Case Summary (G.R. No. 187972)
Background and Nature of Dispute
PAGCOR is a government-owned and controlled corporation created under PD No. 1869, with the authority to regulate and centralize gambling operations through a 25-year franchise, later extended by RA No. 9487. PAGCOR granted FDC the authority to operate a casino inside the Clark Special Economic Zone (CSEZ) via a December 23, 1999 Memorandum of Agreement (MOA), with the license term co-terminus with PAGCOR's franchise, including any extensions. Subsequently, PAGCOR sought to replace the MOA with a new standard Authority to Operate (SAO), prompting FDC to seek injunctive relief to protect its contractual rights and investments. The RTC issued temporary restraining orders (TRO) and eventually a writ of preliminary injunction restraining PAGCOR’s enforcement of the SAO. PAGCOR challenged the trial court’s jurisdiction and the validity of the MOA extension, leading to a petition for review before the CA and subsequently the Supreme Court.
Legal Framework Governing PAGCOR's Authority
PD No. 1869 establishes PAGCOR’s regulatory powers, including exercising powers akin to those of the Securities and Exchange Commission (SEC) over affiliated entities. Section 10 grants PAGCOR a franchise to operate and license gambling casinos for 25 years, renewable for another 25. RA No. 9487 extended PAGCOR’s franchise to July 10, 2033. RA No. 7227 and EO No. 80 pertain to the creation and regulation of Special Economic Zones like Subic Bay and Clark but do not confer licensing authority over casinos to PAGCOR; rather, they affirm PAGCOR's existing power as provided in PD No. 1869. The Coconut Oil Refiners Association case declared Section 5 of EO No. 80—providing incentives to Clark SEZ—void, but this ruling did not negate PAGCOR’s licensing authority under PD 1869.
Jurisdictional Issue: RTC vs. Supreme Court
PAGCOR contended that the proper mode of contesting its regulatory decisions was through a petition for review before the Supreme Court, relying on the quasi-SEC powers granted under PD No. 1869 and PD No. 902-A. However, the Supreme Court held that PAGCOR does not have quasi-judicial powers, and thus, the RTC retains original jurisdiction over civil injunction cases involving licensing disputes like the instant one. The Court distinguished this from exceptional cases where original jurisdiction of the Supreme Court was exercised for important issues. The RTC’s jurisdiction was affirmed pursuant to BP No. 129, which grants it original jurisdiction over injunctions and related civil actions.
Source of PAGCOR's Authority over Casino Licensing
The Supreme Court clarified that PAGCOR’s authority to license casinos derives exclusively from its charter under PD No. 1869 and its amendments, not from RA No. 7227 or EO No. 80. EO No. 80 and RA No. 7227 concern the establishment and governance of economic zones but do not extend licensing powers over casinos beyond PAGCOR’s originating charter. The Court emphasized that Section 13 of RA No. 7227 expressly delegates casino licensing to PAGCOR, while the Subic Bay Metropolitan Authority lacks such authority. Thus, the nullification of Section 5 of EO No. 80 in the Coconut Oil Refiners case does not invalidate PAGCOR’s MOA with FDC, since PAGCOR’s power stems directly from PD No. 1869.
Validity and Effectivity of the Memorandum of Agreement (MOA)
The MOA dated December 23, 1999, validly conferred authority to FDC to operate a casino within the CSEZ. The contract contains a stipulation that the license term is co-terminus with PAGCOR’s charter term, including extensions. PAGCOR’s unilateral act of placing the MOA on a month-to-month extension and replacing it with the SAO was found to be a breach of contract. The Court underscored that the MOA’s validity exists independently of EO No. 80’s Section 5. Furthermore, PAGCOR did not invoke any of the enumerated grounds for revocation or termination contained in the MOA when it altered its regulatory approach vis-à-vis FDC. Therefore, PAGCOR’s actions lacked legal basis and must be nullified.
Legal Effect of the Court of Appeals and Trial Court Decisions
The CA upheld the trial court’s rulings that enjoined PAGCOR from implementing the new SAO and sustained the validity of the TRO and writ of preliminary injunction. It rejected PAGCOR’s arguments on jurisdiction and the nature of FDC’s rights. The Supreme Court affirmed the CA’s decision, finding no error in the lower courts’
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Case Background and Procedural History
- The case involves a petition for review under Rule 45 questioning the May 19, 2009 Decision of the Court of Appeals (CA) in CA-G.R. SP No. 107247.
- The CA affirmed the Regional Trial Court (RTC) of Manila’s November 18, 2008 Order that issued a Temporary Restraining Order (TRO) against PAGCOR, preventing the latter from implementing acts allegedly violating the rights of Fontana Development Corporation (FDC) under a December 23, 1999 Memorandum of Agreement (MOA).
- PAGCOR is a government-owned and controlled corporation (GOCC) created under Presidential Decree (PD) No. 1869, tasked with regulating and centralizing all games of chance in the Philippines.
- PAGCOR’s franchise was originally for 25 years until July 11, 2008, renewable for another 25 years, as per Section 10 of PD 1869 and was extended by Republic Act (RA) No. 9487 in 2007.
- The MOA granted by PAGCOR to FDC (formerly RN Development Corporation) authorized FDC to operate and maintain a casino inside the Clark Special Economic Zone (CSEZ).
- The case arose after PAGCOR notified FDC of its intention to replace the MOA with a new Standard Authority to Operate (SAO), which FDC contested via an injunction complaint.
Legal and Regulatory Framework
- PAGCOR’s regulatory powers include those vested upon it by PD No. 1869, notably Sections 8 and 9, granting it regulatory authority akin to the Securities and Exchange Commission (SEC) over affiliated entities.
- RA No. 7227 provided for the conversion of former military bases into Special Economic Zones (SEZ), including the creation of the Subic Bay Metropolitan Authority (SBMA).
- Executive Order (EO) No. 80, issued in 1993, extended certain incentives applicable to the Subic Bay Special Economic Zone (SSEZ) to the Clark SEZ, including investment incentives.
- The constitutionality of EO No. 80 Section 5 was challenged and its challenged provisions declared void, impacting incentives in the Clark SEZ.
- RA No. 9487, enacted June 20, 2007, extended PAGCOR’s franchise up to July 10, 2033, authorizing it to operate and license gambling entities.
Factual Details on the MOA and Casino Operations
- The MOA of December 23, 1999, granted FDC authority to operate a casino inside the CSEZ, which explicitly stated that the license granted was non-exclusive and co-terminus with PAGCOR's franchise, including any extensions thereof.
- The MOA was amended multiple times and was validly registered with Clark Development Corporation (CDC).
- FDC complied with its obligations under the MOA, investing approximately P1 billion in a hotel-casino complex and marketing to attract high-rolling customers from Asia.
- On July 18, 2008, PAGCOR informed FDC of a month-to-month extension of the MOA pending negotiation but later, on October 6, 2008, indicated the MOA was replaced by the SAO.
- FDC protested the replacement, insisting the MOA's term was extended automatically with PAGCOR’s franchise extension and contested the legal basis of the SAO.
Issues on Jurisdiction and Remedy
- PAGCOR argued the RTC lacked jur