UP v. De Los Angeles
University of the Philippines (UP), pursuant to Act 3608, entered into a logging agreement with ALUMCO granting the latter logging rights over a particular land owned by UP. However, ALUMCO incurred debts which were remained unpaid.
Upon receipt of notice from UP that it would rescind the contract, ALUMCO executed an “Acknowledgment of Debt and Proposed Manner of Payments” which obligated itself to pay for its incurred debts and upon further failure to pay the same, UP may treat the logging agreement rescinded without need for judicial action.
Despite the execution of the document, ALUMCO incurred again debts. Thus, UP informed ALUMCO of its intention to rescind the contract. However, ALUMCO continued its operations which opted UP to filed an action for preliminary injunction and an action for preliminary attachment for the payment of ALUMCOs debts.
During the pendency of the suit, UP was able to enter into another logging agreement with another company. ALUMCO however, obtained a writ of preliminary injunction against UP and the new firm to continue the logging operations. ALUMCO alleged that UP cannot unilaterally rescind the contract without judicial action. Hence, this petition.
Whether or not UP can extra-judicially rescind the logging agreement with ALUMCO
Yes. As the Court previously held in Froilan v. Pan Oriental Shipping Company, “there is nothing in the law that prohibits the parties from entering into an agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of the contract.”
Upon the execution of “Acknowledgment of Debt and Proposed Manner of Payments”, the ALUMCO is estopped from claiming that UP cannot rescind the contract without judicial action. The acknowledgment expressly states that ALUMCO recognizes the right of UP to rescind the contract without resorting to judicial suit. Thus, under the principle of estoppel, they cannot claim otherwise.