Case Digest (G.R. No. 197049) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In the case of Nestle Philippines, Inc. vs. FY Sons, Incorporated, the petitioner is Nestle Philippines, Inc., a corporation primarily engaged in the manufacturing and distribution of Nestle products nationwide, while the respondent is FY Sons, Incorporated, which focuses on trading, marketing, selling, and distributing food items to various service outlets. The origin of the dispute stems from a distributorship agreement that was executed between the parties on December 23, 1998, enabling the respondent to distribute Nestle products in specific regions including Baguio, Dagupan, Angeles, Bulacan, Pampanga, La Union, Tarlac, and Olongapo. A deed of assignment for a time deposit of P500,000 from one Calixto Laureano was also executed to secure the respondent's credit purchases. The distributorship agreement was initially set to expire at the end of 1989, which was followed by a renewal agreement on January 22, 1990, and a subsequent supplemental agreement on June 27, 1990, effect Case Digest (G.R. No. 197049) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Parties and Contract Formation
- Petitioner: Nestle Philippines, Inc. – a corporation engaged in the manufacture and nationwide distribution of Nestlé products.
- Respondent: FY Sons, Incorporated – a corporation engaged in trading, marketing, selling, and distributing food items to restaurants and food service outlets.
- Initial Agreement and Renewals:
- On December 23, 1998, the parties entered into a distributorship agreement wherein petitioner agreed to supply its products for respondent’s distribution to various designated areas (Baguio, Dagupan, Angeles, Bulacan, Pampanga, Urdaneta, La Union, Tarlac, and Olongapo).
- Prior to this, a deed of assignment (executed December 13, 1988) assigned a time deposit of P500,000 by Calixto Laureano as security for respondent’s credit purchases.
- A special power of attorney was executed by Laureano authorizing the respondent to use the time deposit as collateral.
- After the initial expiration of the agreement at the end of 1989, the parties renewed the agreement on January 22, 1990 and later supplemented it on June 27, 1990, effective July 1, 1990.
- Disputed Transactions and Alleged Breaches
- Alleged Violations by Respondent:
- On July 2, 1990, petitioner fined respondent P20,000 for allegedly selling 50 cases of Krem‑Top liquid coffee creamer to Lu Hing Market in Tarlac, a sale purportedly proscribed by the agreement; respondent paid the fine.
- In September 1990, respondent sold Krem‑Top liquid coffee creamer to Augustus Bakery and Grocery, again allegedly violating the agreement, leading to a P40,000 fine imposed by petitioner—which respondent refused to pay.
- Subsequent Exchange of Demands and Complaints:
- On October 19, 1990, respondent, through counsel, complained about petitioner’s breaches and bad faith acts, demanding damages.
- On November 5, 1990, petitioner sent a demand letter and notice of termination on the ground of respondent’s alleged outstanding accounts amounting to P995,319.81, subsequently applying the P500,000 time deposit as partial payment.
- Initiation of Litigation:
- Respondent filed a complaint for damages alleging acts of bad faith by petitioner, such as a lack of support, deliberate non-delivery of stocks, and concocted penalties.
- Petitioner counterclaimed for the unpaid balance along with moral, exemplary damages, attorney’s fees, and costs, asserting that respondent owed P495,319.81, plus additional claims.
- Trial Court and Appellate Proceedings
- Makati City RTC Decision (November 10, 1997):
- The RTC rendered a judgment in favor of respondent, awarding actual damages of P1,000,000, exemplary damages of P100,000, and attorney’s fees of P100,000 while ordering respondent to pay a setoff amount of approximately P53,214.26 to petitioner.
- Court of Appeals (CA) Decision (January 11, 2001):
- The CA affirmed the RTC’s decision with modifications:
- It increased the actual damages award to P1,500,000.
- It deleted the offset amount (P53,214.26) previously deducted in the RTC decision.
- Petitioner’s Petition for Review on Certiorari:
- Petitioner raised several arguments challenging the CA’s ruling on the factual findings and evidentiary issues, particularly concerning the alleged unpaid balance and the competency of witnesses.
- Evidentiary and Procedural Issues Raised
- Testimony concerning Unpaid Balance:
- Respondent’s director, Florentino Yue, Jr., admitted in open court that termination was allegedly due to an unpaid obligation of “around P900,000,” which petitioner argued should validate its termination.
- Respondent countered that this statement was taken out of context and did not serve as a judicial admission of an outstanding debt.
- Admissibility of Documentary Evidence and Witness Testimony:
- Petitioner relied on the testimony of its witness, Cristina Rayos, who had prepared a statement of account based on invoices and delivery orders.
- The CA found her testimony inadmissible as she lacked personal knowledge of the deliveries, rendering her evidence self-serving and not a proper exception to the hearsay rule.
- Additional Arguments on Damages and Termination Validity:
- Petitioner contended that respondent’s documentary evidence proving actual damages (amounting to over P4 million) was beyond the claim of P1,000,000 and that proper jurisdiction over the claim required the correct payment of docket fees.
- The courts, however, limited their award to the amount sought by respondent, basing the results on the factual findings of the lower courts.
Issues:
- Unpaid Balance and Termination Grounds
- Whether the disputed evidence of an alleged unpaid balance of “around P900,000” supports petitioner’s claim for valid termination of the distributorship agreement.
- Whether the admission made by respondent’s witness, Florentino Yue, Jr., is sufficient to establish respondent’s outstanding obligation.
- Competency and Admissibility of Evidence
- Whether the testimony of petitioner’s witness, Cristina Rayos, who prepared the statement of account based on invoices and delivery orders, should be accepted notwithstanding her lack of personal involvement in the actual deliveries.
- Whether her testimony qualifies as an exception to the hearsay rule under Section 43, Rule 130 of the Rules of Court.
- Award of Damages and Appropriateness of Relief
- Whether the award of actual damages in the amount of P1,000,000 (later modified to P1,500,000) is substantially supported by the evidence showing the losses sustained by respondent as a result of petitioner’s breach.
- Whether the refund of the P500,000 time deposit is warranted given the absence of proof of respondent’s alleged outstanding accounts.
- Counterclaims and Procedural Considerations
- Whether petitioner’s counterclaim for the alleged outstanding receivable (approximately P495,319.81) along with additional claims for moral and exemplary damages, attorney’s fees, and costs should have been entertained.
- Whether the proper docket fee procedures were observed in assessing the claim for damages.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)