Kilosbayan vs Guingona

GR No. 113375, May 5, 1994

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,” “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. On 15 August 1993, PGMC submitted its bid to the PCSO. 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.”

On 4 November 1993, KILOSBAYAN sent an open letter to President Fidel V. Ramos strongly opposing the setting up of the on-line lottery system on the basis of serious moral and ethical considerations. 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 Malacañang,” and the imminent implementation of the Contract of Lease in February 1994, KILOSBAYAN, with its co-petitioners, filed on 28 January 1994 this petition.

Petitioner claims that it is a non-stock domestic corporation composed of civic-spirited citizens, pastors, priests, nuns, and lay leaders. The rest of the petitioners, except Senators Freddie Webb and Wigberto Tañada 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 Tañada and Representative Arroyo are suing in their capacities as members of Congress and as taxpayers and concerned citizens of the Philippines. The public respondents, meanwhile allege that the petitioners have no standing to maintain the instant suit, citing the Court’s resolution in Valmonte vs. Philippine Charity Sweepstakes Office.

1. Whether or not the petitioners have locus standi

2. Whether or 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.” is legal and valid.

We find the instant petition to be of transcendental importance to the public. 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.

The language of Section 1 of R.A. No. 1169 is indisputably clear. 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. 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.

Undoubtedly, 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 PSCO would, primarily, provide the franchise. The so-called Contract of Lease is not, therefore, what it purports to be. 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.

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.

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