Asturias Sugar Central, Inc. v. Montinola
REITERATIONFacts
The Antecedents: The Asturias Sugar Central, Inc. (Central) and the respondents entered into a verbal contract prior to the 1931-1932 sugar crop. Under this agreement, the Central committed to mill the respondents' sugar cane and, in return, provide the respondents with 55% of the sugar produced, plus an additional 6% as reimbursement for the respondents' expenses in transporting the cane to the Central. For the 1931-1932 crop, the Central paid the respondents P1,039.39 as a bonus, representing 6% of the sugar produced from their cane. Procedural History: The respondents, finding the bonus insufficient to cover their hauling costs for the 1931-1932 crop, milled their cane elsewhere for the subsequent two years. However, the enactment of U.S. Commonwealth Act No. 213 and Philippine Act No. 4166 in 1934, which regulated sugar production and milling locations, compelled the respondents to have their 1935 and 1936 sugar crops milled at the Asturias Sugar Central. Following this milling, the respondents sued the Central for P388, representing the 6% bonus stipulated in their original verbal contract for the 1935 and 1936 crops. The Petition: The Central refused to pay the P388, arguing that the verbal contract, made before 1931, was no longer valid or binding in 1935 and 1936 because it was not reduced to writing, citing Article 335 of Act No. 190, which requires contracts whose terms cannot be fulfilled within a year to be in writing. The Court of Appeals ruled in favor of the respondents, holding that the cited legal provision was inapplicable as the contract was to be performed within a year and was already consummated. The Central sought review of this decision via certiorari to the Supreme Court, maintaining its position that the unwritten contract was unenforceable for the crops milled in 1935 and 1936.
Issue(s)
Whether a verbal contract, the terms of which cannot be fulfilled within one year, is valid and enforceable if it has been partially performed or consummated. Whether the parties were obligated to re-assume their prior contract due to subsequent legislation.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals, ordering the petitioner to pay the respondents and to bear the costs of the suit.
Ratio Decidendi
On the enforceability of the verbal contract: The Court held that Article 335 of Act No. 190, which requires contracts not performable within one year to be in writing, is not applicable to the present case. The Court reasoned that the contract in question was by its very nature performable within one year, as evidenced by the Central's fulfillment of its terms for the 1931-1932 crop. Furthermore, the contract for the 1935 and 1936 crops had already been consummated, with the respondents having performed their part by delivering their cane for milling. The Court cited that the provisions of law regarding contracts not performable within one year do not extend to cases of this nature, particularly when the contract has been executed. On the reassumption of the contract due to legislation: The Court found that the enactment of Commonwealth Act No. 213 and Commonwealth Act No. 4166 compelled the respondents to mill their cane at the petitioner's Central. This legislative mandate resulted in an unavoidable reassumption of the contract that existed before the 1931-1932 crop. The Court emphasized that obligations arise not only from contracts and quasi-contracts but also from law. Therefore, the parties were necessarily bound to the mutual prestations they had previously promised each other, effectively reviving their prior agreement in light of the new legal requirements.
Main Doctrine
A verbal contract, even if its terms cannot be fulfilled within one year, is binding and enforceable if it has been partially performed or has been consummated by the parties. Furthermore, obligations may arise not only from contracts but also from law.