GR Nos.

8110-01 February 7, 1990 Bacolod-Murica Milling Co (BMMC) v CA and Alonso Gatuslao Bacolod-Murica Milling Co (BMMC) v CA, Alonso Gatuslao, Agro-Industrial Development of SilaySaravia (AIDSISA) and Bacolod-Murcia Agricultural Cooperative Marketing Association (BM-ACMA) Paras, J Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado concur Nature: Petition for review on certiorari of the decision of the CA affirming in toto the decision of the CFI of Negros Occidental Facts: y BMMC is the owner and operator of the sugar central in Bacolod City y In 1920, BMMC, via a contract with several haciendas located next to each other, constructed a railroad system to carry the harvest of the haciendas in the area. The contract was for 45 harvest years ending 1967-68. The haciendas gave BMMC right of way through their lots for the railway system. The right of way was to be extinguished upon expiration of the contract. y Alonso Gatuslao is the owner, planter, of Hacienda San Roque, which is one of the haciendas serviced by BMMC. Their (BMMC and Alonso) contract to haul and mill the sugarcane harvest was to last until the harvest season of 73- 74 y On expiration of the contract Hacienda Helvetia, a signatory in the 1920 agreement and whose lot is a critical entry point for the railroad system, declined to sign an extension and required BMMC to remove the railway tracks in its hacienda. y BMMC filed a complaint for legal easement > Trial Court issued writ of preliminary injunction restraining landowners from destroying railroad tracks or preventing passage of locomotives > Landowners asked SC to retrain lower court from enforcing writ of preliminary injunction > Landowners won so writ of preliminary injunction issued by the trial court was set aside > through the mediation of the President of the Philippines, the BMMC and the landowners (Angela Estate and Gonzaga Estate) agreed to allow BMMC to use the tracks until June 30, 1968. The railroad tracks were closed July 1, 1968 y Oct 30 1968 Alfonso filed a case against BMMC for breach of contract, praying that BMMC be ordered to immediately send transportation facilities and haul the already cut sugarcane to the mill site and also praying for judgment declaring the rescission on the milling contract which was to last up to 73- 74. The ground Alfonso cited was BMMC s failure to comply with its specific obligation to provide necessary transportation facilities to haul the sugarcane of Gatuslao for the crop year 67- 68 y BMMC in reply said that its inability was due to force majeure. It even hired private trucks at great expense to be used for hauling canes. y BMMC then filed suit against Gatuslao, AIDSISA and BM-ACMA seeking performance of their contract (Gatuslao to continue using BMMC s services for the harvest from his Hacienda), and to stop the newly formed contractual relations between the three defendants o the hacienderos in serviced by BMMC were very concerned that BMMC will be unable to service their needs beginning July 1, 1968. It is not unusual for landowners to mortgage properties for farm capital. So the threat of foreclosure was real and imminent for them.

Several letters were sent to BMMC from the president of the Bacolod-Murcia Sugar Farmer s Corporation trying to secure a firm commitment from BMMC that it would still be able to service their hauling and milling needs. However, BMMC simply gave vague answers saying things like our lawyers are studying the possibility of getting a new injunction from the SC of CFI before July 1, 1968 BMMC also issued letters apologetically warning its customers that if it is unable to successfully resolve its railroad issues their operations will be severely hampered and their ability to haul and mill will be limited. o Planters also asked BMMC to put up a 13 Million Peso bond to allay their fears. BMMC only replied with an expression of optimism over the final outcome of its pending cases The two cases were consolidated and the CFI rendered judgment declaring the milling contract void. CA upheld and denied BMMC s MR. Hence the petition to SC o

Issues: I. II. III. IV.

WON the closure of railroad lines constitute force majeure WON Gatuslao has right to rescind WON Gatuslao was justified in violating his milling contract with petitioner WON Gatuslao and BM ACMA are in bad faith in the exercise of their duties

I.

No. The elements of force majeure are 1) the cause of breach of the obligation must be independent of the will of the debtor 2) the event must be either unforeseeable or unavoidable 3) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner 4) the debtor must be free from any participation in or aggravation of the injury to the creditor (Vasquez v CA 138 SCRA 553) BMMC has known since 1920 that its contract will expire after crop year 67- 68. It should have done something during that period. All its efforts were directed toward the outcome of the court litigation but provided no solutions to the transportation problem early enough in case of an adverse decision (which is what they got an adverse decision)

II.

II, III and IV are inter-related and will be treated as one. Article 1191 of CC: 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. In fact it is well established that the party who deems the contract violated may consider it revoked or rescinded pursuant to their agreement and act accordingly even without previous court action. Both parties agree that time is of the essence in the sugar industry. Sugarcanes need to be milled at the right time not too early, not too late. The question is, was BMMC able to provide adequate trucks during crop year 68- 69 to compensate for the closed tracks? The answer is NO. Testimonies revealed that the requirement was for about 700 trucks daily, BMMC only had about 280 trucks. Furthermore, a truck which it sent to Gatuslao was parked on the national highway, a kilometer away from the loading area of Gatuslao s hacienda.

Other instances were mentioned in the case but the image is clear without the use of the tracks, BMMC cannot service their needs. In short, BMMC was not able to adequately comply with its obligation to Gastulao and other adherent planters. Undoubtedly, BMMC is guilty of breach of conditions of the milling contract. Hence, Gatuslao has the right to rescind the milling contract and neither the court a quo erred in decreeing the rescission. Conversely, BMMC cannot claim enforcement of the contract since the offending party forfeits any right to its enforcement. Likewise BM ACMA cannot be faulted for organizing itself to take care of the needs of its members. It was organized at a time when BMMC cannot assure the planters that it could definitely haul and mill their canes. As a result the signing of the milling contract between private respondents AIDSIS and BM-ACMA on June 19, 1968 was a matter of self preservation inasmuch as the sugarcanes were already matured and the planters had crop loans to pay. In fact AIDSISA (a miller located in nearby Silay city) even stressed that it only agreed to mill the crops of the planters after it had carefully ascertained and believed in good faith that the BMMC was incapable of milling the sugarcanes of the adherent planters. No bad faith on respondents. CA and CFI ruling affirmed.