Dela cruz vs paras

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them was in effect withdrawn without judicial hearing. 2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." 7There 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. 11An 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.
Velasco vs villegas

FERNANDO, C.J.:

This is an appeal from an order of the lower court dismissing a suit for declaratory relief challenging
the constitutionality based on Ordinance No. 4964 of the City of Manila, the contention being that it
amounts to a deprivation of property of petitioners-appellants of their means of livelihood without due
process of law. The assailed ordinance is worded thus: "It shall be prohibited for any operator of any
barber shop to conduct the business of massaging customers or other persons in any adjacent room
or rooms of said barber shop, or in any room or rooms within the same building where the barber
shop is located as long as the operator of the barber shop and the room where massaging is
conducted is the same person." 1 As noted in the appealed order, petitioners-appellants admitted that
criminal cases for the violation of this ordinance had been previously filed and decided. The lower court,
therefore, held that a petition for declaratory relief did not lie, its availability being dependent on there
being as yet no case involving such issue having been filed. 2

Even if such were not the case, the attack against the validity cannot succeed. As pointed out in the
brief of respondents-appellees, it is a police power measure. The objectives behind its enactment
are: "(1) To be able to impose payment of the license fee for engaging in the business of massage
clinic under Ordinance No. 3659 as amended by Ordinance 4767, an entirely different measure than
the ordinance regulating the business of barbershops and, (2) in order to forestall possible
immorality which might grow out of the construction of separate rooms for massage of
customers." 3 This Court has been most liberal in sustaining ordinances based on the general welfare
clause. As far back as U.S. v. Salaveria, 4 a 1918 decision, this Court through Justice Malcolm made clear
the significance and scope of such a clause, which "delegates in statutory form the police power to a
municipality. As above stated, this clause has been given wide application by municipal authorities and
has in its relation to the particular circumstances of the case been liberally construed by the courts. Such,
it is well to really is the progressive view of Philippine jurisprudence." 5 As it was then, so it has continued
to be. 6 There is no showing, therefore, of the unconstitutionality of such ordinance.

WHEREFORE, the appealed order of the lower court is affirmed. No costs.

Anglo-fil

These two petitioners foe certiorari seek to annul the order of the Court of First Instance of Manila
issued ex-parte, lifting the restraining orders it had previously issued. The setting aside of the
restraining orders enabled the implementation of the Management Contract executed by and
between respondents, providing for respondent Ocean Terminal Services, Inc. as the exclusive
stevedoring contractor at the South Harbor, Port of Manila.

Involved in these two petitions is the operation of stevedoring work in the South Harbor of the Port of
Manila. Stevedoring, as the term is understood in the port business, consists of the handling of cargo
from the hold of the ship to the dock, in case of pier-side unloading, or to a barge, in case of
unloading at sea. The loading on the ship of outgoing cargo is also part of stevedoring work.
Stevedoring charges at rates approved by the Government are assessed and collected for the
services.

The Philippines Ports Authority (PPA), the government agency charged with the management and
control of all ports, was created by Presidential Decree No. 505, promulgated on July 11, 1974, later
superseded by Presidential Decree No. 857 dated December 23, 1975. The PPAs function is to
carry out an integrated program for the planning, development, financing, and operation of ports and
port districts throughout the country. Among other things, the powers, duties, and jurisdiction of the
Bureau of Customs concerning arrastre operations were transferred to and vested in the PPA.

The Philippine Integrated Port Services, Inc., (PIPSI), petitioner in G.R. No. 54966, is a stevedoring
operator at the Manila South Harbor. Anglo-Fil Trading Corporation, Aduana Stevedoring
Corporation, Anda Stevedoring Corporation, Ben Paz Port Service, Inc., Manila Stevedoring and
Arrastre Services, Inc., (Anglo-Fil, et al.,) petitioners in G.R. No. 54958, are stevedoring and arrastre
operators and contractors, likewise at Manila South Harbor, Port of Manila. Anglo-Fil, et al., are
members of the Philippine Association of Stevedoring Operators and Contractors, Inc. (PASOC).

Prior to the present controversy which arose as a result of the actions of the PPA, twenty-three (23)
contractors competed at the South Harbor for the performance of stevedoring work. The licenses of
these contractors had long expired when the PPA took over the control and management of ports but
they continued to operate afterwards on the strength of temporary permits and hold-over authorities
issued by PPA.

On May 4, 1976, the Board of Directors of PPA passed Resolution No. 10, approving and adopting
and adopting a set of policies on Port Administration, Management and Operation. The PPA adopted
as its own the own the Bureau of Customs policy of placing on only one organization the
responsibility for the operation of arrastre and stevedoring services in one port.

On April 11, 1980, Presidential Ferdinand E. Marcos issued Letter of Instruction No. 1005-A which
among other things, directed PPA;

To expeditiously evaluate all recognized cargo-handling contractors and port-related service

operators doing business in all Port Districts in the country under such criteria as PPA may
set and to determine the qualified contractor or operator under said criteria in order to ensure
effective utilization of port facilities, prevent pilferage and/or pinpoint responsibility for its and
provide optimum services to major ports vital to the countrys trade and economy.

This was followed by the Presidents memorandum to respondent Bacling dated April 18, 1980,
directing submission of a report on the integrated of the stevedoring operations in Manila South
Harbor and emphasizing the need for such integration as well as the strengthening of the PPA in
order to remedy the problems therein. In compliance therewith, PPA made a study evaluation of the
arrastre and stevedoring industry in the ports where integration had not yet been achieved. A special
committee was created on April 25, 1980 to make a final evaluation of existing operators in the
South Harbor and to select the most qualified among them.

On April 28, 1980, the committee submitted its report recommending the award of an exclusive
contract for stevedoring services in the South Harbor to respondent Ocean Terminal Services, Inc.
(OTSI) after finding it the best qualified among the existing contractors. The committee report and
recommendation were indorsed by respondent Primitivo Solis, Jr., Port Manager of Manila, to
respondent Baclig on April 30, 1980. On May 14, 1980, the latter approved the recommendation.

In accordance with the Presidents memorandum dated April 18, 1980, PPA submitted the committee
report to him. On May 24, 1980, the President approved the recommendation to award an exclusive
management contract to OTSI.

On June 27, 1980, PPA and OTSI entered into a management contract which provided, among
others, for a five-year exclusive operation by OTSI of stevedoring services in the South Harbor,
renewable for another five (5) years. The contract set the commencement of the exclusive operation
by OTSI upon proper determination by PPA which shall not be earlier that two (2) months from the
approval of the contract by the Board of Directors of the PPA. The latter gave its approval on June
27, 1980.

On July 23, 1980, petitioner PIPSI instituted an action against PPA and OTSI for the nullification of
the contract between the two, the annulment of the 10% of gross stevedoring revenue being
collected by PPA, and injunction with preliminary injunction. The case was docketed as Civil Case
No. 133477 in the Court of First Instance of Manila, provided over by respondent Judge Alfredo
Lazaro. On July 29, 1980, the respondent court issued a restraining order ex-parte, enjoining
respondents PPA and OTSI from implementing the exclusive contract of stevedoring between them.

On August 21, 1980, with leave of court, petitioners, Anglo-Fil, et al., filed their complaint in
intervention. The motion was granted and on August 22, 1980, respondent court issued another ex-
parte restraining order in the case to include the petitioners Anglo-Fil et al., under the benefits of
such order.

On August 30, 1980, PPA filed an urgent motion to lift the restraining orders "in view of their long
delay in the resolution of the injunction incident and the countervailing public interest involved." On
September 1, 1980, respondent Judge issued an order, which reads:

"AS PRAYED FOR, the restraining orders issued by the this Court on July 29, 1980 and August 20,
1980, are hereby dissolved, lifted, and set aside without prejudice to the Courts resolution on the
propriety of issuing the writ of preliminary injunction prayed for by the petitioners."

On September 5, 1980, PPA sent a letter to the General Manager of PIPSI informing him that due to
the lifting of the temporary restraining order, it was withdrawing PIPSIs hold-over authority to
operate or provide stevedoring services at South Harbor effective September 7, 1980.

Petitioners Anglo-Fil, et al., and PIPSI, therefore, filed the present petitions for certiorari with
preliminary injunction alleging that the lifting of the retraining orders ex-parte by respondent Judge
was clearly affected with grave abuse of discretion amounting to lack of jurisdiction. They also
applied for the issuance in the meantime of a restraining order.

On September 9, 1980, we ordered the consolidation of the two cases and on August 12, 1980,
heard the petitioners motions for a restraining order.

On September 15, 1980, the respondent court issued an order in Civil Case No. 133477 denying the
application of petitioners for a writ of preliminary injunction and affirming its order of September 1,
1980 lifting the temporary restraining orders issued in the case.

On the same day, the Katipunan ng mga Manggagawa sa Daungan (KAMADA), a labor federation
and its thirteen (13) member labor organizations filed a petition to intervene in the consolidated
cases. According to KAMADA, its members would lose their jobs if the contract was implemented. It
also alleged that the collective bargaining contract between OTSI and PWUP would be prejudicial to
workers because KAMADA members received greater benefits from the ousted contractors;

On September 29, 1980, PIPSI filed a supplemental petition to annul the order of the respondent
judge denying the application for preliminary injunction and affirming the orders issued on July 29
and August 22, 1980. 1wphi1
On October 14, 1980, PPA filed its comment with opposition to preliminary injunction stating that the
lifting of the restraining orders by respondent judge was intended to preserve the status quo pending
resolution of the preliminary injunction; that said orders were issued without hearing or bond,
therefore, the dissolution was proper considering that it had been in force for one month and an early
resolution of the motion for injunction was not in sight, and that in dissolving an injunction already
issued, the court cannot be considered as having acted without jurisdiction or in excess thereof even
if dissolution had been made without previous notice to the adverse party and without a hearing.
Furthermore, it argued that when the purpose of an administrative determination is to decide
whether a right or privilege which an applicant does not possess shall be granted to him or withheld
in the exercise of a discretion vested by statute, notice and hearing are not necessary. It also added
that the policy of integration in the award by PPA to OTSI is impressed with public interest while what
is involved as far as petitioners were concerned was merely their alleged right to operate
stevedoring services, a property right the denial of which could easily be restored in the event the
respondent court decided that petitioners are entitled to it.

In their consolidated reply, Anglo-Fil, et al., argued that the temporary order in their favor was not
issued ex-parte for the following reasons: a) it was issued when PIPSI and PPA were already
conducting hearings on the petition for preliminary injunction; b) it was announced in open court; and
c) PPA did not object to such issuance. Likewise, they argued that although a permit to operate is a
privilege, its withdrawal must comply with due process of law just like the practice of law, medicine,
or accountancy, and that not only property rights are involved but their very livelihood, their right to
live.

On October 21, 1980, we issued a resolution granting the temporary mandatory restraining order
"effective immediately ordering respondents to allow the workers represented by said petitioner-
intervenors to render the stevedoring services performed by them on foreign vessels in the Manila
South Harbor before the execution of the exclusive stevedoring contract of June 27, 1980 until
further orders of the Court, the order of respondent Judge, dated September 1 and 15, 1980 as well
as the implementing letter of Philippine Ports Authority of September 5, 1980 to the contrary
notwithstanding."

On October 24, 1980, PPA issued Memorandum Order No. 23 providing for guidelines in
implementing the temporary mandatory restraining order of the Supreme Court dated October 21,
1980, to wit:

xxx xxx xxx

(1.) The Office of the Harbor Master shall determine which union has serviced a particular
vessel for the period from January 1, 1980 to June 26, 1980. The number of services
performed by a particular union for a given vessel shall be quantified for the said period after
which each union shall be identified whether they are affiliated with PWUP or KAMADA.

(2.) The most number of times that a union has serviced a particular vessel with its affiliation
properly considered shall continue to service said vessel for its incoming calls or arrivals.

(3.) If there is a tie in the number of services performed by both PWUP and KAMADA
affiliated unions, the last union that serviced said vessel shall be allowed to continue
servicing the same on all its incoming calls or arrivals.

(4.) Once the union has been properly identified during the berthing meeting, the Harbor
Master shall inform Ocean Terminal Services, Inc. accordingly and shall be authorized to
 negotiate with the union or the gang leader concerned on the number of gangs as may be
required by the vessel or its agent.

(5.) All unions in this order shall refer only to South Harbor stevedoring union.

(6.) KAMADA shall have the duty and responsibility to certify that the stevedores deployed in
any given vessel allowed for their work are bona fide members of their group and that they
were the same stevedores who serviced assigned vessel prior to the stevedoring services
integration.

On November 7 and 10, 1980 OTSI and PPA filed their separate answers to KAMADAs petition in
intervention. They assured this Court that none of the legitimate stevedores who had joined the
KAMADA would be displaced from work provided he joined PWUP. Written guarantees of this
assurance were separately submitted to this Court by both OTSI and PWUP. OTSI further alleged in
its answer that, contrary to the claim of KAMADA, the CBA signed by OTSI with PWUP represented
the best of employment ever offered to the stevedores in the South Harbor.

On November 13, 1980, Anglo-Fil, et al., filed an urgent motion to cite PPA and OTSI in contempt on
the following grounds: 1) issuance of PPA-POM Memorandum No. 23, series of 1980; 2) letter of
October 29, 1980 of PPA to Anglo-Fil, et al., denying a "non-existing" request for permission to
operate by the latter; and 3) refusal of PPA authorities to issue gate passes to KAMADA-affiliated
stevedores to be used and employed by Anglo-Fil, et al., in their resumption of work, pursuant to the
Supreme Court order of October 21, 1980.

On November 20, 1980, PPA filed a motion to lift the temporary mandatory restraining order but the
same was denied by this Court.

On November 26, 1980, an urgent motion for clarification of the resolution of October 21, 1980 was
filed by KAMADA seeking clarification as to which company its workers should work for, alleging that
after Antranco Stevedores Union (Antranco) a KAMADA member, had received a letter from OTSI to
supply the necessary stevedores gang to service the S/S "Success", Anglo-Fil Trading Corporation
prohibited its employees who are members of Antranco from working for OTSI in the light of the
resolution of this Court and the existing collective bargaining agreement between said union and
Anglo-FilTrading Corporation. As a consequence, the union was allegedly unable to service S/S
"Success" and from October 21, 1980 up to the present, OTSI failed to allow members of KAMADA
to service several vessels.

A joint manifestation was filed by respondents PPA and OTSI alleging compliance with the above
resolution to the effect that KAMADA workers have been and are being employed on the vessels
they used to serve prior to June 27, 1980, and justifying issuance of PPA-POM Memorandum No.
23, as a means to avert possible conflict among the competing union groups (PWUP and KAMADA)
involved, to provide a reasonable and fair system for determining which group had previously
worked on a vessel and should work on its subsequent calls, and to insure that only the bonafide
stevedores contemplated by the order of this Court are allowed to work.

On December 2, 1980, another motion for clarification was filed by KAMADA regarding the phrase
"foreign vessels" which it stated to be inaccurate as KAMADA members also work on vessels of
Philippine registry like those operated by Sweet Lines and Lorenzo Shipping Lines whose vessels
also dock at the Manila South Harbor. It suggested that the basis should not be the foreign vessels
but the shipping agents or charterers and consignees and that the basis for determining and
quantifying the vessels given to PWUP or KAMADA should be from January 1, 1978 to September 7,
1980.
This Court in a resolution dated December 9, 1980, granted the motion of KAMADA to wit:

xxx xxx xxx

x x x (3) GRANT the motion for clarification by petitioners-intervenors issuing a resolution previously
released, the pertinent portion of which reads, for while the order of October 21, 1980 is on its face
quite definite as to what it purports to require, this resolution may remove any doubt as to its purpose
and intent, thus assuring the utmost fidelity in its compliance. The order requires and mandates that
all workers represented by said petitioners-invtervenors can continue rendering stevedoring services
performed by them on foreign vessels, in Manila South Harbor before the execution of the exclusive
stevedoring contract of June 27, 1980, until further orders of the Court, without any reference to any
particular vessel, the decisive factor being shipping lines involved and the fact that they were at that
time rendering stevedoring services, irrespective of the labor unions to which they are affiliated. xxx."

Inspite of our clarificatory order, various problems in its implementation appear to have beset the
parties. Repeated motions and manifestations and countermotions and countermanifestations were
filed with unbroken regularity, swelling the records of these petitions to unusual proportions. After
requiring the parties to submit their respective positions, we issued on January 6, 1983, a resolution
which modified our earlier orders as follows:

"G.R. No. 54958 (Anglo-Fil Trading Corporation, et al. vs. Hon.Alfredo Lazaro, et al.); and G.R. No.
54966 (Philippine Integrated Port Services, Inc. vs. Hon. Alfredo Lazaro, et al.). Considering the
urgent motion and manifestation of petitioners-intervenors filed on March 20, 1982, the comment of
respondent Ocean Terminal Services, Inc., filed on June 7, 1982, the comment of respondent
Philippine Ports Authority filed on June 8, 1982, the reply of petitioners-intervenors filed on June 28,
1982, the rejoinder of respondent Ocean Terminal Services, Inc., filed on July 27, 1982, the rejoinder
of respondent Philippine Ports Authority filed on August 6, 1982 and the supplemental motion and
manifestation filed by petitioners-intervenors on September 15, 1982, the Court Resolved to direct
the parties concerned to observe the following guidelines in the allocation of stevedoring
assignments: 1. Any vessel belonging to a shipping line shall be assigned for stevedoring work to the
union that had served that shipping line the greatest number of times as appearing in the PPA
records for the six-month period immediately preceding the execution of the stevedoring contract of
OTSI. 2. The above notwithstanding, whenever a vessel destined to or proceeding from the Port of
Manila has been chartered for a particular voyage by a consignee or any person having interest in
the goods carried therein, such vessel shall be assigned for stevedoring work to the union that
served the charterer the greater number of times as appearing in the PPA records for six-month
period immediately preceding the execution of the stevedoring contract of OTSI. In case there are
two or more charterer who pays the highest freight charges shall be the determining fact in the
assignment. 3. Vessels of new shipping lines calling at the Port of Manila for the first time as well as
vessels contracted by new charterers shall be assigned to the union of choice of the new shipping
line or charterer as the case may be."

The main issue in these petitions is whether or not the respondent judge acted with grave abuse of
discretion when he lifted ex-parte the temporary restraining order he had earlier issued also ex-
parte.

From the viewpoint of procedure, we see no grave abuse of discretion or want of jurisdiction.
Subsequent to the issuance to the questioned order, the respondent court heard the parties on the
petitioners application for a writ of preliminary injunction and, after hearing the parties evidence and
arguments, denied the application for the writ. We also agree the with the respondents that it is not
grave abuse of discretion when a court dissolves ex-parte abuse of discretion when a court
dissolves ex-parte a restraining order also issued ex-parte. (Calaya v. Ramos, 79 Phil, 640; Clarke v.
Philippine Ready Mix Concrete Co., 88 Phil. 460; Larap Labor Union v. Victoriano, 97 Phil. 435.)

The restraining orders dated July 29, 1980 and August 22, 1980 respectively provide:

xxx xxx xxx

"Finding the allegations in the complaint to be sufficient in form and in substance, a temporary
restraining order is hereby issued x x x.

xxx xxx xxx

"and to maintain the status quo until further orders from this court.

x x x.

xxx xxx xxx

"It appearing that on July 29, 1980, this Court issued an order granting the prayer of the original
plaintiff for a temporary restraining order, the same order is hereby reiterated and to include Anglo-Fil
Trading Corporation. x x x.

xxx xxx xxx

"plaintiffs-intervenors herein and for the parties to serve the status quo until further orders from this
Court." (Italics supplied)

A restraining order is an order to maintain the subject of controversy in status quo until the hearing of
an application for a temporary injunction. Unless extended by the court, a restraining order ceases to
be operative at the expiration of the time fixed by its terms. In cases where it has been granted ex-
parte, it may be dissolved upon motion before answer. (See the Revised Rules of Court, Francisco,
pp. 184-186, citing 43 CJS, 28 Am. Jur)

From the aforequoted dispositive portions, it is beyond doubt that the duration of the restraining
orders was "until further orders from the court." In lifting said restraining orders on September 1,
1980, respondent judge merely exercised the prerogative he earlier reposed upon himself to
terminate such orders when circumstances so warranted. Considering again that the previous grants
of the restraining orders in favor of petitioners were made ex-parte and without bond, the need for a
notice and hearing in regard to such lifting was not necessary, much less mandatory.

The petitioners contention that the lifting of the restraining order had rendered moot and academic
the injunction case in the trial court is likewise untenable. A restraining order is distinguished from an
injunction in that it is intended as a restraint on the defendant until the propriety of granting an
injunction pendente lite can be determined, and it goes no further than to preserve the status quo
until such determination. Therefore, the grant, denial, or lifting of a restraining order does not in
anyway pre-empt the courts power to decide the issue in the main action which in the case at bar, is
the injunction suit. In fact, the records will show that the trial court proceeded with the main suit for
injunction after the lifting of the restraining orders.
Petitioner PIPSI also maintains that there were no considerations of public interest which supported
the lifting. On the contrary, the lifting allegedly permitted a situation palpably against public interest,
that is, confiscation of petitioners business and those similarly situated. This, again, is untenable.

The streamlining of the stevedoring activities in the various ports of the Philippines was undertaken
by PPA to implement LOI No. 1005-A. The public interest, public welfare, and public policy sought to
be subserved by said LOI are clearly set forth in its whereas clauses. They areas follows:

xxx xxx xxx

"WHEREAS, it is a declared national policy to support and accelerate the development of

government port facilities as well as vital port development projects and services;

xxx xxx xxx

"WHEREAS, it is a prime concern of government to protect the interests of legitimate port workers
and port users in the country;

xxx xxx xxx

"WHEREAS, there is need to rationalize and integrate cargo-handling and other port-related services
as may have been contracted out or authorized by the PPA in the various ports of the country;

"WHEREAS, the procedures of voluntary merger, consolidation and/or bidding for the awarding or
contracting of cargo-handling and other port-related services have heretofore proven ineffective and
resulted in prolonged and unproductive wrangling, all to the detriment of efficient port operations and
development; and

"WHEREAS, it now become necessary to revitalize and streamline the PPA to carry out its functions
and duties as a vital link in the governmental machinery and the thrust for national economic
development;"

xxx xxx xxx

Clearly, there is a reasonable relation between the undeniable existence of an undesirable situation
and the statutory attempt to avoid it. "Public welfare, then, lies at the bottom of the enactment of said
law, and the state in order to promote the general welfare may interfere with personal liberty, with
property, and with business and occupations." (See Alalayan v. National Power Corporation, 24
SCRA 172; Ermita-Malate Hotel and Motel Owners Association v. City Mayor, 20 SCRA 849) These
considerations were considered by the respondent judge when he issued his questioned order dated
September 1, 1980. He stated:

xxx xxx xxx

"While in the main this Court is not insensitive to the plight of the petitioners, the overriding
considerations of public interest, as impressed by the Office of the Solicitor General, must be given
greater weight and important. This is compounded by the way and manner by which the parties are
now fashioning and shaping their respective positions. The proceedings, to say the least, have
become accented with a myriad of contentious facts and intercalated with complex legal issues. For
the matter is not a simple determination of right and wrong but a collision of ideas and viewpoints. All
these, indeed, militate against an early resolution of the application for a writ of preliminary
injunction.

xxx xxx xxx

The above statement are sufficient bases for the lifting of the order. It is clear that not only did the
respondent judge base the lifting on consideration of public interest but also on the fact that the
restraining orders were issued ex-parte without bond and that the resolution of the motion for
preliminary injunction was still far from being decided.

The statement of the respondent judge that "it cannot sit in judgment, without prejudice to public
interest, on the truth and wisdom of the allegation in support of the Urgent Motion" should not be
interpreted to mean that courts cannot pass upon the greater issue of whether or not public interest
is served or is prejudiced. The determination by PPA that the measure sought to be enforced is
justified by public interest and the PPA manner of implementing a Presidential Decree and Letters of
Instruction are subject to judicial review.

The Constitution defines the powers of government. Who is to determine the nature, scope, and
extent of such powers? The Constitution has provided for the instrumentality of the judiciary as the
rational way. In determining whether or not the exercise of powers vested by the Constitution truly
serves the general welfare or is affected by public interest, the judiciary does not assert any
superiority over the other departments but only fulfills the solemn and sacred obligation assigned to
it by the Constitutions to determine conflicting claims of authority and to establish for the parties in
an actual controversy the rights which that instrument secures and guarantees to them. This is in
truth all that is involved in what is termed "judicial supremacy" which properly is the power of judicial
review under the Constitutions. (See Angara vs. Electoral Commission, 63 Phil. 139) This is why
questions of expropriation of private lands, we have upheld the courts authority to make inquiry on
whether or not lands were private and whether the purpose was in fact, public. (City of Manila v.
Chinese Community of Manila, 40 Phil. 340). Similarly, in the present cases, the question of whether
or not the lifting of the restraining orders will prejudice public interest and will run counter to the
protection to labor provision of the Constitution is determinable by the judiciary under the power of
judicial review.

From the records of these petitions, it is evident that the writ of certiorari cannot be granted. The
respondent judges action was not tainted by any capricious or whimsical exercise of judgment
amounting to lack of jurisdiction.

It is settled to the point of being elementary that the only question involved in certiorari is jurisdiction,
either want of jurisdiction or excess thereof, and abuse of discretion shall warrant the issuance of the
extra-ordinary remedy of certiorari only when the same is grave as when the power is exercised in
an arbitrary or despotic manner. . . . (FS. Divinagracia Agro Commercial, Inc. v. Court of Appeals,
104 SCRA 180; Abig v. Constantino, 3 SCRA 299; Abad Santos v. Province of Tarlac, 67 Phil. 480;
Alafriz v. Nable, 72 Phil. 278; Travers Luna, Inc. v. Nable, 72 Phil. 278; and Villa Rey Transit, Inc. v.
Bello, 75 SCRA 735).

It is not sufficient, however, to resolve these petitions on whether or not there was grave abuse of
discretion tantamount to lack or exercise of jurisdiction.

The larger issue remains. Behind the maneuvering and skirmishing of the parties lies a question of
power. Does the PPA have the power and authority to award an exclusive stevedoring contract in
favor of respondent OTSI? Is the PPA-OTSI Management Contract executed pursuant to P.D. No.
857 and LOI No. 1005-A, valid?
The facts bearing on this issue are not in dispute and are worth reiterating. They are summarized by
the respondent court as follows:

xxx xxx xxx

"Before the advent of Presidential Decree No. 505, as amended by Presidential Decree No. 857, the
administration and management of the South Harbor, Port of Manila, was under the Bureau of
Customs. It appears that the plaintiffs, among others, were engaged in and allowed to operate
stevedoring services on the basis of special permits granted by the Bureau of Customs (Exhibit A).

"It further developed that the number of stevedoring operators or contractors made it difficult for the
Bureau of Customs to maintain order and discipline among them to the detriment of efficiency and
the desired performance at the South Harbor. This appears to be true with other ports. Thus, an in-
depth study and analysis of the problems attendant to arrastre and stevedoring operations was
initiated. The only solution appeared to be the integration of contractors engaged in stevedoring
services with the ultimate objective of having only one stevedoring contractor to engage in cargo-
handling service in a given port. Accordingly, on May 8, 1975, the Bureau of Customs issued
Customs Memorandum Order No. 28-75 providing guidelines for the merger of the multi-operators in
the same ports (Exhibit 1).

"On December 23, 1975, Presidential Decree No. 857 was promulgated superseding Presidential
Decree No. 505 whereby the jurisdiction of the Bureau of Customs concerning arrastre operations,
among others, were transferred and vested in the PPA.

"On May 4, 1976, the PPA, pursuant to its avowed objectives, approved the PPA policies on port
administration, management and operation, adopting as a policy the horizontal and vertical
integration of existing operators at each port (Exhibit 2 and 3).

"On January 19, 1977, a memorandum order was issued whereby the different port operators or
contractors who have existing permits, licenses, contracts, and other kinds of memorandum
agreement issued by the Bureau of Customs were Temporarily allowed the continuance of their
services on a hold-over capacity until such time when the PPA implements its own pertinent policy
guidelines on the matter (Exhibits 5 and 6).

On May 27, 1977, PPA Memorandum Order No. 21, series of 1977, was passed reiterating the
implementation of the policy on integration to insure efficiency and economic in cargo-handling
operation and provide better service to port users and to amply protect the interest of labor and the
government as well. It is the declared policy that there should only be one stevedoring contractor to
engage in cargo-handling services in a given port.

"On April 11, 1980, the Presidential issued Letter of Instruction No. 1005-A (Exhibit 7) which
directed the PPA to accelerate the rationalization of all cargo-handling services and to expeditiously
evaluate all recognized cargo-handling contractors and port related service operators under such
criteria as the PPA may set and to determine the qualified contractor or operator in order to insure
effective utilization of port facilities, prevent pilferage and/or pinpoint responsibility for it and provide
services major ports vital to the countrys trade and economy. This Letter of Instruction was dictated
by experience where the procedures of voluntary mergers, consolidation and/or bidding for the
awarding or contracting of cargo-handling and other port related services have heretofore proven
ineffective and resulted in prolonged and unproductive wrangling, all to the detriment of efficient port
operations and development.
"On April 18, 1980, the President issued a memorandum to the PPA (Annex B of the Answer and
Opposition of OCEAN) to submit its report on the integration and rationalization of the stevedoring
operation in Manila South Harbor and the submission for his approval of the resolution of the board
regarding contracts entered into in connection therewith. This memorandum was dictated by heavy
losses suffered by shippers as well as the smuggling of textiles in the South Harbor.

"Pursuant to and in compliance with the Letter of Instruction of April 11, 1980 and the Memorandum
of the President dated April 18, 1980, the PPA created a Special Evaluation Committee composed of
Atty. David R. Simon, member of the Legal Department of PPA and concurrently Assistant to the Port
of Manila, as Chairman; Mr. Leonardo Mejia, Chief of the Commercial Development Division, Port of
Manila; and, Capt. Jovito G. Tamayo, Harbor Master and Chief of the Harbor Operations Division of
the Port of Manila, as members. The respective and individual duties of the members of the
Committee taken in their integral entirely could easily sum up to an almost complete overview of the
functions of stevedoring contractors and place them in a vantage position as to provide proper
evaluation and determination of the individual performance, qualification, and compliance of PPA
requirements by each stevedoring operator.

"The Committee took into account certain factors with their corresponding percentage weights in its
determination, who among the existing operators, is most qualified for an award of an exclusive
contract. In connection therewith, OCEAN was rated 95% topping all the rest by a wide margin.

"On April 28, 1980, the Evaluation Committee submitted its report recommending the conclusion of a
management contract with OCEAN being the most qualified (Exhibit 8) which recommendation was
adopted by the PPA.

"On June 27, 1980, a management contract was executed by and between PPA and OCEAN
(Exhibit 11).

"On August 19, 1980, the President approved the exclusive management contract between PPA and
OCEAN (Exhibit 10).

"In the meantime, in letters dated July 13, 1980 (Exhibit N) and July 14, 1980 (Exhibit F), PIPSI
and INTERVENORS were informed of the management contract with OCEAN as exclusive operator
at the South harbor, Port of Manila, beginning August 27, 1980."

xxx xxx xxx

The petitioners are on extremely shaky grounds when they invoke the non-impairment clause to
sustain their charge of invalidity. According to the petitioners, contracts entered into with local and
foreign clients or customers would be impaired.

Even in the United States during the heyday of the laissez faire philosophy, we are informed that the
American Supreme Courts interpretations have never allowed the contract clause to be an inflexible
barrier to public regulation. According to Gerald Gunther, Professor of Constitutional Law at Stanford
University, historians have probably exaggerated the impact of the early contract clause decisions on
American economic and legal developments, that the protected position of corporations in the
19th century was due less to any shield supplied by the U.S. Supreme Court than to legislative
unwillingness to impose restraints-an unwillingness reflecting the laissez faire philosophy of the day.
After analyzing the leading cases on the contract clause from 1810 (Fletcher v. Peck, 6 Cranch 87)
to 1880 (Stone v. Mississippi, 101 U.S. 814) he cites the 1914 decision in Atlantic Coast Line R. Co.
v. Goldsboro (232 U.S. 548) where the U.S. Court ruled "It is settled that neither the contract clause
nor the due process clause has the effect of overriding the power of the State to establish all
regulations that are reasonably necessary to secure the health, safety, good order, comfort, or
general welfare of the community; that this power can neither be abdicated nor bargained away, and
is inalienable even by express grant; and that all contract and property rights are held subject to its
fair exercise" and Manigault v. Springs (199 U.S. 473) where the same Court stated that "parties by
entering itno contract may not stop the legislature from enacting laws intended for the public good."
(See Gunther, Cases and Materials On Constitutional Law, 1980 Edition, pp. 554-570).

In the Philippines, the subservience of the contract clause to the police power enacting public
regulations intended for the general welfare of the community is even more clearcut.

As pointed out by then Senior Associate, now Chief Justice Enrique M. Fernando, the laissez faire or
let alone philosophy has no place in our scheme of things, not even under the 1935 Constitution.
(See Fernando, The Constitution of the Philippines, Second Edition, pp. 111-114) In his concurring
opinion in Agricultural Credit and Cooperative Financing Administration v. Confederation of
Unions (30 SCRA 649, 682-683) Chief Justice Fernando stated:

"xxx With the decision reached by us today, the Government is freed from the compulsion exerted by
the Bacani doctrine of the constituent-ministrant test as a criterion for the type of activity in which it
may engage. Its constricting effect is consigned to oblivion. No doubts or misgivings need assail us
that governmental efforts to promote the public weal, whether through regulatory legislation of vast
scope and amplitude or through the undertaking of business activities, would have to face a
searching and rigorous scrutiny. It is clear that their legitimacy cannot be challenged on the ground
alone of their being offensive to the implications of the laissez-faire concept. Unless there be a
repugnancy then to the limitations expressly set forth in the Constitution to protect individual rights,
the government enjoys a much wider latitude of action as to the means it chooses to cope with grave
social and economic problems that urgently press for solution. xxx"

The Manila South Harbor is public property owned by the State. The operations of this premiere port
of the country, including stevedoring work, are affected with public interest. Stevedoring services are
subject to regulation and control for the public good and in the interest of general welfare.

Not only does the PPA, as an agency of the State enjoy the presumption of validity in favor of its
official acts implementing its statutory charter, it has more than adequately proved that the
integration of port services-is far from arbitrary and is related to the stated governmental objective.

A single contractor furnishing the stevedoring requirements of a port has in its favor the economy of
scale and the maximum utilization of equipment and manpower. In turn, effective supervision and
control as well as collection and accounting of the government share of revenues are rendered
easier for PPA than where there are 23 contractors for it to oversee. As respondent court found from
the evidence, the multiple-contractor system has bred cut-throat competitions in the port.
Understandably, most contractors had been unable to acquire sufficient modern facilities, observe
labor standards for their workers, maintain efficiency in services, and pay PPA dues. The questioned
program would accelerate the rationalization and integration of all cargo-handling activities and port-
related services in major ports and the development of vital port facilities, projects, and services.

The contention of petitioners Anglo-Fil, et al., that due process was violated resulting to a
confiscatory effect on private property is likewise without merit.

In the first place, the petitioners were operating merely on "hold-over" permits. These permits which
were based on PPA memorandum Order No. 1, dated January 19, 1977 provided:

xxx xxx xxx

"In view thereof and pending proper evaluation by this Office of all existing permits, licenses,
contracts, and other kinds of memorandum agreements issued by the Bureau of Customs to the
different port operators or contractors, you may temporarily allow the continuance of their services
on a hold-over capacity until such time when the PPA implements its own pertinent policy guidelines
on the matter.

xxx xxx xxx

Clearly, all hold-over permits were by nature temporary and subject to subsequent policy guidelines
as may be implemented by PPA. Such should have served as sufficient notice to petitioners that, at
any time, their authorities may be terminated.

Petitioners PIPISI would also impress upon this Court that the certification issued to it and its fellow
contractors by PPA, dated August 30, 1979, showed that they were not only kept in the dark as to
PPAs subsequent move to award OTSI an exclusive contract, but that they were actually lulled into
believing that their temporary permits were being given pending issuance of their PTO or Permit to
Operate.

We do not believe so. The second paragraph of the certification states that the hold-over permit was
still subject to the memorandum quoted above. The certification provided that: "In accordance with
PPA Memo Circular No. I, dated January 9, 1977, the said firm is allowed to continue operating at
the South Harbor, Port manila." (italics supplied.)

Whether or not the petitioners would be issued a PTO depended on the sound discretion of PPA and
on the policies, rules and regulations that the latter may implement in accordance with the statutory
grant of power. Petitioners, therefore, cannot be said to have been deprived of property without due
process because, in this respect, what was given them was not a property right but a mere privilege
and they should have taken cognizance in the South Harbor, their permits can be withdrawn anytime
the public welfare deems it best to do so.

The absence of arbitrariness or bad faith is manifest in the selection procedure adopted. The award
in fabvor of OTSI was the result of an evaluation of performance of existing contractors made by a
special committee created by the PPA. The respondent court found from the evidence that the
members of that committee were "in a vantage position as to provide proper evaluation and
determination of the individual performance, qualification, and compliance of the PPA requirements
by each stevedoring operator." The committee rated OTSI with the highest grade of 95% in its
evaluation.

And significantly, since no less than the President of the Philippines approved the award of the
management contract to OTSI presumptively after through consideration of all factors relevant to
efficient stevedoring services, it is difficult for this Court to find a violation of due process in the
selection procedure. In the language of the Chief Justice in Lim v. Secretary (34 SCRA 751) if the
task of overturning a decision of a department head is attended with difficulty, the burden of
persuasion becomes much heavier when the challenged action is encased in the armor of an explicit
presidential approval. In the case at bar, there is nothing in the record remotely assailing the motives
of the President in giving his imprimatur to the award.

In seeking the nullification of the management contract, the petitioners also invoke the constitutional
provision on monopolies and combination. Section 2, Article XIV of the Constitution provides:

The state shall regulate or prohibit private monopolies when the public interest so requires. No
1wphi1

combinations in restraint of trade or unfair competition shall be allowed.

Private monopolies are not necessarily prohibited by the Constitution. They may be allowed to exist
but under State regulation. A determination must first be made whether public interest requires that
the State should regulate or prohibit private monopolies. A distinction prevails as regards
combinations in restraint of trade and unfair competition which are prohibited outright by the
Constitution.

By their very nature, certain public services or public utilities such those which supply water,
electricity, transportation, telephone, telegraph, etc. must me given exclusive franchises if public
interest is to be served. Such exclusive franchises are not violative of the law against monopolies.
(58 Corpus Juris Segundum 958-964).

Neither is the management contract violative of the Anti-Graft Law. It is a contract executed in
pursuance to law and the instructions of the President to carry out government objectives to promote
public interest. The act did not cause "undue injury" to the petitioners who as explained earlier had
no vested property rights entitled to protection. There is no undue injury to the government nor any
unwarranted benefit to OTSI consideration for PPA which is the payment by OTSI of ten percent
(10%) of its gross income, something which petitioner PIPSI is loathe to pay. The rationalization and
effective utilization of port facilities is to the advantage of the Government. Furthermore, the
discretion in choosing the stevedoring contractor for the south Harbor, Port Manila, belongs by law to
PPA. As long as standards are set in determining the contractor and such standards are reasonable
and related to the purpose for which they are used, the courts should not inquire into the wisdom of
PPAs choice. The criterion used by PPA namely, the identification of a contractor with the highest
potential for operating an exclusive service, appears reasonable. The factors which were taken into
account in determining the exclusive contractor are indicia of reasonableness. They are:

Productivity. 25%

Equipment Requirement
Capability 25%

Financial Capability 15%

Promptness in Paying

Government share 25%

Compliance with other

PPA Requirements... 20%

100%

It is settled rule that unless the case justifies it, the judiciary will not interfere in purely administrative
matters. (Monark International, Inc. v. Noriel, 83 SCRA 114) Such discretionary power vested in the
proper administrative body, in the absence of arbitrariness and grave abuse so as to go beyond the
statutory authority, is not subject to the contrary judgment or control of others. (See Meralco
Securities Corporation v. Savellano, 117 SCRA 804). In general, courts have no supervisory power
over the proceedings and actions of the administrative departments of the government. This is
particularly true with respect to acts involving the exercise of judgment or discretion, and to findings
of fact. (Pajo v. Ago and Ortiz, 108 Phil.905)

In view of the foregoing, we find the PPA-OTSI Management Contract executed on June 27, 1980,
valid and devoid of any constitutional or legal infirmity. The respondents, however, should maintain
the policy of absorption of bona-fide displaced port workers in the integration scheme as mandated
not only by LOI No. 1005-A but by the policy of the State to assure the rights of workers to security of
tenure. (sec. 9, Art. II, Constitution) We note that both PPA and OTSI have given assurance in their
answers that none of the legitimate stevedores would be displaced from work although they added
that their bonafide stevedores should join PWUP. Which union a worker or various workers should
join cannot be ordained by this Court in these petitions where the basic issue is the validity of the
exclusive stevedoring contract given to one operator for one port. This matter will have to be
eventually threshed out by the workers themselves and the Ministry of Labor and Employment
before it may be elevated to us, if ever. However, we reiterate the guidelines earlier issued that no
bona fide stevedore or worker should be deprived of employment he used to enjoy simply because
of the execution and implementation of the disputed Management Contract. This absorption of bona
fide workers is an act of social justice. When a person has no property, his job may possibly be his
only possession or means of livelihood. Therefore, he should be protected against any arbitrary and
unjust deprivation of his job. (See Bondoc v. Peoples Bank and Trust Company, 103 SCRA 599)

As to the contempt charges, we note that the Order of this Court dated October 21, 1980 allowed
"petitioners-intervenors" meaning KAMADA workers to work at the South Harbor pending resolution
of this case, "the order of respondent judge xxx as well as the implementing letter of Philippine Ports
Authority xxx to the contrary notwithstanding." It is not clear from said orders that the petitioners who
are stevedoring operators and contactors were also specifically included. There was no mention of
them being included and allowed with KAMADA workers to resume operations at the South Harbor.
The petitioners read into the order something which was not there. The only clear import of the
Order was that KAMADA workers must be allowed to work notwithstanding any contrary provisions
in the Management Contract, a situation brought about by the lifting of the restraining orders, the
denial of the petition for preliminary injunction, and the implementing letter of PPA. It is a settled rule
that a party cannot be punished for contempt unless the act which is forbidden or required to be
done is clearly and exactly defined, so that there can be no reasonable doubt or uncertainty as to
what specific act or thing is forbidden or required. (Lee Yick Hon v. Collector of Customs, 41 Phil.
548, citing U.S. v. Achi-son, etc. R. Co., 146 Fed. 176, 183; 13 CJ 15)

WHEREFORE, the petitions in G.R. No. 54958 and G.R. No. 54966 are hereby DISMISSED for lack
of merit. The respondents are, however, directed to comply with the guidelines in the above decision
on the absorption of bonafide stevedores and as thus modifies, the temporary restraining order
dated October 21, 1980 is made PERMANENT. No costs.

Bautista vs juinio

he validity of an energy conservation measure, Letter of Instruction No. 869, issued on May 31, 1979
the response to the protracted oil crisis that dates back to 1974 is put in issue in this prohibition
proceeding filed by petitioners, spouses Mary Concepcion Bautista and Enrique D. Bautista, for
being allegedly violative of the due process and equal protection guarantees 1 of the Constitution. The use of
private motor vehicles with H and EH plates on week-ends and holidays was banned from "[12:00] a.m. Saturday morning to 5:00 a.m.
Monday morning, or 1:00 a.m. of the holiday to 5:00 a.m. of the day after the holiday." 2 Motor vehicles of the following
classifications are exempted: (a) S (Service); (b) T (Truck); (e) DPL (Diplomatic); (d) CC (Consular
Corps); (e) TC (Tourist Cars). 3 Pursuant thereto, respondent Alfredo L. Juinio, then Minister of Public
Works, Transportation and Communications and respondent Romeo P. Edu, then Commissioner of Land
Transportation Commission issued on June 11, 1979, Memorandum Circular No. 39, which imposed "the
penalties of fine, confiscation of vehicle and cancellation of registration on owners of the above-specified
vehicles" found violating such Letter of Instruction. 4 It was then alleged by petitioners that "while the
purpose for the issuance of the LOI 869 is laudable, to wit, energy conservation, the provision banning the
use of H and EH [vehicles] is unfair, discriminatory, [amounting to an] arbitrary classification" and thus in
contravention of the equal protection clause. 5 Moreover, for them, such Letter of Instruction is a denial of
due process, more specifically, "of their right to use and enjoy their private property and of their freedom
to travel and hold family gatherings, reunions and outings on week-ends and holidays," inviting attention
to the fact that others not included in the ban enjoying "unrestricted freedom." 6 It would follow, so they
contend that Memorandum Circular No. 39 imposing penalties of fine, confiscation of the vehicle and
cancellation of license is likewise unconstitutional, for being violative of the doctrine of "undue delegation
of legislative power." 7 It is to be noted that such Memorandum Circular does not impose the penalty of
confiscation but merely that of impounding, fine, and for the third offense that of cancellation of certificate
of registration and for the rest of the year or for ninety days whichever is longer.

This Court gave due course to the petition requiring respondent to answer. There was admission of
the facts as substantially alleged except, as previously noted, that the ban starts at 12:00 a.m. rather
than 1:00 a.m. of a Saturday or of a holiday and as to the mention of a Willy's Kaiser jeep being
registered in the name of a certain Teresita Urbina, about which respondents had no knowledge.
There was a denial of the allegations that the classification of vehicles into heavy H and extra heavy
(EH) on the other hand and light and bantam on the other hand was violative of equal protection and
the regulation as to the use of the former cars on the dates specified a transgression of due process.
The answer likewise denied that there was an undue delegation of legislative power, reference being
made to the Land Transportation and Traffic Code. 8 There was also a procedural objection raised,
namely, that what is sought amounts at most to an advisory opinion rather than an ajudication of a case or
controversy.

Petitioners filed a motion to be allowed to reply to the answer. It was granted. The reply, considering
its exhaustive character serving as its memorandum, stressed anew what it emphasized as the
arbitrary, unreasonable, and oppressive aspects of the challenged Letter of Instruction and
Memorandum Circular No. 39. It disputed what it characterized as an "erroneous and arbitrary
presumption that heavy car owners unnecessarily use and therefore waste gasoline whenever they
drive their cars on week-ends and holidays;" 9 it stigmatized the ban as defeating its "avowed purpose
in the case of the affluent who own not only heavy limousines but also many small cars [as] they may be
compelled to use at least two small cars;" 10 referred to the high cost of taxis or other public transports for those "not able to
afford expensive small cars [possibly] only one heavy and possible old model;" 11 cited the case of "many eight cylinder vehicles which
because of their weight have been registered as light but in fact consume more or as much gasoline as the banned vehicles." 12 Their
conclusion is that "the ban imposed, in result and effect is class legislation." 13

The parties were required to submit memoranda. Respondents did so but not petitioners. They relied
on their reply to the answer as noted, a rather comprehensive pleading. For reasons to be set
forth, this Court holds that the petition cannot prosper.

1. First as to the procedural objection. In the memorandum for respondents, one of the issues raised
was whether "the power of judicial review may be invoked considering the inadequacy of the record
and the highly abstract and academic questions raised by the petitioners." 14 It is inaccurate to say that the
record is inadequate. It does not admit of doubt that the ban applies to petitioners who are "the registered owners of an eight cylinder 1969
Buick, and the vendees of a six cylinder Willy's kaiser jeep, which are both classified as heavy or H." 15 To that extent, therefore, the
enforcement of the assailed Letter of Instruction will amount to a deprivation of what otherwise would be a valid exercise of a property right.
Thus they fall squarely within "the unchallenged rule" as to who may raise a constitutional question, namely, to quote the language of Justice
Laurel in the leading case of People v. Vera, 16 "that the person who impugns the validity of a statute must have a personal and substantial
interest in the case such that he has sustained, or will sustain direct injury as a result of its enforcement. 17 Moreover, that rule has been
considerably relaxed. 18 The question then is neither abstract nor academic as contended by respondents.

2. There is, however, this formidable obstacle that confronts petitioners. What they seek is for this
Court to hold that a Letter of Instruction, a regulatory measure precisely enacted to cope with the
serious and grave problem of energy conservation, is void on its face. Such a task is rendered
unusually difficult by what has been referred to by Justice Laurel in the leading case of Angara v.
Electoral Commission 19 as the "presumption of constitutionality" and by the same jurist in the case of People v. Vera 20 in
slightly different words "a presumption that such an act falls within constitutional limitations." There is
need then for a factual foundation of invalidity. In the language of Ermita-Malate Hotel & Motel Operations
Association, Inc. v. City Mayor or Manila: "It admits of no doubt therefore that there being a presumption
of validity, the necessity for evidence to rebut it is unavoidable, unless the statute or ordinance is void on
its face, which is not the case here. The principle has been nowhere better expressed than in the leading
case of O'Gorman & Young v. Hartford Fire Insurance Co., where the American Supreme Court through
Justice Brandeis tersely and succinctly summed up the matter thus: 'The statute here questioned deals
with a subject clearly within the scope of the police power. We are asked to declare it void on the ground
that the specific method of regulation prescribed is unreasonable and hence deprives the plaintiff of due
process of law. As underlying questions of fact may condition the constitutionality of legislation of this
character, the presumption of constitutionality must prevail in the absence of some factual foundation of
record for overthrowing the statute.' " 21

3. It is true, of course, that there may be instances where a police power measure may, because of
its arbitrary, oppressive or unjust character, be held offensive to the due process clause and,
therefore, may, when challenged in an appropriate legal proceeding, be declared void on its face.
This is not one of them. A recital of the whereas clauses of the Letter of Instruction makes it clear.
Thus: "[Whereas], developments in the international petroleum supply situation continue to follow a
trend of limited production and spiralling prices thereby precluding the possibility of immediate relief
in supplies within the foreseeable future; [Whereas], the uncertainty of fuel supply availability
underscores a compelling need for the adoption of positive measures designed to insure the viability
of the country's economy and sustain its developmental growth; [Whereas], to cushion the effect of
increasing oil prices and avoid fuel supply disruptions, it is imperative to adopt a program directed
towards the judicious use of our energy resources complemented with intensified conservation
efforts and efficient utilization thereof; * * *." 22 That is undeniable is that the action taken is an
appropriate response to a problem that presses urgently for solution. It may not be the only alternative,
but its reasonableness is immediately apparent. Thus, to repeat, substantive due process, which is the
epitome of reasonableness and fair play, is not ignored, much less infringed.

4. In the interplay between such a fundamental right and police power, especially so where the
assailed governmental action deals with the use of one's property, the latter is accorded much
leeway. That is settled law. What is more, it is good law. Due process, therefore, cannot be validly
invoked. As stressed in the cited Ermita-Malate Hotel decision: "To hold otherwise would be to
unduly restrict and narrow the scope of police power which has been properly characterized as the
most essential, insistent and the least limitable of powers, extending as it does 'to all the great public
needs.' It would be, to paraphrase another leading decision, to destroy the very purpose of the state
if it could be deprived or allowed itself to be deprived of its competence to promote public health,
public morals, public safety and the general welfare. Negatively put, police power is 'that inherent
and plenary power in the State which enables it to prohibit all that is hurtful to the comfort, safety,
and welfare of society.' " 23

5. The due process question having been disposed of, there is still the objection based on the equal
protection clause to be considered. A governmental act may not be offensive to the due process
clause, but may run counter to such a guarantee. Such is the case when there is no rational basis
for the classification followed. That is the point raised by petitioners. For them, there is no rational
justification for the ban being imposed on vehicles classified as heavy (H) and extra-heavy (EH), for
precisely those owned by them fall within such category. Tested by the applicable standard that must
be satisfied to avoid the charge of a denial of equal protection, the objection of petitioners is shown
to be lacking in merit. Such a classification on its face cannot be characterized as an affront to
reason. A legal norm according to J.M. Tuason & Co., Inc. vs. Land Tenure
Administration, 24 "whether embodied in a rule, principle, or standard, constitutes a defense against
anarchy at one extreme and tyranny at the other. Thereby, people living together in a community with its
myriad and complex problems can minimize the friction and reduce the conflicts, to assure, at the very
least, a peaceful ordering of existence. The Ideal situation is for the law's benefits to be available to all,
that none be placed outside the sphere of its coverage. Only thus could chance and favor be excluded
and the affairs of men governed by that serene and impartial uniformity, which is of the very essence of
the Idea of law. The actual, given things as they are and likely to continue to be, cannot approximate the
Ideal. Nor is the law susceptible to the reproach that it does not take into account the realties of the
situation. * * * To assure that the general welfare be promoted, which is the end of law, a regulatory
measure may cut into the rights to liberty and property. Those adversely affected may under such
circumstances invoke the equal protection clause only if they can show that the governmental act
assailed, far from being inspired by the attainment of the common weal was prompted by the spirit of
hostility, or at the very least, discrimination that finds no support in reason. It suffices then that the laws
operate equally and uniformly on all persons under similar circumstances or that all persons must be
treated in the same manner, the conditions not being different, both in the privileges conferred and the
liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal
protection and security shall be given to every person under circumstances, which if not Identical are
analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be
treated in the same fashion, whatever restrictions cast on some in the group equally binding on the
rest." 25

6. Nor does it militate against the validity of the Letter of Instruction just because the ban imposed
does not go as far as it could have and therefore could be less efficacious in character. That was the
solution which for the President expressing a power validly lodged in him, recommended itself.
There was a situation that called for a corrective measure. He decided that what was issued by him
would do just that or, at the very least, help in easing the situation. That it did not cover other matters
which could very well have been regulated does not call for a declaration of nullity. The President, to
paraphrase Lutz v. Araneta, 26 "is not required by the Constitution to adhere to the policy of all or
none." 27 It is quite obvious then that no equal protection question arises.

7. It may not be amiss to refer to a 1981 American Supreme Court decision, Minnesota v. Clover
Leaf Creamery Company. 28 Respondent along with several other business corporations adversely
affected involved in the manufacture and utilization of plastic milk containers filed suit in a Minnesota
district court seeking to enjoin enforcement of a Minnesota statute banning the retail sale of milk in plastic
nonreturnable, nonrefillable containers, but permitting such sale in other nonreturnable, nonrefillable
containers, such as paperboard, milk cartons. After conducting extensive evidentiary hearings, the
Minnesota court enjoined enforcement of the statute, finding that it violated among others the equal
protection clause of the Fourteenth Amendment to the Federal Constitution. The Minnesota Supreme
Court affirmed. On certiorari, the United States Supreme Court reversed, with only Justice Stevens
dissenting. The opinion by Justice Brennan noted that "proponents of the legislation argued that it would
promote resource conservation, ease solid waste disposal problems, and conserve energy." 29 That
sufficed for the Court to conclude "that the ban on plastic nonreturnable milk containers bears a rational
relation to the State's objectives, and must be sustained under the Equal Protection Clause." 30 It does
show that notwithstanding the "new equal protection approach" with its emphasis on "suspect
classification" and "fundamental rights and interests standard," a concept so ably expounded by professor
Gunther, the "rational relation test" 31 still retains its validity. Not that there could be any objection to the
classification here followed as being in any way susceptible to such a pejorative expression as "suspect"
or that the assailed Letter of Instruction does not qualify under "the fundamental rights and interests"
standard

8. There was set forth in the petition what were referred to as "other reasonable measures which the
authorities concerned with energy conservation can take immediately, which are in fact acceptable
and obviously called for and should have been done long ago, to wit: 1. require and establish taxi
stands equipped with efficient telephone and communication systems; 2. strict implementation and
observance of cargo truck hours on main arteries; 3. strict observance of traffic rules; 4. effective
solution of traffic problems and decongestion of traffic through rerouting and quick repair of roads
and efficient operation of double decker buses; 5. rationing of gasoline to avoid panic buying and
give the private car owner the option and responsibility of deciding on the use of his allocation; 6.
allow neon and electrically devised advertising signs only from five o'clock p.m. to nine o'clock p.m.
7. prohibit immediately the importation of heavy and luxury cars and seriously re-examine the car
manufacturing program." 32 Admittedly, such measures are conducive to energy conservation. The
question before us however is limited to whether or not Letter of Instruction 869 as implemented by
Memorandum Circular No. 39 is violative of certain constitutional rights. It goes no further than that. The
determination of the mode and manner through which the objective of minimizing the consumption of oil
products may be attained is left to the discretion of the political branches. 33 Absent therefore the alleged
infringement of constitutional rights, more precisely the due process and equal protection guarantees, this
Court cannot adjudge Letter of Instruction No. 869 as tainted by unconstitutionality.

9. It was likewise contended that Memorandum Circular No. 39, issued by the then respondent
Minister of Public Works, Transportation and Communications, and then respondent Land
Transportation Commissioner, imposing the penalties "of fine, confiscation of vehicle and
cancellation of license is likewise unconstitutional," petitioners invoking the principle of non-
delegation of legislative power. 34 To that extent that a Letter of Instruction may be viewed as an exercise
of the decree-making power of the President, then such an argument is futile. If, however, viewed as a
compliance with the duty to take care that the laws be faithfully executed, as a consequence of which
subordinate executive officials may in turn issue implementing rules and regulations, then the objection
would properly be considered as an ultra vires allegation. There is this relevant excerpt from Teoxon v.
Member of the Board of Administrators: 35 "1. The recognition of the power of administrative officials to
promulgate rules in the implementation of the statute, necessarily limited to what is provided for in the
legislative enactment, may be found in the early case of United States v. Barrias decided in 1908. Then
came, in a 1914 decision, United States v. Tupasi Molina, a delineation of the scope of such competence.
Thus: 'Of course the regulations adopted under legislative authority by a particular department must be in
harmony with the provisions of the law, and for the sole purpose of carrying into effect its general
provisions. By such regulations, of course, the law itself can not be extended. So long, however, as the
regulations relate solely to carrying into effect the provisions of the law, they are valid.' In 1936, in People
v. Santos, this Court expressed its disapproval of an administrative order that would amount to an excess
of the regulatory power vested in an administrative official. We reaffirmed such a doctrine in a 1951
decision, where we again made clear that where an administrative order betrays inconsistency or
repugnancy to the provisions of the Act, 'the mandate of the Act must prevail and must be followed.'
Justice Barrera, speaking for the Court in Victorias Milling Company, Inc. v. Social Security Commission,
citing Parker as well as Davis did tersely sum up the matter thus: 'A rule is binding on tile courts so long
as the procedure fixed for its promulgation is followed and its scope is within the statutory granted by the
legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom * * *.
On the other hand, administrative interpretation of the law is at best merely advisory, for it is the courts
that finally determine what the law means.' It cannot be otherwise as the Constitution limits the authority
of the President, in whom all executive power resides, to take care that the laws be faithfully executed. No
lesser administrative executive office or agency then can, contrary to the express language of the
Constitution, assert for itself a more extensive prerogative." 36 It was alleged in the Answer of Solicitor
General Estelito P. Mendoza that Letter of Instruction 869 and Memorandum Circular No. 39 were
adopted pursuant to the Land Transportation and Traffic Code. 37 It contains a specific provision as to
penalties. 38 Thus: "For violation of any provisions of this Act or regulations promulgated pursuant hereto,
not hereinbefore specifically punished, a fine of not less than ten nor more than fifty pesos shall be
imposed." 39 Memorandum Circular No. 39 cannot be held to be ultra vires as long as the fine imposed is
not less than ten nor more than fifty pesos. As to suspension of registration, 40 the Code, insofar as
applicable, provides: "Whenever it shall appear from the records of the Commission that during any
twelve-month period more than three warnings for violations of this Act have been given to the owner of a
motor vehicle, or that the said owner has been convicted by a competent court more than once for
violation of such laws, the Commissioner may, in his discretion, suspend the certificate of registration for a
period not exceeding ninety days and, thereupon, shall require the immediate surrender of the number
plates * * *." 41 It follows that while the imposition of a fine or the suspension of registration under the
conditions therein set forth is valid under the Land Transportation and Traffic Code, the impounding of a
vehicle finds no statutory justification. To apply that portion of Memorandum Circular No. 39 would
be ultra vires. It must likewise be made clear that a penalty even if warranted can only be imposed in
accordance with the procedure required by law. 42

Tablarin vs gutierez

The petitioners sought admission into colleges or schools of medicine for the school year 1987-
1988. However, the petitioners either did not take or did not successfully take the National Medical
Admission Test (NMAT) required by the Board of Medical Education, one of the public respondents,
and administered by the private respondent, the Center for Educational Measurement (CEM).

On 5 March 1987, the petitioners filed with the Regional Trial Court, National Capital Judicial Region,
a Petition for Declaratory Judgment and Prohibition with a prayer for Temporary Restraining Order
and Preliminary Injunction. The petitioners sought to enjoin the Secretary of Education, Culture and
Sports, the Board of Medical Education and the Center for Educational Measurement from enforcing
Section 5 (a) and (f) of Republic Act No. 2382, as amended, and MECS Order No. 52, series of
1985, dated 23 August 1985 and from requiring the taking and passing of the NMAT as a condition
for securing certificates of eligibility for admission, from proceeding with accepting applications for
taking the NMAT and from administering the NMAT as scheduled on 26 April 1987 and in the future.
After hearing on the petition for issuance of preliminary injunction, the trial court denied said petition
on 20 April 1987. The NMAT was conducted and administered as previously scheduled.

Petitioners accordingly filed this Special Civil Action for certiorari with this Court to set aside the
Order of the respondent judge denying the petition for issuance of a writ of preliminary injunction.

Republic Act 2382, as amended by Republic Acts Nos. 4224 and 5946, known as the "Medical Act of
1959" defines its basic objectives in the following manner:

Section 1. Objectives. This Act provides for and shall govern (a) the standardization and
regulation of medical education (b) the examination for registration of physicians; and (c) the
supervision, control and regulation of the practice of medicine in the Philippines.
(Underscoring supplied)

The statute, among other things, created a Board of Medical Education which is composed of (a) the
Secretary of Education, Culture and Sports or his duly authorized representative, as Chairman; (b)
the Secretary of Health or his duly authorized representative; (c) the Director of Higher Education or
his duly authorized representative; (d) the Chairman of the Medical Board or his duly authorized
representative; (e) a representative of the Philippine Medical Association; (f) the Dean of the College
of Medicine, University of the Philippines; (g) a representative of the Council of Deans of Philippine
Medical Schools; and (h) a representative of the Association of Philippine Medical Colleges, as
members. The functions of the Board of Medical Education specified in Section 5 of the statute
include the following:

(a) To determine and prescribe equirements for admission into a recognized college of
medicine;

(b) To determine and prescribe requirements for minimum physical facilities of colleges of
medicine, to wit: buildings, including hospitals, equipment and supplies, apparatus,
instruments, appliances, laboratories, bed capacity for instruction purposes, operating and
 delivery rooms, facilities for outpatient services, and others, used for didactic and practical
instruction in accordance with modern trends;

(c) To determine and prescribe the minimum number and minimum qualifications of teaching
personnel, including student-teachers ratio;

(d) To determine and prescribe the minimum required curriculum leading to the degree of
Doctor of Medicine;

(e) To authorize the implementation of experimental medical curriculum in a medical school

that has exceptional faculty and instrumental facilities. Such an experimental curriculum may
prescribe admission and graduation requirements other than those prescribed in this Act;
Provided, That only exceptional students shall be enrolled in the experimental curriculum;

(f) To accept applications for certification for admission to a medical school and keep a
register of those issued said certificate; and to collect from said applicants the amount of
twenty-five pesos each which shall accrue to the operating fund of the Board of Medical
Education;

(g) To select, determine and approve hospitals or some departments of the hospitals for
training which comply with the minimum specific physical facilities as provided in
subparagraph (b) hereof; and

(h) To promulgate and prescribe and enforce the necessary rules and regulations for the
proper implementation of the foregoing functions. (Emphasis supplied)

Section 7 prescribes certain minimum requirements for applicants to medical schools:

Admission requirements. The medical college may admit any student who has not been
convicted by any court of competent jurisdiction of any offense involving moral turpitude
and who presents (a) a record of completion of a bachelor's degree in science or arts; (b) a
certificate of eligibility for entrance to a medical school from the Board of Medical
Education; (c) a certificate of good moral character issued by two former professors in the
college of liberal arts; and (d) birth certificate. Nothing in this act shall be construed to inhibit
any college of medicine from establishing, in addition to the preceding, other entrance
requirements that may be deemed admissible.

xxx xxx x x x (Emphasis supplied)

MECS Order No. 52, s. 1985, issued by the then Minister of Education, Culture and Sports and
dated 23 August 1985, established a uniform admission test called the National Medical Admission
Test (NMAT) as an additional requirement for issuance of a certificate of eligibility for admission into
medical schools of the Philippines, beginning with the school year 1986-1987. This Order goes on to
state that:

2. The NMAT, an aptitude test, is considered as an instrument toward upgrading the

selection of applicants for admission into the medical schools and its calculated to improve
the quality of medical education in the country. The cutoff score for the successful applicants,
based on the scores on the NMAT, shall be determined every year by the Board of Medical
Education after consultation with the Association of Philippine Medical Colleges. The NMAT
rating of each applicant, together with the other admission requirements as presently called
 for under existing rules, shall serve as a basis for the issuance of the prescribed certificate of
elegibility for admission into the medical colleges.

3. Subject to the prior approval of the Board of Medical Education, each medical college may
give other tests for applicants who have been issued a corresponding certificate of eligibility
for admission that will yield information on other aspects of the applicant's personality to
complement the information derived from the NMAT.

xxx xxx xxx

8. No applicant shall be issued the requisite Certificate of Eligibility for Admission (CEA), or
admitted for enrollment as first year student in any medical college, beginning the school
year, 1986-87, without the required NMAT qualification as called for under this
Order. (Underscoring supplied)

Pursuant to MECS Order No. 52, s. 1985, the private respondent Center conducted NMATs for
entrance to medical colleges during the school year 1986-1987. In December 1986 and in April
1987, respondent Center conducted the NMATs for admission to medical colleges during the school
year 1987.1988. 1avvphi1

Petitioners raise the question of whether or not a writ of preliminary injunction may be issued to
enjoin the enforcement of Section 5 (a) and (f) of Republic Act No. 2382, as amended, and MECS
Order No. 52, s. 1985, pending resolution of the issue of constitutionality of the assailed statute and
administrative order. We regard this issue as entirely peripheral in nature. It scarcely needs
documentation that a court would issue a writ of preliminary injunction only when the petitioner
assailing a statute or administrative order has made out a case of unconstitutionality strong enough
to overcome, in the mind of the judge, the presumption of constitutionality, aside from showing a
clear legal right to the remedy sought. The fundamental issue is of course the constitutionality of the
statute or order assailed.

1. The petitioners invoke a number of provisions of the 1987 Constitution which are, in their
assertion, violated by the continued implementation of Section 5 (a) and (f) of Republic Act 2381, as
amended, and MECS Order No. 52, s. 1985. The provisions invoked read as follows:

(a) Article 11, Section 11: "The state values the dignity of every human person and
guarantees full respect of human rights. "

(b) ArticleII, Section l3: "The State recognizes the vital role of the youth in nation building and
shall promote and protect their physical, moral, spiritual, intellectual and social well being. It
shall inculcate in the youth patriotism and nationalism, and encourage their involvement in
public and civic affairs."

(c) Article II, Section 17: "The State shall give priority to education, science and technology,
arts, culture and sports to foster patriotism and nationalism, accelerate social progress and
to promote total human liberation and development. "

(d) Article XIV, Section l: "The State shall protect and promote the right of all citizens to
quality education at all levels and take appropriate steps to make such education accessible
to all. "
 (e) Article XIV, Section 5 (3): "Every citizen has a right to select a profession or course of
study, subject to fair, reasonable and equitable admission and academic requirements."

Article II of the 1987 Constitution sets forth in its second half certain "State policies" which the
government is enjoined to pursue and promote. The petitioners here have not seriously undertaken
to demonstrate to what extent or in what manner the statute and the administrative order they assail
collide with the State policies embodied in Sections 11, 13 and 17. They have not, in other words,
discharged the burden of proof which lies upon them. This burden is heavy enough where the
constitutional provision invoked is relatively specific, rather than abstract, in character and cast in
behavioral or operational terms. That burden of proof becomes of necessity heavier where the
constitutional provision invoked is cast, as the second portion of Article II is cast, in language
descriptive of basic policies, or more precisely, of basic objectives of State policy and therefore
highly generalized in tenor. The petitioners have not made their case, even a prima facie case, and
we are not compelled to speculate and to imagine how the legislation and regulation impugned as
unconstitutional could possibly offend the constitutional provisions pointed to by the petitioners.

Turning to Article XIV, Section 1, of the 1987 Constitution, we note that once more petitioners have
failed to demonstrate that the statute and regulation they assail in fact clash with that provision. On
the contrary we may note-in anticipation of discussion infra that the statute and the regulation
which petitioners attack are in fact designed to promote "quality education" at the level of
professional schools. When one reads Section 1 in relation to Section 5 (3) of Article XIV as one
must one cannot but note that the latter phrase of Section 1 is not to be read with absolute
literalness. The State is not really enjoined to take appropriate steps to make quality education "
accessible to all who might for any number of reasons wish to enroll in a professional school but
rather merely to make such education accessible to all who qualify under "fair, reasonable and
equitable admission and academic requirements. "

2. In the trial court, petitioners had made the argument that Section 5 (a) and (f) of Republic Act No.
2382, as amended, offend against the constitutional principle which forbids the undue delegation of
legislative power, by failing to establish the necessary standard to be followed by the delegate, the
Board of Medical Education. The general principle of non-delegation of legislative power, which both
flows from the reinforces the more fundamental rule of the separation and allocation of powers
among the three great departments of government, 1 must be applied with circumspection in respect
of statutes which like the Medical Act of 1959, deal with subjects as obviously complex and technical
as medical education and the practice of medicine in our present day world. Mr. Justice Laurel
stressed this point 47 years ago in Pangasinan Transportation Co., Inc. vs. The Public Service
Commission:2

One thing, however, is apparent in the development of the principle of separation of powers
and that is that the maxim of delegatus non potest delegare or delegate potestas non potest
delegare, adopted this practice (Delegibus et Consuetudiniis Anglia edited by G.E.
Woodbine, Yale University Press, 1922, Vol. 2, p. 167) but which is also recognized in
principle in the Roman Law (d. 17.18.3) has been made to adapt itself to the complexities of
modern government, giving rise to the adoption, within certain limits of the principle of
"subordinate legislation," not only in the United States and England but in practically all
modern governments. (People vs. Rosenthal and Osmena [68 Phil. 318, 1939].
Accordingly, with the growing complexity of modern life, the multiplication of the subjects of
governmental regulation and the increased difficulty of administering the laws, there is a
constantly growing tendency toward the delegation of greater power by the legislature, and
toward the approval of the practice by the courts." 3
The standards set for subordinate legislation in the exercise of rule making authority by an
administrative agency like the Board of Medical Education are necessarily broad and highly abstract.
As explained by then Mr. Justice Fernando in Edu v. Ericta4

The standard may be either expressed or implied. If the former, the non-delegation objection
is easily met. The standard though does not have to be spelled out specifically. It could be
implied from the policy and purpose of the act considered as a whole. In the Reflector Law,
clearly the legislative objective is public safety. What is sought to be attained as in Calalang
v. Williams is "safe transit upon the roads. 5

We believe and so hold that the necessary standards are set forth in Section 1 of the 1959 Medical
Act: "the standardization and regulation of medical education" and in Section 5 (a) and 7 of the same
Act, the body of the statute itself, and that these considered together are sufficient compliance with
the requirements of the non-delegation principle.

3. The petitioners also urge that the NMAT prescribed in MECS Order No. 52, s. 1985, is an "unfair,
unreasonable and inequitable requirement," which results in a denial of due process. Again,
petitioners have failed to specify just what factors or features of the NMAT render it "unfair" and
"unreasonable" or "inequitable." They appear to suggest that passing the NMAT is an unnecessary
requirement when added on top of the admission requirements set out in Section 7 of the Medical
Act of 1959, and other admission requirements established by internal regulations of the various
medical schools, public or private. Petitioners arguments thus appear to relate to utility and wisdom
or desirability of the NMAT requirement. But constitutionality is essentially a question of power or
authority: this Court has neither commission or competence to pass upon questions of the
desirability or wisdom or utility of legislation or administrative regulation. Those questions must be
address to the political departments of the government not to the courts.

There is another reason why the petitioners' arguments must fail: the legislative and administrative
provisions impugned by them constitute, to the mind of the Court, a valid exercise of the police
power of the state. The police power, it is commonplace learning, is the pervasive and non-waivable
power and authority of the sovereign to secure and promote an the important interests and needs
in a word, the public order of the general community.6 An important component of that public order
is the health and physical safety and well being of the population, the securing of which no one can
deny is a legitimate objective of governmental effort and regulation.7

Perhaps the only issue that needs some consideration is whether there is some reasonable relation
between the prescribing of passing the NMAT as a condition for admission to medical school on the
one hand, and the securing of the health and safety of the general community, on the other hand.
This question is perhaps most usefully approached by recalling that the regulation of the practice of
medicine in all its branches has long been recognized as a reasonable method of protecting the
health and safety of the public.8 That the power to regulate and control the practice of medicine
includes the power to regulate admission to the ranks of those authorized to practice medicine, is
also well recognized. thus, legislation and administrative regulations requiring those who wish to
practice medicine first to take and pass medical board examinations have long ago been recognized
as valid exercises of governmental power.9 Similarly, the establishment of minimum medical
educational requirements i.e., the completion of prescribed courses in a recognized medical
school for admission to the medical profession, has also been sustained as a legitimate exercise
of the regulatory authority of the state.10 What we have before us in the instant case is closely
related: the regulation of access to medical schools. MECS Order No. 52, s. 1985, as noted earlier,
articulates the rationale of regulation of this type: the improvement of the professional and technical
quality of the graduates of medical schools, by upgrading the quality of those admitted to the student
body of the medical schools. That upgrading is sought by selectivity in the process of admission,
selectivity consisting, among other things, of limiting admission to those who exhibit in the required
degree the aptitude for medical studies and eventually for medical practice. The need to maintain,
and the difficulties of maintaining, high standards in our professional schools in general, and medical
schools in particular, in the current stage of our social and economic development, are widely
known.

We believe that the government is entitled to prescribe an admission test like the NMAT as a means
for achieving its stated objective of "upgrading the selection of applicants into [our] medical schools"
and of "improv[ing] the quality of medical education in the country." Given the widespread use today
of such admission tests in, for instance, medical schools in the United States of America (the
Medical College Admission Test [MCAT]11 and quite probably in other countries with far more
developed educational resources than our own, and taking into account the failure or inability of the
petitioners to even attempt to prove otherwise, we are entitled to hold that the NMAT is reasonably
related to the securing of the ultimate end of legislation and regulation in this area. That end, it is
useful to recall, is the protection of the public from the potentially deadly effects of incompetence and
ignorance in those who would undertake to treat our bodies and minds for disease or trauma.

4. Petitioners have contended, finally, that MECS Order No. 52, s. 1985, is in conflict with the equal
protection clause of the Constitution. More specifically, petitioners assert that that portion of the
MECS Order which provides that

the cutoff score for the successful applicants, based on the scores on the NMAT, shall be
determined every-year by the Board of Medical 11 Education after consultation with the
Association of Philippine Medical Colleges. (Emphasis supplied)

infringes the requirements of equal protection. They assert, in other words, that students seeking
admission during a given school year, e.g., 1987-1988, when subjected to a different cutoff score
than that established for an, e.g., earlier school year, are discriminated against and that this renders
the MECS Order "arbitrary and capricious." The force of this argument is more apparent than real.
Different cutoff scores for different school years may be dictated by differing conditions obtaining
during those years. Thus, the appropriate cutoff score for a given year may be a function of such
factors as the number of students who have reached the cutoff score established the preceding
year; the number of places available in medical schools during the current year; the average score
attained during the current year; the level of difficulty of the test given during the current year, and so
forth. To establish a permanent and immutable cutoff score regardless of changes in circumstances
from year to year, may wen result in an unreasonable rigidity. The above language in MECS Order
No. 52, far from being arbitrary or capricious, leaves the Board of Medical Education with the
measure of flexibility needed to meet circumstances as they change.

We conclude that prescribing the NMAT and requiring certain minimum scores therein as a condition
for admission to medical schools in the Philippines, do not constitute an unconstitutional imposition.

WHEREFORE, the Petition for certiorari is DISMISSED and the Order of the respondent trial court
denying the petition for a writ of preliminary injunction is AFFIRMED. Costs against petitioners.
Villanueva vs Castaneda

CRUZ, J.:

There is in the vicinity of the public market of San Fernando, Pampanga, along Mercado Street, a
strip of land measuring 12 by 77 meters on which stands a conglomeration of vendors stalls together
forming what is commonly known as a talipapa. This is the subject of the herein petition. The
petitioners claim they have a right to remain in and conduct business in this area by virtue of a
previous authorization granted to them by the municipal government. The respondents deny this and
justify the demolition of their stalls as illegal constructions on public property. At the petitioners'
behest, we have issued a temporary restraining order to preserve the status quo between the parties
pending our decision. 1 Now we shall rule on the merits.

This dispute goes back to November 7, 1961, when the municipal council of San Fernando adopted
Resolution No. 218 authorizing some 24 members of the Fernandino United Merchants and Traders
Association to construct permanent stags and sell in the above-mentioned place. 2 The action was
protested on November 10, 1961, in Civil Case No. 2040, where the Court of First Instance of Pampanga,
Branch 2, issued a writ of preliminary injunction that prevented the defendants from constructing the said
stalls until final resolution of the controversy. 3 On January 18, 1964, while this case was pending, the
municipal council of San Fernando adopted Resolution G.R. No. 29, which declared the subject area as
"the parking place and as the public plaza of the municipality, 4 thereby impliedly revoking Resolution No.
218, series of 1961. Four years later, on November 2, 1968, Judge Andres C. Aguilar decided the
aforesaid case and held that the land occupied by the petitioners, being public in nature, was beyond the
commerce of man and therefore could not be the subject of private occupancy. 5 The writ of preliminary
injunction was made permanent. 6

The decision was apparently not enforced, for the petitioners were not evicted from the place; in fact,
according to then they and the 128 other persons were in 1971 assigned specific areas or space
allotments therein for which they paid daily fees to the municipal government. 7 The problem appears
to have festered for some more years under a presumably uneasy truce among the protagonists, none of
whom made any move, for some reason that does not appear in the record. Then, on January 12, 1982,
the Association of Concerned Citizens and Consumers of San Fernando filed a petition for the immediate
implementation of Resolution No. 29, to restore the subject property "to its original and customary use as
a public plaza. 8

Acting thereon after an investigation conducted by the municipal attorney, 9 respondent Vicente A.
Macalino, as officer-in-charge of the office of the mayor of San Fernando, issued on June 14, 1982, a
resolution requiring the municipal treasurer and the municipal engineer to demolish the stalls in the
subject place beginning July 1, 1982. 10 The reaction of the petitioners was to file a petition for prohibition with the Court of First
Instance of Pampanga, docketed as Civil Case No. 6470, on June 26, 1982. The respondent judge denied the petition on July 19,
1982, 11 and the motion for reconsideration on August 5, 1982, 12 prompting the petitioners to come to this Court on certiorari to challenge
his decision. 13

As required, respondent Macalino filed his comment 14 on the petition, and the petitioners countered with their
reply. 15 In compliance with our resolution of February 2, 1983, the petitioners submitted their memorandum 16 and respondent Macalino,
for his part, asked that his comment be considered his memorandum. 17 On July 28, 1986, the new officer-in-charge of the office of the
mayor of San Fernando, Paterno S. Guevarra, was impleaded in lieu of Virgilio Sanchez, who had himself earlier replaced the original
respondent Macalino. 18

After considering the issues and the arguments raised by the parties in their respective pleadings,
we rule for the respondents. The petition must be dismissed.
There is no question that the place occupied by the petitioners and from which they are sought to be
evicted is a public plaza, as found by the trial court in Civil Case No. 2040. This finding was made
after consideration of the antecedent facts as especially established by the testimony of former San
Fernando Mayor Rodolfo Hizon, who later became governor of Pampanga, that the National
Planning Commission had reserved the area for a public plaza as early as 1951. This intention was
reiterated in 1964 through the adoption of Resolution No. 29. 19

It does not appear that the decision in this case was appealed or has been reversed. In Civil Case
G.R. No. 6740, which is the subject of this petition, the respondent judge saw no reason to disturb
the finding in Civil Case No. 2040 and indeed used it as a basis for his own decision sustaining the
questioned order. 20

The basic contention of the petitioners is that the disputed area is under lease to them by virtue of
contracts they had entered into with the municipal government, first in 1961 insofar as the original
occupants were concerned, and later with them and the other petitioners by virtue of the space
allocations made in their favor in 1971 for which they saw they are paying daily fees. 21 The municipal
government has denied making such agreements. In any case, they argue, since the fees were collected
daily, the leases, assuming their validity, could be terminated at will, or any day, as the claimed rentals
indicated that the period of the leases was from day to day. 22

The parties belabor this argument needlessly.

A public plaza is beyond the commerce of man and so cannot be the subject of lease or any other
contractual undertaking. This is elementary. Indeed, this point was settled as early as in Municipality
of Cavite vs. Rojas, 23decided in 1915, where the Court declared as null and void the lease of a public
plaza of the said municipality in favor of a private person.

Justice Torres said in that case:

According to article 344 of the Civil Code: "Property for public use in provinces and in
towns comprises the provincial and town roads, the squares, streets, fountains, and
public waters, the promenades, and public works of general service supported by
said towns or provinces.

The said Plaza Soledad being a promenade for public use, the municipal council of
Cavite could not in 1907 withdraw or exclude from public use a portion thereof in
order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a
portion of said plaza or public place to the defendant for private use the plaintiff
municipality exceeded its authority in the exercise of its powers by executing a
contract over a thing of which it could not dispose, nor is it empowered so to do.

The Civil Code, article 1271, prescribes that everything which is not outside the
commerce of man may be the object of a contract, and plazas and streets are
outside of this commerce, as was decided by the supreme court of Spain in its
decision of February 12, 1895, which says: "communal things that cannot be sold
because they are by their very nature outside of commerce are those for public use,
such as the plazas, streets, common lands, rivers, fountains, etc."

Therefore, it must be concluded that the contract, Exhibit C, whereby the municipality
of Cavite leased to Hilaria Rojas a portion of the Plaza Soledad is null and void and
of no force or effect, because it is contrary to the law and the thing leased cannot be
the object of a was held that the City of contract.
In Muyot vs. de la Fuente, 24 it was held that the City of Manila could not lease a portion of a public
sidewalk on Plaza Sta. Cruz, being likewise beyond the commerce of man.

Echoing Rojas, the decision said:

Appellants claim that they had obtained permit from the present of the City of Manila,
to connect booths Nos. 1 and 2, along the premises in question, and for the use of
spaces where the booths were constructed, they had paid and continued paying the
corresponding rentals. Granting this claim to be true, one should not entertain any
doubt that such permit was not legal, because the City of Manila does not have any
power or authority at all to lease a portion of a public sidewalk. The sidewalk in
question, forming part of the public plaza of Sta. Cruz, could not be a proper subject
matter of the contract, as it was not within the commerce of man (Article 1347, new
Civil Code, and article 1271, old Civil Code). Any contract entered into by the City of
Manila in connection with the sidewalk, is ipso facto null and ultra vires. (Municipality
of Cavite vs. Roxas, et a1, 30 Phil. 603.) The sidewalk in question was intended for
and was used by the public, in going from one place to another. "The streets and
public places of the city shall be kept free and clear for the use of the public, and the
sidewalks and crossings for the pedestrians, and the same shall only be used or
occupied for other purpose as provided by ordinance or regulation; ..." (Sec. 1119,
Revised Ordinances of the City of Manila.) The booths in question served as fruit
stands for their owners and often, if not always, blocked the fire passage of
pedestrians who had to take the plaza itself which used to be clogged with vehicular
traffic.

Exactly in point is Espiritu vs. Municipal Council of Pozorrubio, 25 where the Supreme Court declared:

There is absolutely no question that the town plaza cannot be used for the
construction of market stalls, specially of residences, and that such structures
constitute a nuisance subject to abatement according to law. Town plazas are
properties of public dominion, to be devoted to public use and to be made available
to the public in general They are outside the common of man and cannot be
disposed of or even leased by the municipality to private parties.

Applying this well-settled doctrine, we rule that the petitioners had no right in the first place to occupy
the disputed premises and cannot insist in remaining there now on the strength of their alleged lease
contracts. They should have realized and accepted this earlier, considering that even before Civil
Case No. 2040 was decided, the municipalcouncil of San Fernando had already adopted Resolution
No. 29, series of 1964, declaring the area as the parking place and public plaza of the municipality.

It is the decision in Civil Case No. 2040 and the said resolution of the municipal council of San
Fernando that respondent Macalino was seeking to enforce when he ordered the demolition of the
stags constructed in the disputed area. As officer-in-charge of the office of the mayor, he had the
duty to clear the area and restore it to its intended use as a parking place and public plaza of the
municipality of San Fernando, conformably to the aforementioned orders from the court and the
council. It is, therefore, not correct to say that he had acted without authority or taken the law into his
hands in issuing his order.

Neither can it be said that he acted whimsically in exercising his authority for it has been established
that he directed the demolition of the stalls only after, upon his instructions, the municipal attorney
had conducted an investigation, to look into the complaint filed by the Association of Concerned
Citizens and Consumers of San Fernando. 26 There is evidence that the petitioners were notified of this
hearing, 27which they chose to disregard. Photographs of the disputed area, 28 which does look congested
and ugly, show that the complaint was valid and that the area really needed to be cleared, as
recommended by the municipal attorney.

The Court observes that even without such investigation and recommendation, the respondent
mayor was justified in ordering the area cleared on the strength alone of its status as a public plaza
as declared by the judicial and legislative authorities. In calling first for the investigation (which the
petitioner saw fit to boycott), he was just scrupulously paying deference to the requirements of due
process, to remove an taint of arbitrariness in the action he was caged upon to take.

Since the occupation of the place in question in 1961 by the original 24 stallholders (whose number
later ballooned to almost 200), it has deteriorated increasingly to the great prejudice of the
community in general. The proliferation of stags therein, most of them makeshift and of flammable
materials, has converted it into a veritable fire trap, which, added to the fact that it obstructs access
to and from the public market itself, has seriously endangered public safety. The filthy condition of
the talipapa, where fish and other wet items are sold, has aggravated health and sanitation
problems, besides pervading the place with a foul odor that has spread into the surrounding areas.
The entire place is unsightly, to the dismay and embarrassment of the inhabitants, who want it
converted into a showcase of the town of which they can all be proud. The vendors in
the talipapa have also spilled into the street and obstruct the flow of traffic, thereby impairing the
convenience of motorists and pedestrians alike. The regular stallholders in the public market, who
pay substantial rentals to the municipality, are deprived of a sizable volume of business from
prospective customers who are intercepted by the talipapa vendors before they can reach the
market proper. On top of all these, the people are denied the proper use of the place as a public
plaza, where they may spend their leisure in a relaxed and even beautiful environment and civic and
other communal activities of the town can be held.

The problems caused by the usurpation of the place by the petitioners are covered by the police
power as delegated to the municipality under the general welfare clause. 29 This authorizes the
municipal council "to 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." This authority was validly exercised in this casethrough the
adoption of Resolution No. 29, series of 1964, by the municipal council of San Fernando.

Even assuming a valid lease of the property in dispute, the resolution could have effectively
terminated the agreement for it is settled that the police power cannot be surrendered or bargained
away through the medium of a contract. 30 In fact, every contract affecting the public interest suffers a
congenital infirmity in that it contains an implied reservation of the police power as a postulate of the
existing legal order. 31 This power can be activated at any time to change the provisions of the contract, or
even abrogate it entirely, for the promotion or protection of the general welfare. Such an act will not
militate against the impairment clause, which is subject to and limited by the paramount police power. 32

We hold that the respondent judge did not commit grave abuse of discretion in denying the petition
for prohibition. On the contrary, he acted correctly in sustaining the right and responsibility of the
mayor to evict the petitioners from the disputed area and clear it of an the structures illegally
constructed therein.

The Court feels that it would have been far more amiable if the petitioners themselves, recognizing
their own civic duty, had at the outset desisted from their original stance and withdrawn in good
grace from the disputed area to permit its peaceful restoration as a public plaza and parking place
for the benefit of the whole municipality. They owned this little sacrifice to the community in general
which has suffered all these many years because of their intransigence. Regrettably, they have
refused to recognize that in the truly democratic society, the interests of the few should yield to those
of the greater number in deference to the principles that the welfare of the people is the supreme law
and overriding purpose. We do not see any altruism here. The traditional ties of sharing are absent
here. What we find, sad to say, is a cynical disdaining of the spirit of "bayanihan," a selfish rejection
of the cordial virtues of "pakikisama " and "pagbibigayan" which are the hallmarks of our people.

WHEREFORE, the petition is DISMISSED. The decision dated July 19, 1982, and the order-dated
August 5, 1982, are AFFIRMED. The temporary restraining order dated August 9, 1982, is LIFTED.
This decision is immediately executory. Costs against the petitioners.

Sangalang vs iac
SARMIENTO, J.:

Before the Court are five consolidated petitions, 1 docketed as G.R. Nos. 71169, 74376, 76394, 78182,
and 82281 hereof, in the nature of appeals (by certiorari under Rule 45 of the Rules of Court) from five
decisions of the Court of Appeals, denying specific performance and damages.

The proceedings were commenced at the first instance by Jose Sangalang, joined by his wife
Lutgarda Sangalang, both residents of No. 110 Jupiter Street, Makati, Metro Manila (G.R. No. 71169)
to enforce by specific performance restrictive easement upon property, specifically the Bel- Air
Village subdivision in Makati, Metro Manila, pursuant to stipulations embodied in the deeds of sale
covering the subdivision, and for damages. Later, the Sangalangs were joined by Felix Gaston, a
resident of No. 64 Jupiter Street of the same municipality, and by Mr. and Mrs. Jose and Alicia
Briones, both of No. 66 Jupiter Street. Pending further proceedings, the Bel-Air Village Association,
Inc. (BAVA), an incorporated homeowners' association, entered its appearance as plaintiff-in-
intervention.

BAVA itself had brought its own complaints, four in number, likewise for specific performance and
damages to enforce the same 'deed restrictions.' (See G.R. Nos. 74376, 76394, 78182, and 82281.)

ANTECEDENTS FACTS

I. G.R. No. 71169

The facts are stated in the decision appealed from. We quote:

xxxxxxxxx

(1) Bel-Air Village is located north of Buendia Avenue extension (now Sen. Gil J.
Puyat Ave.) across a stretch of commercial block from Reposo Street in the west up
to Zodiac Street in the east, When Bel-Air Village was planned, this block between
Reposo and Zodiac Streets adjoining Buendia Avenue in front of the village was
designated as a commercial block. (Copuyoc TSN, p. 10, Feb. 12, 1982).

(2) Bel-Air Village was owned and developed into a residential subdivision in the
1950s by Makati Development Corporation (hereinafter referred to as MDC), which in
1968 was merged with appellant Ayala Corporation.
(3) Appellees-spouses Sangalang reside at No. 11O Jupiter Street between Makati
Avenue and Reposo Street; appellees-spouses Gaston reside at No. 64 Jupiter
Street between Makati Avenue and Zodiac Street; appellees-spouses Briones reside
at No. 66 Jupiter Street also between Makati Avenue and Zodiac Street; while
appellee Bel-Air Village Association, Inc. (hereinafter referred to as BAVA) is the
homeowners' association in Bel-Air Village which takes care of the sanitation,
security, traffic regulations and general welfare of the village.

(4) The lots which were acquired by appellees Sangalang and spouse Gaston and
spouse and Briones and spouse in 1960, 1957 and 1958, respectively, were all sold
by MDC subject to certain conditions and easements contained in Deed Restrictions
which formed a part of each deed of sale. The pertinent provisions in said Deed
Restrictions, which are common to all lot owners in Bel-Air Village, are as follows:

I-BEL-AIR ASSOCIATION

The owner of this lot/s or his successors in interest is required to be and is

automatically a member of the Bel-Air Association and must abide by such rules and
regulations laid down by the Association in the interest of the sanitation, security and
the general welfare of the community.

The association will also provide for and collect assessments, which will constitute as
a lien on the property junior only to liens of the government for taxes and to voluntary
mortgages for sufficient consideration entered into in good faith.

II-USE OF LOTS

Subject to such amendments and additional restrictions, reservations, servitudes,

etc., as the Bel- Air Association may from time to time adopt and prescribe, this lot is
subject to the following restrictions:

a. This lot/s shall not be subdivided. However, three or more lots may be
consolidated and subdivided into a lesser number of lots provided that none of the
resulting lots be smaller in area than the smallest lot before the consolidation and
that the consolidation and subdivision plan be duly approved by the governing body
of the Bel-Air Association.

b. This lot/s shall only be used for residential purposes.

c. Only one single family house may be constructed on a single lot, although
separate servants' quarters or garage may be built.

d. Commercial or advertising signs shall not be placed, constructed, or erected on

this lot. Name plates and professional signs of homeowners are permitted so long as
they do not exceed 80 x 40 centimeters in size.

e. No cattle, pigs, sheep, goats, ducks, geese, roosters or rabbits shall be maintained
in the lot, except that pets may be maintained but must be controlled in accordance
with the rulings of the Association. The term "pets' includes chickens not in
commercial quantities.
f. The property is subject to an easement of two (2) meters within the lot and
adjacent to the rear and sides thereof not fronting a street for the purpose of
drainage, sewage, water and other public facilities as may be necessary and
desirable; and the owner, lessee or his representative shall permit access thereto by
authorized representatives of the Bel-Air Association or public utility entities for the
purposes for which the easement is created.

g. This lot shall not be used for any immoral or illegal trade or activity.

h. The owner and/or lessee of this lot/s shall at all times keep the grass cut and
trimmed to reduce the fire hazard of the property.

xxx xxx xxx

VI-TERM OF RESTRICTIONS

The foregoing restrictions shall remain in force for fifty years from January 15, 1957,
unless sooner cancelled in its entirety by two thirds vote of members in good
standing of the Bel-Air Association. However, the Association may, from time to time,
add new ones, amend or abolish particular restrictions or parts thereof by majority
rule.

VII--ENFORCEMENT OF RESTRICTIONS

The foregoing restrictions may be enjoined and/or enforced by court action by the
Bel-Air Association, or by the Makati Development Corporation or its assigns, or by
any registered owner of land within the boundaries of the Bel-Air Subdivision (Sub-
division plan PSD-49226 and Lot 7-B, Psd-47848) or by any member in good
standing of the Bel-Air association." (Exh. 1 -b; Exh. 22, Annex "B"). (Appellant's
Brief, pp. 4- 6)

(5) When MDC sold the above-mentioned lots to appellees' predecessors-in-interest,

the whole stretch of the commercial block between Buendia Avenue and Jupiter
Street, from Reposo Street in the west to Zodiac Street in the east, was still
undeveloped. Access, therefore, to Bel-Air Village was opened to all kinds of people
and even animals. So in 1966, although it was not part of the original plan, MDC
constructed a fence or wall on the commercial block along Jupiter Street. In 1970,
the fence or wall was partly destroyed by typhoon "Yoling." The destroyed portions
were subsequently rebuilt by the appellant. (Copuyoc TSN, pp. 31-34, Feb. 12,
1982). When Jupiter Street was widened in 1972 by 3.5 meters, the fence or wall had
to be destroyed. Upon request of BAVA, the wall was rebuilt inside the boundary of
the commercial block. (Copuyoc TSN, pp. 4447, Feb. 12,1982).

(6) When the appellant finally decided to subdivide and sell the lots in the commercial
block between Buendia and Jupiter, BAVA wrote the appellant on May 9, 1972,
requesting for confirmation on the use of the commercial lots. The appellant replied
on May 16, 1972, informing BAVA of the restrictions intended to be imposed in the
sale and use of the lots. Among these restrictions are: that the building shall have a
set back of 19 meters; and that with respect to vehicular traffic along Buendia
Avenue, entrance only will be allowed, and along Jupiter Street and side streets, both
entrance and exit will be allowed.
(7) On June 30, 1972, appellant informed BAVA that in a few months it shall
subdivide and sell the commercial lots bordering the north side of Buendia Avenue
Extension from Reposo Street up to Zodiac Street. Appellant also informed BAVA that
it had taken all precautions and will impose upon the commercial lot owners deed
restrictions which will harmonize and blend with the development and welfare of Bel-
Air Village. Appellant further applied for special membership in BAVA of the
commercial lot owners. A copy of the deed restrictions for the commercial lots was
also enclosed. The proposed deed restrictions shall include the 19 meter set back of
buildings from Jupiter Street, the requirement for parking space within the lot of one
(1) parking slot for every seventy five (75) meters of office space in the building and
the limitation of vehicular traffic along Buendia to entrance only, but allowing both
vehicular entrance and vehicular exit through Jupiter Street and any side street.

In its letter of July 10, 1972, BAVA acknowledged the above letter of appellant and
informed the latter that the application for special membership of the commercial lot
owners in BAVA would be submitted to BAVA's board of governors for decision.

(8) On September 25, 1972, appellant notified BAVA that, after a careful study, it was
finally decided that the height limitation of buildings on the commercial lots shall be
increased from 12.5 meters to 15 meters. Appellant further informed BAVA that
Jupiter Street shall be widened by 3.5 meters to improve traffic flow in said street.
BAVA did not reply to said letter, but on January 22, 1973, BAVA wrote a letter to the
appellant informing the latter that the Association had assessed the appellant, as
special member of the association, the amount of P40,795.00 (based on 81,590
square meters at P.50 per square meter) representing the membership dues to the
commercial lot owners for the year 1973, and requested the appellant to remit the
amount which its board of governors had already included in its current budget. In
reply, appellant on January 31, 1973 informed BAVA that due to the widening of
Jupiter Street, the area of the lots which were accepted by the Association as
members was reduced to 76,726 square meters. Thus, the corresponding dues at
P.50 per square meter should be reduced to P38,363.00. This amount, therefore,
was remitted by the appellant to BAVA. Since then, the latter has been collecting
membership dues from the owners of the commercial lots as special members of the
Association. As a matter of fact, the dues were increased several times. In 1980, the
commercial lot owners were already being charged dues at the rate of P3.00 per
square meter. (Domingo, TSN, p. 36, March 19, 1980). At this rate, the total
membership dues of the commercial lot owners amount to P230,178. 00 annually
based on the total area of 76,726 square meters of the commercial lots.

(9) Meantime, on April 4, 1975, the municipal council of Makati enacted its ordinance
No. 81, providing for the zonification of Makati (Exh. 18). Under this Ordinance, Bel-
Air Village was classified as a Class A Residential Zone, with its boundary in the
south extending to the center line of Jupiter Street (Exh. 18-A).

Thus, Chapter III, Article 1, Section 3.03, par. F. of the Ordinance provides:

F. Bel-Air Village area, as bounded on the N by Polaris and Mercedes streets and on
the NE by Estrella Street; on the SE by Epifanio de los Santos Avenue and on the
SW by the center line of Jupiter Street. Then bounded on the N by the abandoned
MRR Pasig Line; on the E by Makati Avenue; on the S by the center line of Jupiter
Street and on the W by the center line of Reposo Street." (Exh. 18-A)
 Similarly, the Buendia Avenue Extension area was classified as Administrative Office
Zone with its boundary in the North-North East Extending also up to the center line of
Jupiter Street (Exh. 18b).

Thus, Chapter III, Article I, Section 3.05, par. C. of the Ordinance provides:

C. The Buendia Avenue Extension areas, as bounded on the N-NE by the center line
of Jupiter Street, on the SE by Epifanio de los Santos Avenue; on the SW by Buendia
Avenue and on the NW by the center line of Reposo Street, then on the NE by
Malugay Street; on the SE by Buendia Avenue and on the W by Ayala Avenue
Extension." (Exh. 18-B)

The Residential Zone and the Administrative Office Zone, therefore, have a common
boundary along the center line of Jupiter Street.

The above zoning under Ordinance No. 81 of Makati was later followed under the
Comprehensive Zoning Ordinance for the National Capital Region adopted by the
Metro Manila Commission as Ordinance 81 -01 on March 14, 1981 (Exh. 19).
However, under this ordinance, Bel-Air Village is simply bounded in the South-
Southeast by Jupiter Street-not anymore up to the center line of Jupiter Street (Exh.
B). Likewise, the blockdeep strip along the northwest side of Buendia Avenue
Extension from Reposo to EDSA was classified as a High Intensity Commercial Zone
(Exh. 19-c).

Thus, the Zoning District Boundaries -Makati, in Annex B of the Ordinance provides:

R-I-Low Intensity Residential

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4. Bel-Air 1, 3, 4

Bounded on the North -- J.P. Rizal and Amapola St.

South - Rockwell

Northwest - P. Burgos

Southeast - Jupiter

Southwest - Epifanio de los Santos Ave. (EDSA)

5. Bel-Air 2

Bounded on the Northwest - J.P. Rizal

Southwest - Makati Avenue

South --- Jupiter

Southeast -- Pasig Line

East - South Avenue" (Exh. 19-b)

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C-3-High Intensity Commercial Zone

2. A block deep strip along the northwest side of Buendia Ave. Ext. from Reposo to
EDSA." (Exh, 19-c)

Under the above zoning classifications, Jupiter Street, therefore, is a common

boundary of Bel-Air Village and the commercial zone.

(10) Meanwhile, in 1972, BAVA had installed gates at strategic locations across
Jupiter Street which were manned and operated by its own security guards who were
employed to maintain, supervise and enforce traffic regulations in the roads and
streets of the village. (Villavicencio, TSN, pp, 22-25, Oct. 30, 1980; BAVA Petition,
par. 11, Exh. 17).

Then, on January 17, 1977, the Office of the Mayor of Makati wrote BAVA directing
that, in the interest of public welfare and for the purpose of easing traffic congestion,
the following streets in Bel-Air Village should be opened for public use:

Amapola Street - from Estrella Street to Mercedes Street

Amapola Street -junction of Palma Street gate going to J. Villena Street

Mercedes Street -- from EDSA to Imelda Avenue and Amapola junction

Zodiac Street - from Mercedes Street to Buendia Avenue

Jupiter Street -- from Zodiac Street to Reposo Street connecting Metropolitan Avenue
to Pasong Tamo and V. Cruz Extension intersection

Neptune Street - from Makati Avenue to Reposo Street Orbit Street - from F. Zobel-
Candelaria intersection to Jupiter Street

Paseo de Roxas - from Mercedes Street to Buendia Avenue (Exh. 17, Annex A,
BAVA Petition)

On February 10, 1977, BAVA wrote the Mayor of Makati, expressing the concern of
the residents about the opening of the streets to the general public, and requesting
specifically the indefinite postponement of the plan to open Jupiter Street to public
vehicles. (Exh. 17, Annex B, BAVA Petition).

However, BAVA voluntarily opened to the public Amapola, Mercedes, Zodiac,

Neptune and Paseo de Roxas streets. (Exh. 17-A, Answer of Makati par. 3-7).
Later, on June 17,1977, the Barangay Captain of Bel-Air Village was advised by the
Office of the Mayor that, in accordance with the agreement entered into during the
meeting on January 28, 1 977, the Municipal Engineer and the Station Commander
of the Makati Police were ordered to open for public use Jupiter Street from Makati
Avenue to Reposo Street. Accordingly, he was requested to advise the village
residents of the necessity of the opening of the street in the interest of public welfare.
(Exh. 17, Annex E, BAVA Petition).

Then, on June 10, 1977, the Municipal Engineer of Makati in a letter addressed to
BAVA advised the latter to open for vehicular and pedestrian traffic the entire portion
of Jupiter Street from Makati Avenue to Reposo Street (Exh. 17, BAVA Petition, par.
14).

Finally, on August 12, 1977, the municipal officials of Makati concerned allegedly
opened, destroyed and removed the gates constructed/located at the corner of
Reposo Street and Jupiter Street as well as the gates/fences located/constructed at
Jupiter Street and Makati Avenue forcibly, and then opened the entire length of
Jupiter Street to public traffic. (Exh. 17, BAVA Petition, pars. 16 and 17).

(11) Before the gates were-removed, there was no parking problem or traffic problem
in Jupiter Street, because Jupiter Street was not allowed to be used by the general
public (Villavicencio, TSN, pp. 24-25, Oct. 30, 1980). However, with the opening of
Zodiac Street from Estrella Street to Jupiter Street and also the opening to the public
of the entire length of Jupiter Street, there was a tremendous increase in the volume
of traffic passing along Jupiter Street coming from EDSA to Estrella Street, then to
Zodiac Street to Jupiter Street, and along the entire length of Jupiter Street to its
other end at Reposo Street. (Villavicencio, TSN, pp. 30-32, Oct. 30, 1980).

In the meantime, the purchasers of the commercial lots between Jupiter Street and
Buendia Avenue extension had started constructing their respective buildings in
1974-1975. They demolished the portions of the fence or wall standing within the
boundary of their lots. Many of the owners constructed their own fences or walls in
lieu of the wall and they employed their own security guards. (TSN, p. 83, Feb.
20,1981; TSN, pp. 53-54; 72-74, March 20,1981; TSN, pp. 54-55, July 23, 1981).

(12) Then, on January 27, 1978, appellant donated the entire Jupiter Street from
Metropolitan Avenue to Zodiac Street to BAVA (Exh. 7)- However, even before 1978,
the Makati Police and the security force of BAVA were already the ones regulating
the traffic along Jupiter Street after the gates were opened in 1977. Sancianco TSN,
pp. 26-30, Oct. 2,1981).

In October, 1979, the fence at the corner of Orbit and Neptune Streets was opened
and removed (BAVA Petition, par. 22, Exh. 17). The opening of the whole stretch of
Orbit Street from J.P. Rizal Avenue up to Imelda Avenue and later to Jupiter Street
was agreed to at the conference attended by the President of BAVA in the office of
the Station Commander of Makati, subject to certain conditions, to wit:

That, maintenance of Orbit St. up to Jupiter St. shall be shouldered by the

Municipality of Makati.

That, street lights will be installed and maintenance of the same along Orbit St. from
J.P. Rizal Ave. up to Jupiter St. shall be undertaken by the Municipality.
That for the security of the residents of San Miguel Village and Bel-Air Village, as a
result of the opening of Orbit Street, police outposts shall be constructed by the
Municipality of Makati to be headed by personnel of Station No. 4, in close
coordination with the Security Guards of San Miguel Village and Bel-Air Village." (CF.
Exh. 3 to Counter-Affidavit, of Station Commander, Ruperto Acle p. 253, records)"
(Order, Civil Case No. 34948, Exh. 17-c).

(13) Thus, with the opening of the entire length of Jupiter Street to public traffic, the
different residential lots located in the northern side of Jupiter Street ceased to be
used for purely residential purposes. They became, for all purposes, commercial in
character.

(14) Subsequently, on October 29, 1979, the plaintiffs-appellees Jose D. Sangalang

and Lutgarda D. Sangalang brought the present action for damages against the
defendant-appellant Ayala Corporation predicated on both breach of contract and on
tort or quasi-delict A supplemental complaint was later filed by said appellees seeking
to augment the reliefs prayed for in the original complaint because of alleged
supervening events which occurred during the trial of the case. Claiming to be
similarly situated as the plaintiffs-appellees, the spouses Felix C. Gaston and
Dolores R. Gaston, Jose V. Briones and Alicia R. Briones, and the homeowners'
association (BAVA) intervened in the case.

(15) After trial on the merits, the then Court of First Instance of Rizal, Pasig, Metro
Manila, rendered a decision in favor of the appellees the dispositive portion of which
is as follows:

WHEREFORE, judgment is hereby accordingly rendered as follows:

ON PLAINTIFFS' COMPLAINT:

Defendant is ordered to pay to the plaintiffs-spouses Sangalang the following

damages:

1. The sum of P500,000.00 as actual and consequential damages;

2. The sum of P2,000,000.00 as moral damages;

3. The sum of P500,000.00 as exemplary damages;

4. The sum of P100,000.00 as attorney's fees; and

5. The costs of suit.

ON INTERVENORS FELIX and DOLORES GASTON'S COMPLAINT:

Defendant is ordered to pay to the spouses Felix and Dolores Gaston, the following
damages:

1 . The sum of P400,000.00 as consequential damages;

2 The sum of P500,000.00 as moral damages;

3 The sum of P500,000.00 as exemplary damages:

4 The sum of P50,000.00 as attorney's fees; and

5 The costs of suit.

ON INTERVENORS JOSE and ALICIA BRIONES' COMPLAINT:

Defendant is ordered to pay to the spouses Jose and Alicia Briones, the following
damages:

1 . The sum of P400,000.00 as consequential damages;

2 The sum of P500,000.00 as moral damages;

3 The sum of P500,000.00 as exemplary damages;

4 The sum of P50,000.00 as attorney's fees; and

5 The costs of suit.

ON INTERVENOR BAVA'S COMPLAINT:

Defendant is ordered to pay intervenor BAVA, the following damages:

1. The sum of P400,000.00 as consequential damages;

2. The sum of P500,000.00 as exemplary damages;

3. The sum of P50,000.00 as attorney's fees; and

4. The costs of suit.

The above damages awarded to the plaintiffs and intervenors shall bear legal interest
from the filing of the complaint.

Defendant is further ordered to restore/reconstruct the perimeter wall at its original

position in 1966 from Reposo Street in the west to Zodiac Street in the east, at its
own expense, within SIX (6) MONTHS from finality of judgment.

SO ORDERED.

(Record on Appeal, pp. 400-401) 2

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On appeal, the Court of Appeals 3 rendered a reversal, and disposed as follows:

 ACCORDINGLY, finding the decision appealed from as not supported by the facts
and the law on the matter, the same is hereby SET ASIDE and another one entered
dismissing the case for lack of a cause of action. Without pronouncement as to costs.

SO ORDERED. 4

II. G.R. No. 74376

This petition was similarly brought by BAVA to enforce the aforesaid restrictions stipulated in the
deeds of sale executed by the Ayala Corporation. The petitioner originally brought the complaint in
the Regional Trial Court of Makati, 5 principally for specific performance, plaintiff [now, petitioner]
alleging that the defendant [now, private respondent] Tenorio allowed defendant [Tenorio's co-private
respondent] Gonzalves to occupy and convert the house at 50 Jupiter Street, Bel-Air Village, Makati,
Metro Manila, into a restaurant, without its knowledge and consent, and in violation of the deed
restrictions which provide that the lot and building thereon must be used only for residential purposes
upon which the prayed for main relief was for 'the defendants to permanently refrain from using the
premises as commercial and to comply with the terms of the Deed Restrictions." 6 The trial court
dismissed the complaint on a procedural ground, i.e., pendency of an Identical action, Civil Case No.
32346, entitled "Bel-Air Village Association, Inc. v. Jesus Tenorio." The Court of Appeals 7affirmed, and
held, in addition, that Jupiter Street "is classified as High density commercial (C-3) zone as per
Comprehensive Zoning Ordinance No. 81-01 for National Capital Region," 8 following its own ruling in AC-
G.R. No. 66649, entitled "Bel-Air Village Association, Inc. vs. Hy-Land Realty & Development Corporation,
et al."

III. G.R. No. 76394

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Defendants-spouses Eduardo V. Romualdez, Jr. and Buena Tioseco are the owners
of a house and lot located at 108 Jupiter St., Makati, Metro Manila as evidenced by
Transfer Certificate of Title No. 332394 of the Registry of Deeds of Rizal. The fact is
undisputed that at the time the defendants acquired the subject house and lot,
several restrictions were already annotated on the reverse side of their title; however,
for purposes of this appeal we shall quote hereunder only the pertinent ones, to wit:

(b,) This lot/shall be used only for residential purposes.

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IV. Term of Restriction

The foregoing restriction(s) shall remain in force for fifty years from January 15,
1957, unless sooner cancelled in its entirety by two-thirds vote of the members in
good standing of the Bel-Air Association. However, the Association may from time to
time, add new ones, amend or abolish particular restrictions or parts thereof by
majority rule.

During the early part of 1979, plaintiff noted that certain renovations and
constructions were being made by the defendants on the subject premises, for which
reason the defendants were advised to inform the plaintiff of the kind of construction
that was going on. Because the defendants failed to comply with the request of the
plaintiff, the latter's chief security officer visited the subject premises on March 23,
 1979 and found out that the defendants were putting up a bake and coffee shop,
which fact was confirmed by defendant Mrs. Romualdez herself. Thereafter, the
plaintiff reminded defendants that they were violating the deed restriction. Despite
said reminder, the defendants proceeded with the construction of the bake shop.
Consequently, plaintiff sent defendants a letter dated April 30, 1979 warning them
that if they will not desist from using the premises in question for commercial
purposes, they will be sued for violations of the deed restrictions.

Despite the warning, the defendants proceeded with the construction of their bake
shop. 9

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The trial court 10 adjudged in favor of BAVA. On appeal, the Court of Appeals 11
reversed, on the strength
of its holding in AC-G.R. No. 66649 earlier referred to.

BAVA then elevated the matter to the Court by a petition for review on certiorari. The Court 12 initially
denied the petition "for lack of merit, it appearing that the conclusions of the respondent Court of Appeals
that private respondents' bake and coffee shop lies within a commercial zone and that said private
respondents are released from their obligations to maintain the lot known as 108 Jupiter Street for
residential purposes by virtue of Ordinance No. 81 of the Municipality of Makati and Comprehensive
Zoning Ordinance No. 81-01 of the Metropolitan Manila Commission, are in accord with law and
jurisprudence," 13 for which BAVA sought a reconsideration. Pending resolution, the case was referred to
the Second Division of this Court, 14 and thereafter, to the Court En Banc en consulta. 15 Per our
Resolution, dated April 29, 1988, we consolidated this case with G.R. Nos. 74376 and 82281. 16

IV. G.R. No. 78182.

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The case stemmed from the leasing by defendant Dolores Filley of her building and
lot situated at No. 205 Reposo Street, Bel-Air Village Makati, Metro Manila to her co-
defendant, the advertising firm J. Romero and Associates, in alleged violation of
deed restrictions which stipulated that Filley's lot could only be used for residential
purposes. Plaintiff sought judgment from the lower court ordering the defendants to
"permanently refrain" from using the premises in question "as commercial" and to
comply with the terms of the deed restrictions.

After the proper proceedings, the court granted the plaintiff the sought for relief with
the additional imposition of exemplary damages of P50,000.00 and attorney's fees of
P10,000.00. The trial court gave emphasis to the restrictive clauses contained in
Filley's deed of sale from the plaintiff, which made the conversion of the building into
a commercial one a violation.

Defendants now seek review and reversal on three (3) assignments of errors, namely:

I.

THE TRIAL COURT ERRED IN NOT FINDING THAT THE REGULATIONS

PROMULGATED BY THE MUNICIPAL AUTHORITIES IN MAKATI AND THE
MINISTRY OF HUMAN SETTLEMENT'S CHANGING THE CHARACTER OF THE
 AREAS IN QUESTION HAD RENDERED THE RESTRICTIVE EASEMENT ON THE
TITLE OF THE APPELLANTS VACATED.

II.

THE COURT ERRED IN NOT RULING THAT BECAUSE THE APPELLEE(S) HAD
ALLOWED THE USE OF THE PROPERTY WITHIN THE VILLAGE FOR NON-
RESIDENTIAL PURPOSES, IT IS NOW ESTOPPED FROM ENFORCING THE
RESTRICTIVE PROHIBITIONS SUBJECT MATTER OF THIS CASE.

III.

THE COURT ERRED IN NOT FINDING THAT THERE EXISTED A BILATERAL

CONTRACT BETWEEN THE PARTIES AND THAT SINCE APPELLEE HAD NOT
PERFORMED ITS OBLIGATIONS UNDER THIS ARRANGEMENT THE
APPELLANT IN TURN WAS UNDER NO OBLIGATION TO ANNOTATE THE
RESTRICTIVE PROHIBITIONS ON THE BACK OF THE TITLE.

Appellants anchor their appeal on the proposition that the Bel-Air Village area,
contrary to plaintiff- appellee's pretension of being a strictly residential zone, is in fact
commercial and characterize the restrictions contained in appellant Filley's deed of
sale from the appellee as completely outmoded, which have lost all relevance to the
present-day realities in Makati, now the premier business hub of the nation, where
there is a proliferation of numerous commercial enterprises established through the
years, in fact even within the heart of so-called "residential" villages. Thus, it may be
said that appellants base their position on the inexorable march of progress which
has rendered at naught the continued efficacy of the restrictions. Appellant on the
other hand, relies on a rigid interpretation of the contractual stipulations agreed upon
with appellant Filley, in effect arguing that the restrictions are valid ad infinitum.

The lower court quite properly found that other commercial establishments exist in
the same area (in fact, on the same street) but ignored it just the same and said-

The fact that defendants were able to prove the existence of several commercial
establishments inside the village does not exempt them from liability for violating
some of the restrictions evidently choosing to accord primacy to contractual
stipulation. 17

xxxxxxxxx

The Court of Appeals 18 overturned the lower court, 19 likewise based on AC-G.R. No. 66649. The
respondent Court observed also that J. Romero & Associates had been given authority to open a
commercial office by the Human Settlements Regulatory Commission.

V. G.R. No. 82281

The facts of this case have been based on stipulation. We quote:

COMES NOW, the Parties, assisted by their respective counsel and to this
Honorable Court, respectfully enter into the following stipulations of facts, to wit:
 1. The parties admit the personal circumstances of each other as well as their
capacities to sue and be sued.

2. The parties admit that plaintiff BAVA for short) is the legally constituted
homeowners' association in Bel-Air Subdivision, Makati, Metro Manila.

3. The parties admit that defendant Violets Moncal is the registered owner of a parcel
of land with a residential house constructed thereon situated at No. 104 Jupiter
Street, Bel-Air Village, Makati, Metro Manila; that as such lot owner, she is a member
of the plaintiff association.

4. The parties admit that defendant Majal Development Corporation (Majal for short)
is the lessee of defendant Moncal's house and lot located at No. 104 Jupiter Street.

5. The parties admit that a deed restrictions is annotated on the title of defendant
Moncal, which provides, among others, that the lot in question must be used only for
residential purposes;' that at time Moncal purchased her aforesaid lot in 1959 said
deed restrictions was already annotated in the said title.

6. The parties admit that when Moncal leased her subject property to Majal, she did
not secure the consent of BAVA to lease the said house and lot to the present lessee.

7. The parties admit that along Jupiter Street and on the same side where Moncal's
property is located, there are restaurants, clinics placement or employment agencies
and other commercial or business establishments. These establishments, however,
were sued by BAVA in the proper court.

8. The parties admit that at the time Moncal purchased the subject property from the
Makati Development Corporation, there was a perimeter wall, running along Jupiter
Street, which wall was constructed by the subdivision owner; that at that time the
gates of the entrances to Jupiter Street were closed to public traffic. In short, the
entire length of Jupiter which was inside the perimeter wall was not then open to
public traffic

9. The parties admit that subsequent thereto, Ayala tore down the perimeter wall to
give way to the commercial building fronting Buendia Avenue (now Gil J. Puyat
Avenue).

10. The parties admit that on August 12, 1977, the Mayor of Makati forcibly opened
and removed the street gates constructed on Jupiter Street and Reposo Street,
thereby opening said streets to the public.

11. The parties admit plaintiffs letters of October 10, 23 and 31, 1984; as well as
defendants' letters-reply dated October 17 and 29, 1984. 20

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The trial court 21 dismissed the petitioner's complaint, a dismissal affirmed on appeal, 22 According to the
appellate court, the opening of Jupiter Street to human and vehicular traffic, and the commercialization of
the Municipality of Makati in general, were circumstances that had made compliance by Moncal with the
aforesaid "deed restrictions" "extremely difficult and unreasonable," 23
a development that had excused
compliance altogether under Article 1267 of the Civil Code.

VI. The cases before the Court; the Court's decision.

In brief, G.R. Nos. 74376, 76394, 78182, and 82281 are efforts to enforce the "deed restrictions" in
question against specific residents (private respondents in the petitions) of Jupiter Street and with
respect to G.R. No. 78182, Reposo Street. The private respondents are alleged to have converted
their residences into commercial establishments (a restaurant in G.R. No. 74376, a bakery and
coffee shop in G.R. No. 76394, an advertising firm in G.R. No. 78182; and a construction company,
apparently, in G.R. No. 82281) in violation of the said restrictions. 24

Their mother case, G. R. No. 71169 is, on the other hand, a petition to hold the vendor itself, Ayala
Corporation (formerly Makati Development Corporation), liable for tearing down the perimeter wall
along Jupiter Street that had therefore closed its commercial section from the residences of Bel-Air
Village and ushering in, as a consequence, the full "commercialization" of Jupiter Street, in violation
of the very restrictions it had authored.

As We indicated, the Court of Appeals dismissed all five appeals on the basis primarily of its ruling in
AC-G.R. No. 66649, "Bel-Air Village, Inc. v. Hy-Land Realty Development Corporation, et al.," in
which the appellate court explicitly rejected claims under the same 'deed restrictions" as a result of
Ordinance No. 81 enacted by the Government of the Municipality of Makati, as well as
Comprehensive Zoning Ordinance No. 8101 promulgated by the Metropolitan Manila Commission,
which two ordinances allegedly allowed the use of Jupiter Street both for residential and commercial
purposes. It was likewise held that these twin measures were valid as a legitimate exercise of police
power.

The Court of Appeals' reliance on Ordinance Nos. 81. and 8101 is now assailed in these petitions,
particularly the Sangalang, et al. petition.

Aside from this fundamental issue, the petitioners likewise raise procedural questions. G.R. No.
71169, the mother case, begins with one.

1. G.R. No. 71169

In this petition, the following questions are specifically put to the Court:

May the Honorable Intermediate Appellate Court reverse the decision of the trial
court on issues which were neither raised by AYALA in its Answers either to the
Complaint or Supplemental Complaint nor specifically assigned as one of the alleged
errors on appeal? 25

May the Honorable Intermediate Appellate Court arbitrarily ignore the decisive
findings of fact of the trial court, even if uncontradicted and/or documented, and
premised mainly on its own unsupported conclusions totally reverse the trial court's
decision? 26

May the Honorable Intermediate Appellate Court disregard the trial court's
documented findings that respondent Ayala for its own self-interest and commercial
purposes contrived in bad faith to do away with the Jupiter Street perimeter wall it put
up three times which wall was really intended to separate the residential from the
 commercial areas and thereby insure the privacy and security of Bel Air Village
pursuant to respondent Ayala's express continuing representation and/or covenant to
do so? 27

a.

The first question represents an attack on the appellate court's reliance on Ordinances Nos. 81 and
81-01, a matter not supposedly taken up at the trial or assigned as an error on appeal. As a rule, the
Court of Appeals (then the Intermediate Appellate Court) may determine only such questions as
have been properly raised to it, yet, this is not an inflexible rule of procedure. In Hernandez v.
Andal, 28 it was stated that "an unassigned error closely related to an error properly assigned, or upon
which the determination of the question raised by the error properly assigned is dependent, will be
considered by the appellate court notwithstanding the failure to assign it as error." 29

In Baquiran v. Court of Appeals, 30 we referred to the " modern trend of procedure . . . according] the
courts broad discretionary power" 31 and in which we allowed consideration of matters "having some
bearing on the issue submitted which the parties failed to raise or the lower court ignore[d]. 32 And in Vda.
de Javellana v. Court of Appeals, 33 we permitted the consideration of a 'patent error' of the trial court by
the Court of Appeals under Section 7, of Rule 51, of the Rules of Court, 34although such an error had not
been raised in the brief. But what we note is the fact that the Ayala Corporation did raise the zoning
measures as affirmative defenses, first in its answers 35 and second, in its brief, 36 and submitted at the
trial as exhibits. 37 There is accordingly no cause for complaint on the part of the petitioners for Ayala's
violation of the Rules. But while there was reason for the consideration, on appeal, of the said zoning
ordinances in question, this Court nevertheless finds as inaccurate the Court of Appeals' holding that such
measures, had "in effect, [made] Jupiter Street ... a street which could be used not only for residential
purposes," 38 and that "[It lost its character as a street for the exclusive benefit of those residing in Bel-Air
Village completely." 39

Among other things, there is a recognition under both Ordinances Nos. 81 and 8 1-01 that Jupiter
Street lies as the boundary between Bel-Air Village and Ayala Corporation's commercial section. And
since 1957, it had been considered as a boundary not as a part of either the residential or
commercial zones of Ayala Corporation's real estate development projects. Thus, the Bel-Air Village
Association's articles of incorporation state that Bel-Air Village is 'bounded on the NE., from Amapola
St., to de los Santos Ave., by Estrella St., on the SE from Extrella St., to Pedestrian Lane by E. De
los Santos Ave., on the SW., from Pedestrian Lane to Reposo St., by Jupiter Street

. . . . 40 Hence, it cannot be said to have been "for the exclusive benefit" of Bel-Air Village residents.

We come to the perimeter wall then standing on the commercial side of Jupiter Street the destruction
of which opened the street to the public. The petitioners contend that the opening of the
thoroughfare had opened, in turn, the floodgates to the commercialization of Bel-Air Village. The
wall, so they allege, was designed precisely to protect the peace and privacy of Bel-Air Village
residents from the din and uproar of mercantile pursuits, and that the Ayala Corporation had
committed itself to maintain it. It was the opinion of the Court of Appeals, as we said, that Ayala's
liability therefor, if one existed, had been overtaken by the passage of Ordinances Nos. 81 and 82-
01, opening Jupiter Street to commerce.

It is our ruling, we reiterate, that Jupiter Street lies as a mere boundary, a fact acknowledged by the
authorities of Makati and the National Government and, as a scrutiny of the records themselves
reveals, by the petitioners themselves, as the articles of incorporation of Bel-Air Village Association
itself would confirm. As a consequence, Jupiter Street was intended for the use by both -the
commercial and residential blocks. It was not originally constructed, therefore, for the exclusive use
of either block, least of all the residents of Bel-Air Village, but, we repeat, in favor of both, as
distinguished from the general public.

When the wall was erected in 1966 and rebuilt twice, in 1970 and 1972, it was not for the purpose of
physically separating the two blocks. According to Ayala Corporation, it was put up to enable the Bel-
Air Village Association "better control of the security in the area, 41 and as the Ayala Corporation's
"show of goodwill " 42 a view we find acceptable in the premises. For it cannot be denied that at that time,
the commercial area was vacant, "open for [sic] animals and people to have access to Bel-Air
Village." 43 There was hence a necessity for a wall.

In any case, we find the petitioners' theory, that maintaining the wall was a matter of a contractual
obligation on the part of Ayala, to be pure conjecture. The records do not establish the existence of
such a purported commitment. For one, the subdivision plans submitted did not mention anything
about it. For another, there is nothing in the "deed restrictions" that would point to any covenant
regarding the construction of a wall. There is no representation or promise whatsoever therein to that
effect.

With the construction of the commercial buildings in 1974, the reason for which the wall was built- to
secure Bel-Air Village from interlopers had naturally ceased to exist. The buildings themselves had
provided formidable curtains of security for the residents. It should be noted that the commercial lot
buyers themselves were forced to demolish parts of the wall to gain access to Jupiter Street, which
they had after all equal right to use.

In fine, we cannot hold the Ayala Corporation liable for damages for a commitment it did not make,
much less for alleged resort to machinations in evading it. The records, on the contrary, will show
that the Bel-Air Village Association had been informed, at the very outset, about the impending use
of Jupiter Street by commercial lot buyers. We quote:

xxxxxxxxx

1. Exh. I of appellee, the memorandum of Mr. Carmelo Caluag, President of BAVA,

dated May 10, 1972, informing the BAVA Board of Governors and Barrio Council
members about the future use of Jupiter Street by the lot owners fronting Buendia
Avenue. The use of Jupiter Street by the owners of the commercial lots would
necessarily require the demolition of the wall along the commercial block adjoining
Jupiter Street.

2. Exh. J of appellee, the minutes of the joint meeting of BAVA Board of Governors
and the Bel-Air Barrio Council where the matter that "Buendia lot owners will have
equal rights to use Jupiter Street," and that Ayala's "plans about the sale of lots and
use of Jupiter Street" were precisely taken up. This confirms that from the start BAVA
was informed that the commercial lot owners will use Jupiter Street and that
necessarily the wall along Jupiter Street would be demolished.

3. Exh. 10, the letter of Mr. Demetrio Copuyoc to the President of BAVA, dated May
16, 1972, expressly stating that vehicular entrance and exit to the commercial lots
would be allowed along Jupiter and side streets.

4. Exhs. 27, 27-A, 27-B, the letter of Atty. Salvador J. Lorayes dated June 30, 1972,
with enclosed copy of proposed restriction for the commercial lots to BAVA. He
proposed restriction again expressly stated that "Vehicular entrances and exits are
allowed thru Jupiter and any side streets."
 5. Exh. L of appellee, the minutes of the meeting of the members of BAVA, dated
August 26, 1972, where it is stated "Recently, Ayala Corporation informed the Board
that the lots fronting Buendia Avenue will soon be offered for sale, and that future lot
owners will be given equal rights to use Jupiter Street as well as members of the
Association."

6. Exh. 25, the letter of Atty. Lorayes dated September 25, 1972, informing BAVA of
the widening of Jupiter Street by 3.5 meters to improve traffic flow in said street to
benefit both the residents of Bel-Air and the future owners of the commercial lots. 44

The petitioners cannot successfully rely on the alleged promise by Demetrio Copuyoc, Ayala's
manager, to build a "[f]ence along Jupiter with gate for entrance and/or exit 45 as evidence of Ayala's
alleged continuing obligation to maintain a wall between the residential and commercial sections. It should
be observed that the fence referred to included a "gate for entrance and or exit" which would have
defeated the purpose of a wall, in the sense the petitioners would put in one, that is to say, an
impenetrable barrier. But as Ayala would point out subsequently, the proposed fence was not constructed
because it had become unnecessary when the commercial lot owners commenced constructions thereon.

Be that as it may, the Court cannot visualize any purported obligation by Ayala Corporation to keep
the wall on the strength of this supposed promise alone. If truly Ayala promised anything assuming
that Capuyoc was authorized to bind the corporation with a promise it would have been with respect
to the fence. It would not have established the pre-existing obligation alleged with respect to the wall.

Obligations arise, among other things, from contract. 46 If Ayala, then, were bound by an obligation, it
would have been pursuant to a contract. A contract, however, is characterized by a "meeting of minds
between two persons . 47 As a consensual relation, it must be shown to exist as a fact, clearly and
convincingly. But it cannot be inferred from a mishmash of circumstances alone disclosing some kind of
an "understanding," when especially, those disparate circumstances are not themselves incompatible with
contentions that no accord had existed or had been reached. 48

The petitioners cannot simply assume that the wall was there for the purpose with which they now
give it, by the bare coincidence that it had divided the residential block from the commercial section
of Bel-Air. The burden of proof rests with them to show that it had indeed been built precisely for that
objective, a proof that must satisfy the requirements of our rules of evidence. It cannot be made to
stand on the strength of plain inferences.

b.

This likewise answers the petitioners' second query, whether or not the Court of Appeals had
"arbitrarily ignore(d) the decisive findings of the trial court." 49 i.e., findings pointing to alleged acts
performed by the Ayala Corporation proving its commitment to maintain the wall abovesaid. Specifically,
the petitioners refer to, among other things: (1) Ayala's alleged announcement to Bel- Air Village
Association members that "[the perimeter wall along Jupiter Street will not be demolished," 50 (2) Ayala's
alleged commitment "during the pendency of the case in the trial court" to restore the wall; (3) alleged
assurances by Copuyoc that the wall will not be removed; (4) alleged contrivances by the corporation to
make the association admit as members the commercial lot buyers which provided them equal access to
Jupiter Street; and (5) Ayala's donation to the association of Jupiter Street for "private use" of Bel-Air
residents. 51

682 (1903), where it was held that "whether the plaintiffs services were solicited or whether they
were offered to the defendant for his assistance, inasmuch as these services were accepted and
made use of by the latter, we must consider that there was a tacit and mutual consent as to the
rendition of services." (At 686.) In that case, the defendant had enormously benefitted from the
services that entitled the plaintiff to compensation on the theory that no one may unjustly enrich
himself at the expense of another (Solutio indebiti) The facts of this case differ.

As we stated, the Ayala Corporation's alleged conduct prior to or during the proceedings below are
not necessarily at war with claims that no commitment had been in fact made.

With respect to Ayala's alleged announcement before the association, the Court does not agree that
Ayala had categorically assumed as an obligation to maintain the wall "perpetually," i.e., until the
year 2007 (the expiration date under the "deed restrictions.") There is nothing in its statement that
would bare any commitment. In connection with the conference between the parties "during the
pendency" of the trial, it is to be noted that the Ayala Corporation denies having warranted the
restoration of the said wall therein. What, on the other hand, appears in the records is the fact that
Ayala did make that promise, but provided that the Mayor allowed it. It turned out, however, that the
Mayor balked at the Idea. 52 But assuming that Ayala did promise to rebuild the wall (in that conference),
it does not seem to us that it did consequently promise to maintain it in perpetuity.

It is unfair to say, as the trial court did, that the Ayala had "contrived to make future commercial lot
owners special members of BAVA and thereby acquire equal right with the regular members thereof
to use Jupiter Street 53 since, as we stated, the commercial lot buyers have the right, in any event, to
make use of Jupiter Street, whether or not they are members of the association. It is not their
memberships that give them the right to use it. They share that right with Bel-Air residents from the
outset.

The objective of making the commercial lot owners special members of the Bel-Air Village
Association was not to accord them equal access to Jupiter Street and inferentially, to give them the
right to knock down the perimeter wall. It was, rather, to regulate the use of the street owing
precisely to the "planned" nature of Ayala's development project, and real estate development in
general, and this could best be done by placing the commercial lot owners under the association's
jurisdiction.

Moreover, Ayala's overtures with the association concerning the membership of commercial lot
buyers therein have been shown to be neither perfidious nor unethical nor devious (paraphrasing the
lower court). We quote anew:

xxxxxxxxx

(7) On June 30, 1972, appellant informed BAVA that in a few months it shall
subdivide and sell the commercial lots bordering the north side of Buendia Avenue
Extension from Reposo Street up to Zodiac Street. Appellant also informed BAVA that
it had taken all precautions and will impose upon the commercial lot owners deed
restrictions which will harmonize and blend with the development and welfare of Bel-
Air Village. Appellant further applied for special membership in BAVA of the
commercial lot owners. A copy of the deed restrictions for the commercial lots was
also enclosed. The proposed deed restrictions shall include the 19 meter set back of
buildings from Jupiter Street, the requirement for parking space within the lot of one
(1) parking slot for every seventy five (75) meters of office space in the building and
the limitation of vehicular traffic along Buendia to entrance only, but allowing both
vehicular entrance and vehicular exit through Jupiter Street and any side street.

In its letter of July 10, 1972, BAVA acknowledged the above letter of appellant and informed the latter
that the application for special membership of the commercial lot owners in BAVA would be
submitted to BAVA's board of governors for decision.
 (8) On September 25,1972, appellant notified BAVA that, after a careful study, it was
finally decided that the height limitation of buildings on the commercial lots shall be
increased from 12.5 meters to 15 meters. Appellant further informed BAVA that
Jupiter Street shall be widened by 3.5 meters to improve traffic flow in said street.
BAVA did not reply to said letter, but on January 22, 1973, BAVA wrote a letter to the
appellant informing the latter that the Association had assessed the appellant, as
special member of the association, the amount of P40,795.00 (based on 81,590
square meters at P.50 per square meter) representing the membership dues of the
commercial lot owners for the year 1973, and requested the appellant to remit the
amount which its board of governors had already included in its current budget. In
reply, appellant on January 31, 1973 informed BAVA that due to the widening of
Jupiter Street, the area of the lots which were accepted by the Association as
members was reduced to 76,726 square meters. Thus, the corresponding due at
P.50 per square meter should be reduced to P38,363.00. This amount, therefore,
was remitted by the appellant to BAVA. Since then, the latter has been collecting
membership dues from the owners of the commercial lots as special members of the
Association. As a matter of fact, the dues were increased several times. In 1980, the
commercial lot owners were already being charged dues at the rate of P3.00 per
square meter. (Domingo, TSN, p. 36, March 19, 1980). At this rate, the total
membership dues of the commercial lot owners amount to P230,178.00 annually
based on the total area of 76,726 square meters of the commercial lots. 54

xxxxxxxxx

The alleged undertaking, finally, by Ayala in the deed of donation (over Jupiter Street) to leave
Jupiter Street for the private use of Bel-Air residents is belied by the very provisions of the deed. We
quote:

xxxxxxxxx

IV. That the offer made by the DONOR had been accepted by the DONEE subject to
the condition that the property will be used as a street for the use of the members of
the DONEE, their families, personnel, guests, domestic help and, under certain
reasonable conditions and restrictions, by the general public, and in the event that
said lots or parts thereof cease to be used as such, ownership thereof shall
automatically revert to the DONOR. The DONEE shall always have Reposo Street,
Makati Avenue, and Paseo de Roxas open for the use of the general public. It is also
understood that the DONOR shall continue the maintenance of the street at its
expense for a period of three years from date hereof." (Deed of Donation, p. 6, Exh.
7) 55

xxxxxxxxx

The donation, on the contrary, gave the general public equal right to it.

The Court cannot then say, accepting the veracity of the petitioners' facts" enumerated above, that
the Ayala Corporation may be held liable for specific performance of a demandable obligation, let
alone damages.

The Court adds that Ayala can hardly be held responsible for the alleged deterioration of "living and
environmental conditions" 56 of the Bel-Air area, as a consequence of "Ayala's authorized demolition of
the Jupiter perimeter wall in 1974-1975. " 57 We agree with Ayala that until 1976, "there was peace and
quiet" at Jupiter Street, as the petitioners' (Sangalang, Gaston, and Briones) complaints admit. Hence, the
degeneration of peace and order in Bel-Air cannot be ascribed to the destruction of the wall in 1974 and
1975.

What Ayala submits as the real cause was the opening of Jupiter Street to vehicular traffic in
1977., 58 But this was upon orders of the Mayor, and for which the homeowners' association had precisely
filed suit (Civil Case No. 34998) 59 to contest the act of the Mayor.

c.

This likewise disposes of the third question presented. The petitioners' reliance on Ayala's alleged
conduct (proving its alleged commitment), so we have ruled, is not well-taken. Ayala's alleged acts
do not, by themselves, reflect a commitment to maintain the wall in dispute. It cannot be therefore
said that the Court of Appeals "arbitrarily ignore(d]" 60 the lower court's findings. Precisely, it is the duty
of the appellate court to review the findings of the trial judge, be they of fact or law. 61 It is not bound by
the conclusions of the judge, for which reason it makes its own findings and arrives at its own
conclusions. Unless a grave abuse of discretion may be imputed to it, it may accept or reject the lower
tribunal's determinations and rely solely on the records.

Accordingly, the Court affirms the Court of Appeals' holding that the Ayala Corporation, in its dealings
with the petitioners, the Bel-Air Village Association in particular, had "acted with justice, gave the
appellees [petitioners] their due and observed honesty and good faith." 62 "Therefore, under both
Articles 19 and 21 of the Civil Code, the appellant [Ayala] cannot be held liable for damages." 63

2. G.R. Nos. 74376, 76394, 78182, & 82281

Our decision also resolves, quite anticlimactically, these companion cases. But we do so for various
other reasons. In the Sangalang case, we absolve the Ayala Corporation primarily owing to our
finding that it is not liable for the opening of Jupiter Street to the general public. Insofar as these
petitions are concerned, we likewise exculpate the private respondents, not only because of the fact
that Jupiter Street is not covered by the restrictive easements based on the "deed restrictions" but
chiefly because the National Government itself, through the Metro Manila Commission (MMC), had
reclassified Jupiter Street into high density commercial (C-3) zone, 64 pursuant to its Ordinance No. 81-
01. Hence, the petitioners have no cause of action on the strength alone of the said "deed restrictions.

In view thereof, we find no need in resolving the questions raised as to procedure, since this
disposition is sufficient to resolve these cases.

It is not that we are saying that restrictive easements, especially the easements herein in question,
are invalid or ineffective. As far as the Bel-Air subdivision itself is concerned, certainly, they are valid
and enforceable. But they are, like all contracts, subject to the overriding demands, needs, and
interests of the greater number as the State may determine in the legitimate exercise of police
power. Our jurisdiction guarantees sanctity of contract and is said to be the "law between the
contracting parties, 65 but while it is so, it cannot contravene 'law, morals, good customs, public order, or
public policy. 66 Above all, it cannot be raised as a deterrent to police power, designed precisely to
promote health, safety, peace, and enhance the common good, at the expense of contractual rights,
whenever necessary. In Ortigas & Co., Limited Partnership v. Feati Bank and Trust Co., 67 we are told:

xxxxxxxxx

2. With regard to the contention that said resolution cannot nullify the contractual
obligations assumed by the defendant-appellee referring to the restrictions
 incorporated in the deeds of sale and later in the corresponding Transfer Certificates
of Title issued to defendant-appellee it should be stressed, that while non-impairment
of contracts is constitutionally guaranteed, the rule is not absolute, since it has to be
reconciled with the legitimate exercise of police power, i.e., "the power to prescribe
regulations to promote the health, morals, peace, education, good order or safety
and general welfare of the people.' Invariably described as "the most essential,
insistent, and illimitable of powers" and "in a sense, the greatest and most powerful
attribute of government," the exercise of the power may be judicially inquired into and
corrected only if it is capricious, whimsical, unjust or unreasonable, there having
been a denial of due process or a violation of any other applicable constitutional
guarantee. As this Court held through Justice Jose P. Bengson in Philippine Long
Distance Company vs. City of Davao, et al. police power 'is elastic and must be
responsive to various social conditions; it is not confined within narrow
circumscriptions of precedents resting on past conditions; it must follow the legal
progress of a democratic way of life.' We were even more emphatic in Vda. de
Genuino vs. The Court of agrarian Relations, et al., when We declared: "We do not
see why public welfare when clashing with the individual right to property should not
be made to prevail through the state's exercise of its police power."

Resolution No. 27, 1960 declaring the western part of High way 54, now E. de los
Santos Avenue (EDSA, for short) from Shaw Boulevard to the Pasig River as an
industrial and commercial zone, was obviously passed by the Municipal Council of
Mandaluyong, Rizal in the exercise of police power to safeguard or promote the
health, safety, peace, good order and general welfare of the people in the locality.
Judicial notice may be taken of the conditions prevailing in the area, especially where
Lots Nos. 5 and 6 are located. The lots themselves not only front the highway;
industrial and commercial complexes have flourished about the place. EDSA, a main
traffic artery which runs through several cities and municipalities in the Metro Manila
area, supports an endless stream of traffic and the resulting activity, noise and
pollution are hardly conducive to the health, safety or welfare of the residents in its
route. Having been expressly granted the power to adopt zoning and subdivision
ordinances or regulations, the municipality of Mandaluyong, through its Municipal
Council, was reasonably, if not perfectly, justified under the circumstances, in passing
the subject resolution. 68

xxxxxxxxx

Undoubtedly, the MMC Ordinance represents a legitimate exercise of police power. The petitioners
have not shown why we should hold otherwise other than for the supposed "non-impairment"
guaranty of the Constitution, which, as we have declared, is secondary to the more compelling
interests of general welfare. The Ordinance has not been shown to be capricious or arbitrary or
unreasonable to warrant the reversal of the judgments so appealed. In that connection, we find no
reversible error to have been committed by the Court of Appeals.

WHEREFORE, premises considered, these petitions are DENIED No pronouncement as to costs.

Del Rosario vs bengzon

his is a class suit filed by officers of the Philippine Medical Association, the national organization of
medical doctors in the Philippines, on behalf of their professional brethren who are of kindred
persuasion, wherein this Court is asked to declare as unconstitutional, hence, null and void, some
provisions of the Generics Act of 1988 (Rep. Act No. 6675), and of the implementing Administrative
Order No. 62 issued pursuant thereto, specifically:

(a) Section 6, Pars. (a) and (b) of the Generics Act which provide:

a) All government health agencies and their personnel as well as other government
agencies shall use generic terminology or generic names in all transactions related to
purchasing, prescribing, dispensing and administering of drugs and medicines.

b) All medical, dental and veterinary practitioners, including private practitioners, shall
write prescriptions using the generic name. The brand name may be included if so
desired. (p. 6, Rollo.)

(b) Section 12, Pars. (b), (c) and (d) of the same law which provide:

b) For the second conviction, the penalty of file in the amount of not less than two
thousand pesos (P2,000.00) but not exceeding five thousand pesos (P5,000.00) at
the discretion of the court.

c) For the third conviction, the penalty of fine in the amount of not less than five
thousand pesos (P5,000.00) but not exceeding ten thousand pesos (P10,000.00)
and suspension of his license to practice his profession for thirty (30) days at the
discretion of the court.

d) For the fourth and subsequent convictions, the penalty of fine of not less than ten
thousand pesos (P10,000.00) and suspension of his license to practice his
profession for one year or longer at the discretion of the court. (pp. 6-7, Rollo.) and

(c) Sections 4 and 7, Phase 3 of Administrative Order No. 62, Series of 1989 dated March 9, 1989,
of the respondent Secretary of Health, which read as follows:

Section 4. Violative Erroneous, and Impossible Prescriptions.

4.1. Violative Prescriptions:

4.1.1 Where the generic name is not written;

4.1.2 Where the generic name is not legible and a brand name which is legible is
written;

4.1.3 Where the brand name is indicated and instructions added, such as the phase
'No Substitution' which tend to obstruct, hinder or prevent proper generic dispensing.

4.2 What to do with Violative Prescriptions.

Violative prescriptions shall not be filled. They shall be kept and reported by the
pharmacist of the drug outlet or any other interested party to the nearest DOH Officer
for appropriate action. The pharmacist shall advise the prescriber of the problem
and/or instruct the customer to get the proper prescription.

4.3 Erroneous Prescriptions:

 4.3.1 When the brand name precedes the generic name.

4.3.2 Where the generic name is the one in parenthesis.

4.3.3 Where the brand name in (sic) not in parenthesis.

4.3.4 Where more than one drug product is prescribed in one prescription form.

4.4 What to do with erroneous prescriptions.

Erroneous prescriptions shall be filled. Such prescriptions shall also be kept and
reported by the pharmacist of the drug outlet or any other interested party to the
nearest DOH Office for appropriate action.

xxx xxx xxx

Section 7. Timetable of Implementation.

In order to give all affected parties adequate time for learning and adjustment, the
implementation of these Rules and Regulations shall be in three phases, as follows:

Phase 1 Education Drive ...

Phase 2 Monitoring of Compliance

xxx xxx xxx

Phase 3 Implementation.

Beginning September 1, 1989 the DOH and the other relevant agencies of
government shall monitor compliance with these Rules and Regulations and all
violations shall be subject to the appropriate sanctions and penalties provided for
under these Rules and Regulations and the Generics Act of 1988. (pp. 7-9, Rollo.)

On March 15, 1989, the full text of Republic Act No. 6675 was published in two newspapers of
general circulation in the Philippines. The law took effect on March 30, 1989, fifteen (15) days after
its publication, as provided in Section 15 thereof.

Section 7, Phase 3 of Administrative Order No. 62 was amended by Administrative Order No. 76
dated August 28, 1989 by postponing to January 1, 1990 the effectivity of the sanctions and
penalties for violations of the law, provided in Sections 6 and 12 of the Generics Act and Sections 4
and 7 of the Administrative Order.

The petitioners allege that "as of this date, there is no breach or violation yet" of the law (p. 9, Rollo),
which took effect on March 30, 1989. However, as the penal provisions will only take effect on
January 1, 1990, it would have been more accurate to state that "as of this date, no breaches or
violations of the law have been punished yet" (p. 9, Rollo).
The petition is captioned as an action for declaratory relief, over which this Court does not exercise
jurisdiction. Nevertheless, in view of the public interest involved, we decided to treat it as a petition
for prohibition instead.

The petitioner's main argument against paragraphs (a) and (b), Section 6 of the law, is the alleged
unequal treatment of government physicians, dentists, and veterinarians, on one hand, and those in
private practice on the other hand, in the manner of prescribing generic drugs, for, while the former
are allegedly required to use only generic terminology in their prescriptions, the latter may write the
brand name of the drug in parenthesis below the generic name. The favored treatment of private
doctors, dentists and veterinarians under the law is allegedly a specie of invalid class legislation.

There is no merit in that argument for it proceeds from a misreading and misinterpretation of the
letter and intent of paragraphs (a) and (b), Section 6 of the Generics Act. Indeed, as explained by the
public respondent:

... while paragraph (a) enumerates the government transactions ('Purchasing,

prescribing, dispensing and administering of drugs and medicines') where the sole
use of generic terminology has been required, the 'prescription' of drugs is further
governed by paragraph (b). And the use of the word 'all' in the latter provision
emphasizes the absence of any distinction between government and private
physicians. In other words, in prescribing drugs, physicians, whether in government
service or in private practice, are both governed by exactly the same rules, and thus,
are both authorized to include the brand name in their respective prescriptions. (p.
44, Rollo.)

Furthermore, it may be observed that while paragraph (a) refers to "all government health agencies,
and their personnel as well as other government agencies" (not necessarily physicians, dentists and
veterinarians), paragraph (b) refers to "all medical, dental and veterinary practitioners, including
private practitioners."

Petitioners concede that the requirement for doctors, dentists, and veterinarians to use the generic
terminology in writing their prescriptions, followed by the brand name in parenthesis, is "well and
good" (p. 12, Rollo). However, they complain that under paragraph (d) of the law which reads:

(d) Drug outlets, including drugstores, hospital and non-hospital pharmacies and
non-traditional outlets such as supermarkets and stores, shall inform any buyer about
any and all other drug products having the same generic name, together with their
corresponding prices so that the buyer may adequately exercise his option. Within
one (1) year after approval of this Act, the drug outlets referred to herein, shall post in
conspicuous places in their establishments, a list of drug products with the same
generic name and their corresponding prices. (Annex A, p. 23, Rollo.)

the salesgirl at the drugstore counter is authorized to "substitute the prescribed medicine with
another medicine belonging to the same generic group." Since doctors are not allowed to instruct the
druggist not to substitute the prescription, or to "Dispense only as Prescribed" (per Sec. 4, Adm.
Order No. 62), the petitioners argue that "the act of prescribing the correct medicine for the patient
becomes the act of the salesgirl at the drugstore counter, no longer the act of the physician, dentist,
or veterinarian" (p. 12, Rollo).

Here again, the petitioners have distorted the clear provisions of the law and the implementing
administrative order. For it is plain to see that neither paragraph (d) of Section 6 of the Generics Act,
nor Section 4 of Administrative Order No. 62, gives the salesgirl and/or druggist the discretion to
substitute the doctor's prescription.

On the contrary, Section 4, par. 4.1, of Administrative Order No. 62 directs the pharmacist not to
fill "violative prescriptions" (where the generic name is not written, or illegibly written, and the
prescription of a brand name is accompanied by the doctor's instruction not to substitute it), as well
as "impossible prescriptions" (par. 4.5). Even a doctor's "erroneous" prescriptions "shall be filled,"
not substituted (par. 4.3, Adm. Order No. 62). And, Sections 3 and 5 of Adm. Order No. 63 enjoin the
drug outlets not (to) favor or suggest" or "impose" a particular brand or product on the customer. The
administrative older provides:

In order to ensure the informed choice and use of drugs by the patient/ buyer, the
drug outlet is required to:

3.1.1 Inform the patient/buyer of all available drug products

generically equivalent to the one prescribed with their corresponding
prices. In so doing, the drug outlet shall not favor or suggest any
particular product so that the patient/buyer may fully and adequately
exercise his option to choose (Sec. 3, Adm. Order No. 63 s. 1989).

xxx xxx xxx

The following acts or omissions are considered violations of these rules and
regulations:

5.1 Imposing a particular brand or product on the buyer. ... (pp. 46-47, Rollo.)

The salesgirl at the drugstore counter, merely informs the customer, but does not determine (for she
is incompetent to do so) all the other drug products or brands that have the same generic name, and
their corresponding prices. That information she may obtain from the list of drug products
determined by the Bureau of Food and Drugs to have the same generic name, or which are the
chemical, biological, and therapeutic equivalent of the generic drug. All drugstores or drug outlets
are required by the law to post such list in a conspicuous place in their premises for the information
of the customers, for the choice of whether to buy the expensive brand name drug, or the less
expensive generic, should be exercised by the customer alone.

The purpose of the Generics Act is to carry out the policy of the State:

To promote, encourage and require the use of generic terminology in the importation,
manufacture, distribution, marketing, advertising and promotion, prescription and
dispensing of drugs;

To ensure the adequate supply of drugs with generic names at the lowest possible
cost and endeavor to make them available for free to indigent patients;

To encourage the extensive use of drugs with generic names through a rational
system of procurement and distribution;

To emphasize the scientific basis for the use of drugs, in order that health
professionals may become more aware and cognizant of their therapeutic
effectiveness; and
 To promote drug safety by minimizing duplication in medications and/or use of drugs
with potentially adverse drug interactions. (pp. 3839, Rollo.)

or, as stated by the public respondent, "to promote and require the use of generic drug products that
are therapeutically equivalent to their brand-name counter-parts" (p. 39, Rollo) for "the therapeutic
effect of a drug does not depend on its 'brand' but on the 'active ingredients' which it contains." The
medicine that cures is the "active ingredient" of the drug, and not the brand name by which it has
been baptized by the manufacturer.

The public respondent points out that the institution of generics in the Philippines will compel
physicians to prescribe drugs based on their therapeutic or "active ingredient," instead of their well-
known brand names. Multiple medications which may produce potentially adverse, even lethal,
chemical reactions in the patient will thereby be avoided. Patients with limited means will be able to
buy generic drugs that cost less but possess the same active ingredients, dosage form, and strength
as brand names, many of which are priced beyond the reach of the common tao because the high
costs of advertising, packaging, royalties, and other inputs of production determine their pricing for
the market.

The Court has been unable to find any constitutional infirmity in the Generics Act. It, on the contrary,
implements the constitutional mandate for the State "to protect and promote the right to health of the
people" and "to make essential goods, health and other social services available to all the people at
affordable cost" (Section 15, Art. II and Section 11, Art. XIII, 1987 Constitution).

The prohibition against the use by doctors of "no substitution" and/or words of similar import in their
prescription, is a valid regulation to prevent the circumvention of the law. It secures to the patient the
right to choose between the brand name and its generic equivalent since his doctor is allowed to
write both the generic and the brand name in his prescription form. If a doctor is allowed to prescribe
a brand-name drug with "no substitution," the patient's option to buy a lower-priced, but equally
effective, generic equivalent would thereby be curtailed. The law aims to benefit the impoverished
(and often sickly) majority of the population in a still developing country like ours, not the affluent and
generally healthy minority.

There is no merit in the petitioners' theory that the Generics Act impairs the obligation of contract
between a physician and his patient, for no contract ever results from a consultation between patient
and physician. A doctor may take in or refuse a patient, just as the patient may take or refuse the
doctor's advice or prescription. As aptly observed by the public respondent, no doctor has ever filed
an action for breach of contract against a patient who refused to take prescribed medication,
undergo surgery, or follow a recommended course treatment by his doctor ( p. 53, Rollo). In any
event, no private contract between doctor and patient may be allowed to override the power of the
State to enact laws that are reasonably necessary to secure the health, safety, good order, comfort,
or general welfare of the community. This power can neither be abdicated nor bargained away. All
contractual and property rights are held subject to its fair exercise (Anglo-Fil Trading Corporation vs.
Lazaro, 124 SCRA 495.)

Petitioners have also assailed Section 12, paragraphs b, c and d, of the Generics Act prescribing
graduated penalties (ranging from a reprimand to a fine of not less that P10,000 and the suspension
of the physician's license to practice his profession for one [1]) year or longer, at the discretion of the
court) for violations of its provisions. Petitioners' allegation that these penalties violate the
constitutional guarantee against excessive fines and cruel and degrading punishment, has no merit.
Penal sanctions are indispensable if the law is to be obeyed. They are the "teeth" of the law. Without
them, the law would be toothless, not worth the paper it is printed on, for physicians, dentists and
veterinarians may freely ignore its prescriptions and prohibitions. The penalty of suspension or
cancellation of the physician's license is neither cruel, inhuman, or degrading. It is no different from
the penalty of suspension or disbarment that this Court inflicts on lawyers and judges who
misbehave or violate the laws and the Codes of Professional and Judicial Conduct.

We hold that the Generics Act and the implementing administrative orders of the Secretary of Health
are constitutional. In light of its beneficial provisions, we cannot heed the petitioners' plea to kill it
aborning, i.e., before it has had a chance to prove its value to our people as envisioned by its
makers.

WHEREFORE, the petition is dismissed for lack of merit. Costs against the petitioners.

Basco vs Pagcor

PARAS, J.:

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
1wphi1

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.

People vs judge nitafan

GUTIERREZ, JR., J.:

This petition for certiorari involves an issue that has been raised before this Court several times in
the past. The petitioner, in effect, is asking for a re-examination of our decisions on the issue of
whether or not an entrustee in a trust receipt agreement who fails to deliver the proceeds of the sale
or to return the goods if not sold to the entruster-bank is liable for the crime of estafa.

Petitioner Allied Banking Corporation charged Betty Sia Ang with estafa in Criminal Case No. 87-
53501 in an information which alleged:

That on or about July 18, 1980, in the City of Manila, Philippines, the said accused,
being then the proprietress of Eckart Enterprises, a business entity located at 756
Norberto Amoranto Avenue, Quezon City, did then and there wilfully, unlawfully and
feloniously defraud the Allied Banking Corporation, a banking institution, represented
by its Account Officer, Raymund S. Li, in the following manner, to wit: the said
accused received in trust from the aforesaid bank Gordon Plastics, plastic sheeting
and Hook Chromed, in the total amount of P398,000.00, specified in a trust receipt
and covered by Domestic Letter of Credit No. DLC-002-801254, under the express
obligation on the part of said accused to sell the same and account for the proceeds
of the sale thereof, if sold, or to return said merchandise, if not sold, on or before
October 16, 1980, or upon demand, but the said accused, once in possession of the
said articles, far from complying with the aforesaid obligation, notwithstanding
repeated demands made upon her to that effect, paid only the amount of
P283,115.78, thereby leaving unaccounted for the amount of P114,884.22 which,
 once in her possession, with intent to defraud, she misappropriated, misapplied and
converted to her own personal use and benefit, to the damage and prejudice of said
Allied Banking Corporation in the aforesaid sum of P114,884.22, Philippine Currency.
(Rollo, pp. 13-14)

The accused filed a motion to quash the information on the ground that the facts charged do not
constitute an offense.

On January 7, 1988, the respondent judge granted the motion to quash. The order was anchored on
the premise that a trust receipt transaction is an evidence of a loan being secured so that there is, as
between the parties to it, a creditor-debtor relationship. The court ruled that the penal clause of
Presidential Decree No. 15 on the Trust Receipts Law is inoperative because it does not actually
punish an offense mala prohibita. The law only refers to the relevant estafa provision in the Revised
Penal Code. The Court relied on the judicial pronouncements in People v. Cuevo, 104 SCRA 312
[1981] where, for lack of the required number of votes, this Court upheld the dismissal of a charge
for estafa for a violation of a trust receipt agreement; and in Sia v. People, 121 SCRA 655 [1983]
where we held that the violation merely gives rise to a civil obligation. At the time the order to quash
was issued or on January 7, 1988, these two decisions were the only most recent ones. Hence, this
petition.

The private respondent adopted practically the same stance of the lower court. She likewise asserts
that P.D. 115 is unconstitutional as it violates the constitutional prohibition against imprisonment for
non-payment of a debt. She argues that where no malice exists in a breach of a purely commercial
undertaking, P.D. 115 imputes it.

This Court notes that the petitioner bank brought a similar case before this Court in G.R. No. 82495,
entitled Allied Banking Corporation v. Hon. Secretary Sedfrey Ordoez and Alfredo Ching which we
decided on December 10, 1990 (192 SCRA 246). In that case, the petitioner additionally questioned,
and we accordingly reversed, the pronouncement of the Secretary of Justice limiting the application
of the penal provision of P.D. 115 only to goods intended to be sold to the exclusion of those still to
be manufactured.

As in G.R. No. 82495, we resolve the instant petition in the light of the Court's ruling in Lee v.
Rodil, 175 SCRA 100 [1989] and Sia v. Court of Appeals, 166 SCRA 263 [1988]. We have held in the
latter cases that acts involving the violation of trust receipt agreements occurring after 29 January
1973 (date of enactment of P.D. 115) would make the accused criminally liable for estafa under
paragraph 1 (b), Article 315 of the Revised Penal Code (RPC) pursuant to the explicit provision in
Section 13 of P.D. 115.

The relevant penal provision of P.D. 115 provides:

Sec. 13 of P.D. No. 115 provides:

. . . Penalty clause. The failure of an entrustee to turn over the proceeds of the
sale of the goods, documents or instruments covered by a trust receipt to the extent
of the amount owing to the entruster or as appears in the trust receipt or to return
said goods, documents or instruments if they were not sold or disposed of in
accordance with the terms of the trust receipt shall constitute the crime of estafa,
punishable under the provisions of Article Three Hundred and Fifteen, paragraph one
(b) of Act Numbered Three Thousand Eight Hundred and Fifteen, as amended,
otherwise known as the Revised Penal Code. If the violation or offense is committed
by a corporation, partnership, association or other juridical entities, the
 penalty provided for in this Decree shall be imposed upon the directors, officers,
employees or other officials or persons therein responsible for the offense, without
prejudice to the civil liabilities arising from the criminal offense.

Section 1 (b), Article 315 of the RPC under which the violation is made to fall, states:

. . . Swindling (estafa). Any person who shall defraud another by any of the means
mentioned herein below . . . :

xxx xxx xxx

b. By misappropriating or converting, to the prejudice of another, money, goods, or

any other personal property received by the offender in trust or on commission, or for
administration, or under any other obligation involving the duty to make delivery of or
to return the same, even though such obligation be totally or partially guaranteed by
a bond; or by denying having received such money, good, or other property.

The factual circumstances in the present case show that the alleged violation was committed
sometime in 1980 or during the effectivity of P.D. 115. The failure, therefore, to account for the
P114,884.22 balance is what makes the accused-respondent criminally liable for estafa. The Court
reiterates its definitive ruling that, in the Cuevo and Sia (1983) cases relied upon by the accused,
P.D. 115 was not applied because the questioned acts were committed before its effectivity. (Lee v.
Rodil, supra, p. 108) At the time those cases were decided, the failure to comply with the obligations
under the trust receipt was susceptible to two interpretations. The Court in Sia adopted the view that
a violation gives rise only to a civil liability as the more feasible view "before the promulgation of P.D.
115," notwithstanding prior decisions where we ruled that a breach also gives rise to a liability for
estafa. (People v. Yu Chai Ho, 53 Phil. 874 [1929]; Samo v. People, 115 Phil. 346 [1962]; Philippine
National Bank v. Arrozal, 103 Phil. 213 [1958]; Philippine National Bank v. Viuda e Hijos de Angel
Jose, 63 Phil. 814 [1936]).

Contrary to the reasoning of the respondent court and the accused, a trust receipt arrangement does
not involve a simple loan transaction between a creditor and debtor-importer. Apart from a loan
feature, the trust receipt arrangement has a security feature that is covered by the trust receipt itself.
(Vintola v. Insular Bank of Asia and America, 151 SCRA 578 [1987]) That second feature is what
provides the much needed financial assistance to our traders in the importation or purchase of
goods or merchandise through the use of those goods or merchandise as collateral for the
advancements made by a bank. (Samo v. People, supra). The title of the bank to the security is the
one sought to be protected and not the loan which is a separate and distinct agreement.

The Trust Receipts Law punishes the dishonesty and abuse of confidence in the handling of money
or goods to the prejudice of another regardless of whether the latter is the owner or not. The law
does not seek to enforce payment of the loan. Thus, there can be no violation of a right against
imprisonment for non-payment of a debt.

Trust receipts are indispensable contracts in international and domestic business transactions. The
prevalent use of trust receipts, the danger of their misuse and/or misappropriation of the goods or
proceeds realized from the sale of goods, documents or instruments held in trust for entruster-banks,
and the need for regulation of trust receipt transactions to safeguard the rights and enforce the
obligations of the parties involved are the main thrusts of P.D. 115. As correctly observed by the
Solicitor General, P.D. 115, like Batas Pambansa Blg. 22, punishes the act "not as an offense
against property, but as an offense against public order. . . ." The misuse of trust receipts therefore
should be deterred to prevent any possible havoc in trade circles and the banking community (citing
Lozano v. Martinez, 146 SCRA 323 [1986]; Rollo, p. 57) It is in the context of upholding public
interest that the law now specifically designates a breach of a trust receipt agreement to be an act
that "shall" make one liable for estafa.

The offense is punished as a malum prohibitum regardless of the existence of intent or malice. A
mere failure to deliver the proceeds of the sale or the goods if not sold, constitutes a criminal offense
that causes prejudice not only to another, but more to the public interest.

We are continually re-evaluating the opposite view which insists that the violation of a trust receipt
agreement should result only in a civil action for collection. The respondent contends that there is no
malice involved. She cites the dissent of the late Chief Justice Claudio Teehankee in Ong v. Court of
Appeals, (124 SCRA 578 [1983]) to wit:

The old capitalist orientation of putting importers in jail for supposed estafa or
swindling for non-payment of the price of the imported goods released to them under
trust receipts (a purely commercial transaction) under the fiction of the trust receipt
device, should no longer be permitted in this day and age.

As earlier stated, however, the law punishes the dishonesty and abuse of confidence in the handling
of money or goods to the prejudice of the bank.

The Court reiterates that the enactment of P.D. 115 is a valid exercise of the police power of the
State and is, thus, constitutional. (Lee v. Rodil, supra; Lozano v. Martinez, supra) The arguments of
the respondent are appropriate for a repeal or modification of the law and should be directed to
Congress. But until the law is repealed, we are constrained to apply it.

WHEREFORE, the petition is hereby GRANTED. The Order of the respondent Regional Trial Court
of Manila, Branch 52 dated January 7, 1988 is SET ASIDE. Let this case be remanded to the said
court for disposition in accordance with this decision.

Magtajas vs pryce

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.