G.R. No. L-27070-71 - Cochingyan, Jr. vs. Cloribel

In 1964, the Reparations Commission imported Japanese reparation consumer goods consisting principally of textiles, porcelain wares, electronic tubes, radio parts, and photographic materials.
The proceeds from these goods were meant to accrue to a trust fund exclusively for the benefit and rehabilitation of World War II veterans of the Philippines, as well as their widows and orphans.

Upon the arrival of the importations, various private parties presented conflicting claims and contracts—each asserting ownership over the same goods.
The Court of First Instance (CFI) of Manila intervened and effected a compromise agreement, although the parties could not agree on the mechanics and means of its implementation.
The case eventually reached the Supreme Court which, on April 22, 1977, resolved the matter by creating a special committee to address the issues.

The committee was directed to proceed with the sale of the reparations goods, either by public auction or by negotiation, subject to the prior approval of the Presiding Judge.

The Committee advertised for bidders, listing the reparations consumer goods with detailed quantities and appraised values, including items such as electronics, textiles, porcelain wares, and photographic materials.
During the bid opening on December 21, 1977, Luis Cua submitted the highest qualifying bid of three million one hundred one thousand one hundred eleven pesos and eleven centavos (P3,101,111.11).
A certificate of award was issued on December 29, 1977, which stated that upon compliance with the Committee’s requirements, all goods would be released in favor of the Awardee.
In compliance, Awardee secured an irrevocable letter of credit in the amount of P2,601,111.11.

On February 28, 1978, Awardee received from the Committee all the reparations goods stored at multiple Customs Bonded Warehouses, including Raymundo’s Warehouse and Reliance Warehousing Commercial Co.
Before the Committee could finalize its report to the Court, the Auditor of the Bureau of Customs halted further release of goods by refusing to allow release without payment of storage charges amounting to P2,509,494.00.
Despite various representations made by the Committee to the Collector of Customs, the storage fee issue persisted, delaying the delivery of the remaining goods.

On May 29, 1978, Awardee Luis Cua wrote to the late Chief Justice Fred Ruiz Castro requesting that the remaining undelivered goods no longer be enforced against him and that he be released from his obligations.
His reasons included:

A failure by the Committee to deliver all goods within a reasonable period (noting that five months had passed since acquiring his rights over the goods).
Financial losses and adverse effects due to the delay, including depreciation of the goods’ market value.
The assertion that, had he been aware of the Committee’s inability to deliver on time, he would not have participated in the bidding under the original terms.

As an alternative, Awardee proposed that if the Committee insisted on full consummation of the award, the sale price for the remaining goods be reduced from P1,569,481.89 to a substantially lower amount, P450,000.00, to allow a recovery of potential losses and additional expenses.

The Committee, in response to Awardee’s position, insisted that he take delivery of the remaining goods within five days, warning that failure would lead them to seek authority from the Supreme Court to sell the remaining goods to third parties.
When the Awardee did not meet the five-day requirement, on August 2, 1979, the Committee filed a motion before the Court requesting authority to sell and deliver the remaining goods to third parties, and sought that Awardee be made to pay any shortfall between the approved bid price (P1,601,111.11, as alleged) and the proceeds from such sale.
In his position paper dated August 6, 1979, Awardee contested this calculation by asserting that his unpaid balance was only P1,569,482.11 (after payments totaling P1,531,629.00) and argued that holding him liable for the balance would effectively be contrary to principles of fairness, given that the delay was not due to any fault on his part.
The parties also presented conflicting reports regarding the volume of goods delivered and undelivered, with Awardee and the Committee providing divergent figures for porcelain wares and textiles.

The case underwent further procedural developments, including memoranda filed by the parties, which crystallized the issues into two main questions:

Whether the Committee should be allowed to sell the remaining reparations goods to third parties; and
If sold, whether Awardee should be held liable for the unrealized balance of the approved award.

Other related parties, such as the Philippine Veterans Legion and associated organizations, sought relief regarding their entitled shares, but their claims were deemed premature pending full disposal of the reparations goods and settlement of related expenses.

Whether the Committee is authorized to sell the remaining reparations consumer goods to third parties.

This issue arises from the delivery delays and the conflicting claims regarding the volume of goods received by Awardee.
Both the Awardee and the Committee expressed positions on allowing such a sale, albeit for different reasons.

Whether Awardee Luis Cua should be held liable for any unrealized balance of the approved bid price after deducting the proceeds from the sale of the remaining goods.

The dispute centers on conflicting calculations of the remaining bid price and the corresponding obligations.
Central to this issue is whether Awardee’s non-acceptance of the remaining goods, due to undue delay, can justify discharging him from financial obligations under the award.