“Resorting to Court Not Needed for Rescission”
Parties: UNIVERSITY OF THE PHILIPPINES, petitioner, vs. WALFRIDO DE LOS ANGELES, in his capacity as JUDGE of the COURT OF FIRST INSTANCE IN QUEZON CITY, ET AL, Associated Lumber Manufacturing Company, Inc. (or ALUMCO) respondents.
Land Grant Act 3608, was given as an endowment to UP for purposes of raising income for its support
November 1960, UP and ALUMCO entered into a logging agreement under which the latter was granted exclusive authority, pay UP royalties, forest trees, etc.; but on Dec 1964, had unpaid accounts
After it received notice of contract rescission, ALUMCO executed an instrument, entitled “Acknowledgment of Debt and Proposed Manner of Payments,” Term #3: balance to be paid by the DEBTOR in full no later than June 30, 1965;
ALUMCO incurred additional unpaid accounts
7 September 1965, UP filed a complaint against ALUMCO for the collection or payment of the herein before stated sums of money, then obtained order restraining ALUMCO from logging operations under Land Grant
Before issuance of prelim injunct., UP advertised and awared to Sta Clara Lumber the logging contract on Feb 16, 1966.
Court ordered UP in contempt, filed 3 Rulings, one of which is (1) 25 February 1966, enjoined UP from awarding logging rights over its timber concession (or Land Grant), situated at the Lubayat areas in the provinces of Laguna and Quezon;
period of the logging agreement is five (5) years
blaming its former general manager, Cesar Guy, in not turning over management of ALUMCO, thereby rendering unpaid balance; the rotten condition of the logs
UP’s unilateral rescission of the logging contract, without a court order, was invalid
Offers were made to UP but no response
Court: do not constitute on their face sufficient excuse for non-payment;
Whether petitioner U.P. can treat its contract with ALUMCO rescinded, and may disregard the same before any judicial pronouncement to that effect? Yes.
Express stipulation of parties – nothing in the law will prohibit parties from entering into agreement. Resorting to court is not necessary for recission of contract. (1191 of CC, Froilan vs. Pan Oriental Shipping)
Treating contract as cancelled must be made known and is always provisional. Court decision, if decides contract is not warranted, party will be sentenced to damages.
Party who deems the contract resolved or rescinded proceeds at its own risk
petitioner University made out a prima facie case of breach of contract and defaults in payment by respondent ALUMCO, to the extent that the court below issued a writ of preliminary injunction stopping ALUMCO’s logging operations
Did CFI committed grave abuse of discretion? Yes
considering that whatever prejudice may be suffered by respondent ALUMCO is susceptible of compensation in damages, it becomes plain that the acts of the court a quo in enjoining petitioner’s measures to protect its interest without first receiving evidence on the issues tendered by the parties, and in subsequently refusing to dissolve the injunction, were in grave abuse of discretion, correctible by certiorari, since appeal was not available or adequate. Such injunction, therefore, must be set aside.