[1523]

Gen. Foods Corp. vs. National Coconut Corp.

Nov. 20, 1956
J. JBL Reyes
CIF Cost, Insurance and Freight signify that the price fixed
covers not only the cost of the goods, but the expense of the
freight and insurance to be paid by the seller up to the point of
destination; title passes to the buyer at the moment of delivery
especially named
Facts:

Appellee NCC sold to appellant GFC 1,500 (later

reduced to 1,000) long tons of copra under the ff
terms and conditions:
QUANTITY:c Fifteen Hundred (1500) tons of 2,240
pounds each. Seller has the option of delivering 5
per cent more or less of the contracted quantity,
such surplus or deficiency to be settled as follows:c
On the basis of the delivered weight up to 3 per cent
at the contract price and any excess or deficiency
beyond this 3 per cent at the market price of the day
of arrival at port of discharge, this market price to be
fixed by the Executive Committee of the National
Institute of Oilseeds Products. Each shipment to be
treated as a separate contract
PRICE:cOne hundred and sixty-four dollars ($164)
per ton of 2,000 pounds, CIF New York
PAYMENT:c Buyers to open immediately by cable in
favor of Sellers Irrevocable Letter of Credit through
the Philippine National Bank for 95 per cent of
invoice value based on shipping weight; Balance due
to be paid promptly upon ascertainment and based
upon outturn weights and quality at port of discharge
INSURANCE:c Buyer to provide valid insurance for
Marine and War risks for 110 per cent of CIF
contract value. Seller to allow buyer from the CIF
price an amount equivalent to the current rate of
insurance prevailing on the date of shipment, in lieu
of sellers covering usual marine insurance
themselves
NCC shipped 1054.6278 short tons of copra via SS
Mindoro, weighing was done by Luzon Brokerage by
taking the individual weight of each bag of copra and
summing up the total gross weight of the shipment,
then weighing a certain number of empty bags to
determine the average tare of the empty bags, which
was subtracted from the gross weight of the shipment
to determine the net weight of the cargo. On the
strength of the net weigh thus found, Appellee
prepared and remitted to Appellant the corresponding
bills of lading and other documents, and withdrew
from the latters letter of credit 95 per cent of the
invoice value of the shipment, or a total of
$136,686.95
Upon arrival in New York, the net cargo was
reweighed by Appellant and was found to weigh only
898.792 short tons. Deducting from the value of the
shortage the sum of $8,092.02 received by Appellant
from the insurer for 58.25 long tons lost or destroyed
even before the copra was loaded on board the
vessel, Appellant demanded from Appellee the refund
of the amount of $24,154.59
NCCs OIC Jose Nieva, Sr., acknowledged in a letter
liability for the deficiency in the outturn weights of the
copra and promised payment thereof as soon as

funds were available; but NCC was abolished and

went into liquidation
Board of Liquidators refused to pay; GFC filed action
to recover $24k in CFI Manila; dismissed
Plaintiff-Appellants theory is that although the sale
between the parties quoted a CIF New York price, the
agreement contemplated the payment of the price
according to the weight and quality of the cargo upon
arrival in New York, the port of destination, and that
therefore, the risk of the shipment was upon the seller.
Defendant-Appellee, on the other hand, insists that
the contract in question was an ordinary C. I. F.
agreement wherein delivery to the carrier is delivery to
the buyer, and that the shipment having been
delivered to the buyer and the latter having paid its
price, the sale was consummated

Issue: Whether or not agreement was an ordinary CIF

agreement (if yes, delivery to the buyer is complete upon
delivery of the goods to the carrier)
Held:
NO.

Parties may modify a CIF agreement

In the transaction now in question, despite the quoted
price of CIF New York, and the right of the seller to
withdraw 95 per cent of the invoice price from the
buyers letter of credit upon tender of the shipping and
other documents required by the contract, the express
agreement that the Net Landed Weights were to
govern, and the provision that the balance of the price
was to be ascertained on the basis of outturn weights
and quality of the cargo at the port of discharge,
indicate an intention that the precise amount to be
paid by the buyer depended upon the ascertainment
of the exact net weight of the cargo at the port of
destination. That is furthermore shown by the
provision that the seller could deliver 5 per cent more
or less than the contracted quantity, such surplus or
deficiency to be paid on the basis of the delivered
weight

While the risk of loss was apparently placed on the

Appellant after delivery of the cargo to the carrier, it
was nevertheless agreed that the payment of the
price was to be according to the net landed weight.
The net landed or outturn weight of the cargo, upon
arrival in New York, was 898.692 short tons. Although
the evidence shows that the estimated weight of the
shipment when it left Manila was 1,054.6278 tons, the
Appellee had the burden of proof to show that the
shortage in weight upon arrival in New York was due
to risks of the voyage and not the natural drying up of
the copra while in transit, or to reasonable allowances
for errors in the weighing of the gross cargo and the
empty bags in Manila. In the absence of such proof on
the part of the shipper-Appellee, we are constrained
to hold that the net landed weight of the shipment in
New York should control, as stipulated in the
agreement, and that therefore, the Appellee should be
held liable for the amount of $24,154.59 which it had
overdrawn from Appellants letter of credit

NCC failed to prove that shortage in weight was due

to risks of the voyage and not the natural drying up of
copra while in transit, or to reasonable allowances for
errors in weighing the cargo and empty bags in Manila
Judgment reversed.

[1523]
David vs. Misamis Occidental II Electric Cooperative, Inc.
July 11, 2012
J. Mendoza
Facts:

Petitioner Virgilio S. David (David) was the owner or

proprietor of VSD Electric Sales, a company engaged
in the business of supplying electrical hardware
including transformers for rural electric cooperatives

To solve its problem of power shortage affecting some

areas within its coverage, MOELCI expressed its
intention to purchase a 10 MVA power transformer
from David; its GM Engr. Rada went to Ps office in
QC; P agreed to supply the power transformer
provided that MOELCI would secure a board
resolution because the item would still have to be
imported

June 8, 1992, Engr. Rada and Director Jose Jimenez

(Jimenez), who was in-charge of procurement,
returned to Manila and presented to David the
requested board resolution which authorized the
purchase of one 10 MVA power transformer. In turn,
David presented his proposal for the acquisition of
said transformer. This proposal was the same
proposal that he would usually give to his clients
After the reading of the proposal and the discussion of
terms, David instructed his then secretary and
bookkeeper, Ellen M. Wong, to type the names of
Engr. Rada and Jimenez at the end of the proposal.
Both signed the document under the word "conforme."
The board resolution was thereafter attached to the
proposal
Proposal: P5.2M, 50% of the purchase price should
be paid as downpayment and the remaining balance
to be paid upon delivery. Freight handling, insurance,
customs duties, and incidental expenses were for the
account of the buyer
Board Resolution, on the other hand, stated that the
purchase of the said transformer was to be financed
through a loan from the National Electrification
Administration (NEA). As there was no immediate
action on the loan application, Engr. Rada returned to
Manila in early December 1992 and requested David
to deliver the transformer to them even without the
required downpayment. David granted the request
provided that MOELCI would pay interest at 24% per
annum. Engr. Rada acquiesced to the condition. On
December 17, 1992, the goods were shipped to
Ozamiz City via William Lines. In the Bill of Lading, a
sales invoice was included which stated the agreed
interest rate of 24% per annum
nothing was heard from MOELCI for sometime after
the shipment, Emanuel Medina (Medina), Davids
Marketing Manager, went to Ozamiz City to check on
the shipment. Medina was able to confer with Engr.
Rada who told him that the loan was not yet released
and asked if it was possible to withdraw the shipped
items. Medina agreed
no payment was made after several months, Medina
was constrained to send a demand letter, dated
September 15, 1993, which MOELCI duly received.
Engr. Rada replied in writing that the goods were still
in the warehouse of William Lines again reiterating
that the loan had not been approved by NEA

But Medina found out that goods had already been

released to MOELCI evidenced by the shipping
companys copy of the Bill of Lading which was
stamped "Released," and with the notation that the
arrastre charges in the amount of P5,095.60 had been
paid. This was supported by a receipt of payment with
the corresponding cargo delivery receipt issued by the
Integrated Port Services of Ozamiz, Inc.
demand letters were sent to MOELCI
David filed a complaint for specific performance with
damages with the RTC. In response, MOECLI moved
for its dismissal on the ground that there was lack of
cause of action as there was no contract of sale, to
begin with, or in the alternative, the said contract was
unenforceable under the Statute of Frauds. MOELCI
argued that the quotation letter could not be
considered a binding contract because there was
nothing in the said document from which consent, on
its part, to the terms and conditions proposed by
David could be inferred. David knew that MOELCIs
assent could only be obtained upon the issuance of a
purchase order in favor of the bidder chosen by the
Canvass and Awards Committee
RTC dismissed the complaint. It found that although a
contract of sale was perfected, it was not
consummated because David failed to prove that
there was indeed a delivery of the subject item and
that MOELCI received it
CA: no contract of sale, merely contract to sell; no
delivery of the items
MOELCI, in denying that the power transformer was
delivered to it, argued that the Bill of Lading which
David was relying upon was not conclusive. It argued
that although the bill of lading was stamped
"Released," there was nothing in it that indicated that
said power transformer was indeed released to it or
delivered to its possession. For this reason, it is its
position that it is not liable to pay the purchase price
of the 10 MVA power transformer
Issue: Whether or not there was delivery that consummated
the contract
Held:
YES. 1523 applies.

On issue of whether or not there is contract of sale:

YES, despite its unconventional form, contract of sale
meeting of minds, subject matter, price certain
On the issue of delivery: This Court is unable to agree
with the CA that there was no delivery of the items.
On the contrary, there was delivery and release
Refer back to proposal: shipping expenses to be
handled by buyer - it is clear that MOELCI agreed that
the power transformer would be delivered and that the
freight, handling, insurance, custom duties, and
incidental expenses shall be shouldered by it Makes
Art 1523 applicable
1523: Where, in pursuance of a contract of sale, the
seller is authorized or required to send the goods to
the buyer delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery
of the goods to the buyer, except in the cases
provided for in Article 1503, first, second and third
paragraphs, or unless a contrary intent appears

delivery made by David to William Lines, Inc., as

evidenced by the Bill of Lading, was deemed to be a
delivery to MOELCI. David was authorized to send the
power transformer to the buyer pursuant to their
agreement. When David sent the item through the
carrier, it amounted to a delivery to MOELCI
Article 1523 provides a mere presumption and in
order to overcome said presumption, MOELCI should
have presented evidence to the contrary. The burden

of proof was shifted to MOELCI, who had to show that

the rule under Article 1523 was not applicable. In this
regard, however, MOELCI failed

There being delivery and release, said fact constitutes

partial performance which takes the case out of the
protection of the Statute of Frauds
Petition granted.