Eds Manufacturing v. Healthcheck International, International, Inc. GR No. 16282 !acts" •
Healthcheck is an organi#ation $hich %aintains a net$ork of accredited hos&itals and %edical clinics, one of $hich is '()*+Medical enter. Eds Manufacturing sa$ it fit to o-tain insurance coverage fro% it. Hence, -oth &arties entered into a 1+ear contract in $hich HI $as to &rovide the e%&loees of Eds as host of %edi %edica call serv servic ices es and and -ene -enefi fits ts.2 .2 %ont %onths hs into into the the &rog &rogra ra%, %, HI HI noti notifi fied ed Eds Eds that that its its accreditation $ith '()*M '()*M $as sus&ended on account of the /sian regionalfinancial crisis and advised to avail of the services of near- accredited institutions. !or failing to &reserve its credit standing, HI $as sus&ended fro% its accreditation for a second ti%e. / third sus&ension $as still to follo$ and re%ained in force until the end of its contract $ith Eds.
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0ecause of co%&laints fro% e%&loees of Eds that their healthcards $ere not -eing honored, Eds for%all notified HI that it $as rescinding their agree%ent on account of HI serious and re&eated -reach of undertaking. It thus de%anded a return of &re%iu% for the unused &eriod 6 Million3. HI asked for the surrender of the HM4 cards so that it could &rocess &re+ter%ination of the contract and finali#e the reconciliation of accounts. It stated that until the have received the cards, the $ill consider the account ongoing and e5isting thus su-ect for inclusion to &resent -illing and &a%ent at this tie, the e%&loees of Eds failed to surrender their cards and continued to use the% -eond the &re+ter%ination &re+ter%ination &eriod3.
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In an atte%&t to &re+e%&t Eds7 legal action, HI instituted a case inthe R on the ground that there $as unla$ful &re+ter%ination of the contract and failure of Eds to su-%it a oint reconciliation of accounts and deliver such assets as &ro&erl -elonged to HI the cards3. In its ans$er, Eds alleged that having rescinded the contract, it $as entitled to the unutili#ed &ortion of the &re%iu%.
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/fter trial, the court court ruled in favor of HI and found that Eds7 Eds7 rescission of the agree%ent $as not done through court action or -a notarial act and $as -ased on casual or slight -reaches of the contract. Moreover, its e%&loees continued to use the cards, des&ite the announced rescission. It further held Eds lia-le for the services it &rovided the e%&loees -eond the &eriod, deducting &re%iu%s &aid - Eds. 4n a&&eal, this $as reversed.
Issue" 9hether or not there $as a valid rescission of the /gree%ent -et$een &arties
Ruling" •
here $as no valid rescission. he &o$er to rescind o-ligation sis i%&lied in reci&rocal ones, in case one of the o-ligor should not co%&l $ith $hat is incu%-ent u&on hi%. he inured &art %a choose -et$een the fulfil%ent and rescission of the o-ligation $ith &a%ent of da%ages in either case. He %a also seek rescission, even after he has chosen fulfil%ent, if the latter should -eco%e i%&ossi-le. he court shall decree the rescission clai%ed, unless there -e ust cause authori#ing the fi5ing of a &eriod.
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Rescission $ill not -e allo$ed for a slight or casual -reach -ut onl for su-stantial and funda%ental violations as $ould defeat the ver o-ect of the &arties in %aking the agree%ent. Rescission referred referred to in /rticle 11:1 is on the -reach of faith - one of the &arties $hich is violative of the reci&rocit -et$een the%. Here, Hi violated its contract to &rovide %edical services to Eds7 e%&loees in a su-stantial $a. Ho$ever, although although a ground e5ists to validl rescind the contract, Eds failed to udiciall rescind the sa%e. he rule is, in the a-sence of a sti&ulation, a &art cannot unilaterall and e5traudiciall e5traudiciall rescind a contract. / udicial or notarial act is necessar -efore a valid rescission can take &lace. learl, a udicial or notarial act is necessar -efore a valid rescission can take &lace, $hether or not auto%atic rescission has -een sti&ulated. It is to -e noted that the la$ uses the &hrase ;eventhough; e%&hasi#ing that $hen no sti&ulation is found on auto%atic rescission, the udicial or notarial re
&rovides" ;he ourt shall decree there solution de%anded, unless there should -e grounds $hich ustif the allo$ance of a ter% for the &erfor%ance of the o-ligation. ;onse
