National Power Corporation v.

Court of Appeals
161 SCRA 334 (1988)

FULL TEXT

These consolidated petitions seek to set aside the decision of the respondent
Court of Appeals which adjudged the National Power Corporation liable for
damages against Engineering Construction, Inc. The appellate court, however,
reduced the amount of damages awarded by the trial court. Hence, both parties
filed their respective petitions: The National Power Corporation (NPC) in G.R. No.
47379, questioning the decision of the Court of Appeals for holding it liable for
damages and the Engineering Construction, Inc. (ECI) in G.R. No. 47481,
questioning the same decision for reducing the consequential damages and
attorney's fees and for eliminating the exemplary damages.

The facts are succinctly summarized by the respondent Court of Appeals, as

follows:

On August 4, 1964, plaintiff Engineering Construction, Inc., being a

successful bidder, executed a contract in Manila with the National
Waterworks and Sewerage Authority (NAWASA), whereby the
former undertook to furnish all tools, labor, equipment, and
materials (not furnished by Owner), and to construct the proposed
2nd lpo-Bicti Tunnel, Intake and Outlet Structures, and Appurtenant
Structures, and Appurtenant Features, at Norzagaray, Bulacan, and
to complete said works within eight hundred (800) calendar days
from the date the Contractor receives the formal notice to proceed
(Exh. A).

The project involved two (2) major phases: the first phase
comprising, the tunnel work covering a distance of seven (7)
kilometers, passing through the mountain, from the Ipo river, a
part of Norzagaray, Bulacan, where the Ipo Dam of the defendant
National Power Corporation is located, to Bicti; the other phase
consisting of the outworks at both ends of the tunnel.

By September 1967, the plaintiff corporation already had completed

the first major phase of the work, namely, the tunnel excavation
work. Some portions of the outworks at the Bicti site were still
under construction. As soon as the plaintiff corporation had finished
the tunnel excavation work at the Bicti site, all the equipment no
longer needed there were transferred to the Ipo site where some
projects were yet to be completed.
 The record shows that on November 4,1967, typhoon 'Welming' hit
Central Luzon, passing through defendant's Angat Hydro-electric
Project and Dam at lpo, Norzagaray, Bulacan. Strong winds struck
the project area, and heavy rains intermittently fell. Due to the
heavy downpour, the water in the reservoir of the Angat Dam was
rising perilously at the rate of sixty (60) centimeters per hour. To
prevent an overflow of water from the dam, since the water level
had reached the danger height of 212 meters above sea level, the
defendant corporation caused the opening of the spillway gates."
(pp. 45-46, L-47379, Rollo)

The appellate court sustained the findings of the trial court that the evidence
preponderantly established the fact that due to the negligent manner with which
the spillway gates of the Angat Dam were opened, an extraordinary large
volume of water rushed out of the gates, and hit the installations and
construction works of ECI at the lpo site with terrific impact, as a result of which
the latter's stockpile of materials and supplies, camp facilities and permanent
structures and accessories either washed away, lost or destroyed.

The appellate court further found that:

It cannot be pretended that there was no negligence or that the

appellant exercised extraordinary care in the opening of the
spillway gates of the Angat Dam. Maintainers of the dam knew very
well that it was far safer to open them gradually. But the spillway
gates were opened only when typhoon Welming was already at its
height, in a vein effort to race against time and prevent the
overflow of water from the dam as it 'was rising dangerously at the
rate of sixty centimeters per hour. 'Action could have been taken as
early as November 3, 1967, when the water in the reservoir was
still low. At that time, the gates of the dam could have been opened
in a regulated manner. Let it be stressed that the appellant knew of
the coming of the typhoon four days before it actually hit the
project area. (p. 53, L-47379, Rollo)

As to the award of damages, the appellate court held:

We come now to the award of damages. The appellee submitted a

list of estimated losses and damages to the tunnel project (Ipo
side) caused by the instant flooding of the Angat River (Exh. J-1).
The damages were itemized in four categories, to wit: Camp
Facilities P55,700.00; Equipment, Parts and Plant — P375,659.51;
Materials P107,175.80; and Permanent Structures and accessories
— P137,250.00, with an aggregate total amount of P675,785.31.
The list is supported by several vouchers which were all submitted
as Exhibits K to M-38 a, N to O, P to U-2 and V to X- 60-a (Vide:
Folders Nos. 1 to 4). The appellant did not submit proofs to
traverse the aforementioned documentary evidence. We hold that
the lower court did not commit any error in awarding P 675,785.31
as actual or compensatory damages.
 However, we cannot sustain the award of P333,200.00 as
consequential damages. This amount is broken down as follows:
P213,200.00 as and for the rentals of a crane to temporarily replace
the one "destroyed beyond repair," and P120,000.00 as one month
bonus which the appellee failed to realize in accordance with the
contract which the appellee had with NAWASA. Said rental of the
crane allegedly covered the period of one year at the rate of P40.00
an hour for 16 hours a day. The evidence, however, shows that the
appellee bought a crane also a crawler type, on November 10,
1967, six (6) days after the incident in question (Exh N) And
according to the lower court, which finding was never assailed, the
appellee resumed its normal construction work on the Ipo- Bicti
Project after a stoppage of only one month. There is no evidence
when the appellee received the crane from the seller, Asian
Enterprise Limited. But there was an agreement that the shipment
of the goods would be effected within 60 days from the opening of
the letter of credit (Exh. N).<äre||anº•1àw> It appearing that the
contract of sale was consummated, We must conclude or at least
assume that the crane was delivered to the appellee within 60 days
as stipulated. The appellee then could have availed of the services
of another crane for a period of only one month (after a work
stoppage of one month) at the rate of P 40.00 an hour for 16 hours
a day or a total of P 19,200.00 as rental.

But the value of the new crane cannot be included as part of actual
damages because the old was reactivated after it was repaired. The
cost of the repair was P 77,000.00 as shown in item No. 1 under
the Equipment, Parts and Plants category (Exh. J-1), which amount
of repair was already included in the actual or compensatory
damages. (pp. 54-56, L-47379, Rollo)

The appellate court likewise rejected the award of unrealized bonus from
NAWASA in the amount of P120,000.00 (computed at P4,000.00 a day in case
construction is finished before the specified time, i.e., within 800 calendar days),
considering that the incident occurred after more than three (3) years or one
thousand one hundred seventy (1,170) days. The court also eliminated the
award of exemplary damages as there was no gross negligence on the part of
NPC and reduced the amount of attorney's fees from P50,000.00 to P30,000.00.

In these consolidated petitions, NPC assails the appellate court's decision as

being erroneous on the ground that the destruction and loss of the ECI's
equipment and facilities were due to force majeure. It argues that the rapid rise
of the water level in the reservoir of its Angat Dam due to heavy rains brought
about by the typhoon was an extraordinary occurrence that could not have been
foreseen, and thus, the subsequent release of water through the spillway gates
and its resultant effect, if any, on ECI's equipment and facilities may rightly be
attributed to force majeure.
On the other hand, ECI assails the reduction of the consequential damages from
P333,200.00 to P19,000.00 on the grounds that the appellate court had no basis
in concluding that ECI acquired a new Crawler-type crane and therefore, it only
can claim rentals for the temporary use of the leased crane for a period of one
month; and that the award of P4,000.00 a day or P120,000.00 a month bonus is
justified since the period limitation on ECI's contract with NAWASA had dual
effects, i.e., bonus for earlier completion and liquidated damages for delayed
performance; and in either case at the rate of P4,000.00 daily. Thus, since NPC's
negligence compelled work stoppage for a period of one month, the said award
of P120,000.00 is justified. ECI further assailes the reduction of attorney's fees
and the total elimination of exemplary damages.

Both petitions are without merit.

It is clear from the appellate court's decision that based on its findings of fact
and that of the trial court's, petitioner NPC was undoubtedly negligent because it
opened the spillway gates of the Angat Dam only at the height of typhoon
"Welming" when it knew very well that it was safer to have opened the same
gradually and earlier, as it was also undeniable that NPC knew of the coming
typhoon at least four days before it actually struck. And even though the
typhoon was an act of God or what we may call force majeure, NPC cannot
escape liability because its negligence was the proximate cause of the loss and
damage. As we have ruled in Juan F. Nakpil & Sons v. Court of Appeals, (144
SCRA 596, 606-607):

Thus, if upon the happening of a fortuitous event or an act of God,

there concurs a corresponding fraud, negligence, delay or violation
or contravention in any manner of the tenor of the obligation as
provided for in Article 1170 of the Civil Code, which results in loss
or damage, the obligor cannot escape liability.

The principle embodied in the act of God doctrine strictly requires

that the act must be one occasioned exclusively by the violence of
nature and human agencies are to be excluded from creating or
entering into the cause of the mischief. When the effect, the cause
of which is to be considered, is found to be in part the result of the
participation of man, whether it be from active intervention or
neglect, or failure to act, the whole occurrence is thereby
humanized, as it was, and removed from the rules applicable to the
acts of God. (1 Corpus Juris, pp. 1174-1175).

Thus, it has been held that when the negligence of a person

concurs with an act of God in producing a loss, such person is not
exempt from liability by showing that the immediate cause of the
damage was the act of God. To be exempt from liability for loss
because of an act of God, he must be free from any previous
negligence or misconduct by which the loss or damage may have
been occasioned. (Fish & Elective Co. v. Phil. Motors, 55 Phil. 129;
Tucker v. Milan 49 O.G. 4379; Limpangco & Sons v. Yangco
Steamship Co., 34 Phil. 594, 604; Lasam v. Smith, 45 Phil. 657).
Furthermore, the question of whether or not there was negligence on the part of
NPC is a question of fact which properly falls within the jurisdiction of the Court
of Appeals and will not be disturbed by this Court unless the same is clearly
unfounded. Thus, in Tolentino v. Court of appeals, (150 SCRA 26, 36) we ruled:

Moreover, the findings of fact of the Court of Appeals are generally

final and conclusive upon the Supreme Court (Leonardo v. Court of
Appeals, 120 SCRA 890 [1983]. In fact it is settled that the
Supreme Court is not supposed to weigh evidence but only to
determine its substantially (Nuñez v. Sandiganbayan, 100 SCRA
433 [1982] and will generally not disturb said findings of fact when
supported by substantial evidence (Aytona v. Court of Appeals, 113
SCRA 575 [1985]; Collector of Customs of Manila v. Intermediate
Appellate Court, 137 SCRA 3 [1985]. On the other hand substantial
evidence is defined as such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion (Philippine Metal
Products, Inc. v. Court of Industrial Relations, 90 SCRA 135 [1979];
Police Commission v. Lood, 127 SCRA 757 [1984]; Canete v. WCC,
136 SCRA 302 [1985])

Therefore, the respondent Court of Appeals did not err in holding the NPC liable
for damages.

Likewise, it did not err in reducing the consequential damages from P333,200.00
to P19,000.00. As shown by the records, while there was no categorical
statement or admission on the part of ECI that it bought a new crane to replace
the damaged one, a sales contract was presented to the effect that the new
crane would be delivered to it by Asian Enterprises within 60 days from the
opening of the letter of credit at the cost of P106,336.75. The offer was made by
Asian Enterprises a few days after the flood. As compared to the amount of
P106,336.75 for a brand new crane and paying the alleged amount of P4,000.00
a day as rental for the use of a temporary crane, which use petitioner ECI
alleged to have lasted for a period of one year, thus, totalling P120,000.00, plus
the fact that there was already a sales contract between it and Asian
Enterprises, there is no reason why ECI should opt to rent a temporary crane for
a period of one year. The appellate court also found that the damaged crane was
subsequently repaired and reactivated and the cost of repair was P77,000.00.
Therefore, it included the said amount in the award of of compensatory
damages, but not the value of the new crane. We do not find anything erroneous
in the decision of the appellate court that the consequential damages should
represent only the service of the temporary crane for one month. A contrary
ruling would result in the unjust enrichment of ECI.

The P120,000.00 bonus was also properly eliminated as the same was granted
by the trial court on the premise that it represented ECI's lost opportunity "to
earn the one month bonus from NAWASA ... ." As stated earlier, the loss or
damage to ECI's equipment and facilities occurred long after the stipulated
deadline to finish the construction. No bonus, therefore, could have been
possibly earned by ECI at that point in time. The supposed liquidated damages
for failure to finish the project within the stipulated period or the opposite of the
claim for bonus is not clearly presented in the records of these petitions. It is not
shown that NAWASA imposed them.
As to the question of exemplary damages, we sustain the appellate court in
eliminating the same since it found that there was no bad faith on the part of
NPC and that neither can the latter's negligence be considered gross. In Dee
Hua Liong Electrical Equipment Corp. v. Reyes, (145 SCRA 713, 719) we ruled:

Neither may private respondent recover exemplary damages since

he is not entitled to moral or compensatory damages, and again
because the petitioner is not shown to have acted in a wanton,
fraudulent, reckless or oppressive manner (Art. 2234, Civil Code;
Yutuk v. Manila Electric Co., 2 SCRA 377; Francisco v. Government
Service Insurance System, 7 SCRA 577; Gutierrez v. Villegas, 8
SCRA 527; Air France v. Carrascoso, 18 SCRA 155; Pan Pacific
(Phil.) v. Phil. Advertising Corp., 23 SCRA 977; Marchan v.
Mendoza, 24 SCRA 888).

We also affirm the reduction of attorney's fees from P50,000.00 to P30,000.00.

There are no compelling reasons why we should set aside the appellate court's
finding that the latter amount suffices for the services rendered by ECI's
counsel.

WHEREFORE, the petitions in G.R. No. 47379 and G.R. No. 47481 are both
DISMISSED for LACK OF MERIT. The decision appealed from is AFFIRMED.