Jaworski vs. PAGCOR

Jaworski vs. PAGCOR
G.R. No. 144463 

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Facts:
The Philippine Amusement and Gaming Corporation (PAGCOR), respondent, is a government owned and controlled corporation existing under Presidential Decree 1869 that gives authority to establish and operate clubs and casinos, for amusement, recreation, including sports, gaming pools, and other forms of amusement and recreation including games of chance. Its board of directors approved an instrument denominated as “Grant of Authority and Agreement for the Operation of Sports Betting and Internet Gaming”, which granted Sports and Games and Entertainment Corporation (SAGE) the authority to operate and maintain Sports Betting station in PGCOR’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. Jaworski, petitioner, a member of the senate and chairman of the Senate COmmittee on Games, Amusement and Sports, files this case seeking the nullity of the grant of authority given by PAGCOR to SAGE.

Petitioners contention: 1) PAGCOR is not authorized under its legislative franchise 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 the enactment, the internet was not yet inexistent and gambling activities. a) That the internet necessarily transcends the territorial jurisdiction of the Philippines, and to operate such activity contravenes the limitation in PAGCOR’s franchise under Sec 14, PD. no. 1869. 2) Internet gambling services does not fall under any of the categories of the authorized gambling activities enumerated under Sec 10 of PD no 1869 and that internet gambling does not fall 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 intend to bet or gamble go and play games of chance authorized by law.

Issue:
Whether or not PAGCOR has the right to vest another entity (SAGE), with the authority to operate internet gambling.

Held:
The court held that PAGCOR has acted beyond the limits of its authority when it passed on or shared its franchise to SAGE.

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 cannot delegate its power in view of the legal principle of delegata potestas delegare non potest, in as much as there is nothing in the charter to show that it has been expressly authorized to do so. Hence, in this case, 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. 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 conditions. Given that PAGCOR has no authority to grant such authority, it has exercised beyond the limits provided by the legislature.