Case Summary (G.R. No. L-4440)
Factual Background
On October 22, 1947, in Cebu City, the parties executed a written contract (Exhibit C) by which the Visayan Products Company allegedly sold to Bunge Corporation five hundred long tons of merchantable Philippine copra in bulk at $188.80 U.S. currency per long ton, less one per cent brokerage per short ton of 2,000 pounds, C & F Pacific Coast, U.S.A., with shipment to be effected during November or December 1947 to San Francisco, California, for delivery to the vendee. Plaintiffs averred that, despite repeated demands, the vendors failed to ship and deliver the copra within the agreed time. Plaintiffs asserted that, relying in good faith upon timely performance, they sold to El Dorado Oil Works the copra they had contracted to buy, and because the vendors did not deliver the copra plaintiffs incurred damages in the amount of P180,000.
Defendants' Contentions at Trial and on Appeal
Defendants initially denied the Cebu Visayan Products Company's participation in the contract and contended that Vicente Kho, who signed for the company, lacked authority because authority rested with other corporate officers. Vicente Kho separately alleged that the contract was with a Visayan Products Company organized in Tacloban, Leyte, which he managed and controlled and whose identity, he claimed, plaintiffs knew at the time; he further claimed that he attempted performance but that the copra he had gathered and stored at San Ramon, Samar, was destroyed by a storm before shipment, invoking force majeure to excuse nonperformance. On appeal, appellants abandoned the dispute over the identity of the contracting Visayan Products Company and conceded that a purchase and sale contract under the terms pleaded did exist; their sole remaining defense on appeal was that their failure to deliver resulted from force majeure and therefore they were exempt from civil liability.
Trial Court Proceedings and Judgment
After trial, the lower court found for plaintiffs and rendered judgment against Elena Camenforte & Company for P79,744 with legal interest from filing and costs. The court further ordered that if that company were unable to pay by reason of insolvency, the co-defendants were jointly and severally liable for the unpaid portion. The trial court declined to fully credit plaintiffs' asserted damages of $84,730.86 (P169,461.72) allegedly paid to El Dorado Oil Works because it perceived a discrepancy in the dates of the two contracts: Exhibit O (El Dorado) dated October 21, 1947, executed in New York City, and Exhibit C (Visayan Products) dated October 22, 1947, executed in Cebu; the court inferred that the evidence did not establish that the copra sold to El Dorado derived from the purchase from the defendants. Nonetheless, the court awarded damages based on the highest market price of copra during December 1947, as shown in Exhibit P.
Issue Presented on Appeal
The sole issue presented to the Supreme Court on appeal was a question of law: whether appellants were excused from liability for nonperformance by reason of force majeure arising from the alleged destruction of the copra stored at San Ramon, Samar.
Characterization of the Contract and Legal Principle Applied
The Court examined Exhibit C and determined that the subject matter of the sale was Philippine copra described by weight in long tons, without reference to any particular or specific lot, place of acquisition, earmarking, or segregation. The Court held that the contract therefore concerned a generic thing rather than a determinate or specific thing. Applying the principle that an obligation to deliver a generic thing is not extinguished by the loss of a thing belonging to the genus, the Court concluded that the alleged destruction of the particular copra assembled by appellants in Samar did not discharge their obligation. The Court cited prior decisions to the same effect, including De Leon vs. Soriano, Reyes vs. Caltex, and Vda. Lacson vs. Diaz, and discussed commentary on article 1096 of the Civil Code of Spain as applied in local jurisprudence; the Court also invoked the maxim genus nunquan perit to underscore that a genus does not perish by the loss of a member.
Analysis of Appellants' Force Majeure Defense
The Court reasoned that appellants had contractual discretion to procure the generic copra from any part of the Philippines and that the copra stored at San Ramon, Samar, could at most represent the lot chosen by appellants in exercise of that discretion. Because the obligation was to deliver copra generically, the destruction of that particular lot by storm did not extinguish appellants' duty; appellants remained liable until they could no longer, in fact, supply copra generally. The Court observed that contingencies such as storms are collateral incidents which the parties could have provided against by stipulation, and that inability to produce the generic commodity, irrespective of the cause, did not relieve the seller from contractual commitment.
Treatment of the El Dorado Transaction and Damages
The Supreme Court rejected the trial court's reliance on the nominal one-day discrepancy between the October 21, 1947, El Dorado contract (E
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Parties and Procedural Posture
- Bunge Corporation and Universal Commercial Agencies, Plaintiffs and Appellees, sued Elena Camenforte & Company, doing business or trading under the name and style of Visayan Products Company et al., Defendants and Appellants, for damages for non-delivery of copra under a contract dated October 22, 1947.
- The trial court rendered judgment ordering the defendants to pay the plaintiffs the sum of P79,744, with legal interest from the filing of the complaint and the costs of action, and ordered co-defendants jointly and severally liable in case of insolvency.
- The defendants appealed, and on appeal they abandoned their challenge to the identity of the contracting entity and limited their defense to force majeure.
Key Factual Allegations
- The parties executed a contract in Cebu on October 22, 1947, whereby the vendor agreed to sell 500 long tons of merchantable Philippine copra in bulk to the vendee.
- The contract stipulated a price of $188.80 U.S. currency per ton, less one percent brokerage per short ton of 2,000 pounds, C & F Pacific Coast, U.S.A., with shipment during November or December 1947.
- The vendee alleged repeated demands and non-shipment by the vendor and averred that it sold the purchased copra to El Dorado Oil Works for delivery not later than December 31, 1947.
- The defendant representative, Vicente Kho, admitted the commercial transaction but alleged the contract was with a Visayan Products Company organized in Tacloban and that the copra destined for shipment was destroyed by a storm while stored in a bodega at San Ramon, Samar.
- The plaintiffs claimed damages from consequential obligations incurred in reliance on the sellers' promised delivery.
Contract Terms
- The contract described the subject-matter as Philippine copra sold by weight in long tons and called for shipment to the Pacific Coast of the United States during November or December 1947.
- The contract did not earmark any particular lot or describe a specific source or location for the copra.
- The vendor had the liberty to acquire the copra from any part of the Philippines and to select the particular lots to be delivered.
Defenses Asserted
- The defendants initially denied the identity and authority of the signatory for the Visayan Products Company and contended the Cebu company was not party to the transaction.
- Vicente Kho asserted that he acted for the Tacloban Visayan Products Company of which he was manager and controlling stockholder, and that plaintiffs were aware of that fact.
- The defendants further pleaded force majeure in the form o