17. Soorajmull Nagarmull vs.
Binalbagan | 33 SCRA 46 (1970)
Facts: Under a contract, Soorajmull (herein plaintiff) , a foreign corporation, with offices in India,
agreed to sell to Binalbagan-Isabela Sugar Company (herein defendant), a domestic
corporation, with offices in Manila, 1.7M pieces of Hessian bags. Shipment of these bags was to
be made in equal installments of 425 bales. The subject of the controversy arose when there
were a total of 154 bales that the plaintiff defaulted from July to September shipments.
Defendant then requested the plaintiff to pay 5% of the value of the 154 bales defaulted as
penalty which the latter did.
Meanwhile, on October 1, 1949, the Government of India increased the export duty of jute bags
from 80 to 350 rupees per ton, and on October 5, 1949, plaintiff requested defendant to
increase its letter of credit to cover the enhanced rate of export duty imposed upon the goods
that were to be shipped in October, reminding the latter that under their agreement, any
alteration in export duty was to be for the buyer's account, which the defendant did in
compliance with the said agreement.
Plaintiff wrote to defendant for a further increase of $4,000.00 in its letter of credit to cover the
shipment of 154 bales which under the contract should have been included in the July, August
and September shipments.
Defendant received notification from the Bengal Chamber of Commerce Tribunal of Arbitration
in Calcutta, India, advising it that on December 28, 1950, Plaintiff applied to said Tribunal for
arbitration regarding their claim. The Tribunal requested the defendant to send them its version
of the case. This, defendant did on March 1, 1951, thru the then Government Corporate
Counsel.
The case was heard by the Tribunal of Arbitration, and the defendant was represented at the
hearing by the Philippine Consulate General in Calcutta, India. The whole case revolved on the
question of whether or not the defendant is liable to the plaintiff for the payment of increased
export taxes imposed by the Indian Government on the shipments of jute sacks.
Defendant contends that the jute sacks were delivered by plaintiff months before the said
increase of tax by the Indian Government became effective. While on the other hand, plaintiff
argued that the contract between the parties and all papers and documents made parts thereto
should prevail, including defendant's letter of September 29, 1949.
The Bengal Chamber of Commerce, Tribunal of Arbitration, ruled in favor of the plaintiff ordering
the defendant to pay to the plaintiff the sum of 18,562 rupees and 8 annas. It was then affirmed
by the Calcutta High Court.
For about two years, the plaintiff sought for the enforcement of the said award thru the
Department of Foreign Affairs against the defendant. The defendant then replied that they are
not bound by the decision of the Bengal Chamber of Commerce and consequently are not
obligated to pay the claim in question.
The two parties then sought for the Court to allow them to show evidence on the disputed facts.
The CA affirmed the decision of the Tribunal Arbitration of the Bengal Chamber of Commerce.
Issue: WON the decision of the foreign court may be enforced against Binalbagan
Ruling: NO.
It is true that under the provisions of Section 50 of Rule 39, Rules of Court, a judgment for a
sum of money rendered by a foreign court "is presumptive evidence of a right as between the
parties and their successors in interest by a subsequent title", but when suit for its enforcement
is brought in a Philippine court, said judgment "may be repelled by evidence of a want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact".
Upon the facts of record, the Court was constrained to hold that the decision sought to be
enforced was rendered upon a "clear mistake of law" and because of that it makes appellant
(Binalbagan) — an innocent party — suffer the consequences of the default or breach of
contract committed by appellee.
There is no question at all that appellee was guilty of a breach of contract when it failed to
deliver one-hundred fifty-four Hessian bales which, according to the contract entered into with
appellant, should have been delivered to the latter in the months of July, August and
September, all of the year 1949. It is equally clear beyond doubt that had these one-hundred
fifty-four bales been delivered in accordance with the contract aforesaid, the increase in the
export tax due upon them would not have been imposed because said increased export tax
became effective only on October 1, 1949.
Therefore, that the decisions of the Tribunal of Arbitration of the Bengal Chamber of Commerce
and of the High Court of Judicature of Calcutta fail to apply to the facts of this case fundamental
principles of contract, the same may be impeached, as they have been sufficiently impeached
by appellant, on the ground of "clear mistake of law".
The Court emphasized that it can not sanction a clear mistake of law that would work an
obvious injustice upon appellant.
