Case Summary (G.R. No. 214864)
Petitioner
George A. Kauffman, creditor and beneficiary of the cable transfer.
Respondent
Philippine National Bank, seller of the cable transfer and drawee bank.
Key Dates
• February 5, 1918: Company declares ₱100,000 dividend; ₱98,000 credited to Kauffman.
• October 9, 1918: Wicks procures $45,000 transfer; PNB issues official receipt and sends payment instructions to New York.
• October 11, 1918: PNB directs its New York agency to withhold payment.
• October 15, 1918: Kauffman demands payment in New York; payment refused.
• September 29, 1921: Supreme Court renders decision.
Applicable Law
Civil Code of the Philippines, Article 1257(2) (stipulation in favor of a third person). The Negotiable Instruments Law is inapplicable.
Factual Background
PNB sold a cable transfer for $45,000 to Philippine Fiber and Produce Company, accepting a check for ₱90,355.50 drawn by Treasurer Wicks. An official receipt memorialized PNB’s obligation to pay Kauffman in New York. PNB’s Manila headquarters initially dispatched a cable instructing payment, then—upon its New York agent’s advice to protect the company’s credit—sent a second cable directing withholding of funds. When Kauffman presented the payment order in New York on October 15, 1918, PNB’s agent refused to honor it.
Procedural History
Kauffman sued in the Court of First Instance of Manila for the $45,000, plus interest and costs. The trial court ruled for Kauffman. PNB appealed to the Supreme Court.
Legal Issue
Whether a third-party beneficiary without direct privity can enforce a contractual obligation of PNB to pay the cable transfer.
Court’s Analysis
• The transfer agreement created a contractual promise by PNB to pay Kauffman.
• The Negotiable Instruments Law did not apply because the cable order was neither “to order” nor delivered as a negotiable instrument.
• Under Civil Code Article 1257(2), a third person benefiting from a contract may enforce it upon notifying acceptance before revocation.
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Case Syllabus (G.R. No. 214864)
Facts of the Case
- George A. Kauffman was president and principal shareholder of the Philippine Fiber and Produce Company.
- On February 5, 1918, the company declared a dividend of ₱100,000; Kauffman’s share of ₱98,000 was credited to his account.
- In October 1918, Treasurer George B. Wicks requested a telegraphic transfer of US$45,000 to Kauffman in New York.
- The Philippine National Bank quoted a total cost of ₱90,355.50 (exchange and message) and accepted Wicks’s check for that amount.
- The bank issued an “official receipt” to Wicks evidencing the cable transfer purchase.
- On October 9, the Manila head office cabled its New York agency to pay Kauffman US$45,000 on account of the Philippine Fiber and Produce Company.
- The New York agent, upon receipt, suggested withholding payment because of Kauffman’s reluctance to accept certain bills.
- The Manila office acquiesced and on October 11 instructed New York to withhold payment.
- Wicks cabled Kauffman notifying him of the credit; on October 15 Kauffman demanded payment in New York but was refused.
Procedural History
- Kauffman sued in the Court of First Instance of Manila to recover US$45,000 with interest and costs.
- The trial court rendered judgment in favor of Kauffman.
- The Philippine National Bank appealed to the Supreme Court.
Pertinent Financial and Contractual Circumstances
- The