UNIVERSAL FOOD CORPO­RATION, PETITIONER, VS. THE COURT OF APPEALS, MAGDALO V. FRANCISCO, SR., AND VICTORIANO V. FRANCISCO, RESPONDENTS.

Petition for certiorari by the Universal Food Corporation against
the decision of the Court of Appeals of February 13, 1968 in CA-G.R. 31430-R (Magdalo V. Francisco, Sr. and Victoriano
V. Francisco, plaintiffs-appellants vs. Universal Food Corpora­tion, defendant-appellee), the dispositive
portion of which reads as follows:

“WHEREFORE, the appealed decision is here­by reversed; the BILL OF
ASSIGNMENT marked Exhi­bit A is hereby rescinded, and defendant is hereby or­dered
to return to plaintiff Magdalo V. Francisco, Sr., his
Mafran sauce trademark and formula subject-matter of
Exhibit A, and to pay him his monthly salary of P300.00 from December 1, 1960,
until the return to him of said trademark and formula, plus attorney’s fees in
the amount of P500.00, with costs against defendant.”

On February 14, 1961 Magdalo V.
Francisco Sr. and Victoriano V. Francisco filed with
the Court of First Instance of Manila, against the Universal Food Corporation,
an action for rescission of a contract entitled “Bill of Assignment,”
the plaintiffs prayed the court to adjudge the defendant as without any right
to the use of the Mafran trademark and formula, and
order the latter to res­tore to them the said right of use; to order the
defendant to pair Magdalo V. Francisco, Sr. his
unpaid salary from December 1, 1960, as well as damages in the sum of P40,000,
and to pay the costs of suit.^[1]

On February 28, the defendant filed its answer containing
admissions and denials.  Paragraph 3
thereof “admits the allega­tions contained in paragraph 3 of plaintiffs’
complaint.” The ans­wer further alleged that the defendant had complied
with all the terms and conditions of the Bill of Assignment and, consequently,
the plaintiffs are not entitled to rescission thereof; that the plain­tiff Magdalo V. Francisco, Sr. was riot dismissed from the
service as permanent chief chemist of the corporation as he is still its chief
chemist; and, by way of special defenses, that the afore­said plaintiff is estopped from questioning 1) the contents and due execution
of the Bill of Assignment, 2) the corporate acts of the petitioner,
particularly the resolution adopted by its board of di­rectors at the special
meeting held on October 14, 1960, to suspend operations to avoid further losses
due to increase in the prices of raw materials, since the same plaintiff was
present when that re­solution was adopted and even took part in the
consideration there­of, 3) the actuations of its president and general manager
in en­forcing and implementing the said resolution, 4) the fact that the same
plaintiff was negligent in the performance of his duties as chief chemist of
the corporation, and 5) the further fact that the said plaintiff was delinquent
in the payment of his subscribed shares of stock with the corporation.  The defendant corporation prayed for the
dismissal of the complaint, and asked for P750 as attor­ney’s fees and 5,000 in
exemplary or corrective damages.

On June 25, 1962
the lower court dismissed the plaintiffs’ complaint as well as the defendant’s
claim for damages and attor­ney’s fees, with costs against the former, who
promptly appealed to the Court of Appeals. 
On February 13,1969
the appellate court ren­dered the judgment now the subject of the present
recourse.

The Court of Appeals arrived at the following “uncontro­verted” findings of fact:

“That as far back as 1938, plaintiff Magdalo
V. Francisco, Sr. discovered or invented a formula for the manufacture of a
food seasoning (sauce) de­rived from banana fruits popularly known as MAFRAN
sauce; that the manufacture of this product was used in commercial scale in
1942, and in the same year plaintiff registered his trademark in his name as
own­er and inventor with the Bureau of Patents; that due to lack of sufficient
capital to finance the expansion of the business, in 1960, said plaintiff
secured the fi­nancial assistance of Tirso T. Reyes
who, after a series of negotiations, formed with others defendant Universal
Food Corporation eventually leading to the execution on May 11, 1960 of the aforequoted ‘Bill of Assignment’ (Exhibit A or 1).

“Conformably with the terms and conditions of Exh. A, plaintiff Magdalo V.
Francisco, Sr. was appointed Chief Chemist with a salary of P300.00 a month,
and plaintiff Victoriano V. Francisco was appointed
auditor and superintendent with a salary of P250.00 a month.  Since the start of the operation of defendant
corporation, plaintiff Magdalo V. Francis­co, Sr.,
when preparing the secret materials inside the laboratory, never allowed
anyone, not even his own son, or the President and General Manager Tirso T. Reyes of defendant, to enter the laboratory in
order to keep the formula secret to himself. 
However, said plaintiff expressed a willingness to give the for­mula to
defendant provided that the same should be placed or kept inside a safe to be
opened only when he is already incapacitated to perform his duties as Chief
Chemist, but defendant never acquired a safe for that purpose.  On July 26, 1960, President and General
Manager Tirso T. Reyes wrote plaintiff requesting him
to permit one or two members of his family to observe the preparation of the ‘Mafran Sauce’ (Exhibit C), but said request was denied by
plaintiff.  In spite of such denial, Tirso T. Reyes did not compel or force plaintiff to accede
to said re­quest.  Thereafter, however,
due to the alleged scar­city and high prices of raw materials, on November 28,
1960, Secretary-Treasurer Ciriaco de Guzman of
defendant issued a Memorandum (Exhibit B), duly approved by the President and
General Manager Tirso T. Reyes, that only Supervisor
Ricardo Fran­cisco should be retained in the factory and that the salary of
plaintiff Magdalo V. Francisco, Sr., should be
stopped for the time being until the corporation should resume its
operation.  Some five (5) days later,
that is, on December 3, 1960, President and General Manager Tirso
T. Reyes issued a memorandum to Victoriano Francisco
ordering him to report to the factory and produce ‘Mafran
Sauce’ at the rate of not less than 100 cases a day so as to cope with the or­ders
of the corporation’s various distributors and dealers, and with instructions to
take only the neces­sary daily employees without employing permanent employees
(Exhibit B). Again, on December 6, 1961, another memorandum was issued by the
same Pre­sident and General Manager instructing the Assis­tant Chief Chemist
Ricardo Francisco, to recall all daily employees who are connected in the
production of Mafran Sauce and also some additional
daily employees for the production of Porky Pops (Exhibit B-1).  On December 29, 1960, another memorandum was
issued by the President and General Manager instructing Ricardo Francisco, as
Chief Chemist; and Porfirio Zarraga,
as Acting Superintendent, to produce Mafran Sauce and
Porky Pops in full swing starting January 2, 1961 with further instructions to
hire daily laborers in order to cope with the full blast production (Exhibit
S-2).  Plaintiff Magdalo
V. Francisco, Sr. received his salary as Chief Che­mist in the amount of P300.
00 a month only until his services were terminated on November 30, 1960.  On January 9 and 16, 1961, defendant, acting
thru its President and General Manager, authorized Por­firio
Zarraga and Paula de Bacula
to look for a buy­er of the corporation including its trademarks, for­mula and
assets at a price of not less than P 300,000.00 (Exhibits D and 3D-1). Due to
these successive memoranda, without plaintiff Magdalo
V. Francisco, Sr. being recalled back to work, the latter filed the pre­sent
action on February 14, 1961.  About a
month af­terwards, in a letter dated March 20, 1961, defendant, thru its
President and General Manager, requested said plaintiff to report for duty
(Exhibit 3), but the latter declined the request because the present action was
already filed in court (Exhibit J).”

1.  The petitioner’s first
contention is that the respondents are not entitled to rescission.  It is argued that under article 1191 of the
new Civil Code, the right to rescind a reciprocal obligation is not absolute
and can be demanded only if one is ready, willing and able to comply with his
own obligation and the other is not; that under article 1169 of the same Code,
in reciprocal Obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon
him; that in this case the trial court found that the respon­dents not only
have failed to show that the petitioner has been guil­ty of default in
performing its contractual obligations, “but the re­cord sufficiently
reveals the fact that it was the plaintiff Magdalo V.
Francisco who had been remiss in the compliance of his con­tractual obligation
to cede and transfer to the defendant the formu­la for Mafran
Sauce;” that even the respondent Court of Appeals found that as
“observed by the lower court, ‘the record is replete with the various
attempts made by the defendant (herein petitioner) to secure the said formula
from Magdalo V. Francisco to no avail; and that upon
the foregoing findings, the respondent Court of Appeals unjustly concluded that
the private respondents are entitled to rescind the Bill of Assignment.

The threshold question is whether by virtue of the terms of the
Bill of Assignment the respondent Magdalo V.
Francisco, Sr. ceded and transferred to the petitioner corporation the formula
for Mafran sauce.^[2]

The Bill of Assignment sets forth the following terms and
conditions:

“THAT the Party of the First Part [Magdalo
V. Francisco, Sr.] is the sole and exclusive owner of the MAFRAN trade-mark and
the formula, for MAFRAN SAUCE;

“THAT for and in consideration of the royal­ty of TWO (2%) PER
CENTUM or the net annual protit which the PARTY OF
THE Second Part [Univer­sal Food Corporation] may realize by and or out of its
production of MAFRAN SAUCE and other food products and from other business
which the Party of the Second Part may engage in as defined in its Articles of
Incorporation, and which its Board of Directors shall determine and declare,
said Party of the First Part hereby assign, transfer, and con­vey all its
property rights and interest over said Mafran
trademark and formula for MAFRAN SAUCE unto the Party of the Second Part;”

“THAT the payment for the royalty of TWO (2%) PER CENTUM of the
annual net profit which the Party of the Second Part obligates itself to pay
unto the Party of the First Part as founder and as owner of the MAFRAN
trademark and formula for MAFRAN SAUCE, shall be paid at every end of the
Fiscal year after the proper accounting and inven­tories has been undertaken by
the Party of the Se­cond Part and after a competent auditor designated by the
Board of Directors shall have duly examined and audited its books of accounts
and shall have certified as to the correctness of its Financial Statement;

“THAT it is hereby understood that the Par­ty of the First
Part, to improve the quality of the products of the Party of the First Part and
to increase its production, shall endeavor or undertake such research, study,
experiments and testing, to invent or cause to invent additional formula or for­mulas,
the property rights and interest thereon shall likewise be assigned,
transferred and conveyed unto the Party of the Second Part in consi­deration of
the foregoing premises, covenants and stipulations:

“THAT in the operation and management of the Party of the
First Part, the Party of the First Part shall be entitled to the following
Participation:

“(a)  THAT Dr. MAGDALO V. FRANCISCO shall be
appointed Second Vice-President and Chief Chemist of the Party of the Second
Part, which ap­pointments are permanent in character; and Mr. VICTORIANO V.
FRANCISCO shall be appointed Auditor thereof and in the event that the
Treasurer or any officer who may have the custody of the funds, assets and
other properties of the Party of the Second Part comes from the Party of the
First Part, then the Auditor shall not be appointed from the lat­ter;
furthermore should the Auditor be appointed from the Party representing the
majority shares of the Party of the Second Part, then the Treasu­rer shall be
appointed from the Party of the First Part;

“(b)  THAT in case of death or other disabi­lities
they should become incapacitated to discharge the duties of their respective
position; then, their shares or assigns and who may have necessary qua­lifications
shall be preferred to succeed them;

“(c)  THAT the Party of the First Part shall always
be entitled to at least two (2) membership in the Board of Directors of the
Party of the Second Part;

“(d)  THAT in the manufacture of MAFRAN SAUCE and
other food products by the Party of the Second Part, the Chief Chemist shall
have and shall exercise absolute control and supervision over the laboratory assistants
and personnel and in the pur­chase and safekeeping of the Chemicals and other
mixtures used in the preparation of said products;

“THAT this assignment, transfer and conveyance is absolute and
irrevocable in no case shall the PARTY OF THE First Part ask, demand or sue for
the surrender of its rights and interest over said MAFRAN trademark and mafran formula, except when a dissolution of the Party of
the Second Part, voluntary or otherwise, eventually arises, in which case then
the property rights and interests over said trademark and formula shall
automatically re­vert the Party of the First Part.”

Certain provisions of the Dill of Assignment would seem to
support the petitioner’s position that the respondent patentee, Magdalo V. Francisco, Sr. ceded and transferred to the
petitioner corporation the formula for Mafran
sauce.  Thus, the last part of the second
paragraph recites that the respondent patentee “assign, transfer and
convey all its property rights and interest over said Mafran
trademark and formula for MAFRAN SAUCE unto the Party of the Second Part,”
and the last paragraph states that such “assignment, transfer and conveyance
is absolute and irrevocable (and) in no case shall the PARTY OF
THE First Part ask, demand or sue for the surrender of its rights and
interest over said MAFRAN trademark and mafran
formula.”

However, a perceptive analysis of the entire instrument and the
language employed therein^[3]
would lead one to the conclusion that what was actually ceded and
transferred was only the use of the Mafran
sauce formula.  This was the precise
intention of the parties,^[4]
as we shall presently show.

Firstly, one of the principal considerations of the Fill
of Assignment is the payment of “royalty of TWO (2%) PER CENTUM of
the net annual profit” which the petitioner corporation may real­ize by
and/or out of its production of Mafran sauce and
other food products, etc.  The word
“royalty,” when employed in connection with a license under a patent,
means the compensation paid for the use of a patented invention.

“‘Royalty,‘ when used in connection with a license under
a patent, means the compensation paid by the licensee to the licensor for the
use of the licensor’s patented invention.” (Hazeltine
Corporation vs. Zenith Radio Corporation, 100 F. 2d 10, 16)^[5]

Secondly, in order to preserve the secrecy of the Mafran formula and to prevent its unauthorized
proliferation, it is provi­ded in paragraph 5-(a) of the Bill that the
respondent patentee was to be appointed “chief chemist * * * permanent in
character,” and that in case of his “death or other
disabilities,” then his “heirs or assigns who may have necessary
qualifications shall be preferred to succeed” him as such chief
chemist.  It is further provided in
paragraph 5-(d) that the same respondent shall have and shall exercise absolute
control and supervision over the laboratory assis­tants and personnel and over
the purchase and safekeeping of the chemicals and other mixtures used in the
preparation of the said product. All these provisions of the Fill of Assignment
clearly show that the intention of the respondent patentee at the time of its
execution was to part, not with the formula for Mafran
sauce, but only its use, to preserve the monopoly and to effectively pro­hibit
anyone from availing of the invention.^[6]

Thirdly, pursuant to the last paragraph of the Bill,
should dissolution of, the petitioner corporation eventually take place,
“the property rights and interests over said trademark and for­mula shall
automatically revert” to the respondent patentee.  This must be so, because there could be no
reversion of the trademark and formula in this case, if, as contended by the
petitioner, the respondent patentee assigned, ceded and transferred the
trademark and formula – and not merely, the right to use it – for then such
assignment passes the property in such patent right to the petitioner
corporation to which it is ceded, which, on the corporation becoming insolvent,
will become part of the property in the hands of the receiver thereof.^[7]

Fourthly   it is alleged
in paragraph 3 of the respondents’ complaint that what was ceded and
transferred by virtue of the Bill of Assignment is the “use of the
formula” (and not the formu­la itself). 
This incontrovertible fact is admitted without equivoca­tion in
paragraph 3 of the petitioner’s answer. 
Hence, it does “not require, proof and cannot be
contradicted.”^[8]
The last part of paragraph 3 of the complaint and paragraph 3 of the answer are
reproduced below for ready reference:

“3. – * * * and
due to these privileges, the plaintiff in return assigned to said
corporation his interest and rights over the said trademark and for­mula, so
that the defendant corporation could use the formula in the preparation and
manufacture of the mafran sauce, and the trade
name for the mar­keting of said project, as appearing in said Con­tract * *
*.”

“3. – Defendant
admits the allegation in paragraph 3 of plaintiff’s complaint.”

Fifthly, the facts of the case compellingly demonstrate
con­tinued possession of the Mafran sauce formula by
the respondent patentee.

Finally, our conclusion is fortified by the admonition of
the Civil Code that a conveyance should be interpreted to effect “the
least transmission of rights,”^[9]
and is there a better example of least transmission of rights than allowing or
permitting only the use, without transfer of ownership, of the formula for Mafran Sauce.

The foregoing reasons support the conclusion of the Court of
Appeals^[10]
that what was actually ceded and transferred by the respondent patentee Magdalo V. Francisco, Sr. in favor of the pe­titioner
corporation was only the use of the formula. Properly speaking, the Bill of
Assignment vested in the petitioner corpora­tion no title to the formula.  Without basis, therefore, is the obser­vation
or the lower court that the respondent patentee “had been remiss in the
compliance of his contractual obligation to cede and transfer to the defendant
the formula for Mafran sauce.”

2. The next fundamental question for resolution is whether the
respondent Magdalo V. Francisco, Sr. was dismissed
from his position as chief chemist of the corporation without justifia­ble
cause, and in violation of paragraph 5-(a) of the Bill of Assign­ment which in
part provides that his appointment is “permanent in character.”

The petitioner submits that there is nothing in the successive
memoranda issued by the corporate officers of the petitioner, marked exhibits
B, B-1 and B-2, from which can be implied that the respondent patentee was
being dismissed from his position as chief chemist of the corporation.  The fact, continues the petitioner, is that
at a special meeting of the board of directors of the corporation held on
October 14, 1960, when the board decided to suspend operations of the factory
for two to four months and to retain only a skeletal force to avoid further
losses, the two private respondents were present, and the respondent patentee
was even designated as the acting superintendent, and assigned the mission of
explaining to the personnel a the factory why the corporation was stopping
opera­tions temporarily and laying off personnel.  The petitioner further submits that exhibit B
indicates that the salary of the respondent pa­tentee would not be paid only
during the time that the petitioner cor­poration was idle, and that he could
draw his salary as soon as the corporation resumed operations.  The clear import of this exhibit was
allegedly entirely disregarded by the respondent Court of Appeals, which
concluded that since the petitioner resumed partial production of Mafran sauce without notifying the said respondent
formally, the latter had been dismissed as chief chemist, without considering
that the petitioner had to resume partial operations only to fill its pending
orders, and that the respondents were duly notified of that decision, that is,
that exhibit B-1 was addressed to Ricardo Francisco, and this was made known to
the respondent Vic­toriano V. Francisco.  Besides, the records will show that the
respondent patentee had knowledge of the resumption of production by ‘the
corporation, but in spite of such knowledge he did not report for work.

The petitioner further submits that if the respondent patentee
really had unqualified interest in propagating the product he claimed he so
dearly loved, certainly he would not have waited for a formal notification but
would have immediately reported for work, considering that he was then and
still is a member of the corporation’s board of directors, and insofar as the
petitioner is concerned, he is still its chief chemist; and because Ricardo Francisco
is a son of the respondent patentee to whom had been entrusted the per­formance
of the duties of chief chemist, while the respondent Victoriano
V. Francisco is his brother, the respondent patentee could not feign ignorance
of the resumption of operations.

The petitioner finally submits that although exhibit B-2 is
addressed to Ricardo Francisco, and is dated December 29, 1960, the records
will show that the petitioner was set to resume full capacity production only
sometime in March or April, 1961, and the respondent patentee cannot deny that
in the very same month when the petitioner was set to resume full production,
he re­ceived a copy of the resolution of its board of directors, direct­ing him
to report immediately for duty; that exhibit H, of a later vintage as it is
dated February 1, 1961, clearly shows that Ricar­do Francisco was merely the
acting chemist, and this was the situation on February 1, 1961, thirteen days
before the filing of the present action for rescission.  The designation of Ricardo Francisco as the
chief chemist carried no weight because the president and general manager of
the corporation had no power to make the designation without the consent of the
Corporation’s board of directors.  The
fact of the matter is that although the res­pondent Magdalo
V. Francisco, Sr. was not mentioned in exhibit Has chief chemist, this same
exhibit clearly indicates that Ricardo Francisco was merely the acting chemist
as he was the one assisting his father.

In our view, the foregoing submissions cannot outweigh the uncontroverted facts. 
On November 28, 1960
the secretary?treasurer of the corporation issued a memorandum (exh. B), duly approved by its president and general
manager, directing that on­ly Ricardo Francisco be retained in the factory and
that the salary of respondent patentee, as chief chemist, be stopped for the
time being until the corporation resumed operations.  This measure was taken allegedly because of
the scarcity and high prices of raw ma­terials. Five days later, however, or on
December 3, the presi­dent and general manager issued a memorandum (exh. B-1) order­ing the responded Victoriano
V. Francisco to report to the factory and to produce Mafran
sauce at the rate of no less than 100 cases a day to cope with the orders of
the various distributors and deal­ers of the corporation, and instructing him
to take only the neces­sary daily employees without employing permanent
ones.  Then on December 6, the same
president and general manager issued yet another memorandum (exh. B-2), instructing Ricardo Francisco, as assistant
chief chemist, to recall all daily employees connected with the production of Mafran sauce and to hire additional daily employees for the
production of Porky Pops.  Twenty-three
days afterwards, or on December 29, the same president and general manager
issued still another memorandum (exh. S-2), directing
“Ricardo Francisco, as Chief Chemist” and Porfirio
Zarraga, as acting superintendent, to produce Mafran sauce and Porky Pops in full swing, starting January
2, 1961, with the further instruction to hire daily laborers in order to cope
with the full-blast production And finally, at the hearing held on October 24,
1961, the same president and general manager admitted that “I consider
that the two months we paid him (referring to respondent Magdalo
V. Francisco, Sr.) is the separation pay.”

The facts narrated in the preceding paragraph were the prevailing
milieu on February 14, 1961
when the complaint for rescission of the Bill of Assignment was filed.  They clearly prove that the petitioner,
acting through its corporate officers,^[11]
schemed and maneuvered to ease out, separate and dismiss the said respondent
from the service as permanent chief chemist, in fla­grant violation of
paragraph 5-(a) and (b) of the Bill of Assignment.  The fact that a month after the institution
of the action for rescission, the petitioner corporation, thru its president
and ge­neral manager, requested the respondent patentee to report for duty (exh. 3), is of no consequence.  As the Court of Appeals cor­rectly observed,
such request was a “recall to placate said plain­tiff.”

3. We now come to the question of rescission of the Bill of
Assignment. In this connection, we quote for ready reference the following
articles of the new Civil Code governing rescission of contracts:

“ART. 1191.  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.

“The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case.  He may also seek rescission even after he has
chosen fulfill­ment, if the latter should become impossible.

“The court shall decree the rescission claim­ed, unless there
be just cause authorizing the fixing of a period.

“This is understood to be without prejudice to the rights of
third persons who have acquired the thing, in accordance with articles 1385 and
1388 of the Mortgage Law.”

“ART. 1383.  The
action for rescission is sub­sidiary; it cannot be instituted except when the
party suffering damage has no other legal means to obtain reparation for the
same.”

“ART. 1384. 
Rescission shall be only to the extent necessary to cover the damages
caused.”

At the moment, we shall concern ourselves with the first two
paragraphs of article 1191.  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.  The injured party may choose between
fulfillment and rescission of the obligation, with payment of damages in either
case.

In this case before us, there is no controversy that the
provisions of the Bill of Assignment are reciprocal in nature.  The petitioner corporation violated the Bill
of Assignment, spe­cifically paragraph 5-(a) and (b), by terminating the
services of the respondent patentee Magdalo v.
Francisco, Sr., without law­ful and justifiable cause.

Upon the factual milieu, is rescission of the Bill of Assign­ment
proper?

The general rule is that rescission of a contract will not be
permitted for a slight or casual breach, but only for such substantial and
fundamental breach as would defeat the very object of the parties in making the
agreement.^[12]
The question of whether breach of a contract is substantial depends upon the
attendant circumstances.^[13]
The petitioner contends that rescission of the Bill of Assignment should be
denied, because under article 1383, rescission is a subsidiary remedy which
cannot be instituted except when the party suffering damage has no other legal
Means to obtain reparation for the same. 
However, in this case the dismissal of the respondent patentee Magdalo V. Francisco, Sr. as the permanent chief chemist of
the corporation is a fundamental and substantial breach of the Bill of
Assignment.  He was dismissed without any
fault or negligence on his part.  Thus,
apart from the legal principle that the option – to demand performance or ask
for rescission of a contract – belongs to the injured party,^[14]
the fact remains that the respondents-appellees had
no alternative but to file the present action for rescission and damages.  It is to be emphasized that the respondent
patentee would not have agreed to the other terms of the Bill of Assignment
were it not for the ba­sic commitment of the petitioner corporation to appoint
him as its Second Vice-President arid Chief Chemist on a permanent basis; that
in the manufacture of Mafran sauce and other food
products he would have “absolute control and supervision over the labora­tory
assistants and personnel and in the purchase and safeguarding said
products;” and that only by all these measures could the respondent
patentee preserve effectively the secrecy of the formu­la, prevent its
proliferation, enjoy its monopoly, and, in the pro­cess afford and secure for
himself a lifetime job and steady income. 
The salient provisions of the Bill of Assignment, namely, the transfer
to the corporation of only the use of the formula; the appointment of
the respondent patentee as Second Vice-President and chief chemist on a
permanent status; the obligation of the said respondent patentee to continue
research on the patent to improve the quality of the products of the
corporation; the need of absolute control and supervision over the laboratory
assistants and person­nel and in the purchase and safekeeping of the chemicals
and other mixtures used in the preparation of said product – all these provi­sions
of the Bill of Assignment are so interdependent that violation of one would
result in virtual nullification of the rest.

4. The petitioner further contends that it was error for the Court
of Appeals to hold that the respondent patentee is entitled to payment of his
monthly salary of P300 from December 1, 1960, un­til the return to him of the Mafran trademark and formula, arguing that under article
1191, the right to specific performance is not conjunctive with the right to
rescind a reciprocal contract; that a plaintiff cannot ask for both remedies;
that the appellate court awarded the respondents both remedies as it held that
the respondents are entitled to rescind the Bill of Assignment and also that
the respon­dent patentee is entitled to his salary aforesaid; that this is a
gross error of law, when it is considered that such holding would make the
petitioner liable to pay respondent patentee’s salary from December 1, 1960 to
“kingdom come, ” as the Said holding requires the petitioner to make
payment until it returns the for­mula which, the appellate court itself found,
the corporation ne­ver had; that, moreover, the fact is that the said
respondent pa­tentee refused to go back to work, notwithstanding the call for
him to return – which negates his right to be paid his back salaries for
services which he had not rendered; and that if the said respondent is entitled
to be paid any back salary, the same should be computed only from December 1,
1960 to March 31, 1961, for on March 20, 1961 the petitioner had already
formally called him back to work.

The above contention .is without merit leading once more the Bill
of Assignment in its entirety and the particular provisions in their proper
setting, we hold that the contract placed the use of the formula for Mafran sauce with the petitioner, subject to de fined
limitations.  One of the considerations
for the transfer of the use thereof was the undertaking on the part of the
petitioner cor­poration to employ the respondent patentee as the Second
Vice-President and Chief Chemist on a permanent status, at a monthly salary of
P300, unless “death or other disabilities” supervened.  Under these circumstances, the petitioner
corporation could not escape liability to pay the private respondent patentee
his agreed monthly salary, as long as the use, as well as the right to use, the
formula for Mafran sauce remained with the
corporation.

5.  The petitioner finally
contends that the Court of Appeals – erred in ordering the corporation to
return to the respondents the trademark and formula for Mafran
sauce, when both the decision of the appellate court and that of the lower
court state that the cor­poration is not aware nor is in possession of the
formula for Ma-Iran sauce, and the respondent patentee admittedly never gave
the same to the corporation.  According
to the petitioner these findings would render it impossible to carry out the
order to return the formula to the respondent patentee.  The petitioner’s predicament is
understandable.  Article 1385 of the new
Civil Code provides that rescission creates the obligation to return the things
which were the object of the contract. 
Be that as it may, it is a logical inference from the appellate court’s
decision that what was meant to be returned to the respondent patentee is not
the formula itself, but only its use and the right to such use.  Thus, the respondents in their complaint for
rescission specifically and particularly pray, among others, that the
petitioner corporation be adjudged as “without any right to use said
trademark and formula.”

ACCORDINGLY, conformably with the observations we have
above made, the judgment of the Court of Appeals is modi­fied to read as
follows: “Wherefore, the appealed decision is reversed.  The Bill of Assignment (Exhibit A) is hereby
rescinded, and the defendant-corporation is ordered to return and restore to
the plaintiff Magdalo V. Francisco, Sr. the right to
the use of his Mafran sauce trademark and formula,
subject-matter of the Bill of Assignment, and to this, end the defendant
corporation and all its assigns and successors are hereby permanently enjoined,
effective immediately from using in any manner the said Mafran
sauce trademark and formula.  The
defendant corporation shall also pay to Magdalo V.
Francisco, Sr. his monthly salary of V300 from December 1, 1960, until the date
of finality of this judgment, inclusive, the total amount due to him to earn
legal interest from the date of the finality of this judgment until it shall
have been fully paid, plus attorney’s fees in the amount of P500, with costs
against the defendant corporation.” As thus modified, the said judgment is
affirmed; with co-against the petitioner corporation.

Concepcion, C.J., Dizon,
Makalintal, Zaldivar,
Fernando, Barredo, and
Villamor, JJ., concur.

Reyes, J., concurs in a
separate opinion.

Teehankee, J., took no part.

^[1]
The complaint alleges:

“3.  – That on the 31st day of May, 1960 plaintiffs
and defendant corporation entered into contract, in which it was stipulated
among other things, that inasmuch as plain­tiff Magdalo
V. Francisco, Sr. is the owner and author of the formula of mafran
sauce as above stated, he will be appointed as Second-Vice-President and Chief
Chemist of the defendant corporation, which appointments are perma­nent
in character; and as such Chief shall have and shall exercise absolute control
and supervision over the labora­tory assistants and personnel, and in
the purchase and safe-keeping of the chemicals and other mixtures used in the
preparation of said product in order to preserve the secrecy of the said
formula in the preparation of the ma­fran sauce, in
the manufacture of which the defendant cor­poration will be engaged as its
principal business, and other products which from time to time the plaintiff
may discover and prepare as Chemist; and due to these privi­leges, the
plaintiff in return assigned to said corporation his interests and rights over
the said trade mark and for­mula, so that the defendant corporation could use
the formula in the preparation and manufacture of the mafran
sauce, and the trade name for the marketing of said pro­ject, as appearing in
said Contract;

“4.  – That the defendant corporation, thru the
machi­nation of its President and Manager, Mr. Tirso
T. Reyes, and in violation of the terms and conditions of the said Contract, as
above stated, and for the purpose of defraud­ing the herein plaintiff, said
defendant without any justi­fiable cause dismissed all the assistants and
laborers of .the plaintiff in said laboratory, wherein mafran
sauce is prepared, with the evident intention to discover, the se­cret of the
said formula; and when they were not able to do so, due to the precaution made
by the plaintiff in the pre­paration of said mafran
sauce, the aforementioned defen­dant without justifiable cause and in violation
of the said Contract with regard to the permanent character of his appointment
as Chief Chemist, dismissed him as such (Chief Chemist) from the service of the
defendant corporation, and appointed other employees in his place in the
preparation of the said malran sauce, and proceeded
with the ma­nufacture and marketing of the said product in the absence of the
herein plaintiff;

“5.  – That in furtherance of the intention of the
defen­dant to deprive the herein plaintiffs of their right on the royalty
equivalent to 2% of the net profit of the corpora­tion that may he realized in
the manufacture on rnafran sauce and other like
products and to complete its lent scheme to get at all cost the ownership of
the said trade mark and formula which is the main objective of the said
corporation, said defendant thru machination of its President and Manager, Mr. Tirso T. Reyes and in connivance with his associates
representing the majority al the stockholders of the said corporation, the
latter is now selling in favor of a third party, the assets of their
corporation together with the ownership of the aforemen­tioned trade mark and
formula, in violation of the conditions at the said Contract;

“6.  – That due to this malicious attitude of the
defen­dant, plaintiff Magdalo V. Francisco, Sr. was
deprived of his salary from December 1, 1960 up to the present time at the rate
of THREE HUNDRED (P300.00) PESOS a month, in violation of the conditions of the
said Contract of Assignment;

“7.  – That the defendant in order to add insult to
injury, prepared or caused the preparation and manufacture of ma­fran sauce of inferior quality and sold it in the
market; and as a result of these unlawful acts of the defendant, the good name
and repuation of the mafran
sauce went down causing thereby irreparable damages to the plaintiff as owner
and author of the said formula and trade name, which could be reasonably
estimated in an amount not less than FORTY THOUSAND (P40,000.00) PESOS as of
today, plus an additional sum equivalent to TEN TNOUSAND (P10,000.00) PESOS a
month from this date until the re­turn of the said trade mark and formula to
the plaintiffs;

“8.  – That due to this malicious attitude of the
defen­dant and unlawful machination of its president And mana­ger, Mr. Tirso T. Reyes, the plaintiffs were constrained to engage
the services of the undersigned counsel in the agreed amount of FIVE THOUSAND
(P5,000.00) PESOS, Philippine Currency.”

^[2] A
patent is a property (Blum vs. C. 1, R, 183 F. 2d 881; Mar­shall vs.
Colgate-Palmolive-Peet Co., 175 F. 2d 215; Lamar vs.
Granger, 99.F. Supp. 17).  It has the
attributes of personalty (Hartley Pen Co. vs. Lindy Pen Co., 10. F. R. D. 141, cited in
25-6th-D-1328).  A patent right or any
interest therein may be sold or assigned. 
“The patentee may assign his patent right in toto or he may grant limited rights of manufacture
and sale to others (40 Am. Jur, sec. 133, p. 621,
notes 12).  The paten­tee has the right
to sell it or to keep it; to manufacture the article himself or to authorize
others to sell it (40 Am.Jur., sec. 4, p. 534, notes
9 & 10). The right of a patentee has the characteristics and incidents of
other sorts of property, and that it is as much entitled to the protection of
the courts as in any other character of property (E. Bennet
& Sons vs. National Harrow Co., 186 IL S. 70, 46 L ed 1058, 22 S Ct
747).

^[3]
The interpretation of public instruments involves a question of law, since the
contract is in the nature of law between the parties.  The whole instrument should be read in
toto (Pio Sian Melliza vs. City of
Iloilo et al., G.R. No. L-24732, April
30, 1968); see also Wilson
v. Olsen, 30 P. (2d), 710, 711.

^[4]
Under this section referring to par. 1, sec. 47, Title 35, USCA, which is
substantially similar to sec. 50 of P. A. 1651, a patent may he assigned only
by a written instrument and al­though no particular form of words is essential,
such ins­trument must be substantially a transfer actual or cons­tructive, with
the clear intent of the assignor, at the time, to part with
his legal interest, in whole or in part and with full knowledge of the
rights so transferred.” (Owen vs. Pa­ramount Productions, D. C. Cal.
1941, 41 F. Supp. 551). See also note 3, and Bacordo vs.
.Alcantara et al., G.R. No. L-20080, July 30, 1965.)

^[5]
See also Commissioner of Internal Revenue vs. Clarion Oil Co., 148 13%
2d 671, 673; 77 C.J. S., 542-543.

^[6] Two
constituent property elements, of distinct source, nature, and divisible
content inhere in every patented invention. 
One is property in invention itself – the right to make, use
and sell the patented object or through others – the second is property
in the monopoly – the right effectively to prohibit others from
practicing the invention or profiting therefrom
without owner’s consent. * * * Rights in the invention itself may be
transferred either separately or together, upon one person or many, and
each may independently of the others use the rights received.  The Monopoly is indivisible, except as to
locality, although several assignees may jointly hold the undivided interest in
the patent.  (Zenith Radio Corp. vs.
Radio Corp. of Ameri­ca,
121 F. Supp. 803, 805 (May 20, 1954).

^[7]
Douglas vs. Campbell, 24 Ohio – Cir. Ct. R. 241, cited in p. 43, USCA,
Title 35, on Patents.

^[8]
Admissions made by the parties in the pleadings, or in the course of the trial
or other proceedings do not require proof and can not be contradicted unless previously
shown to have been made through palpable mistake (sec. 2, Rule 129, new Rules
of Court).

^[9]
Cf. Angela Estate, Inc., et al. vs, CFI of Negros Occidental, et al., G.R. No. L-27084, July 31, 1988, citing Art. 1378, 1st
sent, N. C. C., and Olino vs. Medina,
13 Phil. 379.

^[10]
The findings and conclusions of fact of the Court of Appeals will not be
disturbed by the Supreme Court so long as there is evidence to support the same
(A tanacio vs. People, G.R. No. L-7537, Oct. 24, 1955); see also Arroyo, et
al.. vs. El Beaterio del Smo.
Rosario de Molo, el al., G.R. No. L-22005, May 3, 1968; Al­quiza
et al. vs. A lquiza, et al., G.R. No. L-23342,
Feb. 10, 1968; MD Transit
Taxi Co., Inc.. vs. Court of Appeals, et al., G.R. No. L-23882, Feb. 17, 198; City of Manila
vs. Teotico, et al., G.R. No. L-23052, Jan. 29, 1968.

^[11]
Not of de minimis importance in a proper approach to
the pro­blem at hand, is the nature of a general manager’s posi­tion in the
corporate structure.  A rule that has
gained ac­ceptance through the years is that a corporate officer ‘intrusted with the general management and control of its bu­siness,
has implied authority to make any contract or do any other act which is
necessary or appropriate to the con­duct of the ordinary business of the
corporation.’ As such officer, ‘he may, without any special authority from the
Board of Directors, perform all acts of an ordinary nature, which by usage or
necessity are incident to his office, and may bind the corporation by contracts
in matters arising, in the usual course of business’.”  (The Board of Liquidators, etc. vs.
Heirs of Maximo M. Kalaw,
et al., G.R. No. L-18805, August 14,
1967.)

^[12]
Song Fo &Co. vs. Hawaiian-Philippine Co.,
47 Phil. 821, 827.

^[13]
Corpus vs. Hon. Alikpala, et al., G.R. Nos. L-23707
& L-23720, Jan. 17, 1968.

^[14]
Jacinto vs. Carpenter, 46 Phil. 893.

150

6 pt
6 pt
0
3

MicrosoftInternetExplorer4

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin:0in;
mso-para-margin-bottom:.0001pt;
mso-pagination:widow-orphan;
font-size:10.0pt;
font-family:”Times New Roman”;}