Summary: Jardine Davies vs. Court of Appeals (GR 128066, 19 June 2000)

Jardine Davies vs. Court of Appeals
[GR 128066, 19 June 2000], also Purefoods Corporation vs. Court of Appeals [GR 128069]
Second Division, Bellosillo (J): 4 concur

Facts: In 1992, at the height of the power crisis which the country was then experiencing, and to remedy and curtail further losses due to the series of power failures, Pure Foods Corporation decided to install two (2) 1500 KW generators in its food processing plant in San Roque, Marikina City. Sometime in November 1992 a bidding for the supply and installation of the generators was held. Several suppliers and dealers were invited to attend a pre-bidding conference to discuss the conditions, propose scheme and specifications that would best suit the needs of PUREFOODS. Out of the 8 prospective bidders who attended the pre-bidding conference, only 3 bidders, namely, Far East Mills Supply Corporation (FEMSCO), Monark and Advance Power submitted bid proposals and gave bid bonds equivalent to 5% of their respective bids, as required. Thereafter, in a letter dated 12 December 1992 addressed to FEMSCO President Alfonso Po, PUREFOODS confirmed the award of the contract to FEMSCO. Immediately, FEMSCO submitted the required performance bond in the amount of P1,841,187.90 and contractor's all-risk insurance policy in the amount of P6,137,293.00 which PUREFOODS through its Vice President Benedicto G. Tope acknowledged in a letter dated 18 December 1992. FEMSCO also made arrangements with its principal and started the PUREFOODS project by purchasing the necessary materials. PUREFOODS on the other hand returned FEMSCO's Bidder's Bond in the amount of P1,000,000.00, as requested. Later, however, in a letter dated 22 December 1992, PUREFOODS through its Senior Vice President Teodoro L. Dimayuga unilaterally cancelled the award as "significant factors were uncovered and brought to (their) attention which dictate (the) cancellation and warrant a total review and re-bid of (the) project." Consequently, FEMSCO protested the cancellation of the award and sought a meeting with PUREFOODS. However, on 26 March 1993, before the matter could be resolved, PUREFOODS already awarded the project and entered into a contract with JARDINE NELL, a division of Jardine Davies, Inc. (JARDINE), which incidentally was not one of the bidders. FEMSCO thus wrote PUREFOODS to honor its contract with the former, and to JARDINE to cease and desist from delivering and installing the 2 generators at PUREFOODS. Its demand letters unheeded, FEMSCO sued both PUREFOODS and JARDINE: PUREFOODS for reneging on its contract, and JARDINE for its unwarranted interference and inducement. Trial ensued. After FEMSCO presented its evidence, JARDINE filed a Demurrer to Evidence. On 27 June 1994 the Regional Trial Court of Pasig, Branch 68, granted JARDINE's Demurrer to Evidence. On 28 July 1994 the trial court rendered a decision ordering PUREFOODS: (a) to indemnify FEMSCO the sum of P2,300,000.00 representing the value of engineering services it rendered; (b) to pay FEMSCO the sum of US$14,000.00 or its peso equivalent, and P900,000.00 representing contractor's mark-up on installation work, considering that it would be impossible to compel PUREFOODS to honor, perform and fulfill its contractual obligations in view of PUREFOOD's contract with JARDINE and noting that construction had already started thereon; (c) to pay attorney's fees in an amount equivalent to 20% of the total amount due; and, (d) to pay the costs. The trial court dismissed the counterclaim filed by PUREFOODS for lack of factual and legal basis. Both FEMSCO and PUREFOODS appealed to the Court of Appeals. FEMSCO appealed the 27 June 1994 Resolution of the trial court which granted the Demurrer to Evidence filed by JARDINE resulting in the dismissal of the complaint against it, while PUREFOODS appealed the 28 July 1994 Decision of the same court which ordered it to pay FEMSCO. On 14 August 1996 the Court of Appeals affirmed in toto the 28 July 1994 Decision of the trial court. It also reversed the 27 June 1994 Resolution of the lower court and ordered JARDINE to pay FEMSCO damages for inducing PUREFOODS to violate the latter's contract with FEMSCO. As such, JARDINE was ordered to pay FEMSCO P2,000,000.00 for moral damages. In addition, PUREFOODS was also directed to pay FEMSCO P2,000,000.00 as moral damages and P1,000,000.00 as exemplary damages as well as 20% of the total amount due as attorney's fees. On 31 January 1997 the Court of Appeals denied for lack of merit the separate motions for reconsideration filed by PUREFOODS and JARDINE. Hence, 2 petitions for review filed were by PUREFOODS and JARDINE which were subsequently consolidated.

Issue: Whether FEMSCO is entitled to an award for moral damages.

Held: By the unilateral cancellation of the contract, PURE FOODS has acted with bad faith and this was further aggravated by the subsequent inking of a contract between Purefoods and Jardine. It is very evident that Purefoods thought that by the expedient means of merely writing a letter would automatically cancel or nullify the existing contract entered into by both parties after a process of bidding. This is a flagrant violation of the express provisions of the law and is contrary to fair and just dealings to which every man is due. The Court has awarded in the past moral damages to a corporation whose reputation has been besmirched. Herein, FEMSCO has sufficiently shown that its reputation was tarnished after it immediately ordered equipment from its suppliers on account of the urgency of the project, only to be canceled later. The Court thus sustain the appellate court's award of moral damages. The Court however reduced the award from P2,000,000.00 to P1,000,000.00, as moral damages are never intended to enrich the recipient. Likewise, the award of exemplary damages by way of example for the public good is excessive and should be reduced to P100,000.00. On the other hand, the appellate court erred in ordering JARDINE to pay moral damages to FEMSCO as it supposedly induced PUREFOODS to violate the contract with FEMSCO. While it may seem that PUREFOODS and JARDINE connived to deceive FEMSCO, there is no specific evidence on record to support such perception. Likewise, there is no showing whatsoever that JARDINE induced PUREFOODS. The similarity in the design submitted to PUREFOODS by both JARDINE and FEMSCO, and the tender of a lower quotation by JARDINE are insufficient to show that JARDINE indeed induced PUREFOODS to violate its contract with FEMSCO.

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