G.R. No.

91649 May 14, 1991

ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES

MARANAN AND LORENZO SANCHEZ,petitioners,
vs.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION
(PAGCOR), respondent.

H.B. Basco & Associates for petitioners.

Valmonte Law Offices collaborating counsel for petitioners.
Aguirre, Laborte and Capule for respondent PAGCOR.

PARAS, J.:

A TV ad proudly announces:

"The new PAGCOR — responding through responsible gaming."

But the petitioners think otherwise, that is why, they filed the instant petition seeking
to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter —
PD 1869, because it is allegedly contrary to morals, public policy and order, and
because —

A. It constitutes a waiver of a right prejudicial to a third person with a right

recognized by law. It waived the Manila City government's right to impose
taxes and license fees, which is recognized by law;

B. For the same reason stated in the immediately preceding paragraph, the
law has intruded into the local government's right to impose local taxes and
license fees. This, in contravention of the constitutionally enshrined principle
of local autonomy;

C. It violates the equal protection clause of the constitution in that it legalizes

PAGCOR — conducted gambling, while most other forms of gambling are
outlawed, together with prostitution, drug trafficking and other vices;

D. It violates the avowed trend of the Cory government away from

monopolistic and crony economy, and toward free enterprise and
privatization. (p. 2, Amended Petition; p. 7, Rollo)

In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to
the declared national policy of the "new restored democracy" and the people's will as
expressed in the 1987 Constitution. The decree is said to have a "gambling
objective" and therefore is contrary to Sections 11, 12 and 13 of Article II, Sec. 1 of
Article VIII and Section 3 (2) of Article XIV, of the present Constitution (p. 3, Second
Amended Petition; p. 21, Rollo).

The procedural issue is whether petitioners, as taxpayers and practicing lawyers

(petitioner Basco being also the Chairman of the Committee on Laws of the City
Council of Manila), can question and seek the annulment of PD 1869 on the alleged
grounds mentioned above.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by
virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under P.D.
1067-B also dated January 1, 1977 "to establish, operate and maintain gambling
casinos on land or water within the territorial jurisdiction of the Philippines." Its
operation was originally conducted in the well known floating casino "Philippine
Tourist." The operation was considered a success for it proved to be a potential
source of revenue to fund infrastructure and socio-economic projects, thus, P.D.
1399 was passed on June 2, 1978 for PAGCOR to fully attain this objective.

Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable
the Government to regulate and centralize all games of chance authorized by
existing franchise or permitted by law, under the following declared policy —

Sec. 1. Declaration of Policy. — It is hereby declared to be the policy of the

State to centralize and integrate all games of chance not heretofore
authorized by existing franchises or permitted by law in order to attain the
following objectives:

(a) To centralize and integrate the right and authority to operate and conduct
games of chance into one corporate entity to be controlled, administered and
supervised by the Government.

(b) To establish and operate clubs and casinos, for amusement and
recreation, including sports gaming pools, (basketball, football, lotteries, etc.)
and such other forms of amusement and recreation including games of
chance, which may be allowed by law within the territorial jurisdiction of the
Philippines and which will: (1) generate sources of additional revenue to fund
infrastructure and socio-civic projects, such as flood control programs,
beautification, sewerage and sewage projects, Tulungan ng Bayan Centers,
Nutritional Programs, Population Control and such other essential public
services; (2) create recreation and integrated facilities which will expand and
improve the country's existing tourist attractions; and (3) minimize, if not
totally eradicate, all the evils, malpractices and corruptions that are normally
prevalent on the conduct and operation of gambling clubs and casinos without
direct government involvement. (Section 1, P.D. 1869)

To attain these objectives PAGCOR is given territorial jurisdiction all over the
Philippines. Under its Charter's repealing clause, all laws, decrees, executive orders,
rules and regulations, inconsistent therewith, are accordingly repealed, amended or
modified.

It is reported that PAGCOR is the third largest source of government revenue, next
to the Bureau of Internal Revenue and the Bureau of Customs. In 1989 alone,
PAGCOR earned P3.43 Billion, and directly remitted to the National Government a
total of P2.5 Billion in form of franchise tax, government's income share, the
President's Social Fund and Host Cities' share. In addition, PAGCOR sponsored
other socio-cultural and charitable projects on its own or in cooperation with various
governmental agencies, and other private associations and organizations. In its 3
1/2 years of operation under the present administration, PAGCOR remitted to the
government a total of P6.2 Billion. As of December 31, 1989, PAGCOR was
employing 4,494 employees in its nine (9) casinos nationwide, directly supporting
the livelihood of Four Thousand Four Hundred Ninety-Four (4,494) families.

But the petitioners, are questioning the validity of P.D. No. 1869. They allege that
the same is "null and void" for being "contrary to morals, public policy and public
order," monopolistic and tends toward "crony economy", and is violative of the equal
protection clause and local autonomy as well as for running counter to the state
policies enunciated in Sections 11 (Personal Dignity and Human Rights), 12 (Family)
and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article XIII and
Section 2 (Educational Values) of Article XIV of the 1987 Constitution.

This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the
most deliberate consideration by the Court, involving as it does the exercise of what
has been described as "the highest and most delicate function which belongs to the
judicial department of the government." (State v. Manuel, 20 N.C. 144; Lozano v.
Martinez, 146 SCRA 323).

As We enter upon the task of passing on the validity of an act of a co-equal and
coordinate branch of the government We need not be reminded of the time-honored
principle, deeply ingrained in our jurisprudence, that a statute is presumed to be
valid. Every presumption must be indulged in favor of its constitutionality. This is not
to say that We approach Our task with diffidence or timidity. Where it is clear that the
legislature or the executive for that matter, has over-stepped the limits of its authority
under the constitution, We should not hesitate to wield the axe and let it fall heavily,
as fall it must, on the offending statute (Lozano v. Martinez, supra).

In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru Mr.
Justice Zaldivar underscored the —

. . . thoroughly established principle which must be followed in all cases where

questions of constitutionality as obtain in the instant cases are involved. All
presumptions are indulged in favor of constitutionality; one who attacks a
statute alleging unconstitutionality must prove its invalidity beyond a
reasonable doubt; that a law may work hardship does not render it
unconstitutional; that if any reasonable basis may be conceived which
supports the statute, it will be upheld and the challenger must negate all
possible basis; that the courts are not concerned with the wisdom, justice,
policy or expediency of a statute and that a liberal interpretation of the
constitution in favor of the constitutionality of legislation should be adopted.
(Danner v. Hass, 194 N.W. 2nd534, 539; Spurbeck v. Statton, 106
N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46 SCRA
734, 739 [1970]; Peralta v. Commission on Elections, 82 SCRA 30, 55 [1978];
and Heirs of Ordona v. Reyes, 125 SCRA 220, 241-242 [1983] cited in
Citizens Alliance for Consumer Protection v. Energy Regulatory Board, 162
SCRA 521, 540)

Of course, there is first, the procedural issue. The respondents are questioning the
legal personality of petitioners to file the instant petition.

Considering however the importance to the public of the case at bar, and in keeping
with the Court's duty, under the 1987 Constitution, to determine whether or not the
other branches of government have kept themselves within the limits of the
Constitution and the laws and that they have not abused the discretion given to
them, the Court has brushed aside technicalities of procedure and has taken
cognizance of this petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng
Pilipinas Inc. v. Tan, 163 SCRA 371)

With particular regard to the requirement of proper party as applied in the

cases before us, We hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of sustaining
 an immediate injury as a result of the acts or measures complained of. And
even if, strictly speaking they are not covered by the definition, it is still within
the wide discretion of the Court to waive the requirement and so remove the
impediment to its addressing and resolving the serious constitutional
questions raised.

In the first Emergency Powers Cases, ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued by
President Quirino although they were involving only an indirect and general
interest shared in common with the public. The Court dismissed the objection
that they were not proper parties and ruled that "the transcendental
importance to the public of these cases demands that they be settled
promptly and definitely, brushing aside, if we must technicalities of
procedure." We have since then applied the exception in many other cases.
(Association of Small Landowners in the Philippines, Inc. v. Sec. of Agrarian
Reform, 175 SCRA 343).

Having disposed of the procedural issue, We will now discuss the substantive issues
raised.

Gambling in all its forms, unless allowed by law, is generally prohibited. But the
prohibition of gambling does not mean that the Government cannot regulate it in the
exercise of its police power.

The concept of police power is well-established in this jurisdiction. It has been

defined as the "state authority to enact legislation that may interfere with personal
liberty or property in order to promote the general welfare." (Edu v. Ericta, 35 SCRA
481, 487) As defined, it consists of (1) an imposition or restraint upon liberty or
property, (2) in order to foster the common good. It is not capable of an exact
definition but has been, purposely, veiled in general terms to underscore its all-
comprehensive embrace. (Philippine Association of Service Exporters, Inc. v. Drilon,
163 SCRA 386).

Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the
future where it could be done, provides enough room for an efficient and flexible
response to conditions and circumstances thus assuming the greatest benefits. (Edu
v. Ericta, supra)

It finds no specific Constitutional grant for the plain reason that it does not owe its
origin to the charter. Along with the taxing power and eminent domain, it is inborn in
the very fact of statehood and sovereignty. It is a fundamental attribute of
government that has enabled it to perform the most vital functions of governance.
Marshall, to whom the expression has been credited, refers to it succinctly as the
plenary power of the state "to govern its citizens". (Tribe, American Constitutional
Law, 323, 1978). The police power of the State is a power co-extensive with self-
protection and is most aptly termed the "law of overwhelming necessity." (Rubi v.
Provincial Board of Mindoro, 39 Phil. 660, 708) It is "the most essential, insistent,
and illimitable of powers." (Smith Bell & Co. v. National, 40 Phil. 136) It is a dynamic
force that enables the state to meet the agencies of the winds of change.

What was the reason behind the enactment of P.D. 1869?

P.D. 1869 was enacted pursuant to the policy of the government to "regulate and
centralize thru an appropriate institution all games of chance authorized by existing
franchise or permitted by law" (1st whereas clause, PD 1869). As was subsequently
proved, regulating and centralizing gambling operations in one corporate entity —
the PAGCOR, was beneficial not just to the Government but to society in general. It
is a reliable source of much needed revenue for the cash strapped Government. It
provided funds for social impact projects and subjected gambling to "close scrutiny,
regulation, supervision and control of the Government" (4th Whereas Clause, PD
1869). With the creation of PAGCOR and the direct intervention of the Government,
the evil practices and corruptions that go with gambling will be minimized if not
totally eradicated. Public welfare, then, lies at the bottom of the enactment of PD
1896.

Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of
Manila to impose taxes and legal fees; that the exemption clause in P.D. 1869 is
violative of the principle of local autonomy. They must be referring to Section 13 par.
(2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying any
"tax of any kind or form, income or otherwise, as well as fees, charges or levies of
whatever nature, whether National or Local."

(2) Income and other taxes. — a) Franchise Holder: No tax of any kind or
form, income or otherwise as well as fees, charges or levies of whatever
nature, whether National or Local, shall be assessed and collected under this
franchise from the Corporation; nor shall any form or tax or charge attach in
any way to the earnings of the Corporation, except a franchise tax of five (5%)
percent of the gross revenues or earnings derived by the Corporation from its
operations under this franchise. Such tax shall be due and payable quarterly
to the National Government and shall be in lieu of all kinds of taxes, levies,
fees or assessments of any kind, nature or description, levied, established or
collected by any municipal, provincial or national government authority
(Section 13 [2]).

Their contention stated hereinabove is without merit for the following reasons:

(a) The City of Manila, being a mere Municipal corporation has no inherent right to
impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105
Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or
statute must plainly show an intent to confer that power or the municipality cannot
assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax" therefore must
always yield to a legislative act which is superior having been passed upon by the
state itself which has the "inherent power to tax" (Bernas, the Revised [1973]
Philippine Constitution, Vol. 1, 1983 ed. p. 445).

(b) The Charter of the City of Manila is subject to control by Congress. It should be
stressed that "municipal corporations are mere creatures of Congress" (Unson v.
Lacson, G.R. No. 7909, January 18, 1957) which has the power to "create and
abolish municipal corporations" due to its "general legislative powers" (Asuncion v.
Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore, has
the power of control over Local governments (Hebron v. Reyes, G.R. No. 9124, July
2, 1950). And if Congress can grant the City of Manila the power to tax certain
matters, it can also provide for exemptions or even take back the power.

(c) The City of Manila's power to impose license fees on gambling, has long been
revoked. As early as 1975, the power of local governments to regulate gambling thru
the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771 and was
vested exclusively on the National Government, thus:
 Sec. 1. Any provision of law to the contrary notwithstanding, the authority of
chartered cities and other local governments to issue license, permit or other
form of franchise to operate, maintain and establish horse and dog race
tracks, jai-alai and other forms of gambling is hereby revoked.

Sec. 2. Hereafter, all permits or franchises to operate, maintain and establish,

horse and dog race tracks, jai-alai and other forms of gambling shall be
issued by the national government upon proper application and verification of
the qualification of the applicant . . .

Therefore, only the National Government has the power to issue "licenses or
permits" for the operation of gambling. Necessarily, the power to demand or collect
license fees which is a consequence of the issuance of "licenses or permits" is no
longer vested in the City of Manila.

(d) Local governments have no power to tax instrumentalities of the National

Government. PAGCOR is a government owned or controlled corporation with an
original charter, PD 1869. All of its shares of stocks are owned by the National
Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also
exercises regulatory powers thus:

Sec. 9. Regulatory Power. — The Corporation shall maintain a Registry of the

affiliated entities, and shall exercise all the powers, authority and the
responsibilities vested in the Securities and Exchange Commission over such
affiliating entities mentioned under the preceding section, including, but not
limited to amendments of Articles of Incorporation and By-Laws, changes in
corporate term, structure, capitalization and other matters concerning the
operation of the affiliated entities, the provisions of the Corporation Code of
the Philippines to the contrary notwithstanding, except only with respect to
original incorporation.

PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter
role is governmental, which places it in the category of an agency or instrumentality
of the Government. Being an instrumentality of the Government, PAGCOR should
be and actually is exempt from local taxes. Otherwise, its operation might be
burdened, impeded or subjected to control by a mere Local government.

The states have no power by taxation or otherwise, to retard, impede, burden

or in any manner control the operation of constitutional laws enacted by
Congress to carry into execution the powers vested in the federal
government. (MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local
governments.

Justice Holmes, speaking for the Supreme Court, made reference to the
entire absence of power on the part of the States to touch, in that way
(taxation) at least, the instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to prevent
it from consummating its federal responsibilities, or even to seriously burden it
in the accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2,
p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru
extermination of what local authorities may perceive to be undesirable activities or
enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US
42).

The power to tax which was called by Justice Marshall as the "power to destroy" (Mc
Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or
creation of the very entity which has the inherent power to wield it.

(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be
violated by P.D. 1869. This is a pointless argument. Article X of the 1987
Constitution (on Local Autonomy) provides:

Sec. 5. Each local government unit shall have the power to create its own
source of revenue and to levy taxes, fees, and other charges subject to such
guidelines and limitation as the congress may provide, consistent with the
basic policy on local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local government. (emphasis supplied)

The power of local government to "impose taxes and fees" is always subject to
"limitations" which Congress may provide by law. Since PD 1869 remains an
"operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987
Constitution), its "exemption clause" remains as an exception to the exercise of the
power of local governments to impose taxes and fees. It cannot therefore be
violative but rather is consistent with the principle of local autonomy.

Besides, the principle of local autonomy under the 1987 Constitution simply means
"decentralization" (III Records of the 1987 Constitutional Commission, pp. 435-436,
as cited in Bernas, The Constitution of the Republic of the Philippines, Vol. II, First
Ed., 1988, p. 374). It does not make local governments sovereign within the state or
an "imperium in imperio."

Local Government has been described as a political subdivision of a nation or

state which is constituted by law and has substantial control of local affairs. In
a unitary system of government, such as the government under the Philippine
Constitution, local governments can only be an intra sovereign subdivision of
one sovereign nation, it cannot be an imperium in imperio. Local government
in such a system can only mean a measure of decentralization of the function
of government. (emphasis supplied)

As to what state powers should be "decentralized" and what may be delegated to

local government units remains a matter of policy, which concerns wisdom. It is
therefore a political question. (Citizens Alliance for Consumer Protection v. Energy
Regulatory Board, 162 SCRA 539).

What is settled is that the matter of regulating, taxing or otherwise dealing with
gambling is a State concern and hence, it is the sole prerogative of the State to
retain it or delegate it to local governments.

As gambling is usually an offense against the State, legislative grant or

express charter power is generally necessary to empower the local
corporation to deal with the subject. . . . In the absence of express grant of
power to enact, ordinance provisions on this subject which are inconsistent
with the state laws are void. (Ligan v. Gadsden, Ala App. 107 So. 733 Ex-
Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah You, 88 Cal. 99,
 25 PAC 974, 22 Am St. Rep. 280, 11 LRA 480, as cited in Mc Quinllan Vol.
3 Ibid, p. 548, emphasis supplied)

Petitioners next contend that P.D. 1869 violates the equal protection clause of the
Constitution, because "it legalized PAGCOR — conducted gambling, while most
gambling are outlawed together with prostitution, drug trafficking and other vices" (p.
82, Rollo).

We, likewise, find no valid ground to sustain this contention. The petitioners' posture
ignores the well-accepted meaning of the clause "equal protection of the laws." The
clause does not preclude classification of individuals who may be accorded different
treatment under the law as long as the classification is not unreasonable or arbitrary
(Itchong v. Hernandez, 101 Phil. 1155). A law does not have to operate in equal
force on all persons or things to be conformable to Article III, Section 1 of the
Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989).

The "equal protection clause" does not prohibit the Legislature from establishing
classes of individuals or objects upon which different rules shall operate (Laurel v.
Misa, 43 O.G. 2847). The Constitution does not require situations which are different
in fact or opinion to be treated in law as though they were the same (Gomez v.
Palomar, 25 SCRA 827).

Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the
equal protection is not clearly explained in the petition. The mere fact that some
gambling activities like cockfighting (P.D 449) horse racing (R.A. 306 as amended
by RA 983), sweepstakes, lotteries and races (RA 1169 as amended by B.P. 42) are
legalized under certain conditions, while others are prohibited, does not render the
applicable laws, P.D. 1869 for one, unconstitutional.

If the law presumably hits the evil where it is most felt, it is not to be
overthrown because there are other instances to which it might have been
applied. (Gomez v. Palomar, 25 SCRA 827)

The equal protection clause of the 14th Amendment does not mean that all
occupations called by the same name must be treated the same way; the
state may do what it can to prevent which is deemed as evil and stop short of
those cases in which harm to the few concerned is not less than the harm to
the public that would insure if the rule laid down were made mathematically
exact. (Dominican Hotel v. Arizona, 249 US 2651).

Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory
Government away from monopolies and crony economy and toward free enterprise
and privatization" suffice it to state that this is not a ground for this Court to nullify
P.D. 1869. If, indeed, PD 1869 runs counter to the government's policies then it is
for the Executive Department to recommend to Congress its repeal or amendment.

The judiciary does not settle policy issues. The Court can only declare what
the law is and not what the law should be. Under our system of government,
1âw phi 1

policy issues are within the domain of the political branches of government
and of the people themselves as the repository of all state power. (Valmonte
v. Belmonte, Jr., 170 SCRA 256).

On the issue of "monopoly," however, the Constitution provides that:

 Sec. 19. The State shall regulate or prohibit monopolies when public interest
so requires. No combinations in restraint of trade or unfair competition shall
be allowed. (Art. XII, National Economy and Patrimony)

It should be noted that, as the provision is worded, monopolies are not necessarily
prohibited by the Constitution. The state must still decide whether public interest
demands that monopolies be regulated or prohibited. Again, this is a matter of policy
for the Legislature to decide.

On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity) 12

(Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII
and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it
to state also that these are merely statements of principles and, policies. As such,
they are basically not self-executing, meaning a law should be passed by Congress
to clearly define and effectuate such principles.

In general, therefore, the 1935 provisions were not intended to be self-

executing principles ready for enforcement through the courts. They were
rather directives addressed to the executive and the legislature. If the
executive and the legislature failed to heed the directives of the articles the
available remedy was not judicial or political. The electorate could express
their displeasure with the failure of the executive and the legislature through
the language of the ballot. (Bernas, Vol. II, p. 2)

Every law has in its favor the presumption of constitutionality (Yu Cong Eng v.
Trinidad, 47 Phil. 387; Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82
SCRA 30; Abbas v. Comelec, 179 SCRA 287). Therefore, for PD 1869 to be
nullified, it must be shown that there is a clear and unequivocal breach of the
Constitution, not merely a doubtful and equivocal one. In other words, the grounds
for nullity must be clear and beyond reasonable doubt. (Peralta v. Comelec, supra)
Those who petition this Court to declare a law, or parts thereof, unconstitutional
must clearly establish the basis for such a declaration. Otherwise, their petition must
fail. Based on the grounds raised by petitioners to challenge the constitutionality of
P.D. 1869, the Court finds that petitioners have failed to overcome the presumption.
The dismissal of this petition is therefore, inevitable. But as to whether P.D. 1869
remains a wise legislation considering the issues of "morality, monopoly, trend to
free enterprise, privatization as well as the state principles on social justice, role of
youth and educational values" being raised, is up for Congress to determine.

As this Court held in Citizens' Alliance for Consumer Protection v. Energy

Regulatory Board, 162 SCRA 521 —

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

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

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

Separate Opinions

PADILLA, J., concurring:

I concur in the result of the learned decision penned by my brother Mr. Justice
Paras. This means that I agree with the decision insofar as it holds that the
prohibition, control, and regulation of the entire activity known as gambling properly
pertain to "state policy." It is, therefore, the political departments of government,
namely, the legislative and the executive that should decide on what government
should do in the entire area of gambling, and assume full responsibility to the people
for such policy.

The courts, as the decision states, cannot inquire into the wisdom, morality or
expediency of policies adopted by the political departments of government in areas
which fall within their authority, except only when such policies pose a clear and
present danger to the life, liberty or property of the individual. This case does not
involve such a factual situation.

However, I hasten to make of record that I do not subscribe to gambling in any form.
It demeans the human personality, destroys self-confidence and eviscerates one's
self-respect, which in the long run will corrode whatever is left of the Filipino moral
character. Gambling has wrecked and will continue to wreck families and homes; it
is an antithesis to individual reliance and reliability as well as personal industry
which are the touchstones of real economic progress and national development.

Gambling is reprehensible whether maintained by government or privatized. The

revenues realized by the government out of "legalized" gambling will, in the long run,
be more than offset and negated by the irreparable damage to the people's moral
values.

Also, the moral standing of the government in its repeated avowals against "illegal
gambling" is fatally flawed and becomes untenable when it itself engages in the very
activity it seeks to eradicate.
One can go through the Court's decision today and mentally replace the activity
referred to therein as gambling, which is legal only because it is authorized by law
and run by the government, with the activity known as prostitution. Would
prostitution be any less reprehensible were it to be authorized by law, franchised,
and "regulated" by the government, in return for the substantial revenues it would
yield the government to carry out its laudable projects, such as infrastructure and
social amelioration? The question, I believe, answers itself. I submit that the sooner
the legislative department outlaws all forms of gambling, as a fundamental state
policy, and the sooner the executive implements such policy, the better it will be for
the nation.

Melencio-Herrera, J., concur.

G.R. No. L-22814 August 28, 1968

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL BOARD,
THE CITY MAYOR and THE CITY TREASURER, all of the CITY OF
BUTUAN, defendants-appellees.

Sabido, Sabido and Associates for plaintiff-appellant.

The City Attorney of Butuan City for defendants-appellees.

CONCEPCION, C.J.:

Direct appeal to this Court, from a decision of the Court of First Instance of Agusan,
dismissing plaintiff's complaint, with costs.

Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation

with offices and principal place of business in Quezon City. The defendants are the
City of Butuan, its City Mayor, the members of its municipal board and its City
Treasurer. Plaintiff — seeks to recover the sums paid by it to the City of Butuan —
hereinafter referred to as the City and collected by the latter, pursuant to its
Municipal Ordinance No. 110, as amended by Municipal Ordinance No. 122, both
series of 1960, which plaintiff assails as null and void, and to prevent the
enforcement thereof. Both parties submitted the case for decision in the lower court
upon a stipulation to the effect:

1. That plaintiff's warehouse in the City of Butuan serves as a storage for its
products the "Pepsi-Cola" soft drinks for sale to customers in the City of
Butuan and all the municipalities in the Province of Agusan. These "Pepsi-
Cola Cola" soft drinks are bottled in Cebu City and shipped to the Butuan City
warehouse of plaintiff for distribution and sale in the City of Butuan and all
municipalities of Agusan. .

2. That on August 16, 1960, the City of Butuan enacted Ordinance No. 110
which was subsequently amended by Ordinance No. 122 and effective
November 28, 1960. A copy of Ordinance No. 110, Series of 1960 and
Ordinance No. 122 are incorporated herein as Exhibits "A" and "B",
respectively.
 3. That Ordinance No. 110 as amended, imposes a tax on any person,
association, etc., of P0.10 per case of 24 bottles of Pepsi-Cola and the
plaintiff paid under protest the amount of P4,926.63 from August 16 to
December 31, 1960 and the amount of P9,250.40 from January 1 to July 30,
1961.

4. That the plaintiff filed the foregoing complaint for the recovery of the total
amount of P14,177.03 paid under protest and those that if may later on pay
until the termination of this case on the ground that Ordinance No. 110 as
amended of the City of Butuan is illegal, that the tax imposed is excessive and
that it is unconstitutional.

5. That pursuant to Ordinance No. 110 as amended, the City Treasurer of

Butuan City, has prepared a form to be accomplished by the plaintiff for the
computation of the tax. A copy of the form is enclosed herewith as Exhibit "C".

6. That the Profit and Loss Statement of the plaintiff for the period from
January 1, 1961 to July 30, 1961 of its warehouse in Butuan City is
incorporated herein as Exhibits "D" to "D-1" to "D-5". In this Profit and Loss
Statement, the defendants claim that the plaintiff is not entitled to a
depreciation of P3,052.63 but only P1,202.55 in which case the profit of
plaintiff will be increased from P1,254.44 to P3,104.52. The plaintiff differs
only on the claim of depreciation which the company claims to be P3,052.62.
This is in accordance with the findings of the representative of the
undersigned City Attorney who verified the records of the plaintiff.

7. That beginning November 21, 1960, the price of Pepsi-Cola per case of 24
bottles was increased to P1.92 which price is uniform throughout the
Philippines. Said increase was made due to the increase in the production
cost of its manufacture.

8. That the parties reserve the right to submit arguments on the

constitutionality and illegality of Ordinance No. 110, as amended of the City of
Butuan in their respective memoranda.

xxx xxx xxx 1äw phï1.ñët

Section 1 of said Ordinance No. 110, as amended, states what products are
"liquors", within the purview thereof. Section 2 provides for the payment by "any
agent and/or consignee" of any dealer "engaged in selling liquors, imported or local,
in the City," of taxes at specified rates. Section 3 prescribes a tax of P0.10 per case
of 24 bottles of the soft drinks and carbonated beverages therein named, and "all
other soft drinks or carbonated drinks." Section 3-A, defines the meaning of the term
"consignee or agent" for purposes of the ordinance. Section 4 provides that said
taxes "shall be paid at the end of every calendar month." Pursuant to Section 5, the
taxes "shall be based and computed from the cargo manifest or bill of lading or any
other record showing the number of cases of soft drinks, liquors or all other soft
drinks or carbonated drinks received within the month." Sections 6, 7 and 8 specify
the surcharge to be added for failure to pay the taxes within the period prescribed
and the penalties imposable for "deliberate and willful refusal to pay the tax
mentioned in Sections 2 and 3" or for failure "to furnish the office of the City
Treasurer a copy of the bill of lading or cargo manifest or record of soft drinks,
liquors or carbonated drinks for sale in the City." Section 9 makes the ordinance
applicable to soft drinks, liquors or carbonated drinks "received outside" but "sold
within" the City. Section 10 of the ordinance provides that the revenue derived
therefrom "shall be alloted as follows: 40% for Roads and Bridges Fund; 40% for the
General Fund and 20% for the School Fund."

Plaintiff maintains that the disputed ordinance is null and void because: (1) it
partakes of the nature of an import tax; (2) it amounts to double taxation; (3) it is
excessive, oppressive and confiscatory; (4) it is highly unjust and discriminatory; and
(5) section 2 of Republic Act No. 2264, upon the authority of which it was enacted, is
an unconstitutional delegation of legislative powers.

The second and last objections are manifestly devoid of merit. Indeed —
independently of whether or not the tax in question, when considered in relation to
the sales tax prescribed by Acts of Congress, amounts to double taxation, on which
we need not and do not express any opinion - double taxation, in general, is not
forbidden by our fundamental law. We have not adopted, as part thereof, the
injunction against double taxation found in the Constitution of the United States and
of some States of the Union.1 Then, again, the general principle against delegation
of legislative powers, in consequence of the theory of separation of powers 2 is
subject to one well-established exception, namely: legislative powers may be
delegated to local governments — to which said theory does not apply3 — in respect
of matters of local concern.

The third objection is, likewise, untenable. The tax of "P0.10 per case of 24
bottles," of soft drinks or carbonated drinks — in the production and sale of which
plaintiff is engaged — or less than P0.0042 per bottle, is manifestly too small to be
excessive, oppressive, or confiscatory.

The first and the fourth objections merit, however, serious consideration. In this
connection, it is noteworthy that the tax prescribed in section 3 of Ordinance No.
110, as originally approved, was imposed upon dealers "engaged in selling" soft
drinks or carbonated drinks. Thus, it would seem that the intent was then to levy a
tax upon the sale of said merchandise. As amended by Ordinance No. 122, the tax
is, however, imposed only upon "any agent and/or consignee of any person,
association, partnership, company or corporation engaged in selling ... soft drinks or
carbonated drinks." And, pursuant to section 3-A, which was inserted by said
Ordinance No. 122:

... — Definition of the Term Consignee or Agent. — For purposes of this

Ordinance, a consignee of agent shall mean any person, association,
partnership, company or corporation who acts in the place of another by
authority from him or one entrusted with the business of another or to whom is
consigned or shipped no less than 1,000 cases of hard liquors or soft drinks
every month for resale, either retail or wholesale.

As a consequence, merchants engaged in the sale of soft drink or carbonated

drinks, are not subject to the tax, unless they are agents and/or consignees of
another dealer, who, in the very nature of things, must be one engaged in
business outside the City. Besides, the tax would not be applicable to such agent
and/or consignee, if less than 1,000 cases of soft drinks are consigned or shipped to
him every month. When we consider, also, that the tax "shall be based and
computed from the cargo manifest or bill of lading ... showing the number of cases"
— not sold — but "received" by the taxpayer, the intention to limit the application of
the ordinance to soft drinks and carbonated drinks brought into the City from outside
thereof becomes apparent. Viewed from this angle, the tax partakes of the nature of
an import duty, which is beyond defendant's authority to impose by express
provision of law.4
Even however, if the burden in question were regarded as a tax on the sale of said
beverages, it would still be invalid, as discriminatory, and hence, violative of the
uniformity required by the Constitution and the law therefor, since only sales by
"agents or consignees" of outside dealers would be subject to the tax. Sales by local
dealers, not acting for or on behalf of other merchants, regardless of the volume of
their sales, and even if the same exceeded those made by said agents or
consignees of producers or merchants established outside the City of Butuan, would
be exempt from the disputed tax.

It is true that the uniformity essential to the valid exercise of the power of taxation
does not require identity or equality under all circumstances, or negate the authority
to classify the objects of taxation.5 The classification made in the exercise of this
authority, to be valid, must, however, be reasonable6 and this requirement is not
deemed satisfied unless: (1) it is based upon substantial distinctions which make
real differences; (2) these are germane to the purpose of the legislation or
ordinance; (3) the classification applies, not only to present conditions, but, also, to
future conditions substantially identical to those of the present; and (4) the
classification applies equally all those who belong to the same class.7

These conditions are not fully met by the ordinance in question.8 Indeed, if its
purpose were merely to levy a burden upon the sale of soft drinks or carbonated
beverages, there is no reason why sales thereof by sealers other than agents or
consignees of producers or merchants established outside the City of Butuan should
be exempt from the tax.

WHEREFORE, the decision appealed from is hereby reversed, and another one
shall be entered annulling Ordinance No. 110, as amended by Ordinance No. 122,
and sentencing the City of Butuan to refund to plaintiff herein the amounts collected
from and paid under protest by the latter, with interest thereon at the legal rate from
the date of the promulgation of this decision, in addition to the costs, and defendants
herein are, accordingly, restrained and prohibited permanently from enforcing said
Ordinance, as amended. It is so ordered.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando,
JJ., concur.1äwphï1.ñët
GOVERNMENT SERVICE G.R. No. 147192
INSURANCE SYSTEM,
Petitioner,
Present:

PUNO, J., Chairperson,

- v e r s u s - SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA and
GARCIA, JJ.
THE CITY ASSESSOR OF
ILOILO CITY, THE REGISTER
OF DEEDS OF ILOILO CITY and
ROSALINA FRANCISCO, represented by
her attorney-
in-fact, SALVADOR PAJA I,*
Respondents.
Promulgated:
June 27, 2006
x------------------------------------------x

DECISION

CORONA, J.:

Assailed in this present petition for review under Rule 45 of

the Rules of Court are the decision[1] and resolution[2] of the Court of

Appeals (CA) dismissing a petition for annulment of judgment[3] filed

by petitioner, the Government Service Insurance System (GSIS), in

Cadastral Case No. 84 and another unnumbered cadastral case

decided by the Regional Trial Court (RTC), Branches 36 and 31, of

Iloilo City, respectively.

In the two cadastral cases, private respondent Rosalina Francisco

petitioned for the issuance of new transfer certificates of title (TCTs)

in her name over two parcels of land, to wit:

TCT No. 41681

 A parcel of land known as Lot No. 6, Block 2, of the
Subdivision Plan (LRC) Psd-184005 being a portion of Lot 2214-
B, Jaro Cadastre, LRC (GLRO) Record No. 8 situated in the
District of Jaro, Iloilo City, Island of Panay, registered in the name
of GSIS c/o Baldomero Dagdag, of legal age, Filipino citizen and
resident of Jaro, Iloilo City, Philippines on June 28, 1991.

TCT No. 48580

A parcel of land known as Lot No. 22, Block 2, of the

Subdivision Record No. 8 situated in the District of Jaro, Iloilo
City, Island of Panay, registered in the name of GSIS c/o Rodolfo
Ceres, of legal age, Filipino Citizen and a resident of Iloilo City,
Philippines, with an area of Two Hundred Ninety Four (294)
square meters, more or less.

Private respondent Francisco purchased the subject properties

in the auction sales held for the satisfaction of delinquent real

property taxes. After the lapse of the one-year redemption period

and the failure of the registered owner or any interested person to

redeem the properties, the Iloilo City Treasurer issued the

corresponding final bill of sale to private respondent. The sales were

later on duly annotated on the certificates of title on file with the

Register of Deeds. However, the final bill of sale could not be

registered because the owners duplicate certificate of title was

unavailable at that time.

To effect registration in her name, private respondent

instituted separate petitions for the entry of title in her name over

the two lots with the RTCsof Iloilo City. Both petitions were

unopposed.

Finding merit in her petitions, the RTCs, in separate orders issued

on separate dates, directed the issuance of new duplicate TCTs.

The dispositiveportion of the April 29, 1993 order of RTC Branch 36

in Cadastral Case No. 84 read:

WHEREFORE, premises considered, the Register of Deeds

of the City of Iloilo is hereby ordered to issue new owners
duplicate copy of Transfer Certificate of Title No. T-41681 in the
name of GSIS c/o Baldomero Dagdag, upon payment of the
required legal fees. Accordingly, the lost copy of the subject title is
hereby declared as NULL and VOID.[4]

On the other hand, RTC Branch 31 also issued an order, dated

November 8, 1994, in the other (unnumbered) cadastral case,

the dispositive portion of which read:

WHEREFORE, as prayed for, the Register of Deeds, City of

Iloilo is hereby directed to issue a new owners duplicate certificate
of Title No. T-48580 in the name of the G.S.I.S. C/O RODOLFO
CERES, the registered owner, basing the same on the Original
Certificate of Title found intact and existing in the Office of the
Register of Deeds and the latter to cancel Transfer Certificate of
Title No. T-48580 together with the encumbrances therein and to
issue a new Transfer Certificate of Title in the name of ROSALINA
FRANCISCO of legal age, single, Filipino Citizen and resident
of Brgy. Tacas, Jaro, Iloilo City, Philippines. The owners duplicate
certificate of title No. T-48580 which was not surrendered is
hereby declared null and void.[5]

No appeal was made from both orders of the

courts a quo, hence, they became final and executory.

In a petition to annul the judgment of the trial court, petitioner, as

the alleged previous owner of the parcels of land sold at public

auction, assailed the orders of the RTCs of Iloilo City before the CA.

It claimed that the assessment of real property taxes on it (GSIS)

was void since, under its charter (RA 8291), it was exempt from all

forms of taxes (including real property taxes on the properties held

by it) that were due to the local governments where such properties

were located. Furthermore, it claimed that the proceedings in the

assessment and levy of said taxes, as well as the sale of the

properties at public auction, were held without notice to it, hence,

its right to due process was violated.

The appellate court gave no credence to the arguments of

petitioner and dismissed its petition. According to the CA, the

exemption of GSIS under its charter was not applicable pursuant to

Section 234(a) of RA 7160, otherwise known as The Local

Government Code of 1991 (LGC). Under that law, the tax-exempt

status of GSIS cannot be invoked where the actual use or beneficial

ownership of the properties under its title has been conveyed to

another person.[6] The CA added that there was also no basis

for GSISs claim that it was denied due process.[7]

Petitioner filed a motion for reconsideration but this was denied by

the CA, hence, it brought this case to us via a petition for review on

certiorari under Rule 45 of the Rules of Court.

In this petition, petitioner essentially faults the CA for ruling that

its properties were not exempt from all forms of taxes under its

charter (RA 8291) and that the proceedings on the assessment and

levy of its properties were legal.

In support of its position, petitioner points to Section 39 of RA 8291

which reads:

Section 39. Exemption from Tax, Legal Process and

Lien. It is hereby declared that the actuarial solvency of the funds of
the GSIS shall be preserved and maintained at all times and that
the contribution rates are necessary to sustain the benefits under
this Act shall be kept low as possible in order not to burden the
member of the GSIS and their employers. Taxes imposed on the
GSIS tend to impair the actuarial solvency of its funds and increase
the contribution rate necessary to sustain the benefits of this
Act. Accordingly, notwithstanding any laws to the contrary, the
 GSIS, its assets, revenues, including all accruals thereto, and
benefits paid shall be exempt from all taxes, assessment fees,
charges or duties of all kinds. These exemptions shall continue
unless expressly and specifically revoked and any assessment
against the GSIS as of the approval of this Act are hereby
considered paid. Consequently, all laws, ordinances, regulations,
issuances, opinions, or jurisprudence contrary to or in derogation of
this provision are hereby deemed repealed, superseded and
rendered ineffective and without legal force and effect.

xxx xxx xxx

The funds and/or properties referred to herein as well as the

benefits, sums or monies corresponding to the benefits under this
Act shall be exempt from attachment, garnishment, execution, levy
or other processes issued by the courts, quasi-judicial agencies or
administrative bodies including the Commission on Audit (COA)
disallowances and from all financial obligations of the members,
including his pecuniary accountability arising from or caused or
occasioned by his exercise or performance of his official functions
or duties, or incurred relative to or in connection with his position or
otherwise, is in favor of GSIS.[8] (italics supplied)

We find no reversible error in the decision and resolution of the

CA.

Even if the charter of the GSIS generally exempts it from tax

liabilities, the prescription is not so encompassing as to make the tax

exemption applicable to the properties in dispute here.

In the early case of City of Baguio v. Busuego,[9] we held that

the tax-exempt status of the GSIS could not prevent the accrual of

the real estate tax liability on properties transferred by it to a

private buyer through a contract to sell. In the present case, GSIS

had already conveyed the properties to private persons thus making

them subject to assessment and payment of real property

taxes.[10] The alienation of the properties sold by GSIS was the

proximate cause and necessary consequence of the delinquent

taxes due.
 The doctrine laid down in City of Baguio is reflected in Section

234 (a) of the LGC,[11] which states:

Section 234. Exemptions from Real Property Tax. The

following are exempted from payment of the real property
tax:

(a) Real property owned by the Republic of the Philippines

or any of its political subdivisions except when the beneficial
use thereof has been granted, for consideration or otherwise,
to a taxable person. (emphasis supplied)

Petitioner, however, claims that RA 8291, which took effect in 1997,

abrogated Section 234 (a) of the LGC of 1991.

We disagree.

The abrogation or repeal of a law cannot be assumed; the

intention to revoke must be clear and manifest.[12] RA 8291 made no

express repeal or abrogation of the provisions of RA 7160,

particularly Section 234 (a) thereof.

Repeal by implication in this case is not at all convincing either.

To bring about an implied repeal, the two laws must be absolutely

incompatible. They must be clearly repugnant in a way that the later

law (RA 8291) cannot exist without nullifying the prior law (RA

7160).[13]

Indeed, there is nothing in RA 8291 which abrogates, expressly

or impliedly, that particular provision of the LGC. The two statutes

are not inconsistent on that specific point, let alone so irreconcilable

as to compel us to uphold one and strike down the other.

 The rule is that every statute must be interpreted and brought

into accord with other laws in a way that will form a uniform system

of jurisprudence.[14] The legislature is presumed to have known

existing laws on the subject and not to have enacted conflicting

laws.[15] Thus, the legislature cannot be presumed to have intended

Section 234 (a) to run counter to Section 39 of RA 8291.

This conclusion is buttressed by the Court’s 2003 decision

in National Power Corporation v. City of Cabanatuan[16] where we

declared that the tax provisions of the LGC were the most significant

provisions therein insofar as they removed the blanket exclusion of

instrumentalities and agencies of the national government (like

petitioner) from the coverage of local taxation. In that case, petitioner

National Power Corporation (NPC) claimed that it was an

instrumentality of the government exempt under its charter from

paying franchise tax. The Court overruled NPC and upheld the right

of respondent city government to impose the franchise tax on its

privilege to transact business in its area.

Again, in the 2004 case of Rubia v. Government Service

Insurance System,[17] the Court declared that any interpretation that

gave Section 39 an expansive construction to exempt all GSIS assets

and properties from legal processes was unwarranted. These

processes included the levy and garnishment of its assets for taxes or

claims enforced against it. The Court there ruled that the exemption

under Section 39 of the GSIS Charter should be read consistently

with its avowed purpose the maintenance of its actuarial solvency to

finance the retirement, disability and life insurance benefits of its

members. The Court meant that the tax-exempt properties and assets
of GSIS referred to those that remained at its disposal and use, either

for investment or for income-generating purposes. Properties whose

actual and beneficial use had been transferred to private taxable

persons, for consideration or otherwise, were excluded and were thus

taxable.

In Mactan Cebu International Airport Authority v. Marcos,[18] the

Court ruled that the exemption of a government-owned or controlled

corporation from taxes and other charges was not absolute and could

be withdrawn, as in fact certain provisions of the LGC, including

Section 234 (a), were deemed to have expressly withdrawn the tax-

exempt privilege of petitioner as a government-owned corporation.

Lastly, even if we were to construe that RA 8291 abrogated

Section 234(a) of the LGC, still it cannot be made to apply

retroactively without impairing the vested rights of private

respondent. The appellate court thus correctly stated:

xxx it has been the courts consistent ruling that a repealing statute
must not interfere with vested rights or impair the obligation of
contracts; that if any other construction is possible, the act should
not be construed so as to affect rights which have vested under
the old law. Private respondent[s], we reiterate, have become the
private owner[s] of the properties in question in the regular course
of proceedings established by law, and after the decisions
granting such rights have become final and executory. The
enactment of the new GSIS Charter cannot be applied in a
retroactive manner as to divest the private respondent[s] of [their]
ownership.[19] (citations omitted)

WHEREFORE, the petition is hereby DENIED.

No costs.
SO ORDERED.