Jardine Davies Inc. vs. Court of Appeals

G.R. No. 128066, 128069 (June 19, 2000)

SC affirmed contract between Pure Foods and FEMSCO; Pure Foods must indemnify. No damages for Jardine.

Facts:

The case revolves around a dispute between Pure Foods Corporation (PUREFOODS) and Far East Mills Supply Corporation (FEMSCO) regarding a contract for the supply and installation of two 1500 KW generators at PUREFOODS' processing plant in Marikina City. In 1992, amid a power crisis, PUREFOODS decided to install these generators and conducted a bidding process. FEMSCO, along with two other bidders, submitted proposals and bid bonds.

On December 12, 1992, PUREFOODS sent a letter to FEMSCO confirming the award of the contract, outlining the terms and conditions, including a lump sum contract price, payment terms, project specifications, and requirements for performance bonds and insurance. FEMSCO complied by submitting the required performance bond and insurance policy, which were acknowledged by PUREFOODS.

However, on December 22, 1992, PUREFOODS unilaterally canceled the award, citing the discovery of significant factors that warranted a review and re-bid of the project. FEMSCO protested this cancellation and sought a meeting with PUREFOODS. Before any resolution could be reached, PUREFOODS awarded the project to Jardine Davies, Inc. (JARDINE), which had not participated in the bidding.

FEMSCO subsequently filed a lawsuit against both PUREFOODS for breach of contract and JARDINE for tortious interference. The Regional Trial Court initially granted JARDINE's demurrer to evidence, dismissing the case against it, while it ruled in favor of FEMSCO against PUREFOODS, ordering the latter to pay damages.

Both parties appealed to the Court of Appeals, which reversed the trial court's dismissal of the case against JARDINE and ordered it to pay FEMSCO moral damages, while affirming the trial court's decision against PUREFOODS.

Legal Issues:

  1. Whether a perfected contract existed between PUREFOODS and FEMSCO.
  2. If a contract was perfected, whether JARDINE induced or conspired with PUREFOODS to breach that contract.

Arguments:

  • PUREFOODS' Argument: PUREFOODS contended that its December 12 letter was not an acceptance of FEMSCO's bid but a qualified acceptance or counter-offer that required FEMSCO's express consent. It argued that since FEMSCO did not provide such consent, no contract was perfected. Additionally, PUREFOODS claimed it acted in good faith and should not be liable for moral and exemplary damages.

  • FEMSCO's Argument: FEMSCO argued that the December 12 letter constituted a clear acceptance of its bid, thus perfecting the contract. It maintained that PUREFOODS acted in bad faith by unilaterally canceling the contract and subsequently awarding it to JARDINE. FEMSCO sought damages for the losses incurred due to the cancellation.

  • JARDINE's Argument: JARDINE asserted that it had no prior knowledge of any contract between PUREFOODS and FEMSCO and did not induce PUREFOODS to breach that contract. It also argued that FEMSCO, being a corporation, was not entitled to moral damages.

Court's Decision and Legal Reasoning:

The Supreme Court ruled that a perfected contract existed between PUREFOODS and FEMSCO. The Court emphasized that the December 12 letter from PUREFOODS clearly indicated acceptance of FEMSCO's bid, despite the inclusion of certain terms and conditions that pertained to the performance of the contract rather than its perfection. The Court noted that the subsequent submission of the performance bond and insurance by FEMSCO constituted an implied acceptance of any conditions set forth by PUREFOODS.

The Court also found that PUREFOODS acted in bad faith by unilaterally canceling the contract and awarding it to JARDINE, which constituted a violation of fair dealings. The Court upheld the award of damages to FEMSCO, including moral damages, but reduced the amount awarded.

Regarding JARDINE, the Court reversed the appellate court's decision ordering it to pay moral damages, finding insufficient evidence to support the claim that JARDINE induced PUREFOODS to breach its contract with FEMSCO.

Significant Legal Principles Established:

  1. A contract is perfected upon the acceptance of an offer, and acceptance must be communicated to the offeror.
  2. Conditions imposed on the performance of a contract do not affect its perfection.
  3. A party acting in bad faith in the cancellation of a contract may be liable for damages, including moral damages, even if the party is a corporation.
  4. Inducement to breach a contract must be supported by clear evidence to warrant liability for damages.