(54) Universal Food Corp. v. CA, GR L-29155, February 22, 1971 [Per J.

Castro, En Banc]
Issue: Was the Bill of Assignment really one that involves transfer of the formula for Mafran sauce itself?
Digest:
In 1938, Magdalo V. Francisco, Sr. discovered a formula for the manufacture of a food seasoning (sauce)
derived from banana fruits popularly known as MAFRAN sauce. He registered his trademark in his name
as owner and inventor with the Bureau of Patents. However, due to lack of sufficient capital to finance the
expansion of the business, he secured the financial assistance of Tirso T. Reyes who, after a series of
negotiations, formed with Universal Food Corporation eventually leading to the execution of a "Bill of
Assignment"

Magdalo Francisco entered into contract with UFC that he be the Chief Chemist and shall have absolute
control in the purchase and safekeeping of the chemicals used in the preparation of said Mafran sauce.
Francisco kept the formula of the Mafran sauce secret to himself. Thereafter, however, due to the alleged
scarcity and high prices of raw materials, only the necessary daily employees without employing permanent
employees was instructed. Successive memoranda on business operatins were release, without Francisco
being recalled back to work, he filed tan action for rescission of the Bill of Assignment. Then in a letter
dated March 20, 1961, UFC requested Francisco to report for duty, but the latter declined the request
because the present action was already filed in court.

I. What have we learned about the topic?

Art. 1378. When it is absolutely impossible to settle doubts by the rules established in the
preceding articles, and the doubts refer to incidental circumstances of a gratuitous contract, the
least transmission of rights and interests shall prevail. If the contract is onerous, the doubt shall be
settled in favor of the greatest reciprocity of interests.
If the doubts are cast upon the principal object of the contract in such a way that it cannot be
known what may have been the intention or will of the parties, the contract shall be null and void.

Art. 1191. 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. The injured party may choose between the
fulfillment and the rescission of the obligation, with the payment of damages in either case. He may
also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

ART. 1383. The action for rescission is subsidiary; it cannot be instituted except when the party
suffering damage has no other legal means to obtain reparation for the same.

II. What does the case teach us?

Was the Bill of Assignment really one that involves transfer of the formula for Mafran sauce itself?
No, the Mafran Sauce formula was not transferred. Certain provisions of the bill would lead one to believe
that the formula itself was transferred. To quote, “the respondent patentee "assign, transfer and convey all
its property rights and interest over said Mafran trademark and formula for MAFRAN SAUCE unto the
Party of the Second Part," and the last paragraph states that such "assignment, transfer and conveyance is
absolute and irrevocable (and) in no case shall the PARTY OF THE First Part ask, demand or sue for the
surrender of its rights and interest over said MAFRAN trademark and mafran formula." However, a
perceptive analysis of the entire instrument and the language employed therein would lead one to the
conclusion that what was actually ceded and transferred was only the use of the Mafran sauce formula. This
was the precise intention of the parties.
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, ARTICLE 1378 allows only “the least transmission of rights, 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.”

Was UFC’s contention that Magdalo Francisco is not entitled to rescission valid?
No. Francisco is entitled for rescission of contract. Under Art. 1383, the action for rescission is subsidiary;
it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation
for the same. Here, the dismissal of the Francisco as the permanent chief chemist of the corporation is a
fundamental and substantial breach of the Bill of Assignment. He was dismissed without any fault or
negligence on his part. Thus, apart from the legal principle that the option — to demand performance or
ask for rescission of a contract — belongs to the injured party, the fact remains that he had no alternative
but to file the present action for rescission and damages.
Whether or not Francisco ceded not only the use of Mafran sauce formula but also the formula itself.
Francisco only cede the use of Mafran sauce formula. It is the cumulative effects of (a) foregoing
circumstances (b) the admission made by the petitioner of paragraph 3 of the respondent’s complaint (c)
the factual milieu of the case (d) the application of the first sentence of Article 1378 which led the court to
conclude that what was actually ceded and transferred was only the use of the Mafran sauce formula.