Case Digest: Asturias Sugar Central vs Pure Cane Molasses Co., 60 Phil 255

Asturias Sugar Central vs Pure Cane Molasses Co., 60 Phil 255

Subject: Obligations and Contracts

FACTS

Before January 1931, ASC and PCM entered into a contract, whereby ASC bound itself to sell and PCM to buy all the molasses which the ASC would produce at the prices and under the conditions specified therein, one of which was the PCM deposit the sum of P6,000.00 in BPI as security for compliance with the terms, which PCM did. ASC later brought an action against PCM for the amendment of contract. PCM, in its answer, filed on January 14, 1931, raised the question relative to its right to cancel the contract upon payment of P6,000.00 in accordance with the terms thereof, alleging that it had made a demand on the plaintiff to accept the cancellation and to receive P6,000.00 which said plaintiff refused.

Consequently, it prayed that ASC be ordered to accept the P6,000.00 and that the contract be declared cancelled. The lower court rendered judgment that the terms of the contract did not authorize the defendant to cancel it and therefore, the cancellation was not in order.

On appeal, the court reversed the judgment of the trial court and held that, under the terms of the contract, the defendant had the right to cancel it at any time upon payment of P6,000.00, which had been deposited in the BPI for this and other purposes. Upon the filing of MR, the judgment of this court was ratified by resolution of this court of December 31, 1932, which further declared that the contract was deemed cancelled only on November 18, 1932, the date when PCM deposited P6,000.00 with the clerk of the court and when the cancellation was consummated.

After the former case was remanded to the lower court, ASC brought another action against PCM on February 3, 1993, for the recovery of P72, 569.28, representing the alleged damages suffered by ASC by reason of the refusal of PCM to purchase the molasses which it had produced from January 1931 – November 18, 1932. The trial court dismissed the complaint and absolved PCM therefrom. Hence, appealed.

Although the judgment rendered by this court in the former case was not unanimous, it is now res judicata that PCM had the option to cancel the contract at any time upon payment of the P6,000, in accordance with the terms of the document. However, the judgment of this court in the sense that the contract was deemed cancelled on November 18, 1932, implies that the contract in question was in force prior to that date.

ISSUE

Whether or not Pure Cane is entitled to the rescission or cancellation of the contract upon payment of P6,000.

RULING

Yes, Pure Cane is entitled to the cancellation of the contract. Judgement appealed from is reversed and the contract of sale is declared cancelled, and it is ordered that the sum of P6,000 be delivered the Asturias.

Under the law (Art 1191), the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission even after he has chosen fulfillment. If the latter should become impossible.

In this case, the provision states that any obscurity in the contract regarding the point in question, where the terms are susceptible of different interpretations, they should be interpreted in favor of the herein appellant both because the right to cancel was established for its benefit, and because it was the appellee, through its manager, that gave rise to the ambiguity in considering the bond sometimes as a guarantee, and at other times as indemnity for liquidated damages, and lastly as compensation in case of rescission.