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G.R. No. L-32958 November 8, 1930
BLOSSOM AND COMPANY, INC. vs. MANILA GAS CORPORATION -->
EN BANC
G.R. No. L-32958 November 8, 1930
BLOSSOM AND COMPANY, INC., Plaintiff-Appellant, vs. MANILA GAS CORPORATION, Defendant-Appellee.
Harvey and O'Brien for appellant.
Ross, Lawrence and Selph and John B. Miller for appellee.
STATEMENTchanrobles virtual law library
In its complaint filed March 3, 1927, the plaintiff alleges that on September 10, 1918, it entered into a contract with the defendant in which the plaintiff promised and undertook to purchase and receive from the defendant and the defendant agreed to sell and deliver to the plaintiff, for a period of four years, three tons of water gas tar per month from September to January 1, 1919 and twenty tons per month after January 1, 1919, for the remaining period of the contract; one-half ton of coal gas tar a month from September to January 1, 1919, and six tons per month after January 1, 1919, for the remainder of the contract, delivery to be made at the plant of the defendant in the City of Manila, without containers and at the price of P65 per ton for each kind of gas tar, it being agreed that this price should prevail only so long as the raw materials - coal and crude oil -used by the defendant in the manufacture of gas should cost the defendant the same price as that prevailing at the time of the contract, and that in the event of an increase or decrease in the cost of raw material there would be a corresponding increase or decrease in the price of the tar. That on January 31, 1919, this contract was amended so that it should continue to remain in force for a period of ten years from January 1, 1919, and it was agreed that the plaintiff should not be obliged to take the qualities of the tars required during the year 1919, but that it might purchase tars in such quantities as it could use to advantage at the stipulated price. That after the year 1919 the plaintiff would take at least the quantities specified in the contract of September 10, 1918, to be taken from and after January 1, 1919, and that at its option it would have the right to take any quantity of water gas tar in excess of the minimum quantity specified in that contract and up to the total amount of output of that tar of defendant's plant and also to take any quantity of coal gas tar in excess of the minimum quantity specified in that contract and up to 50 per cent of defendant's entire output of coal gas tar, and that by giving the defendant ninety days' notice, it would have the right at its option to take the entire output of defendant's coal gas tar, except such as it might need for its own use in and about its plant. That in consideration of this modification of the contract of September 10, 1918, plaintiff agreed to purchase from the defendant of certain piece of land lying adjacent to its plant at the price of P5 per square meter, the proof of which is evidenced by Exhibit C. That pursuant to Exhibit C, defendant sold and conveyed the land to the plaintiff which in turn executed a mortgage thereon to the defendant for P17,140.20, to secure the payment of the balance of the purchase price.chanroblesvirtualawlibrary chanrobles virtual law library
It is then alleged:
VIII. That about the last part of July, 1920 the defendant herein, the Manila Gas Corporation willfully, and deliberately breached its said contract, Exhibit C, with the plaintiff by ceasing to deliver any coal and water gas tar to it thereunder solely because of the increased price of its tar products and its desire to secure better prices therefor than plaintiff was obliged to pay to it, notwithstanding the frequent and urgent demands made by the plaintiff upon it to comply with its aforesaid contract by continuing to deliver the coal and water gas tar to the plaintiff thereunder, but the said defendant flatly refused to make any deliveries under said contract, and finally on November 23, 1923, the plaintiff was forced to commence action against the defendant herein in the Court of First Instance of Manila, being case No. 25352, of that court entitled 'Blossom & Co., plaintiff, vs. Manila Gas Corporation, defendant,' to recover the damages which it had up to that time suffered by reason of such flagrant violation of said contract on the part of the defendant herein, and to obtain the specific performance of the said contract and after due trial of that action, judgment was entered therein in favor of the plaintiff herein and against the said defendant, the Manila Gas Corporation, for the sum of P26,119.08, as the damages suffered by this plaintiff by the defendant's breach of said contract from July, 1920, up to and including September, 1923, with legal interest thereon from November 23, 1923, and for the costs but the court refused to order the said defendant to resume the delivery of the coal and water gas tar to the plaintiff under said contract, but left the plaintiff with its remedy for damages against said defendant for the subsequent breaches of said contract, which said decision, as shown by the copy attached hereto as Exhibit G, and made a part hereof, was affirmed by our Supreme Court on March 3, 1926;chanrobles virtual law library
IX. That after the defendant had willfully and deliberately violated its said contract as herein-before alleged, and the plaintiff suffered great damage by reason thereof, the plaintiff claimed the right to off- set its damages against the balance due from it to said defendant on account of the purchase of said land from the defendant, and immediately thereupon and notwithstanding said defendant was justly indebted to the plaintiff at that time as shown by the judgment of the Court Exhibit G, in more that four times the amount due to it from the plaintiff, the said defendant caused to be presented against the plaintiff a foreclosure action, known as the Manila Gas Corporation versus Blossom & Company, No. 24267, of the Court of First Instance of Manila, and obtained judgment therein ordering that Blossom & Company pay the last installment and interest due on said land or else the land and improvements placed thereon by the plaintiff would be sold as provided by law in such cases to satisfy the same, and the said defendant proceeded with the sale of said property under said judgment and did everything in its power to sell the same for the sole purpose of crushing and destroying the plaintiff's business and thus rendering it impossible for the plaintiff herein to continue with its said contract in the event that said defendant might in the future consider it more profitable to resume performance of the same, but fortunately the plaintiff was able to redeem its property as well as to comply with its contract and continued demanding that the defendant performed its said contract and deliver to it the coal and water gas tar required thereby.
That the defendant made no deliveries under its contract, Exhibit C, from July, 1920 to March 26, 1926, or until after the Supreme Court affirmed the judgment of the lower court for damages in the sum of P26, 119.08. 1 chanrobles virtual law library
It is then alleged that:
. . . On March 26, 1926 the said defendant offered to resume delivery to the plaintiff from that date of the minimum monthly quantities of tars stated in its contract ,and the plaintiff believing that the said defendant was at least going to try to act in good faith in the further performance of its said contract, commenced to accept deliveries of said tars from it, and at once ascertained that the said defendant was deliberately charging it prices much higher than the contract price, and while the plaintiff accepted deliveries of the minimum quantities of tars stated in said contract up to and including January, 1927, (although it had demanded deliveries of larger quantities thereunder, as hereinafter alleged) and paid the increased prices demanded by the defendant, in the belief that it was its duty to minimize the damages as much as possible which the defendant would be required to pay to it by reason of its violation of said contract, it has in all cases done so under protest and with the express reservation of the right to demand from the said defendant an adjustment of the prices charged in violation of its contract, and the right to the payment of the losses which it had and would suffer by reason of its refusal to make additional deliveries under said contract, and it also has continuously demanded that the said defendant furnish to it statements supported by its invoices showing the cost prices if its raw materials - coal and crude oil - upon which the contract price of the tars in question is fixed, which is the only way the plaintiff has to calculate the true price of said tars, but said defendant has and still refuses to furnish such information, and will continue to refuse to do so, unless ordered to furnish such information to the plaintiff by the court, and the plaintiff believes from the information which it now has and so alleges that the said defendant has overcharged it on the deliveries of said tars mentioned in the sum of at least P10,000, all in violation of the rights of the plaintiff under its said contract with the defendant.
That on January 31, 1926 and pursuant to Exhibit C. plaintiff notified the defendant in writing that commencing with the month of August, 1926 it desired to take delivery of 50 per cent of defendant's coal tar production for that month and that on November 1, 1926, it desired to take the entire output of defendant's coal gas tar, but that the defendant refused and still refuses to make such deliveries unless plaintiff would take all of its water gas tar production with the desired quantity of coal gas tar which refusal was a plain violation of the contract. That on January 29, 1927, and in accord with Exhibit C, plaintiff notified the defendant in writing that within ninety days after the initial delivery to it of its total coal gas tar production or in February, 1927, it would require 50 per cent of its total water gas tar production and that in April 1927, it would require the total output of the defendant of both coal and water gas tars, and that it refused to make either of such deliveries.chanroblesvirtualawlibrary chanrobles virtual law library
It is then alleged:
XIV. That as shown by the foregoing allegations of this complaint, it is apparent that notwithstanding the plaintiff in this case has at all times faithfully performed all the terms and conditions of said contract, Exhibit C, on its part of be performed, and has at all times and is now ready, able and willing to accept and pay for the deliveries of said coal and water gas tars required by said contract and the notices given pursuant thereto, the said defendant, the Manila Gas Corporation, does not intend to comply with its said contract, Exhibit C, and deliver to the plaintiff at the times and under the terms and conditions stated therein the quantities of coal and water gas tars required by said contract, and the several notices given pursuant thereto, and that it is useless for the plaintiff to insist further upon its performance of the said contract, and for that reason he only feasible course for the plaintiff to pursue is to ask the court for the rescission of said contract and for the full damages which the plaintiff has suffered from September, 1923, and will suffer for the remainder of said contract by reason of the defendant's failure and refusal to perform the same, and the plaintiff has so notified the said defendant.
That since September, 1923, by reason of the bad faith of the defendant, the plaintiff has been damaged in the sum of P300,000, for which it prays a corresponding judgment, and that the contract, Exhibit C, be rescinded and declared void and without force and effect.chanroblesvirtualawlibrary chanrobles virtual law library
After the filing and overruling of its demurrer, the defendant filed an answer in the nature of a general and specific denial and on April 10, 1928, and upon stipulation of the parties, the court appointed W. W. Larkin referee, "to take the evidence and, upon completion of the trial, to report his findings of law and fact to the court."chanrobles virtual law library
July 18, 1928, the defendant filed an amended answer in which it alleged as an affirmative defense, first, that the complaint does not state facts sufficient to constitute cause of action the reason that a prior adjudication has been had of all the issues involved in this action, and, second, "that on or about the 16th day of June, 1925, in an action brought in the Court of First Instance of the City on Manila, Philippine Islands, before the Honorable Geo. R. Harvey, Judge, by Blossom & Company, plaintiff, vs. Manila Gas Corporation, defendant, being civil case No. 25353, of said court, for the same cause of action as that set fourth in the complaint herein, said plaintiff recovered judgment upon the merits thereof, against said defendant decreeing a breach of the contract sued upon herein, and awarding damages therefor in the sum of P26,119.08 with legal interest from November 23, 1923, and costs of suit, which judgment was upon appeal affirmed by the Supreme Court of the Philippine Islands, in case G. R. No. 24777 of said court, on the 3d day of March, 1926 and reported in volume 48 Philippines Reports at page 848," and it prays that plaintiff's complaint be dismissed with costs.chanroblesvirtualawlibrary chanrobles virtual law library
After the evidence was taken the referee made an exhaustive report of sixty-pages in which he found that the plaintiff was entitled to P56,901.53 damages, with legal interest from the date of the filing on the complaint, to which both parties filed numerous exceptionschanrobles virtual law library
In its decision the court says:
Incidental references have been made to the referee's report. It was admirably prepared. Leaving aside the question of damages and the facts upon which the referee assessed them, the facts are not in dispute - at least not in serious dispute. They appear in the documentary evidence and this decision is based upon documents introduced into evidence by plaintiff. If I could have agreed with the referee in respect to the question of law, I should have approved his report in toto. If defendant is liable for the damages accruing from November 23, 1923, the date the first complaint was filed, to April 1st, 1926, the date of resumption of relations; and if defendant, after such resumption of relations, again violated the contract, the damages assessed by the referee, are, to my way of thinking, as fair as could be estimated. He went to tremendous pains in figuring out the details upon which he based his decision. Unfortunately, I cannot agree with his legal conclusions and the report is set aside except wherein specifically approved.chanroblesvirtualawlibrary chanrobles virtual law library
It is unnecessary to resolve specifically the many exceptions made by both partied to the referee's report. It would take much time to do so. Much time has already been spent in preparing this decision. Since both parties have informed me that in case of adverse judgment ,and appeal would be taken, I desire to conclude the case so that delay will be avoided.chanroblesvirtualawlibrary chanrobles virtual law library
Let judgment be entered awarding damages to plaintiff in the sum of P2,219.60, with costs.
From which plaintiff only appealed and assigns twenty-four different errors, of which the following are material to this opinion:
I. The trial court erred in holding that this suit in so far as the damages from November, 1923, to March 31, 1926, are concerned , is res adjudicata.chanroblesvirtualawlibrary chanrobles virtual law library
II. The trial court erred in holding that the defendant repudiated the contract in question as a whole, and that the plaintiff when it brought its first suit to collect damages had already elected and consented to the dissolution of the contract, and its choice once made, being final, it was estopped to claim that the contract was alive when that suit was brought.
x x x x x x x x xchanrobles virtual law library
VII. The trial court erred in refusing to sustain plaintiff's third exception to the legal interpretation placed on the contract in this case by the referee with reference to quantity of tars and his conclusion with respect to the terms thereof that:chanrobles virtual law library
"1. Plaintiff must take and defendant must deliver either the minimum or maximum quantity of water gas tar and not any quantity from the minimum to the maximum and/orchanrobles virtual law library
"2. Plaintiff must take either the minimum and any quantity up to fifty per cent of entire output of coal gas tar.chanroblesvirtualawlibrary chanrobles virtual law library
"3. With ninety days' notice by plaintiff to defendant the former must take and the latter must deliver total output of both tars, except such as might be needed by defendant for use in and about its plants and not any quantity from the minimum up to total output of both tars." ( See page 47, Referee's report.)chanrobles virtual law library
And in holding that the option contained in said contract, taking into consideration the purposes of both parties in entering into the contract, was a claimed by defendant: all the water gas tar and 50 per cent of the coal gas tar upon immediate notice and all tars upon ninety day's notice.chanroblesvirtualawlibrary chanrobles virtual law library
VIII. The trial court erred in refusing to sustain plaintiff's fourth exception to the finding and conclusion of the referee that from the correspondence between the parties it was apparent that plaintiff did not make a right use of its option, and that the letter of June 25, 1926, and the subsequent demands, with exception of the letter of July 31, 1926, were not made in pursuance to the terms of the contract, and that defendant had no liability in refusing to comply therewith, and in allowing plaintiff damages only for the failure of the defendant to deliver quantities shown in Exhibits Ref. 21 and 22. ( See pages 51, 52, Referee's report.)chanrobles virtual law library
IX. The trial court erred in finding and holding that the demands of plaintiff for additional tars under its contract with the defendant were extravagant and not made in good faith, and that when it wrote to defendant that it desired maximum quantities of coal gas tars and only minimum of water gas tars, but with the reservation of going back to minimum quantities of both at any time it chose, it announced its intention f breaching the contract, and defendant was under no obligation to deliver maximum quantities of either tars, and since this was the efficient cause of the failure of defendant to deliver or plaintiff to accept tars, the blame is attribute to plaintiff, and it cannot recover for a rescission.
x x x x x x x x xchanrobles virtual law library
XXIII. The trial court erred in refusing to sustain plaintiff's seventeenth exception to the finding and conclusion of the referee that the plaintiff is entitled to recover from the defendant only the following sums:
Water gas tar (Exhibit Ref. 21) P38,134.60 Coal gas tar (Exhibit Ref. 22) 16,547.33 Overcharges on deliveries (Exhibit Ref. 23) 2,219.60 or a total of
56,901.53with interest, and in not awarding to the plaintiff as damages in this case the sum of P319,253.40, with legal interest thereon from the date of filing the complaint in this case, in the manner and form computed but it, and in awarding damages to the plaintiff for the sum of only P2,219.60. with costs.
x x x x x x x x x
JOHNS, J.:
In this action plaintiff seeks to recover damages from the defendant which it claims to have sustained after September, 1923, arising from, and growing out of, its original contract of September 10, 1918, as modified on January 1, 1919, to continue for a period of ten years from that date.chanroblesvirtualawlibrary chanrobles virtual law library
In paragraph VIII of its complaint, plaintiff alleges that about the last part of July, 1920, the defendant "willfully and deliberately breached its said contract," and that it "flatly refused to make any deliveries under said contract, and finally on November 23, 1923," it was forced to commence action in the Court of First Instance against the defendant known as case No. 25352, to recover the damages which it had then sustained by reason of such flagrant violation of said contract on the part of the defendant, in which judgment was rendered in favor of the plaintiff and against the defendant for P26,1119.08, as damages suffered by this plaintiff by the defendant's breach of said contract from July 1920, up to and including September, 1923, with legal interest thereon from November 23, 1923, and for the costs," in which the court refused to order the defendant to resume the delivery of the coal and water gas tar to the plaintiff, in accord with said contract, but left it with its remedy for damages against the defendant for any subsequent breaches of the contract. A copy of that judgment, which was later affirmed by this court, is attached to, marked Exhibit G, and made a part of, the complaint in this action.chanroblesvirtualawlibrary chanrobles virtual law library
In their respective briefs, opposing counsel have much to say about the purpose and intent of the judgment, and it is vigorously asserted that it was never intended that it should be or become a bar to another action by the plaintiff to recover any damages it may have sustained after September, 1923, during the remainder of the ten-year period of that contract. Be that as it may, it must be conceded that the question as to what would be the legal force and effect of that judgment in that case was never presented to, or decided by, the lower court or this court. In the very nature of things, neither court in that case would have the power to pass upon or decided the legal force and effect of its own judgment, for the simple reason that it would be premature and outside of the issues of any pleading, and could not be raised or presented until after the judgment became final and then only by an appropriate plea, as in this case.chanroblesvirtualawlibrary chanrobles virtual law library
Plaintiff specifically alleges that the defendant willfully and deliverately breached the contract and "flatly refused to make any deliveries under said contract," by reason of. which it was forced to and commenced its former action in which it was awarded P26,119.08 damages against the defendant by reason of its breach of the contract from July, 1920, to September, 1923.chanroblesvirtualawlibrary chanrobles virtual law library
In the final analysis, plaintiff in this action seeks to recover damages growing out of, and arising from, other and different breaches of that same contract after November, 1923, for the remainder of the ten-year period, and the question is thus squarely presented as to whether the rendition of the former judgment is a bar to the right of the plaintiff to recover damages from and after September, 1923, arising from, and growing out of, breaches of the original contract of September 10, 1918, as modified on January 1, 1919. That is to say, whether the plaintiff, in a former action, having recovered judgment for the damages which it sustained by reason of a breach of its contract by the defendant up to September, 1923, can now in this action recover damages it may have sustained after September, 1923, arising from, and growing out of, a breach of the same contract, upon and for which it recovered its judgment in the former action.chanroblesvirtualawlibrary chanrobles virtual law library
In the former action in which the judgment was rendered, it is alleged in the compliant:
"7. That about the last part of July or the first part of August, 1920, the Manila Gas Corporation, the defendant herein, without any cause ceased delivering coal and water gas tar to the plaintiff herein; and that from that time up to the present date, the plaintiff corporation, Blossom & Company, has frequently and urgently demanded of the defendant, the Manila Gas Corporation, that it comply with its aforesaid contract Exhibit A by continuing to deliver coal and water gas tar to this plaintiff - but that the said defendant has refused and still refuses, to deliver to the plaintiff any coal and water gas tar whatsoever under the said contract Exhibit A, since the said month of July 1920.chanroblesvirtualawlibrary chanrobles virtual law library
"9. That owing to the bad faith of the said Manila Gas Corporation, defendant herein, in not living up to its said contract Exhibit A, made with this plaintiff, and refusing now to carry out the terms of the same, be delivering to this plaintiff the coal and water gas tar mentioned in the said Exhibit A, has caused to this plaintiff great and irreparable damages amounting to the sum total of one hundred twenty- four thousand eight hundred forty eight pesos and seventy centavos (P124,848,70);and that the said defendant corporation has refused, and still refuses, to pay to this plaintiff the whole or any part of the aforesaid sum.chanroblesvirtualawlibrary chanrobles virtual law library
"10. That the said contract Exhibit A, was to be in force until January 1, 1929, that is to say ten (10) years counted from January 1, 1929; and that unless the defendant again commence to furnish and supply this plaintiff with coal and water gas tar, as provided for in the said contract Exhibit A, the damages already suffered by this plaintiff will continually increase and become larger and larger in the course of years preceding the termination of the said contract on January 1, 1929."
In that action plaintiff prays for judgment against the defendant:
"(a) That upon trial of this this cause judgment be rendered in favor of the plaintiff and against the defendant for the sum of P124,8484.70), with legal interest thereon from November 23, 1923;chanrobles virtual law library
"(b) That the court specifically order the defendant to resume the delivery of the coal and water gas tar to the plaintiff under the terms of the said contract Exhibit A of this complaint."
In the final analysis, plaintiff must stand or fall on its own pleadings, and tested by that rule it must be admitted that the plaintiff's original cause of action, in which it recovered judgment for damages, was founded on the ten-year contract, and that the damages which it then recovered were recovered for a breach of that contract.chanroblesvirtualawlibrary chanrobles virtual law library
Both actions are founded on one and the same contract. By the terms of the original contract of September 10, 1018, the defendant was to sell and the plaintiff was to purchase three tons of water gas tar per month form September to January 1, 1919, and twenty tons of water gas tar per month after January 1, 1919, one-half ton of coal gas tar per month from September to January 1, 1919, and six tons of coal gas tar per month after January 1, 1919. That from and after January 1, 1919, plaintiff would take at least the quantities specified in the contract of September 10, 1918, and that at its option, it would have the right to take the total output of water gas tar of defendant's plant and 50 per cent of the gross output of its coal gas tar, and upon giving ninety days' notice, it would have the right to the entire output of coal gas tar, except such as the defendant might need for its own use. That is to say, the contract provided for the delivery to the plaintiff from month to month of the specified amounts of the different tars as ordered and requested by the plaintiff. In other words, under plaintiff's own theory, the defendant was to make deliveries from month to month of the tars during the period of ten years, and it is alleged in both complaints that the defendant broke its contract, and in bad faith refused to make any more deliveries.chanroblesvirtualawlibrary chanrobles virtual law library
In 34 Corpus Juris, p. 839, it is said:
As a general rule a contract to do several things at several times in its nature, so as to authorize successive actions; and a judgment recovered for a single breach of a continuing contract or covenant is no bar to a suit for a subsequent breach thereof. But where the covenant or contract is entire, and the breach total, there can be only one action, and plaintiff must therein recover all his damages.
In the case of Rhoelm vs, Horst, 178 U. U., 1; 44 Law. ed., 953, that court said:
An unqualified and positive refusal to perform a contract, though the performance thereof is not yet due, may, if the renunciation goes to the whole contract, be treated as a complete breach which will entitle the injured party to bring his action at once.
15 Ruling Case Law, 966, 967, sec. 441 says:
Similarly if there is a breach by the vendor of a contract for the sale of goods to be delivered and paid for in installments, and the vendee maintains an action therefor and recovers damages, he cannot maintain a subsequent action to recover for the failure to deliver later installments.
In Pakas vs. Hollingshead, 184 N. Y., 211; 77 N. E., 40; 3 L. R. A. (N. S.), 1024, the syllabus says:
Upon refusal, by the seller, after partial performance, longer to comply with his contract to sell and deliver a quantity of articles in installments the buyer cannot keep the contract in force and maintain actions for breaches as they occur but must recover all his damages in one suit.
And on page 1044 of its opinion, the court say:
The learned counsel for the plaintiff contends that the former judgment did not constitute a bar to the present action but that the plaintiff had the right to elect to waive or disregard the breach, keep the contract in force, and maintain successive actions for time to time as the installments of goods were to be delivered, however numerous these actions might be. It is said that this contention is supported in reason and justice, and has the sanction of authority at least in other jurisdictions. We do not think that the contention can be maintained. There is not as it seems to us any judicial authority in this state that gives it any substantial support. On the contrary, we think that the cases, so far as we have been able to examine them, are all the other way, and are to the effect that, inasmuch as there was a total breach of the contract by the defendant's refusal to deliver, the plaintiff cannot split up his demand and maintain successive actions, but must either recover all his damages in the first suit or wait until the contract matured or the time for the delivery of all the goods had arrived. In other words, there can be but one action for damages for a total breach of an entire contract to deliver goods, and the fact that they were to be delivered in installment from time to time does not change the general rule.
The case of L. Bucki & Son Lumber Co. vs. Atlantic Lumber Co. (109 Federal, 411), of the United States Circuit Court of Appeals for the Fifth Circuit, is very similar.chanroblesvirtualawlibrary chanrobles virtual law library
The syllabus says:
1. CONTRACTS - CONSTRUCTION -ENTIRE CONTRACT. -A contract was made for the sale of a large quantity of logs to be delivered in monthly installments during a period of eight years, payments to be made also in installments at times having relation tot he deliveries. It contained stipulations as to such payments, and guaranties as to the average size of the logs to be delivered in each installment. Held, that it was an entire contract, and not a number of separate and independent agreements for the sale of the quantity to be delivered and paid for each month, although there might be breaches of the minor stipulations and warranties with reference thereto which would warrant suits without a termination of the contract.chanroblesvirtualawlibrary chanrobles virtual law library
2. JUDGMENTS - MATTERS CONCLUDED -ACTION FOR BREACH OF INDIVISIBLE CONTRACT. - The seller declared the contract terminated for alleged breaches by the purchaser, and brought suit for general and special damages the latter covering payments due for installments of logs delivered. By way of set-off and recoupment against this demand, the purchaser pleaded breaches of the warranty as to the size of the logs delivered during the months for which payment had not been made. Held, that the judgment in such action was conclusive as to all claims or demands or either party against the other growing out of the entire contract, and was a bar to a subsequent suit brought by the purchaser to recover for other breaches of the same warranty in relation to deliveries made in previous months.
On page 415 of the opinion, the court says:
When the contract was ended, the claims of each party for alleged breaches and damages therefor constituted an indivisible demand; and when the same, or any part of the same, was pleaded, litigation had, and final judgment rendered, such suit and judgment constitute a bar to subsequent demands which were or might have been litigated (Baird vs. U. S., 96 U. S., 430; 24 L. ed., 703.)
In Watts vs. Weston (238 Federal, 149), Circuit Court of Appeals, Second Circuit, the syllabus says:
1. JUDGMENTS - 593 - JUDGMENT AS BAR - MATTERS CONCLUDED. - Where a continuing contract was terminated by the absolute refusal of the party whose action was necessary to further perform, a claim for damages on account of the breach constituted as indivisible demand, and when the same or any part of the same was pleaded, litigated, and final judgment rendered, such suit and judgment constitute a bar to subsequent demands which were or might have been litigated therein.
And on page 150 of the opinion, the court says:
It is enough to show the lack of merit in the present contention to point out as an inexorable rule of law that, when Kneval's contract was discharged by his total repudiation thereof, Watt's claims for breaches and damages therefor constituted an indivisible demand, and when the same, or any part of the same, was pleaded, litigation had and final judgment rendered, such suit and judgment constitute a bar to subsequent demands which were or might have been litigated." (Bucki, etc., Co. vs. Atlantic, etc., Co., 109 Fed. at page 415; 48 C. C. A., 459; Cf. Landon vs. Bulkley, 95 Fed., 344; 337 C. C. A., 96.)chanrobles virtual law library
The rule is usually applied in cases of alleged or supposed successive breaches, and consequently severable demands for damages; but if the contract has been discharged by breach, if suit for damages is all that is left, the rule is applicable, and every demand arising form that contract and possessed by any given plaintiff must be presented (at least as against any given defendant) in one action; what the plaintiff does not advance he foregoes by conclusive presumption.
Inn Abbott vs. 76 Land and Water Co. (118 Pac., 425; 161 Cal., 42), at page 428, the court said:
In Fish vs. Folley, 6 Hill (N. Y.), 54, it was held, in accord with the rule we have discussed, that, where the defendant had covenanted that plaintiff should have a continual supply of water for his mill from a dam, and subsequently totally failed to perform for nine years, and plaintiff brought an action for the breach and recovered damages sustained by him to that time, the judgment was a bar to a second action arising from subsequent failure to perform, on the theory that, although he covenant was a continuing one in one sense, it was an entire contract, and a total breach put an end to it, and gave plaintiff the right to sue for an equivalent in damages.chanroblesvirtualawlibrary chanrobles virtual law library
In such a case it is no warrant for a second action that the party may not be able to actually prove in the first action all the items of the demand, or that all the damage may not then have been actually suffered. He is bound to prove in the first action not only such damages as has been actually suffered, but also such prospective damage by reason of the breach as he may be legally entitled to, for the judgment he recovers in such action will be a conclusive adjudication as to the total damage on account of the breach.
It will thus be seen that, where there is a complete and total breach of a continuous contract for a term of years, the recovery of a judgment for damages by reason of the breach is a bar to another action on the same contract for and on account of the continuous breach.chanroblesvirtualawlibrary chanrobles virtual law library
In the final analysis is, there is no real dispute about any material fact, and the important and decisive question is the legal construction of the pleadings in the former case and in this case, and of the contract between the plaintiff and the defendant of January 1, 1920.chanroblesvirtualawlibrary chanrobles virtual law library
The complaint on the former case specifically alleges that the defendant "has refused and still refuses, to deliver to the plaintiff any coal and water gas tar whatsoever under the said contract Exhibit A, since the said month of July, 1920." " That owing to the bad faith of the said Manila Gas Corporation, defendant herein, in not living up to its said contract Exhibit A, made with this plaintiff, and refusing now to carry out the terms of the same." That is a specific allegation not only a breach of the contract since the month of July, 1920, but of the faith of the defendant in its continuous refusal to make deliveries of any coal and water gas tar. That amended complaint was filed on July 11, 1924, or four years after the alleged bad faith in breaking the contract.chanroblesvirtualawlibrary chanrobles virtual law library
Having recovered damages against it, covering a period of four years, upon the theory that the defendant broke the contract, and in bad faith refused to make deliveries of either of the tars, how can the plaintiff now claim and assert that the contract is still in fierce and effect? In the instant case the plaintiff alleges and relies upon the ten year contract on January 11, 1920, which in bad faith was broken by the defendant. If the contract was then broken, how can it be enforced in this action?chanrobles virtual law library
It is admitted that the defendant never made any deliveries of any tar from July, 1920, to April, 1936. Also that it made nine deliveries to plaintiff of the minimum quantities of coal and water gas tar from April 7, 1926, to January 5, 1927.chanroblesvirtualawlibrary chanrobles virtual law library
Plaintiff contends that such deliveries were made under and in continuation of the old contract.chanroblesvirtualawlibrary chanrobles virtual law library
March 26, 1926, after the decision of this court affirming the judgment in the original action, plaintiff wrote the defendant:
. . . It is our desire to take deliveries of at least the minimum quantities set forth therein and shall appreciate to have you advise us how soon you will be in a position to make deliveries; . . .chanroblesvirtualawlibrary chanrobles virtual law library
. . . In view of the fact that you have only effected settlement up to November 23, 1923, please inform us what adjustment you are willing to make for the period of time that has since elapsed without your complying with the contract.
In response to which on March 31, 1926, the defendant wrote this letter to the plaintiff:
In reply to your letter of March 26th, 1926, in regard to tar, we beg to advise you that we are prepared to furnish the minimum quantities of coal and water gas tars as per your letter, viz: twenty tons of water gas tar and six tons of coal gas tar. The price figured on present costs of raw materials is P39.01 ) Thirty-nine and 01/100 Pesos) per ton of water gas and P33.59 (Thirty-three and 59/100 Pesos) per ton of coal tar.chanroblesvirtualawlibrary chanrobles virtual law library
We shall expect you to take delivery and pay for the above amount of tars at our factory on or before April 7th prox.chanroblesvirtualawlibrary chanrobles virtual law library
Thereafter we shall be ready to furnish equal amounts on the first of each month. Kindly make your arrangements accordingly.
On January 29, 1927, the plaintiff wrote the defendant that:
On July 31st last, we made demand upon you, under the terms of our tar contract for 50 per cent of your total coal tar production for that month and also served notice on you that beginning 90 days from August 1st we would require you total output of coal tar monthly; this in addition to the 20 tons of water gas tar provided for in the contract to be taken monthly.
x x x x x x x x xchanrobles virtual law library
We are here again on your for your total output of coal tar immediately and the regular minimum monthly quantity of water gas tar. In this connection we desire to advise you that within 90 days of your initial delivery to us of your total coal tar output we will require 50 per cent of your total water gas tar output, and, further, that two months thereafter we will require your total output of both tars.
February 2, 1927, the defendant wrote the plaintiff:
Replying to your letter of Jan. 29, we would sat that we have already returned to you the check enclosed there with. As we have repeatedly informed you we disagree with you as to the construction of your contract and insist that you take the whole output of both tars if you wish to secure the whole of the coal tar.chanroblesvirtualawlibrary chanrobles virtual law library
With regard to your threat of further suits we presume that you will act as advised. If you make it necessary we shall do the same.
From an analysis of these letters it clearly appears that the plaintiff then sought to reply upon and enforce the contract of January 1, 1920, and that defendant denied plaintiff's construction of the contract, and insisted "that you take the whole output of both tars if you wish to secure the whole of the coal tar."chanrobles virtual law library
February 28, 1927, the plaintiff wrote the defendant:
In view of your numerous violations of and repeated refusal and failure to comply with the terms and provisions of our contract dated January 30-31, 1919, for the delivery to us of water and coal gas tars, etc., we will commence action," which it did.
The record tends to show that tars which the defendant delivered after April 7, 1926, were not delivered under the old contract of January 1, 1920, and that at all times since July 1920, the defendant has consistently refused to make any deliveries of any tars under that contract.chanroblesvirtualawlibrary chanrobles virtual law library
The referee found as a fact that plaintiff was entitled to P2,219.60 for and on account of overcharges which the defendant made for the deliveries of fifty-four tons of coal gas tar, and one hundred eighty tons of water gas tar after April, 1926, and upon that point the lower says:
The fourth charge that plaintiff makes is meritorious. The price was to be fixed on the basis of raw materials. The charge for deliveries during 1926 were too high. In this I agree with entirely with the referee and adopt his findings of fact and calculations. ( See Referee's report, p. 83) The referee awarded for overcharge during the period aforesaid, the sum of P2,219.60. The defendant was trying to discharge plaintiff from buying tars and made the price of raw material appear as high as possible.
That finding is sustained upon the theory that the defendant broke its contract which it made with the plaintiff for the sale and delivery of the tars on and after April, 1926.chanroblesvirtualawlibrary chanrobles virtual law library
After careful study of the many important questions presented on this appeal in the exhaustive brief of the appellant, we are clearly of the opinion that, as found by the lower court, the plea of res judicata must be sustained. The judgment of the lower court is affirmed.chanroblesvirtualawlibrary chanrobles virtual law library
It is so ordered, with costs against the appellant.chanroblesvirtualawlibrary chanrobles virtual law library
Johnson, Street, Malcolm, Villamor, Ostrand, Romualdez, and Villa-Real, JJ., concur.
Endnotes:
1 48 Phil., 848.
