Kilosbayan, Inc. v. Morato, G.R. No.

118910 (Resolution), [November 16, 1995], 320

PHIL 171-199)
Facts of the Case:

In Jan. 25, 1995, PCSO and PGMC signed an Equipment Lease Agreement (ELA)
wherein PGMC leased online lottery equipment and accessories to PCSO. (Rental of
4.3% of the gross amount of ticket or at least P35,000 per terminal annually). 30% of
the net receipts is allotted to charity. Term of lease is for 8 years. PCSO is to employ its
own personnel and responsible for the facilities. Upon the expiration of lease, PCSO
may purchase the equipment for P25 million. Feb. 21, 1995. A petition was filed to
declare ELA invalid because it is the same as the Contract of Lease Petitioner's
Contention: ELA was same to the Contract of Lease.. It is still violative of PCSO's
charter. It is violative of the law regarding public bidding. It violates Sec. 2(2) of Art. 9-
D of the 1987 Constitution. Standing can no longer be questioned because it has
become the law of the case Respondent's reply: ELA is different from the Contract of
Lease. There is no bidding required. The power to determine if ELA is advantageous is
vested in the Board of Directors of PCSO. PCSO does not have funds. Petitioners seek
to further their moral crusade. Petitioners do not have a legal standing because they
were not parties to the contract.

Issue: Whether or not the ELA between PCSO and PGMC is valid.

Decision: Yes.

Petitioners insist on the ruling in the previous case that the PCSO cannot hold
and conduct charity sweepstakes, lotteries and other similar activities in collaboration,
association or joint venture with any other party because of the clause "except for the
activities mentioned in the preceding paragraph (A)" in paragraph (B) of § 1.
Indeed, the questions raised in this case are legal questions and the claims
involved are substantially different from those involved in the prior case between the
parties. As already stated, the ELA is substantially different from the Contract of Lease
declared void in the first case. (Kilosbayan vs Guingona Case)

Thus what the PCSO is prohibited from doing is from investing in a business
engaged in sweepstakes races, lotteries and other similar activities. It is prohibited
from doing so whether "in collaboration, association or joint venture" with others or "by
itself." This seems to be the only possible interpretation of § 1 (A) and (B) in light of its
text and legislative history. That there is today no other entity engaged in sweepstakes
races, lotteries and the like does not detract from the validity of this interpretation. cdt
The Court noted in its decision that the provisions of the first contract, which
were considered to be features of a joint venture agreement, had been removed in the
new contract.
 It is contended that §1 of E.O. No. 301 covers all types of "contract[s] for public
services or for furnishing of supplies, materials and equipment to the government or
to any of its branches, agencies or instrumentalities" and not only contracts of
purchase and sale. Consequently, a lease of equipment, like the ELA, must be
submitted to public bidding in order to be valid. This contention is based on two
premises: (1) that § 1 of E.O. No. 301 applies to any contract whereby the government
acquires title to or the use of the equipment and (2) that the words "supplies,"
"materials," and "equipment" are distinct from each other so that when an exception
in 1 speaks of "supplies," it cannot be construed to mean "equipment."
Petitioners' contention will not bear analysis.
In sum, E.O. No. 301 applies only to contracts for the purchase of supplies,
materials and equipment, and it was merely to change the system of administrative
review of emergency purchases, as theretofore prescribed by E.O. No. 298, that E.O.
No. 301 was issued on July 26, 1987. Part B of this Executive Order applies to leases
of buildings, not of equipment, and therefore does not govern the lease contract in this
case. Even if it applies, it does not require public bidding for entering into it.