8/14/2019 cases o & c (5).docx http://slidepdf.com/reader/full/cases-o-c-5docx 1/24 FIRST DIVISION[G.R. No. 74729. May 31, 2000.] RELIANCE COMMODITIES, INC. and THE PROVINCIAL SHERIFF OF NUEVA ECIJA, petitioners, vs . INTERMEDIATE APPELLATE COURT, MARVIN PAEZ and ROSA VALINO ,respondents.Ongkiko Bucoy Dizon & Associates for petitioners.SYNOPSISMarvin Paez entered into a contract with Samuel Chuason of Reliance Commodities, Inc. whereby the latter agreed to provide the former with funds and equipment for the operation of the manganese mining claims in Nueva Ecija. Later,Paez and his wife executed a real estate mortgage on their property in favor of Reliance as security for more cash advances to sustain the mining operation. Subsequently, misunderstanding ensued regarding cash advances, and Reliance foreclosed the mortgage. Consequently, the Provincial Sheriff served notice that the mortgaged property would be sold at public auction. Respondents then filed an action before the then CFI of Nueva Ecija. Reliance claimed that Paez violated their contract and thus, Paez is not entitled to rescind the contract or recover damages; and by reason of which, Reliance is entitled to foreclose on the security constituted. The Court found for Reliance. Under their contract, Reliance was to pay Paez P70.00 for every ton of manganese ore delivered to him. Also, Reliance was to advance the expenses of mining and hauling and the same were deductible from the agreed consideration of P70.00 per ton. Reliance complied with the agreement, but Paez failed to make even a single delivery of manganese ores. In fact, there was no mining operation at all. Consequently, Reliance rescinded the contracts. In reciprocal obligations, the power to rescind is given to the injured party. More, the rescission of the contracts requires the parties to restore to each other what they have received by reason of the contract. The rescission has the effect of abrogating the contracts in all parts. DHTCaISYLLABUSCIVIL LAW; OBLIGATION AND CONTRACTS; DIFFERENT KINDS OF OBLIGATIONS; RESCISSION OF RECIPROCAL OBLIGATIONS. — In reciprocal
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RELIANCE COMMODITIES, INC. and THE PROVINCIALSHERIFF OF NUEVA ECIJA, petitioners, vs . INTERMEDIATEAPPELLATE COURT, MARVIN PAEZ and ROSA VALINO,
respondents.
Ongkiko Bucoy Dizon & Associates for petitioners.
SYNOPSIS
Marvin Paez entered into a contract with Samuel Chuason of Reliance Commodities, Inc.
whereby the latter agreed to provide the former with funds and equipment for the
operation of the manganese mining claims in Nueva Ecija. Later,Paez and his wife
executed a real estate mortgage on their property in favor of Reliance as security for more
cash advances to sustain the mining operation. Subsequently, misunderstanding ensued
regarding cash advances, and Reliance foreclosed the mortgage. Consequently, the
Provincial Sheriff served notice that the mortgaged property would be sold at public
auction. Respondents then filed an action before the then CFI of Nueva Ecija. Reliance
claimed that Paez violated their contract and thus, Paez is not entitled to rescind the
contract or recover damages; and by reason of which, Reliance is entitled to foreclose onthe security constituted.
The Court found for Reliance. Under their contract, Reliance was to pay Paez P70.00 for
every ton of manganese ore delivered to him. Also, Reliance was to advance the expenses
of mining and hauling and the same were deductible from the agreed consideration of
P70.00 per ton. Reliance complied with the agreement, but Paez failed to make even a
single delivery of manganese ores. In fact, there was no mining operation at all.
Consequently, Reliance rescinded the contracts. In reciprocal obligations, the power to
rescind is given to the injured party. More, the rescission of the contracts requires the
parties to restore to each other what they have received by reason of the contract. Therescission has the effect of abrogating the contracts in all parts. DHTCaI
SYLLABUS
CIVIL LAW; OBLIGATION AND CONTRACTS; DIFFERENT KINDS OF
OBLIGATIONS; RESCISSION OF RECIPROCAL OBLIGATIONS. — In reciprocal
obligations, the power to rescind or resolve is given to the injured party. More, the
rescission of the contracts requires the parties to restore to each other what they received
by reason of the contracts. The rescission has the effect of abrogating the contracts in all
parts.
D E C I S I O N
PARDO, J p:
The case before the Court is an appeal from a decision of the Intermediate Appellate
Court, the dispositive portion of which reads:
"WHEREFORE, the decision appealed from is hereby set aside and another one
entered, declaring both the 'Deed of First Real Estate Mortgage' (Exhibit F) andthe 'Addendum to Operating Agreement' (Exhibit A) null and void, and ordering
defendant Reliance Commodities, Inc. to pay the plaintiffs the amount ofP20,000.00 for unrealized profits in the amount of P3,500.00 as attorney's fees.
The restraining order issued in this case is hereby made permanent. cdtai
"Cost against the defendant Reliance Commodities, Inc.
"SO ORDERED." 1
The facts, as found by the Intermediate Appellate Court, are as follows:
". . . on April 19, 1972, plaintiff Marvin Paez entered into contract with Samuel
Chuason, president and general manager of defendant Reliance Commodities,Inc. whereby the latter agreed to provide the former with funds and equipment
for the operation of the manganese mining claims of Daniel Garde located in
Malinas, Gabaldon, Nueva Ecija. (Exhibit I, RTC Record, p. 199). On June 1,1972, Samuel Chuason and Marvin Paez entered into another agreement called
'Addendum to Operating Agreement' (Exhibit A, Folder of Exhibits, p. 1), the
pertinent provisions of which are as follows:
"(1)PAEZ shall segregate the Manganese Ores into two (2) classes:
"Pursuant to this agreement and upon the suggestion of plaintiff Marvin Paez,
defendant Reliance Commodities, Inc. gave a cash advance of P8,300.00
(Exhibit B, Ibid., p. 5). With this amount, plaintiff Marvin Paez hired laborersand purchased the necessary tools, supplies and foodstuff. With the bulldozer,
dump truck and cobra drill supplied by defendant Reliance Commodities, Inc.
the mining operation in the mountains of Gabaldon, Nueva Ecija started on July
"On July 28, 1972, plaintiffs Marvin Paez and his wife Rosa Valino executed a
deed of first real estate mortgage on their property (Exhibit F, Folder of
Exhibits, p. 9) in favor of defendant Reliance Commodities, Inc. as security formore cash advances needed to sustain the mining operation.
"On the basis of this mortgage agreement, defendant Reliance Commodities,Inc. made several cash advances to plaintiff Marvin Paez (Exhibits 6, 7, 8 and 9,
RTC Record, pp. 203, 204, 206, 208) amounting to P25,030.00. Subsequently, a
difference arose between plaintiff Marvin Paez and defendant companyconcerning cash advances. Defendant Reliance Commodities, Inc. demanded
the return of the bulldozer, the dump truck and the cobra drill. Marvin Paez'
laborers refused to release the equipment, for the reason that they had not been
paid their wages. Defendant Reliance Commodities, Inc. thereupon gave plaintiff Marvin Paez the amount of P800.00 on November 24, 1972 for the
laborers' salaries (Exhibit C, Folder of Exhibits, p. 6). Later, defendant Reliance
Commodities, Inc. foreclosed extrajudicially the mortgage executed by
plaintiffs in its favor. Consequently, the provincial sheriff of Nueva Ecija servednotice on plaintiff Marvin Paez that the mortgaged property would be sold at
public auction on June 4, 1974.
"Plaintiff Marvin Paez with his wife as co-plaintiff filed the present action in the
court below (Court of First Instance of Nueva Ecija) on May 29, 1974, praying
for: 1) a writ of preliminary injunction to enjoin the provincial sheriff from proceeding with the auction sale, 2) an order annulling the Deed of First Real
Estate Mortgage (Exhibit F, Ibid., p. 9) and the Addendum (Exhibit A, Ibid., p.
1), and 3) a directive requiring the defendant Reliance Commodities to makefurther cash advances to plaintiffs in the amount of P75,000.00 plus moral
damages, attorney's fees and costs." 2
In the answer filed on July 8, 1974, defendants claimed that the violation of the contracts
came from the plaintiffs because they failed to deliver at all the manganese ores
stipulated in the contract according to the schedule outlined. Hence, plaintiffs were not
entitled to rescind the contracts or recover damages and by reason of which defendant
was entitled to foreclose on the security constituted. 3
After due trial on May 30, 1974, the trial court rendered a decision in favor of defendants,
the dispositive portion of which reads:
"WHEREFORE, judgment is hereby rendered in favor of defendant RelianceCommodities, Inc. and against the plaintiffs-spouses Marvin Paez and Rosa
Valino, as follows:
"(1)Ordering the dismissal of the complaint filed by said plaintiffs in this case,
for lack of merit; and
"(2)On the counterclaims of said defendant Reliance: prcd
Petitioner made cash advances to respondent Paez totalling P41,130.00 and also turned
over to him three heavy equipment for use in the mining operation. On the other hand,
respondent Paez failed to make even a single delivery of manganese ores to the stockpile
yard at Gabaldon. In fact, there was no mining operation at all.
Consequently, petitioner rescinded the contracts. Contrary to the ruling of the appellatecourt, in reciprocal obligations, the power to rescind or resolve is given to the injured
party. 8 More, the rescission of the contracts requires the parties to restore to each other
what they have received by reason of the contracts. 9
The rescission has the effect of abrogating the contracts in all parts. 10
WHEREFORE, the Court GRANTS the petition for review on certiorari, and
REVERSES the decision of the Intermediate Appellate Court. The Court REVIVES and
AFFIRMS the decision of the trial court, with the modification that the sum to be
restituted to petitioner Reliance Commodities, Inc. shall earn legal interest only from thefinality of this decision until fully paid.
RELIANCE WINS…
No costs. LibLex
SO ORDERED.
Puno and Kapunan, JJ . , concur.
Davide, Jr . , C . J . , is on official leave.
Ynares-Santiago, J . , took no part.
EN BANC
[G.R. No. 14539. December 18, 1920.]
FELISA OSORIO and DANIEL TIRONA, plaintiffs-appellants, vs .
CHAS. R. BENNET, district engineer of Cavite, and THEPROVINCIAL BOARD OF CAVITE, defendants-appellees.
the defendants occupied it because the plaintiffs ceded it to them under certain
conditions.
According to the plaintiffs, the most important of these conditions was that the
defendants, in filling up the new road, should use the mud which must be taken from
the high part of the fishery until its bottom should be on a level with the rest. As
stated by the plaintiffs and as the fact seems to be, this condition was the only
compensation for the cession of their land, because by this excavation the part dug up
would become an enlargement of the fishery already existing. The defendants state
that this condition was imposed by the plaintiffs after the construction was
commenced and not at the time of making the cession. After an examination of the
evidence we reach the conclusion that this condition was imposed from the beginning.
We note immediately that the defendants in their last amended answer make
this allegation:
". . . by virtue of this gratuitous verbal concession, the province took
possession of the lands of the plaintiffs, with their knowledge, and consent, andwithout any objection on their part, said plaintiffs having imposed the
conditions necessary for filling up the road, which condition was that the higher
parts of the lands shall be dug up. This has been done by the defendants for the benefit of the plaintiffs and resulted in the construction of one hectare more or
less of new fishery, land having been taken from the higher portions and used to
fill up the road."
It appears that after the commencement of the work the plaintiff, Felisa Osorio,
observed that the conditions imposed by them in making the cession were not
complied with, and she wrote a letter (Exhibit C) to the defendant Chas. R. Bennet,
district engineer of the Province of Cavite, demanding compliance with them. The
defendant Mr. Bennet answered by letter dated October 3, 1916 (Exhibit E), from
which it may be inferred that this condition was imposed when the cession was made.
Referring to the condition relating to the taking out of mud in the higher part of the
plaintiffs' fishery, Mr. Bennet stated in this letter, as if to make it understood that he
was fulfilling the conditions that there were fourteen bancas that were carrying away
the mud from the higher part of the fishery and from other parts designated by the
caretaker of the plaintiffs. In this letter he further made the assurance that the
provincial board would approve the contract submitted by the plaintiffs and would
authorize him to sign it. The contract referred to was a memorandum of a contract
which the plaintiff Mrs. Felisa Osorio had attached to said letter for the defendants to
sign; and this memorandum stated that one of the conditions of the cession was thatthe new road should be filled up with mud from the higher part of the fishery. The
defendant, Mr. Bennet, declaring as a witness himself admitted having agreed with
plaintiff Mr. Tirona that he would take out mud from the higher part of the fishery,
although he stated that it was to be used in a certain part of the road to secure more
As to all other points, the plaintiffs proved, and it is inferred from the evidence
of the defendants, that at least they did not fully comply with these conditions. The
filling up of the road was to a great extent made with mud taken from nearby lands
instead of mud taken from the higher part of the fishery.
There was another condition which the defendants also failed to fulfill. For the
construction of the road it was necessary to construct two lateral walls and fill up the
intervening space which would be the road. The plaintiffs agreed that the wall of the
fishery should be used as one of the walls on condition that the defendants should pay
its value. Thus it was necessary to build only one wall. It was agreed that the value of
the plaintiffs' wall would be the same as the cost of the other wall which the
defendants would construct, giving it the same form and dimensions. It is admitted
that the defendants did not pay the plaintiffs any sum for the value of their wall. It
also appears that the new wall which the defendants built was narrower, and this
results in the impossibility of determining the value which the defendants should pay
for the plaintiffs wall.
The defendants having failed to comply with the principal conditions imposed
by the plaintiffs when the cession was made, the latter have the right to set aside the
cession and recover the value of the land occupied by the defendants. The right to
resolve the obligation is implied in reciprocal obligations, when one of the parties
fails to comply with his part thereof. (Art. 1124, Civ. Code.)
But the defendants have also alleged, and the court found it to be proved, that
the land occupied by the new provincial road and included in the plaintiffs' title was
the old provincial road. If this is true, it must be considered as excluded from the
plaintiffs' title and they have no right to recover anything as its value. Nevertheless,
the evidence does not bear out this allegation. In order to determine this question offact, the court made an ocular inspection of the land in the presence of the parties. The
court states that he found the remains of the pavement of a bridge and two posts.
Upon this bridge, which separated the old road, there was a small lodging quarter.
From the shape of this payment and the situation of the two posts the court infers that
from the bridge the old road must have taken a southeastern course towards Noveleta.
If, in reality, this was the course of the old road, it would run just a few meters from
the bridge into which the new road runs. It seems, however, that this deduction is not
based upon proven hypothesis. There is no proof that, as the court found, the shape of
the pavement is the same as when the bridge existed. Neither is there proof that the
two posts, which the court described, were the only posts to be found and that there
were no others the different situation of which might indicate that the old road ran in
another direction. But above all, this deduction of the court is openly contrary to other
evidence of the defendants themselves. The latter presented the old official plan of the
old road in which appears the place where the bridge, referred to by the court, was
situated. It appears in this plan that from the bridge the course of the old road was not
to the southeast but to the southwest, and, taking the latter direction into account, the
The claim of the plaintiffs that the land occupied by the defendants is worth P1
per square meter cannot be accepted. It appears that when the plaintiff Daniel Tirona
himself was provincial assessor he assessed this land at the rate of P0.04 per square
meter. It is alleged that the rise in the price of salt increased the value of fisheries
because a fishery may be converted into a salt pit. But no evidence was presented as
to what would be the cost of converting a fishery into a salt pit in order to determinehow far the price of salt in the market may affect the value of the fishery. In any
event, when the land in question was occupied by the defendants, it was a fishery and
not a salt pit and we cannot give it a value not its own. We agree that the land of the
plaintiffs, in the portion occupied by the defendants, was worth P0.04 per square
meter.
With respect to the area of 2,300 square meters which according to the
plaintiffs, was rendered useless as a fishery, we believe that the plaintiffs are not
entitled to recover anything for it, as it has not been occupied by the defendants.
Having reached this conclusion as to the value of the land, we cannot admit
that the profits which the plaintiffs failed to perceive from this land was, as claimed,
P200 per month. These lands, at the rate of P0.04 per square meter, would be worth
P520 and the indemnity of P200 per month, which the plaintiffs claim, would clearly
be disproportionate. We have no other data by which to determine the exact quantity
of the damages suffered by the plaintiffs, but we believe that the same would be justly
appraised at the rate of 6 per cent annual interest on the value of the land.
As to the 40,000 fish which, according to the plaintiffs, escaped from the
fishery, neither is there sufficient proof. Although it is true that part of the old wall
caved in, the evidence is not dear as to the loss of the fish. There is evidence to showthat when the wall caved in, the old wall existed and the passage-way, where, it is
said, fish passed into the sea, was closed with a wooden board, according to the
plaintiffs' own witnesses.
Another error which the appellants impute to the lower court is that it did not
permit them to prove what it would cost to dig up the higher part of the fishery until
its bottom should be at a level with the remaining part. The idea of the appellants
seems to be that, by virtue of the action instituted in this case, they are entitled to
recover of the defendants, as damages, the value of this work which the latter agreed
but failed to perform. We have said that for the failure of the defendants to comply
with this obligation, the plaintiffs have the right to ask for its performance or toresolve the cession, with indemnity for damages, in accordance with article 1124 of
the Civil Code. But these remedies granted by law are alternative. They are not
cumulative, because the resolution of a contract and its performance are incompatible
with each other. Having elected the right to resolve, the plaintiffs cannot, at the same
time, demand the fulfillment of the obligation. If in this action the plaintiffs could
recover of the defendants the cost of digging up the higher portion of the fishery, that
would amount indirectly to compliance by the defendants, with the obligation. In that
manner the plaintiffs would, at the same time, be availing themselves of the two
remedies of resolving the obligation and exacting its fulfillment.
The indemnification which the plaintiffs are entitled to recover in this action
should be limited to the damages incidental to the nonfulfillment of the obligation by
the defendants and not those which the defendants would have been obliged to pay as
expenses, supposing that they had complied with the obligation.
The judgment appealed from is, therefore, reversed and the defendants are
sentenced to pay to the plaintiffs the sum of P520.40, which is the value of the land
occupied by the provincial road of Cavite, with interest at 6 per cent per annum from
September 6, 1916. The defendants are absolved from all other prayers of the
complaint. No special pronouncement as to costs will be made. So ordered.
PLAINTIFF WINS..
Mapa, C.J., Araullo, Street, Malcolm and Villamor, JJ concur.
EN BANC
[G.R. No. L-3838. December 27, 1950.]
RITO V. CRUZ and TEODORA CORONEL-CRUZ, petitioners, vs .FRANCISCO E. JOSE, Judge of the Court of First Instance ofBulacan, SEVERO ABELLERA, Sheriff of Rizal, and DONATODEL ROSARIO, respondents.
Mariano M. Magsalin, for petitioners.
Amado B. Reyes, for respondent Del Rosario.
SYLLABUS
1.OBLIGATIONS AND CONTRACTS; PAYMENT MAY LEGALLY BE
This is a petition for a writ of prohibition to prevent execution of a judgment
rendered by the respondent Court of First Instance of Bulacan.
Respondent Donato Del Rosario filed an action against petitioners Rito V.
Cruz and Teodora Coronel Cruz, for recovery of the sum of P2,109. Parties enteredinto an amicable settlement by which the defendants paid P350 in cash and bound
themselves to pay the balance of P1,759 in the following manner:
On or before February 15, 1950P50.00
On February 28, 1950200.00
On March 30, 1950200.00
On April 30, 1950200.00
On May 30, 1950200.00
On June 30, 1950200.00
On July 30, 1950200.00
On August 30, 1950200.00
On September 30, 1950200.00
On October 30, 1950109.00
————
TotalP1759.00
Parties had agreed that "if the defendants fail for any reason whatsoever to pay any of
the monthly installments when it respectively falls due, the whole balance of theaccount or indebtedness that still remain unpaid shall become due and demandable;
and that execution will issue immediately against the defendants' motorboat
'DIONISIO' which stand as security of defendants' obligation in favor of the plaintiff
and/or other property or properties not otherwise exempt from execution. . . ."
A judgment was rendered by the court in accordance with the terms and
On April 30, 1950, the defendants defaulted in the payment of the installment
due on that date, whereupon on May 5, 1950, a motion for execution of the judgment
was filed by plaintiff, Donato del Rosario. The defendants were notified of the motion
on May 6, 1950, but on May 10, when the motion was called for hearing, said
defendants failed to appear either personally or by counsel. The respondent court
granted the writ of execution, hence this petition for prohibition to prevent thecarrying out of the writ.
Petitioners alleged that their failure to pay on September 30, was due to the
fact that such day was Sunday, and the next day was a holiday. But the respondent
court rightly refused to accept such explanation because payment may be made either
on Sundays or any holidays. Furthermore, if such explanation were true, when the
motion for execution was filed on May 5, of which petitioners were notified on May
6, petitioners would have offered payment immediately. But they did not do so and
when the motion for execution was called for hearing on May 10, petitioners failed to
appear. And it was only on May 11, that they made offer of payment consigning the
amount due in court. All this shows that if petitioners failed to make payment onSeptember 30, it was not because of any Sunday or holiday, but because of lack of
money, and this is corroborated by respondent Donato's statement in his answer to the
effect that on May 5, one of the petitioners came to him to ask for some more days of
grace to pay their debt, a request that was flatly denied by him.
We are of the opinion and so hold that the writ of execution was properly
issued by the respondent court.
Petition is denied with costs against petitioners.
Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyes, Jugo and Bautista
Angelo, JJ., concur.
Moran, C.J., Mr. Justice Paras and Mr. Justice Feria voted for denial.
RESPONDENT’S WINS
EN BANC
[G.R. No. L-2268. October 20, 1950.]
FEDERICO G. SANTIAGO, plaintiff-appellant , vs . BINALBAGANESTATE, INC., defendant-appellee.
Jose L. Blanco and Federico G. Santiago, for appellant.
Marcial P. Lichauco and Augusto Kalaw, for appellee.
1.OBLIGATIONS AND CONTRACTS; DEBT MORATORIUM; WAIVER
BY PARTIAL PAYMENT. — Where part of the obligation alleged to be covered by
the debt moratorium is paid, the benefit of this provision is waived.
2.ID.; ID.; GRATUITY, WHEN A MONETARY OBLIGATION. — A
gratuity becomes a monetary obligation on the date it is approved by the proper
authorities.
D E C I S I O N
PARAS, J p:
The plaintiff entered the service of the defendant on October 20, 1940, first as
stenographer and subsequently in various capacities until he resigned effective
February 16, 1947, due to ill health. The highest monthly salary received by the
plaintiff during the period of his employment was P250. Plaintiff's connection with
the defendant was continuous, except when it was interrupted by the outbreak of the
last war and the entry of the Japanese Army in Manila on January 2, 1942, when the
defendant's Manila office was closed until the early part of February, 1942, and by the
battle for the liberation of Manila when said office was closed from February 3, 1945,
up to the early part of August, 1945.
While the plaintiff was thus employed, Resolution No. 31 of the board ofdirectors of the defendant, approved on June 9, 1936, was in force. It provided that all
permanent employees of the defendant separated from the service on or after July 1,
1938, for any reason other than inefficiency or misconduct, were entitled to
retirement gratuity at the rate of one month's salary for each year of service, andthe proportionate amount of any fraction thereof, said gratuity to be based onthe highest basic rate of salary received.
The plaintiff duly applied for retirement under Resolution No. 31. In its
Resolution No. 8, approved on February 5, 1947, the board of directors of the
defendant approved the payment to the plaintiff of retirement gratuity from October
20, 1940, to December 31, 1941, based on the monthly salary of P150, the totalamount received by the plaintiff, under protest, being P179.20. The plaintiff, in his
communication of April 10, 1947, demanded from the defendant the payment of
P1,401.23, representing unpaid balance of this gratuity for service rendered from
October 20, 1940, to February 15, 1947, based on the highest basic rate of salary of
P250 per month. On April 16, 1947, the board of directors of the defendant adopted
Resolution No. 21, approving plaintiff's claim for retirement gratuity for his service
from August 22, 1945, to February 15, 1947, and, in accordance with said resolution,
the plaintiff received, under protest, the sum of P356.36, based on P200 per month as
the highest basic rate of salary. This second payment included a difference due under
the first payment which was computed only on P150 per month. On June 17, 1947,
the plaintiff addressed a letter to the defendant, reiterating his right to retirement
gratuity for the entire period of his service, including the period covered by the
Japanese occupation. This demand was rejected by the defendant in its letter of June21, 1947, on the ground that the defendant lost heavily during the war and had
resolved to pay retirement gratuity to its employees only up to December 31, 1941.
The present action was instituted by the plaintiff in the Court of First Instance
of Manila to recover from the defendant the sum of P1,044.18, representing unpaid
retirement gratuity due and owing by the defendant to the plaintiff for services
rendered from October 20, 1940, to February 15, 1947. The parties entered into a
partial stipulation reciting substantially the facts above related. After they had waived
their right to present additional evidence and submitted the case for decision on the
pleadings, the trial court absolved the defendant from the complaint with respect to
the gratuities already paid, and dismissed the case, without prejudice, with respect togratuities corresponding to the period covered by the Japanese occupation, from
which judgment the plaintiff interposed the instant appeal.
The defendant-appellee invokes the debt moratorium as regards the gratuity, if
any, due for services rendered during the Japanese occupation, and the trial court
appears to have sustained the defendant's position. This is error, because the defendant
had already chosen to pay the gratuity due from October 20, 1940, to December 31,
1941, which is also covered by the debt moratorium. Moreover, plaintiff's gratuity
became a monetary obligation of the defendant only when its board of directors
approved the retirement on February 5, 1947, or after Manila had been freed from
enemy occupation and control, and is therefore not covered by the debt moratorium.
It is contended that the plaintiff cannot assail the finding of fact of the trial
court that the plaintiff received gratuities corresponding to 1940 and 1941 and to the
period from August 22, 1945, to February 15, 1947, because he has appealed to the
Supreme Court purely on questions of law. This is erroneous. The payments already
made to the plaintiff and the periods intended to be covered by said payments, are
admitted by the plaintiff. He, however, has the right to contend, as a question of law,
that the trial court erred in basing the computation of said payments on P200 per
month, and not on P250 per month.
It is immaterial, contrary to intimations of the defendant, whether plaintiff'semployment was continuous, because Resolution No. 31, upon which defendant's
claim is founded, does not require continuous service in order that an employee may
be entitled to retirement gratuity.
Defendant also argues that gratuity is not a right and may be withdrawn at any
time by the defendant. Assuming that the defendant may at pleasure abolish its
retirement system, the facts in this case do not reveal that the defendant has ever
"1.Party of the First Part is the sole proprietor of the Port Santa Maria
Lumber located at Siocon, Zamboanga, holding Forest License No. Twenty-
four -F (24-F) from the Bureau of Forestry Manila, Philippines;
"2.Party of the First Part does hereby agree and bind himself, his heirsand administrators to sell, within the terms of this agreement, all the logs which
are, or may be, produced from the forestry area described under the abovementioned license at the following prices based upon the Bureau of Forestrymonthly scale report:
(a) Eight (P8.00) pesos, Philippine Currency, per Cubic-Meter of export
logs;
(b) Four (P4.00) pesos, Philippine Currency, per Cubic Meter of mill
logs;
(c) Fifteen (15.00) pesos, Philippine Currency, per Cubic-Meter of groupone spicies. . . .
xxx xxx xxx
"3.Party of the Second Part does hereby agree and bind itself to buy and
purchase from Party of the First Part all the logs which may be produced at the
Port Santa Maria Lumber within the term of this agreement at the prices andunder the conditions mentioned in Paragraph 2 hereof;
"4.The term of this agreement shall be for a period of TEN (10) YEARS
counted from the date of approval hereof by the Bureau of Forestry. Thereafter,
it shall be renewed yearly. Provided, however, that this term shall besubordinated and subject to the period during which the Party of the First Part
shall continue to hold a license from the Bureau of Forestry regarding the forest
area, under which license Party of the First Part presently operates;
"5.In order to speed up and facilitate logging operations at the Port SantaMaria Lumber by Party of the First Part, Party of the Second Part does hereby
agree and bind itself to transport all necessary units belonging to Party of the
First Part to the Basilan Lumber Company, Isabela, Basilan City, for overhauland repair without costs to Party of the First Part. Any addition and
improvement which party of the Second Part may place on said units shall
become the property of the Party of the First Part;
"6.In order to further facilitate log production, Party of the Second Partdoes agree and bind itself to send technical men within a reasonable time and as
necessary, and to move equipments belonging to the Basilan Lumber Company
to the Abelardo Pages License forest area. These equipments shall remain the property of the Party of the Second Part. This shall be in consideration of allsaw-mill facilities, equipments, shop tools and machineries which Party of the
First Part shall turn over to Party of the Second Part as loan during all the time
this contract is in effect;
"7.Party of the Second Part will advance and deliver to Party of the FirstPart the sum of ten thousand (P10,000.00) pesos Philippine Currency, upon
approval hereof by the Director of the Bureau of Forestry, Manila, as advance
payment against log deliveries from the Abelardo Pages forest area.
xxx xxx xxx
"9.The logging operational expenses shall be for the account of the Party
of the First Part. The Party of the Second Part shall, however, reimburse and payto Party of the First Part whatever sums of money he may have spent on account
thereof during a monthly accounting period:
"10.It shall be understood that the reimbursements contemplated andreferred to in paragraph nine (9) hereof, shall be in addition to the purchase
price mentioned and referred to in paragraph two (2) and three (3) hereof. In
other words, the total consideration which will be paid for the logs shall be the
operational costs plus the amount which may be paid for the logs ascontemplated in paragraph two (2) hereof."
The plaintiff is the grantee or owner of a lumber concession, given by the
Bureau of Forestry, of a forest area in Siocon, Zamboanga, and was licensed to
operate it under the name of Port Santa Maria Lumber. The defendant is a corporationwith its principal office at Basilan City, and is presumably engaged in the lumber
business and possesses machinery and equipment used in said business. It would
appear that there was a preliminary agreement, Exhibit A, between the parties before
the execution of the contract, Exhibit B. Under this preliminary agreement, the
Basilan Lumber Company was to operate the lumber concession of the plaintiff and
actually conduct logging operations with its own equipment, all at its own expense.
When this agreement was submitted to the Bureau of Forestry, the latter objected to it,
saying that according to its rules and regulations, only the licensee or concessionaire
is allowed to conduct logging operations within the concession; that if the plaintiff
wanted to retain the license in his name, and he needs machinery or equipment andtechnical men belonging to another party, he should lease said machinery and
equipment and hire the technical men to operate the concession, but that said technical
men must be employed by the concessionaire himself. This evidently was the reason
why the contract, Exhibit B, in order to be approved by the Director of Forestry,
which in fact was approved, made it appear that the plaintiff himself was going to
operate the concession and conduct logging operations and was to finance the same,
although eventually, it would be reimbursed by the defendant for its operational
expenses, the same to be in addition to the cost of the logs to be bought by the
defendant; that the defendant was not only to lend its equipment for the use in the
logging operations, but it would even overhaul and repair the equipment of the plaintiff by transporting the same to its compound and shops in Basilan. From this, the
trial court correctly found that Exhibit B did not express the true intent of the parties;
that it was simulated, and that as a matter of fact, from the time of the execution of the
contract, Exhibit B, or shortly thereafter, about December, 1950, up to June, 1952,
when logging operations were suspended, it was the Basilan Lumber Company that
actually conducted logging operations and financed said operations, this being the real
intention and agreement of the parties, the plaintiff never advancing or paying any of
the said operational expenses; all contrary to the rules and regulations of the Bureau
of Forestry and the policy of the Government, and contrary to what the Director of
Forestry was given to understand by the parties.
In suing on the contract, Exhibit B, and in his effort to prove breach thereof,
the plaintiff introduced evidence to the effect that about the month of June, 1952, the
defendant removed from the logging area logging and hauling equipment, which it
never returned to the same, and withdrew its technical men, thereby stopping
operations. As to the technical men, it will be remembered that one of the conditions
imposed by the Director of Forestry in the approval of the contract, Exhibit B, was
that technical men needed by the plaintiff should be hired by him so that they would
be under his employment and control. The plaintiff, however, never hired said
technical men, but were merely supplied, presumably, free, to him, contrary to the
understanding between the Bureau of Forestry and the plaintiff. Again, according to
the communications exchanged between plaintiff and the defendant after June, 1952,
it would appear that said logging and hauling equipment were removed from the
logging area with the knowledge and consent of the plaintiff and taken to Basilan for purposes of repair and overhauling, in accordance with the contract, Exhibit B.
The communication of the defendant to the plaintiff marked as Exhibit D,
showed that the defendant never intended to abandon the logging operations, because
it had invested considerable amount of money in the same, only that because future
logging operations would cover the hilly portions of the area, a resurvey had to be
made, besides the fact that during the rainy season from July to about December, the
weather and the conditions of the ground were not favorable for logging operations.
This, in addition to the fact that the typhoon that passed over the area had
considerably damaged some of the equipment.
Another point raised by the defendant and favorably discussed by the trial
court in its order of dismissal, is that although according to the contract, the defendant
promised to buy all the logs produced and made ready for sale by the plaintiff, there
was no period of time or limit fixed for said purchase, neither was there a time limit or
period which was agreed upon by the parties as regards the logging operations
actually to be conducted by the defendant, naturally, not under the contract, Exhibit B,
which did not provide for such logging operations by the defendant, but even
according to their own private understanding. Naturally, when there is no time limit
fixed, plaintiff cannot well demand performance of the obligation. But the plaintiff in his brief claims that the trial court should have fixed the
period, if no period was fixed in the agreement. It seems that this point was never
raised before the trial court, and he is not allowed now to raised this point before us.
Furthermore, plaintiff may not ask for the performance of the obligation without first
asking for the fixing by the court of the period or term. The period should first be
determined, because in the absence of such term or period, there can be no breach of
contract or failure to perform the obligation. In the case of Ungson vs. Lopez, 50 Off.
Gaz. 4297, 4299-4300, citing the case of Concepcion vs. People of the Philippines, 74
Phil. 63, and Gonzales vs. De Jose, 66 Phil. 369, citing Article 1128 of the Old Civil
Code (now Article 1197 of the New Civil Code), this Court said:
"On obligations coming within the purview of the above cited provision
the only action that can be maintained is that to ask the court to determine theterm within which the obligor must comply with his obligation for the reason
that the fulfillment of the obligation itself cannot be demanded until after the
court has fixed the period for its compliance and such period has arrived."
With respect to the logs amounting to 2,000 cubic feet, which defendant
supposedly failed or refused to purchase, although ready for sale, plaintiff himself
admitted that logs to be bought by the defendant must be placed at the seashore, and
after the necessary scaling thereof by the forest officer; however, the logs in question
were still up in the mountains or the forest where they had been cut and had not yet
been scaled. Consequently, defendant was not yet called upon to make the purchase.
Considering the facts and circumstances in the case, we agree with the trial
court. The appealed order dismissing the complaint is hereby affirmed, with costs.
in accordance with Ballantyne schedule, because the debtor could have paid said
obligation in Japanese war notes during the occupation.
D E C I S I O N
PARAS, J p:
On March 4, 1947, Alejandro Samson filed against Agapito B. Andal and
Valentina Berana de Andal in the Court of First Instance of Manila a complaint for
declaratory relief, praying that judgment be rendered fixing the amount which
Alejandro Samson should pay to Agapito B. Andal and Valentina Berana de Andal
under a deed of mortgage executed by the former in favor of the latter, and that the
defendants be ordered to cancel the mortgage upon payment of said amount. On
August 26, 1949, the court rendered a decision, declaring that the amount due fromthe plaintiff to the defendants is P150, Philippine currency, plus annual interest at the
rate of 7 per cent from October 25, 1944, and ordering the defendants to execute the
proper deed of cancellation upon payment by the plaintiff of said amount. The court
applied the Ballantyne scale of values. Agapito B. Andal and Valentina Berana de
Andal appealed to the Court of Appeals which, on June 9, 1952, rendered a decision
holding that the plaintiff should pay to the defendants P6,000 (the full amount of the
loan obtained by the plaintiff on the defendants on October 25, 1944), in actual
Philippine currency, plus the stipulated interest, but subject to the moratorium law.
From this decision Alejandro Samson has appealed to this Court by way of certiorari.
By resolution of October 17, 1952, Agapito B. Andal and Valentina Berana de Andal(who had died) were ordered substituted as parties respondents by their heirs, Andrea
B. Andal de Aguila and others.
The Court of Appeals found that Alejandro Samson, herein petitioner, obtained
from Agapito B. Andal and Valentina B. de Andal on October 25, 1944, a loan of
P6,000, with interest at 7 per cent per annum and, to secure its payment, the former
executed in favor of the latter a real estate mortgage. That court, in holding that the
petitioner should pay P6,000 in present Philippine currency, argued that while the
loan was made during the Japanese occupation, it became due and payable only after
said period. We have heretofore sustained the proposition that, when an obligation is
payable within a certain period of time, and the whole or part thereof coincides withthe Japanese occupation, payment after the liberation must be adjusted in accordance
with the Ballantyne schedule, because the debtor could have paid said obligation in
Japanese war notes during the occupation. (Asis vs. Agdamag, 1 G. R. No. L-3709,
October 25, 1951; Ang Lam vs. Peregrina, 2 G. R. No. L-4871, January 26, 1953.) As
Mr. Justice Feria indicated in his concurring opinion in the case of Gomez vs. Tabia, 3
47 Off. Gaz. 641, the debtor's mere failure to accomplish payment during the Japanese
lawful interest thereon from 24 March 1954 when the original complaint was filed
until fully paid (civil case No. 12902), was certified by the Court of Appeals to this
Court for it involves only a question of law.
As agreed upon by the parties, the facts are: On different dates from 10
November 1952 to 30 June 1953 the appellant bought, took delivery and received
from the appellee hardware goods, lumber and construction materials valued at the
total sum of P12,127.57 (par. 1, stipulation of facts; Exhibits A to Z; AA to OO), and
from 4 November 1952 to 10 March 1954 the appellant paid the appellee the total
sum of P6,979.83 which the latter credited to the former's account (par. 3, stipulation
of facts; Exhibits PP, PP-1, QQ, QQ-1 to QQ-2). On 23 December 1954, after the
original complaint had been filed by the appellee (24 March 1954), the appellant paid
the appellee the sum of P1,000 which the latter also credited to the former's account
(par. 6, stipulation of facts), thereby reducing her total indebtedness to P4,147.74.
The appellant does not deny that she received the wares and materials listed in
the invoices (Exhibits A to Z and AA to OO), and that she is still indebted to theappellee in the sum of P4,147.74. At the hearing of the case on 4 June 1956, her
counsel withdrew the objection (filed earlier during the day) to the items listed in
some of the invoices (Minutes of the session of 4 June 1956). However, she argues
that as no time for payment was stipulated or fixed and from the nature and the
circumstances of the obligation it could be inferred that a period was intended, the
Court should fix the period for payment pursuant to article 1197 of the new Civil
Code.
The parties entered into a contract of sale on credit. In the invoices (Exhibits A
to Z and AA to OO) of the wares and materials sold and delivered to the appellant, the
words "credit sales" appear and it is stated that —
All civil actions on this contract shall be instituted in the courts of the City of
Dagupan and it is hereby agreed that all my/our purchases from this Company
are payable in the said City of Dagupan. It is agreed that if this bill is not paidwithin ....... days from date hereof I/we will pay interest at the rate of 10 per
centum per annum on all overdue accounts. The buyer hereby agrees to pay any
and all attorney's fees and court costs should the seller institute legal action.Goods travel at buyer's risk. No claim of whatsoever nature will be considered
after 24 hours from date of delivery.
The parties intended to fix a period for payment of the appellant's obligation
but failed to do so. Under article 1197 of the new Civil Code, the Court may fix it.
Taking into consideration that from 10 November 1952, the first sale, and 30 June
1953, the last sale, to the present, more than six and nearly seven years already have
elapsed, the appellant who does not deny her obligation must be ordered to pay the
appellee the amount she still owes it within fifteen (15) days from the date the