G.R. No. 115117 ; June 8, 2000
INTEGRATED PACKAGING CORP., petitioner, vs. COURT OF APPEALS and FIL-ANCHOR PAPER CO., INC., respondents.

FACTS

Petitioner Integrated Packaging Corp. and private respondent Fil-Anchor Paper Co., Inc. executed an order agreement in May 1978 for the delivery of printing paper on a scheduled basis, with payment terms of 30 to 90 days from delivery. Fil-Anchor made partial deliveries. Subsequently, petitioner entered into a separate printing contract with Philippine Appliance Corporation (Philacor). Fil-Anchor later made additional deliveries of paper from June 1980 to July 1981, for which petitioner incurred an unpaid account. After formal demand, Fil-Anchor filed a collection suit for the unpaid purchases amounting to P763,101.70.
In its defense, petitioner counterclaimed for damages, alleging that Fil-Anchor’s failure to deliver the complete balance of paper under the 1978 agreement caused petitioner to breach its contract with Philacor, resulting in unrealized profits and business dislocation. The Regional Trial Court ruled in favor of Fil-Anchor for the unpaid amount but also awarded petitioner compensatory and moral damages on its counterclaim. The Court of Appeals reversed the trial court’s award of damages, ordering petitioner to pay only the principal sum with interest, and deleting all damages awarded to petitioner.

ISSUE

Whether the Court of Appeals erred in holding that private respondent did not violate the order agreement and is not liable for petitioner’s breach of contract with Philacor, thereby deleting the award of damages to petitioner.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic is anchored on the nature of the parties’ agreement and the requisite proof for damages. The 1978 order agreement was a contract of sale, not a contract to sell, where ownership of the goods passed to the buyer upon delivery. Fil-Anchor’s obligation was to deliver the paper as ordered, not to continuously supply without demand. The evidence showed petitioner did not place further orders for the undelivered balance after the initial partial deliveries; thus, Fil-Anchor committed no breach. Consequently, Fil-Anchor cannot be held liable for petitioner’s subsequent separate breach of its Philacor contracts, which were entered into even after the filing of the collection suit.
On the claim for damages, compensatory damages for unrealized profits must be proven with reasonable certainty. The trial court’s award was based merely on petitioner’s speculative estimates, which are insufficient as competent proof. Since no breach by Fil-Anchor was established, the basis for moral damages, which requires bad faith or gross negligence in contractual breach, is absent. The deletion of attorney’s fees follows the elimination of the award for moral damages. Therefore, the appellate court correctly limited petitioner’s liability to the unpaid purchase price.