Basco Vs Pagcor

State Policies and Principles
Title: Basco v. Philippine Amusements and Gaming Corporation (PAGCOR)

Citation: G.R. No. 91649, May 14, 1991
Facts:
Petitioners filed an instant petition seeking to annul the Philippine Amusement and
Gaming Corporation (PAGCOR) Charter— P.D. 1869, because it is allegedly
contrary to morals, public policy and order. They also claim that the decree is said to
have a “gambling objective” and therefore is contrary to Sections 11, 12 and 13 of
Article II, Sec. 1 of Article VIII and Section 3 (2) of Article XIV of the present
Constitution. Petitioners also contend that is constitutes a waiver of a right
prejudicial to a third person with a right recognized by law. It waived the Manila City
government’s right to impose taxes and license fees. It also violates the equal
protection clause of the Constitution in that it legalizes PAGCOR to conduct
gambling while most other forms of gambling are outlawed, together with
prostitution, drug trafficking and other vices.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by

virtue of P.D. 1067-A and was granted a franchise under P.D. 1067-B “to establish,
operate and maintain gambling casinos on land or water with the territorial
jurisdiction of the Philippines.” The operation was considered a success for it proved
to be a potential source of revenue to fund infrastructure and socioeconomic projects.
PAGCOR was then created under P.D. 1869 to enable the Government to regulate
and centralize all games of chance authorized by existing franchise permitted by law.
To attain these objectives PAGCOR is given the territorial jurisdiction all over the
Philippines.
It is reported that PAGCOR is the third largest source of government revenue, next to
the Bureau of Internal Revenue and the Bureau of Customs. In 1989 alone, PAGCOR
earned P3.43 Billion, and directly remitted to the National Government a total of
P2.5 Billion in form of franchise tax, government’s income share, the President’s
Social Fund and Host Cities’ share. In addition, PAGCOR sponsored socio-cultural
and charitable projects on its own or in cooperation with various governmental
agencies, and other private associations and organizations. As of 1989, PAGCOR
was employing 4,494 employees in its nine (9) casinos nationwide.
Issue/s:
Whether or not Presidential Decree No. 1869 is valid.
Ruling:
Yes. Gambling in all its forms is generally prohibited but the prohibition of gambling
does not mean that the government cannot regulate it in the exercise of its police
power. The concept of police power is defined as the authority of the state to enact
legislation that may interfere with personal liberty or property in order to promote the
general welfare.
P.D. 1869 was enacted pursuant to the policy of the government to “regulate and
centralize through an appropriate institution all games of chance authorized by
existing franchise or permitted by law.” The regulating and centralizing of gambling
operations in one corporate entity—the PAGCOR, was beneficial not just to the
Government but to society in general. It is a reliable source of much needed revenue
for the cash strapped Government. It provided funds for social impact projects and
subjected gambling to “close scrutiny, regulation, supervision and control of
Government.”
The City of Manila, being a mere municipal corporation has no inherent right to
impose taxes. Thus, the Charter or statute must plainly show an intent to confer that
power or the municipality cannot assume it. It’s power to tax therefore must always
yield to a legislative act which is superior having been passed upon by the state itself
which has the inherent power to tax. The Charter of the City of Manila is subject to
control by Congress. It should be stressed that “municipal corporations are mere
creatures of Congress” which as the power to create and abolish municipal
corporations due to its general legislative powers. Congress, therefore, has the power
to control over Local Governments. And if it can grant the City of Manila the power
to tax certain matters, it can also provide for exemptions or even take back the
power. The City of Manila’s power to impose license fees on gambling has long been
revoked. The power of local governments to regulate gambling through the grant of
“franchise, licenses or permits” was withdrawn by P.D. No. 771 and was vested on
the National Government.
PAGCOR’s role is to operate and regulate gambling casinos. The latter role is
governmental, which places it in the category of an agency or instrumentality of the
Government. Being an instrumentality of the Government, PAGCOR should be and
actually is exempt from local taxes. This doctrine emanates from the “supremacy” of
the National Government over local governments. Otherwise, mere creature of the
State can defeat National policies through extermination of what local authorities
may perceive to be undesirable activities or enterprise using the power to tax as a
tool for regulation.
The power of local government to “impose taxes and fees” is always subject to
limitations which Congress may provide by law. Since PD 1869 remains an
“operative” law until amended, repealed or revoked (Sec. 3, Art. XVIII, 1987
Constitution), its “exemption clause” remains as an exception to the exercise of the
power of local governments to impose taxes and fees. It cannot therefore be violative
but rather consistent with the principle of local autonomy. As to what state powers
should be “decentralized” and what may be delegated to local government units
remains a matter of policy, which concerns wisdom. It is therefore a political
question. What is settled is that the matter of regulating, taxing or otherwise dealing
with gambling is a State concern and hence, it is the sole prerogative of the State to
retain it or delegate it to local governments.
With regards to the petitioners’ contention on the equal protection clause, they ignore
the well-accepted meaning of the clause “equal protection of the laws.” The clause
does not preclude classification of individuals who may be accorded different
treatment under the law as long as the classification is not unreasonable or arbitrary.
A law does not have to operate in the equal force on all persons or things to be
conformable to Article III, Section 1 of the Constitution. The Constitution does not
require situations which are different in fact or opinion to be treated in law as though
they were the same.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity)

12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of
Article XIII and Section 2 (Educational Values) of Article XIV of the 1987
Constitution, suffice it to state also that these are merely statements of principles and,
policies. As such, they are basically not self-executing, meaning a law should be
passed by Congress to clearly define and effectuate such principles.
Every law has in its favor the presumption of constitutionality. Therefore, for PD
1869 to be nullified, it must be shown that there is a clear and unequivocal breach of
the Constitution, not merely a doubtful and equivocal one. In other words, the
grounds for nullity must be clear and beyond reasonable doubt.
Based on the grounds raised by the petitioners to challenge the constitutionality of

PD 1869, the Court finds that petitioners have failed to overcome the presumption.

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Basco Vs Pagcor

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State Policies and Principles

Title: Basco v. Philippine Amusements and Gaming Corporation (PAGCOR)

The Philippine Amusements and Gaming Corporation (PAGCOR) was created by

On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity)

Based on the grounds raised by the petitioners to challenge the constitutionality of

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