G.R. No. 126204 November 20, 2001
NATIONAL POWER CORPORATION, petitioner, vs. PHILIPP BROTHERS OCEANIC, INC., respondent.

FACTS

NAPOCOR awarded PHIBRO a contract to supply coal, with shipment to arrive within 30 days after PHIBRO’s receipt of a confirmed Letter of Credit (LC). PHIBRO repeatedly informed NAPOCOR of ongoing industrial strikes in Australia, the point of origin, which hampered shipping as vessel owners demanded a “strike-free” clause. PHIBRO proposed sharing this burden, but NAPOCOR refused. NAPOCOR opened the LC on August 6, 1987. PHIBRO’s first shipment was delayed until November 17, 1987. Subsequently, NAPOCOR disqualified PHIBRO from a later bidding, citing the prior delivery delay as the reason. PHIBRO filed an action for damages, alleging NAPOCOR’s disqualification was malicious and in bad faith. The trial court ruled for PHIBRO, awarding damages and ordering reinstatement to the bidder’s list, a decision affirmed by the Court of Appeals.

ISSUE

Whether NAPOCOR acted with bad faith or abuse of right in disqualifying PHIBRO from future biddings due to the delayed coal shipment.

RULING

The Supreme Court ruled in favor of PHIBRO. The delay in shipment was due to a fortuitous event—the strikes in Australia—which constituted force majeure under the contract terms, exempting PHIBRO from liability. NAPOCOR’s own delay in opening a workable LC also contributed. Consequently, PHIBRO’s failure to deliver on time was justified. While NAPOCOR had the right to evaluate bidders, its act of disqualifying PHIBRO based on a delay for which PHIBRO was not liable was an abuse of that right. The exercise of a right becomes illicit when done with the sole intent of prejudicing another. Here, NAPOCOR’s disqualification, grounded on an invalid reason, was intended to inflict injury, making it liable for damages. The awards for actual, moral, and exemplary damages, as well as attorney’s fees, were upheld as proper consequences of this abusive act.