Varadero v Insular Lumber

Evidence Digest. Atty. Lim. 3C. Ateneo Law. By Karen S. Pascual. EL VARADERO DE MANILA, plaintiff and appellant, vs. INSULAR LUMBER COMPANY , defendant and appellee. Topic:  Compromises Date: 15 September 1924 Keywords: Lighter Tatlo, exorbitant repair cost Ponente: MALCOLM, J. Street, Avanceña, Villamor, Ostrand, and Romualdez, JJ.,  concur. EMERGENCY: INSULAR LUMBER had a lighter1 called” Tatlo” which was to be repaired by EL VARADERO de Manila.  The work was performed pursuant to no express agreement, but with the implicit understanding that the price would be as low as, or lower than, could be, secured from any other company. When repairs were completed and EL VARADERO gave INSULAR LUMBER the bill, the latter (INSULAR LUMBER) refused to pay because it was of the opinion that the price was grossly exorbitant. INSULAR LUMBER, hence, offered a compromise, but they disagreed. Hence, they went to court. In the CFI, they entered a compromise again. Ultimately, they never settled on an agreed figure, coz CFI merely adopted INSULAR LUMBER’s proposal (CFI was so impressed with their testimony). Dissatisfied, EL VARADERO appealed to SC (no appeal to CA was mentioned). ISSUE: Whether the compromise must be excluded in arriving at a correct figure of liability? NO. The general rule is that an offer of compromise is inadmissible. Where, however, the amount named in the offer to accept a certain sum in settlement appears to have been arrived at as a fair estimate of value, it is relevant. The rule of exclusion of compromise negotiations does not apply where there is no denial expressed or implied of liability, and the only questions discussed relate to the amount to be paid (as in this case). HELD: On the facts, that the reasonable value of the repairs performed by El Varádero de Manila on the l ighter Tatlo owned by INSULAR LUMBER Company, was P7,700. COMPLETE INSULAR LUMBER had a lighter2 called” Tatlo” which was to be repaired by EL VARADERO de Manila. The work was performed pursuant to no express agreement, but with the implicit understanding that the price would be as low as, or lower than, could be, secured from any other company. EL VARADERO completed satisfactorily the repairs on the lighter Tatlo. However, INSULAR LUMBER was of the opinion that the bill as presented by El Varadero de Manila was grossly exorbitant. Hence, INSULAR LUMBER proposed a compromise. But, this having failed of realization, realization, the matter was taken to court. At the CFI, these few salient facts influenced the judgment of the CFI. o The itemized bill presented by EL VARADERO, the amount which it still claims, totals P12,412.62. At one time during the course of the negotiations, EL VARADERO was willing to accept P10,241.37. The witnesses for EL VARADERO naturally took the view that the bill was correct. But the trial judge was of the opinion that it was excessive. 

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INSULAR LUMBER, on the other hand, says that a reasonable figure for the work would be P5,310.70. Witnesses were offered to substantiate this contention. Their testimony so impressed the trial judge that he adopted their statements as his own. During the course of the abortive negotiations, however, INSULAR o LUMBER expressed a willingness to pay EL VARADERO P8,070.12. P8,070.12. CFI-Manila RULING:  El Varadero de Manila secured judgment against INSULAR LUMBER Company in the amount of P5,310.70, with legal interest from the presentation of the complaint, and costs. Dissatisfied, EL VARADERO appealed to SC and asked to increase the amount of the judgment to P12,412.62. o

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ISSUE: Whether the compromise must be excluded in arriving at a correct figure of liability? HELD: Judgment is modified, and in lieu of the judgment rendered in the lower court, another shall issue in favor of EL VARADERO and against INSULAR LUMBER for the recovery of P7,700 , with legal interest to begin to run from the date when this judgment shall become final and to continue until payment, without express finding as to costs in either instance. So ordered. RATIO: SC considered 3 points which assisted them in rendering judgment: 1st  point  GR: Compromise is inadmissible. Where, however, the amount named in the offer to accept a certain sum in settlement appears to have been arrived at as a fair estimate of value, it is relevant. Here, there was no denial of liability  and the only question discussed was the amount to be paid   which EL VARADERO insisted should not be less than P10,241.37, and which INSULAR LUMBER insisted should not be m ore than P8,070.12. testimony of one Mariano Yengko, a disinterested witness and is an 2nd  point inspector of vessels, assessed the fair value of the repairs at P5,134.20, but which, on cross examination, he raised to between 7K a nd 8K. the tacit understanding between the parties was that the cost of the 3rd point repairs should be approximately the same as what other companies would charge. INSULAR LUMBER admits that El Varadero de Navotas (another branch of El Varadero) would have done the work for about P8,000.

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1 a flat-bottomed barge used for transporting cargo, 2 a flat-bottomed barge used for transporting cargo,

esp in loading or unloading a ship esp in loading or unloading a ship

Basing our findings, therefore, on the foregoing considerations, we are of the opinion that the reasonable value of the repairs performed by El Varadero de Manila on the Tatlo owned by INSULAR LUMBER Company, was something less than P8,000. We fix the sum definitely at P7,700.