CA agrees LRTA can’t break off P105-M advertising deal

The Court of Appeals has affirmed a ruling of the Pasig City Regional Trial Court (RTC) Branch 154 that stopped the Light Rail Transit Authority (LRTA) from unilaterally terminating its five-year contract with an advertising company over the non-payment of P105 million in advance annual payment for advertising concession rights along the tracks.

In a 13-page decision penned by Associate Justice Sixto Marella Jr., the appellate court’s Thirteenth Division dismissed the petition filed by LRTA seeking to annul and set aside the March 31, 2006 decision of the Pasig RTC.

In upholding the RTC’s decision, the CA noted that evidence would show that Trackworks Rail Transit Advertising, Vending and Promotions, Inc. made efforts to convince LRTA to submit their dispute to mediation, which the LRTA turned down.

According to the CA, the Pasig City RTC was correct when it considered the call of Trackworks for arbitration to settle the case as it is consistent with the policy of the Supreme Court to settle commercial disputes through mediation.

“Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward. Consistent with the said policy of encouraging alternative dispute resolution methods, courts should liberally construe arbitration clauses,” the CA said.

Records of the case 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 on the LRT Line 1 and Line 2 systems. Trackworks participated in the bidding and was later declared the winning bidder.

On June 22, 2005, a five-year contract was signed between LRTA and Trackworks. Pursuant to the contract’s provisions, Trackworks posted the requisite performance bond with Stronghold Insurance Co. for P141.9 million.

The LRTA issued a notice to proceed to enable Trackworks to comply with its obligations under the concession contract. The agency then demanded, in a series of letters, that Trackworks pay the amount of P105 million representing the advance annual payment in accordance with the contract.

But Trackworks refused to comply 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 demanded the issuance of the performance bond.

But Stronghold denied the demand for the issuance of the performance bond, prompting LRTA to terminate the contract.

On Feb. 2, 2006, Trackworks lodged a civil suit before the Pasig RTC seeking arbitration of the case and to compel LRTA from terminating the contract. On March 31, 2006, the Pasig City RTC issued a writ of preliminary injunction in favor of Trackworks. – Mike Frialde