GR 119729; (January, 1997) (Digest)
G.R. No. 119729 . January 21, 1997. ACE-AGRO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS and COSMOS BOTTLING CORPORATION, respondents.
FACTS:
Petitioner Ace-Agro Development Corporation and private respondent Cosmos Bottling Corporation entered into a service contract for the cleaning of bottles and repair of wooden shells, renewable annually. A fire on April 25, 1990, destroyed the area within Cosmos’s plant where Ace-Agro performed its work. On May 15, 1990, Cosmos terminated the contract, citing the destruction of the bottles and shells. Ace-Agro requested reconsideration to resume work and cushion worker unemployment.
On August 28, 1990, Cosmos offered to allow Ace-Agro to resume repairing wooden shells, but required the work be done outside company premises. Ace-Agro refused, claiming external work would incur prohibitive transportation costs. Subsequently, on November 7, 1990, after reconstruction, Cosmos formally offered Ace-Agro to resume all contracted services inside the plant. Ace-Agro rejected this offer, citing a pending labor case filed by its dismissed workers. Ace-Agro then sued for damages from the alleged breach.
ISSUE
Whether private respondent Cosmos Bottling Corporation is liable for breach of contract for terminating the service agreement after the fire and for the subsequent offers of resumption that were rejected by petitioner.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals, ruling that Cosmos did not commit a breach of contract. The termination of the contract was due to a fortuitous event—the fire—which rendered the specific subject matter (the workplace area and the bottles/shells) impossible to use, thereby temporarily extinguishing the obligation under Article 1267 of the Civil Code. Cosmos acted in good faith and without delay in offering to reinstate the contract.
The legal logic is that when the fire made performance impossible, the obligation was suspended. Cosmos’s initial offer for external work was a reasonable alternative under the circumstances. Its subsequent November 7 offer to resume work inside the plant was a valid and complete reinstatement of the original contract terms. Petitioner’s refusal to accept this full reinstatement, based on extraneous reasons like a pending labor case, was unreasonable and constituted a waiver of its rights under the contract. Since Cosmos was blameless and ready to perform after the fortuitous event ceased, no actionable breach occurred. The cause of action for damages therefore lacks merit.