Case Summary (G.R. No. 231679)
Factual Background and Dispute
BOHECO I owned a 5MVA Substation Transformer (Serial No. 540808001) which, in September 1979, was transferred to NAPOCOR's Tongonan Geothermal Plant in Ormoc City. This transfer was facilitated by a radio message from an NEA Director authorizing NAPOCOR personnel to "borrow" the transformer. A series of requisition vouchers and material charge tickets approved by BOHECO official Melchor B. Bobis further authorized this transfer, with handwritten notes referencing pending negotiations among NEA, NAPOCOR, and BOHECO. However, BOHECO never received any documentation evidencing an agreement transferring ownership or use rights.
Upon failure by NAPOCOR to return the transformer or pay rentals, BOHECO filed a complaint for recovery of possession and back rentals. NAPOCOR filed a third-party complaint against NEA, claiming possession was lawful and effected per NEA's directive as a replacement for NAPOCOR's transformer shipped elsewhere. NEA denied responsibility, arguing that no final negotiation or agreement existed and that the action was barred by prescription and administrative remedies under PD 242.
Trial Court Findings and Decision
The Regional Trial Court (RTC) ruled in favor of BOHECO, declaring BOHECO the true and legal owner, ordering NAPOCOR to return the transformer, and jointly holding NAPOCOR and NEA liable for back rentals and attorney’s fees. The RTC recognized that NAPOCOR unlawfully withheld the transformer, awarding PHP 450,000 as back rentals plus 20% attorney’s fees.
Court of Appeals Ruling
Upon appeal, the Court of Appeals (CA) affirmed the RTC decision with modification. It deleted the award of attorney's fees due to lack of specific grounds, and held NAPOCOR solely liable for payment of the back rentals, rejecting joint liability with NEA. The CA found that only NAPOCOR benefited from possession and use of the transformer, while NEA did not hold possession nor benefitted in a manner warranting liability. The CA also imposed legal interest on rentals from the date of demand until full payment and directed the RTC to appoint commissioners to determine the fair rental value.
Issues on Review
The primary issue was whether the CA erred in holding NAPOCOR solely liable for payment of rentals-in-arrears, excluding NEA, given NEA’s alleged benefit from the transformer’s use.
Petitioner’s (NAPOCOR) Arguments
NAPOCOR contended:
- Its possession resulted from NEA’s directive; thus, NEA should bear liability.
- The transfer was part of an internal arrangement ("swap") between NEA and NAPOCOR involving transformers of different capacities.
- NAPOCOR was a possessor in good faith and entitled to the fruits of the property without obligation to pay rentals.
- NEA also benefitted since BOHECO continued paying amortizations to NEA.
Respondents’ (BOHECO and NEA) Positions
- BOHECO: Stressed that both NEA and NAPOCOR benefited and thus both should be solidarily liable; NEA continued receiving payments despite the transformer being in NAPOCOR’s possession.
- NEA: Denied instructing NAPOCOR formally; emphasized absence of a binding written agreement or final "negotiations"; argued NAPOCOR’s possession was not NEA’s authorization but a unilateral action; claimed the case was barred by prescription and failure to exhaust administrative remedies.
Supreme Court’s Analysis and Ruling
The Court affirmed the CA decision, holding:
- Ownership: BOHECO remains the rightful owner of the subject transformer. Possession transferred to NAPOCOR does not equate to an ownership transfer. No evidence supported transfer of ownership from BOHECO to NAPOCOR or from BOHECO to NEA.
- Possession and Liability: Although possession and control of the transformer were transferred to NAPOCOR per NEA’s radio message, NEA did not acquire possession nor exercised control over the transformer. Only NAPOCOR currently held possession and benefitted from its use.
- Rental Payment: Recovery of rentals-in-arrears from NAPOCOR is proper given its possession and use without owner’s consent. The Court found no basis for joint liability with NEA because NEA neither possessed nor benefitted from the transformer usage despite BOHECO’s continued amortization payments to it. The Court emphasized that continuous payments to NEA signify BOHECO’s retained ownership over the transformer, not NEA’s benefit from its use.
- Proof of Rental Value: The Court agreed with the CA that the RTC erred in awarding back rentals without supporting evidence on the fair rental value. The case was remanded to the RTC for appointment of commissioners to ascertain reasonable rental values based on industry standards and evidence.
- Attorney’s Fees: The award of attorney’s fees was correctly deleted due to the RTC’s failure to state factual or legal grounds justifying the award. The CA appropriately followed the rule that such award must be supported by findings.
- Legal Interest: The CA correctly imposed legal interest consistent with established jurisprudence (Nacar v. Gallery Frames), starting from the date of extrajudicial demand and adjusting rates through the timeline until full payment.
- NEA’s Liab
Case Syllabus (G.R. No. 231679)
Background and Nature of the Case
- Petition for Review under Rule 45 of the Rules of Court seeking to set aside the April 28, 2017 Decision of the Court of Appeals (CA).
- CA Decision affirmed with modification the December 16, 2011 Decision of the Regional Trial Court (RTC), Branch 49, Tagbiliran, Bohol.
- The RTC declared BOHECO I as the true and legal owner of a 5MVA Substation Transformer 13.2/7.62/4.16 KV (SN-540808001), referred to as the "subject transformer."
- The case involves a complaint for recovery of possession and payment of back rentals filed by BOHECO against NAPOCOR.
- NAPOCOR filed a third-party complaint against the National Electrification Administration (NEA).
Factual Antecedents
- On September 13, 1979, BOHECO's receipt of a radio message from NEA Director Santos allowed NPC personnel to borrow the subject transformer for the Tongonan Geothermal Plant in Ormoc.
- Engineer Virgilio Ungab of NAPOCOR prepared requisition vouchers for the release of the subject transformer and materials, both approved by BOHECO’s Acting General Manager Melchor B. Bobis.
- Handwritten notes on documents indicated the transaction was “subject to NEA, NPC & BOHECO I negotiations.”
- BOHECO’s possession of the subject transformer ceased on or about September 18, 1979, when Engr. Ungab pulled it out.
- BOHECO wrote letters in 1985 and subsequent years requesting rental payment and copies of agreements between NAPOCOR and NEA related to the transformer, but requests were not honored.
- NAPOCOR claimed its possession was legitimate as NEA replaced its own transformer withdrawn from the Tongonan plant, relying on NEA’s authority to effect such transfer.
- NEA dismissed NAPOCOR’s motion for reconsideration of the third-party complaint dismissal, but later the RTC reinstated the complaint due to NEA’s non-opposition.
Positions and Contentions of the Parties
- BOHECO’s Position:
- BOHECO maintains ownership of the subject transformer.
- NAPOCOR only borrowed the transformer; no agreement involving BOHECO transferred ownership to NAPOCOR.
- NAPOCOR’s possession later became adverse when it insisted on a swap involving NAPOCOR’s 3MVA transformer.
- BOHECO demanded both return of the transformer and payment of reasonable rentals with back rentals for use.
- NAPOCOR’s Position:
- Possession was lawful from the outset due to NEA’s directive.
- Possession involved an internal agreement with NEA to swap transformers to minimize logistics costs.
- Possession was in good faith, entitling it to fruits of the property and exempting it from payment of rentals.
- NAPOCOR objected to the RTC’s finding, arguing that NEA also benefited, thus should share liability.
- NEA’s Position:
- Denied instructing NAPOCOR to take the transformer, contesting the validity of evidence.
- Argued the phrase “subject to negotiation” indicated no binding agreement existed.
- Alleged prescription and laches barred claims.
- Claimed no possession or benefit from the transformer to j