Kilosbayan v. Morato, G.R. NO. 118910.

July 30, 1993

Facts:

1. GR 113375 (KIlosbayan vs. Guingona) held invalidity of the contract between

Philippine Charity Sweepstakes Office (PCSO) and the privately owned Philippine
Gaming Management Corporation (PGMC) for the operation of a nationwide on-line
lottery system. The contract violated the provision in the PCSO Charter which
prohibits PCSO from holding and conducting lotteries through a collaboration,
association, or joint venture.

2. Both parties again signed an Equipment Lease Agreement (ELA) for online lottery
equipment and accessories on January 25, 1995. The agreement are as follow:
- Rental is 4.3% of gross amount of ticket sales by PCSO at which in no case be
less than an annual rental computed at P35,000 per terminal in commercial
operation.
- Rent is computed bi-weekly.
- Term is 8 years.
- PCSO is to employ its own personnel and responsible for the facilities.
- Upon expiration of term, PCSO can purchase the equipment at P25M.

3. Kilosbayan again filed a petition to declare amended ELA invalid because:

- It is the same as the old contract of lease.
5. It is still violative of PCSO’s charter.
6. It is violative of the law regarding public bidding. It has not been approved by the
President and it is not most advantageous to the government.
3. PCSO and PGMC filed separate comments
0. ELA is a different lease contract with none of the vestiges in the prior contract.
1. ELA is not subject to public bidding because it fell in the exception provided in EO
No. 301.
 2. Power to determine if ELA is advantageous vests in the Board of Directors of
PCSO.
3. Lack of funds. PCSO cannot purchase its own online lottery equipment.
4. Petitioners seek to further their moral crusade.
5. Petitioners do not have a legal standing because they were not parties to the
contract.

Issue/s:

1. Whether or not petitioner Kilosbayan, Incorporated has a legal standing to sue.

2. Whether or not the ELA between PCSO and PGMC in operating an online lottery is
valid.

Ruling:

In the resolution of the case, the Court held that:

1. Petitioners do not have a legal standing to sue.

1. STARE DECISIS cannot apply. The previous ruling sustaining the standing of the
petitioners is a departure from the settled rulings on real parties in interest because
no constitutional issues were actually involved.

2. LAW OF THE CASE (opinion delivered on a former appeal) cannot also apply.
Since the present case is not the same one litigated by the parties before in
Kilosbayan vs. Guingona, Jr., the ruling cannot be in any sense be regarded as
“the law of this case”. The parties are the same but the cases are not.

3. RULE ON “CONCLUSIVENESS OF JUDGMENT” cannot still apply. An issue

actually and directly passed upon and determine in a former suit cannot again be
drawn in question in any future action between the same parties involving a
 different cause of action. But the rule does not apply to issues of law at least when
substantially unrelated claims are involved. When the second proceeding involves
an instrument or transaction identical with, but in a form separable from the one
dealt with in the first proceeding, the Court is free in the second proceeding to
make an independent examination of the legal matters at issue.

4. Since ELA is a different contract, the previous decision does not preclude
determination of the petitioner’s standing.

5. Standing is a concept in constitutional law and here no constitutional question is

actually involved. The more appropriate issue is whether the petitioners are ‘real
parties of interest’.

6. Question of contract of law: The real parties are those who are parties to the
agreement or are bound either principally 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.

7. Petitioners do not have such present substantial interest. Questions to the nature
or validity of public contracts maybe made before COA or before the Ombudsman.

2. Equipment Lease Agreement (ELA) is valid.

1. It is different with the prior lease agreement: PCSO now bears all losses because
the operation of the system is completely in its hands.

2. Fixing the rental rate to a minimum is a matter of business judgment and the Court
is not inclined to review.

3. Rental rate is within the 15% net receipts fixed by law as a maximum. (4.3% of
gross receipt is discussed in the dissenting opinion of Feliciano, J.)
 4. In the contract, it stated that the parties can change their agreement. Petitioners
state that this would allow PGMC to control and operate the on-line lottery system.
The Court held that the claim is speculative. In any case, in the construction of
statutes, the resumption 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.

5. It was held in Kilosbayan Vs. Guingona that 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 activities. This only
mentions that PCSO is prohibited from investing in any activities that would
compete in their own activities.

6. It is claimed that ELA is a joint venture agreement which does not compete with
their own activities. The Court held that is also based on speculation. Evidence is
needed to show that the transfer of technology would involve the PCSO and its
personnel in prohibited association with the PGMC.

7. O. 301 (on law of public bidding) applies only to contracts for the purchase of
supplies, materials and equipment and not on the contracts of lease. Public
bidding for leases are only for privately-owned buildings or spaces for government
use or of government owned buildings or spaces for private use.

Petitioners have no standing. ELA is a valid lease contract. The motion for reconsideration
of petitioners is DENIED with finality.