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668 SUPREME COURT REPORTS ANNOTATED

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75

LIM YHI LUYA, petitioner vs. COURT OF APPEALS and

HIND SUGAR COMPANY respondents.

Contracts; Interpretation shall not favor the party who caused

the ambiguity. Thus, the one who prepared the contract which
states: “Terms: Cash upon signing of this contract,” cannot deny
that the agreement was not a cash transaction.—Considering the
admitted fact that the contract of sale (Exhibit “A”) was prepared
in the office of respondent company by Generoso Bongato,
Assistant to the Manager of the company, upon instruction of
General Manager Emiliano L. Abalos who is a lawyer, and We are
now confronted with the varying or conflicting interpretations of
the parties thereto, the respondent company contending that the
stipulation “Terms: Cash upon signing of this contract” does not
mean that the agreement was a cash transaction because no
money was paid by the petitioner at the time of the signing
thereof whereas the petitioner insists that it was a cash
transaction inasmuch as he paid cash amounting to P142,975.00
upon the signing of the contract, the payment having been made
at around 1:30 in the afternoon of November 13, 1970 to the
cashier, Teodoro Garcia, and Manager Abalos although the sale
was agreed to in the morning of the same day, November 13,
1970, the conflicting interpretations have shrouded the
stipulation with ambiguity or vagueness. Then, the cardinal rule
should and must apply, which is that the interpretation shall not
favor the party who caused the ambiguity (Art. 1377, New Civil
Code). We rule that in the instant case, the interpretation to be
taken shall not favor the respondent company since it is the party
who caused the ambiguity in its preparation.
Same; Contemporaneous acts of the parties as indication of
their contractual relation.—The above facts show
contemporaneous and subsequent acts of the parties in relation to
the transaction between them as embodied in the Contract of Sale
of Sugar (Exh. “A”) from which the intention of the contracting
parties may be judged correctly. The trial court was correct in

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judging and deciding the intention of the parties from their

actuations contemporaneous with and

_______________

* FIRST DIVISION

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VOL. 99, SEPTEMBER 11, 1980 669

Lim Yhi Luya vs. Court of Appeals

subsequent to the agreement for the sale of the sugar in question,

and we sustain the trial court, applying Art. 1371, New Civil
Code, supra.
Same; There is symbolic delivery of sugar upon delivery to
vendee of the delivery orders which would authorize the vendee to
withdraw sugar from the warehouse.—In the case at bar, at the
moment the delivery orders were issued and given to the
petitioner-vendee, there was a symbolic or feigned tradition of the
sugar sold since the delivery orders are documents of title to goods
which, under Article 1636, New Civil Code, includes any bill of
lading, dock, warrant, quedan, or warehouse receipt or order for
the delivery of goods, or any other document used in the ordinary
course of business in the sale or transfer of goods, as proof of the
possession or control of the goods, or authorizing or purporting to
authorize the possessor of the document to transfer or receive,
either by indorsement or by delivery, goods represented by such
document. And when the petitioner-buyer withdraw from the
respondent’s warehouse, hauled and took delivery on various
dates and varying quantities of sugar piculs totalling 3,735 piculs,
there was actual delivery thereof which consummated the sale.
Same; Appeal; Evidence; Exceptions to binding effect of
factual findings of Court of Appeals.—In Ramos vs. Pepsi-Cola
Bottling Co., et al., L-22533, February 9, 1967, 19 SCRA 289, We
enumerated the following as exceptions to the general rule: (1)
Where there is a grave abuse of discretion (Buyco vs. People, 95
Phil. 453); (2) When the finding is grounded entirely on
speculation, surmises or conjectures (Joaquin vs. Navarro, 93
Phil. 257); (3) When the inference made is manifestly mistaken,
absurd or impossible (Luna vs. Linatoc, 74 Phil. 15); (4) When the
judgment of the Court of Appeals was based on a
misapprehension of facts (De la Cruz vs. Sosing, 94 Phil. 26); (5)
When the factual findings are conflicting (Casica vs. Villaseca,
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101 Phil. 1205); or (6) When the Court of Appeals, in making its
findings, went beyond the issues of the case and the same are
contrary to the admissions of both appellant and appellee
(Evangelista vs. Alto Surety & Insurance Co., L-1139, April 23,
1958).
Same; Same; Same; Same.—And considering that in the case
at bar the findings of the Court of Appeals are contrary to those of
the trial court, a minute scrutiny by the Supreme Court is in
order, and resort to duly proven evidence becomes necessary.

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Same; Same; Same; If the transaction for the purchase were

not cash, contrary to what was stipulated in the contract, then the
vendor company’s record would have reflected that the sugar was
withdrawn by or delivered to the vendee on credit.—The logical
implication of the ruling of the respondent court which upheld the
position of the respondent company that the purchase of sugar
was not a cash transaction, is that the purchase was on credit.
However, since it appears that the transaction was not recorded
in the company books and there was no document showing it was
not cash, the inference arises that the respondent company
allowed, tolerated, and/or sanctioned a credit transaction to be
unrecorded in the company books which is simply irregular,
unbusiness-like and anomalous. For a corporation or company
like the respondent engaged in the big business of sugar central,
in the production and marketing as well as export of sugar, and in
the present case involving more than a hundred thousand pesos,
to keep no record of the transaction in question is blatantly
against ordinary business practice and procedure in bookkeeping
or accounting.
Same; Same; Same; The Court of Appeals erred in upholding
the oral testimony of the vendor’s manager as against the written
terms of the contract. Parol evidence rule, reinstated.—This ruling
of the Court upholding the oral testimony and claim of Manager
Abalos as against the written contract itself is a grave and
prejudicial error in the appreciation of the evidence because it is a
clear and flagrant disregard of the parol evidence rule (Section 7,
Rule 130, Revised Rules of Court) providing that: When the terms
of an agreement have been reduced to writing, it is to be
considered as containing all such terms, and, therefore, there can
be between the parties and their successors in interest, no
evidence of the terms of the agreement other than the contents of

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the writing, except in the following cases: (a) Where a mistake or

imperfection of the writing, or its failure to express the true intent
and agreement of the parties, or the validity of the agreement is
put in issue by the pleadings; (b) When there is an intrinsic
ambiguity in the writing.”
Same; Judgment; Award of money should include legal
interest.—On the second cause of action, the judgment of the
appellate court is correct insofar as it orders the respondent
company to return to the petitioner the latter’s deposit of
P55,000.00 but should be modified to include payment of legal
interest from January 20, 1971 until fully paid and giving the
option to petitioner either to

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Lim Yhi Luya vs. Court of Appeals

receive the money or take delivery of 1,000 piculs of export sugar

from respondent company.

Melencio-Herrera, J., dissenting:

Contracts; Appeals; The judgment of the Court of Appeals

should be affirmed.—I vote to affirm the judgment of the Court of
Appeals.

PETITION to review the decision of the Court of Appeals.

Certiorari.

The facts are stated in the opinion of the Court.

GUERRERO, J.:

This is a Petition for Review by way of certiorari of the

Decision of the Court of Appeals in CA-G.R. No. 51546-R
entitled “Lim Yhi Luya, Plaintiff-Appellee, versus Hind
Sugar Company, Defendant-Appellant,” which reversed
and modified the decision of the Court of First Instance of
Pangasinan in favor of the plaintiff-appellee, now the
herein petitioner
The antecedent facts may be stated as follows:
Petitioner Lim Yhi Luya is a businessman, resident of
Lingayen, Pangasinan where he operates a grocery store,
hardware store and gasoline station. Private respondent
Hind Sugar Company is engaged in the manufacturing and

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marketing of sugar, its principal office located in Manaoag,

Pangasinan. Vice President and General Manager of
respondent company is Atty. Emiliano Abalos. His
assistant is Generoso Bongato, while the cashier and
accountant of the company is Teodoro Garcia.
Petitioner and private respondent since 1958 have had
business dealings with each other, the company selling
sugar to the petitioner and the latter has been supplying
the company with diesoline, gasoline, muriatic acid,
sulfuric acid, other supplies and materials ordered on
credit.
On November 12, 1970, petitioner received a telegram
from Manager Abalos in the following tenor: “Please come
tomor-

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row morning without fail.” (Exh. “B”). The following day,

November 13, 1970, petitioner proceeded to the company
and in the office of Manager Abalos, the latter offered to
sell sugar at P37.00 per picul. The parties agreed to the
purchase of 4,085 piculs of sugar at P35.00 per picul. The
specific terms of the contract are shown in Exhibit “a” as
follows:

“CONTRACT OF SALE OF SUGAR

Seller : Hind Sugar Company
    Manaoag, Pangasinan
Buyer : Lim Yhi Luya
    Lingayen, Pangasinan
Quantity : Four Thousand Eighty-Five (4,085)
    piculs of Hind-2 sugar, 1969-70 crop
Price : Thirty Five (P35.00) Pesos per
    picul, f.o.b. Manaoag
Terms : Cash upon signing of this contract.
Manaoag, Pangasinan, Nov. 13, 1970.”

On the same day, November 13, 1970, in compliance with

the contract, four delivery orders (Nos. 3054, 3055, 3056,
and 3057) were issued to petitioner by cashier Garcia upon
instructions of Manager Abalos covering the total quantity

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of sugar sold, 4,085 piculs. Between November 13, 1970 to

January 27, 1971, petitioner withdrew from the company
warehouse in varying quantities a total amount of 3,735
piculs under substitute delivery orders leaving a balance of
350 piculs undelivered.
On January 22, 1971, the question of payment cropped
out between the parties. Petitioner claimed that he had
paid P142,975.00 to the company officials, Cashier Garcia
and Manager Abalos on November 13, 1970 and as proof of
his payment, he referred to the contract Exhibit “A”,
particularly to the stipulation stating “Terms: Cash upon
signing of this
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VOL. 99, SEPTEMBER 11, 1980 673

Lim Yhi Luya vs. Court of Appeals

contract.” Respondent company officials denied the claim of

the petitioner, alleging that petitioner never paid for the
sugar on November 13, 1970 or at any time thereafter. An
audit report or examination of the books of the company
made by External Auditor Victorino Daroya showed no
payment by petitioner.
On May 17, 1971, petitioner, as plaintiff below, filed the
complaint against the defendant Hind Sugar Company,
now the herein respondent in Civil Case No. 14873 before
the Court of First Instance of Pangasinan on six (6) causes
of action, alleging—
“On his First Cause of Action: That defendant-appellant
has unreasonably, unlawfully and maliciously refused and
failed to deliver to him 350 piculs of the sugar he bought
from it under their contract (Exh. “A”) with a value of
P12,250.00 altho he has already paid the full price thereof;
On his Second Cause of Action: That defendant-
appellant has unreasonably, unlawfully and maliciously
refused and failed to deliver to him 1,000 piculs of export
sugar altho he has deposited to the account of the
defendant-appellant the price thereof in the amount of
P55,000.00 which the latter has already withdrawn, the
agreed period of delivery which was January 27, 1971
having expired.
On his Third Cause of Action: That defendant-appellant
has refused, despite repeated demands, to release to him
160 piculs of Hind-3 sugar valued at P6,400.00, which he
has already paid;
On his Fourth Cause of Action: That despite his
demands that defendant-appellant liquidate and pay its
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indebtedness to him in the amount of P60,602.30 for

supplies of diesolene, gasoline, muriatic acid, sulfuric acid
and other materials needed by it, exclusive of interest and
attorney’s fees, which were payable within 30 days from
date of delivery, the defendant-appellant has refused to
settle with him;
On his Fifth Cause of Action: That defendant-appellant’s
willful, unjust, unreasonable, malicious and fraudulent
refusal to pay its just obligations has caused him mental
anguish, serious anxiety, wounded feelings, moral shock,
social humilia-

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tion and similar injuries, entitling him to P50,000 in moral,

compensatory and exemplary damages, and on
The Sixth Cause of Action: That he be paid the sum of
P50,000 for attorney’s fees and expenses of litigation.
Answering the complaint, defendant-appellant alleges that
—
On the First Cause of Action: The contract marked as
Exhibit “A” was duly executed but it stopped delivery of the
last 350 piculs of sugar under said contract when plaintiff-
appellee who has not paid any amount not even for the
sugar already withdrawn by him, refused, inspite of
demands, to pay the consideration mentioned in the
contract claiming that he had already paid the full price
stipulated therein. For this, parties had agreed to suspend
further delivery of sugar under the contract until plaintiff-
appellee could prove payment;
On the Second Cause of Action: Altho plaintiff-appellee
has deposited P55,000 on January 20, 1971 for export
sugar, in view of the occurrence of a controversy between
the parties regarding the implementation of the Contract
Exhibit “A”, both parties came to the understanding that
no delivery would be made until the question of payment of
the 4,085 piculs of sugar mentioned in said contract shall
have been satisfactorily settled between them.
On the Third Cause of Action: The 160 piculs of Hind-3
sugar referred to here is the remaining portion of 1,313
piculs purchased by plaintiff-appellee on June 3, 1970, and
the unclaimed sugar was always ready for delivery but
plaintiff-appellee preferred withdrawing from the 4,085
piculs covered by the contract Exhibit “A” instead.

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On the Fourth Cause of Action Plaintiff-appellee has in

truth delivered supplies to defendant-appellant but the
invoices mentioned in the complaint are not the same as
the original delivery receipts signed by defendant-
appellant’s employee when supplies were received, and the
figures contained therein are inaccurate. Moreover, such
supplies were never payable on a 30-day-from-delivery
term, but the standing practice was to off-set their value
against the costs of sugar purchased by plaintiff-appellee,
and
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On the Fifth and Sixth Causes of Action: Defendant-

appellant denies the averments therein and alleges that
the answers to such causes of action are fully covered by its
answers to the first four causes of action.
By way of Counterclaim, defendant-appellant prays that
from the unpaid cost of the 3,085 piculs of sugar contracted
and practically all taken by plaintiff-appellee amounting to
P142,975.00, the value of the materials supplied amounting
to P59,500.00, the P55,000.00 deposited to its account on
January 20, 1971, and the amount of P6,080.00
representing the value of the 350 piculs of sugar unclaimed
by plaintiff-appellee, after it was reprocessed—or a total of
P132,830.30—be off-set, and the balance in the amount of
P10,144.70 in its favor be paid to it, and that plaintiff-
appellee be required to pay, in addition thereto, another
sum of P10,000.00
1
for and as attorney’s fees and costs of
litigation.”
Answering the Counterclaim, plaintiff-appellee denied
for being false and untrue the material allegations of
paragraphs 1, 2, 3 4, 5 and 6 of the Counterclaim and as
special defenses, he alleges: (1) that defendant’s
counterclaim states no cause of action; and (2) that the
complaint was filed by plaintiff because defendant has
acted in gross and evident bad faith in refusing to satisfy
plaintiff’s plainly valid, just and demandable claim.
At the pre-trial conference, the parties submitted a
partial stipulation of facts reproduced as follows:

“COMES NOW the parties in the above-entitled case, through

counsel and respectfully submit the following Partial Stipulation
of Facts and statement of the issues:

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Plaintiff is of legal age, with capacity to sue and be sued

1. and is a resident of Lingayen, Pangasinan whereas
defendant is a corporation duly organized and existing in
accordance with the laws of the Philippines likewise with
capacity to sue and to be sued;
2. Defendant admits having executed on November 13, 1970
a Contract of Sale for 4,085 piculs of Hind-2 sugar, a xerox
copy of which is attached to this Partial Stipulation of
Facts and marked as Annex “1”. The signature appearing
in Annex “1” hereof above the

_______________

1 Decision, Court of Appeals, pp 68-72, Records.

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typewritten name Emiliano L. Abalos is that of the

Vice President and General Manager of defendant
Hind Sugar Company, Mr. Emilano L. Abalos and
the signature appearing above the typewritten
name Lim Yhi Luya appearing in Annex “1” hereof
is that of the plaintiff herein;
3. On November 13, 1970, upon execution of the
Contract of Sale marked as Annex “1” hereof,
defendant delivered and issued to plaintiff four (4)
delivery orders Nos. 3054, 3055, 3056 and 3057
marked respectively as Annexes “1”, “2”, “3” and “4”
of defendant’s Answer and attached to this Partial
Stipulation of Facts as Annexes “2”, “3”, “4” and “5”
hereof;
4. That on various occasions, the latest on January 23,
1971, the defendant delivered to the plaintiff on
account of the contract, Annex “1” hereof and by
virtue of the delivery orders issued by the
defendant at the request of the plaintiff in
substitution of the delivery orders marked as
Annexes “2”, “3”, “4” and “5”, the substitute delivery
orders hereto attached and marked as Annexes “6”
to “110” inclusive (summarized herein under
Annexes “111” to “114” inclusive), showing a total of
3,735 piculs of sugar already delivered and leaving
a balance still undelivered by the defendant to the
plaintiff of 350 piculs of Hind-2 sugar, covered by
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Delivery Orders Nos. 3252, 3254, 3255, 3256, 3257,

3258, 3259, 3260, 3230, 3232, and 3233, marked as
Annexes “115” to “125”, inclusive;
5. That the plaintiff deposited with the Consolidated
Bank and Trust Corporation, Dagupan City
Branch, in the name of the Hind Sugar Company,
the sum of FIFTY FIVE THOUSAND PESOS
(P55,000.00) on January 20, 1971;
6. That defendant issued to plaintiff a provisional
receipt dated January 27, 1971 for said amount of
P55,000.00 (FIFTY FIVE THOUSAND PESOS),
copy of which is hereto attached as Annex “126”;
7. That on June 3, 1970, the defendant sold to the
plaintiff 1,313 piculs of sugar at the rate of P40.00
per picul of H-2 sugar and P38.00 per picul of H-3
sugar, which plaintiff has fully paid per cash debit
hereto attached as Annex “127”, of which 160 piculs
of H-3 sugar remain undelivered by the defendant
to plaintiff;
8. That the plaintiff suppbed the defendant with
diesoline, gasoline, muriatic acid, sulphuric acid
and other supplies and materials ordered by
defendant from plaintiff on credit;
9. The plaintiff delivered to defendant on credit for the
month of January, 1971, supplies and materials in
the amount of P13,988.20

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Lim Yhi Luya vs. Court of Appeals

under invoices Nos. 6327, 6329, 6330, 6331, 6332,

6333 and 6334, marked as Annexes “128” to “134”
inclusive;
10. The plaintiff delivered to defendant on credit for the
month of February, 1971, supplies and materials in
the amount of P23,455.10;
11. That in the month of March, 1971, plaintiff
delivered to the defendant on credit supplies and
materials worth P18,051.00;
12. That in the month of April, 1971, the plaintiff,
delivered to defendant on credit, supplies and
materials worth P5,098.00;
13. The parties submit that the issues to be threshed
out between the parties at the trial of this case are
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the following:

“(a) As to the first cause of action, the remaining issue

is whether or not plaintiffs has paid to defendant
the sum of P142,975.00 which is the purchase price
of the 4,085 piculs of sugar subject to the contract of
sale marked as Annex “1” hereof;
(b) On the second cause of action, the issue is whether
or not the plaintiff is entitled to the delivery by the
defendant of 1,000 piculs of export sugar by virtue
of the deposit on January 20, 1971 of the amount of
P55,000.00;
(c) On the third cause of action, issue is whether or not
plaintiff is entitled to delivery by defendant of 160
piculs of Hind-3 sugar sold by defendant to plaintiff
on June 3, 1970;
(d) On the fourth cause of action, the issue are (1) what
business practice or practices if any were observed
by the plaintiff and the defendant in their business
dealings relative to the purchase of supplies and
materials by the defendant from the plaintiff on
credit; (2) what is the total amount due, if any, from
the defendant to the plaintiff for supplies and
materials delivered by plaintiff to defendant on
credit; (3) whether the supplies and materials
delivered by plaintiff to defendant were payable
within thirty (30) days from date of delivery and
overdue account to earn interests at the rate of 12%
per annum an additional amount equivalent to 25%
of the amount or value of the goods in litigation as
attorney’s fees;
(e) On the sixth cause of action, whether or not
plaintiff is entitled to attorney s fees and expenses
of litigation;
(g) Whether defendant is entitled or not to any set off;
(h) Whether defendant is entitled to attorney’s fees.”

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14. The parties hereby reserve the right to present evidence

on all other matters not herein stipulated.’

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The trial Court has correctly surmised that the principal issue in
this case is whether or not the plaintiff-appellee has paid the sum
of P142,975.00 which is the purchase price of the 4,085 piculs of
sugar covered by the contract of sale (Exhibit “A”) between the
parties. This Contract reads as follows:

CONTRACT OF SALE OF SUGAR

    (HIND-2) 1969-70
SELLER : HIND SUGAR COMPANY
    Manaoag, Pangasinan
BUYER : LIM YHI LUYA
    Lingayen, Pangasinan
QUANTITY : Four Thousand Eighty Five
    (4,085) (Piculs of HIND-2
    Sugar, 1969-70 Crop).
PRICE : Thirty Five (P35.00) PESOS per
    picul F.O.B., Manaoag
TERMS : Cash upon signing of this
    Contract
Manaoag, Pangasinan November 13, 1970

HIND SUGAR COMPANY

By:

(SGD.) EMILIANO L. ABALOS (SGD.) LIM YHI LUYA

Vice President & Gen Mgr.      (Buyer)
     (Seller)  

Plaintiff-appellee claimed during the trial that he has paid

the said amount and when pressed to show his receipt of
payment, he points to that portion of the contract which
reads: “Terms: Cash upon signing of this Contract” as his
receipt and evidence of payment. On the other hand,
defendant-appellant maintained that plaintiff-appellee has
not paid anything on the contract and the contract does not
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prove payment
2
but merely created plaintiff-appellee’s obligation
to pay.”

After trial, the Court of First Instance of Pangasinan

rendered judgment, the dispositive portion of which reads:

“WHEREFORE, this Court renders judgment as follows:

(1) On the first cause of action, ordering the defendant to

immediately deliver to plaintiff the 350 piculs of H-2 sugar
or to pay plaintiff the sum of P12,250.00 plus legal rate of
interest from November 13, 1970, until fully paid, giving
unto the plaintiff the option to choose whether to receive
the sugar or to receive the payment corresponding to the
same;
(2) On the second cause of action, ordering the defendant to
deliver immediately to the plaintiff the 1,000 piculs of
export sugar or to pay the plaintiff the sum of P55,000.00
with legal rate of interest from January 20, 1971, but
giving the option or choice to the plaintiff;
(3) With respect to the third cause of action, ordering the
defendant to deliver to the plaintiff the 160 piculs of H-3
sugar or to pay to plaintiff the sum of P6,400.00 with legal
rate of interest from June 3, 1970 but with the option
again belonging to the plaintiff;
(4) On the fourth cause of action, ordering the defendant to
pay to the plaintiff the sum of P60,592.30 with interest at
12% per annum from the filing of the complaint and to pay
attorney’s fees of 25% of the principal obligation, that is,
the sum of P15,148.08;
(5) On the fifth and sixth causes of action, ordering the
defendant to pay to the plaintiff the sum of P25,000.00 as
damages and to pay another sum of P15,000.00 as
attorney’s fees, the said fees referring to the first, second
and third causes of action; and
(6) Lastly, ordering the defendant to pay the costs of suit.

SO ORDERED.”

Defendant Hind Sugar Company appealed to the Court of

Appeals. The appellate court rendered the following
judgment, thus—

WHEREFORE, judgment is hereby rendered—

_______________

2 Decision, Court of Appeals, pp. 72-77, Records.

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(1) ordering plaintiff-appellee to pay defendant-

appellant the sum of P1,130,725.00 which is the
price of 3,735 piculs of sugar, at P35 a picul, which
plaintiff has withdrawn and received as a result of
the contract of sale Exhibit “A”, and cancelling the
obligation of defendant-appellant to deliver the
remaining 350 piculs called for in said contract for
failure of plaintiff-appellee to pay for the same;
(2) finding the defendant-appellant liable to return to
plaintiff-appellee the latter’s deposit of P55,000.00;
(3) finding the defendant-appellant liable to pay
plaintiff-appellee the sum of P6,040.00 which was
realized from reprocessing the 160 piculs of sugar
paid for but intentionally not claimed by plaintiff
appellee;
(4) finding the defendant-appellant liable to plaintiff-
appellee for the sum of P60,592.30 for materials
and supplies which the latter supplied to it for the
months of January, February, March and April,
1971.
Provided, however, that the plaintiff-appellee may
deduct the said amounts of P55,000.00, P6,080.00
and P60,592.30, totalling P121,672.30 in all, from
his total obligation of P130,725.00 to the defendant-
appellant, paying the latter in cash only the
remaining balance of P9,052.70; and
(5) ordering the plaintiff-appellee to pay defendant-
appellant the further amount of P10,000.00 for and
as attorney’s fees.

With costs against plaintiff-appellee.

SO ORDERED.”

Plaintiff-appellee, now the herein petitioner, having filed a

Motion for Reconsideration but denied by the respondent
Court of Appeals, he now comes before Us with the instant
Petition for Review of the decision.
In reversing the judgment of the lower court on the first
cause of action, the Court of Appeals said:

“Plaintiff appellee claimed during the trial that he has paid the
said amount and when pressed to show his receipt of payment, he
points to that portion of the contract which reads: “Terms: Cash

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upon signing of this Contract” as his receipt and evidence of

payment. On the other hand, defendant-appellant maintained
that plaintiff-appellee has not paid anything on the contract and
the contract does not prove payment but merely created plaintiff-
appellee’s obligation to pay.

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We agree with defendant-appellant. The contract in its entirety

proves no more than that there has been a meeting of the minds
of the parties. The signing perfected the contract but did not ex
propio vigore consummate it. It gave the parties the right to
demand reciprocally the performance of the obligations assumed
by each. The vendor assumed to deliver the amount of sugar sold
while the vendee which is the plaintiff-appellee was to pay the
contracted price upon the signing of the contract. The questioned
portion of the contract does not say, and is not therefore an
evidence that plaintiff-appellee has paid or has performed his
obligation to pay. Stated in another way, the provision of the
Contract in question means that the payment of P142,975.00 IS
TO FOLLOW or IS TO BE MADE (and NOT WAS MADE) upon
the signing of said contract.”

The appellate court further declared that it cannot believe

as true facts the testimony of the petitioner that he paid
the sum of P142,975.000 around 1:30 o’clock in the
afternoon of November 13, 1970 to Emiliano Abalos and
Teodoro Garcia, in cash because he was asked to pay in
cash, and the evidence of his payment was the contract
(Exhibit “A”) itself because the respondent company did not
want to issue a separate receipt for his payment as the
sugar sold belonged not to it but to AR-CA.
The court said that there is no reason for Emiliano
Abalos to deny petitioner’s claim of payment if that was
really made, pointing to the evidence of close relationship
between the parties which show that Emiliano Abalos went
all the way to accommodate the petitioner by modifying the
contract, changing the condition or mode of payment
provided in Exhibit “A” even without changing the written
contract itself. It would have been an affront on their
friendship had Emiliano Abalos followed the suggestions of
the trial court (that Abalos should have demanded that the
contract be corrected in such a way that it does not appear
that the 4,085 piculs of sugar was not really paid for or he
should have put a note on the two copies of the contract
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that the 4,085 piculs of sugar were not then paid), the
appellate court reasoned out.
And according to the court, the explanation of Abalos in
allowing or agreeing to release the delivery orders covering
the 4,085 piculs of sugar sold even without payment by the
peti-
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682 SUPREME COURT REPORTS ANNOTATED

Lim Yhi Luya vs. Court of Appeals

tioner (which explanation is not even pointed out or

intimated in the decision) is a rational and very probable
one.
After holding that the claim of petitioner that he paid
the P142,975.00 wholly in cash is improbable; that it is
simply not the way with businessmen because modern
business moves on credit and checks; that it is unthinkable
to a businessman to keep so much money in his possession
when petitioner banks with several banking houses in
Lingayen and Dagupan City and has always paid mostly in
checks in previous and subsequent transactions, the court
resolved, “We seriously doubt that as a successful
businessman he will ever disregard sound business practice
of keeping his cash in the bank, especially that, according
to him it was not his money but one he has received in
trust and for a certain A. Chan Trading in Makati.”
Petitioner contends that the appellate court erred, first
in holding that the contract of sale of sugar executed by
and between petitioner and respondent is not evidence that
payment of the sugar had been made by the petitioner to
respondent upon the signing of said contract; the Court of
Appeals likewise erred in holding that it was incumbent
upon the petitioner to produce a receipt signed by
respondent to prove that payment of the sugar covered by
the contract of sale had in fact been made by petitioner to
respondent; it erred in not holding that petitioner had
already fully paid the respondent the sugar bought; and
second, in reversing the decision of the trial court and in
not affirming the same.
The first error may be resolved by the rules on the
interpretation of contracts, and the second on the basis of
whether the general rule that findings of the appellate
tribunal are binding and must be respected by Us must
govern the case at bar or the well-established exceptions to
said rule.

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At this juncture, it is well to lay down cardinal rules in

the interpretation of contracts as provided in the New Civil
Code, thus—

“Art. 1370. If the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning
of its stipulations shall control.

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Lim Yhi Luya vs. Court of Appeals

If the words appear to be contrary to the evident intention of the

parties, the latter shall prevail over the former.
Art. 1371. In order to judge the intention of the contracting
parties, their contemporaneous and subsequent acts shall be
principally considered.
Art. 1375. Words which may have different significations shall
be understood in that which is most in keeping with the nature
and object of the contract.
Art. 1377. The interpretation of obscure words or stipulations
in a contract shall not favor the party who caused the obscurity.”

According to the trial court, “(t)here is no question that the

contract was signed on November 13, 1970, in the office of
the Hind Sugar Company at Manaoag, Pangasinan. The
contract itself is so clear and explicit that it cast no doubt
as to its meaning. “Cash upon signing of this contract,”
meaning to say, that once the contract was signed, the
payment of the 4,085 piculs of sugar which is P142,975.00
was made. After the said contract was signed and as
sustained by the plaintiff, he has already delivered the
P142,975.00 in cash to the cashier of the defendant, the
said plaintiff was given all the delivery orders covering the
4,085 piculs of sugar sold and by the giving of the delivery
orders to the plaintiff, the latter was entitled to withdraw
all the 4,085 piculs sugar from the company’s warehouse.”
This is also the stand of the petition.
Contrari-wise, the appellate court castigates the “ex
cathedra pronouncement of the trial court that the words
“Terms: Cash upon the signing of this contract’ means that
payment was made and the contract itself is the receipt
eviden-cmg payment”, as not based on proven facts, adding
further that the trial court “has taken the dubious, weak,
unreliable and improbable statements of plaintiff-appellee
for true, or for granted, and in so doing the trial court has
fallen wittingly or unwittingly into the error of begging the

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question (petitio principii).” In other words, respondent

company’s interpretation of the contract was upheld.
Considering the admitted fact that the contract of sale
(Exhibit “A”) was prepared in the office of respondent
company by Generoso Bongato, Assistant to the Manager of
the com-

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684 SUPREME COURT REPORTS ANNOTATED

Lim Yhi Luya vs. Court of Appeals

pany, upon instruction of General Manager Emiliano L.

Abalos who is a lawyer, and We are now confronted with
the varying or conflicting interpretations of the parties
thereto, the respondent company contending that the
stipulation “Terms: Cash upon signing of this contract”
does not mean that the agreement was a cash transaction
because no money was paid by the petitioner at the time of
the signing thereof, whereas the petitioner insists that it
was a cash transaction inasmuch as he paid cash
amounting to P142,975.00 upon the signing of the contract,
the payment having been made at around 1:30 in the
afternoon of November 13, 1970 to the cashier, Teodoro
Garcia, and Manager Abalos although the sale was agreed
to in the morning of the same day, November 13, 1970, the
conflicting interpretations have shrouded the stipulation
with ambiguity or vagueness. Then, the cardinal rule
should and must apply, which is that the interpretation
shall not favor the party who caused the ambiguity (Art.
1377, New Civil Code). We rule that in the instant case, the
interpretation to be taken shall not favor the respondent
company since it is the party who caused the ambiguity in
its preparation.
We do not agree with the meaning of the provision in the
contract ascribed by the respondent court in its decision
that: “Stated in another way, the provision of the Contract
in question means that the payment of the P142,975.00 IS
TO FOLLOW or IS TO BE MADE (and NOT WAS MADE)
upon the signing of said contract.” As already drafted or
drawn up, complete and finalized with all the signatures
thereon of the contracting parties and presented in court as
Exhibit “A” without any change whatsoever in the mode of
payment, such provision plainly and simply means that the
payment was in CASH, and not on CREDIT. The ambiguity
raised by the use of the words or phrases in the questioned
provision must be resolved and interpreted against the
respondent company.
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In truth, the stipulation in the contract which reads:

“Terms: Cash upon signing of this contract” is very clear
and simple in its meaning, leaving no doubt in Our minds
upon the intention of the contracting parties, hence, the
first rule of con-
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Lim Yhi Luya vs. Court of Appeals

tract interpretation that the literal meaning of its

stipulation shall control, is the governing rule at hand.
Resorting to Webster’s Third New International Dictionary,
p. 2515, for the definition of the word “upon” which literally
means, among others, “10a (1): immediately following on;
very soon after; x x b: on the occasion of; at the time of; x x,”
the clear import of the stipulation is that payment was
made on the occasion of or at the time of the signing of the
contract and not that payment will follow the signing. We
must adopt the former meaning because it is such an
interpretation that would most adequately render the
contract effectual, following Article 1373 of the New Civil
Code which provides:

“Art. 1373. If some stipulation of any contract should admit of

several meanings, it shall be understood as bearing that import
which is most adequate to render it effectual.”

The evidence for the petitioner establishes that after

paying the cash consideration to Cashier Garcia and
Manager Abalos, the parties signed the contract and
thereafter signed copy of said contract was given to
petitioner and also the tour (4) delivery orders covering the
4,085 piculs of sugar sold. The questioned stipulation
recites exactly the act of payment which is the paying of
the money on the occasion of or at the time of the signing.
Respondent would have Us believe that the stipulation
does not mean what it conveys because petitioner has not
paid cash after the signing of the contract nor at any time
thereafter. We cannot agree with the respondent for
otherwise the sanctity of the written contract can easily be
violated and impugned, for otherwise oral testimony would
prevail over a written document to vary, alter or modify the
written terms, and most importantly, respondent’s
interpretation would render the stipulation ineffectual as a
mere agreement.

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Petitioner claims that Exh. “A” is the receipt of his

payment of the P142,975.00 cash upon the signing of the
contract. Respondent, on the other hand, insists that it is
not a written acknowledgement or written admission of
having received the sum of P142,975.00 and may not be
considered a receipt for
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686 SUPREME COURT REPORTS ANNOTATED

Lim Yhi Luya vs. Court of Appeals

any purpose (Brief for the Respondent, p. 34), although he

fully agrees with the proposition that any written
acknowledgement or written admission of anything
received is a receipt (same page 34). This is exactly what
the trial court ruled that “It would be redundant to discuss
what are the forms of receipts, but anything evidencing or
admitting payment in compliance with an obligation is a
receipt and AS THE CONTRACT, EXH. A AS WELL AS
THE SIGNED COPY, IS AN EVIDENCE OF PAYMENT
OF THE P142,975.00 IT MUST BE CONSIDERED A
RECEIPT FOR ALL PURPOSES” (Decision, Record on
Appeal, p. 60). We affirm the lower court’s ruling.
One fact that weighs heavily in support of the lower
court’s ruling is that respondent cannot show nor produce
any document or record whatsoever that petitioner did not
pay the consideration demanded in cash. While Manager
Abalos claims that the mode of payment was altered or
changed, there is no showing or proof that the contract,
Exh. “A”, was accordingly changed or altered. And neither
was such alteration or change noted or recorded in the
books of the respondent company.
The trial court, justifying and supporting its judgment
in favor of the petitioner, cites the following facts: (1) The
liquidation sheet dated December 30, 1970, Exh. “O”,
prepared by the cashier of defendant company, more than a
month after the transaction in question on November 13,
1970 does not charge the petitioner with any indebtedness
to the respondent company of whatever amount, much less
the amount of P142,975.00; instead, it appears from said
Exhibit “O” that as of December 30, 1970, the company had
two outstanding vales in favor of the petitioner: one for
P18,000.00 obtained on December 1, 1970 and another for
P8,800.00 taken on December 15, 1970; (2) that petitioner
had always transacted with respondent company in cash
and never on credit as admitted by Teodoro Garcia, cashier
of the company; (3) that petitioner had been withdrawing
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sugar from the company at its warehouse after November

13, 1970 until January 23, 1971, totalling a quantity of
3,735 piculs of sugar by virtue of the contract Exhibit “A”
without the company demanding from
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Lim Yhi Luya vs. Court of Appeals

the petitioner either verbally or in writing the payment,

even only partial, of such a big amount (P142,975.00).
The above facts show contemporaneous and subsequent
acts of the parties in relation to the transaction between
them as embodied in the Contract of Sale of Sugar (Exh.
“A”) from which the intention of the contracting parties
may be judged correctly. The trial court was correct in
judging and deciding the intention of the parties from their
actuations contemporaneous with and subsequent to the
agreement for the sale of the sugar in question, and We
sustain the trial court, applying Art. 1371, New Civil Code,
supra.
The most telling, crucial and significant act
contemporaneous with and subsequent to the signing of the
agreement embodied in Exhibit “A”, which needs emphasis,
is the delivery to the petitioner of four (4) delivery orders
(Nos. 3054, 3055, 3056 and 3057) covering all the 4,085
piculs of sugar subject of the contract on November 13,
1970, the very day that the contract was entered into and
signed by the parties. The issuance of the delivery orders is
admitted by the parties and in-eluded in the Partial
Stipulation of Facts, paragraph 3 thereof. Viewed in the
light of the established fact that all sugar transactions
between petitioner and respondent are always in cash, as
admitted by Teodoro Garcia who is the cashier of
respondent company (Testimony of Teodoro Garcia, t.s.n.,
Estrada, Hearing, April 22, 1972, pp. 18-19), the issuance
of the four delivery orders is a clear confirmation of the fact
that petitioner paid in cash the cost of the sugar in the
amount of P142,975.00 on the very day that the contract
was signed, November 13, 1970, which is also the day that
the delivery orders were given to him by the cashier upon
direct instruction from the manager.
Furthermore, the issuance of and delivery to the
petitioner-buyer of the said four delivery orders covering all
the 4,085 piculs of sugar placed the control and possession
of the thing sold to the vendee, the herein petitioner, and
pursuant to Article 1497 of the New Civil Code, the sugar
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sold is understood as delivered to the petitioner. The thing

sold shall be understood as delivered when it is placed in
the control and possession of
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Lim Yhi Luya vs. Court of Appeals

the vendee. Therefore, when the thing subject of the sale is

placed in the control and possession of the vendee, delivery
is complete. (La Fuerza, Inc. vs. Court of Appeals, 23 SCRA
1217)
In the case at bar, at the moment the delivery orders
were issued and given to the petitioner-vendee, there was a
symbolic or feigned tradition of the sugar sold since the
delivery orders are documents of title to goods which, under
Article 1636, New Civil Code, includes any bill of lading,
dock, warrant, quedan, or warehouse receipt or order for
the delivery of goods, or any other document used in the
ordinary course of business in the sale or transfer of goods,
as proof of the possession or control of the goods, or
authorizing or purporting to authorize the possessor of the
document to transfer or receive, either by indorsement or
by delivery, goods represented by such document. And
when the petitioner-buyer withdrew from the respondent’s
warehouse, hauled and took delivery on various dates and
varying quantities of sugar piculs totalling 3,735 piculs,
there was actual delivery thereof which consummated the
sale. It is not correct, therefore, for the respondent court to
hold that “the contract in its entirety proves no more than
that there has been a meeting of the minds of the parties.”
It is more than that because the parties did not end the
agreement by simply signing the contract, Exhibit “A”. The
minds of the parties did not only come to a meeting but
they continued to implement and consummate the same.
It may be true, as the decision under review opined, that
“the signing perfected the contract but did not ex propio
vigore consummate it,” if the parties stopped or desisted
thereafter, but the issuance and delivery of the delivery
orders covering the total quantity of sugar sold was a
consummation of the agreement, more so when petitioner-
buyer was allowed by respondent company’s officials to
substitute the four delivery orders Nos. 3054, 3055, 3056,
and 3057 marked Annexes “2”, “3”, “4”, and “5” with
substitute delivery orders marked Annexes “6” to “110”
showing a total of 3,735 piculs of sugar already delivered to

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the petitioner, leaving a small amount of 350 piculs still

unwithdrawn for which petitioner

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filed the original complaint in Civil Case No. 14873 against

the company for delivery. These facts which are not
disputed showing that petitioner was allowed to receive the
delivery orders on November 13, 1970 immediately after
the signing of the agreement on the same day and that he
was further allowed on various dates between November
13, 1970 to January 23, 1971 to take delivery in varying
amounts totalling 3,735 piculs of sugar, have not been
properly appreciated by respondent court, which failure or
omission in Our mind constitute grave and prejudicial
abuse of discretion.
This brings Us to the consideration and resolution of the
second assignment of error wherein petitioner contends
that the exception to the general rule, and not the general
rule itself on the finality of the findings of fact by the Court
of Appeals, is applicable and must govern in the instant
case.
It is, of course, well-established that the general rule
that the appellate court’s findings of facts are binding and
must be respected by Us, has recognized exceptions.
In Ramos vs. Pepsi-Cola Bottling Co., et al., L-22533,
February 9, 1967, 19 SCRA 289, We enumerated the
following as exceptions to the general rule:

1. Where there is a grave abuse of discretion (Buyco

vs. People, 95 Phil. 453);
2. When the finding is grounded entirely on
speculation, surmises or conjectures (Joaquin vs.
Navarro, 93 Phil. 257);
3. When the inference made is manifestly mistaken,
absurb or impossible (Luna vs. Linatoc, 74 Phil. 15);
4. When the judgment of the Court of Appeals was
based on a misapprehension of facts (De la Cruz vs.
Sosing, 94 Phil. 26);
5. When the factual findings are conflicting (Casica vs.
Villaseca 101 Phil. 1205); or
6. When the Court of Appeals, in making its findings,
went beyond the issues of the case and the same are
contrary to the admissions of both appellant and
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appellee (Evangelista vs. Alto Surety & Insurance

Co., L-1139, April 23, 1958).

In Roque vs. Buan, L-22459, October 31, 1967, 21 SCRA

642, We reversed the conclusion of the Court of Appeals,
hav-
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Lim Yhi Luya vs. Court of Appeals

ing found it to be: (1) contrary to the established facts; (2)

an inference based on mere assumption; (3) contrary to the
res ipsa loquitur rule, and (4) not in conformity with the
physical law of nature. And in Fortus vs. Novero, L-22370,
June 29, 1968, 23 SCRA 1330, We ruled that in extreme
cases calling for the exercise of Our supervisory
jurisdiction, this Tribunal may disturb or reverse any
particular finding of fact of the Court of Appeals should We
find it to be arbitrary or whimsical or entirely outside the
issues raised by the parties in their respective pleadings.
Again, in Bunyi vs. Reyes, L-28845, June 10, 1971, 39
SCRA 504, We reversed the factual findings of the
appellate court based on an assumption unsupported by
the evidence on record.
In Sotto vs. Teves, 86 SCRA 154, and Alsua-Betts, et al.
vs. Court of Appeals, et al., 92 SCRA 332, We reiterated
and listed the exceptions to the general rule.
And considering that in the case at bar the findings of
the Court of Appeals are contrary to those of the trial court,
a minute scrutiny by the Supreme Court is in order, and
resort to duly proven evidence becomes necessary. (Legaspi
vs. Court of Appeals, L-39877, Feb. 20, 1976, 69 SCRA 360,
364, citing Tolentino vs. De Jesus, et al., L-32797, March
27, 1974, 56 SCRA 167).
There is merit to petitioner’s contention that the
appellate court misappreciated or misapprehended the
import of the liquidation sheet marked Exhibit “O” which is
a financial statement prepared by the cashier of the
respondent company, Teodoro Garcia, barely two months
after the contract under litigation was entered into,
indicating the mutual obligations between the parties.
Petitioner points out in said statement that he had no
liability whatsoever to the company, much less the cost of
the sugar he had bought on November 13, 1970. On the
contrary, the statement contains outstanding “vales” of
P18,000.00 and P8,800.00 taken by the company and due to
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petitioner. The Court of Appeals said it is a fallacy to

believe that Exhibit “O” is a liquidation of the periodic
accounts of the parties when in fact, it is no more than the
itemization on how the amount of P97,960.51 representing
cost of supplies
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and materials from the petitioner and two “vales” in the

sum of P18,000.00 and P8,800.00 each, or a total of
P124,760.51 had been set-off or deducted from two expected
payments coming from the petitioner amounting to
P140,259.41. In any event, whether Exhibit “O” is a
liquidation sheet or itemization of supplies and materials
for set-off or deduction, it is a customary and normal
business practice to indicate and include all outstanding
accounts, whether payable or receivable, pertaining to a
particular customer or client at the close of the business
year. This is a custom or usage which respondent court
failed to consider and appreciate in the case at bar.
We agree with the petitioner that the decision under
review has overlooked matters of substance in the
evaluation of the evidence. For one, it is an established fact
that the transaction in question was not recorded in the
books of the respondent company. This is the clear
testimony of Victorino Daroya, External Auditor of the
Hind Sugar Company (t.s.n., Vinluan, p. 32, Hearing on
May 13, 1972). And another significant fact is that
according to General Manager Emiliano Abalos, there was
no document to show that the transaction was not cash
upon signing of the contract, in his testimony at the
hearing on May 22, 1972. (t.s.n., Estrada, pp. 35-36).
The logical implication of the ruling of the respondent
court which upheld the position of the respondent company
that the purchase of sugar was not a cash transaction, is
that the purchase was on credit. However, since it appears
that the transaction was not recorded in the company
books and there was no document showing it was not cash,
the inference arises that the respondent company allowed,
tolerated, and/or sanctioned a credit transaction to be
unrecorded in the company books which is simply
irregular, unbusiness-like and anomalous. For a
corporation or company like the respondent engaged in the
big business of sugar central, in the production and
marketing as well as export of sugar, and in the present
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case involving more than a hundred thousand pesos, to

keep no record of the transaction in question is blatantly
against ordinary business practice and procedure in
bookkeeping or accounting. Whether the explanation of the
respondent company’s officials rests on
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close personal friendship or cordial attachment with a

particular customer or client, the conclusion is inevitable
that the appealed judgment is grounded on findings that
are irrational, absurd and arbitrary because the court in
effect sustained the version of the company officers who
wantonly and recklessly violated a customary business rule
of protecting first and above all the interest of the company
they serve.
In the evaluation and appreciation of the evidence on
record, We find that the respondent court gave credence to
the unsupported testimony of General Manager Emiliano
Abalos that the term or mode of payment stipulated in the
written contract, Exh. “A”, had been changed by him to
“payment as withdrawals are made.” This is clear as
testified to by Manager Abalos in the hearing on May 22,
1972, t.s.n., pp. 38-39. The evidence, however, does not
show nor is there proof that the contract, Exh. “A”, was
accordingly changed or altered from “cash upon signing of
the contract” to “payment as withdrawals are made.” In
sustaining the oral testimony of Manager Abalos on the
alleged change of payment, as against the written terms of
the contract that it was cash payment, the respondent
court held that “Emiliano Abalos went all the way to
accommodate the plaintiff-appellee by modifying the
contract, changing the condition or mode of payment
provided in Exhibit “A” even without changing the written
contract itself.”
This ruling of the court upholding the oral testimony
and claim of Manager Abalos as against the written
contract itself is a grave and prejudicial error in the
appreciation of the evidence because it is a clear and
flagrant disregard of the parol evidence rule (Section 7,
Rule 130, Rev. Rules of Court) providing that: “When the
terms of an agreement have been reduced to writing, it is to
be considered as containing all such terms, and, therefore,
there can be, between the parties and their successors in
interest, no evidence of the terms of the agreement other
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than the contents of the writing, except in the following

cases: (a) Where a mistake or imperfection of the writing,
or its failure to express the true intent and agreement of
the parties, or the validity of the agreement is put in issue
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VOL. 99, SEPTEMBER 11, 1980 693

Lim Yhi Luya vs. Court of Appeals

by the pleadings; (b) When there is an intrinsic ambiguity

in the writing.”
Petitioner faults and impeaches the conclusions of the
appellate court as founded entirely on speculations,
surmises or conjectures. Thus, he castigates the court’s
holding which ruled that “(t)he claim of plaintiff-appellee
that he paid the P142,975.00 wholly in cash is improbable.
It is simply not the way with businessmen. Modern
business moves on credits and debts x x x” and that “it is
unthinkable to a businessman to keep cash all the time in
his residence in Lingayen, even if he did not know when or
how soon he would disburse it.” The appealed decision
questions: “Why would plaintiff-appellee be keeping so
much cash in his possession and why should he pay
P142,975.00 all in cash” and then concludes: “We cannot
imagine plaintiff-appellee taking the risk of loss of this
money by keeping it in his house.”
The contention of the petitioner that the respondent
court indulged in speculations and conjectures which are
baseless, is impressed with merit. Truly, the very specific
term of the contract specified cash payment. The
instruction of General Manager Abalos to his assistant,
Generoso Bongato, was particularized to the mode of
payment which was “cash upon signing of this contract”
and the instruction was duly obeyed and complied with. It
is certainly whimsical and absurd for the Court of Appeals
to speculate and surmise that petitioner ought not to have
brought and produced the cash money and should not even
have such cash money in his possession. A review of the
appellate court’s findings is, therefore, justified and
warranted.
Respondents court is also taken to task for ignoring or
suppressing the testimony of Manuel Chua Lim, son of
petitioner and a 24-year old graduate of Bachelor of Science
in Commerce, major in Accounting, who accompanied his
father to the cashier’s office of respondent company and
witnessed the payment of the money in cash by his father
to the cashier, Teodoro Garcia, in the presence of Generoso
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Bongato and Manager Abalos, saw the signing of the

contract and that thereafter, the four (4) delivery orders
were given to his father,
694

694 SUPREME COURT REPORTS ANNOTATED

Lim Yhi Luya vs. Court of Appeals

including a signed copy of the contract, Exhibit “A”.

Admittedly, this piece of evidence which is clear, positive
and convincing was never considered by the court which
was its legal duty to evaluate and appreciate, considering
that the presence of Manuel Chua Lim and his testimony
was not directly denied nor disputed by any of the officials
so named and their witnesses. Hence, We find petitioner’s
contention that the court’s omission among other grave and
serious prejudicial errors pointed by petitioner justify the
reversal of the appealed judgment, to be tenable.
We affirm the decision of the trial court in ruling that
petitioner has paid in cash the sum of P142,975.00 to
respondent company for the purchase of 4,085 piculs of H-2
sugar and is entitled to the delivery of 350 piculs of H-2
sugar or to be paid the sum of P12,250.00 plus legal
interest from November 13, 1970 until fully paid, at the
option of petitioner.
On the second cause of action, the judgment of the
appellate court is correct insofar as it orders the
respondent company to return to the petitioner the latter’s
deposit of P55,000.00 but should be modified to include
payment of legal interest from January 20, 1971 until fully
paid and giving the option to petitioner either to receive the
money or take delivery of 1,000 piculs of export sugar from
respondent company.
On the third cause of action, the appealed judgment is
also correct but the same is likewise modified to include
payment of legal interest on the sum of P6,400.00 from
June 3, 1970 until fully paid, or to take delivery from
respondent the 160 piculs of H-3 sugar, at the option of the
petitioner.
On the fourth cause of action, the judgment of the Court
of Appeals finding respondent company liable to petitioner
for the sum of P60,592.30 for materials and supplies which
the latter supplied to it for the months of January,
February, March and April, 1971 is also correct. The
second portion under paragraph (4) of the judgment is set
aside, as well as paragraph (5) thereof which ordered
petitioner to pay attorney’s fees.
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In other words, the decision of the trial court being in

accordance with the evidence established and the law
applicable, the same is hereby reinstated in toto.
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Lim Yhi Luya vs. Court of Appeals

WHEREFORE, IN VIEW OF THE FOREGOING, We

hereby reverse and set aside paragraph (1) and the second
portion of paragraph (4) of the appealed judgment, and
modify the remaining portions of said judgment Judgment
is hereby rendered—

(1) On the first cause of action, ordering the

respondent to immediately deliver to petitioner the
350 piculs of H-2 sugar or to pay petitioner the sum
of P12,250.00 plus legal rate of interest from
November 13, 1970, until fully paid, giving unto the
petitioner the option to choose whether to receive
the sugar or to receive the payment corresponding
to the same;
(2) On the second cause of action, ordering the
respondent to deliver immediately to the petitioner
the 1,000 piculs of export sugar or to pay the
petitioner the sum of P55,000.00 with legal rate of
interest from January 20, 1971, but giving the
option or choice to the petitioner;
(3) With respect to the third cause of action, ordering
the respondent to deliver to the petitioner the 160
piculs of H-3 sugar or to pay to petitioner the sum
of P6,400.00 with legal rate of interest from June 3,
1970, but the option again belonging to the
petitioner;
(4) On the fourth cause of action, ordering the
respondent to pay to the petitioner the sum of
P60,592.30 with interest at 12% per annum from
the filing of the complaint and to pay attorney’s fees
of 25% of the principal obligation, that is, the sum
of P15,148.08;
(5) On the fifth and sixth causes of action, ordering the
respondent to pay to the petitioner the sum of
P25,000.00 as damages and to pay another sum of
P15,000.00 as attorney’s fees, the said fees referring
to the first, second and third causes of action.

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Costs against respondent.

SO ORDERED.

          Teehankee (Chairman), Makasiar, Fernandez and

De Castro, JJ., concur.
     Melencio-Herrera, J., I vote to affirm the judgment
of the Court of Appeals.

696

696 SUPREME COURT REPORTS ANNOTATED

Lim Yhi Luya vs. Court of Appeals

     Paragraph (1) and the second portion of paragraph (4) is

reverse and set aside and modify the remaining portions of
said judgment.

Notes.—However general the terms of a contract may

be, they shall not be understood to comprehend things that
are distinct and cases that are different from those upon
which the parties intended to agree. (Republic vs. Vda. de
Castellvi, 58 SCRA 336).
Influence obtained by persuasion, argument or appeal to
affection is not against law or morals. (Bañez vs. Court of
Appeals, 59 SCRA 15).
A judicial action for rescission of a contract is not
necessary where the contract provides that it may be
revoked and cancelled for violation of any of its terms and
conditions. (Lopez vs. Commissioner of Customs, 37 SCRA
327).
The breach of a condition imposed by contract may be
invoked only by the party in whose favor the condition was
made. (Sarmiento vs. Salud, 45 SCRA 213).
They being of age and businessmen of experience, it
must be presumed that they had acted with due care and to
have signed the documents in question with full knowledge
of their import and the obligations they were assuming
thereby. (Development Bank of the Philippines vs. National
Merchandising Corp., 40 SCRA 624).
A contract embraces only one cause of action because it
may be violated only once even if it contains several
stipulations. (Quioque vs. Bautista, 4 SCRA 478).
An ambiguous provision of a contract may not be
construed as potestative where the counsel of the party
claiming such construction had been consulted in the
preparation of such contract and, especially, because our
new Civil Code (Article 1308) abhors potestative conditions

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in contracts. (General Enterprises, Inc. vs. Lianga Bay

Logging Co., Inc., 11 SCRA 733).
Except in the cases of statutory forms or solemn
agreements, it is the assent and concurrence of the parties,
and
697

VOL. 99, SEPTEMBER 11, 1980 697

People vs. Gonzales

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