G.R. No. L-9300. April 18, 1958

This is an appeal from a  judgment rendered by the Court of First Instance of Manila,  ordering the defendant corporation  to pay to the Administrator of the estate  of the late Mariano A. Albert, who died during the pendency of the case,  the  sum of P23,000,  interest thereon from the  date  of  the  filing of the complaint, and  costs, and dismissing the defendant’s  counterclaim, certified- to this . Court by  the Court  of  Appeals  for  the reason  that the total  amount sought  to  be recovered by  the defendant corporation exceeds P50,000.

On 19 July 1948  the  plaintiff and the  defendant corporation  entered  into a contract whereby,  for  and  in consideration of the  exclusive right to publish or  cause to be published a manuscript containing commentaries on ” ‘The Revised Penal  Code of the Philippines,’ as amended until July 15, 1948,” written by the plaintiff,  for  a period of five years from the date of execution of the contract; of the liquidated balance  due the  plaintiff as his share in the sale of the reprinted copies of the book as stipulated in a contract executed on 21 May 1946 by and  between him  and  the  defendant  corporation  (Exhibit  1); and  of the  liquidated share of the plaintiff  in the sale  of 1,500 reprinted  copies of the  book,  the  defendant  corporation undertook to  pay- the  plaintiff the sum of P30.000 in eight quarterly  installments of P3,750 each, beginning 15 July 1948  (Exhibit A).   The most  important  stipulations  of the contract are  the following:

1. That the tarty of the  first part is the  author  and sole proprietor  of a  manuscript  which  is  his  revised  commentaries  of “‘The  Revised Penal Code of  the Philippines” as amended until July 15, 1943;

2. That  the party of the first part hereby grants to the party of THE  SECOND  PART the exclusive  right  to publish  or  cause  to  be published  the said manuscript within a period  of 5 years from the execution  of this  document, provided that  the total number of  copies to be  printed within said period shall not he more than 4,000 copies;

4. That  the party of the second fart hereby agrees  to pay  to the party of  the first  part, for the exclusive right, to publish  the manuscript,  object” of  this contract, for a  period of 6 years counted from  the  date  of execution  of  this  document; for the liquidated balance  due  him  as his share in the sales of  the  reprinted  copies of the first edition of  this book as per contract between both parties dated  May 21,  1946;  and for Ms liquidated share in  the sales  of another  1,500 reprinted  copies in  1948 of said  book, now in  the press: the total  amount  of  (P30,000 payable in 8 quarters at the rate of P3,750 a quarter, the first quarter to begin from July 15, 1948. It is also agreed that should the PARTY OF THE SECOND PART fail to pay to the PARTY OF THE FIRST PART any one of the eight installments referred to when due, the rest of the installments shall be deemed due and payable, whether there is judicial or extra-judicial demand made by the PARTY OF THE FIRST PART. In this event , the PART OF THE FIRST PART shall take charge of the publication of this book, and in case it has already been published, will take over the sale and distribution of the printed book, without any right on the part of the PARTY OF THE SECOND PART to participate in its proceeds:

7. That  the party of the  first part obligates himself to deliver to the PARTY OF THE SECOND  PART the manuscript in its final form not  later  than December  31, 1948;  provided,  however,  that  the party of the second  part shall  have no right  to make any change in the manuscript as prepared by the party of the first fart who, if the circumstances  do  permit,  must stamp his  approval in  the printer’s final proof.

In the event of the  impossibility for the party of the  first part to deliver  the manuscript complete by December 31, 1948, the  party of the  SECOND part  shall no longer be  under  obligation to pay the installments  remaining payable by virtue of the provisions  of the Contract, unless the party op the  second part undertakes  to complete the same by inserting the latest decisions of the Supreme Court as  digested and/or commented upon by the PARTY  OF THE FIRST PART.

The defendant  corporation  paid P1,000 to  the  plaintiff on  31 July  1948  (Exhibits  E  and 2) ;  Pl,000  on   10 September 1948  (Exhibit 2-A) ; P2,000 on 10 November 1948  (Exhibits C, C-l and 2-B) ; P2,000 on 29 November 1948  (Exhibit S) ;  and Pl,000 on 24 December 1948 (Exhibit 3-A),  or a  total of  P7,000.  The  defendant corporation made no other or further payment to the plaintiff on  account of the contract.

The evidence for the plaintiff shows that on 16 December 1948 he  wrote  a letter advising the defendant corporation that “The manuscript of  my Commentaries on the Revised Penal Code,  subject  matter of our  Contract  executed  on the 19th of July this  year, is now at your disposal.”  (Exhibit D.)

The  plaintiff  claims  that  the  defendant  corporation breached the contract when it failed to pay the full amount of  the installment for the first quarter on  or before  15 October  1948, the  last day within  which to pay it.  The defendant corporation contends that ‘the plaintiff failed to deliver to it the manuscript in its final form not later than 31 December 1948 as stipulated in paragraph  7 of  the contract (Exhibit A).

The first point then to determine  is whether the ‘plaintiff had performed his part of the contract as stipulated in paragraph 7 of the aforesaid contract.

Upon plaintiff’s demand and defendant’s failure to produce and exhibit the original of the letter dated 16 December 1948 already referred to, the plaintiff read in evidence the contents of a  copy  of said letter (Exhibit D).  Concepcion  K. de Vera, the stenographer who took down by shorthand the dictation of the plaintiff, identified it as  the carbon copy of the original and testified that the original was sent to  the defendant corporation.  On cross-examination she exhibited and  read  to the Court the notes from which she typed the original letter.   The President of  the defendant corporation denies having received not only  the original of the letter dated 16  December 1948 but also  the original of a letter dated 27 April 1949 (Exhibit E) written by the plaintiff to the defendant corporation. In  the last letter reference to the preceding letter of 16 December 1948 (Exhibit D) was made and a demand for payment of the installments due and unpaid was also made.  The  defendant corporation  admits, however,  the receipt  of  the original of the  letters dated 15 August 1949 (Exhibit  F) and 6 June 1949 (Exhibit G).   In the first letter (Exhibit F) the plaintiff reminded the defendant corporation of its promise to settle the installment  due on 15 April and  15 . July and the balance of the  installment due and unpaid of 15 December (January) ; and in the second  (Exhibit G)  the  plaintiff reminded the defendant of its due and unpaid installments and stated that, in view of the  apparent inability of the  defendant corporation to fulfill  its part of  the contract, he would consider the contract rescinded and would publish the  revised edition next  month (July) at his expense.  The defendant corporation has not answered these two letters.

The mere denial  by the President  of the defendant corporation is not  sufficient to outweigh  and  overcome  the evidence showing that the plaintiff  advised the  defendant corporation that the manuscript  of  the commentaries on the Revised  Penal Code,  subject matter  of  the contract executed on 19  July 1948, was ready for  delivery to, and at the disposal  of,  the  defendant corporation for publication.  The defendant corporation failed to pay  on  or  before  15 October 1948 the first installment due,  because it had paid only Pl,000 on 31 July 1948 and another  P1,000 on 10 September 1948.   When the  defendant corporation paid P2.000 on  10  November  1948,  it  was after the last day fixed  for the payment of the first installment. But that delay in the payment of the first quarterly installment may not amount to a breach  to  justify the enforcement of the stipulation set forth, in paragraph 4 of the contract (Exhibit A) because the plaintiff accepted  the payment of P2,000 on 10 November 1948, which completed and paid the lull amount  of  the  first installment due  and left  a, balance of P250 to be credited to the  second  installment due  on 15 January 1949.  On this last mentioned  date the total amount paid by the defendant corporation, including the sum of  P250 in  excess of the amount paid for the first quarterly  installment, was P3.250 or  P500 short of  the total  amount  due  on  such date  corresponding to the  second quarterly installment.   As the  defendant corporation  has made no further payment, the stipulation in paragraph  4 of the contract has to be enforced.

The defendant  corporation argues that the fact that the mimeographed copies of plaintiff’s book or commentaries on. the Revised Penal Code  published  by the PHILAW Publishing Company does not contain cases decided by the Supreme Court up to 1948 is proof that contrary to plaintiff’s  claim the manuscript which  the plaintiff bound himself to write and finish on or before 31  December 1948 was not ready  for publication  on 16  or 31 December 1948. There is no evidence, however,  that   the mimeographed copies of the book published and sold in November 1949 by the plaintiff or the PHILAW Publication Company were the same as that  offered for delivery by the plaintiff to the defendant corporation on 16 December 1948.  Besides, there is no stipulation  in the contract that  the commentaries would include cases decided by the Supreme Court up to 1948.  Nowhere in the  contract may such  stipulation be found.

The action brought by the plaintiff is not for recission of a  contract, under which theory or belief both  parties seem to have  proceeded  and labored, but for a resolution of reciprocal obligations  because one of the obligors failed to comply with that which was incumbent upon him.  The injured party  could choose between requiring specific performance of the obligation or its resolution with indemnity for losses  and payment  of  interest.^[1]  The  stipulation  in paragraph  4  of  the contract  (Exhibit A)  may be  considered as liquidated damages to be paid in case of breach of the contract.^[2] The defendant corporation has not  paid the share of  the plaintiff in the proceeds of the sale  of the first 1,000 copies of’ the  book printed  and sold by the defendant corporation as agreed upon  in the contract entered  into  by and  between  the  parties on  21  May  1946 (Exhibit A).  In the original and  amended  answers  of the defendant corporation it  is alleged  that  said  copies remained unsold,  but on the witness stand Jose M. Aruego, President of  the  defendant corporation, admitted that 800 copies thereof had been sold.  There is also a share due the plaintiff  in the  sale of 1,500 reprinted  copies of the book.   But how much that share amounts to, the evidence does not throw any light, in like manner that there  is no evidence to show  how much is due the plaintiff as his share in the sale of 800 copies of the book.

The counterclaim of the  defendant  was  correctly dismissed by  the trial court, because it found that the one who had breached the contract is the defendant corporation. Such  being the  case, the defendant  corporation cannot claim any damage against the  plaintiff. Aside  from that, it is difficult to believe that  from  1946 to the  time  when the contract  of  16  July  1948 was signed, the defendant    corporation could not and had not disposed of the  1,000  copies of the book.   Such is the import of the letter  of 18 June  1948 written by the plaintiff to  Jose M. Aruego, President of the defendant corporation  (Exhibit H).   It is also difficult to believe that not a single copy of the  1,500 copies of the  book subsequently reprinted was sold, because of the publication  and sale  by the  PHILAW  Publishing Company of the mimeographed copies of the book.  From 1948 to November 1949 when the mimeographed copies  of the book were sold, there was sufficient time for the sale and disposition of the 1,500  reprinted copies of the book. There is no evidence that long before November 1949 there had been  an announcement or publication that copies  of commentaries on the  Revised Penal Code by the plaintiff would  be  mimeographed and ready for distribution and sale.

Although  the  defendant  corporation  breached  the  contract, as found by the trial court, and  there  is no  reason which may find support in the evidence for disturbing such finding, yet  we believe that  in  the  absence of  evidence to show the, amount that should  accrue to the plaintiff  as his share in the proceeds of the sale of  1,000 copies of the book and of  1,500 copies of the reprinted book that were in press when  the contract of 19 July 1948 was entered into, and  the amount of  profits  that the  plaintiff would derive  from the sale of the books to be1 printed, as  agreed upon in the  contract of  19 July 1948, the amount of  liquidated damages is rather excessive, because even if the books  were  sold  at P40, P35 or P30, as hinted by  Jose M. Aruego, the president of the defendant corporation,  in his testimony, the cost of paper,  printing, binding, advertising,  sales  promotion and other incidental  disbursements should  be deducted from  the gross proceeds..  For  that reason  and  in  accordance  with the provisions of  article 2227 of the  new  Civil Code, the  reasonable amount of  liquidated damages that must  be  awarded to  the plaintiff as a result of the breach by the  defendant corporation of the contract is- equitably reduced  to f 15,000.

With this  modification as  to the  amount  of liquidated damages, the judgment appealed from  is affirmed, with costs against the appellant.

Paras, C.  J., Montemayor, Reyes, A., Bautista Angelo, Concepcion,  Reyes,  J. B. L.,  Endencia and Felix,  JJ,, concur.

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^[1] Article 1124, old civil code; article 1191, new civil code.
^[2] Article 2226, new civil code.

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R E S O L U T I O N

PADILLA, J.:

This  is a motion for reconsideration of the  judgment rendered in this case on the ground that “the plaintiff did not  deliver the manuscript on  or before December 31, 1948,” as agreed upon in the contract entered into by and between the parties on 19 July 1948 (Exhibit A).

It must be borne in mind that the price or  the sum of P30,000 payable in eight quarterly installments at the rate of P3.750, the, first quarter to begin 15 July 1948, is not only for the exclusive right of  the appellant corporation to publish or cause to be published the manuscript to be written by the appellee on Ms commentaries of the Revised Penal Code  of  the Philippines, as amended, until 15 July 1948, but also for the liquidated balance due the appellee as his share in the sale of the reprinted copies of the first edition of his  book  as  per  contract between both parties  dated 21  May 1946, and for his  liquidated share in the sale  of another 1,500 reprinted copies  in 1948 of said book  then in the  press.  The first installment of P3,750  was  due  on  15  October   1948.  The   appellant breached the contract when it  paid  only the sum  of P1,000 on  31  July and  another  of  the   same  amount on  10 September  1948, thereby  leaving  an unpaid  balance  of P1,750.  That breach of  the contract entitled the appellee to the payment of  the  rest of the installments  by the appellant whether there was  a  judicial  or extrajudicial demand as  agreed  upon,  and  the  appellee could  then take charge of the publication of the book  and,  if it had  already been  published, he could take over the sale and  distribution of the  printed books  without  any  right on the part of the appellant to participate in its proceeds (paragraph 4,  Exhibit A). It  is only the acceptance by the appellee of the sum of P2,000 paid by the appellant on 10 November 1948  (Exhibits C, C-l, 2-B) that prevented the appellee from enforcing the stipulation in the contract already referred to, to wit: that “the rest of the installments  shall be deemed due and payable, whether there is judicial or extrajudicial demand made by the PARTY  OF THE FIRST PART”  (appellee).   The payment  of P2,000 made on 10 November 1948 accepted by the appellee completed  the payment  of the first  installment due  on 15 October 1948 with an  excess of P250 credited to the second quarterly installment due on 15 January 1949.  But, in the opinion of this Court,  the delay in  the payment of the first quarterly installment may not amount to a breach of contract  to  justify the  enforcement   of the  stipulation  set forth in paragraph 4  of the contract.  The appellant justifies its  refusal to complete  the  payment of the second quarterly installment because of the failure of the appellee to deliver the manuscript on or before 31  December 1948. But  the evidence shows that on  16 December  1948  the appelleee  wrote a letter advising the appellant that—

The manuscript of my  Commentaries  on the Revised Penal Code, subject  matter of our Contract executed on the  19th of July  this year, is  now at your disposal. It is ready to go to the printer should you desire to  publish  the  same next  month. I am keeping  the manuscript in the office because I am afraid that it  may be copied by others,  spoiled or lost in your  possession.  Besides, I desire to add new decisions of the Supreme Court  that may be published from time to  time before the manuscript is actually sent to the printer. Should you insist in keeping the manuscript, make me know and  I shall deliver it to you.  (Exhibit D.)

Although the appellant’s  President denies  having received the letter, yet  the trial court  found  that  such letter was written and delivered  to the appellant, a finding supported by a preponderance of evidence.  The appellant also denies having  received the original  of a letter  dated  27 April 1949 (Exhibit  E) where reference to the previous letter of 16 December 1948  was made and  demand  for payment of installments due and unpaid was  also made.  However, the appellant  corporation  admits  having  received   the original of the letters dated 15 August 1949  (Exhibit F) and 6  June 1949  (Exhibit G).   In the first  letter  the appellee reminded the appellant corporation  of its promise to  settle the quarterly installments  due  on  15  April and ] 5  July and the unpaid balance of the second installment due on 15  January,  and in the  second, the appellee  reminded the  appellant  of  its  due  and  unpaid  quarterly installments, and warned that in view  of  the apparent inability of the appellant corporation to  fulfill its part  of the contract he  would  consider  it  rescinded and  would publish the  revised  edition next month  (July)  at  his expense.

The appellant’s contention and claim that  it did not pay the balance of  P500 due on 15 January  1949, because the appellee failed  to deliver the manuscript on or  before 31 December 1948 cannot be true.  The appellant would have answered the  two  letters it received from the appellee and stated that its refusal to  pay the unpaid balance  of the second installment  was due to the failure of the appellee to deliver the manuscript on or before 31  December 1948, and  that for that reason it was  no  longer  under obligation to pay the unpaid balance of the second installment  and the subsequent installments.  Yet  the  appellant never answered the two letters.

Delivery of the manuscript  does not necessarily mean physical or material delivery  thereof.   In  his  letter  of 16  December 1948  (Exhibit D) the appellee advised the appellant that  the  manuscript  was  then at its disposal, ready to go to the printer  should the appellant desire  to publish it next  month; that he was keeping the manuscript in his office, because he was afraid that it might be copied by  others, spoiled  or  lost in its  possession; and  that  it was his desire to add new decisions of the Supreme Court that might be published from time to  time before the manuscript was  actually sent  to  the printer, but  that  if the appellant would  insist  on having the manuscript,  it should let  him know, because  he would  deliver it.  This constitutes  delivery  of the manuscript.  The   fact that in  spite  of the  receipt of  that letter by  the appellant,  as found  by the trial court,  the  appellant did  not insist on the delivery of the manuscript on  or before 31  December 1948,  and  the  further  fact that  on  24  December  1948 after the receipt of that  letter the  appellant made another payment of Pl,000 was a clear indication that it accepted the appellee’s suggestion because it was  not  then  ready to  print  the manuscript.

As Manrosa says:

La jurisprudencia  se ha encargado tie establecer la armonm entre el nuevo prbicipio cxageradamenle espiritualista y el sentido qtie se ha  de dar a  la tradicion o entrega  tie la cosa.  Lo que  el vendedor csta obligado a  realixar, segun la jufisprudencia  es  cl traspaso de .la cosa veiidida al disfrute (jouisnance) y posesion del comprador; no  a su poutu1 (puissance),  porque  en poder del comprador, en el sentido  do pertenecer  a  su  patrimotiio juridico,  estaba  ya la cosa Vendida desde el momento en que medio  el consentimlento.   

Es decir, que  aunque la   transmision de  la  propiedad  se  habia ya  opcrado desde la perfeccion  del contrato, como  quiera’ que el comprador no podria obtener  log rfectos utiles de  este si la cosa permaneciese perpetuamente  a  la  disposition, al alcance del vendedor y no ai  aleanco y a la disposicion material del comprador  es meiicster poner  la  eosa  en estu situaoion de  mero  hecho para  que el  adquirontc este en  ponibiliclad  de ejercer siis  facultades dominicales, que’ no dependen  ciertamente,  en cuanto  a  su  integridad,  de  eso tmspaso material, puesto que nacieron desde que so presto el consentimiento; pero que necesitan de esa  situacion  de hecho en la cosa. Hemos  repetido lo do  la situacion de hecho  o de rnero hecho para, evitando toda confusion, hacer notar  una vca mas  que no se trata con la entrega. dela cosa, a la manera como la entiende la  jurisprudencia francesa,  de ningun cambio on la situacion  juridica  de la cosa, ya que  esta  antes  y  despnes do la entrega perteneia al pafci/imonio del  corapi’ador poy  haberse transmitido  el  domino de la misma  en  virlud  del  solo consentimiento.

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Por  lo tanto, la entrega de  la cosa,  de cualquiera de  los modos . que  enumcran  los articulos  que conicntamos  y qus seguidamente explicaremos, signifiea que la  transmision  de la propiedad sc ha verifieado del vendedor al comprador.   (Comentarios al  Codigo  Civil Español, Tomo X, paginas 121-122, 4.a edicion.)

Castan on  this point says:

Puede, pues, ser  definida la entrega en nucstro Derecho como  el transferimiento do la posesion jurfdica de la cosa, que hace adquirir 3U propiedad o el derecho real por el comprador.  El articulo 1.462 del Codigo quiere dar idea de  clla diciendo que  “se cntondera entregada la cosa vendida cuando sc  ponga en poder y poscsion del comprador”.   (Defecho Civil Español, Comun y Foral, Tonio 4, pagina 67, 8.a edicioti.)

The resolution of a contract because of the breach thereof by one of the parties to it  does  not preclude an  award of damages.   And there  is more  reason  for such  award when it  is  stipulated.

The motion for reconsideration is denied.

Paras, C. J., Montemayor, Reyes, A., Concepcion,  Reyes, J. B. L., Endencia, and Felix, JJ.,  concur.