G.R. No. 232801 /G.R. No. 234193, June 30, 2021
PHILIPPINE CHARITY SWEEPSTAKES OFFICE (PCSO), PETITIONER, VS. DFNN, INC. (DFNNI), RESPONDENT.

FACTS

On April 9, 2003, petitioner Philippine Charity Sweepstakes Office (PCSO) and respondent DFNN, Inc. (DFNNI) entered into an Equipment Lease Agreement (ELA) for the development of a lotto betting platform via personal communication devices. The ELA contained an arbitration clause. On March 9, 2005, PCSO unilaterally rescinded the ELA via Board Resolution No. 080, citing DFNNI’s failure to secure telecom cooperation and implement the project within six months. DFNNI subsequently filed a Request for Arbitration. An Ad Hoc Arbitration Panel, by an Arbitral Award dated May 21, 2015, declared PCSO’s rescission improper and ordered PCSO to pay DFNNI PhP27,000,000.00 as liquidated damages and to return DFNNI’s equipment. The Panel denied claims for rental payments and interest due to the system’s non-launch.
On June 25, 2015, PCSO filed a Petition for Confirmation of the Arbitral Award before the Regional Trial Court (RTC) of Mandaluyong City (Civil Case No. MC15-9557). The following day, June 26, 2015, DFNNI filed a Petition for Correction of the same Arbitral Award before the RTC of Makati City (Special Proceedings No. M-7844), seeking to include a 2% monthly penalty interest, temperate damages, and attorney’s fees. PCSO opposed the petition for correction and moved to dismiss it or consolidate it with the confirmation case in Mandaluyong. The Makati RTC denied the motion to dismiss and, later, granted DFNNI’s petition for correction, increasing the award. The Mandaluyong RTC, in the confirmation case, denied DFNNI’s motion to consolidate the cases with Makati. DFNNI assailed this denial via certiorari in the Court of Appeals (CA-G.R. SP No. 145462). PCSO also assailed the Makati RTC’s correction order via certiorari in a separate CA case (CA-G.R. SP No. 145983).
The Court of Appeals, in CA-G.R. SP No. 145462, reversed the Mandaluyong RTC and ordered the consolidation of the confirmation case with the correction case in Makati. In CA-G.R. SP No. 145983, the Court of Appeals affirmed the Makati RTC’s decision granting the correction and increasing the arbitral award. PCSO filed petitions for review with the Supreme Court, assailing both Court of Appeals decisions.

ISSUE

The primary issue, for the purpose of this digest based on the provided text, is whether the Court of Appeals correctly affirmed the Makati RTC’s grant of DFNNI’s Petition for Correction of the Arbitral Award to include a 2% monthly penalty interest, temperate damages, and attorney’s fees.

RULING

No. The Supreme Court ruled that the Court of Appeals erred in affirming the Makati RTC’s correction of the arbitral award. The power of a court to correct an arbitral award under Section 11(a) of the Alternative Dispute Resolution Act ( Republic Act No. 9285 ), which allows correction for “an evident material miscalculation of figures,” is limited to corrections based on the face of the award and the record. A correction is not warranted if it requires re-examination of the evidence or re-evaluation of the arbitrators’ findings. In this case, the Arbitration Panel explicitly declined to award the 2% penalty interest, temperate damages, and attorney’s fees after evaluating the evidence and contractual provisions. The Panel found that the penalty interest applied only to unpaid lease rentals, which did not exist as the system was never launched. Granting DFNNI’s petition for correction would effectively constitute an appeal on the merits of the arbitral award, which is not permitted under the limited grounds for correction. Therefore, the original Arbitral Award dated May 21, 2015, awarding only PhP27,000,000.00 as liquidated damages, stands.