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REPUBLIC FLOUR MILLS INC., petitioner, vs.

THE COMMISSIONER OF CUSTOMS and THE COURT OF TAX


APPEALS, respondents.
It is a novel question that this petition for the review of a decision of respondent Court of Tax Appeals presents. Petitioner
Republic Flour Mills, Inc. would have this Court construe the words "products of the Philippines" found in Section 2802 of
the Tariff and Custom Code 1 as excluding bran (ipa) and pollard (darak) on the ground that, coming as they do from
wheat grain which is imported in the Philippines, they are merely waste and not the products, which is the flour produced.
2 That way, it would not be liable at all for the wharfage dues assessed under such section by respondent Commission of
Customs. It elevated the matter to respondent Court, as the construction it would place on the aforesaid section appears
too strained and far remote from the ordinary meaning of the text, not to mention the policy of the Act. We affirm.
In the decision of respondent Court now sought to be reviewed, after stating that what was before it was an appeal from a
decision of the Commissioner of Customs holding petitioner liable for the sum of P7,948.00 as wharfage due the facts
were set forth as follows: "Petitioner, Republic Flour Mills, Inc., is a domestic corporation, primarily engaged in the
manufacture of wheat flour, and produces pollard (darak) and bran (ipa) in the process of milling. During the period from
December, 1963 to July, 1964, inclusive, petitioner exported Pollard and/or bran which was loaded from lighters alongside
vessels engaged in foreign trade while anchored near the breakwater The respondent assessed the petitioner by way of
wharfage dues on the said exportations in the sum of P7,948.00, which assessment was paid by petitioner under protest."
3 The only issue, in the opinion of respondent Court, is whether or not such collection of wharfage dues was in
accordance with law. The main contention before respondent Court of petitioner was "that inasmuch as no government or
private wharves or government facilities [were] utilized in exporting the pollard and/or bran, the collection of wharfage
dues is contrary to law." 4 On the other hand, the stand of respondent Commissioner of Customs was that petitioner was
liable for wharfage dues "upon receipt or discharge of the exported goods by a vessel engaged in foreign trade regardless
of the non-use of government-owned or private wharves." 5 Respondent Court of Tax Appeals sustained the action taken
by the Commissioner of Customs under the appropriate provision of the Tariff and Customs Code, relying on our decision
in Procter & Gamble Phil. Manufacturing Corp. v. Commissioner of Customs. 6 It did not feel called upon to answer the
question now before us as, in its opinion, petitioner only called its attention to it for the first time in its memorandum.
Hence, this petition for review. The sole error assigned by petitioner is that it should not, under its construction of the Act,
be liable for wharfage dues on its exportation of bran and pollard as they are not "products of the Philippines", coming as
they did from wheat grain which were imported from abroad, and being "merely parts of the wheat grain milled by
Petitioner to produce flour which had become waste." 7 We find, to repeat, such contention unpersuasive and affirm the
decision of respondent Court of Tax Appeals.
1.
The language of Section 2802 appears to be quite explicit: "There shall be levied, collected and paid on all articles
imported or brought into the Philippines, and on products of the Philippines ... exported from the Philippines, a charge of
two pesos per gross metric ton as a fee for wharfage ...." One category refers to what is imported. The other mentions
products of the Philippines that are exported. Even without undue scrutiny, it does appear quite obvious that as long as
the goods are produced in the country, they fall within the terms of the above section. Petitioner appeared to have
entertained such a nation. In its petition for review before respondent Court, it categorically asserted: "Petitioner is
primarily engaged in the manufacture of flour from wheat grain. In the process of milling the wheat grain into flour,
petitioner also produces 'bran' and 'pollard' which it exports abroad." 8 It does take a certain amount of hair-splitting to
exclude from its operation what petitioner calls "waste" resulting from the production of flour processed from the wheat
grain in petitioner's flour mills in the Philippines. It is always timely to remember that, as stressed by Justice Moreland:
"The first and fundamental duty of courts, in our judgment, is to apply the law. Construction and interpretation come only
after it has been demonstrated that application is impossible or inadequate without them." 9 Petitioner ought to have been
aware that deference to such a doctrine precludes an affirmative response to its contention. The law is clear; it must be
obeyed. It is as simple, as that. 10
2.
There is need of confining familiar language of a statute to its usual signification. While statutory construction
involves the exercise of choice, the temptation to roam at will and rely on one's predilections as to what policy should
prevail is to be resisted. The search must be for a reasonable interpretation. It is best to keep in mind the reminder from
Holmes that "there is no canon against using common sense in construing laws as saying what obviously means." 11 To
paraphrase Frankfurter, interpolation must be eschewed but evisceration avoided. Certainly, the utmost effort should be
exerted lest the interpretation arrived at does violence to the statutory language in its total context. It would be then to
ignore what has been stressed time and time again as to limits of judicial freedom in the construction of statutes to accept
their view advanced by petitioner.
3.
Then, again, there is the fundamental postulate in statutory construction requiring fidelity to the legislative
purpose. What Congress intended is not to be frustrates. Its objective must be carried out. Even if there be doubt as to the
meaning of the language employed, the interpretation should not be at war with the end sought to be attained. No undue
reflection is needed to show that if through an ingenious argument, the scope of a statute may be contracted, the
probability that other exceptions may be thought of is not remote. If petitioner were to prevail, subsequent pleas motivated
by the same desire to be excluded from the operation of the Tariff and Customs Code would likewise be entitled to

sympathetic consideration. It is desirable then that the gates to such efforts at undue restriction of the coverage of the Act
be kept closed. Otherwise, the end result would be not respect for, but defiance of, a clear legislative mandate. That kind
of approach in statutory construction has never recommended itself. It does not now. 12
WHEREFORE, the decision of respondent Court of Tax Appeals of November 27, 1967 is affirmed. With costs against
petitioner.

SPOUSES LEOPOLDO and MA. LUISA VEROY, petitioners, vs. THE HON. WILLIAM L. LAYAGUE, Presiding Judge,
Branch XIV, Regional Trial Court at Davao City; and BRIG. GEN. PANTALEON DUMLAO, Commanding General,
PC-Criminal Investigation Service, respondents.
This was originally a petition for certiorari, mandamus and prohibition under Rule 65 of the Rules of Court: certiorari, to
review the Order of the respondent Judge dated October 2, 1990 denying herein petitioner's Motion for Hospital
Confinement; mandamus, to compel respondent Judge to resolve petitioners' long pending motion for bail; and prohibition,
to enjoin further proceedings on the ground that the legal basis therefore is unconstitutional for being violative of the due
process and equal protection clauses of the Constitution.
The facts of this case are as follows:
Petitioners are husband and wife who owned and formerly resided at No. 13 Isidro St., Skyline Village. Catalunan Grande,
Davao City. When petitioner Leopoldo Veroy was promoted to the position of Assistant Administrator of the Social Security
System sometime in June, 1988, he and his family transferred to 130 K-8th St., East Kamias, Quezon City, where they are
presently residing. The care and upkeep of their residence in Davao City was left to two (2) houseboys, Jimmy Favia and
Eric Burgos, who had their assigned quarters at a portion of the premises. The Veroys would occasionally send money to
Edna Soguilon for the salary of the said houseboys and other expenses for the upkeep of their house. While the Veroys
had the keys to the interior of the house, only the key to the kitchen, where the circuit breakers were located, was
entrusted to Edna Soguilon to give her access in case of an emergency. Hence, since 1988, the key to the master's
bedroom as well as the keys to the children's rooms were retained by herein Petitioners so that neither Edna Soguilon nor
the caretakers could enter the house.
On April 12, 1990, Capt. Reynaldo Obrero of the Talomo Patrol Station, PC/INP, acting upon a directive issued by
Metrodiscom Commander Col. Franco Calida, raided the house of herein petitioners in Davao City on information that the
said residence was being used as a safehouse of rebel soldiers. They were able to enter the yard with the help of the
caretakers but did not enter the house since the owner was not present and they did not have a search warrant. Petitioner
Ma. Luisa was contacted by telephone in her Quezon City residence by Capt. Obrero to ask permission to search the
house in Davao City as it was reportedly being used as a hideout and recruitment center of rebel soldiers. Petitioner Ma.
Luisa Veroy responded that she is flying to Davao City to witness the search but relented if the search would not be
conducted in the presence of Major Ernesto Macasaet, an officer of the PC/INP, Davao City and a long time family friend
of the Veroys. The authority given by Ma. Luisa Veroy was relayed by Capt. Obrero to Major Macasaet who answered that
Ma. Luisa Veroy has called him twice by telephone on the matter and that the permission was given on the condition that
the search be conducted in his presence.
The following day, Capt. Obrero and Major Macasaet met at the house of herein petitioners in Skyline Village to conduct
the search pursuant to the authority granted by petitioner Ma. Luisa Veroy. The caretakers facilitated their entry into the
yard, and using the key entrusted to Edna Soguilon, they were able to gain entrance into the kitchen. However, a
locksmith by the name of George Badiang had to be employed to open the padlock of the door leading to the children's
room. Capt. Obrero and Major Macasaet then entered the children's room and conducted the search. Capt. Obrero
recovered a .45 cal. handgun with a magazine containing seven (7) live bullets in a black clutch bag inside an unlocked
drawer. Three (3) half-full jute sacks containing printed materials of RAM-SFP (samples of which were attached as
Annexes "H" and "H-1" of the petition) (Rollo, pp. 49-55) were also found in the children's room. A search of the children's
recreation and study area revealed a big travelling bag containing assorted polo shirts, men's brief, two (2) pieces polo
barong and short sleeve striped gray polo. sweat shirt, two (2) pairs men's socks, a towel made in U.S.A., one blanket, a
small black bag, Gandhi brand, containing a book entitled "Islamic Revolution Future Path of the Nation", a road map of
the Philippines, a telescope, a plastic bag containing assorted medicines and religious pamphlets was found in the
master's bedroom. Sgt. Leo Justalero was instructed by Capt. Obrero to make an inventory and receipt of the articles
seized, in the house (Annex "F" of the Petition, Rollo, p. 48). Said receipt was signed by Eric Burgos, one of the
caretakers, and George Badiang, the locksmith, as witnesses. Sgt. Justalero turned over the articles to Sgt. Rodolfo
Urbano at the police station.
The case was referred for preliminary investigation to Quezon City Assistant Prosecutor Rodolfo Ponferrada who was
designated Acting Provincial Prosecutor for Davao City by the Department of Justice through Department Order No. 88
dated May 16, 1990. In a resolution dated August 6, 1990, Fiscal Ponferrada recommended the filing of an information
against herein petitioners for Violation of Presidential Decree No. 1866 (Illegal Possession of Firearms and Ammunitions

in Furtherance of Rebellion) (Annex "L" of the Petition, Rollo, p. 71). Hence, on August 8, 1990. an Information for the said
offense was filed by the Office of the City Prosecutor of Davao City before the Regional Trial Court, 11th Judicial Region,
Davao City, docketed as Criminal Case No. 20595-90 and entitled "People of the Philippines v. Atty. Leopoldo Veroy and
Mrs. Maria Luisa Veroy" (Annex "K" of the Petition, Rollo, p. 70). No bail was recommended by the prosecution.
The aforementioned resolution dated August 6, 1990 of Fiscal Ponferrada was received by the petitioners on August 13,
1990. On the same day, the latter filed a Motion for Bail before herein respondent Judge Layague which was denied on
August 17, 1990 for being premature since at that time, petitioners had not yet been arrested. Despite the fact that the
warrants for their arrest have not yet been served on them, herein petitioners voluntarily surrendered themselves to Brig.
Gen. Pantaleon Dumlao, PC-CIS Chief, since it was the CIS that initiated the complaint. However, the latter refused to
receive them on the ground that his office has not yet received copies of their warrants of arrest.
In the meantime, on August 15, 1990, herein petitioners were admitted to the St. Luke's Hospital for various ailments
brought about or aggravated by the stress and anxiety caused by the filing of the criminal complaint. On August 17, 1990,
Brig. Gen. Dumlao granted their request that they be allowed to be confined at the hospital and placed under guard
thereat.
In an Indorsement dated August 20, 1990, the CIS through Capt. Benjamin de los Santos, made its return to the trial court
informing the latter of the voluntary surrender of herein petitioners and the fact that they were under hospital confinement.
Herein Petitioner reiterated their Motion for Bail. In an Order dated August 24, 1990 (Annex "M" of the Petition, Rollo, p.
74), the hearing for the Motion for Ball was set for August 31, 1990 to enable the prosecution to present evidence it
opposition to said motion. The prosecution filed its written opposition (Annex "N" of the Petition, Rollo, p. 75) on August
28, 1990, arguing that the evidence of petitioners' guilt was strong and thereafter presented its evidence.
On September 21, 1990, respondent Judge required the CIS to produce the bodies of herein petitioners on October 1,
1990 for arraignment (Annex "O" of the Petition, Rollo, p. 76). Upon their arraignment, herein Petitioners entered a plea of
not guilty and filed an "Urgent Motion for Hospital Confinement" (Annex "OO" of the Petition Rollo, p. 77) which was
denied by the court in its Order dated October 2, 1990 (Annex "P" of the Petition, Rollo, p. 80). It likewise ordered their
commitment at the Davao City Rehabilitation Center, Ma-a, Davao City pending trial on the merits. Herein petitioners
argued orally a motion for reconsideration which was opposed by the prosecution. At the conclusion thereof, the court a
quo issued a second order annex "Q" of the Petition, Rollo, p. 83) denying then motion for reconsideration and as to the
alternative prayer to reopen the motion for hospital confinement, set the continuance thereof to October 17, 1990. It was
further ordered that the petitioners shall remain under the custody of the PC-CIS pending resolution of the case.
Meanwhile, petitioners were returned to the St. Luke's Hospital where their physical condition remained erratic. On or
about October 18, 1990, herein petitioners were informed that Brig. Gen. Dumlao had issued a directive for their transfer
from the St. Luke's Hospital to Camp Crame on the basis of the October 2, 1990 Order (Annex "Q" of the Petition, Rollo,
p. 83). Petitioners made representations that the tenor of the court order warranted maintenance of the status quo, i.e.,
they were to continue their hospital confinement. However, Brig, Gen. Dumlao informed them that unless otherwise
restrained by the court, they would proceed with their transfer pursuant to the order of the trial court.
Hence, this petition on October 25, 1990 this Court issued a Temporary Restraining Order, effective immediately and
continuing until further orders from this Court, ordering: (a) respondent Hon. William L. Layague to refrain from further
proceeding with petitioners' "Motion for Hospital Confinement" in Criminal Case No. 20595-90 entitled "People of the
Philippines v. Leopoldo Veroy and Ma. Luisa Veroy"; and (b) respondent Brig. Gen. Pantaleon Dumlao to refrain from
transferring petitioners from the St. Luke's Hospital (Rollo, pp. 84-A to 84-C).
On November 2, 1990, respondent Judge issued an order denying petitioners' Motion for Bail (Annex "A" of the Second
Supplemental Petition, Rollo, p. 133). Petitioners filed a Supplemental Petition on November 7, 1990 (Rollo, P. 105) and a
Second Supplemental Petition on November 16, 1990 (Rollo, p. 120) which sought to review the order of the trial court
dated November 2, 1990 denying their petition for bail.
Acting on the Supplemental Petition filed by Petitioners and taking into consideration several factors such as: a) that the
possibility that they will flee or evade the processes of the court is fairly remote; b) their poor medical condition; and c) the
matters in their Second Supplemental Petition especially since the prosecution's evidence refers to constructive
possession of the disputed firearms in Davao City through the two (2) caretakers while petitioners lived in Manila since
1988, this Court, on November 20, 1990, granted petitioners' provisional liberty and set the bail bond at P20,000.00 each
(Rollo, p. 141). Petitioners posted a cash bond in the said amount on November 23, 1990 (Rollo, pp. 143-145).
The petition was given due course on July 16, 1991 (Rollo, p. 211). Respondents adopted their Comment dated
December 28, 1990 (Rollo, pp. 182-191) as their Memorandum while, petitioners filed their Memorandum on September
9, 1991 (Rollo, pp. 218-269).
As submitted by the respondents, and accepted by petitioners, the petition for mandamus to compel respondent Judge to
resolve petitioners' Motion for Bail, and the petition for certiorari to review the order of respondent judge initially denying

their Motion for Hospital Confinement, were rendered moot and academic by the resolutions of this Court dated November
20, 1990 and October 25, 1990, respectively. What remains to be resolved is the petition for prohibition where petitioners
raised the following issues:
1.
Presidential Decree No. 1866, or at least the third paragraph of Section 1 thereof, is unconstitutional for being
violative of the due process and equal protection clauses of the Constitution;
2.

Presidential Decree No. 1866 has been repealed by Republic Act No. 6968;

3.
Assuming the validity of Presidential Decree No. 1866 the respondent judge gravely abused his discretion in
admitting in evidence certain articles which were clearly inadmissible for being violative of the prohibition against
unreasonable searches and seizures.
The issue of constitutionality of Presidential Decree No. 1866 has been laid to rest in the case of Misolas v. Panga, G.R.
No. 83341, January 30, 1990 (181 SCRA 648), where this Court held that the declaration of unconstitutionality of the third
paragraph of Section 1 of Presidential Decree No. 1866 is wanting in legal basis since it is neither a bill of attainder nor
does it provide a possibility of a double jeopardy.
Likewise, petitioners' contention that Republic Act 6968 has repealed Presidential Decree No. 1866 is bereft of merit. It is
a cardinal rule of statutory construction that where the words and phrases of a statute are not obscure or ambiguous. its
meaning and the intention of the legislature must be determined from the language employed, and where there is no
ambiguity in the words, there is no room for construction (Provincial Board of Cebu v. Presiding Judge of Cebu, CFI, Br.
IV, G.R. No. 34695, March 7, 1989 [171 SCRA 1]). A perusal of the aforementioned laws would reveal that the legislature
provided for two (2) distinct offenses: (1) illegal possession of firearms under Presidential Decree No. 1866; and (2)
rebellion, coup d' etat, sedition and disloyalty under Republic Act 6968; evidently involving different subjects which were
not clearly shown to have eliminated the others.
But petitioners contend that Section 1 of Presidential Decree No. 1866 is couched in general or vague terms. The terms
"deal in", "acquire", "dispose" or "possess" are capable of various interpretations such that there is no definiteness as to
whether or not the definition includes "constructive possession" or how the concept of constructive possession should be
applied. Petitioners were not found in actual possession of the firearm and ammunitions. They were in Quezon City while
the prohibited articles were found in Davao City. Yet they were being charged under Presidential Decree No. 1866 upon
the sole circumstance that the house wherein the items were found belongs to them (Memorandum for Petitioners, Rollo,
pp. 242-244).
Otherwise stated, other than their ownership of the house in Skyline Village, there was no other evidence whatsoever that
herein petitioners possessed or had in their control the items seized (Ibid., pp. 248-250). Neither was it shown that they
had the intention to possess the Firearms or to further rebellion (Ibid., P. 252).
In a similar case, the revolver in question was found in appellant's store and the question arouse whether he had
possession or custody of it within the meaning of the law.
This Court held that:
The animus possidendi must be proved in opium cases where the prohibited drug was found on the premises of the
accused and the same rule is applicable to the possession of firearms. The appellant denied all knowledge of the
existence of the revolver, and the Government's principal witness stated that there were a number of employees in the
store. The only testimony which tends to show that the appellant had the possession or custody of this revolver is the
inference drawn from the fact that it was found in his store, but we think that this inference is overcome by the positive
testimony of the appellant, when considered with the fact that there were a number of employees in the store, who, of
course, could have placed the revolver in the secret place where it was found without the knowledge of the appellant. At
least there is a very serious doubt whether he knew of the existence of this revolver. In such case the doubt must be
resolved in favor of the appellant. (U.S. v. Jose and Tan Bo., 34 Phil. 724 [1916])
But more importantly, petitioners question the admissibility in evidence of the articles seized in violation of their
constitutional right against unreasonable search and seizure.
Petitioners aver that while they concede that Capt. Obrero had permission from Ma. Luisa Veroy to break open the door of
their residence, it was merely for the purpose of ascertaining thereat the presence of the alleged "rebel" soldiers. The
permission did not include any authority to conduct a room to room search once inside the house. The items taken were,
therefore, products of an illegal search, violative of their constitutional rights As such, they are inadmissible in evidence
against them.
The Constitution guarantees the right of the people to be secure in their persons, houses, papers and effects against
unreasonable searches and seizures (Article III, Section 2 of the 1987 Constitution). However, the rule that searches and
seizures must be supported by a valid warrant is not an absolute one. Among the recognized exceptions thereto are: (1) a

search incidental to an arrest; (2) a search of a moving vehicle; and (3) seizure of evidence in plain view (People v. Lo Ho
Wing, G.R. No. 88017, January 21, 1991 [193 SCRA 122]).
None of these exceptions pertains to the case at bar. The reason for searching the house of herein petitioners is that it
was reportedly being used as a hideout and recruitment center for rebel soldiers. While Capt. Obrero was able to enter
the compound, he did not enter the house because he did not have a search warrant and the owners were not present.
This shows that he himself recognized the need for a search warrant, hence, he did not persist in entering the house but
rather contacted the Veroys to seek permission to enter the same. Permission was indeed granted by Ma. Luisa Veroy to
enter the house but only to ascertain the presence of rebel soldiers. Under the circumstances it is undeniable that the
police officers had ample time to procure a search warrant but did not.
In a number of cases decided by this Court, (Guazon v. De Villa, supra.; People v. Aminnudin, G.R. No. L-74869, July 6,
1988 [163 SCRA 402]; Alih v. Castro, G.R. No. L-69401, June 23, 1987 [151 SCRA 279]), warrantless searches were
declared illegal because the officials conducting the search had every opportunity to secure a search Warrant. The objects
seized, being products of illegal searches, were inadmissible in evidence in the criminal actions subsequently instituted
against the accused-appellants (People v. Cendana, G.R. No. 84715, October 17, 1990 [190 SCRA 538]).
Undeniably, the offense of illegal possession of firearms is malum prohibitum but it does not follow that the subject thereof
is necessarily illegal per se. Motive is immaterial in mala prohibita but the subjects of this kind of offense may not be
summarily seized simply because they are prohibited. A search warrant is still necessary. Hence, the rule having been
violated and no exception being applicable, the articles seized were confiscated illegally and are therefore protected by
the exclusionary principle. They cannot be used as evidence against the petitioners in the criminal action against them for
illegal possession of firearms. (Roan v. Gonzales, 145 SCRA 689-690 [1986]). Besides, assuming that there was indeed a
search warrant, still in mala prohibita, while there is no need of criminal intent, there must be knowledge that the same
existed. Without the knowledge or voluntariness there is no crime.
PREMISES CONSIDERED, the petition as granted and the criminal case against the petitioners for illegal possession of
firearms is DISMISSED.
SO ORDERED.

LUIS MALALUAN, petitioner, vs. COMMISSION ON ELECTIONS and JOSEPH EVANGELISTA, respondents.
Novel is the situation created by the decision of the Commission on Elections which declared the winner in an election
contest and awarded damages, consisting of attorneys fees, actual expenses for xerox copies, unearned salary and other
emoluments for the period, from March, 1994 to April, 1995, en masse denominated as actual damages, notwithstanding
the fact that the electoral controversy had become moot and academic on account of the expiration of the term of office of
the Municipal Mayor of Kidapawan, North Cotabato.
Before us is a petition for certiorari and prohibition, with a prayer for the issuance of a temporary restraining order and writ
of preliminary injunction, seeking the review of the decision en banc[1] of the Commission on Elections (COMELEC)
denying the motion for reconsideration of the decision[2] of its First Division,[3] which reversed the decision[4] of the
Regional Trial Court[5] in the election case[6] involving the herein parties. While the Regional Trial Court had found
petitioner Luis Malaluan to be the winner of the elections for the position of Municipal Mayor of Kidapawan, North
Cotabato, the COMELEC, on the contrary, found private respondent Joseph Evangelista to be the rightful winner in said
elections.
Petitioner Luis Malaluan and private respondent Joseph Evangelista were both mayoralty candidates in the Municipality of
Kidapawan, North Cotabato, in the Synchronized National and Local Elections held on May 11, 1992. Private respondent
Joseph Evangelista was proclaimed by the Municipal Board of Canvassers as the duly elected Mayor for having garnered
10,498 votes as against petitioners 9,792 votes. Evangelista was, thus, said to have a winning margin of 706 votes. But,
on May 22, 1992, petitioner filed an election protest with the Regional Trial Court contesting 64 out of the total 181
precincts of the said municipality. The trial court declared petitioner as the duly elected municipal mayor of Kidapawan,
North Cotabato with a plurality of 154 votes. Acting without precedent, the court found private respondent liable not only
for Malaluans protest expenses but also for moral and exemplary damages and attorneys fees. On February 3, 1994,
private respondent appealed the trial court decision to the COMELEC.
Just a day thereafter that is, on February 4, 1994, petitioner filed a motion for execution pending appeal. The motion was
granted by the trial court, in an order, dated March 8, 1994, after petitioner posted a bond in the amount of P500,000.00.
By virtue of said order, petitioner assumed the office of MunicipaJ Mayor of Kidapawan, North Cotabato, and exercised
the powers and functions of said office. Such exercise was not for long, though. In the herein assailed decision adverse to
Malaluans continued governance of the Municipality of Kidapawan, North Cotabato, the First Division of the Commission
on Elections (COMELEC) ordered Malaluan to vacate the office, said division having found and so declared private
respondent to be the duly elected Municipal Mayor of said municipality. The COMELEC en banc affirmed said decision.

Malaluan filed this petition before us on May 31, 1995 as a consequence.


It is significant to note that the term of office of the local officials elected in the May, 1992 elections expired on June 30,
1995. This petition, thus, has become moot and academic insofar as it concerns petitioners right to the mayoralty seat in
his municipality[7] because expiration of the term of office contested in the election protest has the effect of rendering the
same moot and academic.[8]
When the appeal from a decision in an election case has already become moot, the case being an election protest
involving the office of mayor the term of which had expired, the appeal is dismissible on that ground, unless the rendering
of a decision on the merits would be of practical value.[9] This rule we established in the case of Yorac vs. Magalona[10]
which we dismissed because it had been mooted by the expiration of the term of office of the Municipal Mayor of Saravia,
Negros Occidental. This was the object of contention between the parties therein. The recent case of Atienza vs.
Commission on Elections,[11] however, squarely presented the situation that is the exception to that rule.
Comparing the scenarios in those two cases, we-explained:
Second, petitioners citation of Yorac vs. Magalona as authority for his main proposition is grossly inappropriate and
misses the point in issue. The sole question in that case centered on an election protest involving the mayoralty post in
Saravia, Negros Occidental in the general elections of 1955, which was rendered moot and academic by the expiration of
the term of office in December, 1959 It did not involve a monetary award for damages and other expenses incurred as a
result of the election protest. In response to the petitioners contention that the issues presented before the court were
novel and important and that the appeal should not be dismissed, the Court held - citing the same provision of the Rules
of Court upon which petitioner staunchly places reliance - that a decision on the merits in the case would have no practical
value at all, and forthwith dismissed the case for being moot. That is not the case here. In contradistinction to Yorac, a
decision on the merits in the case at bench would clearly have the practical value of either sustaining the monetary award
for damages or relieving the private respondent from having to pay the amount thus awarded.[12]
Indeed, this petition appears now to be moot and academic because the herein parties are contesting an elective post to
which their right to the office no longer exists. However, the question as to damages remains ripe for adjudication. The
COMELEC found petitioner liable for attorneys fees, actual expenses for xerox copies, and unearned salary and other
emoluments from March, 1994 to April, 1995, en mUsse denominated as actual damages, default in payment by petitioner
of which shall result in the collection of said amount from the bond posted by petitioner on the occasion of the grant of his
motion for execution pending appeal in the trial court. Petitioner naturally contests the propriety and legality of this award
upon private respondent on the ground that said damages have not been alleged and proved during trial.
What looms large as the issue in this case is whether or not the COMELEC gravely abused its discretion in awarding the
aforecited damages in favor of private respondent.
The Omnibus Election Code provides that actual or compensatory damages may be granted in all election contests or in
quo warranto proceedings in accordance with law.[13] COMELEC Rules of Procedure provide that in all election contests
the Court may adjudicate damages and attorneys fees as it may deem just and as established by the evidence if the
aggrieved party has included such claims in his pleadings.[14] This appears to require only that the judicial award of
damages be just and that the same be borne out by the pleadings and evidence. The overriding requirement for a valid
and proper award of damages, it must be remembered, is that the same is in accordance with law, specifically, the
provisions of the Civil Code pertinent to damages.
Article 2199 of the Civil Code mandates that except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as
actual or compensatory damages. The Civil Cod.e further prescribes the proper setting for allowance of actual or
compensatory damages in the following provisions:
ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be
those that are the natural and probable consequences of the breach of the obligation, and which the parties have
foreseen or could have reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation.
ART. 2202. In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and probable
consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could
have reasonably been foreseen by the defendant.
Considering that actual or compensatory damages are appropriate only in breaches of obligations in cases of contracts
and quasi-contracts and on the - occasion of crimes and quasi-delicts where the defendant may be held liable for all
damages the proximate cause of which is the act or omission complained of, the monetary claim of a party in an election
case must necessarily be hinged on either a contract or a quasi-contract or a tortious act or omission or a crime, in order

to effectively recover actual or compensatory damages.[15] In the absence of any or all of these, the claimant must be
able to point out a specific provision of law authorizing a money claim for election protest expenses against the losing
party.[16] For instance, the claimant may cite any of the following provisions of the Civil Code under the chapter on human
relations, which provisions create obligations not by contract, crime or negligence, but directly by law:
ART. 19. Every person must in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.
ART. 20. Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for
the same.
ART. 32. Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or
in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for
damages:
(5) Freedom of suffrage;
In any of the cases referred to in this article, whether or not the defendants act or omission constitutes a criminal offense,
the aggrieved party has a right to commence an entirely separate and distinct civil action for damages, and for other relief.
x x x[17]
Claimed as part of the damages to which private respondent is allegedly entitled to, is P169,456.00 constituting salary and
other emoluments from March, 1994 to April, 1995 that would have accrued to him had there not been an execution of the
trial courts decision pending appeal therefrom in the COMELEC.
The long-standing rule in this jurisdiction is that notwithstanding his subsequent ouster as a result of an election protest,
an elective official who has been proclaimed by the COMELEC as winner in an electoral contest and who assumed office
and entered into the performance of the duties of that office, is entitled to the compensation, emoluments and allowances
legally provided for the position.[18] We ratiocinated in the case of Rodriguez vs. Tan that:
This is as it should be. This is in keeping with the ordinary course of events. This is simple justice. The emolument must
go to the person who rendered the service unless the contrary is provided. There is no averment in the complaint that he
is linked with any irregularity vitiating his election. This is the policy and the rule that has been followed consistently in this
jurisdiction in connection with positions held by persons who had been elected thereto but were later ousted as a result of
an election protest. The right of the persons elected to compensation during their incumbency has always been
recognized. We cannot recall of any precedent wherein the contrary rule has been upheld.[19]
In his concurring opinion in the same case, however, Justice Padilla equally stressed that, while the general rule is that
the ousted elective official is not obliged to reimburse the emoluments of office that he had received before his ouster, he
would be liable for damages in case he would be found responsible for any unlawful or tortious acts in relation to his
proclamation. We quote the pertinent portion of that opinion for emphasis:
Nevertheless, if the defendant, directly or indirectly, had committed unlawful or tortious acts which led to and resulted in
his proclamation as senator-elect, when in truth and in fact he was not so elected, he would be answerable for damages.
In that event the salary, fees and emoluments received by or paid to him during his illegal incumbency would be a proper
item of recoverable damage.[20]
The criterion for ajustifiable award of election protest expenses and salaries and emoluments, thus, remains to be the
existence of a pertinent breach of obligations arising from contracts or quasi-contracts, tortious acts, crimes or a specific
legal provision authorizing the money claim in the context of election cases. Absent any of these, we could not even begin
to contemplate liability for damages in election cases, except insofar as attorneys fees are concerned, since the Civil
Code enumerates the specific instances when the same may be awarded by the court.
ART. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to
protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and
demandable claim;

(6) In actions for legal support;


(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmens compensation and employers liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be
recovered.[21]
Given the aforecited laws, and jurisprudence on the matter at issue, let us now look into the basis of respondent
COMELEC for awarding actual damages to private respondent in the form of reimbursement for attorneys fees, actual
expenses for xerox copies, and salary and other emoluments that should have accrued to him from March, 1994 to April,
1995 had the RTC not issued an order for execution pending appeal.
The First Division of the COMELEC ruled on private respondents claim for actual or compensatory damages in this wise:
x x x under the present legal setting, it is more difficult than in the past to secure an award of actual or compensatory
damages either against the protestant or the protestee because of the requirements of the law.
In the instant case, however, We are disposed to conclude that the election protest filed by the protestant is clearly
unfounded. As borne out by the results of the appreciation of ballots conducted by this Commission, apparently the protest
was filed in bad faith without sufficient cause or has been filed for the sole purpose of molesting the protestee-appellant
for which he incurred expenses. The erroneous ruling of the Court which invalidated ballots which were clearly valid added
more injury to the protestee-appellant. This would have been bearable since he was able to perfect his appeal to this
Commission. The final blow, however, came when the Court ordered the execution of judgment pending appeal which,
from all indications, did not comply with the requirements of Section 2, Rule 39 of the Rules of Court. There was no good
and special reason at all to justify the execution ofjudgment pending appeal because the protestees winning margin was
149 votes while that of the protestant - after the Court declared him a winner - was only a margin of 154 votes. Clearly, the
order of execution of judgment pending appeal was issued with grave abuse of discretion.
For these reasons, protestee-appellant seeks to recover the following:
1. Actual damages representing attorneys fees for the new counsel who handled the Appeal and the Petition for Certiorari
before the Court of Appeals x x x -P3 72, 5 00.00
2. Actual expenses for xerox copying of Appellants Brief and the annexes (14 copies at P 1.50 x x x -P11,235.00
3. Actual expenses for xerox copying of ballots x x x - P3,919.20
4. Actual damages for loss of salary and other emoluments since March 1994 as per attached Certification issued by the
Municipal Account of Kidapawan x x x - P96,832.00 (up to October 1994 only)
Under Article 2208 of the New Civil Code attorneys fees and expenses of litigation can be recovered (as actual damages)
in the case of clearly unfounded civil action or proceeding. And, while the case of Eulogio Rodriguez, Sr. vs. Carlos Tan
(91 Phil. 724) disallowed recovery of salaries and allowances (as damages) from elected officials who were later ousted,
under the theory that persons elected has (sic) a right to compensation during their incumbency, the instant case is
different. The protestee-appellant was the one elected. He was ousted not by final judgment but by an order of execution
pending appeal which was groundless and issued with grave abuse of discretion. Protestant-appellee occupied the
position in an illegal manner as a usurper and, not having been elected to the office, but merely installed through a
baseless court order, he certainly had no right to the salaries and emoluments of the office.
Actual damages in the form of reimbursement for attorneys fees (P3 72,500.00), actual expenses for xerox copies
(P15,154.00), unearned salary and other emoluments from March 1994 to April 1995 or 14 months at P12,104.00 a month
(P169,456.00), totalled P557,110.00. To (sic) this amount, however, P3 00,000.00 representing that portion of attorneys
fees denominated as success fee must be deducted this being premised on a contingent event the happening of which
was uncertain from the beginning. Moral damages and exemplary damages claimed are, of course, disallowed not falling
within the purview of Section 259 of the Omnibus Election Code.
It goes without saying that if the protestant-appellee fails to pay the actual damages of P257,110.00, the amount will be
assessed, levied and collected from the bond of P500,000.00 which he put up before the Court as a condition for the
issuance of the order of execution of judgment pending appeal.[22]

Petitioner filed a motion for reconsideration of the aforecited decision on March 29, 1995. The COMELEC en banc,
however, did not find any new matter substantial in nature, persuasive in character or sufficiently provocative to compel
reconsideration of said decision and accordingly affirmed in toto the said decision. Hence, this petition raises, among
others, the issue now solely remaining and in need of final adjudication in view of the mootness of the other issues anent
petitioners right to the contested office the term for which has already expired.
We have painstakingly gone over the records of this case and we can attribute to petitioner no breach of contract or quasicontract; or tortious act nor crime that may make him liable for actual damages. Neither has private respondent been able
to point out to a specific provision of law authorizing a money claim for election protest expenses against the losing party.
[23]
We find respondent COMELECs reasoning in awarding the damages in question to be fatally flawed. The COMELEC
found the election protest filed by the petitioner to be clearly unfounded because its own appreciation of the contested
ballots yielded results contrary to those of the trial court. Assuming, ex gratia argumentis, that this is a reasonable
observation not without basis, it is nonetheless fallacious to conclude a malicious intention on the part of petitioner to
molest private respondent on the basis of what respondent COMELEC perceived as an erroneous ruling of the trial court.
In other words, the actuations of the trial court, after the filing of a case before it, are its own, and any alleged error on its
part does not, in the absence of clear proof, make the suit clearly unfounded for which the complainant ought to be
penalized. Insofar as the award of protest expenses and attorneys fees are concerned, therefore we find them to have
been awarded by respondent COMELEC without basis, the election protest not having been a clearly unfounded one
under the aforementioned circumstances.
Respondent COMELEC also found the order granting execution of judgment pending appeal to be defective because of
alleged non-compliance with the requirement that there be a good and special reason[24] to justify execution pending
appeal. We, however, find that the trial court acted judiciously in the exercise of its prerogatives under the law in issuing
the order granting execution pending appeal. First, it should be noted that the applicability of the provisions of the Rules of
Court, relating to execution pending appeal, has ceased to be debatable after we definitively ruled in Garcia vs. de
Jesus[25] that Section 2, Rule 39 of the Rules of Court, which allows Regional Trial Courts to order executions pending
appeal upon good reasons stated in a special order, may be made to apply by analogy or suppletorily to election contests
decided by them.[26] It is not disputed that petitioner filed a bond in the amount of P500,000.00 as required under the
Rules of Court.
It is also now a settled rule that as much recognition should be given to the value of the decision of a judicial body as a
basis for the right to assume office as that given by law to the proclamation made by the Board of Canvassers.[27]
x x x Why should the proclamation by the board of canvassers suffice as basis of the right to assume office, subject to
future contingencies attendant to a protest, and not the decision of a court of justice? Indeed x x x the board of canvassers
is composed of persons who are less technically prepared to make an accurate appreciation of the ballots, apart from
their being more apt to yield extraneous considerations x x x the board must act summarily, practically raising (sic) against
time, while, on the other hand, the judge has the benefit of all the evidence the parties can offer and of admittedly better
technical preparation and background, apart from his being allowed ample time for conscientious study and mature
deliberation before rendering judgment x x x.[28]
Without evaluating the merits of the trial courts actual appreciation of the ballots contested in the election protest, we note
on the face of its decision that the trial court relied on the findings of the National Bureau of Investigation (NBI)
handwriting experts which findings private respondent did not even bother to rebut. We thus see no reason to disregard
the presumption of regularity in the performance of official duty on the part of the trial court judge. Capping this
combination of circumstances which impel the grant of immediate execution is the undeniable urgency involved in the
political situation in the Municipality of Kidapawan, North Cotabato. The appeal before the COMELEC would undoubtedly
cause the political vacuum in said municipality to persist, and so the trial court reasonably perceived execution pending
appeal to be warranted and justified. Anyway, the bond posted by petitioner could cover any damages suffered by any
aggrieved party. It is true that mere posting of a bond is not enough reason to justify execution pending appeal, but the
nexus of circumstances aforechronicled considered together and in relation to one another, is the dominant consideration
for the execution pending appeal.[29]
Finally, we deem the award of salaries and other emoluments to be improper and lacking legal sanction. Respondent
COMELEC ruled that inapplicable in the instant case is the ruling in Rodriguez vs. Tan[30] because while in that case the
official ousted was the one proclaimed by the COMELEC, in the instant case, petitioner was proclaimed winner only by the
trial court and assumed office by virtue of an order granting execution pending appeal. Again, respondent COMELEC
sweepingly concluded, in justifying the award of damages, that since petitioner was adjudged the winner in the elections
only by the trial court and assumed the functions of the office on the strength merely of an order granting execution
pending appeal, the petitioner occupied the position in an illegal manner as a usurper.
We hold that petitioner was not a usurper because, while a usurper is one who undertakes to act officially without any
color of right,[31] the petitioner exercised the duties of an elective office under color of election thereto.[32] It matters not

that it was the trial court and not the COMELEC that declared petitioner as the winner, because both, at different stages of
the electoral process, have the power to so proclaim winners in electoral contests. At the risk of sounding repetitive, if only
to emphasize this point, we must reiterate that the decision of a judicial body is no less a basis than the proclamation
made by the COMELEC-convened Board of Canvassers for a winning candidates right to assume office, for both are
undisputedly legally sanctioned. We deem petitioner, therefore, to be a de facto officer who, in good faith, has haa
possession of the office and had discharged the duties pertaining thereto[33] and is thus legally entitled to the
emoluments of the office.[34]
To recapitulate, Section 259 of the Omnibus Election Code only provides for the granting in election cases of actual and
compensatory damages in accordance with law. The victorious party in an election case cannot be indemnified for
expenses which he has incurred in an electoral contest in the absence of a wrongful act or omission or breach of
obligation clearly attributable to the losing party. Evidently, if any damage had been suffered by private respondent due to
the execution ofjudgment pending appeal, that damage may be said to be equivalent to damnum absque injuria, which is,
damage without injury, or damage or injury inflicted without injustice, or loss or damage without violation of a legal right, or
a wrong done to a man for which the law provides no remedy.[35]
WHEREFORE, the petition for certiorari is GRANTED. While we uphold the COMELEC decision dated May 5, 1995 that
private respondent Joseph Evangalista is the winner in the election for mayor of the Municipality of Kidapawan, North
Cotabato, that portion of the decision is deemed moot and academic because the term of office for mayor has long
expired. That portion of the decision awarding actual damages to private respondent Joseph Evangelista is hereby
declared null and void for having been issued in grave abuse of discretion and in excess of jurisdiction.
SO ORDERED.

ANTONIO ONG, SR., petitioner, vs. HENRY M. PAREL in his capacity as Regional Director of the Ministry of Labor
and Employment, ROWENA RETERACION, ROSEMARIE VERZO SANDRA FERNANDEZ, DORY TUJARDON, GINA
PENALVEL, ELMA SILAO, LUZVIMINDA MORENO, ROSALIE FAJERNO, MARIVIC SUN, NENT MORENO, ET AL.,
respondents.
This is a special civil action for certiorari seeking to annul on the ground of lack of jurisdiction the following: (a) the Final
Order for Compliance dated October 7, 1986 issued by the public respondent through his assistant Domingo H. Zapanta
ordering petitioner to pay the sum of P254,841.26 representing the claims of thirteen (13) complainant workers; (b) the
Order dated November 18, 1986, denying the petitioner's motion for reconsideration for lack of merit; and (c) the Writ of
Execution dated December 12, 1986 issued by said Regional Director to enforce the aforementioned orders. A writ of
prohibition is also prayed for in this petition to command the public respondent to desist from the conduct of further
proceedings on the matter in question.
The petitioner is the owner of the Mansion House Restaurant located at No. 1 1, J.M. Basa Street, Iloilo City.
On July 28, 1986, private respondent Rowena Reteracion, president of the Mansion House Genuine Labor Union filed a
request for the inspection of the petitioner's restaurant with Regional Office No. VI of the Ministry of Labor and
Employment at Iloilo City. The request for inspection was in connection with the failure of the petitioner to comply with
certain labor standard laws such as those relating to the payment of the minimum wage, the emergency cost of living
allowance, the 13th month pay and the 5-day incentive leave pay.
On July 30, 1986, an on-the-spot inspection of the petitioner's business premises was conducted by the representatives
from MOLE's regional office at Bacolod City in obedience to Office Order No. 027, series of 1986 issued by authority of
the public respondent regional director. Since the petitioner was not able to present his business records then on the
allegation that they were with his accountant, he was given five days or until August 4, 1986 to present said records. The
inspection resulted in the interview of thirteen employees who signed affidavits supporting the charges of non- compliance
with certain labor standard laws against the petitioner.
On August 4, 1986, the officers of MOLE's Labor Standard Welfare Office paid a second visit to the petitioner's business
premises to obtain the requested employment records for inspection. Again, the petitioner failed to present the records.
On August 7, 1986, a subpoena duces tecum was issued by the public respondent requiring the petitioner to submit the
daily time records and payrolls relating to the payment of wages, 13th month pay, and incentive leave pay of the
employees in his business establishment.
On August 12, 1986, the petitioner, instead of complying with the subpoena duces tecum sent a letter to the public
respondent through the labor district officer requesting for clarification as to the basis of the latter's inspection of his
premises. He inquired whether the said inspection was routinary or one based on a complaint filed against him.
On August 14, 1986, the last day for presenting certain employment records for inspection, the petitioner failed to comply.

On September 2, 1986, a narrative report was submitted to the public respondent by his duly designated representatives
regarding the results of the inspection made on the petitioner's business premises. A summary of the computation of the
claims of the thirteen workers based on the affidavits they executed was attached to the report.
On October 7, 1986, the public respondent issued the questioned Final Order for Compliance, with the following
dispositive portion
IN VIEW THEREOF, respondent Antonio Ong, Sr., owner of Mansion House Restaurant, is hereby ordered to pay the sum
of TWO HUNDRED FIFTY FOUR THOUSAND EIGHT HUNDRED FORTY ONE PESOS and 26/100 (P254,841.26)
representing the claims of thirteen (13) complainant workers as stated in the attached sheet of the foregoing mentioned
Summary of Findings within ten (10) days from receipt of this Notice. (p. 21, Rollo; Annex "A " of Petition).
The amount of P254,841.26 representing the total money claims of the thirteen claimant workers is broken down in said
order as follows:

1.

Underpayment of the Minimum Wage Rate

P136,087.98

2.

Non-payment of Emergency Cost of Living Allowance

107,769.93

3. Underpayment of 13th month pay 8,463.35


4.

Non-payment of 5 days incentive leave pay

2,520.00

TOTAL P254,841.26
On October 13, 1986, the petitioner wrote the public respondent a request for reconsideration of the above Final Order for
Compliance on two grounds, namely: (1) The respondent's lack of jurisdiction to entertain money claims which properly
fall within the jurisdiction of the National Labor Relations Commission; and (2) denial of due process for the alleged failure
of the public respondent to furnish the petitioner with copies of the affidavits of the thirteen claimant workers and the
narrative report dated September 2, 1986 submitted to the public respondent by the Labor Standard Welfare Officers who
inspected the petitioner's business premises.
On November 18, 1986, the public respondent denied the petitioner's motion for reconsideration and ruled that there was
no lack of jurisdiction considering that the public respondent had validly assumed jurisdiction over the subject matter
under Article 128(b) of the Labor Code in the exercise of his enforcement powers. The public respondent further ruled that
there was no denial of due process owing to the fact that the petitioner was given five days to present his employment
records and another ten days to comply with the subpoena duces tecum but still he failed to do as required under Section
11, Rule X, Book III of the Implementing Rules of the Labor Code.
On December 9, 1986, the private respondents moved for the issuance of a writ of execution of the Final Order for
Compliance dated October 7, 1986.
On December 12, 1986, a writ of execution was issued by the public respondent. By virtue thereof, the petitioner issued a
postdated check in the amount of P 254,857.26 representing the total money claims of the private respondents.
On December 15, 1986, this petition was filed presenting the following legal issues:
1.
... WHETHER OR NOT THE RESPONDENT REGIONAL DIRECTOR HAS ACTED WITHOUT OR IN EXCESS
OF HIS JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION IN ENTERTAINING THE MONEY CLAIMS OF THE
PRIVATE RESPONDENTS AND IN ISSUING THE 'FINAL ORDER OF COMPLIANCE ORDERING YOUR PETITIONER
TO PAY A TOTAL SUM OF P254,841.26 ...
2.
... WHETHER OR NOT THE RESPONDENT REGIONAL DIRECTOR HAS ACTED WITHOUT OR IN EXCESS
OF HIS JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION IN ISSUING THE ORDER DATED NOVEMBER 18,
1986 DENYING THE MOTION FOR RECONSIDERATION OF YOUR PETITIONER TO THE ABOVE-MENTIONED
ORDER AND IN ISSUING MOTU PROPRIO A WRIT OF EXECUTION DATED DECEMBER 12, 1986, ...
3.
... ASSUMING BUT WITHOUT ADMITTING THAT THE RESPONDENT REGIONAL DIRECTOR HAS
JURISDICTION TO ENTERTAIN THE MONEY CLAIMS OF PRIVATE RESPONDENTS, WHETHER OR NOT DUE
PROCESS OF LAW WAS OBSERVED IN THE ISSUANCE OF THE ORDERS AND WRIT OF EXECUTION ABOVEMENTIONED. (Pp. 1-2, Petition)
The petitioner maintains that all money claims of workers arising from employer-employee relationship are within the
exclusive jurisdiction of the Labor Arbiter as provided under Article 217 of the Labor Code, as amended. He alleges that
the public respondent acted without or in excess of his jurisdiction amounting to grave abuse of discretion in taking

cognizance of the private respondents' claims. Moreover, the petitioner contends that if ever the public respondent is
empowered to award a money judgment, his authority is limited to claims amounting to only P100,000.00 under Policy
Instruction No. 7 of the Ministry of Labor and Employment. The petitioner further asserts that he was denied due process
of law because he was never given the chance to controvert the complaint against him and neither was he given the
opportunity to present any evidence to refute the findings of the inspectors who visited his business establishment.
The private respondents, on the other hand, rely on the visitorial and enforcement powers granted to the public
respondent under Art. 128 of the Labor Code. They alleged that the petitioner, after having defied the repeated requests of
the public respondent to submit his employment records. could not validly claim that he was not given the chance to be
heard and to present his side.
The Solicitor General agrees with the petitioner and submits that under Art. 128 of the Labor Code, the public respondent
is not empowered to adjudicate money claims because such authority is reposed in the Labor Arbiter and the National
Labor Relations Commission as provided under Art. 127 of the same Code, as amended, The Solicitor General further
adds that the visitorial and enforcement powers of the public respondent under Art. 128 of the Labor Code are limited to
awards not exceeding P100,000.00 pursuant to MOLE Policy Instruction No. 7.
Before we resolve the principal issue of whether or not the Regional Director of the Ministry of Labor and Employment has
the authority to award money claims on the strength of his visitorial and enforcement powers, we quote the applicable
provisions of law.
Article 128, sub-paragraphs (a) and (b) of the Labor Code, as amended, provide that:
Visitorial and enforcement power. (a) The Secretary of Labor or his duly authorized representatives, including labor
regulation officers, shall have access to employers' records and premises at any time of the day or night whenever work is
being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or
matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor
law, wage order or rules and regulations issued pursuant thereto.
(b)
The Minister of Labor or his duly authorized representatives shall have the power to order and administer, after
due notice and hearing, compliance with the labor standards provisions of this Code based on the findings of labor
regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the
appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the
labor regulations officer and raises issues which cannot be resolved without considering evidentiary matters that are not
verifiable in the normal course of inspection. (As amended by Section 1, PD No. 1691, May 1, 1980)
The first paragraph of MOLE Policy Instructions No. 7 reads:
Under PD 850, labor standards cases have been taken from the arbitration system and placed under the enforcement
system except where a) questions of law are involved as determined by the Regional Director, b) the amount involved
exceeds P100,000 or over 40% of the equity of the employer, whichever is lower, c) the case requires evidentiary matters
not disclosed or verified in the normal course of inspection, or d) there is no more employer- employee relationship.
Article 217 of the Labor Code enumerates the cases falling under the jurisdiction of Labor Arbiters and the National Labor
Relations Commission, to wit:
Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have the original and exclusive
jurisdiction to hear and decide within thirty (30) working days after submission of the case by the parties for decision, the
following cases involving all workers, whether agricultural or non-agricultural:
1.

Unfair labor practice cases;

2.

Those that workers may file involving wages, hours of work and other terms and conditions of employment;

3.
All money claims of workers, including those based on non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for employees'
compensation, social security, medicare and maternity benefits;
4.

Cases involving household services and

5.
Cases arising from any violation of Article 265 of this Code, including questions involving the legality of strikes and
lockouts.
(b)
The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. (As
amended by Section 2, Batas Pambansa Blg. 130, Aug. 21, 1981 and Section 2, Batas Pambansa Blg. 227, June 1,
1982).

A careful perusal of the aforequoted provisions shows that the instant petition is impressed with merit. Article 217 of the
Labor Code is written in unequivocal terms. It uses the words "original and exclusive." In Aparri v. Court of Appeals (127
SCRA 231), we ruled that:
... It is the rule in statutory construction that if the words and phrases of a statute are not obscure or ambiguous, its
meaning ' 9 and the intention of the legislature must be determined from the language employed, and, where there is no
ambiguity in the words, there is no room for construction (Black on Interpretation of Laws, Sec. 5 1).
Thus, with respect to the money claims of workers such as those relating to the under-payment of the minimum wage rate
and 13th month pay and the non-payment of the emergency cost of living allowance and 5-day incentive leave pay, as in
the case at bar, the original and exclusive jurisdiction to hear and decide cases involving said claims pertains to the labor
arbiters alone. "Original jurisdiction means jurisdiction to take cognizance of a cause at its inception, try it and pass
judgment upon the law and facts. Exclusive jurisdiction precludes the Idea of co-existence and refers to jurisdiction
possessed to the exclusion of others." (pp. 673 and 1251, Black's Law Dictionary) Article 217 of the Labor Code does not
empower the regional director to share in the "original and exclusive jurisdiction" conferred on the labor arbiters. (See
Zambales Base Metals, Inc. v. Minister of Labor, 146 SCRA 50).
We agree with the submission made by the Solicitor General that under Article 128 of the Labor Code, the regional
director's power to visit the establishment of the employer extends only insofar as checking compliance with labor
standard laws is concerned. If the inspection results in a finding that the employer has violated certain labor standard
laws, then, the regional director must order the necessary rectifications. However, this does not include adjudication of
money claims clearly within the ambit of the labor arbiter's authority under Article 217 of the Code.
Considering that the regional director, in the exercise of his visitorial and enforcement powers under Art. 128 of the Labor
Code, has definitely no authority to award money claims properly falling within the jurisdiction of the labor arbiter as
provided in Art. 217 of the same Code, the provision in MOLE Policy Instructions No. 7 which limits the regional director's
authority to amounts not exceeding P100,000.00 refers to the enforcement of labor standards laws by the regional director
in the exercise of his visitorial and enforcement powers. The P100,000.00 limit grants no implied power to adjudicate
claims for monetary benefits filed by the complainant workers of an establishment.
On the corrollary issue of whether or not there was denial of due process in the exercise of the regional director's visitorial
and enforcement powers the records belie the claim that the petitioner was not given the chance to present his side and to
refute the findings of the inspectors who visited his establishment. During the initial on-the-spot inspection made by the
public respondent on the petitioner's business premises, the petitioner's inability to present his business records was a
clear violation of Book III, Rule X, Section II of the Implementing Rules and Regulations of the Labor Code which provides
that:
Sec. II. Place of records. All employment records of the employees of an employer shall be kept and maintained in or
about the premises of the workplace. The premises of a workplace shall be understood to mean the main or branch office
or establishment, if any, depending upon where the employees are regularly assigned. The keeping of the employee's
records in another place is prohibited.
Notwithstanding the violation, the public respondent gave the petitioner five days to produce his employment records. On
the second visit made by the public respondent, the petitioner still failed to present the required records. Finally, when a
subpoena duces tecum was issued, the petitioner, instead of complying, sent a letter for clarification regarding the basis of
the inspection. The letter was obviously a dilatory tactic because on the very face of the authority presented to the
petitioner by the representatives of the public respondent during the on-the-spot inspection, it was stated that the
inspection was being made pursuant to a letter-request of one of his employees. Rowena Reteracion, as President of the
labor union in his business establishment. It is settled that there is no denial of due process where the petitioner was
afforded an opportunity to present his case, (Divine Word High School v. The National Labor Relations Commission, 143
SCRA 346, 350 citing Municipality of Daet v. Hidalgo Enterprises, Inc., 138 SCRA 265). The very essence of the right to
due process of law is having one's "day in court." In People v. Retania y Rodelas (95 SCRA 201), we pronounced that:
... [D]ay in court' according to the authorities means the affording of an opportunity to be heard (11 words and Phrases
Judicially Defined, paragraphs 119 and 120). It is only when a party is denied of the opportunity to be heard that it can be
said that he is denied his day in court. (Rovo v. Gaw Ghee Kiong, O.G. Vol. 49, p. 1021; Monson v. Del Rosario, O.G. Vol.
58, p. 1978). (at p. 210)
WHEREFORE, the petition is hereby GRANTED. The questioned orders of the public respondent dated October 7, 1986
and November 1, 1986, are SET ASIDE as NULL and VOID for lack of jurisdiction. The money claims of private
respondents are remanded to the corresponding labor arbiter for appropriate action with the directive that the same be
heard and decided without delay.
SO ORDERED.

RAOUL B. DEL MAR, petitioner, vs. PHILIPPINE AMUSEMENT AND GAMING CORPORATION, BELLE JAI-ALAI
CORPORATION, FILIPINAS GAMING ENTERTAINMENT TOTALIZATOR CORPORATION, respondents.
These two consolidated petitions concern the issue of whether the franchise granted to the Philippine Amusement and
Gaming Corporation (PAGCOR) includes the right to manage and operate jai-alai.
First, we scour the significant facts. The Philippine Amusement and Gaming Corporation is a government-owned and
controlled corporation organized and existing under Presidential Decree No. 1869 which was enacted on July 11, 1983.
Pursuant to Sections 1 and 10 of P.D. No. 1869, respondent PAGCOR requested for legal advice from the Secretary of
Justice as to whether or not it is authorized by its Charter to operate and manage jai-alai frontons in the country. In its
Opinion No. 67, Series of 1996 dated July 15, 1996, the Secretary of Justice opined that the authority of PAGCOR to
operate and maintain games of chance or gambling extends to jai-alai which is a form of sport or game played for bets
and that the Charter of PAGCOR amounts to a legislative franchise for the purpose.[1] Similar favorable opinions were
received by PAGCOR from the Office of the Solicitor General per its letter dated June 3, 1996 and the Office of the
Government Corporate Counsel under its Opinion No. 150 dated June 14, 1996.[2] Thus, PAGCOR started the operation
of jai-alai frontons.
On May 6, 1999, petitioner Raoul B. del Mar initially filed in G.R. No. 138298 a Petition for Prohibition to prevent
respondent PAGCOR from managing and/or operating the jai-alai or Basque pelota games, by itself or in agreement with
Belle Corporation, on the ground that the controverted act is patently illegal and devoid of any basis either from the
Constitution or PAGCORs own Charter.
However, on June 17, 1999, respondent PAGCOR entered into an Agreement with private respondents Belle Jai Alai
Corporation (BELLE) and Filipinas Gaming Entertainment Totalizator Corporation (FILGAME) wherein it was agreed that
BELLE will make available to PAGCOR the required infrastructure facilities including the main fronton, as well as provide
the needed funding for jai-alai operations with no financial outlay from PAGCOR, while PAGCOR handles the actual
management and operation of jai-alai.[3]
Thus, on August 10, 1999, petitioner Del Mar filed a Supplemental Petition for Certiorari questioning the validity of said
Agreement on the ground that PAGCOR is without jurisdiction, legislative franchise, authority or power to enter into such
Agreement for the opening, establishment, operation, control and management of jai-alai games.
A little earlier, or on July 1, 1999, petitioners Federico S. Sandoval II and Michael T. Defensor filed a Petition for Injunction,
docketed as G.R. No. 138982, which seeks to enjoin respondent PAGCOR from operating or otherwise managing the jaialai or Basque pelota games by itself or in joint venture with Belle Corporation, for being patently illegal, having no basis in
the law or the Constitution, and in usurpation of the authority that properly pertains to the legislative branch of the
government. In this case, a Petition in Intervention was filed by Juan Miguel Zubiri alleging that the operation by PAGCOR
of jai-alai is illegal because it is not included in the scope of PAGCORs franchise which covers only games of chance.
Petitioners Raoul B. del Mar, Federico S. Sandoval II, Michael T. Defensor, and intervenor Juan Miguel Zubiri, are suing
as taxpayers and in their capacity as members of the House of Representatives representing the First District of Cebu
City, the Lone Congressional District of Malabon-Navotas, the Third Congressional District of Quezon City, and the Third
Congressional District of Bukidnon, respectively.
The bedrock issues spawned by the petitions at bar are:
G.R. No. 138298
Petitioner Del Mar raises the following issues:
I. The respondent PAGCOR has no jurisdiction or legislative franchise or acted with grave abuse of discretion, tantamount
to lack or excess of jurisdiction, in arrogating unto itself the authority or power to open, pursue, conduct, operate, control
and manage jai-alai game operations in the country.
II. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x in executing its agreement with co-respondents
Belle and Filgame for the conduct and management of jai-alai game operations, upon undue reliance on an opinion of the
Secretary of Justice.
III. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x in entering into a partnership, joint venture or
business arrangement with its co-respondents Belle and Filgame, through their agreement x x x. The Agreement was
entered into through manifest partiality and evident bad faith (Sec. 3 (e), RA 3019), thus manifestly and grossly
disadvantageous to the government [Anti-Graft and Corrupt Practices Act, RA 3019, Sec. 3 (g)].
IV. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x to award to its co-respondents Belle and
Filgame the right to avail of the tax benefits which, by law, inures solely and exclusively to PAGCOR itself.

V. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x to cause the disbursement of funds for the
illegal establishment, management and operation of jai-alai game operations.
VI. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x to award or grant authority for the
establishment, management and operation of off-fronton betting stations or bookies.
VII. The respondent PAGCOR has no jurisdiction or authority x x x in awarding unto its co-respondents Belle and Filgame,
without public bidding, the subject agreement.
In defense, private respondents BELLE and FILGAME assert:
1. The petition states no cause of action and must be dismissed outright;
2. The petitioner has no cause of action against the respondents, he not being a real party in interest;
3. The instant petition cannot be maintained as a taxpayer suit, there being no illegal disbursement of public funds
involved;
4. The instant petition is essentially an action for quo warranto and may only be commenced by the Solicitor General;
5. The operation of jai-alai is well within PAGCORs authority to operate and maintain. PAGCORs franchise is intended to
be wide in its coverage, the underlying considerations being, that: (1) the franchise must be used to integrate all gambling
operations in one corporate entity (i.e. PAGCOR); and (2) it must be used to generate funds for the government to support
its social impact projects;
6. The agreement executed by, between and among PAGCOR, BJAC and FILGAME is outside the coverage of existing
laws requiring public bidding.
Substantially the same defenses were raised by respondent PAGCOR in its Comment.
G.R. No. 138982
Petitioners contend that:
I. The operation of jai-alai games by PAGCOR is illegal in that:
1) the franchise of PAGCOR does not include the operation of jai-alai since jai-alai is a prohibited activity under the
Revised Penal Code, as amended by P.D. No. 1602 which is otherwise known as the Anti-Gambling Law;
2) jai-alai is not a game of chance and therefore cannot be the subject of a PAGCOR franchise.
II. A franchise is a special privilege that should be construed strictly against the grantee.
III. To allow PAGCOR to operate jai-alai under its charter is tantamount to a license to PAGCOR to legalize and operate
any gambling activity.
In its Comment, respondent PAGCOR avers that:
1. An action for injunction is not among the cases or proceedings originally cognizable by the Honorable Supreme Court,
pursuant to Section 1, Rule 56 of the 1997 Rules of Civil Procedure.
2. Assuming, arguendo, the Honorable Supreme Court has jurisdiction over the petition, the petition should be dismissed
for failure of petitioners to observe the doctrine on hierarchy of courts.
3. x x x Petitioners have no legal standing to file a taxpayers suit based on their cause of action nor are they the real
parties-in-interest entitled to the avails of the suit.
4. Respondents franchise definitely includes the operation of jai-alai.
5. Petitioners have no right in esse to be entitled to a temporary restraining order and/or to be protected by a writ of
preliminary injunction.
The Solicitor General claims that the petition, which is actually an action for quo warranto under Rule 66 of the Rules of
Court, against an alleged usurpation by PAGCOR of a franchise to operate jai alai, should be dismissed outright because
only the Solicitor General or public prosecutor can file the same; that P.D. No. 1869, the Charter of PAGCOR, authorizes
PAGCOR to regulate and operate games of chance and skill which include jai-alai; and that P.D. No. 1602 did not outlaw
jai-alai but merely provided for stiffer penalties to illegal or unauthorized activities related to jai-alai and other forms of
gambling.

We shall first rule on the important procedural issues raised by the respondents.
Respondents in G.R. No. 138982 contend that the Court has no jurisdiction to take original cognizance of a petition for
injunction because it is not one of those actions specifically mentioned in Section 1 of Rule 56 of the 1997 Rules of Civil
Procedure. Moreover, they urge that the petition should be dismissed for failure of petitioners to observe the doctrine on
hierarchy of courts.
It is axiomatic that what determines the nature of an action and hence, the jurisdiction of the court, are the allegations of
the pleading and the character of the relief sought.[4] A cursory perusal of the petition filed in G.R. No. 138982 will show
that it is actually one for Prohibition under Section 2 of Rule 65 for it seeks to prevent PAGCOR from managing,
maintaining and operating jai-alai games. Even assuming, arguendo, that it is an action for injunction, this Court has the
discretionary power to take cognizance of the petition at bar if compelling reasons, or the nature and importance of the
issues raised, warrant the immediate exercise of its jurisdiction.[5] It cannot be gainsaid that the issues raised in the
present petitions have generated an oasis of concern, even days of disquiet in view of the public interest at stake. In Tano,
et al. vs. Socrates, et al.,[6] this Court did not hesitate to treat a petition for certiorari and injunction as a special civil action
for certiorari and prohibition to resolve an issue of far-reaching impact to our people. This is in consonance with our case
law now accorded near religious reverence that rules of procedure are but tools designed to facilitate the attainment of
justice such that when its rigid application tends to frustrate rather than promote substantial justice, this Court has the duty
to suspend their operation.[7]
Respondents also assail the locus standi or the standing of petitioners to file the petitions at bar as taxpayers and as
legislators. First, they allege that petitioners have no legal standing to file a taxpayers suit because the operation of jai-alai
does not involve the disbursement of public funds.
Respondents' stance is not without oven ready legal support. A party suing as a taxpayer must specifically prove that he
has sufficient interest in preventing the illegal expenditure of money raised by taxation.[8] In essence, taxpayers are
allowed to sue where there is a claim of illegal disbursement of public funds,[9] or that public money is being deflected to
any improper purpose,[10] or where petitioners seek to restrain respondent from wasting public funds through the
enforcement of an invalid or unconstitutional law.[11]
In the petitions at bar, the Agreement entered into between PAGCOR and private respondents BELLE and FILGAME will
show that all financial outlay or capital expenditure for the operation of jai-alai games shall be provided for by the latter.
Thus, the Agreement provides, among others, that: PAGCOR shall manage, operate and control the jai-alai operation at
no cost or financial risk to it (Sec. 1[A][1]); BELLE shall provide funds, at no cost to PAGCOR, for all capital expenditures
(Sec. 1[B][1]); BELLE shall make available to PAGCOR, at no cost to PAGCOR, the use of the integrated nationwide
network of on-line computerized systems (Sec. 1[B][2]); FILGAME shall make available for use of PAGCOR on a rent-free
basis the jai-alai fronton facilities (Sec. 1 [C][1]); BELLE & FILGAME jointly undertake to provide funds, at no cost to
PAGCOR, for pre-operating expenses and working capital (Sec. 1 [D][1]); and that BELLE & FILGAME will provide
PAGCOR with goodwill money in the amount of P 200 million (Sec. 1 [D][2]). In fine, the record is barren of evidence that
the operation and management of jai-alai by the PAGCOR involves expenditure of public money.
Be that as it may, in line with the liberal policy of this Court on locus standi when a case involves an issue of overarching
significance to our society,[12] we find and so hold that as members of the House of Representatives, petitioners have
legal standing to file the petitions at bar. In the instant cases, petitioners complain that the operation of jai-alai constitutes
an infringement by PAGCOR of the legislatures exclusive power to grant franchise. To the extent the powers of Congress
are impaired, so is the power of each member thereof, since his office confers a right to participate in the exercise of the
powers of that institution, so petitioners contend. The contention commands our concurrence for it is now settled that a
member of the House of Representatives has standing to maintain inviolate the prerogatives, powers and privileges
vested by the Constitution in his office.[13] As presciently stressed in the case of Kilosbayan, Inc., viz:
We find the instant petition to be of transcendental importance to the public. The issues it raised are of paramount public
interest and of a category even higher than those involved in many of the aforecited cases. The ramifications of such
issues immeasurably affect the social, economic, and moral well-being of the people even in the remotest barangays of
the country and the counter-productive and retrogressive effects of the envisioned on-line lottery system are as staggering
as the billions in pesos it is expected to raise. The legal standing then of the petitioners deserves recognition.
After hurdling the threshold procedural issues, we now come to the decisive substantive issue of whether PAGCOR's
legislative franchise includes the right to manage and operate jai-alai.[14] The issue is of supreme significance for its
incorrect resolution can dangerously diminish the plenary legislative power of Congress, more especially its exercise of
police power to protect the morality of our people. After a circumspect consideration of the clashing positions of the
parties, we hold that the charter of PAGCOR does not give it any franchise to operate and manage jai-alai.
FIRST. A franchise is a special privilege conferred upon a corporation or individual by a government duly empowered
legally to grant it.[15] It is a privilege of public concern which cannot be exercised at will and pleasure, but should be
reserved for public control and administration, either by the government directly, or by public agents, under such

conditions and regulations as the government may impose on them in the interest of the public.[16] A franchise thus
emanates from a sovereign power[17] and the grant is inherently a legislative power. It may, however, be derived indirectly
from the state through an agency to which the power has been clearly and validly delegated.[18] In such cases, Congress
prescribes the conditions on which the grant of a franchise may be made.[19] Thus, the manner of granting the franchise,
to whom it may be granted, the mode of conducting the business, the character and quality of the service to be rendered
and the duty of the grantee to the public in exercising the franchise are almost always defined in clear and unequivocal
language. In the absence of these defining terms, any claim to a legislative franchise to operate a game played for bets
and denounced as a menace to morality ought to be rejected.
SECOND. A historical study of the creation, growth and development of PAGCOR will readily show that it was never given
a legislative franchise to operate jai-alai.
(2.a) Before the creation of PAGCOR, a 25-year right to operate jai-alai in Manila was given by President Marcos to the
Philippine Jai-Alai and Amusement Corporation then controlled by his in-laws, the Romualdez family. The franchise was
granted on October 16, 1975 thru P.D. No. 810 issued by President Marcos in the exercise of his martial law powers. On
that very date, the 25-year franchise of the prior grantee expired and was not renewed. A few months before, President
Marcos had issued P.D. No. 771 dated August 20, 1975, revoking the authority of local government units to issue jai-alai
franchises. By these acts, the former President exercised complete control of the sovereign power to grant franchises.
(2.b) Almost one year and a half after granting the Philippine Jai-Alai and Amusement Corporation a 25-year franchise to
operate jai-alai in Manila, President Marcos created PAGCOR on January 1, 1977 by issuing P.D. No. 1067-A. The decree
is entitled Creating the Philippine Amusements and Gaming Corporation, Defining Its Powers and Functions, Providing
Funds therefor and for Other Purposes. Its Declaration of Policy[20] trumpeted the intent that PAGCOR was created to
implement the policy of the State to centralize and integrate all games of chance not heretofore authorized by existing
franchises or permitted by law x x x. One of its whereas clauses referred to the need to prevent the proliferation of illegal
casinos or clubs conducting games of chance x x x.[21] To achieve this objective, PAGCOR was empowered to establish
and maintain clubs, casinos, branches, agencies or subsidiaries, or other units anywhere in the Philippines x
(2.c) On the same day after creating PAGCOR, President Marcos issued P.D. No. 1067-B granting PAGCOR x x x a
Franchise to Establish, Operate, and Maintain Gambling Casinos on Land or Water Within the Territorial Jurisdiction of the
Republic of the Philippines. Obviously, P.D. No. 1067-A which created the PAGCOR is not a grant of franchise to operate
the game of jai-alai. On the other hand, Section 1 of P.D. No. 1067-B provides the nature and term of PAGCORS
franchise to maintain gambling casinos (not a franchise to operate jai-alai), viz:
SECTION 1. NATURE AND TERM OF FRANCHISE. Subject to the terms and conditions established in this Decree, the
Philippine Amusements and Gaming Corporation is hereby granted for a period of twenty-five (25) years, renewable for
another 25 years, the right, privilege, and authority to operate and maintain gambling casinos, clubs and other recreation
or amusement places, sports, gaming pools, i.e., basketball, football, etc., whether on land or sea, within the territorial
jurisdiction of the Republic of the Philippines.
Section 2 of the same decree spells out the scope of the PAGCOR franchise to maintain gambling casinos (not a
franchise to operate jai-alai), viz:
SEC. 2. SCOPE OF FRANCHISE. In addition to the right and privileges granted it under Sec. 1, this Franchise shall
entitle the franchise holder to do and undertake the following:
(1) Enter into operators and/or management contracts with duly registered and accredited company possessing the
knowledge, skill, expertise and facilities to insure the efficient operation of gambling casinos; Provided, That the service
fees of such management and/or operator companies whose services may be retained by the franchise holder of this
Franchise shall not in the aggregate exceed ten (10%) percent of the gross income.
(2) Purchase foreign exchange that may be required for the importation of equipment, facilities and other gambling
paraphernalia indispensably needed or useful to insure the successful operation of gambling casinos.
(3) Acquire the right of way, access to or thru public lands, public waters or harbors, including the Manila Bay Area; such
right to include, but not limited to, the right to lease and/or purchase public lands, government reclaimed lands, as well as
land of private ownership or those leased from the government. This right shall carry with it the privilege of the franchise
holder to utilize piers, quays, boat landings, and such other pertinent and related facilities within these specified areas for
use as landing, anchoring, or berthing sites in connection with its authorized casino operations.
(4) Build or construct structures, buildings, coastways, piers, docks, as well as any other form of land and berthing
facilities for its floating casinos.
(5) To do and perform such other acts directly related to the efficient and successful operation and conduct of games of
chance in accordance with existing laws and decrees.

(2.d) Still on the day after creating PAGCOR, President Marcos issued P.D. No. 1067-C amending P.D. Nos. 1067-A and
B. The amendment provides that PAGCORs franchise to maintain gambling casinos x x x shall become exclusive in
character, subject only to the exception of existing franchises and games of chance heretofore permitted by law, upon the
generation by the franchise holder of gross revenues amounting to P1.2 billion and its contribution therefrom of the
amount of P720 million as the governments share.
(2.e) On June 2, 1978, President Marcos issued P.D. No. 1399 amending P.D. Nos. 1067-A and 1067-B. The amendments
did not change the nature and scope of the PAGCOR franchise to maintain gambling casinos. Rather, they referred to the
Composition of the Board of Directors,[23] Special Condition of Franchise,[24]` Exemptions,[25] and Other Conditions.[26]
(2.f) On August 13, 1979, President Marcos issued P.D. No. 1632. Again, the amendments did not change a comma on
the nature and scope of PAGCORs franchise to maintain gambling casinos. They related to the allocation of the 60%
share of the government where the host area is a city or municipality other than Metro Manila,[27] and the manner of
payment of franchise tax of PAGCOR.[28]
(2.g) On July 11, 1983, President Marcos issued P.D. No. 1869 entitled Consolidating and Amending P.D. Nos. 1067-A,
1067-B, 1067-C, 1399 and 1632 Relative to the Franchise and Power of the PAGCOR. As a consolidated decree, it
reiterated the nature and scope of PAGCORs existing franchise to maintain gambling casinos (not a franchise to operate
jai-alai), thus:
SEC. 10. Nature and term of franchise. Subject to the terms and conditions established in this Decree, the Corporation is
hereby granted for a period of twenty-five (25) years, renewable for another twenty-five (25) years, the rights, privilege
and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming
pools, i.e. basketball, football, lotteries, etc., whether on land or sea, within the territorial jurisdiction of the Republic of the
Philippines.
SEC. 11. Scope of Franchise. In addition to the rights and privileges granted it under the preceding Section, this Franchise
shall entitle the corporation to do and undertake the following:
(1) Enter into operating and/or management contracts with any registered and accredited company possessing the
knowledge, skill, expertise and facilities to insure the efficient operation of gambling casinos; provided, that the service
fees of such management and/or operator companies whose services may be retained by the Corporation shall not in the
aggregate exceed ten (10%) percent of the gross income;
(2) Purchase foreign exchange that may be required for the importation of equipment, facilities and other gambling
paraphernalia indispensably needed or useful to insure the successful operation of gambling casinos;
(3) Acquire the right of way or access to or thru public land, public waters or harbors, including the Manila Bay Area; such
right shall include, but not be limited to, the right to lease and/or purchase public lands, government reclaimed lands, as
well as lands of private ownership or those leased from the Government. This right shall carry with it the privilege of the
Corporation to utilize piers, quays, boat landings, and such other pertinent and related facilities within these specified
areas for use as landing, anchoring or berthing sites in connection with its authorized casino operations;
(4) Build or construct structures, buildings, castways, piers, decks, as well as any other form of landing and boarding
facilities for its floating casinos; and
(5) To do and perform such other acts directly related to the efficient and successful operation and conduct of games of
chance in accordance with existing laws and decrees.
(2.h) Then came the 1986 EDSA revolution and the end of the Marcos regime. On May 8, 1987, President Corazon
Aquino issued Executive Order No. 169 repealing P.D. Nos. 810, 1124 and 1966 thus revoking the franchise of the
Philippine Jai-Alai and Amusement Corporation controlled by the Romualdezes to operate jai-alai in Manila. PAGCORs
franchise to operate gambling casinos was not revoked. Neither was it given a franchise to operate jai-alai.
THIRD. In light of its legal history, we hold that PAGCOR cannot maintain that section 10 of P.D. No. 1869 grants it a
franchise to operate jai-alai. Section 10 provides:
SEC. 10 Nature and term of franchise. Subject to the terms and conditions established in this Decree, the Corporation is
hereby granted for a period of twenty-five (25) years, renewable for another twenty-five (25) years, the rights, privilege
and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming
pools, i.e., basketball, football, lotteries, etc., whether on land or sea, within the territorial jurisdiction of the Republic of the
Philippines.
(3.a) P.D. No. 1869 is a mere consolidation of previous decrees dealing with PAGCOR. PAGCOR cannot seek comfort in
section 10 as it is not a new provision in P.D. No. 1869 and, from the beginning of its history, was never meant to confer it
with a franchise to operate jai-alai. It is a reiteration of section 1 of P.D. No. 1067-B which provides:

SECTION 1. Nature and Term of Franchise. Subject to the terms and conditions established in this Decree, the Philippine
Amusements and Gaming Corporation is hereby granted for a period of twenty-five (25) years, renewable for another 25
years, the right, privilege, and authority to operate and maintain gambling casinos, clubs and other recreation or
amusement places, sports gaming pools, i.e., basketball, football, etc., whether on land or sea, within the territorial
jurisdiction of the Republic of the Philippines.
(3.b) Plainly, section 1 of P.D. No. 1067-B which was reenacted as section 10 of P.D. No. 1869 is not a grant of legislative
franchise to operate jai-alai. P.D. No. 1067-B is a franchise to maintain gambling casinos alone. The two franchises are as
different as day and night and no alchemy of logic will efface their difference.
(3.c) PAGCOR's stance becomes more sterile when we consider the law's intent. It cannot be the intent of President
Marcos to grant PAGCOR a franchise to operate jai-alai because a year and a half before it was chartered, he issued P.D.
No. 810 granting Philippine Jai-Alai and Amusement Corporation a 25-year franchise to operate jai-alai in Manila. This
corporation is controlled by his in-laws, the Romualdezes.[29] To assure that this Romualdez corporation would have no
competition, President Marcos earlier revoked the power of local governments to grant jai-alai franchises. Thus,
PAGCORs stance that P.D. No. 1067-B is its franchise to operate jai-alai, which would have competed with the
Romualdezes franchise, extends credulity to the limit. Indeed, P.D. No. 1067-A which created PAGCOR made it crystal
clear that it was to implement "the policy of the State to centralize and integrate all games of chance not heretofore
authorized by existing franchises or permitted by law," which included the Philippine Jai-Alai and Amusement Corporation.
(3.d) There can be no sliver of doubt that under P.D. No. 1869, PAGCORs franchise is only to operate gambling casinos
and not jai-alai. This conclusion is compelled by a plain reading of its various provisions, viz:
"SECTION 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:
(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: x x x (3) minimize, if not totally eradicate,
the evils, malpractices and corruptions that are normally prevalent in the conduct and operation of gambling clubs and
casinos without direct government involvement.
TITLE IV GRANT OF FRANCHISE
SEC. 10. Nature and term of franchise. Subject to the terms and conditions established in this Decree, the Corporation is
hereby granted for a period of twenty-five (25) years, renewable for another twenty-five (25) years, the rights, privileges
and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming
pools, i.e. basketball, football, lotteries, etc. whether on land or sea, within the territorial jurisdiction of the Republic of the
Philippines.
SEC. 11. Scope of Franchise. In addition to the rights and privileges granted it under the preceding Section, this Franchise
shall entitle the Corporation to do and undertake the following:
(1) Enter into operating and/or management contracts with any registered and accredited company possessing the
knowledge, skill, expertise and facilities to insure the efficient operation of gambling casinos; provided, that the service
fees of such management and/or operator companies whose services may be retained by the Corporation shall not in the
aggregate exceed ten (10%) percent of the gross income;
(2) Purchase foreign exchange that may be required for the importation of equipment, facilities and other gambling
paraphernalia indispensably needed or useful to insure the successful operation of gambling casinos;
(3) Acquire the right of way or access to or thru public land, public waters or harbors x x x. This right shall carry with it the
privilege of the Corporation to utilize x x x such other pertinent and related facilities within these specified areas x x x in
connection with its authorized casino operations;
(4) Build or construct structures, building castways, piers, decks, as well as any other form of landing and boarding
facilities for its floating casinos;
SEC. 13. Exemptions.
(1) Customs duties, taxes and other imposts on importations. All importations of equipment, vehicles, automobiles, boats,
ships, barges, aircraft and such other gambling paraphernalia, including accessories or related facilities, for the sole and
exclusive use of the casinos, the proper and efficient management and administration thereof, and such other clubs.
Recreation or amusement places to be established under and by virtue of this Franchise shall be exempt from the

payment of all kinds of customs duties, taxes and other imposts, including all kinds of fees, levies, or charges of any kind
or nature, whether National or Local.
Vessels and/or accessory ferry boats imported or to be imported by any corporation having existing contractual
arrangements with the Corporation, for the sole and exclusive use of the casino or to be used to service the operations
and requirements of the casino, shall likewise be totally exempt from the payment of all customs duties, x x x.
(2) Income and other taxes. (a) x x x
(b) Others: The exemption herein granted for earnings derived from the operations conducted under the franchise x x x
shall inure to the benefit of and extend to corporation(s) x x x with whom the Corporation or operator has any contractual
relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise x x x.
(3) Dividend Income. x x x The dividend income shall not in such case be considered as part of beneficiaries taxable
income; provided, however, that such dividend income shall be totally exempted from income or other forms of taxes if
invested within six (6) months from date the dividend income is received, in the following:
(a) operation of the casino(s) or investments in any affiliate activity that will ultimately redound to the benefit of the
Corporation or any other corporation with whom the Corporation has any existing arrangements in connection with or
related to the operations of the casino(s);
(4) Utilization of Foreign Currencies. The Corporation shall have the right and authority, solely and exclusively in
connection with the operations of the casino(s), to purchase, receive, exchange and disburse foreign exchange, subject to
the following terms and conditions:
(a) A specific area in the casino(s) or gaming pit shall be put up solely and exclusively for players and patrons utilizing
foreign currencies;
(b) The Corporation shall appoint and designate a duly accredited commercial bank agent of the Central Bank, to handle,
administer and manage the use of foreign currencies in the casino(s);
(c) The Corporation shall provide an office at casino(s) for the employees of the designated bank, agent of the Central
Bank, where the Corporation will maintain a dollar account which will be utilized exclusively for the above purpose and the
casino dollar treasury employees;
(f) The disbursement, administration, management and recording of foreign exchange currencies used in the casino(s)
shall be carried out in accordance with existing foreign exchange regulations x x x.
SEC. 14. Other Conditions.
(1) Place. The Corporation shall conduct the gambling activities or games of chance on land or water within the territorial
jurisdiction of the Republic of the Philippines. When conducted on water, the Corporation shall have the right to dock the
floating casino(s) in any part of the Philippines where vessels/boats are authorized to dock under the Customs and
Maritime Laws.
(2) Time. Gambling activities may be held and conducted at anytime of the day or night; provided, however, that in places
where curfew hours are observed, all players and personnel of gambling casinos shall remain within the premises of the
casinos.
(3) Persons allowed to play. x x x
(4) Persons not allowed to play.
From these are excepted the personnel employed by the casinos, special guests, or those who at the discretion of the
Management may be allowed to stay in the premises.
TITLE VI EXEMPTION FROM CIVIL SERVICE LAW
SEC. 16. Exemption. All position in the Corporation, whether technical, administrative, professional or managerial are
exempt from the provisions of the Civil Service Law, rules and regulations, and shall be governed only by the personnel
management policies set by the Board of Directors. All employees of the casinos and related services shall be classified
as Confidential appointees.
TITLE VII TRANSITORY PROVISIONS
SEC. 17. Transitory Provisions. x x x

SEC. 18. Exemption from Labor Laws. No union or any form of association shall be formed by all those working as
employees of the casino or related services whether directly or indirectly. For such purpose, all employees of the casinos
or related services shall be classified as confidential appointees and their employment thereof, whether by the franchise
holder, or the operators, or the managers, shall be exempt from the provisions of the Labor Code or any implementing
rules and regulations thereof.
From its creation in 1977 and until 1999, PAGCOR never alleged that it has a franchise to operate jai-alai. Twenty-two
years is a long stretch of silence. It is inexplicable why it never claimed its alleged franchise for so long a time which could
have allowed it to earn billions of pesos as additional income.
(3.e) To be sure, we need not resort to intellectual jujitsu to determine whether PAGCOR has a franchise to operate jaialai. It is easy to tell whether there is a legislative grant or not. Known as the game of a thousand thrills, jai-alai is a
different game, hence, the terms and conditions imposed on a franchisee are spelled out in standard form. A review of
some laws and executive orders granting a franchise to operate jai-alai will demonstrate these standard terms and
conditions, viz:
(3.e.1) Commonwealth Act No. 485 (An Act to Permit Bets in the Game of Basque Pelota) June 18, 1939
Be it enacted by the National Assembly of the Philippines:
SECTION 1. Any provision of existing law to the contrary notwithstanding, it shall be permissible in the game of Basque
pelota, a game of skill (including the games of pala, raqueta, cestapunta, remonte and mano), in which professional
players participate, to make either direct bets or bets by means of a totalizer; Provided, That no operator or maintainer of
a Basque pelota court shall collect as commission a fee in excess of twelve per centum on such bets, or twelve per
centum of the receipts of the totalizer, and of such per centum three shall be paid to the Government of the Philippines, for
distribution in equal shares between the General Hospital and the Philippine Anti-tuberculosis Society.
SEC. 2. Any person, company or corporation, that shall build a court for Basque pelota games with bets within eighteen
months from the date of the approval of this Act, shall thereunder have the privilege to maintain and operate the said court
for a term of twenty-five years from the date in which the first game with bets shall have taken place. At the expiration of
the said term of twenty-five years, the buildings and the land on which the court and the stadium shall be established,
shall become the property of the Government of the Philippines, without payment.
SEC. 3. The location and design of the buildings that shall be used for the same games of Basque pelota, shall have prior
approval of the Bureau of Public Works and the operator shall pay a license fee of five hundred pesos a year to the city or
municipality in which the establishment shall be situated, in addition to the real-estate tax due on such real property.
SEC. 4. This Act shall take effect upon its approval.
ENACTED, without Executive approval, June 18, 1939.
(3.e.2) Executive Order No. 135 (Regulating the Establishment, Maintenance and Operation of Frontons and Basque
Pelota Games [Jai Alai]) May 4, 1948
By virtue of the powers vested in me by Commonwealth Act No. 601, entitled An Act to regulate the establishment,
maintenance and operation of places of amusements in chartered cities, municipalities and municipal districts, the
following rules and regulations governing frontons and basque pelota games are hereby promulgated:
SECTION 1. Definitions. Whenever used in this Order and unless the context indicates a different meaning, the following
terms shall bear the meaning indicated herein:
(a) Basque pelota game shall include the pelota game with the use of pala, raqueta, cesta punta, remonte and mano, in
which professional players participate.
(b) Fronton comprises the court where basque pelota games are played, inlcuding the adjoining structures used in
connection with such games, such as the betting booths and galleries, totalizator equipment, and the grandstands where
the public is admitted in connection with such games.
(c) Pelotari is a professional player engaged in playing basque pelota.
(d) Professional player is one who plays for compensation.
SEC. 2. Supervision over the establishment and operation of frontons and basque pelota games. Subject to the
administrative control and supervision of the Secretary of the Interior, city or municipal mayors shall exercise supervision
over the establishment, maintenance and operation of frontons and basque pelota games within their respective territorial
jurisdiction, as well as over the officials and employees of such frontons and shall see to it that all laws, orders and
regulations relating to such establishments are duly enforced. Subject to similar approval, they shall appoint such

personnel as may be needed in the discharge of their duties and fix their compensation which shall be paid out of the
allotment of one-half per centum (1/2%) out of the total bets or wager funds set aside and made available for the purpose
in accordance with Section 19 hereof. The Secretary of the Interior shall have the power to prohibit or allow the operation
of such frontons on any day or days, or modify their hour of operation and to prescribe additional rules and regulations
governing the same.
SEC. 3. Particular duties of city or municipal mayors regarding operation of basque pelota games and frontons. In
connection with their duty to enforce the laws, orders, rules and regulations relating to frontons and basque pelota games,
the city or municipal mayor shall require that such frontons shall be properly constructed and maintained in accordance
with the provisions of Commonwealth Act No. 485; shall see that the proper sanitary accommodations are provided in the
grandstands and other structures comprising such frontons; and shall require that such frontons be provided with a
properly equipped clinic for the treatment of injuries to the pelotaris.
SEC. 4. Permits. In the absence of a legislative franchise, it shall be unlawful for any person or entity to establish and/or
operate frontons and conduct basque pelota games without a permit issued by the corresponding city or municipal mayor,
with the approval of the provincial governor in the latter case. Any permit issued hereunder shall be reported by the
provincial governor or city mayor, as the case may be, to the Secretary of the Interior.
SEC. 5. License fees. The following license fees shall be paid:
(a) For each basque pelota fronton, five hundred pesos (P500) annually, or one hundred and twenty-five pesos (P125)
quarterly.
(b) For pelotaris, judges or referees and superintendents (intendentes) of basque pelota games, eighteen pesos (P18)
each annually.
The above license fees shall accrue to the funds of the city or municipality where the fronton is operated.
SEC. 6. Location. Except in the case of any basque pelota fronton licensed as of December 8, 1941, no basque pelota
fronton shall be maintained or operated within a radius of 200 lineal meters from any city hall or municipal building,
provincial capitol building, national capitol building, public playa or park, public school, church, hospital, athletic stadium,
or any institution of learning or charity.
SEC. 7. Buildings, sanitary and parking requirements. No permit or license for the construction or operation of a basque
pelota fronton shall be issued without proper certificate of the provincial or city engineer and architect certifying to the
suitability and safety of the building and of the district or city health officer certifying to the sanitary condition of said
building. The city or municipal mayor may, in his discretion and as circumstances may warrant, require that the fronton be
provided with sufficient space for parking so that the public roads and highways be not used for such purposes.
SEC. 8. Protest and complaint. Any person who believes that any basque pelota fronton is located or established in any
place not authorized herein or is being operated in violation of any provision of this order may file a protest or complaint
with the city or municipal mayor concerned, and after proper investigation of such complaint the city or municipal mayor
may take such action as he may consider necessary in accordance with the provisions of section 10 hereof. Any decision
rendered on the matter by the city or municipal mayor shall be appealable to the Secretary of the Interior.
SEC. 9. Persons prohibited admission. Persons under 16 years of age, persons carrying firearms or deadly weapons of
any description, except government officials actually performing their official duties therein, intoxicated persons, and
persons of disorderly nature and conduct who are apt to disturb peace and order, shall not be admitted or allowed in any
basque pelota fronton: Provided, That persons under 16 years of age may, when accompanied by their parents or
guardians, be admitted therein but in no case shall such minors be allowed to bet.
SEC. 10. Gambling prohibited. No card games or any of the prohibited games shall be permitted within the premises of
any basque pelota fronton; and upon satisfactory evidence that the operator or entity conducting the game has tolerated
the existence of any prohibited game within its premises, the city or municipal mayor may take the necessary action in
accordance with the provisions of section 11 hereof.
SEC. 11. Revocation or suspension of permits and licenses. The city or municipal mayor, subject to the approval of the
Secretary of the Interior, may suspend or revoke any license granted under this Order to any basque pelota fronton or to
any official or employee thereof, for violation of any of the rules and regulations provided in this Order or those which said
city or municipal mayor may prescribe, or for any just cause. Such suspension or revocation shall operate to forfeit to the
city or municipality concerned all sums paid therefor.
SEC. 12. Appeals. Any action taken by the city or municipal mayor under the provisions of this Order shall stand, unless
modified or revoked by the Secretary of the Interior.

SEC. 13. Books, records and accounts. The city or municipal mayor, or his duly authorized representative, shall have the
power to inspect at all times the books, records, and accounts of any basque pelota fronton. He may, in his discretion and
as the circumstances may warrant, require that the books and financial or other statements of the person or entity
operating the game be kept in such manner as he may prescribe.
SEC. 14. Days and hours of operation. Except as may otherwise be provided herein, basque pelota games with betting
shall be allowed every day, excepting Sundays, from 2 oclock p.m. to not later than 11 oclock p.m.
SEC. 15. Pelotaris, judges, referees, etc. shall be licensed. No person or entity operating a basque pelota fronton,
wherein games are played with betting, shall employ any pelotari, judge or referee, superintendent of games (intendente),
or any other official whose duties are connected with the operation or supervision of the games, unless such person has
been duly licensed by the city or municipal mayor concerned. Such license shall be granted upon satisfactory proof that
the applicant is in good health, know the rules and usages of the game, and is a person of good moral character and of
undoubted honesty. In the case of pelotaris, such license shall be granted only upon the further condition that they are
able to play the game with reasonable skill and with safety to themselves and to their opponents. The city or municipal
mayor may further require other reasonable qualifications for applicants to a license, not otherwise provided herein. Such
license shall be obtained yearly.
SEC. 16. Installation of automatic electric totalizator. Any person or entity operating a fronton wherein betting in any form
is allowed shall install in its premises within the period of one year from the date this Order takes effect, an automatic
electrically operated indicator system and ticket selling machine, commonly known as totalizator, which shall clearly
record each ticket purchased on every player in any game, the total number of tickets sold on each event, as well as the
dividends that correspond to holders of winning numbers. This requirement shall, however, not apply to double events or
forecast pools or to any betting made on the basis of a combination or grouping of players until a totalizator that can
register such bets has been invented and placed on the market.
SEC. 17. Supervision over sale of betting tickets and payment of dividends. For the purpose of verifying the accuracy of
reports in connection with the sale of betting tickets and the computation of dividends awarded to winners on each event,
as well as other statements with reference to the betting in the games played, the city or municipal mayor shall assign
such number of auditing officers and checkers as may be necessary for the purpose. These auditing officers and checkers
shall be placed in the ticket selling booths, dividend computation booths and such other parts of the fronton, where betting
tickets are sold and dividends computed. It shall be their duty to check up and correct any irregularity or any erroneous
report or computation that may be made by officials of the fronton, in connection with the sale of tickets and the payment
of dividends.
SEC. 18. Wager tickets and dividends. The face value of the wager tickets for any event shall not exceed P5 whether for
win or place, or for any combination or grouping of winning numbers. The face value of said tickets, as the case may be,
shall be the basis for the computation of the dividends and such dividends shall be paid after eliminating fractions of ten
centavos (P0.10); for example: if the resulting dividend is P10.43, the dividend that shall be paid will be only P10.40.
SEC. 19. Distribution of wager funds. The total wager funds or gross receipts from the sale of the betting tickets shall be
apportioned as follows: a commission not exceeding ten and one-half per centum (10 %) on the total bets on each game
or event shall be set aside for the person or entity operating the fronton and four and one-half per centum (4 %) of such
bets shall be covered into the National Treasury for disposition as may be authorized by law or executive order; and the
balance or eighty-five per centum (85%) of the total bets shall be distributed in the form of dividends among holders of win
or place numbers or holders of the winning combination or grouping of numbers, as the case may be: Provided, however,
That of the ten and one-half per centum (10 %) representing the commission of the person or entity operating the fronton,
an amount equivalent to one-half per centum (1/2%) of the total bets or wager funds shall be set aside and made
available to cover the expenses of the personnel assigned to supervise the operation of basque pelota games and
frontons, including payment of salaries of such personnel, purchase of necessary equipment and other sundry expenses
as may be authorized by competent authority.
SEC. 20. Supervision over the conduct of games; enforcement of rules and regulations. The city or municipal mayor is
authorized to place within the premises of the fronton such number of inspectors and agents as may be deemed
necessary to supervise the conduct of the games to see that the rules of the games are strictly enforced, and to carry out
the provisions of this Order as well as such other regulations as may hereafter be prescribed.
SEC. 21. Rules governing the games and personnel of the fronton. The rules and regulations that have been adopted by
any fronton to govern the operation of its games and the behavior, duties and performance of the officials and personnel
connected therewith, such as pelotaris, judges, referees or superintendents of games (intendentes) and others, shall be
the recognized rules and regulations of such fronton until the same are altered or repealed by the Secretary of the Interior;
and any fronton may introduce any type or form of games or events, provided they are not contrary to the provisions of
this Order or any rule or regulation hereafter issued by the Secretary of the Interior.

SEC. 22. Regulations governing pelotaris. Any rule or regulation adopted by any established fronton governing the
conduct or performance of pelotaris to the contrary notwithstanding, the following regulations shall be observed:
(a) The pelotaris who are participating in the games shall not be allowed to communicate, talk or make signs with any one
in the public or with any official or employee of the fronton during the games, except with the judges or referees or the
superintendent (intendente) in charge of the games;
(b) The program of games or events, as well as the line-up or order of playing of the pelotaris in each event shall be
determined by the superintendent of the games (intendente), subject to the approval of the city or municipal mayor, or his
authorized representatives;
(c) Pelotaris shall be in good physical condition before participating in any game and shall be laid off from playing at least
two days in a week. Every pelotari shall once a month secure a medical certificate from a government physician to be
designated by the city or municipal mayor concerned certifying to his physical fitness to engage in the games; and
(d) The amount of dividends computed for any event shall not be posted within the view of the pelotaris participating in the
event until after the termination of said event.
(3.e.3) Presidential Decree No. 810 (An Act Granting the Philippine Jai-Alai and Amusement Corporation a Franchise to
Operate, Construct and Maintain a Fronton for Basque Pelota and Similar Games of Skill in the Greater Manila Area)
October 16, 1975
WHEREAS, by virtue of the provisions of Commonwealth Act Numbered 485 the franchise to operate and maintain a
fronton for the Basque pelota and similar games of skill in the City of Manila, shall expire on October, 1975 whereupon the
ownership of the land, buildings and improvements used in the said game will be transferred without payment to the
government by operation of law;
WHEREAS, there is a pressing need not only to further develop the game as a sport and amusement for the general
public but also to exploit its full potential in support of the governments objectives and development programs;
WHEREAS, Basque pelota is a game of international renown, the maintenance and promotion of which will surely assist
the tourism industry of the country;
WHEREAS, the tourism appeal of the game will be enhanced only with the governments support and inducement in
developing the sport to a level at par with international standards;
WHEREAS, once such tourism appeal is developed, the same will serve as a stable and expanding base for revenue
generation for the governments development projects.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by
the Constitution, hereby decree as follows:
SECTION 1. Any provision of law to the contrary notwithstanding, there is hereby granted to the Philippine Jai-Alai and
Amusement Corporation, a corporation duly organized and registered under the laws of the Philippines, hereinafter called
the grantee or its successors, for a period of twenty-five years from the approval of this Act, extendable for another twentyfive years without the necessity of another franchise, the right, privilege and authority to construct, operate and maintain a
court for Basque Pelota (including the games of pala, raqueta, cestapunta, remonte and mano) within the Greater Manila
Area, establish branches thereof for booking purposes and hold or conduct Basque pelota games therein with bettings
either directly or by means of electric and/or computerized totalizator.
The games to be conducted by the grantee shall be under the supervision of the Games and Amusements Board,
hereinafter referred to as the Board, which shall enforce the laws, rules and regulations governing Basque pelota as
provided in Commonwealth Act numbered four hundred and eighty-five, as amended, and all the officials of the game and
pelotaris therein shall be duly licensed as such by the Board.
SEC. 2. The grantee or its duly authorized agent may offer, take or arrange bets within or outside the place, enclosure or
court where the Basque pelota games are held: Provided, That bets offered, taken or arranged outside the place,
enclosure or court where the games are held, shall be offered, taken or arranged only in places duly licensed by the
corporation; Provided, however, That the same shall be subject to the supervision of the Board. No person other than the
grantee or its duly authorized agents shall take or arrange bets on any pelotari or on the game, or maintain or use a
totalizator or other device, method or system to bet on any pelotari or on the game within or without the place, enclosure
or court where the games are held by the grantee. Any violation of this section shall be punished by a fine of not more
than two thousand pesos or by imprisonment of not more than six months, or both in the discretion of the Court. If the
offender is a partnership, corporation, or association, the criminal liability shall devolve upon its president, directors or any
other officials responsible for the violation.

SEC. 3. The grantee shall provide mechanical and/or computerized devices, namely: a) electric totalizator; b) machine
directly connected to a computer in a display board, for the sale of tickets, including, those sold from the off-court stations;
c) modern sound system and loud speakers; d) facilities that bring safety, security, comfort and convenience to the public;
e) modern intercommunication devices; and f) such other facilities, devices and instruments for clean, honest and orderly
Basque pelota games, within three years from the approval of this Act.
The Board shall assign its auditors and/or inspectors to supervise and regulate the placing of bets, proper computation of
dividends and the distribution of wager funds.
SEC. 4. The total wager fund or gross receipts from the sale of betting tickets will be apportioned as follows: eighty-five
per centum (85%) shall be distributed in the form of dividends among the holders of win or place numbers or holders of
the winning combination or grouping of numbers as the case may be. The remaining balance of fifteen per centum (15%)
shall be distributed as follows: eleven and one-half per centum (11 %) shall be set aside as the commission fee of the
grantee, and three and one-half per centum (3 %) thereof shall be set aside and alloted to any special health, educational,
civic, cultural, charitable, social welfare, sports, and other similar projects as may be directed by the President. The
receipts from betting corresponding to the fraction of ten centavos eliminated from the dividends paid to the winning
tickets, commonly known as breakage, shall also be set aside for the above-named special projects.
SEC. 5. The provision of any existing law to the contrary notwithstanding, the grantee is hereby authorized to hold Basque
pelota games (including the games of pala, raqueta, cestapunta, remonte and mano) on all days of the week except
Sundays and official holidays.
SEC. 6. The provisions of Commonwealth Act numbered four hundred and eighty-five as amended, shall be deemed
incorporated herein, provided that the provisions of this Act shall take precedence over the provisions thereof and all other
laws, executive orders and regulations which are inconsistent herewith.
SEC. 7. The grantee shall not lease, transfer, grant the usufruct of, sell or assign this franchise permit, or the rights or
privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity, nor merge
with any other person, company or corporation organized for the same purpose, without the previous approval of the
President of the Philippines.
SEC. 8. For purposes of this franchise, the grantee is herein authorized to make use of the existing fronton, stadium and
facilities located along Taft Avenue, City of Manila, belonging to the government by virtue of the provisions of
Commonwealth Act numbered four hundred and eighty-five.
It is abundantly clear from the aforequoted laws, executive orders and decrees that the legislative practice is that a
franchise to operate jai-alai is granted solely for that purpose and the terms and conditions of the grant are unequivocably
defined by the grantor. Such express grant and its conditionalities protective of the public interest are evidently wanting in
P.D. No. 1869, the present Charter of PAGCOR. Thus, while E.O. 135 and P.D. No. 810 provided for the apportionment of
the wager funds or gross receipts from the sale of betting tickets, as well as the distribution of dividends among holders of
win or place numbers or holders of the winning combination or grouping of numbers, no such provisions can be found in
P.D. No. 1869. Likewise, while P.D. No. 810 describes where and how the games are to be conducted and bettings to be
made, and imposes a penalty in case of a violation thereof, such provisions are absent in P.D. No. 1869.
In fine, P.D. No. 1869 does not have the standard marks of a law granting a franchise to operate jai-alai as those found
under P.D. No. 810 or E.O. 135. We cannot blink away from the stubborn reality that P.D. No. 1869 deals with details
pertinent alone to the operation of gambling casinos. It prescribes the rules and regulations concerning the operation of
gambling casinos such as the place, time, persons who are and are not entitled to play, tax exemptions, use of foreign
exchange, and the exemption of casino employees from the coverage of the Civil Service Law and the Labor Code. The
short point is that P.D. No. 1869 does not have the usual provisions with regards to jai-alai. The logical inference is that
PAGCOR was not given a franchise to operate jai-alai frontons. There is no reason to resist the beguiling rule that acts of
incorporation, and statutes granting other franchises or special benefits or privileges to corporations, are to be construed
strictly against the corporations; and whatever is not given in unequivocal terms is understood to be withheld.[30]
FOURTH. The tax treatment between jai-alai operations and gambling casinos are distinct from each other. Letters of
Instruction No. 1439 issued on November 2, 1984 directed the suspension of the imposition of the increased tax on
winnings in horse races and jai-alai under the old revenue code, to wit:
WHEREAS, the increased tax on winnings on horse races and jai-alai under Presidential Decree 1959 has already
affected the holding of horse races and jai-alai games, resulting in government revenue loss and affecting the livelihood of
those dependent thereon;
WHEREAS, the manner of taxation applicable thereto is unique and its effects and incidence are in no way similar to the
taxes on casino operation or to any shiftable tax;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by
the Constitution, do hereby order and instruct the Minister of Finance, the Commissioner of the Bureau of Internal
Revenue, and the Chairman, Games & Amusements Board, to suspend the implementation of the increased rate of tax
winnings in horse races and jai-alai games and collect instead the rate applicable prior to the effectivity of PD 1959.
Similarly, under Republic Act No. 8424, or the Tax Reform Act of 1997, there is an amusement tax imposed on operators
of jai-alai (Section 125) and a stamp tax on jai-alai tickets (Section 190). There is no corresponding imposition on
gambling casinos. Well to note, section 13 of P.D. No. 1869 grants to the franchise holder and casino operators tax
exemptions from the payment of customs duties and income tax, except a franchise tax of five (5%) percent which 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. No similar exemptions have been extended to
operators of jai-alai frontons.
FIFTH. P.D. No. 1869, the present Charter of PAGCOR, is a consolidation of P.D. Nos. 1067-A, 1067-B and 1067-C all
issued on January 1, 1977. P.D. No. 1067-A created the PAGCOR and defined its powers and functions; P.D. No. 1067-B
granted to PAGCOR a franchise to establish, operate, and maintain gambling casinos on land or water within the territorial
jurisdiction of the Republic of the Philippines; and P.D. No. 1067-C granted PAGCOR the exclusive right, privilege and
authority to operate and maintain gambling casinos, subject only to the exception of existing franchises and games of
chance permitted by law.
Beyond debate, P.D. No. 1869 adopted substantially the provisions of said prior decrees, with some additions which,
however, have no bearing on the franchise granted to PAGCOR to operate gambling casinos alone, such as the Affiliation
Provisions under Title III and the Transitory Provisions under Title VII. It also added the term lotteries under Section 1 (b)
on Declaration of Policy and Section 10 on the Nature and Term of Franchise. It ought to follow that P.D. No. 1869 carries
with it the same legislative intent that infused P.D. Nos. 1067-A, 1067-B and 1067-C. To be sure, both P.D. No. 1067-A
and P.D. No. 1869 seek to enforce the same avowed policy of the State to minimize, if not totally eradicate, the evils,
malpractices and corruptions that normally are found prevalent in the conduct and operation of gambling clubs and
casinos without direct government involvement. It did not address the moral malevolence of jai-alai games and the need
to contain it thru PAGCOR. We cannot deface this legislative intent by holding that the grant to PAGCOR under P.D. Nos.
1067-A and 1067-B to establish, operate, and maintain gambling casinos, has been enlarged, broadened or expanded by
P.D. No. 1869 so as to include a grant to operate jai-alai frontons. Then and now, the intention was merely to grant
PAGCOR a franchise to operate gambling casinos, no more, no less.
SIXTH. Lest the idea gets lost in the shoals of our subconsciousness, let us not forget that PAGCOR is engaged in
business affected with public interest. The phrase affected with public interest means that an industry is subject to control
for the public good;[31] it has been considered as the equivalent of subject to the exercise of the police power.[32]
Perforce, a legislative franchise to operate jai-alai is imbued with public interest and involves an exercise of police power.
The familiar rule is that laws which grant the right to exercise a part of the police power of the state are to be construed
strictly and any doubt must be resolved against the grant.[33] The legislature is regarded as the guardian of society, and
therefore is not presumed to disable itself or abandon the discharge of its duty. Thus, courts do not assume that the
legislature intended to part away with its power to regulate public morals.[34] The presumption is influenced by
constitutional considerations. Constitutions are widely understood to withhold from legislatures any authority to bargain
away their police power[35] for the power to protect the public interest is beyond abnegation.
It is stressed that the case at bar does not involve a franchise to operate a public utility (such as water, transportation,
communication or electricity) the operation of which undoubtedly redounds to the benefit of the general public. What is
claimed is an alleged legislative grant of a gambling franchise a franchise to operate jai-alai. A statute which legalizes a
gambling activity or business should be strictly construed and every reasonable doubt must be resolved to limit the
powers and rights claimed under its authority.[36]
The dissent would like to make capital of the fact that the cases of Stone vs. Mississippi and Aicardi vs. Alabama are not
on all fours to the cases at bar and, hence, the rulings therein do not apply. The perceived incongruity is more apparent
than real.
Stone[37] involves a contract entered into by the State of Mississippi with the plaintiffs which allowed the latter to sell and
dispose of certificates of subscription which would entitle the holders thereof to such prizes as may be awarded to them,
by the casting of lots or by lot, chance or otherwise. The contract was entered into by plaintiffs pursuant to their charter
entitled An Act Incorporating the Mississippi Agricultural, Educational and Manufacturing Aid Society which purportedly
granted them the franchise to issue and sell lottery tickets. However, the state constitution expressly prohibits the
legislature from authorizing any lottery or allowing the sale of lottery tickets. Mississippi law makes it unlawful to conduct a
lottery.
The question raised in Stone concerned the authority of the plaintiffs to exercise the franchise or privilege of issuing and
selling lottery tickets. This is essentially the issue involved in the cases at bar, that is, whether PAGCORs charter includes

the franchise to operate jai-alai frontons. Moreover, even assuming arguendo that the facts in the cases at bar are not
identical, the principles of law laid down in Stone are illuminating. For one, it was held in Stone that:
Experience has shown that the common forms of gambling are comparatively innocuous when placed in contrast with the
wide-spread pestilence of lotteries. The former are confined to a few persons and places, but the latter infests the whole
community; it enters every dwelling; it reaches every class; it preys upon the hard earnings of the poor; and it plunders the
ignorant and simple. x x x[38]
The verity that all species of gambling are pernicious prompted the Mississippi Court to rule that the legislature cannot
bargain away public health or public morals. We can take judicial notice of the fact that jai-alai frontons have mushroomed
in every nook and corner of the country. They are accessible to everyone and they specially mangle the morals of the
marginalized sector of society. It cannot be gainsaid that there is but a miniscule of a difference between jai-alai and
lottery with respect to the evils sought to be prevented.
In the case of Aicardi vs. Alabama, Moses & Co. was granted a legislative franchise to carry on gaming in the form
specified therein, and its agent, Antonio Aicardi, was indicted for keeping a gaming table. In ascertaining whether the
scope of the companys franchise included the right to keep a gaming table, the Court there held that such an Act should
be construed strictly. Every reasonable doubt should be so resolved as to limit the powers and rights claimed under its
authority. Implications and intendments should have no place except as they are inevitable from the language or the
context.
The view expressed in the dissent that the aforequoted ruling was taken out of context is perched on the premise that
PAGCORs franchise is couched in a language that is broad enough to cover the operations of jai-alai. This view begs the
question for as shown in our disquisition, PAGCOR's franchise is restricted only to the operation of gambling casinos.
Aicardi supports the thesis that a gambling franchise should be strictly construed due to its ill-effects on public order and
morals.
SEVENTH. The dissent also insists that the legislative intent must be sought first of all in the language of the statute itself.
In applying a literal interpretation of the provision under Section 11 of P.D. 1869 that x x x the Corporation is hereby
granted x x x the rights, privileges, and authority to operate and maintain gambling casinos, clubs, and other recreation or
amusement places, sports, gaming pools, i.e., basketball, football, lotteries, etc. x x x, it contends that the extent and
nature of PAGCORs franchise is so broad that literally all kinds of sports and gaming pools, including jai-alai, are covered
therein. It concluded that since under Section 11 of P.D. No. 1869, games of skill like basketball and football have been
lumped together with the word lotteries just before the word etc. and after the words gaming pools, it may be deduced
from the wording of the law that when bets or stakes are made in connection with the games of skill, they may be
classified as games of chance under the coverage of PAGCORs franchise.
We reject this simplistic reading of the law considering the social, moral and public policy implications embedded in the
cases at bar. The plain meaning rule used in the dissent rests on the assumption that there is no ambiguity or obscurity in
the language of the law. The fact, however, that the statute admits of different interpretations is the best evidence that the
statute is vague and ambiguous.[39] It is widely acknowledged that a statute is ambiguous when it is capable of being
understood by reasonably well-informed persons in either of two or more senses.[40] In the cases at bar, it is difficult to
see how a literal reading of the statutory text would unerringly reveal the legislative intent. To be sure, the term jai-alai was
never used and is nowhere to be found in the law. The conclusion that it is included in the franchise granted to PAGCOR
cannot be based on a mere cursory perusal of and a blind reliance on the ordinary and plain meaning of the statutory
terms used such as gaming pools and lotteries. Sutherland tells us that a statute is ambiguous, and so open to
explanation by extrinsic aids, not only when its abstract meaning or the connotation of its terms is uncertain, but also
when it is uncertain in its application to, or effect upon, the fact-situation of the case at bar.[41]
Similarly, the contention in the dissent that :
x x x Even if the Court is fully persuaded that the legislature really meant and intended something different from what it
enacted, and that the failure to convey the real meaning was due to inadvertence or mistake in the use of the language,
yet, if the words chosen by the legislature are not obscure or ambiguous, but convey a precise and sensible meaning
(excluding the case of obvious clerical errors or elliptical forms of expression), then the Court must take the law as it finds
it, and give it its literal interpretation, without being influenced by the probable legislative meaning lying at the back of the
words. In that event, the presumption that the legislature meant what it said, though it be contrary to the fact, is
conclusive.
cannot apply in the cases at bar considering that it has not been shown that the failure to convey the true intention of the
legislature is attributable to inadvertence or a mistake in the language used.
EIGHTH. Finally, there is another reason why PAGCOR's claim to a legislative grant of a franchise to operate jai-alai
should be subjected to stricter scrutiny. The so-called legislative grant to PAGCOR did not come from a real Congress. It

came from President Marcos who assumed legislative powers under martial law. The grant is not the result of
deliberations of the duly elected representatives of our people.
This is not to assail President Marcos legislative powers granted by Amendment No. 6 of the 1973 Constitution, as the
dissent would put it. It is given that in the exercise of his legislative power, President Marcos legally granted PAGCOR's
franchise to operate gambling casinos. The validity of this franchise to operate gambling casinos is not, however, the issue
in the cases at bar. The issue is whether this franchise to operate gambling casinos includes the privilege to operate jaialai. PAGCOR says it does. We hold that it does not. PAGCOR's overarching claim should be given the strictest scrutiny
because it was granted by one man who governed when the country was under martial law and whose governance was
repudiated by our people in EDSA 1986. The reason for this submission is rooted in the truth that PAGCOR's franchise
was not granted by a real Congress where the passage of a law requires a more rigorous process in terms of floor
deliberations and voting by members of both the House and the Senate. It is self-evident that there is a need to be extra
cautious in treating this alleged grant of a franchise as a grant by the legislature, as a grant by the representatives of our
people, for plainly it is not. We now have a real Congress and it is best to let Congress resolve this issue considering its
policy ramifications on public order and morals.
In view of this ruling, we need not resolve the other issues raised by petitioners.
WHEREFORE, the petitions are GRANTED. Respondents PAGCOR, Belle Jai Alai Corporation and Filipinas Gaming
Entertainment Totalizator Corporation are ENJOINED from managing, maintaining and operating jai-alai games, and from
enforcing the agreement entered into by them for that purpose.
SO ORDERED.

ANTONIO C. RAMOS, ROSALINDA M. PEREZ, NORMA C. CASTILLO and BALIUAG MARKET VENDORS
ASSOCIATION, INC., petitioners, vs. COURT OF APPEALS, HON. CAMILO O. MONTESA, JR., in his capacity as
Presiding Judge of the Regional Trial Court of Bulacan, Branch 19, and MUNICIPALITY OF BALIUAG,
respondents.
Who has the legal authority to represent a municipality in lawsuits? If an unauthorized lawyer represents a municipality,
what is the effect of his participation in the proceedings? Parenthetically, does a motion to withdraw the appearance of the
unauthorized counsel have to comply with Rule 15 of the Rules of Court regarding notice and hearing of motions?
These questions are answered by this Court in resolving this petition for review under Rule 45 of the Rules of Court of the
Decision[1] of public respondent[2] in CA-G.R. SP No. 23594 promulgated on March 15, 1991, which denied due course
to and dismissed the petition therein. Also assailed is the Resolution[3] of public respondent promulgated on May 9, 1991,
which denied the motion for reconsideration for lack of merit.
The Facts
The facts as found by public respondent are undisputed, to wit:[4]
"On April 18, 1990, petitioners Antonio C. Ramos, Rosalinda M. Perez, Norma C. Castillo, and the Baliuag Market
Vendors Association, Inc. filed a petition before the court a quo docketed as Civil Case No. 264-M-9 for the Declaration of
Nullity of Municipal Ordinances No. 91 (1976) and No. 7 (1990) and the contract of lease over a commercial arcade to be
constructed in the municipality of Baliuag, Bulacan.
On April 27, 1980, during the hearing on the petitioners' motion for the issuance of preliminary injunction, the Provincial
Fiscal appeared as counsel for respondent Municipality of Baliuag, which opposed the petition. Whereupon, a writ of
preliminary injunction was issued by the court a quo on May 9, 1990.
Meanwhile, on May 3, 1990, the Provincial Fiscal and the Provincial Attorney, Oliviano D. Regalado, filed an Answer in
(sic) behalf of respondent municipality.
At the pre-trial conference scheduled on May 28, 1990, Atty. Roberto B. Romanillos appeared, manifesting that he was
counsel for respondent municipality. On the same date, and on June 15, 1990, respectively, Atty. Romanillos filed a motion
to dissolve injunction and a motion to admit an Amended Answer with motion to dismiss.
On June 18, 1990, Provincial Attorney Oliviano D. Regalado appeared as collaborating counsel of Atty. Romanillos. The
Provincial Fiscal did not appear. It was Atty. Romanillos who submitted the Reply to- petitioners' Opposition to
respondents' motion to dissolve injunction. It was also Atty. Romanillos who submitted a written formal offer of evidence on
July 17, 1990 for respondent municipality.
During the hearing on August 10, 1990, petitioners questioned the personality of Atty. Romanillos to appear as counsel of
(sic) the respondent municipality, which opposition was reiterated on August 15, 1990, and was put in writing in petitioners'

motion of August 20, 1990 to disqualify Atty. Romanillos from appearing as counsel for respondent municipality and to
declare null and void the proceedings participated in and undertaken by Atty. Romanillos.
Meanwhile, Atty. Romanillos and Atty. Regalado filed a joint motion dated August 22, 1990 stating, among others, that Atty.
Romanillos was withdrawing as counsel for respondent municipality and that Atty. Regalado, as his collaborating counsel
for respondent municipality, is adopting the entire proceedings participated in/undertaken by Atty. Romanillos.
On September 19, 1990 respondent Judge issued the Order now being assailed which, as already stated, denied
petitioners' motion to disqualify Atty. Romanillos as counsel for respondent municipality and to declare null and void the
proceedings participated in by Atty. Romanillos; and on the other hand, granted Atty. Regalado's motion 'to formally adopt
the entire proceedings including the formal offer of evidence'. In support of his foregoing action, respondent Judge
reasoned:
'Petitioners' motion for the disqualification of Atty. Romanillos as respondent municipality's counsel is deemed moot and
academic in view of his withdrawal as counsel of said municipality pursuant to a joint motion dated August 22, 1990,
although he shall remain as counsel on record of private respondent Kristi Corporation. Atty. Oliviano Regalado under the
same joint motion moved for the adoption of the entire proceedings conducted by collaborating counsel, Atty. Romanillos.
It is noted that Atty. Romanillos initially entered his appearance as collaborating counsel of the Provincial Prosecutor and
the Provincial Attorney when he filed a motion to dissolve injunction under motion dated May 30, 1990 and since then
despite his active participation in the proceedings, the opposing counsel has never questioned his appearance until after
he made a formal offer of evidence for the respondents. The acquiescence of petitioners,' counsel of (sic) his appearance
is tantamount to a waiver and petitioners are, therefore, estopped to question the same. In all the pleadings made by Atty.
Romanillos, it was clearly indicated that he was appearing as the collaborating counsel of the Provincial Attorney. Besides,
petitioners' counsel failed to submit their comment and/or objection to the said joint motion of respondents' counsel as
directed by the Court within the reglementary period. By virtue of these circumstances, all the proceedings attended to
and participated in by said collaborating counsel is a fait accompli and the Court finds no cogent justification to nullify the
same.'
Petitioners' motion for reconsideration of the foregoing Order was denied by respondent Judge in his Order dated October
19, 1990, the second Order now being assailed. Respondent Judge reiterated the observations which he made in the
Order of September 19, 1990 that Atty. Romanillos, while actively handling the said case was merely appearing as the
collaborating counsel of both the Provincial Prosecutor and the Provincial Attorney of Bulacan; that Atty. Romanillos'
appearance was 'never impugned by petitioners' and was only questioned after his (Atty. Romanillos') submission of the
formal offer of evidence for respondent; and that therefore, said court proceedings 'is (sic) a fait accompli'. Respondent
Judge went on to say that the declaration of nullity of said proceedings and the re-taking of the same evidence by the
same parties is (sic) apparently an exercise in futility'. He added that in the absence of untimely objection by petitioners to
Atty. Romanillos' appearance as the collaborating counsel, petitioners are guilty of laches for having slept on (sic) their
rights and are estopped as their acquiescence may be considered as waiver of such right. Furthermore, according to
respondent Judge, assuming that the proceedings had been 'tainted with frailness to render the same legally
objectionable', the same has been 'legally remedied' by its formal adoption upon motion of the Provincial Accorney (sic),
Atty. Regalado, who is not disqualified to appear as counsel for the municipality of Baliuag, for the reason that by virtue of
Section 19 of R.A. No. 5185 (The Decentralization Act of 1967), the authority to act as legal officer/adviser for (sic) civil
cases of the province of Bulacan, of which the municipality of Baliuag is a political subdivision, has been transferred from
the Provincial Fiscal (now Provincial Prosecutor) of Bulacan to the Provincial Attorney thereof."
As earlier stated, the Court of Appeals dismissed the petition and denied the motion for reconsideration. Hence this
recourse.
The Issues
The issues raised by petitioners in their Memorandum are:[5]
"1) Under present laws and jurisprudence, can a municipality be represented in a suit against it by a private counsel?
2) If not, what is the status of the proceedings undertaken by an unauthorized private counsel;
3) Can the provincial attorney of a province act as counsel of a municipality in a suit;
4) Can the provincial attorney adopt with legal effect the proceedings undertaken by an unauthorized private counselof
(sic) a municipality;
5) May a court act on an alleged motion which violates Sections 4 and 5 of Rule 15 and Section 26, Rule 128 of the Rules
of Court."

Petitioners contend that the assailed Decision which affirmed the Orders of the trial court is void for being violative of the
following laws:[6]
"VI-1 The respondent court violated Section 1683 of the Revised Administrative Code; Section 3, paragraph 3 (a) of
Republic Act No. 2264, otherwise known as the Local Autonomy Act; and Section 35; Book IV, Title III, Chapter 12,
Administrative Code of 1987 (Executive Order No. 292) when it authorized Atty. Oliviano D. Regalado, the Provincial
Attorney of Bulacan, to appear as counsel for respondent Municipality of Baliuag.
VI-2 The respondent court violated Section 1683 of the Revised Administrative Code; Section 3, paragraph 3 (a) of
Republic Act No. 2264, otherwise known as the Local Autonomy Act; Section 35, Book IV, Title III, Chapter 12, Executive
Order No. 292, otherwise known as the Administrative Code of 1987; and Article 1352 of the New Civil Code, when it
denied the petitioners' motion to declare the proceedings undertaken or participated in by said Atty. Roberto B.
Romanillos, as private counsel of respondent Municipality, null and void.
VI-3 The respondent court acted in excess of its jurisdiction and in grave abuse of discretion when it acted and granted
the respondent's JOINT MOTION dated August 22, 1990 (Annex 'H') which, as a rule, is a mere worthless piece of paper
which the respondent judge/court has no authority to act upon, considering that said motion was filed in court in patent
violation of or without complying with the mandatory requirements provided for by Sections 4 and 5 of Rule 15 and
Section 26 of Rule 138 of the Rules of Court."
Public respondent did not give due course to the petition "because it does not prima facie show justifiable grounds for the
issuance of certiorari."[7] Public respondent adds that:[8]
"Considering the foregoing jurisprudence, the logical conclusion is that the Provincial Attorney of Bulacan has now the
authority to represent the municipality of Baliuag in its law suits.
It follows that respondent Judge was correct in ruling in the assailed Order of October 19, 1990 that even assuming,
arguendo, that the proceedings by the court a quo which had been participated in by Atty. Romanillos are legally
objectionable, this was legally remedied by the formal adoption by the provincial Attorney, Atty. Regalado, of the said
proceedings, considering that the provincial attorney is not disqualified from representing the municipality of Baliuag in
civil cases.
In the second place, the record discloses that Atty. Romanillos had appeared as counsel for respondent municipality of
Baliuag in collaboration with the Provincial Prosecutor and the Provincial Attorney, as shown in the motion to dissolve
injunction dated May 28, 1990 which Atty. Romanillos had filed for respondent municipality. Accordingly and pursuant to
the aforecited provisions of law, it cannot correctly be said that respondent Judge had acted with grave abuse of discretion
when he allowed Atty. Romanillos to act as private counsel and Atty. Regalado, Provincial Attorney of Bulacan, to appear
as counsel for respondent Municipality of Baliuag. Perforce, it also cannot be correctly said that respondent Judge
violated the aforecited provisions when he denied petitioners' motion to declare null and void the proceedings undertaken
by and participated in by Atty. Romanillos as private counsel of the municipality of Baliuag.
At any rate, even granting, only for the sake of argument, that Atty. Romanillos' appearance as counsel for the municipality
could not be legally authorized under the aforesaid provisions of law, the fact that Atty. Regalado as Provincial Attorney of
Baliuag had formally adopted the proceedings participated in by Atty. Romanillos as counsel for the municipality of Baliuag
had served, as already stated, to cure such a defect.
Thirdly, We are likewise unable to see grave abuse of discretion in respondent Judge's actuation in granting the joint
motion filed by Atty. Romanillos and Atty. Regalado for the withdrawal of the former as private counsel of respondent
municipality, and the adoption by the latter of the proceedings participated in/undertaken by the former, including the
formal offer of evidence submitted by the former."
Public respondent likewise found that the "joint motion does not partake of the nature of an adversarial motion which
would have rendered non-compliance with Sections 4 and 5 of Rule 15 of the Rules of Court fatal to the motion."[9] It is to
be emphasized that petitioners "sought the disqualification of Atty. Romanillos x x x (Thus,) what petitioners had sought to
(be) achieve(d) in their said motion was in fact what Atty. Romanillos had sought x x x in the joint motion dated August 22,
1990."[10]
Respondent municipality submits that Section 19 of RA 5185:
"is not meant to prohibit or prevent the Provincial Attorney to act as legal adviser and legal officer for municipalities and
municipal districts because such interpretations would be to say the least, absurb (sic). In this jurisdiction, a province is
composed of municipalities and municipal districts, and therefore they are deemed included in the provisions of Section
19 of Republic Act 5185. It is also impractical and contrary to the spirit of the law to limit the sphere of authority of the
Provincial Attorney to the province only."[11]

The different allegations boil down to three main issues: (1) Who is authorized to represent a municipality in a civil suit
against it? (2) What is the effect on the proceedings when a private counsel represents a municipality? Elsewise stated,
may the proceedings be validated by a provincial attorney's adoption of the actions made by a private counsel? (3) Does a
motion of withdrawal of such unauthorized appearance, and adoption of proceedings participated in by such counsel have
to comply with Sections 4 and 5[12] of Rule 15 of the Rules of Court?
The Court's Ruling
We affirm the Decision and Resolution of public respondent.
First Issue: Who Is Authorized to Represent a
Municipality in Its Lawsuits?
In the recent case of Municipality of Pililla, Rizal vs. Court of Appeals,[13] this Court, through Mr. Justice Florenz D.
Regalado, set in clear-cut terms the answer to the question of who may legally represent a municipality in a suit for or
against it, thus:[14]
"x x x The matter of representation of a municipality by a private attorney has been settled in Ramos vs. Court of Appeals,
et al.,[15] and reiterated in Province of Cebu vs. Intermediate Appellate Court, et al.,[16] where we ruled that private
attorneys cannot represent a province or municipality in lawsuits.
Section 1683 of the Revised Administrative Code provides:
'Section 1683. Duty of fiscal to represent provinces and provincial subdivisions in litigation. The provincial fiscal shall
represent the province and any municipality or municipal district thereof in any court, except in cases whereof (sic) original
jurisdiction is vested in the Supreme Court or in cases where the municipality or municipal district in question is a party
adverse to the provincial government or to some other municipality or municipal district in the same province. When the
interests of a provincial government and of any political division thereof are opposed, the provincial fiscal shall act on
behalf of the province.
When the provincial fiscal is disqualified to serve any municipality or other political subdivision of a province, a special
attorney may be employed by its council.'[17]
Under the above provision, complemented by Section 3, Republic Act No. 2264, the Local Autonomy Law,[18] only the
provincial fiscal and the municipal attorney can represent a province or municipality in their lawsuits. The provision is
mandatory. The municipality's authority to employ a private lawyer is expressly limited only to situations where the
provincial fiscal is disqualified to represent it.[19]
For the aforementioned exception to apply, the fact that the provincial fiscal was disqualified to handle the municipality's
case must appear on record.[20] In the instant case, there is nothing in the records to show that the provincial fiscal is
disqualified to act as counsel for the Municipality of Pililla on appeal, hence the appearance of herein private counsel is
without authority of law."
The provincial fiscal's functions as legal officer and adviser for the civil cases of a province and corollarily, of the
municipalities thereof, were subsequently transferred to the provincial attorney.[21]
The foregoing provisions of law and jurisprudence show that only the provincial fiscal, provincial attorney, and municipal
attorney should represent a municipality in its lawsuits. Only in exceptional instances may a private attorney be hired by a
municipality to represent it in lawsuits. These exceptions are enumerated in the case of Alinsug vs. RTC Br. 58, San
Carlos City, Negros Occidental,[22] to wit:[23]
"Indeed, it appears that the law allows a private counsel to be hired by a municipality only when the municipality is an
adverse party in a case involving the provincial government or another municipality or city within the province. This
provision has its apparent origin in the ruling in De Guia v. The Auditor General (44 SCRA 169, March 29, 1979) where the
Court held that the municipality's authority to employ a private attorney is expressly limited only to situations where the
provincial fiscal would be disqualified to serve and represent it. With Sec. 1683 of the old Administrative Code as legal
basis, the Court therein cited Enriquez, Sr. v. Gimenez [107 Phil. 932 (1960)] which enumerated instances when the
provincial fiscal is disqualified to represent in court a particular municipality; if and when original jurisdiction of case
involving the municipality is vested in the Supreme Court, when the municipality is a party adverse to the provincial
government or to some other municipality in the same province, and when, in a case involving the municipality, he, or his
wife, or child, is pecuniarily involved, as heir legatee, creditor or otherwise.
Thereafter, in Ramos vs. Court of Appeals (108 SCRA 728, October 30, 1981), the Court ruled that a municipality may not
be represented by a private law firm which had volunteered its services gratis, in collaboration with the municipal attorney
and the fiscal, as such representation was violative of Sec. 1683 of the old Administrative Code. This strict coherence to
the letter of the law appears to have been dictated by the fact that 'the municipality should not be burdened with expenses

of hiring a private lawyer' and that the interests of the municipality would be best protected if a government lawyer handles
its litigations."' (Underscoring supplied.)
None of the foregoing exceptions is present in this case. It may be said that Atty. Romanillos appeared for respondent
municipality inasmuch as he was already counsel of Kristi Corporation which was sued with respondent municipality in
this same case. The order of the trial court dated September 19, 1990, stated that Atty. Romanillos "entered his
appearance as collaborating counsel of the provincial prosecutor and the provincial attorney."[24] This collaboration is
contrary to law and hence should not have been recognized as legal. It has already been ruled in this wise:
"The fact that the municipal attorney and the fiscal are supposed to collaborate with a private law firm does not legalize
the latter's representation of the municipality of Hagonoy in Civil Case No. 5095-M. While a private prosecutor is allowed
in criminal cases, an analogous arrangement is not allowed in civil cases wherein a municipality is the plaintiff."[25]
As already stated, private lawyers may not represent municipalities on their own. Neither may they do so even in
collaboration with authorized government lawyers. This is anchored on the principle that only accountable public officers
may act for and in behalf of public entities and that public funds should not be expended to hire private lawyers.
Petitioners cannot be held in estoppel for questioning the legality of the appearance of Atty. Romanillos, notwithstanding
that they questioned the witnesses of respondent municipality during the hearing of its motion to dissolve the preliminary
injunction. Municipality of Pililla, Rizal vs. Court of Appeals[26] held that the legality of the representation of an
unauthorized counsel may be raised at any stage of the proceedings. This Court stated that:[27]
"The contention of Atty. Mendiola that private respondent cannot raise for the first time on appeal his lack of authority to
represent the municipality is untenable. The legality of his representation can be questioned at any stage of the
proceedings. In the cases hereinbefore cited, the issue of lack of authority of private counsel to represent a municipality
was only raised for the first time in the proceedings for the collection of attorney's fees for services rendered in the
particular case, after the decision in that case had become final and executory and/or had been duly executed."
Elementary fairness dictates that parties unaware of the unauthorized representation should not be held in estoppel just
because they did not question on the spot the authority of the counsel for the municipality. The rule on appearances of a
lawyer is that
"(u)ntil the contrary is clearly shown, an attorney is presumed to be acting under authority of the litigant whom he purports
to represent. (Azotes v. Blanco, 78 Phil. 739) His authority to appear for and represent petitioner in litigation, not having
been questioned in the lower court, it will be presumed on appeal that counsel was properly authorized to file the
complaint and appear for his client. (Republic v. Philippine Resources Development Corporation, 102 Phil. 960)"[28]
Second Issue: Effect on Proceedings by Adoption of Unauthorized Representation
Would the adoption by Atty. Regalado of the proceedings participated in by Atty. Romanillos validate such proceedings?
We agree with public respondent that such adoption produces validity. Public respondent stated the reasons [29] to which
we agree:
"Moreover, it does not appear that the adoption of proceedings participated in or undertaken by Atty. Romanillos when he
was private counsel for the respondent municipality of Baliuag such as the proceedings on the motion to dissolve the
injunction, wherein petitioners had even cross-examined the witnesses presented by Atty. Romanillos in support of said
motion and had even started to present their witnesses to sustain their objection to the motion would have resulted in any
substantial prejudice to petitioners' interest. As We see it, to declare the said proceedings null and void notwithstanding
the formal adoption thereof by Atty. Regalado as Provincial Attorney of Bulacan who is authorized to represent respondent
municipality of Baliuag in court and to require trial anew to cover the same subject matter, to hear the same witnesses and
to admit the same evidence adduced by the same parties cannot enhance the promotion of justice."
This Court believes that conferring legitimacy to the appearance of Atty. Romanillos would not cause substantial prejudice
on petitioners. Requiring new trial on the mere legal technicality that the municipality was not represented by a legally
authorized counsel would not serve the interest of justice. After all, this Court does not see any injustice committed
against petitioners by the adoption of the work of private counsel nor any interest of justice being served by requiring
retrial of the case by the duly authorized legal representative of the town.
In sum, although a municipality may not hire a private lawyer to represent it in litigations, in the interest of substantial
justice however, we hold that a municipality may adopt the work already performed in good faith by such private lawyer,
which work is beneficial to it (1) provided that no injustice is thereby heaped on the adverse party and (2) provided further
that no compensation in any guise is paid therefor by said municipality to the private lawyer. Unless so expressly adopted,
the private lawyer's work cannot bind the municipality.
Third Issue: "Joint Motion" Need Not Comply with Rule 15

We also agree with the justification of public respondent that a motion to withdraw the appearance of an unauthorized
lawyer is a non-adversarial motion that need not comply with Section 4 of Rule 15 as to notice to the adverse party. The
disqualification of Atty. Romanillos was what petitioners were really praying for when they questioned his authority to
appear for the municipality. The disqualification was granted, thereby serving the relief prayed for by petitioners. Such
being the case, no "notice directed to the parties concerned and served at least 3 days before the hearing thereof"[30]
need be given petitioners, the questioned motion not being contentious. Besides, what petitioners were questioning as to
lack of authority was remedied by the adoption of proceedings by an authorized counsel, Atty. Regalado. The action of the
trial court allowing the motion of respondent municipality effectively granted petitioners' motion to disqualify Atty.
Romanillos. In People vs. Leviste,[31] we ruled that:
"While it is true that any motion that does not comply with the requirements of Rule 15 should not be accepted for filing
and, if filed, is not entitled to judicial cognizance, this Court has likewise held that where a rigid application of the rule will
result in a manifest failure or miscarriage of justice, technicalities may be disregarded in order to resolve the case.
Litigations should, as much as possible, be decided on the merits and not on technicalities. As this Court held in Galvez
vs. Court of Appeals, an order of the court granting the motion to dismiss despite the absence of a notice of hearing, or
proof of service thereof, is merely an irregularity in the proceedings x x x (which) cannot deprive a competent court of
jurisdiction over the Case."'(Citations omitted).
It should be remembered that rules of procedure are but tools designed to facilitate the attainment of justice, such that
when rigid application of the rules tend to frustrate rather than promote substantial justice, this Court is empowered to
suspend their operation.[32]
WHEREFORE, premises considered, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED.
No costs.
SO ORDERED.

Republic v Lacap
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the
Decision[1] dated April 28, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 56345 which affirmed with modification
the Decision[2] of the Regional Trial Court, Branch 41, San Fernando, Pampanga (RTC) in Civil Case No. 10538, granting
the complaint for Specific Performance and Damages filed by Carlito Lacap (respondent) against the Republic of the
Philippines (petitioner).
The factual background of the case is as follows:
The District Engineer of Pampanga issued and duly published an Invitation To Bid dated January 27, 1992. Respondent,
doing business under the name and style Carwin Construction and Construction Supply (Carwin Construction), was prequalified together with two other contractors. Since respondent submitted the lowest bid, he was awarded the contract for
the concreting of Sitio 5 Bahay Pare.[3] On November 4, 1992, a Contract Agreement was executed by respondent and
petitioner.[4] On September 25, 1992, District Engineer Rafael S. Ponio issued a Notice to Proceed with the concreting of
Sitio 5 Bahay Pare.[5] Accordingly, respondent undertook the works, made advances for the purchase of the materials and
payment for labor costs.[6]
On October 29, 1992, personnel of the Office of the District Engineer of San Fernando, Pampanga conducted a final
inspection of the project and found it 100% completed in accordance with the approved plans and specifications.
Accordingly, the Office of the District Engineer issued Certificates of Final Inspection and Final Acceptance.[7]
Thereafter, respondent sought to collect payment for the completed project.[8] The DPWH prepared the Disbursement
Voucher in favor of petitioner.[9] However, the DPWH withheld payment from respondent after the District Auditor of the
Commission on Audit (COA) disapproved the final release of funds on the ground that the contractors license of
respondent had expired at the time of the execution of the contract. The District Engineer sought the opinion of the DPWH
Legal Department on whether the contracts of Carwin Construction for various Mount Pinatubo rehabilitation projects were
valid and effective although its contractors license had already expired when the projects were contracted.[10]
In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III of the DPWH Legal Department opined that since
Republic Act No. 4566 (R.A. No. 4566), otherwise known as the Contractors License Law, does not provide that a contract
entered into after the license has expired is void and there is no law which expressly prohibits or declares void such
contract, the contract is enforceable and payment may be paid, without prejudice to any appropriate administrative liability
action that may be imposed on the contractor and the government officials or employees concerned.[11]

In a Letter dated July 4, 1994, the District Engineer requested clarification from the DPWH Legal Department on whether
Carwin Construction should be paid for works accomplished despite an expired contractors license at the time the
contracts were executed.[12]
In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III of the Legal Department, recommended that
payment should be made to Carwin Construction, reiterating his earlier legal opinion.[13] Despite such recommendation
for payment, no payment was made to respondent.
Thus, on July 3, 1995, respondent filed the complaint for Specific Performance and Damages against petitioner before the
RTC.[14]
On September 14, 1995, petitioner, through the Office of the Solicitor General (OSG), filed a Motion to Dismiss the
complaint on the grounds that the complaint states no cause of action and that the RTC had no jurisdiction over the nature
of the action since respondent did not appeal to the COA the decision of the District Auditor to disapprove the claim.[15]
Following the submission of respondents Opposition to Motion to Dismiss,[16] the RTC issued an Order dated March 11,
1996 denying the Motion to Dismiss.[17] The OSG filed a Motion for Reconsideration[18] but it was likewise denied by the
RTC in its Order dated May 23, 1996.[19]
On August 5, 1996, the OSG filed its Answer invoking the defenses of non-exhaustion of administrative remedies and the
doctrine of non-suability of the State.[20]
Following trial, the RTC rendered on February 19, 1997 its Decision, the dispositive portion of which reads as follows:
WHEREFORE, in view of all the foregoing consideration, judgment is hereby rendered in favor of the plaintiff and against
the defendant, ordering the latter, thru its District Engineer at Sindalan, San Fernando, Pampanga, to pay the following:
a) P457,000.00 representing the contract for the concreting project of Sitio 5 road, Bahay Pare, Candaba, Pampanga plus
interest at 12% from demand until fully paid; and
b) The costs of suit.
SO ORDERED.[21]
The RTC held that petitioner must be required to pay the contract price since it has accepted the completed project and
enjoyed the benefits thereof; to hold otherwise would be to overrun the long standing and consistent pronouncement
against enriching oneself at the expense of another.[22]
Dissatisfied, petitioner filed an appeal with the CA.[23] On April 28, 2003, the CA rendered its Decision sustaining the
Decision of the RTC. It held that since the case involves the application of the principle of estoppel against the
government which is a purely legal question, then the principle of exhaustion of administrative remedies does not apply;
that by its actions the government is estopped from questioning the validity and binding effect of the Contract Agreement
with the respondent; that denial of payment to respondent on purely technical grounds after successful completion of the
project is not countenanced either by justice or equity.
The CA rendered herein the assailed Decision dated April 28, 2003, the dispositive portion of which reads:
WHEREFORE, the decision of the lower court is hereby AFFIRMED with modification in that the interest shall be six
percent (6%) per annum computed from June 21, 1995.
SO ORDERED.[24]
Hence, the present petition on the following ground:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT HAS NO CAUSE OF ACTION AGAINST
PETITIONER, CONSIDERING THAT:
(a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE REMEDIES; AND
(b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE PRIMARY JURISDICTION TO RESOLVE RESPONDENTS
MONEY CLAIM AGAINST THE GOVERNMENT.[25]
Petitioner contends that respondents recourse to judicial action was premature since the proper remedy was to appeal the
District Auditors disapproval of payment to the COA, pursuant to Section 48, Presidential Decree No. 1445 (P.D. No.
1445), otherwise known as the Government Auditing Code of the Philippines; that the COA has primary jurisdiction to
resolve respondents money claim against the government under Section 2(1),[26] Article IX of the 1987 Constitution and
Section 26[27] of P.D. No. 1445; that non-observance of the doctrine of exhaustion of administrative remedies and the
principle of primary jurisdiction results in a lack of cause of action.

Respondent, on the other hand, in his Memorandum[28] limited his discussion to Civil Code provisions relating to human
relations. He submits that equity demands that he be paid for the work performed; otherwise, the mandate of the Civil
Code provisions relating to human relations would be rendered nugatory if the State itself is allowed to ignore and
circumvent the standard of behavior it sets for its inhabitants.
The present petition is bereft of merit.
The general rule is that before a party may seek the intervention of the court, he should first avail of all the means afforded
him by administrative processes.[29] The issues which administrative agencies are authorized to decide should not be
summarily taken from them and submitted to a court without first giving such administrative agency the opportunity to
dispose of the same after due deliberation.[30]
Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of primary jurisdiction; that is, courts
cannot or will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal
prior to the resolution of that question by the administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to
determine technical and intricate matters of fact.[31]
Nonetheless, the doctrine of exhaustion of administrative remedies and the corollary doctrine of primary jurisdiction, which
are based on sound public policy and practical considerations, are not inflexible rules. There are many accepted
exceptions, such as: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where the challenged
administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official
inaction that will irretrievably prejudice the complainant; (d) where the amount involved is relatively small so as to make
the rule impractical and oppressive; (e) where the question involved is purely legal and will ultimately have to be decided
by the courts of justice;[32] (f) where judicial intervention is urgent; (g) when its application may cause great and
irreparable damage; (h) where the controverted acts violate due process; (i) when the issue of non-exhaustion of
administrative remedies has been rendered moot;[33] (j) when there is no other plain, speedy and adequate remedy; (k)
when strong public interest is involved; and, (l) in quo warranto proceedings.[34] Exceptions (c) and (e) are applicable to
the present case.
Notwithstanding the legal opinions of the DPWH Legal Department rendered in 1993 and 1994 that payment to a
contractor with an expired contractors license is proper, respondent remained unpaid for the completed work despite
repeated demands. Clearly, there was unreasonable delay and official inaction to the great prejudice of respondent.
Furthermore, whether a contractor with an expired license at the time of the execution of its contract is entitled to be paid
for completed projects, clearly is a pure question of law. It does not involve an examination of the probative value of the
evidence presented by the parties. There is a question of law when the doubt or difference arises as to what the law is on
a certain state of facts, and not as to the truth or the falsehood of alleged facts.[35] Said question at best could be
resolved only tentatively by the administrative authorities. The final decision on the matter rests not with them but with the
courts of justice. Exhaustion of administrative remedies does not apply, because nothing of an administrative nature is to
be or can be done.[36] The issue does not require technical knowledge and experience but one that would involve the
interpretation and application of law.
Thus, while it is undisputed that the District Auditor of the COA disapproved respondents claim against the Government,
and, under Section 48[37] of P.D. No. 1445, the administrative remedy available to respondent is an appeal of the denial
of his claim by the District Auditor to the COA itself, the Court holds that, in view of exceptions (c) and (e) narrated above,
the complaint for specific performance and damages was not prematurely filed and within the jurisdiction of the RTC to
resolve, despite the failure to exhaust administrative remedies. As the Court aptly stated in Rocamora v. RTC-Cebu
(Branch VIII):[38]
The plaintiffs were not supposed to hold their breath and wait until the Commission on Audit and the Ministry of Public
Highways had acted on the claims for compensation for the lands appropriated by the government. The road had been
completed; the Pope had come and gone; but the plaintiffs had yet to be paid for the properties taken from them. Given
this official indifference, which apparently would continue indefinitely, the private respondents had to act to assert and
protect their interests.[39]
On the question of whether a contractor with an expired license is entitled to be paid for completed projects, Section 35 of
R.A. No. 4566 explicitly provides:
SEC. 35. Penalties. Any contractor who, for a price, commission, fee or wage, submits or attempts to submit a bid to
construct, or contracts to or undertakes to construct, or assumes charge in a supervisory capacity of a construction work
within the purview of this Act, without first securing a license to engage in the business of contracting in this country; or
who shall present or file the license certificate of another, give false evidence of any kind to the Board, or any member
thereof in obtaining a certificate or license, impersonate another, or use an expired or revoked certificate or license, shall

be deemed guilty of misdemeanor, and shall, upon conviction, be sentenced to pay a fine of not less than five hundred
pesos but not more than five thousand pesos. (Emphasis supplied)
The plain meaning rule or verba legis in statutory construction is that if the statute is clear, plain and free from ambiguity, it
must be given its literal meaning and applied without interpretation.[40] This rule derived from the maxim Index animi
sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a
statute correctly express its intention or will and preclude the court from construing it differently. The legislature is
presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of
such words as are found in the statute.[41] Verba legis non est recedendum, or from the words of a statute there should
be no departure.[42]
The wordings of R.A. No. 4566 are clear. It does not declare, expressly or impliedly, as void contracts entered into by a
contractor whose license had already expired. Nonetheless, such contractor is liable for payment of the fine prescribed
therein. Thus, respondent should be paid for the projects he completed. Such payment, however, is without prejudice to
the payment of the fine prescribed under the law.
Besides, Article 22 of the Civil Code which embodies the maxim Nemo ex alterius incommode debet lecupletari (no man
ought to be made rich out of anothers injury) states:
Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him.
This article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as basic
principles to be observed for the rightful relationship between human beings and for the stability of the social order, x x x
designed to indicate certain norms that spring from the fountain of good conscience, x x x guides human conduct [that]
should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and
dominance of justice.[43] The rules thereon apply equally well to the Government.[44] Since respondent had rendered
services to the full satisfaction and acceptance by petitioner, then the former should be compensated for them. To allow
petitioner to acquire the finished project at no cost would undoubtedly constitute unjust enrichment for the petitioner to the
prejudice of respondent. Such unjust enrichment is not allowed by law.
WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision of the Court of Appeals dated April
28, 2003 in CA-G.R. CV No. 56345 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellees, vs. JOSE JABINAL Y CARMEN, defendant-appellant.
Appeal from the judgment of the Municipal Court of Batangas (provincial capital), Batangas, in Criminal Case No. 889,
finding the accused guilty of the crime of Illegal Possession of Firearm and Ammunition and sentencing him to suffer an
indeterminate penalty ranging from one (1) year and one (1) day to two (2) years imprisonment, with the accessories
provided by law, which raises in issue the validity of his conviction based on a retroactive application of Our ruling in
People v. Mapa. 1
The complaint filed against the accused reads:
That on or about 9:00 o'clock, p.m., the 5th day of September, 1964, in the poblacion, Municipality of Batangas, Province
of Batangas, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, a person not
authorized by law, did then and there wilfully, unlawfully and feloniously keep in his possession, custody and direct control
a revolver Cal. .22, RG8 German Made with one (1) live ammunition and four (4) empty shells without first securing the
necessary permit or license to possess the same.
At the arraignment on September 11, 1964, the accused entered a plea of not guilty, after which trial was accordingly held.
The accused admitted that on September 5, 1964, he was in possession of the revolver and the ammunition described in
the complaint, without the requisite license or permit. He, however, claimed to be entitled to exoneration because,
although he had no license or permit, he had an appointment as Secret Agent from the Provincial Governor of Batangas
and an appointment as Confidential Agent from the PC Provincial Commander, and the said appointments expressly
carried with them the authority to possess and carry the firearm in question.
Indeed, the accused had appointments from the above-mentioned officials as claimed by him. His appointment from
Governor Feliciano Leviste, dated December 10, 1962, reads:
Reposing special trust and confidence in your civic spirit, and trusting that you will be an effective agent in the detection of
crimes and in the preservation of peace and order in the province of Batangas, especially with respect to the suppression

of trafficking in explosives, jueteng, illegal cockfighting, cattle rustling, robbery and the detection of unlicensed firearms,
you are hereby appointed a SECRET AGENT of the undersigned, the appointment to take effect immediately, or as soon
as you have qualified for the position. As such Secret Agent, your duties shall be those generally of a peace officer and
particularly to help in the preservation of peace and order in this province and to make reports thereon to me once or
twice a month. It should be clearly understood that any abuse of authority on your part shall be considered sufficient
ground for the automatic cancellation of your appointment and immediate separation from the service. In accordance with
the decision of the Supreme Court in G.R. No. L-12088 dated December 23, 1959, you will have the right to bear a
firearm, particularly described below, for use in connection with the performance of your duties.
By virtue hereof, you may qualify and enter upon the performance of your duties by taking your oath of office and filing the
original thereof with us.
Very truly yours,
(gd.) FELICIANO LEVISTE
Provincial Governor
FIREARM AUTHORIZED TO CARRY:
Kind: ROHM-Revolver
Make: German
SN: 64
Cal: .22
On March 15, 1964, the accused was also appointed by the PC Provincial Commander of Batangas as Confidential Agent
with duties to furnish information regarding smuggling activities, wanted persons, loose firearms, subversives and other
similar subjects that might affect the peace and order condition in Batangas province, and in connection with these duties
he was temporarily authorized to possess a ROHM revolver, Cal. .22 RG-8 SN-64, for his personal protection while in the
performance of his duties.
The accused contended before the court a quo that in view of his above-mentioned appointments as Secret Agent and
Confidential Agent, with authority to possess the firearm subject matter of the prosecution, he was entitled to acquittal on
the basis of the Supreme Court's decision in People vs. Macarandang 2 and People vs. Lucero. 3 The trial court, while
conceding on the basis of the evidence of record the accused had really been appointed Secret Agent and Confidential
Agent by the Provincial Governor and the PC Provincial Commander of Batangas, respectively, with authority to possess
and carry the firearm described in the complaint, nevertheless held the accused in its decision dated December 27, 1968,
criminally liable for illegal possession of a firearm and ammunition on the ground that the rulings of the Supreme Court in
the cases of Macarandang and Lucero were reversed and abandoned in People vs. Mapa, supra. The court considered as
mitigating circumstances the appointments of the accused as Secret Agent and Confidential Agent.
Let us advert to Our decisions in People v. Macarandang, supra, People v. Lucero, supra, and People v. Mapa, supra. In
Macarandang, We reversed the trial court's judgment of conviction against the accused because it was shown that at the
time he was found to possess a certain firearm and ammunition without license or permit, he had an appointment from the
Provincial Governor as Secret Agent to assist in the maintenance of peace and order and in the detection of crimes, with
authority to hold and carry the said firearm and ammunition. We therefore held that while it is true that the Governor has
no authority to issue any firearm license or permit, nevertheless, section 879 of the Revised Administrative Code provides
that "peace officers" are exempted from the requirements relating to the issuance of license to possess firearms; and
Macarandang's appointment as Secret Agent to assist in the maintenance of peace and order and detection of crimes,
sufficiently placed him in the category of a "peace officer" equivalent even to a member of the municipal police who under
section 879 of the Revised Administrative Code are exempted from the requirements relating to the issuance of license to
possess firearms. In Lucero, We held that under the circumstances of the case, the granting of the temporary use of the
firearm to the accused was a necessary means to carry out the lawful purpose of the batallion commander to effect the
capture of a Huk leader. In Mapa, expressly abandoning the doctrine in Macarandang, and by implication, that in Lucero,
We sustained the judgment of conviction on the following ground:
The law is explicit that except as thereafter specifically allowed, "it shall be unlawful for any person to ... possess any
firearm, detached parts of firearms or ammunition therefor, or any instrument or implement used or intended to be used in
the manufacture of firearms, parts of firearms, or ammunition." (Sec. 878, as amended by Republic Act No. 4, Revised
Administrative Code.) The next section provides that "firearms and ammunition regularly and lawfully issued to officers,
soldiers, sailors, or marines [of the Armed Forces of the Philippines], the Philippine Constabulary, guards in the
employment of the Bureau of Prisons, municipal police, provincial governors, lieutenant governors, provincial treasurers,
municipal treasurers, municipal mayors, and guards of provincial prisoners and jails," are not covered "when such firearms

are in possession of such officials and public servants for use in the performance of their official duties." (Sec. 879,
Revised Administrative Code.)
The law cannot be any clearer. No provision is made for a secret agent. As such he is not exempt. ... .
It will be noted that when appellant was appointed Secret Agent by the Provincial Government in 1962, and Confidential
Agent by the Provincial Commander in 1964, the prevailing doctrine on the matter was that laid down by Us in People v.
Macarandang (1959) and People v. Lucero (1958). Our decision in People v. Mapa reversing the aforesaid doctrine came
only in 1967. The sole question in this appeal is: Should appellant be acquitted on the basis of Our rulings in
Macarandang and Lucero, or should his conviction stand in view of the complete reversal of the Macarandang and Lucero
doctrine in Mapa? The Solicitor General is of the first view, and he accordingly recommends reversal of the appealed
judgment.
Decisions of this Court, although in themselves not laws, are nevertheless evidence of what the laws mean, and this is the
reason why under Article 8 of the New Civil Code "Judicial decisions applying or interpreting the laws or the Constitution
shall form a part of the legal system ... ." The interpretation upon a law by this Court constitutes, in a way, a part of the law
as of the date that law originally passed, since this Court's construction merely establishes the contemporaneous
legislative intent that law thus construed intends to effectuate. The settled rule supported by numerous authorities is a
restatement of legal maxim "legis interpretatio legis vim obtinet" the interpretation placed upon the written law by a
competent court has the force of law. The doctrine laid down in Lucero and Macarandang was part of the jurisprudence,
hence of the law, of the land, at the time appellant was found in possession of the firearm in question and when he
arraigned by the trial court. It is true that the doctrine was overruled in the Mapa case in 1967, but when a doctrine of this
Court is overruled and a different view is adopted, the new doctrine should be applied prospectively, and should not apply
to parties who had relied on the old doctrine and acted on the faith thereof. This is especially true in the construction and
application of criminal laws, where it is necessary that the punishability of an act be reasonably foreseen for the guidance
of society.
It follows, therefore, that considering that appellant conferred his appointments as Secret Agent and Confidential Agent
and authorized to possess a firearm pursuant to the prevailing doctrine enunciated in Macarandang and Lucero, under
which no criminal liability would attach to his possession of said firearm in spite of the absence of a license and permit
therefor, appellant must be absolved. Certainly, appellant may not be punished for an act which at the time it was done
was held not to be punishable.
WHEREFORE, the judgment appealed from is hereby reversed, and appellant is acquitted, with costs de oficio.

SPOUSES GAUVAIN and BERNARDITA BENZONAN, petitioners, vs. COURT OF APPEALS, BENITO SALVANI PE
and DEVELOPMENT BANK OF THE PHILIPPINES, respondents
This is a petition to review the August 31, 1990 decision of the Court of Appeals which sustained the right of respondent
Benito Salvani Pe to repurchase a parcel of land foreclosed by petitioner Development Bank of the Philippines (DBP) and
sold to petitioners Gauvain and Bernardita Benzonan.
Respondent Pe is a businessman in General Santos City who owns extensive commercial and agricultural properties. He
is the proprietor of the firm "Dadiangas B.P. Trading." One of the properties he acquired through free patents and
miscellaneous sales from the Bureau of Lands is a 26,064 square meters parcel covered by Free Patent No. 46128
issued on October 29, 1969. OCT No. P-2404 was issued on November 24, 1969.
On February 24, 1970 or barely three months after he acquired the land, the respondent mortgaged the lot in question,
together with another lot covered by TCT No. 3614 and some chattels to secure a commercial loan of P978,920.00 from
the DBP. The lot was developed into a commercial-industrial complex with ricemill and warehouse facilities, a solar drier,
an office and residential building, roadway, garden, depository, and dumping grounds for various materials.
When the private respondent failed to pay his loan after more than seven years had passed, DBP foreclosed the
mortgage on June 28, 1977. On that date, the total obligation amounted to P1,114,913.34. DBP was the highest bidder.
Certificates of sale were issued in its favor; P452,995.00 was for the two lots and P108,450.00 for the chattels. The
certificate covering the disputed lot was registered with the Registry of Deeds on January 24, 1978.
After the foreclosure sale, respondent Pe leased the lot and its improvements from DBP for P1,500.00 a month. Part of
the property was also leased by DBP to the then National Grains Authority.
The respondent failed to redeem the property within the one year period. On September 24, 1979 DBP sold the lot to the
petitioner for P1,650,000.00 payable in quarterly amortizations over a five year period. The petitioners occupied the
purchased lot and introduced further improvements worth P970,000.00.

On July 12, 1983, claiming that he was acting within the legal period given to him to repurchase, respondent Pe offered in
writing to repurchase the lot for P327,995.00. DBP countered, however, that over the years a total of P3,056,739.52 had
already been incurred in the preservation, maintenance, and introduction of improvements.
On October 4, 1983, Pe filed a complaint for repurchase under Section 119 of Commonwealth Act No. 141 with the
Regional Trial Court (RTC) of General Santos City.
On November 27, 1986, the trial court rendered judgment. The dispositive portion reads:
WHEREFORE, in view of the foregoing, the defendant Development Bank of the Philippines is ordered:
1)
to reconvey unto the plaintiff the parcel of land in question (Lot No. P-2404) for the repurchase price of
P327,995.00 plus legal interest from June 18, 1977 to June 19, 1978 only, and the expenses of extrajudicial foreclosure of
mortgage; expenses for registration and ten percent (10%) attorneys fees;
2)
ordering the defendants to vacate forever the premises of said property in favor of the plaintiff upon payment of
the total repurchase price;
3)

ordering the defendants, jointly and solidarily, to pay the plaintiff attorney's fees in the amount of P25,000.00;

4)
and to set an example to government banking and lending institutions not to take borrowers for granted by making
it hard for them to repurchase by misleading them, the bank is hereby ordered to pay the plaintiff by way of exemplary
damages in the amount of P50,000.00;
Ordering further the defendant DBP:
5)
to reimburse the co-defendants spouses Benzonan the amount they have paid or advanced the defendant DBP
for the purchase of Lot O.C.T. No. P-2404;
6)

ordering the defendants to pay the cost of suit. (Rollo of G.R. No. 97973, pp. 74-75)

On appeal, the Court of Appeals affirmed the decision with modifications as follows:
All the foregoing premises considered, judgment is hereby rendered AFFIRMING the decision rendered by the court a quo
with the modification that the defendant DBP shall reimburse to its co-defendant Benzonan spouses all amounts that the
latter have paid for the land, minus interest, and that the Benzonan spouses shall be allowed to remove the improvement
that they have made on the property under litigation, without impairing or damaging the same. (Rollo of G.R. No. 97973,
p. 105)
A motion for reconsideration was denied on March 19, 1991.
The petitioners-spouses in G.R. No. 97973 raise the following "legal issues, reasons, or errors" allegedly committed by the
Court of Appeals, to wit:
1.
The Court of Appeals erred in holding that conversion and use of the land in question to industrial or commercial
purposes, as a result of which it could no longer be used for cultivation, and the fact that respondent Pe has vast holdings
whose motive in seeking to repurchase the property is to continue the business or for speculation or greater profits did not
deprive him of the right to repurchase under Sec. 119 of CA 141, and, as a result, in ignoring or disregarding Pe's
admissions and undisputed facts establishing such circumstances, contrary to what this Court held in Santana v. Marias,
94 SCRA 853 [1979], Vargas v. Court of Appeals, 91 SCRA 195 [1979] and Simeon v. Pea, 36 SCRA 610 [1970].
2.
Assuming, arguendo, that respondent Pe still had the right to repurchase the land under Sec. 119 of CA 141, the
Court of Appeals erred in not counting the 5-year period from the date of foreclosure sale on June 18, 1977 or at the very
most from its registration on January 24, 1978, in accordance with the prevailing doctrinal law at the time as enunciated in
Monge v. Angeles, 101 Phil. 561 [1957], Oliva v. Lamadrid, 21 SCRA 737 [1967] and Tupas v. Damasco, 132 SCRA 593
[1984], pursuant to which Pe's right to repurchase already expired.
3.
The Court of Appeals erred in applying retroactively the ruling in Belisario v. Intermediate Appellate Court, 165
SCRA 101 [1988], which held that the 5-year period is counted from the date after the one-year period to redeem
foreclosed homestead expired, to the foreclosure of the land in question in 1977, as its retroactive application revived Pe's
lost right of repurchase and defeated petitioners' right of ownership that already accrued under the then prevailing
doctrinal law.
4.
Assuming, arguendo, that respondent Pe had the right to repurchase the land in question and assuming, further,
that the 5-year period is to be counted from the consolidation of ownership after the expiration of the one-year period to
redeem, the Court of Appeals erred in not holding that the mere filing of an action for repurchase without tendering or

depositing the repurchase price did not satisfy the requirements of repurchase, Pe's failure to make the tender or deposit
even up to the present being confirmatory of speculative motive behind his attempt to repurchase.
5.
Assuming, finally, that respondent Pe is entitled to repurchase the property, the Court of Appeals erred in not
holding that petitioners are possessors in good faith, similar to a vendee a retro, entitled (a) to reimbursement of
necessary and useful expenses under Article 1616 of the Civil Code as held in Calagan v. CFI of Davao, 95 SCRA 498
[1980] and in Lee v. Court of Appeals, 68 SCRA 196 [1975]; and (b) to refund of all amounts paid by them by reason of the
sale of the property in their favor, including interest payments, in both instances with right of retention. (Rollo of G.R. No.
97973, pp. 14-16)
In G.R No. 97998, DBP limited its petition to the value of the repurchase price and the nature of the contract between the
parties. It framed the issues as follows:
1.
The Court of Appeals erred in not holding that Section 31 of Commonwealth Act No. 459 as amended is not
applicable in the instant case to determine the repurchase price contrary to decisions of the Honorable Supreme Court in
the following cases: DBP v. Jimenez, et al. (36 SCRA 426) and DBP v. Mirang (66 SCRA 141).
2.
The Court of Appeals erred in not holding that the law between the contracting parties are the terms and
conditions embodied in the contract signed by them. (Rollo of G.R. No. 97998, p. 12)
We find merit in the petitions.
The determination of the main issues raised by the petitioners calls for the proper application of Section 119 of CA 141 as
amended which provides: "Every conveyance of land acquired under the free patent or homestead provisions, when
proper, shall be subject to repurchase by the applicant, his widow, or legal heirs, within a period of five years from the date
of conveyance."
There is no dispute over the fact that the Government awarded the land to respondent Pe so that he could earn a living by
farming the land. Did respondent Pe lose his right to repurchase the subject agricultural lot under the aforequoted law
considering its conversion for industrial or commercial purposes? The evidence relating to the conversion is sufficiently
established and yet was not properly appreciated by the respondent court.
Only three months after getting the free patent and the original certificate of title over the subject lot, it was mortgaged by
respondent Pe to get a commercial loan of nearly P1 million from DBP. Pe spent the proceeds of the loan to construct
permanent improvements on the lot for his rice-mill and other businesses, i.e., two warehouse buildings; administrationresidential building; perimeter fence; solar and concrete drier; shed; machine shop; dirty kitchen; and machineries and
equipments such as ricemill (TSN, August 13, 1984, pp. 173-174). The entire lot has been converted to serve commercial
and industrial purposes. The testimony of petitioners Gauvain Benzonan on this score has not been successfully
challenged, viz:
Q.

Out of this 2.6 hectares land area, how much of this is devoted to the solar drier construction?

A.
The solar drier is about one thousand (1,000) square meters . . . ah no, about six thousand (6,000) square
meters.

Q.

What about the area occupied by the warehouse and the ricemill complex?

A.

The warehouse and ricemill complex is occupying about one and a half (1 1/2) hectares.

Q.

What about the area occupied by the residence as well as the roadways?

A.

It covers about another half of a hectare again, Sir.

Q.

Is any part of this two point six hectares devoted to agricultural production or production of agricultural crops?

A.
None whatsoever because the other portion is occupied as a dumping area for our waste materials. (TSN, PP.
361-362, Sept. 3, 1985).
The conversion of the lot for commercial purposes is understandable considering that the heart of General Santos City
developed in that area.
The respondent does not deny that, he is using the land for purely commercial and industrial purposes. His explanation is
that the land may be converted into agricultural land in the future. He applies the Krivenko v. Register of Deeds of Manila
(79 Phil. 461 [1947]) ruling that lands not mineral or forest are agricultural in nature and may be devoted to business
purposes without losing their agricultural classification.

Indeed, the records show that it was never the intention of respondent Pe to utilize the land, given to him for free by the
Government, for agricultural purposes. He was not the kind of poor farmer for whom homesteads and free patents were
intended by the law.
As stated by the petitioners:
1.
Respondent Pe acquired by free patent the land in question with an area of 2.6064 hectares, which was issued
Original Certificate of Title No. P-2404 on November 24, 1969. Instead of cultivating it for agricultural purposes, Pe
mortgaged the land, along with another land, on February 24, 1970, or only three (3) months from issuance of OCT No. P2404, with the DBP for P978,920.00. (par. 4, complaint, Annex "A"). Pe testified that his purpose was to construct in the
land in question "bodega", an administration-residential building, a perimeter fence, a concrete drier, and for some
machineries and equipment." (TSN, p. 95, June 22, 1984). He stated that the improvements and facilities in the land
included "the warehouse, the ricemill and a big warehouse housing the palay of stocks of the National Grains Authority
and an administration-residential building, a solar drier and a perimeter fence and some sheds or garage . . . a small
piggery pen of several compartments, a dirty kitchen . . . a machine shop." (TSN, pp. 173-174, August 13, 1984). Pe used
the property for such purposes and operated the ricemill business for a period of about nine (9) years until September,
1979 (pars. 7 and 8, complaint, Annex "A"), without paying the DBP of his mortgage indebtedness, as a result of which
DBP foreclosed the properties. (Annex "F")
2.
Respondent Pe testified that the land in question with its improvements has an appraised value of P1,347,860.00
in 1974, and P2,028,030.00 in 1976. (TSN, pp. 176, 177, August 13, 1984). Petitioner Gauvain Benzonan claimed it has a
fair market value, as of 1985, of P5,000,000.00. (p. 8, trial court decision, Annex "F"). As against such value of the land
and improvements, respondent Pe insisted that the repurchase price should only be the principal sum of P327,995.00.
(par. 10, complaint, Annex "A")
3.
Respondent Pe, when he testified in 1984, said he was 60 years old; he is now therefore over 66 years old. He is
a "businessman and resident of Dadiangas, General Santos City" (TSN, p. 3, June 20, 1984), doing business under the
style, "Dadiangas B.P. Trading" (TSN, 144, June 22, 1984). In his sworn declaration dated July 18, 1983, filed with the
assessor's office pursuant to P.D. No. 1612, he listed the following real properties and their market value, all situated in
General Santos City, to wit (Exh. 11-Benzonan):
(a)

447 sq. m. residential

28,720.00

(b)

11.9980 hectares of agri. lot

23,880.00

(c)

2.000 hectares of agri. lot

40,000.00

(d)

2.000 hectares of agri. lot

40,000.00

(e)

6,064 sq. m. of industrial lot

P303,200.00

(f)

Industrial building

P434,130.00

(g)

Industrial machinery

96,000.00

On June 22, 1984, when Pe testified, he said that "I own three (3) residential lots," (TSN, p. 153, June 22, 1984) and that
he and his wife own in Antique Province "around twenty (20) hectares planted to coconut and sugarcane" (ibid., p. 145);
he used to have 30 hectares of agricultural lands and 22 subdivision lots, which he sold to Norma Salvani and Carlos
Salvani. (TSN, pp. 166-169, June 22, 1984); Exhs. 1, 1-A, 1-B, 1-C, 3, 6, 6-A-Benzonan). (Rollo of G.R. No. 97973, pp.
17-19)
In the light of the records of these cases, we rule that respondent Pe cannot repurchase the disputed property without
doing violence to everything that CA No. 141 (as amended) stands for.
We ruled in Simeon v. Pea, 36 SCRA 610, 617 [1970] through Chief Justice Claudio Teehankee, that:
These findings of fact of the Court of Appeals that "(E)vidently, the reconveyance sought by the plaintiff (petitioner) is not
in accordance with the purpose of the law, that is, "to preserve and keep in the family of the homesteader that portion of
public land which the State has gratuitously given to him"" and expressly found by it to "find justification from the evidence
of record. . . ."
Under the circumstances, the Court is constrained to agree with the Court of Appeals that petitioners' proposed
repurchase of the property does not fall within the purpose, spirit and meaning of section 119 of the Public Land Act,
authorizing redemption of the homestead from any vendee thereof.

We reiterated this ruling in Vargas v. Court of Tax Appeals, 91 SCRA 195, 200, [1979] viz:
As regards the case of Simeon v. Pea, petitioners ought to know that petitioner therein was not allowed to repurchase
because the lower court found that his purpose was only speculative and for profit. In the present case, the Court of
Appeals found that herein petitioners' purposes and motives are also speculative and for profit.
It might be well to note that the underlying principle of Section 119 of Commonwealth Act No. 141 is to give the
homesteader or patentee every chance to preserve for himself and his family the land that the State had gratuitously
given to him as a reward for his labor in cleaning and cultivating it. (Simeon v. Pea, 36 SCRA 617). As found by the Court
of Appeals, the motive of the petitioners in repurchasing the lots in question being one for speculation and profit, the same
therefore does not fall within the purpose, spirit and meaning of said section.
and in Santana et al. v. Marias, 94 SCRA 853, 861-862 [1979] to wit:
In Simeon v. Pea we analyzed the various cases previously decided, and arrived at the conclusion that the plain intent,
the raison d' etre, of Section 119, C.A. No. 141 ". . . is to give the homesteader or patentee every chance to preserve for
himself and his family the land that the state had gratuitously given to him as a reward for his labor in cleaning and
cultivating it." In the same breath, we agreed with the trial court, in that case, that "it is in this sense that the provision of
law in question becomes unqualified and unconditional. And in keeping with such reasons behind the passage of the law,
its basic objective is to promote public policy, that is, to provide home and decent living for destitutes, aimed at promoting
a class of independent small landholders which is the bulwark of peace and order.
As it was in Simeon v. Pea, respondent Marias' intention in exercising the right of repurchase "is not for the purpose of
preserving the same within the family fold," but "to dispose of it again for greater profit in violation of the law's policy and
spirit." The foregoing conclusions are supported by the trial court's findings of fact already cited, culled from evidence
adduced. Thus respondent Marias was 71 years old and a widower at the time of the sale in 1956; that he was 78 when
he testified on October 24, 1963 (or over 94 years old today if still alive); that . . . he was not living on the property when
he sold the same but was residing in the poblacion attending to a hardware store, and that the property was no longer
agricultural at the time of the sale, but was a residential and commercial lot in the midst of many subdivisions. The profit
motivation behind the effort to repurchase was conclusively shown when the then plaintiff's counsel, in the case below,
Atty. Loreto Castillo, in his presence, suggested to herein petitioners' counsel, Atty. Rafael Dinglasan ". . . to just add to
the original price so the case would be settled." Moreover, Atty. Castillo manifested in court that an amicable settlement
was possible, for which reason he asked for time "within which to settle the terms thereof'" and that "the plaintiff . . . Mr.
Marias, has manifested to the Court that if the defendants would be willing to pay the sum of One Peso and Fifty
Centavos (P1.50) per square meter, he would be willing to accept the offer and dismiss the case."
Our decisions were disregarded by the respondent court which chose to adopt a Court of Appeals ruling in Lim, et al. v.
Cruz, et al., CA-G.R. No. 67422, November 25, 1983 that the motives of the homesteader in repurchasing the land are
inconsequential" and that it does not matter even "when the obvious purpose is for selfish gain or personal
aggrandizement."
The other major issue is when to count the five-year period for the repurchase by respondent Pe whether from the date
of the foreclosure sale or from the expiration of the one year period to redeem the foreclosed property.
The respondent court ruled that the period of repurchase should be counted from the expiration of the one year period to
redeem the foreclosed property. Since the one year period to redeem expired on January 24, 1979 and he filed Case No.
280 on October 4, 1983 to enforce his right to repurchase the disputed property, the Court of Appeals held that Pe
exercised his right to repurchase within the five-year period provided by Section 119 of CA 141 as amended.
The respondent court cited Belisario, et al., v. Intermediate Appellate Court, et al., 165 SCRA 101, 107 [1988] where we
held:
. . . In addition, Section 119 of Commonwealth Act 141 provides that every conveyance of land acquired under the free
patent or homestead patent provisions of the Public Land Act, when proper, shall be subject to repurchase by the
applicant, his widow or legal heirs within the period of five years from the date of conveyance. The five-year period of
redemption fixed in Section 119 of the Public Land Law of homestead sold at extrajudicial foreclosure begins to run from
the day after the expiration of the one-year period of repurchase allowed in an extrajudicial foreclosure. (Manuel v. PNB,
et al., 101 Phil. 968) Hence, petitioners still had five (5) years from July 22, 1972 (the expiration of the redemption period
under Act 3135) within which to exercise their right to repurchase under the Public Land Act.
As noted by the respondent court, the 1988 case of Belisario reversed the previous rulings of this Court enunciated in
Monge, et al., v. Angeles, et al., 101 Phil. 563 [1957] and Tupas v. Damasco, et al., 132 SCRA 593 [1984] to the effect that
the five year period of repurchase should be counted from the date of conveyance or foreclosure sale. The petitioners,
however, urge that Belisario should only be applied prospectively or after 1988 since it established a new doctrine.

We sustain the petitioners' position. It is undisputed that the subject lot was mortgaged to DBP on February 24, 1970. It
was acquired by DBP as the highest bidder at a foreclosure sale on June 18, 1977, and then sold to the petitioners on
September 29, 1979.
At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in Monge
and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for
pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the laws or the Constitution shall form a
part of the legal system of the Philippines." But while our decisions form part of the law of the land, they are also subject to
Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This
is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale
against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already
become vested or impairs the obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565
[1961]).
The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. Thus,
we emphasized in People v. Jabinal, 55 SCRA 607 [1974] ". . . when a doctrine of this Court is overruled and a different
view is adopted, the new doctrine should be applied prospectively and should not apply to parties who had relied on the
old doctrine and acted on the faith thereof."
There may be special cases where weighty considerations of equity and social justice will warrant a retroactive application
of doctrine to temper the harshness of statutory law as it applies to poor farmers or their widows and orphans. In the
present petitions, however, we find no such equitable considerations. Not only did the private respondent apply for free
agricultural land when he did not need it and he had no intentions of applying it to the noble purposes behind the law, he
would now repurchase for only P327,995.00, the property purchased by the petitioners in good faith for P1,650,000.00 in
1979 and which, because of improvements and the appreciating value of land must be worth more than that amount now.
The buyers in good faith from DBP had a right to rely on our rulings in Monge and Tupas when they purchased the
property from DBP in 1979 or thirteen (13) years ago. Under the rulings in these two cases, the period to repurchase the
disputed lot given to respondent Pe expired on June 18, 1982. He failed to exercise his right. His lost right cannot be
revived by relying on the 1988 case of Belisario. The right of petitioners over the subject lot had already become vested as
of that time and cannot be impaired by the retroactive application of the Belisario ruling.
Considering our above findings, we find no need to resolve the other issues raised by the petitioners in their petitions.
WHEREFORE, the questioned decision of the respondent court is hereby REVERSED and SET ASIDE. The complaint for
repurchase under Section 119 of Commonwealth Act No. 141 as amended is DISMISSED. No pronouncement as to
costs.

LORNA GUILLEN PESCA, petitioner, vs. ZOSIMO A. PESCA, respondent.


Submitted for review is the decision of the Court of Appeals, promulgated on 27 May 1998, in C.A. G.R. CV. No. 52374,
reversing the decision of the Regional Trial Court (RTC) of Caloocan City, Branch 130, which has declared the marriage
between petitioner and respondent to be null and void ab initio on the ground of psychological incapacity on the part of
respondent.
Petitioner Lorna G. Pesca and respondent Zosimo A. Pesca first met sometime in 1975 while on board an inter-island
vessel bound for Bacolod City. After a whirlwind courtship, they got married on 03 March 1975. Initially, the young couple
did not live together as petitioner was still a student in college and respondent, a seaman, had to leave the country on
board an ocean-going vessel barely a month after the marriage. Six months later, the young couple established their
residence in Quezon City until they were able to build their own house in Caloocan City where they finally resided. It was
blissful marriage for the couple during the two months of the year that they could stay together when respondent was on
vacation. The union begot four children, 19-year old Ruhem, 17-year old Rez, 11-year old Ryan, and 9-year old Richie.
It started in 1988, petitioner said, when she noticed that respondent surprisingly showed signs of psychological incapacity
to perform his marital covenant. His "true color" of being an emotionally immature and irresponsible husband became
apparent. He was cruel and violent. He was a habitual drinker, staying with friends daily from 4:00 o'clock in the afternoon
until 1:00 o'clock in the morning. When cautioned to stop or, to at least, minimize his drinking, respondent would beat, slap
and kick her. At one time, he chased petitioner with a loaded shotgun and threatened to kill her in the presence of the
children. The children themselves were not spared from physical violence.
Finally, on 19 November 1992, petitioner and her children left the conjugal abode to live in the house of her sister in
Quezon City as they could no longer bear his violent ways. Two months later, petitioner decided to forgive respondent,
and she returned home to give him a chance to change. But, to her dismay, things did not so turn out as expected.
Indeed, matters became worse.

On the morning of 22 March 1994, about eight oclock, respondent assaulted petitioner for about half an hour in the
presence of the children. She was battered black and blue. She submitted herself to medical examination at the Quezon
City General Hospital, which diagnosed her injuries as contusions and abrasions. Petitioner filed a complaint with the
barangay authorities, and a case was filed against respondent for slight physical injuries. He was convicted by the
Metropolitan Trial Court of Caloocan City and sentenced to eleven days of imprisonment.
This time, petitioner and her children left the conjugal home for good and stayed with her sister. Eventually, they decided
to rent an apartment. Petitioner sued respondent before the Regional Trial Court for the declaration of nullity of their
marriage invoking psychological incapacity. Petitioner likewise sought the custody of her minor children and prayed for
support pendente lite.
Summons, together with a copy of the complaint, was served on respondent on 25 April 1994 by personal service by the
sheriff. As respondent failed to file an answer or to enter his appearance within the reglementary period, the trial court
ordered the city prosecutor to look into a possible collusion between the parties. Prosecutor Rosa C. Reyes, on 03 August
1994, submitted her report to the effect that she found no evidence to establish that there was collusion between the
parties.
On 11 January 1995, respondent belatedly filed, without leave of court, an answer, and the same, although filed late, was
admitted by the court. In his answer, respondent admitted the fact of his marriage with petitioner and the birth of their
children. He also confirmed the veracity of Annex "A" of the complaint which listed the conjugal property. Respondent
vehemently denied, however, the allegation that he was psychologically incapacitated.
On 15 November 1995, following hearings conducted by it, the trial court rendered its decision declaring the marriage
between petitioner and respondent to be null and void ab initio on the basis of psychological incapacity on the part of
respondent and ordered the liquidation of the conjugal partnership.
Respondent appealed the above decision to the Court of Appeals, contending that the trial court erred, particularly, in
holding that there was legal basis to declare the marriage null and void and in denying his motion to reopen the case.
The Court of Appeals reversed the decision of the trial court and declared the marriage between petitioner and respondent
valid and subsisting. The appellate court said:
"Definitely the appellee has not established the following: That the appellant showed signs of mental incapacity as would
cause him to be truly incognitive of the basic marital covenant, as so provided for in Article 68 of the Family Code; that the
incapacity is grave, has preceded the marriage and is incurable; that his incapacity to meet his marital responsibility is
because of a psychological, not physical illness; that the root cause of the incapacity has been identified medically or
clinically, and has been proven by an expert; and that the incapacity is permanent and incurable in nature.
The burden of proof to show the nullity of marriage lies in the plaintiff and any doubt should be resolved in favor of the
existence and continuation of the marriage and against its dissolution and nullity."[1]
Petitioner, in her plea to this Court, would have the decision of the Court of Appeals reversed on the thesis that the
doctrine enunciated in Santos vs. Court of Appeals,[2] promulgated on 14 January 1995, as well as the guidelines set out
in Republic vs. Court of Appeals and Molina,[3] promulgated on 13 February 1997, should have no retroactive application
and, on the assumption that the Molina ruling could be applied retroactively, the guidelines therein outlined should be
taken to be merely advisory and not mandatory in nature. In any case, petitioner argues, the application of the Santos and
Molina dicta should warrant only a remand of the case to the trial court for further proceedings and not its dismissal.
Be that as it may, respondent submits, the appellate court did not err in its assailed decision for there is absolutely no
evidence that has been shown to prove psychological incapacity on his part as the term has been so defined in Santos.
Indeed, there is no merit in the petition.
The term psychological incapacity, as a ground for the declaration of nullity of a marriage under Article 36 of the Family
Code, has been explained by the Court in Santos and reiterated in Molina. The Court, in Santos, concluded:
"It should be obvious, looking at all the foregoing disquisitions, including, and most importantly, the deliberations of the
Family Code Revision Committee itself, that the use of the phrase `psychological incapacity under Article 36 of the Code
has not been meant to comprehend all such possible cases of psychoses as, likewise mentioned by some ecclesiastical
authorities, extremely low intelligence, immaturity, and like circumstances (cited in Fr. Artemio Balumad's `Void and
Voidable Marriages in the Family Code and their Parallels in Canon Law, quoting form the Diagnostic Statistical Manuel of
Mental Disorder by the American Psychiatric Association; Edward Hudson's `Handbook II for Marriage Nullity Cases).
Article 36 of the Family Code cannot be taken and construed independently of, but must stand in conjunction with, existing
precepts in our law on marriage. Thus correlated, `psychological incapacity should refer to no less than a mental (not
physical) incapacity that causes a party to be truly incognitive of the basic marital covenants that concomitantly must be
assumed and discharged by the parties to the marriage which, as so expressed by Article 68 of the Family Code, include

their mutual obligations to live together, observe love, respect and fidelity and render help and support. There is hardly
any doubt that the intendment of the law has been to confine the meaning of `psychological incapacity to the most serious
cases of personality disorders clearly demonstrative of an utter insensitivity or inability to give meaning and significance to
the marriage. This psychologic condition must exist at the time the marriage is celebrated."
The "doctrine of stare decisis," ordained in Article 8 of the Civil Code, expresses that judicial decisions applying or
interpreting the law shall form part of the legal system of the Philippines. The rule follows the settled legal maxim legis
interpretado legis vim obtinet that the interpretation placed upon the written law by a competent court has the force of law.
[4] The interpretation or construction placed by the courts establishes the contemporaneous legislative intent of the law.
The latter as so interpreted and construed would thus constitute a part of that law as of the date the statute is enacted. It
is only when a prior ruling of this Court finds itself later overruled, and a different view is adopted, that the new doctrine
may have to be applied prospectively in favor of parties who have relied on the old doctrine and have acted in good faith
in accordance therewith[5] under the familiar rule of lex prospicit, non respicit.
The phrase psychological incapacity, borrowed from Canon law, is an entirely novel provision in our statute books, and,
until the relatively recent enactment of the Family Code, the concept has escaped jurisprudential attention. It is in Santos
when, for the first time, the Court has given life to the term. Molina, that followed, has additionally provided procedural
guidelines to assist the courts and the parties in trying cases for annulment of marriages grounded on psychological
incapacity. Molina has strengthened, not overturned, Santos.
At all events, petitioner has utterly failed, both in her allegations in the complaint and in her evidence, to make out a case
of psychological incapacity on the part of respondent, let alone at the time of solemnization of the contract, so as to
warrant a declaration of nullity of the marriage. Emotional immaturity and irresponsibility, invoked by her, cannot be
equated with psychological incapacity.
The Court reiterates its reminder that marriage is an inviolable social institution and the foundation of the family[6] that the
State cherishes and protects. While the Court commisserates with petitioner in her unhappy marital relationship with
respondent, totally terminating that relationship, however, may not necessarily be the fitting denouement to it. In these
cases, the law has not quite given up, neither should we.
WHEREFORE, the herein petition is DENIED. No costs.
SO ORDERED.

MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners, vs. PRYCE PROPERTIES
CORPORATION, INC. & PHILIPPINE AMUSEMENT AND GAMING CORPORATION, respondents.
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.
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.
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:
(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.
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 all forms 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;
(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;
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.
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. 337593 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 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 "modified pro
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 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 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.

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