G.R. No. 91649 , May 14, 1991
ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN AND LORENZO SANCHEZ, petitioners, vs. PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent.

FACTS

Petitioners, practicing lawyers and taxpayers, sought to annul Presidential Decree No. 1869, the PAGCOR Charter, as unconstitutional. They alleged the law was contrary to morals and public policy, violated the equal protection clause by legalizing government gambling while prohibiting others, and infringed on the principle of local autonomy by exempting PAGCOR from local taxes and license fees. They further contended it fostered a monopolistic crony economy, contrary to the 1987 Constitution ’s state policies on human dignity, the family, youth, and social justice.
PAGCOR was created to centralize and regulate games of chance, with its operations generating significant government revenue used to fund infrastructure and socio-civic projects. The decree explicitly repealed inconsistent laws and granted PAGCOR a franchise with nationwide territorial jurisdiction, including exemptions from all taxes, as provided in its charter.

ISSUE

The primary issue is whether PD No. 1869 is unconstitutional on the grounds asserted by the petitioners.

RULING

The Supreme Court dismissed the petition and upheld the constitutionality of PD No. 1869. On the substantive challenges, the Court ruled that the power to regulate gambling, including its prohibition or legalization, is a legislative prerogative grounded in state policy. The Court cannot inquire into the wisdom or morality of such policy choices absent a clear constitutional violation. The equal protection clause was not violated because the classification between PAGCOR and other gambling entities is based on substantial distinction—PAGCOR is a government-owned entity whose income supports national development programs, making its regulation a proper exercise of police power.
Regarding local autonomy, the tax exemptions are constitutional. The power to grant franchises, including tax exemption privileges, is vested in Congress. Local governments cannot impose taxes on instrumentalities of the national government like PAGCOR, as this would contravene the hierarchical structure of government and impair its operations. The decree’s repealing clause validly amended prior laws, including local tax ordinances. The Court also found no merit in the claims regarding violations of state policies in the Constitution, as these provisions are not self-executing and do not grant justiciable rights that invalidate a specific law. The petition, being a taxpayer’s suit, was entertained due to the paramount public interest involved, but the substantive arguments failed.