CITY OF OLONGAPO, PETITIONER, VS. COURT OF APPEALS AND OLONGAPO ICE & COLD STORAGE, INC., RESPONDENT.

The City of Olongapo (petitioner
herein), since its turnover by the United States Government to the Philippine
Government on December 7, 1959, has been operating an electric plant and/or
supplying electricity to its residents.  Olongapo Ice & Cold Storage, Inc. (private respondent
in this case), on the other hand, is engaged in the business of manufacturing
and selling ice to the public and is one of those being supplied electricity by
the City.

This Petition for Certiorari, Prohibition and Mandamus,
originated from a Complaint filed in Civil Case No. 2547 before the Courts of
First Instance of Zambales in 1962 by private
respondent, questioning the validity of the rates being charged by the
City.  Because the trial Court dismissed
the Complaint on February 9, 1978,
private respondent appealed to the Court of Appeals.  While the appeal was pending, that appellate
Court, upon private respondent’s Motion, issued a Writ of Preliminary
Injunction enjoining the City from stopping electric power service to private respondent.  Contending that the Court of Appeals is not
acting in aid of its appellate jurisdiction and, therefore, can­not issue a
Writ of Preliminary Injunction, the City filed this Petition seeking the
nullification of all proceedings before respondent Court.

Proceedings in the trial
Court

On December 3, 1962, private respondent filed a Complaint against
the City with the Court of First Instance of Zambales,
docketed as Civil Case No. 2547, alleging that for its supply of electric fluid
since it began operation in May, 1962, the City, which is operating an electric
plant without a certificate of public convenience or franchise, had been
demanding payment on the basis of the residential rate, instead of on the
industrial rate; that it offered to pay its electric consumption on the basis
of the industrial rate and not on the residential rate, but the City
unjustifiably refused to accept the same advising it that it (the City) would
further study the matter of whether payment should be based on the residential
or industrial rate; that sometime in November, 1962, the City again demanded
payment of its electric consumption on the basis of the residential rate, which
it refused to pay on the ground that the residential rate is exhorbitant and insisted on payment on the basis of the industrial rate, it is the rate applicable to
it under the law and prevailing rules and regulations of the Public Service
Commission; that it was agreed that before any
further action or step would be taken by the City on its demand for payment, it
(private respondent) would be duly notified by the City; that on November 28,
1962, at about 8:00 o’clock in the morning, without any warning or notice, the
City arbitrarily cut off its electrical connection resulting in the cessation
of its operation and consequent damage to it in the amount of P100.00 a
day, which is the value of its actual daily sale of ice; that, if
charged on the basis of the industrial rate, it would be liable only for
its electric consumption since May, 1962, in the amount of not more than
P6,000.00, as compares with the exhorbitant demand of P15,000.00, based on the residential
rate; and that unless a writ of preliminary mandatory injunction is issued
requiring the City to reconnect its electric service and enjoining it, its
agents, representatives or employees from thereafter disconnecting its electric
service, the City will continue to refuse to connect its electric service
thereby causing it serious and irreparable damage.  It then prayed for the issuance of a writ of
preliminary mandatory injunction pending trial of the case, and after
due hearing, that it be declared for its
electric consumption based on the industrial rate; that the City be ordered to
pay it the amount of P100.00 a day from November 28, 1962 until the
reconnection of its electric service, the amount of P2,000.00 as attorney’s
fees, and costs of the suit.

On December 6, 1962, the trial Court issued an Order directing
the City to reconnect private respondent’s electric service pending the
termination of the litigation, upon the latter’s filing of a bond in the amount
of P15,000.00 to answer for whatever damages the City might suffer by reason of
the issuance of the writ of preliminary mandatory injunction.

Answering the Complaint, the City averred that it has been
operating its electric plant since 1946 and is not required to secure a
certificate of public convenience, pursuant to Sect. 13(a) of Commonwealth Act
No. 146, as amended by Republic Act No. 2677; that its demand upon private
respondent for the payment of its electric fluid consumption is lawful, just
and reasonable on the basis of Ordinance No. 4, S.1960, a valid and subsisting municipal ordinance, known to
private respondent and under which it obligated itself to pay its electric
bills “promptly not later than the 5th of each
month”; that private respondent never offered to pay its electric
consumption so that there was no reason for it to study the matter of whether
to insist on, or agree to, certain rates and to notify private respondent of its
decision; that its act of disconnecting private respondent’s electric service
on November 28, 1962 was lawful and just by reason of its refusal to make any
payment of its electric fluid consumption; that private respondent is not
entitled to recover damages and has no right to a continued supply of
electric fluid unless the same is promptly and duly paid
for; and that the Court has no jurisdiction to determine, fix or classify the
rates or charges on electric consumption with respect to public services.  As counterclaim, the City contends that
private respondent’s electric fluid consumption from May, 1962 up to date of
demand on November 22, 1962 amounts to P14,924.42, of which the sum of
P6,000.00 was paid by private respondent on December 6, 1962, thereby
leaving a balance of P8,924.42 still unpaid; that as a consequence of private
respondent’s unlawful acts, it suffered damages in the amount of no less than
P5,000.00 and that it is entitled to nominal damages in the amount of no less
than P2,000.00 by reason of private respondent’s violation of its contractual
obligation.  It then prayed for the
dismissal of the Complaint and the payment of its counterclaim.

On December 11, 1964,
the City and private respondent entered into a Tentative Agreement as to Schedule
of Rates, which reads as follows:

“COME NOW the parties, assisted by their respective counsel
and to this Honorable Court respectfully state and manifest that they have
agreed that the defendant should charge the plaintiff for its monthly electric
consumption in the following
manners:

1.-For the first 100 kilowatt hours at the rate of P0.15 per kilowatt
hour;

2.-For the next 100 kilowatt hours at the rate of P0.10 per kilowatt
hour;

3.-All over the above figures at the rate of P0.05 per kilowatt hour.

That this agreement is tentative and effective only during the pendency of this case, and without prejudice as to the final result that may be reached by
this Honorable Court or the appellate court.”^[1]

In an Order dated December
11, 1964, the trial Court approved the above Agreement of the
parties and enjoined them to comply strictly with the same pending final
determination of the case.

On November 29, 1968,
the trial Court issued an Order dismissing the case on the ground that the same
had been pending since December 3,
1962, without the parties having taken any step to have it
terminated.

A Motion for Reconsideration was filed by private respondent
claiming that the reason why the case was never set for hearing was because the
Court ordered its postponement pending the outcome of Civil Case No. 9-0, a
related case, which was decided on
November 27, 1968 and subject of an appeal; that the parties have entered into some stipulations which should be decided by
the Court; that it has a just and valid cause of action against the City; and
that it is very much interested in a judicial determination of the rates that
should be charged for its electric consumption.

In an Order dated January
18, 1969, the trial Court held in
abeyance consideration of the Motion for Reconsideration until entry of judgment in Civil Case No.
9-0.

On August 12, 1977,
the City filed a Motion for the setting of the case for hearing as the decision
in Civil Case No. 9-0, which was affirmed by the Court of Appeals, had already
become final.

In an Order dated August
15, 1977, the trial Court set the case for hearing on September 15, 1977.

On February 9, 1978,
the trial Court issued the following Order:

“When this case was called for continuation of hearing, Atty. Braulio Tansinsin asked that the
plaintiff be allowed to send written interrogatories
to witnesses Ruben Valero and an expert engineer whom plaintiff will present in
connection with this case.  Said motion
was vigorously opposed by the defendant represented by City Legal Officer Atty.
Nestor F. Dantes who instead moved for the dismissal
of the above-entitled case.

“It is the observation of this Court that the above-entitled
case was filed on December 3, 1962 even before Olongapo
became a city and as early as December 11, 1964, the then Presiding Judge Lucas
Lacson who has since retired issued an Order allowing
a tentative agreement of the scheduled rates which has been agreed by the parties. 
The agreed rates had become unrealistic upon the lapse of time and on November
29, 1968 this Court
dismissed the case for lack of interest on the part of the plaintiff.  The dismissal of the case did not become
final and for more than ten years, no steps has been taken by the parties to
have this case terminated.  It is the
suspicion of the Court that the continued delay of the disposition of the case
work to the plaintiff’s
advantage as the old rates had become impractical and unrealistic by soaring
prices and the oil crisis as plaintiff apparently has no
intention of terminating the proceedings.

“WHEREFORE, upon motion
of defendant City
of Olongapo, represented by City Legal Officer Nestor
F. Dantes, the motion for reconsideration is hereby
denied, and let this case be DISMISSED with prejudice and without special
pronouncement as to costs.

“SO ORDERED.”

A Motion for Reconsideration thereof was filed by private
respondent on the ground that said Order has no legal and factual basis for the
following reasons:  (1) the case has not yet
been set for pre-trial and unless a pre-trial order terminating the pre-trial
has been issued, the Court may not dismiss the case on the suspicion that it
has no intention of terminating the proceedings; (2) that Ruben Valero, its
President and one of its two principal witnesses, is presently ill in the
United States and that its other witness, an engineer, has likewise gone to the
United States, so that the proceedings could have continued by means of
deposition upon written interrogatories; (3) that on October 29, 1976, the
parties entered into a second Tentative Agreement as to Schedule of Rates
during the pendency of the case and without prejudice
to its final outcome, by virtue of which it was charged by petitioner for its
electric consumption at the rate of P0.20 per kilowatt hour for the first 100
kilowatt hours and P0 .15 per kilowatt hour for the next kilowatt hours, which
thus attempted to make the rates as realistic as possible; and (4) that the
parties are trying to arrive at an amicable settlement of the case.

An Opposition thereto was filed by the City alleging that after
it had asked that the case be set for hearing, private respondent failed to
take any action to proceed with the case; that private respondent has not filed
any motion or manifestation of its intention to resort to the taking of
deposition or sending of written interrogatories; and that private respondent’s
Motion for Reconsideration was not accompanied by affidavit of merits nor was
it under oath.

On March
21, 1978, the trial
Court issued an Order denying the Motion for Reconsideration of the Order dated
February 9, 1978 dismissing the case because of the lack of initiative on the part of
private respondent to terminate the same.

Proceedings in the Court of
Appeals

Thereafter, private respondent appealed to the Court of Appeals,
docketed as CA-G.R. No. 64200-R.

On November 17, 1978, private respondent filed with the Court of
Appeals an Urgent Motion/Petition for Issuance of a Writ of Preliminary
Injunction enjoining the City to desist from stopping electric power service to
it, alleging that during the pendency of the appeal,
or on October 26, 1978, petitioner sent it a letter demanding payment of its
electric consumption in the total amount of P1,123,650.92, within fifteen days
from receipt, otherwise, its electric service would be disconnected; that its
Motion before the lower Court for an Order
restraining the City from disconnecting its electric service pending appeal was
denied by said Court in an Order dated November 9, 1978 for lack of
jurisdiction as a result of the perfection of the appeal; and that while
Republic Act No. 4645 or the Charter of Olongapo City
expressly commends that rates charged for the use of power by its customers be
in accordance with the law and prescribed rules and regulations of the
Public Service Commission, the City Council abused its prerogative and passed
Ordinance No. 57 (Series of 1977) without regard to the law and rules and
regulations of the Public Service Commission by (1) not providing for
industrial rates for industries in the City but only for residential,
commercial and government rates; and (2) that the commercial rates imposed by
Ordinance No. 57 is almost one hundred fifty (150%) percent higher than the
rates prescribed by the National Power Corporation.

In a Resolution, dated November
21, 1978, the Court of Appeals required the City to comment on
private respondent’s Motion.

On November 22, 1978,
private respondent filed an ex-parte Motion for a
Restraining Order pending submission of petitioner’s Comment.

In a Resolution dated November 23, 1978, the Court of
Appeals granted the issuance of a Writ
of Preliminary Injunction, pending the submission of the City’s Comment, upon
private respondent’s filing of a bond of P1,000.00.  The Writ of Preliminary Injunction was issued
on November 24, 1978, enjoining the City and
any person acting in its behalf to refrain or desist from stopping
electric power service to private respondent.

On November 29, 1978,
private respondent filed an Ex-Parte Very Urgent
Motion (1) To Declare Petitioner’s Officials in Contempt of Court and To Order
Their Arrest, and (2) To Order Zambales P.C. Command
To Enforce/Implement Writ of
Preliminary Injunction alleging that the City officials are defying the Writ
of Preliminary Injunction officially re­ceived
by them on November 27, 1978.

In a Resolution dated November 29, 1978, the Court of Appeals (1)
required the City to comment on the Motion to declare its officials in contempt
of Court and to order their arrest within ten days from receipt thereof, and
(2) ordered the Zambales P.C. Commander or any of his
authorized subordinates to cause the immediate enforcement and/or
implementation of the Writ of Preliminary Injunction.

On December 5, 1978, private respondent filed another Ex-Parte Very Urgent Motion (1) To Declare Petitioner’s
Officials in Contempt of Court and To Order Their Detention and (2) To Order Zambales P.C. Command To Re-enforce/Re-implement Writ of
Preliminary Injunction alleging that on November 29, 1978, the Zambales P.C. Command caused the implementation of the Writ
of Preliminary Injunction by advising it (private respondent) to secure the
services of a licensed electrician, in view of the refusal of petitioner’s
officials to implement said Writ, to connect the transmission lines to the
power transformer and it was only then that electric power flowed again; but that on December 4, 1978, at 4:00
o’clock in the afternoon, the crew of petitioner’s Public Utilities Department disconnected
from the street post fronting the premises the transmission lines serving the
power trans­formers.

In a Resolution dated December 6, 1978, the Court of Appeals (1)
ordered the Provincial Commander of Zambales to cause
the immediate re-enforcement/re-implementation of the Writ of Preliminary
Injunction and to make a report on the action taken thereon within ten days
from notice; and (2) required petitioner’s officials to explain, within ten
days from notice, why they should not be held in contempt of Court.

On December 6, 1978, the City filed its “Compliance and
Comments” contending that the Court of Appeals has no appellate
jurisdiction to review the Orders of the trial Court on the ground that no
factual issue is being raised in the appeal as no evidence, documentary or
testimonial, was adduced by either party in the trial Court, but only a
question of law, i.e., whether the trial
Court abused its discretion in dismissing the Complaint and in refusing to set
aside the order of dismissal; that the appeal should have been certified by the
Court of Appeals the Supreme Court, conformably with Section 31 of the
Judiciary Act and Section 3, Rule 50 of the Rules of Court; that for want of
appellate jurisdiction over the appeal, the Court of Appeal cannot issue the
auxiliary Writ of Preliminary Injunction as its jurisdiction to issue such
Writs is only in aid of its appellate jurisdiction; that the Writ  Preliminary Injunction issued by the Court of
Appeals on November 24, 1978 is null and void for want of jurisdiction appeal
and, therefore, the City’s officials cannot be declared in contempt for defying
said Writ; and that the Writ of Preliminary Injunction issued on November 24,
1978 was received by it only on December 1, 1978, on which date the act sought
to be restrained, i.e., stopping electric power service to private respondent,
had already been done, as the power connection to private respondent was
cut-off at 2:00 o’clock in the afternoon of November 23, 1978 for failure of
the latter to comply with its letter of demand dated October  26, 1978.

On December 8, 1978, private respondent filed an Urgent Ex-Parte Motion for Issuance of an Order of Reconnection of
its electric service alleging that the City Legal Officer is questioning the
validity of the Writ of Preliminary Injunction alleging that the same is
academic considering that private respondent’s electric service had already
been disconnected on November 23, 1978 and that the same could not be
reconnected without a specific order to that effect.  Another Motion for Issuance of a Writ of
Mandatory Injunction for the reconnection of its electric service, utilizing
the same bond previously posted by it, was likewise filed by private respondent
on the same date.

On the same date, the Court of Appeals issued a Writ of Mandatory
Injunction, utilizing the same bond previously posted by private respondent,
ordering petitioner to reconnect private respondent’s electric service.

Proceedings before the
Supreme Court

On December 15, 1978, the City filed the instant Petition for Certiorari,
Prohibition and Mandamus with this Court seek­ing the nullity of all the
proceedings had in the Court of Appeals in CA-G.R. No. 64200-R for lack of
jurisdiction and for certification to this Court of the appeal from the Order
of the trial Court in Civil Case No. 2547. 
It likewise prayed for the issuance of a restraining order enjoining the
execution or implementation of the Writ of Preliminary Mandatory Injunction
issued by the Court of Appeals on December
8, 1978 and from further proceeding with the appeal.

On December 19, 1978,
We issued a Resolution requiring respondents to comment on the Petition within
ten days from notice and granting the issuance of a temporary restraining order
enjoining respondent Court of Appeals from further proceeding with CA-G.R. No.
64200-R and from implementing the Writ of Preliminary Mandatory Injunction.

Commenting thereon, private respondent maintains that the Order
of the trial Court dated February 9, 1978 is appealable
to the Court of Appeals as it involves questions of fact as the Order of
dismissal was premised not only on failure to prosecute but also on the alleged
in facts that:  (1) the rates charged
private respondent for its electric consumption based on the tentative
agreement between the parties had become unrealistic; (2) it had not taken
steps to have the case terminated; and (3) the continued delay in the
disposition of the case worked to its advantage and that it had no intention of
terminating the proceeding before the trial Court; and that the City filed the
instant Petition without even giving the Court of Appeals a chance to rule on
the question of jurisdiction raised before it. 
Private respondent further alleged that the three Ordinances passed by
the City, namely Ordinance No. 126 in 1975, No. 29 in 1976 and No. 57 in 1977,
regarding the rates for electric consumption, are contrary to Section 105 of
Republic Act No. 4645 (Charter of Olongapo City) and
Section 13(a) of the Public Service Act. 
It then prayed for the dismissal of the Petition or, in the alternative,
for the elevation of the records of the case to this Court and the lifting of
the temporary restraining order.

In a Resolution dated January
26, 1979, We gave due course to the Petition and required the
parties to submit simultaneous memoranda. 
We also required the Court of Appeals to elevate the records of CA-G.R.
No. 64200-R.

On February 22, 1979, private respondent filed a Motion for the
issuance of a Writ of Preliminary (Mandatory) Injunction ordering petitioner to
reconnect its electric service, which had been cut-off again, allegedly causing
it damage in the sum of not less than P5,000.00 a day.  In a
Resolution dated February 23, 1979,
We resolved to hold in abeyance action on said Motion until the decision on the merits.

A Motion for Reconsideration of our Resolution of February 23,
1979 was filed by private respondent contending that it has been religiously
paying petitioner its electric consumption based on their First and Second
Tentative Agreements, effective during the pendency
of the case without prejudice to its final outcome; that the records show that
it has paid the City P547,076.59 out of a total billing of P1,313,910.80; that
the act of the City in cutting off its
electric power has caused it tremendous adverse effects, irreparable injuries
and losses; and that the City has been imposing unauthorized rates for power
and electrical consumption.  On March 14,
1979, We reconsidered our previous Resolution of February 23, 1979 and issued a
Writ of Preliminary Mandatory Injunction ordering the City to reconnect or
restore electric service to private respondent upon the latter’s 1) filing of a
bond in the amount of P400,000.00; 2) updating of its account in arrears, if
any, with petitioner, based on their tentative agreement of October 29, 1976;
and 3) regular payment of its monthly electrical consumption to petitioner
after reconnection, based on the same tentative agreement.

Findings and Conclusions

As matters now stand, we deem it unnecessary to resolve the
question of whether or not the Writs of Injunction issued by respondent Court
of Appeals were in aid of its appellate jurisdiction.  Of more crucial significance, considering the
pendency of this
case for almost seventeen years since its inception in 1962, is the
determination of the question of whether the trial Court had gravely abused its
discretion in issuing its Order dated February
9, 1978 dismissing the Complaint and that of March 21, 1978 denying reconsideration thereof.  For this purpose, we are treating this Petition also as one for review on certiorari of said
Orders.  In fact, in its Memorandum submitted on February 22, 1979, private respondent prayed for a remand of
the case to the trial Court upon a finding that it had abused its discretion in
dismissing the case.

Private respondent filed its Complaint against the City,
questioning the validity of the rates charged by the latter for its electric
consumption, on December 3, 1962.  On November
29, 1968, the trial Court issued its first Order dismissing the
case.  A Motion for Reconsideration was
filed by private respondent alleging that the reason why the case was never set
for hearing was because the parties
agreed to await the decision in a related case, Civil Case No. 9-0, which was
decided on November 27, 1968
and was still pending appeal.  In an
Order dated January 18, 1969,
the trial Court held in abeyance consi­deration of the Motion for
Reconsideration until the judgment in Civil Case No. 9-0 had became final.

On August 12, 1977,
the City filed a Manifestation stating that the decision in Civil Case No. 9-0 was affirmed by
the Court of Appeals and had already become final and moved that the case be
set for hearing.  In an Order dated August 15, 1977, the trial Court set
the case for hearing on September 15,
1977.

At the continuation of
the hearing on February 9, 1978, private respondent asked for leave to send
written interrogatories to its witnesses who were abroad.  This was opposed by the City which, instead,
moved for the dismissal of the case.  On
the same date, the trial Court issued the questioned Order denying private,
respondent’s Motion and dismissing the case on the ground that private
respondent had apparently no intention of terminating the case.

In its Motion for Reconsideration, private respondent contended
that the Order of dismissal had no legal and factual basis for the reasons that the case had not yet been set for pre-trial;
that its principal witnesses, its President, Mr. Ruben Valero, was taken ill in the United States and its other witness was
likewise abroad, hence its request for deposition upon written interrogatories;
that the parties had agreed to await the outcome of Civil Case No. 9-0; that
the parties had been trying to arrive at an amicable settlement of the case;
and that the parties had entered into another agreement regarding the
rates to be charged to it pending litigation, to reflect the increased rates of
the National Power Corporation.  The same
was denied by the trial Court in an Order dated March 21, 1978, with the observation that the case had
been dragging for more than ten years mainly because of the lack of initiative
on the part of private respondent to have the case terminated.

In its Urgent Motion/Petition for Issuance of a Writ of
Preliminary Injunction filed on November 17, 1978 before the Court of Appeals (Annex J, Petition),
private respondent alleged that the hearing of the case set on September 15,
1977, by virtue of the Order dated
August 15, 1977, was cancelled and reset on October 20, 1977, which was
again cancelled to give the parties time to amicably settle the case and reset on November 24, December 15 and 22, 1977;
that the scheduled hearings were again cancelled, upon motion of both
parties, because of the possibility of an amicable settlement, which was,
however, hindered by the absence of its President, who was then in the United
States; that the hearing on January 10, 1978 was cancelled at its request as
its witnesses, its President, Mr. Ruben Valero, and an expert engineer, were in
the United States; that at the hearing on February 9, 1978, it informed the
Court that Mr. Valero was suddenly taken ill in the United States and was not able to return to the Philippines and
requested that depositions upon written interrogatories be sent its witnesses
who were still abroad.

Upon those circumstances, We find that the trial Court gravely
abused its discretion in dismissing the Complaint by reason of the apparent
lack of interest or intention of private respondent to have the case
terminated.

It should be noted that as early as November 29, 1968, the trial Court had already ordered
the dismissal of the case for failure of the parties to have the case
terminated.  In its Motion for
Reconsideration, private respondent pointed out that the reason why the case
was never set for hearing was the agreement of the parties to await the outcome
of a related case, Civil Case No. 9-0. 
Consequently, resolution of the Motion for Reconsideration was held in abeyance until such time that final
judgment shall have been rendered in Civil Case No. 9-0.

It was only on August 12, 1977 that a Manifestation
was filed in the trial Court by the City stating that the decision in Civil
Case No. 9-0 was affirmed by the Court of Appeals and that the same had already become final. 
The City then moved that the case be set for hearing.  Thus, in an Order dated August
15, 1977, the trial
Court set the case for hearing on September 15, 1977. 
However, as pointed out by private respondent and which is not disputed
by petitioner, the scheduled hearings were cancelled in view of the attempts of
the parties to arrive at and amicable settlement.  However, attempts at an amicable settlement
failed and the ease was set for hearing on January 10, 1978 for the reception of private respondent’s
evidence.  Said scheduled hearing was
cancelled upon the request of private respondent because its principal
witnesses were in the United States.  At
the subsequent hearing on February 9, 1978 for the reception of the evidence
for private respondent, the latter informed the trial Court that its witness,
Ruben Valero, was taken ill in the United States and was not able to return to
the Philippines and thus sought leave to take the deposition upon written
interrogatories of its witnesses who were abroad.

The fact that the case remained in the calendar of the trial
Court for almost fifteen years, i.e., from 1962 to 1977, without any action
having been taken thereon, cannot be faulted on private respondent in view of
the agreement of the parties to await the outcome of a related case, Civil Case
No. 9-0.  In other words, it was only
after said Civil Case No. 9-0 was finally decided
that the case below could have proceeded to trial.  Thus, the said period of fifteen years during
which the case had been pending should not have been taken into account by the
trial Court in concluding that private respondent had no intention of having
the case terminated.  From September
15, 1977, when the
case was set for hearing, to February 9, 1978, when the case was ordered dismissed for
lack of interest on the part of private respondent, is a period of only five
months.  And the reasons why private
respondent was not able to present its evidence within said period of five
months were the parties’ attempts at an amicable settlement of the case, the
subsequent departure of its two principal witnesses for the United States and
the inability of Mr. Ruben Valero to return to the Philippines in time for the
hearing on February 9, 1978 because of illness. 
As held in Brandt vs. Behn, Meyer & Co.,
(38 Phil. 351 [1918]), an action should not be dismissed on a non-suit, granted
for want of prosecution, when the delay was caused by arrangements between the
parties looking to a settlement.  On the
other hand, private respondent’s request for permission to take its witnesses’
deposition upon written interrogatories, instead of merely asking for an
indefinite postponement of the hearing until such time as its witnesses could
have returned to the Philippines,
showed its intention not to unduly delay the termination of the case.

WHEREFORE, 1) the proceedings in the Court of Appeals in
CA-G.R. No. 64200-R are hereby set aside; 2) the Order the trial Court in Civil Case No.
2547 dated February 9, 1978 dismissing the case for lack of interest, as well
as the Order dated March 21, 1978 denying the Motion for Reconsideration, are
also hereby set aside, and the case remanded to the
trial Court for continuation of proceedings.

During the pendency of the case below, petitioner
City of Olongapo
shall continue to supply electricity to private respondent charging the rates stipulated in their tentative agreement
of October 29, 1976, and
private respondent shall pay its monthly bills promptly upon their presentation
by the City.  This is without prejudice
to such new temporary rates as may be determined by the trial Court to reflect
increased costs.

The bond of P400,000.00 required under the Writ of Preliminary
Mandatory Injunction ordered issued on March
14, 1979 shall be transmitted to the trial Court and shall remain
in full force and effect until final determination of the controversy between
the parties.

No pronouncement as for
costs.

SO ORDERED.

Teehankee, (Chairman), Makasiar, Fernandez, Guerrero, and De Castro, JJ., concur.

^[1]
p. 24, Record on Appeal.