G.R. No. L-32958 November 8, 1930BLOSSOM AND COMPANY, INC.,plaintiff-appellant,vs.MANILA GAS CORPORATION,defendant-appellee.

Harvey and O'Brien for appellant.Ross, Lawrence and Selph and John B. Miller for appellee.

STATEMENT

In its complaint filed March 3, 1927, the plaintiff alleges that on September 10, 1918, it entered into a contract with the defendant in which the plaintiff promised and undertook to purchase and receive from the defendant and the defendant agreed to sell and deliver to the plaintiff, for a period of four years, three tons of water gas tar per month from September to January 1, 1919 and twenty tons per month after January 1, 1919, for the remaining period of the contract; one-half ton of coal gas tar a month from September to January 1, 1919, and six tons per month after January 1, 1919, for the remainder of the contract, delivery to be made at the plant of the defendant in the City of Manila, without containers and at the price of P65 per ton for each kind of gas tar, it being agreed that this price should prevail only so long as the raw materials coal and crude oil used by the defendant in the manufacture of gas should cost the defendant the same price as that prevailing at the time of the contract, and that in the event of an increase or decrease in the cost of raw material there would be a corresponding increase or decrease in the price of the tar. That on January 31, 1919, this contract was amended so that it should continue to remain in force for a period of ten years from January 1, 1919, and it was agreed that the plaintiff should not be obliged to take the qualities of the tars required during the year 1919, but that it might purchase tars in such quantities as it could use to advantage at the stipulated price. That after the year 1919 the plaintiff would take at least the quantities specified in the contract of September 10, 1918, to be taken from and after January 1, 1919, and that at its option it would have the right to take any quantity of water gas tar in excess of the minimum quantity specified in that contract and up to the total amount of output of that tar of defendant's plant and also to take any quantity of coal gas tar in excess of the minimum quantity specified in that contract and up to 50 per cent of defendant's entire output of coal gas tar, and that by giving the defendant ninety days' notice, it would have the right at its option to take the entire output of defendant's coal gas tar, except such as it might need for its own use in and about its plant. That in consideration of this modification of the contract of September 10, 1918, plaintiff agreed to purchase from the defendant of certain piece of land lying adjacent to its plant at the price of P5 per square meter, the proof of which is evidenced by Exhibit C. That pursuant to Exhibit C, defendant sold and conveyed the land to the plaintiff which in turn executed a mortgage thereon to the defendant for P17,140.20, to secure the payment of the balance of the purchase price.

It is then alleged:

VIII. That about the last part of July, 1920 the defendant herein, the Manila Gas Corporation willfully, and deliberately breached its said contract, Exhibit C, with the plaintiff by ceasing to deliver any coal and water gas tar to it thereunder solely because of the increased price of its tar products and its desire to secure better prices therefor than plaintiff was obliged to pay to it, notwithstanding the frequent and urgent demands made by the plaintiff upon it to comply with its aforesaid contract by continuing to deliver the coal and water gas tar to the plaintiff thereunder, but the said defendant flatly refused to make any deliveries under said contract, and finally on November 23, 1923, the plaintiff was forced to commence action against the defendant herein in the Court of First Instance of Manila, being case No. 25352, of that court entitled 'Blossom & Co., plaintiff,vs. Manila Gas Corporation, defendant,' to recover the damages which it had up to that time suffered by reason of such flagrant violation of said contract on the part of the defendant herein, and to obtain the specific performance of the said contract and after due trial of that action, judgment was entered therein in favor of the plaintiff herein and against the said defendant, the Manila Gas Corporation, for the sum of P26,119.08, as the damages suffered by this plaintiff by the defendant's breach of said contract from July, 1920, up to and including September, 1923, with legal interest thereon from November 23, 1923, and for the costs but the court refused to order the said defendant to resume the delivery of the coal and water gas tar to the plaintiff under said contract, but left the plaintiff with its remedy for damages against said defendant for the subsequent breaches of said contract, which said decision, as shown by the copy attached hereto as Exhibit G, and made a part hereof, was affirmed by our Supreme Court on March 3, 1926;

IX. That after the defendant had willfully and deliberately violated its said contract as herein-before alleged, and the plaintiff suffered great damage by reason thereof, the plaintiff claimed the right to off- set its damages against the balance due from it to said defendant on account of the purchase of said land from the defendant, and immediately thereupon and notwithstanding said defendant was justly indebted to the plaintiff at that time as shown by the judgment of the Court Exhibit G, in more that four times the amount due to it from the plaintiff, the said defendant caused to be presented against the plaintiff a foreclosure action, known as the Manila Gas CorporationversusBlossom & Company, No. 24267, of the Court of First Instance of Manila, and obtained judgment therein ordering that Blossom & Company pay the last installment and interest due on said land or else the land and improvements placed thereon by the plaintiff would be sold as provided by law in such cases to satisfy the same, and the said defendant proceeded with the sale of said property under said judgment and did everything in its power to sell the same for the sole purpose of crushing and destroying the plaintiff's business and thus rendering it impossible for the plaintiff herein to continue with its said contract in the event that said defendant might in the future consider it more profitable to resume performance of the same, but fortunately the plaintiff was able to redeem its property as well as to comply with its contract and continued demanding that the defendant performed its said contract and deliver to it the coal and water gas tar required thereby.

That the defendant made no deliveries under its contract, Exhibit C, from July, 1920 to March 26, 1926, or until after the Supreme Court affirmed the judgment of the lower court for damages in the sum of P26, 119.08.1It is then alleged that:

. . . On March 26, 1926 the said defendant offered to resume delivery to the plaintiff from that date of the minimum monthly quantities of tars stated in its contract ,and the plaintiff believing that the said defendant was at least going to try to act in good faith in the further performance of its said contract, commenced to accept deliveries of said tars from it, and at once ascertained that the said defendant was deliberately charging it prices much higher than the contract price, and while the plaintiff accepted deliveries of the minimum quantities of tars stated in said contract up to and including January, 1927, (although it had demanded deliveries of larger quantities thereunder, as hereinafter alleged) and paid the increased prices demanded by the defendant, in the belief that it was its duty to minimize the damages as much as possible which the defendant would be required to pay to it by reason of its violation of said contract, it has in all cases done so under protest and with the express reservation of the right to demand from the said defendant an adjustment of the prices charged in violation of its contract, and the right to the payment of the losses which it had and would suffer by reason of its refusal to make additional deliveries under said contract, and it also has continuously demanded that the said defendant furnish to it statements supported by its invoices showing the cost prices if its raw materials coal and crude oil upon which the contract price of the tars in question is fixed, which is the only way the plaintiff has to calculate the true price of said tars, but said defendant has and still refuses to furnish such information, and will continue to refuse to do so, unless ordered to furnish such information to the plaintiff by the court, and the plaintiff believes from the information which it now has and so alleges that the said defendant has overcharged it on the deliveries of said tars mentioned in the sum of at least P10,000, all in violation of the rights of the plaintiff under its said contract with the defendant.

That on January 31, 1926 and pursuant to Exhibit C. plaintiff notified the defendant in writing that commencing with the month of August, 1926 it desired to take delivery of 50 per cent of defendant's coal tar production for that month and that on November 1, 1926, it desired to take the entire output of defendant's coal gas tar, but that the defendant refused and still refuses to make such deliveries unless plaintiff would take all of its water gas tar production with the desired quantity of coal gas tar which refusal was a plain violation of the contract. That on January 29, 1927, and in accord with Exhibit C, plaintiff notified the defendant in writing that within ninety days after the initial delivery to it of its total coal gas tar production or in February, 1927, it would require 50 per cent of its total water gas tar production and that in April 1927, it would require the total output of the defendant of both coal and water gas tars, and that it refused to make either of such deliveries.

It is then alleged:

XIV. That as shown by the foregoing allegations of this complaint, it is apparent that notwithstanding the plaintiff in this case has at all times faithfully performed all the terms and conditions of said contract, Exhibit C, on its part of be performed, and has at all times and is now ready, able and willing to accept and pay for the deliveries of said coal and water gas tars required by said contract and the notices given pursuant thereto, the said defendant, the Manila Gas Corporation, does not intend to comply with its said contract, Exhibit C, and deliver to the plaintiff at the times and under the terms and conditions stated therein the quantities of coal and water gas tars required by said contract, and the several notices given pursuant thereto, and that it is useless for the plaintiff to insist further upon its performance of the said contract, and for that reason he only feasible course for the plaintiff to pursue is to ask the court for the rescission of said contract and for the full damages which the plaintiff has suffered from September, 1923, and will suffer for the remainder of said contract by reason of the defendant's failure and refusal to perform the same, and the plaintiff has so notified the said defendant.

That since September, 1923, by reason of the bad faith of the defendant, the plaintiff has been damaged in the sum of P300,000, for which it prays a corresponding judgment, and that the contract, Exhibit C, be rescinded and declared void and without force and effect.

After the filing and overruling of its demurrer, the defendant filed an answer in the nature of a general and specific denial and on April 10, 1928, and upon stipulation of the parties, the court appointed W. W. Larkin referee, "to take the evidence and, upon completion of the trial, to report his findings of law and fact to the court."

July 18, 1928, the defendant filed an amended answer in which it alleged as an affirmative defense, first, that the complaint does not state facts sufficient to constitute cause of action the reason that a prior adjudication has been had of all the issues involved in this action, and, second, "that on or about the 16th day of June, 1925, in an action brought in the Court of First Instance of the City on Manila, Philippine Islands, before the Honorable Geo. R. Harvey, Judge, by Blossom & Company, plaintiff, vs. Manila Gas Corporation, defendant, being civil case No. 25353, of said court, for the same cause of action as that set fourth in the complaint herein, said plaintiff recovered judgment upon the merits thereof, against said defendant decreeing a breach of the contract sued upon herein, and awarding damages therefor in the sum of P26,119.08 with legal interest from November 23, 1923, and costs of suit, which judgment was upon appeal affirmed by the Supreme Court of the Philippine Islands, in case G. R. No. 24777 of said court, on the 3d day of March, 1926 and reported in volume 48 Philippines Reports at page 848," and it prays that plaintiff's complaint be dismissed with costs.

After the evidence was taken the referee made an exhaustive report of sixty-pages in which he found that the plaintiff was entitled to P56,901.53 damages, with legal interest from the date of the filing on the complaint, to which both parties filed numerous exceptions

In its decision the court says:

Incidental references have been made to the referee's report. It was admirably prepared. Leaving aside the question of damages and the facts upon which the referee assessed them, the facts are not in dispute at least not in serious dispute. They appear in the documentary evidence and this decision is based upon documents introduced into evidence by plaintiff. If I could have agreed with the referee in respect to the question of law, I should have approved his reportintoto. If defendant is liable for the damages accruing from November 23, 1923, the date the first complaint was filed, to April 1st, 1926, the date of resumption of relations; and if defendant, after such resumption of relations, again violated the contract, the damages assessed by the referee, are, to my way of thinking, as fair as could be estimated. He went to tremendous pains in figuring out the details upon which he based his decision. Unfortunately, I cannot agree with his legal conclusions and the report is set aside except wherein specifically approved.

It is unnecessary to resolve specifically the many exceptions made by both partied to the referee's report. It would take much time to do so. Much time has already been spent in preparing this decision. Since both parties have informed me that in case of adverse judgment ,and appeal would be taken, I desire to conclude the case so that delay will be avoided.

Let judgment be entered awarding damages to plaintiff in the sum of P2,219.60, with costs.

From which plaintiff only appealed and assigns twenty-four different errors, of which the following are material to this opinion:

I. The trial court erred in holding that this suit in so far as the damages from November, 1923, to March 31, 1926, are concerned , is resadjudicata.

II. The trial court erred in holding that the defendant repudiated the contract in question as a whole, and that the plaintiff when it brought its first suit to collect damages had already elected and consented to the dissolution of the contract, and its choice once made, being final, it was estopped to claim that the contract was alive when that suit was brought.

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VII. The trial court erred in refusing to sustain plaintiff's third exception to the legal interpretation placed on the contract in this case by the referee with reference to quantity of tars and his conclusion with respect to the terms thereof that:

"1. Plaintiff must take and defendant must deliver either the minimum or maximum quantity of water gas tar andnot any quantity from the minimum to the maximumand/or

"2. Plaintiff must take either theminimum and any quantity up to fifty per cent of entire outputof coal gas tar.

"3. With ninety days' notice by plaintiff to defendant the former must take and the latter must delivertotal output of both tars, except such as might be needed by defendant for use in and about its plants andnot any quantity from the minimum up to total output of both tars." (Seepage 47, Referee's report.)

And in holding that the option contained in said contract, taking into consideration the purposes of both parties in entering into the contract, was a claimed by defendant: all the water gas tar and 50 per cent of the coal gas tar upon immediate notice and all tars upon ninety day's notice.

VIII. The trial court erred in refusing to sustain plaintiff's fourth exception to the finding and conclusion of the referee that from the correspondence between the parties it was apparent that plaintiff did not make a right use of its option, and that the letter of June 25, 1926, and the subsequent demands, with exception of the letter of July 31, 1926, were not made in pursuance to the terms of the contract, and that defendant had no liability in refusing to comply therewith, and in allowing plaintiff damages only for the failure of the defendant to deliver quantities shown in Exhibits Ref. 21 and 22. (Seepages 51, 52, Referee's report.)

IX. The trial court erred in finding and holding that the demands of plaintiff for additional tars under its contract with the defendant were extravagant and not made in good faith, and that when it wrote to defendant that it desired maximum quantities of coal gas tars and only minimum of water gas tars, but with the reservation of going back to minimum quantities of both at any time it chose, it announced its intention f breaching the contract, and defendant was under no obligation to deliver maximum quantities of either tars, and since this was the efficient cause of the failure of defendant to deliver or plaintiff to accept tars, the blame is attribute to plaintiff, and it cannot recover for a rescission.

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XXIII. The trial court erred in refusing to sustain plaintiff's seventeenth exception to the finding and conclusion of the referee that the plaintiff is entitled to recover from the defendant only the following sums:

Water gas tar (Exhibit Ref. 21)P38,134.60

Coal gas tar (Exhibit Ref. 22)16,547.33

Overcharges on deliveries (Exhibit Ref. 23)2,219.60

or a total of

56,901.53

Ref:http://www.lawphil.net/judjuris/juri1930/nov1930/gr_l-32958_1930.html1