Lim vs. Pacquing

A local government permit or license to operate a gambling activity like jai-alai is not equivalent to a legislative franchise and is subject to revocation by the national government through the exercise of police power, as effected by P.D. No. 771, without violating the non-impairment of contracts or equal protection clauses.

The City of Manila, through Ordinance No. 7065 (1971), authorized its Mayor to permit ADC to operate a jai-alai fronton. In 1975, President Marcos issued P.D. No. 771, revoking all local government authority to grant gambling franchises and all existing franchises and permits issued by them. After the 1986 EDSA Revolution, ADC sought to enforce its permit, leading to a series of court cases. The national government, through the Executive Secretary and the Games and Amusements Board (GAB), later moved to question ADC's authority, prompting ADC to secure injunctive writs from the Regional Trial Court.

• Nature of the Grant: On 7 September 1971, the Municipal Board of Manila enacted Ordinance No. 7065, authorizing the Mayor to "allow and permit" ADC to establish, maintain, and operate a jai-alai in Manila under specified terms and conditions.
• National Legislation: Republic Act No. 954 (1953) penalized betting on jai-alai except by an operator with a "legislative franchise." Executive Order No. 392 (1951) transferred the power to regulate jai-alai from local governments to the Games and Amusements Board (GAB).
• Presidential Decree No. 771: Issued on 20 August 1975, it revoked all powers of local governments to grant gambling franchises and expressly revoked "all existing franchises and permits issued by local governments." Two months later, P.D. No. 810 granted a jai-alai franchise to the Philippine Jai-Alai and Amusement Corporation (PJAC), controlled by a relative of President Marcos.
• Post-EDSA Revolution: President Aquino repealed P.D. No. 810 via E.O. No. 169 (1987) but left P.D. No. 771 in force.
• Enforcement Attempts: ADC sought to enforce its permit, leading to a final RTC decision in its favor (1988). Mayor Alfredo Lim later resisted, leading to the First Division's dismissal of his certiorari petition in G.R. No. 115044 (1 Sept 1994).
• Government Intervention: The Republic, through the Solicitor General and GAB, intervened, challenging the very existence of ADC's valid franchise. The Executive Secretary directed GAB to withdraw ADC's provisional authority.
• Injunctive Writs: ADC secured a TRO and later writs of preliminary injunction and mandatory injunction from Judge Reyes, compelling the government to issue it operating authority.

• Lack of Legislative Franchise: Petitioners argued that R.A. No. 954 required a congressional franchise for jai-alai operations, which ADC never possessed. Manila's charter (R.A. No. 409) only delegated regulatory powers (to license, permit, tax), not the power to grant franchises.
• Revocation by P.D. No. 771: Petitioners contended that even if Ordinance No. 7065 were valid, Section 3 of P.D. No. 771 expressly revoked it. P.D. No. 771 is a valid exercise of police power to regulate gambling and promote public morals.
• No Vested Right in a Gambling Franchise: ADC's permit was a mere privilege, not a vested property right, and could be revoked at any time under police power without violating the non-impairment clause or due process.
• Grave Abuse of Discretion by RTC: Judge Reyes acted with grave abuse of discretion in issuing the writs because ADC had no clear legal right, and the laws (R.A. 954, P.D. 771) negated such a right.

• Validity of Ordinance No. 7065: ADC maintained that the ordinance was a valid exercise of delegated legislative power under the Manila Charter (R.A. No. 409, Sec. 18(jj)) and created a binding contract.
• Unconstitutionality of P.D. No. 771: ADC argued that P.D. No. 771, specifically its Section 3, was unconstitutional for violating the equal protection clause (it was targeted at ADC to favor PJAC), the non-impairment of contracts clause, and for being a "rider" (its title did not mention revocation of existing franchises).
• Estoppel and Vested Right: ADC claimed the government was estopped from questioning its franchise after years of recognition and that it had a vested property right based on substantial investments.
• Propriety of Injunctions: ADC argued the RTC correctly issued the writs to preserve the status quo and prevent irreparable injury, as its right was based on a final judgment and prior government issuances.

• Intervention: Whether the Republic's intervention in G.R. No. 115044 was proper despite being filed after the First Division's decision.
• Validity of Franchise: Whether Associated Development Corporation (ADC) possesses a valid and subsisting franchise to operate jai-alai.
• Constitutionality of P.D. 771: Whether Section 3 of Presidential Decree No. 771 is constitutional.
• Grave Abuse of Discretion: Whether respondent Judge Reyes committed grave abuse of discretion in issuing the temporary restraining order, writ of preliminary injunction, and writ of preliminary mandatory injunction.

• Intervention: The intervention was allowed. While ordinarily filed late, the Court treated the Republic's motion as a petition for quo warranto, an original action within its jurisdiction, to finally settle the critical issue of ADC's franchise validity. The Republic was intervening in its governmental capacity to protect public welfare.
• Validity of Franchise: ADC does not possess the required congressional franchise. The power delegated to Manila by R.A. No. 409 was merely to "license, permit, and regulate," not to grant franchises. A local permit cannot substitute for the legislative franchise required by R.A. No. 954. Furthermore, even this permit was revoked by P.D. No. 771.
• Constitutionality of P.D. 771: Section 3 of P.D. No. 771 is constitutional. It is a valid exercise of the State's inherent police power to regulate gambling, a activity mala in se when involving betting, for the promotion of public morals and general welfare. It does not violate the non-impairment clause because a gambling franchise is a mere privilege, not a contract immune from police power. It does not violate equal protection as it revoked all local franchises without discrimination.
• Grave Abuse of Discretion: Judge Reyes acted with grave abuse of discretion. He should have taken judicial notice of R.A. No. 954 and P.D. No. 771, which are presumed valid and which negated ADC's legal right to the reliefs sought. Issuing the writs based on a doubtful right was improper.

• Police Power over Gambling Franchises: The State's police power to regulate or prohibit gambling for the public welfare is paramount and may be exercised to revoke franchises or permits, even if they partake of the nature of contracts. Gambling franchises are subject to stricter regulation than public utility franchises.
• Delegated Legislative Power vs. Franchise Granting: A municipal charter's grant of power to "license, permit, and regulate" an activity does not include the power to grant a legislative franchise, especially when a national law (R.A. No. 954) requires such a franchise for the activity's operation.
• Presumption of Constitutionality: All laws, including presidential decrees, enjoy a strong presumption of constitutionality. The burden rests on the party challenging the law to prove its invalidity clearly and convincingly.
• Treatment of Intervention as Quo Warranto: The Supreme Court may treat a belated motion for intervention as an original action for quo warranto under its expanded jurisdiction to resolve the substantive issue of a respondent's right to exercise a public franchise.

• "A franchise started out as a 'royal privilege or (a) branch of the King's prerogative, subsisting in the hands of a subject.'... Today, a franchise being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to regulation by the state itself by virtue of its police power through its administrative agencies."
• "There is a stronger reason for holding ADC's permit to be a mere privilege because jai-alai, when played for bets, is pure and simple gambling. To analogize a gambling franchise for the operation of a public utility... is to trivialize the great historic origin of this branch of royal privilege."
• "The police power has been described as the least limitable of the inherent powers of the State. It is based on the ancient doctrine — salus populi est suprema lex (the welfare of the people is the supreme law)."

• Director of Lands v. Court of Appeals, 93 SCRA 238 — Cited to justify allowing intervention beyond the reglementary period to prevent injustice, especially when the intervenor is an indispensable party.
• Rubi v. Provincial Board of Mindoro, 39 Phil. 660 — Cited for the classic definition and expansive scope of police power as the "law of overruling necessity."
• Magtajas v. Pryce Properties Corporation, G.R. No. 111097 (1994) — Cited for the principle that the wisdom or morality of a statute prohibiting or allowing gambling is a question for the political departments, not the judiciary.
• RCPI v. NTC, 150 SCRA 450 — Cited to define a franchise as a privilege emanating from the sovereign, subject to regulation and amendment by the State.
• Republic v. Intermediate Appellate Court, 209 SCRA 90 — Cited for the rule that the State cannot be estopped by the mistakes or errors of its officials or agents.

• Republic Act No. 409 (Revised Charter of Manila), Sec. 18(jj) — Delegated to the Municipal Board the power to "tax, license, permit and regulate wagers or betting" on jai-alai and "grant exclusive rights to establishments."
• Republic Act No. 954, Secs. 4 & 5 — Prohibited betting on jai-alai except by an operator with a "legislative franchise."
• Presidential Decree No. 771, Secs. 1 & 3 — Revoked the authority of local governments to grant gambling franchises and revoked "all existing franchises and permits issued by local governments."
• 1987 Constitution, Art. VIII, Sec. 1 — Expanded judicial power to include determining whether there has been a grave abuse of discretion amounting to lack or excess of jurisdiction.

• Justice Florentino P. Feliciano
• Justice Abdulwahid A. Bidin
• Justice Flerida Ruth P. Romero
• Justice Jose C. Bellosillo
• Justice Vicente V. Mendoza
• (Justice Santiago M. Kapunan concurred in a separate opinion)
• (Justice Jose A.R. Melo concurred)

• Justice Camilo D. Quiason (Dissenting): Argued that the motion to intervene should have been denied as it was filed after the case had become final and executory. On the merits, he believed P.D. No. 771's Section 3 was unconstitutional for violating the equal protection and non-impairment clauses, as it was designed to benefit a favored entity (PJAC) at ADC's expense.
• Justice Flerida Ruth P. Romero (Dissenting in part): Concurred with the majority on the validity of P.D. No. 771 but dissented on the treatment of the intervention, believing a separate quo warranto action was the proper remedy.
• Justice Ricardo J. Francisco (Took no part)