Republic vs. MERALCO

A petition for certiorari assailing interlocutory orders is rendered moot and academic by the trial court's intervening rendition of a decision on the merits, as any resolution of the issues on the interlocutory orders ceases to have any practical value.

MERALCO and NAPOCOR entered into a Contract for the Sale of Electricity (CSE) in 1994, requiring MERALCO to purchase minimum volumes of electric power. From 2002 to 2004, MERALCO drew less than the minimum and paid only for actual consumption, prompting NAPOCOR to claim unpaid minimum charges while MERALCO counterclaimed for losses due to delayed transmission lines and direct connections. The parties submitted their dispute to mediation, resulting in a 2003 Settlement Agreement where MERALCO agreed to pay a net amount, subject to a pass-through provision requiring Energy Regulatory Commission (ERC) approval to recover from consumers. After the OSG opposed the joint application for ERC approval in 2008, MERALCO filed a petition for declaratory relief in the RTC to validate the Settlement Agreement.

• The CSE and the Dispute: MERALCO and NAPOCOR executed a CSE in 1994, obligating MERALCO to purchase minimum electric power volumes. MERALCO drew less than the minimum from 2002 to 2004 due to circumstances beyond its control and refused to pay the minimum monthly charges, paying only for actual consumption.
• The Mediation and Settlement Agreement: To avoid delays inimical to public interest, the parties agreed to mediation. This resulted in a 2003 Settlement Agreement where MERALCO agreed to pay a net amount (reduced by credits for delayed transmission facilities and direct connections) over five to six years, subject to an ERC-approved pass-through provision to recover from consumers.
• ERC Proceedings and OSG Intervention: MERALCO and NAPOCOR filed a joint application with the ERC for approval of the pass-through provision in 2004. Nearly two years after the case was submitted for resolution, the OSG filed a motion to intervene and oppose the agreement, prompting the ERC to suspend proceedings.
• Declaratory Relief in the RTC: MERALCO initiated a petition for declaratory relief in the RTC in 2009. The OSG moved to dismiss or stay the proceedings and refer the dispute to arbitration under the CSE. The RTC denied the motion, ruling that the Settlement Agreement did not contain an arbitration clause and the OSG lacked standing to demand arbitration.
• Pre-trial and Waiver of Participation: The RTC reset the pre-trial multiple times at the OSG's request. When the OSG failed to appear on November 4, 2010, the RTC reset the pre-trial to November 24, 2010, marking it as intransferable. On November 22, 2010, the OSG filed a certiorari petition in the CA and moved to cancel the pre-trial and for the judge's inhibition. On November 24, 2010, OSG counsel appeared but asked to be excused from participating. The RTC denied the motions and deemed the OSG to have waived its right to participate and present evidence.

• Arbitration: Petitioner argued that the dispute between MERALCO and NAPOCOR should be resolved through arbitration pursuant to the arbitration clause in the CSE, not through mediation.
• Jurisdiction: Petitioner maintained that the RTC lacked jurisdiction over the subject matter of the declaratory relief action.
• Grave Abuse of Discretion: Petitioner contended that the CA erred in allowing the RTC to proceed with pre-trial despite the pending certiorari petition and in upholding the RTC's declaration of waiver of the right to participate and present evidence.
• Inhibition: Petitioner asserted that the RTC Judge should have inhibited himself due to circumstances of partiality.
• Validity of the Settlement: Petitioner argued that the Settlement Agreement was grossly disadvantageous and prejudicial to the Government, contained a pass-on provision contrary to law and public policy, and was entered into without the participation and legal guidance of the OSG.

• Arbitration: Respondents countered that the Settlement Agreement did not contain an arbitration clause and the CSE's arbitration clause did not apply to the current dispute.
• Standing to Demand Arbitration: Respondents argued that the OSG, not being a party to the CSE or the Settlement Agreement, had no standing to demand arbitration.
• Jurisdiction: Respondents maintained that the RTC had jurisdiction to resolve the validity of the Settlement Agreement, especially since the ERC had ruled that the issues raised by the OSG were outside its jurisdiction.
• Pre-trial Conduct: Respondents asserted that the RTC properly deemed the petitioner to have waived its right to participate because the OSG deliberately refused to participate in the pre-trial despite being present.

• Mootness: Whether the petition for certiorari assailing interlocutory orders was rendered moot and academic by the RTC's intervening rendition of a decision on the merits.
• Proceeding with Pre-trial: Whether the RTC committed grave abuse of discretion in proceeding with the pre-trial despite the pendency of a certiorari petition in the Court of Appeals.
• Waiver of Right to Participate: Whether the RTC committed grave abuse of discretion in deeming the petitioner to have waived the right to participate in the pre-trial and present evidence.
• Arbitration: Whether the dispute between MERALCO and NAPOCOR should be referred to arbitration under the CSE.
• Validity of the Settlement Agreement: Whether the validity of the Settlement Agreement is a proper issue in the certiorari proceeding.

• Mootness: The petition was rendered moot and academic by the RTC's intervening decision on the merits. A case that is moot due to supervening events ceases to present a justiciable controversy, and courts will not determine moot questions.
• Proceeding with Pre-trial: No grave abuse of discretion was committed. Under Section 7, Rule 65 of the Rules of Court, the filing of a petition for certiorari does not interrupt the course of the principal case absent a temporary restraining order or writ of preliminary injunction. Failure of the trial court to proceed may even be a ground for an administrative charge against the judge.
• Waiver of Right to Participate: No grave abuse of discretion was committed. The obligation to appear at a pre-trial conference denotes not mere physical presence but preparedness to go into the subjects assigned by law to a pre-trial. The OSG's deliberate refusal to participate justified the RTC's order deeming the right waived.
• Arbitration: The request to direct arbitration was declined. The primary competence to determine the enforceability of the arbitration clause pertained to the RTC, and the RTC had already rendered judgment on the validity of the Settlement Agreement.
• Validity of the Settlement Agreement: The validity of the Settlement Agreement is not an issue in the certiorari proceeding, which concerns only the propriety of the interlocutory orders. The validity of the agreement is properly within the competence of the RTC (except for the pass-through provision, which falls under ERC jurisdiction).

• Mootness by Supervening Event — A case becomes moot and academic when a supervening event renders the resolution of the issue without any practical value. The courts will not determine moot and academic questions or engage in academic declarations. Applied to this case, the RTC's intervening rendition of a decision on the merits rendered the challenge against its interlocutory orders moot.
• Effect of Certiorari on Principal Case — Under Section 7, Rule 65 of the Rules of Court, the filing of a petition for certiorari does not interrupt the course of the principal case unless a temporary restraining order or writ of preliminary injunction is issued. A trial court judge may face administrative charges for failing to proceed with the principal case in the absence of such injunctive reliefs.
• Pre-trial Appearance — The obligation to appear at a pre-trial conference connotes not mere physical presentation but preparedness to go into the different subjects assigned by law to a pre-trial. A party who appears but deliberately refuses to participate may be deemed to have waived the right to participate and present evidence.

• "The intervening rendition by the trial court of a decision on the merits of the case renders moot and academic the resolution of any issue raised on certiorari against interlocutory orders setting the pre-trial and declaring the petitioner to have waived its right to present its evidence."
• "The petition shall not interrupt the course of the principal case, unless a temporary restraining order or a writ of preliminary injunction has been issued, enjoining the public respondent from further proceeding with the case."
• "The obligation to appear denotes not simply the personal appearance, or the mere physical presentation by a party of one’s self, but connotes as importantly, preparedness to go into the different subject assigned by law to a pre-trial."

• Banco Filipino Savings and Mortgage Bank v. Tuazon, Jr. — Cited as authority for the principle that a case is rendered moot by supervening events, leaving any determination without practical value.
• Ormoc Sugarcane Planter’s Association vs. Court of Appeals — Cited by the RTC (and affirmed) for the principle that an entity not a party or signatory to a contract has no legal basis to demand arbitration under that contract's arbitration clause.
• Development Bank of the Philippines vs. Court of Appeals, et al. — Followed for the doctrine that the obligation to appear at pre-trial connotes preparedness to go into the subjects assigned by law, not mere physical presence.
• De los Santos v. Metropolitan Bank and Trust Company — Cited for the definition of grave abuse of discretion as the arbitrary or despotic exercise of judicial power by reason of passion or personal hostility.

• Section 7, Rule 65 of the Rules of Court — Provides that the filing of a petition for certiorari shall not interrupt the course of the principal case unless a TRO or WPI is issued. Applied to hold that the RTC properly proceeded with the pre-trial despite the pending certiorari petition in the CA.
• Section 4, Rule 18 of the Rules of Court — Mandates the parties and their counsel to appear at the pre-trial. Interpreted to require not just physical presence but active participation and preparedness.
• Section 5, Rule 18 of the Rules of Court — Authorizes the court to deem a party as having waived the right to present evidence or to non-suit a party who fails to appear at a pre-trial conference. Applied to justify the RTC's order deeming the OSG to have waived its rights after it refused to participate.

Sereno, C.J., Leonardo-De Castro, Villarama Jr., and Reyes, JJ.