122. Art . 1191 UNIVERSITY OF THE PHILIPPINES VS.

WALFREDO DE LOS ANGELES, IN HIS CAPACITY

AS JUDGE OF THE COURT OF FIRST INSTANCE IN QUEZON CITY, AND ASSOCIATED LUMBER
MANUFACTURING COMPANY, INC. (ALUMCO)

FACTS:

- UP and ALUMCO entered into a logging agreement under which ALUMCO was granted exclusive
authority from the date of agreement (Nov. 2, 1960) to Dec. 31, 1965 (extendible by 5 years by mutual agreement), to
cut, collect and remove timber from the Land Grant (situated at the Lubayat areas in Laguna and Quezon), in
consideration of payment to UP of royalties and forest fees, etc.

- As of Dec. 8 1964, ALUMCO incurred an unpaid account of P219,362.94 which it had failed to pay
despite repeated demands.

- After UP sent a notice of rescission or termination of the logging agreement, ALUMCO executed an
instrument entitled Acknowledgement of Debt and Proposed Manner of Payments dated Dec. 9, 1964 which was
approved by the UP president. The instrument stipulated the following:

o 5. In the event that the DEBTOR fails to comply with any of its promises or undertakings
in this document, the DEBTOR agrees without reservation that the CREDITOR shall have the right and the
power to consider the Logging Agreement dated December 2, 1960 as rescinded without the necessity of any
judicial suit, and the CREDITOR shall be entitled as a matter of right to Fifty Thousand Pesos (P50,000.00)
by way of and for liquidated damages;

- After ALUMCO again incurred an additional unpaid account amounting to P61 133.74, UP
informed ALUMCO on Jul 19, 1965 that UP considered the logging agreement as rescinded and of no further legal
effect.

- UP filed a complaint for the collection of money in accordance to the stipulations in the instrument.

- UP also began looking for another concessionaire to take over the logging operation by advertising
an invitation to bid.

- ALUMCO filed a petition to enjoin UP from conducting the bidding which was granted by the CFI.

- When UP had received the order, it had already concluded its contract with Sta. Clara Lumber
Company, Inc. and the latter had started logging operations.

- On motion by ALUMCO, the court declared UP in contempt of court and prohibited Sta. Clara from
continuing logging operations in the concession (pending before CA).

- Before the SC, ALUMCO repeated its defenses in the court below, including: UP's unilateral
rescission of the logging contract, without a court order, was invalid. The CFI agreed with ALUMCO on this point

ISSUE: Whether or not UP can treat its contract with ALUMCO rescinded and disregard the same before any judicial
pronouncement to that effect.

RULING:

Yes. In the first place, UP and ALUMCO had expressly stipulated that upon default by the debtor, UP
has the right and the power to consider the Logging Agreement of December 2, 1960 as rescinded without the necessity of any
judicial suit. As to such special stipulation and in connection with Article 1191 of the Civil Code, the Supreme Court, stated in
Froilan vs. Pan Oriental Shipping Co: There is nothing in the law that prohibits the parties from entering into agreement that
violation of the terms of the contract would cause cancellation thereof, even without court intervention. In other words, it is not
always necessary for the injured party to resort to court for rescission of the contract.