GR 143788; (September, 2005) (Digest)
G.R. No. 143788. September 9, 2005.
DANFOSS, INC., Petitioner, vs. CONTINENTAL CEMENT CORPORATION, Respondent.
FACTS
Respondent Continental Cement Corporation (CCC) purchased two frequency converters from petitioner Danfoss, Inc., through local dealer Mechatronics Instruments and Controls, Inc. (MINCI). The purchase order stipulated delivery within eight to ten weeks from the opening of a letter of credit, which was opened on September 9, 1997, setting the delivery deadline on November 19, 1997. On November 9, 1997, Danfoss informed MINCI, with a copy to CCC, of production delays due to substandard components from a supplier, but indicated it was canvassing for a new supplier without stating that delivery by the deadline was impossible.
Anticipating non-delivery, CCC cancelled the order on November 13, 1997, and subsequently filed a complaint for damages against Danfoss and MINCI before the Regional Trial Court (RTC). Danfoss moved to dismiss the complaint for lack of cause of action, arguing that the cancellation and filing of the suit occurred six days before the contractual delivery deadline, thus no breach had yet occurred. The RTC denied the motion, a decision affirmed by the Court of Appeals (CA).
ISSUE
Whether the complaint stated a cause of action against petitioner Danfoss, Inc.
RULING
The Supreme Court ruled in the negative and granted the petition, dismissing the complaint. A cause of action requires a clear right of the plaintiff, a correlative obligation of the defendant, and an act or omission by the defendant constituting a violation of that right. At the time CCC filed its complaint, Danfoss’s obligation to deliver was not yet due and demandable, as the contractual delivery period had not expired. The mere fear or anticipation of breach, based on Danfoss’s communication about production problems, did not constitute an actual breach or repudiation. The Court emphasized that Danfoss was still actively seeking alternative suppliers to meet its obligation, and CCC’s premature cancellation and judicial action deprived Danfoss of the full period to perform. Consequently, with no actionable breach alleged to have occurred by November 19, 1997, the complaint failed to state a cause of action and was dismissible on the ground of prematurity. The RTC and CA decisions were reversed and set aside.