E.C. MCCULLOUGH & CO., vs. S. M. BERGER G.R. No. 19009, September 26, 1922

Fact: The contract was made in February, 1918 the draft was payable ninety days after date; the first shipment of 213 bales arrived on April 26, and the second of 288 bales on May 18, and the plaintiff the draft on May 21 1918, and the transaction between the parties then became complete. On May 23, he cabled the defendant that the tobacco was unsatisfactory. On June 13, he cabled that there would be a loss. On June 28, he wrote the letter above quoted. September 5, the defendant wrote the New York Agency of the Philippine National Bank that he would take the tobacco back on condition that there was not any shortage in the number of bales. During all of this time, the defendant had the use of plaintiff’s money. It is true that the defendant offered to take the tobacco back and refund the money, but this offer was not actually made to the plaintiff until October , and was upon the condition that the full amount of the 501 bales should be returned, which was an impossible condition for the plaintiff to perform. But the plaintiff did offer to account to the defendant for the tobacco which he had sold and to return all of the unsold tobacco which was then in his warehouse, and the defendant declined the offer. As a business man, he knew that the plaintiff has then purchased the tobacco for the purpose of a resale, and that the tobacco had arrived at New York about five months before the offer was made, and he also knew that the plaintiff was using every effort to sell it and convert it into money, and that he would sell the whole or any part of it if a purchaser could be found at a reasonable price. At the time the defendant’s offer was communicated to the plaintiff by the bank the plaintiff in turn offered to account to the defendant for the entire proceeds of the 141 bales which he had already sold, and to deliver to him all of the unsold tobacco. This was all that the plaintiff could do under the existing conditions. The fact that the defendant did not accept this offer is strong evidence that he was seeking an undue advantage, and that his offer to plaintiff was not made in good faith. The second shipment arrived in New York on May 18, and the plaintiff could not be expected to take any final action until the last shipment arrived. On learning the true condition of the tobacco, the plaintiff cabled the defendant on May 23 that it was unsatisfactory, and again on June 13, that there would be a substantial loss, which was followed by the letter of June 28th above quoted.

Issue: Whether the word “sold” used in the written contract shows that the sale was completed?

Held: No, Although the word “sold” is used in the written contract, the transaction shows that the sale was not complete until the arrival of the goods in New York. The defects in the tobacco were inherent and could not be ascertained without opening the bales and making a physical examination. When this was done, the plaintiff promptly cabled the defendant that the tobacco was not satisfactory. In the nature of things, the plaintiff could not then render the defendant a statement of the amount of this claim. By the terms of the contract, the defendant guaranteed the arrival of the tobacco in New York “in good condition.” The testimony is conclusive that the plaintiff in good faith tried to sell the tobacco, and that he sold the 141 bales at the best obtainable price; that the only reason why he did not sell the remainder was because the tobacco was not “in good condition;” and that when he first knew that it was not “in good condition,” he promptly cabled that defendant that it was unsatisfactory. As we construe the record, after the tobacco was inspected, the plaintiff promptly advised the defendant that it was unsatisfactory, and that he would have to sustain a loss, and in good faith undertook to protect the defendant and to minimize the loss, and plaintiff’s claim is not barred by the provisions of either article 336 or 342 of the Code of Commerce.