G.R. No. 258486, August 02, 2023
Mary Ann Carmen Ferrer, in her capacity as Attorney-in-Fact of M.Y. Intercontinental Trading Corporation and/or Tedwin T. Uy, Petitioners, vs. St. Mary’s Publishing and/or Jerry Vicente S. Catabijan, Respondents.

FACTS

Fujian New Technology Color Marking and Printing Company (Fujian New Technology), represented by its local agent M.Y. Intercontinental Trading Corporation (MY Intercontinental) with Tedwin T. Uy as its Senior Executive Vice-President, entered into a Contract in 2008 with St. Mary’s Publishing for the exclusive printing and distribution of textbooks. Pursuant to this Contract and a subsequent December 7, 2009 Purchase Order, Fujian New Technology printed textbooks costing PHP 11,347,781.08. St. Mary’s Publishing defaulted on payment. Consequently, M.Y. Intercontinental issued a notice to rescind the Purchase Order. To protect its interest, M.Y. Intercontinental and Uy, through their representative Marie Ann Carmen F. Ferrer, filed a Petition for Declaratory Relief against St. Mary’s Publishing and its officer, Jerry Vicente S. Catabijan. The petition sought a declaration that the transaction was a contract of sale, making Fujian New Technology an unpaid seller entitled to exercise remedies under the Civil Code (possessory lien, right to resell, right to rescind). Respondents admitted non-payment but contended the contract was merely for printing services, not a sale. The Regional Trial Court (RTC) granted the petition, declaring the agreement a contract of sale and upholding petitioner’s rights as an unpaid seller. The Court of Appeals (CA) reversed the RTC, dismissing the Petition for Declaratory Relief. The CA held the action was improper because a breach of contract (non-payment) had already occurred prior to the filing of the petition, and other remedies like an action for breach of contract were available. Uy elevated the case to the Supreme Court via a Petition for Review on Certiorari.

ISSUE

Whether a petition for declaratory relief is the proper recourse of the parties in this case.

RULING

No. The Supreme Court denied the petition, affirming the Court of Appeals’ dismissal of the Petition for Declaratory Relief. The Court ruled that an action for declaratory relief, governed by Rule 63, Section 1 of the Rules of Court, is only proper before a breach or violation of the deed, contract, or instrument in question. The purpose is to secure an authoritative statement of rights and obligations for guidance in enforcement, not to settle issues arising from an alleged breach. In this case, a breach had unequivocally occurred when St. Mary’s Publishing failed to pay for the printed textbooks before the petition was filed. The Court cited the requisites for declaratory relief, emphasizing that the third requisite—”there must have been no breach of the documents in question”—was absent. Furthermore, the Court rejected the petitioner’s alternative plea to convert the petition into an ordinary civil action under Rule 63, Section 6, as such conversion is only permissible when the breach occurs after the filing of the declaratory relief petition. Since the breach preceded the filing, conversion was not allowed. The proper recourse for the petitioners was an ordinary civil action for breach of contract or specific remedies available to an unpaid seller, not a petition for declaratory relief.