Phil Geothermal Inc v. National Power Corp : 144302 : May 22, 2004 : J.
Carpio-Morales : Third Division : Resolution
[G.R. NO. 144302 : May 27, 2004]
PHILIPPINE GEOTHERMAL INC., Petitioner, v. NATIONAL POWER CORPORATION, Respondent.
R E S O L U T I O N
Before this Court is a Petition for Review on Certiorari seeking to set aside and nullify
the March 24, 2000 Decision and August 2, 2000 Resolution of the Court of
Appeals in CA-G.R. SP No. 43853, Philippine Geothermal Incorporated v. Hon.
Teodoro P. Regino as Presiding Judge of the Regional Trial Court of Quezon
City, Branch 84, and the National Power Corp.
The antecedent facts of the case are as follows:chanroblesvirtua1awlibrary
On September 10, 1971,
the National Power Corporation (NPC) entered into a service contract1 with Philippine Geothermal, Inc. (PGI),
a corporation organized and existing
under the laws of California, United
States of America, for the exploration and
exploitation of geothermal resources covering the Tiwi and Mak-Ban Geothermal
Fields. Section 3.1 of said contract provides:
Section 3 Term
3.1 The term of this contract shall be twenty-five (25) years
renewable for another twenty-five (25) years upon the option of PGI under the
same terms and conditions set forth herein.
Albeit the service contract was to expire in 1996, the negotiations
for its renewal started as early as 1994.
NPC, however, was doubtful whether a renewal would be
constitutional in light of Section 2, Article XII of the 1987 Constitution
SECTION 2. All lands of the public domain,
waters, minerals, coal, petroleum and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora and fauna, and
other natural resources are owned by the state. With the exception of
agricultural lands, all other natural resources shall not be alienated.The
exploration, development, and utilization of natural resources shall be under
the full control and supervision of the state.The state may directly undertake such
activities, or it may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or corporations or
associations at least sixty per centum of whose capital is owned by such
citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and
conditions as may be provided by law. In cases of water rights for irrigation,
water supply, fisheries, or industrial uses other than the development of water
power, beneficial use may be the measure and limit of the grant.
x x x (Emphasis supplied)cralawlibrary
As the service contract contained an arbitral clause, PGI filed
on July 8, 1996 a request
for arbitration2 with the International Court of Arbitration (ICA) of the International Chamber
of Commerce (ICC).
On August 21, 1996,
the NPC filed before the Regional Trial Court (RTC) of Quezon
City a petition for declaratory relief3 against PGI praying for the determination of the constitutionality of Section 3
of the service contract, specifically the above-quoted provision thereof on the
renewal of the contract at the option of PGI.
On October 2, 1996,
PGI filed a motion to dismiss4 the petition for declaratory relief alleging, among other things, that the
trial court has no jurisdiction over it in light of the pending arbitration
proceedings it instituted.
By Order5 of December 3, 1996, Branch
84 of the Quezon City RTC denied the motion to dismiss on the ground that the
legality or constitutionality of the renewal of the service contract is an
issue which only a regular court of justice may resolve or settle.
PGI filed a motion for reconsideration6 which was denied by Order7 of March 6, 1997.
PGI thus assailed the denial by the trial court of its motion to
dismiss by certiorari and prohibition before the Court of Appeals, alleging
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF ITS
JURISDICTION IN NOT GRANTING THE MOTION TO DISMISS RESPONDENT NPCS PETITION
FOR DECLARATORY RELIEF FILED BY PGI FOR THE REASONS THAT:chanroblesvirtua1awlibrary
(A) BY ESTABLISHED JURISPRUDENCE, THE CASE
BELOW SHOULD BE DISMISSED IN VIEW OF THE PENDING ARBITRATION PROCEEDING OVER
THE SAME SUBJECT MATTER BECAUSE (i) RESPONDENT JUDGE DOES NOT HAVE JURISDICTION
TO TAKE COGNIZANCE OF THE CASE; (ii) THERE IS ANOTHER ACTION PENDING BETWEEN
THE PARTIES FOR THE SAME CAUSE; AND (iii) THE PETITION BELOW STATES NO CAUSE OF
(B) CONSTITUTIONAL AND PUBLIC POLICY ISSUES, IF
ANY, SHOULD BE RAISED FIRST IN THE ARBITRATION PROCEEDING, AND SUBSEQUENTLY, IF
WARRANTED, IN THE PROCEEDING FOR THE ENFORCEMENT OF THE ARBITRAL AWARD.
(C) RESPONDENT NPC HAS ENGAGED IN FORUM
(D) THE REMEDY OF DECLARATORY RELIEF IS BOTH
PREMATURE AND ACADEMIC PREMATURE BECAUSE IT SHOULD BE RAISED FIRST IN THE
ARBITRATON PROCEEDING AND IN THE ENFORCEMENT PROCEEDING OF THE ARBITRAL AWARD
IF STILL NECESSARY; AND ACADEMIC BECAUSE BY NPCS OWN CONDUCT, THERE IS ALREADY
A BREACH OF THE SERVICE CONTRACT; AND
(E) THE REPUBLIC OF THE PHILIPPINES,
A PARTY IN THE ARBITRATION CASE BECAUSE OF ITS SOVEREIGN GUARANTY, IS A
NECESSARY PARTY IN THIS CASE; AND THE ABSENCE OF A NECESSARY PARTY IN A CASE
FOR DECLARATORY RELIEF, IS A JURISDICTIONAL DEFECT.8 cralawred
COMMITTED GRAVE ABUSE OF DISCRETION IN DENYING PETITIONER ITS RIGHT TO
PROCEDURAL DUE PROCESS AND IN BEING BIASED IN FAVOR OF NPC TO SERIOUS PREJUDICE
Pending decision of
the petition by the Court of Appeals, PGI and NPC filed on July 10, 1998 a joint motion to suspend
proceedings9 as the parties were exploring the possibility of amicable settlement.
Without resolving the joint motion to suspend, the Court of
Appeals rendered a Decision10 of March 24, 2000
dismissing PGIs petition.
Hence, the instant petition raising the following arguments:
THE COURT OF APPEALS HAD NO JURISDICTION TO
RENDER THE DECISION IN THE LIGHT OF A PENDING JOINT MOTION TO SUSPEND FILED BY
THE PETITION FOR DECLARATORY RELIEF SHOULD
HAVE BEEN DISMISSED BY THE REGIONAL TRIAL COURT AS WELL AS BY THE COURT OF
APPEALS IN VIEW OF THE PENDING ARBITRATION PROCEEDINGS OVER THE SAME SUBJECT
MATTER IN VIEW OF A BREACH OF THE CONTRACT SUBJECT OF THE PETITION.
THE DECISIONS OF THE COURT OF APPEALS AND
OF THE REGIONAL TRIAL COURT ARE NULL AND VOID FOR BEING MATERIALLY INFECTED,
CONSCIOUSLY OR UNCONSCIOUSLY, WITH OBVIOUS BADGES OF BIAS AND PREJUDICE.11 cralawred
During the pendency of the instant petition, PGI and the NPC
filed several joint motions to suspend proceedings12 upon the ground that they were negotiating for the settlement of the case. The
motions were granted by this Court.13 cralawred
On December 22, 2003, PGI and NPC filed a Joint Motion to Approve
Compromise Agreement and to Dismiss based on Compromise Agreement alleging
that, among others things:
x x x
33.The fact that the
Compromise Agreement and its amendment went through such exhaustive review by
different agencies of government and that the same passed thorough scrutiny
attests to the validity and soundness of the terms of compromise contained
therein. It must be pointed out that this agreement was studied and examined by
agencies of government directly dealing with the subject of the agreement and
who are in the best position, by their skill and technical expertise, to assess
the validity of the terms and the benefit accruing to the state.
x x x
36.x x x The Compromise
Agreement is not contrary to law because it in fact directly addressed to the
very heart of the constitutional issues involved in this controversy. Thus
[PGI] and [NPC] have agreed to terminate
the Service Contract subject matter of the dispute, in favor of a new
Geothermal Sales Contract and a PD 1442 Geothermal Service Contract, and PGI
has committed to form a Philippine company for the development and operation of
the Tiwi and Mak-Ban steamfields (Sec. 6.1 thereof) on a going-forward basis, thereby effectively erasing any doubt as to
the legality of the compromise.
x x x
38.x x x [The] Compromise Agreement is not contrary to morals.
The arrangement is commercially advantageous to the Government of the Philippines,
NPC, PSALM and the consuming public. As above-stated, no less than the NEDA has
confirmed that the government stands to gain over US $256 Million by entering
into this compromise. x x x
39. x x x [The]
Compromise Agreement is not contrary to public policy. It has been
categorically declared by the state that private sector participation and
privatization of state-owned enterprises and their assets is encouraged in
order to accelerate economic progress and development as evidenced by various
laws and issuances[.] x x x(Emphasis supplied)cralawlibrary
The assailed decision of the Court of Appeals dwells on the issue
of jurisdiction of the RTC over the NPC petition for declaratory relief on the
constitutionality of the service contract.
Since only the issue of jurisdiction over the constitutionality
of a contract was elevated to this Court, it is beyond its jurisdiction to pass
upon and approve the Compromise Agreement of the parties, who have, as therein
stated, agreed to terminate the service contract subject of the dispute, in
favor of a series of agreements that start with Provisional, followed by
Interim, thenTransition, and
finally Geothermal Resources Sales Contract (GRSC),
the forging of which
agreements is intended to effectively erase any doubt as to the legality of
In light of the foregoing development, while this Court denies the
parties Joint Motion to Approve the Compromise Agreement, it finds the Motion
to Dismiss well-taken.
WHEREFORE, the Motion
to Dismiss the instant petition is hereby GRANTED.
Vitug, (Chairman and Acting Chief Justice),
Sandoval-Gutierrez, and Corona, JJ., concur.
1 Court of Appeals Rollo (CA Rollo) at 69-309.
at 398-401, 403-406, 409-412, 416-420, 423-426, 431-436, 439-444.
402-a, 408, 413, 422, 430, 438.
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