FIRST DIVISION

[G.R. No. 23769. September 16, 1925.]

SONG FO & COMPANY , plaintiff-appellee, vs . HAWAIIAN PHILIPPINE

CO. , defendant-appellant.

Hilado & Hilado, Ross, Lawrence & Selph and Antonio T. Carrascoso, Jr., for
appellant.
Arroyo, Gurrea & Muller for appellee.

SYLLABUS

1. CONTRACTS; SALES; INSTANT CASE. — The written contract examined

and found to provide for the delivery by the Hawaiian-Philippine Co. to Song Fo &
Company of 300,000 gallons of molasses.
2. ID.; ID,.; ID.; PAYMENT. — The terms of payment xed by the parties are
controlling. The time of payment stipulated for in the contract should be treated as of
the essence of the contract.
3. ID.; ID.; ID.; ID.; RESCISSION. — The general rule is that rescission will not
be permitted for a slight or casual breach of the contract, but only for such breaches as
are so substantial and fundamental as to defeat the object of the parties in making the
agreement.
4. ID.; ID.; ID.; ID.; ID. — A delay in payment for a small quantity of molasses
for some twenty days is not such a violation of an essential condition of the contract as
warrants rescission for non-performance.
5. ID.; ID.; ID.; MEASURE OF DAMAGES FOR BREACH OF CONTRACT. — The
facts examined and Song Fo & Company allowed P3,000 on account of the greater
expense to which it was put in being compelled to secure molasses in the open market.
6. ID.; ID.; ID. — The facts examined and Song Fo & Company allowed nothing
for lost profits on account of the breach of the contract, because of failure of proof.

DECISION

MALCOLM , J : p

In the Court of First Instance of Iloilo, Song Fo & Company, plaintiff, presented a
complaint with two causes of action for breach of contract against the Hawaiian-
Philippine Co., defendant, in which judgment was asked for P70,369.50, with legal
interest, and costs. In an amended answer and cross-complaint, the defendant set up
the special defense that since the plaintiff had defaulted in the payment for the
molasses delivered to it by the defendant under the contract between the parties, the
latter was compelled to cancel and rescind the said contract. The case was submitted
for decision on a stipulation of facts and the exhibits therein mentioned. The judgment
of the trial court condemned the defendant to pay for the plaintiff a total of P35,317.93,
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 with legal interest from the date of the presentation of the complaint, and with costs.
From the judgment of the Court of First Instance the defendant only has
appealed. In this court it has made the following assignment of errors: "I. The lower
court erred in nding that the appellant had agreed to sell to the appellee 400,000, and
not only 300,000, gallons of molasses. II. The lower court erred in nding that the
appellant rescinded without su cient cause the contract for the sale of molasses
executed by it and the appellee. III. The lower court erred in rendering judgment in favor
of the appellee and not in favor of the appellant in accordance with the prayer of its
answer and cross-complaint. IV. The lower court erred in denying appellant's motion for
a new trial." The speci ed errors raise three questions which we will consider in the
order suggested by the appellant.
1. Did the defendant agree to sell to the plaintiff 400,000 gallons of
molasses or 300,000 gallons of molasses? The trial court found the former amount to
be correct. The appellant contends that the smaller amount was the basis of the
agreement.
The contract of the parties is in writing. It is found principally in the documents,
Exhibits F and G. The rst mentioned exhibit is a letter addressed by the administrator
of the Hawaiian-Philippine Co. to Song Fo & Company on December 13, 1922. It reads:
"SILAY, OCC. NEGROS, P. I.
"December 13, 1922.
"MESSRS. SONG FO AND CO.
"Iloilo, Iloilo.
"DEAR SIRS: Confirming our conversation we had today with your Mr. Song
Fo, who visited this Central, we wish to state as follows:
"He agreed to the delivery of 300,000 gallons of molasses at the same
price as last year under the same condition, and the same to start after the
completion of our grinding season. He requested if possible to let you have
molasses during January, February and March or in other words, while we are
grinding, and we agreed with him that we would to the best of our ability, altho we
are somewhat handicapped. But we believe we can let you have 25,000 gallons
during each of the milling months, altho it interfere with the shipping of our own
and planters sugars to Iloilo. Mr. Song Fo also asked if we could supply him with
another 100,000 gallons of molasses, and we stated we believe that this is
possible and will do our best to let you have these extra 100,000 gallons during
the next year the same to be taken by you before November 1st, 1923, along with
the 300,000, making 400,000 gallons in all.
"Regarding the payment for our molasses, Mr. Song Fo gave us to
understand that you would pay us at the end of each month for molasses
delivered to you.
"Hoping that this is satisfactorily and awaiting your answer regarding this
matter, we remain.
"Yours very truly,
"HAWAIIAN-PHILIPPINE COMPANY
"By: R.C. PITCAIRN
"Administrator."
Exhibit G is the answer of the manager of Song Fo & Company to the Hawaiian-
Philippine Co. on December 16, 1922. This letter reads:
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 "December 16th, 1922.
"MESSRS. HAWAIIAN-PHILIPPINE CO.,
"Silay, Neg. Occ., P. I.
"DEAR SIRS: We are in receipt of your favors dated the 9th and the 13th
inst. and understood all their contents.
"In connection to yours of the 13th inst, we regret to hear that you
mentioned Mr. Song Fo the one who visited your Central, but it was not for he was
Mr. Song Heng, the representative and the manager of Messrs. Song Fo & Co.
"With reference to the contents of your letter dated the 13th inst. we
con rm all the arrangements you have stated and in order to make the contract
clear, we hereby quote below our old contract as amended, as per our new
arrangements.
"(a) Price, at 2 cents per gallon delivered at the central.
"(b) All handling charges and expenses at the central and at the dock
at Mambaguid for our account.
"(c) For services of one locomotive and at cars necessary for our six
tanks at the rate of P48 for the round trip dock to central and central to dock. This
service to be restricted to one trip for the six tanks.
"Yours very truly,
"SONG FO & COMPANY
"By__________________
"Manager."
We agree with appellant that the above quoted correspondence is susceptible of
but one interpretation. The Hawaiian-Philippine Co. agreed to deliver to Song Fo &
Company 300,000 gallons of molasses. The Hawaiian-Philippine Co. also believed it
possible to accommodate Song Fo & Company by supplying the latter company with an
extra 100,000 gallons. But the language used with reference to the additional 100,000
gallons was not a definite promise. Still less did it constitute an obligation.
If Exhibit T relied upon by the trial court shows anything, it is simply that the
defendant did not consider itself obliged to deliver to the plaintiff molasses in any
amount. On the other hand, Exhibit A, a letter written by the manager of Song Fo &
Company on October 17, 1922, expressly mentions an understanding between the
parties of a contract for 300,000 gallons of molasses.
We sustain appellant's point of view on the rst question and rule that the
contract between the parties provided for the delivery by the Hawaiian-Philippine Co. to
Song Fo & Company of 300,000 gallons of molasses.
2. Had the Hawaiian-Philippine Co. the right to rescind the contract of sale
made with Song Fo & Company? The trial judge answers No, the appellant Yes.
Turning to Exhibit F, we note this sentence: "Regarding the payment for our
molasses, Mr. Song Fo (Mr. Song Heng) gave us to understand that you would pay us at
the end of each month for molasses delivered to you." In Exhibit G, we nd Song Fo &
Company stating that they understand the contents of Exhibit F, and that they "con rm
all the arrangements you have stated, and in order to make the contract clear, we
hereby quote below our old contract as amended, as per our new arrangements. (a)
Price, at 2 cents per gallon delivered at the central." In connection with the portion of
the contract having reference to the payment for the molasses, the parties have agreed
on a table showing the date of delivery of the molasses, the account and date thereof,
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 the date of receipt of account by plaintiff, and date of payment. The table mentioned is
as follows:
Date of receipt
Date of delivery Account and date of account by Date of payment
thereof
plaintiff

1922 1923 1923

Dec. 18 P206.16 Dec. 26/22 Jan. 5 Feb. 20

Dec. 29 206.16 Jan. 3/23 do Do.
1923
Jan. 5 206.16 Jan. 9/23 Mar. 7 or 8 Mar. 31
Feb. 12 206.16 Mar. 12/23 do Do.
Feb. 27 206.16 do do Do.
Mar. 5 206.16 do do Do.
Mar. 16 206.16 Mar. 20/23 Apr. 2/23 Apr. 19
Mar. 24 206.16 Mar. 31/23 do Do.
Mar. 29 206.16 do do Do.
Some doubt has risen as to when Song Fo & Company was expected to make
payments for the molasses delivered. Exhibit F speaks of payments "at the end of each
month." Exhibit G is silent on the point. Exhibit M, a letter of March 28, 1923, from
Warner, Barnes & Co., Ltd., the agent of the Hawaiian-Philippine Co. to Song Fo &
Company, mentions "payment on presentation of bills for each delivery." Exhibit O,
another letter from Warner, Barnes & Co., Ltd. to Song Fo & Company dated April 2,
1923, is of a similar tenor. Exhibit P, a communication sent direct by the Hawaiian-
Philippine Co. to Song Fo & Company on April 2, 1923, by which the Hawaiian-Philippine
Co. gave notice of the termination of the contract, gave as the reason for the rescission,
the breach of Song Fo & Company of this condition: "You will recall that under the
arrangements made for taking our molasses, you were to meet our accounts upon
presentation and at each delivery." Not far removed from this statement, is the
allegation of plaintiff in its complaint that "plaintiff agreed to pay defendant, at the end
of each month upon presentation of accounts."
Resolving such ambiguity as exists and having in mind ordinary business
practice, a reasonable deduction is that Song Fo & Company was to pay the Hawaiian-
Philippine Co. upon presentation of accounts at the end of each month. Under this
hypothesis, Song Fo & Company should have paid for the molasses delivered in
December, 1922, and for which accounts were received by it on January 5, 1923, not
later than January 31 of that year. Instead, payment was not made until February 20,
1923. All the rest of the molasses was paid for either on time or ahead of time.
The terms of payment xed by the parties are controlling. The time of payment
stipulated for in the contract should be treated as of the essence of the contract.
Theoretically, agreeable to certain conditions which could easily be imagined, the
Hawaiian-Philippine Co. would have had the right to rescind the contract because of the
breach of Song Fo & Company. But actually, there is her present no outstanding fact
which would legally sanction the rescission of the contract by the Hawaiian-Philippine
Co.
The general rule is that rescission will not be permitted for a slight or casual
breach of the contract, but only for such breaches as are so substantial and
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 fundamental as to defeat the object of the parties in making the agreement. A delay in
payment for a small quantity of molasses for some twenty days is not such a violation
of an essential condition of the contract as warrants rescission for non-performance.
Not only this, but the Hawaiian-Philippine Co. waived this condition when it arose by
accepting payment of the overdue accounts and continuing with the contract.
Thereafter, Song Fo & Company was not in default in payment so that the Hawaiian-
Philippine Co. had in reality no excuse for writing its letter of April 2, 1923, cancelling
the contract. (Warner, Barnes & Co. vs. Inza [1922], 43 Phil., 505.)
We rule that the appellant had no legal right to rescind the contract of sale
because of the failure of Song Fo & Company to pay for the molasses within the time
agreed upon by the parties. We sustain the finding of the trial judge in this respect.
3. On the basis rst, of a contract for 300,000 gallons of molasses, and
second, of a contract imprudently breached by the Hawaiian-Philippine Co., what is the
measure of damages? We again turn to the facts as agreed upon by the parties.
The rst cause of action of the plaintiff is based on the greater expense to which
it was put in being compelled to secure molasses from other sources. Three hundred
thousand gallons of molasses was the total of the agreement, as we have seen. As
conceded by the plaintiff 55,006 gallons of molasses were delivered by the defendant
to the plaintiff before the breach. This leaves 244,994 gallons of molasses undelivered
which the plaintiff had to purchase in the open market. As expressly conceded by the
plaintiff at page 25 of its brief 100,000 gallons of molasses were secured from the
Central North Negros Sugar Co., Inc., at two centavos a gallon. As this is the same price
speci ed in the contract between the plaintiff and the defendant, the plaintiff
accordingly suffered no material loss in having to make this purchase. So 244,994
gallons minus the 100,000 gallons just mentioned leaves as a result 144,994 gallons.
As to this amount, the plaintiff admits that it could have secured it and more than the
Central Victorias Milling Company one and one-half centavos per gallon. In other words,
the plaintiff had to pay the Central Victorias Milling Company one and one-half centavos
a gallon more for the molasses than it would have had to pay the Hawaiian-Philippine
Co. Translated into pesos and centavos, this meant a loss to the plaintiff of
approximately P2,174.91. As the conditions existing at the central of the Hawaiian-
Philippine Co. may have been different than those found at the Central North Negros
Sugar Co., Inc., and the Central Victorias Milling Company, and as not alone through the
delay but through expenses of transportation and incidental expenses, the plaintiff may
have been put to greater cost in making the purchase of the molasses in the open
market, we would concede under the first cause of action in round figures P3,000.
The second cause of action relates to lost profits on account of the breach of the
contract. The only evidence in the record on this question is the stipulation of counsel
to the effect that had Mr. Song Heng, the manager of Song Fo & Company, been called
as a witness, he would have testi ed that the plaintiff would have realized a pro t of
P14,948.43, if the contract of December 13, 1922, had been ful lled by the defendant.
Indisputably, this statement falls far short of presenting proof on which to make a
finding as to damages.
In the rst place, the testimony which Mr. Song Heng would have given
undoubtedly would follow the same line of thought as found in the decision of the trial
court, which we have found to be unsustainable. In the second place, had Mr. Song
Heng taken the witness-stand and made the statement attributed to him, it would have
been insu cient proof of the allegations of the complaint, and the fact that it is a part
of the stipulation by counsel does not change this result. And lastly, the testimony of
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 the witness Song Heng, if we may dignify it as such, is a mere conclusion, not a proven
fact. As to what items make up the more than P14,000 of alleged lost pro ts, whether
loss of sales or loss of customers, or what not, we have no means of knowing.
We rule that the plaintiff is entitled to recover damages from the defendant for
breach of contract on the rst cause of action in the amount of P3,000 and on the
second cause of action in no amount. Appellant's assignments of error are accordingly
found to be well in taken in part and not well taken in part.
Agreeable to the foregoing, the judgment appealed from shall be modi ed and
the plaintiff shall have and recover from the defendant the sum of P3,000, with legal
interest from October 2, 1923, until payment. Without special nding as to costs in
either instance, it is ordered.
Avanceña, C.J., Johnson, Street, Villamor, Ostrand, Johns, Romualdez, and Villa-
Real, JJ., concur.

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