JAWORSKI vs. PAGCOR

JAWORSKI vs. PAGCOR

G.R. No. 144463 - January 14, 2004

FACTS:

The Philippine Amusement and Gaming Corporation (PAGCOR) is a government owned and controlled corporation existing under PD No. 1869 issued on July 11, 1983 by then President Ferdinand Marcos.

On March 31, 1998, PAGCOR’s board of directors approved an instrument denominated as “Grant of Authority and Agreement for the Operation of Sports Betting and Internet Gaming,” which granted Sports and Games and Entertainment Corporation (SAGE) the authority to operate and maintain Sports Betting station in PAGCOR’s casino locations, and Internet Gaming facilities to service local and international bettors, provided that to the satisfaction of PAGCOR, appropriate safeguards and procedures are established to ensure the integrity and fairness of the games. On September 1, 1998, PAGCOR, represented by its Chairperson, Alicia LI. Reyes, and SAGE, represented by its Chairman of the Board, Henry Sy, Jr., and its President, Antonio D. Lacdao, executed the above-named document. Pursuant to the authority granted by PAGCOR, SAGE commended its operations by conducting gambling on the Internet on a trial-run basis, making pre-paid cards and redemption of winnings available at various Bingo Bonanza outlets.

Petitioner Senator Robert Jaworski, in his capacity as member of the Senate and Chairman of the Senate Committee on Games, Amusement and Sports, filed the instant petition, praying that the grant of authority by PAGCOR in favor of SAGE be nullified. He maintains that PAGCOR committed grave abuse of discretion amounting to lack or excess of jurisdiction when it authorized SAGE to operate gambling on the internet. He contends that PAGCOR is not authorized under its legislative franchise, PD No. 1869, to operate gambling on the internet for the simple reason that the said decree could not have possibly contemplated internet gambling since at the time of its enactment on July 11, 1983 the internet was yet inexistent and gambling activities were confined exclusively to real-space. Further, he argues that the internet, being an international network of computers, necessarily transcends the territorial jurisdiction of the Philippines, and the grant to SAGE of authority to operate internet gambling contravenes the limitation of PAGCOR’s franchise, under Section 14 of PD No. 1869 which provides: “Place. – The Corporation [i.e., PAGCOR] shall conduct gambling activities or games of chance on land or water within the territorial jurisdiction of the Republic of the Philippines. x x x.”

Moreover, according to petitioner, internet gambling does not fall under any of the categories of the authorized gambling activities enumerated under Section 10 of PD No. 1869 which grants PAGCOR the “right, privilege and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports gaming pools, within the territorial jurisdiction of the Republic of the Philippines.” He contends that internet gambling could not have been included within the commonly accepted definition of “gambling casinos,” “clubs” or “other recreation or amusement places” as these terms refer to a physical  structure in real-space where people who intend to bet or gamble go and play games of chance authorized by law.

ISSUE:

Whether or not PAGCOR is allowed to contract any of its franchise to another entity such as SAGE.

RULING:

No.

A legislative franchise is a special privilege granted by the state to corporations. It is a privilege of public concern which cannot be exercised at will and pleasure, but should be reserved for public control and administration, either by the government directly, or by public agents, under such conditions and regulations as the government may impose on them in the interest of the public. It is Congress that prescribes the conditions on which the grant of the franchise may be made. Thus the manner of granting the franchise, to whom it may be granted, the mode of conducting the business, the charter and the quality of the service to be rendered and the duty of the grantee to the public in exercising the franchise are almost always defined in clear and unequivocal language.

While PAGCOR is allowed under its charter to enter into operator’s and/or management contracts, it is not allowed under the same charter to relinquish or share its franchise, much less grant a veritable franchise to another entity such as SAGE. PAGCOR cannot delegate its power in view of the legal principle of delegata potestas delegare non potest, inasmuch as there is nothing in the charter to show that it has been expressly authorized to do so. In Lim v. Pacquing, the Court clarified that “since ADC has no franchise from Congress to operate the jai-alai, it may not so operate even if it has a license or permit from the City Mayor to operate the jai-alai in the City of Manila.” By the same token, SAGE has to obtain a separate legislative franchise and not “ride on” PAGCOR’s franchise if it were to legally operate on-line Internet gambling.