4/28/25, 9:23 PM Republic of the Philippines v. Manila Electric Company, et al. - G.R. No. 201715 - Anycase.

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TITLE
Republic of the Philippines v. Manila Electric Company, et al.
CASE NO
G.R. No. 201715

DATE
December 11, 2013

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AI Summary

The Republic of the Philippines filed a petition against Manila Electric Company
(MERALCO) and National Power Corporation (NPC) for their dispute over the
Settlement Agreement between them. The Court of Appeals dismissed the original
and supplemental petitions for certiorari, prohibition, and mandamus. The Republic of
the Philippines appealed the decision, arguing that the dispute should be resolved
through arbitration instead of mediation. However, the Court upheld the decision of
the Court of Appeals, stating that the issue of the validity of the Settlement
Agreement is not within the scope of the appeal. The Court also declined the request
to direct MERALCO and NPC to resolve their dispute through arbitration, as this falls
under the jurisdiction of the Regional Trial Court, which had already rendered a
decision on the matter.

You can highlight text in the case below to search for related legal issues in different
cases.

723 Phil. 776

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FIRST DIVISION

[ G.R. No. 201715. December 11, 2013 ]

REPUBLIC OF THE PHILIPPINES, PETITIONER, VS. MANILA ELECTRIC

COMPANY (MERALCO), AND NATIONAL POWER CORPORATION (NPC),
RESPONDENTS.

DECISION

BERSAMIN, J.:

The intervening rendition by the trial court of a decision on the merits of the case renders moot and
academic the resolution of any issue raised on certiorari against interlocutory orders setting the pre-trial
and declaring the petitioner to have waived its right to present its evidence. The resolution of the issue,
having been pre-empted by the decision in the main action, ceased to have any practical value.

The Case

Under appeal via petition for review on certiorari is the decision promulgated on October 14, 2011 in
C.A.-G.R. SP No. 116863 entitled Republic of the Philippines, represented by the Office of the Solicitor
General v. Hon. Franco T. Falcon, in his capacity as the Presiding Judge of Branch 71, Regional Trial
Court, National Capital Region, Pasig City, Manila Electric Company and National Power Corporation,[1]
whereby the Court of Appeals (CA) dismissed the original and the supplemental petitions for certiorari,
prohibition and mandamus of herein petitioner Republic of the Philippines, and in effect upheld the
assailed interlocutory orders of November 3, 2010[2] and November 4, 2010,[3] and the pre-trial order of
November 24, 2010,[4] all issued by the Regional Trial Court (RTC), Branch 71, in Pasig City in Special
Civil Action No. 3392, an action for declaratory relief entitled Manila Electric Company v. National Power
Corporation, et al. The CA further ordered the RTC, Branch 71, in Pasig City to proceed with the trial in
Special Civil Action No. 3392, and to resolve the case with dispatch.
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Additionally, the petitioner prays that respondents Manila Electric Company (MERALCO) and National
Power Corporation (NAPOCOR) be directed to resolve their dispute through arbitration pursuant to the
arbitration clause of their contract for the sale of electricity (CSE).[5]

Antecedents

The decision of the CA sums up the following uncontested material antecedents.

MERALCO and NAPOCOR had entered into the CSE on November 21, 1994. The CSE would be
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effective for 10 years starting from January 1, 1995. Under the CSE, NAPOCOR was obliged to supply
and MERALCO was obliged to purchase a minimum volume of electric power and energy from 1995 until
2004 at the rates approved by the Energy Regulatory Board (ERB), now the Energy Regulatory
Commission (ERC). A provision of the CSE required MERALCO to pay minimum monthly charges even
if the actual volume of the power and energy drawn from NAPOCOR fell below the stated minimum
quantities.

In the years 2002, 2003 and 2004, due to circumstances beyond the reasonable control of the parties,
MERALCO drew from NAPOCOR electric power and energy less than the minimum quantities stipulated
in the CSE for those years. MERALCO did not pay the minimum monthly charges but only the charges for
the electric power and energy actually taken. Thus, NAPOCOR served on MERALCO a claim for the
contracted but undrawn electric power and energy starting the billing month of January 2002.

MERALCO objected to the claim of NAPOCOR, and served its notice of termination of the CSE.
MERALCO submitted its own claim to NAPOCOR for, among others: (a) losses suffered due to the delay
in the construction of NAPOCOR’s transmission lines, which prevented it from fully dispatching the
electricity contracted with independent power producers (IPPs) at their respective minimum energy
quantities; and (b) unrealized revenues owing to NAPOCOR’s continuing to supply electricity to directly-
connected customers within MERALCO’s franchise area in violation of the MERALCO franchise and the
CSE.

Recognizing that any delays in the resolution of their dispute was inimical to public interest, MERALCO
and NAPOCOR agreed to submit their dispute to mediation.[6] They appointed the late Ambassador
Sedfrey A. Ordoñez and Antonio V. del Rosario as their mediators, and the mediation required about 20
meetings, during which NAPOCOR and the Government were represented by high-level officials
(including then Energy Secretary Vincent S. Perez, Jr. and PSALM President Edgardo M. del Fonso). The
mediation resulted in the execution on July 15, 2003 of a settlement (entitled An Agreement Resolving The
Issues In Mediation Between The National Power Corporation And The Manila Electric Company In
Regard To The 1994 Contract For The Sale Of Electricity),[7] hereafter referred to as Settlement Agreement
for brevity.

The Settlement Agreement covered the charges being imposed by NAPOCOR and the National
Transmission Corporation (TRANSCO) under Section 2.1 (Contract Demand and Contract Energy of
MERALCO) in relation to Section 5.2 (Transmission Service) and Section 7 (Direct Connection within
MERALCO’s franchise area), all of the CSE. MERALCO therein agreed to pay to NAPOCOR
P27,515,000,000.00 (i.e., the equivalent of 18,222 gigawatt hours valued at P1.51 per kilowatt hour),
which amount represented the value of the difference between the aggregate contracted energy for the
years 2002, 2203 and 2004, on the one hand, and the total amount of energy MERALCO actually
purchased from NAPOCOR from January 2002 until April 30, 2003 and the amount of energy MERALCO
was scheduled to purchase thereafter and until December 31, 2004, on the other. NAPOCOR reciprocated

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by agreeing to give credit to MERALCO for the delayed completion of the transmission facilities as well
as for the energy corresponding to NAPOCOR’s sales to directly-connected customers located within
MERALCO’s franchise area. The credit, valued at P7,465,000,000.00, reduced the net amount payable by
MERALCO to NAPOCOR under the Settlement Agreement to P20,050,000,000.00.

Mediators Amb. Ordoñez and del Rosario rendered their joint attestation to the Settlement Agreement, as
follows:

We, Ambassador Sedfrey A. Ordoñez and Antonio V. del Rosario, do hereby attest and certify
that we have been duly appointed by the Parties and acted as Mediators in the foregoing
Settlement and that the agreements contained therein are the results of the painstaking efforts
exerted by the Parties to resolve the issues and differences between them through reasonable,
fair and just solution that places above all considerations the highest concern for the welfare of
the consumers. x x x[8]

It is noted that from the time the Settlement Agreement was executed on June 15, 2003 until December 31,
2004, MERALCO took further electricity from NAPOCOR, and made payments toward the total
Minimum charge under the CSE that exceeded the parties’ estimate. As a result, the net amount due to
NAPOCOR under the Settlement Agreement was further reduced to about P14,000,000,000.00.

The Settlement Agreement contained a pass-through provision that allowed MERALCO to pay NAPOCOR
the net settlement amount from collections recovered from MERALCO’s consumers once the ERC
approved the pass-through. The net amount due under the Settlement Agreement was to be paid by
MERALCO to NAPOCOR over a period of five to six years, starting on the first billing month
immediately following the ERC’s approval of the pass-through of that amount to MERALCO’s consumers,
and ending 60 months after the last billing month. Spreading payment to NAPOCOR over a moving five-
to six-year period was intended to minimize the impact of the adjustment on the consumers, which was
estimated to be about P0.12 per kilowatt hour.

The Settlement Agreement was duly approved by the respective Boards of MERALCO and NAPOCOR.

Considering that the Settlement Agreement stipulated in its Section 3.1 that it would take effect “upon
approval by the ERC of the recovery of the settlement amounts in this Agreement from consumers, for
which the parties shall file a joint petition with the [ERC],” NAPOCOR and MERALCO filed on April 15,
2004 their joint application in the ERC,[9] seeking the approval of the pass-through provision of the
Settlement Agreement, and a provisional authority to implement the pass-through provision subject to a
final decision after hearing on the merits.

The joint application was set for initial hearing, with notice to the Office of the Solicitor General (OSG)
with a request for the OSG to send a representative to participate in the proceedings. Hearings were
conducted on the application from July 22, 2004 until October 7, 2005, at which NAPOCOR was

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represented by its OSG-designated counsel.

On July 10, 2006, MERALCO submitted its memorandum, and the case was deemed submitted for
resolution.

However, on May 13, 2008, or almost two years after the case was submitted for resolution, the OSG,
representing herein petitioner, filed in the ERC a motion for leave to intervene with motion to admit its
attached opposition.[10] Considering the opposition by the OSG to the validity of the Settlement
Agreement, the ERC suspended the proceedings and deferred the approval of the joint application. This
prompted MERALCO to initiate on November 23, 2009 in the RTC in Pasig an action for declaratory relief
(Special Civil Action No. 3392).[11]

On August 20, 2010, the petitioner filed its comment on the petition for declaratory relief,[12] praying for
the stay of the proceedings and for NAPOCOR and MERALCO to be directed to resort to arbitration.

On September 16, 2010, the representative from the OSG appeared in the RTC and moved to suspend the
proceedings, but the RTC denied the motion. Subsequently, on September 30, 2010, the OSG filed a
motion to dismiss or to stay the proceedings, and to refer the parties to arbitration.

On October 28, 2010, the OSG presented an urgent supplemental motion to cancel the November 4, 2010
hearing. However, on November 3, 2010, the RTC denied the motion to dismiss or to stay the proceedings
and to refer the parties to arbitration through the first assailed order,[13] stating in its pertinent portions as
follows:

The motions filed by the OSG raise a common issue: whether or not the parties, MERALCO
and NPC, should be referred to arbitration?

After a judicious evaluation of the arguments by the parties, this Court rules that MERALCO
and NPC are not required to undergo arbitration.

An examination of the Settlement Agreement, which is the subject matter of this petition for
declaratory relief shows that it does not require the parties therein to resolve their dispute
arising from said agreement through arbitration.

The arbitration clause referred to by the OSG is found in the Contract for the Sale of
Electricity (CSE). Said contract is not the one being litigated in this proceedings. The instant
petition for declaratory relief does not concern the CSE. Besides, there is no unsettled dispute
between MERALCO and NPC arising from the CSE that would require resort to arbitration.

Further, the parties to the Settlement Agreement have not requested that any dispute between
them should be resolved through arbitration. The OSG, who is not a party to the Settlement
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Agreement or to the CSE, has no standing to demand that MERALCO and NPC should
proceed to arbitration consistent with the Supreme Court’s ruling in Ormoc Sugarcane
Planter’s Association vs. Court of Appeals, G.R. No. 156660, August 24, 2009, were (sic) it
ruled that-

By their own allegation, petitioners are associations duly existing and organized
under Philippine law, i.e. they have juridical personalities separate and distinct
from that of their member Planters. It is likewise undisputed that the eighty (80)
milling contracts that were presented were signed only by the member Planter
concerned and one of the Centrals as parties. In other words, none of the
petitioners were parties or signatories to the milling contracts. This circumstance
is fatal to petitioners’ cause since they anchor their right to demand arbitration
from the respondent sugar centrals upon the arbitration clause found in the milling
contracts. There is no legal basis for petitioners’ purported right to demand
arbitration when they are not parties to the milling contracts, especially when the
language of the arbitration clause expressly grants the right to demand arbitration
only to the parties to the contract.

As for OSG’s contention that the instant petition should be dismissed because it would not
terminate the controversy between the parties due to the existing ERC Proceedings, this Court
is mindful of the fact that the ERC itself has ruled in its order of September 14, 2009 that the
issues raised by the OSG in the earlier proceedings before it are outside its jurisdiction. This
means that these issues may be properly resolved by this Court and is in fact duty-bound to
consider and rule the issues presented before it in this case.

This Court therefore holds that there is no impediment for it to continue this proceedings and
to determine the validity of the Settlement Agreement.

WHEREFORE, the office (sic) Office of the Solicitor General’s Motion to Dismiss or Stay the
Proceedings and Refer the Parties to Arbitration and the Motion for Reconsideration (of the
Honorable Court’s Order dated September 16, 2010) are DENIED.

SO ORDERED.[14]

On November 4, 2010, the pre-trial was held, but the Presiding Judge of Branch 71 of the RTC ultimately
reset it through the second assailed order due to the non-appearance of the representative of the OSG,[15]
viz:

When this case was called, Atty. Jonas Emmanuel S. Santos, for the petitioner, Atty. Julieta S.
Baccutan-Estamo, for defendant PNC, appeared.

Over the vehement objection of Atty. Santos and Atty. Baccutan-Estamo on the Urgent
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Supplemental Motion to Cancel November 4, 2010 Hearing filed by the Office of the Solicitor
General, considering that they were both ready, the pre-trial conference set for today is
cancelled and reset to November 24, 2010 at 8:30 A.M., which is an intransferrable date. The
manifestation of Atty. Baccutan-Estamo that if in the next hearing the respondent OSG still
fails to appear they be declared as in default, is noted.

SO ORDERED.

Upon learning that the next scheduled hearing would be on November 24, 2010, the OSG filed on
November 22, 2010 a motion to cancel that pre-trial, and a motion for the inhibition of the RTC Judge. It
set both motions for hearing on November 24, 2010.

Also on November 22, 2010, the petitioner brought in the CA a petition for certiorari, prohibition and
mandamus (C.A.-G.R. SP No. 116863), with an application for a temporary restraining order (TRO) and
writ of preliminary injunction (WPI), alleging that respondent RTC Judge had committed grave abuse of
discretion: (a) in refusing to inhibit himself; (b) in refusing to order respondents MERALCO and
NAPOCOR to resolve their dispute by arbitration; (c) in proceeding with the pre-trial of the case; and (d)
in declaring the petitioner in default and at the same time deeming the petitioner to have waived its right to
participate and present evidence.[16]

During the hearing of November 24, 2010, the representatives of the OSG (namely: State Solicitors
Catalina A. Catral-Talatala and Donalita R. Lazo) appeared in the RTC to argue for the cancellation of the
pre-trial of that date and to have the RTC Judge by reason of his perceived bias in favor of MERALCO.
However, the RTC denied the motion to cancel the pre-trial and instead declared the petitioner to have
waived the right to participate in the pre-trial and to present evidence.[17]

The CA granted the TRO on December 1, 2010,[18] and the WPI on February 3, 2011,[19] enjoining the
RTC Judge from conducting further proceedings in Special Civil Action No. 3392 and from issuing orders
and performing other acts that would render the case moot and academic effective during the pendency of
C.A.-G.R. SP No. 116863.

On October 14, 2011, the CA promulgated its decision under review,[20] disposing thuswise:

IN VIEW OF ALL THE FOREGOING, the instant Petition including its Supplemental
Petition are hereby DENIED. The Regional Trial Court, Branch 71 of Pasig City is hereby
ORDERED to proceed to trial in S.C.A. Case No. 3392, and to immediately resolve the same
with dispatch.

SO ORDERED.

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The CA denied the petitioner’s motion for reconsideration through its resolution promulgated on April 25,
2012.[21]

Hence, the petitioner has appealed.

Issues

The petitioner states as the ground for the allowance of its petition for review on certiorari that:

THE COURT OF APPEALS COMMITTED AN ERROR IN IGNORING FUNDAMENTAL

ISSUES AT THE HEART OF THE CONTROVERSY BETWEEN PETITIONER AND
RESPONDENTS, AND THEREBY IMPROVIDENTLY ALLOWING THE TRIAL COURT
TO PROCEED WITH S.C.A. CASE NO. 3392.[22]

The petitioner submits arguments in support of the foregoing, to wit:

THE DISPUTE BETWEEN MERALCO AND NPC SHOULD BE RESOLVED THROUGH

ARBITRATION INSTEAD OF MEDIATION IN ACCORDANCE WITH THEIR
ARBITRATION AGREEMENT UNDER THE CSE.

II

RESPONDENT JUDGE HAS NO JURISDICTION OVER THE SUBJECT MATTER

RAISED IN S.C.A. CASE NO. 3392.

III

THE COURT OF APPEALS ERRED IN ALLOWING THE TRIAL COURT TO PROCEED

WITH THE PRE-TRIAL AND SUBSEQUENT TRIAL IN S.C.A. CASE NO. 3392 IN
DISREGARD OF PETITIONER’S RIGHTS. IN PARTICULAR, THE COURT OF APPEALS
ERRED IN [i]

FAILING TO ACKNOWLEDGE THE CIRCUMSTANCES OF PARTIALITY THAT

WARRANTED RESPONDENT JUDGE’S INHIBITION FROM THE CASE; [ii]
APPROVING THE TRIAL COURT’S PRECIPITATE ACTION TO PROCEED WITH THE
PRE-TRIAL DESPITE INFORMATION THAT A PETITION FOR CERTIORARI HAD
BEEN FILED BY PETITIONER, AND THEREUPON DECLARING THE PETITIONER TO
HAVE WAIVED THE RIGHT TO PARTICIPATE THEREIN AND TO PRESENT

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EVIDENCE.

IV

THE SETTLEMENT IS GROSSLY DISADVANTAGEOUS AND PREJUDICIAL TO THE

GOVERNMENT.

V.

THE PASS-ON PROVISION IMPOSED UNDER THE SETTLEMENT IS CONTRARY TO

LAW, MORALS, PUBLIC INTEREST, AND PUBLIC POLICY.

VI

THE SETTLEMENT AGREEMENT WAS ENTERED INTO WITHOUT THE

PARTICIPATION AND LEGAL GUIDANCE OF THE OFFICE OF THE SOLICITOR
GENERAL.[23]

Ruling

We deny the petition for review, and affirm the decision of the CA.

RTC’s intervening rendition of the decision on the merits has rendered this appeal moot

In its assailed decision of October 14, 2011, the CA directed the RTC to proceed to the trial on the merits in
Special Civil Action No. 3392, and to resolve the case with dispatch. It is worth mentioning at this
juncture, therefore, that, as the petitioner indicated in its petition,[24] the RTC complied and ultimately
rendered its decision on the merits in Special Civil Action No. 3392 on May 29, 2012 granting
MERALCO’s petition for declaratory relief and declaring the Settlement Agreement between NAPOCOR
and MERALCO as valid and binding, save for the pass-through provision that was reserved for the
consideration and approval of the ERC. The petitioner has probably appealed the decision by now, for its
petition for review expressly manifested the intention to appeal to the CA.[25]

With the intervening rendition of the decision on the merits, the challenge against the interlocutory orders
of the RTC designed to prevent the RTC from proceeding with the pre-trial and the trial on the merits was
rendered moot and academic. In other words, any determination of the issue on the interlocutory orders
was left without any practical value.[26] A case that is moot and academic because of supervening events
ceases to present any justiciable controversy. The courts of law will not determine moot and academic

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questions, for they should not engage in academic declarations and determine moot questions.[27]

II

CA correctly ruled that RTC Judge did not commit grave abuse of discretion in issuing the assailed
orders

Nonetheless, the Court considers it necessary to still deal with the contentions of the petitioner in the
interest of upholding the observations of the CA on the propriety of the interlocutory orders of the RTC.
Doing so will be instructive for the Bench and the practicing Bar who may find themselves in similar
situations.

The petitioner assails the order of the RTC dated November 3, 2010 for denying its motion to dismiss or to
stay proceedings and to refer the parties to arbitration, and the pre-trial order dated November 24, 2010 for
declaring that the petitioner was being deemed to have waived the right to participate in the pre-trial and to
present evidence in its behalf. It argues that the CA thereby erred, firstly, in ruling that the assailed orders
of the RTC were not tainted with grave abuse of discretion, and, secondly, in ordering the RTC to proceed
to the trial of Special Civil Action No. 3392, and to resolve the case with dispatch.

The Court cannot sustain the arguments of the petitioner.

The RTC’s proceeding with the pre-trial set on November 24, 2010 was entirely in accord with the Rules of
Court. While it is true that the OSG had filed on November 22, 2010 the petition for certiorari, prohibition
and mandamus, the CA did not restrain the RTC from thus proceeding. Absent any TRO or WPI stopping
the RTC from proceeding, the mere filing or pendency of the special civil actions for certiorari, mandamus
and prohibition did not interrupt the due course of the proceedings in the main case. This is quite clear
from the revised Section 7, Rule 65 of the Rules of Court,[28] which mandated that the petition shall not
interrupt the course of the principal case, viz:

Section 7. Expediting proceedings; injunctive relief. – The court in which the petition is filed
may issue orders expediting the proceedings, and it may also grant a temporary restraining
order or a writ of preliminary injunction for the preservation of the rights of the parties
pending such proceedings.

The petition shall not interrupt the course of the principal case, unless a temporary
restraining order or a writ of preliminary injunction has been issued, enjoining the
public respondent from further proceeding with the case.

The public respondent shall proceed with the principal case within ten (10) days
from the filing of a petition for certiorari with a higher court or tribunal, absent a
temporary restraining order or a preliminary injunction, or upon its expiration.

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Failure of the public respondent to proceed with the principal case may be a
ground for an administrative charge. (Emphasis supplied)

As the foregoing rule also indicates, for the RTC not to proceed with the pre-trial on its scheduled date of
November 24, 2010 despite the absence of any TRO or WPI enjoining it from doing so could have
subjected its Presiding Judge to an administrative charge.

We further concur with the holding of the CA that the RTC did not commit any grave abuse of discretion
amounting to lack or excess of jurisdiction in deeming the petitioner’s right to participate in the pre-trial
and its right to present evidence as waived through the third assailed pre-trial order dated November 24,
2010. The waiver appears to have been caused by the deliberate refusal of the petitioner’s counsel to
participate in the proceedings.

The pre-trial, initially set on September 16, 2010,[29] was reset by the RTC on October 7, 2010 upon the
motion of the OSG itself notwithstanding that both MERALCO and NAPOCOR had already submitted
their pre-trial briefs and had manifested their readiness to proceed to the pre-trial. Yet, on October 7, 2010,
the representative of the OSG again requested a resetting of the pre-trial. MERALCO expressed its strong
opposition to the request, but the RTC granted the request and moved the pre-trial to November 4, 2010.[30]
Prior to November 4, 2010, the OSG filed an omnibus motion, again requesting the RTC to cancel the pre-
trial. On the scheduled pre-trial of November 4, 2010, the representative of the OSG did not appear for the
petitioner, subsequently admitting that the non-appearance had been intentional. Nonetheless, the RTC
reset the pre-trial on November 24, 2010 over the “vehement objection” of MERALCO’s counsel, but the
RTC expressly conditioned the new date as “intransferable.”[31]

On November 24, 2010, however, the representative of the OSG appeared in court but only to move for the
cancellation of the hearing. The recorded proceedings of that date were recounted in the assailed decision
of the CA, which also rendered its cogent observations on the consequences of the actuations of the
representative of the OSG, as follows:

x x x While petitioner was initially present during the scheduled pre-trial conference on 24
November 2011, State Solicitor Lazo (one of petitioner’s counsels) asked to be excused from
participating thereat. Excerpts of the stenographic notes taken during the hearing a quo on 24
November 2010 reveals:

“xxx

COURT:

Now, on the matter regarding the pre-trial conference which has been set today, the Court
believes that in the absence of a TRO, we will proceed with the pre-trial conference as
scheduled.

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ATTY. LAZO:

Your Honor, may we ask for a written order resolving our motion to cancel hearing today and
our motion for inhibition.

COURT:

The court has already made oral order. In the meantime, you be ready for the conduct of the
pre-trial.

ATTY. LAZO:

Your Honor, may we be excused from participating with the pre-trial.

COURT:

It was your first stand during the first day when the pre-trial was set. In fact, one of the
lawyers of OSG likewise stated that he will not participate. In the interest of substantial
justice let us be more fair in the conduct of this proceedings, we (sic) all officers of the
court, we are guided by the rules, we have to comply, we will proceed. The order will be
made after the hearing, unless that we will suspend the hearing now then the stenographer will
prepare the order so that you’ll have a copy, what do you want, are we going to suspend the
proceedings so that the written order will be given to you. Is that what you want? We will
proceed.

This is one request which has never been done by the Court. An oral order of the Court is only
released after the hearing, because it will be prepared by the stenographer. Are you agreeable
to that statement of the Court or you want to suspend all proceedings of today so that you will
be given a chance that your request will be granted. Are you not changing your motion?

ATTY. LAZO:

Your Honor, I submit to the discretion of this Court.

COURT:

When you submit then you wait, we will proceed. Second call.

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ATTY. LAZO:

Can we have a copy of the same by registered mail because we have some urgent matters
to attend to your Honor.

COURT:

Okay.

ATTY. LAZO:

May we be excused, your Honor.

COURT:

Okay.

What are we going to do?

ATTY. SANTOS:

Your Honor, we are ready to proceed with the pre-trial. We have our Pre-Trial Brief filed
and so with the NPC, your Honor.

COURT:

Now, in the conduct of the pre-trial, you have to reiterate what you already mentioned in your
Pre-Trial Briefs for purposes of this Court to come out with the pre-trial order based on the
stipulations made by the parties.

xxx” (Emphasis supplied)

The above-quoted TSN belies petitioner’s claim that despite its State Solicitor’s appearance
and objection to the holding of the said hearing of 24 November 2010, public respondent
proceeded to declare petitioner in default. A quo, public respondent did not categorically
declare petitioner in default, but instead, decreed petitioner to have waived its right to
participate in the pre-trial and present evidence in its behalf which is in accordance with
Section 5, Rule 18 of the Rules of Court for the apparent reason that State Solicitor Lazo
himself asked to be excused from participating in the pre-trial conference. The case of

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Development Bank of the Philippines vs. Court of Appeals, et al. is enlightening on this point
where the Supreme Court had the occasion to state therein that:

“Consistently with the mandatory character of the pre-trial, the Rules oblige not
only the lawyers but the parties as well to appear for this purpose before the
Court, and when a party “fails to appear at a pre-trial conference (be) may be non-
suited or considered as in default. The obligation in (sic) appear denotes not
simply the personal appearance, or the mere physical presentation by a party
of one’s self, but connotes as importantly, preparedness to go into the
different subject assigned by law to a pre-trial. (Emphasis supplied)

Petitioner’s State Solicitors’ initial attendance during the pre-trial conference could not be
equated to the personal appearance mandated by Section 4, Rule 18 of the Rules of Court. The
duty to appear during the pre-trial conference is not by mere initial attendance, but taking an
active role during the said proceedings. Petitioner (as defendant a quo) has no valid reason to
complain for its predicament now as it chose to withhold its participation during the pre-trial
conference.[32]

From an objective view of the proceedings, the RTC’s deeming of the petitioner’s right to participate in the
pre-trial and its right to present evidence as waived was reasonable under the circumstances. Thus, it did
not act arbitrarily, whimsically, or capriciously. The dismissal of the petition for certiorari, prohibition and
mandamus was correct and justified, for grave abuse of discretion on the part of the RTC was not
persuasively demonstrated by the petitioner. Grave abuse of discretion means either that the judicial or
quasi-judicial power was exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, or that the respondent judge, tribunal or board evaded a positive duty, or virtually refused to
perform the duty enjoined or to act in contemplation of law, such as when such judge, tribunal or board
exercising judicial or quasi-judicial powers acted in a capricious or whimsical manner as to be equivalent
to lack of jurisdiction.[33]

III

Validity of the Settlement Agreement is not an issue in this appeal

In hereby assailing the decision of the CA to uphold the challenged orders of the RTC, the OSG raises
various arguments against the validity of the Settlement Agreement.

The Court believes and holds that it cannot address such arguments simply because the issue in this appeal
concerns only the upholding by the CA of the propriety of the assailed interlocutory orders of the RTC. The
validity of the Settlement Agreement is not an issue.

Moreover, the validity of the Settlement Agreement is properly within the competence of the RTC, the

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proper court for that purpose (except the matter of the pass-through provision, which was within the
jurisdiction of the ERC).

IV

Mediation v. Arbitration

The petitioner requests the Court’s intervention to direct MERALCO and NAPOCOR to resolve their
dispute through arbitration pursuant to the arbitration clause of the CSE.

The Court declines the request, considering that the primary competence to determine the enforceability of
the arbitration clause of the CSE pertained to the RTC in Special Civil Action No. 3392. Yielding to the
request would have the Court usurping the jurisdiction of the RTC. Moreover, with the RTC having
meanwhile rendered its decision declaring the Settlement Agreement valid, the recourse of the petitioner as
to its request is probably an appeal in due course.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision promulgated
by the Court of Appeals on October 14, 2011 in C.A.-G.R. SP No. 116863.

SO ORDERED.

Sereno, C.J., Leonardo-De Castro, Villarama, Jr., and Reyes, JJ., concur.

[1]
Rollo, at pp. 139-170; penned by Associate Justice Jane Aurora C. Lantion, with Presiding Justice
Andres B. Reyes, Jr., Associate Justice Michael P. Elbinias and Associate Justice Agnes Reyes-Carpio,
concurring, and Associate Justice Japar B. Dimaampao dissenting.

[2] Id. at 441-445.

[3]
Id. at 446.

[4]
Id. at 499-502.

[5]
Id. at 131.

[6] Id. at 296.

[7]
Id. at 216-229.

[8]
Id. at 221.
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[9]
Id. at 230-240.

[10]
Id. at 250-291.

[11] Id. at 292-308.

[12]
Id. at 320-349.

[13]
Id. at 441-445.

[14]
Id. at 443-445.

[15]
Id. at 446.

[16]
Id. at 454-484.

[17]
Id. at 499-502.

[18] Id. at 151.

[19]
Id. at 152.

[20]
Supra note 1.

[21]
Id. at 184-186.

[22]
Id. at 87.

[23]
Id. at 87-89.

[24]
Id. at 956-969.

[25] Id. at 86.

[26]
Banco Filipino Savings and Mortgage Bank v. Tuazon, Jr., G.R. No. 132795, March 10, 2004, 425
SCRA 129, 134; Desaville, Jr. v. Court of Appeals, G.R. No. 128310, August 13, 2004, 436 SCRA 387,
391; Malaluan v. Commission on Elections, G.R. No. 120193, March 6, 1996, 254 SCRA 397, 403-404.

[27]
Barayuga v. Adventist University of the Philippines, G.R. No. 168008, August 17, 2011, 655 SCRA

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640, 654-655.

[28] The revision was effective on December 4, 2007 (A.M. No. 07-7-12-SC).

[29]
Rollo, p. 921.

[30]
Id. at 925.

[31] Id. at 499-502.

[32]
Id. at 36-38 (bold underscoring is part of the original text).

[33]
De los Santos v. Metropolitan Bank and Trust Company, G.R. No. 153852, October 24, 2012, 684
SCRA 410, 422-423.

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