G.R. No. L-43814 April 16, 1982
NATIONAL POWER CORPORATION, petitioner, vs. HON. COURT OF APPEALS and WILMAG IRON MINES, INC., respondents.

FACTS

The National Power Corporation (NPC) entered into a contract with Wilmag Iron Mines, Inc. (WILMAG) for the clearing of a reservoir area. The contract granted WILMAG ownership of all commercially valuable timber felled during the project. WILMAG secured a special timber license but faced repeated suspensions and cancellations by government authorities due to allegations of illegal logging outside the designated area. NPC subsequently imposed restrictions, prohibiting further tree-felling and confining WILMAG’s operations to clearing already felled trees. WILMAG completed the project, received full payment based on the actual hectares cleared, and was issued a clearance by NPC.
Subsequently, WILMAG filed a complaint against NPC, claiming damages primarily for the value of commercial logs it allegedly failed to remove due to NPC’s restrictions and the government’s cancellation of its timber license. The trial court dismissed the complaint. The Court of Appeals reversed this decision, awarding WILMAG over Thirty Million Pesos (P30,000,000.00) in damages, including the value of the unremoved logs, damages for commercial credit, and attorney’s fees. NPC appealed to the Supreme Court.

ISSUE

Whether the Court of Appeals erred in awarding massive damages to WILMAG based on its claim for unremoved commercial logs.

RULING

Yes. The Supreme Court reversed the decision of the Court of Appeals and reinstated the trial court’s dismissal of the complaint. The legal logic rests on the principle that factual findings of the Court of Appeals are generally conclusive, but this rule admits exceptions, particularly when such findings are not supported by the evidence. The Court meticulously examined the record and found no evidentiary basis for the appellate court’s award.
The contract explicitly made the removal and disposal of forest products the sole responsibility and risk of WILMAG. The impediments to log removal—the suspension and cancellation of its timber license by the Department of Agriculture and Natural Resources and later by Malacañang—were acts of sovereign authority by the government, not acts of NPC. NPC cannot be held liable for the lawful exercise of governmental power by a separate department. Furthermore, NPC’s subsequent directives restricting WILMAG to clearing only already felled trees were reasonable measures taken in response to WILMAG’s own illegal logging activities, which jeopardized the project and the watershed. WILMAG’s failure to remove the logs within the contract period and extensions was therefore attributable to its own fault and the valid regulatory actions of the state, not to any breach by NPC. The Supreme Court characterized the appellate court’s massive monetary award as “enormous, fantastic and unbelievable,” having no foundation in law or fact.