Nagarmull vs. Binalbagan-Isabela Sugar Co., Inc. [Nagarmull vs. Binalbagan-Isabela Sugar Co., Inc.,...

10/10/15, 12:18 AMSUPREME COURT REPORTS ANNOTATED VOLUME 033

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46 SUPREME COURT REPORTS ANNOTATED

Nagarmull vs. Binalbagan-Isabela Sugar Co., Inc.

No. L-22470, May 28, 1970,

SOORAJMULL NAGARMULL, plaintiff-appellee, vs.

BINALBAGAN-ISABELA SUGAR COMPANY, INC.,defendant-appellant.

Civil actions; Execution of judgments; Effect of foreign

judgments; Judgment for a sum of money rendered by foreign court

cannot be enforced in the Philippines if it was rendered upon a clear

mistake of law.·While under the provisions of Section 50 of Rule39, Rules of Court, a judgment for a sum of money rendered by aforeign court is presumptive evidence of a right as between theparties and their successors in in-

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VOL. 33, MAY 28, 1970 47


terest by a subsequent title, but when suit for its enforcement isbrought in a Philippine court, said judgment may be repelled byevidence of clear mistake of law.

Contracts; Rescissible contracts; Remedy of aggrieved party in

case of breach of contract.·The breach of contract gives theaggrieved party under the law and even under general principles offairness, the right to rescind the contract or to ask for specificperformance, in either case with right to demand damages.

APPEAL from a decision of the Court of First Instance of



"1.

Manila. Solidum, J.

The facts are stated in the opinion of the Court. S. Emiliano Calma for plaintiff-appellee. Salonga, Ordoñez & Associates for defendant-

appellant.

DlZON, J.:

Appeal taken by Binalbagan-Isabela Sugar Company, Inc.from the decision of the Court of First Instance of Manila inCivil Case No. 41103 entitled "Soorajmull Nagarmull vs.Binalbagan-Isabela Sugar Company, Inc." of the followingtenor:

"IN VIEW OF ALL THE FOREGOING, judgment is herebyrendered in favor of the plaintiff, Soorajmull Nagarmull, orderingthe defendant, Binalbagan-Isabela Sugar Co., Inc. to pay saidplaintiff the sum of 18,562 rupees and 8. annas, with reservation forthe plaintiff to prove its equivalent in Philippine pesos on the dateof the filing of the complaint, plus the costs of suit."

The parties submitted to the trial court the followingstipulation of facts:

Under Contract G/4370 dated May 6, 1949,plaintiff, a foreign corporation with offices at No. 8Dalhousie Square (East) Calcutta, India, agreed tosell to defendant, a domestic corporation withoffices at the Chronicle Building, Aduana Street,Manila, 1,700,000 pieces of Hessian bags at $26.20per 100 bags, C.I.F. Iloilo. Shipment of these bagswas to be made in equal installments of 425,000 pcsor 425 bales (1,000 pcs to a bale) during each of themonths of July, August, September

48


Nagarmull vs. Binalbagan-Isabela Sugar Co., Inc,

and October, 1949. A copy of this contract markedAnnex 'A' and the Calcutta Jute Fabrics Shippers



"2.

"3.

"4.

"5.

"6.

"7.

Association Form 1935 which was made a part ofthe contract and marked as Annex 'A-1' are heretoattached.

This agreement was conf irmed in a letter by theplaintiff to the defendant on May 7, 1949, copy ofwhich is attached hereto and made a part hereof asAnnex 'B';

On September 8, 1949, plaintiff advised defendantthat of the 850 bales scheduled for shipment in Julyand August, the former was able to ship only 310bales owing to the alleged failure of the AdamjeeJute Mills to supply the goods in due time. Copy ofplaintiff's letter is attached hereto as Annex 'C' andmade an integral part hereof;

In a letter dated September 29, 1949, defendantrequested plaintiff to ship 100 bales of the 540 balesdefaulted from the July and August shipments. Acopy of this letter marked Annex 'D' is heretoattached, In this connection, it may also bementioned that of the 425 bales scheduled f orshipment in September, 54 bales were likewisedefaulted resulting in a total of 164 bales which isnow the object of the controversy.

Defendant requested plaintiff to pay 5% of thevalue of the 164 bales defaulted as penalty whichplaintiff did.

Meanwhile, on October 1, 1949, the Government ofIndia increased the export duty of jute bags from 80to 350 rupees per ton, and on October 5, 1949,plaintiff requested defendant to increase its letterof credit to cover the enhanced rate of export dutyimposed upon the goods that were to be shipped inOctober, reminding the latter that under theiragreement, any alteration in export duty was to befor the buyer's account. Copy of plaintiff's letter isattached hereto as Annex 'E';

On October 25, 1949, defendant, in compliance withplaintiff's request, increased the amount of its letterof credit by $10,986.25 to cover the increase inexport duty on 425 bales scheduled under thecontract for the shipment in October, 1949. A copy



"8.

"9.

"10.

"11.

of defendant's letter marked Annex 'F' is heretoattached;

On October 27, 1949, plaintiff wrote to defendantfor a further increase of $4,000.00 in its letter ofcredit to cover the shipment of 154 bales whichunder the contract should have been included in theJuly, August and September shipments. A copy ofsaid letter is attached hereto as Annex 'G';

On November 17, 1949, plaintiff wrote defendant aletter reiterating its claim for $4,000.00corresponding to the

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VOL. 33, MAY 28, 1970 49


increased export taxes on the 154 bales delivered todefendant from the defaulted shipments for themonths of July, August and September, 1949. Acopy of said letter is attached hereto as Annex 'H';

On February 6, 1951, defendant receivednotification from the Bengal Chamber ofCommerce, Tribunal of Arbitration in Calcutta,India, advising it that on December 28, 1950,plaintiff applied to said Tribunal for arbitrationregarding their claim. The Tribunal requested thedefendant to send them its version of the case. This,defendant did on March 1, 1951, thru the thenGovernment Corporate Counsel, former JusticePompeyo Diaz. A copy of the letter of authority isattached as Annex T;

The case was heard by the Tribunal of Arbitrationon July 5, 1951. Having previously requested theSecretary of Foreign Affairs for Assistance,defendant was represented at the hearing by thePhilippine Consulate General in Calcutta, India, byConsul Jose Moreno. A copy of the authority,consisting of the letter of Government CorporateCounsel Pompeyo Diaz, dated March 1, 1951, and



"12.

"13.

"14.

1st Indorsement thereon, dated March 2, 1951, areattached hereto as Annexes 'J' and 'J-1';

As presented to the Tribunal of Arbitration, thewhole case revolved on the question of whether ornot defendant is liable to the plaintiff for thepayment of increased export taxes imposed by theIndian Government on the shipments of jute sacks.Defendant contended that if the jute sacks inquestion were delivered by .plaintiff in the monthsof July, August, and September, 1949, pursuant tothe terms of the contract, then there would havebeen no increased export taxes to pay because saidincreased taxes became effective only on October 1,1949, while on the other hand, plaintiff argued thatthe contract between the parties and all papers anddocuments made parts thereto should prevail,including defendant's letter of September 29, 1949:

The Bengal Chamber of Commerce, Tribunal ofArbitration, refused to sustain defendant'scontention and decided in favor of the plaintiff,ordering the defendant to pay to the plaintiff thesum of 18,562 rupees and 8 annas. This award wasthereafter referred to the Calcutta High Courtwhich issued a decree affirming the award;

For about two years, the plaintiff attempted toenforce the said award through the PhilippineCharge de' Affaires in Calcutta, the Indian Legationhere in the Philippines, and the Department ofForeign Affairs, On September 22, 1952, plaintiff,thru the Department of Foreign Affairs, sought to

50



enforce its claim to which letter defendant repliedon August 11, 1952, saying that they are not boundby the decision of the Bengal Chamber of Commerceand consequently are not obligated to pay the claimin question. Copies of said letters are attached



"15.

"16.

"17.

hereto as Annexes K' and 'L', respectively;For more than three years thereafter, nocommunication was received by defendant from theplaintiff regarding their claim until January 26,1956, when Atty. S. Emiliano Calma wrote thedefendant a letter of demand, copy of which isattached hereto as Annex 'M';

On February 3, 1956, defendant's counsel repliedinforming Atty. S. Emiliano Calma that it refuses topay plaintiff's claim because the same has nofoundation in law and in fact. A copy of this letter isattached hereto as Annex 'N';

Thereafter, no communication was received bydefendant from plaintiff or its lawyers regardingtheir claim until June, 1959, when the presentcomplaint was filed. "FINALLY, parties thru their respective counsel,state that much as they have endeavored to agreeon all matters of fact, they have failed to do so oncertain points. It is, therefore respectfully prayed ofthis Honorable Court that parties be allowed topresent evidence on the disputed facts,"

Thereafter the parties submitted additional evidencepursuant to the reservation they made in the abovestipulation.

The appeal was elevated to the Court of Appeals but thelatter, by its resolution of January 27, 1964, elevated if.tothis. Court because the additional documents and oralevidence presented by the parties did not raise any factualissue, and said court further found that "the three assignederrors quoted above all pose questions of law."

As may be gathered from the pleadings and the factsstipulated, the action below was for the enforcement of aforeign judgment: the decision rendered by the Tribunal ofArbitration of the Bengal Chamber of Commerce inCalcutta, India, as affirmed by the High Court ofJudicature of Calcutta. The appealed decision -provides forits enforcement subject to the right reserved to appellee topresent evidence on the equivalent in Philippine currencyof the amount adjudged in Indian currency. The record



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does not disclose any evidence presented for that purposesubsequent to the rendition of judgment.

To secure a reversal of the appealed decision appellantclaims that the lower court committed the following errors:

"I

THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF-APPELLEE, A FOREIGN CORPORATION NOT LICENSED TOTRANSACT BUSINESS IN THE PHILIPPINES, HAS THE RIGHTTO SUE IN PHILIPPINE COURTS.

II

THE LOWER COURT ERRED WHEN IT FAILED TOCONSIDER PLAINTIFF-APPELLEE'S DEFAULT, AND INSTEADRELIED SOLELY ON THE AWARD OF THE BENGAL CHAMBEROF COMMERCE TRIBUNAL OF ARBITRATION.

III

THE LOWER COURT ERRED WHEN IT HELD THATPLAINTIFF-APPELLEE WAS NOT GUILTY OF LACHES."

The main issue to be resolved is whether or not the decisionof the Tribunal of Arbitration of the Bengal Chamber ofCommerce, as affirmed by the High Court of Judicature ofCalcutta, is enforceable in the Philippines.

For the purpose of this decision We shall assume thatappellee·contrary to appellant's contention·has the rightto sue in Philippine courts and that, as far as the instantcase is concerned, it is not guilty of laches. Thisnotwithstanding. We are constrained to reverse theappealed decision upon the ground that it is based upon aclear mistake of law and its enforcement will give rise to apatent injustice.

It is true that under the provisions of Section 50 of Rule39, Rules of Court, a judgment for a sum of money rendered



by a foreign court "is presumptive evidence of a right asbetween the parties and their successors in interest by asubsequent title", but when suit for its enforcement isbrought in a Philippine court, said judgment

52


Nagarmull vs. Binalbagan-Isabela, Sugar Co., Inc.

"may be repelled by evidence of a want of jurisdiction, wantof notice to the party, collusion, fraud, or clear mistake of

law or fact" (Italics supplied.)Upon the facts of record, We are constrained to hold that

the decision sought to be enforced was rendered upon a"clear mistake of law" and because of that it makesappellant·an innocent party·suffer the consequences ofthe default or breach of contract committed by appellee.

There is no question at all that appellee was guilty of abreach of contract when it failed to deliver one-hundredfifty-four Hessian bales which, according to the contractentered into with appellant, should have been delivered tothe latter in the months of July, August and September, allof the year 1949. It is equally clear beyond doubt that hadthese one-hundred fifty-four bales been delivered inaccordance with the contract aforesaid, the increase in theexport tax due upon them would not have been imposedbecause said increased export tax became effective only onOctober 1, 1949.

To avoid its liability for the aforesaid increase in theexport tax, appellee claims that appellant should be heldliable therefor on the strength of its letter of September 29,1949 asking appellee to ship the shortage. This argumentis unavailing because it is not only illogical but contrary toknown principles of fairness and justice. When appellantdemanded that appellee deliver the shortage of 154 bales, itdid nothing more than to demand that to which it wasentitled as a matter of right. The breach of contractcommitted by appellee gave appellant, under the law andeven under general principles of fairness, the right torescind the contract or to ask for its specific performance,in either case with right to demand damages. Part of the



damages appellant was clearly entitled to recover fromappellee growing out of the latter's breach of the contractconsists precisely of the amount of the increase decreed inthe export tax due on the shortage·which, because ofappellee's fault, had to be delivered after the effectivity ofthe increased export tax.

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Victorino vs. Lao

To the extent, therefore, that the decisions of the Tribunalof Arbitration of the Bengal Chamber of Commerce and ofthe High Court of Judicature of Calcutta fail to apply to thefacts of this case fundamental principles of contract, thesame may be impeached, as they have been sufficientlyimpeached by appellant, on the ground of "clear mistake oflaw", We agree in this regard with the majority opinion inIngenohl vs. Walter E. Olsen & Co. (47 Phil. 189), althoughits view was reversed. by the "Supreme Court of the UnitedStates (273 U.S. 541, 71 L, ed. 762) which at that time hadjurisdiction to review by certiorari decisions of this CourtWe can not sanction a clear mistake mistake of law thatwould work an obvious injustice upon appellant.

WHEREFORE, the appealed judgment is reversed andset aside, with costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal,

Zaldivar, Fernando, Teehankee, Barredo and Villamor,, JJ.,

concur. Castro, J., is on official leave.

Judgment reversed and.set. aside.

Notes.·Foreign judgments.·Foreign judgments arerecognized in the Philippines in the absence of want ofjurisdiction, want of notice to party, collusion, fraud, orclear mistake of law or fact (General Corporation of the

Philippines vs. Union Insurance Society of Canton, Ltd., L-2303, Dec, 29, 1951) and If not contrary to our 'laws,customs, and public policy (Querubin vs. Querubin, L-3693,



July 29, 1950, 47 O.G. No. 12 Supp. 315; Arca vs. Javier, L-6768, July 31, 1954, 50 O.G; 3583).

See also Boudard vs. Tait, 67 Phil. 170.

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