Thursday, December 2, 2010

Kauffman vs. PNB

Chester Cabalza recommends his visitors to please read the original & full text of the case cited. Xie xie!

Key Words: Contracts; Stipulation pour autrui

Kauffman vs. PNB
42 Phil 182
September 29, 1921


George A. Kauffman, was the president of a domestic corporation engaged chiefly in the exportation of hemp from the Philippine Islands and known as the Philippine Fiber and Produce Company, of which company the plaintiff apparently held in his own right nearly the entire issue of capital stock. He was based in New York City and as the president of the said company, he was entitled to receive a dividend; as per instruction, Wicks who worked as the treasurer of the company, went to the exchange department of PNB and requested a telegraphic transfer of the money to Kauffman.

The PNB agreed with additional charges for the transaction. The treasurer issued a check to PNB and it was accepted. The PNB’s representative in New York sent a message suggesting the advisability of withholding this money from Kauffman, in view of his reluctance to accept certain bills of the company. PNB acquiesced in this and dispatched to its NY agency a message to withhold the Kauffman payment as suggested. Meanwhile, Wicks then informed Kauffman that his dividends had been wired to his credit in the NY agency of PNB. So Kauffman went to PNB office in NYC and demanded the money, however, he was refused payment. So he filed this complaint.


Whether or not Kauffman has a right of action against PNB?


Yes. It is a stipulation pour autrui.

Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment, provided he has given notice of his acceptance to the person bound before the stipulation has been revoked. (Art. 1257, par. 2, Civ. Code.) In the light of the conclusion thus stated, the right of the plaintiff to maintain the present action is clear enough; for it is undeniable that the bank's promise to cause a definite sum of money to be paid to the plaintiff in NYC is a stipulation in his favor within the meaning of the paragraph above quoted; and the circumstances under which that promise was given disclose an evident intention on the part of the contracting parties that the plaintiff should have the money upon demand in NYC. The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right in him to maintain an action to recover it.

It will be noted that under the paragraph cited a third person seeking to enforce compliance with a stipulation in his favor must signify his acceptance before it has been revoked. In this case the plaintiff clearly signified his acceptance to the bank by demanding payment; and although PNB had already directed its NY agency to withhold payment when this demand was made, the rights of the plaintiff cannot be considered to as there used, must be understood to imply revocation by the mutual consent of the contracting parties, or at least by direction of the party purchasing he exchange. Thus, it was said, "Cable transfers, therefore, mean a method of transmitting money by cable wherein the seller engages that he has the balance at the point on which the payment is ordered and that on receipt of the cable directing the transfer his correspondent at such point will make payment to the beneficiary described in the cable. All these transaction are matters of purchase and sale create no trust relationship."

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