Taylor v. Uy Tieng Piao
REITERATIONFacts
The Antecedents: Plaintiff M. D. Taylor contracted his services to defendants Tan Liuan and Co. as superintendent of an oil factory for two years, with a specified monthly salary and other benefits. The contract included a stipulation allowing the defendants to cancel the contract if the machinery failed to arrive within six months from the date of the contract, for any reason. The machinery did not arrive within the stipulated period, and the defendants, citing the non-arrival and their option to cancel, rescinded the contract and discharged the plaintiff. The plaintiff sued for damages amounting to P13,000. Procedural History: The Court of First Instance of Manila awarded the plaintiff P300 in damages. Both parties appealed: the plaintiff arguing the damages were inadequate, and the defendant Uy Tieng Piao arguing he was not liable at all. The Petition: The plaintiff appealed, claiming the damages awarded were insufficient. The defendant Uy Tieng Piao appealed, asserting his non-liability. The Supreme Court, in a prior brief opinion, affirmed the judgment but is now providing a more detailed explanation upon motion for rehearing.
Issue(s)
Whether the stipulation allowing the defendants to cancel the contract for the non-arrival of machinery "for any reason" is void for leaving the fulfillment of the contract to the will of one of the parties under Article 1256. Whether Article 1119 of the Civil Code applies so as to deem the condition fulfilled (and the machinery arrived) because the defendants allegedly impeded its arrival.
Ruling
The Supreme Court modified the judgment, increasing the awarded damages to P360, and affirmed the judgment as modified. The Court held that the defendant Uy Tieng Piao is liable as a partner.
Ratio Decidendi
On Issue 1: The Court held that the stipulation is valid and does not violate Article 1256 of the Civil Code. It reasoned that Article 1256 does not prevent the insertion of a resolutory condition permitting cancellation, as the exercise of a pre-agreed option to cancel is technically the fulfillment of the contract, not a rejection of it. Citing the commentator Manresa, the Court noted that it is entirely licit to leave the fulfillment to the will of a party in the negative form of rescission, especially in service contracts. The Court emphasized that the parties have the freedom to establish terms they deem advisable under Article 1255, and the phrase "for any reason" must be interpreted in its ordinary sense. Therefore, the fact that the employers could dominate the contingency (the arrival of machinery) did not render the stipulation illegal. On Issue 2: The Court ruled that Article 1119 of the Civil Code is inapplicable to the case at bar. This article applies when an obligor intentionally and unlawfully prevents the fulfillment of a condition that would entitle the obligee to exact performance. In this instance, the arrival of the machinery was an external contingency lawfully within the control of the obligors, and their choice not to proceed was not a breach of an implied term. The Court further distinguished between suspensive conditions and resolutory conditions; while a potestative suspensive condition might void an obligation under Article 1115, a resolutory condition (even if facultative to the debtor) is valid under Article 1113. Consequently, since there was no positive obligation for the defendants to ensure the machinery's arrival, they were not liable for damages for the period following the six-month mark.
Main Doctrine
A resolutory condition in a contract for personal service, permitting the cancellation of the contract by one of the parties, is valid even if the condition depends upon the will of the obligor, as long as it is not a suspensive condition made dependent on the obligor's will.