G.R. No. 197942-43, 199528 March 26, 2014
PHILIPPINE AMUSEMENT AND GAMING CORPORATION, Petitioner, vs. THUNDERBIRD PILIPINAS HOTELS AND RESORTS, INC., EASTBAY RESORTS, INC., and HON. CICERO JURADO, JR., Presiding Judge, Regional Trial Court of Manila, Branch 11, Respondents.

FACTS

Petitioner Philippine Amusement and Gaming Corporation (PAGCOR) was created under P.D. No. 1869, as amended by R.A. No. 9487, and granted a franchise to operate gambling casinos. Respondents Thunderbird Pilipinas Hotels and Resorts, Inc. (Thunderbird Pilipinas) and Eastbay Resorts, Inc. (ERI) entered into Memoranda of Agreement (MOAs) with PAGCOR for the operation of casinos in Fiesta Hotel and Casino in Rizal and Fiesta Casino and Resort in La Union. The MOAs and related agreements (Agreement, Addendum, Amendment, and License) granted respondents provisional Authorities to Operate (ATOs) and stipulated that these ATOs would be co-terminus with PAGCOR’s then-existing franchise until July 11, 2008. Crucially, the agreements contained provisions stating that the MOA/authority “shall be extended” if PAGCOR’s franchise was extended by law beyond July 11, 2008 and if PAGCOR’s authority to grant licenses within special economic zones was included in the new or extended franchise.
Upon the extension of PAGCOR’s franchise via R.A. No. 9487, respondents sought the formal extension of their ATOs to be co-terminus with PAGCOR’s new franchise. PAGCOR’s Board initially approved a five-year extension effective August 6, 2009, with automatic extension to be co-terminus with PAGCOR’s charter (until 2033) upon respondents’ full compliance with their investment commitments. However, under a new Board, PAGCOR later offered only six-month retroactive ATOs and subsequently demanded updated investment plans, alleging respondents missed their timetables. Respondents refused the blank ATOs and insisted on a longer term. They filed a complaint for Specific Performance and Injunction with the Regional Trial Court (RTC) of Manila, which issued an Order and Writ of Injunction on June 23, 2011, and later an Amended Order and Writ of Preliminary Mandatory Injunction on October 13 and 18, 2011, directing PAGCOR to issue renewal ATOs co-terminus with its franchise. PAGCOR filed petitions for certiorari directly with the Supreme Court, challenging the RTC’s orders for grave abuse of discretion.

ISSUE

Whether the Regional Trial Court committed grave abuse of discretion in issuing the injunctive writs ordering PAGCOR to issue renewal Authorities to Operate (ATOs) co-terminus with PAGCOR’s franchise.

RULING

Yes, the Regional Trial Court committed grave abuse of discretion. The Supreme Court granted the petitions and annulled the RTC’s Orders and Writs of Injunction.
The Court held that the RTC’s issuance of the writ of preliminary mandatory injunction constituted grave abuse of discretion because it effectively decided the main case for specific performance at the preliminary stage without a full trial on the merits. The injunctive writs compelled PAGCOR to perform the act of issuing renewal ATOs, which was the very relief sought in the main complaint. This pre-empted the resolution of the principal issue of whether respondents had a clear and unmistakable right to the renewal of their ATOs co-terminus with PAGCOR’s franchise based on the contractual provisions.
The Court found that the contractual provisions for extension were not automatic but contingent upon two conditions: (1) PAGCOR’s franchise extension by law, and (2) the inclusion of PAGCOR’s authority to grant licenses within special economic zones in that extended franchise. The determination of whether these conditions were met, and whether respondents had complied with their investment commitments to merit the automatic extension, required a full-blown trial. The RTC’s orders presupposed the existence of respondents’ right, which was still vigorously contested by PAGCOR. By issuing the mandatory injunction, the RTC virtually granted the main prayer, which was a patent violation of the rules and jurisprudence on injunctions. The RTC thus acted in a capricious, whimsical, and arbitrary manner, amounting to lack or excess of jurisdiction.