C. STILIANOPULOS & CO., PLAINTIFF AND APPELLANT, VS. MANILA TRADING & SUPPLY CO., DEFENDANT AND APPELLEE.

In the final analysis, the real question involved is the legal
construction which should be placed upon the contract Exhibit B dated
February 14, 1924, the execution of which the defendant admits, and of
which paragraphs 7, 8 and 9 are as follows:

“7. It is agreed and understood by both of the
parties hereto that this agreement does not become effective until the
approval of the said Ford Motor Company shall have been endorsed
hereon, and shall continue in force and govern all transactions between
the parties hereto until cancelled or terminated by either party; it
being agreed that either party shall have the privilege with or without
cause, if approved by the Ford Motor Company, of cancelling and
annulling this agreement at any time upon written notice to the other
party; and that this agreement may also be terminated upon notice to
both parties given by the said Ford Motor Company, withdrawing its
approval of this agreement and requesting that same should no longer
remain in force.

“8.
If this agreement shall be terminated in any of the ways above set
forth, it is agreed that such cancellation or termination shall operate
as a cancellation of all unfilled orders which may have been received
by the Dealer from the Service Dealer prior to the date when notice of
such cancellation was received.

“9. Said Service Dealer shall
have no right to assign tliis agreement or any interest in same without
the written consent of the Dealer and the approval of the Ford Motor
Company.”

The plaintiff contends that in no
circumstances could the defendant cancel the contract without the
approval of the Ford Motor Company.

The defendant contends that it had the right to cancel the contract
at any time at its option with or without the approval of the Ford
Motor Company, and that in truth and in fact, it was cancelled with the
approval of that company.

In analyzing those questions, the trial court in a learned, well written opinion says:

“Plaintiff vigorously contends that the phrase ‘if approved by the Ford Motor Company’ constitutes
a condition precedent that should have been complied with by the
defendant before the notice or notification addressed to it under date
September 27, 1925, cancelling the service or agency agreement for the
sale of Ford automobiles and trucks, could become effective. Plaintiff
argues, further, that, the approval of the Ford Motor Company not
having been previously obtained as provided in the contract, the
cancellation was null, void, and of no legal effect, and that,
therefore, plaintiff is entitled to be indemnified both for the profits
which it failed to realize and the losses suffered by it as a result of
the defendant’s having opened in the town of Legaspi a branch for the
sale of the same motor cars and accessories.

“Defendant
dissents wholly from the theory sustained by the plaintiff, and alleges
that Clause 7 of the contract does not require prior approval of the
notice of cancellation and that the cancellation became effective
immediately because the phrase ‘if approved by the Ford Motor Company’ does not constitute a condition precedent in order that the contract could be rescinded. Defendant’s attorneys
argue this interesting aspect of the question in the following manner:

“FIRST QUESTION

“We
submit that there is not the slightest doubt that the defendant company
could cancel its contract with the plaintiff company Exhibit B-1
without the previous approval of the Ford Motor Company.

“Clause 7 of the contract Exhibit B-1 reads as follows:.

“It
is agreed and understood by both of the parties hereto that this
agreement does not become effective until the approval of the said Ford
Motor Company shall have been endorsed hereon, and shall continue in
force and govern all transactions between the parties hereto until
cancelled or terminated by either party; it being agreed that either
party shall have the privilege with or without cause, if approved by
the Ford Motor Company, of cancelling and annulling this agreement at
any time upon written notice to the other party; and that this
agreement may also be terminated upon notice to both parties given by
the said Ford Motor Company, withdrawing its approval of this agreement
and requesting that same should no longer remain in force.

“It
is to be noted, that in order that the contract should become
effective, that is to say, in order that the contract should obligate
the contracting parties, two conditions are required: (1) Previous
approval of the same by the Ford Motor Company, and (2) that such
approval should appear in the contract itself.

“It is also to
be noted, on the other hand, that the contract provides that either of
the contracting parties may cancel it, with or without cause, at any
time, upon written notice to the other party, if the Ford Motor Company
approves the cancellation of the contract.

“From this clause
(7) of the contract Exhibit B-1 it is evident that the prior approval
of the Ford Motor Company is not required for its cancellation. It
suffices that the. Ford Motor Company shall have approved the
cancellation before or after the giving of notice, either verbally or
in writing.

“If, in order to cancel the contract, the
prior written approval of the Ford Motor Company were necessary, this
fact would have been set out expressly in the contract, in the same way
as was the condition that in order that the contract could become
effective the prior approval of the Ford Motor Company in writing
should be endorsed thereon.

“Furthermore, if the contract may be cancelled, with or without cause,
and at any time, upon written notice by either of the contracting
parties to the other, it would be an absurdity to require that the Ford
Motor Company should previously approve such cancellation. If prior
approval of the Ford Motor Company were necessary, neither of the
contracting parties could cancel the contract at any time, with or
without cause, and this is authorized by the contract.

“SECOND QUESTION

“Even
admitting for the sake of argument, that the contract Exhibit B-1 could
not be cancelled without the prior approval of the Ford Motor Company,
as plaintiff contends, nevertheless we submit that plaintiff’s
complaint should be dismissed.

“The Ford Motor Company did
approve the cancellation of the contract Exhibit B-1 by the defendant
company, first verbally and later in writing.

“The contract
Exhibit B-1 was cancelled on October 3, 1925. On September 10 of the
same year, J. S. Reese, the President of the defendant company,
verbally informed the Assistant Sales Manager of the Ford Motor Company
in Detroit, Michigan, Mr. R. I. Roberge, that the defendant company was
going to cancel the contract in question Exhibit B-1, and Mr. Roberge
authorized Mr. Reese to cancel it, requesting the latter, further, to
advise him when the contract had been cancelled in order that the Ford
Company might confirm the cancellation, as it did, as appears from the
instrument Exhibit 1 of the deposition of the witness J. S. Reese, and
which reads as follows:

”
‘Referring to your cancellation on October 3, 1925, of the Service
Agreement and Rider, executed between C. Stilianopulos & Company of
Legaspi and yourselves on February 14, 1924, your action is hereby
approved, ratified and confirmed of that date.

” ‘Yours very truly,

” ‘FORD MOTOR COMPANY
(Sgd.)” ‘R. I. ROBERGE
” ‘ASSISTANT MANAGER OF SALES'”

“The
pertinent part of said clause clearly states that the parties have
agreed that either of them shall have the privilege, with or without
cause, if approved by the Ford Motor Company, to cancel and annul the
contract at any time upon notice in writing to the other party.
Applying the rules of construction, and giving to each word the meaning
contemplated by the contracting parties, it is readily seen that the
phrase if approved by the Ford Motor Company does not
constitute a condition precedent to the cancellation or annulment of
the contract, and that such approval could be given after the written
notice which either party was obligated to give to the other. This
interpretation is justified not only by grammatical construction and
the natural meaning of the words used, but also by the meaning of the
verb ‘to approve’ employed by the parties. To approve, according to the
dictionary, means to qualify or regard a thing as good; in connection
with the agreement entered into by the parties it means to qualify or
regard as good the cancellation agreed upon between them. If this is
the meaning of the verb so employed, then it cannot be doubted that it
was not the intention of the parties that the Ford Motor Company should
give its consent beforehand to the cancellation or annulment of the
contract, for that would be tantamount to requiring that it should
qualify and regard as good an act or contract which as yet did not
exist. A different conclusion would be reached if, instead of using the
phrase ‘if approved’the
parties had agreed that the cancellation or annulment of the contract
could not be effected ‘without the previous consent’ of the Ford Motor
Company. In the latter case, the intention would be clearly in harmony
with the plaintiff’s theory, inasmuch as in order to perfect the
contract and render it binding upon the parties the consent must
necessarily have been obtained at the time of the execution of the
contract.

“For these reasons, it must be concluded that under the above mentioned clause there was no obligation
on the part of the defendant to obtain the prior approval of the Ford
Motor Company, and that, the cancellation or annulment of the contract
being valid, plaintiff cannot rightfully maintain this action.

“It
may be added that the proof introduced warrants defendant’s contention
that the Ford Motor Company did approve, both verbally and in writing,
the cancellation in question; so that from this point of view also the
action brought by plaintiff cannot be sustained.

“In view of
the conclusions above set forth, it is unnecessary to consider the
question of the right claimed by plaintiff to indemnity for losses and
damages (danos y ‘perjuicios), nor the amount thereof.”

The opinion of the lower court is very materially strengthened by
the further important fact that the contract does not mention or
specify any period of time for its duration, by reason of which either
party, without such clauses, could terminate the contract at any time
of its own volition. It will also be noted that the Ford Motor Company
is not a party to the contract. We agree with the trial court that it
was the purpose and intent of the parties that Exhibit B was signed by
the defendant subject to the approval of the Ford Motor Company, and
that it did not become a valid and binding contract until such time as
it was approved by the Ford Motor Company. But even so, after its
approval, either party had a legal right at its option, with or without
cause, to cancel the contract, with or without the approval of the Ford
Motor Company. But the record is also conclusive that the cancellation
of the contract by the defendant was approved by the Ford Motor Company
both orally and in writing.

In the final analysis, both plaintiff and defendant signed the
contract Exhibit B, which does not have or specify any period of time
for its duration, and in and by which both parties agreed that either
party at its option, with or without cause, could cancel the contract,
and either party on its own volition had the legal right to cancel the
contract at any time after it was signed. Plaintiff’s contention would
destroy and defeat the plain and express provisions of its own contract.

The judgment of the lower court is affirmed, with costs. So ordered.

Johnson, Street, Malcolm, Villamor, Ostrand, Romualdez and Villa-Real, JJ., concur.