Laws Applicable: Article 1583 of the Civil Code
FACTS:
- May 5, 1978: Integrated Packaging Corp agreed to deliver to Fil-anchor paper co., inc. 3,450 reams of printing paper. Materials were to be paid within 30-90 days
- June 7, 1978: Integrated entered into a contract with Philippine Appliance Corporation (Philacor) to print three volumes of "Philacor Cultural Books"
- July 30, 1979: only 1,097 out of the 3,450 had been delivered so it wrote to Fil-anchor that delay will prejudice them
- July 23, 1981: Fil-anchor delivered amounting to P766,101.70 of printing paper
- August 27, 1981: Integrated paid P97,200.00 which was applied to its back accounts covered by delivery invoices dated September 29-30, 1980 and October 1-2, 1980
- Integrated entered into an additional printing contract with Philacor but it failed to comply so Philacor demanded compensation for the delay and damage it suffered on account of Integrated's failure
- Fil-anchor filed a collection suit of P766,101.70 against Integrated representing unpaid purchase price of printing paper bought on credit
- By way of counterclaim, Fil-anchor alleged the delivery was short of 2,875 reams so it suffered actual damages and failed to realize expected profits and that complaint was prematurely filed
- RTC: Integrated ordered to pay Fil-anchor P27,222.60 as compensatory and actual damages after deducting P763,101.70 for the value of materials received, P100K as moral damages, P30K for attorney's fees and cost of suit. However, the counterclaim is also meritorious - Integrated could have sold books to Philacor and realized profit of P790,324.30 for which the award of moral damages was justified
- CA: reversed and set aside the judgment of the trial court ordered to pay Fil-anchor P763,101.70 for unpaid printing paper and deleted the award of P790,324.30 as compensatory damages as well as the award of moral damages and attorney's fees, for lack of factual and legal basis
ISSUE: W/N Integrated should be awarded compensatory and moral damages.
HELD: YES. CA affirmed
- suspension of its deliveries to Integrated whenever the latter failed to pay on time, as in this case, is legally justified under the second paragraph of Article 1583 of the Civil Code hence the Fil-anchor did not violate the order agreement
- Fil-anchor is not a party to the agreement between Philacor neither is it a contract pour autrui so no direct bearing
- indemnification for damages comprehends not only the loss suffered, that is to say actual damages (damnum emergens), but also profits which the obligee failed to obtain, referred to as compensatory damages (lucrum cessans). However, to justify a grant of actual or compensatory damages, it is necessary to prove with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party, the actual amount of loss.
- trial court in arriving at the amount are mere estimates or self-serving claim of unrealized profitprepared by Integrated
- deletion of the award of moral damages is proper, since private respondent could not be held liable for breach of contract. Moral damages may be awarded when in a breach of contract the defendant acted in bad faith, or was guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligation. Finally, since the award of moral damages is eliminated, so must the award for attorney's fees be also deleted.
