Case Digest (G.R. No. 70789)
Facts:
Rustan Pulp & Paper Mills, Inc., Bienvenido R. Tantoco, Sr., and Romeo S. Vergara v. The Intermediate Appellate Court and Iligan Diversified Projects, Inc., Romeo A. Lluch and Roberto G. Borromeo, G.R. No. 70789, October 19, 1992, Supreme Court Third Division, Melo, J., writing for the Court.In 1966 petitioner Rustan Pulp and Paper Mills, Inc. established a pulp and paper mill in Baloi, Lanao del Norte. On March 20, 1967 Romeo A. Lluch, a holder of a forest products license, offered to supply raw materials. The parties executed a contract of sale in April 1968 under which Lluch agreed to sell and Rustan to buy pulp wood at P30.00 per cubic meter, to be delivered at Rustan’s Baloi plant. Relevant stipulations included (1) the buyer’s option to purchase from other qualified sellers and (2) paragraph 7 granting the buyer the right to stop delivery "when supply of the same shall become sufficient" provided the seller is given sufficient notice.
During the mill’s installation and test run the machinery developed major defects; deliveries of raw materials accumulated. On September 30, 1968 Rustan (through a letter signed by resident manager Romeo S. Vergara) informed Iligan Diversified Projects, Inc. and others to stop deliveries thirty days hence because supply had become sufficient. Lluch sought clarification whether the letter terminated the contract or merely suspended deliveries, but petitioners did not reply; nonetheless deliveries resumed after talks between Vergara and Lluch. Petitioners continued to accept deliveries from several suppliers despite having sent the stoppage letter.
Private respondents sued for breach of contract; the court of origin dismissed the complaint but enjoined petitioners to respect the contract and to continue accepting and paying for deliveries when commercial operation warranted. On appeal the then Intermediate Appellate Court (First Civil Cases Division, Presiding Justice Ramon G. Gaviola, Jr., with Justices Caguioa, Quetulio-Losa and Luciano concurring) modified the trial court’s judgment by directing petitioners to pay private respondents jointly and severally P30,000 as moral damages and P15,000 as attorney’s fees. Petitioners sought relief in the present petition raising three principal contentions: (1) that Tantoco and Vergara cannot be held personally liable because they signed in representative capacities (or did not sign); (2) that Rustan validly exercised its contractual right to suspend deliveries under paragraph 7; and (3) that moral damages and attorney’s fees were improperly awarded in the absence of fraud or bad faith.
The Appellate Court construed the September 30, 1968 letter as an effective termination rather than a mere temporary suspension, found petitioners’ conduct — sending stoppage letters yet accepting deliveries — internally inconsistent and estopping them from invoking fru...(Pro-only)
Issues:
- May Bienvenido R. Tantoco, Sr. and Romeo S. Vergara be held personally liable under the contract of sale?
- Did Rustan Pulp and Paper Mills, Inc. lawfully exercise its contractual right to stop deliveries under paragraph 7 of the contract?
- Were the awards of moral damages and attorney’s fees proper in the abs...(Pro-only)
Ruling:
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Ratio:
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Doctrine:
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