GR 187972; (June, 2010) (Digest)
G.R. No. 187972 ; June 29, 2010
PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) vs. FONTANA DEVELOPMENT CORPORATION
FACTS
PAGCOR, a government-owned corporation, entered into a Memorandum of Agreement (MOA) with Fontana Development Corporation (FDC) on December 23, 1999. The MOA granted FDC the authority to operate a casino within the Clark Special Economic Zone (CSEZ). A critical stipulation in the MOA stated that the license granted to FDC was “non-exclusive and co-terminus with the Charter of PAGCOR, or any extension thereof.” PAGCOR’s original franchise under P.D. No. 1869 was set to expire on July 11, 2008.
Subsequently, Republic Act No. 9487 was enacted on June 20, 2007, extending PAGCOR’s franchise for another 25 years. Upon the expiration of its original term on July 11, 2008, PAGCOR informed FDC that their MOA was being extended only on a month-to-month basis. PAGCOR later sought to replace the MOA with a new, standard 10-year Authority to Operate. FDC protested, arguing that the extension of PAGCOR’s franchise automatically extended the MOA per their “co-terminus” agreement.
ISSUE
Whether the extension of PAGCOR’s legislative franchise under R.A. No. 9487 automatically renewed or extended the MOA with FDC, given the stipulation that the license was “co-terminus with the Charter of PAGCOR, or any extension thereof.”
RULING
Yes. The Supreme Court affirmed the Court of Appeals’ decision and ruled in favor of FDC. The legal logic hinges on the plain and ordinary meaning of the contractual term “co-terminus.” The MOA explicitly stated that FDC’s license was co-terminus with PAGCOR’s charter “or any extension thereof.” This clause is clear and leaves no room for interpretation. When the legislature extended PAGCOR’s franchise via R.A. No. 9487 , it constituted an “extension thereof” as contemplated in the agreement.
Consequently, the effectivity period of the MOA was correspondingly extended by operation of law and by the express stipulation of the parties. PAGCOR’s unilateral act of imposing a month-to-month arrangement and later a new 10-year authority was a breach of the MOA. The Court emphasized the sanctity of contracts under the Constitution, stating that PAGCOR, as a government entity, must respect the agreements it enters into. The writ of injunction issued by the trial court to compel PAGCOR to honor the MOA was made permanent.