You are on page 1of 2

PAGCOR VS.

FONTANA DEVELOPMENT CORPORATION


G.R. No. 187972, JUNE 29, 2010
FACTS:
In this petition for review under Rule 45, the May 19, 2009
Decision of the Court of Appeals (CA) in CA-G.R. SP No. 107247 is questioned
for not nullifying the November 18, 2008 Order of the Regional Trial Court
(RTC) in Manila in Civil Case No. 08-120338 that issued a temporary
restraining order (TRO) against petitioner Philippine Amusement and Gaming
Corporation (PAGCOR), barring PAGCOR from committing acts that allegedly
violate the rights of respondent Fontana Development Corporation (FDC)
under a December 23, 1999 Memorandum of Agreement (MOA).
PAGCOR granted private respondent Fontana Development Corporation
(FDC) (formerly RN Development Corporation) the authority to operate and
maintain a casino inside the CSEZ under a Memorandum of Agreement
(MOA), stating inter alia: x x x 1. RNDC Improvements x x x 4. Nonexclusivity, PAGCOR and RNDC agree that the license granted to RNDC to
engage in gaming and amusement operations within CSEZ shall be nonexclusive and co-terminus with the Charter of PAGCOR, or any extension
thereof, and shall be for the period hereinabove defined. x x x
The Coconut Oil Refiners Association challenged before the Supreme Court
the constitutionality, among others, of EO No. 80 on the ground that the
incentives granted to SSEZ under RA No. 7227 was exclusive and cannot be
made applicable to CSEZ by a mere executive order. The case was decided in
favor of Coconut Oil Refiners Association and Section 5 aforequoted was
declared of no legal force and effect. RA No. 9487 was enacted, extending
PAGCORs franchise up to July 10, 2033 renewable for another twenty-five
(25) years,
PAGCOR informed FDC that it was extending the MOA on a month-to-month
basis until the finalization of the renewal of the contract. FDC protested,
claiming that the extension of PAGCORs franchise had automatically
extended the MOA: that the SC decisions, including RA Nos. 9400 and 9399,
had no effect on the authority of CDC to allow the establishment of a casino
inside the CSEZ; and that in Coconut Oil Refiners Association, Inc., the SC did
not declare void the entire EO No. 80 but only Section 5 thereof.
FDC filed before the RTC of Manila the instant complaint for Injunction
against PAGCOR, contending that it could not be covered by a month-tomonth extension nor by the standard Authority to Operate since the MOA
was automatically renewed and extended up to 2033.
PAGCOR filed its Special Appearance (for Dismissal of the Petition and the
Opposition to the Prayer for a Temporary Restraining Order and/or Writ of
Preliminary Injunction), praying that the complaint be dismissed for lack of
jurisdiction.
RTC issued the first assailed Order denying PAGCORs motion to dismiss and
granting FDCs application for a TRO. The RTC held that the SC had no
exclusive jurisdiction over cases involving PAGCOR; that the cases of Del Mar
vs. PAGCOR, Sandoval II vs. PAGCOR, Jaworski vs. PAGCOR were decided by
the SC in the exercise of its discretionary power to take cognizance of cases;
that it had jurisdiction over the instant complaint under Section 21(1) of
Batas Pambansa (BP) No. 129 in relation to Article VIII, Section 5(1) of the

1987 Constitution and the rule on hierarchy of courts


ISSUE:
Whether or not the trial court erred in declaring that PAGCOR
issued the license (MOA) to FDC under the authority of PD 1869 and not
under EO 80, Sec. 5.
RULING: NO. Sec. 13 of RA 7227 simply shows that SBMA has no power to
license or operate casinos. Rather, said casinos shall continue to be licensed
by PAGCOR. Hence, the source of PAGCORs authority lies in its basic charter,
PD 1869, as amended, and neither in RA 7227 nor its extension, EO 80, for
the latter merely recognizes PAGCORs power to license casinos. Indeed, PD
1869 empowers PAGCOR to regulate and control all games of chance within
the Philippines, and clearly, RA 7227 or EO 80 cannot be the source of its
powers, but its basic charter, PD 1869.
The reliance of PAGCOR on Coconut Oil Refiners Association, Inc.15 to
buttress its position that the MOA with FDC can be validly supplanted with
the 10-year SAO is clearly misplaced. That case cannot be a precedent to the
instant case, as it dealt solely with the void grant of tax and duty-free
incentives inside CSEZ. The Court ruled in Coconut Oil Refiners Association,
Inc. that the tax incentives within the CSEZ were an invalid exercise of quasilegislative powers, thus:
In the present case, while Section 12 of Republic Act No. 7227 expressly
provides for the grant of incentives to the SSEZ, it fails to make any similar
grant in favor of other economic zones, including the CSEZ. Tax and duty-free
incentives being in the nature of tax exemptions, the basis thereof should be
categorically and unmistakably expressed from the language of the statute.
Consequently, in the absence of any express grant of tax and duty-free
privileges to the CSEZ in Republic Act No. 7227, there would be no legal
basis to uphold the questioned portions of two issuances: Section 5 of
Executive Order No. 80 and Section 4 of BCDA Board Resolution No. 93-05034, which both pertain to the CSEZ. (Emphasis supplied.)