Victorias Planters Association, Inc. vs. Victorias Milling Co., Inc.

The 30-year period stipulated in the milling contracts is measured in consecutive calendar (agricultural) years, not milling years, and a fortuitous event such as war that suspends performance does not extend the contractual term by the number of years performance was impossible.

The petitioners are two non-stock corporations — Victorias Planters Association, Inc. and North Negros Planters Association, Inc. — organized by and composed of sugar cane planters in the districts of Victorias, Manapla, and Cadiz, Negros Occidental, whose sugar cane is milled by the respondent corporation, plus individual planters Fernando Gonzaga, Jose Gaston, and Cesar L. Lopez suing on behalf of all similarly situated planters too numerous to join. The respondent, Victorias Milling Co., Inc., is a corporation that operates a sugar central at Victorias, Negros Occidental, originally organized by Miguel J. Ossorio. A predecessor entity, North Negros Sugar Co., Inc., also organized by Ossorio, had constructed and operated a separate central at Manapla. The planters had executed standard-form milling contracts with these entities between 1917 and 1934, under which they agreed to deliver their sugar cane to the central for milling for a period of 30 years from the first milling, in exchange for a share in the milled sugar. After WWII, the North Negros Sugar Co., Inc. did not reconstruct its destroyed central and arranged for the respondent to mill the sugar cane of the Manapla and Cadiz planters, consolidating all milling at the respondent's Victorias central.

The sugar cane planters of the Manapla and Cadiz districts of Negros Occidental had, on November 17, 1916, entered into a contract entitled "Contrato de la Central Azucarrera de 300 Toneladas" with Miguel J. Ossorio, granting him until December 31, 1916 to decide whether he would construct a sugar central with a milling capacity of 300 tons of sugar cane every 24 hours. Ossorio in fact constructed such a central at Manapla through the North Negros Sugar Co., Inc. Thereafter, from 1917 to 1934, the planters of Manapla and Cadiz executed identical standard-form milling contracts (Annex "A") with the North Negros Sugar Co., Inc., under which they agreed to deliver their sugar cane to the central for milling for a period of 30 years from the first milling. The planters of Victorias, for their part, executed milling contracts either with the North Negros Sugar Co., Inc. (Annexes "B" and "B-1") or with the Victorias Milling Co., Inc. (Annex "C"), another corporation organized by Ossorio that constructed a separate central at Victorias. The North Negros Sugar Co., Inc. had its first milling during the 1918–1919 crop year, while the Victorias Milling Co. had its first milling during the 1921–1922 crop year. Millings took place every successive crop year thereafter, except during a six-year period comprising four years of the Japanese occupation during WWII and two years of post-war reconstruction of the respondent's central at Victorias.

After liberation, the North Negros Sugar Co., Inc. did not reconstruct its destroyed central at Manapla and, in 1946, advised the North Negros Planters Association, Inc. that it had arranged for the respondent Victorias Milling Co., Inc. to mill the sugar cane of the Manapla and Cadiz planters. From that point, all sugar cane produced by the planters of both associations — whether in Manapla, Cadiz, or Victorias — who held milling contracts was milled at the respondent's single central at Victorias.

Beginning in 1948, the planters-members of the North Negros Planters Association, Inc. considered the 30-year period of their milling contracts — executed in 1918 — to have expired and terminated in the crop year 1947–1948. The members of the Victorias Planters Association, Inc. likewise considered their 30-year period to have expired in the crop year 1948–1949. Paragraph 21 of the standard milling contract (Annex "A") provided that the planters would deliver their sugar cane to the central for a period of 30 years from the first milling, and that they imposed voluntary easements on their haciendas to plant sugar cane on at least three-fifths of their total area and deliver the cane to Ossorio for 30 years, counting one year from the date of the first milling. The planters made repeated representations to the respondent corporation for the negotiation and execution of new milling contracts that would account for changed circumstances in the sugar industry and provide for increased participation in the milled sugar.

The respondent refused to accede, contending that the contracts called for 30 years of milling — not 30 years in time — and that since there was no milling during four years of the war and two years of reconstruction, the addition of these six years meant the contracts for the Manapla planters would terminate in the autumn of 1952, those for the Victorias planters in 1957, and still later for those in the Cadiz districts. The respondent further asserted that, apart from the contractual agreements, the war and reconstruction years accrued to it in equity. The trial court, on the basis of a stipulation of facts and the testimony of Jesus Jose Ossorio, rendered judgment declaring the milling contracts expired upon the lapse of the stipulated 30-year period and that the respondent was not entitled to any extension for the six years of war and reconstruction. The respondent appealed.

• Expiration of Contractual Term: Petitioners maintained that the 30-year period stipulated in the milling contracts had already expired — for the North Negros planters in crop year 1947–1948 and for the Victorias planters in crop year 1948–1949 — measured in consecutive calendar years from the first milling.
• Entitlement to New Contracts: Petitioners argued that changed circumstances in the sugar industry, compared to those prevailing over 30 years prior, warranted the negotiation and execution of new milling contracts providing for increased participation in the milled sugar for the benefit of the planters and their workers.

• Milling Years, Not Calendar Years: Respondent contended that the term stipulated in the contracts was thirty milling years, not thirty calendar years, and that the reference to "first milling" in the contracts supported this interpretation.
• Extension for War and Reconstruction: Respondent argued that the six years during which no milling occurred — four years of Japanese occupation and two years of post-war reconstruction — should be added to the 30-year term, so that the contracts for Manapla planters would terminate in the autumn of 1952, for Victorias planters in 1957, and later for Cadiz planters.
• Equitable Accrual: Respondent asserted that, apart from the contractual agreements, the war and reconstruction years accrued to it in equity.
• Planters' Obligation to Deliver: Respondent postulated that the planters were obligated to fulfill their part — delivery of sugar cane — for the six years they failed to perform, characterizing the failure as installments of indebtedness that remained due.

• Nature of the Contractual Period: Whether the 30-year period stipulated in the milling contracts refers to milling years (years in which milling actually occurred) or to consecutive calendar (agricultural) years.
• Effect of Force Majeure on the Period: Whether the six-year period during which no milling occurred — due to the Japanese occupation and post-war reconstruction — should be deducted from or added to the 30-year contractual term.

• Nature of the Contractual Period: No. The 30-year period is measured in consecutive calendar (agricultural) years, not milling years. The term "first milling" was used solely for the purpose of reckoning the start of the 30-year period.
• Effect of Force Majeure on the Period: No. The six years of war and reconstruction cannot be deducted from or added to the 30-year period. Force majeure relieved both parties of their respective obligations during that time but did not suspend or extend the running of the contractual period.

• Nature of the Contractual Period: The contracts provided that the planters would deliver their sugar cane for "treinta (30) años desde la primera molienda" (thirty years from the first milling) and "a contar un (1) año desde la fecha de la primera molienda" (counting one year from the date of the first milling). The phrase "first milling" was a reference point for reckoning the commencement of the 30-year period, not a qualifier converting calendar years into milling years. The Court found no textual basis to construe the stipulated period as anything other than thirty consecutive years. Even assuming arguendo that the period could be construed as milling years, the deduction or extension of six years would still not be justified, because at most the delivery of sugar cane on the last year of the term could be extended until all harvested cane had been delivered. The Court relied on Lacson vs. Diaz, where despite a lease contract stipulating seven sugar crops (not seven crop years) as the term, the Court held that the stipulation contemplated seven consecutive agricultural years and denied the lessee an extension for the years the country was under Japanese occupation during which no sugar cane was planted.

• Effect of Force Majeure on the Period: The respondent's argument that the planters must deliver sugar cane for six additional years to compensate for the six years of non-performance during the war and reconstruction was rejected. The reason the planters failed to deliver was the war — a fortuitous event or force majeure — which also caused the respondent to cease operating its mill. Under Article 1105 of the old Civil Code (Article 1174 of the new Civil Code), fortuitous event relieves the obligor from fulfilling a contractual obligation. The seventh paragraph of Annex "C" (not found in the earlier contracts), which stipulated suspension of the contract during flood, typhoon, earthquake, force majeure, war, insurrection, civil commotion, or organized strike, did not mean that the happening of those events stopped the running of the period agreed upon; it only relieved the parties from the fulfillment of their respective obligations during that time. The central could demand performance from the planters only if the latter had been able to perform but failed or refused to do so — not when they were prevented by force majeure. To require the planters to deliver sugar cane for six more years to make up for what they failed to deliver during the war and reconstruction would be to demand fulfillment of an obligation that was impossible of performance when it became due, contrary to the maxim nemo tenetur ad impossibilia. The obligee, not being entitled to demand performance under those circumstances, could not later demand its fulfillment. The performance of what the law has written off cannot be demanded and required. Granting the respondent's prayer would, in effect, be an extension of the term of the contracts.

• Fortuitous Event (Article 1174, New Civil Code; Article 1105, Old Civil Code) — A fortuitous event relieves the obligor from fulfilling a contractual obligation. In this case, the war constituted force majeure that prevented both the planters from delivering sugar cane and the respondent from operating its mill. Because performance was impossible when it became due, neither party could be compelled to perform for the period of the impossibility. The Court applied this principle to reject the respondent's claim that the planters owed six additional years of delivery.
• Nemo tenetur ad impossibilia — No one is bound to perform the impossible. The Court invoked this maxim to hold that the planters could not be required to deliver sugar cane for six more years to compensate for deliveries that were impossible during the war and reconstruction period.
• Impossibility of Performance as a Bar to Subsequent Demand — Where an obligee is not entitled to demand performance from the obligors because performance was prevented by force majeure, the obligee cannot later demand fulfillment of that which was impossible. "The performance of what the law has written off cannot be demanded and required." The Court applied this principle to hold that the respondent could not claim an extension of the contractual term for the six years of war and reconstruction.
• Contractual Period Reckoned in Calendar Years — Where a contract stipulates a term of years measured from a particular event (e.g., "first milling"), the term runs in consecutive calendar or agricultural years unless the contract clearly indicates otherwise. The Court followed Lacson vs. Diaz, where a lease stipulating "seven sugar crops" was held to mean seven consecutive agricultural years, not seven years in which crops were actually harvested.

• "The fact that the contracts make reference to 'first milling' does not make the period of thirty years one of thirty milling years. The term 'first milling' used in the contracts under consideration was for the purpose of reckoning the thirty-year period stipulated therein." — This passage articulates the ratio decidendi on the nature of the contractual period, establishing that "first milling" is a reference point for commencement, not a qualifier converting calendar years into milling years.

• "To require the planters to deliver the sugar cane which they failed to deliver during the four years of the Japanese occupation and the two years after liberation when the mill was being rebuilt is to demand from the obligors the fulfillment of an obligation which was impossible of performance at the time it became due. Nemo tenetur ad impossibilia." — This passage applies the doctrine of impossibility of performance and the maxim nemo tenetur ad impossibilia to reject the respondent's claim for an extended term.

• "The performance of what the law has written off cannot be demanded and required. The prayer that the plaintiffs be compelled to deliver sugar cane to the appellant for six more years to make up for what they failed to deliver during those trying years, the fulfillment of which was impossible, if granted, would in effect be an extension of the term of the contracts entered into by and between the parties." — This passage establishes the principle that obligations extinguished by force majeure cannot later be revived, and that granting the respondent's prayer would constitute an impermissible extension of the contractual term.

• Lacson vs. Diaz, 47 Off. Gaz., Supp. No. 12, p. 337 — Controlling precedent followed. The Court held that a lease contract stipulating "seven sugar crops" as the term contemplated seven consecutive agricultural years, not seven years in which crops were actually harvested, and denied the lessee an extension for the years of Japanese occupation during which no sugar cane was planted. The Court applied the same reasoning to hold that the 30-year milling contract period ran in consecutive agricultural years.
• Lo Ching vs. Court of Appeals, 46 Off. Gaz., Supp. No. 1, p. 399, 81 Phil. 601 — Cited in a footnote ("Cf.") as comparative authority related to the effect of the Japanese occupation on contractual periods.
• American Far Eastern School of Aviation vs. Ayala y Cia., 89 Phil. 292 — Cited in the same footnote alongside Lo Ching as comparative authority on the effect of war on contractual obligations.

• Article 1105, Old Civil Code — Cited as the basis for the principle that fortuitous event relieves the obligor from fulfilling a contractual obligation. The Court applied this provision to hold that the war, as a fortuitous event, relieved both the planters and the respondent of their respective contractual obligations during the six-year period of non-performance.
• Article 1174, New Civil Code — The corresponding provision in the new Civil Code, cited alongside Article 1105, embodying the same rule on fortuitous event.
• Rule 66, Rules of Court — The procedural rule under which the action for declaratory judgment was filed, seeking judicial interpretation of the milling contracts.

Bengzon, Acting C.J., Montemayor, Reyes, A., Jugo, Bautista Angelo, Labrador, Concepcion, and Reyes, J.B.L., JJ., concurred.