G.R. No. 70451. March 24, 1993.
HENRY H. GAW, petitioner, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT and UY DIET TAN, respondents.

FACTS

Petitioner Henry H. Gaw, through his firm K.H. Gaw Enterprises, entered into a dealership agreement with Prime White Cement Corporation (PWCC) on December 12, 1978, making him one of four exclusive dealers of white cement. The agreement required him to deposit P200,000.00 and to increase his monthly allocation and loan to PWCC to 6,500 bags and P500,000.00, respectively, within 90 days. To meet this requirement, Gaw entered into a marketing agreement on February 2, 1979, with private respondent Uy Diet Tan (doing business as Foundation Commercial). The agreement entitled Tan to 50% of Gaw’s monthly allocation (3,250 bags) and required Tan to deposit P250,000.00 directly with PWCC, with repayment to be made directly to Tan. Tan would pay Gaw a premium of P0.70 per bag. PWCC refused to accept Tan’s deposit check because accepting it in Tan’s name would violate Gaw’s exclusive dealership. Tan’s counsel then proposed depositing the amount under Gaw’s name, but PWCC’s Chairman, Constacio B. Maglana, rejected this, stating the dealership was closed to the four existing dealers. Gaw subsequently entered into a contract on March 9, 1979, with Mandee Commercial, wherein Mandee would provide P250,000.00 (combined with Gaw’s P50,000.00 to add to his initial P200,000.00 deposit) for direct sales of 3,250 bags monthly for 57 months, with Gaw earning a P2.00 per bag profit. On March 5, 1979, Tan filed a complaint (Civil Case No. Q-27097) against Gaw for specific performance with damages and preliminary injunction, alleging Gaw refused to accept the P250,000.00 deposit and insisted on a higher premium. On March 9, 1979, the court issued an order directing the parties to maintain status quo and restraining Gaw from continuing the acts complained of. Gaw received the order on March 12, 1979. On July 16, 1979, Tan moved to withdraw his complaint due to health reasons, and the case was dismissed on July 25, 1979. On November 19, 1979, Gaw filed a complaint for damages (Civil Case No. Q-28799) against Tan, alleging the March 9, 1979 restraining order caused him to lose his contract with Mandee Commercial, resulting in unrealized profits of P370,500.00. The trial court ruled in favor of Gaw, ordering Tan to pay P120,000.00 as actual damages and P10,000.00 as attorney’s fees. The Intermediate Appellate Court reversed this decision, ordering Gaw to pay Tan P100,000.00 as actual damages and P20,000.00 as attorney’s fees. Gaw filed the present petition for review.

ISSUE

Whether the Intermediate Appellate Court erred in reversing the trial court’s decision and holding Gaw liable for damages to Tan.

RULING

The Supreme Court denied the petition and affirmed the decision of the Intermediate Appellate Court. The Court held that the factual findings of the Appellate Court are generally conclusive and found no compelling reason to deviate from them. The Court agreed with the Appellate Court’s conclusion that Gaw was in bad faith. Gaw entered into the marketing agreement with Tan while knowing that his dealership contract with PWCC prohibited him from assigning or subcontracting his dealership rights without PWCC’s prior written consent, which he did not obtain. Gaw’s subsequent contract with Mandee Commercial, involving the same allocation intended for Tan, constituted a clear violation of his agreement with Tan. The Court found that the March 9, 1979 order was a mere status quo order and not a restraining order that legally prevented Gaw from performing his contract with Mandee Commercial; Gaw chose not to proceed with the Mandee contract for his own reasons, not because of legal compulsion. Therefore, Gaw could not attribute his losses to Tan’s judicial action. The Court sustained the Appellate Court’s award of damages to Tan, as Gaw’s breach of the marketing agreement caused Tan to lose the benefits he would have derived from it. The Court modified the award by deleting the grant of attorney’s fees due to insufficient factual and legal justification.