Song Fo & Company v. Hawaiian Philippine Co.
REITERATIONFacts
The Antecedents: Song Fo & Company (plaintiff) filed a complaint against Hawaiian Philippine Co. (defendant) for breach of contract, seeking P70,369.50 plus interest and costs. The defendant, in its amended answer and cross-complaint, asserted that it rescinded the contract due to the plaintiff's default in payment for delivered molasses. Procedural History: The case was submitted on a stipulation of facts and exhibits. The Court of First Instance ruled in favor of the plaintiff, ordering the defendant to pay P35,317.93 with legal interest and costs. The Petition: The defendant appealed the decision, assigning errors related to the quantity of molasses agreed upon, the validity of the rescission, and the judgment rendered.
Issue(s)
Whether the contract was for 400,000 gallons or 300,000 gallons of molasses. Whether the defendant had sufficient cause to rescind the contract. What is the proper measure of damages for the breach of contract.
Ruling
The judgment of the Court of First Instance is modified. The defendant is ordered to pay the plaintiff the sum of P3,000, with legal interest from October 2, 1923, until payment. Costs are not awarded.
Ratio Decidendi
On the quantity of molasses: The Court ruled that the contract was for 300,000 gallons of molasses. While the defendant mentioned the possibility of supplying an additional 100,000 gallons, the language used was not a definite promise or obligation. Correspondence, specifically Exhibit F and Exhibit A, supported the interpretation of a 300,000-gallon agreement, with the additional amount being a conditional possibility rather than a firm commitment. On the right to rescind: The Court held that the defendant did not have a legal right to rescind the contract. Although there was a delay in payment by Song Fo & Company for molasses delivered in December 1922, which was paid on February 20, 1923, instead of by January 31, 1923, this delay was not a substantial and fundamental breach that would defeat the object of the agreement. The Court emphasized that rescission is not permitted for slight or casual breaches. Furthermore, the defendant waived this condition by accepting the overdue payment and continuing with the contract, thereby negating any excuse for the subsequent cancellation. On the measure of damages: The Court found that the plaintiff was entitled to damages on the first cause of action, related to increased expenses for securing molasses from other sources. While 55,006 gallons were delivered, leaving 244,994 gallons undelivered, the plaintiff secured 100,000 gallons at the same contract price, resulting in no material loss for that portion. For the remaining 144,994 gallons, the plaintiff had to pay an additional one and one-half centavos per gallon, resulting in a loss of approximately P2,174.91. The Court, considering potential additional transportation and incidental expenses, awarded P3,000 in round figures for this cause of action. For the second cause of action, concerning lost profits, the Court found the evidence insufficient, as it was based on a stipulation of what a witness would have testified and lacked concrete proof of specific losses.
Main Doctrine
A delay in payment for a small quantity of molasses for approximately twenty days is not a substantial and fundamental breach of an essential condition of the contract that warrants rescission. Furthermore, the party accepting overdue payment and continuing with the contract waives the right to rescind based on that specific breach.