ILIGAN CEMENT CORPORATION, PETITIONER, VS. THE COURT OF APPEALS, HON. ZOSIMO Z. ANGELES, PRESIDING JUDGE, REGIONAL TRIAL COURT, BRANCH 58, MANILA AND BETA ELECTRIC CORPORATION, …

This is a petition for review on certiorari under Rule 45
of the Revised Rules of Court of the decision of the Court of Appeals in CA –
G.R. CV No. 27189, which affirmed the decision of the Regional Trial Court,
Branch 58, Manila in Civil Case No. 15634.

We deny the petition.

I

The facts of the case as found by the Court of Appeals are as
follows:

“In 1981, the Iligan Cement Corporation (ICC), started
undertaking its ‘Plant Rehabilitation’ program of power requirements which had
to be implemented on a phase-to-phase basis. Phase I of this program consisted in the installation of power factor
correction equipment. Based on the
study made by the ICC safety engineer and electrical engineering consultant,
Engineer Fernando Munasque, the ICC decided to have installed in the plant a
combination of the group and the total power factor correction
substations. With the general
specifications furnished to prospective suppliers, the ICC requested the former
to give their respective price quotations for the equipment. Of the four would-be suppliers the ICC
considered the quotation of the BETA Electric
Corporation (Beta) as the most reasonable. The quotation was for either a six-step power factor corrective
equipment or for a three-step corrective power equipment. Subsequently, or on August 19, 1983, Beta
electric likewise submitted a cost estimate with regard to the installation,
commissioning and testing of the equipment together with the supply of wires,
lugs and foundation. After a thorough
evaluation of these proposals, the ICC, through the recommendation of Engr.
Munasque and Engr. Pachler, a Swiss consultant, decided on the purchase of a
three-step power factor correction equipment. It likewise accepted the Beta proposal for the installation,
commissioning and testing of the power factor equipments. Purchase orders were sent to Beta by ICC to
cover these transactions on October 14, 1983. These were however cancelled and superseded by the purchase orders filed
on November 7, 1983, to take into account the increase in prices of material
components of the power factor equipment. It appeared from these purchase orders that the equipment cost
P654,000.00 while the installation, commissioning and testing would amount to
P39,947.00.

On November 21, 1983, Beta submitted to ICC its proposed
construction and wiring diagram for the latter’s comment and approval.

The equipment was delivered to Iligan at plaintiff’s cement plant
there. This equipment upon the approval
of the plaintiff, was installed. On
November 2, 1985, in the presence and with the approval, of ICC engineering
staff, the equipment was switched on. Thereafter, a chattering sound was heard, and fire ensued.

An assessment of the extent of the damage showed that equipment
loss amounted to P8,577,581.84 (Exhs. I and I-2). This however did not include the power factor correction
equipment installed and switched on that day since it proved to be intact and
undamaged despite the fire.

No one claimed responsibility for the fire. Thus, both parties decided to form a
technical committee to study the technical causes of the fire. The committee, as agreed upon, was composed
of five members, two from each party and the fifth member, to be unanimously
chosen by the parties, who would also act as the chairman. The parties chose Engr. Alejandro Jimenez as
chairman, a noted electrical engineer.

On April 30, 1986, the committee submitted its report. Its findings showed that the fire was
‘caused by arcing faults and restrikes arising from overvoltage produced by
switching the 600 KVAR capacitors
into the 4160-volt system which is susceptible to arcing faults and whose
equipment are not well protected against overvoltage. The fire and the damages it caused was due to the fact that oil
circuit breakers were used indoors’ (Records, p. 128).

Despite this report, the parties were unable to pinpoint which
should shoulder what cost. Thus, on
December 29, 1986, the ICC filed a complaint for damages against Beta. It was plaintiff’s theory that part of the
defendant’s duty as the entity commissioned by the ICC to manufacture, install,
commission and test the equipment was the making of a prior technical
audit. This stemmed from a comment made
by the committee stating that the fire could have been avoided ‘had a technical
audit been made before the capacitors were considered.’

Defendant contended that plaintiff had no cause of action against
it inasmuch as:

a.) Defendant performed all its obligations to plaintiff under
their contract.

i) The design and specifications for the
power factor corrective equipment were made exclusively by plaintiff which had
in its employ an expert, a safety engineer and electrical engineering
consultant.

ii.) The power factor correction equipment
delivered and installed by Beta was in accordance with plaintiff’s own design
and specifications.

iii.) Plaintiff approved the construction and
wiring drawings for the equipment delivered by Beta.

iv.) Plaintiff inspected and accepted the power
factor equipment delivered by Beta.

v.) The equipment passed all
the tests required by the plaintiff.

vi.) The energization and switching on the
equipment was previously cleared with and approved by plaintiff.

vii) The equipment suffers
from no defect or deficiency whatsoever (Records, pp. 31-32).

Furthermore, defendant asserted that ‘plaintiff itself made a study
of its electrical system and on the basis of such study, decided on a power
factor corrective equipment which (it) itself designed.’ Thus, it cannot be
faulted if plaintiffs own study did not reveal the weakness and deficiency of
its electrical system.

After a series of hearings, the trial court decided for the
defendant. It held:

‘To the mind of the court, BEC has not at all breached its capacitor
contract with ICC, let alone could such alleged breach of the contract be
considered as the proximate cause of the November 2, 1985 fire that damaged
ICC’s major substation and other power utilization equipment at its Iligan
cement plant. It must be noted that
BEC’s contract with ICC caused only the supply, installation, commissioning and
testing with the 63 step (sic) power factor capacitor at ICC’s Iligan
plant. The transaction itself came into
being as a brainchild of ICC’s own safety and consultant professional
electrical engineer, Fernando Munasque who (in coordination with ICC’s projects
group composed of foreign and local engineers) studied, designed and
recommended the acquisition of the capacitor in 1981 admittedly for cost saving
purposes. In fact, Engineer Munasque
even provided the design, specifications and diagram of the capacitor and
discussed its details with BEC’s
engineers. Furthermore, ICC
supervised the manufacture of the capacitor as BEC had to submit to ICC for
approval all construction, drawings, wirings and other details relative
thereto” (Rollo, pp. 34-37).

The Court of Appeals affirmed the decision of the trial court,
dismissing the complaint and ordering the plaintiff (herein petitioner) to pay
the defendant (herein private respondent) the sum of P1,012,269.61 as actual
damages (representing the unpaid price of the power-factor correction equipment
as of November 30, 1989) and P150,000.00 as attorney’s fees (Rollo, pp. 83-84).

II

In this petition, petitioner insists that the proximate cause of
the fire was the negligence of private respondent in switching on the capacitor
into the electrical system of petitioner without first determining whether said
connection could be done safely. According to petitioner, if private respondent took said precaution, it
could have found that it was not safe to do so and that there was no need for
said equipment to be switched on because the cement plant’s power factor had
reached the desired level even without the use of said equipment.

III

The relations of the parties is governed by the provisions of the
Civil Code of the Philippines on contracts for a piece of work.

Article 1713 of said Code provides:

“By the contract for a piece of work the contractor binds
himself to execute a piece of work for the employer, in consideration of a
certain price or compensation. The
contractor may either employ only his labor or skill, or also furnish the
material.”

A contractor is responsible for the damages caused by the defects
in the work or by the use of materials of inferior quality or due to any
violation of the terms of the contract (cf. Civil Code of the Philippines, Art.
1723; Tolentino, Civil Code of the Philippines 291 [1992]).

Petitioner failed to present evidence that there was a defect in the
capacitor it ordered from private respondent; that the latter used materials of
inferior quality; or that it had violated the terms of the contract for the
supply of said equipment.

The Court of Appeals was categorical that private respondent
“did not at all break its contractual obligation with plaintiff-appellant
(petitioner)” (Rollo, p. 40).

Another point to consider is that after the fire, the capacitor
was still in good condition, which could only mean that private respondent had
complied with the design made by the engineers of petitioner.

Based on the findings of the Technical Committee, the trial court
concluded that the overvoltage, caused by the weak and inadequate electrical
system of the cement plant, generated the sparks which ICC’s circuit breakers
failed to isolate or neutralize. Hence,
the sparks spread to other bigger-sized circuit breakers of the cement plant’s
electrical system, heated the poorly insulated electrical wiring and ignited
the oil in the circuit breakers and transformer equipment.

The Court of Appeals agreed with the trial court that the
overvoltage was caused by the weak and deficient electrical system, including
the lack of protective relays, of the cement plant itself (Rollo, p. 40).

The installation of the equipment prior to its switching on into
the electric system of the cement plant was made under the supervision of the
engineers of petitioner. The wiring
lay-out plans were also approved by petitioner (Rollo, p. 41).

Petitioner has its
own engineering staff and foreign consultants, who were knowledgeable about the
capacity and requirements of the electrical system of the cement plant.

It was petitioner itself which made a study of its electrical
system and on the basis of such study decided on the specifications of the
capacitor. Likewise, it was petitioner
itself that designed the equipment it ordered from private respondent. The blame cannot be laid at the door of
private respondent, if petitioner’s study did not take into consideration the
deficiency of its electrical system. Whatever defects or imperfections were extant in the design were the
responsibility of petitioner’s resident engineers. It was petitioner which formally communicated to private
respondent in a letter dated July 25, 1982, requesting for a quotation for a
power-capacitor bank and attaching thereat a lay-out of said capacitor bank.

According to the Technical Committee, “had a technical audit
been made before the capacitors were considered, the system would have revealed
its weakness” (Rollo, p. 89).

It was petitioner’s duty to conduct a periodic technical audit of
the cement plant. In this particular
case, petitioner was remiss in its duty (TSN, March 4, 1988, pp. 52-54).

The “technical audit” is not included in the contract
for commissioning, installing and testing of the power capacitor. It was supposed to be the subject of another
contract between the parties but which did not push through because of the
fire.

Petitioner contends that there was no more need to switch-on the
capacitor prior to the accident because its power factor had already been
raised to 93.3%, which was more than the desired 85% level. It was petitioner which ordered the
capacitor. It was in a better position
to ascertain whether or not it still needed the equipment. It was its duty to inform private respondent
that it had already achieved the desired power factor rating.

Finally, petitioner claims that the Court of Appeals and the
trial court substituted their own judgment for the findings of fact of the
Technical Committee. The fact is that
the Technical Committee only made these conclusions as to what, not who, caused
the fire. The two courts were the ones
which determined who was to be blamed for the fire on the basis of the findings
of fact of the Technical Committee. In
brief, the two courts did not alter the findings of fact of the Technical
Committee, much less make their own findings.

WHEREFORE, the petition is DENIED and the decision of the
Court of Appeals is AFFIRMED.

SO ORDERED.

Padilla, (Chairman), Davide, Jr., Bellosillo, and Kapunan, JJ., concur.