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ACI PHILIPPINES v. EDITHA C. COQUIA

FACTS:

ACI Philippines, Inc. (petitioner) had a contract with Editha C. Coquia (respondent) for the purchase of flint cullets. Petitioner initially agreed to purchase the cullets at a price of P4.20 per kilo. However, petitioner later demanded a reduction of the purchase price to P3.65 per kilo, to which respondent acceded allegedly under duress. A new purchase order was issued, but petitioner still refused to pay for the deliveries, insisting on a further reduction to P3.10 per kilo.

Respondent filed a complaint against petitioner, seeking payment for the deliveries and demanding that petitioner accept and pay for the remaining deliveries. Petitioner eventually paid for the deliveries, but three days after the complaint was filed. The trial court ruled in favor of respondent, ordering petitioner to accept the deliveries at the original price and pay for them. The trial court also awarded damages, attorney's fees, litigation expenses, and costs of suit to respondent.

The Court of Appeals affirmed the trial court's decision but removed the award of attorney's fees, litigation expenses, and costs of suit. The appellate court considered Purchase Order No. 106211 as a contract of adhesion and held petitioner liable for willfully refusing to pay unless the price is reduced.

Petitioner argues that the purchase orders are not contracts of adhesion and that respondent voluntarily entered into the agreement. Petitioner also disputes the trial court's ruling on accepting and paying for the deliveries at the original price, as well as the award of damages. The Court of Appeals identified three issues for resolution: whether petitioner should accept the deliveries, the applicable unit price, and who is entitled to damages.

ISSUES:

  1. Whether the trial court erred in applying the parol evidence rule and refusing to consider evidence aliunde to show that time was of the essence in the transaction.

  2. Whether evidence presented by the petitioner to modify, explain, or add to the terms of the agreement is admissible despite the parol evidence rule.

  3. Whether the second purchase order superseded the first purchase order and extinguished the original obligation of the petitioner to accept deliveries from the respondent until the specified quantity is filled.

  4. Whether the appellate court erred in awarding damages based on conjectures and assertions.

  5. Whether the appellate court erred in applying Article 21 of the Civil Code.

RULING:

  1. The Supreme Court held that the trial court erred in applying the parol evidence rule and refusing to consider evidence aliunde to show that time was of the essence in the transaction. The court stated that the parol evidence rule does not apply when there is an ambiguity in the terms of the contract. In this case, the purchase order was silent as to the date the flint cullets are needed, which created an ambiguity. Therefore, the court allowed the introduction of evidence to clarify the intent of the parties.

  2. The court ruled that the evidence presented by the petitioner to modify, explain, or add to the terms of the agreement is admissible despite the parol evidence rule. An exception to the parol evidence rule applies when a party puts in issue in their pleading the failure of the written agreement to express the true intent and agreement of the parties.

  3. The court ruled that the second purchase order superseded the first purchase order and extinguished the original obligation of the petitioner to accept deliveries from the respondent until the specified quantity is filled. By acquiescing to the new purchase order which no longer indicated a specific quantity of flint cullets to be delivered, the respondent knew or should be presumed to have known that deliveries made thereafter were no longer meant to complete the original quantity contracted for under the first purchase order.

  4. Yes. The appellate court erred in awarding damages based on conjectures and assertions. In determining actual damages, the court must rely on competent proof and the best evidence obtainable regarding the actual amount of loss.

  5. Yes. The appellate court erred in applying Article 21 of the Civil Code. The application of this provision is barred due to the pre-existing contractual relation between the parties. Furthermore, the petitioner is not deemed to have acted fraudulently or in bad faith.

PRINCIPLES:

  • The parol evidence rule does not apply when there is an ambiguity in the terms of the contract.

  • Evidence aliunde may be admitted to clarify the intent of the parties when there is an ambiguity in the contract.

  • The written document is the best evidence of its own contents.

  • The parol evidence rule excludes any evidence that is used as a substitute for a written contract, or to alter or contradict its terms.

  • An exception to the parol evidence rule applies when a party puts in issue in their pleading the failure of the written agreement to express the true intent and agreement of the parties.

  • Novation extinguishes the original obligation of a contract.

  • Actual damages must be supported by independent evidence and cannot rely on mere assertions or speculations.

  • In determining actual damages, the court cannot rely on mere assertions, speculations, conjectures, or guesswork but must depend on competent proof and the best evidence obtainable regarding the actual amount of loss.

  • The application of Article 21 of the Civil Code is barred when there is a pre-existing contractual relation between the parties.

  • To apply Article 21, the party accused of violating it must have acted fraudulently or in bad faith.