G.R. No. 133909 February 15, 2000
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner, vs. MARS CONSTRUCTION ENTERPRISES, respondent.

FACTS

Petitioner PNCC (formerly CDCP) and respondent Mars Construction entered into a subcontract for the supply of approximately 70,000 cubic meters of various aggregates. The contract was amended to specify, among others, that respondent would deliver a minimum of 6,000 cubic meters per month and that the scope included approximately 35,000 cubic meters of washed 1-1/2″ gravel. Respondent commenced deliveries eight months late and had periods of non-delivery, forcing PNCC to source from other suppliers at a higher cost. Respondent reimbursed PNCC for these price differentials as per their default clause.
The dispute arose when PNCC refused to accept further delivery of about 17,000 cubic meters of washed 1-1/2″ gravel, claiming it no longer needed the material. PNCC had only utilized about 18,140 cubic meters of this type from all sources, less than the stipulated 35,000 cubic meters. Mars Construction sued for unrealized profit (lucrum cessans) on the undelivered quantity and for an outstanding balance. PNCC counterclaimed for additional price differentials and reimbursement for an alleged overpayment.

ISSUE

Whether petitioner PNCC validly and unilaterally rescinded the contract by refusing to accept further deliveries from respondent.

RULING

No. The Supreme Court affirmed the Court of Appeals’ decision holding PNCC liable for breach of contract. The Court ruled that a party cannot unilaterally rescind a contract; rescission must be judicially sought unless the contract expressly grants a party that right, which was absent here. PNCC’s refusal to accept the balance of the agreed-upon quantity constituted a breach.
In interpreting the contract, the Court applied the principle that all provisions must be interpreted together. The amended “Scope of Services” article, specifying approximate quantities for each aggregate type, was to be read in conjunction with the amended “Delivery” article, which set a monthly minimum but did not impose a maximum ceiling. The logical construction was that the approximate figures represented the total quantity PNCC was obligated to purchase from respondent. Since PNCC accepted only about half of the stipulated 35,000 cubic meters of washed 1-1/2″ gravel, it breached the agreement. Consequently, respondent was entitled to lucrum cessans for the undelivered balance, computed as the net profit per unit multiplied by the quantity wrongfully refused. The Court upheld the factual findings of the lower courts on the computation of damages and the offsetting of obligations, noting such findings are generally conclusive.