G.R. No. 135639 & 135826; February 27, 2002
Terminal Facilities and Services Corporation vs. Philippine Ports Authority, et al.

FACTS

Terminal Facilities and Services Corporation (TEFASCO) is a domestic corporation operating a private port in Davao City. In 1975, to address severe congestion at government ports, TEFASCO proposed to the Philippine Ports Authority (PPA) the construction of a specialized private terminal. PPA, through Board Resolution No. 7 dated April 21, 1976, approved the project. The approval was communicated via a letter from PPA’s Acting General Manager on May 7, 1976, authorizing TEFASCO to commence work subject to specified terms and conditions, which included a government share of 50% of wharfage dues and 30% of berthing fees.
A dispute arose when PPA later demanded a 100% share of these fees. TEFASCO filed a complaint for declaratory relief. The trial court ruled in favor of TEFASCO, declaring the 50/30% government share valid and ordering PPA to pay damages. The Court of Appeals modified this decision, upholding the validity of the government share but awarding TEFASCO actual damages representing the income it lost from 1977 to 1991 due to PPA’s imposition of the 100% share, plus attorney’s fees. Both parties filed petitions for review before the Supreme Court.

ISSUE

The core issues were: (1) Whether the PPA Board Resolution and the accompanying letter constituted a valid and binding contract between PPA and TEFASCO; and (2) Whether TEFASCO was entitled to the awarded actual damages for loss of income.

RULING

The Supreme Court ruled in favor of PPA, reversing the Court of Appeals’ award of damages. The Court held that the PPA Board Resolution and the letter of its Acting General Manager did not create a perfected contract. A board resolution is merely a preliminary step; it is not the contract itself. For a contract to be perfected, there must be a concurrence of offer and acceptance upon the object and cause. The letter from PPA’s Acting General Manager was merely an acceptance of the project proposal in principle, but it explicitly stated that the approval was “subject to the terms and conditions set forth at enclosure.” This indicated that essential terms were still to be formalized, and no final meeting of the minds had occurred.
Furthermore, the Court found that TEFASCO failed to prove its entitlement to actual damages with reasonable certainty. Claims for compensatory damages for lost profits must be substantiated by competent proof and cannot be based on mere speculation. The awarded amount was computed based on a hypothetical 31% market share mentioned in a preliminary committee report, not on TEFASCO’s actual operations or proven financial performance. Such speculative computation does not constitute the clear and convincing evidence required for an award of actual damages. Consequently, the award for attorney’s fees was also deleted for lack of basis.