G.R. No. 211044 - Dupasquier vs. Ascendas Corp.

Petitioners Jacques A. Dupasquier and Carlos S. Rufino, representing The Net Group—a consortium of corporations and individuals engaged as developers and operators of PEZA-accredited office buildings—entered into a Memorandum of Understanding (MOU) with respondent Ascendas (Philippines) Corporation, a real estate company operating in Asia.
The MOU, dated January 18, 2007, set forth the terms for Ascendas’ acquisition of all issued shares of The Net Group companies, with further details to be formalized in Definitive Agreements following the MOU.

The Closing Date was defined as two calendar weeks after signing the MOA but no later than March 31, 2007.
The MOA had to be signed on or before March 15, 2007, unless otherwise agreed. Execution of the MOA would supersede the MOU.

Within five business days of signing the MOU, Ascendas was to deliver a US$1,000,000.00 irrevocable Letter of Credit (L/C) to The Net Group—to secure compliance.
The Net Group could draw upon the Due Diligence L/C upon signing the MOA or March 31, 2007, whichever was earlier, if Ascendas failed to sign the MOA without justifiable reason. The drawn amount would serve as liquidated damages.
If The Net Group failed or refused to sign the MOA by March 31, 2007, it could not draw on the Due Diligence L/C and would be in breach.

Disputes arising out of or in connection with the MOU were to be negotiated in good faith within 30 days after written notice, failing which disputes would be finally resolved by arbitration under UNCITRAL rules in Hong Kong, in English.

The MOU took effect upon signing and remained in force unless terminated pursuant to Clause 11 or superseded by Definitive Agreements.
Upon termination or lapse, the MOU ceased to have effect except for the Confidentiality Clause 14(e), which would survive.

Annex "C" Transaction Timeline detailed deadlines and obligations related to Due Diligence, MOA signing, and payments.

Ascendas delivered the Due Diligence L/C and commenced due diligence.
Ascendas informed petitioners that it could not execute the MOA by March 31, 2007, due to delayed completion of due diligence. Petitioners rejected the extension as unwarranted and offered to meet to resolve minor items.
The MOA and Definitive Agreements were not executed by March 31, 2007, nor was there a written extension or revision of the Closing Date.
Petitioners deemed the MOU lapsed as of April 1, 2007, but expressed willingness to negotiate voluntarily.
Ascendas disputed lapse of the MOU, alleging delays and failures on petitioners’ part, and threatened arbitration if disputes were not resolved by September 28, 2007.

Petitioners filed a petition for declaratory relief and sought a temporary restraining order (TRO) to prevent arbitration and to be declared entitled to the Due Diligence L/C amount.
RTC granted TRO and later, through summary judgment, declared that:

Petitioners could not be compelled to arbitrate based on the MOU arbitration clause.
Petitioners were entitled to the Due Diligence L/C amount of US$1,000,000.00.

Ascendas appealed to the Court of Appeals (CA), which set aside the RTC order, holding that:

The Arbitration Clause survived the lapse of the MOU by virtue of the doctrine of separability and thus, the parties were bound to arbitrate.
The petition for declaratory relief was improper as it effectively sought liquidation of damages after breach.

Whether the expiration or lapse of the MOU terminated the Arbitration Clause contained therein, thereby barring Ascendas from compelling arbitration.

Whether the petition for declaratory relief filed by petitioners is proper, considering Ascendas’ claim that a breach had occurred making the petition unsuitable.

Whether the petitioners are entitled to the Due Diligence L/C amount of US$1,000,000.00 under the terms of the MOU.

Whether summary judgment was proper given the absence of genuine issues of material fact and the purely legal nature of the dispute.