G.R. No. 145483 - Lorenzo Shipping Corp. vs. BJ Marthel International, Inc.

Petitioner Lorenzo Shipping Corporation is a domestic coastwise shipping company; respondent BJ Marthel International, Inc. trades and imports industrial engine parts.
From 1987 until the present litigation, respondent supplied petitioner with marine engine spare parts.

On May 31, 1989, respondent sent a formal quotation for Mitsubishi engine parts, including one set of cylinder liner at ₱477,000 with delivery “within 2 months after receipt of firm order” and payment terms of 25% upon delivery and balance in five bi-monthly installments.
On November 2, 1989, petitioner issued Purchase Order No. 13839 for one cylinder liner at ₱477,000, stipulating “25% down payment” and “5 bi-monthly installments” but omitting any delivery date.
On January 15, 1990, petitioner issued Purchase Order No. 14011 for a second cylinder liner with identical payment terms and likewise no delivery date.

Instead of a 25% down payment, petitioner issued ten postdated checks; the first check (dated January 18, 1990) was dishonored for insufficiency of funds.
Respondent opened a letter of credit with First Interstate Bank of Tokyo on February 23, 1990, to procure the liners from Daiei Sangyo Co. Ltd. in Japan.
On April 20, 1990, respondent delivered both cylinder liners to petitioner’s warehouse “subject to verification.” Petitioner did not pay the balance and offered only ₱150,000, alleging late delivery and vessel scrapping.

Respondent filed a complaint for sum of money with preliminary attachment in the RTC of Makati, claiming ₱954,000 plus interest, attorney’s fees, and damages. The RTC granted attachment, later lifted it, and after trial dismissed the complaint, finding time of delivery to be of the essence and that the contract was rescinded by return of checks.
Respondent appealed to the Court of Appeals, which reversed and ordered petitioner to pay ₱954,000 with 14% interest from May 1991.
Petitioner’s motion for reconsideration in the CA was denied; this petition for review ensued before the Supreme Court.

Whether respondent was guilty of delay in delivering the cylinder liners, making time of the essence and justifying contract rescission.
Whether petitioner validly rescinded or canceled the contract of sale due to alleged late delivery.