G.R. No. 42999 ; October 30, 1936
ACME FILMS, INC., plaintiff-appellant, vs. THEATERS SUPPLY CORPORATION, defendant-appellant.

FACTS

Acme Films, Inc. sued Theaters Supply Corporation to collect payment on seven unpaid promissory notes totaling P175, executed by the defendant in December 1933. The defendant admitted the notes but counterclaimed for damages, alleging that Acme breached several “Booking Contracts” by failing to supply agreed-upon cinematographic films in March and April 1934. The defendant claimed it had to obtain replacement films at a higher cost and incurred additional advertising expenses, suffering damages of P400 to P500. The trial court ordered the defendant to pay only P50 (for two notes) and denied the defendant’s counterclaim for damages.

ISSUE

1. Whether the promissory notes were independent obligations or connected to the film supply contracts.
2. Whether Acme Films is liable for damages due to its failure to supply films under the Booking Contracts.

RULING

The Supreme Court reversed the trial court’s judgment.
1. The promissory notes were independent obligations and not conditional on the film supply contracts. The defendant was liable for the full amount of the seven unpaid notes (P175), plus stipulated interest and attorney’s fees.
2. Acme Films was liable for damages for breach of the Booking Contracts. The defendant’s evidence on damages, though estimated, was unrebutted. Applying article 1101 of the Civil Code, the Court awarded the defendant P400 as proven damages, plus legal interest.
The Court ordered mutual payments: Theaters Supply to pay Acme the note obligations, and Acme to pay Theaters Supply the damages.

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