LORENZO SHIPPING CORP., petitioner, vs. BJ MARTHEL INTERNATIONAL, INC., respondent. G.R. No. 145483. November 1 , !

""4

CHICO#NAZARIO, J.$ %ACTS$ Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping. It used to own the cargo vessel M/V Dadiangas E press. !pon the other hand" respondent #$ Marthel International" Inc. is a %usiness entit& engaged in trading" mar'eting" and selling o( various industrial commodities. It is also an importer and distri%utor o( di((erent %rands o( engines and spare parts. )rom *+,-" respondent supplied petitioner with spare parts (or the latter.s marine engines. Sometime in *+,+" petitioner as'ed respondent (or a /uotation (or various machine parts. 0cceding to this re/uest" respondent (urnished petitioner with a (ormal /uotation" thus1 Ma& 2*" *+,+ MI34567+2 L89E3:8 S;IPPI3< LI3ES Pier ," 3orth ;ar%or Manila S!#$EC=1 P09=S )89 E3<I3E M8DEL MI=S!#IS;I 6!E= >?/67 Dear Mr. <o1 @e are pleased to su%mit our o((er (or &our a%ove su%Aect re/uirements. Description 4t&. 6 pcs. 6 pcs. ? pcs. * set !nit Price P >">?7.77 ?-"627.77 *"72>"777.77 =otal Price 22"*?7.77 *6>"-,7.77 ?"7-7"777.77 C--"777.77 P?"-C>"+77.77 DDDDDDDDDDD

3ozzle =ip Plunger B #arrel C&linder ;ead C&linder Liner

=8=0L P9ICE )8# M03IL0

DELIVE9E1 @ithin ? months a(ter receipt o( (irm order. =E9MS1 ?>F upon deliver&" %alance pa&a%le in > %i5monthl& e/ual InstallmentGsH not to e ceed +7 da&s. @e trust &ou (ind our a%ove o((er accepta%le and loo' (orward to &our most valued order. Ver& trul& &ours"

IS<DJ ;E39E P0$09ILL8 Sales Manager Petitioner therea(ter issued to respondent Purchase 8rder 3o. *2,2+" G2H dated 7? 3ovem%er *+,+" (or the procurement o( one set o( c&linder liner" valued at PC--"777" to %e used (or M/V Dadiangas E press. =he purchase order was co5signed %& $ose <o" $r." petitioner.s vice5president" and ;enr& PaAarillo. 4uoted hereunder is the pertinent portion o( the purchase order1 3ame o( Description CEL. LI3E9 M/E 38=;I3< )8LL8@ I3V. K =E9M 8) P0EME3=1 ?>F D8@3 P0EME3= > #I5M83=;LE I3S=0LLME3=GSH Instead o( pa&ing the ?>F down pa&ment (or the (irst c&linder liner" petitioner issued in (avor o( respondent ten postdated chec'sGCH to %e drawn against the (ormer.s account with 0llied #an'ing Corporation. =he chec's were supposed to represent the (ull pa&ment o( the a(orementioned c&linder liner. Su%se/uentl&" petitioner issued Purchase 8rder 3o. *C7**" G>H dated *> $anuar& *++7" (or &et another unit o( c&linder liner. =his purchase order stated the term o( pa&ment to %e L?>F upon deliver&" %alance pa&a%le in > %i5monthl& e/ual installmentGsH.M G6H Li'e the purchase order o( 7? 3ovem%er *+,+" the second purchase order did not state the date o( the c&linder liner.s deliver&. 8n ?6 $anuar& *++7" respondent deposited petitioner.s chec' that was postdated *, $anuar& *++7" however" the same was dishonored %& the drawee %an' due to insu((icienc& o( (unds. =he remaining nine postdated chec's were eventuall& returned %& respondent to petitioner. =he parties presented disparate accounts o( what happened to the chec' which was previousl& dishonored. Petitioner claimed that it replaced said chec' with a good one" the proceeds o( which were applied to its other o%ligation to respondent. )or its part" respondent insisted that it returned said postdated chec' to petitioner. 9espondent therea(ter placed the order (or the two c&linder liners with its principal in $apan" Daiei Sang&o Co. Ltd." %& opening a letter o( credit on ?2 )e%ruar& *++7 under its own name with the )irst Interstate #an' o( =o'&o. 8n ?7 0pril *++7" PaAarillo delivered the two c&linder liners at petitioner.s warehouse in 3orth ;ar%or" Manila. =he sales invoicesG-Hevidencing the deliver& o( the c&linder liners %oth contain the notation Lsu%Aect to veri(icationM under which the signature o( Eric <o" petitioner.s warehouseman" appeared. 9espondent therea(ter sent a Statement o( 0ccount dated *> 3ovem%er *++7 G,H to petitioner. @hile the other items listed in said statement o( account were (ull& paid %& petitioner" the two c&linder liners delivered to petitioner on ?7 0pril *++7 remained unsettled. Conse/uentl&" Mr. 0leAandro Nanaan" $r." respondent.s vice5president" sent a demand letter dated 7? $anuar& *++* G+H to petitioner re/uiring the latter to pa& the value o( the c&linder liners su%Aects o( this case. Instead o( heeding the demand o( respondent (or the (ull pa&ment o( the value o( the c&linder liners" petitioner sent the (ormer a letter dated *? March *++*G*7H o((ering to pa& onl& P*>7"777 (or the c&linder liners. In said letter" petitioner claimed that as the * SE= 4t&. 0mount PC--"777.77

c&linder liners were delivered late and due to the scrapping o( the M/V Dadiangas E press" it IpetitionerJ would have to sell the c&linder liners in Singapore and pa& the %alance (rom the proceeds o( said sale. Shortl& therea(ter" another demand letter dated ?- March *++* G**H was (urnished petitioner %& respondent.s counsel re/uiring the (ormer to settle its o%ligation to respondent together with accrued interest and attorne&.s (ees. Due to the (ailure o( the parties to settle the matter" respondent (iled an action (or sum o( mone& and damages %e(ore the 9egional =rial Court I9=CJ o( Ma'ati Cit&. In its complaint"G*?H respondent Iplainti(( %elowJ alleged that despite its repeated oral and written demands" petitioner o%stinatel& re(used to settle its o%ligations. 9espondent pra&ed that petitioner %e ordered to pa& (or the value o( the c&linder liners plus accrued interest o( P***"277 as o( Ma& *++* and additional interest o( *CF per annum to %e rec'oned (rom $une *++* until the (ull pa&ment o( the principalO attorne&.s (eesO costs o( suitsO e emplar& damagesO actual damagesO and compensator& damages. 8n ?> $ul& *++*" and prior to the (iling o( a responsive pleading" respondent (iled an amended complaint with preliminar& attachment pursuant to Sections ? and 2" 9ule >- o( the then 9ules o( Court. G*2H 0side (rom the pra&er (or the issuance o( writ o( preliminar& attachment" the amendments also pertained to the issuance %& petitioner o( the postdated chec's and the amounts o( damages claimed. In an 8rder dated ?> $ul& *++*" G*CH the court a quo granted respondent.s pra&er (or the issuance o( a preliminar& attachment. 8n 7+ 0ugust *++*" petitioner (iled an !rgent E 5Parte Motion to Discharge @rit o( 0ttachmentG*>H attaching thereto a counter5%ond as re/uired %& the 9ules o( Court. 8n even date" the trial court issued an 8rderG*6H li(ting the lev& on petitioner.s properties and the garnishment o( its %an' accounts. Petitioner a(terwards (iled its 0nswer G*-H alleging therein that time was o( the essence in the deliver& o( the c&linder liners and that the deliver& on ?7 0pril *++7 o( said items was late as respondent committed to deliver said items Lwithin two I?J months a(ter receipt o( (irm orderM G*,H (rom petitioner. Petitioner li'ewise sought counterclaims (or moral damages" e emplar& damages" attorne&.s (ees plus appearance (ees" and e penses o( litigation. Su%se/uentl&" respondent (iled a Second 0mended Complaint with Preliminar& 0ttachment dated ?> 8cto%er *++*.G*+H =he amendment introduced dealt solel& with the num%er o( postdated chec's issued %& petitioner as (ull pa&ment (or the (irst c&linder liner it ordered (rom respondent. @hereas in the (irst amended complaint" onl& nine postdated chec's were involved" in its second amended complaint" respondent claimed that petitioner actuall& issued ten postdated chec's. Despite the opposition %& petitioner" the trial court admitted respondent.s Second 0mended Complaint with Preliminar& 0ttachment.G?7H Prior to the commencement o( trial" petitioner (iled a Motion I)or Leave =o Sell C&linder LinersJ alleging therein that LGwHith the passage o( time and with no de(inite end in sight to the present litigation" the c&linder liners run the ris' o( o%solescence and deteriorationM G??H to the preAudice o( the parties to this case. =hus" petitioner pra&ed that it %e allowed to sell the c&linder liners at the %est possi%le price and to place the proceeds o( said sale in escrow. =his motion" unopposed %& respondent" was granted %& the trial court through the 8rder o( *- March *++*. G?2H
G?*H

0(ter trial" the court a quo dismissed the action" the decretal portion o( the Decision stating1 @;E9E)89E" the complaint is here%& dismissed" with costs against the plainti((" which is ordered to pa& P>7"777.77 to the de(endant as and %& wa& o( attorne&.s (ees. G?CH =he trial court held respondent %ound to the /uotation it su%mitted to petitioner particularl& with respect to the terms o( pa&ment and deliver& o( the c&linder liners. It also declared that respondent had

agreed to the cancellation o( the contract o( sale when it returned the postdated chec's issued %& petitioner. 9espondent.s counterclaims (or moral" e emplar&" and compensator& damages were dismissed (or insu((icienc& o( evidence. 9espondent moved (or the reconsideration o( the trial court.s Decision %ut the motion was denied (or lac' o( merit.G?>H 0ggrieved %& the (indings o( the trial court" respondent (iled an appeal with the Court o( 0ppealsG?6H which reversed and set aside the Decision o( the court a quo. =he appellate court %rushed aside petitioner.s claim that time was o( the essence in the contract o( sale %etween the parties herein considering the (act that a signi(icant period o( time had lapsed %etween respondent.s o((er and the issuance %& petitioner o( its purchase orders. =he dispositive portion o( the Decision o( the appellate court states1 @;E9E)89E" the decision o( the lower court is 9EVE9SED and SE= 0SIDE. =he appellee is here%& 89DE9ED to pa& the appellant the amount o( P+>C"777.77" and accrued interest computed at *CF per annum rec'oned (rom Ma&" *++*.G?-H =he Court o( 0ppeals also held that respondent could not have incurred dela& in the deliver& o( c&linder liners as no demand" Audicial or e traAudicial" was made %& respondent upon petitioner in contravention o( the e press provision o( 0rticle **6+ o( the Civil Code which provides1 =hose o%liged to deliver or to do something incur in dela& (rom the time the o%ligee Audiciall& or e traAudiciall& demands (rom them the (ul(illment o( their o%ligation. Li'ewise" the appellate court concluded that there was no evidence o( the alleged cancellation o( orders %& petitioner and that the deliver& o( the c&linder liners on ?7 0pril *++7 was reasona%le under the circumstances. 8n ?? Ma& ?777" petitioner (iled a motion (or reconsideration o( the Decision o( the Court o( 0ppeals %ut this was denied through the resolution o( 76 8cto%er ?777. G?,H ;ence" this petition (or review which %asicall& raises the issues o( whether or not respondent incurred dela& in per(orming its o%ligation under the contract o( sale and whether or not said contract was validl& rescinded %& petitioner. =hat a contract o( sale was entered into %& the parties is not disputed. Petitioner" however" maintains that its o%ligation to pa& (ull& the purchase price was e tinguished %ecause the adverted contract was validl& terminated due to respondent.s (ailure to deliver the c&linder liners within the two5month period stated in the (ormal /uotation dated 2* Ma& *+,+. =he threshold /uestion" then" is1 @as there late deliver& o( the su%Aects o( the contract o( sale to Austi(& petitioner to disregard the terms o( the contract considering that time was o( the essence thereo(P In determining whether time is o( the essence in a contract" the ultimate criterion is the actual or apparent intention o( the parties and %e(ore time ma& %e so regarded %& a court" there must be a sufficient manifestation, either in the contract itself or the surrounding circumstances of that intention .G?+H Petitioner insists that although its purchase orders did not speci(& the dates when the c&linder liners were supposed to %e delivered" nevertheless" respondent should a%ide %& the term o( deliver& appearing on the /uotation it su%mitted to petitioner.G27H Petitioner theorizes that the /uotation em%odied the o((er (rom respondent while the purchase order represented its Ipetitioner.sJ acceptance o( the proposed terms o( the contract o( sale.G2*H =hus" petitioner is o( the view that these two documents Lcannot %e ta'en separatel& as i( there were two distinct contracts.MG2?H @e do not agree.

It is a cardinal rule in interpretation o( contracts that i( the terms thereo( are clear and leave no dou%t as to the intention o( the contracting parties" the literal meaning shall control. G22H ;owever" in order to ascertain the intention o( the parties" their contemporaneous and su%se/uent acts should %e considered. G2CH @hile this Court recognizes the principle that contracts are respected as the law %etween the contracting parties" this principle is tempered %& the rule that the intention o( the parties is primordialG2>H and Lonce the intention o( the parties has %een ascertained" that element is deemed as an integral part o( the contract as though it has %een originall& e pressed in une/uivocal terms.M G26H In the present case" we cannot su%scri%e to the position o( petitioner that the documents" %& themselves" em%od& the terms o( the sale o( the c&linder liners. 8ne can easil& glean the signi(icant di((erences in the terms as stated in the (ormal /uotation and Purchase 8rder 3o. *2,2+ with regard to the due date o( the down pa&ment (or the (irst c&linder liner and the date o( its deliver& as well as Purchase 8rder 3o. *C7** with respect to the date o( deliver& o( the second c&linder liner. @hile the /uotation provided %& respondent evidentl& stated that the c&linder liners were supposed to %e delivered within two months (rom receipt o( the (irm order o( petitioner and that the ?>F down pa&ment was due upon the c&linder liners. deliver&" the purchase orders prepared %& petitioner clearl& omitted these signi(icant items. =he petitioner.s Purchase 8rder 3o. *2,2+ made no mention at all o( the due dates o( deliver& o( the (irst c&linder liner and o( the pa&ment o( ?>F down pa&ment. Its Purchase 8rder 3o. *C7** li'ewise did not indicate the due date o( deliver& o( the second c&linder liner. In the case o( Bugatti v. Court of Appeals,G2-H we reiterated the principle that LGaH contract undergoes three distinct stages Q preparation or negotiation" its per(ection" and (inall&" its consummation. Negotiation %egins (rom the time the prospective contracting parties mani(est their interest in the contract and ends at the moment o( agreement o( the parties. =he perfection or %irth o( the contract ta'es place when the parties agree upon the essential elements o( the contract. =he last stage is the consummation o( the contract wherein the parties (ul(ill or per(orm the terms agreed upon in the contract" culminating in the e tinguishment thereo(.M In the instant case" the (ormal /uotation provided %& respondent represented the negotiation phase o( the su%Aect contract o( sale %etween the parties. 0s o( that time" the parties had not &et reached an agreement as regards the terms and conditions o( the contract o( sale o( the c&linder liners. Petitioner could ver& well have ignored the o((er or tendered a counter5o((er to respondent while the latter could have" under the pertinent provision o( the Civil Code" G2,H withdrawn or modi(ied the same. =he parties were at li%ert& to discuss the provisions o( the contract o( sale prior to its per(ection. In this connection" we turn to the testimonies o( PaAarillo and Nanaan" $r." that the terms o( the o((er were" indeed" renegotiated prior to the issuance o( Purchase 8rder 3o. *2,2+. During the hearing o( the case on ?, $anuar& *++2" PaAarillo testi(ied as (ollows1 41 Eou testi(ied Mr. @itness" that &ou su%mitted a /uotation with de(endant Lorenzo Shipping Corporation dated rather mar'ed as E hi%it 0 stating the terms o( pa&ment and deliver& o( the c&linder liner" did &ou notP 01 Ees sir.

41 I am showing to &ou the /uotation which is mar'ed as E hi%it 0 there appears in the /uotation that the deliver& o( the c&linder liner will %e made in two months. time (rom the time &ou received the con(irmation o( the order. Is that correctP 01 Ees sir.

41 3ow" a(ter &ou made the (ormal /uotation which is E hi%it 0 how long a time did the de(endant ma'e a con(irmation o( the orderP 01 0(ter si months.

41 0nd this is contained in the purchase order given to &ou %& Lorenzo Shipping CorporationP 01 Ees sir.

41 3ow" in the purchase order dated 3ovem%er ?" *+,+ there appears onl& the date the terms o( pa&ment which &ou re/uired o( them o( ?>F down pa&ment" now" it is stated in the purchase order the date o( deliver&" will &ou e plain to the court wh& the date o( deliver& o( the c&linder liner was not mentioned in the purchase order which is the contract %etween &ou and Lorenzo Shipping CorporationP 01 @hen Lorenzo Shipping Corporation in/uired (rom us (or that c&linder liner" we have in/uired GwithH our supplier in $apan to give us the price and deliver& o( that item. @hen we received that /uotation (rom our supplier it is stated there that the& can deliver within two months %ut we have to get our con(irmed order within $une.

41 #ut were &ou a%le to con(irm the order (rom &our $apanese supplier on $une o( that &earP 01 3o sir.

41 @h&P @ill &ou tell the court wh& &ou were not a%le to con(irm &our order with &our $apanese supplierP 01 #ecause Lorenzo Shipping Corporation did not give us the purchase order (or that c&linder liner.

41 0nd it was onl& on 3ovem%er ?" *+,+ when the& gave &ou the purchase orderP 01 Ees sir.

41 So upon receipt o( the purchase order (rom Lorenzo Shipping Lines in *+,+ did &ou con(irm the order with &our $apanese supplier a(ter receiving the purchase order dated 3ovem%er ?" *+,+P 01 8nl& when Lorenzo Shipping Corporation will give us the down pa&ment o( ?>F. G2+H

)or his part" during the cross5e amination conducted %& counsel (or petitioner" Nanaan" $r." testi(ied in the (ollowing manner1 @I=3ESS1 =his term said ?>F upon deliver&. Su%se/uentl&" in the (inal contract" what was agreed upon %& %oth parties was ?>F down pa&ment. 41 @henP 01 !pon con(irmation o( the order. ... 41 0nd when was the down pa&ment supposed to %e paidP 01 It was not stated when we were supposed to receive that. 3ormall&" we e pect to receive at the earliest possi%le time. 0gain" that would depend on the customers. Even a(ter receipt o( the purchase order which was what happened here" the& re5negotiated the terms and sometimes we do accept that.

41 @as there a re5negotiation o( this termP 01 =his o((er" &es. @e o((ered a (inal re/uirement o( ?>F down pa&ment upon deliver&.

41 @hat was the re5negotiated termP

01

?>F down pa&ment Supposed to %e paid upon order.GC7H

41 =o %e paid whenP 01

=he a%ove declarations remain unassailed. 8ther than its %are assertion that the su%Aect contracts o( sale did not undergo (urther renegotiation" petitioner (ailed to pro((er su((icient evidence to re(ute the a%ove testimonies o( PaAarillo and Nanaan" $r. 3ota%l&" petitioner was the one who caused the preparation o( Purchase 8rders 3o. *2,2+ and 3o. *C7** &et it utterl& (ailed to adduce an& Austi(ication as to wh& said documents contained terms which are at variance with those stated in the /uotation provided %& respondent. =he onl& plausi%le reason (or such (ailure on the part o( petitioner is that the parties had" in (act" renegotiated the proposed terms o( the contract o( sale. Moreover" as the o%scurit& in the terms o( the contract %etween respondent and petitioner was caused %& the latter when it omitted the date o( deliver& o( the c&linder liners in the purchase orders and varied the term with respect to the due date o( the down pa&ment" GC*H said o%scurit& must %e resolved against it.GC?H 9elative to the a%ove discussion" we (ind the case o( Smith, Bell & Co., Ltd. v. Matti,GC2H instructive. =here" we held that Q @hen the time o( deliver& is not (i ed or is stated in general and inde(inite terms" time is not o( the essence o( the contract. . . . In such cases" the deliver& must %e made within a reasona%le time. =he law implies" however" that i( no time is (i ed" deliver& shall %e made within a reasona%le time" in the a%sence o( an&thing to show that an immediate deliver& intended. . . . @e also (ind signi(icant the (act that while petitioner alleges that the c&linder liners were to %e used (or dr& doc' repair and maintenance o( its M/V Dadiangas E press %etween the later part o( Decem%er *+,+ to earl& $anuar& *++7" the record is %ere(t o( an& indication that respondent was aware o( such (act. =he (ailure o( petitioner to noti(& respondent o( said date is (atal to its claim that time was o( the essence in the su%Aect contracts o( sale. In addition" we /uote" with approval" the 'een o%servation o( the Court o( 0ppeals1 . . . It must %e noted that in the purchase orders issued %& the appellee" dated 3ovem%er ?" *+,+ and $anuar& *>" *++7" no speci(ic date o( deliver& was indicated therein. I( time was reall& o( the essence as claimed %& the appellee" the& should have stated the same in the said purchase orders" and not merel& relied on the /uotation issued %& the appellant considering the lapse o( time %etween the /uotation issued %& the appellant and the purchase orders o( the appellee. In the instant case" the appellee should have provided (or an allowance o( time and made the purchase order earlier i( indeed the said c&linder liner was necessar& (or the repair o( the vessel scheduled on the (irst wee' o( $anuar&" *++7. In (act" the appellee should have cancelled the (irst purchase order when the c&linder liner was not delivered on the date it now sa&s was necessar&. Instead it issued another purchase order (or the second set o( c&linder liner. =his (act negates appellee.s claim that time was indeed o( the essence in the consummation o( the contract o( sale %etween the parties. GCCH )inall&" the ten postdated chec's issued in 3ovem%er *+,+ %& petitioner and received %& the respondent as (ull pa&ment o( the purchase price o( the (irst c&linder liner supposed to %e delivered on 7?

$anuar& *++7 (ail to impress. It is not an indication o( (ailure to honor a commitment on the part o( the respondent. =he earliest maturit& date o( the chec's was *, $anuar& *++7. 0s deliver& o( said chec's could produce the e((ect o( pa&ment onl& when the& have %een cashed" GC>H respondent.s o%ligation to deliver the (irst c&linder liner could not have arisen as earl& as 7? $anuar& *++7 as claimed %& petitioner since %& that time" petitioner had &et to (ul(ill its underta'ing to (ull& pa& (or the value o( the (irst c&linder liner. 0s e plained %& respondent" it proceeded with the placement o( the order (or the c&linder liners with its principal in $apan solel& on the %asis o( its previousl& harmonious %usiness relationship with petitioner. 0s an aside" let it %e underscored that LGeHven where time is o( the essence" a %reach o( the contract in that respect %& one o( the parties ma& %e waived %& the other part&.s su%se/uentl& treating the contract as still in (orce.MGC6H Petitioner.s receipt o( the c&linder liners when the& were delivered to its warehouse on ?7 0pril *++7 clearl& indicates that it considered the contract o( sale to %e still su%sisting up to that time. Indeed" had the contract o( sale %een cancelled alread& as claimed %& petitioner" it no longer had an& %usiness receiving the c&linder liners even i( said receipt was Lsu%Aect to veri(ication.M #& accepting the c&linder liners when these were delivered to its warehouse" petitioner indisputa%l& waived the claimed dela& in the deliver& o( said items. @e" there(ore" hold that in the su%Aect contracts" time was not o( the essence. =he deliver& o( the c&linder liners on ?7 0pril *++7 was made within a reasona%le period o( time considering that respondent had to place the order (or the c&linder liners with its principal in $apan and that the latter was" at that time" %eset %& heav& volume o( wor'.GC-H =here having %een no (ailure on the part o( the respondent to per(orm its o%ligation" the power to rescind the contract is unavailing to the petitioner. 0rticle **+* o( the 3ew Civil Code runs as (ollows1 =he power to rescind o%ligations is implied in reciprocal ones" in case one o( the o%ligors should not compl& with what is incum%ent upon him. =he law e plicitl& gives either part& the right to rescind the contract onl& upon the (ailure o( the other to per(orm the o%ligation assumed thereunder. GC,H =he right" however" is not an un%ridled one. =his Court in the case o( niversit! of the "hilippines v. #e los Angeles "GC+Hspea'ing through the eminent civilist $ustice $.#.L. 9e&es" e horts1 8( course" it must %e understood that the act o( a part& in treating a contract as cancelled or resolved on account o( in(ractions %& the other contracting part& must be made $no%n to the other and is al%a!s provisional" %eing ever su%Aect to scrutin& and review %& the proper court. I( the other part& denied that rescission is Austi(ied" it is (ree to resort to Audicial action in its own %ehal(" and %ring the matter to court. =hen" should the court" a(ter due hearing" decide that the resolution o( the contract was not warranted" the responsi%le part& will %e sentenced to damagesO in the contrar& case" the resolution will %e a((irmed" and the conse/uent indemnit& awarded to the part& preAudiced. IEmphasis suppliedJ In other words" the part& who deems the contract violated ma& consider it resolved or rescinded" and act accordingl&" without previous court action" %ut it proceeds at its o%n ris$. )or it is onl& the (inal Audgment o( the corresponding court that will conclusivel& and (inall& settle whether the action ta'en was or was not correct in law. #ut the law de(initel& does not re/uire that the contracting part& who %elieves itsel( inAured must (irst (ile suit and wait (or a Audgment %e(ore ta'ing e traAudicial steps to protect its interest. 8therwise" the part& inAured %& the other.s %reach will have to passivel& sit and watch its damages accumulate during the pendenc& o( the suit until the (inal Audgment o( rescission is rendered when the law itsel( re/uires that he should e ercise due diligence to minimize its own damages. G>7H ;ere" there is no showing that petitioner noti(ied respondent o( its intention to rescind the contract o( sale %etween them. 4uite the contrar&" respondent.s act o( proceeding with the opening o( an irrevoca%le

letter o( credit on ?2 )e%ruar& *++7 %elies petitioner.s claim that it noti(ied respondent o( the cancellation o( the contract o( sale. =rul&" no prudent %usinessman would pursue such action 'nowing that the contract o( sale" (or which the letter o( credit was opened" was alread& rescinded %& the other part&. &HERE%ORE" premises considered" the instant Petition (or 9eview on Certiorari is DE3IED. =he Decision o( the Court o( 0ppeals" dated ?, 0pril ?777" and its 9esolution" dated 76 8cto%er ?777" are here%& 0))I9MED. 3o costs. SO OR'ERE'. "uno, &Chairman', Austria(Martine), Calle*o, Sr., and +inga, ,,., concur.