Tatel v.
Municipality of Virac and convenience of the municipality and the inhabitants thereof, and for
Facts:
In 1966, complaints from the residents of Sta. Elena were brought to the attention
of the Municipality of Virac, concerning the disturbance caused by the operation of
the abaca bailing machine inside petitioner’s warehouse. It allegedly affected the
peace and tranquility of the neighborhood due to the smoke, odor and dust emitted
from the machine. A committee found the crowded nature of the neighborhood to
be under danger, so much so that accidental fire within the warehouse from the
continued operation thereof and the storage of flammable materials therein
created a danger to life and property of the neighborhood. Thus, Resolution No. 29
was passed by the Municipal Council declaring the warehouse of petitioner to be a
public nuisance under the Civil Code. The Council argued that the warehouse was
constructed in violation of Ordinance No. 13, prohibiting the construction of
warehouses within a 200-meter distance from a block of houses. Petitioner
challenges the constitutionality of the ordinance as null and void for having been
passed not in accordance with the law. The lower court found (1) the Ordinance
constitutional; and (2) petitioner in violation of the ordinance for storing flammable
materials (abaca and copra) when the ordinance prohibits only the construction of
warehouses; and (3) declaring the warehouse a public nuisance and ordered its
removal.
Issues and Ruling:
(1) W/N the ordinance is unconstitutional
Negative; Ordinance No. 13, series of 1952, was passed by the Municipal Council of
Virac in the exercise of its police power. It is a settled principle of law that municipal
corporations are agencies of the State for the promotion and maintenance of local
self-government and as such are endowed with the police powers in order to
effectively accomplish and carry out the declared objects of their creation. Its
authority emanates from the general welfare clause under the Administrative Code,
which reads:
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
UC School of Law
Law on Public Corporations
the protection of property therein.
For an ordinance to be valid, it must not only be within the corporate powers of the
municipality to enact but must also be passed according to the procedure
prescribed by law, and must be in consonance with certain well established and
basic principles of a substantive nature. These principles require that a municipal
ordinance:
(1) must not contravene the Constitution or any statute;
(2) must not be unfair or oppressive;
(3) must not be partial or discriminatory;
(4) must not prohibit but may regulate trade;
(5) must be general and consistent with public policy; and
(6) must not be unreasonable.
Ordinance No. 13, Series of 1952, meets these criteria.
(2) W/N the trial court gave the ordinance a meaning other than what it says
Negative; As to the petitioner's second assignment of error, the trial court did not
give the ordinance in question a meaning other than what it says. Ordinance No. 13
passed by the Municipal Council of Virac on December 29, 1952, reads:
AN ORDINANCE STRICTLY PROHIBITING THE CONSTRUCTION OF
WAREHOUSE IN ANY FORM NEAR A BLOCK OF HOUSES EITHER IN
POBLACION OR BARRIO WITH NECESSARY DISTANCE TO AVOID GREAT
LOSSES OF PROPERTY AND LIVES BY FIRE ACCIDENT.
Section 1 provides:
It is strictly prohibited to construct warehouses in any form to any person,
persons, entity, corporation or merchants, wherein to keep or store copra,
hemp, gasoline, petroleum, alcohol, crude oil, oil of turpentine and the like
products or materials if not within the distance of 200 meters from a block
of houses either in the poblacion or barrios to avoid great losses of
properties inclusive lives by fire accident.
Section 2 provides:
Owners of warehouses in any form, are hereby given advice to remove
their said warehouses this ordinance by the Municipal Council, provided
by NY-YO
2020-2021
 however, that if those warehouses now in existence should no longer be
utilized as such warehouse for the above-described products in Section 1
of this ordinance after a lapse of the time given for the removal of the said
warehouses now in existence, same warehouses shall be exempted from
the spirit of the provision of section 1 of this ordinance, provided further,
that these warehouses now in existence, shall in the future be converted
into non-inflammable products and materials warehouses.
In spite of its fractured syntax, basically, what is regulated by the ordinance is the
construction of warehouses wherein inflammable materials are stored where such
warehouses are located at a distance of 200 meters from a block of houses and not
the construction per se of a warehouse. The purpose is to avoid the loss of life and
property in case of fire which is one of the primordial obligation of the government.
This was also the observation of the trial court:
A casual glance of the ordinance at once reveals a manifest disregard of
the elemental rules of syntax. Experience, however, will show that this is
not uncommon in law making bodies in small towns where local
authorities and in particular the persons charged with the drafting and
preparation of municipal resolutions and ordinances lack sufficient
education and training and are not well grounded even on the basic and
fundamental elements of the English language commonly used throughout
the country in such matters. Nevertheless, if one scrutinizes the terms of
the ordinance, it is clear that what is prohibited is the construction of
warehouses by any person, entity or corporation wherein copra, hemp,
gasoline and other inflammable products mentioned in Section 1 may be
stored unless at a distance of not less than 200 meters from a block of
houses either in the poblacion or barrios in order to avoid loss of property
and life due to fire. Under Section 2, existing warehouses for the storage of
the prohibited articles were given one year after the approval of the
ordinance within which to remove them but were allowed to remain in
operation if they had ceased to store such prohibited articles.
Clearly, the lower court did NOT add meaning other than or differrent from what
was provided in the ordinance in question. It merely stated the purpose of the
ordinance and what it intends to prohibit to accomplish its purpose.
(3) W/N the ordinance is discriminatory since other warehouses were not
prosecuted
Negative; As to the third assignment of error, that warehouses similarly situated as
that of the petitioner were not prosecuted, suffice it to say that the mere fact that
the municipal authorities of Virac have not proceeded against other warehouses in
the municipality allegedly violating Ordinance No. 13 is no reason to claim that the
ordinance is discriminatory. A distinction must be made between the law itself and
the manner in which said law is implemented by the agencies in charge with its
administration and enforcement. There is no valid reason for the petitioner to
complain, in the absence of proof that the other bodegas mentioned by him are
operating in violation of the ordinance and that the complaints have been lodged
against the bodegas concerned without the municipal authorities doing anything
about it.
The objections interposed by the petitioner to the validity of the ordinance have
not been substantiated. Its purpose is well within the objectives of sound
government. No undue restraint is placed upon the petitioner or for anybody to
engage in trade but merely a prohibition from storing inflammable products in the
warehouse because of the danger of fire to the lives and properties of the people
residing in the vicinity. As far as public policy is concerned, there can be no better
policy than what has been conceived by the municipal government.

The ambiguity therefore is more apparent than real and springs from
simple error in grammatical construction but otherwise, the meaning and
intent is clear that what is prohibited is the construction or maintenance of
warehouses for the storage of inflammable articles at a distance within
200 meters from a block of houses either in the poblacion or in the barrios.
And the purpose of the ordinance is to avoid loss of life and property in
case of accidental fire which is one of the primordial and basic obligation of
any government.

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 Solicitor General v. Metropolitan Manila Authority
Facts:
Background: The Gonong Case promulgated in 1990 held that the confiscation of
license plates of motor vehicles for traffic violations was not among the sanctions
that Metro Manila Commission under PD 1605 and was permitted only under the
conditions laid down in LOI 43 ( in case of stalled vehicles obstructing public
streets). It was also observed the the confiscation of driver’s license for traffic
violations was not directly prescribed by the decree nor allowed to be imposed by
the Commission.
Subsequent Developments: The Court received several letters complaining about
the confiscation of driver’s license and the removal of license plate. These acts were
done by traffic enforcers from Quezon and Mandaluyong City, by officers of the
Metropolitan Manila Authority (MMA), and by police officers. The concerned
officers and invoked several ordinances (Ordinance No. 7) from their respective
cities authorizing the confiscation of the driver’s license as well as the removal of
license plates for traffic violations. One police officer invoked a memorandum from
the PNP allegedly authorizing such sanctions (this was, however, refuted by the
Director General of the PNP). Subsequently, MMA issued Ordinance No. 11
authorizing itself "to detach the license plate/tow and impound attended/
unattended/ abandoned motor vehicles illegally parked or obstructing the flow of
traffic in Metro Manila."
MMA defended the Ordinance as valid and pursuant to the powers conferred upon
it by EO 392. MMA stressed that the Gonong merely held that the such sanctions
were invalid in the absence of a valid law or ordinance; that Ordinance No. 11 was
enacted specifically for the purpose of providing such law or ordinance. It likewise
pointed out that the ordinance cannot be collaterally attacked. However, the
Solicitor General was of the view that the ordinance was null and void since it was
an invalid exercise of a delegated legislative power – since it violated PD 1605 which
prohibits the removal of license plates and confiscation of driver’s license for traffic
violations in Metro Manila.
Issue and Ruling: W/N Ordinance No. 11 is valid
Negative; The Metropolitan Manila Authority is correct in invoking the doctrine that
the validity of a law or act can be challenged only in a direct action and not
collaterally. That is indeed the settled principle. However, that rule is not inflexible
and may be relaxed by the Court under exceptional circumstances, such as those in
the present controversy.
UC School of Law
Law on Public Corporations
The Solicitor General notes that the practices complained of have created a great
deal of confusion among motorists about the state of the law on the questioned
sanctions. More importantly, he maintains that these sanctions are illegal, being
violative of law and the Gonong decision, and should therefore be stopped. We also
note the disturbing report that one policeman who confiscated a driver's license
dismissed the Gonong decision as "wrong" and said the police would not stop their
"habit" unless they received orders "from the top." Regrettably, not one of the
complainants has filed a formal challenge to the ordinances, including Monsanto
and Trieste, who are lawyers and could have been more assertive of their rights.
Given these considerations, the Court feels it must address the problem squarely
presented to it and decide it as categorically rather than dismiss the complaints on
the basis of the technical objection raised and thus, through its inaction, allow them
to fester.
The Metro Manila Authority sustains Ordinance No. 11, Series of 1991, under the
specific authority conferred upon it by EO 392, while Ordinance No. 7, Series of
1988, is justified on the basis of the General Welfare Clause embodied in the Local
Government Code. It is not disputed that both measures were enacted to promote
the comfort and convenience of the public and to alleviate the worsening traffic
problems in Metropolitan Manila due in large part to violations of traffic rules.
The Court holds that there is a valid delegation of legislative power to promulgate
such measures, it appearing that the requisites of such delegation are present.
These requisites are:
(1) the completeness of the statute making the delegation; and
(2) the presence of a sufficient standard.
Under the first requirement, the statute must leave the legislature complete in all
its terms and provisions such that all the delegate will have to do when the statute
reaches it is to implement it. What only can be delegated is not the discretion to
determine what the law shall be but the discretion to determine how the law shall
be enforced. This has been done in the case at bar.
As a second requirement, the enforcement may be effected only in accordance with
a sufficient standard, the function of which is to map out the boundaries of the
delegate's authority and thus "prevent the delegation from running riot." This
requirement has also been met. It is settled that the "convenience and welfare" of
the public, particularly the motorists and passengers in the case at bar, is an
acceptable sufficient standard to delimit the delegate's authority.
by NY-YO
2020-2021
But the problem before us is not the validity of the delegation of legislative power.
The question we must resolve is the validity of the exercise of such delegated
power.
The measures in question are enactments of local governments acting only as
agents of the national legislature. Necessarily, the acts of these agents must reflect
and conform to the will of their principal. To test the validity of such acts in the
specific case now before us, we apply the particular requisites of a valid ordinance
as laid down by the accepted principles governing municipal corporations.
According to Elliot, a municipal ordinance, to be valid:
(1) must not contravene the Constitution or any statute;
(2) must not be unfair or oppressive;
(3) must not be partial or discriminatory;
(4) must not prohibit but may regulate trade;
(5) must not be unreasonable; and
(6) must be general and consistent with public policy.
A careful study of the Gonong decision will show that the measures under
consideration do not pass the first criterion because they do not conform to existing
law. The pertinent law is PD 1605. PD 1605 does not allow either the removal of
license plates or the confiscation of driver's licenses for traffic violations committed
in Metropolitan Manila. There is nothing in the following provisions of the decree
authorizing the Metropolitan Manila Commission (and now the Metropolitan
Manila Authority) to impose such sanctions:
Section 1. The Metropolitan Manila Commission shall have the power to
impose fines and otherwise discipline drivers and operators of motor
vehicles for violations of traffic laws, ordinances, rules and regulations in
Metropolitan Manila in such amounts and under such penalties as are
herein prescribed. For this purpose, the powers of the Land Transportation
Commission and the Board of Transportation under existing laws over such
violations and punishment thereof are hereby transferred to the
Metropolitan Manila Commission. When the proper penalty to be imposed
is suspension or revocation of driver's license or certificate of public
convenience, the Metropolitan Manila Commission or its representatives
shall suspend or revoke such license or certificate. The suspended or
revoked driver's license or the report of suspension or revocation of the
certificate of public convenience shall be sent to the Land Transportation
Commission or the Board of Transportation, as the case may be, for their
records update. x x x
UC School of Law
Law on Public Corporations
Section 3.` Violations of traffic laws, ordinances, rules and regulations,
committed within a twelve-month period, reckoned from the date of birth
of the licensee, shall subject the violator to graduated fines as follows:
P10.00 for the first offense, P20.00 for the and offense, P50.00 for the
third offense, a one-year suspension of driver's license for the fourth
offense, and a revocation of the driver's license for the fifth offense:
Provided, That the Metropolitan Manila Commission may impose higher
penalties as it may deem proper for violations of its ordinances prohibiting
or regulating the use of certain public roads, streets and thoroughfares in
Metropolitan Manila. x x x
Section 5. In case of traffic violations, the driver's license shall not be
confiscated but the erring driver shall be immediately issued a traffic
citation ticket prescribed by the Metropolitan Manila Commission which
shall state the violation committed, the amount of fine imposed for the
violation and an advice that he can make payment to the city or municipal
treasurer where the violation was committed or to the Philippine National
Bank or Philippine Veterans Bank or their branches within seven days from
the date of issuance of the citation ticket.
If the offender fails to pay the fine imposed within the period herein
prescribed, the Metropolitan Manila Commission or the law-enforcement
agency concerned shall endorse the case to the proper fiscal for
appropriate proceedings preparatory to the filing of the case with the
competent traffic court, city or municipal court.
If at the time a driver renews his driver's license and records show that he
has an unpaid fine, his driver's license shall not be renewed until he has
paid the fine and corresponding surcharges. x x x
Section 8. Insofar as the Metropolitan Manila area is concerned, all laws,
decrees, orders, ordinances, rules and regulations, or parts thereof
inconsistent herewith are hereby repealed or modified accordingly.
In fact, the above provisions prohibit the imposition of such sanctions in
Metropolitan Manila. The Commission was allowed to "impose fines and otherwise
discipline" traffic violators only "in such amounts and under such penalties as are
herein prescribed," that is, by the decree itself. Nowhere is the removal of license
plates directly imposed by the decree or at least allowed by it to be imposed by the
Commission. Notably, Section 5 thereof expressly provides that "in case of traffic
violations, the driver's license shall not be confiscated." These restrictions are
applicable to the Metropolitan Manila Authority and all other local political
by NY-YO
2020-2021
subdivisions comprising Metropolitan Manila, including the Municipality of such action, PD 1605 remains effective and continues prohibit the confiscation of
Mandaluyong. license plates of motor vehicles (except under the conditions prescribed in LOI 43)
and of driver licenses as well for traffic violations in Metropolitan Manila.
The requirement that the municipal enactment must not violate existing law
explains itself. Local political subdivisions are able to legislate only by virtue of a
valid delegation of legislative power from the national legislature (except only that
the power to create their own sources of revenue and to levy taxes is conferred by
the Constitution itself). They are mere agents vested with what is called the power
of subordinate legislation. As delegates of the Congress, the local government unit
cannot contravene but must obey at all times the will of their principal. In the case
before us, the enactments in question, which are merely local in origin, cannot
prevail against the decree, which has the force and effect of a statute.

The self-serving language of Section 2 of the challenged ordinance is worth noting.

Curiously, it is the measure itself, which was enacted by the Metropolitan Manila
Authority, that authorizes the Metropolitan Manila Authority to impose the
questioned sanction.

The measures in question do not merely add to the requirement of PD 1605 but,
worse, impose sanctions the decree does not allow and in fact actually prohibits. In
so doing, the ordinances disregard and violate and in effect partially repeal the law.

We here emphasize the ruling in the Gonong case that PD 1605 applies only to the
Metropolitan Manila area. It is an exception to the general authority conferred by
R.A. No. 413 on the Commissioner of Land Transportation to punish violations of
traffic rules elsewhere in the country with the sanction therein prescribed, including
those here questioned.

The Court agrees that the challenged ordinances were enacted with the best of
motives and shares the concern of the rest of the public for the effective reduction
of traffic problems in Metropolitan Manila through the imposition and enforcement
of more deterrent penalties upon traffic violators. At the same time, it must also
reiterate the public misgivings over the abuses that may attend the enforcement of
such sanction in eluding the illicit practices described in detail in
the Gonong decision. At any rate, the fact is that there is no statutory authority for
— and indeed there is a statutory prohibition against — the imposition of such
penalties in the Metropolitan Manila area. Hence, regardless of their merits, they
cannot be impose by the challenged enactments by virtue only of the delegated
legislative powers.

It is for Congress to determine, in the exercise of its own discretion, whether or not
to impose such sanctions, either directly through a statute or by simply delegating
authority to this effect to the local governments in Metropolitan Manila. Without

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 Lim v. Pacquing
Facts: On September 13, 1994, petitioner Guingona, as Executive Secretary issued a
directive to then Chairman of the Games and Amusement Board (GAB) Sumulong to
hold in abeyance or withdraw any grant of authority to respondent Associated
Development Corporation (ADC) for the operation of jai-alai in the City of Manila
until certain issues were first resolved. Two days later, ADC filed a petition for
prohibition, mandamus and injunction against Guingona and Sumulong seeking to
prevent the latter from withdrawing the provisional authority earlier granted to
ADC. On the same day, the court issued the TRO against GAB. It likewise compelled
GAB to issue in favor of ADC the authority to operate jai-alai. The Republic of the
Philippines intervened in the case questioning the very existence of a valid franchise
granted to ADC. According to the Republic, City Ordinance No. 7065 (which granted
the franchise to ADC) was issued in 1971. However, RA 954 (which requires a
legislative franchise, not a municipal franchise, for the operation of jai-alai) was
enacted in 1953 or years prior to the enactment of the City Ordinance. Moreover,
the Republic contends that even assuming that the franchise granted to ADC was
valid, it was nevertheless revoked by PD 771 issued in 1975 which expressly
revoked all franchises and permits issued for the operation of gambling facilities
issued by local governments.
Issues and Ruling:
(1) W/N the intervention of the Republic of the Philippines during such stage
was proper (and constitutionality of PD 771)
Affirmative; On the propriety of intervention by the Republic, however, it will be
recalled that this Court in Director of Lands v. Court of Appeals allowed intervention
even beyond the period prescribed in Section 2 Rule 12 of the Rules of Court. The
Court ruled in said case that a denial of the motions for intervention would "lead
the Court to commit an act of injustice to the movants, to their successor-in-
interest and to all purchasers for value and in good faith and thereby open the door
to fraud, falsehood and misrepresentation, should intervenors' claim be proven to
be true."
In the present case, the resulting injustice and injury, should the national
government's allegations be proven correct, are manifest, since the latter has
squarely questioned the very existence of a valid franchise to maintain and operate
the jai-alai (which is a gambling operation) in favor of ADC. As will be more
extensively discussed later, the national government contends that Manila
Ordinance No. 7065 which purported to grant to ADC a franchise to conduct jai-alai
operations is void and ultra vires since Republic Act No. 954, approved on 20 June
1953, or very much earlier than said Ordinance No. 7065, the latter approved 7
UC School of Law
Law on Public Corporations
September 1971, in Section 4 thereof, requires a legislative franchise, not a
municipal franchise, for the operation of jai-alai. Additionally, the national
government argues that even assuming, arguendo, that the abovementioned
ordinance is valid, ADC's franchise was nonetheless effectively revoked by
Presidential decree No. 771, issued on 20 August 1975, Sec. 3 of which expressly
revoked all existing franchises and permits to operate all forms of gambling facilities
(including the jai-alai) issued by local governments.
On the other hand, ADC's position is that Ordinance No. 7065 was validly enacted
by the City of Manila pursuant to its delegated powers under it charter, Republic
Act No. 409. ADC also squarely assails the constitutionality of PD No. 771 as
violative of the equal protection and non-impairment clauses of the Constitution. In
this connection, counsel for ADC contends that this Court should really rule on the
validity of PD No. 771 to be able to determine whether ADC continues to possess a
valid franchise.
It will undoubtedly be a grave injustice to both parties in this case if this Court were
to shirk from ruling on the issue of constitutionality of PD No. 771. Such issue has, in
our view, become the very lis mota in resolving the present controversy, in view of
ADC's insistence that it was granted a valid and legal franchise by Ordinance No.
7065 to operate the jai-alai.
The time-honored doctrine is that all laws (PD No. 771 included) are presumed valid
and constitutional until or unless otherwise ruled by this Court. Not only this; Article
XVIII Section 3 of the Constitution states:
Sec. 3. All existing laws, decrees, executive orders, proclamations, letters
of instructions and other executive issuances not inconsistent with this
Constitution shall remain operative until amended, repealed or revoked.
There is nothing on record to show or even suggest that PD No. 771 has been
repealed, altered or amended by any subsequent law or presidential issuance
(when the executive still exercised legislative powers).
Neither can it be tenably stated that the issue of the continued existence of ADC's
franchise by reason of the unconstitutionality of PD No. 771 was settled in G.R. No.
115044, for the decision of the Court's First Division in said case, aside from not
being final, cannot have the effect of nullifying PD No. 771 as unconstitutional, since
only the Court En Banc has that power under Article VIII, Section 4(2) of the
Constitution.
by NY-YO
2020-2021
And on the question of whether or not the government is estopped from contesting
ADC's possession of a valid franchise, the well-settled rule is that the State cannot
be put in estoppel by the mistakes or errors, if any, of its officials or agents.
Consequently, in the light of the foregoing expostulation, we conclude that the
republic (in contra distinction to the City of Manila) may be allowed to intervene in
G.R. No. 115044. The Republic is intervening in G.R. No. 115044 in the exercise, not
of its business or proprietary functions, but in the exercise of its governmental
functions to protect public morals and promote the general welfare.
(2) W/N ADC has a valid franchise to operate jai-alai in Manila
Negative; Anent the question of whether ADC has a valid franchise to operate the
Jai-Alai de Manila, a statement of the pertinent laws is in order.
1. The Charter of the City of Manila was enacted by Congress on 18 June 1949.
Section 18 thereof provides:
Sec. 18. Legislative Powers. — The Municipal Board shall have the
following legislative powers: x x x
(jj) To tax, license, permit and regulate wagers or betting by the public on
boxing, sipa, bowling, billiards, pools, horse and dog races, cockpits, jai-
alai, roller or ice-skating on any sporting or athletic contests, as well as
grant exclusive rights to establishments for this purpose, notwithstanding
any existing law to the contrary.
2. On 1 January 1951, Executive Order No. 392 was issued transferring the authority
to regulate jai-alais from local government to the Games and Amusements Board
(GAB).
3. On 20 June 1953, Congress enacted Republic Act No. 954, entitled "An Act to
Prohibit With Horse Races and Basque Pelota Games (Jai-Alai), And To Prescribe
Penalties For Its Violation". The provisions of Republic Act No. 954 relating to jai-alai
are as follows:
Sec. 4. No person, or group of persons other than the operator or
maintainer of a fronton with legislative franchise to conduct basque pelota
games (Jai-alai), shall offer, to take or arrange bets on any basque pelota
game or event, or maintain or use a totalizator or other device, method or
system to bet or gamble on any basque pelota game or event.
UC School of Law
Law on Public Corporations
Sec. 5. No person, operator or maintainer of a fronton with legislative
franchise to conduct basque pelota games shall offer, take, or arrange bets
on any basque pelota game or event, or maintain or use a totalizator or
other device, method or system to bet or gamble on any basque pelota
game or event outside the place, enclosure, or fronton where the basque
pelota game is held.
4. On 07 September 1971, however, the Municipal Board of Manila nonetheless
passed Ordinance No. 7065 entitled "An Ordinance Authorizing the Mayor To Allow
And Permit The Associated Development Corporation To Establish, Maintain And
Operate A Jai-Alai In The City Of Manila, Under Certain Terms And Conditions And
For Other Purposes."
5. On 20 August 1975, Presidential Decree No. 771 was issued by then President
Marcos. The decree, entitled "Revoking All Powers and Authority of Local
Government(s) To Grant Franchise, License or Permit And Regulate Wagers Or
Betting By The Public On Horse And Dog Races, Jai-Alai Or Basque Pelota, And Other
Forms Of Gambling", in Section 3 thereof, expressly revoked all existing franchises
and permits issued by local governments.
6. On 16 October 1975, Presidential Decree No. 810, entitled "An Act granting The
Philippine Jai-Alai And Amusement Corporation A Franchise To Operate, Construct
And Maintain A Fronton For Basque Pelota And Similar Games of Skill In The
Greater Manila Area," was promulgated.
7 On 08 May 1987, then President Aquino, by virtue of Article XVIII, Section 6, of the
Constitution, which allowed the incumbent legislative powers until the first
Congress was convened, issued Executive Order No. 169 expressly repealing PD 810
and revoking and cancelling the franchise granted to the Philippine Jai-Alai and
Amusement Corporation.
Petitioners in G.R. No. 117263 argue that Republic Act No. 954 effectively removed
the power of the Municipal Board of Manila to grant franchises for gambling
operations. It is argued that the term "legislative franchise" in Rep. Act No. 954 is
used to refer to franchises issued by Congress.
On the other hand, ADC contends that Republic Act N. 409 (Manila Chapter) gives
legislative powers to the Municipal Board to grant franchises, and since Republic
Act No. 954 does not specifically qualify the word "legislative" as referring
exclusively to Congress, then Rep. Act No. 954 did not remove the power of the
Municipal Board under Section 18(jj) of Republic Act No. 409 and consequently it
was within the power of the City of Manila to allow ADC to operate the jai-alai in
the City of Manila.
by NY-YO
2020-2021
On this point, the government counter-argues that the term "legislative powers" is
used in Rep. Act No. 409 merely to distinguish the powers under Section 18 of the
law from the other powers of the Municipal Board, but that the term "legislative
franchise" in Rep. Act No. 954 refers to a franchise granted solely by Congress.
Further, the government argues that Executive Order No. 392 dated 01 January
1951 transferred even the power to regulate Jai-Alai from the local governments to
the Games and Amusements Board (GAB), a national government agency.
It is worthy of note that neither of the authorities relied upon by ADC to support its
alleged possession of a valid franchise, namely the Charter of the City of Manila
(Rep. Act No. 409) and Manila Ordinance No. 7065 uses the word "franchise". Rep.
Act No. 409 empowers the Municipal Board of Manila to "tax, license,
permit and regulate wagers or betting" and to "grant exclusive rights to
establishments", while Ordinance No. 7065 authorized the Manila City Mayor to
"allow and permit" ADC to operate jai-alai facilities in the City of Manila.
It is clear from the foregoing that Congress did not delegate to the City of Manila
the power "to franchise" wagers or betting, including the jai-alai, but retained for
itself such power "to franchise". What Congress delegated to the City of Manila in
Rep. Act No. 409, with respect to wagers or betting, was the power to "license,
permit, or regulate" which therefore means that a license or permit issued by the
City of Manila to operate a wager or betting activity, such as the jai-alai where bets
are accepted, would not amount to something meaningful UNLESS the holder of the
permit or license was also FRANCHISED by the national government to so operate.
Moreover, even this power to license, permit, or regulate wagers or betting on jai-
alai was removed from local governments, including the City of Manila, and
transferred to the GAB on 1 January 1951 by Executive Order No. 392. The net
result is that the authority to grant franchises for the operation of jai-alai frontons is
in Congress, while the regulatory function is vested in the GAB.
In relation, therefore, to the facts of this case, since ADC has no franchise from
Congress to operate the jai-alai, it may not so operate even if it has a license or
permit from the City Mayor to operate the jai-alai in the City of Manila.
It cannot be overlooked, in this connection, that the Revised Penal Code punishes
gambling and betting under Articles 195 to 199 thereof. Gambling is thus generally
prohibited by law, unless another law is enacted by Congress expressly exempting
or excluding certain forms of gambling from the reach of criminal law. Among these
form the reach of criminal law. Among these forms of gambling allowed by special
law are the horse races authorized by Republic Acts Nos. 309 and 983 and gambling
casinos authorized under Presidential Decree No. 1869.
UC School of Law
Law on Public Corporations
While jai-alai as a sport is not illegal per se, the accepting of bets or wagers on the
results of jai-alai games is undoubtedly gambling and, therefore, a criminal offense
punishable under Articles 195-199 of the Revised Penal Code, unless it is shown that
a later or special law had been passed allowing it. ADC has not shown any such
special law.
Republic Act No. 409 (the Revised Charter of the City of Manila) which was enacted
by Congress on 18 June 1949 gave the Municipal Board certain delegated legislative
powers under Section 18. A perusal of the powers enumerated under Section 18
shows that these powers are basically regulatory in nature. The regulatory nature of
these powers finds support not only in the plain words of the enumerations under
Section 28 but also in this Court's ruling in People v. Vera.
In Vera, this Court declared that a law which gives the Provincial Board the
discretion to determine whether or not a law of general application (such as, the
Probation law-Act No. 4221) would or would not be operative within the province,
is unconstitutional for being an undue delegation of legislative power.
From the ruling in Vera, it would be logical to conclude that, if ADC's arguments
were to prevail, this Court would likewise declare Section 18(jj) of the Revised
Charter of Manila unconstitutional for the power it would delegate to the Municipal
Board of Manila would give the latter the absolute and unlimited discretion to
render the penal code provisions on gambling inapplicable or inoperative to
persons or entities issued permits to operate gambling establishments in the City of
Manila.
We need not go to this extent, however, since the rule is that laws must be
presumed valid, constitutional and in harmony with other laws. Thus, the relevant
provisions of Rep. Acts Nos. 409 and 954 and Ordinance No. 7065 should be taken
together and it should then be clear that the legislative powers of the Municipal
Board should be understood to be regulatory in nature and that Republic Act No.
954 should be understood to refer to congressional franchises, as a necessity for the
operation of jai-alai.
We need not, however, again belabor this issue further since the task at hand which
will ultimately, and with finality, decide the issues in this case is to determine
whether PD No. 771 validly revoked ADC's franchise to operate the jai-alai,
assuming (without conceding) that it indeed possessed such franchise under
Ordinance No. 7065.
ADC argues that PD No. 771 is unconstitutional for being violative of the equal
protection and non-impairment provisions of the Constitution. On the other hand,
by NY-YO
2020-2021
the government contends that PD No. 771 is a valid exercise of the inherent police
power of the State.
The police power has been described as the least limitable of the inherent powers
of the State. It is based on the ancient doctrine — salus populi est suprema lex (the
welfare of the people is the supreme law.) In the early case of Rubi v. Provincial
Board of Mindoro, this Court through Mr. Justice George A. Malcolm stated thus:
The police power of the State . . . is a power co-extensive with self-
protection, and is not inaptly termed the "law of overruling necessity." It
may be said to be that inherent and plenary power in the State which
enables it to prohibit all things hurtful to the comfort, safety and welfare of
society. Carried onward by the current of legislation, the judiciary rarely
attempts to dam the onrushing power of legislative discretion, provided
the purposes of the law do not go beyond the great principles that mean
security for the public welfare or do not arbitrarily interfere with the right
of the individual.
It cannot be argued that the control and regulation of gambling do not promote
public morals and welfare. Gambling is essentially antagonistic and self-reliance. It
breeds indolence and erodes the value of good, honest and hard work. It is, as very
aptly stated by PD No. 771, a vice and a social ill which government must minimize
(if not eradicate) in pursuit of social and economic development.
In Magtajas v. Pryce Properties Corporation (20 July 1994, G.R. No. 111097), this
Court stated thru Mr. Justice Isagani A. Cruz:
In the exercise of its own discretion, the legislative power may prohibit
gambling altogether or allow it without limitation or it may prohibit some
forms of gambling and allow others for whatever reasons it may consider
sufficient. Thus, it has prohibited jueteng and monte but permits lotteries,
cockfighting and horse-racing. In making such choices, Congress has
consulted its own wisdom, which this Court has no authority to review,
much less reverse. Well has it been said that courts do not sit to resolve
the merits of conflicting theories. That is the prerogative of the political
departments. It is settled that questions regarding wisdom, morality and
practicability of statutes are not addressed to the judiciary but may be
resolved only by the executive and legislative departments, to which the
function belongs in our scheme of government.
Talks regarding the supposed vanishing line between right and privilege in American
constitutional law has no relevance in the context of these cases since the reference
there is to economic regulations. On the other hand, jai-alai is not a mere economic
UC School of Law
Law on Public Corporations
activity which the law seeks to regulate. It is essentially gambling and whether it
should be permitted and, if so, under what conditions are questions primarily for
the lawmaking authority to determine, taking into account national and local
interests. Here, it is the police power of the State that is paramount.
ADC questions the motive for the issuance of PD Nos. 771. Clearly, however, this
Court cannot look into allegations that PD No. 771 was enacted to benefit a select
group which was later given authority to operate the jai-alai under PD No. 810. The
examination of legislative motivation is generally prohibited. (Palmer v. Thompson,
403 U.S. 217, 29 L. Ed. 2d 438 [1971] per Black, J.) There is, the first place, absolute
lack of evidence to support ADC's allegation of improper motivation in the issuance
of PD No. 771. In the second place, as already averred, this Court cannot go behind
the expressed and proclaimed purposes of PD No. 771, which are reasonable and
even laudable.
It should also be remembered that PD No. 771 provides that the national
government can subsequently grant franchises "upon proper application and
verification of the qualifications of the applicant." ADC has not alleged that it filed
an application for a franchise with the national government subsequent to the
enactment of PD No. 771; thus, the allegations abovementioned (of preference to a
select group) are based on conjectures, speculations and imagined biases which do
not warrant the consideration of this Court.
On the other hand, it is noteworthy that while then president Aquino issued
Executive Order No. 169 revoking PD No. 810 (which granted a franchise to a
Marcos-crony to operate the jai-alai), she did not scrap or repeal PD No. 771 which
had revoked all franchises to operate jai-alais issued by local governments, thereby
re-affirming the government policy that franchises to operate jai-alais are for the
national government (not local governments) to consider and approve.
On the alleged violation of the non-impairment and equal protection clauses of the
Constitution, it should be remembered that a franchise is not in the strict sense a
simple contract but rather it is more importantly, a mere privilege specially in
matters which are within the government's power to regulate and even prohibit
through the exercise of the police power. Thus, a gambling franchise is always
subject to the exercise of police power for the public welfare.
There is a stronger reason for holding ADC's permit to be a mere privilege because
jai-alai, when played for bets, is pure and simple gambling. To analogize a gambling
franchise for the operation of a public utility, such as public transportation
company, is to trivialize the great historic origin of this branch of royal privilege.
by NY-YO
2020-2021
As earlier noted, ADC has not alleged ever applying for a franchise under the
provisions of PD No. 771 and yet, the purpose of PD No. 771 is quite clear from its
provisions, i.e., to give to the national government the exclusive power to grant
gambling franchises. Thus, all franchises then existing were revoked but were made
subject to reissuance by the national government upon compliance by the applicant
with government-set qualifications and requirements.

There was no violation by PD No. 771 of the equal protection clause since the
decree revoked all franchises issued by local governments without qualification or
exception. ADC cannot allege violation of the equal protection clause simply
because it was the only one affected by the decree, for as correctly pointed out by
the government, ADC was not singled out when all jai-alai franchises were revoked.
Besides, it is too late in the day for ADC to seek redress for alleged violation of its
constitutional rights for it could have raised these issues as early as 1975, almost
twenty 920) years ago.

(3) W/N there was grave abuse of discretion in the issuance of the TRO

Affirmative; On the issue of whether or not there was grave abuse of discretion
committed by respondent Judge Reyes in issuing the temporary restraining order
(later converted to a writ of preliminary injunction) and the writ of
preliminary mandatory injunction, we hold and rule there was.

Section 3, Rule 58 of the rules of Court provides for the grounds for the issuance of
a preliminary injunction. While ADC could allege these grounds, respondent judge
should have taken judicial notice of Republic Act No. 954 and PD 771, under Section
1 rule 129 of the Rules of court. These laws negate the existence of any legal right
on the part of ADC to the reliefs it sought so as to justify the issuance of a writ of
preliminary injunction since PD No. 771 and Republic Act No. 954 are presumed
valid and constitutional until ruled otherwise by the Supreme Court after due
hearing, ADC was not entitled to the writs issued and consequently there was grave
abuse of discretion in issuing them.

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 Olivarez v. Sandiganbayan
Facts:
In 1992, Baclaran Credit Cooperative, Inc. (BCCI) charged petitioner Mayor Olivarez
with the Violation of the Anti-Graft and Corrupt Practices Act for unreasonably
refusing to issue a mayor’s permit – in the implementation of Resolution No. 744 –
authorizing BCCI to set up a night manufacturer’s fair during Christmas fiesta
celebration at the Baclaran for 60 days, where a portion of the service road of Roxas
Boulevard will be used. Petitioner allegedly refused to issue the permit unless BCCI
gave money to him. Furthermore, petitioner granted instead through an EO to
unidentified group of Baclaran-based organizations/associations of vendors the
privilege to operate a night fair. Petitioner Olivarez denied the allegation on the
ground BCCI never applied for a license, and that it granted the permit to other
entities considering the best interest of the municipality. The Special Prosecution
Office recommended the dismissal of the case. However, this was reversed by the
Ombudsman.
Issue and Ruling: W/N there exists probable cause to prosecute petitioner
Affirmative; Petitioner assails the discretionary power of the Ombudsman to review
the recommendations of the government prosecutors and to approve or disapprove
the same through a mere marginal note, without conducting another preliminary
investigation. Similarly, petitioners fault respondent Sandiganbayan for, allegedly in
grave abuse of discretion, refusing to review the finding of the Ombudsman that
there exists probable cause to hold petitioner liable for violation of Republic Act No.
3019, considering that the Ombudsman did not comply with the guidelines set forth
by respondent court in the conduct of the reinvestigation.
We shall first deal with the propriety or impropriety of the questioned marginal
notes, dated February 9, 1994 and December 9, 1994, issued by then Special
Prosecutor Aniano Desierto (now Ombudsman) and Deputy Special Prosecutor Jose
de G. Ferrer, respectively. Petitioner contends that these marginal notes are null
and void on the ground that the same were issued without the benefit of a new
preliminary investigation and that the findings therein were not based on the facts
and the evidence presented. It is likewise averred that the above-named
government prosecutors were engaging in a fishing expedition when they changed
theories, that is, from "evident bad faith" to "manifest partiality," but only after the
Sandiganbayan had issued a Resolution declaring that the original finding of bad
faith was unwarranted.
After a careful scrutiny of the issues raised in the petition for certiorari, the
arguments in support thereof, as well as the comments of the public respondents
UC School of Law
Law on Public Corporations
thereon, we are not convinced that herein public respondents acted with grave
abuse of discretion or without or in excess of jurisdiction.
The mere fact that the order to file the information against petitioner was
contained in a marginal note is not sufficient to impute arbitrariness or caprice on
the part of respondent special prosecutors, absent a clear showing that they gravely
abused their discretion in disapproving the recommendation of the investigating
prosecutors to dismiss or withdraw the case against petitioner. Neither are these
marginal notes tainted with or indicative of vindictiveness or arbitrariness as
imputed by petitioner. Public respondents disapproved the recommendation of the
investigating prosecutors because they sincerely believed that there is sufficient
evidence to indict the accused.
The Ombudsman's conformity thereto is but an exercise of his powers based upon
constitutional mandate and the courts should not interfere in such exercise. The
rule is based not only upon respect for the investigatory and prosecutory powers
granted by the Constitution to the Office of the Ombudsman but upon practicality
as well. Otherwise, the functions of the courts will be grievously hampered by
innumerable petitions assailing the dismissal of investigatory proceedings
conducted by the Office of the Ombudsman with regard to complaints filed before
it, in much the same way that the courts would be extremely swamped if they could
be compelled to review the exercise of discretion on the part of the fiscals or
prosecuting attorneys each time they decide to file an information in court or
dismiss a complaint by a private complainant.
It may be true that, on the face thereof, the marginal notes seem to lack any factual
or evidentiary basis for failure to specifically spell out the same. However, that is
not all there is to it. What is actually involved here is a situation wherein, on the
bases of the same findings of fact of the investigating prosecutors, respondent
special prosecutors were of the opinion that, contrary to the former's
recommendation, petitioner is probably guilty of the offense charged. Obviously,
therefore, since it is merely a review of the conclusions arrived at by the
investigating prosecutor, another or a new preliminary investigation is no longer
necessary.
The case of Cruz, Jr. vs. People, et al., which involves substantially the same issues,
has ruled on the matter in this wise:
It may seem that the ratio decidendi for the Ombudsman's order may be
wanting but this is not a case of a total absence of factual and legal bases
nor a failure to appreciate the evidence presented. What is actually
involved here is merely a review of the conclusion arrived at by the
investigating prosecutor as a result of his study and analysis of the
by NY-YO
2020-2021
 complaint, counter-affidavits, and the evidence submitted by the parties
during the preliminary investigation. The Ombudsman here is not
conducting anew another investigation but is merely determining the
propriety and correctness of the recommendation given by the
investigating prosecutor, that is, whether probable cause actually exists or
not, on the basis of the findings of the latter. Verily, it is discretionary upon
the Ombudsman if he will rely mainly on the findings of fact of the
investigating prosecutor in making a review of the latter's report and
recommendation, as the Ombudsman can very well make his own findings
of fact. There is nothing to prevent him from acting one way or the other.
As a matter of fact, Section 4, Rule 112 of the Rules of Court provides that
"where the investigating assistant fiscal recommends the dismissal of the
case but his findings are reversed by the provincial or city fiscal or the chief
state prosecutor on the ground that a probable cause exists, the latter
may, by himself, file the corresponding information against the respondent
or direct any other assistant fiscal or state prosecutor to do so, without
conducting another preliminary investigation."
With more reason may the Ombudsman not be faulted in arriving at a
conclusion different from that of the investigating prosecutor on the basis
of the same set of facts. It cannot be said that the Ombudsman committed
a grave abuse of discretion simply because he opines contrarily to the
prosecutor that, under the facts obtaining in the case, there is probable
cause to believe that herein petitioner is guilty of the offense charged.
. . . (f)rom the tenor of respondent Ombudsman's statement, it is clear that
he agreed with the findings of facts of the investigating prosecutor
but disagreed with the latter's conclusion on the import and significance of
said findings. On the basis of the findings of fact of the investigating
prosecutor, which were not disputed by petitioner, respondent
Ombudsman believed that there was sufficient ground to engender a well-
founded belief that a crime had been committed and that petitioner is
probably guilty thereof.
The alleged shift in theory from "evident bad faith" to "manifest partiality" fails to
present a sufficient indicium that respondent prosecutors gravely abused their
discretion. Manifest partiality, evident bad faith and gross inexcusable negligence
are but elements of the offense defined in and punishable under Section 3(e) of
Republic Act No. 3019 for which petitioner stands charged. The presence or
absence of the elements of the crime are evidentiary in nature and are matters of
defense, the truth of which can be best passed upon after a full-blown trial on the
merits. Thus, the issue of whether there was bad faith or manifest partiality on the
UC School of Law
Law on Public Corporations
part of petitioner should best be determined, not in the preliminary investigation,
but during the trial proper.
It must here be stressed that a preliminary investigation is essentially inquisitorial,
and it is often the only means of discovering the persons who may be seasonably
charged with a crime, to enable the prosecutor to prepare his complaint or
information It is not a trial of the case on the merits and has no purpose except that
of determining whether a crime has been committed and whether there is probable
cause to believe that the accused is guilty thereof, and it does not place the persons
against whom it is taken in jeopardy. It is not the occasion for the full and
exhaustive display of the parties' evidence; it is for the presentation of such
evidence only as may engender a well-grounded belief that an offense has been
committed and that the accused is probably guilty thereof.
Consequently, petitioner's asseveration that the reinvestigation is null and void
because the respondent prosecutors failed to consider all the evidence presented in
his defense has no leg to stand on. A perusal of the records will show that all the
documentary evidence, as well as the additional documents submitted by petitioner
during the reinvestigation, were thoroughly examined and fully evaluated in the
determination of probable cause.
Probable cause, as explained in the aforecited case of Pilapil, is —
. . . a reasonable ground of presumption that a matter is, or may be, well
founded, such a state of facts in the mind of the prosecutor as would lead
a person of ordinary caution and prudence to believe, or entertain an
honest or strong suspicion, that a thing is so. The term does not mean
"actual and positive cause" nor does it import absolute certainty. It is
merely based on opinion and reasonable belief. Thus, a finding of probable
cause does not require an inquiry into whether there is sufficient evidence
to procure a conviction. It is enough that it is believed that the act or
omission complained of constitutes the offense charged. Precisely, there is
a trial for the reception of evidence of the prosecution in support of the
charge.
Whether an act was done causing undue injury to the government and
whether the same was done with manifest partiality or evident bad faith
can only be made out by proper and sufficient testimony. Necessarily, a
conclusion can be arrived at when the case has already proceeded on
sufficient proof.
. . . the court should not be guided by the rule that accused must be shown
to be guilty beyond a reasonable doubt, but rather whether there is
by NY-YO
2020-2021
 sufficient evidence which inclines the mind to believe, without necessarily
leaving room for doubt, that accused is guilty thereof. 9
We have meticulously analyzed the arguments raised by the parties in the various
pleadings and motions, together with their documentary evidence, which all
formed the basis for the issuance of the questioned resolutions, and we are
convinced that there exists probable cause as to warrant the filing of charges
against herein petitioner for a violation of Section 3(e) of Republic Act No. 3019.
Petitioner's main defense is that BCCI was not issued a mayor's permit by reason of
its failure to apply therefor and to comply with the conditions set forth
in Sangguniang Bayan Resolution No. 744. There are several flaws to this argument.
First. The purported absence of an application for the issuance of a permit is
actually more apparent than real. Initially, petitioner claims that he could not grant
a permit to BCCI, which was allegedly demanding an exclusive authority to operate,
on the pretext that he can be held liable for a violation of Republic Act No. 3019 for
giving unwarranted benefits to BCCI to the detriment of other Baclaran-based
vendors' associations. Subsequently, but in the same vein, petitioner tries to justify
the issuance of an executive order granting a permit to the unidentified Baclaran-
based vendors' associations, in that the same did not cause injury to BCCI since the
authority to operate given to the latter is not exclusive.
It would appear, therefore, that petitioner had taken it upon himself to categorize
and determine the exclusivity or non-exclusivity of the authority to operate granted
to BCCI, depending on whether or not it would suit his purpose or predilection. The
inconsistent stand taken by petitioner with regard to the true character of BCCI's
authority to operate is indeed quite perplexing and suffices to cast sufficient doubt
on the real motive behind the non-issuance of the required permit.
Second. It is asserted that the executive order granting a permit to the Baclaran-
based vendors' associations was issued by petitioner supposedly in the best interest
of the municipality as evidenced by its earnings from the night fair in the total
amount of P13,512,948.00. While the avowed purpose may prove noble, still it
miserably pales in contrast to what appears to be bad faith or manifest partiality on
the part of petitioner in refusing to grant a permit to BCCI. Petitioner could not
plausibly demonstrate how the issuance of a permit to BCCI would so adversely
affect public interest as to warrant its denial. On the contrary, the Sangguniang
Bayan of Parañaque had even passed a resolution, which notably was approved by
herein petitioner, expressly allowing BCCI to hold the night fair. This is concrete
proof that the grant of authority to operate in favor of BCCI was not at all contrary
to law and public policy, nor was it prejudicial to public interest.
UC School of Law
Law on Public Corporations
Petitioner's suspected partiality may be gleaned from the fact that he issued a
permit in favor of the unidentified Baclaran-based vendors' associations by the
mere expedient of an executive order, whereas so many requirements were
imposed on BCCI before it could be granted the same permit. Worse, petitioner
failed to show, in apparent disregard of BCCI's right to equal protection, that BCCI
and the unidentified Baclaran-based vendors' associations were not similarly
situated as to give at least a semblance of legality to the apparent haste with which
said executive order was issued. It would seem that if there was any interest served
by such executive order, it was that of herein petitioner.
Petitioner likewise submits that no permit could be issued because BCCI never filed
an application therefor with the proper office, that is, the Business Permit and
Licensing Office. This is actually begging the question. It is not denied that on
November 13, 1992, BCCI, through its general manager, wrote petitioner requesting
for a permit to operate, but this was rejected outright by him on the theory that the
application should be made with the proper municipal official. The indifference
shown by petitioner to BCCI's application taints his actuations with dubiety.
As the mayor of the municipality, the officials referred to were definitely under his
authority and he was not without recourse to take appropriate action on the letter-
application of BCCI although the same was not strictly in accordance with normal
procedure. There was nothing to prevent him from referring said letter-application
to the licensing department, but which paradoxically he refused to do. Whether
petitioner was impelled by any material interest or ulterior motive may be beyond
us for the moment since this is a matter of evidence, but the environmental facts
and circumstances are sufficient to create a belief in the mind of a reasonable man
that this would not be completely improbable, absent countervailing clarification.
Lastly, it may not be amiss to add that petitioner, as a municipal mayor, is expressly
authorized and has the power to issue permits and licenses for the holding of
activities for any charitable or welfare purpose, pursuant to Section 444 (b) (3) (iv
and v) of the Local Government Code of 1991 (Republic Act No. 7160). Hence, he
cannot really feign total lack of authority to act on the letter-application of BCCI.
On the basis of the foregoing, we are reasonably convinced that there is enough
evidence to warrant the filing of a formal charge in court against herein petitioner
for a violation of Section 3(e) of Republic Act No. 3019.
Considering that the findings of fact by the Office of the Ombudsman are supported
by substantial evidence, the same should be considered conclusive. Furthermore,
the Ombudsman's findings are essentially factual in nature. Accordingly, in assailing
said findings on the contention that the Ombudsman committed a grave abuse of
discretion in holding that petitioner is liable for the offense charged, the petition at
by NY-YO
2020-2021
bar clearly raises questions of fact. The arguments therein are anchored on the
propriety of or error in the Ombudsman's appreciation of the facts of the case.

Petitioner cannot be unaware of our oft-repeated injunction that this Court is not a
trier of facts, more so in an application for the extraordinary writ of certiorari where
neither questions of fact nor even of law are entertained, since only questions of
lack or excess of jurisdiction or grave abuse of discretion are authorized. 10 On this
issue, therefore, we find that no grave abuse of discretion has been committed by
respondents which would warrant the granting of the writ of certiorari, especially
where the circumstances attending the recourse therefor are strongly suggestive of
dilatory purposes.

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 Binay v. Domingo
Facts:
In 1988, then Municipality of Makati approved Resolution No. 60 providing for a
P500 cash as a Burial Assistance Program to bereaved families of Makati whose
gross family income does not exceed P2,000 a month. Pursuant thereto, the Metro
Manila Commission approved the disbursement of P400,000 for the
implementation of the program. However, the COA disapproved of the same.
According to COA, there is no perceptible connection between the objective sought
and the alleged public safety and general welfare. Moreover, COA held that it was
not for a public purpose since it benefitted only a few individuals; hence this
petition for certiorari.
Issue and Ruling: W/N the Ordinance was valid as an exercise of police power
Affirmative; The police power is a governmental function, an inherent attribute of
sovereignty, which was born with civilized government. It is founded largely on the
maxims, "Sic utere tuo et ahenum non laedas and "Salus populi est suprema lex. Its
fundamental purpose is securing the general welfare, comfort and convenience of
the people.
Police power is inherent in the state but not in municipal corporations (Balacuit v.
CFI of Agusan del Norte). Before a municipal corporation may exercise such power,
there must be a valid delegation of such power by the legislature which is the
repository of the inherent powers of the State. A valid delegation of police power
may arise from express delegation, or be inferred from the mere fact of the
creation of the municipal corporation; and as a general rule, municipal corporations
may exercise police powers within the fair intent and purpose of their creation
which are reasonably proper to give effect to the powers expressly granted, and
statutes conferring powers on public corporations have been construed as
empowering them to do the things essential to the enjoyment of life and desirable
for the safety of the people. The so-called inferred police powers of such
corporations are as much delegated powers as are those conferred in express
terms, the inference of their delegation growing out of the fact of the creation of
the municipal corporation and the additional fact that the corporation can only fully
accomplish the objects of its creation by exercising such powers. Furthermore,
municipal corporations, as governmental agencies, must have such measures of the
power as are necessary to enable them to perform their governmental functions.
The power is a continuing one, founded on public necessity. Thus, not only does the
State effectuate its purposes through the exercise of the police power but the
municipality does also.
UC School of Law
Law on Public Corporations
Municipal governments exercise this power under the general welfare clause:
pursuant thereto they are clothed with authority to "enact such ordinances and
issue such regulations as may be necessary to carry out and discharge the
responsibilities conferred upon it by law, and such as shall be necessary and proper
to provide for the health, safety, comfort and convenience, maintain peace and
order, improve public morals, promote the prosperity and general welfare of the
municipality and the inhabitants thereof, and insure the protection of property
therein." (Sections 91, 149, 177 and 208, BP 337). And under Section 7 of BP 337,
"every local government unit shall exercise the powers expressly granted, those
necessarily implied therefrom, as well as powers necessary and proper for
governance such as to promote health and safety, enhance prosperity, improve
morals, and maintain peace and order in the local government unit, and preserve
the comfort and convenience of the inhabitants therein."
Police power is the power to prescribe regulations to promote the health, morals,
peace, education, good order or safety and general welfare of the people. It is the
most essential, insistent, and illimitable of powers. In a sense it is the greatest and
most powerful attribute of the government. It is elastic and must be responsive to
various social conditions. (Sangalang, et al. vs. IAC). On it depends the security of
social order, the life and health of the citizen, the comfort of an existence in a
thickly populated community, the enjoyment of private and social life, and the
beneficial use of property, and it has been said to be the very foundation on which
our social system rests. However, it is not confined within narrow circumstances of
precedents resting on past conditions; it must follow the legal progress of a
democratic way of life. (Sangalang, et al. vs. IAC, supra).
In the case at bar, COA is of the position that there is "no perceptible connection or
relation between the objective sought to be attained under Resolution No. 60, s.
1988, supra, and the alleged public safety, general welfare. etc. of the inhabitants
of Makati."
Apparently, COA tries to re-define the scope of police power by circumscribing its
exercise to "public safety, general welfare, etc. of the inhabitants of Makati."
In the case of Sangalang vs. IAC, supra, We ruled that police power is not capable of
an exact definition but has been, purposely, veiled in general terms to underscore
its all comprehensiveness. Its scope, over-expanding to meet the exigencies of the
times, even to anticipate the future where it could be done, provides enough room
for an efficient and flexible response to conditions and circumstances thus assuring
the greatest benefits.
The police power of a municipal corporation is broad, and has been said to be
commensurate with, but not to exceed, the duty to provide for the real needs of
by NY-YO
2020-2021
the people in their health, safety, comfort, and convenience as consistently as may should have more in law." This decision, however must not be taken as a precedent,
be with private rights. It extends to all the great public needs, and, in a broad sense or as an official go-signal for municipal governments to embark on a philanthropic
includes all legislation and almost every function of the municipal government. It orgy of inordinate dole-outs for motives political or otherwise.
covers a wide scope of subjects, and, while it is especially occupied with whatever
affects the peace, security, health, morals, and general welfare of the community, it
is not limited thereto, but is broadened to deal with conditions which exists so as to
bring out of them the greatest welfare of the people by promoting public
convenience or general prosperity, and to everything worthwhile for the
preservation of comfort of the inhabitants of the corporation (62 C.J.S. Sec. 128).
Thus, it is deemed inadvisable to attempt to frame any definition which shall
absolutely indicate the limits of police power.

COA's additional objection is based on its contention that "Resolution No. 60 is still
subject to the limitation that the expenditure covered thereby should be for a
public purpose, ... should be for the benefit of the whole, if not the majority, of the
inhabitants of the Municipality and not for the benefit of only a few individuals as in
the present case."

COA is not attuned to the changing of the times. Public purpose is not
unconstitutional merely because it incidentally benefits a limited number of
persons. As correctly pointed out by the Office of the Solicitor General, "the drift is
towards social welfare legislation geared towards state policies to provide adequate
social services (Section 9, Art. II, Constitution), the promotion of the general welfare
(Section 5, Ibid) social justice (Section 10, Ibid) as well as human dignity and respect
for human rights.

The care for the poor is generally recognized as a public duty. The support for the
poor has long been an accepted exercise of police power in the promotion of the
common good.

There is no violation of the equal protection clause in classifying paupers as subject

of legislation. Paupers may be reasonably classified. Different groups may receive
varying treatment. Precious to the hearts of our legislators, down to our local
councilors, is the welfare of the paupers. Thus, statutes have been passed giving
rights and benefits to the disabled, emancipating the tenant-farmer from the
bondage of the soil, housing the urban poor, etc.

Resolution No. 60, re-enacted under Resolution No. 243, of the Municipality of
Makati is a paragon of the continuing program of our government towards social
justice. The Burial Assistance Program is a relief of pauperism, though not complete.
The loss of a member of a family is a painful experience, and it is more painful for
the poor to be financially burdened by such death. Resolution No. 60 vivifies the
very words of the late President Ramon Magsaysay 'those who have less in life,

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 Villacorta v. Bernardo
Facts:
The City of Dagupan enacted Ordinance No. 22 which regulated subdivision plans
over parcels of land in the city, thus:
Section 1. Every proposed subdivision plan over any lot in the City of
Dagupan, shalt before the same is submitted for approval and/or
verification by the Bureau of Lands and/or the Land Registration
Commission, be previously submitted to the City Engineer of the City who
shall see to it that no encroachment is made on any portion of the public
domain, that the zoning ordinance and all other pertinent rules and
regulations are observed.
Section 2. As service fee thereof, an amount equivalent to P0.30 per
square meter of every lot resulting or will result from such subdivision shall
be charged by the City Engineer's Office.
Section 3. It shall be unlawful for the Register of Deeds of Dagupan City to
allow the registration of a subdivision plan unless there is prior written
certification issued by the City Engineer that such plan has already been
submitted to his office and that the same is in order.
Section 4. Any violation of this ordinance shall be punished by a fine not
exceeding two hundred (P200.00) pesos or imprisonment not exceeding six
(6) months or both in the discretion of the judge.
The same was declared null and void by the lower court.
Issue and Ruling: W/N the lower court acted with grave abuse of discretion
In declaring the said ordinance null and void, the court a quo declared:
From the above-recited requirements, there is no showing that would
justify the enactment of the questioned ordinance. Section 1 of said
ordinance clearly conflicts with Section 44 of Act 496, because the latter
law does not require subdivision plans to be submitted to the City Engineer
before the same is submitted for approval to and verification by the
General Land Registration Office or by the Director of Lands as provided for
in Section 58 of said Act. Section 2 of the same ordinance also contravenes
the provisions of Section 44 of Act 496, the latter being silent on a service
fee of PO.03 per square meter of every lot subject of such subdivision
application; Section 3 of the ordinance in question also conflicts with
UC School of Law
Law on Public Corporations
Section 44 of Act 496, because the latter law does not mention of a
certification to be made by the City Engineer before the Register of Deeds
allows registration of the subdivision plan; and the last section of said
ordinance imposes a penalty for its violation, which Section 44 of Act 496
does not impose. In other words, Ordinance 22 of the City of Dagupan
imposes upon a subdivision owner additional conditions. x x x
The Court takes note of the laudable purpose of the ordinance in bringing
to a halt the surreptitious registration of lands belonging to the
government. But as already intimidated above, the powers of the board in
enacting such a laudable ordinance cannot be held valid when it shall
impede the exercise of rights granted in a general law and/or make a
general law subordinated to a local ordinance.
To sustain the ordinance would be to open the floodgates to other ordinances
amending and so violating national laws in the guise of implementing them. Thus,
ordinances could be passed imposing additional requirements for the issuance of
marriage licenses, to prevent bigamy; the registration of vehicles, to minimize
carnaping; the execution of contracts, to forestall fraud; the validation of passports,
to deter imposture; the exercise of freedom of speech, to reduce disorder; and so
on. The list is endless, but the means, even if the end be valid, would be ultra vires.
So many excesses are attempted in the name of the police power that it is time, we
feel, for a brief admonition.
Regulation is a fact of life in any well-ordered community. As society becomes more
and more complex, the police power becomes correspondingly ubiquitous. This has
to be so for the individual must subordinate his interests to the common good, on
the time honored justification of Salus populi est suprema lex.
In this prolix age, practically everything a person does and owns affects the public
interest directly or at least vicariously, unavoidably drawing him within the embrace
of the police power. Increasingly, he is hemmed in by all manner of statutory,
administrative and municipal requirements and restrictions that he may find
officious and even oppressive.
It is necessary to stress that unless the creeping interference of the government in
essentially private matters is moderated, it is likely to destroy that prized and
peculiar virtue of the free society: individualism.
Every member of society, while paying proper deference to the general welfare,
must not be deprived of the right to be left alone or, in the Idiom of the day, "to do
by NY-YO
2020-2021
his thing." As long as he does not prejudice others, his freedom as an individual
must not be unduly curtailed.

We therefore urge that proper care attend the exercise of the police power lest it
deteriorate into an unreasonable intrusion into the purely private affairs of the
individual. The so-called "general welfare" is too amorphous and convenient an
excuse for official arbitrariness.

Let it always be remembered that in the truly democratic state, protecting the
rights of the individual is as important as, if not more so than, protecting the rights
of the public.

This advice is especially addressed to the local governments which exercise the
police power only by virtue of a valid delegation from the national legislature under
the general welfare clause. In the instant case, Ordinance No. 22 suffers from the
additional defect of violating this authority for legislation in contravention of the
national law by adding to its requirements.

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 Matalin Coconut Co., Inc. v. Municipal Council of Malabang
Facts:
In 1966, the Municipal Council of Malabang, invoking the authority of Sec. 2, RA No.
2264 (Local Autonomy Act) enacted Municipal Ordinance No. 45-46. The Ordinance
imposed a “police inspection fee of P 0.30 per sack of cassava starch” produced and
shipped out of the municipality. Likewise, the Ordinance also set out fines and
penalties for the failure to pay the inspection fee to the Municipal Treasurer.
Consequently, it was challenged by Matalin Coconut Co., Inc. on the ground that the
same was not only ultra vires (for being violative of RA 2264), but also
unreasonable, oppressive and confiscatory. Matalin Coconut filed an action for
declaratory relief and prayed for the refund of the amounts already paid. The trial
court rendered a judgment declaring the Ordinance null and void for being in the
nature of a percentage tax on sales which is beyond the scope of a municipality, and
likewise ordered the refund; hence this appeal.
Issues and Ruling:
(1) W/N an order for a refund is proper in an action for declaratory relief
Affirmative; The respondents-appellants maintain that it was error for the trial
court, in an action for declaratory relief, to order the refund to petitioner-appellee
of the amounts paid by the latter under the municipal ordinance in question. It is
the contention of respondents-appellants that in an action for declaratory relief, all
the court can do is to construe the validity of the ordinance in question and declare
the rights of those affected thereby. The court cannot declare the ordinance illegal
and at the same time order the refund to petitioner of the amounts paid under the
ordinance, without requiring petitioner to file an ordinary action to claim the refund
after the declaratory relief judgment has become final. Respondents maintain that
under Rule 64 of the Rules of Court, the court may advise the parties to file the
proper pleadings and convert the hearing into an ordinary action, which was not
done in this case.
We find no merit in such contention. Under Sec. 6 of Rule 64, the action for
declaratory relief may be converted into an ordinary action and the parties allowed
to file such pleadings as may be necessary or proper, if before the final termination
of the case "a breach or violation of an...ordinance, should take place." In the
present case, no breach or violation of the ordinance occurred. The petitioner
decided to pay "under protest" the fees imposed by the ordinance. Such payment
did not affect the case; the declaratory relief action was still proper because the
applicability of the ordinance to future transactions still remained to be resolved,
although the matter could also be threshed out in an ordinary suit for the recovery
of taxes paid (Shell Co. of the Philippines, Ltd. vs. Municipality of Sipocot, L-12680,
UC School of Law
Law on Public Corporations
March 20, 1959). In its petition for declaratory relief, petitioner-appellee alleged
that by reason of the enforcement of the municipal ordinance by respondents it
was forced to pay under protest the fees imposed pursuant to the said ordinance,
and accordingly, one of the reliefs prayed for by the petitioner was that the
respondents be ordered to refund all the amounts it paid to respondent Municipal
Treasurer during the pendency of the case. The inclusion of said allegation and
prayer in the petition was not objected to by the respondents in their answer.
During the trial, evidence of the payments made by the petitioner was introduced.
Respondents were thus fully aware of the petitioner's claim for refund and of what
would happen if the ordinance were to be declared invalid by the court.
Respondents' contention, if sustained, would in effect require a separate suit for
the recovery of the fees paid by petitioner under protest. Multiplicity of suits should
not be allowed or encouraged and, in the context of the present case, is clearly
uncalled for and unnecessary.
(2) W/N the Ordinance is valid
Negative; The main issue to be resolve in this case whether not Ordinance No. 45-
66 enacted by respondent Municipal Council of Malabang, Lanao del Sur, is valid.
The respondents-appellants contend that the municipality has the power and
authority to approve the ordinance in question pursuant to Section 2 of the Local
Autonomy Act (Republic Act No. 2264).
Since the enactment of the Local Autonomy Act, a liberal rule has been followed by
this Court in construing municipal ordinances enacted pursuant to the taxing power
granted under Section 2 of said law. This Court has construed the grant of power to
tax under the above-mentioned provision as sufficiently plenary to cover
"everything, excepting those which are mentioned" therein, subject only to the
limitation that the tax so levied is for public purposes, just and uniform (Nin Bay
Mining Company vs. Municipality of Roxas, Province of Palawan; C.N. Hodges vs.
Municipal Board, Iloilo City, et al.).
We agree with the finding of the trial court that the amount collected under the
ordinance in question partakes of the nature of a tax, although denominated as
"police inspection fee" since its undeniable purpose is to raise revenue. However,
we cannot agree with the trial court's finding that the tax imposed by the ordinance
is a percentage tax on sales which is beyond the scope of the municipality's
authority to levy under Section 2 of the Local Autonomy Act. Under the said
provision, municipalities and municipal districts are prohibited from imposing" any
percentage tax on sales or other taxes in any form based thereon." The tax imposed
under the ordinance in question is not a percentage tax on sales or any other form
by NY-YO
2020-2021
of tax based on sales. It is a fixed tax of P.30 per bag of cassava starch or flour
"shipped out" of the municipality. It is not based on sales.
However, the tax imposed under the ordinance can be stricken down on another
ground. According to Section 2 of the abovementioned Act, the tax levied must be
"for public purposes, just and uniform" As correctly held by the trial court, the so-
called "police inspection fee" levied by the ordinance is "unjust and unreasonable."
Said the court a quo:
price is P16.00 per bag. The further imposition, therefore, of the tax of
P0.30 per bag, by the ordinance in question would force the petitioner to
close or stop its cassava flour starch milling business considering that it is
maintaining a big labor force in its operation, including a force of security
guards to guard its properties. The ordinance, therefore, has an adverse
effect on the economic growth of the Municipality of Malabang, in
particular, and of the nation, in general, and is contrary to the economic
policy of the government.

... It has been proven that the only service rendered by the Municipality of The decision is affirmed.
Malabang, by way of inspection, is for the policeman to verify from the
driver of the trucks of the petitioner passing by at the police checkpoint
the number of bags loaded per trip which are to be shipped out of the
municipality based on the trip tickets for the purpose of computing the
total amount of tax to be collect (sic) and for no other purpose. The
pretention of respondents that the police, aside from counting the number
of bags shipped out, is also inspecting the cassava flour starch contained in
the bags to find out if the said cassava flour starch is fit for human
consumption could not be given credence by the Court because, aside
from the fact that said purpose is not so stated in the ordinance in
question, the policemen of said municipality are not competent to
determine if the cassava flour starch are fit for human consumption. The
further pretention of respondents that the trucks of the petitioner hauling
the bags of cassava flour starch from the mill to the bodega at the beach of
Malabang are escorted by a policeman from the police checkpoint to the
beach for the purpose of protecting the truck and its cargoes from
molestation by undesirable elements could not also be given credence by
the Court because it has been shown, beyond doubt, that the petitioner
has not asked for the said police protection because there has been no
occasion where its trucks have been molested, even for once, by bad
elements from the police checkpoint to the bodega at the beach, it is solely
for the purpose of verifying the correct number of bags of cassava flour
starch loaded on the trucks of the petitioner as stated in the trip tickets,
when unloaded at its bodega at the beach. The imposition, therefore, of a
police inspection fee of P.30 per bag, imposed by said ordinance is unjust
and unreasonable.

The Court finally finds the inspection fee of P0.30 per bag, imposed by the
ordinance in question to be excessive and confiscatory. It has been shown
by the petitioner, Matalin Coconut Company, Inc., that it is merely realizing
a marginal average profit of P0.40, per bag, of cassava flour starch shipped
out from the Municipality of Malabang because the average production is
P15.60 per bag, including transportation costs, while the prevailing market

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 In the Matter of a Petition for Declaratory Judgment Regarding the Validity of
Municipal Ordinance No. 3659 of the City of Manila. Physical Therapy
Organization of the Philippines, Inc. vs. Municipal Board of the City of Manila
Facts:
This case involved the petition for declaratory relief filed by registered massagists
and licensed operators of massage clinic in the City of Manila seeking to declare
Ordinance No. 3659, promulgated by the Municiapl Board, as null and void. The
petitioners assert that the Ordinance has restricted the practice of massotherapy in
massage clinics to hygienic and aesthetic massage, regulated the practice of
massage, and that the permit fee of P 100 is unreasonable. The trial court upheld
the validity of the Ordinance; hence this appeal.
Issue and Ruling: W/N the Ordinance is valid
Affirmative; The main contention of the appellant in its appeal and the principal
ground of its petition for declaratory judgment is that the City of Manila is without
authority to regulate the operation of massagists and the operation of massage
clinics within its jurisdiction; that whereas under the Old City Charter, particularly,
Section 2444 (e) of the Revised Administrative Code, the Municipal Board was
expressly granted the power to regulate and fix the license fee for the occupation of
massagists, under the New Charter of Manila, Republic Act 409, said power has
been withdrawn or omitted and that now the Director of Health, pursuant to
authority conferred by Section 938 of the Revised Administrative Code and
Executive Order No. 317, series of 1941, as amended by Executive Order No. 392,
series, 1951, is the one who exercises supervision over the practice of massage and
over massage clinics in the Philippines; that the Director of Health has issued
Administrative Order No. 10, dated May 5, 1953, prescribing "rules and regulations
governing the examination for admission to the practice of massage, and the
operation of massage clinics, offices, or establishments in the Philippines", which
order was approved by the Secretary of Health and duly published in the Official
Gazette; that Section 1 (a) of Ordinance No. 3659 has restricted the practice of
massage to only hygienic and aesthetic massage, prohibits or does not allow
qualified massagists to practice therapeutic massage in their massage clinics.
Appellant also contends that the license fee of P100.00 for operator in Section 2 of
the Ordinance is unreasonable, nay, unconscionable.
If we can ascertain the intention of the Manila Municipal Board in promulgating the
Ordinance in question, much of the objection of appellant to its legality may be
solved. It would appear to us that the purpose of the Ordinance is not to regulate
the practice of massage, much less to restrict the practice of licensed and qualified
massagists of therapeutic massage in the Philippines. The end sought to be attained
in the Ordinance is to prevent the commission of immorality and the practice of
UC School of Law
Law on Public Corporations
prostitution in an establishment masquerading as a massage clinic where the
operators thereof offer to massage or manipulate superficial parts of the bodies of
customers for hygienic and aesthetic purposes. This intention can readily be
understood by the building requirements in Section 3 of the Ordinance, requiring
that there be separate rooms for male and female customers; that instead of said
rooms being separated by permanent partitions and swinging doors, there should
only be sliding curtains between them; that there should be "no private rooms or
separated compartments, except those assigned for toilet, lavatories, dressing
room, office or kitchen"; that every massage clinic should be provided with only one
entrance and shall have no direct or indirect communication whatsoever with any
dwelling place, house or building; and that no operator, massagists, attendant or
helper will be allowed "to use or allow the use of a massage clinic as a place of
assignation or permit the commission therein of any immoral or incident act", and
in fixing the operating hours of such clinic between 8:00 a.m. and 11:00 p.m. This
intention of the Ordinance was correctly ascertained by Judge Hermogenes
Concepcion, presiding in the trial court, in his order of dismissal where he said:
"What the Ordinance tries to avoid is that the massage clinic run by an operator
who may not be a masseur or massagista may be used as cover for the running or
maintaining a house of prostitution."
Ordinance No. 3659, particularly, Sections 1 to 4, should be considered as limited to
massage clinics used in the practice of hygienic and aesthetic massage. We do not
believe that Municipal Board of the City of Manila and the Mayor wanted or
intended to regulate the practice of massage in general or restrict the same to
hygienic and aesthetic only.
As to the authority of the City Board to enact the Ordinance in question, the City
Fiscal, in representation of the appellees, calls our attention to Section 18 of the
New Charter of the City of Manila, Act No. 409, which gives legislative powers to the
Municipal Board to enact all ordinances it may deem necessary and proper for the
promotion of the morality, peace, good order, comfort, convenience and general
welfare of the City and its inhabitants. This is generally referred to as the General
Welfare Clause, a delegation in statutory form of the police power, under which
municipal corporations, are authorized to enact ordinances to provide for the
health and safety, and promote the morality, peace and general welfare of its
inhabitants. We agree with the City Fiscal.
As regards the permit fee of P100.00, it will be seen that said fee is made payable
not by the masseur or massagist, but by the operator of a massage clinic who may
not be a massagist himself. Compared to permit fees required in other operations,
P100.00 may appear to be too large and rather unreasonable. However, much
discretion is given to municipal corporations in determining the amount of said fee
without considering it as a tax for revenue purposes:
by NY-YO
2020-2021
 The amount of the fee or charge is properly considered in determining
whether it is a tax or an exercise of the police power. The amount may be
so large as to itself show that the purpose was to raise revenue and not to
regulate, but in regard to this matter there is a marked distinction between
license fees imposed upon useful and beneficial occupations which the
sovereign wishes to regulate but not restrict, and those which are inimical
and dangerous to public health, morals or safety. In the latter case the fee
may be very large without necessarily being a tax. (Cooley on Taxation, Vol.
IV, pp. 3516-17)

Evidently, the Manila Municipal Board considered the practice of hygienic and
aesthetic massage not as a useful and beneficial occupation which will promote and
is conducive to public morals, and consequently, imposed the said permit fee for its
regulation.

The decision is affirmed.

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 Sps. Terrado v. CA
Facts:
In 1983, Act No. 4041 was enacted, ceding to the Municipality of Bayambang,
Pangasinan the Mangabul Fisheries located in the Province of Pangasinan, with a
provision that timber and other forest products therein shall be placed under the
administration and control of the forest service. The Sangguniang Bayan of the
Municipality passed Resolution No. 35, enacting Ordinance No. 8 in 1974,
establishing the Bayambang Fishery and Hunting Park and Municipal Water Shed,
embracing the vast area of the Mangabul Fisheries (2061 hectates with 19
fishponds, and 1500 hectares of watershed area). In the same ordinance, the
Municipality designated private respondent Atty. Geruncio Lacuesta as the
Manager-Administrator for a period of 25 years, renewable for another 25 years,
under the condition that he should pay the Municipality a sum of 10% of the annual
gross income from the sale of forest products, wild game and fish, which shall not
be less than P200,000. The ordinance was approved by the Provincial Board and
was forwarded to the Secretary of Agriculture and Natural Resources (Secretary)
pursuant to Fisheries Act. No. 4003. However, the Secretary disapproved the
ordinance (after the lapse of 30 days from submission) because it grants fishery
privileges to Lacuesta without the competitive public bidding in contravention to
the provision of the Fisheries Act. The Municpality informed Lacuesta of the
disapproval and asked the latter to desist from acting as the Manager-Administrator
of the subject land. Thus, the Mangabul Fisheries was opened to a public bidding,
the winning bidders therein were petitioner spouses in this case. Several procedural
issues further complicated the case, before it reached the Supreme Court for
review.
Issue and Ruling:
(1) W/N Municipal Ordinance No. 8 was valid
Negative; Through the maze and muddle of this protracted legal controversy, it is
plain and clear that the complaints and petitions including all legal incidents and
motions filed in the trial court, the appellate court and before this Tribunal are
traceable in origin to the enactment and implementation of Municipal Ordinance
No. 8, series of 1974, of the Municipality of Bayambang, Pangasinan, establishing
the Bayambang Fishery & Hunting Park and Municipal Watershed coveting the so-
called Mangabul Fisheries. As stated in Section of the Ordinance, the purposes of
the Park are: 1. To attract tourists to Bayambang and thus increase the income of
the municipality and create new employment and new sources of income for the
people; 2. To restore and conserve the natural environment of the area by means of
reforestation of the forest or timberland reserved, thru engineering works, and
other means within the Ipd-92 area; 3. To restore or improve, conserve and develop
UC School of Law
Law on Public Corporations
the fisheries, zones, and exploit the fish resources of all the fisheries therein; 4. To
supply agro-industrial enterprises that may be established in Bayambang with raw
materials from the area; and 5. To provide sports and recreation facilities and
wholesome sports and recreational activities for the people.
Further, under the Ordinance, the Municipality designated, appointed and
constituted private respondent Lacuesta as Manager-Administrator for a period of
twenty-five (25) years, renewable for another twenty-five (25) years upon mutual
agreement (Section 4). Among the powers, duties and obligations of the Manager-
Administrator are: 1. To reforest with woods or economic value all the timberland
portions indicated in Plan Ipd-92 and those that need to be reforested for ecological
purposes; 2. To stock the forest with wildlife or economic value, protect the forest
products and wildlife and regulate their multiplication in accordance with existing
laws; 3. To deepen the fisheries, swamps and tributary streams by dredging,
employing modern scientific and technological methods to restore or improve and
develop the fisheries to increase the fees yield; 4. To conduct and regulate sports
fishing and hunting in the park and collect fees therefrom; 5. To use or dispose of
the fisheries portion in accordance with the general law on municipal waters; 6. To
establish in a suitable site within the park a fishing and hunting camp to be called
"Camp Imelda." In Section 7 of the Ordinance, the Manager-Administrator shall pay
to the municipal government the sum equivalent to ten (10%) percent of the annual
gross income derived from an fees charged for fishing and hunting in the park and
entry into Camp Imelda, from the sale of forest products, wild games and fish from
the area, but not less than P200,000.00.
In accordance with the Ordinance, a Contract of Management and Administration
was executed by the Municipality, represented by its Municipal Mayor as the
Usufructuary and Atty. Geruncio Lacuesta as the Manager-Administrator, setting
forth therein the terms and conditions laid down in the Ordinance as well as the
mode and manner of the payment of the sum of P200,000.00 annually due to the
Municipality including the posting of a surety bond and other details of the
management and administration of the fisheries by the Manager-Administrator,
which contract was executed on January 28, 1975 at Bayambang, Pangasinan.
Thus, the validity or legality of the Municipal Ordinance in question is the crucial
and vital issue that must be resolved once and for all to put an end to this raging
litigation that has become the tug-of-war between the Municipality and Lacuesta,
together with other interested parties, over the vast and rich fishing grounds. In
resolving said issue and ultimately the very root of the conflict, the following
undisputed facts are controlling and decisive: 1. That Municipal Ordinance No. 8 has
been disapproved by the Secretary of Agriculture and Natural Resources; and 2.
That private respondent has since died as shown in the Return of the Postmaster of
Bayambang as noted in Our Resolution of July 2, 1984.
by NY-YO
2020-2021
Ordinance No. 8, having been submitted to the Provincial Board of Pangasinan and
approved by it by virtue of Resolution No. 171 dated October 11, 1974, the same
was submitted to the Secretary of Agriculture & Natural Resources as required by
Section 4 of Act No. 4003, The Fisheries Act, as amended by Commonwealth Act No.
471 passed June 16, 1939, and further amended by RA No. 659 approved June 16,
1951, thus:
Sec. 4. Instructions, orders, rules and regulations. The Secretary of
Agriculture and Commerce shall from time to time issue instructions,
orders, rules and regulations consistent with this Act, as may be necessary
and proper to carry into effect the provisions thereof and for the conduct
of proceedings arising under such provisions; and all licenses, permits,
leases and contracts issued, granted or made herein shall be subject to the
same.
All ordinances, rules or regulations pertaining to fishing or fisheries
promulgated or enacted by provincial boards, municipal boards or
councils, or municipal district councils shall be submitted to the Secretary
of Agriculture and Commerce for approval and shall have full force and
effect unless notice in writing of their disapproval is communicated by the
secretary to the board or council concerned within thirty days after
submission of the ordinance, rule, or regulation.
From the evidence on record, it appears that a Master Plan for the Bayambang
Fishing and Hunting Park and Municipal Watershed (Mangabul Fisheries
Reservation) of Atty. Geruncio Lacuesta, Manager-Administrator of the said park,
was submitted to the Bureau of Fisheries and Aquatic Resources. In the
Indorsement of the Director of Fisheries & Aquatic Resources to the Secretary,
Department of Natural Resources, the Comments, among others, state: "2. Records
of this bureau show that Resolution No. 171, s. 174 of the Provincial Board of
Pangasinan, embodying Resolution No. 35, s. 1974, enacting Ordinance No. 8, s.
1974 of the Municipal Council of Bayambang, Pangasinan and Resolution No. 24, s.
1975 of the same council requesting reconsideration and rectification of the 5th
Indorsement of that department dated April 4, 1975, were returned DISAPPROVED
and denied, respectively, by the Secretary of Natural Resources to the Municipal
Council of Bayambang, Pangasinan .
Upon the recommendation of the Director of Fisheries and Aquatic Resources that
"In the light, therefore, of the foregoing, the Master Plan for the Bayambang Fishing
and Hunting Park and Municipal Watershed (Mangabul Fisheries Reservation),
insofar as fishing and fisheries thereat are concerned should not be given due
course and should be DISAPPROVED in the absence of adequate provisions thereon
to the effect that the grant of the exclusive fishery privileges within its municipal
UC School of Law
Law on Public Corporations
waters shall be granted by the municipal council (now sangguniang bayan) to the
highest bidder conformable with a fishery ordinance duly approved by the
Secretary of Natural Resources, pursuant to Sections 5, 67 and 69 of Act No. 4003,
as amended (now sections 4, 29 and 30 of Presidential Decree No. 704)," the
Secretary of the Department of Natural Resources disapproved the Master Plan.
The legal basis for the disapproval of the Ordinance No. 8 and the Master Plan
mentioned above is clear and explicit in Sections 4, 67 and 69 of Act No. 4003 as
amended by PD 704, Revising and Consolidating All Laws and Decrees Affecting
Fishing and Fisheries. These Sections provide:
Sec. 4. Jurisdiction of the Bureau. — The Bureau shall have jurisdiction and
responsibility in the management, conservation, development, protection,
utilization and disposition of an fishery and aquatic resources of the
country except municipal waters which shall be under the municipal or city
government concerned: Provided, That fish pens and seaweed culture in
municipal centers shall be under the jurisdiction of the Bureau: Provided,
further, That all municipal or city ordinances and resolutions affecting
fishing and fisheries and any disposition thereunder shall be submitted to
the Secretary for appropriate action and shall have full force and effect
only upon his approval. The Bureau shall also have the authority to
regulate and supervise the production, capture and gathering of fish and
fishery/aquatic products.
The Bureau shall prepare and implement, upon approval of the Fishery
Industry Development Council, a Fishery Industry Development Program.
Section 29. Grant of Fishery Privileges. — A municipal or city council,
conformably with an ordinance duly approved by the Secretary pursuant
to section 4 hereof, may: (a) grant to the highest qualified bidder the
exclusive privilege of construction and operating fish corrals, oyster culture
beds, or of gathering "bangus" fry, or the fry of other species in municipal
waters for a period not exceeding five (5) years: ...
Section 30. Municipal concessions and leases concerning fisheries. — Lease
or concession granted by a municipal or city council under authority of an
ordinance approved pursuant to section 4 hereof, concerning fishing or
fisheries in streams, lakes, rivers, in land and/or municipal waters, shall be
valid and enforceable unless the Secretary, upon recommendation of the
Director, approves the same.
Indeed, the Ordinance is clearly against the provisions of the law for it granted
exclusive fishery privileges to the private respondent without benefit of public
by NY-YO
2020-2021
bidding. Under the Fisheries Act, the Municipality may not delegate to a private
individual as Manager-Administrator to "use or dispose of the fisheries portion in
accordance with the general law on municipal waters" nor to charge fees for fishing
and hunting in the park, much less sell forest products, wild games and fish from
the area.
Neither can the Municipality grant the exclusive privilege of fishing for a period
more than five (5) years, whereas in the instant case, the period granted the
Manager-Administrator was for twenty-five (25) years, renewable for another
twenty-five years.
Moreover, under the specific provision of Act No. 4041, there is the proviso that the
timber and other forest products therein shall be placed under the administration
and control of the forest service so that insofar as the ordinance relates to the
timber and other forest products and the reforestation of the timberland portions
indicated in Plan Ipd-92 including the powers, duties and responsibilities of the
Manager-Administrator affecting the forestry portions are violative of Act No. 4041.
It is of no moment that at the pre-trial hearing of Civil Case No. SCC-648 the parties
had admitted the legality of Ordinance No. 8. The issue as to the legality of
Ordinance No. 8 is not a question of fact that the parties may stipulate and agree at
the pre-trial hearing of the case which is for annulment of the contract under
Ordinance No. 8. Such is a question of law for if the Ordinance is illegal and contrary
to law, the contract executed in pursuance thereto is consequently illegal. Acts
executed against the provisions of mandatory or prohibitory laws shall be void,
except when the law itself authorizes their validity. (Art. 5, New Civil Code).
From Our jurisprudence, We cite a number of cases ruling that a public bidding is
essential to the validity of the grant of exclusive privilege of fishery to a private
party, thus:
The law (Sec. 2323 of the Revised Administrative Code) requires that when
the exclusive privilege of fishery or the right to conduct a fish-breeding
ground is granted to a private party, the same shall be let to the highest
bidder in the same manner as is being done in exploiting a ferry, a market
or a slaughter house belonging to the municipality. The requirement of
competitive bidding is for the purpose of inviting competition and to guard
against favoritism, fraud and corruption in letting of fishery privileges.
It may thus be restated that the law that governs the award of fishery
privileges in municipal waters is the provisions of Section 67 and 69 of Act
No. 4003, as amended by Commonwealth Acts Nos. 115 and 471. The
provisions of Sections 2321, 2323 and 2319 of the Revised Administrative
UC School of Law
Law on Public Corporations
Code of 1917 have thereby been modified by Act 4003, as amended. Under
the applicable law the Municipal Council may lease fishery privileges for a
period not exceeding five years to the highest bidder in a public bidding
held, where the call for bid had specified the period for the lease.
The Municipal Council cannot extend the period of lease once it had been
fixed on the basis of the period provided in the call for bids. In the lease of
fishery privileges for a period not exceeding five years the previous
approval of the provincial Board is not necessary. If the lease is for a period
of more than five years, but not exceeding ten years, the previous approval
of the Provincial Board is necessary. If the lease is for a period exceeding
ten years, but not more than twenty years, the prior approval of the
Secretary of Agriculture and Natural Resources is necessary. In all cases the
lease must be based on a competitive public bidding.
(2) W/N the inaction (to approve/disapprove) of the Secretary after the lapse
of 30 days from the submission of the ordinance rendered the same valid
Negative; [I]n the case of Nepomuceno, et al. vs. Ocampo, et al., supra, wherein We
held that the only purpose in the enactment of Republic Act 659 which required the
Secretary of Agriculture and Natural Resources to approve municipal ordinances
pertaining to fishing or fisheries within 30 days after submission of the ordinance,
rule or regulation is simply to expedite prompt action by the Department Chief
concerned. Since Ordinance No. 8 granted fishery privileges exclusively to the
private respondent without benefit of public bidding and for a period exceeding five
(5) years, the said ordinance and the contract of management executed in
accordance therewith were null and void ab initio, such that the failure of the
Secretary of Agriculture & Natural Resources to disapprove the same within 30 days
from its submission does not render validity to the illegal legislation of the
municipal council nor to the contract executed under the same.
From the foregoing conclusion that the ordinance is illegal and void, per force the
contract of management and administration between the Municipality and
Lacuesta is likewise null and void. It also follows that the complaint filed by Lacuesta
for prohibition in Civil Case No. 516 to enjoin the Municipal Council of Bayambang
from leasing the Mangabul Fisheries upon public bidding as authorized in its
Resolution' No. 31, series of 1977 is without legal basis and merit for Lacuesta has
no right or interest under the void ordinance and contract. The suit must be
dismissed and We hereby order its immediate dismissal.
We have noted earlier the death of Lacuesta in Our Resolution of July 2, 1984. His
death is an irreversible fact that throws an entirely new bearing on the legal
controversy at hand. For essentially, the contract of management and
by NY-YO
2020-2021
administration between the Municipality and Lacuesta is one of agency whereby a
person binds himself to render some service or to do something in representation
or on behalf of another, with the consent or authority of the latter. (Article 1868,
New Civil Code). Here in the case at bar, Lacuesta bound himself as Manager-
Administrator of the Bayambang Fishing & Hunting Park and Municipal Watershed
to render service or perform duties and responsibilities in representation or on
behalf of the Municipality of Bayambang, with the consent or authority of the latter
pursuant to Ordinance No. 8. Under Article 1919, New Civil Code, agency is
extinguished by the death of the agent. His rights and obligations arising from the
contract are not transmittable to his heirs. (Art. 1311 , New Civil Code).

Petitioners in both cases before Us, G.R. No. 58794 and G.R. No. 64489, anchor
their claims to certain portions of the Mangabul Fisheries which they allege to have
won in public bidding under the authority of Resolution No. 31, series of 1977 of the
Municipal Council of Bayambang which leased the fisheries for a four-year period.
The period has already lapsed, hence their fishing privilege is no longer effective as
of June 30, 1981. To restore and place petitioners in possession of the fisheries
would be an extension of their four-year period lease which is not authorized under
the ordinance cited above.

Nonetheless, the assailed order of Judge Villalon dated September 3, 1983 restoring
possession of the fisheries to Lacuesta and his men which was issued after her relief
from the case upon her own request is clearly irregular and without authority.
There should be and there ought to be full obedience and compliance by a
subordinate court of the orders and resolutions of this Court. There cannot be any
iota of discipline much less efficiency in the administration of justice if the lower
echelons in the judicial hierarchy can freely act as they wish inspire of their relief.
This should be a stem warning to all judges and personnel in all the courts.

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 Philippine Gamefowl Commission, et al. v. IAC
Facts:
Hee Acusar was ordered to relocate the lone cockpit in Bogo that he operated
pursuant to PD No. 449 (Cockfighting Law of 1974), on the ground that it was
situated in a tertiary commercial zone, a prohibited area. As a result of Acusar’s
failure to comply with the requirement, the Philippine Constabulary considered the
cockpit phased out. Additionally, in a petition to compel the municipal mayor to
issue Acusar a permit to operate a cockpit, the CFI declared that he had waived his
right to a renewal thereof because of his failure to relocate. Thereafter, private
respondent Santiago Sevilla was granted a license to operate a cockpit by Mayor
Celestino Martinez by the Sangguniang Bayan of Bogo and with subsequent
approval of the PC Regional Command 7 as required by law. Acusar sued to revoke
his license, as only one cockpit is allowed by law in cities or municipalities with a
population of not more than 100K. He, however, failed. Acusar went to the
Philippine Gamefowl Commission (PGC) seeking renewal of his cockpit license and
the cancellation of Sevilla’s. He succeeded initially with the issuance of the by the
PGC of an interlocutory order allowing him to temporarily operate his cockpit. This
was challenged in two separate actions filed by Sevilla and the municipal
government of Bogo, which were temporarily restrained by the IAC on petition of
Acusar.
The PGC later issued its resolution on the merits of Acusar’s petition and ordered
Mayor Martinez and the Sangguniang Bayan to issue the necessary mayor’s permit
in favor of Acusar and to cancel and/or revoke the mayor’s permit in favor of
Seviila. Said resolution was declared null and void by the IAC. Hence, this petition.
Issues and Ruling:
(1) W/N the PGC has the power to issue licenses for the operation of cockpits
Negative; We shall first compare the powers vested respectively in the Philippine
Gamefowl Commission and the city and municipal officials under the applicable
laws, to wit, P.D. 1802, P.D. 1802-A and the Local Government Code.
The pertinent powers of the Philippine Gamefowl Commission under Section 2 of
P.D. 1802, which became effective on January 16, 1981, are the following:
UC School of Law
Law on Public Corporations
a) Promulgate and enforce rules and regulations relative to the holding of
cockfight derbies and cockfights in the Philippines including the frequency
sites, conduct and operation of such derbies and cockfights;
b) Issue licenses for the holding of international derbies;
c) xxx
d) Fix and periodically revise whenever necessary, subject to the approval of
the Ministry of Finance, the rates of license fees and other levies that may
be imposed on local derbies and cockfights and international cockfight
derbies, cockpit personnel and employees;
e) To promulgate rules and regulations relative to the holding, methods,
procedures, operations and conduct of cockfighting in general as well as
accreditation of cockpit personnel and association of cockpit owners,
operators and lessees, to elevate the standard of cockfighting; x x x
By contrast, P.D. 1802, as amended by P.D. 1802-A, provides as follows:
SECTION 1. Section 4 of Presidential Decree No. 1802 is hereby amended
to read as follows:
Sec. 4. City and Municipal Mayors with the concurrence of their respective
"Sanggunians" shall have the authority to license and regulate regular
cockfighting pursuant to the rules and regulations promulgated by the
Commission and subject to its review and supervision.
According to the Local Government Code, the municipal mayor has the power to
"grant licenses and permits in accordance with existing laws and municipal
ordinances and revoke them for violation of the conditions upon which they have
been granted," and the Sangguniang Bayan is authorized to "regulate cockpits,
cockfighting and the keeping or training of gamecocks, subject to existing guidelines
promulgated by the Philippine Gamefowl Commission."
A study of the above-cited powers shows that it is the municipal mayor with the
authorization of the Sangguniang Bayan that has the primary power to issue
licenses for the operation of ordinary cockpits. Even the regulation of cockpits is
vested in the municipal officials, subject only to the guidelines laid down by the
Philippine Gamefowl Commission. Its power to license is limited only
to international derbies and does not extend to ordinary cockpits. Over the latter
kind of cockpits, it has the power not of control but only of review and supervision.
We have consistently held that supervision means "overseeing or the power or
authority of an officer to see that their subordinate officers perform their duties. If
by NY-YO
2020-2021
the latter fail or neglect to fulfill them, the former may take such action or steps as
prescribed by law to make them perform their duties." Supervision is a lesser power
than control, which connotes "the power of the officer to alter or modify or set
aside what a subordinate had done in the performance of his duties and to
substitute the judgment of the former for that of the latter. " Review, on the other
hand, is a reconsideration or reexamination for purposes of correction.
As thus defined, the power of supervision does not snow the supervisor to annul
the acts of the subordinate, for that comes under the power of control. What it can
do only is to see to it that the subordinate performs his duties in accordance with
law. The power of review is exercised to determine whether it is necessary to
correct the acts of the subordinate. If such correction is necessary, it must be done
by the authority exercising control over the subordinate or through the
instrumentality of the courts of justice, unless the subordinate motu
proprio corrects himself after his error is called to his attention by the official
exercising the power of supervision and review over him.
At that, even the power of review vested in the Philippine Gamefowl Commission
by P.D. 1802-A may have been modified by the Local Government Code, which
became effective on February 14, 1983. Under the Code, the Sangguniang
Panlalawigan is supposed to examine the ordinances, resolutions and executive
orders issued by the municipal government and to annul the same, but only on one
ground, to wit, that it is beyond the powers of the municipality or ultra
vires. Significantly, no similar authority is conferred in such categorical terms on the
Philippine Gamefowl Commission regarding the licensing and regulation of cockpits
by the municipal government.
The conferment of the power to license and regulate municipal cockpits in the
municipal authorities is in line with the policy of local autonomy embodied in Article
II, Section 10, and Article XI of the 1973 Constitution. It is also a recognition, as the
Court of Appeals correctly points out, of the superior competence of the municipal
officials in dealing with this local matter with which they can be expected to be
more knowledgeable than the national officials. Surely, the Philippine Gamefowl
Commission cannot claim to know more than the municipal mayor and the
Sangguniang Bayan of Bogo, Cebu, about the issues being disputed by the
applicants to the cockpit license.
UC School of Law
Law on Public Corporations
At any rate, assuming that the resolution of the Sangguniang Bayan authorizing the
issuance of a cockpit license to Sevilla was subject to reversal by the PGC, such
action could be justified only if based upon a proven violation of law by the
municipal officials. It may not be made only for the purpose of substituting its own
discretion for the discretion exercised by the municipal authorities in determining
the applicant to which the lone cockpit license should be issued.
In the absence of a clear showing of a grave abuse of discretion, the choice of the
municipal authorities should be respected by the PGC and in any event cannot be
replaced by it simply because it believes another person should have been selected.
Stated otherwise, the PGC cannot directly exercise the power to license cockpits
and in effect usurp the authority directly conferred by law on the municipal
authorities.
If at all, the power to review includes the power to disapprove; but it does not carry
the authority to substitute one's own preferences for that chosen by the
subordinate in the exercise of its sound discretion. In the instant case, the PGC did
not limit itself to vetoing the choice of Sevilla, assuming he was disqualified, but
directly exercised the authority of replacing him with its own choice. Assuming
Sevilla was really disqualified, the choice of his replacement still remained with the
municipal authorities, subject only to the review of the PGC.
In ordering the respondent municipal officials to cancel the mayor's permit in favor
of Santiago A. Sevilla and to issue another one in favor of Acusar, the PGC was
exercising not the powers of mere supervision and review but the power of control,
which had not been conferred upon it.
(2) W/N the license of Acusar was correctly revoked
Affirmative; It appearing that they are supported by substantial evidence, we
accept the factual findings of the respondent court that Acusar's cockpit was within
the prohibited area and was therefore correctly considered phased out when its
operator failed to relocate it as required by law. According to the Court of Appeals,
"it is not controverted that Acusar's cockpit is near a Roman Catholic church near
the Cebu Roosevelt Memorial College, near residential dwellings and near a public
market." These circumstances should be more than enough to disqualify Acusar
even under the prior-operator rule he invokes, assuming that rule was applicable.
by NY-YO
2020-2021
Under that rule, preference is given to the actual holder of the permit, but in the
instant case Acusar could not be said to be actually holding the permit at the time it
was given to Sevilla. Acusar had then already forfeited his right to renew it by
reason of his non-compliance with the requirement to relocate.

This is as good an occasion as any to stress the commitment of the Constitution to

the policy of local autonomy which is intended to provide the needed impetus and
encouragement to the development of our local political subdivisions as "self-
reliant communities." In the words of Jefferson, "Municipal corporations are the
small republics from which the great one derives its strength." The vitalization of
local governments will enable their inhabitants to fully exploit their resources and,
more important, imbue them with a deepened sense of involvement in public
affairs as members of the body politic. This objective could be blunted by undue
interference by the national government in purely local affairs which are best
resolved by the officials and inhabitants of such political units. The decision we
reach today conforms not only to the letter of the pertinent laws but also to the
spirit of the Constitution.

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 De la Cruz, et al. v. Hon. Edgardo L. Paras, et al.
Facts:
Petitioners are owners/ operators of night clubs in Bocaue, Bulacan. Ordinance No.
84 prohibited the operation of night clubs, and the employment of hostesses. Two
cases for prohibition with preliminary injunction were filed on the ground that (1)
said ordinance is null and void, as a municipality has no authority to prohibit a
lawful business occupation or calling; (2) said ordinance is violative of petitioner’s
right to due process and equal protection of the law, as the license previously given
to petitioners was in effect withdrawn without judicial hearing; and (3) that under
PD No. 189, the power to license and regulate tourist-oriented businesses including
night clubs has been transferred to the Department of Tourism. Respondents’
answer alleged that (1) the municipal council is authorized by law not only to
regulate but to prohibit the establishment, maintenance and operation of night
clubs; (2) the ordinance is not violate of due process and equal protection of law
since property rights are subordinate to public interest; (3) that PD No. 189 did not
deprive Municipal Councils of their jurisdiction to regulate or prohibit night clubs. A
decision was rendered upholding the constitutionality and validity of Ordinance No.
84 and dismissing the cases. Hence, this petition.
Issue and Ruling: W/N a municipal corporation can prohibit the exercise of a lawful
trade and the pursuit of a lawful occupation
Negative; 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." This Court is, however, unable to agree with such a conclusion and for
UC School of Law
Law on Public Corporations
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.
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." It is practically a
reproduction of the former Section 39 of Municipal Code. An ordinance enacted by
virtue thereof, according to Justice Moreland, speaking for the Court in the leading
case of United States v. Abendan "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."
In another leading case, United States v. Salaveria, 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 powers and purposes of the corporation, and not
inconsistent with the laws or policy of the State."
by NY-YO
2020-2021
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 law-making 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." 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.
The decision now under review refers to Republic Act No. 938 as amended. 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.' 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: ... "
Then on May 21, 1954, the first section was amended to include not merely "the
power to regulate, but likewise "Prohibit ..." 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
UC School of Law
Law on Public Corporations
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. " 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, in the language of the Administrative Code, such competence
extending to all "the great public needs, 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.
There is reinforcement to the conclusion reached by virtue of a specific provision of
the recently-enacted Local Government Code. 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; ..." 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; ..."
by NY-YO
2020-2021
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.

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. 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.

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 City Government of Quezon City v. Hon. Judge Vicente G. Ericta, et al.
Facts:
Section 9 of Ordinance No. 6118 which regulates the establishment, maintenance
and operation of private memorial type cemetery, provides that at least 6% of the
total area of the memorial park cemetery shall be set aside for charity burial of
deceased persons who are paupers and have been residents of Quezon City for at
least 5 years prior to death to be determined by competent city authorities. For
several years, said provision was not enforced by city authorities. Seven years after
its enactment, a resolution was passed requesting the City Engineer to stop any
further selling/ transaction of memorial park lots in Quezon City where the owners
thereof have failed to donate the required 6% space intended for paupers burial.
Respondent Himlayang Pilipino, Inc. then filed a petition for declaratory relief,
prohibition and mandamus with preliminary injunction seeking to annul Section 9,
for being contrary to the Constitution, the Quezon City Charter, the Local Autonomy
Act and the Revised Administrative Code. Respondent court rendered the decision
declaring Section 9 of Ordinance No. 6118 void.
In this petition, petitioners argue that the taking of the respondent’s property is
valid and reasonable exercise of police power and that the land is taken for a public
use as it is intended for the burial ground of paupers. Respondent, on the other
hand, contends that the ordinance permanently restricts the use of the property
such that it cannot be used for any reasonable purpose and deprives the owner of
all beneficial use of his property.
Issue and Ruling: W/N Section 9 of the ordinance is a valid exercise of police power
Negative; We find the stand of the private respondent as well as the decision of the
respondent Judge to be well-founded. We quote with approval the lower court's
ruling which declared null and void Section 9 of the questioned city ordinance:
An examination of the Charter of Quezon City (Rep. Act No. 537), does not
reveal any provision that would justify the ordinance in question except
the provision granting police power to the City. Section 9 cannot be
justified under the power granted to Quezon City to tax, fix the license fee,
and regulate such other business, trades, and occupation as may be
established or practised in the City.' (Subsections 'C', Sec. 12, R.A. 537).
UC School of Law
Law on Public Corporations
The power to regulate does not include the power to prohibit. A fortiori,
the power to regulate does not include the power to confiscate. The
ordinance in question not only confiscates but also prohibits the operation
of a memorial park cemetery, because under Section 13 of said ordinance,
'Violation of the provision thereof is punishable with a fine and/or
imprisonment and that upon conviction thereof the permit to operate and
maintain a private cemetery shall be revoked or cancelled.' The
confiscatory clause and the penal provision in effect deter one from
operating a memorial park cemetery.
Neither can the ordinance in question be justified under sub- section "t",
Section 12 of Republic Act 537 which authorizes the City Council to-
'prohibit the burial of the dead within the center of population of the city
and provide for their burial in such proper place and in such manner as the
council may determine, subject to the provisions of the general law
regulating burial grounds and cemeteries and governing funerals and
disposal of the dead.' (Sub-sec. (t), Sec. 12, Rep. Act No. 537).
There is nothing in the above provision which authorizes confiscation or as
euphemistically termed by the respondents, 'donation'.
We now come to the question whether or not Section 9 of the ordinance in
question is a valid exercise of police power. The police power of Quezon
City is defined in sub-section 00, Sec. 12, Rep. Act 537 which reads as
follows:
(00) To make such further ordinance and regulations not repugnant to law
as may be necessary to carry into effect and discharge the powers and
duties conferred by this act and such as it shall deem necessary and proper
to provide for the health and safety, promote, the prosperity, improve the
morals, peace, good order, comfort and convenience of the city and the
inhabitants thereof, and for the protection of property therein; and
enforce obedience thereto with such lawful fines or penalties as the City
Council may prescribe under the provisions of subsection (jj) of this
section.
We start the discussion with a restatement of certain basic principles.
Occupying the forefront in the bill of rights is the provision which states
by NY-YO
2020-2021
 that 'no person shall be deprived of life, liberty or property without due
process of law' (Art. Ill, Section 1 subparagraph 1, Constitution).
On the other hand, there are three inherent powers of government by
which the state interferes with the property rights, namely-. (1) police
power, (2) eminent domain, (3) taxation. These are said to exist
independently of the Constitution as necessary attributes of sovereignty.
Police power is defined by Freund as 'the power of promoting the public
welfare by restraining and regulating the use of liberty and property'
(Quoted in Political Law by Tanada and Carreon, V-11, p. 50). It is usually
exerted in order to merely regulate the use and enjoyment of property of
the owner. If he is deprived of his property outright, it is not taken for
public use but rather to destroy in order to promote the general welfare.
In police power, the owner does not recover from the government for
injury sustained in consequence thereof. It has been said that police power
is the most essential of government powers, at times the most insistent,
and always one of the least limitable of the powers of government This
power embraces the whole system of public regulation. The Supreme
Court has said that police power is so far-reaching in scope that it has
almost become impossible to limit its sweep. As it derives its existence
from the very existence of the state itself, it does not need to be expressed
or defined in its scope. Being coextensive with self-preservation and
survival itself, it is the most positive and active of all governmental
processes, the most essential insistent and illimitable. Especially it is so
under the modern democratic framework where the demands of society
and nations have multiplied to almost unimaginable proportions. The field
and scope of police power have become almost boundless, just as the
fields of public interest and public welfare have become almost all
embracing and have transcended human foresight. Since the Courts cannot
foresee the needs and demands of public interest and welfare, they cannot
delimit beforehand the extent or scope of the police power by which and
through which the state seeks to attain or achieve public interest and
welfare. (Ichong vs. Hernandez, L-7995, May 31, 1957).
The police power being the most active power of the government and the
due process clause being the broadest station on governmental power, the
UC School of Law
Law on Public Corporations
conflict between this power of government and the due process clause of
the Constitution is oftentimes inevitable.
It will be seen from the foregoing authorities that police power is usually
exercised in the form of mere regulation or restriction in the use of liberty
or property for the promotion of the general welfare. It does not involve
the taking or confiscation of property with the exception of a few cases
where there is a necessity to confiscate private property in order to
destroy it for the purpose of protecting the peace and order and of
promoting the general welfare as for instance, the confiscation of an
illegally possessed article, such as opium and firearms.
It seems to the court that Section 9 of Ordinance No. 6118, Series of 1964
of Quezon City is not a mere police regulation but an outright confiscation.
It deprives a person of his private property without due process of law,
nay, even without compensation.
In sustaining the decision of the respondent court, we are not unmindful of the
heavy burden shouldered by whoever challenges the validity of duly enacted
legislation whether national or local As early as 1913, this Court ruled in Case v.
Board of Health (24 Phil. 250) that the courts resolve every presumption in favor of
validity and, more so, where the ma corporation asserts that the ordinance was
enacted to promote the common good and general welfare.
In the leading case of Ermita-Malate Hotel and Motel Operators Association Inc. v.
City Mayor of Manila (20 SCRA 849) the Court speaking through the then Associate
Justice and now Chief Justice Enrique M. Fernando stated
Primarily what calls for a reversal of such a decision is the a of any
evidence to offset the presumption of validity that attaches to a statute or
ordinance. As was expressed categorically by Justice Malcolm 'The
presumption is all in favor of validity. ... The action of the elected
representatives of the people cannot be lightly set aside. The councilors
must, in the very nature of things, be familiar with the necessities of their
particular ... municipality and with all the facts and lances which surround
the subject and necessitate action. The local legislative body, by enacting
the ordinance, has in effect given notice that the regulations are essential
to the well-being of the people. ... The Judiciary should not lightly set aside
by NY-YO
2020-2021
 legislative action when there is not a clear invasion of personal or property
rights under the guise of police regulation. (U.S. v. Salaveria (1918], 39 Phil.
102, at p. 111. There was an affirmation of the presumption of validity of
municipal ordinance as announced in the leading Salaveria decision in
Ebona v. Daet, [1950]85 Phil. 369.)
We have likewise considered the principles earlier stated in Case v. Board of
Health supra :
... Under the provisions of municipal charters which are known as the
general welfare clauses, a city, by virtue of its police power, may adopt
ordinances to the peace, safety, health, morals and the best and highest
interests of the municipality. It is a well-settled principle, growing out of
the nature of well-ordered and society, that every holder of property,
however absolute and may be his title, holds it under the implied liability
that his use of it shall not be injurious to the equal enjoyment of others
having an equal right to the enjoyment of their property, nor injurious to
the rights of the community. Any property in the state is held subject to its
general regulations, which are necessary to the common good and general
welfare. Rights of property, like all other social and conventional rights, are
subject to such reasonable limitations in their enjoyment as shall prevent
them from being injurious, and to such reasonable restraints and
regulations, established by law, as the legislature, under the governing and
controlling power vested in them by the constitution, may think necessary
and expedient. The state, under the police power, is possessed with
plenary power to deal with all matters relating to the general health,
morals, and safety of the people, so long as it does not contravene any
positive inhibition of the organic law and providing that such power is not
exercised in such a manner as to justify the interference of the courts to
prevent positive wrong and oppression.
but find them not applicable to the facts of this case.
There is no reasonable relation between the setting aside of at least six (6) percent
of the total area of an private cemeteries for charity burial grounds of deceased
paupers and the promotion of health, morals, good order, safety, or the general
welfare of the people. The ordinance is actually taking without compensation of a
certain area from a private cemetery to benefit paupers who are charges of the
UC School of Law
Law on Public Corporations
municipal corporation. Instead of building or maintaining a public cemetery for this
purpose, the city passes the burden to private cemeteries.
The expropriation without compensation of a portion of private cemeteries is not
covered by Section 12(t) of Republic Act 537, the Revised Charter of Quezon City
which empowers the city council to prohibit the burial of the dead within the center
of population of the city and to provide for their burial in a proper place subject to
the provisions of general law regulating burial grounds and cemeteries. When the
Local Government Code, Batas Pambansa Blg. 337 provides in Section 177 (q) that a
Sangguniang panlungsod may "provide for the burial of the dead in such place and
in such manner as prescribed by law or ordinance" it simply authorizes the city to
provide its own city owned land or to buy or expropriate private properties to
construct public cemeteries. This has been the law and practice in the past. It
continues to the present. Expropriation, however, requires payment of just
compensation. The questioned ordinance is different from laws and regulations
requiring owners of subdivisions to set aside certain areas for streets, parks,
playgrounds, and other public facilities from the land they sell to buyers of
subdivision lots. The necessities of public safety, health, and convenience are very
clear from said requirements which are intended to insure the development of
communities with salubrious and wholesome environments. The beneficiaries of
the regulation, in turn, are made to pay by the subdivision developer when
individual lots are sold to homeowners.
As a matter of fact, the petitioners rely solely on the general welfare clause or on
implied powers of the municipal corporation, not on any express provision of law as
statutory basis of their exercise of power. The clause has always received broad and
liberal interpretation but we cannot stretch it to cover this particular taking.
Moreover, the questioned ordinance was passed after Himlayang Pilipino, Inc. had
incorporated, received necessary licenses and permits, and commenced operating.
The sequestration of six percent of the cemetery cannot even be considered as
having been impliedly acknowledged by the private respondent when it accepted
the permits to commence operations.
by NY-YO
2020-2021
 Velasco, et al. v. Villegas

Facts:
A suit for declaratory relief was filed, challenging the constitutionality of Ordinance
No. 4964 of the City of Manila on the ground that it amounts to a deprivation of
property of petitioners-appellants of their means of livelihood without due process
of law. Said ordinance prohibited any operator of a barber shop to conduct business
of massaging customers or other persons in any adjacent room(s) of said barber
shop. The lower court 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.

Issue and Ruling: W/N the ordinance is valid

Affirmative; 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." This Court has been most liberal in sustaining
ordinances based on the general welfare clause. As far back as U.S. v. Salaveria, 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." As it was then, so it has continued to
be. There is no showing, therefore, of the unconstitutionality of such ordinance.

UC School of Law by NY-YO

Law on Public Corporations 2020-2021
 Ortigas & Co., Limited Partnership v. Feati Bank & Trust Co.
Facts:
Plaintiff is a limited partnership, engaged in real estate business, developing and
selling lots to the public. Plaintiff, as vendor, and Agusto Angeles and Natividad
Angeles, as vendees, entered into separate agreements of sale on installments over
two parcels of land, known as Lot 5 and 6, Block 31 of the Highway Hills Subdivision
in Mandaluyong, Rizal. Later, said vendees transferred their rights and interests
over the lots in favor of one Emma Chavez. Upon completion of the purchase price,
plaintiff executed the corresponding deeds of sale in favor of Emma Chavez. The
agreements contained restrictions that the land shall be used exclusively for
residential purposes and the buyer shall not be entitled to take or remove soil,
stones or gravel from it. The agreements also provided that all constructions must
be of strong materials and shall not be at a distance less than 2 meters from the
boundary lines. Eventually, defendant acquired the two parcels of land with title
issued in its name and the building restrictions annotated therein.
Plaintiff claims that the restrictions annotated were imposed as part of its general
building scheme designed for the development of the Highway Hills Subdivision
which forms part of a big landed estate of plaintiff where commercial and industrial
sites are also designated or established. Defendant, on the other hand, maintains
that the area along the western part of EDSA from Shaw Boulevard to Pasig River
has been declared a commercial and industrial zone, per Resolution No. 27 of the
Municipal Council of Mandaluyong, Rizal. According to defendant, plaintiff sold and
transferred to third persons all lots in said subdivision facing EDSA and the subject
lots were acquired by it more than 2 years after the area had been declared a
commercial and industrial zone.
Defendant commenced construction of a building on Lots 5 and 6, to be devoted to
banking purposes but which defendant claims could also be devoted to and used
exclusively for residential purposes. The following day, plaintiff demanded in writing
that defendant stop the construction of the commercial building of said lots. The
latter refused to comply, contending that the building was constructed in
accordance with the zoning regulations, defendant having filed permit applications
with the Municipality of Mandaluyong. Thus, a complaint was filed seeking the
issuance of a writ of preliminary injunction, restraining and enjoining defendant
from continuing or completing the construction of a commercial bank in the
premises involved. The trial court upheld the defendant and dismissed the
UC School of Law
Law on Public Corporations
complaint, holding that the subject restrictions were subordinate to Municipal
Resolution No. 27. Hence, this appeal.
Issues and Ruling:
(1) W/N Resolution No. 27 is a valid exercise of police power
Affirmative; The contention that the trial court erred in sustaining the validity of
Resolution No. 27 as an exercise of police power is without merit. In the first place,
the validity of the said resolution was never questioned before it. The rule is that
the question of law or of fact which may be included in the appellant's assignment
of errors must be those which have been raised in the court below, and are within
the issues framed by the parties. The object of requiring the parties to present all
questions and issues to the lower court before they can be presented to the
appellate court is to enable the lower court to pass thereon, so that the appellate
court upon appeal may determine whether or not such ruling was erroneous. The
requirement is in furtherance of justice in that the other party may not be taken by
surprise. The rule against the practice of blowing "hot and cold" by assuming one
position in the trial court and another on appeal will, in the words of Elliot, prevent
deception. For it is well-settled that issues or defenses not raised or properly
litigated or pleaded in the Court below cannot be raised or entertained on appeal.
In this particular case, the validity of the resolution was admitted at least impliedly,
in the stipulation of facts below when plaintiff-appellant did not dispute the same.
The only controversy then as stated by the trial court was whether or not the
resolution of the Municipal Council of Mandaluyong ... which declared lots Nos. 4
and 5 among others, as a part of the commercial and industrial zone of the
municipality, prevails over the restrictions constituting as encumbrances on the lots
in question. Having admitted the validity of the subject resolution below, even if
impliedly, plaintiff-appellant cannot now change its position on appeal.
But, assuming arguendo that it is not yet too late in the day for plaintiff-appellant to
raise the issue of the invalidity of the municipal resolution in question, We are of
the opinion that its posture is unsustainable. Section 3 of R.A. No. 2264, otherwise
known as the Local Autonomy Act," empowers a Municipal Council "to adopt zoning
and subdivision ordinances or regulations"; for the municipality. Clearly, the law
does not restrict the exercise of the power through an ordinance. Therefore,
granting that Resolution No. 27 is not an ordinance, it certainly is a regulatory
by NY-YO
2020-2021
measure within the intendment or ambit of the word "regulation" under the
provision. As a matter of fact the same section declares that the power exists "(A)ny
provision of law to the contrary notwithstanding ... "
An examination of Section 12 of the same law which prescribes the rules for its
interpretation likewise reveals that the implied power of a municipality should be
"liberally construed in its favor" and that "(A)ny fair and reasonable doubt as to the
existence of the power should be interpreted in favor of the local government and
it shall be presumed to exist." The same section further mandates that the general
welfare clause be liberally interpreted in case of doubt, so as to give more power to
local governments in promoting the economic conditions, social welfare and
material progress of the people in the community. The only exceptions under
Section 12 are existing vested rights arising out of a contract between "a province,
city or municipality on one hand and a third party on the other," in which case the
original terms and provisions of the contract should govern. The exceptions, clearly,
do not apply in the case at bar.
(2) W/N Resolution No. 27 can supersede the contractual obligations assumed
by defendant
Affirmative; 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. Bengzon 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
UC School of Law
Law on Public Corporations
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, s-1960 declaring the western part of highway 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.
The scope of police power keeps expanding as civilization advances, stressed this
Court, speaking thru Justice Laurel in the leading case of Calalang v. Williams et
al., Thus-
As was said in the case of Dobbins v. Los Angeles (195 US 223, 238 49 L. ed.
169), 'the right to exercise the police power is a continuing one, and a
business lawful today may in the future, because of changed situation, the
growth of population or other causes, become a menace to the public
health and welfare, and be required to yield to the public good.' And in
People v. Pomar (46 Phil. 440), it was observed that 'advancing civilization
is bringing within the scope of police power of the state today things which
were not thought of as being with in such power yesterday. The
development of civilization), the rapidly increasing population, the growth
of public opinion, with an increasing desire on the part of the masses and
of the government to look after and care for the interests of the individuals
of the state, have brought within the police power many questions for
regulation which formerly were not so considered.
by NY-YO
2020-2021
Thus, the state, in order to promote the general welfare, may interfere with
personal liberty, with property, and with business and occupations. Persons may be
subjected to all kinds of restraints and burdens, in order to secure the general
comfort health and prosperity of the state and to this fundamental aim of our
Government, the rights of the individual are subordinated.
The need for reconciling the non-impairment clause of the Constitution and the
valid exercise of police power may also be gleaned from Helvering v. Davis wherein
Mr. Justice Cardozo, speaking for the Court, resolved the conflict "between one
welfare and another, between particular and general, thus —
Nor is the concept of the general welfare static. Needs that were narrow or
parochial a century ago may be interwoven in our day with the well-being
of the nation what is critical or urgent changes with the times.
The motives behind the passage of the questioned resolution being reasonable, and
it being a "legitimate response to a felt public need," not whimsical or oppressive,
the non-impairment of contracts clause of the Constitution will not bar the
municipality's proper exercise of the power. Now Chief Justice Fernando puts it
aptly when he declared: "Police power legislation then is not likely to succumb to
the challenge that thereby contractual rights are rendered nugatory."
Furthermore, We restated in Philippine American Life Ins. Co. v. Auditor
General that laws and reservation of essential attributes of sovereign power are
read into contracts agreed upon by the parties. Thus —
Not only are existing laws read into contracts in order to fix obligations as
between the parties, but the reservation of essential attributes of
sovereign power is also read into contracts as a postulate of the legal
order. The policy of protecting contracts against impairments presupposes
the maintenance of a government by virtue of which contractual relations
are worthwhile – a government which retains adequate authority to secure
the peace and good order of society.
Again, We held in Liberation Steamship Co., Inc. v. Court of Industrial
Relations, through Justice J.B.L. Reyes, that ... the law forms part of, and is read
into, every contract, unless clearly excluded therefrom in those cases where such
exclusion is allowed." The decision in Maritime Company of the Philippines v.
UC School of Law
Law on Public Corporations
Reparations Commission, written for the Court by Justice Fernando, now Chief
Justice, restates the rule.
One last observation. Appellant has placed unqualified reliance on American
jurisprudence and authorities to bolster its theory that the municipal resolution in
question cannot nullify or supersede the agreement of the parties embodied in the
sales contract, as that, it claims, would impair the obligation of contracts in
violation of the Constitution. Such reliance is misplaced.
In the first place, the views set forth in American decisions and authorities are
not per se controlling in the Philippines, the laws of which must necessarily be
construed in accordance with the intention of its own lawmakers and such intent
may be deduced from the language of each law and the context of other local
legislation related thereto, and Burgess, et al v. Magarian, et al., two of the cases
cited by plaintiff-appellant, lend support to the conclusion reached by the trial
court, i.e. that the municipal resolution supersedes/supervenes over the
contractual undertaking between the parties. Dolan v. Brown, states that "Equity
will not, as a rule, enforce a restriction upon the use of property by
injunction where the property has so changed in character and environment as to
make it unfit or unprofitable for use should the restriction be enforced, but will, in
such a case, leave the complainant to whatever remedy he may have at law.
Hence, the remedy of injunction in Dolan vs. Brown was denied on the specific
holding that "A grantor may lawfully insert in his deed conditions or restrictions
which are not against public policy and do not materially impair the beneficial
enjoyment of the estate. Applying the principle just stated to the present
controversy, We can say that since it is now unprofitable, nay a hazard to the health
and comfort, to use Lots Nos. 5 and 6 for strictly residential purposes, defendants-
appellees should be permitted, on the strength of the resolution promulgated
under the police power of the municipality, to use the same for commercial
purposes. In Burgess v. Magarian et al. it was, held that "restrictive covenants
running with the land are binding on all subsequent purchasers ... " However,
Section 23 of the zoning ordinance involved therein contained a proviso expressly
declaring that the ordinance was not intended "to interfere with or abrogate or
annul any easements, covenants or other agreement between parties." In the case
at bar, no such proviso is found in the subject resolution.
by NY-YO
2020-2021
It is, therefore, clear that even if the subject building restrictions were assumed by
the defendant-appellee as vendee of Lots Nos. 5 and 6, in the corresponding deeds
of sale, and later, in Transfer Certificates of Title Nos. 101613 and 106092, the
contractual obligations so assumed cannot prevail over Resolution No. 27, of the
Municipality of Mandaluyong, which has validly exercised its police power through
the said resolution. Accordingly, the building restrictions, which declare Lots Nos. 5
and 6 as residential, cannot be enforced.

UC School of Law by NY-YO

Law on Public Corporations 2020-2021