b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.
00) will be paid from and out of the first letter of
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11827 July 31, 1961
FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES & SMELTING CO., INC., SEGUNDINA VIVAS,
FRNACISCO DANTE, PACIFICO ESCANDOR and FERNANDO TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance because the claims involved aggregate
more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or holder, either by himself or in a
representative capacity, of 11 iron lode mineral claims, known as the Dawahan Group, situated in the
municipality of Jose Panganiban, province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"), Fonacier constituted and appointed
plaintiff-appellee Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a contract with
any individual or juridical person for the exploration and development of the mining claims
aforementioned on a royalty basis of not less than P0.50 per ton of ore that might be extracted therefrom.
On March 19, 1954, Gaite in turn executed a general assignment (Record on Appeal, pp. 17-19) conveying
the development and exploitation of said mining claims into the Larap Iron Mines, a single proprietorship
owned solely by and belonging to him, on the same royalty basis provided for in Exhibit "3". Thereafter,
Gaite embarked upon the development and exploitation of the mining claims in question, opening and
paving roads within and outside their boundaries, making other improvements and installing facilities
therein for use in the development of the mines, and in time extracted therefrom what he claim and
estimated to be approximately 24,000 metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite to
exploit and develop the mining claims in question, and Gaite assented thereto subject to certain
conditions. As a result, a document entitled "Revocation of Power of Attorney and Contract" was executed
on December 8, 1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the consideration of
P20,000.00, plus 10% of the royalties that Fonacier would receive from the mining claims, all his rights and
interests on all the roads, improvements, and facilities in or outside said claims, the right to use the
business name "Larap Iron Mines" and its goodwill, and all the records and documents relative to the
mines. In the same document, Gaite transferred to Fonacier all his rights and interests over the "24,000
tons of iron ore, more or less" that the former had already extracted from the mineral claims, in
consideration of the sum of P75,000.00, P10,000.00 of which was paid upon the signing of the agreement,
and
credit covering the first shipment of iron ores and of the first amount derived from the local sale of iron
ore made by the Larap Mines & Smelting Co. Inc., its assigns, administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier promised to execute in favor of Gaite
a surety bond, and pursuant to the promise, Fonacier delivered to Gaite a surety bond dated December 8,
1954 with himself (Fonacier) as principal and the Larap Mines and Smelting Co. and its stockholders George
Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty as sureties (Exhibit "A-
1"). Gaite testified, however, that when this bond was presented to him by Fonacier together with the
"Revocation of Power of Attorney and Contract", Exhibit "A", on December 8, 1954, he refused to sign said
Exhibit "A" unless another bond under written by a bonding company was put up by defendants to secure
the payment of the P65,000.00 balance of their price of the iron ore in the stockpiles in the mining claims.
Hence, a second bond, also dated December 8, 1954 (Exhibit "B"),was executed by the same parties to the
first bond Exhibit "A-1", with the Far Eastern Surety and Insurance Co. as additional surety, but it provided
that the liability of the surety company would attach only when there had been an actual sale of iron ore
by the Larap Mines & Smelting Co. for an amount of not less then P65,000.00, and that, furthermore, the
liability of said surety company would automatically expire on December 8, 1955. Both bonds were
attached to the "Revocation of Power of Attorney and Contract", Exhibit "A", and made integral parts
thereof.
On the same day that Fonacier revoked the power of attorney he gave to Gaite and the two executed and
signed the "Revocation of Power of Attorney and Contract", Exhibit "A", Fonacier entered into a "Contract
of Mining Operation", ceding, transferring, and conveying unto the Larap Mines and Smelting Co., Inc. the
right to develop, exploit, and explore the mining claims in question, together with the improvements
therein and the use of the name "Larap Iron Mines" and its good will, in consideration of certain royalties.
Fonacier likewise transferred, in the same document, the complete title to the approximately 24,000 tons
of iron ore which he acquired from Gaite, to the Larap & Smelting Co., in consideration for the signing by
the company and its stockholders of the surety bonds delivered by Fonacier to Gaite (Record on Appeal,
pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with respect to the Far Eastern Surety and
Insurance Company, no sale of the approximately 24,000 tons of iron ore had been made by the Larap
Mines & Smelting Co., Inc., nor had the P65,000.00 balance of the price of said ore been paid to Gaite by
Fonacier and his sureties payment of said amount, on the theory that they had lost right to make use of
the period given them when their bond, Exhibit "B" automatically expired (Exhibits "C" to "C-24"). And
when Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed the present complaint
against them in the Court of First Instance of Manila (Civil Case No. 29310) for the payment of the
P65,000.00 balance of the price of the ore, consequential damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform defense that the obligation sued upon by
Gaite was subject to a condition that the amount of P65,000.00 would be payable out of the first letter of
credit covering the first shipment of iron ore and/or the first amount derived from the local sale of the
iron ore by the Larap Mines & Smelting Co., Inc.; that up to the time of the filing of the complaint, no sale
of the iron ore had been made, hence the condition had not yet been fulfilled; and that consequently, the
obligation was not yet due and demandable. Defendant Fonacier also contended that only 7,573 tons of
the estimated 24,000 tons of iron ore sold to him by Gaite was actually delivered, and counterclaimed for
more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to pay Gaite P65,000.00 become due and
demandable when the defendants failed to renew the surety bond underwritten by the Far Eastern Surety
and Insurance Co., Inc. (Exhibit "B"), which expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite to defendant Fonacier were
actually in existence in the mining claims when these parties executed the "Revocation of Power of
Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the defendants to pay plaintiff the
P65,000.00 balance of the price of the approximately 24,000 tons of iron ore was one with a term: i.e.,
that it would be paid upon the sale of sufficient iron ore by defendants, such sale to be effected within
one year or before December 8, 1955; that the giving of security was a condition precedent to Gait's giving
of credit to defendants; and that as the latter failed to put up a good and sufficient security in lieu of the
Far Eastern Surety bond (Exhibit "B") which expired on December 8, 1955, the obligation became due and
demandable under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite did have approximately 24,000 tons
of iron ore at the mining claims in question at the time of the execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and
severally, P65,000.00 with interest at 6% per annum from December 9, 1955 until payment, plus costs.
From this judgment, defendants jointly appealed to this Court.
During the pendency of this appeal, several incidental motions were presented for resolution: a motion to
declare the appellants Larap Mines & Smelting Co., Inc. and George Krakower in contempt, filed by
appellant Fonacier, and two motions to dismiss the appeal as having become academic and a motion for
new trial and/or to take judicial notice of certain documents, filed by appellee Gaite. The motion for
contempt is unmeritorious because the main allegation therein that the appellants Larap Mines & Smelting
Co., Inc. and Krakower had sold the iron ore here in question, which allegedly is "property in litigation",
has not been substantiated; and even if true, does not make these appellants guilty of contempt, because
what is under litigation in this appeal is appellee Gaite's right to the payment of the balance of the price
of the ore, and not the iron ore itself. As for the several motions presented by appellee Gaite, it is
unnecessary to resolve these motions in view of the results that we have reached in this case, which we
shall hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of appellant Fonacier to pay appellee Gaite the
P65,000.00 (balance of the price of the iron ore in question)is one with a period or term and not one with
a suspensive condition, and that the term expired on December 8, 1955; and
(2) that the lower court erred in not holding that there were only 10,954.5 tons in the stockpiles of iron
ore sold by appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the following provision in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F. Fonacier all his rights and
interests over the 24,000 tons of iron ore, more or less, above-referred to together with all his rights and
interests to operate the mine in consideration of the sum of SEVENTY-FIVE THOUSAND PESOS (P75,000.00)
which the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)will be paid from and out of the first letter of
credit covering the first shipment of iron ore made by the Larap Mines & Smelting Co., Inc., its assigns,
administrators, or successors in interest.
We find the court below to be legally correct in holding that the shipment or local sale of the iron ore is
not a condition precedent (or suspensive) to the payment of the balance of P65,000.00, but was only a
suspensive period or term. What characterizes a conditional obligation is the fact that its efficacy or
obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and
uncertain event; so that if the suspensive condition does not take place, the parties would stand as if the
conditional obligation had never existed. That the parties to the contract Exhibit "A" did not intend any
such state of things to prevail is supported by several circumstances:
1) The words of the contract express no contingency in the buyer's obligation to pay: "The balance of Sixty-
Five Thousand Pesos (P65,000.00) will be paid out of the first letter of credit covering the first shipment of
iron ores . . ." etc. There is no uncertainty that the payment will have to be made sooner or later; what is
undetermined is merely the exact date at which it will be made. By the very terms of the contract,
therefore, the existence of the obligation to pay is recognized; only its maturity or demandability is
deferred.
2) A contract of sale is normally commutative and onerous: not only does each one of the parties assume
a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay
the price),but each party anticipates performance by the other from the very start. While in a sale the
obligation of one party can be lawfully subordinated to an uncertain event, so that the other understands
that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or
expectations, emptio spei), it is not in the usual course of business to do so; hence, the contingent
character of the obligation must clearly appear. Nothing is found in the record to evidence that Gaite
desired or assumed to run the risk of losing his right over the ore without getting paid for it, or that
Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted on a
bond a to guarantee payment of the P65,000.00, an not only upon a bond by Fonacier, the Larap Mines &
Smelting Co., and the company's stockholders, but also on one by a surety company; and the fact that
appellants did put up such bonds indicates that they admitted the definite existence of their obligation to
pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00 to the sale or shipment of the ore as a
condition precedent, would be tantamount to leaving the payment at the discretion of the debtor, for the
sale or shipment could not be made unless the appellants took steps to sell the ore. Appellants would thus
be able to postpone payment indefinitely. The desireability of avoiding such a construction of the contract
Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording of the contract the parties indented a
suspensive condition or a suspensive period (dies ad quem) for the payment of the P65,000.00, the rules
of interpretation would incline the scales in favor of "the greater reciprocity of interests", since sale is
essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.
and there can be no question that greater reciprocity obtains if the buyer' obligation is deemed to be
actually existing, with only its maturity (due date) postponed or deferred, that if such obligation were
viewed as non-existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and
not an aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and
that the previous sale or shipment of the ore was not a suspensive condition for the payment of the
balance of the agreed price, but was intended merely to fix the future date of the payment.
This issue settled, the next point of inquiry is whether appellants, Fonacier and his sureties, still have the
right to insist that Gaite should wait for the sale or shipment of the ore before receiving payment; or, in
other words, whether or not they are entitled to take full advantage of the period granted them for making
the payment.
We agree with the court below that the appellant have forfeited the right court below that the appellants
have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the
balance of P65,000.00, because of their failure to renew the bond of the Far Eastern Surety Company or
else replace it with an equivalent guarantee. The expiration of the bonding company's undertaking on
December 8, 1955 substantially reduced the security of the vendor's rights as creditor for the unpaid
P65,000.00, a security that Gaite considered essential and upon which he had insisted when he executed
the deed of sale of the ore to Fonacier (Exhibit "A"). The case squarely comes under paragraphs 2 and 3 of
Article 1198 of the Civil Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make use of the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or securities which he has promised.
(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when
through fortuitous event they disappear, unless he immediately gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the
securities given to the creditor (appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full
knowledge that on its face it would automatically expire within one year was a waiver of its renewal after
the expiration date. No such waiver could have been intended, for Gaite stood to lose and had nothing to
gain barely; and if there was any, it could be rationally explained only if the appellants had agreed to sell
the ore and pay Gaite before the surety company's bond expired on December 8, 1955. But in the latter
case the defendants-appellants' obligation to pay became absolute after one year from the transfer of the
ore to Fonacier by virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite acted within his rights in demanding
payment and instituting this action one year from and after the contract (Exhibit "A") was executed, either
because the appellant debtors had impaired the securities originally given and thereby forfeited any
further time within which to pay; or because the term of payment was originally of no more than one year,
and the balance of P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether there were really 24,000 tons of iron ore
in the stockpiles sold by appellee Gaite to appellant Fonacier, and whether, if there had been a short-
delivery as claimed by appellants, they are entitled to the payment of damages, we must, at the outset,
stress two things:first, that this is a case of a sale of a specific mass of fungible goods for a single price or
a lump sum, the quantity of "24,000 tons of iron ore, more or less," stated in the contract Exhibit "A,"
being a mere estimate by the parties of the total tonnage weight of the mass; and second, that the
evidence shows that neither of the parties had actually measured of weighed the mass, so that they both
tried to arrive at the total quantity by making an estimate of the volume thereof in cubic meters and then
multiplying it by the estimated weight per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron ore because no provision was made in their
contract for the measuring or weighing of the ore sold in order to complete or perfect the sale, nor was
the price of P75,000,00 agreed upon by the parties based upon any such measurement.(see Art. 1480,
second par., New Civil Code). The subject matter of the sale is, therefore, a determinate object, the mass,
and not the actual number of units or tons contained therein, so that all that was required of the seller
Gaite was to deliver in good faith to his buyer all of the ore found in the mass, notwithstanding that the
quantity delivered is less than the amount estimated by them (Mobile Machinery & Supply Co., Inc. vs.
York Oilfield Salvage Co., Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil Code). There is no charge
in this case that Gaite did not deliver to appellants all the ore found in the stockpiles in the mining claims
in questions; Gaite had, therefore, complied with his promise to deliver, and appellants in turn are bound
to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants undertook to buy, not a definite mass,
but approximately 24,000 tons of ore, so that any substantial difference in this quantity delivered would
entitle the buyers to recover damages for the short-delivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually measured or weighed the whole mass
of ore cubic meter by cubic meter, or ton by ton. Both parties predicate their respective claims only upon
an estimated number of cubic meters of ore multiplied by the average tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic meters in the stockpiles of ore that he
sold to Fonacier, while appellants contend that by actual measurement, their witness Cirpriano Manlagit
found the total volume of ore in the stockpiles to be only 6.609 cubic meters. As to the average weight in
tons per cubic meter, the parties are again in disagreement, with appellants claiming the correct tonnage
factor to be 2.18 tons to a cubic meter, while appellee Gaite claims that the correct tonnage factor is about
3.7.
In the face of the conflict of evidence, we take as the most reliable estimate of the tonnage factor of iron
ore in this case to be that made by Leopoldo F. Abad, chief of the Mines and Metallurgical Division of the
Bureau of Mines, a government pensionado to the States and a mining engineering graduate of the
Universities of Nevada and California, with almost 22 years of experience in the Bureau of Mines. This
witness placed the tonnage factor of every cubic meter of iron ore at between 3 metric tons as minimum
to 5 metric tons as maximum. This estimate, in turn, closely corresponds to the average tonnage factor of
3.3 adopted in his corrected report (Exhibits "FF" and FF-1") by engineer Nemesio Gamatero, who was
sent by the Bureau of Mines to the mining claims involved at the request of appellant Krakower, precisely
to make an official estimate of the amount of iron ore in Gaite's stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of ore in the stockpiles made by appellant's
witness Cipriano Manlagit is correct, if we multiply it by the average tonnage factor of 3.3 tons to a cubic
meter, the product is 21,809.7 tons, which is not very far from the estimate of 24,000 tons made by
appellee Gaite, considering that actual weighing of each unit of the mass was practically impossible, so
that a reasonable percentage of error should be allowed anyone making an estimate of the exact quantity
in tons found in the mass. It must not be forgotten that the contract Exhibit "A" expressly stated the
amount to be 24,000 tons, more or less. (ch. Pine River Logging & Improvement Co. vs U.S., 279, 46 L. Ed.
1164).
There was, consequently, no short-delivery in this case as would entitle appellants to the payment of
damages, nor could Gaite have been guilty of any fraud in making any misrepresentation to appellants as
to the total quantity of ore in the stockpiles of the mining claims in question, as charged by appellants,
since Gaite's estimate appears to be substantially correct.
WHEREFORE, finding no error in the decision appealed from, we hereby affirm the same, with costs against lessee alone, or to the lessor alone for that matter. We hold that the above-quoted rulings in Koh v.
appellants. Ongsiaco and Cruz v. Alberto should be and are overruled.

Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes, Dizon, De Leon and Natividad, JJ., concur. 3. ID.; ID.; ID.; VERBAL ASSURANCE OF RENEWAL OF LEASE; INADMISSIBLE UNDER PAROLE EVIDENCE
RULE. An alleged verbal assurance of renewal of a lease is inadmissible to qualify the terms of the
EN BANC
written lease agreement under the parole evidence rule, and unenforceable under the Statute of Frauds.
[G.R. No. L-80231. October 18, 1988.]
4. ID.; ID.; ID.; INTERPRETATION OF PHRASE "RENEWABLE FOR ANOTHER TEN (10) YEARS AT THE OPTION
OF BOTH PARTIES UNDER SUCH TERMS, CONDITIONS AND RENTAL REASONABLE AT THAT TIME." The
CELSO A. FERNANDEZ, Petitioner, v. THE HONORABLE COURT OF APPEALS and MIGUEL
only issue here relates to the interpretation of the phrase "renewable for another ten (10) years at the
TANJANGCO, Respondents.
option of both parties under such terms, conditions and rental reasonable at that time", set out in
paragraph (2) of the lease contract in question. The Court of Appeals read the above contract language as
Celso A. Fernandez for and in his own behalf.
comprising, not technical terms or terms of legal art, but rather just plain and ordinary words. As such, the
Court of Appeals understood the above language as requiring "that the parties should mutually agree
Ricardo J. Lardizabal for Private Respondent.
on a new contract which may not be the same as the original, under such terms, conditions and rental
reasonable at that time. It follows therefore that the plaintiff [petitioner] cannot renew the lease by his
unilateral act of exercising his option. Simply stated, the option must be mutually and consen[s]ually
exercised, and not unilaterally as was erroneously done by the plaintiff. Applied to the lease contract under
SYLLABUS consideration, it appears that the lease has expressed in clear, unmistakable and unambiguous terms the
intention of the parties that if the lease contract was to be renewed, the option to renew should be made
by both parties." We agree with the respondent appellate courts reading: the intention of the parties to
the lease agreement is clearly discernible in the words of that agreement. The assent of both lessor and
lessee is essential for another contract to spring into juridical existence upon expiration of the original one.
1. CIVIL LAW; CONTRACTS; LEASE; WORDS "EXTENDIBLE" AND "RENEWABLE" EXPLAINED. As a matter
The contract clause may be seen to consist of two (2) parts: first, the contract is stipulated to be
of dictionary meaning, "extendible" means "capable of extension", and "renewable" means "capable of
"renewable" for another ten years "at the option of both parties" ; second, the contract is specified to be
renewal" ; both are oriented towards the future. It may be seen that both "extendible" and "renewable",
"renewable under such terms, conditions and rental reasonable at that time." The first part of the clause
when considered in and of themselves, are non-committal: they do not purport to answer the intensely
stresses that the option or faculty to renew was given, not to the lessee alone nor to the lessor by himself,
practical question of who is vested lessor or lessee or both acting together with the option to extend
but to the two (2) simultaneously who hence must both exercise the option to renew if a new contract is
or renew a lease. Again, neither term by itself pre-empts the question of what the specific terms and
to come about. The second portion of the contract clause addresses the future and directs the parties to
conditions of the extended or renewed lease shall be: shall all terms and provisions of the old lease be
negotiate and reach mutual agreement on the terms and conditions of the new contract, including the
carried forward into the future, or shall all or some of them be renegotiated upon expiration of the old
new rental rate, which terms and conditions must be reasonable under such situation as may be extent
lease.
when the time for renewal arrives. The only term on which there has been some pre-agreement is the
period of the new contract: "another ten years." Clearly, the requirement of future mutual agreement as
2. ID.; ID.; ID.; RULINGS IN KOH VS. ONGSIACO (36 PHIL. 185 [1917] AND CRUZ VS. ALBERTO (39 PHIL. 991
to renewal, has here been specified with adequate precision.
[1919]) OVERRULED. Both Koh and Cruz seem to impose an impossible burden upon single words. Put
a little differently, both Mr. Justice Torres and Mr. Justice Street read too much into a single word: they
read "extendible" as if it said "extendible at the option of the lessee alone, all other terms and conditions
remaining unchanged." In effect, Koh and Cruz treated "extendible" as a highly technical and cryptic term.
We do not believe that the use of either "extendible" or "renewable" should be given sacramental DECISION
significance. The important task in contract interpretation is always the ascertainment of the intention of
the contracting parties and that task is of course to be discharged by looking to the words they used to
project that intention in their contract, all the words not just a particular word or two, and words in context
not words standing alone. It is also important to bear in mind that in a reciprocal contract like a lease, the
FELICIANO, J.:
period of the lease must be deemed to have been agreed upon for the benefit of both parties, absent
language showing that the term was deliberately set for the benefit of the lessee or lessor alone. We are
not aware of any presumption in law that the term of a lease is designed for the benefit of the lessee
alone. Koh and Cruz in effect rested upon such a presumption. But that presumption cannot reasonably
be indulged in casually in an era of rapid economic change, marked by, among other things, volatile costs The controversy here revolves around the appropriate reading of a clause in a lease contract that was
of living and fluctuations in the value of the domestic currency. The longer the period the more clearly executed about fifteen years ago.
unreasonable such a presumption would be. In an age like that we live in, very specific language is
necessary to show an intent to grant a unilateral faculty to extend or renew a contract of lease to the On 31 July 1973, respondent Miguel Tanjangco, as lessor, and petitioner Celso A. Fernandez, 1 as lessee,
entered into a ten-year Contract of Lease 2 over a piece of land situated along Kahilum Street, Pandacan, "that the parties should mutually agree on a new contract which may not be the same as the original,
Manila, where petitioner would put up the then proposed New Zamora Market. The parties agreed that under such terms, conditions and rental reasonable at that time. It follows therefore that the plaintiff
the lease, which was scheduled to end on 1 July 1983, would be "renewable for another ten (10) years at [petitioner] cannot renew the lease by his unilateral act of exercising his option. Simply stated, the option
the option of both parties under such terms, conditions and rental reasonable at that time" and that, upon must be mutually and consen[s]ually exercised, and not unilaterally as was erroneously done by the
expiration of the lease, whatever improvements were then existing thereon should automatically belong plaintiff.
to the lessor without having to pay the lessee.chanrobles.com : virtual law library
Applied to the lease contract under consideration, it appears that the lease has expressed in clear,
Before the agreed term ended, or on 19 April 1983, respondent wrote petitioner about the formers unmistakable and unambiguous terms the intention of the parties that if the lease contract was to be
intention not to extend further or renew the lease. Petitioner replied, through a letter dated 6 June 1983, renewed, the option to renew should be made by both parties." 4
that he had opted to renew the contract for another ten (10) years so that he could recover all the
expenses he had incurred in the construction of the market. We agree with the respondent appellate courts reading: the intention of the parties to the lease
agreement is clearly discernible in the words of that agreement. The assent of both lessor and lessee is
In another letter to petitioner dated 1 June 1983, respondent, through his lawyer, advised that respondent essential for another contract to spring into juridical existence upon expiration of the original one. The
could not accept petitioners unilateral action to renew the lease because, under the contract, any renewal contract clause may be seen to consist of two (2) parts: first, the contract is stipulated to be "renewable"
or extension thereof was possible only "at the option of both parties."cralaw virtua1aw library for another ten years "at the option of both parties" ; second, the contract is specified to be "renewable
under such terms, conditions and rental reasonable at that time." The first part of the clause stresses
On 23 June 1983, petitioner commenced an action against respondent before the Regional Trial Court of that the option or faculty to renew was given, not to the lessee alone nor to the lessor by himself, but to
Quezon City, Branch 84, alleging that petitioner was entitled to renew the lease contract, under paragraph the two (2) simultaneously who hence must both exercise the option to renew if a new contract is to come
3 Section 2 thereof, for another ten (10) years, which paragraph in the contract should be construed in a about. The second portion of the contract clause addresses the future and directs the parties to negotiate
liberal manner and with justice. In his prayer, he sought to compel respondent to renew the lease and reach mutual agreement on the terms and conditions of the new contract, including the new rental
agreement for another term, or asked the court to consider the original contract as renewed for another rate, which terms and conditions must be reasonable under such situation as may be extent when the
ten (10) years or to fix another period for the renewal contract. time for renewal arrives. The only term on which there has been some pre-agreement is the period of the
new contract: "another ten years." Clearly, the requirement of future mutual agreement as to renewal,
Respondent, in his answer, contended that a judicial interpretation of the contract involved was not has here been specified with adequate precision.chanrobles.com:cralaw:red
necessary, the contract being simply worded and phrased in a categorical and unequivocal manner that
had expressed clearly the intention of the parties to it, in respect of their mutual prestations. In Millare v. Hernando, 5 the Court had before it a lease contract which provided that the contract "may
be renewed after a period of five years under the terms and conditions as will be mutually agreed upon
On 5 November 1984, the trial court rendered judgment in favor of petitioner. The dispositive portion of by the parties at the time of renewal." The contract clause in the case at bar may be seen to be closely
the decision reads:jgc:chanrobles.com.ph similar to the contract stipulation in Millare, though the former is worded with a slightly lower degree of
particularity. In Millare, the respondent Judge ordered, against the lessors objection, the renewal of the
"WHEREFORE, judgment is hereby rendered declaring the Contract of Lease executed between the lease for another five years and fixed the monthly rentals at P700.00 a month payable in arrears. In setting
plaintiff and the defendant on July 30, 1973 (Exh. "A", "1") renewed for another ten (10) years from July aside the Judges Order, the Court said:jgc:chanrobles.com.ph
1, 1983 to June 30, 1993 with the corresponding increase of rental from P750.00 to P1,500.00 a month
from July 1, 1983 to June 30, 1988 and to P3,760.00 a month from July 1, 1988 to June 30, 1993." 3 "We are otherwise unable to comprehend how he arrived at the reading set forth above. Paragraph 13 of
(Emphasis supplied) the Contract of Lease can only mean that the lessor and lessee may agree to renew the contract upon their
reaching agreement on the terms and conditions to be embodied in such renewal contract. Failure to reach
Respondent immediately brought an appeal to the Court of Appeals, which court, on 9 June 1987, reversed agreement on the terms and conditions of the renewal contract will of course prevent the contract from
the trial courts decision. A Motion for Reconsideration was denied. Hence this Petition for Review being renewed at all. In the instant case, the lessor and the lessee conspicuously failed to reach agreement
on Certiorari. both on the amount of the rental to be payable during the renewal term, and on the term of the renewed
contract." 6 (Emphasis supplied).
By a Resolution dated 18 November 1987, respondent was required to file a Comment on the Petition, to
which a Reply was filed by petitioner on 27 January 1988. Petitioner, however, invokes Koh v. Ongsiaco 7 and Cruz v. Alberto. 8 In Koh, the Court had to construe
the following provision in a contract of lease: "The term of the contract shall be that of one year, counting
The only issue here relates to the interpretation of the phrase "renewable for another ten (10) years at from the 1st of December of the present year (1913), which term shall be extendible at the will of both
the option of both parties under such terms, conditions and rental reasonable at that time", set out in parties." After finding as a matter of fact that the phrase "at the will of both parties" had been intercalated
paragraph (2) of the lease contract in question. in the contract without the knowledge and consent of the lessee, the Court held that the option to extend
the term of the lease had in effect been vested in the lessee alone:jgc:chanrobles.com.ph
The Court of Appeals read the above contract language as comprising, not technical terms or terms of legal
art, but rather just plain and ordinary words. As such, the Court of Appeals understood the above language "The word extendible, contained in the contract executed between the plaintiff and the defendant,
as requiring means that the term of the contract could be extended and is equivalent to a promise to extend made by
the defendant to the plaintiff-lessee, and, as a unilateral stipulation, obliges the promisor to fulfill his
promise. Both the defendant Ongsiaco and the plaintiff Legarda Koh testified that the contract was
extendible at the expiration of its term, and the lessee, accepting the promise, acquired the right to
demand its fulfillment by virtue of the special and obligatory juridic relation established between them.
The plaintiff-lessee, after notifying the lessor that he wished to continue the contract, by virtue of the
word extendible acquired the right to elect between continuing his occupancy of the properties in
accordance with the lease, a promise for the extension of the term of which was made him, and of giving
them up by refraining from demanding the fulfillment of said promise. Therefore, the right arising out of
the grant of the extension of the term of the lease is understood as having been created in favor of the
lessee, who is entitled to require that the lessor fulfill his promise a unilateral one contained in the
contract and accepted by the lessee. The consequence of that promise is that its fulfillment shall depend
solely on the will of one of the contracting parties, the one to whom the promise was made. Such a
concession cannot be considered as anomalous and opposed to the principles of law touching contracts,
inasmuch as the lessor was entirely free to make or not to make the promise, within the most ample liberty
enjoyed by every citizen in the exercise of his rights; but once the promise was made and the contract was
made to read that the term of the latter should be extendible, the lessor cannot be permitted afterwards
to evade fulfillment of this obligation which he freely assumed, . . ." 9 (Emphasis supplied)
In Cruz, the Court was faced with very similar language in another lease agreement written in
Spanish:jgc:chanrobles.com.ph
"That the term of this contract of lease shall be six years counted from the date of execution, and
extendible for another six years agreed upon by both parties. (Que el termino de este contrato de
arrendamiento, sera el de seis (6) aos contados desde la fecha de su otorgamiento, y prorrogable a otros
seis (6) aos convenidos por ambas partes.) 10 (Emphasis supplied)
The Court actually had before it at the same time another lease contract between the same parties and
covering a different portion of the same property: "Plus six years of extension agreed upon by both parties
(mas seis (6) aos de prorroga convenida por ambas partes). "The Court read the above stipulation in
Spanish as importing that the parties had already previously agreed, at the time of execution of the
contract, to give the lessee a unilateral option to extend the period of the lease for another six
years:jgc:chanrobles.com.ph
"It is contended on the part of the plaintiff-appellant that the expression agreed upon by both parties
was used to denote that, while the parties were agreed upon a future extension of the lease, the same
should not take place except by their mutual consent to be expressed in the future, that is to say, upon
the expiration of the original term. These words, so it is insisted, do not refer to a past transaction but to
some future agreement.
The trial judge held, on the contrary, that the phrase in question had the effect of conceding to the lessee
a term of six full years in addition to the original term, being in practical effect equivalent to twelve years,
if the lessee should elect, as he did, to have the term extended. In this connection his Honor noted that
the words agreed upon are used adjectively in the contracts as written in the original Spanish, to qualify
years and extension, respectively, and furthermore, that in the form of the perfect participle those We do not believe that the use of either "extendible" or "renewable" should be given sacramental
qualifying words speak of something past and already determined.
We are of the opinion that the trial judge was entirely correct in his interpretation of the contracts in
question; and though it must be admitted that this interpretation renders the words agreed upon by both
parties superfluous, yet this does not involve any strain upon the meaning of the entire passage. If the
interpretation which the appellant would have us adopt be true, the entire clause relative to the extension
of the term would be superfluous, for if the extension is only to be effective upon a new agreement of the
parties to be made at the expiration of the original term, why should anything at all be said about an
extension? Parties who are free to make one contract of lease are certainly free to make a new one when
the old has expired without being reminded of their faculty to do so by the insertion of a clause of this
kind in the first lease. This would not only be superfluous but nonsensical. The clause relative to the
extension of the lease, should, if possible, be so interpreted as to give it some force.
As we interpret the contracts before us, the parties meant to express the fact that they had already agreed
that there might be an extension of the lease and had agreed upon its duration, thus giving the defendant
the right of election to take for a second term or to quit upon the expiration of the original term. The
clause in question has the same meaning as if the words agreed upon by both parties had been omitted
and the passage had closed with a period after the word years in the first contract and after extension
in the third contract." 11 (Emphasis supplied).
Petitioner urges that Koh and Cruz should be applied in the present case. We do not believe, however,
that Koh and Cruz are controlling here. Upon the other hand, we believe that the Koh and Cruz rulings
need to be re-examined and we do that below.
On the purely linguistic level, we note that the important, operative word in the contract clause in both
Koh and Cruz was "extendible" ; in the case at bar, the contract used the term "renewable." In Koh, the
Court has in effect looking at the word "extendible" standing alone: Mr. Justice Torres found that the
phrase "at the will of both parties" had been unilaterally inserted by a stranger to the contract the
lessors caretaker of the property involved without the consent of the lessee; the phrase therefore could
be disregarded. In Cruz, Mr. Justice Street felt compelled by what may well be too mechanical a rendering
into English of the past participle form in Spanish to read "convenidos por ambas partes" as referring to a
previous agreement contemporaneous with execution of the contract to grant the lessee a unilateral
option to continue with the lease beyond the original term; 12 in any event Mr. Justice Street treated the
phrase as a superfluity. 13 In the case at bar, "renewable" does not stand alone: as noted earlier, it is
qualified and amplified by two phrases, the one stressing that the option to renew was not unilateral but
mutual, and the other emphasizing the need for future agreement between lessor and lessee on the
detailed terms and conditions of renewal.chanrobles virtual lawlibrary
As a matter of dictionary meaning, "extendible" means "capable of extension", and "renewable" means
"capable of renewal" ; both are oriented towards the future. It may be seen that both "extendible" and
"renewable", when considered in and of themselves, are non-committal: they do not purport to answer
the intensely practical question of who is vested lessor or lessee or both acting together with the
option to extend or renew a lease. Again, neither term by itself pre-empts the question of what the specific
terms and conditions of the extended or renewed lease shall be: shall all terms and provisions of the old
lease be carried forward into the future, or shall all or some of them be renegotiated upon expiration of
the old lease. 14 Thus, both Koh and Cruz seem to impose an impossible burden upon single words. Put a
little differently, both Mr. Justice Torres and Mr. Justice Street read too much into a single word: they read
"extendible" as if it said "extendible at the option of the lessee alone, all other terms and conditions
remaining unchanged." In effect, Koh and Cruz treated "extendible" as a highly technical and cryptic term.
significance. The important task in contract interpretation is always the ascertainment of the intention of
the contracting parties and that task is of course to be discharged by looking to the words they used to
project that intention in their contract, all the words not just a particular word or two, and words in context
not words standing alone. In the case at bar, the intent of the parties is observable with sufficient clarity
and specificity in the language they used.chanrobles virtual lawlibrary
It is also important to bear in mind that in a reciprocal contract like a lease, the period of the lease must
be deemed to have been agreed upon for the benefit of both parties, absent language showing that the Philippine round logs at P60.00 per thousand board feet. Due to bad weather conditions and the failure of
term was deliberately set for the benefit of the lessee or lessor alone. 15 We are not aware of any the defendant to send the necessary vessels to Dolores, Samar, only 13,068 board feet of logs were
presumption in law that the term of a lease is designed for the benefit of the lessee alone. Koh and Cruz delivered.
in effect rested upon such a presumption. But that presumption cannot reasonably be indulged in casually
in an era of rapid economic change, marked by, among other things, volatile costs of living and fluctuations On January 22, 1951 the parties entered into a new contract. The previous one was cancelled, with the
in the value of the domestic currency. The longer the period the more clearly unreasonable such a plaintiff waiving all his claims thereunder. Certain advances which had been given by the defendant to the
presumption would be. In an age like that we live in, very specific language is necessary to show an intent plaintiff, in the aggregate amount of P9,000.00, were transferred to and considered as advances on the
to grant a unilateral faculty to extend or renew a contract of lease to the lessee alone, or to the lessor new contract. It was stipulated that the defendant would purchase from the plaintiff 1,700,000 board feet
alone for that matter. We hold that the above-quoted rulings in Koh v. Ongsiaco and Cruz v. Alberto should of logs of the specifications stated in the contract 1,300,000 board feet at P78.00 per thousand and the
be and are overruled.chanrobles virtual lawlibrary rest at P70.00. It was also agreed that the shipment was to be "before the end of July, but will not
commence earlier than April with the option to make partial shipment depending on the availability of
Petitioners contention that respondent had assured him over the telephone that the latter would willingly logs and vessels."
renew the lease for another ten (10) years upon expiration of the original term, does not persuade. Neither
Of the quantity of logs agreed upon, only two shipments were made, one in March and the other in April,
does his claim that he would not have agreed to retain the clause providing for ownership of improvements
1951, amounting to 333,832 board feet and 128,825 board feet, respectively, or a total of 462,657 board
made by the lessee vesting upon the lessor at the expiration of the lease, had respondent not given him
feet. On September 13, 1951 the plaintiff filed in the Court of First Instance of Leyte an action for rescission
such assurance. The Court of Appeals noted that petitioner is a lawyer and was, at the time of entering
of the contract of January 22, 1951 and for recovery of damages in the sum of P155,000.00 by reason of
into the contract, aware of the fact that private respondent might exercise the option not to renew and
the defendant's failure to comply with its obligations. The defendant filed an answer and later an amended
that the option to renew was not his alone. Notwithstanding this awareness, petitioner entered into the
answer, denying the material allegations of the complaint, with special defenses and counterclaims.
lease agreement, probably convinced that he would not only recover the costs of all the improvements he
proposed to introduce into the leased lot but also make profits in the process. In any event, an alleged After due trial the lower court rendered judgment as follows:
verbal assurance of renewal of a lease is inadmissible to qualify the terms of the written lease agreement
under the parole evidence rule, 16 and unenforceable under the Statute of Frauds 17 WHEREFORE and on the strength of all the foregoing, the Court renders judgment: declaring the
aforementioned contract of January 22, 1951, rescinded; ordering the defendant to pay to the plaintiff for
WHEREFORE, the Petition for Review is DENIED and the Decision of the Court of Appeals dated 9 June 1987 actual damages suffered by the latter in the amount of P145,623.03, plus the amount of P50,000.00
is hereby AFFIRMED. Costs against petitioner. representing the plaintiff's actual loss of credit in the operation of his business, and, another sum of
P5,000.00 as attorney's fees. The defendant is likewise ordered to pay the costs.
SO ORDERED.
The defendant appealed to this Court and now avers that the lower court erred: "(1) in stating that
Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Gancayco, Padilla, Bidin, Sarmiento, Woodcraft Works, Ltd. was obligated to send the boat to receive the shipment of logs of the East Samar
Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur. Lumber Mills at Dolores, Samar, before the end of July 1951; (2) in deciding that (appellee) had sufficient
stock of logs to cover the contract on July 31, 1951; (3) in stating that appellant failed to comply with the
Republic of the Philippines terms and conditions of the contract; (4) in granting damages to appellee; and (5) in not granting damages
SUPREME COURT and recovery of money in favor of herein appellant."
Manila
The main issue before us is whether or not appellant Woodcraft Works, Ltd. failed to comply with its
EN BANC obligations under the contract, or more specifically, whether or not it was obligated to furnish the vessel
to receive the shipment of logs from appellee. Appellant contends that it was not.
G.R. No. L-18916 November 28, 1969
The contract (Exh. A) does not expressly provide as to which of the parties should furnish the vessel. But
JOSE ABESAMIS, plaintiff-appellee, it does contain provisions which show clearly, albeit only by implication, that the obligation to do so
vs. devolved upon appellant, thus:
WOODCRAFT WORKS, LTD., defendant-appellant.
Fees & Charges: Bureau of Forestry inspection charges and Philippine Government wharfage fees are for
Ramon O. de Veyra for plaintiff-appellee. account of Woodcraft Works, Ltd.
Zosimo Rivas for defendant-appellant.
Dispatch of Ship: Immediately upon arrival of the vessel at Dolores, Samar, you will commence loading at
the rate of 200,000 bd. ft. per working day per four hatches. Should the weather be unfavorable, be sure
to have a certificate signed by the captain confirming time idle due to this fact. Furthermore, in the event
MAKALINTAL, J.:
the ship's gears are not functioning well, kindly do likewise and get a statement from the captain.
The plaintiff, doing business under the name "East Samar Lumber Mills," was the owner of a timber
Demurrage: Failure to load 200,000 bd. ft. per working day, you agree to pay us the sum of P800.00 per
concession and sawmill located at Dolores, Samar. On November 8, 1950 the defendant Woodcraft Works,
day pro-rata.
Ltd., entered into an agreement with the plaintiff to purchase from the latter 300,000 board feet of
The contract was in the form of a letter addressed by appellant to appellee, and the terms set forth in the
portions aforequoted, particularly with respect to wharfage dues, demurrage and condition of the weather
and of the ship's machinery, would have been of little concern to appellant and would not have been
imposed by it if appellee were the one to furnish the vessel. Besides, the contemporaneous and
subsequent acts of the parties, which under the law may be taken into consideration to determine their
intention (Art. 1371, Civil Code), point unequivocally to the same conclusion. In the two shipments of logs
in March and April of 1961 the vessels "SS AEULUS" and "SS DON JOSE" were furnished by appellant. In
several telegraphic communications exchanged between the parties it was invariably appellee who
requested information as to the arrival of the vessels and appellant who gave the information accordingly.
Finally it was appellant, through its witness Irza Toeg, who had to explain at length during the trial its
failure to furnish the necessary vessels, as follows:
A. Well, when the shipping firms in Manila learned about the failures of the vessels which we sent to
Dolores, Samar to load, and news travels fast from one shipping company to the other, the other shipping
companies were very hesitant when we asked for a vessel to call at the port of Dolores, Samar. They asked
us whether any vessel has already gone there to load and what is the loading rate for that particular vessel.
So the facts of loading rates that the East Samar Lumber Mills was able to effect on the Bunyo Maru had a
very bad effect in obtaining additional vessels. Other shipping companies instructed their vessels not to
go to Dolores, Samar because shipping companies as a rule do not want to gamble and sent vessels to a
loading port when they know of the place and they know that the people operating there would not be
able to handle the loading of the vessels judging from their past performances.
... . You will recall that the first vessel that loaded in this contract was a foreign vessel which was the Bunyo
Maru. Out of the expected quantity of 400,000 bd. ft. of logs only 13,000 approximately was loaded.
Therefore, that had a very bad effect on the other foreign vessels. The second and third vessels however
were of Philippine Registry, and it was only thru our good connection with the shipping company that they
even permitted their vessels to call at Dolores, Samar. So, after the three sad experiences, each one with
considerable delay in the loading time with incomplete quantities that should have been loaded, it was
difficult for us to obtain vessels to call at that port. (T.S.N. pp. 28-30, Deposition)
In the light of all these circumstances, appellant's claim that it was not obligated to furnish the vessel
cannot prevail.
It is next contended that appellee was not in a position to comply with his own obligation to ship the
quantities of logs called for under the contract. This was sought to be proven by means of a certificate
issued by the Bureau of Forestry (Exhs. 11 & 11-A), which is the official record of timber cut under
appellee's permit, showing that appellee's production from January to July, 1951, amounted only to
1,926.64 cubic meters or 816,795 board feet of logs, which was short by 833,205 board feet of the quantity
called for in the contract.
There is indeed a discrepancy between the certificate of production issued by the Bureau of Forestry and
the testimony of Francisco Abesamis regarding the quantity of the timber cut under appellee's permit, but
this was satisfactorily explained by him at the trial in this wise:
A. Because my export grade logs is a big quantity, and if we immediately report those export grade logs to
the Bureau of Forestry before shipment is made, we will be paying forest charges for the logs for which
we have not received payment yet. So we make it a practice to report only the logs that are actually
shipped. The forest charges amount to so much money that we could hardly afford to pay this in advance.
This was more or less a convenience given to us by the lumber grader. And besides that, we prepare a big
quantity of logs but the lumber grader usually is instructed by the buyer to grade only a certain portion of
it because of the limitation of cargo space in buyer's vessel. For example, we have there prepared
1,000,000 board feet but Mr. Selga is instructed to inspect only 400,000 board feet which is the capacity
of incoming vessel. So the balance of 600,000 board feet could not be graded as this quantity could not be
loaded.
Abesamis categorically stated on the witness stand that by the end of July 1951 he had 1,300,000 board
feet of logs available 800,000 at hand and ready for loading and the rest deposited at various stations;
and that he advised appellant of that fact in a telegram dated July 31, 1951 (Exh. S), at the same time
requesting that a grader and a vessel be dispatched to Dolores immediately as the logs were in danger of
deteriorating.
Nicanor Selga, lumber inspector of the Bureau of Forestry, reported to appellant that as of July 3, 1951 he
had graded appellee's logs amounting to 488,015 board feet (Exh. aa). Of this quantity appellant, in its
reply telegram of July 13, 1951 (Exh. BB) said that it could accept 239,547 board feet, made up of logs at
least 13 feet in length and 20 inches in diameter. However, Selga likewise testified that appellee had other
logs some 600,000 board feet in all in the two barrios of Aroganga and Genolaso. After July 3, 1951,
which was the last day Selga made his inspection, there is evidence that appellee continued its logging
operations, such that there was enough to cover the quantity called for in the contract by due date, that
is, on July 31, 1951.
Appellee divides his claim for damages into three categories, each based on a separate breach of contract
by appellant.
First, appellee maintains that due to the failure of appellant to send a vessel to Dolores, Samar, the storm
on May 5, 1951 swept away almost all the logs then awaiting shipment, amounting to 410,000 board feet,
valued at P73,537.77. On this point it should be noted that under the contract shipment was to be made
before the end of July 1951, but not to commence earlier than April of the same year. The obligation
between the parties was a reciprocal one, appellant to furnish the vessel and appellee to furnish the logs.
It was also an obligation with a term, which obviously was intended for the benefit of both parties, the
period having been agreed upon in order to avoid the stormy weather in Dolores, Samar, during the
months of January to March. The obligation being reciprocal and with a period, neither party could
demand performance nor incur in delay before the expiration of the period. Consequently, when the
typhoon struck on May 5, 1951 there was yet no delay on the part of appellant, and the corresponding
loss must be shouldered by appellee.
As regards the second breach it has been established that after the storm of May 5, 1951 appellee
continued its logging operations. Appellant was advised of the quantity of logs ready for shipment and was
urged to send a vessel to take delivery. It thereupon gave assurance that a vessel, the "SS ALBAY," with a
capacity of 450,000 board feet, was coming to Dolores, Samar, to load on June 25, 1951. Appellee readied
the necessary quantity of logs but the vessel did not arrive. As a result, 60,000 board feet of logs which
had been rafted broke loose and were lost. Appellee's loss on this account amounted to a total of
P7,685.26, representing the value of the logs lost, the cost of rafting and other incidental expenses. It may
be observed in this respect that although the obligation would not become due until July 31, 1951
appellant waived the benefit of the period by assuring appellee that it would take delivery of the logs on
June 25, 1951. On that date appellee was ready to comply, but appellant failed on his commitment,
without any satisfactory explanation for such failure. Therefore, appellant should bear the corresponding
loss.
Third and finally, as heretofore pointed out, by the end of July 1951 appellee had sufficient logs ready for
shipment in accordance with the contract. But appellant, in spite of the representations made by the
former, failed to send a vessel on the aforesaid date. There is no evidence that such failure was due to
circumstances beyond appellant's control. As a result logs totalling 800,000 board feet were destroyed by
marine borers, causing a loss of P62,000.00, for which appellant should be held liable.
The trial court sentenced appellant to pay P50,000.00 representing appellee's loss of credit in the
operation of his business. The decision does not say upon what evidence the award is based. Nor is there
any attempt in appellee's brief to justify the amount awarded. Actual or compensatory damages must be
established by clear evidence. In this case, other than a few letters of demand for payment of money
accounts received by appellee from its creditors and presented as exhibits, there is nothing to go upon,
and the mere fact that such demands were made does not necessarily prove loss of credit. This item must
therefore be eliminated.
IN VIEW OF THE FOREGOING, the judgment appealed from is affirmed, with the modification that
appellant Woodcraft Works, Ltd. is sentenced to pay appellee the aggregate sum of P69,685.26 by way of
damages, plus P5,000 as attorney's fees, without costs in this instance.
Concepcion, C.J., Reyes, J.B.L., Dizon, Zaldivar, Sanchez, Castro, Teehankee and Barredo, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-22558 May 31, 1967
GREGORIO ARANETA, INC., petitioner,
vs.
THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., respondent.
Araneta and Araneta for petitioner.
Rosauro Alvarez and Ernani Cruz Pao for respondent.
REYES, J.B.L., J.:
Petition for certiorari to review a judgment of the Court of Appeals, in its CA-G.R. No. 28249-R, affirming
with modification, an amendatory decision of the Court of First Instance of Manila, in its Civil Case No.
36303, entitled "Philippine Sugar Estates Development Co., Ltd., plaintiff, versus J. M. Tuason & Co., Inc.
and Gregorio Araneta, Inc., defendants."
As found by the Court of Appeals, the facts of this case are:
J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, otherwise known as the
Sta. Mesa Heights Subdivision, and covered by a Torrens title in its name. On July 28, 1950, through
Gregorio Araneta, Inc., it (Tuason & Co.) sold a portion thereof with an area of 43,034.4 square meters,
more or less, for the sum of P430,514.00, to Philippine Sugar Estates Development Co., Ltd. The parties
stipulated, among in the contract of purchase and sale with mortgage, that the buyer will
Build on the said parcel land the Sto. Domingo Church and Convent
while the seller for its part will
Construct streets on the NE and NW and SW sides of the land herein sold so that the latter will be a block
surrounded by streets on all four sides; and the street on the NE side shall be named "Sto. Domingo
Avenue;"
The buyer, Philippine Sugar Estates Development Co., Ltd., finished the construction of Sto. Domingo
Church and Convent, but the seller, Gregorio Araneta, Inc., which began constructing the streets, is unable
to finish the construction of the street in the Northeast side named (Sto. Domingo Avenue) because a
certain third-party, by the name of Manuel Abundo, who has been physically occupying a middle part
thereof, refused to vacate the same; hence, on May 7, 1958, Philippine Sugar Estates Development Co.,
Lt. filed its complaint against J. M. Tuason & Co., Inc., and instance, seeking to compel the latter to comply
with their obligation, as stipulated in the above-mentioned deed of sale, and/or to pay damages in the
event they failed or refused to perform said obligation.
Both defendants J. M. Tuason and Co. and Gregorio Araneta, Inc. answered the complaint, the latter
particularly setting up the principal defense that the action was premature since its obligation to construct
the streets in question was without a definite period which needs to he fixed first by the court in a proper
suit for that purpose before a complaint for specific performance will prosper.
The issues having been joined, the lower court proceeded with the trial, and upon its termination, it
dismissed plaintiff's complaint (in a decision dated May 31, 1960), upholding the defenses interposed by
defendant Gregorio Araneta, Inc.1wph1.t
Plaintiff moved to reconsider and modify the above decision, praying that the court fix a period within
which defendants will comply with their obligation to construct the streets in question.
Defendant Gregorio Araneta, Inc. opposed said motion, maintaining that plaintiff's complaint did not
expressly or impliedly allege and pray for the fixing of a period to comply with its obligation and that the
evidence presented at the trial was insufficient to warrant the fixing of such a period.
On July 16, 1960, the lower court, after finding that "the proven facts precisely warrants the fixing of such
a period," issued an order granting plaintiff's motion for reconsideration and amending the dispositive
portion of the decision of May 31, 1960, to read as follows:
WHEREFORE, judgment is hereby rendered giving defendant Gregorio Araneta, Inc., a period of two (2)
years from notice hereof, within which to comply with its obligation under the contract, Annex "A".
Defendant Gregorio Araneta, Inc. presented a motion to reconsider the above quoted order, which
motion, plaintiff opposed.
On August 16, 1960, the lower court denied defendant Gregorio Araneta, Inc's. motion; and the latter
perfected its appeal Court of Appeals.
In said appellate court, defendant-appellant Gregorio Araneta, Inc. contended mainly that the relief
granted, i.e., fixing of a period, under the amendatory decision of July 16, 1960, was not justified by the
pleadings and not supported by the facts submitted at the trial of the case in the court below and that the
relief granted in effect allowed a change of theory after the submission of the case for decision.
Ruling on the above contention, the appellate court declared that the fixing of a period was within the
pleadings and that there was no true change of theory after the submission of the case for decision since
defendant-appellant Gregorio Araneta, Inc. itself squarely placed said issue by alleging in paragraph 7 of
the affirmative defenses contained in its answer which reads
7. Under the Deed of Sale with Mortgage of July 28, 1950, herein defendant has a reasonable time within
which to comply with its obligations to construct and complete the streets on the NE, NW and SW sides of
the lot in question; that under the circumstances, said reasonable time has not elapsed;
Disposing of the other issues raised by appellant which were ruled as not meritorious and which are not
decisive in the resolution of the legal issues posed in the instant appeal before us, said appellate court
rendered its decision dated December 27, 1963, the dispositive part of which reads
IN VIEW WHEREOF, judgment affirmed and modified; as a consequence, defendant is given two (2) years
from the date of finality of this decision to comply with the obligation to construct streets on the NE, NW
and SW sides of the land sold to plaintiff so that the same would be a block surrounded by streets on all
four sides.
Unsuccessful in having the above decision reconsidered, defendant-appellant Gregorio Araneta, Inc.
resorted to a petition for review by certiorari to this Court. We gave it due course.
We agree with the petitioner that the decision of the Court of Appeals, affirming that of the Court of First
Instance is legally untenable. The fixing of a period by the courts under Article 1197 of the Civil Code of
the Philippines is sought to be justified on the basis that petitioner (defendant below) placed the absence
of a period in issue by pleading in its answer that the contract with respondent Philippine Sugar Estates
Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply
with its obligation to construct and complete the streets." Neither of the courts below seems to have
noticed that, on the hypothesis stated, what the answer put in issue was not whether the court should fix
the time of performance, but whether or not the parties agreed that the petitioner should have reasonable
time to perform its part of the bargain. If the contract so provided, then there was a period fixed, a
"reasonable time;" and all that the court should have done was to determine if that reasonable time had
already elapsed when suit was filed if it had passed, then the court should declare that petitioner had
breached the contract, as averred in the complaint, and fix the resulting damages. On the other hand, if
the reasonable time had not yet elapsed, the court perforce was bound to dismiss the action for being
premature. But in no case can it be logically held that under the plea above quoted, the intervention of
the court to fix the period for performance was warranted, for Article 1197 is precisely predicated on the
absence of any period fixed by the parties.
Even on the assumption that the court should have found that no reasonable time or no period at all had
been fixed (and the trial court's amended decision nowhere declared any such fact) still, the complaint not
having sought that the Court should set a period, the court could not proceed to do so unless the complaint
in as first amended; for the original decision is clear that the complaint proceeded on the theory that the
period for performance had already elapsed, that the contract had been breached and defendant was
already answerable in damages.
Granting, however, that it lay within the Court's power to fix the period of performance, still the amended
decision is defective in that no basis is stated to support the conclusion that the period should be set at
two years after finality of the judgment. The list paragraph of Article 1197 is clear that the period can not
be set arbitrarily. The law expressly prescribes that
the Court shall determine such period as may under the circumstances been probably contemplated by
the parties.
All that the trial court's amended decision (Rec. on Appeal, p. 124) says in this respect is that "the proven
facts precisely warrant the fixing of such a period," a statement manifestly insufficient to explain how the
two period given to petitioner herein was arrived at.
It must be recalled that Article 1197 of the Civil Code involves a two-step process. The Court must first
determine that "the obligation does not fix a period" (or that the period is made to depend upon the will
of the debtor)," but from the nature and the circumstances it can be inferred that a period was intended"
(Art. 1197, pars. 1 and 2). This preliminary point settled, the Court must then proceed to the second step,
and decide what period was "probably contemplated by the parties" (Do., par. 3). So that, ultimately, the
Court can not fix a period merely because in its opinion it is or should be reasonable, but must set the time
that the parties are shown to have intended. As the record stands, the trial Court appears to have pulled
the two-year period set in its decision out of thin air, since no circumstances are mentioned to support it.
Plainly, this is not warranted by the Civil Code.
In this connection, it is to be borne in mind that the contract shows that the parties were fully aware that
the land described therein was occupied by squatters, because the fact is expressly mentioned therein
(Rec. on Appeal, Petitioner's Appendix B, pp. 12-13). As the parties must have known that they could not
take the law into their own hands, but must resort to legal processes in evicting the squatters, they must
have realized that the duration of the suits to be brought would not be under their control nor could the
same be determined in advance. The conclusion is thus forced that the parties must have intended to
defer the performance of the obligations under the contract until the squatters were duly evicted, as
contended by the petitioner Gregorio Araneta, Inc.
The Court of Appeals objected to this conclusion that it would render the date of performance indefinite.
Yet, the circumstances admit no other reasonable view; and this very indefiniteness is what explains why
the agreement did not specify any exact periods or dates of performance.
It follows that there is no justification in law for the setting the date of performance at any other time than
that of the eviction of the squatters occupying the land in question; and in not so holding, both the trial
Court and the Court of Appeals committed reversible error. It is not denied that the case against one of
the squatters, Abundo, was still pending in the Court of Appeals when its decision in this case was
rendered.
In view of the foregoing, the decision appealed from is reversed, and the time for the performance of the
obligations of petitioner Gregorio Araneta, Inc. is hereby fixed at the date that all the squatters on affected
areas are finally evicted therefrom.
Costs against respondent Philippine Sugar Estates Development, Co., Ltd. So ordered.
Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and Castro, JJ., concur.
THIRD DIVISION
[G.R. No. 138739. July 6, 2000]
RADIOWEALTH FINANCE COMPANY, petitioner, vs. Spouses VICENTE and MA. SUMILANG DEL
ROSARIO, respondents.
DECISION
PANGANIBAN, J.:
When a demurrer to evidence granted by a trial court is reversed on appeal, the reviewing court cannot
remand the case for further proceedings. Rather, it should render judgment on the basis of the evidence
proffered by the plaintiff. Inasmuch as defendants in the present case admitted the due execution of the
Promissory Note both in their Answer and during the pretrial, the appellate court should have rendered
judgment on the bases of that Note and on the other pieces of evidence adduced during the trial.
The Case
Before us is a Petition for Review on Certiorari of the December 9, 1997 Decision[1] and the May 3, 1999
Resolution[2] of the Court of Appeals in CA-GR CV No. 47737. The assailed Decision disposed as follows:
WHEREFORE, premises considered, the appealed order (dated November 4, 1994) of the Regional Trial
Court (Branch XIV) in the City of Manila in Civil Case No. 93-66507 is hereby REVERSED and SET ASIDE. Let
the records of this case be remanded to the court a quo for further proceedings. No pronouncement as to
costs.[3]
The assailed Resolution denied the petitioners Partial Motion for Reconsideration.[4]
The Facts
The facts of this case are undisputed. On March 2, 1991, Spouses Vicente and Maria Sumilang del Rosario
(herein respondents), jointly and severally executed, signed and delivered in favor of Radiowealth Finance
Company (herein petitioner), a Promissory Note[5] for P138,948. Pertinent provisions of the Promissory
Note read:
FOR VALUE RECEIVED, on or before the date listed below, I/We promise to pay jointly and
severally Radiowealth Finance Co. or order the sum of ONE HUNDRED THIRTY EIGHT THOUSAND NINE
HUNDRED FORTY EIGHT Pesos (P138,948.00) without need of notice or demand, in installments as follows:
P11,579.00 payable for 12 consecutive months starting on ________ 19__ until the amount of P11,579.00
is fully paid. Each installment shall be due every ____ day of each month. A late payment penalty charge
of two and a half (2.5%) percent per month shall be added to each unpaid installment from due date
thereof until fully paid.
xxxxxxxxx
It is hereby agreed that if default be made in the payment of any of the installments or late payment
charges thereon as and when the same becomes due and payable as specified above, the total principal
sum then remaining unpaid, together with the agreed late payment charges thereon, shall at once become
due and payable without need of notice or demand.
xxxxxxxxx
If any amount due on this Note is not paid at its maturity and this Note is placed in the hands of an attorney
or collection agency for collection, I/We jointly and severally agree to pay, in addition to the aggregate of
the principal amount and interest due, a sum equivalent to ten (10%) per cent thereof as attorneys and/or
collection fees, in case no legal action is filed, otherwise, the sum will be equivalent to twenty-five (25%)
percent of the amount due which shall not in any case be less than FIVE HUNDRED PESOS (P500.00) plus
the cost of suit and other litigation expenses and, in addition, a further sum of ten per cent (10%) of said
amount which in no case shall be less than FIVE HUNDRED PESOS (P500.00), as and for liquidated
damages.[6]
Thereafter, respondents defaulted on the monthly installments. Despite repeated demands, they failed to
pay their obligations under their Promissory Note.
On June 7, 1993, petitioner filed a Complaint[7] for the collection of a sum of money before the Regional
Trial Court of Manila, Branch 14.[8] During the trial, Jasmer Famatico, the credit and collection officer of
petitioner, presented in evidence the respondents check payments, the demand letter dated July 12, 1991,
the customers ledger card for the respondents, another demand letter and Metropolitan Bank dishonor
slips. Famatico admitted that he did not have personal knowledge of the transaction or the execution of
any of these pieces of documentary evidence, which had merely been endorsed to him.
On July 4, 1994, the trial court issued an Order terminating the presentation of evidence for the
petitioner.[9] Thus, the latter formally offered its evidence and exhibits and rested its case on July 5, 1994.
Respondents filed on July 29, 1994 a Demurrer to Evidence[10] for alleged lack of cause of action. On
November 4, 1994, the trial court dismissed[11] the complaint for failure of petitioner to substantiate its
claims, the evidence it had presented being merely hearsay.
On appeal, the Court of Appeals (CA) reversed the trial court and remanded the case for further
proceedings.
Hence, this recourse.[12]
Ruling of the Court of Appeals
According to the appellate court, the judicial admissions of respondents established their indebtedness to
the petitioner, on the grounds that they admitted the due execution of the Promissory Note, and that their
only defense was the absence of an agreement on when the installment payments were to begin. Indeed,
during the pretrial, they admitted the genuineness not only of the Promissory Note, but also of the demand
letter dated July 12, 1991. Even if the petitioners witness had no personal knowledge of these documents,
they would still be admissible if the purpose for which [they are] produced is merely to establish the fact
that the statement or document was in fact made or to show its tenor[,] and such fact or tenor is of
independent relevance.
Besides, Articles 19 and 22 of the Civil Code require that every person must -- in the exercise of rights and
in the performance of duties -- act with justice, give all else their due, and observe honesty and good
faith. Further, the rules on evidence are to be liberally construed in order to promote their objective and
to assist the parties in obtaining just, speedy and inexpensive determination of an action.
Issue
The petitioner raises this lone issue:
The Honorable Court of Appeals patently erred in ordering the remand of this case to the trial court instead
of rendering judgment on the basis of petitioners evidence.[13]
For an orderly discussion, we shall divide the issue into two parts: (a) legal effect of the Demurrer to
Evidence, and (b) the date when the obligation became due and demandable.
The Courts Ruling
The Petition has merit. While the CA correctly reversed the trial court, it erred in remanding the case "for
further proceedings."
Consequences of a Reversal, on Appeal, of a Demurrer to Evidence
Petitioner contends that if a demurrer to evidence is reversed on appeal, the defendant should be deemed
to have waived the right to present evidence, and the appellate court should render judgment on the basis
of the evidence submitted by the plaintiff. A remand to the trial court "for further proceedings" would be
an outright defiance of Rule 33, Section 1 of the 1997 Rules of Court.
On the other hand, respondents argue that the petitioner was not necessarily entitled to its claim, simply
on the ground that they lost their right to present evidence in support of their defense when the Demurrer
to Evidence was reversed on appeal. They stress that the CA merely found them indebted to petitioner,
but was silent on when their obligation became due and demandable.
The old Rule 35 of the Rules of Court was reworded under Rule 33 of the 1997 Rules, but the consequence
on appeal of a demurrer to evidence was not changed. As amended, the pertinent provision of Rule 33
reads as follows:
SECTION 1. Demurrer to evidence.After the plaintiff has completed the presentation of his evidence, the
defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has shown
no right to relief. If his motion is denied, he shall have the right to present evidence. If the motion is
granted but on appeal the order of dismissal is reversed he shall be deemed to have waived the right to
present evidence.[14]
Explaining the consequence of a demurrer to evidence, the Court in Villanueva Transit v.
Javellana[15] pronounced:
The rationale behind the rule and doctrine is simple and logical. The defendant is permitted, without
waiving his right to offer evidence in the event that his motion is not granted, to move for a dismissal (i.e.,
demur to the plaintiffs evidence) on the ground that upon the facts as thus established and the applicable
law, the plaintiff has shown no right to relief. If the trial courtdenies the dismissal motion, i.e., finds that
plaintiffs evidence is sufficient for an award of judgment in the absence of contrary evidence, the case still
remains before the trial court which should then proceed to hear and receive the defendants evidence so
that all the facts and evidence of the contending parties may be properly placed before it for adjudication
as well as before the appellate courts, in case of appeal. Nothing is lost. The doctrine is but in line with the
established procedural precepts in the conduct of trials that the trial court liberally receive all proffered
evidence at the trial to enable it to render its decision with all possibly relevant proofs in the record, thus
assuring that the appellate courts upon appeal have all the material before them necessary to make a
correct judgment, and avoiding the need of remanding the case for retrial or reception of improperly
excluded evidence, with the possibility thereafter of still another appeal, with all the concomitant
delays. The rule, however, imposes the condition by the same token that if his demurrer is granted by the
trial court, and the order of dismissal isreversed on appeal, the movant losses his right to present evidence
in his behalf and he shall have been deemed to have elected to stand on the insufficiency of plaintiffs case
and evidence. In such event, the appellate court which reverses the order of dismissal shall proceed to
render judgment on the merits on the basis of plaintiffs evidence. (Underscoring supplied)
In other words, defendants who present a demurrer to the plaintiffs evidence retain the right to present
their own evidence, if the trial court disagrees with them; if the trial court agreeswith them, but on
appeal, the appellate court disagrees with both of them and reverses the dismissal order, the defendants
lose the right to present their own evidence.[16] The appellate court shall, in addition, resolve the case and
render judgment on the merits, inasmuch as a demurrer aims to discourage prolonged litigations.[17]
In the case at bar, the trial court, acting on respondents demurrer to evidence, dismissed the Complaint
on the ground that the plaintiff had adduced mere hearsay evidence. However, on appeal, the appellate
court reversed the trial court because the genuineness and the due execution of the disputed pieces of
evidence had in fact been admitted by defendants.
Applying Rule 33, Section 1 of the 1997 Rules of Court, the CA should have rendered judgment on the basis
of the evidence submitted by the petitioner. While the appellate court correctly ruled that the
documentary evidence submitted by the [petitioner] should have been allowed and appreciated xxx, and
that the petitioner presented quite a number of documentary exhibits xxx enumerated in the appealed
order,[18] we agree with petitioner that the CA had sufficient evidence on record to decide the collection
suit. A remand is not only frowned upon by the Rules, it is also logically unnecessary on the basis of the
facts on record.
Due and Demandable Obligation
Petitioner claims that respondents are liable for the whole amount of their debt and the interest thereon,
after they defaulted on the monthly installments.
Respondents, on the other hand, counter that the installments were not yet due and
demandable. Petitioner had allegedly allowed them to apply their promotion services for its financing
business as payment of the Promissory Note. This was supposedly evidenced by the blank space left for
the date on which the installments should have commenced.[19] In other words, respondents theorize that
the action for immediate enforcement of their obligation is premature because its fulfillment is dependent
on the sole will of the debtor. Hence, they consider that the proper court should first fix a period for
payment, pursuant to Articles 1180 and 1197 of the Civil Code.
This contention is untenable. The act of leaving blank the due date of the first installment did not
necessarily mean that the debtors were allowed to pay as and when they could. If this was the intention
of the parties, they should have so indicated in the Promissory Note. However, it did not reflect any such
intention.
On the contrary, the Note expressly stipulated that the debt should be amortized monthly in installments
of P11,579 for twelve consecutive months. While the specific date on which each installment would be
due was left blank, the Note clearly provided that each installment should be payable each month.
Furthermore, it also provided for an acceleration clause and a late payment penalty, both of which showed
the intention of the parties that the installments should be paid at a definite date. Had they intended that
the debtors could pay as and when they could, there would have been no need for these two clauses.
Verily, the contemporaneous and subsequent acts of the parties manifest their intention and knowledge
that the monthly installments would be due and demandable each month.[20] In this case, the conclusion
that the installments had already became due and demandable is bolstered by the fact that respondents
started paying installments on the Promissory Note, even if the checks were dishonored by their drawee
bank. We are convinced neither by their avowals that the obligation had not yet matured nor by their
claim that a period for payment should be fixed by a court.
Convincingly, petitioner has established not only a cause of action against the respondents, but also a due
and demandable obligation. The obligation of the respondents had matured and they clearly defaulted
when their checks bounced. Per the acceleration clause, the whole debt became due one month (April 2,
1991) after the date of the Note because the check representing their first installment bounced.
As for the disputed documents submitted by the petitioner, the CA ruling in favor of their admissibility,
which was not challenged by the respondents, stands. A party who did not appeal cannot obtain
affirmative relief other than that granted in the appealed decision.[21]
It should be stressed that respondents do not contest the amount of the principal obligation. Their liability
as expressly stated in the Promissory Note and found by the CA isP13[8],948.00 [22] which is payable in
twelve (12) installments at P11,579.00 a month for twelve (12) consecutive months. As correctly found by
the CA, the "ambiguity" in the Promissory Note is clearly attributable to human error.[23]
Petitioner, in its Complaint, prayed for 14% interest per annum from May 6, 1993 until fully paid. We
disagree. The Note already stipulated a late payment penalty of 2.5 percent monthly to be added to each
unpaid installment until fully paid. Payment of interest was not expressly stipulated in the Note. Thus, it
should be deemed included in such penalty.
In addition, the Note also provided that the debtors would be liable for attorneys fees equivalent to 25
percent of the amount due in case a legal action was instituted and 10 percent of the same amount as
liquidated damages. Liquidated damages, however, should no longer be imposed for being
unconscionable.[24] Such damages should also be deemed included in the 2.5 percent monthly
penalty. Furthermore, we hold that petitioner is entitled to attorneys fees, but only in a sum equal to 10
percent of the amount due which we deem reasonable under the proven facts.[25]
The Court deems it improper to discuss respondents' claim for moral and other damages. Not having
appealed the CA Decision, they are not entitled to affirmative relief, as already explained earlier.[26]
WHEREFORE, the Petition is GRANTED. The appealed Decision is MODIFIED in that the remand is SET
ASIDE and respondents are ordered TO PAY P138,948, plus 2.5 percent penalty charge per month
beginning April 2, 1991 until fully paid, and 10 percent of the amount due as attorneys fees. No costs.
SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 11433 December 20, 1916
ARTHUR F. ALLEN, plaintiff-appellant,
vs.
THE PROVINCE OF ALBAY AND THE PROVINCE OF AMBOS CAMARINES, defendants-appellees.
Lawrence, Ross and Block for appellant.
Attorney-General Avancea for appellees.
TRENT, J.:
On February 25, 1913, the Director of Public Works, acting for the Provinces of Albay and Ambos
Camarines, advertised for the sealed proposals, to be opened March 15, 1913, for the construction of a
reenforced concrete bridge over the Agus River on the Albay-Ambos Camarines boundary. At the request
of the plaintiff, the opening of the bids was postponed until March 20, on which date plaintiff submitted
his bid to construct the proposed bridge for the sum of P30,690. On April 25, 1913, the Director of Public
Works asked the provincial boards of Albay and Ambos Camarines for authority to contract with the
plaintiff for the construction of the bridge. The boards passed the necessary resolutions of May 6 and the
plaintiff was notified of their action on June 13. The formal construct was duly executed on June 26, 1913.
The bridge was completed and accepted by the defendant provinces on April 1, 1914. The plaintiff was
paid the construct price less P1,301.45, P925 being retained as liquidated damages at the rate of P25 per
day from February 15, 1914, to March 31, 1914; P175.03 for expenses of inspection from November 1,
1913, to February 15, 1914; and P201.42 for the operation and maintenance of a ferry across the Agus
River during the last mentioned period. This action was instituted for the purpose of recovering the
amount of P1,301.45, P200 overcharges on steel not delivered, P2,000 for damages caused by the
defendants' delay, and P878 for extra work and material furnished on the bridge at defendants' request.
From a judgment in favor of the defendants dismissing the complaint on the merits, with costs, the plaintiff
appealed and now urges that the trial court erred (1) in finding that the delay in completing the work under
the contract in question was due to the fault and negligence of the plaintiff and not to that of the
defendants; (2) in holding that the defendants were entitled to deduct from the contract price for the
construction of the bridge (a) the sum of P925 as a penalty or liquidated damages, (b) the amount of
P201.42 for the operation and maintenance of a ferry, and (c) the amount of P175.03 for expense of
inspection; and (3) in rendering judgment in favor of the defendants, dismissing the plaintiff's complaint
and not rendering judgment for the plaintiff for the amounts prayed for. The first and second alleged errors
will be considered together.
The contract which was, as we have said, duly executed on June 26, 1913, provided in paragraph 4 for the
completion of the bridge on or before the 1st day of September, 1913. And in paragraph 5 it was agreed
that in the event that the necessary steel should be furnished by the provinces at ship side in Legaspi, a
deduction from the contract price should be made of 11 centavos per kilo of steel thus delivered. The
advertisement, instructions to bidders, general conditions, specifications, proposal, and plans were made
a part of the contract.
The plaintiff in his proposal stated:
All work contemplated by this contract is to be completed on or before four months after contractor
furnishes sand and gravel.
The provincial board of Albay in its resolution of May 6 stated that it had received a communication from
the Director of Public Works to the effect that "Mr. Allen's bid was the only one received for this work
which the contractor agrees to finish in four months." The time for the commencement of the work is not
stated. The provincial board of Ambos Camarines in its resolution of May 6 stated "All work to be
completed on or before November 1, 1913." In "Information to bidders," which was made a part of the
contract, it was provided that "the contractor will be required to complete the bridge and have same ready
for traffic on or before September 1, 1913." The Province of Ambos Camarines in its resolution of January
6, 1914, stated that the time for the completion of the bridge was intended to be November 1, 1913, and
the Province of Albay in its resolution of May 5, 1914, stated that, "granting the contention of the
provincial board of Ambos Camarines, it was the intention of the parties to fix the original date for the
termination of the work on November 1, 1913, although the original contract fixed September 1, 1913, . .
." On December 1, 1913, F. T. James, acting on behalf of the plaintiff, addressed the following letter to the
provincial board of the Province of Albay:
December 1, 1913
GENTLEMEN: I have the honor to request that an extension of time be granted me for the construction of
the Argos River Bridge.
Immediately upon entering into contract with the Province of Albay on June 26, 1913, I ordered cement
for the work, but due to the shortage in the Manila market at that time did not receive delivery until the
middle of July, when same was shipped to Legaspi where it arrived four days later.
I had made previous arrangements to have this cement hauled to the bridge site by automobile truck, but
when an attempt was made to do so in July, the recent rains so softened the road beyond Polangui that it
was impossible to send a loaded truck over it with any assurance of safe arrival of the cargo of cement at
Argos River in good condition. Therefore I was obliged to haul by truck to Ligao only and from there to
Argos by carabao carts.
The contractor in Ligao then began to haul cement and also the steel for the bridge. Shortly a quarantine
on animals was put into effect in the town of Polangui, and the hauling had to stop, when I had had
delivered at the bridge site only a few barrels of cement and a very small number of bars of steel for the
piles. It was not until early in October, therefore, that sufficient steel and cement were delivered at the
Argos River to warrant beginning work casting the piles. This work began however immediately this
condition obtained and the sixty concrete piles were completed November 22.
Due to the fact that the material in the Argos River, into which the piles must be driven, is exceptionally
hard and of a very compact nature it is almost imperative that the piles have considerably more than the
usual thirty days for ripening before driving, and of necessity I must wait at least until December 15 before
handling even the first piles cast. My pile driver is being shipped to Nueva Caceres at present writing. I am
obliged to send all my plant and balance of materials in any by that port due to the fact that nobody in
Albay is willing to attempt hauling heavy machinery over the road beyond Polangui for reasons best known
to the honorable board, and it is only a question of hauling same from Nueva Caceres to Argos River as to
the actual date of beginning driving.
As was unforeseen, at the time of entering into contract for this bridge, I have been obliged to use two
plants on my work in the Province of Bulacan where it was anticipated that one would be enough, due to
the unusual conditions and delays from floods and typhoons, so I have not been able to ship my engine
and driver so as to have it at Argos River on the date expected. Therefore, for these above-named reasons,
I have the honor to request that I be granted an extension of time until February 15, 1914, to complete
the Argos Bridge.
Very respectfully.
ARTHUR F. ALLEN, Contractor,
(Sgd.) Per F. T. JAMES.
On May 5, 1914, the provincial board of the Province of Albay passed resolution No. 227, the pertinent
parts of which are as follows:
xxx xxx xxx
Whereas there exists pending a petition of the contractor for the extension of the termination of the work
of the cited bridge until the 15th day of February, 1914;
xxx xxx xxx
Resolved, That this board proposes an amicable settlement for the final settlement of this matter based
upon the following conditions:
Grant extension to February 15, 1914, providing the contractor will paying to the province the sum of
P1,725.78, being the amount for extra cost for inspection expense, interest on loan, cost of ferry operation
to February 15, and 37 days liquidated damages at P25 per day for the time between February 15 and April
1, 1914.
xxx xxx xxx
Resolved further, That all previous resolutions of this board in this regard to this matter which are in
conflict hereof are hereby repealed.
Resolved lastly, That copies of this resolution be furnished the district engineer, Albay, contractor Allen,
provincial treasurer and provincial board of Ambos Camarines.
On June 17, 1914, the provincial board of Albay passed resolution No. 383 which, after stating the reasons
for the resolution, reads:
Resolved, That the final payment to A. F. Allen for the construction of the Agus River Bridge be, and hereby
is, authorized according to the contract, deducting the amount of P1,301.45, same to cover inspection
charges from November 1, 1913, to February 15, 1914, operation and maintenance of ferry from
November 1, 1913, to February 15, 1914, and 37 days liquidated damages from February 15 to March 31,
1914, inclusively, Sundays and holidays excepted, at P25 per day.
xxx xxx xxx
Copies of the above resolution were furnished the provincial treasure and district engineer of Albay, the
provincial board of Ambos Camarines, and the plaintiff.
The provincial board of Ambos Camarines, in its resolution No. 669 passed June 24, 1914, concurred in
resolution No. 383 of the Province of Albay.
The provincial board of Ambos Camarines passed on January 6, 1914, resolution No. 50, the pertinent parts
of which reads as follows:
The recorder presented copy of resolution No. 1114 of the provincial board of Albay, series of 1913, with
accompanying papers, being the application of Mr. A. F. Allen for an extension of the time in which he is
to complete the Agus Bridge (on the provincial boundary) and the recommendation of the Director of
Public Works and the district engineer of Albay.
Being informed of the contents of said resolution and accompanying papers, .
On motion,
The board resolved as follows:
xxx xxx xxx
(b) As to any further extension, the facts alleged by contractor which must be basis of same, obstacles
impeding the transport of his supplies, occurring within the Province of Albay, this board proposes to be
guided by the recommendations of the board of Albay in the matter. However, as it does not appear that
the contractor acquiesces and accepts the extension and conditions embodied in the resolution of the
board of Albay, but on the contrary, Mr. James, representing the contractor being present, informs the
board of Camarines that the contractor is not satisfied with the extension and conditions embodied in the
before-mentioned resolution of Albay, therefore this board abstains from concurring in resolution No.
1114 of Albay and suggests that, if the Albay board finds cause for extending the contract time past
November 1, 1913, that the contractor's concurrence and acceptance of such further extension be
procured before forwarding for the concurrence of this board. Further this board believes that any
arbitrary extensions (contractor not concurring or accepting conditions) or extensions `by grace' could
better and more property be had upon completion of the bridge as a final adjustment of the matter.
Approved unanimously.
Resolution No. 1114 of the provincial board of Albay, series 1913, referred to in resolution No. 50 of the
provincial board of Ambos Camarines, was not presented during the trial in the court below and forms no
part of the record of this case.
The provinces, exercising their right under the contract, furnished all the steel at shipside in Legaspi. The
steel was received by the contractor on the following dates: 27,056 kilos on July 26, 1913; 3,636 kilos on
August 4, 1913; and 7,890 kilos on September 1, 1913. The bridge site is 51.7 kilometers from Legaspi.
The first question to be determined is that relating to the time agreed upon for the completion of the
bridge. Did the contracting parties fix September 1, 1913, as the date ? On the one hand we have an explicit
statement in the information to bidders that "the contractor shall commence the work herein contracted
to be done in ample time to complete the contract within the time specified." In the contract it was
expressly stipulated that the contractor must complete the work on or before the 1st day of September,
1913, or pay P25 a day as liquidated damages for every day thereafter. And James in his letter of December
1, after referring to the fact that the contract was signed on June 26, requested an extension of time for
the completion of the work until February 15, 1914. While on the other hand, we have the statement of
the plaintiff's proposal to the effect that the work contemplated should be completed on or before four
months after the contractor furnished gravel and sand; the statement of the provincial board of Albay that
the contractor agreed to finish the bridge in four months; the same board's later statement referring to
the contention of the board of Ambos Camarines that it was the intention of the parties to fix the time on
November 1, the two statements of the provincial board of Ambos Camarines to the effect that it
understood that November 1 was the date agreed on; and the fact that the provinces deducted inspection
expenses and expenses for the operation of the ferry from November 1.
It will thus be seen that the provinces did intend that the date for the completion of the work should be
November 1 and not September 1. Such were the instructions to the Director of Public Works in
consummating the contract, but the Director did not comply with these instructions as to the date for the
termination of the work. He and the contractor agreed that the date should be September 1. Although this
was not in accordance with the intention of the provinces, yet they (the provinces) subsequently ratified
the contract by their own acts furnishing the steel and making payments. The result is that the provinces
obligated themselves through the Director of Public Works to furnish all the steel at ship side in Legaspi
early enough to permit the contractor to complete the bridge by September 1. This the provinces did not
do, as quite a large shipment of steel arrived in Legaspi on the very day agreed upon for the completion of
the bridge. It may true that the contractor could not have completed the bridge by September 1, if all of
the steel had arrived in Legaspi immediately after the signing of the contract.
Even admitting that the true date for the completion of the bridge was November 1, yet the contractor
could not have completed the work on or before that date on account of the quarantine established and
enforced by the authorities. James, in his letter of December 1 asking for the extension of time, said, "The
contractor in Ligao then began to haul the cement and also the steel for the bridge. Shortly a quarantine
on animals was put into effect in the town of Polangui, and the hauling had to stop when I had had
delivered at the site only a few barrels of cement and a very small number of bars of steel for the piles."
And James in his testimony says, "Jaucian was unable to promptly deliver these materials at the Argus
bridge site, due to a rinderpest quarantine placed, I think, by the Bureau of Agriculture on carabao and
cattle passing on the interprovincial road between Ambos Camarines, Albay, and in all of the towns north
of Ligao," Jaucian in his deposition testified that he encountered difficulties in hauling materials for the
bridge from Ligao to the Agus River; that the first difficulty was the quarantine placed upon animals in
Polangui; that he had been delivering the materials for a week when the quarantine was ordered; that the
quarantine, as he remembered, commenced in July and was removed in October or November; that the
quarantine was uninterrupted during this time; and that it consisted in a definite or absolute prohibition
against the passage of animals from kilometer 30 to kilometer 40. So it is conclusively established that the
only way that the contractor had of moving the materials from Ligao to the bridge site was by means of
animals and that this could not be done from sometime in July until October or November on account of
the quarantine.
Marshall, the district engineer who represented the provinces during the construction of the bridge,
testified that the plans called for the piles of the bridge to be 11 meters long; that the contract was signed
on this basis; that after the contract had signed Von Schmelling, the former district engineer, was down
there and in a verbal conversation it was decided that instead of casting the piles 11 meters long they
should be cast 9 meters long, thereby saving something like 13 cubic meters of concrete; that on October
11 or 12 there came a flood and the water rose about 15 centimeters higher than the extreme high water
shown in the original plans; that it was thereafter agreed to raise the caps on the piles 42 centimeters
higher; and that the raising of the bridge was outside of the original specifications. The testimony of this
witness is corroborated on this point by both the plaintiff and James.
The plaintiff, through his agent, requested an extension of time until February 15, l914, within which to
complete the bridge, but the parties did not agree upon the extension. From the resolution of the
provincial board of Ambos Camarines, dated January 6, 1914, it appears that Albay imposed certain
conditions in consideration for the extension, which were rejected by the plaintiff.
We must, therefore, conclude that the provinces waived the contract time, whether it were September 1
or November 1, by their failure to deliver the steel promptly, by reason of having placed the strict
quarantine on animals and on account of the change in the plans subsequent to October 12, and that the
waiver operated to eliminate the definite date from which to assess liquidated damages; and through the
plaintiff, in continuing the work, was obligated to complete the same within a reasonable time, the
liquidated damage clause was not thereby restored and made applicable to an unreasonable time. Where
strict performance on the part of the contractor is prevented or waived by the other party, a claim by such
party of fines and penalties for delay or failure cannot be sustained. (District of Columbia vs. Camden Iron
Works, 181 U. S. 453.) The same rule applies in cases containing liquidated damage clauses. (United
Engineering and Contracting Co. vs. U. S., 47 Ct. Cls., 489 [1912].) If it be true that the plaintiff contractor
was responsible for a large number of days of delay and the provinces for only a few of the days thereof,
yet, under such circumstances, we cannot "apportion" such delay between the contracting parties and
hold the contractor liable in liquidated damages for the number of days delayed by him in completing the
bridge. (Jefferson Hotel Co. vs. Brumbaugh, 168 Fed. Rep., 867 and cases cited therein; Willis vs. Webster,
37 N. Y. Sup., 354; Mosler Safe Co. vs. Maiden Lane Safe Dep. Co., 199 N. Y., 479; 37 L. R. A., (N. S.) 363,
decided in 1910.) The result is that the provinces are limited to such damages which they may have
suffered on account of an unreasonable delay on the part of the plaintiff in completing the bridge, if there
were, in fact, an unreasonable delay. It would seem, however, that as the plaintiff asked for an extension
on December 1, sometime after the quarantine had been raised and also after the change in the plans had
been made, until February 15, 1914, he should have finished the work on or before the latter date and all
time thereafter would constitute an unreasonable delay. However this may be, the provinces have proven
no actual damages resulting after February 15. It is true that they deducted P175.03 for inspection charges,
but this was done for such inspection prior to February 15, and the same is true of the item of P021.42 for
the maintenance of a ferry. Certainly there was no unreasonable delay prior to February 15. Consequently,
the provinces had no right to withhold the P1,301.45.
The plaintiff sought to recover, in addition to the amount withheld, P200 overcharges on steel, and P878
for extra work and material furnished at defendant's request. While it is true that the question whether
the plaintiff is entitled to recover these amounts is raised by the third assignment of error, yet no specific
reference is made in the plaintiff's brief to said amounts, counsel saying nothing more than, It is
respectfully submitted that appellant is entitled to a reversal of the decision of the Court of First Instance,
and to an order for judgment in accordance with the prayer of his complaint." We have examined the
record, however, and find that the evidence is not sufficient to warrant an affirmative holding that the
plaintiff is entitled to recover these items or either of them.
For the foregoing reasons the judgment appealed from is reversed and judgment will be entered in favor
of the plaintiff and against the defendants for the sum of P1,301.45, with legal interest from April 1, 1914.
No costs will be allowed in this instance. So ordered.
Torres, Johnson and Carson, JJ., concur.
Araullo, J., concurs in the result.

Separate Opinions
MORELAND, J., dissenting:
This case arises over the construction by plaintiff, under a written contract, of a reenforced cement bridge
across the Argos River which forms the boundary line between the Provinces of Albay and Ambos
Camarines, defendants .The contract was entered into June 26, 1913. The plaintiff was to construct the
bridge for a certain sum and furnish all labor, materials, tools, implements and machinery, and to complete
the work by the first day of November, 1913. It was agreed, however, that, if he desired, the defendants
would sell to plaintiff and plaintiff would buy of defendants, at a fixed price, the steel necessary to
reenforce the concrete bridge as well as the cement piles which were to be driven as the foundation of
the bridge. If the steel was purchased of defendants they were to deliver it on board steamer in the harbor
from Legaspi; and plaintiff was to accept delivery there and, by his own means and at his own expense,
transport it to the bridge site on Argos River, 51 kilometers inland from Legaspi. Nowhere in the evidence
or record does it appear when the steel was to be delivered under this contract. On the point, and it is,
under plaintiff's theory, the vital point in the case, the record is absolutely silent. The contract provided
that plaintiff should pay defendants as liquidated damages P25 for every day after November 1, 1913, until
the bridge was completed, except Sundays and holidays.
The controversy which resulted in this action springs from the failure of plaintiff to complete the work in
time, i.e., within the time specified in the contract. The failure is admitted by plaintiff. The sole defense in
the court below, and here on this appeal, is that his noncompliance with the contract in this regard was
due to the failure of the defendants to deliver in time the steel mentioned; and that such failure prevented
his completing the bridge on time and, accordingly, relieved him from all damages caused to the
defendants thereby.
The Supreme Court finds that plaintiff's defense is well founded. How the court arrives at this conclusion
I am unable to understand. In my judgment the findings of the court are not only unsupported by the
evidence but they are contrary to the undisputed evidence and the testimony and admissions of the
plaintiff and his witnesses.
Let us look, first, at plaintiff's own words on the question of delay. They not only help us in that connection
but in several others. The true reasons for the plaintiff's failure in not completing the structure by the 1st
of November, 1913, are given by plaintiff's engineer and superintendent, James, who had complete charge
of the construction of the bridge, the plaintiff being absent from the country. He was also his attorney-in-
fact and fully authorized to act for him in all ways. On the first day of December, the piles for the
foundation of the bridge not having yet been driven the plaintiff, through his engineer, superintendent,
and attorney-in-fact, made, in the form of a letter to the defendant provinces, an application for an
extension of the time within which the bridge was to be completed under the contract of construction.
This application, as appears upon the face thereof, contains a full statement of the reasons and grounds
upon which the application was based. Even a cursory reading discloses that it is a complete and absolute
refutation of every contention made by the plaintiff in this case with respect to his failure to complete the
bridge on time and is a complete and absolute refutation of the opinion of this court upon that question.
It reads as follows: .
GENTLEMEN: I have the honor to request that an extension of time be granted me for the construction of
the Argos River Bridge.
Immediately upon entering into contract with the Province of Albay on June 26, 1913, I ordered cement
for the work, but due to the shortage in the Manila market at that time did not receive delivery until the
middle of July, when same was shipped to Legaspi where it arrived four days later.
I had made previous arrangements to have this cement hauled to the bridge site by automobile truck, but
when an attempt was made to do so in July the recent rains so softened the road beyond Polangui that it
was impossible to send a loaded truck over it with any assurance of safe arrival of the cargo of cement at
Argos River in good condition. therefore I was obliged to haul by truck to Ligao only and from there to
Argos by carabao carts.
The contractor in Ligao then began to haul the cement and also the steel for the bridge. Shortly a
quarantine on animals was put into effect in the town of Polangui, and the hauling had to stop when I had
had delivered at the bridge site only a few barrels of cement and a very small number of bars of steel for
the piles. It was not until early in October, therefore, that sufficient steel and cement were delivered at
the Argos River to warrant beginning work of casting the piles. This work began however immediately this
condition obtained and the sixty concrete piles were completed November 22.
Due to the fact that the material in the Argos River into which the piles must be driven is exceptionally
hard and of a very compact nature it is almost imperative that the piles have considerably more than the
usual thirty days for ripening before driving, and of necessity I must wait until at least December 15 before
handling even the first piles cast. My pile driver is being shipped to Nueva Caceres at present writing. I am
obliged to send all my plant and balance of materials in it that port due to the fact that nobody in Albay is
willing to attempt hauling heavy machinery over the road beyond Polangui for reasons best known to the
honorable board, and it is only a question of hauling same from Nueva Caceres to Argos River as to the
actual date of beginning driving.
As was foreseen at the time of entering into contract for this bridge, I have been obliged to use two plants
on my work in the Province of Bulacan where it was anticipated that one would be enough, due to the
unusual conditions and delays from floods and typhoons, so I have not been able to ship my engine and
driver so as to have it at Argos River on the date expected. Therefore, for these above-named reasons, I
have the honor to request that I be granted an extension of time until February 15th, 1914, to complete
the Argos Bridge.
Very respectfully,
ARTHUR F. ALLEN, Contractor,
(Sgd.) Per F. T. JAMES.
The HONORABLE PROVINCIAL BOARD,
Albay, Albay.
Through The Director of Public Works, for indorsement.
Viewed in connection with the opinion of the Supreme Court, this is striking document in several
particulars .Let us first consider the time of execution and the purpose of the document. It was dated the
1st day of December, 1913, one month after the time when the bridge should have been completed. Now
it is clear that, if the defendants had caused plaintiff's failure to complete the bridge by November 1, he
was relieved of all responsibility which would have otherwise arisen by reason of that failure; and his only
duty was to ask for an extension of time. It had already been extended, at least for a time reasonably
required to complete the structure, by defendants causing plaintiff delay and failure. From plaintiff's point
of view, then, his request for the extension was very significant. It meant that plaintiff knew his failure was
due to his own fault, and that, by making the application for an extension, he was trying to avoid the
consequences of that failure. I believe this inference is a fair once under all the circumstances. Men do not
ordinarily ask for things which they do so it instantly raises the suspicion that they themselves doubt the
validity of their title. According to plaintiff's theory the time had already, in legal effect, been extended for
a period reasonably sufficient to complete the bridge by the omissions of the defendants, and plaintiff had
been operating for a month under that extension. Why, then, ask for an extension? But, above all, why
seek to excuse his own delay and failure to fulfill? On the other hand, if it be urged that plaintiff was simply
asking for the recognition of a right which, by virtue of the defendants' delay, was already his, would not
the allegation of such delay in the letter asking for an extension of time have been the strongest reason
which plaintiff could possibly have offered to obtain what he was seeking? Why present excuses for so
many of his own failures as a ground for extension if he could have closed the mouths of defendants
against objection by alleging their own failure? Why pray for a privilege when he could demand a right?
can any reasonable man conclude that, if the defendants had failed as plaintiff now asserts they failed, he
would have neglected to mention that failure in his letter requesting an extension?
Second, let us consider the nature of the document. In the first place, it is a prayer. It is not a declaration
of a right and a demand for its express recognition. "I have the honor to request that an extension of time
be granted me" says that document at the beginning; and "therefore, for these above named reasons, I
have the honor to request that I be granted an extension of time" says the document at the close. This is
a request, a petition, a prayer and not a demand based on a claimed right or one for the express
recognition of a right already existing.
In the second place, it is an excuse for a failure to perform and not an declaration that he had not, by his
won neglect, failed to perform. It admits his failure and seeks to excuse it. The whole document is filled
with nothing but admissions and excuses. It does not contain an allegation or a claim of a single right
against the defendants. It is filled from beginning to end with admissions that the plaintiff had failed to
fulfill his contract; but nowhere is there even a suggestion that the defendants had failed to fulfill theirs.
The first excuse offered is that, although the plaintiff had ordered the cement immediately after the
execution of the contract, nevertheless "due to the shortage in the Manila market at that time did not
receive delivery until the middle of July, when the same shipped to Legaspi where it arrived four days later."
Although the contract was signed on the 26th of June plaintiff did not obtain delivery of the cement at
Legaspi until about the 20th of July. This is the first reason offered to excuse his failure to perform. Who
was to blame here?
The second reason offered is that " I had made previous arrangements to have this cement hauled to the
bridge site by automobile truck, but when an attempt was made to do so in July the recent rains so
softened the road beyond Polangui that it was impossible to send a loaded truck over it with any assurance
of safe arrival of the cargo of cement at Argos River in good condition. Therefore I was obliged to haul by
truck to Ligao only and from there to Argos by carabao carts." From this it is clear that the plaintiff began
to haul the cement during the latter part of the month of July and that at that time the road was so bad
that the automobile truck could not pass over it. Whose fault was it then that he was unable to transport
his cement to the Argos River? Was it due to any act of the defendants? Clearly this is an admission that it
was due to his own failure.
The third excuse is that the contractor in Ligao was obliged to discontinue the hauling of the cement and
steel from Ligao to the bridge site on account of a quarantine on animals imposed by the Government.
This occurred, says the plaintiff, "when I had had delivered at the bridge site only a few barrels of cement
and a very small number of bars of steel for the piles." Whose fault was this? Was it the fault of the
defendants? The plaintiff admits that it was not. That which caused all of the subsequent difficulties
including those arising from the quarantine was the failure of the plaintiff to begin the delivery of his
cement to the bridge site from Legaspi before the roads had been rendered impassable by the rains. If he
had delivered his cement in Legaspi in time he himself admits that he would have been able to transport
it to the bridge site in an automobile truck and would not have been obliged to rely on carabaos. The
necessity, therefore, of using carabaos was due to plaintiff's own negligence and procastination in not
procuring the delivery of the cement in Legaspi prior to the beginning of the heavy rains. This is not only a
legitimate but an absolutely necessary inference from the document which we are discussing.
The fourth excuse is that, by reason of the facts already stated, "it was not until early in October, therefore,
that sufficient steel and cement were delivered at the Argos River to warrant beginning work of casting
the piles." This excuse needs no discussion other than that already given respecting other excuses.
The fifth excuse given is that "due to the fact that the material in the Argos River in which the piles must
be driven is exceptionally hard and of a very compact nature, it is almost imperative that the piles have
considerably more than the usual thirty days for ripening before driving, and of necessity I must wait until
at least December 15 before handling even the first piles cast." Was the hardness of the soil attributable
to the defendants? Was the fact that he had to give the piles more than thirty days to ripen due to any act
of the defendants? Certainly not. It was a mere miscalculation in his part which he offered as an excuse in
the hope that the defendants would be generous and overlook it with his other mistakes and omissions.
The sixth excuse offered for his failure is that "my pile driver is being shipped to Nueva Caceres at present
writing(December 1, 1913);" and it is admitted that it did not arrive until January. the reason for this delay
is given by the plaintiff as follows: "As was unforeseen at the time of entering into contract for this bridge,
I have been obliged to use two plants on my work in the Province of Bulacan where it was anticipated that
one would be enough, due to the unusual conditions and delays from floods and typhoons, so I have not
been able to ship my engine and driver so as to have it at Argos River on the date expected." It not his
clearly an excuse offered for plaintiff's own failure, for his own negligence?
The document is not an excuse, it is an admission. It is a comprehensive admission on plaintiff's part that he
alone was responsible for every delay that occurred. I have already referred to several passages in the
letter which show that it is a confession and a prayer for clemency. "I failed in this; I failed in that; I failed
in the other thing;" says the plaintiff in the letter. "Wherefore," says he, "I . . . request that an extension of
time be granted me . . . ." One does not request where he has the right to demand; and one does
not grant that which another has a right to require.
"I failed," says the plaintiff in effect. "to get the cement to Legaspi before the rains made the road from
there to the bridge site impassable;" and this is the reason he gave in his letter for that failure:
"Immediately upon entering into contract with the Province of Albay on June 26, 1913, I ordered cement
for the work, but due to the shortage in the Manila market at that time did not receive delivery until the
middle of July, when same was shipped to Legaspi where it arrived four days later."
The plaintiff further says, in effect: "I failed to deliver the cement at the bridge site in time to complete
the work as agreed;" and this is the reason he gives in his letter for that failure: "I had made previous
arrangements to have this cement hauled to the bridge site by automobile truck, but, when an attempt
was made to do so in July, the recent rains so softened the road beyond Polangui that it was impossible to
send a loaded truck over it with any assurance of safe arrival of the cargo of cement at Argos River in good
condition. Therefore I was obliged to haul by truck to Ligao only and from there to Argos by carabao carts.
The contractor in Ligao then began to haul the cement and also the steel for the bridge. Shortly a
quarantine on animals was put into effect in the town of Polangui, and the hauling had to stop when I had
delivered at the bridge site only a few barrels of cement and a very small number of bars of steel for the
piles. It was not until early in October, therefore, that sufficient steel and cement were delivered at the
Argos River to warrant beginning work of casting the piles. This work began however immediately this
condition obtained and the sixty concrete piles were completed November 22."
This is, of course, a clear admission that, on account of a series of circumstances with which the defendants
had nothing to do, he failed to deliver the cement at Legaspi before the rains made the roads impassable,
and failed to deliver the cement at the river until October. The defendants admittedly had nothing to do
with the cement; and it goes without saying that plaintiff could do absolutely nothing in the construction
of the bridge until he had cement. The bridge was a cement bridge; the piles were cement piles. He was
utterly helpless until the cement arrived, no matter how many tons of steel he may have had. Nowhere in
all the case is there a shadow of claim that the defendants interfered with the purchase or delivery of the
cement and nowhere is there a shared of evidence to show that an earlier delivery of steel would have
availed plaintiff anything.
In the passage last quoted plaintiff says in effect: "I failed to complete the bridge on time because I did not
finish casting the piles until November 22." If, by lack of cement he did not complete the piles
until November 22, how could he have completed the bridge November first, the date specified in the
contract, even though he had boatloads of steel at his disposal?
Plaintiff further says in his letter, in effect: "I failed to drive the piles in time to complete the bridge as
agreed." We have already seen some of the reasons for this failure, such as lack of cement and his failure
to deliver it at the bridge site in time. But plaintiff gives two additional reasons. The first one is stated in
the letter as follows: "Due to the fact that the material in the Argos River into which the piles must be
driven is exceptionally hard and of a very compact nature it is almost imperative that the piles have
considerably more than the usual thirty days for ripening before driving, and of necessity I must wait until
at least December 15 before handlong even the first piles cast;" and the second is that: "My pile driver is
being shipped to Nueva Caceres at present writing;" and "As was unforeseen, at the time of entering into
contract for this bridge, I have been obliged to use two plants on my work in the Province of Bulacan where
it was anticipated that one would be enough, due to the unusual conditions and delays from floods and
typhoons, so I have not been able to ship my engine and driver so as to have it at Argos River on the date
expected."
The court makes the following findings:
We must, therefore, conclude that the provinces waived the contract time, whether
it was September 1 or November 1, by their failure to deliver the steel promptly, by
reason of their having placed a strict quarantine on animals and on account of
the change in the plans subsequent to October 12th, . . . .
Compare these findings and conclusions with plaintiff's own statement of the reason why he failed to
complete on time contained in the letter of December 1, and what is the result? I repeat, plaintiff's own
statement of the reasons why he failed to perform on time are a confession that his inability to perform
was brought about by hisown acts and omissions with which the defendants had nothing whatever to do.
This is shown beyond shadow of doubt by plaintiff's letter quoted above; and every fact and circumstance
stated in the letter is fully supported by the undisputed evidence in the case.
These facts are undisputed in the record. Most of them are established from plaintiff's own mouth or the
mouths of his own witnesses:
1. That there was a nonperformance. That, while the agreement obliged him to complete the bridge by
the 1st day of November, 1913, it was not finished until the 31st day of March, 1914.
2. That the bridge was to be a cement structure and that the cement necessary for its construction and for
the casting of the piles was to be furnished and delivered to the bridge site by the plaintiff.
3. That although the contract was signed on the 26th day of June, 1913, and the bridge was to be
completed according to that contract on or before the 1st day of November, 1913, the cement did not
arrive at Legaspi until about the 20th day of July and at the bridge site until the last week in October.
4. That, although the plaintiff began transporting the cement from Legaspi to the bridge site soon after its
arrival on the 20th of July, the rains had at that time so softened the roads that transportation by
automobile truck from Legaspi to the bridge site was impossible; and that for that reason the cement did
not reach the bridge site until the last week in October.
5. That the rains began before the arrival of the cement at Legaspi and they had so softened the roads as
to prevent the delivery of the cement from Legaspi direct to the bridge site by automobile truck as plaintiff
had planned; and that as a result thereof the cement did not reach the bridge site until the last week in
October.
6. That the work of casting the cement piles was not begun until about the 1st day of November and was
not finished until the 22d of November.
7. That the piles were not seasoned enough to be driven until the 15th of December, 1913.
8. That plaintiff's pile driver did not reach the bridge site until the month of January, 1914, and the driving
of the piles did not begin until that time.
Under these facts, which all parties admit, how can it be claimed that it was the act or omission of the
defendants which caused the contractor's failure to complete the bridge on time? But let us go father.
With respect to the alleged failure of the defendants to deliver the steel in time, the following facts also
stand uncontroverted in the case:
9. That the steel to be furnished by the defendants was to be used by plaintiff to reenforce the concrete
bridge and the piles which were to be driven as the foundation of the bridge and could not be used
except jointly with the cement.
10. That the steel to be furnished by the defendants was to be delivered by them in Legaspi on ship board
from whence plaintiff was to transport it to the bridge site fifty-one kilometers inland.
11. That defendants furnished all the steel required, namely, 38,582 kilos. 27,056 of the 38,582 kilos, that
is, three-quarters of all the steel to be furnished, were delivered at Legaspi on July 26, 1913; 3,636 kilos
on August 4, and 7,890, the last delivery under the contract and about one-sixth of the whole, on
September 1. Note in this connection that it is admitted that the cement which arrived in Legaspi on July
20, or thereabouts, could not be transported to the bridge site on account of the condition of the roads
caused by the rains. Note, therefore, that the steel could not be transported from Legaspi to the bridge
site for the same reason. In other words, plaintiff was just as late with his cement as the defendants with
their steel, even admitting that defendants were late at all in its delivery.
12. That the plaintiff could have begun the transportation of the steel at the same time that he actually
began the transportation of the cement; that when he began the transportation of the cement from
Legaspi to the bridge site on the Argos River in an automobile truck he found that (plaintiff's own words)
"the recent rains so softened the road beyond Polangui that it was impossible to send a loaded truck over
it with any assurance of safe arrival of the cargo of cement at Argos River in good condition."
Under these undisputed facts, and plaintiff's own statement already discussed, what act of defendants
caused the failure of plaintiff, conceded by all, to complete the construction on time? When we note that
plaintiff's solecontention is that the failure of the defendants to deliver the steel in time caused his delay
and then compare that contention with the foregoing admitted facts, the contention becomes ridiculous.
The claim that plaintiff was hindered and delayed by defendants' alleged failure to deliver the steel is, in
the face of the admitted fact that the steel was at Legaspi almost as quick as plaintiff's cement, that no
attempt to transport the cement from Legaspi to the bridge site was made until after the steel arrived in
Legaspi, that the transportation of the cement was at that time impossible, that, therefore, no cement
was at the bridge site until the last week in October, that the piles were not cast until November 22, that
they would not be driven until December 15, and that the pile driver did not arrive until January, 1914, so
devoid of merit as not to be entitled to serious consideration.
It must be remembered that, under the contract of construction, plaintiff himself was to deliver everything
at the bridge site on the Argos River, including the steel. The defendants discharged their obligation as to
the delivery of the steel when the ship bearing it stood ready to unload in the harbor of Legaspi. The
plaintiff was to transport it from there to the bridge site. He was to furnish and deliver there all machinery,
tools, and implements necessary to complete the bridge within the time specified in the contract,
November 1, 1913; yet he did not begin to transport his cement from Legaspi to the bridge site until after
the steel arrive in Legaspi, his cement did not reach the bridge site until the last week in October, the piles,
the driving of which was the very first act in the construction of the bridge, as they were the foundation
thereof, were not cast until November 22, and were not ready to be driven until the 15th of December,
and the pile driver itself was not on the ground until the month of January, 1914. It is admitted that the
steel could not be used and, therefore, was not needed at the bridge site until the cement arrived there,
as the steel was to reenforce the cement piles; and that plaintiff did not begin to cast the piles until
November and they were not completed until November 22. Defendants delivered three-fourths of the
steel required by the 26th of July. Another delivery was made a few days later and the balance, about one-
sixth of the whole, was at Legaspi September 1. Therefore, if plaintiff did not begin to cast the piles until
November, certainly it was not due to any act of defendants as they had delivered the steel at Legaspi three
months before that date, and substantially as soon as he had delivered the cement and before plaintiff
was prepared to begin the transportation of his materials from Legaspi to the bridge site.
It is a proposition of law set down in plaintiff's brief on appeal that, before the delay of defendants can be
of service to the plaintiff in the defense offered for his failure to perform on time, it must have delayed
plaintiff, i. e., defendants' delay must have caused or contributed materially to plaintiff's delay; and
plaintiff cites many authorities to that effect. Among them are the following:
It is a well settled rule that, where one party demands strict performance as to time by another party, he
must perform on his part all the conditions which are requisite in order to enable the other party to
perform his part; and a failure on the part of the party demanding performance to do the preliminary work
required in order to enable the other party to complete his within the time limited, operates as a waiver
of the time provisions in the contract. (Dannat vs. Fuller, 120 N. Y., 554.)
There is no question with respect to the law applicable to the case, for by the express terms of the contract,
as well as under the general rule of law, the time prescribed by the contract for the performance of the
plaintiff's work was abrogated by the owner's delay, and the plaintiff had a reasonable time under all the
circumstances for completing performance after the expiration of the delay caused by the owner.
(Levering & Garrigues Co. vs.Century Holding Co., 160 N. Y. Supp., 649.)
The courts have laid down a very salutary rule to the effect that they will no attempt to apportion such
delays where the causes thereof have been mutual, but will refuse under the circumstances to enforce the
penalty. (Jefferson Hotel Co. vs. Brumbaugh, 168 Fed., 867.)
Where the parties are mutually responsible for the delays, because of which the date fixed by the contract
for completion is passed, the obligation for liquidated damages is annulled and, in the absence of some
provision under which another date can be substituted, it cannot be revived. (Mosler Safe Co. vs. Maiden
Lane Safe Deposit Co., 199 N. Y., 479.)
Here the delays of the Government prevented the claimant from a strict performance, and thereby it
waived the contract time within which to perform, and that waiver operated to eliminate the definite date
from which to assess liquidated
damages. . . . Whatever loss the Government may have suffered by reason of the claimant's breach to
perform within a reasonable time must be reduced to actual damages, if any, susceptible of proof. (United
Engineering & Contracting Co. vs. United States, 47 Court of Claims, 489.)
The same doctrine is found in Allen vs. Province of Bulacan, post, p. 875.
These cases assert expressly or impliedly the proposition that, if the owner's failure to fulfill does not cause
or contribute materially to the contractor's delay, then the latter is not excused for failure to perform
within the time specified; and he cannot take refuge behind the delay of the owner. if the owner's delay
does not hinder the contractor, does not in the slightest degree impede or interfere with his progress, it
does no harm, is immaterial, and produces no effect; and it cannot, therefore, be made the basis of an
excuse for the contractor's failure to perform.
In the case before us, even admitting a delay on the part of defendants in delivering the steel at Legaspi,
still it was delivered before plaintiff began to transport his cement from Legaspi to the bridge site, long
before plaintiff could possibly use, it, as his cement did not reach Legaspi until just before the steel arrived
there and did not reach the bridge site until the last week in October, could not be used by the plaintiff
until November, and the piles made therefrom could not be driven until the pile driver arrive in January.
If it is a fact, and plaintiff admits it, that (I use plaintiff's own words) "It was not until early in October,
therefore, that sufficient steel and cement were delivered at the Argos River to warrant beginning the
work of casting the piles," then certainly the delivery of the steel by defendants in July and August could
not have contributed in the slightest to plaintiff's delay. It could not have prevented his getting the cement
at the bridge site. It could not have prevented his getting the steel at the bridge site as he could have
begun the transportation of the steel, as he did his cement, from Legaspi the last of July, as three-quarters
of the steel was delivered on the 26th of July at Legaspi. Instead he did not transport either the steel or the
cement until the month of October, or the very last part of September according to his own admission; and
he did not begin the transportation of his cement until after the steel arrived. Moreover, and this is also
important, the steel arrive at the bridge site as soon as the cement. How, then, did the failure of the
defendants to deliver at Legaspi before July 26 hinder or delay plaintiff? There is only one answer to this
query: It did not effect plaintiff's progress in the slightest degree. Why should effect be given to something
which in the very nature of things can produce no effect? An athlete who is to run in a race to be held on
June 1 makes a contract with a dealer to hire a pair of racing shoes for the occasion, the dealer agreeing
to deliver the shoes on the race track at 9 a. m. of June 1. On May 31 the athlete loses both legs in an
accident. The dealer, learning of the accident, does not deliver the shoes as agreed. Can the athlete legally
claim that he lost the race or was injured or prejudiced in any manner because of the failure of the dealer
to deliver the shoes as agreed? Certainly not; but why? Because neither law nor common sense requires
the doing of an idle and useless thing. What, then, can and should be said of a decision of a court which
holds that the failure of the shoe dealer to deliver the shoes at the race track at 9 o'clock in the morning
of June 1 caused or materially contributed to the failure of the athlete to win the race, although at the
very moment when the race took place he was in the hospital with both legs off. Nevertheless that is what
this court would have to hold if it followed the principles enunciated in this decision. Take another view of
it. An owner of a city lot makes a contract in June to construct a house thereon, to be completed November
1, the contractor to furnish all labor and materials, tools, implements, etc., except that the owner was to
furnish the roofing shingles which, under the contract, were to be delivered on the ground July 1. Could
the contractor, who did not complete the house until the first of April of the year following the making of
the contract, successfully defend an action for breach of contract brought by the owner by proving that
the latter did not deliver the roofing singles until July 27 instead of July 1, when the contractor, at the same
time, admitted that he did not even break ground for the foundation of the house until the month of
October, and that he could not possibly have used them before November even if he had had them?
Certainly not. The contention is, of course, unsustainable that the failure to deliver the roofing shingles at
the time agreed on caused delay when they were actually delivered before the foundation of the house
was even laid and months before the contractor could, under any circumstance, have used them.
Nevertheless that is, in substance, the contention which, in my judgment, this court has sustained in this
case. It has held that the failure of the defendants to deliver steel for reenforced concrete piles to be
driven as the foundation of a bridge caused a delay to the contractor in the construction of the bridge from
November 1 to the 31st of March following, although the steel was actually delivered in Legaspi before
plaintiff began the transportation of his cement to the bridge site and could have been, and as a matter of
fact was, transported at the same time as the cement, was actually delivered months before the contractor
could possibly use it, months before the cement he himself was to furnish was on the ground, months
before he was able to begin casting the piles, and nearly six months before he had even obtained a pile
driver with which to sink the piles. Such a decision, it seems to me, overrules the unquestioned doctrine
that a breach of contract will be disregarded where absolutely no injury results therefrom
(Lassing vs. James, 107 Cal., 348). It is contrary to the principle that the delay of the owner will be
disregarded unless it causes or materially contributes to the contractor's delay (Allen vs. Province of
Bulacan, post, p. 875; Dannat vs. Fuller, 120 N. Y., 554; Levering & Garrigues Co. vs. Century Holding Co.,
160 N. Y. Supp., 649; Cheney vs. Libby, 134 U. S., 68; Erickson vs. U. S., 107 Fed., 204; Missouri Bridge &
Iron Co. vs. Stewart, 134 Mo. App., 618; District of Columbia vs. Camden Iron Works, 181 U. S., 453;
Willis vs. Webster, 27 N. Y. Supp., 354; Weeks vs. Little, 89 N. Y., 566; Ocorr & Rugg Co. vs. City of Little
Falls, 178 N. Y., 622; Manistee Iron Works vs. Shores Lumber Co., 92 Wis., 21; Wyant vs. U. S., 46 Court of
Claims, 205; Smith vs. United States, 48 Court of Claims, 235). It is opposed to the rule that the failure to
perform of any party to a contract will not excuse performance by the other unless the breach is material
or such as prevents the other party from performing his part. (See cases above cited.)
Plaintiff claims that the defendants did not deliver the steel at Legaspi until the rainy season had
commenced and the roads were impassable. "But," reply the defendants to the contractor, "you did not
deliver the cement in Legaspi until after the rainy season had commenced and the roads were
impassable and you began the transportation of the steel as soon as you actually began the transportation
of the cement:' and they say to him: "How could you have used the steel without the cement? What
difference would it have made if we had delivered the steel the first day of June and it had arrived at the
bridge site the 2d day of June (although the contract was not made until the 26th of June)? Your cement
was not there till the last week in October and the steel could not have been used without the cement.
Nothing could have been done with it no matter how early it may have been there. It would have had to
lie there from June 2d to the last week in October without the possibility of being used. How can you claim
that we delayed you when, by reason of your own negligence and incompetency, you could not have used
the steel no matter how early it might have been delivered at Legaspi or at the bridge site? How can you
say that you would have completed the bridge by November 1 if we had delivered the steel at Legaspi
earlier than July 26, in the fact of your own admission that you were wholly unable to deliver the cement at
the bridge site until the last week in October; in the face of your own admission that the concrete piles
were not cast until November 22; in the face of your own admission that they were not ready to be
driven until December 15; and in the face of your own admission that you were wholly unable to get the
pile driver on the ground until the month of January, 1914?"
Not only is the decision contrary to the evidence of plaintiff, as I view the record, but two of the three
defenses which the court establishes in favor of the plaintiff to protect him against his failure to perform
in time were not presented as defenses in this case. There two "defenses" are the quarantine and the
change in plans. They were not offered or considered as such in the court below; nor were they offered as
such in this court. The soledefense which plaintiff has presented in this case, and it is one which he did not
think of offering when he prayedfor an extension of time December 1, is that the defendants did not
deliver the steel at Legaspi so that the plaintiff could transport it to the bridge site before the roads became
impassable from rains. This is the only defense alleged, offered or presented anywhere in the case.
To demonstrate the truth of this statement let us take first the allegations on plaintiff's own pleadings as
to his defense for his failure to perform on time, and there are his only allegations on that subject. His
complaint states:
That plaintiff fully and faithfully complied with all the terms and conditions of the said contract on his part
to be performed, and duly completed and delivered to defendants the said bridge, and that the same was
duly accepted by said defendants.
That the defendants, in violation of the aforesaid contract, and notwithstanding repeated requests on the
part of plaintiff, failed, neglected, and refused to furnish and deliver to plaintiff, at reasonable times as
required and requested by plaintiff, and at the places agreed upon the reenforcing steel necessary for the
proper construction of the said bridge, thereby hindering and delaying plaintiff in the performance of his
part of the said contract; that the first partial delivery of the said steel was completed in Legaspi on or
about July 10, 1914, and complete delivery was not made until September 30, 1914, in the said port of
Legaspi; that at the time said steel arrived the rainy season had commenced, and had so softened the
direct roads, means of communication between Legaspi and the site of the said bridge, that plaintiff was
compelled to incur extra expenditure for the hauling of said steel, to wit, the sum of P2,000 which said
sum, notwithstanding repeated requests of plaintiff, has not been paid, nor any part thereof, by defendant
to plaintiff.
The latter allegation is made for the purpose of obtaining pay for extra work rather than as a defense of
his failure to perform on time; but it shows plaintiff's theory as to the cause of his delay. At that time there
appears to have been no thought of the quarantine or the change in plans as being primarily involved in
causing his delay. The whole theory was simply that failure to deliver the steel before the rains set in and
softened the road waived the time requirement in the contract.
Let us take, second, the opinion of the trial court 1 with reference to the matter under discussion here. The
trial court said:
The third cause of action is for the recovery of P2,000 as extra expenses caused plaintiff by the failure of
defendants to deliver the steel for the bridge within the time specified by the plaintiff.
Further on the opinion of the trial court said:
James, the representative and attorney-in-fact of the plaintiff, the person who had full charge and control
of the construction of the bridge on the Argos river, testifies that the steel was delivered between July 26
or 27 and the first week in September, 1913; that when the steel arrive the rainy season had begun and it
was impossible to transport the materials from Polangui a town in the Province of Albay to the bridge
siteexcept by vehicles drawn by carabaos; that the result was not only a loss of time in the transportation of
the materials but extra expense also.
This is the only discussion in the opinion of the court below relative to plaintiff's defense of his failure to
perform in time. Nothing is said of quarantine or change in plans.
Let us take, third, the brief of plaintiff-appellant in this court 2 and ascertain from it what question he
desired to present to this court. From that brief, the material parts of which will be found in a foot-note,
it is clear that plaintiff neither presented nor relied upon either the quarantine or the change in plans as a
defense to or an excuse of his failure to perform. Neither is mentioned or even suggested in the argument.
On the contrary they are impliedly rejected. Counsel says;
The date stipulated in the final contract, signed on June 26, for the completion of the bridge, was
September 1, 1913, 3 and defendants' right to retain any sum as a penalty or liquidated damages must
depend upon the contractor's failure to finish the bridge by that date. It is true that the bridge was
unfinished on September 1, but it is readily shown by defendants' own evidence that the failure to finish
the bridge by September 1 was caused by their own delay in furnishing the necessary steel. If the decision
of the trial court is correct, defendants may mulct the contractor for liquidated damages because he did
not complete a reinforced concrete bridge the very day on which they furnished the materials.
From this quotation it is clear that there is no place in counsel's theory for the defense of quarantine or of
change in plans. What did the mischief, from plaintiff's point of view, was the failure of the defendants to
finish delivering the steel at Legaspi, more than 51 kilometers from the bridge site, until September 1, the
very day on which the bridge was to be completed; and he triumphantly asks the question how could the
plaintiff be expected to complete the bridge on the very day the steel arrived. To this sole contention
plaintiff's brief joins the proposition of law that, "Time was the essence of the contract, and defendants, by
making it impossible for plaintiff to complete the bridge on September 1, waived that date, and could only
hold plaintiff to a reasonable time for performance." This theory excludes both the quarantine and the
change of plans as an excuse for failure to perform on time. If counsel had discussed the question of
whether the plaintiff performed within a reasonable time after September 1, then it is possible that
quarantine and change of plans might have been pertinent, if they had been pleaded as such, a point which
we now come to consider.
From these observations it is clear that at no stage of the proceedings in this action has plaintiff claimed
as an excuse for his failure to complete the bridge on time that he was prevented from doing it by a
quarantine of animals or by a change of plans. Every pleading he has filed, every argument he has made,
every word he has uttered, is not only foreign to but excludes the possibility of their being urged in his
favor; and the only guide which this court has to do justice between the parties, that is, that which, if we
may so, frames the issues in this court and tells it on what theory the parties have proceeded and desire
to proceed, the question they present and wish to have decided, namely, the briefs filed by the parties in
this court, not only fails to present the defenses on which this court absolves the plaintiff for his failure to
perform, but the theory on which the appellant relies excludes such defenses from consideration by this
court.
But there is an additional consideration which, of itself, shows, in my humble judgment, that the decision
of this court is erroneous in that regard. Neither of these defenses was pleaded by plaintiff in reply to the
defenses offered by the defendants to plaintiff's complaint. In their answer the defendants deny the
allegations of the complaint that plaintiff fully performed according to its terms his part of the contract
and allege that he negligently failed to complete the bridge within the time agreed and that they were
greatly damaged thereby. The only issue framed by the complaint and answer was whether plaintiff
completed the bridge within the time specified in the contract. They raised no question as to the failure
of defendants to perform as agreed. The plaintiff having alleged in his complaint performance strictly in
accordance with the terms of the contract could not be presumed to have later alleged that he
did not perform in accordance with the terms of the contract but, on the contrary,failed so to perform, at
the same time adding that such failure was due to the breach of contract of defendants. Plaintiff made no
reply to defendants' charge of failure to perform; and therefore framed no issue on that subject except
the one already framed by the complaint and answer referred to, namely, whether plaintiff actually
performed in accordance with the terms of the contract, not whether he was excused for or justified in his
failure so to perform. It is true that, notwithstanding the failure of a plaintiff to reply to new matter in an
answer constituting in itself a cause of action, it is deemed to be denied, nevertheless it is a
mere denial and cannot be considered to be an allegation of special defense to the cause of action set out
in the answer (sec. 104, Code Civ. Proc.). It is simply a general denial; it is not a special defense, or a plea
of confession and avoidance, such as, in effect, would be the plea that plaintiff failed to perform but that
his failure was excused and justified by certain acts of the defendants.
Nor did the pleadings present an issue on the question of quarantine. If a defense at all, it is one under
article 1105 of the Civil Code which provides that:
No one shall be held liable for events which could not be foreseen (viz major) or those which, even when
foreseen, were inevitable, aside from the cases expressly stated by law of those in which the obligation so
declares.
This defense is one that must be specially pleaded. It is not one which can be proved under a general
denial.
It is apparent from what has been said that the pleadings raised no issue with respect to an excuse for or
justification of plaintiff's breach based either on defendant's failure to perform, of in a change of plans, or
in the happening of a fortuitous event, which prevented timely performance on plaintiff's part. All these
are special defenses excusing a failure to perform in time and must be specially pleaded. They cannot be
proved under a general denial; and especially not when plaintiff's own pleading affirmatively alleges, as
does the complaint in this action, full performance on his part in strict accordance with the terms of the
contract. If defendants were to be charged with a breach of contract they had a right to be notified of that
charge by plaintiff's pleadings and be given an opportunity to defend themselves in that regard. The mere
allegation by plaintiff of a complete performance in accordance with the terms of the contract and a denial
of full performance by the defendants coupled with an allegation of failure to perform on plaintiff's part
does not raise such an issue as would permit the introduction of evidence tending to show a breach of
contract on the part of the defendants.
The pleadings, therefore, were not framed with the intention or for the purpose of charging the
defendants with a breach of contract which should form the basis of an excuse of the failure of the plaintiff
to perform the contract according to its terms.
While, however, there was no issued framed by the pleadings with respect to the failure of the defendants
to deliver the steel at Legaspi in accordance with their contract with the plaintiff, that question was raised
in the trial court by the plaintiff without objection on the part of the defendants and was there passed
upon by the trial court and has been presented to this court by the briefs of counsel. We have the right
and it is our duty, therefore, to determine that question although the pleadings filed by the parties do not
in law present such an issue or raise such a question (Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep., 504).
The other two defenses found by the court in favor of the plaintiff were not so raised on the trial or passed
upon by the trial court and were not presented by briefs of counsel on this appeal. We have, therefore, no
authority to consider those defenses. To give the plaintiff the benefit thereof would be to surprise the
defendants who had never been notified that the plaintiff claimed any such a defense and have never had
an opportunity to meet it.
In my judgment there is no ground for the finding of the court that the defendants actually failed to comply
with their contract in the delivery of the steel at Legaspi. I am unable to find any evidence in the record to
establish such a breach of contract. Even though we admit that the plaintiff alleges it, the defendants
stoutly deny it and plaintiff has not offered evidence to sustain his allegation. The contract for the
construction of the bridge itself does not mention the time when the steel shall be delivered. There is no
evidence in the case showing what the contract to arrangement was between the parties relative to the
time of the delivery of the steel. There is no evidence to show when the plaintiff ordered the steel. There
is some evidence to the effect that before the contract was signed the plaintiff gave to the district engineer
of the department of public works of the Philippine Islands a list of the steel which would probably be
required. There is not, however, a scintilla of evidence in the record showing that there was an agreement
as to when the steel should be delivered, or at what time the defendants were required to have it at
Legaspi for transportation to the bridge site. From the signing of the contract on the 26th of June forward,
the record is naked of evidence showing that the plaintiff ordered any steel of the defendants or that he
ordered it delivered at any particular time. There being no evidence as to when the steel was ordered
there can be no assumption as to when the steel was to be delivered; and there being no evidence as to
when the steel should be delivered there can be no assumption that it was not delivered as required by
the contract. But, says plaintiff, it was certainly intended that the steel should be delivered before the time
when the bridge should be completed under the contract. But precisely the same may be said with regard
to the cement. The cement was not at all delivered at the bridge site until the last week in October and
was not delivered in Legaspi until the last part of July, about the same time that the steel was delivered.
Certainly, if the defendants delivered the steel, or such portions as would give the plaintiff the opportunity
to begin his work without delay, as quickly as plaintiff himself delivered his cement, there can be no
presumption or claim that the steel was not delivered in time or that it was not delivered in accordance
with the contract. Defendants delivered at Legaspi three-quarters of the quantity of steel finally used in
the construction of the bridge substantially as soon as plaintiff delivered his cement at Legaspi; and there
is no evidence whatever to show that if all of the steel had been required at that time or at any particular
time the defendants could not have furnished it as required. Why should the defendants be presumed to
have broken their contract for a failure to deliver the other sixth of the steel in Legaspi when none of the
plaintiff's cement then in Legaspi could be transported to the bridge site to be used in any way? All that
any contract could have required of defendants was that they deliver at Legaspi as fast as the plaintiff
needed it. It is clear that plaintiff did not need the steel either at Legaspi or in any other place until his
cement was delivered at Legaspi and there was a possibility of its being transported to the bridge site.
There can be no presumption that defendants broke their contract to deliver the steel when, if it had been
delivered the 1st day of June, 1913, and had been transported to the bridge site on the 2nd day of June, it
could not possibly have been used by the plaintiff until the last week in October, which was the time when
his cement arrived at the bridge site.
I repeat, therefore, that there is no evidence in the record showing what the agreement of the parties was
as to the delivery of the steel and, therefore, there is no evidence showing that the defendants were guilty
of a breach of contract in the delivery of the steel; and especially is there no evidence in the record showing
that even if there was a breach of contract, it prejudiced the plaintiff in the slightest degree.
While the plaintiff claims that the contract provides that the bridge should be completed by the 1st day of
September, 1913, the defendants contend that it was to be completed on or before the 1st day of
November of that year. It is true that the written contract provides that the bridge shall be completed on
or before the 1st day of September. That, however, was found by the trial court, upon evidence, to be a
clerical error and the date should have been November 1. Fixing the date of completion at September 1
would make the delivery of the steel by the defendants at Legaspi in the last part of July appear so late as
compared with the date when the bridge should be completed as to show that the defendants prevented
the plaintiff from completing the bridge on time. If the date when the bridge was to be completed was
September 1 and the delivery of the bulk of the steel did not occur until the last part of July, the argument
that defendants prevented the plaintiff form completing the bridge on time would be much stronger than
if the date of completion was November 1st. As we have seen from plaintiff's brief, he has made full use
of that argument. Plaintiff forgets, however, that the earlier he makes the date of completion the worse
it is for him. His cement did not arrive in Legaspi until the latter part of July and it was not delivered at the
bridge site until late in October. His cement piles were not ready for driving until December and his pile
driver did not arrive on the ground until January.
I think my position in this case is fully supported by the decision in the recent case of Allen vs. Province of
Bulacan, post, p. 875. That case is very much the same as the case at bar; and involved many of the same
questions, including that of the failure of the province to deliver the steel in time, thereby causing a delay
in the completion of the bridges which plaintiff in that case had agreed to build for the defendant province
and of complete on or before a given date. There was in that case also the construction which should be
given to a letter directed by the plaintiff to the provincial board asking for an extension of time. That letter
is very similar in tone and substance to that involved in the case at bar. In order to show that fact, as well
as to demonstrate the different views taken by the court of these two letter, I quote it:
MALOLOS, BULACAN, July 25, 1913.
GENTLEMEN: I have the honor to inform you that the earliest date at which I could procure a proper kind
of cement and in a sufficient quantity for beginning work on the Malolos-Hagonoy and Malolos-Calumpit
Bridges, was June 16. The enclosed letter from Messrs. Findlay, Richardson to the honorable board
explains the difficulty.
The notification of the awarding of the contract to us was forwarded by the Director of Public Works during
the last week in February. During that same week the cement dealer made delivery of the last of an order
placed in August, 1912, for an Ilocos Sur contract, but until the above-mentioned date (June 16) made
none for the work in Bulacan.
Therefore, gentlemen, in view of this unavoidable delay in the starting of work requiring material, for its
construction, I have the honor to request an extension of time beyond August 1, for completion of said
bridges, of one hundred and ten (110) working days, which is approximately the loss of time incurred by
nondelivery of cement.
The piles have already been cast at Paombong, Sapang Patay, and Pinagtulayan Rivers, and will be cast at
Baungun the coming week and immediately following that at Kalumpang Creek. Driving of these piles
commence at an early date.
Trusting that this will receive your consideration from the point of view that delays such as in this instance
are not to be foreseen and justify an extension of time, I am,
Very respectfully yours,
(Sgd.) FRANK T. JAMES, Contractor.
THE HONORABLE PROVINCIAL BOARD,
Province of Bulacan, Malolos.
Through the District Engineer.
Concerning the letter just quoted and the alleged failure of the defendant to deliver the steel in time, this
court said in that case:
The foregoing testimony and exhibits established beyond question that the failure on the part of the
province to deliver the steel earlier, after the contract had been executed, did not in any way cause the
delay in completing the bridges nor contribute thereto. James, in his letter of July 25 to the provincial
board, stated that the earliest date that he could procure the proper kind of cement and in sufficient
quantity to begin work on two of the bridges was June 10; that the piles for two others had been cast; that
the piles for the fifth would be cast the following week; and that the driving of the piles would commence
at an early date. Not a word was said in this letter about the steel not being delivered in time. In fact, out
of the twenty-seven shipments of steel all had arrived before June 16, except four and these four were to
be used in the Kalumpang Bridge, which, as late as November 3, had hardly been commenced, the piles
only having been cast. The three rolls of wire mesh which were substituted for the defective ones did not
arrive until October 14, nevertheless, they could not be used before November 3 in either of the bridges,
with the possible exception of Paombong, as James in his letter of that dates states. The three rolls were
so small a portion of that kind of material that their delay certainly could have made no difference,
especially when taken into consideration with the condition of the work even on November 3.
As the province did not cause any delay in the construction of the bridges by reason of not having delivered
the steel earlier after the signing of the contract, consequently, it is self-evident that no delay was caused
by reason of the failure to order the steel before that time.
Are not these remarks equally applicable to the case at bar under the facts?
One of the strange features of the case is that, while defendants admit that there was an extension of time
to complete the bridge from the first of November till the 15th of February and offer the plaintiff the
benefit of that extension, plaintiff contends and asserts that there was no extension of time and he rejects
the benefits which defendants offer him arising from that fact. Plaintiff says in his brief: "It is true that
plaintiff, through his agent, requested an extension of time; but that he refused to agree to the defendants'
proposition is plainly shown by the resolution of the provincial board of Ambos Camarines (defendants'
Exhibit 5)." Another statement in the brief is to the effect:
There was no agreement for the substitution of another date in this case. Defendants arbitrarily set the
time for completion as February 15, 1914 an arrangement which was never agreed to by the plaintiff.
If there was no extension of time then the defendants would have been entitled to recover P25 a day for
every day of delay specified in the contract from November 1 to March 31. They only ask, however, for
damages from February 15 to March 31. That much they are entitled to under the decision in
Allen vs. Province of Bulacan,supra.
I am of the opinion, therefore, that the amount of the recovery should be reduced by the amount of
damages proved.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-22738 December 2, 1924
ONG GUAN CAN and THE BANK OF THE PHILIPPINE ISLANDS, plaintiffs-appellees,
vs.
THE CENTURY INSURANCE CO., LTD., defendant-appellant.
Eiguren & Razon for appellant.
Aurelio Montinola and Jose M. Hontiverso for appellees.
VILLAMOR, J.:
On April 19, 1924, the Court of First Instance of Iloilo rendered a judgment in favor of the plaintiff,
sentencing the defendant company to pay him the sum of P45,000, the value of certain policies of fire
insurance, with legal interest thereon from February 28, 1923, until payment, with the costs. The
defendant company appealed from this judgment, and now insists that the same must be modified and
that it must be permitted to rebuild the house burnt, subject to the alignment of the street where the
building was erected, and that the appellant be relieved from the payment of the sum in which said
building was insured.
A building of the plaintiff was insured against fire by the defendant in the sum of P30,000, as well as the
goods and merchandise therein contained in the sum of P15,000. The house and merchandise insured
were burnt early in the morning of February 28, 1923, while the policies issued by the defendant in favor
of the plaintiff were in force.
The appellant contends that under clause 14 of the conditions of the policies, it may rebuild the house
burnt, and although the house may be smaller, yet it would be sufficient indemnity to the insured for the
actual loss suffered by him.
The clause cites by the appellant is as follows:lawphi1.net
The Company may at its option reinstate or replace the property damaged or destroyed, or any part
thereof, instead of paying the amount of the loss of damages, or may join with any other Company or
insurers in so doing, but the Company shall not be bound to reinstate exactly or completely, but only as
circumstances permit and in reasonable sufficient manner, and in no case shall the Company be bound to
expend more in reinstatement that it would have cost to reinstate such property as it was at the time of
the occurrence of such loss or damage, nor more than the sum insured by the Company thereon.
If this clause of the policies is valid, its effect is to make the obligation of the insurance company an
alternative one, that is to say, that it may either pay the insured value of house, or rebuild it. It must be
noted that in alternative obligations, the debtor, the insurance company in this case, must notify the
creditor of his election, stating which of the two prestations he is disposed to fulfill, in accordance with
article 1133 of the Civil Code. The object of this notice is to give the creditor, that is, the plaintiff in the
instant case, opportunity to express his consent, or to impugn the election made by the debtor, and only
after said notice shall the election take legal effect when consented by the creditor, or if impugned by the
latter, when declared proper by a competent court. In the instance case, the record shows that the
appellant company did not give a formal notice of its election to rebuild, and while the witnesses, Cedrun
and Cacho, speak of the proposed reconstruction of the house destroyed, yet the plaintiff did not give his
assent to the proposition, for the reason that the new house would be smaller and of materials of lower
kind than those employed in the construction of the house destroyed. Upon this point the trial judge very
aptly says in his decision: "It would be an imposition unequitable, as well as unjust, to compel the plaintiff
to accept the rebuilding of a smaller house than the one burnt, with a lower kind of materials than those
of said house, without offering him an additional indemnity for the difference in size between the two
house, which circumstances were taken into account when the insurance applied for by the plaintiff was
accepted by the defendant." And we may add: Without tendering either the insured value of the
merchandise contained in the house destroyed, which amounts to the sum of P15,000.itc@alf
We find in the record nothing to justify the reversal of the finding of the trial judge, holding that the
election alleged by the appellant to rebuild the house burnt instead of paying the value of the insurance
is improper. To our mind, the judgment appealed from is in accordance with the merits of the case and
the law, and must be, as is hereby, affirmed with the cost against the appellant. So ordered.
Johnson, Street, Malcolm, Avancea, Ostrand, Johns and Romualdez, JJ., concur.
epublic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21196 February 6, 1924 a judgment by default. (Boyd vs. Williams and Overbaugh, 70 N.J. Law, 185; Corning vs. Tripp, 1 Howard's
Practice [N.Y.], 14; Williams vs. Richmond, etc. Railroad Co., 110 N. C., 466; Chicago, etc. Railway
ONG GUAN CAN, plaintiff-appellee, Co. vs. Eastham, 30 L.R.A. [N.S.], 740; 23 Cyc., 943; 15 Ruling Case Law, 708.)
vs.
THE CENTURY INSURANCE COMPANY, LTD., defendant-appellant. A delay of mail, such as occurred in the present case, in our opinion amounts to accident or surprise for
which judgments by default may be set aside, especially when the defendant shows by affidavit or
Eiguren and Razon for appellant. otherwise that he has a valid and meritorious defense. The time fixed for filing papers in a cause is
Montinola, Montinola and Hontiveros for appellee. generally directory and the court always has it in its power, in the exercise of a proper discretion, to extend
the time fixed by law whenever the ends of justice would seem to demand such an extension.
JOHNSON, J.:
(Wood vs. Fobes and Farnham, 5 Cal., 62.)
The only question presented by the appeal is whether or not the judgment by default rendered by the
Considering the causes which prevented the defendant from making its appearance within the time
lower court should be set aside and annulled. We think it should be, for the following reasons:
prescribed by subparagraph 2 of article 392 of Act No. 190 and considering its showing that, if permitted
The action was commenced in the Court of First Instance of the City of Iloilo on the 15th day of May, 1923. to answer, it has a meritorious defense, we are of the opinion, and so decide, that the judgment by default
Its purpose was to recover an amount due on the policy of insurance issued by the defendant to the rendered by the lower court should be and is hereby set aside, and it is hereby ordered and decreed that
plaintiff. On the same day a copy of the complaint was served upon the defendant, through its duly the defendant's appearance be admitted and that it be given ten days in which to answer from notice of
authorized representative in the City of Iloilo, Messrs. Andrew & Co. The defendant filed its appearance this decision. And without any findings as to costs, it is so ordered.
with the clerk of the court on the 7th day of June, 1923. The notice of appearance, it is alleged and not
Araullo, C.J., Street, Malcolm, Avancea, Ostrand, Johns and Romualdez, JJ., concur.
denied, was mailed at the City of Manila on the 2d day of June, 1923. On the 5th day of June, 1923, the
attorneys for the plaintiff presented a motion praying that a judgment by default be rendered against the
defendant. Said motion was granted on the same day, and a judgment by default was duly entered. On
the 8th day of June, 1923, the defendant, through its attorneys, filed a motion praying that the judge set
aside said judgment by default and permit the defendant to answer. Said motion recited that the said
notice of appearance was mailed at the City of Manila on the 2nd day of June, 1923, and that the
steamship Vizcaya, carrying mails, including the letter containing the notice of appearance on the 2d day
of June, did not arrive at Iloilo in the usual course until after the time had expired for filing its appearance,
or on the 7th day of June, 1923, due to the fact that said ship encountered a storm at sea. The lower court
denied said motion on the 11th day of June, 1923, to which order the defendant duly expected, and later
presented another motion to the same effect, alleging and asserting that it had a valid and meritorious
defense to the cause of action presented by the plaintiff. Later the second motion was also denied, to
which the defendant also excepted. Some further proceedings were had in the lower court concerning the
judgment by default, which have no importance in the consideration of the question presented.

From the judgment by default of the lower court the defendant appealed and now alleges that it
committed an error in not granting the motions to set aside said judgment and permit the defendant to
answer. It is admitted that the plaintiff and defendant resided in the same province. Under paragraph 2 of
section 392 of Act No. 190 it became the duty of the defendant to appear within twenty days from the
service of the summons. The summons was served on the 15th day of May. The twenty days within which
the defendant was required to appear expired on the 5th day of June. No appearance was filed by the
defendant until perhaps the 7th day of June. It is admitted that the defendant mailed its appearance in
the City of Manila on the 2d day of June, 1923. It is also a fact that mail, in the ordinary course, will arrive
at Iloilo from Manila in two days. The defendant mailed its appearance at a time when in the ordinary
course of events it would have reached the hand of the clerk of the court on or before the expiration of
the time within which it was obliged to make its appearance. The reason that the appearance did not reach
its destination was due to a fact over which the defendant had no control. The failure to make the
appearance within the time prescribed by law was due to no fault of the defendant. The defendant
evidently made an honest effort to comply with the law. To render a judgment against it under these
circumstances would be to render a judgment against it without giving it an opportunity to be heard.

It has been frequently decided that, if pleadings or other papers essential to a case are entrusted to the
mails in due season and under proper precaution and are lost or miscarried, it will be ground for vacating