Philippine Supreme Court Jurisprudence

Philippine Supreme Court Jurisprudence > Year 1998 > September 1998 Decisions > G.R. No. 108129 September 23, 1998 - AEROSPACE CHEMICAL INDUSTRIES v. COURT OF APPEALS, ET AL.:



[G.R. No. 108129. September 23, 1999.]




This petition for review assails the Decision 1 dated August 19, 1992, of the Court of Appeals, which set aside the judgment of the Regional Trial Court of Pasig, Branch 151. The case stemmed from a complaint filed by the buyer (herein petitioner) against the seller (private respondent) for alleged breach of contract. Although petitioner prevailed in the trial court, the appellate court reversed and instead found petitioner guilty of delay and therefore liable for damages, as follows:chanrobles virtual lawlibrary

"WHEREFORE, the Decision of the court a quo is SET ASIDE and a new one rendered, dismissing the complaint with costs against the plaintiff (herein petitioner) and, on the counterclaim, ordering the plaintiff Aerospace Chemical Industries, Inc. to pay the defendant, Philippine Phosphate Fertilizer Corporation the sum of P324,516.63 representing the balance of the maintenance cost and tank rental charges incurred by the defendant for the failure of the plaintiff to haul the rest of the sulfuric acid on the designated date.

Costs against plaintiff-appellee." 2

As gleaned from the records, the following are the antecedents:chanrob1es virtual 1aw library

On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased five hundred (500) metric tons of sulfuric acid from private respondent Philippine Phosphate Fertilizer Corporation (Philphos). The contract 3 was in letter-form as follows:chanrob1es virtual 1aw library

27 June 1986


203 E. Fernandez St.

San Juan, Metro Manila

Attention: Mr. Melecio Hernandez


Subject: Sulfuric Acid Shipment

Gentlemen:chanrob1es virtual 1aw library

This is to confirm our agreement to supply your Sulfuric Acid requirement under the following terms and : virtual law library

A. Commodity : Sulfuric Acid in Bulk

B. Concentration : 98-99% H2SO4

C. Quantity : 500MT - 100 MT Ex-Basay

400 MT Ex-Sangi

D. Price : US$ 50.00/MT - FOB Cotcot, Basay, Negros Or.

US$ 54.00/MT - FOB Sangi, Cebu

E. Payment : Cash in Philippine currency payable to Philippine

Phosphate Fertilizer Corp. (MAKATI) at PCIB

selling rate at the time of payment at least five (5)

days prior to shipment date

F. Shipping Conditions

1. Laycan : July

2. Loadport : Cotcot, Basay, Negros Or. and

Atlas Pier, Sangi, Cebu

x       x       x

11. Other terms and Conditions: To be mutually agreed upon.

Very truly yours,

Philippine Phosphate Fertilizer Corp.

Signed: Herman J. Rustia

Sr. Manager, Materials & Logistics

CONFORME:chanrob1es virtual 1aw library


Signed: Mr. Melecio Hernandez


Initially set beginning July 1986, the agreement provided that the buyer shall pay its purchases in equivalent Philippine currency value, five days prior to the shipment date. Petitioner as buyer committed to secure the means of transport to pick-up the purchases from private respondent’s loadports. Per agreement, one hundred metric tons (100 MT) of sulfuric acid should be taken from Basay, Negros Oriental storage tank, while the remaining four hundred metric tons (400 MT) should be retrieved from Sangi, Cebu.

On August 6, 1986, private respondent sent an advisory letter 4 to petitioner to withdraw the sulfuric acid purchased at Basay because private respondent had been incurring incremental expense of two thousand (P2,000.00) pesos for each day of delay in shipment.chanroblesvirtualawlibrary

On October 3, 1986, petitioner paid five hundred fifty-three thousand, two hundred eighty (P553,280.00) pesos for 500 MT of sulfuric acid.

On November 19, 1986, petitioner chartered M/T Sultan Kayumanggi, owned by Ace Bulk Head Services. The vessel was assigned to carry the agreed volumes of freight from designated loading areas. M/T Kayumanggi withdrew only 70.009 MT of sulfuric acid from Basay because said vessel heavily tilted on its port side. Consequently, the master of the ship stopped further loading. Thereafter, the vessel underwent repairs.

In a demand letter 5 dated December 12, 1986, private respondent asked petitioner to retrieve the remaining sulfuric acid in Basay tanks so that said tanks could be emptied on or before December 15, 1986. Private respondent said that it would charge petitioner the storage and consequential costs for the Basay tanks, including all other incremental expenses due to loading delay, if petitioner failed to comply.

On December 18, 1986, M/T Sultan Kayumanggi docked at Sangi, Cebu, but withdrew only 157.51 MT of sulfuric acid. Again, the vessel tilted. Further loading was aborted. Two survey reports conducted by the Societe Generale de Surveillance (SGS) Far East Limited, dated December 17, 1986 and January 2, 1987, attested to these occurrences.

Later, on a date not specified in the record, M/T Sultan Kayumanggi sank with a total of 227.51 MT of sulfuric acid on board.chanrobles virtual lawlibrary

Petitioner chartered another vessel, M/T Don Victor, with a capacity of approximately 500 MT. 6 On January 26 and March 20, 1987, Melecio Hernandez, acting for the petitioner, addressed letters to private respondent, concerning additional orders of sulfuric acid to replace its sunken purchases, which letters are hereunder excerpted:chanrob1es virtual 1aw library

January 26, 1987

x       x       x

"We recently charter another vessel M/T DON VICTOR who will be authorized by us to lift the balance approximately 272.49 MT.

We request your goodselves to grant us for another Purchase Order with quantity of 227.51 MT and we are willing to pay the additional order at the prevailing market price, provided the lifting of the total 500 MT be centered/confined to only one safe berth which is Atlas Pier, Sangi, Cebu." 7

March 20, 1987

"This refers to the remaining balance of the above product quantity which were not loaded to the authorized cargo vessel, M/T Sultan Kayumanggi at your loadport — Sangi, Toledo City.

Please be advised that we will be getting the above product quantity within the month of April 1987 and we are arranging for a 500 MT Sulfuric Acid inclusive of which the remaining balance: 272.49 MT an additional product quantity thereof of 227.51 MT ." 8chanroblesvirtuallawlibrary

Petitioner’s letter 9 dated May 15, 1987, reiterated the same request to private Respondent.

On January 25, 1988, petitioner’s counsel, Atty. Pedro T. Santos, Jr., sent a demand letter 10 to private respondent for the delivery of the 272.49 MT of sulfuric acid paid by his client, or the return of the purchase price of three hundred seven thousand five hundred thirty (P307,530.00) pesos. Private respondent in reply, 11 on March 8, 1988, instructed petitioner to lift the remaining 30 MT of sulfuric acid from Basay, or pay maintenance and storage expenses commencing August 1, 1986.

On July 6, 1988, petitioner wrote another letter, insisting on picking up its purchases consisting of 272.49 MT and an additional of 227.51 MT of sulfuric acid. According to petitioner it had paid the chartered vessel for the full capacity of 500 MT, stating

"With regard to our balance of sulfuric acid - product at your shore tank/plant for 272.49 metric ton that was left by M/T Sultana Kayumanggi due to her sinking, we request for an additional quantity of 227.51 metric ton of sulfuric acid, 98% concentration.

The additional quantity is requested in order to complete the shipment, as the chartered vessel schedule to lift the high grade sulfuric acid product is contracted for her full capacity/load which is 500 metric tons more or less.

We are willing to pay the additional quantity - 227.51 metric tons high grade sulfuric acid in the prevailing price of the said product." : virtual law library

x       x       x

By telephone, petitioner requested private respondent’s Shipping Manager, Gil Belen, to get its additional order of 227.51 MT of sulfuric acid at Isabel, Leyte. 13 Belen relayed the information to his associate, Herman Rustia, the Senior Manager for Imports and International Sales of private Respondent. In a letter dated July 22, 1988, Rustia

"Subject: Sulfuric Acid Ex-Isabel

Gentlemen:chanrob1es virtual 1aw library

Confirming earlier telcon with our Mr. G.B. Belen, we regret to inform you that we cannot accommodate your request to lift Sulfuric Acid ex-Isabel due to Pyrite limitation and delayed arrival of imported Sulfuric Acid from Japan." 14

On July 25, 1988, petitioner’s counsel wrote to private respondent another demand letter for the delivery of the purchases remaining, or suffer tedious legal action his client would commence.

On May 4, 1989, petitioner filed a complaint for specific performance and/or damages before the Regional Trial Court of Pasig, Branch 151. Private respondent filed its answer with counterclaim, stating that it was the petitioner who was remiss in the performance of its obligation in arranging the shipping requirements of its purchases and, as a consequence, should pay damages as computed

Advanced Payment by Aerospace (Oct. 3, 1986) P553,280.00

Less Shipments

70.009 MT sulfuric acid P72,830.36

151.51 MT sulfuric acid 176,966.27 (249,796.63)

————— —————

Balance P303,483.37

Less Charges

Basay Maintenance Expense

from Aug. 15 to Dec. 15, 1986

(P2,000.00/day x 122 days) P244,000.00

Sangi - Tank Rental

from Aug. 15, 1986 to Aug. 15, 1987

(P32,000.00/mo. x 12 mos.) 384,000.00 (628,000.00)

————— —————

Receivable/Counterclaim (P324,516.63)


Trial ensued and after due proceedings, judgment was rendered by the trial court in petitioner’s favor, disposing as

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant, directing the latter to pay the former the following sums:chanroblesvirtual|awlibrary

1. P306,060.77 - representing the value of the undelivered 272.49 metric tons of sulfuric acid plaintiff paid to defendant;

2. P91,818.23 - representing unrealized profits, both items with 12% interest per annum from May 4, 1989, when the complaint was filed until fully paid;

3. P30,000.00 - as exemplary damages; and

4. P30,000.00 - as attorney’s fees and litigation expenses, both last items also with 12% interest per annum from date hereof until fully paid.

Defendant’s counterclaims are hereby dismissed for lack of merit.

Costs against defendant." 15

In finding for the petitioner, the trial court held that the petitioner was absolved in its obligation to pick-up the remaining sulfuric acid because its failure was due to force majeure. According to the trial court, it was private respondent who committed a breach of contract when it failed to accommodate the additional order of the petitioner, to replace those that sank in the sea,

"To begin with, even if we assume that it is incumbent upon the plaintiff to ‘lift’ the sulfuric acid it ordered from defendant, the fact that force majeure intervened when the vessel which was previouly (sic) listing, but which the parties, including a representative of the defendant, did not mind, sunk, has the effect of absolving plaintiff from ‘lifting’ the sulfuric acid at the designated load port. But even assuming the plaintiff cannot be held entirely blameless, the allegation that plaintiff agreed to a payment of a 2,000-peso incremental expenses per day to defendant for delayed ‘lifting’ has not been proven. . . .

Also, if it were true that plaintiff is indebted to defendant, why did defendant accept a second additional order after the transaction in litigation? Why also, did defendant not send plaintiff statements of account until after 3 years? : virtual law library

All these convince the Court that indeed, defendant must return what plaintiff has paid it for the goods which the latter did not actually receive." 16

On appeal by private respondent, the Court of Appeals reversed the decision of the trial court, as

"Based on the facts of this case as hereinabove set forth, it is clear that the plaintiff had the obligation to withdraw the full amount of 500 MT of sulfuric acid from the defendant’s loadport at Basay and Sangi on or before August 15, 1986. As early as August 6, 1986 it had been accordingly warned by the defendant that any delay in the hauling of the commodity would mean expenses on the part of the defendant amounting to P2,000.00 a day. The plaintiff sent its vessel, the ‘M/T Sultan Kayumanggi’, only on November 19, 1987. The vessel, however, was not capable of loading the entire 500 MT and in fact, with its load of only 227.519 MT, it sank.

Contrary to the position of the trial court, the sinking of the ‘M/T Sultan Kayumanggi’ did not absolve the plaintiff from its obligation to lift the rest of the 272.481 MT of sulfuric acid at the agreed time. It was the plaintiff’s duty to charter another vessel for the purpose. It did contract for the services of a new vessel, the ‘M/T Don Victor’, but did not want to lift the balance of 272.481 MT only but insisted that its additional order of 227.51 MT be also given by the defendant to complete 500 MT, apparently so that the vessel may be availed of in its full capacity.chanroblesvirtual|awlibrary

x       x       x

We find no basis for the decision of the trial court to make the defendant liable to the plaintiff not only for the cost of the sulfuric acid, which the plaintiff itself failed to haul, but also for unrealized profits as well as exemplary damages and attorney’s fees." 17

Respondent Court of Appeals found the petitioner guilty of delay and negligence in the performance of its obligation. It dismissed the complaint of petitioner and ordered it to pay damages representing the counterclaim of private Respondent.

The motion for reconsideration filed by petitioner was denied by respondent court in its Resolution dated December 21, 1992, for lack of merit.

Petitioner now comes before us, assigning the following errors:chanrob1es virtual 1aw library











From the assigned errors, we synthesize the pertinent issues raised by the petitioner as follows:chanrob1es virtual 1aw library

1. Did the respondent court err in holding that the petitioner committed breach of contract, considering that:chanrob1es virtual 1aw library

a) the petitioner allegedly paid the full value of its purchases, yet received only a portion of said purchases?

b) petitioner and private respondent allegedly had also agreed for the purchase and supply of an additional 227.519 MT of sulfuric acid, hence prior delay, if any, had been waived?

2. Did the respondent court err in awarding damages to private respondent?

3. Should expenses for the storage and preservation of the purchased fungible goods, namely sulfuric acid, be on seller’s account pursuant to Article 1504 of the Civil Code?

To resolve these issues, petitioner urges us to review factual findings of respondent court and its conclusion that the petitioner was guilty of delay in the performance of its obligation. According to petitioner, that conclusion is contrary to the factual evidence. It adds that respondent court disregarded the rule that findings of the trial court are given weight, with the highest degree of respect. Claiming that respondent court’s findings conflict with those of the trial court, petitioner prays that the trial court’s findings be upheld over those of the appellate court.chanrobles virtual lawlibrary

Petitioner argues that it paid the purchase price of sulfuric acid, five (5) days prior to the withdrawal thereof, or on October 3, 1986, hence, it had complied with the primary condition set in the sales contract. Petitioner claims its failure to pick-up the remaining purchases on time was due to a storm, a force majeure, which sank the vessel. It thus claims exemption from liability to pay damages. Petitioner also contends that it was actually the private respondent’s shipping officer, who advised petitioner to buy the additional 227.51 MT of sulfuric acid, so as to fully utilize the capacity of the vessel it chartered. Petitioner insists that when its ship was ready to pick-up the remaining balance of 272.49 MT of sulfuric acid, private respondent could not comply with the contract commitment due to "pyrite limitation."cralaw virtua1aw library

While we agree with petitioner that when the findings of the Court of Appeals are contrary to those of the trial court, 18 this Court may review those findings, we find the appellate court’s conclusion that petitioner violated the subject contract amply supported by preponderant evidence. Petitioner’s claim was predicated merely on the allegations of its employee, Melecio Hernandez, that the storm or force majeure caused the petitioner’s delay and failure to lift the cargo of sulfuric acid at the designated loadports. In contrast, the appellate court discounted Hernandez’ assertions. For on record, the storm was not the proximate cause of petitioner’s failure to transport its purchases on time. The survey report submitted by a third party surveyor, SGS Far East Limited, revealed that the vessel, which was unstable, was incapable of carrying the full load of sulfuric acid. Note that there was a premature termination of loading in Basay, Negros Oriental. The vessel had to undergo several repairs before continuing its voyage to pick-up the balance of cargo at Sangi, Cebu. Despite repairs, the vessel still failed to carry the whole lot of 500 MT of sulfuric acid due to ship defects like listing to one side. Its unfortunate sinking was not due to force majeure. It sunk because it was, based on SGS survey report, unstable and unseaworthy.

Witness surveyor Eugenio Rabe’s incident report, dated December 13, 1986 in Basay, Negros Oriental, elucidated this point:chanrobles law library

"Loading was started at 1500hrs. November 19. At 1600Hrs. November 20, loading operation was temporarily stopped by the vessel’s master due to ships stability was heavily tilted to port side, ship’s had tried to transfer the loaded acid to stbdside but failed to do so, due to their auxiliary pump on board does not work out for acid.

x       x       x

Note. Attending surveyor arrived BMC Basay on November 22, due to delayed advice of said vessel Declared quantity loaded onboard based on data’s provided by PHILPHOS representative.

On November 26, two representative of shipping company arrived Basay to assist the situation, at 1300Hrs repairing and/or welding of tank number 5 started at 1000Hrs November 27, repairing and/or welding was suspended due to the explosion of tank no. 5. Explosion ripped about two feet of the double bottom tank.

November 27 up to date no progress of said vessel" 19

While at Sangi, Cebu, the vessel’s condition (listing) did not improve as the survey report therein

"Declared quantity loaded on board was based on shore tank withdrawal due to ship’s incomplete tank calibration table. Barge displacement cannot be applied due to ship was listing to Stboard side which has been loaded with rocks to control her stability." : virtual law library

These two vital pieces of information were totally ignored by trial court. The appellate court correctly took these into account, significantly. As to the weather condition in Basay, the appellate court accepted surveyor Rabe’s testimony,

"Q. Now, Mr. Witness, what was the weather condition then at Basay, Negros Oriental during the loading operation of sulfuric acid on board the Sultana Kayumanggi?

A. Fair, sir." 21

Since the third party surveyor was neither petitioner’s nor private respondent’s employee, his professional report should carry more weight than that of Melecio Hernandez, an employee of petitioner. Petitioner, as the buyer, was obligated under the contract to undertake the shipping requirements of the cargo from the private respondent’s loadports to the petitioner’s designated warehouse. It was petitioner which chartered M/T Sultan Kayumanggi. The vessel was petitioner’s agent. When it failed to comply with the necessary loading conditions of sulfuric acid, it was incumbent upon petitioner to immediately replace M/T Sultan Kayumanggi with another seaworthy vessel. However, despite repeated demands, petitioner did not comply seasonably.

Additionally, petitioner claims that private respondent’s employee, Gil Belen, had recommended to petitioner to fully utilize the vessel, hence petitioner’s request for an additional order to complete the vessel’s 500 MT capacity. This claim has no probative pertinence nor solid basis. A party who asserts that a contract of sale has been changed or modified has the burden of proving the change or modification by clear and convincing evidence. 22 Repeated requests and additional orders were contained in petitioner’s letters to private Respondent. In contrast, Belen’s alleged action was only verbal; it was not substantiated at all during the trial. Note that, using the vessel to full capacity could redound to petitioner’s advantage, not the other party’s. If additional orders were at the instance of private respondent, the same must be properly proved together with its relevance to the question of delay. Settled is the principle in law that proof of verbal agreements offered to vary the terms of written agreements is inadmissible, under the parol evidence rule. 23 Belen’s purported recommendation could not be taken at face value and, obviously, cannot excuse petitioner’s default.chanrobles lawlibrary : rednad

Respondent court found petitioner’s default unjustified, and on this conclusion we

"It is not true that the defendant was not in a position to deliver the 272.481 MT which was the balance of the original 500 MT purchased by the plaintiff. The whole lot of 500 MT was ready for lifting as early as August 15, 1986. What the defendant could not sell to the plaintiff was the additional 227.51 MT which said plaintiff was ordering, for the reason that the defendant was short of the supply needed. The defendant, however, had no obligation to agree to this additional order and may not be faulted for its inability to meet the said additional requirements of the plaintiff. And the defendant’s incapacity to agree to the delivery of another 227.51 MT is not a legal justification for the plaintiff’s refusal to lift the remaining 272.481.

It is clear from the plaintiff’s letters to the defendant that it wanted to send the ‘M/T Don Victor’ only if the defendant would confirm that it was ready to deliver 500 MT. Because the defendant could not sell another 227.51 MT to the plaintiff, the latter did not send a new vessel to pick up the balance of the 500 MT originally contracted for by the parties. This, inspite the representations made by the defendant for the hauling thereof as scheduled and its reminders that any expenses for the delay would be for the account of the plaintiff." 24

We are therefore constrained to declare that the respondent court did not err when it absolved private respondent from any breach of : virtual law library

Our next inquiry is whether damages have been properly awarded against petitioner for its unjustified delay in the performance of its obligation under the contract. Where there has been breach of contract by the buyer, the seller has a right of action for damages. Following this rule, a cause of action of the seller for damages may arise where the buyer refuses to remove the goods, such that buyer has to remove them. 25 Article 1170 of the Civil Code

"Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages."cralaw virtua1aw library

Delay begins from the time the obligee judicially or extrajudicially demands from the obligor the performance of the obligation. 26 Art. 1169

"ARTICLE 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation."cralaw virtua1aw library

In order that the debtor may be in default, it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially. 27

In the present case, private respondent required petitioner to ship out or lift the sulfuric acid as agreed, otherwise petitioner would be charged for the consequential damages owing to any delay. As stated in private respondent’s letter to petitioner, dated December 12, : virtual law library

Subject : M/T "KAYUMANGGI"

Gentlemen :chanrob1es virtual 1aw library

This is to reiterate our telephone advice and our letter HJR-8612-031 dated 2 December 1986 regarding your sulfuric acid vessel, M/T "KAYUMANGGI" .

As we have, in various instances, advised you, our Basay wharf will have to be vacated 15th December 1986 as we are expecting the arrival of our chartered vessel purportedly to haul our equipments and all other remaining assets in Basay. This includes our sulfuric acid tanks. We regret, therefore, that if these tanks are not emptied on or before the 15th of December, we either have to charge you for the tanks waiting time at Basay and its consequential costs (i.e. chartering of another vessel for its second pick-up at Basay, handling, etc.) as well as all other incremental costs on account of the protracted loading delay." 28 (Emphasis supplied)

Indeed the above demand, which was unheeded, justifies the finding of delay. But when did such delay begin? The above letter constitutes private respondent’s extrajudicial demand for the petitioner to fulfill its obligation, and its dateline is significant. Given its date, however, we cannot sustain the finding of the respondent court that petitioner’s delay started on August 6, 1986. The Court of Appeals had relied on private respondent’s earlier letter to petitioner of that date for computing the commencement of delay. But as averred by petitioner, said letter of August 6th is not a categorical demand. What it showed was a mere statement of fact, that" [F]for your information any delay in Sulfuric Acid withdrawal shall cost us incremental expenses of P2,000.00 per day." Noteworthy, private respondent accepted the full payment by petitioner for purchases on October 3, 1986, without qualification, long after the August 6th letter. In contrast to the August 6th letter, that of December 12th was a categorical

Records reveal that a tanker ship had to pick-up sulfuric acid in Basay, then proceed to get the remaining stocks in Sangi, Cebu. A period of three days appears to us reasonable for a vessel to travel between Basay and Sangi. Logically, the computation of damages arising from the shipping delay would then have to be from December 15, 1986, given said reasonable period after the December 12th letter. More important, private respondent was forced to vacate Basay wharf only on December 15th. Its Basay expenses incurred before December 15, 1986, were necessary and regular business expenses for which the petitioner should not be obliged to pay.

Note that private respondent extended its lease agreement for Sangi, Cebu storage tank until August 31, 1987, solely for petitioner’s sulfuric acid. It stands to reason that petitioner should reimburse private respondent’s rental expenses of P32,000 monthly, commencing December 15, 1986, up to August 31, 1987, the period of the extended lease. Note further that there is nothing on record refuting the amount of expenses abovecited. Private respondent presented in court two supporting documents: first, the lease agreement pertaining to the equipment, and second a letter dated June 15, 1987, sent by Atlas Fertilizer Corporation to private respondent representing the rental charges incurred. Private respondent is entitled to recover the payment for these charges. It should be reimbursed the amount of two hundred seventy two thousand (P272,000.00) 29 pesos, corresponding to the total amount of rentals from December 15, 1986 to August 31, 1987 of the Sangi, Cebu storage tank.

Finally, we note also that petitioner tries to exempt itself from paying rental expenses and other damages by arguing that expenses for the preservation of fungible goods must be assumed by the seller. Rental expenses of storing sulfuric acid should be at private respondent’s account until ownership is transferred, according to petitioner. However, the general rule that before delivery, the risk of loss is borne by the seller who is still the owner, is not applicable in this case because petitioner had incurred delay in the performance of its obligation. Article 1504 of the Civil Code clearly

"Unless otherwise agreed, the goods remain at the seller’s risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer’s risk whether actual delivery has been made or not, except that:chanrobles virtual lawlibrary

x       x       x

(2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party at fault." (Emphasis supplied)

On this score, we quote with approval the findings of the appellate court,

". . . The defendant [herein private respondent] was not remiss in reminding the plaintiff that it would have to bear the said expenses for failure to lift the commodity for an unreasonable length of time.

But even assuming that the plaintiff did not consent to be so bound, the provisions of Civil Code come in to make it liable for the damages sought by the defendant.

Article 1170 of the Civil Code provides:chanrob1es virtual 1aw library

‘Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages..’

Certainly, the plaintiff [herein petitioner] was guilty of negligence and delay in the performance of its obligation to lift the sulfuric acid on August 15, 1986 and had contravened the tenor of its letter-contract with the defendant." 30chanrobles law library : red

As pointed out earlier, petitioner is guilty of delay, after private respondent made the necessary extrajudicial demand by requiring petitioner to lift the cargo at its designated loadports. When petitioner failed to comply with its obligations under the contract it became liable for its shortcomings. Petitioner is indubitably liable for proven damages.

Considering, however, that petitioner made an advance payment for the unlifted sulfuric acid in the amount of three hundred three thousand, four hundred eighty three pesos and thirty seven centavos (P303,483.37), it is proper to set-off this amount against the rental expenses initially paid by private Respondent. It is worth noting that the adjustment and allowance of private respondent’s counterclaim or set-off in the present action, rather than by another independent action, is encouraged by the law. Such practice serves to avoid circuitry of action, multiplicity of suits, inconvenience, expense, and unwarranted consumption of the court’s time. 31 The trend of judicial decisions is toward a liberal extension of the right to avail of counterclaims or set-offs. 32 The rules on counterclaims are designed to achieve the disposition of a whole controversy involving the conflicting claims of interested parties at one time and in one action, provided all parties can be brought before the court and the matter decided without prejudicing the right of any party. 33 Set-off in this case is proper and reasonable. It involves deducting P272,000.00 (rentals) from P303,483.37 (advance payment), which will leave the amount of P31,483.37 refundable to petitioner.

WHEREFORE, the petition is hereby DENIED. The assailed decision of the Court of Appeals in CA G.R. CV No. 33802 is AFFIRMED, with MODIFICATION that the amount of damages awarded in favor of private respondent is REDUCED to Two hundred seventy two thousand pesos (P272,000.00). It is also ORDERED that said amount of damages be OFFSET against petitioner’s advance payment of Three hundred three thousand four hundred eighty three pesos and thirty-seven centavos (P303,483.37) representing the price of the 272.481 MT of sulfuric acid not lifted. Lastly, it is ORDERED that the excess amount of thirty one thousand, four hundred eighty three pesos and thirty seven centavos (P31,483.37) be RETURNED soonest by private respondent to herein

Costs against the petitioner.


Bellosillo, Mendoza and Buena, JJ., concur.


1. Rollo, pp. 36-45, Penned by Justice Associate Justice Salome A. Montoya, concurred in by Justices Jose C. Campos and Serafin V.C. Guingona, of the Special Fifth Division of the Court of Appeals.

2. Rollo, p. 44.

3. Records, pp. 5-6.

4. Id. at 136.

5. Id. at 137.

6. TSN, September 1, 1989, pp. 28-29.

7. Records, pp. 47-48. Emphasis ours.

8. Id. at 49.

9. Id. at 50.

10. Id. at 41.

11. Id. at 138.

12. Id. at 40.

13. Id. at 65, Affidavit of Gil B. Belen.

14. Id. at 46.

15. Rollo, p. 51.

16. Id. at 52-53.

17. Id. at 41-42.

18. Mijares v. CA, 271 SCRA 558, 566 (1997), citing Cuizon v. Court of Appeals, 260 SCRA 645, (1996); Floro v. Llenado, 244 SCRA 713 (1995).

19. Records, p. 21.

20. Id. at 23.

21. TSN, December 20, 1989, p. 6.

22. 77 Corpus Juris Secundum, Sales, Section 86, Evidence, p. 773.

23. Gerales v. Court of Appeals, 218 SCRA 638, 648-649 (1993); citing Continental Airlines Inc. v. Santiago, 172 SCRA 490 (1989).

24. Rollo, p. 42.

25. 78 Corpus Juris Secundum, Sales, Action for Damages, Section 462, Right of Action, p. 112.

26. SSS v. Moonwalk Development and Housing Corporation, 221 SCRA 119, 127 (1993).

27. Id. at 128.

28. Records, p. 137.

29. P32,000 x 8.5 months.

30. Rollo, pp. 43-44.

31. Development Bank of the Philippines v. Court of Appeals, 249 SCRA 331, 341 (1995).

32. Id., citing 20 Am. Jur. 2d, Counterclaim, 237-238.

33. Id., citing Kuenzel v. Universal Carloading and Distributing Co., Inc. (1939) 29 F. Supp. 407.

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  • G.R. No. 136159 September 1, 1998 - MACRINA S. SAURA, ET AL. v. RAMON G. SAURA, ET AL.

  • G.R. No. 96428 September 2, 1998 - WILMA T. BARRAMEDA v. COURT OF APPEALS, ET AL.

  • G.R. No. 118784 September 2, 1998 - CHRISTINA AYUSTE v. COURT OF APPEALS, ET AL.

  • G.R. No. 119730 September 2, 1998 - RODOLFO NOCEDA v. COURT OF APPEALS, ET AL.

  • G.R. Nos. 127022 & 127245 September 2, 1998 - FIRESTONE CERAMICS v. COURT OF APPEALS, ET AL.

  • G.R. No. 130501 September 2, 1998 - PEOPLE OF THE PHIL. v. ISABELO PEREZ

  • G.R. No. 130550 September 2, 1998 - PEOPLE OF THE PHIL. v. ANDRES PEÑAFLORIDA

  • G.R. No. 106916 September 3, 1998 - MASAGANA CONCRETE PRODUCTS, ET AL. v. NLRC, ET AL.

  • G.R. No. 116568 September 3, 1998 - DELFIN GARCIA v. NLRC, ET AL.

  • G.R. No. 125808 September 3, 1998 - PEOPLE OF THE PHIL. v. RENE TAPALES

  • G.R. No. 129103 September 3, 1998 - CLAUDIO DELOS REYES, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 130525 September 3, 1998 - PEOPLE OF THE PHIL. v. ERNESTO SACAPAÑO

  • G.R. No. 130964 September 3, 1998 - PEOPLE OF THE PHIL. v. RICARDO ACUNO

  • G.R. No. 131827 September 3, 1998 - PEOPLE OF THE PHIL. v. GERLITO PELEN

  • G.R. Nos. 131830-34 September 3, 1998 - PEOPLE OF THE PHIL. v. JIMMY MOSQUEDA

  • G.R. No. 125848 September 6, 1998 - EDMUNDO BENAVIDEZ v. COURT OF APPEALS, ET AL.

  • G.R. No. 120011 September 7, 1998 - LINO A. SANCHEZ, ET AL. v. SANDIGANBAYAN, ET AL.

  • G.R. No. 122732 September 7, 1998 - PEOPLE OF THE PHIL. v. EDGAR BAYRON

  • G.R. No. 127844 September 7, 1998 - PEOPLE OF THE PHIL. v. JOSEPH GALICGIC

  • G.R. No. 129521 September 7, 1998 - SEC, ET AL. v. MANUEL D. RECTO, ET AL.

  • G.R. No. 122725 September 8, 1998 - BIOGENERICS MARKETING, ET AL. v. NLRC, ET AL.

  • G.R. No. 124920 September 8, 1998 - PEOPLE OF THE PHIL. v. ERNESTO ROSALES

  • A.C. No. 5118 September 9, 1998 - MARILOU SEBASTIAN v. DOROTHEO CALIS

  • A.M. No. P-98-1274 September 9, 1998 - ACELA P. LEONOR v. VILMA B. DELFIN

  • A.M. No. RTJ-99-1477 September 9, 1998 - MAXIMINO BALAYO v. MAMERTO M. BUBAN

  • G.R. No. 119085 September 9, 1998 - RESTAURANTE LAS CONCHAS, ET AL. v. LYDIA LLEGO, ET AL.

  • G.R. No. 120066 September 9, 1998 - OCTABELA ALBA Vda. De RAZ v. COURT OF APPEALS, ET AL.

  • G.R. No. 120465 September 9, 1998 - WILLIAM UY, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 121764 September 9, 1998 - PEOPLE OF THE PHIL. v. RAUL H. SESBREÑO

  • G.R. No. 124506 September 9, 1998 - ROMEL JAYME v. PEOPLE OF THE PHIL.

  • G.R. No. 129939 September 9, 1998 - AMOR D. DELOSO, ET AL. v. ANIANO A. DESIERTO, ET AL

  • G.R. No. 133535 September 9, 1998 - LILIA B. ORGANO v. SANDIGANBAYAN, ET AL.

  • Adm. Matter Nos. MTJ- 94-923 & MTJ- 95-11-125-MCTC September 10, 1998 - ELENA E. JABAO v. MELCHOR E. BONILLA

  • G.R. No. 121982 September 10, 1998 - PEOPLE OF THE PHIL. v. LEONILO CUI, ET AL.

  • G.R. Nos. 125646 & 128663 September 10, 1998 - CITY OF PASIG v. COMELEC, ET AL.

  • G.R. No. 129418 September 10, 1998 - RODRIGO G. HABANA v. NLRC, ET AL.


  • G.R. No. 139043 September 10, 1998 - ALVIN B. GARCIA v. ARTURO C. MOJICA, ET AL.

  • G.R. No. 103073 September 14, 1998 - REPUBLIC OF THE PHIL v. COURT OF APPEALS, ET AL.

  • G.R. No. 108710 September 14, 1998 - ARMANDO T. DE ROSSI v. NLRC, ET AL.

  • G.R. Nos. 110672 & 111201 September 14, 1998 - RURAL BANK OF STA. MARIA, v. COURT OF APPEALS, ET AL.

  • G.R. No. 116109 September 14, 1998 - JACINTO OLAN, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 121365 September 14, 1998 - PEOPLE OF THE PHIL. v. MACAPANTON SALIMBAGO

  • G.R. No. 126998 September 14, 1998 - PEOPLE OF THE PHIL. v. JOEL ELLOREG DE LOS SANTOS

  • G.R. No. 127370 September 14, 1998 - PNB-REPUBLIC BANK v. COURT OF APPEALS, ET AL.

  • G.R. No. 128075 September 14, 1998 - PEOPLE OF THE PHIL. v. ALFREDO ABLANEDA

  • G.R. No. 128325 September 14, 1998 - RODOLFO CAOILI , ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 128734 September 14, 1998 - ANGEL L. BOLEYLEY v. CLARENCE J. VILLANUEVA

  • G.R. No. 128927 September 14, 1998 - REMEDIOS NOTA SAPIERA v. COURT OF APPEALS, ET AL.

  • G.R. No. 129286 September 14, 1998 - PEOPLE OF THE PHIL. v. HERMIE BANTILAN

  • G.R. No. 129843 September 14, 1998 - BLUE DAIRY CORPORATION, ET AL v. NLRC, ET AL.

  • G.R. No. 129882 September 14, 1998 - PEOPLE OF THE PHIL. v. FERNANDO TAN

  • G.R. No. 130947 September 14, 1998 - PEOPLE OF THE PHIL. v. RAMON ROMAN

  • G.R. No. 132244 September 14, 1998 - GERARDO ANGAT v. REPUBLIC OF THE PHIL.

  • G.R. No. 134104 September 14, 1998 - NENITA R. ORCULLO v. MARGARITO P. GERVACIO

  • G.R. No. 118971 September 15, 1998 - RODOLFO R. VASQUEZ v. COURT OF APPEALS, ET AL.

  • G.R. No. 129692 September 15, 1998 - PEOPLE OF THE PHIL. v. ABUBAKAR ANG-NGUHO

  • G.R. No. 104944 September 16, 1998 - PEOPLE OF THE PHIL. v. SAMSON SUPLITO

  • G.R. No. 115215 September 16, 1998 - PEOPLE OF THE PHIL. v. ELIZALDE FACO

  • G.R. No. 121719 September 16, 1998 - VICENTE MANINANG, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 125931 September 16, 1998 - UNION MOTORS CORP. v. NLRC, ET AL.

  • G.R. No. 126047 September 16, 1998 - PEOPLE OF THE PHIL. v. LEOPOLDO AQUINO, ET AL.

  • G.R. No. 130067 September 16, 1998 - PEOPLE OF THE PHIL. v. ANICETA "ANNIE" MORENO

  • G.R. No. 130604 September 16, 1998 - PEOPLE OF THE PHIL. v. CELESTINO JUNTILLA

  • G.R. No. 131784 September 16, 1998 - FELIX L. GONZALES vs.THOMAS and PAULA CRUZ

  • G.R. No. 133064 September 16, 1998 - JOSE C. MIRANDA, ET AL. v. ALEXANDER AGUIRRE, ET AL.

  • G.R. Nos. 133949-51 September 16, 1998 - PEOPLE OF THE PHIL. v. EFREN BUENDIA

  • G.R. No. 136203 September 16, 1998 - LOREÑO TERRY v. PEOPLE OF THE PHIL.


  • A.M. No. RTJ-99-1483 September 17, 1998 - LAURO D. GACAYAN, ET AL. v. FERNANDO PAMINTUAN

  • A.M. No. P-93-989 September 21, 1998 - OFFICE OF THE COURT ADMINISTRATOR v. RODRIGO B. GALO

  • G.R. No. 96982 September 21, 1998 - EMILIANO A. RIZADA, ET AL. v. NLRC, ET AL.

  • G.R. No. 103453 September 21, 1998 - LUIS CEREMONIA v. COURT OF APPEALS, ET AL

  • G.R. No. 106516 September 21, 1998 - PANTRANCO NORTH EXPRESS v. NLRC, ET AL.

  • G.R. No. 120554 September 21, 1998 - SO PING BUN v. COURT OF APPEALS, ET AL.

  • G.R. No. 124355 September 21, 1998 - CHING SEN BEN v. COURT OF APPEALS, ET AL.

  • G.R. No. 126118 September 21, 1998 - PEOPLE OF THE PHIL. v. PROCOPIO TRESBALLES

  • G.R. No. 127315 September 21, 1998 - PEOPLE OF THE PHIL. v. RAFAEL "Lito" BALDEVIESO, ET AL.

  • G.R. No. 132061 September 21, 1998 - PEOPLE OF THE PHIL. v. MELECIO HIVELA

  • A.C. No. 5135 September 22, 1998 - ELSIE B. AROMIN, ET AL. v. VALENTIN O. BONCAVIL


  • G.R. Nos. 84813 & 84848 September 22, 1998 - DOMEL TRADING CORP. v. COURT OF APPEALS, ET AL.

  • G.R. No. 123901 September 22, 1998 - ENRIQUE A. BARROS v. NLRC, ET AL.

  • G.R. No. 128001 September 22, 1998 - MINERVA FRANCO v. COMMISSION ON AUDIT, ET AL.

  • G.R. No. 131847 September 22, 1998 - PEOPLE OF THE PHIL. v. CARMELITO S. ABELLA

  • G.R. No. 133076 September 22, 1998 - MOISES S. SAMSON v. ALEXANDER AGUIRRE, ET AL.

  • G.R. No. 135869 September 22, 1998 - RUSTICO H. ANTONIO v. COMELEC, ET AL.

  • Administrative Case No. 1571 September 23, 1998 - PARALUMAN B. AFURONG v. ANGEL G. AQUINO

  • A.M. No. P-99-1340 September 23, 1998 - ZENAIDA MUSNI v. ERNESTO G. MORALES

  • G.R. No. 108129 September 23, 1998 - AEROSPACE CHEMICAL INDUSTRIES v. COURT OF APPEALS, ET AL.

  • G.R. No. 110873 September 23, 1998 - PEOPLE OF THE PHIL. v. LEONARDO FRANCISCO, ET AL.

  • G.R. No. 118647 September 23, 1998 - CONSOLIDATED FOOD CORP., ET AL. v. NLRC, ET AL.

  • G.R. No. 130460 September 23, 1998 - HERMINIO A. SIASOCO, ET AL. v. JANUARIO N. NARVAJA

  • G.R. No. 135042 September 23, 1998 - ROBERN DEVELOPMENT CORP. v. JESUS V. QUITAIN

  • G.R. No. 135716 September 23, 1998 - FERDINAND TRINIDAD v. COMELEC, ET AL.

  • G.R. Nos. 114299 & 118862 September 24, 1998 - TRADERS ROYAL BANK v. COURT OF APPEALS, ET AL.

  • G.R. No. 128874 September 24, 1998 - PEOPLE OF THE PHIL. v. SAMSON B. BRAGAS

  • G.R. No. 116599 September 27, 1998 - PEOPLE OF THE PHIL. v. DOMINGO PAGPAGUITAN, ET AL.

  • G.R. No. 129304 September 27, 1998 - PEOPLE OF THE PHIL. v. AVA MA. VICTORIA CARIQUEZ

  • G.R. No. 135691 September 27, 1998 - EMMANUEL SINACA v. MIGUEL MULA, ET AL.

  • G.R. Nos. 105954-55 September 28, 1998 - PEOPLE OF THE PHIL. v. IRENEO FAJARDO

  • G.R. No. 114323 September 28, 1998 - OIL AND NATURAL GAS COMMISSION v. COURT OF APPEALS, ET AL.

  • G.R. No. 126152 September 28, 1998 - PNB v. COURT OF APPEALS, ET AL.

  • G.R. No. 128806 September 28, 1998 - KAMS INTERNATIONAL INC, ET AL.. v. NLRC, ET AL.

  • G.R. No. 130632 September 28, 1998 - PEOPLE OF THE PHIL. v. NATY CHUA

  • G.R. No. 131621 September 28, 1998 - LOADSTAR SHIPPING CO. v. COURT OF APPEALS, ET AL.

  • G.R. No. 132324 September 28, 1998 - PEOPLE OF THE PHIL. v. NORLITO TAN, and JOSE TAN

  • G.R. No. 136294 September 28, 1998 - MARIA G. BALUYUT, ET AL. v. RODOLFO GUIAO, ET AL.


  • A.C. No. 5141 September 29, 1998 - PRISCILA L. TOLEDO v. ERLINDA ABALOS


  • A.M. No. MTJ-94-904 September 29, 1998 - JOSEPHINE C. MARTINEZ v. CESAR N. ZOLETA

  • G.R. No. 105374 September 29, 1998 - PEOPLE OF THE PHIL. v. MAXIMO (DAGIT) RABANG, JR.

  • G.R. No. 124736 September 29, 1998 - PEOPLE OF THE PHIL. v. ROMEO GALLO

  • G.R. No. 125330 September 29, 1998 - PEOPLE OF THE PHIL. v. GODOFREDO TAHOP

  • G.R. No. 128157 September 29, 1998 - PEOPLE OF THE PHIL. v. MANUEL MANAHAN

  • G.R. No. 132878 September 29, 1998 - PEOPLE OF THE PHIL. v. EDUARDO GUTIERREZ

  • G.R. No. 137793 September 29, 1998 - NILO H. RAYMUNDO v. COURT OF APPEALS, ET AL.

  • G.R. No. 139281 September 29, 1998 - ROMUALDO SUAREZ v. ARSENIO SALAZAR

  • A.M. No. MTJ-99-1209 September 30, 1998 - FLAVIANO G. ARQUERO v. TERTULO A. MENDOZA

  • G.R. No. 105327 September 30, 1998 - PEOPLE OF THE PHIL. v. JUANITO QUINAGORAN

  • G.R. No. 108135-36 September 30, 1998 - POTENCIANA M. EVANGELISTA v. PEOPLE OF THE PHIL. ET AL.

  • G.R. No. 111915 September 30, 1998 - HEIRS OF FERNANDO VINZONS v. COURT OF APPEALS, ET AL.

  • G.R. No. 113070 September 30, 1998 - PAMPIO A. ABARINTOS, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 113781 September 30, 1998 - PEOPLE OF THE PHIL v. VERGILIO REYES

  • G.R. No. 120235 September 30, 1998 - PEOPLE OF THE PHIL. v. ALEX DE LOS SANTOS

  • G.R. No. 121324 September 30, 1998 - PEPSI-COLA PRODUCTS PHIL INC. v. NLRC, ET AL.

  • G.R. No. 122269 September 30, 1998 - REPUBLIC OF THE PHIL. v. COURT OF APPEALS, Et. Al.

  • G.R. Nos. 127173-74 September 30, 1998 - PEOPLE OF THE PHIL. v. FRENETO CERVETO

  • G.R. No. 127608 September 30, 1998 - GUADALUPE S. REYES v. COURT OF APPEALS, ET AL.

  • G.R. No. 128129 September 30, 1998 - PEOPLE OF THE PHIL. v. TUNDAGUI GAYOMMA

  • G.R. No. 128862 September 30, 1998 - ESTRELLA REAL ESTATE CORP. v. COURT OF APPEALS, ET AL.

  • G.R. No. 130425 September 30, 1998 - ANTONIO C. CAÑETE JR. v. NLRC, ET AL.

  • G.R. No. 131166 September 30, 1998 - CALTEX (PHIL.) v. SULPICIO LINES, ET AL.

  • G.R. No. 132480 September 30, 1998 - PEOPLE OF THE PHIL. v. RANDY RAQUIÑO

  • G.R. No. 135451 September 30, 1998 - PEOPLE OF THE PHIL. v. DANILO F. SERRANO, SR.

  • G.R. No. 135996 September 30, 1998 - EMILIANO R. "BOY" CARUNCHO III v. COMELEC, ET AL.