Case Digest (G.R. No. 129796)
Facts:
Astroland Developers, Inc. v. Government Service Insurance System and Court of Appeals, G.R. No. 129796, September 20, 2004, Supreme Court Second Division, Callejo, Sr., J., writing for the Court.Queens Row Subdivision, Inc. (QRSI) borrowed from the Government Service Insurance System (GSIS) to develop a 100-hectare housing project; disbursements included an initial P10,000,000 loan (May 13, 1971) and an additional P4,000,000 (February 28, 1972). By 1980 the project remained largely unfinished and QRSI had large outstanding obligations; GSIS conditioned an additional P8,000,000 loan on designation of a new project manager, and Astroland Developers, Inc. (ASTRO) was appointed project manager under a Project Management Agreement (PMA) dated September 30, 1980 and a Supplemental Contract to PMA (SCPMA). The PMA assigned ASTRO broad duties (operation, development, marketing, collection) and provided a five-percent commission under Article III; Article X (Secs. 10.01–10.03, as amended) preserved GSIS’s right to terminate the PMA for “valid cause” upon sixty days’ notice.
Disputes arose: the National Housing Authority earlier issued a cease-and-desist (lifted later); contractors sued QRSI/GSIS for unpaid claims; ASTRO performed partial construction (626–635 units by September 1982) and received the P8,000,000 disbursement. Isabel V. Arrieta (QRSI president), appointed exclusive sales agent under the SCPMA, later claimed unpaid commissions; ASTRO denied entitlement. The GSIS Board received reports alleging irregularities, and on June 28, 1982 the Office of the Government Corporate Counsel (OGCC) recommended termination of the PMA and SCPMA; on July 8, 1982 the GSIS Board adopted Resolution No. 587 terminating ASTRO’s appointment effective after sixty days and naming CV Management Corporation as replacement. ASTRO did not seek reconsideration and wound up operations, turning the unfinished project back to QRSI/GSIS.
ASTRO demanded management fees (initially P12,993,419; later claims increased to P21,187,069) which QRSI and GSIS refused to pay; GSIS later adopted Board Resolution No. 216 denying ASTRO’s claim and advising it should seek recovery from QRSI. On March 26, 1986 ASTRO sued GSIS in the Regional Trial Court (Manila) for damages, unearned management fees and attorneys’ fees, alleging GSIS’s unilateral termination was arbitrary and caused loss. The RTC rendered judgment for ASTRO (October 9, 1990), awarding unearned management fees, consequential damages, exemplary damages, attorneys’ fees and interest on the ground that GSIS’s cancellation was arbitrary and the OGCC opinion unreasonable.
GSIS appealed to the Court of Appeals, which on November 12, 1996 reversed, holding GSIS was entitled under Article X (Secs. 10.01–10.02) of the PMA, as amended, to rescind the PMA and SCPMA and that any contractual obl...(Subscriber-Only)
Issues:
- Was GSIS’s unilateral rescission of the PMA and SCPMA in accordance with the PMA/SCPMA and thus valid?
- Is ASTRO entitled to management fees from GSIS either under the PMA/SCPMA or as damages under Articles 19, 20 and 2176 of the ...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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