SAN FERNANDO REGALA TRADING, INC.

, Petitioner,
vs.
CARGILL PHILIPPINES, INC., Respondent.

x-----------------------x

G.R. No. 178042

CARGILL PHILIPPINES, INC., Petitioner,

vs.
SAN FERNANDO REGALA TRADING, INC., Respondent.

G.R. No. 178008 | October 9, 2013

Abad, J.:
Digest Author: Jude Fanila

Topic: C. Damages - Who may Recover – Juridical Persons

Case Summary: Parties entered into a contract whereby petitioner, San Fernando would buy
molasses from Cargill with a specified date and place of delivery. Cargill defaulted which led to
a complaint for breach of contract. RTC awarded moral and exemplary damages.

SC modified earlier decision, deleted moral and exemplary damages. Moral damages can only be
claimed by corporations when it enjoys a good reputation that has been besmirched by the acts of
the defendant.

Petitioners: San Fernando Regala Trading, Inc. - Buyer

Respondents: Cargill Philippines, Inc. – Seller

Doctrines Involved: Moral Damages – As a rule, moral damages are not awarded to a
corporation unless it enjoyed good reputation that was debased and besmirched by the actuations
of the offender.

FACTS:
1. Parties, Cargill and San Fernando were cane molasses traders that did business with each
other.
2. July 15 1996 – Parties entered into a contract of sale (5026) whereby Cargill sold to San
Fernando the following:
a. 4,000 tons of Molasses – P3,9500 per mt (metric ton yata to??).
b. Delivery to be within April – May 1997, at the wharf of Ajinomoto in Pasig,
Manila.
3. Subsequently, parties executed another contract of sale (5047) covering the following:
a. 5,000 mt of molasses – P2,7500 per mt.
 b. Delivery within Oct-Dec 1996 – because San Fernando had a deal with
Ajinomoto for the supply of molasses.
4. Cargill alleged that it offered to deliver the 4k tons within said months but, San Fernando
accepted only 951 mt.
a. Oct-Dec 1996 – Cargill attempted to deliver molasses under contract 5047 but
San Fernando refused to accept delivery. Cargill suffered damages in P360k due
to unrealized profits in addition to costs for demurrage.
b. April 2 1997 – Barge that carried 1,174 mt of molasses arrived at the wharf but
was refused by San Fernando. Barge had to say at the wharf for 71 days. Due to
the stay, Cargill was charged P920k in demurrage fees + P3.48M in damages due
to unrealized profits as it had to sell the cargo to another buyer at a loss.
5. CASE TRAIL:
o RTC – Cargill filed a complaint for money sums and damages against San Fernando
before the RTC of Makati. Alleged that San Fernando refused to accept delivery
because Ajinomoto’s storage tanks were full and that the barge had to stay at the
wharf for around 70 days, waiting for San Fernando’s unloading order. 1
a. Decision: DISMISSED Cargill’s complaint, finding that during that time
period San Fernando kept receiving molasses from other suppliers. Because
San Fernando had an obligation to deliver to Ajinomoto it would have been
improbably that it would have refused delivery from Cargill.
i. Also found that Cargill defaulted, failed to deliver during the 1996
period as evidenced by a letter in which it requested for an adjustment
of the period to 1997 with San Fernando.
b. Cargill’s failure to deliver led to San Fernando defaulting in its obligation
towards Ajinomoto. Therefore, RTC awarded San Fernando the following
claims:
i. unrealized profits,₱500,000.00 in moral damages, another ₱500,000.00
in exemplary damages, attorney’s fees of ₱1,000,000.00, and
₱500,000.00 as cost of litigation.
o CA Decision – MODIFIED RTC Decision.
a. Partial Performance - Cargill was not entirely in breach of Contract 5026 as it
made an advance delivery of 951 mt in March 1997 and that San Fernando
refused to accept delivery from the barge which contained 1,174 mt of
molasses on April 2 1997.
i. Liability of San Fernando - Because San Fernando refused to accept
delivery, it was liable to Cargill for P892k in demurrage fees.
b. Liability of Cargill – breach in contract 5047 as San Fernando did not agree to
move the delivery period.
c. Awards - P11M in unrealized profits | deleted moral and exemplary damages
as no bad faith on the part of Cargill. | also deleted attorney’s fees and
litigation costs.
6. Led to current appeal.

1
This was based off of testimony from the barge staff and Cargill’s employee
ARGUMENTS BEFORE THE SUPREME COURT:
 Petitioner’s Argument related to Doctrine:
 Respondent’s Argument related to Doctrine:

ISSUES + HELD:

1. W/N Cargill was in breach of Contract 5026 (1997 delivery)? – YES

a. Partial performance – Cargill delivered 951 mt. Also delivered 1,174 mt which
San Fernando refused to accept. These amounted to a total of P2,451,405 in
unrealized profit after deducting the value recovered by Cargill after it sold the
molasses to another buyer.
b. Liability to San Fernando –Cargill failed to deliver the remaining balance of
1,875 mt as it had only delivered a total of 2,125mt out of the agreed amount of
4,000 mt. Therefore, it was still liable for an amount of P2,531,250 representing
unrealized profits.
i. Defense of refusal to accept – Insufficient that a seller shows that he is
capable of making delivery, they have to actually deliver the goods to
discharge their obligations. A stipulation that designates time, place and
manner of delivery must be strictly complied with.
ii. Delivery – Therefore, there is only delivery when the seller places the
thing at the buyer’s control and possession at the agreed place of delivery.
Cargill failed to present any evidence that it delivered the remaining
amount to the Ajinomoto wharf.
2. W/N Cargill was in breach of contract 5047 (1996 delivery)? – YES
a. Letter – letter by Cargill addressed to San Fernando dated May 14 1997
requesting that the delivery period be adjusted established that it was already in
default as San Fernando refused to accept the request. San Fernando had good
reason to deny request, as it entered into contract in order to delivery to
Ajinomoto the molasses it would have received.
b. Demand – San Fernando’s lack of written demand unnecessary as the contract
already specified the date and place of delivery i.e. Oct-December 1996,
Ajinomoto wharf.
c. Liability – P11M, representing unrealized profits.
3. W/N award of damages and costs proper? – NO
a. Moral Damages – As a rule, moral damages are not awarded to a corporation
unless it enjoyed good reputation that was debased and besmirched by the
actuations of the offender. Similarly, as a rule moral damages are not recoverable
for breach in culpa contractual unless bad faith has been proved.
i. San Fernando failed to prove either circumstance.
b. Exemplary Damages – In culpa contractual, exemplary damages are awarded only
when the defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.
i. Again, San Fernando failed to prove this.
c. Attorney’s’ fees and litigation costs – Under NCC 2208 such fees are awarded
only when there is an award of exemplary damages. Because no such award was
given, award of fees and costs improper.
RULING:

WHEREFORE, the Court PARTIALLY GRANTS the petitions and MODIFIES the Court of
Appeals Decision on January 19, 2007 in CA-G.R.CV 81993 as follows:

1. San Fernando Regala Trading, Inc. is ORDERED to pay Cargill Philippines, Inc. (a)
₱892,732.50 representing the demurrage that the latter incurred and (b) ₱2,451,405.59
representing its unrealized profit on the rejected delivery of 1,174 mt of molasses, both
under Contract 5026, for a total of ₱3,344,138.09, with interest at 6% per annum
computed from the date of the filing of the complaint until the same is fully paid; and

2. Cargill Philippines, Inc. is ORDERED to pay San Fernando Regala Trading, Inc. the
latter’s unrealized profits of ₱2,531,250.00 for the breach of Contract 5026 and
₱11,000,000.00 for the breach of Contract 5047, for a total of P 13,531,250.00, with
interest at 6% per annum computed from the date of the tiling of the answer with
counterclaim until the same is fully paid.

The Court of Appeals' deletion of the awards of moral and exemplary damages, attorney's fees,
and costs of litigation stands.

SO ORDERED.

DISSENT:

NOTES: