Case Digest (G.R. No. L-19009)
Facts:
E. C. McCullough & Co. v. S. M. Berger, G.R. No. 19009, September 26, 1922, the Supreme Court En Banc, Johns, J., writing for the Court.The plaintiff-appellee was E. C. McCullough & Co. and the defendant-appellant was S. M. Berger. In February 1918, while both parties were in Manila and the tobacco shipment was en route on the high seas to New York, Berger gave McCullough a written assurance that the shipment of 501 bales of tobacco would “guarantee the arrival of the tobacco in New York in good condition, subject, of course, to conditions arising after its departure from Manila, which contingencies are covered by adequate insurance.” Relying on that assurance, McCullough caused his New York office to honor Berger’s 90-day sight draft for $33,109 and paid the draft on May 21, 1918.
The shipment arrived in two consignments (213 bales on April 26 and 288 bales on May 18, 1918) and was warehoused in New York. Buyers who physically inspected the tobacco refused to accept most of it as “musty.” McCullough sold and shipped 75 bales to a Red Lion, Pennsylvania buyer and later realized proceeds of $9,031.71 from a total of 141 bales sold; the remaining bales were offered for sale but rejected because of the musty condition. McCullough promptly notified Berger by cable (May 23 and June 13, 1918) and by letter (June 28, 1918) describing the musty smell and asserting that the tobacco appeared to have been packed in that condition.
Berger, through the Philippine National Bank’s New York agency, on September 5, 1918 instructed the bank to take back the tobacco and pay McCullough $33,109 plus interest “upon delivery to it of the 501 bales” and insisted that no shortage in number of bales be accepted. McCullough informed the bank that he could not return the identical 501 bales because he had already sold 141 bales and offered to account for the proceeds of those sales and to deliver all unsold bales; Berger refused to modify his instruction. The bank later offered to take back the identical 501 bales and pay the draft and interest, but McCullough could not meet the impossible condition of returning those identical bales.
McCullough ultimately sold the remaining tobacco (by public auction) and sustained a net loss of $11,867.98 (U.S. currency), which he converted to pesos and sued Berger in the lower court for that loss plus interest and costs. Berger pleaded denial and, as a separate defense, alleged he had offered formally on August 15, 1918 to repurchase the tobacco at the original price with accrued interest and that McCullough had rejected the offer; Berger also asserted he repeatedly tendered the repurchase price conditioned on return of the tobacco.
The trial court found for McCullough, concluding the tobacco was not in good condition on arrival (and was not good when it left Manila), that McCullough promptly notified Berger and acted in good faith and to minimize loss, and that Berger’s conditional offer was not made in good faith; the trial court awarded damages of $11,867.98 (P23,735.96) with interest and costs. After his motion for new trial was denied, Berger appealed to the Supreme Court.
At trial and on appeal Berg...(Pro-only)
Issues:
- Did the tobacco arrive in New York in the condition guaranteed — i.e., was there a breach of the guaranty that the tobacco would arrive “in good condition”?
- Were Articles 336 and 342 of the Code of Commerce applicable to bar or limit McCullough’s action for defects discovered after arrival?
- Could McCullough maintain an action for breach of contract (and recover damages) after offering or being offered rescission and restitution, or had he elected resciss...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
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Doctrine:
- (Pro-only)