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PHILIPPINE SOCIETY FOR

THE PREVENTION OF

CRUELTY TO ANIMALS,

G.R. No. 169752

Petitioners, Members:

PUNO, C.J.

QUISUMBING,

YNARES-SANTIAGO,

SANDOVAL-GUTIERREZ,

CARPIO,

AUSTRIA-MARTINEZ,

CORONA,

- versus - CARPIO-MORALES,

AZCUNA,

TINGA,CHICO-NAZARIO,

GARCIA,

VELASCO, JR.,

NACHURA, and

REYES, JJ.

COMMISSION ON AUDIT,

DIR. RODULFO J. ARIESGA

(in his official capacity as Director

of the Commission on Audit), MS.

MERLE M. VALENTIN and MS.

SUSAN GUARDIAN (in their official

capacities as Team Leader and Team

Member, respectively, of the audit

Team of the Commission on Audit), Promulgated:

Respondents. September 25, 2007x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- x

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a special civil action for Certiorari andProhibition under

Rule 65 of the Rules of Court, in relation to Section 2 of Rule 64, filed by the

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petitioner assailing Office Order No. 2005-021[1]

dated September 14, 2005 issued

by the respondents which constituted the audit team, as well as its September 23,

2005 Letter[2]

informing the petitioner that respondents audit team shall conduct

an audit survey on the petitioner for a detailed audit of its accounts, operations, and

financial transactions. No temporary restraining order was issued.

The petitioner was incorporated as a juridical entity over one hundred years

ago by virtue of Act No. 1285, enacted on January 19, 1905, by the Philippine

Commission. The petitioner, at the time it was created, was composed of animal

aficionados and animal propagandists. The objects of the petitioner, as stated in

Section 2 of its charter, shall be to enforce laws relating to cruelty inflicted upon

animals or the protection of animals in the Philippine Islands, and generally, to do

and perform all things which may tend in any way to alleviate the suffering ofanimals and promote their welfare.[3]

At the time of the enactment of Act No. 1285, the original Corporation Law,

Act No. 1459, was not yet in existence. Act No. 1285 antedated both the

Corporation Law and the constitution of the Securities and Exchange

Commission. Important to note is that the nature of the petitioner as a corporate

entity is distinguished from the sociedad anonimas under the Spanish Code of

Commerce.

For the purpose of enhancing its powers in promoting animal welfare and

enforcing laws for the protection of animals, the petitioner was initially imbued

under its charter with the power to apprehend violators of animal welfare laws. In

addition, the petitioner was to share one-half (1/2) of the fines imposed and

collected through its efforts for violations of the laws related thereto. As originally

worded, Sections 4 and 5 of Act No. 1285 provide:

SEC. 4. The said society is authorized to appointnot to exceed

five agents in the City of Manila, and not to exceed two in each of the

provinces of the Philippine Islands who shall have all the power and

authority of a police officer to make arrests for violation of the

lawsenacted for the prevention of cruelty to animals and the protection

of animals, and to serve any process in connection with the execution of

such laws; and in addition thereto, all the police force of the Philippine
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Islands, wherever organized, shall, as occasion requires, assist said

society, its members or agents, in the enforcement of all such laws.

SEC. 5. One-half of all the fines imposed and collected through

the efforts of said society, its members or its agents, for violations of the

laws enacted for the prevention of cruelty to animals and for theirprotection, shall belong to said society and shall be used to promote its

objects.

(emphasis supplied)

Subsequently, however, the power to make arrests as well as the privilege to

retain a portion of the fines collected for violation of animal-related laws were

recalled by virtue of Commonwealth Act (C.A.) No. 148,[4]

which reads, in its

entirety, thus:

Be it enacted by the National Assembly of the Philippines:

Section 1. Section four of Act Numbered Twelve hundred and

eighty-five as amended by Act Numbered Thirty five hundred and forty-

eight, is hereby further amended so as to read as follows:

Sec. 4. The said society is authorized to appoint not

to exceed ten agents in the City of Manila, and not toexceed one in each municipality of the Philippines who

shall have the authority to denounce to regular peace

officers any violation of the laws enacted for the prevention

of cruelty to animals and the protection of animals and to

cooperate with said peace officers in the prosecution of

transgressors of such laws.

Sec. 2. The full amount of the fines collectedfor violation of the

laws against cruelty to animals and for the protection of animals, shall

accrue to the general fund of the Municipality where the offense wascommitted.

Sec. 3. This Act shall take effect upon its approval.

Approved, November 8, 1936. (Emphasis supplied)
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Immediately thereafter, then President Manuel L. Quezon issued Executive

Order (E.O.) No. 63 dated November 12, 1936, portions of which provide:

Whereas, during the first regular session of the NationalAssembly, Commonwealth Act Numbered One Hundred Forty Eight

was enacted depriving the agents of the Society for the Prevention of

Cruelty to Animals of their power to arrest persons who have violated

the laws prohibiting cruelty to animals thereby correcting a serious

defect in one of the laws existing in our statute books.

x x x x

Whereas, the cruel treatment of animals is an offense against the

State, penalized under our statutes, which the Government is duty boundto enforce;

Now, therefore, I, Manuel L. Quezon, President of the

Philippines, pursuant to the authority conferred upon me by the

Constitution, hereby decree, order, and direct the Commissioner of

Public Safety, the Provost Marshal General as head of the Constabulary

Division of the Philippine Army, every Mayor of a chartered city, and

every municipal president to detail and organize special members of the

police force, local, national, and the Constabulary to watch, capture,

and prosecute offenders against the laws enacted to prevent cruelty toanimals. (Emphasis supplied)

On December 1, 2003, an audit team from respondent Commission on Audit

(COA) visited the office of the petitioner to conduct an audit survey pursuant to

COA Office Order No. 2003-051 dated November 18, 2003[5]

addressed to the

petitioner. The petitioner demurred on the ground that it was a private entity not

under the jurisdiction of COA, citing Section 2(1) of Article IX of the Constitution

which specifies the general jurisdiction of the COA, viz:

Section 1. General Jurisdiction. The Commission on Audit shall

have the power, authority, and duty to examine, audit, and settle all

accounts pertaining to the revenue and receipts of, and expenditures or

uses of funds and property, owned or held in trust by, or pertaining to
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the Government, or any of its subdivisions, agencies, or

instrumentalities, including government-owned and controlled

corporations with original charters, and on a post-audit basis: (a)

constitutional bodies, commissions and officers that have been granted

fiscal autonomy under the Constitution; (b) autonomous state colleges

and universities; (c) other government-owned or controlled corporationsand their subsidiaries; and (d) such non-governmental entities receiving

subsidy or equity, directly or indirectly, from or through the government,

which are required by law or the granting institution to submit to such

audit as a condition of subsidy or equity. However, where the internal

control system of the audited agencies is inadequate, the Commission

may adopt such measures, including temporary or special pre-audit, as

are necessary and appropriate to correct the deficiencies. It shall keep

the general accounts of the Government, and for such period as may be

provided by law, preserve the vouchers and other supporting papers

pertaining thereto. (Emphasis supplied)

Petitioner explained thus:

a. Although the petitioner was created by special legislation, this

necessarily came about because in January 1905 there was as yet neither

a Corporation Law or any other general law under which it may be

organized and incorporated, nor a Securities and Exchange Commission

which would have passed upon its organization and incorporation.

b. That Executive Order No. 63, issued during the Commonwealth period,

effectively deprived the petitioner of its power to make arrests, and that

the petitioner lost its operational funding, underscore the fact that it

exercises no governmental function. In fine, the government itself, by its

overt acts, confirmed petitioners status as a private juridical entity.

The COA General Counsel issued a Memorandum[6]

dated May 6, 2004,

asserting that the petitioner was subject to its audit authority. In a letter dated May

17, 2004,[7]

respondent COA informed the petitioner of the result of the evaluation,

furnishing it with a copy of said Memorandum dated May 6, 2004 of the General

Counsel.
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Petitioner thereafter filed with the respondent COA a Request for Re-

evaluation dated May 19, 2004,[8]

insisting that it was a private domestic

corporation.

Acting on the said request, the General Counsel of respondent COA, in aMemorandum dated July 13, 2004,

[9]affirmed her earlier opinion that the petitioner

was a government entity that was subject to the audit jurisdiction of respondent

COA. In a letter dated September 14, 2004, the respondent COA informed the

petitioner of the result of the re-evaluation, maintaining its position that the

petitioner was subject to its audit jurisdiction, and requested an initial conference

with the respondents.

In a Memorandum dated September 16, 2004, Director Delfin Aguilarreported to COA Assistant Commissioner JuanitoEspino, Corporate Government

Sector, that the audit survey was not conducted due to the refusal of the petitioner

because the latter maintained that it was a private corporation.

Petitioner received on September 27, 2005 the subject COA Office Order

2005-021 dated September 14, 2005 and the COA Letter dated September 23,

2005.

Hence, herein Petition on the following grounds:

A.

RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS

OF JURISDICTION WHEN IT RULED THAT PETITIONER IS

SUBJECT TO ITS AUDIT AUTHORITY.

B.

PETITIONER IS ENTITLED TO THE RELIEF SOUGHT, THERE

BEING NO APPEAL, NOR ANY PLAIN, SPEEDY AND

ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW

AVAILABLE TO IT.[10]
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The essential question before this Court is whether the petitioner qualifies as

a government agency that may be subject to audit by respondent COA.

Petitioner argues:first, even though it was created by special legislation in1905 as there was no general law then existing under which it may be organized or

incorporated, it exercises no governmental functions because these have been

revoked by C.A. No. 148 and E.O. No. 63; second, nowhere in its charter is it

indicated that it is a public corporation, unlike, for instance, C.A. No. 111 which

created the Boy Scouts of the Philippines, defined its powers and purposes, and

specifically stated that it was An Act to Create a Public Corporation in which,

even as amended by Presidential Decree No. 460, the law still adverted to the Boy

Scouts of the Philippines as a public corporation, all of which are not obtainingin the charter of the petitioner; third, if it were a government body, there would

have been no need for the State to grant it tax exemptions under Republic Act No.

1178, and the fact that it was so exempted strengthens its position that it is a

private institution;fourth, the employees of the petitioner are registered and

covered by the Social Security System at the latters initiative and not through the

Government Service Insurance System, which should have been the case had the

employees been considered government employees;fifth, the petitioner does not

receive any form of financial assistance from the government, since C.A. No. 148,

amending Section 5 of Act No. 1285, states that the full amount of the fines,collected for violation of the laws against cruelty to animals and for the protection

of animals, shall accrue to the general fund of the Municipality where the offense

was committed;sixth, C.A. No. 148 effectively deprived the petitioner of its

powers to make arrests and serve processes as these functions were placed in the

hands of the police force; seventh, no government appointee or representative sits

on the board of trustees of the petitioner; eighth, a reading of the provisions of its

charter (Act No. 1285) fails to show that any act or decision of the petitioner is

subject to the approval of or control by any government agency, except to theextent that it is governed by the law on private corporations in general; and

finally, ninth, the Committee on Animal Welfare, under the Animal Welfare Act of

1998, includes members from both the private and the public sectors.

The respondents contend that since the petitioner is a body politic created

by virtue of a special legislation and endowed with a governmental purpose, then,

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indubitably, the COA may audit the financial activities of the latter. Respondents

in effect divide their contentions into six strains:first, the test to determine whether

an entity is a government corporation lies in the manner of its creation, and, since

the petitioner was created by virtue of a special charter, it is thus a government

corporation subject to respondents auditing power;second, the petitioner exercisessovereign powers, that is, it is tasked to enforce the laws for the protection and

welfare of animals which ultimately redound to the public good and welfare,

and, therefore, it is deemed to be a government instrumentality as defined under

the Administrative Code of 1987, the purpose of which is connected with the

administration of government, as purportedly affirmed by American

jurisprudence; third, by virtue of Section 23,[11]

Title II, Book III of the same Code,

the Office of the President exercises supervision or control over the

petitioner;fourth, under the same Code, the requirement under its special charterfor the petitioner to render a report to the Civil Governor, whose functions have

been inherited by the Office of the President, clearly reflects the nature of the

petitioner as a government instrumentality;fifth, despite the passage of the

Corporation Code, the law creating the petitioner had not been abolished, nor had it

been re-incorporated under any general corporation law; and finally, sixth,

Republic Act No. 8485, otherwise known as the Animal Welfare Act of 1998,

designates the petitioner as a member of its Committee on Animal Welfare which

is attached to the Department of Agriculture.

In view of the phrase One-half of all the fines imposed and collected

through the efforts of said society, the Court, in a Resolution dated January 30,

2007, required the Office of the Solicitor General (OSG) and the parties to

comment on: a) petitioner's authority to impose fines and the validity of the

provisions of Act No. 1285 and Commonwealth Act No. 148 considering that there

are no standard measures provided for in the aforecited laws as to the manner of

implementation, the specific violations of the law, the person/s authorized to

impose fine and in what amount; and, b) the effect of the 1935 and 1987Constitutions on whether petitioner continues to exist or should organize as a

private corporation under the Corporation Code,B.P.Blg. 68 as amended.

Petitioner and the OSG filed their respective Comments. Respondents filed a

Manifestation stating that since they were being represented by the OSG which

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filed its Comment, they opted to dispense with the filing of a separate one and

adopt for the purpose that of the OSG.

The petitioner avers that it does not have the authority to impose fines for

violation of animal welfare laws; it only enjoyed the privilege of sharing in thefines imposed and collected from its efforts in the enforcement of animal welfare

laws; such privilege, however, was subsequently abolished by C.A. No. 148; that it

continues to exist as a private corporation since it was created by the Philippine

Commission before the effectivity of the Corporation law, Act No. 1459; and the

1935 and 1987 Constitutions.

The OSG submits that Act No. 1285 and its amendatory laws did not give

petitioner the authority to impose fines for violation of laws

[12]

relating to theprevention of cruelty to animals and the protection of animals; that even prior to

the amendment of Act No. 1285, petitioner was only entitled to share in the fines

imposed; C.A. No. 148 abolished that privilege to share in the fines collected; that

petitioner is a public corporation and has continued to exist since Act No. 1285;

petitioner was not repealed by the 1935 and 1987 Constitutions which contain

transitory provisions maintaining all laws issued not inconsistent therewith until

amended, modified or repealed.

The petition is impressed with merit.

The arguments of the parties, interlaced as they are, can be disposed of in five

points.

First, the Court agrees with the petitioner that the charter test cannot be

applied.

Essentially, the charter test as it stands today provides:

[T]he test to determine whether a corporation is government owned or

controlled, or private in nature is simple. Is it created by its own charter

for the exercise of a public function, or by incorporation under the

general corporation law? Those with special charters are government

corporations subject to its provisions, and its employees are under the

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jurisdiction of the Civil Service Commission, and are compulsory

members of the Government Service Insurance System. xxx (Emphasis

supplied)[13]

The petitioner is correct in stating that the charter test is predicated, at best,on the legal regime established by the 1935 Constitution, Section 7, Article XIII,

which states:

Sec. 7. The National Assembly shall not, except by general law,

provide for the formation, organization, or regulation of private

corporations, unless such corporations are owned or controlled by the

Government or any subdivision or instrumentality thereof.[14]

The foregoing proscription has been carried over to the 1973 and the 1987Constitutions. Section 16 of Article XII of the present Constitution provides:

Sec. 16. The Congress shall not, except by general law, provide

for the formation, organization, or regulation of private

corporations. Government-owned or controlled corporations may be

created or established by special charters in the interest of the common

good and subject to the test of economic viability.

Section 16 is essentially a re-enactment of Section 7 of Article XVI of the

1935 Constitution and Section 4 of Article XIV of the 1973 Constitution.

During the formulation of the 1935 Constitution, the Committee on

Franchises recommended the foregoing proscription to prevent the pressure of

special interests upon the lawmaking body in the creation of corporations or in the

regulation of the same. To permit the lawmaking body by special law to provide

for the organization, formation, or regulation of private corporations would be in

effect to offer to it the temptation in many cases to favor certain groups, to the

prejudice of others or to the prejudice of the interests of the country.[15]

And since the underpinnings of the charter test had been introduced by the

1935 Constitution and not earlier, it follows that the test cannot apply to the

petitioner, which was incorporated by virtue of Act No. 1285, enacted on January

19, 1905. Settled is the rule that laws in general have no retroactive effect, unless
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the contrary is provided.[16]

All statutes are to be construed as having only a

prospective operation, unless the purpose and intention of the legislature to give

them a retrospective effect is expressly declared or is necessarily implied from the

language used. In case of doubt, the doubt must be resolved against the

retrospective effect.[17]

There are a few exceptions. Statutes can be given retroactive effect in the

following cases: (1) when the law itself so expressly provides; (2) in case of

remedial statutes; (3) in case of curative statutes; (4) in case of laws interpreting

others; and (5) in case of laws creating new rights.[18]

None of the exceptions is

present in the instant case.

The general principle of prospectivity of the law likewise applies to Act No.1459, otherwise known as the Corporation Law, which had been enacted by virtue

of the plenary powers of the Philippine Commission on March 1, 1906, a little over

a year afterJanuary 19, 1905, the time the petitioner emerged as a juridical

entity. Even the Corporation Law respects the rights and powers of juridical

entities organized beforehand, viz:

SEC. 75. Any corporation or sociedad anonima formed,

organized, and existing under the

laws of the Philippine Islands and lawfully transacting business in the Philippine Islands on the date of the passage of this Act, shall be

subject to the provisions hereof so far as such

provisions may be applicable and shall

be entitled at its option either to continue business as such

corporation or to reform and organize under and by virtue of the

provisions of this Act, transferring all corporate interests to the new

corporation which, if a stock corporation, is authorized to issue its shares

of stock at par to the stockholders or members of the old corporation

according to their interests. (Emphasis supplied).

As pointed out by the OSG, both the 1935 and 1987 Constitutions contain

transitory provisions maintaining all laws issued not inconsistent therewith until

amended, modified or repealed.[19]
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In a legal regime where the charter test doctrine cannot be applied, the mere

fact that a corporation has been created by virtue of a special law does not

necessarily qualify it as a public corporation.

What then is the nature of the petitioner as a corporate entity? What legalregime governs its rights, powers, and duties?

As stated, at the time the petitioner was formed, the applicable law was the

Philippine Bill of 1902, and, emphatically, as also stated above, no proscription

similar to the charter test can be found therein.

The textual foundation of the charter test, which placed a limitation on the

power of the legislature, first appeared in the 1935 Constitution. However, thepetitioner was incorporated in 1905 by virtue of Act No. 1258, a law antedating the

Corporation Law (Act No. 1459) by a year, and the 1935 Constitution, by thirty

years. There being neither a general law on the formation and organization of

private corporations nor a restriction on the legislature to create private

corporations by direct legislation, the Philippine Commission at that moment in

history was well within its powers in 1905 to constitute the petitioner as a private

juridical entity.

Time and again the Court must caution even the most brilliant scholars of thelaw and all constitutional historians on the danger of imposing legal concepts of a

later date on facts of an earlier date.[20]

The amendments introduced by C.A. No. 148 made it clear that the petitioner

was a private corporation and not an agency of the government. This was evident

in Executive Order No. 63, issued by then President of the Philippines Manuel

L. Quezon, declaring that the revocation of the powers of the petitioner to appoint

agents with powers of arrest corrected a serious defect in one of the laws existingin the statute books.

As a curative statute, and based on the doctrines so far discussed, C.A. No.

148 has to be given retroactive effect, thereby freeing all doubt as to which class of

corporations the petitioner belongs, that is, it is a quasi-public corporation, a kind

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of private domestic corporation, which the Court will further elaborate on under

thefourth point.

Second, a reading of petitioners charter shows that it is not subject to control

or supervision by any agency of the State, unlike government-owned and -controlled corporations. No government representative sits on the board of trustees

of the petitioner. Like all private corporations, the successors of its members are

determined voluntarily and solely by the petitioner in accordance with its by-laws,

and may exercise those powers generally accorded to private corporations, such as

the powers to hold property, to sue and be sued, to use a common seal, and so

forth. It may adopt by-laws for its internal operations: the petitioner shall be

managed or operated by its officers in accordance with its by-laws in force. The

pertinent provisions of the charter provide:

Section 1. Anna L. Ide, Kate S. Wright, John L. Chamberlain,

William F. Tucker, Mary S. Fergusson, Amasa S. Crossfield, Spencer

Cosby, Sealy B. Rossiter, Richard P. Strong, Jose Robles Lahesa,

Josefina R. de Luzuriaga, and such other persons as may be associated

with them in conformity with this act, and their successors, are hereby

constituted and created a body politic and corporate at law, under the

name and style of The Philippines Society for the Prevention of Cruelty

to Animals.

As incorporated by this Act, said society shall have the power to

add to its organization such and as many members as it desires, to

provide for and choose such officers as it may deem advisable,

and in such manner as it may wish, and to remove members as it

shall provide.

It shall have the right to sue and be sued, to use a common seal, to

receive legacies and donations, to conduct social enterprises for th

e purpose of obtaining funds, to levy dues upon

its members and provide for their collection to hold real and personalestate such as may be necessary for the accomplishment of the purposes

of the society, and to adopt such by-laws for its government as may not

be inconsistent with law or this charter.

x x x x

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Sec. 3. The said society shall be operated under the direction of

its officers, in accordance with its by-laws in force, and this charter.

x x x x

Sec. 6. The principal office of the society shall be kept in the cityof Manila, and the society shall have full power to locate and establish

branch offices of the society wherever it may deem advisable in the

Philippine Islands, such branch offices to be under the supervision and

control of the principal office.

Third. The employees of the petitioner are registered and covered by the

Social Security System at the latters initiative, and not through the Government

Service Insurance System, which should be the case if the employees areconsidered government employees. This is another indication of petitioners

nature as a private entity. Section 1 of Republic Act No. 1161, as amended by

Republic Act No. 8282, otherwise known as the Social Security Act of 1997,

defines the employer:

EmployerAny person, natural or juridical, domestic or foreign,

who carries on in the Philippines any trade, business, industry,

undertaking or activity of any kind and uses the services of another

person who is under his orders as regards the employment, except theGovernment and any of its political subdivisions, branches or

instrumentalities, including corporations owned or controlled by the

Government: Provided, That a self-employed person shall be both

employee and employer at the same time. (Emphasis supplied)

Fourth. The respondents contend that the petitioner is a body politic

because its primary purpose is to secure the protection and welfare of animals

which, in turn, redounds to the public good.

This argument, is, at best, specious. The fact that a certain juridical entity is

impressed with public interest does not, by that circumstance alone, make the

entity a public corporation, inasmuch as a corporation may be private although its

charter contains provisions of a public character, incorporated solely for the public

good. This class of corporations may be considered quasi-public corporations,

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which are private corporations that render public service, supply public

wants,[21]

or pursue other eleemosynary objectives. While purposely organized for

the gain or benefit of its members, they are required by law to discharge functions

for the public benefit. Examples of these corporations are utility,[22]

railroad,

warehouse, telegraph, telephone, water supply corporations and transportationcompanies.

[23] It must be stressed that a quasi-public corporation is a species of

private corporations, but the qualifying factor is the type of service the former

renders to the public: if it performs a public service, then it becomes a quasi-public

corporation.[24]

Authorities are of the view that the purpose alone of the corporation cannot

be taken as a safe guide, for the fact is that almost all corporations are nowadays

created to promote the interest, good, or convenience of the public. A bank, forexample, is a private corporation; yet, it is created for a public benefit. Private

schools and universities are likewise private corporations; and yet, they are

rendering public service. Private hospitals and wards are charged with heavy

social responsibilities. More so with all common carriers. On the other hand, there

may exist a public corporation even if it is endowed with gifts or donations from

private individuals.

The true criterion, therefore, to determine whether a corporation is public orprivate is found in the totality of the relation of the corporation to the State. If the

corporation is created by the State as the latters own agency or instrumentality to

help it in carrying out its governmental functions, then that corporation is

considered public; otherwise, it is private. Applying the above test, provinces,

chartered cities, and barangays can best exemplify public corporations. They are

created by the State as its own device and agency for the accomplishment of parts

of its own public works.[25]

It is clear that the amendments introduced by C.A. No. 148 revoked the

powers of the petitioner to arrest offenders of animal welfare laws and the power to

serve processes in connection therewith.
http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn22http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn22http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn22http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn23http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn23http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn23http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn24http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn24http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn24http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn24http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn23http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn22http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/169752.htm#_ftn21

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Fifth. The respondents argue that since the charter of the petitioner requires

the latter to render periodic reports to the Civil Governor, whose functions have

been inherited by the President, the petitioner is, therefore, a government

instrumentality.

This contention is inconclusive. By virtue of the fiction that all corporations

owe their very existence and powers to the State, the reportorial requirement is

applicable to all corporations of whatever nature, whether they are public, quasi-

public, or private corporationsas creatures of the State, there is a reserved right

in the legislature to investigate the activities of a corporation to determine whether

it acted within its powers. In other words, the reportorial requirement is the

principal means by which the State may see to it that its creature acted according to

the powers and functions conferred upon it. These principles were extensivelydiscussed inBataan Shipyard & Engineering Co., Inc. v. Presidential Commission

on Good Government.[26]

Here, the Court, in holding that the subject corporation

could not invoke the right against self-incrimination whenever the State demanded

the production of its corporate books and papers, extensively discussed the purpose

of reportorial requirements, viz:

x x x The corporation is a creature of the state. It is presumed to be

incorporated for the benefit of the public. It received certain special

privileges and franchises, and holds them subject to the laws of the stateand the limitations of its charter. Its powers are limited by law. It can

make no contract not authorized by its charter. Its rights to act as a

corporation are only preserved to it so long as it obeys the laws of its

creation. There is a reserve[d] right in the legislature to investigate its

contracts and find out whether it has exceeded its powers.It would be a

strange anomaly to hold that a state, having chartered a corporation to

make use of certain franchises, could not, in the exercise of sovereignty,

inquire how these franchises had been employed, and whether they had

been abused, and demand the production of the corporate books and

papers for that purpose. The defense amounts to this, that an officer ofthe corporation which is charged with a criminal violation of the statute

may plead the criminality of such corporation as a refusal to produce its

books. To state this proposition is to answer it. While an individual may

lawfully refuse to answer incriminating questions unless protected by an

immunity statute, it does not follow that a corporation vested with

special privileges and franchises may refuse to show its hand when

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charged with an abuse of such privileges. (Wilson v. United States, 55

Law Ed., 771, 780.)[27]

WHEREFORE, the petition is GRANTED. Petitioner is DECLARED aprivate domestic corporation subject to the jurisdiction of the Securities and

Exchange Commission. The respondents are ENJOINED from investigating,

examining and auditing the petitioner's fiscal and financial affairs.

SO ORDERED.

ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN ANDLORENZO SANCHEZ,petitioners,vs.PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent.

H.B. Basco & Associates for petitioners.

Valmonte Law Offices collaborating counsel for petitioners.

Aguirre, Laborte and Capule for respondent PAGCOR.

PARAS, J.:p

A TV ad proudly announces:

"The new PAGCOR responding through responsible gaming."

But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul thePhilippine Amusement and Gaming Corporation (PAGCOR) Charter PD 1869, because it isallegedly contrary to morals, public policy and order, and because

A. It constitutes a waiver of a right prejudicial to a third person with a right recognized

by law. It waived the Manila City government's right to impose taxes and licensefees, which is recognized by law;

B. For the same reason stated in the immediately preceding paragraph, the law hasintruded into the local government's right to impose local taxes and license fees.This, in contravention of the constitutionally enshrined principle of local autonomy;

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C. It violates the equal protection clause of the constitution in that it legalizesPAGCOR conducted gambling, while most other forms of gambling are outlawed,together with prostitution, drug trafficking and other vices;

D. It violates the avowed trend of the Cory government away from monopolistic andcrony economy, and toward free enterprise and privatization. (p. 2, Amended

Petition; p. 7, Rollo)

In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to the declarednational policy of the "new restored democracy" and the people's will as expressed in the 1987Constitution. The decree is said to have a "gambling objective" and therefore is contrary to Sections11, 12 and 13 of Article II, Sec. 1 of Article VIII and Section 3 (2) of Article XIV, of the presentConstitution (p. 3, Second Amended Petition; p. 21, Rollo).

The procedural issue is whether petitioners, as taxpayers and practicing lawyers (petitioner Bascobeing also the Chairman of the Committee on Laws of the City Council of Manila), can question andseek the annulment of PD 1869 on the alleged grounds mentioned above.

The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D.1067-A dated January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January1, 1977 "to establish, operate and maintain gambling casinos on land or water within the territorial

jurisdiction of the Philippines." Its operation was originally conducted in the well known floatingcasino "Philippine Tourist." The operation was considered a success for it proved to be a potentialsource of revenue to fund infrastructure and socio-economic projects, thus, P.D. 1399 was passedon June 2, 1978 for PAGCOR to fully attain this objective.

Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the Governmentto regulate and centralize all games of chance authorized by existing franchise or permitted by law,under the following declared policy

Sec. 1. Declaration of Policy. It is hereby declared to be the policy of the State tocentralize and integrate all games of chance not heretofore authorized by existingfranchises or permitted by law in order to attain the following objectives:

(a) To centralize and integrate the right and authority to operate and conduct gamesof chance into one corporate entity to be controlled, administered and supervised bythe Government.

(b) To establish and operate clubs and casinos, for amusement and recreation,including sports gaming pools, (basketball, football, lotteries, etc.) and such otherforms of amusement and recreation including games of chance, which may beallowed by law within the territorial jurisdiction of the Philippines and which will: (1)generate sources of additional revenue to fund infrastructure and socio-civic projects,

such as flood control programs, beautification, sewerage and sewage projects,Tulungan ng Bayan Centers, Nutritional Programs, Population Control and suchother essential public services; (2) create recreation and integrated facilities whichwill expand and improve the country's existing tourist attractions; and (3) minimize, ifnot totally eradicate, all the evils, malpractices and corruptions that are normallyprevalent on the conduct and operation of gambling clubs and casinos without directgovernment involvement. (Section 1, P.D. 1869)

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To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. Under itsCharter's repealing clause, all laws, decrees, executive orders, rules and regulations, inconsistenttherewith, are accordingly repealed, amended or modified.

It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau ofInternal Revenue and the Bureau of Customs. In 1989 alone, PAGCOR earned P3.43 Billion, and

directly remitted to the National Government a total of P2.5 Billion in form of franchise tax,government's income share, the President's Social Fund and Host Cities' share. In addition,PAGCOR sponsored other socio-cultural and charitable projects on its own or in cooperation withvarious governmental agencies, and other private associations and organizations. In its 3 1/2 yearsof operation under the present administration, PAGCOR remitted to the government a total of P6.2Billion. As of December 31, 1989, PAGCOR was employing 4,494 employees in its nine (9) casinosnationwide, directly supporting the livelihood of Four Thousand Four Hundred Ninety-Four (4,494)families.

But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the same is "nulland void" for being "contrary to morals, public policy and public order," monopolistic and tendstoward "crony economy", and is violative of the equal protection clause and local autonomy as wellas for running counter to the state policies enunciated in Sections 11 (Personal Dignity and HumanRights), 12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article XIII andSection 2 (Educational Values) of Article XIV of the 1987 Constitution.

This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the most deliberateconsideration by the Court, involving as it does the exercise of what has been described as "thehighest and most delicate function which belongs to the judicial department of the government."(State v. Manuel, 20 N.C. 144; Lozano v. Martinez, 146 SCRA 323).

As We enter upon the task of passing on the validity of an act of a co-equal and coordinate branch ofthe government We need not be reminded of the time-honored principle, deeply ingrained in our

jurisprudence, that a statute is presumed to be valid. Every presumption must be indulged in favor ofits constitutionality. This is not to say that We approach Our task with diffidence or timidity. Where it

is clear that the legislature or the executive for that matter, has over-stepped the limits of its authorityunder the constitution, We should not hesitate to wield the axe and let it fall heavily, as fall it must,on the offending statute (Lozano v. Martinez, supra).

In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru Mr. Justice Zaldivarunderscored the

. . . thoroughly established principle which must be followed in all cases wherequestions of constitutionality as obtain in the instant cases are involved. Allpresumptions are indulged in favor of constitutionality; one who attacks a statutealleging unconstitutionality must prove its invalidity beyond a reasonable doubt; thata law may work hardship does not render it unconstitutional; that if any reasonable

basis may be conceived which supports the statute, it will be upheld and thechallenger must negate all possible basis; that the courts are not concerned with thewisdom, justice, policy or expediency of a statute and that a liberal interpretation ofthe constitution in favor of the constitutionality of legislation should be adopted.(Danner v. Hass, 194 N.W. 2nd534, 539; Spurbeck v. Statton, 106 N.W. 2nd660,663; 59 SCRA 66; seealsoe.g. Salas v. Jarencio, 46 SCRA 734, 739 [1970]; Peraltav. Commission on Elections, 82 SCRA 30, 55 [1978]; and Heirs of Ordona v. Reyes,125 SCRA 220, 241-242 [1983] cited in Citizens Alliance for Consumer Protection v.Energy Regulatory Board, 162 SCRA 521, 540)

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Of course, there is first, the procedural issue. The respondents are questioning the legal personalityof petitioners to file the instant petition.

Considering however the importance to the public of the case at bar, and in keeping with the Court'sduty, under the 1987 Constitution, to determine whether or not the other branches of governmenthave kept themselves within the limits of the Constitution and the laws and that they have not

abused the discretion given to them, the Court has brushed aside technicalities of procedure andhas taken cognizance of this petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng PilipinasInc. v. Tan, 163 SCRA 371)

With particular regard to the requirement of proper party as applied in the casesbefore us, We hold that the same is satisfied by the petitioners and intervenorsbecause each of them has sustained or is in danger of sustaining an immediateinjury as a result of the acts or measures complained of. And even if, strictlyspeaking they are not covered by the definition, it is still within the wide discretion ofthe Court to waive the requirement and so remove the impediment to its addressingand resolving the serious constitutional questions raised.

In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowedto question the constitutionality of several executive orders issued by PresidentQuirino although they were involving only an indirect and general interest shared incommon with the public. The Court dismissed the objection that they were not properparties and ruled that "the transcendental importance to the public of these casesdemands that they be settled promptly and definitely, brushing aside, if we musttechnicalities of procedure." We have since then applied the exception in many othercases. (Association of Small Landowners in the Philippines, Inc. v. Sec. of AgrarianReform, 175 SCRA 343).

Having disposed of the procedural issue, We will now discuss the substantive issues raised.

Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of

gambling does not mean that the Government cannot regulate it in the exercise of its police power.

The concept of police power is well-established in this jurisdiction. It has been defined as the "stateauthority to enact legislation that may interfere with personal liberty or property in order to promotethe general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition orrestraint upon liberty or property, (2) in order to foster the common good. It is not capable of an exactdefinition but has been, purposely, veiled in general terms to underscore its all-comprehensiveembrace. (Philippine Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386).

Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where itcould be done, provides enough room for an efficient and flexible response to conditions andcircumstances thus assuming the greatest benefits. (Edu v. Ericta, supra)

It finds no specific Constitutional grant for the plain reason that it does not owe its origin to thecharter. Along with the taxing power and eminent domain, it is inborn in the very fact of statehoodand sovereignty. It is a fundamental attribute of government that has enabled it to perform the mostvital functions of governance. Marshall, to whom the expression has been credited, refers to itsuccinctly as the plenary power of the state "to govern its citizens". (Tribe, American ConstitutionalLaw, 323, 1978). The police power of the State is a power co-extensive with self-protection and ismost aptly termed the "law of overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39 Phil.660, 708) It is "the most essential, insistent, and illimitable of powers." (Smith Bell & Co. v. National,

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40 Phil. 136) It is a dynamic force that enables the state to meet the agencies of the winds ofchange.

What was the reason behind the enactment of P.D. 1869?

P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru an

appropriate institution all games of chance authorized by existing franchise or permitted by law" (1stwhereas clause, PD 1869). As was subsequently proved, regulating and centralizing gamblingoperations in one corporate entity the PAGCOR, was beneficial not just to the Government but tosociety in general. It is a reliable source of much needed revenue for the cash strappedGovernment. It provided funds for social impact projects and subjected gambling to "close scrutiny,regulation, supervision and control of the Government" (4th Whereas Clause, PD 1869). With thecreation of PAGCOR and the direct intervention of the Government, the evil practices andcorruptions that go with gambling will be minimized if not totally eradicated. Public welfare, then, liesat the bottom of the enactment of PD 1896.

Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to imposetaxes and legal fees; that the exemption clause in P.D. 1869 is violative of the principle of local

autonomy. They must be referring to Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, asthe franchise holder from paying any "tax of any kind or form, income or otherwise, as well as fees,charges or levies of whatever nature, whether National or Local."

(2) Income and other taxes. a) Franchise Holder: No tax of any kind or form,income or otherwise as well as fees, charges or levies of whatever nature, whetherNational or Local, shall be assessed and collected under this franchise from theCorporation; nor shall any form or tax or charge attach in any way to the earnings ofthe Corporation, except a franchise tax of five (5%) percent of the gross revenues orearnings derived by the Corporation from its operations under this franchise. Suchtax shall be due and payable quarterly to the National Government and shall be inlieu of all kinds of taxes, levies, fees or assessments of any kind, nature ordescription, levied, established or collected by any municipal, provincial or national

government authority (Section 13 [2]).

Their contention stated hereinabove is without merit for the following reasons:

(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes(Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v. Municipalityof Caloocan, 7 SCRA 643). Thus, "the Charter or statute must plainly show an intent to confer thatpower or the municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power totax" therefore must always yield to a legislative act which is superior having been passed upon bythe state itself which has the "inherent power to tax" (Bernas, the Revised [1973] PhilippineConstitution, Vol. 1, 1983 ed. p. 445).

(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that"municipal corporations are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909, January18, 1957) which has the power to "create and abolish municipal corporations" due to its "generallegislative powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541).Congress, therefore, has the power of control over Local governments (Hebron v. Reyes, G.R. No.9124, July 2, 1950). And if Congress can grant the City of Manila the power to tax certain matters, itcan also provide for exemptions or even take back the power.

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(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As earlyas 1975, the power of local governments to regulate gambling thru the grant of "franchise, licensesor permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National Government,thus:

Sec. 1. Any provision of law to the contrary notwithstanding, the authority of

chartered cities and other local governments to issue license, permit or other form offranchise to operate, maintain and establish horse and dog race tracks, jai-alai andother forms of gambling is hereby revoked.

Sec. 2. Hereafter, all permits or franchises to operate, maintain and establish, horseand dog race tracks, jai-alai and other forms of gambling shall be issued by thenational government upon proper application and verification of the qualification ofthe applicant . . .

Therefore, only the National Government has the power to issue "licenses or permits" for theoperation of gambling. Necessarily, the power to demand or collect license fees which is aconsequence of the issuance of "licenses or permits" is no longer vested in the City of Manila.

(d) Local governments have no power to tax instrumentalities of the National Government. PAGCORis a government owned or controlled corporation with an original charter, PD 1869. All of its sharesof stocks are owned by the National Government. In addition to its corporate powers (Sec. 3, Title II,PD 1869) it also exercises regulatory powers thus:

Sec. 9. Regulatory Power. The Corporation shall maintain a Registry of theaffiliated entities, and shall exercise all the powers, authority and the responsibilitiesvested in the Securities and Exchange Commission over such affiliating entitiesmentioned under the preceding section, including, but not limited to amendments ofArticles of Incorporation and By-Laws, changes in corporate term, structure,capitalization and other matters concerning the operation of the affiliated entities, theprovisions of the Corporation Code of the Philippines to the contrary notwithstanding,

except only with respect to original incorporation.

PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role isgovernmental, which places it in the category of an agency or instrumentality of the Government.Being an instrumentality of the Government, PAGCOR should be and actually is exempt from localtaxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Localgovernment.

The states have no power by taxation or otherwise, to retard, impede, burden or inany manner control the operation of constitutional laws enacted by Congress to carryinto execution the powers vested in the federal government. (MC Culloch v. Marland,4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local governments.

Justice Holmes, speaking for the Supreme Court, made reference to the entireabsence of power on the part of the States to touch, in that way (taxation) at least,the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and itcan be agreed that no state or political subdivision can regulate a federalinstrumentality in such a way as to prevent it from consummating its federal

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following in re Ah You, 88 Cal. 99, 25 PAC 974, 22 Am St. Rep. 280, 11 LRA 480, ascited in Mc Quinllan Vol. 3 Ibid, p. 548, emphasis supplied)

Petitioners next contend that P.D. 1869 violates the equal protection clause of the Constitution,because "it legalized PAGCOR conducted gambling, while most gambling are outlawed togetherwith prostitution, drug trafficking and other vices" (p. 82, Rollo).

We, likewise, find no valid ground to sustain this contention. The petitioners' posture ignores thewell-accepted meaning of the clause "equal protection of the laws." The clause does not precludeclassification of individuals who may be accorded different treatment under the law as long as theclassification is not unreasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law does nothave to operate in equal force on all persons or things to be conformable to Article III, Section 1 ofthe Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989).

The "equal protection clause" does not prohibit the Legislature from establishing classes ofindividuals or objects upon which different rules shall operate (Laurel v. Misa, 43 O.G. 2847). TheConstitution does not require situations which are different in fact or opinion to be treated in law asthough they were the same (Gomez v. Palomar, 25 SCRA 827).

Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the equal protectionis not clearly explained in the petition. The mere fact that some gambling activities like cockfighting(P.D 449) horse racing (R.A. 306 as amended by RA 983), sweepstakes, lotteries and races (RA1169 as amended by B.P. 42) are legalized under certain conditions, while others are prohibited,does not render the applicable laws, P.D. 1869 for one, unconstitutional.

If the law presumably hits the evil where it is most felt, it is not to be overthrownbecause there are other instances to which it might have been applied. (Gomez v.Palomar, 25 SCRA 827)

The equal protection clause of the 14thAmendment does not mean that alloccupations called by the same name must be treated the same way; the state maydo what it can to prevent which is deemed as evil and stop short of those cases inwhich harm to the few concerned is not less than the harm to the public that wouldinsure if the rule laid down were made mathematically exact. (Dominican Hotel v.Arizona, 249 US 2651).

Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory Government awayfrom monopolies and crony economy and toward free enterprise and privatization" suffice it to statethat this is not a ground for this Court to nullify P.D. 1869. If, indeed, PD 1869 runs counter to thegovernment's policies then it is for the Executive Department to recommend to Congress its repealor amendment.

The judiciary does not settle policy issues. The Court can only declare what the law

is and not what the law should be. Under our system of government, policy issuesare within the domain of the political branches of government and of the peoplethemselves as the repository of all state power. (Valmonte v. Belmonte, Jr., 170SCRA 256).

On the issue of "monopoly," however, the Constitution provides that:

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Sec. 19. The State shall regulate or prohibit monopolies when public interest sorequires. No combinations in restraint of trade or unfair competition shall be allowed.(Art. XII, National Economy and Patrimony)

It should be noted that, as the provision is worded, monopolies are not necessarily prohibited by theConstitution. The state must still decide whether public interest demands that monopolies be

regulated or prohibited. Again, this is a matter of policy for the Legislature to decide.

On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity) 12 (Family) and13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (EducationalValues) of Article XIV of the 1987 Constitution, suffice it to state also that these are merelystatements of principles and, policies. As such, they are basically not self-executing, meaning a lawshould be passed by Congress to clearly define and effectuate such principles.

In general, therefore, the 1935 provisions were not intended to be self-executingprinciples ready for enforcement through the courts. They were rather directivesaddressed to the executive and the legislature. If the executive and the legislaturefailed to heed the directives of the articles the available remedy was not judicial or

political. The electorate could express their displeasure with the failure of theexecutive and the legislature through the language of the ballot. (Bernas, Vol. II, p. 2)

Every law has in its favor the presumption of constitutionality (Yu Cong Eng v. Trinidad, 47 Phil. 387;Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas v. Comelec, 179 SCRA287). Therefore, for PD 1869 to be nullified, it must be shown that there is a clear and unequivocalbreach of the Constitution, not merely a doubtful and equivocal one. In other words, the grounds fornullity must be clear and beyond reasonable doubt. (Peralta v. Comelec, supra) Those who petitionthis Court to declare a law, or parts thereof, unconstitutional must clearly establish the basis for sucha declaration. Otherwise, their petition must fail. Based on the grounds raised by petitioners tochallenge the constitutionality of P.D. 1869, the Court finds that petitioners have failed to overcomethe presumption. The dismissal of this petition is therefore, inevitable. But as to whether P.D. 1869remains a wise legislation considering the issues of "morality, monopoly, trend to free enterprise,

privatization as well as the state principles on social justice, role of youth and educational values"being raised, is up for Congress to determine.

As this Court held in Citizens' Alliance for Consumer Protection v. Energy Regulatory Board, 162SCRA 521

Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in anycase, in its favor the presumption of validity and constitutionality which petitionersValmonte and the KMU have not overturned. Petitioners have not undertaken toidentify the provisions in the Constitution which they claim to have been violated bythat statute. This Court, however, is not compelled to speculate and to imagine howthe assailed legislation may possibly offend some provision of the Constitution. The

Court notes, further, in this respect that petitioners have in the main put in questionthe wisdom, justice and expediency of the establishment of the OPSF, issues whichare not properly addressed to this Court and which this Court may not constitutionallypass upon. Those issues should be addressed rather to the political departments ofgovernment: the President and the Congress.

Parenthetically, We wish to state that gambling is generally immoral, and this is precisely so whenthe gambling resorted to is excessive. This excessiveness necessarily depends not only on thefinancial resources of the gambler and his family but also on his mental, social, and spiritual outlook

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on life. However, the mere fact that some persons may have lost their material fortunes, mentalcontrol, physical health, or even their lives does not necessarily mean that the same are directlyattributable to gambling. Gambling may have been the antecedent,but certainly not necessarily thecause. For the same consequences could have been preceded by an overdose of food, drink,exercise, work, and even sex.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

SULTAN ALIMBUSAR P. LIMBONA, petitioner,vs.CONTE MANGELIN, SALIC ALI, SALINDATO ALI, PILIMPINAS CONDING, ACMAD TOMAWIS,GERRY TOMAWIS, JESUS ORTIZ, ANTONIO DELA FUENTE, DIEGO PALOMARES, JR., RAULDAGALANGIT, and BIMBO SINSUAT, respondents.

Ambrosio Padilla, Mempin & Reyes Law Offices for petitioner petitioner.

Makabangkit B. Lanto for respondents.

SARMIENTO, J.:

The acts of the Sangguniang Pampook of Region XII are assailed in this petition. The antecedentfacts are as follows:

1. On September 24, 1986, petitioner Sultan Alimbusar Limbona was appointed as amember of the Sangguniang Pampook, Regional Autonomous Government, RegionXII, representing Lanao del Sur.

2. On March 12, 1987 petitioner was elected Speaker of the Regional LegislativeAssembly or Batasang Pampook of Central Mindanao (Assembly for brevity).

3. Said Assembly is composed of eighteen (18) members. Two of said members,respondents Acmad Tomawis and Pakil Dagalangit, filed on March 23, 1987 with theCommission on Elections their respective certificates of candidacy in the May 11,1987 congressional elections for the district of Lanao del Sur but they later withdrewfrom the aforesaid election and thereafter resumed again their positions as membersof the Assembly.

4. On October 21, 1987 Congressman Datu Guimid Matalam, Chairman of the

Committee on Muslim Affairs of the House of Representatives, invited Mr. XavierRazul, Pampook Speaker of Region XI, Zamboanga City and the petitioner in hiscapacity as Speaker of the Assembly, Region XII, in a letter which reads:

The Committee on Muslim Affairs well undertake consultations anddialogues with local government officials, civic, religious organizationsand traditional leaders on the recent and present politicaldevelopments and other issues affecting Regions IX and XII.

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The result of the conference, consultations and dialogues wouldhopefully chart the autonomous governments of the two regions asenvisioned and may prod the President to constitute immediately theRegional Consultative Commission as mandated by the Commission.

You are requested to invite some members of the Pampook

Assembly of your respective assembly on November 1 to 15, 1987,with venue at the Congress of the Philippines. Your presence,unstinted support and cooperation is (sic) indispensable.

5. Consistent with the said invitation, petitioner sent a telegram to Acting SecretaryJohnny Alimbuyao of the Assembly to wire all Assemblymen that there shall be nosession in November as "our presence in the house committee hearing of Congresstake (sic) precedence over any pending business in batasang pampook ... ."

6. In compliance with the aforesaid instruction of the petitioner, Acting SecretaryAlimbuyao sent to the members of the Assembly the following telegram:

TRANSMITTING FOR YOUR INFORMATION AND GUIDANCETELEGRAM RECEIVED FROM SPEAKER LIMBONA QUOTECONGRESSMAN JIMMY MATALAM CHAIRMAN OF THE HOUSECOMMITTEE ON MUSLIM AFFAIRS REQUESTED ME TO ASSISTSAID COMMITTEE IN THE DISCUSSION OF THE PROPOSEDAUTONOMY ORGANIC NOV. 1ST TO 15. HENCE WERE ALLASSEMBLYMEN THAT THERE SHALL BE NO SESSION INNOVEMBER AS OUR PRESENCE IN THE HOUSE COMMITTEEHEARING OF CONGRESS TAKE PRECEDENCE OVER ANYPENDING BUSINESS IN BATASANG PAMPOOK OF MATALAMFOLLOWS UNQUOTE REGARDS.

7. On November 2, 1987, the Assembly held session in defiance of petitioner's

advice, with the following assemblymen present:

1. Sali, Salic

2. Conding, Pilipinas (sic)

3. Dagalangit, Rakil

4. Dela Fuente, Antonio

5. Mangelen, Conte

6. Ortiz, Jesus

7. Palomares, Diego

8. Sinsuat, Bimbo

9. Tomawis, Acmad

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10. Tomawis, Jerry

After declaring the presence of a quorum, the Speaker Pro-Tempore was authorizedto preside in the session. On Motion to declare the seat of the Speaker vacant, allAssemblymen in attendance voted in the affirmative, hence, the chair declared saidseat of the Speaker vacant. 8. On November 5, 1987, the session of the Assembly

resumed with the following Assemblymen present:

1. Mangelen Conte-Presiding Officer

2. Ali Salic

3. Ali Salindatu

4. Aratuc, Malik

5. Cajelo, Rene

6. Conding, Pilipinas (sic)

7. Dagalangit, Rakil

8. Dela Fuente, Antonio

9. Ortiz, Jesus

10 Palomares, Diego

11. Quijano, Jesus

12. Sinsuat, Bimbo

13. Tomawis, Acmad

14. Tomawis, Jerry

An excerpt from the debates and proceeding of said session reads:

HON. DAGALANGIT: Mr. Speaker, Honorable Members of the House, with thepresence of our colleagues who have come to attend the session today, I move tocall the names of the new comers in order for them to cast their votes on the

previous motion to declare the position of the Speaker vacant. But before doing so, Imove also that the designation of the Speaker Pro Temporeas the Presiding Officerand Mr. Johnny Evangelists as Acting Secretary in the session last November 2,1987 be reconfirmed in today's session.

HON. SALIC ALI: I second the motions.

PRESIDING OFFICER: Any comment or objections on the two motions presented?Me chair hears none and the said motions are approved. ...

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Twelve (12) members voted in favor of the motion to declare the seat of the Speakervacant; one abstained and none voted against. 1

Accordingly, the petitioner prays for judgment as follows:

WHEREFORE, petitioner respectfully prays that-

(a) This Petition be given due course;

(b) Pending hearing, a restraining order or writ of preliminary injunction be issuedenjoining respondents from proceeding with their session to be held on November 5,1987, and on any day thereafter;

(c) After hearing, judgment be rendered declaring the proceedings held byrespondents of their session on November 2, 1987 as null and void;

(d) Holding the election of petitioner as Speaker of said Legislative Assembly orBatasan Pampook, Region XII held on March 12, 1987 valid and subsisting, and

(e) Making the injunction permanent.

Petitioner likewise prays for such other relief as may be just and equitable. 2

Pending further proceedings, this Court, on January 19, 1988, received a resolution filed by theSangguniang Pampook, "EXPECTING ALIMBUSAR P. LIMBONA FROM MEMBERSHIP OF THESANGGUNIANG PAMPOOK AUTONOMOUS REGION XII," 3 on the grounds, among other things,that the petitioner "had caused to be prepared and signed by him paying [sic] the salaries andemoluments of Odin Abdula, who was considered resigned after filing his Certificate of Candidacyfor Congressmen for the First District of Maguindanao in the last May 11, elections. . . and nothing inthe record of the Assembly will show that any request for reinstatement by Abdula was ever made . .

."4

and that "such action of Mr. Lim bona in paying Abdula his salaries and emoluments withoutauthority from the Assembly . . . constituted a usurpation of the power of the Assembly," 5 that thepetitioner "had recently caused withdrawal of so much amount of cash from the Assembly resultingto the non-payment of the salaries and emoluments of some Assembly [sic]," 6and that he had "fileda case before the Supreme Court against some members of the Assembly on question which shouldhave been resolved within the confines of the Assembly," 7 for which the respondents now submitthat the petition had become "moot and academic". 8

The first question, evidently, is whether or not the expulsion of the petitioner (pending litigation) hasmade the case moot and academic.

We do not agree that the case has been rendered moot and academic by reason simply of theexpulsion resolution so issued. For, if the petitioner's expulsion was done purposely to make thispetition moot and academic, and to preempt the Court, it will not make it academic.

On the ground of the immutable principle of due process alone, we hold that the expulsion inquestion is of no force and effect. In the first place, there is no showing that the Sanggunian hadconducted an investigation, and whether or not the petitioner had been heard in his defense,assuming that there was an investigation, or otherwise given the opportunity to do so. On the otherhand, what appears in the records is an admission by the Assembly (at least, the respondents) that"since November, 1987 up to this writing, the petitioner has not set foot at the Sangguniang

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Pampook." 9 "To be sure, the private respondents aver that "[t]he Assemblymen, in a conciliatorygesture, wanted him to come to Cotabato City," 10 but that was "so that their differences could bethreshed out and settled." 11 Certainly, that avowed wanting or desire to thresh out and settle, nomatter how conciliatory it may be cannot be a substitute for the notice and hearing contemplated bylaw.

While we have held that due process, as the term is known in administrative law, does not absolutelyrequire notice and that a party need only be given the opportunity to be heard, 12 it does not appearherein that the petitioner had, to begin with, been made aware that he had in fact stood charged ofgraft and corruption before his collegues. It cannot be said therefore that he was accorded anyopportunity to rebut their accusations. As it stands, then, the charges now levelled amount to mereaccusations that cannot warrant expulsion.

In the second place, (the resolution) appears strongly to be a bare act of vendetta by the otherAssemblymen against the petitioner arising from what the former perceive to be abduracy on thepart of the latter. Indeed, it (the resolution) speaks of "a case [having been filed] [by the petitioner]before the Supreme Court . . . on question which should have been resolved within the confines ofthe Assemblyman act which some members claimed unnecessarily and unduly assails their integrityand character as representative of the people" 13 an act that cannot possibly justify expulsion.Access to judicial remedies is guaranteed by the Constitution, 14and, unless the recourse amountsto malicious prosecution, no one may be punished for seeking redress in the courts.

We therefore order reinstatement, with the caution that should the past acts of the petitioner indeedwarrant his removal, the Assembly is enjoined, should it still be so minded, to commence properproceedings therefor in line with the most elementary requirements of due process. And while it iswithin the discretion of the members of the Sanggunian to punish their erring colleagues, their actsare nonetheless subject to the moderating band of this Court in the event that such discretion isexercised with grave abuse.

It is, to be sure, said that precisely because the Sangguniang Pampook(s) are "autonomous," thecourts may not rightfully intervene in their affairs, much less strike down their acts. We come,

therefore, to the second issue: Are the so-called autonomous governments of Mindanao, as they arenow constituted, subject to the jurisdiction of the national courts? In other words, what is the extentof self-government given to the two autonomous governments of Region IX and XII?

The autonomous governments of Mindanao were organized in Regions IX and XII by PresidentialDecree No. 161815 promulgated on July 25, 1979. Among other things, the Decree established"internal autonomy" 16 in the two regions "[w]ithin the framework of the national sovereignty andterritorial integrity of the Republic of the Philippines and its Constitution," 17 with legislative andexecutive machinery to exercise the powers and responsibilities 18specified therein.

It requires the autonomous regional governments to "undertake all internal administrative matters forthe respective regions," 19 except to "act on matters which are within the jurisdiction and competence

of the National Government,"20

"which include, but are not limited to, the following:

(1) National defense and security;

(2) Foreign relations;

(3) Foreign trade;

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(4) Currency, monetary affairs, foreign exchange, banking and quasi-banking, andexternal borrowing,

(5) Disposition, exploration, development, exploitation or utilization of all naturalresources;

(6) Air and sea transport

(7) Postal matters and telecommunications;

(8) Customs and quarantine;

(9) Immigration and deportation;

(10) Citizenship and naturalization;

(11) National economic, social and educational planning; and

(12) General auditing. 21

In relation to the central government, it provides that "[t]he President shall have the power of generalsupervision and control over the Autonomous Regions ..." 22

Now, autonomy is either decentralization of administration or decentralization of power. There isdecentralization of administration when the central government delegates administrative powers topolitical subdivisions in order to broaden the base of government power and in the process to makelocal governments "more responsive and accountable," 23 "and ensure their fullest development asself-reliant communities and make them more effective partners in the pursuit of nationaldevelopment and social progress." 24 At the same time, it relieves the central government of theburden of managing local affairs and enables it to concentrate on national concerns. The President

exercises "general supervision" 25 over them, but only to "ensure that local affairs are administeredaccording to law." 26 He has no control over their acts in the sense that he can substitute their

judgments with his own. 27

Decentralization of power, on the other hand, involves an abdication of political power in the favor oflocal governments units declare to be autonomous . In that case, the autonomous government isfree to chart its own destiny and shape its future with minimum intervention from central authorities.According to a constitutional author, decentralization of power amounts to "self-immolation," since inthat event, the autonomous government becomes accountable not to the central authorities but to itsconstituency. 28

But the question of whether or not the grant of autonomy Muslim Mindanao under the 1987

Constitution involves, truly, an effort to decentralize power rather than mere administration is aquestion foreign to this petition, since what is involved herein is a local government unit constitutedprior to the ratification of the present Constitution. Hence, the Court will not resolve that controversynow, in this case, since no controversy in fact exists. We will resolve it at the proper time and in theproper case.

Under the 1987 Constitution, local government units enjoy autonomy in these two senses, thus:

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Section 1. The territorial and political subdivisions of the Republic of the Philippines arethe provinces, cities, municipalities, and barangays. Here shall be autonomous regions inMuslim Mindanao ,and the Cordilleras as hereinafter provided. 29

Sec. 2. The territorial and political subdivisions shall enjoy local autonomy. 30

xxx xxx xxx

See. 15. Mere shall be created autonomous regions in Muslim Mindanao and in theCordilleras consisting of provinces, cities, municipalities, and geographical areas sharingcommon and distinctive historical and cultural heritage, economic and social structures,and other relevant characteristics within the framework of this Constitution and thenational sovereignty as well as territorial integrity of the Republic of the Philippines. 31

An autonomous government that enjoys autonomy of the latter category [CONST. (1987), art. X,sec. 15.] is subject alone to the decree of the organic act creating it and accepted principles on theeffects and limits of "autonomy." On the other hand, an autonomous government of the former classis, as we noted, under the supervision of the national government acting through the President (andthe Department of Local Government).32 If the Sangguniang Pampook (of Region XII), then, isautonomous in the latter sense, its acts are, debatably beyond the domain of this Court in perhapsthe same way that the internalacts, say, of the Congress of the Philippines are beyond our

jurisdiction. But if it is autonomous in the former category only, it comes unarguably under ourjurisdiction. An examination of the very Presidential Decree creating the autonomous governmentsof Mindanao persuades us that they were never meant to exercise autonomy in the second sense,that is, in which the central government commits an act of self-immolation. Presidential Decree No.1618, in the first place, mandates that "[t]he President shall have the power of general supervi

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