Kilosbayan vs. Morato (G.R. No. 118910.

July 17, 1995)

Ponente: MENDOZA

FACTS:

[T]his suit was filed seeking to declare the ELA invalid on the ground that it is substantially the same as
the Contract of Lease nullified in the first case [decision in G.R. No. 113375 (Kilosbayan, Incorporated v.
Guingona, 232 SCRA 110 (1994)) invalidating the Contract of Lease between the Philippine Charity
Sweepstakes Office (PCSO) and the Philippine Gaming Management Corp. (PGMC)].

Petitioners maintain (1) that the Equipment Lease Agreement (ELA) is a different lease contract with
none of the vestiges of a joint venture which were found in the Contract of Lease nullified in the prior
case; (2) that the ELA did not have to be submitted to a public bidding because it fell within the
exception provided in E.O. No. 301, §1 (e); (3) that the power to determine whether the ELA is
advantageous to the government is vested in the Board of Directors of the PCSO; (4) that for lack of
funds the PCSO cannot purchase its own on-line lottery equipment and has had to enter into a lease
contract; (5) that what petitioners are actually seeking in this suit is to further their moral crusade and
political agenda, using the Court as their forum.

ISSUE:

Whether or not the ELA between the Philippine Charity Sweepstakes Office and the Philippine Gaming
Management Corp. is invalid.

HELD:

NO. Petition for prohibition, review and/or injunction was dismissed. Pertinent to the issue, the SC held:

xxx

(3) that the ELA is valid as a lease contract under the Civil Code and is not contrary to the charter of the
Philippine Charity Sweepstakes Office;

(4) that under §1(A) of its charter (R.A. 1169), the Philippine Charity Sweepstakes Office has authority to
enter into a contract for the holding of an on-line lottery, whether alone or in association, collaboration
or joint venture with another party, so long as it itself holds or conducts such lottery; and

(5) That the Equipment Lease Agreement (ELA) in question did not have to be submitted to public
bidding as a condition for its validity.

RATIO:

E.O. No. 301, §1 applies only to contracts for the purchase of supplies, materials and equipment. It does
not refer to contracts of lease of equipment like the ELA. The provisions on lease are found in §§ 6 and 7
but they refer to the lease of privately-owned buildings or spaces for government use or of government-
owned buildings or spaces for private use, and these provisions do not require public bidding. It is thus
difficult to see how E.O. No. 301 can be applied to the ELA when the only feature of the ELA that may be
thought of as close to a contract of purchase and sale is the option to buy given to the PCSO. An option
to buy is not of course a contract of purchase and sale.

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.

Novermber:

ssue:

whether the petitioner has the requisite personality to question the validity of the contract in
this case

Held:

Yes. Kilosbayan’s status as a people’s organization give it the requisite personality to

question the validity of the contract in this case. The Constitution provides that “the State shall
respect the role of independent people’s organizations to enable the people to pursue and
protect, within the democratic framework, their legitimate and collective interests and
aspirations through peaceful and lawful means,” that their right to “effective and reasonable
participation at all levels of social, political, and economic decision-making shall not be abridged.”

These provisions have not changed the traditional rule that only real parties in interest or those
with standing, as the case may be, may invoke the judicial power. The jurisdiction of the Court,
even in cases involving constitutional questions, is limited by the “case and controversy”
requirement of Art. VIII, §5. This requirement lies at the very heart of the judicial function. It is
what differentiates decision-making in the courts from decision-making in the political
departments of the government and bars the bringing of suits by just any party.

It is nevertheless insisted that this Court has in the past accorded standing to taxpayers
and concerned citizens in cases involving “paramount public interest.” Taxpayers, voters,
concerned citizens and legislators have indeed been allowed to sue but then only (1) in cases
involving constitutional issues and (2) under certain conditions. Petitioners do not meet these
requirements on standing.

Taxpayers are allowed to sue, for example, where there is a claim of illegal disbursement of
public funds. or where a tax measure is assailed as unconstitutional. Voters are allowed to
question the validity of election laws because of their obvious interest in the validity of such
laws. Concerned citizens can bring suits if the constitutional question they raise is of
“transcendental importance” which must be settled early. Legislators are allowed to sue to
question the validity of any official action which they claim infringes their prerogatives qua
legislators.
Petitioners do not have the same kind of interest that these various litigants have. Petitioners
assert an interest as taxpayers, but they do not meet the standing requirement for bringing
taxpayer’s suits as set forth in Dumlao v.Comelec, to wit:

While, concededly, the elections to be held involve the expenditure of public moneys, nowhere
in their Petition do said petitioners allege that their tax money is “being extracted and spent in
violation of specific constitutional protections against abuses of legislative power” or that there is
a misapplication of such funds by respondent COMELEC or that public money is being deflected
to any improper purpose. Neither do petitioners seek to restrain respondent from wasting public
funds through the enforcement of an invalid or unconstitutional law. Besides, the institution of a
taxpayer’s suit, per se, is no assurance of judicial review. The Court is vested with discretion as
to whether or not a taxpayer’s suit should be entertained.

Petitioners’ suit does not fall under any of these categories of taxpayers’ suits.

Thus, petitioners’ right to sue as taxpayers cannot be sustained. Nor as concerned citizens can
they bring this suit because no specific injury suffered by them is alleged. As for the petitioners,
who are members of Congress, their right to sue as legislators cannot be invoked because they
do not complain of any infringement of their rights as legislators.

July separate opinion

SEPARATE OPINIONS:

DAVIDE, dissenting

I register a dissenting vote.

I am disturbed by the sudden reversal of our rulings in Kilosbayan, Inc., et al. vs. Guingona, et al.
(hereinafter referred to as the first lotto case) regarding the application or interpretation of the
exception clause in paragraph B, Section 1 of the Charter of the PCSO (R.A.. No. 1169), as amended by
B.P. Blg. 442, and on the issue of locus standi of the petitioners to question the contract of lease
involving the on-line lottery system entered into between the Philippine Charity Sweepstakes Office
(PCSO) and the Philippine Gaming Management Corporation (PGMC). Such reversal upsets the salutary
doctrines of the law of the case, res judicata, and stare decisis. It puts to jeopardy the faith and
confidence of the people, specially the lawyers and litigants, in the certainty and stability of the
pronouncements of this Court. It opens the floodgates to endless litigations for re-examination of such
pronouncements and weakens this Court’s judicial and moral authority to demand from lower courts
obedience thereto and to impose sanctions for their opposite conduct.