G.R. No. 111097 July 20, 1994
MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners, vs. PRYCE PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT AND GAMING CORPORATION, respondents.

FACTS

In 1992, the Philippine Amusement and Gaming Corporation (PAGCOR) decided to expand its casino operations to Cagayan de Oro City by leasing a portion of a building from Pryce Properties Corporation, Inc. This move was met with instant and widespread opposition from civic organizations, religious groups, women’s groups, the youth, the media, the mayor, and city legislators. In response, the Sangguniang Panlungsod of Cagayan de Oro City enacted Ordinance No. 3353 on December 7, 1992, prohibiting the issuance or cancelling existing business permits for any establishment allowing its premises to be used for casino operations. Subsequently, on January 4, 1993, it enacted a stricter Ordinance No. 3375-93, which directly prohibited the operation of a casino within the city and provided penalties for violations. Pryce Properties, joined by PAGCOR as intervenor, assailed these ordinances before the Court of Appeals, which declared the ordinances invalid and prohibited their enforcement. The City of Cagayan de Oro and its mayor filed a petition for review before the Supreme Court.

ISSUE

Whether the Sangguniang Panlungsod of Cagayan de Oro City has the power and authority, under the Local Government Code, to prohibit the establishment and operation of a PAGCOR gambling casino within the city’s territorial limits, thereby effectively challenging the validity of Ordinances Nos. 3353 and 3375-93.

RULING

The Supreme Court ruled against the petitioners. It held that the City of Cagayan de Oro could not prohibit the operation of a PAGCOR casino. The Court found that P.D. 1869, which created PAGCOR, granted it the authority to centralize and regulate all games of chance, including casinos, within the Philippines. This charter is a special law that prevails over the general powers granted to local government units under the Local Government Code. While the Code grants local governments police power under the General Welfare Clause (Section 16) and specific authority to enact ordinances to prevent and suppress gambling (Section 458(a)(1)(v)), this power pertains to “illegal gambling” and other activities inimical to public welfare. The operation of a casino by PAGCOR is a lawful activity sanctioned by a special law. The Court emphasized that local government units cannot enact ordinances that annul or contradict legislative enactments of Congress (or, in this case, a presidential decree that has the force of law). The ordinances in question were effectively in contravention of P.D. 1869 and were therefore invalid. The Court also noted that the policy of local autonomy must operate within the confines of valid national legislation. Consequently, the decision of the Court of Appeals was affirmed.