PAT Case Digest Compilation

8/12/2019 PAT Case Digest Compilation

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-3754 November 15, 1907

ANGELA OJINAGA,plaintiff-appellant,vs.THE ESTATE OF TOMAS R. PEREZ, defendant-appellee.

Haussermann, Cohn and Williams, for appellant.Chicote and Miranda, for appellee.

WILLARD, J .:

The appellant, Doa Angela Ojinaga, as judicial administratrix of Eladio Ojinaga, deceased, presented to the commissioners appointed tohear claims against the estate of Tomas R. Perez, deceased, a demand for 12,053.54 pesos with interest from the 1st of May, 1893. Thisclaim was disallowed by the commissioners and from that disallowance the appellant appealed to the Court of First Instance. That courtentered judgment against the appellant and from that judgment she has appealed to this court.

Domingo Perez died in the town of Nueva Caceres in 1882, leaving as surviving heir ten children, six by one marriage and four by another.His estate was administered by one Manuel Achondo until 1889, when the administration was assumed by Tomas R. Perez, one of theheirs.

In April, 1890, a partition of such estate was had among the heirs of Domingo Perez. By this partition the six children of the first marriagereceived 31,608.90 pesos each, and the four children of the second marriage 17,241.24 pesos each. Two of the children of the firstmarriage, Adela and Aurora, withdrew their participation. The remaining children, however, four of the first marriage and four of the secondTomas R. Perez being included among the former continued Tomas R. Perez in the administration of their respective portions. Thecommunity as thus constituted was as follows:

Of the first marriage, Tomas R. Perez, Patricio Perez, Juan Perez and Eladio Ojinaga, the latter being the surviving husband and successorin interest of Isabel Perez, one of the children of the first marriage. These four contributed to the community their respective portions, i. e.,31,608.90 pesos each.


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Of the second marriage, Filomena, Jose, Rodolfo, and Margarita Perez, who contributed 17,241.24 pesos each.

Tomas R. Perez continued the administration of this property from April 20, 1890, to May, 1893. In such administration he acted asguardian for all the persons interested except Eladio Ojinaga, and as to him Tomas R. Perez acted as agent. In 1893, when, apparently,Juan and Patricio Perez became of age, Tomas R. Perez filed an account of his administration in the Court of First Instance at Nueva

Caceres. In this accounting he showed the net profits of the business for the period stated as 8,084 pesos. The brothers Juan and Patriciorefused to accept this statement as correct, claiming that the profits actually drived by Tomas R. Perez from such business during theperiod named were greater than shown by him. Eladio Ojinaga accepted the account as rendered and permitted Tomas R. Perez tocontinue in the administration of his interest. Patricio Perez and his brother Juan persisted in their charge that the account was not correctand continued to demand a new accounting from Tomas R. Perez. The result was that in 1896 or 1897 arbitrators were appointed toexamine the accounts of Tomas R. Perez from April 20, 1890, to May 1, 1893. These arbitrators had before them the books of Tomas R.Perez which were examined by Patricio Perez. While this examination was going on, and before it had been completed, Patricio Perezoffered to accept 32,000 pesos as a final settlement and determination of the whole question. It seems that Thomas R. Perez was willing topay this amount as a settlement of the transaction, but Patricio Perez and his associates insisted that in the division of this 32,000 pesosamong the heirs Eladio Ojinaga be excluded, and that it be divided among seven heirs instead of being divided among eight heirs.

Patricio Perez knew at this time that Eladio Ojinaga was satisfied with the accounting rendered in 1893, and, testifying at the trial, he saidthat the reason why they excluded Ojinaga from participation in this amount was because they suspected that there was an agreementbetween him and Tomas R. Perez and that the idea of Tomas R. Perez was to take his own share out so as to reduce the share of each forhis own benefit. This settlement, therefore, was never carried out. Litigation was begun by Patricio and Juan Perez against Tomas R. Perezfor an accounting. Other judicial proceedings were commenced by Tomas R. Perez against the heirs, or some of them. A final settlement ofall the suits and proceedings then pending and of the entire matter in controversy was made on the 14th of August, 1901, in a publicdocument of that date. By that agreement: "4. Don Tomas R. Perez binds himself to pay Don Patricio Perez the sum of 12,053.54 pesos,as profits, together with the interests agreed upon during the period of his administration from April 20, 1890, to May 1, 1893." He agreed topay to the other heirs who joined in the agreement, and who were all of the heirs except Eladio Ojinaga, a proportionate amount.lawphil.net

It is claimed by the appellant that this document proves conclusively that the amount of the profits to which Eladio Ojinaga was entitled forthe period in question was this sum of 12,053.54 pesos and that he is entitled to that sum with interest thereon from the 1st of May, 1893. Itis, however, apparent from the whole document, and from the testimony of Patricio Perez, a witness presented by the appellant at the trial,that this agreement was a compromise settlement and that this sum of 12,000 pesos included interest, costs, and expenses. Patricio Pereztestified:

Q. What is the ultimate account on which was calculated your share of 12,053 pesos?A. I can not tell precisely now fromwhence that account was taken, but, adding my share to the shares of my brothers and the other four, this was the total sum to begiven to us, including the prejudice and damage suffered by us.

x x x x x x x x x


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Q. What was to be your share of this 32,000 pesos?A. I do not know exactly.

Q. More or less? A. about 6,000 pesos, approximately.

Q. And how was it that you ultimately received 12,000 pesos?A. Because here in Manila I had incurred further expense and the

interest had been accumulating.

The appellant sought to prove at the trial the actual amount of the profits during the period in question by the books kept at the time, but itappears that these had been lost and destroyed. With the exception of these compromise settlements, the only evidence as to the actualprofits was that furnished by Patricio Perez. He testified that the reason why he would not accept 8,084 pesos as the amount of the profitswas "because the first year he (Tomas R. Perez) rendered the account to the court there was 17,000 pesos profit, and the second year notmore than 8,000 pesos profit, and the third year not more than 4,000 pesos profit, but my brother stated to me that on account of somemistakes in the account the profits became reduced by reason of paying off some expenses."

It appears from testimony that Tomas R. Perez filed yearly statements in regard to the profits and that from these yearly statements theywould appear to amount to 29,000 pesos, but when he presented his final account for the whole time he showed profits of only 8,084

pesos, claiming that expenses had been paid which had not been included in the yearly accounts. Tomas R. Perez having died in 1903, hisexplanation of this difference could not be given.

But assuming that the profits for the period above mentioned were 29,000 pesos instead of 8,000, the question is whether Eladio Ojinagaso conducted himself with regard to the transaction that his administratrix has now lost the right to claim a proportionate share of the said29,000 pesos.

On the 25th of October, 1894, Tomas R. Perez rendered to Eladio Ojinaga an account of his administration from April 1, 1893, to October25, 1894. In that account are found the following items:

Pesos

Proportionate share of profits during 91, 92 and 93..............

1,662.00

6 per cent interest on the above amount..................................

99.72

On the 29th of October, 1894, Ojinaga stated in writing his consent to this account and left to the administration of Tomas R. Perez all theproperty which belonged to him coming from the estate. The rendition of this account and the agreement of Ojinaga to the correctnessthereof constituted a contract between these parties (Ternate vs.Aniversario,15 Off. Gaz., 462; Enriquez, vs.Enriquez,25 Off. Gaz., 739),


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a contract which can be set aside only upon the grounds upon which any other contract can be annulled. It is claimed by the appellant thatit can be annulled on the ground o fraud committed by Tomas R. Perez in concealing from Ojinaga the truth in regard to the amount ofprofits for the period in question. No contract can be set aside on the ground of fraud if the person who claims to be defrauded knew all ofthe facts upon which his claim of fraud is based.

Patricio Perez, who testified as a witness for the appellant, stated that

. . . In the year 1894 Eladio Ojinaga invited me to approve that account because he had done so, and he advised me to approve itbecause it would be more just to him, and I did not like to follow his advice.

x x x x x x x x x

Q. Did Eladio Ojinaga know all this trouble between you and Tomas R. Perez, and your brothers?A. Yes, sir. He hadknowledge of that at the time when he invited me to approve the account. I informed him about that. I gave him all of myreasons for not wishing to approve the account and he told me that he on his part approved it.

It is thus seen that in 1894 Ojinaga knew practically everything that is known to-day. Whether this conversation took place before and afterthe 29th day of October, 1894, is immaterial, because on the 30th of April, 1895, Perez rendered another account to Ojinaga for the timebetween the 25th of October, 1894, and the 30th of April, 1895. The first item in this account approved by Ojinaga on the 29th of October,1894. On the 30th of April, 1896, he rendered another account to Ojinaga for the time between 1st day of May, 1895, and the 30th of April,1896. The first item in this account is the balance of the last preceding account. On the 30th of November, 1896, Ojinaga agreed in writingto the correctness of this account. On the 30th of June, 1897, Tomas R. Perez rendered another account to Ojinaga for the time betweenthe 1st of May, 1896, and the 30th of June, 1897. The first item in this account is the balance of the last preceding account. On September18, 1897, Ojinaga agreed in writing to the correctness of this account.

The appellant admitted at the trial that when litigation was commenced against Tomas R. Perez, about 1897, Ojinaga complained bitterly ofthe conduct of Juan and Patricio and accused them of being unkind to their brother. Evidence was introduced at the trial as to the contents

of two letters said to be lost, written by Tomas R. Perez to Ojinaga at the time the settlement of 32,000 pesos was under discussion, inwhich Perez advised Ojinaga to claim his part of that sum. Even then Ojinaga took no action in the matter. He died in Kobe in July, 1898.His will, made in that month, stated that the last time when he settled accounts with Tomas R. Perez was in 1894, but that this settlementwas not made effective because there were discovered certain irregularities in the account, irregularities which had been, and are now, thesubject to litigation, and he added:

At any rate, it is my desire that whatever profit may accrue from this property, it should be equally divided between my son and mywife.


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From what has been said it is seen that this statement is not exactly correct as he kept on approving the accounts of Perez up to the time ofhis death.

The appellant testified at the trial that she learned the facts in regard to these accounts before her husband's death, and that after his deathJuan and Patricio Perez proposed to her to join them in this litigation. This she refused to do, but said that in case they won the suit she

would pay her share of the expenses when they paid her proportionate share of what they obtained. No action in court was taken by heruntil November, 1902.

Under the circumstances above stated this action can not be maintained. Eladio Ojinaga not only agreed to the correctness of this accountin 1894, but after he was thoroughly informed in the same year as to all the facts in the case he agreed to other accounts, whichnecessarily, as he then knew, involved in a repetition of his agreement to the account of 1894. And knowing all the facts in the case, he notonly did not join in litigation commenced for the purpose of securing a true statement of the profits but expressly refused to do so andcensured the persons who promoted such litigation. The judgment of the court below is affirmed, with the costs of this instance against theappellant. So ordered.

Arellano, C.J., Torres and Tracey, JJ., concur.

Separate Opinions

JOHNSON, J., dissenting:

I can not agree with the conclusion in this case. The following facts were admitted:

(1) That the defendant was the administrator or agent in charge of the property of the plaintiff.

(2) That the actual profits accruing to the plaintiff by virtue of such administration amounted to about 12,000 pesos.

(3) That the defendant paid to the plaintiff of such profits the sum of 1,761.72 pesos.


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(4) That the plaintiff believed that this amount so received was her share of the accrued profits and gave a receipt for the same.

Under these facts the majority of the court held that the receipt so given to the agent was a bar to her right to recover the amount of hershare growing out of the administration of her estate by the administrator or agent. Under the view we take of the case it is unimportantwhether the defendant was administrator or agent. The rule of law, as we understand it, is exactly the same.

No rule of law is better settled than that an agent can not retain for his own use profits made in the course of the agency. Such profitsbelong to the principal. The well-settled and salutary principle that a person who undertakes to act for another shall not, in the same matter,act for himself, results also in the order rule that all profits made and advantage gained by the agent in the execution of the agency belongto the principal. It matters not whether such profit or advantage be the result of the performance or the violation of the duty of the agent, ifhis duty be strictly performed, the resulting profit accrues to the principal as the legitimate consequence of the relation; even if the profitaccrues from his violation of duty, that likewise belongs to the principal, not only because the principal has to assume the responsibility ofthe transaction but also because the agent can not be permitted to derive advantage from his own default. The mere fact that the agent, bysome means or other, by stating facts or refusing to state all of the facts, induces the principal to accept a certain amount as the profitsmade in the course of the agency, this fact can not be used for the purpose of preventing the principal from recovering the true amountwhen the true amount is actually discovered.

It is only by rigid adherence to this rule of law that all temptation can be removed from one acting in a fiduciary capacity to abuse his trust orseek his own advantage in the position which it affords him.

It matters not how fair the conduct of the agent may have been in a particular case, nor that the principal would have been no better off ifthe agent had strictly pursued his power, nor that the principal was not, in fact, injured by the intervention of the agent for his own profit. Theresult in both cases must be the same.

If an agent dealing legitimately with the subject-matter of his agency acquires a profit, or if by departing from his instructions he obtainsbetter results than would have been obtained by following them, the principal may yet claim the advantage thus obtained, even though theagent may have contributed his own funds or responsibility in producing the result. All profits and every advantage, beyond lawful

compensation, made by the agent in a business or by dealing or speculating with the effects of his principal, though in violation of his dutyas agent, and though the loss, if one had occurred, would have fallen on the agent, are for the benefit of the principal. (Duttonvs.Willner, 52N. Y., 312; Gardner vs.Ogden, 22 N. Y., 327; 78 American Decisions, 192.)

The principal may, at his own option, in such cases, compel the agent to account for or convey to him the profits thus acquired.(Gardner vs.Ogden, supra.)

In no instance and under no condition will the courts allow an agent or trustee to make a profit for his own benefit in the course of hisagency or trust relation. The law holds out no such inducement to agents or trustees so to misapply their services to the funds intrusted totheir care. An agent by concealing facts from his principal can under no condition be permitted, by sound jurisprudence, to profit thereby.


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The principal, once such facts are discovered, has the right to recover whatever may be due to him from the agent as the result of theagency. (Merryman vs.David, 31 Ill., 404; Kerfoot vs.Hyman, 52 Ill., 512; Bunker vs.Miles, 30 Maine, 431; 50 American Decisions, 632;Montgomery County vs.Robinson, 85 Ill., 174; In re rose, 80 Cal., 166; Estate of Knight, 12 Cal., 200; 73 American Decisions, 531;Ward vs.Tinkham, 65 Mich., 695.)

It is found also that the rule under the Spanish law is no different from the above quoted. Article 1720 of the Civil Code provides:

Every agent is bound to give an account of his transactions and to pay to the principal all that he may have received by virtue of theagency, even though what has been received is not owed to the principal.

Not only is he liable to the principal for any sum or sums resulting from such agency, but if he has applied the same to his own use he isliable for interest upon the same. (Art. 1724, Civil Code.)

The judgment of the lower court should be reversed and the plaintiff should be permitted to recover, with interest, whatever sum or sumsthe defendant received as a result of the agency or administration, with costs.

SECOND DIVISION

[G.R. No. 20726. December 20, 1923. ]

ALBALADEJO Y CIA., S. en C., Plaintiff-Appellant, v. The PHILIPPINE REFINING CO., as successor to The Visayan RefiningCo., Defendant-Appellant.

Eduardo Gutierrez Repide and Felix Socias, for Plaintiff-Appellant.

Manly, Goddard & Lockwood, for Defendant-Appellant.

Fisher, DeWitt, Perkins & Brady of counsel.

SYLLABUS


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1. CONTRACT; NEGLIGENCE IMPUTED TO DEFENDANT IN PERFORMANCE OF CONTRACTUAL DUTY. By contract between the plaintiff andthe Visayan Refining Company it was agreed that the latter would take, at current prices, all the copra which the former should buy in adesignated territory; and it was made the duty of the Visayan Refining Company to send boats at opportune times to convey the copra

collected by the plaintiff to the point where it was to be used in the manufacture of coconut oil. In its first cause of action the plaintiff allegedthat the company mentioned had at various times negligently failed to send boats to transport the copra purchased by the plaintiff and thatas a result of this delay the copra awaiting shipment had unduly diminished in weight in the process of drying, thereby inflicting heavy lossupon the plaintiff. The trial judge having found that transportation had been supplied with reasonable promptitude, and that the company

mentioned had not been guilty of the alleged negligence, said finding is affirmed by this court.

2. ID.; CONTRACT ONE OF PURCHASE, NOT OF AGENCY. Under the contract of purchase above referred to the plaintiff was not the agentof the Visayan Refining Company as regards the original purchase of copra by the plaintiff from the producers. On the contrary those

purchases were made by the plaintiff in its own behalf. The defendant therefore was not liable to reimburse the plaintiff for expenses incurredby the plaintiff in maintaining its purchasing organization intact over a period during which the actual buying of copra was suspended.

3. ID., DETRIMENT INCURRED AT REQUEST OF ANOTHER; ABSENCE OF INTENTION TO INCUR CONTRACTUAL LIABILITY. The circumstancethat the Visayan Refining Company encouraged the plaintiff to keep its organization intact during such period of suspension and suggested

that when the company resumed buying (which was expected to occur at some time in the future) the plaintiff would be compensated for allloss which it had suffered, meaning that the profits then to be made would justify such expenses, does not render the company liable for such

losses upon its subsequent failure to resume the buying of copra. The inducements thus held out to the plaintiff were not intended to lay thebasis of any contractual liability, and the law will not infer the existence of a contract contrary to the revealed intention of the parties.

D E C I S I O N

STREET,J. :

This action was instituted in the Court of First Instance of the Province of Albay by Albaladejo y Cia., S. en C., to recover a sum of moneyfrom the Philippine Refining Co., as successor to the Visayan Refining Co., two causes of action being stated in the complaint. Upon hearing

the cause the trial judge absolved the defendant from the first cause of action but gave judgment for the plaintiff to recover the sum ofP49,626.68, with costs, upon the second cause of action. From this judgment that plaintiff appealed with respect to the action taken upon thefirst cause of action, and the defendant appealed with respect to the action taken upon the second cause of action. It results that, by theappeal of the two parties, the decision of the lower court is here under review as regards the action taken upon both grounds of action setforth in the complaint.

It appears that Albaladejo Y Cia. is a limited partnership, organized in conformity with the laws of these Islands, and having its principal placeof business at Legaspi, in the Province of Albay; and during the transactions which gave origin to this litigation said firm was engaged in thebuying and selling of the products of the country, especially copra, and in the conduct of a general mercantile business in Legaspi and in otherplaces where it maintained agencies, or sub-agencies, for the prosecution of its commercial enterprises.

The Visayan Refining Co. is a corporation organized under the laws of the Philippine Islands; and prior to July 9, 1920, it was engaged in


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operating its extensive plant at Opon, Cebu, for the manufacture of coconut oil.

On August 28, 1918, the plaintiff made a contract with the Visayan Refining Co., the material parts of which are as follows: jgc:chanrobles.com.ph

"Memorandum of Agreement Re Purchase of Copra. This memorandum of agreement, made and entered into by and between Albaladejo yCompania, S. en C., of Legaspi, Province of Albay, Philippine Islands, party of the first part, and the Visayan Refining Company, Inc., of Opon,

Province of Cebu, Philippine Islands, party of the second part,

"Witnesseth That. Whereas, the party of the first part is engaged in the purchase of copra in the Province of Albay; and, Whereas, theparty of the second part is engaged in the business of the manufacture of coconut oil, for which purpose it must continually purchase largequantities of copra; Now, Therefore, in consideration of the premises and covenants hereinafter set forth, the said parties have agreed and dohereby contract and agree as follows, to wit:jgc:chanrobles.com.ph

"1. The party of the first part agrees and binds itself to sell to the party of the second part, and the party of the second part agrees and bindsitself to buy from the party of the first part, for a period of one (1) year from the date of these presents, all the copra purchased by the partyof the first part in the Province of Albay.

"2. The party of the second part agrees to pay the party of the first part for the said copra the market price thereof in Cebu at date (of)

purchase, deducting, however, from such price the cost of transportation by sea to the factory of the party of second part at Opon, Cebu, theamount deducted to be ascertained from the rates established, from time to time, by the public utility commission, or such entity as shallsucceed to its functions, and also a further deduction for the shrinkage of the copra from the time of its delivery to the party of the secondpart to its arrival at Opon, Cebu, plus one-half of real per picul in the event the copra is delivered to boats which will unload it on the pier ofthe party of the second part at Opon, Cebu, plus one real per picul in the event that the party of the first part shall employ its own capitalexclusively in its purchase.

"3. During the continuance of this contract the party of the second part will not appoint any other agent for the purchase of copra in Legaspi,nor buy copra from any vendor in Legaspi.

"4. The party of the second part will, so far as practicable, keep the party of the first part advised of the prevailing prices paid for copra in theCebu market.

"5. The party of the second part will provide transportation by sea to Opon, Cebu, for the copra delivered to it by the party of the first part,but the party of the first part must deliver such copra to the party of the second part free on board the boats of the latters ships or on thepier alongside the latters ships, as the case may be." cralaw virtua1aw library

Pursuant to this agreement the plaintiff, during the year therein contemplated, bought copra extensively for the Visayan Refining Co. At theend of said year both parties found themselves satisfied with the existing arrangement, and they therefore continued by tacit consent togovern their future relations by the same agreement. In this situation affairs remained until July 9, 1920, when the Visayan Refining Co.closed down its factory at Opon and withdrew from the copra market.

When the contract above referred to was originally made, Albaladejo y Cia. apparently had only one commercial establishment, i.e., that atLegaspi; but the large requirements of the Visayan Refining Co. for copra appeared so far to justify the extension of the plaintiffs business


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that during the course of the next two or three years it established some twenty agencies, or subagencies, in various ports and places of theProvince of Albay and neighboring provinces.

After the Visayan Refining Co. had ceased to buy copra, as above stated, of which fact the plaintiff was duly notified, the supplies of copraalready purchased by the plaintiff were gradually shipped out and accepted by the Visayan Refining Co., and in the course of the next eight orten months the accounts between the two parties were liquidated. The last account rendered by the Visayan Refining Co. to the plaintiff was

for the month of April, 1921, and it showed a balance of P288 in favor of the defendant. Under date of June 25, 1921, the plaintiff companyaddressed a letter from Legaspi to the Philippine Refining Co. (which had now succeeded to the rights and liabilities of the Visayan RefiningCo.) , expressing its approval of said account. In this letter no dissatisfaction was expressed by the plaintiff as to the state of affairs betweenthe parties; but about six weeks thereafter the present action was begun.

Upon reference to paragraph five of the contract reproduced above it will be seen that the Visayan Refining Co. obligated itself to providetransportation by sea to Opon, Cebu, for the copra which should be delivered to it by the plaintiff; and the first cause of action set forth in thecomplaint is planted upon the alleged negligent failure of the Visayan Refining Co. to provide opportune transportation for the copra collectedby the plaintiff and deposited for shipment at various places. In this connection we reproduce the following allegations from the complaint:jgc:chanrobles.com.ph

"6. That, from the month of September, 1918, until the month of June, 1920, the plaintiff opportunely advised the Visayan of the stocks thatthe former had for shipment, and, from time to time, requested the Visayan to send vessels to take up said stocks; but that the Visayan

culpably and negligently allowed a great number of days to elapse before sending the boats for the transportation of the copra to Opon, Cebu,and that due to the fault and negligence of the Visayan, the stocks of copra prepared for shipment by the plaintiff had to remain anunnecessary length of time in warehouses and could not be delivered to the Visayan, nor could they be transmitted to this letter because ofthe lack of boats, and that for this reason the copra gathered by the plaintiff and prepared for delivery to the Visayan suffered thediminishment of weight herein below specified, through shrinkage or excessive drying, and, in consequence thereof, an importantdiminishment in its value.

x x x

"8. That the diminishment in weight suffered as shrinkage through excessive drying by all the lots of copra sold by the plaintiff to the Visayan,due to the fault and negligence of the Visayan in the sending of boats to take up said copra, represents a total of 9,695 piculs and 56 cates,the just and reasonable value of which, at the rates fixed by the purchaser as the price in its liquidation, is a total of two hundred and one

thousand, five hundred and ninety nine pesos and fifty-three centavos (P201,599.53), Philippine currency, in which amount the plaintiff hasbeen damaged and injured by the negligent and culpable acts and omissions of the Visayan, as herein above stated and alleged." cralaw virtua1aw library

In the course of the appealed decision the trial judge makes a careful examination of the proof relative to the movements of the fleet of boatsmaintained by the Visayan Refining Co. for the purpose of collecting copra from the various ports where it was gathered for the said company,as well as of the movements of other boats chartered or hired by said company for the same purpose; and upon consideration of all the factsrevealed in evidence, his Honor found that the Visayan Refining Co. had used reasonable promptitude in its efforts to get out the copra fromthe places where it had been deposited for shipment, notwithstanding occasional irregularities due at times to the condition of the weather asrelated to transportation by sea and at other times to the inability of the Visayan Refining Co. to dispatch boats to the more remote ports.This finding of the trial judge, that no negligence of the kind alleged can properly be imputed to the Visayan Refining Co., is in our opinionsupported by the proof.


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Upon the point of the loss of weight of the copra by shrinkage, the trial judge found that this is a product of which necessarily undergoesconsiderable shrinkage in the process of drying, and intelligent witnesses who are conversant with the matter testified at the trial thatshrinkage of copra varies from twenty to thirty per centum of the original gross weight. It is agreed that the shrinkage shown in all of thecopra which the plaintiff delivered to the Visayan Refining Co. amounted to only 8.187 per centum of the whole, and amount which is notablybelow the normal. This showing was undoubtedly due in part, as the trial judge suggests, to the fact that in purchasing the copra directly

from the producers the plaintiffs buyers sometimes estimated the picul at sixty-eight kilos, or somewhat less, but in no case at the trueweight of 63.25 kilos. The plaintiff was therefore protected in a great measure from loss by shrinkage by purchasing upon a different basis ofweight from that upon which he sold, otherwise the shrinkage shown in the result must have been much greater than that which actuallyappeared. But even considering this fact, it is quite evident that the demonstrated shrinkage of 8.187 per centum was an extremely moderateaverage; and this fact goes to show that there was no undue delay on the part of the Visayan Refining Co. in supplying transportation for thecopra collected by the plaintiff.

In the course of his well-reasoned opinion upon this branch of the case, the trial judge calls attention to the fact that it is expressly providedin paragraph two of the contract that the shrinkage of copra from the time of its delivery to the party of the second part till its arrival at Oponshould fall upon the plaintiff, from whence it is to be inferred that the parties intended that the copra should be paid for according to itsweight upon arrival at Opon regardless of its weight when first purchased; and such appears to have been the uniform practice of the partiesin settling their accounts for the copra delivered over a period of nearly two years.

From what has been said it follows that the first cause of action set forth in the complaint is not well founded, and the trial judge committedno error in absolving the plaintiff therefrom.

It appears that in the first six months of the year 1919, the plaintiff found that its transactions with the Visayan Refining Co. had not beenproductive of reasonable profit, a circumstance which the plaintiff attributed to loss of weight or shrinkage in the copra from the time ofpurchase to its arrival at Opon; and the matter was taken up with the officials of said company, with the result that a bounty amounting toP15,610.41 was paid to the plaintiff by the Visayan Refining Co. In the ninth paragraph of the complaint the plaintiff alleges that this paymentwas made upon account of shrinkage, for which the Visayan Refining Co. admitted itself to be liable; and it is suggested that making of thispayment operated as a recognition on the part of the Visayan Refining Co. of the justice of the plaintiffs claim with respect to the shrinkage inall subsequent transactions. With this proposition we cannot agree. At most the payment appears to have been in recognition of an existingclaim, without involving any commitment as to l iability on the part of the defendant in the future; and furthermore it appears to have been inthe nature of a mere gratuity in order to encourage the plaintiff and to assure that the plaintiffs organization would be kept in efficient state

for future activities. It is certain that no general liability for plaintiffs losses was assumed for the future; and the defendant on more than oneoccasion thereafter expressly disclaimed liability for such losses.

As already stated purchases of copra by the defendant were suspended in the month of July, 1920. At this time the plaintiff had an expensiveorganization which had been built up chiefly, we suppose, with a view to the buying of copra; and this organization was maintained practicallyintact for nearly a year after the suspension of purchases by the Visayan Refining Co. Indeed in October, 1920, the plaintiff added anadditional agency at Gubat to the twenty or more already in existence. As a second cause of action the plaintiff seeks to recover the sum ofP110,000, the alleged amount expended by the plaintiff in maintaining and extending its organization as above stated. As a basis for thedefendants liability in this respect it is alleged that said organization was maintained and extended at the express request, or requirement ofthe defendant, in conjunction with the repeated assurances that the defendant would soon resume activity as a purchaser of copra.


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With reference to this cause of action the trial judge found that the plaintiff, as claimed, had incurred expenses at the request of thedefendant and upon its representation that the plaintiff would be fully compensated therefor in the future. Instead, however, of allowing theplaintiff the entire amount claimed, his Honor gave judgment for only thirty per centum of said amount, in view of the fact that the plaintiffstransactions in copra had amounted in the past only to about thirty per centum of the total business transacted by it. Estimated upon thisbasis, the amount recognized as constituting a just claim was found to be P49,626.68, and for this amount judgment was rendered againstthe defendant.

The discussion of this branch of the appeal involves the sole question whether the plaintiffs expenses in maintaining and extending itsorganization for the purchase of copra in the period between July, 1920, to July, 1921, were incurred at the instance and request of thedefendant, or upon any promise of the defendant to make that expenditure good. A careful examination of the evidence, mostly of adocumentary character, is, in our opinion, convincing that the supposed liability does not exist.

By recurring to paragraph four of the contract between the plaintiff and the Visayan Refining Co. it will be seen that the latter agreed to keepthe plaintiff advised of the prevailing prices paid for copra in the Cebu market. In compliance with this obligation the Visayan Refining Co. wasaccustomed to send out "trade letters" from time to time to its various clients in the southern provinces of whom the plaintiff was one. Inthese letters the manager of the company was accustomed to make comment upon the state of the market and to give such information asmight be of interest or value to the recipients of the letters. From the series of letters thus sent to Albaladejo y Cia. during the latter half of1920, we here reproduce the following excerpts: chanrob1esvirtual1aw library

(Letter of July 2, 1920, from K. B. Day, General Manager, of the Visayan Refining Co., to Albaladejo y Cia.)

"The copra market is still very weak. I have spent the past two weeks in Manila studying conditions and find that practically no business at allis being done. A few of the mills having provincial agents are accepting small deliveries, but I do not suppose that 500 piculs of copra arechanging, hands a day. Buyers are offering from P13 to P15, depending on quality, and sellers are offering to sell at anywhere from P16 toP18, but no business can be done for the simple reason that the banks will not lend the mills any money to buy copra with at this time.

"Reports from the United States are to the effect that the oil market is in a very serious and depressed condition and that the large quantitiesof oil cannot be disposed of at any price.

x x x

"Under these conditions it is imperative that this mill buy no more copra than it can possibly help at the present time. We are not anxious tocompete, nor do we wish to purchase same in competition with others. We do, however, desire to keep our agents doing business and trustthat they will continue to hold their parroquianos (customers), buying only minimum quantities at present.

"The local market has not changed since last week, and our liquidating price is P14." cralaw virtua1aw library

(Letter of July 9, 1920, from Visayan Refining Co. to Albaladejo y Cia.)

"Notify your subagents to drop out of the market temporarily. We do not desire to purchase at present."cralaw virtua1aw library


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(Letter of July 10, 1920, from K. B. Day, General Manager, to Albaladejo y Cia.)

"The market continues to grow weaker. Conditions are so uncertain that this company desires to drop out of the copra market until conditionshave a chance to readjust themselves. We request therefore that our agents drop out of active competition for copra temporarily. Stocks thatare at present on hand will, or course, be liquidated, but no new stocks should be acquired. Agents should do their best to keep theirorganizations together temporarily, for we expect to be in the market again soon stronger than ever. We expect the cooperation of agents in

making this effective; and if they give us this cooperation, we will endeavor to see that they do not lose by the transaction in the long run.This company has been receiving copra from its agents for a long time at prices which have netted it a loss. The company has beensupporting its agents during this period. It now expects the same support from its agents. Agents having stocks actually on hand in theirbodegas should telegraph us the quantity immediately and we will protect same. But stocks not actually in bodegas cannot be considered."cralaw virtua1aw library

(Letter of July 17, 1920, from K. B. Day to Albaladejo y Cia.)

"Conditions have changed very little in the copra market since last reports. . . . We are in the same position as last week and are out of themarket.

"For the benefit of our agents, we wish to explain in a few words just why we are out of the market. Our tanks are full of oil and we havebeen forced to close down our mill until the arrival of a boat to load some of our stocks on hand. We have large stocks of copra. The market

for oil is so uncertain that we do not care to increase these stocks until such time as we know that the market has touched the bottom. Assoon as this period of uncertainty is over, we expect to be in the market again stronger than ever, but it is only the part of business wisdomto play safe at such times as these.

"Owing to the very small amounts of copra now in the provinces, we do not think that our agents will lose anything by our being out of themarket. On the contrary, the producers of copra will have a chance to allow their nuts to mature on the trees so that the quality of coprawhich you will receive when we again are in the market should be much better than what you have been receiving in the past. Due to thehigh prices and scarcity of copra a large proportion of the copra we have received has been made from unripe coconuts and in order to keeprevenue coming in the producers have kept harvesting these coconuts without giving them the chance to let their nuts ripen and should giveyou a better copra in the future which will shrink less and be more satisfactory both from your standpoint and ours. Please do all you can toassist us at this time. We shall greatly appreciate your cooperation."cralaw virtua1aw library

(Letter of August 7, 1920, from H. U. Umstead, Assistant General Manager, to Albaladejo y Cia.)

"The copra situation in Manila remains unchanged and the outlook is still uncertain. Arrivals continue small.

"We are still out of the market and are not yet in a position to give you buying orders. We trust, however, that within the next few weeks wemay be able to reenter the market and resume our former activity.

x x x

"While we are out of the market we have no objection whatever to our agents selling copra to other purchasers, if by doing so they are ableto keep themselves in the market and retain their parroquianos (customers). We do not, however, wish you to use our money for this


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purpose, nor do we want you to buy copra on speculation with the idea in mind that we will take it off your hands at high prices when wereenter the market. We wish to warn you against this now so that you will not be working under any misapprehension.

"In this same mail, we are sending you a notice of change of organization. In your dealings with us hereafter, will you kindly address allcommunications to the Philippine Refining Corporation, Cebu, which you will understand will be delivered to us."cralaw virtua1aw library

(Letter of August 21, 1920, from Philippine Refining Corporation, by K. B. Day, to Albaladejo y Cia.)

"We are not yet in the market, but as we have indicated before, are hopeful of renewing our activities soon. We shall advise all our agentsseasonably of our return to the market. . . .

"We are preparing new forms of agreement between ourselves and our agents and hope to have them completed in time to refer them to ouragents in the course of the next week or ten days.

"All agents should endeavor to liquidate outstanding advances at this time because this is a particularly good time to clean out old accountsand be on a business basis when we return to the market. We request that our agents concentrate their attention on this point during thecoming week."cralaw virtua1aw library

(Letter of October 16, 1920, from K. B. Day, Manager to Albaladejo y Cia.)

"Copra in Manila and coconut oil in the United States have taken a severe drop during the past week. The Cebu price seems to have remainedunchanged, but we look for an early drop in the local market.

"We have received orders from our president in New York to buy no more copra until the situation becomes more favorable. We had hopedand expected to be in the market actively before this time, but this most unexpected reaction in the market makes the date of our entry in itmore doubtful.

"With this in view, we hereby notify our agents that we can accept no more copra and advance no more money until we have permission fromour president to do so. We request, therefore, that you go entirely out of the market, so far as we are concerned, with the exception ofreceiving copra against outstanding accounts.

"In any case agent be compelled to take in copra and desire to send same to us, we will be glad to sell same for him to the highest bidder inCebu. We will make no charge for our services in this connection, but the copra must be forwarded to us on consignment only so that we willnot appear as buyers and be required to pay the internal-revenue tax.

"We are extremely sorry to be compelled to make the present announcement to you, but the market is such that our president does not deemit wise for us to purchase copra at present, and, with this in view, we have no alternative other than to comply with his orders. We hope thatour agents will realize the spirit in which these orders are given, and will do all they can to remain faithful to us until such time as we canreenter the market, which we hope and believe will be within a comparatively short time."cralaw virtua1aw library

(Special Letter of October 16, 1929, from Philippine Refining Corporation, by K. B. Day, to Albaladejo y Cia.)


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"We have received very strict instructions from New York temporarily to suspend the purchase of copra, and of course we must complytherewith. However, should you find yourselves obliged to buy copra in connection with your business, and cannot dispose of i tadvantageously in Cebu, we shall be glad to receive your copra under the condition that we shall sell it in the market on your account to thehighest bidder, or, in other words, we offer you our services free, to sell your copra to the best possible advantages that the local market mayoffer, provided that, in doing so, we be not obliged to accept your copra as a purchase when there be no market for this product.

"Whenever you find yourselves obliged to buy copra in order to liquidate pending advances, we can accept it provided that, so long as presentconditions prevail, we be not required to make further cash advances."cralaw virtua1aw library

We shall quote no further from letters written by the management of the Philippine Refining Corporation to the plaintiff, as we find nothing inthe correspondence which reflects an attitude different from that reflected in the matter above quoted. It is only necessary to add that thehope so frequently expressed in the letters, to the effect that the Philippine Refining Corporation would soon enter the market as a buyer ofcopra on a more extensive scale than its predecessor, was not destined to be realized, and the factory at Opon remained closed.

But it is quite obvious that there is nothing in these letters on which to hold the defendant liable for the expenses incurred by the plaintiff inkeeping its organization intact during the period now under consideration. Nor does the oral testimony submitted by the plaintiff materiallychange the situation in any respect. Furthermore, the allegation in the complaint that one agency in particular (Gubat) had been opened onOctober 1, 1920, at the special instance and request of the defendant, is not at all sustained by the evidence.

We note that in his letter of July 10, 1920, Mr. Day suggested that if the various purchasing agents of the Visayan Refining Co. would keeptheir organization intact, the company would endeavor to see that they should not lose by the transaction in the long run. These words affordno sufficient basis for the conclusion, which the trial judge deduced therefrom, that the defendant is bound to compensate the plaintiff for theexpenses incurred in maintaining its organization. The correspondence sufficiently shows on its face that there was no intention on the part ofthe company to lay a basis for contractual liability of any sort; and the plaintiff must have understood the letters in that light. The partiescould undoubtedly have contracted about it, but there was clearly no intention to enter into contractual relation; and the law will not raise acontract by implication against the intention of the parties. The inducement held forth was that, when purchasing should resumed, theplaintiff would be compensated by the profits then to be earned for any expense that would be incurred in keeping its organization intact. It isneedless to say that there is no proof showing that the officials of the defendant acted in bad faith in holding out this hope.

In the appellants brief contention is advanced that the contract between the plaintiff and the Visayan Refining Co. created the relation ofprincipal and agent between the parties, and reliance is placed upon article 1729 of the Civil Code which requires the principal to indemnify

the agent for damages incurred in carrying out the agency. Attentive perusal of the contract is, however, convincing to the effect that therelation between the parties was not that of principal and agent in so far as relates to the purchase of copra by the plaintiff. It is true that theVisayan Refining Co. made the plaintiff one of its instruments for the collection of copra; but it is clear that in making its purchases from theproducers the plaintiff was buying upon its own account and that when it turned over the copra to the Visayan Refining Co., pursuant to thatagreement, a second sale was effected. In paragraph three of the contract it is declared that during the continuance of this contract theVisayan Refining Co. would not appoint any other agent for the purchase of copra in Legaspi; and this gives rise indirectly to the inferencethat the plaintiff was considered its buying agent. But the use of this term in one clause of the contract cannot dominate the real nature of theagreement as revealed in other clauses, no less than in the caption of the agreement itself. In some of the trade letters also the variousinstrumentalities used by the Visayan Refining Co. for the collection of copra are spoken of as agents. But this designation was evidently usedfor convenience; and it is very clear that in its activity as a buyer the plaintiff was acting upon its own account and not as agent, in the legalsense, of the Visayan Refining Co. The title to all of the copra purchased by the plaintiff undoubtedly remained in it until it was delivered by


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way of subsequent sale to said company.

For the reasons stated we are of the opinion that no liability on the part of the defendant is shown upon the plaintiffs second cause of action,and the judgment of the trial court on this part of the case is erroneous.

The appealed judgment will therefore be affirmed in so far as it absolves the defendant from the first cause of action and will be reversed in

so far as it gives judgment against the defendant upon the second cause of action; and the defendant will be completely absolved from thecomplaint. So ordered, without express finding as to costs of either instance.

Johnson, Malcolm, Avancea, Villamor, Johns and Romualdez,JJ., concur.


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