Divisible Obligation, Rescission

Nature: Petition for Review on Certiorari under Rule 45

[ Complaint for Replevin and/or Recovery of of sum of money]

Spouses Alexander and Julie Lam, Doing Business under the Name and Style COLORWIK
LABORATORIES and COLORWIK PHOTO SUPPLY vs. Kodak Philippines, Ltd.,
G.R. No. 167615
Ponente: Leonen, J
Division

Facts:

On January 8, 1992, the Lam Spouses and Kodak Philippines, Ltd., entered into an agreement
(Letter Agreement) for the sale of three units of the Kodak Minilab System 22XL (Minilab
Equipment) in the amount of P1,796,000.00 per unit. On January 15, 1992, respondent delivered one
unit of the minilab equipment in Tagum, Davao Province. The delivered unit was installed by Noritsu
representatives on Mrach 2, 1992. The Lam Spouses issued postdated checks amounting to
P35,000.00 each for twelve months as payment for the first delivered unit, with the first check due
on March 31, 1992.

Petitioner requested that respondent not to negotiate the check dated March 31, 1992,
allegedly due to insufficiency of funds. The same request was made for the check due on April 30,
1992. However, both checks were negotiated by respondent and were honoured by the depositary
bank. The other checks were subsequently dishonored after the petitioner ordered the depositary bank
to stop payment.

Respondent cancelled the sale and demanded that the petitioner return the unit it delivered
together with its accessories. Petitioner spouses ignored the demand but also rescinded the contract
through the letter dated November 18, 1992 on account of respondents failure to deliver the two
remaining units.

Issues:

1. Whether the contract between the petitioners Spouses Alexander and Julie Lam and
respondent Kodak Philippines, Ltd pertained to obligations that are severable, divisible, and
susceptible of partial performance under Article 1225 of the New Civil Code?
2. Whether or not Article 1191 of the Civil Code is applicable in the present case.

Ruling:

1. The High Court ruled in the negative. Both parties rely on the Letter of Agreement as a basis
of their respective obligations xxx Based on the foregoing, the intention of the parties is for
there to be a single transaction covering all three(3) units of the Multilab Equiptment. xxx
This intent must prevail even though the articles involved are physically separable and capable
of being paid for and delivered individually, consistent with the New Civil Code.
Article 1225. For the purpose of the preceeding articles, obligations to give definite things
and those which are not susceptible of partial performance shall be deemed to be divisible.
xxx
2. With both parties opting for rescission of the contract under Article1191, the Court correctly
ordered for restitution. xxx The power to rescind obligations is implied in reciprocal ones,
incase one of the obligors should not comply with what was incumbent upon him. xxx The
Court of Appeals correctly ruled that both parties must be restored to their original situation
as far as practicable as if the contract was never entered into.xx