La Filipina Uy Gongco Corporation and Philippine Foremost Milling Corporation vs. Harbour Centre Port Terminal, Inc.

A contract is the law between the parties and must be complied with in good faith unless its stipulations are contrary to law, morals, good customs, public order, or public policy. Accordingly, Harbour Centre was bound by the MOA's terms on dredging, priority berthing, and rate adjustments, and its breach thereof warranted an award of damages.

La Filipina Uy Gongco Corporation and Philippine Foremost Milling Corporation (collectively, La Filipina et al.) are locators at the Manila Harbour Centre port, operated by Harbour Centre Port Terminal, Inc. (Harbour Centre). Their decision to locate there was premised on Harbour Centre's commitments, later formalized in a 2004 Memorandum of Agreement (MOA), which guaranteed priority berthing rights, maintenance dredging to a depth of -11.5 meters MLLW, and a specific formula for port and cargo handling charges. A dispute arose when Harbour Centre demanded back rentals, increased handling charges unilaterally, and allegedly failed to maintain the required channel depth, leading La Filipina et al. to file a complaint for specific performance and damages.

• Nature of the Action: La Filipina et al. filed a complaint against Harbour Centre for specific performance (to dredge and honor the MOA) and damages due to alleged breaches of their contractual arrangements.
• Contractual Arrangements: The parties executed a MOA in 2004 detailing rights on port charges, priority berthing, and dredging. Harbour Centre guaranteed to maintain the navigational channel and berthing area at -11.5 meters MLLW, with a penalty of US$2,000 per day for failure.
• Alleged Breaches: Harbour Centre demanded back rentals, unilaterally increased port charges, and failed to maintain the required depth, causing vessels to touch bottom. It also allegedly refused berthing to La Filipina et al.'s barges in September 2008.
• Lower Court Findings: The RTC found Harbour Centre liable for breaching the MOA's dredging, priority berthing, and rate-fixing provisions. It awarded actual damages for berthing refusal, liquidated damages for dredging failure, and exemplary damages and attorney's fees. The CA affirmed with modifications.
• Execution and Dredging: Pending appeal, the RTC ordered execution for dredging. When Harbour Centre failed to comply, the RTC authorized La Filipina et al. to dredge at Harbour Centre's expense, costing over PHP 462 million.
• Subsequent Motions: La Filipina et al. filed a Motion for Payment for reimbursement of dredging costs before the RTC and a Motion for Issuance of Writ of Attachment before the CA.

• Harbour Centre (G.R. No. 230159):
  • Jurisdiction: Argued the RTC, sitting as a special commercial court, had no jurisdiction as the case was purely civil, not maritime.
  • Validity of MOA: Contended the MOA was ultra vires (signed without board authority) and lacked cause or consideration.
  • Damages: Challenged the awards of actual and liquidated damages as unsubstantiated and unconscionable. Claimed the unilateral charge increase was permitted.
  • Rent for Equipment: Argued it should collect rent for space occupied by La Filipina et al.'s unloaders.
  • Reformation: Pleaded for reformation of the MOA due to unforeseen circumstances making it inequitable.
• La Filipina et al. (G.R. No. 229490 & 245515):
  • Attachment: Argued they were entitled to a writ of attachment based on Harbour Centre's fraud and disposal of assets.
  • Motion for Payment: Contended the RTC had jurisdiction to resolve their Motion for Payment as it was an offshoot of the execution pending appeal.
  • Forum Shopping: Denied committing forum shopping, arguing the reliefs sought in the different cases were distinct.

• La Filipina et al. (Opposing Harbour Centre's Petition):
  • Jurisdiction: Asserted the issue was settled in prior rulings that the cause of action was maritime.
  • MOA Validity: Argued Harbour Centre was estopped from questioning validity and had impliedly ratified the MOA by accepting benefits.
  • Damages: Defended the factual findings supporting actual and liquidated damages. Argued the MOA formula bound Harbour Centre on charges.
  • Rent: Cited PPA Memorandum Circular No. 32-96 prohibiting rent for cargo handling equipment areas.
• Harbour Centre (Opposing La Filipina et al.'s Petitions):
  • Attachment: Contended no fraud was proven and the CA could not receive evidence for such a writ.
  • Motion for Payment: Argued the RTC lost jurisdiction upon perfection of the appeal and that filing it constituted forum shopping.

• Jurisdiction: Whether the RTC had jurisdiction over the complaint.
• MOA Validity: Whether the MOA was void for being ultra vires or lacking consideration.
• Reformation: Whether the MOA should be reformed.
• Actual Damages: Whether La Filipina et al. were entitled to actual damages for berthing refusal.
• Liquidated Damages: Whether the award of liquidated damages was proper and whether its amount should be reduced.
• Port Charges: Whether Harbour Centre's unilateral increase in port and handling charges was valid.
• Rent for Equipment: Whether La Filipina et al. should pay rent for space occupied by their unloading equipment.
• RTC Jurisdiction over Motion: Whether the RTC had jurisdiction to act on the Motion for Payment after appeal was perfected.
• Writ of Attachment: Whether the CA erred in denying the plea for a writ of attachment.
• Forum Shopping: Whether La Filipina et al. committed forum shopping.

• Jurisdiction: The issue was settled in a prior final ruling (G.R. No. 191789) that the cause of action was maritime, and thus within the RTC's jurisdiction.
• MOA Validity: Harbour Centre impliedly ratified the MOA by retaining benefits (advance payments) derived from it. The argument on lack of consideration was a factual question not reviewable in a Rule 45 petition.
• Reformation: Harbour Centre's plea for reformation failed as its allegations were unsupported by evidence, and the requisites for reformation were not proven.
• Actual Damages: The award was proper. Harbour Centre violated the priority berthing rights stipulated in the MOA, and the damages were duly proven with receipts and other documentation.
• Liquidated Damages: Harbour Centre's breach of its dredging obligation was proven by multiple surveys. However, the stipulated rate of US$2,000 per day was reduced to US$1,000 per day as unconscionable, considering the dredging failure did not render the port inoperative.
• Port Charges: The unilateral increase violated the MOA, which required adherence to a specific formula and prior written notice.
• Rent for Equipment: No rent was chargeable. The MOA and prior agreements granted free use, and PPA Memorandum Circular No. 32-96 prohibits rent for areas used for cargo handling equipment.
• RTC Jurisdiction over Motion: The Motion for Payment was an offshoot of the execution pending appeal. The RTC correctly retained jurisdiction to resolve it as part of enforcing its judgment.
• Writ of Attachment: The CA erred in ruling it could not receive evidence. A writ of attachment is an auxiliary process within the CA's original jurisdiction. The matter was remanded to the CA for evidence reception on the alleged fraud.
• Forum Shopping: No forum shopping was committed. The petitions (G.R. Nos. 213080, 229490) and the Motion for Payment sought different reliefs and raised distinct issues.

• Contracts as the Law Between the Parties — A contract is binding between the parties and must be complied with in good faith, provided its stipulations are not contrary to law, morals, good customs, public order, or public policy. The Court applied this to hold Harbour Centre to the MOA's terms on dredging, berthing, and rate adjustments.
• Implied Ratification of Corporate Contracts — An unauthorized contract entered into by a corporate officer may be ratified by the corporation's acceptance or retention of benefits thereunder. Harbour Centre's receipt and retention of advance payments under the MOA ratified the agreement, making it binding despite the alleged lack of prior board authority.
• Reduction of Unconscionable Liquidated Damages — Under Articles 1229 and 2227 of the Civil Code, courts may equitably reduce stipulated penalties or liquidated damages if they are iniquitous or unconscionable. The Court reduced the daily penalty from US$2,000 to US$1,000.
• Forum Shopping — Forum shopping exists when a party files multiple actions based on the same cause of action, seeking the same or similar reliefs, either pending resolution or already adjudicated (litis pendentia or res judicata). The Court found no forum shopping as the reliefs in the different cases were not identical.

• "A contract is the law between the parties. Unless a contract contains stipulations that are against the 'law, morals, good customs, public order[,] or public policy[,]' the contract is binding upon the parties and its stipulations must be complied with in good faith."
• "Harbour Centre's act of retaining the benefits arising from the Memorandum of Agreement is deemed an implied ratification of the allegedly ultra vires contract."
• "Given the facts of this case, we find that USD 2,000.00 per day of liquidated damages computed from December 6, 2004 until October 24, 2014 as excessive and unconscionable."

• Hasegawa v. Kitamura, 563 Phil. 572 (2007) — Cited for the principle that jurisdiction over the subject matter is conferred by law and determined by the allegations of the complaint.
• University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, 776 Phil. 401 (2016) — Cited to explain the doctrine of implied ratification of an unauthorized corporate act.
• Philippine Charter Insurance Corporation v. Petroleum Distributors & Services Corporation, 686 Phil. 154 (2012) — Cited for the dual function of liquidated damages as providing for indemnity and strengthening the coercive force of an obligation.
• Asia United Bank v. Goodland Co., Inc., 660 Phil. 504 (2011) — Cited for the definition and modes of committing forum shopping.

• Articles 1229 & 2227, Civil Code — Provide for the equitable reduction of penalties or liquidated damages by the courts if they are iniquitous or unconscionable.
• Article 1308, Civil Code — Establishes the principle of mutuality of contracts, which was invoked to reject Harbour Centre's interpretation of the dispute clause.
• Rule 57, Sections 1 & 3, Rules of Court — Govern the grounds and requisites for the issuance of a writ of preliminary attachment.
• PPA Memorandum Circular No. 32-96 — Prohibits the collection of rental fees for areas officially designated as parking spaces for cargo handling equipment.

Associate Justice Mario V. Lopez, Associate Justice Jhosep Y. Lopez, Associate Justice Alfredo Benjamin S. Caguioa (on leave), Associate Justice Antonio T. Kho, Jr.