Danfoss, Inc. v. Continental Cement Corp.

,
G.R. No. 143788, 9 September 2005, 469 SCRA 505

FACTS: Mechatronics Instruments and Controls, Inc. (MINCI) is an agent of Danfoss, Inc.’s products here
in the Philippines. On September 1997, CCC ordered two unit 132 KW Danfoss Brand Frequency
Converter/Inverter from MINCI to be used in the Finish Mill of its Cement Plant in Bulacan. In the terms
of conditions of the original purchase order, the two unit Frequency Converter shall be delivered by
Danfoss within 8 to 10 weeks from the opening of the letter of credit. The letter of credit opened by CCC
in favour of Danfoss on September 9, 1997.

On September 17, 1997, MINCI informed CCC that its order are already ready for shipment and MINCI
requested to amend the letter of credit changing the port of origin/loading from Singapore to Denmark
(Singapore is the Asian Regional Office of Danfoss, the Head Office of the company is Denmark). CCC
complied and the port of origin in the letter of credit was changed.

Upon receiving the relayed information, CCC surmised that Danfoss would not be able to deliver their
order. There was also no definite commitment of the delivery from Danfoss and MINCI, so CCC informed
MINCI that they intend to cancel its order. The order was cancelled on November 13, 1997.

Hence the complaint for damages filed by CCC with the RTC of Quezon City against Danfoss and MINCI
on November 5, 1998. In reply, Danfoss filed a motion to dismiss the complaint.

ISSUE: Whether there was a cause of action in the complaint filed by respondent.

HELD: No, there was no cause of action in the complaint for damages filed by CCC.

“In order to sustain a dismissal on the ground of lack of cause of action, the insufficiency must appear on
the face of the complaint. And the test of the sufficiency of the facts alleged in the complaint to
constitute a cause of action is whether or not, admitting the facts alleged, the court can render a valid
judgment thereon in accordance with the prayer of the complaint. For this purpose, the motion to
dismiss must hypothetically admit the truth of the facts alleged in the complaint.”

The RTC erred in ruling that “the issue of whether or not the defendants incurred delay in the delivery of
the equipment within the period stipulated was a debatable question.” How could Danfoss be liable for
damages when Danfoss had not yet breached his obligation to deliver the order of CCC, aside from the
fact that the obligation was already negated when CCC cancelled the order before the prestation
became due and demandable? Thus, there was no breach and there was no damage caused by Danfoss.

The principle of anticipatory breach cannot be applied here because the obligation was single and
indivisible – to deliver two units of frequency converter by November 19, 1997. There was no showing
that Danfoss refused to deliver, and on the contrary, Danfoss made an effort to make good in its
obligation by looking for other suppliers who could provide the parts needed to make the timely
delivery of the order. Thus, the case was prematurely filed.

CCC’s fear that Danfoss might not be able to deliver its order on time was not the cause of action
referred to by the Rules and jurisprudence.
PETITION GRANTED. THE CA’S DECISIONS ARE REVERSED AND SET ASIDE.