Case Digest (G.R. No. 201816)
Facts:
Busan Universal Rail, Inc. (petitioner) entered, through a negotiated procurement under Republic Act No. 9184, into a DOTC-MRT3 System Maintenance Provider contract with DOTr-MRT3 (respondent) via a joint venture incorporated as BURI, covering maintenance, overhaul, signaling replacement, and additional maintenance, with contract payments and performance obligations. After petitioner billed up to Billing No. 8, respondent withheld settlement of Billing No. 9 and subsequent billings, prompting petitioner to invoke the contract’s dispute-settlement provisions and to notify respondent of its intent to commence arbitration.
When respondent issued a Notice to Terminate and later a decision terminating the MRT3 Contract, petitioner filed before Branch 105, RTC Quezon City a petition for interim measures of protection with prayer for an interim/temporary order to maintain status quo and compel continued payments and contract performance pending arbitration. The RTC denied the petition, and later denied petitioner’s omnibus motion, ruling it lacked jurisdiction under RA 8975.
Issues:
- Whether the RTC had jurisdiction to issue temporary or interim injunctive relief against respondent pending arbitration where the MRT3 Contract contained an arbitration clause.
- Whether petitioner’s requested relief effectively restrained or compelled termination or rescission of a government contract in violation of Section 3(d) of RA 8975.
- Whether the extreme urgency involving a constitutional issue exception under RA 8975 applied to justify the issuance of interim injunctive relief.
Ruling:
The Supreme Court denied the petition for lack of merit and affirmed the RTC orders denying interim measures and the ancillary prayer for status quo/preliminary mandatory injunction. The Court held that the only proper question was RTC jurisdiction to grant the sought protection, and that the requested relief was barred because it would restrain respondent from terminating the MRT3 Contract.
The Court further held that petitioner failed to show the existence of a constitutional issue of extreme urgency, and it declined to rule on the merits of the parties’ contractual controversy, which properly belonged in arbitration proceedings.
Ratio:
The Court ruled that RA 9285 generally allows a court to grant interim measures of protection before the arbitral tribunal is constituted, but this general rule yields to the special prohibition in RA 8975 for national government projects, including restrictions on injunctive relief that would restrain or prohibit termination or rescission. Citing Department of Foreign Affairs v. Falcon and its rationale, the Court found that when a party seeks relief to prevent termination of a government contract, the grant of injunctive relief is prejudicial to public interest because it can indefinitely hamper government from engaging replacements while the dispute remains pending.
The Court rejected petitioner’s invocation of the constitutional-urgency exception, emphasizing that the parties’ dispute was purely contractual and concerned the propriety of the government’s termination of the contract; petitioner did not demonstrate a constitutional issue of extreme urgency. The Court therefore left questions related to the propriety of termination to arbitration and affirmed the RTC’s dismissal for lack of jurisdiction.
Doctrine:
- RA 9285 allows courts to grant interim measures before an arbitral tribunal is constituted, but it yields to the special prohibition in RA 8975 when the case involves a national government project.
- Under Section 3(d) of RA 8975, courts are prohibited from issuing temporary restraining orders or preliminary injunctions that would restrain, prohibit, or compel termination or rescission of a national government contract/project.
- The extreme urgency involving a constitutional issue exception in RA 8975 applies only upon a clear showing of a constitutional issue of such urgency, which is absent in purely contractual disputes.
- When the controversy’s factual allegations substantially involve matters that should be resolved in arbitration, courts should refrain from ruling on the merits and instead enforce the statutory bar to injunctive relief against termination of national government contracts.
- RA 9285 allows courts to grant interim measures before an arbitral tribunal is constituted, but it yields to the special prohibition in RA 8975 when the case involves a national government project.
- Under Section 3(d) of RA 8975, courts are prohibited from issuing temporary restraining orders or preliminary injunctions that would restrain, prohibit, or compel termination or rescission of a national government contract/project.
- The extreme urgency involving a constitutional issue exception in RA 8975 applies only upon a clear showing of a constitutional issue of such urgency, which is absent in purely contractual disputes.
- When the controversy’s factual allegations substantially involve matters that should be resolved in arbitration, courts should refrain from ruling on the merits and instead enforce the statutory bar to injunctive relief against termination of national government contracts.