Smith, Bell Co. vs Sotelo (Civil Law)

G.R. No. L-16570             March 9, 1922

SMITH, BELL & CO., LTD., plaintiff-appellant, vs. VICENTE SOTELO MATTI, defendant-appellant.

ROMUALDEZ, J.:

FACTS:

In August, 1918, the plaintiff corporation (Smith Bell) and the defendant, Mr. Vicente Sotelo, entered into contracts whereby the former obligated itself to sell, and the latter to purchase from it,

two steel tanks, for the total price of P21,000, the same to be shipped from New York and delivered at Manila "within 3 or 4 months;"

two expellers at the price of P25,000 each, which were to be shipped from San Francisco in the month of September, 1918, or as soon as possible; and

two electric motors at the price of P2,000 each, as to the delivery of which stipulation was made, couched in these words: "Approximate delivery within 90 days. — This is not guaranteed."

The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th of October, 1918; and the motors on the 27th of February, 1919.

Smith, Bell & Co. notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr. Sotelo refused to receive them and to pay the prices stipulated.

Smith Bell brought suit against the defendant, based on 4 separate causes of action, alleging, among other facts, that it immediately notified the defendant of the arrival of the goods, and asked instructions from him as to the delivery thereof, and that the defendant refused to receive any of them and to pay their price. The plaintiff, further, alleged that the expellers and the motors were in good condition.

In their answer, Sotelo, and the intervenor, the Manila Oil Refining and By-Products Co., Inc., (Manila Oil) denied the plaintiff's allegations, and alleged as special defense that Mr. Sotelo had made the contracts in question as manager of the  Manila Oil which fact was known to the plaintiff, and that "it was only in May 1919, that it notified Manila Oil that said tanks had arrived, the motors and the expellers having arrived incomplete and long after the date stipulated." As a counterclaim or set-off, they also allege that, as a consequence of the plaintiff's delay in making delivery of the goods, which the intervenor intended to use in the manufacture of coconut oil, Manila Oil suffered damages in the sums of (P116,783.91) for the nondelivery of the tanks, and (P21,250) on account of the expellers and the motors not having arrived in due time.

The court below absolved the defendants insofar as the tanks and the electric motors were concerned, but rendered judgment against them, ordering them to "receive the aforesaid expellers and pay the Smith Bell the sum of P50,000, the price of the said goods, with legal interest thereon from July 26, 1919, and costs." Both parties appeal from this judgment, each assigning several errors in the findings of the lower court.

ISSUES:

Whether the obligation is conditional or one with a period

WON under the contracts entered into and the circumstances established in the record, the plaintiff has fulfilled, in due time, its obligation to bring the goods in question to Manila

HELD:

1) The obligation is conditional. 2)Yes.

From the record it appears that the contracts were executed at the time of the world war when there existed rigid restrictions on the export from the US of articles like the machinery in question, and maritime, as well as railroad, transportation was difficult, which fact was known to the parties; hence clauses were inserted in the contracts, regarding "Government regulations, railroad embargoes, lack of vessel space, the exigencies of the requirements of the United States Government," in connection with the tanks and "Priority Certificate, subject to the United State Government requirements," with respect to the motors. At the time of the execution of the contracts, the parties were not unmindful of the contingency of the US Government not allowing the export of the goods, nor of the fact that the other foreseen circumstances therein stated might prevent it.

Considering these contracts in the light of the civil law, we cannot but conclude that the term which the parties attempted to fix is so uncertain that one cannot tell just whether, as a matter of fact, those articles could be brought to Manila or not. If that is the case, as we think it is, the obligations must be regarded as conditional.

Obligations for the performance of which a day certain has been fixed shall be demandable only when the day arrives.

A day certain is understood to be one which must necessarily arrive, even though its date be unknown.

If the uncertainty should consist in the arrival or non-arrival of the day, the obligation is conditional and shall be governed by the rules of the next preceding section. (referring to pure and conditional obligations). (Art. 1125, Civ. Code.)

And as the export of the machinery in question was, as stated in the contract, contingent upon the sellers obtaining certificate of priority and permission of the United States Government, subject to the rules and regulations, as well as to railroad embargoes, then the delivery was subject to a condition the fulfillment of which depended not only upon the effort of the herein plaintiff, but upon the will of third persons who could in no way be compelled to fulfill the condition. In cases like this, which are not expressly provided for, but impliedly covered, by the Civil Code, the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality.

xx...This performance, which is fictitious — not real — is not expressly authorized by the Code, which limits itself only to declare valid those conditions and the obligation thereby affected; but it is neither disallowed, and the Code being thus silent, the old view can be maintained as a doctrine. (Manresa's commentaries on the Civil Code [1907], vol. 8, page 132.)

The decisions referred to by Mr. Manresa are those rendered by the supreme court of Spain on November 19, 1896, and February 23, 1871.

In the former it is held:

First. That when the fulfillment of the conditions does not depend on the will of the obligor, but on that of a third person who can in no way be compelled to carry it out, and it is found by the lower court that the obligor has done all in his power to comply with the obligation, the judgment of the said court, ordering the other party to comply with his part of the contract, is not contrary to the law of contracts, or to Law 1, Tit. I, Book 10, of the "Novísima Recopilación," or Law 12, Tit. 11, of Partida 5, when in the said finding of the lower court, no law or precedent is alleged to have been violated. (Jurisprudencia Civil published by the directors of the Revista General de Legislacion y Jurisprudencia [1866], vol. 14, page 656.)

Judgment appealed from is modified. Sotelo Matti is sentenced to accept and receive from the plaintiff the tanks, the expellers and the motors in question, and to pay the plaintiff P96k, with legal interest thereon from July 17, 1919, the date of the filing of the complaint, until fully paid, and the costs of both instances. So ordered.