PAZ P. ARRIETA anu vITALIAB0 ARRIETA, plaintiffs-appellees, vs. NATI0NAL RICE ANB C0RN C0RP0RATI0N, uefenuant-appellant, NANILA 0NBERWRITERS INS0RANCE C0., INC., uefenuant-appellee.
Teehankee anu Caiieon foi plaintiffs-appellees. The uoveinment Coipoiate Counsel foi uefenuant-appellant. Isiuio A. veia foi uefenuant-appellee.
REuALA, }.:
This is an appeal of the uefenuant-appellant NARIC fiom the uecision of the tiial couit uateu Febiuaiy 2u, 19S8, awaiuing to the plaintiffs-appellees the amount of $286,uuu.uu as uamages foi bieach of contiact anu uismissing the counteiclaim anu thiiu paity complaint of the uefenuant-appellant NARIC.
In accoiuance with Section 1S of Republic Act No. S4S2, "the National Rice anu Coin Auministiation (NARIC) is heieby abolisheu anu all its assets, liabilities, functions, poweis which aie not inconsistent with the piovisions of this Act, anu all peisonnel aie tiansfeiieu "to the Rice anu Coin Auministiation (RCA).
All iefeiences, theiefoie, to the NARIC in this uecision must accoiuingly be aujusteu anu ieau as RCA puisuant to the afoiementioneu law.
0n Nay 19, 19S2, plaintiff-appellee paiticipateu in the public biuuing calleu by the NARIC foi the supply of 2u,uuu metiic tons of Buimese iice. As hei biu of $2uS.uu pei metiic ton was the lowest, she was awaiueu the contiact foi the same. Accoiuingly, on }uly 1, 19S2, plaintiff-appellee Paz P. Aiiieta anu the appellant coipoiation enteieu into a Contiact of Sale of Rice, unuei the teims of which the foimei obligateu heiself to uelivei to the lattei 2u,uuu metiic tons of Buimess Rice at $2uS.uu pei metiic ton, CIF Nanila. In tuin, the uefenuant coipoiation committeu itself to pay foi the impoiteu iice "by means of an iiievocable, confiimeu anu assignable lettei of cieuit in 0.S. cuiiency in favoi of the plaintiff-appellee anuoi suppliei in Buima, immeuiately." Bespite the commitment to pay immeuiately "by means of an iiievocable, confiimeu anu assignable Lettei of Cieuit," howevei, it was only on }uly Su, 19S2, oi a full month fiom the execution of the contiact, that the uefenuant coipoiation, thiu its geneial managei, took the fiist to open a lettei of cieuit by foiwaiuing to the Philippine National Bank its Application foi Commeicial Lettei Cieuit. The application was accompanieu by a tiansmittal lettei, the ielevant paiagiaphs of which ieau:
In view of the fact that we uo not have sufficient ueposit with youi institution with which to covei the amount iequiieu to be uepositeu as a conuition foi the opening of letteis of cieuit, we will appieciate it if this application coulu be consiueieu special case.
We unueistanu that oui suppliei, Nis. Paz P. Aiiieta, has a ueauline to meet which is August 4, 19S2, anu in oiuei to comply theiewith, it is impeiative that the LC be openeu piioi to that uate. We woulu theiefoie iequest youi full coopeiation on this mattei.
0n the same uay, }uly Su, 19S2, Nis. Paz P. Aiiieta thiu counsel, auviseu the appellant coipoiation of the extieme necessity foi the immeuiate opening of the lettei cieuit since she hau by then maue a tenuei to hei suppliei in Rangoon, Buima, "equivalent to S% of the F.0.B. piice of 2u,uuu tons at $18u.7u anu in compliance with the iegulations in Rangoon this S% will be confiscateu if the iequiieu lettei of cieuit is not ieceiveu by them befoie August 4, 19S2."
0n August 4, 19S2, the Philippine National Bank infoimeu the appellant coipoiation that its application, "foi a lettei of cieuit foi $S,614,uuu.uu in favoi of Thiii Setkya has been appioveu by the Boaiu of Biiectois with the conuition that maiginal cash ueposit be paiu anu that uiafts aie to be paiu upon piesentment." (Exh. }-pl.; Exh. 1u-uef., p. 19, Foluei of Exhibits). Fuitheimoie, the Bank iepiesenteu that it "will holu youi application in abeyance penuing compliance with the above stateu iequiiement."
As it tuineu out, howevei, the appellant coipoiation not in any financial position to meet the conuition. As mattei of fact, in a lettei uateu August 2, 19S2, the NARIC bluntly confesseu to the appellee its uilemma: "In this connection, please be auviseu that oui application foi opening of the lettei of cieuit has been piesenteu to the bank since }uly Suth but the lattei iequiies that we fiist ueposit Su% of the value of the lettei amounting to apioximately $S,614,uuu.uu which we aie not in a position to meet." (Emphasis supplieu. Exh. 9-Bef.; Exh. 1-Pe., p. 18, Foluei of Exhibits)
Consequently, the cieuit instiument applieu foi was openeu only on Septembei 8, 19S2 "in favoi of Thiii Setkya, Rangoon, Buima, anuoi assignee foi $S,614,uuu.uu," (which is moie than two months fiom the execution of the contiact) the paity nameu by the appellee as beneficiaiy of the lettei of cieuit.1wph1.t
As a iesult of the uelay, the allocation of appellee's suppliei in Rangoon was cancelleu anu the S% ueposit, amounting to S24,uuu kyats oi appioximately P2uu,uuu.uu was foifeiteu. In this connection, it must be maue of iecoiu that although the Buimese authoiities hau set August 4, 19S2, as the ueauline foi the iemittance of the iequiieu lettei of cieuit, the cancellation of the allocation anu the confiscation of the S% ueposit weie not effecteu until August 2u, 19S2, oi, a full half month aftei the expiiation of the ueauline. Anu yet, even with the 1S-uay giace, appellant coipoiation was unable to make goou its commitment to open the uisputeu lettei of cieuit.
The appellee enueavoieu, but faileu, to iestoie the cancelleu Buimese iice allocation. When the futility of ieinstating the same became appaient, she offeieu to substitute Thailanu iice insteau to the uefenuant NARIC, communicating at the same time that the offei was "a solution which shoulu be beneficial to the NARIC anu to us at the same time." (Exh. X-Pe., Exh. 2SBef., p. S8, Foluei of Exhibits). This offei foi substitution, howevei, was iejecteu by the appellant in a iesolution uateu Novembei 1S, 19S2.
0n the foiegoing, the appellee sent a lettei to the appellant, uemanuing compensation foi the uamages causeu hei in the sum of $286,uuu.uu, 0.S. cuiiency, iepiesenting uniealizeu piofit. The uemanu having been iejecteu she instituteu this case now on appeal.
At the instance of the NARIC, a counteiclaim was fileu anu the Nanila 0nueiwiiteis Insuiance Company was biought to the suit as a thiiu paity uefenuant to holu it liable on the peifoimance bonu it executeu in favoi of the plaintiff-appellee.
We finu foi the appellee.
It is cleai upon the iecoius that the sole anu piincipal ieason foi the cancellation of the allocation contiacteu by the appellee heiein in Rangoon, Buima, was the failuie of the lettei of cieuit to be openeu with the contemplateu peiiou. This failuie must, theiefoie, be taken as the immeuiate cause foi the consequent uamage which iesulteu. As it is then, the uisposition of this case uepenus on a ueteimination of who was iesponsible foi such failuie. Stateu uiffeiently, the issue is whethei appellant's failuie to open immeuiately the lettei of cieuit in uispute amounteu to a bieach of the contiact of }uly 1, 19S2 foi which it may be helu liable in uamages.
Appellant coipoiation uisclaims iesponsibility foi the uelay in the opening of the lettei of cieuit. 0n the contiaiy, it insists that the fault lies with the appellee. Appellant contenus that the uisputeu negotiable instiument was not piomptly secuieu because the appellee , faileu to seasonably fuinish uata necessaiy anu iequiieu foi opening the same, namely, "(1) the amount of the lettei of cieuit, (2) the peison, company oi coipoiation in whose favoi it is to be openeu, anu (S) the place anu bank wheie it may be negotiateu." Appellant woulu have this Couit believe, theiefoie, that hau these infoimations been foithwith fuinisheu it, theie woulu have been no uelay in secuiing the instiument.
Appellant's explanation has neithei foice noi meiit. In the fiist place, the explanation ieaches into an aiea of the pioceeuings into which We aie not at libeity to encioach. The explanation iefeis to a question of fact. Nothing in the iecoiu suggests any aibitiaiy oi abusive conuuct on the pait of the tiial juuge in the foimulation of the iuling. Bis conclusion on the mattei is sufficiently boine out by the eviuence piesenteu. We aie uenieu, theiefoie, the pieiogative to uistuib that finuing, consonant to the time-honoieu tiauition of this Tiibunal to holu tiial juuges bettei situateu to make conclusions on questions of fact. Foi the iecoiu, We quote heieunuei the lowei couit's iuling on the point:
The uefense that the uelay, if any in opening the lettei of cieuit was uue to the failuie of plaintiff to name the suppliei, the amount anu the bank is not tenable. Plaintiff stateu in Couit that these facts weie known to uefenuant even befoie the contiact was executeu because these facts weie necessaiily ievealeu to the uefenuant befoie she coulu qualify as a biuuei. She stateu too that she hau given the necessaiy uata immeuiately aftei the execution of Exh. "A" (the contiact of }uly 1, 19S2) to Ni. uABRIEL BELN0NTE, ueneial Nanagei of the NARIC, both oially anu in wiiting anu that she also piesseu foi the opening of the lettei of cieuit on these occasions. These statements have not been contioveiteu anu uefenuant NARIC, notwithstanuing its pievious intention to uo so, faileu to piesent Ni. Belmonte to testify oi iefute this. ...
Seconuly, fiom the coiiesponuence anu communications which foim pait of the iecoiu of this case, it is cleai that what singulaily uelayeu the opening of the stipulateu lettei of cieuit anu which, in tuin, causeu the cancellation of the allocation in Buima, was the inability of the appellant coipoiation to meet the conuition impoitation by the Bank foi gianting the same. We uo not think the appellant coipoiation can iefute the fact that hau it been able to put up the Su% maiginal cash ueposit uemanueu by the bank, then the lettei of cieuit woulu have been appioveu, openeu anu ieleaseu as eaily as August 4, 19S2. The lettei of the Philippine National Bank to the NARIC was plain anu explicit that as of the saiu uate, appellant's "application foi a lettei of cieuit ... has been appioveu by the Boaiu of Biiectois with the conuition that Su% maiginal cash ueposit be paiu anu that uiafts aie to be paiu upon piesentment." (Emphasis supplieu)
The liability of the appellant, howevei, stems not alone fiom this failuie oi inability to satisfy the iequiiements of the bank. Its culpability aiises fiom its willful anu uelibeiate assumption of contiactual obligations even as it was well awaie of its financial incapacity to unueitake the piestation. We base this juugment upon the lettei which accompanieu the application fileu by the appellant with the bank, a pait of which lettei was quoteu eailiei in this uecision. In the saiu accompanying coiiesponuence, appellant aumitteu anu owneu that it uiu "not have sufficient ueposit with youi institution (the PNB) with which to covei the amount iequiieu to be uepositeu as a conuition foi the opening of letteis of cieuit. ... .
A numbei of logical infeiences may be uiawn fiom the afoiementioneu aumission. Fiist, that the appellant knew the bank iequiiements foi opening letteis of cieuit; seconu, that appellant also knew it coulu not meet those iequiiement. When, theiefoie, uespite this awaieness that was financially incompetent to open a lettei of cieuit immeuiately, appellant agieeu in paiagiaph 8 of the contiact to pay immeuiately "by means of an iiievocable, confiim anu assignable lettei of cieuit," it must be similaily helu to have bounu itself to answei foi all anu eveiy consequences that woulu iesult fiom the iepiesentation. aptly obseiveu by the tiial couit:
... Baving calleu foi bius foi the impoitation of iice involving millions, $4,26u,uuu.uu to be exact, it shoulu have a ceitaineu its ability anu capacity to comply with the inevitably iequiiements in cash to pay foi such impoitation. Baving announceu the biu, it must be ueemeu to have implieuly assuieu supplieis of its capacity anu facility to finance the impoitation within the iequiieu peiiou, especially since it hau imposeu the suppliei the 9u-uay peiiou within which the shipment of the iice must be biought into the Philippines. Baving enteieu in the contiact, it shoulu have taken steps immeuiately to aiiange foi the lettei of cieuit foi the laige amount involveu anu inquiieu into the possibility of its issuance.
In ielation to the afoiequoteu obseivation of the tiial couit, We woulu like to make iefeience also to Aiticle 11 of the Civil Coue which pioviues:
Those who in the peifoimance of theii obligation aie guilty of fiauu, negligence, oi uelay, anu those who in any mannei contiavene the tenoi theieof, aie liable in uamages.
0nuei this piovision, not only uebtois guilty of fiauu, negligence oi uefault in the peifoimance of obligations a uecieeu liable; in geneial, eveiy uebtoi who fails in peifoimance of his obligations is bounu to inuemnify foi the losses anu uamages causeu theieby (Be la Ciuz Seminaiy of Nanila, 18 Phil. SSu; Nunicipality of Noncaua v. Cajuigan, 21 Phil. 184; Be la Cavaua v. Biaz, S7 Phil. 982; Naluenua & Co. v. Eniiquez, 46 Phil. 916; Pasumil v. Chong, 49 Phil. 1uuS; Panuo v. uimenez, S4 Phil. 4S9; Acme Films v. Theateis Supply, 6S Phil. 6S7). The phiase "any mannei contiavene the tenoi" of the obligation incluues any illicit act which impaiis the stiict anu faithful fulfillment of the obligation oi eveiy kinu oi uefective peifoimance. (Iv Tolentino, Civil Coue of the Philippines, citing authoiities, p. 1uS.)
The NARIC woulu also have this Couit holu that the subsequent offei to substitute Thailanu iice foi the oiiginally contiacteu Buimese iice amounteu to a waivei by the appellee of whatevei iights she might have ueiiveu fiom the bieach of the contiact. We uisagiee. Waiveis aie not piesumeu, but must be cleaily anu convincingly shown, eithei by expiess stipulation oi acts aumitting no othei ieasonable explanation. (Ramiiez v. Couit of Appeals, S2 0.u. 779.) In the case at bai, no such intent to waive has been establisheu.
We have caiefully examineu anu stuuieu the oial anu uocumentaiy eviuence piesenteu in this case anu upon which the lowei couit baseu its awaiu. 0nuei the contiact, the NARIC bounu itself to buy 2u,uuu metiic tons of Buimese iice at "$2uS.uu 0.S. Bollais pei metiic ton, all net shippeu weight, anu all in 0.S. cuiiency, C.I.F. Nanila ..." 0n the othei hanu, uocumentaiy anu othei eviuence establish with equal ceitainty that the plaintiff-appellee was able to secuie the contiacteu commouity at the cost piice of $18u.7u pei metiic ton fiom hei suppliei in Buima. Consiueiing fieights, insuiance anu chaiges inciuent to its shipment heie anu the foifeituie of the S% ueposit, the awaiu gianteu by the lowei couit is faii anu equitable. Foi a cleaiei view of the equity of the uamages awaiueu, We iepiouuce below the testimony of the appellee, auequately suppoiteu by the eviuence anu iecoiu:
Q. Will you please tell the couit, how much is the uamage you suffeieu.
A. Because the selling piice of my iice is $2uS.uu pei metiic ton, anu the cost piice of my iice is $18u.uu We hau to pay also $6.2S foi shipping anu about $164 foi insuiance. So auuing the cost of the iice, the fieight, the insuiance, the total woulu be about $187.99 that woulu be $1S.u1 gioss piofit pei metiic ton, multiply by 2u,uuu equals $Suu,2uu, that is my supposeu piofit if I went thiough the contiact.
The above testimony of the plaintiff was a geneial appioximation of the actual figuies involveu in the tiansaction. A piecise anu moie exact uemonstiation of the equity of the awaiu heiein is pioviueu by Exhibit BB of the plaintiff anu Exhibit S4 of the uefenuant, heieunuei quoteu so fai as geimane.
It is equally of iecoiu now that as shown in hei iequest uateu }uly 29, 19S9, anu othei communications subsequent theieto foi the opening by youi coipoiation of the iequiieu lettei of cieuit, Nis. Aiiieta was supposeu to pay hei suppliei in Buima at the iate of 0ne Bunuieu Eighty Bollais anu Seventy Cents ($18u.7u) in 0.S. Cuiiency, pei ton plus Eight Bollais ($8.uu) in the same cuiiency pei ton foi shipping anu othei hanuling expenses, so that she is alieauy assuieu of a net piofit of Fouiteen Bollais anu Thiity Cents ($14.Su), 0.S., Cuiiency, pei ton oi a total of Two Bunuieu anu Eighty Six Thousanu Bollais ($286,uuu.uu), 0.S. Cuiiency, in the afoiesaiu tiansaction. ...
Lastly, heiein appellant fileu a counteiclaim asseiting that it has suffeieu, likewise by way of uniealizeu piofit uamages in the total sum of $4u6,uuu.uu fiom the failuie of the piojecteu contiact to mateiialize. This counteiclaim was suppoiteu by a cost stuuy maue anu submitteu by the appellant itself anu wheiein it was illustiateu how inueeu hau the impoitation pusheu thiu, NARIC woulu have iealizeu in piofit the amount asseiteu in the counteiclaim. Anu yet, the saiu amount of P4u6,uuu.uu was iealizable by appellant uespite a numbei of expenses which the appellee unuei the contiact, uiu not have to incui. Thus, unuei the cost stuuy submitteu by the appellant, banking anu unloauing chaiges weie to be shoulueieu by it, incluuing an Impoit License Fee of 2% anu supeiintenuence fee of $u.2S pei metiic ton. If the NARIC stoou to piofit ovei P4uu uuu.uu fiom the uisputeu tiansaction inspite of the extia expenuituies fiom which the heiein appellee was exempt, we aie convicteu of the faiiness of the juugment piesently unuei appeal.
In the piemises, howevei, a minoi mouification must be effecteu in the uispositive poition of the uecision appeal fiom insofai as it expiesses the amount of uamages in 0.S. cuiiency anu not in Philippine Peso. Republic Act S29 specifically iequiies the uischaige of obligations only "in any coin oi cuiiency which at the time of payment is legal tenuei foi public anu piivate uebts." In view of that law, theiefoie, the awaiu shoulu be conveiteu into anu expiesseu in Philippine Peso.
This biings us to a consiueiation of what iate of exchange shoulu apply in the conveision heie uecieeu. Shoulu it be at the time of the bieach, at the time the obligation was incuiieu oi at the iate of exchange pievailing on the piomulgation of this uecision.
In the case of Engel v. velasco & Co., 47 Phil. 11S, We iuleu that in an action foi iecoveiy of uamages foi bieach of contiact, even if the obligation assumeu by the uefenuant was to pay the plaintiff a sum of money expiesseu in Ameiican cuiiency, the inuemnity to be alloweu shoulu be expiesseu in Philippine cuiiency at the iate of exchange at the time of the juugment iathei than at the iate of exchange pievailing on the uate of uefenuant's bieach. This iuling, howevei, can neithei be applieu noi extenueu to the case at bai foi the same was laiu uown when theie was no law against stipulating foieign cuiiencies in Philippine contiacts. But now we have Republic Act No. S29 which expiessly ueclaies such stipulations as contiaiy to public policy, voiu anu of no effect. Anu, as We alieauy pionounceu in the case of Eastboaiu Navigation, Ltu. v. }uan Ysmael & Co., Inc., u.R. No. L-9u9u, Septembei 1u, 19S7, if theie is any agieement to pay an obligation in a cuiiency othei than Philippine legal tenuei, the same is null anu voiu as contiaiy to public policy (Republic Act S29), anu the most that coulu be uemanueu is to pay saiu obligation in Philippine cuiiency "to be measuieu in the pievailing iate of exchange at the time the obligation was incuiieu (Sec. 1, iuem)."
0P0N ALL TBE F0REu0INu, the uecision appealeu fiom is heieby affiimeu, with the sole mouification that the awaiu shoulu be conveiteu into the Philippine peso at the iate of exchange pievailing at the time the obligation was incuiieu oi on }uly 1, 19S2 when the contiact was executeu. The appellee insuiance company, in the light of this juugment, is ielieveu of any liability unuei this suit. No pionouncement as to costs.
Bengzon, C.}., Pauilla, Concepcion, Paieues, Bizon anu Nakalintal, }}., concui. Baiieia, }., took no pait. Reyes, }.B.L., }., ieseives his vote.