Case Digest (G.R. No. 70789) Core Legal Reasoning Model
Facts:
In 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, petitioners Rustan Pulp & Paper Mills, Inc. (Rustan), through its officers Bienvenido R. Tantoco, Sr. and resident manager Dr. Romeo S. Vergara, entered into a contract of sale in April 1968 with respondent Romeo A. Lluch for the delivery of pulp wood at ₱30.00 per cubic meter to Rustan’s mill in Baloi, Lanao del Norte. The contract contained a non-exclusive supply clause and a stipulation that the buyer “shall have the right to stop delivery of the said raw materials by the seller … when supply … shall become sufficient,” provided thirty days’ notice. During the mill’s test run, critical defects in the machinery created a backlog of raw materials. On September 30, 1968, petitioners sent a letter through Dr. Vergara instructing respondents to cease deliveries thirty days he
...
Case Digest (G.R. No. 70789) Expanded Legal Reasoning Model
Facts:
- Parties
- Petitioners
- Rustan Pulp & Paper Mills, Inc. (the “Buyer”)
- Bienvenido R. Tantoco, Sr. (President of Rustan, signed as representative)
- Romeo S. Vergara (Resident Manager, signed the stoppage letter)
- Respondents
- Iligan Diversified Projects, Inc. (one of the Sellers)
- Romeo A. Lluch (holder of forest products license, principal Seller)
- Roberto G. Borromeo
- Contract of Sale and Stipulations
- April 1968 contract: Lluch agreed to sell, Rustan to pay ₱30.00/cu.m for pulp wood delivered to buyer’s plant in Baloi, Lanao del Norte.
- Key stipulations:
- Buyer has option to purchase from other qualified sellers; Seller has priority.
- Paragraph 7: Buyer may stop deliveries when supply is sufficient, upon 30 days’ notice; resumption made at buyer’s discretion.
- Events Leading to Dispute
- Plant installation and test run revealed major machinery defects; stockpiles of pulp wood accumulated.
- September 30, 1968 letter signed by Vergara notified Sellers to stop deliveries effective 30 days later.
- Sellers sought clarification (suspension vs. termination); no reply. Sellers resumed deliveries; petitioners accepted other suppliers’ wood concurrently.
- January 23, 1969: Sellers filed complaint for breach of contract.
- Procedural History
- RTC dismissed complaint but enjoined petitioners to respect the contract when commercial operations warranted.
- Intermediate Appellate Court modified: ordered petitioners jointly and severally to pay P30,000 moral damages and P15,000 attorney’s fees.
- Petitioners elevated the case to the Supreme Court, raising three basic errors.
Issues:
- Personal Liability of Tantoco and Vergara
- Whether Tantoco, as corporate representative, and Vergara, as signatory of the stoppage letter, can be held personally liable under the contract.
- Validity of the Stoppage of Deliveries
- Whether paragraph 7’s grant of unilateral discretion to Buyer to suspend deliveries is a lawful exercise of contractual right.
- Whether petitioners’ conduct—sending the stoppage notice yet continuing to accept deliveries from other suppliers—constitutes breach.
- Award of Moral Damages and Attorney’s Fees
- Whether moral damages and attorney’s fees may be awarded absent fraud or bad faith.
- Whether such awards properly lie against individual officers.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)