Case Summary (G.R. No. 29298)
Relevant Contractual Provisions
The written contract between the planter(s) and the central contained detailed reciprocal covenants. Material provisions included: (1) a covenant by the central to build and operate, without charge to producers, a permanent steam- or motor-run railroad for transportation of cane, sugar, fertilizer, and related needs, and to cause the main line or a branch to reach the plantation “not farther than one mile from any of the boundaries . . . whenever the contour of the land, the curves, and elevations permit the same”; (2) obligations of the producer to deliver cane and to plant at least half his lands in cane annually; and (3) mutual obligations, including clause 10, which provided that if the central was unable to secure, under reasonable conditions, required rights-of-way, it must notify the Committee of Producers and its obligations under the contract would be suspended in whole or in part during such incapacity, without incurring liability.
Factual Findings Pertinent to Performance
The trial court found — and the parties do not seriously dispute — that the central’s railway extended only to Hacienda Esmeralda No. 2 and did not reach Hacienda Dos Hermanos. Extending the railroad to Dos Hermanos would require traversing a distance of approximately four kilometers, necessitating steep grades (approx. 4.84% to 7%), 26 curves, and an estimated construction cost of about P80,000; engineering testimony indicated construction was possible but “very dangerous.” Moreover, the only practical route would cross lands owned by Esteban de la Rama, who refused permission for right-of-way in 1920 and only consented in 1924.
Legal Issue Presented
Whether the central’s failure to extend its railroad to Hacienda Dos Hermanos constituted a breach of contract giving rise to liability in damages, or whether the central was excused because performance was impossible, excessively dangerous, or prevented by the absence of a necessary right-of-way (an occurrence contemplated by the contract itself).
Controlling Legal Principles Cited
The court applied established contract law principles: a party is bound to perform what it has undertaken unless performance is rendered impossible by an act of God, operation of law, or by the other party. Mere inconvenience, increased expense, or hardship does not excuse performance; impossibility must be legal or physical. The decision cites Civil Code articles invoked in the opinion: Article 1272 (impossible things cannot be the subject of contracts) and Article 1184 (a debtor is relieved of obligations if fulfillment becomes legally or physically impossible). The court also referenced common-law authorities to illustrate the same general principle.
Application of Law to the Physical Impossibility Argument
The contract’s railway covenant was explicitly qualified by the phrase “whenever the contour of the land, the curves, and elevations permit the same.” Given the engineering evidence that extension to Dos Hermanos, while technically possible, would require very steep grades, numerous curves, and involve serious danger, the court treated the qualification as an implied condition limiting the central’s absolute duty. The court held that compelling performance that is dangerous or effectively physically impossible would be contrary to public policy and the law; therefore, the central’s obligation was not absolute in locations where terrain and physical conditions prevented safe, practicable construction.
Application of Law to the Right-of-Way Clause (Clause 10)
Clause 10 expressly contemplated the central’s possible inability to secure rights-of-way “under reasonable conditions” and provided that, upon such inability and notice to the Committee of Producers, the central’s contractual obligations could be suspended without liability during the period of incapacity. The factual finding that the necessary route to Dos Hermanos required crossing the lands of Esteban de la Rama, who refused permission in 1920, squarely fell within this contingency. The court treated the non-consent by the intervening landowner as the sort of circu
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Procedural Posture
- Action for damages in the amount of P28,620 for alleged breach of a contract to grind sugar cane in 1920-1921.
- After a rehearing, the trial court absolved the defendant from the complaint and, on the defendant’s cross-complaint, condemned the plaintiff to pay the defendant the sum of P12,114, without special pronouncement as to costs.
- On appeal, the record lacks exhibits, but the absence is not deemed of great importance; the facts as found by the trial judge are not seriously disputed.
- The appellate court found no reversible error on any legal question and affirmed the judgment appealed from, with the costs of this instance against the appellant.
Parties and Subject Matter
- Plaintiffs: Reynaldo Labayen et al.; Reynaldo Labayen is identified as appellant.
- Defendant and appellee: Talisay-Silay Milling Co., Inc., a corporation dedicated to the milling of sugar cane.
- Subject matter: Enforcement and breach of a milling contract, and related obligations concerning the construction and operation of a railroad to serve plantations, particularly the Hacienda Dos Hermanos of Talisay, Occidental Negros.
Relevant Contract Date and Scope
- Contract between the plaintiff(s) and the defendant dated August 27, 1919.
- The contract is described as similar to contracts entered into by the defendant and other planters and serves as the basis of the plaintiff’s cause of action.
Covenants of "La Central" (Third Clause) — Railroad Obligations
- ‘La Central’ covenants to build and to preserve in good condition a permanent railroad run by steam or motor, or both, for use in transporting sugar cane, sugar, fertilizer, and other articles the producer may need.
- The railroad shall be provided without charge to the Producer(s).
- The main line or a branch shall reach the point of the plantation to be described not farther than one mile from any boundary of said plantation, whenever the contour of the land, the curves, and elevations permit the same.
- ‘La Central’ shall provide locomotives or motors and wagons in numbers sufficient to make transportation efficient, and shall build a branch so that from main line, mill, and warehouses it will reach the wharf referred to, with the factory yard available for use with switches or otherwise.
- All steam locomotives shall be provided with safety spark devices.
- The railroad shall be designated so all producers may derive equal benefit as far as possible.
- The right-of-way for the main line is specified as three and a half (3-1/2) meters wide measured from the center of the road to each side, with branches, switches, or curves to have more if necessary.
Obligations of the Producer (Fifth Clause)
- The producer shall accept the provisions of clauses 7, 8, and 19 of the covenants of ‘La Central’ and shall deliver cane as therein provided.
- The producer binds himself to plant each year, according to the usage and custom of a good agriculturist, not less than one-half of his own lands devoted to sugar cane, subject to approval of the Committee of Producers, leaving the remainder uncultivated.
Mutual Obligations (Tenth Clause) — Rights-of-Way Provision
- In case of inability to secure, under reasonable conditions, such rights-of-way as ‘La Central’ may require, ‘La Central’ shall notify the Committee of Producers.
- During such period of incapacity, and without incurring any liability for non-fulfillment of the terms of the contract, the effects of the contract shall be suspended in part or in whole.
- The tenth clause is emphasized (italics in source) as directly relevant to the right-of-way problem in this case.
Factual Findings Concerning Railroad Extension and Feasibility
- It is admitted that the central has not continued its railroad t