date of the signing of the contract but before

Republic of the Philippines

machinery and equipment is loaded at Manila
SUPREME COURT
Harbor and P36,750.00 shall be payable in 12
Manila
monthly installments as provided in the contract.
FIRST DIVISION
In view of the foregoing considerations, the
G.R. No. L-27482 September 10, 1981 Corporation guaranteed said machinery and
GRACE PARK ENGINEERING CO., INC., plaintiff- equipment to process at least 6 tons of cassava
appellee, flour and starch per 24-hour day operation, while
vs. Dimaporo undertook to supply at his own expenses
MOHAMAD ALI DIMAPORO, defendant-appellant. the building wherein shall be housed the machinery
and equipment, laborers needed to complement the
operation of the mill, food, foundation materials,
DE CASTRO,* J.: and effective water system (par. 6, Exh. A).
Appeal (prior to the effectivity of Republic Act No. In compliance with the agreement, defendant paid
5440) by Mohamad Ali Dimaporo from a decision of plaintiff the amounts of P5,750.00 and P10,000.00
the Court of First Instance of Rizal, Branch VI (in its as agreed upon, thus leaving a balance of
Civil Case No. 3828), the dispositive portion of which P36,750.00.
reads: It appears on record, however, that during the
WHEREFORE, all premises considered, course of installation of said machinery and
judgment is hereby rendered declaring the equipment, Dimaporo failed to comply with his
rescission of the Contract for the Sale of obligations specified in par. 6 of said contract, so
Cassava Flour and Starch Processing much so that the Corporation was forced to provide
Machinery and Equipment, Exh. A, dated the necessary materials and labor and advance
April 1, 1954, and ordering mutual restitution whatever expenses had been made for that purpose
by the parties, defendant to return to plaintiff with previous knowledge and consent given by
the cassava flour and starch processing Dimaporo because the latter was short of funds
machinery and equipment and bear the during that time.
transportation expenses thereof to the port It took the Corporation one (1) year and three (3)
of Cotabato, plaintiff corporation to bear the months to install the said machinery and
freight charges thereof for its shipment to equipment, after which, it demanded from Dimaporo
Manila, and, to pay plaintiff the total amount complete payment of the balance due and for all
of P19,628.93 with interest thereon at the expenses made in advance arising from the supply
rate of 6% per annum from the date of filing of materials and labor which Dimaporo failed to
of this complaint until full payment of the provide on time. Dimaporo refused to pay on the
same, and plaintiff to return to defendant the ground that the balance of P36,750.00 never
amount of P15,750.00 representing the became due and demandable because of the
partial payment made to it by defendant for Corporation's failure to complete the installation of
the purchase price of said machinery and the machinery and equipment within the stipulated
equipment. No pronouncement as to period and place the same in satisfactory running
damages and costs. 1 conditions as guaranteed by it in the contract.
Defendant-Appellant Dimaporo questions the Hence, on October 1, 1955 the Corporation brought
validity of the questioned decision in so far as said an action against Dimaporo for rescission of the
decision 1) orders him to return the cassava flour aforesaid contract after mutual restitution by the
and starch processing machinery and equipment parties with provision for damages in its favor.
and 2) orders him to pay plaintiff-appellee Grace Dimaporo, in his answer, likewise seeks the
Park Engineering Co. P19,628.93 with interest. rescission of the contract, after mutual restitution by
The records disclose that on April 1, 1954, Grace the parties, but with provision for the payment by
Park Engineering, Inc., and Mohamad Ali Dimaporo the Corporation of freight charges that may be
entered into a Contract for the Sale of Cassava Flour incurred due to such restitution, and with the award
and Starch Processing Machinery and Equipment of damages in his favor.
(Exh. A) 2 whereby the corporation agreed to sell After hearing on tile merit, the trial court found both
and install, for the consideration of P52,000.00, a parties having violated the terms and conditions of
cassava flour and starch processing machinery and the contract, defendant Dimaporo failing to comply
equipment specifically described therein at with his obligations under par. 6 of the contract and
Dimaporo's place in Karomatan Lanao Mill Site, plaintiff corporation liable for installing machinery
within a period of 70 working days from the date of and equipment that are basically defective and
signing of the contract. It was agreed that P5,750.00 inadequate. As to who was the first infractor in point
shall be paid upon signing of the contract; of time, it was not determined by the trial court.
P10,000.00 shall be paid within 30 days from the Rescission of the contract was granted but held that
parties should bear his/its own damages, applying had the opportunity of weighing carefully what was
article i 192 of the New Civil Code which provides: testified to and did so without oversight or neglect. 4
Hence the rule that when a party appeals directly to
In case both parties have committed a
this Court, he is deemed to have waived the right to
breach of the obligation, the liability of the
dispute any finding of fact made by the court below.
first infractor should be equitably tempered 5
by the Courts. If it cannot be determined
which of the parties first violated the It is next argued for appellant Dimaporo, that the
contract, the same should be deemed trial court erred in ordering the return of the
extinguished, and each shall bear his own machinery and equipment subject matter of the
damages. contract to appellee corporation and maintained
that although a rescission of the contract is in order,
From the judgment of the Court below, Dimaporo
he has no obligation, however, to return the
directly appealed to this Court imputing seven (7)
machinery and equipment, much less pay the
assignments of errors committed by the trial court,
which may be synthesized into four (4) main issues: transportation expenses thereof to the port of
Cotabato, since the machinery and equipment
a) whether he was guilty of breach of contract. shipped by appellee corporation were never
b) whether he was liable to return the machinery delivered to appellant. He contended that by
and equipment subject matter of the contract. reference to the contract, Exh. A, it is clear that the
obligation of the appellee did not end with the
c) whether he was liable to pay appellee Corporation shipment of the machinery and equipment to the all
the amount of P19,628.93 with interest. site; it must also install the machinery and
d) whether he was entitled to the award of damages equipment in such a manner that they would
in his favor. produce at least 6 tons of cassava flour per 24 hours
of operations so much so that until such machinery
Appellant Dimaporo maintained that he has not and equipment were installed and shown to be
committed any breach of contract, Exh. A, capable of producing at the warranted rate, there
particularly par. 6 thereof that it was appellee could be no delivery of such machinery and
Corporation who was guilty thereof, and points in his equipment to appellant.
appellant's brief testimonial and documentary
evidence in support of the same. Upon the other This contention is in Our opinion, not sustained by
hand, the trial court, in its decision, makes the the terms of the contract or by the facts appearing
following findings: in evidence. It is true that under par. 8 of the
contract, E Exh. A, the "SELLER warrants that it will
From the entire evidence presented, it deliver all the machinery and equipment as agreed
appears that defendant had failed to comply in par. 4, guaranteed to process at least 6 tons of
with his obligations under the contract, Exh. cassava flour or starch per 24-hour day operation."
A, more particularly with the provisions of However in said paragraph it was also stipulated
par. 6 thereof. He was unable to furnish that "this warranty of capacity shall be attained only
sufficient laborers needed to complete the when properly coordinated to the necessary manual
operations of the mill, food, foundation labor required for the purpose." And according to
materials and effective water systems (Exhs. the trial court, "the delay of the completion of the
G, G-1, I, I-1, J-1, K, R, CC, KK LL NN-1). Under installation as well as the incapacity of the mill to
Exh. MM, a daily work progress report duly produce the desired amount of flour/starch as
certified correct by defendant, the hammer warranted by the plaintiff under the contract are
mill and flash drier were already attributable to defendant's non-compliance with his
commercially operated on December 11, obligation to furnish food, materials, and water
1954 (Exh. MM-3). This necessarily gives the system."
impression that the installation of the mill
has been completed in accordance with the Even assuming that there is some degree of
contract and the subsequent failure of the plausibility in appellant's position, still the lower
project is due to defendant's fault. ... Taking court did not commit any error in ordering appellant
into consideration defendant's failure to to return the machinery and equipment to appellee
comply with this obligation, plaintiff's delay corporation, for when the former, as defendant in
in the complete installation of the machinery the lower court, filed his Answer to the complaint of
and equipment seems reasonable and appellee corporation, he prayed for the rescission of
understandable. ... 3 the contract between him and the plaintiff and for
mutual restitution by the parties. 6 To sustain
The foregoing is a conclusion of fact of the trial appellant's contention that he is not liable for the
court. The rule is well-settled that factual findings of return of machinery and equipment would be
the trial court, supported by substantial evidence, fundamentally contradicting the very notion of
are generally binding on the Supreme Court. They rescission. The first paragraph of article 1385 of the
are entitled to great respect, the lower court having New Civil Code provides:
 Rescission creates the obligation to return committed a breach of obligation are fully supported
the things which were the object of the by the evidence on record. As We have stated, We
contract, together with their fruits, and the are not in a position to disturb the same. Therefore,
price with its interest; consequently, it can it correctly applied Article 1192 of the New Civil
be carried out only when he who demands Code to the effect that in case both parties have
rescission can return whatever he may be committed a breach of obligation and it cannot be
obliged to restore. determined who was the first infractor, the contract
shall be deemed extinguished and each shall bear
Furthermore, when a contract is resolved or
his/its own damages. Consequently, the trial court
rescinded, it is the duty of the court to require the
committed no reversible error when it ordered
parties to surrender that which they have severally
appellee corporation to pay appellant the amount of
received and to place each as far as practicable in
P15,570.00 representing partial payment of the
his original situation; and when a resolution is
purchase price of the machinery and equipment.
granted, it has the effect of abrogating the contract
This is but a consequence of the decree of rescission
in all parts. The party seeking resolution cannot ask
granted by the trial court. Neither did it commit any
"performance as to part and resolution as to
error when it refused to grant any interest on the
remainder. 7
aforesaid amount of P15,570.00. This is also but a
The last two issues are both centered on the consequence of the enunciated rule that each party
question of who is liable for the payment of should bear his/its own damages. For the same
damages and interests as a result of the breach of reasons, We hold that although appellant is liable to
contract. The trial court, in resolving the issues, pay the amount of P19,628.93 which appellee
applied Article 1192 of the New Civil Code, which as corporation had spent by way of advances with
aforestated, enunciated the rule if both parties which to purchase the necessary materials and
committed a breach of obligation. The trial court supplies, however, he is not liable to pay interest
find the following facts: "Both parties have failed to thereon at the rate of 6% per annum until full
comply with what is respectively encumbent upon payment of the same, as held by the lower court.
them to do, and the object of the contract is Otherwise, to hold so would be in conflict with the
consequently defeated; defendant failed to comply above-mentioned rule that each party must bear
with his obligations under the contract, Exh. A; that his/its own damages.
further scrutiny of the evidence shows that the
PREMISES CONSIDERED, with the only modification
machinery and equipment sold and installed by
that the sum of P19,628.93 be paid by appellant
plaintiff were all along, by themselves, defective
Dimaporo to appellee Grace Park Engineering, Inc.,
and inadequate. As to who was the first infractor in
without interest, the judgment appealed from is
point of time, under said circumstances, cannot be
affirmed in all other respects. No pronouncement as
specifically delineated. Hence, parties should bear
to costs.
his/its own damages.
SO ORDERED.
Based on these findings, the trial court ruled, as
aforestated in the dispositive portion, that appellant Teehankee (Chairman), Makasiar, Fernandez,
Dimaporo must pay appellee corporation the total Guerrero and Melencio-Herrera, JJ., concur.
amount of P19,628.93 which the latter had spent by
way of advances to the former with which to
purchase the necessary materials and supplies at Footnotes
the rate of 6% per annum; that appellee corporation * Mr. Justice de Castro was designated
must return to appellant the amount of P15,750.00 to sit with the First Division under
representing the partial payment made by it to Special Order No. 225.
appellant for the purchase price of said machinery
and equipment. The trial court, however, made no 1 p. 54, Record on Appeal p. 34, Rollo.
pronouncement as to damages and costs. 2 p. 8, Record on Appeal, p. 34, Rollo.
But appellant would contend that the amount of 3 pp 48-49, Record on Appeal, p. 34,
P19,628.93 should be offset by the damages that Rollo.
are due to him by reason of the violations by the
appellee corporation of its obligation under the 4 Corliss vs. Manila Railroad Company
27 SCRA 674; Miguel vs. Court of
contract; that appellee must be required to pay
interests on the amount of P15,750.00 since this Appeals, 29 SCRA 760. Yturralde vs.
Vagilidad 28 SCRA 393; Samson, Jr.
amount paid has already been used by it; and that
since the first infractor was the appellee's vs. Tarroza 28 SCRA 792; Perez vs.
Araneta, 24 SCRA 43.
corporation, therefore, damages should be paid by
that party to the appellant. 5 Cebu Portland Cement Co. vs. Mun.
of Naga, Cebu, 24 SCRA 708; Pascua
The findings of fact of the trial court that both
appellant Dimaporo and appellee corporation have vs. Capuyoc, 77 SCRA 78 citing
Manacop vs. Cansino, I 1 1 Phil. 106.
6 p. 31, Record on Appeal, p. 34,
Rollo.
7 Po Pauco vs. Siguenza and Aguilar,
49 Phil. 404; Magdalena Estate Inc.
vs. Louis J. Myrick 71 Phil. 344;
Verceluz vs. Edano, 46 Phil. 801.