National Rice & Corn Corp. v. Court of Appeals
REITERATIONFacts
The Antecedents: The National Rice and Corn Corporation (NARIC) entered into a contract with Davao Merchandising Corporation (DAMERCO) where DAMERCO would act as NARIC's agent in exporting rice and corn and importing collateral goods on a no-dollar remittance or barter basis. DAMERCO agreed to buy the collateral goods. NARIC filed a collection suit against DAMERCO for the balance of the value of exported corn and rice. DAMERCO claimed it had no obligation until the collateral goods were imported, and that importation was prevented by the suspension of barter transactions by a new administration. Procedural History: The trial court ruled in favor of NARIC. The Court of Appeals, in its initial decision, modified the trial court's ruling. However, upon motion for reconsideration by DAMERCO, the Court of Appeals reversed its earlier decision and dismissed the complaint as premature and for lack of cause of action. The Petition: NARIC filed a petition for certiorari with the Supreme Court, alleging that the Court of Appeals erred in reversing its first decision and upholding DAMERCO's interpretation of the contract, specifically regarding DAMERCO's role as an agent and not a buyer of the corn, and that the conclusions were based on wrong assumptions contrary to the evidence and parties' intent.
Issue(s)
Whether the Court of Appeals erred in reversing its first decision and dismissing the complaint as premature and for lack of cause of action. Whether DAMERCO acted merely as an agent of NARIC in exporting corn and rice and importing collateral goods, or as a buyer of the corn and rice. Whether the obligation of DAMERCO to pay the balance of the value of exported corn and rice is enforceable given the suspension of barter transactions and the non-importation of collateral goods.
Ruling
The petition for certiorari is denied, and the resolution of the Court of Appeals dated January 23, 1970, is affirmed. The complaint is dismissed as premature and for lack of cause of action.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in reversing its first decision and dismissing the complaint as premature and for lack of cause of action: The Supreme Court found no clear showing that the Court of Appeals erred. It was undisputed that DAMERCO acted as an agent for NARIC in exporting the rice and corn. The suspension of barter transactions by the new administration prevented DAMERCO from importing the collateral goods worth approximately US$480,000.00. The Court of Appeals correctly concluded that DAMERCO's obligation to pay was contingent upon the importation of these collateral goods, making the complaint premature. On the issue of DAMERCO's role as agent versus buyer: The Supreme Court affirmed the Court of Appeals' finding that DAMERCO acted as an agent of NARIC in exporting the corn and rice and as a purchaser of the collateral goods to be imported. While the contract initially designated NARIC as seller and DAMERCO as buyer, the subsequent provisions clarified that DAMERCO was to act as an agent for NARIC in exporting and importing. The primary consideration for DAMERCO was the importation and purchase of the collateral goods, not the direct purchase of the corn, especially given its poor quality. The contract's complexity and the "no-dollar remittance basis" further supported this interpretation. On the enforceability of DAMERCO's obligation to pay: The Court held that DAMERCO's obligation to pay the promissory notes was contingent upon the importation of the collateral goods. This importation became legally impossible due to the government's suspension of barter transactions. The Court reasoned that the contract was bilateral and involved reciprocal obligations. DAMERCO had incurred substantial expenses in exporting the corn and had paid for collateral goods as they were received. The failure to import the remaining collateral goods was not DAMERCO's fault but a consequence of government action. Therefore, compelling DAMERCO to pay without the NARIC securing the necessary import permits and enabling the importation of the remaining collateral goods would be inequitable and would leave DAMERCO suffering losses. Citing Customs Commissioner vs. Auyong Hian, the Court emphasized that a permit revocation causing material expense to the owner is grossly inequitable. The obligation of DAMERCO to pay the promissory notes was thus rendered unenforceable under Article 1266 of the Civil Code, making the present action premature.
Main Doctrine
A complaint is premature and lacks cause of action if the plaintiff's obligation is contingent upon the fulfillment of reciprocal obligations by the defendant, which fulfillment became legally impossible due to supervening events not attributable to the defendant, and the plaintiff failed to take necessary steps to enable the defendant to fulfill its part of the agreement.