Samhwa Company Ltd. v. The Honorable Intermediate Appellate Court

Summary

This case involves a breach of contract dispute arising from a 1977 Memorandum of Agreement where respondents Sheff and Swiryn sold their shareholdings in Lotus Export Specialists Inc. to petitioner Samhwa Company Ltd. Under the agreement, Samhwa was obligated to secure the release of personal guarantees and Marcopper share collateral that the original stockholders provided to DBP for a corporate loan, and to make US $50,000 semi-annual payments if release was not accomplished within two years. Samhwa failed to perform these obligations despite DBP's approval of guarantee substitution in 1980. The Supreme Court affirmed lower court findings that this constituted substantial breach of contract under Civil Code provisions, entitling respondents to actual damages for guaranty fees, depreciation in collateral share values, and currency exchange losses, totaling P2,250,627.30. After offsetting respondents' admitted liability of P1,429,950.75, the Court ordered petitioners to pay net damages of P820,676.55, establishing that contracts have the force of law and breach results in liability for natural and probable consequences of non-performance.