Laurel L.
Sanchez
1st Year Section-Medialdea
Subject- Obligation and Contract
RE: CASE DIGEST
Philippine Communications Satellite Corporation, petitioner,
Vs.
Globe Telecom, INC., Respondent.
x-------------------------x
Globe Telecom, INC., petitioner,
Vs.
Philippine Communications Satellite Corporation, Respondent.
G. R. No. 147324 May 25,2004
TINGA, J.:
FACTS:
Globe was contracted by an American companies which is the contractor of US Defense
Communications Agency (USDCA) for the use of communication facilities of the US military
based in Cubi Point, Zambales. Globe on the other hand, contracted Philippine Communications
Satellite Corporation (Philcomsat) as the local service provider for the provision of the
communication facilities. On 07 May 1991, Philcomsat and Globe entered into an Agreement
whereby Philcomsat obligated itself to establish, operate and provide communication facilities for
60 months. In turn, Globe promised to pay Philcomsat monthly rentals for each leased circuit
involved. At the time of the execution of the Agreement, both parties knew that the Military Bases
Agreement between Philippines and the US was to expire in 1991 and the US military shall not be
allowed in the Philippines unless a new treaty is duly concurred in by the Senate. The Senate
passed and adopted Senate Resolution No. 141, expressing its decision not to concur in the
ratification of the Treaty. Globe notified Philcomsat of its intention to discontinue the use of the
earth station effective 08 November 1992. Philcomsat sent a reply letter to Globe stating its
commitment to pay and again sent a letter to Globe demanding payment. Globe refused to heed
Philcomsat’s demand. Philcomsat filed with the RTC of Makati a Complaint against Globe which
Globe filed an Answer to the Complaint. The trial court rendered its Decision in favor of the
plaintiff. Both parties appealed the trial court’s Decision to the Court of Appeals.
ISSUE/S:
1.) Whether the termination of the RP-US Military Bases Agreement, the non-ratification of the Treaty
of Friendship, Cooperation and Security, and the consequent withdrawal of US military forces and
personnel from Cubi Point constitute force majeure which would exempt Globe from complying
with its obligation to pay rentals under its Agreement with Philcomsat;
2.) Whether Globe is liable to pay rentals under the Agreement for the month of December 1992; and
3.) Whether Philcomsat is entitled to attorney’s fees and exemplary damages.
RULING/S:
1.) YES. The Court finds that the defendant is exempted from paying the rentals for the
facility for the remaining term of the contract.
As a consequence of the termination of the RP-US Military Bases Agreement (as
amended) the continued stay of all US Military forces and personnel from Subic Naval Base
would no longer be allowed, hence, plaintiff would no longer be in any position to render the
service it was obligated under the Agreement. To put it blantly (sic), since the US military forces
and personnel left or withdrew from Cubi Point in the year end December 1992, there was no
longer any necessity for the plaintiff to continue maintaining the IBS facility.
2.) YES. The Court likewise affirms the appellate court’s ruling that Globe should pay the
same.
Although Globe alleged that it terminated the Agreement with Philcomsat effective 08
November 1992 pursuant to the formal order issued by Cdr. Corliss of the US Navy, the date
when they actually ceased using the earth station subject of the Agreement was not established
during the trial.34 However, the trial court found that the US military forces and personnel
completely withdrew from Cubi Point only on 31 December 1992.35 Thus, until that date, the
USDCA had control over the earth station and had the option of using the same. Furthermore,
Philcomsat could not have removed or rendered ineffective said communication facility until after
31 December 1992 because Cubi Point was accessible only to US naval personnel up to that
time. Hence, the Court of Appeals did not err when it affirmed the trial court’s ruling that Globe is
liable for payment of rentals until December 1992.
3.) NO. Neither did the appellate court commit any error in holding that Philcomsat is not
entitled to attorney’s fees and exemplary damages.
The award of attorney’s fees is the exception rather than the rule, and must be supported
by factual, legal and equitable justifications.36 In previously decided cases, the Court awarded
attorney’s fees where a party acted in gross and evident bad faith in refusing to satisfy the other
party’s claims and compelled the former to litigate to protect his rights;37 when the action filed is
clearly unfounded,38 or where moral or exemplary damages are awarded.39 However, in cases
where both parties have legitimate claims against each other and no party actually prevailed,
such as in the present case where the claims of both parties were sustained in part, an award of
attorney’s fees would not be warranted.40
Exemplary damages may be awarded in cases involving contracts or quasi-contracts, if
the erring party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.41 In the
present case, it was not shown that Globe acted wantonly or oppressively in not heeding
Philcomsat’s demands for payment of rentals. It was established during the trial of the case
before the trial court that Globe had valid grounds for refusing to comply with its contractual
obligations after 1992.
