G.R. No. L-37120, 20 April 1983


Sometime in September 1972, respondent entered into a contract with the U.S. Navy Exchange, Subic Bay, Philippines, for the operation of a fleet of taxicabs, each taxicab to be provided with the necessary taximeter and a radio transceiver. Isidro Q. Aligada, acting as an agent, approached the petitioner in behalf of the respondent and proposed to import from Japan thru the plaintiff herein or thru plaintiff’s Japanese business associates, all taximeters and radio transceivers needed by the defendant. Petitioner was able to import the same and a firm offer, in written form, was made by Aligada. Petitioner received notice of the fact that the defendant accepted plaintiff’s offer to sell to the defendant the items specified as well as the terms and conditions of said offer. After petitioner received advice from the defendant as to the radio frequency to be assigned by the proper authorities to the defendant, petitioner requested a letter of credit from the defendant, a normal business practice in case of foreign importation. Petitioner was repeatedly assured by Aligada and respondent of the latter’s financial capabilities to pay and refused to open a letter of credit. Thereafter, petitioner found out that defendant had already been operating his taxicabs without the required radio transceivers. And when pressed by the U.S. Navy to comply, defendant blamed petitioner, claiming the latter was in delay. Petitioner sent a letter to the defendant ascertaining his intention to fulfill his end of the bargain but he did not reply. In view of defendant’s failure to fulfill his contractual obligations with the petitioner, the petitioner filed a case against the defendant for breach of contract and damages.

Respondent filed a motion to dismiss alleging a lack of cause of action. He contended that plaintiff was merely anticipating his loss or damage which might result from the alleged failure of defendant to comply with the terms of the alleged contract. Plaintiff’s right therefore under his cause of action is not yet fixed or vested. Respondent Judge in this case dismissed the complaint.


Whether or not the respondent is guilty for breach of contract.


Yes. The Court contends that the parties, both businessmen, entered into the aforesaid contract with the evident intention of deriving some profits therefrom. Upon breach of the contract by either of them, the other would necessarily suffer loss of his expected profits. Since the loss comes into being at the very moment of breach, such loss is real, “fixed and vested” and, therefore, recoverable under the law.

Article 1170 of the Civil Code provides:

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

The phrase “in any manner contravene the tenor” of the obligation includes any illicit act or omission which impairs the strict and faithful fulfillment of the obligation and every kind of defective performance. The damages which the obligor is liable for includes not only the value of the loss suffered by the obligee [daño emergente] but also the profits which the latter failed to obtain [lucro cesante]. If the obligor acted in good faith, he shall be liable for those damages that are the natural and probable consequences of the breach of the obligation and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted; and in case of fraud, bad faith, malice or wanton attitude, he shall be liable for all damages which may be reasonably attributed to the non-performance of the obligation. The same is true with respect to moral and exemplary damages. The applicable legal provisions on the matter, Articles 2220 and 2232 of the Civil Code, allow the award of such damages in breaches of contract where the defendant acted in bad faith.

 * Case digest by Suzeyne Garcia, LLB-1, Andres Bonifacio Law School, SY 2017-2018