Yun Kwan Byung vs PAGCOR

December 11, 2009

FACTS:
1. PAGCOR is a government-owned and controlled corporation tasked to establish and operate gambling clubs and
casinos as a means to promot etourism and generate sources of revenue for the government. To achieve these
objectives, PAGCOR is vested with the power to enter into contracts of every kind and for any lawful purpose that
pertains to its business.
2. Pursuant to this authority, PAGCOR launched its Foreign Highroller Marketing Program (Program). The Program
aims to invite patrons from foreign countries to play at the dollar pit of designated PAGCOR-operated casinos
under specified terms and conditions and in accordance with industry practice
3. The Korean-based ABS Corporation was one of the international groups that availed of the Program. In a letteragreement dated 25 April 1996(Junket Agreement), ABS Corporation agreed to bring in foreign players to play at
the five designated gaming tables of the Casino Filipino Silahis at the Grand Boulevard Hotel in Manila (Casino
Filipino).
4. Petitioner, a Korean national, alleges that from November 1996 to March1997, he came to the Philippines four
times to play for high stakes at the Casino Filipino.
5. Petitioner claims that in the course of the games, he was able to accumulate gambling chips worth US$2.1 million.
Petitioner presented as evidence during the trial gambling chips with a face value of US$1.1million. Petitioner
contends that when he presented the gambling chips for encashment with PAGCORs employees or agents,
PAGCOR refused to redeem them
6. Petitioner brought an action against PAGCOR seeking the redemption of gambling chips valued at US$2.1 million.
- claims that he won the gambling chips at the Casino Filipino, playing continuously day and night.
- alleges that every time he would come to Manila, PAGCOR would extend to him amenities deserving of a high
roller. A PAGCOR official who meets him at the airport would bring him to Casino Filipino, a casino managed
and operated by PAGCOR. The card dealers were all PAGCOR employees, the gambling chips, equipment
and furniture belonged to PAGCOR, and PAGCOR enforced all the regulations dealing with the operation of
foreign exchange gambling pits.
- Petitioner states that he was able to redeem his gambling chips with the cashier during his first few winning
trips. But later on, the casino cashier refused to encash his gambling chips so he had no recourse but to
deposit his gambling chips at the Grand Boulevard Hotels deposit box, every time he departed from Manila.
7. PAGCOR claims that petitioner, who was brought into the Philippines by ABS Corporation, is a junket player who
played in the dollar pit exclusively leased by ABS Corporation for its junket players. PAGCOR alleges that it
provided ABS Corporation with distinct junket chips. ABS Corporation distributed these chips to its junket players.
At the end of each playing period, the junket players would surrender the chips to ABS Corporation. Only ABS
Corporation would make an accounting of these chips to PAGCORs casino treasury. As additional information for
the junket players playing in the gaming room leased to ABS Corporation, PAGCOR posted a notice written in
English and Korean languages which reads: NOTICE: This GAMING ROOM is exclusively operated by ABS
under arrangement with PAGCOR, the former is solely accountable for all PLAYING CHIPS wagered on the
tables. Any financial ARRANGEMENT/TRANSACTION between PLAYERS and ABS shall only be binding upon
said PLAYERS and ABS.
8. PAGCOR argues that petitioner is not a PAGCOR player because under PAGCORs gaming rules, gambling chips
cannot be brought outside the casino. The gambling chips must be converted to cash at the end of every gaming
period as they are inventoried every shift. Under PAGCORs rules, it is impossible for PAGCOR players to
accumulate two million dollars worth of gambling chips and to bring the chips out of the casino premises
9. TC: dismissed the complaint and counterclaim, and ruled that based on PAGCORs charter PAGCOR has no
authority to lease any portion of the gambling tables to a private party like ABS Corporation. CA affirmed.
Issue #1: WON an implied agency was created
Held:
-

NO. There is no implied agency in this case because PAGCOR did not hold out to the public as the principal
of ABS Corporation. PAGCORs actions did not mislead the public into believing that an agency can be
implied from the arrangement with the junket operators, nor did it hold out ABS Corporation with any apparent
authority to represent it in any capacity. The Junket Agreement was merely a contract of lease of facilities and
services.
Article 1869 of the Civil Code states that implied agency is derived from the acts of the principal, from his
silence or lack of action, or hi sfailure to repudiate the agency, knowing that another person is acting on his
behalf without authority. Implied agency, being an actual agency, is a fact to be proved by deductions or
inferences from other facts
On the other hand, apparent authority is based on estoppel and can arise from two instances. First, the
principal may knowingly permit the agent to hold himself out as having such authority, and the principal

Issue # 2:
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becomes estopped to claim that the agent does not have such authority. Second, the principal may clothe the
agent with the indicia of authority as to lead a reasonably prudent person to believe that the agent actually
has such authority.
In an agency by estoppel, there is no agency at all, but the one assuming to act as agent has apparent or
ostensible, although not real, authority to represent another.
The law makes no presumption of agency and proving its existence, nature and extent is incumbent upon the
person alleging it. Whether or not an agency has been created is a question to be determined by the fact that
one represents and is acting for another.
The basis for agency is representation that is, the agent acts for and on behalf of the principal on matters
within the scope of his authority and said acts have the same legal effect as if they were personally executed
by the principal.
On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from
his words or actions, while on the part of the agent, there must be an intention to accept the appointment and
act on it.
Absent such mutual intent, there is generally no agency.
Whether the CA erred in using intent of the contracting parties as the test for creation of agency, when such is
not relevant since the instant case involves liability of the presumed principal in implied agency to a third party

HELD:
-

Issue#3:
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NO. The Court of Appeals correctly used the intent of the contracting parties in determining whether an
agency by estoppel existed in this case.
An agency by estoppel, which is similar to the doctrine of apparent authority requires proof of reliance upon
the representations, and that, in turn, needs proof that the representations predated the action taken in
reliance.
There can be no apparent authority of an agent without acts or conduct on the part of the principal and such
acts or conduct of the principal must have been known and relied upon in good faith and as a result of the
exercise of reasonable prudence by a third person as claimant, and such must have produced a change of
position to its detriment. Such proof is lacking in this case.
In the entire duration that petitioner played in Casino Filipino, he was dealing only with ABS Corporation, and
availing of the privileges extended only to players brought in by ABS Corporation. The facts that he enjoyed
special treatment upon his arrival in Manila and special accommodations in Grand Boulevard Hotel, and that
he was playing in special gaming rooms are all indications that petitioner cannot claim good faith that he
believed he was dealing with PAGCOR. Petitioner cannot be considered as an innocent third party and he
cannot claim entitlement to equitable relief as well
Whether the CA erred in failing to consider that PAGCOR ratified, or at least adopted, the acts of the agent,
ABS Corporation

Held:
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NO. The trial court has declared, and we affirm, that the Junket Agreement is void. Avoid or inexistent contract
is one which has no force and effect from the very beginning. Hence, it is as if it has never been entered into
and cannot be validated either by the passage of time or by ratification.
Article 1409 of the Civil Code provides that contracts expressly prohibited or declared void by law, such as
gambling contracts, "cannot be ratified."RE: VALIDITY OF AGREEMENT:- PAGCOR has the sole and
exclusive authority to operate a gambling activity. While PAGCOR is allowed under its charter to enter into
operators or management contracts, PAGCOR is not allowed under the same charter to relinquish or share
its franchise. PAGCOR cannot delegate its power in view of the legal principle of delegata potestas delegare
non potest, inasmuch as there is nothing in the charter to show that it has been expressly authorized to do so.
Similarly, in this case, PAGCOR, by taking only a percentage of the earnings of ABS Corporation from its
foreign currency collection, allowed ABS Corporation to operate gaming tables in the dollar pit. The Junket
Agreement is in direct violation of PAGCORs charter and is therefore void.
Since the Junket Agreement violates PAGCORs charter, gambling between the junket player and the junket
operator under such agreement is illegal and may not be enforced by the courts. Article 2014 of the Civil
Code, which refers to illegal gambling, states that no action can be maintained by the winner for the collection
of what he has won in a game of chance.