G.R. No. 164299 - MIAA vs. Powergen, Inc.

Case Summary (G.R. No. 164299)

Applicable Law and Legal Basis

The case was adjudicated under the 1987 Philippine Constitution (applicable because the decision date is after 1990) and the Rules of Court (Rule 45 for petitions for review on certiorari; Rule 65 for petitions to the Court of Appeals). The governing principles invoked concern the nature, purpose and strict limitations on preliminary injunctive relief, especially preliminary mandatory injunctions, as developed in Philippine jurisprudence (cases cited include Ortigas & Company, Capitol Medical Center, Sy v. CA, Yujuico v. Quiambao, and PAL, Inc. v. NLRC).

Factual Background: power problems and procurement choice

In the early 1990s Metro Manila, including the airport area, suffered frequent power interruptions, voltage fluctuations and surges that impaired airport operations. MIAA, previously wholly dependent on MERALCO, decided to procure a baseload power plant on a Build-Operate-Own (BOO) scheme to secure continuous supply. Lacking in-house capability, MIAA conducted public bidding and issued a Notice of Award to Powergen, Inc., followed by execution of a Power Generation Agreement (PGA).

Contractual terms: Article 7.3 and Sixth Schedule

The PGA allocated obligations to MIAA including a guaranteed minimum energy off-take of 4,000,000 kWh per month at a privileged discount rate (Article 7.3). The Sixth Schedule provided that energy fees for the fifteen-year cooperation period (including testing/commissioning) would be computed using the MERALCO billing rate less a 40% discount (i.e., MERALCO prevailing rate x 0.60). Monthly billing would take into account the minimum guaranteed consumption "whichever is higher."

Notice to Proceed and its purported modification of obligations

On December 18, 1995, MIAA issued a Notice to Proceed for construction of an initial 7.25 MW power station and expressly stated that the guaranteed minimum energy consumption of 4,000,000 kWh per month stipulated in Article 7.3 "shall be ignored" and MIAA "shall not be liable" to purchase such guaranteed consumption until the full KW capacity in the BOO contract was attained. Powergen’s president signed an acknowledgment accepting the Notice of Proceed.

Implementation, billing dispute, and initiation of litigation

Powergen constructed and operated the diesel power station and billed MIAA accordingly; payments were made following respondent’s billings. In June 2000 MIAA discovered MERALCO’s rate (P2.03/kWh) was lower than Powergen’s billing (P2.22/kWh) and thereafter paid using the lower rate. Powergen filed suit on January 4, 2001 seeking reformation of the PGA, judicial determination of the correct rate, and a directive compelling MIAA to comply with the guaranteed minimum off-take of 4,000,000 kWh. An amended complaint added a request for injunctive relief to prevent MIAA from deducting alleged overpayments.

Trial court and Court of Appeals actions on injunctive relief

The trial court granted Powergen’s urgent motion and issued a writ of preliminary mandatory injunction (order dated January 21, 2003; writ January 23, 2003). MIAA’s motions to set aside or quash the writ were denied. The Court of Appeals affirmed the trial court’s issuance of the preliminary mandatory injunction. MIAA elevated the matter to the Supreme Court by petition for review under Rule 45.

Issue presented

The dispositive issue before the Supreme Court was whether Powergen was entitled to a preliminary mandatory injunction compelling MIAA to comply with Article 7.3 (i.e., to pay the guaranteed minimum energy consumption and the contracted rate) pending trial on the merits.

Legal principles governing preliminary mandatory injunctions

The Court reiterated that an injunction is a preservative, provisional remedy meant to maintain the status quo until the merits are adjudicated; it is not a substitute for trial. A preliminary mandatory injunction is more intrusive than a prohibitory one and generally improper before final hearing except in narrowly defined circumstances: extreme urgency, a very clear right free from doubt, considerations of relative convenience favoring the complainant, a willful and unlawful invasion of rights producing continuing injury, or to reestablish and maintain a preexisting continuing relation recently and arbitrarily interrupted. Granting such a writ is improper when it effectively disposes of the main case absent trial.

Supreme Court analysis and application to the facts

The Court found that resolving whether the Notice to Proceed amended Article 7.3 would require adjudication of the merits of the main action and therefore was not appropriate by preliminary writ. Issuing the mandatory injunction in effect grant

Case Syllabus (G.R. No. 164299)

Citation and Court Information

Reporter citation: 568 Phil. 481.
Division: First Division.
G.R. No.: 164299.
Decision date: February 12, 2008.
Ponente: Justice Corona, J.
Concurring justices: Sandoval-Gutierrez, Azcuna, and Leonardo-De Castro, JJ.
Chief Justice Puno: took no part due to relationship to counsel.
Procedural posture: Petition for review on certiorari under Rule 45 of the Rules of Court, assailing the October 16, 2003 decision of the Court of Appeals in CA-G.R. SP No. 76415 and its June 25, 2004 resolution denying reconsideration.

Parties

Petitioner: Manila International Airport Authority (MIAA).
Respondent: Powergen, Inc.
Representative of respondent noted in record: Luisito C. Magpayo (president), who signed the Acknowledgment of Receipt and Acceptance of the Notice to Proceed.

Factual Background — Power Problems and Decision to Build

In the early 1990s, the whole Metro Manila, including the airport area, experienced daily power outages, split power interruptions, voltage fluctuations and power surges.
These power disruptions impaired efficient functioning of airport facilities and equipment and essential public services at the airport.
MIAA, which at that time was totally dependent on the Manila Electric Company (MERALCO) for its power needs, decided to remedy the situation by installing a baseload power plant to provide continuous and adequate electric supply to all airport facilities.
Because MIAA lacked expertise and capability to undertake the project, it solicited contractors to build and operate the power plant on a Build-Operate-Own scheme.
MIAA prepared the terms of reference and conducted a public bidding for construction of the proposed power plant; Powergen, Inc. submitted a bid.
On April 4, 1994, MIAA issued a notice of award to Powergen, Inc., and thereafter the parties entered into a Power Generation Agreement (PGA).

Contractual Provisions — Article 7.3 and Sixth Schedule

Article 7.3 of the PGA, captioned "MIAA OBLIGATIONS," provided:
- (i) The purchase and the payment of [Powergen, Inc.] of the minimum guaranteed energy consumption of Four Million KWH (4,000,000) per month at the privilege discount rate
- (ii) The purchase and payment of the energy requirement of MIAA above the minimum guaranteed energy consumption in accordance with the Sixth Schedule.
- (iii) To answer for whatever amount supply (sic) MERALCO may charge for the use on a standby basis of its power supply.
The PGA further provided that MIAA shall pay respondent energy fees based on the Sixth Schedule, which included the following provisions:
- "DELIVERY OF POWER AND ENERGY" — Powergen agrees to generate all electric energy requirements of MIAA and MIAA agrees to take at the high voltage side of the main transformer its electric-energy requirements delivered by Powergen until the end of the Agreement.
- "Delivered Energy" — Powergen shall generate electric energy and deliver it to MIAA, and MIAA shall take such electricity from Powergen; the energy delivered shall be paid for by MIAA pursuant to terms and conditions in No. 3 of the Schedule.
- "Terms of Payment" — MIAA will be billed monthly for the total consumed electrical energy taking into consideration the minimum guaranteed consumption whichever is higher.
- Energy Fees formula (No. 3.1): "All Energy Fees payable to [Powergen, Inc.] by MIAA during the fifteen-year Cooperation Period, including the period of Testing/Commissioning, will be computed as per the MERALCO Billing System less Forty Percent (40%) discount. Thus: DISCOUNT RATE = MERALCO's Prevailing Rate at Time of the Billing x 0.60"
- Guaranteed Minimum Energy Off-Take (No. 3.2): "The guaranteed minimum energy consumption of MIAA shall be 4,000,000 KWH/month and the corresponding energy fee will be computed as per the above formula."

Notice to Proceed of December 18, 1995 — Terms and Conditions

On December 18, 1995, MIAA gave Powergen a Notice to Proceed which stated:
- Powergen was notified to proceed with the project in accordance with the PGA, subject to specified conditions.
- Construction of an initial 7.250 MW (2 x 3.625) Power Station to service priority circuits within the MIAA complex.
- The initial Power Station was to be part of the original bid proposal, subject to PGA pricing and relevant provisions.
- Crucially, the Notice included the provision: "Provided, however: That the maximum (sic) guaranteed energy consumption of Four Million (4,000,000) KWH per month of MIAA, stipulated in Article 7.3 of the said contract, shall be ignored and MIAA shall not be liable to the purchase of such guaranteed consumption. Meanwhile, only the actual energy consumed KWH by MIAA shall be the basis for the computation of the operating fees. That Article 7.3 shall be reimposed only when the KW capacity stipulated on the BOO Contract is attained."
Powergen's president signed a "Certified Acknowledgment of Receipt and Acceptance" of the Notice to Proceed on the same day.
Subsequent to the Notice, the power station was constructed and operated by Powergen, and MIAA paid energy fees in accordance with respondent's billings.

Dispute Trigger — Rate Difference and Change in Payment

In June 2000, MIAA discovered MERALCO was charging a lower rate (P2.03 per KWH) than the rate Powergen was collecting (P2.22 per KWH).
Consequently, MIAA used the lower MERALCO rate of P2.03 per KWH in its payments to Powergen.

Litigation — Claims, Reliefs, and Procedural Steps

On January 4, 2001, Powergen filed suit in the Regional Trial Court (RTC) of Pasig City, Branch 168, seeking:
- Reformation of the contract;
- A fixing of the rate at which MIAA should pay Powergen;
- A directive that MIAA comply with the PGA and purchase from and pay the guaranteed minimum energy consumption of four million KWH in accordance with Article 7.3 of the PGA.
On July 24, 2001, Powergen amended its complaint to include an application for temporary restraining order or preliminary injunction to