G.R. No. L-16109 - Taylor vs. Uy Tieng Piao

Case Summary (G.R. No. L-16109)

Factual Background

On December 12, 1918, Taylor contracted to serve as superintendent of an oil factory which Tan Liuan & Co. contemplated establishing in Manila. The contract was for a term of two years. The agreed remuneration was P600 per month for the first year and P700 per month for the second year, with electric light and water for domestic consumption, and a residence to live in, or in lieu thereof P60 per month. At the time of contracting the machinery for the factory had not arrived; ten expellers had been ordered from the United States.

Contract Terms

The contract contained a resolutory clause providing that if the machinery to be installed did not arrive in Manila within six months from the date of the contract, the party of the second part (the employers) might cancel the contract at its option, such cancellation not to occur before the expiration of the six months. The clause used the phrase "for any reason" in describing the contingency of nonarrival.

Nonarrival of Machinery and Rescission

The ordered machinery did not arrive in Manila within six months. No alternative equipment was provided by the defendants at any time. The record suggested, by a preponderance of the evidence, that in early 1919 the defendants either cancelled the order because the oil business no longer promised large returns or lacked the capital to finance the project. On June 28, 1919 the defendants gave written notice that they rescinded the contract effective June 30, 1919, and Taylor was discharged on that date.

Plaintiff's Claim and Legal Arguments

Taylor sued to recover P13,000, representing salary and perquisites due and to become due under the contract. He argued that the resolutory clause permitting cancellation upon nonarrival of the machinery should be read as limited to cases where the nonarrival was due to causes extraneous to the defendants' will or act, such as strikes or transportation difficulties. He relied on article 1256 of the Civil Code (that validity and fulfillment of contracts cannot be left to the will of one contracting party) and article 1119 (a condition is deemed fulfilled if the obligor intentionally impedes its fulfillment), contending that the defendants should not be permitted to take advantage of a failure they themselves caused or dominated.

Defendants' Position

The defendants asserted that the clause as written, including the phrase "for any reason," conferred upon them an express right to cancel the contract where the machinery failed to arrive within six months, without need to show that the nonarrival was due to causes beyond their control. They denied liability for subsequent salary and perquisites.

Trial Court Proceedings and Findings

The Court of First Instance found for Taylor in part and awarded damages. The reported opinion contains differing references to the amount allowed by the lower court, noting both P300 and P100 in different passages of the record. Taylor appealed contending that the award was inadequate; Uy Tieng Piao appealed contending he was not liable as a partner.

Issues Presented on Appeal

The appeals presented two principal issues: whether the defendants lawfully exercised the contractual option to rescind when the machinery failed to arrive within six months, and whether Uy Tieng Piao was liable as a partner of Tan Liuan for the employment contract entered into by the firm.

Supreme Court's Analysis on Contract Interpretation

The Court examined the language of the resolutory clause and concluded that the phrase "for any reason" must be given its ordinary and broad sense. The Court held that the stipulation created a lawful resolutory condition permitting cancellation by the employers upon the contingency specified, and that the mere fact that the employers could dominate the contingency did not render the clause illegal. The Court declined to construe article 1256 as requiring restriction of the words used by the parties where both freely agreed to the terms. The Court observed that cancellation in accordance with conditions agreed upon is itself a fulfillment of the contract within the parties' bargain.

Application of Civil Code Articles

The Court reasoned that article 1256 did not preclude insertion of a resolutory condition in a contract for personal service. It cited the commentator Manresa to support the proposition that leaving fulfillment to the will of a party in the negative form of rescission is licit in certain contracts. The Court further explained that article 1119 addresses situations where the obligor intentionally impedes fulfillment of a condition which the obligee must perform; it did not apply to an external contingency lawfully within the obligor's control as in the present case. The Court distinguished suspensive conditions contemplated by article 1115 from resolutory conditions recognized in article 1113, and noted that a condition facultative as to the debtor does not invalidate a resolutory co

Case Syllabus (G.R. No. L-16109)

Parties and Procedural Posture

M. D. Taylor was the plaintiff and appellant who sued for damages for alleged breach of a personal services contract.
Uy Tieng Piao and Tan Liuan, doing business as Tan Liuan & Co., were the defendants and respondents, with Uy Tieng Piao also appealing from a judgment holding him liable as a partner.
The action arose in the Court of First Instance of the city of Manila and came before the higher court on cross appeals from the award of damages.
The trial court awarded damages to the plaintiff, a figure stated at different points in the opinion as P300 and elsewhere referenced as P100, and the matter was remanded for adjustment by the appellate court.

Key Facts

The parties entered into a written contract on December 12, 1918, by which M. D. Taylor agreed to serve as superintendent of an oil factory for two years at specified monthly salaries.
The contract promised P600 per month for the first year and P700 per month for the second year, together with electric light and water for domestic consumption and a furnished residence or P60 per month in lieu thereof.
At the time of contracting the factory machinery had not yet arrived, though ten expellers had been ordered from the United States.
The contract contained a resolutory clause permitting the defendants to cancel the agreement if the machinery did not arrive in Manila within six months, the clause stating that cancellation could occur if the machinery failed to arrive "for any reason."
The machinery did not arrive within six months and the defendants did not furnish other equipment, and on June 28, 1919 the defendants gave written notice terminating the contract effective June 30, 1919.
The plaintiff instituted suit claiming P13,000 as unpaid salary and perquisites due and to become due under the contract.

Contract Terms

The resolutory clause expressly granted the defendants a right to cancel if the machinery failed to arrive within six months, with the operative phrase including the words "for any reason."
The contract created no express undertaking by the defendants to cause the machinery to arrive within the six-month period.
The agreement provided an express commutation of house rent in the amount of P60 per month in lieu of furnishing a residence.

Issues Presented

Whether the defendants validly exercised a contractually conferred option to cancel the employment agreement when the machinery failed to arrive.
Whether the resolutory clause must be judicially restricted under article 1256 of the Civil Code and article 1119 of the Civil Code to cases where nonarrival was due to causes extraneous to the defendants' will.
Whether Uy Tieng Piao was personally liable as a partner of Tan Liuan & Co. for the obligations arising from the employment contract.
What amount of damages, if any, the plaintiff was entitled to recover for the six-month period and for the remainder of the contract term.

Contentions of the Parties

M. D. Taylor contended that the phrase "for any reason" must be read to exclude failures caused by the defendants' own will or acts and that the defendants bore the burden of proving nonarrival was due to extraneous causes.
The plaintiff relied on article 1256 to argue that a contract should not leave validity or fulfillment to the will of one party, and on article 11