2 - 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 Office,
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 defined as
the opinion delivered on a former appeal. More specifically, 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 first judgment is not
dependent upon its finality. The first judgment is generally, if not universally,
not final. It relates entirely to questions of law, and is confined in its
operation to subsequent proceedings in the same case." (Municipality of
CD Technologies Asia, Inc. © 2022 cdasiaonline.com
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.
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. Galindo, 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 final 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 official
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 difficult
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 benefited 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 sufficient, 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 filed in any form or manner against public
officials 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 find 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 fit." (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 Office to raise funds for charity, Congress
authorized the Philippine Charity Sweepstakes Office (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 fixed
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 first 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 defined 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
profit 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
profit 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 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.
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 definite or indefinite (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 flexible 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.
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:

OFFICE; 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 first 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 first
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 first Kilosbayan case faithfully reflected 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 profit-
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 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 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 first 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 first proposition finds 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 "financial 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 first
proposition fails to take into account actual commercial practice already
reflected 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 difficulty
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 finally the question of whether or not
the original contract between PCSO and PGMC which the Court in the first
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 first 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 fixed at a specified
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 fixed and absolute
figure, although a floor 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 fixed 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 fixed 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 figures 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 justifies the adoption of the
rental provision found both in the old contract and in the ELA giving PGMC a
fixed 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
final judgment of the highest court is a final 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 official 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 first 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 specific 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 confines in private interest
litigations.
5. ID.; ID.; REAL PARTY-IN-INTEREST; NO DEFINED RULE FOR ITS
DETERMINATION. — There is no clearly defined rule by which one may
determine who is or is not real party in interest, nor has there been found
any concise definition 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 file 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 official'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 first 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
file 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 first 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 final and executory. There is, to be sure, an attempt to show that
the subject matter in the first 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 suffice 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
floated 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 Office, 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 finally
adjudged in the prior judgment shall be conclusive between the parties in
the case now before us and that definitely 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 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 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.
OFFICE; CANNOT HOLD AND CONDUCT CHARITY SWEEPSTAKES RACES,
LOTTERIES AND OTHER SIMILAR ACTIVITIES IN COLLABORATION,
ASSOCIATION OR JOINT VENTURE WITH ANY OTHER PARTY. — In the first
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. 11 69, 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
definitions 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 first 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 first 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 first lotto case.
By their conduct, the parties admitted that it is, for which reason the PGMC
and the PCSO submitted in the first 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 final does not detract from
the fact that this case is but a continuation of the first 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 first 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 first nullified 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 first 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
o f 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 fleshed 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 find in this case — otherwise, the
becoming virtue of predictability which is expected from this Court would be
immeasurably affected and the public's confidence 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 benefited 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 defined issues, I find 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,
a n d 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 clarification; he readily accepted the
amendment. Nobody from the floor interpellated me for an explanation or
clarification. 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 first 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.
OFFICE (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 nullified
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 modifications on rental, which include an option to
purchase. The PGMC and the PCSO conveniently forgot that per this Court's
findings in the first 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 confirmed
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 flexible
rate based on a percentage of the gross amount of ticket sales, payable bi-
weekly, with an annual minimum rental fixed 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
nullified 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 specific mention of
supplies in subparagraphs (a), (b), and (e) was clearly intended to exclude
therefrom materials and equipment, and the specific 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 first 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 first 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 qualifies 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 specified property from another person, if he chooses, at any
time within the agreed period, at a fixed 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."
OFFICE (PCSO); EQUIPMENT LEASE CONTRACT (ELA); CONTRACT GROSSLY
DISADVANTAGEOUS TO THE PCSO. — A comparison between the nullified
contract and the assailed ELA to prove that the latter is grossly
disadvantageous to the PCSO is not at all hampered by any perceived
difficulty. 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 insufficient to pay the entire prize money." Under the
assailed ELA, however, the PGMC is entitled to receive a flexible 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 qualified 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 insufficient 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. Teofisto 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 Office (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 fixed rental
thus computed, the PCSO agrees to pay the deficiency 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 first 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 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. 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 filed 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 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, 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 first 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 five 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 official 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 defined as the opinion delivered on a
former appeal. More specifically, 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 first 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 definite 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 first judgment is not
dependent upon its finality. The first judgment is generally, if not universally,
not final. It relates entirely to questions of law, and is confined 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. Galindo, 108 Phil. 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 confined to situations where the matter raised in the second suit is
identical in all respects with that decided in the first 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 first
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 final 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 first 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 official 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 difficult constitutional questions."
(Baker v. Carr, 369 U.S. 186, 7 L. Ed. 2d 633 (1962))
Accordingly, in Valmonte v. Philippine Charity Sweepstakes Office , 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 indefinite 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 benefited 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 specifically, 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 sufficient, 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 filed in any form or manner against public officials 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 fixed 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 fixed rental computed at P35,000.00 per terminal in
commercial operation per annum, provided, further that the
annual minimum fixed 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 fixed 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 first
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 first 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 fixed 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 figure 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 fixing 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 reflected as a percentage

of the net receipts (which is defined 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, specifically since
the amount of gross receipts can only be estimated.
c. Large fixed sums of money for major operating costs, such
as fixed rental for equipment, can very well exceed the
maximum percentages fixed by law, specifically if actual
gross receipts are lower than estimates for budgetary
purposes.
d. The problem of budgeting based on estimates is even
more difficult 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 fixed 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 first 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 defined 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 defined 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 find 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 justifiable issue. Gambling is not illegal per se . . . . It is left to Congress
to deal with activity as it sees fit." (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 Office to raise funds for charity, Congress authorized
the Philippine Charity Sweepstakes Office (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 ofR.A. No. 1169, as
amended by B.P. Blg. 42: cdta
Sec. 1. The Philippine Charity Sweepstakes Office. — The

Philippine Charity Sweepstakes Office, hereinafter designated the
Office, 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 profit-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 profit 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 profit 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 profit-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 sold 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 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.
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 first 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 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 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 specific 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 first 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 first
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 specific 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 first specific 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 first contract and the ELA,
showing such differences. Petitioners do not deny the objectionable
provisions in the first 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 fixed 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 definite 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
flexible 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 find 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
fi r s t Kilosbayan case. 1 All the factors which, to my mind, pressed for
recognition of locus standi on the part of petitioners in the first 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: firstly, 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 first 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 first 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 first Kilosbayan case faithfully reflected 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 Office . — The
Philippine Charity Sweepstakes Office, hereinafter designated the
Office, 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 profit-oriented, by itself
o r 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 profit-
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 difficulties 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 officials of PCSO. Thirdly, the final 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 first proposition, it is respectfully submitted, finds 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 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: . . ." (Italics supplied)
cdasia
It is worthy of special note that the above opening paragraph doesnot

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 "financial 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 first proposition fails to take into account actual commercial
practice already reflected 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 difficulty 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 finally the question of whether or not the original
contract between PCSO and PGMC which the Court in the first 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 fixed at a specified 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 fixed and absolute figure, although a floor 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 fixed 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 first 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 fixed 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 figures 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 justifies the adoption of the
rental provision found both in the old contract and in the ELA giving PGMC a
fixed 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 flowing 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 first place,
basically unreal and merely cosmetic flourishes 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 difficult 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 first 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. 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 final 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 first proposition has
never been of concern to or questioned by any member of this Court
throughout its hegira from the first 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 first 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 filed 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 first 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 first 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 first, 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
ramifications of the original "standing to sue" objection raised in the first
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 first 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 first appeal cannot be reexamined in the second appeal. If
so, then what is necessarily challenged in the first 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 unverified
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 final judgment of the
highest court is a final 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
specific 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 official 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 first 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 first 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 confines 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 simplifies
procedures in actions at law. . . There is no clearly defined rule by which one
may determine who is or is not real party in interest, nor has there been
found any concise definition 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. 10
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 file 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 official'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 first 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 file 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 first 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. 11
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 final and executory. There
is, to be sure, an attempt to show that the subject matter in the first 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 suffice 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 floated 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 Office, 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 finally
adjudged in the prior judgment shall be conclusive between the parties in
the case now before us, and that definitely 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, 12 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 benefit of a duly
clarified 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 findings 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
first-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 find the same
to be an amply sufficient 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 unqualified 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
stultification. 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 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. 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 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 certainly 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.
It must be noted that the decision in the first 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 first 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 find 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 ramifications 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 specific 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 first 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 first lotto
case on the issue of locus standi, unqualifiedly 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 first 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 defined 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 first 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 profit-
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 profit-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 final 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 definitely 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 definition 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 ofres judicata, the
PCSO and the PGMC are bound by the ruling in the first 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 first lotto case.
By their conduct, the parties admitted that it is, for which reason the PGMC
and the PCSO submitted in the first 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 final does not detract from
the fact that this case is but a continuation of the first 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 first 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 first nullified
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 nullified 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 first 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
fleshed 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." 10 Abandonment thereof must be based only on
strong and compelling reasons which I do not find in this case otherwise, the
becoming virtue of predictability which is expected from this Court would be
immeasurably affected and the public's confidence 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 first 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
first 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 first 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 defined. 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 significant
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 defined 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 justified 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 first 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, 16 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 officials 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 first 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
definitely 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 benefited 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 first 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 Office 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 first 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 firemen. Every one has the right and
responsibility to prevent the fire 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 specified
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
specified in its Charter. The funds thus raised are public funds. This Court
must take judicial notice of these facts.
Before I take up the defined issues, I find 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 clarification; 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 first 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 defined issues, my answers are in the affirmative. 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, 17 series of 1994, resolving as follows:
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 confirmation 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 confirmation 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 Office (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 Prequalification
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 Office 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 benefit 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
justifications 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 first justification 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
nullified by this Court, such nullification necessarily implied the
nullification 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 outfit 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 defined 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. 20 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." 21
I am not persuaded. To my mind, the parties only performed a
superficial surgery on the nullified 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 modifications on
rental, which include an option to purchase. The PGMC and the PCSO
conveniently forget that per this Court's findings in the first 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 confirmed 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 specific 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 first 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 superficial surgery on
the text of the nullified 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 difficult 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

difficult 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 Office 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. 22
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. 23
The Rental Clause provides for a flexible rate based on a percentage of
the gross amount of ticket sales, payable bi-weekly, with an annul minimum
rental fixed 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 fixed rental computed at P35,000.00 per
terminal in commercial operation per annum, provided, further that the
annual minimum fixed 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 fixed 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
first 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 nullified 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 nullified contract. I am
convinced that such rate was pre-determined to approximate the profits
which the PGMC expected to realize under the nullified 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. 24
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 first 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 definition in Annex "A" thereof, the "associated or incidental
hardware equipment, furnishing and fixtures, 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 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. 25 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 nullified 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 law, decree, executive order or other issuances to the
furnishing supplies, materials and equipment to the government of any
situations: aisadc
The Court agrees with DOJ Opinion No. 4, series of 1995, which states
that the bidding conducted for the nullified 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 law, decree, executive order or other issuances to the
furnishing supplies, materials and equipment to the government of any
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 specific mention of
supplies in subparagraphs (a), (b), and (e) was clearly intended to exclude
therefrom materials and equipment, and the specific 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 first 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 superfluous, void or insignificant, 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 definitions 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 first 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
Office 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 certification 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 qualifies 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 specified
property from another person, if he chooses, at any time within the agreed
period, at a fixed 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 nullified contract and the assailed ELA

to prove that the latter is grossly disadvantageous to the PCSO is not at all
hampered by any perceived difficulty. As to the almost unrestricted benefits
and advantages which the PCSO were supposed to obtain under the former,
the following findings 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 five (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 offices,
furnishings and fixtures, 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
fifteen 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
affiliates, 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 efficiently 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

flexible 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 qualified 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 insufficient
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 flawed. 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 Office (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 finally 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 nullified 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 definition, for the first 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 fifteen 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 fidelity 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 fields
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 difficult 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).

2 - Kilosbayan, Inc. v. Morato

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2 - Kilosbayan, Inc. v. Morato

Uploaded by

Copyright:

Available Formats

EN BANC

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

KILOSBAYAN, INCORPORATED, JOVITO R. SALONGA, CIRILO

Jovito R. Salonga, Fernando Santiago and Emilio C . Capulong, Jr., for

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

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

1. ADMINISTRATIVE LAW; PHILIPPINE CHARITY SWEEPSTAKES

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

DAVIDE, JR., J., dissenting opinion:

1. REMEDIAL LAW; SUPREME COURT; SUDDEN REVERSAL OF

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

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

On January 25, 1995 the parties signed an Equipment Lease

In the operation of the lottery, the PCSO is to employ its own

3. THE AMENDED EQUIPMENT LEASE AGREEMENT IS NULL

"It may be stated as a rule of general application that, where the

"In accordance with the general rule stated in Section 1821,

As this Court explained in another case. "The law of the case, as

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

CD Technologies Asia, Inc. © 2022 cdasiaonline.com

xxx xxx xxx

The question whether the petitioners have standing to question the

Standing is a special concern in constitutional law because in some

We apprehend no diﬀerence between the petitioner in Valmonte and

The State recognizes the vital role of the youth in nation-building

The state shall give priority to education, science and

(Memorandum for Petitioners, p. 7) cdt

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

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

To be sure there is nothing unusual in ﬁxing the rental as a certain

In the PCSO charter, operating cost are reﬂected as a percentage

LESSEE shall bear the costs of maintenance and necessary

Finally, because the term "Equipment" is deﬁned in the ELA as

Sec. 1. The Philippine Charity Sweepstakes Oﬃce. — The

A. To hold and conduct charity sweepstakes races, lotteries

B. Subject to the approval of the Minister of Human

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

SUBJECT TO THE APPROVAL OF THE MINISTER OF HUMAN

CD Technologies Asia, Inc. © 2022 cdasiaonline.com

May I read the paragraph, Mr. Speaker.

IV. REQUIREMENT OF PUBLIC BIDDING

a. Whenever the supplies are urgently needed to meet an

d. Whenever the supplies under procurement have been

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

(3) that the Equipment Lease Agreement of January 25, 1995 is

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

In my separate concurring opinion in the ﬁrst lotto case (G.R. No.

1. whether the challenged Equipment Lease Agreement (ELA for

On the ﬁrst speciﬁc issue, no less than petitioners admit in their

A lease is a contract whereby one of the parties binds himself to give

Neither can petitioners' arguments that certain provisions in the ELA

As to whether or not the ELA is grossly disadvantageous to the

I join the penetrating dissenting opinions written by my esteemed

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

My submission, essayed with great respect and reluctance, is that Mr.

B. Subject to the approval of the Minister of Human

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

I would, therefore, respectfully suggest that the "except" clause in

It is worthy of special note that the above opening paragraph doesnot

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

Thus, the questions which are provoked by scrutiny of the economic

I am constrained to respectfully dissent from the majority opinion

Coming to the real task at hand, we have this resuscitation of the