33) UNIVERSAL FOOD CORPORATION vs.

CA
G.R. NO. L-29155, May 13, 1970

Topic: Rescission

Facts:
Petitioners contends that a) under the terms of the Bill of Assignment wherein respondent
Magdalo Francisco ceded and transferred not only the right to use the formula for Mafran
sauce but also the formula itself because this, allegedly, was the intention of the parties; b)
that on the basis of the entire evidence on record and as found by the trial court, the
petitioner did not dismiss the respondent Francisco because he was, and still, a member of
the Board of Directors, a stockholder, and a officer of the corporation. And that at such, had
actual knowledge of the resumption of production by petitioner. But that despite the
knowledge, he refused to report back for work. Notwithstanding the petitioner's call for him to
do so; c) that the private respondents are not entitled to rescind the Bill of Assignment; d)
that the evidence on record shows the respondent Francisco was the one not ready, willing
and able to comply with his obligations under the Bill of Assignment, in the sense that he not
only irregularly reported for work but also to assign, transfer and convey to the petitioner of
the said deed of conveyance.

Issue:
1. WON the Bill of Assignment really one that involves transfer of the forkmula for Mafran
sauce itself.
2. WON petitioner’s contention that Magdalo Francisco is not entitled to rescission valid?

Ruling:
1. No. Certain provisions of the bill would lead one to believe that the formula itself was
transferred. The SC had the following reasons to back up the above conclusion. First, royalty
was paid by UFC to Magdalo Francisco. Second, the formula of said Mafran sauce was
never disclosed to anybody else. Third, the Bill acknowledged the fact that upon dissolution
of said Corporation, the patentee rights and interests of said trademark shall automatically
revert back to Magdalo Francisco. Fourth, paragraph 3 of the Bill declared only the transfer
of the use of the Mafran sauce and not the formula itself which was admitted by UFC in its
answer. Fifth, the facts of the case undeniably show that what was transferred was only the
use. Finally, our Civil Code allows only “the least transmission of right, hence, what better
way is there to show the least transmission of right of the transfer of the use of the transfer of
the formula itself.”

2. No. Petitioner’s contention that Magdalo Francisco’s petition for rescission should be
denied because under Article 1383 of the Civil Code of the Philippines rescission can not be
demanded except when the party suffering damage has no other legal means to obtain
reparation, was of no merit because “it is predicated on a failure to distinguish between a
rescission for breach of contract under Article 1191 of the Civil Code and a rescission by
reason of lesion or economic prejudice, under Article 1381, et seq.” This was a case of
reciprocal obligation. Article 1191 may be scanned without disclosing anywhere that the
action for rescission thereunder was subordinated to anything other than the culpable breach
of his obligations by the defendant. Hence, the reparation of damages for the breach was
purely secondary. Simply put, unlike Art. 1383, Art. 1191 allows both the rescission and the
payment for damages. Rescission is not given to the party as a last resort, hence, it is not
subsidiary in nature.
91) SOLINAP vs. DEL ROSARIO
G.R. No. L-50638 July 25, 1983

Topic: Compensation

Facts:
The spouses Tiburcio Lutero and Asuncion Magalona, owners of the Hacienda Tambal,
leased the said hacienda to petitioner Loreto Solinap for 10 years for the stipulated rental of
P50,000.00 a year. It was further agreed in the lease contract that P25,000.00 from the
rental should be paid by Solinap to the PNB to amortize the indebtedness of the spouses
Lutero. When Tiburcio Lutero died, his heirs instituted the testate estate proceedings. On the
basis of an order, respondents Juanito Lutero, grandson and heir of the late Tiburcio, and his
wife Hardivi R. Lutero paid the PNB the sum of P25,000.00 as partial settlement of the
deceased's obligations. Spouses Lutero filed a motion seeking reimbursement from the
petitioner. They argued that the said amount should have been paid by petitioner to the
PNB, as stipulated in the lease contract. Before the motion could be resolved, petitioner a
separate action against the spouses for collection of P71,000.00 they borrowed from the
petitioner. The spouses answered and pleaded a counterclaim against petitioner for
P125,000.00 representing unpaid rentals on Hacienda Tambal and that petitioners
purchased one-half of Hacienda Tambal. The respondent judge issued an order granting the
spouses’ motion for reimbursement from petitioner of the sum of P25,000.00, plus interest.
Petitioner filed a petition for certiorari before this Court, assailing the above order. Acting on
the petition, the P25,000.00 to be paid by the petitioner to the private respondent Luteros
may well be taken up in the final liquidation of the account between petitioner as lessee and
the subject estate as lessor. Thereafter the respondent Luteros filed with the respondent
court a motion raising that the amount payable to private respondents should be
compensated against the latter's indebtedness to him amounting to P71,000.00. This motion
was denied by respondent judge on the ground that the claim of Loreto Solinap against
spouses was yet to be liquidated and determined, such that the requirement in Article 1279
of the New Civil Code that both debts are liquidated for compensation to take place has not
been established by the oppositor Loreto Solinap. Petitioner filed a motion for
reconsideration of this order, but the same was denied.

Issue:
WON the obligation of petitioner to private respondents may be compensated or set-off
against the amount sought to be recovered in an action for a sum of money filed by the
former against the latter.

Ruling:
The petition is devoid of merit. The petitioner's claim against the spouses was still pending
determination by the court. This could not be categorized as liquidated credit which may
properly be set-off against his obligation. As this Court ruled in Mialhe vs. Halili
"compensation cannot take place where one's claim against the other is still the subject of
court litigation. It is a requirement, for compensation to take place, that the amount involved
be certain and liquidated." The petition was dismissed.
149) LITA ENTERPRISES, INC.,vs. IAC
G.R. NO. L-64693 April 27, 1984

Topic: Defective Contracts

Facts:
Ocampo and Garcia purchased in installment, from the Delta Motor Sales Corporation, 5
Toyota Corona Standard cars to be used as taxicabs. They had no franchise to operate
taxicabs, so they contracted with Lita Enterprises for the use of the latter’s certificate of
public convenience in consideration of an initial payment of P1,000 and a monthly rental of
P200 per taxicab unit. The aforesaid cars were then registered in the name of Lita
Enterprises. One of the taxicabs driven by Ocampo and Garcia’s employee, Emeterio Martin,
collided with a motorcycle whose driver, Florante Galvez, died from the head injuries
sustained therefrom. A criminal case was filed against the driver Martin, while a civil case for
damages was instituted by heir of the victim against Lita Enterprises.

Issue:
WON Lita Enterprises is liable to the heir of the victim who died as a result of the gross
negligence of Ocampo and Garcia’s driver while driving one private respondents’ taxicabs.

Ruling:
Yes. A kabit system whereby a person who has been granted a certificate of convenience
allows another person who owns motors vehicles to operate under such franchise for a fee.
Contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil
Code. As a result, the court will not aid either party to enforce an illegal contract, but will
leave them both where it finds them (pari delicto rule). The defect of inexistence of a contract
is permanent and incurable, and cannot be cured by ratification or by prescription.