FIRST DIVISION

[G.R. No. L-3567. August 20, 1907. ]

KAY B. CHANG, ET AL., Plaintiffs-Appellees, v. ROYAL
EXCHANGE ASSURANCE CORPORATION OF LONDON,
Defendant-Appellant.

Del-Pan, Ortigas & Fisher, for Appellant.

John W. Sleeper, for Appellees.

SYLLABUS
1. FIRE INSURANCE; CONDITION PRECEDENT. policy of
fire insurance contained a clause providing that in the event of a
loss under the policy, unless the company should deny all
liability, as a condition precedent to the bringing of any suit by
the insured upon the policy the latter should first submit the
question of liability and indemnity to arbitration. Such a condition
is a valid one in law, and unless it be first complied with no
action can be brought.

2. ID.; ID.; WAIVER. If in the course of the settlement of a
loss. however, the action of the company or its agents amounts
to a refusal to pay, the company will be deemed to have waived
the condition precedent with reference to arbitration and a suit
upon the policy will lie.

D E C I S I O N

WILLARD, J . :

The arbitration clause in the fire policy in question in this case is
in part as follows:jgc:chanrobles.com.ph

"If a disagreement should at any time arise between the
corporation and the assured . . . respect of any loss or damage
alleged to have been caused by fire, every such disagreement,
when it may occur (unless the corporation shall deny liability by
reason of fraud or breach of any of the conditions, or because
the claimant has by some other means waived his rights under
the policy), shall be referred to the arbitration of some person to
be selected by agreement of both parties . . . And by virtue of
these presents it is hereby expressly declared to be a condition
of this policy, and an essential element of the contract between
the corporation and the insured that unless the corporation shall
demand exemption from liability by reason of fraud, breach of
conditions, or waiver, as stated, the assured, or claimant, shall
have no right to commence suit or other proceedings before any
court whatever upon this policy until the amount of the loss or
damage shall have been referred, investigated, and determined
as above provided, and then only for the amount awarded, and
the obtaining of such an award shall be a condition precedent to
the institution of any suit upon this policy and to the liability and
obligation of the corporation to pay or satisfy any claim or
demand based upon this policy."cralaw virtua1aw library

The conditions contained in this clause of the policy are valid,
and no action can be maintained by the assured unless as
award has been made or sought, or unless the company has
denied liability on some of the grounds stated therein. (Hamilton
v. Liverpool, London and Globe Insurance Company, 136 U.S.,
242.) The duty of asking a submission to arbitration does not
rest exclusively upon the company. If it takes no action in that
respect it is the duty of the assured to do so, and to ask that
arbitrators be appointed for the purpose of determining the
amount of the loss, in accordance with the provisions of this
policy. The company may, however, by its conduct, waive the
provisions of this clause relating to arbitration. In fact, this is
expressly stated in the policy itself, as will be seen from the
quotation above made, and the principal question in this case is
whether there has been such waiver or not.

Simple silence of the company is not sufficient. If it remains
passive, it is the duty of the assured to take affirmative action to
secure arbitration. Neither will the failure of the company to
return proofs of loss, or its failure to point out defects therein,
amount to a waiver of the arbitration clause. These acts may
amount to a waiver of the clause requiring the furnishing of
proofs of loss, but such an action can not constitute proof that
the company has refused to pay the policy because the
defendant has failed to comply with the terms and conditions
thereof.

It is claimed, however, by the plaintiffs and appellees, that
affirmative action was taken by the company indicating its
purpose not to pay anything to the insured.

The property insured, consisting of a stock of goods, was
entirely destroyed by a fire on the 11th day of March, 1905. On
the same day the plaintiffs notified the agent of the defendant of
the loss and within fifteen days thereafter presented to the
company a detailed statement of the articles which had been
destroyed and of their value. Plaintiffs were notified by the
company that this proof was insufficient and that they must
obtain the sworn certificates of two merchants to the truth of
their statement. This was done within a few days. Plaintiffs were
again notified that their proof was insufficient. Various interviews
were had between the agent of the defendant and the plaintiff
Chang and the plaintiffs lawyer between the latter part of March
and the 21st of June, 1905. During this time the plaintiffs
furnished additional evidence relating to the justice of their claim
and were told that their proofs were still insufficient. No
indication was made by the companys agent as to what other
proofs should be furnished, he offering, however, at one of the
interview to settle the claim for 3,000 pesos. This offer was
refused by the plaintiffs. In the final interview on June 21,
between the companys agent and the counsel for the plaintiffs,
the former said:jgc:chanrobles.com.ph

"I can not go on with your case, Mr. Sleeper; I have not enough
proof.

"Q. What did Mr. Sleeper state?

"A. I think, so far as I can remember, that he said he wanted to
bring the matter to a basis, but I would not say so to the
court."cralaw virtua1aw library

This action was commenced on the 24th of June, 1905. The
plaintiffs at no time requested the appointment of arbitrators.
After the suit had been commenced, and on the same day, the
defendant requested in writing that arbitrators be appointed in
accordance with the terms of the policy. This was the first
communication in writing which the defendant made to the
plaintiffs after the loss.

Under all the circumstances in the case, we think that the
statement made by the companys agent on the 21st day of
June amounted to a denial of liability on the ground that proper
proofs of loss had not been presented and that, therefore, there
had been a failure of the assured to comply with one of the
terms of the policy. The delay of the company in taking any
affirmative action between the 11th day of March and the 21st
day of June; its repeated statements that the proofs were
insufficient without indicating in any way what other proofs
should be furnished, and its final statement that it could go no
further with the case, was sufficient evidence to show that it did
not intend to pay. This view is somewhat confirmed by what
took place afterwards before the arbitrators, both of whom were
appointed by the defendant in accordance with the terms of the
policy. At the first meeting of these arbitrators the defendant
objected to any award being made upon the ground that the
proof of loss which had been furnished was sworn to before a
notary public and not before the municipal judge, as required by
the provisions of the Code of Commerce.

In the case of The Phenix Insurance Company v. Stocks (149
Ill., 319) the company wrote two letters to the insured, in the first
of which they said:jgc:chanrobles.com.ph

"The circumstances under which this fire occurred are such that
we do not feel justified in extending to you any measure of
grace, in considering your claim, which you may not fairly
demand under the terms of the policy. There is at least one fact
that looks very peculiar, and until our minds are relieved of the
doubts which we have come to receive in regard to the integrity
of this loss, we shall offer you no benefits that you may not
demand under a strict construction of the policy."cralaw
virtua1aw library

In the other letter the company said:jgc:chanrobles.com.ph

"Replying to your letter of August 23d, received this morning, we
beg to say that our views of this matter have been fully
expressed in our previous correspondence, and have nothing at
this time to add."cralaw virtua1aw library

The court said (p. 334):jgc:chanrobles.com.ph

"The mere silence of the company would not amount to a waiver
of its right to insist upon the condition [as to arbitration], but
when it placed its determination upon the grounds stated in the
correspondence, which were such as could not be submitted to
arbitration under the provisions of the policy, it must be held to
have waived the condition requiring arbitration (German Ins. Co.
v. Gueck, 130 Ill., 345), and especially is this so where the
assured would be misled to their prejudice into bringing suit
upon the policy without first having obtained an award. The
company was not bound to speak at all., but when asked in
effect, what its determination was, if it answered, good faith
required that it should disclose the true ground of its
defense."cralaw virtua1aw library

It is apparent in the case at bar that the counsel for the plaintiffs
sought the interview of June 21 for the express purpose of
finding out what the decision of the company was, and after
receiving the answer which has been heretofore quoted, the
plaintiffs were fully justified in bringing the action at once,
without seeking any arbitration.

Judgment was entered in the court below in favor of the
plaintiffs for the sum of 5,265 pesos and 25 centavos, with
interest from the 24th of June, 1905, and costs. It is claimed by
the appellant that the finding of the court below as to the amount
of the loss is not justified by the evidence. A great many
witnesses were presented by each side, but the only persons
who had any real knowledge as to the amount of stock in the
store at the time of the fire, and as to its value, were the plaintiff
Chang and his clerk. They testified that it was worth more than
10,000 pesos, the amount named in the policy. No one of the
witnesses for the defendant fixed the value of the stock then on
hand at more than 500 pesos. The arbitrators appointed by the
defendant found that the value was 2,106 pesos. The
defendants agent testified that during negotiations he offered to
settle for 3,000 pesos. That the plaintiff (Chang) was carrying on
a business of some importance was proved at the trial by the
introduction of the records of the customs in Cebu, by which it
appeared that between the month of July, 1904, and February,
1905, he had imported through the custom-house goods which
with the duty added were of the value of 4,758 dollars and 48
cents, money of the United States, and the plaintiff, Chang,
testified that he had no hand at the time of the fire a large
amount of property, products of the country, which were not
imported through the customs.

In view of all the evidence in the case, we can not say that it
preponderates against the finding of the judge below as to the
amount of the loss.

The judgment of the court below is hereby affirmed, with the
costs of this instance against the Appellant.

Torres, Johnson, and Tracey, JJ., concur.

G.R. No. L-21549 October 22, 1924
TEODORO VEGA, plaintiff-appellee,
vs.
THE SAN CARLOS MILLING CO., LTD., defendant-appellant.
Fisher, Dewitt, Perkins, & Brady, John R. McFie, Jr., Jesus
Trinidad, and Powell & Hill for appellant.
R. Nolan and Feria & La O for appellee.

ROMUALDEZ, J .:
This action is for the recovery of 32,959 kilos of centrifugal
sugar, or its value, P6,252, plus the payment of P500 damages
and the costs.
The defendants filed an answer, and set up two special
defenses, the first of which is at the same time a counterclaim.
The Court of First Instance of Occidental Negros that tried the
case, rendered judgment, the dispositive part of which is as
follows:
By virtue of these considerations, the court is
of opinion that with respect to the complaint,
the plaintiff must be held to have a better right
to the possession of the 32,959 kilos of
centrifugal sugar manufactured in the
defendants' central and the latter is sentenced
to deliver them to the plaintiff, and in default,
the selling price thereof, amounting to
P5,981.06 deposited in the office of the clerk
of the court. Plaintiff's claim for damages is
denied, because it has not been shown that
the defendant caused the plaintiff any
damages. Plaintiff is absolved from
defendant's counterclaim and declared not
bound to pay the such claimed therein.
Plaintiff is also absolved from the
counterclaim of P1,000, for damages, it not
having been proved that any damages were
caused and suffered by defendant, since the
writ of attachment issued in this case was
legal and proper. Without pronouncement as
to costs.
So ordered.
The defendant company appealed from this judgment, and
alleges that the lower court erred in having held itself with
jurisdiction to take cognizance of and render judgment in the
cause; in holding that the defendant was bound to supply cars
gratuitously to the plaintiff for the cane; in not ordering the
plaintiff to pay to the defendant the sum of P2,866 for the cars
used by him, with illegal interest on said sum from the filing of
the counterclaim, and the costs, and that said judgment is
contrary to the weight of the evidence and the law.
The first assignment of error is based on clause 23 of the Mill's
covenants and clause 14 of the Planter's Covenant as they
appear in Exhibit A, which is the same instrument as Exhibit 1.
Said clauses are as follows:
23. That it (the Mill Party of the first part)
will submit and all differences that may arise
between the Mill and the Planters to the
decision of arbitrators, two of whom shall be
chosen by the Mill and two by the Planters,
who in case of inability to agree shall select a
fifth arbitrator, and to respect and abide by the
decision of said arbitrators, or any three of
them, as the case may be.
x x x x x x x x x
14. That they (the Planters--Parties of the
second part) will submit any and all
differences that may arise between the parties
of the first part and the parties of the second
part of the decision of arbitrators, two of
whom shall be chosen by the said parties of
the first part and two by the said party of the
second part, who in case of inability to agree,
shall select a fifth arbitrator, and will respect
and abide by the decision of said arbitrators,
or any three of them, as the case may be.
It is an admitted fact that the differences which arose between
the parties, and which are the subject of the present litigation
have not been submitted to the arbitration provided for in the
above quoted clauses.
Defendant contends that as such stipulations on arbitration are
valid, they constitute a condition precedent, to which the plaintiff
should have resorted before applying to the courts, as he
prematurely did.
The defendant is right in contending that such covenants on
arbitration are valid, but they are not for the reason a bar to
judicial action, in view of the way they are expressed:
An agreement to submit to arbitration, not
consummated by an award, is no bar to suit at
law or in equity concerning the subject matter
submitted. And the rule applies both in
respect of agreements to submit existing
differences and agreements to submit
differences which may arise in the future. (5
C. J., 42.)
And in view of the terms in which the said covenants on
arbitration are expressed, it cannot be held that in agreeing on
this point, the parties proposed to establish the arbitration as a
condition precedent to judicial action, because these clauses
quoted do not create such a condition either expressly or by
necessary inference.
Submission as Condition Precedent to Suit.
Clauses in insurance and other contracts
providing for arbitration in case of
disagreement are very similar, and the
question whether submission to arbitration is
a condition precedent to a suit upon the
contract depends upon the language
employed in each particular stipulation.
Where by the same agreement which creates
the liability, the ascertainment of certain facts
by arbitrators is expressly made a condition
precedent to a right of action thereon, suit
cannot be brought until the award is made.
But the courts generally will not construe an
arbitration clause as ousting them of their
jurisdiction unless such construction is
inevitable, and consequently when the
arbitration clause is not made a condition
precedent by express words or necessary
implication, it will be construed as merely
collateral to the liability clause, and so no bar
to an action in the courts without an award. (2
R. C. L., 362, 363.)
Neither does not reciprocal covenant No. 7 of said contract
Exhibit A expressly or impliedly establish the arbitration as a
condition precedent. Said reciprocal covenant No. 7 reads:
7. Subject to the provisions as to arbitration,
hereinbefore appearing, it is mutually agreed
that the courts of the City of Iloilo shall have
jurisdiction of any and all judicial proceedings
that may arise out of the contractual relations
herein between the party of the first and the
part is of the second part.
The expression "subject to the provisions as to arbitration,
hereinbefore appearing" does not declare such to be a condition
precedent. This phrase does not read "subject to the
arbitration," but "subject to the provisions as to arbitration
hereinbefore appearing." And, which are these "provisions as to
arbitration hereinbefore appearing?" Undoubtedly clauses 23
and 14 quoted above, which do not make arbitration a condition
precedent.
We find no merit in the first assignment of error.
The second raises the most important question in this
controversy, to wit: Whether or not the defendant was obliged to
supply the plaintiff which cars gratuitously for cane.
The Central, of course, bound itself according to the contract
exhibit A in clause 3 of the "Covenant by Mill," as follows:
3. That it will construct and thereafter maintain
and operate during the term of this agreement
a steam or motor railway, or both, for
plantation use in transporting sugar cane,
sugar and fertilizer, as near the center of the
can ands as to contour of the lands will permit
paying due attention to grades and curves;
that it will also construct branch lines at such
points as may be necessary where the
present plantations are of such shape that the
main line cannot run approximately through
the center of said plantations, free of charge
to the Planters, and will properly equip said
railway with locomotives or motors and cars,
and will further construct a branch line from
the main railway line, mill and warehouses to
the before mentioned wharf and will further
construct yard accomodations near the sugar
mill. All steam locomotives shall be provided
which effective spark arresters. The railway
shall be constructed upon suitable and
properly located right-of-way, through all
plantations so as to give, as far as
practicable, to each plantations equal benefit
thereof; said right-of-way to b two and one-
half meters in width on either said from the
center of track on both main line and switches
and branches.
By this covenant, the defendant, the defendant bound itself to
construct branch lines of the railway at such points on the estate
as might be necessary, but said clause No. 3 can hardly be
construed to bind the defendant to gratuitously supply the
plaintiff with cars to transport cane from his fields to the branch
lines agreed upon on its estate.
But on March 18, 1916, the defendant company, through its
manager Mr. F. J. Bell, addressed the following communication
to the plaintiff:
DEAR SIR: In reply to yours of
March 15th.
Yesterday I tried to come out to San
Antonio to see you but the railway
was full of cars of San Jose and I
could not get by with my car. I will try
again as soon as I finish shipping
sugar. The steamer is expected
today.
I had a switch built in the big cut on
San Antonio for loading your cane
near the boundary of Santa Cruz. will
not this sufficient? We have no
another switch here and I hope you
can get along with the 3 you now
have.
Some of the planters are now using
short switches made of 16-lb.
portable track. These can be placed
on the main line at any place and
cars run off into the field and loaded.
I think one on your hacienda would
repay you in one season.
The rain record can wait.
Sincerely yours,
SAN CARLOS MILLING CO.,
LTD. (Sgd.) F.J. BELL
"Manager"
It is suggested to the plaintiff in this letter that he install a 16-lb.
rail portable track switch, to be used in connection with the main
line, so the cars may run on it. It is not suggested that he
purchase cars, and the letter implies that the cars mentioned
therein belong to the defendant.
As a result of this suggestion, the plaintiff bought a portable
track which cost him about P10,000, and after the track was
laid, the defendant began to use it without comment or objection
from the latter, nor payment of any indemnity for over four
years.
With this letter Exhibit D, and its conduct in regard to the same,
the defendant deliberately and intentionally induced the plaintiff
to believe that by the latter purchasing the said portable track,
the defendant would allow the free use of its cars upon said
track, thus inducing the plaintiff to act in reliance on such belief,
that is, to purchase such portable track, as in fact he did and
laid it and used it without payment, the cars belonging to the
defendant.
This is an estoppel, and defendant cannot be permitted to
gainsay its own acts and agreement.
The defendant cannot now demand payment of the plaintiff for
such use of the cars. And this is so, not because the fact of
having supplied them was an act of pure liberality, to which
having once started it, the defendant was forever bound, which
would be unreasonable, but because the act of providing such
cars was, under the circumstances of the case, of compliance of
an obligation to which defendant is bound on account of having
induced the plaintiff to believe, and to act and incur expenses on
the strenght of this belief.
The question of whether or not the plaintiff was under the
necessity of first showing a cooperative spirit and conduct, does
not affect the right which he thus acquired of using the cars in
question gratuitously.
We do not find sufficient reason to support the second
assignment of error.
The point raised in the third assignment of error is a
consequence of the second. If the plaintiff was entitled, as we
have said, to use the cars gratuitously, the defendant has no
right to demand any payment from him for the use of said cars.
The other assignments of error are consequences of the
preceding ones.
We find nothing in the record to serve as a legal and sufficient
bar to plaintiff's action against the defendant for the delivery of
the sugar in question, or its value. A discussion as to the
retention of this deposit to apply upon what is due by reason
thereof made in the judgment appealed from, is here necessary.
The parties do not raise this question in the present instance.
Furthermore, it has not been proven that the plaintiff owes the
defendant anything by reason of such deposit.
The judgment appealed from is hereby affirmed with the costs of
this instance against the appellant. So ordered.
Johnson, Street and Villamor, JJ., concur.

G.R. Nos. L-26216 and 26217 March 5, 1927
MONICO PUENTEBELLA, ET AL., plaintiffs-appellants,
vs.
NEGROS COAL CO., LTD., ET AL., defendants-appellants.
H. V. Bamberger and Simeon Bitanga for plaintiffs-appellants.
Eliseo Hervas for defendants-appellants.
OSTRAND, J .:
These are appeals by both parties from the following decision of
the Court of First Instance of Occidental Negros:
Due to the close connection between these
two cases, they were tried jointly by
agreement of the parties. They are actions for
there recovery of damages for the sum of
P50,000 and P40,000, respectively.
It is alleged that the plaintiffs, having bound
themselves to plant sugar cane which the
defendants, in turn, promised to mill in a
sugar central which they were to erect,
complied with their contract, but the latter did
not erect the central in due time, this delay
causing the former to lose all of the said crop.
It is further prayed that the contracts executed
for that purpose be cancelled.
It is alleged in the answer of the defendants
that the Negros Coal Co., Ltd., was dissolved
on June 16, 1923, by an order of the Court of
First Instance of Iloilo, but that its rights,
actions and obligations were placed in charge
of the commercial firm of Hijos de I. de la
Rama & Co., of which the defendant Esteban
de la Rama is the manager; that due to force
majeure, fortuitous events, and other
circumstances independent of the will of the
defendants, they were unable to complete the
construction of the sugar central within due
time and that the plaintiffs, after the
construction of the central, refused to mill their
cane and did nothing to lessen their losses.
In the first case, they presented a
counterclaim for P18,000 in damages for
violation of the milling contract, and a cross-
complaint for the foreclosure of the mortgage
credits against Juliana Puentebella Vda. De
Ferrer, for the sum of P39,114.63 and a
penalty of P5,867.19; against Pedro Ferrer,
for the sum of P19,557.30, and against
Francisco Ferrer for the sum of P19,557.30,
plus P2,933.59 for attorney's fees and
expenses of litigation. In the second case,
they likewise presented a counterclaim of
P1,800 as damages for violation of the milling
contract, and a cross-complaint for the
foreclosure of the mortgage credit for the sum
of P44,169.90, plus a penalty of P6,625.48.
And, moreover, in the first case it is alleged as
a special defense, that it having been agreed
in the contract upon which the plaintiffs base
their action, that before commencing any
litigation they would submit their differences to
arbitrators, the plaintiffs have done nothing to
comply with this stipulation. Indeed,
paragraph 17 of the contract, Exhibit A, reads
as follows:
"That they shall submit each and every one of
the differences that may arise between the
party of the first part and the party of the
second part to the decision of arbitrators, two
of whom shall be selected by the party of the
first part and two by the party of the second
part, who, in case of a disagreement, shall
select a fifth arbitrator, and they shall respect
and abide by the decision of said arbitrators
or any three of them, as the case may be."
As may be seen, this clause states absolutely,
and not as a mere condition precedent to
judicial action, that all differences between the
contracting parties shall be submitted to
arbitrators, who decision the parties shall
respect and abide by, and the clause is,
therefore, void. (Rudolph Wahl & Co. vs.
Donaldson, Sims & Co., 2 Phil., 301, and
Teodoro Vega vs. San Carlos Milling Co.,
Ltd., G.R. No. 21549, promulgated October
23, 1924.) This is on one hand, while on the
other are the documents, Exhibits 19, 20 and
21 executed separately by the plaintiffs on the
same date as Exhibit A, all representing
mortgage loans, and with the exception of
Exhibit 20, they further more contain a
stipulation on the part of Hijos de I. dela
Rama to finance the farm laborers of the
plaintiffs and to mill the cane in the sugar
central of the Negros Coal Co., Ltd., but
contain no agreement to submit the
differences that might arise between the
parties to arbitrators. These documents
constitute a transaction of binding force,
because they define the duty and obligation of
each party, which is not the case in Exhibit A,
in which an option is left to the plaintiffs to
miss or not to mill their sugar cane in said
central because, as may be inferred from its
context, the purpose was only to obtain, as
the Negros Coal Co., Ltd., did obtain, the right
of way on the plaintiffs' land.
At the trial of these cases the parties
submitted a stipulation of facts, paragraph 5
of which, literally, reads as follows:
"That the partnership denominated "Hijos de I.
de la Rama" was organized in the 1907 for a
period of ten years; that said period having
expired in 1917, Esteban de la Rama was
appointed liquidator of the property of the
partnership by agreement between the
members; that after the liquidation had
commenced, and before the year 1920,
Esteban de la Rama bought all the rights of
his copartners in the property of the said firm
in liquidation, to be paid in installments, with
the right to use the firm name, but with the
obligation no to dispose of the property of the
firm in liquidation while the price stipulated in
the contract of sale of rights remained
unpaid;" Esteban de la Rama being,
therefore, according to this agreement, the
sole owner of the firm of Hijos de I. de la
Rama, and having taken over the rights,
actions and obligations of the Negros Coal
Co., Ltd., as alleged in the first paragraph of
the answer, it appears that he is at present in
possession of all the rights, actions and
obligations which originated from contractual
relations entered into both cases by the
plaintiffs on the one side and the, then,
corporation, known as the Negros Coal Co.,
Ltd., and the Hijos de I. de la Rama on the
other, by virtue of the documents, Exhibits A,
B, 19, 20 and 21.
On March 7, 1924, after the plaintiffs had filed
their complaint in case No. 2911, the plaintiff
Pedro Ferrer died, and intestate proceedings
having been instituted, the court, upon
motion, and under date of August 23, 1924,
ordered the substitution, in this case, of the
deceased Pedro Ferrer by Francisco Ferrer,
judicial administrator of his estate.
Exhibit A is a contract executed in Iloilo by
Esteban de la Rama, in his capacity as
President of the Negros Coal Co., Ltd., on the
one hand, and by Juliana Puentebella, Pedro
Ferrer and Francisco Ferrer on the other,
which contract contains, among other things,
a stipulation that the party of the first part shall
erect a sugar central in the sitio denominated
Labilabi, Escalante, Occidental Negros, with a
railway across the land of the party of the
second part for the transportation of sugar
cane to the central, the said party of the
second part binding itself to mill the sugar
cane in said central, receiving 45 per cent of
the total amount of the sugar manufactured;
and the party of the second part grants an
easement of way on their land to the party of
the first part and, at its option, 'to mill or not to
mill' its cane in the said sugar central.
Exhibits 19, 20 and 21, as has already been
stated, are contracts of mortgage loan
executed separately, the first by Juliana
Puentebella, the second by Pedro Ferrer and
the third by Francisco Ferrer, as debtors, and
by the Hijos de I. dela Rama, as creditor in
each of said contract, it being further
stipulated in the first and the third contract
that the loans were to be used exclusively in
the production of sugar cane on the
mortgaged land; that the mortgagors bound
themselves to mill their sugar cane every year
in course of construction, the central to
receive 45 per cent of the total sugar
manufactured from said cane, and that the
amounts borrowed should be amortized by an
annual payments during ten agricultural
harvests; and while, as has been said, Exhibit
20 is simply a mortgage loan by reason of its
date, notwithstanding that it is the same as
that of Exhibits A, 19 and 21, or July 23, 1920,
from the date of the notarial acknowledgment
in connection with Exhibit A, executed jointly
by the plaintiffs in case No. 2911, it can be
inferred that this loan, as the others, was
made by the commercial firm of Hijos de I. de
la Rama for the purpose of financing the
haciendas of the plaintiffs for the cultivation of
sugar cane and to supply the sugar central of
the Negros Coal Co., Ltd.
Exhibit B executed on June 17, 1920, by and
between Monico and Luis Puentebella on the
one hand and Hijos de I. de la Rama on the
other, is practically the same as Exhibits 19,
and 21, and provides for a mortgage loan for
agricultural purposes and milling in said
central, but with the following additional
clause:
In case the proposed sugar central of the
Negros Coal Co., Ltd., is not in position the
first year to mill the sugar cane of the
mortgagor in time, the mortgagee binds itself
to furnish the mortgagor with the sum of from
P20,000 to P pesos, Philippine currency,
for the erection, under the supervision of the
mortgagors, of a 12-horse-power mill for
grinding muscovado sugar, and to install and
equip the same with all the necessary
material for the operation and milling of
muscovado sugar; in that case of their sugar
cane planted in Jonobjonob, Escalante,
Occidental Negros, and the said mortagagees
will receive one-third of the sugar
manufactured by the mortgagors in
consideration of all of the foregoing.
By virtue of said contracts A, B, 19, 20 and
21, all of the plaintiffs in both cases tilled the
mortgaged land and planted sugar cane
during the months of September, October,
November and December of 1920 and
January of 1921 and, at about the time the
cane was ripe Monico Puentebella at various
times advised De la Rama, by letter, that his
cane was ripening and he, therefore,
demanded the erection of a mill for
muscovado sugar in accordance with the
agreement in the clause quoted from Exhibit
B, which brought forth the following reply:
PROGRESO 28, ILOILO, March 29, 1921
MR. MONICO PUENTEBELLA
Bacolod, Occidental Negros
MY DEAR SIR: Replying to your letter of the 25th inst. which I
have just received, I wish to state the following: That the
Escalante Central will be erected; in fact, it is also wish to state
that about two weeks ago all of the plans of said central were
forwarded to Mr. Fortunato Fuentes, and that long ago all of the
bricks, both common and fireproofs, as well as the cement and
lime were sent there. Therefore, there is no need for you to
worry about your sugar cane planted in Cervantes, for I have
more interest than you in milling it in order to recover the
P30,000 which I have advanced to you for said purpose.
Very respectfully,
E. DE LA RAMA
Mrs. Juliana Puentebella, in company with her son Francisco
Ferrer, also made a trip to Iloilo in March, 1922, for a
conference with Esteban de la Rama and to advise him that
their cane, as well as the cane of her sons Pedro and Francisco
was ripe and some of it over-ripe, and asked permission to mill it
in the San Carlos sugar Central, Occidental Negros, in view of
the fact that neither the sugar central of the Negros Coal Co.,
Ltd., nor the railway had been constructed, but Mr. De la Rama
laid down certain conditions which the petitioner considered
burdensome; so nothing was done about milling the cane in the
San Carlos Central.
Esteban de la Rama while testifying concerning the petition of
Mr. Monico Puentebella for the construction of a muscovado
sugar mill , said:
For various reasons. Because when Mr. Monico Puentebella
required me to comply with this clause of the contract, he did so
at a time when I was building the central and I figured that the
machinery would be installed in my mill, as work had already
been begun and Mr. Fuentes was looking for the machinery and
was to install it before Mr. Puentebella's cane had ripened and
the P20,000 would not be needed. In the second place, before
that date, when Mr. Puentebella demanded the P20,000 of me, I
had received a letter from the Bank of the Philippine Islands.
From the contents of the letter received from the Bank of the
Philippine Islands, I was of the opinion that said Bank was the
owner of the land and held Torrens title thereto, and that it did
not understand why Mr. Puentebella was cultivating this land
which belonged to it without its permission, and that it did not
understand why Mr. Puentebella to make a contract with it; and
as Mr. Puentebello refused to do so, I thought it useless for us
to meddle with a property which was not ours.
It having been positively stated in Exhibit B that the mortgagors
Monico and Luis Puentebella are the undivided coowners with
the Hijos de I. de le Rama and the Bank of the Philippine
Islands of the mortgaged property, the last statement of Esteban
de la Rama, in his testimony aboved quoted, that he considered
it useless to build the mill on the said land, appears to be merely
an excuse for not voluntarily complying with his obligation, and
his estimate as to the completion of the central which he was
building having been made by himself alone, and without the
concurrence of the other contracting party, is not a sufficient
reason for excusing him, for the fulfillment of a contract cannot
be left to the will of one of the contracting parties.
The result was that on account of the said reasoning of Mr. de la
Rama with respect to the Puentebellas and his demands upon
the Ferrers, the cane belonging to both of them was left in the
fields without being milled, and with the exception of a small
quantity belonging to the Puentebellas which they had sent to
the San Carlos Central for milling was drying out and
deteriorating and became a complete loss.
It is alleged, nevertheless, that the delay in the construction of
the central was due to force majeure, fortuitous events and
other circumstances independent of the will of the defendants,
in support of which they attempted to prove that there had been
a strike in the factory of George Fletcher & Co., Ltd., Derby,
England, from whom they had ordered their machinery, which
strike delayed matters, but the evidence in this particular
respect consists of reports from the agent of the defunct firm of
the Cooper Company, with offices in the Philippine Islands,
through which company the said machinery was contracted for,
and, naturally, as it comes from an interested party and is,
moreover, hearsay, it is of little or no value. And even if it be
considered competent evidence, the total loss of the plaintiffs'
crop cannot be attributed to force majeure, fortuitous events or
other circumstances, for it was provided in the construction of
the central, a mill would be furnished for the manufacture of
muscovado sugar which would not only mill the cane of the
Puentebellas, but also that of the defendant Esteban de la
Rama, and the same would have been done with the cane of
the Ferrers, because their lands adjoin.
It is also claimed that the frequent rains, inundations and
crumbling of the earth considerably interrupted the construction
of the earth considerably interrupted the construction of the
central, and, judging from Exhibits 6-A to 6-X, which are all
letters from the person in charge of its construction, and which
include the period from November 5, 1920 to January 22, 1922,
approximately one year and four months, it rained almost
incessantly, which appears to have been an unusual occurrence
of which the Weather Bureau should have had knowledge, and
whose opinion would have been more impartial.
Conceding, however, a certain value to this contention, it would,
nevertheless, seem that these circumstances should have
caused Mr. De la Rama to take all the necessary precautions for
the purpose of insuring the milling of the plaintiffs' crop,
especially so as it appears from the following letter that he
himself foresaw losses:
February 18, 1921
THE COOPER COMPANY
Iloilo, Iloilo , P. I.
MY DEAR SIRS: In view of the long delay in the manufacture of
the equipment which we have contracted for our central at
Escalante, a delay which is almost double the time specified in
the contract and which is causing us a great loss in not being
able to mill at present, we have decided to cancel the order for
said equipment, and you will do us the favor of returning the
P50,000 which we advanced at the time of signing the contract,
together with the interest thereon.
Yours sincerely,
HIJOS DE I. DE LA RAMA
BY E. DE LA RAMA
It is likewise alleged that after the central had been constructed
the plaintiffs refused to mill their cane there and did nothing to
minimized their losses, but the delay in constructing the said
central having been expressly admitted in their previous
defense, the conclusion is that it was completed after the
season was over and the cane was over-ripe, for which reason,
although the defendants were notified that the central would
begin to operate within the first fifteen days of September, 1922,
they cease to cut their cane, because it was already useless
and dried out as stated in the following letters of the plaintiffs:
BACOLOD, September 2, 1922.
Messrs. HIJOS DE I. DE LA RAMA
P. O. Box 298
Iloilo, Iloilo
MY DEAR SIRS: In answer to your letter of the 26th of last
month, I have to inform you that my cane is completely dried out
and useless for milling purposes. You are not ignorant of cause
of this unfortunate result of my efforts in planting cane on the
Cervantes Estate, for I have not even been able to produce
muscovado sugar from it on account of your failure to comply
with that part of our contract which binds you to make us a
further loan of P20,000 in order to obtain machinery for that
purpose in case of delay in the completion of your central, as, in
fact, was the case. This advice from you has come extremely
late and at a time when it is impossible to remedy the situation,
as it is impossible to revive dead cane. You know very well that
these disastrous consequences of my affairs are due to no fault
of mine, but are due to your failure in not complying with your
part.
Very respectfully,
ESCALANTE,
OCCIDENTAL NEGROS,
November 2, 1925

MR. FORTUNATO FUENTES
Manager of the H. I. R. Central
Labilabi, Escalante, Occidental Negros.
MY DEAR SIR: In answer to your favor of September 28th last, I
must advise you that the fields planted with sugar cane,
according to the terms of our contract to mill it in the H. I. R.
Central, are completely dead on account of not having been
milled in said central at the proper time, for which reason it has
been impossible to plant again, the non-fulfillment of said
contract having caused unconsiderable damage.
Very respectfully,
FRANCISCO FERRER
Administrator of J. Vda. de
Ferrer and Pedro Ferrer
It is said in these exhibits that the cane was useless, dried out
and dead, which fact is proven by Exhibits D, E and F,
communications to Monico Puentebella from the San Carlos
Central to which Central, as already stated, Mr. Puentebella
sent a few tons of cane for milling, which letters, dated from
April 2 to 9, 1922, imply that they sent the cane there not later
than the month of March, and, as may be seen from the letters,
the milling was a failure and a complete loss, because said cane
was already over-ripe and because it was sent from Escalante
to the municipality of San Carlos for shipment, which is the only
means of transportation, even today, between the said towns,
and very costly; and considering that the cane which was sent
to idea may be formed of the condition of the plaintiffs' sugar-
cane fields in said month of April, and so disastrous was this
shipment that, according to the testimony of Luis Puentebella,
the share of the agriculturist was not even sufficient to cover the
expenses.
On the other hand, Francisco Ferrer, after the conference of him
and his mother with Esteban de la Rama, attempted to mill his
cane in the sugar mill on the neighbor boring estate belonging to
Rosario Sanz, but the latter refused to do so because the
season was over.
If therefore, the plaintiffs' cane was over-ripe in March, 1922 it
seems certain that when they were notified on September 28,
1922 (Exhibit P addressed to the Ferrers) and on August 26,
1922 (Exhibit 16 addressed to Monico to mill next September),
or when the central commenced to produce sugar on
September 15, 1922, in accordance with the stipulation of facts,
the cane at the end of this period and useless for milling, and
moreover if in March, according to the result of the milling at the
San Carlos, it did not given an average yield and was milled at a
loss, we are more than justified in saying that five and a half
months afterwards the yield would have been almost nothing.
The witnesses for the defendants testified, however, that cane
on virgin land used for the cultivation of sugar cane, lasts about
eighteen months and Mr. De la Rama stretched it to 24 months,
which implies that the plaintiffs cane was still in condition to be
milled when the central commenced to operate in September,
1922, because according to the evidence, the plaintiffs' cane
was planted in September, October, November and December,
1920; and in January, 1921; but applying this same theory to the
plaintiffs first plantings, in April, 1922, they twenty months old, or
more than eighteen, for which reason, were sent to San Carlos
in March they could no longer yield an average production, as
stated by the Central, and, naturally, the best evidence as to
whether the cane is still use full is not the theory of how long it
will last, but the result of the milling.
In "Cane Sugar," by Noel Deerr, page 29, it is said:
The harvest season generally extends over a period of four to
six months and exceptionally in the arid localities may be
continued over the whole year with such stops only as are
required for overhaul and repairs. At the beginning of the crop
an unripe cane of lower sugar content is harvested; the
percentage of sugar gradually increases and is usually at a
maximum in the third and fourth months of harvest, after which it
increases as the cane becomes over-ripe. Taking Cuba as an
example, in December the cane will contain from 10 per cent toll
per cent of sugar, the maximum of 14-15 per cent being
obtained in March and April, after which a fall occurs, which is
very rapid if the crop is prolonged after the seasonal mid-year
rains fall. It is easy to see that the combined questions of factory
capacity, capital lost, duration of harvest, and yield per cent on
cane form a most important economic problem, which is usually
further complicated by a deficiency in the labour supply.
Early observations, later confirmed by chemists upon the
establishment of sugar centrals in this province, coincide with
Mr. Deerr's theory, because, after the cane is ripe, what is called
a "reversion" takes place in the juice or the saccharose is
converted into glucose, which takes place very rapidly, the cane
becoming more fibrous each time, until it finally dries up and
dies.
The plaintiffs Ferrer claim to have lost 120 lacsas of sugar cane,
and the plaintiffs Puentebella, allege a loss of 115 lacsas (a
lacsa a unit of 10,000 sugar-cane plants) which they both
testified having planted in their respective fields. In regard to the
former's plants in the affidavit of Antonio M. Lizares, then an
employee of Esteban de la Rama, defendants' Exhibit 4, it is
said that the witness inspected the Canquinto Estate of
Francisco Ferrer and found about 60 lacsas of stalks which,
according to his calculation, should produce from 25 to 30 piculs
of sugar each, which corroborates the testimony of Francisco
Ferrer that he planted 70 lacsas on the Canquinto Estate, and
does to contradict the testimony of this same witness that his
mother, Juliana Puentebella, planted thirty lacsas on the
Mamposod land, while his brother planted twenty lacsas on the
Ampanan land, making a total of 120 lacsas, which lands in
Canquinto, Mamposod and Ampanan, according to the
testimony of Francisco Ferrer himself, are respectively, those
mortgaged by them to the Hijos de I. de la Rama by virtue of the
documents, Exhibits 19, 20 and 21 and that, according to the
stipulations made in Exhibits 19, and 21 and the interpretation
that has been given to Exhibit 20, the mortgagors bound
themselves to plant sugar cane. This testimony of Francisco
Ferrer is also corroborated by Rosario Sanz, who testified
having seen 100 lacsas of sugar cane on Ferrer's land in March,
1922, which were over-ripe, but if milled in said month would,
nevertheless, have produced 40 piculs of sugar per lacsa, and
would have produced 50 piculs had they been milled at the
proper time. In regard to the cane of the plaintiffs Puentebella, it
appears that in March, 1922, they asked the witness Simeon S.
de Paula to inspect their fields. He testified not less than 100
lacsas and which might have produced 50 when it was ripe, but
they were then going out of season. In exhibit 5, the affidavit of
Gerardo Alunan, Uldarico Suison and Antonio Lizares, them
employees of Mr. De la Rama, it is stated that they went to a
place called Baldosa where they received the information that
there was a field of 17,000 plants, and that they were informed
at the Cervantes Estate that 48 lacsas of sugar-cane plants had
been brought from Cadiz and had been planted in five fields,
and that more than 7,000 plants were brought from Jonobjonob,
making, therefore, a total of fifty lacsas and four thousand sugar
cane plants. But, it may be seen, that all that is stated in this
affidavit in regard to the quantity of plants is mere hearsay and
is not a act personally observed by the informants. It does not
controvert the estimate of Simeon S. de Paula, nor of Dionisio
Patrata who accompanied the former on the inspection of the
fields of the plaintiffs Puentebella, in March, 1922, who likewise
estimated that there were 100 lacsas of cane on the Cervantes
Estate, which should have produced 5,000 piculs of sugar had
the cane been milled in due time; nor does it contradict the
testimony if Jose Alemani to the effect that at a place higher up
adjoining his land, the plaintiffs then had three fields planted
with thirteen or fourteen lacsas. It is true that Esteban de la
Rama testified that the Puentebella fields visited by him
contained only about seven lacsas, but it appears that this
assertion is of little value, as it may be inferred that his visit did
not extend to all of the planted fields; besides, his estimate does
not come anywhere near that contained in the affidavit of his
representatives, Exhibit 5.
Antonio M. Lizares, in his affidavit, Exhibit 4, estimates an
average of thirty piculs of sugar per lacsa from Ferrer's cane,
but made no estimate in his affidavit Exhibit 5, in regard to
Puentebella's cane. But from this estimate , as compared with
that of German Carballo, Simeon S. de Paula, Rosario Sanz,
and Dionisio Patrata, all sugar growers, some with considerable
experience in the cultivation of sugar cane, who also inspected
the plaintiffs' cane , and who unanimously stated that a lacsa of
cane produces 50 piculs of sugar, none of them having a any
interest in these cases nor any proven motives for favoring or
opposing any of the parties, it seems that the preponderance of
judgment is in favor of the latter. Consequently, the 120 lacsas
of sugar-cane stalks belonging to the plaintiffs Ferrer should
have produced 6,000 piculs of sugar, from which 45 per cent
must be deducted which, in accordance with the contracts,
belongs to the central, leaving a balance of 3,300 piculs. The
115 lacsas of the plaintiffs Puentebella should have produced
5,750 piculs of sugar, of which 45 per cent belongs to the
central, leaving a balance of 3,162.50 piculs. The parties having
agreed in the stipulation of facts that the price of the 1921-22
crop was P10.50 a picul of centrifugal sugar, the plaintiffs Ferrer
should have obtained, as a product, P34,650 and the
Puentebellas P33,206.25. From these amounts must be
deducted the expenses of raising the crop and putting the sugar
on the market in Iloilo, at the rate of P1.50 per picul, or P9,000
and P8,625, respectively, leaving a net balance, therefore, of
P25,650 for the former and P24,631.25 for the latter.
The plaintiffs allege, furthermore, that on account of not having
harvested their crops, they could not prepare their fields for the
cultivation of the ratoon crop for the agricultural year of 1922-23,
an having lost the crop for that year, they pray for damages for
such loss. The defendants likewise set up a counterclaim for
damages for the loss of the central's share of the plaintiffs's crop
for the agricultural year of 1922-1923 by reason of the plaintiffs'
failure to prepare their fields. The plaintiffs, not having prepared
their fields for the ratoon crops or to cultivate the same, the
ratoons requiring as much cultivation as new planting, nor
performed any work, nor invested any capital, it is obvious that
they are not entitled to any indemnity for claim any share in a
supposed crop of 1922-23, nor recover by the defendants' own
acts in violating their contracts with the plaintiffs.
In support of the defendants' counterclaim in regard to the
plaintiffs Ferrer, there were presented, Exhibit 19, which is a
mortgage to secure a loan for the sum of P25,000, with interest
at 12 per cent per annum, payable annually, during ten
agricultural years, executed by the plaintiff Juliana Puentebella
Vda. de Ferrer, in favor or that the debtor shall pay 15 per cent
of such amounts as may be claimed, in case of litigation, for
attorney's fees and expenses; Exhibit 20, which is a mortgage to
secure per annum, payable within ten years, executed by the
deceased Pedro Ferrer in favor of the Hijos de I. de la Rama;
and Exhibit 21, which is also a mortgage for the sum of
P12,500, with interest at 12 percent per annum, likewise
payable annually during ten agricultural years, and which
mortgage was executed by Francisco Ferrer in favor of the Hijos
de I. de la Rama it having been furthermore stipulated therein
that, in case of litigation, the debtor should pay 15 per cent of
such amounts as may be claimed, for attorney's fees and the
expenses of litigation; and in regard to the plaintiffs Puentebella,
Exhibit B was introduced which is a mortgage for the sum of
P30,000 with interest at 12 per cent per annum, payable
annually during twenty agricultural years, it having been further
stipulated that in case of litigation, the debtor shall pay 15 per
cent of such amounts as may claimed, for attorney's fees and
expenses; and Exhibit 18, which is a statement of the partial
receipts and payments made by the plaintiffs, to wit:


1920 Nature of transaction Debit Credit Balance
June 18, Received on account ......................... 5,000.00 ............ 5,000
July 2, Received on account ......................... 5,000.00 ............ 10,000
July 31, Double plough .................................... 323.00 ............ 10,323
Aug. 8, 1 tractor ................................................. 3,978.00 ............ 14,301
Aug. 23, Received on account ......................... 5,000.00 ............ 19,301
Sept. 13, Received on account ......................... 2,500.00 ............ 21,801
Sept. 22, Received on account ......................... 1,400.00 ............ 23,201
Oct. 4, Received on account ......................... 900.00 ............ 24,101
Oct. 18, Received on account ......................... 2,000.00 ............ 26,101
Nov. 17, Received on account ......................... 2,000.00 ............ 28,101
Nov. 17, Received on account ......................... ............ 500.00 28,601
Received on account ......................... ............ 500.00 28,101
Received on account ......................... 323.00 ............ 27,778
Dec. 8, Received on account ......................... 2,222.00 ............ 30,000
1921


Received on account ......................... 1,590.00 ............ 31,590


It will be observed that the installments in these contracts are
not due, but as the plaintiffs themselves, in their respective
complaints, ask for the cancellation of the contracts, it is clear
that they have tacitly renounce the terms agreed upon. It is not
believed, however, that the counterclaimants are entitled to any
amount for attorney's fees and expenses of litigation as
stipulated in the contracts Exhibits B, 19 and 21, because these
two cases having been brought by the plaintiffs for violation of
said contracts by the defendants, it would not be equitable and
just their non-fulfillment of the contracts being the determining
cause of the actionto award them any amount for attorney's
fees and expenses to defend these actions, which would not
have arisen had the defendants been loyal to their contracted
obligations.
The mortgage loans earn interest at the rate of 12 per cent per
annum, while the most that the defendants can be ordered to
pay the plaintiffs on the amounts claimed by them is legal
interest from the filing of the complaints herein, a circumstance
which would place Mr. De la Rama in an advantageous position
if the amounts claimed by the parties time the damages were
caused. Such set-off is believed to be equitable because, as a
matter of fact, were it not for the defendants' nonfulfillment of
their obligations, said plaintiffs have lost their respective crops,
or contracted the lost through the fault, delinquency, or violation
of the contracts by their creditors themselves, which are legal
causes, against the guilty party.
In view of the foregoing, the following judgment is rendered.


In regard to the complaint in case No. 2911,
(1) The defendant Esteban de la Rama is
ordered to pay the plaintiffs the sum of
P25,650, and the costs of this action;
(2) In regard to the cross-complaint the
plaintiffs are ordered to pay Esteban de la
Rama, to wit: Juliana Vda. de Ferrer, the sum
of P25,000, with interest at 12 per cent per
annum from August 3, 1920, the date of the
receipt of this amount (Exhibit 22); Pedro
Ferrer, the sum of P12,500 with interest at 12
per cent per annum from August 3, 1920
(Exhibit 23), and Francisco Ferrer, the sum of
P12,500, with interest at 12 per cent per
annum from August 3, 1920 (Exhibit 24);
(3) The counterclaim for damages is
dismissed and it is ordered that the amounts
awarded to the plaintiffs and the principal of
the mortgage loan, which they are hereby
ordered to pay, compensate each other
proportionately up to the concurrent amount,
said compensation to be effective as of April
1, 1922; and
(4) It is ordered that the balance from the
compensation be deposited with the court by
the plaintiffs within three months from the date
hereof, with the admonition that failing to do
so the sale of the mortgaged property will be
ordered and the proceeds thereof applied to
the amount of this judgment with respect to
the counterclaim.
In regard to the complaint in case No. 2912,
(1) The defendant Esteban de la Rama is
ordered to pay the plaintiffs the sum of
P24,581.25 and the costs of this action;
(2) In regard to the cross-complaint, the
plaintiffs are ordered to pay Esteban de la
Rama the sum of P31,590, with interest at 12
percent per annum from the various dates of
the partial receipts, as shown by Exhibit 18,
quoted herein;
(3) The counterclaim for damages is
dismissed and it is ordered that the amounts
awarded to the plaintiffs and the ordered to
pay, compensate each other proportionately
up to the concurrent amount, said
compensation to be effective as of April 1,
1922.
The plaintiffs under their first three assignments of error
maintain that they are entitled to damages for the loss of the
ratoon crop for the year 1923, but we agree with the court below
that such damages are too remote. It is further to be noted that
plaintiffs made no effort to reduce the loss for 1923 by
cultivating the ratoons or by again planting the land to cane or
other crops after the failure of the 1922 cane crop and it is
elementary that a party injured by a breach of contract cannot
recover damages for any loss which he might have avoided with
ordinary care and reasonable expense. (Warren vs. Stoddard,
105 U. S., 224.) Assuming for the sake of the argument that the
damages claimed were not too remote, there is no evidence
sufficiently showing what the amount of the recoverable
damages would have been if the plaintiffs had done their duty
and sought to minimize the losses.
The plaintiff-appellants' fourth assignment of error is evidently
the result of carelessness in reading the appealed judgment and
need not be discussed.
The defendant-appellants present the following assignments of
error:
I. The court below committed an error in
rendering judgment in case G.R. No. 26217
against Esteban de la Rama, ignoring the
Negros Coal Co.
II. The court below committed an error in
holding that the defendants were obliged, by
the terms of the contracts Exhibits A and B, to
grind the plaintiffs' sugar cane in 1921.
III. Even supposing that the defendants were
obliged to grind the plaintiffs' cane in the
central of the Negros Coal Company, the
court below committed an error in holding the
defendants liable for damages for not having
completed the central in 1921.
IV. The court below committed an error in not
dismissing the complaint of Messrs. Ferrer
(G.R. No. 26217), the plaintiffs not having
complied with the condition precedent to
submit their difference to arbitrators before
filing their complaint.
V. Even supposing that the defendants were
liable for damages, the court below committed
an error in ordering Esteban de la Rama to
pay Messrs. Ferrer the sum of P25,650, and
to Messrs. Puentebella the sum of
P24,581.25, by way of damages.
The questions raised by the assignments quoted are fully
discussed in the decision of the court below and hardly require
further elucidation. As to the first assignment, we may say,
however, that aside from the fact that the Negros Coal Co., Ltd.
has been dissolved and that De la Rama figures as its
successor in interest and liabilities, it is further to be noted that
the losses suffered by the plaintiffs were due to De la Rama's
misleading representations and to his failure to fulfill his
promises. In these circumstance, it was not error to give
judgment for damages against him and not against the Negros
Coal Co., Ltd.
The fourth assignment of error is likewise without merit. The
arbitration clause in paragraph 17 of the Ferrer contract, Exhibit
A, expressly provides that the parties shall "abide by the
decision of said arbitrators or any three of them, as he case may
be." The clause does not merely to the courts; it provides for a
final determination of legal rights by arbitration. In other words,
an attempt was make to take the disputes between the parties
out of the jurisdiction of the courts. An agreement to that effect
is contrary to public policy and is not binding upon the parties.
The defendant-appellants' other assignments of error relate only
to questions of fact in regard to which the findings of the court
below are fully sustained by the evidence. The judgment
appealed from is affirmed without costs to any of the parties. So
ordered.
Johnson, Street, Malcolm, Villamor, Ostrand, Romualdez and
Villa-Real, JJ., concur.