Title
Basilan Lumber Co. vs. Cagayan Timber Export Co.
Case
G.R. No. L-15908
Decision Date
Jun 30, 1961
Basilan Lumber Co. sought demurrage and dead freight from Cagayan Timber Export Co., but the Supreme Court ruled recovery invalid as damages were unpaid, emphasizing actual proof under Philippine law.
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Case Digest (G.R. No. L-15908)

Facts:

Parties Involved:

  • Petitioner: Basilan Lumber Company
  • Respondents: Cagayan Timber Export Company, et al.

Contractual Agreements:

  1. Initial Contract (April 25, 1951): Cagayan Timber Export Company agreed to deliver 1,200,000 board feet of exportable logs to Basilan Lumber Company by May 31, 1951.
  2. First Amendment (July 3, 1951): The quantity was reduced to 500,000 board feet, with delivery to be made by July 15, 1951.
  3. Second Amendment (August 22, 1951): The quantity was increased to 740,000 board feet, with delivery to be made by September 1, 1951. A minimum of 50,000 board feet per gang per hatch per weather working day was agreed upon.

Sale to Japanese Buyer:

  • Basilan Lumber Company sold the logs to a Japanese buyer through the East Asiatic Company, which acted as an intermediary.
  • The logs were to be loaded on the vessel "Kanatsu Maru," chartered by the Japanese buyer, which arrived in the Philippines on September 9, 1951.

Loading Issues:

  • The vessel stayed in port for 8 days but only 483,672 board feet of logs were loaded.
  • The loading was delayed due to insufficient logs and poor stevedoring service, taking 7 days instead of the expected 2.5 days.

Damages Claimed:

  • Demurrage: $4,141.16 (for the delay in loading).
  • Dead Freight: $5,673.43 (for the freight of undelivered logs).
  • Total Damages: $9,814.59 (or P19,629.18), plus legal interest and attorney's fees of P2,000.

Issue:

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Ruling:

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Ratio:

  1. Proof of Actual Damages: The Court reiterated the principle that damages must be actual and not speculative. Under Article 2199 of the Civil Code, damages must be "duly proved" before they can be recovered. In this case, there was no proof that Basilan Lumber Company had actually paid the demurrage and dead freight to the Japanese buyer.
  2. Prospective Damages Not Allowed: The Court rejected the argument that prospective damages could be recovered based on the reasonable certainty of their occurrence. The Philippine legal system requires actual proof of damages, unlike some American jurisdictions where prospective damages may be allowed under certain conditions.
  3. Contractual Obligations: The contractual terms holding the seller liable for damages were declaratory of the obligation but did not create a right to recover damages before they were actually incurred. The obligation to indemnify only arises when the damages are actually paid by the obligee.

Conclusion:

The Supreme Court upheld the decision of the Court of Appeals, ruling that Basilan Lumber Company could not recover demurrage and dead freight from Cagayan Timber Export Company because the damages had not yet been actually paid. The Court emphasized the necessity of proving actual damages under Philippine law and rejected the recovery of prospective or speculative damages.


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