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G.R. No. 91649 May 14, 1991

ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN AND LORENZO
SANCHEZ,petitioners,
vs.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent.
H.B. Basco & Associates for petitioners.
Valmonte Law Offices collaborating counsel for petitioners.
Aguirre, Laborte and Capule for respondent PAGCOR.

PARAS, J.:p
A TV ad proudly announces:
"The new PAGCOR responding through responsible gaming."
But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul the
Philippine Amusement and Gaming Corporation (PAGCOR) Charter PD 1869, because it is allegedly
contrary to morals, public policy and order, and because
A. It constitutes a waiver of a right prejudicial to a third person with a right recognized by law. It waived
the Manila City government's right to impose taxes and license fees, which is recognized by law;
B. For the same reason stated in the immediately preceding paragraph, the law has intruded into the local
government's right to impose local taxes and license fees. This, in contravention of the constitutionally
enshrined principle of local autonomy;
C. It violates the equal protection clause of the constitution in that it legalizes PAGCOR conducted
gambling, while most other forms of gambling are outlawed, together with prostitution, drug trafficking and
other vices;
D. It violates the avowed trend of the Cory government away from monopolistic and crony economy, and
toward free enterprise and privatization. (p. 2, Amended Petition; p. 7, Rollo)
In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to the declared national
policy of the "new restored democracy" and the people's will as expressed in the 1987 Constitution. The
decree is said to have a "gambling objective" and therefore is contrary to Sections 11, 12 and 13 of Article
II, Sec. 1 of Article VIII and Section 3 (2) of Article XIV, of the present Constitution (p. 3, Second Amended
Petition; p. 21, Rollo).
The procedural issue is whether petitioners, as taxpayers and practicing lawyers (petitioner Basco being
also the Chairman of the Committee on Laws of the City Council of Manila), can question and seek the
annulment of PD 1869 on the alleged grounds mentioned above.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D. 1067-A dated
January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January 1, 1977 "to establish,
operate and maintain gambling casinos on land or water within the territorial jurisdiction of the Philippines."
Its operation was originally conducted in the well known floating casino "Philippine Tourist." The operation
was considered a success for it proved to be a potential source of revenue to fund infrastructure and socio-
economic projects, thus, P.D. 1399 was passed on June 2, 1978 for PAGCOR to fully attain this objective.
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Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the Government to
regulate and centralize all games of chance authorized by existing franchise or permitted by law, under the
following declared policy
Sec. 1. Declaration of Policy. It is hereby declared to be the policy of the State to centralize and integrate
all games of chance not heretofore authorized by existing franchises or permitted by law in order to attain
the following objectives:
(a) To centralize and integrate the right and authority to operate and conduct games of chance into one
corporate entity to be controlled, administered and supervised by the Government.
(b) To establish and operate clubs and casinos, for amusement and recreation, including sports gaming
pools, (basketball, football, lotteries, etc.) and such other forms of amusement and recreation including
games of chance, which may be allowed by law within the territorial jurisdiction of the Philippines and
which will: (1) generate sources of additional revenue to fund infrastructure and socio-civic projects, such
as flood control programs, beautification, sewerage and sewage projects, Tulungan ng Bayan Centers,
Nutritional Programs, Population Control and such other essential public services; (2) create recreation and
integrated facilities which will expand and improve the country's existing tourist attractions; and (3)
minimize, if not totally eradicate, all the evils, malpractices and corruptions that are normally prevalent on
the conduct and operation of gambling clubs and casinos without direct government involvement. (Section
1, P.D. 1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. Under its Charter's
repealing clause, all laws, decrees, executive orders, rules and regulations, inconsistent therewith, are
accordingly repealed, amended or modified.
It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau of
Internal Revenue and the Bureau of Customs. In 1989 alone, PAGCOR earned P3.43 Billion, and directly
remitted to the National Government a total of P2.5 Billion in form of franchise tax, government's income
share, the President's Social Fund and Host Cities' share. In addition, PAGCOR sponsored other socio-
cultural and charitable projects on its own or in cooperation with various governmental agencies, and other
private associations and organizations. In its 3 1/2 years of operation under the present administration,
PAGCOR remitted to the government a total of P6.2 Billion. As of December 31, 1989, PAGCOR was
employing 4,494 employees in its nine (9) casinos nationwide, directly supporting the livelihood of Four
Thousand Four Hundred Ninety-Four (4,494) families.
But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the same is "null and
void" for being "contrary to morals, public policy and public order," monopolistic and tends toward "crony
economy", and is violative of the equal protection clause and local autonomy as well as for running counter
to the state policies enunciated in Sections 11 (Personal Dignity and Human Rights), 12 (Family) and 13
(Role of Youth) of Article II, Section 1 (Social Justice) of Article XIII and Section 2 (Educational Values) of
Article XIV of the 1987 Constitution.
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the most deliberate
consideration by the Court, involving as it does the exercise of what has been described as "the highest and
most delicate function which belongs to the judicial department of the government." (State v. Manuel, 20
N.C. 144; Lozano v. Martinez, 146 SCRA 323).
As We enter upon the task of passing on the validity of an act of a co-equal and coordinate branch of the
government We need not be reminded of the time-honored principle, deeply ingrained in our jurisprudence,
that a statute is presumed to be valid. Every presumption must be indulged in favor of its constitutionality.
This is not to say that We approach Our task with diffidence or timidity. Where it is clear that the legislature
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or the executive for that matter, has over-stepped the limits of its authority under the constitution, We
should not hesitate to wield the axe and let it fall heavily, as fall it must, on the offending statute (Lozano
v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru Mr. Justice Zaldivar
underscored the
. . . thoroughly established principle which must be followed in all cases where questions of constitutionality
as obtain in the instant cases are involved. All presumptions are indulged in favor of constitutionality; one
who attacks a statute alleging unconstitutionality must prove its invalidity beyond a reasonable doubt; that
a law may work hardship does not render it unconstitutional; that if any reasonable basis may be conceived
which supports the statute, it will be upheld and the challenger must negate all possible basis; that the
courts are not concerned with the wisdom, justice, policy or expediency of a statute and that a liberal
interpretation of the constitution in favor of the constitutionality of legislation should be adopted. (Danner
v. Hass, 194 N.W. 2nd 534, 539; Spurbeck v. Statton, 106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g.
Salas v. Jarencio, 46 SCRA 734, 739 [1970]; Peralta v. Commission on Elections, 82 SCRA 30, 55 [1978];
and Heirs of Ordona v. Reyes, 125 SCRA 220, 241-242 [1983] cited in Citizens Alliance for Consumer
Protection v. Energy Regulatory Board, 162 SCRA 521, 540)
Of course, there is first, the procedural issue. The respondents are questioning the legal personality of
petitioners to file the instant petition.
Considering however the importance to the public of the case at bar, and in keeping with the Court's duty,
under the 1987 Constitution, to determine whether or not the other branches of government have kept
themselves within the limits of the Constitution and the laws and that they have not abused the discretion
given to them, the Court has brushed aside technicalities of procedure and has taken cognizance of this
petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA 371)
With particular regard to the requirement of proper party as applied in the cases before us, We hold that
the same is satisfied by the petitioners and intervenors because each of them has sustained or is in danger
of sustaining an immediate injury as a result of the acts or measures complained of. And even if, strictly
speaking they are not covered by the definition, it is still within the wide discretion of the Court to waive
the requirement and so remove the impediment to its addressing and resolving the serious constitutional
questions raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to question the
constitutionality of several executive orders issued by President Quirino although they were involving only
an indirect and general interest shared in common with the public. The Court dismissed the objection that
they were not proper parties and ruled that "the transcendental importance to the public of these cases
demands that they be settled promptly and definitely, brushing aside, if we must technicalities of
procedure." We have since then applied the exception in many other cases. (Association of Small
Landowners in the Philippines, Inc. v. Sec. of Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive issues raised.
Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of gambling
does not mean that the Government cannot regulate it in the exercise of its police power.
The concept of police power is well-established in this jurisdiction. It has been defined as the "state
authority to enact legislation that may interfere with personal liberty or property in order to promote the
general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition or restraint
upon liberty or property, (2) in order to foster the common good. It is not capable of an exact definition but
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has been, purposely, veiled in general terms to underscore its all-comprehensive embrace. (Philippine
Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386).
Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could
be done, provides enough room for an efficient and flexible response to conditions and circumstances thus
assuming the greatest benefits. (Edu v. Ericta, supra)
It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the charter.
Along with the taxing power and eminent domain, it is inborn in the very fact of statehood and sovereignty.
It is a fundamental attribute of government that has enabled it to perform the most vital functions of
governance. Marshall, to whom the expression has been credited, refers to it succinctly as the plenary
power of the state "to govern its citizens". (Tribe, American Constitutional Law, 323, 1978). The police
power of the State is a power co-extensive with self-protection and is most aptly termed the "law of
overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39 Phil. 660, 708) It is "the most essential,
insistent, and illimitable of powers." (Smith Bell & Co. v. National, 40 Phil. 136) It is a dynamic force that
enables the state to meet the agencies of the winds of change.
What was the reason behind the enactment of P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru an
appropriate institution all games of chance authorized by existing franchise or permitted by law" (1st
whereas clause, PD 1869). As was subsequently proved, regulating and centralizing gambling operations in
one corporate entity the PAGCOR, was beneficial not just to the Government but to society in general. It
is a reliable source of much needed revenue for the cash strapped Government. It provided funds for social
impact projects and subjected gambling to "close scrutiny, regulation, supervision and control of the
Government" (4th Whereas Clause, PD 1869). With the creation of PAGCOR and the direct intervention of
the Government, the evil practices and corruptions that go with gambling will be minimized if not totally
eradicated. Public welfare, then, lies at the bottom of the enactment of PD 1896.
Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes
and legal fees; that the exemption clause in P.D. 1869 is violative of the principle of local autonomy. They
must be referring to Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from
paying any "tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever
nature, whether National or Local."
(2) Income and other taxes. a) Franchise Holder: No tax of any kind or form, income or otherwise as
well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and
collected under this franchise from the Corporation; nor shall any form or tax or charge attach in any way
to the earnings of the Corporation, except a franchise tax of five (5%) percent of the gross revenues or
earnings derived by the Corporation from its operations under this franchise. Such tax shall be due and
payable quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees or
assessments of any kind, nature or description, levied, established or collected by any municipal, provincial
or national government authority (Section 13 [2]).
Their contention stated hereinabove is without merit for the following reasons:
(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes (Icard v.
City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v. Municipality of Caloocan, 7
SCRA 643). Thus, "the Charter or statute must plainly show an intent to confer that power or the
municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax" therefore must
always yield to a legislative act which is superior having been passed upon by the state itself which has the
"inherent power to tax" (Bernas, the Revised [1973] Philippine Constitution, Vol. 1, 1983 ed. p. 445).
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(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that "municipal
corporations are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909, January 18, 1957) which
has the power to "create and abolish municipal corporations" due to its "general legislative powers"
(Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore, has the power
of control over Local governments (Hebron v. Reyes, G.R. No. 9124, July 2, 1950). And if Congress can
grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take
back the power.
(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as
1975, the power of local governments to regulate gambling thru the grant of "franchise, licenses or
permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National Government, thus:
Sec. 1. Any provision of law to the contrary notwithstanding, the authority of chartered cities and other
local governments to issue license, permit or other form of franchise to operate, maintain and establish
horse and dog race tracks, jai-alai and other forms of gambling is hereby revoked.
Sec. 2. Hereafter, all permits or franchises to operate, maintain and establish, horse and dog race tracks,
jai-alai and other forms of gambling shall be issued by the national government upon proper application
and verification of the qualification of the applicant . . .
Therefore, only the National Government has the power to issue "licenses or permits" for the operation of
gambling. Necessarily, the power to demand or collect license fees which is a consequence of the issuance
of "licenses or permits" is no longer vested in the City of Manila.
(d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a
government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks
are owned by the National Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it
also exercises regulatory powers thus:
Sec. 9. Regulatory Power. The Corporation shall maintain a Registry of the affiliated entities, and shall
exercise all the powers, authority and the responsibilities vested in the Securities and Exchange Commission
over such affiliating entities mentioned under the preceding section, including, but not limited to
amendments of Articles of Incorporation and By-Laws, changes in corporate term, structure, capitalization
and other matters concerning the operation of the affiliated entities, the provisions of the Corporation Code
of the Philippines to the contrary notwithstanding, except only with respect to original incorporation.
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental,
which places it in the category of an agency or instrumentality of the Government. Being an instrumentality
of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation
might be burdened, impeded or subjected to control by a mere Local government.
The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the
operation of constitutional laws enacted by Congress to carry into execution the powers vested in the
federal government. (MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local governments.
Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the
part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States
(Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a
federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or
even to seriously burden it in the accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2, p.
140, emphasis supplied)
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Otherwise, mere creatures of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for
regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the
inherent power to wield it.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D. 1869.
This is a pointless argument. Article X of the 1987 Constitution (on Local Autonomy) provides:
Sec. 5. Each local government unit shall have the power to create its own source of revenue and to levy
taxes, fees, and other charges subject to such guidelines and limitation as the congress may provide,
consistent with the basic policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to
the local government. (emphasis supplied)
The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress
may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec.
3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the exercise of the
power of local governments to impose taxes and fees. It cannot therefore be violative but rather is
consistent with the principle of local autonomy.
Besides, the principle of local autonomy under the 1987 Constitution simply means "decentralization" (III
Records of the 1987 Constitutional Commission, pp. 435-436, as cited in Bernas, The Constitution of the
Republic of the Philippines, Vol. II, First Ed., 1988, p. 374). It does not make local governments sovereign
within the state or an "imperium in imperio."
Local Government has been described as a political subdivision of a nation or state which is constituted by
law and has substantial control of local affairs. In a unitary system of government, such as the government
under the Philippine Constitution, local governments can only be an intra sovereign subdivision of one
sovereign nation, it cannot be an imperium in imperio. Local government in such a system can only mean a
measure of decentralization of the function of government. (emphasis supplied)
As to what state powers should be "decentralized" and what may be delegated to local government units
remains a matter of policy, which concerns wisdom. It is therefore a political question. (Citizens Alliance for
Consumer Protection v. Energy Regulatory Board, 162 SCRA 539).
What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a State
concern and hence, it is the sole prerogative of the State to retain it or delegate it to local governments.
As gambling is usually an offense against the State, legislative grant or express charter power is generally
necessary to empower the local corporation to deal with the subject. . . . In the absence of express grant of
power to enact, ordinance provisions on this subject which are inconsistent with the state laws are void.
(Ligan v. Gadsden, Ala App. 107 So. 733 Ex-Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah
You, 88 Cal. 99, 25 PAC 974, 22 Am St. Rep. 280, 11 LRA 480, as cited in Mc Quinllan Vol. 3 Ibid, p. 548,
emphasis supplied)
Petitioners next contend that P.D. 1869 violates the equal protection clause of the Constitution, because "it
legalized PAGCOR conducted gambling, while most gambling are outlawed together with prostitution,
drug trafficking and other vices" (p. 82, Rollo).
We, likewise, find no valid ground to sustain this contention. The petitioners' posture ignores the well-
accepted meaning of the clause "equal protection of the laws." The clause does not preclude classification
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of individuals who may be accorded different treatment under the law as long as the classification is not
unreasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law does not have to operate in equal
force on all persons or things to be conformable to Article III, Section 1 of the Constitution (DECS v. San
Diego, G.R. No. 89572, December 21, 1989).
The "equal protection clause" does not prohibit the Legislature from establishing classes of individuals or
objects upon which different rules shall operate (Laurel v. Misa, 43 O.G. 2847). The Constitution does not
require situations which are different in fact or opinion to be treated in law as though they were the same
(Gomez v. Palomar, 25 SCRA 827).
Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the equal protection is not
clearly explained in the petition. The mere fact that some gambling activities like cockfighting (P.D 449)
horse racing (R.A. 306 as amended by RA 983), sweepstakes, lotteries and races (RA 1169 as amended by
B.P. 42) are legalized under certain conditions, while others are prohibited, does not render the applicable
laws, P.D. 1869 for one, unconstitutional.
If the law presumably hits the evil where it is most felt, it is not to be overthrown because there are other
instances to which it might have been applied. (Gomez v. Palomar, 25 SCRA 827)
The equal protection clause of the 14th Amendment does not mean that all occupations called by the same
name must be treated the same way; the state may do what it can to prevent which is deemed as evil and
stop short of those cases in which harm to the few concerned is not less than the harm to the public that
would insure if the rule laid down were made mathematically exact. (Dominican Hotel v. Arizona, 249 US
2651).
Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory Government away from
monopolies and crony economy and toward free enterprise and privatization" suffice it to state that this is
not a ground for this Court to nullify P.D. 1869. If, indeed, PD 1869 runs counter to the government's
policies then it is for the Executive Department to recommend to Congress its repeal or amendment.
The judiciary does not settle policy issues. The Court can only declare what the law is and not what the law
should be. Under our system of government, policy issues are within the domain of the political branches of
government and of the people themselves as the repository of all state power. (Valmonte v. Belmonte, Jr.,
170 SCRA 256).
On the issue of "monopoly," however, the Constitution provides that:
Sec. 19. The State shall regulate or prohibit monopolies when public interest so requires. No combinations
in restraint of trade or unfair competition shall be allowed. (Art. XII, National Economy and Patrimony)
It should be noted that, as the provision is worded, monopolies are not necessarily prohibited by the
Constitution. The state must still decide whether public interest demands that monopolies be regulated or
prohibited. Again, this is a matter of policy for the Legislature to decide.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity) 12 (Family) and 13 (Role
of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (Educational Values) of Article
XIV of the 1987 Constitution, suffice it to state also that these are merely statements of principles and,
policies. As such, they are basically not self-executing, meaning a law should be passed by Congress to
clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-executing principles ready for
enforcement through the courts. They were rather directives addressed to the executive and the
legislature. If the executive and the legislature failed to heed the directives of the articles the available
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remedy was not judicial or political. The electorate could express their displeasure with the failure of the
executive and the legislature through the language of the ballot. (Bernas, Vol. II, p. 2)
Every law has in its favor the presumption of constitutionality (Yu Cong Eng v. Trinidad, 47 Phil. 387; Salas
v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas v. Comelec, 179 SCRA 287). Therefore,
for PD 1869 to be nullified, it must be shown that there is a clear and unequivocal breach of the
Constitution, not merely a doubtful and equivocal one. In other words, the grounds for nullity must be clear
and beyond reasonable doubt. (Peralta v. Comelec, supra) Those who petition this Court to declare a law,
or parts thereof, unconstitutional must clearly establish the basis for such a declaration. Otherwise, their
petition must fail. Based on the grounds raised by petitioners to challenge the constitutionality of P.D. 1869,
the Court finds that petitioners have failed to overcome the presumption. The dismissal of this petition is
therefore, inevitable. But as to whether P.D. 1869 remains a wise legislation considering the issues of
"morality, monopoly, trend to free enterprise, privatization as well as the state principles on social justice,
role of youth and educational values" being raised, is up for Congress to determine.
As this Court held in Citizens' Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA 521

Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in any case, in its favor the
presumption of validity and constitutionality which petitioners Valmonte and the KMU have not overturned.
Petitioners have not undertaken to identify the provisions in the Constitution which they claim to have been
violated by that statute. This Court, however, is not compelled to speculate and to imagine how the
assailed legislation may possibly offend some provision of the Constitution. The Court notes, further, in this
respect that petitioners have in the main put in question the wisdom, justice and expediency of the
establishment of the OPSF, issues which are not properly addressed to this Court and which this Court may
not constitutionally pass upon. Those issues should be addressed rather to the political departments of
government: the President and the Congress.
Parenthetically, We wish to state that gambling is generally immoral, and this is precisely so when the
gambling resorted to is excessive. This excessiveness necessarily depends not only on the financial
resources of the gambler and his family but also on his mental, social, and spiritual outlook on life.
However, the mere fact that some persons may have lost their material fortunes, mental control, physical
health, or even their lives does not necessarily mean that the same are directly attributable to
gambling. Gambling may have been the antecedent,but certainly not necessarily the cause. For the same
consequences could have been preceded by an overdose of food, drink, exercise, work, and even sex.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Bidin, Sarmiento, Grio-Aquino, Medialdea,
Regalado and Davide, Jr., JJ., concur.

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 AND GAMING
CORPORATION,respondents.
Aquilino G. Pimentel, Jr. and Associates for petitioners.
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R.R. Torralba & Associates for private respondent.

CRUZ, J.:
There was instant opposition when PAGCOR announced the opening of a casino in Cagayan de Oro City.
Civic organizations angrily denounced the project. The religious elements echoed the objection and so did
the women's groups and the youth. Demonstrations were led by the mayor and the city legislators. The
media trumpeted the protest, describing the casino as an affront to the welfare of the city.
The trouble arose when in 1992, flush with its tremendous success in several cities, PAGCOR decided to
expand its operations to Cagayan de Oro City. To this end, it leased a portion of a building belonging to
Pryce Properties Corporation, Inc., one of the herein private respondents, renovated and equipped the
same, and prepared to inaugurate its casino there during the Christmas season.
The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift and hostile. On December
7, 1992, it enacted Ordinance No. 3353 reading as follows:
ORDINANCE NO. 3353
AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND CANCELLING EXISTING
BUSINESS PERMIT TO ANY ESTABLISHMENT FOR THE USING AND ALLOWING TO BE USED ITS PREMISES
OR PORTION THEREOF FOR THE OPERATION OF CASINO.
BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayan de Oro, in session assembled
that:
Sec. 1. That pursuant to the policy of the city banning the operation of casino within its territorial
jurisdiction, no business permit shall be issued to any person, partnership or corporation for the operation
of casino within the city limits.
Sec. 2. That it shall be a violation of existing business permit by any persons, partnership or corporation
to use its business establishment or portion thereof, or allow the use thereof by others for casino operation
and other gambling activities.
Sec. 3. PENALTIES. Any violation of such existing business permit as defined in the preceding section
shall suffer the following penalties, to wit:
a) Suspension of the business permit for sixty (60) days for the first offense and a fine of P1,000.00/day
b) Suspension of the business permit for Six (6) months for the second offense, and a fine of
P3,000.00/day
c) Permanent revocation of the business permit and imprisonment of One (1) year, for the third and
subsequent offenses.
Sec. 4. This Ordinance shall take effect ten (10) days from publication thereof.
Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-93 reading as follows:
ORDINANCE NO. 3375-93
AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING PENALTY FOR VIOLATION
THEREFOR.
10

WHEREAS, the City Council established a policy as early as 1990 against CASINO under its Resolution No.
2295;
WHEREAS, on October 14, 1992, the City Council passed another Resolution No. 2673, reiterating its policy
against the establishment of CASINO;
WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353, prohibiting the issuance of
Business Permit and to cancel existing Business Permit to any establishment for the using and allowing to
be used its premises or portion thereof for the operation of CASINO;
WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of the Local Government Code of 1991
(Rep. Act 7160) and under Art. 99, No. (4), Paragraph VI of the implementing rules of the Local
Government Code, the City Council as the Legislative Body shall enact measure to suppress any activity
inimical to public morals and general welfare of the people and/or regulate or prohibit such activity
pertaining to amusement or entertainment in order to protect social and moral welfare of the community;
NOW THEREFORE,
BE IT ORDAINED by the City Council in session duly assembled that:
Sec. 1. The operation of gambling CASINO in the City of Cagayan de Oro is hereby prohibited.
Sec. 2. Any violation of this Ordinance shall be subject to the following penalties:
a) Administrative fine of P5,000.00 shall be imposed against the proprietor, partnership or corporation
undertaking the operation, conduct, maintenance of gambling CASINO in the City and closure thereof;
b) Imprisonment of not less than six (6) months nor more than one (1) year or a fine in the amount of
P5,000.00 or both at the discretion of the court against the manager, supervisor, and/or any person
responsible in the establishment, conduct and maintenance of gambling CASINO.
Sec. 3. This Ordinance shall take effect ten (10) days after its publication in a local newspaper of general
circulation.
Pryce assailed the ordinances before the Court of Appeals, where it was joined by PAGCOR as intervenor
and supplemental petitioner. Their challenge succeeded. On March 31, 1993, the Court of Appeals declared
the ordinances invalid and issued the writ prayed for to prohibit their enforcement.
1
Reconsideration of this
decision was denied on July 13, 1993.
2

Cagayan de Oro City and its mayor are now before us in this petition for review under Rule 45 of the Rules
of Court.
3
They aver that the respondent Court of Appeals erred in holding that:
1. Under existing laws, the Sangguniang Panlungsod of the City of Cagayan de Oro does not have the
power and authority to prohibit the establishment and operation of a PAGCOR gambling casino within the
City's territorial limits.
2. The phrase "gambling and other prohibited games of chance" found in Sec. 458, par. (a), sub-par. (1)
(v) of R.A. 7160 could only mean "illegal gambling."
3. The questioned Ordinances in effect annul P.D. 1869 and are therefore invalid on that point.
4. The questioned Ordinances are discriminatory to casino and partial to cockfighting and are therefore
invalid on that point.
5. The questioned Ordinances are not reasonable, not consonant with the general powers and purposes of
the instrumentality concerned and inconsistent with the laws or policy of the State.
11

6. It had no option but to follow the ruling in the case of Basco, et al. v. PAGCOR, G.R. No. 91649, May 14,
1991, 197 SCRA 53 in disposing of the issues presented in this present case.
PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulate all games of chance,
including casinos on land and sea within the territorial jurisdiction of the Philippines. In Basco v. Philippine
Amusements and Gaming Corporation,
4
this Court sustained the constitutionality of the decree and even
cited the benefits of the entity to the national economy as the third highest revenue-earner in the
government, next only to the BIR and the Bureau of Customs.
Cagayan de Oro City, like other local political subdivisions, is empowered to enact ordinances for the
purposes indicated in the Local Government Code. It is expressly vested with the police power under what
is known as the General Welfare Clause now embodied in Section 16 as follows:
Sec. 16. General Welfare. Every local government unit shall exercise the powers expressly granted,
those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient
and effective governance, and those which are essential to the promotion of the general welfare. Within
their respective territorial jurisdictions, local government units shall ensure and support, among other
things, the preservation and enrichment of culture, promote health and safety, enhance the right of the
people to a balanced ecology, encourage and support the development of appropriate and self-reliant
scientific and technological capabilities, improve public morals, enhance economic prosperity and social
justice, promote full employment among their residents, maintain peace and order, and preserve the
comfort and convenience of their inhabitants.
In addition, Section 458 of the said Code specifically declares that:
Sec. 458. Powers, Duties, Functions and Compensation. (a) The Sangguniang Panlungsod, as the
legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper
exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and effective city government, and
in this connection, shall:
xxx xxx xxx
(v) Enact ordinances intended to prevent, suppress and impose appropriate penalties for habitual
drunkenness in public places, vagrancy, mendicancy, prostitution, establishment and maintenance of
houses of ill repute,gambling and other prohibited games of chance, fraudulent devices and ways to obtain
money or property, drug addiction, maintenance of drug dens, drug pushing, juvenile delinquency, the
printing, distribution or exhibition of obscene or pornographic materials or publications, and such other
activities inimical to the welfare and morals of the inhabitants of the city;
This section also authorizes the local government units to regulate properties and businesses within their
territorial limits in the interest of the general welfare.
5

The petitioners argue that by virtue of these provisions, the Sangguniang Panlungsod may prohibit the
operation of casinos because they involve games of chance, which are detrimental to the people. Gambling
is not allowed by general law and even by the Constitution itself. The legislative power conferred upon local
government units may be exercised over all kinds of gambling and not only over "illegal gambling" as the
respondents erroneously argue. Even if the operation of casinos may have been permitted under P.D. 1869,
the government of Cagayan de Oro City has the authority to prohibit them within its territory pursuant to
the authority entrusted to it by the Local Government Code.
12

It is submitted that this interpretation is consonant with the policy of local autonomy as mandated in Article
II, Section 25, and Article X of the Constitution, as well as various other provisions therein seeking to
strengthen the character of the nation. In giving the local government units the power to prevent or
suppress gambling and other social problems, the Local Government Code has recognized the competence
of such communities to determine and adopt the measures best expected to promote the general welfare
of their inhabitants in line with the policies of the State.
The petitioners also stress that when the Code expressly authorized the local government units to prevent
and suppress gambling and other prohibited games of chance, like craps, baccarat, blackjack and roulette,
it meant allforms of gambling without distinction. Ubi lex non distinguit, nec nos distinguere
debemos.
6
Otherwise, it would have expressly excluded from the scope of their power casinos and other
forms of gambling authorized by special law, as it could have easily done. The fact that it did not do so
simply means that the local government units are permitted to prohibit all kinds of gambling within their
territories, including the operation of casinos.
The adoption of the Local Government Code, it is pointed out, had the effect of modifying the charter of the
PAGCOR. The Code is not only a later enactment than P.D. 1869 and so is deemed to prevail in case of
inconsistencies between them. More than this, the powers of the PAGCOR under the decree are expressly
discontinued by the Code insofar as they do not conform to its philosophy and provisions, pursuant to Par.
(f) of its repealing clause reading as follows:
(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this
Code are hereby repealed or modified accordingly.
It is also maintained that assuming there is doubt regarding the effect of the Local Government Code on
P.D. 1869, the doubt must be resolved in favor of the petitioners, in accordance with the direction in the
Code calling for its liberal interpretation in favor of the local government units. Section 5 of the Code
specifically provides:
Sec. 5. Rules of Interpretation. In the interpretation of the provisions of this Code, the following rules
shall apply:
(a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in
case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower
local government unit. Any fair and reasonable doubt as to the existence of the power shall be interpreted
in favor of the local government unit concerned;
xxx xxx xxx
(c) The general welfare provisions in this Code shall be liberally interpreted to give more powers to local
government units in accelerating economic development and upgrading the quality of life for the people in
the community; . . . (Emphasis supplied.)
Finally, the petitioners also attack gambling as intrinsically harmful and cite various provisions of the
Constitution and several decisions of this Court expressive of the general and official disapprobation of the
vice. They invoke the State policies on the family and the proper upbringing of the youth and, as might be
expected, call attention to the old case of U.S. v. Salaveria,
7
which sustained a municipal ordinance
prohibiting the playing of panguingue. The petitioners decry the immorality of gambling. They also impugn
the wisdom of P.D. 1869 (which they describe as "a martial law instrument") in creating PAGCOR and
authorizing it to operate casinos "on land and sea within the territorial jurisdiction of the Philippines."
This is the opportune time to stress an important point.
13

The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While it is generally
considered inimical to the interests of the people, there is nothing in the Constitution categorically
proscribing or penalizing gambling or, for that matter, even mentioning it at all. It is left to Congress to deal
with the activity as it sees fit. In the exercise of its own discretion, the legislature may prohibit gambling
altogether or allow it without limitation or it may prohibit some forms of gambling and allow others for
whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but permits
lotteries, cockfighting and horse-racing. In making such choices, Congress has consulted its own wisdom,
which this Court has no authority to review, much less reverse. Well has it been said that courts do not sit
to resolve the merits of conflicting theories.
8
That is the prerogative of the political departments. It is
settled that questions regarding the wisdom, morality, or practicibility of statutes are not addressed to the
judiciary but may be resolved only by the legislative and executive departments, to which the function
belongs in our scheme of government. That function is exclusive. Whichever way these branches decide,
they are answerable only to their own conscience and the constituents who will ultimately judge their acts,
and not to the courts of justice.
The only question we can and shall resolve in this petition is the validity of Ordinance No. 3355 and
Ordinance No. 3375-93 as enacted by the Sangguniang Panlungsod of Cagayan de Oro City. And we shall
do so only by the criteria laid down by law and not by our own convictions on the propriety of gambling.
The tests of a valid ordinance are well established. A long line of decisions
9
has held that to be valid, an
ordinance must conform to the following substantive requirements:
1) It must not contravene the constitution or any statute.
2) It must not be unfair or oppressive.
3) It must not be partial or discriminatory.
4) It must not prohibit but may regulate trade.
5) It must be general and consistent with public policy.
6) It must not be unreasonable.
We begin by observing that under Sec. 458 of the Local Government Code, local government units are
authorized to prevent or suppress, among others, "gambling and other prohibited games of chance."
Obviously, this provision excludes games of chance which are not prohibited but are in fact permitted by
law. The petitioners are less than accurate in claiming that the Code could have excluded such games of
chance but did not. In fact it does. The language of the section is clear and unmistakable. Under the rule
of noscitur a sociis, a word or phrase should be interpreted in relation to, or given the same meaning of,
words with which it is associated. Accordingly, we conclude that since the word "gambling" is associated
with "and other prohibited games of chance," the word should be read as referring to only illegal gambling
which, like the other prohibited games of chance, must be prevented or suppressed.
We could stop here as this interpretation should settle the problem quite conclusively. But we will not. The
vigorous efforts of the petitioners on behalf of the inhabitants of Cagayan de Oro City, and the earnestness
of their advocacy, deserve more than short shrift from this Court.
The apparent flaw in the ordinances in question is that they contravene P.D. 1869 and the public policy
embodied therein insofar as they prevent PAGCOR from exercising the power conferred on it to operate a
casino in Cagayan de Oro City. The petitioners have an ingenious answer to this misgiving. They deny that
it is the ordinances that have changed P.D. 1869 for an ordinance admittedly cannot prevail against a
statute. Their theory is that the change has been made by the Local Government Code itself, which was
14

also enacted by the national lawmaking authority. In their view, the decree has been, not really repealed by
the Code, but merely "modified pro tanto" in the sense that PAGCOR cannot now operate a casino over the
objection of the local government unit concerned. This modification of P.D. 1869 by the Local Government
Code is permissible because one law can change or repeal another law.
It seems to us that the petitioners are playing with words. While insisting that the decree has only been
"modifiedpro tanto," they are actually arguing that it is already dead, repealed and useless for all intents
and purposes because the Code has shorn PAGCOR of all power to centralize and regulate casinos. Strictly
speaking, its operations may now be not only prohibited by the local government unit; in fact, the
prohibition is not only discretionary but mandated by Section 458 of the Code if the word "shall" as used
therein is to be given its accepted meaning. Local government units have now no choice but to prevent and
suppress gambling, which in the petitioners' view includes both legal and illegal gambling. Under this
construction, PAGCOR will have no more games of chance to regulate or centralize as they must all be
prohibited by the local government units pursuant to the mandatory duty imposed upon them by the Code.
In this situation, PAGCOR cannot continue to exist except only as a toothless tiger or a white elephant and
will no longer be able to exercise its powers as a prime source of government revenue through the
operation of casinos.
It is noteworthy that the petitioners have cited only Par. (f) of the repealing clause, conveniently discarding
the rest of the provision which painstakingly mentions the specific laws or the parts thereof which are
repealed (or modified) by the Code. Significantly, P.D. 1869 is not one of them. A reading of the entire
repealing clause, which is reproduced below, will disclose the omission:
Sec. 534. Repealing Clause. (a) Batas Pambansa Blg. 337, otherwise known as the "Local Government
Code," Executive Order No. 112 (1987), and Executive Order No. 319 (1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions, memoranda and
issuances related to or concerning the barangay are hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section 3, a (3)
and b (2) of Republic Act. No. 5447 regarding the Special Education Fund; Presidential Decree No. 144 as
amended by Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended; Presidential
Decree No. 436 as amended by Presidential Decree No. 558; and Presidential Decree Nos. 381, 436, 464,
477, 526, 632, 752, and 1136 are hereby repealed and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded projects.
(e) The following provisions are hereby repealed or amended insofar as they are inconsistent with the
provisions of this Code: Sections 2, 16, and 29 of Presidential Decree No. 704; Sections 12 of Presidential
Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree
No. 463, as amended; and Section 16 of Presidential Decree No. 972, as amended, and
(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this
Code are hereby repealed or modified accordingly.
Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the absence of a clear and
unmistakable showing of such intention. In Lichauco & Co. v. Apostol,
10
this Court explained:
The cases relating to the subject of repeal by implication all proceed on the assumption that if the act of
later date clearly reveals an intention on the part of the lawmaking power to abrogate the prior law, this
intention must be given effect; but there must always be a sufficient revelation of this intention, and it has
become an unbending rule of statutory construction that the intention to repeal a former law will not be
15

imputed to the Legislature when it appears that the two statutes, or provisions, with reference to which the
question arises bear to each other the relation of general to special.
There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, as the private
respondent points out, PAGCOR is mentioned as the source of funding in two later enactments of Congress,
to wit, R.A. 7309, creating a Board of Claims under the Department of Justice for the benefit of victims of
unjust punishment or detention or of violent crimes, and R.A. 7648, providing for measures for the solution
of the power crisis. PAGCOR revenues are tapped by these two statutes. This would show that the PAGCOR
charter has not been repealed by the Local Government Code but has in fact been improved as it were to
make the entity more responsive to the fiscal problems of the government.
It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably
destructive confrontation, courts must exert every effort to reconcile them, remembering that both laws
deserve a becoming respect as the handiwork of a coordinate branch of the government. On the
assumption of a conflict between P.D. 1869 and the Code, the proper action is not to uphold one and annul
the other but to give effect to both by harmonizing them if possible. This is possible in the case before us.
The proper resolution of the problem at hand is to hold that under the Local Government Code, local
government units may (and indeed must) prevent and suppress all kinds of gambling within their territories
except only those allowed by statutes like P.D. 1869. The exception reserved in such laws must be read
into the Code, to make both the Code and such laws equally effective and mutually complementary.
This approach would also affirm that there are indeed two kinds of gambling, to wit, the illegal and those
authorized by law. Legalized gambling is not a modern concept; it is probably as old as illegal gambling, if
not indeed more so. The petitioners' suggestion that the Code authorizes them to prohibit all kinds of
gambling would erase the distinction between these two forms of gambling without a clear indication that
this is the will of the legislature. Plausibly, following this theory, the City of Manila could, by mere
ordinance, prohibit the Philippine Charity Sweepstakes Office from conducting a lottery as authorized by
R.A. 1169 and B.P. 42 or stop the races at the San Lazaro Hippodrome as authorized by R.A. 309 and R.A.
983.
In light of all the above considerations, we see no way of arriving at the conclusion urged on us by the
petitioners that the ordinances in question are valid. On the contrary, we find that the ordinances violate
P.D. 1869, which has the character and force of a statute, as well as the public policy expressed in the
decree allowing the playing of certain games of chance despite the prohibition of gambling in general.
The rationale of the requirement that the ordinances should not contravene a statute is obvious. Municipal
governments are only agents of the national government. Local councils exercise only delegated legislative
powers conferred on them by Congress as the national lawmaking body. The delegate cannot be superior
to the principal or exercise powers higher than those of the latter. It is a heresy to suggest that the local
government units can undo the acts of Congress, from which they have derived their power in the first
place, and negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and rights wholly from the legislature. It
breathes into them the breath of life, without which they cannot exist. As it creates, so it may destroy. As it
may destroy, it may abridge and control. Unless there is some constitutional limitation on the right, the
legislature might, by a single act, and if we can suppose it capable of so great a folly and so great a wrong,
sweep from existence all of the municipal corporations in the State, and the corporation could not prevent
it. We know of no limitation on the right so far as to the corporation themselves are concerned. They are,
so to phrase it, the mere tenants at will of the legislature.
11

This basic relationship between the national legislature and the local government units has not been
enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. Without
16

meaning to detract from that policy, we here confirm that Congress retains control of the local government
units although in significantly reduced degree now than under our previous Constitutions. The power to
create still includes the power to destroy. The power to grant still includes the power to withhold or recall.
True, there are certain notable innovations in the Constitution, like the direct conferment on the local
government units of the power to tax,
12
which cannot now be withdrawn by mere statute. By and large,
however, the national legislature is still the principal of the local government units, which cannot defy its
will or modify or violate it.
The Court understands and admires the concern of the petitioners for the welfare of their constituents and
their apprehensions that the welfare of Cagayan de Oro City will be endangered by the opening of the
casino. We share the view that "the hope of large or easy gain, obtained without special effort, turns the
head of the workman"
13
and that "habitual gambling is a cause of laziness and ruin."
14
In People v.
Gorostiza,
15
we declared: "The social scourge of gambling must be stamped out. The laws against
gambling must be enforced to the limit." George Washington called gambling "the child of avarice, the
brother of iniquity and the father of mischief." Nevertheless, we must recognize the power of the legislature
to decide, in its own wisdom, to legalize certain forms of gambling, as was done in P.D. 1869 and impliedly
affirmed in the Local Government Code. That decision can be revoked by this Court only if it contravenes
the Constitution as the touchstone of all official acts. We do not find such contravention here.
We hold that the power of PAGCOR to centralize and regulate all games of chance, including casinos on
land and sea within the territorial jurisdiction of the Philippines, remains unimpaired. P.D. 1869 has not
been modified by the Local Government Code, which empowers the local government units to prevent or
suppress only those forms of gambling prohibited by law.
Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that cannot be
amended or nullified by a mere ordinance. Hence, it was not competent for the Sangguniang Panlungsod of
Cagayan de Oro City to enact Ordinance No. 3353 prohibiting the use of buildings for the operation of a
casino and Ordinance No. 3375-93 prohibiting the operation of casinos. For all their praiseworthy motives,
these ordinances are contrary to P.D. 1869 and the public policy announced therein and are therefore ultra
vires and void.
WHEREFORE, the petition is DENIED and the challenged decision of the respondent Court of Appeals is
AFFIRMED, with costs against the petitioners. It is so ordered.
Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and
Mendoza, JJ., concur.

G.R. No. 79956 January 29, 1990
CORDILLERA BROAD COALITION, petitioner,
vs.
COMMISSION ON AUDIT, respondent.
G.R. No. 82217 January 29, 1990
LILIA YARANON and BONA BAUTISTA, assisted by their spouses, BRAULIO D. YARANON and
DEMETRIO D. BAUTISTA, JR., respectively; JAMES BRETT and SINAI C. HAMADA, petitioners,
vs.
THE COMMISSION ON AUDIT, HON. CATALINO MACARAIG, Executive Secretary, HON.
VICENTE JAYME, Secretary of Finance, HON. GUILLERMO N. CARAGUE, Secretary of Budget
and Management, and HON. ROSALINA S. CAJUCOM, OIC National Treasurer, respondents.
17


CORTES, J.:
In these consolidated petitions, the constitutionality of Executive Order No. 220, dated July 15, 1987, which
created the (Cordillera Administrative Region, is assailed on the primary ground that it pre-empts the
enactment of an organic act by the Congress and the creation of' the autonomous region in the Cordilleras
conditional on the approval of the act through a plebiscite.
Relative to the creation of autonomous regions, the constitution, in Article X, provides:
AUTONOMOUS REGIONS
Sec. 15. There shall be created autonomous regions in Muslim Mindanao and in the Cordilleras consisting of
provinces, cities, municipalities, and geographical areas sharing common and distinctive historical and
cultural heritage, economic and social structures, and other relevant characteristics within the framework of
this Constitution and the national sovereignty as well as territorial integrity of the Republic of the
Philippines.
SEC. 16. The President shall exercise general supervision over autonomous regions to ensure that laws are
faithfully executed.
Sec. 17. All powers, functions, and responsibilities not granted Constitution or by law to the autonomous
regions shall be vested in the National Government.
Sec. 18. The Congress shall enact an organic act for each autonomous region with the assistance and
participation of the regional consultative commission composed of representatives appointed by the
President from a list of nominees from multi-sectoral bodies. The organic act shall define the basic structure
of government for the region consisting of the executive department and legislative assembly, both of
which shall be elective and representative of the constituent political units. The organic acts shall likewise
provide for special courts with personal, family and property law jurisdiction consistent with the provisions
of this Constitution and national laws.
The creation of the autonomous region shall be effective when approved by majority of the votes cast by
the constituent units in a plebiscite called for the purpose, provided that only provinces, cities, and
geographic areas voting favorably in such plebiscite shall be included in the autonomous region.
Sec. 19. The first Congress elected under this Constitution shall, within eighteen months from the time of
organization of both Houses, pass the organic acts for the autonomous regions in Muslim Mindanao and the
Cordilleras.
Sec. 20. Within its territorial jurisdiction and subject to the provisions of this Constitution and national laws,
the organic act of autonomous regions shall provide for legislative powers over:
(1) Administrative organization;
(2) Creation of sources of revenues;
(3) Ancestral domain and natural resources;
(4) Personal, family and property relations;
(5) Regional urban and rural planning development;
(6) Economic, social and tourism development ;
(7) Educational policies;
18

(8) Preservation and development of the cultural heritage; and
(9) Such other matters as may be authorized by law for the promotion of the general welfare of the people
of the region.
Sec. 21. The preservation of peace and order within the regions shall be the responsibility of the local police
agencies which shall be organized, maintained, supervised, and utilized in accordance with applicable laws.
The defense and security of the regions shall be the responsibility of the National Government.
A study of E.O. No. 220 would be incomplete Without reference to its historical background.
In April 1986, just after the EDSA Revolution, Fr. Conrado M. Balweg, S.V.D., broke off on ideological
grounds from the Communist Party of the Philippines (CPP) and its military arm the New People's Army.
(NPA).
After President Aquino was installed into office by People Power, she advocated a policy of national
reconciliation. She called on all revolutionary forces to a peace dialogue. The CPLA heeded this call of the
President. After the preliminary negotiations, President Aquino and some members of her Cabinet flew to
Mt. Data in the Mountain Province on September 13, 1986 and signed with Fr. Conrado M. Balweg (As
Commander of the CPLA and Ama Mario Yag-ao (as President of Cordillera Bodong Administration, the civil
government of the CPLA a ceasefire agreement that signified the cessation of hostilities (WHEREAS No. 7,
E.O. 220).
The parties arrived at an agreement in principle: the Cordillera people shall not undertake their demands
through armed and violent struggle but by peaceful means, such as political negotiations. The negotiations
shall be a continuing process until the demands of the Cordillera people shall have been substantially
granted.
On March 27, 1987, Ambassador Pelaez [Acting as Chief Negotiator of the government], in pursuance of
the September 13, 1986 agreement, flew to the Mansion House, Baguio City, and signed with Fr. Balweg
(as Chairman of the Cordillera panel) a joint agreement, paragraphs 2 and 3 of which state:
Par. 2- Work together in drafting an Executive Order to create a preparatory body that could perform
policy-making and administrative functions and undertake consultations and studies leading to a draft
organic act for the Cordilleras.
Par. 3- Have representatives from the Cordillera panel join the study group of the R.P. Panel in drafting the
Executive Order.
Pursuant to the above joint agreement, E.O. 220 was drafted by a panel of the Philippine government and
of the representatives of the Cordillera people.
On July 15, 1987, President Corazon C. Aquino signed the joint draft into law, known now as E.O. 220.
[Rejoinder G.R. No. 82217, pp. 2-3].
Executive Order No. 220, issued by the President in the exercise of her legislative powers under Art. XVIII,
sec. 6 of the 1987 Constitution, created the Cordillera Administrative Region (CAR) , which covers the
provinces of Abra, Benguet, Ifugao, Kalinga-Apayao and Mountain Province and the City of Baguio [secs. 1
and 2]. It was created to accelerate economic and social growth in the region and to prepare for the
establishment of the autonomous region in the Cordilleras [sec. 3]. Its main function is to coordinate the
planning and implementation of programs and services in the region, particularly, to coordinate with the
local government units as well as with the executive departments of the National Government in the
supervision of field offices and in identifying, planning, monitoring, and accepting projects and activities in
the region [sec. 5]. It shall also monitor the implementation of all ongoing national and local government
19

projects in the region [sec. 20]. The CAR shall have a Cordillera Regional Assembly as a policy-formulating
body and a Cordillera Executive Board as an implementing arm [secs. 7, 8 and 10]. The CAR and the
Assembly and Executive Board shall exist until such time as the autonomous regional government is
established and organized [sec. 17].
Explaining the rationale for the issuance of E.O. No. 220, its last "Whereas" clause provides:
WHEREAS, pending the convening of the first Congress and the enactment of the organic act for a
Cordillera autonomous region, there is an urgent need, in the interest of national security and public order,
for the President to reorganize immediately the existing administrative structure in the Cordilleras to suit it
to the existing political realities therein and the Government's legitimate concerns in the areas, without
attempting to pre-empt the constitutional duty of the first Congress to undertake the creation of an
autonomous region on a permanent basis.
During the pendency of this case, Republic Act No. 6766 entitled "An Act Providing for an Organic Act for
the Cordillera Autonomous Region," was enacted and signed into law. The Act recognizes the CAR and the
offices and agencies created under E.O. No. 220 and its transitory nature is reinforced in Art. XXI of R.A.
No. 6766, to wit:
SEC. 3. The Cordillera Executive Board, the Cordillera Region Assembly as well as all offices and agencies
created under Execute Order No. 220 shall cease to exist immediately upon the ratification of this Organic
Act.
All funds, properties and assets of the Cordillera Executive Board and the Cordillera Regional Assembly shall
automatically be transferred to the Cordillera Autonomous Government.
I
It is well-settled in our jurisprudence that respect for the inherent and stated powers and prerogatives of
the law-making body, as well as faithful adherence to the principle of separation of powers, require that its
enactment be accorded the presumption of constitutionality. Thus, in any challenge to the constitutionality
of a statute, the burden of clearly and unequivocally proving its unconstitutionality always rests upon the
challenger. Conversely, failure to so prove will necessarily defeat the challenge.
We shall be guided by these principles in considering these consolidated petitions.
In these cases, petitioners principally argue that by issuing E.O. No. 220 the President, in the exercise of
her legislative powers prior to the convening of the first Congress under the 1987 Constitution, has virtually
pre-empted Congress from its mandated task of enacting an organic act and created an autonomous region
in the Cordilleras. We have carefully studied the Constitution and E.O. No. 220 and we have come to the
conclusion that petitioners' assertions are unfounded. Events subsequent to the issuance of E.O. No. 220
also bear out this conclusion.
1. A reading of E.O. No. 220 will easily reveal that what it actually envisions is the consolidation and
coordination of the delivery of services of line departments and agencies of the National Government in the
areas covered by the administrative region as a step preparatory to the grant of autonomy to the
Cordilleras. It does not create the autonomous region contemplated in the Constitution. It merely provides
for transitory measures in anticipation of the enactment of an organic act and the creation of an
autonomous region. In short, it prepares the ground for autonomy. This does not necessarily conflict with
the provisions of the Constitution on autonomous regions, as we shall show later.
The Constitution outlines a complex procedure for the creation of an autonomous region in the Cordilleras.
A regional consultative commission shall first be created. The President shall then appoint the members of a
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regional consultative commission from a list of nominees from multi-sectoral bodies. The commission shall
assist the Congress in preparing the organic act for the autonomous region. The organic act shall be passed
by the first Congress under the 1987 Constitution within eighteen months from the time of its organization
and enacted into law. Thereafter there shall be held a plebiscite for the approval of the organic act [Art. X,
sec. 18]. Only then, after its approval in the plebiscite, shall the autonomous region be created.
Undoubtedly, all of these will take time. The President, in 1987 still exercising legislative powers, as the first
Congress had not yet convened, saw it fit to provide for some measures to address the urgent needs of the
Cordilleras in the meantime that the organic act had not yet been passed and the autonomous region
created. These measures we find in E.O. No. 220. The steps taken by the President are obviously perceived
by petitioners, particularly petitioner Yaranon who views E.O. No. 220 as capitulation to the Cordillera
People's Liberation Army (CPLA) of Balweg, as unsound, but the Court cannot inquire into the wisdom of
the measures taken by the President, We can only inquire into whether or not the measures violate the
Constitution. But as we have seen earlier, they do not.
2. Moreover, the transitory nature of the CAR does not necessarily mean that it is, as petitioner Cordillera
Broad Coalition asserts, "the interim autonomous region in the Cordilleras" [Petition, G.R. No. 79956, p.
25].
The Constitution provides for a basic structure of government in the autonomous region composed of an
elective executive and legislature and special courts with personal, family and property law jurisdiction [Art.
X, sec. 18]. Using this as a guide, we find that E.O. No. 220 did not establish an autonomous regional
government. It created a region, covering a specified area, for administrative purposes with the main
objective of coordinating the planning and implementation of programs and services [secs. 2 and 5]. To
determine policy, it created a representative assembly, to convene yearly only for a five-day regular
session, tasked with, among others, identifying priority projects and development programs [sec. 9]. To
serve as an implementing body, it created the Cordillera Executive Board composed of the Mayor of Baguio
City, provincial governors and representatives of the Cordillera Bodong Administration, ethno-linguistic
groups and non-governmental organizations as regular members and all regional directors of the line
departments of the National Government as ex-officio members and headed by an Executive Director [secs.
10 and 11]. The bodies created by E.O. No. 220 do not supplant the existing local governmental structure,
nor are they autonomous government agencies. They merely constitute the mechanism for an "umbrella"
that brings together the existing local governments, the agencies of the National Government, the ethno-
linguistic groups or tribes, and non-governmental organizations in a concerted effort to spur development in
the Cordilleras.
The creation of the CAR for purposes of administrative coordination is underscored by the mandate of E.O.
No. 220 for the President and appropriate national departments and agencies to make available sources of
funds for priority development programs and projects recommended by the CAR [sec. 21] and the power
given to the President to call upon the appropriate executive departments and agencies of the National
Government to assist the CAR [sec. 24].
3. Subsequent to the issuance of E.O. No. 220, the Congress, after it was convened, enacted Republic Act
No. 6658 which created the Cordillera Regional Consultative Commission. The President then appointed its
members. The commission prepared a draft organic act which became the basis for the deliberations of the
Senate and the House of Representatives. The result was Republic Act No. 6766, the organic act for the
Cordillera autonomous region, which was signed into law on October 23, 1989. A plebiscite for the approval
of the organic act, to be conducted shortly, shall complete the process outlined in the Constitution.
In the meantime, E.O. No. 220 had been in force and effect for more than two years and we find that,
despite E.O. No. 220, the autonomous region in the Cordilleras is still to be created, showing the lack of
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basis of petitioners' assertion. Events have shown that petitioners' fear that E.O. No. 220 was a "shortcut"
for the creation of the autonomous region in the Cordilleras was totally unfounded.
Clearly, petitioners' principal challenge has failed.
II
A collateral issue raised by petitioners is the nature of the CAR: whether or not it is a territorial and political
subdivision. The Constitution provides in Article X:
Section 1. The territorial and political subdivisions of the Republic of the Philippines are the provinces,
cities, municipalities, and barangays. There shall be autonomous regions in Muslim Mindanao and the
Cordilleras as hereinafter provided.
xxx xxx xxx
Sec. 10. No province, city, municipality, or barangay may be created, divided, merged, abolished, or its
boundary substantially altered, except in accordance with the criteria established in the local government
code and subject to approval by a majority of the votes cast in a plebiscite in the political units directly
affected.
We have seen earlier that the CAR is not the autonomous region in the Cordilleras contemplated by the
Constitution, Thus, we now address petitioners' assertion that E. 0. No. 220 contravenes the Constitution by
creating a new territorial and political subdivision.
After carefully considering the provisions of E.O. No. 220, we find that it did not create a new territorial and
political subdivision or merge existing ones into a larger subdivision.
1. Firstly, the CAR is not a public corporation or a territorial and political subdivision. It does not have a
separate juridical personality, unlike provinces, cities and municipalities. Neither is it vested with the powers
that are normally granted to public corporations, e.g. the power to sue and be sued, the power to own and
dispose of property, the power to create its own sources of revenue, etc. As stated earlier, the CAR was
created primarily to coordinate the planning and implementation of programs and services in the covered
areas.
The creation of administrative regions for the purpose of expediting the delivery of services is nothing new.
The Integrated Reorganization Plan of 1972, which was made as part of the law of the land by virtue of
Presidential Decree No. 1, established eleven (11) regions, later increased to twelve (12), with definite
regional centers and required departments and agencies of the Executive Branch of the National
Government to set up field offices therein. The functions of the regional offices to be established pursuant
to the Reorganization Plan are: (1) to implement laws, policies, plans, programs, rules and regulations of
the department or agency in the regional areas; (2) to provide economical, efficient and effective service to
the people in the area; (3) to coordinate with regional offices of other departments, bureaus and agencies
in the area; (4) to coordinate with local government units in the area; and (5) to perform such other
functions as may be provided by law. [See Part II, chap. III, art. 1, of the Reorganization Plan].
We can readily see that the CAR is in the same genre as the administrative regions created under the
Reorganization Plan, albeit under E.O. No. 220 the operation of the CAR requires the participation not only
of the line departments and agencies of the National Government but also the local governments, ethno-
linguistic groups and non-governmental organizations in bringing about the desired objectives and the
appropriation of funds solely for that purpose.
2. Then, considering the control and supervision exercised by the President over the CAR and the offices
created under E.O. No. 220, and considering further the indispensable participation of the line departments
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of the National Government, the CAR may be considered more than anything else as a regional
coordinating agency of the National Government, similar to the regional development councils which the
President may create under the Constitution [Art. X, sec. 14]. These councils are "composed of local
government officials, regional heads of departments and other government offices, and representatives
from non-governmental organizations within the region for purposes of administrative decentralization to
strengthen the autonomy of the units therein and to accelerate the economic and social growth and
development of the units in the region." [Ibid.] In this wise, the CAR may be considered as a more
sophisticated version of the regional development council.
III
Finally, petitioners incidentally argue that the creation of the CAR contravened the constitutional guarantee
of the local autonomy for the provinces (Abra, Benguet, Ifugao, Kalinga-Apayao and Mountain Province)
and city (Baguio City) which compose the CAR.
We find first a need to clear up petitioners' apparent misconception of the concept of local autonomy.
It must be clarified that the constitutional guarantee of local autonomy in the Constitution [Art. X, sec. 2]
refers to the administrative autonomy of local government units or, cast in more technical language, the
decentralization of government authority [Villegas v. Subido, G.R. No. L-31004, January 8, 1971, 37 SCRA
1]. Local autonomy is not unique to the 1987 Constitution, it being guaranteed also under the 1973
Constitution [Art. II, sec. 10]. And while there was no express guarantee under the 1935 Constitution, the
Congress enacted the Local Autonomy Act (R.A. No. 2264) and the Decentralization Act (R.A. No. 5185),
which ushered the irreversible march towards further enlargement of local autonomy in the country
[Villegas v. Subido, supra.]
On the other hand, the creation of autonomous regions in Muslim Mindanao and the Cordilleras, which is
peculiar to the 1987 Constitution contemplates the grant of political autonomy and not just administrative
autonomy these regions. Thus, the provision in the Constitution for an autonomous regional government
with a basic structure consisting of an executive department and a legislative assembly and special courts
with personal, family and property law jurisdiction in each of the autonomous regions [Art. X, sec. 18].
As we have said earlier, the CAR is a mere transitory coordinating agency that would prepare the stage for
political autonomy for the Cordilleras. It fills in the resulting gap in the process of transforming a group of
adjacent territorial and political subdivisions already enjoying local or administrative autonomy into an
autonomous region vested with political autonomy.
Anent petitioners' objection, we note the obvious failure to show how the creation of the CAR has actually
diminished the local autonomy of the covered provinces and city. It cannot be over-emphasized that pure
speculation and a resort to probabilities are insufficient to cause the invalidation of E.O. No. 220.
WHEREFORE, the petitions are DISMISSED for lack of merit.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Grio-
Aquino, Medialdea and Regalado, JJ., concur.