KILOSBAYAN v. GUINGONA
Petitioners filed a case for the prohibition / injunction with a prayer for a TRO & preliminary injunction against the implementation of the Contract of Lease between PCSO & PGMC in connection to an online lotto system. Petitioners are suing in their capacity as members of Congress and as taxpayers. On DECEMBER 17, 1993 the Contract of Lease was executed and approved by the president on DECEMBER 20, 1993. Petitioner claims that the respondents & the OFFICE OF THE PRESIDENT gravely abused their discretion tantamount to a lack of authority by entering into the contract, because: 1. Section 1 of RA 1169 (PCSO Charter) prohibits the PCSO from conducting lotteries in cooperation with any entity 2. RA 3846 & jurisprudence require Congresional franchise before a telecom system (public utility) can be established 3. Article 12 of Section 11 of the Constitution prohibits companies with less than 60% Filipino Ownership from operating a public system 4. PGMG is not authorized by its charter or by RA 7042 (Foreign Investment Act) to install an online Lotto system a. The contract shows that PGMC is the actual operatior while it is a 75% foreign-owned company. RA 7042 puts all forms of gambling on the negative list Respondents answered the allegations by contending: 1. PGMC is only an independent contractor. There is no shared franchise 2. PCSO will not a operate a public system as a telecom system is an indispensable requirement of an online lottery system. Petitioner interpretation of Section 1 of RA 1169 too narrow. 3. There are no violations of laws 4. The issue of morality is a political one and should not be resolved in a legal forum 5. Petitioners are without legal standing, as illustrated in Valmonte vs. PCSO a. The PCSO is a corporate entity and can enter into all kinds of contracts to achieve objectives. Arguing that PCSO will operate a public utility, it is still exempted under Section of Act 3846, where legislative franchisees are not necessary for radio stations Issues: 1. Whether or not petitioners have standing 2. Whether or not the contract is legal under Section 1 of RA 1169 Held: 1. Yes, petitioners have standing. Standing is only a procedural technicality that can be set aside depending on the importance of an issue. As taxpayers and citizens to be affected by the reach of the lotto system, petitioners have standing. No, the contract is illegal. The Court rules in the negative arguing that “whatever is not unequivocally
granted is withheld.” PCSO cannot share the franchise in any way. The contract’s nature can be understood to form the intent of the parties as evident in the provisions of the contract. Article 1371 of the CC provides that the intent of contracting parties are determined in part through their acts. The only contribution PCSO will be giving is the authority to operate. All risks are to be taken by the lessor; operation will be taken by the PCSO only after 8 years. Further proof are: a. Payment of investment acts in the even of contract suspension / breach b. Rent not fixed at 4.9% and can be reduced given that all risks are borne by the lessor c. Prohibition against PGMC involvement in competitor games; strange if gaming is PGMC; business d. Public stock requirement of 25% in 2 years, which is unreasonable for a lease contract. It indicates that PGMC is the operator and the condition an attempt to increase public benefit through public involvement. e. Escrow deposit may be used as performance bond. f. PGMC operation evident in personnel management, procedural and coordinating rules set by the lessor. g. PCSO authority to terminate contact upon PGMC insolvency The contract indicates that PCSO is the actual lessor of the authority to operate given the indivisible community between them. Wherefore, Petition granted. Contract invalid and TRO made permanent Cruz, Concurring: The respondent was not able to prove the allegations that the contract was intentionally crafted to appear to be a lease. PCSO cannot operate without the collaboration of PGMC. The rental fee underscores the PGMC interest in the success of the venture, since their income depends on the degree of success. The transaction is immoral insofar as the activity is fixed by the foreigners on us with government approval. Feliciano concurring: Locus standi reflects an important constitutional principle: the separation of powers. The rules is that those assailing statute must show the adverse effect of its implementation has on them. But it is not a rigid rule. It is not enough that the court invoke public mistrust or national concern in brushing aside the requirement, as it would mean standing is dependent on a majority and is far from being intellectually satisfying. While no principle has been set for determining standing, the guidelines are: 1. character of funds involved (is it public in nature? in this case, the funds are from the general populace); taxpayer with right to see taxes used properly. 2. clear disregard of a law prohibiting certain actions of a public agency – the judicial conclusion on case merits interact with the notion of locus standi
lack of any party with a more direct and specific interest. In this case, no other government agency filed suit. wide impact or implementation; in this case, nationwide.
Padilla, concurring: Gambling is immoral. Petitioner must show a clear, personal or legal right violated by the assailed law, but the requirement must be relaxed in the face of paramount national interest. The PCSO-PGMC contract is clearly a joint venture as each party contributes its share in the enterprise or project – PCSO contributes the market. Melo, dissenting: The petition must be dismissed for lack of standing. Petitioners are without a personal stake in the outcome of the controversy; to invoke public interest is too broad and indeterminate. Their capacity as taxpayers does not give them standing; a taxpayer suit can arise only w\hen public funds derived from taxation are improperly disbursed. PCSO is not a revenue-collecting fund and as such no public funds are involved. The funds in question are corporate in nature and will not fo into the National Treasury. If the petition is entertained, it may give rise to nuisance suits. Puno, dissenting: The requirement of standing to sue inheres from the definition of judicial power. It is not merely a technical rule. Section 1, Article 8 of Consti outlines the requirements to be satisfied / complied with before coming to court: a) actual case / controversy b) question of constitutionality raised by the proper party with actual or potential injury c) question raised ASAP d) judicial decision on question raised necessarily to determine the case. Even a relaxation of the requirement of standing does not mean all cases should be heard. Petitioner has no standing because: a) not part of the contract b) petitioners are not personally injured; they won’t even play c) no ordinary tax is involved or tax money used, given that PGMC assumes all risk d) an action on behalf of other parties must exhibit personal injury and a need to prevent the erosion of a third party right The invocation of constitutional rights and the allegation of vioalation are untenable. Section 1 Article 13(enhance right to dignity and equality through property regulation) is a mere policy direction for the legislative, reminding them to prioritize certain concerns. Section 11, Aticle 12 (60% Filipino ownership) violations cannot be determined by the Court as PGMC has not been proven to be foreign-owned or controlled. The rulings in DE GUIA VS. COMELEC the Court treated standing as a procedural rule when in fact it is a constitutional requirement under Sec 1, Art. 8. In FLAST VS. COHEN standing was shown to focus on the party and not the issue. Standing cannot be granted simply because others cannot come to court. The taxpayer suit
is without legal basis as the PCSO is a quasi-public corporation where taxpayer derivative suits cannot be recognized. The majority struck down the contract on the basis of a statute, but invoked National Importance for overlooking standing. There are no Constitutionallybased arguments. Power unused would be better than power misused. Petition denied. Vitug, Separate Opinion: Tax Payer suits are recognized only insofar as public funds from taxation are misused. Locus standi is not merely a procedural rule but the essence of jurisdiction. The petition strikes at factual issues and requires evidence. The petitioner’s claim that lottery being a game of chance is a crime against morals in the REVISED PENAL CODE is misplaced. The Court has not power to ignore legal mandates. RA 1169 Section 1 authorizes PCSO to conduct lotteries. Petition dismissed. Kapunan, dissenting: There is a need to comply with standards before petition can be recognized. The judiciary has power to decide on cases only when litigants with real interests at stake file complaints in accordance with law. The funds in questions are generated from sources other than taxation / public funds. The Court must respect the other branches of government; national interest is not enough reason to encroach on their powers. The judicial power is to check, not to supplant those powers of elected representatives. There is no constitutional issue involved; the question of the contract’s validity should have been brough before the lower courts. Petition denied.