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, RAFAEL G.
FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL,
SEN. FREDDIE WEBB, SEN. WIGBERTO TAADA, REP. JOKER P.
ARROYO, petitioners,
vs.
MANUEL L. MORATO, in his capacity as Chairman of the Philippine Charity
Sweepstakes Office, and the PHILIPPINE GAMING MANAGEMENT
CORPORATION, respondents.

Ponente: MENDOZA

FACTS:

This suit was filed seeking to declare the ELA invalid on the ground that it is
substantially the same as the Contract of Lease nullified in the first case decision in
G.R. No. 113375 (Kilosbayan, Incorporated v. Guingona, 232 SCRA 110 1994
invalidating the Contract of Lease between the Philippine Charity Sweepstakes Office
(PCSO) and the Philippine Gaming Management Corp. (PGMC)]. Petitioners maintain
(1) that the Equipment Lease Agreement (ELA) is a different lease contract with none of
the vestiges of a joint venture which were found in the Contract of Lease nullified in the
prior case; (2) that the ELA did not have to be submitted to a public bidding because it
fell within the exception provided in E.O. No. 301, 1 (e); (3) that the power to determine
whether the ELA is advantageous to the government is vested in the Board of Directors
of the PCSO; (4) that for lack of funds the PCSO cannot purchase its own on-line lottery
equipment and has had to enter into a lease contract; (5) that what petitioners are
actually seeking in this suit is to further their moral crusade and political agenda, using
the Court as their forum.

ISSUE:

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

HELD:

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

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

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

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

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

Indeed the question is not whether compared with the former joint venture
agreement the present lease contract is [more] advantageous to the government. The
question is whether under the circumstances, the ELA is the most advantageous
contract that could be obtained compared with similar lease agreements which the
PCSO could have made with other parties. Petitioners have not shown that more
favorable terms could have been obtained by the PCSO or that at any rate the ELA,
which the PCSO concluded with the PGMC, is disadvantageous to the government.

SEPARATE OPINIONS:

PADILLA, concurring

I join the majority in voting for the dismissal of the petition in this case.
As to whether or not the ELA is grossly disadvantageous to the government, it should
be stressed that the matter involves, basically, a policy determination by the
executive branch which this Court should not ordinarily reverse or substitute with its own
judgment, in keeping with the time honored doctrine of separation of powers.

VITUG, concurring

I most humbly reiterate the separate opinion I have made in Kilosbayan, Inc., et
al., vs. Teofisto Guingona, Sr., etc., et al. (G.R. No. 113375, promulgated on 05 May
1994).
Back to the core of the petition, however, the matter of the legal standing of petitioners
in their suit assailing the subject-contract appears to me, both under substantive law
and the rules of procedure, to still be an insuperable issue. I have gone over carefully
the pleadings submitted in G.R. No. 118910, and I regret my inability to see anything
new that can convince me to depart from the view I have expressed on it in G.R. No.
113375.

FELICIANO, dissenting

With very great respect, it is submitted that the above conclusion has been
merely assumed rather than demonstrated and that what is in fact before this Court
does not adequately support such conclusion.
 Basco vs PAGCOR GR 91649 (May 14, 1991)
Posted on November 20, 2012
GR 91649
197 SCRA 52, 65
May 14, 1991

FACTS:
Petitioners seek to annul the PAGCOR charter PD 1869 for being allegedly contrary
to morals, public policy and order, monopolistic & tends toward crony economy,
waiving the Manila City governments right to impose taxes & license fees, and violating
the equal protection clause, local autonomy and other state policies in the Constitution.

ISSUES:

Whether PD 1869 is valid.

HELD:

Every law has in its favor the presumption of constitutionality. For a law to be nullified,
it must be shown that there is a clear & unequivocal breach of the Constitution.
The grounds for nullity must be clear and beyond reasonable doubt. The question of
whether PD 1869 is a wise legislation is up for Congress to determine.

The power of LGUs to regulate gambling through the grant of franchises, licenses or
permits was withdrawn by PD 771, and is now vested exclusively on the National
Government. Necessarily, the power to demand/collect license fees is no longer vested
in the City of Manila.

LGUs have no power to tax Government instrumentalities. PAGCOR, being a GOCC, is

therefore exempt from local taxes. The National Government is supreme over local
governments. As such, mere creatures of the State cannot defeat national policies using
the power to tax as a tool for regulation. The power to tax cannot be allowed to defeat
an instrumentality of the very entity which has the inherent power to wield it. The power
of LGUs to impose taxes & fees is always subject to limitation provided by Congress.
The principle of local autonomy does not make LGUs sovereign within a state, it simply
means decentralization.

A law doesnt have to operate in equal force on all persons/things. The equal protection
clause doesnt preclude classification of individuals who may be accorded different
treatment under the law as long as the classification is not unreasonable/arbitrary. The
mere fact that some gambling activities are legalized under certain conditions, while
others are prohibited, does not render the applicable laws unconstitutional.