Asturias Sugar Central v. Pure Cane Molasses

217.
Asturias Sugar Central v. Pure Cane Molasses Co. (60 Phil. 255)
FACTS: Before Jan 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 that PCM deposit
the sum of P6,000 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 Jan 14 1931, raised the question relative to its right to cancel the
contract upon payment of P6,000 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,
which said plaintiff refused. Consequently, it prayed that the ASC be ordered to accept
the P6,000 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, this 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, 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 Dec 31 1932, which further declared that the
contract was deemed cancelled only on Nov 18 1932, the date when PCM deposited
P6,000 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 Feb 3 1933, 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 Jan 1931 - Nov 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 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 Nov 18 1932, implies that the contract in question
was in force prior to that date.
ISSUE: Whether ASC has the right to demand from PCM the payment of the amount
claimed by it as damages resulting from PCM’s refusal to purchase the molasses it had
produced from the month of Jan 1931 - Nov 1932, and which PCM was bound to
purchase under the contract which was in force during that period.
RULING: It is established that PCM demanded the cancellation of the contract and
tendered payment of P6,000 in consideration thereof. The very answer of PCM, which
was filed in the former case on Jan 14 1931, is an express demand for cancellation and
a formal tender of P6,000. This demand and tender were all that the PCM needed to
make in order that ASC would be obliged to give its consent to the cancellation. It was
not necessary for the PCM to deposit the sum of P6,000 with the clerk of the court
merely because the ASC refused to accept it. The tender made by the PCM in good
faith was sufficient. Article 1176 requiring the deposit of the thing due with the clerk of
the court, are not applicable to this case on the ground that they refer to the payment of
a debt. PCM owed the ASC nothing. The sum of P6,000 was not a debt of PCM but
merely a consideration for the cancellation of the contract. The payment thereof
constituted the obligation to be performed by PCM, and the cancellation of the contract,
the corresponding obligation to be performed by ASC. PCM was not obliged to pay
P6,000 before the ASC cancelled the contract, just as ASC was not obliged to cancel
the contract before the PCM paid the P6,000. Both are reciprocal obligations which
should have been performed simultaneously. PCM’s obligation to pay P6,000 to ASC
for the cancellation of the contract is the same as that of the vendor in a contract of sale
with the right of repurchase to refund the purchase price to the purchaser, for the
purposes of the resale, in which case this court has held that deposit of the repurchase
price is not necessary to compel the purchaser to make the resale, if he refuses to
accept it. If, according to the judgment of this court in the former case, the contract
grants the PCM the option to cancel the contract at any time, upon payment of P6,000,
and if PCM demanded such cancellation offering to pay said sum in good faith, the ASC
in refusing to consent to such cancellation, violated the contract. Such being the case,
the ASC has no cause of action against PCM because it is based on the alleged
obligation of PCM to purchase its molasses during the period in which such obligation
would not have existed, had not ASC, in violation of the contract, refused the
cancellation thereof. In such case, ASC derives its cause of action from its own violation
thereof. To recognize the validity of such cause of action would be to sanction and
legalize such breach. On the other hand, such breach of contract cannot be the source
of rights. Had the contract been cancelled in Jan 1931, when PCM demanded its
cancellation, as it had a right to do, there would have been no contract to be complied
with by PCM from that date and the ASC’s cause of action could not have been based
on the cancelled contract. ASC’s violation of that contract by refusing to cancel the
same cannot now be the basis of its cause of action. Hence, a “payment” made
because of a reserved right or option or privilege is not governed by Articles 1232
to 1262, because such “payment” cannot be demanded by the creditor. Judgment
is affirmed.

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