Case No. 55 Articles 1370 & 2035 MILWAUKEE INDUS !IES C"!#"!A I"N$ petitioner, vs.

. #AM#AN%A III ELEC !IC C""#E!A I&E$ INC.$ respondent. %.!. No. 1525'( Ma) 31$ 200* IN%A$ J.+ ,AC S+ Respondent Pampanga III Electric Cooperative, Inc. is the grantee of a franchise to provide electric light and power supply in the municipalities of Apalit, Macabebe, Masantol, Minalin, an imon and to. !omas, Pampanga. Petitioner Milwau"ee Industries Corporation is operating a steel plant in Apalit, Pampanga, and wanted to purchase electricity for its operations directly from the #ational Power Corporation $#AP%C%R&. !o be able to purchase directly from #AP%C%R, petitioner needed to secure a waiver from respondent, as the municipality of Apalit was within its franchise area. Petitioner and respondent e'ecuted a (aiver Agreement for ale of Electricity $(aiver Agreement&. )nder the contract, petitioner promised to pay respondent a waiver or royalty fee e*uivalent to two and a half percent $+.,-& of its monthly power bill from #AP%C%R not later than the ., th day of each month, plus a surcharge of +- per month in case of delay. Respondent then filed a Complaint for collection of sum of money in the Regional !rial Court of Macabebe, Pampanga. It alleged that pursuant to the (aiver Agreement, it billed petitioner for unpaid royalties and surcharges. /espite repeated demands for payment, petitioner refused to pay respondent. In its Answer, petitioner denied that it was liable to pay respondent royalty fees and surcharges. !he R!C rendered its /ecision in favor of petitioner and ruled that petitioner was not liable to pay royalty fees to respondent. It held that although the wording of the contract ma"es it appear that petitioner is obligated to pay royalty fees to respondent every month, there is proof that such was not the real intention of the parties. It was said the #ovember +0, .11, letter sent by respondent to the EIA2, /epartment of Energy, shows that petitioner had to pay royalties only when its electric power consumption in a month e'ceeds 3+ megawatts. Respondent appealed the Decision of the R!C to the Court of Appeals. !he Court of Appeals reversed the trial court and held that petitioner is liable for payment of royalty fees to respondent under the terms of the (aiver Agreement. !he appellate court characteri4ed as unnecessary the trial court5s resort to e'trinsic aids to ascertain the intention of the parties because the terms of the (aiver Agreement are clear and leave no room for interpretation. 6ence, the present petition for review on certiorari. ISSUE+ (hether or not Milwau"ee Industries Corporation is liable to pay royalty fees to respondent under the terms of the (aiver Agreement.

-ELD+ 7es. Milwau"ee Industries Corporation is liable to pay royalty fees to respondent under the terms of the (aiver Agreement. Item . of the (aiver e'pressly provides that a waiver8royalty fee of two and a half percent $+.,-& based on the monthly power bill of the C%# )MER 9petitioner: shall be paid to the cooperative

9respondent: not later than the ., th day of every month. Any delay in the payment shall be levied a surcharge of two percent $+-& per month computed from the date the payment is due. Article .3;< applies in this case. !he general rule is that when the terms of an agreement are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulations shall prevail. It is further re*uired that the stipulations of a contract be interpreted as a whole, attributing to the *uestionable stipulations the sense which may result from all of them ta"en =ointly. !he said provision, Item ., certainly obligates petitioner to pay royalty fees in the amount of +.,- of its electric power consumption appearing in its bill from #AP%C%R not later than the ., th of every month. Its failure to pay the royalty fee on the ., th shall result in its payment of a +- surcharge. Item ., as worded, provides no *ualification to petitioner5s obligation. Petitioner claimed that royalty fees would only be due to respondent if petitioner5s electric power consumption for the month e'ceeds 3+ megawatts anchored on the second (hereas clause of the (aiver Agreement which states that the petitioner has a steel plant located along McArthur 6ighway, Paligui, Apalit, Pampanga with a pro=ected load of !hirty>!wo $3+& megawatts. !he Court ruled that there is nothing in aforementioned clause which supports the claim that the clause limits its obligation under Item .. Evidently, the clause is merely descriptive of petitioner5s electric power supply re*uirements. !his interpretation is also supported by a reading of the contract in its entirety. !here being no ambiguity in the wording of Item . of the (aiver Agreement, its literal meaning is controlling. !o give effect to Item . as worded is li"ewise consistent with the rule that when the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon by the parties and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. !he facts of the present case reveal that the parties really intended to oblige petitioner to pay royalty fees to respondent every month under the terms of the (aiver Agreement in e'change for respondent5s waiver of its right to ob=ect to the direct purchase by petitioner of electric power supply from #AP%C%R. !he (aiver Agreement between the parties must be understood in the conte't of the dynamics of the distribution and generation sectors of the electric power industry at the time the contract was e'ecuted. Indeed, if the purpose of paying royalty fees to respondent under the (aiver Agreement is to compensate respondent for loss of income resulting from petitioner5s direct purchase from #AP%C%R of electricity, for petitioner5s operations within respondent5s franchise area, specifically, the municipality of Apalit, it is not surprising that the parties agreed on royalty fees of +.,- percent of petitioner5s monthly consumption, regardless of the number of megawatts consumed by petitioner in a month. ince the terms of the (aiver Agreement are clear, and are not contrary to law, morals, good customs, public order or public policy, 3; the contract is considered as the law between petitioner and respondent. !hus, petitioner must comply with its obligations thereunder in good faith. 30 ,ALL"+ W-E!E,"!E, the Petition is /E#IE/ for lac" of merit. S" "!DE!ED.