Universal Food Corp. vs.

Court of Appeals
No. L-29155. May 13, 1970

Facts:
In 1938, Magdalo Francisco Sr. invented a formula of a food seasoning formula derived
from banana fruits popularly known as ‘Mafran sauce’.

That in 1942, the product was used in commercial sale and the same was registered his
trademark in Magdalo’s name as owner and inventor with the Bureau of Patents.

And due to lack of capital to finance the expansion of business, Magdalo secured
financial assistance of Tirso Reyes (President and General Manager of Petitioner company) and
others, formed Universal Food Corporation eventually leading to a ‘Bill of Assignment’.

Upon its terms on Exh. A, Magdalo was appointed chief chemist and Second Vice-
President with a salary of P300/month, while Victoriano Francisco as auditor and superintendent
with a salary of P250/month.

In 1960, Magdalo’s services in the Petitioner company was terminated.

In 1961, the President and General Manager looked for a buyer of the corporation
including its trademarks, formula and assets. Because of this, Magdalo filed an action for
rescission of contract and damages against Universal Food Corp.

Issue:
Whether or not Magdalo Francisco Sr. is entitled to rescission due to his dismissal from
the Petitioner company.

Ruling:
Yes. the Bill of Assignment entered into by the parties may be rescinded.
Article 1191 of the Civil Code states that, “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.
The injured party may choose between the fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission even after he has chosen
fulfillment, if the latter should become impossible.
In the present case, the Bill of Assignment shows that it is reciprocal in nature and when
the Petitioner company terminated the services of Magdalo was done without lawful cause.
 The law provides that the general rule in rescission of contracts, a slight or casual breach
is not permitted, but only for such substantial and fundamental breach as would defeat the very
object of the parties in making the agreement.
The court ruled that the dismissal of the respondent without any fault or negligence on his
part is fundamental and substantial breach on the part of the Petitioner. Thus, to demand
performance or ask for rescission of a contract belongs to the injured party.

Samahan ng Magsasaka sa San Josep vs. Valisno

G.R. No. 158314. June 3, 2004

Facts:
The 57-hectare property was registered in the name of Dr. Valisno Sr., the same land was
also the subject of a judicial ejectment suit.

In 1971, the tenants were ejected from the property. Among these are the Samahan ng
Magsasaka sa San Josep, represented by Dominador Maglalang.

A year after, Dr. Valisno mortgaged 12 hectares of his property to Renato Banting which
was later on divided and titles were issued in the name of eight children of Dr. Valisno, Angelito
Banting and Renato Banting.

After mortgage on the 12-hectare land, the same was foreclosed and sold at a pubic
auction and the four grandchildren of Dr. Valisno redeemed the same from the mortgagees.

During the redemption, three out of the four grandchildren were minors. The land was not
transferred to them until 1998.

Subsequently, the entire 57-hectare land became subject to expropriation before DAR. In
1994, SMSJ filed a petition for coverage of the subject land under CARL. It was held that the
property is covered by CARP, subject to the retention rights of the heirs of Dr. Valisno Sr.
In 1997, the Valisno heirs filed a Consolidated Application for Retention and Award
under RA 6557 which was opposed by SMSJ.

The Regional Director granted the application for retention of the heirs of Dr. Valisno
which was affirmed by the DAR Secretary.
The CA reversed the orders of the DAR secretary and granted one hectare each for the
grandchildren and affirmed retention rights over three hectares each.
Hence, this appeal.
Issue:
Whether or not the redemption made by the three minor children were voidable or
annullable.

Ruling:
Article 1327 of the Civil Code provides that minors are incapable of giving consent to a
contract. Article 1390 provides that a contract where one of the parties is incapable of giving
consent is voidable or annullable.
Thus, the redemption made by the minors was merely voidable and was not void ab
initio.
Any action for the annulment of the contracts entered into by the minors would require that: (1)
the plaintiff must have an interest in the contract; and (2) the action must be brought by the
victim and not the party responsible for the defect.
In this case, no action for annulment of contracts was entered by the minors, making the
said redemption valid regardless of the source of their funds and minority, they became the legal
owners of the property in 1973.
The court stated that, even the transaction entered into by a party who is incapable of
consent is voidable, the same is valid until annulled.