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PNB VS.

CA AND KAW NGO ISSUE:


G.R. No. 119580 Was there a contract of sale?
September 26, 1996
FACTS: RULING:
The subject matter of the case is a parcel of land containing a net area No, there was none.
of 1,190.72 square meters (1391.70 square meters minus 200.98
square meters reserved for road widening and Light Rail Transit) A contract to sell is akin to a conditional sale where the efficacy or
situated at the corner of Carlos Palanca and Helios Streets, Sta. Cruz, obligatory force of the vendor's obligation to transfer title is
Manila, owned and registered in the name of the Philippine National subordinated to the happening of future and uncertain event so that if
Bank (PNB). Lapaz made a formal offer to purchase the parcel of land. the suspensive condition does not take place, the parties would stand
PNB, on the other hand, advised Lapaz of its approval of the latter's as if the conditional obligation had never existed. The suspensive
offer to purchase the subject property subject to certain terms and condition is commonly full payment of the purchase price. In other
conditions. One of the conditions in the agreement was to clear the words, in a contract to sell, ownership is retained by the seller and is
subject property of its then accupants; thus, Lapaz undertook the not to pass to the buyer until full payment of the price or the fulfillment
ejectment of the squatters/tenants at her own expense. of some other conditions either which is a future and uncertain event
the non-happening of which is not a breach, casual or serious, but
Subsequently, PNB wrote Lapaz reminding her of her failure to remit simply an event that prevents the obligation of the vendor to convey
the amount of P978,860.00 and of her refusal to send her letter of title from acquiring binding force.
conformity to the letter-agreement. Lapaz was likewise advised to
remit her cash payment of the full price amounting to P5,378,902.50; In the instant case, private respondent does not dispute the fact that,
otherwise, the subject property shall be sold to other interested under identical provisions in the two letter-agreements, her obligation
party/ies and her deposit forfeited. When no further payment was was to deposit an initial amount and then subsequently to deposit an
received by PNB from Lapaz, the former notified the latter by telegram additional amount representing roughly 20% of the purchase price.
that it was giving her a last chance to pay the balance of the required Under both letter-agreements, the consequences of private
downpayment of P563,341.29; failure of which shall cause the respondent's failure to remit the additional deposit will result to such
cancellation of the sale in her favor and the forfeiture of her deposit being forfeited and cause the Bank to sell the property to other
P100,000.00 deposit. The sale in favor of Lapaz never materialized, interested parties. This right reserved in the petitioner to in effect
however, because of her failure to remit the required amount agreed cancel the agreement to sell upon failure of petitioner to remit the
upon; hence, the proposed sale was cancelled and the private additional deposit and to consequently open the subject property anew
respondent's deposit of P100,000.00 was forfeited by the petitioner. to purchase offers, is in the nature of a stipulation reserving title in the
vendor until full payment of the purchase price or giving the vendor the
Lapaz wrote a letter to the former President of the Philippines, right to unilaterally rescind the contract the moment the vendee fails to
Ferdinand E. Marcos, requesting for the lifting of the directive pay within a fixed period. In the instant case, there was apparently no
suspending the sale of the subject property, which letter was transfer of title, not even mention of such a transfer in the future,
transmitted to the then President of the PNB for comment and/or considering that all the parties were aware of the occupancy of the
action. PNB advised Lapaz of the approval of her request for revival of subject property by third persons. This circumstance all the more
the previously approved offer to purchase the subject again to certain reinforces our finding that the transaction contemplated under the
terms and conditions. Lapaz then informed the PNB management that letter-agreements was a contract to sell or a conditional sale which
the terms and conditions set forth were acceptable to her except absolutely depends, for its efficacy, upon the happening of the
condition no. 6 which says that the property shall be cleared of its conditions specified in the said letter-agreements.
present tenants/occupants but all expenses to be incurred in
connection with the ejectment proceedings shall be for her account.
She therefore requested for the deletion of such condition because
she had already defrayed the expenses for the ejectment of the
previous occupants of the premises in compliance with the condition
in the original approved offer to purchase. Besides, the present
occupants are not squatters, but lessees of PNB. Lapaz's request for
modification was not acceptable to the Bank so Lapaz, through,
counsel informed PNB that she was willing to pay and remit the
amount of P827,119.83 representing the balance of the 20% down
payment of the approved purchase price as soon as the subject
property was cleared of its present tenants/occupants. However, the
bank informed Lapaz that it could no longer grant her any extension to
pay the above stated amount, and cancelled the approved sale in
private respondent's favor for being stale and unimplemented and
forfeited her deposit of P200,000.00.
the PCSO cannot purchase its own on-line lottery equipment and has
Case Digest: G.R. No. 174689. October 22, 2007 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
Rommel Jacinto Dantes Silverio, petitioner, vs. Republic of the agenda, using the Court as their forum.
Philippines, respondent.
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:

xxx

(3) 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;

(4) that under §1(A) of its charter (R.A. 1169), the Philippine Charity
Sweepstakes Office has authority to enter into a contract for the
holding of an on-line lottery, whether alone or in association,
collaboration or joint venture with another party, so long as it itselfholds
or conducts such lottery; and

(5) 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
Kilosbayan vs. Morato (G.R. No. 118910. July 17, 1995) venture agreement the present lease contract is “[more] advantageous
to the government.” The question is whether under the circumstances,
Ponente: MENDOZA
the ELA is the most advantageous contract that could be obtained
FACTS: compared with similar lease agreements which the PCSO could have
made with other parties. Petitioners have not shown that more
[T]his suit was filed seeking to declare the ELA invalid on the ground favorable terms could have been obtained by the PCSO or that at any
that it is substantially the same as the Contract of Lease nullified in the rate the ELA, which the PCSO concluded with the PGMC, is
first case [decision in G.R. No. 113375 (Kilosbayan, Incorporated v. disadvantageous to the government.
Guingona, 232 SCRA 110 (1994)) invalidating the Contract of Lease
between the Philippine Charity Sweepstakes Office (PCSO) and the DAVIDE, dissenting
Philippine Gaming Management Corp. (PGMC)]. Petitioners maintain
I register a dissenting vote.
(1) that the Equipment Lease Agreement (ELA) is a different lease
contract with none of the vestiges of a joint venture which were found I am disturbed by the sudden reversal of our rulings
in the Contract of Lease nullified in the prior case; (2) that the ELA did in Kilosbayan, Inc., et al. vs. Guingona, et al. (hereinafter referred to
not have to be submitted to a public bidding because it fell within the as the first lotto case) regarding the application or interpretation of the
exception provided in E.O. No. 301, §1 (e); (3) that the power to exception clause in paragraph B, Section 1 of the Charter of the PCSO
determine whether the ELA is advantageous to the government is (R.A.. No. 1169), as amended by B.P. Blg. 442, and on the issue
vested in the Board of Directors of the PCSO; (4) that for lack of funds of locus standi of the petitioners to question the contract of lease
involving the on-line lottery system entered into between the Philippine category even higher than those involved in many of the aforecited
Charity Sweepstakes Office (PCSO) and the Philippine Gaming cases. The ramifications of such issues immeasurably affect the
Management Corporation (PGMC). Such reversal upsets the salutary social, economic, and moral well-being of the people even in the
doctrines of the law of the case, res judicata, and stare decisis. It puts remotest barangays of the country and the counter-productive and
to jeopardy the faith and confidence of the people, specially the retrogressive effects of the envisioned on-line lottery system are as
lawyers and litigants, in the certainty and stability of the staggering as the billions of pesos it is expected to raise. The legal
pronouncements of this Court. It opens the floodgates to endless standing than of the petitioners deserves recognition and, in the
litigations for re-examination of such pronouncements and weakens exercise of its sound discretion, this Court hereby brushes aside the
this Court’s judicial and moral authority to demand from lower courts procedural barrier which the respondents tried to take advantage
obedience thereto and to impose sanctions for their opposite conduct. of.chanroblesvirtual|awlibrary

DAVIDE, J., dissenting:chanrob1es virtual 1aw library In this concurring opinion, Mr. Justice Florentino P. Feliciano further
showed substantive grounds or considerations of importance which
I register a dissenting vote.
strengthened the legal standing of the petitioners to bring and maintain
I. the action, namely: (a) the public character of the funds or other assets
involved in the contract of lease; (b) the presence of a clear case of
disregard of a constitutional or legal provision by the public respondent
I am disturbed by the sudden reversal of our rulings in Kilosbayan, Inc., agency; (c) the lack of any other party with a more direct and specified
Et. Al. v. Guingona, Et. Al. 1 referred to as the first lotto case) regarding interest in raising the questions involved therein; and (d) the wide
the application or interpretation of the exception clause in paragraph range of impact of the contract of lease and of its implementation.
B, Section 1 of the Charter of the PCSO (R.A. No. 1169), as amended
by B.P. Blg. 442, and on the issue of locus standi of the petitioners to Only last 6 April 1995, in the decision in Tatad v. Garcia, 3 this Court,
question the contract of lease involving the on-line lottery system speaking through Mr. Justice Camilo D. Quiason who had joined in the
entered into between the Philippine Charity Sweepstakes Office dissenting opinions in the first lotto case the petitioners, locus standi
(PCSO) and the Philippine Gaming Management Corporation therein, invoked and applied the ruling on locus standi in the first lotto
(PGMC). Such reversal upsets the salutary doctrines of the law of the case. He stated:chanrob1es virtual 1aw library
case, res judicata and stare decisis. It puts to jeopardy the faith and
confidence of the people, specially the lawyers and litigants, in the The prevailing doctrines in taxpayer’s suits are to allow taxpayers to
certainly and stability of the pronouncements of this Court. It opens the question contracts entered into by the national government or
floodgates to endless litigations for re-examination of such government-owned or controlled corporations allegedly in
pronouncements and weakens this Court’s judicial and moral authority contravention of the law (Kilosbayan, Inc. v. Guingona, 232 SCRA 110
to demand from lower courts obedience thereto and to impose [1994] and to disallow the same when only municipal contracts are
sanctions for their opposite conduct. involved (Bugnay Construction and Development Corporation v.
Laron, 176 SCRA 240 [1989].chanroblesvirtuallawlibrary
It must be noted that the decision in the first lotto case was
unconditionally accepted by the PCSO and the PGMC, as can be For as long as the ruling in Kilosbayan on locus standi is not reversed,
gleaned from their separate manifestations that they would not ask for we have no choice but to follow it and uphold the legal standing of
its reconsideration but would, instead, negotiate a new equipment petitioners as taxpayers to institute the present action.
lease agreement consistent with the decision and the PCSO’s charter
and that they would furnish the Court a copy of the new agreement. Mr. Justice Santiago M. Kapunan, who had also dissented in the first
The decision has, thus, become final on 23 May 1994. 2 lotto case on the issue of locus standi; unqualifiedly concurred with the
majority opinion in Tatad. Mr. Justice Vicente V. Mendoza, the writer
As the writer of the said decision and as the author of the exception to of the ponencia in this case, also invoked the locus standi ruling in the
paragraph B, Section 1 of R.A. No. 1169, as amended, I cannot accept first lotto case to deny legal standing to Tatad, Et. Al. He
the strained and tenuous arguments adduced in the majority opinion it said:chanrob1es virtual 1aw library
justly the reversal of our rulings in the first lotto case. While there are
exceptions to the aforementioned doctrines and I am not inexorably Nor do petitioners have standing to bring this suit as citizens. In the
opposed to upsetting prior decisions if warranted by overwhelming cases in which citizens were authorized to sue, this Court found
considerations of justice and irresistible desire to rectify an error, none standing because it though the constitutional claims pressed for
of such considerations and nothing of substance or weight can bring decision to be of "transcendental importance," as in fact it
this case within any of the exceptions. subsequently granted relief to petitioners by invalidating the
challenged statutes or governmental actions. Thus in the Lotto case
In the said case, we sustained the locus standi of the petitioners, and [Kilosbayan, Inc. v. Guingona, 232 SCRA 110 (1994)] relief by the
in no uncertain terms declared:chanrob1es virtual 1aw library majority for upholding petitioner’s standing, this Court took into
account the "paramount public interest" involved which "immeasurably
We find the instant petition to be of transcendental importance to the affect[ed] the social, economic, and moral well-being of the people . .
public. The issues it raised are of paramount public interest and of a . and the counter-productive and retrogressive effects of the
envisioned on-line lottery system." Accordingly, the Court invalidated
the contract for the operation of the lottery.chanrobles.com : virtual Interim Batasang Pambansa. The original text of paragraph B. Section
lawlibrary 1 of Parliamentary Bill No. 622 reads as follows:jgc:chanrobles.com.ph

Chief Justice Andres R. Narvasa and Associate Justice Abdulwahid A "To engage in any and all investments and related profit-oriented
Bidin, Jose A.R. Melo, Reynato S. Puno, Jose C. Vitug, and Ricardo projects or programs and activities by itself or in collaboration,
J. Francisco, joined him in his concurring opinion. Except for the Chief association or joint venture with any person, association, company or
Justice who took part in the first lotto case and Justice Francisco who entity, whether domestic or foreign, for the main purpose of raising
was not yet a member of this Court at the time, the rest of the Justice funds for health and medical assistance and services and charitable
who joined the concurring opinion of Justice Mendoza had dissented grants." [Record of the Batasan, vol. Two, 993]
in the lotto case on the said issue.
During the period of the committee amendments, the Committee on
Furthermore, it must not be forgotten that this Court has defined the Socio-Economic Planning and Development, through Assemblyman
issues in this case and limited them to the following:chanrob1es virtual Ronaldo B. Zamora, introduced an amendment by substitution to the
1aw library said paragraph B such that, as amended, it should read as
follows:chanroblesvirtual|awlibrary
1. Whether the challenged ELA constitutes an association
collaboration, or joint venture within the meaning of Section 1(B) of "Subject to the approval of the Minister of Human Settlements, to
R.A. No. 1169, as amended by B.P. Blg. engage in health-oriented investments, programs, projects and
42;chanroblesvirtuallawlibrary activities which be profit-oriented, by itself or in collaboration,
association, or joint venture with any person, association, company or
2. Whether the ELA requires prior public bidding; and entity, whether domestic or foreign, for the purpose of providing for
permanent and continuing sources of funds for health programs,
3. Whether the ELA is grossly disadvantageous to the Government. including the expansion of existing ones, medical assistance and
services and/or charitable grants." [Id., 1006-1007]
In fact, during the oral arguments of this case on 3 March 1993 this
court aborted the attempt of the principal counsel for the PGMC, Atty., Before the motion of Assemblyman Zamora for the approval of the
Renato Cayetano, to revive the issue of locus standi. Since it seemed amendment could be acted upon, Assemblyman Davide introduced an
that the had prepared himself for and had been assigned to discuss amendment to the amendment:jgc:chanrobles.com.ph
that issue alone, he took his seat without protest and without a
suggestion that he would ask for an expansion of the scope of the "Mr. DAVIDE:chanrobles.com : virtual lawlibrary
issues.chanrobles.com : virtual lawlibrary
Mr. Speaker.
In the first lotto case, this Court also emphatically ruled that the
language of Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, THE SPEAKER:chanrob1es virtual 1aw library
is
The gentleman from Cebu is recognized.
indisputably clear that with respect to its [PCSO’S] franchise or
privilege "to and conduct charity sweepstakes races, lotteries and Mr. DAVIDE:chanrob1es virtual 1aw library
other similar activities," the PCSO cannot exercise it "in collaboration,
association or joint venture" with any other party. This is the May I introduce an amendment to the committee amendment? The
unequivocal meaning and import of the phrase "except for the activities amendment would be to insert after ‘foreign’ in the amendment just
mentioned in the preceding paragraph (A)," namely, "charity read the following: EXCEPT FOR THE ACTIVITY IN LETTER (A)
sweepstakes races, lotteries and other similar activities."cralaw ABOVE.chanrobles.com : virtual lawlibrary
virtua1aw library
When it is joint venture or in collaboration with may entity such
In support thereof, we explained how the amendment came about and collaboration or joint venture must not include activity letter (a) which
quoted portions of the Record of the Batasan 4 on the proceedings is the holding and conducting of sweepstakes races, lotteries and other
during the period of amendments to show the unequivocal intent of the similar acts.
Interim Batasang Pambansa to proscribe the holding or conducting by
the PCSO of sweepstakes races, lotteries, and other similar activities, MR. ZAMORA:chanrob1es virtual 1aw library
"in collaboration, association, or joint venture with any person,
association, company, or entity, whether domestic or foreign." For We accept the amendment, Mr. Speaker.
convenience, I quote what this Court stated in the said
case:chanroblesvirtuallawlibrary MR DAVIDE:chanrob1es virtual 1aw library

B.P. Blg. 42 originated from Parliamentary Bill No. 622, which was Thank you, Mr. Speaker.chanrobles.com : virtual lawlibrary
covered by Committee Report No. 103 as reported out by the
Committee on Social-Economic Planning and Development of the THE SPEAKER:chanrob1es virtual 1aw library
PCSO and the PGMC are bound by the ruling in the first lotto case on
Is there any objection to the amendment? (Silence) The amendment, the locus standi of the petitioners and the application or interpretation
as amended, is approved." [Id., 1007, Emphasis supplied] of the exception clause in paragraph B, Section 1 of R.A. No. 1169, as
amended. Moreover, that application or interpretation has been laid to
Further amendments to paragraph B were introduced and approved. rest under the doctrine of stare decisis and has also become part of
When Assemblyman Zamora read the final text of paragraph B as our legal system pursuant to Article 8 of the Civil Code which provides:
further amended, the earlier approved amendment of Assemblyman "Judicial decisions applying interpreting the laws or the constitution
Davide become "EXCEPT FOR THE ACTIVITIES MENTIONED IN shall from part of the system of the Philippines."cralaw virtua1aw
PARAGRAPH (A)" ; and by virtue of the amendment introduced by library
Assemblyman Emmanuel Pelaez, the word PRECEDING was inserted
before PARAGRAPH. Assemblyman Pelaez introduction other These doctrines were not adopted whimsically or capriciously. They
amendments. Thereafter, the new Paragraph B was approved. [Id.] are based on public policy and other considerations of great
This is now paragraph B, Section 1 of R.A. No. 1169, as amended by importance and should not be discarded or jettisoned in a cavalier
B.P. Blg. 42. 5 fashion. Yet, they are now put to naught in this case.chanrobles.com :
virtual lawlibrary
This Court further explained the rationale for the prohibition as
follows:chanrob1es virtual 1aw library The principle of the law of the case "is necessary as a matter of policy
to end litigation. There would be no end to a suit if every obstinate
No interpretation of the said provisions to relax or circumvent the litigant could, by repeated appeals, compel a court to listen to criticism
prohibition can be allowed since the privilege to hold or conduct charity on their opinions, or speculate on chances from changes in its
sweepstakes races, lotteries, or other similar activities is a franchise members." 7
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, It is, however, contended that the law of the case is inapplicable that
privileges and franchises, the words are to be taken most strongly doctrine applies only when a case is before an appellate court a
against the grantee . . . [o]ne who claims a franchise or privileges in second time after its remand to a lower court. While indeed the
derogation of the common rights of the public must prove his title statement may be correct, it disregards the fact that the case is nothing
thereto by a grant which is clearly and definitely expressed, and he but a sequel to and is, therefore, for all intents and purposes, a
cannot enlarge it by equivocal or doubtful provisions or by probable continuation of the first lotto case. By their conduct, the parties
interferences. Whatever is not unequivocally granted is withheld. admitted that it is, for which reason the PGMC and the PCSO
Nothing passes by mere implication." [36 am Jur 2d Franchises § 26 submitted in the first lotto case a copy of the ELA in question, and the
(1968)]. petitioners commenced the instant petition also in the said case. Our
resolution that the validity of the ELA could not be decided in the said
In short then, by the exception explicitly made cannot share its case because the decision therein had became final does not detract
franchise with another by way of collaboration, association or joint from the fact that this case is but a continuation of the first lotto case
venture. Neither can it assign, transfer, or lease such franchise. It has or a new chapter in the raping controversy between the petitioners, on
been said "the rights and privileges conferred under a franchise may, the one hand, and the PCSO and the PGMC, on the other, on the
without doubt, be assigned or transferred when the grant is to the operation of the on-line lottery system.
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 Equally unacceptable is the majority opinion’s rejection of the related
constitution, or be made subject to the approval of the grantor or a doctrine of conclusiveness of judgment of the ground that the question
governmental agency, such as a public utilities commission, except of standing is a question, as this case involves a different or unrelated
that an existing right of assignment cannot be impaired by subsequent contract. The legal question of locus standi which was resolved in favor
legislation." [Id., § 63]. of the petitioners in the first lotto case is the same in this case and in
every subsequent case which would involve contracts relating or
It may also be pointed out that the franchise granted to the PCSO to incidental to the contract or holding of lotteries by the PCSO in
hold and conduct lotteries allows it to hold and contract a species of collaboration, association; or joint venture with any person,
gambling. It is settled that "a statute which authorizes the carrying on association, company or entity. And, the contract in question is not
of a gambling activity or business should be strictly construed and different from or unrelated to the first nullified contract, for it in nothing
every reasonable doubt so resolved as to limit the powers and rights but a substitute for the latter. Respondent Morato was even candid
claimed under its authority. [38 Am Jur 2d Gambling § 18 [1968]). 6 enough to admit that no new and separate public bidding was
conducted for the ELA in question because the PCSO was of the belief
The PCSO and the PGMC never challenged our application or that the public bidding for the nullified contract was sufficient.
interpretation of the exception clause and our definition of the terms
collaboration, association, and joint venture. On the contrary they Its reliance on the ruling in Montana v. United States 8 that preclusion
unconditionally accepted the same by not asking for the or collateral estoppel does not apply to issues of law, at least when
reconsideration of our decision in the first lotto case. substantially unrelated claims are involved, is misplaced. For one
thing, the question of the petitioners’ legal standing in the first lotto
Under the principle of either the law of the case of res judicata, the case and in this case is one and the same issue of law. For another,
these cases involve the same and not substantially unrelated subject The justifications given in the majority opinion to underrate the ruling
matter, viz., the second contract between the PCSO and the PGMC locus standi and to ultimately discard it are unconvincing. It is not at all
on the operation of the on-line lottery system. true, as the majority opinion contends, that" [t]he previous sustaining
petitioners intervention may in fact be considered a departure from
The majority opinion likewise failed to consider that in the very settled ruling on real party in interest because no constitutional issues
authority it cited regarding the exception to the rule of issue preclusion were actually involved."cralaw virtua1aw library
(Testament of the Law, 2d Judgments § 28), the second illustration
stated therein is subject to this NOTE: "The doctrine of the stare It must be pointed out that the rule in ordinary civil procedure on real
decisis may lead the court to refuse to reconsider the question of party in interest was never put in issue in the previous case. It was the
sovereign immunity," which simply means that stare decisis is an clear understanding of the Members of the Court that in the light of the
effective bar to a re-examination of a prior judgment. issues raised and the arguments adduced therein, only locus standi
deserved consideration. Accordingly, the majority opinion and the
The doctrine of stare decisis embodies the legal maxim that a principle separate dissenting opinions therein dwelt lengthily on locus standi
or rule of law which has been established by the decision of a court of and brought in the process a vast array of authorities on the issue.
controlling jurisdiction will be followed in other cases involving a similar Moreover, as explicitly stressed in the concurring opinion of Justice
situation. It is founded on the necessity for securing certainty and Feliciano, both constitutional and legal issues were involved therein.
stability in the law and does not require identity or privity of parties. 9 Finally, as shall hereafter be discussed, in public law the rule of real
This is explicitly fleshed out in Article 8 of the Civil Code which provides party in interest is subordinate to the doctrine of locus standi.
that decisions applying or interpreting the laws or the constitution shall
form part of the legal system. Such decisions "assume the same Equally unconvincing is the majority opinion’s contention that the ruling
authority as the statute itself and, until authoritatively abandoned, locus standi in the first lotto case may not be preserved because the
necessarily become, to the extent that they are applicable, the criteria majority vote sustaining the petitioners’ standing was a "tenuous one"
which must control the actuations not only of those called upon to that may not be maintained in a subsequent litigation, and that there
aside thereby but also of those in duty bound to enforce obedience had been changes in the membership of the Court due to the
thereto." 10 Abandonment thereof must be based only on strong and retirement of Justices Isagani A. Cruz and Abdulwahid A. Bidin and
compelling reasons — which I do not find in this case — otherwise, the the appointment of Justices Vicente V. Mendoza and Ricardo J.
becoming virtue of predictability which is expected from this Court Francisco. It has forgotten that, as earlier stated, the ruling was
would be immeasurably affected and the public’s confidence in the reiterated in Tatad v. Garcia. Additionally, when in his concurring
stability of its solemn pronouncements opinion in the Tatad case, Justice Mendoza denied locus standi to
diminished.chanroblesvirtuallawlibrary Tatad, Et Al., because their case did not have the same importance as
the lotto case, he thereby accepted the concession of standing to the
The doctrine of res judicata also bars a re-litigation of the issue of locus petitioners in the lotto case. I wish to stress the fact that all the Justices
standi and a re-examination of the application or interpretation of the who had dissented in the first lotto case on the issue of locus standi
exception clause in paragraph B, Section 1 of R.A. No. 1169, as were either for the majority opinion or for the concurring opinion in the
amended. Section 49 (b), Rule 39 of the Rules of Court on effects of Tatad case. Hence, I can say that the Tatad case has given vigor and
judgment expressly provides:chanrob1es virtual 1aw library strength to the "tenuous" majority in the first lotto case.chanrobles.com
: virtual lawlibrary
(b) In all other cases the judgment or order is, with respect to the matter
cases the judgment or order is, with respect to the matter directly The majority opinion declares that the real issue in this case is not
adjudged or as to other matter that could have been parties and their whether the petitioners have locus standi but whether they are the real
successors in interest by title subsequent to the commencement of the parties-in-interest. This proposition is a bold move to set up a bar to
action or special proceedings, litigating for the same thing in the same taxpayer’s suits or cases invested with public interest by requiring strict
title and in the same capacity. compliance with the rule on real party in interest in ordinary civil
actions, thereby effectively subordinating to that rule the doctrine of
This doctrine has dual aspects: (1) as a bar to the prosecution of a locus standi. I am not prepared to be a party to that proposition.
second action upon the same claim, demand, or cause of action; and
(2) as preclusion to the re-litigation of particular facts of issues in action First. Friendenthal, Et Al., whose book is cited in the majority opinion
between the same parties on a different claim or cause of action. 11 in its discussion of the rule on real party in interest and the doctrine of
Public policy, judicial orderliness, economy of judicial time, and the locus standi, admit that there is a difference between the two, and that
interest of litigants as well as the peace and order of society, all require the former is not strictly applicable in public law cases,
that stability should be accorded judgments: that controversies once thus:chanrob1es virtual 1aw library
decided on their merits shall remain in repose; that inconsistent judicial
decisions shall not be made on the same set of facts; and that there The evolution of standing doctrines seems to point to greater freedom
be an end to litigation which, without the said doctrine, would be of action for plaintiffs. However, the courts still have not articulated how
endless. It not only puts an end to strife, but recognizes that certainty the balance is to be struck between the relevant and often competing
in legal relations must be maintained. It produces certainty as to interests: the plaintiff’s right to relief and the legislature’s right to carry
individual rights and gives and respect to judicial proceedings. 12 out its policies without judicial interference. Nor has the judiciary’s
competence to rule on these interests have analyzed systematically of
its limits defined. Courts essentially continue to be free to reconcile Court, speaking through the constitutionalist nonpareil, Justice and
these competing values on an ad hoc basis.chanrobles.com : virtual later Chief Justice Enrique Fernando, has already declared in Tan v.
lawlibrary Macapagal 15 that as far as a taxpayer’s suit is concerned, this Court
is not devoid of discretion as to whether or not it should be entertained.
It is important to note, however, that standing, because of its In his concurring opinion in Aquino v. Commission on Elections, 16 he
constitutional and public policy underpinnings, is very different from said:chanrob1es virtual 1aw library
questions relating whether a particular plaintiff is the real party in
interest or has capacity to sue. Although all three requirements are Then there is the attack on the standing of petitioners, as vindicating
directed toward ensuring that only certain parties can maintain an at most what they consider a public right and not protecting their rights
action, standing restrictions require a partial consideration of the as individuals. [Respondents’ Comment, 5]. This is to conjure the
merits, as well as of broader policy concerns relating to the proper role specter of the public right dogma as an inhibition to parties intent on
of the judiciary in certain areas. 13 keeping public officials staying on the path of constitutionalism. As was
so well put by Jaffe [Standing to Secure Judicial Review, 74 Harvard
In an earlier book, 14 the same Friedenthal and Miller, with John J. Law Review, 1265 (1961)]; "The protection of the private rights is an
Cound as the lead author, expounded that in the realm of public law, essential constituent of public interest and, conversely, without a well-
the real party in interest rule is not applicable, thus:chanrob1es virtual ordered state there could be no enforcement of private rights. Private
1aw library and public interests are, both in a substantive and procedure sense,
aspects of the totality of the legal order." [Ibid., 1266 Cf. Berger,
A third problem of proper parties occurs in the realm of public law. Standing to Sue in Public Actions, 78 Yale Law Journal 816 (1969)].
When governmental action is attacked on the ground that it violates Moreover, petitioners have convincingly shown that in their capacity
private rights or some constitutional principle, the courts have tended as taxpayers, their standing to sue has been amply demonstrated.
to analyze the question whether the challenger is a proper party There would be a retreat from the liberal approach followed in Pascual
plaintiff to assert the claim in terms of the judge-made doctrine of v. Secretary of Public Works [110 Phil., 331(1960)], foreshadowed by
standing to sue — requiring that plaintiff be adversely affected by the very deception of People v. Vera [65 Phil., 56 (1937)] where the
defendant’s conduct — rather than according to real-party-in -interest doctrine was firs fully discussed, if we act differently now. I do not think
or capacity principles. See Davis, Standing: Taxpayers and Others, we are prepared to take that step. Respondent, however, would hark
356 U. Chi. L. Rev. 601 (1968); Jaffee, The Citizen as a Litigant in back to the American Supreme Court doctrine in Mellon v.
Public Actions: The Non-Hohfeldian or Ideological Plaintiff, 116 U. Pa. Frothingham [262] US 447 (1923)], with their claim that what
L. Rev. 1033 (1968); and Jaffee, Standing Again, 84 Harv. L. Rev. 633 petitioners possess "is an interest which is shared in common by other
(1971). To the extent that standing is understood to mean that the people and is comparatively so minute and indeterminate as to afford
litigant actually must be injured by the governmental action that is any basis and assurance that the judicial process can act on it."
being assailed, it closely resembles the notion of real party in interest [Respondents’ Comment, 5]. That is to speak in the language of the
Rule 17(a). However, several other elements of the standing doctrine bygone era, even in the United States. For as Chief Justice Warren
clearly are unrelated to the simple real-party-in interest test. One clearly pointed out in the later case of Flast v. Cohen [391 US 83
significant context in which the two concepts deserves is when for [1968)], the barrier thus set up if not breached has definitely been
standing purposes plaintiff is required to show both that the he has lowered. [Ibid., 92-95]. The weakness of these particular defenses is
been adversely affected by the governmental conduct that is under thus quite apparent. [Cf. Tan v. Macapagal, 43 SCRA
attack and has suffered an injury to a legally protected right. when 677].chanroblesvirtuallawlibrary
standing is defined in this fashion it may entail a preliminary
consideration of the merits of the case and therefore is quite different Third. Such attempt directly or indirectly restricts the exercise of the
from the real-party-in-interest notion. (Emphasis supplied). judicial authority of this Court in an original action — and there had
been many in the past — to determine whether or not there has been
The downgrading of locus standi and its subordination to the restrictive grave abuse of discretion amounting to lack or excess of jurisdiction
rule on real party in interest cannot be justified by the claim that is on the part of any branch or instrumentality of the Government. Only a
involved here is contract law, not constitutional law. True, contract law very limited few may qualify, the real-party-in-interest rule, to bring
is involved. We are not, however, dealing here with an ordinary actions to questions acts or contracts tainted with such vice. Where,
contract between private parties, but a contract between a corporation because of fear of reprisal, undue pressure, or even connivance with
wholly owned by the government — hence, an instrumentality of the the parties benefited by the contracts or transactions, the so-called real
government — and a private corporation for the contract of the lotto, party in interest chooses not to sue, the patently unconstitutional and
which is invested with paramount and transcendental public interest illegal contracts or transactions will be placed beyond the scrutiny of
and other public policy considerations because the lotto has counter this Court, to the irreparable damage of the Government, and prejudice
— productive and retrogressive effects which are as staggering as the to public interest and the general welfare.
billions of pesos it is expected to raise and provokes issues that
immeasurably affect the social, economic, and moral well-being of the By way of illustration, the first lotto contract would not have reached
people. We said so in the first lotto case. this Court if only the so-called real party in interest could bring an
action to nullify it. Neither would the ELA in question, since for reasons
Second. The attempt to use the real-party-in-interest rule is to only known to them, none of those who had lost in the bidding for the
resurrect the abandoned restrictive application of locus standi. This first lotto contract showed interest to challenge it.
judicial notice of these facts.
The majority opinion posits that a denial to the petitioners of the right
to intervene will not leave without remedy any perceived illegality in Before I take up the defined issues, I find it necessary to meet squarely
the contract because:chanrobles.com : virtual lawlibrary the majority opinion’s interpretation of paragraph B, Section 1 of R.A
No. 1169, as amended. This is, of course, on the assumption that this
[q]uestions as to the nature or validity of public contracts or the Court may now disregard the doctrines of the law of the case, res
necessity for a public bidding before they may be made can be raised judicata and stare decisis.
in an appropriate case before the Commission on Audit or before the
Ombudsman. . .In addition, the Solicitor General is authorized to bring I respectfully submit that the best authority on the intention or rationale
an action for quo warrant if it should be though that a government of a legislative amendment is its author. Fortunately, I happened to be
corporation, like the PCSO, has offended against its corporate charter the author of the exception clause in said provision. The language of
or misused its franchise. that clause is very short and simple, and the elaboration given therefor,
as earlier shown, is equally short and simple. The sponsor of the
That proposition delivers the coup de grace to taxpayers’ suits, measure, then Assemblyman, now Congressman, Ronaldo Zamora
discourages involvement of citizens in public affairs, and negates or did even ask for an explanation or clarification; he readily accepted the
renders ineffective Section 16, Article XIII of the Constitution which amendment. Nobody from the floor interpolated me for an explanation
provides:chanrob1es virtual 1aw library or clarification.chanroblesvirtuallawlibrary

The right of the people and their organizations to effective and I regret then to say that neither the letter nor the spirit of the exception
reasonable participation at all levels of social, political, and economic clause in paragraph B supports the interpretation proposed in the
decision-making shall not be abridged. The State shall, by law, majority opinion. The reason given the majority opinion for the alleged
facilitate the establishment of adequate consultation prohibition from investing in "activities mentioned in the preceding
mechanisms.chanrobles.com : virtual lawlibrary paragraph (A)" (i.e., the holding or conducting of charity sweepstakes
races, lotteries, and other similar activities) is that "these are
Besides, it is fraught with unimaginable danger to public interest if competing activities." In that aspect alone, the majority opinion has
neither the Commission on Audit (COA), nor the Ombudsman, or the clearly misconstrued the exception clause. The prohibition is not
Office of the Solicitor General, would take any action on the matter. directed against such activities, since they are in fact the franchised
primacy activities of the PCSO. What is prohibited is the conduct
In the instant case, the COA refused to directly act on Morato’s request holding thereof "in collaboration, association or joint venture with any
and instead, referred it to the Department of Justice (DOJ) which, in person, association, company, or entity, whether domestic or foreign."
turn, merely endorsed an opinion to the COA. On the other hand, the In the first lotto case, this Court explained the principal reasons for
Office of the Solicitor General is taking the side of the PCSO, as it did prohibition. It the purpose of the prohibition in the exception clause is
in the first lotto case. The observation then of Justice Cruz in his indeed to prevent competition, it would be with more reason that no
concurring opinion in the first lotto case is apropos:chanrob1es virtual other person, natural or jurisdiction, should be allowed to share in the
1aw library PCSO’s franchise to hold and conduct lotteries. In short, the argument
in the majority opinion sustains the rationale of the prohibition.
Locos standi is not such an absolute rule that it cannot admit of
exceptions under certain conditions or circumstances like those G.R. Nos. 189158 and 189530 January 11, 2017
attending this transaction. As I remarked in my dissent in Guazon v. JAMES IENT and MAHARLIKA SCHULZE v TULLETT PREBON
De Villa, 181 SCRA 623, "It is not only the owner of the burning house (PHILIPPINES), INC.,
who has a right to call the firemen. Every one has the right and
responsibility to prevent the fire from spreading even if he lives in the SERENO,C J.:
other block." chanrobles.com : virtual lawlibrary
FACTS: Tradition Group, where petitoners herein are employed, and
Tullett are competitors in the inter-dealer broking business. On the
The majority opinion does not entirely foreclose the possibility of
Tradition Group's motive of expansion and diversification in Asia,
according the petitioners locos standi if only they would allege "that
petitioners lent and Schulze were tasked with the establishment
public funds are being misspent so as to make this action a public one
Tradition Financial Services Philippines, Inc.
and justly relaxation of the requirement that an action must be
prosecuted by the real party in interest." While it may be true that there However, Tullett, filed a Complaint-Affidavit with the City Prosecution
is no such specified allegation, the totality of the petitioners’ allegations Office of Makati City against the officers/employees of the Tradition
points it illegal expenditures of public funds due to or arising out of Group for violation of Sections 31 and 34 of the Corporation Code
violation of the exception clause in paragraph B, Section 1 of R.A. No. which made them criminally liable under Section 144. Impleaded as
1169, as amended, and the public bidding law, and by reason of the respondents in the Complaint-Affidavit were petitioners lent and
grossly disadvantageous provisions of the contract. The public Schulze, Jaime Villalon ,who was formerly President and Managing
character of the sums due the PGMC under the ELA cannot be Director of Tullett, Mercedes Chuidian who was formerly a member of
disputed. The PCSO is solely owned by the Government and is Tullett's Board of Directors. Villalon and Chuidian were charged with
authorized to raise funds for the public purposes specified in its using their former positions in Tullett to sabotage said company by
Charter. The funds thus raised are public funds. This Court must take
orchestrating the mass resignation of its entire brokering staff in order
for them to join Tradition Philippines which was evident on their
conduct of several meetings with the employees. According to Tullett,
petitioners lent and Schulze have conspired with Villalon and Chuidian
in the latter's acts of disloyalty against the company. Petitioners
argued that there could be no violation of Sections 31 and 34 of the
Corporation as these sections refer to corporate acts or corporate
opportunity, that Section 144 of the same Code cannot be applied to
Sections 31 and 34 which already contains the penalties or remedies
for their violation; and conspiracy under the Revised Penal Code
cannot be applied to the Sections 31 and 34 of the Corporation Code.
The city prosecutor dismissed the criminal complaint however, on
respondent’s appeal to the Department of Justice, the dismissal was
reversed finding the arguments of the respondent proper. CA affirmed
the decision of the DOJ secretary.

ISSUE/S: WoN Section 144 of the Corporation Code appliesto


Sections 31 and 34 of the same code, thus, making it a penal offense
so that conspiracy can be appreciated and the petitioners can be
impleaded?

RULING:

NEGATIVE. The Supreme Court applied rule of lenity as a principle


related to liberal interpretation in favor of the accused in criminal
cases. The rule applies when the court is faced with two possible
interpretations of a penal statute, one that is prejudicial to the accused
and another that is favorable to him. The rule calls for the adoption of
an interpretation which is more lenient to the accused.

According to SC, a close reading Section 144 shows that it is not purely
a penal provision because it provides that when the violator is a
corporation, an administrative penalty is imposed in form of
dissolution, which is not a criminal sanction. The Court also added that
there is no provision in the Corporation Code using an emphatic
language to compel the SC to construe the provision as a penal
offense. SC held that through a thorough scrutinizing of the different
provisions in the Corporation Code including Sections 31 and 34, they
only impose civil liability aside from Section 74. SC concludes that had
it been the intention of the drafters of the la to define Sections 31 and
34 as offenses, they could have easily included similar language as
that found in Section 74. The intention can also be gleaned from the
floor deliberations of its proponents. Quite apart that no legislative
intent to criminalize Sections 31 and 34 was manifested in the
deliberations on the Corporation Code, it is noteworthy from the same
deliberations that legislators intended to codify the common law
concepts of corporate opportunity and fiduciary obligations of
corporate officers as found in American jurisprudence into said
provisions. In common law, the remedies available in the event of a
breach of director's fiduciary duties to the corporation are civil
remedies. If a director or officer is found to have breached his duty of
loyalty, an injunction may be issued or damages may be awarded. A
corporate officer guilty of fraud or mismanagement may be held liable
for lost profits. A disloyal agent may also suffer forfeiture of his
compensation. There is nothing in the deliberations to indicate that
drafters of the Corporation Code intended to deviate from common law
practice and enforce the fiduciary obligations of directors and
corporate officers through penal sanction aside from civil liability.
GRANTED. Court of Appeals Resolutions are REVERSED and
SETASIDE.