G.R. No.

126486 February 9, 1998

Baron’s Marketing Corporation vs. Court of Appeals and Phelps Dodge Phils., Inc.

FACT: in 1973, Phelps Dodge Philippines, Inc. (PDPI) appointed Baron’s Marketing Corporation (BMC) as
one of its dealers of electrical wires and cables. From December 1986 to August 1987, BMC purchased
on credit from PDPI various electrical wires in the total amount of 4,102,438.20. these products were
then sold to Meralco. BMC made a payment of 300,000 leaving the outstanding balance of 3,802,438.20.

On several occasions, PDPI demanded payment of the outstanding balance but BMC requested that the
balance be paid in 8 monthly installments plus 1% monthly interest. However, PDPI rejected the offer
and insist the full payment thereof.

PDPI then filed a complaint for the recovery of the value of the products including interest and damages.
The RTC ruled the petition in favor of PDPI. BMC made an appeal on the grounds that the claims for
damages was a result of creditor’s abuse but the CA has affirmed the ruling of the lower court.

ISSUE: WON PDPI is guilty of abuse of rights

HELD: NO. In article 19 of the civil code, there are 3 elements of abuse of rights to consider, namely (1)
existence of a legal right or duty, (2) exercise of bad faith, and (3) intent of prejudicing or injuring
another. It is an elementary rule that good faith is presumed and that the burden of proving bad faith
rest upon the party alleging the same.

In the instant case, BMC’s allegation that PDPI was motivated by a desire to terminate its agency
relationship so that the latter can directly deal with Meralco was not supported by evidence. Thus, the
court ruled it as mere speculation. On the private respondent’s defense, they have the responsibility to
protect their cash position in order for them to pay their own debts. The creditor-respondent’s right not
to accept partial performance of obligation invoked on the petitioner’s offer to pay in installment was
done in good faith.