SC ends DFNN-PCSO squabble

The Supreme Court has laid to rest all civil cases linked to the dispute between DFNN Inc. and the state-controlled Philippine Charity Sweepstakes Office (PCSO) over “illegal” termination of a lotto equipment leasing deal.

This gives DFNN more legal muscle to press for the collection of some P310 million in arbitral award from the PCSO.

In a resolution dated Feb. 20, 2017, the Supreme Court – in the case entitled “Philippine Charity Sweepstakes Office v. DFNN Inc.” with case number G.R. No. 206611 – granted the motion to withdraw petition filed by the PCSO and declared the instant case closed and terminated.

The Supreme Court likewise ordered the issuance of an entry of judgment finally disposing of the case, DFNN said in a disclosure to the Philippine Stock Exchange on Monday.

“The resolution of the instant case puts to rest all civil cases involving DFNN and PCSO in connection with the Equipment Lease Agreement (ELA) between them, all of which were decided in favor of DFNN,” the disclosure said.

However, the disclosure pointed out there’s no effect on the business at this time until DFNN collects from PCSO.

The case stemmed from PCSO’s rescission of its ELA with DFNN which was executed by the parties during the Arroyo administration in 2003. The ELA provided for the exclusive lease from DFNN all the hardware, software, and knowhow to design and develop a system that would allow the processing of bets from personal communication device users nationwide.

In 2005, prior to the commercial operation of the system, DFNN was informed of the PCSO’s decision to terminate the deal, after which the PCSO began negotiating with third parties to carry out the project.

DFNN brought the case to court and obtained a favorable ruling but the arbitral award was at first too meager at only P27 million in liquidated damages. Finding the damage award insufficient, DFNN filed a petition to correct the computation of damages and increase the award by 11 times to over P310 million.

On February 17, 2016 , the RTC granted DFNN’s petition and ordered the correction of the arbitral award to P310,095,149.70 plus 6 percent interest from date of finality of the decision until final satisfaction thereof by the PCSO in accordance with computation for liquidated damages provided under the equipment lease agreement.

In its petition, DFNN had argued that the computation of liquidated damages was governed by a section in the agreement which stated that, “PCSO, if it is the party in default, shall pay DFNN liquidated damages in the amount equal to the market value of the system…inclusive of a penalty charge of 2 percent per month on the amount due computed from the date of termination or cancellation of the agreement to the actual date of payment.” Taking into account such provision, DFNN said the non-inclusion of such penalty charge in the damages awarded to DFNN clearly constituted “an evident miscalculation of figures.”