Case Summary (G.R. No. 111097)
Key Dates
Ordinance No. 3353 enacted December 7, 1992; Ordinance No. 3375-93 enacted January 4, 1993. Court of Appeals declared the ordinances invalid on March 31, 1993; reconsideration denied July 13, 1993. The Supreme Court rendered its decision on July 20, 1994.
Applicable Law and Constitutional Basis
Governing constitutional framework: 1987 Philippine Constitution (applicable because decision date is after 1990). Primary statutory authorities: Local Government Code of 1991 (R.A. No. 7160) — notably Section 16 (general welfare clause), Section 5 (rules of interpretation), Section 458 (powers/duties of Sangguniang Panlungsod), and Section 534 (repealing clause). National special law: Presidential Decree No. 1869 (PAGCOR charter), which created PAGCOR and authorized centralized regulation and operation of games of chance, including casinos. Controlling jurisprudence cited: Basco v. PAGCOR (197 SCRA 53) and earlier authorities on ordinance validity.
Procedural History
Pryce filed an original action in the Court of Appeals seeking to enjoin enforcement of the ordinances; PAGCOR intervened. The Court of Appeals declared the ordinances invalid and issued the requested writ. Petitioners (city and mayor) sought review under Rule 45 in the Supreme Court; Pryce was later dropped as private respondent.
Ordinances Challenged — Substance and Penalties
Ordinance No. 3353: prohibited issuance of business permits and cancelled existing business permits for establishments used for casino operation; prescribed escalating suspension, fines, and eventual revocation and imprisonment. Ordinance No. 3375-93: prohibited operation of casinos outright; imposed administrative fines, closure, and possible imprisonment or fines against managers/supervisors. Both ordinances took effect ten days after publication.
Legal Issues Presented to the Supreme Court
Primary legal questions: (1) Whether the Sangguniang Panlungsod had authority under the Local Government Code to prohibit establishment and operation of a PAGCOR casino within city limits; (2) Whether the phrase “gambling and other prohibited games of chance” in Section 458 refers to illegal gambling only or includes law-authorized gambling; (3) Whether the ordinances in effect annul P.D. 1869; (4) Whether the ordinances were discriminatory, unreasonable, or violative of public policy and ordinary tests of municipal ordinances; and (5) Whether the Court must follow Basco v. PAGCOR.
Governing Tests for Ordinance Validity
The Court reiterated established substantive requirements for a valid municipal ordinance: (1) it must not contravene the Constitution or any statute; (2) it must not be unfair or oppressive; (3) it must not be partial or discriminatory; (4) it must not prohibit trade but may regulate it; (5) it must be general and consistent with public policy; and (6) it must not be unreasonable.
Interpretation of Section 458 — “Gambling and Other Prohibited Games of Chance”
The Court applied the rule noscitur a sociis (a word is known by its companions) to Section 458(a)(1)(v), holding that the phrase “gambling and other prohibited games of chance” should be read as referring to illegal or prohibited gambling. Because the phrase appears among items like prostitution, drug dens, juvenile delinquency and other activities “inimical to the welfare and morals” of the city, the Court concluded the provision empowers local governments to prevent and suppress illegal gambling, not to prohibit forms of gambling expressly authorized by national law.
Conflict Between the Local Government Code and P.D. 1869; Repeal by Implication
The Court addressed petitioners’ argument that the Local Government Code implicitly repealed or modified P.D. 1869 so as to permit local units effectively to ban all gambling, including PAGCOR casinos. The Court emphasized the settled rule that repeal by implication is not lightly presumed and that the Code’s repealing clause does not specifically list P.D. 1869 among repealed statutes. The Court also relied on subsequent statutes that tap PAGCOR revenues as evidence that the PAGCOR charter remained operative. Consequently, the Court found no clear and unmistakable intent to repeal P.D. 1869 by implication.
Harmonization and the Proper Construction
Instead of choosing between the Code and P.D. 1869, the Court applied the principle of harmonization: statutes should be construed to give effect to both where reasonably possible. The Court held that the Local Government Code empowers local government units to prevent and suppress illegal forms of gambling, but it should be read as excepting gambling operations expressly authorized by special law (such as P.D. 1869). Thus the Code does not strip PAGCOR of its statutory authority to operate casinos; local ordinances cannot nullify or contravene a national statute.
Application to the Ordinances and Holding
Applying the foregoing principles, the Court found the challenged ordinances to be ultra vires and void insofar as they attempted to prohibit PAGCOR’s authorized casino operations. Because the ordinances conflicted with P.D. 1869 — a national law authorizing PAGCOR to centralize and regulate casinos — the local legislative measure could not prevail. The Supreme Court denied the petition and affirmed the Court of Appeals’ judgment declaring the ordinances invalid, with costs against the petitioners.
Observations on Justiciability and Morality of Gambling
The Court em
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Procedural and Publication Data
- Reported at 304 Phil. 428, En Banc; G.R. No. 111097; Decision rendered July 20, 1994; majority opinion written by Justice Cruz.
- Petition for review under Rule 45 of the Rules of Court brought by Mayor Pablo P. Magtajas and the City of Cagayan de Oro against the decision of the Court of Appeals.
- Court of Appeals: On March 31, 1993, declared the challenged city ordinances invalid and issued the writ prayed for to prohibit enforcement; petition for reconsideration denied July 13, 1993.
- Pryce Properties Corporation originally a private respondent; note that Pryce was dropped as private respondent in the Supreme Court resolution dated June 13, 1994 (per record).
- Final disposition by the Supreme Court: the petition was DENIED and the Court of Appeals decision AFFIRMED, with costs against the petitioners.
Factual Background
- In 1992 the Philippine Amusement and Gaming Corporation (PAGCOR), having enjoyed success operating casinos in several cities, leased a portion of a building owned by Pryce Properties Corporation, Inc., renovated it, equipped it, and prepared to inaugurate a casino in Cagayan de Oro City for the Christmas season.
- The proposed opening provoked strong civic opposition: civic organizations, religious groups, women’s groups, youth, media, and demonstrations led by the mayor and city legislators all denounced the casino as contrary to the city’s welfare.
- In response to the proposed PAGCOR casino, the Sangguniang Panlungsod of Cagayan de Oro enacted two ordinances aimed at prohibiting casino operation within the city.
Ordinance No. 3353 (December 7, 1992) — Text and Key Provisions
- Title: “AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND CANCELLING EXISTING BUSINESS PERMIT TO ANY ESTABLISHMENT FOR THE USING AND ALLOWING TO BE USED ITS PREMISES OR PORTION THEREOF FOR THE OPERATION OF CASINO.”
- Section 1: Declares policy banning the operation of casino within city territorial jurisdiction; prohibits issuance of business permits for casino operation.
- Section 2: Deems it a violation of an existing business permit to use or allow the use of an establishment or portion thereof for casino operation and other gambling activities.
- Section 3: Penalties differentiated by repeat offenses:
- First offense: Suspension of business permit for 60 days and a fine of P1,000.00/day;
- Second offense: Suspension for six months and a fine of P3,000.00/day;
- Third and subsequent offenses: Permanent revocation of business permit and imprisonment of one (1) year.
- Section 4: Ordinance to take effect ten (10) days from publication.
Ordinance No. 3375-93 (January 4, 1993) — Text and Key Provisions
- Title: “AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING PENALTY FOR VIOLATION THEREFOR.”
- Legislative history recited: Resolution No. 2295 (policy against casinos, 1990) and Resolution No. 2673 (reiteration, Oct. 14, 1992); references to authority under Article 3, Sec. 458(4)(vi) of the Local Government Code and its implementing rules to suppress activities inimical to public morals and welfare.
- Section 1: Prohibits operation of gambling casino in Cagayan de Oro City.
- Section 2: Penalties:
- Administrative fine of P5,000.00 against proprietor/partnership/corporation and closure of establishment;
- Criminal penalty against manager/supervisor/any person responsible: imprisonment of not less than six (6) months nor more than one (1) year or a fine of P5,000.00 or both, at court’s discretion.
- Section 3: Ordinance to take effect ten (10) days after publication in a local newspaper of general circulation.
Procedural History of Legal Challenge
- Pryce Properties filed suit in the Court of Appeals challenging the ordinances; PAGCOR intervened and acted as supplemental petitioner.
- The Court of Appeals declared the ordinances invalid and enjoined enforcement on March 31, 1993; its denial of reconsideration was entered July 13, 1993.
- Cagayan de Oro City and its mayor filed a petition for review in the Supreme Court contesting the Court of Appeals’ ruling and raising multiple errors claimed in that decision.
Issues Presented by Petitioners (as argued in the petition)
- Whether under existing laws the Sangguniang Panlungsod has power to prohibit establishment and operation of a PAGCOR gambling casino within the City’s limits.
- Whether the phrase “gambling and other prohibited games of chance” in Sec. 458(a)(1)(v) of R.A. 7160 (Local Government Code) means only “illegal gambling” (the petitioners contended it did not).
- Whether the ordinances in effect annul P.D. 1869 (PAGCOR charter) and are invalid on that basis.
- Whether the ordinances are discriminatory to casinos and partial to cockfighting (i.e., arbitrary or unequal treatment).
- Whether the ordinances are unreasonable, inconsistent with the general powers and purposes of the instrumentality concerned, and inconsistent with State laws or policy.
- Whether the Court of Appeals was constrained by precedent (Basco v. PAGCOR, G.R. No. 91649, May 14, 1991) in disposing of issues in this case.
Key Statutory and Doctrinal Provisions Invoked
- Presidential Decree No. 1869: Creation of PAGCOR, authorizing it to centralize and regulate all games of chance, including casinos on land and sea within the territorial jurisdiction of the Philippines.
- Local Government Code of 1991 (Republic Act No. 7160):
- Section 16 (General Welfare Clause): Confers on local government units (LGUs) powers necessary, appropriate or incidental to governance and promotion of general welfare, specifically referencing improvement of public morals, health and safety, peace and order, etc.
- Section 458 (Powers, Duties, Functions of Sangguniang Panlungsod): Enumerates authority to enact ordinances to prevent, suppress and impose penalties for, inter alia, gambling and other prohibited games of chance, and to regulate properties and businesses within territorial limits in the interest of general welfare.
- Section 5 (Rules of Interpretation): Directs that powers of LGUs be liberally construed in their favor and provides for liberal interpretation of general welfare provisions, resolving doubts in favor of devolution.
- Section 534 (Repealing Clause): Lists specific laws repealed or modified by the Code and contains paragraph (f) providing that all general and special laws inconsistent with the Code “are hereby repealed or modified accordingly.” Notably, P.D. 1869 is not listed among the laws specifically repealed.
Petitioners’ Principal Arguments (summarized)
- The Sangguniang Panlungsod has authority under Section 16 and Section 458 of the Local Government Code to prohibit casinos as part of its police power to protect morals and welfare; the Code’s grant of power to prevent and suppress