Power Sector Assets and Liabilities Management Corporation v. Sem-Calaca Power Corporation
REITERATIONFacts
The Antecedents: This case concerns the interpretation of an Asset Purchase Agreement (APA) executed between the Power Sector Assets and Liabilities Management Corporation (PSALM) and SEM-Calaca Power Corporation (SCPC) for the sale of the 600-MW Batangas Coal-Fired Thermal Power Plant in Calaca, Batangas. The core dispute revolves around SCPC's obligation under Schedule W of the APA to supply electricity to MERALCO. SCPC contends it is obligated to supply 10.841% of MERALCO's requirements, capped at 169,000 kW per hour. PSALM, however, argues that SCPC is bound to supply the entire 10.841% without any hourly cap, leading to disputes over payments for electricity supplied by SCPC and from the Wholesale Electricity Spot Market (WESM) to cover alleged deficiencies. Procedural History: The dispute escalated when SCPC filed a Petition for Dispute Resolution with the Energy Regulatory Commission (ERC) against PSALM and the National Power Corporation (NPC). The ERC ruled in favor of SCPC, affirming that SCPC's obligation was capped at 169,000 kW per hour and ordering PSALM to return improperly withheld payments. PSALM's motion for reconsideration was denied by the ERC. Subsequently, PSALM filed a Petition for Review with the Court of Appeals (CA), which affirmed the ERC's decision. PSALM's motion for reconsideration with the CA was also denied, leading to the present petition before the Supreme Court. The Petition: PSALM filed a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the CA's decision. PSALM argues that the CA erred in affirming the ERC's interpretation that SCPC's obligation to supply MERALCO is capped at 169,000 kW per hour. PSALM contends that Schedule W of the APA is unambiguous and requires SCPC to supply the full 10.841% of MERALCO's requirements without such a cap, and that the ERC and CA erroneously considered extrinsic evidence and harmonized provisions in a way that led to an absurd result. PSALM seeks to overturn the CA's ruling and reinstate its interpretation of SCPC's obligations.
Issue(s)
Whether the Court of Appeals erred in affirming the Energy Regulatory Commission's interpretation of Schedule W of the Asset Purchase Agreement, specifically regarding the capacity allocation cap of 169,000 kW for SEM-Calaca Power Corporation's (SCPC) obligation to MERALCO. Whether Schedule W of the Asset Purchase Agreement is ambiguous regarding SCPC's obligation to MERALCO.
Ruling
The petition is DENIED. The Court of Appeals' Decision dated September 4, 2012, and Resolution dated November 27, 2012, in CA-G.R. SP No. 123997, affirming the rulings of the Energy Regulatory Commission, are AFFIRMED.
Ratio Decidendi
On the interpretation of Schedule W and the capacity allocation cap: The Court affirmed the ERC's interpretation that SCPC's obligation was to deliver 10.841% of MERALCO's energy requirements but not to exceed 169,000 kW capacity allocation at any given hour. The Court reiterated the principle that rulings of administrative agencies like the ERC are accorded great respect and are generally conclusive on the parties when affirmed by the Court of Appeals, provided they are supported by substantial evidence and not tainted by grave abuse of discretion. The ERC acted within its statutory powers in interpreting the contract between the parties. The Court found no reason to depart from the rule of deference to the ERC's findings, as they were supported by substantial evidence and affirmed by the CA. The ERC's interpretation harmonized the seemingly conflicting figures in Schedule W and gave effect to all provisions of the contract, avoiding an absurd or unreasonable outcome. The Court emphasized that requiring SCPC to supply more than its capacity would be unreasonable, especially considering the limited capacity of the Calaca Power Plant. The Court also noted that PSALM, as the preparer of the APA, should not benefit from any ambiguity therein. On the ambiguity of Schedule W: The Court found that ambiguity indeed surrounded the figures 10.841% and 169,000 kW in Schedule W. The 10.841% lacked a base value, making it an incomplete mathematical statement susceptible to various interpretations. The 169,000 kW was also unclear as to whether it was a cap or limit. Applying Article 1374 of the Civil Code, the Court held that the various stipulations of a contract must be interpreted together, attributing to doubtful ones the sense that results from all of them taken jointly. The ERC correctly harmonized these provisions, preserving both figures and giving them meaning. The Court rejected PSALM's argument that the figures were merely "indicative" as this would render them insignificant and violate the principle of giving effect to all provisions. Furthermore, the Court applied Article 1377 of the Civil Code, stating that any obscurity or ambiguity in the APA, prepared by PSALM, should be interpreted against PSALM. The Court also considered the principle of "reasonableness of the result" in contract interpretation, noting that requiring SCPC to supply beyond its capacity would be unreasonable and absurd.
Main Doctrine
The Supreme Court affirmed the Energy Regulatory Commission's (ERC) interpretation that SEM-Calaca Power Corporation's (SCPC) obligation under Schedule W of the Asset Purchase Agreement (APA) was to deliver 10.841% of MERALCO's energy requirements but not to exceed 169,000 kW capacity allocation at any given hour. The Court held that when contract terms are ambiguous, the intention of the parties must be gathered from the contract's language, and where ambiguity exists, various stipulations must be interpreted together to give effect to all. The Court emphasized that interpreting the contract to require SCPC to supply more than its capacity would lead to an absurd and unreasonable result, and that any ambiguity in the APA, prepared by PSALM, should be interpreted against PSALM.