chapter 2 stat con cases
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G.R. No. L-8888 November 29, 1957
SONG KIAT CHOCOLATE FACTORY, plaintiff-appellant,vs.CENTRAL BANK OF THE PHILIPPINES and
VICENTE GELLA, in his capacity as Treasurer ofthe Philippines, defendants-appellees.
Rogelio M. Jalandoni for appellant.Office of the Solicitor General Ambrosio Padilla andSolicitor Jose P. Alejandro for appellee, Vicente Gella.Nat. M. Balbao and F. E. Evangelista for appellee,Central Bank of the Philippines.
BENGZON, J.:
The question in this appeal is whether cocoa beans may
be considered as "chocolate" for the purposes ofexemption from the foreign exchange tax imposed byRepublic Act No. 601 as amended.
During the period from January 8, 1953 to October 9,1953, the plaintiff appellant imported sun dried cocoabeans for which it paid the foreign exchange tax of 17per cent totalling P74,671.04. Claiming exemption from
said tax under section 2 of same Act, it sued the CentralBank that had exacted payment; and in its amendedcomplaint it included the Treasurer of the Philippines.The suit was filed in the Manila Court of First Instance,wherein defendants submitted in due time a motion to
dismiss on the grounds: first, the complaint stated nocause of action because cocoa beans were not"chocolate"; and second, it was a suit against theGovernment without the latter's consent. .
The Hon. Gregorio S. Narvasa, Judge, sustained themotion, and dismissed the case by his order ofNovember 19, 1954. Hence this appeal.
The lower court, appellant contends, erred in dismissingthe case and in holding that the term "chocolate" doesnot include sun dried cocoa beans.
SEC. 2 of the aforesaid Act provides that "the taxcollected or foreign exchange used for the payment of
costs transportation and/or other charges incident toimportation into the Philippines of rice, flour ..soyabeans, butterfat, chocolate, malt syrup .. shall berefunded to any importer making application therefor,upon satisfactory proof of actual importation . . ."
In support of its contention appellant quotes fromdictionaries and encyclopedias interchangeably using thewords "chocolate", "cacao" and "cocoa". Yet we noticethat the quotations refer to "cocoa" as chocolate nut""chocolate bean" or "chocolate tree." And the legalexemption refers to "chocolate" not the bean, nor the
nut nor the tree. We agree with the Solicitor Generaand the other counsel of respondents that in commonparlance the law is presumed to refer to it1 chocolateis a manufactured or finished product made out of cocoabeans, or "cacao" beans as they are locally known. Wemay take notice of the fact that grocery stores selpowdered cocoa beans as chocolate, labeled "cocoapowder", or simply "cocoa". They are, however, reallychocolate; they are not cocoa beans. The manufacture
of chocolate involves several processes, such asselecting and drying the cocoa beans, then roasting,grinding, sieving and blending.2 Cocoa beans do not
become chocolate unless and until they have undergonethe manufacturing processes above described. The firstis raw material, the other finished product.
The courts regard "chocolate" as
"Chocolate" is a preparation of roasted cacaobeans without the abstraction of the butter andalways contains sugar and added cacao butterRockwood & Co., vs. American President Lines,
D. C. N. J., 68 F. Supp. 224, 226.
Chocolate is a cocoa bean roasted, crackedshelled, crushed, ground, and molded in cakesIt contains no sugar, and is in general use in
families. Sweetened chocolate is manufacturedin the same way but the paste is mixed witsugar, and is used by confectioners in making
chocolate confections. In re Schiling, 53 F. 81,82, 3 C. C. A. 440.
In view of the foregoing, and having in mind the
principle of strict construction of statutes exemptingfrom taxation,3we are of the opinion and so hold, thatthe exemption for "chocolate" in the above section 2
does not include "cocoa beans". The one is raw materialthe other manufactured consumer product; the latter isready for human consumption; the former is not.
However, we cannot stop here, because in August 1954 suit was brought in May 1954 Congress approvedRepublic Act 1197 amending section 2 by substituting"cocoa beans" for "chocolate." This shows, maintains the
appellant, the Legislature's intention to include cocoa
beans in the word "chocolate." In fact, it goes on, theCommittee Chairman who reported House Bill No. 2676which became Republic Act 1197, declared before theHouse.
Mr. ROCES: Mr. SPEAKER, on line 8 page 1,
after the word 'canned', strike out the words'fresh, frozen and' and also the words 'otherbeef', on line 9 and on the same line, line 9
after the word 'chocolate', insert the words'(COCOA BEANS)' in parenthesis ( ). I amproposing to insert the words '(COCOA BEANS)
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in parenthesis ( ) after the word chocolate, Mr.Speaker, in order to clarify any doubt andmanifest the intention of the past Congress thatthe word 'chocolate' should mean 'cocoa beans.
In reply to this, appellees point out that said chairmancould not have spoken of the Congressional intention inapproving Republic Act 601 because he was not amemberof the Congress that passed said Act. Naturally,
all he could state was his owninterpretation of suchpiece of legislation. Courts do not usually give decisiveweight to one legislator's opinion, expressed inCongressional debates concerning the application ofexisting laws.4 Yet even among the legislators takingpart in the consideration of the amendatory statute
(Republic Act 1197) the impression prevailed that, as thelaw then stood5chocolate candy or chocolate barwas
exempted, but cocoa beanswere not. Here are SenatorPeralta's statements during the discussion of the sameHouse Bill No. 2576:
SENATOR PERALTA: I signed that conference
report and I am really bound by it, but, Mr.President, a few hours ago I received someinformation which maybe the chairman would
like to know, to the effect that we allowchocolate bar, chocolate candy to come this
country except from the 17 per cent tax whenwe do not allow cocoa beans, out of which ourlocal manufacturers can make chocolate candy,
exempted. So why do we not take off thatexemption for chocolate and instead put 'cocoabeans' so as to benefit our manufacturers ofchocolate candy?
xxx xxx xxx.
Senator PERALTA: Yes, I agree with thechairman, only I was just wondering if thechairman, might not consider the fact that in
view of the information, this seems to beinconsistent we allow chocolate to come hereexempt and not exempt cocoa beans which is
used by our manufacturers in making chocolatecandy.
And Senator Puyat is quoted as saying, in the sameconnection:
MR. PRESIDENT, On the same page (page 1),
line 9, delete "cocoa beans". The text as it cameto the Senate was misleading. In the original law
the exemption is for chocolate and the versionthat we got from the Lower House is "(cocoabeans)" giving the impression that chocolate
and cocoa beans are synonymous. Now I thinkthis is a sort ofa rider, so your committeerecommends the deletion of those words.
(Journal of the Senate, July 30, 1954, re H. BNo. 2576, Emphasis ours.)
Other parts of the Congressional record quoted in thebriefs would seem to show that in approving House BilNo. 2576, the Congress agreed to exempt "cocoabeans" instead of chocolatewith a view to favoringlocalmanufacturersof chocolate products.6 A change olegislative policy, as appellees contend7 not a
declaration or clarification of previous Congressionapurpose. In fact, as indicating, the Government's newpolicy of exemptingfor the first timeimportations o"cocoa beans," there is the President's proclamation No.62 of September 2, 1954 issued in accordance withRepublic Act No. 1197 specifying that said exemption (of
cocoa beans) shall operate from and after September 3,1954 not before. As a general rule, it may be added
statutes operate prospectively.
Observe that appellant's cocoa beans had been importedduring January-October 1953, i.e. before the exemptiondecree.
After the foregoing discussion, it is hardly necessary toexpress our approval of the lower court's opinion aboutplaintiff's cause of action, or the lack of it. And itbecomes unnecessary to consider the other contention
of defendants that this is a suit against the Governmentwithout its consent.
The order of dismissal is affirmed, with costs againstappellant.
Paras, C. J., Padilla, Montemayor, Reyes, A., BautistaAngelo, Labrador, Concepcion, Reyes, J. B. L., Endencia,and Felix, JJ., concur.
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G.R. No. L-6355-56 August 31, 1953
PASTOR M. ENDENCIA and FERNANDOJUGO, plaintiffs-appellees,vs.SATURNINO DAVID, as Collector of InternalRevenue, defendant-appellant.
Office of the Solicitor General Juan R. Liwag and Solicitor
Jose P. Alejandro for appellant.Manuel O. Chan for appellees.
MONTEMAYOR, J.:
This is a joint appeal from the decision of the Court ofFirst Instance of Manila declaring section 13 of Republic
Act No. 590 unconstitutional, and ordering the appellantSaturnino David as Collector of Internal Revenue to re-
fund to Justice Pastor M. Endencia the sum ofP1,744.45, representing the income tax collected on hissalary as Associate Justice of the Court of Appeals in
1951, and to Justice Fernando Jugo the amount ofP2,345.46, representing the income tax collected on hissalary from January 1,1950 to October 19, 1950, asPresiding Justice of the Court of Appeals, and fromOctober 20, 1950 to December 31,1950, as AssociateJustice of the Supreme Court, without specialpronouncement as to costs.
Because of the similarity of the two cases, involving asthey do the same question of law, they were jointly
submitted for determination in the lower court. JudgeHiginio B. Macadaeg presiding, in a rather exhaustiveand well considered decision found and held that underthe doctrine laid down by this Court in the case ofPerfecto vs. Meer, 85 Phil., 552, the collection of incometaxes from the salaries of Justice Jugo and Justice
Endencia was a diminution of their compensation andtherefore was in violation of the Constitution of thePhilippines, and so ordered the refund of said taxes.
We see no profit and necessity in again discussing andconsidering the proposition and the arguments pro andcons involved in the case of Perfecto vs. Meer, supra,which are raised, brought up and presented here. Inthat case, we have held despite the ruling enunciated by
the United States Federal Supreme Court in the case ofO 'Malley vs. Woodrought 307 U. S., 277, that taxing thesalary of a judicial officer in the Philippines is adiminution of such salary and so violates the
Constitution. We shall now confine our-selves to adiscussion and determination of the remaining question
of whether or not Republic Act No. 590, particularlysection 13, can justify and legalize the collection ofincome tax on the salary of judicial officers.
According to the brief of the Solicitor General on behalfof appellant Collector of Internal Revenue, our decision
in the case of Perfecto vs. Meer, supra, was not receivedfavorably by Congress, because immediately after itspromulgation, Congress enacted Republic Act No. 590To bring home his point, the Solicitor Generareproduced what he considers the pertinent discussion inthe Lower House of House Bill No. 1127 which becameRepublic Act No. 590.
For purposes of reference, we are reproducing section 9,
Article VIII of our Constitution:.
SEC. 9. The members of the Supreme Court andall judges of inferior courts shall hold officeduring good behavior, until they reach the ageof seventy years, or become incapacitated todischarge the duties of their office. They shalreceive such compensation as may be fixed bylaw, which shall not be diminished during theircontinuance in office. Until the Congress shalprovide otherwise, the Chief Justice of theSupreme Court shall receive an annuacompensation of sixteen thousand pesos, and
each Associate Justice, fifteen thousand pesos.
As already stated construing and applying the aboveconstitutional provision, we held in the Perfecto casethat judicial officers are exempt from the payment of
income tax on their salaries, because the collectionthereof by the Government was a decrease ordiminution of their salaries during their continuance in
office, a thing which is expressly prohibited by theConstitution. Thereafter, according to the Solicitor
General, because Congress did not favorably receive thedecision in the Perfecto case, Congress promulgated
Republic Act No. 590, if not to counteract the ruling inthat decision, at least now to authorize and legalize thecollection of income tax on the salaries of judiciaofficers. We quote section 13 of Republic Act No. 590:
SEC 13. No salary wherever received by any
public officer of the Republic of the Philippinesshall be considered as exempt from the incometax, payment of which is hereby declared not to
be dimunition of his compensation fixed by theConstitution or by law.
So we have this situation. The Supreme Court in adecision interpreting the Constitution, particularly section9, Article VIII, has held that judicial officers are exemptfrom payment of income tax on their salaries, because
the collection thereof was a diminution of such salaries,specifically prohibited by the Constitution. Now comesthe Legislature and in section 13, Republic Act No. 590says that "no salary wherever received by any publicofficer of the Republic (naturally including a judiciaofficer) shall be considered as exempt from the incometax," and proceeds to declare that payment of saidincome tax is not a diminution of his compensation. Can
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was to fulfill his obligation and to exercise his privilegeof paying his income tax on his salary. His salary fixedby law was received by him in the amount of said taxcomes from his other sources of income, he may notfully realize the fact that his salary had been decreasedin the amount of said income tax. But under the presentsystem of withholding the income tax at the source,where the full amount of the income tax correspondingto his salary is computed in advance and divided into
equal portions corresponding to the number of pay-daysduring the year and actually deducted from his salarycorresponding to each payday, said official actually does
not receive his salary in full, because the income tax isdeducted therefrom every payday, that is to say, twice amonth. Let us take the case of Justice Endencia. As
Associate Justice of the Court of Appeals, his salary isfixed at p12,000 a year, that is to say, he should receiveP1,000 a month or P500 every payday, fifteenth and
end of month. In the present case, the amount collectedby the Collector of Internal Revenue on said salary is
P1,744.45 for one year. Divided by twelve (months) weshall have P145.37 a month. And further dividing it by
two paydays will bring it down to P72.685, which is theincome tax deducted form the collected on his salaryeach half month. So, if Justice Endencia's salary as ajudicial officer were not exempt from payment of theincome tax, instead of receiving P500 every payday, hewould be actually receiving P427.31 only, and instead ofreceiving P12,000 a year, he would be receiving butP10,255.55. Is it not therefor clear that every payday,his salary is actually decreased by P72.685 and everyyear is decreased by P1,744.45?
Reading the discussion in the lower House in connection
with House Bill No. 1127, which became Republic ActNo. 590, it would seem that one of the main reasonsbehind the enactment of the law was the feeling amongcertain legislators that members of the Supreme Courtshould not enjoy any exemption and that as citizens, outof patriotism and love for their country, they should payincome tax on their salaries. It might be stated in thisconnection that the exemption is not enjoyed by themembers of the Supreme Court alone but also by alljudicial officers including Justices of the Court of Appeals
and judges of inferior courts. The exemption alsoextends to other constitutional officers, like the President
of the Republic, the Auditor General, the members of
the Commission on Elections, and possibly members ofthe Board of Tax Appeals, commissioners of the Public
Service Commission, and judges of the Court ofIndustrial Relations. Compares to the number of allthese officials, that of the Supreme Court Justices is
relatively insignificant. There are more than 990 otherjudicial officers enjoying the exemption, including 15
Justices of the Court of Appeals, about 107 Judges ofFirst Instance, 38 Municipal Judges and about 830Justices of the Peace. The reason behind the exemptionin the Constitution, as interpreted by the United StatesFederal Supreme Court and this Court, is to preserve the
independence of the Judiciary, not only of this HighTribunal but of the other courts, whose presentmembership number more than 990 judicial officials.
The exemption was not primarily intended to benefitjudicial officers, but was grounded on public policy. Assaid by Justice Van Devanter of the United StatesSupreme Court in the case of Evans vs. Gore (253 U. S.,245):
The primary purpose of the prohibition againstdiminution was not to benefit the judges, butlike the clause in respect of tenure, to attractgood and competent men to the bench and topromote that independence of action andjudgment which is essential to the maintenanceof the guaranties, limitations and pervadingprinciples of the Constitution and to theadministration of justice without respect toperson and with equal concern for the poor andthe rich. Such being its purpose, it is to beconstrued, not as a private grant, but as a
limitation imposed in the public interest; in otherwords, not restrictively, but in accord with itsspirit and the principle on which it proceeds.
Having in mind the limited number of judicial officers in
the Philippines enjoying this exemption, especially whenthe great bulk thereof are justices of the peace, many ofthem receiving as low as P200 a month, and considering
further the other exemptions allowed by the income taxlaw, such as P3,000 for a married person and P600 for
each dependent, the amount of national revenue to bederived from income tax on the salaries of judicia
officers, were if not for the constitutional exemption,could not be large or substantial. But even if it wereotherwise, it should not affect, much less outweigh thepurpose and the considerations that prompted the
establishment of the constitutional exemption. In thesame case ofEvans vs. Gore, supra, the Federa
Supreme Court declared "that they (fathers of theConstitution) regarded the independence of the judgesas far as greater importance than any revenue thatcould come from taxing their salaries.
When a judicial officer assumed office, he does notexactly ask for exemption from payment of income taxon his salary, as a privilege . It is already attached to hisoffice, provided and secured by the fundamental law,not primarily for his benefit, but based on publicinterest, to secure and preserve his independence ofjudicial thought and action. When we come to themembers of the Supreme Court, this excemption tothem is relatively of short duration. Because of thelimited membership in this High Tribunal, eleven, anddue to the high standards of experience, practice andtraining required, one generally enters its portals andcomes to join its membership quite late in life, on theaver-age, around his sixtieth year, and being required to
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retire at seventy, assuming that he does not die orbecome incapacitated earlier, naturally he is not in aposition to receive the benefit of exemption for long. Itis rather to the justices of the peace that the exemptioncan give more benefit. They are relatively morenumerous, and because of the meager salary theyreceive, they can less afford to pay the income tax on itand its diminution by the amount of the income tax ifpaid would be real, substantial and onerous.
Considering exemption in the abstract, there is nothingunusual or abhorrent in it, as long as it is based onpublic policy or public interest. While all other citizensare subject to arrest when charged with the commissionof a crime, members of the Senate and House of
Representatives except in cases of treason, felony andbreach of the peace are exempt from arrest, during their
attendance in the session of the Legislature; and whileall other citizens are generally liable for any speech,remark or statement, oral or written, tending to causethe dishonor, discredit or contempt of a natural orjuridical person or to blacken the memory of one who is
dead, Senators and Congressmen in making suchstatements during their sessions are extended immunityand exemption.
And as to tax exemption, there are not a few citizens
who enjoy this exemption. Persons, natural and juridical,are exempt from taxes on their lands, buildings andimprovements thereon when used exclusively for
educational purposes, even if they derive incometherefrom. (Art. VI, Sec. 22 [3].) Holders of governmentbonds are exempted from the payment of taxes on theincome or interest they receive therefrom (sec. 29 (b)
[4], National Internal Revenue Code as amended byRepublic Act No. 566). Payments or income received byany person residing in the Philippines under the laws ofthe United States administered by the United StatesVeterans Administration are exempt from taxation.(Republic Act No. 360). Funds received by officers andenlisted men of the Philippine Army who served in theArmed Forces of the United States, allowances earnedby virtue of such services corresponding to the taxableyears 1942 to 1945, inclusive, are exempted fromincome tax. (Republic Act No. 210). The payment ofwages and allowances of officers and enlisted men ofthe Army Forces of the Philippines sent to Korea are also
exempted from taxation. (Republic Act No. 35). In otherwords, for reasons of public policy and public interest, acitizen may justifiably by constitutional provision orstatute be exempted from his ordinary obligation of
paying taxes on his income. Under the same publicpolicy and perhaps for the same it not higherconsiderations, the framers of the Constitution deemed
it wise and necessary to exempt judicial officers frompaying taxes on their salaries so as not to decrease theircompensation, thereby insuring the independence of the
Judiciary.
In conclusion we reiterate the doctrine laid down in thecase ofPerfecto vs. Meer, supra, to the effect that thecollection of income tax on the salary of a judicial officeris a diminution thereof and so violates the Constitution.We further hold that the interpretation and application ofthe Constitution and of statutes is within the exclusiveprovince and jurisdiction of the Judicial department, andthat in enacting a law, the Legislature may not legallyprovide therein that it be interpreted in such a way that
it may not violate a Constitutional prohibition, therebytying the hands of the courts in their task of laterinterpreting said statute, specially when the
interpretation sought and provided in said statute runscounter to a previous interpretation already given in acase by the highest court of the land.
In the views of the foregoing considerations, the
decision appealed from is hereby affirmed, with nopronouncement as to costs.
Pablo, Bengzon, Padilla, Tuason, Reyes, and Labrador,JJ., concur.
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G.R. No. 111097 July 20, 1994
MAYOR PABLO P. MAGTAJAS & THE CITY OFCAGAYAN DE ORO, petitioners,vs.PRYCE PROPERTIES CORPORATION, INC. &PHILIPPINE AMUSEMENT AND GAMINGCORPORATION,respondents.
Aquilino G. Pimentel, Jr. and Associates for petitioners.
R.R. Torralba & Associates for private respondent.
CRUZ, J.:
There was instant opposition when PAGCOR announcedthe opening of a casino in Cagayan de Oro City. Civicorganizations angrily denounced the project. Thereligious elements echoed the objection and so did the
women's groups and the youth. Demonstrations wereled by the mayor and the city legislators. The media
trumpeted the protest, describing the casino as anaffront to the welfare of the city.
The trouble arose when in 1992, flush with itstremendous success in several cities, PAGCOR decided
to expand its operations to Cagayan de Oro City. To thisend, it leased a portion of a building belonging to PryceProperties Corporation, Inc., one of the herein private
respondents, renovated and equipped the same, andprepared to inaugurate its casino there during the
Christmas season.
The reaction of the Sangguniang Panlungsod of Cagayan
de Oro City was swift and hostile. On December 7, 1992,it enacted Ordinance No. 3353 reading as follows:
ORDINANCE NO. 3353
AN ORDINANCE PROHIBITING THEISSUANCE OF BUSINESS PERMIT AND
CANCELLING EXISTING BUSINESSPERMIT TO ANY ESTABLISHMENT FORTHE USING AND ALLOWING TO BEUSED ITS PREMISES OR PORTIONTHEREOF FOR THE OPERATION OF
CASINO.
BE IT ORDAINED by the SangguniangPanlungsod of the City of Cagayan deOro, in session assembled that:
Sec. 1. That pursuant to the policy ofthe city banning the operation of casino
within its territorial jurisdiction, no
business permit shall be issued to anyperson, partnership or corporation fothe operation of casino within the citylimits.
Sec. 2. That it shall be a violation ofexisting business permit by any personspartnership or corporation to use itsbusiness establishment or portion
thereof, or allow the use thereof byothers for casino operation and othergambling activities.
Sec. 3. PENALTIES. Any violationof such existing business permit asdefined in the preceding section shalsuffer the following penalties, to wit:
a) Suspension of the business permit for sixty (60) daysfor the first offense and a fine of P1,000.00/day
b) Suspension of the business permit for Six (6) monthsfor the second offense, and a fine of P3,000.00/day
c) Permanent revocation of the business permit andimprisonment of One (1) year, for the third and
subsequent offenses.
Sec. 4. This Ordinance shall take effect ten (10) daysfrom publication thereof.
Nor was this all. On January 4, 1993, it adopted asterner Ordinance No. 3375-93 reading as follows:
ORDINANCE NO. 3375-93
AN ORDINANCE PROHIBITING THE OPERATION OFCASINO AND PROVIDING PENALTY FOR VIOLATION
THEREFOR.
WHEREAS, the City Council established a policy as earlyas 1990 against CASINO under its Resolution No. 2295;
WHEREAS, on October 14, 1992, the City Council passedanother Resolution No. 2673, reiterating its policy
against the establishment of CASINO;
WHEREAS, subsequently, thereafter, it likewise passedOrdinance No. 3353, prohibiting the issuance of BusinessPermit and to cancel existing Business Permit to anyestablishment for the using and allowing to be used itspremises or portion thereof for the operation of CASINO;
WHEREAS, under Art. 3, section 458, No. (4), subparagraph VI of the Local Government Code of 1991(Rep. Act 7160) and under Art. 99, No. (4), ParagraphVI of the implementing rules of the Local Government
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Code, the City Council as the Legislative Body shall enactmeasure to suppress any activity inimical to publicmorals and general welfare of the people and/orregulate or prohibit such activity pertaining toamusement or entertainment in order to protect socialand moral welfare of the community;
NOW THEREFORE,
BE IT ORDAINED by the City Council in session dulyassembled that:
Sec. 1. The operation of gambling CASINO in the Cityof Cagayan de Oro is hereby prohibited.
Sec. 2. Any violation of this Ordinance shall be
subject to the following penalties:
a) Administrative fine of P5,000.00 shall be imposedagainst the proprietor, partnership or corporationundertaking the operation, conduct, maintenance of
gambling CASINO in the City and closure thereof;
b) Imprisonment of not less than six (6) months normore than one (1) year or a fine in the amount ofP5,000.00 or both at the discretion of the court against
the manager, supervisor, and/or any person responsiblein the establishment, conduct and maintenance ofgambling CASINO.
Sec. 3. This Ordinance shall take effect ten (10) days
after its publication in a local newspaper of generalcirculation.
Pryce assailed the ordinances before the Court ofAppeals, where it was joined by PAGCOR as intervenor
and supplemental petitioner. Their challenge succeeded.On March 31, 1993, the Court of Appeals declared the
ordinances invalid and issued the writ prayed for toprohibit their enforcement. 1Reconsideration of thisdecision was denied on July 13, 1993. 2
Cagayan de Oro City and its mayor are now before us inthis petition for review under Rule 45 of the Rules of
Court. 3They aver that the respondent Court of Appealserred in holding that:
1. Under existing laws, the Sangguniang Panlungsod of
the City of Cagayan de Oro does not have the powerand authority to prohibit the establishment andoperation of a PAGCOR gambling casino within the City's
territorial limits.
2. The phrase "gambling and other prohibited games ofchance" found in Sec. 458, par. (a), sub-par. (1) (v)of R.A. 7160 could only mean "illegal gambling."
3. The questioned Ordinances in effect annul P.D. 1869and are therefore invalid on that point.
4. The questioned Ordinances are discriminatory tocasino and partial to cockfighting and are thereforeinvalid on that point.
5. The questioned Ordinances are not reasonable, notconsonant with the general powers and purposes of the
instrumentality concerned and inconsistent with the lawsor policy of the State.
6. It had no option but to follow the ruling in the caseofBasco, et al. v. PAGCOR, G.R. No. 91649, May 141991, 197 SCRA 53 in disposing of the issues presentedin this present case.
PAGCOR is a corporation created directly by P.D. 1869 to
help centralize and regulate all games of chance,including casinos on land and sea within the territoriajurisdiction of the Philippines. In Basco v. Philippine
Amusements and Gaming Corporation,4
this Courtsustained the constitutionality of the decree and evencited the benefits of the entity to the national economyas the third highest revenue-earner in the governmentnext only to the BIR and the Bureau of Customs.
Cagayan de Oro City, like other local politicasubdivisions, is empowered to enact ordinances for thepurposes indicated in the Local Government Code. It isexpressly vested with the police power under what is
known as the General Welfare Clause now embodied inSection 16 as follows:
Sec. 16. General Welfare. Every local governmentunit shall exercise the powers expressly granted, thosenecessarily implied therefrom, as well as powersnecessary, appropriate, or incidental for its efficient andeffective governance, and those which are essential tothe promotion of the general welfare. Within theirrespective territorial jurisdictions, local government unitsshall ensure and support, among other things, thepreservation and enrichment of culture, promote healthand safety, enhance the right of the people to abalanced ecology, encourage and support thedevelopment of appropriate and self-reliant scientific and
technological capabilities, improve public morals,enhance economic prosperity and social justice, promotefull employment among their residents, maintain peaceand order, and preserve the comfort and convenience o
their inhabitants.
In addition, Section 458 of the said Code specificallydeclares that:
Sec. 458. Powers, Duties, Functions andCompensation. (a) The Sangguniang Panlungsod, as
the legislative body of the city, shall enact ordinances,
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approve resolutions and appropriate funds for thegeneral welfare of the city and its inhabitants pursuantto Section 16 of this Code and in the proper exercise ofthe corporate powers of the city as provided for underSection 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessaryfor an efficient and effective city government, and in thisconnection, shall:
xxx xxx xxx
(v) Enact ordinances intended to prevent, suppress andimpose appropriate penalties for habitual drunkenness inpublic places, vagrancy, mendicancy, prostitution,establishment and maintenance of houses of illrepute,gamblingand other prohibited games of chance,fraudulent devices and ways to obtain money orproperty, drug addiction, maintenance of drug dens,drug pushing, juvenile delinquency, the printing,distribution or exhibition of obscene or pornographic
materials or publications, and such other activitiesinimical to the welfare and morals of the inhabitants ofthe city;
This section also authorizes the local government unitsto regulate properties and businesses within theirterritorial limits in the interest of the general welfare. 5
The petitioners argue that by virtue of these provisions,the Sangguniang Panlungsod may prohibit the operation
of casinos because they involve games of chance, whichare detrimental to the people. Gambling is not allowedby general law and even by the Constitution itself. Thelegislative power conferred upon local government unitsmay be exercised over all kinds of gambling and not onlyover "illegal gambling" as the respondents erroneously
argue. Even if the operation of casinos may have beenpermitted under P.D. 1869, the government of Cagayande Oro City has the authority to prohibit them within its
territory pursuant to the authority entrusted to it by theLocal Government Code.
It is submitted that this interpretation is consonant withthe policy of local autonomy as mandated in Article II,Section 25, and Article X of the Constitution, as well as
various other provisions therein seeking to strengthenthe character of the nation. In giving the localgovernment units the power to prevent or suppressgambling and other social problems, the Local
Government Code has recognized the competence ofsuch communities to determine and adopt the measures
best expected to promote the general welfare of theirinhabitants in line with the policies of the State.
The petitioners also stress that when the Code expresslyauthorized the local government units to prevent andsuppress gambling and other prohibited games of
chance, like craps, baccarat, blackjack and roulette, itmeant allforms of gambling without distinction. Ubi lexnon distinguit, nec nos distingueredebemos. 6Otherwise, it would have expressly excludedfrom the scope of their power casinos and other formsof gambling authorized by special law, as it could haveeasily done. The fact that it did not do so simply meansthat the local government units are permitted to prohibitall kinds of gambling within their territories, including
the operation of casinos.
The adoption of the Local Government Code, it ispointed out, had the effect of modifying the charter ofthe PAGCOR. The Code is not only a later enactmentthan P.D. 1869 and so is deemed to prevail in case of
inconsistencies between them. More than this, thepowers of the PAGCOR under the decree are expressly
discontinued by the Code insofar as they do not conformto its philosophy and provisions, pursuant to Par. (f) ofits repealing clause reading as follows:
(f) All general and special laws, acts
city charters, decrees, executive ordersproclamations and administrativeregulations, or part or parts thereof
which are inconsistent with any of theprovisions of this Code are hereby
repealed or modified accordingly.
It is also maintained that assuming there is doubt
regarding the effect of the Local Government Code onP.D. 1869, the doubt must be resolved in favor of the
petitioners, in accordance with the direction in the Codecalling for its liberal interpretation in favor of the loca
government units. Section 5 of the Code specificallyprovides:
Sec. 5. Rules of Interpretation. In the interpretationof the provisions of this Code, the following rules shalapply:
(a)Any provision on a power of a local government uni
shall be liberally interpreted in its favor, and in case ofdoubt, any question thereon shall be resolved in favor odevolution of powers and of the lower local governmen
unit. Any fair and reasonable doubt as to the existence
of the power shall be interpreted in favor of the locagovernment unit concerned;
xxx xxx xxx
(c) The general welfare provisions in this Code shall be
liberally interpreted to give more powers to locagovernment unitsin accelerating economic developmentand upgrading the quality of life for the people in the
community; . . . (Emphasis supplied.)
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Finally, the petitioners also attack gambling asintrinsically harmful and cite various provisions of theConstitution and several decisions of this Courtexpressive of the general and official disapprobation ofthe vice. They invoke the State policies on the familyand the proper upbringing of the youth and, as might beexpected, call attention to the old case ofU.S. v.Salaveria, 7which sustained a municipal ordinanceprohibiting the playing ofpanguingue. The petitioners
decry the immorality of gambling. They also impugn thewisdom of P.D. 1869 (which they describe as "a martiallaw instrument") in creating PAGCOR and authorizing it
to operate casinos "on land and sea within the territorialjurisdiction of the Philippines."
This is the opportune time to stress an important point.
The morality of gambling is not a justiciable issue.Gambling is not illegal per se. While it is generallyconsidered inimical to the interests of the people, thereis nothing in the Constitution categorically proscribing orpenalizing gambling or, for that matter, even mentioning
it at all. It is left to Congress to deal with the activity asit sees fit. In the exercise of its own discretion, thelegislature may prohibit gambling altogether or allow it
without limitation or it may prohibit some forms ofgambling and allow others for whatever reasons it may
consider sufficient. Thus, it hasprohibited juetengand montebut permits lotteries,cockfighting and horse-racing. In making such choices,
Congress has consulted its own wisdom, which thisCourt has no authority to review, much less reverse.Well has it been said that courts do not sit to resolve themerits of conflicting theories. 8That is the prerogative of
the political departments. It is settled that questionsregarding the wisdom, morality, or practicibility ofstatutes are not addressed to the judiciary but may beresolved only by the legislative and executivedepartments, to which the function belongs in ourscheme of government. That function is exclusive.Whichever way these branches decide, they areanswerable only to their own conscience and theconstituents who will ultimately judge their acts, and notto the courts of justice.
The only question we can and shall resolve in thispetition is the validity of Ordinance No. 3355 andOrdinance No. 3375-93 as enacted by the SangguniangPanlungsod of Cagayan de Oro City. And we shall do soonly by the criteria laid down by law and not by our ownconvictions on the propriety of gambling.
The tests of a valid ordinance are well established. Along line of decisions 9has held that to be valid, anordinance must conform to the following substantiverequirements:
1) It must not contravene the constitution or anystatute.
2) It must not be unfair or oppressive.
3) It must not be partial or discriminatory.
4) It must not prohibit but may regulate trade.
5) It must be general and consistent with public policy.
6) It must not be unreasonable.
We begin by observing that under Sec. 458 of the LocaGovernment Code, local government units areauthorized to prevent or suppress, among others,"gambling and otherprohibited games of chance."Obviously, this provision excludes games of chancewhich are not prohibited but are in fact permitted bylaw. The petitioners are less than accurate in claimingthat the Code could have excluded such games of
chance but did not. In fact it does. The language of thesection is clear and unmistakable. Under the rule
ofnoscitur a sociis, a word or phrase should beinterpreted in relation to, or given the same meaning ofwords with which it is associated. Accordingly, we
conclude that since the word "gambling" is associatedwith "and otherprohibited games of chance," the wordshould be read as referring to only illegal gamblingwhich, like the otherprohibited games of chance, mustbe prevented or suppressed.
We could stop here as this interpretation should settle
the problem quite conclusively. But we will not. Thevigorous efforts of the petitioners on behalf of theinhabitants of Cagayan de Oro City, and the earnestness
of their advocacy, deserve more than short shrift fromthis Court.
The apparent flaw in the ordinances in question is thatthey contravene P.D. 1869 and the public policy
embodied therein insofar as they prevent PAGCOR fromexercising the power conferred on it to operate a casinoin Cagayan de Oro City. The petitioners have aningenious answer to this misgiving. They deny that it isthe ordinances that have changed P.D. 1869 for an
ordinance admittedly cannot prevail against a statuteTheir theory is that the change has been made by theLocal Government Code itself, which was also enactedby the national lawmaking authority. In their view, thedecree has been, not really repealed by the Code, butmerely "modified pro tanto" in the sense that PAGCORcannot now operate a casino over the objection of thelocal government unit concerned. This modification oP.D. 1869 by the Local Government Code is permissiblebecause one law can change or repeal another law.
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It seems to us that the petitioners are playing withwords. While insisting that the decree has only been"modifiedpro tanto," they are actually arguing that it isalready dead, repealed and useless for all intents andpurposes because the Code has shorn PAGCOR of allpower to centralize and regulate casinos. Strictlyspeaking, its operations may now be not only prohibitedby the local government unit; in fact, the prohibition isnot only discretionary but mandatedby Section 458 of
the Code if the word "shall" as used therein is to begiven its accepted meaning. Local government unitshave now no choice but to prevent and suppress
gambling, which in the petitioners' view includes bothlegal and illegal gambling. Under this construction,PAGCOR will have no more games of chance to regulate
or centralize as they must all be prohibited by the localgovernment units pursuant to the mandatory dutyimposed upon them by the Code. In this situation,
PAGCOR cannot continue to exist except only as atoothless tiger or a white elephant and will no longer be
able to exercise its powers as a prime source ofgovernment revenue through the operation of casinos.
It is noteworthy that the petitioners have cited only Par.(f) of the repealing clause, conveniently discarding the
rest of the provision which painstakingly mentions thespecific laws or the parts thereof which are repealed (ormodified) by the Code. Significantly, P.D. 1869 is notone of them. A reading of the entire repealing clause,which is reproduced below, will disclose the omission:
Sec. 534. Repealing Clause. (a) Batas Pambansa Blg.337, otherwise known as the "Local Government Code,"Executive Order No. 112 (1987), and Executive Order
No. 319 (1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and suchother decrees, orders, instructions, memoranda and
issuances related to or concerning the barangay arehereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic ActNo. 1939 regarding hospital fund; Section 3, a (3) and b
(2) of Republic Act. No. 5447 regarding the SpecialEducation Fund; Presidential Decree No. 144 as
amended by Presidential Decree Nos. 559 and 1741;Presidential Decree No. 231 as amended; PresidentialDecree No. 436 as amended by Presidential Decree No.558; and Presidential Decree Nos. 381, 436, 464, 477,526, 632, 752, and 1136 are hereby repealed andrendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealedinsofar as it governs locally-funded projects.
(e) The following provisions are hereby repealed oramended insofar as they are inconsistent with theprovisions of this Code: Sections 2, 16, and 29 of
Presidential Decree No. 704; Sections 12 of PresidentiaDecree No. 87, as amended; Sections 52, 53, 66, 67, 68,69, 70, 71, 72, 73, and 74 of Presidential Decree No463, as amended; and Section 16 of Presidential DecreeNo. 972, as amended, and
(f) All general and special laws, acts, city chartersdecrees, executive orders, proclamations andadministrative regulations, or part or parts thereof which
are inconsistent with any of the provisions of this Codeare hereby repealed or modified accordingly.
Furthermore, it is a familiar rule that implied repeals arenot lightly presumed in the absence of a clear andunmistakable showing of such intention. In Lichauco &Co. v. Apostol, 10this Court explained:
The cases relating to the subject of repeal by implicationall proceed on the assumption that if the act of laterdate clearly reveals an intention on the part of thelawmaking power to abrogate the prior law, this
intention must be given effect; but there must always bea sufficient revelation of this intention, and it hasbecome an unbending rule of statutory construction thatthe intention to repeal a former law will not be imputedto the Legislature when it appears that the two statutes,or provisions, with reference to which the question
arises bear to each other the relation of general tospecial.
There is no sufficient indication of an implied repeal ofP.D. 1869. On the contrary, as the private respondent
points out, PAGCOR is mentioned as the source offunding in two later enactments of Congress, to wit, R.A
7309, creating a Board of Claims under the Departmentof Justice for the benefit of victims of unjust punishmentor detention or of violent crimes, and R.A. 7648,
providing for measures for the solution of the powercrisis. PAGCOR revenues are tapped by these twostatutes. This would show that the PAGCOR charter has
not been repealed by the Local Government Code buthas in fact been improved as it were to make the entitymore responsive to the fiscal problems of the
government.
It is a canon of legal hermeneutics that instead of pitting
one statute against another in an inevitably destructiveconfrontation, courts must exert every effort to reconcilethem, remembering that both laws deserve a becomingrespect as the handiwork of a coordinate branch of the
government. On the assumption of a conflict betweenP.D. 1869 and the Code, the proper action is not touphold one and annul the other but to give effect toboth by harmonizing them if possible. This is possible inthe case before us. The proper resolution of the problemat hand is to hold that under the Local GovernmentCode, local government units may (and indeed must)prevent and suppress all kinds of gambling within their
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territories except only those allowed by statutes like P.D.1869. The exception reserved in such laws must be readinto the Code, to make both the Code and such lawsequally effective and mutually complementary.
This approach would also affirm that there are indeedtwo kinds of gambling, to wit, the illegal and thoseauthorized by law. Legalized gambling is not a modernconcept; it is probably as old as illegal gambling, if not
indeed more so. The petitioners' suggestion that theCode authorizes them to prohibit all kinds of gamblingwould erase the distinction between these two forms ofgambling without a clear indication that this is the will ofthe legislature. Plausibly, following this theory, the Cityof Manila could, by mere ordinance, prohibit the
Philippine Charity Sweepstakes Office from conducting alottery as authorized by R.A. 1169 and B.P. 42 or stop
the races at the San Lazaro Hippodrome as authorizedby R.A. 309 and R.A. 983.
In light of all the above considerations, we see no wayof arriving at the conclusion urged on us by the
petitioners that the ordinances in question are valid. Onthe contrary, we find that the ordinances violate P.D.1869, which has the character and force of a statute, as
well as the public policy expressed in the decreeallowing the playing of certain games of chance despite
the prohibition of gambling in general.
The rationale of the requirement that the ordinances
should not contravene a statute is obvious. Municipalgovernments are only agents of the national
government. Local councils exercise only delegatedlegislative powers conferred on them by Congress as the
national lawmaking body. The delegate cannot besuperior to the principal or exercise powers higher thanthose of the latter. It is a heresy to suggest that thelocal government units can undo the acts of Congress,
from which they have derived their power in the firstplace, and negate by mere ordinance the mandate of
the statute.
Municipal corporations owe their origin
to, and derive their powers and rightswholly from the legislature. It breathes
into them the breath of life, withoutwhich they cannot exist. As it creates,so it may destroy. As it may destroy, itmay abridge and control. Unless there issome constitutional limitation on theright, the legislature might, by a singleact, and if we can suppose it capable ofso great a folly and so great a wrong,sweep from existence all of themunicipal corporations in the State, andthe corporation could not prevent it. Weknow of no limitation on the right so faras to the corporation themselves areconcerned. They are, so to phrase it,
the mere tenants at will of thelegislature. 11
This basic relationship between the national legislatureand the local government units has not been enfeebledby the new provisions in the Constitution strengtheningthe policy of local autonomy. Without meaning to detractfrom that policy, we here confirm that Congress retainscontrol of the local government units although in
significantly reduced degree now than under ourprevious Constitutions. The power to create still includesthe power to destroy. The power to grant still includesthe power to withhold or recall. True, there are certainnotable innovations in the Constitution, like the directconferment on the local government units of the power
to tax, 12which cannot now be withdrawn by merestatute. By and large, however, the national legislature
is still the principal of the local government units, whichcannot defy its will or modify or violate it.
The Court understands and admires the concern of thepetitioners for the welfare of their constituents and their
apprehensions that the welfare of Cagayan de Oro Citywill be endangered by the opening of the casino. Weshare the view that "the hope of large or easy gain,
obtained without special effort, turns the head of theworkman"13and that "habitual gambling is a cause o
laziness and ruin." 14In People v. Gorostiza, 15wedeclared: "The social scourge of gambling must bestamped out. The laws against gambling must be
enforced to the limit." George Washington calledgambling "the child of avarice, the brother of iniquityand the father of mischief." Nevertheless, we mustrecognize the power of the legislature to decide, in its
own wisdom, to legalize certain forms of gambling, aswas done in P.D. 1869 and impliedly affirmed in theLocal Government Code. That decision can be revokedby this Court only if it contravenes the Constitution asthe touchstone of all official acts. We do not find suchcontravention here.
We hold that the power of PAGCOR to centralize andregulate all games of chance, including casinos on landand sea within the territorial jurisdiction of thePhilippines, remains unimpaired. P.D. 1869 has not been
modified by the Local Government Code, whichempowers the local government units to prevent orsuppress only those forms of gambling prohibited bylaw.
Casino gambling is authorized by P.D. 1869. This decreehas the status of a statute that cannot be amended ornullified by a mere ordinance. Hence, it was notcompetent for the Sangguniang Panlungsod of Cagayande Oro City to enact Ordinance No. 3353 prohibiting theuse of buildings for the operation of a casino andOrdinance No. 3375-93 prohibiting the operation ofcasinos. For all their praiseworthy motives, theseordinances are contrary to P.D. 1869 and the public
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policy announced therein and are therefore ultraviresand void.
WHEREFORE, the petition is DENIED and the challengeddecision of the respondent Court of Appeals isAFFIRMED, with costs against the petitioners. It is soordered.
Narvasa, C.J., Feliciano, Bidin, Regalado,
Romero, Bellosillo, Melo, Quiason, Puno, Vitug,Kapunan and Mendoza, JJ., concur.