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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 Silay-

Saravia (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 BMMCs 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  f orce 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 theircontract (Gatuslao to continue using BMMCs 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.

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o  Several letters were sent to BMMC from the president of the Bacolod-Murcia Sugar

Farmers 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

y  The two cases were consolidated and the CFI rendered judgment declaring the milling contract

void. CA upheld and denied BMMCs MR. Hence the petition to SC

Issues:

I.  WON the closure of railroad lines constitute f orce majeure

II.  WON Gatuslao has right to rescind 

III.  WON Gatuslao was justified in violating his milling contract with petitioner 

IV.  WON Gatuslao and BM ACMA are in bad faith in the exercise of their duties 

I.  No. The elements of  f orce 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 incase 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 Gatuslaos hacienda.

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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 thatthe BMMC was incapable of mill ing the sugarcanes of the adherent planters.

No bad faith on respondents.

CA and CFI ruling affirmed.