G.R. No. L-21876. September 29, 1967
PHILIPPINE AMUSEMENT ENTERPRISES, INC., PLAINTIFF-APPELLANT, VS. SOLEDAD NATIVIDAD AND MARIANO NATIVIDAD, DEFENDANTS-APPELLEES.
CASTRO, J.:
This is an appeal from the decision of the Court of First Instance
of Davao dated May 31, 1962, rescinding, in favor of
the defendants, the lease agreement entered into by the plaintiff Philippine
Enterprises, Inc. and the defendant Soledad Natividad
relative to an automatic phonograph, ordering the latter to restore the
phonograph to the former, denying the plaintiff’s claim for liquidated and
exemplary damages, attorney’s fees and costs of suit, and dismissing the
defendants’ counterclaim. The plaintiff
took the appeal to the Court of Appeals which, however, certified it to this
Court because the questions involved are of law.
On January 6, 1961 the plaintiff, a domestic corporation with
main office in Quezon City and a branch office in Davao City, entered into a contract with the defendant
Soledad Natividad, owner of the Irene’s Refreshment
Parlor in Davao City, whereby the former leased to
the latter an automatic phonograph (Seeburg Selectomatic 100-R), more popularly known as
“jukebox”. The pertinent
provisions of the contract are as follows:
“2. The OPERATOR[1]
agrees to supply and replace parts that may have been damaged as a result of
ordinary wear and tear without any cost to the PROPRIETOR;[2]
* * *
“5. The PROPRIETOR shall pay to the OPERATOR, by
way of rental for the use of the aforesaid automatic phonograph, an amount
equal to 75% of the Gross Receipts for the period of one week, but in no case
shall the amount be less than P50.00 a week;
* * *
“9. The PROPRIETOR agrees that during the term
of this agreement, the OPERATOR shall have the exclusive right to maintain an
automatic phonograph in the premises, and the PROPRIETOR shall not permit
anyone to install or maintain any phonograph or any other devices for the
reproduction or the transmission of music in any part of the premises;
* * *
“11. It is
mutually agreed that the duration of this agreement shall be for the period of
three (3) years from the date hereof and shall renew itself automatically for
a like period under the same terms and conditions, unless either of the parties
hereto gives to the other written notice of his intention to cancel this
agreement by registered mail within thirty (30) days before the expiration of
this agreement or any renewal thereof.
“12. In the event
that the PROPRIETOR shall fail to comply with any of the terms and conditions
of this contract, the OPERATOR, at any time during the existence of the
agreement, shall be entitled as a matter of right to immediately reposses, and the PROPRIETOR binds himself to voluntarily
surrender the said phonograph; and hereby expressly grants permission to
representatives of the OPERATOR any time for such purposes thereby waiving any
action for trespass or damages.
* * *
“15. In the
event of a breach of this agreement by the PROPRIETOR, the parties hereto agree
that the OPERATOR shall be entitled to recover as liquidated damages and not as
a penalty or forfeiture, a sum equal to P50.00 per week for each week
remaining of the unexpired term of this agreement; AND IN THE EVENT OF JUDICIAL
PROCEEDINGS TO ENFORCE ANY OF THE PROVISIONS OF THIS CONTRACT, the OPERATOR
shall be entitled to attorney’s fees of not less than P200.00, costs of the
action, premiums for bonds, and otter expenses and damages which OPERATOR may
suffer or incur by reason thereof, as well as to the immediate issuance of
preliminary writ of mandatory injunction.”
On July 17, 1961
Mariano Natividad, husband of the defendant Soledad Natividad, wrote the following letter to the plaintiff’s
branch office in Davao
City:
“For two (2) weeks ago, I had advice your representative here
in Davao
to get back your jukebox, but until today said representative did not mind us.
“So upon receipt of this letter, you are hereby again adviced to get the said Jukebox and failure on your part to
get it, we shall not be responsible anymore for the said Jukebox.”
On July 27, 1961
Mariano Natividad wrote another letter to the
plaintiff, this time addressed to its main office in Quezon City, informing it of his
letter of July 17 and of the reasons for requesting the return of the jukebox
to the company. This letter reads as
follows:
“Please may you hear our revelations or relations prior to
the advise we had made to your company regarding our slight difference from
your agent, stationed here in Davao
City.
“1. We requested your agent that the said Jukebox
should be inspected once in a while there are times when them said Jukebox
stock up and the coins which will be dropped will just be confiscated due to
the selected record which will not give our selected music.
“2. About a year ago, we asked your agent here
in Davao City
if we could buy your Jukebox. He
replied, ‘yes’ and he will inform the Manila
office. From that time, we made always
an inquiry if said matter was already referred to. But we were surprised why until last May we
did not hear any word from your agent.
So we decided to order one from the United
States.
“3. On July 3rd, we advised personally your agent
that the said Jukebox should be taken from our establishment. He answered us that he will report the matter
to your Central Office. From July 3rd
until July 16th, we had not met your agent.
On the following day, July 17th, we met your agent because he accounted
the income of the said Jukebox and we again told him that the Jukebox should
be taken. He replied that he could not
act because there is no letter from us for the Manila
office advising the return of the said Jukebox. So we made a discussion why he did not tell
us if our letter was necessary; so we wrote a letter on July 17th. At that time when he received our letter, he
requested for an extension of one (1) week for he would forward our letter to Manila. But according to my wife, your agent told her
that he forwarded our letter last July 22nd.
On July 24th, we finally decided to return the said Jukebox and even
have ready laborers to help us load the Jukebox on your pick-up. Your agent, Mr. Gonzales, remarked angrily
that he would not accept the said Jukebox but will just deposit it in our
establishment until the Manila office will act on
it. According to him, your agent, Mr.
Gonzales, we could not remove the said Jukebox from the place because there was
a contract. Later on, Mr. Gonzales
calmly requested us again to have an additional extension of one (1) more
week. In this situation we were very
embarrassed because there were many customers and other persons present during
our discussions. Right on that day, we
transferred your Jukebox inside our airconditioned
room without any business because Mr. Gonzales told us that the said Jukebox
should be deposited only in our establishment.
Your agent Mr. Gonzales, is a good agent on the other world but not in
this world where we are living. Beginning
July 24th until the time you will get the Jukebox, we are going to collect a
monthly rental of Fifty Pesos (P50.00) for the space occupying the
Jukebox.”
In its reply of August 4,
1961 the plaintiff stated that –
“the stocking up of coins is quite
normal in any coin-operated phonograph, as well as failure to get the desired
selection. It has been the policy of
our company, however, to give top priority to the complaints of our
customers. It is not clear from your
letter whether our Branch Manage for Davao City
has been remiss in his duties. We are willing
to give the benefit of the doubt by concluding that he might have failed to
respond to your calls in time and I assure you that immediate instructions
will be issued from this office directing him to give personal attention to any
service that you might wish in connection with the said Juice box.”
It as well denied knowledge of the
defendants’ desire to buy a jukebox and deplored the fact that the defendants
ordered one from the United States
without first sending the request to buy directly to it since the plaintiff was
anyway willing to sell a jukebox to any interested person. Calling attention to paragraph 9 of the
lease contract which gave it the exclusive right to maintain an automatic
phonograph in the defendants, premises, the plaintiff asked the defendants to
re-install its jukebox and remove the other one which the defendants had
installed in their premises.
On August 4 and October
16, 1961, the plaintiff, through counsel, wrote the defendant
spouses, demanding anew compliance with the lease contract and the payment of
damages, and warning them that it would file the corresponding action in court
if they did not comply with its demand.
As the defendants refused the demand, the plaintiff brought action in
the Court of First Instance of Davao on November 21,
1961, praying for the return to it of the automatic phonograph, subject of the
contract of lease, and the payment of P5,850 as liquidated damages, P5,000 as
exemplary damages, P500 as attorney’s fees and P500 as expenses of litigation.
Upon the parties’ stipulation of facts, their pleadings and the
documentary evidence submitted by them as annexes to the stipulation of facts
and pleadings, the lower court rendered the decision hereinbefore adverted to.
The plaintiff imputes four errors to the lower court, the vital
one being the court’s holding that the facts fully warrant a rescission of the
contract of lease in favor of the defendants by reason of the plaintiff’s
failure to perform its obligation to render the automatic phonograph suitable
for the purpose for which it was intended.
It is our view that the decision of the lower court should be
reversed on three grounds.
First. The power to
rescind obligations is implied in reciprocal ones in case one of the obligors
should not comply with what is incumbent upon him. So the Civil Code provides.[3]
But it is equally settled that, in the absence of a stipulation to the
contrary, this power must be invoked judicially; it cannot be exercised solely
on a party’s own judgment that the other has committed a breach of the
obligation.[4]
Hence, as there is nothing in the contract of lease empowering the defendants
to rescind it without resort to the courts, the defendants’ action in
unilaterally terminating the contract is unjustified. As this Court said in Escueta
v. Pando:[5]
“The defendant could not, by himself
alone and without judicial intervention, resolve or annul the agreement. Under article 1124 [now art. 1191] of the
Civil Code, the right to resolve reciprocal obligations, in case one of the obligors
shall fail to comply with that which is incumbent upon him, is deemed to be
implied. But that right must be invoked
judicially; for the same article also provides:
‘The court shall decree the resolution demanded, unless there should be
grounds which justify the allowance of a term for the performance of the
obligation.'”
Second. Rescission
will be ordered only where the breach complained of is substantial as to defeat
the object of the parties in entering into the agreement. It will not be granted where the breach is
slight or casual.[6]
The defendants asked the plaintiff to retrieve its phonograph, claiming that
there were times when the coins dropped into the slot would got stuck,
resulting in its failure to play the desired music. But apart from this bare statement, there is
nothing in the evidence which shows the frequency with which the jukebox failed
to function properly. The expression
“there are times” connotes occasional failure of the phonograph to
operate, not frequent enough to render it unsuitable and unserviceable. As a matter of fact, there is not even a
claim that, as a result of unsatisfactory performance thereof, the income therefrom dropped to such a level that the defendants could
not even pay the plaintiff its guaranteed share of P50 a week. On the
contrary, the evidence (Stipulation of Facts, Annexes J, K, L, M, N, and 0)
shows that, during the period complained of, the operation of the jukebox was
quite profitable to both parties.[7]
Third. We believe
that the defendants actually bought a jukebox only in 1961 after they had
signed the lease contract question, although they might have expressed a desire
to buy one the year before, for otherwise they would not have entered into a
three-year lease. But certainly their
decision to buy a jukebox and operate it themselves was made long before they
ever complained in July, 1961 of any defect in the rented jukebox. To be sure, it is not shown when the rented
phonograph supposedly developed trouble; presumably it was early in July, 1961,
since the defendants’ first letter of complaint was written on July 17. But if, as defendants admit, they began
operating their own jukebox “sometime in July, 1961” (presumably on
July 24,1961 when they removed the rented jukebox from where it was installed),
then the defendants’ pretense that they decided to buy their own jukebox only
after the rented one had failed to function properly becomes highly
improbable. The jukebox which they
ordered from the United States
could not have arrived in so short a time as to enable them to operate it on
July 24.
We are rather inclined to believe that the decision to buy a
jukebox was made because the defendants found it more profitable to operate one
themselves. Their letter of July 17,
1961, in which they demanded the removal of the rented jukebox from their
premises, with the warning that they would not be “responsible
anymore” for it, and their other letter of July 27 of like tenor, betray
the haste with which they wanted to get out of their contractual obligations to
the plaintiff. We note that they did not
even ask the plaintiff to service the rented jukebox; they asked the plaintiff
to remove the jukebox or they would charge rental for the use of the space
occupied by it. The conviction cannot
be avoided that the jukebox which the defendants had ordered from the United
States had arrived and the latter thereafter
conjured up a reason for operating it without being charged with violation of
the lease contract. The defendants’
pretenses cannot excuse their culpable violation of the lease contract; their
conduct fully justifies the award of liquidated damages to the plaintiff.
ACCORDINGLY, the judgment a quo is reversed,
and the contract of lease between the plaintiff and the defendant Soledad Natividad is hereby rescinded in favor of the
plaintiff. The defendants are ordered to
return to the plaintiff the automatic phonograph subject of the contract, and
to pay the plaintiff liquidated damages in the total amount of P5,850, plus 6
per cent interest from the date of the filing of the complaint until the amount
shall have been fully paid, and attorney’s fees in the amount of P200. Costs against the defendants.
Concepcion, C.J., Reyes, Dizon, Makalintal, Zaldivar, Sanchez, Angeles, and Fernando, JJ., concur.
Bengzon, J., did not take part.
[1]
Philippine Amusement Enterprises, Inc.
[2] Soledad
Natividad.
[3] Civ. Code art. 1191; Abaya v.
Standard-Vacuum Oil Co., G.R.L-9511, Aug.
30, 1957; Hodges v. Granada,
59 Phil. 429 (1934).
[4]
Judicial permission to rescind an obligation is not necessary if there is a
special provision in the contract granting the power of cancellation to a
party. E.g., Froilan v. Pan
Oriental Shipping Co., G.R.L-118971, Oct. 31 1964; De la Rama
Steamship Co. v. Tan, G.R.L-8784, May 21, 1956, citing Hanlon v,
Hausermann, 40 Phil. 796 (1920); Taylor v. Uy Tieng Piao,
43 Phil. 870 (1922).
[5]
76 Phil. 256 (1946).
[6] See,
e g.,
Song Fo & Co. v. Hawaiian-Philippine Co.,
47 Phil. 821 (1925).
[7]
See record on Appeal pp. 22, 57-61.