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."

On January 25, 1995, the parties signed an Equipment Lease Agreement (hereafter 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 sales 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 allotted to charity.  (R.A. No. L169, §6 (B))

The term of the lease 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)

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 arising from any cause and for the cost of their maintenance and repair.  (Pars. 7-8)

Upon the expiration of the lease, 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.

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 LEASE 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.
   
   
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) EXPENDITURES 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 COA CIRCULAR NO. 85-55-A.
   

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

For reasons set forth below, we hold that petitioners have no cause against respondents and therefore their petition should be dismissed.


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 Congress suing as such and as "taxpayers 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.

Neither the doctrine of stare decisis nor that of "law of the case," nor that of conclusiveness 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.

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 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." (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 readjudicated therein.  (5 C.J. S. 1267)

"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 case is held to be the law of the case whether that decision is right or wrong, the remedy of the party deeming himself aggrieved being 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)"

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 and determined in a former suit cannot again be drawn in question in any future action between the same parties involving a different cause of action. (Peñalosa v. Tuason, 22 Phil. 303, 313 (1912); Heirs of Roxas v. Galido, 108 Phil. 582 (1960))

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 COUNTS 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 his interest in a patent in 1928 and in a suit it was determined that 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 paid 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 proceeding and where the controlling facts and applicable legal rules remain unchanged." (333 U.S. at 59-600, 92 L.Ed. at 907) Consequently, "if the relevant facts in the two cases are separate, even though they 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 Issue Preclusion is authoritatively formulated in Restatement of the Law 2d, on Judgements, 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; . . .

Illustration:


2.  A brings an action against the municipality of B for tortious injury.  The court sustains B's defense of sovereign immunity and dismisses the action.  Several years later A brings a 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 of sovereign 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 §29, Comment i.

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.

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, §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))

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 that 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.

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 Rule 3, §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 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 benefitted 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))

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 enjoyment by all the people of the blessings of democracy.  (§5)

The natural and primary right and duty of parents in the rearing of the youth for civic efficiency and the development of moral character shall receive the support of the Government. (§12)

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.  (§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.  (§17)


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 a legal right which has been violated.

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)

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 the 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 RULERS 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.

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, Sec. 12) In addition, the Solicitor 6eneral 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.  (Ruler 66, §2(a)(d))

We now turn to the merits of petitioners' claim constituting their cause of action.


This Court ruled in the previous case that the Contract of Lease, which the PCSO had entered into with the PGMC on Decembers 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:

(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 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 or 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.

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 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 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


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:

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 a 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 lease 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)

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 a "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 contact the rental was expressed in terms of percentage of the net proceeds from the sale of tickets which was held to be characteristic of a joint venture agreement. It was the fact that, in the prior case, he 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 this 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 expenditures.  (R.A. No. 1169, §6) As the Solicitor General points out in his Comment filed in behalf of the PCSO:

In the PCSO charter, operating costs 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 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:

1. The 4.3% rental rate for the equipment is well within the maximum of 15% net receipts fixed by law;
   
   
2. 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.
   
   
3. 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.
   
   
4. 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.
   

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 rentals are treated in the charter of the agency (R.A. Not 1169, §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

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.

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 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.

Finally, because the term "Equipment" is defined in tie 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 association 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 of operation.

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 contact 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 SARA 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 §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 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.

It will be helpful to quote the pertinent provisions of R.A. No. 1169, as amended by B.P. Blg. 42:

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.

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 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 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.

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 ands 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 matter of §1(B) is the authority or the PCSO to invest in certain projects for profit in order to enable it to expand its health programs, 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 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 §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 apples whether the PCSO makes the investment alone or with others.

The contrary construction given to §1 in the previous decision is based on remarks made by then Assemblyman, now Mr. Justice, Davide during the deliberations on what lainter became B.P. Blg. 42, amending R.A. No. 1169.  It appears, however, that the remarks 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 §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 §1, as the logical place for them 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 investment. . . ." until the words "charitable grants" on line 23 and in lieu thereof insert the following:

SUBJECT TO THE APPROVAL OF THEE MINISTER OF HUMAN SETTLEMENTS, TO ENGAGE IN HEALTH-ORIENTED INVEST­MENTS, PROGRAMS, PROJECTS AND ACTIVITIES WHICH MAY BE PROFIT-ORIENTED, BY ITSELF OR IN COLLABORATION, ASSOAIATION, 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 ASSISTANAE AND SERVICES AND/OR CHARITABLE GRANTS.

MR. DAVIDE.  Mr. Speaker.


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.


MR. ZAMORA.  We accept the amendment, Mr. Speaker.

MR. DAVIDE.  Thank you, Mr. Speaker.

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 ad the following proviso: PROVIDED, THAT SUCH INVESTMENTS, PROGRAMS, PROJECTS AND ACTIVITIES SHALL NOT COMPETE WITH THE PRIVATE SECTOR IN AREAS WHERE PRIVATE INVESTMENTS ARE ADEQUATE.


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.

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 PRIVATE INVESTMENTS ARE ADEQUATE AS MAY BE DETERMINED BY THE NATIONAL AND ECONOMIC DEVELOPMENT AUTHORITY."

THE SPEAKER.  Is there any objection to the amendment?

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 investment activities "provided that such investments will not compete with the private sector in areas where investments are adequate . . ."

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 Gentleman 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."

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 §1 in the previous decision is insupportable in light of both the text of §1 and the deliberations of the Batasang Pambansa which enacted the amendatory law.

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:

§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.

1. Whenever the supplies are urgently needed to meet an emergency which may involve the loss of, or danger to, life and/or property:
   
   
2. 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;
   
   
3. 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;
   
   
4. 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:
   
   
5. 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
   
   
6. Whenever the purchase is made from an agency of the government.

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, §1 applies only to contracts for the purchase of supplies, materials and equipment.  It does not refer to contracts of lease of equipment like the ELA.  The provisions on lease are found in §§ 6 and 7 but they refer to the lease of privately-owned buildings or spaces for government use or of government-owned buildings or spaces for private use, and these provisions do not require public bidding.  These provisions state:

Sec. 6.  Guidelines for Lease Contracts. - Any provisions 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 the rental rates involved.

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 lease 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 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.

Even assuming that §1 of E.O. No. 301 applies to lease contracts, the reference to "supplies" in the exceptions can not be 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 §1(a) is limited to the furnishing of "supplies" that are urgently needed.

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 contract 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 risks and losses which might be 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.

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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, §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;

(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 §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 public bidding as a condition for its validity.

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.
Feliciano, Regalado, Davide, Jr., Romero, and Bellosillo, JJ., dissenting opinion.
Padilla and Vitug, JJ., separate concurring opinion.
Narvasa, C.J., no part.

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^[1] The doctrine of "conclusiveness of judgment" his 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, §49(c), while the second (res judicata or preclusion of claims) is found in Rule 39, §49(b).

^[2] RECORD OF THE BATASAN, Sept. 6, 1979, 1006-07.  (Emphasis added)


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