Ferrorchrome Philippines, Inc. v. Cagayan Electric Power and Light Company, Inc.

G.R. No. 194871, Aug 14, 2019

First Division
Topic: Consent

Facts: Ferrochrome Philippines, Inc (FPI) entered into an agreement for the direct sale and supply of
its plant operations power requirements (agreement) with the National Power Corporation (NPC), to
generate and transmit electric energy and set up transmission line grids and generation facilities in
the country. This prompted CEPALCO to institute a petition for prohibition, mandamus, and
injunction with prayer for a restraining order and/or injunction against NPC where it alleges that NPC
violated CEPALCO’s rights under its franchise grant. This was granted by the Trial Court.
NPC assailed its judgement before the Supreme Court where it was upheld. In the meantime,
through the Philippine President Memorandum, CEPALCO filed with the Energy Regulatory Board
(ERB) for the discontinuation of all existing direct supply of power by the NPC within CEPALCO’s
franchise area.
Sometime thereafter, the Supreme Court’s decision became final and executory. In a letter,
NPC informed FPI of the implementation of the decision and transfer of FPI’s direct power supply
connection to CEPALCO. NPC also assured FPI that this arrangement will not cause undue
interruption of FPI’s operations. In response, FPI sent NPC a letter stating that it is not bound by the
Trial Court since it was not made a part to the case even if its interest was substantial. It insisted on
holding NOC responsible under the agreement and asserted that if its power supply connection had
already been transferred to CEPALCO, it will pay only the rates provided in the said agreement and
nothing more. FPI also invoked its right to be heard on CEPALCO's capability to supply its power
needs and its willingness to match NPC's rates, as a matter of due process, and claimed that it cannot
afford to pay the 10% add-on rate sought by CEPALCO on top of NPC rates.
Despite knowledge of the transfer of its power connection to CEPALCO, and without informing the
latter, FPI paid NPC the electric bill that the latter erroneously issued. Consequently, CEPALCO sent a
notice of disconnection to FPI for not having received payment for the April 1990 energy bill
amounting to P10,175,804.47, with warning that if the amount is not settled by the stated due date it
will be constrained to disconnect the energy service to FPI.  In reply, FPI informed CEPALCO that it
already paid its April 1990 power bill to NPC in the amount of P9,344,906.24.  FPI filed a complaint of
damages with injunction in the trial court. A counter suit has held the same against FPI. The dispute
reached the Supreme Court. Hence, this case.

Issue: Whether there is a contract between FPI and CEPALCO.

Ruling: No, there is not contract. There is no meeting of the minds between the parties.
It may not be held that an implied contract exists between FPI and CEPALCO. A contract is a
meeting of minds between two persons whereby one binds himself, with respect to the other, to give
something or to render some service. Its essential requisites are: (a) consent of the contracting
parties; (b) object certain which is the subject matter of the contract; and (c) cause of the obligation
which is established. The presence of all the elements is necessary for a valid contract.  When all the
elements are present, the contract shall be obligatory in whatever form they may have been
entered. With respect to the element of consent, Article 1319 of the Civil Code pertinently provides:
Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counteroffer.
There must be no ambiguity in the terms of the offer as well as its acceptance for the
element of consent to be present.
Here, FPI's opposition to CEPALCO's takeover as its supplier of electricity is a glaring
indication of its lack of consent to such an arrangement. The circumstances indicate that FPI used the
electricity supplied by CEPALCO not on a voluntarily, but on a take it or leave it basis. It was not so
much given a choice but forced into the new situation as its business hung on the line. As mentioned,
electricity is a necessity. If much inconvenience may be caused to a plain household by a single day's
power interruption, one can imagine how much more prejudice it would cost to an enterprise whose
lifeblood runs on electric power. There being no consent on the part of FPI to relate to CEPALCO,
there is no meeting of the minds to speak of here, and therefore no implied contract. In all, it was
incumbent upon the parties to forge an agreement that would define their compulsory relationship
before CEPALCO should have assumed its role as power supplier. To say that an implied contract
exists is to modify the clear tenor of the RTC-Quezon City Decision which requires FPI and CEPALCO
to execute a written contract.