Yu v. CA

     Yu v. CA, 

G.R. No 86683, 

January 21, 1993

DOCTRINE: The right to perform an exclusive distributorship agreement and to reap the

profits resulting from such performance are proprietary rights which a party may protect,

and which may otherwise not be dismissed, nay, rendered illusory by the expedient act

of utilizing or interposing a person or firm to obtain goods from the supplier to defeat the

very purpose for which the exclusive distributorship was conceptualized, at the expense

of the sole authorized distributor.

FACTS: 

Petitioner, Yu is the exclusive distributor of the House of Mayfair wallcovering

products in the Philippines, cried foul when his former dealer of the same goods, herein

private respondent, purchased the merchandise from the House of Mayfair in England

through FNF Trading in West Germany and sold said merchandise in the Philippines.

Petitioner has had an exclusive sales agency agreement with the House of Mayfair since

1987 to promote and procure orders for Mayfair wallcovering products from customers in

the Philippines. Private respondent was then petitioner’s dealer, imported the same goods

via the FNF Trading which eventually sold the said merchandise in the domestic market.

Petitioner, filed for suit for injunction since he believes that he was practically by-passed

and that private respondent acted in concert with the FNF Trading in misleading Mayfair

into believing that the said goods were actually intended for Nigeria wherein it was

otherwise shipped and sold in the Philippines. Private respondent denied this allegation,

and responded that petitioner’s understanding with Mayfair is binding only between the

parties. RTC denied the motion for the issuance of a writ of preliminary injunction to

restrain the defendant from selling the goods it has ordered from the FNF Trading of

Germany. In its decision the court stated that the terms and conditions of the agreement

between the plaintiff and the House of Mayfair for the exclusive distributorship by the

plaintiff of the latter’s goods appertain only to them and that there is no privity of contract

between the plaintiff and the defendant. Petitioner filed a petition for review on certiorari

with the CA reacted in the same nonchalant fashion. According to the appellate court,

petitioner was not able to demonstrate the unequivocal right which he sought to protect

and that private respondent is a complete stranger.

ISSUE: 

Whether or not the CA correctly agree with the lower court in disallowing the writ

of injunction? Whether or not there was an unfair competition? If there is, is petitioner

entitled for damages?

HELD: 

The court ruled in favor of the petitioner. The right to perform an exclusive

distributorship agreement and to reap the profits resulting from such performance are

proprietary rights which a party may protect and which may otherwise not be diminished,

nay, rendered illusory by the expedient act of utilizing or interposing a person or firm to

obtain goods from the supplier to defeat the very purpose for which the exclusive

distributorship was conceptualized, at the expense of the sole authorized distributor.

There was indeed an unfair competition, since the private respondent also did not dispute

that House of Mayfair was duped into believing that the goods ordered through FNF

Trading were to be shipped in Nigeria only, but the goods were actually sent to and sold

in the Philippines. To add, the breach caused by private respondent was even aggravated

by the consequent diversion of trade from the business of petitioner to that of private

respondent caused by the latter’s species of unfair competition as demonstrated no less

by the sales effected despite of this Court’s restraining order.