Title
Mary Ann Carmen Ferrer, in her capacity as attorney-in-fact of M.Y. Intercontinental Trading Corporation and/or Tedwin T. Uy vs. St. Mary's Publishing and/or Jerry Vicente S. Catabijan
Case
G.R. No. 258486
Decision Date
Aug 2, 2023
A dispute over unpaid textbook printing led to a petition for declaratory relief, dismissed as improper post-breach; SC upheld CA, citing pre-breach requirement.
contract
declaratory relief
breach of

Case Summary (G.R. No. 258486)

Parties, Venue, and Material Procedural Dates; Governing Rules

The petition sought review of the CA Decision dated January 6, 2021 and the CA Resolution dated December 3, 2021 in CA-G.R. CV No. 110189, which reversed the RTC’s grant of a Petition for Declaratory Relief in Civil Case No. MC-10-5078. The RTC had issued its Decision on July 20, 2012 and an Order on November 12, 2012. The controlling procedural law on the propriety of declaratory relief was Rule 63, Sections 1 and 6 of the Rules of Court. The substantive provisions invoked by the parties, and considered by the RTC, were the Civil Code provisions on contracts and the remedies of an unpaid seller.

Factual Background: The Printing Agreement and Non-Payment

Fujian New Technology was engaged in China. Its local agent, M.Y. Intercontinental, had Uy as Senior Executive Vice-President. In 2008, St. Mary’s Publishing and Fujian New Technology, represented by M.Y. Intercontinental, executed a Contract under which St. Mary’s Publishing engaged Fujian New Technology for the exclusive printing and distribution of various local textbooks. Pursuant to the Contract, St. Mary’s Publishing issued Authorities to Print Textbooks, including a December 7, 2009 Purchase Order and corresponding Sub-Purchase Orders, in favor of Fujian New Technology through M.Y. Intercontinental.

Under the December 7, 2009 Purchase Order, Fujian New Technology printed ninety-one thousand (91,000) copies of Pagpapaunlad ng Kasanayan sa Pagbasa and two hundred ten thousand (210,000) copies of Developing Reading Power. The cost of printing was PHP 11,347,781.08. St. Mary’s Publishing defaulted in paying for the printed textbooks. As a result, M.Y. Intercontinental issued a notice to rescind the December 7, 2009 Purchase Order.

Declaratory Relief in the RTC: The Claimed Status as Unpaid Seller

To protect their interests, M.Y. Intercontinental and Uy, through Ferrer, filed a Petition for Declaratory Relief against St. Mary’s Publishing and Catabijan. Ferrer’s position was that the transaction between St. Mary’s Publishing and Fujian New Technology—represented locally by M.Y. Intercontinental—was in substance a contract of sale. According to Ferrer, once St. Mary’s Publishing failed to pay, Fujian New Technology and its local agent became unpaid sellers entitled to the remedies under the Civil Code, including the right of possessory lien, the right to resell, and the right to rescind.

St. Mary’s Publishing and Catabijan admitted non-payment but contested the characterization of the arrangement. They asserted that the agreement was not a contract of sale but merely a contract for the printing of textbooks, meaning that no vendor-vendee relationship existed between Fujian New Technology (through M.Y. Intercontinental) and St. Mary’s Publishing. They also claimed that negotiations for settlement of the unpaid contract price were ongoing.

RTC Ruling: Declaratory Relief Granted and Remedies Declared

After due proceedings, the RTC granted the Petition for Declaratory Relief. It ruled that the agreement between St. Mary’s Publishing and M.Y. Intercontinental—representing Fujian New Technology—was a contract of sale. Consequently, the RTC declared that Fujian New Technology was an unpaid seller because St. Mary’s Publishing defaulted in paying for the printed textbooks. The RTC further declared that the Contract and the December 7, 2009 Purchase Order were valid and binding.

In its dispositive portion, the RTC declared that, with respect to the subject contract to print, petitioner was an unpaid seller under Article 1525 of the Civil Code. It further declared that under the Civil Code provisions on unpaid sellers, petitioner had a lien on the textbooks while in possession, a right to resell, and a right to rescind. It also declared that, by virtue of Article 1533, petitioner would not thereafter be liable to respondent for profits made upon resale, though it could recover damages for any loss occasioned by breach of the contract of sale. The RTC additionally invoked a “first sale doctrine” theory, declaring that respondent had parted with the right to control the sale, including copyright, and that petitioner could sell again without authority from respondent. The RTC declared certain documents to be legally binding.

Upon denial of a Motion for Reconsideration, St. Mary’s Publishing and Catabijan appealed to the CA.

CA Ruling: Declaratory Relief Improper Due to Breach

On January 6, 2021, the CA reversed and set aside the RTC’s rulings. The CA held that an action for declaratory relief was no longer available because the Contract had already been violated when St. Mary’s Publishing failed to pay the cost of the printed textbooks. The CA added that Fujian New Technology and M.Y. Intercontinental had other available remedies, such as an action for breach of contract against St. Mary’s Publishing.

The CA dismissed the Petition for Declaratory Relief, and its Resolution dated December 3, 2021 denied M.Y. Intercontinental and Uy’s Motion for Reconsideration.

The Petition Before the Supreme Court: Propriety of Declaratory Relief

Uy, through Ferrer, sought Supreme Court review. Uy argued that the Petition sought a declaration of rights under the Contract and purchase orders, which, according to petitioner, was a proper subject of declaratory relief. In the alternative, Uy suggested conversion to an ordinary action should declaratory relief be deemed improper. Respondents countered that declaratory relief was not proper because there had already been a breach or violation of the Contract, and that any breach occurred even before filing, so conversion into an ordinary civil action under Rule 63, Section 6 was not available.

The Supreme Court thus framed the central issue as whether a petition for declaratory relief was the proper recourse.

Legal Basis and Reasoning: Rule 63, Timing of Breach, and Limits of Declaratory Relief

The Court held that the petition was without merit because the requirements for declaratory relief were not satisfied. Under Rule 63, Section 1, a petition for declaratory relief may be brought by any person interested under a deed, will, contract, or other written instrument whose rights are affected by law or regulation, but critically “before breach or violation” of the instrument or regulation. The Court relied on Association of International Shipping Lines, Inc. v. Secretary of Finance, which explained that declaratory relief is intended to provide an authoritative statement for guidance in enforcement or compliance, not to settle issues arising from an alleged breach. Jurisdiction could not be assumed when the deed or contract had already been contravened before filing.

The Court reiterated the requisites for declaratory relief, emphasizing that there must be no breach of the documents at issue at the time the petition is filed. It further noted that M.Y. Intercontinental and Uy sought declarations regarding rights under written instruments, specifically the Contract and the December 7, 2009 Purchase Order. For purposes of assessing the declaratory relief requirements, the Court then examined the nature of the contractual arrangement and, more importantly, the timing of the admitted non-payment.

The Court recalled that under Article 1318 of the Civil Code, a contract is the meeting of minds with consent, object, and consideration. Here, St. Mary’s Publishing had hired Fujian New Technology (represented by M.Y. Intercontinental) to print textbooks in consideration of PHP 76,748,494.68. The Contract required purchase orders for printing, delivery of printed textbooks in batches, and payment of the cost by St. Mary’s Publishing to M.Y. Intercontinental’s designated bank account until paid in full. The Court found that St. Mary’s Publishing offered Fujian New Technology, through M.Y. Intercontinental, to print its textbook requirements through the issuance of purchase orders; M.Y. Intercontinental accepted by delivering the specified volumes, and the printed textbooks corresponded to a total consideration of PHP 11,347,781.08 for the copies delivered under the December 7, 2009 Purchase Order. Thus, the essential requisites of a valid contract were present. Even though the RTC had treated the arrangement as a contract of sale, the Supreme Court focused on the procedural bar: St. Mary’s Publishing admitted it had already failed to pay, and it even acknowledged negotiations regarding the unpaid contract price.

Accordingly, the Court held that St. Mary’s Publishing had already breached the Contract and the December 7, 2009 Purchase Order prior to the filing of the Petition for Declaratory Relief. Since declaratory relief can only be entertained before breach, the Court ruled that the trial court could no longer assume jurisdiction. The Court emphasized that allowing declaratory relief after breach would risk prejudging the issues in the actual action for violation. It supported this with Commission on Audit v. Pampilo, Jr. and, in turn, the reasoning in Sarmiento v. Hon. Capapas, which warned of multiplicity of suits and of a declaratory judgment that could go beyond the scope of such a procee

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster, building context before diving into full texts. AI-powered analysis, always verify critical details.

About Privacy Terms