Kilosbayan Vs Morato

540 SUPREME COURT REPORTS ANNOTATED
Kilosbayan, Incorporated vs. Morato
*
G.R. No. 118910. July 17, 1995.
KILOSBAYAN, INCORPORATED, JOVITO R.

SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO
C. CAPULONG, JR., JOSE T. APOLO, EPHRAIM
TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE,
CHRISTINE TAN, RAFAEL G. FERNANDO, RAOUL V.
VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL,
SEN. FREDDIE WEBB, SEN. WIGBERTO TAÑADA,
REP. JOKER P. ARROYO, petitioners, vs. MANUEL L.
MORATO, in his capacity as Chairman of the Philippine
Charity Sweepstakes Office, and the PHILIPPINE
GAMING MANAGEMENT CORPORATION, respondents.
Constitutional Law; Taxpayer’s Suits; Locus Standi; Actions;

Res Judicata; Stare Decisis; Parties; In this case, concern for
stability in decisional law does not call for adherence to what has
recently been laid down as the rule since the previous ruling
sustaining petitioners’ intervention may itself be considered a
departure from settled rulings on “real parties in interest.”—Stare
decisis is usually the wise policy. But in this case, concern for
stability in decisional law does not call for adherence to what has
recently been laid down as the rule. The previous ruling
sustaining petitioners’ intervention may itself be considered a
departure from settled rulings on “real parties in interest”
because no constitutional issues were actually involved. Just five
years before that ruling this Court had denied standing to a
party who, in questioning the validity of another form of lottery,
claimed the right to sue in the capacity of taxpayer, citizen and
member of the Bar. (Valmonte v. Philippine Charity
Sweepstakes, G.R. No. 78716, Sept. 22, 1987).
Same; Same; Same; Same; Same; Same; Same; If the
complaint is not grounded on the impairment of the powers of
Congress, legislators do not have standing to question the validity
of any law or official action.—Only recently this Court held that
members of Congress have standing to question the validity of
presidential veto on the ground that, if true, the illegality of the
veto would impair their prerogatives as members of Congress.
Conversely if the complaint is not grounded on the impairment of
the powers of Congress, legislators do not have standing to
question the validity of any law or official action. (Philippine
Constitution Association v. Enriquez, 235 SCRA 506 [1994]).
_______________
* EN BANC.
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VOL. 246, JULY 17, 1995 541
Same; Same; Same; Same; Same; Same; Same; There is an

additional reason for reexamination of the ruling on standing
since the voting in the previous case was a narrow one, with seven
(7) members sustaining petitioners’ standing and six (6) denying
petitioners’ right to bring the suit—a tenuous majority that is not
likely to be maintained in any subsequent litigation.—There is an
additional reason for a reexamination of the ruling on standing.
The voting on petitioners’ standing in the previous case was a
narrow one, with seven (7) members sustaining petitioners’
standing and six (6) denying petitioners’ right to bring the suit.
The majority was thus a tenuous one that is not likely to be
maintained in any subsequent litigation. In addition, there have
been changes in the membership of the Court, with the
retirement of Justices Cruz and Bidin and the appointment of the
writer of this opinion and Justice Francisco. Given this fact it is
hardly tenable to insist on the maintenance of the ruling as to
petitioners’ standing.
Same; Same; Same; Same; Same; Same; Same; Words and
Phrases; Doctrine of “Law of the Case;” The doctrine of “law of the
case” applies only when a case is before a court a second time after
a ruling by an appellate court.—Petitioners argue that inquiry
into their right to bring this suit is barred by the doctrine of “law
of the case.” We do not think this doctrine is applicable
considering the fact that while this case is a sequel to G.R. No.
113375, it is not its continuation. The doctrine applies only when
a case is before a court a second time after a ruling by an
appellate court.
Same; Same; Same; Same; Same; Same; Same; Same; Same;
“Law of the Case,” Explained.—Thus in People v. Pinuila, 103
Phil. 992, 999 (1958), it was stated: “‘Law of the case’ has been
defined as the opinion delivered on a former appeal. More
specifically, it means that whatever is once irrevocably
established as the controlling legal rule of decision between the
same parties in the same case continues to be the law of the case,
whether correct on general principles or not, so long as the facts
on which such decision was predicated continue to be the facts of
the case before the court.” (21 C.J.S. 330)
Same; Same; Same; Same; Same; Same; Same; Same; Same;
Res Judicata and “Law of the Case,” Distinguished; “Law of the
Case” relates entirely to questions of law, and is confined in its
operation to subsequent proceedings in the same case.—As this
Court explained in another case, “The law of the case, as applied
to a former decision of an appellate court, merely expresses the
practice of the courts in refusing to reopen what has been
decided. It differs from res judicata in that the conclusiveness of
the first judgment is not dependent upon its finality.
542
The first judgment is generally, if not universally, not final. It

relates entirely to questions of law, and is confined in its operation
to subsequent proceedings in the same case. . . .” (Municipality of
Daet v. Court of Appeals, 93 SCRA 503, 521 [1979]).
Same; Same; Same; Same; Same; Same; Same; Same;
Doctrine of “Conclusiveness of Judgment,” Explained.—Nor is
inquiry into petitioners’ right to maintain this suit foreclosed by
the related doctrine of “conclusiveness of judgment.” According to
the doctrine, an issue actually and directly passed upon and
determined in a former suit cannot again be drawn in question in
any future action between the same parties involving a different
cause of action. (Peñalosa v. Tuason, 22 Phil. 303, 313 (1912);
Heirs of Roxas v. Galido, 108 Phil. 582 [1960]).
Same; Same; Same; Same; Same; Same; Same; Same; It has
been held that the rule on conclusiveness of judgment or
preclusion of issues or collateral estoppel does not apply to issues
of law, at least when substantially unrelated claims are involved.
—It has been held that the rule on conclusiveness of judgment or
preclusion of issues or collateral estoppel does not apply to issues
of law, at least when substantially unrelated claims are involved.
(Montana v. United States, 440 U.S. 147, 162, 59 L.Ed.2d 210,
222 (1979); BATOR, MELTZER, MISHKIN AND SHAPIRO, THE
FEDERAL COURTS AND THE FEDERAL SYSTEM 1058, n. 2
[3rd Ed., 1988]).
“Conclusiveness of Judgment” and Res Judicata, Distinguished.—
The doctrine of “conclusiveness of judgment” is also called
“collateral estoppel” or “preclusion of issues,” as distinguished
from “preclusion of claims” or res judicata. In the Rules of Court,
the first (conclusiveness of judgment, collateral estoppel or
preclusion of issues) is governed by Rule 39, §49(c), while the
second (res judicata or preclusion of claims) is found in Rule 39,
§49(b).
Same; Same; Same; Same; Same; Same; Same; Strictly
speaking, petitioners’ standing is not even an issue in this case
since standing is a concept in constitutional law and here no
constitutional question is actually involved as the issue is whether
petitioners are the “real parties in interest” within the meaning of
Rule 3, §2 of the Rules of Court.—Not only is petitioners’ standing
a legal issue that may be determined again in this case. It is,
strictly speaking, not even the issue in this case, since standing is
a concept in constitutional law and here no constitutional
question is actually involved. The issue in this case is whether
petitioners are the “real parties in interest” within the meaning
of Rule 3, §2 of
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VOL. 246, JULY 17, 1995 543
the Rules of Court which requires that “Every action must be

prosecuted and defended in the name of the real party in
interest.”
Same; Same; Same; Same; Same; Same; Same; The rule on
standing and real party in interest, distinguished.—The
difference between the rule on standing and real party in interest
has been noted by authorities thus: “It is important to note . . .
that standing because of its constitutional and public policy
underpinnings, is very different from questions relating to
whether a particular plaintiff is the real party in interest or has
capacity to sue. Although all three requirements are directed
towards ensuring that only certain parties can maintain an
action, standing restrictions require a partial consideration of the
merits, as well as broader policy concerns relating to the proper
role of the judiciary in certain areas. (FRIEDENTHAL, KANE
AND MILLER, CIVIL PROCEDURE 328 [1985]).
Same; Same; Same; Same; Same; Same; Same; The question
in standing is whether the parties bringing the suit have “alleged
such a personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation
of issues upon which the court so largely depends for illumination
of difficult constitutional questions.”—Standing is a special
concern in constitutional law because in some cases suits are
brought not by parties who have been personally injured by the
operation of a law or by official action taken, but by concerned
citizens, taxpayers or voters who actually sue in the public
interest. Hence the question in standing is whether such parties
have “alleged such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court so
largely depends for illumination of difficult constitutional
questions.” (Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633 [1962]).
Same; Same; Same; Same; Same; Same; Same; Sections 5,
12, 13 and 17 of Article II of the Constitution do not embody
judicially enforceable constitutional rights but guidelines for
legislation.—These are not, however, self executing provisions,
the disregard of which can give rise to a cause of action in the
courts. They do not embody judicially enforceable constitutional
rights but guidelines for legislation.
Same; Same; Same; Same; Same; Same; Same; Contracts; In
actions for the annulment of contracts, the real parties are those
who are parties to the agreement or are bound either principally
or subsidiarily or are prejudiced in their rights with respect to one
of the contracting parties.—In actions for the annulment of
contracts, such as this action,
544
the real parties are those who are parties to the agreement or are
bound either principally or subsidiarily or are prejudiced in their
rights with respect to one of the contracting parties and can show
the detriment which would positively result to them from the
contract even though they did not intervene in it (Ibañez v.
Hongkong & Shanghai Bank, 22 Phil. 572 [1912]), or who claim a
right to take part in a public bidding but have been illegally
excluded from it. (See De la Lara Co., Inc. v. Secretary of Public
Works and Communications, G.R. No. L-13460, Nov. 28, 1958).
Same; Same; Same; Same; Same; Same; Same; Same; Words
and Phrases; “Present Substantial Interest,” Explained.—These
are parties with “a present substantial interest, as distinguished
from a mere expectancy or future, contingent, subordinate, or
consequential interest. . . . The phrase ‘present substantial
interest’ more concretely is meant such interest of a party in the
subject matter of the action as will entitle him, under the
substantive law, to recover if the evidence is sufficient, or that he
has the legal title to demand and the defendant will be protected
in a payment to or recovery by him.” (1 MORAN, COMMENTS
ON THE RULES OF COURT 154-155 [1979])
Commission on Audit; Ombudsman; Petitioners do not have such
present substantial interest in the Equipment Lease Agreement
(ELA) as would entitle them to bring this suit; Questions as to the
nature or validity of public contracts or the necessity of public
bidding can be raised in an appropriate case before the
Commission on Audit or before the Ombudsman.—But petitioners
do not have such present substantial interest in the ELA as
would entitle them to bring this suit. Denying to them the right
to intervene will not leave without remedy any perceived
illegality in the execution of government contracts. Questions as
to the nature or validity of public contracts or the necessity for a
public bidding before they may be made can be raised in an
appropriate case before the Commission on Audit or before the
Ombudsman.
Solicitor General; Quo Warranto; If it should be thought that a
government corporation has offended its corporate charter or
misused its franchise, the Solicitor General is authorized to bring
an action for quo warranto.—In addition, the Solicitor General is
authorized to bring an action for quowarranto if it should be
thought that a government corporation, like the PCSO, has
offended against its corporate charter or misused its franchise.
(Rule 66, §2(a) (d))
545
VOL. 246, JULY 17, 1995 545
Philippine Charity Sweepstakes Office; Contracts; Lease;

There is nothing unusual in fixing the rental as a certain
percentage of the gross receipts.—To be sure there is nothing
unusual in fixing the rental as a certain percentage of the gross
receipts. The lease of space in commercial buildings, for example,
involves the payment of a certain percentage of the receipts in
rental. Under the Civil Code (Art. 1643) the only requirement is
that the rental be a “price certain.” Petitioners do not claim here
that the rental is not a “price certain,” simply because it is
expressed as a certain percentage of the total gross amount of
ticket sales.
Same; Same; Same; In the ELA the rental is expressed in
terms of percentage of the gross proceeds from ticket sales because
the allocation of the receipts under the charter of the PCSO is also
expressed in percentage.—In the new contract the rental is also
expressed in terms of percentage of the gross proceeds from ticket
sales because the allocation of the receipts under the charter of
the PCSO is also expressed in percentage, to wit: 55% is set aside
for prizes; 30% for contribution to charity; and 15% for operating
expenses and capital expenditures. (R.A. No. 1169, §6)
Same; Same; Same; The manner of determining rentals is a
matter of business judgment which, in the absence of a clear and
convincing showing that it was made in grave abuse of discretion
of the PCSO, the Supreme Court is not inclined to review.—
Petitioners reply that to obviate the possibility that the rental
would not exceed 15% of the net receipts what the respondents
should have done was not to agree on a minimum fixed rental of
P35,000.00 per terminal in commercial operation. This is a
matter of business judgment which, in the absence of a clear and
convincing showing that it was made in grave abuse of discretion
of the PCSO, this Court is not inclined to review.
Same; Same; Same; As in the construction of statutes, the
presumption is that in making contracts the government has acted
in good faith; The doctrine that the possibility of abuse is not a
reason for denying power to the government holds true also in
cases involving the validity of contracts made by it.—In any case
as in the construction of statutes, the presumption is that in
making contracts the government has acted in good faith. The
doctrine that the possibility of abuse is not a reason for denying
power to the government holds true also in cases involving the
validity of contracts made by it.
Same; Same; Same; A contract of lease may call for some
form of collaboration or association between the parties.—A
contract of lease, as
546
this is defined in Civil law, may call for some form of

collaboration or association between the parties since lease is a
“consensual, bilateral, onerous and commutative contract by
which one person binds himself to grant temporarily the use of a
thing or the rendering of some service to another who undertakes
to pay some rent, compensation or price.” (5 PADILLA, CIVIL
CODE 611 [6TH ED. 1974]).
Same; Same; Same; The ELA is a lease contract that contains
none of the features of the former contract which were considered
“badges of a joint venture agreement.”—We hold that the ELA is a
lease contract and that it contains none of the features of the
former contract which were considered “badges of a joint venture
agreement.” To further find fault with the new contract would be
to cavil and expose the opposition to the contract to be actually
an opposition to lottery under any and all circumstances.
Same; Same; Same; Gambling; The morality of gambling is
not a justiciable issue; Gambling is not illegal per se.—But “[t]he
morality of gambling is not a justiciable issue. Gambling is not
illegal per se. . . . It is left to Congress to deal with the activity as
it sees fit.” (Magtajas v. Pryce Properties Corp. Inc., 234 SCRA
255, 268 (1994). Cf. Lim v. Pacquing, G.R. No. 115044, Jan. 27,
1995) In the case of lottery, there is no dispute that, to enable the
Philippine Charity Sweepstakes Office to raise funds for charity,
Congress authorized the Philippine Charity Sweepstakes Office
(PCSO) to hold or conduct lotteries under certain conditions.
Same; Statutory Construction; Statutes; R.A. 1169; The
Supreme Court’s interpretation of R.A. 1169 in the earlier
Kilosbayan case must be reexamined.—In G.R. No. 113375 it was
held that the PCSO does not have the power to enter into any
contract which would involve it in any form of “collaboration,
association or joint venture” for the holding of sweepstakes races,
lotteries and other similar activities. This interpretation must be
reexamined especially in determining whether petitioners have a
cause of action.
Same; Same; Same; Same; The charter of the PCSO does not
absolutely prohibit it from holding or conducting lottery “in
collaboration, association or joint venture” with another party.—
We hold that the charter of the PCSO does not absolutely
prohibit it from holding or conducting lottery “in collaboration,
association or joint venture” with another party. What the PCSO
is prohibited from doing is to invest in a business engaged in
sweepstakes races, lotteries and similar activities, and it is
prohibited from doing so whether in “collaboration, association
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VOL. 246, JULY 17, 1995 547
or joint venture” with others or “by itself.” The reason for this is
that these are competing activities and the PCSO should not
invest in the business of a competitor.
Same; Same; Same; Same; The prohibition in §1(B) of R.A.
1169 is not so much against the PCSO entering into any
collaboration, association or joint venture with others as against
PCSO investing in the business of another franchise holder which
would directly compete with PCSO’s own charity sweepstakes
races, lotteries or similar activities.—To harmonize pars. (A) and
(B), the latter must be read as referring to the authority of the
PCSO to invest in the business of others. Put in another way, the
prohibition in §1(B) is not so much against the PCSO entering
into any collaboration, association or joint venture with others as
against the PCSO investing in the business of another franchise
holder which would directly compete with PCSO’s own charity
sweepstakes races, lotteries or similar activities. The prohibition
applies whether the PCSO makes the investment alone or with
others.
Same; Same; Same; Same; The contrary construction given to
§1 in the previous decision is based on remarks made by then
Assemblyman, now Mr. Justice, Davide during the deliberations
on what later became B.P. Blg. 42, amending R.A. No. 1169, in
connection with a proposal to give the PCSO the authority “to
engage in any and all investments”—and it is reasonable to
suppose that the members of the Batasan Pambansa, in approving
the amendment, understood it as referring to the exception to par.
(B) of §1 giving the PCSO the power to make investments.—The
contrary construction given to §1 in the previous decision is based
on remarks made by then Assemblyman, now Mr. Justice, Davide
during the deliberations on what later became B.P. Blg. 42,
amending R.A. No. 1169. It appears, however, that the remarks
were made in connection with a proposal to give the PCSO the
authority “to engage in any and all investments .” It was to
provide exception with regard to the type of investments which
the PCSO is authorized to make that the Davide amendment was
adopted. It is reasonable to suppose that the members of the
Batasan Pambansa, in approving the amendment, understood it
as referring to the exception to par. (B) of §1 giving the PCSO the
power to make investments. Had it been their intention to
prohibit the PCSO from entering into any collaboration,
association or joint venture with others even in instances when
the sweepstakes races, lotteries or similar activities are operated
by it (“itself”), they would have made the amendment not in par.
(B), but in par. (A), of §1, as the logical place for the amendment.
548
Same; Same; Same; Same; The construction given to §1 in the

previous decision is insupportable in light of both the text of §1
and the legislative deliberations.—The construction given to §1 in
the previous decision is insupportable in light of both the text of
§1 and the deliberations of the Batasang Pambansa which
enacted the amendatory law.
Same; Bids and Bidding; Statutes; E.O. 301; §1 of E.O. No.
301 applies only to contracts for the purchase of supplies,
materials and equipment and does not refer to contracts of lease of
equipment.—E.O. No. 301, §1 applies only to contracts for the
purchase of supplies, materials and equipment. It does not refer
to contracts of lease of equipment like the ELA. The provisions on
lease are found in §§ 6 and 7 but they refer to the lease of
privately-owned buildings or spaces for government use or of
government-owned buildings or spaces for private use, and these
provisions do not require public bidding.
Same; Same; Same; Same; Sales; An option to buy is not a
contract of purchase and sale.—It is thus difficult to see how E.O.
No. 301 can be applied to the ELA when the only feature of the
ELA that may be thought of as close to a contract of purchase
and sale is the option to buy given to the PCSO. An option to buy
is not of course a contract of purchase and sale.
PADILLA, J.,Concurring:
Constitutional Law; Actions; Parties; Locus Standi; The

principle of locus standi should not stand in the way of a review
by the Supreme Court of the validity of the changed agreement
between the PCSO and the PGMC.—The core issue in the present
case is the same as the issue in the first lotto case, i.e., the
validity of a changed agreement between PCSO and PGMC.
Thus, it is my view that the principle of locus standi should not
stand in the way of a review by this Court of the validity of such
changed agreement.
Contracts; Lease; That the parties have stipulated on flexible
rentals does not render it less of a lease contract and more of joint
venture.—A lease is a contract whereby one of the parties binds
himself to give to another the enjoyment or use of a thing for a
price certain and for a period which may be definite or indefinite
(Article 1643, Civil Code). It would appear from the above legal
provision that the ELA is truly a straight contract of lease. That
the parties to the ELA have stipulated on flexible rentals does
not render it less of a lease contract and more of a joint venture.
Surely, the PGMC as owner of the leased equipment is free to
demand the amount of rentals it deems commensu-
549
VOL. 246, JULY 17, 1995 549
rate for the use thereof and, as long as PCSO agrees to the
amount of such rentals, as justifying an adequate net return to it,
then the contract is valid and binding between the parties
thereto. This is the essence of freedom to enter into contracts.
Commission on Audit; Judicial Review; Doctrine of Primary
Jurisdiction; The Supreme Court should not preempt the
determination and judgment of the COA on matters which are
within its primary jurisdiction under the Constitution.—On the
allegation of lack of public bidding on the ELA, the Commission
on Audit (COA) has yet to resolve a case where the issue of the
validity of the ELA due to lack of public bidding has been
squarely raised. This matter surfaced during the hearing of the
present case. Needless to say, the Court should not preempt the
determination and judgment of the COA on matters which are
within its primary jurisdiction under the Constitution.
Constitutional Law; Separation of Powers; On the question as
to whether the ELA is grossly disadvantageous to the government,
such matter involves basically a policy-determination by the
executive branch which the Supreme Court should not ordinarily
reverse or substitute with its own judgment.—As to whether or
not the ELA is grossly disadvantageous to the government, it
should be stressed that the matter involves, basically, a policy—
determination by the executive branch which this Court should
not ordinarily reverse or substitute with its own judgment, in
keeping with the time honored doctrine of separation of powers.
FELICIANO, J.,Dissenting:
Statutory Construction; The view expressed by an individual

legislator who eventually comes to sit in the Supreme Court as to
the meaning to be given to words crafted by himself should, at the
very least, be regarded as entitled to a strong presumption of
correctness.—In so doing, my learned brother Mendoza, J.
purports to controvert and overturn the reading that the majority
of this Court, through Mr. Justice Davide, Jr., in the first
Kilosbayan case gave to the relevant provisions of the PCSO
charter. It so happens that the critical language in the relevant
PCSO charter provision—that is, the “except” clause in Section 1
(B) of the PCSO charter as amended by B.P. Blg. 42—was crafted
by the then Assemblyman Hilario G. Davide, Jr. during the
deliberations in the Interim Batasan Pambansa on the bill that
became B.P. Blg. 42. It is impliedly contended by the majority
that the intent of an individual legislator should not be regarded
as conclusive as to the “correct” interpretation of the provision of
a statute. This is true
550
enough, as a general proposition, for it is the intent of the

legislative body as manifested in the language used by the
legislature that must be examined and applied by this Court.
However, it seems to me that the view expressed by an individual
legislator who eventually comes to sit in this Court as to the
meaning to be given to words crafted by himself should, at the
very least, be regarded as entitled to a strong presumption of
correctness.
Contracts; Sales; Lease; It is commonplace knowledge that
equipment leases (especially “financial leases” involving expensive
capital equipment) are often substitutes for or equivalents of
purchase and sale contracts.—It is commonplace knowledge that
equipment leases (especially “financial leases” involving
expensive capital equipment) are often substitutes for or
equivalents of purchase and sale contracts, given the
multifarious credit and tax constraints operating in the market
place.
Same; Same; Same; Bids and Bidding; It is true enough that
public bidding may be inconvenient and time consuming but it is
still the only method of procurement so far invented by man by
which the government could reasonably expect to keep relatively
honest those who would contract with it.—Public bidding is
precisely the standard and best way of ensuring that a contract
by which the government seeks to provide itself with supplies or
materials or equipment is in fact the most advantageous to
government. It is true enough that public bidding may be
inconvenient and time consuming; but it is still the only method
of procurement so far invented by man by which the government
could reasonably expect to keep relatively honest those who
would contract with it. This is the basic reason why competition
through public bidding is the general rule and not the exception.
I fear that the opinion of my learned brother Justice Mendoza
would, in ultimate effect, stand this rule on its head and make
public bidding the exception rather than the general rule.
Same; Same; Same; In the commercial world, a rental
provision cast in terms of a fixed participation in the gross
revenues of the lessee signals substantial economic interest in the
business of such lessee which cannot be regarded as compatible
with an “ordinary” equipment rental agreement—it is of the very
substance of a commercial joint venture and of economic
collaboration or association.—I begin with the nature and form of
the rental provisions of the ELA. The rental payable by PCSO as
lessee of equipment and other assets owned by PGMC as lessor,
is fixed at a specified percentage, 4.3% of the gross revenues
accruing to PCSO out of or in connection with the operation of
such
551
VOL. 246, JULY 17, 1995 551
equipment and assets. The rental payable is not, in other words,

expressed in terms of a fixed and absolute figure, although a floor
amount per leased terminal is set. Instead, the actual total
amount of the rental rises and falls from month to month as the
revenues grow or shrink in volume. I respectfully suggest that
thereby the lessor of the facilities leased has acquired a legal
interest either in the business of the lessee PCSO that is
conducted through the operation of such facilities and equipment,
or at least in the income stream of PCSO originating from such
operation. In the commercial world, a rental provision cast in
terms of a fixed participation in the gross revenues of the lessee,
signals substantial economic interest in the business of such
lessee. Such a provision cannot be regarded as compatible with
an “ordinary” equipment rental agreement. On the other hand, it
is of the very substance of a commercial joint venture and of
economic collaboration or association.
REGALADO, J.,Dissenting:
Actions; Res Judicata; Law of the Case; The “law of the case”
may also arise from an original holding of a higher court on a
writ of certiorari, and is binding not only in subsequent appeals
or proceedings in the same case, but also in a subsequent suit
between the same parties.—Accordingly, the “law of the case” may
also arise from an original holding of a higher court on a writ of
certiorari, and is binding not only in subsequent appeals or
proceedings in the same case, but also in a subsequent suit
between the same parties. What I wish to underscore is that
where, as in the instant case, the holding of this highest Court on
a specific issue was handed down in an original action for
certiorari, it has the same binding effect as it would have had if
promulgated in a case on appeal. Furthermore, since in our
jurisdiction an original action for certiorari to control and set
aside a grave abuse of official discretion can be commenced in the
Supreme Court itself, it would be absurd that for its ruling
therein to constitute the law of the case, there must first be a
remand to a lower court which naturally could not be the court of
origin from which the postulated second appeal should be taken.
Same; Same; Same; Constitutional Law; Parties; Locus
Standi; The concept of a cause of action in public interest cases
should not be straightjacketed within its usual narrow confines in
private interest litigations.—It is true that a right of action is the
right or standing to enforce a cause of action. For its purposes,
the majority urges the adoption of the standard concept of a real
party in interest based on his possession of a cause of action. It
could not have failed to perceive, but
552
nonetheless refuses to concede, that the concept of a cause of

action in public interest cases should not be straitjacketed within
its usual narrow confines in private interest litigations.
Same; Same; Same; Same; Same; Same; The matter of the
right of petitioners to file and maintain the present action—
whether the objection thereto is premised on lack of locus standi or
right of action—has already been foreclosed by the judgment in
the first lotto case.—I hold the view that the matter of the right of
petitioners to file and maintain this action—whether the
objection thereto is premised on lack of locus standi or right of
action—has already been foreclosed by our judgment in the first
lotto case, G.R. No. 113375. If the majority refuses to recognize
such right under the “law of the case” principle, I see no reason
why that particular issue can still be ventilated now as a survivor
of the doctrinal effects of res judicata.
Same; Same; Same; The removal and replacement of some
objectionable terms of a contract, which nevertheless continues to
operate under the same basis, with and on the same property, and
for the same purpose, and through the same contracting parties
does not suffice to extinguish the identity of the subject matter in
both cases.—The removal and replacement of some objectionable
terms of a contract, which nevertheless continues to operate
under the same basis, with and on the same property, for the
same purpose, and through the same contracting parties does not
suffice to extinguish the identity of the subject matter in both
cases. This would be to exalt form over substance. Furthermore,
respondents themselves admitted that the new contract is
actually the same as the original one, with just some variants in
the terms of the latter to eliminate those which were objected to.
The contrary assumption now being floated by respondents would
create chaos in our remedial and contractual laws, open the door
to fraud, and subvert the rules on the finality of judgments.
DAVIDE, JR., J.,Dissenting:
Actions; Res Judicata; Law of the Case; Stare Decisis;

Parties; Locus Standi; Under the principle of either the law of the
case or res judicata, the PCSO and the PGMC are bound by the
ruling in the first lotto case on the locus standi of the petitioners
and the application or interpretation of the exception clause in §1
(B) of R.A. No. 1169.—Under the principle of either the law of the
case or res judicata, the PCSO and the PGMC are bound by the
ruling in the first lotto case on the locus standi of the petitioners
and the application or interpretation of the exception clause in
paragraph B, Section 1 of R.A. No. 1169, as amended.
553
VOL. 246, JULY 17, 1995 553

VOL. 246, JULY 17, 1995 553
Moreover, that application or interpretation has been laid to rest

under the doctrine of stare decisis and has also become part of
our legal system pursuant to Article 8 of the Civil Code which
provides: “Judicial decisions applying or interpreting the laws or
the constitution shall form part of the legal system of the
Philippines.”
Same; Same; Same; Same; Same; Same; Decisions applying
or interpreting laws or the constitution “assume the same
authority as the statute itself and, until authoritatively
abandoned, necessarily become, to the extent that they are
applicable, the criteria which must control the actuations not only
of those called upon to abide thereby but also of those in duty
bound to enforce obedience thereto.”—The doctrine of stare decisis
embodies the legal maxim that a principle or rule of law which
has been established by the decision of a court of controlling
jurisdiction will be followed in other cases involving a similar
situation. It is founded on the necessity for securing certainty
and stability in the law and does not require identity or privity of
parties. This is explicitly fleshed out in Article 8 of the Civil Code
which provides that decisions applying or interpreting the laws
or the constitution shall form part of the legal system. Such
decisions “assume the same authority as the statute itself and,
until authoritatively abandoned, necessarily become, to the
extent that they are applicable, the criteria which must control
the actuations not only of those called upon to abide thereby but
also of those in duty bound to enforce obedience thereto.”
Same; Same; Same; Same; Same; Same; Abandonment of
decisions applying or interpreting laws or the constitution must be
based only on strong and compelling reasons otherwise the
becoming virtue of predictability expected from the Supreme Court
would be immeasurably affected and the public’s confidence in the
stability of its solemn pronouncements diminished.—
Abandonment thereof must be based only on strong and
compelling reasons—which I do not find in this case—otherwise,
the becoming virtue of predictability which is expected from this
Court would be immeasurably affected and the public’s
confidence in the stability of its solemn pronouncements
diminished.
Same; Same; Same; Same; Same; Same; Dual aspects of the
doctrine of res judicata.—The doctrine of res judicata also bars a
relitigation of the issue of locus standi and a re-examination of
the application or interpretation of the exception clause in
paragraph B, Section 1 of R.A. 1169, as amended. This doctrine
has dual aspects: (1) as a bar to the prosecution of a second action
upon the same claim, demand, or cause of action; and (2) as
preclusion to the relitigation of particular facts or issues in
another action between the same parties on
554
a different claim or cause of action.

Statutory Construction; The best authority on the intention or
rationale of a legislative amendment is its author.—I respectfully
submit that the best authority on the intention or rationale of a
legislative amendment is its author. Fortunately, I happened to
be the author of the exception clause in said provision. The
language of that clause is very short and simple, and the
elaboration given therefor, as earlier shown, is equally short and
simple. The sponsor of the measure, then Assemblyman, now
Congressman, Ronaldo Zamora did not even ask for an
explanation or clarification; he readily accepted the amendment.
Nobody from the floor interpellated me for an explanation or
clarification.
Contracts; Lease; Bids and Bidding; Even assuming that the
subject ELA is not a joint venture contract, still it must be
nullified for having been entered into without public bidding and
for being grossly disadvantageous to the Government.—Even
assuming that the subject ELA is not a joint venture contract,
still it must be nullified for having been entered into without
public bidding and for being grossly disadvantageous to the
Government. It has been said: In this jurisdiction, public bidding
is the policy and medium adhered to in Government procurement
and construction contracts under existing laws and regulations.
It is the accepted method for arriving at a fair and reasonable
price and ensures that overpricing, favoritism and other
anomalous practices are eliminated or minimized. And any
Government contract entered into without the required bidding is
null and void and cannot adversely affect the rights of third
parties.
Same; Same; Sales; Words and Phrases; “Optional Contract,”
Explained.—An optional contract is a privilege existing in one
person, for which he had paid a consideration, which gives him
the right to buy certain specified property from another person, if
he chooses, at any time within the agreed period, at a fixed price.
Said contract is separate and distinct contract from the contract
which the parties may enter into upon the consummation of the
option. The second paragraph of Article 1479 of the Civil Code
expressly provides that “[a]n accepted unilateral promise to buy
or to sell a determinate thing for a price certain is binding upon
the promissor if the promise is supported by a consideration
distinct from the price.”
VITUG, J., Concurring Opinion:
Constitutional Law; Judicial Power; Separation of Powers;

The constitutional provision defining “judicial power” has not
been intended
555
VOL. 246, JULY 17, 1995 555
to unduly mutate, let alone to disregard, the long established rules

on locus standi, and neither has it been meant to do away with the
principle of separation of powers and its essential incidents.—A
provision which has been introduced by the 1987 Constitution is
a definition, for the first time in our fundamental law, of the term
“judicial power,” as such authority and duty of courts of justice
“to settle actual controversies involving rights which are legally
demandable and enforceable and to determine whether or not
there has been a grave abuse of discretion, amounting to lack or
excess of jurisdiction, on the part of any branch or
instrumentality of the Government” (Article VIII, Section 1,
Constitution). I take it that the provision has not been intended
to unduly mutate, let alone to disregard, the long established
rules on locus standi. Neither has it been meant, I most
respectfully submit, to do away with the principle of separation of
powers and its essential incidents such as by, in effect, conferring
omnipotence on, or allowing an intrusion by, the courts in respect
to purely political decisions, the exercise of which is explicitly
vested elsewhere, and subordinate to that of their own the will of
either the Legislative Department or the Executive Department
—both co-equal, independent and coordinate branches, along
with the Judiciary, in our system of government. Again, if it were
otherwise, there indeed would be truth to the charge, in the
words of some constitutionalists, that “judicial tyranny” has been
institutionalized by the 1987 Constitution, an apprehension
which should, I submit, rather be held far from truth and reality.
PETITION for prohibition, review and/or Injunction in the

Supreme Court.
The facts are stated in the opinion of the Court.

Jovito R. Salonga, Fernando Santiago and Emilio
Capulong, Jr. for petitioners.
Renato L. Cayetano and Eleazar Reyes for private
respondents.
MENDOZA, J.:
As a result of our decision in G.R. No. 113375 (Kilosbayan,

Incorporated v. Guingona, 232 SCRA 110 [1994])
invalidating the Contract of Lease between the Philippine
Charity Sweepstakes Office (PCSO) and the Philippine
Gaming Management Corp. (PGMC) on the ground that it
had been made in violation of the charter of the PCSO, the
parties entered into negotiations for
556

a new agreement that would be “consistent with the
latter’s [PCSO] charter . . . and conformable to this
Honorable Court’s aforesaid Decision.”
On January 25, 1995, the parties signed an Equipment
Lease Agreement (hereafter called ELA) whereby the
PGMC leased online lottery equipment and accessories to
the PCSO in consideration of a rental equivalent to 4.3% of
the gross amount of ticket sales derived by the PCSO from
the operation of the lottery which in no case shall be less
than an annual rental computed at P35,000.00 per
terminal in commercial operation. The rental is to be
computed and paid bi-weekly. In the event the bi-weekly
rentals in any year fall short of the annual minimum fixed
rental thus computed, the PCSO agrees to pay the
deficiency out of the proceeds of its current ticket sales.
(Pars. 1-2)
Under the law, 30% of the net receipts from the sale of
tickets is allotted to charity. (R.A. No. 1169, §6 [B])
The term of the lease is eight (8) years, commencing
from the start of commercial operation of the lottery
equipment first delivered to the lessee pursuant to the
agreed schedule. (Par. 3)
In the operation of the lottery, the PCSO is to employ
its own personnel. (Par. 5) It is responsible for the loss of,
or damage to, the equipment arising from any cause and
for the cost of their maintenance and repair. (Pars. 7-8)
Upon the expiration of the lease, the PCSO has the
option to purchase the equipment for the sum of P25
million.
A copy of the ELA was submitted to the Court by the
PGMC in accordance with its manifestation in the prior
case.
On February 21, 1995 this suit was filed seeking to
declare the ELA invalid on the ground that it is
substantially the same as the Contract of Lease nullified
in the first case. Petitioners argue:
1. THE AMENDED ELA IS NULL AND VOID SINCE IT IS

BASICALLY OR SUBSTANTIALLY THE SAME AS OR
SIMILAR TO THE OLD LEASE CONTRACT AS
REPRESENTED AND ADMITTED BY RESPONDENTS
PGMC AND PCSO.
2. ASSUMING ARGUENDO, THAT THE AMENDED ELA
IS MATERIALLY DIFFERENT FROM THE OLD LEASE
CONTRACT, THE AMENDED ELA IS NEVERTHELESS
NULL AND VOID FOR BEING INCONSISTENT WITH
AND VIOLATIVE OF PCSO’S CHARTER AND THE
DECISION OF THIS HONORABLE COURT OF MAY 5,
1995.
557
VOL. 246, JULY 17, 1995 557

3. THE AMENDED EQUIPMENT LEASE AGREEMENT

IS NULL AND VOID FOR BEING VIOLATIVE OF THE
LAW ON PUBLIC BIDDING OF CONTRACTS FOR
FURNISHING SUPPLIES, MATERIALS AND
EQUIPMENT TO THE GOVERNMENT,
PARTICULARLY E.O. NO. 301 DATED 26 JULY 1987
AND E.O. NO. 298 DATED 12 AUGUST 1940 AS
AMENDED, AS WELL AS THE “RULES AND
REGULATIONS FOR THE PREVENTION OF
IRREGULAR, UNNECESSARY, EXCESSIVE OR
EXTRAVAGANT (IUEE) EXPENDITURES
PROMULGATED UNDER COMMISSION ON AUDIT
CIRCULAR NO. 85-55-A DATED SEPTEMBER 8, 1985,
CONSIDERING THAT IT WAS AWARDED AND
EXECUTED WITHOUT THE PUBLIC BIDDING
REQUIRED UNDER SAID LAWS AND COA RULES
AND REGULATIONS, IT HAS NOT BEEN APPROVED
BY THE PRESIDENT OF THE PHILIPPINES, AND IT
IS NOT MOST ADVANTAGEOUS TO THE
GOVERNMENT.
4. THE ELA IS VIOLATIVE OF SECTION 2(2), ARTICLE
IX-D OF THE 1987 CONSTITUTION IN RELATION TO
COA CIRCULAR NO. 85-55-A.
The PCSO and PGMC filed separate comments in which

they question the petitioners’ standing to bring this suit.
They maintain (1) that the ELA is a different lease
contract with none of the vestiges of a joint venture which
were found in the Contract of Lease nullified in the prior
case; (2) that the ELA did not have to be submitted to a
public bidding because it fell within the exception provided
in E.O. No. 301, §1(e); (3) that the power to determine
whether the ELA is advantageous to the government is
vested in the Board of Directors of the PCSO; (4) that for
lack of funds the PCSO cannot purchase its own on-line
lottery equipment and has had to enter into a lease
contract; (5) that what petitioners are actually seeking in
this suit is to further their moral crusade and political
agenda, using the Court as their forum.
For reasons set forth below, we hold that petitioners
have no cause against respondents and therefore their
petition should be dismissed.
I PETITIONERS’ STANDING
The Kilosbayan, Inc. is an organization described in its

petition as “composed of civic-spirited citizens, pastors,
priests, nuns and lay leaders who are committed to the
cause of truth, justice,
558

and national renewal.” Its trustees are also suing in their

individual and collective capacities as “taxpayers and
concerned citizens.” The other petitioners (Sen. Freddie
Webb, Sen. Wigberto Tañada and Rep. Joker P. Arroyo)
are members of Congress suing as such and as “taxpayers
and concerned citizens.”
Respondents question the right of petitioners to bring
this suit on the ground that, not being parties to the
contract of lease which they seek to nullify, they have no
personal and substantial interest likely to be injured by
the enforcement of the contract. Petitioners on the other
hand contend that the ruling in the previous case
sustaining their standing to challenge the validity of the
first contract for the operation of lottery is now the “law of
the case” and therefore the question of their standing can
no longer be reopened.
Neither the doctrine of stare decisis nor that of “law of
the case,” nor that of conclusiveness of judgment poses a
barrier to a determination of petitioners’ right to maintain
this suit.
Stare decisis is usually the wise policy. But in this case,
concern for stability in decisional law does not call for
adherence to what has recently been laid down as the rule.
The previous ruling sustaining petitioners’ intervention
may itself be considered a departure from settled rulings
on “real parties in interest” because no constitutional
issues were actually involved. Just five years before that
ruling this Court had denied standing to a party who, in
questioning the validity of another form of lottery, claimed
the right to sue in the capacity of taxpayer, citizen and
member of the Bar. (Valmonte v. Philippine Charity
Sweepstakes, G.R. No. 78716, Sept. 22, 1987) Only
recently this Court held that members of Congress have
standing to question the validity of presidential veto on the
ground that, if true, the illegality of the veto would impair
their prerogatives as members of Congress. Conversely if
the complaint is not grounded on the impairment of the
powers of Congress, legislators do not have standing to
question the validity of any law or official action.
(Philippine Constitution Association v. Enriquez, 235
SCRA 506 [1994])
There is an additional reason for a reexamination of the
ruling on standing. The voting on petitioners’ standing in
the previous case was a narrow one, with seven (7)
members sustaining petitioners’ standing and six (6)
denying petitioners’ right to
559
VOL. 246, JULY 17, 1995 559

bring the suit. The majority was thus a tenuous one that is
not likely to be maintained in any subsequent litigation. In
addition, there have been changes in the membership of
the Court, with the retirement of Justices Cruz and Bidin
and the appointment of the writer of this opinion and
Justice Francisco. Given this fact it is hardly tenable to
insist on the maintenance of the ruling as to petitioners’
standing.
Petitioners argue that inquiry into their right to bring
this suit is barred by the doctrine of “law of the case.” We
do not think this doctrine is applicable considering the fact
that while this case is a sequel to G.R. No. 113375, it is not
its continuation. The doctrine applies only when a case is
before a court a second time after a ruling by an appellate
court. Thus in People v. Pinuila, 103 Phil. 992, 999 (1958),
it was stated:
“‘Law of the case’ has been defined as the opinion delivered on a

former appeal. More specifically, it means that whatever is once
irrevocably established as the controlling legal rule of decision
between the same parties in the same case continues to be the
law of the case, whether correct on general principles or not, so
long as the facts on which such decision was predicated continue
to be the facts of the case before the court.” (21 C.J.S. 330)
“It may be stated as a rule of general application that, where
the evidence on a second or succeeding appeal is substantially the
same as that on the first or preceding appeal, all matters,
questions, points, or issues adjudicated on the prior appeal are
the law of the case on all subsequent appeals and will not be
considered or readjudicated therein. (5 C.J.S. 1267)
“In accordance with the general rule stated in Section 1821,
where, after a definite determination, the court has remanded the
cause for further action below, it will refuse to examine question
other than those arising subsequently to such determination and
remand, or other than the propriety of the compliance with its
mandate; and if the court below has proceeded in substantial
conformity to the directions of the appellate court, its action will
not be questioned on a second ap
peal. . . . “As a general rule a decision on a prior appeal of the
same case is held to be the law of the case whether that decision
is right or wrong, the remedy of the party deeming himself
aggrieved being to seek a rehearing. (5 C.J.S. 1276-77)
“Questions ‘necessarily involved in the decision on a former
appeal will be regarded as the law of the case on a subsequent
appeal, although the questions are not expressly treated in the
opinion of the
560

court, as the presumption is that all the facts in the case bearing
on the point decided have received due consideration whether all
or none of them are mentioned in the opinion. (5 C.J.S. 1286-87)”
As this Court explained in another case, “The law of the

case, as applied to a former decision of an appellate court,
merely expresses the practice of the courts in refusing to
reopen what has been decided. It differs from res judicata
in that the conclusiveness of the first judgment is not
dependent upon its finality. The first judgment is
generally, if not universally, not final. It relates entirely to
questions of law, and is confined in its operation to
subsequent proceedings in the same case . . . .”
(Municipality of Daet v. Court of Appeals, 93 SCRA 503,
521 [1979])
It follows that since the present case is not the same one
litigated by the parties before in G.R. No. 113375, the
ruling there cannot in any sense be regarded as “the law of
this case.” The parties are the same but the cases are not.
Nor is inquiry into petitioners’ right to maintain this
suit foreclosed
1
by the related doctrine of “conclusiveness of
judgment.” According to the doctrine, an issue actually
and directly passed upon and determined in a former suit
cannot again be drawn in question in any future action
between the same parties involving a different cause of
action. (Peñalosa v. Tuason, 22 Phil. 303, 313 (1912); Heirs
of Roxas v. Galido, 108 Phil. 582 [1960])
It has been held that the rule on conclusiveness of
judgment or preclusion of issues or collateral estoppel does
not apply to issues of law, at least when substantially
unrelated claims are involved. (Montana v. United States,
440 U.S. 147, 162, 59 L.Ed.2d 210, 222 [1979]; BATOR,
MELTZER, MISHKIN AND SHAPIRO, THE FEDERAL
COURTS AND THE FEDERAL SYSTEM 1058, n. 2 (3rd
Ed., [1988]) Following this ruling it was held in
Commissioner v. Sunnen, 333 U.S. 591, 92 L.Ed. 898
(1947) that where a
_______________
1 The doctrine of “conclusiveness of judgment” is also called “collateral

estoppel” or “preclusion of issues,” as distinguished from “preclusion of
claims” or res judicata. In the Rules of Court, the first (conclusiveness of
judgment, collateral estoppel or preclusion of issues) is governed by Rule
39, §49(c), while the second (res judicata or preclusion of claims) is found
in Rule 39, §49(b).
561
VOL. 246, JULY 17, 1995 561

taxpayer assigned to his wife his interest in a patent in

1928 and in a suit it was determined that money paid to
his wife for the years 1929-1931 under the 1928
assignment was not part of his taxable income, this
determination is not preclusive in a second action for
collection of taxes on amounts paid to his wife under
another deed of assignment for other years (1937 to 1941).
For income tax purposes what is decided with respect to
one contract is not conclusive as to any other contract
which was not then in issue, however similar or identical it
may be. The rule on collateral estoppel, it was held, “must
be confined to situations where the matter raised in the
second suit is identical in all respects with that decided in
the first proceeding and where the controlling facts and
applicable legal rules remain unchanged.” (333 U.S. at
599-600, 92 L.Ed. at 907) Consequently, “if the relevant
facts in the two cases are separate, even though they be
similar or identical, collateral estoppel does not govern the
legal issues which occur in the second case. Thus the
second proceeding may involve an instrument or
transaction identical with, but in a form separable from,
the one dealt with in the first proceeding. In that situation
a court is free in the second proceeding to make an
independent examination of the legal matters at issue. . . .”
(333 U.S. at 601, 92 L.Ed. at 908)
This exception to the General Rule of Issue Preclusion
is authoritatively formulated in Restatement of the Law 2d,
on Judgments, as follows:
§ 28. Although an issue is actually litigated and determined by a

valid and final judgment, and the determination is essential to
the judgment, relitigation of the issue in a subsequent action
between the parties is not precluded in the following
circumstances:
....
(2) The issue is one of law and (a) the two actions involve
claims that are substantially unrelated , or (b) a new
determination is warranted in order to take account of an
intervening change in the applicable legal context or otherwise to
avoid inequitable administration of the laws; . . .
Illustration:
....
2. A brings an action against the municipality of B for tortious
injury. The court sustains B’s defense of sovereign immunity and
562

dismisses the action. Several years later A brings a second action

against B for an unrelated tortious injury occurring after the
dismissal. The judgment in the first action is not conclusive on
the question whether the defense of sovereign immunity is
available to B. Note: The doctrine of stare decisis may lead the
court to refuse to reconsider the question of sovereign immunity.
See §29, Comment i.
The question whether petitioners have standing to

question the Equipment Lease Agreement or ELA is a
legal question. As will presently be shown, the ELA, which
petitioners seek to declare invalid in this proceeding, is
essentially different from the 1993 Contract of Lease
entered into by the PCSO with the PGMC. Hence the
determination in the prior case (G.R. No. 113375) that
petitioners had standing to challenge the validity of the
1993 Contract of Lease of the parties does not preclude
determination of their standing in the present suit.
Not only is petitioners’ standing a legal issue that may
be determined again in this case. It is, strictly speaking,
not even the issue in this case, since standing is a concept
in constitutional law and here no constitutional question is
actually involved. The issue in this case is whether
petitioners are the “real parties in interest” within the
meaning of Rule 3, §2 of the Rules of Court which requires
that “Every action must be prosecuted and defended in the
name of the real party in interest.”
The difference between the rule on standing and real
party in interest has been noted by authorities thus: “It is
important to note . . . that standing because of its
constitutional and public policy underpinnings, is very
different from questions relating to whether a particular
plaintiff is the real party in interest or has capacity to sue.
Although all three requirements are directed towards
ensuring that only certain parties can maintain an action,
standing restrictions require a partial consideration of the
merits, as well as broader policy concerns relating to the
proper role of the judiciary in certain areas.
(FRIEDENTHAL, KANE AND MILLER, CIVIL
PROCEDURE 328 [1985])
Standing is a special concern in constitutional law
because in some cases suits are brought not by parties who
have been personally injured by the operation of a law or
by official action taken, but by concerned citizens,
taxpayers or voters who actually sue in the public interest.
Hence the question in standing is whether such parties
have “alleged such a personal stake in the
563
VOL. 246, JULY 17, 1995 563

outcome of the controversy as to assure that concrete

adverseness which sharpens the presentation of issues
upon which the court so largely depends for illumination of
difficult constitutional questions.” (Baker v. Carr, 369 U.S.
186, 7 L.Ed.2d 633 [1962])
Accordingly, in Valmonte v. Philippine Charity
Sweepstakes Office, G.R. No. 78716, Sept. 22, 1987,
standing was denied to a petitioner who sought to declare
a form of lottery known as Instant Sweepstakes invalid
because, as the Court held,
Valmonte brings the suit as a citizen, lawyer, taxpayer and

father of three (3) minor children. But nowhere in his petition
does petitioner claim that his rights and privileges as a lawyer or
citizen have been directly and personally injured by the operation
of the Instant Sweepstakes. The interest of the person assailing
the constitutionality of a statute must be direct and personal. He
must be able to show, not only that the law is invalid, but also
that he has sustained or is in immediate danger of sustaining
some direct injury as a result of its enforcement, and not merely
that he suffers thereby in some indefinite way. It must appear
that the person complaining has been or is about to be denied
some right or privilege to which he is lawfully entitled or that he
is about to be subjected to some burdens or penalties by reason of
the statute complained of.
We apprehend no difference between the petitioner in

Valmonte and the present petitioners. Petitioners do not in
fact show what particularized interest they have for
bringing this suit. It does not detract from the high regard
for petitioners as civic leaders to say that their interest
falls short of that required to maintain an action under
Rule 3, §2.
It is true that the present action involves not a mere
contract between private individuals but one made by a
government corporation. There is, however, no allegation
that public funds are being misspent so as to make this
action a public one and justify relaxation of the
requirement that an action must be prosecuted in the
name of the real party in interest. (Valmonte v. PCSO,
supra; Bugnay Const. and Dev. Corp. v. Laron, 176 SCRA
240 [1989])
On the other hand, the question as to “real party in
interest” is whether he is “the party who would be
benefitted or injured by the judgment, or the ‘party
entitled to the avails of the suit.’ ”
564

(Salonga v. Warner Barnes & Co., Ltd., 88 Phil. 125, 131

[1951])
Petitioners invoke the following Principles and State
Policies set forth in Art. II of the Constitution:
The maintenance of peace and order, the protection of life,

liberty, and property, and the promotion of the general welfare
are essential for the enjoyment by all the people of the blessings
of democracy. (§5)
The natural and primary right and duty of parents in the
rearing of the youth for civic efficiency and the development of
moral character shall receive the support of the Government.
(§12)
The State recognizes the vital role of the youth in nation-
building and shall promote their physical, moral, spiritual,
intellectual, and social well-being. It shall inculcate in the youth
patriotism and nationalism, and encourage their involvement in
public and civic affairs. (§13)
The State shall give priority to education, science and
technology, arts, culture, and sports to foster patriotism and
nationalism, accelerate social progress, and promote total human
liberation and development. (§17)
(Memorandum for Petitioners, p. 7)
These are not, however, self executing provisions, the

disregard of which can give rise to a cause of action in the
courts. They do not embody judicially enforceable
constitutional rights but guidelines for legislation.
Thus, while constitutional policies are invoked, this case
involves basically questions of contract law. More
specifically, the question is whether petitioners have a
legal right which has been violated.
In actions for the annulment of contracts, such as this
action, the real parties are those who are parties to the
agreement or are bound either principally or subsidiarily
or are prejudiced in their rights with respect to one of the
contracting parties and can show the detriment which
would positively result to them from the contract even
though they did not intervene in it (Ibañez v. Hongkong &
Shanghai Bank, 22 Phil. 572 [1912]), or who claim a right
to take part in a public bidding but have been illegally
excluded from it. (See De la Lara Co., Inc. v. Secretary of
Public Works and Communications, G.R. No. L-13460,
Nov. 28, 1958)
These are parties with “a present substantial interest,
as distinguished from a mere expectancy or future,
contingent, subordinate, or consequential interest. . . . The
phrase ‘present
565
VOL. 246, JULY 17, 1995 565

substantial interest’ more concretely is meant such

interest of a party in the subject matter of the action as
will entitle him, under the substantive law, to recover if
the evidence is sufficient, or that he has the legal title to
demand and the defendant will be protected in a payment
to or recovery by him.” (1 MORAN, COMMENTS ON THE
RULES OF COURT 154-155 ([1979]) Thus, in Gonzales v.
Hechanova, 118 Phil. 1065 (1963) petitioner’s right to
question the validity of a government contract for the
importation of rice was sustained because he was a rice
planter with substantial production, who had a right
under the law to sell to the government.
But petitioners do not have such present substantial
interest in the ELA as would entitle them to bring this
suit. Denying to them the right to intervene will not leave
without remedy any perceived illegality in the execution of
government contracts. Questions as to the nature or
validity of public contracts or the necessity for a public
bidding before they may be made can be raised in an
appropriate case before the Commission on Audit or before
the Ombudsman. The Constitution requires that the
Ombudsman and his deputies, “as protectors of the people
shall act promptly on complaints filed in any form or
manner against public officials or employees of the
government, or any subdivision, agency or instrumentality
thereof including government-owned or controlled
corporations.” (Art. XI, §12) In addition, the Solicitor
General is authorized to bring an action for quo warranto
if it should be thought that a government corporation, like
the PCSO, has offended against its corporate charter or
misused its franchise. (Rule 66, §2[a] [d])
We now turn to the merits of petitioners’ claim
constituting their cause of action.
II. THE EQUIPMENT LEASE AGREEMENT
This Court ruled in the previous case that the Contract of

Lease, which the PCSO had entered into with the PGMC
on December 17, 1993 for the operation of an on-line
lottery system, was actually a joint venture agreement, or,
at the very least, a contract involving “collaboration or
association” with another party and, for that reason, was
void. The Court noted the following features of the
contract:
566

(1) The PCSO had neither funds nor expertise to

operate the on-line lottery system so that it would
be dependent on the PGMC for the operation of the
lottery system.
(2) The PGMC would exclusively bear all costs and
expenses for printing tickets, payment of salaries
and wages of personnel, advertising and promotion
and other expenses for the operation of the lottery
system. Mention was made of the provision, which
the Court considered “unusual in a lessor-lessee
relationship but inherent in a joint venture,” for
the payment of the rental not at a fixed amount but
at a certain percentage (4.9%) of the gross receipts
from the sale of tickets, and the possibility that
“nothing may be due or demandable at all because
the PGMC binds itself to ‘bear all risks if the
revenue from the ticket sales, on an annualized
basis, are insufficient to pay the entire prize
money.’ ” (232 SCRA at 147)
(3) It was only after the term of the contract that
PCSO personnel would be ready to operate the
lottery system themselves because it would take
the entire eight-year term of the contract for the
technology transfer to be completed. In the view of
the Court, this meant that for the duration of the
contract, the PGMC would actually be the operator
of the lottery system, and not simply the lessor of
equipment.
The Court considered the Contract of Lease to be actually

a joint venture agreement. From another angle, it said
that the arrangement, especially the provision that all
risks were for the account of the PGMC, was in effect a
lease by the PCSO of its franchise to the PGMC.
These features of the old Contract of Lease have been
removed in the present ELA. While the rent is still
expressed in terms of percentage (it is now 4.3% of the
gross receipts from the sale of tickets) in the ELA, the
PGMC is now guaranteed a minimum rent of P35,000.00 a
year per terminal in commercial operation. (Par. 2) The
PGMC is thus assured of payment of the rental. Thus par.
2 of the ELA provides:
2. RENTAL
During the effectivity of this Agreement and the term of this

lease as provided in paragraph 3 hereof, LESSEE shall pay
rental to LESSOR equivalent to FOUR POINT THREE
PERCENT (4.3%) of the gross amount of ticket sales from all of
LESSEE’s on-line lottery
567
VOL. 246, JULY 17, 1995 567

operations in the Territory, which rental shall be computed and
payable bi-weekly net of withholding taxes on income, if any:
provided that, in no case shall the annual aggregate rentals per
year during the term of the lease be less than the annual
minimum fixed rental computed at P35,000.00 per terminal in
commercial operation per annum, provided, further that the
annual minimum fixed rental shall be reduced pro-rata for the
number of days during the year that a terminal is not in
commercial operation due to repairs or breakdown. In the event
the aggregate bi-weekly rentals in any year falls short of the
annual minimum fixed rental computed at P35,000.00 per
terminal in commercial operation, the LESSEE shall pay such
shortfall from out of the proceeds of the then current ticket sales
from LESSEE’s on-line lottery operations in the Territory (after
payment first of prizes and agents’ commissions but prior to any
other payments, allocations or disbursements) until said shortfall
shall have been fully settled, but without prejudice to the
payment to LESSOR of the then current bi-weekly rentals in
accordance with the provisions of the first sentence of this
paragraph 2.
The PCSO now bears all losses because the operation of

the system is completely in its hands. This feature of the
new contract negates any doubt that it is anything but a
lease agreement.
It is contended that the rental of 4.3% is substantially
the same as the 4.9% in the old contract because the
reduction is negligible especially now that the PCSO
assumes all business risks and risk of loss of, or damage
to, equipment. Petitioners allege that:
PGMC’s annual minimum rental is P35,000.00 per terminal or a

total of P70,000,000.00 per annum considering that there are
2,000 terminals per the amended ELA. In order to meet the
amount, based on the 4.3% rental arrangement without a
shortfall, the gross ticket sales must amount to at least
P1,627,906,977.00. Multiplying this amount by 4.9% we get the
4.9% rental fee fixed under the old lease contract and the product
is P79,767,442.00. Deducting from this amount the sum of
P70,000,000.00 representing the annual minimum rental under
the amended ELA, we get the figure of P9,767,442 which is
equivalent to the .06% difference between the rental under the
old lease contract and under the amended ELA.
This amount of P9,767,442.00 cannot possibly cover the costs,
expenses and obligations shouldered by PGMC under the old
lease contract but which are now to be borne by the PCSO under
the new
568

ELA, not to mention the additional P25 million that the PCSO
has to pay the PGMC if the former exercises its option to
purchase the equipment at the end of the lease period under the
amended ELA.
(Petition, p. 37)
To be sure there is nothing unusual in fixing the rental as

a certain percentage of the gross receipts. The lease of
space in commercial buildings, for example, involves the
payment of a certain percentage of the receipts in rental.
Under the Civil Code (Art. 1643) the only requirement is
that the rental be a “price certain.” Petitioners do not
claim here that the rental is not a “price certain,” simply
because it is expressed as a certain percentage of the total
gross amount of ticket sales.
Indeed it is not alone the fact that in the old contract
the rental was expressed in terms of percentage of the net
proceeds from the sale of tickets which was held to be
characteristic of a joint venture agreement. It was the fact
that, in the prior case, the PGMC assumed, in addition, all
risks of loss from the operation of the lottery, with the
distinct possibility that nothing might be due it. In the
view of the Court this possibility belied claims that the
PGMC had no participation in the lottery other than being
merely the lessor of equipment.
In the new contract the rental is also expressed in terms
of percentage of the gross proceeds from ticket sales
because the allocation of the receipts under the charter of
the PCSO is also expressed in percentage, to wit: 55% is
set aside for prizes; 30% for contribution to charity; and
15% for operating expenses and capital expenditures. (R.A.
No. 1169, §6) As the Solicitor General points out in his
Comment filed in behalf of the PCSO:
In the PCSO charter, operating costs are reflected as a percentage

of the net receipts (which is defined as gross receipts less ticket
printing costs which shall not exceed 2% and the 1% granted to
the Commission on Higher Education under Republic Act No.
7722). The mandate of the law is that operating costs, which
include payments for any leased equipment, cannot exceed 15%
of net receipts, or 14.55% of gross receipts. The following
conclusions are, therefore evident:
a. The 4.3% rental rate for the equipment is well within the
maximum of 15% net receipts fixed by law;
b. To obviate any violation of the law, it is best to express
large operating costs for budgetary purposes as a
percentage of
569
VOL. 246, JULY 17, 1995 569

either gross or net receipts, specifically since the amount

of gross receipts can only be estimated.
c. Large fixed sums of money for major operating costs , such
as fixed rental for equipment, can very well exceed the
maximum percentages fixed by law, specifically if actual
gross receipts are lower than estimates for budgetary
purposes.
d. The problem of budgeting based on estimates is even
more difficult when new projects are involved, as is the
case in the on-line lottery.
(PCSO’s Comment, pp. 18-20)
Petitioners reply that to obviate the possibility that the

rental would not exceed 15% of the net receipts what the
respondents should have done was not to agree on a
minimum fixed rental of P35,000.00 per terminal in
commercial operation. This is a matter of business
judgment which, in the absence of a clear and convincing
showing that it was made in grave abuse of discretion of
the PCSO, this Court is not inclined to review. In this case
the rental has to be expressed in terms of percentage of the
revenue of the PCSO because rentals are treated in the
charter of the agency (R.A. No. 1169, §6[C]) as “operating
expenses” and the allotment for “operating expenses” is a
percentage of the net receipts.
The ELA also provides:
8. REPAIR SERVICES
LESSEE shall bear the costs of maintenance and necessary

repairs, except those repairs to correct defective workmanship or
replace defective materials used in the manufacture of
Equipment discovered after delivery of the Equipment, in which
case LESSOR shall bear the costs of such repairs and, if
necessary, the replacements. The LESSEE may at any time
during the term of the lease, request the LESSOR to upgrade the
equipment and/or increase the number of terminals, in which
case the LESSEE and LESSOR shall agree on an arrangement
mutually satisfactory to both of them, upon such terms as may be
mutually agreed upon .
By virtue of this provision on upgrading of equipment,

petitioners claim, the parties can change their entire
agreement and thereby, by “clever means and devices,”
enable the PGMC to “actually operate, manage, control
and supervise the conduct
570

and holding of the on-line lottery system,” considering that

as found in the first decision, “the PCSO had neither funds
of its own nor the expertise to operate and manage an on-
line lottery.”
The claim is speculative. It is just as possible to
speculate that after sometime operating the lottery system
the PCSO will be able to accumulate enough capital to
enable it to buy its own equipment and gain expertise. As
for expertise, after three months of operation of the on-line
lottery, there appears to be no complaint that the PCSO is
relying on others, outside its own personnel, to run the
system. In any case as in the construction of statutes, the
presumption is that in making contracts the government
has acted in good faith. The doctrine that the possibility of
abuse is not a reason for denying power to the government
holds true also in cases involving the validity of contracts
made by it.
Finally, because the term “Equipment” is defined in the
ELA as including “technology, intellectual property rights,
knowhow processes and systems,” it is claimed that these
items could only be transferred to the PCSO by the PGMC
training PCSO personnel and this was found in the first
case to be a badge of a joint venture.
Like the argument based on the upgrading of
equipment, we think this contention is also based on
speculation rather than on fact or experience. Evidence is
needed to show that the transfer of technology would
involve the PCSO and its personnel in prohibited
association or collaboration with the PGMC within the
contemplation of the law.
A contract of lease, as this is defined in Civil law, may
call for some form of collaboration or association between
the parties since lease is a “consensual, bilateral, onerous
and commutative contract by which one person binds
himself to grant temporarily the use of a thing or the
rendering of some service to another who undertakes to
pay some rent, compensation or price.” (5 PADILLA,
CIVIL CODE 611 [6TH ED. 1974]). The lessor of a
commercial building, it may be assumed, would be
interested in the success of its tenants. But it is untenable
to contend that this is what the charter of the PCSO
contemplates in prohibiting it from entering into
“collaboration or association” with any party. It may be
added that even if the PCSO purchases its own equipment,
it still needs the assistance of the PGMC in the initial
phase of opera-
571
VOL. 246, JULY 17, 1995 571

tion.
We hold that the ELA is a lease contract and that it
contains none of the features of the former contract which
were considered “badges of a joint venture agreement.” To
further find fault with the new contract would be to cavil
and expose the opposition to the contract to be actually an
opposition to lottery under any and all circumstances. But
“[t]he morality of gambling is not a justiciable issue.
Gambling is not illegal per se. . . . It is left to Congress to
deal with the activity as it sees fit.” (Magtajas v. Pryce
Properties Corp. Inc., 234 SCRA 255, 268 (1994). Cf. Lim
v. Pacquing, G.R. No. 115044, Jan. 27, 1995) In the case of
lottery, there is no dispute that, to enable the Philippine
Charity Sweepstakes Office to raise funds for charity,
Congress authorized the Philippine Charity Sweepstakes
Office (PCSO) to hold or conduct lotteries under certain
conditions.
We therefore now consider whether under the charter of
the PCSO any contract for the operation of an on-line
lottery system, which involves any form of collaboration or
association, is prohibited.
III. THE INTERPRETATION OF §1 OF R.A. 1169
In G.R. No. 113375 it was held that the PCSO does not
have the power to enter into any contract which would
involve it in any form of “collaboration, association or joint
venture” for the holding of sweepstakes races, lotteries and
other similar activities. This interpretation must be
reexamined especially in determining whether petitioners
have a cause of action.
We hold that the charter of the PCSO does not
absolutely prohibit it from holding or conducting lottery “in
collaboration, association or joint venture” with another
party. What the PCSO is prohibited from doing is to invest
in a business engaged in sweepstakes races, lotteries and
similar activities, and it is prohibited from doing so
whether in “collaboration, association or joint venture”
with others or “by itself.” The reason for this is that these
are competing activities and the PCSO should not invest in
the business of a competitor.
It will be helpful to quote the pertinent provisions of
R.A. No. 1169, as amended by B.P. Blg. 42:
572

§1. The Philippine Charity Sweepstakes Office.—The

Philippine Charity Sweepstakes Office, hereinafter
designated the Office, shall be the principal
government agency for raising and providing for
funds for health programs, medical assistance and
services and charities of national character, and as
such shall have the general powers conferred in
section thirteen of Act Numbered One Thousand
Four Hundred Fifty-Nine, as amended, and shall
have the authority:
A. To hold and conduct charity sweepstakes races,

lotteries and other similar activities, in such
frequency and manner, as shall be determined, and
subject to such rules and regulations as shall be
promulgated by the Board of Directors.
B. Subject to the approval of the Minister of Human
Settlements, to engage in health and welfare-
related investments, programs, projects and
activities which may be profit-oriented, by itself or
in collaboration, association or joint venture with
any person, association, company or entity,
whether domestic or foreign, except for the
activities mentioned in the preceding paragraph
(A), for the purpose of providing for permanent and
continuing sources of funds for health programs,
including the expansion of existing ones, medical
assistance and services, and/or charitable grants:
Provided, That such investments will not compete
with the private sector in areas where investments
are adequate as may be determined by the
National Economic and Development Authority.
When parsed, it will be seen that §1 grants the PCSO

authority to do any of the following: (1) to hold or conduct
charity sweepstakes races, lotteries and similar activities;
and/or (2) to invest—whether “by itself or in collaboration,
association or joint venture with any person, association,
company or entity”—in any “health and welfare-related
investments, programs, projects and activities which may
be profit oriented,” except “the activities mentioned in the
preceding paragraph (A),” i.e.., sweepstakes races, lotteries
and similar activities. The PCSO is prohibited from
investing in “activities mentioned in the preceding
paragraph (A)” because, as already stated, these are
competing activities.
The subject matter of §1(B) is the authority of the PCSO
to invest in certain projects for profit in order to enable it
to expand itshealth programs, medical assistance and
charitable grants. The exception in the law refers to
investment in businesses engaged in sweepstakes races,
lotteries and similar activities. The limitation applies not
only when the investment is under-
573
VOL. 246, JULY 17, 1995 573

taken by the PCSO “in collaboration, association or joint

venture” but also when made by the PCSO alone, “by
itself.” The prohibition can not apply to the holding of a
lottery by the PCSO itself. Otherwise, what it is
authorized to do in par. (A) would be negated by what is
prohibited by par. (B).
To harmonize pars. (A) and (B), the latter must be read
as referring to the authority of the PCSO to invest in the
business of others. Put in another way, the prohibition in
§1(B) is not so much against the PCSO entering into any
collaboration, association or joint venture with others as
against the PCSO investing in the business of another
franchise holder which would directly compete with
PCSO’s own charity sweepstakes races, lotteries or similar
activities. The prohibition applies whether the PCSO
makes the investment alone or with others.
The contrary construction given to §1 in the previous
decision is based on remarks made by then Assemblyman,
now Mr. Justice, Davide during the deliberations on what
later became B.P. Blg. 42, amending R.A. No. 1169. It
appears, however, that the remarks were made in
connection with a proposal to give the PCSO the authority
“to engage in any and all investments .” It was to provide
exception with regard to the type of investments which the
PCSO is authorized to make that the Davide amendment
was adopted. It is reasonable to suppose that the members
of the Batasan Pambansa, in approving the amendment,
understood it as referring to the exception to par. (B) of §1
giving the PCSO the power to make investments. Had it
been their intention to prohibit the PCSO from entering
into any collaboration, association or joint venture with
others even in instances when the sweepstakes races,
lotteries or similar activities are operated by it (“itself”),
they would have made the amendment not in par. (B), but
in par. (A), of §1, as the logical
2
place for the amendment.
The following excerpt from the record of the discussion
on Parliamentary Bill No. 622, which became B.P. Blg. 42,
bears out this conclusion:
MR. ZAMORA. On the same page, starting from line 18

until line 23, delete the entire paragraph from “b. to
engage in
_______________
2 2 RECORD OF THE BATASAN, Sept. 6, 1979, 1006-07. (Emphasis

added)
574

any and all investment. . . .” until the words “charitable
grants” on line 23 and in lieu thereof insert the following:
SUBJECT TO THE APPROVAL OF THE MINISTER OF

HUMAN SETTLEMENTS, TO ENGAGE IN HEALTH-
ORIENTED INVESTMENTS, PROGRAMS, PROJECTS AND
ACTIVITIES WHICH MAY BE PROFITORIENTED, BY ITSELF
OR IN COLLABORATION, ASSOCIATION, OR JOINT
VENTURE WITH ANY PERSON, ASSOCIATION, COMPANY
OR ENTITY, WHETHER DOMESTIC OR FOREIGN, FOR THE
PURPOSE OF PROVIDING FOR PERMANENT AND
CONTINUING SOURCES OF FUNDS FOR HEALTH
PROGRAMS, INCLUDING THE EXPANSION OF EXISTING
ONES, MEDICAL ASSISTANCE AND SERVICES AND/OR
CHARITABLE GRANTS.
I move for approval of the amendment, Mr. Speaker.

MR. DAVIDE. Mr. Speaker.
THE SPEAKER. The gentleman from Cebu is recognized.
MR. DAVIDE. May I introduce an amendment to the
committee amendment? The amendment would be to
insert after “foreign” in the amendment just read the
following: EXCEPT FOR THE ACTIVITY IN LETTER
(A) ABOVE.
When it is a joint venture or in collaboration with any other entity

such collaboration or joint venture must not include activity letter
(a) which is the holding and conducting of sweepstakes races,
lotteries and other similar acts .
MR. ZAMORA. We accept the amendment, Mr. Speaker.

MR. DAVIDE. Thank you, Mr. Speaker.
THE SPEAKER. Is there any objection to the amendment?
(Silence) The amendment, as amended, is approved.
MR. ZAMORA. Continuing the line, Mr. Speaker, after
“charitable grants” change the period (.) into a semi-
colon (;) and add the following proviso: PROVIDED,
THAT SUCH INVESTMENTS, PROGRAMS,
PROJECTS AND ACTIVITIES SHALL NOT
COMPETE WITH THE PRIVATE SECTOR IN AREAS
WHERE PRIVATE INVESTMENTS ARE ADEQUATE.
May I read the whole paragraph, Mr. Speaker.
MR. DAVIDE. May I introduce an amendment after
“adequate.” The intention of the amendment is not to
leave the determi-
575
VOL. 246, JULY 17, 1995 575

nation of whether it is adequate or not to anybody. And

my amendment is to add after “adequate” the words AS
MAY BE DETERMINED BY THE NATIONAL
ECONOMIC AND DEVELOPMENT AUTHORITY. As a
matter of fact, it will strengthen the authority to invest in
these areas, provided that the determination of whether
the private sector’s activity is already adequate must be
determined by the National Economic and Development
Authority.
MR. ZAMORA. Mr. Speaker, the committee accepts the
proposed amendment.
MR. DAVIDE. Thank you, Mr. Speaker.
THE SPEAKER. May the sponsor now read the entire
paragraph?
MR. ZAMORA. May I read the paragraph, Mr. Speaker.
“Subject to the Minister of Human Settlements, to engage in

health and welfare-oriented investment programs, projects, and
activities which may be profit-oriented, by itself or in
collaboration, association or joint venture with any person,
association, company or entity, whether domestic or foreign,
EXCEPT FOR THE ACTIVITIES MENTIONED IN
PARAGRAPH (a) for the purpose of providing for permanent and
continuing sources of funds for health programs, including the
expansion of existing ones, medical assistance and services
and/or charitable grants: PROVIDED THAT SUCH
INVESTMENTS, HEALTH PROGRAMS, PROJECTS AND
ACTIVITIES SHALL NOT COMPETE WITH THE PRIVATE
SECTOR IN AREAS WHERE PRIVATE INVESTMENTS ARE
ADEQUATE AS MAY BE DETERMINED BY THE NATIONAL
AND ECONOMIC DEVELOPMENT AUTHORITY.”
THE SPEAKER. Is there any objection to the amendment?

MR. PELAEZ. Mr. Speaker.
THE SPEAKER. The Gentleman from Misamis Oriental is
recognized.
MR. PELAEZ. Mr. Speaker, may I suggest that in that
proviso, we remove “health programs, projects and
activities,” because the proviso refers only to investment
activities—“provided that such investments will not
compete with the private sector in areas where
investments are adequate . . .”
MR. ZAMORA. It is accepted, Mr. Speaker.
THE SPEAKER. Is there any objection?
MR. PELAEZ. Mr. Speaker, may I propose an
improvement to the amendment of the Gentleman from
Cebu, just for style,
576

I would suggest the insertion of the word PRECEDING

before the word “paragraph.” The phrase will read “the
PRECEDING paragraph.”
MR. ZAMORA. It is accepted, Mr. Speaker.
THE SPEAKER. Very well. Is there any objection to the
committee amendment, as amended? (Silence) The
Chair hears none; the amendment is approved.
The construction given to §1 in the previous decision is

insupportable in light of both the text of §1 and the
deliberations of the Batasang Pambansa which enacted
the amendatory law.
IV. REQUIREMENT OF PUBLIC BIDDING
Finally the question is whether the ELA is subject to

public bidding. In justifying the award of the contract to
the PGMC without public bidding, the PCSO invokes E.O.
No. 301, which states in pertinent part:
§1. Guidelines for Negotiated Contracts. Any provision of law,
decree, executive order or other issuances to the contrary
notwithstanding, no contract for public services or for furnishing
supplies, materials and equipment to the government or any of
its branches, agencies or instrumentalities shall be renewed or
entered into without public bidding, except under any of the
following situations.
a. Whenever the supplies are urgently needed to meet an

emergency which may involve the loss of, or danger to,
life and/or property;
b. Whenever the supplies are to be used in connection with a
project or activity which cannot be delayed without
causing detriment to the public service;
c. Whenever the materials are sold by an exclusive
distributor or manufacturer who does not have sub-
dealers selling at lower prices and for which no suitable
substitute can be obtained elsewhere at more
advantageous terms to the government;
d. Whenever the supplies under procurement have been
unsuccessfully placed on bid for at least two consecutive
times, either due to lack of bidders or the offers received
in each instance were exorbitant or non-conforming to
specifications;
e. In cases where it is apparent that the requisition of the
needed supplies through negotiated purchase is most
advantageous to the government to be determined by the
Department Head
577
VOL. 246, JULY 17, 1995 577

concerned; and
f. Whenever the purchase is made from an agency of the
government.
Petitioners point out that while the general rule requiring

public bidding covers “contract[s] for public services or for
furnishing supplies, materials and equipment” to the
government or to any of its branches, agencies or
instrumentalities, the exceptions in pars. (a), (b), (d), (e)
and (f) refer to contracts for the furnishing ofsupplies only,
while par. (c) refers to the furnishing of materials, only.
They argue that as the general rule covers the furnishing
of “supplies, materials and equipment,” the reference in
the exceptions to the furnishing of “supplies” must be
understood as excluding the furnishing of any of the other
items, i.e., “materials” and “equipment.”
E.O. No. 301, §1 applies only to contracts for the
purchase of supplies, materials and equipment. It does not
refer to contracts of lease of equipment like the ELA. The
provisions on lease are found in §§ 6 and 7 but they refer
to the lease of privately-owned buildings or spaces for
government use or of government-owned buildings or
spaces for private use, and these provisions do not require
public bidding. These provisions state:
6. Guidelines for Lease Contracts.—Any provisions of

law, decree, executive order or other issuances to
the contrary notwithstanding, the Department of
Public Works and Highways (DPWH), with respect
to the leasing of privately-owned buildings or
spaces for government use or of government-owned
buildings or space for private use, shall formulate
uniform standards or guidelines for determining
the reasonableness of the terms of lease contracts
and of the rental rates involved.
§7. Jurisdiction Over Lease Contracts.—The heads of
agency intending to rent privately-owned buildings
or spaces for their use, or to lease out government-
owned buildings or spaces for private use, shall
have authority to determine the reasonableness of
the terms of the lease and the rental rates thereof,
and to enter in such lease contracts without need of
prior approval by higher authorities, subject to
compliance with the uniform standards or
guidelines established pursuant to Section 6 hereof
by the DPWH and to the audit jurisdiction of COA
or its duly authorized representative in accordance
with existing rules and regulations.
578

It is thus difficult to see how E.O. No. 301 can be applied

to the ELA when the only feature of the ELA that may be
thought of as close to a contract of purchase and sale is the
option to buy given to the PCSO. An option to buy is not of
course a contract of purchase and sale.
Even assuming that §1 of E.O. No. 301 applies to lease
contracts, the reference to “supplies” in the exceptions can
not be strictly construed to exclude the furnishing of
“materials” and “equipment” without defeating the
purpose for which these exceptions are made. For example,
par. (a) excepts from the requirement of public bidding the
furnishing of “supplies” which are “urgently needed to
meet an emergency which may involve the loss of, or
danger to, life and/or property.” Should rescue operations
during a calamity, such as an earthquake, require the use
of heavy equipment, either by purchase or lease, no one
can insist that there should first be a public bidding before
the equipment may be purchased or leased because the
heavy equipment is not a “supply” and §1(a) is limited to
the furnishing of “supplies” that are urgently needed.
Petitioners contend that in any event the contract in
question is not the “most advantageous to the
government.” Whether the making of the present ELA
meets this condition is not to be judged by a comparison,
line by line, of its provisions with those of the old contract
which this Court found to be in reality a joint venture
agreement. In some respects the old contract would be
more favorable to the government because the PGMC
assumed many of the risks and burdens incident to the
operation of the online lottery system, while under the
ELA it is freed from these burdens. That is because the old
contract was a joint venture agreement. The ELA, on the
other hand, is a lease contract, with the PCSO, as lessee,
bearing solely the risks and burdens of operating the on-
line lottery system.
It is paradoxical that in their effort to show that the
ELA is a joint venture agreement and not a lease contract,
petitioners point to contractual provisions whereby the
PGMC assumed risks and losses which might conceivably
be incurred in the operation of the lottery system, but to
show that the present lease agreement is not the most
advantageous arrangement that can be obtained, the very
absence of these features of the old contract which made it
a joint venture agreement, is criticized.
579
VOL. 246, JULY 17, 1995 579

Indeed the question is not whether compared with the

former joint venture agreement the present lease contract
is “[more] advantageous to the government.” The question
is whether under the circumstances, the ELA is the most
advantageous contract that could be obtained compared
with similar lease agreements which the PCSO could have
made with other parties. Petitioners have not shown that
more favorable terms could have been obtained by the
PCSO or that at any rate the ELA, which the PCSO
concluded with the PGMC, is disadvantageous to the
government.
___________________
For the foregoing reasons, we hold:
(1) that petitioners have neither standing to bring this

suit nor substantial interest to make them real
parties in interest within the meaning of Rule 3,
§2;
(2) that a determination of the petitioners’ right to
bring this suit is not precluded or barred by the
decision in the prior case between the parties;
(3) that the Equipment Lease Agreement of January
25, 1995 is valid as a lease contract under the Civil
Code and is not contrary to the charter of the
Philippine Charity Sweepstakes Office;
(4) that under §1(A) of its charter (R.A. 1169), the
Philippine Charity Sweepstakes Office has
authority to enter into a contract for the holding of
an on-line lottery, whether alone or in association,
collaboration or joint venture with another party,
so long as it itself holds or conducts such lottery;
and
(5) That the Equipment Lease Agreement in question
did not have to be submitted to public bidding as a
condition for its validity.
WHEREFORE, the Petition for Prohibition, Review and/or

Injunction seeking to declare the Equipment Lease
Agreement between the Philippine Charity Sweepstakes
Office and the Philippine Gaming Management Corp.
invalid is DISMISSED.
SO ORDERED.
Melo, Quiason, Puno, Kapunan and Francisco, JJ.,

concur.
580

Narvasa (C.J.), No part, related to party directly

interested in case.
Feliciano, J., Please see dissenting opinion.
Padilla, J., See separate concurring opinion.
Regalado, J., Please see dissenting opinion.
Davide, J., Please see dissenting opinion.
Romero, J., I join the dissenting opinions.
Bellosillo, J., I concur in the dissenting opinions of
Mr. Justice Feliciano and Mr. Justice Davide, Jr.
Vitug, J., Please see separate concurring opinion.
CONCURRING OPINION
PADILLA, J.:
I join the majority in voting for the dismissal of the

petition in this case.
It is the duty of the Supreme Court to apply the laws
enacted by Congress and approved by the President,
(unless they are violative of the Constitution) even if such
laws run counter to a Member’s personal conviction that
gambling should be totally prohibited by law.
In the present case, we are confronted with Republic
Act No. 1169 as amended by B.P. Blg. 42 which expressly
allows the PCSO to conduct lotteries, clearly a form of
gambling.
Given the various laws allowing specific forms of
gambling, only Congress and the Executive branch of
government can, at present, repeal these laws to
effectively eradicate gambling, if these two (2) political
branches truly intend to embark on an honest to goodness
national moral recovery and development program.
In my separate concurring opinion in the first lotto case
(G.R. No. 113375), I expressed the view that the rule on
locus standi, being merely a procedural rule, should be
relaxed, as the issue then was of paramount national
interest and importance, namely, the legality of a lease
contract entered into by PCSO with PGMC whereby the
former sought to operate an “on-line high-tech” lottery,
undeniably a form of gambling, the terms of which
581
VOL. 246, JULY 17, 1995 581

clearly pointed to an “association, collaboration or joint

venture” with PGMC.
The core issue in the present case is the same as the
issue in the first lotto case, i.e., the validity of a changed
agreement between PCSO and PGMC. Thus, it is my view
that the principle of locus standi should not stand in the
way of a review by this Court of the validity of such
changed agreement.
The specific issues in the present case were formulated
by the Court during the hearing held on 3 March 1995
thus:
1. whether the challenged Equipment Lease

Agreement (ELA for short) between PCSO and
PGMC constitutes an “association, collaboration or
joint venture” between the two (2) entities within
the meaning of Section 1(b) of Republic Act No.
1169 as amended by Batas Pambansa Blg. 42 and
therefore prohibited by said law;
2. whether the ELA requires a prior public bidding;
and
3. whether the ELA is grossly disadvantageous to the
government.
On the first specific issue, no less than petitioners admit in

their petition that the ELA is substantially different from
the contract declared void by this Court in G.R. No.
113375. Attached to the petition in this case (Annex “D”) is
a 14-page comparison between the first contract and the
ELA, showing such differences. Petitioners do not deny
that the objectionable provisions in the first contract are
no longer found in the ELA. In fact, as I had stated in my
opinion on the issue of whether or not to grant a temporary
restraining order (TRO) in this case, the ELA is prima
facie a simple contract of lease of equipment where PCSO
is bound to pay a minimum amount as rental plus a fixed
percentage of gross receipts from the sales of lottery
tickets, with an option given PCSO to purchase the leased
equipment upon expiration of the lease contract.
The argument that the ELA still constitutes a
prohibited “association, collaboration or joint venture” with
PGMC is, in my view, a much too strained interpretation
of the law which results from a less than pragmatic
analysis of the issue.
To my mind, the question of whether or not the ELA
constitutes “association, collaboration or joint venture”
between PCSO and PGMC should be tackled by looking at
the nature of a contract of lease.
582
A lease is a contract whereby one of the parties binds

himself to give to another the enjoyment or use of a thing
for a price certain and for a period which may be definite
or indefinite (Article 1643, Civil Code).
It would appear from the above legal provision that the
ELA is truly a straight contract of lease. That the parties
to the ELA have stipulated on flexible rentals does not
render it less of a lease contract and more of a joint
venture. Surely, the PGMC as owner of the leased
equipment is free to demand the amount of rentals it
deems commensurate for the use thereof and, as long as
PCSO agrees to the amount of such rentals, as justifying
an adequate net return to it, then the contract is valid and
binding between the parties thereto. This is the essence of
freedom to enter into contracts.
Petitioners have not cited any law which prevents such
stipulations to be included in contracts of lease or which
changes the nature of such agreement from a lease to some
other juridical relation. In fact, such stipulations are
common in leases of real estate for commercial purposes. A
ruling that would prevent PCSO from entering into such
lease agreement for the operation by PCSO of the lottery
would defeat the intent of the law to raise, from such lotto
operations, funds for charitable institutions and
government civic projects, because an outright purchase by
PCSO of the lottery equipment appears next to impossible
or at least not feasible coastwise considering the capital
requirement involved. In enacting the law creating the
PCSO, Congress, to be sure, did not intend to make it
impossible for PCSO to attain its given purposes. A rigid
interpretation of the restriction on “association,
collaboration, and joint venture” will result in such
impossibility.
Neither can petitioners’ arguments that certain
provisions in the ELA will ensure PGMC’s continued
participation and interest in the lottery operations provide
enough grounds for granting the petition in this case. Such
arguments are based on speculations devoid of any
material or concrete factual basis.
In sum, the ELA constitutes, in my view, a straight
lease agreement of equipment between PCSO and PGMC.
Such an agreement is, as far as PCSO’s charter is
concerned, validly and lawfully entered into.
583
VOL. 246, JULY 17, 1995 583

On the allegation of lack of public bidding on the ELA, the

Commission on Audit (COA) has yet to resolve a case
where the issue of the validity of the ELA due to lack of
public bidding has been squarely raised. This matter
surfaced during the hearing of the present case. Needless
to say, the Court should not preempt the determination
and judgment of the COA on matters which are within its
primary jurisdiction under the Constitution.
As to whether or not the ELA is grossly
disadvantageous to the government, it should be stressed
that the matter involves, basically, a policy—
determination by the executive branch which this Court
should not ordinarily reverse or substitute with its own
judgment, in keeping with the time honored doctrine of
separation of powers.
Based on the foregoing considerations, I vote to
DISMISS the petition.
FELICIANO, J.,Dissenting:
I find myself regretfully quite unable to join the majority

opinion written by my distinguished brother in the Court,
Mendoza, J.
I join the penetrating dissenting opinions written by my
esteemed brothers Regalado and Davide, Jr., JJ. In respect
of the matter of locus standi, I would also reiterate the
concurring opinion 1
I wrote on that subject in the first
Kilosbayan case. All the factors which, to my mind,
pressed for recognition of locus standi on the part of
petitioners in the first Kilosbayan case, still exist and
demand, with equal weight and insistence, such
recognition in the present or second Kilosbayan case. I fear
that the Court may well have occasion in the future
profoundly to regret the doctrinal ball and chain that we
have today clamped on our own limbs.
In the paragraphs which follow, I seek to address three
(3) major substantive points made in the majority opinion:
firstly, the new interpretation of Section 1 (B) of the PCSO
charter as amended by B.P. Blg. 42; secondly, the question
of whether the
_______________
1 Kilosbayan, Inc., et al. v. Teofisto Guingona, etc., et al., 232 SCRA

110, at 153 (1994).
584

“Equipment Lease Agreement” (ELA) is subject to the

requirements of public bidding; and lastly, the question of
whether the ELA has been effectively “purged” of the
characteristics of a prohibited joint venture arrangement
or collaboration or association.
I turn first to the novel argument made in the majority

opinion that the charter of PCSO does not “prohibit[—] it
from holding or conducting lottery in collaboration,
association or joint venture with another party.” That
opinion argues that “what [PCSO] is prohibited from doing
is to invest in a business engaged in sweepstakes races,
lotteries and similar activities” which are “competing
activities and the PCSO should not invest in the business
of a competitor.”
In so doing, my learned brother Mendoza, J. purports to
controvert and overturn the reading that the majority of
this Court, through Mr. Justice Davide, Jr., in the first
Kilosbayan case gave to the relevant provisions of the
PCSO charter. It so happens that the critical language in
the relevant PCSO charter provision—that is, the “except”
clause in Section 1 (B) of the PCSO charter as amended by
B.P. Blg. 42—was crafted by the then Assemblyman
Hilario G. Davide, Jr. during the deliberations in the
Interim Batasan Pambansa on the bill that became B.P.
Blg. 42. It is impliedly contended by the majority that the
intent of an individual legislator should not be regarded as
conclusive as to the “correct” interpretation of the
provision of a statute. This is true enough, as a general
proposition, for it is the intent of the legislative body as
manifested in the language used by the legislature that
must be examined and applied by this Court. However, it
seems to me that the view expressed by an individual
legislator who eventually comes to sit in this Court as to
the meaning to be given to words crafted by himself
should, at the very least, be regarded as entitled to a
strong presumption of correctness. Put a little differently, I
respectfully submit that in a situation such as that
presented in this case, a strong presumption arises that
the interpretation given by Mr. Justice Davide, Jr. and
approved and adopted by the majority of the Court in the
first Kilosbayan case faithfully reflected the intent of the
legisla-
585
VOL. 246, JULY 17, 1995 585

tive body as a whole. Fortunately, in the present case, it is

not necessary to take the word of Mr. Justice Davide, Jr.
as to what the intent of the legislative body was in respect
of Section 1 (B) of the present PCSO charter. For that
intent is clearly discernible in the very words used by the
legislative body itself. I turn, therefore, to a scrutiny of the
words used by that legislative body.
In arriving at his new interpretation, Mr. Justice
Mendoza engages in “parsing:”
“When parsed, it will be seen that under §1, the PCSO is given
authority to do any of the following: (1) to hold or conduct charity
sweepstakes races, lotteries or similar activities; and/or (2) to
invest—whether ‘by itself or in collaboration, association or joint
venture with any person, association, company or entity’ in any
‘health and welfare-related investments, programs, projects and
activities which may be profit-oriented,’ except those which are
engaged in any of ‘the activities mentioned in the preceding
paragraph (A),’ i.e., sweepstakes races, lotteries and similar
activities, for the obvious reason, as already states, that these are
competing activities.” (Underscoring in the original)
My submission, essayed with great respect and reluctance,

is that Mr. Justice Mendoza has misread the pertinent
provisions of R.A. No. 1169, as amended by B.P. Blg. 42,
and that in so parsing those provisions, he has in fact
overlooked their actual syntax. The pertinent portions
need to be quoted here in full:
“§ 1. The Philippine Charity Sweepstakes Office .—The Philippine

Charity Sweepstakes Office, hereinafter designated the Office,
shall be the principal government agency for raising and
providing for funds for health programs, medical assistance and
services and charities of national character, and as such shall
have the general powers conferred in section thirteen of Act
Numbered One Thousand Four Hundred Fifty-Nine, as amended,
and shall have the authority:
A. To hold and conduct charity sweepstakes races, lotteries

and other similar activities, in such frequency and
manner, as shall be determined, and subject to such rules
and regulations as shall be promulgated by the Board of
Directors.
B. Subject to the approval of the Minister of Human
Settlements to engage in health and welfare-related
investments, programs, projects and activities which may
be profit-oriented, by itself or in collaboration, association
or joint venture with any person , association,
586

company or entity, whether domestic or foreign, except for
the activities mentioned in the preceding paragraph (A),
for the purpose of providing of permanent and continuing
sources of funds for health programs, including the
expansion of existing ones, medical assistance and
services, and/ or charitable grants: Provided, That such
investments will not compete with the private sector in
areas where investments are adequate as may be
determined by the National Economic and Development
Authority.” (Italics supplied)
Examining the actual text of Section 1 (B), it will be noted

that what PCSO has been authorized to do is not simply
“to invest—whether ‘by itself or in collaboration,
association or joint venture—’ in any health and welfare-
related investments, programs, projects and activities
which may be profit-oriented x x x.” Rather, the PCSO has
been authorized to do any and all of the following acts:
(1) “to engage in health and welfare-related

investments—which may be profit-oriented—;”
(2) “to engage in health and welfare-related—
programs—which may be profit-oriented—;”
(3) “to engage in health and welfare-related—projects
—which may be profit-oriented—;” and
(4) “to engage in health and welfare-related—activities
—which may be profit-oriented—.”
The operative words of Section 1 (B) are “to engage in x x x

health and welfare-related investments, programs,
projects and activities x x x” which, however, Mendoza, J.
would read restrictively and simply as “to invest in.” To do
so, one must disregard the actual language used by the
statute.
It would appear that the majority thinks of
“investments” essentially in terms of passive investments
and conceives of Section 1 (B) as a prohibition against
PCSO investing its own funds by buying either equity or
debt instruments issued by some other company itself also
authorized to engage in sweepstakes races, lotteries or
similar activities and therefore, competing with PCSO.
Under this view, the prohibition is intended to prevent
PCSO from competing with itself by putting its funds in
privately owned and operated enterprises lawfully and
regularly engaged in raising funds by holding and
conducting sweepstakes races, lotteries or similar
activities for “health programs, medical
587
VOL. 246, JULY 17, 1995 587

assistance 2 and services and charities of national

character.”
There appear some major difficulties with the view
proffered by the majority. Firstly, PCSO appears in fact to
be a legal monopoly, that is to say, there appears to be no
other governmentowned or -controlled corporation or
entity that is legally authorized to hold sweepstakes races,
lotteries and similar activities on a regular and continuing
basis for the purpose of generating funds for charitable,
health and welfare-related purposes. A careful search in
the records of the Securities and Exchange Commission
has failed to show any privately owned company that has
been organized for that principal purpose, i.e., to generate
funds through the regular holding of sweepstakes races
and lotteries for charitable and welfare and health-related
projects. Secondly, assuming for argument’s sake that
there is somewhere some obscure, publicly or privately
owned entity which is engaged in the same basic activity
that the PCSO is authorized to engage in Section 1 (A) of
its charter, it seems unreal to suppose that an express
statutory injunction should have been found necessary to
prevent PCSO from competing with itself by buying some
equity or a debt interest in such a company. Such an
injunction would seem unfairly to assume an unusual
degree of ineptitude on the part of officials of PCSO.
Thirdly, the final proviso found in Section 1 (B) (quoted
supra) makes clear that the legislative concern was not
with PCSO competing with itself but rather with
protecting the private sector from competition that would be
offered by PCSO , either alone or in combination with some
other enterprise, when it would seek to exercise its
expanded powers under Section 1 (B) in areas already
adequately served by private capital.
I would, therefore, respectfully suggest that the “except”
clause in Section 1 (B), is not designed as a non-
competition provision, nor as a measure intended to
prevent PCSO from putting its money in enterprises
competing with PCSO. What the law seeks thereby to
avoid, rather, is the PCSO sharing or franchising out its
exclusive authority to hold and conduct sweepstakes races,
lotteries and similar activities by collaborating or
associating or entering into joint ventures with other
persons or entities not
_______________
2 Opening paragraph, Section 1, Revised PCSO charter.
588

government-owned and legislatively chartered like the

PCSO is. The prohibition against PCSO sharing its
authority with others is designed, among other things, to
prevent diversion to other uses of revenue streams that
should go solely to the charitable and welfare-related
purposes specified in PCSO’s charter.
It will be seen that without the “except” clause inserted
at the initiative of former Assemblyman Davide, Jr.,
Section 1 (B) would be so comprehensively worded as to
permit PCSO precisely to share its exclusive right to hold
and conduct sweepstakes races, lotteries and the like. It is
this “except” clause which prevents such sharing or
lending or farming out of the PCSO “franchise”
“by itself or in collaboration, association or joint venture with any

person, association, company or entity, whether domestic or
foreign, except for the activities mentioned in the preceding
paragraph (A) x x x.”
This “except” clause thus operates, as it were, as a renvoi
clause which refers back to Section 1 (A) and in this
manner avoids the necessity of simultaneously amending
the text of Section 1 (A). The textual location, in other
words, of the “except” clause offers no support for the new-
found and entirely
3
original interpretation offered in the
majority opinion.
_______________
3 The majority opinion contends as follows:
“x x x. Had it been [the legislators’] intention to prohibit the PCSO from entering
into any collaboration, association or joint venture with others even in instances
when the sweepstakes races, lotteries or similar activities are operated by it
(‘itself’), they would have made the amendment not in par. (B), but in par. (A), of
§1, as the logical place for the amendment.”
In the very next page, the majority opinion quotes then Assemblyman
Davide, Jr.:
“MR. DAVIDE: May I introduce an amendment to the committee

amendment? The amendment would be to insert after ‘foreign’ in the
amendment just read the following: EXCEPT FOR THE ACTIVITY IN
LETTER (A) ABOVE.
When it is a joint venture or in collaboration with any other entity such
collaboration or joint venture must not include activity
589
VOL. 246, JULY 17, 1995 589

II
I consider next the question of whether the “Equipment

Lease Agreement” (ELA) is subject to public bidding.
PCSO refers to Executive Order No. 301 dated 26 July
1987 in seeking to justify the award of the ELA to the
PGMC without public bidding. In accepting the
contentions of PCSO, the majority opinion relies basically
on two (2) propositions. The first of these is that:
“Executive Order No. 301, Section 1 refers to contracts of

purchase and sale [only]. For that matter, there is nothing in that
Order which refers to contracts for the lease of equipment. What
the order contains are provisions (Sections 6-7) for the lease of
privately owned buildings or spaces for government use or of
government owned buildings or spaces for private use and these
provisions do not require public bidding. These provisions state x
x x. I do not see, therefore, how Executive Order No. 301 can be
applied to the ELA when the only feature it has that may be
thought close to a contract of purchase and sale is the option to
buy given to the PCSO. But—an option to buy is not a contract of
purchase and sale.” (Italics and brackets supplied)
The second proposition offered is that the use of the term

“supplies” “cannot be limited so as to exclude ‘materials’
and ‘equipment’ without defeating the purpose for which
these exceptions are made.”
The first proposition, it is respectfully submitted, finds
no basis in the actual language used in the operative
paragraph of Section 1 of Executive Order No. 301 setting
out the general rule:
“Section 1. Guidelines for Negotiated Contracts.—Any provisions

of law, decree, executive order or other issuances to the contrary
supplies, materials and equipment to the government or any of its
branches, agencies or instrumentalities shall be renewed or
entered into without
_______________
letter (a) which is the holding and conducting of sweepstakes races, lotteries and other
similar acts.” (Emphases supplied)
It is submitted that Assemblyman Davide’s statement is entirely clear and captures the
essence of the amendment he offered with such economy of words.
590

public bidding, except under any of the following situations: x x
x.” (Emphases supplied)
It is worthy of special note that the above opening

paragraph doesnot even use the words “purchase and sale”
or “buy and sell;” the actual term used is “furnishing x x x
equipment to the government.” The term “furnishing” can
scarcely be limited to sales to the government but must
instead be held to embrace any contract which provides
the government with either title to or use of equipment. A
contrary view can only result in serious emasculation of
Executive Order No. 301. It is commonplace knowledge
that equipment leases (especially “financial leases”
involving expensive capital equipment) are often
substitutes for or equivalents of purchase and sale
contracts, given the multifarious credit
4
and tax constraints
operating in the market place. Thus, the above first
proposition fails to take into account actual commercial
practice already reflected in our present commercial and
tax law.
The second proposition similarly requires one who must
interpret and apply the provisions of Section 1 of Executive
Order No. 301 to disregard the actual language used in
that Order. For Executive Order No. 301 uses three (3)
distinguishable terms: “supplies,” “materials” and
“equipment.” These terms are not always used
simultaneously in Executive Order No. 301. In some
places, only “supplies” is used; in other places, only
“materials” is employed; and in still other places, the term
“equipment” is used alongside with, but separately from,
both of the other two (2) terms. To say that “supplies,”
“materials” and “equipment” are merely synonymous or
fungible would appear too casual a treatment
5
of the actual
language of Executive Order No. 301.
_______________
4 See, e.g., Beltran v. PAIC Finance Corporation, 209 SCRA 105

(1992); Investors Finance Corporation v. Court of Appeals, 193 SCRA 701
(1991).
5 The majority also seek to bolster the second proposition by what is
essentially an argumentum ad absurdum. Should rescue operations after
a calamity like an earthquake require the use of heavy equipment, there
is no law that requires the government to go (with or without a public
bidding) shopping for equipment first before commencing such rescue
operations. As a practical matter, the government (through, e.g.,
591
VOL. 246, JULY 17, 1995 591

The fundamental difficulty with the above two (2)

propositions is this: that public bidding is precisely the
standard and best way of ensuring that a contract by
which the government seeks to provide itself with supplies
or materials or equipment is in fact the most advantageous
to government. It is true enough that public bidding may
be inconvenient and time consuming; but it is still the only
method of procurement so far invented by man by which
the government could reasonably expect to keep relatively
honest those who would contract with it. This is the basic
reason why competition through public bidding is the
general rule and not the exception. I fear that the opinion
of my learned brother Justice Mendoza would, in ultimate
effect, stand this rule on its head and make public bidding
the exception rather than the general rule.
III
I would address finally the question of whether or not the

original contract between PCSO and PGMC which the
Court in the first Kilosbayan case found to be a joint
venture, has been so substantially changed as to have been
effectively converted from a joint venture arrangement to
an ordinary equipment lease agreement. The majority of
the Court have concluded that the ELA has been
effectively “purged” of the characteristics of a joint venture
arrangement and that it should now be regarded as lawful
under the provisions of the revised PCSO charter.
With very great respect, it is submitted that the above
conclusion has been merely assumed rather than
demonstrated and that what is in fact before this Court
does not adequately support such conclusion.
I begin with the nature and form of the rental
provisions of the ELA. The rental payable by PCSO as
lessee of equipment and other assets owned by PGMC as
lessor, is fixed at a specified
_______________
the Department of Public Works and Highways) would simply order its
own equipment to be brought forthwith to the scene of the disaster. Or
the government may resort to the “requisition” or the temporary
expropriation of the use of personal property, i.e., heavy equipment, and
thereafter pay compensation for such use.
592

percentage, 4.3% of the gross revenues accruing to PCSO

out of or in connection with the operation of such
equipment and assets. The rental payable is not, in other
words, expressed in terms of a fixed and absolute figure,
although a floor amount per leased terminal is set.
Instead, the actual total amount of the rental rises and
falls from month to month as the revenues grow or shrink
in volume. I respectfully suggest that thereby the lessor of
the facilities leased has acquired a legal interest either in
the business of the lessee PCSO that is conducted through
the operation of such facilities and equipment, or at least
in the income
6
stream of PCSO originating from such
operation. In the commercial world, a rental provision cast
in terms of a fixed participation in the gross revenues of
the lessee, signals substantial economic interest in the
business of such lessee. Such a provision cannot be
regarded as compatible with an “ordinary” equipment
rental agreement. On the other hand, it is of the very
substance of a commercial joint venture and of economic
collaboration or association.
Another of my distinguished brothers in the Court, Mr.
Justice Padilla, remarks that this type of rental stipulation
is fairly common in leases of real estate in, e.g., Makati.
This may well be the case. It is, however, absolutely
essential to bear in mind that neither, e.g., Ayala Land,
Inc. as lessor-company nor any of the ordinary commercial
enterprises leasing real property in Makati, operate under
statutory restrictions like those in Section 1 (B) of R.A. No.
1169 as amended by B.P. Blg. 42 upon PCSO. In the Ayala
Center, lessor and lessee are legally free to devise any
rental provision they may agree upon, even if such a
provision
_______________
6 Such an interest on the part of the lessor would, for instance,

constitute an “insurable interest” in the business or revenue flow of the
lessee so as to enable the lessor to take out insurance against the
occurrence of risks adversely affecting such business or revenue flow. As
to the breadth and amplitude of the concept of “insurable interest,” see,
e.g., Key ex rel Heaton v. Continental Insurance Company, 74 S.W. 162,
165 (1903); Fenter v. General Accident Fire and Life Assurance
Corporation, 484 P. 2d 310 (1971); Leggio v. Millers National Insurance
Co., 398 S.W. 2d 607 (1965); Bird v. Central Manufacturers Mut. Ins. Co.,
120 P. 2d 753 (1942); Smith v. Eagle Star Insurance Co., 370 S.W. 2d 448
(1963).
593
VOL. 246, JULY 17, 1995 593

would constitute participation by the lessor in the business

of the lessee or a joint venture between the two (2).
The majority opinion, apparently following the posture
adopted by the Solicitor General in respect of this point,
states:
“in this case the rental has to be expressed in terms of percentage

of the revenue of the PCSO because rentals are treated in the
charter of the agency (R.A. No. 1169, Section 6 [C]) as ‘operating
expenses and the allotment for “operating expenses” is a
percentage of the net receipts .’ ” (Italics supplied)
The Solicitor General is clearly not an accountant. In the

first place, the so-called “allotment for ‘operating expenses’
” is in fact nothing more than a ceiling established by the
statute for permissible operating expenses. The statute
commands that the PCSO not spend for its operations
more than 15% of its “net receipts.” There is no law
requiring PCSO to spend the maximum which it is
authorized to spend. Upon the other hand, law and
regulations prohibit the PCSO from spending more than
what is in fact reasonably necessary to produce the
revenues targeted by it. Thus, the assertion that the 4.3%
rental rate is “well within the maximum of 15% net receipt
fixed by law” is entirely meaningless insofar as explaining
the structure of the rental provision and the
reasonableness thereof is concerned. In the second place, it
is child’s play for an accountant to convert absolute figures
representing operating expenses [actual or budgeted] into
a percentage of “net receipts [actual or expected];” there is
nothing in Section 6 (C) of the PCSO charter that either
requires or justifies the adoption of the rental provision
found both in the old contract and in the ELA giving
PGMC a fixed share in gross revenues. The explanation
offered by the Solicitor General is unfortunately merely
contrived; its acceptance depends on lack of familiarity
with elementary accounting concepts.
Under the original agreement between PCSO and
PGMC, the latter bore the great bulk of the risks and
business burdens involved in their relationship. The
consideration for PGMC carrying such business risks and
burdens was set at 4.9% of gross revenues flowing out of
the lotto operations. In contrast, under the written terms
of the new contract or ELA, the bulk if not all the risks and
business burdens previously borne by PGMC have
594

apparently been shifted to PCSO. The consideration to
PGMC has been reduced from 4.9% to 4.3% of gross
revenues arising out of lotto operations.
Considering the nature and number of the business
risks and burdens said to be shifted under the provisions
of ELA from PGMC to PCSO, the stipulated reduction of
the rental—by 0.6% of gross revenues—would appear
disproportionately low when appraised in terms of
ordinary commercial standards and practice. 7
The original
rental rate was reduced by 12.24% only. Of course, the
minimal reduction of the rental rate payable under the
ELA to PGMC would be understandable if one assumes
that the business risks and burdens set out in such detail
in the old contract, and moved over to PCSO in equal
detail in the new contract, are, in the first place, basically
unreal and merely cosmetic flourishes applied to the
contract documentation. But one is extremely loath to
make such an assumption, not only because the record
offers no basis for such an assumption, but also because it
would raise far more questions than it would settle.
Moreover, the true relationship between the rental rate
and the economic burdens and risks assumed by PCSO
under the ELA, will remain unexplained.
Thus, the questions which are provoked by scrutiny of
the economic implications of the text of the ELA (which, it
should again be recalled, did not go through the process of
public bidding) are so numerous and consequential that it
becomes very difficult to suppose that the ELA is what it
purports to be. It is suggested, with respect, that the
burden of showing that the elements found by the Court in
the first Kilosbayan case to constitute the prohibited
“collaboration, association or joint ven-
_______________
7 During the oral hearing of this case, at least one Member of the
Court requested counsel for PGMC to enlighten the Court as to the
structure of the rental provisions, that is to say, to indicate to the Court
the factors or kinds of factors deemed relevant in setting the percentage
figure constituting the rental rate. (TSN, 3 March 1995, pp. 47-57) No
useful information was furnished to the Court either during the hearing
or in the pleadings filed thereafter. There has also been no showing of
how the percentage rate and structure of the rental provisions of ELA
compare with the rental provisions in comparable contracts in other parts
of the world.
595
VOL. 246, JULY 17, 1995 595

ture” have truly (and not simply ostensibly) been expunged

from the relationship between PCSO and PGMC rests, not
on Kilosbayan nor on this Court, but rather on PCSO and
PGMC. It is respectfully submitted further that that
burden has not been adequately discharged in the present
case by the simple rearrangement of words and
paragraphs of the old contract considering that the reality
of the re-arrangement is controverted by the commercial
terms of the new contract.
One final word. The PCSO appears sincerely convinced
that the legal restrictions placed upon its operations by the
actual text of Section 1(B) of its revised charter prevent it
from realizing the kinds and volume of revenues that it
needs for charitable and health and welfare-oriented
programs. In this situation, the appropriate recourse is not
to make light of nor to conjure away those legal
restrictions but rather to go to the legislative authority
and there ask for further amendment of its charter. In that
same forum, the petitioners may in turn ventilate their
own concerns and deeply felt convictions.
For all the foregoing, I vote to grant the Petition for
Certiorari.
DISSENTING OPINION
REGALADO, J.:
I am constrained to respectfully dissent from the majority

opinion premised on the constitutional and procedural
doctrines posed and interpreted in tandem therein. I also
regret that I have to impose on the majority with this
virtual turno en contra when I could have indicated my
disaccord by just joining Mr. Justice Davide in his
commendably objective presentation of the minority
position. I feel, however, that certain views that have been
advanced require a rejoinder lest they lapse into the realm
of unanimous precedents.
Preliminarily, there is no need to emphasize that the
morality of gambling is not a justiciable issue, and that
this Court should not rule on the wisdom of the policy
thereon but only on the power of the corresponding
authorities to adopt the same. To my knowledge, the first
proposition has never been of concern to or questioned by
any member of this Court throughout its hegira
596

1 2
from the first lotto case, then to the jai alai controversy,
and now this so-called sequel to the lottery dispute. The
second is a constitutional tenet so hoary with age that for
the majority to still belabor the same would somehow
reflect unfavorably upon the dissenting members.
Upon the other hand, the Court may even be
misunderstood as adopting an adjudicative pattern
designed against transparency of and inquiry into public
affairs. The misperception could very well be that it is
glossing over the validity of the lottery contract by seeking
refuge in the rule of locus standi, and suppressing concern
over societal mores on gambling by invoking the doctrine
of non-justiciability.
Coming to the real task at hand, we have this
resuscitation of the nagging question of locus standi. In the
first lotto case, the Court excepted petitioners from the
traditional locus standi proscription because the issues
raised on the indiscriminate operation of a nationwide on-
line lottery system are of paramount public interest and of
a category higher than those involved in former cases
wherein the application of that rule was sustained.
Respect for that holding was accordingly 3observed and
enjoined in Tatad, et al. vs. Garcia, etc., et al.
That the Court acted correctly in the original case,
instead of clinging to the hidebound constitutional dictum
of indeterminate vintage, has been demonstrated in the
various opinions filed in the jai alai case with illustrations
of the frequent reexamination of constitutional precepts in
the courts of the United States itself from which they
originated. Thus, creating exceptions to said doctrines and
even rejecting the same in the interest of justice are not
unusual, and this Court has likewise done so presumably
since it agrees that one ought not to be more popish than
the Pope.
Withal, the relaxation of the locus standi doctrine in the
first lotto case is impugned and lamented in the second one
now at
_______________
1 Kilosbayan, Inc., et al. vs. Guingona, Jr., etc., et al., G.R. No. 113375,
May 5, 1994, 232 SCRA 110.
2 Lim, etc., et al. vs. Pacquing, etc., et al., G.R. No. 115044, and
Guingona, Jr., et al. vs. Reyes, et al., G.R. No. 117263, jointly decided on
January 27, 1995.
3 G.R. No. 114222, April 6, 1995.
597
VOL. 246, JULY 17, 1995 597

bar. Yet, with regard to the “law of the case” doctrine,

during the deliberations the majority submitted, and I am
borrowing their authority therefor, that “(d)octrine is
merely a rule of procedure and does not go to the power of
the court, and will not be adhered to
4
where its application
will result in an unjust decision.” I feel that here the
majority is thus ignoring the adage about the proverbial
sauce being for both the goose and the gander.
In the first lotto case, the minority therein rested its
position entirely on procedural grounds, that is, by merely
challenging the legal standing of petitioners but without
any comment on the merits of the contract in question.
Since the case at bar is in truth a reprise of the first, I had
expected that this case would now be decided purely on the
merits of the putative expanded lease agreement. Indeed,
to make the Court’s judgment here turn again on technical
procedural grounds, by hiding within the shroud of the
locus standi mystique, does not strike me as a decisive and
conclusive adjudication. While the contract involved is not
of centennial duration, its legal impact on and the social
cost to the country should warrant more than an
androgynous solution.
Be that as it may, since the majority opinion has now
evolved other adjective theories which are represented to
be either different from or ramifications of the original
“standing to sue” objection raised in the first lotto case, I
will hazard my own humble observations thereon.
1. There is, initially, the salvo against the adoption of
the “law of the case” doctrine in the original majority
ponencia. It is contended that this doctrine requires, for its
applicability, an issue involved in a case originating from a
lower court which is first resolved by an appellate court,
that case being then remanded to the court of origin for
further proceedings and with the prior resolution by the
higher court of that issue being the “law of the case” in any
other proceeding in or a subsequent appeal from the same
case. It is insinuated that said doctrine exists only under
such a scenario.
_______________
4 People vs. Medina, Cal., Cal. Rptr. 630, 635, 492 P.2d 686, cited in
Black’s Law Dictionary, 6th ed., 887.
598

It may be conceded that, in the context of the cited cases

wherein this doctrine was applied, two “appeals” are
generally involved and the issue resolved in the first
appeal cannot be reexamined in the second appeal. If so,
then what is necessarily challenged in the first recourse to
the higher court is either an interlocutory order of the
court a quo elevated on an original action for certiorari or
an appealable adjudication which nonetheless did not
dispose of the entire case below because it was either a
special proceeding or an action admitting of multiple
appeals.
That is the present reglementary situation in the
Philippines which, unfortunately, does not appear to have
been taken into account when the double-appeal procedure
involved in one particular American concept was cited as
authority in the majority opinion. No attempt was made to
ascertain whether in the American cases cited the lex fori
provided for identical or even substantial counterparts of
our procedural remedies of review by a higher court on
either an appeal by certiorari or writ of error, or through
an original action of certiorari, prohibition or mandamus.
Yet on such unverified premises, and without a showing
that the situations are in pari materia, we are told that
since the case at bar does not possess the formatted
sequence of an initiatory action in a lower court, an appeal
to a higher court, a remand to the lower court, and then a
second appeal to the higher court, the “law of the case”
doctrine cannot apply. I have perforce to reject that
submission as I cannot indulge in the luxury of absolutes
espoused by this majority view.
I fear that this majority rule, has unduly constricted the
factual and procedural situations where such doctrine may
apply, through its undue insistence on the remedial
procedure involved in the proceedings rather than the
juridical effect of the pronouncement of the higher court.
Even in American law, the “law of the case” doctrine was
essentially designed to express the practice of courts 5
generally to refuse to reopen what has been decided and,
thereby, to emphasize the rule that the final judgment of
the highest court is a final determination of the
_______________
5 White vs. Higgins, C.C.A. Mass., 116 F.2d 312; Fleming vs. Campbell,
148 Kan. 516, 83 P.2d 708.
599
VOL. 246, JULY 17, 1995 599

6
rights of the parties. That is the actual and basic role that
it was conceived to play in judicial determinations, just
like the rationale for the doctrines of res judicata and
conclusiveness of judgment.
Accordingly, the “law of the case” may also arise from
an original 7
holding of a higher court on a writ of
certiorari, and is binding not only in subsequent appeals
or proceedings in the same case, 8
but also in a subsequent
suit between the same parties. What I wish to underscore
is that where, as in the instant case, the holding of this
highest Court on a specific issue was handed down in an
original action for certiorari, it has the same binding effect
as it would have had if promulgated in a case on appeal.
Furthermore, since in our jurisdiction an original action
for certiorari to control and set aside a grave abuse of
official discretion can be commenced in the Supreme Court
itself, it would be absurd that for its ruling therein to
constitute the law of the case, there must first be a remand
to a lower court which naturally could not be the court of
origin from which the postulated second appeal should be
taken.
2. Obviously realizing that continued reliance on the
locus standi bar to petitioner’s suit is not an ironclad
guaranty against it, the majority position has taken a
different tack. It now invokes the concept of and the rules
on a right of action in ordinary civil actions and,
prescinding from its previous position, insists that what is
supposedly determinative of the issue of representation is
contract law and not constitutional law. On the predicate
that petitioners are not parties to the contract, primarily
or subsidiarily, they then are not real parties in interest,
and for lack of cause of action on their part they have no
right of action. Ergo, they cannot maintain the present
petition.
As a matter of a conventional rule of procedure, the
syllogism of the majority can claim the merit of logic but,
even so, only on
_______________
6 Atchison, T. & S.F. Ry. Co. vs. Railroad Comm. of California, 209 Cal.
460, 288 P. 775.
7 Goodkind vs. Wolkowsky, 147 Fla. 415, 2 So.2d 723; Atlantic Coast
Line R. Co. vs. Sperry Flour Co., 63 Ga. App. 611, 11 S.E. 2d 809.
8 Oglethorpe University vs. City of Atlanta, 180 Ga. 152, 178 S.E. 156.
600

assumed premises. More importantly, however, the

blemish in its new blueprint is that the defense of lack of a
right of action is effectively the same as lack of locus
standi, that is, the absence of the remedial right to sue. As
the commentators of Castille would say, the objection
under the new terminology is “lo mismo perro con distinto
collar.” That re-christened ground, as we shall later see,
has already been foreclosed by the judgment of the Court
in the first lotto case.
It is true that a right of action is the right or standing to
enforce a cause of action. For its purposes, the majority
urges the adoption of the standard concept of a real party
in interest based on his possession of a cause of action. It
could not have failed to perceive, but nonetheless refuses
to concede, that the concept of a cause of action in public
interest cases should not be straitjacketed within its usual
narrow confines in private interest litigations.
Thus, adverting again to American jurisprudence, there
is the caveat that “the adoption of a provision requiring
that an action be prosecuted in the name of the real party
in interest does not solve all questions as to the proper
person or persons to institute suit, although it obviously
simplifies procedures in actions at law. x x x There is no
clearly defined rule by which one may determine who is or
is not the real party in interest, nor has there been found
any concise definition of the term. Who is the real party in
interest depends on the peculiar facts of each separate case,
and one may be a party 9
in interest and yet not be the sole
real party in interest .” (Italics supplied.)
The majority opinion quotes the view of a foreign author
but unfortunately fails to put the proper emphasis on the
portion thereof which I believe should be that which
should correctly be stressed, and which I correspondingly
reproduce:
It is important to note x x x that standing because of its

constitutional and public policy underpinnings, is very different
from questions relating to whether a particular plaintiff is the
real party in interest or has the capacity to sue. Although all
three requirements are directed towards ensuring that only
certain parties can maintain an action,
_______________
9 59 Am. Jur. 2d, Parties, 429, citing State vs. Estate of Frankel, 94 Misc. 2d
105, 404 NYS2d 954.
601
VOL. 246, JULY 17, 1995 601

standing restrictions require a partial consideration of the merits,

as well as of broader policy concerns
10
relating to the proper role of
the judiciary in certain areas.
Indeed, if the majority would have its way in this case,

there would be no available judicial remedy against
irregularities or excesses in government contracts for lack
of a party with legal standing or capacity to sue. This legal
dilemma or vacuum is supposedly remediable under a
suggestion submitted in the majority opinion, to wit:
Denial to petitioners of the right to intervene will not leave

without remedy any perceived illegality in the execution of
government contracts. Questions as to the nature or validity of
public contracts or the necessity for a public bidding before they
may be made can be raised in an appropriate complaint before
the Commission on Audit or before the Ombudsman. x x x In
addition, the Solicitor General is authorized to bring an action for
quo warranto if it should be thought that a government
corporation x x x has offended against its corporate charter or
misused its franchise. x x x.
The majority has apparently forgotten its own argument

that in the present case petitioners are not the real
parties, hence they cannot avail of any remedial right to
file a complaint or suit. It is, therefore, highly improbable
that the Commission on Audit would deign to deal with
those whom the majority says are strangers to the
contract. Again, should this Court now sustain the assailed
contract, of what avail would be the suggested recourse to
the Ombudsman? Finally, it is a perplexing suggestion
that petitioners ask the Solicitor General to bring a quo
warranto suit, either in propria personal or ex relatione ,
not only because one has to contend with that official’s own
views or personal interests but because he is himself the
counsel for respondents in this case. Any proposed remedy
must take into account not only the legalities in the case
but also the realities of life.
3. The majority believes that in view of the retirement
and replacement of two members of the Court, it is time to
reexamine
_______________
10 Citing Friedenthal, Kane and Miller, Civil Procedure, Hornbook

Series, 1985 ed., 328.
602

the ruling in the first lotto case. A previous judgment of

the Court may, of course, be revisited but if the ostensible
basis is the change of membership and known positions of
the new members anent an issue pending in a case in the
Court, it may not sit well with the public as a judicious
policy. This would be similar to the situation where a
judgment promulgated by the Court is held up by a motion
for reconsideration and which motion, just because the
present Rules do not provide a time limit for the resolution
thereof, stays unresolved until the appointment of
members sympathetic thereto. Thus, the unkind criticisms
of “magistrate shopping” or “court packing” levelled by
disgruntled litigants is not unknown to this Court.
I hold the view that the matter of the right of
petitioners to file and maintain this action—whether the
objection thereto is premised on lack of locus standi or
right of action—has already been foreclosed by our
judgment in the first lotto case, G.R. No. 113375. If the
majority refuses to recognize such right under the “law of
the case” principle, I see no reason why that particular
issue can still be ventilated 11now as a survivor of the
doctrinal effects of res judicata.
It is undeniable that in that case and the one at bar,
there is identity of parties, subject matter and cause of
action. Evidently, the judgment in G.R. No. 113375 was
rendered by a court of competent jurisdiction, it was an
adjudication on the merits, and has long become final and
executory. There is, to be sure, an attempt to show that the
subject matter in the first action is different from that in
the instant case, since the former was the original contract
and the latter is the supposed expanded contract. I am not
persuaded by the proffered distinction.
The removal and replacement of some objectionable
terms of a contract, which nevertheless continues to
operate under the
_______________
11 Since this is a Philippine case, I am using the term “res judicata”

and, hereafter, “conclusiveness of judgment” in the Philippine setting and
as understood in our jurisdiction. The importation of the alluring but
variegated concepts thereof in American law for application in this case
would compound the confusion, especially if considered along with the
rule on collateral estoppel, whether by judgment or verdict, as understood
in U.S. procedural law.
603
VOL. 246, JULY 17, 1995 603

same basis, with and on the same property, for the

samepurpose, and through the same contracting parties
does not suffice to extinguish the identity of the subject
matter in both cases. This would be to exalt form over
substance. Furthermore, respondents themselves admitted
that the new contract is actually the same as the original
one, with just some variants in the terms of the latter to
eliminate those which were objected to. The contrary
assumption now being floated by respondents would create
chaos in our remedial and contractual laws, open the door
to fraud, and subvert the rules on the finality of
judgments.
Yet, even assuming purely ex hypothesi that the
amended terms in the expanded lease agreement created a
discrete set of litigable violations of the statutory charter
of the Philippine Charity Sweepstakes Office, thereby
collectively resulting in a disparate actionable wrong or
delict, that would merely constitute at most a difference in
the causes of action in the former and the present cases.
Under Section 49(c), Rule 39 of the Rules of Court, we
would still have a situation of collateral estoppel, better
known in this jurisdiction as conclusiveness of judgment.
Hence, all relevant issues finally adjudged in the prior
judgment shall be conclusive between the parties in the
case now before us, and that definitely includes at the very
least the adjudgment therein that petitioners have the
locus standi or the right to sue respondents on the
contracts concerned.
In either case,—whether of res judicata, on which I
insist, or of conclusiveness of judgment, which I assume
arguendo—what is now being primarily resisted is the
right of petitioners to sue, aside from the postulated
invalidity of the contract for the government-sponsored
lottery system. It does seem odd, if not arcane, that
petitioners were held to have the requisite locus standi or
right of action in said G.R. No. 113375 and, for that
matter, were likewise so recognized
12
in the expanded value
added tax (EVAT) case, but are now mysteriously
divested of that “place of standing” allegedly due to, for
legal purposes, a compelling need for reexamination of the
doctrine, and, for economic reasons, an obsession for
autarky of the nation.
_______________
12 Kilosbayan, Inc., et al. vs. Executive Secretary, et al., G.R. No.

115781, August 25, 1994, 235 SCRA 630.
604

4. I repeat what I said at the outset that this case should

be decided on the merits and on substantive
considerations, not on dubious technicalities intended to
prevent an inquiry into the validity of the supposed
amended lease contract. The people are entitled to the
benefit of a duly clarified and translucent transaction, just
as respondents deserve the opportunity, and should even
by themselves primarily seek, to be cleansed of any
suspicions or lingering doubts arising from the fact that
the sponsors for jai alai and, now, of lotto are different.
On the merits, to obviate unnecessary replication I
reiterate my concurrence with the findings and conclusions
of Mr. Justice Davide in his dissenting opinion, the
presentation whereof is completely devoid of strained or
speculative premises, and moreover has the virtue of being
based on his first-hand knowledge as a legislator of the
very provisions of the law now in dispute. In this instance
and absent any other operative data, I find the same to be
an amply sufficient and highly meritorious analysis of the
controversy on the contract.
One concluding point. I am not impressed by the stance
of the majority that our taking cognizance of this case and
resolving it on the merits will hereafter invite others to
unduly overburden this Court with avoidable
importunities. This sounds like a tongue-in-cheek riposte
since the Court has clearly indicated that it sets aside
objections grounded on judge-made constitutional theories
only under cogent reasons of substantial justice and
paramount public interest.
On the contrary, to pay unqualified obeisance to the
beguiling locus standi or right of action doctrines posited
by the majority in this case would not only be an
abdication of a clear judicial duty. It could conceivably
result in depriving the people of recourse to us from
dubious government contracts through constitutionally
outdated or procedurally insipid theories for such
stultification. This is a contingency which is not only
possible, but probable under our oligarchic society in esse;
and not only undesirable, but repugnant within a just
regime of law still in posse.
605
VOL. 246, JULY 17, 1995 605

DISSENTING OPINION
DAVIDE, JR., J.:
I register a dissenting vote.
I.
I am disturbed by the sudden reversal of our 1

rulings in
Kilosbayan, Inc., et al. vs. Guingona, et al. (hereinafter
referred to as the first lotto case) regarding the application
or interpretation of the exception clause in paragraph B,
Section 1 of the Charter of the PCSO (R.A. No. 1169), as
amended by B.P. Blg. 442, and on the issue of locus standi
of the petitioners to question the contract of lease
involving the on-line lottery system entered into between
the Philippine Charity Sweepstakes Office (PCSO) and the
Philippine Gaming Management Corporation (PGMC).
Such reversal upsets the salutary doctrines of the law of
the case, res judicata, and stare decisis. It puts to jeopardy
the faith and confidence of the people, specially the
lawyers and litigants, in the certainty and stability of the
pronouncements of this Court. It opens the floodgates to
endless litigations for re-examination of such
pronouncements and weakens this Court’s judicial and
moral authority to demand from lower courts obedience
thereto and to impose sanctions for their opposite conduct.
It must be noted that the decision in the first lotto case
was unconditionally accepted by the PCSO and the PGMC,
as can be gleaned from their separate manifestations that
they would not ask for its reconsideration but would,
instead, negotiate a new equipment lease agreement
consistent with the decision and the PCSO’s charter and
that they would furnish the Court a copy of the new
agreement.
2
The decision has, thus, become final on 23 May
1994.
As the writer of the said decision and as the author of
the exception to paragraph B, Section 1 of R.A. No. 1169,
as amended, I cannot accept the strained and tenuous
arguments adduced in
_______________
1 G.R. No. 113375, 5 May 1994. Reported in 232 SCRA 110.

2 Rollo, G.R. No. 113375, vol. I, 508.
606

the majority opinion to justify the reversal of our rulings in

the first lotto case. While there are exceptions to the
aforementioned doctrines and I am not inexorably opposed
to upsetting prior decisions if warranted by overwhelming
considerations of justice and irresistible desire to rectify an
error, none of such considerations and nothing of
substance or weight can bring this case within any of the
exceptions.
In the said case, we sustained the locus standi of the
petitioners, and in no uncertain terms declared:
We find the instant petition to be of transcendental importance to

the public. The issues it raised are of paramount public interest
and of a category even higher than those involved in many of the
aforecited cases. The ramifications of such issues immeasurably
affect the social, economic, and moral well-being of the people
even in the remotest barangays of the country and the counter-
productive and retrogressive effects of the envisioned on-line
lottery system are as staggering as the billions of pesos it is
expected to raise. The legal standing then of the petitioners
deserves recognition and, in the exercise of its sound discretion,
this Court hereby brushes aside the procedural barrier which the
respondents tried to take advantage of.
In his concurring opinion, Mr. Justice Florentino P.

Feliciano further showed substantive grounds or
considerations of importance which strengthened the legal
standing of the petitioners to bring and maintain the
action, namely: (a) the public character of the funds or
other assets involved in the contract of lease; (b) the
presence of a clear case of disregard of a constitutional or
legal provision by the public respondent agency; (c) the
lack of any other party with a more direct and specific
interest in raising the questions involved therein; and (d)
the wide range of impact of the contract of lease and of its
implementation.
Only3 last 6 April 1995, in the decision in Tatad vs.
Garcia, this Court, speaking through Mr. Justice Camilo
D. Quiason who had joined in the dissenting opinions in
the first lotto case denying the petitioners’ locus standi
therein, invoked and applied the ruling on locus standi in
the first lotto case. He stated:
_______________
3 G.R. No. 114222.
607
VOL. 246, JULY 17, 1995 607
The prevailing doctrines in taxpayer’s suits are to allow

taxpayers to question contracts entered into by the national
government or government-owned or controlled corporations
allegedly in contravention of the law (Kilosbayan, Inc. v.
Guingona, 232 SCRA 110 [1994] and to disallow the same when
only municipal contracts are involved (Bugnay Construction and
Development Corporation v. Laron, 176 SCRA 240 [1989].
For as long as the ruling in Kilosbayan on locus standi is not
reversed, we have no choice but to follow it and uphold the legal
standing of petitioners as taxpayers to institute the present
action.
Mr. Justice Santiago M. Kapunan, who had also dissented

in the first lotto case on the issue of locus standi,
unqualifiedly concurred with the majority opinion in
Tatad. Mr. Justice Vicente V. Mendoza, the writer of the
ponencia in this case, also invoked the locus standi ruling
in the first lotto case to deny legal standing to Tatad, et al.
He said:
Nor do petitioners have standing to bring this suit as citizens. In

the cases in which citizens were authorized to sue, this Court
found standing because it thought the constitutional claims
pressed for decision to be of “transcendental importance,” as in
fact it subsequently granted relief to petitioners by invalidating
the challenged statutes or governmental actions. Thus in the
Lotto case [Kilosbayan, Inc. vs. Guingona, 232 SCRA 110 (1994)]
relied upon by the majority for upholding petitioners’ standing,
this Court took into account the “paramount public interest”
involved which “immeasurably affect[ed] the social, economic,
and moral well-being of the people... and the counter-productive
and retrogressive effects of the envisioned on-line lottery system.”
Accordingly, the Court invalidated the contract for the operation
of the lottery.
Chief Justice Andres R. Narvasa and Associate Justices

Abdulwahid A. Bidin, Jose A.R. Melo, Reynato S. Puno,
Jose C. Vitug, and Ricardo J. Francisco, joined him in his
concurring opinion. Except for the Chief Justice who took
no part in the first lotto case and Justice Francisco who
was not yet a member of this Court at the time, the rest of
the Justices who joined the concurring opinion of Justice
Mendoza had dissented in the first lotto case on the said
issue.
Furthermore, it must not be forgotten that this Court
has defined the issues in this case and limited them to the
following:
608

1. Whether the challenged ELA constitutes an

association, collaboration, or joint venture within
the meaning of Section 1(B) of R.A. No. 1169, as
amended by B.P. Blg. 42;
2. Whether the ELA requires prior public bidding;
and
3. Whether the ELA is grossly disadvantageous to the
Government.
In fact, during the oral arguments of this case on 3 March

1993 this Court aborted the attempt of the principal
counsel for the PGMC, Atty. Renato Cayetano, to revive
the issue of locus standi. Since it seemed that he had
prepared himself for and had been assigned to discuss that
issue alone, he took his seat without protest and without a
suggestion that he would ask for an expansion of the scope
of the issues.
In the first lotto case, this Court also emphatically ruled
that the language of Section 1 of R.A. No. 1169, as
amended by B.P. Blg. 42, is
indisputably clear that with respect to its [PCSO’s] franchise or

privilege “to hold and conduct charity sweepstakes races,
lotteries and other similar activities,” the PCSO cannot exercise
it “in collaboration, association or joint venture” with any other
party. This is the unequivocal meaning and import of the phrase
“except for the activities mentioned in the preceding paragraph
(A),” namely, “charity sweepstakes races, lotteries and other
similar activities.”
In support thereof, we explained how the amendment

came about
4
and quoted portions of the Record of the
Batasan on the proceedings during the period of
amendments to show the unequivocal intent of the Interim
Batasang Pambansa to proscribe the holding or conducting
by the PCSO of sweepstakes races, lotteries, and other
similar activities, “in collaboration, association, or joint
venture with any person, association, company, or entity,
whether domestic or foreign.” For convenience, I quote
what this Court stated in the said case:
B.P. Blg. 42 originated from Parliamentary Bill No. 622, which

was covered by Committee Report No. 103 as reported out by the
Committee on Socio-Economic Planning and Development of the
In-
_______________
4 Vol. Two, 993; 1006-1007.
609
VOL. 246, JULY 17, 1995 609

terim Batasang Pambansa. The original text of paragraph B,

Section 1 of Parliamentary Bill No. 622 reads as follows:
“To engage in any and all investments and related profitoriented

projects or programs and activities by itself or in collaboration,
association or joint venture with any person, association, company or
entity, whether domestic or foreign, for the main purpose of raising
funds for health and medical assistance and services and charitable
grants.” [Record of the Batasan, vol. Two, 993)
During the period of committee amendments, the Committee

on Socio-Economic Planning and Development, through
Assemblyman Ronaldo B. Zamora, introduced an amendment by
substitution to the said paragraph B such that, as amended, it
should read as follows:
“Subject to the approval of the Minister of Human Settlements, to
engage in health-oriented investments, programs, projects and activities
which may be profit-oriented, by itself or in collaboration, association, or
joint venture with any person, association, company or entity, whether
domestic or foreign, for the purpose of providing for permanent and
continuing sources of funds for health programs, including the expansion
of existing ones, medical assistance and services and/or charitable
grants.” [Id., 1006-1007].
Before the motion of Assemblyman Zamora for the approval of

the amendment could be acted upon, Assemblyman Davide
introduced an amendment to the amendment:
“MR. DAVIDE:
Mr. Speaker.
THE SPEAKER:
The gentleman from Cebu is recognized.
MR. DAVIDE:
May I introduce an amendment to the committee
amendment? The amendment would be to insert after
‘foreign’ in the amendment just read the following:
EXCEPT FOR THE ACTIVITY IN LETTER (A)
ABOVE.
When it is a joint venture or in collaboration with
any entity such collaboration or joint venture must not
include activity letter (a) which is the holding and
conducting of sweepstakes races, lotteries and other
similar acts .
610

MR. ZAMORA:
We accept the amendment, Mr. Speaker.
MR. DAVIDE:
Thank you, Mr. Speaker.
THE SPEAKER:
Is there any objection to the amendment? (Silence)
The amendment, as amended, is approved.” [Id., 1007,
emphasis supplied]
Further amendments to paragraph B were introduced and

approved. When Assemblyman Zamora read the final text of
paragraph B as further amended, the earlier approved
amendment of Assemblyman Davide became “EXCEPT FOR
THE ACTIVITIES MENTIONED IN PARAGRAPH (A);” and by
virtue of the amendment introduced by Assemblyman Emmanuel
Pelaez, the word PRECEDING was inserted before
PARAGRAPH. Assemblyman Pelaez introduced other
amendments. Thereafter, the new Paragraph B was approved.
[Id.] This is now paragraph
5
B, Section 1 of R.A. No. 1169, as
amended by B.P. Blg. 42.
This Court further explained the rationale for the

prohibition as follows:
No interpretation of the said provision to relax or circumvent the

prohibition can be allowed since the privilege to hold or conduct
charity sweepstakes races, lotteries, or other similar activities is
a franchise granted by the legislature to the PCSO. It is a settled
rule that “in all grants by the government to individuals or
corporations of rights, privileges and franchises, the words are to
be taken most strongly against the grantee . . . . [o]ne who claims
a franchise or privilege in derogation of the common rights of the
public must prove his title thereto by a grant which is clearly and
definitely expressed, and he cannot enlarge it by equivocal or
doubtful provisions or by probable inferences. Whatever is not
unequivocably granted is withheld. Nothing passes by mere
implication.” [36 Am Jur 2d Franchises § 26 (1968)].
In short then, by the exception explicitly made in paragraph B,
Section 1 of its charter, the PCSO cannot share its franchise with
another by way of collaboration, association or joint venture.
Neither can it assign, transfer, or lease such franchise. It has
been said that “the rights and privileges conferred under a
franchise may, without doubt, be assigned or transferred when
the grant is to the grantee and
_______________
5 Those in brackets are in footnotes in the first lotto case.
611
VOL. 246, JULY 17, 1995 611

assigns, or is authorized by statute. On the other hand, the right

of transfer or assignment may be restricted by statute or the
constitution, or be made subject to the approval of the grantor or
a governmental agency, such as a public utilities commission,
except that an existing right of assignment cannot be impaired by
subsequent legislation.” [Id., § 63].
It may also be pointed out that the franchise granted to the
PCSO to hold and conduct lotteries allows it to hold and conduct
a species of gambling. It is settled that “a statute which
authorizes the carrying on of a gambling activity or business
should be strictly con-strued and every reasonable doubt so
resolved as to limit the powers and rights claimed
6
under its
authority. [38 Am Jur 2d Gambling § 18 [1968]).
The PCSO and the PGMC never challenged our

application or interpretation of the exception clause and
our definitions of the terms collaboration, association, and
joint venture. On the contrary, they unconditionally
accepted the same by not asking for the reconsideration of
our decision in the first lotto case.
Under the principle of either the law of the case or res
judicata, the PCSO and the PGMC are bound by the ruling
in the first lotto case on the locus standi of the petitioners
and the application or interpretation of the exception
clause in paragraph B, Section 1 of R.A. No. 1169, as
amended. Moreover, that application or interpretation has
been laid to rest under the doctrine of stare decisis and has
also become part of our legal system pursuant to Article 8
of the Civil Code which provides: “Judicial decisions
applying or interpreting the laws or the constitution shall
form part of the legal system of the Philippines.”
These doctrines were not adopted whimsically or
capriciously. They are based on public policy and other
considerations of great importance and should not be
discarded or jettisoned in a cavalier fashion. Yet, they are
now put to naught in this case.
The principle of the law of the case “is necessary as a
matter of policy to end litigation. There would be no end to
a suit if every obstinate litigant could, by repeated appeals,
compel a court to listen to criticisms on their opinions, or
speculate on chances
_______________
6 Same as indicated in footnote no. 5.
612

7
from changes in its members.”
It is, however, contended that the law of the case is
inapplicable because that doctrine applies only when a
case is before an appellate court a second time after its
remand to a lower court. While indeed the statement may
be correct, it disregards the fact that this case is nothing
but a sequel to and is, therefore, for all intents and
purposes, a continuation of the first lotto case. By their
conduct, the parties admitted that it is, for which reason
the PGMC and the PCSO submitted in the first lotto case a
copy of the ELA in question, and the petitioners
commenced the instant petition also in the said case. Our
resolution that the validity of the ELA could not be decided
in the said case because the decision therein had become
final does not detract from the fact that this case is but a
continuation of the first lotto case or a new chapter in the
raging controversy between the petitioners, on the one
hand, and the PCSO and the PGMC, on the other, on the
operation of the on-line lottery system.
Equally unacceptable is the majority opinion’s rejection
of the related doctrine of conclusiveness of judgment on the
ground that the question of standing is a legal question, as
this case involves a different or unrelated contract. The
legal question of locus standi which was resolved in favor
of the petitioners in the first lotto case is the same in this
case and in every subsequent case which would involve
contracts relating or incidental to the conduct or holding of
lotteries by the PCSO in collaboration, association, or joint
venture with any person, association, company, or entity.
And, the contract in question is not different from or
unrelated to the first nullified contract, for it is nothing
but a substitute for the latter. Respondent Morato was
even candid enough to admit that no new and separate
public bidding was conducted for the ELA in question
because the PCSO was of the belief that the public bidding
for the nullified contract was
_______________
7 Zarate vs. Director of Lands, 39 Phil. 747, 749 [1919], citing

American cases. See also Fernando vs. Crisostomo, 90 Phil. 585 [1951];
Padilla vs. Paterno, 93 Phil. 884 [1953]; People vs. Penuila, 103 Phil. 992
[1958]; Kabigting vs. Director of Prisons, 6 SCRA 281 [1962]; People vs.
Olarte, 19 SCRA 494 [1967]; Ramos vs. Intermediate Appellate Court,
171 SCRA 93 [1989].
613
VOL. 246, JULY 17, 1995 613

sufficient. 8
Its reliance on the ruling in Montana vs. United States
that preclusion of issues or collateral estoppel does not
apply to issues of law, at least when substantially
unrelated claims are involved, is misplaced. For one thing,
the question of the petitioners’ legal standing in the first
lotto case and in this case is one and the same issue of law.
For another, these cases involve the same and not
substantially unrelated subject matter , viz., the second
contract between the PCSO and the PGMC on the
operation of the on-line lottery system.
The majority opinion likewise failed to consider that in
the very authority it cited regarding the exception to the
rule of issue preclusion (Restatement of the Law, 2d
Judgments § 28), the second illustration stated therein is
subject to this NOTE: “The doctrine of the stare decisis
may lead the court to refuse to reconsider the question of
sovereign immunity,” which simply means that stare
decisis is an effective bar to a re-examination of a prior
judgment.
The doctrine of stare decisis embodies the legal maxim
that a principle or rule of law which has been established
by the decision of a court of controlling jurisdiction will be
followed in other cases involving a similar situation. It is
founded on the necessity for securing certainty and
stability in9 the law and does not require identity or privity
of parties. This is explicitly fleshed out in Article 8 of the
Civil Code which provides that decisions applying or
interpreting the laws or the constitution shall form part of
the legal system. Such decisions “assume the same
authority as the statute itself and, until authoritatively
abandoned, necessarily become, to the extent that they are
applicable, the criteria which must control the actuations
not only of those called upon to abide thereby but also of 10
those in duty bound to enforce obedience thereto.”
Abandonment thereof must be based only
_______________
8 440 U.S. 147, 162, 59 L.Ed., 2d 210, 222 [1979].

9 A.C. FREEMAN, A Treatise on the Law of Judgments by Edward W.
Tuttle, vol. 2 [1925 ed.], §630, 1329.
10 Caltex (Phils.), Inc. vs. Palomar, 18 SCRA 247 [1966]. See also
Floresca vs. Philex Mining Corp., 136 SCRA 141 [1985]; Philippine
Constitution Association vs. Enriquez, 235 SCRA 506 [1994].
614

on strong and compelling reasons—which I do not find in

this case—otherwise, the becoming virtue of predictability
which is expected from this Court would be immeasurably
affected and the public’s confidence in the stability of its
solemn pronouncements diminished.
The doctrine of res judicata also bars a relitigation of
the issue of locus standi and a re-examination of the
application or interpretation of the exception clause in
paragraph B, Section 1 of R.A. No. 1169, as amended.
Section 49(b), Rule 39 of the Rules of Court on effects of
judgment expressly provides:
(b) In all other cases the judgment or order is, with respect to the
matter directly adjudged or as to other matter that could have
been raised in relation thereto, conclusive between the parties
and their successors in interest by title subsequent to the
commencement of the action or special proceedings, litigating for
the same thing in the same title and in the same capacity.
This doctrine has dual aspects: (1) as a bar to the

prosecution of a second action upon the same claim,
demand, or cause of action; and (2) as preclusion to the
relitigation of particular facts or issues in another action
between 11
the same parties on a different claim or cause of
action. Public policy, judicial orderliness, economy of
judicial time, and the interest of litigants as well as the
peace and order of society, all require that stability should
be accorded judgments; that controversies once decided on
their merits shall remain in repose; that inconsistent
judicial decisions shall not be made on the same set of
facts; and that there be an end to litigation which, without
the said doctrine, would be endless. It not only puts an end
to strife, but recognizes that certainty in legal relations
must be maintained. It produces certainty as to individual
rights12
and gives dignity and respect to judicial proceed-
ings.
The justifications given in the majority opinion to
underrate the ruling on locus standi and to ultimately
discard it are unconvincing. It is not at all true, as the
majority opinion contends, that “[t]he previous ruling
sustaining petitioners’ in-
_______________
11 46 Am Jur 2d Judgments §396, 563.

12 46 Am Jur 2d Judgments §395, 559-562.
615
VOL. 246, JULY 17, 1995 615

tervention may in fact be considered a departure from

settled rulings on ‘real party in interest’ because no
constitutional issues were actually involved.”
It must be pointed out that the rule in ordinary civil
procedure on real party in interest was never put in issue
in the previous case. It was the clear understanding of the
Members of the Court that in the light of the issues raised
and the arguments adduced therein, only locus standi
deserved consideration. Accordingly, the majority opinion
and the separate dissenting opinions therein dwelt
lengthily on locus standi and brought in the process a vast
array of authorities on the issue. Moreover, as explicitly
stressed in the concurring opinion of Justice Feliciano,
both constitutional and legal issues were involved therein.
Finally, as shall hereafter be discussed, in public law the
rule of real party in interest is subordinated to the doctrine
of locus standi.
Equally unconvincing is the majority opinion’s
contention that the ruling on locus standi in the first lotto
case may not be preserved because the majority vote
sustaining the petitioners’ standing was a “tenuous one”
that may not be maintained in a subsequent litigation, and
that there had been changes in the membership of the
Court due to the retirement of Justices Isagani A. Cruz
and Abdulwahid A. Bidin and the appointment of Justices
Vicente V. Mendoza and Ricardo J. Francisco. It has
forgotten that, as earlier stated, the ruling was reiterated
in Tatad vs. Garcia. Additionally, when in his concurring
opinion in the Tatad case, Justice Mendoza denied locus
standi to Tatad, et al., because their case did not have the
same importance as the first lotto case, he thereby
accepted the concession of standing to the petitioners in
the lotto case. I wish to stress the fact that all the Justices
who had dissented in the first lotto case on the issue of
locus standi were either for the majority opinion or for the
concurring opinion in the Tatad case. Hence, I can say that
the Tatad case has given vigor and strength to the
“tenuous” majority in the first lotto case.
The majority opinion declares that the real issue in this
case is not whether the petitioners have locus standi but
whether they are the real parties-in-interest. This
proposition is a bold move to set up a bar to taxpayer’s
suits or cases invested with public interest by requiring
strict compliance with the rule on real party in interest in
ordinary civil actions, thereby effectively subordi-
616

nating to that rule the doctrine of locus standi. I am not

prepared to be a party to that proposition.
First. Friedenthal, et al., whose book is cited in the
majority opinion in its discussion of the rule on real party
in interest and the doctrine of locus standi, admit that
there is a difference between the two, and that the former
is not strictly applicable in public law cases, thus:
The evolution of standing doctrine seems to point to greater

freedom of action for plaintiffs. However, the courts still have not
articulated how the balance is to be struck between the relevant
and often competing interests: the plaintiff’s right to relief and
the legislature’s right to carry out its policies without judicial
interference. Nor has the judiciary’s competence to rule on these
interests have analyzed systematically or its limits defined.
Courts essentially continue to be free to reconcile these
competing values on an ad hoc basis.
It is important to note, however, that standing because of its
constitutional and public policy underpinnings, is very different
from questions relating to whether a particular plaintiff is the
real party in interest or has capacity to sue. Although all three
requirements are directed toward ensuring that only certain
parties can maintain an action, standing restrictions require a
partial consideration of the merits, as well as of broader policy
concerns
13
relating to the proper role of the judiciary in certain
areas.
14
In an earlier book, the same Friedenthal and Miller, with
14
In an earlier book, the same Friedenthal and Miller, with
John J. Cound as the lead author, expounded that in the
realm of public law, the real party in interest rule is not
applicable, thus:
A third problem of proper parties occurs in the realm of public

law. When governmental action is attacked on the ground that it
violates private rights or some constitutional principle, the courts
have tended to analyze the question whether the challenger is a
proper party plaintiff to assert the claim in terms of the judge-
made doctrine of standing to sue—requiring that plaintiff be
adversely affected by defendant’s conduct—rather than according
to real-party-in-interest or capacity principles. See Davis,
Standing: Taxpayers and Others, 35 U.Chi.L.Rev. 601
_______________
13 JACK H. FRIEDENTHAL, MARY KAY KANE, and ARTHUR R. MILLER,

Civil Procedure, 328 [1985].
14 JOHN J. COUND, JACK H. FRIEDENTHAL, and ARTHUR R. MILLER,
Civil Procedure, Cases and Materials, 523 [1980].
617
VOL. 246, JULY 17, 1995 617

(1968); Jaffee, The Citizen as a Litigant in Public Actions: The

Non-Hohfeldian or Ideological Plaintiff, 116 U.Pa.L.Rev. 1033
(1968); and Jaffee, Standing Again, 84 Harv.L.Rev. 633 (1971).
To the extent that standing is understood to mean that the
litigant actually must be injured by the governmental action that
is being assailed, it closely resembles the notion of real party in
interest under Rule 17(a). However, several other elements of the
standing doctrine clearly are unrelated to the simple real-party-
in-interest test . One significant context in which the two concepts
diverge is when for standing purposes plaintiff is required to
show both that he has been adversely affected by the
governmental conduct that is under attack and has suffered an
injury to a legally protected right. When standing is defined in
this fashion it may entail a preliminary consideration of the
merits of the case and therefore is quite different from the real-
party-in-interest notion. (emphasis supplied).
The downgrading of locus standi and its subordination to

the restrictive rule on real party in interest cannot be
justified by the claim that what is involved here is contract
law, not constitutional law. True, contract law is involved.
We are not, however, dealing here with an ordinary
contract between private parties, but a contract between a
corporation wholly owned by the government—hence, an
instrumentality of the government—and a private
corporation for the conduct of the lotto, which is invested
with paramount and transcendental public interest and
other public policy considerations because the lotto has
counter-productive and retrogressive effects which are as
staggering as the billions of pesos it is expected to raise
and provokes issues that immeasurably affect the social,
economic, and moral well-being of the people. We said so in
the first lotto case.
Second. The attempt to use the real-party-in-interest
rule is to resurrect the abandoned restrictive application of
locus standi. This Court, speaking through the
constitutionalist nonpareil, Justice and later Chief Justice
Enrique Fernando,
15
has already declared in Tan vs.
Macapagal that as far as a taxpayer’s suit is concerned,
this Court is not devoid of discretion as to whether or not it
should be entertained. In his concurring opinion in Aquino
_______________
15 43 SCRA 677 [1972]. See also Macasiano vs. NHA, 224 SCRA 236
[1993].
618

16
vs. Commission on Elections, he said:
Then there is the attack on the standing of petitioners, as

vindicating at most what they consider a public right and not
protecting their rights as individuals. [Respondents’ Comment,
5]. This is to conjure the specter of the public right dogma as an
inhibition to parties intent on keeping public officials staying on
the path of constitutionalism. As was so well put by Jaffe
[Standing to Secure Judicial Review, 74 Harvard Law Review,
1265 (1961)]: “The protection of private rights is an essential
constituent of public interest and, conversely, without a well-or-
dered state there could be no enforcement of private rights.
Private and public interests are, both in a substantive and
procedural sense, aspects of the totality of the legal order.” [Ibid.,
1266. Cf. Berger, Standing to Sue in Public Actions, 78 Yale Law
Journal 816 (1969)]. Moreover, petitioners have convincingly
shown that in their capacity as taxpayers, their standing to sue
has been amply demonstrated. There would be a retreat from the
liberal approach followed in Pascual v. Secretary of Public Works
[110 Phil. 331 (1960], foreshadowed by the very decision of People
v. Vera [65 Phil. 56 (1937)] where the doctrine was first fully
discussed, if we act differently now. I do not think we are
prepared to take that step. Respondents, however, would hark
back to the American Supreme Court doctrine in Mellon v.
Frothingham [262 US 447 (1923)], with their claim that what
petitioners possess “is an interest which is shared in common by
other people and is comparatively so minute and indeterminate
as to afford any basis and assurance that the judicial process can
act on it.” [Respondents’ Comment, 5]. That is to speak in the
language of a bygone era, even in the United States. For as Chief
Justice Warren clearly pointed out in the later case of Flast v.
Cohen [391 US 83 (1968)], the barrier thus set up if not breached
has definitely been lowered. [Ibid., 92-95]. The weakness of these
particular defenses is thus quite apparent. [Cf. Tan v.
Macapagal, 43 SCRA 677].
Third. Such attempt directly or indirectly restricts the

exercise of the judicial authority of this Court in an
original action—and there had been many in the past—to
determine whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the
Government. Only a very limited few may qualify,
_______________
16 62 SCRA 275, 308 [1975]. Those in brackets appear in footnotes.
619
VOL. 246, JULY 17, 1995 619

under the real-party-in-interest rule, to bring actions to

question acts or contracts tainted with such vice. Where,
because of fear of reprisal, undue pressure, or even
connivance with the parties benefited by the contracts or
transactions, the so-called real party in interest chooses
not to sue, the patently unconstitutional and illegal
contracts or transactions will be placed beyond the
scrutiny of this Court, to the irreparable damage of the
Government, and prejudice to public interest and the
general welfare.
By way of illustration, the first lotto contract would not
have reached this Court if only the so-called real party in
interest could bring an action to nullify it. Neither would
the ELA in question, since for reasons only known to them,
none of those who had lost in the bidding for the first lotto
contract showed interest to challenge it.
The majority opinion posits that a denial to the
petitioners of the right to intervene will not leave without
remedy any perceived illegality in the contract because:
[q]uestions as to the nature or validity of public contracts or the

necessity for a public bidding before they may be made can be
raised in an appropriate case before the Commission on Audit or
before the Ombudsman. . . . In addition, the Solicitor General is
authorized to bring an action for quo warranto if it should be
thought that a government corporation, like the PCSO, has
offended against its corporate charter or misused its franchise.
That proposition delivers the coup de grace to taxpayers’

suits, discourages involvement of citizens in public affairs,
and negates or renders ineffective Section 16, Article XIII
of the Constitution which provides:
The right of the people and their organizations to effective and

reasonable participation at all levels of social, political, and
economic decision-making shall not be abridged. The State shall,
by law, facilitate the establishment of adequate consultation
mechanisms.
Besides, it is fraught with unimaginable danger to public

interest if neither the Commission on Audit (COA), nor the
Ombudsman, or the Office of the Solicitor General, would
take any action on the matter.
620

In the instant case, the COA refused to directly act on

Morato’s request and, instead, referred it to the
Department of Justice (DOJ) which, in turn, merely
indorsed an opinion to the COA. On the other hand, the
Office of the Solicitor General is taking the side of the
PCSO, as it did in the first lotto case. The observation then
of Justice Cruz in his concurring opinion in the first lotto
case is apropos:
Locus standi is not such an absolute rule that it cannot admit of

exceptions under certain conditions or circumstances like those
attending this transaction. As I remarked in my dissent in
Guazon vs. De Villa, 181 SCRA 623, “It is not only the owner of
the burning house who has a right to call the firemen. Every one
has the right and responsibility to prevent the fire from
spreading even if he lives in the other block.”
The majority opinion does not entirely foreclose the

possibility of according the petitioners locus standi if only
they would allege “that public funds are being misspent so
as to make this action a public one and justify relaxation of
the requirement that an action must be prosecuted by the
real party in interest.” While it may be true that there is
no such specific allegation, the totality of the petitioners’
allegations points to illegal expenditures of public funds
due to or arising out of violations of the exception clause in
paragraph B, Section 1 of R.A. No. 1169, as amended, and
the public bidding law, and by reason of the grossly
disadvantageous provisions of the contract. The public
character of the sums due the PGMC under the ELA
cannot be disputed. The PCSO is solely owned by the
Government and is authorized to raise funds for the public
purposes specified in its Charter. The funds thus raised
are public funds. This Court must take judicial notice of
these facts.
Before I take up the defined issues, I find it necessary to
meet squarely the majority opinion’s interpretation of
paragraph B, Section 1 of R.A. No. 1169, as amended. This
is, of course, on the assumption that this Court may now
disregard the doctrines of the law of the case, res judicata,
and stare decisis.
I respectfully submit that the best authority on the
intention or rationale of a legislative amendment is its
author. Fortunately, I happened to be the author of the
exception clause in said provision. The language of that
clause is very short and simple, and the elaboration given
therefor, as earlier shown, is equally
621
VOL. 246, JULY 17, 1995 621

short and simple. The sponsor of the measure, then

Assemblyman, now Congressman, Ronaldo Zamora did not
even ask for an explanation or clarification; he readily
accepted the amendment. Nobody from the floor
interpellated me for an explanation or clarification.
I regret then to say that neither the letter nor the spirit
of the exception clause in paragraph B supports the
interpretation proposed in the majority opinion. The
reason given in the majority opinion for the alleged
prohibition from investing in “activities mentioned in the
preceding paragraph (A)” (i.e., the holding or conducting of
charity sweepstakes races, lotteries, and other similar
activities) is that “these are competing activities.” In that
aspect alone, the majority opinion has clearly
misconstrued the exception clause. The prohibition is not
directed against such activities, since they are in fact the
franchised primary activities of the PCSO. What is
prohibited is the conduct or holding thereof “in
collaboration, association or joint venture with any person,
association, company, or entity, whether domestic or
foreign.” In the first lotto case, this Court explained the
principal reasons for such prohibition. If the purpose of the
prohibition in the exception clause is indeed to prevent
competition, it would be with more reason that no other
person, natural or juridical, should be allowed to share in
the PCSO’s franchise to hold and conduct lotteries. In
short, the argument in the majority opinion sustains the
rationale of the prohibition.
II.
As to the defined issues, my answers are in the

affirmative. To better appreciate them, the minute details
of the undisputed operative facts which are crucial to their
resolution must have to be bared.
After its setback in G.R. No. 113375, the PGMC and the
PCSO prepared a draft of a new ELA.
On 26 July 1994, the Board 17
of Directors of the PCSO
approved Resolution No. 445, series of 1994, resolving as
follows:
_______________
17 Annex “1” to Memorandum for the public respondents; Rollo, 431.
622

NOW, THEREFORE, BE IT RESOLVED, as it is hereby

resolved, that the draft Equipment Lease Agreement, hereto
attached, is APPROVED, and the Chairman of the Board is
AUTHORIZED to enter into and execute the said Agreement,
SUBJECT to the confirmation by the Commission on Audit that
PCSO can enter in the said Agreement.
On the same date, PCSO Chairman Morato sent 18 a letter to
Hon. Celso D. Gangan, Chairman of the COA, seeking
confirmation on whether the Equipment Lease Agreement
is exempt from the requirements of public bidding imposed
under Executive Order No. 301 (1987) and the pertinent
government accounting and auditing rules. The request
was based on the following submissions:
1. Pursuant to the provisions of Republic Act No.

1169, as amended, the Philippine Charity
Sweepstakes Office (PCSO), with the approval of
the Office of the President, decided to operate an
On-line lottery system.
2. In August 1993, Request for Proposals (Annex “A”)
were issued seeking lessors for the On-Line Lottery
System under a build-lease basis at no expense or
risk to PCSO.
3. The bids were evaluated by the Special
Prequalification Bids and Awards Committee and
its bid report was further evaluated by a Special
Review Committee of the Office of the President.
4. On 21 October 1993, the Office of the President
announced that it was awarding the Lease
Contract to Philippine Gaming and Management
Corporation (PGMC) as lessor, provided that the
contract would similarly be awarded to two (2)
other bidders if they matched the terms of PGMC.
Morato invoked the following grounds to justify his request

for confirmation:
a. A lease of equipment, with option to purchase, by a

government corporation such as the PCSO,
provided this is approved by its governing board, is
not generally subject to the public bidding
requirement (Section 4.3, second paragraph, COA
Circular No. 85-55-A dated 8 September 1985);
_______________
18 Annex “2” to Memorandum for the public respondents; Rollo, 432.

623
VOL. 246, JULY 17, 1995 623

b. The new lease contract is still the result of an

award made after public bidding; and
c. In this case, it is apparent that the lease of the
needed equipment through negotiation is the most
advantageous to the Government since so many
studies, plans and procedures had already been
worked out with PGMC since October 1993 as a
result of the previous bidding (Section 1.e,
Executive Order No. 301 [1987]).
The COA indorsed Morato’s letter to the DOJ and

requested an opinion on the propriety or legality of the
proposed ELA which was entered into without the benefit
of a public bidding under E.O. No. 301 and the pertinent
government accounting and auditing rules.
19
In its Opinion No. 4, series of 1995, contained in a 2nd
Indorsement addressed to the COA, dated 16 January
1995, the DOJ, through Acting Secretary Demetrio G.
Demetria:
(a) Disagreed with the statement of Morato that any of

the three justifications he enumerated in his letter
to the COA may constitute valid basis for the
exemption from public bidding.
(b) Declined to express an opinion on the first
justification that under COA Circular No. 85-55-A
of 8 September 1985 a lease of equipment with
option to purchase is not generally subject to public
bidding, since it involves an interpretation of a
COA circular which is best left to the COA’s
determination.
(c) Expressed doubts on the accuracy of Morato’s
statement that the new lease contract is still the
result of the award made after public bidding and
opined that since the original lease contract was
nullified by this Court, such nullification
necessarily implied the nullification of the public
bidding which preceded its execution.
(d) Agreed, nonetheless, with Morato that the new
ELA is exempt from the public bidding
requirement under Section 1(e) of E.O. No. 301,
and ratiocinates as follows:
The cited provision reads:

SECTION 1. Guidelines for Negotiated Contracts.—Any
provision of law, decree, executive order or other issuances to the
contrary notwithstanding, no contract for public services or for
furnishing supplies, materials and equipment to the government
or any of its branches, agencies or instrumentalities shall be
_______________
19 Annex “B” of Petition; Rollo, 48 et seq.
624

renewed or entered into without public bidding except under any of the
following situations:
xxx
(e) In cases where it is apparent that the requisition of the needed
supplies through negotiated purchase is most advantageous to the
government to be determined by the Department Head concerned; and
xxx
It should be noted that while public bidding is generally

required for contracts for public services or for furnishing
supplies, materials and equipment, paragraph (e), abovequoted,
would exempt from the requirement of public bidding “the
requisition of the needed supplies” and would allow the
acquisition thereof through negotiated purchase if deemed most
advantageous to the government as determined by the
Department Head concerned.
In the instant case, it is believed that the new lease
agreement, although denominated, “Equipment Lease
Agreement,” may be considered a contract for furnishing supplies
and may fall under the exception provided for in paragraph (e) if
entering into such agreement, through negotiation, is determined
to be the most advantageous by the Department Head concerned.
The words “supplies” and “equipment” are not synonymous.
The word “equipment” imports “the outfit necessary to enable the
contractor to perform the agreed service, the tools, implements,
and appliances which might have been previously used or might
be subsequently used by the contractor in carrying on other work
of like character” (Standard Boiler Works v. National Surety Co.,
71 Wash. 28, 127 Pac. 573). The word “supplies,” on the other
hand, is defined as “any article entirely consumed by its use in
the work” (National Surety Co. v. Bratnober Lumber Co., 67
Wash. 601, 122, Pac. 337).
It has been held, however, that the true distinction between
“supplies” and “equipment” rests on the effect the use has upon
the article, rather than upon the degree of use to which it is
subjected. Thus, a “supply” would be any article furnished for
carrying on the work which from its nature is necessarily
consumed by use in the work, while “equipment” would consist of
those articles that are not necessarily so consumed, but which
may survive the particular work and be further used on work of
like character (United States Rubber Co. of California v.
Washington Engineering Co., 149 P. 706).
In case of lease of equipment, it was held that the rental value
of machinery hired by the contractor for use in carrying on work
within the terms of the contract is recoverable from the
bondsman as a supply, the reason for this being that what was
consumed in the work was the use of the machinery and not the
machinery itself (United States
625
VOL. 246, JULY 17, 1995 625

Rubber Co. vs. Washington Eng’g. Co., supra, citing cases).

Applying this ruling to the instant case, the subject Equipment
Lease Agreement, as observed earlier, may be deemed to be an
agreement for furnishing of supplies because by its terms, what
will be consumed by the PCSO, as Lessee, would be the use of the
equipment, and not the equipment itself.
Based thereon, the aforesaid Equipment Lease Agreement
may be the subject of negotiation pursuant to Section 1(e) of E.O.
No. 301 if it be determined to be the most advantageous to the
government by the Department Head concerned.
As earlier stated, on 25 January 1995, the PGMC,

represented by Alfredo C. Ramos, its Vice-Chairman, and
the PCSO, represented by Manuel L. Morato, its
Chairman, signed the assailed ELA.
A. The PGMC avers that the old contract was reformed
to expunge therefrom the features and provisions which
were held by this Court as indicative of the statutorily20
proscribed collaboration, association, or joint venture. For
their part, the public respondents claim that “as can be
glaringly seen from the face of the ELA, none of the terms
and conditions in the old contract of lease which this
Honorable Court found as 21vestiges of a joint venture is
present in the subject ELA.”
I am not persuaded. To my mind, the parties only
performed a superficial surgery on the nullified contract by
merely deleting therefrom provisions which this Court had
considered in the first lotto case to be badges of a joint
venture contract and by engrafting some modifications on
rental, which include an option to purchase. The PGMC
and the PCSO conveniently forgot that per this Court’s
findings in the first lotto case, they had an indivisible
community of interest in the conception, birth, and growth
of the on-line lottery and that each is wed to the other for
better or for worse. The surgery affected only the post-
natal activities of the union, but not the indivisibility of
their community of interest at conception and at the birth
of the on-line lottery system. Put differently, it only
separated one from the other from bed and board but did
not dissolve the bonds of such indivisibility or
_______________
20 Comment of the PGMC, 4; Rollo, 206.

21 Comment of the public respondents, 9-10; Id., 254-55.
626
community of interest. This was confirmed by respondent

Morato when he candidly confessed in his letter to the
COA Chairman that:
[I]t is apparent that the lease of the needed equipment through

negotiations is the most advantageous to the Government since
so many studies, plans and procedures had already been worked
out with PGMC since October 1993 as a result of the previous
bidding (Sec. 1.e, Executive Order No. 301 [1987]). (emphasis
supplied)
Although Mr. Morato did not volunteer to disclose what

those studies, plans, and procedures are, it is logical to
presume that they refer to, among other things, (1) the
building of the on-line lottery system, at no expense of or
risk to the PCSO, which was precisely the specific purpose
of the Request for Proposals and which Morato admitted in
his “presentation” in his letter to the COA Chairman; and
(2) those that this Court had noted in the first lotto case, to
wit: (a) the preparation of the detailed plan of all games
and the marketing thereof; and (b) the determination of
the number of players, value of winnings, and the logistics
required to introduce the games, including the Master
Games Plan. The indispensable role of the PGMC as a
collaborator, associate, or joint venturer up to that point
where actual operation of the online lottery system shall
begin was unaffected by the superficial surgery on the text
of the nullified contract. Atty. Eleazar Reyes, co-counsel of
Atty. Cayetano for the PGMC, was candid enough to admit
during the oral arguments that it would be extremely
difficult for the PGMC and the PCSO to avoid the
proscribed “collaboration, association, or joint venture”
under the exception of paragraph B, Section 1 of R.A. No.
1169, as amended. He, nevertheless, hastened to add that
an outright purchase by the PCSO of the PGMC’s
equipment would be the best and safest recourse. Thus:
JUSTICE DAVIDE:
Mr. Counsel you just admitted a while ago that it is
extremely difficult to comply with the revised charter
of the Philippine Charity Sweepstakes Office insofar
as collaboration, joint venture, association are
concerned?
ATTY. REYES:
Yes, Your Honor.
627
VOL. 246, JULY 17, 1995 627

JUSTICE DAVIDE:
But if given the chance to rewrite this contract, what
proposal would you give, what recommendation would
you give to your client?
ATTY. REYES:
Your Honor, that is why I said I would leave it to the
business judgment of my client.
JUSTICE DAVIDE:
As a lawyer what kind of a contract would you
recommend to be rewritten, to satisfy the law, to
satisfy the judgment of this Court in the first case?
ATTY. REYES:
The safest, Your Honor, is a sale.
JUSTICE DAVIDE:
Sale, meaning the Philippine Charity Sweepstakes
Office will buy everything?
ATTY. REYES:
Yes, Your Honor.
JUSTICE DAVIDE:
Why did you not recommend that to your client
instead you went into the process [of drafting the]
ELA.
ATTY. REYES:
Because, Your Honor, they do not have the money.
They are going to use the proceeds from the gains for
the payment of the rental but they do not have the
cash.
JUSTICE DAVIDE:
In the event that this Court will now strike down this
agreement as also void, would you recommend that to
your client as a third contract?
ATTY. REYES:
22
Yes, Your Honor, if the PCSO can pay for it.
Besides, even on the face of the new ELA, the elements of

the proscribed joint venture or, at the very least,
collaboration or association, can be deleted, albeit they are
hidden behind the skirt of the following: (a) the Rental
Clause; (b) the upgrading provision under the Repair
Services Clause; and (c) the details of what are embraced
in the term Lottery Equipment and Accessories subject 23
of
the contract, which are found in Annex “A” of the ELA.
_______________
22 TSN, Oral Arguments of 3 March 1995, 60-62.

23 Rollo, 68-69.
628

The Rental Clause provides for a flexible rate based on a

percentage of the gross amount of ticket sales, payable bi-
weekly, with an annual minimum rental fixed at
P35,000.00 per terminal in commercial operation, any
shortfall of which shall be paid out of the proceeds of the
current ticket sales. This clause provides in full as follows:
RENTAL
During the effectivity of this Agreement and the term of this

lease as provided in paragraph 3 hereof, LESSEE shall pay
rental to LESSOR equivalent to FOUR POINT THREE
PERCENT (4.3%) of the gross amount of ticket sales from all of
LESSEE’s on-line lottery operations in the Territory, which
rental shall be computed and payable bi-weekly, net of
withholding taxes on income, if any: provided that, in no case
shall the annual aggregate rentals per year during the term of
the lease be less than the annual minimum fixed rental computed
at P35,000.00 per terminal in commercial operation per annum,
provided, further that the annual minimum fixed rental shall be
reduced pro-rata for the number of days during the year that a
terminal is not in commercial operation due to repairs or
breakdown. In the event the aggregate bi-weekly rentals in any
year falls short of the annual minimum fixed rental computed at
P35,000.00 per terminal in commercial operation, the LESSEE
shall pay such shortfall from out of the proceeds of the then
current ticket sales from LESSEE’s on-line lottery operations in
the Territory (after payment first of prizes and agents’
commissions but prior to any other payments, allocations or
disbursements) until said shortfall shall have been fully settled,
but without prejudice to the payment to LESSOR of the then
current bi-weekly rentals in accordance with the provisions of the
first sentence of this paragraph 2.
This is an unusually novel arrangement which insures and

guarantees the PGMC full participation in the gross
proceeds of ticket sales even if, ultimately, a draw could
mean losses to the PCSO. It allots to the PGMC only a
very limited share in the losses since, under any
circumstance and the most unfavorable business climate,
the PGMC is assured of an irreducible minimum “rental”
per terminal. The term “rental” is then a very deceptive,
yet poorly contrived, disguise to cloak the real role of the
PGMC. At the hearing, Atty. Eleazar Reyes feigned
ignorance on how the “rental” of 4.3% of the gross amount
of ticket sales was arrived at. This Court should not wait
for the end of the
629
VOL. 246, JULY 17, 1995 629

world for any acceptable explanation therefor. The
explanation can easily be had by relating it to the rental of
4.9% of gross receipts from ticket sales under the nullified
contract. The reduction of only 0.6% (4.9%-4.3%) is
negligible considering the PCSO’s assumption of, among
other things, all business risks; operation of the equipment
with the use of its own personnel; risks of loss of and
damage to the equipment; responsibility for maintenance
and repairs, all of which were the PGMC’s duties,
obligations, and responsibilities under the nullified
contract. I am convinced that such rate was pre-
determined to approximate the profits which the PGMC
expected to realize under the nullified contract. The rental
clause is, indeed, a subtle scheme to unconditionally
guaranty PGMC’s share in the profits.
If read in conjunction with the upgrading provision
buried under the clause “Repair Services” it becomes clear
that the parties do have a different purpose for the use of
the term rental.
The Repair Services clause provides as follows:
REPAIR SERVICES
LESSEE shall bear the costs of maintenance and necessary

repairs, except those repairs to correct defective workmanship or
replace defective materials used in the manufacture of
Equipment discovered after delivery of the Equipment, in which
case LESSOR shall bear the costs of such repairs and, if
necessary, the replacements. The LESSEE may at any time
during the term of the lease, request the LESSOR to upgrade the
equipment and/or increase the number of terminals, in which
case the LESSEE and LESSOR shall agree on an arrangement
mutually satisfactory to both of them, upon such terms as may be
mutually agreed upon.
The upgrading provision is full of mischief and is, perhaps,

the most deceptive provision in the ELA that puts to
naught any pretense of good faith in expunging from the
old contract all indicia of the statutorily proscribed
collaboration, association, or joint venture. It is a provision
which is entirely unrelated to the clause under which it is
placed—Repair Services. It should have been either set
forth as a separate clause
24
or at least placed under the
clause on Equipment.
_______________
24 Clause 1.
630

It should be stressed here that in the old contract the

upgrading clause is under facilities, which include among
other things all capital equipment, computers, terminals,
and softwares. Under the upgrading provision, new
equipment may be used; the number of terminals may be
increased; and new terms and conditions, including rates
of “rentals” and the purchase price in case of exercise of
the option to buy, may be agreed upon. This makes the
ELA not just a sweetheart contract, but one which will
preserve the parties’ indivisible union and community of
interest, thereby giving further credence to this Court’s
observation in the first lotto case that each is wed to the
other for better or for worse.
The term Equipment, which is allegedly the subject of
the ELA, includes, per its definition in Annex “A” thereof,
the “associated or incidental hardware equipment,
furnishing and fixtures, technology, intellectual property
rights, knowhow, processes and systems .” Technology,
knowhow, processes, and systems necessarily include
transfer of technology and other expertise which could only
be carried out over a number of years of continuing
training and supervision of personnel, which the PGMC is
necessarily and logically required to do. Intellectual
property rights can only refer to, among other things, the
detailed plans of all games and the Master Games Plan
which, under the nullified contract, are to be prepared by
the PGMC.
It may be observed that the term facilities in the old
contract included all capital equipment but excluded
“technology, intellectual property rights, knowhow,
processes and systems.” As this Court found in the first
lotto case, there was a separate provision on the PGMC’s
obligations (1) to train PCSO and other local personnel and 25
(2) to effect the transfer of technology and other expertise.
Clearly, the inclusion of “technology, intellectual property
rights, knowhow, processes and systems” in the term
Equipment was a ploy to hide, again, the continuing
indispensable collaboration of the PGMC in the conduct of
the on-line lottery business.
_______________
25 232 SCRA 110, 146 [1994].
631
VOL. 246, JULY 17, 1995 631

B. Even assuming that the subject ELA is not a joint

venture contract, still it must be nullified for having been
entered into without public bidding and for being grossly
disadvantageous to the Government. It has been said:
In this jurisdiction, public bidding is the policy and medium

adhered to in Government procurement and construction
contracts under existing laws and regulations. It is the accepted
method for arriving at a fair and reasonable price and ensures
that overpricing, favoritism and other anomalous practices are
eliminated or minimized. And any Government contract entered
into without the required bidding is null26 and void and cannot
adversely affect the rights of third parties.
27
The opening paragraph of E.O. No. 298, series of 1940, of
President Manuel L. Quezon, entitled “Prohibiting the
Automatic Renewal of Contracts, Requiring Public Bidding
Before Entering Into New Contracts, Providing Exceptions
Therefor, ” states this policy:
Whereas, as a matter of general policy, it is in the interest of the

public service that Government contracts for public services or
for furnishing of supplies, materials, and equipment to the
Government be submitted to public bidding.
28
This was restated in E.O. No. 301 of President Corazon C.
Aquino, entitled “Decentralizing Actions on Government
Negotiated Contracts, Lease Contracts and Records
Disposal,” whose Section 1 reads:
SECTION 1. Guidelines for Negotiated Contracts.—Any provision

_______________
26 BARTOLOME C. FERNANDEZ, A Treatise on Government

Contracts Under Philippine Law, Revised ed. [1991], 25.
27 Promulgated on 12 August 1940.
28 Promulgated on 26 July 1987.
632

The Court agrees with DOJ Opinion No. 4, series of 1995,

which states that the bidding conducted for the nullified
contract could be a valid basis for the new ELA and that,
therefore, a new bidding was in order. The DOJ erred,
however, when it further stated that the ELA is exempt
under Section 1(e) of E.O. No. 301 from the public-bidding
requirement.
Sections 1 and 2 of E.O. No. 301 under subdivision A
(Decentralization of Negotiated Contracts) read in full as
follows:
SECTION 1. Guidelines for Negotiated Contracts.—Any provision

a. Whenever the supplies are urgently needed to meet an

emergency which may involve the loss of, or danger to,
life and/or property;
b. Whenever the supplies are to be used in connection with a
project or activity which cannot be delayed without
causing detriment to the public service;
c. Whenever the materials are sold by an exclusive
distributor or manufacturer who does not have subdealers
selling at lower prices and for which no suitable
substitute can be obtained elsewhere at more
advantageous terms to the government;
d. Whenever the supplies under procurement have been
unsuccessfully placed on bid for at least two consecutive
times, either due to lack of bidders or the offers received
in each instance were exorbitant or non-conforming to
specifications;
e. In cases where it is apparent that the requisition of the
needed supplies through negotiated purchase is most
advantageous to the government to be determined by the
Department Head concerned; and
f. Whenever the purchase is made from an agency of the
government.
SEC. 2. Jurisdiction over Negotiated Contracts.—In line with

the principles of decentralization and accountability, negotiated
contracts for public services or for furnishing supplies, materials
or equipment may be entered into by the department or agency
head or the governing board of the government-owned or
controlled corporation concerned, without need of prior approval
by higher authorities, subject to availability of funds, compliance
with the standards or guidelines
633
VOL. 246, JULY 17, 1995 633

prescribed in Section 1 hereof, and to the audit jurisdiction of the
Commission on Audit in accordance with existing rules and
regulations.
Negotiated contracts involving P2,000,000 up to P10,000,000
shall be signed by the Secretary and two other Undersecretaries.
It is clear that Sections 1 and 2 refer to contracts for public

services, or for furnishing supplies, materials, and
equipment to the government. In no uncertain terms, the
Executive Order itself distinguishes the terms supplies,
materials, and equipment from each other, i.e., it did not
intend to consider them as synonymous terms. If such
were the intention, there would have been no need to
enumerate them separately and to limit subparagraphs
(a), (b), and (e) to supplies; subparagraph (c) to materials;
and subparagraph (f) to all three (supplies, materials and
equipment). The specific mention of supplies in
subparagraphs (a), (b), and (e) was clearly intended to
exclude therefrom materials and equipment, and the
specific mention of materials in subparagraph (c) was
likewise intended to exclude supplies and equipment.
Expressio unius est exclusio alterius .
Elsewise stated, the Executive Order leaves no room for
a construction that confuses supplies with materials or
equipment or either of the last two 29with the first or with
each other. According to Sutherland:
It is an elementary rule of construction that effect must be given,

if possible, to every word, clause and sentence of a statute. A
statute should be construed so that effect is given to all its
provisions, so that no part will be inoperative or superfluous, void
or insignificant, and so that one section will not destroy another
unless the provision is the result of obvious mistake or error.
In a last-ditch effort to save the ELA, the DOJ opined that

the subject ELA could be deemed as an agreement for
furnishing supplies and, in support thereof, 30cited United
States Rubber Co. vs. Washington Eng’g. Co. wherein it
was allegedly held that in
_______________
29 FRANK E. HORACK, JR., Statutes and Statutory Construction by
J.G. Sutherland, vol. 2 [1943 ed.] 339.
30 86 Wash 180, 149 Pac. 706.
634

a lease of equipment, the rental value of machinery hired

by the contractor for use in carrying on work was the use
of the machinery and not the machinery itself. The DOJ
opinion is outlandish, as the case it cited did not make the
attributed pronouncement. It must have miscomprehended
or misappreciated the ruling in United States Rubber Co..
The said pronouncement 31
is found in Hurley-Mason Co. vs.
American Bonding Co., which was cited by the appellant
in the United States Rubber Co. case, and which the court
did not, in fact, accept. Thus, the court stated:
But the appellant cites as supporting its contention the case of

Hurley-Mason Co. v. American Bonding Co., 79 Wash. 564, 140
Pac. 575, to which may be added the more recent case of National
Lumber & Box Co. v. Title Guaranty & Surety Co., 149 Pac. 16,
which hold that the rental value of machinery hired by the
contractor for use in carrying on work within the terms of the
contract is recoverable from the bondsman as a supply furnished
the contractor. These cases proceed on the theory that it was the
use of the machinery that was consumed in the work, not the
machinery itself, and that this use being distinguishable from the
machinery could be recovered for against the bondsman as a
supply. If this distinction is sound, then the cases are in line with
the other cases cited, as such “use” was necessarily consumed in
carrying on the work. The appellant argues, however, that the
distinction is not sound; that there is no just ground for holding
that one who rents to a contractor the tools and working
appliances necessary for the prosecution of a particular work may
have recovery against the contractor’s bondsmen for the rental
value of the articles furnished, while one who sells the contractor
the same character of articles on credit has no claim against the
bondsmen for any part of the purchase price. But, if this be true,
and it be true that the contractor’s working equipment is not to
be deemed a supply, it argues that the decisions cited are
erroneous, rather than that the appellant’s goods fall within the
meaning of the term “supplies.”
On the contrary, United States Rubber Co. explicitly

distinguished supplies from equipment, thus:
So construing the statute, the definitions of “equipment” and

“supply” coincide, and a certain and natural dividing line is found
between them.
_______________
31 79 Wash. 564, 140 Pac. 575.
635
VOL. 246, JULY 17, 1995 635

A “supply” would be any article furnished for carrying on the

work which from its nature is necessarily consumed by use in the
work, while “equipment” would consist of those articles that are
not necessarily so consumed, but which may survive the
particular work and be further used on work of like character. In
this view also the question actually decided in the case of
National Surety Co. v. Bratnober Lumber Co. harmonizes with
the other cases cited, since coal, like powder and other explosives,
and like electricity used for power and other forms of energy used
for the same purpose, is necessarily consumed by its use, and
cannot survive for like uses in a similar character of work.
Tested by these rules, it is plain that the articles furnished by
the appellant are not supplies, but are a part of the contractor’s
equipment. While they were actually worn out by use in carrying
on the work, they were not articles of such a nature as to be
necessarily consumed by such use, and might have survived, had
their use therein been of less duration, for use in subsequent
work of like character.
Besides, subparagraph (e) of Section 1 unequivocally refers

to a contract of purchase of supplies. The ELA in question
is not a contract of purchase of supplies. The parties
themselves proclaim to the whole world and solemnly
represent to this Court that it is acontract of lease of
equipment. They titled it, in bold big letters,
“EQUIPMENT LEASE AGREEMENT,” and devote the
first clause thereof to EQUIPMENT. Accordingly, since the
ELA is not a contract of purchase of supplies, we are
unable to understand why the DOJ applied Section 1(e) of
E.O. No. 301 to exempt the ELA from the public-bidding
requirement.
The submission of the petitioners that the ELA violates
paragraph 4.3 of the COA Rules and Regulations for the
Prevention of Irregular, Unnecessary, Excessive, and
Extravagant Expenditures is not persuasive. The said
paragraph covers Lease Purchase contracts. It reads:
4.3 LEASE PURCHASE
The national government may enter into agreement for the lease
purchase of equipment subject to public bidding, the approval of
the Office of the Management, and to other pertinent accounting
and auditing religions. Details of the payments shall be indicated
in the lease purchase agreement and accompanied with a
certification of availability of equipment outlay authorized for the
agency to cover the full contract cost. The lease purchase
agreement may be entered into
636

only for specialized equipment such as typewriters, adding

machines and automobiles, the purchase price of which is at least
P50,000.00. All lease purchase agreement of equipment the total
value of which exceeds P200,000.00 shall be subject to the
approval of the President. Corporation/local governments may
adopt the mechanisms of these lease-purchase agreement subject
to the approval of their legislative or governing boards.
The ELA in question hardly qualifies as a lease purchase

contract because there is no perfected agreement to
purchase (sale) but only an option on the part of PCSO to
purchase the equipment for P25 million. It is, in fact, an
option which is not supported by a separate and distinct
consideration, hence, not really binding upon the PGMC.
An optional contract is a privilege existing in one
person, for which he had paid a consideration, which gives
him the right to buy certain specified property from
another person, if he chooses, at any time within the
agreed period, at a fixed price. Said contract is separate
and distinct contract from the contract which the parties
32
may enter into upon the consummation of the option. The
second paragraph of Article 1479 of the Civil Code
expressly provides that “[a]n accepted unilateral promise
to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by
a consideration distinct from the price.”
C. A comparison between the nullified contract and the
assailed ELA to prove that the latter is grossly
disadvantageous to the PCSO is not at all hampered by
any perceived difficulty. As to the almost unrestricted
benefits and advantages which the PCSO were supposed to
obtain under the former, the following findings of this
Court in the first lotto case bind the parties:
The contemporaneous acts of the PCSO and the PGMC reveal

that the PCSO had neither funds of its own nor the expertise to
operate and manage an on-line lottery system, and that although
it wished to have the system, it would have it “at no expense or
risks to the government.” Because of these serious constraints
and unwillingness to bear expenses and assume risks, the PCSO
was candid enough to
_______________
32 Enriquez de la Cavada vs. Diaz, 37 Phil. 982 [1918].
637
VOL. 246, JULY 17, 1995 637

state in its RFP that it is seeking for “a suitable contractor which

shall build, at its own expense, all the facilities needed to operate
and maintain” the system; exclusively bear “all capital, operating
expenses and expansion expenses and risks;” and submit “a
comprehensive nationwide lottery development plan . . . which
will include the game, the marketing of the games, and the
logistics to introduce the game to all the cities and municipalities
of the country within five (5) years;” and that the operation of the
on-line lottery system should be “at no expense or risk to the
government”—meaning itself, since it is a government-owned and
controlled agency. The facilities referred to means “all capital
equipment, computers, terminals, software, nationwide
telecommunications network, ticket sales offices, furnishings and
fixtures, printing costs, costs of salaries and wages, advertising
and promotions expenses, maintenance costs, expansion and
replacement costs, security and insurance, and all other related
expenses needed to operate a nationwide on-line lottery system.”
In short, the only contribution the PCSO would have is its
franchise or authority to operate the on-line lottery system; with
the rest, including the risks of the business, being borne by the
proponent or bidder. It could be for this reason that it warned
that “the proponent must be able to stand to the acid test of
proving that it is an entity able to take on the role of responsible
maintainer of the on-line lottery system.” The PCSO, however,
makes it clear in its RFP that the proponent can propose a period
of the contract which shall not exceed fifteen years, during which
time it is assured of a “rental” which shall not exceed 12% of
gross receipts. As admitted by the PGMC, upon learning of the
PCSO’s decision, the Berjaya Group Berhad, with its affiliates,
wanted to offer its services and resources to the PCSO.
Forthwith, it organized the PGMC as “a medium through which
the technical and management services required for the project
would be offered and delivered to PCSO.”
Undoubtedly, then, the Berjaya Group Berhad knew all along
that in connection with an on-line lottery system, the PCSO had
nothing but its franchise, which it solemnly guaranteed it had in
the General Information of the RFP. Howsoever viewed then,
from the very inception, the PCSO and the PGMC mutually
understood that any arrangement between them would
necessarily leave to the PGMC the technical, operations, and
management aspects of the on-line lottery system while the
PCSO would, primarily, provide the franchise. The words
Gaming and Management in the corporate name of respondent
Philippine Gaming Management Corporation could not have been
conceived just for euphemistic purposes. Of course, the RFP
cannot substitute for the Contract of Lease which was
subsequently executed by the PCSO and the PGMC.
Nevertheless, the Contract of Lease
638

incorporates their intention and understanding.

xxx
Consistent with the above observations on the RFP, the PCSO
has only its franchise to offer, while the PGMC represents and
warrants that it has access to all managerial and technical
expertise to promptly and effectively carry out the terms of the
contract. And, for the period of eight years, the PGMC is under
obligation to keep all the Facilities in safe condition and if
necessary, upgrade, replace, and improve them from time to time
as new technology develops to make the on-line lottery system
more cost-effective and competitive; exclusively bear all costs and
expenses relating to the printing, manpower, salaries and wages,
advertising and promotion, maintenance, expansion and
replacement, security and insurance, and all other related
expenses needed to operate the on-line lottery system; undertake
a positive advertising and promotions campaign for both
institutional and product lines without engaging in negative
advertising against other lessors; bear the salaries and related
costs of skilled and qualified personnel for administrative and
technical operations; comply with procedural and coordinating
rules issued by the PCSO; and to train PCSO and other local
personnel and to effect the transfer of technology and other
expertise, such that at the end of the term of the contract, the
PCSO will be able to effectively take over the Facilities and
efficiently operate the on-line lottery system. The latter simply
means that, indeed, the managers, technicians or employees who
shall operate the on-line lottery system are not managers,
technicians or employees of the PCSO, but of the PGMC and that
it is only after the expiration of the contract that the PCSO will
operate the system. After eight years, the PCSO would
automatically become the owner of the Facilities without any
other further consideration.
For all the above representations, duties, obligations and
responsibilities, as well as the automatic loss of its
ownership over the facilities without any further
consideration in favor of the PCSO after the expiration of
only eight years, the PGMC gets only a so-called rental of
4.9% of gross receipts from ticket sales, payable net of
taxes required by law to be withheld, which may, however,
be drastically reduced, or in extreme cases, totally
obliterated because the PGMC bears “all risks if the
revenue from ticket sales, on an annualized basis, are
insufficient to pay the entire prize money.”
Under the assailed ELA, however, the PGMC is entitled
to receive a flexible rental equivalent to 4.3% of the gross
ticket sales (or only 0.6% lower than it was entitled to
under the old
639
VOL. 246, JULY 17, 1995 639

contract) for the use of its on-line lottery system equipment

(as distinguished from facilities in the old contract), which
does not anymore include the nationwide
telecommunications network, without any assumption of
business risks and the obligations (1) to keep the facilities
in safe condition and if necessary, to upgrade, replace, and
improve them from time to time as technology develops,
and bear all expenses relating thereto; (2) to undertake
advertising and promotions campaign; (3) to bear all taxes,
amusements, or other charges imposed on the activities
covered by the contract; (4) to pay the premiums for third
party or comprehensive insurance on the facilities: (5) to
pay all expenses for water, light, fuel, lubricants, electric
power, gas, and other utilities used and necessary for the
operation of the facilities; and to pay the salaries and
related costs of skilled and qualified personnel for
administrative and technical operations and maintenance
crew. The PGMC is also given thereunder a special
privilege of receiving P25 million as purchase price for the
equipment at the expiration of eight years should the
PCSO exercise its option to purchase.
Unlike in the old contract where nothing may at all be
due the PGMC in the event that the ticket sales, computed
on an annual basis, are insufficient to pay the entire prize
money, under the new ELA the PCSO is under obligation
to pay rental equivalent to 4.3% of the gross receipts from
ticket sales, the aggregate amount of which per year
should not be less than the minimum annual rental of
35,000.00 per terminal in commercial operation. Any
shortfall shall be paid out of the proceeds of the then
current ticket sales after payment of prizes and agents’
commissions but prior to any other payments, allocations,
or disbursements. The grossness of the disadvantage to the
PCSO is all too obvious, and why the PCSO accepted such
unreasonable, unconscionable, and inequitable terms and
conditions confounds us.
The majority opinion, however, glosses over these
considerations because it believes that the determination
of the issue of gross disadvantage should not be done
through a comparison of the first lotto contract and the
ELA in question. It says:
Indeed the question is not whether compared with the former

joint venture agreement the present lease contract is “[more]
advantageous to the government.” The question is whether under
the circum-
640

stances, the ELA is the most advantageous contract that could be

obtained compared with similar lease agreements which the
PCSO could have made with the other parties.
It then concludes:
Petitioners have not shown that more favorable terms could have
been obtained by the PCSO or that at any rate the ELA, which
the PCSO concluded with the PGMC, is disadvantageous to the
government.
That postulation is flawed. It forgets that no other contract
proposed by other parties were available for comparison
precisely because no public bidding was conducted. To
demand a comparison with non-existing contracts would
be unreasonable.
The challenged ELA must then be declared void for the
follow-ing reasons: (1) it is a joint venture contract
prohibited under the exception in paragraph B, Section 1
of R.A. No. 1169, as amended by B.P. Blg. 42; (2) it was
entered into without the mandatory public bidding; and (3)
it is grossly disadvantageous to the PCSO and, ultimately,
the Government.
I therefore vote to GRANT the instant petition and to
declare VOID and INVALID the challenged EQUIPMENT
LEASE AGREEMENT (ELA) entered into between the
public respondent Philippine Charity Sweepstakes Office
(PCSO) and the private respondent Philippine Gaming
Management Corporation (PGMC).
SEPARATE CONCURRING OPINION
VITUG, J.:
I most humbly reiterate the separate opinion I have made

in Kilosbayan, Inc., et al. vs. Teofisto Guingona, Sr., etc., et
al. (G.R. No. 113375, promulgated on 05 May 1994).
Before a peremptory voting could be taken by the Court
on the main merits of the instant case (G.R. No. 118910),
the ultimate outcome of its deliberations thereon, then still
in progress, remained uncertain. In the meanwhile , it
behooved, in my view, all concerned to be bound by, or at
the very least to respect, the decision in G.R. No. 113375.
It was clear to me that until G.R. No.
641
VOL. 246, JULY 17, 1995 641

118910 would have itself been finally resolved, the
petitioners were entitled to a temporary restraining order
on the basis of the decision in G.R. No. 113375 (and thus I
then voted accordingly). The new contract entered into
(now in dispute in G.R. No. 118910), compared with the
previous contract nullified in G.R. No. 113375, just as I
also saw it then, was not substantially different from, let
alone significantly better than, the nullified contract.
Back to the core of the petition, however, the matter of
the legal standing of petitioners in their suit assailing the
subject-contract appears to me, both under substantive law
and the rules of procedure, to still be an insuperable issue.
I have gone over carefully the pleadings submitted in G.R.
No. 118910, and I regret my inability to see anything new
that can convince me to depart from the view I have
expressed on it in G.R. No. 113375.
In part, I also said in G.R. No. 113375: A provision
which has been introduced by the 1987 Constitution is a
definition, for the first time in our fundamental law, of the
term “judicial power,” as such authority and duty of courts
of justice “to settle actual controversies involving rights
which are legally demandable and enforceable and to
determine whether or not there has been a grave abuse of
discretion, amounting to lack or excess of jurisdiction, on
the part of any branch or instrumentality of the
Government” (Article VIII, Section 1, Constitution). I take
it that the provision has not been intended to unduly
mutate, let alone to disregard, the long established rules
on locus standi. Neither has it been meant, I most
respectfully submit, to do away with the principle of
separation of powers and its essential incidents such as by,
in effect, conferring omnipotence on, or allowing an
intrusion by, the courts in respect to purely political
decisions, the exercise of which is explicitly vested
elsewhere, and subordinate to that of their own the will of
either the Legislative Department or the Executive
Department—both co-equal, independent and coordinate
branches, along with the Judiciary, in our system of
government. Again, if it were otherwise, there indeed
would be truth to the charge, in the words of some
constitutionalists, that “judicial tyranny” has been
institutionalized by the 1987 Constitution, an
apprehension which should, I submit, rather be held far
from truth and reality.
642

In the Commencement Address I delivered to the 1995

graduating class of the San Beda College of Law, I
broached a matter which I felt was of contemporary
concern. Allow me to quote from it:
“x x x The relatively recent event in our history, still too vivid to

be lost, had given root to a discernible change in our fundamental
law. Reacting to the lessons we, in the recent past, have learned,
well meant safeguards have been installed. One such measure is
in strengthening the judiciary, unquestionably in order to check
on further abuses of power. Thus, the Supreme has been charged
with overseeing the entire judiciary by removing this function
from, heretofore traditionally with, the executive. It has also
given authority to the highest court of the land to literally strike
down any act of either Congress or the Executive for any grave
abuse of discretion. What has thus come about is a Supreme
Court that effectively wields almost absolute authority to dictate
matters of grave import to the country—in politics, in business
and in veritably all major decisions of the State. The Supreme
Court is manned by fifteen justices, presumably all learned in
law, but can it safely be said that beyond the usual spheres of
their judicial expertise, they so also have the capability to react
to all needs of government. The tribunal’s power is awesome. It
may be apropos to ask. Can the Court adequately respond at
every turn with full fidelity and competence? If you would have
had the time to follow up recent pronouncements of the Court,
you might have noticed that on certain occasions I have dissented
from what I have felt and still feel to be an unwise encroachment
of functions that are better left to the judgment of others who are
no less experts in their respective fields than we in law. Congress
is the branch of government, composed of the representatives of
the people, that lays down the policies of government and the
Executive that carries out the people’s mandate. I have found it
most difficult in voting with my colleagues whenever such
policies are negated merely because of what the Court perceives
to be grave abuse of discretion, clearly too relative a term to
permit it to be its own sentinel against misuse.”
WHEREFORE, for the same reasons I have stated in G.R.

No. 113375, I respectfully vote for the dismissal of the
instant petition.
Petition dismissed.
Notes—The doctrine of separation of powers calls for

the other departments being left alone to discharge their
duties as
643
VOL. 246, JULY 17, 1995 643

Cansino vs. Director of the New Bilibid Prison
they see fit. The legislative and executive branches are not
bound to seek the Court’s advice as to what to do or not to
do. (Tan vs. Macapagal, 43 SCRA 677 [1972])
The duty of the Supreme Court to exercise its power of
judicial review must still be performed in the context of a
concrete case or controversy. (Tolentino vs. Secretary of
Finance, 235 SCRA 630 [1994])
——o0o——
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540 SUPREME COURT REPORTS ANNOTATED

Kilosbayan, Incorporated vs. Morato

KILOSBAYAN, INCORPORATED, JOVITO R.

Constitutional Law; Taxpayer’s Suits; Locus Standi; Actions;

VOL. 246, JULY 17, 1995 541

Kilosbayan, Incorporated vs. Morato

Same; Same; Same; Same; Same; Same; Same; There is an

542 SUPREME COURT REPORTS ANNOTATED

Kilosbayan, Incorporated vs. Morato

The first judgment is generally, if not universally, not final. It

VOL. 246, JULY 17, 1995 543

Kilosbayan, Incorporated vs. Morato

the Rules of Court which requires that “Every action must be

544 SUPREME COURT REPORTS ANNOTATED

Kilosbayan, Incorporated vs. Morato

VOL. 246, JULY 17, 1995 545

Kilosbayan, Incorporated vs. Morato

Philippine Charity Sweepstakes Office; Contracts; Lease;

Kilosbayan, Incorporated vs. Morato

this is defined in Civil law, may call for some form of

VOL. 246, JULY 17, 1995 547

Kilosbayan, Incorporated vs. Morato

548 SUPREME COURT REPORTS ANNOTATED

Kilosbayan, Incorporated vs. Morato

Same; Same; Same; Same; The construction given to §1 in the

Constitutional Law; Actions; Parties; Locus Standi; The

VOL. 246, JULY 17, 1995 549

Kilosbayan, Incorporated vs. Morato

Statutory Construction; The view expressed by an individual

550 SUPREME COURT REPORTS ANNOTATED

Kilosbayan, Incorporated vs. Morato

enough, as a general proposition, for it is the intent of the

VOL. 246, JULY 17, 1995 551

Kilosbayan, Incorporated vs. Morato

equipment and assets. The rental payable is not, in other words,

552 SUPREME COURT REPORTS ANNOTATED

Kilosbayan, Incorporated vs. Morato

nonetheless refuses to concede, that the concept of a cause of

DAVIDE, JR., J.,Dissenting:

Actions; Res Judicata; Law of the Case; Stare Decisis;

VOL. 246, JULY 17, 1995 553

Kilosbayan, Incorporated vs. Morato

Moreover, that application or interpretation has been laid to rest

554 SUPREME COURT REPORTS ANNOTATED

Kilosbayan, Incorporated vs. Morato

a different claim or cause of action.

VITUG, J., Concurring Opinion:

Constitutional Law; Judicial Power; Separation of Powers;

VOL. 246, JULY 17, 1995 555

Kilosbayan, Incorporated vs. Morato

to unduly mutate, let alone to disregard, the long established rules

PETITION for prohibition, review and/or Injunction in the

The facts are stated in the opinion of the Court.

As a result of our decision in G.R. No. 113375 (Kilosbayan,

556 SUPREME COURT REPORTS ANNOTATED

1. THE AMENDED ELA IS NULL AND VOID SINCE IT IS

VOL. 246, JULY 17, 1995 557

3. THE AMENDED EQUIPMENT LEASE AGREEMENT

The PCSO and PGMC filed separate comments in which

The Kilosbayan, Inc. is an organization described in its

558 SUPREME COURT REPORTS ANNOTATED

and national renewal.” Its trustees are also suing in their

VOL. 246, JULY 17, 1995 559