G.R. No. 170134, June 17, 2015
ANGEL V. TALAMPAS, JR., Petitioner, vs. MOLDEX REALTY, INC., Respondent.

FACTS

Petitioner Angel V. Talampas, Jr., owner of AVTJ Construction, entered into a contract with respondent Moldex Realty, Inc. on December 16, 1992, to develop a residential subdivision (Metrogate Silang Estates) for a contract price of ₱10,500,000.00. Work commenced on January 14, 1993. On May 14, 1993, the project manager requested a one-week suspension due to a change in plans, which lasted three weeks. On June 16, 1993, petitioner received an antedated letter from respondent dated April 23, 1993, stating the decision to terminate the contract “due to a business decision.” Petitioner, in a letter dated June 15, 1993, had requested an official termination letter to demobilize equipment. On August 18, 1993, petitioner demanded payment for equipment rentals during the suspension and for unrealized profits due to early termination. Respondent refused. Petitioner filed a complaint for breach of contract and damages, alleging unilateral termination and fraud for non-disclosure of the project’s lack of a DAR conversion clearance. The Regional Trial Court (RTC) found respondent liable for breach and fraud, awarding damages. The Court of Appeals (CA) reversed, dismissing the complaint for lack of cause of action, finding the termination was by mutual agreement based on petitioner’s June 15, 1993 letter, and that fraud was not proven.

ISSUE

1. Whether the contract was unilaterally terminated by respondent without justifiable cause or by mutual agreement.
2. Whether the lack of a DAR conversion clearance, allegedly not disclosed, constituted fraud and was the true reason for termination.
3. Whether respondent had a responsibility to disclose the lack of conversion clearance prior to the contract.
4. Whether the contract was an integrated whole or divisible.
5. Whether petitioner is entitled to damages.

RULING

The Supreme Court granted the petition, reversed the CA decision, and reinstated the RTC decision with modifications.
1. The contract was unilaterally terminated by respondent without justifiable cause. The April 23, 1993 termination letter was a positive act of rescission. Petitioner’s June 15, 1993 letter merely sought official documentation to demobilize and did not constitute consent to termination. The grounds for termination under the contract were specific, and “business decision” or “redesign” was not among them.
2. Fraud was not proven. The duty to secure DAR conversion clearance belonged to respondent, but failure to obtain it at the time of contract execution did not in itself amount to fraud, especially since it was eventually obtained. Fraud must be established by clear and convincing evidence, which was lacking. The reason for termination stated was “business decision.”
3. Respondent had the obligation to secure the conversion clearance, but non-disclosure prior to the contract did not constitute fraud or bad faith on the facts presented.
4. The contract was an integrated whole, not divisible. The obligation to complete the project was indivisible.
5. Petitioner is entitled to damages, but the awards were modified.
a. Equipment rentals (₱1,485,000.00): Awarded. Respondent’s suspension of work constituted breach, making it liable for expenses incurred due to idled equipment.
b. Unrealized profits (₱2,100,000.00): Not awarded. Lost profits must be proven with reasonable certainty, which petitioner failed to do. The claim was based on a mere percentage of the contract price without substantiation.
c. Moral damages (₱300,000.00) and Exemplary damages (₱150,000.00): Deleted. These damages require proof of bad faith or wanton conduct, which was not present.
d. Attorney’s fees: Awarded. Petitioner was compelled to litigate to protect his interest due to respondent’s breach.
e. Costs of suit: Awarded.