G.R. No. 111397 - Lim vs. Court of Appeals

Case Summary (G.R. No. 111397)

Factual Background

Bistro Pigalle, Inc. operated the New Bangkok Club and the Exotic Garden Restaurant under a mayor’s permit valid until December 31, 1992. On December 7, 1992, Bistro filed Civil Case No. 92-63712 alleging that Mayor Lim directed policemen to inspect and investigate Bistro’s licenses and the work permits and health certificates of its staff, which disrupted and halted its nightclub and restaurant operations. Bistro further alleged that Lim refused to accept its 1993 business license application and the work permit applications of its staff. Bistro relied on this Court’s pronouncement in De la Cruz vs. Paras, 123 SCRA 569 (1983), that municipal corporations may regulate but may not prohibit the operation of nightclubs, and prayed for injunctive and mandamus relief.

Trial Court Proceedings

The trial court issued a temporary restraining order on December 29, 1992, enjoining Lim and his agents from inspecting or otherwise interfering in Bistro’s operation. After hearings and the submission of evidence, the trial court on January 20, 1993 granted a writ of prohibitory preliminary injunction ordering Lim and persons acting under his authority to cease and desist from inspecting, investigating, closing, or impeding Bistro’s operations while the petition remained pending; the court denied the writ of mandatory injunction as tantamount to mandamus and reserved resolution of mandamus. Despite the injunction, Lim issued a closure order effective January 23, 1993 and sent policemen to implement it. Bistro filed an urgent motion for contempt, which it later withdrew on condition that Lim respect the injunction. Lim again disrupted operations on several dates in February and March 1993. Lim moved to dissolve the injunction and to dismiss the case; the trial court denied the motion in its March 2, 1993 order, authorized Bistro to remove physical impediments placed on its establishments, allowed resumption of operations and deferred contempt proceedings to permit elevation of the matter to the Supreme Court.

Court of Appeals Decision

Lim filed a petition for certiorari, prohibition and mandamus in the Court of Appeals alleging that Judge Wilfredo Reyes committed grave abuse of discretion amounting to lack of jurisdiction in issuing the injunctive orders. The Court of Appeals, after reviewing that the trial court issued the writs after hearings and the taking of evidence, held that the issuance of a writ of preliminary injunction to preserve the status quo was within the sound exercise of judicial discretion and that the appellate court would not interfere except in a clear case of abuse. The Court of Appeals therefore denied and dismissed Lim’s petition on March 25, 1993 and denied his motion for reconsideration on July 13, 1993.

Issues Presented to the Supreme Court

Petitioners raised three principal questions: whether the trial judge committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the orders of December 29, 1992, January 20, 1993 and March 2, 1993; whether the Court of Appeals committed reversible error in its Decision of March 25, 1993 and Resolution of July 13, 1993; and whether Civil Case No. 92-63712 and CA-G.R. SP No. 30381 became moot and academic when Bistro’s establishments were closed on July 1, 1993 pursuant to Ordinance No. 7783.

Parties’ Contentions

Lim contended that the mayor’s statutory power to grant and refuse municipal licenses and permits, as set forth in Section 11 (l), Article II of the Revised Charter of the City of Manila and Section 455 (3)(iv) of the Local Government Code, implicitly included the power to inspect, investigate and close establishments for violations of license conditions; Lim maintained that his inspections and closure orders fell within these powers and that the trial court therefore lacked jurisdiction to enjoin his acts. Bistro maintained that those legal provisions did not authorize the prohibition of nightclubs, that the mayor failed to identify any specific violation of license conditions, and that Lim’s refusal to accept license applications denied Bistro due process; Bistro invoked the Court’s prior ruling in De la Cruz vs. Paras and sought protection of its property and business operations through injunctive relief.

Supreme Court’s Analytical Framework

The Supreme Court confined its review to the first two issues because the constitutionality of Ordinance No. 7783 had not been raised in the trial court or the Court of Appeals and was pending in another case. The Court recognized that the authority of mayors to issue business licenses and permits was unquestioned under the cited statutes. The Court examined the statutory language and distinguished between the power to issue, suspend, revoke or refuse licenses and the procedural prerequisites for the exercise of those powers; it emphasized that suspension, revocation or refusal presupposed the violation of license conditions or noncompliance with issuance prerequisites.

Legal Reasoning and Application of Due Process

The Court held that while a mayor may inspect and investigate commercial establishments to determine compliance with license conditions, such power did not authorize police raids conducted by the Western Police District. The Court relied on Ordinance No. 7716, which expressly prohibited members of the Western Police District from conducting inspections of business establishments for enforcement of sanitary rules, licenses and permits, and revenue laws, and allocated such responsibility to local government authorities and concerned agencies, including the City Health Officer and the City Treasurer pursuant to the Revised City Ordinances and Section 470 of the Local Government Code. The Court found that Lim acted beyond his authority when he directed policemen to raid and close Bistro’s establishments. The Court further held that the power to suspend, revoke or refuse licenses required observance of due process, meaning that the mayor must afford notice and an opportunity to be heard before depriving an applicant or license

Case Syllabus (G.R. No. 111397)

Parties and Posture

Hon. Alfredo Lim and Rafaelito Garayblas filed a petition for review under Rule 45, Rules of Court from the decision of the Court of Appeals.
The Court of Appeals, Hon. Wilfredo Reyes, and Bistro Pigalle, Inc. were respondents in the Rule 45 petition.
The petition sought review of the Court of Appeals Decision of March 25, 1993 and its Resolution of July 13, 1993 which upheld orders of the Regional Trial Court, Branch 36, Manila.
The Regional Trial Court issued a temporary restraining order on December 29, 1992, a writ of prohibitory preliminary injunction on January 20, 1993, and an order denying dissolution of the injunction on March 2, 1993.
The Supreme Court denied the petition and affirmed the Court of Appeals Decision in toto.

Key Facts

Bistro Pigalle, Inc. owned and operated the New Bangkok Club and the Exotic Garden Restaurant and held a Mayor's permit valid until December 31, 1992.
On December 7, 1992 Bistro Pigalle, Inc. filed Civil Case No. 92-63712 for mandamus and prohibition with prayer for temporary restraining order or writ of preliminary injunction.
Petitioner Lim, Mayor of Manila, directed policemen to inspect and investigate Bistro's licenses and the work permits and health certificates of its staff, which caused cessation of the establishments' operations.
Lim refused to accept Bistro's 1993 business license application and the 1993 work permit applications of its staff.
Despite the trial court injunctions, Lim ordered a closure effective January 23, 1993 and police executed the order, and further disruptions occurred on February 12, 13, 15, 26, 27, and March 1 and 2, 1993.
Lim filed a petition for certiorari, prohibition and mandamus in the Court of Appeals on March 10, 1993, which the Court of Appeals denied on March 25, 1993 and denied reconsideration on July 13, 1993.
Manila City Ordinance No. 7783 took effect on July 1, 1993, and on that same day Lim ordered permanent closure of Bistro's operations pursuant to that ordinance.

Trial Court Orders

The trial court issued a Temporary Restraining Order on December 29, 1992 enjoining Lim and his agents from inspecting or otherwise interfering with Bistro's operations.
The trial court granted a writ of prohibitory preliminary injunction on January 20, 1993 enjoining Lim and persons acting under his authority from inspecting, investigating, closing, or impeding Bistro's business operations while the petition was pending.
The trial court denied the writ of mandatory injunction as tantamount to granting mandamus and reserved resolution of mandamus until hearing on the merits.
The trial court declared that no injunction bond was required because the injunction related to a government official's duties.
The trial court denied Lim's motion to dissolve the injunction in its March 2, 1993 order and authorized Bistro to remove impediments and resume operations while deferring contempt proceedings to allow appeal to the Supreme Court.

Court of Appeals Ruling

The Court of Appeals held that the trial court did not commit grave abuse of discretion because it issued the injunction after hearings and consideration of evidence.
The Court of Appeals reasoned that a writ of preliminary injunction serves to preserve the status quo and prevent irreparable injury pending final resolution of the merits.
The Court of Appeals concluded that issuance of the writ was within the trial court’s sound discretion and that the appellate court would not interfere absent clear abuse.
The Court of Appeals therefore denied Lim's petition and dismissed the case.

Issues Presented

Petitioners contended that the respondent judge committed grave abuse of disc