SOORAJMULL NAGARMULL, PLAINTIFF AND APPELLEE, VS. BINALBAGAN-ISABELA SUGAR COMPANY, INC., DEFENDANT AND APPELLANT.

Appeal taken by Binalbagan-Isabela Sugar Company, Inc. from the decision
of the Court of First Instance of Manila in Civil Case No. 41103 entitled
“Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Company, Inc.” of
the following tenor:

“IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered in
favor of the plaintiff, Soo­rajmull Nagarmull, ordering the defendant, Binal­bagan-Isabela
Sugar Co., Inc., to pay said plain­tiff the sum of 18,562 rupees and 8
annas, with reservation for the plaintiff to prove its equiv­alent in
Philippine pesos on the date of the fil­ing of the complaint, plus the costs of
suit.”

The parties submitted to the trial court the following
stipulation of facts:

“1.    Under
Contract G/4370 dated May 6, 1949, plaintiff, a foreign corporation with
offices at No. 8 Dalhousie Square (East), Cal­cutta, India, agreed to
sell to defendant, a domestic corporation with offices at the Chro­nicle
Building, Aduana Street, Manila, 1,700,000 pieces of Hessian bags at $26.20 per
100 bags, C.I.F. Iloilo.  Shipment of these bags was to be made in
equal installments of 425,000 pcs or 425 bales (1,000 pcs to a bale) during
each of the months of July, August, September and October, 1949.  A copy of this contract marked Annex ‘A‘ and the Calcutta Jute Fabrics Shippers Association Form 1935 which was
made a part of the contract and marked as Annex ‘1-A’ are hereto attached.

“2.    This agreement was confirmed in a letter by
the plaintiff to the defendant on May 7, 1949, copy of which is attached here­to
and made a part hereof as Annex ‘B’;

“3.    On September 8, 1949, plaintiff advised
defendant that of the 850 bales scheduled for shipment in July and August, the
former was able to ship only 310 bales owing to the alleged failure of the
Adamjee Jute Mills to supply the goods in due time.  Copy of plaintiff’s letter is attached here­to
as Annex ‘C’ and made an integral part hereof;

“4.    In a letter dated September 29, 1949,
defendant requested plaintiff to ship 100 bales of the 540 bales defaulted from the July and August shipments.  A copy of this letter marked Annex ‘D’ is hereto at­tached.  In this connection, it may also be mentioned
that of the 425 bales scheduled for shipment in September, 54 bales were
likewise defaulted resulting in a total of 154 bales which is now the object of
the con­troversy.

“5.    Defendant requested plaintiff to pay 5% of the value of the 154 bales
default­ed as penalty which plaintiff did.

“6.    Meanwhile, on October 1, 1949, the
Government of India increased the export duty of jute bags from 80 to 350
rupees per ton, and on October 5, 1949, plaintiff requested defendant to
increase its letter of credit to cover the enhanced rate of export duty imposed
upon the goods that were to be shipped in Octo­ber, reminding the latter that
under their agreement, any alteration in export duty was to be for the buyer’s account.  Copy
of plain­tiff’s letter is attached hereto as Annex ‘E’;

“7.    On
October 25, 1949, defendant, in compliance with plaintiff’s request,
increased the amount of its letter of credit by $10,986.25 to cover the
increase in export duty on 425 bales scheduled under the contract for shipment
in Octo­ber, 1949.  A copy of defendant’s
letter marked Annex ‘F’ is
hereto attached;

“8.    On October 27, 1949, plaintiff wrote to
defendant for a further increase of $4,000.00 in its letter of credit to cover the shipment of 154 bales which
under the contract should have been included in the July, August and September
shipments.  A copy of said letter is
attached hereto as Annex ‘G’;

“9.    On November 17, 1949, plaintiff wrote
defendant a letter reiterating its claim for $4,000.00 corresponding to the
increased export taxes on the 154 bales delivered to defendant from the
defaulted shipments for the months of July, August and September, 1949.  A copy of said letter is attached hereto as Annex ‘H’;

“10.  On
February 6, 1951, defendant received notification from the Bengal Chamber
of Commerce, Tribunal of Arbitration in Calcutta, India, advis­ing it that on December 28, 1950, plaintiff
applied to said Tribunal for arbitration regarding their claim.  The Tribunal requested the defendant to send
them its version of the case.  This,
defend­ant did on March 1, 1951, thru the then Government Corporate Counsel,
former Justice Pompeyo Diaz.  A copy of
the letter of authority is attached as Annex
‘I’;

“11.  The
case was heard by the Tribunal of Arbitration on July 5, 1951.  Having pre­viously requested the Secretary of
Foreign Affairs for assistance, defendant was repre­sented at the hearing by
the Philippine Consulate General in Calcutta, India, by Consul Jose
Moreno.  A copy of the authority, con­sisting
of the letter of Government Corporate Counsel Pompeyo Diaz, dated March 1, 1951, and 1st Indorsement thereon, dated
March 2, 1951, are attached hereto as Annexes ‘J’ and ‘J-1′;

“12.  As
presented to the Tribunal of Arbitration, the whole case revolved on the
question of whether or not defendant is lia­ble to the plaintiff for the
payment of increased export taxes imposed by the Indian Government on the
shipments of jute sacks.  Defendant
contended that if the jute sacks in question were delivered by plaintiff in the
months of July, August, and September, 1949, pursuant to the terms of the
contract, then there would have been no increased export taxes to pay because
said increased taxes be­came effective only on October 1, 1949, while on the
other hand, plaintiff argued that the contract between the parties and all
papers and documents made parts thereto should pre­vail, including defendant’s
letter of Septem­ber 29, 1949;

“13.  The Bengal Chamber of Commerce, Tribunal of
Arbitration, refused to sustain defendant’s contention and decided in favor of
the plaintiff, ordering the defendant to pay to the plaintiff the sum of 18,562
rupees and 8 annas.  This award was
thereafter re­ferred to the Calcutta High Court which issued a decree
affirming the award;

“14.  For about two years, the plaintiff attempted
to enforce the said award through the Philippine Charge de ‘Affaires in
Calcutta, the Indian Legation here in the Philippines, and the Department of
Foreign Affairs.  On September 22, 1952,
plaintiff, thru the De­partment of Foreign Affairs, sought to enforce its claim to which letter defendant replied
on August 11, 1952, saying that they are not bound by the decision of the
Bengal Chamber of Commerce and consequently are not obligated to pay the claim
in question.  Copies of said letters are
attached hereto as Annexes ‘K’ and ‘L’, respectively;

“15.  For more than three years thereafter, no
communication was received by defendant from the plaintiff regarding their
claim until January 26, 1956, when Atty. S. Emiliano Calma wrote the defendant a
letter of demand, copy of which is attached hereto as Annex ‘M’;

“16.  On February 3, 1956, defendant’s counsel
replied informing Atty. S. Emiliano Calma that it refuses to pay plaintiff’s
claim because the same has no foundation in law and in fact.  A copy of this letter
is attached hereto as Annex ‘N’;

“17.  Thereafter,
no communication was received by defendant from plaintiff or its lawyers regarding their claim until June,
1959, when the present complaint was filed.

“FINALLY, parties thru their respective counsel, state that
much as they have endeavoured to agree on all matters of fact, they have failed
to do so on certain points.  It is,
therefore, respectfully prayed of this Honorable Court that parties be allowed
to present evidence on the disputed facts.”

Thereafter the parties submitted additional evidence pursuant to
the reservation they made in the above stipula­tion.

The appeal was elevated to the Court of Appeals but the latter, by
its resolution of January 27, 1964, elevated it to this Court because the
additional documents and oral evidence presented by the parties did not raise
any factual issue, and said court further found that “the three assigned
errors quoted above all pose questions of law”.

As may be gathered from the pleadings and the facts stipulated,
the action below was for the enforcement of a foreign judgment:  the decision rendered by the Tribunal of
Arbitration of the Bengal Chamber of Commerce in Calcutta, India, as affirmed by the High Court of
Judicature of Calcutta.  The appealed
decision provides for its enforce­ment subject to the right reserved to
appellee to present evidence on the equivalent in Philippine currency of the
amount adjudged in Indian currency.  The
record does not disclose any evidence presented for that purpose subsequent to
the rendition of judgment.

To secure a reversal of
the appealed decision appel­lant claims that the lower court committed the
following errors:

“I

THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF-APPELLEE, A FOREIGN
CORPORATION NOT LICENSED TO TRANSACT BUSINESS IN THE PHILIPPINES, HAS THE RIGHT
TO SUE IN PHILIP­PINE COURTS.

II

THE LOWER COURT ERRED WHEN IT FAILED TO CONSIDER
PLAINTIFF-APPELLEE’S DEFAULT, AND
INSTEAD RELIED SOLELY ON THE AWARD
OF THE BENGAL CHAMBER OF COMMERCE TRIBUNAL OF ARBITRATION.

III

THE LOWER COURT ERRED WHEN IT HELD THAT PLAINTIFF-APPELLEE WAS NOT
GUILTY OF LACHES.”

The main issue to be resolved is whether or not the decision of
the Tribunal of Arbitration of the Bengal Chamber of Commerce, as affirmed by
the High Court of Judicature of Calcutta, is enforceable in the Philippines.

For the purpose of this decision We shall assume that appellee –
contrary to appellant’s contention – has the right to sue in Philippine courts
and that, as far as the instant case is concerned, it is not guilty of
laches.  This notwith­standing, We are
constrained to reverse the appealed decision upon the ground that it is based
upon a clear mistake of law and its enforcement will give rise to a patent injustice.

It is true that
under the provisions of Section 50 of Rule 39, Rules of Court, a judgment for a
sum of money rendered by a foreign court “is presumptive evidence of a
right as between, the parties and their successors in in­terest by a subsequent
title”, but when suit for its enforcement is brought in a Philippine court, said judgment
“may be repelled by evidence of a want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact” (Underline
supplied).

Upon the facts of record, We are constrained to hold that the
decision sought to be enforced was rendered upon a “clear mistake of
law” and because of that it makes appel­lant – an innocent party – suffer
the consequences of the default or breach of contract committed by
appellee.

There is no question at
all that appellee was guilty of a breach of contract when it failed to
deliver one-hundred fifty-four Hessian bales which, according to the contract
entered into with appellant, should have been delivered to the latter in the
months of July, August and September, all of the year 1949.  It is equally
clear beyond doubt that had these one-hundred fifty-four bales been
delivered in accordance with the contract aforesaid, the increase in the
export tax due upon them would not have been imposed because said increased
export tax became effective only on
October 1, 1949.

To avoid its liability for the aforesaid increase in the export tax, appellee claims that
appellant should be held liable therefor on the strength of its letter of
September 29, 1949 asking appellee to
ship the shortage.  This argument is
unavailing because it is not only
illogical but contrary to known principles of fairness and justice.  When appellant demanded that appellee deliver the shortage of 154 bales, it did
nothing more than to demand that to which it was entitled as a matter of right.  The breach of contract
committed by appellee gave appellant, under the law and even under general principles of fairness, the right to
rescind the contract or to ask for its specific performance, in either case with right to demand
damages.  Part of the damages appellant was clearly entitled to recover from
appellee growing out of the latter’s breach of the contract consists precisely
of the amount of the increase
decreed in the export tax due on the shortage – which, because of appellee’s
fault, had to be de­livered after the effectivity of the increased export tax.

To the extent, therefore, that the decisions of the Tribunal of
Arbitration of the Bengal Chamber of Commerce and of the High Court of
Judicature of Calcutta fail to apply to the facts of this case fundamental
principles of contract, the same may be im­peached, as they have been
sufficiently impeached by appellant, on
the ground of “clear mistake of law”. 
We agree in this regard with the majority opinion in Ingenohl vs.
Walter E. Olsen & Co. (47 Phil. 189), although its view was reversed by the Supreme Court of
the United States (273 U.S. 541, 71 L.ed. 762) which at that time had
jurisdiction to review by certiorari decisions of this Court.  We can
not sanction a clear mistake of law that would work an obvious injustice upon
appellant.

WHEREFORE, the appealed judgment is reversed and set
aside, with costs.

Concepcion, C.J., Reyes, Makalintal, Zaldivar, Fernando,
Teehankee, Barredo, and Villamor, JJ., concur.

Castro, J., on official leave.