Monday, May 17, 2010

Lorenzo Shipping, Inc. vs BJ Marthel Intl, Inc.

Chester Cabalza recommends his visitors to please read the original & full text of the case cited. Xie xie!

Lorenzo Shipping, Inc. vs BJ Marthel Intl, Inc.
G.R. No. 145483
November 19, 2004


Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping. It used to own the cargo vessel M/V Dadiangas Express.
Upon the other hand, respondent BJ Marthel International, Inc. is a business entity engaged in trading, marketing, and selling of various industrial commodities. It is also an importer and distributor of different brands of engines and spare parts.
From 1987 onwards, respondent supplied petitioner with spare parts for the latter's marine engines. Sometime in 1989, petitioner asked respondent for a quotation for various machine parts. Acceding to this request, respondent furnished petitioner with a formal quotation. It was stipulated in the contract that DELIVERY is within 2 months after receipt of firm order. The TERMS is 25% upon delivery, balance payable in 5 bi-monthly equal and Installment[s] not to exceed 90 days.

Petitioner thereafter issued to respondent Purchase Order. For the procurement of one set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express. Instead of paying the 25% down payment for the first cylinder liner, petitioner issued in favor of respondent ten postdated checks to be drawn against the former's account with Allied Banking Corporation. The checks were supposed to represent the full payment of the aforementioned cylinder liner.

Subsequently, petitioner issued Purchase Order dated 15 January 1990, for yet another unit of cylinder liner. This purchase order stated the term of payment to be "25% upon delivery, balance payable in 5 bi-monthly equal installment[s]. On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January 1990, however, the same was dishonored by the drawee bank due to insufficiency of funds. The remaining nine postdated checks were eventually returned by respondent to petitioner.

However, the parties presented disparate accounts of what happened to the check which was previously dishonored. Petitioner claimed that it replaced said check with a good one, the proceeds of which were applied to its other obligation to respondent. For its part, respondent insisted that it returned said postdated check to petitioner.

On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in North Harbor, Manila. The sales invoices evidencing the delivery of the cylinder liners both contain the notation "subject to verification" under which the signature of Eric Go, petitioner's warehouseman, appeared.

Due to the failure of the parties to settle the matter, respondent filed an action for sum of money and damages before the Regional Trial Court (RTC) of Makati City. In its complaint, respondent (plaintiff below) alleged that despite its repeated oral and written demands, petitioner obstinately refused to settle its obligations. Respondent prayed that petitioner be ordered to pay for the value of the cylinder liners plus accrued interest of P111,300 as of May 1991 and additional interest of 14% per annum to be reckoned from June 1991 until the full payment of the principal; attorney's fees; costs of suits; exemplary damages; actual damages; and compensatory damages.

In an Order dated 25 July 1991, the court a quo granted respondent's prayer for the issuance of a preliminary attachment. On 09 August 1991, petitioner filed an Urgent Ex-Parte Motion to Discharge Writ of Attachment attaching thereto a counter-bond as required by the Rules of Court. On even date, the trial court issued an Order lifting the levy on petitioner's properties and the garnishment of its bank accounts.
Petitioner afterwards filed its Answer alleging therein that time was of the essence in the delivery of the cylinder liners and that the delivery on 20 April 1990 of said items was late as respondent committed to deliver said items "within two (2) months after receipt of firm order" from petitioner. Petitioner likewise sought counterclaims for moral damages, exemplary damages, attorney's fees plus appearance fees, and expenses of litigation.

Subsequently, respondent filed a Second Amended Complaint with Preliminary Attachment dated 25 October 1991. The amendment introduced dealt solely with the number of postdated checks issued by petitioner as full payment for the first cylinder liner it ordered from respondent. Whereas in the first amended complaint, only nine postdated checks were involved.


W/N significant the period of time which lapsed in the contract causing the delay in the delivery of the cylinder liners is essential in the decision of the case at bar?


After trial, the court a quo dismissed the action, the decretal portion of the Decision stating: WHEREFORE, the complaint is hereby dismissed, with costs against the plaintiff, which is ordered to pay P50,000.00 to the defendant as and by way of attorney's fees.

The trial court held respondent bound to the quotation it submitted to petitioner particularly with respect to the terms of payment and delivery of the cylinder liners. It also declared that respondent had agreed to the cancellation of the contract of sale when it returned the postdated checks issued by petitioner. Respondent's counterclaims for moral, exemplary, and compensatory damages were dismissed for insufficiency of evidence. Respondent moved for the reconsideration of the trial court's Decision but the motion was denied for lack of merit.

The respondent filed an appeal with the Court of Appeals which reversed and set aside the Decision of the court. The appellate court brushed aside petitioner's claim that time was of the essence in the contract of sale between the parties herein considering the fact that a significant period of time had lapsed between respondent's offer and the issuance by petitioner of its purchase orders. The dispositive portion of the Decision of the appellate court states: WHEREFORE, the decision of the lower court is REVERSED and SET ASIDE. The appellee is hereby ORDERED to pay the appellant the amount of P954,000.00, and accrued interest computed at 14% per annum reckoned from May, 1991.

The Court of Appeals also held that respondent could not have incurred delay in the delivery of cylinder liners as no demand, judicial or extrajudicial, was made by respondent upon petitioner in contravention of the express provision of Article 1169 of the Civil Code which provides: 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.

On 22 May 2000, petitioner filed a motion for reconsideration of the Decision of the Court of Appeals but this was denied through the resolution of 06 October 2000. WHEREFORE, premises considered, the instant Petition for Review on Certiorari is DENIED. The Decision of the Court of Appeals, dated 28 April 2000, and its Resolution, dated 06 October 2000, are hereby AFFIRMED. No costs. SO ORDERED.

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