Basco vs PAGCOR G.R. No. 91649 (Case Digest)

 

Basco vs PAGCOR

G.R. No. 91649

Facts:

            Petitioners file petition seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter — PD 1869, because it is allegedly contrary to morals, public policy and order.  PAGCOR was created under P.D. 1869 to enable the Government to regulate and centralize all games of chance authorized by existing franchise or permitted by law.

                Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees; that the exemption clause in P.D. 1869 is violative of the principle of local autonomy.

 

Issue:

            Whether PD 1869 is unconstitutional being contrary to morals, public policy and order.

 

Held:

            Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of gambling does not mean that the Government cannot regulate it in the exercise of its police power.

                The concept of police power is well-established in this jurisdiction. It has been defined as the "state authority to enact legislation that may interfere with personal liberty or property in order to promote the general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition or restraint upon liberty or property, (2) in order to foster the common good. It is not capable of an exact definition but has been, purposely, veiled in general terms to underscore its all-comprehensive embrace. (Philippine Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386).

 

 

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Issue 2:

                Exemption clause (in tax) in P.D. 1869 is violative of the principle of local autonomy.

 

Held:

                NO. The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes.  Its "power to tax" therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the "inherent power to tax"

                The Charter of the City of Manila is subject to control by Congress. It should be stressed that "municipal corporations are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909, January 18, 1957) which has the power to "create and abolish municipal corporations" due to its "general legislative powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore, has the power of control over Local governments (Hebron v. Reyes, G.R. No. 9124, July 2, 1950). And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power.  The City of Manila's power to impose license fees on gambling, has long been revoked.

 

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è Therefore, only the National Government has the power to issue "licenses or permits" for the operation of gambling. Necessarily, the power to demand or collect license fees which is a consequence of the issuance of "licenses or permits" is no longer vested in the City of Manila.

 

è Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also exercises regulatory powers.

 

The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it.

 

 

 

The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the exercise of the power of local governments to impose taxes and fees. It cannot therefore be violative but rather is consistent with the principle of local autonomy.

 

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Besides, the principle of local autonomy under the 1987 Constitution simply means "decentralization".  It does not make local governments sovereign within the state or an "imperium in imperio."