Case Digest (G.R. No. 185765)
Facts:
Philippine Economic Zone Authority v. Pilhino Sales Corporation, G.R. No. 185765, September 28, 2016, the Supreme Court Second Division, Leonen, J., writing for the Court.The petitioner is the Philippine Economic Zone Authority (PEZA); the respondent is Pilhino Sales Corporation (Pilhino). PEZA published an invitation to bid on October 4, 1997 for two fire truck units with specified capacities. Three firms bid and Pilhino was awarded the contract; the agreed price was negotiated down to P2,900,000.00 per unit (total contract price P5,800,000.00). The written contract required delivery within 45 days of receipt of a purchase order and contained a liquidated-damages clause: a penalty of 1/10 of 1% of the total contract price for each day of delay.
PEZA issued a purchase order dated November 6, 1997, but Pilhino failed to deliver. PEZA made formal demands on July 27, 1998 and February 23, 1999; Pilhino still did not comply. PEZA then filed a Complaint for rescission of contract and damages in the Regional Trial Court (RTC) of Pasay City, docketed as Civil Case No. 00-0343 and raffled to Branch 108.
In its defense Pilhino contended there was no starting date for delivery because it had not accepted the purchase order and even suggested there was no meeting of minds. The RTC, in a Decision dated November 2, 2005 (penned by Judge Tingaraan U. Guiling), ruled for PEZA: it rescinded the contract, ordered forfeiture of Pilhino’s performance bond, awarded liquidated damages at the stipulated rate computed from June 19, 1998, exemplary damages of P100,000.00, and costs.
Pilhino appealed to the Court of Appeals (CA). In its May 2, 2008 Decision the CA rejected Pilhino’s denial of meeting of minds (citing Pilhino’s submission of a performance bond and an indemnity agreement, and a March 29, 1999 letter in which Pilhino admitted it could not meet the original specifications and offered alternative trucks at P3,600,000.00/unit while offering to shoulder the price difference and to stop penalty accumulation). The CA nonetheless modified the RTC award: it deleted the forfeiture of the performance bond and reduced liquidated damages to P1,400,000.00, relying on Article 1229 and Article 2227 of the Civil Code and treating Pilhino’s post-breach offer as a mitigating factor. The CA denied PEZA’s motion for reconsideration in a November 25, 2008 Resolution.
PEZA filed a Petition for Review ...(Pro-only)
Issues:
- When a contract is rescinded for breach, can the contractually stipulated liquidated damages still be awarded?
- If such an award is proper, was the Court of Appeals correct in reducing the stipulated liquidated damages to ...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)