G.R. No. 168756 - Shrimp Specialists, Inc. vs. Fuji-Triumph Agri-Industrial Corp.

The case is a consolidation of two petitions involving Shrimp Specialists, Inc. and Fuji-Triumph Agri-Industrial Corporation.
In one petition (G.R. No. 168756), Shrimp Specialists assailed the CA decision that ordered it to pay Fuji-Triumph a principal amount plus interest, attorney’s fees, and costs.
In the other (G.R. No. 171476), Fuji-Triumph assailed the CA’s denial of its motion for reconsideration regarding the same underlying dispute.

Shrimp Specialists and Fuji entered into a Distributorship Agreement wherein Fuji agreed to supply prawn feeds on credit to be used in prawn farms managed and supervised by Shrimp Specialists.
Shrimp Specialists commenced regular purchases in 1987, and from 3 June 1989 to 24 July 1989, prawn feeds were delivered by Fuji with payment evidenced by nine postdated checks.
Shrimp Specialists claimed that a stop-payment order was issued on these checks because it discovered that earlier deliveries were contaminated with aflatoxin, and it alleged that Fuji had promised to provide better quality feeds.

In January 1990, following discussions in Ozamiz City between Ervin Lim of Fuji-Triumph (Vice-President and owner) and Edward Lim of Shrimp Specialists (Finance Officer), both parties agreed that Shrimp Specialists would issue another set of checks to cover the previous ones.
A written agreement was executed by Edward Lim and Ervin Lim, which included a clause stating that Fuji was to be informed in advance if the checks could not be deposited “for failure to replace the defective feeds.”
Despite the agreement, the replacement checks were again dishonored due to another stop-payment order issued by Shrimp Specialists.

Shrimp Specialists argued that despite the written agreement, Fuji’s action of depositing the checks without prior notice or without replacing the defective feeds compelled it to issue a stop-payment order.
Fuji, on the other hand, maintained that there was no defect in the prawn feeds and contended that Shrimp Specialists’ stop-payment orders were due to requesting a hold on the deposit for alleged insufficient funds.
Fuji initiated criminal charges against the signatories of the checks for violations of the Anti-Bouncing Checks Law; the charges were eventually dismissed.
A civil suit was filed by Fuji on 26 October 1990, and the Regional Trial Court (15 April 1997 decision) held Shrimp Specialists and its President, Eugene Lim, jointly and severally liable for the payments and additional costs.
The Court of Appeals modified the trial court decision by absolving Eugene Lim from any liability while upholding the principal award against Shrimp Specialists.
Both parties elevated the case to the Supreme Court, each raising distinct issues regarding the interpretation of the written agreement and the imposition of solidary liability.

Shrimp Specialists raised the issue of whether the clause “to inform in advance in case the same checks cannot be deposited for failure to replace the defective feeds” clearly amounted to an admission that Fuji delivered defective feeds.
The contention was that the statement should be read as an acknowledgment of defective delivery, thereby obliging Fuji to replace the feeds.

Fuji contended that the CA erred in dismissing the case against Eugene Lim by freeing him from solidary liability with Shrimp Specialists.
The issue centered on whether Eugene Lim, as president and signatory to the Distributorship Agreement, should be held personally liable for the obligations arising from the transactions with Fuji.