Case Title Engel vs.

Velasco
G.R. No. 47 Phil 115
Date: December 29, 1924

FACTS:
Plaintiffs were export brokers, or jobbers, of textile merchandise in the City of New
York, while the defendant was the owner of a large store in Manila where general
merchandise is sold both at wholesale and retail. Defendant Velasco, from time to time,
imports textile fabrics on a large scale.

In 1920 commercial relations were established between the plaintiffs and the defendant,
and in the succeeding three (3) months, the defendant sent to the plaintiffs numerous
orders for merchandise. The defendant would first obtain from the plaintiffs by cable
information as to the prices of the goods desired, and would thereupon send a
cablegram to the plaintiffs, instructing them to buy and hold specified qualities of
goods in the amount and at the prices stated. Defendant would dispatch by mail more
extended instructions, confirming the cablegram and giving such other advice as was
desirable. Upon receiving the defendant's written order by mail the plaintiffs
transmitted the instructions contained therein to the manufacturer for execution and at
the same time prepared and forwarded to the defendant a formal written sales note,
conforming in the main to the terms specified in the previous communications between
the plaintiffs and the defendant.

As a result of this procedure the plaintiffs became directly obligated to the

manufacturer who produced the goods, while the defendant became obligated to the
plaintiffs, assuming that all conditions essential to the creation of liability had been
fulfilled. The plaintiffs proceed upon the idea of breach of contract on the part of the
defendant in its failure to accept and to pay for the goods covered by the orders above
referred to. The defendant interposed answers in the three cases denying generally the
allegations of the complaints and setting forth various special defenses, with
counterclaims and an affirmative cross action. Upon hearing the proof, the trial judge
absolved the plaintiffs from the defendant's counterclaims and cross complaint and
gave judgment for the plaintiffs to recover of the defendant the sum of P152,217.74,
with interest at six per centum, to be calculated upon different portions of the total from
specified dates. From this judgment the defendant appealed.

ISSUE:
Whether or not the obligation of the defendant should be considered fixed at the time
of the breach and the equivalent of the two currencies should be computed as of that
date.

HELD:
Yes.
The provision, ―Telegraphic correspondence shall only be the basis of an obligation
between contracting parties who have previously admitted this medium in a written
contract, and provided the telegrams fulfill the conventional conditions or
conventional signs which may have been previously fixed and agreed to by the
contracting parties,‖ this provision was in force at the time all of the orders involved in
this litigation were given, and it is therefore insisted that the messages transmitted by
cable are inadmissible against the defendant. In this connection it will be noted that no
prior written agreement is in evidence by which the parties expressly admitted
telegraphic correspondence as a basis of contract, though it is true that the private cable
code used by the defendant in its cable correspondence with the plaintiffs had been
supplied by the latter. We are unable to concede to this provision the effect claimed for
it by the defendant, namely, of eliminating entirely from the case so much of the
correspondence as was conducted by cable. Upon examining the documentary proof,
it will be found that upon sending its orders by cable, the defendant followed with
letters of confirmation by mail, in which the various cables were referred to and in
effect incorporated in the written correspondence. By reason of this circumstance it is
proper to refer to the cablegrams in relation with the letters.

There is nothing in the provision quoted from article 51 which prohibits parties to a
contract from ratifying agreements effected by telegraphic communications; and
subsequent ratification, or incorporation of the telegraphic communications in written
letters of the same or later date, must be conceded to have all the effect of a previous
written agreement under the provision quoted.

Furthermore, it is apparent that even under the statute telegraphic communications

conveying notification of acts done could not be ignored, where the basis of a contract
has already been established, and the same must be true of telegraphic directions
communicated by one contracting party to another in relation with the performance of
the contract. In this connection we note that the attorneys for the defendant, while
vigorously insisting upon the elimination of the telegraphic correspondence in general,
have not hesitated to rely upon more than one cablegram passing between the parties.
The failure of the defendant to accept and pay for all the goods ordered and shipped to
Manila was undoubtedly due to the inability of the defendant to command the funds
necessary to meet the obligations, but when confronted with the necessity of
dishonoring the orders, the responsible officers of the defendant put forth various
pretexts to justify its position.

The cause will therefore be returned to the lower court with instructions to enter a
judgment eliminating the premium of thirteen and one-half per centum charged
against the defendant in the plaintiffs' liquidation of the claims contained in actions
Nos. 19917 and 20637. In all other respects the judgment is affirmed