Universal Food Corporation v CA

GR L-29155
Ponente: Justice Castro

Facts:
Magdalo Francisco Sr. invented a formula for the manufacture of a food seasoning
popularly known as MAFRAN sauce. He is the owner and registered patent holder of
the sauce. However, due to lack of capital to finance its expansion, the former secured
the financial assistance which eventually led to a contract called Bill of Assignment
with Universal Food Corporation.

In conformity with the contract, private respondent-appelee was appointed Chief

Chemist and plaintiff Victoriano V. Francisco was appointed auditor and superintendent.
However, due to the alleged scarcity and high prices of raw materials, Secretary-
Treasurer of the corporation issued a memo that only Supervisor Ricardo Francisco
should be retained in the factory and that the salary of plaintiff Magdalo V. Francisco,
Sr., should be stopped for the time being until the corporation should resume its
operation. Private respondent-appelee received his salary as Chief Chemist in the
amount of P300.00 a month only until his services were terminated. Subsequent
memorandums were issued without private respondent-appellee being recalled to return
to work. Due to these, private respondent-appellee Magdalo V. Francisco, Sr. filed this
present action for rescission of their contract.

The petitioner contends that rescission of the Bill of Assignment should be denied,
because under article 1383, rescission is a subsidiary remedy which cannot be
instituted except when the party suffering damage has no other legal means to obtain
reparation for the same.

Issue:
Whether or not the failure of the corporation to recall Magdalo Francisco back to work is
a sufficient cause to rescind the contract

Held:
The general rule is that rescission of a contract will not be permitted for a slight or
casual breach, but only for such substantial and fundamental breach as would defeat
the very object of the parties in making the agreement. The question of whether a
breach of a contract is substantial depends upon the attendant circumstances.

In this case the dismissal of the respondent patentee as the permanent chief chemist of
the corporation is a fundamental and substantial breach of the contract. He was
dismissed without any fault or negligence on his part. Thus, apart from the legal
principle that the option to demand performance or ask for rescission of a contract
belongs to the injured party, the fact remains that the respondents-appellees had no
alternative but to file the present action for rescission and damages.