In our view, the crucial issues for resolution in this case are as follows:
(1) Whether or not private respondent violated the order agreement, and;
(2) Whether or not private respondent is liable for petitioner's breach of contract with Philacor.
Petitioner's contention lacks factual and legal basis, hence, bereft of merit.
Petitioner contends, firstly, that private respondent
violated the order agreement when the latter failed to deliver the
balance of the printing paper on the dates agreed upon.
The transaction between the parties is a contract of
sale whereby private respondent (seller) obligates itself to deliver
printing paper to petitioner (buyer) which, in turn, binds itself to pay
therefor a sum of money or its equivalent (price).6 Both parties concede that the order agreement gives rise to a reciprocal obligations7
such that the obligation of one is dependent upon the obligation of the
other. Reciprocal obligations are to be performed simultaneously, so
that the performance of one is conditioned upon the simultaneous
fulfillment of the other.8
Thus, private respondent undertakes to deliver printing paper of
various quantities subject to petitioner's corresponding obligation to
pay, on a maximum 90-day credit, for these materials. Note that in the
contract, petitioner is not even required to make any deposit, down
payment or advance payment, hence, the undertaking of private respondent
to deliver the materials is conditional upon payment by petitioner
within the prescribed period. Clearly, petitioner did not fulfill its
side of the contract as its last payment in August 1981 could cover only
materials covered by delivery invoices dated September and October
1980.
There is no dispute that the agreement provides for
the delivery of printing paper on different dates and a separate price
has been agreed upon for each delivery. It is also admitted that it is
the standard practice of the parties that the materials be paid within a
minimum period of thirty (30) days and a maximum of ninety (90) days
from each delivery.9
Accordingly, the private respondent's suspension of its deliveries to
petitioner whenever the latter failed to pay on time, as in this case,
is legally justified under the second paragraph of Article 1583 of the
Civil Code which provides that:
When there is a contract of sale of goods to be
delivered by stated installments, which are to be separately paid for,
and the seller makes defective deliveries in respect of one or more
installments, or the buyer neglects or refuses without just cause to take delivery of or pay for one or more installments,
it depends in each case on the terms of the contract and the
circumstances of the case, whether the breach of contract is so material
as to justify the injured party in refusing to proceed further
and suing for damages for breach of the entire contract, or whether the
breach is severable, giving rise to a claim for compensation but not to a
right to treat the whole contract as broken. (Emphasis supplied)
In this case, as found a quo petitioner's
evidence failed to establish that it had paid for the printing paper
covered by the delivery invoices on time. Consequently, private
respondent has the right to cease making further delivery, hence the
private respondent did not violate the order agreement. On the contrary,
it was petitioner which breached the agreement as it failed to pay on
time the materials delivered by private respondent. Respondent appellate
court correctly ruled that private respondent did not violate the order
agreement.
On the second assigned error, petitioner contends
that private respondent should be held liable for petitioner's breach of
contract with Philacor. This claim is manifestly devoid of merit.
As correctly held by the appellate court, private
respondent cannot be held liable under the contracts entered into by
petitioner with Philacor. Private respondent is not a party to said
agreements. It is also not a contract pour autrui. Aforesaid
contracts could not affect third persons like private respondent because
of the basic civil law principle of relativity of contracts which
provides that contracts can only bind the parties who entered into it,
and it cannot favor or prejudice a third person, 10 even if he is aware of such contract and has acted with knowledge thereof. 11
Indeed, the order agreement entered into by
petitioner and private respondent has not been shown as having a direct
bearing on the contracts of petitioner with Philacor. As pointed out by
private respondent and not refuted by petitioner, the paper specified in
the order agreement between petitioner and private respondent are
markedly different from the paper involved in the contracts of
petitioner with Philacor. 12
Furthermore, the demand made by Philacor upon petitioner for the latter
to comply with its printing contract is dated February 15, 1984, which
is clearly made long after private respondent had filed its complaint on
August 14, 1981. This demand relates to contracts with Philacor dated
April 12, 1983 and May 13, 1983, which were entered into by petitioner
after private respondent filed the instant case.lawphi1
To recapitulate, private respondent did not violate
the order agreement it had with petitioner. Likewise, private respondent
could not be held liable for petitioner's breach of contract with
Philacor. It follows that there is no basis to hold private respondent
liable for damages. Accordingly, the appellate court did not err in
deleting the damages awarded by the trial court to petitioner.
The rule on compensatory damages is well established.
True, indemnification for damages comprehends not only the loss
suffered, that is to say actual damages (damnum emergens), but also profits which the obligee failed to obtain, referred to as compensatory damages (lucrum cessans).
However, to justify a grant of actual or compensatory damages, it is
necessary to prove with a reasonable degree of certainty, premised upon
competent proof and on the best evidence obtainable by the injured
party, the actual amount of loss. 13
In the case at bar, the trial court erroneously concluded that
petitioner could have sold books to Philacor at the quoted selling price
of P1,850,750.55 and by deducting the production cost of P1,060,426.20,
petitioner could have earned profit of P790,324.30. Admittedly, the
evidence relied upon by the trial court in arriving at the amount are
mere estimates prepared by petitioner. 14
Said evidence is highly speculative and manifestly hypothetical. It
could not provide sufficient legal and factual basis for the award of
P790,324.30 as compensatory damages representing petitioner's
self-serving claim of unrealized profit.
Further, the deletion of the award of moral damages
is proper, since private respondent could not be held liable for breach
of contract. Moral damages may be awarded when in a breach of contract
the defendant acted in bad faith, or was guilty of gross negligence
amounting to bad faith, or in wanton disregard of his contractual
obligation. 15 Finally, since the award of moral damages is eliminated, so must the award for attorney's fees be also deleted. 16
WHEREFORE, the instant petition is DENIED. The decision of the Court of Appeals is AFFIRMED. Costs against petitioner.
G.R. No. 115117 June 8, 2000
INTEGRATED PACKAGING CORP., petitioner,
vs. COURT OF APPEALS and FIL-ANCHOR PAPER CO., INC., respondents.
vs. COURT OF APPEALS and FIL-ANCHOR PAPER CO., INC., respondents.
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