G.R. No.

L-32958

November 8, 1930

BLOSSOM
AND
COMPANY,
INC., plaintiff-appellant,
vs.
MANILA GAS CORPORATION, defendant-appellee.
Harvey
and
O'Brien
for
appellant.
Ross, Lawrence and Selph and John B. Miller for appellee.
STATEMENT
In its complaint filed March 3, 1927, the plaintiff alleges that
on September 10, 1918, it entered into a contract with the defendant
in which the plaintiff promised and undertook to purchase and
receive from the defendant and the defendant agreed to sell and
deliver to the plaintiff, for a period of four years, three tons of water
gas tar per month from September to January 1, 1919 and twenty
tons per month after January 1, 1919, for the remaining period of the
contract; one-half ton of coal gas tar a month from September to
January 1, 1919, and six tons per month after January 1, 1919, for
the remainder of the contract, delivery to be made at the plant of the
defendant in the City of Manila, without containers and at the price of
P65 per ton for each kind of gas tar, it being agreed that this price
should prevail only so long as the raw materials coal and crude oil
used by the defendant in the manufacture of gas should cost the
defendant the same price as that prevailing at the time of the
contract, and that in the event of an increase or decrease in the cost
of raw material there would be a corresponding increase or decrease
in the price of the tar. That on January 31, 1919, this contract was
amended so that it should continue to remain in force for a period of
ten years from January 1, 1919, and it was agreed that the plaintiff
should not be obliged to take the qualities of the tars required during
the year 1919, but that it might purchase tars in such quantities as it
could use to advantage at the stipulated price. That after the year
1919 the plaintiff would take at least the quantities specified in the
contract of September 10, 1918, to be taken from and after January
1, 1919, and that at its option it would have the right to take any
quantity of water gas tar in excess of the minimum quantity specified
in that contract and up to the total amount of output of that tar of

defendant's plant and also to take any quantity of coal gas tar in
excess of the minimum quantity specified in that contract and up to
50 per cent of defendant's entire output of coal gas tar, and that by
giving the defendant ninety days' notice, it would have the right at its
option to take the entire output of defendant's coal gas tar, except
such as it might need for its own use in and about its plant. That in
consideration of this modification of the contract of September 10,
1918, plaintiff agreed to purchase from the defendant of certain piece
of land lying adjacent to its plant at the price of P5 per square meter,
the proof of which is evidenced by Exhibit C. That pursuant to Exhibit
C, defendant sold and conveyed the land to the plaintiff which in turn
executed a mortgage thereon to the defendant for P17,140.20, to
secure the payment of the balance of the purchase price.
It is then alleged:
VIII. That about the last part of July, 1920 the defendant
herein, the Manila Gas Corporation willfully, and deliberately
breached its said contract, Exhibit C, with the plaintiff by
ceasing to deliver any coal and water gas tar to it thereunder
solely because of the increased price of its tar products and
its desire to secure better prices therefor than plaintiff was
obliged to pay to it, notwithstanding the frequent and urgent
demands made by the plaintiff upon it to comply with its
aforesaid contract by continuing to deliver the coal and water
gas tar to the plaintiff thereunder, but the said defendant
flatly refused to make any deliveries under said contract, and
finally on November 23, 1923, the plaintiff was forced to
commence action against the defendant herein in the Court
of First Instance of Manila, being case No. 25352, of that
court entitled 'Blossom & Co., plaintiff, vs. Manila Gas
Corporation, defendant,' to recover the damages which it
had up to that time suffered by reason of such flagrant
violation of said contract on the part of the defendant herein,
and to obtain the specific performance of the said contract
and after due trial of that action, judgment was entered
therein in favor of the plaintiff herein and against the said
defendant, the Manila Gas Corporation, for the sum of
P26,119.08, as the damages suffered by this plaintiff by the
defendant's breach of said contract from July, 1920, up to
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and including September, 1923, with legal interest thereon

from November 23, 1923, and for the costs but the court
refused to order the said defendant to resume the delivery of
the coal and water gas tar to the plaintiff under said contract,
but left the plaintiff with its remedy for damages against said
defendant for the subsequent breaches of said contract,
which said decision, as shown by the copy attached hereto
as Exhibit G, and made a part hereof, was affirmed by our
Supreme Court on March 3, 1926;
IX. That after the defendant had willfully and deliberately
violated its said contract as herein-before alleged, and the
plaintiff suffered great damage by reason thereof, the plaintiff
claimed the right to off- set its damages against the balance
due from it to said defendant on account of the purchase of
said land from the defendant, and immediately thereupon
and notwithstanding said defendant was justly indebted to
the plaintiff at that time as shown by the judgment of the
Court Exhibit G, in more that four times the amount due to it
from the plaintiff, the said defendant caused to be presented
against the plaintiff a foreclosure action, known as the Manila
Gas Corporation versus Blossom & Company, No. 24267, of
the Court of First Instance of Manila, and obtained judgment
therein ordering that Blossom & Company pay the last
installment and interest due on said land or else the land and
improvements placed thereon by the plaintiff would be sold
as provided by law in such cases to satisfy the same, and
the said defendant proceeded with the sale of said property
under said judgment and did everything in its power to sell
the same for the sole purpose of crushing and destroying the
plaintiff's business and thus rendering it impossible for the
plaintiff herein to continue with its said contract in the event
that said defendant might in the future consider it more
profitable to resume performance of the same, but
fortunately the plaintiff was able to redeem its property as
well as to comply with its contract and continued demanding
that the defendant performed its said contract and deliver to
it the coal and water gas tar required thereby.

That the defendant made no deliveries under its contract, Exhibit C,

from July, 1920 to March 26, 1926, or until after the Supreme Court
affirmed the judgment of the lower court for damages in the sum of
P26, 119.08. 1
It is then alleged that:
. . . On March 26, 1926 the said defendant offered to resume
delivery to the plaintiff from that date of the minimum monthly
quantities of tars stated in its contract ,and the plaintiff
believing that the said defendant was at least going to try to
act in good faith in the further performance of its said
contract, commenced to accept deliveries of said tars from it,
and at once ascertained that the said defendant was
deliberately charging it prices much higher than the contract
price, and while the plaintiff accepted deliveries of the
minimum quantities of tars stated in said contract up to and
including January, 1927, (although it had demanded
deliveries of larger quantities thereunder, as hereinafter
alleged) and paid the increased prices demanded by the
defendant, in the belief that it was its duty to minimize the
damages as much as possible which the defendant would be
required to pay to it by reason of its violation of said contract,
it has in all cases done so under protest and with the
express reservation of the right to demand from the said
defendant an adjustment of the prices charged in violation of
its contract, and the right to the payment of the losses which
it had and would suffer by reason of its refusal to make
additional deliveries under said contract, and it also has
continuously demanded that the said defendant furnish to it
statements supported by its invoices showing the cost prices
if its raw materials coal and crude oil upon which the
contract price of the tars in question is fixed, which is the
only way the plaintiff has to calculate the true price of said
tars, but said defendant has and still refuses to furnish such
information, and will continue to refuse to do so, unless
ordered to furnish such information to the plaintiff by the
court, and the plaintiff believes from the information which it
now has and so alleges that the said defendant has
overcharged it on the deliveries of said tars mentioned in the
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sum of at least P10,000, all in violation of the rights of the

plaintiff under its said contract with the defendant.

failure and refusal to perform the same, and the plaintiff has
so notified the said defendant.

That on January 31, 1926 and pursuant to Exhibit C. plaintiff notified

the defendant in writing that commencing with the month of August,
1926 it desired to take delivery of 50 per cent of defendant's coal tar
production for that month and that on November 1, 1926, it desired
to take the entire output of defendant's coal gas tar, but that the
defendant refused and still refuses to make such deliveries unless
plaintiff would take all of its water gas tar production with the desired
quantity of coal gas tar which refusal was a plain violation of the
contract. That on January 29, 1927, and in accord with Exhibit C,
plaintiff notified the defendant in writing that within ninety days after
the initial delivery to it of its total coal gas tar production or in
February, 1927, it would require 50 per cent of its total water gas tar
production and that in April 1927, it would require the total output of
the defendant of both coal and water gas tars, and that it refused to
make either of such deliveries.

That since September, 1923, by reason of the bad faith of the

defendant, the plaintiff has been damaged in the sum of P300,000,
for which it prays a corresponding judgment, and that the contract,
Exhibit C, be rescinded and declared void and without force and
effect.

It is then alleged:
XIV. That as shown by the foregoing allegations of this
complaint, it is apparent that notwithstanding the plaintiff in
this case has at all times faithfully performed all the terms
and conditions of said contract, Exhibit C, on its part of be
performed, and has at all times and is now ready, able and
willing to accept and pay for the deliveries of said coal and
water gas tars required by said contract and the notices
given pursuant thereto, the said defendant, the Manila Gas
Corporation, does not intend to comply with its said contract,
Exhibit C, and deliver to the plaintiff at the times and under
the terms and conditions stated therein the quantities of coal
and water gas tars required by said contract, and the several
notices given pursuant thereto, and that it is useless for the
plaintiff to insist further upon its performance of the said
contract, and for that reason he only feasible course for the
plaintiff to pursue is to ask the court for the rescission of said
contract and for the full damages which the plaintiff has
suffered from September, 1923, and will suffer for the
remainder of said contract by reason of the defendant's

After the filing and overruling of its demurrer, the defendant filed an
answer in the nature of a general and specific denial and on April 10,
1928, and upon stipulation of the parties, the court appointed W. W.
Larkin referee, "to take the evidence and, upon completion of the
trial, to report his findings of law and fact to the court."
July 18, 1928, the defendant filed an amended answer in which it
alleged as an affirmative defense, first, that the complaint does not
state facts sufficient to constitute cause of action the reason that a
prior adjudication has been had of all the issues involved in this
action, and, second, "that on or about the 16th day of June, 1925, in
an action brought in the Court of First Instance of the City on Manila,
Philippine Islands, before the Honorable Geo. R. Harvey, Judge, by
Blossom & Company, plaintiff, vs. Manila Gas Corporation,
defendant, being civil case No. 25353, of said court, for the same
cause of action as that set fourth in the complaint herein, said plaintiff
recovered judgment upon the merits thereof, against said defendant
decreeing a breach of the contract sued upon herein, and awarding
damages therefor in the sum of P26,119.08 with legal interest from
November 23, 1923, and costs of suit, which judgment was upon
appeal affirmed by the Supreme Court of the Philippine Islands, in
case G. R. No. 24777 of said court, on the 3d day of March, 1926
and reported in volume 48 Philippines Reports at page 848," and it
prays that plaintiff's complaint be dismissed with costs.
After the evidence was taken the referee made an exhaustive report
of sixty-pages in which he found that the plaintiff was entitled to
P56,901.53 damages, with legal interest from the date of the filing on
the complaint, to which both parties filed numerous exceptions
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In its decision the court says:

Incidental references have been made to the referee's
report. It was admirably prepared. Leaving aside the
question of damages and the facts upon which the referee
assessed them, the facts are not in dispute at least not in
serious dispute. They appear in the documentary evidence
and this decision is based upon documents introduced into
evidence by plaintiff. If I could have agreed with the referee
in respect to the question of law, I should have approved his
report in toto. If defendant is liable for the damages accruing
from November 23, 1923, the date the first complaint was
filed, to April 1st, 1926, the date of resumption of relations;
and if defendant, after such resumption of relations, again
violated the contract, the damages assessed by the referee,
are, to my way of thinking, as fair as could be estimated. He
went to tremendous pains in figuring out the details upon
which he based his decision. Unfortunately, I cannot agree
with his legal conclusions and the report is set aside except
wherein specifically approved.
It is unnecessary to resolve specifically the many exceptions
made by both partied to the referee's report. It would take
much time to do so. Much time has already been spent in
preparing this decision. Since both parties have informed me
that in case of adverse judgment ,and appeal would be
taken, I desire to conclude the case so that delay will be
avoided.
Let judgment be entered awarding damages to plaintiff in the
sum of P2,219.60, with costs.
From which plaintiff only appealed and assigns twenty-four different
errors, of which the following are material to this opinion:
I. The trial court erred in holding that this suit in so far as the
damages from November, 1923, to March 31, 1926, are
concerned , is res adjudicata.

II. The trial court erred in holding that the defendant

repudiated the contract in question as a whole, and that the
plaintiff when it brought its first suit to collect damages had
already elected and consented to the dissolution of the
contract, and its choice once made, being final, it was
estopped to claim that the contract was alive when that suit
was brought.
x xx

x xx

x xx

VII. The trial court erred in refusing to sustain plaintiff's third

exception to the legal interpretation placed on the contract in
this case by the referee with reference to quantity of tars and
his conclusion with respect to the terms thereof that:
"1. Plaintiff must take and defendant must deliver either the
minimum or maximum quantity of water gas tar and not any
quantity from the minimum to the maximum and/or
"2. Plaintiff must take either the minimum and any quantity
up to fifty per cent of entire output of coal gas tar.
"3. With ninety days' notice by plaintiff to defendant the
former must take and the latter must deliver total output of
both tars, except such as might be needed by defendant for
use in and about its plants and not any quantity from the
minimum up to total output of both tars." (See page 47,
Referee's report.)
And in holding that the option contained in said contract,
taking into consideration the purposes of both parties in
entering into the contract, was a claimed by defendant: all
the water gas tar and 50 per cent of the coal gas tar upon
immediate notice and all tars upon ninety day's notice.
VIII. The trial court erred in refusing to sustain plaintiff's
fourth exception to the finding and conclusion of the referee
that from the correspondence between the parties it was
apparent that plaintiff did not make a right use of its option,
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and that the letter of June 25, 1926, and the subsequent
demands, with exception of the letter of July 31, 1926, were
not made in pursuance to the terms of the contract, and that
defendant had no liability in refusing to comply therewith,
and in allowing plaintiff damages only for the failure of the
defendant to deliver quantities shown in Exhibits Ref. 21 and
22. (See pages 51, 52, Referee's report.)
IX. The trial court erred in finding and holding that the
demands of plaintiff for additional tars under its contract with
the defendant were extravagant and not made in good faith,
and that when it wrote to defendant that it desired maximum
quantities of coal gas tars and only minimum of water gas
tars, but with the reservation of going back to minimum
quantities of both at any time it chose, it announced its
intention f breaching the contract, and defendant was under
no obligation to deliver maximum quantities of either tars,
and since this was the efficient cause of the failure of
defendant to deliver or plaintiff to accept tars, the blame is
attribute to plaintiff, and it cannot recover for a rescission.
x xx

x xx

x xx

XXIII. The trial court erred in refusing to sustain plaintiff's

seventeenth exception to the finding and conclusion of the
referee that the plaintiff is entitled to recover from the
defendant only the following sums:
Water gas tar (Exhibit Ref. 21)

P38,134.60

Coal gas tar (Exhibit Ref. 22)

16,547.33

Overcharges on deliveries (Exhibit Ref. 23)

2,219.60

or a total of

56,901.53

Ref:http://www.lawphil.net/judjuris/juri1930/nov1930/gr_l32958_1930.html
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