G.R. No.

111097 July 20, 1994

MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners,

vs.
PRYCE PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT AND GAMING
CORPORATION, respondents.

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

R.R. Torralba & Associates for private respondent.

CRUZ, J.:

There was instant opposition when PAGCOR announced the opening of a casino in Cagayan de Oro
City. Civic organizations angrily denounced the project. The religious elements echoed the objection
and so did the women's groups and the youth. Demonstrations were led by the mayor and the city
legislators. The media trumpeted the protest, describing the casino as an affront to the welfare of the
city.

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

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

ORDINANCE NO. 3353

AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND

CANCELLING EXISTING BUSINESS PERMIT TO ANY ESTABLISHMENT FOR
THE USING AND ALLOWING TO BE USED ITS PREMISES OR PORTION
THEREOF FOR THE OPERATION OF CASINO.

BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayan de Oro, in

session assembled that:

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

Sec. 2. — That it shall be a violation of existing business permit by any persons,

partnership or corporation to use its business establishment or portion thereof, or
allow the use thereof by others for casino operation and other gambling activities.

Sec. 3. — PENALTIES. — Any violation of such existing business permit as defined

in the preceding section shall suffer the following penalties, to wit:
 a) Suspension of the business permit for sixty (60)
days for the first offense and a fine of P1,000.00/day

b) Suspension of the business permit for Six (6)

months for the second offense, and a fine of
P3,000.00/day

c) Permanent revocation of the business permit and

imprisonment of One (1) year, for the third and
subsequent offenses.

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

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

ORDINANCE NO. 3375-93

AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING

PENALTY FOR VIOLATION THEREFOR.

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

WHEREAS, on October 14, 1992, the City Council passed another Resolution No.
2673, reiterating its policy against the establishment of CASINO;

WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353,

prohibiting the issuance of Business Permit and to cancel existing Business Permit to
any establishment for the using and allowing to be used its premises or portion
thereof for the operation of CASINO;

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

NOW THEREFORE,

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

Sec. 1. — The operation of gambling CASINO in the City of Cagayan de Oro is

hereby prohibited.

Sec. 2. — Any violation of this Ordinance shall be subject to the following penalties:

a) Administrative fine of P5,000.00 shall be imposed against the proprietor,

partnership or corporation undertaking the operation, conduct, maintenance of
gambling CASINO in the City and closure thereof;
 b) Imprisonment of not less than six (6) months nor more than one (1) year or a fine
in the amount of P5,000.00 or both at the discretion of the court against the manager,
supervisor, and/or any person responsible in the establishment, conduct and
maintenance of gambling CASINO.

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

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

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

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

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

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

4. The questioned Ordinances are discriminatory to casino and partial to cockfighting

and are therefore invalid on that point.

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

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

PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulate all games of
chance, including casinos on land and sea within the territorial jurisdiction of the Philippines.
In Basco v. Philippine Amusements and Gaming Corporation, 4 this Court sustained the
constitutionality of the decree and even cited the benefits of the entity to the national economy as the third
highest revenue-earner in the government, next only to the BIR and the Bureau of Customs.

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

Sec. 16. — General Welfare. — Every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as powers
necessary, appropriate, or incidental for its efficient and effective governance, and
those which are essential to the promotion of the general welfare. Within their
 respective territorial jurisdictions, local government units shall ensure and support,
among other things, the preservation and enrichment of culture, promote health and
safety, enhance the right of the people to a balanced ecology, encourage and
support the development of appropriate and self-reliant scientific and technological
capabilities, improve public morals, enhance economic prosperity and social justice,
promote full employment among their residents, maintain peace and order, and
preserve the comfort and convenience of their inhabitants.

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

Sec. 458. — Powers, Duties, Functions and Compensation. — (a) The Sangguniang
Panlungsod, as the legislative body of the city, shall enact ordinances, approve
resolutions and appropriate funds for the general welfare of the city and its
inhabitants pursuant to Section 16 of this Code and in the proper exercise of the
corporate powers of the city as provided for under Section 22 of this Code, and shall:

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

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, gamblingand other prohibited
games of chance, fraudulent devices and ways to
obtain money or property, drug addiction,
maintenance of drug dens, drug pushing, juvenile
delinquency, the printing, distribution or exhibition of
obscene or pornographic materials or publications,
and such other activities inimical to the welfare and
morals of the inhabitants of the city;

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

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

It is submitted that this interpretation is consonant with the policy of local autonomy as mandated in
Article II, Section 25, and Article X of the Constitution, as well as various other provisions therein
seeking to strengthen the character of the nation. In giving the local government units the power to
prevent or suppress gambling and other social problems, the Local Government Code has
recognized the competence of such communities to determine and adopt the measures best
expected to promote the general welfare of their inhabitants in line with the policies of the State.
The petitioners also stress that when the Code expressly authorized the local government units to
prevent and suppress gambling and other prohibited games of chance, like craps, baccarat,
blackjack and roulette, it meant allforms of gambling without distinction. Ubi lex non distinguit, nec
nos distinguere debemos. 6 Otherwise, it would have expressly excluded from the scope of their power
casinos and other forms of gambling authorized by special law, as it could have easily done. The fact that
it did not do so simply means that the local government units are permitted to prohibit all kinds of
gambling within their territories, including the operation of casinos.

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

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

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

Sec. 5. Rules of Interpretation. — In the interpretation of the provisions of this Code,

the following rules shall apply:

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

xxx xxx xxx

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

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

This is the opportune time to stress an important point.

The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While it is generally
considered inimical to the interests of the people, there is nothing in the Constitution categorically
proscribing or penalizing gambling or, for that matter, even mentioning it at all. It is left to Congress
to deal with the activity as it sees fit. In the exercise of its own discretion, the legislature may prohibit
gambling altogether or allow it without limitation or it may prohibit some forms of gambling and allow
others for whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but
permits lotteries, cockfighting and horse-racing. In making such choices, Congress has consulted its
own wisdom, which this Court has no authority to review, much less reverse. Well has it been said
that courts do not sit to resolve the merits of conflicting theories. 8 That is the prerogative of the
political departments. It is settled that questions regarding the wisdom, morality, or practicibility of statutes
are not addressed to the judiciary but may be resolved only by the legislative and executive departments,
to which the function belongs in our scheme of government. That function is exclusive. Whichever way
these branches decide, they are answerable only to their own conscience and the constituents who will
ultimately judge their acts, and not to the courts of justice.

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

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

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

2) It must not be unfair or oppressive.

3) It must not be partial or discriminatory.

4) It must not prohibit but may regulate trade.

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

6) It must not be unreasonable.

We begin by observing that under Sec. 458 of the Local Government Code, local government units
are authorized to prevent or suppress, among others, "gambling and other prohibited games of
chance." Obviously, this provision excludes games of chance which are not prohibited but are in fact
permitted by law. The petitioners are less than accurate in claiming that the Code could have
excluded such games of chance but did not. In fact it does. The language of the section is clear and
unmistakable. Under the rule of noscitur a sociis, a word or phrase should be interpreted in relation
to, or given the same meaning of, words with which it is associated. Accordingly, we conclude that
since the word "gambling" is associated with "and other prohibited games of chance," the word
should be read as referring to only illegal gambling which, like the other prohibited games of chance,
must be prevented or suppressed.

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

The apparent flaw in the ordinances in question is that they contravene P.D. 1869 and the public
policy embodied therein insofar as they prevent PAGCOR from exercising the power conferred on it
to operate a casino in Cagayan de Oro City. The petitioners have an ingenious answer to this
misgiving. They deny that it is the ordinances that have changed P.D. 1869 for an ordinance
admittedly cannot prevail against a statute. Their theory is that the change has been made by the
Local Government Code itself, which was also enacted by the national lawmaking authority. In their
view, the decree has been, not really repealed by the Code, but merely "modified pro tanto" in the
sense that PAGCOR cannot now operate a casino over the objection of the local government unit
concerned. This modification of P.D. 1869 by the Local Government Code is permissible because
one law can change or repeal another law.

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

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

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

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

(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding
hospital fund; Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the
Special Education Fund; Presidential Decree No. 144 as amended by Presidential
Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended; Presidential
Decree No. 436 as amended by Presidential Decree No. 558; and Presidential
Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed and
rendered of no force and effect.

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

(e) The following provisions are hereby repealed or amended insofar as they are
inconsistent with the provisions of this Code: Sections 2, 16, and 29 of Presidential
Decree No. 704; Sections 12 of Presidential Decree No. 87, as amended; Sections
52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree No. 463, as
amended; and Section 16 of Presidential Decree No. 972, as amended, and
 (f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly.

Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the absence of a
clear and unmistakable showing of such intention. In Lichauco & Co. v. Apostol, 10 this Court
explained:

The cases relating to the subject of repeal by implication all proceed on the
assumption that if the act of later date clearly reveals an intention on the part of the
lawmaking power to abrogate the prior law, this intention must be given effect; but
there must always be a sufficient revelation of this intention, and it has become an
unbending rule of statutory construction that the intention to repeal a former law will
not be imputed to the Legislature when it appears that the two statutes, or provisions,
with reference to which the question arises bear to each other the relation of general
to special.

There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, as the private
respondent points out, PAGCOR is mentioned as the source of funding in two later enactments of
Congress, to wit, R.A. 7309, creating a Board of Claims under the Department of Justice for the
benefit of victims of unjust punishment or detention or of violent crimes, and R.A. 7648, providing for
measures for the solution of the power crisis. PAGCOR revenues are tapped by these two statutes.
This would show that the PAGCOR charter has not been repealed by the Local Government Code
but has in fact been improved as it were to make the entity more responsive to the fiscal problems of
the government.

It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably
destructive confrontation, courts must exert every effort to reconcile them, remembering that both
laws deserve a becoming respect as the handiwork of a coordinate branch of the government. On
the assumption of a conflict between P.D. 1869 and the Code, the proper action is not to uphold one
and annul the other but to give effect to both by harmonizing them if possible. This is possible in the
case before us. The proper resolution of the problem at hand is to hold that under the Local
Government Code, local government units may (and indeed must) prevent and suppress all kinds of
gambling within their territories except only those allowed by statutes like P.D. 1869. The exception
reserved in such laws must be read into the Code, to make both the Code and such laws equally
effective and mutually complementary.

This approach would also affirm that there are indeed two kinds of gambling, to wit, the illegal and
those authorized by law. Legalized gambling is not a modern concept; it is probably as old as illegal
gambling, if not indeed more so. The petitioners' suggestion that the Code authorizes them to
prohibit all kinds of gambling would erase the distinction between these two forms of gambling
without a clear indication that this is the will of the legislature. Plausibly, following this theory, the City
of Manila could, by mere ordinance, prohibit the Philippine Charity Sweepstakes Office from
conducting a lottery as authorized by R.A. 1169 and B.P. 42 or stop the races at the San Lazaro
Hippodrome as authorized by R.A. 309 and R.A. 983.

In light of all the above considerations, we see no way of arriving at the conclusion urged on us by
the petitioners that the ordinances in question are valid. On the contrary, we find that the ordinances
violate P.D. 1869, which has the character and force of a statute, as well as the public policy
expressed in the decree allowing the playing of certain games of chance despite the prohibition of
gambling in general.
The rationale of the requirement that the ordinances should not contravene a statute is obvious.
Municipal governments are only agents of the national government. Local councils exercise only
delegated legislative powers conferred on them by Congress as the national lawmaking body. The
delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is a
heresy to suggest that the local government units can undo the acts of Congress, from which they
have derived their power in the first place, and negate by mere ordinance the mandate of the statute.

Municipal corporations owe their origin to, and derive their powers and rights wholly
from the legislature. It breathes into them the breath of life, without which they cannot
exist. As it creates, so it may destroy. As it may destroy, it may abridge and control.
Unless there is some constitutional limitation on the right, the legislature might, by a
single act, and if we can suppose it capable of so great a folly and so great a wrong,
sweep from existence all of the municipal corporations in the State, and the
corporation could not prevent it. We know of no limitation on the right so far as to the
corporation themselves are concerned. They are, so to phrase it, the mere tenants at
will of the legislature. 11

This basic relationship between the national legislature and the local government units has not been
enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy.
Without meaning to detract from that policy, we here confirm that Congress retains control of the
local government units although in significantly reduced degree now than under our previous
Constitutions. The power to create still includes the power to destroy. The power to grant still
includes the power to withhold or recall. True, there are certain notable innovations in the
Constitution, like the direct conferment on the local government units of the power to tax, 12 which
cannot now be withdrawn by mere statute. By and large, however, the national legislature is still the
principal of the local government units, which cannot defy its will or modify or violate it.

The Court understands and admires the concern of the petitioners for the welfare of their
constituents and their apprehensions that the welfare of Cagayan de Oro City will be endangered by
the opening of the casino. We share the view that "the hope of large or easy gain, obtained without
special effort, turns the head of the workman" 13 and that "habitual gambling is a cause of laziness and
ruin." 14 In People v. Gorostiza, 15 we declared: "The social scourge of gambling must be stamped out.
The laws against gambling must be enforced to the limit." George Washington called gambling "the child
of avarice, the brother of iniquity and the father of mischief." Nevertheless, we must recognize the power
of the legislature to decide, in its own wisdom, to legalize certain forms of gambling, as was done in P.D.
1869 and impliedly affirmed in the Local Government Code. That decision can be revoked by this Court
only if it contravenes the Constitution as the touchstone of all official acts. We do not find such
contravention here.

We hold that the power of PAGCOR to centralize and regulate all games of chance, including
casinos on land and sea within the territorial jurisdiction of the Philippines, remains unimpaired. P.D.
1869 has not been modified by the Local Government Code, which empowers the local government
units to prevent or suppress only those forms of gambling prohibited by law.

Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that cannot be
amended or nullified by a mere ordinance. Hence, it was not competent for the Sangguniang
Panlungsod of Cagayan de Oro City to enact Ordinance No. 3353 prohibiting the use of buildings for
the operation of a casino and Ordinance No. 3375-93 prohibiting the operation of casinos. For all
their praiseworthy motives, these ordinances are contrary to P.D. 1869 and the public policy
announced therein and are therefore ultra vires and void.

WHEREFORE, the petition is DENIED and the challenged decision of the respondent Court of
Appeals is AFFIRMED, with costs against the petitioners. It is so ordered.
.R. No. 71169 December 22, 1988

JOSE D. SANGALANG and LUTGARDA D. SANGALANG, petitioners, FELIX C. GASTON and

DOLORES R. GASTON, JOSE V. BRIONES and ALICIA R. BRIONES, and BEL-AIR VILLAGE
ASSOCIATION, INC., intervenors-petitioners,
vs.
INTERMEDIATE APPELLATE COURT, and AYALA CORPORATION, respondents.

G.R. No. 74376 December 22, 1988

BEL-AIR VILLAGE ASSOCIATION, INC., petitioner,

vs.
THE INTERMEDIATE APPELLATE COURT, ROSARIO DE JESUS TENORIO, and CECILIA
GONZALVEZ, respondents.

G.R. No. 76394 December 22,1988

BEL-AIR VILLAGE ASSOCIATION, INC., petitioner,

vs.
THE COURT OF APPEALS, and EDUARDO and BUENA ROMUALDEZ respondents.

G.R. No. 78182 December 22, 1988

BEL-AIR VILLAGE ASSOCIATION, INC., petitioner,

vs.
COURT OF APPEALS, DOLORES FILLEY, and J. ROMERO & ASSOCIATES, respondents.

G.R. No. 82281 December 22, 1988

BEL-AIR VILLAGE ASSOCIATION, INC, petitioner,

vs.
COURT OF APPEALS, VIOLETA MONCAL, and MAJAL DEVELOPMENT
CORPORATION, respondents.

Sangco, Anastacio, Castaneda & Duran Law Office for petitioners & private intervenors- petitioners.

Raul S. Sison Law Offices for intervenor-petitioner Bel-Air Village Association, Inc. Renato L. Dela
Fuente for respondent Ayala Corporation.

G.R. No. L-74376:

Raul S. Sison Law Offices for petitioner.

Sergio L. Guadiz for private respondents.

G.R. No. L-76394:

Raul S. Sison Law Offices for petitioner.

Gruba, Tanlimco Lamso and Apuhin Law Offices for respondents.

G.R. No. L-78182:

Funk & Associates for petitioners.

Tee Tomas & Associates for respondents.

G.R. No. L-82281:

Funk & Associates for petitioner.

Castillo, Laman, Tan & Associates for private respondents.

SARMIENTO, J.:

Before the Court are five consolidated petitions, 1 docketed as G.R. Nos. 71169, 74376, 76394, 78182,
and 82281 hereof, in the nature of appeals (by certiorari under Rule 45 of the Rules of Court) from five
decisions of the Court of Appeals, denying specific performance and damages.

The proceedings were commenced at the first instance by Jose Sangalang, joined by his wife
Lutgarda Sangalang, both residents of No. 110 Jupiter Street, Makati, Metro Manila (G.R. No.
71169) to enforce by specific performance restrictive easement upon property, specifically the Bel-
Air Village subdivision in Makati, Metro Manila, pursuant to stipulations embodied in the deeds of
sale covering the subdivision, and for damages. Later, the Sangalangs were joined by Felix Gaston,
a resident of No. 64 Jupiter Street of the same municipality, and by Mr. and Mrs. Jose and Alicia
Briones, both of No. 66 Jupiter Street. Pending further proceedings, the Bel-Air Village Association,
Inc. (BAVA), an incorporated homeowners' association, entered its appearance as plaintiff-in-
intervention.

BAVA itself had brought its own complaints, four in number, likewise for specific performance and
damages to enforce the same 'deed restrictions.' (See G.R. Nos. 74376, 76394, 78182, and 82281.)

ANTECEDENTS FACTS

I. G.R. No. 71169

The facts are stated in the decision appealed from. We quote:

xxxxxxxxx

(1) Bel-Air Village is located north of Buendia Avenue extension (now Sen. Gil J.
Puyat Ave.) across a stretch of commercial block from Reposo Street in the west up
to Zodiac Street in the east, When Bel-Air Village was planned, this block between
Reposo and Zodiac Streets adjoining Buendia Avenue in front of the village was
designated as a commercial block. (Copuyoc TSN, p. 10, Feb. 12, 1982).

(2) Bel-Air Village was owned and developed into a residential subdivision in the
1950s by Makati Development Corporation (hereinafter referred to as MDC), which in
1968 was merged with appellant Ayala Corporation.
(3) Appellees-spouses Sangalang reside at No. 11O Jupiter Street between Makati
Avenue and Reposo Street; appellees-spouses Gaston reside at No. 64 Jupiter
Street between Makati Avenue and Zodiac Street; appellees-spouses Briones reside
at No. 66 Jupiter Street also between Makati Avenue and Zodiac Street; while
appellee Bel-Air Village Association, Inc. (hereinafter referred to as BAVA) is the
homeowners' association in Bel-Air Village which takes care of the sanitation,
security, traffic regulations and general welfare of the village.

(4) The lots which were acquired by appellees Sangalang and spouse Gaston and
spouse and Briones and spouse in 1960, 1957 and 1958, respectively, were all sold
by MDC subject to certain conditions and easements contained in Deed Restrictions
which formed a part of each deed of sale. The pertinent provisions in said Deed
Restrictions, which are common to all lot owners in Bel-Air Village, are as follows:

I-BEL-AIR ASSOCIATION

The owner of this lot/s or his successors in interest is required to be and is

automatically a member of the Bel-Air Association and must abide by such rules and
regulations laid down by the Association in the interest of the sanitation, security and
the general welfare of the community.

The association will also provide for and collect assessments, which will constitute as
a lien on the property junior only to liens of the government for taxes and to voluntary
mortgages for sufficient consideration entered into in good faith.

II-USE OF LOTS

Subject to such amendments and additional restrictions, reservations, servitudes,

etc., as the Bel- Air Association may from time to time adopt and prescribe, this lot is
subject to the following restrictions:

a. This lot/s shall not be subdivided. However, three or more lots may be
consolidated and subdivided into a lesser number of lots provided that none of the
resulting lots be smaller in area than the smallest lot before the consolidation and
that the consolidation and subdivision plan be duly approved by the governing body
of the Bel-Air Association.

b. This lot/s shall only be used for residential purposes.

c. Only one single family house may be constructed on a single lot, although
separate servants' quarters or garage may be built.

d. Commercial or advertising signs shall not be placed, constructed, or erected on

this lot. Name plates and professional signs of homeowners are permitted so long as
they do not exceed 80 x 40 centimeters in size.

e. No cattle, pigs, sheep, goats, ducks, geese, roosters or rabbits shall be maintained
in the lot, except that pets may be maintained but must be controlled in accordance
with the rulings of the Association. The term "pets' includes chickens not in
commercial quantities.
f. The property is subject to an easement of two (2) meters within the lot and
adjacent to the rear and sides thereof not fronting a street for the purpose of
drainage, sewage, water and other public facilities as may be necessary and
desirable; and the owner, lessee or his representative shall permit access thereto by
authorized representatives of the Bel-Air Association or public utility entities for the
purposes for which the easement is created.

g. This lot shall not be used for any immoral or illegal trade or activity.

h. The owner and/or lessee of this lot/s shall at all times keep the grass cut and
trimmed to reduce the fire hazard of the property.

xxx xxx xxx

VI-TERM OF RESTRICTIONS

The foregoing restrictions shall remain in force for fifty years from January 15, 1957,
unless sooner cancelled in its entirety by two thirds vote of members in good
standing of the Bel-Air Association. However, the Association may, from time to time,
add new ones, amend or abolish particular restrictions or parts thereof by majority
rule.

VII--ENFORCEMENT OF RESTRICTIONS

The foregoing restrictions may be enjoined and/or enforced by court action by the
Bel-Air Association, or by the Makati Development Corporation or its assigns, or by
any registered owner of land within the boundaries of the Bel-Air Subdivision (Sub-
division plan PSD-49226 and Lot 7-B, Psd-47848) or by any member in good
standing of the Bel-Air association." (Exh. 1 -b; Exh. 22, Annex "B"). (Appellant's
Brief, pp. 4- 6)

(5) When MDC sold the above-mentioned lots to appellees' predecessors-in-interest,

the whole stretch of the commercial block between Buendia Avenue and Jupiter
Street, from Reposo Street in the west to Zodiac Street in the east, was still
undeveloped. Access, therefore, to Bel-Air Village was opened to all kinds of people
and even animals. So in 1966, although it was not part of the original plan, MDC
constructed a fence or wall on the commercial block along Jupiter Street. In 1970,
the fence or wall was partly destroyed by typhoon "Yoling." The destroyed portions
were subsequently rebuilt by the appellant. (Copuyoc TSN, pp. 31-34, Feb. 12,
1982). When Jupiter Street was widened in 1972 by 3.5 meters, the fence or wall had
to be destroyed. Upon request of BAVA, the wall was rebuilt inside the boundary of
the commercial block. (Copuyoc TSN, pp. 4447, Feb. 12,1982).

(6) When the appellant finally decided to subdivide and sell the lots in the commercial
block between Buendia and Jupiter, BAVA wrote the appellant on May 9, 1972,
requesting for confirmation on the use of the commercial lots. The appellant replied
on May 16, 1972, informing BAVA of the restrictions intended to be imposed in the
sale and use of the lots. Among these restrictions are: that the building shall have a
set back of 19 meters; and that with respect to vehicular traffic along Buendia
Avenue, entrance only will be allowed, and along Jupiter Street and side streets, both
entrance and exit will be allowed.
(7) On June 30, 1972, appellant informed BAVA that in a few months it shall
subdivide and sell the commercial lots bordering the north side of Buendia Avenue
Extension from Reposo Street up to Zodiac Street. Appellant also informed BAVA
that it had taken all precautions and will impose upon the commercial lot owners
deed restrictions which will harmonize and blend with the development and welfare
of Bel-Air Village. Appellant further applied for special membership in BAVA of the
commercial lot owners. A copy of the deed restrictions for the commercial lots was
also enclosed. The proposed deed restrictions shall include the 19 meter set back of
buildings from Jupiter Street, the requirement for parking space within the lot of one
(1) parking slot for every seventy five (75) meters of office space in the building and
the limitation of vehicular traffic along Buendia to entrance only, but allowing both
vehicular entrance and vehicular exit through Jupiter Street and any side street.

In its letter of July 10, 1972, BAVA acknowledged the above letter of appellant and
informed the latter that the application for special membership of the commercial lot
owners in BAVA would be submitted to BAVA's board of governors for decision.

(8) On September 25, 1972, appellant notified BAVA that, after a careful study, it was
finally decided that the height limitation of buildings on the commercial lots shall be
increased from 12.5 meters to 15 meters. Appellant further informed BAVA that
Jupiter Street shall be widened by 3.5 meters to improve traffic flow in said street.
BAVA did not reply to said letter, but on January 22, 1973, BAVA wrote a letter to the
appellant informing the latter that the Association had assessed the appellant, as
special member of the association, the amount of P40,795.00 (based on 81,590
square meters at P.50 per square meter) representing the membership dues to the
commercial lot owners for the year 1973, and requested the appellant to remit the
amount which its board of governors had already included in its current budget. In
reply, appellant on January 31, 1973 informed BAVA that due to the widening of
Jupiter Street, the area of the lots which were accepted by the Association as
members was reduced to 76,726 square meters. Thus, the corresponding dues at
P.50 per square meter should be reduced to P38,363.00. This amount, therefore,
was remitted by the appellant to BAVA. Since then, the latter has been collecting
membership dues from the owners of the commercial lots as special members of the
Association. As a matter of fact, the dues were increased several times. In 1980, the
commercial lot owners were already being charged dues at the rate of P3.00 per
square meter. (Domingo, TSN, p. 36, March 19, 1980). At this rate, the total
membership dues of the commercial lot owners amount to P230,178. 00 annually
based on the total area of 76,726 square meters of the commercial lots.

(9) Meantime, on April 4, 1975, the municipal council of Makati enacted its ordinance
No. 81, providing for the zonification of Makati (Exh. 18). Under this Ordinance, Bel-
Air Village was classified as a Class A Residential Zone, with its boundary in the
south extending to the center line of Jupiter Street (Exh. 18-A).

Thus, Chapter III, Article 1, Section 3.03, par. F. of the Ordinance provides:

F. Bel-Air Village area, as bounded on the N by Polaris and Mercedes streets and on
the NE by Estrella Street; on the SE by Epifanio de los Santos Avenue and on the
SW by the center line of Jupiter Street. Then bounded on the N by the abandoned
MRR Pasig Line; on the E by Makati Avenue; on the S by the center line of Jupiter
Street and on the W by the center line of Reposo Street." (Exh. 18-A)
 Similarly, the Buendia Avenue Extension area was classified as Administrative Office
Zone with its boundary in the North-North East Extending also up to the center line of
Jupiter Street (Exh. 18b).

Thus, Chapter III, Article I, Section 3.05, par. C. of the Ordinance provides:

C. The Buendia Avenue Extension areas, as bounded on the N-NE by the center line
of Jupiter Street, on the SE by Epifanio de los Santos Avenue; on the SW by
Buendia Avenue and on the NW by the center line of Reposo Street, then on the NE
by Malugay Street; on the SE by Buendia Avenue and on the W by Ayala Avenue
Extension." (Exh. 18-B)

The Residential Zone and the Administrative Office Zone, therefore, have a common
boundary along the center line of Jupiter Street.

The above zoning under Ordinance No. 81 of Makati was later followed under the
Comprehensive Zoning Ordinance for the National Capital Region adopted by the
Metro Manila Commission as Ordinance 81 -01 on March 14, 1981 (Exh. 19).
However, under this ordinance, Bel-Air Village is simply bounded in the South-
Southeast by Jupiter Street-not anymore up to the center line of Jupiter Street (Exh.
B). Likewise, the blockdeep strip along the northwest side of Buendia Avenue
Extension from Reposo to EDSA was classified as a High Intensity Commercial Zone
(Exh. 19-c).

Thus, the Zoning District Boundaries -Makati, in Annex B of the Ordinance provides:

R-I-Low Intensity Residential

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4. Bel-Air 1, 3, 4

Bounded on the North -- J.P. Rizal and Amapola St.

South - Rockwell

Northwest - P. Burgos

Southeast - Jupiter

Southwest - Epifanio de los Santos Ave. (EDSA)

5. Bel-Air 2

Bounded on the Northwest - J.P. Rizal

Southwest - Makati Avenue

South --- Jupiter

Southeast -- Pasig Line

East - South Avenue" (Exh. 19-b)

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C-3-High Intensity Commercial Zone

2. A block deep strip along the northwest side of Buendia Ave. Ext. from Reposo to
EDSA." (Exh, 19-c)

Under the above zoning classifications, Jupiter Street, therefore, is a common

boundary of Bel-Air Village and the commercial zone.

(10) Meanwhile, in 1972, BAVA had installed gates at strategic locations across
Jupiter Street which were manned and operated by its own security guards who were
employed to maintain, supervise and enforce traffic regulations in the roads and
streets of the village. (Villavicencio, TSN, pp, 22-25, Oct. 30, 1980; BAVA Petition,
par. 11, Exh. 17).

Then, on January 17, 1977, the Office of the Mayor of Makati wrote BAVA directing
that, in the interest of public welfare and for the purpose of easing traffic congestion,
the following streets in Bel-Air Village should be opened for public use:

Amapola Street - from Estrella Street to Mercedes Street

Amapola Street -junction of Palma Street gate going to J. Villena Street

Mercedes Street -- from EDSA to Imelda Avenue and Amapola junction

Zodiac Street - from Mercedes Street to Buendia Avenue

Jupiter Street -- from Zodiac Street to Reposo Street connecting Metropolitan

Avenue to Pasong Tamo and V. Cruz Extension intersection

Neptune Street - from Makati Avenue to Reposo Street Orbit Street - from F. Zobel-
Candelaria intersection to Jupiter Street

Paseo de Roxas - from Mercedes Street to Buendia Avenue (Exh. 17, Annex A,
BAVA Petition)

On February 10, 1977, BAVA wrote the Mayor of Makati, expressing the concern of
the residents about the opening of the streets to the general public, and requesting
specifically the indefinite postponement of the plan to open Jupiter Street to public
vehicles. (Exh. 17, Annex B, BAVA Petition).

However, BAVA voluntarily opened to the public Amapola, Mercedes, Zodiac,

Neptune and Paseo de Roxas streets. (Exh. 17-A, Answer of Makati par. 3-7).
Later, on June 17,1977, the Barangay Captain of Bel-Air Village was advised by the
Office of the Mayor that, in accordance with the agreement entered into during the
meeting on January 28, 1 977, the Municipal Engineer and the Station Commander
of the Makati Police were ordered to open for public use Jupiter Street from Makati
Avenue to Reposo Street. Accordingly, he was requested to advise the village
residents of the necessity of the opening of the street in the interest of public welfare.
(Exh. 17, Annex E, BAVA Petition).

Then, on June 10, 1977, the Municipal Engineer of Makati in a letter addressed to
BAVA advised the latter to open for vehicular and pedestrian traffic the entire portion
of Jupiter Street from Makati Avenue to Reposo Street (Exh. 17, BAVA Petition, par.
14).

Finally, on August 12, 1977, the municipal officials of Makati concerned allegedly
opened, destroyed and removed the gates constructed/located at the corner of
Reposo Street and Jupiter Street as well as the gates/fences located/constructed at
Jupiter Street and Makati Avenue forcibly, and then opened the entire length of
Jupiter Street to public traffic. (Exh. 17, BAVA Petition, pars. 16 and 17).

(11) Before the gates were-removed, there was no parking problem or traffic problem
in Jupiter Street, because Jupiter Street was not allowed to be used by the general
public (Villavicencio, TSN, pp. 24-25, Oct. 30, 1980). However, with the opening of
Zodiac Street from Estrella Street to Jupiter Street and also the opening to the public
of the entire length of Jupiter Street, there was a tremendous increase in the volume
of traffic passing along Jupiter Street coming from EDSA to Estrella Street, then to
Zodiac Street to Jupiter Street, and along the entire length of Jupiter Street to its
other end at Reposo Street. (Villavicencio, TSN, pp. 30-32, Oct. 30, 1980).

In the meantime, the purchasers of the commercial lots between Jupiter Street and
Buendia Avenue extension had started constructing their respective buildings in
1974-1975. They demolished the portions of the fence or wall standing within the
boundary of their lots. Many of the owners constructed their own fences or walls in
lieu of the wall and they employed their own security guards. (TSN, p. 83, Feb.
20,1981; TSN, pp. 53-54; 72-74, March 20,1981; TSN, pp. 54-55, July 23, 1981).

(12) Then, on January 27, 1978, appellant donated the entire Jupiter Street from
Metropolitan Avenue to Zodiac Street to BAVA (Exh. 7)- However, even before 1978,
the Makati Police and the security force of BAVA were already the ones regulating
the traffic along Jupiter Street after the gates were opened in 1977. Sancianco TSN,
pp. 26-30, Oct. 2,1981).

In October, 1979, the fence at the corner of Orbit and Neptune Streets was opened
and removed (BAVA Petition, par. 22, Exh. 17). The opening of the whole stretch of
Orbit Street from J.P. Rizal Avenue up to Imelda Avenue and later to Jupiter Street
was agreed to at the conference attended by the President of BAVA in the office of
the Station Commander of Makati, subject to certain conditions, to wit:

That, maintenance of Orbit St. up to Jupiter St. shall be shouldered by the

Municipality of Makati.

That, street lights will be installed and maintenance of the same along Orbit St. from
J.P. Rizal Ave. up to Jupiter St. shall be undertaken by the Municipality.
That for the security of the residents of San Miguel Village and Bel-Air Village, as a
result of the opening of Orbit Street, police outposts shall be constructed by the
Municipality of Makati to be headed by personnel of Station No. 4, in close
coordination with the Security Guards of San Miguel Village and Bel-Air Village." (CF.
Exh. 3 to Counter-Affidavit, of Station Commander, Ruperto Acle p. 253, records)"
(Order, Civil Case No. 34948, Exh. 17-c).

(13) Thus, with the opening of the entire length of Jupiter Street to public traffic, the
different residential lots located in the northern side of Jupiter Street ceased to be
used for purely residential purposes. They became, for all purposes, commercial in
character.

(14) Subsequently, on October 29, 1979, the plaintiffs-appellees Jose D. Sangalang

and Lutgarda D. Sangalang brought the present action for damages against the
defendant-appellant Ayala Corporation predicated on both breach of contract and on
tort or quasi-delict A supplemental complaint was later filed by said appellees
seeking to augment the reliefs prayed for in the original complaint because of alleged
supervening events which occurred during the trial of the case. Claiming to be
similarly situated as the plaintiffs-appellees, the spouses Felix C. Gaston and
Dolores R. Gaston, Jose V. Briones and Alicia R. Briones, and the homeowners'
association (BAVA) intervened in the case.

(15) After trial on the merits, the then Court of First Instance of Rizal, Pasig, Metro
Manila, rendered a decision in favor of the appellees the dispositive portion of which
is as follows:

WHEREFORE, judgment is hereby accordingly rendered as follows:

ON PLAINTIFFS' COMPLAINT:

Defendant is ordered to pay to the plaintiffs-spouses Sangalang the following

damages:

1. The sum of P500,000.00 as actual and consequential damages;

2. The sum of P2,000,000.00 as moral damages;

3. The sum of P500,000.00 as exemplary damages;

4. The sum of P100,000.00 as attorney's fees; and

5. The costs of suit.

ON INTERVENORS FELIX and DOLORES GASTON'S COMPLAINT:

Defendant is ordered to pay to the spouses Felix and Dolores Gaston, the following
damages:

1 . The sum of P400,000.00 as consequential damages;

2 The sum of P500,000.00 as moral damages;

3 The sum of P500,000.00 as exemplary damages:

4 The sum of P50,000.00 as attorney's fees; and

5 The costs of suit.

ON INTERVENORS JOSE and ALICIA BRIONES' COMPLAINT:

Defendant is ordered to pay to the spouses Jose and Alicia Briones, the following
damages:

1 . The sum of P400,000.00 as consequential damages;

2 The sum of P500,000.00 as moral damages;

3 The sum of P500,000.00 as exemplary damages;

4 The sum of P50,000.00 as attorney's fees; and

5 The costs of suit.

ON INTERVENOR BAVA'S COMPLAINT:

Defendant is ordered to pay intervenor BAVA, the following damages:

1. The sum of P400,000.00 as consequential damages;

2. The sum of P500,000.00 as exemplary damages;

3. The sum of P50,000.00 as attorney's fees; and

4. The costs of suit.

The above damages awarded to the plaintiffs and intervenors shall bear legal interest
from the filing of the complaint.

Defendant is further ordered to restore/reconstruct the perimeter wall at its original

position in 1966 from Reposo Street in the west to Zodiac Street in the east, at its
own expense, within SIX (6) MONTHS from finality of judgment.

SO ORDERED.

(Record on Appeal, pp. 400-401) 2

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On appeal, the Court of Appeals 3 rendered a reversal, and disposed as follows:

 ACCORDINGLY, finding the decision appealed from as not supported by the facts
and the law on the matter, the same is hereby SET ASIDE and another one entered
dismissing the case for lack of a cause of action. Without pronouncement as to costs.

SO ORDERED. 4

II. G.R. No. 74376

This petition was similarly brought by BAVA to enforce the aforesaid restrictions stipulated in the
deeds of sale executed by the Ayala Corporation. The petitioner originally brought the complaint in
the Regional Trial Court of Makati, 5 principally for specific performance, plaintiff [now, petitioner]
alleging that the defendant [now, private respondent] Tenorio allowed defendant [Tenorio's co-private
respondent] Gonzalves to occupy and convert the house at 50 Jupiter Street, Bel-Air Village, Makati,
Metro Manila, into a restaurant, without its knowledge and consent, and in violation of the deed
restrictions which provide that the lot and building thereon must be used only for residential purposes
upon which the prayed for main relief was for 'the defendants to permanently refrain from using the
premises as commercial and to comply with the terms of the Deed Restrictions." 6 The trial court
dismissed the complaint on a procedural ground, i.e., pendency of an Identical action, Civil Case No.
32346, entitled "Bel-Air Village Association, Inc. v. Jesus Tenorio." The Court of Appeals 7affirmed, and
held, in addition, that Jupiter Street "is classified as High density commercial (C-3) zone as per
Comprehensive Zoning Ordinance No. 81-01 for National Capital Region," 8 following its own ruling in AC-
G.R. No. 66649, entitled "Bel-Air Village Association, Inc. vs. Hy-Land Realty & Development
Corporation, et al."

III. G.R. No. 76394

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Defendants-spouses Eduardo V. Romualdez, Jr. and Buena Tioseco are the owners
of a house and lot located at 108 Jupiter St., Makati, Metro Manila as evidenced by
Transfer Certificate of Title No. 332394 of the Registry of Deeds of Rizal. The fact is
undisputed that at the time the defendants acquired the subject house and lot,
several restrictions were already annotated on the reverse side of their title; however,
for purposes of this appeal we shall quote hereunder only the pertinent ones, to wit:

(b,) This lot/shall be used only for residential purposes.

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IV. Term of Restriction

The foregoing restriction(s) shall remain in force for fifty years from January 15,
1957, unless sooner cancelled in its entirety by two-thirds vote of the members in
good standing of the Bel-Air Association. However, the Association may from time to
time, add new ones, amend or abolish particular restrictions or parts thereof by
majority rule.

During the early part of 1979, plaintiff noted that certain renovations and
constructions were being made by the defendants on the subject premises, for which
reason the defendants were advised to inform the plaintiff of the kind of construction
that was going on. Because the defendants failed to comply with the request of the
plaintiff, the latter's chief security officer visited the subject premises on March 23,
 1979 and found out that the defendants were putting up a bake and coffee shop,
which fact was confirmed by defendant Mrs. Romualdez herself. Thereafter, the
plaintiff reminded defendants that they were violating the deed restriction. Despite
said reminder, the defendants proceeded with the construction of the bake shop.
Consequently, plaintiff sent defendants a letter dated April 30, 1979 warning them
that if they will not desist from using the premises in question for commercial
purposes, they will be sued for violations of the deed restrictions.

Despite the warning, the defendants proceeded with the construction of their bake
shop. 9

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The trial court 10 adjudged in favor of BAVA. On appeal, the Court of Appeals 11 reversed, on the strength
of its holding in AC-G.R. No. 66649 earlier referred to.

BAVA then elevated the matter to the Court by a petition for review on certiorari. The Court 12 initially
denied the petition "for lack of merit, it appearing that the conclusions of the respondent Court of Appeals
that private respondents' bake and coffee shop lies within a commercial zone and that said private
respondents are released from their obligations to maintain the lot known as 108 Jupiter Street for
residential purposes by virtue of Ordinance No. 81 of the Municipality of Makati and Comprehensive
Zoning Ordinance No. 81-01 of the Metropolitan Manila Commission, are in accord with law and
jurisprudence," 13 for which BAVA sought a reconsideration. Pending resolution, the case was referred to
the Second Division of this Court, 14 and thereafter, to the Court En Banc en consulta. 15 Per our
Resolution, dated April 29, 1988, we consolidated this case with G.R. Nos. 74376 and 82281. 16

IV. G.R. No. 78182.

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The case stemmed from the leasing by defendant Dolores Filley of her building and
lot situated at No. 205 Reposo Street, Bel-Air Village Makati, Metro Manila to her co-
defendant, the advertising firm J. Romero and Associates, in alleged violation of
deed restrictions which stipulated that Filley's lot could only be used for residential
purposes. Plaintiff sought judgment from the lower court ordering the defendants to
"permanently refrain" from using the premises in question "as commercial" and to
comply with the terms of the deed restrictions.

After the proper proceedings, the court granted the plaintiff the sought for relief with
the additional imposition of exemplary damages of P50,000.00 and attorney's fees of
P10,000.00. The trial court gave emphasis to the restrictive clauses contained in
Filley's deed of sale from the plaintiff, which made the conversion of the building into
a commercial one a violation.

Defendants now seek review and reversal on three (3) assignments of errors, namely:

I.

THE TRIAL COURT ERRED IN NOT FINDING THAT THE REGULATIONS

PROMULGATED BY THE MUNICIPAL AUTHORITIES IN MAKATI AND THE
MINISTRY OF HUMAN SETTLEMENT'S CHANGING THE CHARACTER OF THE
 AREAS IN QUESTION HAD RENDERED THE RESTRICTIVE EASEMENT ON THE
TITLE OF THE APPELLANTS VACATED.

II.

THE COURT ERRED IN NOT RULING THAT BECAUSE THE APPELLEE(S) HAD
ALLOWED THE USE OF THE PROPERTY WITHIN THE VILLAGE FOR NON-
RESIDENTIAL PURPOSES, IT IS NOW ESTOPPED FROM ENFORCING THE
RESTRICTIVE PROHIBITIONS SUBJECT MATTER OF THIS CASE.

III.

THE COURT ERRED IN NOT FINDING THAT THERE EXISTED A BILATERAL

CONTRACT BETWEEN THE PARTIES AND THAT SINCE APPELLEE HAD NOT
PERFORMED ITS OBLIGATIONS UNDER THIS ARRANGEMENT THE
APPELLANT IN TURN WAS UNDER NO OBLIGATION TO ANNOTATE THE
RESTRICTIVE PROHIBITIONS ON THE BACK OF THE TITLE.

Appellants anchor their appeal on the proposition that the Bel-Air Village area,
contrary to plaintiff- appellee's pretension of being a strictly residential zone, is in fact
commercial and characterize the restrictions contained in appellant Filley's deed of
sale from the appellee as completely outmoded, which have lost all relevance to the
present-day realities in Makati, now the premier business hub of the nation, where
there is a proliferation of numerous commercial enterprises established through the
years, in fact even within the heart of so-called "residential" villages. Thus, it may be
said that appellants base their position on the inexorable march of progress which
has rendered at naught the continued efficacy of the restrictions. Appellant on the
other hand, relies on a rigid interpretation of the contractual stipulations agreed upon
with appellant Filley, in effect arguing that the restrictions are valid ad infinitum.

The lower court quite properly found that other commercial establishments exist in
the same area (in fact, on the same street) but ignored it just the same and said-

The fact that defendants were able to prove the existence of several commercial
establishments inside the village does not exempt them from liability for violating
some of the restrictions evidently choosing to accord primacy to contractual
stipulation. 17

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The Court of Appeals 18 overturned the lower court, 19 likewise based on AC-G.R. No. 66649. The
respondent Court observed also that J. Romero & Associates had been given authority to open a
commercial office by the Human Settlements Regulatory Commission.

V. G.R. No. 82281

The facts of this case have been based on stipulation. We quote:

COMES NOW, the Parties, assisted by their respective counsel and to this
Honorable Court, respectfully enter into the following stipulations of facts, to wit:
 1. The parties admit the personal circumstances of each other as well as their
capacities to sue and be sued.

2. The parties admit that plaintiff BAVA for short) is the legally constituted
homeowners' association in Bel-Air Subdivision, Makati, Metro Manila.

3. The parties admit that defendant Violets Moncal is the registered owner of a parcel
of land with a residential house constructed thereon situated at No. 104 Jupiter
Street, Bel-Air Village, Makati, Metro Manila; that as such lot owner, she is a member
of the plaintiff association.

4. The parties admit that defendant Majal Development Corporation (Majal for short)
is the lessee of defendant Moncal's house and lot located at No. 104 Jupiter Street.

5. The parties admit that a deed restrictions is annotated on the title of defendant
Moncal, which provides, among others, that the lot in question must be used only for
residential purposes;' that at time Moncal purchased her aforesaid lot in 1959 said
deed restrictions was already annotated in the said title.

6. The parties admit that when Moncal leased her subject property to Majal, she did
not secure the consent of BAVA to lease the said house and lot to the present
lessee.

7. The parties admit that along Jupiter Street and on the same side where Moncal's
property is located, there are restaurants, clinics placement or employment agencies
and other commercial or business establishments. These establishments, however,
were sued by BAVA in the proper court.

8. The parties admit that at the time Moncal purchased the subject property from the
Makati Development Corporation, there was a perimeter wall, running along Jupiter
Street, which wall was constructed by the subdivision owner; that at that time the
gates of the entrances to Jupiter Street were closed to public traffic. In short, the
entire length of Jupiter which was inside the perimeter wall was not then open to
public traffic

9. The parties admit that subsequent thereto, Ayala tore down the perimeter wall to
give way to the commercial building fronting Buendia Avenue (now Gil J. Puyat
Avenue).

10. The parties admit that on August 12, 1977, the Mayor of Makati forcibly opened
and removed the street gates constructed on Jupiter Street and Reposo Street,
thereby opening said streets to the public.

11. The parties admit plaintiffs letters of October 10, 23 and 31, 1984; as well as
defendants' letters-reply dated October 17 and 29, 1984. 20

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The trial court 21 dismissed the petitioner's complaint, a dismissal affirmed on appeal, 22 According to the
appellate court, the opening of Jupiter Street to human and vehicular traffic, and the commercialization of
the Municipality of Makati in general, were circumstances that had made compliance by Moncal with the
 23
aforesaid "deed restrictions" "extremely difficult and unreasonable," a development that had excused
compliance altogether under Article 1267 of the Civil Code.

VI. The cases before the Court; the Court's decision.

In brief, G.R. Nos. 74376, 76394, 78182, and 82281 are efforts to enforce the "deed restrictions" in
question against specific residents (private respondents in the petitions) of Jupiter Street and with
respect to G.R. No. 78182, Reposo Street. The private respondents are alleged to have converted
their residences into commercial establishments (a restaurant in G.R. No. 74376, a bakery and
coffee shop in G.R. No. 76394, an advertising firm in G.R. No. 78182; and a construction company,
apparently, in G.R. No. 82281) in violation of the said restrictions. 24

Their mother case, G. R. No. 71169 is, on the other hand, a petition to hold the vendor itself, Ayala
Corporation (formerly Makati Development Corporation), liable for tearing down the perimeter wall
along Jupiter Street that had therefore closed its commercial section from the residences of Bel-Air
Village and ushering in, as a consequence, the full "commercialization" of Jupiter Street, in violation
of the very restrictions it had authored.

As We indicated, the Court of Appeals dismissed all five appeals on the basis primarily of its ruling in
AC-G.R. No. 66649, "Bel-Air Village, Inc. v. Hy-Land Realty Development Corporation, et al.," in
which the appellate court explicitly rejected claims under the same 'deed restrictions" as a result of
Ordinance No. 81 enacted by the Government of the Municipality of Makati, as well as
Comprehensive Zoning Ordinance No. 8101 promulgated by the Metropolitan Manila Commission,
which two ordinances allegedly allowed the use of Jupiter Street both for residential and commercial
purposes. It was likewise held that these twin measures were valid as a legitimate exercise of police
power.

The Court of Appeals' reliance on Ordinance Nos. 81. and 8101 is now assailed in these petitions,
particularly the Sangalang, et al. petition.

Aside from this fundamental issue, the petitioners likewise raise procedural questions. G.R. No.
71169, the mother case, begins with one.

1. G.R. No. 71169

In this petition, the following questions are specifically put to the Court:

May the Honorable Intermediate Appellate Court reverse the decision of the trial
court on issues which were neither raised by AYALA in its Answers either to the
Complaint or Supplemental Complaint nor specifically assigned as one of the alleged
errors on appeal? 25

May the Honorable Intermediate Appellate Court arbitrarily ignore the decisive
findings of fact of the trial court, even if uncontradicted and/or documented, and
premised mainly on its own unsupported conclusions totally reverse the trial court's
decision? 26

May the Honorable Intermediate Appellate Court disregard the trial court's
documented findings that respondent Ayala for its own self-interest and commercial
purposes contrived in bad faith to do away with the Jupiter Street perimeter wall it put
up three times which wall was really intended to separate the residential from the
commercial areas and thereby insure the privacy and security of Bel Air Village
 pursuant to respondent Ayala's express continuing representation and/or covenant to
do so? 27

a.

The first question represents an attack on the appellate court's reliance on Ordinances Nos. 81 and
81-01, a matter not supposedly taken up at the trial or assigned as an error on appeal. As a rule, the
Court of Appeals (then the Intermediate Appellate Court) may determine only such questions as
have been properly raised to it, yet, this is not an inflexible rule of procedure. In Hernandez v.
Andal, 28 it was stated that "an unassigned error closely related to an error properly assigned, or upon
which the determination of the question raised by the error properly assigned is dependent, will be
considered by the appellate court notwithstanding the failure to assign it as error." 29

In Baquiran v. Court of Appeals, 30 we referred to the " modern trend of procedure . . . according] the
courts broad discretionary power" 31 and in which we allowed consideration of matters "having some
bearing on the issue submitted which the parties failed to raise or the lower court ignore[d]. 32 And in Vda.
de Javellana v. Court of Appeals, 33 we permitted the consideration of a 'patent error' of the trial court by
the Court of Appeals under Section 7, of Rule 51, of the Rules of Court, 34although such an error had not
been raised in the brief. But what we note is the fact that the Ayala Corporation did raise the zoning
measures as affirmative defenses, first in its answers 35 and second, in its brief, 36 and submitted at the
trial as exhibits. 37 There is accordingly no cause for complaint on the part of the petitioners for Ayala's
violation of the Rules. But while there was reason for the consideration, on appeal, of the said zoning
ordinances in question, this Court nevertheless finds as inaccurate the Court of Appeals' holding that
such measures, had "in effect, [made] Jupiter Street ... a street which could be used not only for
residential purposes," 38 and that "[It lost its character as a street for the exclusive benefit of those residing
in Bel-Air Village completely." 39

Among other things, there is a recognition under both Ordinances Nos. 81 and 8 1-01 that Jupiter
Street lies as the boundary between Bel-Air Village and Ayala Corporation's commercial section.
And since 1957, it had been considered as a boundary not as a part of either the residential or
commercial zones of Ayala Corporation's real estate development projects. Thus, the Bel-Air Village
Association's articles of incorporation state that Bel-Air Village is 'bounded on the NE., from Amapola
St., to de los Santos Ave., by Estrella St., on the SE from Extrella St., to Pedestrian Lane by E. De
los Santos Ave., on the SW., from Pedestrian Lane to Reposo St., by Jupiter Street

. . . . 40 Hence, it cannot be said to have been "for the exclusive benefit" of Bel-Air Village residents.

We come to the perimeter wall then standing on the commercial side of Jupiter Street the destruction
of which opened the street to the public. The petitioners contend that the opening of the
thoroughfare had opened, in turn, the floodgates to the commercialization of Bel-Air Village. The
wall, so they allege, was designed precisely to protect the peace and privacy of Bel-Air Village
residents from the din and uproar of mercantile pursuits, and that the Ayala Corporation had
committed itself to maintain it. It was the opinion of the Court of Appeals, as we said, that Ayala's
liability therefor, if one existed, had been overtaken by the passage of Ordinances Nos. 81 and 82-
01, opening Jupiter Street to commerce.

It is our ruling, we reiterate, that Jupiter Street lies as a mere boundary, a fact acknowledged by the
authorities of Makati and the National Government and, as a scrutiny of the records themselves
reveals, by the petitioners themselves, as the articles of incorporation of Bel-Air Village Association
itself would confirm. As a consequence, Jupiter Street was intended for the use by both -the
commercial and residential blocks. It was not originally constructed, therefore, for the exclusive use
of either block, least of all the residents of Bel-Air Village, but, we repeat, in favor of both, as
distinguished from the general public.
When the wall was erected in 1966 and rebuilt twice, in 1970 and 1972, it was not for the purpose of
physically separating the two blocks. According to Ayala Corporation, it was put up to enable the
Bel-Air Village Association "better control of the security in the area, 41 and as the Ayala Corporation's
"show of goodwill " 42 a view we find acceptable in the premises. For it cannot be denied that at that time,
the commercial area was vacant, "open for [sic] animals and people to have access to Bel-Air
Village." 43 There was hence a necessity for a wall.

In any case, we find the petitioners' theory, that maintaining the wall was a matter of a contractual
obligation on the part of Ayala, to be pure conjecture. The records do not establish the existence of
such a purported commitment. For one, the subdivision plans submitted did not mention anything
about it. For another, there is nothing in the "deed restrictions" that would point to any covenant
regarding the construction of a wall. There is no representation or promise whatsoever therein to that
effect.

With the construction of the commercial buildings in 1974, the reason for which the wall was built- to
secure Bel-Air Village from interlopers had naturally ceased to exist. The buildings themselves had
provided formidable curtains of security for the residents. It should be noted that the commercial lot
buyers themselves were forced to demolish parts of the wall to gain access to Jupiter Street, which
they had after all equal right to use.

In fine, we cannot hold the Ayala Corporation liable for damages for a commitment it did not make,
much less for alleged resort to machinations in evading it. The records, on the contrary, will show
that the Bel-Air Village Association had been informed, at the very outset, about the impending use
of Jupiter Street by commercial lot buyers. We quote:

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1. Exh. I of appellee, the memorandum of Mr. Carmelo Caluag, President of BAVA,

dated May 10, 1972, informing the BAVA Board of Governors and Barrio Council
members about the future use of Jupiter Street by the lot owners fronting Buendia
Avenue. The use of Jupiter Street by the owners of the commercial lots would
necessarily require the demolition of the wall along the commercial block adjoining
Jupiter Street.

2. Exh. J of appellee, the minutes of the joint meeting of BAVA Board of Governors
and the Bel-Air Barrio Council where the matter that "Buendia lot owners will have
equal rights to use Jupiter Street," and that Ayala's "plans about the sale of lots and
use of Jupiter Street" were precisely taken up. This confirms that from the start BAVA
was informed that the commercial lot owners will use Jupiter Street and that
necessarily the wall along Jupiter Street would be demolished.

3. Exh. 10, the letter of Mr. Demetrio Copuyoc to the President of BAVA, dated May
16, 1972, expressly stating that vehicular entrance and exit to the commercial lots
would be allowed along Jupiter and side streets.

4. Exhs. 27, 27-A, 27-B, the letter of Atty. Salvador J. Lorayes dated June 30, 1972,
with enclosed copy of proposed restriction for the commercial lots to BAVA. He
proposed restriction again expressly stated that "Vehicular entrances and exits are
allowed thru Jupiter and any side streets."

5. Exh. L of appellee, the minutes of the meeting of the members of BAVA, dated
August 26, 1972, where it is stated "Recently, Ayala Corporation informed the Board
 that the lots fronting Buendia Avenue will soon be offered for sale, and that future lot
owners will be given equal rights to use Jupiter Street as well as members of the
Association."

6. Exh. 25, the letter of Atty. Lorayes dated September 25, 1972, informing BAVA of
the widening of Jupiter Street by 3.5 meters to improve traffic flow in said street to
benefit both the residents of Bel-Air and the future owners of the commercial lots. 44

The petitioners cannot successfully rely on the alleged promise by Demetrio Copuyoc, Ayala's
manager, to build a "[f]ence along Jupiter with gate for entrance and/or exit 45 as evidence of Ayala's
alleged continuing obligation to maintain a wall between the residential and commercial sections. It
should be observed that the fence referred to included a "gate for entrance and or exit" which would have
defeated the purpose of a wall, in the sense the petitioners would put in one, that is to say, an
impenetrable barrier. But as Ayala would point out subsequently, the proposed fence was not constructed
because it had become unnecessary when the commercial lot owners commenced constructions thereon.

Be that as it may, the Court cannot visualize any purported obligation by Ayala Corporation to keep
the wall on the strength of this supposed promise alone. If truly Ayala promised anything assuming
that Capuyoc was authorized to bind the corporation with a promise it would have been with respect
to the fence. It would not have established the pre-existing obligation alleged with respect to the wall.

Obligations arise, among other things, from contract. 46 If Ayala, then, were bound by an obligation, it
would have been pursuant to a contract. A contract, however, is characterized by a "meeting of minds
between two persons . 47 As a consensual relation, it must be shown to exist as a fact, clearly and
convincingly. But it cannot be inferred from a mishmash of circumstances alone disclosing some kind of
an "understanding," when especially, those disparate circumstances are not themselves incompatible with
contentions that no accord had existed or had been reached. 48

The petitioners cannot simply assume that the wall was there for the purpose with which they now
give it, by the bare coincidence that it had divided the residential block from the commercial section
of Bel-Air. The burden of proof rests with them to show that it had indeed been built precisely for that
objective, a proof that must satisfy the requirements of our rules of evidence. It cannot be made to
stand on the strength of plain inferences.

b.

This likewise answers the petitioners' second query, whether or not the Court of Appeals had
"arbitrarily ignore(d) the decisive findings of the trial court." 49 i.e., findings pointing to alleged acts
performed by the Ayala Corporation proving its commitment to maintain the wall abovesaid. Specifically,
the petitioners refer to, among other things: (1) Ayala's alleged announcement to Bel- Air Village
Association members that "[the perimeter wall along Jupiter Street will not be demolished," 50 (2) Ayala's
alleged commitment "during the pendency of the case in the trial court" to restore the wall; (3) alleged
assurances by Copuyoc that the wall will not be removed; (4) alleged contrivances by the corporation to
make the association admit as members the commercial lot buyers which provided them equal access to
Jupiter Street; and (5) Ayala's donation to the association of Jupiter Street for "private use" of Bel-Air
residents. 51

682 (1903), where it was held that "whether the plaintiffs services were solicited or whether they
were offered to the defendant for his assistance, inasmuch as these services were accepted and
made use of by the latter, we must consider that there was a tacit and mutual consent as to the
rendition of services." (At 686.) In that case, the defendant had enormously benefitted from the
services that entitled the plaintiff to compensation on the theory that no one may unjustly enrich
himself at the expense of another (Solutio indebiti) The facts of this case differ.
As we stated, the Ayala Corporation's alleged conduct prior to or during the proceedings below are
not necessarily at war with claims that no commitment had been in fact made.

With respect to Ayala's alleged announcement before the association, the Court does not agree that
Ayala had categorically assumed as an obligation to maintain the wall "perpetually," i.e., until the
year 2007 (the expiration date under the "deed restrictions.") There is nothing in its statement that
would bare any commitment. In connection with the conference between the parties "during the
pendency" of the trial, it is to be noted that the Ayala Corporation denies having warranted the
restoration of the said wall therein. What, on the other hand, appears in the records is the fact that
Ayala did make that promise, but provided that the Mayor allowed it. It turned out, however, that the
Mayor balked at the Idea. 52 But assuming that Ayala did promise to rebuild the wall (in that conference),
it does not seem to us that it did consequently promise to maintain it in perpetuity.

It is unfair to say, as the trial court did, that the Ayala had "contrived to make future commercial lot
owners special members of BAVA and thereby acquire equal right with the regular members thereof
to use Jupiter Street 53 since, as we stated, the commercial lot buyers have the right, in any event, to
make use of Jupiter Street, whether or not they are members of the association. It is not their
memberships that give them the right to use it. They share that right with Bel-Air residents from the
outset.

The objective of making the commercial lot owners special members of the Bel-Air Village
Association was not to accord them equal access to Jupiter Street and inferentially, to give them the
right to knock down the perimeter wall. It was, rather, to regulate the use of the street owing
precisely to the "planned" nature of Ayala's development project, and real estate development in
general, and this could best be done by placing the commercial lot owners under the association's
jurisdiction.

Moreover, Ayala's overtures with the association concerning the membership of commercial lot
buyers therein have been shown to be neither perfidious nor unethical nor devious (paraphrasing the
lower court). We quote anew:

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(7) On June 30, 1972, appellant informed BAVA that in a few months it shall
subdivide and sell the commercial lots bordering the north side of Buendia Avenue
Extension from Reposo Street up to Zodiac Street. Appellant also informed BAVA
that it had taken all precautions and will impose upon the commercial lot owners
deed restrictions which will harmonize and blend with the development and welfare
of Bel-Air Village. Appellant further applied for special membership in BAVA of the
commercial lot owners. A copy of the deed restrictions for the commercial lots was
also enclosed. The proposed deed restrictions shall include the 19 meter set back of
buildings from Jupiter Street, the requirement for parking space within the lot of one
(1) parking slot for every seventy five (75) meters of office space in the building and
the limitation of vehicular traffic along Buendia to entrance only, but allowing both
vehicular entrance and vehicular exit through Jupiter Street and any side street.

In its letter of July 10, 1972, BAVA acknowledged the above letter of appellant and informed the
latter that the application for special membership of the commercial lot owners in BAVA would be
submitted to BAVA's board of governors for decision.

(8) On September 25,1972, appellant notified BAVA that, after a careful study, it was
finally decided that the height limitation of buildings on the commercial lots shall be
 increased from 12.5 meters to 15 meters. Appellant further informed BAVA that
Jupiter Street shall be widened by 3.5 meters to improve traffic flow in said street.
BAVA did not reply to said letter, but on January 22, 1973, BAVA wrote a letter to the
appellant informing the latter that the Association had assessed the appellant, as
special member of the association, the amount of P40,795.00 (based on 81,590
square meters at P.50 per square meter) representing the membership dues of the
commercial lot owners for the year 1973, and requested the appellant to remit the
amount which its board of governors had already included in its current budget. In
reply, appellant on January 31, 1973 informed BAVA that due to the widening of
Jupiter Street, the area of the lots which were accepted by the Association as
members was reduced to 76,726 square meters. Thus, the corresponding due at
P.50 per square meter should be reduced to P38,363.00. This amount, therefore,
was remitted by the appellant to BAVA. Since then, the latter has been collecting
membership dues from the owners of the commercial lots as special members of the
Association. As a matter of fact, the dues were increased several times. In 1980, the
commercial lot owners were already being charged dues at the rate of P3.00 per
square meter. (Domingo, TSN, p. 36, March 19, 1980). At this rate, the total
membership dues of the commercial lot owners amount to P230,178.00 annually
based on the total area of 76,726 square meters of the commercial lots. 54

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The alleged undertaking, finally, by Ayala in the deed of donation (over Jupiter Street) to leave
Jupiter Street for the private use of Bel-Air residents is belied by the very provisions of the deed. We
quote:

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IV. That the offer made by the DONOR had been accepted by the DONEE subject to
the condition that the property will be used as a street for the use of the members of
the DONEE, their families, personnel, guests, domestic help and, under certain
reasonable conditions and restrictions, by the general public, and in the event that
said lots or parts thereof cease to be used as such, ownership thereof shall
automatically revert to the DONOR. The DONEE shall always have Reposo Street,
Makati Avenue, and Paseo de Roxas open for the use of the general public. It is also
understood that the DONOR shall continue the maintenance of the street at its
expense for a period of three years from date hereof." (Deed of Donation, p. 6, Exh.
7) 55

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The donation, on the contrary, gave the general public equal right to it.

The Court cannot then say, accepting the veracity of the petitioners' facts" enumerated above, that
the Ayala Corporation may be held liable for specific performance of a demandable obligation, let
alone damages.

The Court adds that Ayala can hardly be held responsible for the alleged deterioration of "living and
environmental conditions" 56 of the Bel-Air area, as a consequence of "Ayala's authorized demolition of
the Jupiter perimeter wall in 1974-1975. " 57 We agree with Ayala that until 1976, "there was peace and
quiet" at Jupiter Street, as the petitioners' (Sangalang, Gaston, and Briones) complaints admit. Hence, the
degeneration of peace and order in Bel-Air cannot be ascribed to the destruction of the wall in 1974 and
1975.

What Ayala submits as the real cause was the opening of Jupiter Street to vehicular traffic in
1977., 58 But this was upon orders of the Mayor, and for which the homeowners' association had
precisely filed suit (Civil Case No. 34998) 59 to contest the act of the Mayor.

c.

This likewise disposes of the third question presented. The petitioners' reliance on Ayala's alleged
conduct (proving its alleged commitment), so we have ruled, is not well-taken. Ayala's alleged acts
do not, by themselves, reflect a commitment to maintain the wall in dispute. It cannot be therefore
said that the Court of Appeals "arbitrarily ignore(d]" 60 the lower court's findings. Precisely, it is the duty
of the appellate court to review the findings of the trial judge, be they of fact or law. 61 It is not bound by
the conclusions of the judge, for which reason it makes its own findings and arrives at its own
conclusions. Unless a grave abuse of discretion may be imputed to it, it may accept or reject the lower
tribunal's determinations and rely solely on the records.

Accordingly, the Court affirms the Court of Appeals' holding that the Ayala Corporation, in its
dealings with the petitioners, the Bel-Air Village Association in particular, had "acted with justice,
gave the appellees [petitioners] their due and observed honesty and good faith." 62 "Therefore, under
63
both Articles 19 and 21 of the Civil Code, the appellant [Ayala] cannot be held liable for damages."

2. G.R. Nos. 74376, 76394, 78182, & 82281

Our decision also resolves, quite anticlimactically, these companion cases. But we do so for various
other reasons. In the Sangalang case, we absolve the Ayala Corporation primarily owing to our
finding that it is not liable for the opening of Jupiter Street to the general public. Insofar as these
petitions are concerned, we likewise exculpate the private respondents, not only because of the fact
that Jupiter Street is not covered by the restrictive easements based on the "deed restrictions" but
chiefly because the National Government itself, through the Metro Manila Commission (MMC), had
reclassified Jupiter Street into high density commercial (C-3) zone, 64 pursuant to its Ordinance No.
81-01. Hence, the petitioners have no cause of action on the strength alone of the said "deed restrictions.

In view thereof, we find no need in resolving the questions raised as to procedure, since this
disposition is sufficient to resolve these cases.

It is not that we are saying that restrictive easements, especially the easements herein in question,
are invalid or ineffective. As far as the Bel-Air subdivision itself is concerned, certainly, they are valid
and enforceable. But they are, like all contracts, subject to the overriding demands, needs, and
interests of the greater number as the State may determine in the legitimate exercise of police
power. Our jurisdiction guarantees sanctity of contract and is said to be the "law between the
contracting parties, 65 but while it is so, it cannot contravene 'law, morals, good customs, public order, or
public policy. 66 Above all, it cannot be raised as a deterrent to police power, designed precisely to
promote health, safety, peace, and enhance the common good, at the expense of contractual rights,
whenever necessary. In Ortigas & Co., Limited Partnership v. Feati Bank and Trust Co., 67 we are told:

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2. With regard to the contention that said resolution cannot nullify the contractual
obligations assumed by the defendant-appellee referring to the restrictions
incorporated in the deeds of sale and later in the corresponding Transfer Certificates
 of Title issued to defendant-appellee it should be stressed, that while non-impairment
of contracts is constitutionally guaranteed, the rule is not absolute, since it has to be
reconciled with the legitimate exercise of police power, i.e., "the power to prescribe
regulations to promote the health, morals, peace, education, good order or safety
and general welfare of the people.' Invariably described as "the most essential,
insistent, and illimitable of powers" and "in a sense, the greatest and most powerful
attribute of government," the exercise of the power may be judicially inquired into and
corrected only if it is capricious, whimsical, unjust or unreasonable, there having
been a denial of due process or a violation of any other applicable constitutional
guarantee. As this Court held through Justice Jose P. Bengson in Philippine Long
Distance Company vs. City of Davao, et al. police power 'is elastic and must be
responsive to various social conditions; it is not confined within narrow
circumscriptions of precedents resting on past conditions; it must follow the legal
progress of a democratic way of life.' We were even more emphatic in Vda. de
Genuino vs. The Court of agrarian Relations, et al., when We declared: "We do not
see why public welfare when clashing with the individual right to property should not
be made to prevail through the state's exercise of its police power."

Resolution No. 27, 1960 declaring the western part of High way 54, now E. de los
Santos Avenue (EDSA, for short) from Shaw Boulevard to the Pasig River as an
industrial and commercial zone, was obviously passed by the Municipal Council of
Mandaluyong, Rizal in the exercise of police power to safeguard or promote the
health, safety, peace, good order and general welfare of the people in the locality.
Judicial notice may be taken of the conditions prevailing in the area, especially where
Lots Nos. 5 and 6 are located. The lots themselves not only front the highway;
industrial and commercial complexes have flourished about the place. EDSA, a main
traffic artery which runs through several cities and municipalities in the Metro Manila
area, supports an endless stream of traffic and the resulting activity, noise and
pollution are hardly conducive to the health, safety or welfare of the residents in its
route. Having been expressly granted the power to adopt zoning and subdivision
ordinances or regulations, the municipality of Mandaluyong, through its Municipal
Council, was reasonably, if not perfectly, justified under the circumstances, in
passing the subject resolution. 68

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Undoubtedly, the MMC Ordinance represents a legitimate exercise of police power. The petitioners
have not shown why we should hold otherwise other than for the supposed "non-impairment"
guaranty of the Constitution, which, as we have declared, is secondary to the more compelling
interests of general welfare. The Ordinance has not been shown to be capricious or arbitrary or
unreasonable to warrant the reversal of the judgments so appealed. In that connection, we find no
reversible error to have been committed by the Court of Appeals.

WHEREFORE, premises considered, these petitions are DENIED No pronouncement as to costs.

IT IS SO ORDERED.

G.R. No. L-34915 June 24, 1983

CITY GOVERNMENT OF QUEZON CITY and CITY COUNCIL OF QUEZON CITY, petitioners,
vs.
HON. JUDGE VICENTE G. ERICTA as Judge of the Court of First Instance of Rizal, Quezon
City, Branch XVIII; HIMLAYANG PILIPINO, INC., respondents.

City Fiscal for petitioners.

Manuel Villaruel, Jr. and Feliciano Tumale for respondents.

GUTIERREZ, JR., J.:

This is a petition for review which seeks the reversal of the decision of the Court of First Instance of
Rizal, Branch XVIII declaring Section 9 of Ordinance No. 6118, S-64, of the Quezon City Council null
and void.

Section 9 of Ordinance No. 6118, S-64, entitled "ORDINANCE REGULATING THE

ESTABLISHMENT, MAINTENANCE AND OPERATION OF PRIVATE MEMORIAL TYPE
CEMETERY OR BURIAL GROUND WITHIN THE JURISDICTION OF QUEZON CITY AND
PROVIDING PENALTIES FOR THE VIOLATION THEREOF" provides:

Sec. 9. At least six (6) percent of the total area of the memorial park cemetery shall
be set aside for charity burial of deceased persons who are paupers and have been
residents of Quezon City for at least 5 years prior to their death, to be determined by
competent City Authorities. The area so designated shall immediately be developed
and should be open for operation not later than six months from the date of approval
of the application.

For several years, the aforequoted section of the Ordinance was not enforced by city authorities but
seven years after the enactment of the ordinance, the Quezon City Council passed the following
resolution:

RESOLVED by the council of Quezon assembled, to request, as it does hereby

request the City Engineer, Quezon City, to stop any further selling and/or transaction
of memorial park lots in Quezon City where the owners thereof have failed to donate
the required 6% space intended for paupers burial.

Pursuant to this petition, the Quezon City Engineer notified respondent Himlayang Pilipino, Inc. in
writing that Section 9 of Ordinance No. 6118, S-64 would be enforced

Respondent Himlayang Pilipino reacted by filing with the Court of First Instance of Rizal Branch XVIII
at Quezon City, a petition for declaratory relief, prohibition and mandamus with preliminary injunction
(Sp. Proc. No. Q-16002) seeking to annul Section 9 of the Ordinance in question The respondent
alleged that the same is contrary to the Constitution, the Quezon City Charter, the Local Autonomy
Act, and the Revised Administrative Code.

There being no issue of fact and the questions raised being purely legal both petitioners and
respondent agreed to the rendition of a judgment on the pleadings. The respondent court, therefore,
rendered the decision declaring Section 9 of Ordinance No. 6118, S-64 null and void.

A motion for reconsideration having been denied, the City Government and City Council filed the
instant petition.
Petitioners argue that the taking of the respondent's property is a valid and reasonable exercise of
police power and that the land is taken for a public use as it is intended for the burial ground of
paupers. They further argue that the Quezon City Council is authorized under its charter, in the
exercise of local police power, " to make such further ordinances and resolutions not repugnant to
law as may be necessary to carry into effect and discharge the powers and duties conferred by this
Act and such as it shall deem necessary and proper to provide for the health and safety, promote the
prosperity, improve the morals, peace, good order, comfort and convenience of the city and the
inhabitants thereof, and for the protection of property therein."

On the other hand, respondent Himlayang Pilipino, Inc. contends that the taking or confiscation of
property is obvious because the questioned ordinance permanently restricts the use of the property
such that it cannot be used for any reasonable purpose and deprives the owner of all beneficial use
of his property.

The respondent also stresses that the general welfare clause is not available as a source of power
for the taking of the property in this case because it refers to "the power of promoting the public
welfare by restraining and regulating the use of liberty and property." The respondent points out that
if an owner is deprived of his property outright under the State's police power, the property is
generally not taken for public use but is urgently and summarily destroyed in order to promote the
general welfare. The respondent cites the case of a nuisance per se or the destruction of a house to
prevent the spread of a conflagration.

We find the stand of the private respondent as well as the decision of the respondent Judge to be
well-founded. We quote with approval the lower court's ruling which declared null and void Section 9
of the questioned city ordinance:

The issue is: Is Section 9 of the ordinance in question a valid exercise of the police
power?

An examination of the Charter of Quezon City (Rep. Act No. 537), does not reveal
any provision that would justify the ordinance in question except the provision
granting police power to the City. Section 9 cannot be justified under the power
granted to Quezon City to tax, fix the license fee, and regulate such other business,
trades, and occupation as may be established or practised in the City.' (Subsections
'C', Sec. 12, R.A. 537).

The power to regulate does not include the power to prohibit (People vs. Esguerra,
81 PhiL 33, Vega vs. Municipal Board of Iloilo, L-6765, May 12, 1954; 39 N.J. Law,
70, Mich. 396). A fortiori, the power to regulate does not include the power to
confiscate. The ordinance in question not only confiscates but also prohibits the
operation of a memorial park cemetery, because under Section 13 of said ordinance,
'Violation of the provision thereof is punishable with a fine and/or imprisonment and
that upon conviction thereof the permit to operate and maintain a private cemetery
shall be revoked or cancelled.' The confiscatory clause and the penal provision in
effect deter one from operating a memorial park cemetery. Neither can the ordinance
in question be justified under sub- section "t", Section 12 of Republic Act 537 which
authorizes the City Council to-

'prohibit the burial of the dead within the center of population of the
city and provide for their burial in such proper place and in such
manner as the council may determine, subject to the provisions of the
general law regulating burial grounds and cemeteries and governing
 funerals and disposal of the dead.' (Sub-sec. (t), Sec. 12, Rep. Act
No. 537).

There is nothing in the above provision which authorizes confiscation or as

euphemistically termed by the respondents, 'donation'

We now come to the question whether or not Section 9 of the ordinance in question
is a valid exercise of police power. The police power of Quezon City is defined in
sub-section 00, Sec. 12, Rep. Act 537 which reads as follows:

(00) To make such further ordinance and regulations not repugnant to

law as may be necessary to carry into effect and discharge the
powers and duties conferred by this act and such as it shall deem
necessary and proper to provide for the health and safety, promote,
the prosperity, improve the morals, peace, good order, comfort and
convenience of the city and the inhabitants thereof, and for the
protection of property therein; and enforce obedience thereto with
such lawful fines or penalties as the City Council may prescribe under
the provisions of subsection (jj) of this section.

We start the discussion with a restatement of certain basic principles. Occupying the
forefront in the bill of rights is the provision which states that 'no person shall be
deprived of life, liberty or property without due process of law' (Art. Ill, Section 1
subparagraph 1, Constitution).

On the other hand, there are three inherent powers of government by which the state
interferes with the property rights, namely-. (1) police power, (2) eminent domain, (3)
taxation. These are said to exist independently of the Constitution as necessary
attributes of sovereignty.

Police power is defined by Freund as 'the power of promoting the public welfare by
restraining and regulating the use of liberty and property' (Quoted in Political Law by
Tanada and Carreon, V-11, p. 50). It is usually exerted in order to merely regulate
the use and enjoyment of property of the owner. If he is deprived of his property
outright, it is not taken for public use but rather to destroy in order to promote the
general welfare. In police power, the owner does not recover from the government
for injury sustained in consequence thereof (12 C.J. 623). It has been said that police
power is the most essential of government powers, at times the most insistent, and
always one of the least limitable of the powers of government (Ruby vs. Provincial
Board, 39 PhiL 660; Ichong vs. Hernandez, 1,7995, May 31, 1957). This power
embraces the whole system of public regulation (U.S. vs. Linsuya Fan, 10 PhiL 104).
The Supreme Court has said that police power is so far-reaching in scope that it has
almost become impossible to limit its sweep. As it derives its existence from the very
existence of the state itself, it does not need to be expressed or defined in its scope.
Being coextensive with self-preservation and survival itself, it is the most positive and
active of all governmental processes, the most essential insistent and illimitable
Especially it is so under the modern democratic framework where the demands of
society and nations have multiplied to almost unimaginable proportions. The field and
scope of police power have become almost boundless, just as the fields of public
interest and public welfare have become almost all embracing and have transcended
human foresight. Since the Courts cannot foresee the needs and demands of public
interest and welfare, they cannot delimit beforehand the extent or scope of the police
 power by which and through which the state seeks to attain or achieve public interest
and welfare. (Ichong vs. Hernandez, L-7995, May 31, 1957).

The police power being the most active power of the government and the due
process clause being the broadest station on governmental power, the conflict
between this power of government and the due process clause of the Constitution is
oftentimes inevitable.

It will be seen from the foregoing authorities that police power is usually exercised in
the form of mere regulation or restriction in the use of liberty or property for the
promotion of the general welfare. It does not involve the taking or confiscation of
property with the exception of a few cases where there is a necessity to confiscate
private property in order to destroy it for the purpose of protecting the peace and
order and of promoting the general welfare as for instance, the confiscation of an
illegally possessed article, such as opium and firearms.

It seems to the court that Section 9 of Ordinance No. 6118, Series of 1964 of Quezon
City is not a mere police regulation but an outright confiscation. It deprives a person
of his private property without due process of law, nay, even without compensation.

In sustaining the decision of the respondent court, we are not unmindful of the heavy burden
shouldered by whoever challenges the validity of duly enacted legislation whether national or local
As early as 1913, this Court ruled in Case v. Board of Health (24 PhiL 250) that the courts resolve
every presumption in favor of validity and, more so, where the ma corporation asserts that the
ordinance was enacted to promote the common good and general welfare.

In the leading case of Ermita-Malate Hotel and Motel Operators Association Inc. v. City Mayor of
Manila (20 SCRA 849) the Court speaking through the then Associate Justice and now Chief Justice
Enrique M. Fernando stated

Primarily what calls for a reversal of such a decision is the a of any evidence to offset
the presumption of validity that attaches to a statute or ordinance. As was expressed
categorically by Justice Malcolm 'The presumption is all in favor of validity. ... The
action of the elected representatives of the people cannot be lightly set aside. The
councilors must, in the very nature of things, be familiar with the necessities of their
particular ... municipality and with all the facts and lances which surround the subject
and necessitate action. The local legislative body, by enacting the ordinance, has in
effect given notice that the regulations are essential to the well-being of the people.
... The Judiciary should not lightly set aside legislative action when there is not a
clear invasion of personal or property rights under the guise of police regulation.
(U.S. v. Salaveria (1918], 39 Phil. 102, at p. 111. There was an affirmation of the
presumption of validity of municipal ordinance as announced in the leading Salaveria
decision in Ebona v. Daet, [1950]85 Phil. 369.)

We have likewise considered the principles earlier stated in Case v. Board of

Health supra :

... Under the provisions of municipal charters which are known as the general welfare
clauses, a city, by virtue of its police power, may adopt ordinances to the peace,
safety, health, morals and the best and highest interests of the municipality. It is a
well-settled principle, growing out of the nature of well-ordered and society, that
every holder of property, however absolute and may be his title, holds it under the
 implied liability that his use of it shall not be injurious to the equal enjoyment of others
having an equal right to the enjoyment of their property, nor injurious to the rights of
the community. An property in the state is held subject to its general regulations,
which are necessary to the common good and general welfare. Rights of property,
like all other social and conventional rights, are subject to such reasonable limitations
in their enjoyment as shall prevent them from being injurious, and to such reasonable
restraints and regulations, established by law, as the legislature, under the governing
and controlling power vested in them by the constitution, may think necessary and
expedient. The state, under the police power, is possessed with plenary power to
deal with all matters relating to the general health, morals, and safety of the people,
so long as it does not contravene any positive inhibition of the organic law and
providing that such power is not exercised in such a manner as to justify the
interference of the courts to prevent positive wrong and oppression.

but find them not applicable to the facts of this case.

There is no reasonable relation between the setting aside of at least six (6) percent of the total area
of an private cemeteries for charity burial grounds of deceased paupers and the promotion of health,
morals, good order, safety, or the general welfare of the people. The ordinance is actually a taking
without compensation of a certain area from a private cemetery to benefit paupers who are charges
of the municipal corporation. Instead of building or maintaining a public cemetery for this purpose,
the city passes the burden to private cemeteries.

The expropriation without compensation of a portion of private cemeteries is not covered by Section
12(t) of Republic Act 537, the Revised Charter of Quezon City which empowers the city council to
prohibit the burial of the dead within the center of population of the city and to provide for their burial
in a proper place subject to the provisions of general law regulating burial grounds and cemeteries.
When the Local Government Code, Batas Pambansa Blg. 337 provides in Section 177 (q) that a
Sangguniang panlungsod may "provide for the burial of the dead in such place and in such manner
as prescribed by law or ordinance" it simply authorizes the city to provide its own city owned land or
to buy or expropriate private properties to construct public cemeteries. This has been the law and
practise in the past. It continues to the present. Expropriation, however, requires payment of just
compensation. The questioned ordinance is different from laws and regulations requiring owners of
subdivisions to set aside certain areas for streets, parks, playgrounds, and other public facilities from
the land they sell to buyers of subdivision lots. The necessities of public safety, health, and
convenience are very clear from said requirements which are intended to insure the development of
communities with salubrious and wholesome environments. The beneficiaries of the regulation, in
turn, are made to pay by the subdivision developer when individual lots are sold to home-owners.

As a matter of fact, the petitioners rely solely on the general welfare clause or on implied powers of
the municipal corporation, not on any express provision of law as statutory basis of their exercise of
power. The clause has always received broad and liberal interpretation but we cannot stretch it to
cover this particular taking. Moreover, the questioned ordinance was passed after Himlayang
Pilipino, Inc. had incorporated. received necessary licenses and permits and commenced operating.
The sequestration of six percent of the cemetery cannot even be considered as having been
impliedly acknowledged by the private respondent when it accepted the permits to commence
operations.

WHEREFORE, the petition for review is hereby DISMISSED. The decision of the respondent court is
affirmed.

SO ORDERED.
G.R. No. L-27247 April 20, 1983

IN THE MATTER OF THE PETITION FOR DECLARATORY JUDGMENT REGARDING THE

VALIDITY OF ORDINANCE NO. 386 OF THE CITY OF BAGUIO, BAGUIO CITIZENS ACTION
INC., and JUNIOR CHAMBER OF BAGUIO CITY, INC., petitioners-appellants,
vs.
THE CITY COUNCIL AND CITY MAYOR OF THE CITY OF BAGUIO, respondents-appellees.

DE CASTRO, J:

In this petition for declaratory relief originally filed in the Court of First Instance of Baguio, Branch II,
what is involved is the validity of Ordinance 386 passed by the City Council of Baguio City which
took effect on February 23, 1967, quoted together with the explanatory note, as follows:

ORDINANCE 386

AN ORDINANCE CONSIDERING ALL SQUATTERS OF PUBLIC LAND, OTHER

THAN THOSE EARMARKED FOR PUBLIC USE IN THE CITY OF BAGUIO WHO
ARE DULY REGISTERED AS SUCH AT THE TIME OF THE PROMULGATION OF
THIS ORDINANCE AS BONAFIDE OCCUPANTS OF THEIR RESPECTIVE LOTS
AND WHICH SHALL HEREAFTER BE EMBRACED AS A CITY GOVERNMENT
HOUSING PROJECT AND PROVIDING FOR OTHER PURPOSES.

Upon strong recommendation of the Vice-Mayor and Presiding Officer, on Motion of

all the Councilors, seconded by the same, be it ordained by the City Council
assembled:

Section l.—All public lands within Baguio townsite which are occupied by squatters
who are duly registered as such at the time of the promulgation of this Ordinance
such public lands not designated by city and national authorities for public use, shall
be considered as embraced and comprising a City Government Housing Project;
PROVIDED, HOWEVER, That areas covered by Executive Orders or Presidential
Proclamations but the city had made official representation for the lifting of such
orders or proclamation shall be deemed to be part of the Baguio Townsite for the
purposes of this ordinance;

Section 2.—Building permits shall have been deemed issued to all squatters as
contemplated by this Ordinance, giving such squatters five years from the approval
of this Ordinance to satisfactorily comply with city building specifications and
payment of the corresponding city building permit fees;

Section 3.—All cases pending in court against squatters be dropped without

prejudice to the full prosecution of all subsequent violations in relation to the
provisions of existing city ordinances and/or resolutions;

Section 4.—All squatters be given all the necessary and needed protection of the
City Government against the stringent provisions of the Public Land Act, particularly
on public bidding, in that the lots occupied by said squatters be awarded to them by
direct sale through Presidential Proclamation;
Section 5.—The City Government shall not be interested in making financial profit out
of the project and that the appraisal and evaluation of the said lots shall be made at
minimum cost per square meters, the total cost of the lots made payable within the
period of ten years;

Section 6.—The minimum lot area requirements shall be disregarded in cases where
it could not be implemented due to existing congestion of houses, and that, if
necessary, areas applied for under this ordinance shall be reduced to that which is
practical under the circumstances; PROVIDED, HOWEVER, That squatters in
congested areas shall be given preference in the transfer to resettlement areas or
government housing projects earmarked as such under the provisions of this
ordinance, if and when it becomes necessary to ease congestion or when their lots
shall be traversed by the laying of roads or are needed for public use;

Section 7.—The amount of P20,000.00 or so much as is necessary, for the lot survey
of each squatter's lot be appropriated, such survey of which shall be conducted by
licensed private surveyors through public biddings; PROVIDED, That, said expenses
for survey shall be included in the overall cost of each lot;

Section 8.—The three-man control committed for the Quirino-Magsaysay housing

project which was previously created under City Ordinance No. 344, shall exercise
administration and supervision of the city government housing projects created under
this Ordinance shall, furthermore, be entrusted with the duty of: (1) Consolidating a
list of all city squatters who shall be benefitted in contemplation and under the
provisions of this Ordinance; (2) To assist and help the squatters in the preparation
of all the necessary and required paper work and relative items in connection with
their application over their respective lots; (3) To seek and locate other areas within
the Baguio Townsite conveniently situated and which will be earmarked as
subsequently housing projects of the city for landless bonafide city residents; and (4)
To carry out and implement the provisions of this Ordinance without the least
possible delay.

EXPLANATORY NOTE

This ordinance is primarily designed to extend a helping hand to the numerous

landless city residents and the called 'Squatters' within the Baguio Townsite in their
desire to acquire residential lots which they may rightly call their own.

The reported people who have violated the City's building ordinances were not so
guarded by any criminal perversity, but where given to it more by circumstances of
necessity and that they are, therefore, entitled to a more human treatment, more of
understanding and more of pity rather than be herded before the courts, likened to
hardened criminals and deliberate violators of our laws and ordinances.

PRESENT AND VOTING:

Hon. Norberto de Guzman — Vice Mayor Presiding Officer Hon. Gaudencio Floresca
— Councilor Hon. Jose S. Florendo — Councilor Hon. Francisco G. Mayo —
Councilor Hon. Braulio D. Yaranon — Councilor Hon. Sinforoso Fañgonil —
Councilor
The petition for declaratory relief filed with the Court of First Instance of Baguio, Branch II, prays for
a judgment declaring the Ordinance as invalid and illegal ab initio. The respondents-appellees, the
City Council and the City Mayor, filed motions to dismiss the petition which were denied.
Nonetheless, in the decision thereafter rendered, the petition was dismissed on the grounds that: 1)
another court, the Court of First Instance of Baguio, Branch I, had declared the Ordinance valid in a
criminal case filed against the squatters for illegal construction, and the Branch II of the same court
cannot, in a declaratory proceeding, review and determine the validity of said judgment pursuant to
the policy of judicial respect and stability; 2) those who come within the protection of the ordinance
have not been made parties to the suit in accordance with Section 2 of Rule 64 and it has been held
that the non-joinder of such parties is a jurisdictional defect; and 3) the court is clothed with
discretion to refuse to make any declaration where the declaration is not necessary and proper at
the time under all circumstances, e.g. where the declaration would be of no practical help in ending
the controversy or would not stabilize the disputed legal relation, citing Section 5 of Rule 64; ICJS
1033-1034; 16 AM. JUR 287-289; Hoskyns vs. National City Bank of New York, 85 Phil. 201.

Hence, the instant appeal which was perfected in accordance with the provisions of Rule 42, before
the approval of Republic Act No. 5440 on September 9, 1968.

1. The case before the Court of First Instance of Baguio, Branch 1, dealt with the criminal liability of
the accused for constructing their houses without obtaining building permits, contrary to Section 47
in relation to Section 52 of the Revised Ordinances of Baguio, which act the said court considered as
pardoned by Section 2 of Ordinance 386. The court in said case upheld the power of the Municipal
Council to legalize the acts punished by the aforesaid provisions of the Revised Ordinances of
Baguio, stating that the Municipal Council is the policy determining body of Baguio City and therefore
it can amend, repeal, alter or modify its own laws as it did when it enacted Ordinance 386. In
deciding the case, the first branch of the court a quo did not declare the whole Ordinance valid. This
is clear when it stated that "had the issue been the legalization of illegal occupation of public land,
covered by Republic Act No. 947, ... the Ordinance in question should have been ultra vires and
unconstitutional." 1 Said court merely confined itself to Sections 2 and 3 of Ordinance 386. It did not
make any definite pronouncement whether or not the City Council has the power to legalize the illegal
occupation of public land which is the issue in the instant case. It is noteworthy that the court, in passing
upon the validity of the aforesaid sections, was apparently guided by the rule that where part of a statute
is void as repugnant to the organic law, while another part is valid, the valid portion, if separable from the
invalid may stand and be enforced. Contrary to what was said in the decision under review, the second
branch of the court a quo was not called upon to determine the validity of the judgment of the first branch.

2. The non-inclusion of the squatters mentioned in the Ordinance in question as party defendants in
this case cannot defeat the jurisdiction of the Court of First Instance of Baguio. There is nothing in
Section 2 of Rule 64 of the Rules of Court which says that the non-joinder of persons who have or
claim any interest which would be affected by the declaration is a jurisdictional defect. Said section
merely states that "All persons shall be made parties who have or claim any interest which would be
affected by the declaration; and no declaration shall, except or otherwise provided in these rules,
prejudice the rights of persons not parties to the action." This section contemplates a situation where
there are other persons who would be affected by the declaration, but were not impleaded as
necessary parties, in which case the declaration shall not prejudice them. If at all, the case may be
dismissed not on the ground of lack of jurisdiction but for the reason stated in Section 5 of the same
Rule stating that "the Court may refuse to exercise the power to declare rights and to construe
instruments in any case where a decision would not terminate the uncertainty or controversy which
gave rise to the action, or any case where the declaration or construction is not necessary and
proper at the time under all circumstances."

It must be noted that the reason for the law requiring the joinder of all necessary parties is that
failure to do so would deprive the declaration of the final and pacifying function the action for
declaratory relief is calculated to subserve, as they would not be bound by the declaration and may
raise the Identical issue. 2 In the case at bar, although it is true that any declaration by the court would
affect the squatters, the latter are not necessary parties because the question involved is the power of the
Municipal Council to enact the Ordinances in question. Whether or not they are impleaded, any
determination of the controversy would be binding upon the squatters.

A different situation obtains in the case of Degala v. Reyes 3 cited in the decision under review. The
Degala case involves the validity of the trust created in the will of the testator. In the said case, the
Roman Catholic Church which was a necessary party, being the one which would be most vitally affected
by the declaration of the nullity of the will was not brought in as party. The Court therefore, refused to
make any declaratory judgment on ground of jurisdictional defect, for there can be no final judgment that
could be rendered and the Roman Catholic not being bound by such judgment might raise the Identical
issue, making therefore the declaration a mere exercise in futility.

This is not true in the instant case. A declaration on the nullity of the ordinance, would give the
squatters no right which they are entitled to protect. The party most interested to sustain and defend
the legality of the Ordinance is the body that passed it, the City Council, and together with the City
Mayor, is already a party in these proceedings.

3. The Ordinance in question is a patent nullity. It considered all squatters of public land in the City of
Baguio as bona-fide occupants of their respective lots. As we have stated in City of Manila v.
Garcia, 4 et al.:

Squatting is unlawful and no amount of acquiescence on the part of the city officials
will elevate it into a lawful act. In principle, a compound of illegal entry and official
permit to stay is obnoxious to our concept of proper official norm of conduct.
Because, such permit does not serve social justice; it fosters moral decadence. It
does not promote public welfare; it abets disrespect for the law. It has its roots in
vice; so it is an infected bargain. Official approval of squatting should not, therefore,
be permitted to obtain in this country where there is an orderly form of government.

In the same case, squatting was characterized as a widespread vice and a blight Thus:

Since the last global war, squatting on another's property in this country has become
a widespread vice. It was and is a blight Squatter's areas pose problems of health,
sanitation. They are breeding places for crime. They constitute proof that respect for
the law and the rights of others, even those of the government are being flouted.
Knowingly, squatters have embarked on the pernicious act of occupying property
whenever and wherever convenient to their interests without as much as leave, and
even against the will, of the owner. They are emboldened seemingly because of their
belief that they could violate the law with impunity. The pugnaciousness of some of
them has tied up the hands of legitimate owners. The latter are thus prevented from
recovering possession by peaceful means. Government lands have not been spared
by them. They know, of course, that instrusion into property, government or private,
is wrong. But, then the wheels of justice grind slow, mainly because of lawyers who,
by means, fair or foul, are quite often successful in procuring delay of the day of
reckoning. Rampancy of forcible entry into government lands particularly, is abetted
by the apathy of some public officials to enforce the government's rights. Obstinacy
of these squatters is difficult to explain unless it is spawned by official tolerance, if not
outright encouragement or protection. Said squatters have become insensible to the
difference between right and wrong. To them, violation of law means nothing. With
the result that squatters still exists, much to the detriment of public interest. It is high
 time that, in this aspect, sanity and the rule of law be restored. It is in this
environment that we look into the validity of the permits granted defendants herein.

In the above cited case, the land occupied by the squatters belongs to the City of Manila. In the
instant case, the land occupied by the squatters are portions of water sheds, reservations, scattered
portions of the public domain within the Baguio townsite. Certainly, there is more reason then to void
the actions taken by the City of Baguio through the questioned ordinance.

Being unquestionably a public land, no disposition thereof could be made by the City of Baguio
without prior legislative authority. It is the fundamental principle that the state possesses plenary
power in law to determine who shall be favored recipients of public domain, as well as under what
terms such privilege may be granted not excluding the placing of obstacles in the way of exercising
what otherwise would be ordinary acts of ownership. And the law has laid in the Director of Lands
the power of exclusive control, administrations, disposition and alienation of public land that includes
the survey, classification, lease, sale or any other form of concessions or disposition and
management of the lands of public domains. 5

Nor could the enactment of Ordinance 386 be justified by stating that "this Ordinance is primarily
designed to extend a helping hand to the numerous landless city residents and the so called
squatters within the Baguio townsite in their desire to acquire residential lots which they may rightly
call their own and that the reported people who have violated the City's building ordinances were not
so guided by any criminal perversity, but were given to it more by circumstances of necessity and
that they are, therefore, entitled to a more human treatment, more understanding and more of pity
rather than be herded before the courts, likened to hardened criminals and deliberate violators of our
laws and ordinances." 6

Our pronouncement in Astudillo vs. Board of Directors of PHHC 7 is relevant to this case. Thus—

In carrying out its social re-adjustment policies, the government could not simply lay
aside moral standards, and aim to favor usurpers, squatters, and intruders, unmindful
of the lawful and unlawful origin and character of their occupancy. Such a policy
would perpetuate conflicts instead of attaining their just solution. (Bernardo vs.
Bernardo, 96 Phil. 202, 206.)

Indeed, the government has enunciated a militant policy against squatters. Thus,
Letter of Instruction No. 19 dated October 2, 1972 orders city and district engineers
'to remove all illegal constructions including buildings ... and those built without
permits on public or private property' and providing for the relocation of squatters (68
O.G. 7962. See Letter of Instruction No. 19-A). As noted by Justice Sanchez, since
the last global war, squatting on another's property in this country has become a
widespread vice. (City of Manila vs.. Garcia, L-26053, Feb. 21, 1967, 19 SCRA 413,
418).

WHEREFORE, in view of the foregoing, Ordinance 386 is hereby rendered nullified and without
force and effect.

SO ORDERED.

G.R. No. 92389 September 11, 1991

HON. JEJOMAR C. BINAY and the MUNICIPALITY OF MAKATI, petitioners,
vs.
HON. EUFEMIO DOMINGO and the COMMISSION ON AUDIT, respondents.

Jejomar C. Binay for himself and for his co-petitioner.

Manuel D. Tamase and Rafael C. Marquez for respondents.

PARAS, J.:p

The only pivotal issue before Us is whether or not Resolution No. 60, re-enacted under Resolution
No. 243, of the Municipality of Makati is a valid exercise of police power under the general welfare
clause.

The pertinent facts are:

On September 27, 1988, petitioner Municipality, through its Council, approved Resolution No. 60
which reads:

A RESOLUTION TO CONFIRM AND/OR RATIFY THE ONGOING BURIAL

ASSISTANCE PROGRAM INITIATED BY THE OFFICE OF THE MAYOR, OF
EXTENDING FINANCIAL ASSISTANCE OF FIVE HUNDRED PESOS (P500.00) TO
A BEREAVED FAMILY, FUNDS TO BE TAKEN OUT OF UNAPPROPRIATED
AVAILABLE FUNDS EXISTING IN THE MUNICIPAL TREASURY. (Rollo, Annnex
"A" p. 39)

Qualified beneficiaries, under the Burial Assistance Program, are bereaved families of Makati whose
gross family income does not exceed two thousand pesos (P2,000.00) a month. The beneficiaries,
upon fulfillment of other requirements, would receive the amount of five hundred pesos (P500.00)
cash relief from the Municipality of Makati. (Reno, Annex "13", p. 41)

Metro Manila Commission approved Resolution No. 60. Thereafter, the municipal secretary certified
a disbursement fired of four hundred thousand pesos (P400,000.00) for the implementation of the
Burial Assistance Program. (Rollo, Annex "C", p. 43).

Resolution No. 60 was referred to respondent Commission on Audit (COA) for its expected
allowance in audit. Based on its preliminary findings, respondent COA disapproved Resolution No.
60 and disallowed in audit the disbursement of finds for the implementation thereof. (Rollo, Annex
"D", P. 44)

Two letters for reconsideration (Annexes "E" and "F", Rollo, pp. 45 and 48, respectively) filed by
petitioners Mayor Jejomar Binay, were denied by respondent in its Decision No. 1159, in the
following manner:

Your request for reconsideration is predicated on the following grounds, to wit:

1. Subject Resolution No. 60, s. 1988, of the Municipal Council of Makati and the
intended disbursements fall within the twin principles of 'police power and parens
patriae and
 2. The Metropolitan Manila Commission (MMC), under a Certification, dated June 5,
1989, has already appropriated the amount of P400,000.00 to implement the Id
resolution, and the only function of COA on the matter is to allow the financial
assistance in question.

The first contention is believed untenable. Suffice it to state that:

a statute or ordinance must have a real substantial, or rational

relation to the public safety, health, morals, or general welfare to be
sustained as a legitimate exercise of the police power. The mere
assertion by the legislature that a statute relates to the public health,
safety, or welfare does not in itself bring the statute within the police
power of a state for there must always be an obvious and real
connection between the actual provisions of a police regulations and
its avowed purpose, and the regulation adopted must be reasonably
adapted to accomplish the end sought to be attained. 16 Am. Jur 2d,
pp. 542-543; emphasis supplied).

Here, we see no perceptible connection or relation between the objective sought to

be attained under Resolution No. 60, s. 1988, supra, and the alleged public safety,
general welfare, etc. of the inhabitants of Makati.

Anent the second contention, let it be stressed that Resolution No. 60 is still subject
to the limitation that the expenditure covered thereby should be for a public purpose,
i.e., that the disbursement of the amount of P500.00 as burial assistance to a
bereaved family of the Municipality of Makati, or a total of P400,000.00 appropriated
under the Resolution, should be for the benefit of the whole, if not the majority, of the
inhabitants of the Municipality and not for the benefit of only a few individuals as in
the present case. On this point government funds or property shall be spent or used
solely for public purposes. (Cf. Section 4[2], P.D. 1445). (pp. 50-51, Rollo)

Bent on pursuing the Burial Assistance Program the Municipality of Makati, through its Council,
passed Resolution No. 243, re-affirming Resolution No. 60 (Rollo, Annex "H", p. 52).

However, the Burial Assistance Program has been stayed by COA Decision No. 1159. Petitioner,
through its Mayor, was constrained to file this special civil action of certiorari praying that COA
Decision No. 1159 be set aside as null and void.

The police power is a governmental function, an inherent attribute of sovereignty, which was born
with civilized government. It is founded largely on the maxims, "Sic utere tuo et ahenum non laedas
and "Salus populi est suprema lex Its fundamental purpose is securing the general welfare, comfort
and convenience of the people.

Police power is inherent in the state but not in municipal corporations (Balacuit v. CFI of Agusan del
Norte, 163 SCRA 182). Before a municipal corporation may exercise such power, there must be a
valid delegation of such power by the legislature which is the repository of the inherent powers of the
State. A valid delegation of police power may arise from express delegation, or be inferred from the
mere fact of the creation of the municipal corporation; and as a general rule, municipal corporations
may exercise police powers within the fair intent and purpose of their creation which are reasonably
proper to give effect to the powers expressly granted, and statutes conferring powers on public
corporations have been construed as empowering them to do the things essential to the enjoyment
of life and desirable for the safety of the people. (62 C.J.S., p. 277). The so-called inferred police
powers of such corporations are as much delegated powers as are those conferred in express
terms, the inference of their delegation growing out of the fact of the creation of the municipal
corporation and the additional fact that the corporation can only fully accomplish the objects of its
creation by exercising such powers. (Crawfordsville vs. Braden, 28 N.E. 849). Furthermore,
municipal corporations, as governmental agencies, must have such measures of the power as are
necessary to enable them to perform their governmental functions. The power is a continuing one,
founded on public necessity. (62 C.J.S. p. 273) Thus, not only does the State effectuate its purposes
through the exercise of the police power but the municipality does also. (U.S. v. Salaveria, 39 Phil.
102).

Municipal governments exercise this power under the general welfare clause: pursuant thereto they
are clothed with authority to "enact such ordinances and issue such regulations as may be
necessary to carry out and discharge the responsibilities conferred upon it by law, and such as shall
be necessary and proper to provide for the health, safety, comfort and convenience, maintain peace
and order, improve public morals, promote the prosperity and general welfare of the municipality and
the inhabitants thereof, and insure the protection of property therein." (Sections 91, 149, 177 and
208, BP 337). And under Section 7 of BP 337, "every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as powers necessary and
proper for governance such as to promote health and safety, enhance prosperity, improve morals,
and maintain peace and order in the local government unit, and preserve the comfort and
convenience of the inhabitants therein."

Police power is the power to prescribe regulations to promote the health, morals, peace, education,
good order or safety and general welfare of the people. It is the most essential, insistent, and
illimitable of powers. In a sense it is the greatest and most powerful attribute of the government. It is
elastic and must be responsive to various social conditions. (Sangalang, et al. vs. IAC, 176 SCRA
719). On it depends the security of social order, the life and health of the citizen, the comfort of an
existence in a thickly populated community, the enjoyment of private and social life, and the
beneficial use of property, and it has been said to be the very foundation on which our social system
rests. (16 C.J.S., P. 896) However, it is not confined within narrow circumstances of precedents
resting on past conditions; it must follow the legal progress of a democratic way of life. (Sangalang,
et al. vs. IAC, supra).

In the case at bar, COA is of the position that there is "no perceptible connection or relation between
the objective sought to be attained under Resolution No. 60, s. 1988, supra, and the alleged public
safety, general welfare. etc. of the inhabitants of Makati." (Rollo, Annex "G", p. 51).

Apparently, COA tries to re-define the scope of police power by circumscribing its exercise to "public
safety, general welfare, etc. of the inhabitants of Makati."

In the case of Sangalang vs. IAC, supra, We ruled that police power is not capable of an exact
definition but has been, purposely, veiled in general terms to underscore its all comprehensiveness.
Its scope, over-expanding to meet the exigencies of the times, even to anticipate the future where it
could be done, provides enough room for an efficient and flexible response to conditions and
circumstances thus assuring the greatest benefits.

The police power of a municipal corporation is broad, and has been said to be commensurate with,
but not to exceed, the duty to provide for the real needs of the people in their health, safety, comfort,
and convenience as consistently as may be with private rights. It extends to all the great public
needs, and, in a broad sense includes all legislation and almost every function of the municipal
government. It covers a wide scope of subjects, and, while it is especially occupied with whatever
affects the peace, security, health, morals, and general welfare of the community, it is not limited
thereto, but is broadened to deal with conditions which exists so as to bring out of them the greatest
welfare of the people by promoting public convenience or general prosperity, and to everything
worthwhile for the preservation of comfort of the inhabitants of the corporation (62 C.J.S. Sec. 128).
Thus, it is deemed inadvisable to attempt to frame any definition which shall absolutely indicate the
limits of police power.

COA's additional objection is based on its contention that "Resolution No. 60 is still subject to the
limitation that the expenditure covered thereby should be for a public purpose, ... should be for the
benefit of the whole, if not the majority, of the inhabitants of the Municipality and not for the benefit of
only a few individuals as in the present case." (Rollo, Annex "G", p. 51).

COA is not attuned to the changing of the times. Public purpose is not unconstitutional merely
because it incidentally benefits a limited number of persons. As correctly pointed out by the Office of
the Solicitor General, "the drift is towards social welfare legislation geared towards state policies to
provide adequate social services (Section 9, Art. II, Constitution), the promotion of the general
welfare (Section 5, Ibid) social justice (Section 10, Ibid) as well as human dignity and respect for
human rights. (Section 11, Ibid." (Comment, p. 12)

The care for the poor is generally recognized as a public duty. The support for the poor has long
been an accepted exercise of police power in the promotion of the common good.

There is no violation of the equal protection clause in classifying paupers as subject of legislation.
Paupers may be reasonably classified. Different groups may receive varying treatment. Precious to
the hearts of our legislators, down to our local councilors, is the welfare of the paupers. Thus,
statutes have been passed giving rights and benefits to the disabled, emancipating the tenant-farmer
from the bondage of the soil, housing the urban poor, etc.

Resolution No. 60, re-enacted under Resolution No. 243, of the Municipality of Makati is a paragon
of the continuing program of our government towards social justice. The Burial Assistance Program
is a relief of pauperism, though not complete. The loss of a member of a family is a painful
experience, and it is more painful for the poor to be financially burdened by such death. Resolution
No. 60 vivifies the very words of the late President Ramon Magsaysay 'those who have less in life,
should have more in law." This decision, however must not be taken as a precedent, or as an official
go-signal for municipal governments to embark on a philanthropic orgy of inordinate dole-outs for
motives political or otherwise.

PREMISES CONSIDERED, and with the afore-mentioned caveat, this petition is hereby GRANTED
and the Commission on Audit's Decision No. 1159 is hereby SET ASIDE.

SO ORDERED.