G.R. No. L-15351; January 28, 1961
MORCOIN CO., LTD. and SUTER, INC., plaintiffs-appellees, vs. THE CITY OF MANILA, THE MAYOR OF MANILA, THE CITY TREASURER and THE CHIEF OF POLICE OF MANILA, defendants-appellants.

FACTS

Morcoin Co., Ltd. and Suter, Inc., owners and operators of automatic phonograph machines (juke boxes) in Manila, paid an annual permit fee of P5 and an additional P50 license fee per machine under existing ordinances. In 1954, the City Mayor, aiming to curb the purported idleness and moral delinquency associated with pinball machines, recommended amending the ordinance to impose more prohibitive fees. Consequently, the Municipal Board enacted Ordinance No. 3628, which, under its Sections 773 and 774, imposed a uniform annual license fee of P300 for the installation and use of various coin-operated machines, including juke boxes. The ordinance also restricted pinball machine operations near certain establishments.
The plaintiffs filed an action assailing the validity of Ordinance No. 3628, arguing that the P300 license fee for their juke boxes was exorbitant, excessive, confiscatory, and disproportionate to the reasonable expenses of regulation. The defendants, the City of Manila and its officials, contended that the ordinance was valid, citing a prior case (Recreation and Amusement Association of the Philippines vs. City of Manila) and alleging that the operation of such machines was a non-useful business subject to high fees. The Court of First Instance of Manila declared the ordinance null and void, prompting this direct appeal.

ISSUE

Whether Ordinance No. 3628 of the City of Manila, imposing a P300 annual license fee on juke box machines, is valid.

RULING

The Supreme Court affirmed the lower court’s decision, declaring Ordinance No. 3628 invalid. The legal logic centered on the scope of the City’s delegated power. The authority to “regulate and fix the license fees” for slot and coin-operated machines, derived from Section 18 of the Revised Charter of Manila (Republic Act No. 409), is a police power measure for regulation, not a taxing power for revenue. Where the Charter intended to grant taxing power, it did so explicitly; its absence here means the license fee must be purely regulatory. Consequently, the fee imposed must be approximately commensurate with, and sufficient to cover, the necessary expenses of issuing the license and the incidental costs of inspection, regulation, and supervision. The P300 fee was deemed not to meet this standard, being prohibitive and disproportionate to the regulatory costs involved.
The Court rejected the City’s defenses. The prior Recreation and Amusement Association case was distinguishable, as it primarily addressed the plaintiff’s legal capacity to sue and involved pinball machines, which the Court had previously declared as gambling devices subject to suppression. The classification of juke box operation as a “non-useful business” was also unfounded, noting that the City’s own committees had described it as “legitimate, harmless and of some cultural value.” The comparison to license fees for cinematographs was inapposite, as those fees were explicitly tied to covering expenses for specific police and fire protection services. Therefore, the ordinance exceeded the City’s regulatory authority.