Aerospace Chemical Industries v. Court Of Appeals

QUISUMBING, J.:

This petition for review assails the Decision1 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: 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 rest of the sulfuric acid on the designated date.

Costs against plaintiff-appellee.2 As gleaned from the records, the following are the antecedents: 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 contract3 was in letter-form as follows: 27 June 1986 AEROSPACE INDUSTRIES INC. 203 E. Fernandez St.

San Juan, Metro Manila Attention: Mr. Melecio Hernandez Manager Subject : Sulfuric Acid Shipment Gentlemen: This is to confirm our agreement to supply your Sulfuric Acid requirement under the following terms and conditions: A. Commodity : Sulfuric Acid in Bulk B. Concentration : 98-99% H2SO4 C. Quantity : 500 MT-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. Load port : 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 : AEROSPACE INDUSTRIES, INC. Signed: Mr. Melecio Hernandez Manager 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 letter4 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.

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 letter5 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.1âwphi1.nêt 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: January 26,1987 x x x x x x 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 load port - 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.8 Petitioner's letter9 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 letter10 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 that: 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.12 x x x x x x 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 replied: Subject: Sulfuric Acid Ex-Isabel Gentlemen: 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 below: 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