G.R. No. 192797 - Excellent Essentials International Corp. vs. Extra Excel International Philippines, Inc.

Case Summary (G.R. No. 192797)

Case Background

The conflict commenced when E. Excel International, Inc. and Excellent Essentials lodged a complaint against Excel Philippines, seeking damages and an injunction to prevent Excel Philippines from selling, distributing, and marketing E. Excel products. An exclusive rights contract dated August 9, 1996, granted Excel Philippines the exclusive rights to distribute E. Excel products. This contract allowed Excel International to modify or terminate the agreement at its discretion.

Internal Dispute and Contract Revocation

A significant intra-corporate conflict within Excel International resulted in Jau-Hwa Stewart gaining control of the company. Consequently, Stewart revoked Excel Philippines' exclusive rights on December 1, 2000, and appointed Excellent Essentials as the new exclusive distributor. Despite this revocation, Excel Philippines continued its operations, prompting Excel International and Excellent Essentials to file a complaint for an injunction and damages against Excel Philippines.

Proceedings in Regional Trial Court

The Regional Trial Court (RTC), Branch 56, initially ruled in favor of Excel Philippines on April 4, 2001, issuing a preliminary injunction against Excellent Essentials, thereby protecting Excel Philippines' claimed exclusive distributorship rights. After Excellent Essentials’ motion for reconsideration was denied, they appealed to the Court of Appeals (CA).

Court of Appeals Ruling

On February 11, 2002, the CA reversed the RTC's ruling, finding that the existence of Excel Philippines' exclusive rights was uncertain due to the actions of Excel International and the subsequent appointment of Excellent Essentials. The CA held that the potential damages could be adequately compensated through monetary damages rather than an injunction.

Decision of the Regional Trial Court, Branch 138

The trial continued, and on September 8, 2006, RTC, Branch 138 dismissed Excellent Essentials' complaint and Excel Philippines' counterclaims, stating the question of exclusive distributorship rights was moot following a Utah Court decision declaring Stewart's actions invalid.

Appeal to the Court of Appeals

Excel Philippines appealed this dismissal, and the CA partially granted the appeal, modifying the RTC's decision to award damages, including P170,897,948.00 as temperate damages, P2,500,000.00 in exemplary damages, and attorney’s fees. Excellent Essentials did not seek reconsideration of this decision.

Supreme Court Review

In seeking review, Excellent Essentials contended that the damages claimed by Excel Philippines were speculative and that its operations did not impact Excel Philippines adversely. However, the Supreme Court denied the petition. The Court highlighted two main issues: (a) whether the prior CA ruling on the injunction was binding on the damages claim and (b) whether Excellent Essentials' corporate activities caused Excel Philippines harm.

Conclusiveness of Judgment and Tortious Interference

The Supreme Court clarified that findings from a preliminary injunction are interlocutory and do not conclusively determine liability for damages in the main case. The Court emphasized that a third party could be liable for tortious interference if they induce one party to violate a contract with another. Evidence showed that Excellent Essentials, established under dubious circumstances influenced by Excel Philippines' prior relationship with Excel International, engaged in actions that constituted tortious interference with Excel Philippines' exclusive contract.

Finding of Bad Faith

The Court concluded that Excellent Essentials acted w