G.R. No. L-37120 April 20, 1983
VICTORINO D. MAGAT, petitioner, vs. HON. LEO D. MEDIALDEA and SANTIAGO A. GUERRERO, respondents.

FACTS

Petitioner Victorino D. Magat filed a complaint for breach of contract against respondent Santiago A. Guerrero. The complaint alleged that Guerrero, through his agent Isidro Q. Aligada, secured a firm written offer from Magat for the supply of radio transceivers needed for Guerrero’s taxicab contract with the U.S. Navy Exchange in Subic Bay. Guerrero accepted the offer by signing his conformity on the document. The offer was conditioned on Guerrero advising Magat of the radio frequency assigned by authorities, after which Magat would make delivery within 60 to 90 days. Guerrero subsequently provided the required radio frequency and, through his agent, instructed Magat to proceed with the order upon receipt of a letter of credit. Magat alleged he made preparations for manufacture based on these assurances. However, Guerrero ultimately failed and refused to open the necessary letter of credit to cover payment, thereby breaching the perfected contract.
The respondent Judge, Hon. Leo D. Medialdea, dismissed the complaint for failure to state a cause of action. The trial court held that the complaint did not sufficiently allege that Magat suffered any actual damage from the breach, as it failed to specify the amount of profit he would have earned from the transaction. Magat filed the instant petition for review, arguing that his complaint sufficiently averred a cause of action for breach of contract with resulting damages.

ISSUE

Whether the complaint sufficiently states a cause of action for breach of contract.

RULING

Yes. The Supreme Court set aside the order of dismissal and remanded the case. A cause of action exists if the complaint alleges: (1) a legal right of the plaintiff, (2) a correlative obligation of the defendant, and (3) an act or omission of the defendant in violation of the plaintiff’s right causing injury or damage. The complaint clearly alleges a perfected contract of sale through Guerrero’s signed acceptance of Magat’s offer. Guerrero’s subsequent failure to open the required letter of credit constitutes a breach of that contractual obligation.
The Court held that the alleged damage—the loss of expected profits from the transaction—is a real and recoverable injury that arises at the moment of breach. Under Article 1170 of the Civil Code, one who contravenes the tenor of an obligation is liable for damages. This includes not only actual loss (daño emergente) but also lost profits (lucro cesante) as provided in Article 2200. The complaint’s allegation that Guerrero’s breach caused Magat to lose the benefit of their agreement is a sufficient allegation of lucro cesante. The precise quantum of damages is a matter for proof during trial, not a requirement for stating a cause of action in the pleading. Furthermore, the complaint implies bad faith on Guerrero’s part, which could also support claims for moral and exemplary damages under the Civil Code. Therefore, on the basis of the facts alleged, a valid judgment could be rendered in accordance with the prayer of the complaint.