GENERAL ENTERPRISES, INC.

,
vs. LIANGA BAY LOGGING COMPANY,
INC.,
Facts:
Lianga Bay Logging Company, Inc. and General Enterprises, Inc, entered into a
contract. In the agreement, the Lianga Bay Logging Company, Inc. as the Producer and
the General Enterprises, Inc. as Distributor.

The Producer sent a notice to the Distributor stating that after the November shipment
there will be no longer logs available for export to Korea and Europe. The Producer
thereafter stopped supplying logs for export, thereby causing the Distributor to initiate
the action before the Court of First Instance of Rizal alleging breach of contract and
praying for damages both actual and compensatory.

Both parties presented their evidence, the court a quo rendered decision in favor of the
plaintiff and against the defendant ordering the latter to pay the damages. Defendant
appealed, that he sent notices to the appellee that he can no longer comply with the
obligation due to restriction imposed by the government and demanded renegotiation
for the price. Furthermore, due to the machinery breakdown he was unable to produce
logs to the appellee.

Issue:
Whether or not the defendant-appellant is liable to the damages even though it was
caused by fortuitous event.

Held:
Yes, The restrictions imposed by the government and the breakdown of machineries
have the nature of fortuitous events. But it was written in the contract that even the
happening of a fortuitous event in itself does not extinguish the obligation.

The award therefore, made by the court a quo of the amount of P100,000.00. The
court however believed, that the amount of P100,000.00 awarded to appellee as
exemplary damages is somewhat excessive it appearing that appellant did not act in bad
faith. Hence, the award was mitigated to P50,000.00.
WHEREFORE, the decision appealed from is hereby modified by awarding to appellee
only the amount of P50,000.00 as exemplary damages. In all other respects, the decision
is affirmed, with costs.