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Philippine Supreme Court Jurisprudence > Year 1925 > September 1925 Decisions > G.R. No. 23769 September
16, 1925 - SONG FO & CO. v. HAWAIIAN PHIL. CO.

047 Phil 821:

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FIRST DIVISION

[G.R. No. 23769. September 16, 1925. ]

SONG FO & COMPANY, Plaintiff-Appellee, v. HAWAIIAN PHILIPPINE CO., Defendant-Appellant.

Hilado & Hilado, Ross, Lawrence & Selph and Antonio T. Carrascoso, Jr., for Appellant.

Arroyo, Gurrea & Muller for Appellee.

SYLLABUS

1. CONTRACTS; SALES; INSTANT CASE. — The written contract examined and found to provide for the
delivery by the Hawaiian-Philippine Co. to Song Fo & Company of 300,000 gallons of molasses.

2. ID.; ID,.; ID.; PAYMENT. — The terms of payment fixed by the parties are controlling. The time of
payment stipulated for in the contract should be treated as of the essence of the contract.

3. ID.; ID.; ID.; ID.; RESCISSION. — The general rule is that rescission will not be permitted for a slight
or casual breach of the contract, but only for such breaches as are so substantial and fundamental as to
defeat the object of the parties in making the agreement.
DebtKollect Company, Inc.
4. ID.; ID.; ID.; ID.; ID. — A delay in payment for a small quantity of molasses for some twenty days is
not such a violation of an essential condition of the contract as warrants rescission for non-performance.

5. ID.; ID.; ID.; MEASURE OF DAMAGES FOR BREACH OF CONTRACT. — The facts examined and Song Fo
& Company allowed P3,000 on account of the greater expense to which it was put in being compelled to
secure molasses in the open market.

6. ID.; ID.; ID. — The facts examined and Song Fo & Company allowed nothing for lost profits on account
of the breach of the contract, because of failure of proof.

DECISION

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ChanRobles Intellectual Property
Division
September-1925 Jurisprudence
G.R. No. 23824 September 4, 1925 - PEOPLE OF
THE PHIL. ISLANDS v. THOMAS NIMROD MCKINNEY
047 Phil 792
G.R. No. 23757 September 5, 1925 - PEOPLE OF
THE PHIL. v. CATALINO RIOARIN
048 Phil 984
G.R. No. 23836 September 9, 1925 - H. R. ANDREAS
v. BANK OF THE PHIL. ISLANDS
047 Phil 795
G.R. No. 24552 September 10, 1925 - MARTIN
NISPEROS v. HONORABLE EMILIO ARANETA DIAZ
047 Phil 806
G.R. No. 24599 September 15, 1925 - PHIL.
MANUFACTURING CO. v. HON. CARLOS A. IMPERIAL
047 Phil 810
G.R. No. 23550 September 16, 1925 - P. J. SALAS
RODRIGUEZ v. MARIANO P. LEUTERIO
047 Phil 818
http://www.chanrobles.com/cralaw/1925septemberdecisions.php?id=76
MALCOLM, J. :
In the Court of First Instance of Iloilo, Song Fo & Company, plaintiff, presented a complaint with two
causes of action for breach of contract against the Hawaiian-Philippine Co., defendant, in which judgment
was asked for P70,369.50, with legal interest, and costs. In an amended answer and cross-complaint,
the defendant set up the special defense that since the plaintiff had defaulted in the payment for the
molasses delivered to it by the defendant under the contract between the parties, the latter was
compelled to cancel and rescind the said contract. The case was submitted for decision on a stipulation of
facts and the exhibits therein mentioned. The judgment of the trial court condemned the defendant to
pay for the plaintiff a total of P35,317.93, with legal interest from the date of the presentation of the
complaint, and with costs.
From the judgment of the Court of First Instance the defendant only has appealed. In this court it has
made the following assignment of errors: "I. The lower court erred in finding that the appellant had
agreed to sell to the appellee 400,000, and not only 300,000, gallons of molasses. II. The lower court
erred in finding that the appellant rescinded without sufficient cause the contract for the sale of molasses
executed by it and the appellee. III. The lower court erred in rendering judgment in favor of the appellee
and not in favor of the appellant in accordance with the prayer of its answer and cross-complaint. IV. The
lower court erred in denying appellant’s motion for a new trial." The specified errors raise three questions
which we will consider in the order suggested by the Appellant.
1. Did the defendant agree to sell to the plaintiff 400,000 gallons of molasses or 300,000 gallons of
molasses? The trial court found the former amount to be correct. The appellant contends that the smaller
amount was the basis of the agreement.
The contract of the parties is in writing. It is found principally in the documents, Exhibits F and G. The
first mentioned exhibit is a letter addressed by the administrator of the Hawaiian-Philippine Co. to Song
Fo & Company on December 13, 1922. It reads: jgc:chanrobles.com.ph
"SILAY, OCC. NEGROS, P. I.
"December 13, 1922.
"MESSRS. SONG FO AND CO.
"Iloilo, Iloilo.
"DEAR SIRS: Confirming our conversation we had today with your Mr. Song Fo, who visited this Central,
we wish to state as follows: jgc:chanrobles.com.ph
"He agreed to the delivery of 300,000 gallons of molasses at the same price as last year under the same
condition, and the same to start after the completion of our grinding season. He requested if possible to
let you have molasses during January, February and March or in other words, while we are grinding, and
we agreed with him that we would to the best of our ability, altho we are somewhat handicapped. But we
believe we can let you have 25,000 gallons during each of the milling months, altho it interfere with the
shipping of our own and planters sugars to Iloilo. Mr. Song Fo also asked if we could supply him with
another 100,000 gallons of molasses, and we stated we believe that this is possible and will do our best
to let you have these extra 100,000 gallons during the next year the same to be taken by you before
November 1st, 1923, along with the 300,000, making 400,000 gallons in all.
"Regarding the payment for our molasses, Mr. Song Fo gave us to understand that you would pay us at
the end of each month for molasses delivered to you.
"Hoping that this is satisfactorily and awaiting your answer regarding this matter, we remain.
"Yours very truly,
"HAWAIIAN-PHILIPPINE COMPANY
"By: R.C. PITCAIRN
"Administrator." cralaw virtua1aw library
Exhibit G is the answer of the manager of Song Fo & Company to the Hawaiian-Philippine Co. on
December 16, 1922. This letter reads: jgc:chanrobles.com.ph
"December 16th, 1922.
"MESSRS. HAWAIIAN-PHILIPPINE CO.,
"Silay, Neg. Occ., P. I.
"DEAR SIRS: We are in receipt of your favors dated the 9th and the 13th inst. and understood all their
contents.
"In connection to yours of the 13th inst, we regret to hear that you mentioned Mr. Song Fo the one who
visited your Central, but it was not for he was Mr. Song Heng, the representative and the manager of
Messrs. Song Fo & Co.
1/11/20, 12:16 AM
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G.R. No. 23769 September 16, 1925 - SONG FO &
CO. v. HAWAIIAN PHIL. CO.
047 Phil 821
G.R. No. 24603 September 16, 1925 - CARLOS
ORENCIA v. HON. EMILIO ARANETA DIAZ
047 Phil 830
G.R. No. 24627 September 16, 1925 - CARLOS
VILLANUEVA v. HON. EMILIO ARANETA DIAZ
047 Phil 836
G.R. No. 24602 September 17, 1925 - MARCOS
VERCELES v. HON. EMILIO ARANETA DIAZ
047 Phil 843
G.R. No. 24489 September 21, 1925 - ARSENIO
VIOLA v. COURT OF FIRST INSTANCE OF CAMARINES
SUR, ET AL
047 Phil 849
G.R. No. 24502 September 21, 1925 - FRANCISCO
TABADA v. HON. FRANCISCO ZANDUETA
047 Phil 859
G.R. No. 23601 September 22, 1925 - YNCHAUSTI
& CO. v. BEN F. WRIGHT
047 Phil 866
G.R. No. 24168 September 22, 1925 - FLORENCIO
MANALO v. HON. ISIDRO PAREDES, ET AL
047 Phil 938
G.R. No. 23252 September 25, 1925 - BANK OF THE
PHILIPPINE ISLANDS v. LAGUNA COCOANUT OIL
COMPANY, ET AL.
048 Phil 5
G.R. No. 23839 September 24, 1925 - RAFAEL
VERCHES v. ELENA RIOS
048 Phil 16
G.R. No. 24046 September 25, 1925 - JOSE
BACTOSO v. PROVINCIAL GOVERNOR OF CEBU
048 Phil25 cralaw:red
G.R. No. 23400 September 26, 1925 - LA
COMPAÑIA GENERAL DE TABACOS DE FILIPINAS v.
COLLECTOR OF INTERNAL REVENUE
048 Phil 35
G.R. No. 23703 September 28, 1925 - HILARIO
GERCIO v. SUN LIFE ASSURANCE CO. OF CANADA, ET
AL.
048 Phil 53
G.R. No. 23717 September 28, 1925 - DOMINGO
ALMIROL, ET AL. v. RAFAEL MONSERRAT
048 Phil 67
G.R. No. 23431 September 29, 1925 - PILAR TELL v.
CARMEN TELL, ET AL.
048 Phil 70
G.R. Nos. 23460 & 23461 September 29, 1925 -
PEOPLE OF THE PHIL. v. EDUARD ABAUAG, ET AL.
048 Phil 79
G.R. No. 23586 September 30, 1925 - MARTA
QUEROL, ET AL. v. FRANCISCO QUEROL
http://www.chanrobles.com/cralaw/1925septemberdecisions.php?id=76
"With reference to the contents of your letter dated the 13th inst. we confirm all the arrangements you
have stated and in order to make the contract clear, we hereby quote below our old contract as amended,
as per our new arrangements.
"(a) Price, at 2 cents per gallon delivered at the central.
"(b) All handling charges and expenses at the central and at the dock at Mambaguid for our account.
"(c) For services of one locomotive and flat cars necessary for our six tanks at the rate of P48 for the
round trip dock to central and central to dock. This service to be restricted to one trip for the six tanks.
"Yours very truly,
"SONG FO & COMPANY
"By__________________
"Manager." cralaw virtua1aw library
We agree with appellant that the above quoted correspondence is susceptible of but one interpretation.
The Hawaiian-Philippine Co. agreed to deliver to Song Fo & Company 300,000 gallons of molasses. The
Hawaiian-Philippine Co. also believed it possible to accommodate Song Fo & Company by supplying the
latter company with an extra 100,000 gallons. But the language used with reference to the additional
100,000 gallons was not a definite promise. Still less did it constitute an obligation.
If Exhibit T relied upon by the trial court shows anything, it is simply that the defendant did not consider
itself obliged to deliver to the plaintiff molasses in any amount. On the other hand, Exhibit A, a letter
written by the manager of Song Fo & Company on October 17, 1922, expressly mentions an
understanding between the parties of a contract for 300,000 gallons of molasses.
We sustain appellant’s point of view on the first question and rule that the contract between the parties
provided for the delivery by the Hawaiian-Philippine Co. to Song Fo & Company of 300,000 gallons of
molasses.
2. Had the Hawaiian-Philippine Co. the right to rescind the contract of sale made with Song Fo &
Company? The trial judge answers No, the appellant Yes.
Turning to Exhibit F, we note this sentence: "Regarding the payment for our molasses, Mr. Song Fo (Mr.
Song Heng) gave us to understand that you would pay us at the end of each month for molasses
delivered to you." In Exhibit G, we find Song Fo & Company stating that they understand the contents of
Exhibit F, and that they "confirm all the arrangements you have stated, and in order to make the contract
clear, we hereby quote below our old contract as amended, as per our new arrangements. (a) Price, at 2
cents per gallon delivered at the central." In connection with the portion of the contract having reference
to the payment for the molasses, the parties have agreed on a table showing the date of delivery of the
molasses, the account and date thereof, the date of receipt of account by plaintiff, and date of payment.
The table mentioned is as follows: chanrob1es virtual 1aw library
Date of receipt
Date of delivery Account and date of account by Date of payment
thereof plaintiff
1922 1923 1923
Dec. 18 P206.16 Dec. 26/22 Jan. 5 Feb. 20
Dec. 29 206.16 Jan. 3/23 do Do.
1923
Jan. 5 206.16 Jan. 9/23 Mar. 7 or 8 Mar. 31
Feb. 12 206.16 Mar. 12/23 do Do.
Feb. 27 206.16 do do Do.
Mar. 5 206.16 do do Do.
Mar. 16 206.16 Mar. 20/23 Apr. 2/23 Apr. 19
Mar. 24 206.16 Mar. 31/23 do Do.
Mar. 29 206.16 do do Do.
Some doubt has risen as to when Song Fo & Company was expected to make payments for the molasses
delivered. Exhibit F speaks of payments "at the end of each month." Exhibit G is silent on the point.
Exhibit M, a letter of March 28, 1923, from Warner, Barnes & Co., Ltd., the agent of the Hawaiian-
Philippine Co. to Song Fo & Company, mentions "payment on presentation of bills for each delivery."
Exhibit O, another letter from Warner, Barnes & Co., Ltd. to Song Fo & Company dated April 2, 1923, is of
a similar tenor. Exhibit P, a communication sent direct by the Hawaiian-Philippine Co. to Song Fo &
Company on April 2, 1923, by which the Hawaiian-Philippine Co. gave notice of the termination of the
1/11/20, 12:16 AM
Page 3 of 5
 048 Phil 90 contract, gave as the reason for the rescission, the breach of Song Fo & Company of this condition: "You
will recall that under the arrangements made for taking our molasses, you were to meet our accounts
upon presentation and at each delivery." Not far removed from this statement, is the allegation of
plaintiff in its complaint that "plaintiff agreed to pay defendant, at the end of each month upon
presentation of accounts." cralaw virtua1aw library

Resolving such ambiguity as exists and having in mind ordinary business practice, a reasonable deduction
is that Song Fo & Company was to pay the Hawaiian-Philippine Co. upon presentation of accounts at the
end of each month. Under this hypothesis, Song Fo & Company should have paid for the molasses
delivered in December, 1922, and for which accounts were received by it on January 5, 1923, not later
than January 31 of that year. Instead, payment was not made until February 20, 1923. All the rest of the
molasses was paid for either on time or ahead of time.

The terms of payment fixed by the parties are controlling. The time of payment stipulated for in the
contract should be treated as of the essence of the contract. Theoretically, agreeable to certain conditions
which could easily be imagined, the Hawaiian-Philippine Co. would have had the right to rescind the
contract because of the breach of Song Fo & Company. But actually, there is her present no outstanding
fact which would legally sanction the rescission of the contract by the Hawaiian-Philippine Co.

The general rule is that rescission will not be permitted for a slight or casual breach of the contract, but
only for such breaches as are so substantial and fundamental as to defeat the object of the parties in
making the agreement. A delay in payment for a small quantity of molasses for some twenty days is not
such a violation of an essential condition of the contract as warrants rescission for non-performance. Not
only this, but the Hawaiian-Philippine Co. waived this condition when it arose by accepting payment of
the overdue accounts and continuing with the contract. Thereafter, Song Fo & Company was not in
default in payment so that the Hawaiian-Philippine Co. had in reality no excuse for writing its letter of
April 2, 1923, cancelling the contract. (Warner, Barnes & Co. v. Inza [1922], 43 Phil., 505.)

We rule that the appellant had no legal right to rescind the contract of sale because of the failure of Song
Fo & Company to pay for the molasses within the time agreed upon by the parties. We sustain the finding
of the trial judge in this respect.

3. On the basis first, of a contract for 300,000 gallons of molasses, and second, of a contract imprudently
breached by the Hawaiian-Philippine Co., what is the measure of damages? We again turn to the facts as
agreed upon by the parties.

The first cause of action of the plaintiff is based on the greater expense to which it was put in being
compelled to secure molasses from other sources. Three hundred thousand gallons of molasses was the
total of the agreement, as we have seen. As conceded by the plaintiff 55,006 gallons of molasses were
delivered by the defendant to the plaintiff before the breach. This leaves 244,994 gallons of molasses
undelivered which the plaintiff had to purchase in the open market. As expressly conceded by the plaintiff
at page 25 of its brief 100,000 gallons of molasses were secured from the Central North Negros Sugar
Co., Inc., at two centavos a gallon. As this is the same price specified in the contract between the plaintiff
and the defendant, the plaintiff accordingly suffered no material loss in having to make this purchase. So
244,994 gallons minus the 100,000 gallons just mentioned leaves as a result 144,994 gallons. As to this
amount, the plaintiff admits that it could have secured it and more than the Central Victorias Milling
Company one and one-half centavos per gallon. In other words, the plaintiff had to pay the Central
Victorias Milling Company one and one-half centavos a gallon more for the molasses than it would have
had to pay the Hawaiian-Philippine Co. Translated into pesos and centavos, this meant a loss to the
plaintiff of approximately P2,174.91. As the conditions existing at the central of the Hawaiian-Philippine
Co. may have been different than those found at the Central North Negros Sugar Co., Inc., and the
Central Victorias Milling Company, and as not alone through the delay but through expenses of
transportation and incidental expenses, the plaintiff may have been put to greater cost in making the
purchase of the molasses in the open market, we would concede under the first cause of action in round
figures P3,000.

The second cause of action relates to lost profits on account of the breach of the contract. The only
evidence in the record on this question is the stipulation of counsel to the effect that had Mr. Song Heng,
the manager of Song Fo & Company, been called as a witness, he would have testified that the plaintiff
would have realized a profit of P14,948.43, if the contract of December 13, 1922, had been fulfilled by
the defendant. Indisputably, this statement falls far short of presenting proof on which to make a finding
as to damages.

In the first place, the testimony which Mr. Song Heng would have given undoubtedly would follow the
same line of thought as found in the decision of the trial court, which we have found to be unsustainable.
In the second place, had Mr. Song Heng taken the witness-stand and made the statement attributed to
him, it would have been insufficient proof of the allegations of the complaint, and the fact that it is a part
of the stipulation by counsel does not change this result. And lastly, the testimony of the witness Song
Heng, if we may dignify it as such, is a mere conclusion, not a proven fact. As to what items make up the
more than P14,000 of alleged lost profits, whether loss of sales or loss of customers, or what not, we
have no means of knowing.

We rule that the plaintiff is entitled to recover damages from the defendant for breach of contract on the
first cause of action in the amount of P3,000 and on the second cause of action in no amount. Appellant’s
assignments of error are accordingly found to be well in taken in part and not well taken in part.

Agreeable to the foregoing, the judgment appealed from shall be modified and the plaintiff shall have and
recover from the defendant the sum of P3,000, with legal interest from October 2, 1923, until payment.
Without special finding as to costs in either instance, it is ordered.

Avanceña, C.J., Johnson, Street, Villamor, Ostrand, Johns, Romualdez, and Villa-Real, JJ., concur.

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