Case Summary (G.R. No. 125646)
Key Dates
• July 2002: Broiler growers’ meeting in Naga City.
• September 2002–April 2003: Five verbal “per‐grow” arrangements for 36,000 chicks each.
• June 2003: Fifth delivery fell short by 4,000 chicks; verbal accommodation terminated.
• 12 August 2003: SMFI’s notice of termination.
• 25 August 2003: Magtuto’s complaint letter to SMFI AVP.
• 2004: Civil complaint filed in RTC Naga City.
• 4 February 2013: RTC decision awarding damages.
• 28 August 2015: CA decision modifying RTC award.
• 6 May 2016: Denial of CA motion for reconsideration.
• 24 July 2019: Supreme Court decision.
Applicable Law
• 1987 Philippine Constitution
• Rule 45, 1997 Revised Rules of Civil Procedure
• Civil Code (Arts. 1317–1319 on contract validity; Art. 1356 on form; Art. 1159 on good faith; Art. 1687 on periodic obligation; Arts. 2199–2200 on compensatory damages)
Factual Background
At a July 2002 gathering of Swift Foods’ broiler growers, SMFI representatives presented its standard contract‐growing scheme. Magtuto, a six‐year Swift contract grower, agreed verbally with Vinoya that SMFI would supply 36,000 day‐old chicks per batch, plus feeds, medicines, materials, and technical support, for a 30–35-day growing period. Magtuto posted a ₱72,000 cash bond to guarantee performance. SMFI harvested and paid Magtuto a grower’s fee after each batch. Four deliveries of 36,000 chicks proceeded smoothly between October 2002 and April 2003. In June 2003, SMFI delivered only 32,000 chicks, citing hatchery shortages and market factors. Magtuto’s demand for the missing 4,000 heads was rebuffed. SMFI then terminated the arrangement, allegedly due to poor working relations.
Procedural History
Magtuto filed suit for breach of contract and damages (actual, moral, nominal, exemplary, attorney’s fees, litigation expenses). The RTC found a binding verbal contract and awarded compensatory (₱334,556.41), moral (₱500,000), nominal (₱100,000), exemplary (₱200,000) damages, attorney’s fees (₱100,000), and litigation expenses (₱13,583.80). The CA affirmed liability but deleted moral, nominal, and exemplary damages, increasing compensatory damages to ₱383,835.85. SMFI’s motion for reconsideration was denied.
Issue
Whether a valid contract existed absent a written agreement, and whether compensatory damages could be awarded for the short delivery of 4,000 chicks.
Ruling
Partially granted. The verbal per‐grow agreement between Magtuto and SMFI (through Vinoya) was valid and binding. SMFI is liable for actual damages only for the undelivered 4,000 chicks, computed at ₱38,383.58 with 6% legal interest per annum from finality.
Rationale
Contract Formation
• Civil Code Art. 1318 requisites (consent, certain object, cause) were satisfied by the mutual agreement on chick delivery, growing services, and grower’s fee.
• Art. 1356 allows enforceability of oral contracts when essential requisites exist.
• SMFI’s tacit ratification (deliveries, provision of inputs, harvest, payments) validated Vinoya’s authority (Arts. 1317; 1319).Nature of Obligation
• The per‐grow arran
Case Syllabus (G.R. No. 125646)
Procedural History
- Petition for review on certiorari under Rule 45 filed before the Supreme Court challenging the Court of Appeals’ Decision dated 28 August 2015 and Resolution dated 6 May 2016 in CA-G.R. CV No. 101074.
- The Regional Trial Court of Naga City, Branch 22, rendered a Decision on 4 February 2013 in Civil Case No. 2004-0008, finding in favor of Magtuto and awarding various damages.
- Petitioners San Miguel Foods, Inc. (SMFI) and Dr. James A. Vinoya appealed to the Court of Appeals; the CA affirmed with modification—raising actual damages to ₱383,835.85 and deleting awards for moral, exemplary, and nominal damages.
- Motion for reconsideration before the CA was denied on 6 May 2016.
Facts
- In July 2002, Ernesto Raoul V. Magtuto, a broiler chick grower under Swift Foods, Inc., attended a growers’ meeting at Villa Caceres Hotel in Naga City organized by Dr. Edwin Rosales (Swift Foods branch manager).
- SMFI representatives Dr. James A. Vinoya (veterinarian/production supervisor) and Engr. Rene C. Ogilvie (Bicol Region Poultry Operations Manager) presented SMFI’s contract growing scheme.
- Around September 2002, Magtuto and Vinoya entered into an oral agreement: SMFI to deliver 36,000 day-old chicks per grow, supply feeds, medicines, materials and technical support; Magtuto to grow the chicks for 30–35 days, harvest, and prepare the facility for the next delivery within 15 days.
- To secure performance, Magtuto posted a cash bond of ₱72,000 (equivalent to two grows at ₱36,000 per grow), with deductions from his account if chicks were missing.
- SMFI delivered five batches of chicks from October 2002 to June 2003; the first four deliveries were complete (36,000 each), but the fifth delivery in June 2003 was short by 4,000 heads.
- Magtuto protested the shortage and demanded full delivery; Vinoya replied that only surplus chicks were available and that official contract growers had priority.
- Feeling insulted by Vinoya’s tone, Magtuto sent a complaint letter dated 12 June 2003 to Ogilvie; no action was taken.
- On 12 August 2003, Vinoya notified Magtuto of termination of their arrangement due to “poor working relationship.”
- Magtuto wrote a letter dated 25 August 2003 to SMFI Assistant Vice President Benjamin Hilario, complaining about delayed July delivery, expenses incurred, loss of income, and withdrawal of his ₱72,000 bond.
- On 1 September 2003,