JARDINE DAVIES, INC. v.

COURT OF APPEALS
G.R. No. 128066, June 19, 2000, (Bellosillo, J.)
Purefoods decided to install two generators in its food processing plant due to the
series of power failures at that time. Bidding for the supply and installation of the
generators were held. Out of the 8 prospective bidders, Far East Mills Supply
Corporation (FEMSCO) was confirmed the award by Purefoods. 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, Purefoods unilaterally cancelled the award as significant factors were
uncovered and brought to their attention which dictate the cancellation and warrant
a total review and rebid of the project. FEMSCO protested the cancellation of the
award, however before the matter could be resolved, Purefoods awarded the project
to Jardine. FEMSCO wrote Purefoods to honor it contact and for Jardine to cease and
desist from installing the 2 generators at Purefoods. The letters went 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.
The RTC granted Jardines demurrer and dismissed the case against it and trial
proceeded as regards Purefoods. The trial court ordered Purefoods to indemnify
FEMSCO the sum of P2.3M representing the value of engineering services rendered,
and US$14,000, P900,000 contractors mark-up and attorneys fees. FEMSCO and
Purefoods appealed to the CA. FEMSCO appealed the resolution which granted the
demurrer to Jardine while Purefoods appealed the decision which ordered it to pay
FEMSCO.
The CA affirmed the decision of the RTC in toto and reversed the resolution of the
RTC and ordered Jardine to pay FEMSCO P2M as moral damages and Purefoods to
pay an additional P2M as moral damages as well.
The case was raised to the SC. Purefoods contends that it did not accept FEMSCOs
proposal but it more of a qualified acceptance constituting a counter-offer which
requires FEMSCOs conforme. Since Purefoods never received a conforme, it had
every right to revoke its qualified acceptance. Also since Purefoods was never in bad
faith, moral and exemplary damages should not have been awarded.
Jardine asserts that it had no prior knowledge of the supposed contract between
Purefoods and FEMSCO, and neither did it induce Purefoods to violate the latters
alleged contract with FEMSCO. Jardine reasons that FEMSCO, an artificial person, is
not entitled to moral damages, and if proper, P2M is extremely excessive.
ISSUES:
1. Is FEMSCO entitled to moral damages from Purefoods
2. Is FEMSCO entitled to moral damages from Jardine?

3. Is there a perfected contract between Purefoods and FEMSCO?

RULING:
1. Yes. Petitioner PUREFOODS also argues that it was never in bad faith. On the
contrary, it believed in good faith that no such contract was perfected. We are
not convinced. We subscribe to the factual findings and conclusions of the trial
court which were affirmed by the appellate court Hence, by the unilateral cancellation of the contract, the defendant (petitioner
PURE FOODS) has acted with bad faith and this was further aggravated by the
subsequent inking of a contract between defendant Purefoods and erstwhile codefendant 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,
to the Court's mind, 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.
This Court has awarded in the past moral damages to a corporation whose
reputation has been besmirched. In the instant case, respondent 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. We thus sustain respondent appellate court's award of moral
damages. We however reduce 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.
2. No. While it may seem that petitioners PUREFOODS and JARDINE connived to
deceive respondent FEMSCO, we find no specific evidence on record to support
such perception. Likewise, there is no showing whatsoever that petitioner
JARDINE induced petitioner PUREFOODS. The similarity in the design submitted
to petitioner PUREFOODS by both petitioner JARDINE and respondent FEMSCO,
and the tender of a lower quotation by petitioner JARDINE are insufficient to
show that petitioner JARDINE indeed induced petitioner PUREFOODS to violate its
contract with respondent FEMSCO.
3. Yes. In the instant case, there is no issue as regards the subject matter of the
contract and the cause of the obligation. The controversy lies in the consent whether there was an acceptance of the offer, and if so, if it was communicated,
thereby perfecting the contract. To resolve the dispute, there is a need to
determine what constituted the offer and the acceptance. Since petitioner
PUREFOODS started the process of entering into the contract by conducting a
bidding, Art. 1326 of the Civil Code, which provides that "[a]dvertisements for
bidders are simply invitations to make proposals," applies. Accordingly, the
Terms and Conditions of the Bidding disseminated by petitioner PUREFOODS
constitutes the "advertisement" to bid on the project. The bid proposals or
quotations submitted by the prospective suppliers including respondent
FEMSCO, are the offers. And, the reply of petitioner PUREFOODS, the acceptance
or rejection of the respective offers.

Quite obviously, the 12 December 1992 letter of petitioner PUREFOODS to FEMSCO

constituted acceptance of respondent FEMSCO's offer as contemplated by law. The
tenor of the letter, i.e., "This will confirm that Pure Foods has awarded to your firm
(FEMSCO) the project," could not be more categorical. While the same letter
enumerated certain "basic terms and conditions," these conditions were imposed on
the performance of the obligation rather than on the perfection of the contract. In
fine, the enumerated "basic terms and conditions" were prescriptions on how the
obligation was to be performed and implemented. They were far from being
conditions imposed on the perfection of the contract.
But even granting arguendo that the 12 December 1992 letter of petitioner
PUREFOODS constituted a "conditional counter-offer," respondent FEMCO's
submission of the performance bond and contractor's all-risk insurance was an
implied acceptance, if not a clear indication of its acquiescence to, the "conditional
counter-offer," which expressly stated that the performance bond and the
contractor's all-risk insurance should be given upon the commencement of the
contract. Corollarily, the acknowledgment thereof by petitioner PUREFOODS, not to
mention its return of FEMSCO's bidder's bond, was a concrete manifestation of its
knowledge that respondent FEMSCO indeed consented to the "conditional counteroffer." After all, as earlier adverted to, an acceptance may either be express or
implied,[10] and this can be inferred from the contemporaneous and subsequent
acts of the contracting parties.