pubcorp - 1st 9 cases

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Republic of the PhilippinesSupreme Court

Manila

EN BANC

PHILIPPINE SOCIETY FORTHE PREVENTION OFCRUELTY TO ANIMALS,

G.R. No. 169752

Petitioners, Members:

PUNO, C.J. QUISUMBING,

YNARES-SANTIAGO,SANDOVAL-GUTIERREZ,

CARPIO, AUSTRIA-MARTINEZ, CORONA,

- versus - CARPIO-MORALES, AZCUNA, TINGA, CHICO-NAZARIO, GARCIA,

VELASCO, JR.,NACHURA, andREYES,JJ.

COMMISSION ON AUDIT,DIR. RODULFO J. ARIESGA(in his official capacity as Directorof the Commission on Audit), MS.MERLE M. VALENTIN and MS.SUSAN GUARDIAN (in their officialcapacities as Team Leader and TeamMember, respectively, of the audit

Team of the Commission on Audit),

Promulgated:Respondents. September 25, 2007

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D E C I S I O N

AUSTRIA-MARTINEZ,J.:

Before the Court is a special civil action for Certiorari andProhibition under

Rule 65 of the Rules of Court, in relation to Section 2 of Rule 64, filed by the petitioner

assailing Office Order No. 2005-021[1] dated September 14, 2005 issued by the

respondents which constituted the audit team, as well as its September 23, 2005

Letter[2] informing the petitioner that respondents audit team shall conduct an audit
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survey on the petitioner for a detailed audit of its accounts, operations, and financial

transactions. No temporary restraining order was issued.

The petitioner was incorporated as a juridical entity over one hundred years ago

by virtue of Act No. 1285, enacted on January 19, 1905, by the PhilippineCommission. The petitioner, at the time it was created, was composed of animal

aficionados and animal propagandists. The objects of the petitioner, as stated in

Section 2 of its charter, shall be to enforce laws relating to cruelty inflicted upon

animals or the protection of animals in the Philippine Islands, and generally, to do and

perform all things which may tend in any way to alleviate the suffering of animals and

promote their welfare.[3]

At the time of the enactment of Act No. 1285, the original Corporation Law, ActNo. 1459, was not yet in existence. Act No. 1285 antedated both the Corporation Law

and the constitution of the Securities and Exchange Commission. Important to note is

that the nature of the petitioner as a corporate entity is distinguished from

thesociedad anonimas under the Spanish Code of Commerce.

For the purpose of enhancing its powers in promoting animal welfare and

enforcing laws for the protection of animals, the petitioner was initially imbued under

its charter with the power to apprehend violators of animal welfare laws. In addition,

the petitioner was to share one-half (1/2) of the fines imposed and collected throughits efforts for violations of the laws related thereto. As originally worded, Sections 4

and 5 of Act No. 1285 provide:

SEC. 4. The said society is authorized to appointnot to exceed

five agents in the City of Manila, and not to exceed two in each of theprovinces of the Philippine Islands who shall have all the power andauthority of a police officer to make arrests for violation of thelaws enacted for the prevention of cruelty to animals and the protectionof animals, and to serve any process in connection with the execution of

such laws; and in addition thereto, all the police force of the PhilippineIslands, wherever organized, shall, as occasion requires, assist saidsociety, its members or agents, in the enforcement of all such laws.

SEC. 5. One-half of all the fines imposed and collected through

the efforts of said society, its members or its agents, for violations of thelaws enacted for the prevention of cruelty to animals and for theirprotection, shall belong to said society and shall be used to promote itsobjects.
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(emphasis supplied)

Subsequently, however, the power to make arrests as well as the privilege to

retain a portion of the fines collected for violation of animal-related laws were recalled

by virtue of Commonwealth Act (C.A.) No. 148,[4] which reads, in its entirety, thus:

Be it enacted by the National Assembly of the Philippines:

Section 1. Section four of Act Numbered Twelve hundred andeighty-five as amended by Act Numbered Thirty five hundred and forty-eight, is hereby further amended so as to read as follows:

Sec. 4. The said society is authorized to appoint notto exceed ten agents in the City of Manila, and not toexceed one in each municipality of the Philippines whoshall have the authority to denounce to regular peaceofficers any violation of the laws enacted for the preventionof cruelty to animals and the protection of animals and tocooperate with said peace officers in the prosecution oftransgressors of such laws.

Sec. 2. The full amount of the fines collected for violation of the

laws against cruelty to animals and for the protection of animals, shallaccrue to the general fund of the Municipalitywhere the offense wascommitted.

Sec. 3. This Act shall take effect upon its approval.

Approved, November 8, 1936. (Emphasis supplied)

Immediately thereafter, then President Manuel L. Quezon issued Executive

Order (E.O.) No. 63 dated November 12, 1936, portions of which provide:

Whereas, during the first regular session of the National

Assembly, Commonwealth Act Numbered One Hundred Forty Eightwas enacted depriving the agents of the Society for the Prevention of

Cruelty to Animals of their power to arrest persons who have violatedthe laws prohibiting cruelty to animals thereby correcting a seriousdefect in one of the laws existing in our statute books.

x x x x
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Whereas, the cruel treatment of animals is an offense againstthe State, penalized under our statutes, which the Government is dutybound to enforce;

Now, therefore, I, Manuel L. Quezon, President of the Philippines,pursuant to the authority conferred upon me by the Constitution, hereby

decree, order, and direct the Commissioner of Public Safety, the ProvostMarshal General as head of the Constabulary Division of the PhilippineArmy, every Mayor of a chartered city, and every municipal president todetail and organize special members of the police force, local, national,and the Constabulary to watch, capture, and prosecuteoffenders against the laws enacted to prevent cruelty toanimals. (Emphasis supplied)

On December 1, 2003, an audit team from respondent Commission on Audit

(COA) visited the office of the petitioner to conduct an audit survey pursuant to COA

Office Order No. 2003-051 dated November 18, 2003[5] addressed to the

petitioner. The petitioner demurred on the ground that it was a private entity not

under the jurisdiction of COA, citing Section 2(1) of Article IX of the Constitution which

specifies the general jurisdiction of the COA, viz:

Section 1. General Jurisdiction. The Commission on Audit shall

have the power, authority, and duty to examine, audit, and settle allaccounts pertaining to the revenue and receipts of, and expenditures oruses of funds and property, owned or held in trust by, or pertaining to

the Government, or any of its subdivisions, agencies, orinstrumentalities, including government-owned and controlledcorporations with original charters, and on a post-audit basis: (a)constitutional bodies, commissions and officers that have been grantedfiscal autonomy under the Constitution; (b) autonomous state collegesand universities; (c) other government-owned or controlled corporationsand their subsidiaries; and (d) such non-governmental entities receivingsubsidy or equity, directly or indirectly, from or through the government,which are required by law or the granting institution to submit to suchaudit as a condition of subsidy or equity. However, where the internalcontrol system of the audited agencies is inadequate, the Commissionmay adopt such measures, including temporary or special pre-audit, as

are necessary and appropriate to correct the deficiencies. It shall keepthe general accounts of the Government, and for such period as may beprovided by law, preserve the vouchers and other supporting paperspertaining thereto. (Emphasis supplied)

Petitioner explained thus:


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a. Although the petitioner was created by special legislation, this

necessarily came about because in January 1905 there was as yet neither a

Corporation Law or any other general law under which it may be organized

and incorporated, nor a Securities and Exchange Commission which would

have passed upon its organization and incorporation.

b. That Executive Order No. 63, issued during the Commonwealth period,

effectively deprived the petitioner of its power to make arrests, and that the

petitioner lost its operational funding, underscore the fact that it exercises

no governmental function. In fine, the government itself, by its overt acts,

confirmed petitioners status as a private juridical entity.

The COA General Counsel issued a Memorandum

[6]

dated May 6, 2004, assertingthat the petitioner was subject to its audit authority. In a letter dated May 17, 2004,[7] respondent COA informed the petitioner of the result of the evaluation, furnishing it

with a copy of said Memorandum dated May 6, 2004 of the General Counsel.

Petitioner thereafter filed with the respondent COA a Request for Re-evaluation

dated May 19, 2004,[8] insisting that it was a private domestic corporation.

Acting on the said request, the General Counsel of respondent COA, in a

Memorandum dated July 13, 2004,[9] affirmed her earlier opinion that the petitionerwas a government entity that was subject to the audit jurisdiction of respondent

COA. In a letter dated September 14, 2004, the respondent COA informed the

petitioner of the result of the re-evaluation, maintaining its position that the petitioner

was subject to its audit jurisdiction, and requested an initial conference with the

respondents.

In a Memorandum dated September 16, 2004, Director Delfin Aguilar reported

to COA Assistant Commissioner Juanito Espino, Corporate Government Sector, thatthe audit survey was not conducted due to the refusal of the petitioner because the

latter maintained that it was a private corporation.

Petitioner received on September 27, 2005 the subject COA Office Order 2005-

021 dated September 14, 2005 and the COA Letter dated September 23, 2005.
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Hence, herein Petition on the following grounds:

A.

RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE ABUSE OFDISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHENIT RULED THAT PETITIONER IS SUBJECT TO ITS AUDIT AUTHORITY.

B.PETITIONER IS ENTITLED TO THE RELIEF SOUGHT, THERE BEING NOAPPEAL, NOR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THEORDINARY COURSE OF LAW AVAILABLE TO IT.[10]

The essential question before this Court is whether the petitioner qualifies as a

government agency that may be subject to audit by respondent COA.

Petitioner argues: first, even though it was created by special legislation in 1905

as there was no general law then existing under which it may be organized or

incorporated, it exercises no governmental functions because these have been

revoked by C.A. No. 148 and E.O. No. 63; second, nowhere in its charter is it indicated

that it is a public corporation, unlike, for instance, C.A. No. 111 which created the Boy

Scouts of the Philippines, defined its powers and purposes, and specifically stated

that it was An Act to Create a Public Corporation in which, even as amended byPresidential Decree No. 460, the law still adverted to the Boy Scouts of the Philippines

as a public corporation, all of which are not obtaining in the charter of the

petitioner; third, if it were a government body, there would have been no need for the

State to grant it tax exemptions under Republic Act No. 1178, and the fact that it was

so exempted strengthens its position that it is a private institution; fourth, the

employees of the petitioner are registered and covered by the Social Security System

at the latters initiative and not through the Government Service Insurance System,

which should have been the case had the employees been considered government

employees; fifth, the petitioner does not receive any form of financial assistance from

the government, since C.A. No. 148, amending Section 5 of Act No. 1285, states that

the full amount of the fines, collected for violation of the laws against cruelty to

animals and for the protection of animals, shall accrue to the general fund of the

Municipality where the offense was committed; sixth, C.A. No. 148 effectively

deprived the petitioner of its powers to make arrests and serve processes as these
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functions were placed in the hands of the police force; seventh, no government

appointee or representative sits on the board of trustees of the petitioner; eighth, a

reading of the provisions of its charter (Act No. 1285) fails to show that any act or

decision of the petitioner is subject to the approval of or control by any government

agency, except to the extent that it is governed by the law on private corporations ingeneral; and finally, ninth, the Committee on Animal Welfare, under the Animal

Welfare Act of 1998, includes members from both the private and the public sectors.

The respondents contend that since the petitioner is a body politic created by

virtue of a special legislation and endowed with a governmental purpose, then,

indubitably, the COA may audit the financial activities of the latter. Respondents in

effect divide their contentions into six strains: first, the test to determine whether an

entity is a government corporation lies in the manner of its creation, and, since thepetitioner was created by virtue of a special charter, it is thus a government

corporation subject to respondents auditing power; second, the petitioner exercises

sovereign powers, that is, it is tasked to enforce the laws for the protection and

welfare of animals which ultimately redound to the public good and welfare, and,

therefore, it is deemed to be a government instrumentality as defined under the

Administrative Code of 1987, the purpose of which is connected with the

administration of government, as purportedly affirmed by American

jurisprudence; third, by virtue of Section 23,[11] Title II, Book III of the same Code, the

Office of the President exercises supervision or control over the petitioner; fourth,under the same Code, the requirement under its special charter for the petitioner to

render a report to the Civil Governor, whose functions have been inherited by the

Office of the President, clearly reflects the nature of the petitioner as a government

instrumentality; fifth, despite the passage of the Corporation Code, the law creating

the petitioner had not been abolished, nor had it been re-incorporated under any

general corporation law; and finally, sixth, Republic Act No. 8485, otherwise known as

the Animal Welfare Act of 1998, designates the petitioner as a member of its

Committee on Animal Welfare which is attached to the Department of Agriculture.

In view of the phrase One-half of all the fines imposed and collected through

the efforts of said society, the Court, in a Resolution dated January 30, 2007,

required the Office of the Solicitor General (OSG) and the parties to comment on: a)

petitioner's authority to impose fines and the validity of the provisions of Act No. 1285

and Commonwealth Act No. 148 considering that there are no standard measures


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provided for in the aforecited laws as to the manner of implementation, the specific

violations of the law, the person/s authorized to impose fine and in what amount; and,

b) the effect of the 1935 and 1987 Constitutions on whether petitioner continues to

exist or should organize as a private corporation under the Corporation

Code, B.P.Blg. 68 as amended.

Petitioner and the OSG filed their respective Comments. Respondents filed a

Manifestation stating that since they were being represented by the OSG which filed

its Comment, they opted to dispense with the filing of a separate one and adopt for

the purpose that of the OSG.

The petitioner avers that it does not have the authority to impose fines for

violation of animal welfare laws; it only enjoyed the privilege of sharing in the finesimposed and collected from its efforts in the enforcement of animal welfare laws;

such privilege, however, was subsequently abolished by C.A. No. 148; that it

continues to exist as a private corporation since it was created by the Philippine

Commission before the effectivity of the Corporation law, Act No. 1459; and the 1935

and 1987 Constitutions.

The OSG submits that Act No. 1285 and its amendatory laws did not give

petitioner the authority to impose fines for violation of laws[12] relating to the

prevention of cruelty to animals and the protection of animals; that even prior to theamendment of Act No. 1285, petitioner was only entitled to share in the fines

imposed; C.A. No. 148 abolished that privilege to share in the fines collected; that

petitioner is a public corporation and has continued to exist since Act No. 1285;

petitioner was not repealed by the 1935 and 1987 Constitutions which contain

transitory provisions maintaining all laws issued not inconsistent therewith until

amended, modified or repealed.

The petition is impressed with merit.

The arguments of the parties, interlaced as they are, can be disposed of in five

points.

First, the Court agrees with the petitioner that the charter test cannot be

applied.


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Essentially, the charter test as it stands today provides:

[T]he test to determine whether a corporation is government owned orcontrolled, or private in nature is simple. Is it created by its own charterfor the exercise of a public function, or by incorporation under thegeneral corporation law? Those with special charters are governmentcorporations subject to its provisions, and its employees are under the

jurisdiction of the Civil Service Commission, and are compulsorymembers of the Government Service Insurance System. xxx (Emphasissupplied)[13]

The petitioner is correct in stating that the charter test is predicated, at best, on

the legal regime established by the 1935 Constitution, Section 7, Article XIII, which

states:

Sec. 7. The National Assembly shall not, except by general law,

provide for the formation, organization, or regulation of privatecorporations, unless such corporations are owned or controlled by theGovernment or any subdivision or instrumentality thereof.[14]

The foregoing proscription has been carried over to the 1973 and the 1987

Constitutions. Section 16 of Article XII of the present Constitution provides:

Sec. 16. The Congress shall not, except by general law, provide

for the formation, organization, or regulation of privatecorporations. Government-owned or controlled corporations may becreated or established by special charters in the interest of the commongood and subject to the test of economic viability.

Section 16 is essentially a re-enactment of Section 7 of Article XVI of the 1935

Constitution and Section 4 of Article XIV of the 1973 Constitution.

During the formulation of the 1935 Constitution, the Committee on Franchises

recommended the foregoing proscription to prevent the pressure of special interestsupon the lawmaking body in the creation of corporations or in the regulation of the

same. To permit the lawmaking body by special law to provide for the organization,

formation, or regulation of private corporations would be in effect to offer to it the

temptation in many cases to favor certain groups, to the prejudice of others or to the

prejudice of the interests of the country.[15]
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And since the underpinnings of the charter test had been introduced by the

1935 Constitution and not earlier, it follows that the test cannot apply to the

petitioner, which was incorporated by virtue of Act No. 1285, enacted on January 19,

1905. Settled is the rule that laws in general have no retroactive effect, unless thecontrary is provided.[16] All statutes are to be construed as having only a prospective

operation, unless the purpose and intention of the legislature to give them a

retrospective effect is expressly declared or is necessarily implied from the language

used. In case of doubt, the doubt must be resolved against the retrospective effect.[17]

There are a few exceptions. Statutes can be given retroactive effect in the

following cases: (1) when the law itself so expressly provides; (2) in case of remedialstatutes; (3) in case of curative statutes; (4) in case of laws interpreting others; and

(5) in case of laws creating new rights.[18] None of the exceptions is present in the

instant case.

The general principle of prospectivity of the law likewise applies to Act No.

1459, otherwise known as the Corporation Law, which had been enacted by virtue of

the plenary powers of the Philippine Commission on March 1, 1906, a little over a year

after January 19, 1905, the time the petitioner emerged as a juridical entity. Even the

Corporation Law respects the rights and powers of juridical entities organizedbeforehand, viz:

SEC. 75. Any corporation or sociedad anonima formed,

organized, and existing under thelaws of the Philippine Islands and lawfully transacting business inthe Philippine Islands on the date of the passage of this Act, shall be

subject to the provisions hereof so far as suchprovisions may be applicable and shallbe entitled at its option either to continue business as suchcorporation or to reform and organize under and by virtue of the

provisions of this Act, transferring all corporate interests to the newcorporation which, if a stock corporation, is authorized to issue its sharesof stock at par to the stockholders or members of the old corporationaccording to their interests. (Emphasis supplied).


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As pointed out by the OSG, both the 1935 and 1987 Constitutions contain

transitory provisions maintaining all laws issued not inconsistent therewith until

amended, modified or repealed.[19]

In a legal regime where the charter test doctrine cannot be applied, the mere

fact that a corporation has been created by virtue of a special law does notnecessarily qualify it as a public corporation.

What then is the nature of the petitioner as a corporate entity? What legal

regime governs its rights, powers, and duties?

As stated, at the time the petitioner was formed, the applicable law was the

Philippine Bill of 1902, and, emphatically, as also stated above, no proscription similar

to the charter test can be found therein.

The textual foundation of the charter test, which placed a limitation on the

power of the legislature, first appeared in the 1935 Constitution. However, the

petitioner was incorporated in 1905 by virtue of Act No. 1258, a law antedating the

Corporation Law (Act No. 1459) by a year, and the 1935 Constitution, by thirty

years. There being neither a general law on the formation and organization of private

corporations nor a restriction on the legislature to create private corporations by

direct legislation, the Philippine Commission at that moment in history was well within

its powers in 1905 to constitute the petitioner as a private juridical entity.

Time and again the Court must caution even the most brilliant scholars of the

law and all constitutional historians on the danger of imposing legal concepts of a

later date on facts of an earlier date.[20]

The amendments introduced by C.A. No. 148 made it clear that the petitioner

was a private corporation and not an agency of the government. This was evident in

Executive Order No. 63, issued by then President of the Philippines Manuel L. Quezon,declaring that the revocation of the powers of the petitioner to appoint agents with

powers of arrest corrected a serious defect in one of the laws existing in the statute

books.

As a curative statute, and based on the doctrines so far discussed, C.A. No. 148

has to be given retroactive effect, thereby freeing all doubt as to which class of


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corporations the petitioner belongs, that is, it is a quasi-public corporation, a kind of

private domestic corporation, which the Court will further elaborate on under

thefourth point.

Second, a reading of petitioners charter shows that it is not subject to controlor supervision by any agency of the State, unlike government-owned and -controlled

corporations. No government representative sits on the board of trustees of the

petitioner. Like all private corporations, the successors of its members are

determined voluntarily and solely by the petitioner in accordance with its by-laws,

and may exercise those powers generally accorded to private corporations, such as

the powers to hold property, to sue and be sued, to use a common seal, and so

forth. It may adopt by-laws for its internal operations: the petitioner shall be

managed or operated by its officers in accordance with its by-laws in force. Thepertinent provisions of the charter provide:

Section 1. Anna L. Ide, Kate S. Wright, John L. Chamberlain,

William F. Tucker, Mary S. Fergusson, Amasa S. Crossfield, SpencerCosby, Sealy B. Rossiter, Richard P. Strong, Jose Robles Lahesa, JosefinaR. de Luzuriaga, and such other persons as may be associated withthem in conformity with this act, and their successors, are herebyconstituted and created a body politic and corporate at law, under thename and style of The Philippines Society for the Prevention of Crueltyto Animals.

As incorporated by this Act, said society shall have the power to

add to its organization such and as many members as it desires, toprovide for and choose such officers as it may deem advisable,and in such manner as it may wish, and to remove members as itshall provide.

It shall have the right to sue and be sued, to use a common seal,

toreceive legacies and donations, to conduct social enterprises for the purpose of obtaining funds, to levy dues uponits members and provide for their collection to hold real and personalestate such as may be necessary for the accomplishment of thepurposes of the society, and to adopt such by-laws for its government asmay not be inconsistent with law or this charter.

x x x xSec. 3. The said society shall be operated under the direction of

its officers, in accordance with its by-laws in force, and this charter.


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x x x xSec. 6. The principal office of the society shall be kept in the city

of Manila, and the society shall have full power to locate and establishbranch offices of the society wherever it may deem advisable in thePhilippine Islands, such branch offices to be under the supervision and

control of the principal office.

Third. The employees of the petitioner are registered and covered by the Social

Security System at the latters initiative, and not through the Government Service

Insurance System, which should be the case if the employees are considered

government employees. This is another indication of petitioners nature as a private

entity. Section 1 of Republic Act No. 1161, as amended by Republic Act No. 8282,

otherwise known as the Social Security Act of 1997, defines the employer:

Employer Any person, natural or juridical, domestic or foreign,

who carries on in the Philippines any trade, business, industry,undertaking or activity of any kind and uses the services of anotherperson who is under his orders as regards the employment, except theGovernment and any of its political subdivisions, branches orinstrumentalities, including corporations owned or controlled by theGovernment: Provided, That a self-employed person shall be bothemployee and employer at the same time. (Emphasis supplied)

Fourth. The respondents contend that the petitioner is a body politic because

its primary purpose is to secure the protection and welfare of animals which, in turn,

redounds to the public good.

This argument, is, at best, specious. The fact that a certain juridical entity is

impressed with public interest does not, by that circumstance alone, make the entity

a public corporation, inasmuch as a corporation may be private although its charter

contains provisions of a public character, incorporated solely for the public good. This

class of corporations may be considered quasi-public corporations, which are private

corporations that render public service, supply public wants,[21]

or pursue othereleemosynary objectives. While purposely organized for the gain or benefit of its

members, they are required by law to discharge functions for the public

benefit. Examples of these corporations are utility,[22] railroad, warehouse, telegraph,

telephone, water supply corporations and transportation companies.[23] It must be

stressed that a quasi-public corporation is a species of private corporations, but


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the qualifying factor is the type of service the former renders to the public: if it

performs a public service, then it becomes a quasi-public corporation.[24]

Authorities are of the view that the purpose alone of the corporation cannot be

taken as a safe guide, for the fact is that almost all corporations are nowadays

created to promote the interest, good, or convenience of the public. A bank, for

example, is a private corporation; yet, it is created for a public benefit. Private

schools and universities are likewise private corporations; and yet, they are rendering

public service. Private hospitals and wards are charged with heavy social

responsibilities. More so with all common carriers. On the other hand, there may

exist a public corporation even if it is endowed with gifts or donations from private

individuals.

The true criterion, therefore, to determine whether a corporation is public or

private is found in the totality of the relation of the corporation to the State. If the

corporation is created by the State as the latters own agency or instrumentality to

help it in carrying out its governmental functions, then that corporation is considered

public; otherwise, it is private. Applying the above test, provinces, chartered cities,

and barangays can best exemplify public corporations. They are created by the State

as its own device and agency for the accomplishment of parts of its own public works.

[25]

It is clear that the amendments introduced by C.A. No. 148 revoked the powers

of the petitioner to arrest offenders of animal welfare laws and the power to serve

processes in connection therewith.

Fifth. The respondents argue that since the charter of the petitioner requires

the latter to render periodic reports to the Civil Governor, whose functions have been

inherited by the President, the petitioner is, therefore, a government instrumentality.

This contention is inconclusive. By virtue of the fiction that all corporations owe

their very existence and powers to the State, the reportorial requirement is applicable

to all corporations of whatever nature, whether they are public, quasi-public, or

private corporationsas creatures of the State, there is a reserved right in the


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legislature to investigate the activities of a corporation to determine whether it acted

within its powers. In other words, the reportorial requirement is the principal means

by which the State may see to it that its creature acted according to the powers and

functions conferred upon it. These principles were extensively discussed

in BataanShipyard & Engineering Co., Inc. v. Presidential Commission on Good

Government.[26] Here, the Court, in holding that the subject corporation could not

invoke the right against self-incrimination whenever the State demanded the

production of its corporate books and papers, extensively discussed the purpose of

reportorial requirements, viz:

x x x The corporation is a creature of the state. It is presumed to beincorporated for the benefit of the public. It received certain specialprivileges and franchises, and holds them subject to the laws of thestate and the limitations of its charter. Its powers are limited by law. Itcan make no contract not authorized by its charter. Its rights to act as acorporation are only preserved to it so long as it obeys the laws of itscreation. There is a reserve[d] right in the legislature to investigate itscontracts and find out whether it has exceeded its powers. It would be astrange anomaly to hold that a state, having chartered a corporation tomake use of certain franchises, could not, in the exercise of sovereignty,inquire how these franchises had been employed, and whether they hadbeen abused, and demand the production of the corporate books and

papers for that purpose. The defense amounts to this, that an officer ofthe corporation which is charged with a criminal violation of the statutemay plead the criminality of such corporation as a refusal to produce itsbooks. To state this proposition is to answer it. While an individual maylawfully refuse to answer incriminating questions unless protected by animmunity statute, it does not follow that a corporation vested withspecial privileges and franchises may refuse to show its hand whencharged with an abuse of such privileges. (Wilson v. United States, 55Law Ed., 771, 780.)[27]

WHEREFORE, the petition is GRANTED. Petitioner is DECLARED a private

domestic corporation subject to the jurisdiction of the Securities and Exchange

Commission. The respondents are ENJOINED from investigating, examining and

auditing the petitioner's fiscal and financial affairs.

SO ORDERED.


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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 80391 February 28, 1989

SULTAN ALIMBUSAR P. LIMBONA, petitioner,vs.

CONTE MANGELIN, SALIC ALI, SALINDATO ALI, PILIMPINAS CONDING, ACMADTOMAWIS, GERRY TOMAWIS, JESUS ORTIZ, ANTONIO DELA FUENTE, DIEGOPALOMARES, JR., RAUL DAGALANGIT, and BIMBO SINSUAT, respondents.

Ambrosio Padilla, Mempin & Reyes Law Offices for petitioner petitioner.

Makabangkit B. Lanto for respondents.


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SARMIENTO, J.:

The acts of the Sangguniang Pampook of Region XII are assailed in this petition. Theantecedent facts are as follows:

1. On September 24, 1986, petitioner Sultan Alimbusar Limbona wasappointed as a member of the Sangguniang Pampook, RegionalAutonomous Government, Region XII, representing Lanao del Sur.

2. On March 12, 1987 petitioner was elected Speaker of the RegionalLegislative Assembly or Batasang Pampook of Central Mindanao(Assembly for brevity).

3. Said Assembly is composed of eighteen (18) members. Two of saidmembers, respondents Acmad Tomawis and Pakil Dagalangit, filed on

March 23, 1987 with the Commission on Elections their respectivecertificates of candidacy in the May 11, 1987 congressional elections forthe district of Lanao del Sur but they later withdrew from the aforesaidelection and thereafter resumed again their positions as members of theAssembly.

4. On October 21, 1987 Congressman Datu Guimid Matalam, Chairmanof the Committee on Muslim Affairs of the House of Representatives,invited Mr. Xavier Razul, Pampook Speaker of Region XI, ZamboangaCity and the petitioner in his capacity as Speaker of the Assembly,Region XII, in a letter which reads:

The Committee on Muslim Affairs well undertakeconsultations and dialogues with local government officials,civic, religious organizations and traditional leaders on therecent and present political developments and other issuesaffecting Regions IX and XII.

The result of the conference, consultations and dialogueswould hopefully chart the autonomous governments of thetwo regions as envisioned and may prod the President toconstitute immediately the Regional ConsultativeCommission as mandated by the Commission.

You are requested to invite some members of the PampookAssembly of your respective assembly on November 1 to15, 1987, with venue at the Congress of the Philippines.

Your presence, unstinted support and cooperation is (sic)indispensable.

5. Consistent with the said invitation, petitioner sent a telegram toActing Secretary Johnny Alimbuyao of the Assembly to wire all


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Assemblymen that there shall be no session in November as "ourpresence in the house committee hearing of Congress take (sic)precedence over any pending business in batasang pampook ... ."

6. In compliance with the aforesaid instruction of the petitioner, ActingSecretary Alimbuyao sent to the members of the Assembly the followingtelegram:

TRANSMITTING FOR YOUR INFORMATION AND GUIDANCETELEGRAM RECEIVED FROM SPEAKER LIMBONA QUOTECONGRESSMAN JIMMY MATALAM CHAIRMAN OF THE HOUSECOMMITTEE ON MUSLIM AFFAIRS REQUESTED ME TOASSIST SAID COMMITTEE IN THE DISCUSSION OF THEPROPOSED AUTONOMY ORGANIC NOV. 1ST TO 15. HENCEWERE ALL ASSEMBLYMEN THAT THERE SHALL BE NOSESSION IN NOVEMBER AS OUR PRESENCE IN THE HOUSECOMMITTEE HEARING OF CONGRESS TAKE PRECEDENCEOVER ANY PENDING BUSINESS IN BATASANG PAMPOOK OFMATALAM FOLLOWS UNQUOTE REGARDS.

7. On November 2, 1987, the Assembly held session in defiance ofpetitioner's advice, with the following assemblymen present:

1. Sali, Salic

2. Conding, Pilipinas (sic)

3. Dagalangit, Rakil

4. Dela Fuente, Antonio

5. Mangelen, Conte

6. Ortiz, Jesus

7. Palomares, Diego

8. Sinsuat, Bimbo

9. Tomawis, Acmad

10. Tomawis, Jerry

After declaring the presence of a quorum, the Speaker Pro-Tempore wasauthorized to preside in the session. On Motion to declare the seat of theSpeaker vacant, all Assemblymen in attendance voted in the affirmative,hence, the chair declared said seat of the Speaker vacant. 8. OnNovember 5, 1987, the session of the Assembly resumed with thefollowing Assemblymen present:


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1. Mangelen Conte-Presiding Officer

2. Ali Salic

3. Ali Salindatu

4. Aratuc, Malik

5. Cajelo, Rene

6. Conding, Pilipinas (sic)

7. Dagalangit, Rakil

8. Dela Fuente, Antonio

9. Ortiz, Jesus

10 Palomares, Diego

11. Quijano, Jesus

12. Sinsuat, Bimbo

13. Tomawis, Acmad

14. Tomawis, Jerry

An excerpt from the debates and proceeding of said session reads:HON. DAGALANGIT: Mr. Speaker, Honorable Members of the House, withthe presence of our colleagues who have come to attend the sessiontoday, I move to call the names of the new comers in order for them tocast their votes on the previous motion to declare the position of theSpeaker vacant. But before doing so, I move also that the designation ofthe Speaker Pro Tempore as the Presiding Officer and Mr. JohnnyEvangelists as Acting Secretary in the session last November 2, 1987 bereconfirmed in today's session.

HON. SALIC ALI: I second the motions.

PRESIDING OFFICER: Any comment or objections on the two motionspresented? Me chair hears none and the said motions are approved. ...

Twelve (12) members voted in favor of the motion to declare the seat ofthe Speaker vacant; one abstained and none voted against. 1

Accordingly, the petitioner prays for judgment as follows:


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WHEREFORE, petitioner respectfully prays that-

(a) This Petition be given due course;

(b) Pending hearing, a restraining order or writ of preliminary injunctionbe issued enjoining respondents from proceeding with their session tobe held on November 5, 1987, and on any day thereafter;

(c) After hearing, judgment be rendered declaring the proceedings heldby respondents of their session on November 2, 1987 as null and void;

(d) Holding the election of petitioner as Speaker of said LegislativeAssembly or Batasan Pampook, Region XII held on March 12, 1987 validand subsisting, and

(e) Making the injunction permanent.

Petitioner likewise prays for such other relief as may be just andequitable. 2

Pending further proceedings, this Court, on January 19, 1988, received a resolutionfiled by the Sangguniang Pampook, "EXPECTING ALIMBUSAR P. LIMBONA FROMMEMBERSHIP OF THE SANGGUNIANG PAMPOOK AUTONOMOUS REGION XII," 3 on thegrounds, among other things, that the petitioner "had caused to be prepared andsigned by him paying [sic] the salaries and emoluments of Odin Abdula, who wasconsidered resigned after filing his Certificate of Candidacy for Congressmen for theFirst District of Maguindanao in the last May 11, elections. . . and nothing in therecord of the Assembly will show that any request for reinstatement by Abdula wasever made . . ." 4 and that "such action of Mr. Lim bona in paying Abdula his salaries

and emoluments without authority from the Assembly . . . constituted a usurpation ofthe power of the Assembly," 5 that the petitioner "had recently caused withdrawal ofso much amount of cash from the Assembly resulting to the non-payment of thesalaries and emoluments of some Assembly [sic]," 6and that he had "filed a casebefore the Supreme Court against some members of the Assembly on question whichshould have been resolved within the confines of the Assembly," 7 for which therespondents now submit that the petition had become "moot and academic". 8

The first question, evidently, is whether or not the expulsion of the petitioner(pending litigation) has made the case moot and academic.

We do not agree that the case has been rendered moot and academic by reason

simply of the expulsion resolution so issued. For, if the petitioner's expulsion wasdone purposely to make this petition moot and academic, and to preempt the Court,it will not make it academic.

On the ground of the immutable principle of due process alone, we hold that theexpulsion in question is of no force and effect. In the first place, there is no showingthat the Sanggunian had conducted an investigation, and whether or not thepetitioner had been heard in his defense, assuming that there was an investigation,


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or otherwise given the opportunity to do so. On the other hand, what appears in therecords is an admission by the Assembly (at least, the respondents) that "sinceNovember, 1987 up to this writing, the petitioner has not set foot at the SangguniangPampook." 9 "To be sure, the private respondents aver that "[t]he Assemblymen, in aconciliatory gesture, wanted him to come to Cotabato City," 10 but that was "so thattheir differences could be threshed out and settled." 11 Certainly, that avowed

wanting or desire to thresh out and settle, no matter how conciliatory it may becannot be a substitute for the notice and hearing contemplated by law.

While we have held that due process, as the term is known in administrative law,does not absolutely require notice and that a party need only be given theopportunity to be heard, 12 it does not appear herein that the petitioner had, to beginwith, been made aware that he had in fact stood charged of graft and corruptionbefore his collegues. It cannot be said therefore that he was accorded anyopportunity to rebut their accusations. As it stands, then, the charges now levelledamount to mere accusations that cannot warrant expulsion.

In the second place, (the resolution) appears strongly to be a bare act of vendetta bythe other Assemblymen against the petitioner arising from what the former perceiveto be abduracy on the part of the latter. Indeed, it (the resolution) speaks of "a case[having been filed] [by the petitioner] before the Supreme Court . . . on questionwhich should have been resolved within the confines of the Assemblyman act whichsome members claimed unnecessarily and unduly assails their integrity and characteras representative of the people" 13 an act that cannot possibly justify expulsion.Access to judicial remedies is guaranteed by the Constitution, 14and, unless therecourse amounts to malicious prosecution, no one may be punished for seekingredress in the courts.

We therefore order reinstatement, with the caution that should the past acts of the

petitioner indeed warrant his removal, the Assembly is enjoined, should it still be sominded, to commence proper proceedings therefor in line with the most elementaryrequirements of due process. And while it is within the discretion of the members ofthe Sanggunian to punish their erring colleagues, their acts are nonetheless subjectto the moderating band of this Court in the event that such discretion is exercisedwith grave abuse.

It is, to be sure, said that precisely because the Sangguniang Pampook(s) are"autonomous," the courts may not rightfully intervene in their affairs, much less strikedown their acts. We come, therefore, to the second issue: Are the so-calledautonomous governments of Mindanao, as they are now constituted, subject to the

jurisdiction of the national courts? In other words, what is the extent of self-

government given to the two autonomous governments of Region IX and XII?

The autonomous governments of Mindanao were organized in Regions IX and XII byPresidential Decree No. 161815 promulgated on July 25, 1979. Among other things,the Decree established "internal autonomy" 16 in the two regions "[w]ithin theframework of the national sovereignty and territorial integrity of the Republic of thePhilippines and its Constitution," 17 with legislative and executive machinery toexercise the powers and responsibilities 18specified therein.


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It requires the autonomous regional governments to "undertake all internaladministrative matters for the respective regions," 19 except to "act on matters whichare within the jurisdiction and competence of the National Government," 20 "whichinclude, but are not limited to, the following:

(1) National defense and security;

(2) Foreign relations;

(3) Foreign trade;

(4) Currency, monetary affairs, foreign exchange, banking and quasi-banking, and external borrowing,

(5) Disposition, exploration, development, exploitation or utilization of allnatural resources;

(6) Air and sea transport

(7) Postal matters and telecommunications;

(8) Customs and quarantine;

(9) Immigration and deportation;

(10) Citizenship and naturalization;

(11) National economic, social and educational planning; and

(12) General auditing. 21

In relation to the central government, it provides that "[t]he President shall have thepower of general supervision and control over the Autonomous Regions ..." 22

Now, autonomy is either decentralization of administration or decentralization ofpower. There is decentralization of administration when the central governmentdelegates administrative powers to political subdivisions in order to broaden the baseof government power and in the process to make local governments "moreresponsive and accountable," 23 "and ensure their fullest development as self-reliantcommunities and make them more effective partners in the pursuit of national

development and social progress."24

At the same time, it relieves the centralgovernment of the burden of managing local affairs and enables it to concentrate onnational concerns. The President exercises "general supervision" 25 over them, butonly to "ensure that local affairs are administered according to law." 26 He has nocontrol over their acts in the sense that he can substitute their judgments with hisown. 27

Decentralization of power, on the other hand, involves an abdication of political powerin the favor of local governments units declare to be autonomous . In that case, the


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autonomous government is free to chart its own destiny and shape its future withminimum intervention from central authorities. According to a constitutional author,decentralization of power amounts to "self-immolation," since in that event, theautonomous government becomes accountable not to the central authorities but toits constituency. 28

But the question of whether or not the grant of autonomy Muslim Mindanao under the1987 Constitution involves, truly, an effort to decentralize power rather than mereadministration is a question foreign to this petition, since what is involved herein is alocal government unit constituted prior to the ratification of the present Constitution.Hence, the Court will not resolve that controversy now, in this case, since nocontroversy in fact exists. We will resolve it at the proper time and in the proper case.

Under the 1987 Constitution, local government units enjoy autonomy in these twosenses, thus:

Section 1. The territorial and political subdivisions of the Republic of the

Philippines are the provinces, cities, municipalities, and barangays. Hereshall be autonomous regions in Muslim Mindanao ,and the Cordilleras ashereinafter provided. 29

Sec. 2. The territorial and political subdivisions shall enjoy localautonomy. 30

xxx xxx xxx

See. 15. Mere shall be created autonomous regions in Muslim Mindanaoand in the Cordilleras consisting of provinces, cities, municipalities, andgeographical areas sharing common and distinctive historical and

cultural heritage, economic and social structures, and other relevantcharacteristics within the framework of this Constitution and the nationalsovereignty as well as territorial integrity of the Republic of thePhilippines. 31

An autonomous government that enjoys autonomy of the latter category [CONST.(1987), art. X, sec. 15.] is subject alone to the decree of the organic act creating itand accepted principles on the effects and limits of "autonomy." On the other hand,an autonomous government of the former class is, as we noted, under the supervisionof the national government acting through the President (and the Department ofLocal Government).32 If the Sangguniang Pampook (of Region XII), then, isautonomous in the latter sense, its acts are, debatably beyond the domain of this

Court in perhaps the same way that the internal acts, say, of the Congress of thePhilippines are beyond our jurisdiction. But if it is autonomous in the former categoryonly, it comes unarguably under our jurisdiction. An examination of the veryPresidential Decree creating the autonomous governments of Mindanao persuades usthat they were never meant to exercise autonomy in the second sense, that is, inwhich the central government commits an act of self-immolation. Presidential DecreeNo. 1618, in the first place, mandates that "[t]he President shall have the power ofgeneral supervision and control over Autonomous Regions." 33 In the second place,


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the Sangguniang Pampook, their legislative arm, is made to discharge chieflyadministrative services, thus:

SEC. 7. Powers of the Sangguniang Pampook. The SangguniangPampook shall exercise local legislative powers over regional affairswithin the framework of national development plans, policies and goals,in the following areas:

(1) Organization of regional administrative system;

(2) Economic, social and cultural development of the AutonomousRegion;

(3) Agricultural, commercial and industrial programs for the AutonomousRegion;

(4) Infrastructure development for the Autonomous Region;

(5) Urban and rural planning for the Autonomous Region;

(6) Taxation and other revenue-raising measures as provided for in thisDecree;

(7) Maintenance, operation and administration of schools established bythe Autonomous Region;

(8) Establishment, operation and maintenance of health, welfare andother social services, programs and facilities;

(9) Preservation and development of customs, traditions, languages andculture indigenous to the Autonomous Region; and

(10) Such other matters as may be authorized by law,including theenactment of such measures as may be necessary for the promotion ofthe general welfare of the people in the Autonomous Region.

The President shall exercise such powers as may be necessary to assurethat enactment and acts of the Sangguniang Pampook and the Lupong

Tagapagpaganap ng Pook are in compliance with this Decree, nationallegislation, policies, plans and programs.

The Sangguniang Pampook shall maintain liaison with the BatasangPambansa. 34

Hence, we assume jurisdiction. And if we can make an inquiry in the validity of theexpulsion in question, with more reason can we review the petitioner's removal asSpeaker.


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Briefly, the petitioner assails the legality of his ouster as Speaker on the grounds that:(1) the Sanggunian, in convening on November 2 and 5, 1987 (for the sole purpose ofdeclaring the office of the Speaker vacant), did so in violation of the Rules of theSangguniang Pampook since the Assembly was then on recess; and (2) assuming thatit was valid, his ouster was ineffective nevertheless for lack of quorum.

Upon the facts presented, we hold that the November 2 and 5, 1987 sessions wereinvalid. It is true that under Section 31 of the Region XII Sanggunian Rules, "[s]essionsshall not be suspended or adjourned except by direction of the SangguniangPampook," 35 but it provides likewise that "the Speaker may, on [sic] his discretion,declare a recess of "short intervals." 36 Of course, there is disagreement between theprotagonists as to whether or not the recess called by the petitioner effectiveNovember 1 through 15, 1987 is the "recess of short intervals" referred to; thepetitioner says that it is while the respondents insist that, to all intents and purposes,it was an adjournment and that "recess" as used by their Rules only refers to "arecess when arguments get heated up so that protagonists in a debate can talk thingsout informally and obviate dissenssion [sic] and disunity. 37 The Court agrees with therespondents on this regard, since clearly, the Rules speak of "short intervals."Secondly, the Court likewise agrees that the Speaker could not have validly called arecess since the Assembly had yet to convene on November 1, the date sessionopens under the same Rules. 38Hence, there can be no recess to speak of that couldpossibly interrupt any session. But while this opinion is in accord with therespondents' own, we still invalidate the twin sessions in question, since at the timethe petitioner called the "recess," it was not a settled matter whether or not he could.do so. In the second place, the invitation tendered by the Committee on MuslimAffairs of the House of Representatives provided a plausible reason for theintermission sought. Thirdly, assuming that a valid recess could not be called, it doesnot appear that the respondents called his attention to this mistake. What appears isthat instead, they opened the sessions themselves behind his back in an apparent actof mutiny. Under the circumstances, we find equity on his side. For this reason, weuphold the "recess" called on the ground of good faith.

It does not appear to us, moreover, that the petitioner had resorted to the aforesaid"recess" in order to forestall the Assembly from bringing about his ouster. This is notapparent from the pleadings before us. We are convinced that the invitation was whatprecipitated it.

In holding that the "recess" in question is valid, we are not to be taken as establishinga precedent, since, as we said, a recess can not be validly declared without a sessionhaving been first opened. In upholding the petitioner herein, we are not giving hima carte blanche to order recesses in the future in violation of the Rules, or otherwise

to prevent the lawful meetings thereof.

Neither are we, by this disposition, discouraging the Sanggunian from reorganizingitself pursuant to its lawful prerogatives. Certainly, it can do so at the proper time. Inthe event that be petitioner should initiate obstructive moves, the Court is certainthat it is armed with enough coercive remedies to thwart them. 39

In view hereof, we find no need in dwelling on the issue of quorum.


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WHEREFORE, premises considered, the petition is GRANTED. The SangguniangPampook, Region XII, is ENJOINED to (1) REINSTATE the petitioner as Member,Sangguniang Pampook, Region XII; and (2) REINSTATE him as Speaker thereof. Nocosts.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano,Gancayco, Bidin, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Padilla, J., took no part.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC


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G.R. No. 111097 July 20, 1994

MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners,vs.PRYCE PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT ANDGAMING CORPORATION,respondents.

Aquilino G. Pimentel, Jr. and Associates for petitioners.

R.R. Torralba & Associates for private respondent.

CRUZ,J.:

There was instant opposition when PAGCOR announced the opening of a casino inCagayan de Oro City. Civic organizations angrily denounced the project. The religious

elements echoed the objection and so did the women's groups and the youth.Demonstrations were led by the mayor and the city legislators. The media trumpetedthe protest, describing the casino as an affront to the welfare of the city.

The trouble arose when in 1992, flush with its tremendous success in several cities,PAGCOR decided to expand its operations to Cagayan de Oro City. To this end, itleased a portion of a building belonging to Pryce Properties Corporation, Inc., one ofthe herein private respondents, renovated and equipped the same, and prepared toinaugurate its casino there during the Christmas season.

The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift andhostile. On December 7, 1992, it enacted Ordinance No. 3353 reading as follows:

ORDINANCE NO. 3353

AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT ANDCANCELLING EXISTING BUSINESS PERMIT TO ANY ESTABLISHMENT FOR

THE USING AND ALLOWING TO BE USED ITS PREMISES OR PORTIONTHEREOF FOR THE OPERATION OF CASINO.

BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayande Oro, in session assembled that:

Sec. 1. That pursuant to the policy of the city banning the operation ofcasino within its territorial jurisdiction, no business permit shall beissued to any person, partnership or corporation for the operation ofcasino within the city limits.

Sec. 2. That it shall be a violation of existing business permit by anypersons, partnership or corporation to use its business establishment orportion thereof, or allow the use thereof by others for casino operationand other gambling activities.


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Sec. 3. PENALTIES. Any violation of such existing business permitas defined in the preceding section shall suffer the following penalties,to wit:

a) Suspension of the business permit for sixty(60) days for the first offense and a fine ofP1,000.00/day

b) Suspension of the business permit for Six(6) months for the second offense, and a fineof P3,000.00/day

c) Permanent revocation of the businesspermit and imprisonment of One (1) year, forthe third and subsequent offenses.

Sec. 4. This Ordinance shall take effect ten (10) days from publication

thereof.Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-93reading as follows:

ORDINANCE NO. 3375-93

AN ORDINANCE PROHIBITING THE OPERATION OF CASINO ANDPROVIDING PENALTY FOR VIOLATION THEREFOR.

WHEREAS, the City Council established a policy as early as 1990 againstCASINO under its Resolution No. 2295;

WHEREAS, on October 14, 1992, the City Council passed anotherResolution No. 2673, reiterating its policy against the establishment ofCASINO;

WHEREAS, subsequently, thereafter, it likewise passed Ordinance No.3353, prohibiting the issuance of Business Permit and to cancel existingBusiness Permit to any establishment for the using and allowing to beused its premises or portion thereof for the operation of CASINO;

WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of theLocal Government Code of 1991 (Rep. Act 7160) and under Art. 99, No.(4), Paragraph VI of the implementing rules of the Local GovernmentCode, the City Council as the Legislative Body shall enact measure tosuppress any activity inimical to public morals and general welfare ofthe people and/or regulate or prohibit such activity pertaining toamusement or entertainment in order to protect social and moralwelfare of the community;

NOW THEREFORE,


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BE IT ORDAINED by the City Council in session duly assembled that:

Sec. 1. The operation of gambling CASINO in the City of Cagayan deOro is hereby prohibited.

Sec. 2. Any violation of this Ordinance shall be subject to the followingpenalties:

a) Administrative fine of P5,000.00 shall be imposed against theproprietor, partnership or corporation undertaking the operation,conduct, maintenance of gambling CASINO in the City and closurethereof;

b) Imprisonment of not less than six (6) months nor more than one (1)year or a fine in the amount of P5,000.00 or both at the discretion of thecourt against the manager, supervisor, and/or any person responsible inthe establishment, conduct and maintenance of gambling CASINO.

Sec. 3. This Ordinance shall take effect ten (10) days after itspublication in a local newspaper of general circulation.

Pryce assailed the ordinances before the Court of Appeals, where it was joined byPAGCOR as intervenor and supplemental petitioner. Their challenge succeeded. OnMarch 31, 1993, the Court of Appeals declared the ordinances invalid and issued thewrit prayed for to prohibit their enforcement. 1Reconsideration of this decision wasdenied on July 13, 1993. 2

Cagayan de Oro City and its mayor are now before us in this petition for review underRule 45 of the Rules of Court. 3They aver that the respondent Court of Appeals erred

in holding that:

1. Under existing laws, the Sangguniang Panlungsod of the City ofCagayan de Oro does not have the power and authority to prohibit theestablishment and operation of a PAGCOR gambling casino within theCity's territorial limits.

2. The phrase "gambling and other prohibited games of chance" found inSec. 458, par. (a), sub-par. (1) (v) of R.A. 7160 could only mean"illegal gambling."

3. The questioned Ordinances in effect annul P.D. 1869 and aretherefore invalid on that point.

4. The questioned Ordinances are discriminatory to casino and partial tocockfighting and are therefore invalid on that point.

5. The questioned Ordinances are not reasonable, not consonant withthe general powers and purposes of the instrumentality concerned andinconsistent with the laws or policy of the State.


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6. It had no option but to follow the ruling in the case ofBasco, et al. v.PAGCOR, G.R. No. 91649, May 14, 1991, 197 SCRA 53 in disposing of theissues presented in this present case.

PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulateall games of chance, including casinos on land and sea within the territorial

jurisdiction of the Philippines. In Basco v. Philippine Amusements and GamingCorporation, 4this Court sustained the constitutionality of the decree and even citedthe benefits of the entity to the national economy as the third highest revenue-earnerin the government, next only to the BIR and the Bureau of Customs.

Cagayan de Oro City, like other local political subdivisions, is empowered to enactordinances for the purposes indicated in the Local Government Code. It is expresslyvested with the police power under what is known as the General Welfare Clause nowembodied in Section 16 as follows:

Sec. 16. General Welfare. Every local government unit shall

exercise the powers expressly granted, those necessarily impliedtherefrom, as well as powers necessary, appropriate, or incidental for itsefficient and effective governance, and those which are essential to thepromotion of the general welfare. Within their respective territorial

jurisdictions, local government units shall ensure and support, amongother things, the preservation and enrichment of culture, promote healthand safety, enhance the right of the people to a balanced ecology,encourage and support the development of appropriate and self-reliantscientific and technological capabilities, improve public morals, enhanceeconomic prosperity and social justice, promote full employment amongtheir residents, maintain peace and order, and preserve the comfort andconvenience of their inhabitants.

In addition, Section 458 of the said Code specifically declares that:

Sec. 458. Powers, Duties, Functions and Compensation. (a) TheSangguniang Panlungsod, as the legislative body of the city, shall enactordinances, approve resolutions and appropriate funds for the generalwelfare of the city and its inhabitants pursuant to Section 16 of thisCode and in the proper exercise of the corporate powers of the city asprovided for under Section 22 of this Code, and shall:

(1) Approve ordinances and pass resolutions necessary for an efficientand effective city government, and in this connection, shall:

xxx xxx xxx

(v) Enact ordinances intended to prevent,suppress and impose appropriate penaltiesfor habitual drunkenness in public places,vagrancy, mendicancy, prostitution,establishment and maintenance of houses of


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ill repute,gambling and other prohibitedgames of chance, fraudulent devices andways to obtain money or property, drugaddiction, maintenance of drug dens, drugpushing, juvenile delinquency, the printing,distribution or exhibition of obscene or

pornographic materials or publications, andsuch other activities inimical to the welfareand morals of the inhabitants of the city;

This section also authorizes the local government units to regulate properties andbusinesses within their territorial limits in the interest of the general welfare. 5

The petitioners argue that by virtue of these provisions, the Sangguniang Panlungsodmay prohibit the operation of casinos because they involve games of chance, whichare detrimental to the people. Gambling is not allowed by general law and even bythe Constitution itself. The legislative power conferred upon local government unitsmay be exercised over all kinds of gambling and not only over "illegal gambling" asthe respondents erroneously argue. Even if the operation of casinos may have beenpermitted under P.D. 1869, the government of Cagayan de Oro City has the authorityto prohibit them within its territory pursuant to the authority entrusted to it by theLocal Government Code.

It is submitted that this interpretation is consonant with the policy of local autonomyas mandated in Article II, Section 25, and Article X of the Constitution, as well asvarious other provisions therein seeking to strengthen the character of the nation. Ingiving the local government units the power to prevent or suppress gambling andother 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 their inhabitants in line with the policies of the State.The petitioners also stress that when the Code expressly authorized the localgovernment units to prevent and suppress gambling and other prohibited games ofchance, like craps, baccarat, blackjack and roulette, it meant allforms of gamblingwithout distinction. Ubi lex non distinguit, nec nos distinguere debemos. 6Otherwise,it would have expressly excluded from the scope of their power casinos and otherforms of gambling authorized by special law, as it could have easily done. The factthat it did not do so simply means that the local government units are permitted toprohibit all kinds of gambling within their territories, including the operation ofcasinos.

The adoption of the Local Government Code, it is pointed out, had the effect ofmodifying the charter of the PAGCOR. The Code is not only a later enactment thanP.D. 1869 and so is deemed to prevail in case of inconsistencies between them. Morethan this, the powers of the PAGCOR under the decree are expressly discontinued bythe Code insofar as they do not conform to its philosophy and provisions, pursuant toPar. (f) of its repealing clause reading as follows:

(f) All general and special laws, acts, city charters, decrees, executiveorders, proclamations and administrative regulations, or part or parts


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thereof which are inconsistent with any of the provisions of this Code arehereby repealed or modified accordingly.

It is also maintained that assuming there is doubt regarding the effect of the LocalGovernment Code on P.D. 1869, the doubt must be resolved in favor of thepetitioners, in accordance with the direction in the Code calling for its liberalinterpretation in favor of the local government units. Section 5 of the Code specificallyprovides:

Sec. 5. Rules of Interpretation. In the interpretation of the provisionsof this Code, the following rules shall apply:

(a)Any provision on a power of a local government unit shall be liberallyinterpreted in its favor, and in case of doubt, any question thereon shallbe resolved in favor of devolution of powers and of the lower localgovernment unit. Any fair and reasonable doubt as to the existence ofthe power shall be interpreted in favor of the local government unit

concerned;xxx xxx xxx

(c) The general welfare provisions in this Code shall be liberallyinterpreted to give more powers to local government units inaccelerating economic development and upgrading the quality of life forthe people in the community; . . . (Emphasis supplied.)

Finally, the petitioners also attack gambling as intrinsically harmful and cite variousprovisions of the Constitution and several decisions of this Court expressive of thegeneral and official disapprobation of the vice. They invoke the State policies on the

family and the proper upbringing of the youth and, as might be expected, callattention to the old case ofU.S. v. Salaveria, 7which sustained a municipal ordinanceprohibiting the playing ofpanguingue. The petitioners decry the immorality ofgambling. They also impugn the wisdom of P.D. 1869 (which they describe as "amartial law instrument") in creating PAGCOR and authorizing it to operate casinos "onland and sea within the territorial jurisdiction of the Philippines."

This is the opportune time to stress an important point.

The morality of gambling is not a justiciable issue. Gambling is not illegal per se.While it is generally considered inimical to the interests of the people, there is nothingin the Constitution categorically proscribing or penalizing gambling or, for that

matter, even mentioning it at all. It is left to Congress to deal with the activity as itsees fit. In the exercise of its own discretion, the legislature may prohibit gamblingaltogether or allow it without limitation or it may prohibit some forms of gambling andallow others for whatever reasons it may consider sufficient. Thus, it hasprohibited jueteng and monte but permits lotteries, cockfighting and horse-racing. Inmaking such choices, Congress has consulted its own wisdom, which this Court hasno authority to review, much less reverse. Well has it been said that courts do not sitto resolve the merits of conflicting theories. 8That is the prerogative of the political


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departments. It is settled that questions regarding the wisdom, morality, orpracticibility of statutes are not addressed to the judiciary but may be resolved onlyby the legislative and executive departments, to which the function belongs in ourscheme of government. That function is exclusive. Whichever way these branchesdecide, they are answerable only to their own conscience and the constituents whowill ultimately judge their acts, and not to the courts of justice.

The only question we can and shall resolve in this petition is the validity of OrdinanceNo. 3355 and Ordinance No. 3375-93 as enacted by the Sangguniang Panlungsod ofCagayan de Oro City. And we shall do so only by the criteria laid down by law and notby our own convictions on the propriety of gambling.

The tests of a valid ordinance are well established. A long line of decisions 9has heldthat to be valid, an ordinance must conform to the following substantiverequirements:

1) It must not contravene the constitution or any statute.

2) It must not be unfair or oppressive.

3) It must not be partial or discriminatory.

4) It must not prohibit but may regulate trade.

5) It must be general and consistent with public policy.

6) It must not be unreasonable.

We begin by observing that under Sec. 458 of the Local Government Code, local

government units are authorized to prevent or suppress, among others, "gamblingand otherprohibited games of chance." Obviously, this provision excludes games ofchance which are not prohibited but are in fact permitted by law. The petitioners areless than accurate in claiming that the Code could have excluded such games ofchance but did not. In fact it does. The language of the section is clear andunmistakable. Under the rule ofnoscitur a sociis, a word or phrase should beinterpreted in relation to, or given the same meaning of, words with which it isassociated. Accordingly, we conclude that since the word "gambling" is associatedwith "and otherprohibited games of chance," the word should be read as referring toonly illegal gambling which, like the otherprohibited games of chance, must beprevented or suppressed.

We could stop here as this interpretation should settle the problem quite conclusively.But we will not. The vigorous efforts of the petitioners on behalf of the inhabitants ofCagayan de Oro City, and the earnestness of their advocacy, deserve more than shortshrift from this Court.

The apparent flaw in the ordinances in question is that they contravene P.D. 1869 andthe public policy embodied therein insofar as they prevent PAGCOR from exercisingthe power conferred on it to operate a casino in Cagayan de Oro City. The petitioners


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have an ingenious answer to this misgiving. They deny that it is the ordinances thathave changed P.D. 1869 for an ordinance admittedly cannot prevail against a statute.

Their theory is that the change has been made by the Local Government Code itself,which was also enacted by the national lawmaking authority. In their view, the decreehas been, not really repealed by the Code, but merely "modified pro tanto" in thesense that PAGCOR cannot now operate a casino over the objection of the local

government unit concerned. This modification of P.D. 1869 by the Local GovernmentCode is permissible because one law can change or repeal another law.

It seems to us that the petitioners are playing with words. While insisting that thedecree has only been "modifiedpro tanto," they are actually arguing that it is alreadydead, repealed and useless for all intents and purposes because the Code has shornPAGCOR of all power to centralize and regulate casinos. Strictly speaking, itsoperations may now be not only prohibited by the local government unit; in fact, theprohibition is not only discretionary but mandatedby Section 458 of the Code if theword "shall" as used therein is to be given its accepted meaning. Local governmentunits have now no choice but to prevent and suppress gambling, which in thepetitioners' view includes both legal and illegal gambling. Under this construction,PAGCOR will have no more games of chance to regulate or centralize as they must allbe prohibited by the local government units pursuant to the mandatory duty imposedupon them by the Code. In this situation, PAGCOR cannot continue to exist exceptonly as a toothless tiger or a white elephant and will no longer be able to exercise itspowers as a prime source of government revenue through the operation of casinos.

It is noteworthy that the petitioners have cited only Par. (f) of the repealing clause,conveniently discarding the rest of the provision which painstakingly mentions thespecific laws or the parts thereof which are repealed (or modified) by the Code.Significantly, P.D. 1869 is not one of them. A reading of the entire repealing clause,which is reproduced below, will disclose the omission:

Sec. 534. Repealing Clause. (a) Batas Pambansa Blg. 337, otherwiseknown as the "Local Government Code," Executive Order No. 112(1987), and Executive Order No. 319 (1988) are hereby repealed.

(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees,orders, instructions, memoranda and issuances related to or concerningthe barangay are hereby repealed.

(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939regarding hospital fund; Section 3, a (3) and b (2) of Republic Act. No.5447 regarding the Special Education Fund; Presidential Decree No. 144

as amended by Presidential Decree Nos. 559 and 1741; PresidentialDecree No. 231 as amended; Presidential Decree No. 436 as amendedby Presidential Decree No. 558; and Presidential Decree Nos. 381, 436,464, 477, 526, 632, 752, and 1136 are hereby repealed and rendered ofno force and effect.

(d) Presidential Decree No. 1594 is hereby repealed insofar as it governslocally-funded projects.


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(e) The following provisions are hereby repealed or amended insofar asthey are inconsistent with the provisions of this Code: Sections 2, 16,and 29 of Presidential Decree No. 704; Sections 12 of PresidentialDecree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72,73, and 74 of Presidential Decree No. 463, as amended; and Section 16of Presidential Decree No. 972, as amended, and

(f) All general and special laws, acts, city charters, decrees, executiveorders, proclamations and administrative regulations, or part or partsthereof which are inconsistent with any of the provisions of this Code arehereby repealed or modified accordingly.

Furthermore, it is a familiar rule that implied repeals are not lightly presumed in theabsence of a clear and unmistakable showing of such intention. In Lichauco & Co. v.

Apostol, 10this Court explained:

The cases relating to the subject of repeal by implication all proceed on

the assumption that if the act of later date clearly reveals an intentionon the part of the lawmaking power to abrogate the prior law, thisintention must be given effect; but there must always be a sufficientrevelation of this intention, and it has become an unbending rule ofstatutory construction that the intention to repeal a former law will notbe imputed to the Legislature when it appears that the two statutes, orprovisions, with reference to which the question arises bear to eachother the relation of general to special.

There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, asthe private respondent points out, PAGCOR is mentioned as the source of funding intwo later enactments of Congress, to wit, R.A. 7309, creating a Board of Claims under

the Department of Justice for the benefit of victims of unjust punishment or detentionor of violent crimes, and R.A. 7648, providing for measures for the solution of thepower crisis. PAGCOR revenues are tapped by these two statutes. This would showthat the PAGCOR charter has not been repealed by the Local Government Code buthas in fact been improved as it were to make the entity more responsive to the fiscalproblems of the government.

It is a canon of legal hermeneutics that instead of pitting one statute against anotherin an inevitably destructive confrontation, courts must exert every effort to reconcilethem, remembering that both laws deserve a becoming respect as the handiwork of acoordinate branch of the government. On the assumption of a conflict between P.D.1869 and the Code, the proper action is not to uphold one and annul the other but to

give effect to both by harmonizing them if possible. This is possible in the case beforeus. The proper resolution of the problem at hand is to hold that under the LocalGovernment Code, local government units may (and indeed must) prevent andsuppress all kinds of gambling within their territories except only those allowed bystatutes like P.D. 1869. The exception reserved in such laws must be read into theCode, to make both the Code and such laws equally effective and mutuallycomplementary.


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This approach would also affirm that there are indeed two kinds of gambling, to wit,the illegal and those authorized by law. Legalized gambling is not a modern concept;it is probably as old as illegal gambling, if not indeed more so. The petitioners'suggestion that the Code authorizes them to prohibit all kinds of gambling woulderase the distinction between these two forms of gambling without a clear indicationthat this is the will of the legislature. Plausibly, following this theory, the City of Manila

could, by mere ordinance, prohibit the Philippine Charity Sweepstakes Office fromconducting a lottery as authorized by R.A. 1169 and B.P. 42 or stop the races at theSan Lazaro Hippodrome as authorized by R.A. 309 and R.A. 983.

In light of all the above considerations, we see no way of arriving at the conclusionurged on us by the petitioners that the ordinances in question are valid. On thecontrary, we find that the ordinances violate P.D. 1869, which has the character andforce of a statute, as well as the public policy expressed in the decree allowing theplaying of certain games of chance despite the prohibition of gambling in general.

The rationale of the requirement t

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