G.R. No. 189191 - Mid-Islands Power Generation Corporation vs. Court of Appeals

Case Summary (G.R. No. 189191)

Factual Background

The controversy arose from an Electric Supply Agreement (ESA) between Oriental Mindoro Electric Cooperative, Inc. (ORMECO) and Power One, under which Power One was permitted to install, construct, acquire, and operate an electric generating facility in Oriental Mindoro and to assign its rights and obligations under the ESA to an affiliate or a project company. The ESA also allowed Power One to use the existing Calapan Diesel Power Plant in Oriental Mindoro.

To implement the project, Power One invited partners to form a project company, eventually designated as Mid-Islands Power Generation Corporation. On 4 June 2004, Power One entered into a Memorandum of Agreement (MOA) with Victor Pascual, Faustino Lim, Philip Uy, and Viscal Development Corporation, providing that the project company would assume and implement Phase 1 of an ESA with Central Negros Electric Cooperative (ESA-CENECO) and Phase 1 of an ESA with ORMECO (ESA-ORMECO). The MOA allocated capital subscription at sixty-nine and a half percent (sixty-nine point five percent) for the new partners, twenty-nine and a half percent for Power One through Islands Grid, and one percent for a certain Kenneth Uy. It also specified that management and operations would be the responsibility of the newly organized co-partners of Power One.

On 15 October 2004, by virtue of an Assignment Memorandum, Power One assigned the two ESAs to Mid-Islands Power and notified ORMECO, and ORMECO acknowledged the assumption by Mid-Islands Power of Power One’s rights and obligations under ESA-ORMECO. Later, in July 2005, Pascual et al. entered into a Revised MOA with Power One. Under the Revised MOA, the parties shelved the CENECO project and focused on Phase 1 of the ORMECO project while adding Phase 2 of the ESA-ORMECO to the venture. They also agreed to form an O & M Company to operate and manage the Calapan Diesel Power Plant for Mid-Islands Power, with Pascual et al. holding eighty percent and Power One through Islands Grid holding twenty percent of its stocks.

The relationship deteriorated when Tan, acting for Power One, sent correspondences in May 2006. Power One attributed the delay in completing the ORMECO project to Mid-Islands Power’s failure to fulfill commitments and demanded faster action. Mid-Islands Power, in return, raised issues involving monetary advances, future financing, and proposed amendments to shareholding provisions. Further correspondences followed, with both sides raising concerns about lack of financing, inability to complete the phases, and alleged inefficiency in management.

Eventually, Power One issued a demand letter requiring Pascual et al., through Mid-Islands Power, to perform obligations under the Revised MOA. Power One asserted that delays reduced electrical generation to less than fifty percent of capacity and claimed that Mid-Islands Power’s right to supply power and occupy and operate leased facilities of NAPOCOR had not taken effect. Power One also alleged that it had informed ORMECO that the assignment in favor of Mid-Islands Power had not become effective as of 30 April 2006 due to Mid-Islands Power’s inability to fulfill obligations. Further, Power One alleged ORMECO had noticed MindoroTech was operating the Calapan Diesel Power Plant in violation of the ESA.

On 19 August 2006, Power One and Islands Grid barred Mid-Islands Power and MindoroTech from entering the Calapan Diesel Power Plant. On 11 September 2006, MindoroTech Services Inc. and Mid-Islands Power filed Civil Case No. 70957-SJ for injunction with urgent prayer for TRO and preliminary injunction against Power One, Islands Grid, Tan, and Lauron. They contended that the transferred interests and obligations had already vested and that respondents should be restrained from preventing them from performing their lawful and valid obligations.

Respondents opposed, asserting that the assignment of the ESA-ORMECO had not become effective because conditions in the Revised MOA remained unfulfilled, and that commercial operation of the Calapan Diesel Power Plant required compliance with conditions, including consultation with ORMECO and receipt of ORMECO’s approval.

Injunctive Proceedings in the Trial Courts

The Pasig RTC issued a 72-hour TRO in favor of MindoroTech and Mid-Islands Power. During the continuation of the hearing on preliminary injunction, the parties adopted a policy of “no touch,” whereby none of the parties would enter the control and engine rooms of the plant. They also agreed to an interim compromise operation. The branch sheriff placed plant operation under the responsibility of Mid-Islands Power and MindoroTech.

On 20 October 2006, while Civil Case No. 70957-SJ was pending, ORMECO filed a separate complaint (Civil Case No. CV-06-5689) in the RTC in Calapan City, seeking specific performance, preliminary mandatory injunction, and damages against Power One. On the same date, the Calapan RTC issued a 72-hour TRO compelling Power One to perform and immediately operate the Calapan Diesel Power Plant pursuant to the ESA-ORMECO and authorized ORMECO to operate the plant if Power One failed to comply. The Calapan RTC sheriff eventually turned over operations to ORMECO and removed Mid-Islands Power and MindoroTech therefrom, expressly reasoning that the TRO safeguarded public interest because an impending brownout threatened Oriental Mindoro.

On 6 November 2006, the Pasig RTC issued an Order granting a writ of preliminary injunction. It found actual and imminent danger and concluded that preventing Mid-Islands Power from operating the plant would unduly interfere with performance of the ESA and result in a power crisis. It also found that public interest required full and continuous supply of electricity. Thus, Mid-Islands Power and MindoroTech were allowed to reenter and operate the plant.

On the afternoon of 10 November 2006, the Pasig RTC’s preliminary injunction was implemented by the branch sheriff, allowing resumption of operations. However, that same day, the Calapan RTC issued a separate writ of preliminary mandatory injunction against Mid-Islands Power and MindoroTech, and Power One’s counsel demanded that they vacate. As both trial courts’ writs were enforced by different sheriffs, trouble ensued. Eventually, the Calapan RTC sheriff forcibly broke open the plant doors and ordered personnel of both corporations to leave.

Proceedings Before the Court of Appeals

Power One, Islands Grid, Tan, and Lauron challenged the Pasig RTC injunctive order before the CA via Petition for Certiorari and Prohibition in CA-G.R. SP No. 97243, arguing that the Pasig RTC lacked territorial jurisdiction because the acts sought to be enjoined occurred in Calapan, Oriental Mindoro. On 10 December 2007, the CA issued a Decision sustaining the Pasig RTC. The CA recognized that the lockout occurred in Calapan but held that the restrainable acts were effectively committed within Pasig RTC territorial jurisdiction because Power One’s officers allegedly acted from its principal office in Pasig City.

On 4 March 2008, the CA denied reconsideration. Later, on 20 April 2009, the CA ordered entry of judgment of the 10 December 2007 Decision, treating it as final and executory on 2 April 2008 after no further appeal was taken.

Meanwhile, the Pasig RTC continued with the main action. On 29 September 2008, it rendered summary judgment in favor of MindoroTech and Mid-Islands Power, making the preliminary injunction of 6 November 2006 permanent. It permanently enjoined Islands Grid and Power One from acts tending to prevent Mid-Islands Power and MindoroTech from exercising their rights and performing obligations in operating the plant.

The CA’s Resolutions on the Motion for Extension and the Core Question Presented

Following the 29 September 2008 Order, Power One filed on 9 December 2008 a Motion for Extension of time to file a Petition for Certiorari with the CA, asking for a 15-day extension. It stated that the petition would question the Pasig RTC’s 29 September 2008 order granting a permanent injunction. Power One claimed that it received the order on 10 October 2008, which would have set the deadline to 9 December 2008, but argued that its lawyer handling the case left the firm and other lawyers could not act due to other professional engagements. While the CA acted upon the motion, Power One proceeded to file a Petition for Certiorari on 23 December 2008. The CA granted the extension on 23 December 2008, docketed as CA-G.R. SP No. 106511.

Mid-Islands Power opposed the extension, contending that the grant violated A.M. No. 07-7-12-SC, which amended Rule 65, Section 4. On 23 June 2009, the CA denied Mid-Islands Power’s opposition, prompting the present petition before the Supreme Court.

The sole issue was whether the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction when it granted Power One’s motion for extension to file its Rule 65 petition, in light of A.M. No. 07-7-12-SC.

The Parties’ Contentions on the Effect of A.M. No. 07-7-12-SC

Mid-Islands Power argued that A.M. No. 07-7-12-SC deleted the clause allowing extension of time to file a Rule 65 petition for compelling reasons, and therefore the CA should not have granted the extension. It pointed out that the earlier version of Rule 65, Section 4 had expressly limited any extension to no more than fifteen (15) days and only for compelling reasons. It then relied on the Supreme Court En Banc Resolution in A.M. No. 07-7-12-SC, which removed the extension clause, and invoked jurisprudence explaining that the amendment aimed to prevent abuse of the petition for certiorari as a tool to delay proceedings and frustrate justice. Mid-Islands Power maintained that the CA’s act disregarded or modified the En Banc resolution by granting the extension despite the deletion of the extension authority.

The petitioner acknowledged, through discussion of later jurisprudence, that Domdom v. Sandiganbayan held the

Case Syllabus (G.R. No. 189191)

Mid-Islands Power Generation Corporation filed a Petition for Certiorari and Prohibition under Rule 65 of the Rules of Court, assailing the 23 December 2008 and 23 June 2009 Resolutions of the Court of Appeals in CA-G.R. SP No. 106511.
The petition challenged whether the Court of Appeals had authority to grant a Motion for Extension to file a petition for certiorari after the Supreme Court En Banc issued A.M. No. 07-7-12-SC, which took effect on 27 December 2007.
The Court framed the core issue as whether the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction in granting the extension.

Parties and Procedural Posture

Power One Corporation filed a petition for certiorari in the CA, later docketed as CA-G.R. SP No. 106511, assailing injunctive orders issued in connection with Civil Case No. 70957-SJ.
Mid-Islands Power Generation Corporation opposed the CA grant of the extension and later filed the instant Supreme Court petition after the CA denied its motion.
The Court of Appeals granted the Motion for Extension and, upon 23 June 2009, denied Mid-Islands Power’s challenge to the extension’s propriety.
The Court addressed only the sole issue: whether the CA committed grave abuse of discretion in allowing the extension.

Key Factual Allegations

MindoroTech Services Inc. (MindoroTech) and Mid-Islands Power filed a Complaint for injunction with urgent prayer for temporary restraining order and preliminary injunction in Civil Case No. 70957-SJ against Power One Corporation, Islands Grid Network Philippines, Inc. (Islands Grid), David Tan (Tan), and Manuel Lauron (Lauron).
Oriental Mindoro Electric Cooperative, Inc. (ORMECO) entered into an Electric Supply Agreement (ESA) with Power One permitting it to install, construct, acquire, and operate an electric generating facility in Oriental Mindoro, and to assign its rights and obligations to an affiliate or a project company it would organize.
The ESA arrangement involved Power One’s permitted use of the existing Calapan Diesel Power Plant in Oriental Mindoro and the prospective formation of a joint venture project company.
On 4 June 2004, Power One executed a Memorandum of Agreement (MOA) with Victor Pascual, Faustino Lim, Philip Uy, and Viscal Development Corporation, stipulating that the project company Mid-Islands Power would own and implement Phase 1 of ESA-CENECO and Phase 1 of ESA-ORMECO.
Under the MOA, the proposed ownership allocation was sixty-nine point five percent for the new partners, twenty-nine point five percent for Power One through Islands Grid, and the remaining one percent for Kenneth Uy, with management and operations resting with the new co-partners.
On 15 October 2004, Power One executed an Assignment Memorandum assigning its two ESAs to Mid-Islands Power, and ORMECO acknowledged the assumption by Mid-Islands Power under ESA-ORMECO.
In July 2005, the parties executed a Revised MOA shelving the CENECO project and focusing on Phase 1 of the ORMECO project, adding Phase 2 to the joint venture, while agreeing to form an O & M Company to operate the Calapan Diesel Power Plant for Mid-Islands Power.
The revised equity arrangement for the O & M Company was eighty percent for Pascual et al. and twenty percent for Power One through Islands Grid.
A business dispute arose when Tan, on behalf of Power One, sent correspondences in May 2006 alleging Mid-Islands Power’s inability to fulfill deadlines for Phase 1 and demanding faster action to cut delays.
Mid-Islands Power and Power One exchanged further correspondences concerning monetary advances, financing, revisions of shareholding provisions, insufficient financing, inability to complete Phases 1 and 2, and alleged inefficiencies in joint venture management.
Power One issued a demand letter to Pascual et al. through Mid-Islands, seeking specific performance under the Revised MOA and asserting that continued delay reduced electricity generation to less than 50% of capacity.
Power One also alleged that its supply right to ORMECO and NPC, and its authority to occupy and operate leased NAPOCOR facilities, had not taken effect due to Mid-Islands Power’s alleged failure to fulfill obligations.
Power One claimed it informed ORMECO that the assignment of the ESA to Mid-Islands Power did not take effect as of 30 April 2006, and it asserted that ORMECO purportedly noticed MindoroTech operating the Calapan Diesel Power Plant in violation of the ESA.
On 19 August 2006, Power One and Islands Grid barred Mid-Islands Power and MindoroTech from entering the Calapan Diesel Power Plant.
On 11 September 2006, MindoroTech and Mid-Islands Power filed the complaint in Civil Case No. 70957-SJ, contending that the interests, rights, and obligations of respondents had been transferred and that respondents should be restrained from preventing performance under the ESA and Revised MOA.
Respondents countered that the ESA assignment had not become effective due to unfulfilled conditions under the Revised MOA and that commercial operation required satisfaction of those conditions, including consultations and approval by ORMECO.
The Pasig City Regional Trial Court (Pasig RTC) issued a 72-hour TRO and, at the continuation of the preliminary injunction hearing, the parties agreed to a policy of no touch and an interim compromise operation, with the branch sheriff placing operation under Mid-Islands Power and MindoroTech.
While the complaint remained pending, ORMECO filed a separate complaint in Calapan City (Calapan RTC) seeking specific performance and preliminary mandatory injunction and damages against Power One, docketed as Civil Case No. CV-06-5689.
On 20 October 2006, the Calapan RTC issued a 72-hour TRO commanding Power One to operate the Calapan Diesel Power Plant pursuant to ESA-ORMECO, and authorizing ORMECO to operate if Power One failed, with the court stating it issued the TRO to safeguard public