Friday, August 29, 2008 CA upholds ruling vs LRTA's plea on ad contract
THE Light Rail Transit Authority (LRTA) suffered a setback after the Court of Appeals (CA) stopped it from unilaterally terminating its multimillion-peso five-year contract with an outdoor advertising firm due to the company's failure to pay the agreed advance annual payment.
In a decision penned by Associate Justice Sixto Marella Jr., the CA 13th Division affirmed the ruling of the Pasig City Regional Trial Court (RTC) dated March 21, 2006 enjoining the LRTA from ending its exclusive concession contract with Trackworks Rail Transit Advertising, Vending and Promotions, Inc. due to its failure to pay P105 million.
The CA junked the petition of LRTA that RTC Judge Abraham Borreta committed grave abuse of discretion when he issued the ruling that also enjoined LRTA from re-bidding the concession rights over the spaces covered by the contract.
The appellate court said it is clear based on the evidence presented by Trackworks that it stands to suffer irreparable damage if LRTA is not enjoined from terminating and re-bidding the contract.
The CA also noted that Trackworks made efforts to convince LRTA to submit their dispute to mediation which was turned down by the railway firm.
It added that the lower court was correct when it considered the call of Trackworks for arbitration to settle the case as it is consistent to the policy of the Supreme Court (SC) to settle commercial disputes through mediation.
Court records showed that LRTA conducted a public bidding for concession rights on all structural spaces and areas for the marketing, installation, maintenance, and dismantling of advertising commercial medium of LRT Line 1 and Line 2 systems.
Trackworks participated and was subsequently declared the winning bidder.
On June 22, 2005, a five-year contract was entered into between LRTA and Trackworks.
Pursuant to the contract's provisions, Trackworks posted the requisite performance bond purportedly issued by Stronghold Insurance Company in the amount of P141.9 million to guarantee faithful performance of the obligation.
Thereafter, LRTA issued a notice to proceed to enable respondent Trackworks to comply with its obligations under the concession contract.
The railway company demanded Trackworks through a series of letter to pay the amount of P105 million representing the advance annual payment in accordance with the contract.
However, Trackworks refused to comply with the said demands and instead sought to be indefinitely excused from paying its obligations.
LRTA then informed Stronghold of the alleged breach of contact committed by Trackworks and called on the performance bond.
But Stronghold denied issuing the said performance, prompting LRTA to advise Trackworks of the termination of the concession contract citing its failure to pay the P105 million.
On February 2, 2006, Trackworks filed a civil suit before the Pasig RTC seeking to compel LRTA to mediate and/or to enjoin petitioner from terminating their contract.
The Pasig RTC, in a ruling on March 31, 2006, issued a writ of preliminary injunction in favor of Trackworks. (ECV/Sunnex)
