Asiga Mining Corporation Vs. Manila Mining Corporation and Basiana Mining Exploration Corporation

Power Sector Assets and Liabitlities Management Corporation Vs. Sem-Calaca Power Corporation
G.R. No. 204719. December 5, 2016

On December 2, 2009, DMCI transferred all of its rights and obligations under the APA and the Land Lease Agreement (also called Final Transaction Documents) to herein respondent SEM-Calaca Power Corporation (SCPC) by entering into an Amendment, Accession and Assumption Agreement that was signed by PSALM, DMCI and SCPC.9 Under the agreement, SCPC took over all the rights and obligations of DMCI under the said documents. SCPC also alleged that on that same date, it took over the physical possession, operation and maintenance of the Calaca Power Plant.10

Also on the same date, SCPC started providing electricity to customers listed in Schedule W of the APA, among which is MERALCO.

Schedule W is partially reproduced hereunder:

SCHEDULE W
POWER SUPPLY CONTRACTS

Part I: Description of the PSC

CUSTOMERS	POWER SUPPLY CONTRACT				REMAINING CONTRACT VOLUME as of 26 June 2009
	Contract Duration		Monthly Average
	Effectivity	Expiration	Energy (MWh)	Demand (kW)	Energy (Mwh)	Demand (kW)	Average (MWh/mo)
Meralco (10.841%)	6 Nov 2006	25 Nov 2011	69,256	169,000	1,517,414	169,000	69,256
PEZA-Cavite Ecozone	26 June 2006	25 June 2011	34,038	55,420	623,320	80,800	24,933
BATELEC I	26 Dec 2006	25 Dec. 2010	16,450	42,000	334,586	42,000	17,610
Sunpower Philippines	18 Aug 2004	17 Aug 2019	5,500	8,955	676,500	8,970	5,500
Steel Asia	26 Mar 2008	25 Dec 2009	5,263	8,000	57,770	10,000	8,253
SteelCorp	26 June 2009	25 Dec 2009	2,500	8,000	15,000	8,320	2,500
Puyat Steel Corp.	26 Nov 2008	25 Nov 2009	194	1,300	3,260	2,150	543
ECSCO, Inc.	26 Dec 2005	25 Dec 2010	206	450	4,445	440	234
Lipa Ice Plant	26 Jan. 2005	25 Jan. 2010	220	400	4,650	520	245
BCFTPP Contractor
Semirara Mining	NA	NA	291	1450	NA	NA	Actual Consumption
Pozzolanic Industries Inc.	NA	NA	11	50	NA	NA	Actual Consumption
TOTAL		MWh	703,506		3,236,945		129,056
		MW		295		322

Notes:

·         All figures mentioned above are only indicative and will be based on the hourly/daily/monthly nominated volume as per average monthly contract level. A typical hourly customer's load profile for Calaca is demonstrated in the attached Figure 1 of this Schedule J (sic) (Power Supply Contract).

·         The special conditions governing the assumption by the Buyer of the assignment of a portion of the Contract Energy under Meralco TSC are contained in Part II of this Schedule J (sic) (Power Supply Contract).
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Furthermore, in the event that the Purchased Assets (sic) is not able to supply the contracted power under the aforesaid contracts due to the unavailability of coal or other causes, the Buyer may enter into a back-to-back supply contract with other generators or buy directly from the market for the deficiency.

Part II: Special Conditions of the MERALCO TSC

The following conditions, unique to the MERALCO-NPC contract, shall apply to the assigned portion of the Contract Energy from the MERALCO TSC.

1. Neither the MERALCO TSC nor any portion thereof shall be assigned to the Buyer. It is the Contract Energy specified in part I that is the subject of the assignment.

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SCPC contends that it is obliged to supply 10.841% of MERALCO's total requirement but not to exceed 169,000 kW in any hourly interval. However, PSALM holds a different view and contends that SCPC is bound to supply the entire 10.841% of what MERALCO requires, without regard to any cap or limit.

In its Decision dated July 6, 2011, the ERC ruled in favor of SCPC and against NPC and PSALM.

1.    Explain principles of contract interpretation under Article 1370

Among the key principles in the interpretation of contracts is that espoused in Article 1370, paragraph 1, of the Civil Code, quoted as follows:

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.

The rule means that the contract's meaning should be determined from its clear terms without reference to extrinsic facts or aids. The intention of the parties must be gathered from the contract's language, and from that language alone. Stated differently, where the language of a written contract is clear and unambiguous, the contract must be taken to mean that which, on its face, it purports to mean, unless some good reason can be assigned to show that the words should be understood in a different sense.

Thus, conversely, when the terms of the contract are unclear or are ambiguous, interpretation must proceed beyond the words' literal meaning. Paragraph 2 of the same Article 1370 provides:

If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.

2.    Explain principles of contract interpretation under Article 1374

Art. 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.

Then, case law is also settled on the rule that contracts should be so construed as to harmonize and give effect to its different provisions. The legal effect of a contract is not determined alone by any particular provision disconnected from all others, but from the whole read together.

3.    When may a contract be considered ambiguous?

A contract provision is ambiguous if it is susceptible of two reasonable alternative interpretations. In such case, its interpretation is left to the court, or another tribunal with jurisdiction over it.

4.    Define Interpretation

More simply, "interpretation" is defined as the act of making intelligible what was before not understood, ambiguous, or not obvious; it is a method by which the meaning of language is ascertained. The "interpretation" of a contract is the determination of the meaning attached to the words written or spoken which make the contract.

5.    Determine if there was an ambiguity in Schedule W in this case

The ambiguity in Schedule W partly lies in the figure "10.841%," which lacks a base value and is bereft of any specific quantity or number (in kilowatts or any other unit) to represent the generated electricity that SCPC was obliged to deliver to MERALCO. A mere percentage below MERALCO's name without indicating what it is and what its base value is amounts to an incomplete numerical statement. Then, on the right columns, specific quantities, including the "160,000 kW," are laid down which seem to correspond or add up to SCPC's generating capacity but which, in the "Notes" section of the schedule, are confusingly referred to as merely "indicative," i.e., estimates, which do not help reduce the uncertainty.

Such a lack of clarity results in a perplexing situation wherein the obligation to deliver could be interpreted as open-ended by one party — the obligee, but could be argued as "capped" or "limited" by the other party — the obligor. Obviously, such divergence needed to be addressed by a disinterested third party like the ERC.

6.    How does the Court treat rulings of administrative agencies?

It is general practice among the courts that the rulings of administrative agencies like the ERC are accorded great respect, owing to a traditional deference given to such administrative agencies equipped with the special knowledge, experience and capability to hear and determine promptly disputes on technical matters. Factual findings of administrative agencies that are affirmed by the Court of Appeals are generally conclusive on the parties and not reviewable by this Court. Although there are instances when such a practice is not applied, such as when the board or official has gone beyond its/his statutory authority, exercised unconstitutional powers or clearly acted arbitrarily without regard to its/his duty or with grave abuse of discretion, or when the actuation of the administrative official or administrative board or agency is tainted by a failure to abide by the command of the law, none of such instances obtain in the present case which would prompt this Court to reverse the findings of the tribunal below.

7.    May the court interfere with the actions of administrative agency?

As such, the Court will not interfere with the same, mindful of the principle that actions of an administrative agency may not be disturbed nor set aside by the judicial department sans any error of law, grave abuse of power or lack of jurisdiction, or grave abuse of discretion clearly conflicting with either the letter or spirit of the law.