G.R. No.

19009           September 26, 1922

E.C. MCCULLOUGH & CO., plaintiff-appelle, vs. S. M. BERGER, Defendant-Appellant.

Fisher & DeWitt for appellant.

Perkins & Kincaid for appellee.

STATEMENT chanrobles virtual law library

For cause of action it is alleged that in the month of February, 1918, plaintiff and defendant and
defendant entered into an agreement by which the defendant was to deliver plaintiff 501 bales of
tobacco of New York City in good condition. That delivery was made and the plaintiff paid the
full purchase price. That upon an examination later the tobacco was found to be in must
condition, and its value was $12,000 less than it would have been if the tobacco had been in the
condition which defendant agreed that it should be, as a result of which plaintiff claims damages
for P12,000, United States currency, or P24,000, Philippine currency. That when the condition of
the tobacco was discovered, plaintiff promptly notified the defendant, who ignored the protest.
Wherefore, the plaintiff prays judgment for the amount of P24,000, Philippine currency, for costs
and general relief.chanroblesvirtualawlibrary chanrobles virtual law library

For answer, the defendant denies all the material allegation of the complaint, and, as a further
and separate defense, alleges that on August 15, 1918, he was advised by the plaintiff that the
latter was dissatisfied with the quality of the tobacco, and he made him a formal written offer to
repurchase the tobacco at the original selling price with accrued interest, and that plaintiff
rejected the offer.chanroblesvirtualawlibrary chanrobles virtual law library

That defendant has been ready and willing at all reasonable times to accept the return of the
tobacco and to return the amount of the purchase price with legal interest, and has a repeatedly
tendered to the plaintiff such purchase price in exchange for the return of the tobacco, and that
plaintiff had refused to return it. That any damages which plaintiff may have suffered have been
wholly due to his willful refusal to return and redeliver the
tobacco.chanroblesvirtualawlibrary chanrobles virtual law library

Upon such issues there was a stipulation of facts, and after trial the lower court rendered
judgment against the defendant and in favor of the plaintiff for the sum of P11,867.98 or
P23,735.96 with legal interest from January 6, 192, and costs, from which, after his motion for a
new trial was overruled, the defendant appeals, claiming that the court erred: First, in finding that
the tobacco was not in good condition when it arrived in New York; second, in holding that the
plaintiff is entitled to maintain an action for breach of contract after having agreed with the
defendant to rescind and to make restitution of the subject-matter and the price after a violation
of the agreement; third in holding that the plaintiff, having elected to rescind and notified the
defendant of such an election, may now refused it and affirm the same and recover from the
alleged breach of warranty; fourth, in holding that this action should be maintained, no claim
having been made for the alleged breach of warranty of quality within the statutory period; and,
fifth, in overruling the defendant's motion for a new trial.

JOHNS, J.:

In February, 1918, the defendant met the plaintiff in the city of Manila and advised him that he
had made a shipment of 501 bales of tobacco to new York City consigned to S. Lowenthal &
Sons, who had refused to honor the draft which was drawn upon them. He asked the plaintiff
whether he could use the tobacco provided it was "perfectly sound." At the plaintiff's request the
defendant made and signed a writing as follows:

Referring to the shipment of 501 bales of tobacco sold you consisting of 188 200-pound bales of
scrap and 313 200-pound bales of booked tobacco, I beg to confirm my verbal conversation with
you in stating that I guarantee the arrival of the tobacco in New York in good condition, subject,
of course, to conditions arising after its departure from Manila, which contingencies are covered
by adequate insurance. (Stipulation par. 1.)

Upon the strength of this the plaintiff cabled his New York office to honor the defendant's draft,
which was ninety days' sight for $33,109, and was the same draft and amount which had been
refused by S. Lowenthal & Sons. The draft was honored by his New York office at plaintiff's
request. The shipment consisted of 188 bales of "scrap," invoiced at 28 cents, gold, per pound,
and 313 bales of "striped" and "booked" at 36 cents, gold, per pound, and was made c.i.f. New
York. Before its arrival in New York the plaintiff had found purchasers for a large portion of it
with whom he had made contracts for sale subject to examination as to condition. The tobacco
arrived in two shipments. The first of 213 bales on April 26, and the second of 288 bales on May
18, 1918, and it was at once placed in warehouses by plaintiff. With the exception of four or five
bales, it appeared from an examination that the tobacco was well baled, and to all outward
appearances was in good condition after the shipment. After it was placed in the warehouse, the
tobacco itself was examined as to its condition and quality by the different buyers to whom the
plaintiff had contracted to sell it, and after such physical inspection, they refused to accept it and
complete their purchase because it was "musty." It appears that the plaintiff had sold 188 bales of
the tobacco before its arrival in New York to a customer in Red Lion, Pennsylvania, to whom he
shipped 75 bales of it after its arrival. This customer refused to receive any of the remaining
bales which he had purchased, and the plaintiff was compelled to again reship it back to New
York. Complying with his agreement, on May 21, 1918, the plaintiff paid the defendant's draft
which he had previously accepted, thus completing his part of the contract with the
defendant.chanroblesvirtualawlibrary chanrobles virtual law library

On May 23, 1918, and as a result of physical inspection, the plaintiff cabled the defendant that
the tobacco was unsatisfactory, and on June 13, he again cabled that there would likely be a loss.
On June 28, 1918, the plaintiff wrote a letter to the defendant in which, among other things, he
says:

. . . The tobacco has a very strong ground smell and somewhat of a musty smell as though it had
been mixed up with must tobacco. In other words, it appears like this tobacco assorted from bales
which were mildewed and this is that part of the bale which was not mildewed. It does not seem
possible that this odor, or musty smell, could have developed in transit as it seems perfectly clear
that the tobacco was packed in that same condition. In all the bales which we have examined,
which have been considerable, the tobacco seems to be perfectly dry. In view of that I can see
nothing but every indication that the tobacco was originally a bad lot.

In this letter he also advised the defendant that he was doing everything he could to sell the
tobacco, and that he did not have any prospective buyer even at a loss of 25 per
cent.chanroblesvirtualawlibrary chanrobles virtual law library

August 9, 1918, the defendant acknowledge the receipt of the letter and cables, saying that he
was "not in a position to lose between seventeen and twenty thousand pesos, and that he would
consent to a reduction of four thousand pesos, if that was acceptable, and, if it was not, to have
the bank pay back the amount of the draft with interest and take charge of the tobacco until the
defendant would arrive in New York." The plaintiff did not receive this cable until August 21,
when he cabled in reply that he would turn the tobacco over to the defendant, and that he
"awaited telegraphic instruction in regard to it. That at least twenty dealers had passed on the
tobacco." At that time the plaintiff had sold 66 bales of scattered samples from which, with the
75 bales sold to the Red Lion customer, he realized
$9,031.71.chanroblesvirtualawlibrary chanrobles virtual law library

September 5, 1918, the defendant wrote the New York Agency of the Philippine National Bank
in which he said that the plaintiff had advised him that the tobacco on arrival was satisfactory,
and that there would be a loss, and that the had assured its arrival at destination "in good
condition." That he was taking it back. That the bank should pay plaintiff $33,109 plus interest
upon delivery to it of the 501 bales. That "on no account should they agree to accept any
shortage in the number of bales."chanrobles virtual law library

October 18, 1918, without any knowledge of the defendant's instruction to the bank, the plaintiff
wrote him that his proposition to take the tobacco back was satisfactory in which he said that he
had not heard from the bank "at the time of writing with reference to taking back of the
tobacco."chanrobles virtual law library

October 30, 1918, the bank wrote the plaintiff that it would take back the identical 501 bales, and
pay him the amount of the draft and interest. The plaintiff then wrote the bank a complete history
of the transaction, and explained why the identical 501 bales could not be returned. That he had
realized $9,031.71 from 141 bales of it which he had sold, for which he would account and
return the balance of the tobacco which was then unsold and in the New York warehouse. The
$9,031.71 was more than the actual agreed purchase price of the 141 bales. This offer was cabled
to the defendant, who replied:

The instructions given you in my letter dated September 5, 1918, will not be modified.

The bank notified the plaintiff of the receipt of this cable, and in turn notified the plaintiff of the
receipt of this cable, and in turn notified the plaintiff of the receipt of this cable, and in turn
notified the defendant that the plaintiff would sell the tobacco at public auction, and then sue him
for the balance of the purchase price, and later the plaintiff did sell the remainder of the tobacco
upon which there was a net actual loss to him of $11,867.98, over and above all actual charges
and expenses.chanroblesvirtualawlibrary chanrobles virtual law library

Although at the time of the making of the contract between them the plaintiff and defendant were
in Manila, the tobacco involved was on the high seas in transit to New York. From necessity the
plaintiff could not see or examine it and would not know anything about its grade or quality, and,
for that reason, insisted that the defendant should make and sign the writing above quoted in
which he says:

I guarantee the arrival of the tobacco in New York in good condition, subject, of course to, to
conditions arising after its departure from Manila, which contingencies are covered by adequate
insurance.

The trial court found and the testimony is conclusive that the tobacco did not arrive in New York
"in good condition," and that , as a matter of fact, it was not "in good condition" when it left
Manila.chanroblesvirtualawlibrary chanrobles virtual law library

The plaintiff and defendant had known each other for about ten years, and had mutual confidence
in each other, and were experienced business men.chanroblesvirtualawlibrary chanrobles virtual
law library

Defendant's draft of the tobacco had been dishonored. Plaintiff was willing to take the tobacco
and honor the draft, with the proviso that the defendant would guarantee its arrival "in good
condition."chanrobles virtual law library

The evidence shows that in the whole transaction, the plaintiff acted in good faith and made an
earnest effort to protect the defendant and minimized his loss. Defendant knew that in the very
nature of things the plaintiff bought the tobacco for the purpose of resale, and that in the ordinary
course of business, he would resell it. The record shows that he found purchasers for portions of
it before its arrival in New York. The only reason why plaintiff's sales were not consummated
was because the tobacco did not stand inspection and was not "in good condition" at the time of
its arrival in New York. In other words, plaintiff bought and paid the defendant for tobacco
which was not "in good condition," and bought it for the purpose of resale. In the very nature of
things, the defendant knew that the plaintiff bought the tobacco for the purpose of resale, and he
also knew that , if the tobacco was not "in good condition," it was not worth the amount of the
purchase price which plaintiff paid.chanroblesvirtualawlibrary chanrobles virtual law library

The defense cites and relies upon articles 336 and 342 of the Code of Commerce which are as
follows:

A purchaser who, at the time of receiving the merchandise, fully examines the vendor, alleging a
defect in the quantity or quality of the merchandise.chanroblesvirtualawlibrary chanrobles virtual
law library

A purchaser shall have a right of action against a vendor for defects in the quantity or quality of
merchandise receive in bales or packages, provided he brings his action within the four days
following it receipt, and that the damage is not due to accident or to natural defect of the
merchandise or to fraud.chanroblesvirtualawlibrary chanrobles virtual law library

In such cases the purchaser may choose between the rescission of the contract or its fulfillment in
accordance with what has been agreed upon, but always with the payment of the damages he
may have suffered by reason of the defects or faults.chanroblesvirtualawlibrary chanrobles
virtual law library

The vendor may avoid this claim by demanding when making the delivery that the merchandise
be examined by the purchaser for his satisfaction with regard to the quantity and quality thereof.

Article 342:

A purchaser who has not made any claim based on the inherent defects in the article sold, within
the thirty days following its delivery, shall lose all rights of action against the vendor for such
defects.

Whatever may be the rule as to sales which are completed within the jurisdiction of the
Philippine Islands, those sections do not, and were never intended to, apply to a case founded
upon the facts shown in the record. Although it is true that the contract between the plaintiff and
the defendant was made in Manila, yet at the time it was made the tobacco was on the high seas,
and under the contract, it was to be delivered "in good condition" in the City of New York, in
consideration of which the plaintiff agreed to pay the draft. That is to say, the transaction was not
complete until after the arrival of the tobacco in New York "in good condition," and the payment
of the draft. It must be conceded that if, for any reason, the tobacco did not arrive in New York,
the defendant could not recover upon the draft from the plaintiff. Hence, it must follow that the
delivery of the tobacco at New York was a condition precedent which devolved upon the
defendant to perform without which he would not have a cause of action against the
plaintiff.chanroblesvirtualawlibrary chanrobles virtual law library

It is true that the writing recites "the shipment of 501 bales of tobacco sold you." Yet, the fact
remains that it was necessary to deliver the tobacco in New York to complete the
sale.chanroblesvirtualawlibrary chanrobles virtual law library

Contracts of this nature should be construed with reference to the surrounding conditions and the
relative situation of the parties.chanroblesvirtualawlibrary chanrobles virtual law library

At the time this contract was made both parties were in Manila, the tobacco was in transit to New
York, and the defendant knew that the plaintiff entered into the contract for the purpose of a
resale. Soon after the contract was made, the plaintiff left Manila and went to New York where,
relying upon this contract with the defendant, he found purchasers for the tobacco on the
assumption that it was "in good condition."chanrobles virtual law library
Although the word "sold" is used in the written contract, the transaction shows that the sale was
not complete until the arrival of the goods in New York.chanroblesvirtualawlibrary chanrobles
virtual law library

The case of Middleton vs. Ballingall (1 Cal., 446), is somewhat in point, in which the court says:

I think that the fair construction to be put upon the contract is, that on the arrival of the ship
containing the goods, the defendants should deliver them, and the plaintiffs should pay the
contract price. And the authorities hold that the arrival of the goods, in such case, is a condition
precedent, which must be shown to have taken place before either party can bring suit.

In the instant case, the contract was at least executory as to the delivery of the tobacco in New
York.chanroblesvirtualawlibrary chanrobles virtual law library

Cyc., vol. 35, pp. 274, 275 and 276, says:

In order to pass the title to goods as against the seller or those claiming under him there must be
a valid existing and completed contract of sale. Under a complete contract of sale the property in
the goods passes at once from the seller to the buyer, at the place where the contract becomes
complete, and for this reason the agreement is frequently called an executed contract. The sale is,
however, an executory contract, if the seller merely promises to transfer the property at some
future day, or the agreement contemplates the performance of some act or condition necessary to
complete the transfer. Under such a contract until the act is performed or the condition fulfilled
which is necessary to convert the executory into an executed contract, no title passes to the buyer
as against the seller or persons claiming under him. While certain terms and expressions standing
alone import an executed or executory contract, they are by no means conclusive but must be
construed with reference to other provisions of the contract and according to what appears to
have been the real intention of the parties, and so a mere recital in the writing evidencing the
contract that the article is "sold" or that the buyer has "purchased" it does not necessarily make
the contract executed; while on the other hand a recital that the seller "agrees to sell" is not
conclusive that the title was not intended to pass immediately.

The trial court found and the evidence sustains the finding that that plaintiff acted in good faith.
The contract was made in February, 1918 the draft was payable ninety days after date; the first
shipment of 213 bales arrived on April 26, and the second of 288 bales on May 18, and the
plaintiff the draft on May 21 1918, and the transaction between the parties then became
complete. On May 23, he cabled the defendant that the tobacco was unsatisfactory. On June 13,
he cabled that there would be a loss. On June 28, he wrote the letter above quoted. September 5,
the defendant wrote the New York Agency of the Philippine National Bank that he would take
the tobacco back on condition that there was not any shortage in the number of bales. During all
of this time, the defendant had the use of plaintiff's money. It is true that the defendant offered to
take the tobacco back and refund the money, but this offer was not actually made to the plaintiff
until October , and was upon the condition that the full amount of the 501 bales should be
returned, which was an impossible condition for the plaintiff to perform. But the plaintiff did
offer to account to the defendant for the tobacco which he had sold and to return all of the unsold
tobacco which was then in his warehouse, and the defendant declined the offer. As a business
man, he knew that the plaintiff has then purchased the tobacco for the purpose of a resale, and
that the tobacco had arrived at New York about five months before the offer was made, and he
also knew that the plaintiff was using every effort to sell it and convert it into money, and that he
would sell the whole or any part of it if a purchaser could be found at a reasonable price. At the
time the defendant's offer was communicated to the plaintiff by the bank the plaintiff in turn
offered to account to the defendant for the entire proceeds of the 141 bales which he had already
sold, and to deliver to him all of the unsold tobacco. This was all that the plaintiff could do under
the existing conditions. The fact that the defendant did not accept this offer is strong evidence
that he was seeking an undue advantage, and that his offer to plaintiff was not made in good
faith.chanroblesvirtualawlibrary chanrobles virtual law library
The second shipment arrived in New York on May 18, and the plaintiff could not be expected to
take any final action until the las shipment arrived. On learning the true condition of the tobacco,
the plaintiff cabled the defendant on May 23 that it was unsatisfactory, and again on June 13, that
there would be a substantial loss, which was followed by the letter of June 28th above
quoted.chanroblesvirtualawlibrary chanrobles virtual law library

The defects in the tobacco were inherent and could not be ascertained without opening the bales
and making a physical examination. When this was done, the plaintiff promptly cabled the
defendant that the tobacco was not satisfactory. In the nature of things, the plaintiff could not
then render the defendant a statement of the amount of this claim. By the terms of the contract,
the defendant guaranteed the arrival of the tobacco in New York "in good condition."chanrobles
virtual law library

Plaintiff's first cable sent ten days after the arrival of the tobacco advised the defendant that it
was unsatisfactory, and the second, twenty-six days after its arrival, advised him that there would
be a loss.chanroblesvirtualawlibrary chanrobles virtual law library

Appellant's attorneys have submitted a very able and adroit brief in which they severely criticize
the evidence on the part of the plaintiff. Upon all of the material questions of fact, the trial court
found for the plaintiff, and, in our opinion, the evidence sustains the
findings.chanroblesvirtualawlibrary chanrobles virtual law library

It must be remembered that during all these times there was about ten thousand miles of ocean
between them.chanroblesvirtualawlibrary chanrobles virtual law library

The plaintiff had parted with his money and honored the draft, expecting to sell the tobacco and
get his money back with a profit.chanroblesvirtualawlibrary chanrobles virtual law library

The testimony is conclusive that the plaintiff in good faith tried to sell the tobacco, and that he
sold the 141 bales at the best obtainable price; that the only reason why he did not sell the
remainder was because the tobacco was not "in good condition;" and that when he first knew that
it was not "in good condition," he promptly cabled that defendant that it was
unsatisfactory.chanroblesvirtualawlibrary chanrobles virtual law library

As we construe the record, after the tobacco was inspected, the plaintiff promptly advised the
defendant that it was unsatisfactory, and that he would have to sustain a loss, and in goo faith
undertook to protect the defendant and to minimize the loss, and plaintiff's claim is not barred by
the provisions of either article 336 or 342 of the Code of
Commerce.chanroblesvirtualawlibrary chanrobles virtual law library

The judgment is affirmed, with costs. So ordered.chanroblesvirtualawlibrary chanrobles virtual

law library

Araullo, C.J., Johnson, Malcolm, Avanceña, Villamor, Ostrand and Romualdez, JJ., concur.

Separate Opinions chanrobles virtual law library

STREET, J., concurring:chanrobles virtual law library

I concur in the conclusion reached in this case and in accord with most that is said in the opinion. But in the view I take of the
case, it ought not to be said that the sale was not complete until the arrival of the tobacco in New
York.chanroblesvirtualawlibrary chanrobles virtual law library

In view of the express guaranty given by the defendant to the effect that the tobacco would arrive in good condition, barring
certain contingencies, and it having been clearly proved that the tobacco was not in good condition upon arrival there, a right of
action accrued to the plaintiff to be indemnified to the extent allowed, and this independently of article 342 of the Code of
Commerce. But, even supposing this provision to be applicable, claim was made within thirty days after complete delivery had
been effected. The maneuvers of the defendant relative to taking back the tobacco - on terms which he must have believed would
be impossible of fulfillment - were ruse to gain an advantage in the impending legal controversy; and the contention that there
was a rescission, or accepted offer or rescission, is untenable.
G.R. No. L-2412            April 11, 1906

PEDRO ROMAN, plaintiff-appellant, 
vs.
ANDRES GRIMALT, defendant-appellee.

Alberto Barretto, for appellant.

Chicote, Miranda and Sierra, for appellee.

TORRES, J.:

On July 2, 1904, counsel for Pedro Roman filed a complaint in the Court of First Instance of this
city against Andres Grimalt, praying that judgment be entered in his favor and against the
defendant (1) for the purchase price of the schooner Santa Marina, to wit, 1,500 pesos or its
equivalent in Philippine currency, payable by installments in the manner stipulated; (2) for legal
interest on the installments due on the dates set forth in the complaint; (3) for costs of
proceedings; and (4) for such other and further remedy as might be considered just and equitable.

On October 24 of the same year the court made an order sustaining the demurer filed by
defendant to the complaint and allowing plaintiff ten days within which to amend his complaint.
To this order the plaintiff duly excepted.

Counsel for plaintiff on November 5 amended his complaint and alleged that between the 13th
and the 23rd day of June, 1904, both parties, through one Fernando Agustin Pastor, verbally
agreed upon the sale of the said schooner; that the defendant in a letter dated June 23 had agreed
to purchase the said schooner and of offered to pay therefor in three installment of 500 pesos
each, to wit, on July 15, September 15, and November 15, adding in his letter that if the plaintiff
accepted the plan of payment suggested by him the sale would become effective on the following
day; that plaintiff on or about the 24th of the same month had notified the defendant through
Agustin Pastor that he accepted the plan of payment suggested by him and that from that date the
vessel was at his disposal, and offered to deliver the same at once to defendant if he so desired;
that the contract having been closed and the vessel being ready for delivery to the purchaser, it
was sunk about 3 o'clock p. m., June 25, in the harbor of Manila and is a total loss, as a result of
a severe storm; and that on the 30th of the same month demand was made upon the defendant for
the payment of the purchase price of the vessel in the manner stipulated and defendant failed to
pay. Plaintiff finally prayed that judgment be rendered in accordance with the prayer of his
previous complaint.

Defendant in his answer asked that the complaint be dismissed with costs to the plaintiff,
alleging that on or about June 13 both parties met in a public establishment of this city and the
plaintiff personally proposed to the defendant the sale of the said vessel, the plaintiff stating that
the vessel belonged to him and that it was then in a sea worthy condition; that defendant
accepted the offer of sale on condition that the title papers were found to be satisfactory, also that
the vessel was in a seaworthy condition; that both parties then called on Calixto Reyes, a notary
public, who, after examining the documents, informed them that they were insufficient to show
the ownership of the vessel and to transfer title thereto; that plaintiff then promised to perfect his
title and about June 23 called on defendant to close the sale, and the defendant believing that
plaintiff had perfected his title, wrote to him on the 23d of June and set the following day for the
execution of the contract, but, upon being informed that plaintiff had done nothing to perfect his
title, he insisted that he would buy the vessel only when the title papers were perfected and the
vessel duly inspected.

Defendant also denied the other allegations of the complaint inconsistent with his own
allegations and further denied the statement contained in paragraph 4 of the complaint to the
effect that the contract was completed as to the vessel; that the purchase price and method of
payment had been agreed upon; that the vessel was ready for delivery to the purchaser and that
an attempt had been made to deliver the same, but admitted, however, the allegations contained
in the last part of the said paragraph.

The court below found that the parties had not arrived at a definite understanding. We think that
this finding is supported by the evidence introduced at the trial.

A sale shall be considered perfected and binding as between vendor and vendee when they have
agreed as to the thing which is the object of the contract and as to the price, even though neither
has been actually delivered. (Art. 1450 of the Civil Code.)

Ownership is not considered transmitted until the property is actually delivered and the purchaser
has taken possession of the value and paid the price agreed upon, in which case the sale is
considered perfected.

When the sale is made by means of a public instrument the execution thereof shall be equivalent
to the delivery of the thing which is the object of the contract. (Art. 1462 of the Civil Code.)

Pedro Roman, the owner, and Andres Grimalt, the purchaser, had been for several days
negotiating for the purchase of the schooner Santa Marina — from the 13th to the 23d of June,
1904. They agreed upon the sale of the vessel for the sum of 1,500 pesos, payable in three
installments, provided the title papers to the vessel were in proper form. It is so stated in the
letter written by the purchaser to the owner on the 23rd of June.

The sale of the schooner was not perfected and the purchaser did not consent to the execution of
the deed of transfer for the reason that the title of the vessel was in the name of one Paulina
Giron and not in the name of Pedro Roman, the alleged owner. Roman promised, however, to
perfect his title to the vessel, but he failed to do so. The papers presented by him did not show
that he was the owner of the vessel.

If no contract of sale was actually executed by the parties the loss of the vessel must be borne by
its owner and not by a party who only intended to purchase it and who was unable to do so on
account of failure on the part of the owner to show proper title to the vessel and thus enable them
to draw up the contract of sale.

The vessel was sunk in the bay on the afternoon of the 25th of June, 1904, during a severe storm
and before the owner had complied with the condition exacted by the proposed purchaser, to wit,
the production of the proper papers showing that the plaintiff was in fact the owner of the vessel
in question.

The defendant was under no obligation to pay the price of the vessel, the purchase of which had
not been concluded. The conversations had between the parties and the letter written by
defendant to plaintiff did not establish a contract sufficient in itself to create reciprocal rights
between the parties.

It follows, therefore, that article 1452 of the Civil Code relative to the injury or benefit of the
thing sold after a contract has been perfected and articles 1096 and 1182 of the same code
relative to the obligation to deliver a specified thing and the extinction of such obligation when
the thing is either lost or destroyed, are not applicable to the case at bar.

The first paragraph of article 1460 of the Civil Code and section 335 of the Code of Civil Procedure are not
applicable. These provisions contemplate the existence of a perfected contract which can not, however, be enforced
on account of the entire loss of the thing or made the basis of an action in court through failure to conform to the
requisites provided by law.

The judgment of the court below is affirmed and the complaint is dismissed with costs against the plaintiff. After the
expiration of twenty days from the date hereof let judgment be entered in accordance herewith and ten days
thereafter let the case be remanded to the Court of First Instance for proper action. So ordered.
G.R. No. L-9954             March 22, 1915

CARLOS DE LIZARDI, administrator of the estate of Lim Jocsing, plaintiff-appellee, 

vs.
F.M. YAPTICO, defendant-appellant.

P. E. del Rosario for appellant.

Aitken and DeSelms for appellee.

TORRES, J.:

Appeal filed through bill of exceptions by counsel for the defendant from the judgment of
January 30, 1913, whereby the Honorable Adolph Wislizenus, judge, sentenced him to pay to the
plaintiff the sum of P10,320, with legal interest at the rate of 6 per cent a years from the date of
the filing of the complaint, and the costs.

On June 5, 1913, counsel for Carlos de Lizardi, administrator of the property of the deceased
Lim Jocsing, appointed in the proceedings for the settlement of his intestate estate, filed a
complaint in writing in the Court of First Instance of Cebu alleging; That on October 13, 1912,
said Lim Jocsing, then living, placed on board the steamer Bais, lying at Malitbog, Leyte, a
certain quantity of abaca valued at P15,000, consigned to the defendant F.M. Yaptico to be sold
in Cebu, Lim Jocsing insuring said abaca for the sum of P15,000 with an insurance company
whose agent in Cebu was the defendant himself and paying the premium on the insurance policy;
that on or about October 15, 1912, by reason of the wrecking of the said steamer Bais in its
voyage to Cebu, Lim Jocsing perished in the sea and at the same time all the abaca he had on
board was lost; that the defendant Yaptico collected the insurance, amounting to P15,000 and
appropriated the sum to his own use, refusing to return it to the plaintiff; wherefore, judgment is
prayed against the defendant by sentencing him to pay the sum of P15,000 to the plaintiff
administrator of the property of Lim Jocsing.

In his answer the defendant F.M. Yaptico admitted as a fact that Lim Jocsing had delivered for
him and loaded on board the steamer Bais a certain quantity of abaca valued at P10,320, and
under an express contract made between him and Lim Jocsing the abaca the latter delivered on
board the Bais became the property of Yaptico; he also admitted that said shipment of abaca had
been insured in his own name by the defendant, who paid the corresponding premium; that this
abaca was lost as a consequence of the wrecking of the said steamer, on which occasion the said
Lim Jocsing perished; that he likewise admitted the fact of having collected the insurance on the
abaca; but he denied that said insurance belonged to Lim Jocsing, and furthermore denied all
other allegations in the complaint not specifically admitted in his answer.

Under date of October 20, 1913 defendant filed a motion asking leave to amend the first
paragraph of his answer, because the value of the abaca loaded by Lim Jocsing upon the
steamer Bais, as billed to the defendant, was only P9,460, but was insured for P10,320. This
motion was denied by the court, as the facts set forth in the amendment might be the object of
proof on trial.

After trial and examination of the evidence adduced by both parties, the court found that the
abaca loaded by Lim Jocsing on the steamer Bais on October 13, 1912, was his property,
wherefore it rendered the decision above mentioned. Defendant excepted thereto and in writing
asked for a reopening of the case and moved for a new trial. This motion was denied with
exception on the part of the appellant, who presented his bill of exceptions, which was approved
and forwarded to the clerk of this court.

There is no question whatsoever as to the facts. Manuela Perez Lim Jocsing, a Chinese merchant
of the town of Malitbog, Leyte, secured from the firm of F.M. Yaptico, called also Chiat Seng, of
Cebu, the opening of an account current on its books and furthermore the extension to him of a
credit of P15,000 to be employed in the purchase of abaca and copra, this credits to be
guaranteed by all his business (Exhibit B, PP. 60, 61). On October 9, 1912, the Chinaman
Manuel telegraphed several times to the Yaptico firm asking it to send him one of its steamers,
with money and certain goods he had ordered that same day (Exhibit 16, p. 47; Exhibit 18, p. 48;
Exhibit 19, p. 52, Exhibit 22, p. 55; and Exhibit 23, p. 57); wherefore Yaptico sent the
steamer Bais to Malitbog, carrying 850 sacks of rice and other goods the value whereof
amounted to P7,127, and also the sum of P4,000 in cash consigned to the said Chinaman Lim
Jocsing (Exhibit C, p. 62).

Having received the goods and the money sent by the defendant, said Lim Jocsing in his turn on
October 13, 1912, loaded upon the Bais 430 piculs of abaca consigned to the defendant in Cebu,
which abaca at the rate of P22 a picul was worth P9,460, and this amount was charged to the
defendant, while it was also credited on the account current of Lim Jocsing, as appears from the
extract of accounts entered on page 46 of the record.

Aside from the consignment of abaca, copra was also loaded upon the said steamer, and these
articles of merchandise were insured at P15,000 for and in the name of Chiat Seng — that is, the
defendant Yaptico, in two insurance companies, whose agent in Cebu was defendant himself
(Exhibit 14, p. 45).

It is an indisputable fact that the defendant Yaptico collected the sum of P10,320, the insurance
on 430 piculs of abaca at the rate of P24, a picul, which sum he retains in his possession on the
ground that the abaca insured and lost through the wrecking of the said steamer belonged to him.

We have therefore to decide who was to owner of the abaca carried on board the Bais when it
was wrecked, and who is entitled to collect the insurances on that abaca.

The question resolves itself into an interpretation of the contract entered into between the parties
(Exhibit B, PP. 60 and 61 of the record), which gave rise to the commercial relations between
Manuela Perez Lim Jocsing of Malitbog, Leyte, and the firm of F.M. Yaptico of Cebu., This
contract, which is written in Chinese characters, was executed about the years 1909 by the said
Lim Jocsing in favor of the firm F.M. Yaptico, or Chiat Seng, and by virtue thereof the defendant
opened for him in its books an account current and at the same time extended to him a credit of
P15,000 to be employed in the purchase of abaca and copra, which was his principal business in
the Island of Leyte, Jim Jocsing guaranteeing said credit with the business he had established.

In the said contract appears the stipulation, among other things, that all the abaca and copra
which Lim Jocsing might secure should to be delivered to the defendant Yaptico and the value
thereof should be credited on the shipper's account, said Lim Jocsing obligating himself to ship
these article only Yaptico's steamers and to pay the latter the freight charge set forth in the
contract. Lim Jocsing bound himself to send and deliver to Yaptico at least 10,000 piculs of
abaca annually, but no quantity of copra was fixed, and if the abaca secured did not amount to
10,000 piculs he would pay the difference, and he obligated himself to pay to the defendant a
commission of 20 centavos for each picul sent; but the warehouse charges, fire insurance, and
other expenses the abaca might occasion while it was stored in Cebu would be for the account of
the shipper Lim Jocsing. IN the forth paragraph it was agreed that whenever Yaptico should send
a steamer to Lim Jocsing to get the abaca and copra he would also furnish the latter money and
merchandise in value approximating the amount of abaca and copra delivered. The fifth
paragraph of the contract reads literally: "The abaca and copra that I may deliver to be received
on board by his agent shall be for the account of Yaptico,. except in case I should otherwise
expressly provide in writing."

In the remaining paragraph it was agreed how the account should be liquidated and the debt paid
to Yaptico.

Plaintiff claims that all the abaca and copra delivered and loaded upon Yaptico's steamer and
sent to him in Cebu belonged to Lim Jocsing, who forwarded them in order that the defendant
might sell them on commission, not only because the Yaptico firm is a commission firm and this
kind of transactions form a large part of its business, but also from the context of the said
contract (Exhibit B) it appears that Lim Jocsing could pay a commission of 20 centavos to
Yaptico for each picul of abaca or copra sent to the latter; that these articles of merchandise
should be shipped only in the defendant's steamers at the freight rates stipulated; that furthermore
said Lim Jocsing obligated himself to bear the expenses of storage, insurance, etc., upon the
goods while they were stored in Cebu; and therefore the defendant Yaptico had on various
occasions telegraphed to Lim Jocsing in Malitbog the price quoted for abaca and copra in the
Cebu market and at other times communicated to him by telegraph the sales of his abaca or
copra, giving the grade of the article, the selling price and the buyer's name (Exhibit 16, p.47;
Exhibit 17, p.49; Exhibit 20, p. 50; and Exhibit 25, p. 53).

Finally, the plaintiff Lizardi produced in evidence various documents he had found among the
papers belonging to the deceased Lim Jocsing, some of which are invoices for goods sent him by
the defendant Yaptico; various extracts from Lim Jocsing's account current, which under the
contract (Exhibit B) the defendant sent him monthly, in which extract Lim Jocsing is credited
with the value of the sales of copra and abaca (Exhibit 6, 7, 8, and 12, ); some statements of sale
of abaca sent to Lim Jocsing by the defendant showing the quantity, grade, price, and buyer's
name (Exhibits 9, 10, and 11). All these documents are drawn up in Chinese, but heir
corresponding translations into Spanish are attached to the originals. In the said statement of sale
it appears that Lim Jocsing paid the expenses of the abaca sold in Cebu, consisting of freight
charges, drying, insurance, internal-revenue tax, and defendant's commission, expenses that by
the terms of the contract (Exhibit B) Lim Jocsing was obligated to meet.

It is now alleged by the plaintiff that in view of these facts the conclusions is inevitable that the
abaca which Lim Jocsing sent to the defendant Yaptico for sale on commission did not become
the latter's property, but continued to belong to the said Lim Jocsing and the trial; court so held.

Defendant maintains that by the clear and explicit terms of the fifth paragraph of the contract
(Exhibit B) it is understood without any effort whatsoever that all abaca shipped and delivered
on board his steamers became his property, unless Lim Jocsing expressly provided otherwise in
writing. It cannot be denied that Lim Jocsing did not expressly provided in writing for the
equipment of the abaca that he delivered on board the steamer Bais on October 13, 1912,
according to the agreement. He merely delivered it to the steamer's supercargo, without
providing in writing for the disposition of the abaca in a special manner under the terms of the
contract.

The witness Benito Tan Unchuan, who examined the Spanish translation of the contract Exhibit
B, at the request of plaintiff's counsel, affirmed that it is faithful and exact. The fifth paragraph of
this contract sets forth in a clear and positive manner, without leaving room for any reasonable
doubt, that the intention of the contracting parties was that the abaca and copra which should be
delivered and received on board the defendant's steamers would be on account — that is to say,
on account and at the risk of Yaptico, unless Lim Jocsing otherwise expressly provided in
writing. It is clear that the merchandise which was shipped on defendant's account and this risk
would be in his charge and under his responsibility, because once received it became his
property; and in case of loss, as has occurred, the defendant would be the only one prejudiced as
the owner thereof.

Upon this understanding of the contract the parties had dealing during the three of four years
they maintained commercial relations, for the manager of the Yaptico firm asserted that
whenever Lim Jocsing had abaca or copra to forward, he sent him money and goods for a value
equal to that of said merchandise which Lim Jocsing was to receive and the latter obligated were
made with money of the defendant, and for these reasons he had an agent, named Go Tiu, who at
the same time was the supercargo of the shipper Lim Jocsing (sten. notes, p. 23). In fact, the
insurance policies, Exhibit E, F, and G, demonstrate that in the months of February, April, and
May, 1912, Lim Jocsing insured in his own name certain shipments of abaca and copra
forwarded to the defendant in Cebu to be sold by him and these must have been acquired by Lim
Jocsing with his own money; but the other policies, Exhibit H and I, must undoubtedly have been
for the insurance of the abaca and copra collected and acquired with money of the defendant, for
they were issued in favor of Chiat Seng — that is, the defendant.

It is, therefore fact proven that, under clause 5 of the contract before mentioned, under the terms
of which the contracting parties acted, the abaca and copra delivered by Lim Jocsing on board
the steamer Bias for the defendant became the latter's property, nor can the plaintiff be permitted
to maintain a different theory from that which clearly and indisputably appears in the fifth
paragraph of the contract, Exhibit B, for it is provided in article 1281 of the Civil Code that:

When the terms of an obligation stated in a written contract are clear and leave no room
for doubt, the plaint meaning of the wording thereof should be observed, it not being
lawful to include therein things and cases different from those which the interested
parties intended to contract for. (Azarraga vs. Rodriquez, 9 Phil. Rep., 637.)

Persons who enter into a contract which is not contrary to law, to good morals, or to
public policy are bound by the terms of their agreement. (Santos vs. Marquez, 13 Phil.,
Rep. 207; Alcantara vs. Alinea, 8 Phil. Rep., 11; Icaza vs. Perz, 5 Phil. Rep., 166.)

Moreland, in the first paragraph it was stipulated that, when Lim Jocsing sent his products to the
defendant the latter was to credit the former's account with the value of the abaca and copra
forwarded. Hence it follows that upon receiving the goods and crediting Lim Jocsing's account
current with the value thereof the defendant made himself the real owner of the merchandise
delivered and therefore had a right to protect his interests by insuring it as he did. If the abaca
lost in the wrecking of the Bais had not been insured, upon whom would the loss fallen? Under
the paragraph of the contract cited, Lim Jocsing would not have lost the value of the abaca
because upon receipt of the goods on board the steamer the defendant had to place the value
thereof to the credit of Lim Jocsing, and whether the shipment arrived at Cebu or not its value
was already entered on his account, wherefore the one who would have suffered the loss in that
case would have been the defendant; but as he insured it in his name and on his account to
provided against accident and as the abaca belonged to him, it is just that he collect the value of
the insurance thereon.

True it is that Lim Jocsing was on board the Bais with the abaca in question when it was lost; and
that when he was going in person to Cebu with his abaca, the shipment was his own money; but
it is not proven in the record that Lim Jocsing had disposed by letter of the abaca which
disappeared, the value whereof was Yaptico's and therefore once delivered on board the steamer
to the supercargo, according to the fifth paragraph of the contract, the abaca should be regarded
as sold to Yaptico and as belonging to him, with the value of the insurance.

This theory is in conformity with the terms of the contract and is reasonable, for when the
defendant extended credit to Lim Jocsing he furnished him in cash the sum of P15,000 and,
furthermore, obligated himself to send money and goods of approximately the same value as the
abaca and copra he should receive from Lim Jocsing, so that the latter might secure more, thus
furnishing in advance the value of the goods which Lim Jocsing obligated himself to deliver to
the party who was furnishing him in advance the value of the shipment, and these goods,
consisting of copra and abaca, forwarded and delivered to the agent of the defendant, became the
reimbursement or payment of the sum advanced; wherefore it is only just that the defendant, as
owner of the money or of the value of the shipment, should be regarded as the owner thereof and
consequently of the insurance, the premiums on which he had paid.

Plaintiff argues that it is ridiculous and in conflict with the other clauses of the said contract,
Exhibit B, to suppose that the abaca and copra shipped on the defendant's steamer would be his
property and yet that Lim Jocsing should be obligated to pay the freight charges, insurance,
storage, and other expenses, for if Lim Jocsing had not been the owner of said article then he
would not have been obligated to bear those expenses.
The fact that Lim Jocsing had to reimburse these expenses does not conflict with the property
rights of the defendant Yaptico in the abaca and copra received from Lim Jocsing, taking into
consideration that the latter was doing business with capital or money of the defendant Yaptico,
without payment of any premium or interest; wherefore nothing is more just than that the
creditor should benefits from the freight charges on his boats, from the commission on the sales,
and that he be indemnified for the expenses of storage, fire insurance, and so forth, because the
defendant advanced his money without getting any profits from the operations of buying up
abaca copra carried on by the said Lim Jocsing.

The circumstances that the defendant Yaptico kept Lim Jocsing informed of the price of the
abaca and copra sold in Cebu, even of he goods delivered on board to the supercargo, does not
indicate ownership rights, but merely the interest Lim Jocsing had in knowing the price of the
sales, since the result of the latter would appear in the account current and the amount the sale
produced would be deducted from the sum advanced to him by the defendant.

As owner of the abaca the defendant Yaptico was interested in its preservation and had the right
to insure it against any risk or accident prejudicial to his interests, and since the loss of the abaca
would have injured Yaptico as the owner of both the fiber and the money with which it was
acquired, nothing is more just than that when it was insured the insurance should accrue to his
benefits and in payment of the value of the abaca, which he had already advanced.

For these reason the judgment appealed from must be reversed, and we should absolved the
defendant Yaptico from the complaint, as we hereby do, without special finding as to costs. So
ordered.
G.R. No. L-3383           September 13, 1907

TAN LEONCO, plaintiff-appellee, 
vs.
GO INQUI, defendant-appellant.

Chicote & Miranda for appellant.

Federico Olbes for appellee.

JOHNSON, J.:

On the 23rd of July, 1904, the plaintiff and appellee commenced an action in the Court of First
Instance of the Province of Sorsogon against the defendant, Go Inqui, as representative of the
mercantile company "J.C.," for ]the purpose of recovering the sum of 800 pesos, with interest.
This indebtedness is evidenced by a bill of exchange, executed and delivered by said company of
the plaintiff upon 3rd day of March, 1901. The bill of exchange was drawn upon one Lim Uyco,
of Manila.

The bill of exchange was duly presented to Lim Uyco, refused payment because he had received
instructions to that effect from the said company.

Upon the 15th day of August, 1906, the defendant filed an answer to the said complaint,
admitting all of the facts of said complaint, and setting up a counterclaim, claiming that the
plaintiff owed the defendant the sum P2,369, with interested at 6 per cent. To this answer the
plaintiff filed of the defendant, and setting up a counterclaim to that of the defendant, amounting
to P5,500.

Upon the 26th day of October, 1904, the Ho. Grant Trent, judge of the Court of First Instance of
said province, appointed arbitrators in accordance with the provisions of the Civil Code, for the
purpose of setting, if possible, the differences between the plaintiff and defendant. On the 31st
day of March, 1905, the said arbitrators mare a report of the facts in said cause.

On the 5th day of June, 1905, upon petition to the said judge signed by the attorneys for the
respective parties, the cause was set down for hearing without the intervention of the arbitrators,
and was duly tried before the judge of the Court of First Instance of said province.

On the 6th day of November, 1905, the judge indicated a sentence in the cause against the
defendant and in favor of the plaintiff for the sum of 800 pesos, Mexican currency, or its value in
the Conant, at the rate of P1.30, with interest 6 per cent from 3d day of march, 1901, and costs,
including the fees of the arbitrators appointed at its request of the respective the counterclaim
presented by the defendant.

The decision of the lower court contains the following finding of facts:

In the year 1897 the plaintiff left the Philippine for China, and prior to his departure
turned over to Tan Tonguan, for his management, the plantations of abaca (hemp) which
the plaintiff then possessed in this province. While the plaintiff was in China, Tan
Tonguan worked the abaca and obtained 800 pesos worth of fiber, which he caused to be
stored, by direction of the defendants, in a warehouse in Buhang, and after storing the
draft or check in question, handing it to the plaintiff, who in the mean time had returned
from China. The plaintiff then, desiring to leave again for China, presented the draft for
payment in Manila, but as the defendants had suspended the payment of the same, the
plaintiff was unable to collect the amount thereof. When the said abaca was stored by
Tan Tonguan in Buhang it became the property of the defendants (although it did not go
through their hands), and on the face of the draft they acknowledge having received the
amount of said draft. Therefore, it is evident that the defendants can not alleged now that
they had not received the amount of the said draft.
 In the years 1896 and 1897 the plaintiff entered into an agreement with the then head of
the firm, of J.C., wherein it was agreed that the plaintiff could transfer the shop at San
Isidro to the Chinaman Tan Tonguan, and the shop of Buhang tot he Chinaman Lim Joco
and Tim Bico; and by reason by such transfers it was agreed between them that the said
Chinamen to whom the two should had been transferred would become liable for the debt
of the plaintiff directly in connection with the said two shops, one being for the sum of
about 600 pesos and the under these conditions, the plaintiff can not now be held to the
liable for the 2,390 odd pesos claimed by the defendants in their counterclaim; they must
look for payment of this sum to the Chinamen in whose favor the two shops were
transferred.

When the draft in question was presented by the plaintiff in Manila for payment, having
failed to collect the amount,. he did not cause the protest to be drawn up in the manner
provided by the Code of Commerce. Whether this draft or check is considered as a bill of
exchange, it is my opinion that said draft or check should the plaintiff should therefore be
relieved from the formalities of the protest for want of payment of the same, as provided
for with regard to bills of exchange.

When the defendnat received notice of the decision of the lower court he presented a motion for
a new trial upon the ground that the facts found by the court were openly and manifestly contrary
to the weight of the evidence presented during the trial, and presented a motion for a new trial.
The motion for a new trial was denied by the lower court. the defendant then appealed to this
court.

An examination of the proof adduced during the trial shows to the issues presented to the court;
lower, considering the fact that the judge of the lower court saw and heard the witnesses, we
adopt his findings as the facts which constitute the preponderance of evidence adduced in the
cause.

From this decision the defendant appealed to this court assigned several errors which are alleged
to have been committed by the lower court, the first four of which relates to the consideration
which the defendant received for the said bill of exchange or check.

The evidence shows that the plaintiff, through his agent before the date on which the bill of
exchange was executed and delivered, deposited in a warehouse in the pueblo of Buhang a
quantity of abaca (hemp), the value of which was 800 pesos, and that the bill of exchange was
executed in payment for the abaca. The evidence also shows that the warehouse in the
said pueblo where the hemp was deposited belonged to the defendant and that it had been the
customs of the plaintiff to make deposit in the warehouses of the defendant.

After the deposit of the hemp in the manner above states,. and before the same was removed
from the warehouse by the defendant, the warehouse and its content s were destroyed by
the insurrectos. The defendant alleged that he never received the hemp and therefore there was
no consideration for the bill of exchange. The plaintiff claims that when the hemp was deposited
in the warehouse it became the property of the defendant and that the defendant recognized this
fact when he stated in the bill of exchange that it was given for "value received."

It is not disputed that the warehouse in which the hemp was deposited was the warehouse of the
defendant. The hemp became the property of the defendant upon the delivery thereof in the
warehouse of the defendant (arts. 1462 and 1463, Civil Code), and was property of the defendant
at the time a complete delivery of the said abaca to the defendant, and the loss occuring
thereafter,. without any fault of the plaintiff, was loss of the defendant . We that the delivery of
the hemp as above stated was duly made to the defendant and constituted a valuable
consideration for the said bill of exchange or check.

It was alleged that he said bill of exchange, after being presented to the drawee in Manila, was
not protested and that there is some question of the right of the p[plaintiff to recover upon said
bill of exchange without the same having been duly protested. The action was not brought upon
the bill of exchange; the bill of exchange was used only as evidence of the indebtedness. We
believe, however, that inasmuch as the defendant had himself ordered the drawee not to pay the
said bill of exchange, that protest and notice of nonpayment under these conditions was
unnecessary in order to render the drawer, or defendant in this case, liable.

As to the assignment of error relating to the counterclaim presented by the defendant, we are of
the opinion that the evidence did not support said contention on the part of the defendant.

The judgment of the lower court is therefore affirmed, with costs. So ordered.
G.R. No. L-17527             April 30, 1963

SUN BROTHERS APPLIANCES, INC., plaintiff-appellee, 

vs.
DAMASO P. PEREZ, defendant-appellant.

Dominador A. Alafriz for plaintiff-appellee. 

Robert P. Halili & Associates for defendant-appellant.

LABRADOR, J.:

This is an action brought by the plaintiff to recover from defendant the sum of P1,404.00, the
price of one Admiral Air Conditioner, Slim Style, Model 100-23-1 H.P., Serial No. 2978828,
delivered to the defendant by the plaintiff under a conditional sale agreement entered into by and
between them on December 6, 1958, in the City of Manila, plus stipulated interest of 12% from
January 6, 1959 until the same is fully paid, together with P200 as attorney's fees, and costs.
Defendant answered that the air-conditioner in question was delivered to him installed in the
office of the defendant located at Gardiner street, Lucena, Quezon on December 14, 1959 but
that said air-conditioner was totally destroyed by fire which occured in the morning of December
28, 1958 at 2 o'clock. Defendant further claimed that the machine was destroyed by force
majeure, not by the defendant's fault and/or negligence and, therefore, he is not liable under the
conditional sale, Annex "A", which the parties, plaintiff and defendant, had executed.

At the trial of the case the parties entered into a stipulation of facts, the most important provision
of which are as follows:

1. That defendant admits that on December 6, 1958, he entered into a Conditional Sale
Agreement with the plaintiff, copy of which contract is attached to the complaint as
Annex "A";

2. That pursuant to the terms and conditions provided in the said Conditional Sale
Agreement the plaintiff delivered to the defendant (1) Admiral Air Conditioner Slim
Style Model 100-23-1 HP, Serial No. 2978828 with the contract price of P1,678.00 and
that said Air Conditioner was received by the defendant;

3. That defendant made a down payment of P274.00 on December 6, 1958, pursuant to

the terms and conditions of the Conditional Sales Agreement; and Air Conditioner was
installed by the plaintiff, thru its representative, at Lucena, Quezon;

4. That said Air Conditioner was burned on December 27,1958, on or about 2:00 o'clock
in the morning, however, defendant will present evidence to show that the Air
Conditioner subject of the complaint herein was burned where it was installed by the
plaintiff;

5. That defendant, after making down payment of P274.00 to the plaintiff, did not pay
any of the monthly installments of P78.00 thereafter, leaving a balance of P1,404.00 in
favor of the plaintiff;

6. That after defendant presents evidence to prove that the Air Conditioner was burned
where it was installed by the plaintiff to the satisfaction of this Honorable Court, the
parties agree to leave to this Honorable Court the resolution of the issue whether loss by
fire extinguishes the obligation of the defendant to pay to the plaintiff the subsequent
installments of the initial payment;"

The Court of First Instance before which the action was brought rendered judgment condemning
the defendant to pay the plaintiff the amount demanded in the complaint, including interest and
attorney's fees. The defendant has appealed the case directly to us as involving only a question of
law.

The conditional sale executed by the plaintiff and defendant contained the following stipulation:

"2. Title to said property shall vest in the Buyer only upon full payment of the entire
account as herein provided, and only upon complete performance of all the other
conditions herein specified:

"3. The Buyer shall keep said property in good condition and properly protected against
the elements, at his/its address above-stated, and undertakes that if said property or any
part thereof be lost, damaged, or destroyed for any causes, he shall suffer such loss, or
repair such damage, it being distinctly understood and agreed that said property remains
at Buyer's risk after delivery;"

The Court below declared that as the buyer would be liable in case of loss for any cause, such
buyer assumed liability even in case of loss by fortuitous event; so it rendered judgment
declaring defendant liable for the sun demanded together with interest and attorney's fees.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to
prove their case not covered by this stipulation of facts. 1äwphï1.ñët

In this Court on appeal defendant-appellant argues that inasmuch as the title to the property sold
shall vest in the buyer only upon full payment of the price, the loss of the vendor; that the phrase
"for any cause" used in paragraph 2 of the agreement may not be interpreted to include a
fortuitous event absolutely beyond the control of the appellant; and that although Article 1174 of
the new Civil Code recognizes the exception on fortuitous event when the parties to a contract
expressly so stipulate, the phrase "for any cause" used in the contract did not indicate any
intention of the parties that the loss of the unit due to fortuitous event is to be included within the
responsibility of the vendor.

In answer to the arguments above set forth the appellee argues that the stipulation in the contract
of sale whereby the buyer shall be liable for any loss, damage or destruction for any cause, is not
contrary to law, morals or public policy and is specifically authorized to be stipulated upon
between the parties by Article 1174 of the Civil Code; that the risk of loss was expressly
stipulated to be undertaken by the buyer, even if the title to the property sold remained, also by
stipulation, in the vendor; that the terms "any cause" used in the agreement includes a fortuitous
event, and an express stipulation making the vendee responsible in such case is valid.

We believe that the agreement making the buyer responsible for any loss whatsoever, fortuitous
or otherwise, even if the title to the property remains in the vendor, is neither contrary to law, nor
to morals or public policy. We have held such stipulation to be legal in the case of Government
vs. Amechazurra, 10 Phil. 637 (Tolentino, Commentaries on the Civil Code, Vol. IV, p. 120)and
declare it to be based on a sound public policy in conditional sales according to American
decisions.

"The weight of authority support the rule that where goods are sold and delivered to the vendor
under an agreement that the title is to remain in the vendor until payment, the loss or destruction
of the property while in the possession of the vendor before payment, without his fault, does not
relieve him from the obligation to pay the price, and he, therefore, suffers the loss. In accord with
this rule are the provisions of the Uniform Sales Act and the Uniform Conditional Sales Act.
There are several basis for this rule. First is the absolute and unconditional nature of the vendee's
promise to pay for the goods. The promise is nowise dependent upon the transfer of the absolute
title. Second is the fact that the vendor has fully performed his contract and has nothing further to
do except receive payment, and the vendee received what he bargained for when he obtained the
right of possession and use of the goods and the right to acquire title upon making full payment
of the price. A third basis advanced for the rule is the policy of providing an incentive to care
properly for the goods, they being exclusively under the control and dominion of the vendee."
(47 Am. Jur., pp. 81-82).

We, therefore, agree with the trial court that the loss by fire or fortuitous event was expressly
agreed in the contract to be borne by the buyer and this express agreement is not contrary to law
but sanctioned by it as well as by the demands of sound, public policy. The judgment of the court
below is affirmed, with costs against defendant-appellant.
G.R. No. L-21263             April 30, 1965

LAWYERS COOPERATIVE PUBLISHING COMPANY, plaintiff-appellee, 

vs.
PERFECTO A. TABORA, defendant-appellant.

Paredes, Poblador, Cruz and Nazareno for plaintiff-appellee.

Tabora and Concon for defendant-appellant.

BAUTISTA ANGELO, J.:

On May 3, 1955, Perfecto A. Tabora bought from the Lawyers Cooperative Publishing Company
one complete set of American Jurisprudence consisting of 48 volumes with 1954 pocket parts,
plus one set of American Jurisprudence, General Index, consisting of 4 volumes, for a total price
of P1,675.50 which, in addition to the cost of freight of P6.90, makes a total of P1,682.40.
Tabora made a partial payment of P300.00, leaving a balance of P1,382.40. The books were duly
delivered and receipted for by Tabora on May 15, 1955 in his law office Ignacio Building, Naga
City.

In the midnight of the same date, however, a big fire broke out in that locality which destroyed
and burned all the buildings standing on one whole block including at the law office and library
of Tabora As a result, the books bought from the company as above stated, together with
Tabora's important documents and papers, were burned during the conflagration. This
unfortunate event was immediately reported by Tabora to the company in a letter he sent on May
20, 1955. On May 23, the company replied and as a token of goodwill it sent to Tabora free of
charge volumes 75, 76, 77 and 78 of the Philippine Reports. As Tabora failed to pay he monthly
installments agreed upon on the balance of the purchase price notwithstanding the long time that
had elapsed, the company demanded payment of the installments due, and having failed, to pay
the same, it commenced the present action before the Court of First Instance of Manila for the
recovery of the balance of the obligation. Plaintiff also prayed that defendant be ordered to pay
25% of the amount due as liquidated damages, and the cost of action.

Defendant, in his answer, pleaded force majeure as a defense. He alleged that the books bought
from the plaintiff were burned during the fire that broke out in Naga City on May 15, 1955, and
since the loss was due to force majeure he cannot be held responsible for the loss. He prayed that
the complaint be dismissed and that he be awarded moral damages in the amount of P15,000.00.

After due hearing, the court a quo rendered judgment for the plaintiff. It ordered the defendant to
pay the sum of P1,382.40, with legal interest thereon from the filing of the complaint, plus a sum
equivalent to 25% of the total amount due as liquidated damages, and the cost of action.

Defendant took the case to the Court of Appeals, but the same is now before us by virtue of a
certification issued by that Court that the case involves only questions of law.

Appellant bought from appellee one set of American Jurisprudence, including one set of general
index, payable on installment plan. It was provided in the contract that "title to and ownership of
the books shall remain with the seller until the purchase price shall have been fully paid. Loss or
damage to the books after delivery to the buyer shall be borne by the buyer." The total price of
the books, including the cost of freight, amounts to P1,682.40. Appellant only made a down
payment of P300.00 thereby leaving a balance of P1,382.40. This is now the import of the
present action aside from liquidated damages.

Appellant now contends that since it was agreed that the title to and the ownership of the books
shall remain with the seller until the purchase price shall have been fully paid, and the books
were burned or destroyed immediately after the transaction, appellee should be the one to bear
the loss for, as a result, the loss is always borne by the owner. Moreover, even assuming that the
ownership of the books were transferred to the buyer after the perfection of the contract the latter
should not answer for the loss since the same occurred through force majeure. Here, there is no
evidence that appellant has contributed in any way to the occurrence of the
conflagration.1äwphï1.ñët

This contention cannot be sustained. While as a rule the loss of the object of the contract of sale
is borne by the owner or in case of force majeure the one under obligation to deliver the object is
exempt from liability, the application of that rule does not here obtain because the law on the
contract entered into on the matter argues against it. It is true that in the contract entered into
between the parties the seller agreed that the ownership of the books shall remain with it until the
purchase price shall have been fully paid, but such stipulation cannot make the seller liable in
case of loss not only because such was agreed merely to secure the performance by the buyer of
his obligation but in the very contract it was expressly agreed that the "loss or damage to the
books after delivery to the buyer shall be borne by the buyer." Any such stipulation is sanctioned
by Article 1504 of our Civil Code, which in part provides:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer,
in pursuance of the contract and the ownership in the goods has been retained by the
seller merely to secure performance by the buyer of his obligations under the contract, the
goods are at the buyer's risk from the time of such delivery.

Neither can appellant find comfort in the claim that since the books were destroyed by fire
without any fault on his part he should be relieved from the resultant obligation under the rule
that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event.
This is because this rule only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in case of fortuitous event.
Here these qualifications are not present. The obligation does not refer to a determinate thing, but
is pecuniary in nature, and the obligor bound himself to assume the loss after the delivery of the
goods to him. In other words, the obligor agreed to assume any risk concerning the goods from
the time of their delivery, which is an exception to the rule provided for in Article 1262 of our
Civil Code.

Appellant likewise contends that the court a quo erred in sentencing him to pay attorney's fees.
This is merely the result of a misapprehension for what the court a quo ordered appellant to pay
is not 25% of the amount due as attorney's fees, but as liquidated damages, which is in line with
an express stipulation of the contract. We believe, however, that the appellant should not be
made to pay any damages because his denial to pay the balance of the account is not due to bad
faith.

WHEREFORE, the decision appealed from is modified by eliminating that portion which refers
to liquidated damages. No costs.
 G.R. No. 2464  January 8, 1907

ANTONIO DE LA RIVA,Plaintiff-Appellee, vs. LIZARRAGA HERMANOS, ET

AL., defendant-appellants.

Herrero & Cari�gal for appellants. 

J. R. Serra for appellee.

TRACEY, J.:

Teodoro Carranza built at Atimonan in Tayabas two boats on the oral order of the plaintiff, to be
paid for through the house of Gutierrez Hermanos at Manila, with which at the time both parties
had standing accounts, the exact price being left to be determined by their cost. From time to
time moneys were advanced Carranza by Gutierrez Hermanos, but without any charge on the
books against the plaintiff or any adjustment of the accounts as between the parties, which was
deferred until the business should be closed. After some months, the boats being finished, Behn,
Meyer & Co., who at that time were also the plaintiff's correspondents at Manila, chartered of
Gutierrez Hermanos the steamerMagallanes, which carried them to Manila under a bill of
landing signed by the captain, in which Teodoro Carranza was named shipper and Behn, Meyer,
and Co. consignees, delivery being directed to them, but not on their order. On some date not
shown, after the arrival of the boats at Manila, this order was indorsed by the consignees with a
direction for their delivery to the plaintiff. Upon seeking them under this order, the plaintiff
found them in the possession of the sheriff under an attachment in favor of the
defendants.chanroblesvirtualawlibrary chanrobles virtual law library

Teodoro Carranza built these boats, not as a mandatory, of the plaintiff but on his own account,
retaining the ownership of them until their legal transfer. This was not affected by reason of the
payments advanced by Gutierrez Hermanos through the unjusted accounts of the parties, nor by
the shipment of the boats or the remittance of the bill of lading of Behn, Meyer & Co., who were
merely the consignees of the builder and represented him, nor yet by the indorsement of the
consignees. Had the bill of lading run to their order, then title would have passed by the
indorsement of it, or had it been payable to the bearer, then in that case by the mere delivery of
it. (Code of Commerce, art. 708.) By terms, however, the freight was deliverable to the
consignees by name and their interest could be transferred only by document purporting to
convey the property. Therefore the plaintiff failed to establish his title as against the sheriff under
the attachment and must fail in this action.chanroblesvirtualawlibrary chanrobles virtual law
library

The judgment of the Court of First Instance is reversed with the costs of that court, but not of this
instance. After expiration of twenty days let judgment be entered in accordance herewith and ten
days thereafter the record remanded to the court from whence it came for proper action. So
ordered.chanroblesvirtualawlibrary chanrobles virtual law library

Arellano, C.J., Torres, Mapa, Carson and Willard, JJ., concur.