11 MAGTAJAS v. PRYCE PROPERTIES CORP.

the establishment and operation of a PAGCOR gambling casino

Rules of Interpretation | July 20, 1994 | Cruz, J.
Nature of Case: Petition for Review under Rule 45
Digest maker:
SUMMARY: PAGCOR, in exercise of its authority to centralize and regulate all
games of chance, entered into an agreement with Pryce Properties Corporation,
Inc. to operate a casino in Cagayan de Oro City. In response and opposition,
Cagayan de Oro City enacted two city ordinances prohibiting the operation of a
casino within its territorial limits. The Court held that the Local Government Code
does not amend the PAGCOR charter, which defines legal gambling, and that as
such, the ordinances are not valid as they violate the PAGCOR charter.
DOCTRINE: The Rules of Interpretation generally allow the liberal interpretation
in favor of local government units, except when it can be clearly interpreted. The
enactments of a local government unit cannot be superior to that of the legislature,
from which the local government derives its delegated authority.
Petitioner : Mayor Pablo P. Magtajas & the City of Cagayan de Oro
Respondent : Pryce Properties Corporation, Inc. & Philippine Amusement
and Gaming Corporation
FACTS:
 1992 : PAGCOR did well in its casino operations in various cities and
decided to open a site in Cagayan de Oro City. It leased a portion of a
building belonging to Pryce Properties Corporation, Inc., which it renovated
and equipped to be a casino, intending to inaugurate it during the
Christmas season
o December 7, 1992 : Sangguniang Panlungsod of Cagayan de Oro
City opposed the idea and was swift and hostile, enacting
Ordinance No. 33531
within the City’s territorial limits
o The phrase “gambling and other prohibited games of chance”
found in Sec. 458, par. (a), sub-par. (1) – (v) of RA 7160 could only
mean “illegal gambling”
o The questioned Ordinances in effect annul PD 1869 and are
therefore invalid on that point
o The questioned Ordinances are discriminatory to casino and partial
to cockfighting and are therefore invalid on that point
o The questioned Ordinances are not reasonable, not consonant with
the general powers and purposes of the instrumentality concerned
and inconsistent with the laws or policy of the State
o It had no option but to follow the ruling in the case of Basco, et al. v.
PAGCOR, GR No. 91649, May 14, 1991, 197 SCRA 53 in disposing of
the issues presented in this present case.
ISSUE/S & RATIO:
 W/N the Local Government Code amended sections of the enabling law of
PAGCOR upon its enactment NO
o PAGCOR is a corporation created by PD1869 to centralize and
regulate all games of chance, including casinos on land and sea
within the territorial jurisdiction of the Philippines.
o Basco v PAGCOR sustained the constitutionality of the decree and
cited the benefits of the entity to the national economy.
o While Cagayan de Oro City is empowered to enact ordinances for
the purposes indicated in the Local Government Code, a part of
which is police power under the General Welfare Clause3 and the
power to enact ordinances4
SEC. 16. - General Welfare. - Every local government unit shall exercise the powers
3

o January 4, 1993 : Sangguniang Panlungsod of Cagayan de Oro City expressly granted, those necessarily implied therefrom, as well as powers
adopted Ordinance No. 3375-932 necessary, appropriate, or incidental for its efficient and effective governance, and
those which are essential to the promotion of the general welfare. Within their
 Pryce Properties Corporation, Inc. assailed the ordinances before the Court respective territorial jurisdictions, local government units shall ensure and support,
of Appeals, joining PAGCOR as intervenor among other things, the preservation and enrichment of culture, promote health
 March 31, 1993 : Court of Appeals declared the ordinances invalid and and safety, enhance the right of the people to a balanced ecology, encourage and
support the development of appropriate and self-reliant scientific and technological
issued the writ prayed for to prohibit their enforcement; Reconsideration
capabilities, improve public morals, enhance economic prosperity and social justice,
subsequently denied on July 13, 1993 promote full employment among their residents, maintain peace and order, and
 Cagayan de Oro City filed a petition for review under Rule 45, averring that preserve the comfort and convenience of their inhabitants.
the Court of Appeals erred in holding that: 4 Sec. 458. - Powers, Duties, Functions and Compensation. - (a) The
Sangguniang Panlungsod, as the legislative body of the city, shall enact ordinances,
o Under existing laws, the Sangguniang Panlungsod of the City of approve resolutions and appropriate funds for the general welfare of the city and its inhabitants
Cagayan de Oro does not have the power and authority to prohibit pursuant to Section 16 of this Code and in the proper exercise of the
corporate powers of the city as provided for under Section 22 of this Code, and
shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and effective
1 AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND CANCELLING EXISTING city government, and in this connection, shall:

BUSINESS PERMIT TO ANY ESTABLISHMENT FOR THE USING AND ALLOWING TO BE USED ITS x x x
PREMISES OR PORTION THEREOF FOR THE OPERATION OF CASINO (v) Enact ordinances intended to prevent, suppress and impose appropriate penalties for
2 AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING PENALTY FOR habitual drunkenness in public places, vagrancy, mendicancy, prostitution, establishment and
VIOLATION THERFOR maintenance of houses of ill repute, gambling and other prohibited games of chance,
 oPetitioners argue that the Local Government Code authorizes them
to prohibit the operation of casinos because they involve games of
chance and that the code expressly permits the regulation of such
within its territory, pursuant to the policy of local autonomy as
mandated in Article II, Section 25 and Article X of the Constitution,
and that they assert that the Code does not distinguish gambling
from illegal gambling. It further stresses that assuming there is
doubt regarding the effect of the Local Government Code vis-à-vis
PD 1869, the doubt must be resolved in favor of the local
government pursuant to Section 5 of the Code
 Sec. 5. Rules of Interpretation. – In the interpretation of
the provisions of this Code, the following rules shall apply:
(a) Any provision on a power of a local government unit
shall be liberally resolved in favor of devolution of
powers and of the lower local government unit. Any
fair and reasonable doubt as to the existence of the
power shall be interpreted in favor of the local
government concerned;
(b) xxx
(c) The general welfare provisions in this Code shall be
liberally interpreted to give more powers to local
government units in accelerating economic
development and upgrading the quality of life for the
people in the community.
o The Court is of the opinion that the Local Government Code does
not amend the PAGCOR charter. The argument that provisions of
the Local Government Code amend the PAGCOR charter cannot
be sustained as it is clearly stated that the gambling which the
Code aims to regulate is illegal gambling – it should be read in
consonance with the entirety of the provision “gambling and
other prohibited games of chance”. PAGCOR has been
authorized by law to operate, and as such, it is not within what is
contemplated by the code as an illegal form of gambling. The
PAGCOR charter is also not part of the laws repealed by the
Code, as enumerated in the repealing clause. While the rules of
interpretation provide for a liberal interpretation in favor of local
governments, it cannot discount the fact that a law authorizes
PAGCOR to operate casinos and is therefore not a form of illegal
gambling as contemplated by the Code which the unit can
regulate.
 W/N the assailed ordinances are valid NO
o Test of a valid ordinance
 It must not contravene the constitution or any statute.
fraudulent devices and ways to obtain money or property, drug addiction, maintenance of
drug dens, drug pushing, juvenile delinquency, the printing, distribution or exhibition of
obscene or pornographic materials or publications, and such other activities inimical to the
welfare and morals of the inhabitants of the city;
 It must not be unfair or oppressive.
 It must not be partial or discriminatory.
 It must not prohibit but may regulate trade.
 It must be general and consistent with public policy.
 It must not be unreasonable.
o The assailed ordinances contravene the PAGCOR charter insofar as
they prevent PAGCOR from exercising the power conferred on it to
operate a casino in Cagayan de Oro City.
o The ordinances violate PD 1869 which has the character and force
of a statute, as well as the public policy expressed in the decree
allowing the playing of certain games of chance despite the
prohibition of gambling in general. A local government
ordinance, which has been delegated legislative authority, cannot
be superior to that which has the principal authority to legislate.
RULING:
WHEREFORE, the petition is DENIED and the challenged decision of the
respondent Court of Appeals is AFFIRMED, with costs against the petitioners. It is
so ordered.
SEPARATE OPINION:
Davide Jr.
Pryce Properties Corporation directly filed with the Court of Appeals a petition for
prohibition, invoking the court’s original jurisdiction to issue writs of prohibition.
However, the principal cause of action is one for declaratory relief, to declare null
and unconstitutional the ordinances. As such, the Court of Appeals does not have
jurisdiction over the nature of the action. It should have been filed with the Regional
Trial Court of Cagayan de Oro City.
Padilla
Reiterates view that gambling in any form runs counter to the government’s own
efforts to re-establish and resurrect the Filipino moral character which is generally
perceived to be in a state of continuing erosion.
NOTES: