PNB VS.
CA AND KAW NGO ISSUE:
G.R. No. 119580
September 26, 1996
FACTS:
The subject matter of the case is a parcel of land containing a net area
of 1,190.72 square meters (1391.70 square meters minus 200.98
square meters reserved for road widening and Light Rail Transit)
situated at the corner of Carlos Palanca and Helios Streets, Sta. Cruz,
Manila, owned and registered in the name of the Philippine National
Bank (PNB). Lapaz made a formal offer to purchase the parcel of land.
PNB, on the other hand, advised Lapaz of its approval of the latter's
offer to purchase the subject property subject to certain terms and
conditions. One of the conditions in the agreement was to clear the
subject property of its then accupants; thus, Lapaz undertook the
ejectment of the squatters/tenants at her own expense.
Subsequently, PNB wrote Lapaz reminding her of her failure to remit
the amount of P978,860.00 and of her refusal to send her letter of
conformity to the letter-agreement. Lapaz was likewise advised to
remit her cash payment of the full price amounting to P5,378,902.50;
otherwise, the subject property shall be sold to other interested
party/ies and her deposit forfeited. When no further payment was
received by PNB from Lapaz, the former notified the latter by telegram
that it was giving her a last chance to pay the balance of the required
downpayment of P563,341.29; failure of which shall cause the
cancellation of the sale in her favor and the forfeiture of her
P100,000.00 deposit. The sale in favor of Lapaz never materialized,
however, because of her failure to remit the required amount agreed
upon; hence, the proposed sale was cancelled and the private
respondent's deposit of P100,000.00 was forfeited by the petitioner.
Lapaz wrote a letter to the former President of the Philippines,
Ferdinand E. Marcos, requesting for the lifting of the directive
suspending the sale of the subject property, which letter was
transmitted to the then President of the PNB for comment and/or
action. PNB advised Lapaz of the approval of her request for revival of
the previously approved offer to purchase the subject again to certain
terms and conditions. Lapaz then informed the PNB management that
the terms and conditions set forth were acceptable to her except
condition no. 6 which says that the property shall be cleared of its
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.
Was there a contract of sale?
RULING:
No, there was none.
A contract to sell is akin to a conditional sale where the efficacy or
obligatory force of the vendor's obligation to transfer title is
subordinated to the happening of future and uncertain event so that if
the suspensive condition does not take place, the parties would stand
as if the conditional obligation had never existed. The suspensive
condition is commonly full payment of the purchase price. In other
words, in a contract to sell, ownership is retained by the seller and is
not to pass to the buyer until full payment of the price or the fulfillment
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
simply an event that prevents the obligation of the vendor to convey
title from acquiring binding force.
In the instant case, private respondent does not dispute the fact that,
under identical provisions in the two letter-agreements, her obligation
was to deposit an initial amount and then subsequently to deposit an
additional amount representing roughly 20% of the purchase price.
Under both letter-agreements, the consequences of private
respondent's failure to remit the additional deposit will result to such
deposit being forfeited and cause the Bank to sell the property to other
interested parties. This right reserved in the petitioner to in effect
cancel the agreement to sell upon failure of petitioner to remit the
additional deposit and to consequently open the subject property anew
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
right to unilaterally rescind the contract the moment the vendee fails to
pay within a fixed period. In the instant case, there was apparently no
transfer of title, not even mention of such a transfer in the future,
considering that all the parties were aware of the occupancy of the
subject property by third persons. This circumstance all the more
reinforces our finding that the transaction contemplated under the
letter-agreements was a contract to sell or a conditional sale which
absolutely depends, for its efficacy, upon the happening of the
conditions specified in the said letter-agreements.

Case Digest: G.R. No. 174689. October 22, 2007
Rommel Jacinto Dantes Silverio, petitioner, vs. Republic of the
Philippines, respondent.
Kilosbayan vs. Morato (G.R. No. 118910. July 17, 1995)
Ponente: MENDOZA
FACTS:
[T]his 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:
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
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.
DAVIDE, dissenting
I register a dissenting vote.
I am disturbed by the sudden reversal of our rulings
in Kilosbayan, Inc., et al. vs. Guingona, et al. (hereinafter referred to
as the first lotto case) regarding the application or interpretation of the
exception clause in paragraph 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 question the contract of lease
involving the on-line lottery system entered into between the Philippine
Charity Sweepstakes Office (PCSO) and the Philippine Gaming
Management Corporation (PGMC). Such reversal upsets the salutary
doctrines of the law of the case, res judicata, and stare decisis. It puts
to jeopardy the faith and confidence of the people, specially the
lawyers and litigants, in the certainty and stability of the
pronouncements of this Court. It opens the floodgates to endless
litigations for re-examination of such pronouncements and weakens
this Court’s judicial and moral authority to demand from lower courts
obedience thereto and to impose sanctions for their opposite conduct.
DAVIDE, J., dissenting:chanrob1es virtual 1aw library
I register a dissenting vote.
I.
I am disturbed by the sudden reversal of our rulings in Kilosbayan, Inc.,
Et. Al. v. Guingona, Et. Al. 1 referred to as the first lotto case) regarding
the application or interpretation of the exception clause in paragraph
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
question the contract of lease involving the on-line lottery system
entered into between the Philippine Charity Sweepstakes Office
(PCSO) and the Philippine Gaming Management Corporation
(PGMC). Such reversal upsets the salutary doctrines of the law of the
case, res judicata and stare decisis. It puts to jeopardy the faith and
confidence of the people, specially the lawyers and litigants, in the
certainly and stability of the pronouncements of this Court. It opens the
floodgates to endless litigations for re-examination of such
pronouncements and weakens this Court’s judicial and moral authority
to demand from lower courts obedience thereto and to impose
sanctions for their opposite conduct.
It must be noted that the decision in the first lotto case was
unconditionally accepted by the PCSO and the PGMC, as can be
gleaned from their separate manifestations that they would not ask for
its reconsideration but would, instead, negotiate a new equipment
lease agreement consistent with the decision and the PCSO’s charter
and that they would furnish the Court a copy of the new agreement.
The decision has, thus, become final on 23 May 1994. 2
As the writer of the said decision and as the author of the exception to
paragraph B, Section 1 of R.A. No. 1169, as amended, I cannot accept
the strained and tenuous arguments adduced in the majority opinion it
justly the reversal of our rulings in the first lotto case. While there are
exceptions to the aforementioned doctrines and I am not inexorably
opposed to upsetting prior decisions if warranted by overwhelming
considerations of justice and irresistible desire to rectify an error, none
of such considerations and nothing of substance or weight can bring
this case within any of the exceptions.
In the said case, we sustained the locus standi of the petitioners, and
in no uncertain terms declared:chanrob1es virtual 1aw library
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 of pesos it is expected to raise. The legal
standing than 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.chanroblesvirtual|awlibrary
In this concurring opinion, Mr. Justice Florentino P. Feliciano further
showed substantive grounds or considerations of importance which
strengthened the legal standing of the petitioners to bring and maintain
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
agency; (c) the lack of any other party with a more direct and specified
interest in raising the questions involved therein; and (d) the wide
range of impact of the contract of lease and of its implementation.
Only last 6 April 1995, in the decision in Tatad v. Garcia, 3 this Court,
speaking through Mr. Justice Camilo D. Quiason who had joined in the
dissenting opinions in the first lotto case the petitioners, locus standi
therein, invoked and applied the ruling on locus standi in the first lotto
case. He stated:chanrob1es virtual 1aw library
The prevailing doctrines in taxpayer’s suits are to allow taxpayers to
question contracts entered into by the national government or
government-owned or controlled corporations allegedly in
contravention of the law (Kilosbayan, Inc. v. Guingona, 232 SCRA 110
[1994] and to disallow the same when only municipal contracts are
involved (Bugnay Construction and Development Corporation v.
Laron, 176 SCRA 240 [1989].chanroblesvirtuallawlibrary
For as long as the ruling in Kilosbayan on locus standi is not reversed,
we have no choice but to follow it and uphold the legal standing of
petitioners as taxpayers to institute the present action.
Mr. Justice Santiago M. Kapunan, who had also dissented in the first
lotto case on the issue of locus standi; unqualifiedly concurred with the
majority opinion in Tatad. Mr. Justice Vicente V. Mendoza, the writer
of the ponencia in this case, also invoked the locus standi ruling in the
first lotto case to deny legal standing to Tatad, Et. Al. He
said:chanrob1es virtual 1aw library
Nor do petitioners have standing to bring this suit as citizens. In the
cases in which citizens were authorized to sue, this Court found
standing because it though the constitutional claims pressed for
decision to be of "transcendental importance," as in fact it
subsequently granted relief to petitioners by invalidating the
challenged statutes or governmental actions. Thus in the Lotto case
[Kilosbayan, Inc. v. Guingona, 232 SCRA 110 (1994)] relief by the
majority for upholding petitioner’s standing, this Court took into
account the "paramount public interest" involved which "immeasurably
affect[ed] the social, economic, and moral well-being of the people . .
. 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

Is there any objection to the amendment? (Silence) The amendment,
as amended, is approved." [Id., 1007, Emphasis supplied]
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 become "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 introduction other
amendments. Thereafter, the new Paragraph B was approved. [Id.]
This is now paragraph B, Section 1 of R.A. No. 1169, as amended by
B.P. Blg. 42. 5 fashion. Yet, they are now put to naught in this case.chanrobles.com :
This Court further explained the rationale for the prohibition as
follows:chanrob1es virtual 1aw library
No interpretation of the said provisions 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 privileges 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
interferences. Whatever is not unequivocally granted is withheld.
Nothing passes by mere implication." [36 am Jur 2d Franchises § 26
(1968)].
In short then, by the exception explicitly made 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 "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, except
that an existing right of assignment cannot be impaired by subsequent
legislation." [Id., § 63].
It may also be pointed out that the franchise granted to the PCSO to
hold and conduct lotteries allows it to hold and contract 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. [38 Am Jur 2d Gambling § 18 [1968]). 6
The PCSO and the PGMC never challenged our application or
interpretation of the exception clause and our definition of the terms
collaboration, association, and joint venture. On the contrary they
unconditionally accepted the same by not asking for the
reconsideration of our decision in the first lotto case.
Under the principle of either the law of the case of res judicata, the
PCSO and the PGMC are bound by the ruling in the first lotto case on
the locus standi of the petitioners and the application or interpretation
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
rest under the doctrine of stare decisis and has also become part of
our legal system pursuant to Article 8 of the Civil Code which provides:
"Judicial decisions applying interpreting the laws or the constitution
shall from part of the system of the Philippines."cralaw virtua1aw
library
These doctrines were not adopted whimsically or capriciously. They
are based on public policy and other considerations of great
importance and should not be discarded or jettisoned in a cavalier
virtual lawlibrary
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
litigant could, by repeated appeals, compel a court to listen to criticism
on their opinions, or speculate on chances from changes in its
members." 7
It is, however, contended that the law of the case is inapplicable that
doctrine applies only when a case is before an appellate court a
second time after its remand to a lower court. While indeed the
statement may be correct, it disregards the fact that the case is nothing
but a sequel to and is, therefore, for all intents and purposes, a
continuation of the first lotto case. By their conduct, the parties
admitted that it is, for which reason the PGMC and the PCSO
submitted in the first lotto case a copy of the ELA in question, and the
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
case because the decision therein had became final does not detract
from the fact that this case is but a continuation of the first lotto case
or a new chapter in the raping controversy between the petitioners, on
the one hand, and the PCSO and the PGMC, on the other, on the
operation of the on-line lottery system.
Equally unacceptable is the majority opinion’s rejection of the related
doctrine of conclusiveness of judgment of the ground that the question
of standing is a question, as this case involves a different or unrelated
contract. The legal question of locus standi which was resolved in favor
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
incidental to the contract or holding of lotteries by the PCSO in
collaboration, association; or joint venture with any person,
association, company or entity. And, the contract in question is not
different from or unrelated to the first nullified contract, for it in nothing
but a substitute for the latter. Respondent Morato was even candid
enough to admit that no new and separate public bidding was
conducted for the ELA in question because the PCSO was of the belief
that the public bidding for the nullified contract was sufficient.
Its reliance on the ruling in Montana v. United States 8 that preclusion
or collateral estoppel does not apply to issues of law, at least when
substantially unrelated claims are involved, is misplaced. For one
thing, the question of the petitioners’ legal standing in the first lotto
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
matter, viz., the second contract between the PCSO and the PGMC
on the operation of the on-line lottery system.
The majority opinion likewise failed to consider that in the very
authority it cited regarding the exception to the rule of issue preclusion
(Testament of the Law, 2d Judgments § 28), the second illustration
stated therein is subject to this NOTE: "The doctrine of the stare
decisis may lead the court to refuse to reconsider the question of
sovereign immunity," which simply means that stare decisis is an
effective bar to a re-examination of a prior judgment.
The doctrine of stare decisis embodies the legal maxim that a principle
or rule of law which has been established by the decision of a court of
controlling jurisdiction will be followed in other cases involving a similar
situation. It is founded on the necessity for securing certainty and
stability in the law and does not require identity or privity of parties. 9
This is explicitly fleshed out in Article 8 of the Civil Code which provides
that decisions applying or interpreting the laws or the constitution shall
form part of the legal system. Such decisions "assume the same
authority as the statute itself and, until authoritatively abandoned,
necessarily become, to the extent that they are applicable, the criteria
which must control the actuations not only of those called upon to
aside thereby but also of those in duty bound to enforce obedience
thereto." 10 Abandonment thereof must be based only on strong and
compelling reasons — which I do not find in this case — otherwise, the
becoming virtue of predictability which is expected from this Court
would be immeasurably affected and the public’s confidence in the
stability of its solemn pronouncements
diminished.chanroblesvirtuallawlibrary
The doctrine of res judicata also bars a re-litigation of the issue of locus
standi and a re-examination of the application or interpretation of the
exception clause in paragraph B, Section 1 of R.A. No. 1169, as
amended. Section 49 (b), Rule 39 of the Rules of Court on effects of
judgment expressly provides:chanrob1es virtual 1aw library
(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
adjudged or as to other matter that could have been parties and their
successors in interest by title subsequent to the commencement of the
action or special proceedings, litigating for the same thing in the same
title and in the same capacity.
This doctrine has dual aspects: (1) as a bar to the prosecution of a
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
between the same parties on a different claim or cause of action. 11
Public policy, judicial orderliness, economy of judicial time, and the
interest of litigants as well as the peace and order of society, all require
that stability should be accorded judgments: that controversies once
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
be an end to litigation which, without the said doctrine, would be
endless. It not only puts an end to strife, but recognizes that certainty
in legal relations must be maintained. It produces certainty as to
individual rights and gives and respect to judicial proceedings. 12
The justifications given in the majority opinion to underrate the ruling
locus standi and to ultimately discard it are unconvincing. It is not at all
true, as the majority opinion contends, that" [t]he previous sustaining
petitioners intervention may in fact be considered a departure from
settled ruling on real party in interest because no constitutional issues
were actually involved."cralaw virtua1aw library
It must be pointed out that the rule in ordinary civil procedure on real
party in interest was never put in issue in the previous case. It was the
clear understanding of the Members of the Court that in the light of the
issues raised and the arguments adduced therein, only locus standi
deserved consideration. Accordingly, the majority opinion and the
separate dissenting opinions therein dwelt lengthily on locus standi
and brought in the process a vast array of authorities on the issue.
Moreover, as explicitly stressed in the concurring opinion of Justice
Feliciano, both constitutional and legal issues were involved therein.
Finally, as shall hereafter be discussed, in public law the rule of real
party in interest is subordinate to the doctrine of locus standi.
Equally unconvincing is the majority opinion’s contention that the ruling
locus standi in the first lotto case may not be preserved because the
majority vote sustaining the petitioners’ standing was a "tenuous one"
that may not be maintained in a subsequent litigation, and that there
had been changes in the membership of the Court due to the
retirement of Justices Isagani A. Cruz and Abdulwahid A. Bidin and
the appointment of Justices Vicente V. Mendoza and Ricardo J.
Francisco. It has forgotten that, as earlier stated, the ruling was
reiterated in Tatad v. Garcia. Additionally, when in his concurring
opinion in the Tatad case, Justice Mendoza denied locus standi to
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
petitioners in the lotto case. I wish to stress the fact that all the Justices
who had dissented in the first lotto case on the issue of locus standi
were either for the majority opinion or for the concurring opinion in the
Tatad case. Hence, I can say that the Tatad case has given vigor and
strength to the "tenuous" majority in the first lotto case.chanrobles.com
: virtual lawlibrary
The majority opinion declares that the real issue in this case is not
whether the petitioners have locus standi but whether they are the real
parties-in-interest. This proposition is a bold move to set up a bar to
taxpayer’s suits or cases invested with public interest by requiring strict
compliance with the rule on real party in interest in ordinary civil
actions, thereby effectively subordinating to that rule the doctrine of
locus standi. I am not prepared to be a party to that proposition.
First. Friendenthal, Et Al., whose book is cited in the majority opinion
in its discussion of the rule on real party in interest and the doctrine of
locus standi, admit that there is a difference between the two, and that
the former is not strictly applicable in public law cases,
thus:chanrob1es virtual 1aw library
The evolution of standing doctrines seems to point to greater freedom
of action for plaintiffs. However, the courts still have not articulated how
the balance is to be struck between the relevant and often competing
interests: the plaintiff’s right to relief and the legislature’s right to carry
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
these competing values on an ad hoc basis.chanrobles.com : virtual
lawlibrary
It is important to note, however, that standing, because of its
constitutional and public policy underpinnings, is very different from
questions relating whether a particular plaintiff is the real party in
interest or has capacity to sue. Although all three requirements are
directed toward ensuring that only certain parties can maintain an
action, standing restrictions require a partial consideration of the
merits, as well as of broader policy concerns relating to the proper role
of the judiciary in certain areas. 13
In an earlier book, 14 the same Friedenthal and Miller, with John J.
Cound as the lead author, expounded that in the realm of public law,
the real party in interest rule is not applicable, thus:chanrob1es virtual
1aw library
A third problem of proper parties occurs in the realm of public law.
When governmental action is attacked on the ground that it violates
private rights or some constitutional principle, the courts have tended
to analyze the question whether the challenger is a proper party
plaintiff to assert the claim in terms of the judge-made doctrine of
standing to sue — requiring that plaintiff be adversely affected by
defendant’s conduct — rather than according to real-party-in -interest
or capacity principles. See Davis, Standing: Taxpayers and Others,
356 U. Chi. L. Rev. 601 (1968); Jaffee, The Citizen as a Litigant in
Public Actions: The Non-Hohfeldian or Ideological Plaintiff, 116 U. Pa.
L. Rev. 1033 (1968); and Jaffee, Standing Again, 84 Harv. L. Rev. 633
(1971). To the extent that standing is understood to mean that the
litigant actually must be injured by the governmental action that is
being assailed, it closely resembles the notion of real party in interest
Rule 17(a). However, several other elements of the standing doctrine
clearly are unrelated to the simple real-party-in interest test. One
significant context in which the two concepts deserves is when for
standing purposes plaintiff is required to show both that the he has
been adversely affected by the governmental conduct that is under
attack and has suffered an injury to a legally protected right. when
standing is defined in this fashion it may entail a preliminary
consideration of the merits of the case and therefore is quite different
from the real-party-in-interest notion. (Emphasis supplied).
The downgrading of locus standi and its subordination to the restrictive
rule on real party in interest cannot be justified by the claim that is
involved here is contract law, not constitutional law. True, contract law
is involved. We are not, however, dealing here with an ordinary
contract between private parties, but a contract between a corporation
wholly owned by the government — hence, an instrumentality of the
government — and a private corporation for the contract of the lotto,
which is invested with paramount and transcendental public interest
and other public policy considerations because the lotto has counter
— productive and retrogressive effects which are as staggering as the
billions of pesos it is expected to raise and provokes issues that
immeasurably affect the social, economic, and moral well-being of the
people. We said so in the first lotto case.
Second. The attempt to use the real-party-in-interest rule is to
resurrect the abandoned restrictive application of locus standi. This
Court, speaking through the constitutionalist nonpareil, Justice and
later Chief Justice Enrique Fernando, has already declared in Tan v.
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.
In his concurring opinion in Aquino v. Commission on Elections, 16 he
said:chanrob1es virtual 1aw library
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. [Respondents’ Comment, 5]. 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 [Standing to Secure Judicial Review, 74 Harvard
Law Review, 1265 (1961)]; "The protection of the 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 procedure sense,
aspects of the totality of the legal order." [Ibid., 1266 Cf. Berger,
Standing to Sue in Public Actions, 78 Yale Law Journal 816 (1969)].
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 [110 Phil., 331(1960)], foreshadowed by
the very deception of People v. Vera [65 Phil., 56 (1937)] where the
doctrine was firs fully discussed, if we act differently now. I do not think
we are prepared to take that step. Respondent, however, would hark
back to the American Supreme Court doctrine in Mellon v.
Frothingham [262] US 447 (1923)], 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."
[Respondents’ Comment, 5]. That is to speak in the language of the
bygone era, even in the United States. For as Chief Justice Warren
clearly pointed out in the later case of Flast v. Cohen [391 US 83
[1968)], the barrier thus set up if not breached has definitely been
lowered. [Ibid., 92-95]. The weakness of these particular defenses is
thus quite apparent. [Cf. Tan v. Macapagal, 43 SCRA
677].chanroblesvirtuallawlibrary
Third. Such attempt directly or indirectly restricts the exercise of the
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
grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the Government. Only a
very limited few may qualify, the real-party-in-interest rule, to bring
actions to questions acts or contracts tainted with such vice. Where,
because of fear of reprisal, undue pressure, or even connivance with
the parties benefited by the contracts or transactions, the so-called real
party in interest chooses not to sue, the patently unconstitutional and
illegal contracts or transactions will be placed beyond the scrutiny of
this Court, to the irreparable damage of the Government, and prejudice
to public interest and the general welfare.
By way of illustration, the first lotto contract would not have reached
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
only known to them, none of those who had lost in the bidding for the
first lotto contract showed interest to challenge it.

The majority opinion posits that a denial to the petitioners of the right
to intervene will not leave without remedy any perceived illegality in
the contract because:chanrobles.com : virtual lawlibrary
[q]uestions as to the nature or validity of public contracts or the
necessity for a public bidding before they may be made can be raised
in an appropriate case before the Commission on Audit or before the
Ombudsman. . .In addition, the Solicitor General is authorized to bring
an action for quo warrant if it should be though that a government
corporation, like the PCSO, has offended against its corporate charter
or misused its franchise.
That proposition delivers the coup de grace to taxpayers’ suits,
discourages involvement of citizens in public affairs, and negates or
renders ineffective Section 16, Article XIII of the Constitution which
provides:chanrob1es virtual 1aw library
The right of the people and their organizations to effective and
reasonable participation at all levels of social, political, and economic
decision-making shall not be abridged. The State shall, by law,
facilitate the establishment of adequate consultation
mechanisms.chanrobles.com : virtual lawlibrary
Besides, it is fraught with unimaginable danger to public interest if
neither the Commission on Audit (COA), nor the Ombudsman, or the
Office of the Solicitor General, would take any action on the matter.
In the instant case, the COA refused to directly act on Morato’s request
and instead, referred it to the Department of Justice (DOJ) which, in
turn, merely endorsed an opinion to the COA. On the other hand, the
Office of the Solicitor General is taking the side of the PCSO, as it did
in the first lotto case. The observation then of Justice Cruz in his
concurring opinion in the first lotto case is apropos:chanrob1es virtual
1aw library
Locos standi is not such an absolute rule that it cannot admit of
exceptions under certain conditions or circumstances like those
attending this transaction. As I remarked in my dissent in Guazon v.
De Villa, 181 SCRA 623, "It is not only the owner of the burning house
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
other block." chanrobles.com : virtual lawlibrary
The majority opinion does not entirely foreclose the possibility of
according the petitioners locos standi if only they would allege "that
public funds are being misspent so as to make this action a public one
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
is no such specified allegation, the totality of the petitioners’ allegations
points it illegal expenditures of public funds due to or arising out of
violation of the exception clause in paragraph B, Section 1 of R.A. No.
1169, as amended, and the public bidding law, and by reason of the
grossly disadvantageous provisions of the contract. The public
character of the sums due the PGMC under the ELA cannot be
disputed. The PCSO is solely owned by the Government and is
authorized to raise funds for the public purposes specified in its
Charter. The funds thus raised are public funds. This Court must take
judicial notice of these facts.
Before I take up the defined issues, I find it necessary to meet squarely
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
Court may now disregard the doctrines of the law of the case, res
judicata and stare decisis.
I respectfully submit that the best authority on the intention or rationale
of a legislative amendment is its author. Fortunately, I happened to be
the author of the exception clause in said provision. The language of
that clause is very short and simple, and the elaboration given therefor,
as earlier shown, is equally short and simple. The sponsor of the
measure, then Assemblyman, now Congressman, Ronaldo Zamora
did even ask for an explanation or clarification; he readily accepted the
amendment. Nobody from the floor interpolated me for an explanation
or clarification.chanroblesvirtuallawlibrary
I regret then to say that neither the letter nor the spirit of the exception
clause in paragraph B supports the interpretation proposed in the
majority opinion. The reason given the majority opinion for the alleged
prohibition from investing in "activities mentioned in the preceding
paragraph (A)" (i.e., the holding or conducting of charity sweepstakes
races, lotteries, and other similar activities) is that "these are
competing activities." In that aspect alone, the majority opinion has
clearly misconstrued the exception clause. The prohibition is not
directed against such activities, since they are in fact the franchised
primacy activities of the PCSO. What is prohibited is the conduct
holding thereof "in collaboration, association or joint venture with any
person, association, company, or entity, whether domestic or foreign."
In the first lotto case, this Court explained the principal reasons for
prohibition. It the purpose of the prohibition in the exception clause is
indeed to prevent competition, it would be with more reason that no
other person, natural or jurisdiction, should be allowed to share in the
PCSO’s franchise to hold and conduct lotteries. In short, the argument
in the majority opinion sustains the rationale of the prohibition.
G.R. Nos. 189158 and 189530 January 11, 2017
JAMES IENT and MAHARLIKA SCHULZE v TULLETT PREBON
(PHILIPPINES), INC.,
SERENO,C J.:
FACTS: Tradition Group, where petitoners herein are employed, and
Tullett are competitors in the inter-dealer broking business. On the
Tradition Group's motive of expansion and diversification in Asia,
petitioners lent and Schulze were tasked with the establishment
Tradition Financial Services Philippines, Inc.
However, Tullett, filed a Complaint-Affidavit with the City Prosecution
Office of Makati City against the officers/employees of the Tradition
Group for violation of Sections 31 and 34 of the Corporation Code
which made them criminally liable under Section 144. Impleaded as
respondents in the Complaint-Affidavit were petitioners lent and
Schulze, Jaime Villalon ,who was formerly President and Managing
Director of Tullett, Mercedes Chuidian who was formerly a member of
Tullett's Board of Directors. Villalon and Chuidian were charged with
using their former positions in Tullett to sabotage said company by
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.