Case Summary (G.R. No. 91649)
Key Dates
Creation and Charter Grants:
• P.D. 1067-A & 1067-B (January 1, 1977) – Initial establishment and franchise for floating casino operations
• P.D. 1399 (June 2, 1978) – Expanded PAGCOR objectives
• P.D. 1869 (July 11, 1983) – Centralization and regulation of all games of chance
Petition Filed: Second Amended Petition relying on the 1987 Constitution
Decision: May 14, 1991 (En Banc)
Applicable Law
• 1987 Philippine Constitution – national policy on police power (Article II, III, VIII, XIII, XIV), local autonomy (Article X), equal protection (Article III, Section 1), monopoly regulation (Article XII, Section 19)
• P.D. 1869 – PAGCOR Charter repealing inconsistent laws; income-tax and license-fee exemption (Sec. 13[2])
• P.D. 771 (1975) – Revoked local governments’ licensing power over gambling
• Jurisprudence on presumption of constitutionality, police power, local autonomy, and taxpayer standing
Factual Background
PAGCOR was created under successive decrees to centralize gaming operations, generate revenue for infrastructure and social services, enhance tourism, and curb corrupt practices in unregulated gambling. By 1989, PAGCOR’s revenues reached ₱3.43 billion with ₱2.5 billion remitted to the national government; total remittances of ₱6.2 billion over 3½ years. The corporation employed 4,494 persons in nine casinos.
Issues Presented
- Procedural Standing: Whether the petitioners, as taxpayers and lawyers, may challenge P.D. 1869.
- Substantive Grounds:
a. Waiver of Manila’s taxing and licensing rights; violation of local autonomy.
b. Violation of the equal protection clause by legalizing PAGCOR gambling while outlawing other vices.
c. Incompatibility with government policy against monopolies and toward privatization.
d. Contravention of state policies on personal dignity, social justice, family, youth, and education under the 1987 Constitution.
Procedural Considerations
The Court, invoking its duty under the 1987 Constitution to review coordinate branches’ acts, dispensed with technical standing requirements. Petitioners were deemed proper parties because they sustained or faced immediate injury, and the case’s transcendental importance warranted waiver of formal impediments.
Presumption of Constitutionality
Statutes carry a strong presumption of validity. A challenger must prove unconstitutionality beyond reasonable doubt, negating every conceivable basis supporting the law. Courts do not inquire into legislative wisdom or policy expediency.
Police Power and Public Welfare
Gambling, prohibited unless authorized, falls within the State’s police power to regulate for general welfare. P.D. 1869’s objectives—centralization, revenue generation for public projects, tourism development, and eradication of malpractices—serve legitimate police-power ends.
Local Autonomy and Tax Exemption
• Manila’s charter grants no inherent taxing power; such power derives solely from Congress.
• P.D. 771 (1975) had already revoked local licensing and fee powers over gambling.
• PAGCOR, as a national government–owned and –controlled instrumentality, is exempt from local taxes to prevent local impediments to a national policy.
• Article X, Section 5 of the 1987 Constitution permits Congress to impose limitations on local revenue powers. P.D. 1869’s exemption clause remains valid until amended by Congress.
Equal Protection Clause
Classification is permissible if not arbitrary or unreasonable. Legal distinctions between PAGCOR-authorized gaming and prohibited vices do not violate equal protection, as the State may tailor measures to address evils most
...continue readingCase Syllabus (G.R. No. 91649)
Facts of the Case
- Petitioners are Attorneys Humberto Basco, Edilberto Balce, Socrates Maranan and Lorenzo Sanchez, challenging the constitutionality of P.D. No. 1869, the Charter of PAGCOR.
- They seek annulment of the PAGCOR Charter on grounds that it is contrary to morals, public policy and order.
- Specific allegations include waiver of Manila’s taxing and licensing rights, intrusion on local autonomy, violation of equal protection, perpetuation of monopoly/crony economy, and contravention of declared state policies in the 1987 Constitution.
- PAGCOR was originally created under P.D. 1067-A/B (January 1, 1977), expanded by P.D. 1399 (June 2, 1978), and re-created under P.D. 1869 (July 11, 1983) to centralize and integrate all games of chance under government control.
- PAGCOR’s declared objectives under Section 1, P.D. 1869 include generating revenue for infrastructure and social services, expanding tourist attractions, and eradicating malpractices in unregulated gambling.
- By 1989, PAGCOR had become the third largest source of government revenue, remitting P2.5 billion to the National Government and supporting thousands of employees and socio-cultural projects.
Procedural Issue: Standing and Jurisdiction
- Petitioners invoke taxpayer status and petitioner Basco’s role as Chairman of Manila’s Committee on Laws to question P.D. 1869.
- Respondent challenges their legal personality to maintain the petition.
- The Court, emphasizing the “transcendental importance” of the constitutional questions, waives procedural technicalities and grants standing to address the issues.
Petitioners’ Contentions
- P.D. 1869 constitutes a waiver of Manila’s right to impose taxes and license fees in violation of local autonomy.
- It intrudes upon local governments’ power to levy local taxes and fees, contravening the Constitution.
- It violates the equal protection clause by legalizing PAGCOR-conducted gambling while outlawing other vices.
- It conflicts with the Cory administration’s avowed shift away from monopolistic/crony economy toward free enterprise and privatization.
- It is contrary to various state policies and principles enshrined in the 1987 Constitution (Arts. II, VIII, XIV, XIII).