EN BANC

G.R. No. 144463             January 14, 2004

SENATOR ROBERT S. JAWORSKI, petitioner,

vs.
PHILIPPINE AMUSEMENT AND GAMING CORPORATION and SPORTS AND GAMES
ENTERTAINMENT CORPORATION, respondents.

DECISION

YNARES-SANTIAGO, J.:

The instant petition for certiorari and prohibition under Rule 65 of the Rules of Court seeks to nullify
the "Grant of Authority and Agreement for the Operation of Sports Betting and Internet Gaming,"
executed by respondent Philippine Amusement and Gaming Corporation (hereinafter referred to as
PAGCOR) in favor of respondent Sports and Games and Entertainment Corporation (also referred to
as SAGE).

The facts may be summarized as follows:

PAGCOR is a government owned and controlled corporation existing under Presidential

Decree No. 1869 issued on July 11, 1983 by then President Ferdinand Marcos. Pertinent
provisions of said enabling law read:

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:

xxx     xxx     xxx

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.

xxx     xxx     xxx

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.
On March 31, 1998, PAGCOR’s board of directors approved an instrument denominated as "Grant
of Authority and Agreement for the Operation of Sports Betting and Internet Gaming", which granted
SAGE the authority to operate and maintain Sports Betting station in PAGCOR’s casino locations,
and Internet Gaming facilities to service local and international bettors, provided that to the
satisfaction of PAGCOR, appropriate safeguards and procedures are established to ensure the
integrity and fairness of the games.

On September 1, 1998, PAGCOR, represented by its Chairperson, Alicia Ll. Reyes, and SAGE,
represented by its Chairman of the Board, Henry Sy, Jr., and its President, Antonio D. Lacdao,
executed the above-named document.

Pursuant to the authority granted by PAGCOR, SAGE commenced its operations by conducting
gambling on the Internet on a trial-run basis, making pre-paid cards and redemption of winnings
available at various Bingo Bonanza outlets.

Petitioner, in his capacity as member of the Senate and Chairman of the Senate Committee on
Games, Amusement and Sports, files the instant petition, praying that the grant of authority by
PAGCOR in favor of SAGE be nullified. He maintains that PAGCOR committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it authorized SAGE to operate gambling
on the internet. He contends that PAGCOR is not authorized under its legislative franchise, P.D.
1869, to operate gambling on the internet for the simple reason that the said decree could not have
possibly contemplated internet gambling since at the time of its enactment on July 11, 1983 the
internet was yet inexistent and gambling activities were confined exclusively to real-space. Further,
he argues that the internet, being an international network of computers, necessarily transcends the
territorial jurisdiction of the Philippines, and the grant to SAGE of authority to operate internet
gambling contravenes the limitation in PAGCOR’s franchise, under Section 14 of P.D. No. 1869
which provides:

Place. – The Corporation [i.e., PAGCOR] shall conduct gambling activities or games of
chance on land or water within the territorial jurisdiction of the Republic of the Philippines. x x
x

Moreover, according to petitioner, internet gambling does not fall under any of the categories of the
authorized gambling activities enumerated under Section 10 of P.D. No. 1869 which grants
PAGCOR the "right, privilege and authority to operate and maintain gambling casinos, clubs, and
other recreation or amusement places, sports gaming pools, within the territorial jurisdiction of the
Republic of the Philippines."1 He contends that internet gambling could not have been included
within the commonly accepted definition of "gambling casinos", "clubs" or "other recreation or
amusement places" as these terms refer to a physical structure in real-space where people who
intend to bet or gamble go and play games of chance authorized by law.

The issues raised by petitioner are as follows:

I. WHETHER OR NOT RESPONDENT PAGCOR IS AUTHORIZED UNDER P.D. NO. 1869

TO OPERATE GAMBLING ACTIVITIES ON THE INTERNET;

II. WHETHER RESPONDENT PAGCOR ACTED WITHOUT OR IN EXCESS OF ITS

JURISDICTION, OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION, WHEN IT AUTHORIZED RESPONDENT SAGE TO
OPERATE INTERNET GAMBLING ON THE BASIS OF ITS RIGHT "TO OPERATE AND
MAINTAIN GAMBLING CASINOS, CLUBS AND OTHER AMUSEMENT PLACES" UNDER
SECTION 10 OF P.D. 1869;
 III. WHETHER RESPONDENT PAGCOR ACTED WITHOUT OR IN EXCESS OF ITS
JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT GRANTED AUTHORITY TO SAGE TO OPERATE
GAMBLING ACTIVITIES IN THE INTERNET.

The above-mentioned issues may be summarized into a single pivotal question: Does PAGCOR’s
legislative franchise include the right to vest another entity, SAGE in this case, with the authority to
operate Internet gambling? Otherwise put, does Presidential Decree No. 1869 authorize PAGCOR
to contract any part of its franchise to SAGE by authorizing the latter to operate Internet gambling?

Before proceeding with our main discussion, let us first try to hurdle a number of important
procedural matters raised by the respondents.

In their separate Comments, respondents PAGCOR and SAGE insist that petitioner has no legal
standing to file the instant petition as a concerned citizen or as a member of the Philippine Senate
on the ground that he is not a real party-in-interest entitled to the avails of the suit. In this light, they
argue that petitioner does not have the requisite personal and substantial interest to impugn the
validity of PAGCOR’s grant of authority to SAGE.

Objections to the legal standing of a member of the Senate or House of Representative to maintain a
suit and assail the constitutionality or validity of laws, acts, decisions, rulings, or orders of various
government agencies or instrumentalities are not without precedent. Ordinarily, before a member of
Congress may properly challenge the validity of an official act of any department of the government
there must be an unmistakable showing that the challenged official act affects or impairs his rights
and prerogatives as legislator.2 However in a number of cases,3 we clarified that where a case
involves an issue of utmost importance, or one of overreaching significance to society, the Court, in
its discretion, can brush aside procedural technicalities and take cognizance of the petition.
Considering that the instant petition involves legal questions that may have serious implications on
public interests, we rule that petitioner has the requisite legal standing to file this petition.

Respondents likewise urge the dismissal of the petition for certiorari and prohibition because under
Section 1, Rule 65 of the 1997 Rules of Civil Procedure, these remedies should be directed to any
tribunal, board, officer or person whether exercising judicial, quasi-judicial, or ministerial functions.
They maintain that in exercising its legally-mandated franchise to grant authority to certain entities to
operate a gambling or gaming activity, PAGCOR is not performing a judicial or quasi-judicial act.
Neither should the act of granting licenses or authority to operate be construed as a purely
ministerial act. According to them, in the event that this Court takes cognizance of the instant
petition, the same should be dismissed for failure of petitioner to observe the hierarchy of courts.

Practically the same procedural infirmities were raised in Del Mar v. Philippine Amusement and
Gaming Corporation where an almost identical factual setting obtained. Petitioners therein filed a
petition for injunction directly before the Court which sought to enjoin respondent from operating the
jai-alai games by itself or in joint venture with another corporate entity allegedly in violation of law
and the Constitution. Respondents contended that the Court had no jurisdiction to take original
cognizance of a petition for injunction because it was not one of the actions specifically mentioned in
Section 1 of Rule 56 of the 1997 Rules of Civil Procedure. Respondents likewise took exception to
the alleged failure of petitioners to observe the doctrine on hierarchy of courts. In brushing aside the
apparent procedural lapse, we held that "x x x 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." 4
In the case at bar, we are not inclined to rule differently. The petition at bar seeks to nullify, via a
petition for certiorari and prohibition filed directly before this Court, the "Grant of Authority and
Agreement for the Operation of Sports Betting and Internet Gaming" by virtue of which SAGE was
vested by PAGCOR with the authority to operate on-line Internet gambling. It is well settled that
averments in the complaint, and not the nomenclature given by the parties, determine the nature of
the action.5 Although the petition alleges grave abuse of discretion on the part of respondent
PAGCOR, what it primarily seeks to accomplish is to prevent the enforcement of the "Grant of
Authority and Agreement for the Operation of Sports Betting and Internet Gaming." Thus, the action
may properly be characterized as one for Prohibition under Section 2 of Rule 65, which incidentally,
is another remedy resorted to by petitioner.

Granting arguendo that the present action cannot be properly treated as a petition for prohibition, the
transcendental importance of the issues involved in this case warrants that we set aside the
technical defects and take primary jurisdiction over the petition at bar. One cannot deny that the
issues raised herein have potentially pervasive influence on the social and moral well being of this
nation, specially the youth; hence, their proper and just determination is an imperative need. This is
in accordance with the well-entrenched principle that rules of procedure are not inflexible tools
designed to hinder or delay, but to facilitate and promote the administration of justice. Their strict and
rigid application, which would result in technicalities that tend to frustrate, rather than promote
substantial justice, must always be eschewed. 6

Having disposed of these procedural issues, we now come to the substance of the action.

A legislative franchise is a special privilege granted by the state to corporations. 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. It is
Congress that prescribes the conditions on which the grant of the franchise may be made. Thus the
manner of granting the franchise, to whom it may be granted, the mode of conducting the business,
the charter and the 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. 7

After a circumspect consideration of the foregoing discussion and the contending positions of the
parties, we hold that PAGCOR has acted beyond the limits of its authority when it passed on or
shared its franchise to SAGE.

In the Del Mar case where a similar issue was raised when PAGCOR entered into a joint venture
agreement with two other entities in the operation and management of jai alai games, the Court, 8 in
an En Banc Resolution dated 24 August 2001, partially granted the motions for clarification filed by
respondents therein insofar as it prayed that PAGCOR has a valid franchise, but only by itself (i.e.
not in association with any other person or entity), to operate, maintain and/or manage the game of
jai-alai.

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 grant of franchise is a special privilege that
constitutes a right and a duty to be performed by the grantee. The grantee must not perform its
activities arbitrarily and whimsically but must abide by the limits set by its franchise and strictly
adhere to its terms and conditionalities. A corporation as a creature of the State is presumed to exist
for the common good. Hence, the special privileges and franchises it receives are subject to the laws
of the State and the limitations of its charter. There is therefore a reserved right of the State to
inquire how these privileges had been employed, and whether they have been abused. 9

While PAGCOR is allowed under its charter to enter into operator’s and/or management contracts, it
is not allowed under the same charter to relinquish or share its franchise, much less grant a veritable
franchise to another entity such as SAGE. PAGCOR can not delegate its power in view of the legal
principle of delegata potestas delegare non potest, inasmuch as there is nothing in the charter to
show that it has been expressly authorized to do so. In Lim v. Pacquing, 10 the Court clarified that
"since ADC has no franchise from Congress to operate the jai-alai, it may not so operate even if it
has a license or permit from the City Mayor to operate the jai-alai in the City of Manila." By the same
token, SAGE has to obtain a separate legislative franchise and not "ride on" PAGCOR’s franchise if
it were to legally operate on-line Internet gambling.

WHEREFORE, in view of all the foregoing, the instant petition is GRANTED. The "Grant of Authority
and Agreement to Operate Sports Betting and Internet Gaming" executed by PAGCOR in favor of
SAGE is declared NULL and VOID.

SO ORDERED.

Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-
Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ., concur.