G.R. No.

L-5279

October 31, 1955

PHILIPPINE
ASSOCIATION
OF
COLLEGES
AND
UNIVERSITIES,
ETC.,
vs.
SECRETARY OF EDUCATION and the BOARD OF TEXTBOOKS, respondents.

petitioner,

Manuel C. Briones, Vicente G. Sinco, Manuel V. Gallego and Enrique M. Fernando for petitioner.
Office of the Solicitor General Pompeyo Diaz and Assistant Solicitor General Francisco Carreon for
respondents.
BENGZON, J.:
The petitioning colleges and universities request that Act No. 2706 as amended by Act No. 3075 and
Commonwealth Act No. 180 be declared unconstitutional, because: A. They deprive owners of schools
and colleges as well as teachers and parents of liberty and property without due process of law; B.
They deprive parents of their natural rights and duty to rear their children for civic efficiency; and C.
Their provisions conferring on the Secretary of Education unlimited power and discretion to prescribe
rules and standards constitute an unlawful delegation of legislative power.
A printed memorandum explaining their position in extenso is attached to the record.
The Government's legal representative submitted a mimeographed memorandum contending that, (1)
the matter constitutes no justiciable controversy exhibiting unavoidable necessity of deciding the
constitutional questions; (2) petitioners are in estoppel to challenge the validity of the said acts; and
(3) the Acts are constitutionally valid.
Petitioners submitted a lengthy reply to the above arguments.
Act No. 2706 approved in 1917 is entitled, "An Act making the inspection and recognition of private
schools and colleges obligatory for the Secretary of Public Instruction." Under its provisions, the
Department of Education has, for the past 37 years, supervised and regulated all private schools in this
country apparently without audible protest, nay, with the general acquiescence of the general public
and the parties concerned.
It should be understandable, then, that this Court should be doubly reluctant to consider petitioner's
demand for avoidance of the law aforesaid, specially where, as respondents assert, petitioners suffered
no wrongnor allege anyfrom the enforcement of the criticized statute.
It must be evident to any one that the power to declare a legislative enactment void is one
which the judge, conscious of the fallability of the human judgment, will shrink from exercising
in any case where he can conscientiously and with due regard to duty and official oath decline
the responsibility. (Cooley Constitutional Limitations, 8th Ed., Vol. I, p. 332.)
When a law has been long treated as constitutional and important rights have become
dependent thereon, the Court may refuse to consider an attack on its validity. (C. J. S. 16, p.
204.)
As a general rule, the constitutionality of a statute will be passed on only if, and to the extent
that, it is directly and necessarily involved in a justiciable controversy and is essential to the
protection of the rights of the parties concerned. (16 C. J. S., p. 207.)
In support of their first proposition petitioners contend that the right of a citizen to own and operate a
school is guaranteed by the Constitution, and any law requiring previous governmental approval or
permit before such person could exercise said right, amounts to censorship of previous restraint, a

practice abhorent to our system of law and government. Petitioners obviously refer to section 3 of Act
No. 2706 as amended which provides that before a private school may be opened to the public it must
first obtain a permit from the Secretary of Education. The Solicitor General on the other hand points
out that none of the petitioners has cause to present this issue, because all of them have permits to
operate and are actually operating by virtue of their permits.1 And they do not assert that the
respondent Secretary of Education has threatened to revoke their permits. They have suffered no
wrong under the terms of lawand, naturally need no relief in the form they now seek to obtain.
It is an established principle that to entitle a private individual immediately in danger of
sustaining a direct injury as the result of that action and it is not sufficient that he has merely a
general to invoke the judicial power to determine the validity of executive or legislative action
he must show that he has sustained or is interest common to all members of the public. ( Ex
parte Levitt, 302 U. S. 633 82 L. Ed. 493.)
Courts will not pass upon the constitutionality of a law upon the complaint of one who fails to
show that he is injured by its operation. (Tyler vs. Judges, 179 U. S. 405; Hendrick vs. Maryland,
235 U. S. 610; Coffman vs. Breeze Corp., 323 U. S. 316-325.)
The power of courts to declare a law unconstitutional arises only when the interests of litigant
require the use of that judicial authority for their protection against actual interference, a
hypothetical threat being insufficient. (United Public Works vs. Mitchell, 330 U .S. 75; 91 L. Ed.
754.)
Bona fide suit.Judicial power is limited to the decision of actual cases and controversies. The
authority to pass on the validity of statutes is incidental to the decision of such cases where
conflicting claims under the Constitution and under a legislative act assailed as contrary to the
Constitution are raised. It is legitimate only in the last resort, and as necessity in the
determination of real, earnest, and vital controversy between litigants. (Taada and Fernando,
Constitution of the Philippines, p. 1138.)
Mere apprehension that the Secretary of Education might under the law withdraw the permit of one of
petitioners does not constitute a justiciable controversy. (Cf. Com. ex rel Watkins vs. Winchester
Waterworks (Ky.) 197 S. W. 2d. 771.)
And action, like this, is brought for a positive purpose, nay, to obtain actual and positive relief.
(Salonga vs. Warner Barnes, L-2245, January, 1951.) Courts do not sit to adjudicate mere academic
questions to satisfy scholarly interest therein, however intellectually solid the problem may be. This is
specially true where the issues "reach constitutional dimensions, for then there comes into play regard
for the court's duty to avoid decision of constitutional issues unless avoidance becomes evasion." (Rice
vs. Sioux City, U. S. Sup. Ct. Adv. Rep., May 23, 1995, Law Ed., Vol. 99, p. 511.)
The above notwithstanding, in view of the several decisions of the United States Supreme Court
quoted by petitioners, apparently outlawing censorship of the kind objected to by them, we have
decided to look into the matter, lest they may allege we refuse to act even in the face of clear violation
of fundamental personal rights of liberty and property.
Petitioners complain that before opening a school the owner must secure a permit from the Secretary
of Education. Such requirement was not originally included in Act No. 2706. It was introduced by
Commonwealth Act No. 180 approved in 1936. Why?
In March 1924 the Philippine Legislature approved Act No. 3162 creating a Board of Educational Survey
to make a study and survey of education in the Philippines and of all educational institutions, facilities
and agencies thereof. A Board chairmaned by Dr. Paul Munroe, Columbia University, assisted by a staff
of carefully selected technical members performed the task, made a five-month thorough and impartial

examination of the local educational system, and submitted a report with recommendations, printed as
a book of 671 pages. The following paragraphs are taken from such report:
PRIVATE-ADVENTURE SCHOOLS
There is no law or regulation in the Philippine Islands today to prevent a person, however
disqualified by ignorance, greed, or even immoral character, from opening a school to teach
the young. It it true that in order to post over the door "Recognized by the Government," a
private adventure school must first be inspected by the proper Government official, but a
refusal to grant such recognition does not by any means result in such a school ceasing to
exist. As a matter of fact, there are more such unrecognized private schools than of the
recognized variety. How many, no one knows, as the Division of Private Schools keeps records
only of the recognized type.
Conclusion.An unprejudiced consideration of the fact presented under the caption Private
Adventure Schools leads but to one conclusion, viz.: the great majority of them from primary
grade to university are money-making devices for the profit of those who organize and
administer them. The people whose children and youth attend them are not getting what they
pay for. It is obvious that the system constitutes a great evil. That it should be permitted to
exist with almost no supervision is indefensible. The suggestion has been made with the
reference to the private institutions of university grade that some board of control be
organized under legislative control to supervise their administration. The Commission believes
that the recommendations it offers at the end of this chapter are more likely to bring about the
needed reforms.
Recommendations.The Commission recommends that legislation be enacted to prohibit the
opening of any school by an individual or organization without the permission of the Secretary
of Public Instruction. That before granting such permission the Secretary assure himself that
such school measures up to proper standards in the following respects, and that the continued
existence of the school be dependent upon its continuing to conform to these conditions:
(1) The location and construction of the buildings, the lighting and ventilation of the rooms, the
nature of the lavatories, closets, water supply, school furniture and apparatus, and methods of
cleaning shall be such as to insure hygienic conditions for both pupils and teachers.
(2) The library and laboratory facilities shall be adequate to the needs of instruction in the
subjects taught.
(3) The classes shall not show an excessive number of pupils per teacher. The Commission
recommends 40 as a maximum.
(4) The teachers shall meet qualifications equal to those of teachers in the public schools of
the same grade.
xxx

xxx

xxx

In view of these findings and recommendations, can there be any doubt that the Government in the
exercise of its police power to correct "a great evil" could validly establish the "previous permit"
system objected to by petitioners? This is what differentiates our law from the other statutes declared
invalid in other jurisdictions. And if any doubt still exists, recourse may now be had to the provision of
our Constitution that "All educational institutions shall be under the supervision and subject to
regulation by the State." (Art. XIV, sec. 5.) The power to regulate establishments or business
occupations implies the power to require a permit or license. (53 C. J. S. 4.)

What goes for the "previous permit" naturally goes for the power to revoke such permit on account of
violation of rules or regulations of the Department.
II. This brings us to the petitioners' third proposition that the questioned statutes "conferring on the
Secretary of Education unlimited power and discretion to prescribe rules and standards constitute an
unlawful delegation of legislative power."
This attack is specifically aimed at section 1 of Act No. 2706 which, as amended, provides:
It shall be the duty of the Secretary of Public Instruction to maintain a general standard of
efficiency in all private schools and colleges of the Philippines so that the same shall furnish
adequate instruction to the public, in accordance with the class and grade of instruction given
in them, and for this purpose said Secretary or his duly authorized representative shall have
authority to advise, inspect, and regulate said schools and colleges in order to determine the
efficiency of instruction given in the same,
"Nowhere in this Act" petitioners argue "can one find any description, either general or specific, of
what constitutes a 'general standard of efficiency.' Nowhere in this Act is there any indication of any
basis or condition to ascertain what is 'adequate instruction to the public.' Nowhere in this Act is there
any statement of conditions, acts, or factors, which the Secretary of Education must take into account
to determine the 'efficiency of instruction.'"
The attack on this score is also extended to section 6 which provides:
The Department of Education shall from time to time prepare and publish in pamphlet form the
minimum standards required of primary, intermediate, and high schools, and colleges granting
the degrees of Bachelor of Arts, Bachelor of Science, or any other academic degree. It shall
also from time to time prepare and publish in pamphlet form the minimum standards required
of law, medical, dental, pharmaceutical, engineering, agricultural and other medical or
vocational schools or colleges giving instruction of a technical, vocational or professional
character.
Petitioners reason out, "this section leaves everything to the uncontrolled discretion of the Secretary of
Education or his department. The Secretary of Education is given the power to fix the standard. In plain
language, the statute turns over to the Secretary of Education the exclusive authority of the legislature
to formulate standard. . . .."
It is quite clear the two sections empower and require the Secretary of Education to prescribe rules
fixing minimum standards of adequate and efficient instruction to be observed by all such private
schools and colleges as may be permitted to operate. The petitioners contend that as the legislature
has not fixed the standards, "the provision is extremely vague, indefinite and uncertain"and for that
reason constitutionality objectionable. The best answer is that despite such alleged vagueness the
Secretary of Education has fixed standards to ensure adequate and efficient instruction, as shown by
the memoranda fixing or revising curricula, the school calendars, entrance and final examinations,
admission and accreditation of students etc.; and the system of private education has, in general, been
satisfactorily in operation for 37 years. Which only shows that the Legislature did and could, validly rely
upon the educational experience and training of those in charge of the Department of Education to
ascertain and formulate minimum requirements of adequate instruction as the basis of government
recognition of any private school.
At any rate, petitioners do not show how these standards have injured any of them or interfered with
their operation. Wherefore, no reason exists for them to assail the validity of the power nor the
exercise of the power by the Secretary of Education.

True, the petitioners assert that, the Secretary has issued rules and regulations "whimsical and
capricious" and that such discretionary power has produced arrogant inspectors who "bully heads and
teachers of private schools." Nevertheless, their remedy is to challenge those regulations specifically,
and/or to ring those inspectors to book, in proper administrative or judicial proceedingsnot to
invalidate the law. For it needs no argument, to show that abuse by the officials entrusted with the
execution of a statute does not per se demonstrate the unconstitutionality of such statute.
Anyway, we find the defendants' position to be sufficiently sustained by the decision in Alegra vs.
Collector of Customs, 53 Phil., 394 upon holding the statute that authorized the Director of Agriculture
to "designate standards for the commercial grades of abaca, maguey and sisal" against vigorous
attacks on the ground of invalid delegation of legislative power.
Indeed "adequate and efficient instruction" should be considered sufficient, in the same way as "public
welfare" "necessary in the interest of law and order" "public interest" and "justice and equity and
substantial merits of the case" have been held sufficient as legislative standards justifying delegation
of authority to regulate. (See Taada and Fernando, Constitution of the Philippines, p. 793, citing
Philippine cases.)
On this phase of the litigation we conclude that there has been no undue delegation of legislative
power.
In this connection, and to support their position that the law and the Secretary of Education have
transcended the governmental power of supervision and regulation, the petitioners appended a list of
circulars and memoranda issued by the said Department. However they failed to indicate which of
such official documents was constitutionally objectionable for being "capricious," or pain "nuisance";
and it is one of our decisional practices that unless a constitutional point is specifically raised, insisted
upon and adequately argued, the court will not consider it. (Santiago vs. Far Eastern, 73 Phil., 408.)
We are told that such list will give an idea of how the statute has placed in the hands of the Secretary
of Education complete control of the various activities of private schools, and why the statute should
be struck down as unconstitutional. It is clear in our opinion that the statute does not in express terms
give the Secretary complete control. It gives him powers to inspect private schools, to regulate their
activities, to give them official permits to operate under certain conditions, and to revoke such permits
for cause. This does not amount to complete control. If any of such Department circulars or
memoranda issued by the Secretary go beyond the bounds of regulation and seeks to establish
complete control, it would surely be invalid. Conceivably some of them are of this nature, but besides
not having before us the text of such circulars, the petitioners have omitted to specify. In any event
with the recent approval of Republic Act No. 1124 creating the National Board of Education,
opportunity for administrative correction of the supposed anomalies or encroachments is amply
afforded herein petitioners. A more expeditious and perhaps more technically competent forum exists,
wherein to discuss the necessity, convenience or relevancy of the measures criticized by them. (See
also Republic Act No. 176.)
If however the statutes in question actually give the Secretary control over private schools, the
question arises whether the power of supervision and regulation granted to the State by section 5
Article XIV was meant to include control of private educational institutions. It is enough to point out
that local educators and writers think the Constitution provides for control of Education by the State.
(See Tolentino, Government of the Philippine Constitution, Vol. II, p. 615; Benitez, Philippine Social Life
and Progress, p. 335.)
The Constitution (it) "provides for state control of all educational institutions" even as it enumerates
certain fundamental objectives of all education to wit, the development of moral character, personal
discipline, civic conscience and vocational efficiency, and instruction in the duties of citizenship.
(Malcolm & Laurel, Philippine Constitutional Law, 1936.)

The Solicitor General cities many authorities to show that the power to regulate means power to
control, and quotes from the proceedings of the Constitutional Convention to prove that State control
of private education was intended by the organic law. It is significant to note that the Constitution
grants power to supervise and to regulate. Which may mean greater power than mere regulation.
III. Another grievance of petitionersprobably the most significantis the assessment of 1 per cent
levied on gross receipts of all private schools for additional Government expenses in connection with
their supervision and regulation. The statute is section 11-A of Act No. 2706 as amended by Republic
Act No. 74 which reads as follows:
SEC. 11-A. The total annual expense of the Office of Private Education shall be met by the
regular amount appropriated in the annual Appropriation Act: Provided, however, That for
additional expenses in the supervision and regulation of private schools, colleges and
universities and in the purchase of textbook to be sold to student of said schools, colleges and
universities and President of the Philippines may authorize the Secretary of Instruction to levy
an equitable assessment from each private educational institution equivalent to one percent of
the total amount accruing from tuition and other fees: . . . and non-payment of the assessment
herein provided by any private school, college or university shall be sufficient cause for the
cancellation by the Secretary of Instruction of the permit for recognition granted to it.
Petitioners maintain that this is a tax on the exercise of a constitutional rightthe right to open a
school, the liberty to teach etc. They claim this is unconstitutional, in the same way that taxes on the
privilege of selling religious literature or of publishing a newspaperboth constitutional privileges
have been held, in the United States, to be invalid as taxes on the exercise of a constitutional right.
The Solicitor General on the other hand argues that insofar as petitioners' action attempts to restrain
the further collection of the assessment, courts have no jurisdiction to restrain the collection of taxes
by injunction, and in so far as they seek to recover fees already paid the suit, it is one against the
State without its consent. Anyway he concludes, the action involving "the legality of any tax impost or
assessment" falls within the original jurisdiction of Courts of First Instance.
There are good grounds in support of Government's position. If this levy of 1 per cent is truly a mere
feeand not a taxto finance the cost of the Department's duty and power to regulate and supervise
private schools, the exaction may be upheld; but such point involves investigation and examination of
relevant data, which should best be carried out in the lower courts. If on the other hand it is a tax,
petitioners' issue would still be within the original jurisdiction of the Courts of First Instance.
The last grievance of petitioners relates to the validity of Republic Act No. 139 which in its section 1
provides:
The textbooks to be used in the private schools recognized or authorized by the government
shall be submitted to the Board (Board of Textbooks) which shall have the power to prohibit the
use of any of said textbooks which it may find to be against the law or to offend the dignity and
honor of the government and people of the Philippines, or which it may find to be against the
general policies of the government, or which it may deem pedagogically unsuitable.
This power of the Board, petitioners aver, is censorship in "its baldest form". They cite two U. S. cases
(Miss. and Minnesota) outlawing statutes that impose previous restraints upon publication of
newspapers, or curtail the right of individuals to disseminate teachings critical of government
institutions or policies.
Herein lies another important issue submitted in the cause. The question is really whether the law may
be enacted in the exercise of the State's constitutional power (Art. XIV, sec. 5) to supervise and
regulate private schools. If that power amounts to control of private schools, as some think it is, maybe
the law is valid. In this connection we do not share the belief that section 5 has added new power to

what the State inherently possesses by virtue of the police power. An express power is necessarily
more extensive than a mere implied power. For instance, if there is conflict between an express
individual right and the express power to control private education it cannot off-hand be said that the
latter must yield to the formerconflict of two express powers. But if the power to control education is
merely implied from the police power, it is feasible to uphold the express individual right, as was
probably the situation in the two decisions brought to our attention, of Mississippi and Minnesota,
states where constitutional control of private schools is not expressly produced.
However, as herein previously noted, no justiciable controversy has been presented to us. We are not
informed that the Board on Textbooks has prohibited this or that text, or that the petitioners refused or
intend to refuse to submit some textbooks, and are in danger of losing substantial privileges or rights
for so refusing.
The average lawyer who reads the above quoted section of Republic Act 139 will fail to perceive
anything objectionable. Why should not the State prohibit the use of textbooks that are illegal, or
offensive to the Filipinos or adverse to governmental policies or educationally improper? What's the
power of regulation and supervision for? But those trained to the investigation of constitutional issues
are likely to apprehend the danger to civil liberties, of possible educational dictatorship or thought
control, as petitioners' counsel foresee with obvious alarm. Much depends, however, upon the
execution and implementation of the statute. Not that constitutionality depends necessarily upon the
law's effects. But if the Board on Textbooks in its actuations strictly adheres to the letter of the section
and wisely steers a middle course between the Scylla of "dictatorship" and the Charybdis of "thought
control", no cause for complaint will arise and no occasion for judicial review will develop. Anyway, and
again, petitioners now have a more expeditious remedy thru an administrative appeal to the National
Board of Education created by Republic Act 1124.
Of course it is necessary to assure herein petitioners, that when and if, the dangers they apprehend
materialize and judicial intervention is suitably invoked, after all administrative remedies are
exhausted, the courts will not shrink from their duty to delimit constitutional boundaries and protect
individual liberties.
IV. For all the foregoing considerations, reserving to the petitioners the right to institute in the proper
court, and at the proper time, such actions as may call for decision of the issue herein presented by
them, this petition for prohibition will be denied. So ordered.

G.R. Nos. L-34161 February 29, 1972

EUGENE A. TAN, SILVESTRE J. ACEJAS and ROGELIO V. FERNANDEZ, on their behalf and on
behalf
of
the
People
of
the
Philippines,
petitioners,
vs.
DIOSDADO P. MACAPAGAL, on his behalf and on behalf of the other Delegates to the 1971
Constitutional Convention, respondents.
RESOLUTION

FERNANDO, J.:p
A five-page petition filed on October 6, 1971 by Eugene A. Tan, Silvestre J. Acejas and Rogelio V.
Fernandez, respectively, of Roxas City, Romblon and Davao City, for declaratory relief as taxpayers,
but purportedly suing on behalf of themselves and the Filipino people, in assailing the validity of the
Laurel-Leido Resolution, 1 dealing with the range of the authority of the 1971 Constitutional

Convention, would have this Court declare that it is "without power, under Section 1, Article XV of the
Constitution and Republic Act 6132, to consider, discuss and adopt proposals which seek to revise the
present Constitution through the adoption of a form of government other than the form now outlined in
the present Constitution [the Convention being] merely empowered to propose improvements to the
present Constitution without altering the general plan laid down therein." 2 Such a plea of the utmost
seriousness was sought to be compressed in a five-page pleading. It is understandable, therefore, why
the petition could hardly be characterized as possessed of merit. Accordingly, on October 8, 1971, this
Court issued a resolution dismissing it. Then came on the last day of that month a printed thirty-two
page motion for reconsideration. It is evident that petitioners took some pains this time, although the
main reliance seems to be on a secondary authority, American Jurisprudence. 3 The show of diligence is
impressive but the persuasive quality is something else. A perusal thereof yields the conclusion that
petitioners are oblivious of the authoritative precedents in this jurisdiction. The approach is not
distinguished by its conformity with the law as it stands. In this sphere as elsewhere, new cults may be
eroding considering, however, the compulsion of the ancient faiths. Considering, however, the
compulsion of the fundamental principle of separation of powers, this Court cannot exercise the
competence petitioners would erroneously assume it possesses, even assuming that they have the
requisite standing, which is the first question to be faced.
1. What calls for prior determination is whether or not petitioners had the requisite standing to seek a
declaration of the alleged nullity of a resolution of the Constitutional Convention. 4 In the categorical
and succinct language of Justice Laurel: "The unchallenged rule is that the person who impugns the
validity of a statute must have a personal and substantial interest in the case such that he has
sustained, or will sustain, direct injury as a result of its enforcement." 5 There has been a relaxation of
this rule. So it was announced by the present Chief Justice in Pascual v. The Secretary of Public Works. 6
Thus: "Again, it is well settled that the validity of a statute may be contested only by one who will
sustain a direct injury, in consequence of its enforcement. Yet, there are many decisions nullifying, at
the instance of taxpayers, laws providing for the disbursement of public funds, upon the theory that
the "expenditure of public funds, by an officer of the State for the purpose of administering an
unconstitutional act constitutes a misapplication of such funds," which may be enjoined at the request
of a taxpayer." 7 Moreover, where a constitutional question is raised, a Senator has usually been
considered as possessed of the requisite personality to bring a suit. Thus in Mabanag vs. Lopez Vito, 8 it
was a member of the Senate who was heard by this Court in a suit for prohibition to prevent the
enforcement of the congressional resolution proposing the parity rights amendment. 9 Likewise, in the
latest case in point, Tolentino v. Commission on Elections, it was a Senator who brought action
challenging the validity of Organic Resolution No. 1 of the 1971 Constitutional Convention. He was
quite sucessful too. Petitioners in the present case cannot be heard to assert that they do qualify under
such a category.
Moreover, as far as a taxpayer's suit is concerned, Court is not devoid of discretion as to whether or
not it should be entertained. It is our view that a negative answer is indicated. Nor should petitioners
feel discriminated against just because in Gonzales v. Commission on Elections, 10 a member of the
Philippine Bar, now Delegate Ramon Gonzales, was allowed to prosecute his action for prohibition
instituted by him as a taxpayer. Petitioners have no cause for legitimate resentment as such suit could
be distinguished from the present.
2. Petitioner Gonzales in accordance with the controlling doctrine had the good sense to wait before
filing his suit until after the enactment of the statute 11 for the submission to the electorate of certain
proposed amendments to the Constitution. 12 It was only then that the matter was ripe for
adjudication. Prior to that stage, the judiciary had to keep its hands off. The doctrine of separation of
powers calls for the other departments being left alone to discharge their duties as they see fit. The
judiciary as Justice Laurel emphatically asserted "will neither direct nor restrain executive [or
legislative]
action ... ." 13 The legislative and executive branches are not bound to seek its advice as to what to do
or not to do. Judicial inquiry has to be postponed in the meanwhile. It is a prerequisite that something
had by then been accomplished or performed by either branch before a court may come into the

picture. At such a time, it may pass on the validity of what was done but only "when ... properly
challenged in an appropriate legal proceeding." 14
Such a principle applies as well when the inquiry concerns the scope of the competence lodged in the
Constitutional Convention. The judiciary must leave it free to fulfill its responsibility according to its
lights. There is to be no interference. Its autonomy is to be respected. It cannot be otherwise if it is to
perform its function well. Such should be the case not only because it is a coordinate agency but also
because its powers are transcendent, amounting as it does to submitting for popular ratification
proposals which may radically alter the organization and functions of all three departments, including
the courts. It is therefore much more imperative that the rule of non-interference be strictly adhered to
until the appropriate time comes.
More specifically, as long as any proposed amendment is still unacted on by it, there is no room for the
interposition of judicial oversight. Only after it has made concrete what it intends to submit for
ratification may the appropriate case be instituted. Until then, the courts are devoid of jurisdiction.
That is the command of the Constitution as interpreted by this Court. Unless and until such a doctrine
loses force by being overruled or a new precedent being announced, it is controlling. That is implicit in
the rule of law. Petitioners' motion for reconsideration cannot therefor be sustained.
WHEREFORE, the motion for reconsideration is denied. No costs.
G.R. No. L-52245 January 22, 1980
PATRICIO DUMLAO, ROMEO B. IGOT,
vs.
COMMISSION ON ELECTIONS, respondent.

and

ALFREDO

SALAPANTAN,

JR.,

petitioners,

Raul M. Gonzales for petitioners

Office of the Solicitor General for respondent.

MELENCIO-HERRERA, J:
This is a Petition for Prohibition with Preliminary Injunction and/or Restraining Order filed by petitioners,
in their own behalf and all others allegedly similarly situated, seeking to enjoin respondent Commission
on Elections (COMELEC) from implementing certain provisions of Batas Pambansa Big. 51, 52, and 53
for being unconstitutional.
The Petition alleges that petitioner, Patricio Dumlao, is a former Governor of Nueva Vizcaya, who has
filed his certificate of candidacy for said position of Governor in the forthcoming elections of January
30, 1980. Petitioner, Romeo B. Igot, is a taxpayer, a qualified voter and a member of the Bar who, as
such, has taken his oath to support the Constitution and obey the laws of the land. Petitioner, Alfredo
Salapantan, Jr., is also a taxpayer, a qualified voter, and a resident of San Miguel, Iloilo.
Petitioner Dumlao specifically questions the constitutionality of section 4 of Batas Pambansa Blg. 52 as
discriminatory and contrary to the equal protection and due process guarantees of the Constitution.
Said Section 4 provides:
Sec. 4. Special Disqualification in addition to violation of section 10 of Art. XI I-C of the
Constitution and disqualification mentioned in existing laws, which are hereby declared
as disqualification for any of the elective officials enumerated in section 1 hereof.

Any retired elective provincial city or municipal official who has received payment of
the retirement benefits to which he is entitled under the law, and who shall have been
6,5 years of age at the commencement of the term of office to which he seeks to be
elected shall not be qualified to run for the same elective local office from which he
has retired (Emphasis supplied)
Petitioner Dumlao alleges that the aforecited provision is directed insidiously against him, and that the
classification provided therein is based on "purely arbitrary grounds and, therefore, class legislation."
For their part, petitioners igot and Salapantan, Jr. assail the validity of the following statutory
provisions:
Sec 7. Terms of Office Unless sooner removed for cause, all local elective officials
hereinabove mentioned shall hold office for a term of six (6) years, which shall
commence on the first Monday of March 1980.
.... (Batas Pambansa Blg. 51) Sec. 4.
Sec. 4. ...
Any person who has committed any act of disloyalty to the State, including acts
amounting to subversion, insurrection, rebellion or other similar crimes, shall not be
qualified to be a candidate for any of the offices covered by this Act, or to participate in
any partisan political activity therein:
provided that a judgment of conviction for any of the aforementioned crimes shall be
conclusive evidence of such fact and
the filing of charges for the commission of such crimes before a civil court or military
tribunal after preliminary investigation shall be prima fascie evidence of such fact.
... (Batas Pambansa Big. 52) (Paragraphing and Emphasis supplied).
Section 1. Election of certain Local Officials ... The election shall be held on January
30, 1980. (Batas Pambansa, Blg. 52)
Section 6. Election and Campaign Period The election period shall be fixed by the
Commission on Elections in accordance with Section 6, Art. XII-C of the Constitution.
The period of campaign shall commence on December 29, 1979 and terminate on
January 28, 1980. (ibid.)
In addition to the above-cited provisions, petitioners Igot and Salapantan, Jr. also question the
accreditation of some political parties by respondent COMELEC, as authorized by Batas Pambansa Blg.
53, on the ground that it is contrary to section 9(1)Art. XIIC of the Constitution, which provides that a
"bona fide candidate for any public office shall be it. from any form of harassment and discrimination.
"The question of accreditation will not be taken up in this case but in that of Bacalso, et als. vs.
COMELEC et als. No. L-52232) where the issue has been squarely raised,
Petitioners then pray that the statutory provisions they have challenged be declared null and void for
being violative of the Constitution.
I . The procedural Aspect

At the outset, it should be stated that this Petition suffers from basic procedural infirmities, hence,
traditionally unacceptable for judicial resolution. For one, there is a misjoinder of parties and actions.
Petitioner Dumlao's interest is alien to that of petitioners Igot and Salapantan Petitioner Dumlao does
not join petitioners Igot and Salapantan in the burden of their complaint, nor do the latter join Dumlao
in his. The respectively contest completely different statutory provisions. Petitioner Dumlao has joined
this suit in his individual capacity as a candidate. The action of petitioners Igot and Salapantan is more
in the nature of a taxpayer's suit. Although petitioners plead nine constraints as the reason of their
joint Petition, it would have required only a modicum more of effort tor petitioner Dumlao, on one hand
said petitioners lgot and Salapantan, on the other, to have filed separate suits, in the interest of
orderly procedure.
For another, there are standards that have to be followed inthe exercise of the function of judicial
review, namely (1) the existence of an appropriate case:, (2) an interest personal and substantial by
the party raising the constitutional question: (3) the plea that the function be exercised at the earliest
opportunity and (4) the necessity that the constiutional question be passed upon in order to decide the
case (People vs. Vera 65 Phil. 56 [1937]).
It may be conceded that the third requisite has been complied with, which is, that the parties have
raised the issue of constitutionality early enough in their pleadings.
This Petition, however, has fallen far short of the other three criteria.
A. Actual case and controversy.
It is basic that the power of judicial review is limited to the determination of actual cases and
controversies.
Petitioner Dumlao assails the constitutionality of the first paragraph of section 4 of Batas Pambansa
Blg. 52, quoted earlier, as being contrary to the equal protection clause guaranteed by the
Constitution, and seeks to prohibit respondent COMELEC from implementing said provision. Yet,
Dumlao has not been adversely affected by the application of that provision. No petition seeking
Dumlao's disqualification has been filed before the COMELEC. There is no ruling of that constitutional
body on the matter, which this Court is being asked to review on Certiorari. His is a question posed in
the abstract, a hypothetical issue, and in effect, a petition for an advisory opinion from this Court to be
rendered without the benefit of a detailed factual record Petitioner Dumlao's case is clearly within the
primary jurisdiction (see concurring Opinion of now Chief Justice Fernando in Peralta vs. Comelec, 82
SCRA 30, 96 [1978]) of respondent COMELEC as provided for in section 2, Art. XII-C, for the
Constitution the pertinent portion of which reads:
"Section 2. The Commission on Elections shall have the following power and functions:
1) xxx
2) Be the sole judge of all contests relating to the elections, returns and qualifications
of all members of the National Assembly and elective provincial and city officials.
(Emphasis supplied)
The aforequoted provision must also be related to section 11 of Art. XII-C, which provides:
Section 11. Any decision, order, or ruling of the Commission may be brought to the
Supreme Court on certiorari by the aggrieved party within thirty days from his receipt
of a copy thereof.
B. Proper party.

The long-standing rule has been that "the person who impugns the validity of a statute must have a
personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as
a result of its enforcement" (People vs. Vera, supra).
In the case of petitioners Igot and Salapantan, it was only during the hearing, not in their Petition, that
Igot is said to be a candidate for Councilor. Even then, it cannot be denied that neither one has been
convicted nor charged with acts of disloyalty to the State, nor disqualified from being candidates for
local elective positions. Neither one of them has been calle ed to have been adversely affected by the
operation of the statutory provisions they assail as unconstitutional Theirs is a generated grievance.
They have no personal nor substantial interest at stake. In the absence of any litigate interest, they
can claim no locus standi in seeking judicial redress.
It is true that petitioners Igot and Salapantan have instituted this case as a taxpayer's suit, and that
the rule enunciated in People vs. Vera, above stated, has been relaxed in Pascual vs. The Secretary of
Public Works (110 Phil. 331 [1960], thus:
... it is well settled that the validity of a statute may be contested only by one who will
sustain a direct injury in consequence of its enforcement. Yet, there are many decisions
nullifying at the instance of taxpayers, laws providing for the disbursement of public
funds, upon the theory that "the expenditure of public funds, by an officer of the State
for the purpose of administering an unconstitutional act constitutes a misapplication of
such funds," which may be enjoined at the request of a taxpayer.
In the same vein, it has been held:
In the determination of the degree of interest essential to give the requisite standing to
attack the constitutionality of a statute, the general rule is that not only persons
individually affected, but also taxpayers have sufficient interest in preventing the
illegal expenditure of moneys raised by taxation and they may, therefore, question the
constitutionality of statutes requiring expenditure of public moneys. (Philippine
Constitution Association, Inc., et als., vs. Gimenez, et als., 15 SCRA 479 [1965]).
However, the statutory provisions questioned in this case, namely, sec. 7, BP Blg. 51, and sections 4,
1, and 6 BP Blg. 52, do not directly involve the disbursement of public funds. While, concededly, the
elections to be held involve the expenditure of public moneys, nowhere in their Petition do said
petitioners allege that their tax money is "being extracted and spent in violation of specific
constitutional protections against abuses of legislative power" (Flast v. Cohen, 392 U.S., 83 [1960]), or
that there is a misapplication of such funds by respondent COMELEC (see Pascual vs. Secretary of
Public Works, 110 Phil. 331 [1960]), or that public money is being deflected to any improper purpose.
Neither do petitioners seek to restrain respondent from wasting public funds through the enforcement
of an invalid or unconstitutional law. (Philippine Constitution Association vs. Mathay, 18 SCRA 300
[1966]), citing Philippine Constitution Association vs. Gimenez, 15 SCRA 479 [1965]). Besides, the
institution of a taxpayer's suit, per se is no assurance of judicial review. As held by this Court in Tan vs.
Macapagal (43 SCRA 677 [1972]), speaking through our present Chief Justice, this Court is vested with
discretion as to whether or not a taxpayer's suit should be entertained.
C. Unavoidability of constitutional question.
Again upon the authority of People vs. Vera, "it is a wellsettled rule that the constitutionality of an act
of the legislature will not be determined by the courts unless that question is properly raised and
presented in appropriate cases and is necessary to a determination of the case; i.e., the issue of
constitutionality must be the very lis mota presented."
We have already stated that, by the standards set forth in People vs. Vera, the present is not an
"appropriate case" for either petitioner Dumlao or for petitioners Igot and Salapantan. They are

actually without cause of action. It follows that the necessity for resolving the issue of constitutionality
is absent, and procedural regularity would require that this suit be dismissed.
II. The substantive viewpoint.
We have resolved, however, to rule squarely on two of the challenged provisions, the Courts not being
entirely without discretion in the matter. Thus, adherence to the strict procedural standard was relaxed
in Tinio vs. Mina (26 SCRA 512 [1968]); Edu vs. Ericta (35 SCRA 481 [1970]); and in Gonzalez vs.
Comelec (27 SCRA 835 [1969]), the Opinion in the Tinio and Gonzalez cases having been penned by
our present Chief Justice. The reasons which have impelled us are the paramount public interest
involved and the proximity of the elections which will be held only a few days hence.
Petitioner Dumlao's contention that section 4 of BP Blg. 52 is discriminatory against him personally is
belied by the fact that several petitions for the disqualification of other candidates for local positions
based on the challenged provision have already been filed with the COMELEC (as listed in p. 15,
respondent's Comment). This tellingly overthrows Dumlao's contention of intentional or purposeful
discrimination.
The assertion that Section 4 of BP Blg. 52 is contrary to the safer guard of equal protection is neither
well taken. The constitutional guarantee of equal protection of the laws is subject to rational
classification. If the groupings are based on reasonable and real differentiations, one class can be
treated and regulated differently from another class. For purposes of public service, employees 65
years of age, have been validly classified differently from younger employees. Employees attaining
that age are subject to compulsory retirement, while those of younger ages are not so compulsorily
retirable.
In respect of election to provincial, city, or municipal positions, to require that candidates should not be
more than 65 years of age at the time they assume office, if applicable to everyone, might or might
not be a reasonable classification although, as the Solicitor General has intimated, a good policy of the
law would be to promote the emergence of younger blood in our political elective echelons. On the
other hand, it might be that persons more than 65 years old may also be good elective local officials.
Coming now to the case of retirees. Retirement from government service may or may not be a
reasonable disqualification for elective local officials. For one thing, there can also be retirees from
government service at ages, say below 65. It may neither be reasonable to disqualify retirees, aged 65,
for a 65 year old retiree could be a good local official just like one, aged 65, who is not a retiree.
But, in the case of a 65-year old elective local official, who has retired from a provincial, city or
municipal office, there is reason to disqualify him from running for the same office from which he had
retired, as provided for in the challenged provision. The need for new blood assumes relevance. The
tiredness of the retiree for government work is present, and what is emphatically significant is that the
retired employee has already declared himself tired and unavailable for the same government work,
but, which, by virtue of a change of mind, he would like to assume again. It is for this very reason that
inequality will neither result from the application of the challenged provision. Just as that provision
does not deny equal protection neither does it permit of such denial (see People vs. Vera, 65 Phil. 56
[1933]). Persons similarly situated are sinlilarly treated.
In fine, it bears reiteration that the equal protection clause does not forbid all legal classification. What
is proscribes is a classification which is arbitrary and unreasonable. That constitutional guarantee is
not violated by a reasonable classification based upon substantial distinctions, where the classification
is germane to the purpose of the law and applies to all Chose belonging to the same class (Peralta vs.
Comelec, 82 SCRA 30 [1978] citing Felwa vs. Salas, 18 SCRA 606 [1966]; Rafael v. Embroidery and
Apparel Control and Inspection Board, 21 SCRA 336 [1967]; Inchong etc., et al. vs. Hernandez 101 Phil.
1155 [1957]). The purpose of the law is to allow the emergence of younger blood in local governments.
The classification in question being pursuant to that purpose, it cannot be considered invalid "even it

at times, it may be susceptible to the objection that it is marred by theoretical inconsistencies" (Chief
Justice Fernando, The Constitution of the Philippines, 1977 ed., p. 547).
There is an additional consideration. Absent herein is a showing of the clear invalidity of the
questioned provision. Well accepted is the rule that to justify the nullification of a law, there must be a
clear and unequivocal breach of the Constitution, not a doubtful and equivocal breach. Courts are
practically unanimous in the pronouncement that laws shall not be declared invalid unless the conflict
with the Constitution is clear beyond reasonable doubt (Peralta vs. COMELEC, 82 SCRA 55 [1978],
citing Cooper vs. Telfair 4 Dall 14; Dodd, Cases on Constitutional Law, 3rd ed. 1942, 56). Lastly, it is
within the compentence of the legislature to prescribe qualifications for one who desires to become a
candidate for office provided they are reasonable, as in this case.
In so far as the petition of Igot and Salapantan are concerned, the second paragraph of section 4 of
Batas Pambansa Blg. 52, quoted in full earlier, and which they challenge, may be divided in two parts.
The first provides:
a. judgment of conviction jor any of the aforementioned crimes shall be conclusive
evidence of such fact ...
The supremacy of the Constitution stands out as the cardinal principle. We are aware of the
presumption of validity that attaches to a challenged statute, of the well-settled principle that "all
reasonable doubts should be resolved in favor of constitutionality," and that Courts will not set aside a
statute as constitutionally defective "except in a clear case." (People vs. Vera, supra). We are
constrained to hold that this is one such clear case.
Explicit is the constitutional provision that, in all criminal prosecutions, the accused shall be presumed
innocent until the contrary is proved, and shall enjoy the right to be heard by himself and counsel
(Article IV, section 19, 1973 Constitution). An accusation, according to the fundamental law, is not
synonymous with guilt. The challenged proviso contravenes the constitutional presumption of
innocence, as a candidate is disqualified from running for public office on the ground alone that
charges have been filed against him before a civil or military tribunal. It condemns before one is fully
heard. In ultimate effect, except as to the degree of proof, no distinction is made between a person
convicted of acts of dislotalty and one against whom charges have been filed for such acts, as both of
them would be ineligible to run for public office. A person disqualified to run for public office on the
ground that charges have been filed against him is virtually placed in the same category as a person
already convicted of a crime with the penalty of arresto, which carries with it the accessory penalty of
suspension of the right to hold office during the term of the sentence (Art. 44, Revised Penal Code).
And although the filing of charges is considered as but prima facie evidence, and therefore, may be
rebutted, yet. there is "clear and present danger" that because of the proximity of the elections, time
constraints will prevent one charged with acts of disloyalty from offering contrary proof to overcome
the prima facie evidence against him.
Additionally, it is best that evidence pro and con of acts of disloyalty be aired before the Courts rather
than before an administrative body such as the COMELEC. A highly possible conflict of findings
between two government bodies, to the extreme detriment of a person charged, will thereby be
avoided. Furthermore, a legislative/administrative determination of guilt should not be allowed to be
substituted for a judicial determination.
Being infected with constitutional infirmity, a partial declaration of nullity of only that objectionable
portion is mandated. It is separable from the first portion of the second paragraph of section 4 of Batas
Pambansa Big. 52 which can stand by itself.
WHEREFORE, 1) the first paragraph of section 4 of Batas pambansa Bilang 52 is hereby declared valid.
Said paragraph reads:

SEC. 4. Special disqualification. In addition to violation of Section 10 of Article XII(C)

of the Constitution and disqualifications mentioned in existing laws which are hereby
declared as disqualification for any of the elective officials enumerated in Section 1
hereof, any retired elective provincial, city or municipal official, who has received
payment of the retirement benefits to which he is entitled under the law and who shall
have been 65 years of age at the commencement of the term of office to which he
seeks to be elected, shall not be qualified to run for the same elective local office from
which he has retired.
2) That portion of the second paragraph of section 4 of Batas Pambansa Bilang 52
providing that "... the filing of charges for the commission of such crimes before a civil
court or military tribunal after preliminary investigation shall be prima facie evidence
of such fact", is hereby declared null and void, for being violative of the constitutional
presumption of innocence guaranteed to an accused.
SO ORDERED.
G.R. No. 127685 July 23, 1998
BLAS F. OPLE, petitioner,
vs.
RUBEN D. TORRES, ALEXANDER AGUIRRE, HECTOR VILLANUEVA, CIELITO HABITO, ROBERT BARBERS, CARMENCITA
REODICA, CESAR SARINO, RENATO VALENCIA, TOMAS P. AFRICA, HEAD OF THE NATIONAL COMPUTER CENTER and
CHAIRMAN OF THE COMMISSION ON AUDIT, respondents.

PUNO, J.:
The petition at bar is a commendable effort on the part of Senator Blas F. Ople to prevent the shrinking of the right to privacy, which the
1

Petitioner
Ople prays that we invalidate Administrative Order No. 308 entitled "Adoption of a National Computerized
Identification Reference System" on two important constitutional grounds, viz: one, it is a usurpation of the
power of Congress to legislate, and two, it impermissibly intrudes on our citizenry's protected zone of
privacy. We grant the petition for the rights sought to be vindicated by the petitioner need stronger barriers
against further erosion.
revered Mr. Justice Brandeis considered as "the most comprehensive of rights and the right most valued by civilized men."

A.O. No. 308 was issued by President Fidel V. Ramos On December 12, 1996 and reads as follows:
ADOPTION OF A NATIONAL COMPUTERIZED
IDENTIFICATION REFERENCE SYSTEM
WHEREAS, there is a need to provide Filipino citizens and foreign residents with the
facility to conveniently transact business with basic service and social security providers
and other government instrumentalities;
WHEREAS, this will require a computerized system to properly and efficiently identify
persons seeking basic services on social security and reduce, if not totally eradicate
fraudulent transactions and misrepresentations;

WHEREAS, a concerted and collaborative effort among the various basic services and
social security providing agencies and other government intrumentalities is required to
achieve such a system;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by
virtue of the powers vested in me by law, do hereby direct the following:
Sec. 1. Establishment of a National Compoterized Identification Reference System. A
decentralized Identification Reference System among the key basic services and social
security providers is hereby established.
Sec. 2. Inter-Agency Coordinating Committee. An Inter-Agency Coordinating Committee
(IACC) to draw-up the implementing guidelines and oversee the implementation of the
System is hereby created, chaired by the Executive Secretary, with the following as
members:
Head, Presidential Management Staff
Secretary, National Economic Development Authority
Secretary, Department of the Interior and Local Government
Secretary, Department of Health
Administrator, Government Service Insurance System,
Administrator, Social Security System,
Administrator, National Statistics Office
Managing Director, National Computer Center.
Sec. 3. Secretariat. The National Computer Center (NCC) is hereby designated as
secretariat to the IACC and as such shall provide administrative and technical support to
the IACC.
Sec. 4. Linkage Among Agencies. The Population Reference Number (PRN) generated
by the NSO shall serve as the common reference number to establish a linkage among
concerned agencies. The IACC Secretariat shall coordinate with the different Social
Security and Services Agencies to establish the standards in the use of Biometrics
Technology and in computer application designs of their respective systems.
Sec. 5. Conduct of Information Dissemination Campaign. The Office of the Press
Secretary, in coordination with the National Statistics Office, the GSIS and SSS as lead
agencies and other concerned agencies shall undertake a massive tri-media information
dissemination campaign to educate and raise public awareness on the importance and
use of the PRN and the Social Security Identification Reference.
Sec. 6. Funding. The funds necessary for the implementation of the system shall be
sourced from the respective budgets of the concerned agencies.

Sec. 7. Submission of Regular Reports. The NSO, GSIS and SSS shall submit regular
reports to the Office of the President through the IACC, on the status of implementation of
this undertaking.
Sec. 8. Effectivity. This Administrative Order shall take effect immediately.
DONE in the City of Manila, this 12th day of December in the year of Our Lord, Nineteen
Hundred and Ninety-Six.
(SGD.) FIDEL V. RAMOS
A.O. No. 308 was published in four newspapers of general circulation on January 22, 1997 and January
23, 1997. On January 24, 1997, petitioner filed the instant petition against respondents, then Executive
Secretary Ruben Torres and the heads of the government agencies, who as members of the Inter-Agency
Coordinating Committee, are charged with the implementation of A.O. No. 308. On April 8, 1997, we
issued a temporary restraining order enjoining its implementation.
Petitioner contends:
A. THE ESTABLISNMENT OF A NATIONAL COMPUTERIZED IDENTIFICATION
REFERENCE SYSTEM REQUIRES A LEGISLATIVE ACT. THE ISSUANCE OF A.O. NO.
308 BY THE PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES IS, THEREFORE,
AN UNCONSTITUTIONAL USURPATION OF THE LEGISLATIVE POWERS OF THE
CONGRESS OF THE REPUBLIC OF THE PHILIPPINES.
B. THE APPROPRIATION OF PUBLIC FUNDS BY THE PRESIDENT FOR THE
IMPLEMENTATION OF A.O. NO. 308 IS AN UNCONSTITUTIONAL USURPATION OF
THE EXCLUSIVE RIGHT OF CONGRESS TO APPROPRIATE PUBLIC FUNDS FOR
EXPENDITURE.
C. THE IMPLEMENTATION OF A.O. NO. 308 INSIDIOUSLY LAYS THE GROUNDWORK
FOR A SYSTEM WHICH WILL VIOLATE THE BILL OF RIGHTS ENSHRINED IN THE
CONSTITUTION. 2
Respondents counter-argue:
A. THE INSTANT PETITION IS NOT A JUSTICIABLE CASE AS WOULD WARRANT A
JUDICIAL REVIEW;
B. A.O. NO. 308 [1996] WAS ISSUED WITHIN THE EXECUTIVE AND
ADMINISTRATIVE POWERS OF THE PRESIDENT WITHOUT ENCROACHING ON
THE LEGISLATIVE POWERS OF CONGRESS;
C. THE FUNDS NECESSARY FOR THE IMPLEMENTATION OF THE IDENTIFICATION
REFERENCE SYSTEM MAY BE SOURCED FROM THE BUDGETS OF THE
CONCERNED AGENCIES;
D. A.O. NO. 308 [1996] PROTECTS AN INDIVIDUAL'S INTEREST IN PRIVACY. 3
We now resolve.

I
As is usual in constitutional litigation, respondents raise the threshold issues relating to the standing to
sue of the petitioner and the justiciability of the case at bar. More specifically, respondents aver that
petitioner has no legal interest to uphold and that the implementing rules of A.O. No. 308 have yet to be
promulgated.
These submissions do not deserve our sympathetic ear. Petitioner Ople is a distinguished member of our
Senate. As a Senator, petitioner is possessed of the requisite standing to bring suit raising the issue that
the issuance of A.O. No. 308 is a usurpation of legislative power. 4 As taxpayer and member of the
Government Service Insurance System (GSIS), petitioner can also impugn the legality of the
misalignment of public funds and the misuse of GSIS funds to implement A.O. No. 308. 5
The ripeness for adjudication of the Petition at bar is not affected by the fact that the implementing rules
of A.O. No. 308 have yet to be promulgated. Petitioner Ople assails A.O. No. 308 as invalid per se and as
infirmed on its face. His action is not premature for the rules yet to be promulgated cannot cure its fatal
defects. Moreover, the respondents themselves have started the implementation of A.O. No. 308 without
waiting for the rules. As early as January 19, 1997, respondent Social Security System (SSS) caused the
publication of a notice to bid for the manufacture of the National Identification (ID) card. 6 Respondent
Executive Secretary Torres has publicly announced that representatives from the GSIS and the SSS have
completed the guidelines for the national identification system. 7 All signals from the respondents show
their unswerving will to implement A.O. No. 308 and we need not wait for the formality of the rules to pass
judgment on its constitutionality. In this light, the dissenters insistence that we tighten the rule on standing
is not a commendable stance as its result would be to throttle an important constitutional principle and a
fundamental right.
II
We now come to the core issues. Petitioner claims that A.O. No. 308 is not a mere administrative order
but a law and hence, beyond the power of the President to issue. He alleges that A.O. No. 308
establishes a system of identification that is all-encompassing in scope, affects the life and liberty of every
Filipino citizen and foreign resident, and more particularly, violates their right to privacy.
Petitioner's sedulous concern for the Executive not to trespass on the lawmaking domain of Congress is
understandable. The blurring of the demarcation line between the power of the Legislature to make laws
and the power of the Executive to execute laws will disturb their delicate balance of power and cannot be
allowed. Hence, the exercise by one branch of government of power belonging to another will be given a
stricter scrutiny by this Court.
The line that delineates Legislative and Executive power is not indistinct. Legislative power is "the
authority, under the Constitution, to make laws, and to alter and repeal them." 8 The Constitution, as the
will of the people in their original, sovereign and unlimited capacity, has vested this power in the Congress
of the Philippines. 9 The grant of legislative power to Congress is broad, general and comprehensive. 10
The legislative body possesses plenary power for all purposes of civil government. 11 Any power, deemed
to be legislative by usage and tradition, is necessarily possessed by Congress, unless the Constitution
has lodged it elsewhere. 12 In fine, except as limited by the Constitution, either expressly or impliedly,
legislative power embraces all subjects and extends to matters of general concern or common interest. 13
While Congress is vested with the power to enact laws, the President executes the laws. 14 The executive
power is vested in the Presidents. 15 It is generally defined as the power to enforce and administer the
laws. 16 It is the power of carrying the laws into practical operation and enforcing their due observance. 17

As head of the Executive Department, the President is the Chief Executive. He represents the
government as a whole and sees to it that all laws are enforced by the officials and employees of his
department. 18 He has control over the executive department, bureaus and offices. This means that he
has the authority to assume directly the functions of the executive department, bureau and office or
interfere with the discretion of its officials. 19 Corollary to the power of control, the President also has the
duty of supervising the enforcement of laws for the maintenance of general peace and public order. Thus,
he is granted administrative power over bureaus and offices under his control to enable him to discharge
his duties effectively. 20
Administrative power is concerned with the work of applying policies and enforcing orders as determined
by proper governmental organs. 21 It enables the President to fix a uniform standard of administrative
efficiency and check the official conduct of his agents. 22 To this end, he can issue administrative orders,
rules and regulations.
Prescinding from these precepts, we hold that A.O. No. 308 involves a subject that is not appropriate to
be covered by an administrative order. An administrative order is:
Sec. 3. Administrative Orders. Acts of the President which relate to particular aspects
of governmental operation in pursuance of his duties as administrative head shall be
promulgated in administrative orders. 23
An administrative order is an ordinance issued by the President which relates to specific aspects
in the administrative operation of government. It must be in harmony with the law and should be
for the sole purpose of implementing the law and carrying out the legislative policy. 24 We reject
the argument that A.O. No. 308 implements the legislative policy of the Administrative Code of
1987. The Code is a general law and "incorporates in a unified document the major structural,
functional and procedural principles of governance." 25 and "embodies changes in administrative
structure and procedures designed to serve the
people." 26 The Code is divided into seven (7) Books: Book I deals with Sovereignty and General
Administration, Book II with the Distribution of Powers of the three branches of Government, Book
III on the Office of the President, Book IV on the Executive Branch, Book V on Constitutional
Commissions, Book VI on National Government Budgeting, and Book VII on Administrative
Procedure. These Books contain provisions on the organization, powers and general
administration of the executive, legislative and judicial branches of government, the organization
and administration of departments, bureaus and offices under the executive branch, the
organization and functions of the Constitutional Commissions and other constitutional bodies, the
rules on the national government budget, as well as guideline for the exercise by administrative
agencies of quasi-legislative and quasi-judicial powers. The Code covers both the internal
administration of government, i.e, internal organization, personnel and recruitment, supervision
and discipline, and the effects of the functions performed by administrative officials on private
individuals or parties outside government. 27
It cannot be simplistically argued that A.O. No. 308 merely implements the Administrative Code of 1987. It
establishes for the first time a National Computerized Identification Reference System. Such a System
requires a delicate adjustment of various contending state policies the primacy of national security, the
extent of privacy interest against dossier-gathering by government, the choice of policies, etc. Indeed, the
dissent of Mr. Justice Mendoza states that the A.O. No. 308 involves the all-important freedom of thought.
As said administrative order redefines the parameters of some basic rights of our citizenry vis-a-vis the
State as well as the line that separates the administrative power of the President to make rules and the
legislative power of Congress, it ought to be evident that it deals with a subject that should be covered by
law.

Nor is it correct to argue as the dissenters do that A.D. No. 308 is not a law because it confers no right,
imposes no duty, affords no proctection, and creates no office. Under A.O. No. 308, a citizen cannot
transact business with government agencies delivering basic services to the people without the
contemplated identification card. No citizen will refuse to get this identification card for no one can avoid
dealing with government. It is thus clear as daylight that without the ID, a citizen will have difficulty
exercising his rights and enjoying his privileges. Given this reality, the contention that A.O. No. 308 gives
no right and imposes no duty cannot stand.
Again, with due respect, the dissenting opinions unduly expand the limits of administrative legislation and
consequently erodes the plenary power of Congress to make laws. This is contrary to the established
approach defining the traditional limits of administrative legislation. As well stated by Fisher: ". . . Many
regulations however, bear directly on the public. It is here that administrative legislation must he restricted
in its scope and application. Regulations are not supposed to be a substitute for the general policymaking that Congress enacts in the form of a public law. Although administrative regulations are entitled
to respect, the authority to prescribe rules and regulations is not an independent source of power to make
laws." 28
III
Assuming, arguendo, that A.O. No. 308 need not be the subject of a law, still it cannot pass constitutional
muster as an administrative legislation because facially it violates the right to privacy. The essence of
privacy is the "right to be let alone." 29 In the 1965 case of Griswold v. Connecticut, 30 the United States
Supreme Court gave more substance to the right of privacy when it ruled that the right has a constitutional
foundation. It held that there is a right of privacy which can be found within the penumbras of the First,
Third, Fourth, Fifth and Ninth Amendments, 31 viz:
Specific guarantees in the Bill of Rights have penumbras formed by emanations from
these guarantees that help give them life and substance . . . various guarantees create
zones of privacy. The right of association contained in the penumbra of the First
Amendment is one, as we have seen. The Third Amendment in its prohibition against the
quartering of soldiers "in any house" in time of peace without the consent of the owner is
another facet of that privacy. The Fourth Amendment explicitly affirms the ''right of the
people to be secure in their persons, houses and effects, against unreasonable searches
and seizures." The Fifth Amendment in its Self-Incrimination Clause enables the citizen to
create a zone of privacy which government may not force him to surrender to his
detriment. The Ninth Amendment provides: "The enumeration in the Constitution, of
certain rights, shall not be construed to deny or disparage others retained by the people."
In the 1968 case of Morfe v. Mutuc, 32 we adopted the Griswold ruling that there is a constitutional
right to privacy. Speaking thru Mr. Justice, later Chief Justice, Enrique Fernando, we held:
xxx xxx xxx
The Griswold case invalidated a Connecticut statute which made the use of
contraceptives a criminal offence on the ground of its amounting to an unconstitutional
invasion of the right of privacy of married persons; rightfully it stressed "a relationship
lying within the zone of privacy created by several fundamental constitutional
guarantees." It has wider implications though. The constitutional right to privacy has
come into its own.

So it is likewise in our jurisdiction. The right to privacy as such is accorded recognition

independently of its identification with liberty; in itself, it is fully deserving of constitutional
protection. The language of Prof. Emerson is particularly apt: "The concept of limited
government has always included the idea that governmental powers stop short of certain
intrusions into the personal life of the citizen. This is indeed one of the basic distinctions
between absolute and limited government. Ultimate and pervasive control of the
individual, in all aspects of his life, is the hallmark of the absolute state. In contrast, a
system of limited government safeguards a private sector, which belongs to the
individual, firmly distinguishing it from the public sector, which the state can control.
Protection of this private sector protection, in other words, of the dignity and integrity of
the individual has become increasingly important as modern society has developed.
All the forces of a technological age industrialization, urbanization, and organization
operate to narrow the area of privacy and facilitate intrusion into it. In modern terms, the
capacity to maintain and support this enclave of private life marks the difference between
a democratic and a totalitarian society."
Indeed, if we extend our judicial gaze we will find that the right of privacy is recognized and enshrined in
several provisions of our Constitution. 33 It is expressly recognized in section 3 (1) of the Bill of Rights:
Sec. 3. (1) The privacy of communication and correspondence shall be inviolable except
upon lawful order of the court, or when public safety or order requires otherwise as
prescribed by law.
Other facets of the right to privacy are protectad in various provisions of the Bill of Rights, viz: 34
Sec. 1. No person shall be deprived of life, liberty, or property without due process of law,
nor shall any person be denied the equal protection of the laws.
Sec. 2. The right of the people to be secure in their persons, houses papers, and effects
against unreasonable searches and seizures of whatever nature and for any purpose
shall be inviolable, and no search warrant or warrant of arrest shall issue except upon
probable cause to be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and particularly
describing the place to be searched and the persons or things to be seized.
xxx xxx xxx
Sec. 6. The liberty of abode and of changing the same within the limits prescribed by law
shall not be impaired except upon lawful order of the court. Neither shall the right to travel
be impaired except in the interest of national security, public safety, or public health as
may be provided by law.
xxx xxx xxx
Sec. 8. The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary to law shall
not be abridged.
Sec. 17. No person shall be compelled to be a witness against himself.

Zones of privacy are likewise recognized and protected in our laws. The Civil Code provides that "[e]very
person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other
persons" and punishes as actionable torts several acts by a person of meddling and prying into the
privacy of another. 35 It also holds a public officer or employee or any private individual liable for damages
for any violation of the rights and liberties of another person, 36 and recognizes the privacy of letters and
other private communications. 37 The Revised Penal Code makes a crime the violation of secrets by an
officer, 38 the revelation of trade and industrial secrets, 39 and trespass to dwelling. 40 Invasion of privacy is
an offense in special laws like the Anti-Wiretapping Law, 41 the Secrecy of Bank Deposits Act 42 and the
Intellectual Property Code. 43 The Rules of Court on privileged communication likewise recognize the
privacy of certain information. 44
Unlike the dissenters, we prescind from the premise that the right to privacy is a fundamental right
guaranteed by the Constitution, hence, it is the burden of government to show that A.O. No. 308 is
justified by some compelling state interest and that it is narrowly drawn. A.O. No. 308 is predicated on two
considerations: (1) the need to provides our citizens and foreigners with the facility to conveniently
transact business with basic service and social security providers and other government instrumentalities
and (2) the need to reduce, if not totally eradicate, fraudulent transactions and misrepresentations by
persons seeking basic services. It is debatable whether these interests are compelling enough to warrant
the issuance of A.O. No. 308. But what is not arguable is the broadness, the vagueness, the overbreadth
of A.O. No. 308 which if implemented will put our people's right to privacy in clear and present danger.
The heart of A.O. No. 308 lies in its Section 4 which provides for a Population Reference Number (PRN)
as a "common reference number to establish a linkage among concerned agencies" through the use of
"Biometrics Technology" and "computer application designs."
Biometry or biometrics is "the science of the applicatin of statistical methods to biological facts; a
mathematical analysis of biological data." 45 The term "biometrics" has evolved into a broad category of
technologies which provide precise confirmation of an individual's identity through the use of the
individual's own physiological and behavioral characteristics. 46 A physiological characteristic is a relatively
stable physical characteristic such as a fingerprint, retinal scan, hand geometry or facial features. A
behavioral characteristic is influenced by the individual's personality and includes voice print, signature
and keystroke. 47 Most biometric idenfication systems use a card or personal identificatin number (PIN) for
initial identification. The biometric measurement is used to verify that the individual holding the card or
entering the PIN is the legitimate owner of the card or PIN. 48
A most common form of biological encoding is finger-scanning where technology scans a fingertip and
turns the unique pattern therein into an individual number which is called a biocrypt. The biocrypt is stored
in computer data banks 49 and becomes a means of identifying an individual using a service. This
technology requires one's fingertip to be scanned every time service or access is provided. 50 Another
method is the retinal scan. Retinal scan technology employs optical technology to map the capillary
pattern of the retina of the eye. This technology produces a unique print similar to a finger print. 51 Another
biometric method is known as the "artificial nose." This device chemically analyzes the unique
combination of substances excreted from the skin of people. 52 The latest on the list of biometric
achievements is the thermogram. Scientists have found that by taking pictures of a face using infra-red
cameras, a unique heat distribution pattern is seen. The different densities of bone, skin, fat and blood
vessels all contribute to the individual's personal "heat signature." 53
In the last few decades, technology has progressed at a galloping rate. Some science fictions are now
science facts. Today, biometrics is no longer limited to the use of fingerprint to identify an individual. It is a
new science that uses various technologies in encoding any and all biological characteristics of an
individual for identification. It is noteworthy that A.O. No. 308 does not state what specific biological

characteristics and what particular biometrics technology shall be used to identify people who will seek its
coverage. Considering the banquest of options available to the implementors of A.O. No. 308, the fear
that it threatens the right to privacy of our people is not groundless.
A.O. No. 308 should also raise our antennas for a further look will show that it does not state whether
encoding of data is limited to biological information alone for identification purposes. In fact, the Solicitor
General claims that the adoption of the Identification Reference System will contribute to the "generation
of population data for development planning." 54 This is an admission that the PRN will not be used solely
for identification but the generation of other data with remote relation to the avowed purposes of A.O. No.
308. Clearly, the indefiniteness of A.O. No. 308 can give the government the roving authority to store and
retrieve information for a purpose other than the identification of the individual through his PRN.
The potential for misuse of the data to be gathered under A.O. No. 308 cannot be undarplayed as the
dissenters do. Pursuant to said administrative order, an individual must present his PRN everytime he
deals with a government agency to avail of basic services and security. His transactions with the
government agency will necessarily be recorded whether it be in the computer or in the documentary
file of the agency. The individual's file may include his transactions for loan availments, income tax
returns, statement of assets and liabilities, reimbursements for medication, hospitalization, etc. The more
frequent the use of the PRN, the better the chance of building a huge formidable informatin base through
the electronic linkage of the files. 55 The data may be gathered for gainful and useful government
purposes; but the existence of this vast reservoir of personal information constitutes a covert invitation to
misuse, a temptation that may be too great for some of our authorities to resist. 56
We can even grant, arguendo, that the computer data file will be limited to the name, address and other
basic personal infomation about the individual. 57 Even that hospitable assumption will not save A.O. No.
308 from constitutional infirmity for again said order does not tell us in clear and categorical terms how
these information gathered shall he handled. It does not provide who shall control and access the data,
under what circumstances and for what purpose. These factors are essential to safeguard the privacy and
guaranty the integrity of the information. 58 Well to note, the computer linkage gives other government
agencies access to the information. Yet, there are no controls to guard against leakage of information.
When the access code of the control programs of the particular computer system is broken, an intruder,
without fear of sanction or penalty, can make use of the data for whatever purpose, or worse, manipulate
the data stored within the system. 59
It is plain and we hold that A.O. No. 308 falls short of assuring that personal information which will be
gathered about our people will only be processed for unequivocally specified purposes. 60 The lack of
proper safeguards in this regard of A.O. No. 308 may interfere with the individual's liberty of abode and
travel by enabling authorities to track down his movement; it may also enable unscrupulous persons to
access confidential information and circumvent the right against self-incrimination; it may pave the way for
"fishing expeditions" by government authorities and evade the right against unreasonable searches and
seizures. 61 The possibilities of abuse and misuse of the PRN, biometrics and computer technology are
accentuated when we consider that the individual lacks control over what can be read or placed on his ID,
much less verify the correctness of the data encoded. 62 They threaten the very abuses that the Bill of
Rights seeks to prevent. 63
The ability of sophisticated data center to generate a comprehensive cradle-to-grave dossier on an
individual and transmit it over a national network is one of the most graphic threats of the computer
revolution. 64 The computer is capable of producing a comprehensive dossier on individuals out of
information given at different times and for varied purposes. 65 It can continue adding to the stored data
and keeping the information up to date. Retrieval of stored date is simple. When information of a

privileged character finds its way into the computer, it can be extracted together with other data on the
subject. 66 Once extracted, the information is putty in the hands of any person. The end of privacy begins.
Though A.O. No. 308 is undoubtedly not narrowly drawn, the dissenting opinions would dismiss its danger
to the right to privacy as speculative and hypothetical. Again, we cannot countenance such a laidback
posture. The Court will not be true to its role as the ultimate guardian of the people's liberty if it would not
immediately smother the sparks that endanger their rights but would rather wait for the fire that could
consume them.
We reject the argument of the Solicitor General that an individual has a reasonable expectation of privacy
with regard to the Natioal ID and the use of biometrics technology as it stands on quicksand. The
reasonableness of a person's expectation of privacy depends on a two-part test: (1) whether by his
conduct, the individual has exhibited an expectation of privacy; and (2) whether this expectation is one
that society recognizes as reasonable. 67 The factual circumstances of the case determines the
reasonableness of the expectation. 68 However, other factors, such as customs, physical surroundings
and practices of a particular activity, may serve to create or diminish this expectation. 69 The use of
biometrics and computer technology in A.O. No. 308 does not assure the individual of a reasonable
expectation of privacy. 70 As technology advances, the level of reasonably expected privacy decreases. 71
The measure of protection granted by the reasonable expectation diminishes as relevant technology
becomes more widely accepted. 72 The security of the computer data file depends not only on the physical
inaccessibility of the file but also on the advances in hardware and software computer technology. A.O.
No. 308 is so widely drawn that a minimum standard for a reasonable expectation of privacy, regardless
of technology used, cannot be inferred from its provisions.
The rules and regulations to be by the IACC cannot remedy this fatal defect. Rules and regulations
merely implement the policy of the law or order. On its face, A.O. No. gives the IACC virtually infettered
discretion to determine the metes and bounds of the ID System.
Nor do your present laws prvide adequate safeguards for a reasonable expectation of privacy.
Commonwealth Act. No. 591 penalizes the disclosure by any person of data furnished by the individual to
the NSO with imprisonment and fine. 73 Republic Act. No. 1161 prohibits public disclosure of SSS
employment records and reports. 74 These laws, however, apply to records and data with the NSO and the
SSS. It is not clear whether they may be applied to data with the other government agencies forming part
of the National ID System. The need to clarify the penal aspect of A.O. No. 308 is another reason why its
enactment should be given to Congress.
Next, the Solicitor General urges us to validate A.O. No. 308's abridgment of the right of privacy by using
the rational relationship test. 75 He stressed that the purposes of A.O. No. 308 are: (1) to streamline and
speed up the implementation of basic government services, (2) eradicate fraud by avoiding duplication of
services, and (3) generate population data for development planning. He cocludes that these purposes
justify the incursions into the right to privacy for the means are rationally related to the end. 76
We are not impressed by the argument. In Morfe v. Mutuc, 77 we upheld the constitutionality of R.A. 3019,
the Anti-Graft and Corrupt Practices Act, as a valid police power measure. We declared that the law, in
compelling a public officer to make an annual report disclosing his assets and liabilities, his sources of
income and expenses, did not infringe on the individual's right to privacy. The law was enacted to promote
morality in public administration by curtailing and minimizing the opportunities for official corruption and
maintaining a standard of honesty in the public service. 78
The same circumstances do not obtain in the case at bar. For one, R.A. 3019 is a statute, not an
administrative order. Secondly, R.A. 3019 itself is sufficiently detailed. The law is clear on what practices

were prohibited and penalized, and it was narrowly drawn to avoid abuses. IN the case at bar, A.O. No.
308 may have been impelled by a worthy purpose, but, it cannot pass constitutional scrutiny for it is not
narrowly drawn. And we now hod that when the integrity of a fundamental right is at stake, this court will
give the challenged law, administrative order, rule or regulation a stricter scrutiny. It will not do for the
authorities to invoke the presumption of regularity in the performance of official duties. Nor is it enough for
the authorities to prove that their act is not irrational for a basic right can be diminished, if not defeated,
even when the government does not act irrationally. They must satisfactorily show the presence of
compelling state interests and that the law, rule or regulation is narrowly drawn to preclude abuses. This
approach is demanded by the 1987 Constitution whose entire matrix is designed to protect human rights
and to prevent authoritarianism. In case of doubt, the least we can do is to lean towards the stance that
will not put in danger the rights protected by the Constitutions.
The case of Whalen v. Roe 79 cited by the Solicitor General is also off-line. In Whalen, the United States
Supreme Court was presented with the question of whether the State of New York could keep a
centralized computer record of the names and addresses of all persons who obtained certain drugs
pursuant to a doctor's prescription. The New York State Controlled Substance Act of 1972 required
physicians to identify parties obtaining prescription drugs enumerated in the statute, i.e., drugs with a
recognized medical use but with a potential for abuse, so that the names and addresses of the patients
can be recorded in a centralized computer file of the State Department of Health. The plaintiffs, who were
patients and doctors, claimed that some people might decline necessary medication because of their fear
that the computerized data may be readily available and open to public disclosure; and that once
disclosed, it may stigmatize them as drug addicts. 80 The plaintiffs alleged that the statute invaded a
constitutionally protected zone of privacy, i.e., the individual interest in avoiding disclosure of personal
matters, and the interest in independence in making certain kinds of important decisions. The U.S.
Supreme Court held that while an individual's interest in avoiding disclosuer of personal matter is an
aspect of the right to privacy, the statute did not pose a grievous threat to establish a constitutional
violation. The Court found that the statute was necessary to aid in the enforcement of laws designed to
minimize the misuse of dangerous drugs. The patient-identification requirement was a product of an
orderly and rational legislative decision made upon recommmendation by a specially appointed
commission which held extensive hearings on the matter. Moreover, the statute was narrowly drawn and
contained numerous safeguards against indiscriminate disclosure. The statute laid down the procedure
and requirements for the gathering, storage and retrieval of the informatin. It ebumerated who were
authorized to access the data. It also prohibited public disclosure of the data by imposing penalties for its
violation. In view of these safeguards, the infringement of the patients' right to privacy was justified by a
valid exercise of police power. As we discussed above, A.O. No. 308 lacks these vital safeguards.
Even while we strike down A.O. No. 308, we spell out in neon that the Court is not per se agains the use
of computers to accumulate, store, process, retvieve and transmit data to improve our bureaucracy.
Computers work wonders to achieve the efficiency which both government and private industry seek.
Many information system in different countries make use of the computer to facilitate important social
objective, such as better law enforcement, faster delivery of public services, more efficient management
of credit and insurance programs, improvement of telecommunications and streamlining of financial
activities. 81 Used wisely, data stored in the computer could help good administration by making accurate
and comprehensive information for those who have to frame policy and make key decisions. 82 The
benefits of the computer has revolutionized information technology. It developed the internet, 83 introduced
the concept of cyberspace 84 and the information superhighway where the individual, armed only with his
personal computer, may surf and search all kinds and classes of information from libraries and databases
connected to the net.
In no uncertain terms, we also underscore that the right to privacy does not bar all incursions into
individual privacy. The right is not intended to stifle scientific and technological advancements that

enhance public service and the common good. It merely requires that the law be narrowly focused 85 and
a compelling interest justify such intrusions. 86 Intrusions into the right must be accompanied by proper
safeguards and well-defined standards to prevent unconstitutional invasions. We reiterate that any law or
order that invades individual privacy will be subjected by this Court to strict scrutiny. The reason for this
stance was laid down in Morfe v. Mutuc, to wit:
The concept of limited government has always included the idea that governmental
powers stop short of certain intrusions into the personal life of the citizen. This is indeed
one of the basic disctinctions between absolute and limited government. Ultimate and
pervasive control of the individual, in all aspects of his life, is the hallmark of the absolute
state. In contrast, a system of limited government safeguards a private sector, which
belongs to the individual, firmly distinguishing it from the public sector, which the state
can control. Protection of this private sector protection, in other words, of the dignity
and integrity of the individual has become increasingly important as modern society
has developed. All the forces of a technological age industrialization, urbanization, and
organization operate to narrow the area of privacy and facilitate intrusion into it. In
modern terms, the capacity to maintain and support this enclave of private life marks the
difference between a democratic and a totalitarian society. 87
IV
The right to privacy is one of the most threatened rights of man living in a mass society. The threats
emanate from various sources governments, journalists, employers, social scientists, etc. 88 In th case
at bar, the threat comes from the executive branch of government which by issuing A.O. No. 308
pressures the people to surrender their privacy by giving information about themselves on the pretext that
it will facilitate delivery of basic services. Given the record-keeping power of the computer, only the
indifferent fail to perceive the danger that A.O. No. 308 gives the government the power to compile a
devastating dossier against unsuspecting citizens. It is timely to take note of the well-worded warning of
Kalvin, Jr., "the disturbing result could be that everyone will live burdened by an unerasable record of his
past and his limitations. In a way, the threat is that because of its record-keeping, the society will have lost
its benign capacity to forget." 89 Oblivious to this counsel, the dissents still say we should not be too quick
in labelling the right to privacy as a fundamental right. We close with the statement that the right to privacy
was not engraved in our Constitution for flattery.
IN VIEW WHEREOF, the petition is granted and Adminisrative Order No. 308 entitled "Adoption of a
National Computerized Identification Reference System" declared null and void for being unconstitutional.
SO ORDERED.
G.R. No. 113375 May 5, 1994
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, FELIPE L. GOZON, RAFAEL G.
FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, SEN. FREDDIE WEBB, SEN. WIGBERTO TAADA,
and REP. JOKER P. ARROYO, petitioners,
vs.
TEOFISTO GUINGONA, JR., in his capacity as Executive Secretary, Office of the President; RENATO CORONA, in his capacity as
Assistant Executive Secretary and Chairman of the Presidential review Committee on the Lotto, Office of the President;
PHILIPPINE CHARITY SWEEPSTAKES OFFICE; and PHILIPPINE GAMING MANAGEMENT CORPORATION, respondents.
Jovito R. Salonga, Fernando Santiago, Emilio C. Capulong, Jr. and Felipe L. Gozon for petitioners.
Renato L. Cayetano and Eleazar B. Reyes for PGMC.

Gamaliel G. Bongco, Oscar Karaan and Jedideoh Sincero for intervenors.

DAVIDE, JR., J.:

This is a special civil action for prohibition and injunction, with a prayer for a temporary restraining order and preliminary injunction, which
seeks to prohibit and restrain the implementation of the "Contract of Lease" executed by the Philippine Charity Sweepstakes Office (PCSO)
and the Philippine Gaming Management Corporation (PGMC) in connection with the on- line lottery system, also known as "lotto."
Petitioner Kilosbayan, Incorporated (KILOSBAYAN) avers that it is a non-stock domestic corporation composed of civic-spirited citizens,
pastors, priests, nuns, and lay leaders who are committed to the cause of truth, justice, and national renewal. The rest of the petitioners,
except Senators Freddie Webb and Wigberto Taada and Representative Joker P. Arroyo, are suing in their capacities as members of the
Board of Trustees of KILOSBAYAN and as taxpayers and concerned citizens. Senators Webb and Taada and Representative Arroyo are
suing in their capacities as members of Congress and as taxpayers and concerned citizens of the Philippines.
The pleadings of the parties disclose the factual antecedents which triggered off the filing of this petition.
Pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as amended by B.P. Blg. 42) which grants it the authority to hold and
conduct "charity sweepstakes races, lotteries and other similar activities," the PCSO decided to establish an on- line lottery system for the
purpose of increasing its revenue base and diversifying its sources of funds. Sometime before March 1993, after learning that the PCSO was
interested in operating an on-line lottery system, the Berjaya Group Berhad, "a multinational company and one of the ten largest public
companies in Malaysia," long "engaged in, among others, successful lottery operations in Asia, running both Lotto and Digit games, thru its
subsidiary, Sports Toto Malaysia," with its "affiliate, the International Totalizator Systems, Inc., . . . an American public company engaged in
the international sale or provision of computer systems, softwares, terminals, training and other technical services to the gaming industry,"
"became interested to offer its services and resources to PCSO." As an initial step, Berjaya Group Berhad (through its individual nominees)
organized with some Filipino investors in March 1993 a Philippine corporation known as the Philippine Gaming Management Corporation
(PGMC), which "was intended to be the medium through which the technical and management services required for the project would be
offered and delivered to PCSO."

Before August 1993, the PCSO formally issued a Request for Proposal (RFP) for the Lease Contract of
an on-line lottery system for the PCSO. 2 Relevant provisions of the RFP are the following:
1. EXECUTIVE SUMMARY
xxx xxx xxx
1.2. PCSO is seeking a suitable contractor which shall build, at its own expense, all the
facilities ('Facilities') needed to operate and maintain a nationwide on-line lottery system.
PCSO shall lease the Facilities for a fixed percentage ofquarterly gross receipts. All
receipts from ticket sales shall be turned over directly to PCSO. All capital, operating
expenses and expansion expenses and risks shall be for the exclusive account of the
Lessor.
xxx xxx xxx
1.4. The lease shall be for a period not exceeding fifteen (15) years.
1.5. The Lessor is expected to submit a comprehensive nationwide lottery development
plan ("Development Plan") which will include the game, the marketing of the games, and
the logistics to introduce the games to all the cities and municipalities of the country
within five (5) years.
xxx xxx xxx

1.7. The Lessor shall be selected based on its technical expertise, hardware and software
capability, maintenance support, and financial resources. The Development Plan shall
have a substantial bearing on the choice of the Lessor. The Lessor shall be a domestic
corporation, with at least sixty percent (60%) of its shares owned by Filipino
shareholders.
xxx xxx xxx
The Office of the President, the National Disaster Control Coordinating Council, the
Philippine National Police, and the National Bureau of Investigation shall be authorized to
use the nationwide telecommunications system of the Facilities Free of Charge.
1.8. Upon expiration of the lease, the Facilities shall be owned by PCSO without any
additional consideration. 3
xxx xxx xxx
2.2. OBJECTIVES
The objectives of PCSO in leasing the Facilities from a private entity are as follows:
xxx xxx xxx
2.2.2. Enable PCSO to operate a nationwide on-line Lottery system at no expense or risk
to the government.
xxx xxx xxx
2.4. DUTIES AND RESPONSIBILITIES OF THE LESSOR
xxx xxx xxx
2.4.2. THE LESSOR
The Proponent is expected to furnish and maintain the Facilities, including the personnel
needed to operate the computers, the communications network and sales offices under a
build-lease basis. The printing of tickets shall be undertaken under the supervision and
control of PCSO. The Facilities shall enable PCSO to computerize the entire gaming
system.
The Proponent is expected to formulate and design consumer-oriented Master Games
Plan suited to the marketplace, especially geared to Filipino gaming habits and
preferences. In addition, the Master Games Plan is expected to include a Product Plan
for each game and explain how each will be introduced into the market. This will be an
integral part of the Development Plan which PCSO will require from the Proponent.
xxx xxx xxx
The Proponent is expected to provide upgrades to modernize the entire gaming system
over the life ofthe lease contract.

The Proponent is expected to provide technology transfer to PCSO technical personnel.

7. GENERAL GUIDELINES FOR PROPONENTS

xxx xxx xxx
Finally, the Proponent must be able to stand 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, and able
to achieve PSCO's goal of formalizing an on-line lottery system to achieve its mandated
objective. 5
xxx xxx xxx
16. DEFINITION OF TERMS
Facilities: All capital equipment, computers, terminals, software, nationwide
telecommunication network, ticket sales offices, furnishings, and fixtures; printing costs;
cost of salaries and wages; advertising and promotion expenses; maintenance costs;
expansion and replacement costs; security and insurance, and all other related expenses
needed to operate nationwide on-line lottery system. 6
Considering the above citizenship requirement, the PGMC claims that the Berjaya Group "undertook to
reduce its equity stakes in PGMC to 40%," by selling 35% out of the original 75% foreign stockholdings to
local investors.
On 15 August 1993, PGMC submitted its bid to the PCSO. 7
The bids were evaluated by the Special Pre-Qualification Bids and Awards Committee (SPBAC) for the
on-line lottery and its Bid Report was thereafter submitted to the Office of the President. 8 The submission
was preceded by complaints by the Committee's Chairperson, Dr. Mita Pardo de Tavera. 9
On 21 October 1993, the Office of the President announced that it had given the respondent PGMC the
go-signal to operate the country's on-line lottery system and that the corresponding implementing contract
would be submitted not later than 8 November 1993 "for final clearance and approval by the Chief
Executive." 10 This announcement was published in the Manila Standard, Philippine Daily Inquirer, and the
Manila Times on 29 October 1993. 11
On 4 November 1993, KILOSBAYAN sent an open letter to Presidential Fidel V. Ramos strongly opposing
the setting up to the on-line lottery system on the basis of serious moral and ethical considerations. 12
At the meeting of the Committee on Games and Amusements of the Senate on 12 November 1993,
KILOSBAYAN reiterated its vigorous opposition to the on-line lottery on account of its immorality and
illegality. 13
On 19 November 1993, the media reported that despite the opposition, "Malacaang will push through
with the operation of an on-line lottery system nationwide" and that it is actually the respondent PCSO
which will operate the lottery while the winning corporate bidders are merely "lessors." 14
On 1 December 1993, KILOSBAYAN requested copies of all documents pertaining to the lottery award
from Executive Secretary Teofisto Guingona, Jr. In his answer of 17 December 1993, the Executive

Secretary informed KILOSBAYAN that the requested documents would be duly transmitted before the end
of the month. 15. However, on that same date, an agreement denominated as "Contract of Lease" was
finally executed by respondent PCSO and respondent PGMC. 16 The President, per the press statement
issued by the Office of the President, approved it on 20 December 1993. 17
In view of their materiality and relevance, we quote the following salient provisions of the Contract of
Lease:
1. DEFINITIONS
The following words and terms shall have the following respective meanings:
1.1 Rental Fee Amount to be paid by PCSO to the LESSOR as compensation for the
fulfillment of the obligations of the LESSOR under this Contract, including, but not limited
to the lease of the Facilities.
xxx xxx xxx
1.3 Facilities All capital equipment, computers, terminals, software (including source
codes for the On-Line Lottery application software for the terminals, telecommunications
and central systems), technology, intellectual property rights, telecommunications
network, and furnishings and fixtures.
1.4 Maintenance and Other Costs All costs and expenses relating to printing,
manpower, salaries and wages, advertising and promotion, maintenance, expansion and
replacement, security and insurance, and all other related expenses needed to operate
an On-Line Lottery System, which shall be for the account of the LESSOR. All expenses
relating to the setting-up, operation and maintenance of ticket sales offices of dealers and
retailers shall be borne by PCSO's dealers and retailers.
1.5 Development Plan The detailed plan of all games, the marketing thereof, number
of players, value of winnings and the logistics required to introduce the games, including
the Master Games Plan as approved by PCSO, attached hereto as Annex "A", modified
as necessary by the provisions of this Contract.
xxx xxx xxx
1.8 Escrow Deposit The proposal deposit in the sum of Three Hundred Million Pesos
(P300,000,000.00) submitted by the LESSOR to PCSO pursuant to the requirements of
the Request for Proposals.
2. SUBJECT MATTER OF THE LEASE
The LESSOR shall build, furnish and maintain at its own expense and risk the Facilities
for the On-Line Lottery System of PCSO in the Territory on an exclusive basis. The
LESSOR shall bear all Maintenance and Other Costs as defined herein.
xxx xxx xxx
3. RENTAL FEE

For and in consideration of the performance by the LESSOR of its obligations herein,
PCSO shall pay LESSOR a fixed Rental Fee equal to four point nine percent (4.9%) of
gross receipts from ticket sales, payable net of taxes required by law to be withheld, on a
semi-monthly basis. Goodwill, franchise and similar fees shall belong to PCSO.
4. LEASE PERIOD
The period of the lease shall commence ninety (90) days from the date of effectivity of
this Contract and shall run for a period of eight (8) years thereafter, unless sooner
terminated in accordance with this Contract.
5. RIGHTS AND OBLIGATIONS OF PCSO AS OPERATOR OF THE ON-LINE LOTTERY
SYSTEM
PCSO shall be the sole and individual operator of the On-Line Lottery System.
Consequently:
5.1 PCSO shall have sole responsibility to decide whether to implement, fully or partially,
the Master Games Plan of the LESSOR. PCSO shall have the sole responsibility to
determine the time for introducing new games to the market. The Master Games Plan
included in Annex "A" hereof is hereby approved by PCSO.
5.2 PCSO shall have control over revenues and receipts of whatever nature from the OnLine Lottery System. After paying the Rental Fee to the LESSOR, PCSO shall have
exclusive responsibility to determine the Revenue Allocation Plan; Provided, that the
same shall be consistent with the requirement of R.A. No. 1169, as amended, which fixes
a prize fund of fifty five percent (55%) on the average.
5.3 PCSO shall have exclusive control over the printing of tickets, including but not
limited to the design, text, and contents thereof.
5.4 PCSO shall have sole responsibility over the appointment of dealers or retailers
throughout the country. PCSO shall appoint the dealers and retailers in a timely manner
with due regard to the implementation timetable of the On-Line Lottery System. Nothing
herein shall preclude the LESSOR from recommending dealers or retailers for
appointment by PCSO, which shall act on said recommendation within forty-eight (48)
hours.
5.5 PCSO shall designate the necessary personnel to monitor and audit the daily
performance of the On-Line Lottery System. For this purpose, PCSO designees shall be
given, free of charge, suitable and adequate space, furniture and fixtures, in all offices of
the LESSOR, including but not limited to its headquarters, alternate site, regional and
area offices.
5.6 PCSO shall have the responsibility to resolve, and exclusive jurisdiction over, all
matters involving the operation of the On-Line Lottery System not otherwise provided in
this Contract.
5.7 PCSO shall promulgate procedural and coordinating rules governing all activities
relating to the On-Line Lottery System.

5.8 PCSO will be responsible for the payment of prize monies, commissions to agents
and dealers, and taxes and levies (if any) chargeable to the operator of the On-Line
Lottery System. The LESSOR will bear all other Maintenance and Other Costs, except as
provided in Section 1.4.
5.9 PCSO shall assist the LESSOR in the following:
5.9.1 Work permits for the LESSOR's staff;
5.9.2 Approvals for importation of the Facilities;
5.9.3 Approvals and consents for the On-Line Lottery System; and
5.9.4 Business and premises licenses for all offices of the LESSOR and
licenses for the telecommunications network.
5.10 In the event that PCSO shall pre-terminate this Contract or suspend the operation of
the On-Line Lottery System, in breach of this Contract and through no fault of the
LESSOR, PCSO shall promptly, and in any event not later than sixty (60) days, reimburse
the LESSOR the amount of its total investment cost associated with the On-Line Lottery
System, including but not limited to the cost of the Facilities, and further compensate the
LESSOR for loss of expected net profit after tax, computed over the unexpired term of
the lease.
6. DUTIES AND RESPONSIBILITIES OF THE LESSOR
The LESSOR is one of not more than three (3) lessors of similar facilities for the
nationwide On-Line Lottery System of PCSO. It is understood that the rights of the
LESSOR are primarily those of a lessor of the Facilities, and consequently, all rights
involving the business aspects of the use of the Facilities are within the jurisdiction of
PCSO. During the term of the lease, the LESSOR shall.
6.1 Maintain and preserve its corporate existence, rights and privileges, and conduct its
business in an orderly, efficient, and customary manner.
6.2 Maintain insurance coverage with insurers acceptable to PCSO on all Facilities.
6.3 Comply with all laws, statues, rules and regulations, orders and directives, obligations
and duties by which it is legally bound.
6.4 Duly pay and discharge all taxes, assessments and government charges now and
hereafter imposed of whatever nature that may be legally levied upon it.
6.5 Keep all the Facilities in fail safe condition and, if necessary, upgrade, replace and
improve the Facilities from time to time as new technology develops, in order to make the
On-Line Lottery System more cost-effective and/or competitive, and as may be required
by PCSO shall not impose such requirements unreasonably nor arbitrarily.
6.6 Provide PCSO with management terminals which will allow real-time monitoring of
the On-Line Lottery System.

6.7 Upon effectivity of this Contract, commence the training of PCSO and other local
personnel and the transfer of technology and expertise, such that at the end of the term
of this Contract, PCSO will be able to effectively take-over the Facilities and efficiently
operate the On-Line Lottery System.
6.8 Undertake a positive advertising and promotions campaign for both institutional and
product lines without engaging in negative advertising against other lessors.
6.9 Bear all expenses and risks relating to the Facilities including, but not limited to,
Maintenance and Other Costs and:
xxx xxx xxx
6.10 Bear all risks if the revenues from ticket sales, on an annualized basis, are
insufficient to pay the entire prize money.
6.11 Be, and is hereby, authorized to collect and retain for its own account, a security
deposit from dealers and retailers, in an amount determined with the approval of PCSO,
in respect of equipment supplied by the LESSOR. PCSO's approval shall not be
unreasonably withheld.
xxx xxx xxx
6.12 Comply with procedural and coordinating rules issued by PCSO.
7. REPRESENTATIONS AND WARRANTIES
The LESSOR represents and warrants that:
7.1 The LESSOR is corporation duly organized and existing under the laws of the
Republic of the Philippines, at least sixty percent (60%) of the outstanding capital stock of
which is owned by Filipino shareholders. The minimum required Filipino equity
participation shall not be impaired through voluntary or involuntary transfer, disposition, or
sale of shares of stock by the present stockholders.
7.2 The LESSOR and its Affiliates have the full corporate and legal power and authority to
own and operate their properties and to carry on their business in the place where such
properties are now or may be conducted. . . .
7.3 The LESSOR has or has access to all the financing and funding requirements to
promptly and effectively carry out the terms of this Contract. . . .
7.4 The LESSOR has or has access to all the managerial and technical expertise to
promptly and effectively carry out the terms of this Contract. . . .
xxx xxx xxx
10. TELECOMMUNICATIONS NETWORK

The LESSOR shall establish a telecommunications network that will connect all
municipalities and cities in the Territory in accordance with, at the LESSOR's option,
either of the LESSOR's proposals (or a combinations of both such proposals) attached
hereto as Annex "B," and under the following PCSO schedule:
xxx xxx xxx
PCSO may, at its option, require the LESSOR to establish the telecommunications
network in accordance with the above Timetable in provinces where the LESSOR has not
yet installed terminals. Provided, that such provinces have existing nodes. Once a
municipality or city is serviced by land lines of a licensed public telephone company, and
such lines are connected to Metro Manila, then the obligation of the LESSOR to connect
such municipality or city through a telecommunications network shall cease with respect
to such municipality or city. The voice facility will cover the four offices of the Office of the
President, National Disaster Control Coordinating Council, Philippine National Police and
the National Bureau of Investigation, and each city and municipality in the Territory except
Metro Manila, and those cities and municipalities which have easy telephone access from
these four offices. Voice calls from the four offices shall be transmitted via radio or VSAT
to the remote municipalities which will be connected to this voice facility through wired
network or by radio. The facility shall be designed to handle four private conversations at
any one time.
xxx xxx xxx
13. STOCK DISPERSAL PLAN
Within two (2) years from the effectivity of this Contract, the LESSOR shall cause itself to
be listed in the local stock exchange and offer at least twenty five percent (25%) of its
equity to the public.
14. NON-COMPETITION
The LESSOR shall not, directly or indirectly, undertake any activity or business in
competition with or adverse to the On-Line Lottery System of PCSO unless it obtains the
latter's prior written consent thereto.
15. HOLD HARMLESS CLAUSE
15.1 The LESSOR shall at all times protect and defend, at its cost and expense, PCSO
from and against any and all liabilities and claims for damages and/or suits for or by
reason of any deaths of, or any injury or injuries to any person or persons, or damages to
property of any kind whatsoever, caused by the LESSOR, its subcontractors, its
authorized agents or employees, from any cause or causes whatsoever.
15.2 The LESSOR hereby covenants and agrees to indemnify and hold PCSO harmless
from all liabilities, charges, expenses (including reasonable counsel fees) and costs on
account of or by reason of any such death or deaths, injury or injuries, liabilities, claims,
suits or losses caused by the LESSOR's fault or negligence.

15.3 The LESSOR shall at all times protect and defend, at its own cost and expense, its
title to the facilities and PCSO's interest therein from and against any and all claims for
the duration of the Contract until transfer to PCSO of ownership of the serviceable
Facilities.
16. SECURITY
16.1 To ensure faithful compliance by the LESSOR with the terms of the Contract, the
LESSOR shall secure a Performance Bond from a reputable insurance company or
companies acceptable to PCSO.
16.2 The Performance Bond shall be in the initial amount of Three Hundred Million Pesos
(P300,000,000.00), to its U.S. dollar equivalent, and shall be renewed to cover the
duration of the Contract. However, the Performance Bond shall be reduced
proportionately to the percentage of unencumbered terminals installed; Provided, that the
Performance Bond shall in no case be less than One Hundred Fifty Million Pesos
(P150,000,000.00).
16.3 The LESSOR may at its option maintain its Escrow Deposit as the Performance
Bond. . . .
17. PENALTIES
17.1 Except as may be provided in Section 17.2, should the LESSOR fail to take
remedial measures within seven (7) days, and rectify the breach within thirty (30) days,
from written notice by PCSO of any wilfull or grossly negligent violation of the material
terms and conditions of this Contract, all unencumbered Facilities shall automatically
become the property of PCSO without consideration and without need for further notice
or demand by PCSO. The Performance Bond shall likewise be forfeited in favor of PCSO.
17.2 Should the LESSOR fail to comply with the terms of the Timetables provided in
Section 9 and 10, it shall be subject to an initial Penalty of Twenty Thousand Pesos
(P20,000.00), per city or municipality per every month of delay; Provided, that the Penalty
shall increase, every ninety (90) days, by the amount of Twenty Thousand Pesos
(P20,000.00) per city or municipality per month, whilst shall failure to comply persists.
The penalty shall be deducted by PCSO from the rental fee.
xxx xxx xxx
20. OWNERSHIP OF THE FACILITIES
After expiration of the term of the lease as provided in Section 4, the Facilities directly
required for the On-Line Lottery System mentioned in Section 1.3 shall automatically
belong in full ownership to PCSO without any further consideration other than the Rental
Fees already paid during the effectivity of the lease.
21. TERMINATION OF THE LEASE
PCSO may terminate this Contract for any breach of the material provisions of this
Contract, including the following:

21.1 The LESSOR is insolvent or bankrupt or unable to pay its debts, stops or suspends
or threatens to stop or suspend payment of all or a material part of its debts, or proposes
or makes a general assignment or an arrangement or compositions with or for the benefit
of its creditors; or
21.2 An order is made or an effective resolution passed for the winding up or dissolution
of the LESSOR or when it ceases or threatens to cease to carry on all or a material part
of its operations or business; or
21.3 Any material statement, representation or warranty made or furnished by the
LESSOR proved to be materially false or misleading;
said termination to take effect upon receipt of written notice of
termination by the LESSOR and failure to take remedial action within
seven (7) days and cure or remedy the same within thirty (30) days from
notice.
Any suspension, cancellation or termination of this Contract shall not
relieve the LESSOR of any liability that may have already accrued
hereunder.
xxx xxx xxx
Considering the denial by the Office of the President of its protest and the statement of Assistant
Executive Secretary Renato Corona that "only a court injunction can stop Malacaang," and the imminent
implementation of the Contract of Lease in February 1994, KILOSBAYAN, with its co-petitioners, filed on
28 January 1994 this petition.
In support of the petition, the petitioners claim that:
. . . X X THE OFFICE OF THE PRESIDENT, ACTING THROUGH
RESPONDENTS EXECUTIVE SECRETARY AND/OR ASSISTANT
EXECUTIVE SECRETARY FOR LEGAL AFFAIRS, AND THE PCSO
GRAVELY ABUSE[D] THEIR DISCRETION AND/OR FUNCTIONS
TANTAMOUNT TO LACK OF JURISDICTION AND/OR AUTHORITY IN
RESPECTIVELY: (A) APPROVING THE AWARD OF THE CONTRACT
TO, AND (B) ENTERING INTO THE SO-CALLED "CONTRACT OF
LEASE" WITH, RESPONDENT PGMC FOR THE INSTALLATION,
ESTABLISHMENT AND OPERATION OF THE ON-LINE LOTTERY AND
TELECOMMUNICATION SYSTEMS REQUIRED AND/OR
AUTHORIZED UNDER THE SAID CONTRACT, CONSIDERING THAT:
a) Under Section 1 of the Charter of the PCSO, the PCSO is prohibited from holding and
conducting lotteries "in collaboration, association or joint venture with any person,
association, company or entity";
b) Under Act No. 3846 and established jurisprudence, a Congressional franchise is
required before any person may be allowed to establish and operate said
telecommunications system;

c) Under Section 11, Article XII of the Constitution, a less than 60% Filipino-owned and/or
controlled corporation, like the PGMC, is disqualified from operating a public service, like
the said telecommunications system; and
d) Respondent PGMC is not authorized by its charter and under the Foreign Investment
Act (R.A. No. 7042) to install, establish and operate the on-line lotto and
telecommunications systems. 18
Petitioners submit that the PCSO cannot validly enter into the assailed Contract of Lease with the PGMC
because it is an arrangement wherein the PCSO would hold and conduct the on-line lottery system in
"collaboration" or "association" with the PGMC, in violation of Section 1(B) of R.A. No. 1169, as amended
by B.P. Blg. 42, which prohibits the PCSO from holding and conducting charity sweepstakes races,
lotteries, and other similar activities "in collaboration, association or joint venture with any person,
association, company or entity, foreign or domestic." Even granting arguendo that a lease of facilities is
not within the contemplation of "collaboration" or "association," an analysis, however, of the Contract of
Lease clearly shows that there is a "collaboration, association, or joint venture between respondents
PCSO and PGMC in the holding of the On-Line Lottery System," and that there are terms and conditions
of the Contract "showing that respondent PGMC is the actual lotto operator and not respondent PCSO." 19
The petitioners also point out that paragraph 10 of the Contract of Lease requires or authorizes PGMC to
establish a telecommunications network that will connect all the municipalities and cities in the territory.
However, PGMC cannot do that because it has no franchise from Congress to construct, install, establish,
or operate the network pursuant to Section 1 of Act No. 3846, as amended. Moreover, PGMC is a 75%
foreign-owned or controlled corporation and cannot, therefore, be granted a franchise for that purpose
because of Section 11, Article XII of the 1987 Constitution. Furthermore, since "the subscribed foreign
capital" of the PGMC "comes to about 75%, as shown by paragraph EIGHT of its Articles of
Incorporation," it cannot lawfully enter into the contract in question because all forms of gambling and
lottery is one of them are included in the so-called foreign investments negative list under the Foreign
Investments Act (R.A. No. 7042) where only up to 40% foreign capital is allowed. 20
Finally, the petitioners insist that the Articles of Incorporation of PGMC do not authorize it to establish and
operate an on-line lottery and telecommunications systems. 21
Accordingly, the petitioners pray that we issue a temporary restraining order and a writ of preliminary
injunction commanding the respondents or any person acting in their places or upon their instructions to
cease and desist from implementing the challenged Contract of Lease and, after hearing the merits of the
petition, that we render judgment declaring the Contract of Lease void and without effect and making the
injunction permanent. 22
We required the respondents to comment on the petition.
In its Comment filed on 1 March 1994, private respondent PGMC asserts that "(1) [it] is merely an
independent contractor for a piece of work, (i.e., the building and maintenance of a lottery system to be
used by PCSO in the operation of its lottery franchise); and (2) as such independent contractor, PGMC is
not a co-operator of the lottery franchise with PCSO, nor is PCSO sharing its franchise, 'in collaboration,
association or joint venture' with PGMC as such statutory limitation is viewed from the context, intent,
and spirit of Republic Act 1169, as amended by Batas Pambansa 42." It further claims that as an
independent contractor for a piece of work, it is neither engaged in "gambling" nor in "public service"
relative to the telecommunications network, which the petitioners even consider as an "indispensable
requirement" of an on-line lottery system. Finally, it states that the execution and implementation of the
contract does not violate the Constitution and the laws; that the issue on the "morality" of the lottery

franchise granted to the PCSO is political and not judicial or legal, which should be ventilated in another
forum; and that the "petitioners do not appear to have the legal standing or real interest in the subject
contract and in obtaining the reliefs sought." 23
In their Comment filed by the Office of the Solicitor General, public respondents Executive Secretary
Teofisto Guingona, Jr., Assistant Executive Secretary Renato Corona, and the PCSO maintain that the
contract of lease in question does not violate Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and
that the petitioner's interpretation of the phrase "in collaboration, association or joint venture" in Section 1
is "much too narrow, strained and utterly devoid of logic" for it "ignores the reality that PCSO, as a
corporate entity, is vested with the basic and essential prerogative to enter into all kinds of transactions or
contracts as may be necessary for the attainment of its purposes and objectives." What the PCSO charter
"seeks to prohibit is that arrangement akin to a "joint venture" or partnership where there is "community of
interest in the business, sharing of profits and losses, and a mutual right of control," a characteristic which
does not obtain in a contract of lease." With respect to the challenged Contract of Lease, the "role of
PGMC is limited to that of a lessor of the facilities" for the on-line lottery system; in "strict technical and
legal sense," said contract "can be categorized as a contract for a piece of work as defined in Articles
1467, 1713 and 1644 of the Civil Code."
They further claim that the establishment of the telecommunications system stipulated in the Contract of
Lease does not require a congressional franchise because PGMC will not operate a public utility;
moreover, PGMC's "establishment of a telecommunications system is not intended to establish a
telecommunications business," and it has been held that where the facilities are operated "not for
business purposes but for its own use," a legislative franchise is not required before a certificate of public
convenience can be granted. 24 Even granting arguendo that PGMC is a public utility, pursuant to Albano
S.
Reyes, 25 "it can establish a telecommunications system even without a legislative franchise because not
every public utility is required to secure a legislative franchise before it could establish, maintain, and
operate the service"; and, in any case, "PGMC's establishment of the telecommunications system
stipulated in its contract of lease with PCSO falls within the exceptions under Section 1 of Act No. 3846
where a legislative franchise is not necessary for the establishment of radio stations."
They also argue that the contract does not violate the Foreign Investment Act of 1991; that the Articles of
Incorporation of PGMC authorize it to enter into the Contract of Lease; and that the issues of "wisdom,
morality and propriety of acts of the executive department are beyond the ambit of judicial review."
Finally, the public respondents allege that the petitioners have no standing to maintain the instant suit,
citing our resolution in Valmonte vs. Philippine Charity Sweepstakes Office. 26
Several parties filed motions to intervene as petitioners in this case, 27 but only the motion of Senators
Alberto Romulo, Arturo Tolentino, Francisco Tatad, Gloria Macapagal-Arroyo, Vicente Sotto III, John
Osmea, Ramon Revilla, and Jose Lina 28 was granted, and the respondents were required to comment
on their petition in intervention, which the public respondents and PGMC did.
In the meantime, the petitioners filed with the Securities and Exchange Commission on 29 March 1994 a
petition against PGMC for the nullification of the latter's General Information Sheets. That case, however,
has no bearing in this petition.
On 11 April 1994, we heard the parties in oral arguments. Thereafter, we resolved to consider the matter
submitted for resolution and pending resolution of the major issues in this case, to issue a temporary
restraining order commanding the respondents or any person acting in their place or upon their
instructions to cease and desist from implementing the challenged Contract of Lease.

In the deliberation on this case on 26 April 1994, we resolved to consider only these issues: (a) the locus
standi of the petitioners, and (b) the legality and validity of the Contract of Lease in the light of Section 1
of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding and conducting
lotteries "in collaboration, association or joint venture with any person, association, company or entity,
whether domestic or foreign." On the first issue, seven Justices voted to sustain the locus standi of the
petitioners, while six voted not to. On the second issue, the seven Justices were of the opinion that the
Contract of Lease violates the exception to Section 1(B) of R.A. No. 1169, as amended by B.P. Blg. 42,
and is, therefore, invalid and contrary to law. The six Justices stated that they wished to express no
opinion thereon in view of their stand on the first issue. The Chief Justice took no part because one of the
Directors of the PCSO is his brother-in-law.
This case was then assigned to this ponente for the writing of the opinion of the Court.
The preliminary issue on the locus standi of the petitioners should, indeed, be resolved in their favor. A
party's standing before this Court is a procedural technicality which it may, in the exercise of its discretion,
set aside in view of the importance of the issues raised. In the landmark Emergency Powers Cases, 29 this
Court brushed aside this technicality because "the transcendental importance to the public of these cases
demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of
procedure. (Avelino vs. Cuenco, G.R. No. L-2821)." Insofar as taxpayers' suits are concerned, this Court
had declared that it "is not devoid of discretion as to whether or not it should be entertained," 30 or that it
"enjoys an open discretion to entertain the same or not." 31 In De La Llana vs. Alba, 32 this Court declared:
1. The argument as to the lack of standing of petitioners is easily resolved. As far as
Judge de la Llana is concerned, he certainly falls within the principle set forth in Justice
Laurel's opinion in People vs. Vera [65 Phil. 56 (1937)]. Thus: "The unchallenged rule is
that the person who impugns the validity of a statute must have a personal and
substantial interest in the case such that he has sustained, or will sustain, direct injury as
a result of its enforcement [Ibid, 89]. The other petitioners as members of the bar and
officers of the court cannot be considered as devoid of "any personal and substantial
interest" on the matter. There is relevance to this excerpt from a separate opinion in
Aquino, Jr. v. Commission on Elections [L-40004, January 31, 1975, 62 SCRA 275]:
"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. 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; "The
protection of 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." 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, foreshadowed
by the very decision of People v. Vera where the doctrine was first fully discussed, if we
act differently now. I do not think we are prepared to take that step. Respondents,
however, would hard back to the American Supreme Court doctrine in Mellon v.
Frothingham, 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." That is to speak in
the language of a bygone era, even in the United States. For as Chief Justice Warren
clearly pointed out in the later case of Flast v. Cohen, the barrier thus set up if not
breached has definitely been lowered.

In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan, 33 reiterated in Basco vs.
Philippine Amusements and Gaming Corporation, 34 this Court stated:
Objections to taxpayers' suits for lack of sufficient personality standing or interest are,
however, in the main procedural matters. Considering the importance to the public of the
cases at bar, and in keeping with the Court's duty, under the 1987 Constitution, to
determine whether or not the other branches of government have kept themselves within
the limits of the Constitution and the laws and that they have not abused the discretion
given to them, this Court has brushed aside technicalities of procedure and has taken
cognizance of these petitions.
and in Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, 35 it
declared:
With particular regard to the requirement of proper party as applied in the cases before
us, we hold that the same is satisfied by the petitioners and intervenors because each of
them has sustained or is in danger of sustaining an immediate injury as a result of the
acts or measures complained of. [Ex Parte Levitt, 303 US 633]. And even if, strictly
speaking, they are not covered by the definition, it is still within the wide discretion of the
Court to waive the requirement and so remove the impediment to its addressing and
resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to
question the constitutionality of several executive orders issued by President Quirino
although they were invoking only an indirect and general interest shared in common with
the public. The Court dismissed the objective that they were not proper parties and ruled
that the transcendental importance to the public of these cases demands that they be
settled promptly and definitely, brushing aside, if we must, technicalities of procedure. We
have since then applied this exception in many other cases. (Emphasis supplied)
In Daza vs. Singson, 36 this Court once more said:
. . . For another, we have early as in the Emergency Powers Cases that where serious
constitutional questions are involved, "the transcendental importance to the public of
these cases demands that they be settled promptly and definitely, brushing aside, if we
must, technicalities of procedure." The same policy has since then been consistently
followed by the Court, as in Gonzales vs. Commission on Elections [21 SCRA 774] . . .
The Federal Supreme Court of the United States of America has also expressed its discretionary power to
liberalize the rule on locus standi. In United States vs. Federal Power Commission and Virginia Rea
Association vs. Federal Power Commission, 37 it held:
We hold that petitioners have standing. Differences of view, however, preclude a single
opinion of the Court as to both petitioners. It would not further clarification of this
complicated specialty of federal jurisdiction, the solution of whose problems is in any
event more or less determined by the specific circumstances of individual situations, to
set out the divergent grounds in support of standing in these cases.
In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and
even association of planters, and non-profit civic organizations were allowed to initiate and prosecute
actions before this Court to question the constitutionality or validity of laws, acts, decisions, rulings, or

orders of various government agencies or instrumentalities. Among such cases were those assailing the
constitutionality of (a) R.A. No. 3836 insofar as it allows retirement gratuity and commutation of vacation
and sick leave to Senators and Representatives and to elective officials of both Houses of Congress; 38 (b)
Executive Order No. 284, issued by President Corazon C. Aquino on 25 July 1987, which allowed
members of the cabinet, their undersecretaries, and assistant secretaries to hold other government
offices or positions; 39 (c) the automatic appropriation for debt service in the General Appropriations Act; 40
(d) R.A. No. 7056 on the holding of desynchronized elections; 41 (d) R.A. No. 1869 (the charter of the
Philippine Amusement and Gaming Corporation) on the ground that it is contrary to morals, public policy,
and order; 42 and (f) R.A. No. 6975, establishing the Philippine National
Police. 43
Other cases where we have followed a liberal policy regarding locus standi include those attacking the
validity or legality of (a) an order allowing the importation of rice in the light of the prohibition imposed by
R.A. No. 3452; 44 (b) P.D. Nos. 991 and 1033 insofar as they proposed amendments to the Constitution
and P.D. No. 1031 insofar as it directed the COMELEC to supervise, control, hold, and conduct the
referendum-plebiscite on 16 October 1976; 45 (c) the bidding for the sale of the 3,179 square meters of
land at Roppongi, Minato-ku, Tokyo, Japan; 46 (d) the approval without hearing by the Board of
Investments of the amended application of the Bataan Petrochemical Corporation to transfer the site of its
plant from Bataan to Batangas and the validity of such transfer and the shift of feedstock from naphtha
only to naphtha and/or liquefied petroleum gas; 47 (e) the decisions, orders, rulings, and resolutions of the
Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner of
Customs, and the Fiscal Incentives Review Board exempting the National Power Corporation from
indirect tax and duties; 48 (f) the orders of the Energy Regulatory Board of 5 and 6 December 1990 on the
ground that the hearings conducted on the second provisional increase in oil prices did not allow the
petitioner substantial cross-examination; 49 (g) Executive Order No. 478 which levied a special duty of
P0.95 per liter or P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil products; 50
(h) resolutions of the Commission on Elections concerning the apportionment, by district, of the number of
elective members of Sanggunians; 51 and (i) memorandum orders issued by a Mayor affecting the Chief of
Police of Pasay City. 52
In the 1975 case of Aquino vs. Commission on Elections, 53 this Court, despite its unequivocal ruling that
the petitioners therein had no personality to file the petition, resolved nevertheless to pass upon the
issues raised because of the far-reaching implications of the petition. We did no less in De Guia vs.
COMELEC 54 where, although we declared that De Guia "does not appear to have locus standi, a
standing in law, a personal or substantial interest," we brushed aside the procedural infirmity "considering
the importance of the issue involved, concerning as it does the political exercise of qualified voters
affected by the apportionment, and petitioner alleging abuse of discretion and violation of the Constitution
by respondent."
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 in pesos it is expected to
raise. The legal standing then 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.
And now on the substantive issue.

Section 1 of R.A. No. 1169, as amending by B.P. Blg. 42, prohibits the PCSO from holding and conducting
lotteries "in collaboration, association or joint venture with any person, association, company or entity,
whether domestic or foreign." Section 1 provides:
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 investment will not compete with
the private sector in areas where investments are adequate as may be
determined by the National Economic and Development Authority.
(emphasis supplied)
The language of the section is indisputably clear that with respect to its 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."
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 Socio-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. 55
During the period of 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:
Subject to the approval of the Minister of Human Settlements, to engage in healthoriented 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, 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. 56
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.
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.
When it is joint venture or in collaboration with any entity
such collaboration or joint venture must not include
activity 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.
THE SPEAKER.
Is there any objection to the amendment? (Silence) The
amendment, as amended, is approved. 57
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 introduced other amendments. Thereafter, the new
paragraph B was approved. 58
This is now paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42.

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 inferences. Whatever is not unequivocally
granted is withheld. Nothing passes by mere implication." 59
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 that "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, exception that an existing right of assignment cannot be impaired by
subsequent legislation." 60
It may also be pointed out that the franchise granted to the PCSO to hold and conduct lotteries allows it to
hold and conduct 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." 61
Does the challenged Contract of Lease violate or contravene the exception in Section 1 of R.A. No. 1169,
as amended by B.P. Blg. 42, which prohibits the PCSO from holding and conducting lotteries "in
collaboration, association or joint venture with" another?
We agree with the petitioners that it does, notwithstanding its denomination or designation as a (Contract
of Lease). We are neither convinced nor moved or fazed by the insistence and forceful arguments of the
PGMC that it does not because in reality it is only an independent contractor for a piece of work, i.e., the
building and maintenance of a lottery system to be used by the PCSO in the operation of its lottery
franchise. Whether the contract in question is one of lease or whether the PGMC is merely an
independent contractor should not be decided on the basis of the title or designation of the contract but by
the intent of the parties, which may be gathered from the provisions of the contract itself. Animus hominis
est anima scripti. The intention of the party is the soul of the instrument. In order to give life or effect to an
instrument, it is essential to look to the intention of the individual who executed it. 62 And, pursuant to
Article 1371 of the Civil Code, "to determine the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered." To put it more bluntly, no one
should be deceived by the title or designation of a contract.
A careful analysis and evaluation of the provisions of the contract and a consideration of the
contemporaneous acts of the PCSO and PGMC indubitably disclose that the contract is not in reality a
contract of lease under which the PGMC is merely an independent contractor for a piece of work, but one
where the statutorily proscribed collaboration or association, in the least, or joint venture, at the most,
exists between the contracting parties. Collaboration is defined as the acts of working together in a joint
project. 63 Association means the act of a number of persons in uniting together for some special purpose
or business. 64 Joint venture is defined as an association of persons or companies jointly undertaking
some commercial enterprise; generally all contribute assets and share risks. It requires a community of
interest in the performance of the subject matter, a right to direct and govern the policy in connection
therewith, and duty, which may be altered by agreement to share both in profit and
losses. 65

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, at 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 governmentowned 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." 66
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. 67 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 aspects of the on-line lottery system while the PCSO would,
primarily, provide 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.
The so-called Contract of Lease is not, therefore, what it purports to be. Its denomination as such is a
crafty device, carefully conceived, to provide a built-in defense in the event that the agreement is
questioned as violative of the exception in Section 1 (B) of the PCSO's charter. The acuity or skill of its
draftsmen to accomplish that purpose easily manifests itself in the Contract of Lease. It is outstanding for
its careful and meticulous drafting designed to give an immediate impression that it is a contract of lease.
Yet, woven therein are provisions which negate its title and betray the true intention of the parties to be in
or to have a joint venture for a period of eight years in the operation and maintenance of the on-line lottery
system.
Consistent with the above observations 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 carry out the terms of the contract. And, for a 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 these reasons, too, the PGMC has the initial prerogative to prepare the detailed plan of all games and
the marketing thereof, and determine the number of players, value of winnings, and the logistics required
to introduce the games, including the Master Games Plan. Of course, the PCSO has the reserved
authority to disapprove them. 68 And, while the PCSO has the sole responsibility over the appointment of
dealers and retailers throughout the country, the PGMC may, nevertheless, recommend for appointment
dealers and retailers which shall be acted upon by the PCSO within forty-eight hours and collect and
retain, for its own account, a security deposit from dealers and retailers in respect of equipment supplied
by it.
This joint venture is further established by the following:
(a) Rent is defined in the lease contract as the amount to be paid to the PGMC as compensation for the
fulfillment of its obligations under the contract, including, but not limited to the lease of the Facilities.
However, this rent is not actually a fixed amount. Although it is stated to be 4.9% of gross receipts from
ticket sales, payable net of taxes required by law to be withheld, it may be drastically reduced or, in
extreme cases, 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."
This risk-bearing provision is unusual in a lessor-lessee relationship, but inherent in a joint venture.
(b) In the event of pre-termination of the contract by the PCSO, or its suspension of operation of the online lottery system in breach of the contract and through no fault of the PGMC, the PCSO binds itself "to
promptly, and in any event not later than sixty (60) days, reimburse the Lessor the amount of its total
investment cost associated with the On-Line Lottery System, including but not limited to the cost of the
Facilities, and further compensate the LESSOR for loss of expected net profit after tax, computed over
the unexpired term of the lease." If the contract were indeed one of lease, the payment of the expected
profits or rentals for the unexpired portion of the term of the contract would be enough.
(c) The PGMC cannot "directly or indirectly undertake any activity or business in competition with or
adverse to the On-Line Lottery System of PCSO unless it obtains the latter's prior written consent." If the
PGMC is engaged in the business of leasing equipment and technology for an on-line lottery system, we
fail to see any acceptable reason why it should allow a restriction on the pursuit of such business.
(d) The PGMC shall provide the PCSO the audited Annual Report sent to its stockholders, and within two
years from the effectivity of the contract, cause itself to be listed in the local stock exchange and offer at
least 25% of its equity to the public. If the PGMC is merely a lessor, this imposition is unreasonable and

whimsical, and could only be tied up to the fact that the PGMC will actually operate and manage the
system; hence, increasing public participation in the corporation would enhance public interest.
(e) The PGMC shall put up an Escrow Deposit of P300,000,000.00 pursuant to the requirements of the
RFP, which it may, at its option, maintain as its initial performance bond required to ensure its faithful
compliance with the terms of the contract.
(f) The PCSO shall designate the necessary personnel to monitor and audit the daily performance of the
on-line lottery system; and promulgate procedural and coordinating rules governing all activities relating to
the on-line lottery system. The first further confirms that it is the PGMC which will operate the system and
the PCSO may, for the protection of its interest, monitor and audit the daily performance of the system.
The second admits the coordinating and cooperative powers and functions of the parties.
(g) The PCSO may validly terminate the contract if the PGMC becomes insolvent or bankrupt or is unable
to pay its debts, or if it stops or suspends or threatens to stop or suspend payment of all or a material part
of its debts.
All of the foregoing unmistakably confirm the indispensable role of the PGMC in the pursuit, operation,
conduct, and management of the On-Line Lottery System. They exhibit and demonstrate the parties'
indivisible community of interest in the conception, birth and growth of the on-line lottery, and, above all, in
its profits, with each having a right in the formulation and implementation of policies related to the
business and sharing, as well, in the losses with the PGMC bearing the greatest burden because of its
assumption of expenses and risks, and the PCSO the least, because of its confessed unwillingness to
bear expenses and risks. In a manner of speaking, each is wed to the other for better or for worse. In the
final analysis, however, in the light of the PCSO's RFP and the above highlighted provisions, as well as
the "Hold Harmless Clause" of the Contract of Lease, it is even safe to conclude that the actual lessor in
this case is the PCSO and the subject matter thereof is its franchise to hold and conduct lotteries since it
is, in reality, the PGMC which operates and manages the on-line lottery system for a period of eight years.
We thus declare that the challenged Contract of Lease violates the exception provided for in paragraph B,
Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and is, therefore, invalid for being contrary to
law. This conclusion renders unnecessary further discussion on the other issues raised by the petitioners.
WHEREFORE, the instant petition is hereby GRANTED and the challenged Contract of Lease executed
on 17 December 1993 by respondent Philippine Charity Sweepstakes Office (PCSO) and respondent
Philippine Gaming Management Corporation (PGMC) is hereby DECLARED contrary to law and invalid.
The Temporary Restraining Order issued on 11 April 1994 is hereby MADE PERMANENT.
No pronouncement as to costs.
SO ORDERED.