GR 192797; (April, 2018) (Digest)
G.R. No. 192797 APRIL 18, 2018
EXCELLENT ESSENTIALS INTERNATIONAL CORPORATION, Petitioner vs EXTRA EXCEL INTERNATIONAL PHILIPPINES, INC., Respondent
FACTS
The dispute originated from a complaint for injunction and damages filed by E. Excel International, Inc. and its new distributor, petitioner Excellent Essentials, against respondent Extra Excel International Philippines, Inc. (Excel Philippines). Excel Philippines was incorporated pursuant to a 1995 Agreement between E. Excel International and Bright Vision Consultants, Ltd., which granted the to-be-formed company an “irrevocable and exclusive right” to distribute E. Excel products in the Philippines. Subsequently, on August 9, 1996, the parties executed an Exclusive Rights Contract, which reserved E. Excel International’s right to discontinue or alter the agreement at any time.
Following an intra-corporate struggle for control of E. Excel International, its new president revoked the 1996 contract with Excel Philippines on December 1, 2000, and appointed Excellent Essentials as the new exclusive distributor. Excel Philippines refused to cease operations, prompting the lawsuit. Excel Philippines countered that its exclusive right was irrevocable based on the foundational 1995 Agreement, which it claimed was not validly rescinded.
ISSUE
Whether the Court of Appeals erred in reversing the trial court and holding Excel Philippines entitled to damages for the wrongful revocation of its exclusive distributorship.
RULING
The Supreme Court denied the petition and affirmed the CA decision. The legal logic centered on the nature and validity of the 1995 Agreement. The Court held that the 1995 Agreement between E. Excel International and Bright Vision was a contract in favor of a third person (Excel Philippines) under Article 1311 of the Civil Code. A third person can demand its fulfillment provided they communicated their acceptance to the obligor before its revocation. Excel Philippines, by incorporating itself and operating as the exclusive distributor as stipulated, clearly accepted the benefit. Consequently, E. Excel International could not unilaterally revoke the irrevocable exclusive right once accepted.
The subsequent 1996 Exclusive Rights Contract did not supersede the 1995 Agreement. The 1996 contract was between different parties (E. Excel International and the already-formed Excel Philippines) and contained a revocability clause inconsistent with the prior irrevocable grant. The Court ruled that the earlier, more favorable stipulation in the 1995 Agreement in favor of Excel Philippines remained valid. Therefore, the appointment of Excellent Essentials as the new distributor was invalid, and Excel Philippines’ continued operations were lawful. The injunction against it was wrongfully issued, making E. Excel International and Excellent Essentials liable for damages sustained by Excel Philippines due to the baseless lawsuit.