Title
Bacolod-Murcia Milling Co., Inc. vs. Banco Nacional Filipino
Case
G.R. No. 47610
Decision Date
Jul 17, 1944
Plaintiff sought to buy 12 hectares at P300/hectare under a milling contract; Supreme Court ruled intended use (golf course, housing) fell outside contract scope, denying purchase.
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Case Digest (G.R. No. 47610)

Facts:

  1. Background of the Case:

    • The Bacolod-Murcia Milling Co., Inc. (plaintiff) filed a case against Banco Nacional Filipino (Philippine National Bank) and Fernando F. Gonzaga (defendants) to compel the sale of 12 hectares of land from Hacienda Helvetia at P300 per hectare.
    • The land in question consists of Lot 1072-B and a portion of Lot 1072-C-3 of the Bacolod cadastre.
    • The trial court ruled in favor of the plaintiff but fixed the price at P1,500 per hectare. Both parties appealed.
  2. Ownership and Contracts:

    • Hacienda Helvetia originally belonged to Jose de la Rama, who entered into a milling contract with the plaintiff in 1920 (Exhibit B). The contract included a clause (paragraph 9) allowing the plaintiff to purchase land at P300 per hectare for specific purposes related to the sugar central.
    • In 1936, the Philippine National Bank acquired Hacienda Helvetia and executed an amended milling contract (Exhibit C) with the plaintiff, incorporating the same clause.
    • Jose de la Rama later sold his rights to the hacienda to Fernando F. Gonzaga, who consolidated full ownership.
  3. Negotiations and Dispute:

    • The plaintiff sought to purchase 12 hectares of land for laborers' housing and a golf course. Negotiations with the bank failed, leading to the filing of the lawsuit.
    • The plaintiff argued that under paragraph 9 of the milling contract, it was entitled to purchase the land at P300 per hectare.
    • The defendants contended that the clause did not apply because the plaintiff’s intended use of the land (golf course and laborers' housing) was not covered by the contract.
  4. Evidence Presented:

    • The plaintiff presented evidence showing it had sufficient vacant land for laborers' housing, making the purchase of additional land unnecessary.
    • The defendants argued that the land’s value had significantly increased, and the plaintiff’s offer of P300 per hectare was unreasonable.

Issue:

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Ruling:

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Ratio:

  1. Interpretation of Contracts:

    • The Court emphasized that contracts must be interpreted based on their clear terms. The trial court erred by reading into the milling contract purposes (golf course and laborers' housing) that were not included or intended by the parties.
    • Article 1283 of the Civil Code states that contracts should not be construed to include things or cases not intended by the parties.
  2. Specific Performance:

    • For specific performance to be granted, the terms of the contract must be clear and enforceable. Since the plaintiff’s intended use of the land did not fall within the scope of the milling contract, the action for specific performance failed.
  3. Estoppel:

    • The Court rejected the plaintiff’s argument that Fernando F. Gonzaga was estopped from opposing the sale. The prior agreements did not create a binding obligation to sell the land at P300 per hectare.
  4. Land Value and Necessity:

    • The Court found that the plaintiff already had sufficient vacant land for laborers' housing, making the purchase of additional land unnecessary. The plaintiff’s offer of P300 per hectare was unreasonable given the land’s increased value.
  5. Social Justice Considerations:

    • The dissenting opinion argued that the plaintiff’s proposed improvements (laborers' housing and playground) were essential for the welfare of its workers and should be allowed under the milling contract. However, the majority held that such considerations could not override the clear terms of the contract.

Conclusion:

The Supreme Court ruled that the plaintiff’s action for specific performance could not be sustained because the case did not fall within the scope of the milling contract. The defendants were absolved from the complaint, and the plaintiff was ordered to return the disputed lot to Fernando F. Gonzaga.


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