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FIRST DIVISION

[G.R. No. 74729. May 31, 2000.]

RELIANCE COMMODITIES, INC. and THE PROVINCIALSHERIFF OF NUEVA ECIJA, petitioners, vs . INTERMEDIATEAPPELLATE COURT, MARVIN PAEZ and ROSA VALINO,

respondents.

Ongkiko Bucoy Dizon & Associates for petitioners.

SYNOPSIS

Marvin Paez entered into a contract with Samuel Chuason of Reliance Commodities, Inc.

whereby the latter agreed to provide the former with funds and equipment for the

operation of the manganese mining claims in Nueva Ecija. Later,Paez and his wife

executed a real estate mortgage on their property in favor of Reliance as security for more

cash advances to sustain the mining operation. Subsequently, misunderstanding ensued

regarding cash advances, and Reliance foreclosed the mortgage. Consequently, the

Provincial Sheriff served notice that the mortgaged property would be sold at public

auction. Respondents then filed an action before the then CFI of Nueva Ecija. Reliance

claimed that Paez violated their contract and thus, Paez is not entitled to rescind the

contract or recover damages; and by reason of which, Reliance is entitled to foreclose onthe security constituted.

The Court found for Reliance. Under their contract, Reliance was to pay Paez P70.00 for

every ton of manganese ore delivered to him. Also, Reliance was to advance the expenses

of mining and hauling and the same were deductible from the agreed consideration of

P70.00 per ton. Reliance complied with the agreement, but Paez failed to make even a

single delivery of manganese ores. In fact, there was no mining operation at all.

Consequently, Reliance rescinded the contracts. In reciprocal obligations, the power to

rescind is given to the injured party. More, the rescission of the contracts requires the

parties to restore to each other what they have received by reason of the contract. Therescission has the effect of abrogating the contracts in all parts. DHTCaI

SYLLABUS

CIVIL LAW; OBLIGATION AND CONTRACTS; DIFFERENT KINDS OF

OBLIGATIONS; RESCISSION OF RECIPROCAL OBLIGATIONS. — In reciprocal

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obligations, the power to rescind or resolve is given to the injured party. More, the

rescission of the contracts requires the parties to restore to each other what they received

by reason of the contracts. The rescission has the effect of abrogating the contracts in all

parts.

D E C I S I O N

PARDO, J p:

The case before the Court is an appeal from a decision of the Intermediate Appellate

Court, the dispositive portion of which reads:

"WHEREFORE, the decision appealed from is hereby set aside and another one

entered, declaring both the 'Deed of First Real Estate Mortgage' (Exhibit F) andthe 'Addendum to Operating Agreement' (Exhibit A) null and void, and ordering

defendant Reliance Commodities, Inc. to pay the plaintiffs the amount ofP20,000.00 for unrealized profits in the amount of P3,500.00 as attorney's fees.

The restraining order issued in this case is hereby made permanent. cdtai

"Cost against the defendant Reliance Commodities, Inc.

"SO ORDERED." 1

The facts, as found by the Intermediate Appellate Court, are as follows:

". . . on April 19, 1972, plaintiff Marvin Paez entered into contract with Samuel

Chuason, president and general manager of defendant Reliance Commodities,Inc. whereby the latter agreed to provide the former with funds and equipment

for the operation of the manganese mining claims of Daniel Garde located in

Malinas, Gabaldon, Nueva Ecija. (Exhibit I, RTC Record, p. 199). On June 1,1972, Samuel Chuason and Marvin Paez entered into another agreement called

'Addendum to Operating Agreement' (Exhibit A, Folder of Exhibits, p. 1), the

pertinent provisions of which are as follows:

"(1)PAEZ shall segregate the Manganese Ores into two (2) classes:

"Pursuant to this agreement and upon the suggestion of plaintiff Marvin Paez,

defendant Reliance Commodities, Inc. gave a cash advance of P8,300.00

(Exhibit B, Ibid., p. 5). With this amount, plaintiff Marvin Paez hired laborersand purchased the necessary tools, supplies and foodstuff. With the bulldozer,

dump truck and cobra drill supplied by defendant Reliance Commodities, Inc.

the mining operation in the mountains of Gabaldon, Nueva Ecija started on July

1, 1972 (t.s.n. August 27, 1976, pp. 9-10).

http://www.cdasiaonline.com/search/show_article/6463?search=%28obligation+and+contracts%29#footnotes




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"On July 28, 1972, plaintiffs Marvin Paez and his wife Rosa Valino executed a

deed of first real estate mortgage on their property (Exhibit F, Folder of

Exhibits, p. 9) in favor of defendant Reliance Commodities, Inc. as security formore cash advances needed to sustain the mining operation.

"On the basis of this mortgage agreement, defendant Reliance Commodities,Inc. made several cash advances to plaintiff Marvin Paez (Exhibits 6, 7, 8 and 9,

RTC Record, pp. 203, 204, 206, 208) amounting to P25,030.00. Subsequently, a

difference arose between plaintiff Marvin Paez and defendant companyconcerning cash advances. Defendant Reliance Commodities, Inc. demanded

the return of the bulldozer, the dump truck and the cobra drill. Marvin Paez'

laborers refused to release the equipment, for the reason that they had not been

paid their wages. Defendant Reliance Commodities, Inc. thereupon gave plaintiff Marvin Paez the amount of P800.00 on November 24, 1972 for the

laborers' salaries (Exhibit C, Folder of Exhibits, p. 6). Later, defendant Reliance

Commodities, Inc. foreclosed extrajudicially the mortgage executed by

plaintiffs in its favor. Consequently, the provincial sheriff of Nueva Ecija servednotice on plaintiff Marvin Paez that the mortgaged property would be sold at

public auction on June 4, 1974.

"Plaintiff Marvin Paez with his wife as co-plaintiff filed the present action in the

court below (Court of First Instance of Nueva Ecija) on May 29, 1974, praying

for: 1) a writ of preliminary injunction to enjoin the provincial sheriff from proceeding with the auction sale, 2) an order annulling the Deed of First Real

Estate Mortgage (Exhibit F, Ibid., p. 9) and the Addendum (Exhibit A, Ibid., p.

1), and 3) a directive requiring the defendant Reliance Commodities to makefurther cash advances to plaintiffs in the amount of P75,000.00 plus moral

damages, attorney's fees and costs." 2

In the answer filed on July 8, 1974, defendants claimed that the violation of the contracts

came from the plaintiffs because they failed to deliver at all the manganese ores

stipulated in the contract according to the schedule outlined. Hence, plaintiffs were not

entitled to rescind the contracts or recover damages and by reason of which defendant

was entitled to foreclose on the security constituted. 3

After due trial on May 30, 1974, the trial court rendered a decision in favor of defendants,

the dispositive portion of which reads:

"WHEREFORE, judgment is hereby rendered in favor of defendant RelianceCommodities, Inc. and against the plaintiffs-spouses Marvin Paez and Rosa

Valino, as follows:

"(1)Ordering the dismissal of the complaint filed by said plaintiffs in this case,

for lack of merit; and

"(2)On the counterclaims of said defendant Reliance: prcd









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"(a)Ordering the said plaintiffs jointly and severally, to pay unto the

defendant Reliance Commodities, Inc. the sum of P41,130.00,

representing the cash advances they received from the said company,with interest thereon at the rate of 12% per annum from the dates of

receipt of said advances until the same are fully paid;

"(b)Ordering the said plaintiffs, jointly and severally, to pay unto the

defendant Reliance Commodities, Inc. the sum of P5,000.00 as and for

attorney's fees;

"(c)Setting aside the restraining order heretofore issued in this case so

that defendant Reliance may proceed with the extrajudicial foreclosureof the real estate mortgage in its favor upon plaintiff's failure to pay the

cash advances and interest thereon which they are ordered to pay under

this decision; and

"(d)Ordering the said plaintiffs to pay the costs.

"SO ORDERED.

"Cabanatuan City, May 24, 1982." 4

On November 25, 1982, respondents Marvin Paez and Rosa Valino as defendants in the

lower court filed an appeal to the Court of Appeals. 5

On March 10, 1986, the Intermediate Appellate Court promulgated its decision, quoted in

the opening paragraph of this opinion.

Hence, this petition. 6

The basic issue raised is whether the Intermediate Appellate Court erred in finding that

the petitioner, not respondent, gave cause for rescission of the contracts and in ruling that

restitution was not available in rescission of contracts under Article 1191 of the Civil

Code.

We rule in favor of petitioners. 7

Under the agreement of petitioner Reliance Commodities, Inc. with respondent Mervin

Paez, the former was to pay Paez P70.00 for every ton of manganese ores delivered with

a grade of 40% to 46% or over. Payment was to be made upon delivery of the ores at the

stockpile yard at Gabaldon, Nueva Ecija. Petitioner Reliance was to advance the expenses

of mining and hauling as they were incurred every fifteen (15) days, and that advances

made were deductible from the agreed consideration of P70.00 per ton.

















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Petitioner made cash advances to respondent Paez totalling P41,130.00 and also turned

over to him three heavy equipment for use in the mining operation. On the other hand,

respondent Paez failed to make even a single delivery of manganese ores to the stockpile

yard at Gabaldon. In fact, there was no mining operation at all.

Consequently, petitioner rescinded the contracts. Contrary to the ruling of the appellatecourt, in reciprocal obligations, the power to rescind or resolve is given to the injured

party. 8 More, the rescission of the contracts requires the parties to restore to each other

what they have received by reason of the contracts. 9

The rescission has the effect of abrogating the contracts in all parts. 10

WHEREFORE, the Court GRANTS the petition for review on certiorari, and

REVERSES the decision of the Intermediate Appellate Court. The Court REVIVES and

AFFIRMS the decision of the trial court, with the modification that the sum to be

restituted to petitioner Reliance Commodities, Inc. shall earn legal interest only from thefinality of this decision until fully paid.

RELIANCE WINS…

No costs. LibLex

SO ORDERED.

Puno and Kapunan, JJ . , concur.

Davide, Jr . , C . J . , is on official leave.

Ynares-Santiago, J . , took no part.

EN BANC

[G.R. No. 14539. December 18, 1920.]

FELISA OSORIO and DANIEL TIRONA, plaintiffs-appellants, vs .

CHAS. R. BENNET, district engineer of Cavite, and THEPROVINCIAL BOARD OF CAVITE, defendants-appellees.

Sumulong & Estrada for appellants.

Provincial Fiscal Reyes for appellees.













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SYLLABUS

1.CONTRACTS; RECIPROCAL OBLIGATIONS; RESOLUTION OR

PERFORMANCE. — The remedies granted by law to exact the fulfillment of the

obligation or its resolution are, when the obligation is reciprocal, alternative and not

cumulative. When the resolution of the obligation is demanded, the fulfillment thereofcannot, even indirectly, be asked at the same time.

2.ID.; ID.; INDEMNIFICATION IN CASE OF RESOLUTION. — The

indemnification to which the plaintiffs are entitled, when they elect to resolve the

obligation, should be the damages incidental to the nonfulfillment of the obligation

but not those which the defendant would have to pay as expenses should they fulfill

the obligation.

D E C I S I O N

AVANCEÑA, J p:

The plaintiffs are owners of a parcel of registered land used as a fishery which

is described in paragraph two of the amended complaint. They purchased it from

Sidney D. Sugar, the person who secured its original registration in accordance with

the Land Registration Law. About the month of September, 1916, the defendants

occupied, some where in the western part, a portion of this land of an area of 13,000

square meters in order to convert it into a provincial road.

The plaintiffs bring this action to recover of the defendants the value of this

piece of land at the rate of one peso (P1) per square meter, and the value of another

portion of 2,380 square meters, which was rendered useless as a fishery because of the

construction of the road. According to the plaintiffs, the defendants, in the

construction thereof, removed part of the fishery's dyke, as a result of which about

40,000 fish valued at P4,000 escaped from it. They, therefore, also ask judgment

against the defendants for this sum. Lastly, they ask that judgment be rendered,

granting them an indemnification, for the profits they failed to receive, in the sum. of

P200 for each month that had elapsed since September, 1916.

The court absolved the defendants from the complaint and the plaintiffsappealed.

It appears from the evidence, and it is admitted by the parties, that a part of the

Cavite-Noveleta provincial road in the Province of Cavite, which was constructed in

1916, occupied a portion of land included in the title of the plaintiffs, situated

somewhere in the western part, and having an area of 13,000 square meters, and that

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the defendants occupied it because the plaintiffs ceded it to them under certain

conditions.

According to the plaintiffs, the most important of these conditions was that the

defendants, in filling up the new road, should use the mud which must be taken from

the high part of the fishery until its bottom should be on a level with the rest. As

stated by the plaintiffs and as the fact seems to be, this condition was the only

compensation for the cession of their land, because by this excavation the part dug up

would become an enlargement of the fishery already existing. The defendants state

that this condition was imposed by the plaintiffs after the construction was

commenced and not at the time of making the cession. After an examination of the

evidence we reach the conclusion that this condition was imposed from the beginning.

We note immediately that the defendants in their last amended answer make

this allegation:

". . . by virtue of this gratuitous verbal concession, the province took

possession of the lands of the plaintiffs, with their knowledge, and consent, andwithout any objection on their part, said plaintiffs having imposed the

conditions necessary for filling up the road, which condition was that the higher

parts of the lands shall be dug up. This has been done by the defendants for the benefit of the plaintiffs and resulted in the construction of one hectare more or

less of new fishery, land having been taken from the higher portions and used to

fill up the road."

It appears that after the commencement of the work the plaintiff, Felisa Osorio,

observed that the conditions imposed by them in making the cession were not

complied with, and she wrote a letter (Exhibit C) to the defendant Chas. R. Bennet,

district engineer of the Province of Cavite, demanding compliance with them. The

defendant Mr. Bennet answered by letter dated October 3, 1916 (Exhibit E), from

which it may be inferred that this condition was imposed when the cession was made.

Referring to the condition relating to the taking out of mud in the higher part of the

plaintiffs' fishery, Mr. Bennet stated in this letter, as if to make it understood that he

was fulfilling the conditions that there were fourteen bancas that were carrying away

the mud from the higher part of the fishery and from other parts designated by the

caretaker of the plaintiffs. In this letter he further made the assurance that the

provincial board would approve the contract submitted by the plaintiffs and would

authorize him to sign it. The contract referred to was a memorandum of a contract

which the plaintiff Mrs. Felisa Osorio had attached to said letter for the defendants to

sign; and this memorandum stated that one of the conditions of the cession was thatthe new road should be filled up with mud from the higher part of the fishery. The

defendant, Mr. Bennet, declaring as a witness himself admitted having agreed with

plaintiff Mr. Tirona that he would take out mud from the higher part of the fishery,

although he stated that it was to be used in a certain part of the road to secure more

economy in the construction thereof.

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As to all other points, the plaintiffs proved, and it is inferred from the evidence

of the defendants, that at least they did not fully comply with these conditions. The

filling up of the road was to a great extent made with mud taken from nearby lands

instead of mud taken from the higher part of the fishery.

There was another condition which the defendants also failed to fulfill. For the

construction of the road it was necessary to construct two lateral walls and fill up the

intervening space which would be the road. The plaintiffs agreed that the wall of the

fishery should be used as one of the walls on condition that the defendants should pay

its value. Thus it was necessary to build only one wall. It was agreed that the value of

the plaintiffs' wall would be the same as the cost of the other wall which the

defendants would construct, giving it the same form and dimensions. It is admitted

that the defendants did not pay the plaintiffs any sum for the value of their wall. It

also appears that the new wall which the defendants built was narrower, and this

results in the impossibility of determining the value which the defendants should pay

for the plaintiffs wall.

The defendants having failed to comply with the principal conditions imposed

by the plaintiffs when the cession was made, the latter have the right to set aside the

cession and recover the value of the land occupied by the defendants. The right to

resolve the obligation is implied in reciprocal obligations, when one of the parties

fails to comply with his part thereof. (Art. 1124, Civ. Code.)

But the defendants have also alleged, and the court found it to be proved, that

the land occupied by the new provincial road and included in the plaintiffs' title was

the old provincial road. If this is true, it must be considered as excluded from the

plaintiffs' title and they have no right to recover anything as its value. Nevertheless,

the evidence does not bear out this allegation. In order to determine this question offact, the court made an ocular inspection of the land in the presence of the parties. The

court states that he found the remains of the pavement of a bridge and two posts.

Upon this bridge, which separated the old road, there was a small lodging quarter.

From the shape of this payment and the situation of the two posts the court infers that

from the bridge the old road must have taken a southeastern course towards Noveleta.

If, in reality, this was the course of the old road, it would run just a few meters from

the bridge into which the new road runs. It seems, however, that this deduction is not

based upon proven hypothesis. There is no proof that, as the court found, the shape of

the pavement is the same as when the bridge existed. Neither is there proof that the

two posts, which the court described, were the only posts to be found and that there

were no others the different situation of which might indicate that the old road ran in

another direction. But above all, this deduction of the court is openly contrary to other

evidence of the defendants themselves. The latter presented the old official plan of the

old road in which appears the place where the bridge, referred to by the court, was

situated. It appears in this plan that from the bridge the course of the old road was not

to the southeast but to the southwest, and, taking the latter direction into account, the

old road could not be where the new one is.

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The claim of the plaintiffs that the land occupied by the defendants is worth P1

per square meter cannot be accepted. It appears that when the plaintiff Daniel Tirona

himself was provincial assessor he assessed this land at the rate of P0.04 per square

meter. It is alleged that the rise in the price of salt increased the value of fisheries

because a fishery may be converted into a salt pit. But no evidence was presented as

to what would be the cost of converting a fishery into a salt pit in order to determinehow far the price of salt in the market may affect the value of the fishery. In any

event, when the land in question was occupied by the defendants, it was a fishery and

not a salt pit and we cannot give it a value not its own. We agree that the land of the

plaintiffs, in the portion occupied by the defendants, was worth P0.04 per square

meter.

With respect to the area of 2,300 square meters which according to the

plaintiffs, was rendered useless as a fishery, we believe that the plaintiffs are not

entitled to recover anything for it, as it has not been occupied by the defendants.

Having reached this conclusion as to the value of the land, we cannot admit

that the profits which the plaintiffs failed to perceive from this land was, as claimed,

P200 per month. These lands, at the rate of P0.04 per square meter, would be worth

P520 and the indemnity of P200 per month, which the plaintiffs claim, would clearly

be disproportionate. We have no other data by which to determine the exact quantity

of the damages suffered by the plaintiffs, but we believe that the same would be justly

appraised at the rate of 6 per cent annual interest on the value of the land.

As to the 40,000 fish which, according to the plaintiffs, escaped from the

fishery, neither is there sufficient proof. Although it is true that part of the old wall

caved in, the evidence is not dear as to the loss of the fish. There is evidence to showthat when the wall caved in, the old wall existed and the passage-way, where, it is

said, fish passed into the sea, was closed with a wooden board, according to the

plaintiffs' own witnesses.

Another error which the appellants impute to the lower court is that it did not

permit them to prove what it would cost to dig up the higher part of the fishery until

its bottom should be at a level with the remaining part. The idea of the appellants

seems to be that, by virtue of the action instituted in this case, they are entitled to

recover of the defendants, as damages, the value of this work which the latter agreed

but failed to perform. We have said that for the failure of the defendants to comply

with this obligation, the plaintiffs have the right to ask for its performance or toresolve the cession, with indemnity for damages, in accordance with article 1124 of

the Civil Code. But these remedies granted by law are alternative. They are not

cumulative, because the resolution of a contract and its performance are incompatible

with each other. Having elected the right to resolve, the plaintiffs cannot, at the same

time, demand the fulfillment of the obligation. If in this action the plaintiffs could

recover of the defendants the cost of digging up the higher portion of the fishery, that

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would amount indirectly to compliance by the defendants, with the obligation. In that

manner the plaintiffs would, at the same time, be availing themselves of the two

remedies of resolving the obligation and exacting its fulfillment.

The indemnification which the plaintiffs are entitled to recover in this action

should be limited to the damages incidental to the nonfulfillment of the obligation by

the defendants and not those which the defendants would have been obliged to pay as

expenses, supposing that they had complied with the obligation.

The judgment appealed from is, therefore, reversed and the defendants are

sentenced to pay to the plaintiffs the sum of P520.40, which is the value of the land

occupied by the provincial road of Cavite, with interest at 6 per cent per annum from

September 6, 1916. The defendants are absolved from all other prayers of the

complaint. No special pronouncement as to costs will be made. So ordered.

PLAINTIFF WINS..

Mapa, C.J., Araullo, Street, Malcolm and Villamor, JJ concur.

EN BANC

[G.R. No. L-3838. December 27, 1950.]

RITO V. CRUZ and TEODORA CORONEL-CRUZ, petitioners, vs .FRANCISCO E. JOSE, Judge of the Court of First Instance ofBulacan, SEVERO ABELLERA, Sheriff of Rizal, and DONATODEL ROSARIO, respondents.

Mariano M. Magsalin, for petitioners.

Amado B. Reyes, for respondent Del Rosario.

SYLLABUS

1.OBLIGATIONS AND CONTRACTS; PAYMENT MAY LEGALLY BE

MADE ON SUNDAYS OR ANY HOLIDAYS. —

Payment of an obligation may

legally be made even on Sundays or any holidays.

D E C I S I O N

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MORAN, C.J p:

This is a petition for a writ of prohibition to prevent execution of a judgment

rendered by the respondent Court of First Instance of Bulacan.

Respondent Donato Del Rosario filed an action against petitioners Rito V.

Cruz and Teodora Coronel Cruz, for recovery of the sum of P2,109. Parties enteredinto an amicable settlement by which the defendants paid P350 in cash and bound

themselves to pay the balance of P1,759 in the following manner:

On or before February 15, 1950P50.00

On February 28, 1950200.00

On March 30, 1950200.00

On April 30, 1950200.00

On May 30, 1950200.00

On June 30, 1950200.00

On July 30, 1950200.00

On August 30, 1950200.00

On September 30, 1950200.00

On October 30, 1950109.00

————

TotalP1759.00

Parties had agreed that "if the defendants fail for any reason whatsoever to pay any of

the monthly installments when it respectively falls due, the whole balance of theaccount or indebtedness that still remain unpaid shall become due and demandable;

and that execution will issue immediately against the defendants' motorboat

'DIONISIO' which stand as security of defendants' obligation in favor of the plaintiff

and/or other property or properties not otherwise exempt from execution. . . ."

A judgment was rendered by the court in accordance with the terms and

conditions of this amicable settlement.

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On April 30, 1950, the defendants defaulted in the payment of the installment

due on that date, whereupon on May 5, 1950, a motion for execution of the judgment

was filed by plaintiff, Donato del Rosario. The defendants were notified of the motion

on May 6, 1950, but on May 10, when the motion was called for hearing, said

defendants failed to appear either personally or by counsel. The respondent court

granted the writ of execution, hence this petition for prohibition to prevent thecarrying out of the writ.

Petitioners alleged that their failure to pay on September 30, was due to the

fact that such day was Sunday, and the next day was a holiday. But the respondent

court rightly refused to accept such explanation because payment may be made either

on Sundays or any holidays. Furthermore, if such explanation were true, when the

motion for execution was filed on May 5, of which petitioners were notified on May

6, petitioners would have offered payment immediately. But they did not do so and

when the motion for execution was called for hearing on May 10, petitioners failed to

appear. And it was only on May 11, that they made offer of payment consigning the

amount due in court. All this shows that if petitioners failed to make payment onSeptember 30, it was not because of any Sunday or holiday, but because of lack of

money, and this is corroborated by respondent Donato's statement in his answer to the

effect that on May 5, one of the petitioners came to him to ask for some more days of

grace to pay their debt, a request that was flatly denied by him.

We are of the opinion and so hold that the writ of execution was properly

issued by the respondent court.

Petition is denied with costs against petitioners.

Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyes, Jugo and Bautista

Angelo, JJ., concur.

Moran, C.J., Mr. Justice Paras and Mr. Justice Feria voted for denial.

RESPONDENT’S WINS

EN BANC

[G.R. No. L-2268. October 20, 1950.]

FEDERICO G. SANTIAGO, plaintiff-appellant , vs . BINALBAGANESTATE, INC., defendant-appellee.

Jose L. Blanco and Federico G. Santiago, for appellant.

Marcial P. Lichauco and Augusto Kalaw, for appellee.

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SYLLABUS

1.OBLIGATIONS AND CONTRACTS; DEBT MORATORIUM; WAIVER

BY PARTIAL PAYMENT. — Where part of the obligation alleged to be covered by

the debt moratorium is paid, the benefit of this provision is waived.

2.ID.; ID.; GRATUITY, WHEN A MONETARY OBLIGATION. — A

gratuity becomes a monetary obligation on the date it is approved by the proper

authorities.

D E C I S I O N

PARAS, J p:

The plaintiff entered the service of the defendant on October 20, 1940, first as

stenographer and subsequently in various capacities until he resigned effective

February 16, 1947, due to ill health. The highest monthly salary received by the

plaintiff during the period of his employment was P250. Plaintiff's connection with

the defendant was continuous, except when it was interrupted by the outbreak of the

last war and the entry of the Japanese Army in Manila on January 2, 1942, when the

defendant's Manila office was closed until the early part of February, 1942, and by the

battle for the liberation of Manila when said office was closed from February 3, 1945,

up to the early part of August, 1945.

While the plaintiff was thus employed, Resolution No. 31 of the board ofdirectors of the defendant, approved on June 9, 1936, was in force. It provided that all

permanent employees of the defendant separated from the service on or after July 1,

1938, for any reason other than inefficiency or misconduct, were entitled to

retirement gratuity at the rate of one month's salary for each year of service, andthe proportionate amount of any fraction thereof, said gratuity to be based onthe highest basic rate of salary received.

The plaintiff duly applied for retirement under Resolution No. 31. In its

Resolution No. 8, approved on February 5, 1947, the board of directors of the

defendant approved the payment to the plaintiff of retirement gratuity from October

20, 1940, to December 31, 1941, based on the monthly salary of P150, the totalamount received by the plaintiff, under protest, being P179.20. The plaintiff, in his

communication of April 10, 1947, demanded from the defendant the payment of

P1,401.23, representing unpaid balance of this gratuity for service rendered from

October 20, 1940, to February 15, 1947, based on the highest basic rate of salary of

P250 per month. On April 16, 1947, the board of directors of the defendant adopted

Resolution No. 21, approving plaintiff's claim for retirement gratuity for his service

from August 22, 1945, to February 15, 1947, and, in accordance with said resolution,

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the plaintiff received, under protest, the sum of P356.36, based on P200 per month as

the highest basic rate of salary. This second payment included a difference due under

the first payment which was computed only on P150 per month. On June 17, 1947,

the plaintiff addressed a letter to the defendant, reiterating his right to retirement

gratuity for the entire period of his service, including the period covered by the

Japanese occupation. This demand was rejected by the defendant in its letter of June21, 1947, on the ground that the defendant lost heavily during the war and had

resolved to pay retirement gratuity to its employees only up to December 31, 1941.

The present action was instituted by the plaintiff in the Court of First Instance

of Manila to recover from the defendant the sum of P1,044.18, representing unpaid

retirement gratuity due and owing by the defendant to the plaintiff for services

rendered from October 20, 1940, to February 15, 1947. The parties entered into a

partial stipulation reciting substantially the facts above related. After they had waived

their right to present additional evidence and submitted the case for decision on the

pleadings, the trial court absolved the defendant from the complaint with respect to

the gratuities already paid, and dismissed the case, without prejudice, with respect togratuities corresponding to the period covered by the Japanese occupation, from

which judgment the plaintiff interposed the instant appeal.

The defendant-appellee invokes the debt moratorium as regards the gratuity, if

any, due for services rendered during the Japanese occupation, and the trial court

appears to have sustained the defendant's position. This is error, because the defendant

had already chosen to pay the gratuity due from October 20, 1940, to December 31,

1941, which is also covered by the debt moratorium. Moreover, plaintiff's gratuity

became a monetary obligation of the defendant only when its board of directors

approved the retirement on February 5, 1947, or after Manila had been freed from

enemy occupation and control, and is therefore not covered by the debt moratorium.

It is contended that the plaintiff cannot assail the finding of fact of the trial

court that the plaintiff received gratuities corresponding to 1940 and 1941 and to the

period from August 22, 1945, to February 15, 1947, because he has appealed to the

Supreme Court purely on questions of law. This is erroneous. The payments already

made to the plaintiff and the periods intended to be covered by said payments, are

admitted by the plaintiff. He, however, has the right to contend, as a question of law,

that the trial court erred in basing the computation of said payments on P200 per

month, and not on P250 per month.

It is immaterial, contrary to intimations of the defendant, whether plaintiff'semployment was continuous, because Resolution No. 31, upon which defendant's

claim is founded, does not require continuous service in order that an employee may

be entitled to retirement gratuity.

Defendant also argues that gratuity is not a right and may be withdrawn at any

time by the defendant. Assuming that the defendant may at pleasure abolish its

retirement system, the facts in this case do not reveal that the defendant has ever

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resolved to withdraw the benefits bestowed by Resolution No. 31. Indeed, defendant's

contention is inconsistent with the circumstance that it paid to the plaintiff gratuity for

the period subsequent to the Japanese occupation, namely, from August 22, 1945, to

February 15, 1947. This payment is also inconsistent with the contention that the

defendant had resolved to pay retirement gratuities only up to December 31, 1941.

As Resolution No. 31 plainly provides that the gratuity must be computed on

the highest basic rate of salary, the gratuity to which the plaintiff is entitled for the

entire period of his employment must be based on P250 per month. It is, however,

argued that said monthly salary of P250 should not be taken as a basis, because it was

paid in Japanese military notes which were of a much lower value than the Philippine

currency. Resolution No. 31 makes no specification of the currency with which the

retirement gratuity is to be paid. The distinction is therefore not important. Moreover,

the monthly salary of P250 was given to the plaintiff beginning August 1, 1943, not

because of the low purchasing power of the then Philippine peso but because the

plaintiff was appointed secretary-treasurer of the defendant, a position undoubtedly

much higher than the other positions held by the plaintiff.

In view of the fact that Resolution No. 31 provides that the gratuity should be

one month's salary for each year of service, and the proportionate amount of any

fraction thereof, the plaintiff is entitled to collect gratuity only for the service actually

rendered by him, that is, excluding the periods during which, according to the

stipulation, the defendant was closed.

It being necessary to determine the exact period during which the plaintiff had

rendered actual service to the defendant, and the corresponding amount still due him

as gratuity for said period, which are matters of fact, the case has to be, as it is hereby,

remanded to the lower court for further proceedings in conformity with this decision.So ordered, without costs.

Moran, C.J., Feria, Pablo Bengzon, Tuason and Reyes, JJ., concur.

EN BANC

[G.R. No. L-10679. November 29, 1958.]

ABELARDO PAGES, plaintiff-appellant , vs . BASILAN LUMBERCOMPANY, defendant-appellee.

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Villena & Almeda, and Briones, Duterte, Yap, Gillamac, Rubillos & Montecillo

for appellant.

Ramon A. Lumabao and Pelaez, Pelaez & Pelaez, for appellee.

SYLLABUS

1.OBLIGATIONS AND CONTRACTS; ABSENCE OF PERIOD WITHIN

WHICH OBLIGOR MAY PERFORM THE OBLIGATION; WHEN OBLIGEE

MAY DEMAND PERFORMANCE. — When there is no time limit fixed for the

performance of the obligation, the obligee may not ask for the performance of the

obligation without first asking for the fixing by the court of the period or terms within

which the obligor must comply with his obligation. The period should first be

determined, because in the absence of such term or period, there can be no breach of

contract or failure to perform the obligation.

D E C I S I O N

MONTEMAYOR , J p:

This is an appeal from the order of the Court of First Instance of Cebu,

dismissing the complaint filed by plaintiff Abelardo Pages against the Basilan Lumber

Company, for breach of contract and for damages, P1,080,000.00 as compensatory

damages, P500,000.00 as moral damages, P8,000.00 for the value of the logs which

the defendant allegedly refused to buy or to pay for, and P150,000.00 as attorney's

fees, including the amount of P183,155.55 as the value of the units and equipment

said to belong to the plaintiff in case of failure to deliver the same.

After plaintiff-appellant had presented his evidence and rested his case,

defendant-appellee moved for the dismissal of the complaint on the ground that the

plaintiff had no cause of action against it, that the contract sued upon was void and

invalid, since it did not express the true intent of the parties, and the cause and

consideration was contrary to law and the existing rules and regulations of the Bureau

of Forestry. The trial court granted the motion and dismissed the complaint on the

same grounds alleged by the defendant.

The contract involved (Exhibit B) was entered into between the parties on

September 4, 1950. For purposes of reference, we reproduce the pertinent portions

thereof:

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"1.Party of the First Part is the sole proprietor of the Port Santa Maria

Lumber located at Siocon, Zamboanga, holding Forest License No. Twenty-

four -F (24-F) from the Bureau of Forestry Manila, Philippines;

"2.Party of the First Part does hereby agree and bind himself, his heirsand administrators to sell, within the terms of this agreement, all the logs which

are, or may be, produced from the forestry area described under the abovementioned license at the following prices based upon the Bureau of Forestrymonthly scale report:

(a) Eight (P8.00) pesos, Philippine Currency, per Cubic-Meter of export

logs;

(b) Four (P4.00) pesos, Philippine Currency, per Cubic Meter of mill

logs;

(c) Fifteen (15.00) pesos, Philippine Currency, per Cubic-Meter of groupone spicies. . . .

xxx xxx xxx

"3.Party of the Second Part does hereby agree and bind itself to buy and

purchase from Party of the First Part all the logs which may be produced at the

Port Santa Maria Lumber within the term of this agreement at the prices andunder the conditions mentioned in Paragraph 2 hereof;

"4.The term of this agreement shall be for a period of TEN (10) YEARS

counted from the date of approval hereof by the Bureau of Forestry. Thereafter,

it shall be renewed yearly. Provided, however, that this term shall besubordinated and subject to the period during which the Party of the First Part

shall continue to hold a license from the Bureau of Forestry regarding the forest

area, under which license Party of the First Part presently operates;

"5.In order to speed up and facilitate logging operations at the Port SantaMaria Lumber by Party of the First Part, Party of the Second Part does hereby

agree and bind itself to transport all necessary units belonging to Party of the

First Part to the Basilan Lumber Company, Isabela, Basilan City, for overhauland repair without costs to Party of the First Part. Any addition and

improvement which party of the Second Part may place on said units shall

become the property of the Party of the First Part;

"6.In order to further facilitate log production, Party of the Second Partdoes agree and bind itself to send technical men within a reasonable time and as

necessary, and to move equipments belonging to the Basilan Lumber Company

to the Abelardo Pages License forest area. These equipments shall remain the property of the Party of the Second Part. This shall be in consideration of allsaw-mill facilities, equipments, shop tools and machineries which Party of the

First Part shall turn over to Party of the Second Part as loan during all the time

this contract is in effect;

"7.Party of the Second Part will advance and deliver to Party of the FirstPart the sum of ten thousand (P10,000.00) pesos Philippine Currency, upon

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approval hereof by the Director of the Bureau of Forestry, Manila, as advance

payment against log deliveries from the Abelardo Pages forest area.

xxx xxx xxx

"9.The logging operational expenses shall be for the account of the Party

of the First Part. The Party of the Second Part shall, however, reimburse and payto Party of the First Part whatever sums of money he may have spent on account

thereof during a monthly accounting period:

"10.It shall be understood that the reimbursements contemplated andreferred to in paragraph nine (9) hereof, shall be in addition to the purchase

price mentioned and referred to in paragraph two (2) and three (3) hereof. In

other words, the total consideration which will be paid for the logs shall be the

operational costs plus the amount which may be paid for the logs ascontemplated in paragraph two (2) hereof."

The plaintiff is the grantee or owner of a lumber concession, given by the

Bureau of Forestry, of a forest area in Siocon, Zamboanga, and was licensed to

operate it under the name of Port Santa Maria Lumber. The defendant is a corporationwith its principal office at Basilan City, and is presumably engaged in the lumber

business and possesses machinery and equipment used in said business. It would

appear that there was a preliminary agreement, Exhibit A, between the parties before

the execution of the contract, Exhibit B. Under this preliminary agreement, the

Basilan Lumber Company was to operate the lumber concession of the plaintiff and

actually conduct logging operations with its own equipment, all at its own expense.

When this agreement was submitted to the Bureau of Forestry, the latter objected to it,

saying that according to its rules and regulations, only the licensee or concessionaire

is allowed to conduct logging operations within the concession; that if the plaintiff

wanted to retain the license in his name, and he needs machinery or equipment andtechnical men belonging to another party, he should lease said machinery and

equipment and hire the technical men to operate the concession, but that said technical

men must be employed by the concessionaire himself. This evidently was the reason

why the contract, Exhibit B, in order to be approved by the Director of Forestry,

which in fact was approved, made it appear that the plaintiff himself was going to

operate the concession and conduct logging operations and was to finance the same,

although eventually, it would be reimbursed by the defendant for its operational

expenses, the same to be in addition to the cost of the logs to be bought by the

defendant; that the defendant was not only to lend its equipment for the use in the

logging operations, but it would even overhaul and repair the equipment of the plaintiff by transporting the same to its compound and shops in Basilan. From this, the

trial court correctly found that Exhibit B did not express the true intent of the parties;

that it was simulated, and that as a matter of fact, from the time of the execution of the

contract, Exhibit B, or shortly thereafter, about December, 1950, up to June, 1952,

when logging operations were suspended, it was the Basilan Lumber Company that

actually conducted logging operations and financed said operations, this being the real

intention and agreement of the parties, the plaintiff never advancing or paying any of

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the said operational expenses; all contrary to the rules and regulations of the Bureau

of Forestry and the policy of the Government, and contrary to what the Director of

Forestry was given to understand by the parties.

In suing on the contract, Exhibit B, and in his effort to prove breach thereof,

the plaintiff introduced evidence to the effect that about the month of June, 1952, the

defendant removed from the logging area logging and hauling equipment, which it

never returned to the same, and withdrew its technical men, thereby stopping

operations. As to the technical men, it will be remembered that one of the conditions

imposed by the Director of Forestry in the approval of the contract, Exhibit B, was

that technical men needed by the plaintiff should be hired by him so that they would

be under his employment and control. The plaintiff, however, never hired said

technical men, but were merely supplied, presumably, free, to him, contrary to the

understanding between the Bureau of Forestry and the plaintiff. Again, according to

the communications exchanged between plaintiff and the defendant after June, 1952,

it would appear that said logging and hauling equipment were removed from the

logging area with the knowledge and consent of the plaintiff and taken to Basilan for purposes of repair and overhauling, in accordance with the contract, Exhibit B.

The communication of the defendant to the plaintiff marked as Exhibit D,

showed that the defendant never intended to abandon the logging operations, because

it had invested considerable amount of money in the same, only that because future

logging operations would cover the hilly portions of the area, a resurvey had to be

made, besides the fact that during the rainy season from July to about December, the

weather and the conditions of the ground were not favorable for logging operations.

This, in addition to the fact that the typhoon that passed over the area had

considerably damaged some of the equipment.

Another point raised by the defendant and favorably discussed by the trial

court in its order of dismissal, is that although according to the contract, the defendant

promised to buy all the logs produced and made ready for sale by the plaintiff, there

was no period of time or limit fixed for said purchase, neither was there a time limit or

period which was agreed upon by the parties as regards the logging operations

actually to be conducted by the defendant, naturally, not under the contract, Exhibit B,

which did not provide for such logging operations by the defendant, but even

according to their own private understanding. Naturally, when there is no time limit

fixed, plaintiff cannot well demand performance of the obligation. But the plaintiff in his brief claims that the trial court should have fixed the

period, if no period was fixed in the agreement. It seems that this point was never

raised before the trial court, and he is not allowed now to raised this point before us.

Furthermore, plaintiff may not ask for the performance of the obligation without first

asking for the fixing by the court of the period or term. The period should first be

determined, because in the absence of such term or period, there can be no breach of

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contract or failure to perform the obligation. In the case of Ungson vs. Lopez, 50 Off.

Gaz. 4297, 4299-4300, citing the case of Concepcion vs. People of the Philippines, 74

Phil. 63, and Gonzales vs. De Jose, 66 Phil. 369, citing Article 1128 of the Old Civil

Code (now Article 1197 of the New Civil Code), this Court said:

"On obligations coming within the purview of the above cited provision

the only action that can be maintained is that to ask the court to determine theterm within which the obligor must comply with his obligation for the reason

that the fulfillment of the obligation itself cannot be demanded until after the

court has fixed the period for its compliance and such period has arrived."

With respect to the logs amounting to 2,000 cubic feet, which defendant

supposedly failed or refused to purchase, although ready for sale, plaintiff himself

admitted that logs to be bought by the defendant must be placed at the seashore, and

after the necessary scaling thereof by the forest officer; however, the logs in question

were still up in the mountains or the forest where they had been cut and had not yet

been scaled. Consequently, defendant was not yet called upon to make the purchase.

Considering the facts and circumstances in the case, we agree with the trial

court. The appealed order dismissing the complaint is hereby affirmed, with costs.

Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion, Reyes,

J.B.L. and Endencia, JJ., concur.

SECOND DIVISION

[G.R. No. L-5932. February 25, 1954.]

ALEJANDRO SAMSON, petitioner , vs . ANDREA B. ANDAL DEAGUILA, ET AL., respondents.

Engracio F. Clemeña and Cenen S. Ceniza for petitioner.

Sison, Sevilla, Aquino, Paras, Lauro Aguila and Pedro P. Colina for

respondents.

SYLLABUS

OBLIGATIONS AND CONTRACTS; INDEBTEDNESS PAYABLE

DURING JAPANESE OCCUPATION; BALLANTYNE SCHEDULE. — When an

obligation is payable within a certain period of time and the whole or part thereof

coincides with the Japanese occupation, payment after the liberation must be adjusted

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in accordance with Ballantyne schedule, because the debtor could have paid said

obligation in Japanese war notes during the occupation.

D E C I S I O N

PARAS, J p:

On March 4, 1947, Alejandro Samson filed against Agapito B. Andal and

Valentina Berana de Andal in the Court of First Instance of Manila a complaint for

declaratory relief, praying that judgment be rendered fixing the amount which

Alejandro Samson should pay to Agapito B. Andal and Valentina Berana de Andal

under a deed of mortgage executed by the former in favor of the latter, and that the

defendants be ordered to cancel the mortgage upon payment of said amount. On

August 26, 1949, the court rendered a decision, declaring that the amount due fromthe plaintiff to the defendants is P150, Philippine currency, plus annual interest at the

rate of 7 per cent from October 25, 1944, and ordering the defendants to execute the

proper deed of cancellation upon payment by the plaintiff of said amount. The court

applied the Ballantyne scale of values. Agapito B. Andal and Valentina Berana de

Andal appealed to the Court of Appeals which, on June 9, 1952, rendered a decision

holding that the plaintiff should pay to the defendants P6,000 (the full amount of the

loan obtained by the plaintiff on the defendants on October 25, 1944), in actual

Philippine currency, plus the stipulated interest, but subject to the moratorium law.

From this decision Alejandro Samson has appealed to this Court by way of certiorari.

By resolution of October 17, 1952, Agapito B. Andal and Valentina Berana de Andal(who had died) were ordered substituted as parties respondents by their heirs, Andrea

B. Andal de Aguila and others.

The Court of Appeals found that Alejandro Samson, herein petitioner, obtained

from Agapito B. Andal and Valentina B. de Andal on October 25, 1944, a loan of

P6,000, with interest at 7 per cent per annum and, to secure its payment, the former

executed in favor of the latter a real estate mortgage. That court, in holding that the

petitioner should pay P6,000 in present Philippine currency, argued that while the

loan was made during the Japanese occupation, it became due and payable only after

said period. We have heretofore sustained the proposition that, when an obligation is

payable within a certain period of time, and the whole or part thereof coincides withthe Japanese occupation, payment after the liberation must be adjusted in accordance

with the Ballantyne schedule, because the debtor could have paid said obligation in

Japanese war notes during the occupation. (Asis vs. Agdamag, 1 G. R. No. L-3709,

October 25, 1951; Ang Lam vs. Peregrina, 2 G. R. No. L-4871, January 26, 1953.) As

Mr. Justice Feria indicated in his concurring opinion in the case of Gomez vs. Tabia, 3

47 Off. Gaz. 641, the debtor's mere failure to accomplish payment during the Japanese













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occupation did not make him liable to pay, as damage or penalty, the difference

between the value of the Japanese war notes at the time the obligation became payable

and of the Philippine currency at the time of payment. It is true that the creditors

herein could not demand payment prior to October 25, 1945, but this did not preclude

the debtor, herein petitioner, from paying his obligation at any time within one year

from October 25, 1944, if he had wanted to do so.

Wherefore, the decision of the Court of Appeals is hereby reversed, and it is

declared that the amount which the petitioner should pay to cancel his mortgage is

only the sum of P150, the equivalent in actual Philippine currency of P6,000 in

Japanese war notes on October 25, 1944, plus annual interest at the rate of 7 per cent

on the said sum of P150 from October 25, 1944. So ordered without costs.

Bengzon, Reyes, Jugo, Bautista Angelo and Labrador, JJ., concur.

EN BANC

[G.R. No. L-12692 January 30, 1960.]

COSMIC LUMBER COMPANY, INC., plaintiff-appellee, vs .AGAPITA MANAOIS, defendant-appellant .

Primicias & Del Castillo for appellee.

José Rivera for appellant .

SYLLABUS

OBLIGATIONS AND CONTRACTS; WHEN COURT MAY FIX A

PERIOD. — Where in a contract of sale on credit no time for payment of the

obligation was stipulated or fixed by the parties, and from the nature and the

circumstances of the obligation it can be inferred that a period was intended, the Court

may fix the period for payment pursuant to article 1197 of the New Civil Code.

D E C I S I O N

PADILLA, J p:

The defendant's appeal from a judgment of the Court of First Instance of

Pangasinan, Fourth Branch, ordering her to pay the plaintiff the sum of P4,147.74,

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lawful interest thereon from 24 March 1954 when the original complaint was filed

until fully paid (civil case No. 12902), was certified by the Court of Appeals to this

Court for it involves only a question of law.

As agreed upon by the parties, the facts are: On different dates from 10

November 1952 to 30 June 1953 the appellant bought, took delivery and received

from the appellee hardware goods, lumber and construction materials valued at the

total sum of P12,127.57 (par. 1, stipulation of facts; Exhibits A to Z; AA to OO), and

from 4 November 1952 to 10 March 1954 the appellant paid the appellee the total

sum of P6,979.83 which the latter credited to the former's account (par. 3, stipulation

of facts; Exhibits PP, PP-1, QQ, QQ-1 to QQ-2). On 23 December 1954, after the

original complaint had been filed by the appellee (24 March 1954), the appellant paid

the appellee the sum of P1,000 which the latter also credited to the former's account

(par. 6, stipulation of facts), thereby reducing her total indebtedness to P4,147.74.

The appellant does not deny that she received the wares and materials listed in

the invoices (Exhibits A to Z and AA to OO), and that she is still indebted to theappellee in the sum of P4,147.74. At the hearing of the case on 4 June 1956, her

counsel withdrew the objection (filed earlier during the day) to the items listed in

some of the invoices (Minutes of the session of 4 June 1956). However, she argues

that as no time for payment was stipulated or fixed and from the nature and the

circumstances of the obligation it could be inferred that a period was intended, the

Court should fix the period for payment pursuant to article 1197 of the new Civil

Code.

The parties entered into a contract of sale on credit. In the invoices (Exhibits A

to Z and AA to OO) of the wares and materials sold and delivered to the appellant, the

words "credit sales" appear and it is stated that —

All civil actions on this contract shall be instituted in the courts of the City of

Dagupan and it is hereby agreed that all my/our purchases from this Company

are payable in the said City of Dagupan. It is agreed that if this bill is not paidwithin ....... days from date hereof I/we will pay interest at the rate of 10 per

centum per annum on all overdue accounts. The buyer hereby agrees to pay any

and all attorney's fees and court costs should the seller institute legal action.Goods travel at buyer's risk. No claim of whatsoever nature will be considered

after 24 hours from date of delivery.

The parties intended to fix a period for payment of the appellant's obligation

but failed to do so. Under article 1197 of the new Civil Code, the Court may fix it.

Taking into consideration that from 10 November 1952, the first sale, and 30 June

1953, the last sale, to the present, more than six and nearly seven years already have

elapsed, the appellant who does not deny her obligation must be ordered to pay the

appellee the amount she still owes it within fifteen (15) days from the date the

judgment shall have become final.

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With the slight modification just mentioned, the judgment appealed from is

affirmed, with costs against the appellant.

Parás, C. J., Bengzon, Montemayor, Bautista Angelo, Labrador, Concepción,

Reyes, J. B. L., Endencia, Barrera and Gutiérrez David, JJ., concur.

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