1922 – Smith Bell & Co, Ltd v. Matti, GR No. 16570 (Conditional Obligation, Contract of Purchase and Delivery of Machinery)

• GR No. 16570

• Smith Bell & Co, Ltd v. Matti, GR No. 16570, 44 Phil. 874 (March 9, 1922)

• ChanRobles
• Lawyerly
• LawPhil

• OBLICON

• Conditional Obligation, Contract of Purchase and Delivery of Machinery

• Contract of Purchase and Delivery of Tanks, Expellers, and Motors

• Uncertain terms makes an obligation conditional
• Presumption of performance of obligation bound to conditions dependent on will of third persons who cannot be compelled to fulfill it
• Time of fulfillment of obligation irrelevant if not fixed in contract
• Principal have no right of action if agent acted in own name.

• Uncertain terms makes an obligation conditional
  • 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 obligation must be regarded as conditional.
• Presumption of performance of obligation bound to conditions dependent on will of third persons who cannot be compelled to fulfill it
  • … [T]he 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.
• Time of fulfillment of obligation irrelevant if not fixed in contract
  • In connection with this obligation to deliver, occurring in a contract of sale like those in question, the rule in North America is that when the time of delivery is not fixed in the contract, time is regarded unessential.
• Principal have no right of action if agent acted in own name.
  • When an agent acts in his own name, the principal shall have no right of action against the persons with whom the agent has contracted, or such persons against the principal. In such case, the agent is directly liable to the person with whom he has contracted, as if the transaction were his own. Cases involving things belonging to the principal are excepted.

• This is a case on appeal to the Supreme Court involving defendant’s refusal to pay and receive the late but successful delivery of tanks, expellers, and motors by plaintiff. The clauses of the contract in question involved various approximations of delivery date; it provided no guarantees of exact date of delivery because of stipulations making the obligation dependent on force majeure, US Government requirements and other causes. The Supreme Court ruled for the plaintiff; the clauses in question are uncertain terms, making the obligation conditional. More so, it is impliedly covered by the Civil Code that the obligor is deemed to have performed his part of the obligation if he has done so in all his power even if the condition, dependent on the will of third persons that cannot be compelled to fulfill it, is not fulfilled in reality. Lastly, evidence on record showed that the plaintiff has successfully fulfilled his part of the obligation in reasonable time.

• March 9, 1922

• Supreme Court of the Philippines

• En Banc

• Romualdez, J.

• Araullo, CJ
• Johnson
• Street
• Malcolm
• Avancena
• Villamor
• Ostrand
• Johns

3.5.2. Dissenting

• N/A

3.5.3. Absent/Others

• N/A

• N/A

• Smith, Bell, & Co.

3.7.2. DEFENDANT-APPELLANT

• Vicente Sotelo Matti

• Ross & Lawrence & Ewald E. Selph

3.8.2. DEFENDANT-APPELLEE

• Ramon Sotelo

• Appeal from a decision of the lower court

• Code of Commerce
  • Article 246
  • Article 247
• Spanish Civil Code
  • Article 1717
  • Article 1125

• Loomis v. Norman Printers’ Supply Co., 81 Conn., 343; 71 Atl., 358
• New Bedford Copper Co. v. Southard, 95 Me., 209; 49 Atl., 1062
• White v. McMillian, 114 N.C., 349; 19 S.E., 234
• Montgomery v. Thompson, 152 Cal., 319; 92 Pac., 866
• O’Brien vs. Higley, 162 Ind., 316; 70 N. E., 242;
• Pratt vs. Lincoln [Me. 1888], 13 Atl., 689;
• White vs. McMillan, 114 N. c., 349; 19 S. E., 234;
• Ballantyne vs. Watson, 30 U. C. C. P., 529.

• On August 1918, plaintiff corporation and defendant entered into contracts.
  • The former obligated to sell and the latter to purchase the following:
    • two steel tanks (P 21,000 each)
      • from New York to Manila in three to four months
        • "To be delivered within 3 or 4 months — The promise or indication of shipment carries with it absolutely no obligation on our part — Government regulations, railroad embargoes, lack of vessel space, the exigencies of the requirements of the United States Government, or a number of causes may act to entirely vitiate the indication of shipment as stated. In other words, the order is accepted on the basis of shipment at Mill’s convenience, time of shipment being merely an indication of what we hope to accomplish."
    • two expellers (P 25,000 each)
      • from San Francisco in the month of September 1918
        • "Approximate delivery within ninety days. — This is not guaranteed. — This sale is subject to our being able to obtain Priority Certificate, subject to the United States Government requirements and also subject to confirmation of manufactures."
    • two electric motors (P 2,000 each)
      • the following stipulation: "approximate delivery within ninety days – this is not guaranteed."
        • "Approximate delivery within ninety days. — This is not guaranteed. — This sale is subject to our being able to obtain Priority Certificate, subject to the United States Government requirements and also subject to confirmation of manufactures."
  • All the contracts have the following final clause:
    • "The sellers are not responsible for delays caused by fires, riots on land or on the sea, strikes or other cause known as ‘Force Majeure’ entirely beyond the control of the sellers or their representatives."
• Plaintiff successfully delivered the obligations on the following dates:
  • Tanks (April 27, 1919)
  • Expellers (October 26, 1918)
  • Motors (February 27, 1919)
• Plaintiff corporation notified the defendant. Defendant refused to pay.

• Lower Court
  • Plaintiff brought suit against the defendant, alleged the following:
    • It notified the defendant on the arrival of the goods
    • It asked instructions for him as to the delivery thereof
    • The defendant refused to receive any of them
    • The defendant refused to pay the price
    • The expellers and motors were in good condition
  • Defendant denied the allegations and alleged the following:
    • Mr. Sotelo had made the contracts in question as Manager of the intervenor, Manila Oil Refining and Bystanding Products Co.
    • Plaintiff only notified defendant only in May 1919, and it arrived incomplete and long after the stipulated date
    • As a result, intervenor suffered damages in the sum of
      • P 116,788.91 for nondelivery of the tanks and
      • P 21,250 on the expellers not arriving in due time.
  • The Court absolved the complaint regarding the tanks and electric motors. It also ordered them to pay plaintiff the sum of P 50,000 with legal interest thereon from July 26, 1919, and costs.
• Supreme Court
  • Both parties appealed, assigning different errors.

• Whether, as evidence has shown, the obligation is conditional in nature?
• Whether the plaintiff has fulfilled, in due time, its obligation to bring the goods in question to Manila?
• Whether the Manila Oil Refining and By-Products Co., Inc., has right of action against the plaintiff?

• Whether, as evidence has shown, the obligation is conditional in nature?
  • Yes.
    • The oral evidence falls short of fixing such period.
    • From the record it appears that these contracts were executed at the time of the world war when there existed rigid restrictions on the export from the United States 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 States 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 United States 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 obligation must be regarded as conditional.
• Whether the plaintiff has fulfilled, in due time, its obligation to bring the goods in question to Manila?
  • Yes
    • 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.
      • ("In such cases, the decisions prior to the Civil Code have held that the obligee having done all that was in his power, was entitled to enforce performance of the obligation. 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.))
    • It is sufficiently proven in the record that the plaintiff has made all the efforts it could possibly by expected to make under the circumstances, to bring the goods in question to Manila, as soon as possible. And, as a matter of fact, through such efforts, it succeeded in importing them and placing them at the disposal of the defendant, Mr. Sotelo, in April, 1919. Under the doctrine just cited, which, as we have seen is of the same juridical origin as our Civil Code, it is obvious that the plaintiff has complied with its obligation.
    • In connection with this obligation to deliver, occurring in a contract of sale like those in question, the rule in North America is that when the time of delivery is not fixed in the contract, time is regarded unessential.
    • Whether or not the delivery of the machinery in litigation was offered to the defendant within a reasonable time, is a question to be determined by the court.
    • The record shows, as we have stated, that the plaintiff did all within its power to have the machinery arrive at Manila as soon as possible, and immediately upon its arrival it notified the purchaser of the fact and offered to deliver it to him. Taking these circumstances into account, we hold that the said machinery was brought to Manila by the plaintiff within a reasonable time.
    • Therefore, the plaintiff has not been guilty of any delay in the fulfillment of its obligation, and, consequently, it could not have incurred any of the liabilities mentioned by the intervenor in its counterclaim or set-off.
• Whether the Manila Oil Refining and By-Products Co., Inc., has right of action against the plaintiff?
  • No.
    • Besides, it does not appear that the intervenor, the Manila Oil Refining and ByProducts Co., Inc., has in any way taken part in these contracts. These contracts were signed by the defendant, Mr. Vicente Sotelo, in his individual capacity and own name. If he was then acting as agent of the intervenor, the latter has no right of action against the herein plaintiff.
    • "When an agent acts in his own name, the principal shall have no right of action against the persons with whom the agent has contracted, or such persons against the principal. In such case, the agent is directly liable to the person with whom he has contracted, as if the transaction were his own. Cases involving things belonging to the principal are excepted. The provisions of this article shall be understood to be without prejudice to actions between principal and agent." (Civil Code, art. 1717.)

• Judgment appealed from modified.
  • Mr. Vicente Sotelo Matti is sentenced to accept and receive from the plaintiff the tanks, the expellers and the mottors in question
  • He must pay the plaintiff the sum of ninety-six thousand pesos (96,000), with legal interest from July 17, 1919, the date of the filing of the complaint, until fully paid.

• N/A