TL;DR

The Supreme Court ruled that a company cannot get a court order to stop a government bidding process if it cannot clearly prove it has a legal right that is being violated. In this case, Philippine Gaming and Management Corporation (PGMC) tried to stop the Philippine Charity Sweepstakes Office (PCSO) from bidding out a new online lottery system, claiming they had an exclusive right. However, the Court found that PGMC’s previous contract had expired, and they had no existing right to prevent PCSO from seeking new bids. This means businesses must demonstrate a current, valid legal right to successfully obtain an injunction to halt government actions like bidding processes; otherwise, the bidding can proceed.

Bidding Wars and Paper Rights: When Injunctions Fail

Can a company halt a government bidding process simply by claiming a past contractual right? This was the central question in the case of Philippine Charity Sweepstakes Office vs. Hon. Maximo M. De Leon and Philippine Gaming and Management Corporation. The Philippine Charity Sweepstakes Office (PCSO) sought to overturn a lower court’s order that stopped their bidding for a new Nationwide On-line Lottery System (NOLS). The lower court, acting on a plea from Philippine Gaming and Management Corporation (PGMC), had issued a preliminary injunction, effectively pausing the bidding. PCSO argued that the injunction was wrongly issued because PGMC had no clear legal right to warrant such protection. This case delves into the crucial requirements for obtaining a preliminary injunction, particularly the necessity of demonstrating a clear and existing legal right.

The dispute originated from a long-standing Equipment Lease Agreement between PCSO and PGMC for online lottery equipment in Luzon. This agreement, initially signed in 1995, had been amended and extended multiple times, with the latest extension set to expire in August 2018. As the expiration date approached, PCSO initiated preparations for a public bidding process to secure a new NOLS provider for five years, starting August 2018. PGMC, claiming an exclusive right to supply lottery equipment in Luzon based on past agreements, sought and obtained a preliminary injunction from the Regional Trial Court (RTC) to halt the bidding. The RTC reasoned that PGMC’s rights under an Interim Settlement and pending arbitration warranted protection. PCSO contested this, leading to the Supreme Court case.

The Supreme Court emphasized that a preliminary injunction is an ancillary remedy to protect existing rights, not to create new ones. Citing Rule 58, Section 3 of the 1997 Rules of Civil Procedure, the Court reiterated the grounds for issuing a preliminary injunction, which include the applicant being entitled to the relief demanded, potential injustice if the act complained of continues, or actions violating the applicant’s rights. The Court underscored the essential prerequisite: a clear legal right must be demonstrably violated. Referencing Department of Public Works and Highways (DPWH) v. City Advertising Ventures Corporation, the decision highlighted that a successful applicant must present prima facie evidence of an existing right, a substantial violation of that right, and the necessity of the injunction to prevent irreparable injury.

In its analysis, the Supreme Court meticulously reviewed the contractual history between PCSO and PGMC. It noted that the Equipment Lease Agreement, along with its amendments and the Supplemental and Status Quo Agreement, clearly stipulated the term of PGMC’s engagement, which was explicitly extended only until August 21, 2018. The bidding initiated by PCSO was for a period commencing after this expiration date. The Court found that PGMC failed to present any evidence of a legal right extending beyond August 2018. Therefore, PGMC’s claim of an exclusive right to prevent the bidding for the subsequent five-year period was unsubstantiated. The Court stated:

Respondent Philippine Gaming and Management Corporation’s claim of exclusive rights, as stated in the Interim Settlement and which was brought to arbitration, pertained to its rights under the Amendments to Equipment Lease Agreement, which will expire on August 21, 2018. It failed to provide proof that the Amendments to Equipment Lease Agreement was extended beyond August 21, 2018. It cannot claim that it has alleged exclusive rights to be protected and that it will suffer irreparable injury if petitioner continued with the Nationwide On-line Lottery System bidding process. This is precisely because the bidding was for the next supplier of the Nationwide On-line Lottery System for a period of five (5) years after August 21, 2018 or commencing on August 22, 2018.

The Supreme Court concluded that the RTC gravely abused its discretion in granting the injunction. Without a demonstrable legal right being violated, the injunction was deemed improper. Furthermore, the Court pointed out that an arbitral tribunal had already ruled against PGMC’s claim of exclusivity, a decision later confirmed by the RTC itself. This confirmation further weakened PGMC’s basis for injunctive relief. The Supreme Court granted PCSO’s petition, effectively dissolving the preliminary injunction and allowing PCSO to proceed with the bidding process for the Nationwide On-line Lottery System in Luzon. This decision reinforces the principle that injunctive relief is not granted lightly and hinges on the applicant’s ability to prove a clear, existing legal right under threat.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Philippine Charity Sweepstakes Office vs. Hon. Maximo M. De Leon and Philippine Gaming and Management Corporation, G.R. Nos. 236577 and 236597, August 15, 2018