G.R. No. L-44944 August 9, 1985
TOP-WELD MANUFACTURING, INC., petitioner, vs. ECED, S.A., IRTI, S.A., EUTECTIC CORPORATION, VICTOR C. GAERLAN, and THE HON. COURT OF APPEALS, respondents.

FACTS

Petitioner Top-weld Manufacturing, Inc., a Philippine corporation, entered into a License and Technical Assistance Agreement with Swiss corporation IRTI, S.A., and a separate Distributor Agreement with Panamanian corporation ECED, S.A., concerning welding products. Upon learning that the foreign corporations were negotiating to replace it, Top-weld filed a complaint in the Court of First Instance of Rizal (Civil Case No. 21409) against IRTI, ECED, Eutectic Corporation, and individual Victor Gaerlan. It sought a preliminary injunction to restrain the termination of its contracts and to prohibit negotiations with third parties, invoking Section 4(9) of Republic Act No. 5455 , which requires alien firms terminating investments to reimburse their Philippine counterparts.
The trial court initially issued a restraining order and later granted Top-weld’s application for a preliminary injunction. The respondent corporations opposed, alleging in their verified answers and supporting affidavits that Top-weld had committed multiple material breaches of the contracts, including failure to pay royalties, use of wrong materials, manufacture of substandard products, and falsification of invoices. They argued these breaches constituted just cause for termination, rendering R.A. 5455 inapplicable, and that the contracts had, in any event, expired by their own terms.

ISSUE

Whether the Court of Appeals correctly annulled the trial court’s orders granting preliminary injunctive relief to Top-weld.

RULING

Yes, the Court of Appeals was correct. The Supreme Court affirmed its decision, dismissing Top-weld’s petition. The legal logic rests on two primary grounds. First, the respondent corporations presented overwhelming, uncontroverted, and not inherently improbable evidence through verified pleadings and affidavits detailing Top-weld’s material breaches of the contracts. In contrast, Top-weld failed to substantively refute these allegations with competent evidence, offering only an unverified reply. In injunction proceedings, he who alleges a fact has the burden of proving it. The respondents successfully demonstrated just cause for termination, which negated Top-weld’s reliance on the protective provisions of R.A. 5455, as the law presupposes a termination without such cause.
Second, and decisively, the dispute had been rendered moot and academic. The License Agreement with IRTI had been extended only until December 31, 1975. The injunction suit was filed in June 1975 and the Court of Appeals decision was rendered after this expiration date. Courts cannot compel parties to continue contractual relationships or extend contracts beyond their stipulated terms, as doing so would violate the fundamental principle of mutual consent and voluntariness in contracts. With the contract’s life having ended by its own terms, there was no longer any active legal interest to protect via injunction. Therefore, the appellate court properly set aside the lower court’s orders.