Bacolod-Murcia Milling v.

CA (1990)

Petitioners: BACOLOD-MURCIA MILLING CO., INC.

Respondents: CA, ALONSO GATUSLAO, AGRO-INDUSTRIAL DEVELOPMENT OF SILAY-

SARAVIA (AIDSISA) AND BACOLODMURCIA AGRICULTURAL COOPERATIVE MARKETING
ASSOCIATION (BMACMA),

Ponente: PARAS

Topic: Remedies for Breach

SUMMARY: (1-2 sentence summary of facts, issue, ratio and ruling)

FACTS:

- BMMC is the owner and operator of the sugar central in Bacolod City.

- Alonso Gatuslao is a registered planter of the Bacolod-Murcia Mill District.

- On May 24, 1957, BMMC and Alonso Gatuslao executed an ‘Extension and Modification of
Milling Contract’ which was registered on September 17, 1962

- BMMC has transported sugar cane from the plantation to its mill through its cane cars and
railroad track system for 45 years from 1920-1921.

- When the Hacienda Helvetia owners’ milling contracts with BMMC expired at the end of the
1964-1965 crop year, the corresponding right-of-way granted to BMMC also expired.

- Thus, the BMMC was unable to use its railroad facilities during the crop year 1968-1969 due to
the closure in 1968 of the portion of the railway traversing the Hacienda Helvetia as per SC
decision in Angela Estate, Inc. and Fernando F. Gonzaga, Inc. v. CFI of Negros Occidental.

- Through the mediation of the President of the Philippines, the Angela Estate and the Gonzaga
Estate agreed with BMMC to allow the use of the railroad tracks passing through Hacienda
Helvetia during the 1967-1968 milling season only.

- Due the non-renewal of the right-of-way contract with Angela Estates, BMMC was unable to
transport the sugar canes of Alonso Gatuslao or of AIDSISA beginning 1968. Gatuslao on various
dates requested transportation facilities from BMMC to no avail.

- Gatuslao and his wife filed a case for breach of contract and damages against BMMC and
sought judgment rescinding the contract, invoking BMMC’s alleged failure and/or inability to
comply with its specific obligation of providing the necessary transportation facilities to haul the
Gatuslao’s sugarcane from his plantation for the crop year 1967-1968.

- BMMC claimed that despite its inability to use its railways system for its locomotives and cane
cars to haul the sugarcanes of all its adhered planters for the 1968-69 crop year allegedly due
to force majeure, in order to comply with its obligation, BMMC hired at tremendous expense,
private trucks as prime movers for its trailers to be used for hauling of the canes, especially for
those who applied for and requested transportation facilities. Gatuslao instead of loading their cut
canes on BMMC’s cargo trucks, loaded their cut canes on trucks provided by the BM-ACMA.

- Thus, BMMC also filed against Gatuslao, the AIDSISA and the BM-ACMA a case seeking
specific performance under the milling contract executed on May 24, 1957 between BMMC
and Gatuslao, praying for writs of preliminary mandatory injunction to stop the alleged violation
of the contract by Gatuslao in confederation, collaboration and connivance with BM-
ACMA, AIDSISA and damages.

- Gatuslao and BM-ACMA argued that the case is barred by another action pending between the
same parties for the same cause of action.

- AIDSISA argued that before it agreed to mill the sugarcane of Gatuslao, it carefully ascertained
and believed in good faith that: (a) BMMC was incapable of milling the sugarcane of AIDSISA's
co-defendant planters as well as the sugarcane of other planters formerly adherent to BMMC; (b)
BMMC had in effect agreed to a rescission of its milling contracts with its adhered planters,
including Gatuslao, because of inadequate means of transportation and had warned and advised
them to mill their sugarcane elsewhere, and had thus induced them to believe, and act on the
belief, that it could not mill their sugarcane and that it would not object to their milling with other
centrals; and (c) up to now BMMC is incapable of hauling the sugarcane of AIDSISA's
codefendants to BMMC’s mill site for milling purposes.

- The cases were consolidated for joint trial. The CFI declared the milling contract dated May 24,
1957 rescinded. The CA affirmed

ISSUES:

 WON the termination of BMMC’s right of way over the Hacienda Helvetia caused by the
expiration of its amended milling contracts with the landowners of the hacienda is a
fortuitous event or force majeure which will exempt BMMC from fulfillment of its contractual
obligations (as BMMC argued)
o NO. The terms of the milling contracts were clear and undoubtedly there was no
reason for BMMC to expect otherwise. The closure of any portion of the railroad
track, not necessarily in the hacienda Helvetia but in any of the properties whose
owners decided not to renew their milling contracts with BMMC upon their
expiration, was foreseeable and inevitable.
o Despite its awareness that the conventional contract of lease would expire in Crop
Year 1964-1965 and that refusal on the part of any one of the landowners to renew
their milling contracts and the corresponding use of the right of way on their lands
would render impossible compliance of Its commitments, BMMC took a calculated
risk that all the landowners would renew their contracts.
 WoN Gatuslao has the right to rescind the milling contract with BMMC under A1191
o YES. Resolution of this issue ultimately rests on whether or not BMMC was able
to provide adequate and efficient transportation facilities of the canes of Gatuslao
and the other planters milling with BMMC during the crop year 1968-1969.
 o The evidence shows that great efforts had been exerted by the planters to enter
into some concrete understanding with BMMC with a view of obtaining a
reasonable assurance that the latter would be able to haul and mill their canes for
the 1968-1969 crop year, but to no avail.
o As admitted by BMMC itself, in its communications with the planters, it is not in a
position to provide adequate transportation for the canes in compliance with its
commitment under the milling contract.
o As found by the trial court, the experience of Alfonso Gatuslao at the start of the
1968-1969 milling season is reflective of the inadequacies of the reparto or trailer
allotment as well as the state of unpreparedness on the part of BMMC to meet the
problem posed by the closure of the railway lines.
o After Gatuslao had cut his sugarcanes for hauling, no trailers arrived and when two
trailers finally arrived on October 20, 1968 after several unheeded requests, they
were left on the national highway about one (1) kilometer away from the loading
station. Such fact was confirmed by Carlos Butog, the driver of the truck that hauled
the trailers.
o Javelosa, Assistant Crop Loan Inspector, testified that the estimated production of
Gatuslao for the crop year 19681969 was 4,400 piculs hauled by 10 cane cars a
week with a maximum capacity of 8 tons. Compared with his later schedule of only
one trailer a week with a maximum capacity of only 3 to 4 tons, there appears to
be no question that the means of transportation provided by BMMC is very
inadequate to answer the needs of Gatuslao.
o Undoubtedly, BMMC is guilty of breach of the conditions of the milling
contract and that Gatuslao is the injured party. Under A1191, the injured
party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. In fact, he may also
seek rescission even after he had chosen fulfillment if the latter should
become impossible.
o BMMC cannot claim enforcement of the contract. By virtue of the violations
of the terms of the contract, the offending party has forfeited any right to its
enforcement (Boysaw).
 WoN Gatuslao and BM-ACMA are guilty of bad faith in the exercise of their duties and are
in estoppel to question the adequacy of BMMC’s transportation facilities and its capacity
to mill and haul the canes of its adherent planters
o NO. BM-ACMA cannot be faulted for organizing itself to take care of the needs of
its members.
o See AIDSISA defense above, which SC quoted with approval
o The President of BMMC himself induced the planters to believe and to act on the
belief that it would not object to the milling of their canes with other centrals.

NOTES: