SECOND DIVISION
[G.R. No. 206611. February 20, 2017.]
PHILIPPINE CHARITY SWEEPSTAKES OFFICE, petitioner,vs. DFNN, INC., represented by its chairman/president Ramon C. Garcia, Jr., respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Second Division, issued a Resolution dated 20 February 2017 which reads as follows:
"G.R. No. 206611: PHILIPPINE CHARITY SWEEPSTAKES OFFICE v. DFNN, INC., represented by its Chairman/President Ramon C. Garcia, Jr.
Before this Court is a Motion to Withdraw Petition 1 requesting for the withdrawal of the Petition for Review 2 filed on May 10, 2013 as recent developments have already rendered it moot.
The controversy in this case arose from an Equipment Lease Agreement (Lease Agreement) between the Philippine Charity Sweepstakes Office, and DFNN, Inc. (DFNN), 3 a publicly listed company "engaged in the design, development and implementation of wireless personal communication devices," 4 for the lease of equipment. Personal communication devices include, but are not limited to, "mobile phones, trunk radios, Blackberry rim devices, PDAs, and pen tablets." 5 The parties agreed that DFNN would lease the "hardware, software and know how" 6 to design and develop a system that would allow the use of personal communication devices to receive and process bets for its lotto operations. 7
Under the proposed Lease Agreement, the Philippine Charity Sweepstakes Office had to pay DFNN an initial lease license fee of P27 million, exclusive of Value Added Tax, and a lease charge of 5% of the total value of bets placed. It also obligated itself to pay, on a monthly basis, another 0.15% of the total value of bets placed or received, exclusive of Value Added Tax for hardware maintenance, and another 3% of the total value of prepaid lotto cards. 8 The proposed Lease Agreement also provided an option for the Philippine Charity Sweepstakes Office to either purchase the system from DFNN for P27 million after the expiry of the term, or to renew the Agreement. 9 DFNN, however, would retain ownership of all intellectual property rights over the system. 10
On March 9, 2005, the Philippine Charity Sweepstakes Office issued Board Resolution No. 80, series of 2005, which unilaterally rescinded the Lease Agreement. 11 The reasons given for the rescission were (1) DFNN's failure to secure the conformity of Smart and Globe, which accounts for "90% of the mobile subscribers at the time of the execution" of the Lease Agreement, and (2) DFNN's failure to secure the conformity of the Philippine Gaming Management Commission, and its system provider, International Lottery & Totalizator Systems, Inc., both of which claimed that the DFNN interface "would result in the hacking of their system." 12
On April 19, 2005, DFNN filed criminal complaints before the Office of the Ombudsman against the officers of the Philippine Charity Sweepstakes Office for rescinding the Lease Agreement. 13 In a letter dated December 14, 2007, DFNN proposed arbitration to settle their differences. 14
The Philippine Charity Sweepstakes Office referred the letter dated December 14, 2007 to the Office of the Government Corporate Counsel for advice. The Office of the Government Corporate Counsel advised it to consider the propriety of arbitration only if (1) DFNN would withdraw all the complaints it had filed before the Office of the Ombudsman, and if (2) it would comply with the arbitration clause in the Lease Agreement on a discussion and settlement in good faith before resorting to arbitration. 15
The Philippine Charity Sweepstakes Office alleged that it informed DFNN of the Office of the Government Corporate Counsel's advice. On March 17, 2008, DFNN supposedly agreed to enter into a compromise with the Philippine Charity Sweepstakes Office, and proposed to implement the Lease Agreement with its duly authorized service provider. 16 It also purportedly committed to withdraw the complaints it had filed before the Office of the Ombudsman. 17
Sometime in 2009, then Philippine Charity Sweepstakes Office Chair of the Board of Directors Sergio O. Valencia discussed with the Board of Directors that Pacific Online Systems Corporation and DFNN agreed to reopen the project, and proposed to the Board to allow these same companies to operate it. 18 The Philippine Charity Sweepstakes Office agreed to the proposal with the understanding that DFNN would no longer question the rescission of the Lease Agreement. 19 On August 6, 2009, the Philippine Charity Sweepstakes Office Board of Directors issued Resolution No. 1210, series of 2009, approving the proposals of the Philippine Gaming Management Commission, in partnership with International Lottery & Totalizator Systems, Inc., and Pacific Online Systems Corporation, in partnership with DFNN. 20
On September 1, 2009, the Philippine Charity Sweepstakes Office coordinated a meeting to discuss the guidelines of the project's implementation. In this meeting, DFNN raised its concern about the legal basis of the proceedings as the Philippine Charity Sweepstakes Office Board of Directors allegedly unilaterally revised the project. 21 DFNN also brought up the issue of having two separate mobile access numbers required for Luzon and Visayas-Mindanao operations contrary to the nationwide operation stated in the Lease Agreement, its offer of establishing a mutual sharing and profit-sharing between the parties, and its offer to the Philippine Gaming Management Commission to use its system instead of utilizing different content providers for each telecommunications company. 22
On February 9 2010, DFNN filed a Petition for Interim Measure of Protection in Aid of Arbitration — Preliminary Injunction with Application for Temporary Order of Protection before the Regional Trial Court of Quezon City, Branch 220 against the Philippine Charity Sweepstakes Office. 23 The Petition sought to restrain the implementation of Resolution No. 1210, series of 2009 pending the commencement of arbitration proceedings between the parties, per the arbitration clause in the Lease Agreement. 24
On February 24, 2010, the Regional Trial Court issued an Order granting the urgent application for the issuance of a temporary order of protection. 25 In compliance with the Order, DFNN posted a bond of P500,000.00. 26
On March 19, 2010, the Regional Trial Court issued an Order 27 granting the Petition, without prejudice to the subsequent grant, modification, amendment, revision, or revocation by the arbitral tribunal. The trial court found that the Lease Agreement was not validly terminated since the Philippine Charity Sweepstakes Office failed to substantiate its claim that DFNN was at fault for the cancellation of the Lease Agreement. 28 The trial court also found that the Philippine Charity Sweepstakes Office failed to present proof that it served DFNN with a written notice of default for its alleged inability to perform the obligations of the Lease Agreement. 29
The Philippine Charity Sweepstakes Office filed an Omnibus Motion 30 assailing the Order and seeking clarification on whether the trial court would issue a writ of permanent injunction. It also sought to inhibit Judge Jose G. Paneda as it perceived from the Order he issued, that there was bias and prejudice. 31
On November 30, 2010, the trial court issued an Order 32 denying the Omnibus Motion. The Philippine Charity Sweepstakes Office filed a Notice of Appeal, 33 which the Regional Trial Court gave due course to in an Order 34 dated February 8, 2011.
On March 21, 2013, the Court of Appeals issued the assailed Resolution 35 dismissing the appeal. According to the Court of Appeals, the Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules) required that the appeal of an order granting an interim measure of protection should be made by a petition for review, not by an ordinary appeal. 36 It stated that the trial court's ruling on the invalidity of the Lease Agreement's rescission did not convert the case into an ordinary civil action pursuant to the United Nations Commission on International Trade Law (UNCITRAL Model Law) on International Commercial Arbitration. Its ruling was intended merely as an interim measure of protection. 37
The Philippine Charity Sweepstakes Office filed a Petition for Review on Certiorari38 with this Court to assail the March 21, 2013 Resolution. DFNN was ordered by this Court to comment on the Petition in a Resolution dated July 24, 2013. 39
Before a comment could be filed, the Philippine Charity Sweepstakes Office filed a Manifestation 40 dated August 29, 2013, requesting this Court to stay the proceedings pending the resolution of the arbitration proceedings commenced by the parties on August 16, 2013. 41 On January 6, 2014, DFNN filed its Comment on the Manifestation 42 pursuant to this Court's Resolution 43 dated November 11, 2013.
In compliance with this Court's Resolution dated July 24, 2013, DFNN filed its Comment 44 to the Petition, to which the Philippine Charity Sweepstakes Office filed its Reply 45 dated October 23, 2013.
The issue to be resolved by this Court is whether the Court of Appeals erred in dismissing the appeal for being the wrong mode of appeal under the Special ADR Rules. 46
In its Reply to the Comment dated January 6, 2014, petitioner stated that as of May 21, 2015, the Ad Hoc Arbitration Panel had rendered an Arbitral Award. It found that petitioner improperly terminated the Lease Agreement, and ordered it to pay DFNN the amount of P27,000,000.00 as liquidated damages. 47 Petitioner further reported that it has filed a Petition for Confirmation of the Arbitral Award, which is now pending for resolution with the Regional Trial Court of Mandaluyong. 48 Respondent, on the other hand, has filed a Petition for Correction of Arbitral Award, which is now pending before the Court of Appeals. 49
Interim measure of protection is defined under the UNCITRAL Model Law on International Commercial Arbitration 50 as:
Section 1. Interim measures. —
Article 17. Power of arbitral tribunal to order interim measures. —
(2) An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to:
(a) Maintain or restore the status quo pending determination of the dispute;
(b) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or
(d) Preserve evidence that may be relevant and material to the resolution of the dispute. 51
Under Republic Act No. 9285 or the Alternative Dispute Resolution Act of 2004, a court may grant an interim measure of protection or provisional relief:
(i) to prevent irreparable loss or injury;
(ii) to provide security for the performance of any obligation;
(iii) to produce or preserve any evidence; or
(iv) to compel any other appropriate act or omission. 52
Interim measures of protection serve to protect the status quo during the pendency of the arbitration proceeding. It is merely ancillary to the main action. Considering that the Ad Hoc Arbitral Tribunal has already rendered an Arbitral Award, this case has become moot.
A case becomes moot when, due to supervening events, it ceases to present a justiciable controversy. 53 Any resolution on the merits will have no practical effect or value. 54
Petitioner has previously manifested to this Court to stay the proceedings in view of the pendency of the arbitration. 55 Respondent was also of the opinion that the Petition should be dismissed since the commencement of the arbitration proceedings has already rendered the case moot. 56
Considering that no party will be prejudiced by the termination of this action, the withdrawal of the Petition is granted.
WHEREFORE, the Reply (To Respondent's 6 January 2014 Comment) is NOTED and the Motion to Withdraw Petition is GRANTED. Let the case be considered CLOSED and TERMINATED.
Let entry of judgment be issued immediately.
SO ORDERED."
Very truly yours,
MA. LOURDES C. PERFECTODivision Clerk of Court
By:
(SGD.) TERESITA AQUINO TUAZONDeputy Division Clerk of Court
Footnotes
1.Rollo, pp. 186-192.
2.Id. at 8-27.
3. According to the Petition it filed before the trial court, it was previously registered under the name "Diversified Financial Network, Inc.," however, the Securities and Exchange Commission approved the change of its name to DFNN, Inc. on September 28, 2009. See rollo, p. 67.
4.Rollo, p. 45.
5.Id.
6.Id. at 46.
7.Id.
8.Id. at 51 and 73.
9.Id. at 49.
10.Id.
11.Id. at 14.
12.Id. at 14-15.
13.Id. at 15-16.
14.Id. at 16.
15.Id.
16.Id. at 17.
17.Id.
18.Id.
19.Id.
20.Id. at 18.
21.Id. at 78.
22.Id. at 78-79.
23.Id. at 67-98.
24.Id. at 18.
25.Id. at 99. A copy of the Order was not attached in the rollo.
26.Id.
27.Id. at 99-104. The Order was penned by Judge Jose G. Paneda of the Regional Trial Court of Quezon City, Branch 220.
28.Id. at 100.
29.Id. at 101.
30.Id. at 105-117.
31.Id. at 114-115.
32.Id. at 34-44. The Order was penned by Judge Jose G. Paneda of Quezon City Regional Trial Court, Branch 220.
33.Id. at 118-119.
34.Id. at 121. The Order was penned by Judge Jose G. Paneda of Quezon City Regional Trial Court, Branch 220.
35.Id. at 31-33. The Resolution was penned by Associate Justice Samuel L. Gaerlan, and concurred in by Associate Justices Rebecca De Guia-Salvador and Apolinario D. Bruselas, Jr. of the Third Division, Court of Appeals, Manila.
36.Id. at 32.
37.Id. at 32-33.
38.Id. at 8-29.
39.Id. at 139.
40.Id. at 140-142.
41.Id. at 140.
42.Id. at 165-174.
43.Id. at 158-159.
44.Id. at 143-151.
45.Id. at 152-157.
46. A.M. No. 07-11-08-SC, or the Special Rules of Court on Alternative Dispute Resolution, Rule 19.12 (a) provides that the grant or denial of an interim measure of protection may be appealed to the Court of Appeals through a petition for review:
Rule 19.12. Appeal to the Court of Appeals. — An appeal to the Court of Appeals through a petition for review under this Special Rule shall only be allowed from the following final orders of the Regional Trial Court: a. Granting or denying an interim measure of protection.
47.Rollo, pp. 187-193.
48.Id. at 188-189.
49.Id. at 187.
50. Adopted by the United Nations Commission on International Trade Law (UNCITRAL) on June 21, 1985 (United Nations Document A/40/17) and recommended for enactment by the General Assembly in Resolution No. 40/72. It was approved on December 11, 1985 and amended on July 7, 2006.
Available at <https://www.uncitral.org/pdf/englisli/texts/aititration/ml-arb/07-86998_Ebook.pdf.> (last visited February 20, 2017).
51. UNCITRAL Model Law on International Commercial Arbitration (1985), chap. IV (A), sec. 1, art. 17 (2).
52. Rep. Act No. 9285 (2004), sec. 28 (b) (2).
53. See David v. Macapagal-Arroyo, 522 Phil. 705 (2006) Per J. Sandoval-Gutierrez, En Banc.
54. See David v. Macapagal-Arroyo, 522 Phil. 705 (2006) Per J. Sandoval-Gutierrez, En Banc.
55.Rollo, pp. 140-142.
56.Id. at 146.