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Facts:
In 1964, plaintiff Agcaoili applied with the defendant GSIS to purchase a house and lot in Marikina. In
the following year in a letter, respondent approved petitioners application with the advise to occupy
the said house immediately and failure to occupy the same from the receipt of the notice, plaintiffs
application shall be considered disapproved and will be awarded to another applicant. Plaintiff lost no
time in occupying the house. However, he could not stay in it and had to leave the following day because
the house was nothing more than a shell, in such a state of incompleteness that civilized occupation
was not possible. Agcaoili did however ask a homeless friend, a certain Villanueva, to stay in the
premises as some sort of watchman, pending completion of the construction of the house. Agcaoili
thereafter complained to the GSIS, to no avail.
The GSIS asked Agcaoili to pay the monthly amortizations and other fees. Agcaoili paid the first monthly
installment and the incidental fees, 3 but refused to make further payments until and unless the GSIS
completed the housing unit. What the GSIS did was to cancel the award and require Agcaoili to vacate
the premises. 4 Agcaoili reacted by instituting suit in the Court of First Instance of Manila for specific
performance and damages.
The CFI ruled in favor of Agcaoili declaring the cancellation of the award illegal and viod and ordering
GSIS to respect and enforce the aforesaid award, and to complete the house in question to make the
same habitable and authorizing GSIS to collect the monthly amortization only after said house shall
have been completed. Hence this present appeal. GSIS argued the following:
1. Agcaoili had no right to suspend payment of amortizations on account of the incompleteness of his
housing unit, since said unit had been sold in the condition and state of completion then existing ...
(and) he is deemed to have accepted the same in the condition he found it when he accepted the
award.
2. Perfection of the contract of sale between it and Agcaoili being conditioned upon the latters
immediate occupancy of the house subject thereof, and the latter having failed to comply with the
condition, no contract ever came into existence between them.
Issues:
1. Whether or not Agcaoli may suspend payment of amortization on account of the incompleteness of
his housing unit, since said unit had been sold in the condition and state of completion then existing ...
(and) he is deemed to have accepted the same in the condition he found it when he accepted the
award? Whether or not there was a valid contract of sale between Agcaoili and GSIS?
2. Whether or not Agcaolili repudiated his contract with GSIS?
Held:
On the first issue, Yes, because Art. 1169 of the Civil Code provides that in reciprocal obligations,
neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. Certainly, the prestation of the contract which was ratified upon
approval of GSIS (presupposing the meeting of the minds of GSIS and Agcaoli) is the house and lot,
on the condition that the house should be habitable. Thus: There was then a perfected contract of sale
between the parties; there had been a meeting of the minds upon the purchase by Agcaoili of a
determinate house and lot in the GSIS Housing Project at Nangka Marikina, Rizal at a definite price
payable in amortizations at P31.56 per month, and from that moment the parties acquired the right to
reciprocally demand performance.
There would be no sense to require the awardee to immediately occupy and live in a shell of a house,
a structure consisting only of four walls with openings, and a roof, and to theorize, as the GSIS does,
that this was what was intended by the parties, since the contract did not clearly impose upon it the
obligation to deliver a habitable house, is to advocate an absurdity, the creation of an unfair situation.
By any objective interpretation of its terms, the contract can only be understood as imposing on the
GSIS an obligation to deliver to Agcaoili a reasonably habitable dwelling in return for his undertaking to
pay the stipulated price. Since GSIS did not fulfill that obligation, and was not willing to put the house
in habitable state, it cannot invoke Agcaoilis suspension of payment of amortizations as cause to cancel
the contract between them. It is axiomatic that (i)n reciprocal obligations, neither party incurs in delay
if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon
him.
in character" (3.) WON rescission of the Bill of Assignment is proper (4.) WON the corporation is liable
to pay the patentee his agreed monthly salary, as long as the use, as well as the right to use, the
formula for Mafran sauce remained with the corporation (5.) WON it can bbe inferred from the appellate
courts decision that what was meant to be returned to the patentee is not the formula itself, but only its
use and the right to such use
HELD
1. What was actually ceded and transferred by the patentee Magdalo V Francisco in favor of the
petitioner corporation was only the use of the formula. The Bill of Assignment vested in the petitioner
corporation no title to the formula.
- One of the principal considerations of the Bill of Assignment is the payment of "royalty of 2% of the
net annual profit" which the petitioner corporation may realize by and/or out of its production of Mafran
sauce and other food products, etc. The word "royalty," when employed in connection with a license
under a patent, means the compensation paid for the use of a patented invention.
- The intention of the patentee at the time of its execution was to part, not with the formula for Mafran
sauce, but only its use, to preserve the monopoly and to effectively prohibit anyone from availing of the
invention.
- Should dissolution or the petitioner corporation eventually take place, "the property rights and interests
over said trademark and formula shall automatically revert" to the patentee.
- Facts of the case compellingly demonstrate continued possession of the Mafran sauce formula by the
patentee.
- A conveyance should be interpreted to effect "the least transmission of rights."
2. YES. The petitioner, acting through its corporate officers, schemed and maneuvered to ease out,
separate and dismiss the said from the service as permanent chief chemist, in flagrant violation of the
Bill of Assignment. The fact that a month after the institution of the action for rescission, the petitioner
corporation, thru Reyes requested the patentee to report for duty, is of no consequence.
3. YES. Appellees had no alternative but to rile the present action for rescission and damages.
- The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him. The injured party may choose between fulfillment and
rescission of the obligation, with payment of damages in either case.
- There is no controversy that the provisions of the Bill of Assignment are reciprocal in nature.
The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but
only for such substantial and fundamental breach as would defeat the very object of the parties in
making the agreement.
- The dismissal of Magdalo V Francisco as the permanent chief chemist of the corporation is a
fundamental and substantial breach of the Bill of Assignment. He was dismissed without any fault or
negligence on his part.
4. YES. The corporation could not escape liability to pay the patentee his agreed monthly salary, as
long as the use, as well as the right to use, the formula for Mafran sauce remained with the corporation.
- The contract placed the use of the formula for Mafran sauce with the petitioner, subject to defined
limitations. One of the considerations for the transfer of the use thereof was the undertaking on the part
of the petitioner corporation to employ the patentee as the Second Vice President and Chief Chemist
on a permanent status, at a monthly salary of P300, unless "death or other disabilities" supervened.
5. YES. It is a logical inference from the appellate court's decision that what was meant to be returned
to the patentee is not the formula itself, but only its use and the right to such use. Article 1385 of the
New Civil Code provides that rescission creates the obligation to return the things which were the object
of the contract.
These two things are different. While failure to comply w/ CONDITION ON PERFECTION OF
CONTRACT results in failure of a contract, failure to comply w/ CONDITION ON PERFORMANCE OF
THE OBLIGATION merely gives other party options and/or remedies.
- Even granting that the letter of Purefoods is just a conditional counter-offer,
FEMSCOs submission of bond and insurance was implied acceptance, and acknowledgment by
Purefoods, not to mention its return of the Bidders Bond, manifests its knowledge that FEMSCO
consented to the offer.
2. NO
- The similarity in the design submitted to Purefoods by both Jardine and FEMCO and the tender of a
lower quotation by Jardine are insufficient to show that Jardine induced Purefoods to violate contract
with FEMSCO.
VICTORIAS PLANTERS ASS., INC., ET AL. VS. VICTORIAS MILLING CO., INC.
G.R. No. L-6648 July 25, 1955
FACTS:
The petitioners Victorias Planters Association, Inc. and North Negros Planters Association,
Inc. and the respondent Victorias Milling Co., Inc entered into a milling contract whereby
they stipulated a 30-year period within which the sugar cane produced by the petitioner
would be milled by the respondent central. The parties also stipulated that in the event of
force majuere, the contract shall be deemed suspended during this period.
The petitioner failed to deliver the sugar cane during the four years of the Japanese
occupation and the two years after liberation when the mill was being rebuilt or a total of
six years.
ISSUE:
Can the petitioners be compelled to deliver sugar cane for six more years after the
expiration of the 30-year period to make up for what they failed to deliver to the
respondent?
RULING: No. Fortuitous event relieves the obligor from fulfilling the contractual obligation
under Article 1174 of the Civil Code. The stipulation in the contract that in the event of
force majeure the contract shall be deemed suspended during the said period does not
mean that the happening of any of those events stops the running of the period agreed
upon. It only relieves the parties from the fulfillment of their respective obligations during
that time the petitioner from delivering the sugar cane and the respondent central from
milling.
In order that the respondent central may be entitled to demand from the petitioner the
fulfillment of their part in the contracts, the latter must have been able to perform it but
failed or refused to do so and not when they were prevented by force majeure such as
war. To require the petitioners to deliver the sugar cane which they failed to deliver during
the six years is to demand from them the fulfillment of an obligation, which was impossible
of performance during the time it became due. Nemo tenetur ed impossibilia. The
respondent central not being entitled to demand from the petitioners the performance of
the latters part of the contracts under those circumstances cannot later on demand its
fulfillment. The performance of what the law has written off cannot be demanded and
required.
The prayer that the petitioners be compelled to deliver sugar cannot for six years more to
make up for what they failed to deliver, the fulfillment of which was impossible, of granted,
would in effect be an extension of the terms of the contracts entered into by and between
the parties.