Facts:

The case involves Asturias Sugar Central, Inc. as the petitioner (recurrente), and Gloria Montinola, in her capacity as special administrator of the estate of Ruperto Montinola and also as administrator of the intestate estate of Basa B. de Montinola, as the respondent (recurida). It originates from an agreement made prior to the sugar milling season of 1931-1932, under which Asturias Sugar Central committed to mill the sugarcane supplied by Montinola and promised to pay 55% of the sugar produced along with an additional 6% to cover transport costs. After the milling season, a money transfer of P1,039.39 was made as a bonus, reflecting the 2,246.723 picos of sugar produced from Montinola's cane. However, Montinola found this payment insufficient to meet the transportation expenses, leading them to mill their cane elsewhere in subsequent years.

The situation changed in 1934 after the enactment of U.S. Congress Law No. 213 and Philippine Law No. 4166, which limited sugar produ

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Facts:

Background of the Contract

• A verbal contract was entered into before the 1931-1932 sugar season between Asturias Sugar Central, Inc. (referred to as the recurrent) and the respondents (Gloria Montinola, acting in her capacities as the special administrator of the testamentary estate of Ruperto Montinola and the administrator of the intestate estate of Basa B. de Montinola).
• The agreed terms stipulated that the recurrent would mill the respondents’ sugar canes and would, in addition to a 55% participation in the sugar resulting from the milling, pay an additional bonus equivalent to 6% of the sugar produced, which was intended to compensate for the respondents’ expenses incurred in transporting the canes.

Performance and Early Compliance

• During the 1931-1932 season, the recurrent performed her obligations by milling the sugar canes of the respondents.
• Following the season, the recurrent paid a bonus of ₱1,039.39, which was calculated on the basis of 2,246.723 sugar picos obtained from the respondents’ canes.

Dispute Over Expenses and Milling Location

• The respondents contended that the bonus was insufficient to cover their actual cane transportation expenses.
• As a result, in subsequent seasons, they had their sugar canes milled at another central (Central Azucarera de Janiuay) to avoid incurring further losses.

Impact of New Legislation and Reassertion of the Contract

• In 1934, two new laws came into force:
• Ley No. 213 passed by the United States Congress.
• Ley No. 4166 enacted by the Philippine Legislature.
• These laws not only restricted sugar production in the Philippines but also dictated that sugar canes must be milled in a predetermined central.
• Under these laws, for the 1935 and 1936 seasons, the respondents’ production was limited (241,345 picos in 1935 and 444,930 picos in 1936), and their canes had to be milled at the recurrent’s central.
• Consequently, the respondents demanded an additional bonus payment of ₱388, equal to the 6% bonus on the sugar produced from their canes during these two seasons.

The Recurrent’s Defense

• The recurrent refused to pay the additional amount, arguing that:
• The verbal contract, having been entered into before 1931, was no longer binding in 1935 or 1936.
• The basis of her argument rested on Article 335 of Law No. 190, which requires that contracts whose terms cannot be performed within one year must be in writing.
• She maintained that, due to the lack of written documentation, the original contract was not valid for the additional periods.

Issue:

Validity of the Verbal Contract

• Whether a verbal contract entered into before the 1931-1932 season remains binding in subsequent seasons, particularly in the 1935 and 1936 periods.
• Whether the argument under Article 335 of Law No. 190, which mandates written contracts for those not performable within one year, is applicable to this case.

Effect of Subsequent Legislation on Contractual Obligations

• Whether the enactment of Ley No. 213 and Ley No. 4166, which imposed limitations on sugar production and designated the milling location, necessitated a re-examination or alteration of the previously agreed contract.
• Whether the forced milling of the respondents’ canes in the recurrent’s central reinstated the original contractual relations and obligations.

Legal Consequences of Contract Performance and Reassessment

• Whether the contract, as already partially executed during the 1931-1932 season, can be considered fully consummated to the extent that subsequent changes in milling arrangements do not exempt the recurrent from further payment obligations.
• Whether the respondents’ actions and subsequent performance under the altered legal regime entitle them to the additional bonus payment as stipulated in the original agreement.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)