Title
Philippine Charity Sweepstakes Office vs. TMA Group of Companies Pty Ltd.
Case
G.R. No. 212143
Decision Date
Aug 28, 2019
PCSO-TMA joint venture for a thermal coating plant declared void; CJVA exceeded PCSO's mandate, circumvented public bidding. RTC's injunctions deemed improper; judges face administrative probes.

Case Summary (G.R. No. 212143)

Background of the Dispute and Joint Venture Agreement

The PCSO, a government entity mandated by law to conduct charity sweepstakes and lotteries, entered into a CJVA with TMA Australia for the creation of the first thermal coating plant in the Philippines. The joint venture’s purpose was to produce thermal-coated papers, primarily for export sales, with a 50-year term, subject to periodic renegotiation for additional benefits to PCSO. TMA committed to invest approximately Php 4.4 billion, while PCSO committed to purchase all thermal paper and related consumables requirements for its gaming operations exclusively from the joint venture. Profit sharing was 80% to TMA and 20% to PCSO.

Suspension of the CJVA and OGCC Opinion Finding It Null and Void

In August 2010, PCSO suspended implementation of the CJVA pending review by the Office of the Government Corporate Counsel (OGCC). The OGCC issued Opinion No. 079, series of 2011, declaring the CJVA null and void on several grounds:

  • The CJVA’s purpose extended beyond PCSO’s primary corporate purpose under its charter.
  • PCSO’s “contribution” was limited to a commitment to buy thermal paper over 50 years, which violated JV Guidelines requiring government contributions to be assets of value.
  • The CJVA was a disguised supply contract intended to circumvent public bidding requirements, thus possibly evading audit by COA.

RTC Proceedings and Issuance of Injunctive Writs Favoring TMA

Despite the OGCC’s opinion and PCSO’s suspension, TMA filed a complaint for specific performance with a prayer for preliminary mandatory and prohibitory injunctions, seeking to enforce the CJVA. The RTC (Judge Dumayas) granted:

  • A temporary restraining order and subsequently writs of preliminary mandatory and prohibitory injunctions directing PCSO to lift the suspension, continue implementing the CJVA, and stop any act leading to its cancellation, including bidding for lotto paper supplies from other sources.
  • The injunctions ordered PCSO to accept and pay for deliveries of lottery papers and consumables under the CJVA.

PCSO’s Motion to Quash and CA’s Affirmation of RTC Orders

PCSO filed a motion to quash the writs, citing absence of clear and unmistakable right and lack of urgent necessity, as well as the CJVA’s invalidity. The RTC denied the motion to quash after a delay of more than a year. The Court of Appeals affirmed the RTC’s orders, upholding the issuance of the injunctions on the basis of preserving the status quo and preventing irreparable injury to TMA.

Execution Proceedings and Further Enforcement Orders by RTC

TMA moved for execution of orders directing PCSO to pay for delivered lotto papers. The RTC (Judge Calis) granted the motions for execution and ordered garnishment of PCSO’s funds totaling Php 82 million, and later Php 707 million, to satisfy TMA’s claims for deliveries under the CJVA. PCSO opposed, alleging lack of authority to pay without purchase orders and invalidity of the CJVA. The CA upheld these execution orders as well, ruling that PCSO’s funds, as a government corporation, were subject to garnishment and that PCSO was bound to source from TMA under the CJVA.

RTC’s Writ of Permanent Injunction and Subsequent Execution Order

The RTC (Judge Villarosa) ruled that the preliminary writ of injunction was substituted by a permanent writ ordering full performance of the CJVA and issued a writ of execution for Php 707 million for lotto papers manufactured and ready for delivery. Despite PCSO’s appeals and pending motions for reconsideration, the execution proceeded, and funds were garnished and paid to TMA.

Supreme Court’s Review and Significant Legal Findings

Upon consolidation of the three petitions, the Supreme Court reversed and nullified:

  • The RTC’s issuance of writs of preliminary mandatory and prohibitory injunctions ordering PCSO to lift the suspension and implement the CJVA. The Court held that:
    • A preliminary injunction is a provisional remedy meant to preserve the status quo, not to grant the principal relief sought.
    • The requisites for injunctive relief — material and substantial invasion of a clear and unmistakable right, and urgent necessity to prevent irreparable damage — were not met, as the CJVA’s validity was in question and the damages alleged were economic and reparable.
    • The RTC and CA erred in assuming TMA had a clear, enforceable right when the CJVA’s validity was formally challenged.
  • The writs of execution against PCSO’s funds, premised on the injunctions, were declared void as they extended beyond the scope of provisional relief and improperly compelled payment on an unproven and possibly invalid agreement.
    • The Court emphasized that government funds are generally immune from execution, except in limited circumstances such as with government-owned corporations that can sue and be sued, but even then execution must be properly grounded and justified.
  • The RT courts improperly arrogated to themselves power to determine the terms, volumes, and prices of goods PCSO was compelled to accept and pay for, contrary to the CJVA’s provisions and PCSO’s procurement authority.
  • The enforcement actions prejudged the case on the merits, violating the fundamental legal principle that preliminary injunctions must not dispose of the main case.

Administrative Commentary and Call for Investigation of Judicial Conduct

In a separate concurring opinion, Justice Peralta agreed fully with the judgment but strongly suggested that separate administrative investigations be initiated against former Judges Dumayas and Villarosa for apparent improprieties, including:

  • Undue delay in ruling on motions critical to review of injunctions.
  • Granting execution and enforcement orders despite pending appeals and even a Supreme Court TRO enjoining similar implementations.
  • Failure to exercise prudence considering the public interest involved and the questionable nature of the underlying contract.
    Justice Peralta cited the doctrine of res ipsa loquitur, noting gross errors or p

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