G.R. No. 40709 - Asturias Sugar Central, Inc. vs. Pure Cane Molasses Co., Inc.

The parties, Asturias Sugar Central, Inc. (plaintiff) and Pure Cane Molasses Co., Inc. (defendant), entered into a contract prior to January 1931.
Under the terms of Exhibit A, the plaintiff bound itself to sell all the molasses produced at its sugar central, while the defendant undertook to purchase the entire output.
A key stipulation was that the defendant deposit P6,000 in the Bank of the Philippine Islands as security for the faithful compliance with the contract.

In an answer filed on January 14, 1931, the defendant explicitly raised its right to cancel the contract, based on the provision that allowed cancellation upon payment of P6,000.
The defendant demanded that the plaintiff accept the cancellation by tendering the said sum, and it duly deposited P6,000 in a bank, fulfilling its part with respect to the cancellation option.
The plaintiff, however, refused to accept the cancellation, thereby insistently maintaining the contractual obligations.

The trial court initially ruled that the contract’s terms did not authorize the defendant to cancel it, effectively denying the cancellation plea.
On appeal, the Supreme Court reversed the lower court’s decision, holding that the defendant was entitled to cancel the contract by offering P6,000 in accordance with the contract’s stipulation.
Upon a motion for reconsideration, the Supreme Court ratified its judgment by resolution dated December 31, 1932 and clarified that the contract was deemed cancelled as of November 18, 1932—the date when the defendant deposited the P6,000 with the clerk of court and the cancellation was consummated.

After remand, the plaintiff filed another suit on February 3, 1933, seeking to recover damages amounting to P72,569.28, which it alleged were incurred from January 1931 to November 1932 due to the defendant’s refusal to purchase molasses as originally contracted.
The trial court dismissed the complaint and absolved the defendant of liability.
The plaintiff appealed, leading to a division among the justices—while the majority upheld the cancellation and dismissed the damage claims, dissenting opinions argued for damage awards based on differing interpretations of the cancellation’s effective date and the consequent obligations.

Whether the defendant’s tender of P6,000 constituted a valid exercise of its contractual option to cancel the contract.
Whether the plaintiff’s refusal to accept the cancellation tender amounted to a breach of the contractual terms.
Whether the plaintiff is entitled to damages for the period when the contract was allegedly in force (from January 1931 to November 1932) despite the exercise of the cancellation option.
When the cancellation of the contract should be considered effective—whether it took effect at the initial demand in January 1931 or on November 18, 1932, as determined in the subsequent resolution.
How the P6,000 deposited by the defendant should be incorporated into the assessment of damages or treated as a consideration for the cancellation.