The Supreme Court in Gonzales v. Philippine Amusement and Gaming Corporation (PAGCOR) addressed the limits of PAGCOR’s franchise and the validity of delegating its operational authority. The Court ruled that PAGCOR could not transfer its franchise to other entities, emphasizing that its authority to operate gambling activities must be exercised directly. Further, the Court dismissed the petition questioning the constitutionality of PAGCOR’s charter, citing the doctrine of mootness, as the issues raised had been previously settled and the petitioner’s death complicated the proceedings. This case underscores the principle that constitutional challenges must present an active controversy and that franchises cannot be delegated without express legislative authorization.

Gambling Franchises: Can PAGCOR Share Its Hand?

The case of Ramon A. Gonzales v. PAGCOR emerged from a challenge to the constitutionality of PAGCOR’s creation and its subsequent agreements with various corporations. Gonzales, acting as a citizen, taxpayer, and member of the Philippine Bar, filed a special civil action for prohibition. He questioned the validity of PAGCOR granting operational authority to Sports and Games Entertainment Corporation (SAGE) for internet gambling, Best World Gaming and Entertainment Corporation (BEST WORLD) for computerized bingo gaming, and Belle Jai-alai Corporation (BELLE) and Filipinas Gaming Entertainment Totalizator Corporation (FILGAME) for jai-alai operations. The petitioner argued that these agreements constituted an unlawful delegation of PAGCOR’s franchise.

Central to the legal challenge was whether PAGCOR, created under Presidential Decree (P.D.) 1869, as amended, could delegate its franchise to operate and maintain gambling casinos and other gaming activities. Gonzales contended that allowing PAGCOR to grant operational authority to other corporations was an undue delegation of legislative power. The respondents, on the other hand, maintained that PAGCOR’s charter allowed it to enter into operating and/or management contracts, thus justifying the agreements.

In addressing the delegation issue, the Supreme Court referenced its earlier rulings in Del Mar v. Phil. Amusement and Gaming Corp., et al. The Court had previously enjoined PAGCOR, BELLE, and FILGAME from jointly operating jai-alai games, emphasizing that PAGCOR’s franchise could only be exercised directly. This principle was reiterated in Jaworski v. Phil. Amusement and Gaming Corp., where the Court explicitly stated that PAGCOR could not relinquish or share its franchise with another entity like SAGE.

In the case at bar, PAGCOR executed an agreement with SAGE whereby the former grants the latter the authority to operate and maintain sports betting stations and Internet gaming operations. In essence, the grant of authority gives SAGE the privilege to actively participate, partake and share PAGCOR’s franchise to operate a gambling activity.

The Court emphasized the legal principle of delegata potestas delegare non potest, which means that a delegated power cannot be further delegated. The Court clarified that unless expressly authorized by its charter, PAGCOR could not grant a veritable franchise to another entity. This legal principle underscores the importance of ensuring that the authority granted by law is exercised by the entity to which it was originally entrusted.

Further complicating the matter, Gonzales passed away during the proceedings. This raised questions about the continuation of the case, particularly since Gonzales had filed the petition as a class suit. Attorneys Manuel B. Imbong and Jo Aurea M. Imbong sought to be substituted as petitioners, arguing that the case was instituted on behalf of all Filipino citizens, taxpayers, and members of the Philippine Bar and thus survived Gonzales’ death. However, the Court noted that the movants were asserting their own individual interests rather than rights transmitted to them by Gonzales’ death.

The Court considered whether the motion for substitution could be treated as a motion for intervention. However, even if treated as such, the Court found that the petition would still be dismissed due to mootness. The Court observed that the issues raised by Gonzales regarding the constitutionality of P.D. 1869 were not inconsistent with the current Constitution. Moreover, the agreements that Gonzales sought to nullify had already been addressed in prior cases.

In its analysis, the Court referenced Section 3, Article XVIII of the Constitution, which provides that all existing laws and decrees not inconsistent with the Constitution remain operative until amended, repealed, or revoked. The Court noted that Gonzales had not demonstrated any inconsistency between P.D. 1869 and the Constitution, leading to the denial of his prayer to enjoin PAGCOR’s operations.

The Supreme Court also tackled the petitioner’s argument against the validity of P.D. 1869, asserting it was an illegal exercise of legislative powers by then-President Marcos. The Court acknowledged that these issues were extensively debated in past cases like Javellana v. Executive Secretary and Aquino, Jr. v. Enrile. While legal scholars may continue to debate the wisdom and reasoning of these decisions, their historical impact on the Philippine legal system is undeniable.

While the legal scholars may continue to debate the wisdom and reasoning of these decisions, their objective existence and historical impact on the Philippine legal system cannot seriously be questioned. As the Court emphasized, its power is limited to adjudicating actual controversies and determining whether a government branch or instrumentality has acted with grave abuse of discretion. Revisiting settled historical and constitutional questions falls beyond the Court’s purview.

The Court recognized that the People Power Revolution of 1986 and the ratification of the 1987 Constitution had fundamentally altered the legal landscape. The separation of legislative and executive powers was restored, rendering the need to assess the validity of the former President’s lawmaking powers obsolete.

In essence, the Supreme Court dismissed the petition, underscoring the importance of direct exercise of franchise authority and the doctrine of mootness. The decision reinforces the principle that constitutional challenges must present live controversies and that settled legal questions will not be revisited lightly.

FAQs

What was the key issue in this case?	The central issue was whether PAGCOR could delegate its franchise to operate gambling activities to other corporations, and whether the creation of PAGCOR under Presidential Decree 1869 was constitutional. The petitioner questioned the validity of agreements between PAGCOR and other entities, arguing they constituted an unlawful delegation of PAGCOR’s franchise.
What did the Supreme Court rule regarding PAGCOR’s franchise?	The Supreme Court ruled that PAGCOR could not transfer or delegate its franchise to other entities. It emphasized that PAGCOR’s authority to operate gambling activities must be exercised directly, and that the agreements with other corporations were an undue delegation of legislative power.
What is the legal principle of delegata potestas delegare non potest?	The principle of delegata potestas delegare non potest means that a delegated power cannot be further delegated. In this context, it means that PAGCOR, having been delegated the authority to operate gambling activities, cannot sub-delegate that authority to other entities without express legislative authorization.
Why was the petition dismissed despite the issues raised?	The petition was dismissed due to mootness and the death of the original petitioner. The Court found that the issues raised regarding the constitutionality of P.D. 1869 had been previously settled, and the agreements in question had already been addressed in prior cases.
What is the significance of Section 3, Article XVIII of the Constitution in this case?	Section 3, Article XVIII of the Constitution provides that all existing laws and decrees not inconsistent with the Constitution remain operative until amended, repealed, or revoked. The Court noted that the petitioner had not demonstrated any inconsistency between P.D. 1869 and the Constitution, thus affirming its continued validity.
How did the death of the petitioner affect the case?	The death of the petitioner raised questions about the continuation of the case, particularly since it was filed as a class suit. While attorneys sought to be substituted as petitioners, the Court found that they were asserting their own individual interests rather than rights transmitted by the deceased.
What is a class suit, and how does it apply in this case?	A class suit is a lawsuit filed by a representative party on behalf of a larger group of individuals who share a common interest. In this case, the petitioner claimed to represent all Filipino citizens, taxpayers, and members of the Philippine Bar, but the Court found that the requirements for a valid class suit were not sufficiently met.
What prior cases were referenced in the Supreme Court’s decision?	The Supreme Court referenced its earlier rulings in Del Mar v. Phil. Amusement and Gaming Corp., et al. and Jaworski v. Phil. Amusement and Gaming Corp. These cases established the principle that PAGCOR’s franchise could only be exercised directly and could not be delegated to other entities.

The Gonzales v. PAGCOR case clarifies the limits of PAGCOR’s franchise and emphasizes the importance of adhering to the principle against undue delegation of authority. This ruling ensures that the power to operate gambling activities remains with the entity specifically authorized by law, safeguarding against unauthorized expansion and potential abuses. The dismissal of the constitutional challenge due to mootness also underscores the need for active controversies in judicial proceedings, reinforcing the stability of established legal principles.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Gonzales v. PAGCOR, G.R. No. 144891, May 27, 2004