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 theGovernment 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 certiorariand 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
PAGCORon 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
ofgambling 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
ofgambling 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-
alaibecause 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
readingof 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
anyexisting 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, 2
nd
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, 5
th
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, 5
th
ed., 1992 Revision, p. 713.
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