Case Digest (G.R. No. 68555)
Facts:
On July 16, 1969, Alejandro Te (plaintiff) and Prime White Cement Corporation (defendant), through its President Zosimo Falcon and Chairman Justo Trazo, executed a dealership agreement under which the corporation would supply Te 20,000 bags of white cement per month for five years, beginning September 1970, at P9.70 per bag, FOB Davao and Cagayan de Oro. Te advertised his exclusive dealership in the Manila Chronicle and contracted with several hardware stores in Davao and Cagayan de Oro to resell his entire allocation. In August 1970, Te sought to open a letter of credit to fund the first delivery. Instead, the corporation imposed new terms reducing monthly deliveries to 8,000 bags, raising the price to P13.30, altering delivery points and payment conditions, and reserving unilateral price readjustment. Upon Te’s demands for compliance, the corporation refused and granted exclusive rights to another dealer, Napoleon Co. Te sued for breach, and the trial court awarded him actualCase Digest (G.R. No. 68555)
Facts:
- Dealership Agreement
- On July 16, 1969, Prime White Cement Corporation (“defendant”) through its President, Zosimo R. Falcon, and Chairman of the Board, Justo B. Trazo, executed an exclusive dealership agreement with Alejandro Te (“plaintiff”) to distribute white cement in Mindanao for five years starting September 1970.
- Key terms:
- Monthly supply: 20,000 bags (94 lbs/bag) of white cement.
- Price: ₱9.70 per bag, FOB Davao and Cagayan de Oro ports.
- Payment: Irrevocable letter of credit upon loading certification.
- Plaintiff’s Preparatory Acts
- August 16, 1969: Plaintiff advertised his exclusive dealership in the Manila Chronicle and solicited sub-dealers.
- September–December 1969: Plaintiff entered into resale agreements with hardware stores in Davao and Cagayan de Oro, relying on his allocation.
- August 18, 1970: Plaintiff informed defendant of preparations to open the letter of credit for the September delivery.
- Defendant’s Conditions and Refusal
- Through corporate secretary’s letter (Exh. C), defendant imposed new terms:
- Delivery deferred to end of November 1970.
- Reduced quantity: 8,000 bags per month for three months.
- Price increased to ₱13.30 per bag, subject to unilateral readjustment.
- Delivery at Austurias; letter of credit only with Prudential Bank, Makati; advance payment as guarantee.
- Plaintiff’s repeated demands to comply (Exhs. D, E, G, I, L, N, R) were refused.
- Defendant then granted an exclusive dealership to Napoleon Co. for Mindanao (Exh. T).
- Trial and Appellate Proceedings
- Trial court awarded plaintiff actual damages of ₱3,302,400, moral damages of ₱100,000, and attorney’s fees of ₱10,000.
- The Intermediate Appellate Court affirmed, applying estoppel against defendant because its officers had apparent authority to bind the corporation.
- Prime White Cement Corporation filed a petition for review, challenging the appellate decision on grounds of lack of board authorization, fiduciary duty breaches, unenforceable contract, and improper damages award.
Issues:
- Whether the dealership agreement executed by the President and Chairman of the Board, without prior board approval or stockholder ratification, is a valid and enforceable contract against Prime White Cement Corporation.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)