The Supreme Court ruled that a city mayor overstepped their authority by imposing conditions on a business permit for an optical company that effectively regulated the practice of optometry, a function exclusively under the Professional Regulation Commission. This decision clarifies the boundaries between local government’s power to regulate businesses and the state’s authority to oversee licensed professions, protecting businesses from overly restrictive local regulations.

When Local Licensing Intrudes on Professional Practice: The Acebedo Optical Story

Acebedo Optical Company, Inc. sought a business permit from the City Mayor of Iligan. After local optometrists protested, the City Mayor granted the permit but attached several conditions. These stipulations included prohibitions against Acebedo operating an optical clinic, examining or prescribing eyeglasses, selling eyeglasses without an independent optometrist’s prescription (excluding Ray-Ban), advertising optical lenses, and grinding lenses without an independent optometrist’s prescription. The Samahan ng Optometrist sa Pilipinas (SOPI) filed a complaint alleging violations of these conditions. Subsequently, the City Legal Officer investigated and recommended the revocation of Acebedo’s permit, which the City Mayor then executed. Acebedo challenged this decision, arguing the mayor had exceeded his authority and violated due process. The central legal question revolves around the extent to which a local government can regulate a business when it intersects with a regulated profession.

The Supreme Court, in analyzing the case, addressed the scope of police power delegated to local government units. The Court acknowledged that local governments, through the **general welfare clause** of the Local Government Code, possess the authority to enact regulations that promote health, safety, and the general well-being of their constituents. This power extends to the issuance of licenses and permits for businesses operating within their jurisdiction. However, this regulatory authority is not without limits. The Court emphasized that such regulations must be reasonable, non-oppressive, and consistent with existing laws and the Constitution. As stated in Balacuit vs. CFI of Agusan del Norte:

“x x x While a business may be regulated, such regulation must, however, be within the bounds of reason, i. e., the regulatory ordinance must be reasonable, and its provision cannot be oppressive amounting to an arbitrary interference with the business or calling subject of regulation. A lawful business or calling may not, under the guise of regulation, be unreasonably interfered with even by the exercise of police power. xxx

xxx xxx xxx

xxx The exercise of police power by the local government is valid unless it contravenes the fundamental law of the land or an act of the legislature, or unless it is against public policy or is unreasonable, oppressive, partial, discriminating or in derogation of a common right.”

Building on this principle, the Court distinguished between the regulation of a business and the regulation of a profession. A business permit allows an entity to engage in commercial activities, while a professional license grants an individual the authority to practice a specific profession. In Acebedo’s case, the company sought a permit to operate an optical shop, not a license to practice optometry. The Court referenced its prior ruling in Samahan ng Optometrists sa Pilipinas vs. Acebedo International Corporation, which established that hiring licensed optometrists does not equate to the corporation itself practicing optometry. This distinction is critical, as it clarifies that a business can employ licensed professionals without the business itself being subjected to the regulations governing that profession.

The Court found that the conditions imposed on Acebedo’s business permit by the City Mayor effectively regulated the practice of optometry, an area under the purview of the Professional Regulation Commission and the Board of Optometry. The City Mayor’s actions exceeded his authority, as the power to regulate professions lies with the administrative agencies specifically empowered by law to do so. The Court emphasized that a business permit is intended to regulate the conduct of business, not the practice of a profession. The conditions imposed by the City Mayor encroached upon the regulatory powers of the state-level professional bodies. Moreover, the Court noted the legislative history of Republic Act No. 8050, where Congress deliberately avoided a definitive stance on the prohibition of indirect practice of optometry by corporations, leaving the issue for judicial determination. This further supported the Court’s view that the City Mayor’s actions were premature and overreaching.

The Court also addressed the argument that Acebedo was bound by the conditions of the business permit because it had accepted them, essentially forming a private agreement or contract. The Court rejected this argument, stating that a license or permit is not a contract but a special privilege. As the Court stated in Gonzalo Sy Trading vs. Central Bank:

“xxx a license or a permit is not a contract between the sovereignty and the licensee or permitee, and is not a property in the constitutional sense, as to which the constitutional proscription against impairment of the obligation of contracts may extend. A license is rather in the nature of a special privilege, of a permission or authority to do what is within its terms. It is not in any way vested, permanent or absolute.”

Therefore, the doctrine of estoppel, which prevents a party from denying a previous representation, did not apply. The conditions imposed by the City Mayor were ultra vires, meaning beyond the scope of his authority, and could not be given effect, regardless of Acebedo’s initial acquiescence. Ultra vires acts are considered null and void from the outset, and no subsequent action can validate them. Finally, the Court clarified that the issuance of business permits is an exercise of police power, not a proprietary function. Municipalities exercise police power as agents of the State, under the general welfare clause, to regulate businesses and promote public welfare. This power must be exercised reasonably and within the bounds of the law, which was not the case here.

FAQs

What was the key issue in this case?	The central issue was whether a city mayor exceeded their authority by imposing conditions on a business permit that effectively regulated the practice of optometry. The Supreme Court clarified the distinction between regulating a business and regulating a profession.
What did the City Mayor of Iligan do?	The City Mayor imposed conditions on Acebedo Optical’s business permit that restricted their ability to operate like an optical clinic, examine patients, or sell eyeglasses without an independent optometrist’s prescription. These conditions were challenged as an overreach of local authority.
What is the general welfare clause?	The general welfare clause in the Local Government Code grants local government units the power to enact regulations that promote health, safety, and the general well-being of their constituents. However, this power is not unlimited and must be exercised reasonably and within the bounds of the law.
What is the difference between a business permit and a professional license?	A business permit authorizes an entity to engage in commercial activities, while a professional license grants an individual the authority to practice a specific profession. A business can employ licensed professionals without the business itself being subjected to the regulations governing that profession.
Can a corporation hire licensed optometrists?	Yes, the Supreme Court has ruled that hiring licensed optometrists does not equate to the corporation itself practicing optometry, as long as the corporation is not unduly controlling the optometrist’s professional judgment. The corporation’s main purpose must still be a commercial activity related to optometry, rather than the actual practice of optometry itself.
What does ‘ultra vires’ mean in this context?	‘Ultra vires’ means ‘beyond the powers.’ In this case, the conditions imposed by the City Mayor were considered ultra vires because they exceeded the scope of his authority and encroached upon the regulatory powers of state-level professional bodies.
Is a business permit a contract?	No, the Supreme Court clarified that a business permit is not a contract but a special privilege granted by the government. It can be revoked or modified based on violations of law or ordinance, and does not create a contractual obligation.
What is the role of the Professional Regulation Commission (PRC)?	The PRC is the government agency responsible for regulating and supervising the practice of professions in the Philippines. It has the exclusive authority to oversee professions like optometry, ensuring that practitioners meet certain standards and adhere to ethical guidelines.

In conclusion, the Supreme Court’s decision in Acebedo Optical Company, Inc. vs. Court of Appeals reinforces the principle that local government units must exercise their regulatory powers within the bounds of the law, respecting the boundaries between business regulation and professional oversight. This ruling provides important clarity for businesses operating in regulated fields, ensuring they are not subjected to arbitrary or excessive local restrictions.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Acebedo Optical Company, Inc. vs. Court of Appeals, G.R. No. 100152, March 31, 2000