DANFOSS, INC., Petitioners, vs. CONTINENTAL CEMENT CORPORATION, Respondent. G.R. No. 143 !! Septe"#er $, %&&' FACTS( 1.

Mechatronics Instruments and Controls, Inc. (MINCI) is an agent of Danfoss, Inc.s products here in the Philippines. On eptem!er 1""#, CCC ordered t$o unit 1%& '( Danfoss )rand *re+uenc, Con-erter.In-erter from MINCI to !e used in the *inish Mill of its Cement Plant in )ulacan. In the terms of conditions of the original purchase order, the t$o unit *re+uenc, Con-erter shall !e deli-ered !, Danfoss $ithin / to 10 $ee1s from the opening of the letter of credit. 2he letter of credit opened !, CCC in fa-our of Danfoss on eptem!er ", 1""#. &. On eptem!er 1#, 1""#, MINCI informed CCC that its order are alread, read, for shipment and MINCI re+uested to amend the letter of credit changing the port of origin.loading from ingapore to Denmar1 ( ingapore is the 3sian 4egional Office of Danfoss, the 5ead Office of the compan, is Denmar1). CCC complied and the port of origin in the letter of credit $as changed. %. On No-em!er 6, 1""#, MINCI rela,ed to CCC that Danfoss Inc. $as still chec1ing the status of their order. CCC replied that e-er, dela, in the deli-er, of the order $ill cause loss to their compan,, so CCC re+uested for earl, $or1 out and immediate shipment to a-oid further loss. 7. )ut, on No-em!er ", 1""#, Danfoss Inc. informed MINCI through fa8, that the reason for the deli-er, pro!lems $as that some of the supplied components for the ne$ 9:2 ;000 series (this ma, !e a part of the con-erter $hich is the su!<ect thing in this case or a machine to create the con-erter) did not meet the agreed +ualit, standard. o, Danfoss $as can-assing for another supplier for the said 9:2 ;000 series. In the fa8, there $as no clear message as to $hen normal production $ill resume. ;. =pon recei-ing the rela,ed information, CCC surmised that Danfoss $ould not !e a!le to deli-er their order. 2here $as also no definite commitment of the deli-er, from Danfoss and MINCI, so CCC informed MINCI that the, intend to cancel its order. 2he order $as cancelled on No-em!er 1%, 1""#. 6. 5ence the complaint for damages filed !, CCC $ith the 42C of >ue?on Cit, against Danfoss and MINCI on No-em!er ;, 1""/. In repl,, Danfoss filed a motion to dismiss the complaint. CCCs contention @ Due to the AimpendingB dela, in the deli-er, of its order, it suffered more than P/ million and $as compelled to loo1 for another supplier. Danfosss contention@ 2he case should !e dismissed on the ground that it did not state a cause of action. 1) 2he letter of credit $as opened on eptem!er ", 1""#, so, since the agreed deli-er, period is / to 10 $ee1s from the opening of the letter of credit, the due date is until No-em!er 1", 1""#. &) 3lthough Danfoss $as ha-ing a pro!lem $ith its supplier prior to CCCs cancellation of its order, CCC onl, surmised that Danfoss could not deli-er $ithin the due date agreed upon. %) Neither Danfoss nor CCC agreed to change the date of deli-er,. Onl, the port of origin $as changed in the letter of credit. Danfoss has until No-em!er 1", 1""# to deli-er the order, CCC cancelled the order on No-em!er 1%, 1""#. 7) CCC ne-er made an e8tra<udicial demand for the deli-er, of its order on its due date as it cancelled the order !efore the due date. ;) Damages sought for !, CCC could not ha-e accrued ,et since the order $as cancelled !efore the deli-er, $as actuall, dela,ed. #. /. 42C ruled in fa-or of CCC. 3ccording to the 42C@ A...the issue of $hether or not the defendants incur dela, in the deli-er, of the e+uipment in +uestion $ithin the period stipulated is a de!ata!le +uestion $hich necessitates actual trial on the merits $here the parties ha-e to adduce e-idence in support of their respecti-e stance. C3@ 3ffirmed the decision of the 42C and denied the Motion for 4econsideration of Danfoss.

ISS)E( (ON there $as a cause of action in the complaint filed !, CCC against Danfoss *ELD( No, there $as no cause of action in the complaint for damages filed !, CCC. C ruled that AIn order to sustain a dismissal on the ground of lac1 of cause of action, the insufficienc, must appear on the face of the complaint. 3nd the test of the sufficienc, of the facts alleged in the complaint to constitute a cause of action is $hether or not, admitting the facts alleged, the court can render a -alid <udgment thereon in accordance $ith the pra,er of the complaint. *or this purpose, the motion to dismiss must h,potheticall, admit the truth of the facts alleged in the complaint.B 3fter a careful perusal of the allegations in respondents complaint for damages against petitioner, $e rule that the same failed to state a cause of action. (hen respondent sued petitioner for damages, petitioner had not -iolated an, right of respondent from $hich a cause of action had arisen. 4espondent onl, surmised that petitioner $ould not !e a!le to deli-er the t$o units fre+uenc, con-erter.in-erter on the date agreed upon !, them. )ased on this apprehension, it cancelled its order si8 da,s prior to the agreed date of deli-er,. 5o$ could respondent hold petitioner lia!le for damages (1) $hen petitioner had not ,et !reached its o!ligation to deli-er the goods and (&) after respondent made it impossi!le for petitioner to deli-er them !, cancelling its order e-en !efore the agreed deli-er, dateC 2he trial court erred in ruling that the issue of $hether or not the defendants incurred dela, in the deli-er, of the e+uipment $ithin the period stipulated $as a de!ata!le +uestion. It said that trial on the merits $as necessar, and the parties had to adduce e-idence in support of their respecti-e positions./ )ut $hat $as there to argue a!out $hen, !ased on the allegations of the complaint, petitioner $as not ,et due to deli-er the t$o units fre+uenc, con-erter.in-erter $hen respondent cancelled its orderC It still had si8 da,s $ithin $hich to compl, $ith its o!ligation. 2he court a +uo should not ha-e denied petitioners motion to dismiss the complaint (for its failure to state a cause of action) $hen, on its face, it $as clear that petitioner had not ,et reneged on its o!ligation to deli-er the fre+uenc, con-erter.in-erter on the date mutuall, agreed upon !, the parties. Moreo-er, the o!ligation itself $as negated !, no less than respondents o$n act of cancelling its order e-en !efore the prestation !ecame due and demanda!le. (here therefore $as the !reachC (here $as the damage caused !, petitionerC 2here $as none. Conse+uentl,, it $as $rong for the C3 to affirm the order of the trial court den,ing petitioners motion to dismiss the complaint for its failure to state a cause of action.