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Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-40709

August 1, 1934

ASTURIAS SUGAR CENTRAL, INC., plaintiff-appellant,


vs.
THE PURE CANE MOLASSES CO., INC., defendant-appellee.
Felipe Ysmael for appellant.
W. E. Greenbaum for appellee. Republic of the Philippines
SUPREME COURT
Manila
EN BANC
DECISION
September 29, 1967
G.R. No. L-21876
PHILIPPINE AMUSEMENT ENTERPRISES, INC., plaintiff-appellant,
vs.
SOLEDAD NATIVIDAD and MARIANO NATIVIDAD, defendants-appellees.
Disini and Arnobit for plaintiff-appellant.
Isidoro Crisostomo for defendants-appellees.
Castro, J.:
This is an appeal from the decision of the Court of First Instance of Davao dated
May 31, 1962, rescinding, in favor of the defendants, the lease agreement
entered into by the plaintiff Philippine Amusement Enterprises, Inc. and the
defendant Soledad Natividad relative to an automatic phonograph, ordering the
latter to restore the phonograph to the former, denying the plaintiff's claim for
liquidated and exemplary damages, attorney's fees and costs of suit, and
dismissing the defendants' counterclaim. The plaintiff took the appeal to the
Court of Appeals which, however, certified it to this Court because the questions
involved are of law.
On January 6, 1961 the plaintiff, a domestic corporation with main office in
Quezon City and a branch office in Davao City, entered into a contract with the
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defendant Soledad Natividad, owner of the Irene's Refreshment Parlor in Davao


City, whereby the former leased to the latter an automatic phonograph (Seeburg
Selectomatic 100-R), more popularly known as "jukebox". The pertinent
provisions of the contract are as follows:
2. The OPERATOR1 agrees to supply and replace parts that may have been
damaged as a result of ordinary wear and tear without any cost to the
PROPRIETOR;2
xxxxxxxxx
5. The PROPRIETOR shall pay to the OPERATOR, by way of rental for the use of
the aforesaid automatic phonograph, an amount equal to 75% of the Gross
Receipts for the period of one week, but in no case shall the amount be less than
P50.00 a week;
xxxxxxxxx
9. The PROPRIETOR agrees that during the term of this agreement, the
OPERATOR shall have the exclusive right to maintain an automatic phonograph in
the premises, and the PROPRIETOR shall not permit anyone to install or maintain
any phonograph or any other devices for the reproduction or the transmission of
music in any part of the premises;
xxxxxxxxx
11. It is mutually agreed that the duration of this agreement shall be for the
period of three (3) years from the date hereof and shall renew itself automatically
for a like period under the same terms and conditions, unless either of the parties
hereto gives to the other written notice of his intention to cancel this agreement
by registered mail within thirty (30) days before the expiration of this agreement
or any renewal thereof.
12. In the event that the PROPRIETOR shall fail to comply with any of the terms
and conditions of this contract, the OPERATOR, at any time during the existence
of the agreement, shall be entitled as a matter of right to immediately repossess,
and the PROPRIETOR binds himself to voluntarily surrender the said phonograph;
and hereby expressly grants permission to representatives of the OPERATOR any
time for such purposes thereby waiving any action for trespass or damages.
xxxxxxxxx
15. In the event of a breach of this agreement by the PROPRIETOR, the parties
hereto agree that the OPERATOR shall be entitled to recover as liquidated
damages and not as a penalty or forfeiture, a sum equal to P50.00 per week for
each week remaining of the unexpired term of this agreement; AND IN THE
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EVENT OF JUDICIAL PROCEEDINGS TO ENFORCE ANY OF THE PROVISIONS OF THIS


CONTRACT, the OPERATOR shall be entitled to attorney's fees of not less than
P200.00, costs of the action, premiums for bonds, and other expenses and
damages which OPERATOR may suffer or incur by reason thereof, as well as to
the immediate issuance of preliminary writ of mandatory injunction 4iy1.
On July 17, 1961, Mariano Natividad, husband of the defendant Soledad
Natividad, wrote the following letter to the plaintiff's branch office in Davao City:
For two (2) weeks ago, I had advised your representative here in Davao to get
back your jukebox, but until today said representative did not mind us.
So upon receipt of this letter, you are hereby again advised to get the said
Jukebox and failure on your part to get it, we shall not be responsible anymore for
the said Jukebox.
On July 27, 1961 Mariano Natividad wrote another letter to the plaintiff, this time
addressed to its main office in Quezon City, informing it of his letter of July 17 and
of the reasons for requesting the return of the jukebox to the company. This letter
reads as follows:
Please may you hear our revelations or relations prior to the advice we had made
to your company regarding our slight difference from your agent, stationed here
in Davao City.
1. We requested your agent that the said Jukebox should be inspected once in a
while there are times when the said Jukebox stock up and the coins which will be
dropped will just be confiscated due to the selected record which will not give our
selected music.
2. About a year ago, we asked your agent here in Davao City if we could buy your
Jukebox. He replied, "yes" and he will inform the Manila office. From that time, we
made always an inquiry if said matter was already referred to. But we were
surprised why until last May we did not hear any word from your agent. So we
decided to order one from the United States.
3. On July 3rd, we advised personally your agent that the said Jukebox should be
taken from our establishment. He answered us that he will report the matter to
your Central Office. From July 3rd until July 16th, we had not met your agent. On
the following day, July 17th, we met your agent because he accounted the
income of the said Jukebox and we again told him that the Jukebox should be
taken. He replied that he could not act because there is no letter from us for the
Manila office advising the return of the said Jukebox. So we made a discussion
why he did not tell us if our letter was necessary; so we wrote a letter on July
17th. At that time when he received our letter, he requested for an extension of
one (1) week for he would forward our letter to Manila. But according to my wife,
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your agent told her that he forwarded our letter last July 22nd. On July 24th, we
finally decided to return the said Jukebox and even have ready laborers to help us
load the Jukebox on your pick-up. Your agent, Mr. Gonzales, remarked angrily that
he would not accept the said Jukebox but will just deposit it in our establishment
until the Manila office will act on it. According to him, your agent, Mr. Gonzales,
we could not remove the said Jukebox from the place because there was a
contract. Later on, Mr. Gonzales calmly requested us again to have an additional
extension of one (1) more week. In this situation we were very embarrassed
because there were many customers and other persons present during our
discussions. Right on that day, we transferred your Jukebox inside our
airconditioned room without any business because Mr. Gonzales told us that the
said Jukebox should be deposited only in our establishment. Your agent, Mr.
Gonzales, is a good agent on the other world but not in this world where we are
living. Beginning July 24th until the time you will get the Jukebox, we are going to
collect a monthly rental of Fifty Pesos (P50.00) for the space occupying the
Jukebox.
In its reply of August 4, 1961 the plaintiff stated that
the stocking up of coins is quite normal in any coin-operated phonograph, as well
as failure to get the desired selection. It has been the policy of our company,
however, to give top priority to the complaints of our customers. It is not clear
from your letter whether our Branch Manager for Davao City has been remiss in
his duties. We are willing to give the benefit of the doubt by concluding that he
might have failed to respond to your calls in time and I assure you that
immediate instructions will be issued from this office directing him to give
personal attention to any service that you might wish in connection with the said
Jukebox.
It as well denied knowledge of the defendants' desire to buy a jukebox and
deplored the fact that the defendants ordered one from the United States without
first sending the request to buy directly to it since the plaintiff was anyway willing
to sell a jukebox to any interested person. Calling attention to paragraph 9 of the
lease contract which gave it the exclusive right to maintain an automatic
phonograph in the defendants' premises, the plaintiff asked the defendants to reinstall its jukebox and remove the other one which the defendants had installed
in their premises.
On August 4 and October 16, 1961, the plaintiff, through counsel, wrote the
defendant spouses, demanding anew compliance with the lease contract and the
payment of damages, and warning them that it would file the corresponding
action in court if they did not comply with its demand. As the defendants refused
the demand, the plaintiff brought action in the Court of First Instance of Davao on
November 21, 1961, praying for the return to it of the automatic phonograph,
subject of the contract of lease and the payment of P5,850 as liquidated
damages, P5,000 as exemplary damages, P500 as attorney's fees and P400 as
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expenses of litigation.
Upon the parties' stipulation of facts, their pleadings and the documentary
evidence submitted by them as annexes to the stipulation of facts and pleadings,
the lower court rendered the decision hereinbefore adverted to.
The plaintiff imputes four errors to the lower court, the vital one being the court's
holding that the facts fully warrant a rescission of the contract of lease in favor of
the defendants by reason of the plaintiff's failure to perform its obligation to
render the automatic phonograph suitable for the purpose for which it was
intended.
It is our view that the decision of the lower court should be reversed on three
grounds.
First. The power to rescind obligations is implied in reciprocal ones in case one of
the obligors should not comply with what is incumbent upon him. So the Civil
Code provides.3 But it is equally settled that, in the absence of a stipulation to
the contrary, this power must be invoked judicially; it cannot be exercised solely
on a party's own judgment that the other has committed a breach of the
obligation.4 Hence, as there is nothing in the contract of lease empowering the
defendants to rescind it without resort to the courts, the defendants' action in
unilaterally terminating the contract is unjustified. As this Court said in Escueta v.
Pando:5
The defendant could not, by himself alone and without judicial intervention,
resolve or annul the agreement. Under article 1124 [now art. 1191] of the Civil
Code, the right to resolve reciprocal obligations, in case one of the obligors shall
fail to comply with that which is incumbent upon him, is deemed to be implied.
But that right must be invoked judicially for the same article also provides: "The
court shall decree the resolution demanded, unless there should be grounds
which justify the allowance of a term for the performance of the obligation."
Second. Rescission will be ordered only where the breach complained of is
substantial as to defeat the object of the parties in entering into the agreement.
It will not be granted where the breach is slight or casual.6 The defendants asked
the plaintiff to retrieve its phonograph, claiming that there were times when the
coins dropped into the slot would get stuck, resulting in its failure to play the
desired music. But apart from this bare statement, there is nothing in the
evidence which shows the frequency with which the jukebox failed to function
properly. The expression "there are times" connotes occasional failure of the
phonograph to operate, not frequent enough to render it unsuitable and
unserviceable. As a matter of fact, there is not even a claim that, as a result of
unsatisfactory performance thereof, the income therefrom dropped to such a
level that the defendants could not even pay the plaintiff its guaranteed share of
P50 a week. On the contrary, the evidence (Stipulation of Facts, Annexes J, K, L,
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M, N, and O) shows that, during the period complained of, the operation of the
jukebox was quite profitable to both parties.7
Third. We believe that the defendants actually bought a jukebox only in 1961
after they had signed the lease contract in question, although they might have
expressed a desire to buy one the year before, for otherwise they would not have
entered into a three-year lease. But certainly their decision to buy a jukebox and
operate it themselves was made long before they ever complained in July, 1961
of any defect in the rented jukebox. To be sure, it is not shown when the rented
phonograph supposedly developed trouble; presumably it was early in July, 1961,
since the defendants' first letter of complaint was written on July 17. But if, as
defendants admit, they began operating their own jukebox "sometime in July,
1961" (presumably on July 24, 1961 when they removed the rented jukebox from
where it was installed), then the defendants' pretense that they decided to buy
their own jukebox only after the rented one had failed to function properly
becomes highly improbable. The jukebox which they ordered from the United
States could not have arrived in so short a time as to enable them to operate it
on July 24.
We are rather inclined to believe that the decision to buy a jukebox was made
because the defendants found it more profitable to operate one themselves.
Their letter of July 17, 1961, in which they demanded the removal of the rented
jukebox from their premises, with the warning that they would not be
"responsible anymore" for it, and their other letter of July 27 of like tenor, betray
the haste with which they wanted to get out of their contractual obligations to the
plaintiff. We note that they did not even ask the plaintiff to service the rented
jukebox; they asked the plaintiff to remove the jukebox or they would charge
rental for the use of the space occupied by it. The conviction cannot be avoided
that the jukebox which the defendants had ordered from the United States had
arrived and the latter thereafter conjured up a reason for operating it without
being charged with violation of the lease contract. The defendants' pretenses
cannot excuse their culpable violation of the lease contract; their conduct fully
justifies the award of liquidated damages to the plaintiff.
ACCORDINGLY, the judgment a quo is reversed, and the contract of lease
between the plaintiff and the defendant Soledad Natividad is hereby rescinded in
favor of the plaintiff. The defendants are ordered to return to the plaintiff the
automatic phonograph subject of the contract, and to pay the plaintiff liquidated
damages in the total amount of P5,850, plus 6 per cent interest from the date of
the filing of the complaint until the amount shall have been fully paid, and
attorney's fees in the amount of P200. Costs against the defendants.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Angeles and
Fernando, J.J., concur.
Bengzon, J.P., J., took no part.
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Footnotes
1Philippine Amusement Enterprises, Inc noMaM.
2Soledad Natividad.
3Civ. Code art. 1191; Abaya v. Standard-Vacuum Oil Co., G.R. L-9511, Aug. 30,
1957; Hodges v. Granada, 59 Phil. 429 (1934).
4Judicial permission to rescind an obligation is not necessary if there is a special
provision in the contract granting the power of cancellation to a party. E.g.,
Froilan v. Pan Oriental Shipping Co., G.R. L-11897, Oct. 31, 1964; De la Rama
Steamship Co. v. Tan, G.R. L-8784, May 21, 1956, citing Hanlon v. Hausermann,
40 Phil. 796 (1920); Taylor v. Uy Tiong Pao 43 Phil. 873 (1922).
576 Phil. 256 (1946).
6See, e.g., Song Fo & Co. v. Hawaiian-Philippine Co., 47 Phil. 821 (1925).
7See Record on Appeal, pp. 22, 57-61. .
AVANCEA, C.J.:
Prior to the month of January, 1931, the plaintiff Asturias Sugar Central, Inc., and
the defendant Pure Cane Molasses Co., entered into a contract, Exhibit A,
whereby the former bound itself to sell and the latter to buy all the molasses
which the said plaintiff would produce at the prices and under the conditions
specified therein, one of which was that the defendant deposit the sum of P6,000
in the Bank of the Philippine Islands as security for compliance with the terms of
the contract, which the said defendant did. In an action which the plaintiff later
brought against the defendant for the amendment of the contract Exhibit A, the
latter, in its answer, filed on January 14, 1931, raised the question relative to its
right to cancel the contract upon payment of the sum of P6,000 in accordance
with the terms thereof, alleging that it had made a demand on the plaintiff to
accept the cancellation and to receive the sum of P6,000, which said plaintiff
refused. Consequently, it prayed that the plaintiff be ordered to accept the said
sum of P6,000 and that the contract Exhibit A declared cancelled. The lower court
rendered judgment therein holding, among other things, that the terms of the
contract Exhibit A did not authorize the defendant to cancel it and, therefore, the
cancellation was not in order. On appeal, this court reversed the judgment of the
trial court and held that, under the terms of the contract, the defendant had the
right to cancel it at any time upon payment of the sum of P6,000, which had been
deposited in the Bank of the Philippine Islands for this and other purposes. Upon
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the filing of a motion for reconsideration the judgment of this court was ratified
by resolution of this court of December 31, 1932, which further declared that the
contract was deemed cancelled only on November 18, 1932, the date when the
defendant deposited the sum of P6,000 with the clerk of the court and when the
cancellation was consummated.1
After the former case was remanded to the lower court, the plaintiff brought
another action against the defendant on February 3, 1933, for the recovery of the
sum of P72,569.28. This sum represented the alleged damages suffered by the
plaintiff by reason of the refusal of the defendant to purchase the molasses which
it had produced from the month of January, 1931, to November 18, 1932. The
trial court dismissed the complaint and absolved the defendant therefrom. From
this judgment the plaintiff took the appeal now under consideration.
Although the judgment rendered by this court in the former case was not
unanimous, it is now res judicata that the defendant had option to cancel the
contract at any time upon payment of the sum of P6,000, in accordance with the
terms of the document Exhibit A. However, the judgment of this court in the
sense that the contract was deemed cancelled on November 18, 1932, implies
that the contract in question was in force prior to that date. Therefore, the whole
question raised in this appeal hinges on whether or not the plaintiff has the right
to demand from the defendant the payment of the amount claimed by it as
damages resulting from the defendant's refusal to purchase the molasses it had
produced from the month of January, 1931, to November, 1932, and which said
defendant was bound to purchase under the contract which was in force during
that period.
It is an established fact that the defendant demanded the cancellation of the
contract and tendered payment of the sum of P6,000 in consideration thereof.
The very answer of the defendant, which was filed in the former case on January
14, 1931, is an express demand for cancellation and a formal tender of the sum
of P6,000. This demand and tender were all that the defendant needed to make
in order that the plaintiff would be obliged to give its consent to the cancellation.
It was not necessary for the defendant to deposit the sum of P6,000 with the
clerk of the court merely because the plaintiff refused to accept it. The tender
made by the defendant in good faith was sufficient. Article 1176 et seq. of the
Civil Code requiring the deposit of the thing due with the clerk of the court, are
not applicable to a debt. In this case the defendant owed the plaintiff nothing.
The said sum P6,000 was not a debt of the defendant but merely a consideration
for the cancellation of the contract previously agreed upon. The payment thereof
constituted the obligation to be performed by the defendant, and the cancellation
of the contract, the corresponding obligation to be performed by the plaintiff. The
defendant was not obliged to pay the sum of P6,000 before the plaintiff cancelled
the contract, just as the plaintiff was not obliged to cancel the contract before the
defendant paid the sum of P6,000. Both are reciprocal obligations which should
have been performed simultaneously. In principle, the defendant's obligation to
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pay the sum of P6,000 to the plaintiff for the cancellation of the contract is the
same as that of the vendor in a contract of sale with the right of repurchase to
refund the purchase price to the purchaser, for the purposes of the resale, in
which case this court has held that deposit of the repurchase price is not
necessary to compel the purchaser to make the resale, if he refuses to accept it.
(Villegas vs. Capistrano, 9 Phil., 416.)
Furthermore, this court is of the opinion that the offer of the defendant to pay to
the plaintiff the sum of P6,000 was made in good faith, taking into consideration,
particularly, the fact that said sum had been deposited in a bank at the disposal
of the plaintiff, for the purpose, among other things, of the cancellation of the
contract.
If, according to the judgment of this court in the former case Exhibit A grants the
defendant the option to cancel the contract at any time, upon payment of the
sum of P6,000, and if the defendant demanded such cancellation offering to pay
said sum in good faith, the plaintiff in refusing to consent to such cancellation,
violated the contract. Such being the case, the plaintiff has no cause of action
against the defendant because it is based on the alleged obligation of the said
defendant to purchase its molasses during the period in which such obligation
would not have existed, had not the plaintiff, in violation of the contract, refused
the cancellation thereof. In such case, the plaintiff derives its cause of action from
its own violation thereof. To recognize the validity of such cause of action would
be to sanction and legalize such breach. On the other hand, such breach of
contract cannot be the source of rights. Had the contract been cancelled in
January, 1931, when the defendant demanded its cancellation, as it had a right to
do, there would have been no contract to be complied with by the defendant
from that date and the plaintiff's cause of action could not have been based on
the cancelled contract. Plaintiff's violation of that contract by refusing to cancel
the same cannot now be the basis of its cause of action. Wherefore, the judgment
appealed from this hereby affirmed, with costs against the appellant. So ordered.
Street, Hull, Vickers, Butte and Goddard, JJ., concur.

Separate Opinions
IMPERIAL, J., dissenting:
On March 21, 1929, the plaintiff entered into a written contract with the
defendant whereby the latter bound itself to purchase from 200,000 to 400,000
gallons of molasses from the former at the rate of four (4) centavos a gallon, for
five consecutive agricultural years, beginning with the year 1929-1930. It was
also stipulated, among other things, that the plaintiff bound itself to sell all the
molasses produced annually in its sugar central, with the exception of 15 per cent
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thereof, and that the defendant had the option to cancel the contract upon notice
and payment of the sum of P6,000, which was likewise fixed as a security or bond
to be given by the defendant for the faithful compliance with its obligations under
the contract.
The plaintiff instituted civil case No. 8436 in the Court of First Instance of Iloilo
wherein it is prayed that the terms of the contract be clarified in the sense that
the sum of P6,000 which had been offered by the defendant be considered as a
bond or security for the faithful compliance with its obligations and not as a
consideration for its option to cancel the contract, and that the quantity of
molasses which it was obliged to deliver to said defendant should be only onehalf of the central's production, in addition to other quantities belonging to the
planters the ownership of which had passed to it for failure of the said owners to
have the molasses removed within 48 hours in accordance with the existing
milling contracts. At first the defendant was in accord with the allegations of the
complaint, but in its supplementary answer, and by way of a cross-complaint, it
prayed that the contract of sale of molasses be cancelled, on the ground that
under its terms it was given the option to cancel it upon payment of the sum of
P6,000 which it tendered and placed at plaintiff's disposal.
The trial court sustained the plaintiff's allegations and rendered judgment in
accordance with the prayer of the complaint. On appeal (G.R. No. 36026), 1 this
court reversed the appealed judgment and declared the contract cancelled, and
in its resolution on the motion for reconsideration held further that the contract
was deemed cancelled on November 18, 1932, when the defendant deposited
the sum of P6,000 with the clerk of the court.
Subsequently, the plaintiff instituted this action (civil case No. 9384 of the Court
of First Instance of Iloilo) to recover the sum of P72,569.28 from the defendant,
According to the complaint, this sum represents the stipulated cost of the
molasses produced during the agricultural years 1930-1931, 1931-932, 19321933, which the defendant unjustifiably refused to purchase and accept with the
exception of a small quantity thereof sold to La Jarolea of La Paz, Iloilo, to
minimize the damages which the plaintiff suffered.
In its second amended answer, the defendant set up the following special
defenses: that the judgment rendered by this court in civil case No. 8436 (G. R.
No. 36026), definitely decided all the questions which the plaintiff raises again in
its second complaint and that its claim is now res judicata; that in the aforesaid
civil case plaintiff did not claim the damages which it now seeks to recover from
the defendant for which reason plaintiff lost whatever right it might have had
therein; that in its motion for reconsideration of the judgment rendered by this
court, the plaintiff asked, among other things, that the contract be not cancelled,
but in the event that cancellation lies, the same should not be decreed until the
defendant has paid for all the molasses which it refused to accept, and that
according to the judgment of this court the sum of P6,000, which the defendant
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was bound to pay to the plaintiff, also represented whatever damages may be
due the latter resulting from the cancellation of the contract.
When the case was submitted, the trial court upheld the defendants contention
that the sum of P6,000, now deposited with the clerk of the court and at the
plaintiff's disposal, likewise represented the damages now claimed by the plaintiff
due to defendant's refusal to receive the molasses in question, and rendered
judgment absolving the defendant from the complaint, without costs. Appealing
from this judgment plaintiff here vigorously contends that it is entitled to the
damages, which it has undisputably proven.
In affirming the appealed judgment the majority of the members of this court rely
on the general principle that when a contract is decreed cancelled, its legal
effects should retroact to the date the right thereto commenced, which, in this
case, was, January 14, 1931, when the defendant notified the plaintiff of its
option to cancel the contract and offered to pay the sum of P6,000. There is an
apparent confusion of terms herein.
There is an attempt to apply same principle both to a case wherein a contract, is
rescinded or annulled and that wherein a contract is cancelled by the parties.
When a contract is rescinded or annulled on any of the grounds specified by the
law, the parties are undoubtedly entitled only to the remedies expressly reserved
for them in articles 1295, 1303, 1304, 1305, 1306, 1307 and 1308 of the Civil
Code and they may not demand performance of any obligation arising from the
rescinded or annulled contract. Neither can they maintain an action for damages
based on a breach of contract save the cases excepted by articles 1295 and
1307. The reason for this is obvious: when a contract is rescinded or annulled, it
ceases to exist and the contracting parties are entitled to have the subject matter
thereof restored to its original status quo.
Where a contract has been rescinded by mutual consent, the parties are as
a general rule restored to their original rights with relation to the subject
matter, and no action for breach can be maintained thereafter, nor are the
parties bound by the contract with reference to their subsequent actions.
(13 C. J., pp. 602, 603.)
However, when the contract is merely cancelled or terminated by express
agreement of the parties, as in this case, such cancellation does not affect nor
annul already existing obligations.
Ordinarily any claim in respect of performance and of what has been paid
or received on the contract will be referred to the agreement of rescission,
where the contract is rescinded while in the course of performance, and as
a general rule no such claim may be made unless it has been expressly or
impliedly reserved; but there are cases which hold that the fact that the
parties agree to terminate the contract does not in itself show that they
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agree to release all rights of action for breach which may have arisen up to
that time, it being held that the mere fact that parties make use of the
terms "rescind" or "cancel" does not show that they intend their acts to
have such legal effect. (13 C. J., p. 603.)
Where under the contract a party may terminate it at his option, he is not
liable after termination for further transactions thereunder, but obligations
which have already accrued are not affected. . . . (13 C. J., p. 608.)
The right to cancel the contract was reserved to the defendant upon payment of
the sum of P6,000. Under this option, it could terminate the contract but the
obligations arising therefrom were enforceable while it was in existence and until
its cancellation has been agreed upon by the parties or decreed by the court. To
wipe out already existing and enforceable obligations before the termination of
the contract would be to annul completely the agreement and obligations
voluntarily stipulated by the parties.
Anticipating the commencement of this action by the plaintiff, it was stated in the
resolution upon the motion for reconsideration that the contract should not be
deemed cancelled except from November 18, 1932, when the defendant
deposited the sum of P6,000 with the clerk of the court. To hold now that such
cancellation commenced on January 14, 1931, would be to ignore a settled
question.
As to the amount of damages, the sum claimed by the plaintiff should be reduced
to P35,000 because the defendant was only bound to purchase molasses up to
November 18, 1932. It is difficult to establish a correct and clear basis for this
sum in round numbers, but at least it represents the approximate value of the
molasses which the defendant was bound to receive and pay for under the terms
of the contract.
Some of the members of the court have taken the view that the aforesaid sum
should be deemed to include the P6,000 deposited with the clerk of court. This
latter sum was awarded to the plaintiff, and the defendant bound itself to pay it,
by way of consideration or price of the option to cancel. The amount having been
given for a different purposes, it should not be confused wit, or deducted from
the damages.
The appealed judgment should be reversed and damages in the sum of P35,000
awarded to the plaintiff, with costs in both instances.
DIAZ, J., dissenting:
It is with regret that I have to dissent from the majority opinion. Inasmuch as it
has already been held in the decision rendered in case G. R. No. 36026 that the
cancellation of the contract Exhibit A, entered into by the parties, should be
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understood as having taken effect on November 18, 1932, when the defendant
had ceased purchasing the molasses which the plaintiff had been placing at its
disposal since the agricultural year 1930-1931, in violation of the terms of said
contract it is my opinion that said defendant is obliged to indemnify the plaintiff
for the damages it suffered by reason of such breach, but certainly not in the
amount of P72,569.28, which it claims in the complaint. It may be true that the
plaintiff suffered the damages in question but, from the communications
exchanged between the parties, which form part of the documentary evidence
presented during the hearing, it may be inferred that, having foreseen the
possibility of a disagreement similar to the one which gave rise to this suit
between them, they had fixed the indemnity which said defendant should pay the
plaintiff at P6,000. Therefore, the question raised by the parties should be
decided by awarding the plaintiff an indemnity in the sum of P6,000,
notwithstanding the fact that it had already been allowed a like sum in the
aforesaid case G.R. No. 36026, on the ground that the former was for a different
cause or purpose.
Malcolm, Villa-Real and Abad Santos, concur.
Footnote
1

57 Phil. 519, 534.

IMPERIAL, J., dissenting:


1

57 Phil., 519 534.

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