Solar Harvest, Inc. Vs.

Davao Corrugated Carton Corporation

GR No. 176858, July 26, 2010

FACTS: In the 1st Quarter of 1998, Solar Harvest and Davao Corrugated entered into an unwritten agreement. Solar
Harvest placed orders for customized boxes for its business of exporting bananas at USD 1.10 each. Petitioner made a
full payment of USD 40,150.00. By Jan. 3, 2001 petitioner had not received any of the ordered boxes. On Feb. 19, 2001
Davao Corrugated replied that as early as April 3, 1998, order/boxes are completed and Solar Harvest failed to pick them
up from their warehouse within 30 days from completion as agreed upon. Respondent mentioned that petitioner even
placed additional order of 24,000.00 boxes, out of which, 14,000 had already been manufactured without any advance
payment from Solar Harvest. Davao Corrugated then demanded that Solar Harvest remove boxes from their warehouse,
pay balance of USD 15,400.00 for the additional boxes and P132,000 as storage fee. On August 17, 2001 Solar harvest
filed complaint against Davao Corrugated for sum of money and damages claiming that the agreement was for the
delivery of the boxes, which Davao Corrugated did not do. They further alleged that whenever repeated follow-up was
made to Davao Corrugated, they would only see sample boxes and get promise of delivery. Due to Davao Corrugated’s
failure to deliver, Solar Harvest had to cancel the order and demanded payment and/or refund which Davao Corrugated
refused to pay. Davao Corrugated counterclaimed that they had already completed production of the 36,500 boxes plus
an additional 14,000 boxes (which was part of the additional 24,000 order that is unpaid). The agreement was for Solar
Harvest to pick up the boxes, which they did not do. They even averred that on Oct. 8, 1998 Solar Harvest’s
representative Bobby Que even went to the warehouse to inspect and saw that indeed boxes were ready for pick up. On
Feb. 20, 1999, Que visited the factory again and said that they ought to sell the boxes to recoup some of the costs of the
14,000 additional orders because their transaction to ship the bananas did not materialize. Solar Harvest denies that
they made the additional order. On March 20, 2004 the RTC ruled in favor of Davao Corrugated.

ISSUE: Whether or not Davao Corrugated was responsible for breach of contract as Solar Harvest had not yet demanded
from it the delivery of the boxes?

HELD: NO. The CA held that it was unthinkable that for around 2 years petitioner merely followed up and did not
demand the delivery of the boxes. Even assuming that the agreement is for delivery by Davao Corrugated, respondent
would not be liable for breach of contract as petitioner had not yet demanded from it the delivery of the boxes. There is
no error in the decision of the RTC. Furthermore, the claim for reimbursement is actually one for rescission or resolution
of contract under Article 1191 of the Civ. Code. The right to rescind contracts arises once the party defaults in the
performance of his obligation. Article 1191 should be taken in conjunction with Article 1169: Those obliged to deliver or
to do something in delay from the time the obligee judicially or extrajudicially demands form them the fulfilment of their
obligation. However the demand from creditor shall not be necessary in order that delay may exist.:

1. When the obligation or the law expressly so declares, or

2. When from the nature and the circumstance of the obligation it appears that the designation of the time
when the thing is to be delivered or the service is to be rendered was a controlling motive for the
establishment of the contract; OR
3. When the demand would be useless, as when the obligor has rendered it beyond his power to perform.

In reciprocal obligations, the general rule is that the fulfilment of the parties’s respective obligations should be
simultaneous. No demand is necessary because once a party fulfills his obligation and the other party fails to do his, the
latter automatically incurs delay. When dates are set, the default for each obligation is determined by the rules given in
the 1st paragraph of the article. Thus even in reciprocal obligations, if the period for the fulfilment of the obligation is
fixed, demand from the obligee is still necessary before the obligor can be considered in default and before a cause of
action for rescission will accrue. In the case of Solar Harvest, merely following up the order was not the same as
demanding for the boxes. The SC held that Solar Harvests petition is denied and that Davao Corrugated did not commit
breach of contract and may remove the boxes from their premises after petitioner is given a period of time to remove
them from their warehouse as they deem proper (Court gave 30day period to comply with this)