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INDUSTRIAL TEXTILE MANUFACTURING COMPANY OF THE PHILIPPINES v. LPJ ENTERPRISES

FACTS:

LPJ Enterprises, Inc. (respondent) had a contract to supply 300,000 bags of cement per year to Atlas Consolidated Mining and Development Corporation. Industrial Textile Manufacturing Company of the Philippines (Itemcop) approached the respondent with an offer to cooperate in developing plastic cement bags, to which the respondent agreed. However, the experiment was unsuccessful, with cement dust seeping out of the plastic bags. Despite this setback, the petitioner continued with the experiment and eventually managed to reduce the seepage with improved bags. The petitioner then sent 180 bags of cement using the plastic bags to Atlas and declared the experiment a success. Subsequently, the petitioner issued four purchase orders for plastic bags to the respondent, and the petitioner delivered the orders. However, the respondent only made partial payments, leaving a balance. The petitioner demanded payment for the remaining balance, but the respondent denied full responsibility for the second, third, and fourth purchase orders. The respondent claimed that the workers of the cement supplier refused to use the plastic bags due to health hazards caused by the cement dust seepage. The trial court ruled in favor of the petitioner, ordering the respondent to pay the remaining balance with interest.

ISSUES:

  1. Whether respondent is liable to pay petitioner for the undelivered plastic bags covered by the second, third, and fourth purchase orders.

  2. Whether respondent is obligated to return the unused plastic bags to petitioner.

RULING:

  1. Yes, respondent is liable to pay petitioner for the undelivered plastic bags covered by the second, third, and fourth purchase orders. The trial court ruled that respondent is liable to pay the remaining balance of P84,123.80 for the undelivered bags, and this ruling was affirmed by the Intermediate Appellate Court.

  2. No, respondent is not obligated to return the unused plastic bags to petitioner. The bags were in the possession of respondent's supplier and petitioner maintained that it was respondent's obligation to return the bags. However, respondent claimed that the workers of their supplier strongly objected to the use of the plastic bags due to health hazards, thus they were forced to revert to using kraft paper bags. The trial court did not rule on this issue, but the Intermediate Appellate Court absolved respondent from any liability to return the bags.

PRINCIPLES:

  • Liability for undelivered goods: If a buyer fails to accept and pay for the goods in accordance with the terms of the contract, the seller is entitled to recover the purchase price of the undelivered goods. (Commercial Law)

  • Obligation to return goods: A buyer is generally not obligated to return goods that they did not accept and pay for, unless otherwise provided in the contract or there are specific legal provisions that require the return of the goods. (Commercial Law)

  • Liability for health hazards: If the use of certain goods poses serious health hazards to workers or consumers, the buyer may be justified in refusing to use such goods and terminating the contract. The seller may be relieved from liability for the non-use of the goods in such cases. (Health and Safety Laws)