1. CONTRACT OF SALE; ACTION FOR BREACH; IMPLIED WARRANTY; EXAMINATION OF MERCHANDISE BY PURCHASER. — A purchaser of merchandise having fully examined the same to his satisfaction before the consummation of the sale, cannot maintain an action for breach of an implied warranty under article 336 of the Code of Commerce.

2. ID.; ID.; LATENT DETECTS; TIME WITHIN WHICH CLAIM MUST BE PRESENTED. — In order to maintain an action under article 342 of the Code of Commerce for latent defects in merchandise purchased, he must present his claim in regard to such defects within thirty days from the delivery of the merchandise.

3. ID.; FRAUD; ACTION FOR DAMAGES. — There being no express warranty and the plaintiff having no cause of action on the implied warranties as to the quality of the merchandise, the recovery of damages, if any, can only be based on fraud under article 344 of the Code of Commerce.

4. ID.; ID.; INTENTION TO DECEIVE ESSENTIAL. — An intention to deceive or mislead the purchaser of merchandise to his prejudice, is an essential element of the fraud referred to in article 34 of the Code of Commerce.

On October 25, 1922, the plaintiff and the defendant entered into the following contact (Exhibit A):jgc:chanrobles.com.ph

"CONTRACT

"MANILA, October 25, 1922

"Messrs. GO JOCCO

"Manila, P. I.

"As brokers duly authorized, we have on this date sold by order and for the accounts of yourselves to Messrs. Philippine Manufacturing Co., Inc., Manila, P. I., 500 tons of coconut oil for the price of twenty-seven and a half centavos per kilo ex tanque.

"The delivery shall be made within 35 days, that is, between November 1st and December 6, 1922, inclusive.

"The purchaser shall pay the vendor the total amount of this contract on the 15th of November, 1922.

"Should the purchaser take the oil a few days before November 15, 1922, the purchaser shall pay to the vendor all the amount of the aforesaid contract two days before delivery.

"Should the purchaser fail to take the oil until the 5th day of December, 1922, said purchaser shall pay the vendor as storage the sum of P50 for each successive day.

"The state or class of the oil: Not more than 5% F. F. A.

"Conformes:jgc:chanrobles.com.ph

"PHIL. MF’G. CO. (Sgd.) "S. W. MASON

(Sgd.) "Go JOCCO "Vendor

"Vendee "BERMUDEZ & BAUTISTA

"By (Sgd. )BERMUDEZ

"Brokers"

The oil purchased was stored in the defendant’s tanks Nos. 5 and 7 and, previously to the closing of the contract, the plaintiff’s secretary and chemist, Mr. S. W. Mason, took samples of the oil from said tanks for analysis. The testimony is uncontradicted that on November 15, 1922, the defendant, in conformity with the terms of the contract Exhibit A, endeavored to collect the price of the oil from the plaintiff, but was told by Mr. Mason that it would first be necessary to measure the contents of the tanks and to again examine the oil. On the same day, Mason went to the defendant’s establishment and took new samples of the oil from the tanks for chemical analysis. He thereupon ordered his men to close the tanks by placing padlocks on the valves, he retaining the keys. After having done so, he advised the defendant that he would analyze the samples and that if the result was satisfactory, payment would be made at once, and later in the day the plaintiff gave the defendant its check for P137,500, the full amount of the contract purchase price.

On November 17, 1922, the plaintiff sold the oil by contract in writing to the Portsmouth Cotton Oil Refining Corporation at the price of $7.50, United States currency, per 100 pounds, C. I. F., Norfolk, Virginia, the contract containing the following provision as to the quality of the oil:jgc:chanrobles.com.ph

"Coconut Oil bases 5 per cent free fatty acid, Maximum 7 per cent free fatty acid shall be fair average of the season of the country in which it is pressed, and shall be sold on basis 5 per cent free fatty acid, one per cent moisture and impurities; provided, however, that any oil which exceeds 5 per cent free fatty acid but does not exceed 7 per cent free fatty acid, shall not be rejected but shall be reduced in price one half of one per cent for each one per cent excess acidity over 5 per cent, fractions in proportion."cralaw virtua1aw library

In the morning of November 27, 1922, the oil was drawn from the tanks by the plaintiff and brought aboard the tank steamer Acme for shipment to the Portsmouth Cotton Oil Refining Corporation at Norfolk, Virginia, together with other oil manufactured by the plaintiff and by the Philippine Vegetable Oil Company, the whole shipment amounting to approximately 901 long tons. Mr. Mason was present when the oil was removed from the defendant’s tanks.

Mr. Ericksen of the firm of Morton & Ericksen, marine and cargo surveyors, surveyed the ship’s tank No. 2 in which the shipment in question was carried. In his certificate of survey, Exhibit B, he states among other things:jgc:chanrobles.com.ph

"Temperatures were taken and samples drawn of oil loaded into No. 2 tank, port and starboard sections Steamship Acme from Philippine Manufacturing Co.’s storage tank A, Philippine National Oil Co.’s Storage Tanks Nos. and 7, and from tank lighters Quinan which were loaded from P. V. O. Storage Tank No. 21. All these samples were submitted to Bureau of Science, Manila, for determination of specific gravity and weight per cu. ft.

"Samples of oil were also drawn from vessel’s tank, both sections, after all oil was loaded on board and submitted to Bureau of Science for analysis. Samples of this oil drawn from vessel’s tanks will be forwarded to Fireman’s Fund Insurance Co., San Francisco."cralaw virtua1aw library

On the arrival of the Acme at Norfolk, the Portsmouth Cotton Oil Refining Corporation refused to accept the oil on the ground that it was contaminated with cottonseed oil and, in accordance with the contract between the Parties. the matter was submitted to the New York Produce Exchange Arbitration Committee for arbitration. Samples alleged to have been taken from the shipment were tested by the Bureau of Chemistry of the New York Produce Exchange through the so-called Halphen test, and were found to be contaminated with cottonseed oil. As to the proceedings before the Arbitration Committee, Mr. Berry, the plaintiff’s vice-president and treasurer, who at that time was in New York, makes the following statement in a letter to the defendant dated July 6, 1923:jgc:chanrobles.com.ph

"The matter was discussed, each side given an opportunity to present its arguments and examine the other’s witnesses and statements. However, the purchaser produced a certificate of the Bureau of Science of Manila showing that an examination made of the oil taken from your tanks showed the presence of Kapok Seed Oil. This certificate, showing the condition of the oil before it was loaded into the deep tanks of the vessel, appeared to convince the committee that the purchaser’s claim was justified. The committee called us back again the next day and asked whether we would be willing to agree with the purchaser to receive the rejection of the oil and replace it with oil of good tender or what objections we could possibly have to granting the allowance asked for. There was every indication shown by the committee that its decision would decidedly be in favor of the purchaser. The writer had been in close touch with the market and knew just what could be done with the oil if the decision was against us. Realizing that the committee would not render a decision in our favor, the writer made a proposition to the purchaser in the presence of the arbitration committee to buy back the oil from him on the basis of 87/8