G.R. No. 185765 - Philippine Economic Zone Authority vs. Pilhino Sales Corp.

On October 4, 1997, the Philippine Economic Zone Authority (PEZA) invited bids for two brand-new fire truck units (4,000–5,000 L water, 500–1,000 L foam).
Three firms participated; Pilhino Sales Corporation won at ₱2,900,000 per truck (negotiated down from ₱3,000,000).
Contract terms: delivery of two FF3HP trucks within 45 days of PEZA’s purchase order (dated November 6, 1997) and a liquidated-damages penalty of 1/10 of 1% of the total contract price per day of delay.

Pilhino failed to deliver; PEZA formally demanded compliance on July 27, 1998 and February 23, 1999.
PEZA filed Civil Case No. 00-0343 in RTC Pasay City (Branch 108) for rescission and damages.
RTC’s November 2, 2005 Decision: rescinded the contract; forfeited Pilhino’s performance bond; awarded exemplary damages (₱100,000), costs of suit, and liquidated damages at 1/10 of 1% of ₱5,800,000 per day from June 19, 1998.

CA’s May 2, 2008 Decision: held there was a meeting of minds (bond and indemnity agreement evidence); recognized Pilhino’s March 29, 1999 letter proposing new specs at ₱3,600,000/unit and waiver of penalties; reduced liquidated damages to ₱1,400,000; deleted bond forfeiture.
CA’s November 25, 2008 Resolution denied PEZA’s motion for reconsideration.
PEZA filed a Rule 45 Petition before the Supreme Court, seeking reinstatement of the RTC award; Pilhino counter-argued that rescission voided the penalty stipulation.

Whether a contract’s stipulated liquidated damages remain enforceable notwithstanding the contract’s rescission.
Whether the Court of Appeals properly reduced the agreed liquidated-damages penalty based on Pilhino’s belated offer to mitigate.