G.R. No. 159831 - Pilipinas Shell Petroleum Corp. vs. John Bordman Ltd. of Iloilo Inc.

Case Digest (G.R. No. 159831)
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Facts:

Parties and Transaction History

Petitioner: Pilipinas Shell Petroleum Corporation, a corporation engaged in refining and processing petroleum products.
Respondent: John Bordman Ltd. of Iloilo, Inc., a long-standing customer who had been purchasing bunker oil since 1955.
Initially, invoicing was done by Pilipinas Shell while delivery was effected through Arabay, Inc., its sole distributor until 1975, when Shell took over direct marketing.

Dispute over Delivery and Billing Practices

Respondent alleged that it was billed for 210 liters per drum although actual volumetric tests indicated short deliveries.
On July 24, 1974, a test using a drum revealed that only 190 liters could be accommodated, demonstrating a short delivery gap of 9.5%.
Following the test, Arabay reduced the billing rate to 200 liters per drum, except for a few deliveries from August 1 to September 9, 1974 where the billing was at 190 liters.
A subsequent test on January 23, 1975, allegedly showed the drum capacity to be 187.5 liters.

Legal Action and Pleadings

On August 20, 1980, Respondent filed a civil case for specific performance seeking:

Delivery of the deficient fuel oil volume; and
Payment of exemplary damages, attorney’s fees, and costs of suit.

Pursuant to the complaint, Respondent demanded fuel oil credits adjusted initially to 640,000 liters and then to 780,000 liters, reflecting the inconsistency in billing rates since 1966.
Pretrial proceedings led to a limited issue: whether short deliveries occurred and if the action was barred by prescription, laches, or estoppel.

Pretrial and Trial Court Proceedings

Remedial measures included:

John Bordman’s Motion for Trial by Commissioner, which was granted;
The commissioner’s report (April 20, 1988) supported the contention of short deliveries.

Petitioner, along with Arabay, filed an Answer with Counterclaim denying deficient deliveries and asserting affirmative defenses such as waiver, prescription, laches, and estoppel.
During trial, evidentiary presentations involved:

Volumetric tests conducted by respondent’s witness Engineer Jose A. Macarubbo;
Disputes over whether such tests were reflective of the actual delivery conditions, including issues of drum condition and testing methodologies.

Trial Court Decision and Appellate Review

The trial court ruled in favor of Respondent, affirming that Pilipinas Shell was liable for delivering 916,487.62 liters fewer than contracted, and awarded:

Delivery of the deficient volume of bunker oil;
Actual damages of P1,000,000;
Exemplary damages and attorney’s fees, originally set at P500,000 each (later reduced).

The Court of Appeals (CA) affirmed the trial court’s decision and rejected petitioner’s challenges concerning:

The credibility of respondent’s evidence, including the testimony of Macarubbo;
The reliability of the volumetric tests;
The validity of objections based on estoppel, laches, and prescription.

Issues:

Verification and Certification

Whether the verification and certification against forum shopping in the Petition were valid, particularly given the allegation that the executed verification was unauthorized because the signatory (Shell’s vice-president) lacked proper authority.
Whether the delegation of authority by Shell’s board, allowing the vice-president to act, was proper and sufficient.

Factual Findings and Evidence Assessment

Whether the trial court’s and CA’s reliance on respondent’s evidence, including the testimony of Engineer Macarubbo and the outcome of the volumetric tests, was justified.
Whether petitioner’s challenge that the tests were not reflective of the actual delivery circumstances (e.g., drum conditions, positioning during loading) was sufficiently rebutted.

Prescription

Whether the action for specific performance and damages based on alleged short deliveries was time-barred considering:

The commencement of the prescriptive period in actions based on contractual breaches is determined by the occurrence of the breach rather than the execution of the contract; and
The impact of formal written demands and the actual discovery of the shortage on the accrual of the cause of action.

Whether the prescriptive period should be reckoned from the date when respondent discovered the short deliveries (July 24, 1974) rather than earlier billing dates.

Estoppel and Laches

Whether Respondent’s delay in asserting its claim (about twenty-five years after initial deliveries) should bar recovery through the doctrines of estoppel or laches.
Whether the stipulation in Shell’s invoices, which declared that fuel was received in good condition, legally precluded respondent from later claiming short deliveries.

Award of Exemplary Damages and Attorney’s Fees

Whether the award of exemplary damages was justified based on Shell’s alleged wanton refusal to deliver the correct quantity of fuel oil despite knowing the shortage.
Whether the award of attorney’s fees – reduced to P100,000 – was proper given that such fees are normally linked to the imposition of exemplary damages but may also be granted on just and equitable grounds independently.

Overall Error in Factual and Legal Findings

Whether the CA and the trial court committed grave abuse of discretion by misappreciating the facts as presented in the record.
Whether the evidentiary discrepancies, particularly regarding the physical tests and delivery measurements, warrant a reversal of the appellate and trial courts’ findings.

Ruling:

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Ratio:

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Doctrine:

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