UNIVERSITY OF THE PHILIPPINES, petitioner, vs. WALFRIDO DE LOS 1.
1. WON a final court decree is necessary before UP can rescind the
ANGELES, Quezon City CFI Judge, et al., respondents [1970]
 Act 3608: public land was given as a Land Grant to UP as endowment to
raise additional income for its support
 Nov. 2, 1960: UP & ALUMCO (Associated Lumber Mfg. Co. Inc.) entered
into a logging agreement granting ALUMCO exclusive authority to cut,
collect & remove timber from the land grant & payment to UP of royalties,
forest fees, etc. until Dec. 31, 1965 & extendible for 5 yrs by mutual
agreement.
 Dec. 8, 1964: ALUMCO incurred unpaid account of P219,362.94 w/c they
failed to pay despite several demands. UP sent ALUMCO a notice to
rescind/terminate the agreement. ALUMCO then executed an instrument,
“Acknowledgement of Debt & Proposed Manner of Payments” stipulating
that outstanding balance shall be paid in full no later than June 30,
1965 & if they fail to do so, UP has the power to consider the agreement
rescinded w/out need of any judicial suit & UP shall be entitled to
P50,000.00 for liquidated damages.
 Logging operations continued but ALUMCO incurred more unpaid accounts
w/c amounted to P61,133.74 (Dec. 9, 1964-July 15, 1965) on top of the
outstanding balance from Dec. 8, 1964.
 July 19, 1965: UP informed ALUMCO that it has considered as rescinded &
of no further legal effect the logging agreement. UP then instituted a
complaint against ALUMCO to collect aforementioned sums of money.
Court granted an order restraining ALUMCO from continuing its logging
operations.
 Prior to the court’s order, UP advertised an invitation to bid to take in a
new concessionaire to replace ALUMCO w/c was subsequently awarded to
Sta. Clara Lumber Co. Contract was signed on Feb. 16, 1966.
 ALUMCO filed a petition enjoining UP from conducting the bidding w/c led
to the issuance of the following Court orders:
1. UP enjoined from awarding logging rights to any other party. Order
was received on Feb. 25, 1966, after contract w/Sta. Clara was
signed.
2. UP was held in contempt of court & Sta. Clara Lumber was directed to
refrain from exercising logging rights.
3. UP’s motion for reconsideration was denied.
 ALUMCO’s defense/contentions:
1. It blamed former gen. manager Cesar Guy in not turning over
management thus rendering it unable to pay.
2. Failure to pursue the manner of payment was caused by rotten logs
w/c could not be sold to Sta. Clara Lumber Co. Inc. w/whom they had
a contract to buy & sell.
3. UP’s unilateral rescission w/o court order was invalid.
4. UP’s supervisor did not allow them to cut new logs unless the logs cut
during Guy’s management were sold.
5. UP’s supervisor stopped all logging operations on July 15, 1965.
6. It proposed several offers to resume operations but UP did not reply.
Issues & Ratio:
contract. – NO.
 ALUMCO specifically allowed UP to rescind the contract if it fails to pay not
later than June 30, 1965 in the “Acknowledgement of Debt & Proposed
Manner of Payments” it executed.
 CC Art. 1191 & Froilan v. Pan Oriental Shipping Co.: the law does not
prohibit parties from entering into an agreement that violation of the
terms would cause cancellation of the contract even w/o court
intervention. Injured party need not always resort to the court for
rescission of contract.
 Of course, it should be made known to the other party & it is always
subject to the scrutiny & review by the proper court. Meaning, the party
who deems the contract violated may consider it rescinded & act w/o
previous court action BUT IT PROCEEDS AT ITS OWN RISK. Since only
the final judgment of the corresponding court will conclusively & finally
settle whether the action taken was or was not correct in law.
 This does not contradict previous SC rulings declaring that judicial action
is necessary for the resolution of a reciprocal obligation. As mentioned,
only final judgment of the court will finally settle whether rescission was
proper or not. But either party can consider the contract as rescinded if
their agreement provides for such, however it’s subject to judicial
invalidation.
 Rule requiring judicial action won’t be rendered nugatory since the other
party can always resort to the courts in case the rescinder abuses its
power or commits an error.
 Supreme Court of Spain interpretation of Spanish Civil Code Art. 1124
(similar to CC Art. 1191): resolution of reciprocal/synallagmatic contracts
may be made extrajudicially unless successfully impugned in court.
2. WON 1st court order enjoining UP from awarding logging rts to
another party was proper. – NO, there was grave abuse of
discretion since it decided w/out first receiving evidence on the
issues & it subsequently refused to dissolve the injunction.
 UP made out a prima facie case of breach of contract & defaults in
payment by ALUMCO as proven by a court order stopping ALUMCO’s
logging operations.
 ALUMCO profited from its operations previous to the agreement.
 Excuses/defenses offered are not sufficient excuse for non-payment.
 Whatever prejudices ALUMCO may suffer is susceptible of compensation in
damages.
3. Issue WRT contempt of court was not discussed since such was
pending w/ the Court of Appeals.
Holding: 1st court order granting ALUMCO’s petition for injunction set aside.
Remanded for further proceedings.