G.R. No. L-47379 and G.R. No. L-47481. May 16, 1988.
NATIONAL POWER CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS and ENGINEERING CONSTRUCTION, INC., respondents. ENGINEERING CONSTRUCTION, INC., petitioner, vs. COURT OF APPEALS and NATIONAL POWER CORPORATION, respondents.

FACTS

Engineering Construction, Inc. (ECI) was the contractor for a tunnel project for the National Waterworks and Sewerage Authority (NAWASA) near the Angat Dam, operated by the National Power Corporation (NPC). On November 4, 1967, Typhoon Welming struck Central Luzon, causing the water level in the dam’s reservoir to rise dangerously. To prevent an overflow, NPC opened the spillway gates. The resultant torrent of water struck ECI’s installations and construction works at the Ipo site with terrific force, destroying stockpiles, camp facilities, equipment, and permanent structures.
The trial court found NPC negligent and awarded damages to ECI. The Court of Appeals affirmed NPC’s liability but modified the damages awarded. NPC filed a petition ( G.R. No. 47379 ) questioning its liability, while ECI filed its own petition (G.R. No. 47481) contesting the reduction of consequential and exemplary damages and attorney’s fees.

ISSUE

The primary issues were: (1) whether NPC was liable for damages due to negligence; and (2) whether the Court of Appeals correctly computed the award for consequential damages and attorney’s fees, and correctly eliminated the award for exemplary damages.

RULING

The Supreme Court dismissed both petitions and affirmed the decision of the Court of Appeals. On the issue of liability, the Court sustained the factual findings of the lower courts that NPC was negligent. The evidence established that NPC, aware of the approaching typhoon days in advance, waited until the last moment when the water was at a critical level before opening the spillway gates. This was done in a sudden manner rather than gradually, which was the safer procedure. This negligence was the proximate cause of the flood damage to ECI’s properties.
Regarding damages, the Court upheld the appellate court’s reduction of consequential damages. ECI claimed rental costs for a temporary crane for one year, but the evidence showed it purchased a new crane just days after the flood and resumed work after only a one-month stoppage. Awarding a full year’s rental would constitute unjust enrichment. Thus, only one month’s rental was justified. The claimed lost bonus was also correctly eliminated, as the project was already past its completion deadline, making such a bonus impossible to earn.
The Court also affirmed the elimination of exemplary damages. The appellate court found no gross negligence or bad faith on NPC’s part; its negligence was not of a wanton or reckless character required for an award of exemplary damages under Article 2234 of the Civil Code. Finally, the reduction of attorney’s fees from P50,000 to P30,000 was sustained, as the appellate court’s assessment on the sufficiency of compensation for legal services was found to be sound and without compelling reason for reversal.