October 2009 - Philippine Supreme Court Decisions/Resolutions
Philippine Supreme Court Jurisprudence
G.R. No. 185159 - Subic Telecommunications Company, Inc. v. Subic Bay Metropolitan Authority and Innove Communications, Inc.
THIRD DIVISION
[G.R. NO. 185159 : October 12, 2009]
SUBIC TELECOMMUNICATIONS COMPANY, INC., Petitioner, v. SUBIC BAY METROPOLITAN AUTHORITY and INNOVE COMMUNICATIONS, INC., Respondents.
D E C I S I O N
VELASCO, JR., J.:
The Case
In this Petition for Review on Certiorari under Rule 45, petitioner Subic Telecommunications Company, Inc. (Subic Telecom) assails and seeks to set aside the April 4, 2008 Decision,1 as effectively reiterated in a Resolution2 of October 28, 2008, both issued by the Court of Appeals (CA) in CA-G.R. CV No. 88757, an appeal from the orders dated June 30, 2006 and August 24, 2006 of the Regional Trial Court (RTC), Branch 74 in Olongapo City in Civil Case No. 155-O-2006, a suit for specific performance.
The Facts
Respondent Subic Bay Metropolitan Authority (SBMA) is a government corporation created pursuant to Republic Act No. (RA) 7227, otherwise known as the "Bases Conversion and Development Act of 1992." Consequent to the withdrawal in 1992 of the American naval forces and its civilian complement from the Subic Naval Base and the earlier eruption of Mt. Pinatubo in 1991, Congress created SBMA to develop the Subic Bay Freeport Zone (SBFZ)3 as a self-sustaining industrial, commercial, financial, and investment center; to generate employment opportunities; and to attract foreign investments. Among the development projects SBMA prioritized was the upgrading of the antiquated telephone system the US Navy previously established. One scheme to attract investors thereat was a system of exclusivity for a reasonable period of time to allow the recovery of investments. It was against this backdrop that Subic Telecom was conceived.
After winning an international competitive bidding to provide telecommunications services in the SBFZ, the Philippine Long Distance Telephone Co., Inc. (PLDT) and the American Telephone and Telegraph Co. (AT&T) entered on June 29, 1994 into a 25-year renewable Joint Venture Agreement4 (JVA) with the SBMA for the purpose of, among others, forming a joint venture company to provide telecommunications and related services in the zone. Thus, the incorporation of Subic Telecom.
On January 23, 1995, SBMA, by a Resolution,5 granted Subic Telecom a franchise to provide telecommunications services and establish, operate, and maintain telecommunications facilities, networks, and systems in the SBFZ. Subsequent developments saw Subic Telecom investing on telecommunications equipment and other facilities and starting to operate its telecommunications services with its network connected to the nationwide network of PLDT.
To ensure Subic Telecom's viability and safeguard its investments, the joint venture partners agreed that, for a period of 10 years from June 29, 1994, the date of the agreement, up to June 30, 2004, SBMA would not allow third parties to engage in any activity that would materially affect what the partners considered as Subic Telecom's basic and enhanced telecommunications services, i.e., local exchange and toll services. This agreement was reflected in Section 11(c)(ii) of the JVA pertinently providing, thus:
SECTION 11. COVENANTS
x x x
(c) SBMA Covenants. SBMA covenants and agree with as follows:
x x x
(ii) Contracts. Except as provided hereunder, during the terms of the Agreement and any renewal thereof, SBMA shall not enter into contracts with third parties which would materially impair or materially restrict in any unreasonable way Subic Telecom's operations. For ten (10) years from the date hereof, SBMA shall not enter into contracts with third parties which would materially restrict in any unreasonable way Subic Telecom's operation of local exchange and toll services (domestic and international) ("Basic and Enhanced Telecommunications Services"); provided however that SBMA shall not be restricted from entering into contracts with or issuing authorizations in favor of parties engaged in businesses other than Basic and Enhanced Telecommunications Services, including, but not limited to wireless or cellular telephone services, paging services, cable television or manufacture, sale, installation or servicing of telecommunications and telephone equipment.6 (Emphasis supplied.)
In addition to the non-competition clause on the basic and enhanced telecommunications services in the SBFZ, it is provided under Sec. 18(k) of the JVA that Subic Telecom has the option to renew its exclusivity privilege for three (3) five-year periods subject to the continuing compliance by Subic Telecom of its obligations under the JVA, and provided that neither PLDT nor AT&T defaults under the JVA. Said Sec. 18(k) pertinently provides:
SECTION 18. MISCELLANEOUS
x