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UNIVERSITY OF THE PHILIPPINES, petitioner, vs. WALFRIDO DE LOSANGELES, Quezon City CFI Judge, et al.

, respondents [1970] Act 3608: public land was given as a Land Grant to UP as endowment toraise additional income for its support Nov. 2, 1960: UP & ALUMCO (Associated Lumber Mfg. Co. Inc.) enteredi n t o a logging agreement granting ALUMCO exclusive authority to c u t , collect & remove timber from the land grant & payment to UP of royalties,f o r e s t f e e s , e t c . u n t i l D e c . 3 1 , 1 9 6 5 & e x t e n d i b l e f o r 5 y r s b y m u t u a l agreement. Dec. 8, 1964: ALUMCO incurred unpaid account of P219,362.94 w/c theyf a i l e d t o p a y d e s p i t e s e v e r a l d e m a n d s . U P s e n t A L U M C O a n o t i c e t o rescind/terminate the agreement. ALUMCO then executed an instrument, Acknowledgement of Debt & Proposed Manner of Payments stipulatingt h a t o u t s t a n d i n g b a l a n c e s h a l l b e p a i d i n f u l l n o l a t e r t h a n J u n e 3 0 , 1965 & if they fail to do so, UP has the power to consider the agreementr e s c i n d e d w / o u t n e e d o f a n y j u d i c i a l s u i t & U P s h a l l b e e n t i t l e d t o P50,000.00 for liquidated damages. Logging operations continued but ALUMCO incurred more unpaid accountsw/c amounted to P61,133.74 (Dec. 9, 1964-July 15, 1965) on top of theoutstanding balance from Dec. 8, 1964. July 19, 1965: UP informed ALUMCO that it has considered as rescinded & o f no further legal effect the logging agreement. UP then instituted acomplaint against ALUMCO to collect a f o r e m e n t i o n e d s u m s o f m o n e y . Court granted an order restraining ALUMCO from continuing its loggingoperations. Prior to the courts order, UP advertised an invitation to bid to take in anew concessionaire to replace ALUMCO w/c was subsequently awarded toSta. Clara Lumber Co. Contract was signed on Feb. 16, 1966. ALUMCO filed a petition enjoining UP from conducting the bidding w/c ledto the issuance of the following Court orders:1 . U P e n j o i n e d f r o m awarding logging rights to any other party. Orderwas received o n F e b . 2 5 , 1 9 6 6 , a f t e r c o n t r a c t w / S t a . C l a r a w a s signed.2 . U P was held in contempt of court & Sta. Clara Lumber was d i r e c t e d t o refrain from exercising logging rights.3 . U P s m o t i o n f o r reconsideration was denied.

ALUMCOs defense/contentions:1 . I t b l a m e d f o r m e r g e n . manager Cesar Guy in not turning o v e r management thus rendering it unable to pay.2 . F a i l u r e t o p u r s u e t h e m a n n e r o f p a y m e n t w a s c a u s e d b y r o t t e n l o g s w/c could not be sold to Sta. Clara Lumber Co. Inc. w/whom they hada contract to buy & sell.3 . U P s u n i l a t e r a l r e s c i s s i o n w / o c o u r t o r d e r w a s invalid.4.UPs supervisor did not allow them to cut new logs u n l e s s t h e l o g s c u t during Guys management were sold.5 . U P s s u p e r v i s o r s t o p p e d a l l l o g g i n g o p e r a t i o n s o n J u l y 1 5 , 1 9 6 5 . 6.It proposed several offers to resume operations but UP did not reply. Issues & Ratio:1 . W O N a f i n a l c o u r t d e c r e e i s n e c e s s a r y b e f o r e U P c a n r e s c i n d t h e contract. NO. ALUMCO specifically allowed UP to rescind the contract if it fails to pay notlater than June 30, 1965 in the Acknowledgement of Debt & ProposedManner of Payments it executed. CC Art. 1191 & Froilan v. Pan Oriental Shipping Co.: the law does notprohibit parties from entering into an agreement that violation of thet e r m s w o u l d c a u s e c a n c e l l a t i o n o f t h e c o n t r a c t e v e n w / o c o u r t intervention. Injured party need n o t a l w a y s r e s o r t t o t h e c o u r t f o r rescission of contract. Of course, it should be made known to the other party & it is a l w a y s subject to the scrutiny & review by the proper court. Meaning, the partyw h o d e e m s t h e c o n t r a c t v i o l a t e d m a y c o n s i d e r i t r e s c i n d e d & a c t w / o previous court action BUT IT PROCEEDS AT ITS OWN RISK . Since onlythe final judgment of the corresponding court will conclusively & finallysettle whether the action taken was or was not correct in law. This does not contradict previous SC rulings declaring that judicial actionis necessary for the resolution of a reciprocal obligation. As mentioned,only final judgment of the court will finally settle whether rescission wasproper or not. But either party can consider the contract as rescinded if t h e i r agreement provides for such, however its subject to j u d i c i a l invalidation. Rule requiring judicial action wont be rendered nugatory since the otherp a r t y c a n a l w a y s r e s o r t t o t h e c o u r t s i n c a s e t h e r e s c i n d e r a b u s e s i t s power or commits an error. Supreme Court of Spain interpretation of Spanish Civil Code Art. 1124(similar to CC Art. 1191): resolution of reciprocal/synallagmatic contractsmay be made extrajudicially unless successfully impugned in court. 2.

WON 1 st court order enjoining UP from awarding logging rts toa n o t h e r party was proper. NO, there was grave abuse o f discretion since it decided w/out first receiving evidence on theissues & it subsequently refused to dissolve the injunction. UP made out a prima facie case of breach of contract & defaults inpayment by ALUMCO as proven by a court order s t o p p i n g A L U M C O s logging operations. ALUMCO profited from its operations previous to the agreement. Excuses/defenses offered are not sufficient excuse for non-payment. Whatever prejudices ALUMCO may suffer is susceptible of compensation indamages. 3.Issue WRT contempt of court was not discussed since such w a s pending w/ the Court of Appeals.Holding: 1 st court order granting ALUMCOs petition for injunction set aside.Remanded for further proceedings.

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