G.R. No. 111097 July 20, 1994

MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners, vs. 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:

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:

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 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

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:

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.

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 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 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.

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 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.

G.R. No. 91649 May 14, 1991

ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN AND LORENZO 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 the Philippine Amusement and Gaming Corporation (PAGCOR) Charter — PD 1869, because it is allegedly 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 license fees, which is recognized by law;

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

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

D. It violates the avowed trend of the Cory government away from monopolistic and crony 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 declared national policy of the "new restored democracy" and the people's will as expressed in the 1987 Constitution. The decree is said to have a "gambling objective" and therefore is contrary to Sections 11, 12 and 13 of Article II, Sec. 1 of Article VIII and Section 3 (2) of Article XIV, of the present Constitution (p. 3, Second Amended Petition; p. 21, Rollo).

The procedural issue is whether petitioners, as taxpayers and practicing lawyers (petitioner Basco being also the Chairman of the Committee on Laws of the City Council of Manila), can question and seek 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 January 1, 1977 "to establish, operate and maintain gambling casinos on land or water within the territorial jurisdiction of the Philippines." Its operation was originally conducted in the well known floating casino "Philippine Tourist." The operation was considered a success for it proved to be a potential source of revenue to fund infrastructure and socio-economic projects, thus, P.D. 1399 was passed on 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 Government to 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 to centralize and integrate all games of chance not heretofore authorized by existing franchises or permitted by law in order to attain the following objectives:

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

(b) To establish and operate clubs and casinos, for amusement and recreation, including sports gaming pools, (basketball, football, lotteries, etc.) and such other forms of amusement and recreation including games of chance, which may be allowed 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 such other essential public services; (2) create recreation and integrated facilities which will expand and improve the country's existing tourist attractions; and (3) minimize, if not totally eradicate, all the evils, malpractices and corruptions that are normally prevalent on the conduct and operation of gambling clubs and casinos without direct government involvement. (Section 1, P.D. 1869)

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

It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau of Internal Revenue and the Bureau of Customs. In 1989 alone, PAGCOR earned P3.43 Billion, and directly remitted to the National Government a total of P2.5 Billion in form of franchise tax, government's income share, the President's Social Fund and Host Cities' share. In addition, PAGCOR sponsored other socio-cultural and charitable projects on its own or in cooperation with various governmental agencies, and other private associations and organizations. In its 3 1/2 years of operation under the present administration, PAGCOR remitted to the government a total of P6.2 Billion. As of December 31, 1989, PAGCOR was employing 4,494 employees in its nine (9) casinos nationwide, directly supporting the livelihood of 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 "null and void" for being "contrary to morals, public policy and public order," monopolistic and tends toward "crony economy", and is violative of the equal protection clause and local autonomy as well as for running counter to the state policies enunciated in Sections 11 (Personal Dignity and Human Rights), 12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article XIII and Section 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 deliberate consideration by the Court, involving as it does the exercise of what has been described as "the highest 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 of the 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 of its 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 authority under 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 Zaldivar underscored the —

. . . thoroughly established principle which must be followed in all cases where questions of constitutionality as obtain in the instant cases are involved. All presumptions are indulged in favor of constitutionality; one who attacks a statute alleging unconstitutionality must prove its invalidity beyond a reasonable doubt; that a 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 the challenger must negate all possible basis; that the courts are not concerned with the wisdom, justice, policy or expediency of a statute and that a liberal interpretation of the constitution in favor of the constitutionality of legislation should be adopted. (Danner v. Hass, 194 N.W. 2nd 534, 539; Spurbeck v. Statton, 106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46 SCRA 734, 739 [1970]; Peralta v. 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)

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

Considering however the importance to the public of the case at bar, and in keeping with the Court's duty, under the 1987 Constitution, to determine whether or not the other branches of government have 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 and has taken cognizance of this petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA 371)

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

In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to question the constitutionality of several executive orders issued by President Quirino although they were involving only an indirect and general interest shared in common with the public. The Court dismissed the objection that they were not proper parties and ruled that "the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must technicalities of procedure." We have since then applied the exception in many other cases. (Association of Small Landowners in the Philippines, Inc. v. Sec. of Agrarian Reform, 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 "state authority to enact legislation that may interfere with personal liberty or property in order to promote the general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition or restraint upon liberty or property, (2) in order to foster the common good. It is not capable of an exact definition but has been, purposely, veiled in general terms to underscore its all-comprehensive embrace. (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 it could be done, provides enough room for an efficient and flexible response to conditions and circumstances 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 the charter. Along with the taxing power and eminent domain, it is inborn in the very fact of statehood and sovereignty. It is a fundamental attribute of government that has enabled it to perform the most vital functions of governance. Marshall, to whom the expression has been credited, refers to it succinctly as the plenary power of the state "to govern its citizens". (Tribe, American Constitutional Law, 323, 1978). The police power of the State is a power co-extensive with self-protection and is most 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, 40 Phil. 136) It is a dynamic force that enables the state to meet the agencies of the winds of change.

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" (1st whereas clause, PD 1869). As was subsequently proved, regulating and centralizing gambling operations in one corporate entity — the PAGCOR, was beneficial not just to the Government but to society in general. It is a reliable source of much needed revenue for the cash strapped Government. It provided funds for social impact projects and subjected gambling to "close scrutiny, regulation, supervision and control of the Government" (4th Whereas Clause, PD 1869). With the creation of PAGCOR and the direct intervention of the Government, the evil practices and corruptions that go with gambling will be minimized if not totally eradicated. Public welfare, then, lies at the bottom of the enactment of PD 1896.

Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes 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, as the franchise holder from paying any "tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local."

(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, whether National or Local, shall be assessed and collected under this franchise from the Corporation; nor shall any form or tax or charge attach in any way to the earnings of the Corporation, except a franchise tax of five (5%) percent of the gross revenues or earnings derived by the Corporation from its operations under this franchise. Such tax shall be due and payable quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial or national government authority (Section 13 [2]).

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. Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or statute must plainly show an intent to confer that power or the municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax" therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the "inherent power to tax" (Bernas, the Revised [1973] Philippine Constitution, 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, January 18, 1957) which has the power to "create and abolish municipal corporations" due to its "general legislative 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, it can also provide for exemptions or even take back the power.

(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as 1975, the power of local governments to regulate gambling thru the grant of "franchise, licenses or 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 of franchise to operate, maintain and establish horse and dog race tracks, jai-alai and other forms of gambling is hereby revoked.

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

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

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

Sec. 9. Regulatory Power. — The Corporation shall maintain a Registry of the affiliated entities, and shall exercise all the powers, authority and the responsibilities vested in the Securities and Exchange Commission over such affiliating entities mentioned under the preceding section, including, but not limited to amendments of Articles of Incorporation and By-Laws, changes in corporate term, structure, capitalization and other matters concerning the operation of the affiliated entities, the provisions 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 is governmental, which places it in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local government.

The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into 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 entire absence 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 it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42).

The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it.

(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D. 1869. This is a pointless argument. Article X of the 1987 Constitution (on Local Autonomy) provides:

Sec. 5. Each local government unit shall have the power to create its own source of revenue and to levy taxes, fees, and other charges subject to such guidelines and limitation as the congress may provide, consistent with the basic policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to the local government. (emphasis supplied)

The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the exercise of the power of local governments to impose taxes and fees. It cannot therefore be violative but rather is consistent with the principle of local autonomy.

Besides, the principle of local autonomy under the 1987 Constitution simply means "decentralization" (III Records of the 1987 Constitutional Commission, pp. 435-436, as cited in Bernas, The Constitution of the Republic of the Philippines, Vol. II, First Ed., 1988, p. 374). It does not make local governments sovereign within the state or an "imperium in imperio."

Local Government has been described as a political subdivision of a nation or state which is constituted by law and has substantial control of local affairs. In a unitary system of government, such as the government under the Philippine Constitution, local governments can only be an intra sovereign subdivision of one sovereign nation, it cannot be an imperium in imperio. Local government in such a system can only mean a measure of decentralization of the function of government. (emphasis supplied)

As to what state powers should be "decentralized" and what may be delegated to local government units remains a matter of policy, which concerns wisdom. It is therefore a political question. (Citizens Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA 539).

What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a State concern and hence, it is the sole prerogative of the State to retain it or delegate it to local governments.

As gambling is usually an offense against the State, legislative grant or express charter power is generally necessary to empower the local corporation to deal with the subject. . . . In the absence of express grant of power to enact, ordinance provisions on this subject which are inconsistent with the state laws are void. (Ligan v. Gadsden, Ala App. 107 So. 733 Ex-Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah You, 88 Cal. 99, 25 PAC 974, 22 Am St. Rep. 280, 11 LRA 480, as cited 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 together with prostitution, drug trafficking and other vices" (p. 82, Rollo).

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

The "equal protection clause" does not prohibit the Legislature from establishing classes of individuals or objects upon which different rules shall operate (Laurel v. Misa, 43 O.G. 2847). The Constitution does not require situations which are different in fact or opinion to be treated in law as though 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 protection is not clearly explained in the petition. The mere fact that some gambling activities like cockfighting (P.D 449) horse racing (R.A. 306 as amended by RA 983), sweepstakes, lotteries and races (RA 1169 as amended by B.P. 42) are legalized under certain conditions, while others are prohibited, does not render the applicable laws, P.D. 1869 for one, unconstitutional.

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

The equal protection clause of the 14th Amendment does not mean that all occupations called by the same name must be treated the same way; the state may do what it can to prevent which is deemed as evil and stop short of those cases in which harm to the few concerned is not less than the harm to the public that would insure 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 away from monopolies and crony economy and toward free enterprise and privatization" suffice it to state that this is not a ground for this Court to nullify P.D. 1869. If, indeed, PD 1869 runs counter to the government's policies then it is for the Executive Department to recommend to Congress its repeal or 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 issues are within the domain of the political branches of government and of the people themselves as the repository of all state power. (Valmonte v. Belmonte, Jr., 170 SCRA 256).

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

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

It should be noted that, as the provision is worded, monopolies are not necessarily prohibited by the Constitution. The state must still decide whether public interest demands that monopolies be regulated or prohibited. Again, this is a matter of policy for the Legislature to decide.

On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity) 12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it to state also that these are

merely statements of principles and, policies. As such, they are basically not self-executing, meaning a law should be passed by Congress to clearly define and effectuate such principles.

In general, therefore, the 1935 provisions were not intended to be self-executing principles ready for enforcement through the courts. They were rather directives addressed to the executive and the legislature. If the executive and the legislature failed 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 the executive 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 SCRA 287). Therefore, for PD 1869 to be nullified, it must be shown that there is a clear and unequivocal breach of the Constitution, not merely a doubtful and equivocal one. In other words, the grounds for nullity must be clear and beyond reasonable doubt. (Peralta v. Comelec, supra) Those who petition this Court to declare a law, or parts thereof, unconstitutional must clearly establish the basis for such a declaration. Otherwise, their petition must fail. Based on the grounds raised by petitioners to challenge the constitutionality of P.D. 1869, the Court finds that petitioners have failed to overcome the presumption. The dismissal of this petition is therefore, inevitable. But as to whether P.D. 1869 remains 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, 162 SCRA 521 —

Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in any case, in its favor the presumption of validity and constitutionality which petitioners Valmonte and the KMU have not overturned. Petitioners have not undertaken to identify the provisions in the Constitution which they claim to have been violated by that statute. This Court, however, is not compelled to speculate and to imagine how the 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 question the wisdom, justice and expediency of the establishment of the OPSF, issues which are not properly addressed to this Court and which this Court may not constitutionally pass upon. Those issues should be addressed rather to the political departments of government: the President and the Congress.

Parenthetically, We wish to state that gambling is generally immoral, and this is precisely so when the gambling resorted to is excessive. This excessiveness necessarily depends not only on the financial resources of the gambler and his family but also on his mental, social, and spiritual outlook on life. However, the mere fact that some persons may have lost their material fortunes, mental control, physical health, or even their lives does not necessarily mean that the same are directly attributable to gambling. Gambling may have been the antecedent, but certainly not necessarily the cause. For the same consequences could have been preceded by an overdose of food, drink, exercise, work, and even sex.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

G.R. No. L-42571-72 July 25, 1983

VICENTE DE LA CRUZ, RENATO ALIPIO, JOSE TORRES III, LEONCIO CORPUZ, TERESITA CALOT, ROSALIA FERNANDEZ, ELIZABETH VELASCO, NANETTE VILLANUEVA, HONORATO BUENAVENTURA, RUBEN DE CASTRO, VICENTE ROXAS, RICARDO DAMIAN, DOMDINO ROMDINA, ANGELINA OBLIGACION, CONRADO GREGORIO, TEODORO REYES, LYDIA ATRACTIVO, NAPOLEON MENDOZA, PERFECTO GUMATAY, ANDRES SABANGAN, ROSITA DURAN, SOCORRO BERNARDEZ, and PEDRO GABRIEL, petitioners, vs. THE HONORABLE EDGARDO L. PARAS, MATIAS RAMIREZ as the Municipal Mayor, MARIO MENDOZA as the Municipal Vice-Mayor, and THE MUNICIPAL COUNCIL OF BOCAUE, BULACAN, respondents.

Federico N. Alday for petitioners.

Dakila F. Castro for respondents.

FERNANDO, C.J.:

The crucial question posed by this certiorari proceeding is whether or not a municipal corporation, Bocaue, Bulacan, represented by respondents, 1 can, prohibit the exercise of a lawful trade, the operation of night clubs, and the pursuit of a lawful occupation, such clubs employing hostesses. It is contended that the ordinance assailed as invalid is tainted with nullity, the municipality being devoid of power to prohibit a lawful business, occupation or calling, petitioners at the same time alleging that their rights to due process and equal protection of the laws were violated as the licenses previously given to them was in effect withdrawn without judicial hearing. 2

The assailed ordinance 3 is worded as follows: "Section 1.— Title of Ordinance.— This Ordinance shall be known and may be cited as the [Prohibition and Closure Ordinance] of Bocaue, Bulacan. Section 2. — Definitions of Terms — (a) 'Night Club' shall include any place or establishment selling to the public food or drinks where customers are allowed to dance. (b) 'Cabaret' or 'Dance Hall' shall include any place or establishment where dancing is permitted to the public and where professional hostesses or hospitality girls and professional dancers are employed. (c) 'Professional hostesses' or 'hospitality girls' shall include any woman employed by any of the establishments herein defined to entertain guests and customers at their table or to dance with them. (d) 'Professional dancer' shall include any woman who dances at any of the establishments herein defined for a fee or remuneration paid directly or indirectly by the operator or by the persons she dances with. (e) 'Operator' shall include the owner, manager, administrator or any person who operates and is responsible for the operation of any night club, cabaret or dance hall. Section 3. — Prohibition in the Issuance and Renewal of Licenses, Permits. — Being the principal cause in the decadence of morality and because of their other adverse effects on this community as explained above, no operator of night clubs, cabarets or dance halls shall henceforth be issued permits/licenses to operate within the jurisdiction of the municipality and no license/permit shall be issued to any professional hostess, hospitality girls and professional dancer for employment in any of the aforementioned establishments. The prohibition in the issuance of licenses/permits to said persons and operators of said establishments shall include prohibition in the renewal thereof. Section 4.— Revocation of Permits and Licenses.— The licenses and permits issued to operators of night clubs, cabarets or dance halls which are now in operation including permits issued to professional hostesses, hospitality girls and professional dancers are hereby revoked upon the expiration of the thirty-day period given them as provided in Section 8 hereof and thenceforth, the operation of these establishments within the jurisdiction of the municipality shall be illegal. Section 5.— Penalty in case of violation. — Violation of any of the provisions of this Ordinance shall be punishable by imprisonment not exceeding three (3) months or a fine not exceeding P200.00 or both at the discretion of the Court. If the offense is committed by a juridical entity, the person charged with the management and/or operation thereof shall be liable for the penalty provided herein. Section 6. — Separability Clause.— If, for any reason, any section or provision of this Ordinance is held unconstitutional or invalid, no other section or provision hereof shall be affected thereby. Section 7.— Repealing Clause.— All ordinance, resolutions, circulars, memoranda or parts thereof that are inconsistent with the provisions of this Ordinance are hereby repealed. Section 8.— Effectivity.— This Ordinance shall take effect immediately upon its approval; provided, however, that operators of night clubs, cabarets and dance halls now in operation including professional hostesses, hospitality girls and professional dancers are given a period of thirty days from the approval hereof within which to wind up their businesses and comply with the provisions of this Ordinance." 4

On November 5, 1975, two cases for prohibition with preliminary injunction were filed with the Court of First Instance of Bulacan. 5 The grounds alleged follow:

1. Ordinance No. 84 is null and void as a municipality has no authority to prohibit a lawful business, occupation or calling.

2. Ordinance No. 84 is violative of the petitioners' right to due process and the equal protection of the law, as the license previously given to petitioners was in effect withdrawn without judicial hearing. 3. That under Presidential Decree No. 189, as amended, by Presidential Decree No. 259, the power to license and regulate tourist-oriented businesses including night clubs, has been transferred to the Department of Tourism." 6 The cases were assigned to respondent Judge, now Associate Justice Paras of the Intermediate Appellate Court, who issued a restraining order on November 7, 1975. The answers were thereafter filed. It was therein alleged: " 1. That the Municipal Council is authorized by law not only to regulate but to prohibit the establishment, maintenance and operation of night clubs invoking Section 2243 of the RAC, CA 601, Republic Acts Nos. 938, 978 and 1224. 2. The Ordinance No. 84 is not violative of petitioners' right to due process and the equal protection of the law, since property rights are subordinate to public interests. 3. That Presidential Decree No. 189, as amended, did not deprive Municipal Councils of their jurisdiction to regulate or prohibit night clubs." 7 There was the admission of the following facts as having been established: "l. That petitioners Vicente de la Cruz, et al. in Civil Case No. 4755-M had been previously issued licenses by the Municipal Mayor of Bocaue-petitioner Jose Torres III, since 1958; petitioner Vicente de la Cruz, since 1960; petitioner Renato Alipio, since 1961 and petitioner Leoncio Corpuz, since 1972; 2. That petitioners had invested large sums of money in their businesses; 3. That the night clubs are well-lighted and have no partitions, the tables being near each other; 4. That the petitioners owners/operators of these clubs do not allow the hospitality girls therein to engage in immoral acts and to go out with customers; 5. That these hospitality girls are made to go through periodic medical check-ups and not one of them is suffering from any venereal disease and that those who fail to submit to a medical check-up or those who are found to be infected with venereal disease are not allowed to work; 6. That the crime rate there is better than in other parts of Bocaue or in other towns of Bulacan." 8 Then came on January 15, 1976 the decision upholding the constitutionality and validity of Ordinance No. 84 and dismissing the cases. Hence this petition for certiorari by way of appeal.

In an exhaustive as well as scholarly opinion, the lower court dismissed the petitions. Its rationale is set forth in the opening paragraph thus: "Those who lust cannot last. This in essence is why the Municipality of Bocaue, Province of Bulacan, stigmatized as it has been by innuendos of sexual titillation and fearful of what the awesome future holds for it, had no alternative except to order thru its legislative machinery, and even at the risk of partial economic dislocation, the closure of its night clubs and/or cabarets. This in essence is also why this Court, obedient to the mandates of good government, and cognizant of the categorical imperatives of the current legal and social revolution, hereby [upholds] in the name of police power the validity and constitutionality of Ordinance No. 84, Series of 1975, of the Municipal Council of Bocaue, Bulacan. The restraining orders heretofore issued in these two cases are therefore hereby rifted, effective the first day of February, 1976, the purpose of the grace period being to enable the petitioners herein to apply to the proper appellate tribunals for any contemplated redress." 9 This Court is, however, unable to agree with such a conclusion and for reasons herein set forth, holds that reliance on the police power is insufficient to justify the enactment of the assailed ordinance. It must be declared null and void.

1. Police power is granted to municipal corporations in general terms as follows: "General power of council to enact ordinances and make regulations. - The municipal council shall enact such ordinances and make such regulations, not repugnant to law, as may be necessary to carry into effect and discharge the powers and duties conferred upon it by law and such as shall seem necessary and proper to provide for the health and safety, promote the prosperity, improve the morals, peace, good order, comfort, and convenience of the municipality and the inhabitants thereof, and for the protection of property therein." 10 It is practically a reproduction of the former Section 39 of Municipal Code. 11 An ordinance enacted by virtue thereof, according to Justice Moreland, speaking for the Court in the leading case of United States v. Abendan 12 "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. Where the power to legislate upon a given subject, and the mode of its exercise and the details of such legislation are not prescribed, the ordinance passed pursuant thereto must be a reasonable exercise of the power, or it will be pronounced invalid." 13 In another leading case, United States v. Salaveria, 14 the ponente this time being Justice Malcolm, where the present Administrative Code provision was applied, it was stated by this Court: "The general welfare clause has two branches: One branch attaches itself to the main trunk of municipal authority, and relates to such ordinances and regulations as may be necessary to carry into effect and discharge the powers and duties conferred upon the municipal council by law. With this class we are not here directly concerned. The second branch of the clause is much more independent of the specific functions of the council which are enumerated by law. It authorizes such ordinances as shall seem necessary and proper to provide for the health and safety, promote the prosperity, improve the morals, peace, good order, comfort, and convenience of the municipality and the inhabitants thereof, and for the protection of property therein.' It is a general rule that ordinances passed by virtue of the implied power found in the general welfare clause must be reasonable, consonant with the general powersand purposes of the corporation, and not inconsistent with the laws or policy of the State." 15 If night clubs were merely then regulated and not prohibited, certainly the assailed ordinance would pass the test of validity. In the two leading cases above set forth, this Court had stressed reasonableness, consonant with the general powers and purposes of municipal corporations, as well as consistency with the laws or policy of the State. It cannot be said that such a sweeping exercise of a lawmaking power by Bocaue could qualify under the term reasonable. The objective of fostering public morals, a worthy and desirable end can be attained by a measure that does not encompass too wide a field. Certainly the ordinance on its face is characterized by overbreadth. The purpose sought to be achieved could have been attained by reasonable restrictions rather than by an absolute prohibition. The admonition in Salaveria should be heeded: "The Judiciary should not lightly set aside legislative action when there is not a clear invasion of personal or property rights under the guise of police regulation." 16 It is clear that in the guise of a police regulation, there was in this instance a clear invasion of personal or property rights, personal in the case of those individuals desirous of patronizing those night clubs and property in terms of the investments made and salaries to be earned by those therein employed.

2. The decision now under review refers to Republic Act No. 938 as amended. 17 It was originally enacted on June 20, 1953. It is entitled: "AN ACT GRANTING MUNICIPAL OR CITY BOARDS AND COUNCILS THE POWER TO REGULATE THE ESTABLISHMENT, MAINTENANCE AND OPERATION OF CERTAIN PLACES OF AMUSEMENT WITHIN THEIR RESPECTIVE TERRITORIAL JURISDICTIONS.' 18 Its first section insofar as pertinent reads: "The municipal or city board or council of each chartered city shall have the power to regulate by ordinance the establishment, maintenance and operation of night clubs, cabarets, dancing schools, pavilions, cockpits, bars, saloons, bowling alleys, billiard pools, and other similar places of amusement within its territorial jurisdiction: ... " 19 Then on May 21, 1954, the first section was amended to include not merely "the power to regulate, but likewise "Prohibit ... " 20 The title, however, remained the same. It is worded exactly as Republic Act No. 938. It is to be admitted that as thus amended, if only the above portion of the Act were considered, a municipal council may go as far as to prohibit the operation of night clubs. If that were all, then the appealed decision is not devoid of support in law. That is not all, however. The title was not in any way altered. It was not changed one whit. The exact wording was followed. The power granted remains that of regulation, not prohibition. There is thus support for the view advanced by petitioners that to construe Republic Act No. 938 as allowing the prohibition of the operation of night clubs would give rise to a constitutional question. The Constitution mandates: "Every bill shall embrace only one subject which shall be expressed in the title thereof. " 21 Since there is no dispute as the title limits the power to regulating, not prohibiting, it would result in the statute being invalid if, as was done by the Municipality of Bocaue, the operation of a night club was prohibited. There is a wide gap between the exercise of a regulatory power "to provide for the health and safety, promote the prosperity, improve the morals, 22 in the language of the Administrative Code, such competence extending to all "the great public needs, 23 to quote from Holmes, and to interdict any calling, occupation, or enterprise. In accordance with the well-settled principle of constitutional construction that between two possible interpretations by one of which it will be free from constitutional infirmity and by the other tainted by such grave defect, the former is to be preferred. A construction that would save rather than one that would affix the seal of doom certainly commends itself. We have done so before We do so again. 24

3. There is reinforcement to the conclusion reached by virtue of a specific provision of the recently-enacted Local Government Code. 25 The general welfare clause, a reiteration of the Administrative Code provision, is set forth in the first paragraph of Section 149 defining the powers and duties of the sangguniang bayan. It read as follows: "(a) 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; ..." 26 There are in addition provisions that may have a bearing on the question now before this Court. Thus the sangguniang bayan shall "(rr) Regulate cafes, restaurants, beer-houses, hotels, motels, inns, pension houses and lodging houses, 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 infringing on the taxing or regulatory powers of the municipality; (ss) Regulate public dancing schools, public dance halls, and sauna baths or massage parlors; (tt) Regulate the establishment and operation of billiard pools, theatrical performances, circuses and other forms of entertainment; ..." 27 It is clear that municipal corporations cannot prohibit the operation of night clubs. They may be regulated, but not prevented from carrying on their business. It would be, therefore, an exercise in futility if the decision under review were sustained. All that petitioners would have to do is to apply once more for licenses to operate night clubs. A refusal to grant licenses, because no such businesses could legally open, would be subject to judicial correction. That is to comply with the legislative will to allow the operation and continued existence of night clubs subject to appropriate regulations. In the meanwhile, to compel petitioners to close their establishments, the necessary result of an affirmance, would amount to no more than a temporary termination of their business. During such time, their employees would undergo a period of deprivation. Certainly, if such an undesirable outcome can be avoided, it should be. The law should not be susceptible to the reproach that it displays less than sympathetic concern for the plight of those who, under a mistaken appreciation of a municipal power, were thus left without employment. Such a deplorable consequence is to be avoided. If it were not thus, then the element of arbitrariness enters the picture. That is to pay less, very much less, than full deference to the due process clause with its mandate of fairness and reasonableness.

4. The conclusion reached by this Court is not to be interpreted as a retreat from its resolute stand sustaining police power legislation to promote public morals. The commitment to such an Ideal forbids such a backward step. Legislation of that character is deserving of the fullest sympathy from the judiciary. Accordingly, the judiciary has not been hesitant to lend the weight of its support to measures that can be characterized as falling within that aspect of the police power. Reference is made by respondents to Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila. 28 There is a misapprehension as to what was decided by this Court. That was a regulatory measure. Necessarily, there was no valid objection on due process or equal protection grounds. It did not prohibit motels. It merely regulated the mode in which it may conduct business in order precisely to put an end to practices which could encourage vice and immorality. This is an entirely different case. What was involved is a measure not embraced within the regulatory power but an exercise of an assumed power to prohibit. Moreover, while it was pointed out in the aforesaid Ermita-Malate Hotel and Motel Operators Association, Inc. decision that there must be a factual foundation of invalidity, it was likewise made clear that there is no need to satisfy such a requirement if a statute were void on its face. That it certainly is if the power to enact such ordinance is at the most dubious and under the present Local Government Code non-existent.

WHEREFORE, the writ of certiorari is granted and the decision of the lower court dated January 15, 1976 reversed, set aside, and nullied. Ordinance No. 84, Series of 1975 of the Municipality of Bocaue is declared void and unconstitutional. The temporary restraining order issued by this Court is hereby made permanent. No costs.

[G.R. No. 125218. January 23, 1998]

FILSTREAM INTERNATIONAL INCORPORATED, petitioner, vs. COURT OF APPEALS, JUDGE FELIPE S. TONGCO and THE CITY OF MANILA, respondent.

[G.R. No. 128077. January 23, 1998]

FILSTREAM INTERNATIONAL INCORPORATED, petitioner, vs., COURT OF APPEALS, ORLANDO MALIT, ANTONIO CAGUIAT, ALICIA CABRERA, ARMANDO LACHICA, JACINTO CAGUIAT, GLORIA ANTONIO, ELIZALDE NAVARRA, DOLORES FUENTES, SUSANA ROY, ANTONIO IBANEZ, BENIGNO BASILIO, LUCERIA DEMATULAC, FLORENCIA GOMEZ, LAZARO GOMEZ, JOSE GOMEZ, VENANCIO MANALOTO, CRISTINO UMALI, DEMETRIA GATUS, PRISCILLA MALONG, DOMINGO AGUILA, RAMON SAN AGUSTIN, JULIAN FERRER, JR., FRANCISCO GALANG, FLORENTINO MALIWAT, SEVERINA VILLAR, TRINIDAD NAGUIT, JOSE NAGUIT, FORTUNATO AGUSTIN CABRERA, GAUDENCIO INTAL, DANILO DAVID, ENRIQUE DAVID, VICENTE DE GUZMAN, POLICARPIO LUMBA, BELEN PALMA, ELEN SOMVILLO, LEONARDO MANICAD, OPRENG MICLAT, BENITA MATA, GREGORIO LOPEZ, MARCELINA SAPNO, JESUS MERCADO, and CALIXTO GOMEZ, respondent.

D E C I S I O N

FRANCISCO, J.:

In resolving the instant petitions, the Court is tasked to strike a balance between the contending interests when the state exercised its power of eminent domain. On one side we have the owners of the property to be expropriated who must be duly compensated for the loss of their property, while on the other is the State which must take the property for public use.

Petitioner, Filstream International Inc., is the registered owner of the properties subject of this dispute consisting of adjacent parcels of land situated in Antonio Rivera Street, Tondo II, Manila, with a total area of 3,571.10 square meters and covered by T.C.T. Nos. 203937, 203936, 169198, 169199, 169200 and 169202 of the Register of Deeds of Manila.

On January 7, 1993, petitioner filed an ejectment suit before the Metropolitan Trial Court of Manila (Branch 15) docketed as Civil Case No. 140817-CV against the occupants of the abovementioned parcels of land (herein private respondents in G.R. No. 128077) on the grounds of termination of the lease contract and non-payment of rentals. Judgment was rendered by the MTC on September 14, 1993 ordering private respondents to vacate the premises and pay back rentals to petitioner.

Not satisfied, private respondents appealed the decision to the Regional Trial Court of Manila, Branch 4 (Civil Case No. 93-68130) which in turn affirmed the decision of the MTC in its decision dated February 22, 1994. Still not content, private respondents proceeded to the Court of Appeals via a petition for review (CA-G.R. SP No. 33714). The result however remained the same as the CA affirmed the decision of the RTC in its decision dated August 25, 1994.

Thereafter, no further action was taken by the private respondents, as a result of which the decision in the ejectment suit became final and executory.

However, it appeared that during the pendency of the ejectment proceedings private respondents filed on May 25, 1993, a complaint for Annulment of Deed of Exchange against petitioner Filstream which was docketed in Civil Case No. 93-66059 before the RTC of Manila, Branch 43. It was at this stage that respondent City of Manila came into the picture when the city government approved Ordinance No. 7813 on November 5, 1993, authorizing Mayor Alfredo S. Lim to initiate the acquisition by negotiation, expropriation, purchase, or other legal means certain parcels of land registered under T.C.T. Nos. 169193, 169198, 169190, 169200, 169202, and 169192 of the Registry of Deeds of Manila which formed part of the properties of petitioner then occupied by private respondents. Subsequently, the City of Manila approved Ordinance No. 7855 declaring the expropriation of certain parcels of land situated along Antonio Rivera and Fernando Ma. Guerero streets in Tondo, Manila which were owned by Mr. Enrique Quijano Gutierez, petitioner’s predecessor-in-interest. The said properties were to be sold and distributed to qualified tenants of the area pursuant to the Land Use Development Program of the City of Manila.

On May 23, 1994, respondent City of Manila filed a complaint for eminent domain (Civil Case No. 94-70560) before the RTC of Manila, Branch 42, seeking to expropriate the aforecited parcels of land owned by petitioner Filstream which are situated at Antonio Rivera Street, Tondo II, Manila.

Pursuant to the complaint filed by respondent City of Manila,the trial court issued a Writ of Possession in favor of the former which ordered the transfer of possession over the disputed premises to the City of Manila.

At this juncture, petitioner Filstream filed a motion to dismiss the complaint for eminent domain as well as a motion to quash the writ of possession. The motion to dismiss was premised on the following grounds: no valid cause of action; the petition does not satisfy the requirements of public use and a mere clandestine maneuver to circumvent the writ execution issued by the RTC of Manila, Branch 4 in the ejectment suit; violation of the constitutional guarantee against non-impairment of obligation and contract; price offered was too low hence violative of the just compensation provision of the constitution and the said amount is without the certification of the City Treasurer for availability of funds. With respect to the motion to quash the writ of possession, petitioner raised the following objections: failure to comply with Section 2 of Rule 67 of the Rules of Court, Ordinance No. 7813 is a void enactment for it was approved without a public hearing and violative of the constitutional guarantee against impairment of obligation and contracts; the price is too low and unconscionable violating the just compensation provision of the constitution, and the said writ is tainted with infirmity considering the absence of a certification from the City of Manila that there is an immediately available fund for the subject expropriation.

Respondent City of Manila filed its opposition to petitioner Filstream’s two motion and to which petitioner accordingly filed a reply. On September 30, 1994, the RTC of Manila, Branch 42, issued an order denying petitioner Filstream’s motion to dismiss and the motion to quash the Writ of Possession and declared as follows:

“IN FINE, the defendant’s motion to dismiss and motion to quash writ of possession are both without merit and are hereby DENIED and the subject parcels of lands covered by TCT Nos. 203937, 203936, 169198, 169199, 169200, and 169202 (of the Register of Deeds of Manila) located at Antonio Rivera Street, Tondo II, Manila with a total area of 3,571.10 square meters are hereby declared CONDEMNED in favor of the City of Manila for distribution and resale to all poor and landless qualified residents/tenants in the said area under the city’s ‘land-for-the-landless’ program upon payment of just compensation which is yet to be determined by this Court.”

Petitioner filed a motion for reconsideration as well as a supplemental motion for reconsideration seeking the reversal of the above-quoted order but the same were denied. Still, petitioner filed a subsequent motion to be allowed to file a second motion for reconsideration but it was also denied.

Aggrieved, petitioner filed on March 31, 1996, a Petition for Certiorari with the Court of Appeals (CA-G.R. SP No. 36904) seeking to set aside the September 30, 1994 order of the RTC of Manila, Branch 42. However, on March 18, 1996, respondent CA issued a resolution dismissing the petition in this wise:

“It appearing that the above-entitled petition is insufficient in form and substance -- it does not comply with Section 2(a), Rule 6 of the Revised Internal Rules of the Court of Appeals which requires that the petition shall be x x x accompanied by x x x other pertinent documents and papers, aside from the fact that copies of the pleadings attached to the petition are blurred and unreadable -- this Court resolved to summarily DISMISS the same (petition).

Petitioner filed a motion for reconsideration and attached clearer copies of the pertinent documents and papers pursuant to Section 2(a) Rule 6 of the Revised Internal Rules of the Court of Appeals. But on May 20, 1996, respondent CA issued a resolution denying the motion as petitioner failed to submit clearer and readable copies of the pleadings. This prompted petitioner to proceed to this Court giving rise to the instant petition for review on certiorari under Rule 45 and docketed herein as G.R. No. 125218, assailing the dismissal of its petition by the CA in its resolution dated March 18, 1996 as well as that of its motion for reconsideration in the resolution dated May 20, 1996.

Meanwhile, owing to the finality of the decision in the ejectment suit (Civil Case No 140817 – CV), the MTC of Manila, Branch 15, upon motion of petitioner Filstream, issued a Writ of Execution as well as a Notice to Vacate the disputed premises. Private respondents filed a Motion to Recall/Quash the Writ of Execution and Notice to Vacate alleging the existence of a supervening event in that the properties subject of the dispute have already been ordered condemned in an expropriation proceeding in favor of the City of Manila for the benefit of the qualified occupants thereof, thus execution shall be stayed. Petitioner opposed the motion, reiterating that the decision in the ejectment case is already final and executory and disputed private respondents’ right to interpose the expropriation proceedings as a defense because the latter were not parties to the same.

For its part, the City of Manila filed on March 13, 1996, a motion for intervention with prayer to stay/quash the writ of execution on the ground that it is the present possessor of the property subject of execution.

In its order dated March 14, 1996, the MTC of Manila, Branch 14, denied private respondents’ motion as it found the allegations therein bereft of merit and upheld the issuance of the Writ of Execution and Notice to Vacate in petitioner’s favor. Subsequently, the trial court also denied the motion filed by the City of Manila.

On April 22, 1996, the trial court issued an order commanding the demolition of the structure erected on the disputed premises. To avert the demolition, private respondents filed before the RTC of Manila, Branch 14, a Petition for Certiorari and Prohibition with prayer for the issuance of a temporary restraining order and preliminary injunction (docketed as Civil Case No. 96-78098). On April 29, 1996, the RTC of Manila, Branch 33, issued a TRO enjoining the execution if the writ issued in Civil Case No. 140817-CV by the MTC of Manila, Branch 14. Subsequently, the RTC issued a writ of preliminary injunction on May 14, 1996.

On May 15, 1996, the City of Manila filed its Petition for Certiorari and Prohibition with prayer for the issuance of a temporary restraining order and preliminary injunction which was raffled to Branch 23 of the RTC of Manila (docketed as Civil Case No. 96-78382), seeking the reversal of the orders issued by the MTC of Manila, Branch 14, which denied its motion to intervene and quash the writ of execution in Civil Case No. 140817-CV.

Thereafter, upon motion filed by the City of Manila, an order was issued by the RTC of Manila, Branch 10, ordering the consolidation of Civil Case No. 96-78382 with Civil Case No. 96-78098 pending before Branch 14 of the RTC of Manila. On May 21, 1996, the RTC of Manila, Branch 14, issued an injunction in Civil Case No. 96-78098 enjoining the implementation of the writ of execution until further orders from the court. Petitioner Filstream filed a Motion to Dissolve the Writ of Preliminary Injunction and to be allowed to post a counter-bond but the trial court denied the same. Filstream then filed a motion for reconsideration from the order of denial but pending resolution of this motion for voluntary inhibition of the presiding judge of the RTC of Manila, Branch 14. The motion for inhibition was granted and as a result, the consolidated cases (Civil Case No. 96-78382 and 96-78098) were re-raffled to the RTC of Manila, Branch 33.

During the proceedings before the RTC of Manila, Branch 33, petitioner Filstream moved for the dismissal of the consolidated cases (Civil Case No. 96-78382 and 96-78098) for violation of Supreme Court Circular No. 04-94 (forum shopping) because the same parties, causes of action and subject matter involved therein have already been disposed of in the decision in the ejectment case (Civil Case No. 140817) which has already become final and executory prior to the filing of these consolidated cases.

On December 9, 1996, an order was issued by the RTC of Manila, Branch 33, ordering the dismissal of Civil Cases Nos. 96-78382 and 96-78098 for violation of Supreme Court Circular No. 04-94. Immediately thereafter, petitioner Filstream filed an Ex-parte Motion for Issuance of an Alias Writ of Demolition and Ejectment and a supplemental motion to the same dated January 10 and 13, 1997, respectively, before the MTC of Manila, Branch 15, which promulgated the decision in the ejectment suit (Civil Case No. 140817-CV). On January 23, 1997, the court granted the motion and issued the corresponding writ of demolition.

As a consequence of the dismissal of the consolidated cases, herein private respondents filed a Petition for Certiorari and Prohibition with prayer for the issuance of a temporary restraining order and preliminary injunction before the Court of Appeals (docketed as CA-G.R. SP No. 43101) assailing the above-mentioned order of dismissal by the RTC of Manila, Branch 33, as having been issued with grave abuse of discretion tantamount to lack or in excess of jurisdiction.

In a resolution dated January 28, 1997, the Court of Appeals granted herein private respondents prayer for the issuance of a temporary restraining order and directed the MTC of Manila, Branch 15, to desist from implementing the order of demolition dated January 23, 1997, unless otherwise directed.

At the conclusion of the hearing for the issuance of a writ of preliminary injunction, the Court of Appeals, in its resolution dated February 18, 1997, found merit in private respondents’ allegations in support of their application of the issuance of the writ and granted the same, to wit:

“Finding that the enforcement or implementation of the writ of execution and notice to vacate issued in Civil Case No. 140817-CV, the ejectment case before respondent Judge Jiro, during the pendency of the instant petition, would probably be in violation of petitioner’s right, and would tend to render the judgment in the instant case ineffectual, and probably work injustice to the petitioners, the application for the issuance of a writ of preliminary injunction is hereby GRANTED.

“WHEREFORE, upon the filing of a bond in the amount of P150,000.00, let a writ of preliminary injunction be issued enjoining respondents, their employees, agents, representatives and anyone acting in their behalf from enforcing or executing the writ of execution and notice to vacate issued in Civil Case No. 140817-CV of the court of respondent Judge Jiro, or otherwise disturbing the status quo, until further orders of this Court.”

In turn, petitioner Filstream is now before this Court via a Petition for Certiorari under Rule 65 (G.R. No. 128077), seeking to nullify the Resolutions of the Court of Appeals dated January 28, 1997 and February 18, 1997 which granted herein private respondents’ prayer for a TRO and Writ of Preliminary Injunction, the same being null and void for having been issued in grave abuse of discretion.

Upon motion filed by petitioner Filstream, in order to avoid any conflicting decision on the legal issues raised in the petitions, the Court ordered that the later petition, G.R. No. 128077 be consolidated with G.R. No. 128077 in the resolution of March 5, 1997.

The issue raised in G.R. No. 125218 is purely procedural and technical matter. Petitioner takes exception to the resolutions of respondent CA dated March 18, 1996 and May 20, 1996 which ordered the dismissal of its Petition for Certiorari for non-compliance with Sec. 2(a) of Rule 6 of the Revised Internal Rules of the Court of Appeals by failing to attach to its petition other pertinent documents and papers and for attaching copies of pleadings which are blurred and unreadable. Petitioner argues that respondent appellate court seriously erred in giving more premium to form rather than the substance.

We agree with the petitioner. A strict adherence to the technical and procedural rules in this case would defeat rather than meet the ends of justice as it would result in the violation of the substantial rights of petitioner. At stake in the appeal filed by petitioner before the CA is the exercise of their property rights over the disputed premises which have been expropriated and have in fact been ordered condemned in favor of the City of Manila. In effect, the dismissal of their appeal in the expropriation proceedings based on the aforementioned grounds is tantamount to a deprivation of property without due process of law as it would automatically validate the expropriation proceedings based on the aforementioned grounds is tantamount to a deprivation of property without due process of law as it would automatically validate the expropriation proceedings which the petitioner is still disputing. It must be emphasized that where substantial rights are affected, as in this case, the stringent application of procedural rules may be relaxed if only to meet the ends of substantial justice.

In these instances, respondent CA can exercise its discretion to suspend its internal rules and allow the parties to present and litigate their causes of action so that the Court can make an actual and complete disposition of the issues presented in the case. Rather than simply dismissing the petition summarily for non-compliance with respondent court’s internal rules, respondent CA should have instead entertained petitioner Filstream’s petition for review on Certiorari, and ordered petitioner to submit the corresponding pleadings which it deems relevant and replace those which are unreadable. This leniency could not have caused any prejudiced to the rights of the other parties.

With regard to the other petition, G.R. No. 128077, petitioner Filstream objects to the issuance by respondent CA of the restraining order and the preliminary injunction enjoining the execution of the writ of demolition issued in the ejectment suit (Civil Case No. 140817-CV) as an

incident to private respondents’ pending petition assailing the dismissal by the RTC of Manila, Branch 33, of the consolidated petitions for certiorari filed by private respondents and the City of Manila on the ground of forum shopping.

The propriety of the issuance of the restraining order and the writ of preliminary injunction is but a mere incient to the actual controversy which is rooted in the assertion of the conflicting rights of the parties in this case over the disputed premises. In order to determine whether private respondents are entitled to the injunctive reliefs granted by respondent CA, we deemed it proper to extract the source of discord.

Petitioner Filstream anchors its claim by virtue of its ownership over the properties and the existence of a final and executory judgment against private respondents ordering the latter’s ejectment from the premises (Civil Case No. 140817-CV).

Private respondents’ claim on the other hand hinges on an alleged supervening event which has rendered the enforcement of petitioner’s rights moot, that is, the expropriation proceedings (Civil Case No. 94-70560) undertaken by the City of Manila over the disputed premises for the benefit of herein private respondents. For its part, the City of Manila is merely exercising its power of eminent domain within its jurisdiction by expropriating petitioner’s properties for public use.

There is no dispute as to the existence of a final and executory judgment in favor of petitioner Filstream ordering the ejectment of private respondents from the properties subject of this dispute. The judgment in the ejectment suit became final and executory after private respondents failed to interpose any appeal from the adverse decision of the Court of Appeals dated August 25, 1994 in CA-G.R. SP No. 33714. Thus, petitioner has every right to assert the execution of this decision as it had already became final and executory.

However, it must also be conceded that the City of Manila has an undeniable right to exercise its power of eminent domain within its jurisdiction. The right to expropriate private property for public use is expressly granted to it under Section 19 of the 1991 Local Government Code, to wit:

SECTION 19. Eminent Domain – A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided, however, that the power of eminent domain may not be exercised unless a valid and definite offer has been previously made to the owner, and such offer was not accepted; Provided, further, That the local government unit may immediately take possession of the property upon the filing of the expropriation proceedings and upon making a deposit with the proper court of at least fifteen (15%) of the fair market value of the property based on the current tax declaration of the property to be expropriated: Provided, finally, That the amount to be paid for the expropriated property shall be determined by the proper court, based on the fair market value at the time of the taking of the property.” (Italics supplied)

More specifically, the City of Manila has the power to expropriate private property in the pursuit of its urban land reform and housing program as explicitly laid out in the Revised Charter of the City of Manila (R.A. No. 409) as follows:

“General powers – The city may have a common seal and alter the same at pleasure, and may take, purchase, receive, hold, lease, convey, and dispose of real and personal property for the general interest of the city, condemn private property for public use, contract and be contracted with, sue and be sued, and prosecute and defend to final judgment and execution, and exercise all the powers hereinafter conferred.” (R.A. 409, Sec. 3; Italics supplied).

x x x x x x x x x

“Sec. 100. The City of Manila is authorized to acquire private lands in the city and to subdivide the same into home lots for sale on easy terms to city residents, giving first priority to the bona fide tenants or occupants of said lands, and second priority to laborers and low-salaried employees. For the purpose of this section, the city may raise necessary funds by appropriations of general funds, by securing loans or by issuing bonds, and, if necessary, may acquire the lands through expropriation proceedings in accordance with law, with the approval of the President x x x”. (Italics supplied).

In fact, the City of Manila’s right to exercise these prerogatives notwithstanding the existence of a final and executory judgment over the property to be expropriated has been upheld by this Court in the case of Philippine Columbian Association vs. Panis, G.R. No. 106528, December 21, 1993. Relying on the aforementioned provisions of the Revised Charter of the City of Manila, the Court declared that:

“The City of Manila, acting through its legislative branch, has the express power to acquire private lands in the city and subdivide these lands into home lots for sale to bona-fide tenants or occupants thereof, and to laborers and low-salaried employees of the city.

That only a few could actually benefit from the expropriation of the property does not diminish its public use character. It is simply not possible to provide all at once land and shelter for all who need them (Sumulong v. Guerrero, 154 SCRA 461 [1987]).

Corollary to the expanded notion of public use, expropriation is not anymore confined to vast tracts of land and landed estates (Province of Camarines Sur v. Court of Appeals, G.R. Nol 103125, May 17, 1993; J. M. Tuason and Co., Inc. v. Land Tenure Administration, 31 SCRA 413 [1970]). It is therefore of no moment that the land sought to be expropriated in this case is less than the half a hectare only (Pulido v. Court of Appeals, 122 SCRA 63 [1983]).

Through the years, the public use requirement in eminent domain has evolved into a flexible concept, influenced by changing conditions (Sumulong v. Guerrero, supra; Manotok v. National Housing Authority, 150 SCRA 89 [1987]; Heirs of Juancho Ardona v. Reyes, 125 SCRA 220 [1983]). Public use now includes the broader notion of indirect public benefit or advantage, including a particular, urban land reform and housing.”

We take judicial notice of the fact that urban land reform has become a paramount task in view of the acute shortage of decent housing in urban areas particularly in Metro Manila. Nevertheless, despite the existence of a serious dilemma, local government units are not given an unbridled authority when exercising their power of eminent domain in pursuit of solutions to these problems. The basic rules still have to be followed, which are as follows: “no person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws (Art. 3, Sec. 1, 1987 Constitution); private property shall not be taken for public use without just compensation (Art. 3, Section 9, 1987 Constitution)”. Thus the exercise by local government units of the power of eminent domain is not without limitations. Even Section 19 of the 1991 Local Government Code is very explicit that it must comply with the provisions of the Constitution and pertinent laws, to wit:

“SECTION 19. Eminent Domain. – A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws: x x x.” (Italics supplied).

The governing law that deals with the subject of expropriation for purposed of urban land reform and housing in Republic Act No. 7279 (Urban Development and Housing Act of 1992) and Sections 9 and 10 of which specifically provide as follows:

Sec. 9. Priorities in the acquisition of Land – Lands for socialized housing shall be acquired in the following order:

(a) Those owned by the Government or any of its sub-divisions, instrumentalities, or agencies, including government-owned or –controlled corporations and their subsidiaries;

(b) Alienable lands of the public domain;

(c) Unregistered or abandoned and idle lands;

(d) Those within the declared Areas of Priority Development, Zonal Improvement sites, and Slum Improvement and Resettlement Program sites which have not yet been acquired;

(e) Bagong Lipunan Improvement sites and Services or BLISS sites which have not yet been acquired; and

(f) Privately-owned lands.

Where on-site development is found more practicable and advantageous to the beneficiaries, the priorities mentioned in this section shall not apply. The local government units shall give budgetary priority to on-site development of government lands.

“Sec. 10. Modes of Land Acquisition. – The modes of acquiring lands for purposes of this Act shall include, among others, community mortgage, land swapping, land assembly or consolidation, land banking, donation to the Government, joint venture agreement, negotiated purchase, and expropriation: Provided, however, That expropriation shall be resorted to only when other modes of acquisition have been exhausted: Provided further, That where expropriation is resorted to, parcels of land owned by small property owners shall be exempted for purposes of this Act: Provided, finally, That abandoned property, as herein defined, shall be reverted and escheated to the State in a proceeding analogous to the procedure laid down in Rule 91 of the Rules of Court.

For the purpose of socialized housing, government-owned and foreclosed properties shall be acquired by the local government units, or by the National Housing Authority primarily through negotiated purchase: Provided, That qualified beneficiaries who are actual occupants of the land shall be given the right of first refusal.” (Italics supplied).

Very clear from the abovequoted provisions are the limitations with respect to the order of priority in acquiring private lands and in resorting to expropriation proceedings as means to acquire the same. Private lands rank last in the order of priority for purposes of socialized housing. In the same vein, expropriation proceedings are to be resorted to only when the other modes of acquisition have been exhausted. Compliance with these conditions must be deemed mandatory because these are the only safeguards in securing the right of owners of private property to due process when their property is expropriated for public use.

Proceeding from the parameters laid out in the above disquisitions, we now pose the crucial question: Did the city of Manila comply with the abovementioned conditions when it expropriated petitioner Filstream’s properties? We have carefully scrutinized the records of this case and found nothing that would indicate the respondent City of Manila complied with Sec. 9 and Sec. 10 of R.A. 7279. Petitioners Filstream’s properties were expropriated and ordered condemned in favor of the City of Manila sans any showing that resort to the acquisition of other lands listed under Sec. 9 of RA 7279 have proved futile. Evidently, there was a violation of petitioner Filstream’s right to due process which must accordingly be rectified.

Indeed, it must be emphasized that the State has a paramount interest in exercising its power of eminent domain for the general good considering that the right of the State to expropriate private property as long as it is for public use always takes precedence over the interest of private property owners. However we must not lose sight of the fact that the individual rights affected by the exercise of such right are also entitled to protection, bearing in mind that the exercise of this superior right cannot override the guarantee of due process extended by the law to owners of the property to be expropriated. In this regard, vigilance over compliance with the due process requirements is in order.

WHEREFORE, the petitions are hereby GRANTED. In G.R. 125218, the resolutions of the Court of Appeals in CA-G.R. SP No. 36904 dated March 18, 1996 and May 20, 1996 are hereby REVERSED and SET ASIDE. In G.R. No. 128077, the resolution of the Court of Appeals in CA-G.R. SP No. 43101 dated January 28, 1997 and February 18, 1997 are REVERSED and SET ASIDE.

SO ORDERED.