G.R. No. L-11310




Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-11310 January 31, 1918 CARLOS PALANCA, plaintiff-appellant, vs. FRED WILSON & CO., defendant-appellee. Alfredo Chicote and Jose Arnaiz for appellant. Gilbert, Cohn and Fisher for appellee. MALCOLM, J.: As the culmination of negotiations, on June 11, 1913, Song Fo and Co., of Manila, through its manager Carlos Palanca, entered into a contract with Fred Wilson and Co. for the purchase of a distilling apparatus for P10,000. Wilson and Co. ordered the apparatus of Turner, Schon and Co., London, installing it in January, 1914. On May 18, 1914, or about five months after the machine was installed, Palanca wrote Wilson and Co. that the rectifying machine had been examined by a number of competent persons who stated that the machine was not capable of producing the amount of alcohol stipulated in the contract. Getting no satisfaction from the reply of Wilson and Co., action for damages for breach of contract was begun in the Court of First Instance of the city of Manila, praying first that the defendant be ordered to comply strictly with the terms of the contract and second that the defendant be ordered to pay as damages the amount of P16,713.80. Defendant answered with a general denial and a cross-complaint asking judgment against the plaintiff in the sum of P5,000, the final installment claimed to be due as the purchase price of the machine. By the judgment handed down by the Honorable James A. Ostrand, judge of first instance, it was ordered that the plaintiff take nothing by his action, and that the defendant have and recovered judgment against the plaintiff for the sum of P5,000, with interest thereon at the rate of 12 per cent per annum from the first day of September, 1914, without special findings as to costs. It is around the first clause of the contract (Exhibit D) that all the argument centers. This clause reads: "Un aparato; 'Guillaume' para la destilacion-rectificacion directa y continua; tipo 'C,' Agricola, de una capacidad de 6,000 litros cada 24 horas de trabajo, de un grado de 96-97 Gay Lussac, todo segun el grabado de la pagina 30 del catalogo Egrot, edicion de 1907." We believe in the first place, that it is undeniable from the evidence, that the apparatus in question, while it could treat 6,000 liters of raw material a day, did not produce 6,000 liters a day, but on the contrary only something over 480 liters a day of rectified alcohol of the required grade. This being true, appellant vigorously asserts that there has been a breach of the contract in that instead of the machine having a capacity of 6,000 liters for every 24 hours of work, it only had (a producing) capacity of 480 liters for this period of time. Appellant would require that all the terms of the contract be given effect with special emphasis upon the phrase "de un grado de 96-97 Gay Lussac." This last phrase in connection with the previous one "de una capacidad de 6,000 litros cada 24 horas de trabajo" according to appellant could not possibly mean that the machine was only to take in 6,000 liters for this would be improbable in view of the express mention of the grade of the product. Appellee on the other hand relies on the ordinary meaning of the word "capacity" as indicating receptivity and on the preliminary negotiations as explaining the intention of the parties. The evidence is of little assistance in resolving the question. Thus, Carlos Palanca, the manager of Song Fo and Co., and now the successor of the company, testified that he told the agents of Wilson and Co. that he need a machine that would produce at least 6,000 liters of alcohol a day. The agent of Wilson and Co., James F. Loader, squarely contradicted this on the stand and said that Palanca asked him to get on an apparatus to treat 6,000 liters. Beginning anew, in order to reach a proper conclusion as to the meaning of clause one of the contract, we approach the subject from two directions. Under the first view, we take up the meaning of the words themselves. Under the second, believing that it is necessary to explain intrinsic ambiguity in the contract, we can go, as we are permitted to do under chapter IV title II, book IV of the Civil Code, and chapter X of the Code of Civil Procedure, especially section 285, to evidence of the circumstances under which the agreement was made. The terms of the contract disclose the following essential constituents: (1) A machine Guillaume, type "C" (Agricola) as described on page 30 of the Catalogue Egrot, edition of 1907; (2) a machine of a capacity of 6,000 liters for every 24 hours of work, and (3) a machine producing alcohol of a grade 96-97 Gay Lussac. Type C (Agricola) as described on pages 30 and 31 of the catalogue mentions the grade of alcohol guaranteed of 96-97 Gay Lussac, but contains no mention of a capacity of 6,000 liters a day. Passing the second element for the moment, there is no dispute in the record, or more properly speaking the plaintiff did not prove, that the machine did not turn out alcohol of the grade 96-97 Gay Lussac. Predicated therefore on the description to be found in the catalogue, it is plain that the defendant sold to the plaintiff the machine there mentioned. This leaves for interpretation the one word "capacity." That in connection with the distilling of liquor, the word "capacity" may have different meanings unless restricted in terminology, is disclosed by the decision of the United States Supreme Court in Chicago Distilling Co. vs. Stone ([1891] 140 U. S., 647), where the qualifying phrases "working capacity" and "producing capacity" are specifically" mentioned. The ordinary meaning of the word is defined in the English Dictionaries as "ability to receive or contain; cubic extent; carrying power or space; said of that within which any solid or fluid may be placed, and also used figuratively; as the keg has a capacity of 10 gallons; the ship's capacity is 1,000 tons." The ordinary meaning of the Spanish equivalent "capacidad" as disclosed by the Spanish Dictionaries is "ambito que tiene alguna cosa y es suficiente para contener en si otra; como el de una vasijia, arca, etc. En el vaso se debe atender la disposicion y capacidad." Both definitions denote that which anything can receive or contain. We think, however, that it can be laid down as a premise for further discussion that there is intrinsic ambiguity in the contract which needs explanation. Section 285 of the Code of Civil Procedure providing that a written agreement shall be presumed to contain all the terms, nevertheless "does not exclude other evidence of the circumstances under which the agreement was made, or to which it relates, or to explain an intrinsic ambiguity." Turning, therefore, to the surrounding circumstances, we find the following: Wilson and Co. in their offer to Song Fo and Co. on June 9, 1913, while mentioning capacity, only did so in express connection with the name and description of the machine as illustrated in the catalogue. They furnished Song Fo and Co. with plans and specifications of the distilling apparatus; and these describe a capacity of 6,000 liters of jus (ferment). Wilson and Co.'s order to manufacturer, while mentioning a capacity of 6,000 liters per day, does so again in connection with the description in the maker's catalogue. And, finally, it was stated during the trial, and it has not been denied, that a machine capable of producing 6,000 liters of rectified alcohol every 24 hours from nipa ferment would cost between P35,000 and P40,000. We are accordingly constrained to hold that the proper construction of clause 1 of the contract, in question in connection with the conduct of the parties and surrounding circumstances, is that Wilson and Co. were to furnish Song Fo and CO. a distilling apparatus, type C (Agricola), as described on page 30 of the maker's catalogue, capable of receiving or treating 6,000 liters every 24 hours of work and of producing alcohol of a grade 96-97 Gay Lussac. We conclude that the judgment of the trial court should be affirmed without special finding as to costs. So ordered. Arellano, C.J., Carson, Araullo, Street, and Avanceña, JJ., concur. Separate Opinions TORRES, J., dissenting: I dissent. I am of the opinion that the judgment must be reversed. 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