CASE DIGEST: Yu v. The Honorable Court of Appeals

 

PHILIP S. YU, petitioner, vs. THE HONORABLE COURT OF APPEALS, THE HONORABLE PRESIDING JUDGE, RTC OF MANILA, BRANCH XXXIV (34) and UNISIA MERCHANDISING CO., INC., respondents.

GR No. 86683 (January 21, 1993)

 

FACTS:

Petitioner has had an exclusive sales agency agreement with the House of Mayfair since 1987 to promote and procure orders for Mayfair wallcovering products from customers in the Philippines. Even as petitioner was such exclusive distributor, private respondent, which was then petitioner’s dealer, imported the same goods via the FNF Trading which eventually sold the merchandise in the domestic market.

In the suit for injunction before the Regional Trial Court of the National Capital Judicial Region stationed at Manila, petitioner pressed the idea that he was practically by-passed and that private respondent acted in concert with the FNF Trading in misleading Mayfair into believing that the goods ordered by the trading firm were intended for shipment to Nigeria although they were actually shipped to and sold in the Philippines.

Private respondent professed ignorance of the exclusive contract in favor of petitioner. Even then, private respondent responded by asserting that petitioner’s understanding with Mayfair is binding only between the parties thereto.

The trial court denied the issuance of the writ of preliminary injunction. The trial court reasoned that the terms and conditions of the agency agreement, between the plaintiff and The House of Mayfair of England for the exclusive distributorship by the plaintiff of the latter’s goods, apertain to them: that there is no privity of contract between the plaintiff and the defendant; that the controversy in this case arose from a breach of contract by the FNF Trading of Germany, for having shipped goods it had purchased from The House of Mayfair to the Philippines.

The CA ruled the same. According to the appellate court, petitioner was not able to demonstrate the unequivocal right which he sought to protect and that private respondent is a complete stranger vis-a-vis the covenant between petitioner and Mayfair. Apart from these considerations, the reviewing authority noted that petitioner could be fully compensated for the prejudice he suffered judging from the tenor of Mayfair’s correspondence to FNF Trading wherein Mayfair took the cudgels for petitioner in seeking compensation for the latter’s loss as a consequence of private respondent’s scheme.

On March 13, 1989, a temporary restraining order was issued to last until further notice from the SC directed against private respondent. Notwithstanding such proscription, private respondent persisted in the distribution and sale, triggering petitioner’s motion to cite private respondent’s manager in contempt of court.

ISSUE:

WON the writ for preliminary injunction may be issued against respondent

RULING:

Verily, injunction is the appropriate remedy to prevent a wrongful interference with contracts by strangers to such contracts where the legal remedy is insufficient and the resulting injury is irreparable. The liability of private respondent, if any, does not emanate from the four corners of the contract for undoubtedly, Unisia Merchandising Co., Inc. is not a party thereto but its accountability is “an independent act generative of civil liability”. These observations, however, do not in the least convey the message that We have placed the cart ahead of the horse by pronouncing private respondent’s liability at this stage in view of the pendency of the main suit for injunction below. We are simply rectifying certain misperceptions entertained by the appellate court as regards the feasibility of requesting a preliminary injunction to enjoin a stranger to an agreement.

The right to perform an exclusive distributorship agreement and to reap the profits resulting from such performance are proprietary rights which a party may protect which may otherwise not be diminished, nay, rendered illusory by the expedient act of utilizing or interposing a person or firm to obtain goods from the supplier to defeat the very purpose for which the exclusive distributorship was conceptualized, at the expense of the sole authorized distributor.

Another circumstance which respondent court overlooked was petitioner’s suggestion, which was not disputed by herein private respondent in its comment, that the House of Mayfair in England was duped into believing that the goods ordered through the FNF Trading were to be shipped to Nigeria only, but the goods were actually sent to and sold in the Philippines. A ploy of this character is akin to the scenario of a third person who induces a party to renege on or violate his undertaking under a contract, thereby entitling the other contracting party to relief therefrom (Article 1314, New Civil Code). The breach caused by private respondent was even aggravated by the consequent diversion of trade from the business of petitioner to that of private respondent caused by the latter’s species of unfair competition as demonstrated no less by the sales effected inspite of this Court’s restraining order. This brings Us to the irreparable mischief which respondent court misappreciated when it refused to grant the relief simply because of the observation that petitioner can be fully compensated for the damage. A contrario, the injury is irreparable where it is continuous and repeated since from its constant and frequent recurrence, no fair and reasonable redress can be had therefor by petitioner insofar as his goodwill and business reputation as sole distributor are concerned. Withal, to expect petitioner to file a complaint for every sale effected by private respondent will certainly court multiplicity of suits.