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G.R. No. L-37187 ASIATIC INTEGRATED CORPORATION, vs.

HON. FEDERICO ALIKPALA, in his capacity as Presiding Judge of the Court of First
Instance of Manila, Branch XXII, DOLORSINDO PANER and ARMANDO CAPISTRANO.
G.R. No. L-37248 THE CITY OF MANILA, RAMON D. BAGATSING and SERAFIN LUZ CUI,
as MAYOR and Market Administrator, respectively of the City of Manila, vs. HON.
FEDERICO ALIKPALA, as Judge of the Court of First Instance of Manila, ARMANDO
CAPISTRANO, DOLORSINDO PANER, PETRA ATIENZA, REMEGIA GREGORIO, and
SAMAHAN NG MGA MANININDA SA PAMILIHANG QUINTA, INK.
G.R. No. L-37249 ASIATIC INTEGRATED CORPORATION, vs.
HON. FEDERICO ALIKPALA, in his capacity as Presiding Judge of the Court of First
Instance of Manila, Branch XXII, DOLORSINDO PANER, ARMANDO CAPISTRANO and
SAMAHAN NG MANININDA NG QUINTA, INK.
September 15, 1975
Barredo, J.
FACTS: R.A. 6039 amended the Charter of the City of Manila to create the Market Committee.
The Market Committee had the following functions: to formulate, recommend and adopt,
subject to the ratification of the municipal board, and approval of the mayor, policies and rules or
regulation repealing or amending existing provisions of the market code as amended X X X.
Upon the recommendation of the Market Committee, the City of Manila entered into a
Management and Operating Contract with Asiatic Integrated Corporation (Asiatic) for the
conduct, management, operation, development and maintenance of the City public markets and
talipapas for a period of ten (10) years. Among other terms and conditions, the contract provided
that Asiatic would appropriate a yearly amount of not less than thirty (30%) per cent of the
gross income of the public markets and talipapas for the fiscal year 1971-1972 to answer for the
maintenance and repair, reconstruction, development and rehabilitation of the public markets
and talipapas and proof of such appropriation and minimum expenditure must be submitted to
the [City of Manila, represented by then Mayor Bagatsing] or his duly authorize representative
or representatives. The 30% of gross income of public markets constituted a sinking fund
mandated by R.A. 6039, to be used to amortize or to finance the construction of new markets,
to remodel or replace old market building, the purchase of privately-owned building utilized as
public markets, and purchase of new market sites and the construction of market building and
facilities thereof.
Additionally, the contract provided that Asiatic would be entitled to the annual gross income
from the City public markets and talipapas in excess of Php 500,000.00 for the first year
thereof, with an increasing scale per year ending in Php 950,000.00 by Year Ten.
A group of 12 out of 20 councilors, all members of the Municipal Board, signed a resolution
supporting this measure.
(Note: The events following occurred after the petition for certiorari was filed before the SC and
the issues were joined. This note will be clarified in the Issues portion.)
Then-President Marcos sent a memorandum to then Mayor Bagatsing, enumerating several
requirements that must be met. President Marcos would later issue Presidential Decree No.

345, authorizing the reversion of the 30% sinking fund to the general fund of the City of Manila.
Pursuant to these, the contract with Asiatic was amended to accommodate these changes. On
the other hand, the Municipal Board of Manila passed a Ordinance No. 7451 authorizing Mayor
Bagatsing to lease vacant, unused and unencumbered patrimonial properties, or other leasable
patrimonial properties to reputable and highly qualified persons, firms or corporations. Pursuant
to these later developments, the contract with Asiatic was amended accordingly, extending the
lease period to 25 years and restructuring the profit-sharing scheme as follows: P500,000.00 for
the first year, and additional sum of P50,000.00 such that in the progression of this yearly
increase, the City of Manila shall be receiving the sum of P1,700,000.00 on the 25th year .
The contract was assailed by groups of vendors and employees of public markets, on the
following grounds: (1) the Management and Operating Contract, involving as it does public
markets, is ultra vires or beyond the authority of the City to enter into; (2) the Mayor of Manila
had no power to execute the same and bind the City without the corresponding authority given
in an ordinance duly approved by the Municipal Board; (3) it is violative of Republic Act No. 37
nationalizing public markets and of the existing civil service laws, rules and regulations; and (4)
it is grossly disadvantageous to the City.
The Manila RTC, under Judge Alikpala, found for the petitioners in the original case
(respondents here, along with Judge Alikpala himself) and ruled that the contract was invalid,
hence this petition.
ISSUES:
Procedural WON petitioners in the original case had standing
1) WON the Management and Operating Contract, involving as it does public markets, is ultra
vires or beyond the authority of the City to enter into
Petitioners: Public markets may be leased as
part of the corporate functions of a municipal
corporation, as the operation of a public
market is not a governmental function; in fact
the Charter of the City of Manila authorizes the
Municipal Board to prohibit or permit the
establishment or operation within the city limits
of public markets ... by any person, entity,
association or corporation other than the city.

Respondents: Public markets are for public


use, hence are not patrimonial property and
thus cannot be the subject of lease.
Judge Alikpala, in his assailed ruling, applied
by analogy the rule on the lease of public
wharves, which is prohibited.

2) WON ) the Mayor of Manila had power to execute the contract


Petitioners: The Municipal Board issued a
resolution signed by 3/5 of the Board
expressing concurrence with the contract with
Asiatic.
Furthermore, Mayor Bagatsing was authorized
by the Market Committee, which under R.A.
6039 had sufficient power to confer authority
to the Mayor, even over any authority that the
Municipal Board may have.

Respondents: They Mayors act was never


supported by any Municipal Board resolution.
The purported resolution does not exist, as
certified by the Assistant Secretary of the
Board.

3) WON it is violative of Republic Act No. 37 nationalizing public markets and of the existing civil
service laws, rules and regulations
Petitioners: The contract is one for
management and operation, not an award of
stalls. Asiatics role is limited to collecting stall
fees
and
performing
maintenance,
rehabilitation and repair of market facilities and
structures.

Respondents: Contention is that the contract


awards public market stalls to Asiatic, which
violates the preference in the law to award
stalls to Filipino citizens.
Furthermore, the contract violates the rules
and regulations on civil service on security of
tenure of public market employees.

4) WON the contract is grossly disadvantageous to the city


Petitioners: The 30% reserved amount and the
annual amounts that Asiatic is required to
remit to the city government of Maila
constitutes income for Manila.

Respondents: The City stands to lose as much


as P3M from the income that would be paid to
Asiatic instead of directly benefitting the
constituents of Manila.

HELD:
On the procedural aspect: The Court ruled that the contract, as interpreted, meant that the
vendors and employees continued to be employees of the city government and not of Asiatic,
and that their rights would not be prejudiced by the contract. Hence the original petitioners,
respondents in this case, had NO STANDING. Still, the Court proceeded to rule on the
substantial aspects of the case.
On the substantive arguments: The Court saw it fit to take into account several factual events
that occurred after the issues had been joined. (In the Facts above, it pertains to the narrative
beginning with the memorandum of President Marcos to Mayor Bagatsing.)
1) The Court finds for the petitioners. Aside from the arguments of the petitioners above, the
Court noted that the contract provides for a continuation of the employment of public market
employees, with no grant of power to Asiatic to have any input or control over their status as
employees. Since they remain employees of the city government, it cannot be argued that the
contract is invalid.
2) The Court again finds for the petitioners. The Court ruled, first, that the Municipal Board
resolution concurring with the contract is tantamount to ratification of the acts of the Mayor in
entering into the contract. On the allegations that the Resolution did not exist, the court noted
that a certified true copy of the Resolution was submitted and formed part of the records of the
case, and that at no time were the signatures appearing ever assailed as forgeries. As to the
certification of the Assistant secretary to the Board, the Court noted that there was no showing
that the person issuing the certification was the same officer who should have had proper
custody of the resolution.
Aside from the arguments of the petitioners above, the Court noted that on the basis of a
memorandum sent by President Marcos, a supplementary contract was signed embodying
substantially the conditions provided in the memorandum. Later, President Marcos, who also
possessed legislative powers at the time, passed P.D. 345 removing the need to create the 30%
sinking fund. Being an act of legislature, the P.D. virtually legalizes the contract entered into by

Mayor Bagatsing, even if it had been otherwise ultra vires. With Marcos having prior knowledge
of the contract, it cannot be argued that the P.D. refers only generally to the sinking fund, and
not the contract itself. In fact the P.D. explicitly mentions the removal of the sinking fund
precisely because Asiatic would be bearing the cost of maintenance, repair and rehabilitation.
As further support, the Municipal board passed Ordinance No. 7451, which the Court interpreted
as a virtual ratification of the contract with Asiatic, since it covered any leasable property of the
City, which logically includes public markets. When the contract was amended pursuant to
Ordinance 7451 and such amendment was made known to the Municipal board, no attempt was
made to reject or repudiate the contract.
3) The Court once again finds for the petitioners. Aside from the arguments above, the Court
noted that given the petitioners were determined to be employees of the city government, the
contract does not violate any rule or regulation with regards to security of tenure, as Asiatic
would have no say in their status as city employees.
4) Finally, the Court finds for the petitioners once more. Aside from the arguments raised by the
petitioners, the court noted that the Municipal Board noted the benefits of the contract to the city
in its resolution, and later in its Ordinance. First, in the resolution, the Board stated that the
contract placed the cost burden of rehabilitation and repair on Asiatic, which admittedly the City
of Manila could not shoulder at the time. This reality and the clear advantage of having Asiatic
take on the expenses of rehabilitating Manilas public markets was reiterated in Ordinance 7451.
Finally, in P.D. 345, President Marcos noted that because Asiatic had taken on the cost burden
of rehabilitation, the 30% sinking fund could then be returned to the general fund of the City, and
reappropriated to other urgent public works projects.
DISPOSITIVE PORTION: Petition is GRANTED, assailed decision is SET ASIDE and the
contract is deemed LEGAL and BINDING.
Last note: This case was decided well before the 1991 LGC. Under the LGC, Sec. 130 (c), the
collection of local taxes, fees, charges and other impositions shall in no case be left to any
private person. Under todays law, such a contract may be void for violating the LGC, since
under the contract it would be Asiatic who would collect stall rentals and fees then afterwards
remit a balance to the city government.