Title
Asturias Sugar Central, Inc. vs. Pure Cane Molasses Co., Inc.
Case
G.R. No. 40709
Decision Date
Aug 1, 1934
Plaintiff sued defendant for damages after defendant canceled a molasses purchase contract by depositing P6,000 as stipulated. Supreme Court ruled cancellation valid, absolving defendant of liability, as plaintiff’s refusal to accept cancellation breached the contract.
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Case Digest (G.R. No. 40709)

Facts:

  1. Contract Formation:

    • Prior to January 1931, Asturias Sugar Central, Inc. (plaintiff) and Pure Cane Molasses Co., Inc. (defendant) entered into a contract (Exhibit A).
    • The contract stipulated that the plaintiff would sell all its molasses to the defendant at specified prices and conditions.
    • The defendant was required to deposit P6,000 in the Bank of the Philippine Islands as security for compliance with the contract.
  2. Dispute Over Contract Cancellation:

    • In January 1931, the defendant sought to cancel the contract, offering to pay the P6,000 deposit as per the contract terms.
    • The plaintiff refused to accept the cancellation and filed a case to amend the contract.
    • The defendant, in its answer, demanded the cancellation of the contract and tendered the P6,000, which the plaintiff rejected.
  3. First Court Decision:

    • The lower court ruled that the contract did not authorize the defendant to cancel it.
    • On appeal, the Supreme Court reversed the decision, holding that the defendant had the right to cancel the contract upon payment of P6,000.
    • The Supreme Court further clarified that the contract was deemed cancelled on November 18, 1932, when the defendant deposited the P6,000 with the court.
  4. Second Action for Damages:

    • After the first case, the plaintiff filed another action on February 3, 1933, seeking P72,569.28 in damages.
    • The damages were claimed for the defendant's refusal to purchase molasses from January 1931 to November 18, 1932.
    • The trial court dismissed the complaint, and the plaintiff appealed.

Issue:

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Ruling:

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Ratio:

  1. Contractual Obligations and Cancellation:

    • The terms of the contract explicitly allowed the defendant to cancel it upon payment of P6,000.
    • The defendant's tender of the P6,000 in good faith was sufficient to effect the cancellation, and the plaintiff's refusal to accept it was a breach of the contract.
  2. Reciprocal Obligations:

    • The payment of P6,000 and the cancellation of the contract were reciprocal obligations that should have been performed simultaneously.
    • The defendant was not required to deposit the P6,000 with the court to compel the plaintiff to cancel the contract.
  3. No Cause of Action for Damages:

    • The plaintiff's cause of action was based on the defendant's refusal to purchase molasses during a period when the contract would have been cancelled had the plaintiff not breached it.
    • A party cannot derive rights from its own breach of contract.
    • The plaintiff's refusal to cancel the contract when the defendant validly exercised its right to do so precluded any claim for damages.
  4. Res Judicata:

    • The Supreme Court's prior decision in the first case was res judicata, meaning the issue of the defendant's right to cancel the contract was conclusively settled and could not be relitigated.

Dissent

  • Dissenting Opinion:
    • Some justices dissented, arguing that the cancellation of the contract should not retroactively nullify the defendant's obligations prior to November 18, 1932.
    • They contended that the plaintiff was entitled to damages for the defendant's refusal to purchase molasses during the period the contract was in force.
    • The dissenting justices suggested that the damages should be reduced to P35,000, representing the approximate value of the molasses the defendant was obligated to purchase.

Conclusion:

  • The Supreme Court affirmed the trial court's judgment, absolving the defendant from liability and denying the plaintiff's claim for damages.
  • The Court held that the plaintiff's refusal to accept the cancellation of the contract was a breach, and the plaintiff could not base its cause of action on its own violation of the contract.


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