Vega vs. San Carlos Milling Co PDF
Vega vs. San Carlos Milling Co PDF
Vega vs. San Carlos Milling Co PDF
Fisher, DeWitt, Perkins & Brady, John R. McFie, jr., Jesus Trinidad and
Powell & Hill, for appellant.
R. Nolan and Feria & La O, for appellee.
SYLLABUS
DECISION
ROMUALDEZ, J : p
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 defendant 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
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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 defendant's 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 sum 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 legal 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 any
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."
xxx xxx xxx
"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 to 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
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are valid, but they are not for that 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 a 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 dissimilar, 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 the 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 parties 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 with
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:
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"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 cane lands as the 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 accommodations near the sugar mill. All
steam locomotives shall be provided with 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 be two and
one-half meters in width on either side from the center of track on both
main line and switches and branches."
By this covenant, 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 on 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 be sufficient?
We have not 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-
1b. rail 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.
Separate Opinions
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AVANCEÑA, J., concurring:
I join with Mr. Justice Ostrand in his dissent based on the proposition
that the defendant is not bound to furnish cars free of charge for use on the
plaintiff's portable railway tracks, in relation with its corollary, that the letter
written by the manager of the defendant's mill on March 18, 1916, does not
estop the defendant from demanding compensation for the future use of the
cars. I dissent also on another ground, which is, that the parties having
formally agreed to submit their differences to arbitrators, while recognizing
the jurisdiction of the courts, arbitration has been made a condition
precedent to litigation, and should be held valid and enforceable.
Lamentable, to say the least, is the chaotic condition which exists with
reference to the efficacy of arbitration agreements. While the variety of
reasons advanced by the courts for refusing to compel parties to abide by
their arbitration contracts are not always convincing, and while research
discloses that the rules have mounted on antiquity rather than on reason,
yet we presume that, with or without reason, the general principles must be
accepted. A light is, however, breaking through the clouds of obscurity and
courts which formerly showed hostility to arbitration are now looking upon it
with reluctant favor. The possibly inevitable jealousy of the courts toward
anything which deprives them of jurisdiction and the idea which once
prevailed that since there are courts, therefore everybody must go to the
courts, is, as Federal Judge Hough declares in the case of United States
Asphalt Refining Co. vs. Trinidad Lake Petroleum Co. ([1915], 222 Fed.,
1006), "A singular view of juridical sanctity."
In the Philippines fortunately, the attitude of the courts toward
arbitration agreements is slowly crystallizing into definite and workable form.
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The doctrine announced in Wahl and Wahl vs. Donaldson, Sims & Co.
([1903], 2 Phil., 301), was that a clause in a contract providing that all
matters in dispute shall be referred to arbitrators and to them alone, is
contrary to public policy and cannot oust the courts of jurisdiction. But even
this conservative expression of the doctrine has been modernized by the
subsequent cases of Chang vs. Royal Exchange Assurance Corporation of
London ([1907], 8 Phil., 399); Allen vs. Province of Tayabas ( [1918], 38 Phil.,
356); and Chan Linte vs. Law Union and Rock Ins. Co. ([1921], 42 Phil., 548).
The rule now is that unless the agreement is such as absolutely to close the
doors of the courts against the parties, which agreement would be void, the
courts will look with favor upon such amicable arrangements and will only
with great reluctance interfere to anticipate or nullify the action of the
arbitrator.
The new point of the judiciary in the progressive jurisdiction of
Pennsylvania, in England, and under the Civil Law, is also worthy of our
serious consideration. It is the rule in Pennsylvania that when the persons
making an executory contract stipulate in it that all disputes and differences
between them, present or prospective, in reference to such contract or any
sum payable under it, shall be submitted to the arbitrament of a named
individual, or specifically designated persons, they are effectually bound
irrevocably by that stipulation, and precluded from seeking redress
elsewhere until the arbiter or arbiters agreed upon have rendered an award
or otherwise been discharged. The courts there, however, make a distinction
between agreements for a general reference to arbitration and designating a
particular individual or tribunal to arbitrate. The former may be waived or
revoked, and is no obstacle to a suit or action for the same matter; the latter
is irrevocable and until the designated arbiter or arbiters have decided, no
right of action arises which can be enforced in law or in equity. (Snodgrass
vs. Gavit [1857], 28 Pa., 221; Commercial Union Assur. Co. vs. Hocking
[1886], 115 Pa., 407; 2 Am. St. Rep., 562; Page vs. Vankirk, 1 Brewst. [Pa.],
282; 47 L. R. A. [N. S.], note, pp. 399, 400.)
In England, the view seems now to prevail that a contractual
stipulation for a general arbitration, constitutes a condition precedent to the
institution of judicial proceedings for the enforcement of the contract.
(Compagnie de Commerce etc. vs. Hamburg Amerika etc. [1917], 36 Phil.,
590, 635.) Lord Watson in Hamlyn vs. Talisker Distillery ([1894], App. Cas.,
202), said: "The rule that a reference to arbiters not named cannot be
enforced does not appear to me to rest upon any essential considerations of
public policy. Even if an opposite inference were deducible from the
authorities by which it was established, the rule has been so largely
trenched upon by the legislation of the last 50 years, . . . that I should
hesitate to affirm that the policy upon which it was originally based could
now be regarded as of cardinal importance."
Finally, it is within our knowledge that the Spanish civil law wisely
contains elaborate provisions looking to the amicable adjustment of
controversies out of court. Litigation by means of friendly adjusters was
formerly well known. The procedure in this kind of litigation was minutely
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outlined in the Ley de Enjuiciamiento Civil. Two articles of the Civil Code,
namely, articles 1820 and 1821, were given up to the subject of arbitration,
and expressly confirmed this method of settling differences. ( See Cordoba
vs. Conde [1903], 2 Phil., 445.)
Now, with all these legal views to the forefront, let us notice the facts to
which they should be applied.
Clause 23 of the Mill's Covenants, clause 14 of the Planters' Covenants,
and clause 7 of the Mutual Covenants, read as follows:
"23. That it (the Mill—Party of the First Part) will submit any
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."
xxx xxx xxx
"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 to 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."
xxx xxx xxx
"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 parties of the second part."
It was plainly the solemn purpose of the parties to settle their
controversies amicably if possible before resorting to the courts. They
provided for themselves by mutual consent a method which was speedier
and less expensive for all concerned and less likely to breed that ill-feeling
which is often the consequence of hotly contested litigation. All this was
done by the Planters on the one hand and by the Milling Company on the
other, to the end that justice might guide them and possible differences be
quickly adjusted.
It is clear, by paragraph 7 of the Mutual Covenants, that these parties
did not intend that the decision of the arbitrators should prevent resort to
the courts, for they expressly agreed to carry litigation between them to the
courts of Iloilo. Acting under legal rules, even in their most restrictive form,
disputes arising out of the contract, were to be referred to arbitration so that
the damages sustained by a breach of the contract, could be ascertained by
specified arbitrators before any right of action arose; but the matters in
dispute were not to be referred to arbitrators and to them alone, to the utter
exclusion of the courts. It is exactly correct to state that the clauses of the
Covenants hereinbefore quoted, were meant as a condition precedent to
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litigation, which accordingly should be given effect.
For the two reasons above explained, I vote for reversal.
I must dissent from the conclusion of the court that the defendant is
bound to furnish cars free of charge for use on the plaintiff's portable railway
tracks.
It is admitted that the written contract between the parties does not
impose this obligation upon the defendant, but it is argued that the letter of
March 18, 1916, written by the manager of the defendant's mill, taken in
connection with the fact that many of the defendant's patrons were
permitted to use its cars on their portable railroads, without charge, now
estops the defendant from demanding compensation for the future use of
the cars.
That the court has here misapplied the doctrine of equitable estoppel
or estoppel in pais seems clear. The definitions of such estoppel may vary
somewhat but all authorities agree that the party invoking the doctrine must
have been mislead to his prejudice. That is the final and, in reality, most
important of the elements of equitable estoppel. These elements are thus
stated in 3 Words and Phrases, 2498:
"To constitute an estoppel, the following elements are essential:
(1) There must be conduct, acts, language, or silence amounting to a
representation or a concealment of material facts. (2) These facts must
be known to the party estopped at the time of his said conduct, or, at
least, the circumstances must be such that knowledge of them is
necessarily imputed to him. (3) The truth concerning these facts must
be unknown to the other party claiming the benefit of the estoppel at
the time when such conduct was done, and at the time when it was
acted upon by him. (4) The conduct must be done with the intention,
or, at least, with the expectation, that it will be acted upon by the other
party, or under such circumstances that it is both natural and probable
that it will be so acted upon. (5) The conduct must be relied upon by
the other party, and, thus relying, he must be led to act upon it. (6) He
must in fact act upon it in such a manner as to change his position for
the worse. (First Nat. Bank vs. Dean, 17 N. Y. Supp., 375, 377; 60 N. Y.
Super. Ct. 299 [citing Pom. Eq. Jur.]; Grange vs. Palmer, 10 N. Y. Supp.,
201, 204; 56 Hun., 481; Roberts vs. Trammell, 40 N. E., 162; 15 Ind.
App., 445; First Nat. Bank vs. Williams, 26 N. E., 75, 77; 126 Ind., 423;
Appeal of Crans [Pa.], 9 Atl., 282, 287; Brigham Young Trust Co. vs.
Wagener, 40 Pac., 764, 765 ; 12 Utah, 1; Blodgett vs. Perry, 10 S. W.,
891, 892; 97 Mo. 263; 10 Am. St. Rep., 307; Gentry vs. Gentry, 26 S.
W., 1090, 1095; 122 Mo., 202; Taylor vs. Zepp, 14 Mo., 482, 488; 55
Am. Dec., 113; Acton vs. Dooley, 74 Mo., 63, 67; De Berry vs. Wheeler,
30 S. W., 338, 339 ; 128 Mo., 84; 49 Am. St. Rep., 538; Hall vs. Warren
[Ariz.], 48 Pac., 214, 216; Smith vs. Brown [Ariz.], 42 Pac., 949, 950;
Hampton vs. Alford [Tex.], 14 S. W., 1072, 1073; Long vs. Cude [Tex.],
26 S. W., 1000; Nichols—Steuart vs. Crosby, 29 S. W., 380, 381; 87
Tex., 443; Security Mortgage & Trust Co. vs. Caruthers, 32 S. W., 837,
843 ; 11 Tex. Civ. App., 430; Chesapeake & 0. R. Co. vs. Walker, 40 S.
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E., 633, 641; 100 Va., 69 [quoting 4 Am. & Eng. Dec. Eq., 268]; Stevens
vs. Dennett, 51 N. H., 324, 333; Troy vs. Rogers, 20 South., 999, 1003;
113 Ala., 131; Griffith vs. Wright, 6 Colo., 248, 249.)"
Bearing in mind the principles stated, let us now analyze the facts in
the case. The letter of March 18, 1916, is quoted in the decision. It contains
a suggestion that the plaintiff install short switches made of 16-1b. rail
portable track on his hacienda and expresses the opinion that the
installation would pay for itself in one season. Nothing is said about cars. The
plaintiff acted on this advice and purchased and installed portable railroad
tracks. He was allowed to use the defendant's cars on the tracks free of
charge for over four years. It is not suggested that defendant's estimate of
the saving to be effected through this installation of the portable railway
system was misleading and we can therefore assume that the system has
paid for itself several times over. If so, in what respect can it be said that the
plaintiff has been mislead to his prejudice? As we have seen, if he has not
been so mislead the doctrine of equitable estoppel will not apply. It is
evident that in this case the doctrine is invoked for — positive gain, a
purpose which is entirely beyond the scope of the doctrine. In Lindsay vs.
Cooper (94 Ala., 170), the court, speaking of equitable estoppels, says:
"Their operation should be limited to saving harmless, or making whole, the
person in whose favor they arise, and they should never be made the
instrument of gain or profit." (See also 10 R. C. L., 698 and other authorities
there cited.)
The principles stated are elementary and should become obvious to
any lawyer upon a moment's reflection. But I may, perhaps, suggest a
homely illustration bearing on the application of these principles: A advises
his neighbor B to buy a saddle-horse. B has no saddle but, in view of their
good neighborly relations, expects to be able to borrow one from A. B buys
the horse, borrows A's saddle and keeps it for several years. He does not
regret the purchase of the horse but asserts that he would not have bought
it but for the fact that he expected to use A's saddle and that this
expectation was justified by the further fact that A appeared to be an easy
man to borrow from and was in the habit of extending similar assistance to
all of his neighbors. It seems to me that as far as the principles involved are
concerned, the example given is a close parallel to the present case, but I
hope that this court would not hold A estopped from asserting his title to the
saddle and from demanding its return.
In the present case the relations between the parties are governed by
contracts in writing which are presumed to contain all the terms of their
agreement. (Sec. 285, Code of Civ. Proc.) It is not alleged that the written
agreement fails to express the true intent and agreement of the parties. Yet
the court through what clearly is a misapplication of the doctrine of
equitable estoppel in effect varies that written agreement and proceeds to
create a new contract between the parties. The decision of the court upon
this point is, as far as I can find, unique and I suppose that most men who
have occasion to enter into written business agreements will fervently hope
that it will so remain.