EN BANC

[G.R. No. 138298. November 29, 2000]

RAOUL B. DEL MAR, petitioner, vs. PHILIPPINE AMUSEMENT AND GAMING CORPORATION, BELLE JAI-ALAI CORPORATION, FILIPINAS GAMING ENTERTAINMENT TOTALIZATOR CORPORATION, respondents.

[G.R. No. 138982. November 29, 2000]

FEDERICO S. SANDOVAL II and MICHAEL T. DEFENSOR, petitioners, vs. PHILIPPINE AMUSEMENT AND GAMING CORPORATION, respondent.

JUAN MIGUEL ZUBIRI, intervenor.

D E C I S I O N

PUNO, J.:

These two consolidated petitions concern the issue of whether the franchise granted to the Philippine Amusement and Gaming Corporation (PAGCOR) includes the right to manage and operate jai-alai.

First, we scour the significant facts. The Philippine Amusement and Gaming Corporation is a government-owned and controlled corporation organized and existing under Presidential Decree No. 1869 which was enacted on July 11, 1983. Pursuant to Sections 1 and 10 of P.D. No. 1869, respondent PAGCOR requested for legal advice from the Secretary of Justice as to whether or not it is authorized by its Charter to operate and manage jai-alai frontons in the country. In its Opinion No. 67, Series of 1996 dated July 15, 1996, the Secretary of Justice opined that the authority of PAGCOR to operate and maintain games of chance or gambling extends to jai-alai which is a form of sport or game played for bets and that the Charter of PAGCOR amounts to a legislative franchise for the purpose.[1] Similar favorable opinions were received by PAGCOR from the Office of the Solicitor General per its letter dated June 3, 1996 and the Office of the Government Corporate Counsel under its Opinion No. 150 dated June 14, 1996.[2] Thus, PAGCOR started the operation of jai-alai frontons.

On May 6, 1999, petitioner Raoul B. del Mar initially filed in G.R. No. 138298 a Petition for Prohibition to prevent respondent PAGCOR from managing and/or operating the jai-alai or Basque pelota games, by itself or in agreement with Belle Corporation, on the ground that the controverted act is patently illegal and devoid of any basis either from the Constitution or PAGCORs own Charter.

However, on June 17, 1999, respondent PAGCOR entered into an Agreement with private respondents Belle Jai Alai Corporation (BELLE) and Filipinas Gaming Entertainment Totalizator Corporation (FILGAME) wherein it was agreed that BELLE will make available to PAGCOR the required infrastructure facilities including the main fronton, as well as provide the needed funding for jai-alai operations with no financial outlay from PAGCOR, while PAGCOR handles the actual management and operation of jai-alai.[3]

Thus, on August 10, 1999, petitioner Del Mar filed a Supplemental Petition for Certiorari questioning the validity of said Agreement on the ground that PAGCOR is without jurisdiction, legislative franchise, authority or power to enter into such Agreement for the opening, establishment, operation, control and management of jai-alai games.

A little earlier, or on July 1, 1999, petitioners Federico S. Sandoval II and Michael T. Defensor filed a Petition for Injunction, docketed as G.R. No. 138982, which seeks to enjoin respondent PAGCOR from operating or otherwise managing the jai-alai or Basque pelota games by itself or in joint venture with Belle Corporation, for being patently illegal, having no basis in the law or the Constitution, and in usurpation of the authority that properly pertains to the legislative branch of the government. In this case, a Petition in Intervention was filed by Juan Miguel Zubiri alleging that the operation by PAGCOR of jai-alai is illegal because it is not included in the scope of PAGCORs franchise which covers only games of chance.

Petitioners Raoul B. del Mar, Federico S. Sandoval II, Michael T. Defensor, and intervenor Juan Miguel Zubiri, are suing as taxpayers and in their capacity as members of the House of Representatives representing the First District of Cebu City, the Lone Congressional District of Malabon-Navotas, the Third Congressional District of Quezon City, and the Third Congressional District of Bukidnon, respectively.

The bedrock issues spawned by the petitions at bar are:

G.R. No. 138298

Petitioner Del Mar raises the following issues:

I. The respondent PAGCOR has no jurisdiction or legislative franchise or acted with grave abuse of discretion, tantamount to lack or excess of jurisdiction, in arrogating unto itself the authority or power to open, pursue, conduct, operate, control and manage jai-alai game operations in the country.

II. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x in executing its agreement with co-respondents Belle and Filgame for the conduct and management of jai-alai game operations, upon undue reliance on an opinion of the Secretary of Justice.

III. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x in entering into a partnership, joint venture or business arrangement with its co-respondents Belle and Filgame, through their agreement x x x. The Agreement was entered into through manifest partiality and evident bad faith (Sec. 3 (e), RA 3019), thus manifestly and grossly disadvantageous to the government [Anti-Graft and Corrupt Practices Act, RA 3019, Sec. 3 (g)].

IV. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x to award to its co-respondents Belle and Filgame the right to avail of the tax benefits which, by law, inures solely and exclusively to PAGCOR itself.

V. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x to cause the disbursement of funds for the illegal establishment, management and operation of jai-alai game operations.

VI. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x to award or grant authority for the establishment, management and operation of off-fronton betting stations or bookies.

VII. The respondent PAGCOR has no jurisdiction or authority x x x in awarding unto its co-respondents Belle and Filgame, without public bidding, the subject agreement.

In defense, private respondents BELLE and FILGAME assert:

1. The petition states no cause of action and must be dismissed outright;

2. The petitioner has no cause of action against the respondents, he not being a real party in interest;

3. The instant petition cannot be maintained as a taxpayer suit, there being no illegal disbursement of public funds involved;

4. The instant petition is essentially an action for quo warranto and may only be commenced by the Solicitor General;

5. The operation of jai-alai is well within PAGCORs authority to operate and maintain. PAGCORs franchise is intended to be wide in its coverage, the underlying considerations being, that: (1) the franchise must be used to integrate all gambling operations in one corporate entity (i.e. PAGCOR); and (2) it must be used to generate funds for the government to support its social impact projects;

6. The agreement executed by, between and among PAGCOR, BJAC and FILGAME is outside the coverage of existing laws requiring public bidding.

Substantially the same defenses were raised by respondent PAGCOR in its Comment.

G.R. No. 138982

Petitioners contend that:

I. The operation of jai-alai games by PAGCOR is illegal in that:

1) the franchise of PAGCOR does not include the operation of jai-alai since jai-alai is a prohibited activity under the Revised Penal Code, as amended by P.D. No. 1602 which is otherwise known as the Anti-Gambling Law;

2) jai-alai is not a game of chance and therefore cannot be the subject of a PAGCOR franchise.

II. A franchise is a special privilege that should be construed strictly against the grantee.

III. To allow PAGCOR to operate jai-alai under its charter is tantamount to a license to PAGCOR to legalize and operate any gambling activity.

In its Comment, respondent PAGCOR avers that:

1. An action for injunction is not among the cases or proceedings originally cognizable by the Honorable Supreme Court, pursuant to Section 1, Rule 56 of the 1997 Rules of Civil Procedure.

2. Assuming, arguendo, the Honorable Supreme Court has jurisdiction over the petition, the petition should be dismissed for failure of petitioners to observe the doctrine on hierarchy of courts.

3. x x x Petitioners have no legal standing to file a taxpayers suit based on their cause of action nor are they the real parties-in-interest entitled to the avails of the suit.

4. Respondents franchise definitely includes the operation of jai-alai.

5. Petitioners have no right in esse to be entitled to a temporary restraining order and/or to be protected by a writ of preliminary injunction.

The Solicitor General claims that the petition, which is actually an action for quo warranto under Rule 66 of the Rules of Court, against an alleged usurpation by PAGCOR of a franchise to operate jai alai, should be dismissed outright because only the Solicitor General or public prosecutor can file the same; that P.D. No. 1869, the Charter of PAGCOR, authorizes PAGCOR to regulate and operate games of chance and skill which include jai-alai; and that P.D. No. 1602 did not outlaw jai-alai but merely provided for stiffer penalties to illegal or unauthorized activities related to jai-alai and other forms of gambling.

We shall first rule on the important procedural issues raised by the respondents.

Respondents in G.R. No. 138982 contend that the Court has no jurisdiction to take original cognizance of a petition for injunction because it is not one of those actions specifically mentioned in Section 1 of Rule 56 of the 1997 Rules of Civil Procedure. Moreover, they urge that the petition should be dismissed for failure of petitioners to observe the doctrine on hierarchy of courts.

It is axiomatic that what determines the nature of an action and hence, the jurisdiction of the court, are the allegations of the pleading and the character of the relief sought.[4] A cursory perusal of the petition filed in G.R. No. 138982 will show that it is actually one for Prohibition under Section 2 of Rule 65 for it seeks to prevent PAGCOR from managing, maintaining and operating jai-alai games. Even assuming, arguendo, that it is an action for injunction, this Court has the discretionary power to take cognizance of the petition at bar if compelling reasons, or the nature and importance of the issues raised, warrant the immediate exercise of its jurisdiction.[5] It cannot be gainsaid that the issues raised in the present petitions have generated an oasis of concern, even days of disquiet in view of the public interest at stake. In Tano, et al. vs. Socrates, et al.,[6] this Court did not hesitate to treat a petition for certiorari and injunction as a special civil action for certiorari and prohibition to resolve an issue of far-reaching impact to our people. This is in consonance with our case law now accorded near religious reverence that rules of procedure are but tools designed to facilitate the attainment of justice such that when its rigid application tends to frustrate rather than promote substantial justice, this Court has the duty to suspend their operation.[7]

Respondents also assail the locus standi or the standing of petitioners to file the petitions at bar as taxpayers and as legislators. First, they allege that petitioners have no legal standing to file a taxpayers suit because the operation of jai-alai does not involve the disbursement of public funds.

Respondents' stance is not without oven ready legal support. A party suing as a taxpayer must specifically prove that he has sufficient interest in preventing the illegal expenditure of money raised by taxation.[8] In essence, taxpayers are allowed to sue where there is a claim of illegal disbursement of public funds,[9] or that public money is being deflected to any improper purpose,[10] or where petitioners seek to restrain respondent from wasting public funds through the enforcement of an invalid or unconstitutional law.[11]

In the petitions at bar, the Agreement entered into between PAGCOR and private respondents BELLE and FILGAME will show that all financial outlay or capital expenditure for the operation of jai-alai games shall be provided for by the latter. Thus, the Agreement provides, among others, that: PAGCOR shall manage, operate and control the jai-alai operation at no cost or financial risk to it (Sec. 1[A][1]); BELLE shall provide funds, at no cost to PAGCOR, for all capital expenditures (Sec. 1[B][1]); BELLE shall make available to PAGCOR, at no cost to PAGCOR, the use of the integrated nationwide network of on-line computerized systems (Sec. 1[B][2]); FILGAME shall make available for use of PAGCOR on a rent-free basis the jai-alai fronton facilities (Sec. 1 [C][1]); BELLE & FILGAME jointly undertake to provide funds, at no cost to PAGCOR, for pre-operating expenses and working capital (Sec. 1 [D][1]); and that BELLE & FILGAME will provide PAGCOR with goodwill money in the amount of P 200 million (Sec. 1 [D][2]). In fine, the record is barren of evidence that the operation and management of jai-alai by the PAGCOR involves expenditure of public money.

Be that as it may, in line with the liberal policy of this Court on locus standi when a case involves an issue of overarching significance to our society,[12] we find and so hold that as members of the House of Representatives, petitioners have legal standing to file the petitions at bar. In the instant cases, petitioners complain that the operation of jai-alai constitutes an infringement by PAGCOR of the legislatures exclusive power to grant franchise. To the extent the powers of Congress are impaired, so is the power of each member thereof, since his office confers a right to participate in the exercise of the powers of that institution, so petitioners contend. The contention commands our concurrence for it is now settled that a member of the House of Representatives has standing to maintain inviolate the prerogatives, powers and privileges vested by the Constitution in his office.[13] As presciently stressed in the case of Kilosbayan, Inc., viz:

We find the instant petition to be of transcendental importance to the public. The issues it raised are of paramount public interest and of a category even higher than those involved in many of the aforecited cases. The ramifications of such issues immeasurably affect the social, economic, and moral well-being of the people even in the remotest barangays of the country and the counter-productive and retrogressive effects of the envisioned on-line lottery system are as staggering as the billions in pesos it is expected to raise. The legal standing then of the petitioners deserves recognition x x x.

After hurdling the threshold procedural issues, we now come to the decisive substantive issue of whether PAGCOR's legislative franchise includes the right to manage and operate jai-alai.[14] The issue is of supreme significance for its incorrect resolution can dangerously diminish the plenary legislative power of Congress, more especially its exercise of police power to protect the morality of our people. After a circumspect consideration of the clashing positions of the parties, we hold that the charter of PAGCOR does not give it any franchise to operate and manage jai-alai.

FIRST. A franchise is a special privilege conferred upon a corporation or individual by a government duly empowered legally to grant it.[15] 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.[16] A franchise thus emanates from a sovereign power[17] and the grant is inherently a legislative power. It may, however, be derived indirectly from the state through an agency to which the power has been clearly and validly delegated.[18] In such cases, Congress prescribes the conditions on which the grant of a franchise may be made.[19] Thus, the manner of granting the franchise, to whom it may be granted, the mode of conducting the business, the character and 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. In the absence of these defining terms, any claim to a legislative franchise to operate a game played for bets and denounced as a menace to morality ought to be rejected.

SECOND. A historical study of the creation, growth and development of PAGCOR will readily show that it was never given a legislative franchise to operate jai-alai.

(2.a) Before the creation of PAGCOR, a 25-year right to operate jai-alai in Manila was given by President Marcos to the Philippine Jai-Alai and Amusement Corporation then controlled by his in-laws, the Romualdez family. The franchise was granted on October 16, 1975 thru P.D. No. 810 issued by President Marcos in the exercise of his martial law powers. On that very date, the 25-year franchise of the prior grantee expired and was not renewed. A few months before, President Marcos had issued P.D. No. 771 dated August 20, 1975, revoking the authority of local government units to issue jai-alai franchises. By these acts, the former President exercised complete control of the sovereign power to grant franchises.

(2.b) Almost one year and a half after granting the Philippine Jai-Alai and Amusement Corporation a 25-year franchise to operate jai-alai in Manila, President Marcos created PAGCOR on January 1, 1977 by issuing P.D. No. 1067-A. The decree is entitled Creating the Philippine Amusements and Gaming Corporation, Defining Its Powers and Functions, Providing Funds therefor and for Other Purposes. Its Declaration of Policy[20] trumpeted the intent that PAGCOR was created to implement the policy of the State to centralize and integrate all games of chance not heretofore authorized by existing franchises or permitted by law x x x. One of its whereas clauses referred to the need to prevent the proliferation of illegal casinos or clubs conducting games of chance x x x.[21] To achieve this objective, PAGCOR was empowered to establish and maintain clubs, casinos, branches, agencies or subsidiaries, or other units anywhere in the Philippines x x x.[22]

(2.c) On the same day after creating PAGCOR, President Marcos issued P.D. No. 1067-B granting PAGCOR x x x a Franchise to Establish, Operate, and Maintain Gambling Casinos on Land or Water Within the Territorial Jurisdiction of the Republic of the Philippines. Obviously, P.D. No. 1067-A which created the PAGCOR is not a grant of franchise to operate the game of jai-alai. On the other hand, Section 1 of P.D. No. 1067-B provides the nature and term of PAGCORS franchise to maintain gambling casinos (not a franchise to operate jai-alai), viz:

SECTION 1. NATURE AND TERM OF FRANCHISE. Subject to the terms and conditions established in this Decree, the Philippine Amusements and Gaming Corporation is hereby granted for a period of twenty-five (25) years, renewable for another 25 years, the right, privilege, and authority to operate and maintain gambling casinos, clubs and other recreation or amusement places, sports, gaming pools, i.e., basketball, football, etc., whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines.

Section 2 of the same decree spells out the scope of the PAGCOR franchise to maintain gambling casinos (not a franchise to operate jai-alai), viz:

SEC. 2. SCOPE OF FRANCHISE. In addition to the right and privileges granted it under Sec. 1, this Franchise shall entitle the franchise holder to do and undertake the following:

(1) Enter into operators and/or management contracts with duly registered and accredited company possessing the knowledge, skill, expertise and facilities to insure the efficient operation of gambling casinos; Provided, That the service fees of such management and/or operator companies whose services may be retained by the franchise holder of this Franchise shall not in the aggregate exceed ten (10%) percent of the gross income.

(2) Purchase foreign exchange that may be required for the importation of equipment, facilities and other gambling paraphernalia indispensably needed or useful to insure the successful operation of gambling casinos.

(3) Acquire the right of way, access to or thru public lands, public waters or harbors, including the Manila Bay Area; such right to include, but not limited to, the right to lease and/or purchase public lands, government reclaimed lands, as well as land of private ownership or those leased from the government. This right shall carry with it the privilege of the franchise holder to utilize piers, quays, boat landings, and such other pertinent and related facilities within these specified areas for use as landing, anchoring, or berthing sites in connection with its authorized casino operations.

(4) Build or construct structures, buildings, coastways, piers, docks, as well as any other form of land and berthing facilities for its floating casinos.

(5) To do and perform such other acts directly related to the efficient and successful operation and conduct of games of chance in accordance with existing laws and decrees.

(2.d) Still on the day after creating PAGCOR, President Marcos issued P.D. No. 1067-C amending P.D. Nos. 1067-A and B. The amendment provides that PAGCORs franchise to maintain gambling casinos x x x shall become exclusive in character, subject only to the exception of existing franchises and games of chance heretofore permitted by law, upon the generation by the franchise holder of gross revenues amounting to P1.2 billion and its contribution therefrom of the amount of P720 million as the governments share.

(2.e) On June 2, 1978, President Marcos issued P.D. No. 1399 amending P.D. Nos. 1067-A and 1067-B. The amendments did not change the nature and scope of the PAGCOR franchise to maintain gambling casinos. Rather, they referred to the Composition of the Board of Directors,[23] Special Condition of Franchise,[24]` Exemptions,[25] and Other Conditions.[26]

(2.f) On August 13, 1979, President Marcos issued P.D. No. 1632. Again, the amendments did not change a comma on the nature and scope of PAGCORs franchise to maintain gambling casinos. They related to the allocation of the 60% share of the government where the host area is a city or municipality other than Metro Manila,[27] and the manner of payment of franchise tax of PAGCOR.[28]

(2.g) On July 11, 1983, President Marcos issued P.D. No. 1869 entitled Consolidating and Amending P.D. Nos. 1067-A, 1067-B, 1067-C, 1399 and 1632 Relative to the Franchise and Power of the PAGCOR. As a consolidated decree, it reiterated the nature and scope of PAGCORs existing franchise to maintain gambling casinos (not a franchise to operate jai-alai), thus:

SEC. 10. Nature and term of franchise. Subject to the terms and conditions established in this Decree, the Corporation is hereby granted for a period of twenty-five (25) years, renewable for another twenty-five (25) years, the rights, privilege and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming pools, i.e. basketball, football, lotteries, etc., whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines.

SEC. 11. Scope of Franchise. In addition to the rights and privileges granted it under the preceding Section, this Franchise shall entitle the corporation to do and undertake the following:

(1) Enter into operating and/or management contracts with any registered and accredited company possessing the knowledge, skill, expertise and facilities to insure the efficient operation of gambling casinos; provided, that the service fees of such management and/or operator companies whose services may be retained by the Corporation shall not in the aggregate exceed ten (10%) percent of the gross income;

(2) Purchase foreign exchange that may be required for the importation of equipment, facilities and other gambling paraphernalia indispensably needed or useful to insure the successful operation of gambling casinos;

(3) Acquire the right of way or access to or thru public land, public waters or harbors, including the Manila Bay Area; such right shall include, but not be limited to, the right to lease and/or purchase public lands, government reclaimed lands, as well as lands of private ownership or those leased from the Government. This right shall carry with it the privilege of the Corporation to utilize piers, quays, boat landings, and such other pertinent and related facilities within these specified areas for use as landing, anchoring or berthing sites in connection with its authorized casino operations;

(4) Build or construct structures, buildings, castways, piers, decks, as well as any other form of landing and boarding facilities for its floating casinos; and

(5) To do and perform such other acts directly related to the efficient and successful operation and conduct of games of chance in accordance with existing laws and decrees.

(2.h) Then came the 1986 EDSA revolution and the end of the Marcos regime. On May 8, 1987, President Corazon Aquino issued Executive Order No. 169 repealing P.D. Nos. 810, 1124 and 1966 thus revoking the franchise of the Philippine Jai-Alai and Amusement Corporation controlled by the Romualdezes to operate jai-alai in Manila. PAGCORs franchise to operate gambling casinos was not revoked. Neither was it given a franchise to operate jai-alai.

THIRD. In light of its legal history, we hold that PAGCOR cannot maintain that section 10 of P.D. No. 1869 grants it a franchise to operate jai-alai. Section 10 provides:

SEC. 10 Nature and term of franchise. Subject to the terms and conditions established in this Decree, the Corporation is hereby granted for a period of twenty-five (25) years, renewable for another twenty-five (25) years, the rights, privilege and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming pools, i.e., basketball, football, lotteries, etc., whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines.

(3.a) P.D. No. 1869 is a mere consolidation of previous decrees dealing with PAGCOR. PAGCOR cannot seek comfort in section 10 as it is not a new provision in P.D. No. 1869 and, from the beginning of its history, was never meant to confer it with a franchise to operate jai-alai. It is a reiteration of section 1 of P.D. No. 1067-B which provides:

SECTION 1. Nature and Term of Franchise. Subject to the terms and conditions established in this Decree, the Philippine Amusements and Gaming Corporation is hereby granted for a period of twenty-five (25) years, renewable for another 25 years, the right, privilege, and authority to operate and maintain gambling casinos, clubs and other recreation or amusement places, sports gaming pools, i.e., basketball, football, etc., whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines.

(3.b) Plainly, section 1 of P.D. No. 1067-B which was reenacted as section 10 of P.D. No. 1869 is not a grant of legislative franchise to operate jai-alai. P.D. No. 1067-B is a franchise to maintain gambling casinos alone. The two franchises are as different as day and night and no alchemy of logic will efface their difference.

(3.c) PAGCOR's stance becomes more sterile when we consider the law's intent. It cannot be the intent of President Marcos to grant PAGCOR a franchise to operate jai-alai because a year and a half before it was chartered, he issued P.D. No. 810 granting Philippine Jai-Alai and Amusement Corporation a 25-year franchise to operate jai-alai in Manila. This corporation is controlled by his in-laws, the Romualdezes.[29] To assure that this Romualdez corporation would have no competition, President Marcos earlier revoked the power of local governments to grant jai-alai franchises. Thus, PAGCORs stance that P.D. No. 1067-B is its franchise to operate jai-alai, which would have competed with the Romualdezes franchise, extends credulity to the limit. Indeed, P.D. No. 1067-A which created PAGCOR made it crystal clear that it was to implement "the policy of the State to centralize and integrate all games of chance not heretofore authorized by existing franchises or permitted by law," which included the Philippine Jai-Alai and Amusement Corporation.

(3.d) There can be no sliver of doubt that under P.D. No. 1869, PAGCORs franchise is only to operate gambling casinos and not jai-alai. This conclusion is compelled by a plain reading of its various provisions, viz:

"SECTION 1. Declaration of Policy. - It is hereby declared to be the policy of the State to centralize and integrate all games of chance not heretofore authorized by existing franchises or permitted by law in order to attain the following objectives:

x x x x x x

(b) To establish and operate clubs and casinos, for amusement and recreation, including sports, gaming pools (basketball, football, lotteries, etc.) and such other forms of amusement and recreation including games of chance, which may be allowed by law within the territorial jurisdiction of the Philippines and which will: x x x (3) minimize, if not totally eradicate, the evils, malpractices and corruptions that are normally prevalent in the conduct and operation of gambling clubs and casinos without direct government involvement.

x x x x x x

TITLE IV GRANT OF FRANCHISE

SEC. 10. Nature and term of franchise. Subject to the terms and conditions established in this Decree, the Corporation is hereby granted for a period of twenty-five (25) years, renewable for another twenty-five (25) years, the rights, privileges and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming pools, i.e. basketball, football, lotteries, etc. whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines.

SEC. 11. Scope of Franchise. In addition to the rights and privileges granted it under the preceding Section, this Franchise shall entitle the Corporation to do and undertake the following:

(1) Enter into operating and/or management contracts with any registered and accredited company possessing the knowledge, skill, expertise and facilities to insure the efficient operation of gambling casinos; provided, that the service fees of such management and/or operator companies whose services may be retained by the Corporation shall not in the aggregate exceed ten (10%) percent of the gross income;

(2) Purchase foreign exchange that may be required for the importation of equipment, facilities and other gambling paraphernalia indispensably needed or useful to insure the successful operation of gambling casinos;

(3) Acquire the right of way or access to or thru public land, public waters or harbors x x x. This right shall carry with it the privilege of the Corporation to utilize x x x such other pertinent and related facilities within these specified areas x x x in connection with its authorized casino operations;

(4) Build or construct structures, building castways, piers, decks, as well as any other form of landing and boarding facilities for its floating casinos;

x x x x x x

SEC. 13. Exemptions.

(1) Customs duties, taxes and other imposts on importations. All importations of equipment, vehicles, automobiles, boats, ships, barges, aircraft and such other gambling paraphernalia, including accessories or related facilities, for the sole and exclusive use of the casinos, the proper and efficient management and administration thereof, and such other clubs. Recreation or amusement places to be established under and by virtue of this Franchise shall be exempt from the payment of all kinds of customs duties, taxes and other imposts, including all kinds of fees, levies, or charges of any kind or nature, whether National or Local.

Vessels and/or accessory ferry boats imported or to be imported by any corporation having existing contractual arrangements with the Corporation, for the sole and exclusive use of the casino or to be used to service the operations and requirements of the casino, shall likewise be totally exempt from the payment of all customs duties, x x x.

(2) Income and other taxes. (a) x x x

(b) Others: The exemption herein granted for earnings derived from the operations conducted under the franchise x x x shall inure to the benefit of and extend to corporation(s) x x x with whom the Corporation or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise x x x.

(3) Dividend Income. x x x The dividend income shall not in such case be considered as part of beneficiaries taxable income; provided, however, that such dividend income shall be totally exempted from income or other forms of taxes if invested within six (6) months from date the dividend income is received, in the following:

(a) operation of the casino(s) or investments in any affiliate activity that will ultimately redound to the benefit of the Corporation or any other corporation with whom the Corporation has any existing arrangements in connection with or related to the operations of the casino(s);

x x x x x x

(4) Utilization of Foreign Currencies. The Corporation shall have the right and authority, solely and exclusively in connection with the operations of the casino(s), to purchase, receive, exchange and disburse foreign exchange, subject to the following terms and conditions:

(a) A specific area in the casino(s) or gaming pit shall be put up solely and exclusively for players and patrons utilizing foreign currencies;

(b) The Corporation shall appoint and designate a duly accredited commercial bank agent of the Central Bank, to handle, administer and manage the use of foreign currencies in the casino(s);

(c) The Corporation shall provide an office at casino(s) for the employees of the designated bank, agent of the Central Bank, where the Corporation will maintain a dollar account which will be utilized exclusively for the above purpose and the casino dollar treasury employees;

x x x x x x

(f) The disbursement, administration, management and recording of foreign exchange currencies used in the casino(s) shall be carried out in accordance with existing foreign exchange regulations x x x.

SEC. 14. Other Conditions.

(1) Place. The Corporation shall conduct the gambling activities or games of chance on land or water within the territorial jurisdiction of the Republic of the Philippines. When conducted on water, the Corporation shall have the right to dock the floating casino(s) in any part of the Philippines where vessels/boats are authorized to dock under the Customs and Maritime Laws.

(2) Time. Gambling activities may be held and conducted at anytime of the day or night; provided, however, that in places where curfew hours are observed, all players and personnel of gambling casinos shall remain within the premises of the casinos.

(3) Persons allowed to play. x x x

(4) Persons not allowed to play. -

x x x x x x

From these are excepted the personnel employed by the casinos, special guests, or those who at the discretion of the Management may be allowed to stay in the premises.

TITLE VI EXEMPTION FROM CIVIL SERVICE LAW

SEC. 16. Exemption. All position in the Corporation, whether technical, administrative, professional or managerial are exempt from the provisions of the Civil Service Law, rules and regulations, and shall be governed only by the personnel management policies set by the Board of Directors. All employees of the casinos and related services shall be classified as Confidential appointees.

TITLE VII TRANSITORY PROVISIONS

SEC. 17. Transitory Provisions. x x x

SEC. 18. Exemption from Labor Laws. No union or any form of association shall be formed by all those working as employees of the casino or related services whether directly or indirectly. For such purpose, all employees of the casinos or related services shall be classified as confidential appointees and their employment thereof, whether by the franchise holder, or the operators, or the managers, shall be exempt from the provisions of the Labor Code or any implementing rules and regulations thereof.

From its creation in 1977 and until 1999, PAGCOR never alleged that it has a franchise to operate jai-alai. Twenty-two years is a long stretch of silence. It is inexplicable why it never claimed its alleged franchise for so long a time which could have allowed it to earn billions of pesos as additional income.

(3.e) To be sure, we need not resort to intellectual jujitsu to determine whether PAGCOR has a franchise to operate jai-alai. It is easy to tell whether there is a legislative grant or not. Known as the game of a thousand thrills, jai-alai is a different game, hence, the terms and conditions imposed on a franchisee are spelled out in standard form. A review of some laws and executive orders granting a franchise to operate jai-alai will demonstrate these standard terms and conditions, viz:

(3.e.1) Commonwealth Act No. 485 (An Act to Permit Bets in the Game of Basque Pelota) June 18, 1939

Be it enacted by the National Assembly of the Philippines:

SECTION 1. Any provision of existing law to the contrary notwithstanding, it shall be permissible in the game of Basque pelota, a game of skill (including the games of pala, raqueta, cestapunta, remonte and mano), in which professional players participate, to make either direct bets or bets by means of a totalizer; Provided, That no operator or maintainer of a Basque pelota court shall collect as commission a fee in excess of twelve per centum on such bets, or twelve per centum of the receipts of the totalizer, and of such per centum three shall be paid to the Government of the Philippines, for distribution in equal shares between the General Hospital and the Philippine Anti-tuberculosis Society.

SEC. 2. Any person, company or corporation, that shall build a court for Basque pelota games with bets within eighteen months from the date of the approval of this Act, shall thereunder have the privilege to maintain and operate the said court for a term of twenty-five years from the date in which the first game with bets shall have taken place. At the expiration of the said term of twenty-five years, the buildings and the land on which the court and the stadium shall be established, shall become the property of the Government of the Philippines, without payment.

SEC. 3. The location and design of the buildings that shall be used for the same games of Basque pelota, shall have prior approval of the Bureau of Public Works and the operator shall pay a license fee of five hundred pesos a year to the city or municipality in which the establishment shall be situated, in addition to the real-estate tax due on such real property.

SEC. 4. This Act shall take effect upon its approval.

ENACTED, without Executive approval, June 18, 1939.

(3.e.2) Executive Order No. 135 (Regulating the Establishment, Maintenance and Operation of Frontons and Basque Pelota Games [Jai Alai]) May 4, 1948

By virtue of the powers vested in me by Commonwealth Act No. 601, entitled An Act to regulate the establishment, maintenance and operation of places of amusements in chartered cities, municipalities and municipal districts, the following rules and regulations governing frontons and basque pelota games are hereby promulgated:

SECTION 1. Definitions. Whenever used in this Order and unless the context indicates a different meaning, the following terms shall bear the meaning indicated herein:

(a) Basque pelota game shall include the pelota game with the use of pala, raqueta, cesta punta, remonte and mano, in which professional players participate.

(b) Fronton comprises the court where basque pelota games are played, inlcuding the adjoining structures used in connection with such games, such as the betting booths and galleries, totalizator equipment, and the grandstands where the public is admitted in connection with such games.

(c) Pelotari is a professional player engaged in playing basque pelota.

(d) Professional player is one who plays for compensation.

SEC. 2. Supervision over the establishment and operation of frontons and basque pelota games. Subject to the administrative control and supervision of the Secretary of the Interior, city or municipal mayors shall exercise supervision over the establishment, maintenance and operation of frontons and basque pelota games within their respective territorial jurisdiction, as well as over the officials and employees of such frontons and shall see to it that all laws, orders and regulations relating to such establishments are duly enforced. Subject to similar approval, they shall appoint such personnel as may be needed in the discharge of their duties and fix their compensation which shall be paid out of the allotment of one-half per centum (1/2%) out of the total bets or wager funds set aside and made available for the purpose in accordance with Section 19 hereof. The Secretary of the Interior shall have the power to prohibit or allow the operation of such frontons on any day or days, or modify their hour of operation and to prescribe additional rules and regulations governing the same.

SEC. 3. Particular duties of city or municipal mayors regarding operation of basque pelota games and frontons. In connection with their duty to enforce the laws, orders, rules and regulations relating to frontons and basque pelota games, the city or municipal mayor shall require that such frontons shall be properly constructed and maintained in accordance with the provisions of Commonwealth Act No. 485; shall see that the proper sanitary accommodations are provided in the grandstands and other structures comprising such frontons; and shall require that such frontons be provided with a properly equipped clinic for the treatment of injuries to the pelotaris.

SEC. 4. Permits. In the absence of a legislative franchise, it shall be unlawful for any person or entity to establish and/or operate frontons and conduct basque pelota games without a permit issued by the corresponding city or municipal mayor, with the approval of the provincial governor in the latter case. Any permit issued hereunder shall be reported by the provincial governor or city mayor, as the case may be, to the Secretary of the Interior.

SEC. 5. License fees. The following license fees shall be paid:

(a) For each basque pelota fronton, five hundred pesos (P500) annually, or one hundred and twenty-five pesos (P125) quarterly.

(b) For pelotaris, judges or referees and superintendents (intendentes) of basque pelota games, eighteen pesos (P18) each annually.

The above license fees shall accrue to the funds of the city or municipality where the fronton is operated.

SEC. 6. Location. Except in the case of any basque pelota fronton licensed as of December 8, 1941, no basque pelota fronton shall be maintained or operated within a radius of 200 lineal meters from any city hall or municipal building, provincial capitol building, national capitol building, public playa or park, public school, church, hospital, athletic stadium, or any institution of learning or charity.

SEC. 7. Buildings, sanitary and parking requirements. No permit or license for the construction or operation of a basque pelota fronton shall be issued without proper certificate of the provincial or city engineer and architect certifying to the suitability and safety of the building and of the district or city health officer certifying to the sanitary condition of said building. The city or municipal mayor may, in his discretion and as circumstances may warrant, require that the fronton be provided with sufficient space for parking so that the public roads and highways be not used for such purposes.

SEC. 8. Protest and complaint. Any person who believes that any basque pelota fronton is located or established in any place not authorized herein or is being operated in violation of any provision of this order may file a protest or complaint with the city or municipal mayor concerned, and after proper investigation of such complaint the city or municipal mayor may take such action as he may consider necessary in accordance with the provisions of section 10 hereof. Any decision rendered on the matter by the city or municipal mayor shall be appealable to the Secretary of the Interior.

SEC. 9. Persons prohibited admission. Persons under 16 years of age, persons carrying firearms or deadly weapons of any description, except government officials actually performing their official duties therein, intoxicated persons, and persons of disorderly nature and conduct who are apt to disturb peace and order, shall not be admitted or allowed in any basque pelota fronton: Provided, That persons under 16 years of age may, when accompanied by their parents or guardians, be admitted therein but in no case shall such minors be allowed to bet.

SEC. 10. Gambling prohibited. No card games or any of the prohibited games shall be permitted within the premises of any basque pelota fronton; and upon satisfactory evidence that the operator or entity conducting the game has tolerated the existence of any prohibited game within its premises, the city or municipal mayor may take the necessary action in accordance with the provisions of section 11 hereof.

SEC. 11. Revocation or suspension of permits and licenses. The city or municipal mayor, subject to the approval of the Secretary of the Interior, may suspend or revoke any license granted under this Order to any basque pelota fronton or to any official or employee thereof, for violation of any of the rules and regulations provided in this Order or those which said city or municipal mayor may prescribe, or for any just cause. Such suspension or revocation shall operate to forfeit to the city or municipality concerned all sums paid therefor.

SEC. 12. Appeals. Any action taken by the city or municipal mayor under the provisions of this Order shall stand, unless modified or revoked by the Secretary of the Interior.

SEC. 13. Books, records and accounts. The city or municipal mayor, or his duly authorized representative, shall have the power to inspect at all times the books, records, and accounts of any basque pelota fronton. He may, in his discretion and as the circumstances may warrant, require that the books and financial or other statements of the person or entity operating the game be kept in such manner as he may prescribe.

SEC. 14. Days and hours of operation. Except as may otherwise be provided herein, basque pelota games with betting shall be allowed every day, excepting Sundays, from 2 oclock p.m. to not later than 11 oclock p.m.

SEC. 15. Pelotaris, judges, referees, etc. shall be licensed. No person or entity operating a basque pelota fronton, wherein games are played with betting, shall employ any pelotari, judge or referee, superintendent of games (intendente), or any other official whose duties are connected with the operation or supervision of the games, unless such person has been duly licensed by the city or municipal mayor concerned. Such license shall be granted upon satisfactory proof that the applicant is in good health, know the rules and usages of the game, and is a person of good moral character and of undoubted honesty. In the case of pelotaris, such license shall be granted only upon the further condition that they are able to play the game with reasonable skill and with safety to themselves and to their opponents. The city or municipal mayor may further require other reasonable qualifications for applicants to a license, not otherwise provided herein. Such license shall be obtained yearly.

SEC. 16. Installation of automatic electric totalizator. Any person or entity operating a fronton wherein betting in any form is allowed shall install in its premises within the period of one year from the date this Order takes effect, an automatic electrically operated indicator system and ticket selling machine, commonly known as totalizator, which shall clearly record each ticket purchased on every player in any game, the total number of tickets sold on each event, as well as the dividends that correspond to holders of winning numbers. This requirement shall, however, not apply to double events or forecast pools or to any betting made on the basis of a combination or grouping of players until a totalizator that can register such bets has been invented and placed on the market.

SEC. 17. Supervision over sale of betting tickets and payment of dividends. For the purpose of verifying the accuracy of reports in connection with the sale of betting tickets and the computation of dividends awarded to winners on each event, as well as other statements with reference to the betting in the games played, the city or municipal mayor shall assign such number of auditing officers and checkers as may be necessary for the purpose. These auditing officers and checkers shall be placed in the ticket selling booths, dividend computation booths and such other parts of the fronton, where betting tickets are sold and dividends computed. It shall be their duty to check up and correct any irregularity or any erroneous report or computation that may be made by officials of the fronton, in connection with the sale of tickets and the payment of dividends.

SEC. 18. Wager tickets and dividends. The face value of the wager tickets for any event shall not exceed P5 whether for win or place, or for any combination or grouping of winning numbers. The face value of said tickets, as the case may be, shall be the basis for the computation of the dividends and such dividends shall be paid after eliminating fractions of ten centavos (P0.10); for example: if the resulting dividend is P10.43, the dividend that shall be paid will be only P10.40.

SEC. 19. Distribution of wager funds. The total wager funds or gross receipts from the sale of the betting tickets shall be apportioned as follows: a commission not exceeding ten and one-half per centum (10 %) on the total bets on each game or event shall be set aside for the person or entity operating the fronton and four and one-half per centum (4 %) of such bets shall be covered into the National Treasury for disposition as may be authorized by law or executive order; and the balance or eighty-five per centum (85%) of the total bets shall be distributed in the form of dividends among holders of win or place numbers or holders of the winning combination or grouping of numbers, as the case may be: Provided, however, That of the ten and one-half per centum (10 %) representing the commission of the person or entity operating the fronton, an amount equivalent to one-half per centum (1/2%) of the total bets or wager funds shall be set aside and made available to cover the expenses of the personnel assigned to supervise the operation of basque pelota games and frontons, including payment of salaries of such personnel, purchase of necessary equipment and other sundry expenses as may be authorized by competent authority.

SEC. 20. Supervision over the conduct of games; enforcement of rules and regulations. The city or municipal mayor is authorized to place within the premises of the fronton such number of inspectors and agents as may be deemed necessary to supervise the conduct of the games to see that the rules of the games are strictly enforced, and to carry out the provisions of this Order as well as such other regulations as may hereafter be prescribed.

SEC. 21. Rules governing the games and personnel of the fronton. The rules and regulations that have been adopted by any fronton to govern the operation of its games and the behavior, duties and performance of the officials and personnel connected therewith, such as pelotaris, judges, referees or superintendents of games (intendentes) and others, shall be the recognized rules and regulations of such fronton until the same are altered or repealed by the Secretary of the Interior; and any fronton may introduce any type or form of games or events, provided they are not contrary to the provisions of this Order or any rule or regulation hereafter issued by the Secretary of the Interior.

SEC. 22. Regulations governing pelotaris. Any rule or regulation adopted by any established fronton governing the conduct or performance of pelotaris to the contrary notwithstanding, the following regulations shall be observed:

(a) The pelotaris who are participating in the games shall not be allowed to communicate, talk or make signs with any one in the public or with any official or employee of the fronton during the games, except with the judges or referees or the superintendent (intendente) in charge of the games;

(b) The program of games or events, as well as the line-up or order of playing of the pelotaris in each event shall be determined by the superintendent of the games (intendente), subject to the approval of the city or municipal mayor, or his authorized representatives;

(c) Pelotaris shall be in good physical condition before participating in any game and shall be laid off from playing at least two days in a week. Every pelotari shall once a month secure a medical certificate from a government physician to be designated by the city or municipal mayor concerned certifying to his physical fitness to engage in the games; and

(d) The amount of dividends computed for any event shall not be posted within the view of the pelotaris participating in the event until after the termination of said event.

(3.e.3) Presidential Decree No. 810 (An Act Granting the Philippine Jai-Alai and Amusement Corporation a Franchise to Operate, Construct and Maintain a Fronton for Basque Pelota and Similar Games of Skill in the Greater Manila Area) October 16, 1975

WHEREAS, by virtue of the provisions of Commonwealth Act Numbered 485 the franchise to operate and maintain a fronton for the Basque pelota and similar games of skill in the City of Manila, shall expire on October, 1975 whereupon the ownership of the land, buildings and improvements used in the said game will be transferred without payment to the government by operation of law;

WHEREAS, there is a pressing need not only to further develop the game as a sport and amusement for the general public but also to exploit its full potential in support of the governments objectives and development programs;

WHEREAS, Basque pelota is a game of international renown, the maintenance and promotion of which will surely assist the tourism industry of the country;

WHEREAS, the tourism appeal of the game will be enhanced only with the governments support and inducement in developing the sport to a level at par with international standards;

WHEREAS, once such tourism appeal is developed, the same will serve as a stable and expanding base for revenue generation for the governments development projects.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, hereby decree as follows:

SECTION 1. Any provision of law to the contrary notwithstanding, there is hereby granted to the Philippine Jai-Alai and Amusement Corporation, a corporation duly organized and registered under the laws of the Philippines, hereinafter called the grantee or its successors, for a period of twenty-five years from the approval of this Act, extendable for another twenty-five years without the necessity of another franchise, the right, privilege and authority to construct, operate and maintain a court for Basque Pelota (including the games of pala, raqueta, cestapunta, remonte and mano) within the Greater Manila Area, establish branches thereof for booking purposes and hold or conduct Basque pelota games therein with bettings either directly or by means of electric and/or computerized totalizator.

The games to be conducted by the grantee shall be under the supervision of the Games and Amusements Board, hereinafter referred to as the Board, which shall enforce the laws, rules and regulations governing Basque pelota as provided in Commonwealth Act numbered four hundred and eighty-five, as amended, and all the officials of the game and pelotaris therein shall be duly licensed as such by the Board.

SEC. 2. The grantee or its duly authorized agent may offer, take or arrange bets within or outside the place, enclosure or court where the Basque pelota games are held: Provided, That bets offered, taken or arranged outside the place, enclosure or court where the games are held, shall be offered, taken or arranged only in places duly licensed by the corporation; Provided, however, That the same shall be subject to the supervision of the Board. No person other than the grantee or its duly authorized agents shall take or arrange bets on any pelotari or on the game, or maintain or use a totalizator or other device, method or system to bet on any pelotari or on the game within or without the place, enclosure or court where the games are held by the grantee. Any violation of this section shall be punished by a fine of not more than two thousand pesos or by imprisonment of not more than six months, or both in the discretion of the Court. If the offender is a partnership, corporation, or association, the criminal liability shall devolve upon its president, directors or any other officials responsible for the violation.

SEC. 3. The grantee shall provide mechanical and/or computerized devices, namely: a) electric totalizator; b) machine directly connected to a computer in a display board, for the sale of tickets, including, those sold from the off-court stations; c) modern sound system and loud speakers; d) facilities that bring safety, security, comfort and convenience to the public; e) modern intercommunication devices; and f) such other facilities, devices and instruments for clean, honest and orderly Basque pelota games, within three years from the approval of this Act.

The Board shall assign its auditors and/or inspectors to supervise and regulate the placing of bets, proper computation of dividends and the distribution of wager funds.

SEC. 4. The total wager fund or gross receipts from the sale of betting tickets will be apportioned as follows: eighty-five per centum (85%) shall be distributed in the form of dividends among the holders of win or place numbers or holders of the winning combination or grouping of numbers as the case may be. The remaining balance of fifteen per centum (15%) shall be distributed as follows: eleven and one-half per centum (11 %) shall be set aside as the commission fee of the grantee, and three and one-half per centum (3 %) thereof shall be set aside and alloted to any special health, educational, civic, cultural, charitable, social welfare, sports, and other similar projects as may be directed by the President. The receipts from betting corresponding to the fraction of ten centavos eliminated from the dividends paid to the winning tickets, commonly known as breakage, shall also be set aside for the above-named special projects.

SEC. 5. The provision of any existing law to the contrary notwithstanding, the grantee is hereby authorized to hold Basque pelota games (including the games of pala, raqueta, cestapunta, remonte and mano) on all days of the week except Sundays and official holidays.

SEC. 6. The provisions of Commonwealth Act numbered four hundred and eighty-five as amended, shall be deemed incorporated herein, provided that the provisions of this Act shall take precedence over the provisions thereof and all other laws, executive orders and regulations which are inconsistent herewith.

SEC. 7. The grantee shall not lease, transfer, grant the usufruct of, sell or assign this franchise permit, or the rights or privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity, nor merge with any other person, company or corporation organized for the same purpose, without the previous approval of the President of the Philippines.

SEC. 8. For purposes of this franchise, the grantee is herein authorized to make use of the existing fronton, stadium and facilities located along Taft Avenue, City of Manila, belonging to the government by virtue of the provisions of Commonwealth Act numbered four hundred and eighty-five.

It is abundantly clear from the aforequoted laws, executive orders and decrees that the legislative practice is that a franchise to operate jai-alai is granted solely for that purpose and the terms and conditions of the grant are unequivocably defined by the grantor. Such express grant and its conditionalities protective of the public interest are evidently wanting in P.D. No. 1869, the present Charter of PAGCOR. Thus, while E.O. 135 and P.D. No. 810 provided for the apportionment of the wager funds or gross receipts from the sale of betting tickets, as well as the distribution of dividends among holders of win or place numbers or holders of the winning combination or grouping of numbers, no such provisions can be found in P.D. No. 1869. Likewise, while P.D. No. 810 describes where and how the games are to be conducted and bettings to be made, and imposes a penalty in case of a violation thereof, such provisions are absent in P.D. No. 1869.

In fine, P.D. No. 1869 does not have the standard marks of a law granting a franchise to operate jai-alai as those found under P.D. No. 810 or E.O. 135. We cannot blink away from the stubborn reality that P.D. No. 1869 deals with details pertinent alone to the operation of gambling casinos. It prescribes the rules and regulations concerning the operation of gambling casinos such as the place, time, persons who are and are not entitled to play, tax exemptions, use of foreign exchange, and the exemption of casino employees from the coverage of the Civil Service Law and the Labor Code. The short point is that P.D. No. 1869 does not have the usual provisions with regards to jai-alai. The logical inference is that PAGCOR was not given a franchise to operate jai-alai frontons. There is no reason to resist the beguiling rule that acts of incorporation, and statutes granting other franchises or special benefits or privileges to corporations, are to be construed strictly against the corporations; and whatever is not given in unequivocal terms is understood to be withheld.[30]

FOURTH. The tax treatment between jai-alai operations and gambling casinos are distinct from each other. Letters of Instruction No. 1439 issued on November 2, 1984 directed the suspension of the imposition of the increased tax on winnings in horse races and jai-alai under the old revenue code, to wit:

WHEREAS, the increased tax on winnings on horse races and jai-alai under Presidential Decree 1959 has already affected the holding of horse races and jai-alai games, resulting in government revenue loss and affecting the livelihood of those dependent thereon;

WHEREAS, the manner of taxation applicable thereto is unique and its effects and incidence are in no way similar to the taxes on casino operation or to any shiftable tax;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and instruct the Minister of Finance, the Commissioner of the Bureau of Internal Revenue, and the Chairman, Games & Amusements Board, to suspend the implementation of the increased rate of tax winnings in horse races and jai-alai games and collect instead the rate applicable prior to the effectivity of PD 1959.

Similarly, under Republic Act No. 8424, or the Tax Reform Act of 1997, there is an amusement tax imposed on operators of jai-alai (Section 125) and a stamp tax on jai-alai tickets (Section 190). There is no corresponding imposition on gambling casinos. Well to note, section 13 of P.D. No. 1869 grants to the franchise holder and casino operators tax exemptions from the payment of customs duties and income tax, except a franchise tax of five (5%) percent which shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or national government authority. No similar exemptions have been extended to operators of jai-alai frontons.

FIFTH. P.D. No. 1869, the present Charter of PAGCOR, is a consolidation of P.D. Nos. 1067-A, 1067-B and 1067-C all issued on January 1, 1977. P.D. No. 1067-A created the PAGCOR and defined its powers and functions; P.D. No. 1067-B granted to PAGCOR a franchise to establish, operate, and maintain gambling casinos on land or water within the territorial jurisdiction of the Republic of the Philippines; and P.D. No. 1067-C granted PAGCOR the exclusive right, privilege and authority to operate and maintain gambling casinos, subject only to the exception of existing franchises and games of chance permitted by law.

Beyond debate, P.D. No. 1869 adopted substantially the provisions of said prior decrees, with some additions which, however, have no bearing on the franchise granted to PAGCOR to operate gambling casinos alone, such as the Affiliation Provisions under Title III and the Transitory Provisions under Title VII. It also added the term lotteries under Section 1 (b) on Declaration of Policy and Section 10 on the Nature and Term of Franchise. It ought to follow that P.D. No. 1869 carries with it the same legislative intent that infused P.D. Nos. 1067-A, 1067-B and 1067-C. To be sure, both P.D. No. 1067-A and P.D. No. 1869 seek to enforce the same avowed policy of the State to minimize, if not totally eradicate, the evils, malpractices and corruptions that normally are found prevalent in the conduct and operation of gambling clubs and casinos without direct government involvement. It did not address the moral malevolence of jai-alai games and the need to contain it thru PAGCOR. We cannot deface this legislative intent by holding that the grant to PAGCOR under P.D. Nos. 1067-A and 1067-B to establish, operate, and maintain gambling casinos, has been enlarged, broadened or expanded by P.D. No. 1869 so as to include a grant to operate jai-alai frontons. Then and now, the intention was merely to grant PAGCOR a franchise to operate gambling casinos, no more, no less.

SIXTH. Lest the idea gets lost in the shoals of our subconsciousness, let us not forget that PAGCOR is engaged in business affected with public interest. The phrase affected with public interest means that an industry is subject to control for the public good;[31] it has been considered as the equivalent of subject to the exercise of the police power.[32] Perforce, a legislative franchise to operate jai-alai is imbued with public interest and involves an exercise of police power. The familiar rule is that laws which grant the right to exercise a part of the police power of the state are to be construed strictly and any doubt must be resolved against the grant.[33] The legislature is regarded as the guardian of society, and therefore is not presumed to disable itself or abandon the discharge of its duty. Thus, courts do not assume that the legislature intended to part away with its power to regulate public morals.[34] The presumption is influenced by constitutional considerations. Constitutions are widely understood to withhold from legislatures any authority to bargain away their police power[35] for the power to protect the public interest is beyond abnegation.

It is stressed that the case at bar does not involve a franchise to operate a public utility (such as water, transportation, communication or electricity) the operation of which undoubtedly redounds to the benefit of the general public. What is claimed is an alleged legislative grant of a gambling franchise a franchise to operate jai-alai. A statute which legalizes a gambling activity or business should be strictly construed and every reasonable doubt must be resolved to limit the powers and rights claimed under its authority.[36]

The dissent would like to make capital of the fact that the cases of Stone vs. Mississippi and Aicardi vs. Alabama are not on all fours to the cases at bar and, hence, the rulings therein do not apply. The perceived incongruity is more apparent than real.

Stone[37] involves a contract entered into by the State of Mississippi with the plaintiffs which allowed the latter to sell and dispose of certificates of subscription which would entitle the holders thereof to such prizes as may be awarded to them, by the casting of lots or by lot, chance or otherwise. The contract was entered into by plaintiffs pursuant to their charter entitled An Act Incorporating the Mississippi Agricultural, Educational and Manufacturing Aid Society which purportedly granted them the franchise to issue and sell lottery tickets. However, the state constitution expressly prohibits the legislature from authorizing any lottery or allowing the sale of lottery tickets. Mississippi law makes it unlawful to conduct a lottery.

The question raised in Stone concerned the authority of the plaintiffs to exercise the franchise or privilege of issuing and selling lottery tickets. This is essentially the issue involved in the cases at bar, that is, whether PAGCORs charter includes the franchise to operate jai-alai frontons. Moreover, even assuming arguendo that the facts in the cases at bar are not identical, the principles of law laid down in Stone are illuminating. For one, it was held in Stone that:

Experience has shown that the common forms of gambling are comparatively innocuous when placed in contrast with the wide-spread pestilence of lotteries. The former are confined to a few persons and places, but the latter infests the whole community; it enters every dwelling; it reaches every class; it preys upon the hard earnings of the poor; and it plunders the ignorant and simple. x x x[38]

The verity that all species of gambling are pernicious prompted the Mississippi Court to rule that the legislature cannot bargain away public health or public morals. We can take judicial notice of the fact that jai-alai frontons have mushroomed in every nook and corner of the country. They are accessible to everyone and they specially mangle the morals of the marginalized sector of society. It cannot be gainsaid that there is but a miniscule of a difference between jai-alai and lottery with respect to the evils sought to be prevented.

In the case of Aicardi vs. Alabama, Moses & Co. was granted a legislative franchise to carry on gaming in the form specified therein, and its agent, Antonio Aicardi, was indicted for keeping a gaming table. In ascertaining whether the scope of the companys franchise included the right to keep a gaming table, the Court there held that such an Act should be construed strictly. Every reasonable doubt should be so resolved as to limit the powers and rights claimed under its authority. Implications and intendments should have no place except as they are inevitable from the language or the context.

The view expressed in the dissent that the aforequoted ruling was taken out of context is perched on the premise that PAGCORs franchise is couched in a language that is broad enough to cover the operations of jai-alai. This view begs the question for as shown in our disquisition, PAGCOR's franchise is restricted only to the operation of gambling casinos. Aicardi supports the thesis that a gambling franchise should be strictly construed due to its ill-effects on public order and morals.

SEVENTH. The dissent also insists that the legislative intent must be sought first of all in the language of the statute itself. In applying a literal interpretation of the provision under Section 11 of P.D. 1869 that x x x the Corporation is hereby granted x x x the rights, privileges, and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming pools, i.e., basketball, football, lotteries, etc. x x x, it contends that the extent and nature of PAGCORs franchise is so broad that literally all kinds of sports and gaming pools, including jai-alai, are covered therein. It concluded that since under Section 11 of P.D. No. 1869, games of skill like basketball and football have been lumped together with the word lotteries just before the word etc. and after the words gaming pools, it may be deduced from the wording of the law that when bets or stakes are made in connection with the games of skill, they may be classified as games of chance under the coverage of PAGCORs franchise.

We reject this simplistic reading of the law considering the social, moral and public policy implications embedded in the cases at bar. The plain meaning rule used in the dissent rests on the assumption that there is no ambiguity or obscurity in the language of the law. The fact, however, that the statute admits of different interpretations is the best evidence that the statute is vague and ambiguous.[39] It is widely acknowledged that a statute is ambiguous when it is capable of being understood by reasonably well-informed persons in either of two or more senses.[40] In the cases at bar, it is difficult to see how a literal reading of the statutory text would unerringly reveal the legislative intent. To be sure, the term jai-alai was never used and is nowhere to be found in the law. The conclusion that it is included in the franchise granted to PAGCOR cannot be based on a mere cursory perusal of and a blind reliance on the ordinary and plain meaning of the statutory terms used such as gaming pools and lotteries. Sutherland tells us that a statute is ambiguous, and so open to explanation by extrinsic aids, not only when its abstract meaning or the connotation of its terms is uncertain, but also when it is uncertain in its application to, or effect upon, the fact-situation of the case at bar.[41]

Similarly, the contention in the dissent that :

x x x Even if the Court is fully persuaded that the legislature really meant and intended something different from what it enacted, and that the failure to convey the real meaning was due to inadvertence or mistake in the use of the language, yet, if the words chosen by the legislature are not obscure or ambiguous, but convey a precise and sensible meaning (excluding the case of obvious clerical errors or elliptical forms of expression), then the Court must take the law as it finds it, and give it its literal interpretation, without being influenced by the probable legislative meaning lying at the back of the words. In that event, the presumption that the legislature meant what it said, though it be contrary to the fact, is conclusive.

cannot apply in the cases at bar considering that it has not been shown that the failure to convey the true intention of the legislature is attributable to inadvertence or a mistake in the language used.

EIGHTH. Finally, there is another reason why PAGCOR's claim to a legislative grant of a franchise to operate jai-alai should be subjected to stricter scrutiny. The so-called legislative grant to PAGCOR did not come from a real Congress. It came from President Marcos who assumed legislative powers under martial law. The grant is not the result of deliberations of the duly elected representatives of our people.

This is not to assail President Marcos legislative powers granted by Amendment No. 6 of the 1973 Constitution, as the dissent would put it. It is given that in the exercise of his legislative power, President Marcos legally granted PAGCOR's franchise to operate gambling casinos. The validity of this franchise to operate gambling casinos is not, however, the issue in the cases at bar. The issue is whether this franchise to operate gambling casinos includes the privilege to operate jai-alai. PAGCOR says it does. We hold that it does not. PAGCOR's overarching claim should be given the strictest scrutiny because it was granted by one man who governed when the country was under martial law and whose governance was repudiated by our people in EDSA 1986. The reason for this submission is rooted in the truth that PAGCOR's franchise was not granted by a real Congress where the passage of a law requires a more rigorous process in terms of floor deliberations and voting by members of both the House and the Senate. It is self-evident that there is a need to be extra cautious in treating this alleged grant of a franchise as a grant by the legislature, as a grant by the representatives of our people, for plainly it is not. We now have a real Congress and it is best to let Congress resolve this issue considering its policy ramifications on public order and morals.

In view of this ruling, we need not resolve the other issues raised by petitioners.

WHEREFORE, the petitions are GRANTED. Respondents PAGCOR, Belle Jai Alai Corporation and Filipinas Gaming Entertainment Totalizator Corporation are ENJOINED from managing, maintaining and operating jai-alai games, and from enforcing the agreement entered into by them for that purpose.

SO ORDERED.

Melo, Panganiban, Pardo, Buena, Gonzaga-Reyes, and Ynares-Santiago JJ., concur.

Davide, Jr., C.J., Vitug and De Leon Jr., JJ., see separate opinion.

Bellosillo, Kapunan, and Quisumbing, JJ., join the opinion of J. De Leon.

Mendoza, J., join in the separate opinion of Vitug, J.



[1] Annex D, Petition, G.R. No. 138298; Rollo, 171-174.

[2] Annex A, id.; Ibid., 23.

[3] Annex A, Supplemental Petition, G.R. No. 138298; Ibid., 162-168.

[4] Times Broadcasting Network vs. CA, et al., 274 SCRA 366 (1997); Estate of the late Mercedes Jacob vs. CA, et al., 283 SCRA 474 (1997).

[5] Fortich, et al. vs. Corona, et al., 289 SCRA 624 (1998).

[6] 278 SCRA 154 (1997).

[7] Ramos vs. CA, et al., 269 SCRA 34 (1997).

[8] Bugnay Construction & Dev. Corp. vs. Laron, 176 SCRA 240 (1989).

[9] Pascual vs. Sec. of Public Works, 110 Phil 331 (1960); Sanidad vs. Comelec, 73 SCRA 333 (1976); Kilosbayan, Inc., et al. vs. Morato, et al., 250 SCRA 130 (1995).

[10] Dumlao vs. Comelec, 95 SCRA 392 (1980).

[11] Philconsa vs. Mathay, 18 SCRA 300 (1966).

[12] Philconsa vs. Gimenez, 15 SCRA 479 (1965); Civil Liberties Union vs. Executive Secretary, 194 SCRA 317 (1991); Guingona vs. Carague, 196 SCRA 221 (1991); Osmea vs. Comelec, 199 SCRA 750 (1991); Basco vs. PAGCOR, 197 SCRA 52 (1991); Carpio vs. Executive Secretary, 206 SCRA 290 (1992).

[13] Philconsa vs. Mathay, supra.

[14] The game was introduced to the country during the Spanish colonial period. The first games were played at a fronton in Numancia Street, Binondo, Manila. In 1917, the games were moved to a larger fronton at the corner of Taft Avenue and San Luis Street in Ermita where it gained popularity. From a plain sport, jai-alai became a form of gambling when the Philippine Legislature issued a franchise legalizing betting in June 1939. The fronton was then operated by the Madrigals, a family close to Commonwealth President Manuel Quezon. Devastated by World War II, the fronton was rebuilt in 1948. During the term of President Marcos, the jai-alai franchise was granted to the Romualdez family. After the EDSA revolution, the Aquino administration closed down jai-alai. Then, in 1994, during the term of President Ramos, the Associated Development Corporation (ADC) revived the games at a new location in Harrison Plaza, Manila. However, after only a few months of operation, this Court ruled that a congressional franchise was required for the games.

[15] City of Oakland vs. Hogan, 106 P.2d 987, 994, 41 Cal. App.2d 333.

[16] Central Pac. R. Co. vs. People of State of California, 16 S.Ct. 766, 778, 162 U.S. 91, 40 L Ed. 903; Hamill vs. Hawks, C.C.A. Okl., 58 F.2d 41, 44.

[17] People ex rel. Foley vs. Begole, 56 P.2d 931, 933, 98 Colo. 354.

[18] City of Helena vs. Helena Light and R. Co., 207 O. 337, 63 Mont. 108.

[19] Beekman vs. Third Ave. R. Co., 47 N.E. 277, 153 N.Y. 144.

[20] Section 1 of P.D. No. 1067-A.

[21] See third whereas clause.

[22] See section 3(2) of P.D. No. 1067-A.

[23] See section 5 of P.D. No. 1067-A.

[24] See section 3 of P.D. No. 1067-C.

[25] See section 4 of P.D. No. 1067-B.

[26] See section 5, par. 1 of P.D. No. 1067-B.

[27] See section 1 of P.D. No. 1632.

[28] See section 2 of P.D. No. 1632.

[29] See Dissenting Opinion in Lim v. Pacquing, et al., 240 SCRA 649 (1995), pp. 720 and 729.

[30] Black on Interpretation of Laws, 2nd ed., pp. 504-506.

[31] Nebbia v New York, 291 U.S. 502.

[32] Bernas, The 1987 Constitution of the Republic of the Philippines, A Commentary, 1996 ed., p. 1053.

[33] People v Chicago, 103 N.E. 609; Slaughter v OBerry, 35 S.E. 241, 48 L.R.A. 442.

[34] Stone v Mississippi, 101 U.S. 814.

[35] Sutherland Statutory Construction, Vol. 3, 5th ed., p. 244.

[36] Aicardi v Alabama, 22 L.Ed. 215; West Indies, Inc. v First National Bank, 214 P.2d 144.

[37] 101 U.S. 1079.

[38] Ibid. at p. 1080.

[39] Marathon Le Tourneau Co., Marine Division v. National Labor Relations Board, 414 F. Supp 1074 (1976).

[40] Wisconsin Dept. of Revenue v. Nagle-Hart, Inc., 234 NW2d 350 (1975); Allen v. Juneau County Forest Withdrawal Appeal Review Committee, 295 NW2d 218 (1980); Kimberly-Clark Corp. v. Public Service Commission, 320 NW2d 5 (1982).

[41] Sutherland Statutory Construction, Vol. 2A, 5th ed., 1992 Revision, p. 713.