G.R. No. 84764 April 18, 1989
CONTINENTAL AIRLINES, INC. and AIR MICRONESIA, INC., petitioners, vs. HON. CONSUELO Y. SANTIAGO, Judge, RTC, Makati, Br. 149, the SECURITIES & EXCHANGE COMMISSION, ALBERTO P. ATAS etc., and ARPAN AIR, INC., represented by CUSTODIO A. PARLADE respondents, TRANS PACIFIC AIR SERVICE CORPORATION, intervenor.

FACTS

Petitioners Continental Airlines, Inc. and Air Micronesia, Inc., foreign corporations licensed to do business in the Philippines, appointed respondent Arpan Air, Inc. (ARPAN) as their passenger and cargo sales agent through identical General Passenger Sales Agency Agreements dated February 12 and March 11, 1986. After two years, the petitioners gave notice of termination of the agreements, invoking a contractual provision allowing termination by any party in its “complete discretion” and “with or without cause” upon 90-day notice. ARPAN, represented by its director Custodio Parlade, filed a complaint with the Regional Trial Court (RTC) of Makati, arguing that the termination clause was void for being violative of Article 70 of Presidential Decree No. 1789 (The Omnibus Investments Code). The RTC issued a writ of preliminary injunction enjoining the termination and ordering the maintenance of the status quo. This prompted petitioners to file the instant special civil action for certiorari to nullify the writ.

ISSUE

Whether the Regional Trial Court committed grave abuse of discretion in issuing the writ of preliminary injunction based on its prima facie finding that the contractual termination clause was proscribed by Article 70 of P.D. No. 1789.

RULING

The Supreme Court granted the petition and nullified the writ of preliminary injunction. While the case reached the Court ostensibly to review the propriety of the preliminary injunction, the parties, through their voluminous pleadings and submission of all relevant documentary evidence, had effectively laid before the Court all material facts and legal propositions necessary for a final resolution of the main issue on the merits. The Court, in the interest of expediency and to limit the issues for trial, proceeded to resolve the core legal question. The Court held that Article 70 of P.D. No. 1789, which prohibits the termination of a technology transfer arrangement except for causes provided in the agreement or by final judgment of a competent court, applies only to agreements involving the transfer of systematic knowledge for the manufacture of a product or the application of a process. The agency agreements in question, which pertained solely to the sale of passenger and cargo air transportation services, did not involve any such transfer of technology. They were simple commercial agency contracts, not technology transfer arrangements covered by the cited law. Therefore, the termination clause granting a right to terminate at a party’s complete discretion was valid and enforceable. The RTC’s contrary prima facie finding, which formed the basis for the injunction, was a clear error in law constituting grave abuse of discretion.