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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-11904 October 9, 1917

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellee, vs. DERHAM BROTHERS and THE INTERNATIONAL BANKING CORPORATION, defendants-appellants. Lawrence and Ross for appellants. Attorney-General Avancea for appellee.

STREET, J.: In the year 1910, Derham Brothers, of Manila, entered into negotiations with the Director of Lands for the purpose of securing from the Government of the Philippine Islands a lease covering block 49 of Reclamation No. 1, Manila Harbor, commonly known as the Luneta Fill, an area reclaimed from the sea by the process of dredring the harbor and filling in the reclaimed territory. A notice was accordingly published by the Executive Secretary, setting forth some of the conditions on which the land would be leased. Thereafter Derham Brothers addressed to the Director of Lands, under date of May 17, 1910, a communication stating the terms under which said firm would take the property. The only specification which is material to this controversy is contained in paragraph 4 of said communication, which is as follows: 4th. The rental and taxes to commence upon the grading to the official line and grade and metalling thereof of the roadway of the streets of the three blocks on the south, east, and the west, contiguous to said property, and the grading to the official line and grade and metalling the roadway thereof of the street on the north of said property to its entire length. This provision is made as it is absolutely necessary that we have a direct outlet for our proposed building. Upon July 26, 1910, the Director of Lands replying to this communication of Derham Brothers, said: I have the honor to enclose herewith form of lease which you will be expected to execute upon the completion of the four streets surrounding said block, together with an outlet to street already constructed or to be constructed. It is understood, of course, that you will fulfill all the conditions as set forth in said offer of May 17th.

Derham Brothers thereupon took possession of the premises and upon August 10, 1910, they executed an assignment to the International Banking Corporation whereby they transferred to the latter their right to receive from the Government of the Philippine Islands the lease to the premises in question when the same should be formally executed. This assignment was accepted by the bank, and the assignment was approved by the Director of Lands. The assignment to the bank and the memorandum of the Director of Lands approving said assignment contain nothing which has the legal effect of varying the obligation of the parties as it had existed up to that time, and it is clear that the International Banking Corporation, with respect to its obligation to accept the lease, is merely in the same position that Derham Brothers would have been in if the assignment has not been made. The present action was instituted on behalf of the Government with the two-fold purpose of recovering a judgment against Derham Brothers for the use and occupation of the premises since July 31, 1912, and to compel the defendant bank to execute the lease of the premises in question. From a judgment of the Court of First Instance in favor of the plaintiff the defendants have appealed. The question presented for this court is whether the conditions upon which the liability of the lessee for rent depended had been complied with upon the date mentioned. It appears from the proof in this case that the block in question fronts on Muelle San Francisco, a street which runs along the waterfront of Manila Harbor in a direction from north to south. The property is bounded on the north by Aduana Street, on the east by Boston Street, on the south by Fourteenth Street. Aduana Street has been prepared and opened for use from Muelle San Francisco to Boston Street, that is to say, along the length of the north side of the block in question. In the plans submitted as proof in this case it appears that Aduana Street was originally protected to run from Muelle San Francisco eastward to the Maleon, or about three blocks eastward from block 49; but, as stated, this street has been opened only to Boston Street. Boston Street has been prepared and opened for use from Twelfth to Sixteenth Streets, running across four blocks. Fourteenth Street, on the south side of the block in question, has been prepared and opened for use from Muelle San Francisco to Boston Street. From what has been stated it appears that the block in question is surrounded on all four sides by streets which have been prepared and opened for use. The building erected by Derham Brothers on block 49 has its frontage upon Muelle San Francisco, and the south side of said building abuts upon Fourteenth Street. There is a considerable open space between the rear side building and Boston Street, since the building does not cover the entire block. For the same reason an open space of less extent is found between the north side of the building and Aduana Street. As regards the condition of these streets, it appears from the blue-print plan exhibited in this case (Exhibit A) and from other proof that Muelle San Francisco has been properly ballasted with crushed rock over a width of eighteen and thirty-hundredths meters. This street is designed to be 40 meters wide when completely surfaced and ready for use in its entire breadth. The ballasted portion, the part now in use, runs along immediately in front of block 49. Aduana Street is all ballasted with crushed rock throughout the part opened for use that is, from Muelle San Francisco to Boston Street. Boston Street, with a projected width of 16 meters, has a roadway dressed with crushed rock, of 8 meters. Fourteenth Street, with a projected width of 10.68

meters, has a roadway, dressed with crushed rock, of 10 meters in the part which runs alongside of the defendant's building, and of 8 meters from the end of the building to Boston Street. None of these streets are supplied with sidewalks or curbing. Referring to the specification contained in paragraph 4 of the original offer of Derham Brothers it appears that the two principal matters there specified are (1) that the streets shall be granted to the official line and grade and (2) that the roadway shall be metalled (i. e., dressed with crushed stone.) With reference to the grading, it may be stated that a plan in blue print (Exhibit B) is exhibited with the testimony of F. D. Jones, witness for the Government in this cause, from which it appears that no criticism can be made with respect to the grade of any part of the streets surrounding the property in question. The term grade has reference to the level, or regular inclination, of a roadbed; and grading refers to the altering of the level of ground in order to make it conform to a prescribed grade. The exhibit just mentioned shows the cross-section of each of the four streets surrounding the block in question; and these cross-sections show clearly that the streets are properly graded not only in respect to the part covered by crushed stone but also with respect to the portions which have not been thus finished. Paragraph 4, referred to above, contains no specification as to the width of the roadway, which should be metalled, or dressed with crushed rock; but it is obvious from the use of the expression "roadway of the street" that it was not contemplated that the roadway should necessarily cover the width of the entire street. The "roadway" was evidently thought of as something different from the whole street, and therefore as something less extensive. The width of the roadway was, in our opinion, something that was clearly left to be determined by the conditions of traffic in the neighborhood of this property. In the New Standard Dictionary we find "roadway" defined as "a road, especially that part of the road over which vehicles pass." Practically the same definition is given in Webster's International. As a part is less than the whole, it follows from this definition that the roadway of a street is less extensive that the entire street. In Joplin vs. Freeman (125 Mo. App., 717), it was held that the use of the term "roadway of any street" on a certain statute indicated the intention of the legislature to discriminate between that part of the street used as a highway for general travel and that part used exclusively as a sidewalk for pedestrians. To understand the meaning of the term "roadway" as used in the contract now under consideration, it is necessary to bear in mind that the specifications do not call for the construction of sidewalk and curbs, and in conformity with a custom extensively prevailing in the Orient none have been constructed in any of these streets. Now it must be conceded, though the fact is often forgotten in these days of rushing automobiles, that pedestrians, as well as vehicles, have the right to travel upon roads and streets, whether there be any sidewalks or not. By customary rule of the road, pedestrians are expected to keep to one side. The distinction between the part of the street given up to vehicular traffic and the part intended for the use of pedestrians is therefore perfectly intelligence; and it seems clear that the term "roadway" as used in the specifications applies to the portion given up to vehicular traffic, leaving a space available for pedestrians if it should be required for their use. The contention of the defendants that the roadway of the street covers the entire breadth of the street is untenable because it takes no account of that part of the street which is, or might be,

assigned for pedestrian use. It is true that the Government is not bound by this contract to built paved sidewalks protected by curbing, but if this should ever be done such sidewalks would fall within the official lines of the streets as already established, unless a new strip of land should be condemned or appropriated for the purpose; and it cannot be insisted that the Government is in any event bound thus to extend the official lines. As fully appears from the authorities the term "street," in its widest and most correct sense, includes both roadway and sidewalk; and if the sidewalk is omitted as a feature of construction there still remain the space that is, or might be, devoted to pedestrian use. In Boston Street, which contains the largest proportion of unmetalled surface we have a total surveyed width of 16 meters. In the center is a metalled roadway of 8 meters, and on either side is a strip 4 meters wide which would, if needed, be available for pedestrian travel. Can it be seriously insisted that this street is incomplete, within the meaning of the contact under consideration, because of the failure of the Government to cover the entire width of these streets with crushed rock? We think not. It may be admitted that where paved sidewalks are constructed this has the effect of defining the boundaries between the roadway and the part of the street devoted to pedestrian use. The word street, as used in America, includes the roadway, the gutters, and the sidewalks. (Knapp, Stout & Co. vs. Transfer Ry. Co., 126 Mo., 35; Gallaher vs. City of Jefferson, 125 Iowa, 324, 330; Taber vs. Grafmiller, 109 Ind., 206, 209; Allegheny County Light Co. vs. Booth, 216 Pa., 564; Health vs. Manson, 147 Cal., 694, 699. See also 27 Am. and Eng. Encyc. Law, 2d ed., p. 103.) The side walk is simply a part of the street which the town authorities have set apart for the use of pedestrians. (Hester, vs. Traction Co., 138 N. C., 288.) Again, "a street includes the whole width of public way; it is customary in a city to set apart a portion of it for foot passengers; but there is no rule of law absolutely requiring this, and in many parts of an incorporated town it might be needless." (Brevoort vs. Detroit, 24 Mich., 322, 325.) The authorities just cited show conclusively that the word street, in its correct and ordinary acceptation, includes not only the roadway, which is used for carriages and vehicular traffic generally, but also the portion used for pedestrian travel; and the distinction holds good whether the part designed for pedestrians consists of the paved way which we call a sidewalk, or not. If this idea is kept in mind it is impossible to think of "street" and "roadway of the street" as being coextensive terms, since, properly speaking, the roadway comprises only the central portion of the street. The conclusion is that in metalling the street around block 49, to the extent shown in this case, the Government complied with its obligation to metal the roadway of said streets, and that consequently these streets are in a state of completion as contemplated in the communication of the Director of Lands, of July 26, 1910. It is, however, urged for the defendants that F. D. Jones, the engineer who had been engaged in making these streets, admitted in his testimony that they were incomplete or unfinished; but he was speaking with reference to the official plans and specification for the improvement of this territory, and he was not giving an opinion on the

question whether the street were complete in the sense prescribed in the contract which is in controversy. No question can be made as to the quality of the finish on that portion of these streets which has been surfaced with stone; and the defendants offered no proof that the roadway so finished was in any respect inadequate for the traffic required of it. Of course the burden of proof is on the Government to show compliance with the conditions which were agreed upon as conditions precedent to the liability of the lessee for rent; but inasmuch as the width of the roadway was not specified in the contract it may be safely inferred, in the absence of proof to the contrary, that the roadways shown to be in existence on all these streets are ample for the traffic required of them. We are therefore of the opinion that there is no merit in the contention of the defendants so far as regards either the grade, the width of the roadway, or the quality of the finish of these streets. The next question to be considered has reference to the failure to extend Aduana Street on eastward to the Malecon. In this connection it should be noted that the language of paragraph 4 is to the effect that the street on the north of said property shall have a metalled roadway "to its entire length." This language is nor clear because the pronoun "its" might be taken to refer to the word "property" with as much propriety as to the more remote antecedent "street." If this ambiguity be considered to exist, the proper construction to be given to this expression is determined by article 1288 of the Civil Code, wherein it is declared that the interpretation of obscure clauses in a contract shall not favor the party who caused the obscurity. If, on the other hand, the ambiguity does not exist, we think that this specification is limited by the words contained in the communication of the Director of Lands of July 26, 1910, wherein this official uses the expression "the completion of the four streets surrounding said blocks, together with an outlet to street already constructed or to be constructed." By these words the Director of Lands either expressed his interpretation of the specifications referred to or he qualified it by making a new offer in which the obligation as to the making of streets was limited to streets surrounding block 49. In either view Derham Brothers were bound. It is a familiar principle that a contracting party is bound by that interpretation of an ambiguous provision which he knows the other party has adopted; and on the other hand, if it was a counterproposal, Derham Brothers accepted it by taking possession of the property in pursuance of said proposal. In this connection it should be noted that the communication of the Director of Lands dated July 26, 1910, addressed to Derham Brothers, does not purport to be an acceptance by the offer contained in their original communication of May 17, 1910; and the phrase "we accept," or other equivalent expression indicating acquiescence in the terms of that offer, is not issued. On the contrary this communication from the Director of Lands purports to be, and is, a notification to Derham Brothers that they would be expected to execute the lease when the stated conditions should be fulfilled. We think that the meeting of minds which perfected the contract in this case occurred when Derham Brothers accepted the counterproposal of the Director of Lands and went into possession of the property pursuant thereto. The evidence of the terms of the contract are therefore, to be found, not exclusively in the offer of Derham Brothers, but in that offer as qualified by the conditions expressed in the communication of the Director of Lands. We are therefore of the opinion that the Government was not bound to open Aduana Street any farther than to Boston Street.

The spirit of all the specifications as to the streets around this property is contained in the statement of Derham Brothers that "it is absolutely necessary to have a direct outlet for our proposed building." They now have all the possible outlets from their building directly to the street which they could have; and it would not be proper to impose upon the Government the obligation to open another street leading directly from their building to another part of the city; for, as shown above; this term is no part of the contract. Furthermore, it appears from the plans exhibited in this case that the defendants have outlets through two thoroughfares (Twelfth and Sixteenth Streets) leading to the business part of the city. These streets are reached from their building either through Muelle San Francisco or Boston Street. It is thus manifest that the proposal of the Director of Lands to supply them with one outlet to a street already constructed or to be constructed has been more than fulfilled. From the foregoing opinion it follows that, in our opinion, there is no error in the judgment appealed from, and the same is accordingly affirmed, with costs of this instance against the appellants. So ordered. Arellano, C.J., Carson and Araullo, JJ., concur.

Separate Opinions

JOHNSON, J., dissenting: When the plaintiff agreed that the "rents and taxes" should not be due and payable until the streets were graded, to the official line, and metalled, it certainly did not mean that it could collect said rents and taxes upon a partial completion of said conditions. Both by the proof and the decisions it is shown that the streets were only partially completed -- partially graded and partially metalled. When we say that a street shall be graded and metalled we certainly do not mean that a small strip in the center thereof shall be graded and metalled only. The judgment appealed from should be revoked. MALCOLM, J., dissenting: I concur in the dissent of Mr. Justice Johnson. RESOLUTION November 2, 1917.

STREET, J.: The appellant in this cause had filed an application for a rehearing which seems to require a few words more; and we begin by quoting the opening words of the application itself. We may accept the court's conclusion that the Government was not bound to open Aduana Street any further than to Boston Street. We may also accept the conclusion that the conditions of the contract do not call for paved sidewalks and curbing. We also conclude that the "roadway" is less than the "street" and that the conditions would be satisfied by metalling the roadway not the entire width of the street. Notwithstanding the rather extensive admission contained in the words just quoted, the appellant still contends that the roadway of the streets in question has not been metalled in sufficient breadth to justify a recovery by the Government in this case; and he contends in effect that the Government is bound to metal all the space lying between the parallel lines laid down as the boundaries of the central portion of the streets as shown in the plan marked Exhibit B. This contention can be understood only by reference to the two exhibits introduced in evidence, as will now be explained. When the parties entered into the contract which is the subject of this action they had in mind the plan of reclamation No. 1, of Manila Harbor, which was then on file in the Bureau of Lands; and when Derham Brothers, in paragraph 4 of their communication of May 17, 1910, speak of the official line of the streets, they undoubtedly refer to the line, or lines, indicated upon said official plan. Now there is in evidence in this case a blue print, marked Exhibit A, purporting to be a plan of reclamation No. 1, Manila Harbor, prepared under the authority of the Director of Lands. It contains a complete survey of the entire district and shows every street, block, and monument in the reclaimed area, with such minor details as a competent surveyor would be likely to insert in a general plan of such a district. This blue print is evidently a copy of an original, and it purports to be official. We have therefore assumed, as the parties litigant have assumed, that this is a copy of the official plan which was in existence when the contract was made. Careful inspection, however, shows that this particular copy was drawn from the original sometime after the contract was made, for it contains "control points established during November, 1910." The changes incorporated in this copy could not, we suppose, affect matters to which the contract relates, or it would have been rejected. We are, therefore, confident that the official plan with reference to which the contract was made was substantially the same as this Exhibit A.1awphil.net There is also in evidence another plan in blue print marked Exhibit B. This plan appears to have been prepared in the office of the city engineer of Manila, and it was approved by the Municipal Board of said city on February 13, 1912. It contains designs showing the cross-section of a few streets, among others the four which surround block 49. As this plan was made after the streets were put substantially in their final condition, it follows that it could not have been the basis of the contract which had been made two years earlier. The only use to which it could be legitimately put was to assist in conveying to the court a more accurate conception of the work actually accomplished. It was, therefore, introduced in evidence for the purpose of showing, in connection with the testimony of F. D. Jones, the condition of said streets on July 31, 1912; and

in the original opinion of this court we referred to this plan as showing that the streets in question were then graded to the official line and grade. The difference between the two plans, Exhibits A and B, so far as concerns the present controversy, is that in the earlier plan (showing the contemplated improvements of the whole district) the lines of the streets are indicated simply by the parallel lines which enclose the blocks, of square, of the city, while in the later plan the cross-section of Boston Street indicates lines for sidewalks. These strips are 4 meters wide on each side of that street. The similar crosssections of Aduana Street and Fourteenth Street show very narrow strips of ground on either side which might conceivably be designed for the purpose of creating sidewalks, though hardly attaining to this dignity. They apparently here represent that narrow strip of ground over which the eaves of adjacent buildings are allowed to project. The lines indicating these sidewalk embellishments are entirely wanting in the earlier plan, Exhibit A. If the parties to this controversy had made their contract with reference to the plan contained in Exhibit B, showing that the lines of the sidewalks had already been officially laid down, we would have held, in conformity with the reasoning of the original opinion, that the Government was bound to metal all the space contained between the lines of those sidewalks have had the effect of defining the boundaries of the roadway of the streets. But it is evident that a plan, made in the office of the city engineer, and approved by the authorities of the City of Manila nearly two years after the contract in question was executed, can not have the effect of binding the Government of the Philippine Islands, the plaintiff in this lawsuit. It follows that the official lines of the streets are to be ascertained from Exhibit A and not from Exhibit B; and as lines for sidewalks are not laid down in the earlier plan, it results that the width of the roadway of the streets is not defined by the contract nor by the plan with reference to which the contract was made. This being true, the Government was not bound to metal a roadway of any particular width and was only bound, as we have already held, to metal a roadway broad enough to be adequate for traffic requirements. That this condition has been fulfilled is perfectly clear, and indeed is admitted, as will be seen from the following statement contained in the application now before us. Says counsel for the appellant: "The court may be puzzled by the insistence of defendants upon a completion of the streets beyond the needs of defendant's property." It is entirely obvious that the appellant is in error in attempting to have his rights defined by reference to a plan which was not in existence when the contract was made. But the appellant directs attention to the following words in paragraph 4 of the specifications, "The rentals and taxes to commence upon the grading to the official line and grade and metalling thereof of the roadway of the streets." His contention is that the provisions quoted should be interpreted to require the metalling of the roadway to the official line of the streets. We hold that the words "to the official line" qualify only the word "grading;" and any other interpretation would clearly violate the plain meaning of the language used. This contention of the appellant is really the gist of the whole case; and our decision is principally founded on the rejection of the interpretation proposed by him. The appellant again directs attention to the words "completion of the four streets surrounding said block," as used in the communication of the Director of Lands, of July 26, 1910, and argues that the streets are in a state of incompletion since they lack "some width of

roadway, curbs, and sidewalks to be complete" (quoting from language used by witness F. D. Jones). It is evident that the word "completion" as used by the Director of Lands has reference to the kind and degree of completion indicated in paragraph 4 of the specifications. It is only by connecting the language of the Director of Lands with the specifications of said paragraph that the Government becomes bound to metal any part of the roadway; and if the proposition of the Director of Lands stood alone, the Government could have left the entire street unmetalled, adopting some other method of completion, as by using asphalt, paving stones, or blocks, or adopting whatever other mode of finish it may have desired. The application for a rehearing calls attention to the fact that the true width of Boston Street, as indicated by the official lines is 24 meters instead of 16 meters as stated in the opinion of the court. The mistake made by us in stating the width of this street in no wise affects the solution of the case. The result would have been the same if this street were as wide as Muelle San Francisco, which is 40 meters wide, or ever wider. Application denied. Arellano, C.J., Torres, Carson and Araullo, JJ., concur. MALCOLM, J., dissenting. I dissent.