D.
1869 and so is deemed to prevail in case of inconsistencies between them. More than
this, the powers of the PAGCOR under the decree are expressly discontinued by the
Code insofar as they do not conform to its philosophy and provisions, pursuant to Par.
(f) of its repealing clause reading as follows:
(f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly.
It is also maintained that assuming there is doubt regarding the effect of the Local
Government Code on P.D. 1869, the doubt must be resolved in favor of the petitioners,
in accordance with the direction in the Code calling for its liberal interpretation in favor
of the local government units. Section 5 of the Code specifically provides:

46
Sec. 5. Rules of Interpretation. — In the interpretation of the provisions of this Code,
the following rules shall apply:
(a) Any provision on a power of a local government unit shall be liberally interpreted in
its favor, and in case of doubt, any question thereon shall be resolved in favor of
devolution of powers and of the lower local government unit. Any fair and reasonable
doubt as to the existence of the power shall be interpreted in favor of the local
government unit concerned;
xxx xxx xxx
(c) The general welfare provisions in this Code shall be liberally interpreted to give
more powers to local government units in accelerating economic development and
upgrading the quality of life for the people in the community; . . . (Emphasis supplied.)
Finally, the petitioners also attack gambling as intrinsically harmful and cite various
provisions of the Constitution and several decisions of this Court expressive of the
general and official disapprobation of the vice. They invoke the State policies on the
family and the proper upbringing of the youth and, as might be expected, call attention
to the old case of U.S. v. Salaveria,7 which sustained a municipal ordinance prohibiting
the playing of panguingue. The petitioners decry the immorality of gambling. They also
impugn the wisdom of P.D. 1869 (which they describe as "a martial law instrument") in
creating PAGCOR and authorizing it to operate casinos "on land and sea within the
territorial jurisdiction of the Philippines."
This is the opportune time to stress an important point.
The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While
it is generally considered inimical to the interests of the people, there is nothing in the
Constitution categorically proscribing or penalizing gambling or, for that matter, even
mentioning it at all. It is left to Congress to deal with the activity as it sees fit. In the
exercise of its own discretion, the legislature may prohibit gambling altogether or allow
it without limitation or it may prohibit some forms of gambling and allow others for
whatever reasons it may consider sufficient. Thus, it has
prohibited jueteng and monte but permits lotteries, cockfighting and horse-racing. In
making such choices, Congress has consulted its own wisdom, which this Court has no
authority to review, much less reverse. Well has it been said that courts do not sit to
resolve the merits of conflicting theories. 8 That is the prerogative of the political
departments. It is settled that questions regarding the wisdom, morality, or practicibility
of statutes are not addressed to the judiciary but may be resolved only by the
legislative and executive departments, to which the function belongs in our scheme of
government. That function is exclusive. Whichever way these branches decide, they are
answerable only to their own conscience and the constituents who will ultimately judge
their acts, and not to the courts of justice.

47
The only question we can and shall resolve in this petition is the validity of Ordinance
No. 3355 and Ordinance No. 3375-93 as enacted by the Sangguniang Panlungsod of
Cagayan de Oro City. And we shall do so only by the criteria laid down by law and not
by our own convictions on the propriety of gambling.
The tests of a valid ordinance are well established. A long line of decisions 9 has held
that to be valid, an ordinance must conform to the following substantive requirements:
1) It must not contravene the constitution or any statute.
2) It must not be unfair or oppressive.
3) It must not be partial or discriminatory.
4) It must not prohibit but may regulate trade.
5) It must be general and consistent with public policy.
6) It must not be unreasonable.
We begin by observing that under Sec. 458 of the Local Government Code, local
government units are authorized to prevent or suppress, among others, "gambling
and other prohibited games of chance." Obviously, this provision excludes games of
chance which are not prohibited but are in fact permitted by law. The petitioners are
less than accurate in claiming that the Code could have excluded such games of chance
but did not. In fact it does. The language of the section is clear and unmistakable.
Under the rule of noscitur a sociis, a word or phrase should be interpreted in relation to,
or given the same meaning of, words with which it is associated. Accordingly, we
conclude that since the word "gambling" is associated with "and other prohibited games
of chance," the word should be read as referring to only illegal gambling which, like
the other prohibited games of chance, must be prevented or suppressed.
We could stop here as this interpretation should settle the problem quite conclusively.
But we will not. The vigorous efforts of the petitioners on behalf of the inhabitants of
Cagayan de Oro City, and the earnestness of their advocacy, deserve more than short
shrift from this Court.
The apparent flaw in the ordinances in question is that they contravene P.D. 1869 and
the public policy embodied therein insofar as they prevent PAGCOR from exercising the
power conferred on it to operate a casino in Cagayan de Oro City. The petitioners have
an ingenious answer to this misgiving. They deny that it is the ordinances that have
changed P.D. 1869 for an ordinance admittedly cannot prevail against a statute. Their
theory is that the change has been made by the Local Government Code itself, which
was also enacted by the national lawmaking authority. In their view, the decree has
been, not really repealed by the Code, but merely "modified pro tanto" in the sense
that PAGCOR cannot now operate a casino over the objection of the local government

48
unit concerned. This modification of P.D. 1869 by the Local Government Code is
permissible because one law can change or repeal another law.
It seems to us that the petitioners are playing with words. While insisting that the
decree has only been "modified pro tanto," they are actually arguing that it is already
dead, repealed and useless for all intents and purposes because the Code has shorn
PAGCOR of all power to centralize and regulate casinos. Strictly speaking, its operations
may now be not only prohibited by the local government unit; in fact, the prohibition is
not only discretionary but mandated by Section 458 of the Code if the word "shall" as
used therein is to be given its accepted meaning. Local government units have now no
choice but to prevent and suppress gambling, which in the petitioners' view includes
both legal and illegal gambling. Under this construction, PAGCOR will have no more
games of chance to regulate or centralize as they must all be prohibited by the local
government units pursuant to the mandatory duty imposed upon them by the Code. In
this situation, PAGCOR cannot continue to exist except only as a toothless tiger or a
white elephant and will no longer be able to exercise its powers as a prime source of
government revenue through the operation of casinos.
It is noteworthy that the petitioners have cited only Par. (f) of the repealing clause,
conveniently discarding the rest of the provision which painstakingly mentions the
specific laws or the parts thereof which are repealed (or modified) by the Code.
Significantly, P.D. 1869 is not one of them. A reading of the entire repealing clause,
which is reproduced below, will disclose the omission:
Sec. 534. Repealing Clause. — (a) Batas Pambansa Blg. 337, otherwise known as the
"Local Government Code," Executive Order No. 112 (1987), and Executive Order No.
319 (1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders,
instructions, memoranda and issuances related to or concerning the barangay are
hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital
fund; Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the Special
Education Fund; Presidential Decree No. 144 as amended by Presidential Decree Nos.
559 and 1741; Presidential Decree No. 231 as amended; Presidential Decree No. 436 as
amended by Presidential Decree No. 558; and Presidential Decree Nos. 381, 436, 464,
477, 526, 632, 752, and 1136 are hereby repealed and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded
projects.
(e) The following provisions are hereby repealed or amended insofar as they are
inconsistent with the provisions of this Code: Sections 2, 16, and 29 of Presidential

49
Decree No. 704; Sections 12 of Presidential Decree No. 87, as amended; Sections 52,
53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree No. 463, as amended;
and Section 16 of Presidential Decree No. 972, as amended, and
(f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly.
Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the
absence of a clear and unmistakable showing of such intention. In Lichauco & Co. v.
Apostol, 10 this Court explained:
The cases relating to the subject of repeal by implication all proceed on the assumption
that if the act of later date clearly reveals an intention on the part of the lawmaking
power to abrogate the prior law, this intention must be given effect; but there must
always be a sufficient revelation of this intention, and it has become an unbending rule
of statutory construction that the intention to repeal a former law will not be imputed to
the Legislature when it appears that the two statutes, or provisions, with reference to
which the question arises bear to each other the relation of general to special.
There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, as
the private respondent points out, PAGCOR is mentioned as the source of funding in
two later enactments of Congress, to wit, R.A. 7309, creating a Board of Claims under
the Department of Justice for the benefit of victims of unjust punishment or detention
or of violent crimes, and R.A. 7648, providing for measures for the solution of the
power crisis. PAGCOR revenues are tapped by these two statutes. This would show that
the PAGCOR charter has not been repealed by the Local Government Code but has in
fact been improved as it were to make the entity more responsive to the fiscal problems
of the government.
It is a canon of legal hermeneutics that instead of pitting one statute against another in
an inevitably destructive confrontation, courts must exert every effort to reconcile them,
remembering that both laws deserve a becoming respect as the handiwork of a
coordinate branch of the government. On the assumption of a conflict between P.D.
1869 and the Code, the proper action is not to uphold one and annul the other but to
give effect to both by harmonizing them if possible. This is possible in the case before
us. The proper resolution of the problem at hand is to hold that under the Local
Government Code, local government units may (and indeed must) prevent and suppress
all kinds of gambling within their territories except only those allowed by statutes like
P.D. 1869. The exception reserved in such laws must be read into the Code, to make
both the Code and such laws equally effective and mutually complementary.

50
This approach would also affirm that there are indeed two kinds of gambling, to wit, the
illegal and those authorized by law. Legalized gambling is not a modern concept; it is
probably as old as illegal gambling, if not indeed more so. The petitioners' suggestion
that the Code authorizes them to prohibit all kinds of gambling would erase the
distinction between these two forms of gambling without a clear indication that this is
the will of the legislature. Plausibly, following this theory, the City of Manila could, by
mere ordinance, prohibit the Philippine Charity Sweepstakes Office from conducting a
lottery as authorized by R.A. 1169 and B.P. 42 or stop the races at the San Lazaro
Hippodrome as authorized by R.A. 309 and R.A. 983.
In light of all the above considerations, we see no way of arriving at the conclusion
urged on us by the petitioners that the ordinances in question are valid. On the
contrary, we find that the ordinances violate P.D. 1869, which has the character and
force of a statute, as well as the public policy expressed in the decree allowing the
playing of certain games of chance despite the prohibition of gambling in general.
The rationale of the requirement that the ordinances should not contravene a statute is
obvious. Municipal governments are only agents of the national government. Local
councils exercise only delegated legislative powers conferred on them by Congress as
the national lawmaking body. The delegate cannot be superior to the principal or
exercise powers higher than those of the latter. It is a heresy to suggest that the local
government units can undo the acts of Congress, from which they have derived their
power in the first place, and negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and rights wholly
from the legislature. It breathes into them the breath of life, without which they cannot
exist. As it creates, so it may destroy. As it may destroy, it may abridge and control.
Unless there is some constitutional limitation on the right, the legislature might, by a
single act, and if we can suppose it capable of so great a folly and so great a wrong,
sweep from existence all of the municipal corporations in the State, and the corporation
could not prevent it. We know of no limitation on the right so far as to the corporation
themselves are concerned. They are, so to phrase it, the mere tenants at will of the
legislature. 11
This basic relationship between the national legislature and the local government units
has not been enfeebled by the new provisions in the Constitution strengthening the
policy of local autonomy. Without meaning to detract from that policy, we here confirm
that Congress retains control of the local government units although in significantly
reduced degree now than under our previous Constitutions. The power to create still
includes the power to destroy. The power to grant still includes the power to withhold
or recall. True, there are certain notable innovations in the Constitution, like the direct
conferment on the local government units of the power to tax, 12 which cannot now be

51
withdrawn by mere statute. By and large, however, the national legislature is still the
principal of the local government units, which cannot defy its will or modify or violate it.
The Court understands and admires the concern of the petitioners for the welfare of
their constituents and their apprehensions that the welfare of Cagayan de Oro City will
be endangered by the opening of the casino. We share the view that "the hope of large
or easy gain, obtained without special effort, turns the head of the workman" 13 and
that "habitual gambling is a cause of laziness and ruin." 14 In People v. Gorostiza, 15 we
declared: "The social scourge of gambling must be stamped out. The laws against
gambling must be enforced to the limit." George Washington called gambling "the child
of avarice, the brother of iniquity and the father of mischief." Nevertheless, we must
recognize the power of the legislature to decide, in its own wisdom, to legalize certain
forms of gambling, as was done in P.D. 1869 and impliedly affirmed in the Local
Government Code. That decision can be revoked by this Court only if it contravenes the
Constitution as the touchstone of all official acts. We do not find such contravention
here.
We hold that the power of PAGCOR to centralize and regulate all games of chance,
including casinos on land and sea within the territorial jurisdiction of the Philippines,
remains unimpaired. P.D. 1869 has not been modified by the Local Government Code,
which empowers the local government units to prevent or suppress only those forms of
gambling prohibited by law.
Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that
cannot be amended or nullified by a mere ordinance. Hence, it was not competent for
the Sangguniang Panlungsod of Cagayan de Oro City to enact Ordinance No. 3353
prohibiting the use of buildings for the operation of a casino and Ordinance No. 3375-93
prohibiting the operation of casinos. For all their praiseworthy motives, these ordinances
are contrary to P.D. 1869 and the public policy announced therein and are
therefore ultra vires and void.
WHEREFORE, the petition is DENIED and the challenged decision of the respondent
Court of Appeals is AFFIRMED, with costs against the petitioners. It is so ordered.
Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo, Melo, Quiason, Puno, Vitug,
Kapunan and Mendoza, JJ., concur.

52
G.R. No. 115044 January 27, 1995
HON. ALFREDO S. LIM, in his capacity as Mayor of Manila, and the City of
Manila, petitioners,
vs.
HON. FELIPE G. PACQUING, as Judge, branch 40, Regional Trial Court of
Manila and ASSOCIATED CORPORATION, respondents.
G.R. No. 117263 January 27, 1995
TEOFISTO GUINGONA, JR. and DOMINADOR R. CEPEDA, petitioners,
vs.
HON. VETINO REYES and ASSOCIATED DEVELOPMENT
CORPORATION, respondents.

PADILLA, J.:
These two (2) cases which are inter-related actually involve simple issues. if these
issues have apparently become complicated, it is not by reason of their nature because
of the events and dramatis personae involved.
The petition in G.R. No. 115044 was dismissed by the First Division of this Court on 01
September 1994 based on a finding that there was "no abuse of discretion, much less
lack of or excess of jurisdiction, on the part of respondent judge [Pacquing]", in issuing
the questioned orders. Judge Pacquing had earlier issued in Civil Case No. 88-45660,
RTC of Manila, Branch 40, the following orders which were assailed by the Mayor of the
City of Manila, Hon. Alfredo S. Lim, in said G.R. No. 115044:
a. order dated 28 March 1994 directing Manila mayor Alfredo S. Lim to issue
the permit/license to operate the jai-alai in favor of Associated Development
Corporation (ADC).
b. order dated 11 April 1994 directing mayor Lim to explain why he should not be cited
for contempt for non-compliance with the order dated 28 March 1994.
c. order dated 20 April 1994 reiterating the previous order directing Mayor Lim to
immediately issue the permit/license to Associated Development Corporation (ADC).
The order dated 28 march 1994 was in turn issued upon motion by ADC for execution
of a final judgment rendered on 9 September 1988 which ordered the Manila Mayor to
immediately issue to ADC the permit/license to operate the jai-alai in Manila, under
Manila Ordinance No. 7065.
On 13 September 1994, petitioner Guingona (as executive secretary) issued a directive
to then chairman of the Games and Amusements Board (GAB) Francisco R. Sumulong,

53
jr. to hold in abeyance the grant of authority, or if any had been issued, to withdraw
such grant of authority, to Associated Development Corporation to operate the jai-alai in
the City of Manila, until the following legal questions are properly resolved:
1. Whether P.D. 771 which revoked all existing Jai-Alai franchisers issued by local
governments as of 20 August 1975 is unconstitutional.
2. Assuming that the City of Manila had the power on 7 September 1971 to issue a Jai-
Alai franchise to Associated Development Corporation, whether the franchise granted is
valied considering that the franchise has no duration, and appears to be granted in
perpetuity.
3. Whether the City of Manila had the power to issue a Jai-Alai franchise to Associated
Development Corporation on 7 September 1971 in view of executive Order No. 392
dated 1 January 1951 which transferred from local governments to the Games and
Amusements Board the power to regulate Jai-Alai.1
On 15 September 1994, respondent Associated Development Corporation (ADC) filed a
petition for prohibition, mandamus, injunction and damages with prayer for temporary
restraining order and/or writ of preliminary injunction in the Regional Trial Court of
Manila against petitioner Guingona and then GAB chairman Sumulong, docketed as Civil
Case No. 94-71656, seeking to prevent GAB from withdrawing the provisional authority
that had earlier been granted to ADC. On the same day, the RTC of Manila, Branch 4,
through presiding Judge Vetino Reyes, issued a temporary restraining order enjoining
the GAB from withdrawing ADC's provisional authority. This temporary restraining order
was converted into a writ of preliminary injunction upon ADC's posting of a bond in the
amount of P2,000,000.00.2
Subsequently, also in G.R. No. 115044, the Republic of the Philippines, through the
Games and Amusements Board, filed a "Motion for Intervention; for Leave to File a
Motion for reconsideration in Intervention; and to Refer the case to the Court En Banc"
and later a "Motion for Leave to File Supplemental Motion for Reconsideration-in-
Intervention and to Admit Attached Supplemental Motion for Reconsideration-in-
Intervention".
In an En Banc Resolution dated 20 September 1994, this Court referred G.R. No.
115044 to the Court En Banc and required the respondents therein to comment on the
aforementioned motions.
Meanwhile, Judge Reyes on 19 October 1994 issued another order, this time, granting
ADC a writ of preliminary mandatory injunction against Guingona and GAB to compel
them to issue in favor of ADC the authority to operate jai-alai.

54
Guingona, as executive secretary, and Dominador Cepeda, Jr. as the new GAB
chairman, then filed the petition in G.R. No. 117263 assailing the abovementioned
orders of respondent Judge Vetino Reyes.
On 25 October 1994, in G.R. No. 117263, this Court granted petitioner's motion
for leave to file supplemental petition and to admit attached supplemental petition with
urgent prayer for restraining order. The Court further required respondents to file their
comment on the petition and supplemental petition with urgent prayer for restraining
order. The Court likewise set the case and all incidents thereof for hearing on 10
November 1994.
At the hearing on 10 November 1994, the issues to be resolved were formulated by the
Court as follows:
1. whether or not intervention by the Republic of the Philippines at this stage of the
proceedings is proper;
2. assuming such intervention is proper, whether or not the Associated Development
Corporation has a valid and subsisting franchise to maintain and operate the jai-alai;
3. whether or not there was grave abuse of discretion committed by respondent Judge
Reyes in issuing the aforementioned temporary restraining order (later writ of
preliminary injunction); and
4. whether or not there was grave abuse of discretion committed by respondent Judge
Reyes in issuing the aforementioned writ of preliminary mandatory injunction.
On the issue of the propriety of the intervention by the Republic of the Philippines, a
question was raised during the hearing on 10 November 1994 as to whether
intervention in G.R. No. 115044 was the proper remedy for the national government to
take in questioning the existence of a valid ADC franchise to operate the jai-alai or
whether a separate action for quo warranto under Section 2, Rule 66 of the Rules of
Court was the proper remedy.
We need not belabor this issue since counsel for respondent ADC agreed to the
suggestion that this Court once and for all settle all substantive issues raised by the
parties in these cases. Moreover, this Court can consider the petition filed in G.R. No.
117263 as one for quo warranto which is within the original jurisdiction of the Court
under section 5(1), Article VIII of the Constitution. 3
On the propriety of intervention by the Republic, however, it will be recalled that this
Court in Director of Lands v. Court of Appeals (93 SCRA 238) allowed intervention even
beyond the period prescribed in Section 2 Rule 12 of the Rules of Court. The Court
ruled in said case that a denial of the motions for intervention would "lead the Court to
commit an act of injustice to the movants, to their successor-in-interest and to all

55
purchasers for value and in good faith and thereby open the door to fraud, falsehood
and misrepresentation, should intervenors' claim be proven to be true."
In the present case, the resulting injustice and injury, should the national government's
allegations be proven correct, are manifest, since the latter has squarely questioned the
very existence of a valid franchise to maintain and operate the jai-alai (which is a
gambling operation) in favor of ADC. As will be more extensively discussed later, the
national government contends that Manila Ordinance No. 7065 which purported to
grant to ADC a franchise to conduct jai-alai operations is void and ultra vires since
Republic Act No. 954, approved on 20 June 1953, or very much earlier than said
Ordinance No. 7065, the latter approved 7 September 1971, in Section 4 thereof,
requires a legislative franchise, not a municipal franchise, for the operation of jai-alai.
Additionally, the national government argues that even assuming, arguendo, that the
abovementioned ordinance is valid, ADC's franchise was nonetheless effectively revoked
by Presidential decree No. 771, issued on 20 August 1975, Sec. 3 of which expressly
revoked all existing franchises and permits to operate all forms of gambling facilities
(including the jai-alai) issued by local governments.
On the other hand, ADC's position is that Ordinance No. 7065 was validly enacted by
the City of Manila pursuant to its delegated powers under it charter, Republic Act No.
409. ADC also squarely assails the constitutionality of PD No. 771 as violative of the
equal protection and non-impairment clauses of the Constitution. In this connection,
counsel for ADC contends that this Court should really rule on the validity of PD No. 771
to be able to determine whether ADC continues to possess a valid franchise.
It will undoubtedly be a grave injustice to both parties in this case if this Court were to
shirk from ruling on the issue of constitutionality of PD No. 771. Such issue has, in our
view, become the very lis mota in resolving the present controversy, in view of ADC's
insistence that it was granted a valid and legal franchise by Ordinance No. 7065 to
operate the jai-alai.
The time-honored doctrine is that all laws (PD No. 771 included) are presumed valid
and constitutional until or unless otherwise ruled by this Court. Not only this; Article
XVIII Section 3 of the Constitution states:
Sec. 3. All existing laws, decrees, executive orders, proclamations, letters of instructions
and other executive issuances not inconsistent with this Constitution shall remain
operative until amended, repealed or revoked.
There is nothing on record to show or even suggest that PD No. 771 has been repealed,
altered or amended by any subsequent law or presidential issuance (when the executive
still exercised legislative powers).

56
Neither can it be tenably stated that the issue of the continued existence of ADC's
franchise by reason of the unconstitutionality of PD No. 771 was settled in G.R. No.
115044, for the decision of the Court's First Division in said case, aside from not being
final, cannot have the effect of nullifying PD No. 771 as unconstitutional, since only the
Court En Banc has that power under Article VIII, Section 4(2) of the Constitution.4
And on the question of whether or not the government is estopped from contesting
ADC's possession of a valid franchise, the well-settled rule is that the State cannot be
put in estoppel by the mistakes or errors, if any, of its officials or agents (Republic v.
Intermediate Appellate Court, 209 SCRA 90)
Consequently, in the light of the foregoing expostulation, we conclude that the republic
(in contra distinction to the City of Manila) may be allowed to intervene in G.R. No.
115044. The Republic is intervening in G.R. No. 115044 in the exercise, not of its
business or proprietary functions, but in the exercise of its governmental functions to
protect public morals and promote the general welfare.
II
Anent the question of whether ADC has a valid franchise to operate the Jai-Alai de
Manila, a statement of the pertinent laws is in order.
1. The Charter of the City of Manila was enacted by Congress on 18 June 1949. Section
18 thereof provides:
Sec. 18. Legislative Powers. — The Municipal Board shall have the following legislative
powers:
xxx xxx xxx
(jj) To tax, license, permit and regulate wagers or betting by the public on boxing, sipa,
bowling, billiards, pools, horse and dog races, cockpits, jai-alai, roller or ice-skating on
any sporting or athletic contests, as well as grant exclusive rights to establishments for
this purpose, notwithstanding any existing law to the contrary.
2. On 1 January 1951, Executive Order No. 392 was issued transferring the authority
to regulate jai-alais from local government to the Games and Amusements Board
(GAB).
3. On 20 June 1953, Congress enacted Republic Act No. 954, entitled "An Act to Prohibit
With Horse Races and Basque Pelota Games (Jai-Alai), And To Prescribe Penalties For
Its Violation". The provisions of Republic Act No. 954 relating to jai-alai are as follows:
Sec. 4. No person, or group of persons other than the operator or maintainer of a
fronton with legislative franchise to conduct basque pelota games (Jai-alai), shall offer,
to take or arrange bets on any basque pelota game or event, or maintain or use a

57
totalizator or other device, method or system to bet or gamble on any basque pelota
game or event. (emphasis supplied).
Sec. 5. No person, operator or maintainer of a fronton with legislative franchise to
conduct basque pelota games shall offer, take, or arrange bets on any basque pelota
game or event, or maintain or use a totalizator or other device, method or system to
bet or gamble on any basque pelota game or event outside the place, enclosure, or
fronton where the basque pelota game is held. (emphasis supplied).
4. On 07 September 1971, however, the Municipal Board of Manila nonetheless passed
Ordinance No. 7065 entitled "An Ordinance Authorizing the Mayor To Allow And Permit
The Associated Development Corporation To Establish, Maintain And Operate A Jai-Alai
In The City Of Manila, Under Certain Terms And Conditions And For Other Purposes."
5. On 20 August 1975, Presidential Decree No. 771 was issued by then President
Marcos. The decree, entitled "Revoking All Powers and Authority of Local
Government(s) To Grant Franchise, License or Permit And Regulate Wagers Or Betting
By The Public On Horse And Dog Races, Jai-Alai Or Basque Pelota, And Other Forms Of
Gambling", in Section 3 thereof, expressly revoked all existing franchises and permits
issued by local governments.
6. On 16 October 1975, Presidential Decree No. 810, entitled "An Act granting The
Philippine Jai-Alai And Amusement Corporation A Franchise To Operate, Construct And
Maintain A Fronton For Basque Pelota And Similar Games of Skill In THE Greater Manila
Area," was promulgated.
7 On 08 May 1987, then President Aquino, by virtue of Article XVIII, Section 6, of the
Constitution, which allowed the incumbent legislative powers until the first Congress
was convened, issued Executive Order No. 169 expressly repealing PD 810 and revoking
and cancelling the franchise granted to the Philippine Jai-Alai and Amusement
Corporation.
Petitioners in G.R. No. 117263 argue that Republic Act No. 954 effectively removed the
power of the Municipal Board of Manila to grant franchises for gambling operations. It is
argued that the term "legislative franchise" in Rep. Act No. 954 is used to refer to
franchises issued by Congress.
On the other hand, ADC contends that Republic Act N. 409 (Manila Chapter) gives
legislative powers to the Municipal Board to grant franchises, and since Republic Act No.
954 does not specifically qualify the word "legislative" as referring exclusively to
Congress, then Rep. Act No. 954 did not remove the power of the Municipal Board
under Section 18(jj) of Republic Act No. 409 and consequently it was within the power
of the City of Manila to allow ADC to operate the jai-alai in the City of Manila.

58
On this point, the government counter-argues that the term "legislative powers" is used
in Rep. Act No. 409 merely to distinguish the powers under Section 18 of the law from
the other powers of the Municipal Board, but that the term "legislative franchise" in
Rep. Act No. 954 refers to a franchise granted solely by Congress.
Further, the government argues that Executive Order No. 392 dated 01 January 1951
transferred even the power to regulate Jai-Alai from the local governments to the
Games and Amusements Board (GAB), a national government agency.
It is worthy of note that neither of the authorities relied upon by ADC to support its
alleged possession of a valid franchise, namely the Charter of the City of Manila (Rep.
Act No. 409) and Manila Ordinance No. 7065 uses the word "franchise". Rep. Act No.
409 empowers the Municipal Board of Manila to "tax, license,
permit and regulate wagers or betting" and to "grant exclusive rights to
establishments", while Ordinance No. 7065 authorized the Manila City Mayor to
"allow and permit" ADC to operate jai-alai facilities in the City of Manila.
It is clear from the foregoing that Congress did not delegate to the City of Manila the
power "to franchise" wagers or betting, including the jai-alai, but retained for itself such
power "to franchise". What Congress delegated to the City of Manila in Rep. Act No.
409, with respect to wagers or betting, was the power to "license, permit, or regulate"
which therefore means that a license or permit issued by the City of Manila to operate a
wager or betting activity, such as the jai-alai where bets are accepted, would not
amount to something meaningful UNLESS the holder of the permit or license was also
FRANCHISED by the national government to so operate. Moreover, even this power to
license, permit, or regulate wagers or betting on jai-alai was removed from local
governments, including the City of Manila, and transferred to the GAB on 1 January
1951 by Executive Order No. 392. The net result is that the authority to grant franchises
for the operation of jai-alai frontons is in Congress, while the regulatory function is
vested in the GAB.
In relation, therefore, to the facts of this case, since ADC has no franchise from
Congress to operate the jai-alai, it may not so operate even if its has a license or permit
from the City Mayor to operate the jai-alai in the City of Manila.
It cannot be overlooked, in this connection, that the Revised Penal Code punishes
gambling and betting under Articles 195 to 199 thereof. Gambling is thus generally
prohibited by law, unless another law is enacted by Congress expressly exempting or
excluding certain forms of gambling from the reach of criminal law. Among these form
the reach of criminal law. Among these forms of gambling allowed by special law are
the horse races authorized by Republic Acts Nos. 309 and 983 and gambling casinos
authorized under Presidential Decree No. 1869.

59
While jai-alai as a sport is not illegal per se, the accepting of bets or wagers on the
results of jai-alai games is undoubtedly gambling and, therefore, a criminal offense
punishable under Articles 195-199 of the Revised Penal Code, unless it is shown that a
later or special law had been passed allowing it. ADC has not shown any such special
law.
Republic Act No. 409 (the Revised Charter of the City of Manila) which was enacted by
Congress on 18 June 1949 gave the Municipal Board certain delegated legislative
powers under Section 18. A perusal of the powers enumerated under Section 18 shows
that these powers are basically regulatory in nature.5 The regulatory nature of these
powers finds support not only in the plain words of the enumerations under Section 28
but also in this Court's ruling in People v. Vera (65 Phil. 56).
In Vera, this Court declared that a law which gives the Provincial Board the discretion to
determine whether or not a law of general application (such as, the Probation law-Act
No. 4221) would or would not be operative within the province, is unconstitutional for
being an undue delegation of legislative power.
From the ruling in Vera, it would be logical to conclude that, if ADC's arguments were to
prevail, this Court would likewise declare Section 18(jj) of the Revised Charter of Manila
unconstitutional for the power it would delegate to the Municipal Board of Manila would
give the latter the absolute and unlimited discretion to render the penal code provisions
on gambling inapplicable or inoperative to persons or entities issued permits to operate
gambling establishments in the City of Manila.
We need not go to this extent, however, since the rule is that laws must be presumed
valid, constitutional and in harmony with other laws. Thus, the relevant provisions of
Rep. Acts Nos. 409 and 954 and Ordinance No. 7065 should be taken together and it
should then be clear that the legislative powers of the Municipal Board should be
understood to be regulatory in nature and that Republic Act No. 954 should be
understood to refer to congressional franchises, as a necessity for the operation of jai-
alai.
We need not, however, again belabor this issue further since the task at hand which will
ultimately, and with finality, decide the issues in this case is to determine whether PD
No. 771 validly revoked ADC's franchise to operate the jai-alai, assuming (without
conceding) that it indeed possessed such franchise under Ordinance No. 7065.
ADC argues that PD No. 771 is unconstitutional for being violative of the equal
protection and non-impairment provisions of the Constitution. On the other hand, the
government contends that PD No. 771 is a valid exercise of the inherent police power of
the State.

60
The police power has been described as the least limitable of the inherent powers of
the State. It is based on the ancient doctrine — salus populi est suprema lex (the
welfare of the people is the supreme law.) In the early case of Rubi v. Provincial Board
of Mindoro (39 Phil. 660), this Court through Mr. Justice George A. Malcolm stated thus:
The police power of the State . . . is a power co-extensive with self-protection, and is
not inaptly termed the "law of overruling necessity." It may be said to be that inherent
and plenary power in the State which enables it to prohibit all things hurtful to the
comfort, safety and welfare of society. Carried onward by the current of legislation, the
judiciary rarely attempts to dam the onrushing power of legislative discretion, provided
the purposes of the law do not go beyond the great principles that mean security for
the public welfare or do not arbitrarily interfere with the right of the individual.
In the matter of PD No. 771, the purpose of the law is clearly stated in the "whereas
clause" as follows:
WHEREAS, it has been reported that in spite of the current drive of our law
enforcement agencies against vices and illegal gambling, these social ills are still
prevalent in many areas of the country;
WHEREAS, there is need to consolidate all the efforts of the government to eradicate
and minimize vices and other forms of social ills in pursuance of the social and
economic development program under the new society;
WHEREAS, in order to effectively control and regulate wagers or betting by the public
on horse and dog races, jai-alai and other forms of gambling there is a necessity to
transfer the issuance of permit and/or franchise from local government to the National
Government.
It cannot be argued that the control and regulation of gambling do not promote public
morals and welfare. Gambling is essentially antagonistic and self-reliance. It breeds
indolence and erodes the value of good, honest and hard work. It is, as very aptly
stated by PD No. 771, a vice and a social ill which government must minimize (if not
eradicate) in pursuit of social and economic development.
In Magtajas v. Pryce Properties Corporation (20 July 1994, G.R. No. 111097), this Court
stated thru Mr. Justice Isagani A. Cruz:
In the exercise of its own discretion, the legislative power may prohibit gambling
altogether or allow it without limitation or it may prohibit some forms of gambling and
allow others for whatever reasons it may consider sufficient. Thus, it has
prohibited jueteng and monte but permits lotteries, cockfighting and horse-racing. In
making such choices, Congress has consulted its own wisdom, which this Court has no
authority to review, much less reverse. Well has it been said that courts do not sit to
resolve the merits of conflicting theories. That is the prerogative of the political

61
departments. It is settled that questions regarding wisdom, morality and practicability of
statutes are not addressed to the judiciary but may be resolved only by the executive
and legislative departments, to which the function belongs in our scheme of
government. (Emphasis supplied)
Talks regarding the supposed vanishing line between right and privilege in American
constitutional law has no relevance in the context of these cases since the reference
there is to economic regulations. On the other hand, jai-alai is not a mere economic
activity which the law seeks to regulate. It is essentially gambling and whether it should
be permitted and, if so, under what conditions are questions primarily for the
lawmaking authority to determine, talking into account national and local interests.
Here, it is the police power of the State that is paramount.
ADC questions the motive for the issuance of PD Nos. 771. Clearly, however, this Court
cannot look into allegations that PD No. 771 was enacted to benefit a select group
which was later given authority to operate the jai-alai under PD No. 810. The
examination of legislative motivation is generally prohibited. (Palmer v. Thompson, 403
U.S. 217, 29 L. Ed. 2d 438 [1971] per Black, J.) There is, the first place, absolute lack
of evidence to support ADC's allegation of improper motivation in the issuance of PD
No. 771. In the second place, as already averred, this Court cannot go behind the
expressed and proclaimed purposes of PD No. 771, which are reasonable and even
laudable.
It should also be remembered that PD No. 771 provides that the national
government can subsequently grant franchises "upon proper application and verification
of the qualifications of the applicant." ADC has not alleged that it filed an application for
a franchise with the national government subsequent to the enactment of PD No. 771;
thus, the allegations abovementioned (of preference to a select group) are based on
conjectures, speculations and imagined biases which do not warrant the consideration
of this Court.
On the other hand, it is noteworthy that while then president Aquino issued Executive
Order No. 169 revoking PD No. 810 (which granted a franchise to a Marcos-crony to
operate the jai-alai), she did not scrap or repeal PD No. 771 which had revoked all
franchises to operate jai-alais issued by local governments, thereby re-affirming the
government policy that franchises to operate jai-alais are for the national government
(not local governments) to consider and approve.
On the alleged violation of the non-impairment and equal protection clauses of the
Constitution, it should be remembered that a franchise is not in the strict sense a simple
contract but rather it is more importantly, a mere privilege specially in matters which
are within the government's power to regulate and even prohibit through the exercise

62
of the police power. Thus, a gambling franchise is always subject to the exercise of
police power for the public welfare.
In RCPI v. NTC (150 SCRA 450), we held that:
A franchise started out as a "royal privilege or (a) branch of the King's prerogative,
subsisting in the hands of a subject." This definition was given by Finch, adopted by
Blackstone, and accepted by every authority since . . . Today, a franchise being merely a
privilege emanating from the sovereign power of the state and owing its existence to a
grant, is subject to regulation by the state itself by virtue of its police power through its
administrative agencies.
There is a stronger reason for holding ADC's permit to be a mere privilege because jai-
alai, when played for bets, is pure and simple gambling. To analogize a gambling
franchise for the operation of a public utility, such as public transportation company, is
to trivialize the great historic origin of this branch of royal privilege.
As earlier noted, ADC has not alleged ever applying for a franchise under the provisions
of PD No. 771. and yet, the purpose of PD No. 771 is quite clear from its provisions, i.e.,
to give to the national government the exclusive power to grant gambling franchises.
Thus, all franchises then existing were revoked but were made subject to reissuance by
the national government upon compliance by the applicant with government-set
qualifications and requirements.
There was no violation by PD No. 771 of the equal protection clause since the decree
revoked all franchises issued by local governments without qualification or exception.
ADC cannot allege violation of the equal protection clause simply because it was the
only one affected by the decree, for as correctly pointed out by the government, ADC
was not singled out when all jai-alai franchises were revoked. Besides, it is too late in
the day for ADC to seek redress for alleged violation of its constitutional rights for it
could have raised these issues as early as 1975, almost twenty 920) years ago.
Finally, we do not agree that Section 3 of PD No. 771 and the requirement of a
legislative franchise in Republic Act No. 954 are "riders" to the two 92) laws and are
violative of the rule that laws should embrace one subject which shall be expressed in
the title, as argued by ADC. In Cordero v. Cabatuando (6 SCRA 418), this Court ruled
that the requirement under the constitution that all laws should embrace only one
subject which shall be expressed in the title is sufficiently met if the title is
comprehensive enough reasonably to include the general object which the statute seeks
to effect, without expressing each and every end and means necessary or convenient
for the accomplishing of the objective.
III

63
On the issue of whether or not there was grave abuse of discretion committed by
respondent Judge Reyes in issuing the temporary restraining order (later converted to a
writ of preliminary injunction) and the writ of preliminary mandatory injunction, we hold
and rule there was.
Section 3, Rule 58 of the rules of Court provides for the grounds for the issuance of a
preliminary injunction. While ADC could allege these grounds, respondent judge should
have taken judicial notice of Republic Act No. 954 and PD 771, under Section 1 rule 129
of the Rules of court. These laws negate the existence of any legal right on the part of
ADC to the reliefs it sought so as to justify the issuance of a writ of preliminary
injunction. since PD No. 771 and Republic Act No. 954 are presumed valid and
constitutional until ruled otherwise by the Supreme Court after due hearing, ADC was
not entitled to the writs issued and consequently there was grave abuse of discretion in
issuing them.
WHEREFORE, for the foregoing reasons, judgment is hereby rendered:
1. allowing the Republic of the Philippines to intervene in G.R. No. 115044.
2. declaring Presidential Decree No. 771 valid and constitutional.
3. declaring that respondent Associated Development corporation (ADC) does not
possess the required congressional franchise to operate and conduct the jai-alai under
Republic Act No. 954 and Presidential Decree No. 771.
4. setting aside the writs of preliminary injunction and preliminary mandatory injunction
issued by respondent Judge Vetino Reyes in civil Case No. 94-71656.
SO ORDERED.
Feliciano, Bidin, Regalado, Romero, Bellosillo and Mendoza, JJ., concur.
Narvasa, C.J. and Francisco, JJ., took no part.

64
G.R. No. 92389 September 11, 1991
HON. JEJOMAR C. BINAY and the MUNICIPALITY OF MAKATI, petitioners,
vs.
HON. EUFEMIO DOMINGO and the COMMISSION ON AUDIT, respondents.
Jejomar C. Binay for himself and for his co-petitioner.
Manuel D. Tamase and Rafael C. Marquez for respondents.

PARAS, J.:
The only pivotal issue before Us is whether or not Resolution No. 60, re-enacted under
Resolution No. 243, of the Municipality of Makati is a valid exercise of police power
under the general welfare clause.
The pertinent facts are:
On September 27, 1988, petitioner Municipality, through its Council, approved
Resolution No. 60 which reads:
A RESOLUTION TO CONFIRM AND/OR RATIFY THE ONGOING BURIAL ASSISTANCE
PROGRAM INITIATED BY THE OFFICE OF THE MAYOR, OF EXTENDING FINANCIAL
ASSISTANCE OF FIVE HUNDRED PESOS (P500.00) TO A BEREAVED FAMILY, FUNDS TO
BE TAKEN OUT OF UNAPPROPRIATED AVAILABLE FUNDS EXISTING IN THE MUNICIPAL
TREASURY. (Rollo, Annnex "A" p. 39)
Qualified beneficiaries, under the Burial Assistance Program, are bereaved families of
Makati whose gross family income does not exceed two thousand pesos (P2,000.00) a
month. The beneficiaries, upon fulfillment of other requirements, would receive the
amount of five hundred pesos (P500.00) cash relief from the Municipality of Makati.
(Reno, Annex "13", p. 41)
Metro Manila Commission approved Resolution No. 60. Thereafter, the municipal
secretary certified a disbursement fired of four hundred thousand pesos (P400,000.00)
for the implementation of the Burial Assistance Program. (Rollo, Annex "C", p. 43).
Resolution No. 60 was referred to respondent Commission on Audit (COA) for its
expected allowance in audit. Based on its preliminary findings, respondent COA
disapproved Resolution No. 60 and disallowed in audit the disbursement of finds for the
implementation thereof. (Rollo, Annex "D", P. 44)

65
Two letters for reconsideration (Annexes "E" and "F", Rollo, pp. 45 and 48, respectively)
filed by petitioners Mayor Jejomar Binay, were denied by respondent in its Decision No.
1159, in the following manner:
Your request for reconsideration is predicated on the following grounds, to wit:
1. Subject Resolution No. 60, s. 1988, of the Municipal Council of Makati and the
intended disbursements fall within the twin principles of 'police power and parens
patriae and
2. The Metropolitan Manila Commission (MMC), under a Certification, dated June 5,
1989, has already appropriated the amount of P400,000.00 to implement the Id
resolution, and the only function of COA on the matter is to allow the financial
assistance in question.
The first contention is believed untenable. Suffice it to state that:
a statute or ordinance must have a real substantial, or rational relation to the public
safety, health, morals, or general welfare to be sustained as a legitimate exercise of the
police power. The mere assertion by the legislature that a statute relates to the public
health, safety, or welfare does not in itself bring the statute within the police power of a
state for there must always be an obvious and real connection between the actual
provisions of a police regulations and its avowed purpose, and the regulation adopted
must be reasonably adapted to accomplish the end sought to be attained. 16 Am. Jur
2d, pp. 542-543; emphasis supplied).
Here, we see no perceptible connection or relation between the objective sought to be
attained under Resolution No. 60, s. 1988, supra, and the alleged public safety, general
welfare, etc. of the inhabitants of Makati.
Anent the second contention, let it be stressed that Resolution No. 60 is still subject to
the limitation that the expenditure covered thereby should be for a public purpose, i.e.,
that the disbursement of the amount of P500.00 as burial assistance to a bereaved
family of the Municipality of Makati, or a total of P400,000.00 appropriated under the
Resolution, should be for the benefit of the whole, if not the majority, of the inhabitants
of the Municipality and not for the benefit of only a few individuals as in the present
case. On this point government funds or property shall be spent or used solely for
public purposes. (Cf. Section 4[2], P.D. 1445). (pp. 50-51, Rollo)
Bent on pursuing the Burial Assistance Program the Municipality of Makati, through its
Council, passed Resolution No. 243, re-affirming Resolution No. 60 (Rollo, Annex "H", p.
52).

66
However, the Burial Assistance Program has been stayed by COA Decision No. 1159.
Petitioner, through its Mayor, was constrained to file this special civil action of certiorari
praying that COA Decision No. 1159 be set aside as null and void.
The police power is a governmental function, an inherent attribute of sovereignty, which
was born with civilized government. It is founded largely on the maxims, "Sic utere tuo
et ahenum non laedas and "Salus populi est suprema lex Its fundamental purpose is
securing the general welfare, comfort and convenience of the people.
Police power is inherent in the state but not in municipal corporations (Balacuit v. CFI of
Agusan del Norte, 163 SCRA 182). Before a municipal corporation may exercise such
power, there must be a valid delegation of such power by the legislature which is the
repository of the inherent powers of the State. A valid delegation of police power may
arise from express delegation, or be inferred from the mere fact of the creation of the
municipal corporation; and as a general rule, municipal corporations may exercise police
powers within the fair intent and purpose of their creation which are reasonably proper
to give effect to the powers expressly granted, and statutes conferring powers on public
corporations have been construed as empowering them to do the things essential to the
enjoyment of life and desirable for the safety of the people. (62 C.J.S., p. 277). The so-
called inferred police powers of such corporations are as much delegated powers as are
those conferred in express terms, the inference of their delegation growing out of the
fact of the creation of the municipal corporation and the additional fact that the
corporation can only fully accomplish the objects of its creation by exercising such
powers. (Crawfordsville vs. Braden, 28 N.E. 849). Furthermore, municipal corporations,
as governmental agencies, must have such measures of the power as are necessary to
enable them to perform their governmental functions. The power is a continuing one,
founded on public necessity. (62 C.J.S. p. 273) Thus, not only does the State effectuate
its purposes through the exercise of the police power but the municipality does also.
(U.S. v. Salaveria, 39 Phil. 102).
Municipal governments exercise this power under the general welfare clause: pursuant
thereto they are clothed with authority to "enact such ordinances and issue such
regulations as may be necessary to carry out and discharge the responsibilities
conferred upon it by law, and such as shall be necessary and proper to provide for the
health, safety, comfort and convenience, maintain peace and order, improve public
morals, promote the prosperity and general welfare of the municipality and the
inhabitants thereof, and insure the protection of property therein." (Sections 91, 149,
177 and 208, BP 337). And under Section 7 of BP 337, "every local government unit
shall exercise the powers expressly granted, those necessarily implied therefrom, as
well as powers necessary and proper for governance such as to promote health and
safety, enhance prosperity, improve morals, and maintain peace and order in the local
government unit, and preserve the comfort and convenience of the inhabitants therein."

67
Police power is the power to prescribe regulations to promote the health, morals,
peace, education, good order or safety and general welfare of the people. It is the most
essential, insistent, and illimitable of powers. In a sense it is the greatest and most
powerful attribute of the government. It is elastic and must be responsive to various
social conditions. (Sangalang, et al. vs. IAC, 176 SCRA 719). On it depends the security
of social order, the life and health of the citizen, the comfort of an existence in a thickly
populated community, the enjoyment of private and social life, and the beneficial use of
property, and it has been said to be the very foundation on which our social system
rests. (16 C.J.S., P. 896) However, it is not confined within narrow circumstances of
precedents resting on past conditions; it must follow the legal progress of a democratic
way of life. (Sangalang, et al. vs. IAC, supra).
In the case at bar, COA is of the position that there is "no perceptible connection or
relation between the objective sought to be attained under Resolution No. 60, s. 1988,
supra, and the alleged public safety, general welfare. etc. of the inhabitants of Makati."
(Rollo, Annex "G", p. 51).
Apparently, COA tries to re-define the scope of police power by circumscribing its
exercise to "public safety, general welfare, etc. of the inhabitants of Makati."
In the case of Sangalang vs. IAC, supra, We ruled that police power is not capable of an
exact definition but has been, purposely, veiled in general terms to underscore its all
comprehensiveness. Its scope, over-expanding to meet the exigencies of the times,
even to anticipate the future where it could be done, provides enough room for an
efficient and flexible response to conditions and circumstances thus assuring the
greatest benefits.
The police power of a municipal corporation is broad, and has been said to be
commensurate with, but not to exceed, the duty to provide for the real needs of the
people in their health, safety, comfort, and convenience as consistently as may be with
private rights. It extends to all the great public needs, and, in a broad sense includes all
legislation and almost every function of the municipal government. It covers a wide
scope of subjects, and, while it is especially occupied with whatever affects the peace,
security, health, morals, and general welfare of the community, it is not limited thereto,
but is broadened to deal with conditions which exists so as to bring out of them the
greatest welfare of the people by promoting public convenience or general prosperity,
and to everything worthwhile for the preservation of comfort of the inhabitants of the
corporation (62 C.J.S. Sec. 128). Thus, it is deemed inadvisable to attempt to frame any
definition which shall absolutely indicate the limits of police power.
COA's additional objection is based on its contention that "Resolution No. 60 is still
subject to the limitation that the expenditure covered thereby should be for a public
purpose, ... should be for the benefit of the whole, if not the majority, of the inhabitants

68
of the Municipality and not for the benefit of only a few individuals as in the present
case." (Rollo, Annex "G", p. 51).
COA is not attuned to the changing of the times. Public purpose is not unconstitutional
merely because it incidentally benefits a limited number of persons. As correctly pointed
out by the Office of the Solicitor General, "the drift is towards social welfare legislation
geared towards state policies to provide adequate social services (Section 9, Art. II,
Constitution), the promotion of the general welfare (Section 5, Ibid) social justice
(Section 10, Ibid) as well as human dignity and respect for human rights. (Section
11, Ibid." (Comment, p. 12)
The care for the poor is generally recognized as a public duty. The support for the poor
has long been an accepted exercise of police power in the promotion of the common
good.
There is no violation of the equal protection clause in classifying paupers as subject of
legislation. Paupers may be reasonably classified. Different groups may receive varying
treatment. Precious to the hearts of our legislators, down to our local councilors, is the
welfare of the paupers. Thus, statutes have been passed giving rights and benefits to
the disabled, emancipating the tenant-farmer from the bondage of the soil, housing the
urban poor, etc.
Resolution No. 60, re-enacted under Resolution No. 243, of the Municipality of Makati is
a paragon of the continuing program of our government towards social justice. The
Burial Assistance Program is a relief of pauperism, though not complete. The loss of a
member of a family is a painful experience, and it is more painful for the poor to be
financially burdened by such death. Resolution No. 60 vivifies the very words of the late
President Ramon Magsaysay 'those who have less in life, should have more in law." This
decision, however must not be taken as a precedent, or as an official go-signal for
municipal governments to embark on a philanthropic orgy of inordinate dole-outs for
motives political or otherwise.
PREMISES CONSIDERED, and with the afore-mentioned caveat, this petition is hereby
GRANTED and the Commission on Audit's Decision No. 1159 is hereby SET ASIDE.
SO ORDERED.

69
EN BANC
G.R. No. 211093, June 06, 2017
MINDANAO SHOPPING DESTINATION CORPORATION, ACE HARDWARE
PHILS., INC., INTERNATIONAL TOYWORLD, INC., STAR APPLIANCE CENTER,
INC., SURPLUS MARKETING CORPORATION, WATSONS PERSONAL CARE
STORES (PHILS.), INC., AND SUPERVALUE, INC., Petitioners, v. HON. RODRIGO
R. DUTERTE, IN HIS CAPACITY AS MAYOR OF DAVAO CITY, HON. SARA
DUTERTE, VICE-MAYOR OF DAVAO CITY, IN HER CAPACITY AS PRESIDING
OFFICER OF THE SANGGUNIANG PANLUNGSOD, AND THE SANGGUNIANG
PANLUNGSOD (CITY COUNCIL) NG DAVAO, Respondents.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 451 of the Rules of Court seeking
the reversal of the Decision2 dated August 29, 2013 and Resolution3 dated January 22,
2014 of the Court of Appeals in CA-G.R. SP No. 101482, which affirmed the Decision
dated July 2, 2007 and Resolution dated October 31, 2007 of the Office of the
President.
Petitioners Mindanao Shopping Destination Corporation, Ace Hardware Philippines, Inc.,
International Toyworld, Inc., Star Appliance Center, Inc., Surplus Marketing Corporation,
Watsons Personal Care Stores (Philippines), Inc. and Supervalue, Inc. (collectively as
petitioners) are corporations duly organized and existing under and by virtue of
Philippine law and engaged in the retail business of selling general merchandise within
the territorial jurisdiction of Davao City.4
The facts are as follows:
On November 16, 2005, respondent Sangguniang Panglungsod of Davao City
(Sanggunian), after due notice and hearing, enacted the assailed Davao City Ordinance
No. 158-05, Series of 2005, otherwise known as "An Ordinance Approving the 2005
Revenue Code of the City of Davao, as Amended�5 attested to by Vice-Mayor Hon.
Luis B. Bonguyan (respondent Vice-Mayor), as Presiding Officer of the Sanggunian, and
approved by then City Mayor, Hon. Rodrigo R. Duterte, now the President of the
Republic of the Philippines. The Ordinance took effect after the publication in
the Mindanao Mercury Times, a newspaper of general circulation in Davao City, for
three (3) consecutive days, December 23, 24 and 25, 2005.6
Petitioners' particular concern is Section 69 (d)7 of the questioned Ordinance which
provides:

70
Section 69. Imposition of Tax. There is hereby imposed on the following persons who
establish, operate, conduct or maintain their respective business within the City a
graduated business tax in the amounts prescribed:
xxxx
(d) On Retailers

Gross Sales/Receipts for the Preceding Year Rates of Tax Per Annum

�

More than P50,000 but not over P400,000.00 2%

In excess of P400,000.00 1 � %

However, barangays shall have the exclusive power to levy taxes on stores where the
gross sales or receipts of the preceding calendar year does not exceed Fifty Thousand
Pesos (P50,000) subject to existing laws and regulations.
xxx
Petitioners claimed that they used to pay only 50% of 1% of the business tax rate
under the old Davao City Ordinance No. 230, Series of 1990, but in the assailed new
ordinance, it will require them to pay a tax rate of 1.5%, or an increase of 200% from
the previous rate. Petitioners believe that the increase is not allowed under Republic Act
(RA) No. 7160, The Local Government Code (LGC). Consequently, invoking the LGC,
petitioners appealed to the DOJ, docketed as MTO-DOJ Case No. 02-2006, asserting the
unconstitutionality and illegality of Section 69 (d), for being unjust, excessive,
oppressive, confiscatory and contrary to the 1987 Constitution and the provisions of the
LGC. Petitioners prayed that the questioned ordinance, particularly Section 69 (d)
thereof be declared as null and void ab initio.
For lack of material time, the appeal was filed and served through registered mail.
Unfortunately, when the appeal was mailed on January 24, 2006, the
verification/certification of non-forum shopping and the postal money order, covering
the payment of filing fees were not attached. The attachments were mailed the next
day, January 25, 2006, together with a covering manifestation. Petitioners received
respondents' Comment on the appeal on March 2, 2006; and, on June 27, 2006,
petitioners received respondents' manifestation alleging that the appeal should be
deemed filed out of time for failure to pay the filing fees within the prescribed period.
In a Resolution8 dated July 12, 2006, the DOJ-OSec dismissed the appeal and denied
petitioners' motion for reconsideration.9

71
Meanwhile, on September 26, 2006, Davao City Ordinance No. 0253, Series of 2006
(Amended Ordinance), amended Section 69 (d) of the questioned ordinance. In it, tax
rate on retailers with gross receipts in excess of P400,000.00 was reduced from one and
one-half percent (1 �%) to one and one-fourth percent (1 �% Section 69 (d), as
amended, now reads:
(d) On Retailers

Gross Sales/Receipts for the Preceding Year Rates of Tax Per Annum

�

More than P50,000 but not over P400,000.00 2%

In excess of P400,000.00 1 � %

However, barangays shall have the exclusive power to levy taxes on stores where the
gross sales or receipts of the preceding calendar year does not exceed Fifty Thousand
Pesos (P50,000) subject to existing laws and regulations.
With the above development, respondents maintained that the adjustment in the tax
base no longer exceeds the limitation as set forth in Section 191 of the LGC considering
that the current Davao City tax rate of 1.25% on retailers with gross receipts/sales of
over P400,000.00 under the assailed ordinance is way below or 0.25% short of the
maximum tax rates of 1.5% for cities sanctioned by the LGC. Respondents insist that
there is thus no increase or adjustment to speak of under the premises which is
violative of Section 191 of the LGC.
From the dismissal of the appeal and the denial of their motion for reconsideration,
petitioners filed an appeal before the Office of the President (OP). On July 2, 2007, the
OP, finding no merit on petitioners' appeal, dismissed the latter.10 Petitioners moved for
reconsideration, but was denied anew in a Resolution11 dated October 31, 2007.
Unperturbed, petitioners filed a petition for review before the Court of Appeals.12
On August 29, 2013, in the disputed Decision of the appellate court, the latter
dismissed the petition, to wit:
WHEREFORE, the Petition is DISMISSED. The Decision dated July 2, 2007 and the
Resolution dated October 31, 2007 of the Office of the President in O.P. Case no. 06-L-
425 are AFFIRMED.
SO ORDERED. 13

72
 Mindanao Shopping Destination vs Davao City
Petitioners moved for reconsideration, but were denied in a Resolution14 dated January
22, 2014. Thus, the instant petition for review on certiorari under Rule 45 of the Rules
of Court raising the following issues:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS DESPITE THE PATENT
ILLEGALITY AND UNCONSTITUTIONALITY, UPHELD THE VALIDITY OF THE ORDINANCE
AS WELL AS THE LOCAL SANGGUNIAN'S ARBITRARY EXERCISE OF ITS POWER TO TAX
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT ADDRESSING
THE MAIN ISSUE RAISED BY PETITIONERS AS A CONSTITUTIONAL ISSUE.
WHETHER THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE SUBSTANTIAL
COMPLIANCE OVER PROCEDURAL DEFICIENCIES
On the procedural issues, We find that at this stage of the proceeding, it is futile to
belabor on the procedural deficiencies since the issue of timeliness of the appeal has
become moot and academic considering that petitioners' appeal was given due course
by the OP. In fact, both the OP and the appellate court decided the appeal on the
merits and not merely on technicality. We will, thus, proceed with the substantive issues
of the instant case.
Petitioners assert that although the maximum rate that may be imposed by cities on
retailers with gross receipts exceeding P400,000.00 is 1.5% of the gross receipts, the
maximum adjustment which can be applied once every five (5) years, is only 0.15% or
10% of the maximum rate of 1.5% of the gross receipts in accordance with Section 191
of the LGC. However, petitioners lamented that the assailed Ordinance increased the tax
rate on them, as retailers, by more than the maximum allowable rate of 0.15%,
from 50% of 1% (0.5%) of the gross receipts to 1.5% (now, 1.25%). of the gross
receipts, thus, violating Section 191 in relation to Sections 143 and 151 of the Code.
A perusal of the assailed new ordinance, particularly Section 69 (a) and (b) of Davao
City Ordinance No. 158-05, Series of 2005, provides:
Section 69. Imposition of Tax. - There is hereby imposed on the following persons who
establish, operates, conduct or maintain their respective business within the city a
graduated tax in the amounts hereafter prescribed:
xxxx
(b) On WHOLESALERS, DISTRIBUTORS, OR DEALERS, in any article of commerce
of whatever kind or nature in accordance with the following schedules:

Gross Sales/Receipts for the Preceding Calendar Year Amount of Tax per Annum

73
xxxx

In excess P2,000,00.00 At a rate of fifty-five (55%)

percent of one percent (1%)

xxxx

(d) On RETAILERS:

Gross Sales/Receipts for the Preceding Calendar Year Amount of Tax per Annum

More than P50,000.00 but not over P400,000.00 2% �

In excess of P400,000.00 1 1/2% �

x x x15

Petitioners claim that the assailed tax ordinance is violative of the Local Government
Code, specifically Section 191, in relation to Sections 143 and 151, to wit:
Section 191. Authority of Local Government Units to Adjust Rates of Tax Ordinances.
- Local government units shall have the authority to adjust the tax rates as
prescribed herein not oftener than once every five (5) years, but in no case
shall such adjustment exceed ten percent (10%) of the rates fixed under this
Code.
Section 143 (d). Tax on Business. -The municipality may impose taxes on the
following businesses:
xxxx
(d) On retailers

With gross sales or receipts for the preceding calendar year in Rate of Tax Per
the amount of: Annum

400,000.00 or less 2.00% �

More than P400,000.00 1.00 % �

xxxx
Section 151. Scope of Taxing Powers. - Except as otherwise provided in this Code, the
city, may levy the taxes, fees, and charges which the province or municipality may
impose: Provided, however, That the taxes, fees and charges levied and collected by

74
highly urbanized and independent component cities shall accrue to them and distributed
in accordance with the provisions of this Code.
The rates of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than fifty percent
(50%) except the rates of professional and amusement taxes. 16
We disagree.
Under the old tax ordinance of Davao City, Ordinance No. 230, Series of 1990,
wholesalers and retailers were grouped as one, thus, the tax base and tax rate imposed
upon retailers were the same as that imposed upon wholesalers. Subsequently, with the
implementation of Republic Act No. 7160, otherwise known as the Local Government
Code of the Philippines, the latter authorized a difference in the tax treatment between
wholesale and retail businesses. Where before under the old tax ordinance, Davao City
retailers only paid � of 1% of the gross sales/receipts exceeding P2,000,000.00, now
under the new tax ordinance, retailers would have to pay 1.25% of the gross
sales/receipts exceeding P400,000.00.
However, it must be emphasized that the assailed new tax ordinance is actually the
initial implementation by the Davao City local government of the tax provisions of R.A
7160 (LGC) considering that the old tax ordinance of Davao City was enacted in 1990,
or prior to the effectivity of the LGC on January 1, 1992. It then would explain why the
old tax ordinance of Davao City lumped under one business tax and under the same set
of tax rates these two business activities - retail and wholesale. There is no provision
under Batas Pambansa Blg. 337,17 the old LGC, which specifically define these business
activities. Under Section 131 of R.A. 7160,18 however, wholesale and retail are now
defined, classified and taxed differently. It cannot be said then that Davao City, on its
own, deliberately grouped these two business activities under one business tax. To
reiterate, it is only with the implementation of R.A. 7160 that these two business
activities, i.e., wholesale and retail, were specifically defined, classified in different
categories, and, thus, taxed differently. Corollarily, it is only sound that by
analogy, wholesalers and retailers should likewise be treated and classified differently to
provide accuracy to the very meaning of its rootword and to give meaning to the
intention of the law.
Thus, considering that wholesale and retail were defined and classified differently under
the LGC, it is then logical that they are, likewise, given separate and distinct tax base.
Article II, Sections 142 and 143 of the LGC provides:
ARTICLE I
Municipalities

75
Section 142. Scope of Taxing Powers. - Except as otherwise provided in this Code,
municipalities may levy taxes, fees, and charges not otherwise levied by provinces.
Section 143. Tax on Business. -The municipality may impose taxes on the following
businesses:
xxxx
(b) On wholesalers, distributors, or dealers in any article of commerce of whatever kind
or nature in accordance with the following schedule:

With gross sales or receipts for the preceding calendar year in � Amount of
the amount of: Tax Per
Annum

� �

Less than P1,000.00 18

P1,000.00 or more but less than 2,000.00 33.00

2,000.00 or more but less than 3,000.00 50.00

3,000.00 or more but less than 4,000.00 72.00

4,000.00 or more but less than 5,000.00 100.00

5,000.00 or more but less than 6,000.00 121.00

6,000.00 or more but less than 7,000.00 143.00

7,000.00 or more but less than 8,000.00 165.00

8,000.00 or more but less than 10,000.00 187.00

10,000.00 or more but less than 15,000.00 220.00

15,000.00 or more but less than 20,000.00 275.00

20,000.00 or more but less than 30,000.00 330.00

30,000.00 or more but less than 40,000.00 440.00

40,000.00 or more but less than 50,000.00 660.00

76
50,000.00 or more but less than 75,000.00 990.00

75,000.00 or more but less than 100,000.00 1,320.00

100,000.00 or more but less than 150,000.00 1,870.00

150,000.00 or more but less than 200,000.00 2,420.00

200,000.00 or more but less than 300,000.00 3,300.00

300,000.00 or more but less than 500,000.00 4,400.00

500,000.00 or more but less than 750,000.00 6,600.00

750,000.00 or more but less than 1,000,000.00 8,800.00

1,000,000.00 or more but less than 2,000,000.00 10,000.00

2,000,000.00 or more at a rate not exceeding fifty percent (50%) of one

percent (1%).

xxxx
(d) On retailers.

With gross sales or receipts for the preceding calendar year in Rate of Tax Per
the amount of: Annum

� �

P400,000.00 or less 2%

more than P400,000.00 1%

Provided, however, That barangays shall have the exclusive power to levy taxes, as
provided under Section 152 hereof, on gross sales or receipts of the preceding calendar
year of Fifty thousand pesos (P50,000.00) or less, in the case of cities, and Thirty
thousand pesos (P30,000.00) or less, in the case of municipalities.19
From the foregoing, it can be shown that the assailed ordinance does not violate the
limitation imposed by Section 191 of the LGC on the adjustment of tax rate for the
following reasons:
Firstly, Section 191 of the LGC presupposes that the following requirements are present
for it to apply, to wit: (i) there is a tax ordinance that already imposes a tax in
77
accordance with the provisions of the LGC; and (ii) there is a second tax ordinance that
made adjustment on the tax rate fixed by the first tax ordinance. In the instant case,
both elements are not present.
As to the first requirement, it cannot be said that the old tax ordinance (first ordinance)
was imposed in accordance with the provisions of the LGC. To reiterate, the old tax
ordinance of Davao City was enacted before the LGC came into law. Thus, the assailed
new ordinance, Davao City Ordinance No. 158-05, Series of 2005 was actually the first
to impose the tax on retailers in accordance with the provisions of the LGC.
As to the second requirement, the new tax ordinance (second ordinance) imposed the
new tax base and the new tax rate as provided by the LGC for retailers. It must be
emphasized that a tax has two components, a tax base and a tax rate. However,
Section 191 contemplates a situation where there is already an existing tax as
authorized under the LGC and only a change in the tax rate would be effected. Again,
the new ordinance Davao City provided, not only a tax rate, but also a tax base that
were appropriate for retailers, following the parameters provided under the LGC. Suffice
it to say, the second requirement is absent. Thus, given the absence of the above two
requirements for the application of Section 191 of the LGC, there is no reason for the
latter to cover a situation where the ordinance, as in this case, was an initial
implementation of R.A. 7160.
Secondly, Section 191 of the LGC will not apply because with the assailed tax
ordinance, there is no outright or unilateral increase of tax to speak of. The resulting
increase in the tax rate for retailers was merely incidental. When Davao City enacted
the assailed ordinance, it merely intended to rectify the glaring error in the classification
of wholesaler and retailer in the old ordinance. Petitioners are retailers as contemplated
by the LGC. Petitioners never disputed their classification as retailers.20 Thus, being
retailers, they are subject to the tax rate provided under Section 69 (d) and not under
Section 69 (b) of the assailed ordinance. In effect, under the assailed ordinance as
amended, petitioners as retailers are now assessed at the tax rate of one and one-
fourth (1 �%) percent on their gross sales and not the fifty-five (55%) percent of
one (1%) percent on their gross sales since the latter tax rate is only applicable to
wholesalers, distributors, or dealers. The assailed ordinance merely imposes and
collects the proper and legal tax due to the local government pursuant to the LGC.
While it may appear that there was indeed a significant adjustment on the tax rate of
retailers which affected the petitioners, it must, however, be emphasized that the
adjustment was not by virtue of a unilateral increase of the tax rate of petitioners as
retailers, but again, merely incidental as a result of the correction of the classification of
wholesalers and retailers and its corresponding tax rates in accordance with the
provisions of the LGC.

78
Indeed, as correctly pointed out by the appellate court, Section 191 is a limitation upon
the adjustment, specifically on the increase in the tax rates imposed by the local
government units. We quote the appellate court's ruling with approval, to wit:
x x x Section 191 has no bearing in the instant case because what actually took place in
the questioned Ordinance was the correction of an erroneous classification, and not, an
upward adjustment or increase of tax rates. The fact that there occurred an increase in
payment due to the reclassification is of no moment, because: (1) reclassification is not
prohibited; (2) reclassification was made to effect a correction; and (3) the taxes
imposed upon the reclassified taxpayers, was not amended or increased from that
stated in the Local Government Code. And, it is worthwhile to mention that petitioners
have not denied that they are engaged in the retail business, hence, the reclassification
was right, proper and legal.21
Couched in similar conclusion is the ruling of the Office of the President where in the
same manner it agreed that the adjustment in the tax rate of petitioners did not violate
the provisions of the LGC and the Constitution. The pertinent portion of the decision
reads, thus:
Secondly, the office a quo correctly ruled that the City Government of Davao merely
reclassified taxpayers earlier treated as one class into separate classes thus subjecting
them to different tax bases and tax rates such that "retailers" are no longer treated and
taxed in the same way as "wholesalers" unlike in the old ordinance. Distinctly defined
from each other, a different tax treatment for each class of taxpayer is reasonable. Such
being the case, the maximum tax rate and tax base ceilings provided in Section 143, in
relation to Section 151 of the Local Government Code, is not in point as the
prohibition/limitation refers to an adjustment or increase in the tax rate or tax base for
the same class of taxpayer. As held in PLDT, Inc. vs. City of Davao (399 SCRA 442),
"statutes in derogation of sovereignty such as those containing exemption from taxation
should be strictly construed in favor of the State."22
Thirdly, it must be pointed out that the limitation under Section 191 of the LGC was
provided to guard against possible abuse of the LGU's power to tax.23 In this case,
however, strictly speaking, the new tax rate for petitioners as retailers under the
assailed ordinance is not a case where there was an imposition of a new tax rate, rather
there is merely a rectification of an erroneous classification of taxpayers and tax
rates, i.e., of grouping retailers and wholesalers in one category, and their
corresponding rates. The amendment of the old tax ordinance was not intended to
abuse the LGU's taxing powers but merely sought to impose the rates as provided
under the LGC as in fact the tax rate imposed was even lower than the rate authorized
by the LGC. In effect, the assailed ordinance merely corrected the old ordinance so that
it will be in accord with the LGC. To rule otherwise is tantamount to pronouncing that
Davao City can no longer correct the apparent error in classifying wholesaler and

79
retailer in the same category under its old tax ordinance. Such proposition runs counter
to the well-entrenched principle that estoppel does not apply to the government,
especially on matters of taxation. Taxes are the nation's lifeblood through which
government agencies continue to operate and with which the State discharges its
functions for the welfare of its constituents.24
However, while Davao City may rectify and amend their old tax ordinance in order to
give full implementation of the LGC, it, however, cannot impose a straight 1.25% at its
initial implementation of the LGC in so far as retailers are concerned. Davao City should,
at the very least, start with 1% (the minimum tax rate) as provided under Section 143
(d) of the LGC. While Davao City cannot be faulted in failing to immediately implement
the LGC, petitioners cannot likewise be unjustly prejudiced by its initial implementation
of the LGC. It is but fair and reasonable that Davao City at its initial implementation of
the LGC, impose the tax rates as provided in Section 143. It is only then that the
imposition of the tax rate on retailers will not be considered as confiscatory or
oppressive, considering that the reclassification of wholesaler and retailer and their
corresponding tax rate being observed now is in accord with the LGC.
Furthermore, to clarify, the old ordinance, because it remained unchanged until the new
tax ordinance was enacted in 2005, charged lower tax rates for retailers which resulted
in lower revenues of Davao City. Corollarily, while there was an increase in the amount
of taxes to be paid by petitioners as retailers, it should not be overlooked that the
retailer has, in fact, benefited already for a long time under the old tax ordinance
because it paid lower taxes due to Davao City's failure to immediately implement the
LGC. Davao City has already foregone a substantial loss in revenues as a result of an
unadjusted lower tax rate for retailers. Thus, dictated by justice and fairness, in its
initial attempt to implement the LGC, Davao City should, at the very least, start with 1%
(the minimum tax rate) as provided under Section 143 (d) of the LGC. Considering that
11 years had already elapsed from its implementing in 2006, Davao City could adjust its
tax rate twice now which will make its adjusted tax rate for retailers pegged at 1.2%, in
accordance with Section 191 of the LGC. To clarify, from 2006-2011 (first 5 years), the
initial tax rate should start with 1%; from 2011-2016 (next 5 years) - 1.1%, thus, for
the years 2017-2021, the tax adjustment is 1.21%. However, for this purpose, Davao
City should pass an ordinance to give effect to the above-discussed tax adjustments.
Again, based on the foregoing, Davao City merely implemented the LGC, albeit it
resulted in - an increase in retailer's tax liability - which nevertheless is not covered by
Section 191 of the LGC. In any case, an ordinance based on reasonable classification
does not violate the constitutional guaranty of the equal protection of the law. The
requirements for a valid and reasonable classification are: (1) it must rest on substantial
distinctions; (2) it must be germane to the purpose of the law; (3) it must not be
limited to existing conditions only; and (4) it must apply equally to all members of the

80
same class. For the purpose of rectifying the erroneous classification of wholesaler and
retailer in the old ordinance in order to conform to the classification and the tax rates as
imposed by the LGC is neither invalid nor unreasonable. The differentiation of
wholesaler and retailer conforms to the practical dictates of justice and equity and is not
discriminatory within the meaning of the Constitution. It is inherent in the power to tax
that a State is free to select the subjects of taxation. Inequities which result from a
singling out of one particular class for taxation or exemption infringe no constitutional
limitation.25
Settled is the rule that every law, in this case an ordinance, is presumed valid. To strike
down a law as unconstitutional, petitioner has the burden to prove a clear and
unequivocal breach of the Constitution, which petitioner miserably failed to do.26
In Smart Communications, Inc. v. Municipality of Malvar, Batangas,27 citing Lawyers
Against Monopoly and Poverty (LAMP) v. Secretary of Budget and Management,28 the
Court held, thus:
To justify the nullification of the law or its implementation, there must be a clear and
unequivocal, not a doubtful, breach of the Constitution. In case of doubt in the
sufficiency of proof establishing unconstitutionality, the Court must sustain legislation
because "to invalidate [a law] based on x x x baseless supposition is an affront to the
wisdom not only of the legislature that passed it but also of the executive which
approved it." This presumption of constitutionality can be overcome only by the clearest
showing that there was indeed an infraction of the Constitution, and only when such a
conclusion is reached by the required majority may the Court pronounce, in the
discharge of the duty it cannot escape, that the challenged act must be struck down.
WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision dated
August 29, 2013 and the Resolution dated January 22, 2014 of the Court of Appeals in
CA-G.R. SP No. 101482 are hereby AFFIRMED with MODIFICATION in so far as the
tax rate of 1.25% to be imposed on petitioners is REDUCED to 1.21%.
SO ORDERED.

81
[G.R. No. 112497. August 4, 1994.]

HON. FRANKLIN M. DRILON, in his capacity as SECRETARY OF

JUSTICE, Petitioner, v. MAYOR ALFREDO S. LIM, VICE-MAYOR JOSE L.
ATIENZA, CITY TREASURER ANTHONY ACEVEDO, SANGGUNIANG
PANGLUNSOD AND THE CITY OF MANILA, Respondents.

The City Legal Officer for Petitioner.

Angara, Abello, Concepcion, Regala & Cruz for Caltex (Phils.)

Joseph Lopez for Sangguniang Panglunsod ng Manila.

L.A. Maglaya for Petron Corporation.

DECISION

CRUZ, J.:

The principal issue in this case is the constitutionality of Section 187 of the Local
Government Code reading as follows:chanrob1es virtual 1aw library

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

82
rednad

Pursuant thereto, the Secretary of Justice had, on appeal to him of four oil companies
and a taxpayer, declared Ordinance No. 7794, otherwise known as the Manila Revenue
Code, null and void for non-compliance with the prescribed procedure in the enactment
of tax ordinances and for containing certain provisions contrary to law and public policy.
1

In a petition for certiorari filed by the City of Manila, the Regional Trial Court of Manila
revoked the Secretary’s resolution and sustained the ordinance, holding inter alia that
the procedural requirements had been observed. More importantly, it declared Section
187 of the Local Government Code as unconstitutional because of its vesture in the
Secretary of Justice of the power of control over local governments in violation of the
policy of local autonomy mandated in the Constitution and of the specific provision
therein conferring on the President of the Philippines only the power of supervision over
local governments. 2

The present petition would have us reverse that decision. The Secretary argues that the
annulled Section 187 is constitutional and that the procedural requirements for the
enactment of tax ordinances as specified in the Local Government Code has indeed not
been observed.chanroblesvirtual|awlibrary

Parenthetically, this petition was originally dismissed by the Court for non-compliance
with Circular 1-88, the Solicitor General having failed to submit a certified true copy of
the challenged decision. 3 However, on motion for reconsideration with the required
certified true copy of the decision attached, the petition was reinstated in view of the
importance of the issues raised therein.

We stress at the outset that the lower court had jurisdiction to consider the
constitutionality of Section 187, this authority being embraced in the general definition
of the judicial power to determine what are the valid and binding laws by the criterion
of their conformity to the fundamental law. Specifically, BP 129 vests in the regional trial
courts jurisdiction over all civil cases in which the subject of the litigation is incapable of
pecuniary estimation, 4 even as the accused in a criminal action has the right to
question in his defense the co institutionality of a law he is charged with violating and
of the proceedings taken against him, particularly as they contravene the Bill of Rights.
Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court
appellate jurisdiction over final judgments and orders of lower courts in all cases in
which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or
regulation is in question.chanrobles.com:cralaw:red

83
In the exercise of this jurisdiction, lower courts are advised to act with the utmost
circumspection, bearing in mind the consequences of a declaration of unconstitutionality
upon the stability of laws, no less than on the doctrine of separation of powers. As the
questioned act is usually the handiwork of the legislative or the executive departments,
or both, it will be prudent for such courts, if only out of a becoming modesty, to defer
to the higher judgment of this Court in the consideration of its validity, which is better
determined after a thorough deliberation by a collegiate body and with the concurrence
of the majority of those who participated in its discussion. 5

It is also emphasized that every court, including this Court, is charged with the duty of
a purposeful hesitation before declaring a law unconstitutional, on the theory that the
measure was first carefully studied by the executive and the legislative departments and
determined by them to be in accordance with the fundamental law before it was finally
approved. To doubt is to sustain. The presumption of constitutionality can be overcome
only by the clearest showing that there was indeed an infraction of the Constitution,
and only when such a conclusion is reached by the requipped majority may the Court
pronounce, in the discharge of the duty it cannot escape, that the challenged act must
be struck down.chanrobles.com : virtual law library

In the case before us, Judge Rodolfo C. Palattao declared Section 187 of the Local
Government Code unconstitutional insofar as it empowered the Secretary of Justice to
review tax ordinances and, inferentially, to annul them. He cited the familiar distinction
between control and supervision, the first being "the power of an officer to alter or
modify or set aside what a subordinate officer had done in the performance of his
duties and to substitute the judgment of the former for the latter," while the second is
"the power of a superior officer to see to it that lower officers perform their functions is
accordance with law." 6 His conclusion was that the challenged section gave to the
Secretary the power of control and not of supervision only as vested by the Constitution
in the President of the Philippines. This was, in his view, a violation not only of Article X,
specifically Section 4 thereof, 7 and of Section 5 on the taxing powers of local
governments, 8 and the policy of local autonomy in
general.chanroblesvirtuallawlibrary:red

We do not share that view. The lower court was rather hasty in invalidating the
provision.

Section 187 authorizes the Secretary of Justice to review only the constitutionality or
legality of the tax ordinance and, if warranted, to revoke it on either or both of these
grounds. When he alters or modifies or sets aside a tax ordinance, he is not also
permitted to substitute his own judgment for the judgment of the local government that

84
enacted the measure. Secretary Drilon did set aside the Manila Revenue Code, but he
did not replace it with his own version of what the Code should be. He did not
pronounce the ordinance unwise or unreasonable as a basis for its annulment. He did
not say that in his judgment it was a bad law. What he found only was that it was
illegal. All he did in reviewing the said measure was determine if the petitioners were
performing their functions is accordance with law, that is, with the prescribed procedure
for the enactment of tax ordinances and the grant of powers to the city government
under the Local Government Code. As we see it, that was an act not of control but of
mere supervision.chanrobles lawlibrary : rednad

An officer in control lays down the rules in the doing of an act. It they are not followed,
he may, in his discretion, order the act undone or re-done by his subordinate or he may
even decide to do it himself. Supervision does not cover such authority. The supervisor
or superintendent merely sees to it that the rules are followed, but he himself does not
lay down such rules, nor does he have the discretion to modify or replace them. If the
rules are not observed, he may order the work done or re-done but only to conform to
the prescribed rules. He may not prescribe his own manner for the doing of the act. He
has no judgment on this matter except to see to it that the rules are followed. In the
opinion of the Court, Secretary Drilon did precisely this, and no more nor less than this,
and so performed an act not of control but of mere supervision.

The case of Taule v. Santos 9 cited in the decision has no application here because the
jurisdiction claimed by the Secretary of Local Governments over election contests in the
Katipunan ng Mga Barangay was held to belong to the Commission on Elections by
constitutional provision. The conflict was over jurisdiction, not supervision or
control.chanrobles virtual lawlibrary

Significantly, a rule similar to Section 187 appeared in the Local Autonomy Act, which
provided in its Section 2 as follows:chanrob1es virtual 1aw library

A tax ordinance shall go into effect on the fifteenth day after its passage, unless the
ordinance shall provide otherwise: Provided, however, That the Secretary of Finance
shall have authority to suspend the effectivity of any ordinance within one hundred and
twenty days after receipt by him of a copy thereof, if, in his opinion, the tax or fee
therein levied or imposed is unjust, excessive, oppressive, or confiscatory, or when it is
contrary to declared national economy policy, and when the said Secretary exercises
this authority the effectivity of such ordinance shall suspended, either in part or as a
whole, for a period of thirty days within which period the local legislative body may
either modify the tax ordinance to meet the objections thereto, or file an appeal with a
court of competent jurisdiction; otherwise, the tax ordinance or the part or parts
thereof declared suspended, shall be considered as revoked. Thereafter, the local

85
legislative body may not reimposed the same tax or fee until such time as the grounds
for the suspension thereof shall have ceased to exist.

That section allowed the Secretary of Finance to suspend the effectivity of a tax
ordinance if, in his opinion, the tax or fee levied was unjust, excessive, oppressive or
confiscatory. Determination of these flaws would involve the exercise of judgment or
discretion and not merely an examination of whether or not the requirements or
limitations of the law had been observed; hence, it would smack of control rather than
mere supervision. That power was never questioned before this Court but, at any rate,
the Secretary of Justice is not given the same latitude under Section 187. All he is
permitted to do is ascertain the constitutionality or legality of the tax measure, without
the right to declare that, in his opinion, it is unjust, excessive, oppressive or
confiscatory. He has no discretion on this matter. In fact, Secretary Drilon set aside the
Manila Revenue Code only on two grounds, to wit, the inclusion therein of certain ultra
vires provisions and non-compliance with the prescribed procedure in its enactment.
These grounds affected the legality, not the wisdom or reasonableness of the tax
measure.chanrobles law library : red

The issue of non-compliance with the prescribed procedure in the enactment of the
Manila Revenue Code is another matter.

In his resolution, Secretary Drilon declared that there were no written notices of public
hearings on the proposed Manila Revenue Code that were sent to interested parties as
required by Art. 276(b) of the Implementing Rules of the Local Government Code nor
were copies of the proposed ordinance published in three successive issues of a
newspaper of general circulation pursuant to Art. 276(a). No minutes were submitted to
show that the obligatory public hearings had been held. Neither were copies of the
measure as approved posted in prominent places in the city in accordance with Sec.
511(a) of the Local Government Code. Finally, the Manila Revenue Code was not
translated into Pilipino or Tagalog and disseminated among the people for their
information and guidance, conformably to Sec. 59(b) of the Code.chanrobles.com.ph :
virtual law library

Judge Palattao found otherwise. He declared that all the procedural requirements had
been observed in the enactment of the Manila Revenue Code and that the City of
Manila had not been able to prove such compliance before the Secretary only because
he had given it only five days within which to gather and present to him all the
evidence (consisting of 25 exhibits) later submitted to the trial court.

To get to the bottom of his question, the Court acceded to the motion of the
respondents and called for the elevation to it of the said exhibits. We have carefully

86
examined every one of these exhibits and agree with the trial court that the procedural
requirements have indeed been observed. Notices of the public hearings were sent to
interested parties as evidenced by Exhibits G-1 to 17. The minutes of the hearings are
found in Exhibits M, M-1, M-2, and M-3. Exhibits B and C show that the proposed
ordinances were published in the Balita and the Manila Standard on April 21 and 25,
1993, respectively, and the approved ordinance was published in the July 3, 4, 5 1993
issues of the Manila Standard and in the July 6, 1993 issue of Balita, as shown by
Exhibits Q, Q-1, Q-2, and Q-3.chanrobles.com.ph : virtual law library

The only exceptions are the posting of the ordinance as approved but this omission
does not affect its validity, considering that its publication in three successive issues of a
newspaper of general circulation will satisfy due process. It has also not been shown
that the text of the ordinance has been translated and disseminated, but this
requirement applies to the approval of local development plans and public investment
programs of the local government unit and not to tax ordinances.

We make no ruling on the substantive provisions of the Manila Revenue Code as their
validity has not been raised in issue in the present petition.

WHEREFORE, the judgment is hereby rendered REVERSING the challenged decision of

the Regional Trial Court insofar as it declared Section 187 of the Local Government
Code unconstitutional but AFFIRMING its finding that the procedural requirements in
the enactment of the Manila Revenue Code have been observed. No pronouncement as
to costs.chanroblesvirtualawlibrary

87
1-----------------------------Batangas CATV vs CA
14---------------------Rural Bank of Makati vs Mun of Makati - GR 150763

23-------------------------Tano v Socrates - GR 119249

42---------------------MagtaJas vs PrYce Properties Corporation

54----------------------Lim v Pacquing (1995)

66----------------------Binay v Domingo (1991)

72------------------------------ Mindanao Shopping Destination vs Davao City

85-------------------------------Drilon v Lim (1994)

88