Kilosbayan vs Morato

Legal Standing

KILOSBAYAN VS. MORATO

G.R. NO. 118910. July 30, 1993

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.

Facts:
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.

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.

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

It is the same as the old contract of lease.

It is still violative of PCSO’s charter.

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.

PCSO and PGMC filed separate comments

ELA is a different lease contract with none of the vestiges in the prior contract.

ELA is not subject to public bidding because it fell in the exception provided in EO
No. 301.

Power to determine if ELA is advantageous vests in the Board of Directors of PCSO.

Lack of funds. PCSO cannot purchase its own online lottery equipment.

Petitioners seek to further their moral crusade.

Petitioners do not have a legal standing because they were not parties to the contract.
Issues:

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

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

Rulings:

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

Petitioners do not have a legal standing to sue.

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.

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.

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.

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

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’.

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.

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.

Equipment Lease Agreement (ELA) is valid.

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

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

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.)

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.

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.

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.
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.