Palanca v. Fred Wilson & Co.

January 31, 1918 | Malcolm, J. | Appeal | Parole Evidence Rule

PETITIONER: Carlos Palanca

RESPONDENT: Fred Wilson & Co.
SUMMARY: Palanca, as the manager of Song Fo & Co., purchased a distilling machine from Fred Wilson & Co. Palanca had the
machine examined and found out that the machine cannot produce 6000 liters of alcohol per day contrary to the stipulation in the
contract. Palanxa sued the Fred Wilson & Co. for damages on the ground of breach of contract. The CFI dismissed the action. SC
held that, since there is an ambiguity in the interpretation of the term capacity in the contract, resort to circumstances under which
the agreement was made can be done. The circumstances show that the machine delivered was that stipulated in the contract.
Hence, no breach of contract was present in the case.
DOCTRINE: Chapter 4, title 2, book 4 of the Civil Code, and chapter 10 of the Code of Civil Procedure permit the introduction of
evidence to explain the circumstances under intrinsic ambiguity.

FACTS:
1. Carlos Palanca, manager of Song Fo & Co., entered into a
contract with Fred Wilson & Co., for the purchase of a
distilling apparatus for P10,000.
2. Five months after the machine was installed, Palanca
notified Fred Wilson & Co. that the machine was examined by
competent persons who found that it is not capable of
producing the amount of alcohol in the contract. Clause 1 of
the contract discloses the following essential constitutes: (1) A
machine Guillaume, type "C" (Agricola) as described on page
30 of the Catalogue Egrot, edition of 1907; (2) a machine of a
capacity of 6,000 liters for every 24 hours of work, and (3) a
machine producing alcohol of a grade 96-97 Gay Lussac.
3. An action for damages for breach of contract against Fred
Wilson & Co. was filed with the CFI of Manila. Fred Wilson
& Co. answered with a general denial and a cross-complaint
regarding the final installment of the purchase price (P5,000).
4. CFI ruled in favor of Fred Wilson & Co. dismissing the
complaint of Palanca and ordering the payment of the final
installment of the purchase price. Hence the present appeal.
5. Palanca asserts that there has been a breach of the contract
in that instead of the machine having a capacity of 6,000 liters
for every 24 hours or work, it only had a producing capacity of
480 liters for this period of time.
6. Both parties argue on the interpretation of the word
capacity in the contract. Palanca testified that he told the
agents of Fred Wilson & Co., that he need a machine that
would produce at least 6,000 liters of alcohol a day. The agent
of Fred Wilson & Co., James F. Loader, contradicted this and
said that Palanca asked him to get a price on an apparatus to
treat 6,000 liters.
ISSUE/S:
1. WON there is a breach of contract NO
RULING: CFI decision is AFFIRMED
RATIO:
1. There is no dispute that the machine stipulated in the
contract is the same machine delivered. There is also no
dispute that the machine delivered produced the alcohol grade
stipulated in the contract. The only dispute is the proper
interpretation of the word capacity.
2. It can be laid down as a premise that there is intrinsic
ambiguity in the contract. Section 285 of the Code of Civil
Procedure provides that a written agreement shall be presumed
to contain all the terms; nevertheless, it "does not exclude
other evidence of the circumstances under which the
agreement was made, or to which it relates, or to explain an
intrinsic ambiguity." SEE DOCTRINE.
3. The circumstances show that, Fred Wilson & Co, in their
offer, mentioned capacity only in express connection with the
name and description of the machine as illustrated in the
catalogue. They furnished Song Fo & Co. with plans and
specifications of the distilling apparatus and these describe a
capacity of 6,000 liters of jus (ferment). Fred Wilson & Co.s
order to manufacturer, while mentioning a capacity of 6,000
liters per day, does so in connection, with the description in
the makers catalogue. And, finally, it was testified and it has
not been denied, that a machine capable of producing 6,000
liters or rectified alcohol every 24 hours from nipa ferment
would cost between P35,000 and P40,000.
3. The proper construction of clause 1 of the contract is that
Fred Wilson & Co. were to furnish Song Fo & Co. a distilling
apparatus, type C (Agricola), as described on page 30 of the
makers catalogue, capable of receiving or treating 6,000 liters
every 24 hours of work and of producing alcohol of a grade
96-97 Gay Lussac.