Title
Co Chiong vs. Cuaderno, Sr.
Case
G.R. No. L-1440
Decision Date
Mar 31, 1949
Republic Act No. 37 and Department Order No. 32 upheld, granting Filipino citizens priority in leasing public market stalls; alien stallholders' challenge dismissed.
lease
public market stalls
preference
A

Case Summary (G.R. No. L-1440)

Statutory and Administrative Measures

Republic Act No. 37 declared that “All citizens of the Philippines shall have preference in the lease of public market stalls.” It empowered the Secretary of Finance to promulgate the necessary rules to carry the law into effect, repealed inconsistent laws, and specified that it would “take effect on the first day of January, nineteen hundred and forty-seven.” Pursuant to this mandate, the Secretary of Finance promulgated Department of Finance Order No. 32 on November 29, 1946. That Order declared that all stalls or booths in public markets would be deemed vacated by their occupants, and that their leases would terminate on January 1, 1947.

The challenged provision of the Department Order, particularly Section 2, laid out a procedure. It required posting notices of general vacancy, and it provided that if occupants on December 31, 1946 were Filipino citizens who had occupied the stalls for at least thirty days and filed timely applications, they would be given leases subject to the regulations. If the occupants on December 31, 1946 were not Filipino citizens, the stalls affected were to be awarded to the first Filipino applicant who filed in accordance with the Order. The Order further addressed situations involving competing Filipino applicants and stated that the award of stalls to an alien could be made only in the absence of a Filipino applicant.

Commencement of Judicial Relief and Interim Restraining Orders

On December 27, 1946, the petitioners and appellees filed a petition for prohibition in the lower court to restrain the appellants from enforcing Republic Act No. 37 and Department of Finance Order No. 32, alleging unconstitutionality. The lower court issued on December 28, 1946 a writ of preliminary injunction ordering the appellants to desist from ejecting appellees from the leased stalls specified in the petition. However, the writ was later dissolved on January 7, 1947.

A related procedural episode occurred in the Supreme Court. Appellees filed a petition for certiorari and mandamus, L-1266, seeking annulment of the order dissolving the writ of preliminary injunction. That petition was dismissed on August 29, 1947, and the decision notes that one ground was that the Secretary of Finance suspended the operation of Department Order No. 32, which respondents were about to enforce.

Evidence Presented at Trial

After the Supreme Court dismissal of the interlocutory petition, trial proceeded in the lower court. Appellees presented three market stall holders—Yee Shi, Go Hong, and Uy Ho—as witnesses to support the practical effects of the enforcement measures.

Yee Shi, identified as a Chinese widow aged 46, testified that she had continuously occupied stalls in Divisoria Market since June 1932 after her husband, a former lessee, died. She stated that she signed lease contracts but received no copies from market authorities. She testified that on December 24, 1946 she received notice to vacate by not later than 4 p.m. on December 31, 1946. She further asserted that she had no means of livelihood other than the stall business, and that ejectment would leave her unable to support her five children. She also testified that there were no other alien market vendors than the Chinese.

Go Hong, a Chinese vendor aged 49, testified to continuous occupancy of stalls at Quiapo Market since 1916. As with Yee Shi, he stated that he signed lease contracts but received no copy. He testified that ejectment would deprive him of means to support his Filipino wife and four children. He added that there were no alien vendors other than Chinese, and he approximated that Chinese vendors occupied about 9 per cent of the stalls in Quiapo market.

Uy Ho, a Chinese stall holder aged 48, testified to continuous occupancy at Divisoria Market since 1928, with a brief interruption from 1943 to 1944 when he joined “the Marking guerrillas.” He stated he signed lease contracts without receiving copies. He testified that he would have no means to support his wife and six children if ejected. He also described that his youngest child was ten months old, and that on December 21, 1946 he received notice to vacate by not later than 4 p.m. on December 31, 1946.

Appellees also submitted extensive documentary evidence. They presented, among others, the Market Code of Manila (including Ordinance No. 2898 and related provisions), the Department of Finance Order No. 32, and notices given by the City Treasurer to vacate the stalls. They likewise introduced records of prior civil cases and opinions of city and fiscal authorities, and various materials concerning treaties and related governmental practice. The record further included a certificate indicating the percentage of public market stalls occupied by aliens in Manila, identification cards for Yee Shi, and a certificate to show that appellees allegedly exhausted administrative remedies to seek repeal or modification of the Act and the Department Order.

Position of the Parties on Validity

At trial, appellants presented only a single type of evidence: an exhibit showing that all market stalls in Manila had allegedly already been applied for by Filipino citizens. The record stated that there were 3,479 applications from Filipino citizens, averaging five applications to every two stalls and almost eight Filipinos for every alien occupant, and that the stalls would be awarded to Filipinos under Republic Act No. 37.

All parties’ legal positions converged on a critical statutory construction issue. The lower court sustained the constitutionality of Republic Act No. 37, but it voided Section 2 of Department of Finance Order No. 32 for lack of conformity with the Act. The lower court specifically ordered appellants to desist from enforcing the provisions of the Department Order and from ejecting appellees from their respective stalls. Appellants assigned six errors, but the Supreme Court limited the controversy on appeal to whether Section 2 of Department of Finance Order No. 32 was authorized by Republic Act No. 37. The trial court answered in the negative.

The lower court’s reasoning, as narrated in the decision, rested on the timing and scope of effectivity. It observed that while the Act had been approved on October 1, 1946, the Act expressly provided for effectivity on January 1, 1947, and it found no textual basis indicating Congress intended retroactive application. On that premise, it treated the challenged Department Order’s declaration of termination as unconstitutional.

Appellants, for their part, argued that assuming the awards were leases, they had expired on January 1, 1947, and that the Secretary of Finance merely recognized the day-to-day nature of the leases, especially considering municipal provisions in the Market Code concerning citizenship and any grace period for foreigners holding existing businesses. Appellees countered that the power granted to the Secretary of Finance was limited to promulgating rules strictly conforming to the statute, and that Republic Act No. 37 itself contained no authorization for termination of all existing leases and for dispossession of all stallholders on January 1, 1947. Appellees emphasized that the Secretary of Finance could not supply omissions in the law through administrative rulemaking.

Ruling of the Lower Court and Issues on Appeal

The lower court upheld the constitutionality of Republic Act No. 37, but voided the operative part of Section 2 of Department of Finance Order No. 32 for being inconsistent with the statute. It then enjoined enforcement of that Department Order as to ejectment.

On appeal, the Supreme Court treated the primary question as one of administrative authority and statutory conformity: whether Section 2 of Department of Finance Order No. 32 was issued to implement Republic Act No. 37, particularly its preference policy, rather than to go beyond the legislative grant.

Supreme Court’s Decision and Disposition

The Court held that Section 2 of Department of Finance Order No. 32, specifically the declaration that all stalls or booths in public markets would be vacated and that leases would be terminated on January 1, 1947, had been issued to make effective the provisions of Republic Act No. 37. It reasoned that the “main purpose” of the Act was to grant preference to Filipino citizens in the lease of public market stalls. Congress, it said, decreed effectivity on January 1, 1947, and empowered the Secretary of Finance to promulgate necessary rules to carry out the Act’s purpose, which meant that beginning January 1, 1947, where occupancy of a public market stall was applied for by Filipinos and by aliens, the stalls were to be awarded to Filipino applicants.

The Court explained that the Department Order’s “declaration in said Department of Finance Order” that all public market stalls were vacated as of January 1, 1947 was consistent with that legislative intent and served to render the preference effective. It added that the declaration could be considered surplusage because, even without it, Filipino applicants would already be entitled to lease and occupy stalls occupied by aliens commencing January 1, 1947.

Because the lower court had voided the Department Order provision on the theory that it exceeded the statute, the Supreme Court reversed the appealed decision and dismissed the petition.

Legal Basis and Reasoning

The Supreme Court addressed not only the authorization question but also appellees’ renewed attack on the constitutionality of Republic Act No. 37, despite appellees not having appealed from the lower court’s ruling upholding that Act. The Court nonetheless considered the argument that the Act violated general constitutional guarantees, including due process of law and equal protection of the laws, in the context of the preference policy affecting aliens and public market stall leasing.

The Court characterized public markets as public services or utilities, likening them to other p

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