Case Summary (G.R. No. 202481)
Petitioner and Respondent
• Petitioner: National Power Corporation (NAPOCOR)
• Respondent: Philipp Brothers Oceanic, Inc. (PHIBRO)
Key Dates
• May 14, 1987 – NAPOCOR issues invitation to bid
• July 8, 1987 – NAPOCOR accepts PHIBRO’s bid; PHIBRO notified July 15, 1987
• August 6, 1987 – NAPOCOR opens confirmed and workable Letter of Credit
• November 17, 1987 – PHIBRO effects first coal shipment
• October–December 1987 – PHIBRO excluded from subsequent bidding rounds
• January 16, 1992 – Regional Trial Court decision in favor of PHIBRO
• August 27, 1996 – Court of Appeals affirms RTC decision
• November 20, 2001 – Supreme Court renders decision
Applicable Law
• 1987 Philippine Constitution (post-1990 decisions)
• Civil Code of the Philippines, Arts. 19, 1174 (force majeure), 2200 (compensation for losses and profits), 2217 (moral damages), 2234 (exemplary damages)
• Bidding Terms and Specifications, Sections V (shipment schedule) and XVII (force majeure clause)
• Instruction to Bidders, IB-17 (reservation to reject any or all bids)
Factual Background
- PHIBRO prequalified and won the July 1987 public bidding to deliver two equal shipments (60,000 ± 10% MT each) of imported coal within 30 calendar days after receipt of NAPOCOR’s Letter of Credit.
- PHIBRO warned NAPOCOR of impending Australian industrial disputes and sought inclusion of a “strike-free” clause; NAPOCOR refused to share this risk.
- Strikes and work stoppages in New South Wales persisted from early July to late September 1987, making vessels scarce and delaying loading.
- NAPOCOR opened its Letter of Credit on August 6, 1987; PHIBRO nonetheless shipped coal only on November 17, 1987.
- In October 1987 NAPOCOR invited new bids; PHIBRO complied with prequalification requirements but was excluded, allegedly for non-performance under the July contract and purportedly impaired track record.
Procedural History
• PHIBRO filed for damages and injunctive relief before the Makati RTC (Civil Case No. 18473), alleging malice and bad faith in its disqualification from NAPOCOR tenders. NAPOCOR counterclaimed for P12,436,185.73 as actual damages and P500,000 for litigation expenses.
• January 16, 1992 – RTC awarded PHIBRO reinstatement in future biddings; actual (US$864,000), moral (US$100,000), exemplary (US$50,000) damages; attorney’s fees and litigation expenses (US$73,231.91).
• August 27, 1996 – Court of Appeals affirmed the RTC, holding that strikes constituted force majeure (per Section XVII), excusing PHIBRO’s delay, and that NAPOCOR acted maliciously in blacklisting PHIBRO.
• NAPOCOR elevated the case to the Supreme Court by petition for review under Rule 45.
Issues Presented
- Whether PHIBRO’s delivery delay was excused by force majeure and NAPOCOR’s delayed Letter of Credit.
- Whether NAPOCOR abused its discretion or acted in bad faith in disqualifying PHIBRO from subsequent bidding.
- Whether PHIBRO was entitled to injunctive relief, actual, moral, exemplary damages, attorney’s fees, and litigation expenses.
- Whether NAPOCOR’s counterclaims for damages should have been upheld.
Supreme Court Ruling
- Findings of Fact – The occurrence of Australian strikes (force majeure) and NAPOCOR’s delay in opening the Letter of Credit were supported by substantial evidence; such determinations are binding on the Supreme Court.
- Force Majeure – Under Civil Code Art. 1174 and the parties’ Section XVII stipulation, “strikes” are expressly covered. PHIBRO’s non-performance within 30 days was excused.
- Discretion to Reject Bids – Although NAPOCOR reserved the right under IB-17 to reject any or all bids, that right must be exercised in good faith in accordance with Civil Code Art. 19. The exclusion of PHIBRO, based on a bona fide belief of impaired track record, did not constitute bad faith or abuse of d
Case Syllabus (G.R. No. 202481)
Facts
- On May 14, 1987, National Power Corporation (NAPOCOR) invited bids for 120,000 metric tons of imported coal for its Batangas Coal-Fired Thermal Power Plant in Calaca, Batangas.
- Philipp Brothers Oceanic, Inc. (PHIBRO) was prequalified, participated in the public bidding, and had its bid accepted.
- NAPOCOR conveyed acceptance by letter dated July 8, 1987, received by PHIBRO on July 15, 1987.
- “Bidding Terms and Specifications” (Section V) required the seller to arrange gearless bulk carriers and deliver:
- 60,000 MT (±10%) by July 20, 1987
- 60,000 MT (±10%) by September 4, 1987
– in each case within 30 calendar days after receipt of Letter of Credit (LC).
- On July 10 and again July 23–31, 1987, PHIBRO informed NAPOCOR of looming industrial disputes and strikes in Australia, requesting a “strike-free” clause in the charter party; NAPOCOR refused to share that risk.
- NAPOCOR issued a confirmed and workable LC on August 6, 1987. PHIBRO’s first shipment, however, sailed only on November 17, 1987.
- In October 1987, NAPOCOR readvertised the coal tender. PHIBRO applied but, on November 24, 1987, was disqualified for “not meeting minimum requirements.”
- PHIBRO discovered that NAPOCOR’s real reason for exclusion was its demand for damages for the delayed first shipment.
- On December 4, 1987, PHIBRO filed suit for damages and injunctive relief with RTC Makati, Branch 57.
Procedural History
- RTC Makati, Branch 57 (Decision of January 16, 1992):
- Ruled in favor of PHIBRO.
- Ordered NAPOCOR to reinstate PHIBRO as accredited bidder and allow participation in future tenders.
- Awarded PHIBRO:
• US$864,000 as actual damages
• US$100,000 as moral damages
• US$50,000 as exemplary damages
• US$73,231.91 for litigation expenses and attorney’s fees
• Costs of suit - Dismissed NAPOCOR’s counterclaims.
- Court of Appeals (Decision of August 27, 1996; CA-G.R. CV No. 37906):
- Affirmed in toto the RTC decision.
- Held PHIBRO’s delay excused by NAPOCOR’s late LC opening and Australian strikes (force majeure per Section XVII of the bidding terms).
- Upheld the awards of reinstatement, damages, fees, and costs.
- Supreme Court (G.R. No. 126204, November 20, 2001):
- NAPOCOR petitioned for review under Rule 45, raising only