Title
ABS-CBN Broadcasting Corporation vs. Honorable Court of Appeals
Case
G.R. No. 128690
Decision Date
Jan 21, 1999
ABS-CBN challenged the Court of Appeals decision on a film exhibition contract, asserting a perfected agreement with Viva Productions. The court ruled that no contract existed without board approval, and upheld damage awards to RBS.
contract dispute
film exhibition agreement
right of first refusal
A

Case Summary (G.R. No. 128690)

Procedural History

ABS-CBN and VIVA had a 1990 Film Exhibition Agreement. Disputes over a 1992 package offer of VIVA films led ABS-CBN to file a complaint for specific performance and to seek injunctive relief against RBS, VIVA, and Del Rosario (Civil Case No. Q-92-12309). The RTC issued a TRO and later a preliminary injunction; litigants posted bonds and counterbonds; after trial the RTC dismissed ABS-CBN’s complaint (28 April 1993) and awarded damages and attorneys’ fees against ABS-CBN. The Court of Appeals affirmed with modification (31 October 1996), reducing the awards. ABS-CBN petitioned to the Supreme Court seeking reversal of the Court of Appeals’ rulings on contract formation and on damages/attorneys’ fees. The Supreme Court granted the petition and reversed the Court of Appeals decision except for an unappealed award of attorneys’ fees in favor of VIVA.

Core Facts

  • 1990: ABS-CBN and VIVA executed a Film Exhibition Agreement giving ABS-CBN a right of first refusal to the next 24 VIVA films for TV telecast, but such right was expressly subject to terms to be agreed and to exercise within 15 days of written offer.
  • December 1991: VIVA (through Del Rosario) offered film packages; January 6, 1992: ABS-CBN (via Charo Santos‑Concio) responded in writing, indicating it could only “tick off” 10 titles and requesting scheduling concessions — the letter was characterized as a rejection of the offered list.
  • February–April 1992: Del Rosario presented a larger list (52 originals + re‑runs) and negotiations followed. On April 2, 1992, Lopez (ABS‑CBN) and Del Rosario met at Tamarind Grill; Lopez later claimed a verbal agreement on 14 films and a price written on a napkin; Del Rosario denied such agreement and maintained VIVA’s demand for the 104‑film package at P60 million. ABS‑CBN prepared and sent a draft contract (counter‑proposal) covering 53 films for P35 million; VIVA’s Board rejected the counter‑proposal and proceeded to grant RBS exclusive rights to the 104 films (letter of agreement dated April 24/29, 1992).
  • May 27, 1992: ABS‑CBN filed the specific performance complaint and obtained injunctive relief; litigation ensued, including counterbonds, and ultimately trial on the merits.

Issues Presented

  • Whether a perfected binding contract arose between ABS‑CBN and VIVA granting ABS‑CBN exclusive rights to the subject films.
  • Whether RBS was entitled to recover actual/compensatory damages, moral and exemplary damages, and attorneys’ fees from ABS‑CBN as a consequence of ABS‑CBN’s complaint and the injunctive proceedings.

Legal Principles on Contract Formation Applied by the Court

  • A contract requires concurrence of consent, a certain object, and cause (Art. 1305, Art. 1318, Civil Code). Contracts undergo negotiation, perfection (meeting of the minds), and consummation.
  • Acceptance must be absolute and identical to the offer; a qualified acceptance that varies material terms constitutes a counter‑offer and rejects the original offer. The courts cited controlling jurisprudence establishing that material variance prevents perfection of contract.
  • Corporate acts such as entering into contracts are generally exercised by the board of directors; officers or agents bind the corporation only within delegated authority, which must be specific and proven.

Court’s Analysis — No Perfected Contract Between ABS‑CBN and VIVA

  • The Supreme Court agreed with the RTC and Court of Appeals that no meeting of minds occurred. The April 2 meeting at Tamarind Grill involved negotiations over a VIVA offer for 104 films; ABS‑CBN’s subsequent transmission of a draft contract proposing 53 films for P35 million constituted a counter‑proposal that materially altered the terms, and therefore was not an acceptance.
  • The purported oral agreement as written on a napkin by Lopez was unproved and inconsistent with the draft contract’s contents; the napkin was never produced and the draft contained many provisions not discussed at the lunch. Contradictions in testimony (e.g., differing total amounts P35M vs P36M) further undermined ABS‑CBN’s claim of a concluded deal.
  • Even if Del Rosario had agreed to terms orally, there was no evidence he had authority to bind VIVA absent specific board delegation; VIVA’s Board rejected the draft contract and insisted on the 104-film package. Under the Corporation Code (Sec. 23), board approval was required for such corporate action unless properly delegated.
  • The Supreme Court thus concluded the contract was not perfected: the negotiations remained in the bargaining stage, the parties did not achieve concurrence on object and consideration, and VIVA’s Board did not approve the alleged agreement.

Court’s Analysis — Right of First Refusal

  • The 1990 agreement conferred a right of first refusal to ABS‑CBN for the next 24 films but expressly left price and terms to be agreed and required exercise within 15 days of an actual written offer. The Court found that ABS‑CBN, through Concio’s January 6, 1992 letter, had effectively rejected the initial list and thereby had lost its right of first refusal as to that offer. Subsequent lists and negotiations were treated as a new package, not a continuation of the prior right of first refusal.

Court’s Analysis — Damages and Attorneys’ Fees (RBS Claims)

  • Actual (compensatory) damages: The Supreme Court found no sufficient legal basis to hold ABS‑CBN liable for RBS’s claimed pecuniary losses (e.g., premium on the counterbond, print advertisement costs). RBS chose to post a counterbond to dissolve the injunction; ABS‑CBN had not yet posted the required bond and had sought its reduction, and the posting of a counterbond by RBS was an option exercised by RBS. The Court held ABS‑CBN could not be held responsible for RBS’s decision to incur those costs. The RTC’s TRO and preliminary injunction were issued on a factual and legal basis adequate to support issuance; dissolution occurred due to RBS’s counterbond, not because the injunction was void.
  • Moral and exemplary damages: The Court explained that such awards presuppose malice, bad faith, or acts contrary to morals/public policy (Arts. 19–21). There was no adequate proof that ABS‑CBN acted with malice or bad faith in instituting the action; ABS‑CBN honestly believed in the merits of its claim after extensive negotiations and preparation of a draft contract. Moreover, moral damages generally compensate personal injury to feelings and are not normally recoverable by juridical persons; prior statements suggesting reco
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