Case Digest (G.R. No. 100401)
Facts:
This is Consolidated Dairy Products Co., Jesus B. Bito and Federico B. Guilas, as Acting Trustees of Consolidated Philippines, Inc. and Dairy Export Co., Inc. v. The Court of Appeals and Standard Investment Corporation, G.R. No. 100401, promulgated August 24, 1992, Supreme Court First Division, Medialdea, J., writing for the Court.Petitioner Consolidated Dairy Products Company (Seattle) and its Philippine affiliate Consolidated Philippines, Inc. (CPI) entered into a joint venture in the 1950s to manufacture and sell Darigold dairy products in the Philippines; CPI obtained the exclusive right to use the Darigold tradename and began operations. Due to local policy, CPI contracted on April 2, 1959 with Standard Investment Corporation (Standard) to supply all its can requirements until May 31, 1969; Standard built facilities and trained personnel relying on that contract. In 1966 Dairy Export Company (Dexco), a subsidiary of Consolidated Seattle, was organized in the Philippines; on May 6, 1968 Standard, CPI and Dexco executed a memorandum extending the can-supply agreement through December 31, 1981.
A series of corporate developments followed: Consolidated Seattle transferred licensing control to Dexco, threatened sale or bankruptcy of CPI, and in 1974 canceled CPI’s license to use Darigold. Syjuco, Inc. (the 49% minority shareholder of CPI) ultimately sold its shares to Consolidated Seattle on October 8, 1976 pursuant to a memorandum conditioned on preservation of Standard’s rights (including a Section 6(d) guarantee). CPI was dissolved and Dexco took over CPI’s marketing and began selling Darigold products. On November 3, 1976 CPI (through its manager) notified Standard of cancellation of the can-supply contract; Standard claimed it had been prejudiced, demanded reimbursement for separation pay and unrealized profits, and filed suit after its demands were rejected.
At trial Standard presented evidence of separation pay paid to its employees, inventory losses, and projected unrealized profits; CPI (through acting trustees) and Consolidated Seattle defended on various grounds including lack of privity, the effect of dissolution and the memorandum agreement, alleged prior approval by Standard, and contractual dispute-resolution (referral to an impartial referee). Dexco moved to dismiss for failure to state a cause of action. The trial court (Court of First Instance, later RTC) rendered judgment in favor of Standard, ordering Consolidated Seattle and/or its alter ego Dexco, and CPI (acting trustees) jointly and severally to pay separation pay with interest, P8,107,931.13 for unrealized profits, P1,150,197.80 for inventory losses, P1,000,000 exemplary damages, and attorneys’ fees equal to 25% of recoveries.
Consolidated Seattle and CPI (acting trustees) appealed to the Court of Appeals (CA-G.R. CV No. 01644), which on April 19, 1991 affirmed the trial court in toto. They then filed this petition for review on certiorari under Rule 45 of the Rules of Court, raising six assignments of error: (1) failure to state cause of action against Dexco; (2) Standard’s alleged knowledge/approval of CPI’s dissolution that terminated the contract; (3) prematurity for failure to refer claim to an impartial referee as required by the contract; (4) error sustaining claim for unrealized profits; (5) error awarding inventory losses; and (6) error awarding exemplary damages and attorneys’ fees. The Supreme Court resolved the petition.
Issues:
- Under Rule 45, are the factual findings of the Court of Appeals final and binding on the Supreme Court in this petition for review on certiorari?
- Did the amended complaint state a cause of action against Dexco?
- Did Standard know of and approve the dissolution of CPI, thereby extinguishing CPI’s obligations under the can supply contract?
- Was Standard’s action premature for failure to first refer the claim to an impartial referee as required by the can supply contract?
- Was the award for unrealized profits proper in amount and legal basis?
- Were the awards for inventory losses, exemplary damages, and attorneys’ fees proper?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)