DANFOSS, INC., Petitioners, vs. CONTINENTAL CEMENT CORPORATION, Respondent.

G.R. No. 143788 September 9, 2005

FACTS:
Mechatronics Instruments and Controls, Inc. (MINCI) is an agent of Danfoss, Inc.’s products here in the Philippines. On
September 1997, CCC ordered two unit 132 KW Danfoss Brand Frequency Converter/Inverter from MINCI to be used in the
Finish Mill of its Cement Plant in Bulacan. In the terms of conditions of the original purchase order, the two unit Frequency
Converter shall be delivered by Danfoss within 8 to 10 weeks from the opening of the letter of credit. The letter of credit
opened by CCC in favour of Danfoss on September 9, 1997.
On September 17, 1997, MINCI informed CCC that its order are already ready for shipment and MINCI requested to amend
the letter of credit changing the port of origin/loading from Singapore to Denmark (Singapore is the Asian Regional Office of
Danfoss, the Head Office of the company is Denmark). CCC complied and the port of origin in the letter of credit was changed.
On November 6, 1997, MINCI relayed to CCC that Danfoss Inc. was still checking the status of their order. CCC replied that
every delay in the delivery of the order will cause loss to their company, so CCC requested for early work out and immediate
shipment to avoid further loss.
But, on November 9, 1997, Danfoss Inc. informed MINCI through fax, that the reason for the delivery problems was that some
of the supplied components for the new VLT 5000 series (this may be a part of the converter which is the subject thing in this
case or a machine to create the converter) did not meet the agreed quality standard. So, Danfoss was canvassing for another
supplier for the said VLT 5000 series. In the fax, there was no clear message as to when normal production will resume.
Upon receiving the relayed information, CCC surmised that Danfoss would not be able to deliver their order. There was also
no definite commitment of the delivery from Danfoss and MINCI, so CCC informed MINCI that they intend to cancel its order.
The order was cancelled on November 13, 1997.
Hence the complaint for damages filed by CCC with the RTC of Quezon City against Danfoss and MINCI on November 5,
1998. In reply, Danfoss filed a motion to dismiss the complaint.
CCC’s contention : Due to the “impending” delay in the delivery of its order, it suffered more than P8 million and was compelled to look
for another supplier.
Danfoss’s contention: The case should be dismissed on the ground that it did not state a cause of action.
1) The letter of credit was opened on September 9, 1997, so, since the agreed delivery period is 8 to 10 weeks from the opening of
the letter of credit, the due date is until November 19, 1997.
2) Although Danfoss was having a problem with its supplier prior to CCC’s cancellation of its order, CCC only surmised that Danfoss
could not deliver within the due date agreed upon.
3) Neither Danfoss nor CCC agreed to change the date of delivery. Only the port of origin was changed in the letter of credit. Danfoss
has until November 19, 1997 to deliver the order, CCC cancelled the order on November 13, 1997.
4) CCC never made an extrajudicial demand for the delivery of its order on its due date as it cancelled the order before the due date.
5) Damages sought for by CCC could not have accrued yet since the order was cancelled before the delivery was actually delayed.

1. RTC ruled in favor of CCC. According to the RTC: “...the issue of whether or not the defendants incur delay in the delivery of
the equipment in question within the period stipulated is a debatable question which necessitates actual trial on the merits
where the parties have to adduce evidence in support of their respective stance.
2. CA: Affirmed the decision of the RTC and denied the Motion for Reconsideration of Danfoss.

ISSUE: WON there was a cause of action in the complaint filed by CCC against Danfoss

HELD: No, there was no cause of action in the complaint for damages filed by CCC.
SC ruled that “In order to sustain a dismissal on the ground of lack of cause of action, the insufficiency must appear on the face of the
complaint. And the test of the sufficiency of the facts alleged in the complaint to constitute a cause of action is whether or not, admitting
the facts alleged, the court can render a valid judgment thereon in accordance with the prayer of the complaint. For this purpose, the
motion to dismiss must hypothetically admit the truth of the facts alleged in the complaint.”

After a careful perusal of the allegations in respondent’s complaint for damages against petitioner, we rule that the same failed to state
a cause of action. When respondent sued petitioner for damages, petitioner had not violated any right of respondent from which a
cause of action had arisen. Respondent only surmised that petitioner would not be able to deliver the two units frequency
converter/inverter on the date agreed upon by them. Based on this apprehension, it cancelled its order six days prior to the agreed date
of delivery. How could respondent hold petitioner liable for damages (1) when petitioner had not yet breached its obligation to deliver
the goods and (2) after respondent made it impossible for petitioner to deliver them by cancelling its order even before the agreed
delivery date?

The trial court erred in ruling that the issue of whether or not the defendants incurred delay in the delivery of the equipment within the
period stipulated was a debatable question. It said that trial on the merits was necessary and the parties had to adduce evidence in
support of their respective positions.8 But what was there to argue about when, based on the allegations of the complaint, petitioner
was not yet due to deliver the two units frequency converter/inverter when respondent cancelled its order? It still had six days within
which to comply with its obligation. The court a quo should not have denied petitioner’s motion to dismiss the complaint (for its failure to
state a cause of action) when, on its face, it was clear that petitioner had not yet reneged on its obligation to deliver the frequency
converter/inverter on the date mutually agreed upon by the parties. Moreover, the obligation itself was negated by no less than
respondent’s own act of cancelling its order even before the prestation became due and demandable. Where therefore was the breach?
Where was the damage caused by petitioner? There was none.
Consequently, it was wrong for the CA to affirm the order of the trial court denying petitioner’s motion to dismiss the complaint for its
failure to state a cause of action.
The principle of anticipatory breach enunciated in Blossom & Company, Inc. v. Manila Gas Corporation does not apply here. In that
case, Blossom & Company, Inc. entered into a contract with Manila Gas Corporation for the sale and delivery of water gas and coal gas
tar at stipulated prices for a period of four years. On the second year of the contract, Manila Gas willfully and deliberately refused to
deliver any coal and water gas tar to Blossom and Company, Inc. because it was asking for a higher price than what had been
previously stipulated by them. The price of its tar products had gone up. We held that:

even if the contract is divisible in its performance and the future periodic deliveries are not yet due, if the obligor has already manifested
his refusal to comply with his future periodic obligations, the contract is entire and the breach total, hence, there can only be one action
for damages.

Thus, the principle contemplates future periodic deliveries and a willful refusal to comply therewith. Here, the obligation was single and
indivisible to deliver two units of frequency converter/inverter by November 19, 1997. The records do not show that petitioner refused to
deliver the goods on the date agreed upon. On the contrary, petitioner exerted efforts to make good its obligation by looking for other
suppliers who could provide it the parts needed to make timely delivery of the frequency converter/inverter ordered by respondent.
The premature invocation of the courts intervention was fatal to respondents cause of action. Hence, the dismissal of respondents
complaint was in order.

LUI v ZUELLIG

Facts:

Lui Enterprises, Inc. and Zuellig Pharma Corporation entered into a 10-year contract of lease over a parcel of land located in Barrio
Tigatto, Buhangin, Davao City.

Zuellig Pharma, the lessee over the parcel of land, received a letter from the Philippine Bank of Communications. Claiming to be the
new owner of the leased property, the bank asked Zuellig Pharma to pay rent directly to it.

Zuellig Pharma promptly informed Lui Enterprises of the Philippine Bank of Communications’ claim. As a reply, Lui Enterprises wrote to
Zuellig Pharma and insisted on its right to collect the leased property’s rent

Due to conflicting claims, Zuellig Pharma filed a case for interpleader to compel Lui Enterprises and Philippine Bank of Communications
to litigate their conflicting claims on who should be the one entitled to payment of monthly rents. Meanwhile, Zuellig asked the courts to
tender and consign monthly rents while the case is ongoing.

The Philippine Bank of Communications filed its answer to the complaint. On the other hand, Lui Enterprises filed a motion to dismiss
on the ground that Zuellig Pharma’s alleged representative did not have authority to file the complaint for interpleader on behalf of the
corporation

Zuellig Pharma filed its opposition to the motion to dismiss of Lui Enterprises. It argued that the motion to dismiss should be denied for
having been filed late. A motion to dismiss should be filed within the required time given to file an answer to the complaint, which is 15
days from service of summons on the defendant.23 Summons was served on Lui Enterprises on July 4, 2003. It had until July 19, 2003
to file a motion to dismiss, but Lui Enterprises filed the motion only on July 23, 2003.
RTC Makati found Lui Enterprises to be declared in default for failure to file the motion to dismiss within the reglementary period. Then,
the court proceeded to hear the case without Lui Enterprises’ participation.

CA sustained the denial of admission of the motion to dismiss.

Petitioner now contends that the lower courts should have admitted the motion to dismiss since the very purpose of an interpleader is to
litigate who is entitled to the monthly rent. By declaring them in default, it defeated the very purpose of the suit for interpleader

Issue: W/N the a party may be declared in default in an interpleader case

Held: Yes.

Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a person may file a special civil action for interpleader if conflicting
claims are made against him or her over a subject matter in which he or she has no interest. This remedy is for the lessee to protect
him or her from „double vexation in respect of one liability. A lessee may file an interpleader case to extinguish his or her obligation to
pay rent, remove him or her from the adverse claimants’ dispute, and compel the parties with conflicting claims to litigate among
themselves.

In this case, Zuellig Pharma filed the interpleader case to extinguish its obligation to pay rent. Its purpose in filing the interpleader case
was not defeated when the Makati trial court declared Lui Enterprises in default.

An adverse claimant in an interpleader case may be declared in default. Under Rule 62, Section 5 of the 1997 Rules of Civil Procedure,
a claimant who fails to answer within the required period may, on motion, be declared in default. The consequence of the default is that
the court may render judgment barring [the defaulted claimant] from any claim in respect to the subject matter.

The Rules would not have allowed claimants in interpleader cases to be declared in default if it would ironically defeat the very purpose
of the suit.
Since Lui Enterprises failed to file its motion to dismiss within the prescribed period, Makati RTC correctly declared them in default.

Spouses Manuel vs Ong

Respondent Ramon Ong (Ong) filed with the Regional Trial Court of La Trinidad, Benguet a complaint for accion reivindicatoria. Ong
charged the Spouses Manuel with having constructed improvements — through force, intimidation, strategy, threats, and stealth — on a
property he supposedly owned. Ong filed with the Regional Trial Court a motion to declare the Spouses Manuel in default.
Sheriff Joselito Sales attempted to personally serve summons on the Spouses Manuel at their address in Lower Bacong, Loacan,
Itogon, Benguet.
Spouses Manuel, however, requested that service be made at another time considering that petitioner Sandra Manuel's mother was
then critically ill.
Sheriff Sales made another attempt at personal service to petitioner Sandra Manuel but she refused to sign and receive the summons
and the complaint. Sheriff Sales was thus prompted to merely tender the summons.
As the Spouses Manuel failed to file their answer within the required 15-day period, Ong asked that they be declared in default.
RTC issued an order granting Ong's motion to declare the Spouses Manuel in default. RTC also granted motion for ex parte
presentation of evidence.
Spouses Manuel filed a motion to lift the order of default. They claimed that it is the siblings of petitioner Sandra Manuel who resided in
Lower Bacong, Itogon, Benguet so summons could not have been properly served on them in the former address. RTC denied motion
to lift order of default.

Issue : W/N jurisdiction over their person was acquired? YES.

W/N the Spouses Manuel may be granted relief from the order of default? NO.
Ratio:
Issue #1:
Jurisdiction over the persons of both defendants was validly acquired because personal service of summons, via tender to petitioner
Sandra Manuel, was made by Sheriff Joselito Sales. The sheriff’s return on summons indicated that Sheriff Joselito Sales endeavored
to personally hand the summons and a copy of the complaint to the Spouses Manuel on two (2) separate occasions.
The Spouses Manuel did not deny the occurrence of the events narrated in the sheriff’s return but claimed that no valid service of
summons was made. The Spouses Manuel cannot capitalize on the supposed variance of address. Personal service of summons has
nothing to do with the location where summons is served. A defendant’s address is inconsequential.
Topical: the Spouses Manuel’s self-serving assertion must crumble in the face of the clear declarations in the sheriff’s return. The acts
of Sheriff Joselito Sales and the events relating to the attempt to personally hand the summons and a copy of the complaint to the
Spouses Manuel, as detailed in the sheriff’s return, enjoy the presumption of regularity. Moreover, Sheriff Joselito Sales must be
presumed to have taken ordinary care and diligence in carrying out his duty to make service upon the proper person(s) and not upon an
impostor.
A sheriff’s return, if complete on its face, must be accorded the presumption of regularity and, hence, taken to be an accurate and
exhaustive recital of the circumstances relating to the steps undertaken by a sheriff. In this case, the Spouses Manuel have harped on
their (self-serving) claim of maintaining residence elsewhere but failed to even allege that there was anything irregular about the
sheriff’s return or that it was otherwise incomplete.

Issue #2: The requisites for declaring a party in default were satisfied by respondent Ong.
1) the claiming party must file a motion asking the court to declare the defending party in default;
2) the defending party must be notified of the motion to declare him in default;
3) the claiming party must prove that the defending party has failed to answer within the period provided by the Rule."
It is not disputed that Ong filed a motion to declare the Spouses Manuel in default. It is also not disputed that the latter filed their answer
after the fifteen-day period had lapsed. It is similarly settled that the Spouses Manuel were notified that a motion to declare them in
default had been filed.
Not only were the requisites for declaring a party in default satisfied, the Spouses Manuel’s motion to lift order of default was also
shown to be procedurally infirm. To lift the order of default, there are 3 requirements:
1.) the motion to lift order of default
2.) an affidavit showing the invoked ground - fraud, accident, mistake or excusable negligence
3.) the party's meritorious defense or defenses

In this case, the Court of Appeals noted that the Spouses Manuel’s motion to lift order of default was not made under oath. We add that
this motion was not accompanied by an affidavit of merit specifying the facts which would show that their non-filing of an answer within
fifteen (15) days from March 16, 2010 was due to fraud, accident, mistake, or excusable negligence.
Failing both in making their motion under oath and in attaching an affidavit of merits, the Spouses Manuel’s motion to lift order of default
must be deemed pro-forma. It is not even worthy of consideration