126990-1995-Kilosbayan Inc. v. Morato

EN BANC
[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, REFAEL 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 O ce, and the PHILIPPINE GAMING
MANAGEMENT CORPORATION , respondents.
Jovito R. Salonga, Fernando Santiago and Emilio C . Capulong, Jr., for the
petitioners.
Renato L. Cayetano, Eleazar Reyes for private respondent PGMC.
The Solicitor General for public respondent.
SYLLABUS
1. REMEDIAL LAW; ACTIONS; "LAW OF THE CASE"; DOCTRINE APPLICABLE

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.
2. ID.; ID.; ID.; DEFINITION. — "Law of the case" has been de ned as the
opinion delivered on a former appeal. More speci cally, 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.
3. ID.; ID.; "LAW OF THE CASE" DIFFERENTIATED FROM RES JUDICATA. — 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 rst judgment is not dependent upon its nality. The rst judgment is generally, if
not universally, not nal. It relates entirely to questions of law, and is con ned in its
operation to subsequent proceedings in the same case." ( Municipality of Daet v. Court
of Appeals, 93 SCRA 503, 521 [1979])
4. ID.; ID.; "LAW OF THE CASE"; DOCTRINE WILL NOT APPLY WHERE THE
PARTIES ARE THE SAME BUT THE CASES ARE DIFFERENT. — 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.
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5. ID.; ID.; RULE ON CONCLUSIVENESS OF JUDGMENT OR PRECLUSION OF
ISSUES; DOCTRINE CONSTRUED. — 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])
6. ID.; ID.; ID.; DOCTRINE DOES NOT APPLY TO ISSUES OF LAW. — 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])
7. ID.; ID.; ID.; ID. — This exception to the General Rule of Issue Preclusion is
authoritatively formulated in Restatement of the Law 2d, on Judgments, as follows:
Sec. 28. Although an issue is actually litigated and determined by a valid and nal
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.
8. ID.; ID.; ID.; ID.; QUESTION WHETHER PETITIONERS HAVE STANDING TO
QUESTION THE EQUIPMENT LEASE AGREEMENT (ELA), A LEGAL QUESTION. — 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.
9. ID.; ID.; RULE ON STANDING AND REAL PARTY-IN-INTEREST,
DIFFERENTIATED. — 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 o cial 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 di cult constitutional questions."
(Baker v. Carr , 369 U.S. 7 L. Ed. 2d 633 [1962]) On the other hand, the question as to
"real party-in-interest" is whether he is "the party who would be bene ted or injured by
the judgment, or the 'party entitled to the avails of the suit.'" ( Salonga v. Warner Barnes
& Co., Ltd., 88 Phil 125, 131 [1951])
10. ID.; ID.; REAL PARTIES-IN-INTEREST IN ANNULMENT OF CONTRACTS
ARE PARTIES TO THE AGREEMENT. — 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])
11. ID.; ID.. ID.; PARTIES WITH PRESENT SUBSTANTIAL INTEREST;
"PRESENT SUBSTANTIAL INTEREST," CONSTRUED. — 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 action as will entitle
him, under the substantive law, to recover if the evidence is su cient, 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])
12. ID.; ID.; ID.; PARTIES WITHOUT PRESENT SUBSTANTIAL INTEREST IN
THE EQUIPMENT LEASE AGREEMENT, NOT ENTITLED TO BRING SUIT FOR
ANNULMENT; CASE AT BAR. — 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 led in any form or manner against public o cials 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, Sec. 2 [a] [d] For reasons set for,
we hold that petitioner have no cause against respondents and therefore their petition
should be dismissed.
13. CIVIL LAW; OBLIGATIONS AND CONTRACTS; EQUIPMENT LEASE
AGREEMENT, A LEASE CONTRACT. — The 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. 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. 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, Sec. 6[C]) as "operating expenses" and the allotment for "operating expenses" is a
percentage of the net receipts. 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 nd 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
t." ( 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 O ce to raise funds for charity, Congress
authorized the Philippine Charity Sweepstakes O ce (PCSO) to hold or conduct
lotteries under certain conditions.
14. REMEDIAL LAW; COURTS; WILL GENERALLY NOT INTERFERE WITH
MATTERS OF BUSINESS JUDGMENT. — 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 xed 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.
15. ID.; EVIDENCE; PRESUMPTIONS; GOVERNMENT IS PRESUMED TO HAVE
ACTED IN GOOD FAITH IN TAKING CONTRACTS; CASE AT BAR. — By virtue of the
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 and holding of the on-line
lottery system," considering that as found in the rst 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.
16. CIVIL LAW; OBLIGATIONS AND CONTRACTS; LEASE CONTRACTS,
DEFINED. — A contract of lease, as this is de ned 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]).
17. ADMINISTRATIVE LAW; PHILIPPINE CHARITY SWEEPSTAKES OFFICE
(RA 1169); NOT PROHIBITED FROM HOLDING OR CONDUCTING LOTTERY "IN
COLLABORATION, ASSOCIATION OR JOINT VENTURE" WITH ANOTHER PARTY;
PROHIBITION REFERS TO INVESTMENT IN BUSINESS ENGAGED IN LOTTERIES AND
SIMILAR ACTIVITIES. — 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. 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 entity" in any "health
and welfare-related investments, programs, projects and activities which may be pro t
oriented," except "the activities mentioned in the preceding paragraph (A)," i.e.,
sweepstakes races, lotteries and similar activities. The PCSO is prohibited from
investing 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 pro t in order to enable it to expand its health
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 undertaken 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 authorize 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.
18. ID.; ID.; MAY ENTER INTO EQUIPMENT LEASE CONTRACT WITHOUT
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. E.O. No. 301, Sec. 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 Secs. 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. It is thus di cult 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 opinion:
1. REMEDIAL LAW; SUPREME COURT; DUTY TO APPLY THE LAW

IRRESPECTIVE OF PERSONAL CONVICTION OF MEMBER. — 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.
2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; LEASE, DEFINED. — 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 de nite or inde nite
(Article 1643, Civil Code).
3. ID.; ID.; ID.; LESSOR OF EQUIPMENT, FREE TO DEMAND AMOUNT OF
RENTALS. — 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 exible 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.
4. ADMINISTRATIVE LAW; PHILIPPINE CHARITY SWEEPSTAKES OFFICE;
EQUIPMENT LEASE AGREEMENT (ELA), A STRAIGHT LEASE EQUIPMENT. —
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 costwise considering the
capital equipment 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' argument 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.
5. REMEDIAL LAW; SUPREME COURT; SHOULD NOT PREEMPT JUDGMENT
OF COMMISSION ON AUDIT (COA) ON MATTERS WITHIN ITS JURISDICTION; ISSUE ON
NECESSITY OF PUBLIC BIDDING IN ELA, WITHIN COA'S JURISDICTION. — 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.
6. POLITICAL LAW; ISSUE AS TO WHETHER ELA IS GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT, A POLITICAL QUESTION. — 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 opinion:

PROHIBITION AGAINST HOLDING OR CONDUCTING LOTTERY IN COLLABORATION,
ASSOCIATION OR JOINT VENTURE WITH ANOTHER PARTY; VIEW EXPRESSED BY THE
INDIVIDUAL LEGISLATOR WHO CRAFTED QUESTIONED PROVISION SHOULD AT LEAST
BE ENTITLED TO A STRONG PRESUMPTION OF CORRECTNESS. — I turn rst 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 rst 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 "collect" 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 rst Kilosbayan case faithfully re ected the intent of the
legislative body as a whole.
2. ID.; ID.; ID.; INTENT CLEARLY DISCERNIBLE IN WORDS USED BY
LEGISLATURE. — 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. 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 pro t-
oriented . . ." Rather, the PCSO has been authorized "to engage in health and welfare-
related investments, programs, projects and activities which may be profit-oriented.
3. ID.; ID.; ID.; CONSTRUED. — 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
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 speci ed 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 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) . . ." 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
original interpretation offered in the majority opinion.
4. ID.; ID.; EQUIPMENT LEASE AGREEMENT (ELA); PUBLIC BIDDING, A
NECESSARY PREREQUISITE; CASE AT BAR. — 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 rst of these is that Executive
Order No. 301, Section 1 refers to contracts of purchase and sale [ only]. 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 rst proposition nds no basis in the actual language used
in the operative paragraph of Section 1 of Executive Order No. 301 setting out the
general rule ". . . 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: . . . It is worthy of special note that the above opening paragraph does not
even use the words "purchase and sale" or "buy and sell"; the actual term used is
"furnishing . . . equipment to the government." The term "furnishing" can scarcely be
limited to sales to the government but must instead be held to embraced 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 common place
knowledge that equipment leases (especially " nancial 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. Thus the above rst proposition fails to take into account actual commercial
practice already re ected 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. 310 to disregard the actual language used in that
Order. For Executive Order No. 301 uses done (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 of the actual language of Executive Order No. 301. The
fundamental di culty 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.
5. ID.; ID.; JOINT VENTURE NOT CONVERTED INTO AN ORDINARY
EQUIPMENT LEASE AGREEMENT BY SIMPLE REARRANGEMENT OF WORDS AND
PARAGRAPHS. — I would address nally the question of whether or not the original
contract between PCSO and PGMC which the Court in the rst 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. It is suggested, with respect
that the burden of showing that the elements found by the Court in the rst Kilosbayan
case to constitute the prohibited "collaboration, association or joint venture" 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 re-arrangement 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.
6. ID.; ID.; ID.; RENTAL IS NOT EXPRESSED IN TERMS OF A FIXED AND
ABSOLUTE FIGURE. — I begin with the natare 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 xed at a speci ed 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 xed and absolute gure,
although a oor 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 or 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 xed 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. The assertion that the 4.3% rental rate is "well within the
maximum of 15% net receipt xed 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 gures
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 justi es the adoption of the rental provision found both in the old
contract and in the ELA giving PGMC a xed 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.
7. ID.; ID.; APPROPRIATE RECOURSE TO THE LEGISLATIVE AUTHORITY TO
VENTILATE LEGAL RESTRICTIONS ON ITS REVISED CHARTER. — 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.
REGALADO, J., dissenting opinion:
1. REMEDIAL LAW; ACTIONS; "LAW OF THE CASE" DOCTRINE; PURPOSE. —

Even in American law, the "law of the case" doctrine was essentially designed to
express the practice of courts generally to refuse to reopen what has been decided
and, thereby, to emphasize the rule that the nal judgment of the highest court is a nal
determination of the 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 judicataand conclusiveness of judgment.
2. ID.; ID.; ID.; MAY ARISE FROM AN ORIGINAL HOLDING OF A HIGHER
COURT ON A WRIT OF CERTIORARI. — 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. Furthermore, since in our jurisdiction an original action for
certiorari to control and set aside a grave abuse of o cial 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 rst 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.
3. ID.; ID.; ID.; ID.; WITH SAME BINDING EFFECT WITH THAT OF AN
APPEALED CASE. — What I wish to underscore is that where, as in the instant case, the
holding of this highest Court on a speci c 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.
4. ID.; ID.; CAUSE OF ACTION; CONCEPT THEREOF IN PUBLIC INTEREST
CASES SHOULD DIFFER FROM 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
nonetheless refuses to concede that the concept of a cause of action in public interest
cases should not be straitjacketed within its usual narrow con nes in private interest
litigations.
5. ID.; ID.; REAL PARTY-IN-INTEREST; NO DEFINED RULE FOR ITS
DETERMINATION. — There is no clearly de ned rule by which one may determine who is
or is not real party in interest, nor has there been found any concise de nition 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 in interest and yet not be the sole real party in interest.
6. ID.; ID.; ID.; ABSENCE OF REMEDIAL MEASURE, AVAILABLE TO PERSONS
NOT REAL PARTIES-IN-INTEREST IN QUESTIONING GOVERNMENT CONTRACTS. — 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. The legal dilemma or vacuum is supposedly remediable
under a suggestion submitted in the majority opinion. 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 le 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 persona or ex relatione, not only because one has to
contend with that o cial'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.
7. ID.; ID.; JUDGMENT; CHANGE OF MEMBERSHIP OF MEMBERS OF COURT,
NOT GROUND TO REEXAMINE RULING. — The majority believes that in view of the
retirement and replacement of two members of the Court, it is time to reexamine the
ruling in the rst 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.
8. ID.; ID.; "LAW OF THE CASE" DOCTRINE; ISSUE ON RIGHT OF PETITIONER
TO FILE AND MAINTAIN ACTION QUESTIONING LEGALITY OF GOVERNMENT
CONTRACTS, FORECLOSED BY COURT'S JUDGMENT IN FIRST LOTTO CASE. — I hold
the view that the matter of the right of petitioners to le 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 rst 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.
9. ID.; ID.; ID.; REMOVAL AND REPLACEMENT OF SOME OBJECTIONABLE
TERMS OF CONTRACT DOES NOT EXTINGUISH IDENTITY OF SUBJECT MATTER IN
BOTH CASES. — 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 nal and executory. There is, to be sure, an attempt to show that
the subject matter in the rst 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
same basis, with on the same property, for the same purpose, and through the same
contracting parties does not su ce 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 oated 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.
10. ID.; ID.; CONCLUSIVENESS OF JUDGMENT; ALL ISSUES FINALLY
ADJUDGED SHALL BE CONCLUSIVE BETWEEN PARTIES ON APPEAL; CASE AT BAR. —
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 O ce, 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 nally
adjudged in the prior judgment shall be conclusive between the parties in the case now
before us and that de nitely includes at the very least the adjudgment therein that
petitioners have the locus standi or the right to sue respondents on the contracts
concerned.
DAVIDE, JR., J., dissenting opinion:
1. REMEDIAL LAW; SUPREME COURT; SUDDEN REVERSAL OF RULING PUTS

TO JEOPARDY THE FAITH AND CONFIDENCE OF THE PEOPLE IN THE CERTAINTY AND
STABILITY OF THE PRONOUNCEMENTS OF THIS COURT. — I am disturbed by the
sudden reversal of our rulings in Kilosbayan, Inc., et al. vs. Guingona, et al. (hereinafter
referred to as the rst 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 O ce (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
con dence of the people, specially the lawyers and litigants, in the certainty and
stability of the pronouncements of this Court. It opens the oodgates to endless
litigations for reexamination 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.
CANNOT HOLD AND CONDUCT CHARITY SWEEPSTAKES RACES, LOTTERIES AND
OTHER SIMILAR ACTIVITIES IN COLLABORATION, ASSOCIATION OR JOINT VENTURE
WITH ANY OTHER PARTY. — In the rst 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 this [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."
3. REMEDIAL LAW; ACTIONS; UNDER THE PRINCIPLE OF EITHER THE LAW
OF THE CASE OR RES JUDICATA , THE PCSO AND PGMC ARE BOUND BY THE RULING
IN THE FIRST LOTTO CASE ON THE LOCUS STANDI OF THE PETITIONERS AND
INTERPRETATION OF THE EXCEPTION CLAUSE IN PARAGRAPH B, SECTION 1 OF R.A.
1169, AS AMENDED FOR FAILING TO MOVE FOR ITS RECONSIDERATION. — The PCSO
and the PGMC never challenged our application or interpretation of the exception
clause and our de nitions of the terms collaboration, association, and joint venture. On
the contrary, they unconditionally accepted the same by not asking for reconsideration
of our decision in the rst 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 rst 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."
4. ID.; ID.; LAW OF CASE; CONSTRUED. — 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 from changes in its members."
5. ID.; ID.; ID.; DOCTRINE APPLIES WHERE THE SECOND CASE IS BUT A
SEQUEL TO AND CONTINUATION OF THE FIRST LOTTO CASE. — 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 rst lotto case. By their conduct, the parties admitted that it is, for which reason the
PGMC and the PCSO submitted in the rst 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 nal does not detract from the fact that this case is but a
continuation of the rst 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.
6. ID.; ID.; CONCLUSIVENESS OF JUDGMENT; APPLICABLE TO CASE AT BAR
WHERE THE CONTRACT IN QUESTION IS NOT DIFFERENT FROM OR UNRELATED TO
THE FIRST NULLIFIED CONTRACT. — 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 rst 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 rst nulli ed 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 sufficient.
7. ID.; ID.; PRECLUSION OF ISSUES OR COLLATERAL ESTOPPEL; DOES NOT
APPLY TO CASE AT BAR WHERE ISSUE INVOLVED IS ONE OF LAW. — 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 rst 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 Law, 2d
Judgments S. 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.
8. ID.; ID.; DOCTRINE OF STARE DECISIS ; CONSTRUED; ABANDONMENT
THEREOF NOT WARRANTED IN CASE AT BAR. — 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
eshed 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." Abandonment thereof must
be based only on strong and compelling reasons — which I do not nd in this case —
otherwise, the becoming virtue of predictability which is expected from this Court
would be immeasurably affected and the public's con dence in the stability of its
solemn pronouncements diminished.
9. ID.; ID.; RES JUDICATA ; ASPECTS. — The doctrine of res judicata 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 a different claim or cause of
action.
10. ID.; ID.; ID.; CONSTRUED. — 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
rights and gives dignity and respect to judicial proceedings.
11. ID.; ID.; RULE ON REAL PARTY-IN-INTEREST SUBORDINATE TO
DOCTRINE OF LOCUS STANDI . — In public law the rule of real party-in-interest is
subordinated to the doctrine of locus standi. 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 action, thereby effectively subordinating to that
rule the doctrine of locus standi. I am not prepared to be a party to that proposition.
First. Friendenthal, 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, between the two, and that the former is not strictly
applicable in public law cases. 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, 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. 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, 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
bene ted 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.
12. STATUTORY CONSTRUCTION; LAWS; LEGISLATIVE AMENDMENT;
AUTHOR THEREOF, BEST AUTHORITY ON INTENTION OR RATIONALE OF
AMENDMENT. — Before I take up the de ned issues, I nd 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 short and simple. The sponsor of
the measure, then Assemblyman, now Congressman, Ronaldo Zamora did not even ask
for an explanation or clari cation; he readily accepted the amendment. Nobody from
the oor interpellated me for an explanation or clari cation. 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 direct 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 rst 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 on the PCSO's franchise to hold and conduct
lotteries. In short, the argument in the majority opinion sustains the rationale of the
prohibition.
(PCSO); EQUIPMENT LEASE CONTRACT (ELA), A JOINT VENTURE CONTRACT;
DELETION OF PROVISIONS WHICH HOWEVER DID NOT AFFECT THE INDIVISIBILITY
OF COMMUNITY OF INTEREST ON THE ON-LINE LOTTERY SYSTEM DOES NOT
TRANSFORM CONTRACT TO ONE OF LEASE. — I am not persuaded. To my mind, the
parties only performed a surgery on the nulli ed 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 modi cations on rental, which include an
option to purchase. The PGMC and the PCSO conveniently forgot that per this Court's
ndings in the rst lotto case, they had an indivisible community of interest in
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 community of interest.
This was con rmed 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]).
14. ID.; ID.; ID.; ID.; RENTAL CLAUSE. — 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 detected, 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 of the contract, which are found in Annex "A" of the ELA. The Rental Clause
provides for a exible rate based on a percentage of the gross amount of ticket sales,
payable bi-weekly, with an annual minimum rental xed 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 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. The rental clause is, indeed, a subtle
scheme to unconditionally guaranty PGMC's share in the profits.
15. ID.; ID.; ID.; ID.; UPGRADING CLAUSE. — 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.
16. ID.; ID.; ID.; ID.; EQUIPMENT. — 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 (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.
17. ID.; ID.; ID.; PUBLIC BIDDING, A PREREQUISITE. — Even assuming that the
subject ELA is not a joint venture contract, still it must be nulli ed for having been
entered into without public bidding and for being grossly disadvantageous to the
Government. 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 that . . . contracts for public services or for furnishing of supplies, materials, and
equipment to the Government be submitted to public bidding. This was restated in E.O.
No. 301 of President Corazon C. Aquino, entitled "Decentralizing Actions on
Government Negotiated Contracts, Lease Contracts and Records Disposals, " whose
Section 1 reads in part that . . . 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. It is clear that Sections 1 and 2 of Executive Order No.
301 refer to contracts for public services, or 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 speci c mention of supplies in
subparagraphs (a), (b), and (e) was clearly intended to exclude therefrom materials and
equipment, and the speci c 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 with the rst or with each
other. 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 a contract of lease of equipment. They titled it, in bold big letters, "EQUIPMENT
LEASE AGREEMENT," and devote the rst 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.
18. ID.; ID.; ID.; NOT COVERED BY COA RULES AND REGULATION FOR
PREVENTION OF IRREGULAR, UNNECESSARY, EXCESSIVE AND EXTRAVAGANT
EXPENDITURES. — 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. The ELA in question hardly quali es 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.
19. CIVIL LAW; OBLIGATIONS AND CONTRACTS; OPTIONAL CONTRACT,
CONSTRUED. — 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 speci ed property
from another person, if he chooses, at any time within the agreed period, at a xed
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 promisor if
the promise supported by a consideration distinct from the price."
(PCSO); EQUIPMENT LEASE CONTRACT (ELA); CONTRACT GROSSLY
DISADVANTAGEOUS TO THE PCSO. — A comparison between the nulli ed contract and
the assailed ELA to prove that the latter is grossly disadvantageous to the PCSO is not
at all hampered by any perceived di culty. For all the 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 insu cient to pay
the entire prize money." Under the assailed ELA, however, the PGMC is entitled to
receive a exible rental equivalent to 4.3% of the gross ticket sale (or only 0.6% lower
than it was entitled to under the old 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 quali ed
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 of the event that the ticket sales, computed on an annual basis, are insu cient
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 P35,000.00 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 as.
VITUG, J., concurring opinion:
1. REMEDIAL LAW; COURTS; JUDICIAL POWER, DEFINED. — "Judicial power,"

is 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. I take it that the
provision of Article VIII, Section 1, Constitution 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 incident 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 of 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 constitutionalist, that "judicial tyranny" has been institutionalized by the
1987 Constitution, an apprehension which should, I submit, rather be held far from truth
and reality.
2. ID.; ACTIONS; LOCUS STANDI , RULE THEREON NOT DISREGARDED BY
CONSTITUTIONAL DEFINITION OF JUDICIAL POWER. — I most humbly reiterate the
separate opinion I have made in Kilosbayan, Inc., et al., vs. Teo sto Guingona, Sr., etc., et
al. (G.R. No. 113375, promulgated on 05 May 1994). 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.
DECISION
MENDOZA , J : p
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 O ce (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 a new agreement that would be
"consistent with the latter's [PCSO] charter . . . and conformable to this Honorable
Court's aforesaid Decision." cdasia
On January 25, 1995 the parties signed an Equipment Lease Agreement

(thereafter called ELA) whereby the PGMC leased on-line lottery equipment and
accessories to the PCSO in consideration of a rental equivalent to 4.3 % of the gross
amount of ticket sale 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 xed rental thus
computed, the PCSO agrees to pay the de ciency 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 alloted to
charity. (R.A. No. 1169, Sec. 6 [B])
The term of the leases is eight (8) years, commencing from the start of
commercial operation of the lottery equipment rst delivered to the lessee pursuant to
the agreed schedule. (Par. 3) cdtai
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 from any cause and for
the cost of their maintenance and repair. (Pars. 7-8)
Upon the expiration of the leases, 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. cdt
On February 21, 1995 this suit was led seeking to declare the ELA invalid on the
ground that it is substantially the same as the Contract of Lease nulli ed in the rst
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 LEASES 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. aisadc

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) EXPENDITURE 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 THE COA CIRCULAR NO. 85-55-A.
The PCSO and PGMC led a separate comments in which they question the
petitioners' standing to bring suit. They maintain (1) that the ELA is a different lease
contract with none of the vestiges of a joint venture in the Contract of Lease nulli ed 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, Sec. 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 the 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. cdta
For the reason 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, 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 the Congress suing as such and as "taxpayer 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 rst 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. cdasia
Neither the doctrine of stare decisis nor that of "law of the case", nor that of
conclusive 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 ve 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 o cial 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 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. cdta
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 de ned as the opinion delivered on a former
appeal. More speci cally, 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 these case, whether correct on general principles
or not, so long as the facts on which such decision was predicated continue to be
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 rst 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 re-adjudicated therein. (5 C.J.S. 1267) cdasia
"In accordance with the general rule stated in Section 1821, where after a
de nite 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
appeal . . . .
"As a general rule a decision on a prior appeal of the same is held to be the
law of the case whether that decision is right or wrong, the remedy of the party
deeming himself aggrieved 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 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)" cdtai

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 rst judgment is not dependent upon its nality. The rst
judgment is generally, if not universally, not nal. It relates entirely to questions of law,
and is con ned 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 by the related
doctrine of "conclusiveness of judgment." 1 According to the doctrine, an issue actually
and directly passed upon the 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. 582
[1960]) cdt
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 taxpayer
assigned to his wife interest in a patent in 1928 and in a suit it was determined that the
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 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
con ned to situations where the matter raised in the second suit is identical in all
respects with that decided in the rst preceding 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 may
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 rst
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 the Issue Preclusion is authoritatively
formulated in Restatement of the Law 2d, on Judgments, as follows:
Sec. 28. Although an issue is actually litigated and determined by a
valid and nal 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:cdasia
xxx xxx xxx

(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:
xxx xxx xxx
2. A brings an action against the municipality of B for tortious injury.
The court sustain B's defense of sovereign immunity and dismisses the action.
Several years later A brings the second action against B for an unrelated tortious
injury occurring after the dismissal. The judgment in the rst action is not
conclusive on the question whether the defense 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 Sec. 29, Comment i.
The question whether the 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 the petitioner 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, Sec. 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]) aisadc
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 o cial 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 di cult constitutional questions." ( Baker v. Carr ,
369 U.S. 186, 7 L. Ed. 2d 633 (1962))
Accordingly, in Valmonte v. Philippine Charity Sweepstakes O ce , 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 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 inde nite 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. cdta
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
the Rule 3, Sec. 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 the 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 bene ted or injured by the judgment, or the 'party entitled to the
avails of the suit.'" (Salonga v. Warner Barnes & Co., Ltd., 88 Phil. 125, 131 [1951]) cdasia
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
employment by all the people of the blessings of democracy. (Sec. 5)
The natural and primary right and duty of the parents in the rearing of the
youth for civic efficiency and the development of moral character shall receive the
support of the Government. (Sec. 12) cdtai
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. (Sec. 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. (Sec. 17)
(Memorandum for Petitioners, p. 7) cdt
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 speci cally, the question is whether petitioners have
legal right which has been violated.
In action for 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 no 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 substantial interest' more concretely is meant such interest of a party
in the subject matter of action as will entitle him, under the substantive law, to recover if
the evidence is su cient, or that he has the legal title to demand and the defendant will
be protected in a payment 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. cdasia
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.
Question 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 led in any form or manner against public o cials or employees of the
government, or any subdivision, agency or instrumentality thereof including
government-owned or controlled corporations." (Art. XI , Sec. 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, Sec. 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 Leases, which the PCSO
had entered into two 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: cdt
(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 xed 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 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. aisadc
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 the 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 the 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 the 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 leases be less than the
annual minimum xed rental computed at P35,000.00 per terminal in
commercial operation per annum, provided, further that the annual
minimum xed 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 xed 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 in the Territory (after payment rst 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 rst 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:
aisadc
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 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
xed 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 gure 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 leases contract but which are
now to be borne by the PCSO under the new 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) cdt
To be sure there is nothing unusual in xing 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 "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
characteristics 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 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
expenditure. (R.A. No. 1169, Sec. 6) As the Solicitor General points out in his Comment
filed in behalf of the PCSO: aisadc
In the PCSO charter, operating cost are re ected as a percentage of the net
receipts (which is de ned 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 the 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 either
gross or net receipts, speci cally since the amount of gross receipts
can only be estimated.
c. Large xed sums of money for major operating costs , such as xed
rental for equipment, can very well exceed the maximum
percentages xed by law, speci cally if actual gross receipts are
lower than estimates for budgetary purposes.
d. The problem of budgeting based on estimates is even more di cult
when new projects are involved, as is the case in the on-line lottery.
(PCSO's Comment, pp. 18-20) cdt
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 xed 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 rental are treated in the charter of the agency (R.A. No.
1169, Sec. 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 aisadc
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 the 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 and
holding of the on-line lottery," considering that as found in the rst 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. cdta
Finally, because the term "Equipment" is de ned in the ELA as including

"technology, intellectual property rights, know-how 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 or collaboration with the PGMC within the contemplation of the law.
A contract of lease, as this is de ned 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 or operation. cdt
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 nd 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 justi able issue. Gambling is not illegal per se . .
. . It is left to Congress to deal with activity as it sees t." ( 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 O ce to raise funds for charity, Congress authorized the Philippine
Charity Sweepstakes O ce (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 SEC. 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 doe not absolutely prohibit it from holding
or conducting lottery "in collaborating, 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 that 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: cdta
Sec. 1. The Philippine Charity Sweepstakes O ce. — The Philippine

Charity Sweepstakes O ce, hereinafter designated the O ce, shall be the
principal government agency for raising and providing for funds for heath
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 heath and welfare-related investments, programs, projects and
activities which may be pro t-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 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 the areas where the investments are adequate as may be
determined by the National Economic and Development Authority. aisadc
When parsed, it will be seen that Sec. 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 pro t
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 of Sec. 1 (B) is the authority of the PCSO to invest in certain projects
for the pro t in order to enable it to expand its health programs, medical assistance
and charitable grants. The exception in the law refers to investments in businesses
engaged in sweepstakes races, lotteries and similar activities. The limitation applies
not only when the investments is undertaken 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 when 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 Sec. 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. cdt
The contrary construction given to Sec. 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 remark 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 Sec.
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 Sec. 1, as the logical place for the amendment.

The following excerpt 2 from the record of the discussion on Parliamentary Bill
No. 622, which became B.P. Blg. 422, 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 any and all investments. . . ." until the
words "charitable grants" on line 23 and in lieu thereof insert the following:
cdasia
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 A 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 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. aisadc
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. cdtai
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 THE
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 determination 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. aisadc
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 pro t-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 THE PRIVATE INVESTMENTS ARE ADEQUATE AS MAY BE
DETERMINED BY THE NATIONAL AND ECONOMIC DEVELOPMENT
AUTHORITY."
THE SPEAKER.
Is there any objection to the amendment? aisadc
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
investments activities — "provided that such investments will not compete
with the private sector in areas where the investments are adequate . . ."
aisadc
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
Gentlemen from Cebu, just for style, I would suggest the insertion of the
word PRECEDING before the word "paragraph." The phrase will read "the
PRECEDING paragraph." aisadc
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 Sec. 1 in the previous decision is insupportable in light
of both the text of Sec. 1 and the deliberations of the Batasang Pambansa which
enacted the amendatory law. aisadc
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:
Sec. 1. Guidelines for Negotiated Contracts. — Any provision of the
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. cdasia
a. Whenever the supplies are urgently needed to meet an emergency which

may be 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 s o l d 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; cdtai
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 need 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. cdt
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 of supplies 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, Sec. 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 Secs. 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:
Sec. 6. Guidelines for Lease Contracts. — Any provision 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 rental rates involved.
aisadc
Sec. 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 leases 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.
It thus di cult 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 Sec. 1 of E.O. 301 applies to lease contracts, the reference
to "supplies" in the exceptions can not 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 rst be a public bidding before
the equipment may be purchased or leased because the heavy equipment is not a
"supply" and Sec. 1 (a) is limited to the furnishing of "supplies" that are urgently needed.
cdta
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 contracts would be more favorable to the government because
the PGMC assumed many of the risks and burdens incident to the operation of the on-
line 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 risk 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.
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. cdasia
————————
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, Sec. 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; cdtai
(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 Sec. 1 (A) of its charter (R.A. 1169), the Philippine Charity
Sweepstakes O ce 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 the public bidding as a condition for its validity. aisadc
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.
Padilla and Vitug, JJ., see separate concurring opinions.
Feliciano, Regalado, Davide, Jr., JJ., see separate dissenting opinions.
Romero, J., joins the dissenting opinions.
Bellosillo, J., concurs in the dissenting opinions of Mr. Justice Feliciano and Mr.
Justice Davide, Jr.
Narvasa, C .J ., took no part, related to party directly interested in case.
Separate Opinions
PADILLA , J ., concurring :
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 speci c 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. cdasia
In my separate concurring opinion in the rst lotto case (G.R. No. 113375),
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 an "on-line high-tech" lottery, undeniably a form of gambling, the terms of
which 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 rst 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 speci c issues in the present case were formulated by the Court during the
hearing held on 3 March 1995 thus: aisadc
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. aisadc
On the rst speci c 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 rst contract and the ELA, showing such differences. Petitioners do not
deny the objectionable provisions in the rst 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 xed
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 constitute "association,
collaboration or joint venture" between PCSO and PGMC should be tackled by looking
at the nature of a contract of lease. cdasia
A lease is a contract whereby one of the parties binds himself to give another the
enjoyment or use of a thing for a price certain and for a period which may be de nite 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 exible 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 costwise 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. cdtai
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.
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. cdt
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 then foregoing considerations, I vote to DISMISS the petition.
FELICIANO , J ., dissenting :
I nd myself regretfully quite unable to join the majority opinion written by my

distinguished brother in the Court, Mendoza, J . aisadc
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 I wrote on that subject in the first Kilosbayan case. 1 All
the factors which, to my mind, pressed for recognition of locus standi on the part of
petitioners in the rst 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: rstly, the new interpretation of Section 1(B) of the
PCSO charter as amended by B.P. Blg 42; secondly, the question of whether the
"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
I turn rst to the novel argument made in the majority opinion that the charter of
PCSO does not "prohibited [—] 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." cdt
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 rst
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 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 rst Kilosbayan case
faithfully re ected the intent of the legislative 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, therefor, 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 Sec. 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 mentioned in the preceding paragraph (A),' i.e., sweepstakes races,
lotteries and similar activities, for the obvious reason, as already stated, that these
are competing activities." (Italics in the original)
aisadc
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:
Sec 1. The Philippine Charity Sweepstakes O ce . — The Philippine
Charity Sweepstakes O ce, hereinafter designated the O ce, 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. cdasia
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 pro t-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 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 pro t-oriented . . ." Rather, the PCSO has been
authorize to do any and all of the following acts:
(1) "to engage in health and welfare-related investments — which may
be profit-oriented — "; cdt
(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 —." aisadc
The operations words of Section 1 (B) are "to engage in. . . health and welfare-related
investments, programs, projects and activities . . ." 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 assistance and services and charities of national character." 2
There appear some major di culties 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 government-owned 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 o cials of PCSO. Thirdly, the nal proviso fund 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. cdt
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
entering into joint ventures with other persons or entities not 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) . . ."
aisadc
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
next of Section 1 (A). The textual location, in other words, of the "except" clause offers
no support for the new-found and entirely original interpretation offered in the majority
opinion. 3
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. This provisions state . . . 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).aisadc
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 rst proposition, it is respectfully submitted, nds 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
the government or any of its branches, agencies or instrumentalities shall be
situations: . . ." (Italics supplied)
cdasia
It is worthy of special note that the above opening paragraph does not even use
the words "purchase and sale" or "buy and sell;" the actual term used is " furnishing . . .
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 " nancial leases" involving expensive capital equipment)
are often substitutes for or equivalents and sale contracts, given the multifarious credit
and tax constraints operating in the market place. 4 Thus, the above rst proposition
fails to take into account actual commercial practice already re ected 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 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 of the actual language of Executive Order no. 301. 5
The fundamental di culty with the above two (2) proposition 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. cdtai
III
I would address nally the question of whether or not the original contract
between PCSO and PGMC which the Court in the rst 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 xed at a speci ed 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 xed and absolute gure, although a oor
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. 6 In the commercial world, a rental provision cast in terms of a
xed 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. aisadc
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 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 percentages 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)
aisadc
The Solicitor General is clearly not an accountant. In the rst 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 xed 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
account to convert absolute gures 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 justi es the adoption of the
rental provision found both in the old contract and in the ELA giving PGMC a xed 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 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
owing 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 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. The original rental
rate was reduced by 12. 24% only. 7 Of course, the minimal reduction of the rental rate
payable under the ELA to PGMC would been understandable if one assumes that the
business risks and burdens set out in such detail in the old contract, and moved to
PCSO in equal detail in the new contract, are, in the rst place, basically unreal and
merely cosmetic ourishes 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 assumptions, 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.
cdasia
Thus, the questions which are provoked by scrutiny of the economic implications
of the text of the ELA (which, it should be recalled, did not go through the process of
public bidding) are so numerous and consequential that it becomes very di cult 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 rst Kilosbayan case to
constitute the prohibited "collaboration, association or joint venture" have truly (and not
simply ostensibly) been expunged from the relationship between PCSO and PGMC
rests, no t on Kilosbayan nor on this Court, but rather on PCSO. It is respectfully
submitted further that that burden has not been adequately discharged in the present
case by the simple re-arrangement of words and paragraphs of the old contract
considering that the reality of the re-arrangement is controverted by the commercials
terms of the new contract.
One nal 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. cdtai
REGALADO , J ., dissenting :
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.
Preliminary, 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 rst proposition has never been of concern to or questioned by any
member of this Court throughout its hegira from the rst lotto case, 1 then to the jai
alai controversy, 2 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. cdt
Coming to the real task at hand, we have this resuscitation of the nagging
question of locus standi. In the rst 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 observed and enjoined in
Tatad, et al. vs. Garcia, etc., et al. 3
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 led 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 rst lotto case is
impugned and lamented in the second one now at 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 where its application will result in an
unjust decision." 4 I feel that here the majority is thus ignoring the adage about the
proverbial sauce being for both the goose and the gander. aisadc
In the rst 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 rst, I had excepted 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 rami cations of the
original "standing to sue" objection raised in the rst 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 rst
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.cdasia
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 rst
appeal cannot be reexamined in the second appeal. If so, then what is necessarily
challenged in the rst 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 unveri ed
premises, and without a showing that the situations are in pari materia, we are told that
since the case at bar does not posses 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 generally to refuse to
reopen what has been decided 5 and, thereby, to emphasize the rule that the nal
judgment of the highest court is a nal determination of the rights of the parties. 6 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. cdtai
Accordingly, the "law of the case" may also arise from an original holding of a
higher court on a writ of certiorari, 7 and is binding not only in subsequent appeals or
proceedings in the same case, but also in a subsequent suit between the same parties.
8 What I wish to underscore is that where, as in the instant case, the holding of this
highest Court on a speci c 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 o cial 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 rst 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 invoked the concept of and the rules on a right of action in
ordinary civil actions and, prescinding from its previous positions, 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 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 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 rst
lotto case. cdt
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 con nes in
private interest litigations.
Thus, adverting again to American jurisprudence, there is the caveat that "the
adoption of 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 persons of persons to
institute suit, although it obviously simpli es procedures in actions at law. . . There is no
clearly de ned rule by which one may determine who is or is not real party in interest,
nor has there been found any concise de nition 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-
in-interest and yet not be the sole real party in interest." 9 (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: aisadc
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 the 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 of broader policy concerns relating to the proper role of the
judiciary in certain areas. 1 0
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 suggestions 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. . . . In addition, the Solicitor
General is authorized to bring an action for quo warranto if it should be thought
that a government corporation . . . has offended against its corporate charter or
misused its franchise. . .
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 le 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
persona or ex relatione, not only because one has to contend with that o cial'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. cdta
3. The majority believes that in view of the retirement and replacement of two
members of the Court, it is time to reexamine the ruling in the rst 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 le 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 rst 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. 1 1
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 nal and executory. There is, to be sure, an attempt to show that the
subject matter in the rst 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. aisadc
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
su ce 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 oated 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 Philippines Charity Sweepstakes O ce, 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 nally
adjudged in the prior judgment shall be conclusive between the parties in the case now
before us, and that de nitely 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 their 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 locos standi or right of action on said G.R. No. 113375
and, for that matter, were likewise so recognized in the expanded value added tax
(EVAT) case, 1 2 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. aisadc
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 bene t of a duly clari ed and transluscent 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 jail alai and, now, of lotto are different.
On the merits, to obviate unnecessary replication I reiterate my concurrence with
the ndings and conclusions of Mr. Justice Davide in this dissenting opinion, the
presentation whereof is completely devoid of strained or speculative premises, and
moreover has the virtue of being based on his rst-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 nd the same to be an amply su cient and highly meritorious analysis
of the controversy on the contract.
One concluding point. I am not impressed by their 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. aisadc
On the contrary, to pay unquali ed obeisance to the beguiling locos standi or

right of action doctrines posited by the majority in this case would only not 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 stulti cation. 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.
DAVIDE, JR. , J ., dissenting :
I register a dissenting vote.

I.
I am disturbed by the sudden reversal of our rulings in Kilosbayan, Inc., et al. vs.
Guingona, et al. 1 (hereinafter referred to as the rst 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. 42, 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 O ce (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 con dence of the people, specially the lawyers and litigants, in
the certainly and stability of the pronouncements of this Court. It opens the oodgates
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 rst 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. The
decision has, thus, become final on 23 May 1994. 2
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 the majority opinion to justify the reversal of our rulings in the
rst 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 nd 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
rami cations 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 than 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. cdtai
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 speci c
interest in raising the questions involved therein; and (d) the wide range of impact of
the contract of lease and of its implementation.
Only last 6 April 1995, in the decision in Tatad vs. Garcia , 3 this Court, speaking
through Mr. Justice Camilo D. Quiason who had joined in the dissenting opinions in the
rst lotto case denying the petitioners' locus standi therein, invoked and applied the
ruling on locus standi in the first lotto case. He stated:
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]. cdt
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 rst lotto case on the
issue of locus standi, unquali edly 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
though 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)] relief by the majority for
upholding petitioner's 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. aisadc
Chief Justice Andres R. Narvasa and Associate Justice 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 rst lotto case
and Justice Francisco who was not yet a member of this Court at the time, the rest of
the Justice who joined the concurring opinion of Justice Mendoza had dissented in the
lotto case on the said issue.
Furthermore, it must not be forgotten that this Court has de ned the issues in
this case and limited them to the following:
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; cdt
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. aisadc
In the rst 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
and conduct charity sweepstakes races, lotteries and other similar activities," the
PCSO cannot exercise it "in collaboration, association or joint venture" with any
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 and quoted portions
of the Record of the Batasan 4 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: cdasia
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 Social-
Economic Planning and Development of the Interim 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 pro t-oriented
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 the 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: cdtai
"Subject to the approval of the Minister of Human Settlements, to

engage in health-oriented investments, programs, projects and activities
which be pro t-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: aisadc
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. aisadc
When it is joint venture or in collaboration with may 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. aisadc
THE SPEAKER:
Is there any objection to the amendment? (Silence) The amendment,
as amended, is approved." [Id., 1007, italics supplied]
Further amendments to paragraph B were introduced and approved. When
Assemblyman Zamora read the nal 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 introduction other
amendments. Thereafter, the new Paragraph B was approved. [ Id.] This is now
paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42. 5
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 de nitely expressed, and he cannot enlarge it by
equivocal or doubtful provisions or by probable interferences. Whatever is not
unequivocally granted is withheld. Nothing passes by mere implication." [36 am
Jur 2d Franchises S. 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 "the rights and privileges conferred under a
franchise may, without doubt, be assigned or transferred when the grant is to the
grantee and 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., S. 63].
It may also be pointed out that the franchise granted to the PCSO to hold
and conduct lotteries allows it to hold and contract a species of gambling. It is
settled that "a statute which authorizes the carrying on of a gambling activity or
business should be strictly construed and every reasonable doubt so resolved as
to limit the powers and rights claimed under its authority. [38 Am Jur 2d
Gambling S. 18 [1968]). 6
The PCSO and the PGMC never challenged our application or interpretation of the
exception clause and our de nition 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 of res judicata, the PCSO and the
PGMC are bound by the ruling in the rst 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 interpreting the laws or the constitution shall from 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. aisadc
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 criticism on their opinions, or speculate on chances
from changes in its members." 7
It is, however, contended that the law of the case is inapplicable 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 the
case is nothing but a sequel to and is, therefore, for all intents and purposes, a
continuation of the rst lotto case. By their conduct, the parties admitted that it is, for
which reason the PGMC and the PCSO submitted in the rst 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 became nal does not detract from the fact that this
case is but a continuation of the rst 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 in involves a different or unrelated contract. The legal question of
locus standi which was resolved in favor of the petitioners in the rst 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 rst nulli ed contract, for it
in 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 nulli ed
contract was sufficient. cdta
Its reliance on the ruling in Montana vs. United States 8 that preclusion 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 rst 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 S. 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 in the law and does not require identity or privity of
parties. 9 This is explicitly eshed 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." 1 0 Abandonment
thereof must be based only on strong and compelling reasons which I do not nd in
this case otherwise, the becoming virtue of predictability which is expected from this
Court would be immeasurably affected and the public's con dence in the stability of its
solemn pronouncements diminished. cdasia
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 of issues in action between the same parties on a different claim or
cause of action. 11 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 rights and gives dignity and
respect to judicial proceedings. 12
The justifications given in the majority opinion to underrate the ruling locus standi
and to ultimately discard it are unconvincing. It is not at all true, as the majority opinion
contends, that "[t]he previous sustaining petitioners' intervention may in fact be
considered a departure from settled ruling 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 subordinate to the doctrine of locus standi.
Equally unconvincing is the majority opinion's contention that the ruling locus
standi in the rst 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 rst 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 rst 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. aisadc
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 subordinating to that rule the doctrine of locus
standi. I am not prepared to be a party to that proposition.
First. Friendenthal, 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 doctrines 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 of its limits de ned. Courts essentially continue to be
free to reconcile these competing values on an ad hoc basis. aisadc
It is important to note, however, that standing, because of its constitutional

and public policy underpinnings, is very different from questions relating 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 relating to the proper role of the
judiciary in certain areas. 13
In an earlier book, 14 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 (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 Rule 17(a). However, several other elements of the standing doctrine
clearly are unrelated to the simple real-party-in interest test. One signi cant
context in which the two concepts diverge is when for standing purposes plaintiff
is required to show both that the 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 de ned 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. (Italcis supplied).
cdta
The downgrading of locus standi and its subordination to the restrictive rule on real
party in interest cannot be justi ed by the claim that 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 contract 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 rst 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, has already
declared in Tan vs . Macapagal 15 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 vs. Commission on Elections, 1 6 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 o cials
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
the private rights is an essential constituent of public interest and, conversely,
without a well-ordered 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 rst fully discussed, if we act differently now. I do not think we
are prepared to take that step. Respondent, 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 the 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 de nitely been lowered. [ Ibid., 92-95]. The weakness of these
particular defenses is thus quite apparent. [Cf. Tan v. Macapagal, 43 SCRA 677]. cdt
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, the real-party-in-interest rule, to bring actions to
questions acts or contracts tainted with such vice. Where, because of fear of reprisal,
undue pressure, or even connivance with the parties bene ted 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 rst 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:
aisadc
[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 though 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. aisadc
Besides, it is fraught with unimaginable danger to public interest if neither the

Commission on Audit (COA), nor the Ombudsman, or the O ce of the Solicitor General,
would take any action on the matter.
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 endorsed
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 rst lotto case. The observation then of Justice Cruz in
his concurring opinion in the first lotto case is apropos:
Locos 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 remen. Every one has the
right and responsibility to prevent the re from spreading even if he lives in the
other block." aisadc
The majority opinion does not entirely foreclose the possibility of according the
petitioners locos 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 speci ed allegation, the totality of the petitioners' allegations points it illegal
expenditures of public funds due to or arising out of violation 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
speci ed in its Charter. The funds thus raised are public funds. This Court must take
judicial notice of these facts.
Before I take up the de ned issues, I nd 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 short and simple. The
sponsor of the measure, then Assemblyman, now Congressman, Ronaldo Zamora did
even ask for an explanation or clari cation; he readily accepted the amendment.
Nobody from the floor interpellated me for an explanation or clarification. cdasia
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 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
holding thereof "in collaboration, association or joint venture with any person,
association, company, or entity, whether domestic or foreign." In the rst lotto case,
this Court explained the principal reasons for prohibition. It 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 de ned issues, my answers are in the a rmative. 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. cdt
On 26 July 1994, the Board of Directors of the PCSO approved Resolution No.
445, series of 1994, resolving as follows:
17
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 and execute the said Agreement, SUBJECT to
the con rmation by the Commission on audit that PCSO can enter in the said
Agreement.
On the same date, PCSO Chairman Morato sent a letter to Hon. Celso D. Gangan,
Chairman of the COA, 18 seeking con rmation on whether the Equipment Lease
Agreement is exempt from the requirements of public imposed under Executive Order
No. 301 (1987) and the pertinent government accounting and auditing rules. The
request was based on the following submissions: aisadc
1. Pursuant to the provisions of Republic Act No. 1169, as amended,

the Philippines Charity Sweepstakes O ce (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 Prequali cation Bids and
Awards Committee and its bid report was further evaluated by a Special Review
Committee of the office of the President. aisadc
4. On 21 October 1993, the O ce 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); aisadc
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 endorsed 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 bene t of
a public bidding under E.O. NO. 301 and the pertinent government accounting and
auditing rules. cdasia
In its Opinion No. 4, series of 1995, 19 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 the any of the three justi cations
he enumerated in his letter to the COA may constitute basis for the
exemption from public bidding.
(b) Declined to express an opinion on the rst justi cation 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. aisadc
(c) Expressed doubts on the accuracy of Morato's statement that the new
lease contract is still the result of the award after public bidding and
opined that since the original lease contract was nulli ed by this Court,
such nulli cation necessarily implied the nulli cation 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 provisions reads: cdtai
Sec 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:
xxx xxx 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 xxx 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. aisadc
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 many fall under the exemption 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 out t 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 de ned 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. California v.
Washington Engineering Co., 149, p. 706). aisadc
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 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 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 advantages 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. cdt
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 statutorily
proscribed collaboration, association, or joint venture. 2 0 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
vestiges of a joint venture is present in the subject ELA." 2 1
I am not persuaded. To my mind, the parties only performed a super cial surgery
on the nulli ed contract by merely deleting therefrom provisions which this Court had
considered in the rst lotto case to be badges of a joint venture contract and by
engrafting some modi cations on rental, which include an option to purchase. The
PGMC and the PCSO conveniently forget that per this Court's ndings in the rst 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 systems.
Put differently, it only separated one from the other from bed and board but did not
dissolve the bonds of such indivisibility or community of interest. This was con rmed
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]). (Italics
supplied) aisadc
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 speci c 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 rst 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 on-line lottery
system shall being was unaffected by the super cial surgery on the text of the nulli ed
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 di cult 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 di cult 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. aisadc
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?aisadc
ATTY. REYES:
The safest, Your Honor, is a sale.
JUSTICE DAVIDE:
Sale, meaning the Philippine Charity Sweepstakes O ce will buy
everything?
ATTY. REYES:
Yes, Your Honor. aisadc
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 strikes down this agreement as also
void, would you recommend that to your client as a third contract? aisadc
ATTY. REYES:

Yes, Your Honor, if the PCSO can pay for it. 2 2
Besides, even on the face of the new ELA, the elements of the prescribed joint
venture or, at the very least, collaboration or association, can be detected, 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 of the contract, which are found in
Annex "A" of the ELA. 2 3
The Rental Clause provides for a exible rate based on a percentage of the gross
amount of ticket sales, payable bi-weekly, with an annul minimum rental xed 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: cdasia
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 xed rental computed at
P35,000.00 per terminal in commercial operation per annum, provided, further
that the annual minimum xed 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 in any year falls short of the
annual minimum xed 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 rst of prizes and agents' commissions but prior to any other
payments, allocations or disbursements) until said shortfall shall have been fully
settled, but without prejudiced to the payment to LESSOR of the then current bi-
weekly rentals in accordance with the provisions of the 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
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 nulli ed
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 and damage to the equipment; responsibility
for maintenance and repairs, all of which were the PGMC's duties, obligations, and
responsibilities under the nulli ed contract. I am convinced that such rate was pre-
determined to approximate the pro ts which the PGMC expected to realize under the
nulli ed contract. The rental clause is, indeed, a subtle scheme to unconditionally
guaranty PGMC's shares 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. aisadc
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 or at
least placed under the clause on Equipment. 2 4
It should be stressed here that in the old contract the upgrading clause in 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 rst 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
de nition in Annex "A" thereof, the "associated or incidental hardware equipment,
furnishing and xtures, 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
necessary 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 include all capital
equipment but excluded "technology, intellectual property rights, knowhow, processes
and systems." As this Court found in the rst lotto case, there was a separate provision
on the PGMC's obligations (1) to train PCSO and other local personnel and (2) to effect
the transfer of technology and other expertise. 2 5 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. aisadc
B. Even assuming that the subject ELA is not a joint venture contract, still it
must be nulli ed 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. 26
The opening paragraph of E.O. No. 298, series of 1940, 27 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: aisadc
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.
This was restated in E.O. 301 28 of the 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 of
the government of any of its branches, agencies or instrumentalities shall be
situations: aisadc
The Court agrees with DOJ Opinion No. 4, series of 1995, which states that the
bidding conducted for the nulli ed 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 of
the government of any of its branches, agencies or instrumentalities shall be
situations: cdasia
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; cdtai
d. Whenever the supplies under procurement have been

unsuccessfully placed on bid for at least two consecutive times, either due
to lack of bidders of 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. aisadc
SEC. 2. Jurisdiction over Negotiating 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 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 speci c mention
of supplies in subparagraphs (a), (b), and (e) was clearly intended to exclude therefrom
materials and equipment, and the speci c mention of materials in subparagraph (c)
was likewise intended to exclude supplies and equipment. Expressio unius est exclusio
alterius. aisadc
Elsewise stated, the Executive Order leaves no room for a construction that
confuses supplies with materials or equipment or either of the last two with the rst or
with each other. According to Sutherland: 29
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 super uous, void or insigni cant, 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, cited
United States Rubber Co. vs. Washington Eng'g. Co. 30 wherein it was allegedly held that
in 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 is found in Hurley-Mason Co. vs. American Bonding Co. , 31
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: cdasia
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 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 de nitions of "equipment" and "supply" coincide,
and a certain and natural dividing line is found between them. A "supply" would
be any article furnished for carrying on the work which from its nature is
necessarily so 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. cdtai
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 a contract of lease of equipment. They titled it, in bold big letters,
"EQUIPMENT LEASE AGREEMENT ," and devote the rst 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: cdt
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 O ce 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 certi cation of availability of equipment outlay authorized
for the agency to cover the full contract cost. The lease purchase agreement may
be entered into only for specialized equipment such as typewriters, adding
machine 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. Corporations/local
governments may adopt the mechanism of these lease-purchase agreement or
governing boards.
The ELA in question hardly quali es 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 speci ed property from another
person, if he chooses, at any time within the agreed period, at a xed price. Said
contract is separate and distinct contract from the contract which the parties may
enter into upon the consummation of the option. 32 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 promisor if the
promise is supported by a consideration distinct from the price." aisadc
C. A comparison between the nulli ed contract and the assailed ELA to prove
that the latter is grossly disadvantageous to the PCSO is not at all hampered by any
perceived di culty. As to the almost unrestricted bene ts and advantages which the
PCSO were supposed to obtain under the former, the following ndings of the 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 state in its RFP that it is seeking for "a suitable contractor which
shall build, as 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 ve (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 o ces, furnishings and xtures,
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 fteen
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 a liates, 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." aisadc
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 aspect of the on-line
lottery system while the PCSO would, primarily, proved 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 incorporates their intention and
understanding.
xxx xxx xxx
Consistent with the above observation 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 carryout 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 e ciently 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." aisadc
Under the assailed ELA, however, the PGMC is entitled to receive a exible rental
equivalent to 4.3% of the gross ticket sales (or only 0.6% lower than it was entitled to
under the old 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 telecommunication 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 quali ed 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 opinion 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 insu cient 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 P35,000.00 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 consideration 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: aisadc
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 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. cdasia
That postulation is awed. It forgets that no other contract proposed by other parties
were available for comparison precisely because no public bidding was conducted. The
demand a comparison with non-existing contracts would be unreasonable.
The challenged ELA must then be declared void for the following 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 O ce (PCSO) and the private respondent
Philippine Gaming Management Corporation (PGMC). aisadc
VITUG , J ., concurring :
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. 118910 would have itself been nally
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
nulli ed 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. aisadc
Back to the core of the petition, however, the manner of the legal standing of
petitioner 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 I 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 de nition, for the rst 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
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 held far from truth and reality.
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: aisadc
". . . The relatively recent event in our history, still too vivid to be lost, has
govern 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 fteen 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
reposed at every turn with full delity and competence? If you would have had the
time to follow up recent pronouncements of the Court, you might have noticed
that on certain occasion I have dissented from what I have felt and still feel to be
an unwise encroachment of function that are better left to the judgment of others
who are no less experts in their respective elds 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 di cult 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.
Footnotes
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, Sec. 49 (c), while the second (res judicata or preclusion
of claims) is found in Rule 39, Sec. 49 (b).
2. 2 RECORD OF THE BATASAN, Sept. 6, 1979, 1006-07. (Italics added)
FELICIANO, J., dissenting:
1. Kilosbayan, Inc., et al. v. Teofisto Guingona, etc., et al., 232 SCRA 110, at 153 (1994).
2. Opening paragraph, Section 1, Revised PCSO charter.
3. The majority opinion contends as follows:
". . . 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 letter (a) which is the holding and conducting of
sweepstakes races, lotteries and other similar acts." (Italics 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.
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., 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.
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).
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.
REGALADO, J., dissenting:

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 on decided January 27, 1995.
3. G.R. No. 114222, April 6, 1995.
4. People vs. Medina, Cal., Cal. Rptr. 630, 635, 492 P. 2d 686, cited in Black's Law
Dictionary, 6th ed., 887.
5. White vs. Higgins, C.C.A. Mass., 116 F. 2d 312; Fleming vs. Cambell, 148 Kan. 516, 83 P.
2d 708.
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.
9. 59 Am. Jur. 2d, Parties, 429, citing State vs. Estate of Frankel, 94 Misc. 2d 105, 404
NYS2d 954.
10. Citing Friedenthal, Kane and Miller, Civil Procedure, Hornbook Series, 1985 ed., 328.
11. Since this is 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.
12. Kilosbayan, Inc., et al. vs. Executive Secretary, et al., G.R. No. 115781; August 25, 1994,
235 SCRA 630.
DAVIDE, JR., J., dissenting:
1. G.R. No. 113375, 5 May 1994. Reported in 232 SCRA 110.
2. Rollo, G.R. No. 113375, vol. 1,508.
3. G.R. No. 114222.
4. Vol. Two, 993; 1006-1007.
5. Those in brackets are in footnotes in the first lotto case.
6. Same as intended in footnote no. 5.
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].
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.], G. 630, 1329.
10. Caltex (Phil.), 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].
11. 46 Am Jur 2d Judgment S. 396, 563.
12. 46 Am Jur 2d Judgment S. 395, 559-562.
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].
15. 43 SCRA 677 [1972]. See also Macasiano vs. NHA, 224 SCRA 236 [1993].
16. 62 SCRA 275, 308 [1975]. Those in brackets appear in footnotes.
17. Annex "1" to Memorandum for the public respondents; Rollo, 431.
18. Annex "2" to Memorandum for the public respondents; Rollo, 432.
19. Annex "B" of Petition; Rollo, 48 et seq.
20. Comment of the PGMC, 4; Rollo, 206.
21. Comment of the public respondents, 9-10; Id., 254-55.

22. TSN, Oral Arguments of 3 March 1995, 60-62.
23. Rollo, 68-69.
24. Clause 1.
25. 232 SCRA 110, 146 [1994].
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.
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.
31. 79 Wash 564, 140 Pac 575.
32. Enriquez de la Cavada vs. Diaz, 37 Phil 982 (1918).

126990-1995-Kilosbayan Inc. v. Morato

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126990-1995-Kilosbayan Inc. v. Morato

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EN BANC

[G.R. No. 118910. July 17, 1995.]

KILOSBAYAN, INCORPORATED, JOVITO R. SALONGA, CIRILO A.

1. REMEDIAL LAW; ACTIONS; "LAW OF THE CASE"; DOCTRINE APPLICABLE

1. REMEDIAL LAW; SUPREME COURT; DUTY TO APPLY THE LAW

1. ADMINISTRATIVE LAW; PHILIPPINE CHARITY SWEEPSTAKES OFFICE;

1. REMEDIAL LAW; ACTIONS; "LAW OF THE CASE" DOCTRINE; PURPOSE. —

1. REMEDIAL LAW; SUPREME COURT; SUDDEN REVERSAL OF RULING PUTS

1. REMEDIAL LAW; COURTS; JUDICIAL POWER, DEFINED. — "Judicial power,"

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

On January 25, 1995 the parties signed an Equipment Lease Agreement

2. ASSUMING ARGUENDO, THAT THE AMENDED ELA IS MATERIALLY

CD Technologies Asia, Inc. 2019 cdasiaonline.com

"Questions necessarily involved in the decision on a former appeal will be

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It has been held that the rule on conclusiveness of judgment or preclusion of

xxx xxx xxx

Standing is a special concern in constitutional law because in some cases suits

We apprehend no difference between the petitioner in Valmonte and the present

(Memorandum for Petitioners, p. 7) cdt

The Court considered the Contract of Lease to be actually a joint venture

PGMC's annual minimum rental is P35,000.00 per terminal or a total of

To be sure there is nothing unusual in xing the rental as a certain percentage of

b. To obviate any violation of the law, it is best to express large

(PCSO's Comment, pp. 18-20) cdt

Finally, because the term "Equipment" is de ned in the ELA as including

Sec. 1. The Philippine Charity Sweepstakes O ce. — The Philippine

The contrary construction given to Sec. 1 in the previous decision is based on

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SUBJECT TO THE APPROVAL OF THE MINISTER OF HUMAN

When it is a joint venture or in collaboration with any other entity

"Subject to the Minister of Human Settlements, to engage in health

IV. REQUIREMENT OF PUBLIC BIDDING

a. Whenever the supplies are urgently needed to meet an emergency which

b. Whenever the supplies are to be used in connection with a project or

c. Whenever the materials are s o l d by an exclusive distributor or

d. Whenever the supplies under procurement have been unsuccessfully

Sec. 7. Jurisdiction Over Lease Contracts. — The heads of agency

WHEREFORE, the Petition for Prohibition, Review and/or Injunction seeking to

1. whether the challenged Equipment Lease Agreement (ELA for short)

As to whether or not the ELA is grossly disadvantageous to the government, it

I nd myself regretfully quite unable to join the majority opinion written by my

I join the penetrating dissenting opinions written by my esteemed brothers

In so doing, my learned brother Mendoza, J. purports to controvert and overturn

B. Subject to the approval of the Minister of Human Settlements to

(2) "to engage in health and welfare-related — programs — which may

Another of my distinguished brothers in the Court, Mr. Justice Padilla, remarks

I am constrained to respectfully dissent from the majority opinion premised on

It is important to note. . . that standing because of its constitutional and

The removal and replacement of some objectionable terms of a contract, which

On the contrary, to pay unquali ed obeisance to the beguiling locos standi or

DAVIDE, JR. , J ., dissenting :

I register a dissenting vote.

In his concurring opinion, Mr. Justice Florentino P. Feliciano further showed

For as long as the ruling in Kilosbayan on locus standi is not reversed, we

2. Whether the ELA requires prior public bidding; and

During the period of the committee amendments, the Committee on Socio-

"Subject to the approval of the Minister of Human Settlements, to

Before the motion of Assemblyman Zamora for the approval of the

"Mr. DAVIDE: aisadc

When it is joint venture or in collaboration with may entity such

It is important to note, however, that standing, because of its constitutional

[q]uestions as to the nature or validity of public contracts or the necessity

That proposition delivers the coup de grace to taxpayers' suits, discourages