G.R. No. 198867 , October 16, 2019
Chua Ping Hian also known as Jimmy Ching, Petitioner, v. Silverio Manas (deceased), substituted by his heirs, namely, Caridad Manas, surviving spouse, and children, Nestor Manas, Rolando Manas, Rene Manas and Benilda Manas, Respondent.

FACTS

Petitioner Chua Ping Hian (Jimmy Ching) entered into a Contract of Sale with respondent Silverio Manas on August 15, 1997, for the purchase of five sets of Simplex Model XL 35mm movie projectors (U.S. Rebuilt) at a total price of P3,150,000.00. The contract stipulated: a 30% downpayment (P945,000, paid on July 19, 1997); a 40% second payment upon complete delivery on or before January 15, 1998; and a 30% balance after complete installation, testing, and satisfactory operation. Manas warranted the equipment’s usefulness for two years from installation. Only four Simplex projectors were initially available; a Century brand projector was delivered as the fifth set on November 29, 1998. Various parts and accessories were delivered between August 22, 1997, and May 8, 1999. Disputes arose over installation: Manas claimed completion, while Ching asserted incomplete installation, leading him to hire Nelson Ruzgal for wiring connections. After a trial run on December 24, 1998, the cinemas opened on December 25, 1998. Within months, multiple defects emerged in optical lenses, lamphouses, rectifiers, and a projector motor. Manas failed to repair or replace these despite warranty demands. In May 1999, Manas sent a notice claiming full compliance, but Ching received it only after a lawsuit commenced. Manas demanded payment of the balance (P2,205,000) via a lawyer’s letter in August 1999. Ching refused, citing delayed delivery and breach of warranty. Manas filed a complaint for collection, while Ching counterclaimed for damages.

ISSUE

Whether petitioner Ching was justified in withholding payment of the balance of the purchase price due to respondent Manas’s breaches of contract, particularly delayed delivery and failure to honor the warranty, thereby precluding Ching from being in default (mora solvendi).

RULING

Yes. The Supreme Court affirmed with modifications the Court of Appeals’ (CA) Amended Decision. The Court held that petitioner Ching had valid grounds to withhold payment under Article 1169 of the Civil Code, as respondent Manas committed several breaches: (1) failure to deliver the fifth Simplex projector set by the January 15, 1998 deadline, substituting it with a Century brand delivered only on November 29, 1998, with final deliveries completed only on May 8, 1999; (2) failure to fully install the equipment as required under the contract, necessitating Ching to hire a third party; and (3) failure to honor the two-year warranty by not repairing or replacing defective parts (optical lenses, lamphouses, rectifiers, projector motor). These breaches constituted default by Manas (mora accipiendi), justifying Ching’s suspension of payment until resolution of the warranty issues. Consequently, Ching was not in delay (mora solvendi), and Manas was not entitled to the stipulated 14% interest per annum for non-payment. The CA correctly awarded Manas the reduced balance of P1,559,740.00 (after deducting Ching’s proven expenses for repairs and installation), but legal interest was modified to accrue at 6% per annum only from the finality of the Court’s decision until full satisfaction. Claims for moral and exemplary damages and Ching’s counterclaims were denied for lack of merit.