MORCOIN CO., LTD., AND SUTER, INC., PLAINTIFFS AND APPELLEES, VS. THE CITY OF MANILA, ET AL., DEFENDANTS AND APPELLANTS.

Direct appeal from a decision of the Court of First Instance of Manila,
Branch IV, declaring Ordinance No. 3628 of the City of Manila null and
void.

Morcoin Co., Ltd., and Suter, Inc., are owners and
operators of automatic phonograph machines, more popularly known as
juke boxes, in the City of Manila. As such owners and operators, they
paid an annual permit fee of P5 for each machine, and a similar amount
when ever a juke box is transferred to a different location. In
compliance with Sections 773 and 774 of Ordinance No. 3347, they also
paid an additional sum of P50 per annum as license fee for the installation and use of each juke box machine.

On February 2, 1954, the Mayor of the City of Manila, in order to curb
the use of pinball machines which “have conduced to promote idleness
among an increasing number of city residents”, recommended to the
Municipal Board the further amendment of Sections 773 and 774 of
Ordinance No. 1600 by restricting the operation or maintenance of said
machines within a specified radius from certain designated places and
“by making the rate of license fees more prohibitive.” Emphasizing that
“pinball machines contribute to moral delinquency”, the City Mayor, on
February 19, 1954, sent a “1st TRACER ” to the Municipal Board urging
the prompt enactment of the proposed amendment to said sections 773 and
774. Five days thereafter, the Board’s Committee on Laws, sharing the
same views of the City Mayor about the “deleterious effects” which
pinball machines produce, recommended, on second indorsement, the
approval of the proposed amendment. Acting upon that recommendation,
the Municipal Board of the City of Manila, on March 19, 1954, enacted
Ordinance No. 3628, containing the proposed amendment, which was
approved by the City Mayor on the following day. Sections 773 and 774
of Ordinance No. 1600 as amended by Ordinance No. 3628 read as follows:

“SEC.
773. Licenses.—No person, entity or corporation shall install or cause
to be installed for the use of the public for compensation any
mechanical contrivance or automatic apparatus which functions through
the introduction of money not otherwise prohibited by the law of
weights and measures and not a gambling device, for purposes of
amusement or of confronting the weight of persons or things, or
printing letters or numbers, or displaying features inside the
apparatus or reproducing recorded music, including other kinds of
machines or apparatus without having first obtained a license therefor
from the City Treasurer. Such license must be posted on the apparatus
concerned, Provided, that the operation or maintenance of pinball
machines, not otherwise falling under the category of a gambling
device, shall not be allowed within a radius of two hundred (200)
meters from any church, hospital, institution of learning, public
market, plaza, and government buildings.

“SEC. 774.
Fees.—There shall be paid for every license granted for the
installation and use of an apparatus provided in this chapter, an
annual fee of P300.00 which is payable in advance: Provided, that
person-coin operated weighing or scale, machines shall pay only an
annual fee of P12.00 payable in advance.”

The validity of the above ordinance was contested by a group of owners
and operators of pinball machines who call themselves “Recreation and
Amusement Association of the Philippines” before the Court of First
Instance of Manila, but that court dismissed the action, it being of
the opinion that the said ordinance was valid.

On September
24, 1957, Morcoin Co., Ltd. and Suter, Inc., the owners and operators,
as already stated, of juke box machines in the City of Manila, brought
an action in the Court of First Instance of Manila, its Mayor,
Treasurer and Chief of Police, assailing the validity of Ordinance No.
3628 on the ground that the license fee of P300 imposed by the said
ordinance upon juke box machines is exorbitant, excessive, confiscatory
and substantially disproportionate to the reasonable expenses of
issuing the license for and regulating the said machines. The
defendants, thru the City Fiscal, filed their answer denying the
material allegations of the complaint and interposed a counterclaim for
plaintiff’s failure to pay their outstanding obligations arising under
Ordinance No. 3628. By way of special defenses, defendants alleged that
the complaint states no cause of action, because the validity of
Ordinance No. 3628 has already been upheld in the case of Recreation
and Amusement Association of the Philippines vs. City of
Manila, et al. (100 Phil., 950), and that the operation of automatic
phonograph machines is a non-useful business upon which a large license
fee may be imposed.

After trial, the lower court rendered
judgment declaring Ordinance No. 3628 null and void and enjoining the
enforcement of the same in connection with plaintiffs’ business. Hence
this appeal.

The appeal is without merit.

There can be no question that Sections 773 and 774 of Ordinance No.
1600, as amended by Ordinance No. 3628, was enacted pursuant to section
18 [1] of the Revised Charter of the City of Manila (Republic Act No.
409 as amended), which provides that the Municipal Board has the
legislative power “to regulate and fix the license fees for * * * slot
machines * * * “. The power to regulate and impose license fee for the
operations of slot machines—which include juke box machines, pinball
machines and other coin-operated contrivances—should not, however, be
construed as including the power to impose license taxes for revenue
purposes. Indeed, a cursory reading of the legislative powers of the
Municipal Board enumerated in section 18 of the City’s Revised Charter
shows that the power to tax is given where it was intended to be
exercised and is not given where it was not so designed. As the
authority was withheld, it must logically result that the power granted
under the above-quoted provision of the Citys’ Charter is purely
regulatory for police purposes. (Pacific Commercial Co. vs. Romualdez and Alfonso, 49 Phil., 917; Hercules Lumber vs.
Municipality of Zamboanga, 55 Phil., 653.) Such being the case, the
amount of license fees that may be imposed upon juke box machines and
other coin-operated contrivances cannot be prohibitive, extortionate,
confiscatory or in an unlawful restraint of trade, but should be
approximately commensurate with and sufficient to cover all the
necessary or probable expenses of issuing the license and of such
inspection, regulation and supervision as may be lawful. (Cu Unjieng vs. Pat-stone, 42 Phil., 818; City of Iloilo vs.
Villanueva, 105 Phil., 337; 33 Am. Jur. 367; 53 C.J.S. 517; See also
the cases cited therein.) Any ordinance which imposes a license fee
which is substantially in excess of the reasonable expense of issuing
the license and regulating the occupation to which it pertains, is
invalid. (25 Am. Law and Proc. 611; 28 Id. 749, 570.)

In the present case, we are inclined to agree with the trial court that
the amount of P300 imposed by Ordinance No. 3628 as license fee for the
installation and use of juke box machines is unreasonable and far
exceeds the expenses of issuing the license and of regulating their
operation. It will be observed that the ordinance in question does not
even provide for inspection and supervision of each machine installed.
And the Committees on Laws and Finance of the Municipal Board of the
City of Manila themselves—which conducted a public hearing in
connection with the petition filed during the pendency of this case by
some juke box operators—found that juke box operators would not make
any profit by paying the license fee of P300, and that the said amount
of P300 is “prohibitory and suppressive”.^[1]
This finding is supported by the record, for it was shown that two of
plaintiffs’ juke box machines, after deducting depreciation and
operating expenses, but before the payment of permit and license fees,
had an annual income of only about P211. In view of these
circumstances, it is obvious that the amount of P300 charged as license
fee is excessive and cannot be justified. In this connection, it should
be stated that although the presumption is always in favor of the
validity or reasonableness of the ordinance, such presumption must
nevertheless be set aside when the invalidity or unreasonableness
appears on the face of the ordinance itself or is established by proper
evidence.

It is argued that the business of operating juke
box machines is a non-useful occupation and consequently the amount of
license fee that may be imposed thereon may be very large without
necessarily being considered unreasonable. We do not think it is
correct to say that the operation of juke box machines is a non-useful
occupation. The Committees on Laws and Finance of the Municipal Board
of Manila themselves, in their joint report submitted to the Board,
after public hearing, stated that the operation of juke boxes is a
“legitimate, harmless and of some cultural value”. It is gratuitous and
unfair to brand juke boxes as not contributing to the economic or moral
wealth of the individual or of the nation, simply because the said
contrivance may be found in nightclubs and bars where dancing is
indulged in.

Defendants cite the case of Recreation and Amusement Association of the Philippines vs.
City of Manila, et al. (100 Phil., 950), where this Court upheld the
dismissal of the complaint contesting the validity of Ordinance 3628.
The main issue in that case, however, was the legal capacity of the
plaintiff to sue, which was not registered in accordance with law.
Besides, the said case involved the restriction of the use of pinball
machines, which admittedly produce deleterious effects among city
residents. Such machines have in fact been declared by this Court to be
gambling devices which may be suppressed by ordinance. (Uy Ha vs. City of Manila, 108 Phil., 400; 58 Off. Gaz., [37] 5997.)

Defendants likewise cite the case of the Universal Picture Corporation vs.
Romualdez (52 Phil. 576), wherein an ordinance of the City of Manila
imposing the license fee of P1,800 for first-class cinematographs was
held reasonable. The case cited is not in point. The ordinance there in
question provided for police and fire protection as well as the
inspection and supervision of wires in electrical installations, and
the license fees fixed were charged only with a view of covering the
expenses therefor.

In view of the foregoing, the decision
appealed from declaring Ordinance No. 3628 of the City of Manila
invalid is hereby affirmed, with costs against appellants.

Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., Paredes, and Dizon, JJ., concur.

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^[1]
IN VIEW of this finding, the matter was referred to the City Treasurer
for comment and recommendation as to what would be reasonable and
commensurate with the necessary expenses of licensing and supervision.
On the basis of the ocular inspection conducted by the deputies of the
City Treasurer, the latter official recommended that the amount of P100
per annum would be reasonable for juke boxes in nightclubs and
other places where dancing is allowed and P75 for juke boxes in
restaurants or places where food and drinks are served. Agreeing1 with
the City Treasurer, the Committee on Ways and Means of the Municipal
Board of the City of Manila recommended the approval of a proposed
ordinance imposing a license fee of P100 on juke box machines. The
proposed ordinance was enacted by the Municipal Board on September 11,
1959, but it was never approved by the City Mayor.