7 Universal vs CA

UNIVERSAL FOOD CORPORATION vs. THE COURT OF APPEALS G.R. No. L-29155 May 13, 1970 CASTRO, J.:

FACTS: In 1938, Magdalo V. Francisco, Sr. discovered a formula for the manufacture of a food seasoning (sauce) derived from banana fruits popularly known as MAFRAN sauce. It was used commercially since 1942, and in the same year plaintiff registered his trademark in his name as owner and inventor with the Bureau of Patents. However, due to lack of sufficient capital to finance the expansion of the business, he secured the financial assistance of Tirso T. Reyes who, after a series of negotiations, formed with defendant Universal Food Corporation (UFC) eventually leading to the execution on May 11, 1960 of the aforequoted "Bill of Assignment". Francisco entered into contract with UFC stipulating among other things that he be the Chief Chemist and Second Vice-President of UFC and shall have absolute control and supervision over the laboratory assistants and personnel and in the purchase and safekeeping of the chemicals used in the preparation of said Mafran sauce and that said positions are permanent in nature. He was appointed Chief Chemist with a salary of P300.00 a month. He kept the formula of the Mafran sauce secret to himself. Thereafter, however, due to the alleged scarcity and high prices of raw materials, UFC issued several memoranda including the salary of plaintiff Magdalo V. Francisco, Sr., be stopped for the time being until the corporation should resume its operation. Magdalo V. Francisco, Sr. received his salary as Chief Chemist in the amount of P300.00 a month only until his services were terminated on November 30, 1960. On January 9 and 16, 1961, UFC, acting thru its President and General Manager, authorized Porfirio Zarraga and Paula de Bacula to look for a buyer of the corporation including its trademarks, formula and assets at a price of not less than P300,000.00. Due to these successive memoranda, Magdalo V. Francisco, Sr., without being recalled back to work, filed the present action on February 14, 1961. Then in a letter dated March 20, 1961, UFC requested said plaintiff to report for duty, but the latter declined the request because the present action was already filed in court. ISSUE: Whether or not Magdalo Francisco should be entitled to rescission. HELD:

YES. Petitioner’s contention that Magdalo Francisco’s petition for rescission should be denied because under Article 1383 of the Civil Code of the Philippines rescission cannot be demanded except when the party suffering damage has no other legal means to obtain reparation, was of no merit because “it is predicated on a failure to distinguish between a rescission for breach of contract under Article 1191 of the Civil Code and a rescission by reason of lesion or economic prejudice, under Article 1381, et seq.” This was a case of reciprocal obligation. Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder was subordinated to anything other than the culpable breach of his obligations by the defendant. Hence, the reparation of damages for the breach was purely secondary. Simply put, unlike Art. 1383, Art. 1191 allows both the rescission and the payment for damages. Rescission is not given to the party as a last resort, hence, it is not subsidiary in nature.