Blossom and Company, Inc. vs. Manila Gas Corporation

A total repudiation of an entire, indivisible contract constitutes a single breach that merges all damages—both suffered and prospective—into one indivisible cause of action; a final judgment for damages in an action for that breach is res judicata and bars any subsequent suit for further damages arising from the same breach.

Blossom and Company, Inc., a buyer of tar by-products, entered into a supply contract with Manila Gas Corporation on September 10, 1918. The contract was amended on January 31, 1919, extending its term to ten years from January 1, 1919, and granting Blossom options to increase its monthly takings up to Manila Gas’s entire output. Beginning in July 1920, Manila Gas completely ceased all deliveries of both water gas tar and coal gas tar, citing increased raw material costs and a desire to sell at higher market prices. Blossom repeatedly demanded performance, but Manila Gas flatly refused. In November 1923, Blossom filed its first action to recover damages from July 1920 to September 1923 and to compel specific performance. The trial court awarded P26,119.08 in damages, refused specific performance, and left Blossom to its remedy of damages for future breaches. That judgment was affirmed by the Supreme Court on March 3, 1926 (G.R. No. 24777, 48 Phil. 848). After the affirmance, Manila Gas offered to resume delivery of minimum quantities; Blossom accepted deliveries from April 1926 to January 1927 under protest, paid increased prices, and reserved its rights. Disputes over quantities and pricing persisted. Blossom then commenced the present action for damages from September 1923 onward and for rescission.

• The Contract: On September 10, 1918, Blossom agreed to buy from Manila Gas specified minimum monthly quantities of water gas tar and coal gas tar for four years, with the price tied to the cost of raw materials. The contract was amended on January 31, 1919, extending the term to ten years from January 1, 1919. The amendment gave Blossom the right, at its option, to take the entire output of water gas tar and up to fifty percent of coal gas tar, and, upon ninety days’ notice, the entire output of coal gas tar, except what Manila Gas needed for its own use. To secure the modification, Blossom purchased adjacent land from Manila Gas on credit, executing a mortgage for the balance.

• The Total Cessation of Deliveries: Beginning in late July 1920, Manila Gas completely stopped delivering any tar under the contract. It refused all demands by Blossom, motivated by the increased market price of tar and the desire to obtain better prices from other buyers. The refusal was absolute and unqualified, extending to any quantity of either type of tar.

• The First Action (Civil Case No. 25352): On November 23, 1923, Blossom sued Manila Gas. The complaint alleged that Manila Gas “has refused and still refuses, to deliver to the plaintiff any coal and water gas tar whatsoever … since the said month of July, 1920,” in bad faith, and prayed for P124,848.70 in damages and an order compelling specific performance. The trial court awarded P26,119.08 as damages for the period July 1920 to September 1923, declined to order resumption of delivery, and stated that Blossom retained its remedy for damages for subsequent breaches. The judgment became final after affirmance by the Supreme Court on March 3, 1926.

• Resumed Deliveries Under Protest: After the affirmance, Manila Gas offered to deliver minimum monthly quantities. Blossom accepted deliveries of 180 tons of water gas tar and 54 tons of coal gas tar between April 1926 and January 1927, paying the prices set by Manila Gas. Blossom did so under written protest, reserving the right to claim overcharges and further damages, and continuously demanded the price basis and larger quantities under the option clauses. Manila Gas supplied only minimum quantities, refused to disclose raw-material cost data, and insisted that if Blossom wanted the full coal tar output it must also take the full water gas tar output.

• The Present Action: On March 3, 1927, Blossom filed this suit claiming P300,000 in damages for breaches from September 1923 through the remaining term and seeking rescission of the amended contract. Manila Gas invoked res judicata, arguing that the first judgment barred all further claims under the same contract.

• Res Judicata Inapplicable: Petitioner contended that the prior judgment was not a bar because the causes of action differed: the first suit sought damages only up to September 1923 and specific performance, while the present suit sought damages for later breaches and rescission. The trial court in the first case expressly reserved the right to sue for future damages.
• Continuing Contract Theory: Petitioner argued that the contract called for monthly deliveries over ten years, giving rise to separate, successive breaches. It maintained that it had elected to keep the contract in force and to sue for each installment breach as it occurred, consistent with the reservation in the prior judgment.
• Erroneous Interpretation of Option Clauses: Petitioner assigned error to the trial court’s adoption of the referee’s restrictive reading of the option provisions. It claimed the right to demand any quantity between the minimum and the specified maximum percentages, and that its notices for larger quantities were valid and made in good faith. Manila Gas’s refusal based on its own construction constituted further breaches entitling Blossom to full damages.

• Res Judicata Bar: Respondent countered that the amended 1919 contract was entire and indivisible. The complaint in the first action pleaded a single total and continuing refusal to perform, which amounted to a complete repudiation of the whole contract. The judgment in that action thus merged all claims for damages—past, present, and prospective—and precluded any second action on the same contract.
• Total Breach Accepted by Plaintiff: Respondent maintained that its 1920 refusal constituted a total breach, and Blossom accepted that breach by suing for damages rather than treating the contract as subsisting. Having made that election, Blossom could not later split its indivisible damage claim.
• Plaintiff Bound by Its Pleading: Respondent stressed that Blossom’s own first complaint alleged a permanent, ongoing refusal “since the said month of July, 1920” and bad faith. This judicial admission conclusively characterized the breach as total, and the legal consequences could not be circumvented by a non-binding recital in the judgment purporting to reserve future suits.

• Res Judicata: Whether the final judgment in Civil Case No. 25352, affirmed in G.R. No. 24777, constitutes res judicata barring Blossom’s claim for damages for breaches of the same contract occurring after September 1923.
• Option Interpretation: Whether the trial court erred in its interpretation of the option clauses concerning the quantities of tar Blossom was entitled to demand.
• Good Faith of Demands: Whether Blossom’s demands for additional tars were made in good faith and in compliance with the contract, such that Manila Gas’s refusal constituted independent breaches.
• Damages: Whether Blossom was entitled to damages beyond the P2,219.60 awarded for overcharges.

• Res Judicata: The plea of res judicata was sustained. The amended contract was an entire, indivisible agreement. Manila Gas’s absolute and unqualified refusal to perform from July 1920 onward constituted a total breach, not a series of partial breaches. When a contracting party totally repudiates an entire contract, the injured party’s claim for damages is a single, indivisible demand; all damages—both already suffered and prospective—must be recovered in one action. Blossom’s first suit for damages for that total breach, culminating in a final judgment, merged the entire damage claim into that judgment. A second action for later-installment damages arising from the same total breach was therefore barred under the doctrines of res judicata and the rule against splitting a single cause of action. The declaration in the first judgment that Blossom retained a remedy for future breaches had no binding effect on that question because the force of the judgment had not been litigated and could not prospectively determine the res judicata effect of the adjudication itself.
• Option Interpretation and Good Faith of Demands: The affirmance of the res judicata bar rendered these issues moot with respect to any claim for additional damages; no further breach of the original contract could be asserted.
• Damages: The award of P2,219.60 was affirmed. The deliveries made after April 1926 were treated by the trial court as arising from a separate, subsequent arrangement rather than under the original contract. The overcharges on those deliveries were not barred by res judicata and were properly computed.

• Total Breach of Entire Contract Bars Successive Actions: Where a contract is entire and one party commits a total breach by an absolute and unequivocal refusal to perform, the breach gives rise to a single, indivisible cause of action for all damages. The injured party must recover both suffered and prospective damages in one suit; a final judgment on that cause of action is res judicata and precludes any later action for additional damages arising from the same breach. This rule prevents the splitting of a single, indivisible demand into multiple suits.
• Rule Against Splitting a Cause of Action: A plaintiff may not divide a single cause of action and maintain successive suits for different parts of the same demand. When a contract is terminated by total repudiation, all claims for breaches and damages constitute an indivisible demand, and the judgment in the first suit is conclusive as to all claims that were or could have been litigated therein.

• “An unqualified and positive refusal to perform a contract, though the performance thereof is not yet due, may, if the renunciation goes to the whole contract, be treated as a complete breach which will entitle the injured party to bring his action at once.” (quoting Roehm v. Horst, 178 U.S. 1)
• “Inasmuch as there was a total breach of the contract by the defendant's refusal to deliver, the plaintiff cannot split up his demand and maintain successive actions, but must either recover all his damages in the first suit or wait until the contract matured or the time for the delivery of all the goods had arrived.” (quoting Pakas v. Hollingshead, 184 N.Y. 211)
• “In such a case it is no warrant for a second action that the party may not be able to actually prove in the first action all the items of the demand, or that all the damage may not then have been actually suffered. He is bound to prove in the first action not only such damages as has been actually suffered, but also such prospective damage by reason of the breach as he may be legally entitled to, for the judgment he recovers in such action will be a conclusive adjudication as to the total damage on account of the breach.” (quoting Abbott v. 76 Land and Water Co., 161 Cal. 42)

• Pakas v. Hollingshead, 184 N.Y. 211, 77 N.E. 40 (1906) — Followed. A seller’s total refusal to deliver goods in installments gives the buyer one indivisible cause of action; the buyer cannot keep the contract alive and sue for successive breaches.
• L. Bucki & Son Lumber Co. v. Atlantic Lumber Co., 109 F. 411 (5th Cir. 1901) — Followed. Where a long-term installment contract is terminated by one party, the resulting damage claims form an indivisible demand, and the first judgment bars all subsequent claims under that contract.
• Watts v. Weston, 238 F. 149 (2d Cir. 1916) — Followed. Applied the rule that a total repudiation of a continuing contract makes the resulting damage claim indivisible, so the first suit precludes all later demands.
• Abbott v. 76 Land and Water Co., 161 Cal. 42, 118 P. 425 (1911) — Followed. Affirmed the rule that a total breach of an entire continuing covenant entitles the injured party to all damages in one action, and the judgment obtained is conclusive of total damage.
• Roehm v. Horst, 178 U.S. 1 (1900) — Cited for the principle that an absolute renunciation of a contract may be treated as a present total breach, giving an immediate right of action for all damages.

• N/A — The decision rests on common-law principles and precedents governing res judicata and the indivisibility of a cause of action for total breach; no specific statutory or codal provisions were cited or applied.

Johnson, Street, Malcolm, Villamor, Ostrand, Romualdez, and Villa-Real, JJ., concurred.