G.R. No. L-9935; February 1, 1915
YU TEK and CO., plaintiff-appellant, vs. BASILIO GONZALES, defendant-appellant.

FACTS:
The plaintiff, Yu Tek and Co., and the defendant, Basilio Gonzales, entered into a written contract (Exhibit A). Under its terms, Gonzales acknowledged receipt of P3,000 from Yu Tek and Co. and obligated himself to deliver 600 piculs of first and second-grade sugar within a three-month period from January 1 to March 31, 1912. The contract stipulated that if Gonzales failed to deliver the sugar within the period, the contract would be rescinded, and he would be obligated to return the P3,000 and pay an additional P1,200 “by way of indemnity for loss and damages.”

Gonzales delivered no sugar and failed to return the P3,000. Yu Tek and Co. filed an action to recover both sums. The trial court rendered judgment only for the P3,000. Both parties appealed: Gonzales contested his liability, and Yu Tek and Co. sought recovery of the additional P1,200.

Gonzales sought to introduce parol evidence to prove that the parties intended the sugar to come exclusively from his own plantation’s crop and that he was unable to deliver due to the crop’s failure. The trial court excluded this evidence.

ISSUE:
1. Whether parol evidence is admissible to prove that the defendant’s obligation to deliver sugar was limited to the produce of his own plantation.
2. Whether the contract constituted a perfected sale of determinate goods, such that the loss of the defendant’s crop would extinguish his obligation under Articles 1452, 1096, and 1182 of the Civil Code.
3. Whether the stipulated sum of P1,200 is recoverable as liquidated damages.

RULING:
1. On the parol evidence: The Supreme Court ruled that parol evidence was correctly excluded. The contract contained no stipulation limiting the source of the sugar to the defendant’s plantation. The terms were clear and unconditional, obliging Gonzales to deliver 600 piculs of sugar without specifying origin. Under the rule, parol evidence cannot be admitted to add a contemporaneous condition not mentioned in the writing, absent fraud or mistake. The rights of the parties must be determined solely from the written contract.

2. On the nature of the contract: The Court held the contract was an executory contract of sale (a promise to sell) and not a perfected sale. For a sale to be perfected under Article 1450 of the Civil Code, the parties must have agreed upon the determinate “thing” which is the object of the contract. Here, the object was 600 piculs of sugara generic description. No specific lot of sugar was segregated, appropriated, or identified as the subject of the contract at the time of agreement. Therefore, there was no transfer of ownership, and the provisions on the loss of the determinate thing (Arts. 1452, 1096, 1182) were inapplicable. Gonzales’s obligation was personalto deliver sugar of the specified kind and quantityand was not extinguished by the failure of his crop.

3. On the P1,200 indemnity: The Court ruled that the sum of P1,000 was a valid stipulation for liquidated damages under Article 1255 of the Civil Code. The contract language was clear: upon failure to deliver, the contract would be rescinded and Gonzales must return the P3,000 and pay P1,200 “by way of indemnity for loss and damages.” The parties were free to agree upon such terms, which were not contrary to law, morals, or public order. The trial court’s view that the clause was merely a limitation on damages was erroneous.

DISPOSITIVE PORTION:
The judgment of the trial court was MODIFIED. The plaintiff is entitled to recover from the defendant the sum of P3,000 (the advance payment) plus P1,200 as liquidated damages. The modified judgment was affirmed, without costs.