GRACE PARK ENGINEERING CO., INC., PLAINTIFF-APPELLEE, VS. MOHAMAD ALI DIMAPORO, DEFENDANT-APPELLANT.

Appeal (prior to the effectivity of Republic Act No. 5440) by
Mohamad Ali Dimaporo from a decision of the Court of First Instance of Rizal,
Branch VI (in its Civil Case No. 3828), the dispositive portion of which reads:

“WHEREFORE, all premises considered, judgment is hereby
rendered declaring the rescission of the Contract for the Sale of Cassava Flour
and Starch Processing Machinery and Equipment, Exh. A, dated April 1, 1954, and
ordering mutual restitution by the parties, defendant to return to plaintiff
the cassava flour and starch processing machinery and equipment and bear the
transportation expenses thereof to the port of Cotabato, plaintiff corporation
to bear the freight charges thereof for its shipment to Manila, and, to pay
plain­tiff the total amount of P19,628.93 with interest thereon at the rate of
6% per annum from the date of filing of this complaint until full payment of
the same, and plaintiff to return to defendant the amount of P15,750.00
representing the partial payment made to it by defendant for the purchase price
of said machinery and equipment.  No pronouncement
as to damages and costs.”^[1]

Defendant-Appellant Dimaporo questions the validity of the
questioned decision in so far as said decision 1) orders him to return the
cassava flour and starch processing ma­chinery and equipment and 2) orders him
to pay plaintiff-appellee Grace Park Engineering Co. P19,628.93 with interest.

The records disclose that on April 1, 1954, Grace Park Engineering, Inc., and Mohamad
Ali Dimaporo entered into a Contract for the Sale of Cassava Flour and Starch
Processing Machinery and Equipment (Exh. A)^[2]
whereby the corporation agreed to sell and install, for the consideration of P52,000.00, a cassava flour and starch
processing machinery and equipment specifically described therein at Dimaporo’s
place in Karomatan, Lanao Mill Site, within a period of 70 working days from
the date of signing of the contract.  It
was agreed that P5,750.00 shall be paid upon signing of the contract;
P10,000.00 shall be paid within 30 days from the date of the signing of the
contract but before machinery and equipment is loaded at Manila Harbor and
P36,750.00 shall be payable in 12 monthly installments as provided in the
contract.

In view of the foregoing considerations, the Corporation
guaranteed said machinery and equipment to process at least 6 tons of cassava
flour and starch per 24-hour day operation, while Dimaporo undertook to supply
at his own expenses the building wherein shall be housed the machinery and
equipment, laborers needed to complement the operation of the mill, food,
foundation materials, and effective water system (par. 6, Exh. A.).

In compliance with the agreement, defendant paid plain­tiff the
amounts of P5,750.00 and P10,000.00 as agreed upon, thus leaving a balance of
P36,750.00.

It appears on record, however, that during the course of
installation of said machinery and equipment, Dimaporo failed to comply with
his obligations specified in par. 6 of said contract, so much so that the
Corporation was forced to provide the necessary materials and labor and advance
whatever expenses had been made for that purpose with previous knowledge and
consent given by Dimaporo because the latter was short of funds during that
time.

It took the Corporation one (1) year and three (3) months to
install the said machinery and equipment, after which, it demanded from
Dimaporo complete payment of the balance due and for all expenses made in
advance arising from the supply of materials and labor which Dimaporo failed to
provide on time.  Dimaporo refused to pay
on the ground that the balance of P36,750.00 never became due and demand­able
because of the Corporation’s failure to complete the installation of the
machinery and equipment within the stipulated period and place the same in
satisfactory running conditions as guaranteed by it in the contract.

Hence, on October 1,
1955 the Corporation brought an action against Dimaporo for
rescission of the aforesaid contract after mutual restitution by the parties
with pro­vision for damages in its favor. 
Dimaporo, in his answer, likewise seeks the rescission of the contract,
after mutual restitution by the parties, but with provision for the pay­ment by
the Corporation of freight charges that may be incurred due to such
restitution, and with the award of damages in his favor.

After hearing on the merit, the trial court found both parties
having violated the terms and conditions of the contract, defendant Dimaporo
failing to comply with his obligations under par. 6 of the contract and
plaintiff cor­poration liable for installing machinery and equipment that are basically defective and inadequate.  As to who was the first infractor in point of
time, it was not determined by the trial court. 
Rescission of the contract was granted but held that parties should bear
his/its own damages, applying article 1192 of the New Civil Code which
provides:

“In case both parties have committed a breach of the
obligation, the liability of the first infractor should be equitably tempered
by the Courts.  If it cannot be
determined which of the parties first violated the contract, the same should be
deemed extinguished, and each shall bear his own damages.”

From the judgment of the
Court below, Dimaporo directly appealed to this Court imputing seven (7)
assignments of errors committed by the trial court, which may be synthesized
into four (4) main issues:

a)     
whether he was guilty of breach of
contract.

b)      whether he was liable to return the machinery and equipment subject
matter of the contract.

c)     
whether he was liable to pay
appellee Corpo­ration the amount of P19,628.93 with interest.

d)     
whether he was entitled to the
award of damages in his favor.

Appellant Dimaporo
maintained that he has not committed any breach of contract, Exh. A,
particularly par. 6 thereof; that it was appellee Corporation who was guilty
thereof, and points in his appellant’s brief testimonial and docu­mentary
evidence in support of the same.  Upon
the other hand, the trial court, in its decision, makes the following findings:

“From the entire evidence presented, it appears that defendant
had failed to comply with his obligations under the contract, Exh. A, more
particularly with the provisions of par. 6 thereof.  He was unable to furnish sufficient laborers
needed to complete the operations of the mill, food, foundation materials and
effective water systems (Exhs. G, G–1,
I, Y–1, J–1, K, R, CC, KK, LL, NN-1).  Under
Exh. MM, a daily work progress report duly certified correct by defendant, the
hammer mill and flash drier were already commercially operated on December
11, 1954 (Exh.
MM-3).  This necessarily gives the
impression that the installation of the mill has been completed in accordance
with the contract and the subsequent failure of the project is due to
defendant’s fault. x x x.  Taking into
consideration defendant’s failure to comply with this obligation, plaintiff’s delay
in the complete installation of the machinery and equipment seems reasonable
and understandable.  x x x”^[3]

The foregoing is a conclusion of fact of the trial court.  The rule is well-settled that factual
findings of the trial court, supported by substantial evidence, are generally
binding on the Supreme Court.  They are
entitled to great respect, the lower court having had the opportunity of
weighing carefully what was testified to and did so without oversight or neglect.^[4]
Hence the rule that when a party appeals directly to this Court, he is deemed
to have waived the right to dispute any finding of fact made by the court
below.^[5]

It is next argued for appellant Dimaporo that the trial court
erred in ordering the return of the machinery and equipment subject matter of
the contract to appellee corporation and maintained that although a rescission
of the contract is in order, he has no obligation, however, to return the
machinery and equipment, much less pay the trans­portation expenses thereof to
the port of Cotabato, since the machinery and equipment shipped by appellee
corporation were never delivered to appellant. 
He contended that by reference to the contract, Exh. A, it is clear that
the obligation of the appellee did not end with the shipment of the machinery
and equipment to the mill site; it must also install the machinery and
equipment in such a manner that they would produce at least 6 tons of cassava
flour per 24 hours of operations so much so that until such machinery and
equipment were installed and shown to be capable of producing at the warranted
rate, there could be no delivery of such machinery and equipment to appellant.

This contention is in Our opinion, not sustained by the terms of
the contract or by the facts appearing in evidence.  It is true that under par. 8 of the contract,
Exh. A, the “SELLER warrants that it will deliver all the machinery and
equipment as agreed in par. 4, guaranteed to process at least 6 tons of cassava
flour or starch per 24-hour day operation.” However in said paragraph it
was also stipulated that “this warranty of capacity shall be attained only
when properly coordinated to the necessary manual labor required for the
purpose.” And according to the trial court, “the delay of the
completion of the installation as well as the incapacity of the mill to produce
the desired amount of flour/starch as warranted by the plaintiff under the
contract are attributable to defendant’s non-compliance with his obligation to
furnish food, materials, and water system.”

Even assuming that there is some degree of plausibility in
appellant’s position, still the lower court did not commit any error in
ordering appellant to return the machinery and equipment to appellee
corporation, for when the former, as defendant in the lower court, filed his
Answer to the com­plaint of appellee corporation, he prayed for the rescission
of the contract between him and the plaintiff and for mutual restitution by the
parties.^[6]
To sustain appellant’s contention that he is not liable for the return of machinery
and equipment would be fundamentally contradicting the very notion of
rescission.  The first paragraph of
article 1385 of the New Civil Code provides:

“Rescission creates the obligation to return the things which
were the object of the contract, together with their fruits, and the price with
its interest; consequently, it can be carried out only when he who demands
rescission can return whatever he may be obliged to restore.”

Furthermore, when a contract is resolved or rescinded, it is the
duty of the court to require the parties to sur­render that which they have
severally received and to place each as far as practicable in his original
situation; and when a resolution is granted, it has the effect of abrogating
the contract in all parts.  The party
seeking resolution cannot ask “performance as to part and resolution as to
remainder.”^[7]

The last two issues are both centered on the question of who is
liable for the payment of damages and interests as a result of the breach of
contract.  The trial court, in resolving
the issues, applied Article 1192 of the New Civil Code, which as aforestated,
enunciated the rule if both parties committed a breach of obligation.  The trial court find the following facts:  “Both parties have failed to comply with
what is respectively encumbent upon them to do, and the object of the contract
is consequently defeated; defendant failed to comply with his obligations under
the contract, Exh. A; that further scrutiny of the evidence shows that the
machinery and equipment sold and installed by plaintiff were all along, by
themselves, defective and inadequate.  As
to who was the first infractor in point of time, under said circumstances,
cannot be specifically delineated. 
Hence, parties should bear his/its own damages.”

Based on these findings, the trial court ruled, as aforestated in
the dispositive portion, that appellant Dimaporo must pay appellee corporation
the total amount of P19,628.93 which the latter had spent by way of advances to
the former with which to purchase the necessary materials and supplies at the
rate of 6% per annum; that appellee corporation must return to appellant the
amount of P15,750.00 representing the partial payment made by it to appellant
for the purchase price of said machinery and equipment.  The trial court, however, made no
pronouncement as to damages and costs.

But appellant would contend that the amount of P19,628.93 should
be offset by the damages that are due to him by reason of the violations by the
appellee corporation of its obli­gation under the contract; that appellee must
be required to pay interests on the amount of P15,750.00 since this amount paid
has already been used by it; and that since the first infractor was the
appellee’s corporation, therefore, damages should be paid by that party to the
appellant.

The findings of fact of the trial court that both appellant
Dimaporo and appellee corporation have committed a breach of obligation are
fully supported by the evidence on record. 
As We have stated, We are not in a position to disturb the same.  Therefore, it correctly applied Article 1192
of the New Civil Code to the effect that in case both parties have committed a
breach of obligation and it cannot be determined who was the first infractor,
the contract shall be deemed extinguished and each shall bear his/its own
damages.  Consequently, the trial court
committed no reversible error when it ordered appellee corporation to pay
appellant the amount of P15,570.00 representing partial payment of the purchase
price of the machinery and equipment. 
This is but a consequence of the decree of rescission granted by the
trial court. Neither did it commit any error when it refused to grant any
interest on the afore­said amount of P15,570.00.  This is also but a consequence of the
enunciated rule that each party should bear his/its own damages.  For the same reasons, We hold that although
appel­lant is liable to pay the amount of P19,628.93 which appellee corporation
had spent by way of advances with which to pur­chase the necessary materials and
supplies, however, he is not liable to pay interest thereon at the rate of 6%
per annum until full payment of the same, as held by the lower court.  Otherwise, to hold so would be in conflict
with the above-mentioned rule that each party must bear his/its own damages.

PREMISES CONSIDERED, with the only modification that the
sum of P19,628.93 be paid by appellant Dimaporo to appellee Grace Park Engineering, Inc., without interest, the
judgment appealed from is affirmed in all other respects.  No pronouncement as to costs.

SO ORDERED.

Teehankee, (Chairman), Makasiar, Fernandez, Guerrero, and Melencio-Herrera, JJ., concur.

^[1]
p. 54, Record on Appeal, p. 34, Rollo.

^[2]
p. 8, Record on Appeal, p. 34, Rollo.

^[3]
pp. 48-49, Record on Appeal, p. 34,
Rollo.

^[4]
Corliss vs. Manila Railroad Company 27 SCRA 674; Miguel vs. Court
of Appeals, 29 SCRA 760.  Yturralde vs.
Vagilidad, 28 SCRA 393; Samson Jr. vs. Tarroza, 28 SCRA 792; Perez vs.
Araneta, 24 SCRA 43.

^[5]
Cebu Portland Cement Co. vs. Mun. of Naga, Cebu,
24 SCRA 708; Pascua vs. Capuyoc, 77 SCRA 78 citing Mañacop vs.
Cansino, 111 Phil. 106.

^[6]  p. 31, Record on Appeal, p. 34, Rollo.

^[7]
Po Pauco vs. Siguenza and Aguilar, 49 Phil. 404; Magdalena Estate Inc. vs.
Louis J. Myrick, 71 Phil. 344; Verceluz vs. Edaño, 46 Phil, 801.