Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-23700 March 18, 1925
BLOSSOM and CO., petitioner,
vs.
MANILA GAS CORPORATION, RICARDO SUMMERS, sheriff of the City of Manila, and GEORGE R.
HARVEY, Judge of First Instance of Manila, respondents.
J. Courtney Hixson for petitioner.
Thomas Cary Welch for respondents.
OSTRAND, J .:
Though the petition in this case is styled a "Petition for preliminary injunction," it is in reality a petition for a
writ of prohibition. The petitioner alleges, among many other things, more or less immaterial, that on or
about October 16, 1923, in the City of Manila, in civil case No. 24267, wherein one of the herein
respondents, the Manila Gas Corporation was plaintiff and the herein petitioner Blossom and Co. was the
defendant, a judgment in mortgage foreclosure proceedings was rendered against the said Blossom and
Co. ordering the payment of P7,794.65 to the said Manila Gas Corporation, with interest thereon at the rate
of 8 per cent per annum, the judgment also providing that if the defendant Blossom and Co. failed to satisfy
the judgment within ninety days from the time of the notification of said judgment, the mortgaged land
should be sold by the sheriff at public auction and the proceeds of the sale applied towards the satisfaction
of said judgment; that from said judgment Blossom and Co. appealed to this court and on October 18,
1924, the judgment of the Court of First Instance was affirmed;
1
that the decision of this court became final
on the 28th of the same month and the record was returned to the court below.
It is further alleged that on December 31, 1924, the respondent, the Honorable George R. Harvey, Judge of
the Court of First Instance of the City of Manila, ordered that a writ of execution be issued against the
defendant in said case No. 24267; that on January 6, 1925, the same respondent modified his order of
December 31, 1924, by ordering "that the judgment be executed;" that on or about January 9, 1925, the
respondent Ricardo Summers, in his capacity as sheriff of the City of Manila and in compliance with the
aforesaid orders, advertised in the newspapers of the City of Manila that the mortgaged property would be
sold at public auction to the highest bidder in front of the court house in Manila, at 9 o'clock a.m. on
February 6, 1925.
The petitioner further alleges that the execution of the judgment is premature inasmuch as the period of
three months from the date of the judgment provided for in section 256 of the Code of Civil Procedure for
the execution of a judgment in foreclosure proceedings had not then expired; that the interests of the
petitioner will suffer grave injury from the premature execution of the judgment; and that the petitioner has
no other plain, speedy, and adequate remedy in the ordinary course of law than to apply to this court for an
order enjoining the respondents from proceeding with the aforesaid sale.
Upon being required to answer the petition within five days, the respondents in lieu of an answer filed a
demurrer which will be considered as an answer admitting the material allegations of the petition. The case
was thereupon set down for hearing on February 17, 1925, at which hearing the parties were represented
by counsel and arguments submitted.
The only question presented for our consideration is whether, in the event a judgment for the plaintiff in a
foreclosure proceeding is affirmed on appeal, the three months stay of execution allowed the defendant by
section 256 of the Code of Civil Procedure is to be counted from the date of the judgment of the lower court
or whether it should be counted from the date of the final determination of the case by the appellate court.
The respondents maintain that under the second paragraph of section 506 of the Code of Civil Procedure
the judgment must, in regard to its execution, be treated as if no appeal had been taken and that three
months from the date of the original judgment having expired it might be executed immediately upon the
remittitur. We cannot accept this view and do not think that the paragraph of the Code upon which the
respondents rely supports their contention. The section in which it is found reads as follows:
Certificate of judgment to be remitted the Court of First Instance. In all cases heard by the
Supreme Court on bills of exception, its judgment shall be remitted to the Courts of First Instance
from which the actions respectively came into the Supreme Court; and for this purpose it shall be
the duty of the clerk of the Supreme Court, within ten days after the close of any term, to remit to
the clerks of Courts of First Instance, notices of all judgments of the Supreme Court in actions
brought from the Courts of First Instance respectively. Upon receiving the notice so remitted, the
clerk of the Court of First Instance shall enter the same upon his docket and file the notice with the
other papers in the action.
The judgment so remitted shall be executed by the Court of First Instance, in the same manner as
though the action had not been carried to the Supreme Court. But the Supreme Court may, by
special order, direct any particular judgment to be remitted to the proper Court of First Instance at
any time, without awaiting the end of the term.
It shall likewise be the duty of the clerk of the Supreme Court, within ten days after the close of any
term, to remit to the clerks of the Courts of First Instance, with the notices of all judgments of the
Supreme Court in this section referred to, likewise all the original documents and the record of the
actions transmitted by the Court of First Instance, in order that the files of the action may remain
together in that court.
As will be seen, the paragraph in question relates to the manner of executing the judgment and says
nothing about the time. As to the time for the execution, section 144 of the Code of Civil Procedure
provides that, except by special order of the court, no execution shall issue upon a final judgment until after
the period for perfecting a bill of exceptions has expired and that the filing of a bill of exceptions shall of
itself stay execution until the final determination of the action, unless for special reasons stated in the bill of
exceptions the court shall order that execution be not stayed. In other words, the filing of the bill tolls the
running of time pending the final disposition on appeal and we can see no valid reason why this should not
apply to the three months period allowed the judgment debtor by section 256 to satisfy the judgment before
execution issues.
That such is the intent of the statute seems fairly clear. The defendant in a foreclosure proceeding has no
right of redemption from the judicial sale of the mortgaged property and the purpose of the three months
stay of execution is very evidently to give the judgment debtor time and opportunity to make the necessary
arrangements for the payment of the debt after it has been definitely determined that the debt is due and
must be paid by him. In the event of an appeal there is no definite determination of the case until it is finally
disposed of by the appellate court and if we were to hold that the appeal did not suspend the running of the
period mentioned, the result would necessarily be that the defendant would be deprived of the time granted
him by the statute to provide funds for the satisfaction of the judgment before its execution. We therefore
hold that the running of said period is suspended during the appeal and as the case cannot be said to be
finally determined on appeal while the record remains with the appellate court, it logically follows that the
period does not begin to run until the remittitur of the record to the court below. In the present case, it is
alleged in the petition and admitted by the respondents that the decision of this court in the foreclosure
proceedings became final on October 28, 1924, and that on January 9, 1925, only seventy-three days after
it became final.
It appearing that the execution here in question was begun before the expiration of three months from the
final determination of the case, the petition is granted and the respondents are prohibited from proceeding
with the execution until after the expiration of the period of three months from October 28, 1924. The
respondent, the Manila Gas Corporation, shall pay the costs. So ordered.
Johnson, Malcolm, Villamor, and Romualdez, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-32958 November 8, 1930
BLOSSOM AND COMPANY, INC., plaintiff-appellant,
vs.
MANILA GAS CORPORATION, defendant-appellee.
Harvey and O'Brien for appellant.
Ross, Lawrence and Selph and John B. Miller for appellee.
STATEMENT
In its complaint filed March 3, 1927, the plaintiff alleges that on September 10, 1918, it entered into a
contract with the defendant in which the plaintiff promised and undertook to purchase and receive from the
defendant and the defendant agreed to sell and deliver to the plaintiff, for a period of four years, three tons
of water gas tar per month from September to January 1, 1919 and twenty tons per month after January 1,
1919, for the remaining period of the contract; one-half ton of coal gas tar a month from September to
January 1, 1919, and six tons per month after January 1, 1919, for the remainder of the contract, delivery to
be made at the plant of the defendant in the City of Manila, without containers and at the price of P65 per
ton for each kind of gas tar, it being agreed that this price should prevail only so long as the raw materials
coal and crude oil used by the defendant in the manufacture of gas should cost the defendant the
same price as that prevailing at the time of the contract, and that in the event of an increase or decrease in
the cost of raw material there would be a corresponding increase or decrease in the price of the tar. That
on January 31, 1919, this contract was amended so that it should continue to remain in force for a period of
ten years from January 1, 1919, and it was agreed that the plaintiff should not be obliged to take the
qualities of the tars required during the year 1919, but that it might purchase tars in such quantities as it
could use to advantage at the stipulated price. That after the year 1919 the plaintiff would take at least the
quantities specified in the contract of September 10, 1918, to be taken from and after January 1, 1919, and
that at its option it would have the right to take any quantity of water gas tar in excess of the minimum
quantity specified in that contract and up to the total amount of output of that tar of defendant's plant and
also to take any quantity of coal gas tar in excess of the minimum quantity specified in that contract and up
to 50 per cent of defendant's entire output of coal gas tar, and that by giving the defendant ninety days'
notice, it would have the right at its option to take the entire output of defendant's coal gas tar, except such
as it might need for its own use in and about its plant. That in consideration of this modification of the
contract of September 10, 1918, plaintiff agreed to purchase from the defendant of certain piece of land
lying adjacent to its plant at the price of P5 per square meter, the proof of which is evidenced by Exhibit C.
That pursuant to Exhibit C, defendant sold and conveyed the land to the plaintiff which in turn executed a
mortgage thereon to the defendant for P17,140.20, to secure the payment of the balance of the purchase
price.
It is then alleged:
VIII. That about the last part of July, 1920 the defendant herein, the Manila Gas Corporation
willfully, and deliberately breached its said contract, Exhibit C, with the plaintiff by ceasing to
deliver any coal and water gas tar to it thereunder solely because of the increased price of its tar
products and its desire to secure better prices therefor than plaintiff was obliged to pay to it,
notwithstanding the frequent and urgent demands made by the plaintiff upon it to comply with its
aforesaid contract by continuing to deliver the coal and water gas tar to the plaintiff thereunder, but
the said defendant flatly refused to make any deliveries under said contract, and finally on
November 23, 1923, the plaintiff was forced to commence action against the defendant herein in
the Court of First Instance of Manila, being case No. 25352, of that court entitled 'Blossom & Co.,
plaintiff, vs. Manila Gas Corporation, defendant,' to recover the damages which it had up to that
time suffered by reason of such flagrant violation of said contract on the part of the defendant
herein, and to obtain the specific performance of the said contract and after due trial of that action,
judgment was entered therein in favor of the plaintiff herein and against the said defendant, the
Manila Gas Corporation, for the sum of P26,119.08, as the damages suffered by this plaintiff by
the defendant's breach of said contract from July, 1920, up to and including September, 1923, with
legal interest thereon from November 23, 1923, and for the costs but the court refused to order the
said defendant to resume the delivery of the coal and water gas tar to the plaintiff under said
contract, but left the plaintiff with its remedy for damages against said defendant for the
subsequent breaches of said contract, which said decision, as shown by the copy attached hereto
as Exhibit G, and made a part hereof, was affirmed by our Supreme Court on March 3, 1926;
IX. That after the defendant had willfully and deliberately violated its said contract as herein-before
alleged, and the plaintiff suffered great damage by reason thereof, the plaintiff claimed the right to
off- set its damages against the balance due from it to said defendant on account of the purchase
of said land from the defendant, and immediately thereupon and notwithstanding said defendant
was justly indebted to the plaintiff at that time as shown by the judgment of the Court Exhibit G, in
more that four times the amount due to it from the plaintiff, the said defendant caused to be
presented against the plaintiff a foreclosure action, known as the Manila Gas
Corporation versus Blossom & Company, No. 24267, of the Court of First Instance of Manila, and
obtained judgment therein ordering that Blossom & Company pay the last installment and interest
due on said land or else the land and improvements placed thereon by the plaintiff would be sold
as provided by law in such cases to satisfy the same, and the said defendant proceeded with the
sale of said property under said judgment and did everything in its power to sell the same for the
sole purpose of crushing and destroying the plaintiff's business and thus rendering it impossible for
the plaintiff herein to continue with its said contract in the event that said defendant might in the
future consider it more profitable to resume performance of the same, but fortunately the plaintiff
was able to redeem its property as well as to comply with its contract and continued demanding
that the defendant performed its said contract and deliver to it the coal and water gas tar required
thereby.
That the defendant made no deliveries under its contract, Exhibit C, from July, 1920 to March 26, 1926, or
until after the Supreme Court affirmed the judgment of the lower court for damages in the sum of P26,
119.08.
1

It is then alleged that:
. . . On March 26, 1926 the said defendant offered to resume delivery to the plaintiff from that date
of the minimum monthly quantities of tars stated in its contract ,and the plaintiff believing that the
said defendant was at least going to try to act in good faith in the further performance of its said
contract, commenced to accept deliveries of said tars from it, and at once ascertained that the said
defendant was deliberately charging it prices much higher than the contract price, and while the
plaintiff accepted deliveries of the minimum quantities of tars stated in said contract up to and
including January, 1927, (although it had demanded deliveries of larger quantities thereunder, as
hereinafter alleged) and paid the increased prices demanded by the defendant, in the belief that it
was its duty to minimize the damages as much as possible which the defendant would be required
to pay to it by reason of its violation of said contract, it has in all cases done so under protest and
with the express reservation of the right to demand from the said defendant an adjustment of the
prices charged in violation of its contract, and the right to the payment of the losses which it had
and would suffer by reason of its refusal to make additional deliveries under said contract, and it
also has continuously demanded that the said defendant furnish to it statements supported by its
invoices showing the cost prices if its raw materials coal and crude oil upon which the
contract price of the tars in question is fixed, which is the only way the plaintiff has to calculate the
true price of said tars, but said defendant has and still refuses to furnish such information, and will
continue to refuse to do so, unless ordered to furnish such information to the plaintiff by the court,
and the plaintiff believes from the information which it now has and so alleges that the said
defendant has overcharged it on the deliveries of said tars mentioned in the sum of at least
P10,000, all in violation of the rights of the plaintiff under its said contract with the defendant.
That on January 31, 1926 and pursuant to Exhibit C. plaintiff notified the defendant in writing that
commencing with the month of August, 1926 it desired to take delivery of 50 per cent of defendant's coal
tar production for that month and that on November 1, 1926, it desired to take the entire output of
defendant's coal gas tar, but that the defendant refused and still refuses to make such deliveries unless
plaintiff would take all of its water gas tar production with the desired quantity of coal gas tar which refusal
was a plain violation of the contract. That on January 29, 1927, and in accord with Exhibit C, plaintiff
notified the defendant in writing that within ninety days after the initial delivery to it of its total coal gas tar
production or in February, 1927, it would require 50 per cent of its total water gas tar production and that in
April 1927, it would require the total output of the defendant of both coal and water gas tars, and that it
refused to make either of such deliveries.
It is then alleged:
XIV. That as shown by the foregoing allegations of this complaint, it is apparent that
notwithstanding the plaintiff in this case has at all times faithfully performed all the terms and
conditions of said contract, Exhibit C, on its part of be performed, and has at all times and is now
ready, able and willing to accept and pay for the deliveries of said coal and water gas tars required
by said contract and the notices given pursuant thereto, the said defendant, the Manila Gas
Corporation, does not intend to comply with its said contract, Exhibit C, and deliver to the plaintiff
at the times and under the terms and conditions stated therein the quantities of coal and water gas
tars required by said contract, and the several notices given pursuant thereto, and that it is useless
for the plaintiff to insist further upon its performance of the said contract, and for that reason he
only feasible course for the plaintiff to pursue is to ask the court for the rescission of said contract
and for the full damages which the plaintiff has suffered from September, 1923, and will suffer for
the remainder of said contract by reason of the defendant's failure and refusal to perform the
same, and the plaintiff has so notified the said defendant.
That since September, 1923, by reason of the bad faith of the defendant, the plaintiff has been damaged in
the sum of P300,000, for which it prays a corresponding judgment, and that the contract, Exhibit C, be
rescinded and declared void and without force and effect.
After the filing and overruling of its demurrer, the defendant filed an answer in the nature of a general and
specific denial and on April 10, 1928, and upon stipulation of the parties, the court appointed W. W. Larkin
referee, "to take the evidence and, upon completion of the trial, to report his findings of law and fact to the
court."
July 18, 1928, the defendant filed an amended answer in which it alleged as an affirmative defense, first,
that the complaint does not state facts sufficient to constitute cause of action the reason that a prior
adjudication has been had of all the issues involved in this action, and, second, "that on or about the 16th
day of June, 1925, in an action brought in the Court of First Instance of the City on Manila, Philippine
Islands, before the Honorable Geo. R. Harvey, Judge, by Blossom & Company, plaintiff, vs. Manila Gas
Corporation, defendant, being civil case No. 25353, of said court, for the same cause of action as that set
fourth in the complaint herein, said plaintiff recovered judgment upon the merits thereof, against said
defendant decreeing a breach of the contract sued upon herein, and awarding damages therefor in the sum
of P26,119.08 with legal interest from November 23, 1923, and costs of suit, which judgment was upon
appeal affirmed by the Supreme Court of the Philippine Islands, in case G. R. No. 24777 of said court, on
the 3d day of March, 1926 and reported in volume 48 Philippines Reports at page 848," and it prays that
plaintiff's complaint be dismissed with costs.
After the evidence was taken the referee made an exhaustive report of sixty-pages in which he found that
the plaintiff was entitled to P56,901.53 damages, with legal interest from the date of the filing on the
complaint, to which both parties filed numerous exceptions
In its decision the court says:
Incidental references have been made to the referee's report. It was admirably prepared. Leaving
aside the question of damages and the facts upon which the referee assessed them, the facts are
not in dispute at least not in serious dispute. They appear in the documentary evidence and this
decision is based upon documents introduced into evidence by plaintiff. If I could have agreed with
the referee in respect to the question of law, I should have approved his report in toto. If defendant
is liable for the damages accruing from November 23, 1923, the date the first complaint was filed,
to April 1st, 1926, the date of resumption of relations; and if defendant, after such resumption of
relations, again violated the contract, the damages assessed by the referee, are, to my way of
thinking, as fair as could be estimated. He went to tremendous pains in figuring out the details
upon which he based his decision. Unfortunately, I cannot agree with his legal conclusions and the
report is set aside except wherein specifically approved.
It is unnecessary to resolve specifically the many exceptions made by both partied to the referee's
report. It would take much time to do so. Much time has already been spent in preparing this
decision. Since both parties have informed me that in case of adverse judgment ,and appeal would
be taken, I desire to conclude the case so that delay will be avoided.
Let judgment be entered awarding damages to plaintiff in the sum of P2,219.60, with costs.
From which plaintiff only appealed and assigns twenty-four different errors, of which the following are
material to this opinion:
I. The trial court erred in holding that this suit in so far as the damages from November, 1923, to
March 31, 1926, are concerned , is res adjudicata.
II. The trial court erred in holding that the defendant repudiated the contract in question as a whole,
and that the plaintiff when it brought its first suit to collect damages had already elected and
consented to the dissolution of the contract, and its choice once made, being final, it was estopped
to claim that the contract was alive when that suit was brought.
x x x x x x x x x
VII. The trial court erred in refusing to sustain plaintiff's third exception to the legal interpretation
placed on the contract in this case by the referee with reference to quantity of tars and his
conclusion with respect to the terms thereof that:
"1. Plaintiff must take and defendant must deliver either the minimum or maximum quantity of
water gas tar and not any quantity from the minimum to the maximum and/or
"2. Plaintiff must take either the minimum and any quantity up to fifty per cent of entire output of
coal gas tar.
"3. With ninety days' notice by plaintiff to defendant the former must take and the latter must
deliver total output of both tars, except such as might be needed by defendant for use in and about
its plants and not any quantity from the minimum up to total output of both tars." (See page 47,
Referee's report.)
And in holding that the option contained in said contract, taking into consideration the purposes of
both parties in entering into the contract, was a claimed by defendant: all the water gas tar and 50
per cent of the coal gas tar upon immediate notice and all tars upon ninety day's notice.
VIII. The trial court erred in refusing to sustain plaintiff's fourth exception to the finding and
conclusion of the referee that from the correspondence between the parties it was apparent that
plaintiff did not make a right use of its option, and that the letter of June 25, 1926, and the
subsequent demands, with exception of the letter of July 31, 1926, were not made in pursuance to
the terms of the contract, and that defendant had no liability in refusing to comply therewith, and in
allowing plaintiff damages only for the failure of the defendant to deliver quantities shown in
Exhibits Ref. 21 and 22. (See pages 51, 52, Referee's report.)
IX. The trial court erred in finding and holding that the demands of plaintiff for additional tars under
its contract with the defendant were extravagant and not made in good faith, and that when it wrote
to defendant that it desired maximum quantities of coal gas tars and only minimum of water gas
tars, but with the reservation of going back to minimum quantities of both at any time it chose, it
announced its intention f breaching the contract, and defendant was under no obligation to deliver
maximum quantities of either tars, and since this was the efficient cause of the failure of defendant
to deliver or plaintiff to accept tars, the blame is attribute to plaintiff, and it cannot recover for a
rescission.
x x x x x x x x x
XXIII. The trial court erred in refusing to sustain plaintiff's seventeenth exception to the finding and
conclusion of the referee that the plaintiff is entitled to recover from the defendant only the
following sums:
Water gas tar (Exhibit Ref. 21) P38,134.60
Coal gas tar (Exhibit Ref. 22) 16,547.33
Overcharges on deliveries (Exhibit Ref. 23) 2,219.60
or a total of

56,901.53
with interest, and in not awarding to the plaintiff as damages in this case the sum of P319,253.40,
with legal interest thereon from the date of filing the complaint in this case, in the manner and form
computed but it, and in awarding damages to the plaintiff for the sum of only P2,219.60. with costs.
x x x x x x x x x

JOHNS, J .:
In this action plaintiff seeks to recover damages from the defendant which it claims to have sustained after
September, 1923, arising from, and growing out of, its original contract of September 10, 1918, as modified
on January 1, 1919, to continue for a period of ten years from that date.
In paragraph VIII of its complaint, plaintiff alleges that about the last part of July, 1920, the defendant
"willfully and deliberately breached its said contract," and that it "flatly refused to make any deliveries under
said contract, and finally on November 23, 1923," it was forced to commence action in the Court of First
Instance against the defendant known as case No. 25352, to recover the damages which it had then
sustained by reason of such flagrant violation of said contract on the part of the defendant, in which
judgment was rendered in favor of the plaintiff and against the defendant for P26,1119.08, as damages
suffered by this plaintiff by the defendant's breach of said contract from July 1920, up to and including
September, 1923, with legal interest thereon from November 23, 1923, and for the costs," in which the
court refused to order the defendant to resume the delivery of the coal and water gas tar to the plaintiff, in
accord with said contract, but left it with its remedy for damages against the defendant for any subsequent
breaches of the contract. A copy of that judgment, which was later affirmed by this court, is attached to,
marked Exhibit G, and made a part of, the complaint in this action.
In their respective briefs, opposing counsel have much to say about the purpose and intent of the
judgment, and it is vigorously asserted that it was never intended that it should be or become a bar to
another action by the plaintiff to recover any damages it may have sustained after September, 1923, during
the remainder of the ten-year period of that contract. Be that as it may, it must be conceded that the
question as to what would be the legal force and effect of that judgment in that case was never presented
to, or decided by, the lower court or this court. In the very nature of things, neither court in that case would
have the power to pass upon or decided the legal force and effect of its own judgment, for the simple
reason that it would be premature and outside of the issues of any pleading, and could not be raised or
presented until after the judgment became final and then only by an appropriate plea, as in this case.
Plaintiff specifically alleges that the defendant willfully and deliverately breached the contract and "flatly
refused to make any deliveries under said contract," by reason of. which it was forced to and commenced
its former action in which it was awarded P26,119.08 damages against the defendant by reason of its
breach of the contract from July, 1920, to September, 1923.
In the final analysis, plaintiff in this action seeks to recover damages growing out of, and arising from, other
and different breaches of that same contract after November, 1923, for the remainder of the ten-year
period, and the question is thus squarely presented as to whether the rendition of the former judgment is a
bar to the right of the plaintiff to recover damages from and after September, 1923, arising from, and
growing out of, breaches of the original contract of September 10, 1918, as modified on January 1, 1919.
That is to say, whether the plaintiff, in a former action, having recovered judgment for the damages which it
sustained by reason of a breach of its contract by the defendant up to September, 1923, can now in this
action recover damages it may have sustained after September, 1923, arising from, and growing out of, a
breach of the same contract, upon and for which it recovered its judgment in the former action.
In the former action in which the judgment was rendered, it is alleged in the compliant:
"7. That about the last part of July or the first part of August, 1920, the Manila Gas Corporation, the
defendant herein, without any cause ceased delivering coal and water gas tar to the plaintiff
herein; and that from that time up to the present date, the plaintiff corporation, Blossom &
Company, has frequently and urgently demanded of the defendant, the Manila Gas Corporation,
that it comply with its aforesaid contract Exhibit A by continuing to deliver coal and water gas tar to
this plaintiff but that the said defendant has refused and still refuses, to deliver to the plaintiff
any coal and water gas tar whatsoever under the said contract Exhibit A, since the said month of
July 1920.
"9. That owing to the bad faith of the said Manila Gas Corporation, defendant herein, in not living
up to its said contract Exhibit A, made with this plaintiff, and refusing now to carry out the terms of
the same, be delivering to this plaintiff the coal and water gas tar mentioned in the said Exhibit A,
has caused to this plaintiff great and irreparable damages amounting to the sum total of one
hundred twenty- four thousand eight hundred forty eight pesos and seventy centavos
(P124,848,70);and that the said defendant corporation has refused, and still refuses, to pay to this
plaintiff the whole or any part of the aforesaid sum.
"10. That the said contract Exhibit A, was to be in force until January 1, 1929, that is to say ten (10)
years counted from January 1, 1929; and that unless the defendant again commence to furnish
and supply this plaintiff with coal and water gas tar, as provided for in the said contract Exhibit A,
the damages already suffered by this plaintiff will continually increase and become larger and
larger in the course of years preceding the termination of the said contract on January 1, 1929."
In that action plaintiff prays for judgment against the defendant:
"(a) That upon trial of this this cause judgment be rendered in favor of the plaintiff and against the
defendant for the sum of P124,8484.70), with legal interest thereon from November 23, 1923;
"(b) That the court specifically order the defendant to resume the delivery of the coal and water gas
tar to the plaintiff under the terms of the said contract Exhibit A of this complaint."
In the final analysis, plaintiff must stand or fall on its own pleadings, and tested by that rule it must be
admitted that the plaintiff's original cause of action, in which it recovered judgment for damages, was
founded on the ten-year contract, and that the damages which it then recovered were recovered for a
breach of that contract.
Both actions are founded on one and the same contract. By the terms of the original contract of September
10, 1018, the defendant was to sell and the plaintiff was to purchase three tons of water gas tar per month
form September to January 1, 1919, and twenty tons of water gas tar per month after January 1, 1919,
one-half ton of coal gas tar per month from September to January 1, 1919, and six tons of coal gas tar per
month after January 1, 1919. That from and after January 1, 1919, plaintiff would take at least the
quantities specified in the contract of September 10, 1918, and that at its option, it would have the right to
take the total output of water gas tar of defendant's plant and 50 per cent of the gross output of its coal gas
tar, and upon giving ninety days' notice, it would have the right to the entire output of coal gas tar, except
such as the defendant might need for its own use. That is to say, the contract provided for the delivery to
the plaintiff from month to month of the specified amounts of the different tars as ordered and requested by
the plaintiff. In other words, under plaintiff's own theory, the defendant was to make deliveries from month
to month of the tars during the period of ten years, and it is alleged in both complaints that the defendant
broke its contract, and in bad faith refused to make any more deliveries.
In 34 Corpus Juris, p. 839, it is said:
As a general rule a contract to do several things at several times in its nature, so as to authorize
successive actions; and a judgment recovered for a single breach of a continuing contract or
covenant is no bar to a suit for a subsequent breach thereof. But where the covenant or contract is
entire, and the breach total, there can be only one action, and plaintiff must therein recover all his
damages.
In the case of Rhoelm vs, Horst, 178 U. U., 1; 44 Law. ed., 953, that court said:
An unqualified and positive refusal to perform a contract, though the performance thereof is not yet
due, may, if the renunciation goes to the whole contract, be treated as a complete breach which
will entitle the injured party to bring his action at once.
15 Ruling Case Law, 966, 967, sec. 441 says:
Similarly if there is a breach by the vendor of a contract for the sale of goods to be delivered and
paid for in installments, and the vendee maintains an action therefor and recovers damages, he
cannot maintain a subsequent action to recover for the failure to deliver later installments.
In Pakas vs. Hollingshead, 184 N. Y., 211; 77 N. E., 40; 3 L. R. A. (N. S.), 1024, the syllabus says:
Upon refusal, by the seller, after partial performance, longer to comply with his contract to sell and
deliver a quantity of articles in installments the buyer cannot keep the contract in force and
maintain actions for breaches as they occur but must recover all his damages in one suit.
And on page 1044 of its opinion, the court say:
The learned counsel for the plaintiff contends that the former judgment did not constitute a bar to
the present action but that the plaintiff had the right to elect to waive or disregard the breach, keep
the contract in force, and maintain successive actions for time to time as the installments of goods
were to be delivered, however numerous these actions might be. It is said that this contention is
supported in reason and justice, and has the sanction of authority at least in other jurisdictions. We
do not think that the contention can be maintained. There is not as it seems to us any judicial
authority in this state that gives it any substantial support. On the contrary, we think that the cases,
so far as we have been able to examine them, are all the other way, and are to the effect that,
inasmuch as there was a total breach of the contract by the defendant's refusal to deliver, the
plaintiff cannot split up his demand and maintain successive actions, but must either recover all his
damages in the first suit or wait until the contract matured or the time for the delivery of all the
goods had arrived. In other words, there can be but one action for damages for a total breach of an
entire contract to deliver goods, and the fact that they were to be delivered in installment from time
to time does not change the general rule.
The case of L. Bucki & Son Lumber Co. vs. Atlantic Lumber Co. (109 Federal, 411), of the United States
Circuit Court of Appeals for the Fifth Circuit, is very similar.
The syllabus says:
1. CONTRACTS CONSTRUCTION ENTIRE CONTRACT. A contract was made for the
sale of a large quantity of logs to be delivered in monthly installments during a period of eight
years, payments to be made also in installments at times having relation tot he deliveries. It
contained stipulations as to such payments, and guaranties as to the average size of the logs to be
delivered in each installment. Held, that it was an entire contract, and not a number of separate
and independent agreements for the sale of the quantity to be delivered and paid for each month,
although there might be breaches of the minor stipulations and warranties with reference thereto
which would warrant suits without a termination of the contract.
2. JUDGMENTS MATTERS CONCLUDED ACTION FOR BREACH OF INDIVISIBLE
CONTRACT. The seller declared the contract terminated for alleged breaches by the
purchaser, and brought suit for general and special damages the latter covering payments due for
installments of logs delivered. By way of set-off and recoupment against this demand, the
purchaser pleaded breaches of the warranty as to the size of the logs delivered during the months
for which payment had not been made. Held, that the judgment in such action was conclusive as
to all claims or demands or either party against the other growing out of the entire contract, and
was a bar to a subsequent suit brought by the purchaser to recover for other breaches of the same
warranty in relation to deliveries made in previous months.
On page 415 of the opinion, the court says:
When the contract was ended, the claims of each party for alleged breaches and damages
therefor constituted an indivisible demand; and when the same, or any part of the same, was
pleaded, litigation had, and final judgment rendered, such suit and judgment constitute a bar to
subsequent demands which were or might have been litigated (Baird vs. U. S., 96 U. S., 430; 24 L.
ed., 703.)
In Watts vs. Weston (238 Federal, 149), Circuit Court of Appeals, Second Circuit, the syllabus says:
1. JUDGMENTS 593 JUDGMENT AS BAR MATTERS CONCLUDED. Where a
continuing contract was terminated by the absolute refusal of the party whose action was
necessary to further perform, a claim for damages on account of the breach constituted as
indivisible demand, and when the same or any part of the same was pleaded, litigated, and final
judgment rendered, such suit and judgment constitute a bar to subsequent demands which were
or might have been litigated therein.
And on page 150 of the opinion, the court says:
It is enough to show the lack of merit in the present contention to point out as an inexorable rule of
law that, when Kneval's contract was discharged by his total repudiation thereof, Watt's claims for
breaches and damages therefor constituted an indivisible demand, and when the same, or any
part of the same, was pleaded, litigation had and final judgment rendered, such suit and judgment
constitute a bar to subsequent demands which were or might have been litigated." (Bucki, etc., Co.
vs. Atlantic, etc., Co., 109 Fed. at page 415; 48 C. C. A., 459; Cf. Landon vs. Bulkley, 95 Fed.,
344; 337 C. C. A., 96.)
The rule is usually applied in cases of alleged or supposed successive breaches, and
consequently severable demands for damages; but if the contract has been discharged by breach,
if suit for damages is all that is left, the rule is applicable, and every demand arising form that
contract and possessed by any given plaintiff must be presented (at least as against any given
defendant) in one action; what the plaintiff does not advance he foregoes by conclusive
presumption.
Inn Abbott vs. 76 Land and Water Co. (118 Pac., 425; 161 Cal., 42), at page 428, the court said:
In Fish vs. Folley, 6 Hill (N. Y.), 54, it was held, in accord with the rule we have discussed, that,
where the defendant had covenanted that plaintiff should have a continual supply of water for his
mill from a dam, and subsequently totally failed to perform for nine years, and plaintiff brought an
action for the breach and recovered damages sustained by him to that time, the judgment was a
bar to a second action arising from subsequent failure to perform, on the theory that, although he
covenant was a continuing one in one sense, it was an entire contract, and a total breach put an
end to it, and gave plaintiff the right to sue for an equivalent in damages.
In such a case it is no warrant for a second action that the party may not be able to actually prove
in the first action all the items of the demand, or that all the damage may not then have been
actually suffered. He is bound to prove in the first action not only such damages as has been
actually suffered, but also such prospective damage by reason of the breach as he may be legally
entitled to, for the judgment he recovers in such action will be a conclusive adjudication as to the
total damage on account of the breach.
It will thus be seen that, where there is a complete and total breach of a continuous contract for a term of
years, the recovery of a judgment for damages by reason of the breach is a bar to another action on the
same contract for and on account of the continuous breach.
In the final analysis is, there is no real dispute about any material fact, and the important and decisive
question is the legal construction of the pleadings in the former case and in this case, and of the contract
between the plaintiff and the defendant of January 1, 1920.
The complaint on the former case specifically alleges that the defendant "has refused and still refuses, to
deliver to the plaintiff any coal and water gas tar whatsoever under the said contract Exhibit A, since the
said month of July, 1920." " That owing to the bad faith of the said Manila Gas Corporation, defendant
herein, in not living up to its said contract Exhibit A, made with this plaintiff, and refusing now to carry out
the terms of the same." That is a specific allegation not only a breach of the contract since the month of
July, 1920, but of the faith of the defendant in its continuous refusal to make deliveries of any coal and
water gas tar. That amended complaint was filed on July 11, 1924, or four years after the alleged bad faith
in breaking the contract.
Having recovered damages against it, covering a period of four years, upon the theory that the defendant
broke the contract, and in bad faith refused to make deliveries of either of the tars, how can the plaintiff now
claim and assert that the contract is still in fierce and effect? In the instant case the plaintiff alleges and
relies upon the ten year contract on January 11, 1920, which in bad faith was broken by the defendant. If
the contract was then broken, how can it be enforced in this action?
It is admitted that the defendant never made any deliveries of any tar from July, 1920, to April, 1936. Also
that it made nine deliveries to plaintiff of the minimum quantities of coal and water gas tar from April 7,
1926, to January 5, 1927.
Plaintiff contends that such deliveries were made under and in continuation of the old contract.
March 26, 1926, after the decision of this court affirming the judgment in the original action, plaintiff wrote
the defendant:
. . . It is our desire to take deliveries of at least the minimum quantities set forth therein and shall
appreciate to have you advise us how soon you will be in a position to make deliveries; . . .
. . . In view of the fact that you have only effected settlement up to November 23, 1923, please
inform us what adjustment you are willing to make for the period of time that has since elapsed
without your complying with the contract.
In response to which on March 31, 1926, the defendant wrote this letter to the plaintiff:
In reply to your letter of March 26th, 1926, in regard to tar, we beg to advise you that we are
prepared to furnish the minimum quantities of coal and water gas tars as per your letter, viz: twenty
tons of water gas tar and six tons of coal gas tar. The price figured on present costs of raw
materials is P39.01 ) Thirty-nine and 01/100 Pesos) per ton of water gas and P33.59 (Thirty-three
and 59/100 Pesos) per ton of coal tar.
We shall expect you to take delivery and pay for the above amount of tars at our factory on or
before April 7th prox.
Thereafter we shall be ready to furnish equal amounts on the first of each month. Kindly make your
arrangements accordingly.
On January 29, 1927, the plaintiff wrote the defendant that:
On July 31st last, we made demand upon you, under the terms of our tar contract for 50 per cent
of your total coal tar production for that month and also served notice on you that beginning 90
days from August 1st we would require you total output of coal tar monthly; this in addition to the
20 tons of water gas tar provided for in the contract to be taken monthly.
x x x x x x x x x
We are here again on your for your total output of coal tar immediately and the regular minimum
monthly quantity of water gas tar. In this connection we desire to advise you that within 90 days of
your initial delivery to us of your total coal tar output we will require 50 per cent of your total water
gas tar output, and, further, that two months thereafter we will require your total output of both tars.
February 2, 1927, the defendant wrote the plaintiff:
Replying to your letter of Jan. 29, we would sat that we have already returned to you the check
enclosed there with. As we have repeatedly informed you we disagree with you as to the
construction of your contract and insist that you take the whole output of both tars if you wish to
secure the whole of the coal tar.
With regard to your threat of further suits we presume that you will act as advised. If you make it
necessary we shall do the same.lawphil.net
From an analysis of these letters it clearly appears that the plaintiff then sought to reply upon and enforce
the contract of January 1, 1920, and that defendant denied plaintiff's construction of the contract, and
insisted "that you take the whole output of both tars if you wish to secure the whole of the coal tar."
February 28, 1927, the plaintiff wrote the defendant:
In view of your numerous violations of and repeated refusal and failure to comply with the terms
and provisions of our contract dated January 30-31, 1919, for the delivery to us of water and coal
gas tars, etc., we will commence action," which it did.
The record tends to show that tars which the defendant delivered after April 7, 1926, were not delivered
under the old contract of January 1, 1920, and that at all times since July 1920, the defendant has
consistently refused to make any deliveries of any tars under that contract.
The referee found as a fact that plaintiff was entitled to P2,219.60 for and on account of overcharges which
the defendant made for the deliveries of fifty-four tons of coal gas tar, and one hundred eighty tons of water
gas tar after April, 1926, and upon that point the lower says:
The fourth charge that plaintiff makes is meritorious. The price was to be fixed on the basis of raw
materials. The charge for deliveries during 1926 were too high. In this I agree with entirely with the
referee and adopt his findings of fact and calculations. (See Referee's report, p. 83) The referee
awarded for overcharge during the period aforesaid, the sum of P2,219.60. The defendant was
trying to discharge plaintiff from buying tars and made the price of raw material appear as high as
possible.
That finding is sustained upon the theory that the defendant broke its contract which it made with the
plaintiff for the sale and delivery of the tars on and after April, 1926.
After careful study of the many important questions presented on this appeal in the exhaustive brief of the
appellant, we are clearly of the opinion that, as found by the lower court, the plea of res judicata must be
sustained. The judgment of the lower court is affirmed.
It is so ordered, with costs against the appellant.
Johnson, Street, Malcolm, Villamor, Ostrand, Romualdez, and Villa-Real, JJ., concur.


















Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24069 June 28, 1968
LA FUERZA, INC., petitioner,
vs.
THE HON. COURT OF APPEALS and ASSOCIATED ENGINEERING CO., INC., respondents.
Sycip, Salazar, Luna and Associates for respondent Associated Engineering Co., Inc.
De Santos and Delfino for petitioner.
CONCEPCION, C.J .:
Ordinary action for the recovery of a sum of money. In due course, the Court of First Instance of Manila
rendered judgment for defendant, La Fuerza, Inc. hereinafter referred to as La Fuerza which was at
first affirmed by the Court of Appeals. On motion for reconsideration, the latter, however, set aside its
original decision and sentenced La Fuerza to pay to the plaintiff, Associated Engineering Co.,
hereinafter referred to as the Plaintiff the sum of P8,250.00, with interest at the rate of 1% per month,
from July, 1960 until fully paid, plus P500 as attorney's fees and the costs. Hence, this Petition for review
on certiorari.
The facts, as found by the Court of First Instance and adopted by the Court of Appeals, are:
The plaintiff (Associated Engineering, Co., Inc.) is a corporation engaged in the manufacture and
installation of flat belt conveyors. The defendant (La Fuerza, Inc.) is also a corporation engaged in
the manufacture of wines. Sometime in the month of January, 1960, Antonio Co, the manager of
the plaintiff corporation, who is an engineer, called the office of the defendant located at 399
Muelle de Binondo, Manila and told Mariano Lim, the President and general manager of the
defendant that he had just visited the defendant's plant at Pasong Tamo, Makati, Rizal and was
impressed by its size and beauty but he believed it needed a conveyor system to convey empty
bottles from the storage room in the plant to the bottle washers in the production room thereof. He
therefore offered his services to manufacture and install a conveyor system which, according to
him, would increase production and efficiency of his business. The president of the defendant
corporation did not make up his mind then but suggested to Antonio Co to put down his offer in
writing. Effectively, on February 4, 1960, marked as Exhibit A in this case. Mariano Lim did not act
on the said offer until February 11, 1960, when Antonio Co returned to inquire about the action of
the defendant on his said offer. The defendants president and general manager then expressed
his conformity to the offer made in Exhibit A by writing at the foot thereof under the word
"confirmation" his signature. He caused, however, to be added to this offer at the foot a note which
reads: "All specifications shall be in strict accordance with the approved plan made part of this
agreement hereof." A few days later, Antonio Co made the demand for the down payment of
P5,000.00 which was readily delivered by the defendant in the form of a check for the said amount.
After that agreement, the plaintiff started to prepare the premises for the installations of the
conveyor system by digging holes in the cement floor of the plant and on April 18, 1960, they
delivered one unit of 110' 26" wide flat belt conveyor, valued at P3,750.00, and another unit
measuring 190' and 4" wide flat conveyor, valued at P4,500.00, or a total of P13,250.00. Deducting
the down payment of P5,000.00 from this value, there is a balance, of P8,250.00 to be paid by the
defendant upon the completion of the installation, Exhibit B.
The work went under way during the months of March and April, during which time the president
and general manager of the defendant corporation was duly apprised of the progress of the same
because his plant mechanic, one Mr. Santos, had kept him informed of the installation for which he
gave the go signal. It seems that the work was completed during the month of May, 1960. Trial
runs were made in the presence of the president and general manager of the defendant
corporation, Antonio Co, the technical manager of the plaintiff, and some other people. Several
trial runs were made then totalling about five. These runs were continued during the month of June
where about three trial runs were made and, lastly, during the month of July, 1960.
As a result of this trial or experimental runs, it was discovered, according to the defendant's
general manager, that the conveyor system did not function to their satisfaction as represented by
the technical manager of the plaintiff Antonio Co for the reason that, when operated several bottles
collided with each other, some jumping off the conveyor belt and were broken, causing
considerable damage. It was further observed that the flow of the system was so sluggish that in
the opinion of the said general manager of the defendant their old system of carrying the bottles
from the storage room to the washers by hand carrying them was even more efficient and faster.
After the last trial run made in the month of July and after the plaintiff's technical manager had
been advised several times to make the necessary and proper adjustments or corrections in order
to improve the efficiency of the conveyor system, it seems that the defects indicated by the said
president and general manager of the defendant had not been remedied so that they came to the
parting of the ways with the result that when the plaintiff billed the defendant for the balance of the
contract price, the latter refused to pay for the reason that according to the defendant the conveyor
system installed by the plaintiff did not serve the purpose for which the same was manufactured
and installed at such a heavy expense. The flat belt conveyors installed in the factory of the
defendant are still there....
x x x x x x x x x
On March 22, 1961, the contractor commenced the present action to recover the sums of P8,250, balance
of the stipulated price of the aforementioned conveyors, and P2,000, as attorney's fees, in addition to the
costs.
In its answer to the complaint, La Fuerza alleged that the "conveyors furnished and installed by the plaintiff
do not meet the conditions and warrantings" (warranties?) of the latter, and set up a counterclaim for the
P5,000 advanced by La Fuerza, which prayed that the complaint be dismissed; that its contract with the
plaintiff be rescinded; and that plaintiff be sentenced to refund said sum of P5,000 to La Fuerza, as well as
to pay thereto P1,000 as attorney's fees, apart from the costs.
After appropriate proceedings, the Court of First Instance of Manila rendered a decision the dispositive part
of which reads:
WHEREFORE, judgment is hereby rendered rescinding the contract entered into by the parties in
this case, marked as Exhibit A, and ordering the plaintiff to refund or return to the defendant the
amount of P5,000.00 which they had received as down payment, and the costs of this action. On
the other hand, defendant is ordered to permit the plaintiff to remove the flat belt conveyors
installed in their premises.
As above indicated, this decision was affirmed by the Court of Appeals, which, on motion for
reconsideration of the plaintiff, later set aside its original decision and rendered another in plaintiff's favor,
as stated in the opening paragraph hereof.
The appealed resolution of the Court of Appeals was, in effect, based upon the theory of prescription of La
Fuerza's right of action for rescission of its contract with the plaintiff, for in the language of said
resolution "Article 1571 of the Civil Code provides that an action to rescind 'shall be barred after six
months from delivery of the thing sold'", and, in the case at bar, La Fuerza did not avail of the right to
demand rescission until the filing of its answer in the Court of First Instance, on April 17, 1961, or over ten
(10) months after the installation of the conveyors in question had been completed on May 30, 1960.
La Fuerza assails the view taken by the Court of Appeals, upon the ground: 1) that there has been, in
contemplation of law, no delivery of the conveyors by the plaintiff; and 2) that, assuming that there has
been such delivery, the period of six (6) months prescribed in said Art. 1571 refers to the "period within
which" La Fuerza may "bring an action to demand compliance of the warranty against hidden defects", not
the action for rescission of the contract. Both grounds are untenable.
With respect to the first point, La Fuerza maintains that plaintiff is deemed not to have delivered the
conveyors, within the purview of Art. 1571, until it shall have complied with the conditions or requirements
of the contract between them that is to say, until the conveyors shall meet La Fuerza's "need of a
conveyor system that would mechanically transport empty bottles from the storage room to the bottle
workers in the production room thus increasing the production and efficiency" of its business-and La Fuerza
had accepted said conveyors.
On this point, the Court of Appeals had the following to say:
Article 1571 of the Civil Code provides that an action to rescind 'shall be barred after six months,
from delivery of the thing sold". This article is made applicable to the case at bar by Article 1714
which provides that "the pertinent provisions on warranty of title against hidden defect in a contract
of sale" shall be applicable to a contract for a piece of work. Considering that Article 1571 is a
provision on sales, the delivery mentioned therein should be construed in the light of the provisions
on sales. Article 1497 provides that the thing sold shall be understood as delivered when it is
placed in the control and possession of the vendee. Therefore, when the thing subject of the sale
is placed in the control and possession of the vendee, delivery is complete. Delivery is an act of
the vendor. Thus, one of the obligations of the vendor is the delivery of the thing sold (Art. 1495).
The vendee has nothing to do with the act of delivery by the vendor. On the other hand,
acceptance is an obligation on the part of the vendee (Art. 1582). Delivery and acceptance are two
distinct and separate acts of different parties. Consequently, acceptance cannot be regarded as a
condition to complete delivery.
x x x x x x x x x
We find no plausible reason to disagree with this view. Upon the completion of the installation of the
conveyors, in May, 1960, particularly after the last trial run, in July 1960, La Fuerza was in a position to
decide whether or not it was satisfied with said conveyors, and, hence, to state whether the same were a
accepted or rejected. The failure of La Fuerza to express categorically whether they accepted or rejected
the conveyors does not detract from the fact that the same were actually in its possession and control; that,
accordingly, the conveyors had already been delivered by the plaintiff; and that, the period prescribed in
said Art. 1571 had begun to run.
With respect to the second point raised by La Fuerza, Art. 1571 of the Civil Code provides:
Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the
delivery of the thing sold.
x x x x x x x x x
Among the "ten articles" referred to in this provision, are Articles 1566 and 1567, reading:
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing
sold, even though he was not aware thereof. ."This provision shall not apply if the contrary has
been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold.
Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect
between withdrawing from the contract and demanding a proportionate reduction of the price, with
damages in either case.
x x x x x x x x x
Pursuant to these two (2) articles, if the thing sold has hidden faults or defects as the conveyors are
claimed to have the vendor in the case at bar, the plaintiff shall be responsible therefor and the
vendee or La Fuerza, in the present case "may elect between withdrawing from the contract
and demanding a proportional reduction of the price, with damages in either case." In the exercise of this
right of election, La Fuerza had chosen to withdraw from the contract, by praying for its rescission; but the
action therefor in the language of Art. 1571 "shall be barred after six months, from the delivery of the
thing sold." The period of four (4) years, provided in Art. 1389 of said Code, for "the action to claim
rescission," applies to contracts, in general, and must yields, in the instant case, to said Art. 1571, which
refers to sales in particular.
Indeed, in contracts of the latter type, especially when goods, merchandise, machinery or parts or
equipment thereof are involved, it is obviously wise to require the parties to define their position, in relation
thereto, within the shortest possible time. Public interest demands that the status of the relations between
the vendor and the vendee be not left in a condition of uncertainty for an unreasonable length of time,
which would be the case, if the lifetime of the vendee's right of rescission were four (4) years.
WHEREFORE, the appealed resolution of the Court of Appeals is hereby affirmed, with costs against
appellant, La Fuerza, Inc. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Angeles and Fernando, JJ., concur.
Castro, J., took no part.

















Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-47231 December 19, 1940
THE CARIDAD ESTATES, INC., plaintiff-appellee,
vs.
PABLO SANTERO, defendant-appellant.
Pablo de Guia and Francisco Reyes Alino for appellant.
Demetrio B. Encarnacion for appellee.

LAUREL, J .:
On November 28, 1934, the Caridad Estates, Inc., through its manager, Hammon H. Buck, leased to Pablo
Santero cadastral lots Nos. 1080 B-1, 1080 b-2 and 1116 in the municipality of Cavite, Cavite, for one year
for P2,200. Said lands were used for fishpond and salt bed purposes. About three months prior to the
expiration of the contract of lease, or on August 24, 1935, the lessor sold the same lots to the leases for
P30,000, payable as follows: P1,500 on the execution of the agreement; P4,000 on or before December,
1935; P4,500 on or before March, 1936; and the remaining balance of P20,000 in ten years, each annual
installment to be paid on or before the month of August of each year beginning 1937. In said contract
(Exhibit A), the parties stipulated that should the vendee fail to make the payments agreed upon within sixty
days of the date they fall due, the total balance shall become due and payable and recoverable by an
action at law, or the vendor may recover possession of the property and consider any and all sums paid by
the vendee forfeited.
On account of the purchase price of P30,000, the vendee, defendant-appellant here, made the following
payments: P1,500 on August 12, 1935 (Exhibit 7), P435 on December 28, 1935 (Exhibit 8), P225 on
December 31, 1935 (Exhibit 9), P2,460 on January 3, 1936 (Exhibits 10 and 11), P1,500 on May 1, 1936
(Exhibit 12), and P1,470 on May 3, 1936 (Exhibits 13 and 14). As things thus stood, the amount
outstanding in vendee's account as of March, 1936, was P2,445.20. The defendant-appellant claims that
he offered to pay this amount on September 21, 1936, with check No. C-65060, but the plaintiff refused to
accept payment on the ground that the contract of sale had been definitely cancelled since September 15,
1936, when the same lands were conveyed by sale to Triston Sison. On the other hand, it is alleged by the
plaintiff-appellee that on August 31, 1936, its general manager by formal communication (Exhibit B),
advised the defendant of the revocation of the contract of sale and asked the latter to vacate the premises
immediately thereafter.
As the defendants-appellant would not surrender possession of the lands in question, the Caridad Estates,
Inc., on October 2, 1936, filed a complaint for illegal detainer and recovery of rentals against Pablo Santero
in the justice of the peace of court of Cavite. The defendant, on January 27, 1937, submitted his answer,
the principal argument of which being that the justice of the peace of court was without jurisdiction to
entertain the action as it involved, besides the question of ownership, a contract of P30,000. On May 28,
1937, the court rendered its decision, ordering the defendant to surrender the property in question, and to
pay the plaintiff, for its use and occupation, a monthly rental of P200, beginning September 16, 1936, until
actual delivery, with legal interest from the commencement of the suit.
Defendant-appellant brought the case on appeal to the Court of First Instance which affirmed the ruling of
the justice of the peace court, in its decision of December 29, 1937. The dispositive part of the decision
reads:
En virtud de todo lo espuesto, el Juzgado condena al demandado Pablo Santero a restituir la
posesion de las propriedas descritas en la demanda a la demandante Caridad Estates of Cavite,
Inc., manteniendo asi su derecho de posesion sobre las referidas propriedas adquirino desde el
13 de septiembre de 1937, en virtud de la orden de ejucucion dictada por este Juzgado por falta
de pago de las mensualidades especificadas en la sentencia apelada del Juzgado de Paz. Se
condena tambien a dicho demandado a pagar a dicha demandante la cantidad de doscientos
pesos (P200) mensuales por el uso y ocupacion de las propiedas detentadas ilegalmente, a
contar desde el dis 16 de septiembre de 1936 y hasta el dia 13 de septiembre de 1937, en que se
hizo la entrega de su posesion a la demandante, con sus intereses legales y las costas del juicio.
His exception and motion for new trial having been denied, the defendant-appellant, on February 2, 1938,
moved to declare the provincial sheriff in contempt of court for the reasons stated in his petition, and on
February 11, 1938, presented another motion praying for the dissolution of the order of execution issued by
the justice of the peace court of Cavite on June 2, 1937. On March 22, 1938, the Court of First Instance
disallowed the two motions of the defendant. From this judgment, the defendant appealed assigning the
following alleged errors as committed by the trial court a quo in its decision, to wit:
1. The lower court erred in holding that the contract of purchase and the sale of the real property in
question may be rescinded by the vendor-plaintiff on the mere failure of the vendee-defendant to
complete the payment of the installment due during the month of March, 1936.
2. The lower court erred in sustaining that vendor-plaintiff could forfeit to his own benefit the whole
sum of P7,590 paid by the defendant on account of the purchase price and apply it all to the rental
of the land involved for the period from December, 1935 to August 31, 1936, or nine months.
3. The lower court erred in holding that the plaintiff can institute this ejectment proceedings in the
justice of the peace court before demand has been made by suit in the Court of First Instance for
the rescission of the contract of purchase and the sale of this real estate, or for the payment of
what is due from the defendant.
4. The lower court erred in holding that it has appellate jurisdiction over the case of ejectment, and
that the justice of the peace court had original jurisdiction over this case.
5. The lower court erred in holding that no extension of time has been granted to defendant to pay
the balance of P2,445.20 of the installment of P4,500 due in the month of March, 1936, and the
payment of this P2,445.20 may be refused by plaintiff after the term specified in the contract
expired.
6. The lower court erred in not giving to the defendant a new trial to enable him to prove damages
sustained by him on account of the execution in January 28, 1938, of the order of attachment of
June 2, 1937.lawphil.net
7. The lower court erred in holding that it had no jurisdiction to discharge the order of attachment of
June 2, 1937, issued by the justice of the peace court.
8. The lower court erred in not discharging the order of attachment, in not absolving the defendant
of this complaint and in not requiring the plaintiff to accept the payment of P2,445.20 tendered by
defendant and in not assessing damages against the plaintiff, and in not crediting the defendant of
the sum of P550 over payment of rental.
Notwithstanding that, as afore-transcribed, appellant pointed out eight errors as having been committed by
the court below, there are, to our mind, only three important questions of law that stand to be resolved: (1)
whether or not provisions of the contract of sale (Exhibit A), more specifically paragraphs 3 and 4 thereof,
violate those legal principles which condemn pacto commissorio; (2) whether or not the justice of the peace
of court of Cavite had jurisdiction to entertain the ejectment suit filed by the plaintiff; and (3) whether or not
the Court of First Instance had legal authority to decree the discharge of the order of attachment issued by
the justice of the peace on June 2, 1937.
The first question to be decided is raised in the first and second assignments of errors. The attack of nullity
is centered around paragraphs 3 and 4 of the contract of sale which, as appellant contends, ordain a
procedure or mode of action basically and fundamentally pactum commissorium.
The pertinent portion of paragraph 4 provides as follows:
. . . But if the said party of the second part should fail to make the payments above specified within
sixty days of the date or dates stipulated in this agreement or neglect to repair any damage caused
to the above described property within sixty days of formal notification of such damages by the
party of the first part, the total remaining purchase price shall become due and payable and
recoverable by action at law, or the party of the first part, may, at its option, recover possession of
the above described property in which case any and all sums paid by the party of the second part
under the provisions of this court shall be considered as rental for the use and occupancy of the
property.
Paragraph 3 recites:
The party of the second part acknowledge that he has received the above described property and
all the improvements thereon in good condition and engages during the period of this contract to
repair at his own expense any damage that may be caused to the said property or improvements
through storm, fire or deterioration and in the event of failure to fulfill the terms of payment as
above stated to faithfully comply with the penal clause here appended and in the event that the
party of the first part should demand the return of the property on account of non-compliance with
the terms of payment, to deliver possession of the said property and improvements thereon in
good condition and repair.
As may be seen, paragraph 4 gives the vendor, if the vendee fails to make the specified payments, the
option of (1) considering the total remaining purchase price due and payable and recoverable by an action
at law or (2) recovering the possession of the property in which case any and all sums paid by the vendee
shall be regarded as rental for the use and occupancy of the property. On the other hand, paragraph 3
obligates the vendee to deliver the possession of the property and the improvements thereon in good
condition and repair in the event that the vendor should demand the return of the same on account of
noncompliance with the terms and conditions of payment. It is quite plain, therefore, that the course
followed by the vendor in cancelling the contract and demanding the repossession of the property was well
supported by the employed in consonance with, the covenants embodied in their agreement. As the
stipulations in question do not violate the prohibitive provisions of the land or defeat morals and public
order they constitute the law between the parties, binding and effectual upon them. (Arts. 1255 and 1278,
Civil Code; Jimeno vs. Gacilago, 12 Phil., 16.)
Appellant, however, gives full reliance on article 1504 of the Civil Code, and vigorously argues that
whatever be the provision of the contract, resolution may not be declared in the absence of a demand upon
the vendee "either judicially or by a notarial act." A cursory reading of the provision would be the best
refutation of the appellant's argument, as it leaves no doubt as to its inapplicability in the present instance.
The contract (Exhibit A) is a sale in installment, in which the parties have laid down the procedure to be
followed in the event the vendee failed to fulfill his obligation. There is, consequently, no occasion for the
application of the requirements of article 1504.
Taking up the argument that the stipulations outlined in paragraphs 3 and 4 of the contract have resulted in
apactum commissorium, we are of the opinion that the objection is without legal basis. Historically and in
point of strict law, pactum commissorium, referred to in Law 41, title 5, and Law 12, title 12 of the Fifth
Partida, and included in articles 1859 and 1884 of the Civil Code, presupposes the existence of mortgage
or pledge or that of antichresis. (Alcantara vs. Alinea et al., 8 Phil., 111.) Upon this account, it becomes
hardly conceivable, although the argument has been employed here rather extravagantly, that the idea of
pactum commissorium should occur in the present contract of sale, considering that, it is admitted, the
person to whom the property is forfeited is the real and equitable owner of the same because title would not
pass until equitable owner of the same because title would not pass until the payment of the last
installment. At most, the provisions in point, as the parties themselves have indicated in the contract, is a
penal clause which carries the express waiver of the vendee to any and all sums he paid when the vendor,
upon his inability to comply with his duty, seeks to recover possession of the property, a conclusive
recognition of the right of the vendor to said sums, and avoid unnecessary litigation designed to enforce
fulfillment of the terms and conditions agreed upon. Said provisions are not unjust or inequitable and does
not, as appellant contends, make the vendor unduly rich at his cost and expense. The charge that the
amount forfeited greatly exceeded that which should be paid had the contract been one of lease loses its
weight when we consider that during the years 1935 and 1936, when the agreement was full force and
effect, the price of salt rose high to bring big profits and returns.
The factual background of this case is not lacking in point of authority. In The Manila Racing Club, Inc. vs.
The Manila Jockey Club, et al., G.R. No. 46533, promulgated October 28, 1939, the condition of the
contract was that "si el comprador no paga en su debido tiempo la cantidad correspondiente a cualquiera
de los plazos la vendedora podria declarar resuelto el contrato y confiscadas en su favor las cantidades
pagadas." In deciding the main question raised on appeal, similar in all respects to the one which now
confronts us, the court said: "Esta clausula de confiscacion de lo pagado parcialmente es valida. Tiene el
caracter de clausula penal, que puede se establecida legalmente por las partes (arts. 1152 y 1255 del
Codigo Civil). En su doble objecto de asegurar el cumplimiento, no es contraria a la ley, ni a la moral, ni al
orden publico, habiendo sido pactada voluntaria y conscientemente por las partes."
For the foregoing reasons, we find no merit in the first, second, and third assignment of errors.
The next question raised in the fourth assignment of error is whether or not the justice of the peace court of
Cavite had jurisdiction to entertain the ejectment suit filed by the plaintiff. The controversy is reduced to
interpretation of section 80 of the Code of Civil Procedure.
Section 80 provides:
Anyone deprived of the possession of any land or building by force, intimidation, threat, strategy,
or stealth, and any landlord, vendor, vendee, or other person against whom the possession of any
land or building is unlawfully withheld after the expiration or determination of the right to hold
possession, by virtue of any contract, express or implied, and the legal representative or assigns of
any such landlord, vendor, vendee, or other person, shall at any time within one year after such
unlawful deprivation or withholding of possession be entitled, as against the person or persons
unlawfully withholding or depriving of possession, or against any persons claiming under them, to
restitution of the land, building, and premises possession of which is unlawfully withheld, together
with damages and costs: . . . (Cf. sec. 1, Rule 72.)
In conformity with the above-copied provision, it is clear that any vendor against whom the possession of
any land is unlawfully withheld after the expiration of the right to hold the same by virtue of an express
contract, shall be entitled to restitution together with damages and costs, and when the action arising
therefrom is commenced within one year from the time the acts of deprivation took place, the justice of the
peace court of the place where the land is situated has exclusive jurisdiction to try the case.
(Monteblanco vs. Hinigaran Plantation, Inc., and Corua, G.R. No. 43550, promulgated November 27,
1936.) This, in our opinion, is the precise position of the parties, and a review of the environmental
circumstances leads to the conclusion that the essential requirements of section 80 are here present.
In violation of the provisions of the contract (Exhibit A), the vendor-appellant failed to complete his payment
of the installment due in March, 1936. Subsequently, or on August 31, 1936, he received the notification
letter of Manager H.H. Buck of the Caridad Estates, Inc. cancelling the contract and asking him to vacate
the premises. After his receipt of the letter, therefore, his right to remain in possession of the property by
virtue of the contract of sale expired, and his retention of the same became, to all intents and purposes,
illegal and violative of the propriety rights of the appellee. As the action for ejectment was filed on October
2, 1936, it is clear that more than fifteen days had elapsed from the receipt of the notification letter and that
the same was brought within the one-year period contemplated under section 80. It follows that the Court of
First Instance acted properly in overruling the objection of the peace court, and in taking cognizance of the
case in its appellate jurisdiction.
With reference to the last question relative to the denial of the motion of the defendant for the dissolution of
the order of attachment issued by the justice of the peace court, it is sufficient to state that the same proper
and legal under the circumstances, because the failure or neglect of the appellant to raise the question of
the correctness of the decision of the justice of the peace court of June 18, 1937, disallowing the petition
for annulment of the said order of attachment on appeal limited or confined the jurisdiction of the court
below to deciding the merits of the ejectment proceedings.
The other assignments of errors deals strictly with bare questions of fact and findings of the court below
should not be disturbed.
The judgment appealed from should be, as it is hereby affirmed, with costs against the appellant.
In view of the result, the deposit of P2,400 which appears to have been made by the defendant-appellant at
his own instance with the clerk of this court is ordered returned to him. So ordered.
G.R. No. 4679, Guevara v. De Pascual et al., 12 Phil311
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
December 22, 1908
G.R. No. 4679
MANUEL GUEVARA, plaintiff-appellant,
vs.
CARMEN DE PASCUAL, ET AL., defendants-appellees.
Leodegario Azarraga, for appellant.
Gibbs and Gale, for appellees.
WILLARD, J .:
On the 20th of November, 1906, the plaintiff sold to the defendant, Carmen de Pascual, who made the
purchase with the consent of her husband, C.R. Duffin, the "New Coin Cafe," a bar or drinking saloon
situated in the city of Manila. By the terms of the contract the purchaser agreed to pay the owner of the
property where the bar was located the sum of P1,200 in monthly installments of P100 each, rent due for
the occupation of the building; to pay a debt due from the seller to Macke, Chandler and Co. amounting to
P112, and to pay to the plaintiff P600 on the 28th of February, 1907, and P588 on the 28th of February,
1908. The contract contained also the following conditions:
IV. That both contracting parties bind themselves to a strict compliance with the present contract, which, in
case of non-fulfillment of any of its clauses by either of the parties, shall be rescinded.
V. That in the case the purchaser, Carmen de Pascual de Duffin, should infringe any of the clauses or
provisions of this contract, the same shall be rescinded in accordance with the preceding clause, and said
purchaser will immediately return to the vendor the bar with all its appurtenances, furniture and any other
improvements made therein, without the right, on the part of the said purchaser, to any remuneration for
such improvements.
The purchaser took possession of the bar but did not pay the rent in the month of December nor did she
pay the whole of the sum due the defendants Macke, Chandler and Co. She became the debtor of Macke,
Chandler and Co. for other merchandise sold to her by them; on the 8th of January they commenced an
action against her to recover the amount due them and on the 9th of January caused the personal property
in the bar to be attached by the sheriff of his right in regard to the bar. The sheriff secured a bond from
Macke, Chandler and Co., disregarded the notice, and on the 18th of January, 1907, sold the personal
property therein for the sum of P410.90. The plaintiff commenced this action on the 26th of January, 1907,
against Carmen de Pascual, her husband, C.R. Duffin, Macke, Chandler and Co., and the sheriff of the city
of Manila. Judgment was rendered in the court below in favor of the plaintiff and against Carmen de
Pascual and her husband by default in the sum of P4,000. From this judgment these defendants have not
appealed.
Judgment was rendered in the court below in favor of Macke, Chandler and Co., and the sheriff, acquitting
them of the complaint. From this part of the judgment the plaintiff has appealed.
By the express terms of the contract, which have been above quoted, the plaintiff had a right to rescind it in
case the purchaser failed to comply with the terms thereof. That the purchaser did fail so to comply, is
admitted; and that the plaintiff had a perfect right to rescind the contract as against the purchaser, can not
be questioned, and is not questioned, they having not appealed from the judgment against them. But the
question is, what rights has the plaintiff against third persons, namely, Macke, Chandler and Co. and the
sheriff?
It is evident that article 1290 and following articles of the Civil Code do not refer to the rescission of
contracts such as the one is question. (Judgment of the supreme court of Spain, April 24, 1901.) The rights
of the parties to this action are rather governed by articles 1506 and 1124 of that code. Article 1124 is as
follows:
The right to rescind the obligations is considered as implied and mutual ones, in case of the obligated
persons does not comply with what is incumbent upon him.
The person prejudiced may choose between exacting the fulfillment of the obligation or its rescission, with
indemnity for damages and payment of interest in either case. He may also demand the rescission, even
after having requested its fulfillment, should the latter appear impossible.
The court shall order the rescission demanded, unless third acquirers, in accordance with articles 1295 and
1298, and the provisions of the Mortgage Law.
It is true that this article does not directly refer to contracts which expressly give the right to rescind. But,
that it was intended to apply to them, we think is evident.
Article 1295 referred to in article 1124 is as follows:
Rescission obliges the return of the things which were the objects of the contract, with their fruits and the
sum with interests; therefore it can only be carried into effect when the person who may have claimed it can
return that which, on his part, he is bound to do.
Neither shall rescission take place when the things which are the object of the contract are legally in the
possession of third persons who have not acted in bad faith.
In such cases the indemnity for damages may be claimed from the person who caused the lesion.
The only question in the case is whether or not the plaintiff has the right to rescind this contract against
Macke, Chandler and Co. and the sheriff, who are third parties, and that question depends upon whether
they are legally in possession of the property and have acted in good faith.
The mere failure to fulfill the contract did not operate as a rescission thereof. It was necessary that the
plaintiff take some affirmative action indicating his intention to rescind it. (Judgment [supreme court of
Spain] of the 19th of January, 1904.)
As to the defendant, Macke, Chandler and Co., we do not think that the evidence shows that any such
action was taken by the plaintiff prior to the sale on the 18th day of January, 1907. The plaintiff alleged that
on the 16th day of January he notified the sheriff in writing that he was the owner of the property. This
allegation is denied in the answer of the defendants, Macke, Chandler and Co., and, while one of the
witnesses testified that a notice was given, he did not testify what the contents of that notice were and the
notice itself was apparently not introduced in evidence. So far as Macke, Chandler and Co. are concerned,
the judgment in their favor must be affirmed.
But as to the sheriff, different facts appear. Instead of denying the allegations of the complaint in respect to
the notice, the sheriff in his answer expressly admitted those allegations and affirmatively alleged the
following:
That on the 16th day of January, 1907, the plaintiff in this case presented an affidavit to this defendant,
claiming to be the owner of the aforesaid property, and according to that notice this defendant required and
obtained from the said B.H. Macke and W.N. Chandler, a bond to indemnify this defendant for whatever
damages he might suffer by reason of the sale of said property in order to satisfy the above referred
execution.
It thus appears that the sheriff had a copy of the contract in his possession before he made the sale; that
he knew that the plaintiff have a right to rescind it, and the he knew from the affidavit made that the plaintiff
claimed to be the owner of the property and therefore had rescinded it. Under this circumstances it can not
be said that the sheriff, when he had possession of the goods for the purpose of selling them on execution,
was in possession of them in good faith, within the meaning of that phrase as it is used in article 1295.
This action, in which the plaintiff asked expressly that the contract be declared rescinded, was commenced
on the 26th day of January, ten days after the notice was given to the sheriff and eight days from the sale.
The plaintiff had the right to have the contract rescinded not only against the original parties thereto but
also against the sheriff.
The plaintiff presented no evidence to show what the value of the property actually sold by the sheriff was.
He presented evidence to show that the value of certain improvements made by Carmen de Pascual was,
but these improvements to a large extent were not susceptible of sale on execution and were not sold. The
only evidence to show what the value of the property sold by the sheriff was, is what it brought, namely,
P410.90, and as against the sheriff this must be taken as its value.
The judgment of the court below in favor of Macke, Chandler and Co. is affirmed. The judgment in favor of
the sheriff is reversed, and judgment is entered against him and in favor of the plaintiff for the sum of
P410.90, with interest thereon from the 26th day of January, 1907, and the costs of the Court of First
Instance. No costs will be allowed either party in this court. So ordered.
Arellano, C.J., Torres, Mapa, Carson, and Tracey, JJ., concur.










Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26585 March 13, 1968
NATIONAL MARKETING CORPORATION, (NAMARCO) JOVENAL D. ALMENDRAS, and SERAPIO
DATOC,petitioners,
vs.
HON. GAUDENCIO CLORIBEL, in his capacity as DISTRICT JUDGE OF THE COURT OF FIRST
INSTANCE OF MANILA and VILTRA COMPANY AND/OR GERMAN E. VILLANUEVA, respondents.
Habacon & Tasico for petitioners.
Protacio Caalita for respondents.
DIZON, J .: .
This is a petition for certiorari, prohibition and mandamus, with a prayer for the immediate issuance
of a writ of preliminary injunction, filed on September 23, 1966 by the National Marketing Corporation,
hereinafter referred to as NAMARCO, Jovenal D. Almendras and Serapio Datoc, against the Honorable
Gaudencio Cloribel, in his capacity as Judge of the Court of First Instance of Manila, and VILTRA Company
and/or German E. Villanueva, to annul certain orders issued by the respondent judge in Civil Case No.
64696 of this court; to prohibit respondent judge from enforcing said orders, and to order him to approve
and certify the appeal interposed by petitioners Almendras and Datoc from one of said orders which found
them guilty of contempt of court and ordered their arrest.
On September 28 of the same year, We gave due course to the petition and issued, upon previous
approval of the bond required from petitioners, the writ of preliminary injunction prayed for.
It appears that respondent German E. Villanueva, a Manila businessman, had been trading under
the name and style of VILTRA Company. For purposes of this decision, We shall hereafter refer to him
simply as VILTRA.
On March 11, 1966 VILTRA filed in the Court of First Instance of Manila an action
for mandamus against NAMARCO and Pacific Banking Corporation, with a prayer for the issuance of a writ
of preliminary injunction and a judgment for damages. On the same date the verified petition was
superseded by an amended one, the only amendment introduced being the omission of the Pacific Banking
Corporation as a party respondent.
Main allegations of the verified petition above referred to were; that on November 24, 1965 VILTRA
and NAMARCO had entered into a written contract, the former as buyer and the latter as seller, whereby
VILTRA agreed to open an irrevocable domestic letter of credit in favor of NAMARCO who, in turn, would
open an irrevocable foreign letter of credit in favor of certain parties in Japan who would supply 10,000
metric tons of wire rods valued at $1,320,000.00; that subsequently NAMARCO refused to comply with its
obligation to open an irrevocable foreign letter of credit in favor of the suppliers, as a result of which the
wire rods agreed upon could not be shipped and imported to the Philippines, to the damage and prejudice
of VILTRA in the total amount of P330,000; that on March 11, 1966 the respondent judge ordered the
issuance of the writ of preliminary injunction prayed for in the verified petition upon the filing by VILTRA and
approval by the Court of a P10,000 bond, said writ having been subsequently issued commanding
NAMARCO to honor, comply and/or abide with the contract of sale mentioned in the petition as executed
on November 24, 1965 and to request or direct the Pacific Banking Corporation to immediately send a
cable to its correspondent bank in Japan and open immediately upon receipt of the writ an irrevocable letter
of credit in favor of Tokyo Boeki, Ltd. for the account of NAMARCO in connection with 10,000 metric tons of
wire rods at $132 per metric ton; that in due time NAMARCO filed its answer to the amended petition
praying for its dismissal, alleging substantially, inter alia, that VILTRA was not a qualified applicant for trade
assistance under Section 7, Administrative Order No. 17 of NAMARCO dated August 31, 1965, and that
VILTRA itself had failed to open an irrevocable domestic letter of credit in pursuance of the alleged
agreement.
The motion filed by NAMARCO for the reconsideration of the order granting, and the issuance of, the
writ of preliminary mandatory injunction was denied on March 24, 1966.
Thereafter, or more specifically, on March 16, 1966, VILTRA filed an urgent motion to cite herein
petitioners Jovenal D. Almendras and Serapio Datoc, Acting General Manager and Assistant General
Manager, respectively, of NAMARCO, for contempt of court upon the ground that they had refused and
failed to comply with the order of the Court of March 11, 1966. Granting the motion the Court ordered
Almendras and Datoc to appear before it on March 16, 1966 to show cause why they should not be found
guilty of contempt. After said parties had given their explanation, the respondent judge issued on March 29,
1966 an order finding them guilty of contempt of court and ordering their arrest.
It is not disputed that Almendras and Datoc filed on March 30, 1966 a notice of appeal from the order
just mentioned, together with the corresponding appeal bond. However, VILTRA objected to the appeal
being given due course on the ground that the notice of appeal filed did not mention the court to which the
aggrieved parties were appealing. Notwithstanding the reply filed by Almendras and Datoc to said
opposition, the respondent judge, in his order of July 6, 1966 "dismissed" (refused to give due course to)
the appeal. Almendras and Datoc filed an urgent motion for the reconsideration of this order of July 6 and
prayed that their appeal be given due course, but the respondent judge, in an order dated August 24, 1966,
denied the same for lack of merit and further directed the Sheriff of Manila to enforce the court's order of
July 6, 1966 in relation to those issued on March 11, 24 and 29 of the same year. Furthermore, the
respondent judge issued another order dated September 16, 1966 directing the Sheriff of Manila or his
deputy to take Almendras and Datoc into their custody and not to release them until they had complied with
the order of March 11, 1966.
In view of the foregoing actuations of the respondent judge, herein petitioners filed the present
action.1wph1.t
It is not disputed that VILTRA's action (Civil Case No. 64696 of the Court of First Instance of Manila)
was a special civil action for mandamus and that its obvious purpose and objective was to compel
NAMARCO
. . . to honor, comply and/or abide with the contract of sale it executed with petitioner Viltra
Co., on November 24, 1965, and further, request and direct Pacific Banking Corporation to cable
immediately its correspondent bank in Japan and/or order said bank to open immediately upon
receipt of this order from the Manila Sheriff or his Deputy, an irrevocable letter of credit in favor of
Tokyo Boeki, Ltd., No. 1-2, Chome, Nishitachobori, Tokyo, Japan for the account of respondent
NAMARCO, Manila, for 5,000 metric tons of wire rods, quality, SAE 1008, Dia. 5.5 MM, at US
$13.00 per M/T, C&F, Manila, from any Port in Japan, port of discharge Manila, marine insurance
for the account of petitioner, subject to such terms and conditions in the Contract of Sale, and the
balance of 5,000 metric tons of wire rods, out of the original 10,000 metric tons of wire rods stated
in the contract, SAE 1008, Dia. 6.0 MM at US $132.00 per M/T, C&F, Manila, marine insurance of
the account of the petitioner subject to the terms and conditions in the said Contract of Sale, and
after due proceedings:
a. Render judgment in favor of petitioner making the injunction permanent;
b. Render judgment ordering respondent NAMARCO to pay petitioner the following sums of
money:
1. P100,000.00 for material and actual damages;
2. P100,000.00 for moral damages;
3. P100,000.00 for exemplary damages;
4. P30,000.00 attorney's fees;
5. P20,000.00 as litigation, and
6. Payment of costs.
Petitioner further prays for such other relief deemed just and equitable in the premises.
Plain it is, therefore, that the real purpose of the action was to compel NAMARCO to comply with the
contract or agreement it had allegedly entered into with VILTRA on November 24, 1965. The action was
clearly improper, it being the settled rule that mandamus never lies to enforce performance of contractual
obligations (City of Manila vs. Posadas, 48 Phil. 309; Florida Central etc. vs. State etc., 20 L.R.A. 419). In
case of breach of contract the aggrieved party's remedy is an ordinary action in the proper court for specific
performance. We have heretofore held this rule to be applicable even in cases brought against municipal
corporations to compel payment of the price agreed upon in a contract (Quiogue vs. Romualdez, 46 Phil.
337; Jacinto vs. Director of Lands, 49 Phil. 853), the reason being that a contractual obligation is not a duty
specifically enjoined upon a party by law resulting from office, trust or station.
VILTRA's error in this respect was compounded and made worse by the gross error of the
respondent judge in entertaining and granting an ex parte motion for the issuance of a
preliminary mandatory injunction.
As is well known, a mandatory injunction which commands the performance of some specific act is
regarded as of a more serious nature than a mere prohibitive injunction, the latter being intended generally
to maintain thestatus quo only. While our courts, being both of law and equity, have jurisdiction to issue a
mandatory writ, We have always held that its issuance would be justified only in clear cases; that it is
generally improper to issue it before final hearing because it tends to do more than to maintain the status
quo; that it should be issued only where there is a willful and unlawful invasion of plaintiff's right and that
the latter's case is one free from doubt and dispute (Manila Electric Company vs. del Rosario, 22 Phil. 433-
437; Eusebio vs. Aguas, 47 Phil. 567; Villadones, et al. vs. Encarnacion, et al., G.R. No. L-6425,
September 30, 1964; Coronado vs. Tan, G.R. No. L-6530, March 31, 1955; Bautista vs. Honorable
Barcelona, 53 O.G. 4464).
In the case now before Us, the facts make it crystal clear that VILTRA's right under its alleged
contract with NAMARCO did not give him a clear and undisputed right to the relief sought in his petition
for mandamus, it being undisputed that the perfection of the contract was denied by NAMARCO in its
answer filed in Civil Case No. 64696, for the reason that VILTRA was not qualified to receive the benefit of
what was known as trade assistance in accordance with Section 7, Administrative Order No. 16 of
NAMARCO dated August 31, 1965, and that VILTRA itself had not complied nor had it offered to comply
with the condition precedent stipulated therein regarding the opening by VILTRA of an irrevocable domestic
letter of credit in favor of NAMARCO.
Moreover, the writ of mandatory injunction issued by the respondent judge actually amounted not
only to a judgment for the issuance of the writ of mandamus prayed for in VILTRA's verified petition, but
also amounted to an order of execution thereof all these before a hearing on the merits.
From what has been said heretofore we conclude, and so declare, that the respondent judge
committed a grave abuse of discretion in issuing his orders of March 11, and 29, and August 24 and
September 16, 1966.
IN VIEW OF ALL THE FOREGOING, it is the judgment of this Court that the writs prayed for should
issue. Consequently, the orders complained of, issued in Civil Case No. 64696 of the Court of First
Instance of Manila on March 11, 24, 29, July 6, August 24 and September 16, all of the year 1966, are
hereby voided and set aside.
The order of March 29, 1966 finding petitioners Almendras and Datoc guilty of contempt of court and
all orders subsequently issued to implement the same having been avoided, there is no need for said
parties to appeal therefrom, nor for Us to discuss the question of whether or not the respondent judge erred
in not giving due course to their appeal. Consequently, the writ of mandamus prayed for in their petition is
denied, the relief being unnecessary.
With costs against respondent VILTRA.1wph1.t
Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.