PAN PACIFIC CO v.

PAC
(GR NO. L-22050) June 13, 1968
This is an action for the recovery, from said Corporation and its president,
defendant John W. Mears, of several sums of money under five (5) causes of action,
namely: 1) P92,406.73, as the alleged balance of the cost of eighteen (18) bowling
alleys and additional equipment thereof, and the installation thereof; 2) P11,703.00,
as the price of two (2) carom and three (3) pocket tables, with their equipment,
together with two (2) sets of ivory balls and one (1) revolving cue rack; 3)
P3,369.90, as the costs of miscellaneous billiard and bowling accessories and
equipment; 4) P8,550.00, as the cost of 168 sets of duck pins; and 5) 25% of the
aggregate amount due under the first four (4) causes of action, as exemplary or
corrective damages. Plaintiff prays, also, that the defendants be sentenced to pay
interest, attorney's fees, and the costs.
Facts: In 1950, Hurst and Mears met, and the question of defendant war
damage payments in the Philippines came up in the conversation. Hurst, who was
then Vice-President of the plaintiff corporation 1 suggested to Mears that the
defendant re-invest part of the war damage payment due defendant corporation in
bowling alleys. The plaintiff was then distributor of Brunswick-Balke-Collender
Company of the United States, manufacturer of bowling alleys.
hereby submit our firm quotation of P85,948.42 to cover the cost of installing
twelve (12) Brunswick Bowling Alleys in any location acquired by you in the City of
Manila or its immediate suburbs. This quotation includes the cost of the alleys,
additional equipment and installation cost but does not include freight charges for
accessories that will have to be ordered from the United States. Such freight
charges will be charged to you at actual cost upon the arrival of the shipment. Then
follows a detailed list of the materials which were included and additional
equipment for 6 months maintenance of alleys and the terms of payment. The price
was payable 50% upon the signing of the agreement and the balance in six (6)
monthly installments, the first installment falling due on the first day of work on the
installation of alleys. 3 The one-year guarantee against materials and defective
workmanship was allowed by the plaintiff company. This was, as stated above,
accepted by the Philippine Advertising Corporation, thru John W. Mears, President.
Attached to the letter, Exhibit A, was, according to Hurst, a breakdown of the
bowling alley quotation. Subsequently, the defendants ordered and the plaintiff
supplied to the defendants another six (6) Brunswick bowling alleys. The agreement
with respect to them is embodied in the letter-agreement, Annex B, 4 dated October
2, 1950. The pertinent portion of this letter reads as follows:
Then follows a detailed list of the items that the supplier included in the
quotation and additional equipment for 6 months maintenance of alleys. According
to the letter, it was also agreed that defendants were to pay 8% interest on the
monthly payment and it was also understood that any luxury or additional sales tax
that might be imposed by the government would be for defendants' account. This
letter was also accepted by defendant corporation thru John W. Mears.
The sum of P92,406.73 sought to be recovered by the plaintiff, under its first
cause of action, allegedly represents the unpaid balance of the cost of 18 bowling
alleys and additional equipment.
Contention of appellant: Appellant denies plaintiffs light to collect this
balance upon the ground that: 1) the sum of P30,661.90 representing the aggregate
amount of inland freight, ocean freight, arrastre and sales tax, should be deemed
included in the price agreed upon; 2) eight (8) of the bowling alleys installed by the
plaintiff were "second-hand", not the new ones ordered by the defendants; 3) the
bowling alleys installed by the plaintiff were of a lower quality than those ordered by
the defendants; and 4) the installations made by the plaintiff were defective.
Plaintiffs contention: Upon the other hand, apart from refuting the
testimony of Aquino and other witnesses for the defense thereon, plaintiff's
witnesses testified that each and every one of the 18 bowling alleys it had installed
in appellant's premises were new. This was confirmed by J.E. Whitaker, for many
years export manager of Brunswick-Balke-Collender Co., and an expert in the
installation and maintenance of bowling alleys, who inspected defendants' alleys in
November, 1951.

ISSUE: WON appellant is liable to pay its obligation as agreed and WON it is
liable to pay damages?
Ruling: Appellant asserts that it is under no obligation to pay the interest
and attorney's fees referred to in said invoices, because it had not agreed to the
above-quoted provision, the invoices for the goods having been signed by Prudencia
Arboleda, a mere clerk of appellant herein, and because, in fact, Mears had written
on appellant's copy of one of said invoices Exhibit G-1 the words "Received
copy but not conformed." Appellant's witness, Miss Arboleda declared, however that
she had authority to receive said invoices or copies thereof; that she, thereupon,
turned them over to defendant Mears; and that the latter received said copies,
without expressing any objection thereto. Then, also, it appears that the note,
expressing his non-comformity with the provisions of Exhibit G-1, was written by
him on said copy, dated March 15, 1951, about a month and a half later, or on April
27, 1951. Again, defendants did not try to cause a similar entry to be made in
plaintiff's original invoice, or to otherwise advise the plaintiff of defendants
objection to the provisions of said invoice. Worse still, appellant kept and used the
billiard tables, the bowling alleys and the accessories or equipment described in the
aforementioned invoices, without offering either to pay the amounts thereof or to
return said goods. In the language of His Honor, the trial Judge, "His acceptance of
the equipment and supplies and accessories, and the use he made of them is an
implied conformity to the terms of the invoices and he is bound thereby."
Under the fifth cause of action, plaintiff seeks to recover moral damages for
the alleged wanton refusal of the defendants to pay their just obligation to the
plaintiff and for taking advantage of the plaintiffs good faith. Art. 2229 of the New
Civil Code provides that "exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages." And Article 2232 provides that "in contracts
and quasi-contracts, the court may award exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner". The
records of this case amply demonstrate that the defendants, in utter disregard of
the rights of the plaintiff, had refused deliberately and wantonly to pay the plaintiff
what is justly due. The installation of the bowling alleys, together with their
equipment, and the billiard tables had brought the defendant a lucrative income
from the year of its opening in 1951, to the present; and yet outside of the down
payment which defendant had paid on the 18 bowling alleys, defendant had
absolutely refused, which the Court has found without just cause, to pay the
balance thereof and the cost of the bowling and billiard accessories this
notwithstanding that the defendant had promised to pay the balance of the price of
the bowling alleys in installments, the first installment to be paid on the day that
the plaintiff would commence work on the bowling alleys. Defendant, taking
advantage of the plaintiff's good faith, requested a deferment of the payment until
the installation shall have been completed; but the installation having been
completed, defendants under one pretext or another, refused without just cause to
pay what is due the plaintiff.
Plaintiff is entitled to actual damages consisting in the payment of interest
and attorney's fees, and considering that the defendants had acted wantonly,
oppressively, if not fraudulently, in the performance of their obligation, plaintiff is
likewise entitled to moral and exemplary damages, which the Court fixes in the
amount of P20,000.00. Under the first cause of action, plaintiff is entitled to
attorney's fees, since plaintiff, in accordance with Article 2208 of the New Civil
Code, has been awarded exemplary damages, and because defendant acted in
gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and
demandable claim, and it is just and equitable that attorney's fees and expenses of
litigation should be recovered. Considering the lengthy pleadings, the voluminous
records, the lengthy and protracted trial, and the professional standing of counsel,
the Court hereby charges the defendants with the payment of attorney's fees in the
amount of P15,000.00. (Record on Appeal, pp. 649-652.)
We are fully in accord with the foregoing view, which we adopt as ours.
WHEREFORE, the decision appealed from should be, as it is hereby, affirmed,
with costs against defendant-appellant Philippine Advertising Corporation.