Magtajas vs. Pryce Properties Corporation, Inc.

A local government unit's power under the Local Government Code to prevent or suppress "gambling and other prohibited games of chance" is limited to gambling activities that are illegal under general law. It does not extend to gambling forms, like PAGCOR casinos, that are specifically authorized and regulated by a national statute (P.D. 1869). Consequently, a municipal ordinance that prohibits such statutorily-authorized gambling contravenes the national law and is invalid.

In 1992, the Philippine Amusement and Gaming Corporation (PAGCOR), a government-owned and controlled corporation created by P.D. 1869 to centralize and regulate games of chance, planned to open a casino in Cagayan de Oro City. It leased a portion of a building owned by Pryce Properties Corporation, Inc. The proposed casino met with immediate and widespread opposition from civic, religious, and youth groups, as well as from the city's mayor and legislators. In response, the Sangguniang Panlungsod of Cagayan de Oro City enacted two ordinances: Ordinance No. 3353 (December 7, 1992), which prohibited the issuance of business permits to establishments used for casino operations, and the sterner Ordinance No. 3375-93 (January 4, 1993), which directly prohibited the operation of casinos within the city and imposed penalties.

• Nature of the Parties and Action: Petitioners were the City of Cagayan de Oro and its mayor. Respondents were Pryce Properties Corporation, Inc. (lessor of the premises) and PAGCOR. The action was a challenge to the validity of two city ordinances prohibiting casino operations.
• PAGCOR's Planned Expansion: In 1992, PAGCOR, created by P.D. 1869 to regulate games of chance, decided to expand its casino operations to Cagayan de Oro City. It leased a portion of Pryce Plaza Hotel, renovated it, and prepared for inauguration.
• Local Legislative Response: Faced with strong public opposition, the Sangguniang Panlungsod enacted Ordinance No. 3353, which prohibited business permits for establishments used for casino operations. It later enacted the more comprehensive Ordinance No. 3375-93, which directly prohibited casino operations within the city and provided for penalties including fines and imprisonment.
• Challenge in the Court of Appeals: Pryce Properties filed a petition for prohibition with the Court of Appeals, arguing the ordinances were invalid. PAGCOR intervened. The Court of Appeals declared the ordinances invalid and issued a writ prohibiting their enforcement.
• Appeal to the Supreme Court: The city and its mayor appealed to the Supreme Court via a petition for review, arguing the Court of Appeals erred in finding the ordinances invalid.

• Scope of Local Legislative Power: Petitioners argued that Section 458 of the Local Government Code (R.A. 7160) expressly authorizes the Sangguniang Panlungsod to enact ordinances to "prevent, suppress and impose appropriate penalties for... gambling and other prohibited games of chance." They contended this power covers all forms of gambling, including those authorized by P.D. 1869, as the Code does not distinguish between legal and illegal gambling (ubi lex non distinguit, nec nos distinguere debemos).
• Modification of P.D. 1869: Petitioners maintained that the Local Government Code, as a later enactment, modified P.D. 1869 pro tanto. They cited the Code's repealing clause (Sec. 534[f]), which modifies all laws inconsistent with it, and argued that PAGCOR's authority to operate casinos over a local government's objection was thereby withdrawn.
• Policy of Local Autonomy: Petitioners invoked the constitutional policy of local autonomy (Art. II, Sec. 25; Art. X) and the Code's rule of liberal interpretation in favor of local government units (Sec. 5). They argued that the power to prohibit gambling is essential to promoting the general welfare and public morals of the community.
• Intrinsic Harm of Gambling: Petitioners attacked the morality of gambling, citing constitutional policies on the family and the youth, and argued that the State's official disapprobation of the vice justified the ordinances.

• Contravention of National Statute: Respondent PAGCOR countered that its authority to operate casinos is expressly granted by P.D. 1869, which has the force of a statute. A mere local ordinance cannot amend, repeal, or contravene a national law.
• Limited Scope of the Local Government Code: Respondents argued that the phrase "gambling and other prohibited games of chance" in Section 458 of the Code, interpreted under the principle of noscitur a sociis, refers only to illegal gambling. It does not encompass games of chance, like PAGCOR casinos, that are authorized and regulated by specific statute.
• No Implied Repeal: Respondents asserted that P.D. 1869 was not repealed, expressly or impliedly, by the Local Government Code. The Code's repealing clause does not mention P.D. 1869. Furthermore, subsequent legislation (e.g., R.A. 7309, R.A. 7648) continued to reference PAGCOR as a revenue source, indicating its charter remained in force.
• Tests for Valid Ordinances: Respondents argued the ordinances failed the established substantive requirements for valid ordinances, as they contravened a statute (P.D. 1869) and were therefore invalid.

• Conflict with National Law: Whether the challenged city ordinances, which prohibit casino operations, are valid exercises of local legislative power or whether they contravene P.D. 1869, the national statute that authorizes PAGCOR to operate casinos.
• Interpretation of the Local Government Code: Whether the power granted to local government units under Section 458 of the Local Government Code to suppress "gambling and other prohibited games of chance" includes the power to prohibit gambling activities specifically authorized by a national statute.

• Conflict with National Law: The ordinances are invalid because they contravene P.D. 1869. A local government unit's delegated legislative power cannot override the will of the national legislature. P.D. 1869 retains its force as a statute, and the ordinances, by prohibiting what the statute permits, are ultra vires and void.
• Interpretation of the Local Government Code: The phrase "gambling and other prohibited games of chance" in Section 458 of the Code refers only to illegal gambling. The word "prohibited" qualifies "games of chance" and, by association under noscitur a sociis, also qualifies "gambling." The Code thus authorizes local government units to suppress only those forms of gambling that are not authorized by law. The proper reconciliation of the Code and P.D. 1869 is to hold that local government units must prevent and suppress all gambling except that allowed by statutes like P.D. 1869.

• Hierarchy of Laws and the Ultra Vires Doctrine for Ordinances — An ordinance must not contravene the Constitution or any statute. Municipal corporations are creatures of the legislature, possessing only delegated powers. An ordinance that conflicts with a state statute is void. This principle remains valid notwithstanding the constitutional policy of local autonomy.
• Noscitur a Sociis — A word or phrase in a statute should be interpreted in relation to, or given the same meaning as, the words with which it is associated. Applied to Section 458 of the Local Government Code, the word "gambling" was interpreted in context with "other prohibited games of chance," leading to the conclusion that it refers only to illegal gambling.
• Tests for a Valid Ordinance — The Court reiterated the long-standing substantive requirements: (1) must not contravene the Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must be general and consistent with public policy; (6) must not be unreasonable.

• "The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While it is generally considered inimical to the interests of the people, there is nothing in the Constitution categorically proscribing or penalizing gambling or, for that matter, even mentioning it at all. It is left to Congress to deal with the activity as it sees fit."
• "The delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is a heresy to suggest that the local government units can undo the acts of Congress, from which they have derived their power in the first place, and negate by mere ordinance the mandate of the statute."
• "The proper resolution of the problem at hand is to hold that under the Local Government Code, local government units may (and indeed must) prevent and suppress all kinds of gambling within their territories except only those allowed by statutes like P.D. 1869."

• Basco v. Philippine Amusement and Gaming Corporation, 197 SCRA 52 (1991) — Cited as controlling precedent that sustained the constitutionality of P.D. 1869 and PAGCOR's existence. The Court noted it had previously recognized PAGCOR's role as a significant revenue source for the government.
• Lichauco & Co. v. Apostol, 44 Phil. 138 (1922) — Cited for the principle that implied repeals are not favored and require a clear showing of legislative intent. Used to reject the argument that the Local Government Code impliedly repealed P.D. 1869.
• U.S. v. Salaveria, 39 Phil. 102 (1918) — Mentioned by petitioners; an old case sustaining a municipal ordinance prohibiting a specific card game. The Court did not rely on it, distinguishing the present case as involving a conflict with a specific national statute.

• Presidential Decree No. 1869 (PAGCOR Charter) — The decree creating PAGCOR and granting it the power to centralize and regulate all games of chance, including casinos. The Court held this decree has the force of a statute that local ordinances cannot contravene.
• Section 458(a)(1)(v), Local Government Code of 1991 (R.A. 7160) — Grants the Sangguniang Panlungsod power to enact ordinances to prevent and suppress "gambling and other prohibited games of chance." The Court interpreted this as covering only illegal gambling.
• Section 16, Local Government Code of 1991 (General Welfare Clause) — Cited by petitioners as a source of police power. The Court acknowledged this power but held it cannot be exercised to contravene a specific national statute.
• Section 5, Local Government Code of 1991 (Rules of Interpretation) — Provides for liberal interpretation of the Code in favor of local government units. The Court applied this rule but found it could not justify an interpretation that would effectively repeal P.D. 1869.

The majority opinion was concurred in by: Chief Justice Andres R. Narvasa, and Justices Florentino P. Feliciano, Abdulwahid A. Bidin, Florenz D. Regalado, Flerida Ruth P. Romero, Jose C. Bellosillo, Jose A.R. Melo, Ricardo J. Quiason, Reynato S. Puno, Vitug, Santiago M. Kapunan, and Jose C. Mendoza.

Notable Separate Concurrences: - Justice Teodoro R. Padilla concurred but emphasized that while the ordinances were legally invalid, the government should weigh the moral and social costs of expanding gambling facilities against the revenue benefits. - Justice Hilario G. Davide, Jr. concurred in the result but questioned the Court of Appeals' jurisdiction, suggesting the petition should have been filed with the Regional Trial Court under the principle of hierarchy of courts. He also opined that the ordinances could be reconciled with P.D. 1869 by construing them as not applying to PAGCOR.

N/A — There were no dissenting opinions recorded in the provided text.