THIRD DIVISION

[G.R. No. 163988. November 17, 2005.]

VALENTINA A. NUÑEZ, FELIX A. NUÑEZ, FELIXITA A. NUÑEZ, LEONILO A. NUÑEZ, JR., ELIZA A. NUÑEZ, EMMANUEL A. NUÑEZ and DIVINA A. NUÑEZ as heirs of LEONILO S. NUÑEZ, ** petitioners, vs. GSIS FAMILY BANK (Formerly COMSAVINGS BANK) and the COURT OF APPEALS, respondents.

D E C I S I O N

CARPIO MORALES, J p:

The facts are not disputed:

Petitioners are the heirs of Leonilo S. Nuñez (Leonilo) who, during his lifetime, obtained three loans from the GSIS Family Bank, formerly ComSavings Bank which in turn was formerly known as Royal Savings and Loan Association (the bank).

The first loan, contracted on April 6, 1976 in the amount of P55,900.00, was secured by a mortgage over a parcel of land covered by TCT NT-139575-A whereon the mortgage was annotated on April 8, 1976. 1

The second loan, obtained on July 7, 1976 in the amount of P127,000.00, was secured by mortgage of properties covered by TCT Nos. NT-143002, 143003 and 139575. 2

The third loan, obtained also on July 7, 1976 in the amount of P105,900.00, actually amended the first loan of P55,900.00 to secure which amended loan the same property covered by TCT No. NT-139575-A 3 was mortgaged. The amended loan, no copy of which forms part of the records, was admitted by the parties during the pre-trial. 4

On June 30, 1978, when the three loans were maturing, Leonilo purportedly obtained a "fourth loan" in the amount of P1,539,135.00 to secure which he executed a Real Estate Mortgage antedated June 28, 1978 over properties covered by TCT Nos. NT-145734, 143001, 143004, 143005, 143006, 143007. 5

On the maturity of the three loans or on June 30, 1978, Leonilo executed a Promissory Note 6 in the amount of P1,539,135.00, due and payable on December 27, 1978.

The details of the loans secured by Leonilo including the purported "fourth loan" are shown in the following table:

 

More than nineteen (19) years after Leonilo's June 30, 1978 Promissory Note matured or on December 11, 1997, the bank undertook to extrajudicially foreclose 7 the properties covered by TCT Nos. NT-143002, 143003, 139575 and 139575-A which secured the first two loans.

In its petition for extrajudicial foreclosure, the bank alleged that Leonilo violated the terms and conditions of the loans secured by the Real Estate Mortgages since June 30, 1978 when he failed, despite repeated demands, to pay his principal obligations, and interest due thereon from December 27, 1978, up to the time that the petition was filed. 8

Acting on the bank's petition for Extra-judicial Foreclosure of Mortgage, the Ex-Officio Sheriff of Gapan, Nueva Ecija issued a Notice of Extra-judicial Sale 9 setting the sale of the properties involved at public auction on January 9, 1998.

The auction took place as scheduled, with the bank as the highest and only bidder in the amount of P33,026,100.00. A Certificate of Sale 10 was thus issued in favor of the bank.

On September 1, 1999, on petition of the bank, the mortgage over properties covered by TCT Nos. 143001 and 143007, two of the six parcels of land which secured the "fourth loan" that matured on December 27, 1978, was extrajudicially foreclosed. At the public auction, the bank was the highest bidder and a Certificate of Sale 11 dated February 18, 2000 was issued in its name.

Leonilo later filed on June 20, 2000 before the Regional Trial Court (RTC) of Gapan, Nueva Ecija a complaint against the GSIS Family Bank, 12 docketed as Civil Case No. 2269, for Annulment of Extrajudicial Foreclosure Sale, Reconveyance and Cancellation of Encumbrances.

In his complaint, Leonilo denied securing a "fourth loan" but nevertheless alleged that "for purposes of the action, the same shall be assumed to have been validly secured."

Invoking prescription, he citing Articles 1142 13 and 1144 14 of the Civil Code, Leonilo contended that his first three loans and the "fourth loan" matured on June 30, 1978 and December 27, 1978, hence, they had prescribed on June 28, 1988 and December 25, 1988, respectively. 15 When, on December

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11, 1997 and September 1, 1999 then, the bank filed the Petitions for Extrajudicial Foreclosure of Mortgage, Leonilo concluded that it no longer had any right as prescription had set in.

Leonilo invited the attention of the court to the fact that although six titles secured the purported "fourth loan" of P1,539,135.00, only two, TCT Nos. NT-143001 and NT-143007, were the subject of foreclosure sale on September 1, 1999 and the mortgage was not annotated on the four other mortgaged titles, TCT Nos. NT-143004, 143005, 143006 and 145734. 16 Moreover, he pointed out that the record 17 shows that the Real Estate Mortgage dated June 28, 1978 purportedly securing the "fourth loan" was annotated on NT-143001 and NT-143007 subject of the September 1, 1999 foreclosure only on August 31, 1999 or more than 11 years after the prescriptive period to foreclose had set in. 18

By Decision dated August 9, 2002, Branch 34 of the Gapan RTC found for Leonilo who died during the pendency of the trial of the case, hence, his substitution by his heirs — herein petitioners, declaring that the bank's cause of action over the loans had prescribed and, therefore, the proceedings for extrajudicial foreclosure of real estate mortgages were null and void.

The bank filed a motion for reconsideration 19 on September 20, 2002, the last of the 15-day period within which it could interpose an appeal, but it did not comply with the provision of Section 4, Rule 15 20 of the Rules of Court on notice of hearing, prompting herein petitioners to file a Motion to Strike Out Motion for Reconsideration with Motion for the issuance of a writ of execution. 21

The bank filed an Opposition with Motion to Admit 22 (the Motion for Reconsideration), attributing its failure to incorporate the notice of hearing to inadvertent deletion from its computer file of standard clauses for pleadings the required notice of hearing and to the heavy workload of the handling counsel, Atty. George Garvida.

The trial court denied the bank's Motion for Reconsideration by Order 23 of November 18, 2002 and accordingly ordered it stricken off the record:

After a serious evaluation of the arguments for/and against the instant Motion for Reconsideration, the Court believes and so-holds that, while it is true that the high Court has set aside technicality in order not to defeat the ends of justice in appropriate cases, it is likewise true that litigations at some point of time must end otherwise, litigation of cases will be endless.

WHEREFORE, given the foregoing, the instant Motion for Reconsideration is hereby DENIED, for failure to comply with Rule 15, Section 4, of the 1997 Rules on Civil Procedures (sic).

xxx xxx xxx 24

The bank filed a Notice of Appeal 25 to which petitioners filed a Motion to Dismiss for being filed late, 26 which motion was granted by the trial court by Order 27 of February 10, 2003.

The bank thereupon elevated via petition for certiorari 28 the case before the Court of Appeals (CA) faulting the trial court to have

I. . . . COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK AND/OR EXCESS OF JURISDICTION IN ISSUING THE HEREIN ASSAILED ORDER DATED 10 FEBRUARY 2003 CONSIDERING THAT THE TRIAL COURT HAD ALREADY LOST JURISDICTION OF THE

CASE IN VIEW OF THE PERFECTION OF THE PETITIONER'S APPEAL ON DECEMBER 11, 2002.

II. . . . COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK AND/OR EXCESS OF JURISDICTION WHEN IT DENIED HEREIN PETITIONER'S MOTION FOR RECONSIDERATION IN ITS ORDER DATED 18 NOVEMBER 2002, THERE BEING STRONG AND COMPELLING REASONS TO ADMIT SAID MOTION AND TO CONSIDER THE ERRONEOUS CONCLUSIONS OF FACT AND LAW ON WHICH THE DECISION OF THE TRIAL COURT WAS BASED. 29

The bank, which is owned by the Government Service Insurance System, argued that to rigidly and strictly apply the rules of procedure would result to injustice and irreparable damage to the government as it stands to lose a substantial amount if not allowed to recover the proceeds of the loans. 30

The appellate court, by February 23, 2004 Decision, 31 found for the bank. Citing Labad v. University of Southeastern Philippines, 32 it ruled that while the right to appeal is a statutory and not a natural right, it is nevertheless an essential part of the judicial system, hence, courts should be cautious not to deprive a party of the right to appeal; and in the exercise of its equity jurisdiction, the trial court should have given the bank's Notice of Appeal due course to better serve the ends, and prevent a miscarriage of justice. ICDSca

Petitioners' Motion for Reconsideration having been denied by Resolution 33 of May 25, 2004, the present Petition for Certiorari under Rule 65 was filed, raising these issues:

1. Whether or not the public respondent committed grave abuse of discretion in reversing the order of the Regional Trial Court denying the notice of appeal and in giving due course to the notice of appeal.

2. Whether the private respondent could still appeal a judgment which has become final and executory. 34

At the outset, clarification on petitioners' mode of appeal is in order. Petitioners and counsel confuse their petition as one Petition for Review under Rule 45 35 with a Petition for Certiorari under Rule 65. 36 For while they treat it as one for Review on Certiorari, they manifest that it is filed "pursuant to Rule 65 of the 1997 Rules of Civil Procedure in relation to Rule 45 of the New Rules of Court." 37  In Ligon v. Court of Appeals 38 where the therein petitioner described her petition as "an appeal under Rule 45 and at the same time as a special civil action of certiorari under Rule 65 of the Rules of Court," this Court, in frowning over what it described as a "chimera," reiterated that the remedies of appeal and certiorari are mutually exclusive and not alternative nor successive. 39

To be sure, the distinctions between Rules 45 and 65 are far and wide. However, the most apparent is that errors of jurisdiction are best reviewed in a special civil action for certiorari under Rule 65 while errors of judgment can only be corrected by appeal in a petition for review under Rule 45. 40

This Court, however, in accordance with the liberal spirit which pervades the Rules of Court and in the interest of justice may treat a petition for certiorari as having filed under Rule 45, more so if the same was filed within the reglementary period for filing a petition for review. 41

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The records show that the petition was filed on time both under Rules 45 and 65. 42 Following Delsan Transport, the petition, stripped of allegations of "grave abuse of discretion," actually avers errors of judgment which are the subject of a petition for review. 43

This Court finds the petition impressed with merit.

Rule 41 of the 1997 Rules of Civil Procedure which governs appeals from Regional Trial Courts provides:

SEC. 2. Modes of appeal. —

(a) Ordinary appeal. — The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a notice of appeal with the court which rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party. No record on appeal shall be required except in special proceedings and other cases of multiple or separate appeals where the law or these Rules so require. In such cases, the record on appeal shall be filed and served in like manner.

xxx xxx xxx

SEC. 3. Period of ordinary appeal. — The appeal shall be taken within fifteen (15) days from notice of the judgment or final order appealed from. Where a record on appeal is required, the appellants shall file a notice of appeal and a record on appeal within thirty (30) days from notice of the judgment or final order. However, on appeal in habeas corpus cases shall be taken within forty-eight (48) hours from notice of the judgment or final order appealed from.

The period of appeal shall be interrupted by a timely motion for new trial or reconsideration . No motion for extension of time to file a motion for new trial or reconsideration shall be allowed. (Underscoring supplied).

On the other hand, Rule 22 provides for the manner of computing time and the effect of interruption:

SEC. 1. How to compute time. — In computing any period of time prescribed or allowed by these Rules, or by order of the court, or by any applicable statute, the day of the act or event from which the designated period of time begins to run is to be excluded and the date of performance included. If the last day of the period, as thus computed, falls on a Saturday, a Sunday or a legal holiday in the place where the court sits, the time shall not run until the next working day.

SEC. 2. Effect of interruption. — Should an act be done which effectively interrupts the running of the period, the allowable period after such interruption shall start to run on the day after notice of the cessation of the cause thereof.

The day of the act that caused the interruption shall be excluded in the computation of the period. (Emphasis and underscoring supplied).

The requirement of notice under Sections 4 and 5 44 of Rule 15 in connection with Section 2, Rule 37 of the Rules of Court is mandatory. 45 Absence of the mandatory requirement renders the motion a worthless piece of paper which the clerk of court has no right to receive and which the court has no authority to act upon. 46 Being a fatal defect, in cases of motions to reconsider a decision, the running of the period to appeal is not tolled by their filing or pendency. 47

When the bank then filed its Motion for Reconsideration on the last of the 15-day period for taking an appeal and it was subsequently denied, the bank had only one (1) day from December 9, 2002 when it

received a copy of the order denying the motion or until December 10, 2002 within which to perfect its appeal. 48

It filed the Notice of Appeal, however, on December 11, 2002, hence, out of time, and the decision of the trial court had become final and executory. =ISTCHE

While Rules may be relaxed when the party invoking liberality adequately explains his failure to abide therewith, the bank failed to do so.

The explanations 49 proffered by the bank behind its failure to incorporate a notice of hearing of the Motion for Reconsideration — inadvertent deletion from its computer file of the standard clauses for pleadings during the printing of the finalized draft of the motion and the handling counsel's heavy workload — are unsatisfactory.

To credit the foregoing explanations would render the mandatory rule on notice of hearing meaningless and nugatory as lawyers would simply invoke these grounds should they fail to comply with the rules.

As to the claim that the government would suffer loss of substantial amount if not allowed to recover the proceeds of the loans, this Court finds that any loss was caused by respondent's own doing or undoing.

In fine, the failure to timely perfect an appeal cannot simply be dismissed as a mere technicality, for it is jurisdictional. 50

Nor can petitioner invoke the doctrine that rules of technicality must yield to the broader interest of substantial justice. While every litigant must be given the amplest opportunity for the proper and just determination of his cause, free from the constraints of technicalities, the failure to perfect an appeal within the reglementary period is not a mere technicality. It raises a jurisdictional problem as it deprives the appellate court of jurisdiction over the appeal. The failure to file the notice of appeal within the reglementary period is akin to the failure to pay the appeal fee within the prescribed period. In both cases, the appeal is not perfected in due time. As we held in Pedrosa v. Hill, the requirement of an appeal fee is by no means a mere technicality of law or procedure, but an essential requirement without which the decision appealed from would become final and executory. The same can be said about the late filing of a notice of appeal. (Emphasis and underscoring supplied). 51

Jurisdictional issue aside, upon the ground of prescription, the bank's case would just the same fail. An action to foreclose a real estate mortgage prescribes in ten years. 52 The running of the period, however, may be interrupted. 53

A review of the records of the case shows that, as correctly claimed by petitioners, no letter of demand, court action, or foreclosure proceeding was undertaken prior to December 11, 1997 and September 1, 1999.

While the bank included in its Formal Offer of Evidence 54 Exhibits "E" and "H" which are the Petitions for Extra-Judicial Foreclosure alleging that "repeated demands" for payment were made after Leonilo defaulted and failed to pay the loan obligations, allegations are not proofs. Unless a demand is proven, one cannot be held in default. 55

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In justifying its failure to file a collection suit, the bank contended that it would have amounted to a waiver of its right to foreclose. But if early on it opted to foreclose the mortgages, why it waited until 1997 and 1999, more than nineteen years after the right to do so arose, the bank is glaringly mute.

Clutching at straws, the bank argues that the applicable provision is Article 1141, 56 not Article 1142 57 of the Civil Code.

Article 1141 of the Civil Code speaks of real actions over immovables or rights. Article 1142 of the Civil Code speaks of a mortgage action which prescribes in ten years. The strategic location of Article 1142 immediately right after Article 1141 of the same Code, which speaks of real actions, indicates that it is an exception to the rule in the previous article.

That an action for foreclosure of mortgage over real property prescribes in ten years is in fact settled. In Buhat, et al. v. Besana, etc., et al. 58 where an action was instituted on December 6, 1952 for the foreclosure of mortgage over real property to secure an obligation payable on or before May 31, 1930, this Court affirmed the dismissal of the action by the then Court of First Instance as the action was filed more than ten years from May 31, 1930 or some 22 years after the obligation had become due and demandable.

WHEREFORE, the petition is GRANTED. The assailed Court of Appeals decision dated February 23, 2004 and Resolution dated May 25, 2004 are REVERSED and SET ASIDE. The Decision dated August 9, 2002 of the Regional Trial Court of Gapan, Nueva Ecija, Branch 34, which had become final and executory, stands.

SO ORDERED.

Panganiban, Corona and Garcia, JJ., concur.Sandoval-Gutierrez, J., is on leave.

 Footnotes  

**In some pleadings and motions filed, Leonilo was identified as LEONITO. Hence, in some orders issued by the Regional Trial Court, the Court of Appeals Rollo cover, and the Resolution dated May 25, 2004 of the Court of Appeals Leonilo is erroneously typed as LEONITO.

1.Annex "A" of the Complaint, RTC Records at 9-12.2.Annex "B" of the Complaint, RTC Records at 13-16.3.Petition, Rollo at 6; CA Decision, Rollo at 22.4.RTC Records at 97-99.5.Annex "D" of the Complaint, RTC Records at 18-24.6.Annex "C" of the Complaint, RTC Records at 17.7.Re: Petition for Extra-Judicial Foreclosure of Real Estate Mortgage of Leonilo S. Nuñez, under Act

No. 3135 as amended by Act 4118, RTC Records at 25-28. 8.RTC Records at 27.9.Id. at 29-32.

10.Id. at 33-34.11.Annex "I", RTC Records at 38-39.12.RTC Records at 1-8.13.Art. 1142. A mortgage action prescribes after ten years.14.Art. 1144. The following actions must be brought within ten years from the time the right of action

accrues: (1) upon a written contract;xxx xxx xxx15.RTC Records at 3.16.Id. at 5.17.Id. at 41 for TCT No. NT-143001 and 49 for TCT No. NT-143007.18.Id. at 5.19.Id. at 139-148.20.SECTION 4. Hearing of motion. — Except for motions which the court may act upon without

prejudicing the rights of the adverse party, every written motion shall be set for hearing by the applicant.

  Every written motion required to be heard and the notice of the hearing thereof shall be served in such a manner as to ensure its receipt by the other party at least three (3) days before the date of hearing, unless the court for good cause sets the hearing on shorter notice.

21.Rollo at 57-60.22.Id. at 61-65.23.RTC Records at 165-166.24.Id. at 166.25.Id. at 168-169.26.Id. at 172-175.27.Id. at 189.28.CA Rollo at 2-25.29.Id. at 13-14.30.Id. at 17-18.31.Rollo at 21-27.32.362 SCRA 510 (2001).33.Rollo at 33.34.Id. at 11.35.SECTION 1. Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from

a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.

36.SECTION 1. Petition for Certiorari. — When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require. . . .

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37.Rollo at 3.38.294 SCRA 73 (1998).39.Id. at 84 (1998).40.Riviera Filipina, Inc. v. Court of Appeals, 380 SCRA 245 (2003).41.Delsan Transport Lines, Inc. v. Court of Appeals, 268 SCRA 597 (1997).42.The petition was filed on June 30, 2004. If treated as Petition for Review on certiorari under Rule

45, the reglementary period expires on July 3, 2004 while if the petition is treated as Petition for certiorari under Rule 65, the period expires on August 17, 2004.

43.On page 12 of the Rollo, petitioners restated the grounds but termed them as "issues." Thus, the "issues" in the petition are: (1) whether a motion for reconsideration which contains no setting of the date of hearing interrupt the period to appeal; and (2) assuming for the sake of arguments that the motion for reconsideration filed by the respondent stopped the running of the period to appeal though it did not comply with the provision of Rule 15, Section 4 of the New Rules of Court, still the judgment has already become final and could no longer be the subject of an appeal.

44.SECTION 5. Notice of hearing. — The notice of hearing shall be addressed to all parties concerned, and shall specify the time and date of the hearing which must not be later than ten (10) days after the filing of the motion.

45.National Commercial Bank of Saudi Arabia v. Court of Appeals, 396 SCRA 541 (2003).46.Pallada v. Regional Trial Court of Kalibo, Aklan, Branch 1, 304 SCRA 440 (1999).47.Bank of the Philippine Islands v. Far East Molasses Corp., 198 SCRA 689 (1991).48. Vide , Manila Memorial Park Cemetery, Inc. v. Court of Appeals, 344 SCRA 769 (2000).49.Rollo at 61-62.50.Delgado v. Court of Appeals, 447 SCRA 402 (2004); Fukuzumi v. Sanritsu Great International

Corporation, 436 SCRA 228 (2004).51.Republic v. Court of Appeals, 322 SCRA 81, 90 (2000).52.Art. 1142, Civil Code. A mortgage action prescribes after ten years; Benedicto v. Court of Appeals,

182 SCRA 45 (1990); Buhat, et al. v. Besana, etc. et al., 95 Phil. 721 (1954).53.Art. 1155. The prescription of actions is interrupted when they are filed before the court, when

there is written extra-judicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.

54.RTC Records at 121-125.55.Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee

judicially or extrajudicially demands from them the fulfillment of their obligation. . . .56.Art. 1141. Real actions over immovables prescribe after thirty years.  This provision is without prejudice to what is established for the acquisition of ownership and other

real rights by prescription.57.Art. 1142. A mortgage action prescribes after ten years.58.95 Phil. 721 (1954).

 ||| (Nuñez v. GSIS Family Bank, G.R. No. 163988, [November 17, 2005], 511 PHIL 735-751)

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FIRST DIVISION

[G.R. No. 80593. December 18, 1989.]

PHILIPPINE NATIONAL BANK, petitioner, vs. TERESITA CRUZ, JOSE AGRIPINO, BERNARDO BAUZON, LUCRECIA BILBAO, MA. LUISA CABRERA, FRANCIS BAACLO, GUADALUPE CAMACHO, LUZ DE LEON, MIKE VILLAVERDE, NEPOMUCENO MEDINA, EDGARDO MENDOZA, JENNIFER VELEZ, AMELIA MEDINA, EDUARDO ESPEJO and RICARDO BATTO, respondents.

The Chief Legal Officer for petitioner.Romualdo C. Delos Santos for respondents.

SYLLABUS

1. LABOR LAW; PROVISIONS IN THE LABOR CODE AS TO WORKERS PREFERENCE AS REGARDS MONETARY CLAIMS MUST PREVAIL OVER THE PROVISIONS OF THE CIVIL CODE; REASON. — This Court must uphold the preference accorded to the private respondents in view of the provisions of Article 110 of the Labor Code which are clear and which admit of no other interpretation. The phrase "any provision of law to the contrary notwithstanding" indicates that such preference shall prevail despite the order set forth in Articles 2241 to 2245 of the Civil Code. No exceptions were provided under the said article, henceforth, none shall be considered. Furthermore, the Labor Code was signed into Law decades after the Civil Code took effect. In Herman vs. Radio Corporation of the Philippines, this Court declared that whenever two statutes of different dates and of contrary tenor are of equal theoretical application to a particular case, the statute of later date must prevail being a later expression of legislative will. Applying the aforecited case in the instant petition, the Civil Code provisions cited by the petitioner must yield to Article 110 of the Labor Code.

2. ID.; WORKER'S PREFERENCE IN CASE OF BANKRUPTCY; APPLIES EVEN IF THE EMPLOYER'S PROPERTIES ARE ENCUMBERED BY A MORTGAGE CONTRACT. — Our pronouncement in A.C. Ransom labor Union-CCLU vs. NLRC, (150 SCRA 498) reinforces the abovementioned interpretation where this Court, explicitly stated that "(t)he worker preference applies even if the employer's properties are encumbered by means of a mortgage contract . . . . So that, when (the) machinery and equipment of RANSOM were sold to Revelations Manufacturing Corporation for P2 M in 1975, the right of the 22 laborers to be paid from the proceeds should have been recognized . . . ."

3. ID.; ID.; EXTENDS TO TAX CLAIMS. — Under Article 110 of the Labor Code as amended, the unpaid wages and other monetary claims of workers should be paid in full before the claims of the Government and other creditors. Thus not even tax claims could have preference over the workers' claim.

4. ID.; ID.; INTENDED FOR THE PROTECTION OF THE WORKING CLASS. — Consistent with the ruling of this Court in Volkschel Labor Union vs. Bureau of Labor Relations, this court adopts the doctrine that "(i)n the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be the primordial and paramount

consideration." Bearing this in mind, this Court must reiterate the dictum laid down in A.C. Ransom that the conflict between Article 110 of the Labor Code and Article 2241 to 2245 of the Civil Code must be resolved in favor of the former. A contrary ruling would defeat the purpose for which Article 110 was intended; that is, for the protection of the working class, pursuant to the never-ending quest for social justice.

D E C I S I O N

GANCAYCO, J p:

The focus of the instant petition for certiorari is the application of Article 110 of the Labor Code. The said article provides that workers shall enjoy first preference with regard to wages due them in cases of bankruptcy or liquidation of an employer's business. Cdpr

The antecedent facts of the case are as follows:

Sometime in 1980 Aggregate Mining Exponents (AMEX) laid-off about seventy percent (70%) of its employees because it was experiencing business reverses. The retained employees constituting thirty percent (30%) of the work force however, were not paid their wages. This non-payment of salaries went on until July 1982 when AMEX completely ceased operations and instead entered into an operating agreement with T.M. San Andres Development Corporation whereby the latter would be leasing the equipment and machineries of AMEX. LLjur

The unpaid employees sought redress from the Labor Arbiter 1 who, on August 27, 1986 rendered a decision finding their claim valid and meritorious. The dispositive part of the said decision, reads:

WHEREFORE, finding the claims of complainants for payment of unpaid wages and separation pay to be valid and meritorious, respondents Aggregate Mining Exponent and its president Luis Tirso Revilla should, as they are hereby ordered to pay the same to said complainants in the following amounts:

Yrs. of   Separation

Employees  Service  Rate Pay  Backwages1. Jose Agripino  8  P1,300.00  P5,200.00  P6,174.962. Bernardo Bauzon  9  1,900.00  8,550.00  11,712.853. Lucresia Bilbao  7  2,300.00  8,050.00  19,247.004. Teresita S. Cruz  12  2,700.00  16,200.00  23,485.705. Ma. Luisa Cabrera  3  1,800.00  2,700.00  5,004.356. Francis Baaclo  7  3,500.00  12,550.00  32,986.907. Guadalupe Camacho  6  1,300.00  3,900.00  3,227.158. Luz de Leon  5  1,300.00  3,250.00  3,110.859. Mike Villaverde  6  1,500.00  4,500.00  4,793.8010. Nepomuceno Medina  5  1,200.00  3,000.00  4,287.1011. Edgardo Mendoza  4  920.00  1,840.00  832.1012. Jenifer Velez  2  740.00  740.00  4,287.6613. Amelia Medina  2  740.00  740.00  6,822.8114. Eduardo Espejo  4  970.00  1,940.00  234.1015. Ricardo Batto  7  3,000.00  10,500.00  9,874.70

 —————  —————  TOTAL P83,360.00  P136,092.03

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in the total amount of P219,452.03. To properly effectuate the payment of the same, the necessary arrangement should be made between respondents Annex and T.M. San Andres Development Corp. and Philippine National Bank (PNB) on their respective role and participation herein. For should the principal respondent be unable to satisfy these Awards, the same can be satisfied from the proceeds or fruits of its machineries and equipment being operated by respondent T .M . San Andres Dev. Corp. either by operating agreement with respondent Amex or thru lease of the same from PNB.

To obviate any further differences between complainants and their counsel to the latter's attorney's fees which seems to be the cause of their earlier misunderstanding, as can be gleaned from the Charging Lien filed by said counsel, respondents are, moreover, ordered to segregate and pay the same directly to said counsel, the amount of which is to be computed pursuant to their agreement on July 14, 1983 (Annex A of Position to Enter Attorney's Charging Lien in the Record of the Case)." 2

AMEX and its President, Tirso Revilla did not appeal from this decision. But PNB, in its capacity as mortgagee-creditor of AMEX interposed an appeal with the respondent Commission, not being satisfied with the outcome of the case. The appeal was primarily based or the allegation that the workers' lien covers unpaid wages only and not the termination or severance pay which the workers likewise claimed they were entitled to.

In a resolution 3 dated October 27, 1987, the National Labor Relations Commission affirmed the decision appealed from. Hence the instant petition filed by the petitioner bank based on the following grounds:

"I. ARTICLE 110 OF THE LABOR CODE MUST BE READ IN RELATION TO ARTICLES 2241, 2242, 2243, 2244 AND 2245 OF THE CIVIL CODE CONCERNING THE CLASSIFICATION, CONCURRENCE AND PREFERENCE OF CREDITS.

"II. ARTICLE 110 OF THE LABOR CODE DOES NOT PURPORT TO CREATE A LIEN IN FAVOR OF WORKERS OR EMPLOYEES FOR UNPAID WAGES EITHER UPON ALL OF THE PROPERTIES OR UPON ANY PARTICULAR PROPERTY OWNED BY THEIR EMPLOYER." 4

The petition is devoid of merit.

At the outset, petitioner PNB did not question the validity of the workers' claim for unpaid wages with respect to the mortgaged properties of AMEX, provided that the same be limited to the unpaid wages, and to the exclusion of termination pay. In the instant petition however, PNB starts off with the question of whether or not the workers' lien take precedence over any other claim considering that this Court has ruled otherwise in Republic vs. Peralta. 5

This Court cannot allow the petitioner to alter its stance at this stage inasmuch as it is deemed to have acquiesced in the decision of the labor arbiter concerning payment of unpaid wages. The records reveal that the petitioner failed to question the same on appeal. Hence, it is now barred from claiming that the workers' lien applies only to the products of their labor and not to other properties of the employer which are encumbered by mortgage contracts or otherwise. cdrep

Notwithstanding the foregoing, an attempt on the part of the petitioner to seek relief from that portion of the decision would still be in vain.

Article 110 of the Labor Code provides that:

"Art. 110. Worker preference in case of bankcruptcy. In the event of bankcruptcy or liquidation of an employer's business, — his workers shall enjoy first preference as regarding their unpaid wages and other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary claims, shall be paid in full before claims of the government and other creditors may be paid." 6

This Court must uphold the preference accorded to the private respondents in view of the provisions of Article 110 of the Labor Code which are clear and which admit of no other interpretation. The phrase "any provision of law to the contrary notwithstanding" indicates that such preference shall prevail despite the order set forth in Articles 2241 to 2245 of the Civil Code. 6a No exceptions were provided under the said article, henceforth, none shall be considered. Furthermore, the Labor Code was signed into Law decades after the Civil Code took effect.

In Herman vs. Radio Corporation of the Philippines, 7 this Court declared that whenever two statutes of different dates and of contrary tenor are of equal theoretical application to a particular case, the statute of later date must prevail being a later expression of legislative will. Applying the aforecited case in the instant petition, the Civil Code provisions cited by the petitioner must yield to Article 110 of the Labor Code. cdphil Moreover, Our pronouncement in A.C. Ransom Labor Union-CCLU vs. NLRC, 8 reinforces the above-mentioned interpretation where this Court, speaking through Associate Justice Melencio-Herrera, explicitly stated that "(t)he worker preference applies even if the employer's properties are encumbered by means of a mortgage contract . . . . So that, when (the) machinery and equipment of RANSOM were sold to Revelations Manufacturing Corporation for P2 M in 1975, the right of the 22 laborers to be paid from the proceeds should have been recognized . . .." 9

Reliance by the petitioners on Republic vs. Peralta is without basis. The said case involved a question of workers' preference as against the tax claims of the State. In the said case the Court held that the State must prevail in that instance since "it has been frequently said that taxes are the very lifeblood of government. The effective collection of taxes is a task of highest importance for the sovereign. It is critical indeed for its own survival." 10

Nevertheless, under Article 110 of the Labor Code as amended, the unpaid wages and other monetary claims of workers should be paid in full before the claims of the Government and other creditors. Thus not even tax claims could have preference over the workers' claim. llcd

Consistent with the ruling of this Court in Volkschel Labor Union vs. Bureau of Labor Relations, 11 this court adopts the doctrine that "(i)n the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be the primordial and paramount consideration." 12 Bearing this in mind, this Court must reiterate the dictum laid down in A.C . Ransom that the conflict between Article 110 of the Labor Code and Article 2241 to 2245 of the Civil Code must be resolved in favor of the former. A contrary ruling would defeat the purpose for which Article 110 was intended; that is, for the protection of the working class, pursuant to the never-ending quest for social justice. cdll

Petitioner next advances the theory that "even if the worker's lien applies in the instant case, the same should cover only unpaid wages excluding termination or severance pay." 13 To support this

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contention, petitioner cites Section 7, Rule I, Book VI of the Rules and Regulations implementing the Labor Code which provides that:

"The just causes for terminating the services of an employee shall be those provided under Article 283 of the Code. The separation from work of an employee for a just cause does not entitle him to termination pay provided in the Code, . . .." (Emphasis supplied.)

Based on that premise, petitioner contends that the claim for termination pay should not be enforced against AMEX properties mortgaged to petitioner PNB because Article 110 of the Labor Code refers only to "wages due them for services rendered during the period prior to bankcruptcy or liquidation." 14 Citing serious financial losses as the basis for the termination of the private respondents, petitioner alleges that the employees are not entitled to the termination pay which they claim.

This contention is, again, bereft of merit.

The respondent Commission noted that "AMEX failed to adduce convincing evidence to prove that the financial reverses were indeed serious." 15 After a careful study of the records of the case, this Court finds no reason to alter the findings of the respondent Commission.

In Garcia vs. National Labor Relations Commission, 16 it was held that "it is essentially required that the alleged losses in business operations must be proved." 17 This policy was adopted to obviate the possibility of an employer fabricating business reverses in order to ease out employees for no apparent reason. Hence, no departure shall be made by this Court from the ruling in Philippine Commercial and Industrial Bank vs. National Mines and Allied Workers Union (NAMAWU-MIF) 19

Furthermore, in Peralta, this Court held that for purposes of the application of Article 110, "termination pay is reasonably regarded as forming part of the remuneration or other money benefits accruing to employees or workers by reason of their having previously rendered services . . .." 20 Hence, separation pay must be considered as part of remuneration for services rendered or to be rendered.

Indeed Article 110 of the Labor Code, as amended, aforecited, now provides that the workers' preference covers not only unpaid wages but also other monetary claims.

The respondent Commission was, therefore, not in error when it awarded the termination pay claimed by the private respondents. As far as the latter are concerned, the termination pay which they so rightfully claim is an additional remuneration for having rendered services to their employer for a certain period of time. Noteworthy also is the relationship between termination pay and services rendered by an employee, that in computing the amount to be given to an employee as termination pay, the length of service of such employee is taken into consideration such that the former must be considered as part and parcel of wages. Under these circumstances then, this Court holds that the termination or severance pay awarded by the respondent Commission to the private respondents is proper and should be sustained. cdll

Lastly, it must be noted that the amount claimed by petitioner PNB for the satisfaction of the obligations of AMEX is relatively insubstantial and is not significant enough as to drain its coffers. By contrast, that same amount could mean subsistence or starvation for the workingman. Quoting further from Philippine

Commercial and Industrial Bank, this Court supports the equitable principle that "it is but humane and partakes of the divine that labor, as human beings, must be treated over and above chattels, machineries and other kinds of properties and the interests of the employer who can afford and survive the hardships of life better than their workers. Universal sense of human justice, not to speak of our specific social justice and protection to labor constitutional injunctions dictate the preferential lien that the above provision accord to labor." 21 In line with this policy, measures must be undertaken to ensure that such constitutional mandate on protection to labor is not rendered meaningless by an erroneous interpretation of the applicable laws.

WHEREFORE, premises considered, the petition is hereby DISMISSED for lack of merit. No costs.

SO ORDERED.

Narvasa, Griño-Aquino and Medialdea, JJ ., concur.

Separate Opinions

CRUZ, J ., concurring:

I can perhaps be allowed a little immodesty in taking this occasion to point out that in Republic of the Philippines v. Peralta, cited in the ponencia, I was the only one who held the view that the claims of the laborers should take precedence over those of even the Government under Article 110 of the Labor Code.

Interpreting the said provision, I submitted that it should be read according to its literal import and obvious philosophy, to favor and protect the laborer pursuant to the social justice policy. None of my thirteen colleagues then agreed with me.

With the amendment of the article, evidently to correct the meaning given to it in Peralta, all doubt has been removed as to its original intention (which I feel was quite clear even before). There is no question now that under Article 110 of the Labor Code as reworded the claims of the laborer prevail over those of all others, including the Government itself, in the interest of social justice. It is for me a cause for deep elation. dctai

Footnotes

1.Labor Arbiter Raymundo R. Valenzuela.2.Pages 34 to 35, Rollo.3.Penned by Commissioner Oscar N. Abella, concurred in by Commissioners Daniel M. Lucas, Jr.

and Domingo Zapanta.4.Page 6, Petition; Page 28, Rollo.5.150 SCRA 37 (1987).6.Republic Act 6715; See Official Gazette, Manila 6, 1989, page 15.6a.Articles 2241 to 2245, Civil Code of the Philippines.7.50 Phil. 490 (1927).

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8.150 SCRA 498 (1987).9.Ibid, page 507.10.Op cit., page 51.11.137 SCRA 42 (1985).12.Ibid, page 48.13.Page 26, Rollo.14.Page 27, Rollo.15.Pages 4 to 5, Resolution; page 36 to 37, Rollo.16.153 SCRA 639 (1987), citing National Federation of Labor Union vs. Ople, 143 SCRA 124 (1986).17.Ibid, page 651.18.115 SCRA 873 (1982).19.Ibid, page 880.20.Supra, note 5, page 44.21.Op cit., Note 18, pages 880 to 881.

 ||| (PNB v. Cruz, G.R. No. 80593, [December 18, 1989], 259 PHIL 696-706)

CASE DIGESTPhilippine National Bank v. Cruz, et al.

G.R. No. 80593December 18, 1989

FACTS:

Aggregate Mining Exponents (AMEX) suffered huge financial losses and was unable to pay its remaining employees. Two years after, AMEX entered into an operation contract agreement with T.M. San Andres Development Corporation, thus enabling the latter to acquire on lease the equipment of AMEX. The unpaid workers filed for monetary compensation before the Labor Arbiter. The said Arbiter awarded backwages and separation pay. AMEX did not appeal but PNB, as mortgage-creditor, appealed and alleged that the workers should be given their unpaid wages only and not the termination pay. The NLRC denied the appeal of PNB. Hence, this instant petition by the PNB on the grounds that Article 110 of the Labor Code does not create lien in favor of the workers for unpaid wages upon the properties of the employer.

ISSUE:

W/N Art. 110 of the Labor Code is to be construed as not favoring the unpaid workers because of the order of preference provided in Art. 2241 to 2245 of the Civil Code.

HELD:

No. Art. 110 of the Labor Code provides for “worker preference in case of bankruptcy”. It specifically states that “In the event of bankruptcy… of an employer’s business, his workers shall enjoy FIRST preference as regards to their unpaid wages, any provision of law to the contrary not withstanding… such unpaid wages shall be paid in FULL before claims of the government and other creditors may be paid.”

LATIN MAXIM: 6a, 49

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EN BANC

[G.R. No. 87119. April 16, 1991.]

HON. GEMILIANO C. LOPEZ, JR., in his capacity as City Mayor of Manila, petitioner, vs. THE CIVIL SERVICE COMMISSION, HON. DANILO R. LACUNA, in his capacity as Vice-Mayor and Presiding Officer of the City Council of Manila, and THE CITY COUNCIL OF MANILA, respondents.

The City Legal Officer for petitioner.Lacuna, Bello & Associates Law Offices for Danilo B. Lacuna.

SYLLABUS

1. CONSTITUTIONAL LAW; CIVIL SERVICE COMMISSION; JUDGMENTS THEREOF UNAPPEALABLE AND SUBJECT ONLY TO THIS COURT'S CERTIORARI JURISDICTION. — As we held, the Civil Service Commission, under the Constitution, is the single arbiter of all contests relating to the civil service and as such, its judgments are unappealable and subject only to this Court's certiorari jurisdiction.

2. STATUTORY CONSTRUCTION; SPECIAL LAW PREVAILS OVER A GENERAL LAW REGARDLESS OF THEIR DATES OF PASSAGE AND THE SPECIAL IS CONSIDERED AN EXCEPTION TO THE GENERAL. — There is no doubt that Republic Act No. 409, which provides specifically for the organization of the Government of the City of Manila, is a special law, and whereas Republic Act No. 5185 and Batas Blg. 337, which apply to municipal governments in general, are general laws. As the Solicitor General points out, and we agree with him, it is a canon of statutory construction that a special law prevails over a general law — regardless of their dates of passage — and the special is to be considered as remaining an exception to the general.

3. ID.; CONFLICT BETWEEN STATUTES MUST BE AVOIDED. — So also, every effort must be exerted to avoid a conflict between statutes. If reasonable construction is possible, the laws must be reconciled in that manner.

4. ID.; REPEALS OF LAWS BY IMPLICATION, NOT FAVORED; WHEN THERE IS A MERE REPUGNANCY BETWEEN TWO STATUTES, THE ONE LATER IN TIME REPEALS THE OTHER. — Repeals of laws by implication moreover are not favored, and the mere repugnancy between two statutes should be very clear to warrant the court in holding that the later in time repeals the other.

5. ID.; REPUBLIC ACT NO. 5185 (DECENTRALIZATION LAW) AND BATAS BLG. 337 (LOCAL GOVERNMENT CODE), NOT MEANT TO DEPRIVE CITY COUNCIL OF MANILA OF ITS APPOINTING POWER GRANTED BY REPUBLIC ACT NO. 409 (CHARTER OF THE CITY OF MANILA). — We also agree with the Civil Service Commission that the provisions of Republic Act No. 5185, giving mayors the power to appoint all officials "entirely paid out by city funds" and those of Batas Blg. 337, empowering local executives with the authority to appoint "all officers and employees of the city," were meant not to vest the city mayors per se with comprehensive powers but rather, to

underscore the transfer of the power of appointment over local officials and employees from the President to the local governments and to highlight the autonomy of local governments. They were not meant, however, to deprive the City Council of Manila for instance, its appointing power granted by existing statute, and after all, that arrangement is sufficient to accomplish the objectives of both the Decentralization Act and the Local Government Code, that is, to provide teeth to local autonomy.

D E C I S I O N

SARMIENTO, J p:

The only question in this petition, denominated as a "direct appeal under Article VIII, Section 5(2)(e), of the Constitution and Section 9(3), of Batas Blg. 129," is whether the City Council of Manila still has the power to appoint Council officers and employees under Republic Act No. 409, otherwise known as the Charter of the City of Manila, or whether the power is now vested with the City Mayor pursuant to Republic Act No. 5185, the Decentralization Law, and Batas Blg. 337, the Local Government Code. The facts are as follows:

On September 13, 1988, the Vice-Mayor of Manila and Presiding Officer of the City Council of Manila, the Hon. Danilo R. Lacuna, submitted to the Civil Service Commission, through the Regional Director of the National Capital Region, the appointments of nineteen officers and employees in the Executive Staff of the Office of the Presiding Officer, City Council of Manila, pursuant to the provisions of Section 15, of said Republic Act No. 409, as amended, which reads:

SEC. 15. . . .. . . The Board shall appoint and the Vice Mayor shall sign all appointments of the other employees of the Board. 1

The City Budget Officer of Manila later sought from the Personnel Bureau of the Mayor's office "comment and/or recommendation" on whether the payroll of the newly appointed employees of the City Council may be paid on the basis of appointments signed by the Vice-Mayor. 2 The Personnel Bureau then forwarded the query to the City Legal Officer who, in a 3rd endorsement dated September 19, 1988, 3 rendered an opinion that the proper appointing officer is the City Mayor and not the City Council. This opinion was transmitted by the Secretary to the City Mayor to the Commission.

On February 1, 1989, the Commission promulgated Resolution No. 89-075, and held that contrary to the opinion of the City Legal Officer, it is the City Council to which the appointing power is vested. The dispositive portion thereof is as follows: prLL

WHEREFORE, foregoing premises considered, the Commission resolved to rule, as it hereby rules that the proper appointing authority of the officers and employees of the City Council of Manila is the City Council and the signatory of individual appointments thus issued is the City Vice-Mayor of Manila. 4

As we stated at the outset, the issue is whether or not Section 15, supra, of the Charter of the City of Manila has been repealed, and as a result, the City Council can no longer tender appointments to Council positions.

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As we also mentioned at the outset, this petition has been brought by way of a "direct appeal" from the resolution of the Civil Service Commission pursuant supposedly to the Constitution and Batas Blg. 129. In this connection, we have held that no appeal lies from the decisions of the Civil Service Commission, and that parties aggrieved thereby may proceed to this Court alone on certiorari under Rule 65 of the Rules of Court, within thirty days from receipt of a copy thereof, pursuant to Section 7, Article IX, of the Constitution. We quote:

SEC. 7. Unless otherwise provided by this Constitution or by law, any decision, order, or ruling of each Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from receipt of a copy thereof. 5

As we held, the Civil Service Commission, under the Constitution, is the single arbiter of all contests relating to the civil service and as such, its judgments are unappealable and subject only to this Court's certiorari jurisdiction. 6

The petitioner's omission notwithstanding, we are nevertheless accepting the petition and because of the important public interest it involves, we are considering it as a petition for certiorari under Rule 65, considering further that it was filed within the thirty-day period. 7

As the petitioner contends, Section 15 of Republic Act No. 409 as amended has supposedly been repealed by Republic Act No. 5185, specifically, Section 4 thereof, which we quote, in part:

xxx xxx xxx

The City Assessor, City Agriculturist, City Chief of Police and City Chief of Fire Department and other heads of offices entirely paid out of city funds and their respective assistants or deputies shall, subject to civil service law, rules and regulations, be appointed by the City Mayor: Provided, however, That this section shall not apply to Judges, Auditors, Fiscals, City Superintendents of Schools, Supervisors, Principals, City Treasurers, City Health Officers and City Engineers.

xxx xxx xxx

All other employees, except teachers, paid out of provincial, city or municipal general funds, road and bridge funds, school funds, and other local funds, shall, subject to civil service law, rules and regulations, be appointed by the Provincial Governor, City or Municipal Mayor upon recommendation of the office head concerned . . . 8

and by Batas Blg. 337, we likewise quote:

SEC. 171. Chief Executive; Compensation, Powers, and Duties. —

xxx xxx xxx

(2) The city mayor shall:

xxx xxx xxx

(h) Appoint, in accordance with civil service law, rules and regulations, all officers and employees of the city, whose appointments are not otherwise provided in this Code; 9

There is no doubt that Republic Act No. 409, which provides specifically for the organization of the Government of the City of Manila, is a special law, and whereas Republic Act No. 5185 and Batas Blg. 337, which apply to municipal governments in general, are general laws. As the Solicitor General points out, and we agree with him, it is a canon of statutory construction that a special law prevails over a general law — regardless of their dates of passage — and the special is to be considered as remaining an exception to the general. 10

So also, every effort must be exerted to avoid a conflict between statutes. If reasonable construction is possible, the laws must be reconciled in that manner. cdphil

Repeals of laws by implication moreover are not favored, and the mere repugnancy between two statutes should be very clear to warrant the court in holding that the later in time repeals the other. 11

Why a special law prevails over a general law has been put by the Court as follows:

xxx xxx xxx

. . . The Legislature consider and make provision for all the circumstances of the particular case. The Legislature having specially considered all of the facts and circumstances in the particular case in granting a special charter, it will not be considered that the Legislature, by adopting a general law containing provisions repugnant to the provisions of the charter, and without making any mention of its intention to amend or modify the charter, intended to amend, repeal, or modify the special act. (Lewis vs. Cook County, 74 I11. App., 151; Philippine Railway Co. vs. Nolting, 34 Phil., 401.) 12

 In one case, we held that Republic Act No. 5185 did not divest the Mayor of Manila of his power under the Charter of the City of Manila to approve the city budget. 13

We also agree with the Civil Service Commission that the provisions of Republic Act No. 5185, giving mayors the power to appoint all officials "entirely paid out by city funds" 14 and those of Batas Blg. 337, empowering local executives with the authority to appoint "all officers and employees of the city," 15 were meant not to vest the city mayors per se with comprehensive powers but rather, to underscore the transfer of the power of appointment over local officials and employees from the President to the local governments and to highlight the autonomy of local governments. They were not meant, however, to deprive the City Council of Manila for instance, its appointing power granted by existing statute, and after all, that arrangement is sufficient to accomplish the objectives of both the Decentralization Act and the Local Government Code, that is, to provide teeth to local autonomy. cdphil

In the light of all the foregoing, we do not find any grave abuse of discretion committed by the respondent Commission.

WHEREFORE, the petition is DISMISSED. No costs.

SO ORDERED.

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

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Footnotes1.Rep. Act No. 409, as amended by Rep. Act No. 1571, sec. 15.2.Rollo, 17.3.Id., 19.4.Id., 27.5.CONST., art. IX, sec. 7; Dario v. Mison, G.R. Nos. 81954, 81967, 82023, 83737, 85310, 85335,

86241, August 8, 1989, 176 SCRA 84. .6.Dario v. Mison, supra.7.The petitioners received a copy of Resolution No. 89-075 of the Civil Service Commission on

February 15, 1989 (rollo, id., 5); the petition was filed on March 2, 1989.8.Rep. Act No. 5185, sec. 4.9.Batas Blg. 337, sec. 171(h).10.Butuan Sawmill, Inc. v. City of Butuan, No. L-21516, April 29, 1966, 16 SCRA 755.11.Manila Railroad Co. v. Rafferty, 40 Phil. 224, 228 (1919).12.Supra, 230.13.Cabigao v. Villegas, No. L-31463, August 31, 1970, 34 SCRA 632.14.Rep. Act No. 5785, sec. 4, supra.15.Batas Blg. 337, sec. 171(h), supra.

 ||| (Lopez, Jr. v. CSC, G.R. No. 87119, [April 16, 1991], 273 PHIL 147-153)

CASE DIGESTLopez, Jr. v. Civil Service Commission

G.R. No. 87119 April 16, 1991

FACTS:

The Vice-mayor of Manila submitted to the Civil Service Commission the appointment of 19 officers in the Executive Staff of the Office of the Presiding Officer pursuant to the provisions of RA 409. However, the City Budget of Manila questioned whether the payroll of the newly appointed employees may be paid out of city funds on the basis of the appointments signed by the Vice Mayor. The City Legal Officer then rendered an opinion that the proper appointing officer is the City Mayor and not the City Council.

ISSUE:

W/N the Charter of the City of Manila has been repealed by RA 5185 giving mayors the power to appoint all officials entirely paid out by city funds and BP 337 empowering local executives to appoint all officers and employees of the city.

HELD:

No. Regardless of their date of passage, a special law (RA 409) providing specifically for the organization of the Government of the City of Manila prevails over a general law. RA 5185 and BP 337 as general laws were not meant to deprive the City Council of Manila of its appointing power. Also, since repeals by implication are not favored, conflict between the statutes should be very clear to favor the assumption that the latter in time repeals the other.

37, 38b, 50

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THIRD DIVISION

[G.R. No. 72477. October 16, 1990.]

NATIONAL POWER CORPORATION, petitioner, vs. HON. PRESIDING JUDGE, REGIONAL TRIAL COURT, 10TH JUDICIAL REGION BRANCH XXV, CAGAYAN DE ORO CITY, PROVINCE OF MISAMIS ORIENTAL, MUNICIPALITY OF JASAAN, MISAMIS ORIENTAL AND BARANGAY APLAYA, JASAAN, MISAMIS ORIENTAL, respondents.

Pantaleon Z. Salcedo for respondent Barangay Aplaya.The Provincial Attorney for respondent Misamis Oriental and Municipality of Jasaan.

D E C I S I O N

FERNAN, C .J p:

In this Special Civil Action for Certiorari, petitioner National Power Corporation (NAPOCOR for brevity) questions the jurisdiction of the Regional Trial Court of Cagayan de Oro City, Branch XXV to hear Civil Case No. 9901 filed by respondents Province of Misamis Oriental and Municipality of Jasaan for the collection of real property tax and special education fund tax from petitioner covering the years 1978 to 1984. cdasia

The antecedent facts are as follows:

On October 10, 1984, the Province of Misamis Oriental filed a complaint 1 with the Regional Trial Court of Cagayan de Oro City, Branch XXV against NAPOCOR for the collection of real property tax and special education fund tax in the amounts of P11,105,008.10 and P11,104,658.10, respectively, covering the period 1978 to 1984. Petitioner NAPOCOR then defendant therein, filed a motion to dismiss 2 dated January 12, 1985 on the grounds that the court has no jurisdiction over the action or suit and that it is not the proper forum for the adjudication of the case. In support of this motion NAPOCOR cited Presidential Decree No. 242 dated July 9, 1973 which provides that disputes between agencies of the government including government-owned or controlled corporations shall be administratively settled or adjudicated by the Secretary of Justice.

The court through Judge Pablito C. Pielago issued an order 3 dated January 28, 1985 denying the motion to dismiss. NAPOCOR filed a supplemental motion to dismiss 4 on February 22, 1985 citing a resolution of the Fiscal Incentive Review Board, No. 10-85 effective January 11, 1984, restoring the tax and duty exemption privileges of petitioner.

On March 27, 1985, NAPOCOR filed its answer to the complaint with counterclaim. Treating the same as a second motion to dismiss and finding the affirmative defenses therein stated to be unmeritorious, the court a quo issued an order on June 27, 1985, denying the second motion to dismiss and requiring both parties to appear before the court for the purpose of submitting a stipulation of facts.

On July 23, 1985, Barangay Aplaya, Municipality of Jasaan, Misamis Oriental filed a complaint in intervention 5 contending that non-payment by NAPOCOR of real property taxes would adversely affect its interest since under the law, ten percent (10%) of the real property tax collected on properties within its jurisdiction shall accrue to the general fund of the barangay. Thereafter, the case was set for trial pursuant to the court's order dated August 20, 1985. 6

On October 30, 1985, petitioner NAPOCOR filed before this Court the present special civil action for certiorari, 7 setting forth the following issues, to wit:

"1) Respondent Court acted without or in excess of jurisdiction and with grave abuse of discretion when it issued the orders dated January 28, 1985, June 27, 1985 and August 20, 1985, denying petitioner's motions to have Civil Case No. 9901 dismissed on the grounds of lack of jurisdiction and/or improper venue.

"2) Petitioner is exempt from payment of real property taxes."

Relied upon by NAPOCOR in assailing the jurisdiction of the lower court and/or the venue of the action are Sections 2 and 3 of Presidential Decree No. 242, entitled "PRESCRIBING THE PROCEDURE FOR ADMINISTRATIVE SETTLEMENT OR ADJUDICATION OF DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN OR AMONG GOVERNMENT OFFICES, AGENCIES AND INSTRUMENTALITIES, INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS, AND FOR OTHER PURPOSES" dated on July 9, 1973. Sections 2 and 3 of this Decree provide:

Section 2. In all cases involving only questions of law, the same shall be submitted to and settled or adjudicated by the Secretary of Justice, as Attorney General and ex officio legal adviser of all government-owned or controlled corporations and entities, in consonance with section 83 of the Revised Administrative Code. His ruling or determination of the question in each case shall be conclusive and binding upon all the parties concerned. cdasia

Section 3. Cases involving mixed questions of law and of fact or only factual issues shall be submitted to and settled or adjudicated by:

(a) The Solicitor General, with respect to disputes or claims or controversies between or among the departments, bureaus, offices and other agencies of the National Government;

(b) The Government Corporate Counsel, with respect to disputes or claims or controversies between or among the government-owned or controlled corporations or entities being served by the office of the Government Corporate Counsel; and

(c) The Secretary of Justice, with respect to all other disputes or claims or controversies which do not fall under the categories mentioned in paragraphs (a) and (b). (Emphasis supplied)

In upholding the lower court's jurisdiction, respondent municipal corporations, on the other hand, rely on Presidential Decree No. 464, entitled "THE REAL PROPERTY TAX CODE" enacted on July 1, 1974, specifically Section 82 thereof which provides:

Section 82. Collection of real property tax through the courts. — The delinquent real property tax shall constitute a lawful indebtedness of the taxpayer to the province or city and collection of the tax may be enforced by civil action in any court of competent jurisdiction. The civil action shall be filed by the Provincial or City Fiscal within fifteen days after receipt of the statement of delinquency certified to by the provincial or city treasurer. This remedy shall be in addition to all other remedies provided by law.

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It is indeed desirable and beneficial to the Judiciary's on-going program of decongesting court dockets that intra-governmental disputes such as this be settled administratively. Unfortunately, our consideration of the legal provisions involved leads us to a different conclusion. In reconciling these two conflicting provisions of P.D. 242 and P.D. 464 on the matter of jurisdiction, we are guided by the basic rules on statutory construction. LexLib

An examination of these two decrees shows that P.D. 242 is a general law which deals with administrative settlement or adjudication of disputes, claims and controversies between or among government offices, agencies and instrumentalities, including government-owned or controlled corporations. The coverage is broad and sweeping, encompassing all disputes, claims and controversies.

P.D. 464 on the other hand, governs the appraisal and assessment of real property for purposes of taxation by provinces, cities and municipalities, as well as the levy, collection and administration of real property tax. It is a special law which deals specifically with real property taxes.

It is a basic tenet in statutory construction that between a general law and a special law, the special law prevails. GENERALIA SPECIALIBUS NON DEROGANT. 8

Where a later special law on a particular subject is repugnant to, or inconsistent with, a prior general law on the same subject, a partial repeal of the latter will be implied to the extent of the repugnancy or an exception grafted upon the general law.

A special law must be intended to constitute an exception to the general law in the absence of special circumstances forcing a contrary conclusion. 9

The conflict in the provisions on jurisdiction between P.D. 242 and P.D. 464 should be resolved in favor of the latter law, since it is a special law and of later enactment. P.D. 242 must yield to P.D. 464 on the matter of who or which tribunal or agency has jurisdiction over the enforcement and collection of real property taxes. Therefore, respondent court has jurisdiction to hear and decide Civil Case No. 9901.

On the question of whether or not NAPOCOR is liable to pay real property taxes and special education fund taxes for the years 1978 to 1984, we rule in the affirmative. LLjur

Presidential Decree No. 1177, entitled "REVISING THE BUDGET PROCESS IN ORDER TO INSTITUTIONALIZE THE BUDGETARY INNOVATIONS OF THE NEW SOCIETY" was passed on July 30, 1977. Section 23 thereof provides:

Section 23. Tax and Duty Exemptions. — All units of government, including government-owned or controlled corporations, shall pay income taxes, customs duties and other taxes and fees as are imposed under revenue laws; provided, that organizations otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General Fund in the exact amount of taxes/duties due; provided, further, that a procedure shall be established by the Secretary of Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be considered as both revenue and expenditure of the General Fund. (Emphasis supplied)

Petitioner alleges that what has been withdrawn is its exemption from taxes, duties, and fees which are payable to the national government while its exemption from taxes, duties and fees payable to government branches, agencies and instrumentalities remains unaffected. Considering that real property taxes are payable to the local government, NAPOCOR maintains that it is exempt therefrom.

We find the above argument untenable. It reads into the law a distinction that is not there. It is contrary to the clear intent of the law to withdraw from all units of government, including government-owned or controlled corporations their exemptions from all kinds of taxes. Had it been otherwise, then the law would have said so. Not having distinguished as to the kinds of tax exemptions withdrawn, the plain meaning is that all tax exemptions are covered. Where the law does not distinguish, neither must we. Moreover, Presidential Decree No. 1931 entitled "DIRECTING THE RATIONALIZATION OF DUTY AND TAX EXEMPTION PRIVILEGES GRANTED TO GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS AND ALL OTHER UNITS OF GOVERNMENT" which was passed on June 11, 1984, categorically states:

"WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of tax privileges to any government-owned or controlled corporation and all other units of government." (Emphasis supplied)

Thus, any dubiety on NAPOCOR'S liability to pay taxes, duties and fees should be considered unequivocably resolved by the above provision.

In the case of National Power Corporation vs. The Province of Albay, et. al., 10 herein petitioner was held liable for real property taxes to the provincial government of Albay for the period June 11, 1984 to March 10, 1987, when it claims to have been enjoying tax exemptions under Resolutions Nos. 10-85, 1-86 and 17-87 of the Fiscal Incentives Review Board (FIRB). It must be noted that Resolution 10-85 was the same resolution cited by petitioner in its supplemental motion to dismiss 11 in Civil Case No. 9901. If the attempt (found ineffective for lack of authority in the above-cited case of NPC vs. The Province of Albay) to restore petitioner's tax exemptions began only in 1985 with the issuance of FIRB Resolution No. 10-85, it stands to reason that prior thereto, i.e., from 1977 when P.D. 1177 was promulgated up to 1984, petitioner did not enjoy any tax privilege as would exempt it from the payment of the taxes under consideration. cdasia

In the same case of NPC vs. The Province of Albay, 12 this Court had occasion to state:

"Actually, the State has no reason to decry the taxation of NAPOCOR's properties, as and by way of real property taxes. Real property taxes, after all, form part and parcel of the financing apparatus of the Government in development and nation-building, particularly in the local government level.

xxx xxx xxx

"To all intents and purposes, real property taxes are funds taken by the State with one hand and given to the other. In no measure can the Government be said to have lost anything."

The proceeds of the real property tax are divided among the province, city or municipality where the property subject to the tax is situated and shall be applied by the respective local government unit for its own use and benefit. Even the barrio where the property is situated shares in the real property tax

Statutory Construction – Chapter IX: Statute Construed as a Whole and in Relation to Other Statutes Page 14

collections. Likewise, the entire proceeds of the additional one per cent (1%) real property tax levied for the Special Education Fund created under R.A. 5447, are divided among the province, city and municipalities where the property is situated. cdtai

WHEREFORE, the petition is DISMISSED. Petitioner having been found liable for the taxes being collected in Civil Case No. 9901, the respondent court is hereby directed to proceed with deliberate dispatch in hearing the case for the purpose of determining the exact liability of petitioner. No Costs.

SO ORDERED.

Gutierrez, Jr., Bidin and Cortes, JJ., concur.Feliciano, J., is on leave.

Footnotes

1.Rollo, pp. 18-21.2.Rollo, pp. 22-24.3.Rollo, pp. 25-26; 28-30.4.Rollo, pp. 31-33.5.Rollo, pp. 65-66.6.Rollo, pp. 72-73.7.Rollo, pp. 2-16.8.Lagman vs. City of Manila, G.R. No. 23305, June 30, 1966, 17 SCRA 579.9.Baga vs. PNB, 99 Phil. 889, cited in Butuan Sawmill, Inc. vs. City of Butuan, et al., No. L-21516,

April 29, 1966, 16 SCRA 755.10.G.R. No. 87479, June 4, 1990.11.Rollo, pp. 31-33.12.Ibid.

 ||| (National Power Corp. v. Presiding Judge, RTC, 10th Judicial Region, Br. XXV, Cagayan De Oro City, G.R. No. 72477, [October 16, 1990], 268 PHIL 507-516)

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FIRST DIVISION

[G.R. No. L-55230. November 8, 1988.]

HON. RICHARD J. GORDON, in his capacity as City Mayor of Olongapo, petitioner, vs. JUDGE REGINO T. VERIDIANO II and Spouses EDUARDO and ROSALINDA YAMBAO, respondents.

SYLLABUS

1. ADMINISTRATIVE LAW; FOOD AND DRUG ADMINISTRATION; VESTED WITH ALL DRUG INSPECTION FUNCTIONS AND APPROVAL OF APPLICATION FOR AUTHORITY TO OPERATE OR ESTABLISH A DRUG ESTABLISHMENT. — The authorization to operate issued by the FDA is a condition precedent to the grant of a mayor's permit to the drug store seeking to operate within the limits of the city. This requirement is imperative. The power to determine if the opening of the drug store is conformable to the national policy and the laws on the regulation of drug sales belongs to the FDA. Hence, a permit issued by the mayor to a drug store not previously cleared with and licensed by the said agency will be a nullity.

2. ID.; CHARTER OF OLONGAPO CITY; EMPOWERS CITY MAYOR TO GRANT OR REFUSE MUNICIPAL LICENSES TO OPERATE OR PERMITS OF ALL CLASSES AND TO REVOKE THE SAME. — The petitioner traces his authority to the charter of Olongapo City, R.A. No. 4645, which inter alia empowers the city mayor under Section 10 thereof to grant or refuse municipal licenses to operate or permits of all classes and to revoke the same for violation of the conditions upon which they were granted.

3. ID.; ID.; ID.; POWER TO APPROVE A LICENSE INCLUDE BY IMPLICATION, THE POWER TO REVOKE. — The power to approve a license includes by implication, even if not expressly granted, the power to revoke it. By extension, the power to revoke is limited by the authority to grant the license, from which it is derived in the first place. Thus, if the FDA grants a license upon its finding that the applicant drug store has complied with the requirements of the general laws and the implementing administrative rules and regulations, it is only for their violation that the FDA may revoke the said license. By the same token, having granted the permit upon his ascertainment that the conditions thereof as applied particularly to Olongapo City have been complied with, it is only for the violation of such conditions that the mayor may revoke the said permit.

4. ID.; FOOD AND DRUG ADMINISTRATION; ORDER OF CLOSURE OF A DRUG STORE FOR VIOLATION OF ITS CONDITIONS; GROUND NOT AVAILABLE AS A GROUND FOR REVOCATION OF THE MAYOR'S PERMIT OF THE SAME STORE. — In the present case, the closure of the San Sebastian Drug Store was ordered by the FDA for violation of its own conditions, which it certainly had the primary power to enforce. By revoking the mayor's permit on the same ground for which the San Sebastian Drug Store had already been penalized by the FDA, the mayor was in effect reversing the decision of the latter on a matter that came under its jurisdiction. As the infraction involved the pharmacy and drug laws which the FDA had the direct responsibility to execute, the mayor had no

authority to interpose his own findings on the matter and substitute them for the decision already made by the FDA.

5. ID.; FACTUAL FINDINGS OF ADMINISTRATIVE AUTHORITIES, ACCORDED GREAT RESPECT. — The indefinite suspension of the mayor's permit for Olongapo City Drug Store was based on the transfer thereof to the site of the San Sebastian Drug Store as approved by the FDA but without permission from the petitioner. On this matter, the Court believes that the final decision rested with the mayor. The condition violated related more to the location in Olongapo City of business establishments in general than to the regulation of drug stores in particular. It therefore came under the petitioner's jurisdiction.

D E C I S I O N

CRUZ, J p:

The issue before the Court is the conflict between the Food and Drug Administration and the mayor of Olongapo City over the power to grant and revoke licenses for the operation of drug stores in the said city. While conceding that the FDA possesses such power, the mayor claims he may nevertheless, in the exercise of his own power, prevent the operation of drug stores previously permitted by the former.

There are two drug stores involved in this dispute, to wit, the San Sebastian Drug Store and the Olongapo City Drug Store, both owned by private respondent Rosalinda Yambao. 1 They are located a few meters from each other in the same building on Hospital Road, Olongapo City. 2 They were covered by Mayor's Permits Nos. 1954 and 1955, respectively, issued for the year 1980, 3 and licenses to operate issued by the FDA for the same year. 4

This case arose when on March 21, 1980, at about 5:00 o'clock in the afternoon, a joint team composed of agents from the FDA and narcotics agents from the Philippine Constabulary conducted a "test buy" at San Sebastian Drug Store and was sold 200 tablets of Valium, 10 mg. worth P410.00 without a doctor's prescription. 5

A report on the operation was submitted to the petitioner, as mayor of Olongapo City, on April 9, 1980. 6 On April 17, 1980, he issued a letter summarily revoking Mayor's Permit No. 1954, effective April 18, 1980, "for rampant violation of R.A. 5921, otherwise known as the Pharmacy Law and R.A. 6425 or the Dangerous Drugs Act of 1972." 7 Later, when the petitioner went to Singapore, Vice-Mayor Alfredo T. de Perio, Jr. caused the posting of a signboard at the San Sebastian Drug Store announcing its permanent closure. 8

Acting on the same investigation report of the "test-buy," and after hearing, FDA Administrator Arsenio Regala, on April 25, 1980, directed the closure of the drug store for three days and its payment of a P100.00 fine for violation of R.A. No. 3720. He also issued a stern warning to Yambao against a repetition of the infraction. 9 On April 29, 1980, the FDA lifted its closure order after noting that the penalties imposed had already been discharged and allowed the drug store to resume operations. 10

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On April 30, 1980, Yambao, through her counsel, wrote a letter to the petitioner seeking reconsideration of the revocation of Mayor's Permit No. 1954. 11 On May 7, 1980, having received on reply, she and her husband filed with the Regional Trial Court of Olongapo City a complaint for mandamus and damages, with a prayer for a writ of preliminary injunction, against the petitioner and Vice-Mayor de Perio. 12

On the same date, Yambao requested permission from the FDA to exchange the locations of the San Sebastian Drug Store and the Olongapo City Drug Store for reasons of "business preference." 13

The request was granted. 14 But when informed to this action, the petitioner, in a letter to the private respondent dated May 13, 1980, disapproved the transfers and suspended Mayor's Permit No. 1955 for the Olongapo City Drug Store. 15

The Yambaos then filed on May 15, 1980, a supplemental complaint questioning the said suspension and praying for the issuance of a preliminary writ of prohibitory injunction. 16 On the same day, the respondent judge issued an order directing the maintenance of the status quo with respect to the Olongapo City Drug Store pending resolution of the issues. 17

On May 21, 1980, the petitioner wrote the FDA requesting reconsideration of its order of April 29, 1980, allowing resumption of the operation of the San Sebastian Drug Store. 18 The request was denied by the FDA in its reply dated May 27, 1980. 19

A motion for reconsideration of the status quo order had earlier been filed on May 1, 1980 by the petitioner. After a joint hearing and an exchange of memoranda thereon, the respondent judge issued an order on July 16, 1980, 20 the dispositive portion of which read as follows:

"WHEREFORE, the defendants' motion for reconsideration of the status quo order dated May 15, 1980, is hereby DENIED and the letter of the defendant city mayor dated April 17, 1980, for the revocation of Mayor's Permit No. 1954 for the San Sebastian Drug Store is declared null and void.

"Accordingly, a writ of preliminary prohibitory injunction is heretofore issued enjoining defendants from doing acts directed towards the closure of the San Sebastian Drug Store and the suspension of the Olongapo City Drug Store both situated at Hospital Road, Olongapo City. Further, the signboard posted at San Sebastian Drug Store by the defendants is ordered removed in order that the said drug store will resume its normal business operation.

"The hearing of the main petition for damages is set on August 14, 1980, at 1:30 o'clock in the afternoon."

The petitioner's motion for reconsideration of the above-stated order was denied in an order dated September 4, 1980. 21 The petitioner thereupon came to this Court in this petition for certiorari and prohibition with preliminary injunction, to challenge the aforesaid orders.

We issued a temporary restraining order against the respondent judge on October 27, 1980, 22 but lifted it on December 10, 1980, for failure of the petitioner to file his comment on the private respondents' motion to lift the said order and/or for issuance of a counter restraining order. 23

First, let us compare the bases of the powers and functions respectively claimed by the FDA and the petitioner as mayor of Olongapo City.

The task of drug inspection was originally lodged with the Board of Pharmaceutical Examiners pursuant to Act 2762, as amended by Act 4162. By virtue of Executive Order No. 392 dated January 1, 1951 (mandating reorganization of various departments and agencies), this was assumed by the Department of Health and exercised through an office in the Bureau of Health known as the Drug Inspection Section. This section was empowered "to authorize the opening of pharmacies, drug stores and dispensaries, and similar establishments after inspection by persons authorized by law."

The Food and Drug Administration was created under R.A. No. 3720 (otherwise known as the Food, Drug and Cosmetic Act), approved on June 22, 1963, and vested with all drug inspection functions in line with "the policy of the State to insure safe and good quality supply of food, drug and cosmetics, and to regulate the production, sale and traffic of the same to protect the health of the people." Section 5 of this Act specifically empowers it: 

"(e) to issue certificates of compliance with technical requirements to serve as basis for the issuance of license and spotcheck for compliance with regulations regarding operation of food, drug and cosmetic manufacturers and establishments."

For a more effective exercise of this function, the Department of Health issued on March 5, 1968, Administrative Order No. 60, series of 1968, laying down the requirements for the application to be filed with the FDA for authorization to operate or establish a drug establishment. The order provides that upon approval of the application, the FDA shall issue to the owner or administrator of the drug store or similar establishment a "License to Operate" which "shall be renewed within the first 3 months of each year upon payment of the required fees." This license contains the following reservation:

"However, should during the period of issue, a violation of any provisions of the Food, Drug and Cosmetic Act and/or the regulations issued thereunder be committed, this License shall be subject to suspension or revocation."

When the drug addiction problem continued to aggravate, P.D. No. 280 was promulgated on August 27, 1973, to give more teeth to the powers of the FDA, thus:

"Section 1. Any provision of law to the contrary notwithstanding, the Food and Drug Administrator is hereby authorized to order the closure, or suspend or revoke the license of any drug establishment which after administrative investigation is found guilty of selling or dispensing drugs, medicines and other similar substances in violation of the Food, Drug and Cosmetic Act, and Dangerous Drugs Act of 1972, or other laws regulating the sale or dispensation of drugs, or rules and regulations issued pursuant thereto.

"Sec. 2. The administrative investigation shall be summary in character. The owner of the drug store shall be given an Opportunity to be heard." (P.D. 280, emphasis supplied.)

For his part, the petitioner, traces his authority to the charter of Olongapo City, R.A. No. 4645, which inter alia empowers the city mayor under Section 10 thereof:

"k. to grant or refuse municipal licenses to operate or permits of all classes and to revoke the same for violation of the conditions upon which they were granted, or if acts prohibited by law or city ordinances are being committed under protection of such licenses or in the premises in which the business for which the same have been granted is carried on, or for any other good reason of general interest."

The charter also provides, in connection with the powers of the city health officer, that:

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"Sec. 6(k). He and his representatives shall have the power to arrest violators of health laws, ordinances, rules and regulations and to recommend the revocation or suspension of the permits of the different establishments to the City Mayor for violation of health laws, ordinances, rules and regulations ." (Emphasis supplied.)

An application to establish a drug store in Olongapo City must be filed with the Office of the Mayor and must show that the applicant has complied with the existing ordinances on health and sanitation, location or zoning, fire or building, and other local requirements. If the application is approved, the applicant is granted what is denominated a "Mayor's Permit" providing inter alia that it "is valid only at the place stated above and until (date), unless sooner revoked for cause." 24

Courts of justice, when confronted with apparently conflicting statutes, should endeavor to reconcile the same instead of declaring outright the invalidity of one as against the other. Such alacrity should be avoided. The wise policy is for the judge to harmonize them if this is possible, bearing in mind that they are equally the handiwork of the same legislature, and so give effect to both while at the same time also according due respect to a coordinate department of the government. It is this policy the Court will apply in arriving at the interpretation of the laws above-cited and the conclusions that should follow therefrom.

A study of the said laws will show that the authorization to operate issued by the FDA is a condition precedent to the grant of a mayor's permit to the drug store seeking to operate within the limits of the city. This requirement is imperative. The power to determine if the opening of the drug store is conformable to the national policy and the laws on the regulation of drug sales belongs to the FDA. Hence, a permit issued by the mayor to a drug store not previously cleared with and licensed by the said agency will be a nullity.

This is not to say, however, that the issuance of the mayor's permit is mandatory once it is shown that the FDA has licensed the operation of the applicant drug store. This is not a necessary consequence. For while it may appear that the applicant has complied with the pertinent national laws and policies, this fact alone will not signify compliance with the particular conditions laid down by the local authorities like zoning, building, health, sanitation, and safety regulations, and other municipal ordinances enacted under the general welfare clause. This compliance still has to be ascertained by the mayor if the permit is to be issued by his office. Should he find that the local requirements have not been observed, the mayor must then, in the exercise of his own authority under the charter, refuse to grant the permit sought.

The power to approve a license includes by implication, even if not expressly granted, the power to revoke it. By extension, the power to revoke is limited by the authority to grant the license, from which it is derived in the first place. Thus, if the FDA grants a license upon its finding that the applicant drug store has complied with the requirements of the general laws and the implementing administrative rules and regulations, it is only for their violation that the FDA may revoke the said license. By the same token, having granted the permit upon his ascertainment that the conditions thereof as applied particularly to Olongapo City have been complied with, it is only for the violation of such conditions that the mayor may revoke the said permit.

Conversely, the mayor may not revoke his own permit on the ground that the compliance with the conditions laid down and found satisfactory by the FDA when it issued its license is in his own view not

acceptable. This very same principle also operates on the FDA. The FDA may not revoke its license on the ground that the conditions laid down in the mayor's permit have been violated notwithstanding that no such finding has been made by the mayor.

In the present case, the closure of the San Sebastian Drug Store was ordered by the FDA for violation of its own conditions, which it certainly had the primary power to enforce. By revoking the mayor's permit on the same ground for which the San Sebastian Drug Store had already been penalized by the FDA, the mayor was in effect reversing the decision of the latter on a matter that came under its jurisdiction. As the infraction involved the pharmacy and drug laws which the FDA had the direct responsibility to execute, the mayor had no authority to interpose his own findings on the matter and substitute them for the decision already made by the FDA.

It would have been different if the offense condoned by the FDA was a violation of, say, a city ordinance requiring buildings to be provided with safety devices or equipment, like fire extinguishers. The city executive may ignore such condonation and revoke the mayor's permit just the same. In this situation, he would be acting properly because the enforcement of the city ordinance is his own prerogative. In the present case, however, the condition allegedly violated related to a national law, not to a matter of merely local concern, and so came under the jurisdiction of the FDA.

Settled is the rule that the factual findings of administrative authorities are accorded great respect because of their acknowledged expertise in the fields of specialization to which they are assigned. 25 Even the courts of justice, including this Court, are concluded by such findings in the absence of a clear showing of a grave abuse of discretion, which is not present in the case at bar. For all his experience in the enforcement of city ordinances, the petitioner cannot claim the superior aptitudes of the FDA in the enforcement of the pharmacy and drug addiction laws. He should therefore also be prepared, like the courts of justice themselves, to accept its decisions on this matter.

The petitioner magnifies the infraction committed by the San Sebastian Drug Store but the FDA minimizes it. According to the FDA Administrator, Valium is not even a prohibited drug, which is why the penalty imposed was only a 3-day closure of the drug store and a fine of P100.00. 26 Notably, the criminal charges filed against the private respondent for the questioned transaction were dismissed by the fiscal's office. 27

It is also worth noting that the San Sebastian Drug Store was penalized by the FDA only after a hearing held on April 25, 1980, at which private respondent Yambao, assisted by her lawyer-husband, appeared and testified. 28 By contrast, the revocation of the mayor's permit was communicated to her in a letter 29 reading simply as follows:

 April 17, 1980Rosalinda Yambaoc/o San Sebastian Drug StoreHospital Road, Olongapo CityMadame:Based on a report submitted by PC Major Virtus V. Gil, Chief 3 RFO, Dis. B, Task Force `Bagong Buhay,' you are rampantly violating the provisions of Republic Act 5921 otherwise known as the `Pharmacy Law.'Aside from this, there is evidence that you are dispensing regulated drugs contrary to the provisions of R.A. 6425 otherwise known as the Dangerous Drugs Act of 1972.

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In view of the above, Mayor's Permit No. 1954 heretofore issued in your name for the operation of a drug store (San Sebastian) at the Annex Building of the Fil-Am (IYC),along Hospital Road, this City, is REVOKED effective April 18, 1980. PLEASE BE GUIDED ACCORDINGLY. Very truly yours, (SGD.) RICHARD J. GORDON City Mayor

If only for the violation of due process which is manifest from this letter, the mayor's arbitrary action can be annulled.

The indefinite suspension of the mayor's permit for Olongapo City Drug Store was based on the transfer thereof to the site of the San Sebastian Drug Store as approved by the FDA but without permission from the petitioner. On this matter, the Court believes that the final decision rested with the mayor. The condition violated related more to the location in Olongapo City of business establishments in general than to the regulation of drug stores in particular. It therefore came under the petitioner's jurisdiction.

The FDA would have the right to disapprove the site of the drug store only if it would impair the health or other interests of the customers in contravention of the national laws or policies, as where the drug store is located in an unsanitary site. But the local executive would have reason to object to the location, even if approved by the FDA, where it does not conform to, say, a zoning ordinance intended to promote the comfort and convenience of the city residents.

The reason given by the petitioner in disapproving the transfer was violation of Mayor's Permit No. 1955, which by its terms was valid only at the place stated therein. In the letter of May 13, 1980, 30 the private respondent was clearly informed that for violation of the condition of Mayor's Permit No. 1955 granting her the privilege of operating the Olongapo City Drug Store at No. 1-B Fil-Am Bldg., Hospital Road, the said permit was "hereby suspended." We find that reason was valid enough. The permit clearly allowed the drug store to operate in the address given and not elsewhere. No hearing was necessary because the transfer without the mayor's permission is not disputed and was in fact impliedly admitted by the private respondent.

If the private respondent wanted to transfer her drug store, what she should have done was to secure the approval not only of the FDA but also, and especially, of the mayor. Merely notifying the petitioner of the change in the location of her drug stores as allowed by the FDA was not enough. The FDA had no authority to revoke that particular condition of the mayor's permits indicating the sites of the two drug stores as approved by the mayor in the light of the needs of the city. Only the mayor could.

We assume that Mayor's Permit No. 1954 could also have been validly suspended for the same reason (as the sites of the two drug stores were exchanged without amendment of their respective permits) were it not for the fact that such permit was revoked by the petitioner on the more serious ground of violation of the Pharmacy Law and the Dangerous Drugs Act of 1972.

It is understood, however, that the suspension should be deemed valid only as the two drug stores have not returned to their original sites as specified in their respective permits. Indefinite suspension will

amount to a permanent revocation, which will not be a commensurate penalty with the degree of the violation being penalized.

The Court adds that denial of the request for transfer, if properly made by the private respondents, may not be validly denied by the judge in the absence of a clear showing that the transfer sought will prejudice the residents of the city. As the two drug stores are only a few meters from each other, and in the same building, there would seem to be no reason why the mere exchange of their locations should not be permitted. Notably, the location of the two drug stores had previously been approved in Mayor's Permit Nos. 1954 and 1955.

Our holding is that the petitioner acted invalidly in revoking Mayor's Permit No. 1954 after the FDA had authorized the resumption of operations of the San Sebastian Drug Store following the enforcement of the penalties imposed upon it. However, it was competent for the petitioner to suspend Mayor's Permit No. 1955 for the transfer of the Olongapo City Drug Store in violation of the permit. Such suspension should nevertheless be effective only pending the return of the drug store to its authorized original site or the eventual approval by the mayor of the requested transfer if found to be warranted.

The petitioner is to be commended for his zeal in the promotion of the campaign against drug addiction, which has sapped the vigor and blighted the future of many of our people, especially the youth. The legal presumption is that he acted in good faith and was motivated only by his concern for the residents of Olongapo City when he directed the closure of the first drug store and the suspension of the permit of the other drug store. It appears, though, that he may have overreacted and was for this reason properly restrained by the respondent judge.

WHEREFORE, the challenged Orders of July 6, 1980 and September 4, 1980, ate MODIFIED in the sense that the suspension of Mayor's Permit No. 1955 shall be considered valid but only until the San Sebastian Drug Store and the Olongapo City Drug Store return to their original sites as specified in the FDA licenses and the mayor's permits or until the request for transfer, if made by the private respondents, is approved but the petitioner. The rest of the said Orders are AFFIRMED, with costs against the petitioner.

SO ORDERED.

Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ ., concur.

Footnotes

1.Rollo, p. 47.2.Ibid.3.Id.4.Id., p. 96.5.Id., pp. 48, 15.6.Id.7.Id., p. 23.8.Id., p. 48.

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9.Id., pp. 24-26.10.Id., p. 26.11.Id., pp. 27-28.12.Id., pp. 14-21.13.Id., p. 34.14.Id.15.Id., pp. 36-37.16.Id., pp. 29-33.17.Id., p. 38.18.Id., pp. 98-100.19.Id., p. 104.20.Id., pp. 47-54.21.Id., p. 64.22.Id., pp. 65-67.23.Id., pp. 160-162.24.Id., p. 211.25.Tagum Doctors Enterprises v. Gregorio Apsay, et al., G.R. No. 81188, August 30, 1988; Antonio

de Leon v. Heirs of Gregorio Reyes, et al., l52 SCRA 584; Liangga Bay Logging Co., Inc. v. Hon. Enage, et al., 152 SCRA 80; Packaging Products Corp. v. NLRC, 152 SCRA 210, and the cases cited therein; Ateneo de Manila University v. CA, 145 SCRA 100.

26.Rollo, p. 25.27.Ibid., pp. 234-242.28.Id., p. 14.29.Id., p. 23.30.Id., p. 36.

 ||| (Gordon v. Veridiano, G.R. No. L-55230, [November 8, 1988])

CASE DIGESTRichard Gordon v. Regino Veridiano II

G.R. No. L-55230Nov. 8, 1988

FACTS:

Respondent Yambao owns a San Sebastian Drugstore and an Olongapo City Drugstore. A ‘test buy’ operation at San Sebastian Drugstore, wherein agents were sold 200 tablets of Valium without a doctor’s prescription, gave rise to the closure ordered by the FDA. Before such order was promulgated, the Mayor revoked the Mayor’s Permits issued to San Sebastian Drugstore and subsequently, a signboard was posted by the Vice-Mayor at the drugstore announcing its permanent closure. On May 7, 1980, FDA approved Respondent’s request to exchange the locations of the two drugstores (which were 5m apart and in the same building). Upon knowledge of this, Petitioner then revoked the Mayor’s Permit issued to Olongapo City Drugstore.

ISSUE:

The conflict between the FDA’s and the mayor’s power to grant and revoke licenses for the operation of drugstores.

RULING:

The FDA had the authority to order the closure of San Sebastian Drugstore, the Mayor however did not. In the case of Olongapo City Drugstore however, the authority rested on the Mayor (local jurisdiction).

LATIN MAXIM:

20c, 38b

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EN BANC

[G.R. No. L-23052. January 29, 1968.]

CITY OF MANILA, petitioner, vs. GENERO M. TEOTICO and THE COURT OF APPEALS, respondents.

City Fiscal Manuel T. Reyes for petitioner.Sevilla, Daza & Associates for respondents.

SYLLABUS

1. STATUTORY CONSTRUCTION; SPECIFIC PROVISIONS OF CIVIL CODE, THOUGH A GENERAL LAW, PREVAIL OVER MANILA CHARTER, SPECIAL LAW. — Insofar as its territorial application is concerned, Republic Act 409 is a special law and the Civil Code is a general legislation; but as regards the subject-matter of the provisions of sec. 4, Rep. Act 409 and Article 2189 of the Civil Code, the former establishes a general rule regulating the liability of the City of Manila for damages or injury to persons or property arising from the failure of city officers to enforce the provisions of said Act; while article 2189 of the Civil Code constitutes a particular prescription making provinces, cities and municipalities liable for damages for the death or injury suffered by any person by reason of the defective condition of roads, streets and other public works under the control or supervision of said municipal governments. In other words, sec. 4 of Rep. Act 409 refers to liability arising from negligence in general regardless of the object thereof, whereas Article 2189 of the Civil Code, governs liability due to defective streets in particular. The Civil Code is decisive herein because the present action is based on the alleged defective condition of a road.

2. PLEADINGS; ANSWER; ALLEGATIONS NOT SET FORTH IN ANSWER, CANNOT BE RAISED FOR FIRST TIME ON APPEAL. — The assertion that P. Burgos Avenue is a national highway for which the City of Manila is not liable, was made for the first time in the petitioner's motion for reconsideration of the decision of the Court of Appeals. It was not alleged in the answer. Such assertion raised a question of fact which had not been put in issue in the trial court and cannot, therefore, be raised for the first time on appeal much less after the rendition of the decision of the appellate court.

3. ID.; FINDINGS OF FACT OF COURT OF APPEALS, CONCLUSIVE. — The determination of whether or not P. Burgos Avenue is under the control or supervision of the City of Manila and whether the latter is guilty of negligence in connection with the maintenance of said road is a question of fact — a question already decided by the Court of Appeals and the factual findings of said Court are not subject to a review by the Supreme Court.

D E C I S I O N

CONCEPCION, C.J p:

Appeal by certiorari from a decision of the Court of Appeals.

On January 27, 1958, at about 8:00 p.m., Genaro N. Teotico was at the corner of the Old Luneta and P. Burgos Avenue, Manila, within a "loading and unloading" zone, waiting for a jeepney to take him down town. After waiting for about five minutes, he managed to hail a jeepney that came along to a stop. As he stepped down from the curb to board the jeepney, and took a few steps, he fell inside an uncovered and unlighted catchbasin or manhole on P. Burgos Avenue. Due to the fall, his head hit the rim of the manhole breaking his eyeglasses and causing broken pieces thereof to pierce his left eyelid. As blood flowed therefrom, impairing his vision, several persons came to his assistance and pulled him out of the manhole. One of them brought Teotico to the Philippine General Hospital, where his injuries were treated, after which he was taken home. In addition to the lacerated wound in his left upper eyelid, Teotico suffered contusions on the left thigh, the left upper arm, the right leg and the upper lip, apart from an abrasion on the right infra-patella region. These injuries and the allergic eruptions caused by anti-tetanus injections administered to him in the hospital, required further medical treatment by a private practitioner who charged therefor P1,400.00.

As a consequence of the foregoing occurrence, Teotico filed, with the Court of First Instance of Manila, a complaint — which was, subsequently, amended — for damages against the City of Manila, its mayor, city engineer, city health officer, city treasurer and chief of police. As stated in the decision of the trial court, and quoted with approval by the Court of Appeals,

"At the time of the incident, plaintiff was a practicing public accountant, a businessman and a professor at the University of the East. He held responsible positions in various business firms like the Philippine Merchandising Co., the A. U. Valencia and Co., the Silver Swan Manufacturing Company and the Sincere Packing Corporation. He was also associated with several civic organizations such as the Wack Wack Golf Club, the Chamber of Commerce of the Philippines, Y's Men Club of Manila and the Knight's of Rizal. As a result of the incident, plaintiff was prevented from engaging in his customary occupation for twenty days. Plaintiff has lost a daily income of about P50.00 during his incapacity to work. Because of the incident, he was subjected to humiliation and ridicule by his business associates and friends. During the period of his treatment, plaintiff was under constant fear and anxiety for the welfare of his minor children since he was their only support. Due to the filing of this case, plaintiff has obligated himself to pay his counsel the sum of P2,000.00.

"On the other hand, the defense presented evidence, oral and documentary, to prove that the Storm Drain Section, Office of the City Engineer of Manila, received a report of the uncovered condition of a catchbasin at the corner of P. Burgos and Old Luneta Streets, Manila, on January 24, 1958, but the same was covered on the same day (Exhibit 4); that again the iron cover of the same catchbasin was reported missing on January 30, 1958, but the said cover was replaced the next day (Exhibit 5); that the Office of the City Engineer never received any report to the effect that the catchbasin in question was not covered between January 25 and 29, 1958; that it has always been a policy of the said office, which is charged with the duty of installation, repair and care of storm drains in the City of Manila, that whenever a report is received from whatever source of the loss of a catchbasin cover, the matter is immediately attended to, either by immediately replacing the missing cover or covering the catchbasin with steel matting; that because of the lucrative scrap iron business then prevailing, stealing of iron catchbasin covers was rampant; that the Office of the City Engineer has filed complaints in court resulting from theft of said iron covers; that in order to prevent such thefts, the city government has changed the position and layout of catch basins in the City by constructing them under the sidewalk with concrete cement covers and openings on the sides of the gutter; and that these changes had been undertaken by the city from time to time whenever funds were available."

After appropriate proceedings the Court of First Instance of Manila rendered the aforementioned decision sustaining the theory of the defendants and dismissing the amended complaint, without costs.

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On appeal taken by plaintiff, this decision was affirmed by the Court of Appeals, except insofar as the City of Manila is concerned, which was sentenced to pay damages in the aggregate sum of P6,750.00. 1 Hence, this appeal by the City of Manila.

The first issue raised by the latter is whether the present case is governed by Section 4 of Republic Act No. 409 (Charter of the City of Manila) reading:

"The city shall not be liable or held for damages or injuries to persons or property arising from the failure of the Mayor, the Municipal Board, or any other city officer, to enforce the provisions of this chapter, or any other law or ordinance, or from negligence of said Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said provisions."

or by Article 2189 of the Civil Code of the Philippines, which provides:

"Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by, any person by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision."

Manila maintains that the former provision should prevail over the latter, because Republic Act 409 is a special law, intended exclusively for the City of Manila, whereas the Civil Code is a general law, applicable to the entire Philippines.

The Court of Appeals, however, applied the Civil Code, and, we think, correctly. It is true that, insofar as its territorial application is concerned, Republic Act No. 409 is a special law and the Civil Code a general legislation; but, as regards the subject- matter of the provisions above quoted, Section 4 of Republic Act 409 establishes a general rule regulating the liability of the City of Manila for "damages or injury to persons or property arising from the failure of" city officers "to enforce the provisions of" said Act "or any other law or ordinance, or from negligence" of the city "Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said provisions." Upon the other hand, Article 2189 of the Civil Code constitutes a particular prescription making "provinces, cities and municipalities . . . liable for damages for the death of, or injury suffered by, any person by reason" — specifically — "of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision." In other words, said section 4 refers to liability arising from negligence, in general, regardless of the object thereof, whereas Article 2189 governs liability due to "defective streets, "in particular. Since the present action is based upon the alleged defective condition of a road, said Article 2189 is decisive thereon.

It is urged that the City of Manila cannot be held liable to Teotico for damages: 1) because the accident involving him took place in a national highway; and 2) because the City of Manila has not been negligent in connection therewith. As regards the first issue, we note that it is based upon an allegation of fact not made in the answer of the City. Moreover, Teotico alleged in his complaint, as well as in his amended complaint, that his injuries were due to the defective condition of a street which is "under the supervision and control" of the City. In its answer to the amended complaint, the City, in turn, alleged that "the streets aforementioned were and have been constantly kept in good condition and regularly inspected and the storm drains and manholes thereof covered, by the defendant City and its officers concerned" who

"have been ever vigilant and zealous in the performance of their respective functions and duties as imposed upon them by law." Thus, the City had, in effect, admitted that P. Burgos Avenue was and is under its control and supervision.

Moreover, the assertion to the effect that said avenue is a national highway was made, for the first time, in its motion for reconsideration of the decision of the Court of Appeals. Such assertion raised, therefore, a question of fact, which had not been put in issue in the trial court, and can not be set up, for the first time, on appeal, much less after the rendition of the decision of the appellate court, in a motion for the reconsideration thereof.

At any rate, under Article 2189 of the Civil Code, it is not necessary for the liability therein established to attach that the defective roads or streets belong to the province, city or municipality from which responsibility is exacted. What said article requires is that the province, city or municipality have either "control or supervision" over said street or road. Even if P. Burgos avenue were, therefore, a national highway, this circumstance would not necessarily detract from its "control or supervision" by the City of Manila, under Republic Act 409. In fact Section 18(x) thereof provides:

"SEC. 18. Legislative powers. — The Municipal Board shall have the following legislative powers:

xxx xxx xxx

"(x) Subject to the provisions of existing law to provide for the laying out, construction and improvement, and to regulate the use of streets, avenues, alleys, sidewalks, wharves, piers, parks, cemeteries, and other public places; to provide for lighting, cleaning, and sprinkling of streets and public places; . . . to provide for the inspection of, fix the license fees for and regulate the openings in the same for the laying of gas, water, sewer and other pipes, the building and repair of tunnels, sewers, and drains, and all structures in and under the same and the erecting of poles and the stringing of wires therein; to provide for and regulate cross-walks, curbs, and gutters therein; . . . to regulate traffic and sales upon the streets and other public places; to provide for the abatement of nuisances in the same and punish the authors or owners thereof; to provide for the construction and maintenance, and regulate the use, of bridges, viaducts, and culverts; to prohibit and regulate ball playing, kiteflying, hoop rolling, and other amusements which may annoy persons using the streets and public places, or frighten horses or other animals; to regulate the speed of horses and other animals, motor and other vehicles, cars, and locomotives within the limits of the city; to regulate the lights used on all such vehicles, cars, and locomotives; . . . to provide for and change the location, grade, and crossing of railroads, and compel any such railroad to raise or lower its tracks to conform to such provisions or changes; and to require railroad companies to fence their property, or any part thereof, to provide suitable protection against injury to persons or property, and to construct and repair ditches, drains, sewers, and culverts along and under their tracts, so that the natural drainage of the streets and adjacent property shall not be obstructed."

This authority has been neither withdrawn nor restricted by Republic Act No. 917 and Executive Order No. 113, dated May 2, 1955, upon which the City relies. Said Act governs the disposition or appropriation of the highway funds and the giving of aid to provinces, chartered cities and municipalities in the construction of roads and streets within their respective boundaries, and Executive Order No. 113 merely implements the provisions of said Republic Act No. 917, concerning the disposition and appropriation of the highway funds. Moreover, it provides that "the construction, maintenance and improvement of national primary, national secondary and national aid provincial and city roads shall be accomplished by the Highway District Engineers and Highway City Engineers under the supervision of the Commissioner of Public Highways and shall be financed from such appropriations as may be authorized by the Republic of the Philippines in annual or special appropriation Acts."

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Then, again, the determination of whether or not P. Burgos Avenue is under the control or supervision of the City of Manila and whether the latter is guilty of negligence, in connection with the maintenance of said road, which were decided by the Court of Appeals in the affirmative, is one of fact, and the findings of said Court, thereon are not subject to our review.

WHEREFORE, the decision appealed from should be as it is hereby affirmed, with costs against the City of Manila. It is so ordered.

Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Ruiz Castro, Angeles and Fernando, JJ., concur.

Footnotes

1. Medical fees-P1,400.00; Lost income-P350.00; Moral damages-P3,000.000; and Attorney fees-P2,000.00.

CASE DIGESTCity of Manila v. Teotico

G.R. No. L-2305222 SCRA 267

January 29, 1968

FACTS:

In January 1958, at about 8pm, Teotico was about to board a jeepney in P. Burgos, Manila when he fell into an uncovered manhole, resulting injuries upon him . Thereafter he sued for damages under Art.2189 of the Civil Code the City of Manila, the mayor, the city engineer, the city health officer, the city treasurer, and the chief of police. The CFI Manila ruled against Teotico. Upon appeal, the CA reversed the CFI ruling and held that the City of Manila should pay damages to Teotico.

The City of Manila assailed the decision of the CA on the ground that the charter of Manila states that it shall not be liable for damages caused by the negligence of the city officers in enforcing the charter; that the charter is a special law and shall prevail over the Civil Code which is a general law; and that the accident happened in national highway.

ISSUE:

Whether the City of Manila have control or supervision over P. Burgos Ave making it responsible for the damages suffered by Teotico.

HELD:

Yes. It is true that in case of conflict, a special law prevails over a general law; that the charter of Manila is a special law and that the Civil Code is a general law. However, looking at the particular provisions of each law concerned, the provision of the Manila Charter exempting it from liability caused by the negligence of its officers is a general law in the sense that it exempts the city from negligence of its officers in general. There is no particular exemption but merely a general exemption. On the other hand, Article 2189 of the Civil Code provides a particular prescription to the effect that it makes provinces, cities, and municipalities liable for the damages caused to a certain person by reason of the “…defective condition of roads, streets, bridges, public buildings, and other-public works under their control or supervision.”

The allegation that the incident happened in a national highway was only raised for the first time in the City’s motion for reconsideration in the Court of Appeals, hence it cannot be given due weight. At any rate, even though it is a national highway, the law contemplates that regardless if whether or not the road is national, provincial, city, or municipal, so long as it is under the City’s control and supervision, it shall be responsible for damages by reason of the defective conditions thereof. In the case at bar, the City admitted they have control and supervision over the road where Teotico fell when the City alleged that it has been doing constant and regular inspection of the city’s roads, P. Burgos included.

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EN BANC

[G.R. No. L-41631. December 17, 1976.]

HON. RAMON D. BAGATSING, as Mayor of the City of Manila; ROMAN G. GARGANTIEL, as Secretary to the Mayor; THE MARKET ADMINISTRATOR; and THE MUNICIPAL BOARD OF MANILA, petitioners, vs. HON. PEDRO A. RAMIREZ, in his capacity as Presiding Judge of the Court of First Instance of Manila, Branch XXX and the FEDERATION OF MANILA MARKET VENDORS, INC., respondents.

Santiago F . Alidio and Restituto R. Villanueva for petitioners.Antonio H . Abad, Jr. for private respondent.Federico A. Blay for petitioner for intervention.

D E C I S I O N

MARTIN, J p:

The chief question to be decided in this case is what law shall govern the publication of a tax ordinance enacted by the Municipal Board of Manila, the Revised City Charter (R.A. 409, as amended), which requires publication of the ordinance before its enactment and after its approval, or the Local Tax Code (P.D. No. 231), which only demands publication after approval. cd

On June 12, 1974, the Municipal Board of Manila enacted Ordinance No. 7522, "AN ORDINANCE REGULATING THE OPERATION OF PUBLIC MARKETS AND PRESCRIBING FEES FOR THE RENTALS OF STALLS AND PROVIDING PENALTIES FOR VIOLATION THEREOF AND FOR OTHER PURPOSES." The petitioner City Mayor, Ramon D. Bagatsing, approved the ordinance on June 15, 1974.

On February 17, 1975, respondent Federation of Manila Market Vendors, Inc. commenced Civil Case 96787 before the Court of First Instance of Manila, presided over by respondent Judge, seeking the declaration of nullity of Ordinance No. 7522 for the reason that (a) the publication requirement under the Revised Charter of the City of Manila has not been complied with; (b) the Market Committee was not given any participation in the enactment of the ordinance, as envisioned by Republic Act 6039; (c) Section 3 (e) of the Anti-Graft and Corrupt Practices Act has been violated; and (d) the ordinance would violate Presidential Decree No. 7 of September 30, 1972 prescribing the collection of fees and charges on livestock and animal products. prLL

Resolving the accompanying prayer for the issuance of a writ of preliminary injunction, respondent Judge issued an order on March 1, 1975, denying the plea for failure of the respondent Federation of Manila Market Vendors, Inc. to exhaust the administrative remedies outlined in the Local Tax Code.

After due hearing on the merits, respondent Judge rendered its decision on August 29, 1975, declaring the nullity of Ordinance No. 7522 of the City of Manila on the primary ground of non-compliance with the requirement of publication under the Revised City Charter. Respondent Judge ruled:

"There is, therefore, no question that the ordinance in question was not published at all in two daily newspapers of general circulation in the City of Manila before its enactment. Neither was it published in the same manner after approval, although it was posted in the legislative hall and in all city public markets and city public libraries. There being no compliance with the mandatory requirement of publication before and after approval, the ordinance in question is invalid and, therefore, null and void."

Petitioners moved for reconsideration of the adverse decision, stressing that (a) only a post-publication is required by the Local Tax Code; and (b) private respondent failed to exhaust all administrative remedies before instituting an action in court.

On September 26, 1975, respondent Judge denied the motion.

Forthwith, petitioners brought the matter to Us through the present petition for review on certiorari.

We find the petition impressed with merits.

1. The nexus of the present controversy is the apparent conflict between the Revised Charter of the City of Manila and the Local Tax Code on the manner of publishing a tax ordinance enacted by the Municipal Board of Manila. For, while Section 17 of the Revised Charter provides:

"Each proposed ordinance shall be published in two daily newspapers of general circulation in the city, and shall not be discussed or enacted by the Board until after the third day following such publication. . . . Each approved ordinance . . . shall be published in two daily newspapers of general circulation in the city, within ten days after its approval; and shall take effect and be in force on and after the twentieth day following its publication, if no date is fixed in the ordinance."

Section 43 of the Local Tax Code directs: Cdpr

"Within ten days after their approval, certified true copies of all provincial, city, municipal and barrio ordinances levying or imposing taxes, fees or other charges shall be published for three consecutive days in a newspaper or publication widely circulated within the jurisdiction of the local government, or posted in the local legislative hall or premises and in two other conspicuous places within the territorial jurisdiction of the local government. In either case, copies of all provincial, city, municipal and barrio ordinances shall be furnished the treasurers of the respective component and mother units of a local government for dissemination."

In other words, while the Revised Charter of the City of Manila requires publication before the enactment of the ordinance and after the approval thereof in two daily newspapers of general circulation in the city, the Local Tax Code only prescribes for publication after the approval of "ordinances levying or imposing taxes, fees or other charges" either in a newspaper or publication widely circulated within the jurisdiction of the local government or by posting the ordinance in the local legislative hall or premises and in two other conspicuous places within the territorial jurisdiction of the local government. Petitioners' compliance with the Local Tax Code rather than with the Revised Charter of the City spawned this litigation.

There is no question that the Revised Charter of the City of Manila is a special act since it relates only to the City of Manila, whereas the Local Tax Code is a general law because it applies universally to all local governments. Blackstone defines general law as a universal rule affecting the entire community and special law as one relating to particular persons or things of a class. 1 And the rule commonly said

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is that a prior special law is not ordinarily repealed by a subsequent general law. The fact that one is special and the other general creates a presumption that the special is to be considered as remaining an exception of the general, one as a general law of the land, the other as the law of a particular case. 2 However, the rule readily yields to a situation where the special statute refers to a subject in general, which the general statute treats in particular. The exactly is the circumstance obtaining in the case at bar. Section 17 of the Revised Charter of the City of Manila speaks of "ordinance" in general, i.e., irrespective of the nature and scope thereof, whereas, Section 43 of the Local Tax Code relates to "ordinances levying or imposing taxes, fees or other charges" in particular. In regard, therefore, to ordinances in general, the Revised Charter of the City of Manila is doubtless dominant, but, that dominant force loses its continuity when it approaches the realm of "ordinances levying or imposing taxes, fees or other charges" in particular. There, the Local Tax Code controls. Here, as always, a general provision must give way to a particular provision. 3 Special provision governs. 4 This is especially true where the law containing the particular provision was enacted later than the one containing the general provision. The City Charter of Manila was promulgated on June 18, 1949 as against the Local Tax Code which was decreed on June 1, 1973. The law-making power cannot be said to have intended the establishment of conflicting and hostile systems upon the same subject, or to leave in force provisions of a prior law by which the new will of the legislating power may be thwarted and overthrown. Such a result would render legislation a useless and idle ceremony, and subject the law to the reproach of uncertainty and unintelligibility. 5

The case of City of Manila v. Teotico 6 is opposite. In that case, Teotico sued the City of Manila for damages arising from the injuries he suffered when he fell inside an uncovered and unlighted catchbasin or manhole on P. Burgos Avenue. The City of Manila denied liability on the basis of the City Charter (R.A. 409) exempting the City of Manila from any liability for damages or injury to persons or property arising from the failure of the city officers to enforce the provisions of the charter or any other law or ordinance, or from negligence of the City Mayor, Municipal Board, or other officers while enforcing or attempting to enforce the provisions of the charter or of any other law or ordinance. Upon the other hand, Article 2189 of the Civil Code makes cities liable for damages for the death of, or injury suffered by any persons by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision. On review, the Court held the Civil Code controlling. It is true that, insofar as its territorial application is concerned, the Revised City Charter is a special law and the subject matter of the two laws, the Revised City Charter establishes a general rule of liability arising from negligence in general, regardless of the object thereof, whereas the Civil Code constitutes a particular prescription for liability due to defective streets in particular. In the same manner, the Revised Charter of the City prescribes a rule for the publication of "ordinance" in general, while the Local Tax Code establishes a rule for the publication of "ordinance levying or imposing taxes fees or other charges in particular. LibLex

In fact, there is no rule which prohibits the repeal even by implication of a special or specific act by a general or broad one. 7 A charter provision may be impliedly modified or superseded by a later statute, and where a statute is controlling, it must be read into the charter notwithstanding any particular charter provision. 8 A subsequent general law similarly applicable to all cities prevails over any conflicting charter provision, for the reason that a charter must not be inconsistent with the general laws and public policy of the state. 9 A chartered city is not an independent sovereignty. The state remains supreme in all matters not purely local. Otherwise stated, a charter must yield to the constitution and general laws

of the state, it is to have read into it that general law which governs the municipal corporation and which the corporation cannot set aside but to which it must yield. When a city adopts a charter, it in effect adopts as part of its charter general law of such character. 10  2. The principle of exhaustion of administrative remedies is strongly asserted by petitioners as having been violated by private respondent in bringing a direct suit in court. This is because Section 47 of the Local Tax Code provides that any question or issue raised against the legality of any tax ordinance, or portion thereof, shall be referred for opinion to the city fiscal in the case of tax ordinance of a city. The opinion of the city fiscal is appealable to the Secretary of Justice, whose decision shall be final and executory unless contested before a competent court within thirty (30) days. But, the petition below plainly shows that the controversy between the parties is deeply rooted in a pure question of law: whether it is the Revised Charter of the City of Manila or the Local Tax Code that should govern the publication of the tax ordinance. In other words, the dispute is sharply focused on the applicability of the Revised City Charter or the Local Tax Code on the point at issue, and not on the legality of the imposition of the tax. Exhaustion of administrative remedies before resort to judicial bodies is not an absolute rule. It admits of exceptions. Where the question litigated upon is purely a legal one, the rule does not apply. 11 The principle may also be disregarded when it does not provide a plain, speedy and adequate remedy. It may and should be relaxed when its application may cause great and irreparable damage. 12

3. It is maintained by private respondent that the subject ordinance is not a "tax ordinance," because the imposition of rentals, permit fees, tolls and other fees is not strictly a taxing power but a revenue-raising function, so that the procedure for publication under the Local Tax Code finds no application. The pretense bears its own marks of fallacy. Precisely, the raising of revenues is the principal object of taxation. Under Section 5, Article XI of the New Constitution, "Each local government unit shall have the power to create its own sources of revenue and to levy taxes, subject to such provisions as may be provided by law." 13 And one of those sources of revenue is what the Local Tax Code points to in particular: "Local governments may collect fees or rentals for the occupancy or use of public markets and premises . . ." 14 They can provide for and regulate market stands, stalls and privileges, and, also, the sale, lease or occupancy thereof. They can license, or permit the use of, lease, sell or otherwise dispose of stands, stalls or marketing privileges. 15

It is a feeble attempt to argue that the ordinance violates Presidential Decree No. 7, dated September 30, 1972, insofar as it affects livestock and animal products, because the said decree prescribes the collection of other fees and charges thereon "with the exception of ante-mortem and post-mortem inspection fees, as well as the delivery, stockyard and slaughter fees as may be authorized by the Secretary of Agriculture and Natural Resources." 16 Clearly, even the exception clause of the decree itself permits the collection of the proper fees for livestock. And the Local Tax Code (P.D. 231, July 1, 1973) authorizes in its Section 31: "Local governments may collect fees for the slaughter of animals and the use of corrals . . ."

4. The non-participation of the Market Committee in the enactment of Ordinance No. 7522 supposedly in accordance with Republic Act No. 6039, an amendment to the City Charter of Manila, providing that "the market committee shall formulate, recommend and adopt, subject to the ratification of the municipal board, and approval of the mayor, policies and rules or regulation repealing or maneding existing

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provisions of the market code" does not infect the ordinance with any germ of invalidity. 17 The function of the committee is purely recommendatory as the underscored phrase suggests, its recommendation is without binding effect on the Municipal Board and the City Mayor. Its prior acquiescence of an intended or proposed city ordinance is not a condition sine qua non before the Municipal Board could enact such ordinance. The native power of the Municipal Board to legislate remains undisturbed even in the slightest degree. It can move in its own initiative and the Market Committee cannot demur. At most, the Market Committee may serve as a legislative aide of the Municipal Board in the enactment of city ordinances affecting the city markets or, in plain words, in the gathering of the necessary data, studies and the collection of consensus for the proposal of ordinances regarding city markets. Much less could it be said that Republic Act 6039 intended to delegate to the Market Committee the adoption of regulatory measures for the operation and administration of the city markets. Potestas delegata non delegare potest. prcd

5. Private respondent bewails that the market stall fees imposed in the disputed ordinance are diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been let by the City of Manila to the said corporation in a "Management and Operating Contract." The assumption is of course saddled on erroneous premise. The fees collected do not go direct to the private coffers of the corporation. Ordinance No. 7522 was not made for the corporation but for the purpose of raising revenues for the city. That is the object it serves. The entrusting of the collection of the fees does not destroy the public purpose of the ordinance. So long as the purpose is public, it does not matter whether the agency through which the money is dispensed is public or private. The right to tax depends upon the ultimate use, purpose and object for which the fund is raised. It is not dependent on the nature or character of the person or corporation whose intermediate agency is to be used in applying it. The people may be taxed for a public purpose, although it be under the direction of an individual or private corporation. 18

Nor can the ordinance be stricken down as violative of Section 3(e) of the Anti-Graft and Corrupt Practices Act because the increased rates of market stall fees as levied by the ordinance will necessarily inure to the unwarranted benefit and advantage of the corporation. 19 We are concerned only with the issue whether the ordinance in question is intra vires. Once determined in the affirmative, the measure may not be invalidated because of consequences that may arise from its enforcement. 20

ACCORDINGLY, the decision of the court below is hereby reversed and set aside. Ordinance No. 7522 of the City of Manila, dated June 15, 1975, is hereby held to have been validly enacted. No. costs. cdasiaSO ORDERED.

Castro, C .J ., Barredo, Makasiar, Antonio, Muñoz Palma, Aquino and Concepcion, Jr., JJ ., concur.Fernando, J ., concurs but qualifies his assent as to an ordinance intra vires not being open to question "because of consequences that may arise from its enforcement."Teehankee, J ., reserves his vote.

Footnotes

1.Cooley, The Law of Taxation, Vol. 2, 4th ed.

2.Butuan Sawmill, Inc. vs. City of Butuan, L-21516, April 29, 1966, 16 SCRA 758, citing State v. Stoll, 17 Wall. 425.

3.Lichauco & Co. v. Apostol, 44 Phil. 145 (1922).4.Crawford, Construction of Statutes, 265, citing U.S. v. Jackson, 143 Fed. 783.5.See Separate Opinion of Justice Johns in Lichauco, fn. 3, citing Lewis' Sutherland Statutory

Construction, at 161.6.L-23052, January 29, 1968, 22 SCRA 270.7.See 73 Am Jur 2d 521.8.McQuillin, Municipal Corporation, Vol. 6, 3rd ed., 223.9.See Bowyer v. Camden, 11 Atl. 137.10.McQuillin, Municipal Corporation, Vol. 6, 3rd ed., 229-230.11.Tapales v. President and Board of Regents of the U.P., L-17523, March 30, 1963, 7 SCRA 553;

C.N. Hodges v. Municipal Board of the City of Iloilo, L-18276, January 12, 1967, 19 SCRA 32-33; Aguilar v. Valencia, L-30396, July 30, 1971, 40 SCRA 214; Mendoza v. SSC, L-29189, April 11, 1972, 44 SCRA 380.

12.Cipriano v. Marcelino, L-27793, February 28, 1972, 43 SCRA 291; Del Mar v. PVA, L-27299, June 27, 1973, 51 SCRA 346, citing cases.

13.See City of Bacolod v. Enriquez, L-27408, July 25, 1975, Second Division, per Fernando, J ., 65 SCRA 384-85.

14.Article 5, Section 30, Chapter II.15.McQuillin, Municipal Corporations, Vol. 7, 3rd ed., 275.16.P.D. 7 was amended by P.D. 45 on November 10, 1972, so as to allow local governments to

charge the ordinary fee for the issuance of certificate of ownership and one peso for the issuance of transfer certificate for livestock.

17.The market committee is composed of the market administrator as chairman, and a representative of each of the city treasurer, the municipal board, the Chamber of Filipino Retailers, Inc. and the Manila Market Vendors Association Inc. as members.

18.Cooley, The Law of Taxation, Vol. 1, 394-95.19.Section 3 (e); causing any undue injury to any party, including the government, or giving any

private party any unwarranted benefits, advantage or preference in the discharge of his official administrative or judicial functions through manifest partiality evident bad faith or gross inexcusable negligence. . . ."

20.Willoughby, The Constitutional Law of the United States, 668 et seq. ||| (Bagatsing v. Ramirez, G.R. No. L-41631, [December 17, 1976], 165 PHIL 909-920)

 

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CASE DIGESTBagatsing v Ramirez

GR No L-41631December 17, 1976

FACTS:

In 1974, the Municipal Board of Manila enacted Ordinance 7522, regulating the operation of public markets and prescribing fees for the rentals of stalls and providing penalties for violation thereof. The Federation of Manila Market Vendors Inc. assailed the validity of the ordinance, alleging among others the noncompliance to the publication requirement under the Revised Charter of the City of Manila. CFI-Manila declared the ordinance void. Thus, the present petition.

ISSUE:

What law should govern the publication of a tax ordinance, the Revised City Charter, which requires publication of the ordinance before its enactment and after its approval, or the Local Tax Code, which only demands publication after approval?

Is the ordinance valid?

RULING:

The Local Tax Code prevails. There is no question that the Revised Charter of the City of Manila is a special act since it relates only to the City of Manila whereas the Local Tax Code is a general law because it applies universally to all local governments. The fact that one is special and the other general creates a presumption that the special is to be considered as remaining an exception of the general, one as a general law of the land, the other as the law of a particular case. However, the rule readily yields to a situation where the special statute refers to a subject in general, which the general statute treats in particular. The Revised Charter of the City prescribes a rule for the publication of “ordinance” in general, while the Local Tax Code establishes a rule for the publication of “ordinance levying or imposing taxes fees or other charges” in particular.

The ordinance is valid.

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EN BANC

[G.R. No. 111097. July 20, 1994.]

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

SYLLABUS

DAVIDE, JR., J., separate opinion:

1.REMEDIAL LAW; SPECIAL CIVIL ACTIONS; PRINCIPAL CAUSE OF ACTION IN CASE AT BAR ONE FOR DECLARATORY RELIEF. — It must at once be noted that private respondent Pryce Properties Corporation (PRYCE) directly filed with the Court of Appeals its so-called petition for prohibition, thereby invoking the said court's original jurisdiction to issue writs of prohibition under Section 9(1) of B.P. Blg. 129. As I see it, however, the principal cause of action therein is one for declaratory relief: to declare null and unconstitutional — for, inter alia, having been enacted without or in excess of jurisdiction, for impairing the obligation of contracts, and for being inconsistent with public policy — the challenged ordinances enacted by the Sangguniang Panlungsod of the City of Cagayan de Oro. The intervention therein of public respondent Philippine Amusement and Gaming Corporation (PAGCOR) further underscores the "declaratory relief" nature of the action. PAGCOR assails the ordinances for being contrary to the non-impairment and equal protection clauses of the Constitution, violative of the Local Government Code, and against the State's national policy declared in P.D. No. 1869. Accordingly, the Court of Appeals does not have jurisdiction over the nature of the action.

2.ID.; ID.; PROHIBITION; ESTABLISHED POLICY RELATIVE TO HIERARCHY OF COURTS NOT OBSERVED IN FILING OF PETITION IN CASE AT BAR. — Assuming arguendo that the case is one for prohibition, then, under this Court's established policy relative to the hierarchy of courts, the petition should have been filed with the Regional Trial Court of Cagayan de Oro City. I find no special or compelling reason why it was not filed with the said court. I do not wish to entertain the thought that PRYCE doubted a favorable verdict therefrom, in which case the filing of the petition with the Court of Appeals may have been impelled by tactical considerations. A dismissal of the petition by the Court of Appeals would have been in order pursuant to our decisions in People vs. Cuaresma (172 SCRA 415, [1989]) and Defensor-Santiago vs. Vasquez (217 SCRA 633 1993]).

3.STATUTORY CONSTRUCTION; PRESIDENTIAL DECREE NO. 1869 NOT REPEALED PRO TANTO BY LOCAL GOVERNMENT CODE. — The challenged ordinances were enacted pursuant to the Sangguniang Panglungsod's express powers conferred by Section 458paragraph (a)subparagraphs (1)-(V), (3)-(ii), and (4)-(i), (iv), and (vii), Local Government Code, and pursuant to its implied power under Section 16 thereof. . . . . The issue that necessarily arises is whether in granting local governments (such as the City of Cagayan de Oro) the above powers and functions, the Local Government Code has, pro tanto, repealed P.D. No. 1869 insofar as PAGCOR'S general authority to establish and maintain gambling casinos anywhere in the Philippines is concerned. I join the majority in holding that the ordinances cannot repeal P.D. No. 1869.

4.CONTRAVENTION OF LAW NOT NECESSARILY A CONTRAVENTION OF THE CONSTITUTION; ORDINANCES IN CASE AT BAR RECONCILED WITH PRESIDENTIAL DECREE NO. 1869. — The nullification by the Court of Appeals of the challenged ordinances as unconstitutional primarily because it is in contravention to P.D. No. 1869 is unwarranted. A contravention of a law is not necessarily a contravention of the constitution. In any case, the ordinances can still stand even if they be conceded as offending P.D. No. 1869. They can be reconciled, which is not impossible to do. So reconciled, the ordinances should be construed as not applying to PAGCOR.

D E C I S I O N

CRUZ, J p:

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 and 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. 3353AN 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:

SECTION 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.

SECTION 2. That it shall be 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.

SECTION 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

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c) Permanent revocation of the business permit and imprisonment of One (1) year, for the third and subsequent offenses.

SECTION 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:

SECTION 1. The operation of gambling CASINO in the City of Cagayan de Oro is hereby prohibited.

SECTION 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.

SECTION 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, 195 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. cdasia 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. — (1) The Sangguniang Panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:

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

xxx xxx xxx

(v)Enact ordinances intended to prevent, suppress and impose appropriate penalties for habitual drunkenness in public places, vagrancy, mendicancy, prostitution, establishment and maintenance of houses of ill repute, gambling and other prohibited games of chance, fraudulent devices and ways to obtain money or

Statutory Construction – Chapter IX: Statute Construed as a Whole and in Relation to Other Statutes Page 29

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 and 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. cdlex

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

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

It is also maintained that assuming there is doubt regarding the effect of the Local Government Code on P.D. 1869, the doubt must be resolved in favor of the petitioners, in accordance with the direction in the Code calling for its liberal interpretation in favor of the local government units. Section 5 of the Code specifically provides:

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

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

xxx xxx xxx

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

Finally, the petitioners also attack gambling as intrinsically harmful and cite various provisions of the Constitution and several decisions of this Court expressive of the general and official disapprobation of the vice. They invoke the State policies on the family and the proper upbringing of the youth and, as might be expected, call attention to the old case of U.S. v. Salaveria, 7 which sustained a municipal ordinance prohibiting the playing of panguingue. The petitioners decry the immorality of gambling. They also impugn the wisdom of P.D. 1869 (which they describe as "a martial law instrument") in creating PAGCOR and authorizing it to operate casinos "on land and sea within the territorial jurisdiction of the Philippines." LexLib

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 no 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. cda

The only question we can and shall resolve in this petition is the validity of Ordinance No. 3355 and Ordinance No. 3375-93 as enacted by the Sangguniang Panlungsod of Cagayan de Oro City. And we shall do so only by the criteria laid down by law and not by our own convictions on the propriety of gambling.

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

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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. LLpr

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 the 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 petitioner 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 by 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 on 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. prLL

(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; Section 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 of 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

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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 in 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. LexLib

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 in 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. llcd

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 ordinance 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 the costs against the petitioners. It is so ordered.

Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and Mendoza, JJ., concur.Padilla, J. and Davide, Jr., JJ., see separate opinion.

Separate Opinions

PADILLA, J.:

I concur with the majority holding that the city ordinances in question cannot modify much less repeal PAGCOR's general authority to establish and maintain gambling casinos anywhere in the Philippines under Presidential Decree No. 1869. LexLib

In Basco v. Philippine Amusement and Gaming Corporation (PAGCOR), 197 SCRA 52, I stated in a separate opinion that:

". . . I agree with the decision insofar as it holds that the prohibition, control, and regulation of the entire activity known as gambling properly pertain to 'state policy'. It is, therefore, the political departments of government, namely, the legislative and the executive that should decide on what government should do in the entire area of gambling, and assume full responsibility to the people for such policy." (emphasis supplied)

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However, despite the legality of the opening and operation of a casino in Cagayan de Oro City by respondent PAGCOR, I wish to reiterate my view that gambling in any form runs counter to the government's own efforts to re-establish and resurrect the Filipino moral character which is generally perceived to be in a state of continuing erosion.

It is in the light of this alarming perspective that I call upon government to carefully weigh the advantages and disadvantages of setting up more gambling facilities in the country.

That the PAGCOR contributes greatly to the coffers of the government is not enough reason for setting up more gambling casinos because, undoubtedly, this will not help improve, but will cause a further deterioration in the Filipino moral character.

It is worth remembering in this regard that, 1) What is legal is not always moral and 2) the ends do no always justify the means.

As in Basco, I can easily visualize prostitution at par with gambling. And yet, legalization of the former will not render it any less reprehensible even if substantial revenue for the government can be realized from it. The same is true of gambling.

In the present case, it is my considered view that the national government (through PAGCOR) should re-examine and re-evaluate its decision of imposing the gambling casino on the residents of Cagayan de Oro City; for it is abundantly clear that public opinion in the city is very much against it, and again the question must be seriously deliberated: will the prospects of revenue to be realized from the casino outweigh the further destruction of the Filipino sense of values?

DAVIDE, JR., J .:

While I concur in part with the majority, I wish, however, to express my views on certain aspects of this case.

I.

It must at once be noted that private respondent Pryce Properties Corporation (PRYCE) directly filed with the Court of Appeals its so-called petition for prohibition, thereby invoking the said court's original jurisdiction to issue writs of prohibition under Section 9(1) of B.P. Blg. 129. As I see it, however, the principal cause of action therein is one for declaratory relief: to declare null and unconstitutional — for, inter alia, having been enacted without or in excess of jurisdiction, for impairing the obligation of contracts, and for being inconsistent with public policy — the challenged ordinances enacted by the Sangguniang Panlungsod of the City of Cagayan de Oro. The intervention therein of public respondent Philippine Amusement and Gaming Corporation (PAGCOR) further underscores the "declaratory relief" nature of the action. PAGCOR assails the ordinances for being contrary to the non-impairment and equal protection clauses of the Constitution, violative of the Local Government Code, and against the State's national policy declared in P.D. No. 1869. Accordingly, the Court of Appeals does not have jurisdiction over the nature of the action. Even assuming arguendo that the case is one for prohibition, then, under this Court's established policy relative to the hierarchy of courts, the petition should have

been filed with the Regional Trial Court of Cagayan de Oro City. I find no special or compelling reason why it was not filed with the said court. I do not wish to entertain the thought that PRYCE doubted a favorable verdict therefrom, in which case the filing of the petition with the Court of Appeals may have been impelled by tactical considerations. A dismissal of the petition by the Court of Appeals would have been in order pursuant to our decisions in People vs. Cuaresma (172 SCRA 415, [1989]) and Defensor-Santiago vs. Vasquez (217 SCRA 633 1993]). In Cuaresma, this Court stated:

"A last word. This court's original jurisdiction to issue writs of certiorari (as well as prohibition, mandamus, quo warranto, habeas corpus and injunction) is not exclusive . It is shared by this Court with Regional Trial Courts (formerly Courts of First Instance), which may issue the writ, enforceable in any part of their respective regions. It is also shared by this court, and by the Regional Trial Court, with the Court of Appeals (formerly, Intermediate Appellate Court), although prior to the effectivity of Batas Pambansa Bilang 129 on August 14, 1981, the latter's competence to issue the extraordinary writs was restricted by those 'in aid of its appellate jurisdiction.' This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of the court to which application therefor will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and should also serve as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level ('inferior') courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefore, clearly and specifically set out in the petition. This is established policy. It is a policy that is necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket. Indeed, the removal of the restriction of the jurisdiction of the Court of Appeals in this regard, supra — resulting from the deletion of the qualifying phrase, 'in aid of its appellate jurisdiction' — was evidently intended precisely to relieve this Court pro tanto of the burden of dealing with applications  for extraordinary writs which, but for the expansion of the Appellate Court's corresponding jurisdiction, would have had to be filed with it." (citations omitted)

And in Vasquez, this Court said:

"One final observation. We discern in the proceedings in this case a propensity on the part of petitioner, and, for that matter, the same may be said of a number of litigants who initiate recourses before us, to disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court despite the fact that the same is available in the lower courts in the exercise of their original or concurrent jurisdiction, or its even mandated by law to be sought therein. This practice must be stopped, not only because of the imposition upon the previous time of this Court but also because of the inevitable and resultant delay, intended or otherwise, in the adjudication of the case which often has to be remanded or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues since this Court is not a trier of facts. We, therefore, reiterate the judicial policy that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of our primary jurisdiction." LLpr

 

II.

The challenged ordinances are (a) Ordinance No. 3353 entitled, "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," and (b) Ordinance No. 3375-93 entitled, "An Ordinance Prohibiting the Operation of Casino and Providing Penalty for Violation Therefore." They were enacted to implement Resolution No. 2295 entitled, "Resolution

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Declaring As a Matter of Policy to Prohibit and/or Not to Allow the Establishment of the Gambling Casino in the City of Cagayan de Oro," which was promulgated on 19 November 1990 — nearly two years before PRYCE and PAGCOR entered into a contract of lease under which the latter leased a portion of the former's Pryce Plaza Hotel for the operation of a gambling casino — which resolution was vigorously reiterated in Resolution No. 2673 of 19 October 1992.

The challenged ordinances were enacted pursuant to the Sangguniang Panglungsod's express powers conferred by Section 458, paragraph (a), subparagraphs (1)-(V), (3)-(ii), and (4)-(i), (iv), and (vii), Local Government Code, and pursuant to its implied power under Section 16 thereof (the general welfare clause) which reads:

"SECTION 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 amount their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants."

The issue that necessarily arises is whether in granting local governments (such as the City of Cagayan de Oro) the above powers and functions, the Local Government Code has, pro tanto, repealed P.D. No. 1869 insofar as PAGCOR'S general authority to establish and maintain gambling casinos anywhere in the Philippines is concerned. LLphil

I join the majority in holding that the ordinances cannot repeal P.D. No. 1869.

III.

The nullification by the Court of Appeals of the challenged ordinances as unconstitutional primarily because it is in contravention to P.D. No. 1869 is unwarranted. A contravention of a law is not necessarily a contravention of the constitution. In any case, the ordinances can still stand even if they be conceded as offending P.D. No. 1869. They can be reconciled, which is not impossible to do. So reconciled, the ordinances should be construed as not applying to PAGCOR.

IV.

From the pleadings, it is obvious that the government and the people of Cagayan de Oro City are, for obvious reasons, strongly against the opening of the gambling casino in their city. Gambling, even if legalized, would be inimical to the general welfare of the inhabitants of the city, or of any place for that matter. The PAGCOR, as a government-owned corporation, must consider the valid concerns of the people of the City of Cagayan de Oro and should not impose its will upon them in an arbitrary, if not despotic, manner.Footnotes 

1.Rollo, pp. 64-94.

2.Ibid., pp. 53-62.3.Pryce was dropped as private respondent in the resolution of the Court dated June 13, 1994.4.197 SCRA 53.5.Sec. 458, [2(vi-xv); [3(ii-vii)]; [4(i-ix), Local Government Code, 1991.6.Where the law does not distinguish, neither ought we to distinguish.7.39 Phil. 102.8.Garcia v. Executive Secretary, 204 SCRA 516, quoting Cooley, Constitutional Limitations, 8th ed.,

379-380.9.Tatel v. Municipality of Virac, 207 SCRA 157; Solicitor General v. Metropolitan Manila Authority, 204

SCRA 837; De la Cruz v. Paras, 123 SCRA 569; U.S. v. Abandan, 24 Phil. 165.10.44 Phil. 138.11.Clinton v. Ceder Rapids, etc. Railroad Co., 24 Iowa 455.12.Art. X, Sec. 5, Constitution.13.Planiol, Droit Civil, Vol. 2, No. 2210.14.Ibid.15.77 Phil. 88.

 ||| (Magtajas v. Pryce Properties Corp., Inc., G.R. No. 111097, [July 20, 1994])

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CASE DIGESTMagtajas v. Pryce Properties Corp., Inc.

G.R. No. 111097July 20, 1994

FACTS:

PAGCOR, created by P.D. 1896, leased a building belonging to Pryce in order to prepare to open a casino in Cagayan de Oro City. Various civic organizations, religious elements, women’s and youth groups, and even the local officials angrily denounced the project. The Sangguniang Panlungsod swiftly enacted two ordinances disallowing the building of the planned casino. Petitioners argue that by virtue of the Local Government Code (LGC), the Sangguniang Panlungsod may prohibit the operation of casinos by passing ordinances to protect the general welfare of their citizens from the harmful effects of gambling.

ISSUE:

W/N the two ordinances as enacted by the Sangguniang Panlungsod of Cagayan de Oro are valid.

HELD:

The two local ordinances are not valid. In Basco v. Phil. Amusements and Gaming Corp., this Court sustained the constitutionality of the decree. Under the LGC, local government units are authorized to prevent or suppress “gambling and other prohibited games of chance.” Since the world “gambling” should be read as referring to only illegal gambling which, like the other prohibited games of chance, must be prevented or suppressed. On the assumption of a conflict between P.D. 1869 and the LGC, the proper action is not to uphold one and annul the other but to give effect to both by harmonizing them if possible. 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.

LATIN MAXIM:

5a, 9c, 11e, 28, 37, 38, 50

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EN BANC

[G.R. No. 143596. December 11, 2003.]

JUDGE TOMAS C. LEYNES, petitioner, vs. THE COMMISSION ON AUDIT (COA), HON. GREGORIA S. ONG, DIRECTOR, COMMISSION ON AUDIT and HON. SALVACION DALISAY, PROVINCIAL AUDITOR, respondents.

D E C I S I O N

CORONA, J p:

Before us is a petition for certiorari under Rule 65 in relation to Section 2, Rule 64 of the Rules of Court, seeking to reverse and set aside the decision 1 dated September 14, 1999 of the Commission on Audit (COA), affirming the resolution of COA Regional Director Gregoria S. Ong dated March 29, 1994 which in turn affirmed the opinion dated October 19, 1993 of the Provincial Auditor of Oriental Mindoro, Salvacion M. Dalisay. All three denied the grant of P1,600 monthly allowance to petitioner Judge Tomas C. Leynes by the Municipality of Naujan, Oriental Mindoro.

FACTUAL ANTECEDENTS

Petitioner Judge Tomas C. Leynes who, at present, is the presiding judge of the Regional Trial Court of Calapan City, Oriental Mindoro, Branch 40 was formerly assigned to the Municipality of Naujan, Oriental Mindoro as the sole presiding judge of the Municipal Trial Court thereof. As such, his salary and representation and transportation allowance (RATA) were drawn from the budget of the Supreme Court. In addition, petitioner received a monthly allowance of P944 from the local funds 2 of the Municipality of Naujan starting 1984. 3

On March 15, 1993, the Sangguniang Bayan of Naujan, through Resolution No. 057, sought the opinion of the Provincial Auditor and the Provincial Budget Officer regarding any budgetary limitation on the grant of a monthly allowance by the municipality to petitioner judge. On May 7, 1993, the Sangguniang Bayan unanimously approved Resolution No. 101 increasing petitioner judge's monthly allowance from P944 to P1,600 (an increase of P656) starting May 1993. 4 By virtue of said resolution, the municipal government (the Municipal Mayor and the Sangguniang Bayan) approved a supplemental budget which was likewise approved by the Sangguniang Panlalawigan and the Office of Provincial Budget and Management of Oriental Mindoro. In 1994, the Municipal Government of Naujan again provided for petitioner judge's P1,600 monthly allowance in its annual budget which was again approved by the Sangguniang Panlalawigan and the Office of Provincial Budget and Management of Oriental Mindoro. 5

On February 17, 1994, Provincial Auditor Salvacion M. Dalisay sent a letter to the Municipal Mayor and the Sangguniang Bayan of Naujan directing them to stop the payment of the P1,600 monthly allowance or RATA to petitioner judge and to require the immediate refund of the amounts previously paid to the latter. She opined that the Municipality of Naujan could not grant RATA to petitioner judge in addition to the RATA the latter was already receiving from the Supreme Court. Her directive was based on the following:

Section 36, RA No. 7645, General Appropriations Act of 1993

Representation and Transportation Allowances. The following officials and those of equivalent rank as may be determined by the Department of Budget and Management (DBM) while in the actual performance of their respective functions are hereby granted monthly commutable representation and transportation allowances payable from the programmed appropriations provided for their respective offices, not exceeding the rates indicated below . . .

National Compensation Circular No. 67 dated January 1, 1992, of the Department of Budget and Management

Subject: Representation and Transportation Allowances of National Government Officials and Employees

xxx xxx xxx

4. Funding Source: In all cases, commutable and reimbursable RATA shall be paid from the amount appropriated for the purpose and other personal services savings of the agency or project from where the officials and employees covered under this Circular draw their salaries. No one shall be allowed to collect RATA from more than one source. 6 (italics supplied)

Petitioner judge appealed to COA Regional Director Gregoria S. Ong who, however, upheld the opinion of Provincial Auditor Dalisay and who added that Resolution No. 101, Series of 1993 of the Sangguniang Bayan of Naujan failed to comply with Section 3 of Local Budget Circular No. 53 dated September 1, 1993 outlining the conditions for the grant of allowances to judges and other national officials or employees by the local government units (LGUs). Section 3 of the said budget circular provides that:

Sec. 3. Allowances. — LGUs may grant allowances/additional compensation to the national government officials/employees assigned to their locality at rates authorized by law, rules and regulations and subject to the following preconditions:

a. That the annual income or finances of the municipality, city or province as certified by the Accountant concerned will allow the grant of the allowances/additional compensation without exceeding the general limitations for personal services under Section 325 of RA 7160;

b. That the budgetary requirements under Section 324 of RA 7160 including the full requirement of RA 6758 have been satisfied and provided fully in the budget as certified by the Budget Officer and COA representative in the LGU concerned;

c. That the LGU has fully implemented the devolution of personnel/functions in accordance with the provisions of RA 7160;

d. That the LGU has already created mandatory positions prescribed in RA 7160; and

e. That similar allowances/additional compensation are not granted by the national government to the officials/employees assigned to the LGU. 7

Petitioner judge appealed the unfavorable resolution of the Regional Director to the Commission on Audit. In the meantime, a disallowance of the payment of the P1,600 monthly allowance to petitioner was issued. Thus he received his P1,600 monthly allowance from the Municipality of Naujan only for the period May 1993 to January 1994.

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On September 14, 1999, the COA issued its decision affirming the resolution of Regional Director Gregoria S. Ong:

The main issue . . . is whether or not the Municipality of Naujan, Oriental Mindoro can validly provide RATA to its Municipal Judge, in addition to that provided by the Supreme Court.

Generally, the grant of (RATA) [sic] to qualified national government officials and employees pursuant to Section 36 of R.A. 7645 [General Appropriations Act of 1993] and NCC No. 67 dated 01 January 1992 is subject to the following conditions to wit:

1. Payable from the programmed/appropriated amount and others from personal services savings of the respective offices where the officials or employees draw their salaries;

2. Not exceeding the rates prescribed by the Annual General Appropriations Act;

3. Officials/employees on detail with other offices or assigned to serve other offices or agencies shall be paid from their parent agencies;

4. No one shall be allowed to collect RATA from more than one source.

On the other hand, the municipal government may provide additional allowances and other benefits to judges and other national government officials or employees assigned or stationed in the municipality, provided, that the finances of the municipality allow the grant thereof pursuant to Section 447, Par. 1(xi), R.A. 7160, and provided further, that similar allowance/additional compensation are not granted by the national government to the official/employee assigned to the local government unit as provided under Section 3(e) of Local Budget Circular No. 53, dated 01 September 1993.

The conflicting provisions of Section 447, Par. (1) (xi) of the Local Government Code of 1991 and Section 36 of the General Appropriations Act of 1993 [RA 7645] have been harmonized by the Local Budget Circular No. 53 dated 01 September 1993, issued by the Department of Budget and Management pursuant to its powers under Section 25 and Section 327 of the Local Government Code. The said circular must be adhered to by the local government units particularly Section 3 thereof which provides the implementing guidelines of Section 447, Par. (1) (xi) of the Local Government Code of 1991 in the grant of allowances to national government officials/employees assigned or stationed in their respective local government units.Consequently, the subject SB Resolution No. 101 dated 11 May 1993 of the Sangguniang Bayan of Naujan, Oriental Mindoro, having failed to comply with the inherent precondition as defined in Section 3 (e) . . . is null and void. Furthermore, the Honorable Judge Tomas C. Leynes, being a national government official is prohibited to receive additional RATA from the local government fund pursuant to Section 36 of the General Appropriations Act (R.A. 7645 for 1993) and National Compensation Circular No. 67 dated 1 January 1992. 8 (italics ours)

ASSIGNMENTS OF ERROR

Petitioner judge filed a motion for reconsideration of the above decision but it was denied by the Commission in a resolution dated May 30, 2000. Aggrieved, petitioner filed the instant petition, raising the following assignments of error for our consideration:

IWHETHER OR NOT RESOLUTION NO. 101, SERIES OF 1993 OF NAUJAN, ORIENTAL MINDORO, WHICH GRANTED ADDITIONAL ALLOWANCE TO THE MUNICIPAL TRIAL JUDGE OF NAUJAN, ORIENTAL MINDORO AND INCREASING HIS CURRENT REPRESENTATION AND TRAVELLING ALLOWANCE (RATA) TO AN AMOUNT EQUIVALENT TO THAT RECEIVED MONTHLY BY SANGGUNIANG MEMBERS IN PESOS: ONE THOUSAND SIX HUNDRED (P1,600.00) EFFECTIVE 1993, IS VALID. AEITDH

IIWHETHER OR NOT THE POWER OF MUNICIPAL GOVERNMENTS TO GRANT ADDITIONAL ALLOWANCES AND OTHER BENEFITS TO NATIONAL GOVERNMENT EMPLOYEES STATIONED IN THEIR MUNICIPALITY IS VERY EXPLICIT AND UNEQUIVOCAL UNDER THE LOCAL GOVERNMENT CODE OF 1991 PARTICULARLY SECTION 447 IN RELATION TO SECTIONS 17 AND 22 THEREOF.

IIIWHETHER OR NOT THE DEPARTMENT OF BUDGET AND MANAGEMENT (DBM) CAN, BY THE ISSUANCE OF BUDGET CIRCULARS, RESTRICT A MUNICIPAL GOVERNMENT FROM EXERCISING ITS GIVEN LEGISLATIVE POWERS OF PROVIDING ADDITIONAL ALLOWANCES AND OTHER BENEFITS TO NATIONAL EMPLOYEES STATIONED OR ASSIGNED TO THEIR MUNICIPALITY FOR AS LONG AS THEIR FINANCES SO ALLOW. 

IVWHETHER OR NOT THE LOCAL GOVERNMENT CODE OF 1991 PARTICULARLY SECTION 447(a)(1)(xi) WAS EXPRESSLY OR IMPLIEDLY REPEALED OR MODIFIED BY REPUBLIC ACT 7645 AND THE GENERAL APPROPRIATIONS ACT OF 1993.

VWHETHER OR NOT PETITIONER WAS ENTITLED TO RECEIVE THE ADDITIONAL ALLOWANCES GRANTED TO HIM BY THE MUNICIPALITY OF NAUJAN, ORIENTAL MINDORO BY VIRTUE OF ITS RESOLUTION NO. 101, SERIES OF 1993.

POSITION OF COA

Respondent Commission on Audit opposes the grant by the Municipality of Naujan of the P1,600 monthly allowance to petitioner Judge Leynes for the reason that the municipality could not grant RATA to judges in addition to the RATA already received from the Supreme Court. 9 Respondent bases its contention on the following:

1. National Compensation Circular No. 67 (hereafter NCC No. 67) dated January 1, 1992 of the Department of Budget and Management (DBM) which provides that (a) the RATA of national officials and employees shall be payable from the programmed appropriations or personal services savings of the agency where such officials or employees draw their salary and (b) no one shall be allowed to collect RATA from more than one source;

2. the General Appropriations Act of 1993 (RA 7645) which provided that the RATA of national officials shall be payable from the programmed appropriations of their respective offices and

3. Local Budget Circular No. 53 (hereafter LBC No. 53) dated September 1, 1993 of the DBM which prohibits local government units from granting allowances to national government officials or employees stationed in their localities when such allowances are also granted by the national government or are similar to the allowances granted by the national government to such officials or employees. 10

POSITION OF PETITIONER

Petitioner judge, on the other hand, asserts that the municipality is expressly and unequivocally empowered by RA 7160 (the Local Government Code of 1991) to enact appropriation ordinances granting allowances and other benefits to judges stationed in its territory. Section 447(a)(1)(xi) of the Local Government Code of 1991 imposes only one condition, that is, "when the finances of the municipal government allow." The Code does not impose any other restrictions in the exercise of such power by the municipality. Petitioner also asserts that the DBM cannot amend or modify a substantive

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law like the Local Government Code of 1991 through mere budget circulars. Petitioner emphasizes that budget circulars must conform to, not modify or amend, the provisions of the law it seeks to implement. 11

HISTORY OF GRANT OF ALLOWANCES TO JUDGES

The power of local government units (LGUs) to grant allowances to judges stationed in their respective territories was originally provided by Letter of Instruction No. 1418 dated July 18, 1984 (hereafter LOI No. 1418):

WHEREAS, the State is cognizant of the need to maintain the independence of the Judiciary;

WHEREAS, the budgetary allotment of the Judiciary constitutes only a small percentage of the national budget;

WHEREAS, present economic conditions adversely affected the livelihood of the members of the Judiciary;

WHEREAS, some local government units are ready, willing and able to pay additional allowances to Judges of various courts within their respective territorial jurisdiction;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, do hereby direct:

1. Section 3 of Letter of Implementation No. 96 is hereby amended to read as follows:

"3. The allowances provided in this letter shall be borne exclusively by the National Government. However, provincial, city and municipal governments may pay additional allowances to the members and personnel of the Judiciary assigned in their respective areas out of available local funds but not to exceed P1,500.00; Provided, that in Metropolitan Manila, the city and municipal governments therein may pay additional allowances not exceeding P3,000.00. (italics ours)" 12

On June 25, 1991, the DBM issued Circular No. 91-7 outlining the guidelines for the continued receipt of allowances by judges from LGUs:

Consistent with the constitutional provision on the fiscal autonomy of the judiciary and the policy of the National Government of allowing greater autonomy to local government units, judges of the Judiciary are hereby allowed to continue to receive allowances at the same rates which they have been receiving from the Local Government Units as of June 30, 1989, subject to the following guidelines:

1. That the continuance of payment of subject allowance to the recipient judge shall be entirely voluntary and non-compulsory on the part of the Local Government Units;

2. That payment of the above shall always be subject to the availability of local funds;

3. That it shall be made only in compliance with the policy of non-diminution of compensation received by the recipient judge before the implementation of the salary standardization;

4. That the subject allowance shall be given only to judges who were receiving the same as of June 30, 1989 and shall be co-terminous with the incumbent judges; and

5. That the subject allowance shall automatically terminate upon transfer of a judge from one local government unit to another local government unit. (italics ours)

On October 10, 1991, Congress enacted RA 7160, otherwise known as the Local Government Code of 1991. 13 The power of the LGUs to grant allowances and other benefits to judges and other national officials stationed in their respective territories was expressly provided in Sections 447(a)(1)(xi), 458(a)(1)(xi) and 468(a)(1)(xi) of the Code.

On March 15, 1994, the DBM issued Local Budget Circular No. 55 (hereafter LBC No. 55) setting out the maximum amount of allowances that LGUs may grant to judges. For provinces and cities, the amount should not exceed P1,000 and for municipalities, P700.

On December 3, 2002, we struck down the above circular in Dadole, et al. vs. COA. 14 We ruled there that the Local Government Code of 1991 clearly provided that LGUs could grant allowances to judges, subject only to the condition that the finances of the LGUs allowed it. We held that "setting a uniform amount for the grant of allowances (was) an inappropriate way of enforcing said criterion." Accordingly, we declared that the DBM exceeded its power of supervision over LGUs by imposing a prohibition that did not jibe with the Local Government Code of 1991. 15

ESTABLISHED PRINCIPLES INVOLVED

From the foregoing history of the power of LGUs to grant allowances to judges, the following principles should be noted:

1. the power of LGUs to grant allowances to judges has long been recognized (since 1984 by virtue of LOI No. 1418) and, at present, it is expressly and unequivocally provided in Sections 447, 458 and 468 of the Local Government Code of 1991;

2. the issuance of DBM Circular No. 91-7 dated June 25, 1991 and LBC No. 55 dated March 15, 1994 indicates that the national government recognizes the power of LGUs to grant such allowances to judges;

3. in Circular No. 91-7, the national government merely provides the guidelines for the continued receipt of allowances by judges from LGUs while in LBC No. 55, the national government merely tries to limit the amount of allowances LGUs may grant to judges and

4. in the recent case of Dadole, et al. vs. COA, the Court upheld the constitutionally enshrined autonomy of LGUs to grant allowances to judges in any amount deemed appropriate, depending on availability of funds, in accordance with the Local Government Code of 1991.

OUR RULING

We rule in favor of petitioner judge. Respondent COA erred in opposing the grant of the P1,600 monthly allowance by the Municipality of Naujan to petitioner Judge Leynes.

DISCUSSION OF OUR RULING

Section 447(a)(1)(xi) of RA 7160, the Local Government Code of 1991, provides:

(a) The sangguniang bayan, as the legislative body of the municipality, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the municipality and its inhabitants . . ., and shall:

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

xxx xxx xxx

(xi) When the finances of the municipal government allow, provide for additional allowances and other benefits to judges, prosecutors, public elementary and high school teachers, and other national government officials stationed in or assigned to the municipality; (italics ours)

Respondent COA, however, contends that the above section has been repealed, modified or amended by NCC No. 67 dated January 1, 1992, RA 7645 (the General Appropriations Act of 1993) and LBC No. 53 dated September 1, 1993. 16

It is elementary in statutory construction that an administrative circular cannot supersede, abrogate, modify or nullify a statute. A statute is superior to an administrative circular, thus the latter cannot repeal or amend it. 17 In the present case, NCC No. 67, being a mere administrative circular, cannot repeal a substantive law like RA 7160.

It is also an elementary principle in statutory construction that repeal of statutes by implication is not favored, unless it is manifest that the legislature so intended. The legislature is assumed to know the existing laws on the subject and cannot be presumed to have enacted inconsistent or conflicting statutes. 18 Respondent COA alleges that Section 36 of RA 7645 (the GAA of 1993) repealed Section 447(a)(1)(xi) of RA 7160 (the LGC of 1991). A review of the two laws, however, shows that this was not so. Section 36 of RA 7645 merely provided for the different rates of RATA payable to national government officials or employees, depending on their position, and stated that these amounts were payable from the programmed appropriations of the parent agencies to which the concerned national officials or employees belonged. Furthermore, there was no other provision in RA 7645 from which a repeal of Section 447(a)(1)(xi) of RA 7160 could be implied. In the absence, therefore, of any clear repeal of Section 447(a)(1)(xi) of RA 7160, we cannot presume such intention on the part of the legislature. Moreover, the presumption against implied repeal becomes stronger when, as in this case, one law is special and the other is general. 19 The principle is expressed in the maxim generalia specialibus non derogant, a general law does not nullify a specific or special law. The reason for this is that the legislature, in passing a law of special character, considers and makes special provisions for the particular circumstances dealt with by the special law. This being so, the legislature, by adopting a general law containing provisions repugnant to those of the special law and without making any mention of its intention to amend or modify such special law, cannot be deemed to have intended an amendment, repeal or modification of the latter. 20

In this case, RA 7160 (the LGC of 1991) is a special law 21 which exclusively deals with local government units (LGUs), outlining their powers and functions in consonance with the constitutionally mandated policy of local autonomy. RA 7645 (the GAA of 1993), on the other hand, was a general law 22 which outlined the share in the national fund of all branches of the national government. RA 7645 therefore, being a general law, could not have, by mere implication, repealed RA 7160. Rather, RA

7160 should be taken as the exception to RA 7645 in the absence of circumstances warranting a contrary conclusion. 23

The controversy actually centers on the seemingly sweeping provision in NCC No. 67 which states that "no one shall be allowed to collect RATA from more than one source." Does this mean that judges cannot receive allowances from LGUs in addition to the RATA from the Supreme Court? For reasons that will hereinafter be discussed, we answer in the negative.

The pertinent provisions of NCC No. 67 read:

3. Rules and Regulations:

3.1.1 Payment of RATA, whether commutable or reimbursable, shall be in accordance with the rates prescribed for each of the following officials and employees and those of equivalent ranks, and the conditions enumerated under the pertinent sections of the General Provisions of the annual General Appropriations Act (GAA):

xxx xxx xxx

4. Funding Source:

In all cases, commutable and reimbursable RATA shall be paid from the amount appropriated for the purpose and other personal services savings of the agency or project from where the officials and employees covered under this Circular draw their salaries. No one shall be allowed to collect RATA from more than one source. (italics ours)

In construing NCC No. 67, we apply the principle in statutory construction that force and effect should not be narrowly given to isolated and disjoined clauses of the law but to its spirit, broadly taking all its provisions together in one rational view. 24 Because a statute is enacted as a whole and not in parts or sections, that is, one part is as important as the others, the statute should be construed and given effect as a whole. A provision or section which is unclear by itself may be clarified by reading and construing it in relation to the whole statute. 25

Taking NCC No. 67 as a whole then, what it seeks to prevent is the dual collection of RATA by a national official from the budgets of "more than one national agency." We emphasize that the other source referred to in the prohibition is another national agency. This can be gleaned from the fact that the sentence "no one shall be allowed to collect RATA from more than one source" (the controversial prohibition) immediately follows the sentence that RATA shall be paid from the budget of the national agency where the concerned national officials and employees draw their salaries. The fact that the other source is another national agency is supported by RA 7645 (the GAA of 1993) invoked by respondent COA itself and, in fact, by all subsequent GAAs for that matter, because the GAAs all essentially provide that (1) the RATA of national officials shall be payable from the budgets of their respective national agencies and (2) those officials on detail with other national agencies shall be paid their RATA only from the budget of their parent national agency:

Section 36, RA 7645, General Appropriations Act of 1993:

Representation and Transportation Allowances. The following officials and those of equivalent rank as may be determined by the Department of Budget and Management (DBM) while in the actual performance of

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their respective functions are hereby granted monthly commutable representation and transportation allowances payable from the programmed appropriations provided for their respective offices, not exceeding the rates indicated below, which shall apply to each type of allowance:

xxx xxx xxx

Officials on detail with other offices, including officials of the Commission of Audit assigned to serve other offices or agencies, shall be paid the allowance herein authorized from the appropriations of their parent agencies. (italics ours)

Clearly therefore, the prohibition in NCC No. 67 is only against the dual or multiple collection of RATA by a national official from the budgets of two or more national agencies . Stated otherwise, when a national official is on detail with another national agency, he should get his RATA only from his parent national agency and not from the other national agency he is detailed to.

Since the other source referred in the controversial prohibition is another national agency, said prohibition clearly does not apply to LGUs like the Municipality of Naujan. National agency of course refers to the different offices, bureaus and departments comprising the national government. The budgets of these departments or offices are fixed annually by Congress in the General Appropriations Act. 26 An LGU is obviously not a national agency. Its annual budget is fixed by its own legislative council (Sangguniang Bayan, Panlungsod or Panlalawigan), not by Congress. Without doubt, NCC No. 67 does not apply to LGUs.

The prohibition in NCC No. 67 is in fact an administrative tool of the DBM to prevent the much-abused practice of multiple allowances, thus standardizing the grant of RATA by national agencies. Thus, the purpose clause of NCC No. 67 reads:

This Circular is being issued to ensure uniformity and consistency of actions on claims for representation and transportation allowance (RATA) which is primarily granted by law to national government officials and employees to cover expenses incurred in the discharge or performance of their duties and responsibilities.

By no stretch of the imagination can NCC No. 67 be construed as nullifying the power of LGUs to grant allowances to judges under the Local Government Code of 1991. It was issued primarily to make the grant of RATA to national officials under the national budget uniform. In other words, it applies only to the national funds administered by the DBM, not the local funds of LGUs.

To rule against the power of LGUs to grant allowances to judges as what respondent COA would like us to do will subvert the principle of local autonomy zealously guaranteed by the Constitution. 27 The Local Government Code of 1991 was specially promulgated by Congress to ensure the autonomy of local governments as mandated by the Constitution. By upholding, in the present case, the power of LGUs to grant allowances to judges and leaving to their discretion the amount of allowances they may want to grant, depending on the availability of local funds, we ensure the genuine and meaningful local autonomy of LGUs.

We now discuss the next contention of respondent COA: that the resolution of the Sangguniang Bayan of Naujan granting the P1,600 monthly allowance to petitioner judge was null and void because it failed to comply with LBC No. 53 dated September 1, 1993:

Sec. 3. Allowances. — LGUs may grant allowances/additional compensation to the national government officials/employees assigned to their locality at rates authorized by law, rules and regulations and subject to the following preconditions:

a. That the annual income or finances of the municipality, city or province as certified by the Accountant concerned will allow the grant of the allowances/additional compensation without exceeding the general limitations for personal services under Section 325 of RA 7160;

b. That the budgetary requirements under Section 324 of RA 7160 including the full requirement of RA 6758 have been satisfied and provided fully in the budget as certified by the Budget Officer and COA representative in the LGU concerned;

c. That the LGU has fully implemented the devolution of personnel/functions in accordance with the provisions of RA 7160;

d. That the LGU has already created mandatory positions prescribed in RA 7160.

e. That similar allowances/additional compensation are not granted by the national government to the officials/employees assigned to the LGU.

Though LBC No. 53 of the DBM may be considered within the ambit of the President's power of general supervision over LGUs, 28 we rule that Section 3, paragraph (e) thereof is invalid. RA 7160, the Local Government Code of 1991, clearly provides that provincial, city and municipal governments may grant allowances to judges as long as their finances allow. Section 3, paragraph (e) of LBC No. 53, by outrightly prohibiting LGUs from granting allowances to judges whenever such allowances are (1) also granted by the national government or (2) similar to the allowances granted by the national government, violates Section 447(a)(1)(xi) of the Local Government Code of 1991. 29 As already stated, a circular must conform to the law it seeks to implement and should not modify or amend it. 30

Moreover, by prohibiting LGUs from granting allowances similar to the allowances granted by the national government, Section 3(e) of LBC No. 53 practically prohibits LGUs from granting allowances to judges and, in effect, totally nullifies their statutory power to do so. Being unduly restrictive therefore of the statutory power of LGUs to grant allowances to judges and being violative of their autonomy guaranteed by the Constitution, Section 3, paragraph (e) of LBC No. 53 is hereby declared null and void. Paragraphs (a) to (d) of said circular, however, are valid as they are in accordance with Sections 324 31 and 325 32 of the Local Government Code of 1991; these respectively provide for the budgetary requirements and general limitations on the use of provincial, city and municipal funds. Paragraphs (a) to (d) are proper guidelines for the condition provided in Sections 447, 458 and 468 of the Local Government Code of 1991 that LGUs may grant allowances to judges if their funds allow. 33

Respondent COA also argues that Resolution No. 101 of the Sangguniang Bayan of Naujan failed to comply with paragraphs (a) to (d) of LBC No. 53, thus it was null and void.

The argument is misplaced.

Guidelines (a) to (d) were met when the Sangguniang Panlalawigan of Oriental Mindoro approved Resolution No. 101 of the Sangguniang Bayan of Naujan granting the P1,600 monthly allowance to

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petitioner judge as well as the corresponding budgets of the municipality providing for the said monthly allowance to petitioner judge. Under Section 327 of the Local Government Code of 1991, the Sangguniang Panlalawigan was specifically tasked to review the appropriation ordinances of its component municipalities to ensure compliance with Sections 324 and 325 of the Code. Considering said duty of the Sangguniang Panlalawigan, we will assume, in the absence of proof to the contrary, that the Sangguniang Panlalawigan of Oriental Mindoro performed what the law required it to do, that is, review the resolution and the corresponding budgets of the Municipality of Naujan to make sure that they complied with Sections 324 and 325 of the Code. 34 We presume the regularity of the Sangguniang Panlalawigan's official act.

Moreover, it is well-settled that an ordinance must be presumed valid in the absence of evidence showing that it is not in accordance with the law. 35 Respondent COA had the burden of proving that Resolution No. 101 of the Sangguniang Bayan of Naujan did not comply with the condition provided in Section 447 of the Code, the budgetary requirements and general limitations on the use of municipal funds provided in Sections 324 and 325 of the Code and the implementing guidelines issued by the DBM, i.e., paragraphs (a) to (d), Section 3 of LBC No. 53. Respondent COA also had the burden of showing that the Sangguniang Panlalawigan of Oriental Mindoro erroneously approved said resolution despite its non-compliance with the requirements of the law. It failed to discharge such burden. On the contrary, we find that the resolution of the Municipality of Naujan granting the P1,600 monthly allowance to petitioner judge fully complied with the law. Thus, we uphold its validity.

In sum, we hereby affirm the power of the Municipality of Naujan to grant the questioned allowance to petitioner Judge Leynes in accordance with the constitutionally mandated policy of local autonomy and the provisions of the Local Government Code of 1991. We also sustain the validity of Resolution No. 101, Series of 1993, of the Sangguniang Bayan of Naujan for being in accordance with the law.

WHEREFORE, the petition is hereby GRANTED. The assailed decision dated September 14, 1999 of the Commission of Audit is hereby SET ASIDE and Section 3, paragraph (e) of LBC No. 53 is hereby declared NULL and VOID.

No costs.

SO ORDERED. HSaCcE

Davide, Jr., C .J ., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Carpio Morales, Callejo, Sr., Azcuna, and Tinga, JJ ., concur.

Footnotes1.Penned by Chairman Celso D. Gañgan and Commissioners Raul C. Flores and Emmanuel M.

Dalman.2.Respondent COA erroneously considered the P944 monthly allowance as RATA from the Supreme

Court in its Comment dated October 23, 2000 and Memorandum dated June 26, 2001. Rollo, pp. 53, 103.

3.Annex "D", Certification of the Office of the Municipal Accountant; Petition for Certiorari, p. 5.4.Annex "E", Resolution No. 101, Series of 1991, Rollo, p. 35.

5.Petition for Certiorari, p. 4.6.Rollo, p. 38.7.Rollo, pp. 40-42.8.Rollo, pp. 22-25.9.Respondent COA erroneously considered the P944 monthly allowance being received by petitioner

judge from the local funds of the municipality since 1984 as RATA from the Supreme Court. Thus, in 1993 when the municipality increased said allowance to P1,600 (an increase of P656), COA opposed the grant of the whole P1,600 monthly allowance because the municipality supposedly could not grant RATA to petitioner judge in addition to the RATA already granted by the Supreme Court. See Comment dated October 23, 2000 and Memorandum dated June 26, 2001, Rollo, pp. 53, 103.

10.Rollo, pp. 22-25, 31-33, 36-38, 57-64.11.Rollo, pp. 10-17.12.In Allarde vs. Commission on Audit, 218 SCRA 227 [1993], we ruled that the use of the word

"may" in LOI No. 1418 signifies that the allowance may not be demanded as a matter of right, but is entirely dependent on the will of the municipality concerned. It should be treated as an honorarium, an amount that is "given not as a matter of obligation but in appreciation of services rendered, a voluntary donation in consideration for services which admit of no compensation in money (Santiago vs. Commission on Audit, 199 SCRA 128, 130)."

13.The law took effect on January 1, 1992.14.G.R. No. 125350, December 3, 2002.15.Instead of filing a comment on behalf of respondent COA in this case, the Solicitor General filed a

manifestation supporting the position of petitioner judges. The Solicitor General argued that (1) DBM only enjoyed the power to review and determine whether disbursement of funds were made in accordance with the ordinance passed by a LGU while (2) the COA had no more than auditorial visitation powers over the LGUs pursuant to Section 348 of RA 7160 which provides for the power to inspect at any time the financial accounts of LGUs. Moreover, the Solicitor General opined that "the DBM and the respondent are only authorized under RA 7160 to promulgate a Budget Operations Manual for LGUs, to improve and systematize methods, techniques and procedures employed in budget preparation, authorization, execution and accountability" pursuant to Section 354 of RA 7160. The Solicitor General pointed out that LBC 55 was not exercised under any of the aforementioned provisions.

16.Rollo, pp. 22-25.17.China Banking Corporation vs. Court of Appeals, 265 SCRA 327 [1996].18.U.S. vs. Palacio, 33 Phil. 208 [1916]; Maceda vs. Macaraeg, 197 SCRA 771 [1991].19.Manila Railroad Co. vs. Rafferty, 40 Phil. 224 [1919]; Commissioner of Internal Revenue vs. Court

of Appeals, 207 SCRA 487 [1992].20.De Villa vs. Court of Appeals, 195 SCRA 722 [1991].21.A special law is one which relates to particular persons or things of a class, or to a particular

portion or section of the state only. U.S. vs. Serapio, 23 Phil. 584 [1912].22.A general law is one which affects all people of the state or all of a particular class of persons in

the state or embraces a class of subjects or places and does not omit any subject or place naturally belonging to such class. U.S. vs. Serapio, 23 Phil. 584 [1912]; Valera vs. Tuason, 80 Phil. 823 [1948]; Villegas vs. Subido, 41 SCRA 190 [1971].

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23.Villegas vs. Subido, 41 SCRA 190 [1971].24.Araneta vs. Concepcion, 99 Phil. 709 [1956]; Sotto vs. Sotto, 43 Phil. 688 [1922].25.Maddumba vs. Ozaeta, 82 Phil. 345 [1948]; Lopez vs. El Hogar Filipino, 47 Phil. 249 [1925].26.National agencies included in the national budget are Congress, Office of the President, Office of

the Vice-President, DA, DAR, DBM, DECS, DENR, DOF, DFA, DOH, DILG, DOJ, DOLE, DND, DPWH, DOST, DSWD, DOT, DTI, DOTC, NEDA, Office of the Press Secretary, the Judiciary, Constitutional Offices, Commission on Human Rights, State Universities and Colleges and Autonomous Regions. See the GAA of 1993 as example.

27.Section 25, Article II; Section 2, Article X, 1987 Constitution.28.The LBC No. 53 was issued by the DBM by virtue of Administrative Order No. 42 which clarified

the role of the DBM in the administration of the compensation and position classification systems in the LGUs and mandated it, among other things, to provide guidelines for the grant of allowances and additional forms of compensation by the LGUs. AO No. 42 was issued by the President by virtue of his power of general supervision over the LGUs under Section 25 of the Local Government Code of 1991.

29.Also Section 458(a)(1)(xi) and Section 468(a)(1)(xi), Local Government Code of 1991.30.Supra note 17.31.Section 324. Budgetary Requirements. — The budgets of local government units for any fiscal

year shall comply with the following requirements:  (a) The aggregate amount appropriated shall not exceed the estimates of income;  (b) Full provision shall be made for all statutory and contractual obligations of the local government

unit concerned: Provided, however, that the amount of appropriations for debt servicing shall not exceed twenty percent (20%) of the regular income of the local government unit concerned;

  (c) In the case of provinces, cities, and municipalities, aid to component barangays shall be provided in amounts of not less than One thousand pesos (P1,000.00) per barangay; and

  (d) Five percent (5%) of the estimated revenue from regular sources shall be set aside as an annual lump sum appropriation for unforeseen expenditures arising from the occurrence of calamities: Provided, however, that such appropriation shall be used only in the area, or a portion thereof, of the local government unit or other areas declared in a state of calamity by the President.

32.Section 325. General Limitations. — The use of the provincial, city and municipal funds shall be subject to the following limitations:

  (a) The total appropriations, whether annual or supplemental, for personal services of a local government unit for one (1) fiscal year shall not exceed forty-five (45%) in the case of first to third class provinces, cities, and municipalities, and fifty-five percent (55%) in the case of fourth class or lower, of the total annual income from regular sources realized in the next preceding fiscal year. The appropriations for salaries, wages, representation and transportation allowances of officials and employees of the public utilities and economic enterprises owned, operated, and maintained by the local government unit concerned shall not be included in the annual budget or in the computation of the maximum amount for personal services. The appropriations for the personal services of such economic enterprises shall be charged to their respective budgets;

 

  (b) No official or employee shall be entitled to a salary rate higher than the maximum fixed for his position or other positions of equivalent rank by applicable laws or rules and regulations issued thereunder;

  (c) No local fund shall be appropriated to increase or adjust salaries or wages of officials and employees of the national government, except as may be expressly authorized by law;

  (d) In cases of abolition of positions and the creation of new ones resulting from the abolition of existing positions in the career service, such abolition or creation shall be made in accordance with pertinent provisions of this code and the civil service law, rules and regulations;

  (e) Positions in the official plantilla for career positions which are occupied by incumbents holding permanent appointments shall be covered by adequate appropriations;

  (f) No changes in designation or nomenclature of positions resulting in a promotion or demotion in rank or increase or decrease in compensation shall be allowed, except when the position is actually vacant, and the filling of such positions shall be strictly made in accordance with the civil service law, rules and regulations;

  (g) The creation of new positions and salary increases or adjustments shall in no case be made retroactive; and

  (h) The annual appropriations for discretionary purposes of the local chief executive shall not exceed two percent (2%) of the actual receipts derived from basic real property tax in the next preceding calendar year. Discretionary funds shall be disbursed only for public purposes to be supported by appropriate vouchers and subject to such guidelines as may be prescribed by law. No amount shall be appropriated for the same purpose except as authorized under this Section.

33.Paragraph (a) should be read in conjunction with the recent circular of the DBM, Local Budget Circular No. 75 dated July 12, 2002 entitled Guidelines on Personal Services Limitation. Section 5.5 thereof entitled Honoraria of National Government Personnel provides: "The appropriation intended to be granted as honoraria and similar benefits to national government personnel shall be classified as Maintenance and Other Operating Expenses (MOOE) since these are not personal services costs of the local government unit."

34.Figuerres vs. Court of Appeals, 305 SCRA 206 [1999].35.Ibid.

 ||| (Leynes v. Commission on Audit, G.R. No. 143596, [December 11, 2003], 463 PHIL 557-580)

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CASE DIGESTLEYNES Vs. COAGR NO. 143596DEC. 11, 2003

FACTS:

Petitioner Judge Tomas C. Leynes, presiding judge of RTC of Calapan City, Branch 40 Oriental Mindoro. His RATA is taken from the SC and in addition he received a monthly allowance from the local funds of the Municipality of Naujan-being the sole presiding judge. On May 7, 1993, SB approved increasing petitioner’s monthly allowance. On Feb. 17, 1994 Provincial auditor issued a memorandum to stop the payment of allowance for he is already receiving RATA from the SC.

ISSUE:

Whether or not the Municipality of Naujan validly provided allowance in addition to that given by the SC.

HELD: YES, RA 7160 is a special law which exclusively deals with LGU’s outlining their own powers and functions in consonance with the constitutional mandated policy of the Local autonomy. Resolution No.101 is valid. Respondent COA erred in opposing the grant of allowance to the judges.

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