A.M. No. 97-2-53-RTC - IN RE: Marcos

The petitioner, Philippine Amusement and Gaming Corporation (PAGCOR), is a government-owned and controlled corporation created under Presidential Decree (PD) No. 1869 to regulate and centralize all games of chance authorized by franchise or law. Its franchise was originally for 25 years until July 11, 2008, renewable by another 25 years. Under Section 9 of PD 1869, PAGCOR was vested with regulatory powers similar to those of the Securities and Exchange Commission (SEC) over affiliated entities engaged in gambling.
Republic Act No. 7227 (RA 7227) was enacted in 1992 to convert former military bases into Special Economic Zones (SEZs), establishing the Subic Bay Metropolitan Authority (SBMA). An Executive Order (EO) No. 80 issued in 1993 extended incentives granted to Subic Bay SEZ to Clark SEZ (CSEZ), but this was later partly invalidated by the Supreme Court.
On December 23, 1999, PAGCOR entered into a Memorandum of Agreement (MOA) with Fontana Development Corporation (FDC), granting it authority to operate and maintain a casino inside the Clark SEZ. The license was explicitly non-exclusive and co-terminus with PAGCOR’s franchise, including any extension thereof. The MOA was amended several times and was registered with Clark Development Corporation (CDC).

In 2005, the Coconut Oil Refiners Association challenged EO 80’s constitutionality, resulting in the invalidation of certain provisions, specifically Section 5 regarding investment incentives in CSEZ.
On June 20, 2007, RA No. 9487 extended PAGCOR’s franchise to July 10, 2033, renewable for another 25 years.
In July 2008, PAGCOR informed FDC of a month-to-month extension of the MOA pending renewal but later, on October 6, 2008, replaced the MOA with a new standard Authority to Operate (SAO), which FDC protested.

FDC filed a complaint for injunction before the Regional Trial Court (RTC) in Manila, claiming:

The MOA was automatically extended with PAGCOR’s franchise extension until 2033.
The replacement of the MOA with the SAO was invalid and violated FDC’s rights.
FDC had invested heavily in reliance on the MOA.

The RTC issued a temporary restraining order (TRO) on November 19, 2008, barring PAGCOR from implementing the new SAO. PAGCOR filed motions to dismiss and for reconsideration, which were denied.
The RTC initially denied FDC’s motion for a writ of preliminary injunction but later granted it on January 30, 2009, ordering a bond of P100 million. PAGCOR’s motion to reconsider was denied.
PAGCOR filed a petition for certiorari with the Court of Appeals (CA) questioning RTC’s jurisdiction and orders, but the CA dismissed the petition for lack of merit on May 19, 2009, ruling the matter moot and academic since the TRO had lapsed.
PAGCOR did not challenge the writ of preliminary injunction issued later by RTC. PAGCOR then elevated the case to the Supreme Court via a petition for review.

Whether the RTC or the Supreme Court has jurisdiction over the complaint for injunction filed by Fontana Development Corporation.
Whether the casino license (MOA) granted to FDC was issued pursuant to PAGCOR’s charter under PD 1869 or under Section 5 of EO No. 80, in relation to RA 7227.
The validity and enforceability of PAGCOR’s issuance of the new Standard Authority to Operate in substitution of the MOA.
Whether the MOA was automatically extended by virtue of PAGCOR’s franchise extension.
The effect of the Supreme Court’s invalidation of Section 5 of EO 80 on the MOA and PAGCOR’s authority to regulate casinos within the Clark SEZ.