G.R. No. 164299 ; February 12, 2008
MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. POWERGEN, INC., respondent.

FACTS

In the early 1990s, frequent power outages in Metro Manila impaired airport operations. Petitioner Manila International Airport Authority (MIAA), dependent on MERALCO, solicited bids for a Build-Operate-Own power plant. Respondent Powergen, Inc. won the bid, and the parties executed a Power Generation Agreement (PGA) on April 4, 1994. Article 7.3 of the PGA obligated MIAA to purchase and pay for a minimum guaranteed energy consumption of 4,000,000 KWH per month at a discounted rate. However, on December 18, 1995, MIAA issued a “Notice to Proceed” which stated that the minimum guaranteed consumption clause “shall be ignored” and only actual consumption would be paid until the full contracted power capacity was attained. Respondent’s president signed an acknowledgment of receipt and acceptance of this notice. The plant was built and operated, with MIAA paying based on respondent’s billings. In June 2000, MIAA discovered MERALCO’s rates were lower than what respondent was charging and began paying using the lower rate. Respondent filed a complaint for reformation of contract on January 4, 2001, seeking to compel MIAA to comply with the minimum purchase obligation under Article 7.3 of the PGA. Respondent later filed an urgent motion for a preliminary injunction to compel such compliance. The trial court granted the motion and issued a writ of preliminary mandatory injunction, which the Court of Appeals affirmed.

ISSUE

Whether respondent Powergen, Inc. is entitled to a preliminary mandatory injunction to compel petitioner MIAA to comply with the minimum guaranteed energy purchase obligation under Article 7.3 of the Power Generation Agreement.

RULING

The Supreme Court ruled in favor of petitioner MIAA and held that the issuance of the preliminary mandatory injunction was improper. The Court emphasized that an injunction is a preservative remedy to protect a substantive right during the pendency of a suit, not a means to adjudicate the main case. The trial court’s and the Court of Appeals’ determination of whether the “Notice to Proceed” amended the PGA essentially touched on the merits of the main action for reformation of contract. Granting the writ of mandatory injunction, which would compel MIAA to purchase the guaranteed minimum energy, would effectively grant the main relief sought in the complaint without a full trial. The Court cited the principle that courts should avoid issuing a writ of preliminary injunction that disposes of the main case without a trial. Therefore, the lower courts committed grave abuse of discretion in issuing the writ.