Case Summary (G.R. No. L-18916)
Petitioner (Appellant)
Woodcraft Works, Ltd. — appealed the lower court judgment, contesting (1) that it was obligated to furnish vessels to receive appellee’s logs, (2) findings that appellee had sufficient stock by July 31, 1951, (3) findings of appellant’s noncompliance, (4) the award of damages to appellee, and (5) denial of appellant’s counterclaims.
Respondent (Appellee)
Jose Abesamis (East Samar Lumber Mills) — sought rescission of the January 22, 1951 contract and recovery of damages for appellant’s alleged failure to comply with shipping obligations and accept delivery of logs.
Key Dates and Procedural History
- November 8, 1950: Initial contract for 300,000 board feet at P60 per Mbdft (largely not performed; only 13,068 bdft delivered).
- January 22, 1951: Parties executed a new contract (previous cancelled; advances of P9,000 carried over) for 1,700,000 bdft (1,300,000 bdft at P78/Mbdft and remainder at P70/Mbdft) with shipment to be "before the end of July, but will not commence earlier than April" and option for partial shipments.
- March–April 1951: Two shipments totaling 462,657 bdft were actually made.
- May 5, 1951: Typhoon struck, causing loss of logs then awaiting shipment.
- September 13, 1951: Appellee filed suit in the Court of First Instance of Leyte for rescission and damages (original claim P155,000).
- Trial court rendered judgment rescinding the contract and awarding P145,623.03 (actual damages), P50,000 (loss of credit), and P5,000 (attorney’s fees).
- Appeal to the Supreme Court; decision rendered November 28, 1969.
Applicable Law and Constitutional Basis
- Governing constitutional reference for this 1969 decision: the 1935 Philippine Constitution (applicable because the decision date precedes 1990).
- Civil Code principles applied, specifically the rule permitting recourse to contemporaneous and subsequent acts to determine parties’ intent (Article 1371, Civil Code), and general contract doctrines on reciprocal obligations, terms, waiver, and damages.
Contract Terms Relevant to Shipping Obligation
The January 22, 1951 agreement did not expressly state which party must furnish vessels. Contractual provisions, however, addressed: Bureau of Forestry inspection charges and wharfage fees to be for Woodcraft Works, dispatch and loading rate expectations (200,000 bdft per working day per four hatches), requirements for certificates when weather or ship gear caused idling, and a demurrage clause (P800 per day pro rata for failure to load 200,000 bdft per working day). These terms bear directly on which party bore responsibility for providing vessels and managing loading operations.
Factual Findings on Which Party Furnished Vessels
The Court considered (1) the contractual provisions cited above, which would be inapplicable or unnecessary if appellee were to furnish vessels; (2) contemporaneous and subsequent acts under Article 1371 showing practice between the parties; and (3) testimonial and documentary evidence that appellant had furnished the vessels for the two shipments in March–April 1951 and regularly supplied information on vessel arrivals. Appellant’s witness explained difficulty in procuring additional vessels for Dolores due to prior loading experiences. The Supreme Court concluded that, by implication and by conduct, the obligation to furnish vessels devolved upon Woodcraft Works, Ltd.
Appellee’s Capacity to Perform (Availability of Logs)
Appellant relied on Bureau of Forestry certificates (showing production January–July 1951 of 1,926.64 cubic meters or 816,795 bdft) to assert appellee lacked sufficient timber to comply. Appellee’s testimony explained grading and reporting practices: export-grade logs were often not reported before shipment to avoid prepayment of forest charges, and graders were instructed to inspect only the portion to be shipped due to vessel capacity limits. Bureau inspector Selga had certified 488,015 bdft as graded by July 3, 1951 and testified about additional logs (approx. 600,000 bdft) at other stations. The Court accepted appellee’s explanation and found that by July 31, 1951 appellee had the 1,300,000 bdft required under the contract (800,000 bdft ready and the remainder at other stations), supported by a July 31 telegram from appellee requesting grader and vessel dispatch.
Legal Characterization of the Parties’ Obligations and Timing
The Court treated the parties’ obligations as reciprocal with a definite term: appellant to furnish vessels, appellee to furnish logs, shipment to occur between April and the end of July. Because the agreed period delayed the maturity of obligations, neither party could be held in delay before the period expired, except where a party waived the benefit of the period by promising earlier performance and thus undertaking an enforceable obligation to perform sooner.
Damages Claimed by Appellee and Court’s Analysis
Appellee’s damages were assessed in three categories corresponding to separate breaches or failures by appellant:
Loss from May 5, 1951 typhoon (410,000 bdft; claimed value P73,537.77): Court’s analysis — shipment period began in April and maturity was not due until July 31, 1951; appellant had not yet incurred delay, and appellee bore the risk for losses occurring before appellant’s obligation matured. Consequently, appellant was not liable for the May 5 storm loss, and this claim was denied.
Loss from failure to accept shipment on June 25, 1951 (60,000 bdft lost after rafts broke loose; claimed P7,685.26): Court’s analysis — appellant had assured appellee that the SS ALBAY (capacity 450,000 bdft) would load on June 25, 1951, thereby waiving the benefit of the contractual period as to that earlier date. Appellee prepared logs in reliance; appellant failed to perform without satisfactory explanation. Appellant was therefore liable for the consequent loss of P7,685.26.
Loss from failure to accept shipment by July 31, 1951 (800,000 bdft destroyed by marine borers; claimed P62,000): Court’s analysis — by July 31 appellee had sufficient logs ready; appellant failed to send a vessel and produced no evidence of excusing circumstances. Appellant was held liable for the P62,000 loss.
Aggregate recoverable damages under these two successful categories totaled P69,685.26 (P7,685.26 + P62,000).
Award for Loss of Credit and Assessment by the Court
The trial court had awarded P50,000 for appellee’s alleged loss of credit. The Supreme Court found no adequate evidentiary basis for this award: the exhibits comprised a few letters of demand from creditors, which
Case Syllabus (G.R. No. L-18916)
Procedural History
- Action filed by plaintiff Jose Abesamis (doing business as East Samar Lumber Mills) in the Court of First Instance of Leyte on September 13, 1951 seeking rescission of the January 22, 1951 contract and recovery of damages in the amount of P155,000.00 for alleged breach by defendant Woodcraft Works, Ltd.
- Defendant filed answer and amended answer, denying material allegations and asserting special defenses and counterclaims.
- The trial court rendered judgment: declared the January 22, 1951 contract rescinded; ordered defendant to pay plaintiff actual damages of P145,623.03, P50,000.00 for alleged loss of credit, and P5,000.00 attorney’s fees; and ordered defendant to pay costs.
- Defendant appealed to the Supreme Court (G.R. No. L-18916).
- The Supreme Court reviewed the record and rendered its decision on November 28, 1969, affirming the lower court’s rescission but modifying the damages award.
Parties and Principal Allegations
- Plaintiff-appellee: Jose Abesamis, trading as East Samar Lumber Mills; owner of a timber concession and sawmill at Dolores, Samar.
- Defendant-appellant: Woodcraft Works, Ltd., purchaser in the contracts for logs.
- Plaintiff’s core allegation: defendant failed to comply with contractual obligations to take delivery of logs, causing extensive loss and damage.
- Defendant’s principal contention on appeal: the trial court erred in finding (1) that Woodcraft Works was obligated to send vessels to Dolores, Samar before the end of July 1951; (2) that appellee had sufficient stock of logs by July 31, 1951; (3) that appellant failed to comply with contractual terms; (4) in awarding damages to appellee; and (5) in not awarding damages and recovery in favor of appellant.
Relevant Contracts and Their Terms
- Initial contract (November 8, 1950): Agreement for defendant to purchase from plaintiff 300,000 board feet of Philippine round logs at P60.00 per thousand board feet. Only 13,068 board feet were actually delivered due to bad weather and defendant’s failure to send vessels.
- New contract (January 22, 1951): The prior contract was cancelled and plaintiff waived claims thereunder. Advances previously given by defendant totaling P9,000.00 were transferred as advances on the new contract.
- Terms of the January 22, 1951 contract:
- Total quantity: 1,700,000 board feet of logs.
- Price allocation: 1,300,000 board feet at P78.00 per thousand, remainder at P70.00 per thousand.
- Shipping period: “before the end of July, but will not commence earlier than April with the option to make partial shipment depending on the availability of logs and vessels.”
- Contract form: a letter addressed by appellant to appellee; contained clauses addressing fees and charges, dispatch of ship, and demurrage.
Contractual Provisions Bearing on Who Furnishes Vessels
- Fees & Charges clause: Bureau of Forestry inspection charges and Philippine Government wharfage fees are “for account of Woodcraft Works, Ltd.”
- Dispatch of Ship clause: “Immediately upon arrival of the vessel at Dolores, Samar, you will commence loading at the rate of 200,000 bdft. per working day per four hatches.” Provisions on obtaining captain’s certificate for delays due to unfavorable weather or ship’s gears not functioning.
- Demurrage clause: Failure to load 200,000 bdft. per working day obliges the payor to pay P800.00 per day pro-rata.
- Court’s observation on implication: these provisions—particularly as to wharfage dues, demurrage, and weather/gear contingencies—would have been of little concern to appellant and would not have been imposed by it if appellee were to furnish the vessel; viewed as implying the ship-procurement obligation lay with appellant.
Contemporaneous and Subsequent Acts Relevant to Intention
- Actual vessel provision: In the two shipments made in March and April 1951 the vessels “SS AEULUS” and “SS DON JOSE” were furnished by appellant.
- Communications pattern: Telegraphic exchanges show appellee requesting information about vessel arrivals and appellant supplying such information.
- Testimony of Irza Toeg (appellant’s witness): detailed explanation that due to prior failures and poor loading experiences at Dolores, Samar, other shipping firms became hesitant to send vessels; the first foreign vessel (Bunyo Maru) loaded only about 13,000 out of an expected 400,000 bd.ft., adversely affecting future vessel calls; subsequent Philippine-registered vessels called only through appellant’s connections; these factors made it difficult for appellant to obtain vessels thereafter.
- Legal reference used by the Court: contemporary and subsequent acts may be taken into consideration to determine parties’ intention under Article 1371 of the Civil Code.
Main Issue on Appeal
- Whether Woodcraft Works, Ltd. failed to comply with its obligations under the contract, specifically whether it was obligated to furnish the vessel to receive shipment of logs from appellee.
Court’s Conclusion on Obligation to Furnish Vessels
- Court’s holding: appellant was obligated to furnish the vessel.
- Rationale:
- Absence of express provision is overcome by implication from contractual clauses allocating wharfage and demurrage to appellant and requiring immediate loading upon vessel arrival at a specified loading rate.
- The contract’s form (letter from appellant to appellee) and the inclusion of clauses usually relevant to a shipowner/purchaser who would supply the vessel indicate appellant’s obligation.
- Contemporaneous acts (appellant having furnished vessels for March and April s