GEORGE A. KAUFFMAN, PLAINTIFF AND APPELLEE, VS. THE PHILIPPINE NATIONAL BANK, DEFENDANT AND APPELLANT.

At the time of the transaction which gave
rise to this litigation the plaintiff, George A. Kauffman, was the
president of a domestic corporation engaged chiefly in the exportation
of hemp from the Philippine Islands and known as the Philippine Fiber
and Produce Company, of which company the plaintiff apparently held in
his own right nearly the entire issue of capital stock. On February 5,
1918, the board of directors of said company, declared a dividend of
P100,000 from its surplus earnings for the year 1917, of which the
plaintiff was entitled to the sum of P98,000. This amount was
accordingly placed to his credit on the books of the company, and so
remained until in October of the same year when an unsuccessful effort
was made to transmit the whole, or a greater part thereof, to the
plaintiff in New York City.

In this connection it appears that on October 9, 1918, George B.
Wicks, treasurer of the Philippine Fiber and Produce Company, presented
himself in the exchange department of the Philippine National Bank in
Manila and requested that a telegraphic transfer of $45,000 should be
made to the plaintiff in New York City, upon account of the Philippine
Fiber and Produce Company. He was informed that the total cost of said
transfer, including exchange and cost of message, would be P90,355.50.
Accordingly, Wicks, as treasurer of the Philippine Fiber and Produce
Company, thereupon drew and delivered a check for that amount on the
Philippine National Bank; and the same was accepted by the officer
selling the exchange in payment of the transfer in question. As
evidence of this transaction a document was made out and delivered to
Wicks, which is referred to by the bank’s assistant cashier as its
official receipt. This memorandum receipt is in the following language:

				“October 9th,1918.
“CABLE TRANSFER BOUGHT FROM
	“PHILIPPINE NATIONAL BANK,
		“Manila, P. I.			StampP18.
“ForeignAmount			Rate
$45,000.			3/8%		P90,337.50

“Payable through Philippine National Bank, New York.
To G. A. Kauffman, New York. Total P90,355.50, Account of Philippine
Fiber and Produce Company. Sold to Messrs. Philippine Fiber and Produce
Company, Manila.

	(Sgd.) “Y. LERMA,
	“Manager,’ Foreign Department.”

On the same day the Philippine National Bank dispatched to its New York agency a cablegram to the following effect:

“Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000. (Sgd.) PHILIPPINE NATIONAL BANK, Manila“

Upon receiving this telegraphic message, the bank’s representative
in New York sent a cable message in reply suggesting the advisability
of withholding this money from Kauffman, in view of his reluctance to
accept certain bills of the Philippine Fiber and Produce Company. The
Philippine National Bank acquiesced in this and on October 11
dispatched to its New York agency another message to withhold the
Kauffman payment as suggested.

Meanwhile Wicks, the treasurer of the Philippine Fiber and Produce
Company, cabled to Kauffman in New York, advising him that $45,000 had
been placed to his credit in the New York agency of the Philippine
National Bank; and in response to this advice Kauffman presented
himself at the office of the Philippine National Bank in New York City
on October 15, 1918, and demanded the money. By this time, however, the
message from .the Philippine National Bank of October 11, directing the
withholding of payment had been received in New York, and payment was
therefore refused.

In view of these facts, the plaintiff Kauffman instituted the
present action in the Court of First Instance of the city of Manila to
recover said sum, with interest and costs; and judgment having been
there entered favorably to the plaintiff, the defendant appealed.

Among additional facts pertinent to the case we note the
circumstance that at the time of the transaction abovementioned, the
Philippine Fiber and Produce Company did not have on deposit in the
Philippine National Bank money adequate to pay the check for
P90,355.50, which was delivered in payment of the telegraphic order;
but the company did have credit to that extent, or more, for overdraft
in current account, and the check in question was charged as an
overdraft against the Philippine Fiber and Produce Company and has
remained on the books of the bank as an interest-bearing item in the
account of said company.

It is furthermore noteworthy that no evidence has been introduced
tending to show failure of consideration with respect to the amount
paid for said telegraphic order. It is true that in the defendant’s
answer it is suggested that the failure of the bank to pay over the
amount of this remittance to the plaintiff in New York City, pursuant
to its agreement, was due to a desire to protect the bank in its
relations with the Philippine Fiber and Produce Company, whose credit
was secured at the bank by warehouse receipts on Philippine products;
and it is alleged that after the exchange in question was sold the bank
found that it did not have sufficient security to warrant payment of
the remittance. In view, however, of the failure of the bank to
substantiate these allegations, or to offer any other proof showing
failure of consideration, it must be assumed that the obligation of the
bank was supported by adequate consideration.

In this
court the defense is mainly, if not exclusively, based upon the
proposition that, inasmuch as the plaintiff Kauffman was not a party to
the contract with the bank for the transmission of this credit, no
right of action can be vested in him for the breach thereof. “In this
situation,”—we here quote the words of the appellant’s brief,— “if
there exists a cause of action against the defendant, it would not be
in favor of the plaintiff who had taken no part at all in the
transaction nor had entered into any contract with the plaintiff, but
in favor of the Philippine Fiber and Produce Company, the party which
contracted in its own name with the defendant.”

The question thus placed before us is one purely of law; and at the
very threshold of the discussion it can be stated that the provisions
of the Negotiable Instruments Law (Act No. 2031) are not relevant to
the case. The reason for this is that before the Negotiable Instruments
Law can come into operation there must be a document in existence of
the character described in section 1 of that Law; and no rights
properly speaking arise in respect to said instrument until it is
delivered. In the case before us there was an order, it is true,
transmitted by the defendant bank to its New York branch, for the
payment of a specified sum of money to George A. Kauffman. But this
order was not made payable “to order” or “to bearer,” as required in
subsection (d) of that Act; and inasmuch as it never left the
possession of the bank, or its representative in New York City, there
was no delivery in the sense intended in section 16 of the same Law. In
this connection it is unnecessary to point out that the official
receipt delivered by the bank to the purchaser of the telegraphic
order, and already set out above, cannot itself be viewed in the light
of a negotiable instrument, although it affords complete proof of the
obligation actually assumed by the bank.

Stated in bare simplicity the admitted facts show that the
defendant bank for a valuable consideration paid by the Philippine
Fiber and Produce Company agreed on October 9, 1918, to cause a sum of
money to be paid to the plaintiff in New York City; and the question is
whether the plaintiff can maintain an action against the bank for the
nonperformance of said undertaking. In other words, is the lack of
privity with the contract on the part of the plaintiff fatal to the
maintenance of an action by him?

The only express provision of law that has been cited as bearing
directly on this question is the second paragraph of article 1257 of
the Civil Code; and unless the present action can be maintained under
that provision, the plaintiff admittedly has no case. This provision
states an exception to the more general rule expressed in the first
paragraph of the same article to the effect that contracts are
productive of effects only between the parties who execute them; and in
harmony with this general rule are numerous decisions of this court
(Wolfson vs. Estate of Martinez, 20 Phil., 340; Ibanez de Aldecoa vs. Hongkong and Shanghai Banking Corporation, 22 Phil., 572, 584; Manila Railroad Co. vs. Compania Trasatlantica, and Atlantic, Gulf & Pacific Co., 38 Phil., 875, 894.)

The paragraph introducing the exception which we are now to consider is in these words:

“Should the contract contain any stipulation in
favor of a third person, he may demand its fulfillment, provided he has
given notice of his acceptance to the person bound before the
stipulation has been revoked.” (Art. 1257, par. 2, Civ. Code.)

In the case of Uy Tarn and Uy Yet vs. Leonard (30 Phil.,
471), is found an elaborate dissertation upon the history and
interpretation of the paragraph above quoted and so complete is the
discussion contained in that opinion that it would be idle for us here
to go over the same matter. Suffice it to say that Justice Trent,
speaking for the court in that case, sums up its conclusions upon the
conditions governing the right of the person for whose benefit a
contract is made to maintain an action for the breach thereof in the
following words:

“So, we believe the fairest test, in this
jurisdiction at least, whereby to determine whether the interest of a
third person in a contract is a stipulation pour autrui, or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract.

“If a third person claims an enforcible interest in the contract, that
question must be settled by determining whether the contracting parties
desired to tender him such an interest. Did they deliberately insert
terms in their agreement with the avowed purpose of conferring a favor
upon such third person? In resolving this question, of course, the
ordinary rules of construction and interpretation of writings must be
observed.” (Uy Tarn and Uy Yet vs. Leonard, supra,)

Further on in the same opinion he adds: “In applying this test to a stipulation pour autrui,
it matters not whether the stipulation is in the nature of a gift or
whether there is an obligation owing from the promisee to the third
person. That no such obligation exists may in some degree assist in
determining whether the parties intended to benefit a third person,
whether they stipulated for him.” (Uy Tarn and Uy Yet vs. Leonard, supra.)

In the light of the conclusions thus stated, the right of the
plaintiff to maintain the present action is clear enough; for it is
undeniable that the bank’s promise to cause a definite sum of money to
be paid to the plaintiff in New York City is a stipulation in his favor
within the meaning of the paragraph above quoted; and the circumstances
under which that promise was given disclose an evident intention on the
part of the contracting parties that the plaintiff should have that
money upon demand in New York City. The recognition of this unqualified
right in the plaintiff to receive the money implies in our opinion the
right in him to maintain an action to recover it; and indeed if the
provision in question were not applicable to the facts now before us,
it would be difficult to conceive of a case arising under it.

It will be noted that under the paragraph cited a third person
seeking to enforce compliance with a stipulation in his favor must
signify his acceptance before it has been revoked. In this case the
plaintiff clearly signified his acceptance to the bank by demanding
payment; and although the Philippine National Bank had already directed
its New York agency to withhold payment when this demand was made, the
rights of the plaintiff cannot be considered to have been prejudiced by
that fact. The word “revoked,” as there used, must be understood to
imply revocation by the mutual consent of the contracting parties, or
at least by direction of the party purchasing the exchange.

In the course of the argument attention was directed to the case of Legniti vs.
Mechanics, etc. Bank (130 N. E. Rep., 597), decided by the Court of
Appeals of the State of New York on March 1, 1921, wherein it is held
that, by selling a cable transfer of funds on a foreign country in
ordinary course, a bank incurs a simple contractual obligation, and
cannot be considered as holding the money which was paid for the
transfer in the character of a specific trust. Thus, it was said,
“Cable transfers, therefore, mean a method of transmitting money by
cable wherein the seller engages that he has the balance at .the point
on which the payment is ordered and that on receipt of the cable
directing the transfer his correspondent at such point will make
payment to the beneficiary described in the cable. All these
transactions are matters of purchase and sale create no trust
relationship.”

As we view it there is nothing in the decision referred to decisive
of the question now before us, which is merely that of the right of the
beneficiary to maintain an action against the bank selling the transfer.

Upon the considerations already stated, we are of the opinion that
the right of action exists, and the judgment must be affirmed. It is so
ordered, with costs against the appellant. Interest will be computed as
prescribed in section 510 of the Code of Civil Procedure.

Johnson, Aravllo, Avancena, and Villamor, JJ., concur.