Arrieta vs.
National Rice and Corn Corporation, 10 SCRA 79 , No. L-15645, January 31, 1964
G.R. No. L-15645 January 31, 1964
REGALA, J.:
FACTS: This is an appeal of the defendant-appellant NARIC (National Rice and Corn Administration) or Rice and Corn Administration (RCA by virtue of RA 3452) from the decision of the trial court dated February 20, 1958, awarding to the plaintiffs-appellees the amount of $286,000.00 as damages for breach of contract and dismissing the counterclaim and third party complaint of the defendant-appellant NARIC.
On May 19, 1952, the Arrietas participated in the public bidding called by the NARIC for the supply of 20,000 metric tons of Burmese rice for $203.00 per metric ton which was the lowest , wherein the contract was awarded.
On July 1, 1952, Paz P. Arrieta and NARIC entered into a Contract of Sale of Rice, under the terms of which the former obligated herself to deliver to the latter 20,000 metric tons of Burmess Rice at $203.00 per metric ton, CIF Manila. In turn, the defendant corporation committed itself to pay for the imported rice “by means of an irrevocable, confirmed and assignable letter of credit in U.S. currency in favor of the plaintiff-appellee and/or supplier in Burma, immediately.” It was only on July 30, 1952, NARIC general manager opened a letter of credit by forwarding to the Philippine National Bank its Application for Commercial Letter Credit accompanied by a transmittal letter stating that Mrs. Paz P. Arrieta, has a deadline on August 4, 1952 with her supplier, since she had by then made a tender to her supplier in Rangoon, Burma, “equivalent to 5% of the F.O.B. price of 20,000 tons at $180.70 and in compliance with the regulations in Rangoon this 5% will be confiscated if the required letter of credit is not received by them before August 4, 1952.”
On August 4, 1952, the Philippine National Bank informed the appellant corporation that its application, “for a letter of credit for $3,614,000.00 in favor of Thiri Setkya has been approved by the Board of Directors with the condition that marginal cash deposit be paid and that drafts are to be paid upon presentment. Furthermore, the Bank represented that it “will hold your application in abeyance pending compliance with the above stated requirement.” However, the appellant corporation not in any financial position to meet the condition as evident in a letter dated August 2, 1952, the NARIC bluntly confessed to the appellee its dilemma: “In this connection, please be advised that our application for opening of the letter of credit has been presented to the bank since July 30th but the latter requires that we first deposit 50% of the value of the letter amounting to aproximately $3,614,000.00 which we are not in a position to meet.”
Consequently, the credit instrument applied for was opened only on September 8, 1952 “in favor of Thiri Setkya, Rangoon, Burma, and/or assignee for $3,614,000.00,” (which is more than two months from the execution of the contract). As a result of the delay, the allocation of appellee’s supplier in Rangoon was cancelled and the 5% deposit, amounting to 524,000 kyats or approximately P200,000.00 was forfeited effected until August 20, 1952, which was 16 days after the deadline.
The appellee endeavoured, but failed, to restore the cancelled Burmese rice allocation. When the futility of reinstating the same became apparent, she offered to substitute Thailand rice instead to the defendant NARIC, communicating at the same time that the offer was a solution which should be beneficial to both parties however, was rejected by the appellant in a resolution dated November 15, 1952.
On the foregoing, the appellee sent a letter to the appellant, demanding compensation for the damages caused her in the sum of $286,000.00, U.S. currency, representing unrealized profit. The demand having been rejected she instituted this case now on appeal. At the instance of the NARIC, a counterclaim was filed and the Manila Underwriters Insurance Company was brought to the suit as a third party defendant to hold it liable on the performance bond it executed in favor of the plaintiff-appellee.
ISSUE: Is the appellant liable in damages for breach of contract due its failure to open immediately the letter of credit on July 1, 1952 .
It is clear upon the records that the sole and principal reason for the cancellation of the allocation contracted by the appellee herein in Rangoon, Burma, was the failure of the letter of credit to be opened with the contemplated period. This failure must, therefore, be taken as the immediate cause for the consequent damage which resulted. As it is then, the disposition of this case depends on a determination of who was responsible for such failure.
Appellant corporation disclaims responsibility for the delay in the opening of the letter of credit. On the contrary, it insists that the fault lies with the appellee. Appellant contends that the disputed negotiable instrument was not promptly secured because the appellee , failed to seasonably furnish data necessary and required for opening the same, namely, “(1) the amount of the letter of credit, (2) the person, company or corporation in whose favor it is to be opened, and (3) the place and bank where it may be negotiated.” that there would have been no delay in securing the instrument should the above data were provided immediately.
The lower court’s ruled that: The defense’s reason for the delay was not acceptable as Plaintiff stated that the required data were made known to defendant even before the contract was executed because these facts were necessarily to qualify the plaintiff as a bidder and for the execution of the contract thru Mr. GABRIEL BELMONTE, General Manager of the NARIC.
Secondly, it is clear that what singularly delayed the opening of the stipulated letter of credit and which, in turn, caused the cancellation of the allocation in Burma, was the inability of the appellant corporation to meet the condition of importation by the Bank as approved by the board of directors however with the condition to put up the 50% marginal cash deposit demanded by the bank, then the letter of credit would have been approved, opened and released as early as August 4, 1952.
The liability of the appellant, however was not in the processing of the Letter of credit alone, but their inability to satisfy the requirements of the bank. The appellant knew the bank requirements for opening letters of credit NARIC also knew it could not meet those requirement. Having entered in the contract, it should have taken steps immediately to arrange for the letter of credit for the large amount involved and inquired into the possibility of its issuance.
Every debtor who fails in performance of his obligations is bound to indemnify for the losses and damages caused. The phrase “any manner contravene the tenor” of the obligation includes any illicit act which impairs the strict and faithful fulfillment of the obligation or every kind or defective performance.
The NARIC would also have this Court hold that the subsequent offer to substitute Thailand rice for the originally contracted Burmese rice amounted to a waiver by the appellee of whatever rights she might have derived from the breach of the contract. We disagree. Waivers are not presumed, but must be clearly and convincingly shown, either by express stipulation or acts admitting no other reasonable explanation. In the case at bar, no such intent to waive has been established.
The court, after carefully examined and studied the oral and documentary evidence presented in this case and upon which the lower court based its award. Under the contract, the NARIC bound itself to buy 20,000 metric tons of Burmese rice at “$203.00 U.S. Dollars per metric ton, all net shipped weight, and all in U.S. currency, C.I.F. Manila …” On the other hand, documentary and other evidence establish with equal certainty that the plaintiff-appellee was able to secure the contracted commodity at the cost price of $180.70 per metric ton from her supplier in Burma. Considering freights, insurance and charges incident to its shipment here and the forfeiture of the 5% deposit, the award granted by the lower court is fair and equitable. For a clearer view of the equity of the damages awarded,
Lastly, the appellant filed a counterclaim asserting that it has suffered, likewise by way of unrealized profit damages in the total sum of $406,000.00 from the failure of the projected contract to materialize which was supported by a cost study made and submitted by the appellant itself illustrated how indeed had the importation pushed thru, NARIC would have realized in profit the amount asserted in the counterclaim. And yet, the said amount of P406,000.00 was realizable by appellant despite a number of expenses which the appellee under the contract, did not have to incur.
HELD: The decision of the lower court was affirmed, with the sole modification that the award should be converted into the Philippine peso at the rate of exchange prevailing at the time the obligation was incurred or on July 1, 1952 when the contract was executed. The appellee insurance company, in the light of this judgment, is relieved of any liability under this suit. No pronouncement as to costs.
nitzshella 