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A2010 Compiled Oblicon Digests

A2010 Compiled Oblicon Digests

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06/15/2011

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Sections

  • BARREDOVGARCIA
  • MENDOZAVARRIETA
  • PSBAVCOURTOFAPPEALS
  • AMADORAVCA
  • SONGFOCOVHAWAIIANPHILIPPINECO
  • VELARDEVCOURTOFAPPEALS
  • WOODHOUSEVHALILI
  • GERALDEZVCA
  • GUTERREZVGUTIERREZ
  • VAZQUEZVDEBORJA
  • PARASdissent
  • DEGUIAVMANILAELECTRICRAILROADLIGHTCO
  • CRISOSTOMOVCA
  • SANTOSVENTURAHOCORMAFDNVSANTOS
  • VASQUEZVAYALACORPORATION
  • ABELLAVFRANCISCO
  • VDADEVILLARUELVMANILAMOTORCOINCAND COLMENARES
  • TENGCOVCA
  • CENTRALBANKOFTHEPHILIPPINESVCOURTOF APPEALS
  • CHAVEZVGONZALES
  • TELEFASTCOMMUNICATIONSPHILIPPINEWIRELESSINC VCASTRO
  • RICEANDCORNCORP
  • MAGATVMEDIALDEA
  • TANGUILIGVCOURTOFAPPEALS
  • KHEHONGCHENGVCOURTOFAPPEAL
  • SIGUANVLIM
  • REPUBLICVLUZONSTEVEDORINGCORPORATION
  • DIOQUINOVLAUREANO
  • AUSTRIAVCOURTOFAPPEALS
  • NATIONALPOWERCORPORATIONVCA
  • YOBIDOVCOURTOFAPPEALS
  • BACOLODMURCIAMILLINGCOINCVCA
  • PHILIPPINECOMMUNICATIONSSATELLITECORPORATION
  • VGLOBETELECOMINC
  • EASTERNSHIPPINGLINESVCA
  • CRISMINAGARMENTSVCA
  • KENGHUAVCA
  • SECURITYBANKVRTC
  • ALMEDAVCOURTOFAPPEALS
  • FIRSTMETROINVESTMENTCORPORATIONVESTEDEL
  • SOLMOUNTAINRESERVEINC
  • GAITEVFONACIER
  • GONZALESVHEIRSOFTHOMASANDPAULACRUZ
  • CORONELVCA
  • PARKSVPROVINCEOFTARLAC
  • CENTRALPHILIPPINEUNIVERSITYVCOURTOFAPPEALS
  • DAVIDEdissent
  • QUIJADAVCA
  • LAOLIMVCA
  • NAGATELEPHONEVCOURTOFAPPEALS
  • OSMEÑAVRAMA
  • PARASconcur
  • TAYLORVUYTIENGPIAOANDTANLIUAN
  • MITHBELLCOVSOTELOMATTI
  • ROMEROVCA
  • ROMANCATHOLICARCHBISHOPOFMANILAVCA
  • HERRERAVLPLEVISTECOINC
  • BOYSAWVINTERPHILPROMOTIONS
  • UPVDELOSANGELES
  • DEERQUIAGAVCA
  • VISAYANSAWMILLCOMPANYINCVCA
  • ROMEROdissent
  • LACHICAVARANETA
  • PONCEDELEONVSYJUCOINC
  • BUCEVCA
  • ARANETAVPHILIPPINESUGARESTATESDEVTCO
  • YNCHAUSTIVYULO
  • LAFARGECEMENTPHLIPPINESINCVCONTINENTAL CEMENTCORPORATION
  • JAUCIANVQUEROL
  • RFCVCA
  • QUIOMBINGVCA
  • ALIPIOVCOURTOFAPPEALS
  • MAKATIDEVELOPMENTCORPVEMPIREINSURANCECO
  • TANVCOURTOFAPPEALS
  • COUNTRYBANKERSINSURANCEVCA
  • KALALOVLUZ
  • STPAULFIREMARINEINSURANCECOVMACONDRAY
  • COINC
  • PAPAVVALENCIA
  • PHILIPPINEAIRLINESINCVCOURTOFAPPEALSSTO TOMAS
  • REPARATIONSCOMMISSIONVUNIVERSALDEEPSEA FISHINGCORPORATION
  • DBPVCA
  • FILINVESTCREDITCORPVPHILIPPINEACETYLENECO
  • INC
  • ABADSANTOSconcur
  • TLGINTERNATIONALCONTINENTALENTERPRISINGINCV FLORES
  • SOCOVMILITANTE
  • MEATPACKINGCORPORATIONOFTHEPHILIPPINESV SANDIGANBAYAN
  • PABUGAISVSAHIJWANI
  • OCCEÑAVCOURTOFAPPEALS
  • PNCCVCOURTOFAPPEALS
  • GANTIONVCOURTOFAPPEALS
  • SILAHISMARKETINGCORPVIAC
  • BPIVREYES
  • PHILIPPINENATIONALBANKVCOURTOFAPPEALS
  • MIRASOLVCA
  • MILLARVCA
  • DORMITORIOVFERNANDEZ
  • MAGDALENAESTATESINCvRODRIGUEZ
  • REYESVSECRETARYOFJUSTICE
  • CONCHINGYANVRBSURETYINSURANCE
  • BROADWAYCENTRUMCONDOMINIUMCORPVTROPICAL
  • CALIFORNIABUSLINEVSTATEINVESTMENT
  • QUINTOVPEOPLE
  • LICARIOSVGATMAITAN
  • ASTROELECTRONICSCORPVPHILIPPINEEXPORTAND
  • GSISVCOURTOFAPPEALS
  • MANILARAILROADCOVCOMPANIATRANSATLANTICA
  • PAKISTANINTERNATIONALAIRLINESCORPORATIONv OPLE
  • ARROYOVBERWIN
  • FILIPINASCOMPAÑIADESEGUROSETALVMANDANAS
  • BUSTAMANTEVROSEL
  • FLORENTINOVENCARNACIONSR
  • COQUIAVFIELDMENSINSURANCECOINC
  • INTEGRATEDPACKAGINGCORPVCAFILANCHORPAPER
  • DAYWALTVLACORPDELOSPADRESAGUSTINOS RECOLETOS
  • SOPINGBUNVCA
  • ROSENSTOCKVBURKE
  • MALBAROSAVCOURTOFAPPEALS
  • JARDINEDAVIESINCVCOURTOFAPPEALS
  • ADELFAPROPERTIESINCVCOURTOFAPPEALS
  • HEIRSOFWILLIAMSEVILLAVSEVILLA
  • VITUGconcur
  • KATIPUNANVKATIPUNAN
  • HILLVVELOSO
  • TUASONVMARQUEZ
  • AZARRAGAVGAY
  • TRINIDADVIAC
  • RODRIGUEZVRODRIGUEZ
  • SUNTAYVCA
  • LIGUEZVCOURTOFAPPEALS
  • CARANTESVCOURTOFAPPEALS
  • BUENAVENTURAVCA
  • GARCIAVBISAYA
  • BENTIRANDPORMIDAVLEANDAANDLEYTEGULF
  • TRADERSINC
  • BORROMEOVCOURTOFAPPEALS
  • KASILAGVRODRIGUEZ
  • SEPARATEOPINION
  • VILLAREALconcurdissent
  • LAURELconcurintheresult
  • MORANdissent
  • AVANCEÑAdissent
  • UNIVERSALFOODCORPVCOURTOFAPPEALS
  • ORIAVMCMICKING
  • SINGSONGVISABELASAWMILL
  • CADWALLERCOVSMITHBELLANDCO
  • UYSOOLIMVTANUNCHUAN
  • PHILIPPINENATIONALBANKVPHILIPPINEVEGETABLE
  • OILCO
  • AVANCEÑAANDVILLAMORconcurdissent
  • JOHNSONdissent
  • STREETconcurdissent
  • LIMKETKAIVCOURTOFAPPEALS
  • COURTOFAPPEALS
  • UBARRAVMAPALAD
  • PHILIPPINEBANKINGCORPORATIONVLUISHE
  • FERNANDOconcur
  • FRENZELVCATITO
  • VILLARROELVESTRADA
  • FISHERVROBB
  • MANILALODGENO BENEVELONTPROTECTIVE ORDEROFTHEELKSVCA
  • MIGUELVCATALINO
  • ANNOTATION SCRA
  • SALAOVSALAO
  • FABIANvFABIAN
  • BUENOVREYES
  • TAMAYOVCALLEJO

Obligations and Contracts

BARREDO V GARCIA BOCOBO; July 8, 1942
NATURE Petition for review on certiorari FACTS - from CA, holding Fausto Barredo liable for damages for death pf Faustino Garcia caused by negligence of Pedro Fontanilla, a taxi driver employed by Fausto Barredo - May 3, 1936 – in road between Malabon and Navotas, head-on collision between taxi of Malate Taxicab and carretela guided by Pedro Dimapilis thereby causing overturning of the carretela and the eventual death of Garcia, 16-yo boy and one of the passengers - Fontanilla convicted in CFI and affirmed by CA and separate civil action is reserved - Parents of Garcia filed action against Barredo as sole proprietor of Malate Taxicab as employer of Fontanilla - CFI and CA awarded damages bec Fontanilla’s negligence apparent as he was driving on the wrong side of the road and at a high speed > no proof he exercised diligence of a good father of the family as Barredo is careless in employing (selection and supervision) Fontanilla who had been caught several times for violation of Automobile Law and speeding > CA applied A1903CC that makes inapplicable civil liability arising from crime bec this is under obligations arising from wrongful act or negligent acts or omissions punishable by law - Barredo’s defense is that his liability rests on RPC TF liability only subsidiary and bec no civil action against Fontanilla TF he too cannot be held responsible ISSUE WON parents of Garcia may bring separate civil action against Barredo making him primarily liable and directly responsible under A1903CC as employer of Fontanilla HELD Yes. There are two actions available for parents of Garcia. One is under the A100RPC wherein the employer is only subsidiarily liable for the damages arising from the crime thereby first exhausting the properties of Fontanilla. The other action is under A1903CC (quasi-delict or culpa aquiliana) wherein as the negligent employer of Fontanilla, Barredo is held primarily liable subject to proving that he exercising diligence of a good father of the family. The parents simply took the action under the Civil Code as it is more practical to get damages from the employer bec he has more money to give than Fontanilla who is yet to serve his sentence. Obiter Difference bet Crime and Quasi-delict 1) crimes – public interest; quasi-delict – only private interest 2) Penal code punishes or corrects criminal acts; Civil Code by means of indemnification merely repairs the damage 3) delicts are not as broad as quasi-delicts; crimes are only punished if there is a penal law; quasi-delicts include any kind of fault or negligence intervenes NOTE: not all violations of penal law produce civil responsibility

A2010 page 1 Prof. Labitag
e.g. contravention of ordinances, violation of game laws, infraction of rules of traffic when nobody is hurt 4) crime – guilt beyond reasonable doubt; civil – mere preponderance of evidence - Presumptions: 1) injury is caused by servant or employee, there instantly arises presumption of negligence of master or employer in selection, in supervision or both 2) presumption is juris tantum not juris et de jure TF may be rebutted by proving exercise of diligence of a good father of the family - basis of civil law liability: not respondent superior bu the relationship of pater familias - motor accidents – need of stressing and accentuating the responsibility of owners of motor vehicles

MENDOZA V ARRIETA MELENCIO-HERRERA; June 29, 1979

NATURE Petition for review on Certiorari of the Orders of CFI Manila dismissing petitioner’s Complaint for Damages based on quasi-delict FACTS - Three-way vehicular accident occurred along Mac-Arthur Highway, Marilao, Bulacan involving (1) Mercedes Benz, owned and driven by petitioner MENDOZA; (2) private jeep owned and driven by respondent SALAZAR; (3) gravel and sand truck owned by respondent TIBOL and driven by MONTOYA. - Mendoza’s and Montoya’s version: After jeep driver overtook the truck, it swerved to the left going towards Marilao, and hit car which was bound for Manila. Before impact, Salazar jumped from the jeep, Mendoza unaware that jeep was bumped from behind by truck - Salazar’s version: After overtaking truck, he flashed a signal indicating his intention to turn left towards Marilao but was stopped at intersection by a policeman directing traffic. While at stop position, his jeep was bumped at rear by truck causing him to be thrown out of jeep. Jeep then swerved to left and hit the car. - Oct. 22, 1969. In CFI Bulacan, two separate informations for Reckless Imprudence Causing Damage to Proprety were filed against SALAZAR (damage to Mendoza) and MONTOYA (damage to Salazar) - Salazar was acquitted; Motoya found guilty beyond reasonable doubt - Aug. 22, 1970. In CFI Manila, Mendoza filed a civil case against Salazar and Timbol either in alternative or in solidum. - Timbol filed Motion to Dismiss on grounds that complaint is barred by prior judgement; CFI Manila dismissed Complaint against Timbol - Salazar filed Motion to Dismiss; CFI Mla also dismissed Complaint against him on grounds that New Rules of Court rewuires an express reservation of civil action to be made in the criminal action ISSUES 1. WON Mendoza can file an independent civil case against Timbol a) Is the civil suit barred by prior judgment in the criminal case? b) Is the civil suit barred by failure to make a reservation in the criminal action of right to file an independent civil action (as required in Sec.2 of Rule 111)?

Obligations and Contracts
2. WON Mendoza can file an independent civil case against Salazar HELD 1. Yes. a) No, not all requisites of Res Judicata are present. Ratio There is no identity of cause of action between the dismissed criminal case and the new civil case. Reasoning In the criminal case, cause of action was enforcement of civil liability arising from criminal negligence. In the civil case, it was quasi-delict. The two factors a cause of action must consist of are: (1) plaintiff’s primary right – Mendoza as owner of the car; (2) defendant’s delict or wrongful act or omission which violated the primary right – negligence or lack of skill, either of Salazar or of Montoya. b) No, right to file an independent civil action need not be reserved. Ratio Sec. 2 of Rule 111, Rules of Court is inoperative because it is an unauthorized amendment of substantive law, and it cannot stand because of its inconsistency with Art.2177. Reasoning Art.2176 and 2177 of Civil Code create a civil liability distinct and different from the civil action arising from the offense of negligence under the RPC. 2. No. Ratio Civil action had extinguished because “the fact from which civil liability might arise did not exist.” (Sec 3c, Rule 111, Rules of Court) Under the facts of the case, Salazar cannot be held liable. Reasoning The offended party has an option between action for enforcement of civil liability based on culpa CRIMINAL (RPC, Art.100) or action for recovery of damages based on culpa AQUILIANA (CC, Art.2177). First option was deemed simultaneously instituted with the criminal action unless expressly waived or reserved of separate application. It can be concluded that Mendoza opted to base his cause of action on culpa criminal, as evidenced by his active participation in the prosecution of criminal suit against Salazar. Disposition Order dismissing Civil Case against Timbol is set aside and trial court to proceed with hearing on merits; orders dismissing complaint in Civil Case against Salazar are upheld.

A2010 page 2 Prof. Labitag
- Defendants (now petitioners) sought to have the suit dismissed alleging that since they are presumably sued under Art. 2180 of the Civil Code, the complaint states no cause of action against them since academic institutions, like PSBA, are beyond the ambit of that rule. - Respondent Trial court denied the motion to dismiss. And the MFR was similarly dealt with. Petitioners the assailed the trial court’s dispositions before the respondent appellate court which affirmed the trial court’s ruling. ISSUES WON respondent court is correct in denying dismissal of the case. HELD Ratio Although a school may not be liable under Art. 2180 on quasi-delicts, it may still be liable under the law on contracts. Reasoning The case should be tried on its merits. But respondent court’s premise is incorrect. It is expressly mentioned in Art. 2180 that the liability arises from acts done by pupils or students of the institution. In this sense, PSBA is not liable. But when an academic institution accepts students for enrollment, the school makes itself responsible in providing their students with an atmosphere that is conducive for learning. Certainly, no student can absorb the intricacies of physics or explore the realm of arts when bullets are flying or where there looms around the school premises a constant threat to life and limb. Disposition WHEREFORE, the foregoing premises considered, the petition is DENIED. The Court of origin is hereby ordered to continue proceedings consistent wit this ruling of the Court. Costs against the petitioners. Voting Melencio-Herrera (Chairman), Paras, Regalado and Nocon, JJ., concur.

AMADORA V CA CRUZ; April 15, 1988
NATURE Petition for certiorari to review the decision of Court of Appeals. FACTS - A few days before high school graduation, while in the auditorium of his school (Colegio de San Jose-Recoletos), a classmate, Pablito Daffon, fired a gun that mortally hit and killed Alfredo Amadora. - The victim’s parents filed a civil action for damages under Article 2180 of the Civil Code against the Colegio de San Jose-Recoletos, its rector, the high school principal, the dean of boys, and the physics teacher (the victim was in school to finish his physics experiment –a prerequisite to graduation), together with Daffon and two other students, through their respective parents. - The pertinent provision reads: “Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices so long as they remain in their custody.” ISSUE

PSBA V COURT OF APPEALS PADILLA; February 4, 1992
NATURE Petition to review the decision of Court of Appeals. FACTS - A stabbing incident on August 30, 1985 which caused the death of Carlitos Bautista on the premises of the Philippine School of Business Administration (PSBA) prompted the parents of the deceased to file suit in the Manila RTC. It was established that his assailants were not members of the school’s academic community but were outsiders. - The suit impleaded PSBA, its President, VP, Treasure, Chief of Security and Assistant Chief of Security. It sought to adjudge them liable for the victim’s death due to their alleged negligence, recklessness and lack of security precautions.

Obligations and Contracts
WON respondents are liable under Art. 2180 HELD Ratio Those liable under the related provision of Art. 2180 shall be taken to mean as teacher(s)-in-charge for academic institutions and heads for schools of arts and trades. Reasoning The difference between academic and arts and trades institutions lie in history. Back in the times of artisan guilds, heads of academic institutions were already focused on administrative work and it is only the teachers who interact closely with students. Heads of schools of arts and trades, on the other hand, because of the technical nature of their craft, interact directly with the appentices. Although the same may not be said for schools of arts and trades at present, it is what is written. And only a re-writing of the law can abolish the intended difference. In the case at bar, none of the respondents were liable. The school is not liable under Art. 2180; the rector, the principal and the dean of boys only exercised general authority; the mere fact that Amadora was in school to finish his physics experiment did not make the physics teacher in-charge; and even if he were incharge, there was no showing that it was his negligence in disciplining Daffon that made Daffon shoot Amadora; and the other respondents didn’t have custody of the offender. Disposition WHEREFORE, the petition is DENIED, without any pronouncements as to costs. Voting Yap, Narvasa, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes and Grino-Aquino, JJ., concur. Teehankee, C.J., did not participate in deliberations. Fernan and Padilla, JJ., no part, formerly counsel for Colegio de San Jose-Recoletos. Gutierrez, Jr., J., concur but please see additional statement. Herrera, J., with separate concurring and dissenting opinion.

A2010 page 3 Prof. Labitag
language used in another exhibit with reference to the additional 100,000 gallons was not a definite promise. Still less did it constitute an obligation. - The terms of contract fixed by the parties are controlling. The time of payment stipulated for in the contract should be treated as of the essence of the contract. Hawaiian-Philippine Co. had no legal right to rescind the contract of sale because of the failure of Song Fo & Co. to pay for the molasses within the time agreed upon by the parties. The general rule is that the rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches are as so substantial and fundamental as to defeat the object of the parties in making the agreement. A delay in payment for a small quantity of molasses for some 20 days is not such a violation of an essential condition of the contracts as warrants rescission for nonperformance. - The measure of damages for breach of contract in this case is as follows: Song Fo & Co. is allowed P3,000 on account of the greater expense to which it was put in being compelled to secure molasses in the open market. It is allowed nothing for lost profits on account of the breach of the contract, because of failure of proof.

VELARDE V COURT OF APPEALS PANGANIBAN; July 11, 2001
FACTS - David Raymundo (private respondent) is the absolute and registered owner of a parcel of land, together with the house and other improvements. - Gorge Raymundo, David’s father, negotiated with Avelina and Mariano Velarde (plaintiffs) for the sale of David’s property, which was under lease. - Aug 8, 1986, a Deed of Sale with Assumption of Mortgage was executed by David Raymundo in favor of Avelina Velarde. It states that David Raymundo sells, cedes, transfers conveys and delivers the property to Avelina Velarde for P800,000 and that Avelina Velarde assumes to pay the mortgage obligations on the property in the amount of P1,800,000 in favor of BPI. - On the same date, Avelina, with the consent of husband Mariano, executed an Undertaking, parts of which as follows: 1. that Avelina Velarde paid David Raymundo P800,000, and assumes the mortgage obligations on the property with BPI in the amount of P1.8M. 2. while Avelina’s application for the assumption of the mortgage obligations on the property is not yet approved by BPI, Avelina agreed to pay the mortgage obligations on the property, including interest and charges for late payment. 3. Avelina binds and obligates herself to strictly and faithfully comply with the ff terms and conditions: a. until such time that assumption of mortgage obligations on the property is approved by BPI, Avelina shall continue to pay said loan in accordance with its terms and conditions. b. In the event Avelina violates any of the terms and conditions, her downpayment of P800,000 plus all payments made with BPI on the mortgage loan shall be forfeited in favor of David Raymundo, and that David shall resume total and complete possession and ownership of the property, and the Deed of Sale with Assumption of Mortgage shall be deemed automatically cancelled.

SONG FO & CO. V HAWAIIAN- PHILIPPINE CO. MALCOLM; September 16, 1925
NATURE Appeal from a judgment of the Court of First Instance of Iloilo FACTS Plaintiff presented a complaint with two causes of action for breach of contract against the defendant in which judgment was asked for P70,369.50, with legal interest and cost. In an amended answer and cross-complaint, the defendant set up the special defense that since the plaintiff had defaulted in the payment for molasses delivered to it by the defendant under the contract between the parties, the latter was compelled to cancel and rescind the contract. The case was submitted for decision on a stipulation of facts and exhibits. The judgment of the trial court condemned the defendant to pay to the plaintiff a total of P35,317.93 with legal interest from the date of the presentation of the complaint, and with costs. HELD - The written contract between the parties provided for the delivery by the Hawaiian-Philippine Co. to Song Fo & Co. of 300,000 gallons of molasses. The

This prompted the Velardes not to make any further payment. the Velardes filed a complaint against respondents for specific performance. thru counsel. Disposition CA decision affirmed with modification that private respondents are ordered to return to petitioners P874. (Sept 19.CA reversed the ruling and dismissed the Velardes’ Complaint. not a violation of the terms and conditions of the mortgage contract. .Private respondents validly exercised their right to rescind the contract. July 31. They wanted private respondents to perform obligations beyond those stipulated in the contract before fulfilling their own obligation to pay the full purchase price. ISSUES 1. plaintiffs were advised that their Application for Assumption of Mortgage with BPI was not approved. a violation that consequently gave rise to private respondents’ right to rescind the same in accordance with law. Thus.8M and ordered the Raymundos to execute a deed of absolute sale and to surrender possession of property to the Velardes.Dec. . wrote plaintiffs informing them that their nonpayment to BPI constituted nonperformance of their obligation. . .November 29. plaintiff to act as industrial partner or manager. Private respondents’ right to rescind the contract finds basis in Article 1191 of the Civil Code. mutual restitution is required to bring back the parties their original situation prior to the inception of the contract. of the latter should become impossible. A. 1947. It can be carried out only when the one who demands rescission can return whatever he may be obliged to restore. Civil Code provisions shall govern.the breach committed by petitioners was a nonperformance of a reciprocal obligation. the oblige may seek rescission and.Jan. . and damages. Yes. and the execution of the Deed of Sale is deemed equivalent to delivery. . in the absence of any just cause for the court to determine the period of compliance. and c) respondents execute an absolute deed of sale in favor of Avelina Velarde not later than Jan 21. and the buyer to pay therefore a price certain in money or its equivalent. 1987. . because of the failure of petitioners to comply with their obligation to pay the balance of the purchase price.RTC instructed the parties to proceed with the sale. WON the finding of the CA that the Velardes’ Jan 7. 1986 at 23. . which effectively transferred ownership of property to Velarde through consecutive delivery. 15. that they shall organize a partnership for the bottling and distribution of Mission soft drinks. 1987. plaintiff had informed the Mission Dry Corporation of Los Angeles. . In a contract of sale.Feb 9. the seller obligates itself to transfer the ownership of and deliver a determinate thing. Nov 19. which had become due. 1987.The right of rescission of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them. in case one of the obligors should not comply with what is incumbent upon him. . . defendants sent the Velardes a notarial notice of cancellation/rescission of the intended sale of the property. thus necessitating a new agreement between the parties HELD 1.Obligations and Contracts .” .Since breach herein is under A1191. U. 1986 at P27. that he had interested a prominent . 1986. 2. 925) .Prior to entering into this agreement. 5.Jan 8.To rescind is t declare a contract void at its inception and to put an end to it as though it never was. furnishing the capital necessary therefore 2. 1191.On January 7. Labitag rescission even after he has chosen fulfillment. The Velardes violated the very essence of reciprocity in the contract of sale. Oct 20. He may also seek A2010 page 4 Prof. 1986 at 23.plaintiff entered into a written agreement with defendant: 1. allegedly due to the plaintiffs’ failure to comply with the terms and conditions of the Deed of Sale with Assumption of Mortgage and the Undertaking. California. Prior physical delivery or possession is not legally required. the automatic rescission and forfeiture of payment clauses do not apply. while the plaintiff was to attend to the operation and development of the bottling plant 3. .225. the Raymundos. the Velardes paid BPI the monthly interest on the loan for 3 months. Yes. S.000. 3.Rescission creates an obligation to return the object of the contract. the court shall decree the rescission.. that plaintiff was to secure the Mission Soft Drinks franchise for and in behalf of the proposed partnership 4. and that petitioners had no right to demand preconditions to the fulfillment of their obligation. The injured party may choose between fulfillment and the rescission of the obligation. 1953 FACTS .Mutual restitution required in rescission.150 with legal interest. writ of possession. that the defendant was to decide matters of general policy regarding the business. and the defendant as a capitalist. which provides: “Art. SC did not find it necessary to discuss third issue but said that the three conditions were not part of the original contract.As per agreement. The breach contemplated in said provision is the obligor’s failure to comply with an existing obligation. nullity of cancellation. 1987. WON there is a breach of contract 2.Private respondents already performed their obligation through the execution of the Deed of Sale. 1987 letter gave three “new conditions” constituted an attempt to novate. with the payment of damages in either case. directing the Velardes to pay the balance of P1.Petitioners did not perform their correlative obligation of paying the contract price in the manner agreed upon. that the plaintiff was to receive 30 per cent of the net profits of the business . the Velardes responded thru counsel and advised that they are willing to pay the balance in cash not later that Jan 21 1987 provided that: a) respondents deliver actual possession of the property not later that Jan 15. WOODHOUSE V HALILI LABRADOR. 1987. When the obligor cannot comply with what is incumbent upon it. WON the rescission by the Raymundos of the contract valid 3. b) respondents cause the release of title and mortgage from BPI and make the title available and free from any liens and encumbrances. manufacturers of the bases and ingredients of the beverages bearing its name. . . The power to rescind obligations is implied in reciprocal ones. 1987.

000 . defendant believed. plaintiff was given "a thirty days' option on exclusive bottling and distribution rights for the Philippines" . The original draft prepared by defendant's counsel was to the effect that plaintiff obligated himself to secure a franchise for the defendant. in order that he may close the deal with him. upon its dissolution or termination. 2.Defendant gave excuses and would not execute said agreement. the same shall be reassigned to the plaintiff. Defendant agreed to give plaintiff 30 per cent share in the net profits because he was transferring his exclusive franchise to the partnership. thus the complaint by the plaintiff.CFI ruling: 1. . Yes.The contract was finally signed by plaintiff on December 3. or was made to believe.Petition for review on Certiorari . that defendant did not fail to carry out his undertakings. the immediate reaction of defendant. fraud wasn’t proved ISSUES 1. 1947. counterclaim for P200.Defendant: 1. He could not have had such a feeling had not plaintiff actually made him believe that he (plaintiff) was the exclusive grantee of the franchise. or was about to become owner of an exclusive bottling franchise. and the plaintiff on this appeal argues. and that plaintiff did not secure the franchise but was given to defendant himself 2. annuls the agreement to form the partnership HELD 1. the causal fraud. if it existed. damages in the amount of P200. The defendant may not be compelled against his will to carry out the agreement nor execute the partnership papers. that the right to bottle and distribute be granted him for a limited time under the condition that it will finally be transferred to the corporation . In consequence. was the ability of plaintiff to get the exclusive franchise to bottle and distribute for the defendant or for the partnership. WON false representation. that led plaintiff to enter into the partnership agreement. plaintiff's participation in the net profits to one half of that agreed upon. when in California he learned that plaintiff did not have the exclusive franchise. share thereof of 30 per cent 4. that plaintiff only undertook in the agreement "to secure the Mission Dry franchise for and in behalf of the proposed partnership. and accounting of profits 3.Lydia came to know about the respondent through advertisements about tours in Europe and eventually availed of one of the packages they offered. execution of the contract of partnership 2. The trial court reasoned. This Court has held that in order that fraud may vitiate consent. GERALDEZ V CA REGALADO. was secured by the representation of plaintiff that he was the owner. Thus it is that it was also agreed upon that the franchise was to be transferred to the name of the partnership. . but plaintiff failed to do so 4. . the main cause that induced defendant to enter into the partnership agreement with plaintiff. which only renders the party who employs it liable for damages. this was not the causal consideration. as he himself testified. or the principal inducement. .Pursuant to this request. who was willing to invest half a million dollars in the bottling and distribution of the said beverages. The law recognizes the individual's freedom or liberty to do an act he has promised to do. .This is an action for damages by reason of contractual breach filed by Lydia Geraldez against Kenstar Travel Corporation. it must be the causal (dolo causante). February 23. and requested. which representation was false. execution of contract cannot be enforced upon parties 3. the defendant’s consent to the agreement. and the incidental deceit. not merely the incidental (dolo incidente) inducement to the making of the contract. The record abounds with circumstances indicative of the fact that the principal consideration. 1994 NATURE .Obligations and Contracts financier (defendant herein) in the business.Plaintiff: 1.When the bottling plant was already in operation. as it is evident from the very language of the agreement that the parties intended that the execution of the agreement to form a partnership was to be carried out at a later date. which may be ground for the annulment of a contract. Plaintiff did make false representations and this can be seen through his letters to Mission Dry Corporation asking for the latter to grant him temporary franchise so that he could settle the agreement with defendant. was to reduce. as he pleases. that plaintiff agreed to contribute to the exclusive franchise to the partnership. plaintiff demanded of defendant that the partnership papers be executed. article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud.But if plaintiff was guilty of a false representation. FACTS .Again. that plaintiff was the grantee of an exclusive franchise. No. and that." The existence of this provision in the final agreement does not militate against plaintiff having represented that he had the exclusive franchise. Labitag . but that it was plaintiff who failed 3. WON plaintiff falsely represented that he had an exclusive franchise to bottle Mission beverages 2. On the other hand. or not to do it. A2010 page 5 Prof.May the agreement be carried out or executed? We find no merit in the claim of plaintiff that the partnership was already a fait accompli from the time of the operation of the plant. it rather strengthens belief that he did actually make the representation. this supposed ownership of an exclusive franchise was actually the consideration or price plaintiff gave in exchange for the share of 30 per cent granted him in the net profits of the partnership business. accounting of profits and to pay plaintiff 15 % of the profits 2. .00 as damages . .

Php 200k. SC: Private respondents cannot rely on its defense of “substantial compliance” with the contract. There is no need for further interpretation when the wordings are clear. it cannot be denied that a first-class hotel could at the very least provide basic necessities and sanitary accommodations. the only participation of the other party is the affixing of his signature or his “adhesion” thereto.RTC: granted a writ of preliminary attachment against private respondent on the ground respondent committed fraud in contracting an obligation (as per petitioner’s motion) but said writ was also lifted upon filing a counterbond of Php 990k . it could and should have instead increased the price to enable it to arrange for the promised first-class accommodations. . satisfaction and peace of mind of its clients during the trip. and for attorney’s fees to Lydia Geraldez worth Php 500k. but with local European tour guides were likewise never made available. wherein we explained the concept of the euro tour manager SC: the advertisement reveals that the contemplated tour manager contemplated is a natural person not a juridical one as KTC asserts. 1338. but by what he leads others reasonably to think he intends. . and supervision of an experienced and competent European or Filipino tour guide who could’ve given her training. Respondent also had to pay for the costs of the suit. Such a contract must be strictly construed against the one who drafted the same.The inability of the group to visit the leather factory is likewise reflective of the neglect and ineptness of Zapanta in attentively following the itinerary for the day. . .On the First Class Hotels The respondents likewise committed a grave misrepresentation when it assured in its Volare 3 tour package that the hotels it had chosen would provide the tourists complete amenities and were conveniently located along the way for the daily itineraries. .Clearly. control. . corporations).are those deceptions or misrepresentations of a serious character employed by one party . especially where there are stipulations that are printed in fine letters and are hardly legible. . Php 300k and Php 50k respectively. (see page 330) SC: * CONTRACT OF ADHESION: contracts drafted by only one party (i. Kenstar Travel Corporation did commit fraudulent misrepresentations amounting to bad faith to the prejudice of Lydia Geraldez and the members of the tour group. .if it could not provide the tour participants with first-class lodgings on the basis of the amount that they paid. .Even assuming arguendo that there is indeed a difference in classifications . . and which is contrary to the elementary rules of good faith and fair play.The package was “VOLARE 3” which covered 22-day tour of Europe for 190. it is beyond cavil that the import of the “he” is a natural and not a juridical person (in reference to the euro tour guide). exemplary damages. .000 Php which she paid for herself and her sister.On the European Tour Manager KTC: the euro tour manager refers to an organization and not to an individual. A2010 page 6 Prof.RTC awarded moral damages. Labitag . One is bound not by what he subjectively intends. . the obligation to provide not only a European tour manager.CA modified the RTC’s decision since they found no malice could be imputed against Kenstar Travel Corporation. referred to in Art. This incompetence must necessarily be traced to the lack of due diligence on the part of KTC in the selection of its employees. was not visited • The Filipino lady tour guide was performing said job for the first time.Obligations and Contracts .Dolo Causante – causal fraud . HELD Yes. The UGC leather factory was one of the highlights of the tour and it was incumbent upon the organizers of the tour to take special efforts to ensure the same. KTC’s choice of Zapanta as tour guide is a manifest disregard of its specific assurances to the tour group.On respondent’s choice of tour guide By providing the Volare 3 tourist group with an inexperienced and a first timer tour escort. which was a highlight of the tour. Zapanta couldn’t even remember the name of the European guide with her supposedly. nominal damages. Furthermore. KTC manifested its indifference to the convenience. The meaning that will determine the legal effect of a contract is that which is arrived at by objective standards. resulting in agitation and anxiety on their part. Geraldez didn’t attend the pre-departure briefing. Respondent should have selected an experienced European tour guide. Reasoning . It turned out that some of the hotels were not sufficiently equipped with even the basic facilities and were at a distance from the cities covered by the projected tour. KTC relies in the delimitation of its responsibility printed on the face of its brochure. or it could have allowed Zapanta (the lady guide) to go as an understudy under the guidance.Her disappointments (because it was contrary to what was in the brochure) during the trip were: • There was no European tour manager for their group of tourists • The hotels which she and the group were billeted were not firstclass • The UGC Leather Factory. .e. ISSUE WON private respondent acted in bad faith or with gross negligence in discharging its obligations under the contract.The fraud or dolo which is present or employed at the time of birth or perfection of a contract may either be dolo causante or dolo incidente.Lydia also filed other complaints at the Department of Tourism and the Securities and Exchange Commission which fined the respondent Php 5k and Php 10k respectively.Damages Moral damages may be awarded in breaches of contract where the obligor acted fraudulently or in bad faith. From the advertisement.

10 per sack for a total consideration of P 8. 1944 NATURE PETITION to review on certiorari a decision of te Court of Appeals FACTS . VAZQUEZ V DE BORJA OZAETA. she suffered serious anxiety and distress when the group was unable to visit the leather factory and when she didn’t receive first-class accommodations in their lodgings.Obligations and Contracts . and was owned by his parents Mr.. 1931 NATURE Appeal from the judgment of the CFI of Manila FACTS . . . 1334. respectively. the travel agency acting as tour operator must nevertheless be held to strict accounting for contracted services. According to the Code Commission. . for wanton acts must be suppressed. The collision resulted in NG suffering a fractured right leg requiring him medical assistance.The collision was caused by negligence. February 23. Note Nominal damages are awarded when there the complainant suffered actual or substantial damage from the breach of contract. considering the public interest in tourism.BG was an incompetent chauffer as he was driving in an excessive speed. Vazquez filed a counterclaim for P1. . where the car is occupied and being used for the pleasure of the other members of the family. neither willing to slow up and give right of way inevitably resulted to the collision and the accident. MG was not in the car.70.effects: damages . The truck was driven by the chauffer Abelardo Velasco (AV) and was owned by Saturnino Cortez (SCor). Labitag ISSUE What are the liabilities of the owners and drivers of the vehicles involved in the collision HELD . exemplary damages are required by public policy. ATTY’S FEES –Php 20k and costs against the respondent KTC.A passenger of the autobus.The contention that there was contributory negligence as the plaintiff kept his foot outside the truck was not pleaded and was dismissed as speculative.some particular or accident of the obligation .314.de Borja entered into a contract with Natividad-Vazquez Sabani Development to purchased 4. EXEMPLARY DAMAGES – Php 50k.Exemplary damages are imposed by way of example or correction for the public good.224. These entitle her to moral damages. . . .On Feb 2.Action was commenced by Francisco de Borja in the Court of First Instance of Manila against Antonio Vazquez and Fernando Busuego to recover from them jointly and severally the total amount of P4.000 empty sacks which presumealy were to be used in the delivery of the palay.Lydia joined the tour with the belief of a euro tour guide accompanying them. the CA GUTERREZ V GUTIERREZ MALCOLM.80 and have since refused to deliver the balance. Vazquez and Busuego represented the Company in the transaction as acting manager and treasurer. Manuel Gutierrez (MG). a corporation which the defendant Vazquez represented as its acting manager.000 as damages. While the plaintiff blames both sets of defendants. 18 y/o. whom he designates or permits to run it.Trial court found in favor of the plaintiff and ordered Vazquez to pay the total sum of P3. . The fact that 2 drivers were approaching a narrow bridge.effects: nullity of the contract and indemnification of damages . referred to in Art. a passenger truck and a private automobile collided while attempting to pass each other on the Talon bridge on the Manila South Rd in Las Pinas. It also absolved Busuego from the complaint. Inc.000 sack of palay at P2. BG was with his mother and several other members of the family. ./Mrs.512 cavans of rice and 1. . The guarantee the father gave at the time the son was granted a license to operate motor vehicles gave the father responsible for the acts of his son. The auto was being operated by Bonifacio Gutierrez (BG).702.70 arising out of the non delivery of 1. other than the child driving it. 1930. . Narciso Gutierrez (NG) was en route from San Pablo to Manila.SCor and AV’s liability is based on the contract. September 23. who maintains it for the general use of his family is liable for its negligent operation by one of his children. the owner of the passenger truck blames the automobile and vice versa.400 which was paid by de Borja. The position of the truck on the bridge and the speed in operating the machine and the lack of care employed reached such conclusion. . de Borja delivered to the defendants a total of 4.Defendants only deliverd to de Borja a total of 2. temperate.without which the other party would NOT have entered into the contract .are those which are not serious in character -without which the other party would still have entered into the contract .Under the present state of law.78 plus interest and costs. extraordinary diligence is not required in travel or tour contracts. the owner of the vehicle. .510 empty sacks. A2010 page 7 Prof. In addition. Disposition MORAL DAMAGES –Php 100k. liquidated or compensatory damages.SC: KTC is responsible for damages whether it has committed either dolo causante or incidente. in addition to moral.Vazquez appealed to the CA and it modified the judgement by reducing the amount to P 3. Award for nominal damages is deleted.Vazquez denied entering into the contract in his individual and personal capacity. The contract was between plaintiff and Natividad-Vazquez Sabani Development Co. On motion for reconsideration. . Ratio In the US it is uniformly held that the head of the house. . whether in the local or in the international scene.552.At the time of the collision. such as that in the case at bar..488 cavans of palay with a value of P5.essential cause of the consent .Dolo Incidente – incidental fraud.

. ISSUES 1. Hence. WON the defendant has disproved the existence of negligence 2. Vazquez by his fault or negligence cased damage to the plaintiff. DE GUIA V MANILA ELECTRIC. then he would be personally liable for such damage. . .1 Did the trial judge err in the awarding of the damages for loss of professional earnings (P900)? SEPARATE OPINION PARAS [ dissent] -From the facts. Hence the technicality of a procedural error should not be hindrance to the rendition. Hence the CFI and Ca are both correct in holding the failure to deliver was the result of Vazquez’s fault or negligence. as damages incurred by him in consequence of physical injuries sustained. the small wheels of the rear truck left the track ran for a short distance and hit a concrete post. The shock of the impact threw him forward. What is the nature of the relation between the parties? 3. In the contractual obligation. the plaintiff remaining on the back platform holding the handle of the right-hand door. If liable for damages. A2010 page 8 Prof. it is the obligor to fulfill said contract and not its agents.100.WON de Borja entered into the contract with Vazquez in his personal capacity or as manager of the Natividad-Vazquez Sabani Development 2. at about 8pm. -the post was shattered: at the time the car struck against the concrete post. On the other hand. But since the suit is based on the contract.The Action being on a contract.Corporations are artificial beings invested by law with a personality of is own. the complaint should have been dismissed. RAILROAD & LIGHT CO STREET. The plaintiff and the defendant company appealed. .No award is given to Vazquez as the SC believes that he was morally responsible to the party with whom he contracted to see to it that the corporation represented by him fulfilled the contract by delivering that palay it had sold particularly since the same had already been made. or an obligation arising from contract from an obligation arising from culpa aquiliana. if independently from the contract. ISSUES 1. and the left part of his chest struck against the door causing him to fall. the plaintiff alleged that his head struck one of the seats and he became unconscious. grasping the handle of the right-hand door. A physician of the defendant company visited the plaintiff and noted that the plaintiff was walking about and apparently suffering somewhat from bruises on his chest. the obligor is the party guilty of negligence in the fulfillment of said contract. with interest and costs. -Sept 4. the plaintiff was allegedly standing on the rear platform. What is the extent of the defendant’s liability? 5. The plaintiff said nothing about his head being injured and refused to go to a hospital. As there seems to be no showing that Vazquez personally benefited from the transaction. without finding as to cost. -the plaintiff was awarded with P6. he nonetheless consummated the transaction and .The suit be considered as based on fault and negligence of Vazquez and to sentence defendant accordingly.The trial court in finding Vazquez guilty of negligence in the performance of the contract and in holding him personally liable manifestly failed to distinguish a contractual from an extra-contractual obligation. . which is not a party to the suit. WON the defendant is liable for the damages 4. WON the defendant could avail of the last paragraph of Art 1903 on culpa aquiliana (Art 2180) 5. then the court has no jurisdiction over the issue and could not adjudicate upon it. -At about 30 meters from the starting point the car entered a switch. Knowing full well that the contract could not be fulfilled. January 28. and all these physicians testified for the plaintiff in the trial court. Labitag received the full payment. This legal fiction may however be disregarded only when an attempt is made to use its as a cloak to hide an unlawful or fraudulent purpose. it appears that Vasquez prior to entering into contract with de Borja knew that his company was already insolvent. 1915.Hence the two petitions from both plaintiff and defendant to the Supreme court for certiorari. Disposition The judgment of the CA is reversed and the complaint is dismissed. The mere fact that its personality is owing to a legal fiction and that it necessarily has to act thru its agents does not make such agents personally liable on a contract duly entered into by them for and in behalf of said corporation. Reasoning .Obligations and Contracts set aside its judgment and ordered the case remanded to the court of origin for further proceedings. and it appearing from the preponderance of the evidence that the party liable is Natividad-Vazquez. he is within his rights to invoke the legal fiction to avoid personal liability. WON Vazquez is entitled to counter damages arising out of the erroneous suit HELD Ratio . FACTS -The plaintiff is a physician residing in Caloocan City. separate and distinct from that of the shareholders and from that of its officers who manage and run its affairs. the defendant boarded a car at the end of the line with the intention of coming to Caloocan. -The plaintiff consulted other physicians about his condition. In the falling. Upon coming out of the switch.While it is true that the contract is between de Borja and the company. -the plaintiff was taken to his home which was a short distance away from the site of the incident. 1920 NATURE APPEAL from a judgment of the Court of First Instance of Manila. it was proven during the trial that it was Vazquez who prevented the performance of the contract and also of negligence bordering on fraud which caused damage to de Borja.

A2010 page 9 Prof. that he developed infarct of the liver and traumatic neurosis. Montes (the doctor who treated the plaintiff) which is the obligation supposedly incurred with respect to treatment for said injuries. NO. some 40 meters distant from the exit of the switch. 2.1. vertigo. even if true. and this operation was repeated as he passed out. therefore. the existence of negligence in the operation of the car must be sustained. Ratio The company was bound to convey and deliver the plaintiff safely and securely with reference to the degree of care which. the damages were too speculative to be the basis of recovery in a civil action. it is irrelevant to prove that the defendant company had exercised due care in the selection and instruction of the motorman who was in charge of its car and that he was in experienced and reliable servant.2 YES.e. By testimonial evidence. and that restoration to health could only be accomplished after long years of complete repose. sensing in the situation a possibility of profit. He is only justified with P200. Reasoning The plaintiff had boarded the car as a passenger for the city of Manila and the company undertook to convey him for hire.4 Is the plaintiff reasonable in demanding P10. Reasoning As a result of the incident. the company incurred the liability defined in articles 1103-1107 of the Civil Code. with its complicated train of ailments. 5. The court granted that there is negligence as shown by the distance which the car was allowed to run with the front wheels of the rear truck derailed. is required by law and custom applicable to the case. the trial court was fully justified in rejecting the exaggerated estimate of damages allegedly created.600 per annum and a possible outside practice worth of P350. when the defendant must answer for the consequences of the negligence of its employees. 5. and the damages ordinarily recoverable are in all events limited to such as might be reasonably foreseen in the light of the facts then known to the contracting parties.Obligations and Contracts 5. under the circumstances. which could be reasonably foreseen at the time the obligation is contracted. to the culpa aquiliana of the civil law and not to liability incurred by breach of contract.000)? 5. Upon getting again on the straight track he put the control successively at points one. 5. and with the aid of his own professional knowledge. So the trial judge accordingly allowed P900 as damages for loss of earnings. the medical service for which reimbursement is claimed should not only . old CC) 5. Reasoning The motorman alleged that he reduced his speed to the point that the car barely entered the switch under its own momentum. against a person who has acted in good faith. -According to the court. Ratio The extent of the liability for the breach of a contract must be determined in the light of the situation in existence at the time the contract is made. he enveloped himself more or less unconsciously in an atmosphere of delusion which rendered him incapable of appreciating at their true value the symptoms of disorder which he developed.000 for the cost of medical treatment and other expenses incident to his cure? 6. The car was practically empty (so it’s possible that it could run faster???). even showing testimonial evidences from numerous medical experts. 3. were trivial and that the attendant nervous derangement. Reasoning The representative from Negros Occidental has supposedly asked Dr. was merely simulated.4 No. At the moment when the control was placed at point four he perceived that the rear wheels were derailed and applied the brake. No. -The medical experts introduced by the defendant testified however that the plaintiff’s injuries. at a higher rate than would ordinarily be indicated by the control at point four. Ratio In order to constitute a proper element of recovery in an action of this character. or the amount actually paid to Dr. Labitag 5. Ratio Damage of this character could not. the defendant is liable for the damages Ratio/ Reasoning Upon failure to comply with that obligation arising from the contract. Ratio/ Reasoning The plaintiff alleged. as not being clearly contrary to the evidence. However. at the time of the accident. three and lastly at point four.3 Did the trial judge err in not awarding damages for the plaintiff’s supposed incapacitation for future professional practice (P30. supplemented by suggestions obtained from his professional friends and associates. considered in their physical effects. but at the same instant the car struck the post. the trial judge was liberal enough to the plaintiff. the evidence showed that immediately after the incident the plaintiff. aside from the fact that the car was running in an excessive speed. testimonial evidence alleged that the rate of a car propelled by electricity with the control at point "four" should be about five or 6 miles per hour (around 8 kph) and other evidence showed that the car was behind schedule time and that it was being driven. the plaintiff was unable to properly attend his professional labors for 3 months and suspend his practice for that period. an employer who has displayed due diligence in choosing and instructing his servants is entitled to be considered a debtor in good faith (w/n meaning of article 1107. The trial judge erred in awarding such damages. Montinola to nominate the plaintiff as district health officer of Negros Occidental for two years. with a salary of P1. and other disturbing symptoms of a serious and permanent character. was about P300/month. have been foreseen by the delinquent party as a probable consequence of the injury inflicted. after leaving the switch. The defendant is liable for the damages ordinary recoverable for the breach of contractual obligation. and these manifestations of disorder rendered him liable to a host of other dangerous diseases. Reasoning The court has the power to moderate liability according to the circumstances of the case. YES. the defendant could not avail of the last paragraph of Art 1903 Ratio/ Reasoning The last paragraph of article 1903 of the civil code refers to liability incurred by negligence in the absence of contractual relation. as a physician. accompanied by nervousness. that is. devoted himself with great assiduity to the promotion of this litigation. Ratio An experienced and attentive motorman should have discovered that something was wrong and would have stopped before he had driven the car over the entire distance from the point where the wheels left the track to the place where the post was struck. 4.2 Did the trial judge err in the awarding of the damages for inability to accept a position as a district health officer? 5. WON the trial judge erred in treating written statements of the physicians who testified as primary evidence? HELD 1.3 NO. two. The relation between the parties was of a contractual nature. his customary income. i. However. NO. Also.

Rose Cabrido. who has transacted with Payag on at least 10 occasions. WON respondents are liable for moral damages HELD 1. but instead. The SARMIENTO V SPS. The jewelry shop failed to perform its obligation with the ordinary diligence required by the circumstances. Respondents conceded to the existence of an agreement for crafting a pair of gold rings mounted with diamonds but denied they had obligation to dismount the diamonds from the original setting. certificates or the written statements of the physicians which were referred to in the trial cannot be admitted as primary evidence since it is fundamentally of a hearsay nature Ratio The only legitimate use of certificates could be put. After failing to do the same. or was guilty of gross negligence amounting to bad faith. He removed the diamond by twisting the setting with a pair of pliers. with legal interest from Nov. After the new settings were completed. Payag delivered to the jewelry shop one of the diamond earrings which was earlier appraised as worth . CA affirmed the judgment of the RTC. Virginia Lao. He denied being an employee of the Jewelry shop. YES Ratio Moral damages may be awarded in a breach of contract when there is proof that defendant acted in bad faith. Petitioner claims that dismounting the diamonds from the original setting was part of the obligation assumed by respondents under the contract of service. requested her to find someone to reset a pair of diamond earrings into two gold rings.000. The MTCC of Tagbilaran City rendered a decision in favor of the petitioner. YES Ratio The contemporaneous and subsequent acts of the parties reveal the scope of obligation assumed by the jewelry shop to reset the pair of earrings. Unsuccessful. who has been accepting job referrals through respondents for 6 mos. Santos also recalled that Payag requested him to dismount what appeared to him as sapphire and that the stone accidentally broke. The subsequent breakage could only have been caused by Santos’ negligence in using the wrong equipment. Petitioner required the respondents to replace the diamond with the same size and quality.’ Reasoning Santos acted negligently in dismounting the diamond from its original setting. Marilou. breaking the gem in the process. YES Ratio Those who. -On the obligation supposedly incurred by the plaintiff to three other physicians: (1) it does not appear that said physicians have in fact made charges for those services with the intention of imposing obligations on the plaintiff to pay them. Petitioner provided 12 grams of gold to be used in crafting the pair of ring settings. Instead of using a miniature wire. 2. she readily accepted the job order and charged P400. CABRIDO CORONA. the petitioner was forced to buy a replacement in the amount of P30. Dra. She examined one of them and went on to dismount the diamond from the original setting. after the incident had in fact any necessary or legitimate relation to the injuries received by the plaintiff. 1003 NATURE Petition for review on certiorari of a decision of the Court of Appeals FACTS Tomasa Sarmiento’s friend.33 carat and almost perfect in cut and clarity. to refresh his memory upon details which he might have forgotten Disposition Judgment from the trial court modified by reducing the amount of the recovery to P1. denied having any transaction with Payag whom she met only after the latter came to seek compensation for the broken piece of jewelry. of the time and of the place. Facts show that Marilou. she delegated it to the goldsmith. WON respondents are liable for damages 3. 6. or in wanton disregard of his contractual obligation. The fault or negligence of the obligor consists in the ‘omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons.100. was to allow the physician who issued it to refer thereto. After 3 days. speaks in the most general terms with respect to the times and extent of the services rendered. Montes. and it is not clear that those services which were rendered many months. Sarmiento sent Tita Payag with the earrings to Dingding’s Jewelry Shop. which accepted the job order for P400. in his testimony. When they refused. now. Reasoning Dr. ISSUES 1. 3. and Santos. Reasoning Marilou expressed no reservation regarding the dismounting of the diamonds. He should have known that using a pair of pliers would have entailed unnecessary risk of breakage. 8. he used a pair of pliers. on the other hand. Labitag reimbursement thinking she was the owner. WON dismounting of the diamond from its original setting was part of the obligation 2. she cannot deny that the dismounting was part of the shop’s obligation to reset the pair of earrings. admitted knowing Payag to avail their services and recalled that when Santos broke the jewelry. Payag turned to her for . owned and managed by spouses Luis and Rose Cabrido. she called petitioner to bring the diamond earrings to be reset. Reasoning Santos was a goldsmith for more than 40 years. as evidence for plaintiff. Zenon Santos. (2) in employing so many physicians the plaintiff must have had in view the successful promotion of the issue of this lawsuit rather than the bona fide purpose of effecting the cure of his injuries. The RTC ruled in favor of the respondents. 1916 (all judges – 6 (ponente counted) – concurred) A2010 page 10 Prof. Marilou examined the diamond before dismounting and found the same to be in order. or year. Respondent Marilou Sun went on to dismount the diamond from original settings. On appeal. negligence or delay and those who in any manner contravene the tenor thereof. Having acted the way she did. April 9. She could have instructed Payag to have the diamonds dismounted first. Res ipsa loquitur. to do it. are liable for damages. manager. in the performance of their obligations are guilty of fraud.Obligations and Contracts be such as to have created a legal obligation upon the plaintiff but such as was reasonably necessary in view of his actual condition. she asked their goldsmith. which is the practice of the trade. are employed at the jewelry shop. YES.

as did the CA.Court of Appeals also found both parties at fault but held that Crisostomo is more negligent because as a lawyer and a well-traveled person. In August and September. she demanded the difference between the sum she paid for Jewels of Europe and the amount she owed respondent for British Pageant . Canlas. ISSUES WON there exists a cause of action. a travel agency is not a carrier that it is not an entity engaged in the business of transporting either passengers or goods. Subsequent monthly rental payments were accepted under the same condition.Upon Crisostomo’s return. NO FAILURE YET on the part of private respondents. -without such demand. 1984. Labitag travel agency include procuring tickets and facilitating travel permits or visas and booking customers for tours. The demand required partakes of an extrajudicial remedy that must be pursued before resorting to judicial action so much so that when there is full compliance with the demand. there is no need for court action. V CA MEDIALDEA. Menor prevailed upon her aunt to take another tour – the British Pageant. 2003 NATURE Petition for review on certiorari of a decision of the Court of Appeals FACTS . Menor told her to be at the airport on Saturday two hours before her flight . Liwanag. It is thus not bound under the law to observe extraordinary diligence in the performance of its obligation CRISOSTOMO V CA YNARES-SANTIAGO.Trial court dismissed the case.Respondents Ong. Nagbuya. which was accepted. . Rental payments were made to a collector of the Susana Realty who went to the premises monthly. Crisostomo was given discount for her niece. no cause of action for ejectment has accrued. 10% of the amount was deducted from the amount being claimed as refund . She was asked anew to pay P21k as partial payment and commenced the trip in July .Caravan Travel refused to reimburse her saying it was non-refundable .Trial Court held that the Caravan Travel was negligent in erroneously advising Crisostomo of her departure date through it employee. . "Landlord to proceed against tenant only after demand. August 25. Menor was the company’s ticketing manager . in 1984. .in this case." states that the right to bring an action of ejectment or unlawful detainer must be counted from the time the defendants failed to pay rent after the demand therefor. Crisostomo was guilty of contributory negligence for not verifying the exact date of her departure. She discovered that the flight she was supposed to take had already departed the previous day. . The private respondents continued to pay monthly rentals to a collector sent by the petitioner from April to June. For reasons of public policy. August 7. Respondent’s services as a CETUS DEVELOPMENT.However. petitioner sent letters demanding they vacate the premises and pay back rentals.Without checking her travel documents. verbal leases. a common carrier in a contract of carriage is bound by law to carry passengers as far as human care and foresight can provide using the utmost diligence of a very cautious person and with due regard for all circumstances. A2010 page 11 Prof. which were accepted subject to the condition that the acceptance was without prejudice to the filing of an ejectment suit. Respondents were ordered to pay P30. Manila. (b) when from the nature and circumstances of obligation it can be inferred that time is of the essence of the contract. .Crisostomo called up Menor to complain. originally owned by the Susana Realty. 2 requisites: 1) must be failure to pay rent/comply with conditions of lease. they paid. private respondents paid arrearages. and subsequently the Regional Trial Court did so. they failed to pay because no collector came. **exceptions where demand is not required: (a) when obligation or law so declares. when the complaints for unlawful detainer were filed considering the fact that upon demand by petitioner for payment of back rentals. -for purposes of bringing an ejectment suit. Menor went to her aunt’s house on June 12. (c) when demand would be useless. on a month-to-month basis. 1989 NATURE Petition for review on certiorari of the decision of the CA FACTS .Atty.000 as moral damages.Obligations and Contracts gross negligence of their employee makes the respondents liable of moral damages. Crisostomo went to NAIA on Saturday. and 2) must be DEMAND to both pay or to comply and vacate. Cetus Development.000 as actual damages and P10. Menor who was not presented as a witness. respondents immediately tendered payment. RoC. were lessees of premises in Quiapo. Teng. 1991 (Wednesday) to deliver the travel documents and plane tickets. . Immediately upon receipt of the demand letters. Sudario. . effects of default do not arise. However.In October. Crisostomo gave Menor the full payment. Disposition Petition was granted and CA decision was reversed. They were individual. She was ordered to pay the Caravan Travel the balance of British Pageant plus interest ISSUE WON a travel agency is bound under the law to observe extraordinary diligence in the performance of its obligation HELD NO. Crisostomo contracted the services of Caravan Travel and Tours Int’l to arrange and facilitate her booking.Premises were sold to petitioner.Pursuant to the contract. ticketing. . Accordingly. she should have known better. HELD -Section 2.For failure of the private respondents to vacate the premises as demanded in the letter. and accommodation in a tour dubbed Jewels of Europe at a total cost of P74k. because upon demand. petitioner filed with the Metropolitan Trial court complaints for ejectment. INC.

spouses Daniel Vasquez and Ma.Santos Ventura Hocorma Foundation Inc (SVHFI) and Ernesto Santos executed a Compromise Agreement on October 26. 1990.P. which SVFHI ignored. -Under the MOA. Disposition petition for certiorari denied. CA reversed and ordered SVHFI to pay legal interest on the principal amount of P13 million at the rate of 12% per annum from the date of demand on October 28. The relevant provisions of the MOA on this point are: “5. Ayala agreed to offer 4 lots adjacent to the retained area for sale to the Vazquez spouses at the prevailing price at the time of purchase. Therefore 3 requisites present: 1) The obligation was already due and demandable after the lapse of the two-year period from the execution of the contract. it incurred delay. 1992 up to the date of actual payment of the whole obligation. It was able to fully settle its outstanding balance only on February 8.Santos filed a Complaint for Declaratory Relief and Damages alleging that there was delay on the part of petitioner in paying the balance of P13 million.5 Million immediately upon the execution of the agreement.In order for the debtor to be in default.15. 1991. 1992. The BUYER hereby commits that it will develop the ‘Remaining Property’ into a first class residential subdivision of the same class as its New Alabang Subdivision. -Petitioner claims that its failure to send a collector is not a valid defense because sending a collector is not one of the obligations of the lessor under Article 1654: but 1) it was established that it was customary for private respondents to pay the rentals through a collector.” . . . 1981. an exercise of a non-existing right to rescind.the petitioner's demand to vacate was PREMATURE. From the time a compromise is validly entered into. less what was defined as the “Retained Area” consisting of 18. TC dismissed petition. Inc. 3) The demand letter sent to the petitioner was in accordance with an extra-judicial demand contemplated by law. This compensation is in the form of interest. (2) that the debtor delays performance. all of the latter’s shares of stock in Conduit Development. Luisa M. that in the event that defendant Foundation shall sell or dispose of any of the lands previously subject of lis pendens. November 19. and 2) Article 1257 provides that where no agreement has been designated for the payment of rentals. When Santos wrote a demand letter on October 28. the proceeds of any such sale shall be partially devoted to the payment of the Foundation’s obligations. and that it intends to complete the first phase under its amended development plan within three (3) years from the date of this Agreement. . CA decision affirmed. .9 hectare property in Ayala Alabang.736 square meters. which was then being developed by Conduit under a development plan where the land was divided into Villages 1.Article 1169 of the New Civil Code provides: Those obliged to deliver or to do VASQUEZ V AYALA CORPORATION TINGA. ISSUE WON Santos is entitled to legal interest. 1994.The main asset of Conduit was a 49. Construction and Development Corp. the obligation was already due and demandable. Vasquez entered into a Memorandum of Agreement (MOA) with AYALA Corporation with Ayala buying from the Vazquez spouses. 1990 (date of execution of the compromise agreement. Labitag something incur in delay from the time the obligee judicially or extra-judicially demands from them the fulfillment of their obligation. The agreement stipulated that 1) SVHFI shall Santos P1. The agreement was judicially approved on September 30. HELD YES. A2010 page 12 Prof. The obligation is liquidated because the debtor knows precisely how much he is to pay and when he is to pay it. it becomes the source of the rights and obligations of the parties thereto. the place of payment is at the domicile of the defendants. . 1991). x x x” 5. Interest as damages is generally allowed as a matter of right. On November 22. it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated. SANTOS VENTURA HOCORMA FDN V SANTOS QUISUMBING. and the balance of P13 Million shall be paid within a period of not more than two years from the execution of the agreement.The compromise agreement as a consensual contract became binding between the parties upon its execution and not upon its court approval. Santos has been deprived of funds to which he is entitled by virtue of their compromise agreement. which were previously subjects of lis pendens.SVHFI sold two real properties. November 4. The two-year period must be counted from October 26. and (3) that the creditor requires the performance judicially or extra-judicially. Santos applied with the RTC for the issuance of a writ of execution of its compromise judgment. not on the judicial approval on September 30. however. The RTC granted the writ.” The development was then being undertaken for Conduit by G. petitioner’s real properties located in Mabalacat. 2004 FACTS .When the petitioner failed to pay its due obligation after the demand was made. Discovering the disposition made by the SVHFI. The goal of compensation requires that the complainant be compensated for the loss of use of those funds. 2004 NATURE Petition for Review on Certiorari FACTS -April 23. . Santos sent a letter to the petitioner demanding the payment of the remaining P13 million. 2) Immediately upon the execution of the agreement Santos shall cause the dismissal with prejudice of Civil Cases and for the immediate lifting of the various notices of lis pendens on the real properties.Obligations and Contracts .7. 2 and 3 of the “Don Vicente Village. The BUYER agrees to give the SELLERS a first option to purchase four developed lots next to the “Retained Area” at the prevailing market price at the time of the purchase. Ayala was to develop the entire property. Pampanga were auctioned. provided. Muntinlupa. 1995. 2) Petitioner delayed in the performance.

the Vasquez spouses made several express warranties. no default or breach exists in the due performance and observance by the Company of any term. tax liabilities due or to become due and whether incurred in respect of or measured in respect of the Company’s income prior to Closing or arising out of transactions or state of facts existing prior thereto.80 as the subcontractor of G. threatened against or affecting the SELLERS with respect to the Shares or the Property.2 SELLERS do not know or have no reasonable ground to know of any basis for any assertion against the Company as at closing or any liability of any nature and in any amount not fully reflected or reserved against such Audited Financial Statements referred to above.3 Except as otherwise disclosed to the BUYER in writing on or before the Closing. as follows: “3. 1987. and 7.6.1. covenant or condition of any instrument or agreement to which the company is a party or by which it is bound. There are no actions.6.1. -One of the letters signed by their authorized agent.113 . suits or proceedings pending.P. without limitation. WON the provisions of the MOA constitutes an option to buy for spouses Vasquez HELD Procedural YES. While in the Conduit plan. the Company as of the date thereof. Conduit and Ayala -G. will constitute such default or breach. Ayala then received a letter from one Maximo Del Rosario of Lancer General Builder Corporation informing Ayala that he was claiming the amount of P1. 7. Construction. and those disclosed to BUYER. nor do the SELLERS know or have reasonable grounds to know of any basis for any such action or proceeding or of any governmental investigation relative to the Company. three years from the settlement of the legal problems with the previous contractor. -However. It is well-settled that the jurisdiction of this Court in cases brought to it from the Court of Appeals by way of petition for review under Rule 45 is limited to reviewing or revising errors of law imputed to it. Construction in turn filed a cross-claim against Ayala.2 Except to the extent reflected or reserved in the Audited Financial Statements of the Company as of Closing.P.7 is not Conduit’s development plan. including. but Ayala’s amended development plan which was still to be formulated as of the time of the MOA. the Company is not engaged in or a party to. Labitag -After the execution of the MOA.3.1 The said Audited Financial Statements shall show that on the day of Closing. has no liabilities of any nature whether accrued. 7. categorically stated that they expected “development of Phase 1 to be completed by February 19. -This was rejected by the Vasquez spouses who wanted to pay at 1984 prices.P. was ever made by the Vasquez spouses for Ayala to sell the 4 lots.P. -The four lots were then offered to be sold to the Vasquez spouses at the prevailing price in 1990. when it was dismissed with prejudice after Ayala paid both Lancer and GP Construction the total of P4. obligation to develop and incurrence of delay.558. 2 of this Agreement. no demand after April 23. any legal action or other proceedings before any court or administrative body. Construction was not able to reach an amicable settlement with Lancer so Lancer sued G. .4 To the knowledge of the SELLERS. we have to consider the evidence on record and resolve such factual issues as an exception to the general rule Substantive . contingent or otherwise. since in the instant case there is a conflict between the factual findings of the trial court and the appellate court.5. 3. 1984. absolute. the 4 lots to be offered for sale to the Vasquez Spouses were in the first phase thereof or Village 1. TC ruled in favor or petitioners CA ruled in favor of respondents ISSUES Procedural WON the court should review the factual findings of the Court of Appeals as they are in conflict with those of the trial court Subsantive 1. The true and complete list.1. and those disclosed to BUYER. -Under the MOA. in the Ayala plan which was formulated a year later. it was in the third phase. its findings of fact being conclusive on this Court as a matter of general principle. free from all liens and encumbrances and that the Company shall have no obligation to any party except for billings payable to GP Construction & Development Corporation and advances made by Daniel Vazquez for which BUYER shall be responsible in accordance with Par. Construction and Lancer both tried to enjoin Ayala from undertaking the development of the property.Obligations and Contracts -The parties are agreed that the development plan referred to in paragraph 5.P. 6.” -By early 1990 Ayala finished the development of the vicinity of the 4 lots to be offered for sale. However. -The suit was terminated on February 19. Ayala caused the suspension of work on Village 1 of the Don Vicente Project.509. -G. 7.2.G.1. with notice or lapse of time or both. WON AYALA Corporation is in default for failure to finish the development of the phase in question within 3 years 2. Engr. thereby leading to the suit below. or Phase II-c.-Vasquez spouses sent several “reminder” letters of the approaching so-called deadline on Ayalas obligation to sell 4 lots to them. certified by the Secretary and Treasurer of the Company showing: A list of all persons and/or entities with whom the Company has pending contracts.” A2010 page 13 Prof.2. Audited financial statements of the Company as at Closing date.1. Construction.686. if any. particularly as regards the issues of breach of warranty. 7. the Company shall own the “Remaining Property”. The SELLERS shall deliver to the BUYER 3. Representation and Warranties by the SELLERs The SELLERS jointly and severally represent and warrant to the BUYER that at the time of the execution of this Agreement and at the Closing: 6. 1990. and no condition exists which. Eduardo Turla. threatened with. or to the best of the knowledge of the SELLERS. or to the knowledge of the SELLERS.

INC. Manila Motor Co.Plaintiff failed to pay the rest of the price on January 5. The defendant is entitled to resolve the contract for failure to pay the price within the time specified. their complaint for specific performance was premature. . extendible fifteen days thereafter . AND COLMENARES REYES. Accordingly. 1928. and asked that he be judicially declared the owner of said lots. A2010 page 14 Prof. Labitag .The CFI absolved the defendant from the complaint. It is a mere right of first refusal and not an option contract. and that he was willing to execute the deed of sale upon payment of the balance due . and that the defendant be ordered to deliver it to him . containing an area of 221 hectares.On December 27. petitioners should have petitioned the court to fix the period in accordance with Article 1197 of the Civil Code.. At this time no payment of rental was done during the said period. the defendant was entitled to rescind the contract for failure of plaintiff to pay the price within the time specified HELD Yes. Francisco.Plaintiff brought an action to compel the defendant to execute the deed of sale upon receipt of the balance of the price. defendant instructed Mabanta to inform the plaintiff that the option would be considered cancelled.This case is a petition of the judgment that ordered Manila Motor Co.. As no such action was filed by petitioners. lots 937-945 of the Tala Estate in Novaliches. But the SC ruled that regardless of whether it was an option or a sale. 937-945. 1945 as well as for them to pay for the destruction of the property. AYALA Corporation cannot likewise be said to have delayed performance of the obligation.Under Article 1193 of the Civil Code.On Novemer 13. wanted to resume the contract given that the contract gives them the option to continue such lease.31. necessarily. the sale of subject lots. he signed a document stating that he received P500 from Julio Abella (plaintiff) on account of lots no. Neither is there a fixed or determinable price at which the subject lots will be offered for sale. . 1929. and the “demand letters” which were mere reminders were sent even before three years could pass after the signing. The phrase “at the prevailing market price at the time of the purchase” connotes that there is no definite period within which AYALA Corporation is bound to reserve the subject lots for petitioners to exercise their privilege to purchase. 1928. Mabanta notified the plaintiff that he had received the power of attorney to sign the deed of conveyance of the lots to him. 2. wrote a letter to Roman Mabanta. i. having agreed that the selling price would be paid not later than December. .. The price is considered certain if it may be determined with reference to another thing certain or if the determination thereof is left to the judgment of a specified person or persons. When the Americans liberated the country they took possession of the said property and paid for the same amount to Villaruel. Inc. Villaruel however would want . the CFI considered that the agreement in question was an option for the purchase of the lots.Manila Motor Co. ABELLA V FRANCISCO AVANCEÑA. but Mabanta refused to accept it and instead returned by check the sum of P915.31. and the plaintiff appealed ISSUE WON the time was an essential element in the contract.1928. possession on the 31 st day of October 1940. and therefore.He was behind in payment for these installments and on October 31. 1930 NATURE Appeal from a judgment of the CFI of RIzal FACTS . NO. however. Inc. a representative of the spouses even told AYALA that the date of reckoning shall be from the date the case with lancer was finished. and (3) that the creditor requires the performance judicially or extrajudicially. to pay Villaruel for the lease of their building from June 1. the price for which the subject lots will be sold are not specified.31 .On January 3. 1928. Although the paragraph has a definite object. being in Cebu.Obligations and Contracts 1. in the event that the plaintiff failed to pay the remainder of the selling price VDA. Since the MOA does not specify a period for the development of the subject lots.Guillermo Francisco (defendant) purchased from the Government on installments. and in view of the fact that the vendor executed the contract to pay off with the proceeds thereof certain obligations which fell due in the same month of December. DE VILLARUEL V MANILA MOTOR CO. upon demand made by Francisco .In the same letter. attaching a power of attorney authorizing him to sign in behalf of the defendant all the documents required by the Bureau of Land for the transfer of lots to the plaintiff . but attempted to do so on January 9.The plaintiff asked for a few days’ time. and to return the amount of P915.There was no fixed date in the MOA.. 350 a month should be paid. The leasing continued until the invasion in 1941. the time fixed for the payment of the selling price was essential in the transaction. . but Mabanta only gave him until January 5 . the contract lasts for 5 years and that the amount of Php. was divided on the question of whether the agreement was an option or a sale. Rizal. the balance of which is due on or before December 15 of the same year. The SC. Inc. 1958 NATURE Appeal from a judgment of the CFI of Negros Occidental FACTS . Reasoning In holding that the time was an essential element in the contract. Inc. Caloocan. Abella made another payment of P415. the obligation not being demandable at that point.Moreover. obligations for whose fulfillment a day certain has been fixed shall be demandable only when that day comes. It is to be placed on Manila Motor Co. (2) that the debtor delays performance.e. December 13. December 20. In order that the debtor may be in default it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated. at the rate of 100/hectare. 1942 to March 29.. leased the building from Villaruel and entered a contract. the period within which they will be offered for sale to petitioners and.

the former owner of the land. the lessor has the privilege to waive his right to bring an action against his tenant and give the latter credit for the payment of the rents and allow him to continue indefinitely in the possession of the premises. It is failure to pay rents after a demand therefore is made that entitles the lessor to bring an action of Unlawful Detainer. It should be noted that the contract of lease between the petitoner and Lutgarda Cifra. misunderstood. The refusal to accept placed the lessors in default to bear supervening risks of accidental injury or destruction. on the other hand. October 19. to Benjamin Cifra and the person to whom payment was offered had no authority to accept payment. NO. The question of whether or not private respondent is the owner of the leased premises is one of fact which is within the cognizance of the trial court whose findings thereon will not be disturbed on appeal unless there is a showing that the trial court had overlooked. Moreover. Further more. the tenant would not be in illegal possession of the premises and the landlord can not maintain an action until after he has taken steps to convert the legal possession into an illegal possession.While the contract of lease was still subsisting. This is because the Japanese Occupation was legitimate following both International and Domestic law recognize the use of private properties at the time of war. hence..It is unwarranted by the Moratorium Order under EO No. the fact that the military seizure was considered a fortuitous event means that the failure of one party to fulfill its commitment entails that the other party is excused to do his correlative performance since the causa of the lease must exist throughout the term of the contract. Metro Manila leased the said property to Emilia Tengco.. The occupation is a pertubacion de derecho (trespassing under color of title) and not pertubacion de hecho (mere act of trespass). The obligation ceased during such deprivation. Disposition: The petition is denied.. ISSUES 1.. Under the circumstances. Disposition Manila Motor Co. the owner of the premises at No. hence.. WON Benjamin Cifra. TENGCO V CA PADILLA. NO. FACTS . Tengco. attempted to pay her rentals to the person whom she used to pay her dues. A2010 page 15 Prof. did not give the payment to Benjamin Cifra or consigned the amount to the court. Applying Art.Lutgarda Cifra. 1989 NATURE Review on certiorari of the decision of CA. Inc. YES. While the trial was ongoing. Navotas. ceases to have effect when the property is sold. filed an action for umlawful detainer with the MTC of Navotas to evict the peititioner. from the said premises for her alleged failure to comply with the terms and conditions of the lease contract by failing and refusing to pay the stipulated rentals despite repeated demands. 2. Lutgarda Cifra transferred the ownership of the property to Benjamin Cifra. The Court has held that a contract of lease executed by the vendor. Pascual St. 164 Int. During such period. . 1945. judgment was rendered against Tengco and ordered the defendant and any and all persons claiming rights under her to vacate the premises occupied by her and to surrender possession thereof to the plaintiff. 3. 1560 the lessors are liable for it and that such occurrence resulted to the deprivation of the lessee from the peaceful use and enjoyment of the property leased.The record of the case shows that on 16 September 1976. Labitag Emilia Tengco. is asked to pay only Php. Jr. Jr. CENTRAL BANK OF THE PHILIPPINES V COURT OF APPEALS MAKASIAR. notwithstanding demand made by Cifra. is liable to pay for the rental fees at the time of the Japanese Occupation and the destruction of property HELD No. petitioner's non-payment of the rentals on the premises. entitles private respondent to eject her from the premises. Villaruel then sought for a supplemental complaint demanding reimbursement. Inc. . ISSUE WON Manila Motor Co. Gov. WON laches had deprived the lessor of the right to eject her considering that the Complaint was filed only in September 1976 whereas his cause of action arose sometime in February. The ownership of the property had been transferred by Lutgarda Cifra. October 3. . 1985 NATURE Petition for certiorari to review the decision of the Court of Appeals. in the absence of a contrary agreement.Obligations and Contracts the contract rescinded and for Manila Motor Co. But that person refused to accept the payment as she is no longer had the authority to accept payments. to pay for the rentals during from June 1. the original lessor.Tengco. WON the lessor was guilty of mora accipiendi 3. 1974 when she defaulted in the payment of rentals HELD 1. and her failure to avail of the remedy provided for in Article 1256 of the Civil Code. Consequently. or misapplied some fact or circumstance of weight and substance that would have affected the result of the case. Inc. the property got burned. CFI granted the petition of Villaruel giving rise for this appeal. mere disturbance entail that the lessee shall have a direct action against the trespasser but the military occupation was not what the drafters had on mind for such occupation is not preventable. the refusal to accept that proffered rentals is not without justification. The tenant's mere failure to pay rent does not ipso facto make unlawful his possession of the leased premises. unrecorded. was not in writing and. After trial. not recorded. Failure to consign does not eradicate the default of the lessors nor the risk of loss that lay upon them. Benjamin Cifra. is the owner of the leased premises 2. 32. . 1750 from July to November 1946 and not for the petitioned amount. 1942 until March 29. . despite her knowledge of this transfer. Also. The contract was not in writing. unless recorded.

hence. b. This time.The prohibition on the bank to make new loans is irrelevant bec it did not prohibit the bank fr releasing the balance of loans previously contracted. he signified willingness to pay. . . CA affirmed dismissal of Tolentino’s petition for specific performance.95 for materials and labor. e. WON Tolentino’s action for specific performance can prosper 2. ISSUES 1. but it ruled that the bank can neither foreclose the real estate mortgage nor collect the P17K loan. . to rescind the real estate mortgage.The alleged discovery by the bank of overvaluation of the loan collateral is not an issue. When one party is willing and ready to perform. a. It was required that Tolentino shall use the loan solely as additional capital to develop his other property into a subdivision. repayable in semi-annual installments for 3 yrs.The loan called for a lump sum of P80K. But the moral damages and attorney’s fees should not be awarded because they were not alleged in the complaint. . NO . And after the bank failed to restore its solvency. Rescission is the only remedy left. When Tolentino executed real estate mortgage. 3. the defendant not having worked on the typewriter and returning it to the owner unrepaired. . He is also liable for the missing parts.00. . 1197 cannot be raised as a defense.Island Savings Bank approved the loan application for P80K of Sulpicio Tolentino who executed a real estate mortgage over his 100 hectare land. . ISSUE WON Chavez should be entitled to greater damages than what was awarded to him in the trial court HELD YES . alleging that since the bank failed to deliver P63K.A mere P17K partial release of the loan was made by the bank and Tolentino and his wife signed a promissory note for the P17K at 12% annual interest payable w/in 3 yrs.Art.Gonzales was not able to finish the work after a certain time despite repeated reminders from Chavez. Art.The bank’s asking for advance interest for the loan is improper considering that the total loan hasn’t been released.Since the bank failed to furnish the balance.The bank was in default and Tolentino may choose bet specific performance or A2010 page 16 Prof. . prohibited the bank fr making new loans and investments.The promissory note gave rise to this liability. A person can’t be charged interest for nonexisting debt. NO .Chavez brought his typewriter on July of 1963 to Gonzales to have it fixed. . d. His failure to pay made him party in default.00 which Gonzales did. YES . The bank officials should have been more responsible and the bank bears risk in case the collateral turned out to be overvalued. This is not applicable because the time for compliance has already expired. 1197 states that the petitioner should have first filed for a petition from the Court. If liable to pay P17K. w/ 12% annual interest. the Central Bank prohibited Island Savings Bank fr doing business in the Philippines. He is liable for the cost of executing the obligation in the proper manner.Tolentino filed petition for specific performance or rescission and damages w/ preliminary injunction.In October 1963 Chavez went to Gonzales’ house and got the typewriter. .Obligations and Contracts FACTS .Insolvency of debtor is not an excuse for non-fulfillment of obligation but is a breach of contract. Furthermore. Now. after finding that bank was suffering liquidity problems. Labitag rescission w/ damages in either case. the bank’s obligation to furnish the P80K loan accrued.Since both Tolentino and the bank are in default. But considering that the bank is now prohibited fr doing business. . this was not raised in the pleadings so this issue can’t be raised. There was no agreement as to when the typewriter should be ready for return to Chavez. CHAVEZ V GONZALES REYES. 1165 because of his non-performance. the real estate mortgage became unenforceable to such extent.00 for the purchase of spare parts which Chavez gave. It was returned to him with the cover and some essential parts missing.The trial court awarded Chavez damages of only P31. . he is entitled to specific performance and if not.Chavez formally demanded that the missing parts be returned along with the cover and the sum of P6. 2. That time. the other party not ready nor willing incurs in delay. April 30. 1970 FACTS . c.10 out of his total claim of P690. it is the bank which has right to rescind the promissory note. Liability may be offset. The bank VP and Treasurer promised release of the balance. WON Tolentino’s real estate mortgage can be foreclosed HELD 1. WON Tolentino is liable to pay the P17K covered by the promissory note 3. fixing the period. . .Trial court found Tolentino’s petition unmeritorious.August 1964 – the typewriter was fixed by another person which cost Chavez P89.Monetary Board of Central Bank. not entitled to rescission. both are liable for damages. .Gonzales asked Chavez for P6. .Gonzales is liable under Art. . the Central Bank resolution made it impossible for the bank to furnish the P63K balance. . but the rescission shld only be for the P63K balance. . .The loan agreement implied reciprocal obligations. specific performance cannot be granted.Island Savings Bank in view of the non-payment of the P17K filed an application for foreclosure of the real estate mortgage. An advance interest was deducted fr the partial release but this prededucted interest was refunded to Tolentino after being informed that there was no fund yet for the release of the P63K balance.

Sofia C. Sr. Neither the husband nor any of the other children of the deceased. guilty of contravening its obligation to said private respondent and is thus liable for damages. Ignacio Castro Jr.Petitioner appeals from the judgment of the appellate court contending that the award of moral damages should be eliminated as defendant's negligent act was not motivated by "fraud. . there would have been no need for this suit or for Mrs.When Sofia returned to the United States.00 moral damages. Scottsburg.00 moral damages.000.00 moral damages.The trial court's award of P16. wife of plaintiff Ignacio Castro. vs Telefast Communication/Philippine Wireless.This liability is not limited to actual or quantified damages.000. for transmission.000." Under its theory. with interest at 6% per annum: 1. who was then in the Philippines. Mario Castro.00 moral damages. fright. She and the other plaintiffs thereupon brought action for damages arising from defendant's breach of contract. The only defense of the defendant was that it was unable to transmit the telegram because of "technical and atmospheric factors beyond its control. 8. therefore. Esmeralda C.000. The award of P20.000 moral damages." Art.00 as moral damages.000. . 5... despite performance by Crouch of her obligation by paying the required charges. P10.Sofia C. Sr.00 moral damages.00.00 as moral damages to each . It states: "Moral damages include physical suffering. petitioner undertook to send said private respondent's message overseas by telegram.” FACTS . The telegram was accepted by the defendant in its Dagupan office. by act or omission. P20. 1956.00 moral damages.00 as compensatory damages to Sofia C. P31.. Jr. . 6. Ignacio Castro Sr. Labitag and the award of P1. P20.00 to each of the plaintiffs and costs. Crouch's testimony. However. serious anxiety. moral damages may be recovered if they are the proximate results of the defendant's wrongful act or omission. social humiliation and similar injury.000. and those who in any manner contravene the tenor thereof. Ignacio Castro. the fee or charges paid by Sofia C. Gloria Castro. Crouch. P10.Defendant is also ordered to pay P5. Art. the mental anguish and the sorrow that the overseas children must have suffered upon learning of the death of their mother after she had already been interred.Petitioner's act or omission which amounted to gross negligence. causes damage to another. and mother of the other plaintiffs. U. 1170 of the Civil Code provides that "those who in the performance of their obligations are guilty of fraud. P10. Inc. . . 12.00 for each of the private TELEFAST COMMUNICATIONS / PHILIPPINE WIRELESS. Sr. the Court of Appeals affirmed the trial court's decision but eliminated the award of P16. Had petitioner not been remiss in performing its obligation.92 and P16.On appeal by petitioner. are liable for damages. after trial. at 685 Wanda.000. mental anguish.000. P10. INC.00 attorney's fees.A. sustained in the amount of P1. Crouch . passed away in Lingayen. is obliged to pay for the damage done. petitioner did not do.000. Floro was also reduced to P10. then all residing in the United States. Indiana. Crouch as to why it could not transmit the telegram.00 moral damages." . Aurora Castro. there being fault or negligence.The CFI of Pangasinan. Agerico Castro. HELD Yes. addressed a telegram to plaintiff Ignacio Castro. it can only be held liable for P 31.000. 3.00 moral damages.] . malice or recklessness. ISSUE WON petitioner can be henld liable for moral damages." Petitioner and Sofia Crouch entered into a contract whereby. and Esmeralda C.000. 10. Consolacion was interred with only her daughter Sofia in attendance. returned for the burial. This. Pangasinan. 00 for each. Salvador Castro.The award of exemplary damages by the trial court is likewise justified and. Rolando Castro. Conrado Castro. Consolacion Bravo-Castro. as moral damages.000. 9. 1988 NATURE Petition for Review on Certiorari of the decision of the Intermediate Appellate Court dated 11 February 1986. P10. . negligence or delay.00 as moral damages. Crouch representing the expenses she incurred when she came to the Philippines from the United States to testify before the trial court is sustained.000. Crouch for the telegram that was never sent to the addressee thereof. was precisely the cause of the suffering private respondents had to undergo.00 as compensatory damages to Sofia C. she discovered that the wire she had caused the defendant to send had not been received.Obligations and Contracts A2010 page 17 Prof.92. February 29. P10.000.000. after payment of the required fees or charges. therefore. P10. V CASTRO PADILLA. Floro. To sustain petitioner's contrary position in this regard would result in an inequitous situation where petitioner will only be held liable for the actual cost of a telegram fixed thirty [30] years ago.00 as compensatory damages and P20. .On November 2. 2176 also provides that "whoever. 2217 of the Civil Code is applicable to this case. 11. 7. the telegram never reached its addressee. ordered the defendant to pay the plaintiffs damages as follows. P10. without being given the opportunity to even make a choice on whether they wanted to pay her their last respects? There is no doubt that these emotional sufferings were proximately caused by appellant's omission and substantive law provides for the justification for the award of moral damages. Virgilio Castro. wounded feelings. in “Castro. for a fee.S.00 to each of the private respondents as exemplary damages. On the same day.000. 2.As the appellate court properly observed: Who can seriously dispute the shock. her daughter Sofia Crouch. besmirched reputation. 4. . exemplary damages in the amount of P1.000. P20.000. Art." No evidence appears on record that defendant ever made any attempt to advise the plaintiff Sofia C. 47170 announcing Consolacion's death. Petitioner was.000.000. moral shock. Crouch. Though incapable of pecuniary computation.

however. stems not alone from this failure or inability to satisfy the requirements of the bank." (which is more than two months from the execution of the contract) the party named by the appellee as beneficiary of the letter of credit.Under this provision. and [5] Costs of suit. Mrs." . On the same day. The letter of the Philippine National Bank to the NARIC was plain and explicit that as of the said date. Rangoon. every debtor who fails in the performance of his obligations is bound to indemnify for the losses and damages caused thereby. which it candidly admitted in a communication with PNB. citing authorities. Civil Code of the Philippines. . [2] P1. [3] P16.00 as moral damages.00 as damages for breach of contract and dismissing the counterclaim and third party complaint of the defendant-appellant NARIC.000.00 as attorney's fees. Arrieta and the appellant corporation entered into a Contract of Sale of Rice. not only debtors guilty of fraud.000 metric tons of Burmese rice. then the letter of credit would have been approved. confirmed and assignable letter of credit. currency in favor of the plaintiff-appellee and/or supplier in Burma. appellant agreed in paragraph 8 of the contract to pay immediately "by means of an irrevocable." . to each of private respondents.On May 19. second. thru counsel. plaintiff-appellee participated and won in the public bidding called by the NARIC for the supply of 20. or every kind of defective performance.00 as compensatory damages. The demand having been rejected.000 metric tons of Burmese Rice at $203. 103." however. but failed. . to private respondent Sofia C. Crouch. was rejected by the appellant in a resolution dated November 15. 1952 as the deadline for the remittance of the required letter of .S.00 per metric ton. The Decision appealed from is modified so that petitioner is held liable to private respondents in the following amounts: [1] P10.000. When the futility of reinstating the same became apparent. 1952. awarding to the plaintiffs-appellees the amount of $286.00 as exemplary damages. negligence or default in the performance of obligations are decreed liable: in general.000. the credit instrument applied for was opened only on September 8. Burma "equivalent to 5% of the F. First. July 30. 1964 NATURE Appeal of the defendant-appellant NARIC from the decision of the trial court dated February 20. January 31.It turned out however. 1952. immediately. she instituted this case now on appeal. to each of private respondents.000 tons at $180. ISSUE WON the lower court erred in holding NARIC liable for damages for breach of contract HELD . plaintiff-appellee Paz P.Despite the commitment to pay immediately "by means of an irrevocable.) ARRIETA V NATIONAL RICE AND CORN CORP REGALA. .70 and in compliance with the regulations in Rangoon this 5% will be confiscated if the required letter of credit is not received by them before August 4. that the defendant corporation. amounting to 524. currency. demanding compensation for the damages caused her in the sum of $286. When. or. has been approved by the Board of Directors with the condition that 50% marginal cash deposit be paid and that drafts are to be paid upon presentment. representing unrealized profit. Arrieta. In this connection.B." it must be similarly be held to have bound itself too answer for all and every consequences that would result from the representation. communicating at the same time that the offer was "a solution which should be beneficial to the NARIC and to us at the same time. the cancellation of the allocation and the confiscation of the 5% deposit were not effected until August 20. FACTS . And yet. she offered to substitute Thailand rice instead to the defendant NARIC.A number of logical inferences may be drawn from NARIC’s admission. A2010 page 18 Prof. that appellant also knew it could not meet those requirements.000. are liable in damages. 1952.000.00 was forfeited. appellant corporation was unable to make good its commitment to open the disputed letter of credit. (IV Tolentino.000. it was only on July 30. Consequently. opened and released as early as August 4. 1952. U.The appellee endeavored. and/or assignee for $3. We do not think the appellant corporation can refute the fact that had it been able to put up the 50 c/o marginal cash deposit demanded by the bank. Disposition Petition is DENIED. under the terms of which the former obligated herself to deliver to the latter 20. or a full month from the execution of the contract." This offer for substitution.000. p. that the appellant knew the bank requirements for opening letters of credit. Burma. thru its general manager. the appellant corporation was not in any financial position to meet the condition. it must be made of record that although the Burmese authorities had set August 4.00. .S.YES. on July 1. confirmed and assignable letter of credit in U. advised the appellant corporation of the extreme necessity for the immediate opening of the letter of credit since she had by then made a tender to her supplier in Rangoon. . appellant's it "application for a letter of credit . Paz P. negligence. and those who in any manner contravene the tenor thereof. The phrase "in any manner contravene the tenor" of the obligation includes any illicit act which impairs the strict and faithful fulfillment of the obligation. As a result of the delay. confirmed and assignable Letter of Credit. therefore. however. even with that 15-day grace. the allocation of appellee's supplier in Rangoon was cancelled and the 5% deposit. 1952 "in favor of Thiri Setkya. . Labitag credit. 1952. Appellee sent a letter to the appellant. took the first step to open a letter of credit by forwarding to the Philippine National Bank its Application for Commercial Letter of Credit.000. CIF Manila.In relation to the aforequoted observation of the trial court." The liability of the appellant. as a warning to all telegram companies to observe due diligence in transmitting the messages of their customers. Its culpability arises from its willful and deliberate assumption of contractual obligations even as it was well aware of its financial incapacity to undertake the presentation. 1952. despite this awareness that it was financially incompetent to open a letter of credit immediately. We would like to make reference also to Article 1170 of the Civil Code which provides: "Those who in the performance of their obligation are guilty of fraud. or delay. to restore the cancelled Burmese rice allocation.000 kyats or approximately P200. a full half month after the expiration of the deadline. 1952. price of 20. 1958. Accordingly. In turn.00.O. the defendant Corporation committed itself to pay for the imported rice "by means of an irrevocable. [4] P5.Obligations and Contracts respondents. 1952.614.

of operating a fleet of taxicabs inside the U. the award should be converted into and expressed in Philippine Peso. Naval Base to his financial benefit and at the expense and prejudice of third parties such as the plaintiff. No pronouncement as to costs. which complaint was dismissed for failure to state a cause of action. 52 Off. currency and not in Philippine Peso.S.S. wherein the plaintiff quoted in his offer a total price of $77. Isidro Q. but must be clearly and convincingly shown. Navy and his goodwill already established with the Naval personnel. Navy provided him with the radio frequency of 34.By his letter dated October 7. however. He alleged that plaintiff was merely anticipating his loss or damage. In the case at bar. 1972. We disagree. Navy Exchange.2 MHZ [Megaherzt] and requested his said agent to proceed with his order placed with the plaintiff. April 20.On March 27. 1973. with the sole modification that the award should be converted into the Philippine peso at the rate of exchange prevailing at the time the obligation was incurred or on July 1. Aligada. Magat against respondent Santiago A.Defendant and his agent were able to import from Japan with the assistance of the plaintiff and his Japanese business associates the necessary taximeters for defendant's taxicabs in partial fulfillment of defendant's commitments with the U. he fails and refuses to open the necessary letter of credit to cover payment of the goods . Navy Exchange. 1972 addressed to the plaintiff by the defendant's agent.In his letter dated October 6. were pressing defendant for compliance with his commitments with respect to the installations of radio transceivers on his taxicabs he impliedly laid the blame for the delay upon the plaintiff thus destroying the reputation of the plaintiff with the mid Naval Authorities with whom plaintiff transacts business . Aligada.S. but defendant did not even have the courtesy to answer plaintiff's demand Petitioner’s Claims The defendant entered into a contract with the plaintiff without the least intention of faithfully complying with his obligations.Isidro Q. the decision appealed from is hereby affirmed. whereupon all that the plaintiff had to do was to await advice from the defendant as. Philippines. as shown by the signed conformity of the defendant which was duly delivered by the defendant's agent to the plaintiff.S. MAGAT V MEDIALDEA ESCOLIN. which might result from the alleged failure of defendant to comply with the terms of the alleged contract. acting as agent of the defendant. now Deputy Judicial Administrator.S. presided by respondent Judge Leo D.59 FOB Yokohama. the goods or articles offered for sale by the plaintiff to . Disposition UPON ALL THE FOREGOING.Defendant and his agent have repeatedly assured plaintiff of the defendant's financial capabilities to pay for the goods and in fact he accomplished the necessary application for a letter of credit with his banker. the plaintiff's assistance in this matter having been given to the defendant gratis et amore . the defendant advised his agent that the U. plaintiff wrote a letter thru his counsel to ascertain from the defendant as to whether it is his intention to fulfill his pan of the agreement with the plaintiff or whether he desired to have the contract between them definitely cancelled.S. Labitag the defendant to be delivered sixty to ninety days after receipt of advice from the defendant of the radio frequency assigned to the defendant by the proper authorities . Court of Appeals. is relieved of any liability under this suit. the plaintiff will suffer several damages Respondent’s Arguments Respondent Guerrero filed a motion to dismiss complaint for lack of cause of action. Waivers are not presumed. defendant's agent qualified defendant's instructions that plaintiff should proceed to fulfill defendant's order only upon receipt by the plaintiff of the defendant's letter of credit ." In view of that law. either by express stipulation or acts admitting no other reasonable explanation.Obligations and Contracts . Subic Bay. Republic Act 529 specifically requires the discharge of obligations only "in any coin or currency which at the time of payment is legal tender for public and private debts. 225.In the premises. That in view of the defendant's failure to fulfill his contractual obligations with the plaintiff. Medialdea. a minor modification must be effected in the disposition portion of the decision appealed from insofar as it expresses the amount of damages in U. 1983 NATURE Petition for review on certiorari to determine the sufficiency of the averments contained in the complaint for alleged breach of contract filed by petitioner Victorino D.Plaintiff received notice of the fact that the defendant accepted plaintiff's offer to sell to the defendant the items as well as the terms and conditions of said offer. no such intent to waive has been established.S. A2010 page 19 Prof. Plaintiff's right of recovery under his cause of action is premised not on any loss or damage actually suffered by him but on a non-existing loss or damage which he is expecting to incur in the near future. but he subsequently instructed his banker not to give due course to his application for a letter of credit and that for reasons only known to the defendant. each taxicab to be provided with the necessary taximeter and a radio transceiver for receiving and sending of massage from mobile taxicab to fixed base stations within the Naval Base .It came to the knowledge of the plaintiff that the defendant has been operating his taxicabs without the required radio transceivers and when the U. which fact was duly communicated to the plaintiff . Philippines. 779).Because of the experience of the plaintiff in connection with his various contracts with the U.. Navy Exchange. acting as agent of the defendant approached the plaintiff and proposed to import from Japan thru the plaintiff or thru plaintiff's Japanese business associates. 98 Phil. for the operation of a fleet of taxicabs.620.The NARIC would also have this Court hold that the subsequent offer to substitute Thailand rice for the originally contracted Burmese rice amounted to a waiver by the appellee of whatever rights she might have derived from the breach of the contract. Aligada secured a firm offer in writing dated September 25.S. Plaintiff's right therefore under his cause of action is not yet fixed or vested. 1952 when the contract was executed. therefore. Gaz. all taximeters and radio transceivers needed by the defendant . Isidro Q.Defendant entered into a contract with the U. to the radio frequency to be assigned by the proper authorities to the defendant . in the light of this judgment. . but he did so only in order to obtain the concession from the U. 1972. The appellee insurance company. (Ramirez vs.Plaintiff awaited the opening of such a letter of credit by the defendant . Guerrero of the CFI of Rizal. made representations with the plaintiff that defendant desired to procure from Japan thru the plaintiff the needed radio transceivers and to this end. Navy Authorities of Subic Bay. FACTS .

but moral and exemplary damages as well. Articles 2220 and 2232 of the Civil Code. leaving a balance of P15. Disposition The questioned order of dismissal was set aside and the case was ordered remanded to the court of origin for further proceedings.000.00. Labitag NATURE Petition for review on certiorari of CA decision FACTS -April 1987: petitioner Jacinto M. a force majeure. private respondent failed to comply with his correlative obligation by refusing to open a letter of credit to cover payment of the goods ordered by him. Petitioners' Counterclaim -The construction of a deep well was not included in the agreement to build the windmill system. If the obligor acted in good faith. the other would necessarily suffer loss of his expected profits. Respondents' Comments -Since the deep well formed part of the system. and that consequently. 1997 . The complaint sufficiently alleges bad faith on the part of the defendant. WON the agreement to construct the windmill system included the installation of a deep well. Reasoning The complaint recites the circumstances that led to the perfection of the contract entered into by the parties. over petitioner's opposition. negligence. (SPGMI) should be credited to his account by petitioner. petitioner suffered not only loss of his expected profits. Pursuant to the agreement respondent paid petitioner a down payment of P30. A2010 page 20 Prof.00 and an installment payment of P15.000 he tendered to San Pedro General Merchandising Inc. From these allegations. WON private respondent is already in default in the payment of his outstanding balance. It further avers that while petitioner had fulfilled his part of the bargain. to construct a windmill system for him. The same is true with respect to moral and exemplary damages.000. -Assuming that he owed petitioner a balance of P15. He claims that the collapse was attributable to a typhoon. But it rejected petitioner's claim of force majeure and ordered the latter to reconstruct the windmill in accordance with the stipulated one-year guaranty. ISSUES 1. it ruled that the construction of the deep well was included in the agreement of the parties because the term "deep well" was mentioned in both proposals. January 2.Article 1170 Of the Civil Code provides: "Those who in the performance of their obligation are guilty of fraud. therefore. 3. this should be offset by the defects in the windmill system which caused the structure to collapse after a strong wind hit their place. 4. -CA reversed. WON respondent can claim that Pili of SPGMI accepted his payment on behalf of petitioner.000.The damages which the obligor is liable for includes not only the value of the loss suffered by the obligee [daño emergense] but also the profits which the latter failed to obtain [lucro cesante]. Lower Court’s Ruling -RTC ruled in favor of plaintiff-petitioner: that the construction of the deep well was not part of the windmill project & that there is no clear and convincing proof that the windmill system fell down due to the defect of the construction. or delay. recoverable under the law. Upon breach of the contract by either of them. After some negotiations they agreed on the construction of the windmill for a consideration of P60. -He also disowned any obligation to repair or reconstruct the system and insisted that he delivered it in good and working condition to respondent who accepted the same without protest.00.000. issued a minute order dismissing the complaint ISSUE WON there is sufficient cause of action HELD YES. 2. bad faith. malice or wanton attitude. with consequent injury or damage to the latter for which he may maintain an action for recovery of damages or other appropriate relief.000. Tanguilig doing business under the name and style J. Engineering and General Merchandising proposed to respondent Vicente Herce Jr. which relieved him of any liability. both businessmen.000. The applicable legal provisions on the matter. he shall be liable for all damages which may be reasonably attributed to the nonperformance of the obligation. 5. of the project. The contract price of P60. the parties. Who should bear the costs of the reconstruction? HELD TANGUILIG V COURT OF APPEALS BELLOSILLO. such loss is real. [2] a correlative duty of the defendant and [3] an act or omission of the defendant in violation of the plaintiff's right. MFR was also denied. petitioner filed a complaint to collect the amount. "fixed and vested" and.00 with a one-year guaranty from the date of completion and acceptance by respondent Herce Jr. Since the loss comes into being at the very moment of breach. and in case of fraud. No costs.Obligations and Contracts . WON petitioner is under obligation to reconstruct the windmill after it collapsed." The phrase "in any manner contravene the tenor" of the obligation includes any illicit act or omission which impairs the strict and faithful fulfillment of the obligation and every kind of defective performance.00. he shall be liable for those damages that are the natural and probable consequences of the breach of the obligation and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. .00 was solely for the windmill assembly and its installation. exclusive of other incidental materials needed for the project.M. the P15.T. Ratio The essential elements of a cause of action are: [1] the existence of a legal right of the plaintiff. and those who in any manner contravene the tenor thereof are liable for damages. allow the award of such damages in breaches of contract where the defendant acted in bad faith. .Indisputably. -14 March 1988: due to the refusal and failure of respondent to pay the balance.The respondent judge. . the essential elements of a cause of action are present. entered into the aforesaid contract with the evident intention of deriving some profits therefrom.

Obligations and Contracts 1. the date of the decision of the trial court in Civil Case No. a writ of execution was forthwith. 2000 and its resolution dated July 11. . Reasoning Tanguilig has not complied with his obligation to repair the windmill system. -If the price of P60. the action was already barred by prescription. (b) the event must be either unforeseeable or unavoidable. herein co-petitioners Sandra Joy and Ray Steven. -If indeed the deep well were part of the windmill project. An alias writ of execution was. 13357. otherwise the windmills will not turn. alias Felix Khe. If SPGMI was really commissioned by petitioner to construct the deep well. 4. a strong wind should be present in places where windmills are constructed. went to Butuan City on January 17. Said writ of execution. Reasoning There was no contract between Pili and Tanguilig for the construction of Herce’s deep well. Reasoning When the windmill failed to function properly it became incumbent upon petitioner to institute the proper repairs in accordance with the guaranty stated in the contract.000. 1997. 3. resulting in the total loss of the shipment. their contemporaneous & subsequent acts shall be principally considered. the intention of the parties shall be accorded primordial consideration and. American Home instituted a civil case to recover the money paid to the consignee. Ratio NO.000. they discovered that petitioner Khe Hong Cheng no longer had any property and that he had conveyed the subject properties to his children. On the contrary. and. based on breach of contract of carriage.Having been subrogated into the rights of the consignee. to enforce the alias writ of execution. petitioner Khe Hong Cheng executed deeds of donations of parcels of land in favor of his children. Zamboanga del Norte. 1997.While the case was still pending. 2. accompanied by counsel of respondent Philam. (Nakpil v CA) Reasoning Petitioner failed to show that the collapse of the windmill was due solely to a fortuitous event. neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.Petitioner Khe Hong Cheng. (d) the debtor must be free from any participation in or aggravation of the injury to the creditor. including respondent Philam.00 (the value of the copra) to the consignee. . Ratio TANGUILIG. is the owner of Butuan Shipping Lines. (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner. 1989. FACTS . Art. . Labitag KHE HONG CHENG V COURT OF APPEAL KAPUNAN. -The presumption that "things have happened according to the ordinary course of nature and the ordinary habits of life" has not been rebutted by petitioner. . Respondent Philam alleged. 1174 of the Civil Code the event should be the sole and proximate cause of the loss or destruction of the object of the contract. the prescriptive period began to run only from December 29. Four requisites must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor. . or more than four (4) years after said registration. the obligation of respondent was to pay the entire amount to petitioner without prejudice to any action that Guillermo Pili or SPGMI may take. they should not be disturbed. from the finality of decision. CC: In reciprocal obligations. They posited that the registration of the deeds of donation on December 27. the same shall be executed at his cost.M/V PRINCE ERIC sank somewhere between Negros Island and Northeastern Mindanao. within 3mos.The Philippine Agricultural Trading Corporation shipped on board the vessel M/V PRINCE ERIC. Tanguilig ordered to reconstruct subject defective windmill system. against the latter. A2010 page 21 Prof. Reasoning The words "deep well" preceded by the prepositions "for" and "suitable for" were meant only to convey the idea that the proposed windmill would be appropriate for a deep well pump with a diameter of 2 to 3 inches. Herce. that petitioner executed the aforesaid deeds in fraud of his creditors. . 1993.The trial court rendered judgment against petitioner in the civil case on December 29. however. paid the amount of P354. The alleged letter was never presented in court. the insurer. four years after the donations were made and the TCTs were registered in the donees’ names ordering him to pay herein respondents. owned by petitioner Khe Hong Cheng.After the said decision became final and executory.The trial court denied the motion to dismiss. 1993. the contract for its installation would have been strictly a matter between petitioner and Pili himself with the former assuming the obligation to pay the price. American Home. . It held that respondent Philam's complaint had not yet prescribed. . Petitioners’ Claim Petitioners moved for its dismissal on the ground that the action had already prescribed. applied for and granted. March 28. Civil Code provisions on "payments made by a third person” do not apply in the instant case as no creditor-debtor relationship has been established between the parties. He can not claim exemption by reason of force majeure. 1167. . . in case of doubt. . 5. Masbate. In interpreting contracts. CC: if a person obliged to do something fails to do it. Ratio NO. Because of the loss.000 with interest. 2000 denying the motion for reconsideration of the aforesaid decision. was not served. for delivery to Dipolog City. seeking to set aside the decision of the Court of Appeals dated April 10. Jr directed to pay balance of P15. A strong wind in this case cannot be fortuitous — unforeseeable nor unavoidable. When the sheriff. the sheriff found no property under the name of Butuan Shipping Lines and/or petitioner Khe Hong Cheng to levy or garnish for the satisfaction of the trial court's decision. Art. or on December 20. Ratio YES. In order for a party to claim exemption from liability by reason of fortuitous event under Art. Where the terms of the instruments are clear and leave no doubt as to their meaning.The said shipment of copra was covered by a marine insurance policy issued by American Home Insurance Company (respondent Philam's assured).Respondent Philam filed a complaint for the rescission of the deeds of donation executed by petitioner Khe Hong Cheng in favor of his children and for the nullification of their titles. 2001 NATURE Petition for Review on Certiorari under Rule 45.400 bags of copra at Masbate. Ratio NO. 3. an agreement particularly to this effect should have been entered into. Disposition Judgment modified. 1169. in accordance with the one-year guaranty.Despite earnest efforts. if any.00 included the deep well. thereafter. -The claim of Guillermo Pili of SPGMI that Herce Jr. According to the trial court. wrote him a letter asking him to build a deep well pump as part of the price/contract Herce had with Tanguilig is unsubstantiated. 1989 constituted constructive notice and since the complaint a quo was filed only on February 25.

Respondent Philam had no inkling. 2) the issuance by the trial court of a writ of execution for the satisfaction of the judgment. 2. i. It was only then that respondent Philam's action for rescission of the deeds of donation accrued because then it could be said that respondent Philam had exhausted all legal means to satisfy the trial court's judgment in its favor. the decision of the trial court against the debtor will retroact to the time when the debtor became indebted to the creditor.Even if respondent Philam was aware. 1989.Respondent Philam only learned about the unlawful conveyances made by petitioner Khe Hong Cheng in January 1997 when its counsel accompanied the sheriff to Butuan City to attach the properties of petitioner Khe Hong Cheng.e. . as of December 27. Citing Articles 1381 and 1383 of the Civil Code. The Court enunciated the principle that it is the legal possibility of bringing the action which determines the starting point for the computation of the prescriptive period for the action. SIGUAN V LIM DAVIDE. when there is no special provision which ordains otherwise. Had respondent Philam filed his complaint on December 27. The CA reckoned the accrual of respondent Philam's cause of action on January 1997. 5) That the third person who received the property conveyed. NO. and 3) the failure of the sheriff to enforce and satisfy the judgment of the court. payable to “cash”. had no more properties in his name. 4) That the act being impugned is fraudulent. the general rule. November 19. . The date of the decision of the trial court is immaterial. There they found that he no longer had any properties in his name.668. 2000. the time when it first learned that the judgment award could not be satisfied because the judgment creditor. from the moment the cause of action accrues. as prescribed under Article 1383 of the Civil Code. 3) That the creditor has no other legal remedy to satisfy his claim. It bears stressing that petitioner Khe Hong Cheng even expressly declared and represented that he had reserved to himself property sufficient to answer for his debts. the following requisites must concur: 1) That the plaintiff asking for rescission has a credit prior to the alienation. if by onerous title. respondent Philam had not yet exhausted all legal means for the satisfaction of the decision in its favor.An action to rescind or an accion pauliana must be of last resort.Art.” Since this provision of law is silent as to when the prescriptive period would commence. 1993. What is important is that the credit of the plaintiff A2010 page 22 Prof.. . FACTS . it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. the CA affirmed the trial court's decision in favor of respondent Philam. . “The action to claim rescission must be commenced within four years. petitioner Khe Hong Cheng. ISSUE 1. such complaint would have been dismissed for being premature. availed of only after all other legal remedies have been exhausted and have been proven futile.An accion pauliana thus presupposes the following: 1) A judgment. Ratio Article 1389 of the Civil Code simply provides that. . To count the four year prescriptive period to rescind an allegedly fraudulent contract from the date of registration of the conveyance with the Register of Deeds. the creditor has no other legal remedy to satisfy his claim. The time for prescription for all kinds of actions. would run counter to Article 1383 of the Civil Code as well as settled jurisprudence. 2. i. applies. as alleged by the petitioners. Upon presentment by petitioner with .On appeal by petitioners. 2) That the debtor has made a subsequent contract conveying a patrimonial benefit to a third person.On 25 and 26 August 1990 LIM issued two Metrobank checks in the sums of P300K and P241. Prior thereto. that petitioner Khe Hong Cheng had executed the deeds of donation in favor of his children. After all. at the time. the complaint against Butuan Shipping Lines and/or petitioner Khe Hong Cheng was still pending before the trial court.Petitioners’ motion for reconsideration was likewise dismissed in the appellate court's resolution dated July 11. WON the action to rescind the donations has already prescribed. 1150. For an accion pauliana to accrue. that the trial court's judgment would be in its favor and further. . Disposition The petition was DENIED for lack of merit. and not when the decision in the civil case became final and executory on December 29. that such judgment would not be satisfied due to the deeds of donation executed by petitioner Khe Hong Cheng during the pendency of the case. The CA declared that the action to rescind the donations had not yet prescribed. 1997. Not only were all other legal remedies for the enforcement of respondent Philam’s claims not yet exhausted at the time the deeds of donation were executed and registered. Respondent Philam would also not have been able to prove then that petitioner Khe Hong Chneg had no more property other than those covered by the subject deeds to satisfy a favorable judgment by the trial court. has been an accomplice in the fraud. barely a month from its discovery that petitioner Khe Hong Cheng had no other property to satisfy the judgment award against him. Reasoning Petitioners argument that the Civil Code must yield to the Mortgage and Registration Laws is misplaced. for in no way does this imply that the specific provisions of the former may be all together ignored. When did the four (4) year prescriptive period as provided for in Article 1389 of the Civil Code for respondent Philam to file its action for rescission of the subject deeds of donation commence to run? HELD 1. An action for rescission is subsidiary. The action to rescind the donations has already prescribed. therefore. 1999 NATURE This is a petition for review on certiorari of a decision of the Court of Appeals. It requires that the creditor has exhausted the property of the debtor. Labitag antedates that of the fraudulent alienation by the debtor of his property. the CA ruled that the four year period to institute the action for rescission began to run only in January 1997.e. but would benefit by rescission of the conveyance to the third person.Art. although demandable later.Obligations and Contracts . It would likewise violate the third requisite to file an action for rescission of an allegedly fraudulent conveyance of property. its action for rescission of the subject deeds clearly had not yet prescribed. Since respondent Philam filed its complaint for accion pauliana against petitioners on February 25. 1383. 1989. . respectively. shall be counted from the day they may be brought.

1384. therefore the Court has jurisdiction to review errors of fact of the case. 23. . is not a party to the accion pauliana. and is therefore not rescissible.20 February 1998 CA reversed RTC’s decision and dismissed petitioer’s accion pauliana. the Deed of Donation made by LIM in favor of her children was not executed in fraud. . . 2. when the Deed was executed. Only the creditor who brought the action for rescission can benefit from the rescission (Art.In an attempt to support the case for rescission. Civil Code).For accion pauliana to prosper. the sum of P10K moral damages.As regards the questioned Deed of Donation. and this must be proved as one of the bases of the judicial pronouncement setting aside the contract. she asserted that it was not antedated but was made in good faith at a time when she had sufficient property. the checks were dishonored for the reason that the account was already “closed. of the fact which gave rise to their execution and of the date of the latter.A criminal case for violation of Batas Pambansa Blg. because two requisites for said action was absent: 1. . . GENERAL RULE: rescission requires existence of creditors at the time of the alleged fraud.As for the awards of moral damages. alienation is maintained. On 29 December 1992 the RTC of Cebu City a quo convicted LIM as charged. the following must be present: • plaintiff asking for rescission has a credit prior to the alienation. SEC. having been acknowledged before a notary public. has been an accomplice in the fraud. even against a third person. The revocation is only to the extent of the plaintiff creditor’s unsatisfied credit. P10K attorney’s fees. Public documents as evidence.On 2 July 1991 a Deed of Donation conveying parcels of land and purportedly executed by LIM on 10 August 1989 in favor of her children. or the intent to commit the fraud. The Deed was registered only 2 July 1991 because she was seriously ill. therefore. which was the reason she appealed to the CA.” Demands to make good the checks proved futile. – xxx All other public documents are evidence. She claimed that her convictions in criminal cases 22127-28 were erroneous. accion pauliana – action to rescind contracts in fraud of creditors. . there must be a fraud. 22 was filed against LIM. Respondents’ Comment . Action for rescission is a subsidiary remedy only. Rule 132.Contracts entered in fraud may be rescinded only when the creditors cannot in any manner collect the claims due them. Intramuros. W/O any prior existing debt. This includes “Documents acknowledged before a notary public except last wills and testaments…” . 4) directed the LIMs to pay the petitioner jointly and severally.Obligations and Contracts the drawee bank. . Petitioner claimed therein that sometime in July 1991 LIM. She cannot be said to have been prejudiced or defrauded by such alienation. 2) declared null and void the transfer certificates of title issued in the name of LIM’s children.Philippine Bar Association (PBA) decided to construct an office building on its 840 square meter lot located at the corner of Aduana and Arzobispo Streets. Petitioner’s Claim .. It is evidence of the fact which gave rise to its execution and of its date (Sec. petitioner brought up the criminal case involving Victoria Suarez. . through a Deed of Donation. creditor has no other legal remedy to satisfy his claim. that LIM conspired and confederated with her children in antedating the questioned Deed. the trial court made these awards without stating any justification in their ratio decidendi. Reasoning The facts of the RTC and the CA regarding the execution of the Deed are conflicting. Rules of Court) Court is not convinced that it was antedated.LIM was also convicted of estafa by the RTC of Quezon City filed Victoria Suarez. rescissible HELD Ratio No. New transfer certificates of title were thereafter issued in the names of the donees. Art.On 23 June 1993 petitioner filed an accion pauliana against LIM and her children. including her. there can neither be no injury nor fraud.The Deed of Donation executed is a public document. A2010 page 23 Prof. fraudulently transferred all her real property to her children in bad faith and in fraud of creditor. act impugned is fraudulent. . However the Supreme Court acquitted LIM but found her civilly liable in the amount of P169K. the 3rd person who received the property conveyed (if by onerous title). Suarez. as to the excess. 23. The petitioner was not able to prove that she had exhausted other legal means to obtain reparation for the same. Labitag • • • debtor has made a subsequent contract conveying a patrimonial benefit to a 3rd party. 1986 NATURE Petitions for certiorari to review the decision of the Court of Appeals FACTS . P5K as expenses of litigation. 759 of Civil Code states that donation is always presumed to be in fraud of creditors when the donor did not reserve sufficient property to pay his debts prior to donation. This was affirmed by CA. . albeit a creditor prior to the alienation. residential lots which were sufficient to cover the debts.LIM denied any liability to petitioner. etc. In addition. trial court ordered the rescission of the questioned deed of donation.On 31 December 1994. • JUAN NAKPIL & SONS V COURT OF APPEALS PARAS. However. a house and lot. 3) ordered Registered of Deeds of Cebu to cancel said titles and to reinstate the previous titles in the name of LIM.Fourth requisite for accion pauliana not present either. ISSUE WON the Deed of Donation executed by respondent Rosa LIM in favor of her children was made in fraud of Petitioner and. Petitioner’s alleged credit existed only a year after the deed of donation was executed. October 3. was registered with the Register of Deeds of Cebu. LIM had properties such as farming lands. there must be a credit existing prior to the celebration of the contract. . Subsidiary remedy – the exhaustion of all remedies by the prejudiced creditor to collect claims due him before rescission is resorted to. .

. Nakpil & Sons. FACTS . REPUBLIC V LUZON STEVEDORING CORPORATION REYES. Petitioners Nakpil and UCCI on the other hand claimed that it was an act of God that caused the failure of the building which should exempt them from responsibility.000 to be paid by the contractor and architects jointly. c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner. PBA claims that the collapse was due to defects in the construction. It filed before the Supreme Court. Mr. 1966. the parties agreed to refer the technical issues involved in the case to a Commissioner. On the other hand. 1967 NATURE APPEAL from a decision of the Court of First Instance of Manila. exempts from liability. ISSUES 1. .No. United Construction Inc. . when the barge rammed against one of the wooden piles of the Nagtahan bailey bridge. the defects in the construction and in the plans and specifications were the proximate causes that rendered the PBA building unable to withstand the earthquake. To be exempt. A pre-trial was conducted during which.In the early afternoon of August 17. negligence. Technical issues involve question regarding the design and construction of the building. . and contractors for damages due to defects in the construction.28. The front columns of the building buckled. or aggravation of the injury to the creditor. filed a third-party complaint against the architects Nakpil alleging that the collapse was due to the defects in the said plans and specifications. he must be free from any previous negligence or misconduct. the building was shored up by United Construction at the cost of P13. the obligor cannot escape liability. September 29. was swollen and the current swift.Trial court found said company liable.which caused the failure of the building. The river. among others.1174 of the new Civil Code for a breach of obligation due to an act of God. Andres Hizon. The contractor was United Construction Inc. and the more competent and experienced among its patrons. three more earthquakes occurred and with the PBA’s request.1723 of the New Civil Code which holds the architects liable for damages on the building due to defects in the design. were inevitable. such person is not exempt from liability by showing that the immediate cause of the damage was the act of God. deviations from said plans and specifications by the contractor and failure of the contractor to observe the requisite workmanship in the construction of the building.000. UCCI was found to have made substantial deviations from the plans and specifications. . All parties involved appealed and the CA affirmed the decision of the trial court but modified the decision by granting PBA an additional P200. WON the collision of appellant’s barge with the supports or piers of the Nagtahan bridge was in law caused by fortuitous event or force majeure. parties who are otherwise liable because of their negligence HELD . the ff must concur: a) the cause of the breach of obligation must be independent of the will of the debtor. b) the event must be unforeseeable or unavoidable. The trial court agreed with the findings of the Commissioner. pains A2010 page 24 Prof. and . 1960. applicable law is Art. ISSUE WON an act of God. Thus it has been held that when the negligence of a person concurs with an act of God in producing a loss.3 magnitude) hit Manila and the building in question sustained major damage.an unusually strong earthquake. The building was completed in June.An act of God has been defined as an accident. As correctly assessed by both courts. reasonably to have been expected. the failure of contractors to follow plans and specifications and violations by the defendants of the terms of the contract. On the other hand. In the early morning of August 2.Republic of the Philippines sued for actual and consequential damage caused by the said company’s employees amounting to 200. on account of the heavy downpour of Manila and the surrounding provinces on August 15 and 16. and d) the debtor must be free of any participation in. .The Commissioner submitted his report which stated that the damage sustained by the PBA building was directly caused by the earthquake and was also caused by the defects in the plans and specifications prepared by the architects. 661. and the architect was Juan F. the general rule is that no person shall be responsible for events which could not be foreseen or which though foreseen. owned by Luzon Stevedoring Corporation was being towed down the Pasig river by tugboats “Bangus” and “Barbero” also belonging to the same corporation. due directly and exclusively to natural causes without human intervention which by no amount of foresight. and to have failed to observe the requisite workmanship in the construction as well as to exercise the requisite amount of supervision. The United Architects of the Philippines and The Philippine Institute of Architects intervened as amicus curiae and submitted a position paper which said that the plans and specifications of the Nakpils were not defective. 1968 PBA commenced action or the recovery of damages arising from the partial collapse of the building. As a temporary remedial measure.The parties appealed from the decision of the CA and thus this petition. Defendant claims that got the strongest tugboats. the building was demolished at their expense. Labitag or care. When asked by the Court to comment. 1960.Obligations and Contracts Manila. could have been prevented.Thus if upon the happening of a fortuitous event or an act of God. at that time. 1968 an unusually strong earthquake (7. the Commissioner reiterated his findings and said that there were deficiencies in the design of the architects which contributed to the collapse of the building. there concurs a corresponding fraud.The negligence of the contractor and the architect was established beyond dispute in both the trial court and the CA.November 29. delay or violation or contravention in any manner of the tenor of the obligation which results in loss or damage. .during the pendency of the case. . Defendant company disclaimed liability on the grounds that it was brought about by force majeure as they exercised due diligence in the selection and supervision of its employees and that the Nagtahan Bailey Bridge is an obstruction to navigation. causing the building to tilt forward dangerously. Nakpil on the other hand were found to have defects in the plans and specifications prepared by them. smashing the posts and causing the bridge to list. . To exempt the obligor from liability under art. barge L-1892.

ISSUE WON Laureano should be liable for damages thus sustained by Dioquino’s car HELD Ratio Laureano has no obligation to pay for the damages sustained due to throwing of stones that broke the windshield. June 10.As Abad failed to return the jewelry or pay for its value notwithstanding demands. the appeal hence is by all three defendants. who hit her and snatched her purse containing the pieces of jewelry and cash.Plaintiff Atty. But actually foreseen. 2. There is no requirement of diligence beyond what human care and foresight can provide. 1970 NATURE Appeal from a decision of the CFI Masbate. . included in the suit are the latter’s wife and father. 1174. are extraordinary events not foreseeable or avoidable. to be sold on commission basis or to be returned on demand. ." In that case then. 1961. HELD 1. or which. or. It was held that defendants failed to prove the fact of robbery. The very precautions adopted by appellant prove that the possibility of danger was not only foreseeable. No. WON it was error for the Court to have permitted the plaintiff-appellee to introduce additional evidence of damages after said party had rested its case.” as a result. Affirmed insofar as it dismissed the case against the two other defendants DIOQUINO V LAUREANO FERNANDO.Defendant was the sole passenger.On Jan.Art. and such negligence did not free her from liability for damages for the loss of the jewelry. whose barges and tugs travel up and down the river everyday. The appellant company. This is up to the sound discretion of the trial Judge. the risk was quite evident and the nature of the obligation such that a party could rightfully be deemed as having assumed it Disposition Wherefore the decision of the lower court assigning liability to Defendant is Reversed.Obligations and Contracts 2. Obiter Exception: Except in cases expressly specified by the law.Dioquino sued Laureano. Reasoning . . Austria brought an action against her and her husband for recovery of the pendant or of its value. defendants spouses set up the defense that the alleged robbery had extinguished their obligation. were inevitable” (Art. Luzon Stevedoring Corp – The mere difficulty to foresee the happening is not impossibility to foresee the same. if indeed it was committed.Republic v. Answering the allegations of the complaint. Pedro Dioquino is the owner of a car which defendant Federico Laureano borrowed. idea or paragraph . For caso fortuito or force majeure (which in law are identical in so far as they exempt an obligor from liability) by definition. voluntarily entered into a situation involving obvious danger. or when the nature of the obligation requires the assumption of risk . when the car was stoned by some “mischievous boys. but actually foreseen. on the sole issue of whether in a contract of agency (consignment of goods for sale) it is necessary that there be prior conviction for robbery before the loss of the article shall exempt the consignee from liability for such loss. though foreseen were inevitable. knowing and appreciating the perils posed by the swollen stream and its swift current.00. “events that could not be foreseen.Luzon Stevedoring Corporation. or which. and was not caso foruito. and was not caso fortuito.On Feb. breaking the windshield . A2010 page 25 Prof.Dioquino prevailed in the lower court but only against principal defendant Laureano. The extraordinary circumstance independent of his will as obligor exempts him of the same by reason of force majeure or caso fortuito. though foreseen. foreseen. . . in place. FACTS NOTE: to separate facts. that defendant Maria Abad was guilty of negligence when she went home without any companion.500. May 28. The incident became the subject of a criminal case against certain persons. FACTS . The mere difficulty to foresee the happening is not impossibility to foresee the same. however. aside from plaintiff’s driver. .What is contemplated in the exception is resulting liability even if caused by a fortuitous event where the party charged may be considered as having assumed the risk incident in the nature of the obligation to be performed.CC). just put dash before each sentence. . wife and father being absolved. . while walking home Abad was said to have been accosted by two men. The very measures adopted by said company prove that the possibility of danger was not only foreseeable. Labitag General Rule: No person shall be responsible for those events which could not be. for years. and damages. . could not safely ignore the danger posed by these allegedly improper constructions that had been erected and.Nonetheless. or when it is otherwise declared by stipulation.Force Majeure or Caso Fortuito are extraordinary events not foreseeable or unavoidable (events that though foreseen. are inevitable) . Maria G. Disposition AFFIRMED. It is not therefore enough that the event should not have foreseen or anticipated as is commonly believed.Trial court rendered judgment for the plaintiff. 1961. Abad acknowledged having received from Guillermo Austria one (1) pendant with diamonds valued at P4. although it was already getting dark and she was carrying a large amount of cash and valuables on the day in question. but it must be one impossible to foresee or to avoid. 1174 of the Civil Code provides: AUSTRIA V COURT OF APPEALS REYES. 1971 NATURE Guillermo Austria petitions for the review of the decision rendered by the Court of Appeals.

and that (3) the obligor must be free of participation in. complete it within 800 calendar days from the date the Contractor receives the formal notice to proceed and to furnish all tools. such debtor must also be free of any concurrent or contributory fault or negligence. and holding that the facts of robbery and defendant Maria Abad's possession of the pendant on that unfortunate day have been duly established. 2. The court also found that NPC had known of the coming of the typhoon 4 days prior to it actually hitting the area. 4. i. damaging or destroying its stockpile of materials and supplies. that the same rule should obtain ten years previously. . it is necessary that (1) the event must be independent of the human will (or rather. May 16." . Bulacan. in returning alone to her house in the evening.ECI executed a contract with NAWASA on Aug. that the heavy rains brought about by the typhoon was an extraordinary occurrence that they could not have foreseen. WON CA erred in reducing the consequential damages from P 333. which reads as follows: " ART. 1967. Thus. The conduct of respondent Maria G. . FACTS . To avail of the exemption granted in the law. Abad. WON Court of Appeals erred in finding that there was robbery in the case. though foreseen.On the other hand.Obligations and Contracts . did take place without any concurrent fault on the debtor's part. the injury to the creditor. Those who in the performance of their obligations are guilty of fraud. or delay." . 1988 NATURE -consolidated petitions filed by NAPOCOR (NPC) and ECI seeking to set aside the decision of Court of Appeals in holding NPC liable for damages against Engineering Construction. The opening of the gates caused an extraordinary large volume of water to rush out. that renders travel after nightfall a matter to be sedulously avoided without suitable precaution and protection. Petitioner NPC contends that this CA decision is erroneous on the ground that the destruction and loss of ECI’s equipment and facilities were due to force majeure. camp facilities. Plaintiff thereupon instituted the present proceeding. it is not necessary that the persons responsible for the occurrence should be found or punished.. ISSUE 1. . To constitute a caso fortuito that would exempt a person from responsibility. not on the agents or factors responsible for them. providing that: "ART. No. and in either case at the rate of P 4K daily. 2. 4. WON respondent CA erred in holding NPC liable for damages 2. Labitag NATIONAL POWER CORPORATION V CA GUTIERREZ. Thus. 1170. to construct the 2nd IpoBicti Tunnel in Norzagaray. in 1961. WON Abad was guilty of negligence. 1964. It is undeniable that in order to completely exonerate the debtor for reason of a fortuitous event. with their high incidence of crimes against persons and property. and would not exempt her from responsibility in the case of a robbery. The construction of the tunnel covered an area that included the Ipo river where the Ipo Dam (Angat Hydro-electric Project and Dam) of defendant NPC is located. ISSUES 1. are liable for damages. Disposition Petition in this case is hereby dismissed. the trial court and the appellate court found NPC negligent and held liable for the damages. hitting the installations and construction works of ECI.On Nov. bonus for earlier completion and liquidated damages for delayed performance.The Court of Appeals sustained the findings of the trial court that the maintainers of the dam opened the gates when the typhoon was already at its height. This is apparent from Article 1170 of the Civil Code of the Philippines. We are not persuaded. permanent structures and accessories. although nobody has been found guilty of the supposed crime. for at that time criminality had not by far reached the levels attained in the present day. when the robbery in question did take place. thus extinguishing Abad’s liability.It is clear that under the circumstances prevailing at present in the City of Manila and its suburbs.200 to P 19. WON CA erred in reducing attorney’s fees from P 50K to P 30K . Thus to prevent overflow. WON CA erred in eliminating exemplary damages 4. A2010 page 26 Prof.CA reversed the judgment on the basis of the lack of credibility of the two defense witnesses who testified on the occurrence of the robbery. reaching the danger level of 212 m above sea level. Effectively washing away. the said award of P 120K is justified. since NPC's negligence compelled work stoppage for a period of one month. Inc. labor. attorney’s fees and for eliminating exemplary damages awarded to ECI by the trial court. with costs against the petitioner. of the debtor's or obligor's). it only can claim rentals for the temporary use of the leased crane for a period of one month. Except in cases expressly specified by law. or when the nature of the obligation requires the assumption of risk. and this can be done by preponderant evidence.The point at issue in this proceeding is how the fact of robbery is to be established in order that a person may avail of the exempting provision of Article 1174 of the new Civil Code. no person shall be responsible for those events which could not be foreseen. (2) the occurrence must render it impossible for the debtor to fulfill the obligation in a normal manner. when they knew full well that it was far safer to open them gradually. were inevitable. . would be negligent per se.e. equipment. carrying jewelry of considerable value. or when it is otherwise declared by stipulation. typhoon “Welming” struck the project area and bringing with it heavy rains and causing water in the reservoir of Angat Dam to rapidly rise.200 to P 19K on the grounds that the appellate court had no basis in concluding that ECI acquired a new Crawler-type crane and therefore. the robbery in this case. and that the award of P 4K a day or P 120K a month bonus is justified since the period limitation on ECI's contract with NAWASA had dual effects. NPC caused the opening of the spillway gates. 1174. or aggravation of. and materials needed. or which.000 3. HELD 1. and those who in any manner contravene the tenor thereof. declared respondents not responsible for the loss of the jewelry on account of a fortuitous event. negligence. No. ECI assails the CA’s reduction of the consequential damages awarded by the trial court from P 333. it would only be sufficient to establish that the unforeseeable event. (ECI) and for reducing the consequential damages. however.The emphasis of the provision is on the events.

Even though the typhoon was an act of God or force majeure. No bonus. whether it be active intervention.The tire that exploded. this is question of fact which properly falls within the jurisdiction of the CA and will not be disturbed by this Court unless it is clearly unfounded. It is settled that the SC is not a trier of facts. a separate charge was filed against the Philippine Phoenix Surety and Insurance but was dismissed . however was a new one installed only five days before the incident.When a passenger boards a common carrier. there is no reason why ECI should opt to rent a temporary crane for a period of one year. More so. underwent driving tests before they were employed ISSUE WON the explosion of a newly installed tire of a passenger vehicle is a fortuitous event that exempts the carrier from liability for the death of passenger HELD .Obligations and Contracts HELD 1. it included the said amount in the award of compensatory damages.CC 1755 provides that passengers must be carried safely as far as human care and foresight can provide. Leny cautioned the driver that the bus was running fast but he merely stared at her .Furthermore. 2. the left front tire of the bus exploded. which use petitioner ECI alleged to have lasted for a period of one year. when a passenger is injured or dies while traveling. thus. unless the defendant proves that the case was caso fortuito. fraudulent. could have been possibly earned by ECI at that point in time. It is not supposed to weigh evidence and will generally not disturb findings of fact when supported by substantial evidence. Ratio Findings of fact of the CA are generally final and conclusive upon the SC. It is not shown that NAWASA imposed them.However. must be independent of human will o It must be impossible to foresee the event which constitutes the caso fortuito. it must be impossible to avoid o The occurrence must be such as to render impossible for the debtor to fulfill his obligation in a normal manner o The obligor must be free from any participation in the aggravation of the injury resulting to the creditor . Reyes.Complaint for breach of contract was filed by Leny against the owner of the bus.During the trip to Davao. the whole occurrence is humanized and therefore removed from the rules applicable to the acts of God. A contrary ruling would result in the unjust enrichment of ECI. long after the stipulated deadline (within 800 calendar days) to finish the construction. neglect or failure to act. NPC cannot escape liability because its negligence was the proximate cause of the loss and damage. The offer was made by Asian Enterprises a few days after the flood. v. CA.The P 120K bonus was also properly eliminated as the same was granted by the trial court on the premise that it represented ECI's lost opportunity "to earn the one month bonus from NAWASA. There are no compelling reasons to set aside the appellate court’s finding that the latter amount suffices for the services rendered by ECI’s counsel. totaling P 120K plus the fact that there was already a sales contract between it and Asian Enterprises. therefore. a sales contract was presented to the effect that the new crane would be delivered to it by Asian Enterprises within 60 days from the opening of the letter of credit at the cost of P 106." The loss or damage to ECI's equipment and facilities occurred more than 3 years or 1.This caused the death of Tito TUmboy and physical injuries to other passengers . 3. reckless or oppressive manner. 1997 FACTS . No. The supposed liquidated damages for failure to finish the project within the stipulated period or the opposite of the claim for bonus is not clearly presented in the records of these petitions. Therefore. October 17. in which the bus fell into ravine .170 days after the execution of the contract. but not the value of the new crane.75.336. The appellate court also found that the damaged crane was subsequently repaired and reactivated and the cost of repair was P 77K. Ratio As held in Juan Nakpil & Sons v. We do not find anything erroneous in the decision of the appellate court that the consequential damages should represent only the service of the temporary crane for one month. he takes the risks incidental to the mode of travel he has taken as a carrier is not an insurer of the safety of its passengers and is not bound absolutely and at all events to carry them safely and without injury . with a due regard for all circumstances . When the effect is found to be in part the result of the participation of man. while there was no categorical statement or admission on the part of ECI that it bought a new crane to replace the damaged one. there even be no need to make an express finding of negligence or fault . 4. the act of God doctrine requires that the act must be occasioned exclusively by the violence of nature and human agencies had no part therein. the law presumes that the carrier is negligent based on CC Art. The Yobidos used as a defense that the case was a caso fortuito. 1756. The appellate court found that there was no bad faith on the part of NPC and that neither can its negligence be considered gross. or if it can be foreseen. Disposition Petitions are both dismissed for lack of merit A2010 page 27 Prof.Liability for a tire blow-out is not a fortuitous event as the requisites for these are o The Cause of the unforeseen and unexpected occurrence or the failure of the debtor to comply with his obligations. Alberta Yobido and its driver. If carrier be unable to debunk this presumption. as this is the presumption in culpa contractual. . Drivers on the other hand. together with their minor children boarded a Yobido Liner bus bound for Davao City from Surigao del Sur . Comparing the amount for a brand new crane and paying the alleged amount of P 4K a day as rental for the use of a temporary crane. From the findings of the appellate court.But while driving in Agusan del Sur. using utmost diligence of very cautious persons. . No. Labitag YOBIDO V COURT OF APPEALS ROMERO. No. No. Ratio As was held in Dee Hua Liong Electrical Equipment Corp.Tito and Lenoy Tumboy. exemplary damages cannot be awarded to private respondent because petitioner is not shown to have acted in a wanton.

HELD 1. 1957 BMMC and Alonso Gatuslao executed an 'Extension and Modification of Milling Contract' so that from the crop year 1957-1958 up to crop year 1973-1974. WON the closure of BMMC’s railroad lines constitutes force majeure.Driver must have taken precautionary measures given the circumstances but the driver did not do anything to this effect . Alonso Gatuslao will be milling all the sugarcane grown and produced on his plantation with the Mill of BMMC. BMMC had been hauling planter Gatuslao's sugar cane to its mill or factory continuously until the crop year 1967-68. damages may be recovered in breach of contract of carriage resulting in the death of a passenger.Obligations and Contracts . seeking specific performance under the milling contract executed on May 24. . with a speed a little less than the speed limit. 1968.The two cases were concolidated and the trial court ruled in favor of Alonso Gatuslao. . the corresponding right of way of the owners of the hacienda Helvetia granted to the Central also expired.On October 30. being a registered owner of Lot Nos. INC. When their milling contracts with BMMC expired at the end of the 1964-1965 crop year. known as Hacienda San Roque. notwithstanding exemplary damages as the carrier through its driver acted recklessly A2010 page 28 Prof.The fact that a new tire was installed nor even the existence of force majeure does not imply caso fortuito immediately as the carrier must still prove that it was not negligent in causing the death or injury resulting from the accident . there subsists no right of way to be protected. February 7. . 3. the restraining order be made permanent and the orders complained of be annulled and set aside. . In the same case the Court ruled that the Central's conventional right of way over the hacienda Helvetia ceased with the expiration of its amended milling contracts with the landowners of the hacienda at the end of the 1964-1965 crop year and that in the absence of a renewal contract or the establishment of a compulsory servitude of right of way on the same spot and route which must be predicated on the satisfaction of the preconditions required by law. FACTS . 1957 between plaintiff and defendant Alonso Gatuslao praying for the issuance of writs of preliminary mandatory injunction to stop the alleged violation of the contract by Alonso Gatuslao in confederation with BM-ACMA. Negros Occidental. inclusive. sued BMMC for breach of contract.MURCIA MILLING CO. moral and exemplary damages and attorney's fees. when the following elements concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor. In the same case the landowners asked this Court to restrain the lower court from enforcing the writ of preliminary injunction it issued.BMMC is the owner and operator of the sugar central in Bacolod City. V CA PARAS. No. Alonso Gatuslao. . obstructing or in any way preventing the passage and operation of plaintiff's locomotives and cane cars over defendants' property during the pendency of the litigation and maintained the same in its subsequent orders of May 31. WON Gatuslao and BM-ACMA are guilty of bad faith in the exercise of their duties and are in estoppel to question the adequacy of the transportation facilities of BMMC and its capacity to mill and haul the canes of its adherent planters. and November 26. for the issuance of a writ ordering defendant to immediately send transportation facilities and haul the already cut sugarcane to the mill site and to declare the rescission of the milling contract executed by plaintiffs and defendant in 1957 for seventeen (17) years or up to crop year 1973-74.000 pesos .There were human factors involved in this case that showed negligence such as the failure of the driver to slow down despite the caution by a passenger. praying that after the hearing on the merits. WON Gatuslao has the right to rescind the milling contract with BMMC. ISSUES 1. Ratio An obligor is exempted from liability for a breach of an obligation due to an act of God.Thus. AIDSISA. Labitag . (b) the debtor BACOLOD. ALONSO GATUSLAO is a registered planter of the Bacolod-Murcia Mill District. 1965. 140. the Yobidos are held liable for damages amounting to 50.Since the crop year 1920-21 to crop year 1967-1963. however.For failing to overthrow the presumption of negligence with clear an convincing evidence. 1987 affirming in toto the decision of the CFI of Negros Occidental in two consolidated civil cases.The outcome of the case. Plaintiffs further prayed for the recovery of actual and compensatory damages as well as moral and exemplary damages and attorney's fees. The Court gave due course to the landowner's petition and on August 10. on a road that was rough.While moral damages are not recoverable in culpa contractual.BMMC filed a complaint for legal easement against the owners of the hacienda. BMMC constructed the railroad tracks in 1920 and the adherent planters granted the BMMC a right of way over their lands as provided for in the milling contracts. 141 and 101-A of the Cadastral Survey of Murcia. the canes of planters adhered to the mill of BMMC were transported from the plantation to the mill by means of cane cars and through railway system operated by BMMC. On May 24. et al. with the CFI of Negros Occidental which issued on October 4. invoking as ground the alleged failure and/or inability of defendant to comply with its specific obligation of providing the necessary transportation facilities to haul the sugarcane of Gatuslao from plaintiff's plantation specifically for the crop year 1967-1968. (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner. . Philippines. 1967 issued the writ of preliminary injunction enjoining the lower court from enforcing the writ of preliminary injunction issued by the latter on October 4. the AgroIndustrial Development of Silay-Saravia (AIDSISA) and the BM-ACMA. .. and for the recovery of actual. 1990 NATURE Petition for review on certiorari of the decision of the CA promulgated on September 11. winding and wet due to the rain . the BMMC was unable to use its railroad facilities during the crop year 19681969 due to the closure in 1968 of the portion of the railway traversing the hacienda Helvetia. 1966. 310. 2. was not favorable to BMMC. (b) the event must be either unforseeable or unavoidable. 4. 1965 an ex parte writ of preliminary injunction restraining the landowners from destroying the railroad tracks in question and from impeding. inclusive. CA affirmed. WON Gatuslao was justified in violating his milling contract with BMMC.BMMC filed in the same court a civil case against Alonso Gatuslao.

as such party is a debtor and creditor of the other. so that resolution of this issue ultimately rests on whether or not BMMC was able to provide adequate and efficient transportation facilities of the canes of Gatuslao and the other planters milling with BMMC during the crop year 1968-1969. INC TINGA. was to expire in 1991. Disposition Petition is DENIED for lack of merit and the decision of the CA is AFFIRMED in toto. the closure of the railway located inside said plantation paralyzed the entire transportation system. PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION V GLOBE TELECOM. As a result. The mode of transportation is a vital factor in the sugar industry. not necessarily in the hacienda Helvetia but in any of the properties whose owners decided not to renew their milling contracts with the Central upon their expiration. Reasoning The terms of the milling contracts were clear and undoubtedly there was no reason for BMMC to expect otherwise. Araneta. Yes and No.Obligations and Contracts must be free from any participation in. was forseeable and inevitable. The signing of the milling contract between AIDSISA and B-M ACMA was a matter of selfpreservation inasmuch as the sugarcanes were already matured and the planters had crop loans to pay. such that the obligation of one is dependent upon the obligation of the other. Pres. More importantly. 3. Inc. Globe in turn entered into an Agreement with the Philippine Communications Satellite Corp. J. BMMC cannot claim enforcement of the contract. & 4. It was due to the termination of the contractual relationships of the parties. 2. the answer is in the negative. notified BMMC as far back as August or September 1965 of its intention not to allow the passage of the railway system thru its land after the aforesaid crop year. respectively. The American companies in turn contracted with Globe for the use of their communication facilities. He has the right to rescind the milling contract and neither the court a quo erred in decreeing the rescission claimed nor the CA in affirming the same. or aggravation of the injury to the creditor. They are to be performed simultaneously so that the performance of one is conditioned upon the simultaneous fulfillment of the other. Thus. troops personnel. [were treated as one] Ratio The power to rescind obligations is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him. Inc. but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. the B-M ACMA cannot be faulted for organizing itself to take care of the needs of its members. globe coordinated the provision of various communication facilities for US military bases in Clark Air Base and Subic Naval Base -the US Defense Communications Agency (USDCA) contracted with American companies to operate its communication facilities for its military bases. if the quantity and quality of the juice are to be assured. however. for which petitioner is charged with knowledge. Labitag and Gatuslao is the injured party. Further delay would mean tremendous losses. The party who deems the contract violated may consider it revoked or rescinded pursuant to their agreement and act accordingly. both parties knew the RP-US Military Bases Agreement. operate and provide an IBS Standard B earth station for the use of USDCA. the basis for the occupancy of the Clark and Subic bases. Likewise. All its efforts were geared toward the outcome of the court litigation but provided no solutions to the transport problem early enough in case of an adverse decision. which is located at the entrance of the mill. precisely for this reason the mode of transportation or hauling the canes is embodied in the milling contract. not too early or too late. 2004 NATURE Petition for review on certiorari of a decision of the Court of Appeals FACTS -for several years before 1991. (Philcomsat) for a term of 5 years. But BMMC is now unable to haul the canes by railways as stipulated because of the closure of the railway lines. Unfortunately. further seeking the withdrawal of all US military forces by 12/31/92 8/06/92: Globe notified Philcomsat of its intention to discontinue the use of the earth stations in view of the withdrawal of the US forces invoking Sec 8 of their Agreement w/c states: . the closure of the railway lines was not an act of God nor does it constitute force majeure.. Angela Estate. its facilities. Conversely. shall not be allowed into the Philippines unless a new treaty is concurred in by the Senate and ratified by a majority vote of the people in a national referendum. BMMC is guilty of breach of the conditions of the milling contract A2010 page 29 Prof. with the payment of damages in either case. 141. was the one which refused to renew its milling contract. the offending party has forfeited any right to its enforcement. The question of whether a breach of a contract is substantial depends upon the attendant circumstances. petitioner took a calculated risk that all the landowners would renew their contracts. The injured party may choose between the fulfillment and the rescission of the obligation. As found by both the trial court and the CA. He may also seek rescission even after he had chosen fulfillment if the latter should become impossible. BMMC undertook expressly among its principal prestations not only to mill Gatuslao's canes but to haul them by railway to the mill. The closure of any portion of the railroad track. even without previous court action. It was organized at that time when petitioner could not assure the planters that it could definitely haul and mill their canes. It is the general rule. 9/16/91: the Senate passed Resolution No. Yes. that rescission of a contract will not be permitted for a slight or casual breach. expressing its decision not to concur w/ the ratification of the Treaty of Friendship. Reasoning The contract in question involves reciprocal obligations. -at the time of the execution of the Agreement. Cooperation and Security w/c was extend the US’s term of use of Subic Naval Base. Both parties are agreed that time is of the essence in the sugar industry. whereby the latter would obligate itself to establish. Despite its awareness that the conventional contract of lease would expire in Crop Year 1964-1965 and that refusal on the part of any one of the landowners to renew their milling contracts and the corresponding use of the right of way on their lands would render impossible compliance of its commitments. -Art XVIII Sec 25 of the 1987 Constitution states that such foreign bases. so that the sugarcanes have to be milled at the right time. May 25. the sugar plantation of Angela Estate.. Adequate measures should have been adopted by BMMC to forestall such paralyzation but the records show none. By virtue of the violations of the terms of the contract. & GM of the BMMC itself suggested that it explore solutions to the problem of hauling the canes to the milling station in the eventuality of a judicial order permanently closing the railroad lines so that the planters may be able to proceed with their planting with absolute peace of mind that they will be properly milled and not left to rot in the fields.

Disposition petitions are DENIED for lack of merit.On Dec.136 plus interest and atty’s fees -Globe answered insisting that it was exempt from paying since the bases ceased operations 1/05/99: the trial court rendered its decision. The assailed decision of the CA is affirmed.38. 1992 3. 1981. plaintiff was compelled to pay the consignee P19.000 as atty’s fees. which damage was unknown to plaintiff.238 rental for the month of Dec. 1982 defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. (Claims were presented against defendants who failed and refused to pay the same) [b] As a consequence of the losses sustained. ordering Globe to pay Philcomsat $92. regulation. one drum opened and without seal. Exemplary damages may be awarded if the erring party acted in a wanton. 1981. EASTERN SHIPPING LINES V CA VITUG. Inc. public policy.Defendant/s argue/s: [a] As for defendant Eastern Shipping (carrier) it alleged that the shipment was discharged in good order from the vessel unto the custody of Metro Port Service so that any damage/losses incurred after the shipment was . 1994 FACTS . oppressive or malevolent manner—however.032. Globe shall continue to pay Philcomsat for the rental of the actual number of T1 circuits in use…for the remaining life of the Agreement…” -after the US forces left. Cooperation and Security. YES. both parties later filed their respective Petitions for Review w/c gave rise to the ff issues w/c the court was tasked to resolve: ISSUES 1. Although Globe alleged that it terminated the Agreement w/ Philcomsat effective 11/08/92. 1174 -Courts cannot stipulate/amend for the parties if the Agreement does not contravene law. two fiber drums of riboflavin were shipped from Yokohama. Philcomsat filed a complaint at the RTI of Makati demanding the payment of its outstanding obligations amounting to $4. and that the termination of the RP-US Military Bases Agreement cannot be considered force majeure since the happening was foreseeable. Inc. Globe did not. Since both parties have legitimate claims against each other and no party prevailed. so that it became subrogated to all the rights of action of said consignee against defendants . and the withdrawal of the US military forces constitute force majeure exempting Globe from payment 2. The latter excepted to one drum which contained spillages. WON Philcomsat is entitled to atty’s fees and exemplary damages HELD No reversible error was committed by the CA in issuing the assailed decision hence petitions are denied 1. 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service. it was discharged unto the custody of defendant Metro Port Service. On Jan. an award of atty’s fees is unwarranted. exempting Globe from complying w/ its obligations under the Agreement and paying Philcomsat exemplary damages. (The latter excepted to one drum. . Philcomsat claimed that the RTC erred in considering the non-ratification of the Treaty as force majeure. 81/01177 for P36. while the rest of the contents was adulterated/fake.032. 1174 also states that “…no person shall be responsible for those events which…though foreseen were inevitable…” Art 1306 CC: parties may establish stipulations.382. rental fees -both appeals were dismissed. fraudulent. 4.) On Jan 7. the injury to the creditor -the SC agrees w/ CA and the TC that the said requisites are present in the present case. etc. morals. hence. However. the US military forces and personnel completely withdrew only on 12/31/92 3.95 under the aforestated marine insurance policy. The shipment was insured under plaintiff's Marine Insurance Policy No. Philcomsat contends that Sec 8 of the Agreement should be taken in line w/ Art. NO. or aggravation of.. 8 and 14. said to be in bad order. the non-ratification of the Treaty of Friendship. Labitag (2) the occurrence must render it impossible for the debtor to fulfill his obligation in a normal manner (3) the obligor must be free of participation in.95. July 12. Sec 8 has the force of law between the parties -for Globe to be exempt from non-compliance w/ its obligation to pay rental under Sec 8. the Court found it unjust to require Globe to continue paying even though Philcomsat cannot be compelled to continue performing its obligation under the Agreement 2. 12. WON Globe is liable to pay rental for the month of December. Art 1159 CC: obligations arising from contracts have the force of law between the contracting parties and should be complied w/ in good faith -the agreement as to what would constitute fortuitous events in Sec 8 does not run contrary to or expand the concept of fortuitous events under Art. direction or request of the Government of the Philippines…” -Philcomsat replied.910. citing Sec 7 on ‘Discontinuance of Service’ of the same Agreement: “…Notwithstanding the non-use of the earth station. due to the fault and negligence of defendants. Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill of Lading No. 1174 of the Civil Code. YES. the dismissal of the counterclaim -both parties appealed to the CA. reckless. Both parties had no control over the non-renewal of the RP-US Military Bases Agreement or the subsequent withdrawal of the US forces from Subic -Also. terms and conditions so long as these do not counter any law. WON the termination of the RP-US Military Bases Agreement.466. morals.Plaintiff argues: [a] due to the losses/damage sustained by said drum. upon arrival of shipment. Art. order. Globe contented that the RTC erred in holding it liable for the Dec. the consignee suffered losses totaling P19. On Dec.Obligations and Contracts …”neither party will be held liable…for any failure to perform its obligation under this Agreement if such failure results directly or indirectly from force majeure… including any law. YMA-8. the ff must be established: (1) the event must be independent of human will A2010 page 30 Prof. and P300. public policy and such.

[c] Allied Brokerage (broker)alleged that plaintiff has no cause of action against it. being the carrier and not having been able to rebut the presumption of fault. which.032. When the obligation is breached. 1736-1738. contracts. 52 Phil.We do not. .” 3. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages B. been passed upon by the Court. quasi-contracts. In the absence of stipulation. jointly and severally: 1) The amount of P19. Metro Port Service vs. liability of the common carrier. too. With regard particularly to an award of interest in the concept of actual and compensatory damages. while the liability of defendant Metro Port Service. as follows: i. from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. the contravenor can be held liable for damages. The factual circumstances may have called for different applications. in lieu of 6%.The ostensible discord is not difficult to explain. law.000. on the award of interest. When an obligation. Inc. (This was upheld in a number of cases. and there need not be an express finding of negligence to hold it liable (Art. 131 SCRA 365). ii.e. we take note.CA affirmed the decision of the Trial Court in toto. Dollar Steamship Lines. where the demand is established with reasonable certainty.There are. is that "there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants" (the herein petitioner among them).e.Accordingly. and it consists in the payment of a sum of money. guided by the rule that the courts are vested with discretion. regardless of its source. Notice the Disposition portion of this case which says: “The legal interest to be paid is 6% on the amount due computed from the decision. A factual finding of both the court a quo and the appellate court. ISSUES 1.Obligations and Contracts incurred after the shipment was turned over to the latter. Furthermore. [b] Dismissed the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation. and the debtor incurs in delay. a presumption arises against the carrier of its failure to observe that diligence. . exceptional cases when such presumption of fault is not observed but these cases. and received by. . and in the absence of stipulation. enumerated in Article 1734 of the Civil Code. Court of Appeals. Court of Appeals. in any event. of the court a quo. . not one of which can be applied to this case. by way of clarification and reconciliation.. referred to above. imply by the above pronouncement that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier.When the goods shipped are either lost or arrive in damaged condition. 2209 CC: If the obligation consists in the payment of a sum of money. The date of the decision of the court a quo. is breached. and 3) Costs. . a loan or forbearance of money. WON a claim for damage sustained on a shipment of goods can be a solidary. i.e. portion of the same was already in bad order. pursuant to Section 6. A 12% interest. an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. shall be the payment of interest agreed upon. are exclusive.. . WON the applicable rate of interest.The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the goods to the consignee has. the interest due should be that which may have been stipulated in writing. Kindly check original text) . the rate of interest. is no longer its liability. i. until fully paid (the liability of defendant Eastern Shipping. The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of. it still exercised extra ordinary care and diligence in the handling/delivery of the cargo to consignee in the same condition shipment was received by it. or until the lapse of a reasonable time for their acceptance by. the arrastre operator and the customs broker 2. shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. 2. Kui Bai vs. Art. such responsibility also devolves upon the CARRIER. shall be imposed on such amount upon finality of this decision until the payment thereof. whichever is lesser. of course. there being no stipulation to the contrary.000. to suggest the following rules of thumb for future guidance: A. 1735. not constituting a loan or forbearance of money. Nonetheless. depending on the equities of each case. 161 SCRA 646. to be held liable in this particular case. or joint and several. the legal interest which is six percent per annum. is inevitable regardless of whether there are others solidarily liable with it. Civil Code. of course. delicts or quasi-delicts is breached. is 12% or 6% HELD 1. Court of Appeals. dated 03 February 1988. . In Fireman's Fund Insurance vs. but nonetheless. the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art.Trial Court ruling: [a] Defendants to pay plaintiff. the carrier for transportation until delivered to. 1169. Philippine National Railways vs.Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee. Both the ARRASTRE and the CARRIER are A2010 page 31 Prof.. Labitag therefore charged with the obligation to deliver the goods in good condition to the consignee. crate box or container in no case to exceed P5..95. nor that attendant facts in a given case may not vary the rule. Inc. 2) P3. as well as the accrual thereof. is imposed. the indemnity for damages. it may not be unwise. or vice-versa. . not having negligent or at fault for the shipment was already in damage and bad order condition when received by it. 139 SCRA 87. Ganzon vs.The instant petition has been brought solely by Eastern Shipping Lines. 863). with the present legal interest of 12% per annum from October 1. No interest. the liability imposed on Eastern Shipping Lines. is. however. [b] Metroport (arrastre operator) averred that although subject shipment was discharged unto its custody. the person entitled to receive them (Arts. the date of filing of this complaints. sole petitioner in this case. shall be to the extent of the actual invoice value of each package. Civil Code) but when such certainty cannot be so reasonably established at the time . When an obligation. Metro Port Services (182 SCRA 455) . the interest due shall itself earn legal interest from the time it is judicially demanded. i.01 of the Management Contract). the rate of interest shall be 12% per annum to be computed from default. shall not exceed US$500 per case or the CIF value of the loss. WON payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is rendered 3. Civil Code. 1982.00 as attorney's fees. Accordingly.00 each. Inc.

Obligations and Contracts
the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. iii. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. Disposition Petition is partly GRANTED. The appealed decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is 6% on the amount due computed from the decision, dated 03 February 1988, of the court a quo. A 12% interest, in lieu of 6%, shall be imposed on such amount upon finality of this decision until the payment thereof.

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considers interest a form of indemnity for the delay in the performance of an obligation. Because the amount due in this case arose from a contract for a piece of work, not from a loan or forbearance of money, the legal interest of six percent (6%) per annum should be applied. Furthermore, since the amount of the demand could be established with certainty when the Complaint was filed, the six percent (6%) interest should be computed from the filing of the said Complaint. But after the judgment becomes final and executory until the obligation is satisfied, the interest should be reckoned at twelve percent (%12) per year. Private respondent maintains that the twelve percent (12%) interest should be imposed, because the obligation arose from a forbearance of money. This is erroneous. In Eastern Shipping , the Court observed that a "forbearance" in the context of the usury law is a "contractual obligation of lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay a loan or debt then due and payable." Using this standard, the obligation in this case was obviously not a forbearance of money, goods or credit. Disposition Decision modified.The rate of interest shall be six percent (6%) per annum, computed from the time of the filing of the Complaint in the trial court until the finality of the judgment. If the adjudged principal and the interest (or any part thereof) remain unpaid thereafter, the interest rate shall be twelve percent (12%) per annum computed from the time the judgment becomes final and executory until it is fully satisfied. No pronouncement as to costs.

CRISMINA GARMENTS V CA PANGANIBAN; March 9, 1999
FACTS -The petitioner, who was engaged in the export of girls' denim pants, contracted the services of the respondent, the sole proprietress of the D'Wilmar Garments, for the sewing of 20,762 pieces of assorted girls denims. The respondent sewed the materials and delivered them to the petitioner. -Petitioner told the respondent that some were defective. The respondent offered to take the defective goods back, but the petitioner’s representative already said they were good. She was told just to return for her check of P76,410. -The petitioner failed to pay. The respondent demanded payment. The petitioner’s vice president comptroller wrote to the respondent saying that 6,164 pairs of jeans were defective and as such, she was liable to the petitioner for P49,925.51. - The respondent filed before the trial court for the collection of P76,410. The trial court ordered the petitioner to pay the said amount with interest thereon at 12% per annum. The CA affirmed. - petitioner submits that the interest rate should be six percent (6%), pursuant to Article 2209 of the Civil Code. On the other hand, private respondent maintains that the interest rate should be twelve percent (12 %) per annum, in accordance with Central Bank (CB) Circular No. 416. She argues that the circular applies, since "the money sought to be recovered by her is in the form of forbearance." ISSUE WON it is proper to impose interest at the rate of twelve percent (12%) per annum for an obligation that does not involve a loan or forbearance of money in the absence of stipulation of the parties HELD No. The proper interest rate should be 6% per annum. In Reformina v. Tomol Jr., this Court stressed that the interest rate under CB Circular No. 416 applies to (1) loans; (2) forbearance of money, goods or credits; or (3) a judgment involving a loan or forbearance of money, goods or credits. Cases beyond the scope of the said circular are governed by Article 2209 of the Civil Code, which

KENG HUA V CA PANGANIBAN; February 12, 1998
NATURE Petition for review on certiorari of a decision of the Court of Appeals. FACTS Respondent Sea-Land Service Inc., a shipping company, received at its Hong Kong terminal a sealed container containing 76 bales of “unsorted waste paper” for shipment to petitioner Keng Hua Paper Products, Co. in Manila. A bill of lading to cover the shipment was issued by the plaintiff. On July 9, 1982, the shipment was discharged at the Manila International Container Port. Notices of arrival were transmitted to the petitioner but the latter failed to discharge the shipment from the container during the grace period. The said shipment remained inside the respondent’s container from the moment the grace period expired until the time the shipment was unloaded from the container on November 22, 1983 or a total of 481 days. During this period, demurrage charges accrued. Letters demanding payment were sent to the petitioner who refused to settle its obligation which eventually amounted to P67,340.00. Petitioner alleges that it had purchased 50 tons of waste paper from the shipper in Hong Kong, Ho Kee Waste Paper, as manifested in the Letter of Credit; that, under the letter of credit, the remaining balance of the shipment was only 10 metric tons; that the shipment respondent was asking petitioner to accept was 20 metric tons; that if petitioner were to accept the shipment, it would be violating Central Bank rules and regulations and custom and tariff laws; that respondent had no cause of action against petitioner because the latter did not hire the former to carry the merchandise. Petitioner contends that it should not be bound by the bill of lading because it never gave its consent thereto.

Obligations and Contracts
Although petitioner admits “physical acceptance” of the bill of lading, it argues that its subsequent actions belie the finding that it accepted the terms therein. Petitioner cites as support the “Notice of Refused or On Hand Freight” it received on November 2, 1982 from respondent, which acknowledged that petitioner declined to accept the shipment. Petitioner points to its January 24, 1983 letter to respondent stressing “that its acceptance of the bill of lading would be tantamount to an act of smuggling as the amount it had imported was only for 10,000 kilograms”. The discrepancy in the amount of waste paper it actually purchased visà-vis the excess amount in the bill of lading allegedly justified its refusal to accept the shipment. ISSUES 1. WON petitioner is bound by the bill of lading 2. WON the amount of demurrage charges is correct 3. WON petitioner was correct in not accepting the overshipment 4. WON the award of interest is correct 5. WON the award of attorney’s fees is correct HELD 1. Yes. A bill of lading serves 2 functions. 1st, it is a receipt for the goods shipped. 2nd, it is a contract by which three parties, namely, the shipper, the carrier, and the consignee undertake specific responsibilities and assume stipulated obligations. The acceptance of a bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that the same was a perfected and binding contract. In the case at bar, both lower courts held that the bill of lading was a valid and perfected contract between the shipper (Ho Kee), the consignee (petitioner Keng Hua), and the carrier (respondent Sea-Land). Section 17 of the bill of lading provided that the shipper and the consignee were liable for the payment of demurrage charges for the failure to discharge the shipment beyond the grace period allowed by tariff rules. Petitioner admits that its received the bill of lading immediately after the arrival of the shipment on July 8, 1982. It was only 6 months later that petitioner sent a letter to respondent saying that it could not accept the shipment. Petitioner’s inaction for such a long time conveys the clear inference that it accepted the terms and conditions of the bill of lading. Mere apprehension of violating customs, tariff and central bank laws without a clear demonstration that taking delivery of the shipment has become legally impossible cannot defeat the petitioner’s contractual obligation and liability under the bill of lading. In any event, the issue of whether or not petitioner accepted the bill of lading was raised for the first time on appeal to this Court and cannot be entertained. Questions not raised in the trial court cannot be raised for the first time on appeal. 2. Yes. Petitioner’s argument that it is not obligated to pay any demurrage charges because respondent made no demand for the sum of P67,340 prior to the filing of the complaint is puerile. The amount of demurrage charges is a factual conclusion of the trial court that was affirmed by the Court of Appeals and, thus, binding on this Court. 3. No. The contract of carriage, as stipulated in the bill of lading, must be treated independently of the contract of sale between the seller and the buyer, and the contract for the issuance of a letter of credit between the buyer and the issuing bank. Any discrepancy between the amount of the goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as

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embodied in the bill of lading. Petitioner’s remedy in the case of overshipment lies against the seller/shipper, not against the carrier. 4. No. The case involves an obligation not arising from a loan or forbearance of money, thus pursuant to Art. 2209 of the Civil Code the applicable interest rate is 6% per annum to be computed from the date of the trial court’s decision. The rate of 12% per annum shall be charged on the total then outstanding from the time the judgment becomes final and executory until its satisfaction. 5. No. The Court notes that the matter of attorney’s fees was taken up only in the Disposition portion of the trial court’s decision. The settled requirement is that the text of the decision should state the reason for the award of attorney’s fees. Disposition Decision is AFFIRMED with the MODIFICATION that legal interest be computed at 6% per annum from September 28, 1990, then at 12% per annum from finality of judgment until full satisfaction. The award of attorney’s fees is DELETED.

SECURITY BANK V RTC HERMOSISIMA; October 23, 1996
NATURE Petition for review on certiorari of a decision of the RTC of Makati assailing the decision of Judge Fernando Gorospe, which found private respondent Eusebio liable to petitioner for a sum of money. FACTS - April 27, 1983, private respondent Magtanggol Eusebio executed a promissory note in favor of petitioner Security Bank and Trust Co. (SBTC) in the total amount of P100,000  payable in 6 monthly installments with 23% per annum interest up to the 5th installment - July 28, 198, Eusebio again executed another promissory note to SBTC. He bound himself to pay P100,000  again payable in 6 monthly installments with 23% per annum interest - Finally, another promissory note was executed in Aug. 31, 1983 in the amount of P65,000. - On all promissory notes, Leila Ventura signed as co-maker. - Upon maturity, the principal balance remaining on the note stood as: PN1 – P16, 665 as of Sept. 1983 PN2 – P 83,333 as of Aug. 1983 PN3 – P65,000 as of Aug. 1983 - SBTC filed a collection case upon Euseio’s refusal to pa the balance payable - RTC ordered Eusebio to pay the balance w/ 12% interest - SBTC filed a motion for partial reconsideration contending that: (1) the interest rate agreed upon was 23% (2) the interests awarded should be compounded quarterly from due date (3) Leila Ventura should likewise be held liable to pay the balance since she has signed as co-maker - The court held Leila Ventura to be jointly and severally liable but denied the motion to grant the rates beyond 12%; hence this petition ISSUE

Obligations and Contracts
WON the 23% rate of interest per annum agreed upon by petitioner bank and respondents is allowable and not against the Usury law. HELD YES it is allowable Ratio - the applicable provision of law is the Central Bank Circular No. 905 w/c took effect on Dec. 22, 1982, part. Sec. 1&2 - Central Bank Circular 905 was issued by Central Bank Monetary Board which empowers them to prescribe the maximum rates of interest for loans and certain forebearances - This circular did not repeal or in any way amend the Usury Law but simply suspended the latter’s effectivity; basic is the rule in statutory construction that when the law is clear and unambiguous, the court is left with not alternative but to apply the same in its clear language - The rate was agreed upon by the parties freely; respondent did not question that rate and it is not for the respondent court to change stipulation in the contract where it is not illegal - Furthermore, art. 1306 CC provides that contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy - In a loan or forbearance of money, the interest due should be that stipulated in writing and in the absence thereof, the rate shall be 12% per annum; hence only in the absence of a stipulation can a court impose the 12% interest

A2010 page 34 Prof. Labitag
- March 31, 1984 the bank, over petitioners’ protests, raised the interest rate to 28% pursuant to their credit agreement; interest rate increased to a high of 68% between March 1984 to Sept 1986 - before the loan was to mature in March 1988, the spouses filed a petition for declaratory relied with prayer for a writ of preliminary injunction and TRO—spouses sought clarification as to WON the PNB could unilaterally raise interest rates on the loan, pursuant to the credit agreement’s escalation clause - lower court issued TRO; by this time the spouses were already in default of their loan obligations---> invoking the law on Mandatory Foreclosure (Act 3135 and PD 385), PNB countered by ordering the extrajudicial foreclosure of petitioners’ mortgaged properties----> lower court, however, issued a supplemental writ of preliminary injunction - PNB posted a counterbond and the trial court dissolved the supplemental writ; PNB once more set a new date for the foreclosure of Marvin Plaza -spouses tendered to PNB the amount of 40,142,518 pesos (interest calculated at 21%); PNB refused to accept---> spouses formally consigned the amount with the RTC which granted the writ of preliminary injunction enjoining the foreclosure of Marvin Plaza - Judge Capulong refused to lift WPI - PNB filed petition for Certiorari, Prohibition and Mandamus with CA - On August 1993 CA rendered its decision setting aside the assailed orders and upholding respondent’s right to foreclose the mortgaged property pursuant to Act 3135 and PD 385 ISSUES 1. WON PNB was authorized to raise its interest rates from 21% to as high as 68% under the credit agreement 2. WON PNB is granted the authority to foreclose the Marvin Plaza under the mandatory foreclosure provisions of PD385 HELD Ratio 1. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result is void. Any stipulation regarding the validity or compliance of the contract which is left solely to the will of one of the parties, is likewise, invalid. 2. In facilitating collection of debts through the automatic foreclosure provisions of PD 385, the government is, however, not exempted from observing basic principles of law, and ordinary fairness and decency under the due process clause of the Constitution. Reasoning 1. – the binding effect of any agreement between parties to a contract is premised on two settled principles: that any obligation arising from contract has the force of law between the parties; and that there must be mutuality between the parties based on their essential equality - PNB unilaterally altered the terms of its contract with petitioners by increasing the interest rates on the loan without prior assent of the latter - the manner of agreement is itself explicitly stipulated by the Civil Code in Art.1956 “no interest shall be due unless it has been expressly stipulated in writing”--- what has been stipulated in writing is that petitioners were bound merely to pay 21% interest, subject to possible escalation or de-escalation

ALMEDA V COURT OF APPEALS KAPUNAN; April 17, 1996
NATURE Petition for review on certiorari a decision of the CA setting aside the TRO and upholding respondent’s right to foreclose the mortgaged property FACTS - in 1981, Philippine National Bank granted to petitioners, spouses Ponciano Almeda and Eufemia Almeda, several loan/credit accommodations totaling P18 Million payable in 6 years at an interest rate of 21% per annum - to secure the loan, spouses executed a Real Estate Mortgage Contract covering a 3.5 K sq.m. parcel of land and the building erected thereon (the Marvin Plaza) located at Pasong Tamo, Makati - a credit agreement with the ff pertinent terms and conditions: >interest of 21% per annum, payable semi-annually in arrears, the first interest payment to become due and payable 6 months from date of initial release of loan >”the Bank reserves the right to increase the interest rate within the limits allowed by law at any time depending on whatever policy it may adopt in the future...the adjustment in the interest rate agreed upon shall take effect on the effectivity date of the increase/decrease of the maximum interest rate.” - between 1981 and 1984 petitioners made several partial payments on the loan totaling 7,735,004.66, a substantial portion of which was applied to accrued interest

However. WON Central Bank Circular No.000 as supervision fee.000 as underwriting fee. However.000 shares of Este Del Sol’s capital stock.000 as consultancy fee for 4 years. 1978 when the law in effect was the Usury Law.330. Labitag date of the first release in accordance with the Schedule of Amortization. Loan was payable in 36 equal and consecutive monthly amortizations to commence at the 13th month from the . The underwriting agreement also stipulated for the payment by respondent to FMIC a consultancy fee of P332.297. Montalban. It is an elementary rule of contracts that the laws. Moreover.1308 of the CC “the contract must bind both contracting parties. a balance of 6. In the instant case. FMIC caused the extrajudicial foreclosure of the real estate mortgage. Thus.escalation clauses in credit agreements are perfectly valid and do not contravene public policy. The decision and resolution of the CA is REVERSED AND SET ASIDE. retroactive application of a Central Bank Circular cannot and should not be presumed.000.increases were arbitrary . the circular did not repeal.PNB cannot claim that there was no honest-to-goodness attempt on the part of the spouses to settle their obligations Disposition The unilateral and progressive increases imposed by PNB were null and void.the dispute regarding the interest rate increases was never settled so the exact amount of petitioners’ obligations could not be determined .106 for breakdown). and upon agreement . which agreements implicitly incorporate provisions of existing law . A2010 page 35 Prof. 500. Navarro: distinction between a law and an admin regulation is recognized in the Monetary Board guidelines. an Underwriting Agreement on Jan 31.00 to finance the construction and development of the Este Del Sol Mountain Reserve.73 was left. several facts and instances taken altogether show that the Underwriting and Consultancy Agreements were simply cloaks or devices to cover an illegal scheme employed by FIRST METRO INVESTMENT CORPORATION V ESTE DEL SOL MOUNTAIN RESERVE. guidelines thus presuppose that a Central Bank regulation is not within the term ‘any law’ . 1978. CA found and declared that the fees provided for in the underwriting and consultancy agreements were mere subterfuges to camouflage the excessively usurious interest charged by FMIC. WON the Loan Agreement was usurious 3.00 per annum for a period of 4 years. respondent Este Del Sol also executed as provided for in the Loan Agreement. it is within the limits allowed by law. which was approved by the trial court. 2001 NATURE Petition for review on certiorari of a decision of the Court of Appeals FACTS On January 31.the credit agreement requires that the increase be within the limits allowed by law—refers to legislative enactments not admin circulars (PNB relied on CB Circular No. They also declared that the one-time 20% penalty on the amount due and the 10% attorney’s fees would be reasonable and suffice to compensate FMIC for those items. Under the terms of the loan agreement. 905) as shown in the credit agreement where there is a distinction made between “law or the Monetary Board Circulars” -Banco Filipino Savings and Mortgage Bank v. PNB was disauthorized from unilaterally raising the interest rate partly because the increase violated the principle of mutuality of contracts expressed in Art. In addition to the underwriting fee. CA ordered FMIC to pay or reimburse Este Del Sol the amount of P971. its validity or compliance cannot be left to the will of one of them” .000 was the highest bidder. Furthermore. DE LEON. petitioner FMIC granted respondent Este Del Sol a loan of P7. in force at the time the contract was made and entered into.000. CA. On February 22. govern it.000 per annum for a period of 4 consecutive years for the supervision of the public offering of the shares. Central Bank Circular No. Rizal. P200. 2. INC.863. and only after the spouses refused to meet their obligations following such determination . The Loan Agreement in question was executed on Jan 31. November 15. 905 should be applied retroactively 2. This was unpaid and accordingly.109). No. they are still subject to laws and provisions governing agreements between parties. FMIC instituted an instant collection suit over the petitioners. WON the CA erred in awarding an amount not prayed for by the respondents HELD 1. interest on the loan was 16% per annum based on the diminishing balance. 1978 whereby FMIC shall get a one-time underwriting fee of P200. 630. took effect on Jan 1. a Central Bank Circular cannot repeal a law. the underwriting agreement provided a supervision fee of 200. The case is remanded to RTC for further proceedings. FMIC billed respondents P200. P1. 500. ISSUES 1. on appeal. it appeared to have incurred a total obligation of P12. – PD 385 was issued principally to guarantee that government financial institutions would not be denied substantial cash inflows necessary to finance the government’s development projects by large borrowers who resort to litigation to prevent or delay the government’s collection of their debts or loans . 1983. an acceleration clause was provided and the amount due was 20% onetime penalty on the amount due and such amount shall bear interest at the highest rate permitted by law plus attorney’s fees equivalent to 25% of the sum sought to be recovered which in no case shall be less than 20. 1978.the foreclosure provisions could be validly invoked by PNB only after settlement of the question involving the interest rate on the loan. 679. Since respondent failed to meet the schedule of re-payment in accordance with a revised Schedule of Amortization. After deducting further fees and charges.in PNB v.Obligations and Contracts when the circumstances warrant it.petitioners never agreed in writing to pay the increased interest rates demanded by PNB 2. Failing to receive payment for the balance. Yes.000 in the form of 120. 385. 905 which removed the ceiling on interest rates for secured and unsecured loans regardless of maturity. These amounts were deducted from the first release of the loan. Incase of default. a sports/resort complex project located at Bario Puray. An apparently lawful loan is usurious when it is intended that additional compensation for the loan be disguised by an ostensibly unrelated contract providing for payment by the borrower for the lender’s services which are of little value or which are not in fact to be rendered. The property was auctioned and FMIC with 9.98 (see p. 000 representing the difference between what is due to the petitioner and what is due to Este (computation on p. but only suspended the effectivity of the Usury Law.

1954 was executed by the same parties to the first bond with the Far Eastern Surety and Insurance Co. This fact means that all the said agreements which were executed simultaneously were set to mature or shall remain effective during the same period of time. covering the first shipment of iron ore and/or the first amount derived from the local sale of the iron ore by the Larap Mines & GAITE V FONACIER REYES.000 balance of the price of the iron ore in the stockpiles in the mining claims. 1961 NATURE Appeal from CFI Manila FACTS .All the defendants except Francisco Dante set up the uniform defense that the obligation sued upon by Gaite was subject to a condition that the amount would be payable out of the first letter of credit.. and that.. the latter filed the present complaint against them in the Court of First Instance of Manila for the payment of the P65. Inc. 4) Regarding the underwriting Agreement involving 120. Fonacier entered into a "Contract of Mining Operation". he refused to sign unless another bond underwritten by a bonding company was put up by defendants to secure the payment of the P65.000. for the consideration of P20. its assigns. and explore the mining claims in question.000 balance of the price of the ore. Francisco Dante. of which was paid upon the signing of the agreement. and attorney's fees. Inc. in consideration for the signing by the company and its stockholders of the surety bonds delivered by Fonacier to Gaite . in consideration of the sum of P75. 1954.000.Gaite demanded from Fonacier and his sureties payment of said amount. administrators.Up to December 8. .upon signing. together with the improvements therein and the use of the name "Larap Iron Mines" and its goodwill. A2010 page 36 Prof. and the balance of P65.Gaite transferred to Fonacier all his rights and interests over the "24. 2) As admitted by FMIC.000 tons of iron ore had been made by the Larap Mines & Smelting Co. the Underwriting Agreement is “part and parcel of the Loan Agreement”. Gaite in turn executed a general assignment conveying the development and exploitation of said mining claims unto the Larap Iron Mines.Obligations and Contracts petitioner FMIC. . Segundina Vivas. also dated December 8. and its stockholders George Krakower. known as the Dawahan Group. No. . Whether the exact amount of the relief was not expressly prayed for is of no moment for the reason that that the relief was plainly warranted by the allegations of the respondents as well as by the facts as found by the appellate court. Fonacier constituted and appointed Fernando A. when the bond expired WRT the Far Eastern Surety and Insurance Company. exploit.000 will be paid from and out of the first letter of credit covering the first shipment of iron ores and or the first amount derived from the local sale of iron ore made by the Larap Mines & Smelting Co. Fonacier executed a surety bond in favor of Gaite dated December 8.For some reason or another.000 balance of the price of said ore been paid to Gaite by Fonacier and his sureties . 5) There was no need for a Consultancy Agreement since respondent appeared to be more competent to be consultants in the development of the project. Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for the exploration and development of the mining claims on a royalty basis of not less than P0. the right to develop. Isabelo Fonacier decided to revoke the authority granted by him to Gaite to exploit and develop the mining claims in question. Inc. a second bond. P10. situated in the municipality of Jose Panganiban.000.000 metric tons of iron ore. improvements. As to the debtor.. as additional surety. These are: 1) the Underwriting and Consultancy Agreements are the same date of the Loan Agreement. 1955. plus 10% of the royalties that Fonacier would receive from the mining claims > all his rights and interests on all the roads. and Gaite assented subject to certain conditions .Gaite testified when this bond was presented to him by Fonacier together with the "Revocation of Power of Attorney and Contract". but it provided that the liability of the surety company would attach only when there had been an actual sale of iron ore by the Larap Mines & Smelting Co. July 31. opening and paving roads within and outside their boundaries. on the theory that they had lost every right to make use of the period given them when their bond automatically expired and when Fonacier and his sureties failed to pay as demanded by Gaite. a single proprietorship owned solely by and belonging to him.000 tons of iron ore which he acquired from Gaite. Hence.000 shares of respondent’s capital stock.000. . more or less" that had been already extracted from the mineral claims. 1952. 1954. and extracted what he claimed and estimated to be approximately 24. 3) It is from the first partial release of the loan that the said corresponding bills for Underwriting. making other improvements and installing facilities therein for use in the development of the mines.To secure the payment of the balance of P65. no sale of the approximately 24.on December 8. the unpaid principal debt still stands and remains but the stipulation as to the usurious interest is void. of 11 iron lode mineral claims. the liability of said surety company would automatically expire on December 8.00. to the Larap Mines & Smelting Co.Gaite embarked upon the development and exploitation of the mining claims in question.. Supervision and Consultancy fees were deducted and apparently paid.000 tons of iron ore. either by himself or in a representative capacity.000. and conveying unto the Larap Mines and Smelting Co. transferring. 1955. on the same royalty basis . Pacifico Escandor. ceding. A party is entitled to as much relief as the facts may warrant.On March 19. a document entitled "Revocation of Power of Attorney and Contract" was executed wherein Gaite transferred to Fonacier. However. The nullity of the stipulation on the usurious interest does not affect the lender’s right to receive back the principal amount of the loan. nor had the P65.50 per ton of ore that might be extracted therefrom . for an amount of not less than P65. and facilities in or outside said claims > the right to use the business name "Larap Iron Mines" and its goodwill > all the records and documents relative to the mines . in usurious loans. there was really no need for an Underwriting Agreement since respondent had its own marketing arm to sell its shares.By a "Deed of Assignment" dated September 29. 3. province of Camarines Norte .. furthermore. and Fernando Ty as sureties .Isabelo Fonacier was the owner and/ or holder. Labitag . in consideration of certain royalties and transferred the complete title to the approximately 24. the entire obligation does not become void because of an agreement for usurious interest. or successors in interests. the amount paid for the usurious interest is recoverable by him. 1954 with himself (Fonacier) as principal and the Larap Mines and Smelting Co. consequential damages.

000 damages. so that the other understands that he assumes the risk of receiving nothing for what he gives (as in the case of a sale of hopes or expectations. . . that it would be paid upon the sale of sufficient iron ore by defendants. with only its maturity (due date) postponed or deferred. This is proved by the fact that Gaite insisted on a bond to guarantee payment of the P65.000. 1955 substantially reduced the security of the vendor's rights as creditor for the unpaid P65. . would be tantamount to leaving the payment at the discretion of the debtor. paragraph 1. only its maturity or demandability is deferred. what is undetermined is merely the exact date at which it will be made.000 is one with a period or term and not one with suspensive condition 2. . 1955. and not an aleatory contract where the transferor. and not only upon a bond by Fonacier. greatest reciprocity of interests.000) will be paid out of the first letter of credit covering the first shipment of iron ore . since sale is essentially onerous. but was intended merely to fix the future date of the payment. provides: "if the contract is onerous.000 to the sale or shipment of the ore as a condition precedent. Inc.573 tons of the estimated 24. Labitag 2) A contract of sale is normally commutative and onerous not only does each one of the parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price). Article 1378. Gaite. but was only a suspensive period or term. 1955 until full payment.000.000 tons of the iron ore at the mining claims in question at the time of the execution of the contract . While in a sale the obligation of one party can be lawfully subordinated to an uncertain event. YES. hence the condition had not yet been fulfilled and that consequently. and there can be no question that greater reciprocity obtains if the buyer's obligation is deemed to be actually existing. and that up to the time of the filing of the complaint.000 balance of the price of the approximately 24.. the contingent character of the obligation must clearly appear.. 2. than if such obligation were viewed as non-existent or not binding until the ore was sold. 3) To subordinate the obligation to pay the remaining P65. it is not in the usual course of business to do so.That the parties to the contract did not intend any such state of things to prevail is supported by several circumstances: 1) The words of the contract express no contingency in the buyer's obligation to pay: "The balance of Sixty-Five Thousand Pesos (P65. . hence. the obligation became due and demandable under Article 1198 of the New Civil Code . the parties would stand as if the conditional obligation had never existed .000 tons of iron ore was one with a term: i.000.Fonacier also contended that only 7. Ratio Appellants have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65. the obligation was not yet due and demandable. P65. would assume the risk of not being paid at all.000 tons of iron ore sold to him by Gaite was actually delivered. and counterclaimed for more than P200. such sale to be effected within one year or before December 8.Judgment of LC was rendered in favor of plaintiff Gaite ordering defendants to pay him. By the very terms of the contract. the existence of the obligation to pay is recognized. 1198. Reasoning . NO.000 with interest at 6% per annum from December 9. 4) Assuming that there could be doubt whether by the wording of the contract the parties intended a suspensive condition or a suspensive period (dies ad quem) for the payment of the P65. so that if the suspensive condition does not take place. no sale of the iron ore had been made. a security that Gaite considered essential and upon which he had insisted when he executed the deed of sale of the ore to Fonacier.Obligations and Contracts Smelting Co.lower court held that the obligation of defendants to pay plaintiff the P65. jointly and severally. that the giving of security was a condition precedent to Gaite's giving of credit to defendants. but each party anticipates performance by the other from the very start. There is no uncertainty that the payment will have to be made sooner or later.The expiration of the bonding company's undertaking on December 8. and that the previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the agreed price.What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event. the doubt shall be settled in favor of the. The Civil Code of the Philippines.000. or that Fonacier understood that Gaite assumed any such risk.".000 because of their failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. therefore. Ratio The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the balance of P65. if it is an obligation with a term. the rules of interpretation would incline the scales in favor of "the greatest reciprocity of interests". but also on one by a surety company. The debtor shall lose every right to make use of the period: .. in fine. Appellants would thus be able to postpone payment indefinitely. Reasoning . emptio spei). plus costs ISSUES 1. WON the obligation of Fonacier and his sureties to pay Gaite P65.006 tons of iron ore sold by plaintiff Gaite to defendant Fonacier were actually in existence in the mining claims when these parties executed the "Revocation of Power of Attorney and Contract" HELD 1." etc.The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines: "ART. for the sale or shipment could not be made unless the appellants took steps to sell the ore. 1955. Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his rights over the ore without getting paid for it. . A2010 page 37 Prof. WON defendants have a right to insist that Gaite should wait for the sale or shipment of the ore before receiving payment or WON they are entitled to take full advantage of the period granted them for making the payment 3.e. and the fact that appellants did put up such bonds indicates that they admitted the definite existence of their obligation to pay the balance of P65.The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit. WON the estimated 24. and the company's stockholders. and that as the latter failed to put up a good and sufficient security in lieu of the Far Eastern Surety bond which expired on December 8.lower court found that plaintiff Gaite did have approximately 24. the Larap Mines & Smelting Co.000.

who placed the tonnage factor of every cubic meter of iron ore at between 3 metric tons as minimum to 5 metric tons as maximum. over the herein leased portion to the LESSEE within a reasonable period of time which shall not in any case exceed 4 years. so that all that was required of the seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass.no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full knowledge that on its face it would automatically expire within one year was a waiver of its renewal after the expiration date .Contract contains the following provisions: PAR. 1955. The terms of this contract is for a period of one year upon the signing thereof.000 agreed upon by the parties based upon any such measurement (see Art. after which a new Contract shall be executed by the parties which shall be the same in all respects with this Contract insofar as the terms and conditions are concerned. upon signing of contract on 12/01/83 PAR. 1480. the mass. of Bureau of Mines to the mining claim involved at the request of appellant Krakower.C.The sale between the parties is a sale of a specific mass of iron ore because no provision was made in their contract for the measuring or weighing of the ore sold in order to complete or perfect the sale. more or less. and when through fortuitous event they disappear. Rizal dismissed case in favor of Gonzales) FACTS . for Gaite stood to lose and had nothing to gain thereby.809. precisely to make an official estimate. that this is a case of a sale of a specific mass of fungible goods for a single price or a lump sum.. therefore. (RTC of San Mateo. The LESSORS hereby commit themselves and shall undertake to obtain a separate and distinct T.It must not be forgotten that the contract expressly stated the amount to be 24. The LESSEE shall pay by way of annual rental an amount equivalent to P2. evidence shows that neither of the parties had actually measured or weighed the mass. with Fonacier claiming the correct tonnage factor to be 2. together with heirs of Thomas and Paula Cruz (Lessors) entered into a CONTRACT OF LEASE/PURCHASE with Felix Gonzales (sole proprietor of Felgon Farms/Lessee) of a half-portion of a parcel of land situated in Rodriguez. The subject-matter of the sale is.No such waiver could have been intended. Rizal.609 cubic meters A2010 page 38 Prof. more or less". unless immediately renewed or replaced. This estimate. he took possession of the property and installed Sambrano as his caretaker . it could be rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the surety company's bond expired on December 8. YES Ratio No short-delivery as would entitle Fonacier to the payment of damages. closely corresponds to the average tonnage factor of 3. .000 tons. average tonnage factor of 3.3 tons to a cubic meter. while Gaite claims that the correct tonnage factor is about 3. in turn. unless he immediately gives new ones equally satisfactory. (3) When by his own acts he has impaired said guaranties or securities after their establishment. and not the actual number of units or tons contained therein. so that they both tried to arrive at the total quantity by making an estimate of the volume thereof in cubic meters and then multiplying it by the estimated weight per ton of each cubic meter.9. stated in the contract being a mere estimate by the parties of the total tonnage weight of the mass 2. the LESSEE shall purchase the property on the agreeable price of 1M payable w/in 2 years period with an interest of 12% per annum. second par.1.375 cubic meters in the stockpiles of ore that he sold to Fonacier.7 tons.18 tons to a cubic meter.In the face of the conflict of evidence. covered by Transfer Certificate of Title .Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the securities given to the creditor (appellee Gaite). Abad. a government pensionado to the States and a mining engineering graduate of the Universities of Nevada and California. chief of the Mines and Metallurgical Division of the Bureau of Mines. a determinate object. 1983 – Paula Ano Cruz. But in the latter case the defendantsappellants' obligation to pay became absolute after one year from the transfer of the ore to Fonacier by virtue of the deed 3.2. Reasoning Important things 1. nor could Gaite have been guilty of any fraud in making any misrepresentation as to the total quantity of ore in the stockpiles of the mining claims in question since Gaite's estimate appears to be substantially correct.Obligations and Contracts (1) * * * * * (2) When he does not furnish to the creditor the guaranties or securities which he has promised. the parties are in disagreement.T.no charge in this case that Gaite did not deliver to appellants all the ore found in the stockpiles in the mining claims in question TF Gaite complied with his promise to deliver.500 per hectare.000 tons made by Gaite.if we multiply it by the.Gaite asserts there was a total of 7. New Civil Code)..on the average weight in tons per cubic meter..7. nor was the price of P75. . with almost 22 years of experience in the Bureau of Mines. . which is not very far from the estimate of 24. and if there was any. Disposition Judgment affirmed GONZALES V HEIRS OF THOMAS AND PAULA CRUZ PANGANIBAN. and appellants in turn are bound to pay the lump price . we take as the most reliable estimate of the tonnage factor of iron ore in this case to be that made by Leopoldo F. the quantity of "24.Gonzales paid P2500 per hectare or P15T annual rental. of the amount of iron ore in Gaite's stockpiles after the dispute arose. 1999 NATURE Petition for review on certiorari of a decision of the Court of Appeals reversing decision of trial court and ordering Gonzales to surrender possession of the property. . considering that actual weighing of each unit of the mass was practically impossible . notwithstanding that the quantity delivered is less than the amount estimated by them . while appellants contend that by actual measurement. Labitag . PAR. September 16. After the period of this Contract. ." . the product is 21. their witness Cipriano Manlañgit found the total volume of ore in the stockpiles to be only 6.000 tons of iron ore.3 adopted in his corrected report by engineer Nemesio Gamatero.Dec 1.

Labitag .Aug 24. and Gonzales cannot be obliged to purchase the property. 1682 and 1670. Bernardina Calixto and Severo Cruz .Transfer of title to the property in Gonzales’ name cannot be interpreted as a condition precedent to the payment of the agreed purchase price. ISSUES 1. Gonzales’ interpretation that par.Par.In a contract of sale. sale of the property under the Contract cannot be perfected.Cruzs filed a complaint for recovery of the possession of the property alleging breach of par. It is a future and uncertain event upon which the acquisition or resolution of rights is made to depend by those who execute the juridical act. Reasoning They have not caused the transfer of the TCT to their names which is a condition precedent to Gonzales’ obligation. Capt. normal course of things in sale of real properties dictate that there must first be payment of agreed purchase price before transfer of title can be made. Coronel. Considering the antecedents of the ownership of the disputed lot. But petitioner maintains that respondents were obligated to obtain a TCT in their names. the Coronels executed a document entitled “Receipt of Down Payment” in favor of Ramona Patricia Alcaraz containing the following conditions appurtenant to the sale of their house and lot: 1. Constancio P.In the Contract.Par.He did not exercise his option to purchase the property immediately after expiration of 1-yr lease.Failure of Lessors to secure the TCT does not entitle them to rescind the contract. Ratio There can be no rescission of an obligation as yet non-existent.Said property is currently the subject of an extra-judicial partition. Gonzales also advanced P50T to them expedite transfer of TCT to their names. WON CA erred in the interpretation of the “law between the parties” 2. because the suspensive condition has not happened. 1987 – Since Gonzales refused to appear before the Brgy. CORONEL V CA MELO. Title to property remains in the name of Cruz’s predecessors-in-interest.9 was intended to ensure that respondents would have a valid title over the specific portion they were selling to the petitioner. after Cruz’s have complied with par9. October 7. At the time the contract was executed.” . Ratio In requiring the lessors to obtain first a separate and distinct TCT in their names. Ramona will make a down payment of P50. Disposition Petition granted. ..9 is a condition precedent to the purchase of the property renders it most effectual. . it shall be understood as bearing that import most adequate to render it effectual. 1985.1 was effectively modified by par. . 1996 NATURE Petition for review on certiorari of a decision of the Court of Appeals. Yes. 2.9. . . .Obligations and Contracts .9 is a condition and it clearly indicates that the Heirs of Cruz shall obtain a Transfer Certificate of Title in the name of the lessee within 4 years before a new contract is to be entered into under the same terms and conditions as the original Contract of Lease/Purchase . A2010 page 39 Prof. Captain of San Isidro. (NEMO DAT QUOD NON HABET: no one can give what one does not have) . No. a certification allowing the case to be brought to Court was issued. Ratio In the interpretation of contracts. The power to rescind is given to the injured party.000 upon execution of the document aforestated. Issue was brought before Brgy.On Jan.000 down payment. they cannot terminate the Contract of Lease due to their failure to notify the defendant in due time of such intention. which Gonzales received but did not heed . Demand made will come under the implied new lease of Art.Also.” . 3.Cruz sent out a letter to Gonzales informing him of the lessors’ decision to rescind the Contract due to a breach committed by Gonzales. and w/o paying any further rentals. respondents were given a maximum of 4 years to obtain a separate TCT.Gonzales refused to vacate the property.9 to mean that respondents obliged themselves to obtain a TCT in the name of petitioner. WON respondents can rescind the contract HELD 1. stating that after a separate TCT had been obtained.. upon receipt of the P50.Par. if some stipulation should admit of several meanings.March 18. He remained in possession of the property without paying the purchase price provided for in the Contract.Without the fulfillment of the condition.9 and payment of only P50T of the P500T agreed down payment on the purchase price of P1M Ruling of RTC . 19. 2. “a new contract shall be executed which shall be the same in all respects with this Contract. Gonzales can only be compelled to perform his obligation under par1.9. 1987 – Final demand letter to vacate premises was sent by remaining lessors after the death of Paula Ano Cruz. and extra-judicial proceedings were still ongoing. FACTS .Terms of contract require no interpretation.CA interpretation ignores last part of par. Ruling of CA . letter also served as a demand for him to vacate the premises within 10 days from the receipt of the letter . Decision of RTC is reinstated. but the award of moral damages and attorney’s fees is deleted for lack of basis. 9 of the Contract of Lease/Purchase is a condition 3. such undertaking is a condition precedent to the lessee’s obligation to purchase and pay for the land. title to the property passes to the vendee upon the delivery of the thing sold. Reasoning Both RTC and CA interpreted par. Yes. Reasoning Condition is defined as “every future and uncertain event upon which an obligation or provision is made to depend. WON par. . land was not registered in the names of lessors. . The Coronels will cause the transfer in their names of the title of their property registered in the name of their deceased father.

continuing in the same paragraph..The inevitable conclusion is that on Jan. . 1985.Obligations and Contracts Upon the transfer in their names of the subject property. the Coronels sold the property covered by TCT No. 6. that is. fulfilled on February 6. on Feb. as well as the extinguishment of loss of those already acquired.000 in cash. et al. Further.The lower court rendered judgment for specific performance ordering the Coronels to execute in favor of Concepcion. A2010 page 40 Prof. 327403. the Coronels canceled and rescinded the contract with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. 1985. hold that in accordance with Art. . Thus. to immediately deliver the said document of sale to Concepcion. The Court significantly notes that this suspensive condition was. and to immediately execute the said deed of absolute sale.000. the Court fully agreed to the decision of the trial court.” . the parties may reciprocally demand performance.. together with all the improvements existing thereon free from all liens and encumbrances and once accomplished.Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. as evidenced by the document denominated as “Receipt of Down Payment”. both of the Civil Code. in correlation with Art. once the condition has been fulfilled. Upon receipt thereof. 327043 to intervenor-appellant Mabanag for P1. was obliged to forthwith pay the balance of the purchase price amounting to P1. From that moment. this condition was fulfilled. that: … Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names. petitioners conclusively admitted that: 3. mother of Ramona. the parties entered into a contract of sale subject only to the suspensive condition that the sellers shall effect the issuance of new certificate title from that of their father’s name to their names and that. 327043. Concepcion. the buyer. . TCT No.Art. The Coronels executed a Deed of Absolute Sale over the subject property in favor of Mabanag.We. 1187. Subsequently. while the buyer on her part. Art. the acquisition of rights. 6. for Art. consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners’ father. A new title on the subject property was issued in the name of Mabanag under TCT No. et al. et al. therefore. plainly applies to the case at bench.190. when a new title was issued in the names of petitioners as evidenced by TCT No. Coronel. The claim for damages and attorney’s fees filed by Concepcion. 1985. petitioners.000 after the latter paid P300. The effects of conditional obligations to give. shall depend upon the happening of the event which constitutes the condition. Coronel. Only.Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners’ names was fulfilled on Feb. not aware that they have set their own trap for themselves. a deed of absolute sale covering that parcel of land embraced in and covered by TCT No.” The sale was still subject to this suspensive condition. On appeal. Mabanag. the conditional contract of sale between petitioners and private respondent Ramona became obligatory. 1187 which pertinently provides — Art. the property originally registered in the name of the Coronels’ father was transferred in their names under TCT No. ISSUE WON petitioners and private respondents entered into a conditional contract of sale HELD .It is also significant to note that in the first paragraph in page 9 of their petition.190. which petitioners unequivocally committed themselves to do as evidenced by the “Receipt of Down Payment. 351582. 1985. In conditional obligations. 1475. 1181.190. Thus: 3. Concepcion Alcaraz.000. The petitioners-sellers Coronel bound themselves “to effect the transfer in our names from our deceased father Constancio P. 6. shall retroact to the day of the constitution of the obligation… . the parties had agreed to a conditional contract of sale.. A few days later.Besides. 6. were obliged to present the transfer certificate of title already in their names to private respondent Ramona Alcaraz. Labitag Art. the transfer certificate of title immediately upon receipt of the downpayment abovestated. Concepcion. . Mabanag then caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City. were ordered to pay the Coronels the whole balance of the purchase price amounting to P1. paid the down payment of P50.000. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of P1. there could be no perfected contract of sale. 327403. 331582) of the Registry of Deeds for Quezon City. 1985. 1985.On the same date. 327403 (now TCT No. 1186. subject to the provisions of the law governing the form of contracts.000. in fact. et al. . et al. For this reason. On Feb. 331582 in the name of Mabanag was canceled and delivered to be without force and effect. 1186 of the Civil Code expressly provides that: Art. it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on Feb. 1181. et al. 19. 1475. Constancio P. they contend. What is clearly established by the plain language of the subject document is that when the said “Receipt of Down Payment” was prepared and signed by the Coronels. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. as well as the counterclaims by the Coronels and intervenors were dismissed. the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument. filed a complaint for specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. the respective obligations of the parties under the contract of sale became mutually demandable. as sellers. the Coronels. .Yes. to their names. on said date.. . . and all other persons claiming under them were ordered to vacate the subject property and deliver possession thereof to Concepcion.580.

Meanwhile nothing is acquired and there is only an expectancy of right. and the transfer certificate issued to the Province of Tarlac cancelled. applied for and obtained the registration of the land in its name.Obligations and Contracts In obligations to do or not to do. or 2) that it had been judicially decreed.000. 1921. Concepcion Cirer and James Hill and prayed that he be declared the absolute owner entitled to the possession of the parcel of land.The plaintiff alleges that the conditions of the donation had not been complied with.When the sellers declared in the “Receipt of Down Payment” that they received an amount as purchase price for their house and lot without any reservation of title until full payment of the entire purchase price. What may be perceived form the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father. . it is necessary either: 1) that the revocation had been consented to by the donee. But the allegation that it is a condition precedent is erroneous. Labitag . . donated it perpetually to the municipality of Tarlac. Consequently. a) Appellant contends that a condition precedent having been imposed in the donation and the same not having been complied with. the condition not having been complied with. The parcel thus donated was later registered in the name of the donee. It just so happened. that the transfer certificate of title was then still in the name of their father.The donation was accepted by Mr. The characteristic of a condition precedent is that the acquisition of the right is not effected while said condition is not complied with or is not deemed complied with. by reason of the transfer. however. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50. the municipality of Tarlac. . Concepcion Cirer and James Hill. in each case. the compliance of which cannot be effected except when the right is deemed acquired. completely willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order. The Province of Tarlac. it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer. 1985. which donation was accepted by the latter. None of these circumstances existed when Cirer and Hill sold the parcel to the plaintiff. as municipal president. but since the transfer certificate of title was still in the name of petitioners’ father. Santiago de Jesus. Cirer and Hill were no longer the owners of this parcel and could not have sold it to the plaintiff. . in the same document on behalf of the municipal council of Tarlac. the natural and ordinary idea conveyed is that they sold their property. 2. This “condition precedent” according to appellant. July 13. that the transfer of the same by the municipality of Tarlac to the Province of Tarlac be annulled. the municipality of Tarlac.The plaintiff has no right of action. the courts shall determine. under certain conditions specified in the public document in which they made the donation. when a condition is imposed. As of that point in time.Jan 15. nor could Parks have acquired it from them. they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. .Oct 18. the title to the property was transferred to the municipality of Tarlac. Concepcion Cirer and James Hill sold this parcel to plaintiff George L. Consequently. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. the work to commence in both cases within the period of six months from the date of the ratification by the parties of the document evidencing the donation. reciprocal obligations of both seller and buyer arose. . A2010 page 41 Prof. the municipality of Tarlac transferred the parcel to Province of Tarlac. 1923. the noncompliance thereof is sufficient cause for the revocation of the donation. .Lower court dismissed the complaint. 1910. a) with regard to the “condition precedent”. Parks. b) Appellant also contends that. it is true that the condition has not been complied with. The donation was not revoked when Cirer and Hill made the sale to the plaintiff. promised to sell the property to the latter. Province of Tarlac. the donation never became effective. When the “Receipt of Down Payment” is considered in its entirety. even supposing that it was not a condition precedent but subsequent. and invokes the sale of the parcel of land made by Concepcion Cirer and James Hill in his favor. The parcel having been donated by Cirer and Hill to the municipality of Tarlac. the retroactive effect of the condition that has been complied with.the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on Feb. in any event. The sale made by Cirer and Hill to Parks cannot have any effect. It was more expedient to first effect the change in the certificate of title so as to bear their names. In order to consider it revoked. petitioners were committed to immediately execute the deed of absolute sale. 6. the owners of parcel of land No. As soon as the new certificate of title is issued in their names. ISSUE WON plaintiff has right of action HELD . . refers to the condition imposed that one of the parcels donated was to be used absolutely and exclusively for the erection of a central school and the other for a public park. the corresponding certificate of title having been issued to it. PARKS V PROVINCE OF TARLAC AVENCENA. after compliance by the buyer with certain terms and conditions. In the present case the condition that a public school be erected and a public park made of the donated land could not be complied with except after giving effect to the donation. 1926 NATURE APPEAL from a judgment of the Court of First Instance of Tarlac FACTS . when the sale was made. such condition cannot be a condition precedent.The parties did not merely enter into a contract to sell where the sellers. the municipality of Tarlac. Petitioners' Claim .Aug 24.Plaintiff-appelant brought this action against the Province of Tarlac.

six months after the ratification of the instrument of donation of October 18. 43. Disposition The judgment appealed from is affirmed. hence. CENTRAL PHILIPPINE UNIVERSITY V COURT OF APPEALS BELLOSILLO. the donor did not fix a period within which the condition must be fulfilled. with costs against the appellant. 1924. Don Ramon Lopez. shall depend upon the happening of the even which constitutes the condition. that is. In this case. hence. No. as well as the extinguishment or loss of those already acquired. the said land shall be called RAMON LOPEZ CAMPUS and the said college shall be under obligation to erect a cornerstone bearing that name. executed for a valuable consideration which is considered the equivalent of the donation itself.Obligations and Contracts b) Although the appellant’s contention that noncompliance of the condition of the donation is sufficient ground for revocation. on conditional obligations. Sr. WON the Court may fix a period within which petitioner would establish a medical college HELD 1. the conditions imposed are the very obligations of the donation. that it did not sell. that it did not violate any of the conditions in the deed of donation because it never used the donated property for any other purpose than that for which it was intended 3. it says that the donation in question is onerous. cannot be applied in this case. Proc. there is no more need to fix the duration of a term of the obligation when such procedure would be a mere technicality and formality and would serve no purpose than to delay or lead to an unnecessary and expensive multiplication of suits. The action for the revocation of the donation for this cause arose or April 19. or convey it to any third party . Sr. In fact. it remanded the case to the court of origin for the determination of the time within which the petitioner should comply with the first condition annotated in the certificate of title ISSUES 1. The mere fact that there is no time fixed as to when the conditions of the donation are to be fulfilled does not ipso facto mean that the statute of limitations will not apply anymore and the action to revoke the donation becomes imprescriptible. Labitag could not be considered as having failed to comply with its part of the bargain. the period of prescription of this class of action is ten years.the discussion on conditional obligations is unnecessary as there is no conditional obligation to speak of in this case. No. The condition imposed by the donor depended upon the exclusive will of the donee as to when this condition shall be fulfilled. Art. . petitioner SEPARATE OPINION DAVIDE [ dissent] .the TC held that petitioner failed to comply with the conditions of the donation and declared it null and void. who was a member of the Board of Trustees of the Central Philippine College (now Central Philippine University) executed a deed of donation in favor of the latter of a parcel of land with the following annotations: 1. 3. WON the quoted annotations are onerous obligations and resolutory conditions 2. 2.in 1939.on May 31. transfer or convey to any third party nor in any way encumber said land 3.the CA ruled that the annotations at the back of petitioner’s certificate of title were resolutory conditions breach of which should terminate the rights of the donee thus making the donation revocable. 1911. More than a reasonable period of 50 years has already been allowed petitioner to avail of the opportunity to comply with the condition even if it be burdensome. since 1939 up to the time the action was filed the latter had not complied with the conditions of the donation 2. the right of the private respondents to file the action had prescribed 2. It also found that while the first condition mandated petitioner to utilize the donated property for the establishment of a medical school. that CPU had in fact negotiated with the National Housing Authority to exchange the donated property with another land owned by the latter . thus.CPU. Sr. transfer. 1181 of the Civil Code. A2010 page 42 Prof. to make the donation in its favor forever valid. filed an action for annulment of donation. Under Art. The conditions imposed by the donor determines neither the existence nor the extinguishment of the obligations of the donor and the donee with respect to the donation. Since the time within which the condition should be fulfilled depended upon the exclusive will of the petitioner. 1989. in its answer alleged that: 1. namely. Yes. private respondents herein. more than ten years after this cause accrued. Code of Civ. the acquisition of rights. reconveyance and damages against CPU alleging that: 1. the land described shall be utilized by the CPU exclusively for the establishment and use of a medical college with all its buildings as part of the curriculum 2. 1995 FACTS . Yet in the last paragraph it states that the donation is basically a gratuitous one. . It further directed the petitioner to execute a deed of reconveyance of the property in favor of the heirs of the donor. 1197. WON the right of the respondents to initiate an action has already prescribed 3. until a period was fixed for the fulfillment of the condition. Any net income from the land or any of its parks shall be put in a fund to be known as the RAMON LOPEZ CAMPUS FUND to be used for improvements of said campus and erection of a building thereon . the period for bringing an action for the revocation of the donation has prescribed. 1910.pointed out an inconsistency in the majority opinion’s description of the donation in question.the court should fix the duration for the performance of the conditions/obligations in the donation. In one part. where the courts may fix the duration for fulfillment. the heirs of Don Ramon Lopez. the said college shall not sell.). it has been held that its absolute acceptance and the acknowledgment of its obligation provided in the deed of donation were sufficient to prevent the statute of limitations from barring the action of private respondents upon the original contract which was the deed of donation. the starting point from which the obligation to comply must be counted from the expiration of a reasonable period and opportunity for petitioner to fulfill what has been charged upon it by the donor. Under the laws in force (sec. Don Ramon Lopez. . The complaint in this action was presented July 5.

Obligations and Contracts
QUIJADA V CA MARTINEZ; December 4, 1998
NATURE Certiorari of CA’s decision FACTS - April 5, 1956-Trinidad Quijada , together with her siblings, donated a two-hectare land to the Municipality of Talacogon, Agusan del Sur with the condidtion that the parcel of land shall be used SOLELY and EXCLUSIVELY as part of the campus of the proposed provincial high school of the said municipality. - Trinidad remained in possession of the land despite the donation. - July 29, 1962- Trinidad sold one hectare of the said land to Regalado Mondejar (respondent) without the benefit of a deed of sale and evidenced only by receipts of payment. - 1980- the heirs of Trinidad (who at this time was dead already) instituted a complaint which was dismissed for failure to prosecute. - 1987- the proposed provincial high school failed to materialize, the Sangguniang Bayan of the municipality enacted a resolution reverting the two-hectare land donated back to the donors. - In the meantime, Mondejar sold portions of the land to respondents, Fernando Bautista, Rodolfo Goloran, Efren Guden, and Ernesto Goloran. - The heirs of Trinidad filed for this action (quieting of title, recovery of possession and ownership of parcels of land with claim for attorney’s fees and damages.) - According to the heirs, their mother Trinidad never sold, conveyed, transferred or disposed of the property in question to any person or entity much less to Mondejar save the donation made to the Municipality of Talacogon. - Since the land still belonged to the municipality at the time of the alleged sale to Mondejar, the supposed sale is null and void. - Mondejar claims that one hectare of the land was sold to him on July 29, 1962, and the remaining one-hectare on installment basis until fully paid. As a defense, he claims that the action is barred by LACHES or has prescribed. - TC- Trinidad had no legal right to sell the land to Mondejar since the ownership belongs to the municipality and the deed of sale executed by Trinidad to Mondejar did not carry with it the conformity and acquiescence of her children since she was a widow and 63 yrs old at that time. So the respondents were asked to vacate the land and restore the possession to the heirs. - CA- reversed the decision of the TC; sale to Mondejar was valid as Trinidad retained an inchoate interest on the lots by virtue of the automatic reversion clause in the deed of donation. ISSUE WON the sale of the land to Mondejar was valid since the ownership of the said land belonged to the municipality at the time of the sale by virtue of the conditional deed of donation executed by Trinidad and her siblings and WON the action is barred by laches

A2010 page 43 Prof. Labitag
HELD The decision of the CA is upheld; sale is valid. No atty’s fees awarded; No moral damages were likewise awarded. Reasoning On donation - When the Municipality’s acceptance of the donation was made known to the donor, the Municipality became the new owner of the donated property - donation being a mode of acquiring and transmitting ownership- notwithstanding the condition imposed by the donee. - The condition was that if the school never materializes or that it is opened but discontinued or closed in the future, the property shall revert to the donor. - The donation is perfected once the acceptance by the donee is made known to the donor. - The resolutory condition is the construction of the school. It has been ruled that when a person donates land to another on the condition that the latter would build upon the land a school, the condition imposed is not a condtion precedent or a suspensive condition but a resolutory one. - At the time of the sales, Trinidad could not have sold the lots since the ownership had been transferred by virtue of the deed of donation. So long as the resolutory condtion subsists and capable of fulfillment, the donation remains effective and the donee continues to be the owner subject only to the rights of the donor or his successors-in-interest under the deed of donation. - Since no period was imposed by the donor on when the must the donee must comply with the condition, the latter remains the owner so long as he has tried to comply with the condition within a reasonable period. In this case, the Municipality manifested in a resolution that they cannot comply with the condition of building a school and the same was made known to the donor. This was when the ownership reverted back to Trinidad as provided in the reversion clause of the deed of donation. - The donor may have inchoate (meaning: imperfect) interest in the donated property during the time that ownership of the land has not reverted to her. Such inchoate interest may be the subject of contracts including a contract of sale. Here what the donor sold was the land itself which she no longer owned. It would have been different if what she sold were her interests over the property under the deed of donation which is subject to the possibility of reversion of ownership arising from the non-fulfillment of the resolutory condition. On laches - The petitioners’ action in NOT YET barred by laches. It cannot be said that the petitioners had slept on their rights for along time since they initiated the action a year after upon knowledge of the reversion of the property to the donor. - Laches presupposes failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could have or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, thus, giving rise to a presumption that the party entitled to assert it either has abandoned or declined to assert it. - Essential elements: a. Conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation complained of; b. delay in asserting complainant’s right after he had knowledge of the defendant’s conduct and after he has an opportunity to sue;

Obligations and Contracts
c. Lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; d. injury or prejudice to the defendant in the event relief is accorded to the complaint. - these elements are not present in this case On sale - Sale being a consensual contract is perfected by mere consent which is manifested the moment there is a meeting of the minds as to the offer and acceptance thereof on 3 elements: subject matter, price and terms of payment of the price. - Ownership by the seller on the thing sold at the time of the perfection of the contract of sale is not an element for its perfection. Perfection per se does not transfer ownership which occurs upon the actual or constructive delivery of the thing sold. - The consummation of the perfected contract is another matter. It occurs upon the actual or constructive delivery of the subject matter to the buyer when the seller or her successors-in-interest subsequently acquires ownership thereof.

A2010 page 44 Prof. Labitag
HELD 1. Ratio The lease contract cannot be made to depend solely on the free and uncontrolled choice of the lessee. Reasoning - The stipulation “for as long as the defendant needed the premises and can meet and pay the said increases” is purely potestative. The continuance, effectivity and fulfillment of a contract of lease cannot be made to depend exclusively upon the free and uncontrolled choice of the lessee between continuing payment of the rentals or not, depriving the owner of any say in the matter. - Where the instrument is susceptible of two interpretations, the one which will make it valid and legal should be adopted. 2. Ratio The second action for ejectment does not constitute res judicata. Reasoning - For a judgment be a bar to a subsequent case, it must be (1) a final judgment, (2) rendered by a court with jurisdiction over the subject matter of the parties, (3) it must be judgment on the merits, and (4) there must be identity between the two cases as to parties, subject matter and cause of action. - The fourth is lacking in the case at bar. There is no identity of subject matter and cause of action. Disposition Wherefore, the decision of respondent Court of Appeals is reversed and set aside. Private respondent is hereby ordered to immediately vacate and return the possession of the leased premises subject of the present action to the petitioner and to pay the monthly rentals due thereon in accordance with the compromise agreement until he has actually vacated the same.

LAO LIM V CA REGALADO; October 31, 1990
NATURE Petition to review the decision of the Court of Appeals FACTS - Dy entered into a contract of lease with Lim foe a period of 3 years (1976-1979). After the stipulated term expired, Dy refused to vacate the premises, hence Lim filed for an ejectment suit against Dy. The case was terminated by a judicially approved compromise agreement. - The compromise agreement provides “that the term of lease shall be renewed every three years retroacting from Oct 1979 – 1982; after which the rental shall be raised automatically by 20% every three years for as long as the defendant (DY) needed the premises and can meet and pay the said increases, the defendant to give notice of his intent to renew 60 days before the expiration of the term.” - April 17, 1985 – petitioner advised that he would no longer renew the contract October 1985. On August 5, 1985, Dy informed the petitioner in writing of his intention to renew the contract of lease for another term. Lim advised that he did not agree to a renewal. - January 15, 1986 – Lim filed another ejectment suit which was dismissed on the grounds that (1) the lease contract has not expired being a continuous one the period whereof depended on upon the lessee’s need for the premises and his ability to pay rents and (2) the compromise agreement constitutes res judicata. - On appeal, the respondent court affirmed the lower court’s judgment in toto. ISSUES 1. WON the lease contract only depends on the party’s need for the premises and his ability to pay the rents 2. WON the compromise agreement constitute res judicata

NAGA TELEPHONE V COURT OF APPEALS NOCON; February 24, 1994
NATURE PETITION for a review of the decision of the CA. FACTS - Petitioner, Naga Telephone Co., Inc. (NATELCO), is a telephone company rendering local as well as long distance telephone service in Naga City. On November 1, 1977, it entered into a contract with Camarines Sur II Electric Cooperative, Inc. (CASURECO II), a corporation established for the purpose of operating an electric power service in the same city, “for the use by the petitioner in the operation of its telephone service the electric light posts of the respondent”. In consideration of such use, NATELCO agreed to provide the respondent with free use of ten telephone connections. - The contract between included, among others, a stipulation to the effect that the contract shall “be as long as the party of the first part (NATELCO) has need for the electric post of the second part (CASURECO II) it being understood that this contract shall terminate when for any reason whatsoever, the party of the second part is forced to stop, abandoned its operation as a public service and it becomes necessary to remove the electric post”. - After over ten years, the respondent filed on January 2, 1989 with the RTC of Naga City action against the petitioner for reformation of the contract on the grounds that it is too one sided in favor of the petitioner. The action also prayed that petitioner be ordered to pay for the use of electric posts which are not covered by the

Obligations and Contracts
agreement. And finally, that CASURECO be indemnified no less than P100,000 arising out of the poor servicing of the ten telephone units which had caused it great inconvenience and damages. - The trial court found in favor of the respondents and ordered the reformation of the contract in the interest of justice and equity. As part of the ruling, the court ordered NATELCO to pay respondent a monthly rental of P10.00 per electric post being used from the time of the filing of the case. On the other and, CASURECO was ordered by the same trial court to pay NATELCO for the use and transfers of its telephone units at the same rate that the public are paying. - Appeal to the CA was made and the CA affirmed the ruling of the trial court but this time not based on the reformation but rather on the operation of Article 1267 of the Civil Code and on the potestative condition with rendered the condition void. - The CA held that as reformation only lie or may prosper when the contract failed to express the true intentions of the parties due to error or mistake, accident , or fraud and there is no allegation to this effect, the proper basis is the aforementioned Article. - The section on the continued use of the electric post for so long as these are needed by NATELCO was considered as being purely potestative on the part of the petitioner as it leaves the continued effectivity of the contract to NATELCO’s sole and exclusive will. As held in previous jurisprudence, there must be mutuality and equality in any contract. - Hence the appeal. ISSUE WON the ruling of the CA is valid HELD Yes. The agreement between the parties has become too one sided in favor of the petitioner to the great disadvantage of the respondent. Continuing with the agreement will result in the petitioner’s unjust enrichment at the expense of the respondent.

A2010 page 45 Prof. Labitag
property, and as a special security, she would give her house in Pagina. The contract was signed by 2 witnesses. -27 Oct. 1891: Defendant asked a further loan from the Don of P70, P50 of which would be loaned to Don Peñares, and the P70 would be paid in sugar. -Some time after the execution and delivery of the above contracts, Don Osmeña died. In the settlement and division of the property of his estate the above contracts became the property of one of his hieirs, Agustina Rafols. Later(no date given) the said Agustina Rafols ceded to the present plaintiff all of her right and interest in said contracts. -( my copy is missing some paragraphs, can’t find a copy in the internet so just look at your copies for the periods between the death of Don Osmeña and March 15) -15 March 1902: Doña Rama recognized her obligations in the said contract with Don Osmeña, stating in the contract she executed (EXHIBIT C) that if her house in Pagina would be sold she would use the money to pay for her debts. -26 June 1906: Doña Tomasa did not pay the amount due so the plaintiff commenced this action in CFI Cebu. CFI deci judgment in favor of the plaintiff and against the defendant for the sum of P200 with interest at the rate of 18 3/4 per cent per annum, from the 15th day of November, 1890, and for the sum of P20, with interest at the rate of 181 per cent per annum, from the 27th day of October, 1891, until the said sums were paid. Plaintiff’s Claim the execution and delivery of the above contracts, the demand for payment, and the failure to pay on the part of the defendant, and the prayer for a judgment for the amount due on the said contracts. (own testimony – I don’t know if Agustina is a guy – my copy said “the plaintiff himself”) Defendant’s defense general denial and setting up the special defense of prescription. (no evidence presented) ISSUE WON the proof presented during the trial in CFI is sufficient for the lower court to recognize the debt of Doña Rama, provided that she imposed the condition that she would pay her debts upon selling her house HELD YES, the proof presented is sufficient. Ratio A condition imposed upon a contract by the promisor, the performance of which depends upon his exclusive will, is void, in accordance with the provisions of article 1115 of the Civil Code. Reasoning It was suggested during the discussion of the case in this court that, in the acknowledgment of the indebtedness made by the defendant, she imposed the condition that she would pay the obligation if she sold her house. If that statement found in her acknowledgment of the indebtedness should be regarded as a condition, it was a condition which depended upon her exclusive will, and is, therefore, void. (Art. 1115, Civil Code.) The acknowledgment, therefore, was an absolute acknowledgment of the obligation and was sufficient to prevent the statute of limitation from barring the action upon the original contract. Disposition We are satisfied, from all of the evidence adduced during the trial, that the judgment of the lower court should be affirmed. So ordered.

OSMEÑA V RAMA JOHNSON; September 9, 1909
NATURE APPEAL from a judgment of the Court of First Instance of Cebu. FACTS -15 Nov 1890: Doña Rama executed and delivered to Victoriano Osmeña a contract (EXHIBIT A) which stated that she received P200 in cash from Don Osmeña which she would pay in sugar in January/February the next year at the price on the day of delivering the sugar into the Don’s warehouses + Interest w/ rate of half a cuartillo per month on each peso from Nov 15 to the day of the settlement; if ever the Doña could not pay in full, a balance shall be struck, showing the amount outstanding at the end of each June, including interest, and outstanding balance of the respondent would be considered as capital which the respondent would pay in sugar. The respondent also promised that she would sell to Don Osmeña all her sugar that would be harvested, and as security, she pledged all her present and future

HERMOSA V LONGORA LABRADOR; October 27, 1953

the property was sold in November 1947. became either immediately demandable or payable within a term fixed by the court. WON claims furnished after the death of the intestate (third claim) should have been allowed HELD 1. depending partly upon the will of the intestate and partly upon chance.It was understood that should the machinery to be installed fail. 2. Sr. covering salary and perks due and to become due ISSUE WON in a contract for the prestation of service. as soon as he receive funds derived from the sale of his property in Spain.Obligations and Contracts NATURE Petition for review by certiorari of a decision of the Court of Appeals FACTS Epifanio Longora had three claims against the intestate estate of Fernando Hermosa. either cancelled the order for machinery from choice or were unable to supply the capital necessary to finance the project. mainly that a buyer. A2010 page 46 Prof. ready. CA held that the payment did not become due until the administrstrix received the payment from the buyer of the property. Sr. 1922 NATURE Appeal from a judgment of CFI of Manila FACTS . Upon authorization of the probate court. the action to recover the same only accrued. P60/month . NO Ratio Even if authorization to furnish necessaries to his grandson may have been given. The will to sell on the part of the intestate was present in fact. for any reason. the contract may be cancelled by the party of the second part at its option. . . upon the happening of the suspensive condition. or presumed to legally exist. the debt resulting from the advances made to Fernando Hermosa. hence the action to recover the advances has not yet prescribed 3. Labitag (2) upon the death of the intestate. Sr. The claimant presented evidence that the intestate had asked for said credit advances for himself and the members of his family “on condition that their payment should be made by Fernando Hermosa Sr. As the condition above is null and void. 1948. In fact no sale was effected during his lifetime. the second made to his son. such cancellation not to occur before the expiration of such 6 months . which occurred in December 1944. NO Ratio The condition in question is not a condicion potestativa since it also depends upon other circumstances beyond the debtor’s control Reasoning The condition of the obligation was not purely a potestative one. the machinery for contemplated factory had not been acquired. NO Ratio As the obligation retroacts to the date of when the contract was entered into. WON the action has already prescribed 3. The terms are subject to the sole judgment—if not whims and caprice—of Fernando Hermosa.The machinery did not arrive in Manila within the 6 months. light and water for domestic consumption or in lieu thereof. on the date the money became available here. The matter of the sale of the house rested on the sole will of the debtor. the reason does not appear. within the meaning of the statute of limitations. depending exclusively upon the will of the intestate. ISSUES 1. able and willing to purchase the property under the conditions demanded by the intestate. There were still other conditions that had to concur to effect the sale. October 2. his agent’s authority or authorization is deemed terminated Disposition Judgment appealed from is hereby affirmed in so far as it approves the first and second claims and reversed as to that of the third. the action has prescribed after the lapse of ten years. unaffected by any outside consideration or influence. .At this time. TAYLOR V UY TIENG PIAO AND TAN LIUAN STREET. The first represented credit advances made to the intestate from 1932 to 1944. WON the claim was subject to a condition exclusively dependent upon the will of the debtor (condicion potestativa) and therefore null and void 2. but a preponderance of evidence show that the defendants seeing that oil business no longer promised large returns.Defendants communicated to Taylor that they had decided to rescind the contract. though ten expellers had been ordered from the US .The contract extended over 2 years and the salary was P600/month during the first year and P700/month during the second with electric. In both cases. the claim was filed on Oct. but a mixed one. to arrive in Manila within the period of 6 months.Taylor instituted this action to recover damages in the amount of P13k.Taylor contracted his services to Tan Liuan & Co as superintendent of an oil factory which the latter contemplated establishing . SEPARATE OPINION PARAS [ concur] I concur insofar as it reverses the appealed judgment allowing the third claim but dissent therefrom insofar as it affirms the appealed judgment approving other claims. although the price and other conditions thereof were still within his discretion and final approval. it is lawful for the parties to insert a provision giving the employer the power to cancel the contract in contingency which may be dominated by himself HELD YES. all amounts advanced from the time of the agreement became due. Reasoning As the obligation to pay became due and demandable only when the house was sold and the proceeds received in the islands. this authorization could not be made to extend after intestate’s death Reasoning The court gave two reasons: (1) the obligation to furnish support is personal and is extinguished upon the death of the person obliged to give support. and the third made to his grandson from 1945 to 1947 after the death of the intestate.

V SOTELO MATTI ROMUALDEZ.expellers arrived October 26. . Ratio When an agent acts in his own name. such as the character of the goods.What is reasonable time? – to be determined by the circumstances attending the particular transaction.One of the consequences of the stipulation was that the employers were left in a position where they could dominate the contingency. and P21.as a consequence of the delay. the trial judge overlooked the item of P60 (commutation of house rent) This amount Taylor is entitled to recover in addition to P300 awarded by CFI. however. as if the business were for his own account. and its existence cannot be implied in the face of the stipulation.000.petitioner immediately notified the defendant of the arrival of the goods . 1919. 1919. and the result was about the same as if they had been given an unqualified option to dispense with the services of Taylor at the end of 6 months. to be shipped from New York and delivered at Manila “within 3 or 4 months”. expellers.expellers and motors in good conditions Respondents' Comments . in the absence of affirmative proof showing that the non-arrival of the machinery was due to some cause not having its origin in their own act or will. A2010 page 47 Prof. BELL & CO. motors.tanks arrived at Manila April 27. the obligor shall not be held guilty of delay in the fulfillment of its obligation if it delivers the goods within a reasonable time.. No.denied the allegations as to the shipment and arrival of the goods RUSTAN PULP AND PAPER MILLS V IAC . the obligor will be deemed to have sufficiently performed his part of the obligation. and transportation was difficult. they would of course be liable. . but rendered judgment against them for the expellers. Bell & Co. . . WON the intervenor has right of action HELD 1. 2) 2 expellers to be shipped from San Francisco in the month of September. and the usual course of business in the particular trade. Reasoning When the agent transacts business in his own name. . ordering them to “receive the aforesaid expellers and pay the plaintiff the price of the said goods” .August..it was only in May. Reasoning . the plaintiff has fulfilled.The court below absolved the defendants from the complaint insofar as the tanks and electric motors were concerned. art 246) Disposition the judgment appealed from is modified.denied the notification and the refusal and the good conditions of the goods . 2. and the defendant sentenced to accept and receive from the plaintiff the tanks. its obligation to bring the goods in question to Manila 2.” . the Manila Oil Refining and ByProducts Co.and he has the right to demand performance of the contract by the other party. delivery must be made within reasonable time. 3) 2 electric motors to be delivered “Approximate delivery within ninety days. if he has done all that was in his power. expresses no such positive obligation. under the contracts entered into and the circumstances established in the record.both parties appeal Petitioners' Claim . and it could not have incurred any of the liabilities mentioned by the intervenor in its counterclaim. or could be demonstrated that the defendants were under positive obligation to cause the machinery to arrive in Manila. incomplete and long after the date stipulated .Plaintiff obligated itself to sell (and the defendant to purchase) 1) 2 steel tanks. . WON. Ratio When no definite date has been fixed for the delivery of goods.In such cases. -The plaintiff corporation notified Sotelo of the arrival of these goods. Yes. even if the condition has not been fulfilled in reality.Obligations and Contracts .250 for the expellers and motors arriving late. . in due time. but Sotelo refused to receive them and to pay the prices stipulated. but in assessing the damages due for the six-month period. and the costs of both instances. it shall not be necessary to state who is the principal and he shall be directly liable. and defendant Sotelo entered into contract: . *They were executed at the time of the world war when there existed rigid restrictions on the export from the US of articles like the machinery in question. or as soon as possible. But this circumstance does not make the stipulation illegal.CFI no error in rejecting Taylor’s claim in so far as damages are sought for the period subsequent to the expiration of 6 months.The contract. – This is not guaranteed. the ability of the seller to produce the goods if they are to be manufactured. ISSUES 1.783. 1918: Plaintiff Corporation Smith. that it notified the intervenor that goods had arrived. the purpose for which they are intended.alleged as special defense: Sotelo made the contracts in question as manager of the intervenor. the intervenor suffered damages in the sum of P116.defendant refused to receive and pay the price . the facilities available for transportation. 1919 .91 for the nondelivery fo the tanks. .When the delivery is subject to the fulfillment of a condition dependent on the will of third persons who could in no way be compelled to fulfill the condition (like in this case).A condition at once facultative and resolutory may be valid even though the condition is made to depend upon the will of the obligor. 1918.motors arrived Feb. with legal interest. 1918 . (Code of Com. defining the conditions under which the defendants can cancel the contract. The plaintiff has not been guilty of any delay in the fulfillment of its obligation. Labitag . the principal shall have no right of action against the persons with whom the agent has contracted. SMITH. 1922 NATURE APPEAL from a judgement of the CFI of Manila FACTS .If it were apparent. . 27. and to pay the plaintiff the sum of P96.The obligation is regarded as conditional: the term which the parties attempted to fix is so uncertain that one cannot tell just whether those articles could be brought to Manila or not. and the distance the goods must be carried.

Alfonso Flores and his wife offered a parcel of land measuring 1. Romeo Vergara. which prompted the Japanese supplier of the machinery to recommend the stoppage of the deliveries. they executed a contract of sale whereby Lluch agreed to sell. NO. Romero. but the query was not answered by petitioners.On January 23. On appeal. .On April 1968." . the IAC modified the judgment by directing Rustan.Petitioners contend that they are within the right stoppage guaranteed by par 7. -The project was made known to several freelance real estate brokers. . On 09 June 1988.with the following terms and conditions: "1.The suppliers were informed to stop deliveries and Rustan sent a letter (dated Sept 1968) to Lluch informing him that “the supply of raw materials to us has become sufficient and we will not be needing further delivery from you." . that the SELLER is given sufficient notice. however.000. October 19. a holder of a forest products license. in a letter “That the contract to supply is not exclusive because Rustan shall have the option to buy from other suppliers who are qualified and holder of appropriate government authority or license to sell and dispose pulp wood. Lluch and the other suppliers resumed deliveries after the series of talks between Vergara and Lluch. . And because of this precept. wrote to Rustan and offered to supply raw materials.00 as attorney's fees ISSUES 1. subject to redelivery when the need arises as determined likewise by petitioners.Lluch. 1969.00 as moral damages and P15. – -Petitioner expressed his concurrence. Labitag if supply at the plant is sufficient as ascertained by petitioners. 1995 FACTS -Petitioner Virgilio R. cannot be made liable thereunder in his individual capacity in the absence of stipulation to that effect due to the personality of the corporation being separate and distinct from the persons composing it. Tantoco and Vergara to pay respondents. NO . his foreign partners decided to put up a central warehouse in Metro Manila on a land area of approximately 2. ROMERO V CA VITUG. the machinery line had major defects while deliveries of the raw materials piled up. -A day or so after the announcement. This is a potestative imposition in the contract which must be obliterated for being invalid as it is purely dependent upon the will of one party. the sum of P30. .000. the lot was in the name of private respondent Enriqueta Chua vda.” It was signed by Dr. except for the presence of squatters in the area. Parañaque. There is no doubt that the contract speaks loudly about petitioners' prerogative but what diminishes the legal efficacy of such right is the condition attached to it which is dependent exclusively on will of the petitioner… for which reason. . Metro Manila.In the bilateral undertaking.952 square meters located in Barangay San Dionisio. private respondent would agree to sell the property for only P800 00 per square meter. That the sum of FIFTY THOUSAND PESOS (P50. .000. -Petitioner visited the property and. to pay the price of P30.00 per cubic meter of pulp wood raw materials to be delivered at the buyer's plant. de Ongsiong. . they stipulated the following: "That BUYER shall have the option to buy from other SELLERS… that BUYER shall not buy from any other seller whose pulp woods being sold shall have been established to have emanated from the SELLER'S lumber and/or firewood concession. . jointly and severally. petitioner Rustan proposed. . among other things. The trial court dismissed it.000. “(Par 7) That the BUYER shall have the right to stop delivery of the said raw materials by the seller covered by this contract when supply of the same shall become sufficient until such time when need for said raw materials shall have become necessary provided. -Flores spouses called on petitioner with a proposal that should he advance the amount of P50.The President and Manager of a corporation who entered into and signed a contract in his official capacity. the same cannot be said to apply in the present case.00 which could be used in taking up an ejectment case against the squatters. the SC treated the controversial stipulation as inoperative 2. WON the contractual provisions mentioned above as regards the stoppage of delivery when there is sufficient supply of raw materials are valid 2. In response.Rustan established a pulp and paper mill in Lanao del Norte in 1966." was executed between petitioner and private respondent. a contract denominated "Deed of Conditional Sale. WON Tantoco and Vergara should be personally liable HELD 1. a complaint for contractual breach was filed. Inc. and Rustan Pulp and Paper Mill.00) ONLY Philippine Currency. As per the terms of our contract. . The two exceptions contemplated by Article 1897 of the New Civil Code where agents are directly responsible are absent and wanting. FACTS .000 square meters. he found the place suitable for a central warehouse. is to be paid upon signing and execution of this instrument. This alleged ambiguity notwithstanding.During the test run of the pulp mill. Vergara's supposed non-participation in the contract of sale although he signed the letter dated Sept 30.Lluch sought to clarify whether stoppage of delivery or termination of the contract of sale was intended. .And that SELLER has the priority to supply the pulp wood materials requirement of the BUYER. November 23.Obligations and Contracts MELO. please stop delivery 30 days from today. 1968 is completely immaterial.The SC’s simple understanding of the literal import of par 7 of the obligation in question is that petitioners can stop delivery of pulp wood from private respondents A2010 page 48 Prof.Though it is a legal truism that a condition which is both potestative and resolutory may be valid even though that saving clause is left entirely to the will of the obligor. 1992 NATURE Petition for review of the decision of the then Intermediate Appellate Court. Disposition The decision appealed from is MODIFIED in the sense that only petitioner Rustan Pulp and Paper Mills is ordered to pay moral damages and attorney's fees as awarded by respondent Court. the resident manager. .

filed a complaint for nullification of deed of donation. documentary stamp. Parenthetically. assuming for the sake of argument that such a demand is proper under Article 159223 of the Civil Code. on 30 March 1989. Cavite containing an area of 964 sq. The writ of execution of the judgment was issued. -On or about June 30.Obligations and Contracts "2. Private respondent's failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code. -Private respondent's action for rescission is not warranted. assurances and such other fees and expenses as may be necessary to transfer the title to the name of the VENDEE shall be for the account of the VENDEE while capital gains tax shall be paid by the VENDOR. in whose administration all properties within the province of Cavite owned by the Archdiocese of Manila was allegedly transferred on April 26. Petitioner did not breach the agreement.000. this offer to pay. 5. private respondents as plaintiffs.That if after 60 days from the date of the signing of this contract the VENDOR shall not be able to remove the squatters from the property being purchased.Alfonso Flores. June 19. 1991 NATURE Petition for review on certiorari to overturn the decision of the Court of Appeals FACTS . 00) previously paid as downpayment shall be forfeited in favor of the VENDOR. It is private respondent who has failed in her obligation under the contract. . The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them.".00. -Private respondent filed a complaint for ejectment (Civil Case No. it is now possible to eject the squatters from the premises of the subject property. that expenses which shall be incurred by reason thereof shall be chargeable to the purchase price of the land. now both deceased. 4. still later. 6.000. -A few months later. she could not "get rid of the squatters" on the lot. would likewise suffice to defeat private respondent's prerogative to rescind thereunder. Sergio A. acknowledged (sic) and deliver the corresponding deed of absolute sale in favor of the VENDEE free from all liens and encumbrances and all Real Estate taxes are all paid and updated. and while still within the prohibitive period to dispose of the property. having been made prior to the demand for rescission. In his letter of 23 June 1989. -In a letter. 1962.000 002 from petitioner. VENDOR without necessity of demand shall immediately sign. otherwise. CA REGALADO. 1980. The decision was handed down beyond the 60day period (expiring 09 August 1988) stipulated in the contract. aforementioned." This option clearly belongs to petitioner and not to private respondent. Apostol. -In contracts of sale particularly. for which reason. Labitag -The undertaking required of private respondent does not constitute a "potestative condition dependent solely on his will" that might.That in the event that the VENDEE shall not be able to pay the VENDOR the balance of the purchase price of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1. She is not the injured party. in fact. to shoulder the expenses of the execution of the judgment in the ejectment case and to make arrangements with the sheriff to effect such execution. -On November 29. meters -The deed of donation provides that the donee shall not dispose or sell the property within a period of one hundred (100) years from the execution of the deed of donation. leaving unaffected the obligation itself. Upon full payment of the overall purchase price as aforesaid. execute. A2010 page 49 Prof.000.600. rescission of contract and reconvoyance of real . otherwise a violation of such condition would render ipso facto null and void the deed of donation and the property would revert to the estate of the donors. counsel for petitioner. in behalf of private respondent. F. 7579) against Melchor Musa and 29 other squatter families with the Metropolitan Trial Court of Parañaque. the spouses Eusebio de Castro and Martina Rieta. judgment was rendered ordering the defendants to vacate the premises. forthwith received and acknowledged a check for P50. counsel for petitioner has tendered payment and demanded forthwith the execution of the deed of absolute sale. 1984. ISSUE WON the vendor may demand the rescission of a contract for the sale of a parcel of land for a cause traceable to his own failure to have the squatters on the subject property evicted within the contractually stipulated period HELD NO. ROMAN CATHOLIC ARCHBISHOP OF MANILA V. the FIFTY THOUSAND PESOS (P50.511. "3. transfer fee. dated 07 April 1989. he proposes that he shall take it upon himself to eject the squatters. or on 21 February 1989. The balance of the purchase price in the amount of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1. private respondent sought to return the P50. Article 1545 of the Civil Code. in his reply of 17 April 1989. allows the obligee to choose between proceeding with the agreement or waiving the performance of the condition.00) ONLY after 45 days from written notification to the VENDEE of the removal of the squatters from the property being purchased. petitioner Roman Catholic Bishop of Imus.00) ONLY shall be paid 45 days after the removal of all squatters from the above described property. refused the tender and stated: "Our client believes that with the exercise of reasonable diligence considering the favorable decision rendered by the Court and the writ of execution issued pursuant thereto. only the condition is avoided. Petitioner has waived the performance of the condition imposed on private respondent to free the property from squatters. executed a deed of donation in favor of therein defendant Roman Catholic Archbishop of Manila covering a parcel of land at Kawit.600. be void in accordance with Article 1182 of the Civil Codebut a "mixed" condition "dependent not on the will of the vendor alone but also of third persons like the squatters and government agencies and personnel concerned. 1930.Expenses for the registration such as registration fees. the downpayment made by the buyer shall be returned /reimbursed by the VENDOR to the VENDEE.00 she received from petitioner since. He has agreed. Where the so-called "potestative condition" is imposed not on the birth of the obligation but on its fulfillment. executed a deed of absolute sale of the property subject of the donation in favor of petitioners Florencio and Soledad Ignao in consideration of the sum of P114. Atty. she said. provided.On August 23.511.

Such a prohibition against alienation.Obligations and Contracts property with damages against petitioners Florencio and Soledad C. and the third ground being that the cause of action has prescribed. and may be exercised against the donee's heirs. petitioner Roman Catholic Bishop of Imus also filed a motion to dismiss on three (3) grounds. and remanded the case. such condition shall be considered as not imposed. It is the contention of petitioners that the cause of action of herein private respondents has already prescribed. No. -Article 764 was intended to provide a judicial remedy in case of non-fulfillment or contravention of conditions specified in the deed of donation if and when the parties have not agreed on the automatic revocation of such donation upon the occurrence of the contingency contemplated therein. Labitag . the same must not be contrary to law. and not Article 764 of the Civil Code. 1984. The condition imposed in the deed of donation in the case before us constitutes a patently unreasonable and undue restriction on the right of the donee to dispose of the property donated. must not be perpetual or for an unreasonable period of time -In the case at bar. -Donation. Imus.A judicial action for rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions -The aforesaid rule apply to contracts. constitutes an undue restriction on the rights arising from ownership of petitioners and is. Branch XX. -On December 19. Book III on donations. That is not the situation in the case at bar -The action filed by private respondents may not be dismissed by reason of prescription 2. MFRs filed separately by the spouses Ignao and the RC Bishop of Imus were denied ISSUES 1. the first two (2) grounds of which were identical to that of the motion to dismiss filed by the Ignao spouses. public order and public policy. as a mode of acquiring ownership. Once a donation is accepted. -Now. the donee becomes the absolute owner of the property donated. contrary to public policy. The cause of action of private respondents is based on the alleged breach by petitioners of the resolutory condition in the deed of donation that the property donated should not be sold within a period of one hundred (100) years from the date of execution of the deed of donation. 1984. The suppletory application of the foregoing doctrinal ruling to the present controversy is consequently justified A2010 page 50 Prof. the judgment of respondent court is SET ASIDE and another judgment is hereby rendered DISMISSING Civil Case No. as in this case. Ignao and the Roman Catholic Bishop of Imus. Although the donor may impose certain conditions in the deed of donation. as specifically stated in said statutory provision. when the donee fails to comply with any of the conditions which the former imposed upon the latter. Consequently. Said condition. morals. expressly provides for automatic revocation and reversion of the property donated. the Roman Catholic Archbishop of Manila likewise filed a motion to dismiss on the ground that he is not a real party in interest and. -On January 9. said Title III does not have an explicit provision on the matter of a donation with a resolutory condition and which is subject to an express provision that the same shall be considered ipso facto revoked upon the breach of said resolutory condition imposed in the deed therefor. in our opinion. should be declared as an illegal or impossible condition within the contemplation of Article 727 of the Civil Code. Cavite .When a deed of donation. in order to be valid. together with the Roman Catholic Archbishop of Manila -On December 17. results in an effective transfer of title over the property from the donor to the donee. -The cause of action of herein private respondents has not yet prescribed since an action to enforce a written contract prescribes in ten (10) years." and that "his action shall prescribe after four years from the noncompliance with the condition. 1985. the rules on contract and the general rules on prescription should apply. The deed of donation involved herein expressly provides for automatic reversion of the property donated in case of violation of the condition therein. petitioners Florencio Ignao and Soledad C. No reliance may accordingly be placed on said prohibitory paragraph in the deed of donation -The validity of such prohibitory provision in the deed of donation was not specifically put in issue in the pleadings of the parties. the complaint does not state a cause of action against him. Ignao filed a motion to dismiss based on the grounds that (1) herein private respondents. invoking Article 764 of the Civil Code which provides that "When donation shall be revoked at the instance of the donor. 095-84 of the Regional Trial Court. -Trial Court dismissed the case on the ground that the action has prescribed -CA reversed. Cavite. as is the case of the deed presently in question. therefore. hence a judicial declaration revoking the same is not necessary . we hold that the prohibition in the deed of donation against the alienation of the property for an entire century. That may be true. as plaintiffs therein. but we see no reason why the same should not be applied to the donation in the present case -Article 732 of the Civil Code provides that donations inter vivos shall be governed by the general provisions on contracts and obligations in all that is not determined in Title III. which right is an indispensable attribute of ownership. and (2) the complaint states no cause of action. may be transmitted to the heirs of the donor. good customs. but such oversight or inaction does not prevent this Court from passing upon and resolving the same Disposition WHEREFORE. No. WON the action has already prescribed 2. have no legal capacity to sue. being an unreasonable emasculation and denial of an integral attribute of ownership." Reasoning -Said provision does not apply in the case at bar. WON the private respondent has a cause of action against petitioners HELD 1. therefore.

a motion for postponement was denied. When a . Sarreal and Nieto. Leviste mortgaged two (2) lots. WON 2. Br. but this loss are attributable to his fault in: (a) not being able to submit collateral to GSIS in substitution of Paranaque property. thus this petition. . V. INC. 1985 NATURE Petition for certiorari FACTS . He was willing to approve the fight on Nov 4 provided it will be promoted by a certain Mamerto Besa.Sarreal wrote to Games and Amusement Board (GAB) regarding this switch of managers bec they weren’t notified. WON there was a violation of the May 1 contract and if so. 1987 NATURE Appeal from the decision of the court of first instance of Rizal. Boysaw was still absent on the later date.Leviste had obtained a loan from the GSIS. February 28. . Another violation was made in the transfers of managerial rights. WON 5. earned from it. MELENCIO-HERRERA. Due to Herrera’s default. WON 3. . who was guilty there was legal ground for postponement of the fight lower court erred in refusing postponement of the trial for 3rd time lower court erred in denying new trial lower court erred in awarding appellees damages HELD 1.Boysaw and Yulo moved for a new trial. . accdg to contract. particularly the payment of the scheduled amortizations on the dates herein specified shall render this contract automatically cancelled and any and all payments made shall be forfeited in favor of the vendor and deemed as rental and/or liquidated damages. . Hence.Sarreal offered to move the fight to Oct 28 for it to be w/in the 30 day allowable postponement in the contract. but failed to fully settle its obligation in the GSIS. Labitag BOYSAW V INTERPHIL PROMOTIONS FERNAN. must be consented to by Interphil. the highest bidder. . . USA National Boxing Assoc approved. 2. Marcelo nor Leviste benefited in any way at the expense of Herrera. (b) not paying off the mortgage debt. Disposition DENIED A2010 page 51 Prof. one located at Paranaque and the other at Buendia with the 3-storey building thereon. It was also stipulated in the Contract of Sell that “failure to comply with any of the conditions contained therein. LEVISTE & CO. Lower court reset the trial. P. ISSUE WON the assigning of Leviste of his right to redeem the foreclosed property to Marcelo result in unjust enrichment of Leviste and patent injustice on the part of Herrera as he would not only forfeit the Buendia property to Marcelo but would also lose the amount he paid to Leviste and the GSIS HELD NO.The fight contemplated in the May 1 contract never materialized. They paid and received what is due them.GAB called for conferences and decided to schedule the Elorde-Boysaw bout on Nov 4. shld not engage in other bouts prior to the contest.” .Boysaw was abroad when he was scheduled to take the witness stand. 1961. Boysaw violated the contract when he fought with Avila.Interphil signed Elorde to a similar agreement. . . Reasoning: 1.Leviste then undertook to arrange for the conformity of the GSIS to petitioner’s assumption of the obligation. (2) assume Leviste’s indebtedness to the GSIS and (3) substitute the Paranaque property with his own within a period of six months. 1961. the power to rescind obligations is implied. who later transferred the rights to Alfredo Yulo. Boysaw and manager Ketchum signed with Interphil (represented by Sarreal) a contract to engage Flash Elorde in a boxing match at Rizal Memorial Stadium on Sept 30. WON 4.Herrera’s request to GSIS to allow him redeem his property in installments was apparently disapproved. and (c)not making earnest effort to redeem the property as possible redemptioner. this appeal. . As security therefore. Yulo refused. Court reset. Civil Code provides.Obligations and Contracts HERRERA V L. .Boysaw fought and defeated Louis Avila in Nevada. March 20. Boysaw.Leviste assigned its right to redeem both foreclosed properties to Marcelo. Neither the GSIS. Though Herrera actually suffered loss (amount he paid to Leviste. 1961 or not later than 30 days shld a postponement be mutually agreed upon. in reciprocal ones. These were in fact novations which. On the third instance. Boysaw and Yulo sued Interphil. . Marcelo redeemed the properties and later the properties were turned over by Marcelo to Leviste upon payment of the latter.Leviste sold to Petitoner Herrera the Buendia Property on the conditions that petitioner would (1) pay Leviste. ISSUES 1.Ketchum assigned to Amado Araneta his managerial rights. (as in this case) in case one of the obligors shld not comply w/ what is incumbent upon him. to be valid. his property was foreclosed and auctioned in favor of GSIS. FACTS On May 1. .Herrera took possession of the Buendia property. payment to GSIS less rentals received). but it was denied.

collect and remove timber from the Land Grant. .362. Because . September 29. ISSUE WON UP can treat the contract with ALUMCO as rescinded without any judicial pronouncement HELD Yes. Although the decision dated September 30. 31. 1965 . Reynoso to sell to the latter his 3. and act accordingly.000 payable in installments on definite dates fixed in the contract but not later than November 30. Labitag .ALUMCO should pay its outstanding balance to UP on or before June 30. they have forfeited any right to the enforcement of the contract. which can’t alter the result of the trial. Because the appellants willfully refused to participate in the final hearing and refused to present documentary evidence. Ratio The party who deems the contract violated may consider it resolved or rescinded. The said logging agreement began on the date of agreement to Dec. 9. The issue of denial of postponement of trial was raised in another petition for certiorari and prohibition. The GAB did not act arbitrarily in acceding to the request to reset the date of the fight and Yulo himself agreed to abide by the GAB ruling. but all they wanted was to postpone the fight owing to an injury Elorde sustained. 1964 – ALUMCO accumulated unpaid dues of P219. The court was correct in denying new trial. 25.Before the preliminary injunction was granted. . UP V DE LOS ANGELES REYES.On November 4. 16. A2010 page 52 Prof.100 shares of EDC for P900.But since the decision finding UP in contempt is on appeal in the CA. Reasoning . 2. 4.It was unable to comply with the manner of payments stated in the “Acknowledgement” because the logs they harvested were rotten. the aggrieved creditor may not deal with the substitute. The delay in writing finis to this case is attributable to several factors. 3. the SC decided not to make any comment. 9. the contract would be rescinded.100 paid-up shares of stock of the Erquiaga Development Corporation (EDC) which owns the Hacienda San Jose in Irosin. 5. .133. . 1970 NATURE Petition for certiorari and prohibition FACTS . . 1965 – UP obtained an order which prevented ALUMCO from continuing its logging activities.The “Acknowledgement ” already indicated that should ALUMCO fail to pay its dues on time.1989 NATURE PETITION to review the decision of the Court of Appeals. ALUMCO then drew up an “Acknowledgment of Debt and Proposed Mariner of Payments” dated Dec.000 in damages. . UP can treat the contract with ALUMCO as rescinded without any judicial pronouncement. September 27. 1966. . but it proceeds at its own risk. notwithstanding the fact that by virtue of the appellants’ violations.April 12. 1966 – ALUMCO obtained an order which enjoined UP from awarding logging rights to a different concessionaire. 1965 on top of its existing outstanding obligation. The desire to postpone the fight is lawful and reasonable. 1965. 1972 of the trial court became final and executory because none of the parties appealed. extendible for a period of five years.74 from Dec. It can’t be resurrected in this case. . . 2. 1966 – UP declared in contempt of court and Sta.Santiago de Erquiaga was the owner of 100% or 3. 1960 – UP entered into a logging agreement with ALUMCO wherein ALUMCO was granted the exclusive authority to cut. not the least of which is the intransigents of the defeated party.Respondents blame their former manager for their financial turmoil because he did not turn over the company to ALUMCO. . The alleged newly discovered evidence are merely clearances fr clerk of court. its execution has taken all of the past seventeen (17) years with the end nowhere in sight. . 1964 and was approved by the UP president. UP will have the right to rescind the contract without the necessity of a judicial suit and UP shall have the right to P50.Obligations and Contracts contract is unlawfully novated. 8. 30. he entered into an Agreement with Jose L. Respondents’ Comments: . Clara was told to stop the logging activities.ALUMCO continued the logging concession but once more incurred an outstanding balance of P61.This is a case that began in the CFI of Sorsogon in 1970. they prevented themselves fr objecting to or presenting proof contrary to those adduced by the appellees. 1968.Nov.Dec. FACTS .1968.Feb. Clara Lumber. 1964 to July 15. The contract with Santa Clara was signed on Feb. . .If ALUMCO fails to do that. Sorsogon. without previous court action.UP sent a notice to ALUMCO. saying that the former would terminate/rescind the contract. The appellees offered to move the fight w/in the 30 day period for postponement but this was refused by the appellants.94 which it failed to pay despite repeated demands. The appellees could have opted to rescind or refuse to recognize the new manager. 1965 – UP rescinded the contract and filed a civil suit against ALUMCO on September 7 of the same year.Sept.July 19. DE ERQUIAGA V CA GRIÑO-AQUINO. It is only the final judgment of the corresponding court that will and finally settle whether the action taken was or was not correct in law. UP already conducted a bidding and eventually awarded the concession to Sta.It is only upon a judicial declaration that the contract can be considered rescinded.

as well as the possession of the Hacienda San Jose.000.00 because Erquiaga has shown sufficient and justifiable ground for the appointment of a receiver' in order to preserve the Hacienda which has obviously been mismanaged by the defendant to a point where the amortization of the loan with the DBP has been neglected and the arrears in payments have risen to the amount of P503. The difference of P71. Reynoso failed to pay the balance of P561.On May 31. Development Corporation.100 shares of stocks but more particularly the products received by the defendant from the hacienda. The hacienda and its natural fruits as represented by the shares of stock which the defendant received as manager and controlling stockholder of the EDC can not be divorced from the certificates of stock in order to determine whether the defendant has correctly reported the income of the corporation or concealed part of it for his personal advantage. Labitag defendant Jose Reynoso are one and the same persons as far as the obligation to account for the products of the hacienda is concerned. as provided in paragraph 3. -On March 3. the filing of bond by said Erquiaga in the amount of P410.000. on March 2.70 payable on or before December 17. rescinding the sale of 3.On March 21.000. the CFI of Sorsogon issued an Order.600 shares of stock of the EDC which are in their possession. the only asset of the corporation. the CFI of Sorsogon appointed a receiver upon the filing of a bond in the amount of P100.The court also held that the fruits referred to in the decision include not only the dividends received. b) In the said meeting the plaintiff is authorized to vote not only the 1. . Reynoso was able to pay the total sum of P410. the payment to the defendant of the total sum ofP410. . damages and attorney’s fees.100 paid up shares) in EDC to Reynoso.000. the CFI of Sorsogon approved the P410.1968.00 plus legal interest from November 4. 1969. as well as to return said fruits received by him to plaintiff . stating that. .00 bond submitted by Erquiaga and the possession.000 to Erquiaga who thereupon transferred all his shares (3. the present petition for certiorari. dissolving the receivership and ordering the delivery of the possession of the Hacienda San Jose to Erquiaga.510.00 conditioned to the payment of whatever may be due to the substituted heirs of deceased defendant Reynoso after the approval of the accounting report submitted by Reynoso. as prayed for. as the case may be.As of December 17. 1976.00.000. 1975.00 plus legal interest from December 17.371. the total price of the sale was later increased to P971.000.100 paid up shares of stock of the EDC which now stand in his name in the books of the corporation. to . Erquiaga.600 shares of stock to private respondent is concerned. .600 shares in the name and possession of the defendants. However.321. Reynosos filed their motion for reconsideration which the CFI of Sorsogon but was denied . should be held in abeyance pending rendition of the accounting by the defendant of the fruits received by him on account of the 3. Should the defendants refuse or delay in delivering such shares of stock. the CA issued a writ of mandamus. through counsel. . upon the complaint filed by de Erquiaga. rendered judgment in favor of the de Erquiaga. and there is danger that the DBP may institute foreclosure proceedings to the damage and prejudice of the plaintiff. de Reynoso and children. The EDC and A2010 page 53 Prof. Reynoso pledged 1. 1975 insofar as the delivery of the 1. within five (5) days from receipt hereof.00 plus the interest.70 as of October 19. subparagraph (c) of the contract to sell. The hacienda and the products thereon produced constitute the physical assets of the EDC represented by the shares of stock and it would be absurd to suppose that any accounting could be made by the defendant without necessarily taking into account the products received which could be the only basis for determining whether dividends are due or not on account of the investment.100 shares of stock of the EDC to Erquiaga in case of failure of petitioners to comply with the Order of October 9. the CFl of Sorsogon issued an order.On February 12. .The parties did not appeal therefrom and it became final and executory.70 represented brokers' commission and interest .371.500 shares in favor of Erquiaga as security for the balance of his obligation. . defendant Reynoso died and he was substituted by his surviving spouse Valdez Vda. if any.000. prohibition and mandamus with the CA instituted by the substitute defendants. on the 3. Indeed it is reasonable to suppose that when such accounting is made (not only to the dividends due from the shares of stock but to the products of the hacienda which is the only asset of the EDC) certain sums may be found due to the plaintiff from the defendant which may partially or entirely off set the amount adjudged against him in the decision.Hence. and (2) upon delivery by petitioners or transfer by the Clerk of Court of said shares of stock to private respondent. management and control of the hacienda were turned over to Erquiaga.100 paid up shares of stock of the EDC to Reynoso.100 paid up shares of stock of the EDC. 1968.Obligations and Contracts Reynoso failed to pay the second and third installments on time. So. until paid. with a view of putting an end to a much protracted litigation and for the best interests of the parties.70 on or before December 17. P50.In the same Order. d) The members of the board and the officers who are elected are authorized to execute any and a contracts or agreements under such conditions as may be required by the DBP for the purpose of restructuring the loan of the EDC with the said bank. as provided in the promissory notes he delivered to Erquiaga. the CFI of Sorsogon. although the decision has become final and executory. c) the plaintiff to return to the defendant the amount of P100. and the amount of P310.1972.On April 26. the plaintiff is authorized: a) To call and hold a special meeting of the stockholders of the EDC to elect the members of the Board of Directors. 1969. 1970. and to pay the costs of this suit and expenses of litigation. 1968.On October 9. formally informed Reynoso that he was rescinding the sale of his shares in the Erquiaga. . d) the defendant to pay the plaintiff as actual damages the amount of P12. commanding the respondent Judge to order (1) the Clerk of Court of the CFI of Sorsogon to execute the necessary deed of conveyance to effect the transfer of ownership of the entire 3. 1973.100 shares of the capital stock of EDC. 1973. the CFI of Sorsogon issued an order directing defendants to deliver to the plaintiff or his counsel within five (5) days from receipt of this order the 1. upon motion of Erquiaga. c) The question as to who shall be elected members of the Board of Directors and officers of the board is left to the discretion of the plaintiff.On September 30 1972. .000.500 shares of stock in his name but also the 1. who filed a petition for certiorari with a prayer for a writ of preliminary injunction seeking the annulment of the aforementioned. b) the defendant to render a full accounting of the fruits he received by virtue of said 3. 1975. and ordering: a) the defendant to return and reconvey to the plaintiff the 3. 1975.00 as attorney's fees.

1972. setting-off therewith the amount of P62.100 shares of stock of the EDC should be computed up to September 30. and the price with its interest.500 shares of stock have already been returned to Erquiaga. Reynoso. 5. the date of the judgment.000 as actual damages in favor of Erquiaga.00 adjudged in favor of private respondent. defendants-appellants Ursula Torres Calasanz and Tomas Calasanz and plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta.000 which the latter paid for those shares. 3. consequently.000 should be set off against the price of P410.000 that Erquiaga is obligated to return to Reynoso. This should not await the mutual restitution of the fruits. the date of said judgment.000).The payment of legal interest by Erquiaga to Reynoso on the price of P410. until paid (total: P410. ISSUE WON the decision of the Court of Appeals requiring the petitioner to pay the private respondents the sum of P410. .On December 19. 1385 of the Civil Code which provides: "ART. upon the conveyance to him of the remaining 1. Labitag . 2. the installments being . Erquiaga (or his heirs) should return to Reynoso the price of P410.only the following have been done by the parties in compliance with the final judgment in the main case: 1. FACTS . For it would be inequitable and oppressive to require Erquiaga to pay the legal interest earned by Reynosa's P410. Since Reynoso's judgment liability to Erquiaga for attorney's fees and damages in the total sum of P62.The Hacienda San Jose and 1.000. since Reynoso has not yet given an accounting of those fruits. "In this case.100 shares of stock of the Erquiaga Development Corporation delivered to him under the sale.000 plus legal interest from December 17. Reynoso has returned to Erquiaga only the pledged 1.000 as attorney's fees to Erquiaga under paragraph (e) of the judgment. 1976. ANGELES V CALASANZ GUTIERREZ. . The plaintiffs-appellees made a downpayment of P392. Reynoso has not paid the sum of P50." A2010 page 54 Prof.000 which should earn legal rate of interest after September 30.20 until fully paid. and its counterpart: the fruits of Hacienda San Jose which Reynoso received from the time the hacienda was delivered to him on November 4.600 shares. and the return by Reynoso of Erquiaga's 3. Erquiaga's P410. The Hacienda San Jose was returned to Erquiaga on March 3. However.00 plus 7% interest per annum.Obligations and Contracts issue a writ of execution ordering private respondent to pay petitioners the amount of P410. without first awaiting Reynoso's accounting of the fruits of the Hacienda San Jose. They promised to pay the balance in monthly installments of P41. the decision of the Court of Appeals in CA is affirmed. declaring the contract to sell as not having been validly cancelled and ordering the defendants-appellants to execute a final deed of sale in favor of the plaintiffs-appellees.However. Erquiaga. To this extent. Pursuant to the rescission decreed in the final judgment. instead of 3.1968. Reynoso has not paid the costs of suit and expenses of litigation as ordered in paragraph (f) of the final judgment.100 shares) and of the consideration paid (P410. with legal interest from November 4. and against petitioners' predecessor-ininterest. 1975.000 while in the possession of Erquiaga.000 by Erquiaga to Reynoso.1975.000 paid by Reynoso for Erquiaga's 3.000 surety bond shall be deemed cancelled. violates Article 1385 of the Civil Code HELD NO. Reynoso has not paid the judgment of P12. as ordered in paragraph (b) of the decision.600 shares of stock to Erquiaga as ordered in paragraph (a) of the decision. March 18. the payment of said interest by Erquiaga should await Reynoso's accounting of the fruits received by him from the Hacienda San Jose. "Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. Branch X.000 since 1968 or for the past 20 years (amounting to over P400. should await the rendition and approval of his accounting.00 upon the execution of the contract. Seventh Judicial District. 2.000 after deducting P62.500 shares of stock of the Erquiaga Development Corporation. 1972. Rescission creates the obligation to return the things which were the object of the contract. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore.00 attorneys fees and costs.What the parties have not done yet are: 1.000 paid by Reynoso on the sale. In all other respects.00 plus interests. The order of respondent Court directing Erquiaga to return the sum of P410. Reynoso has riot rendered a full accounting of the fruits he has received from Hacienda San Jose by virtue of the 3. indemnity for damages may be demanded from the person causing the loss. Rizal for the amount of P3. Therefore. .100 shares with the fruits (construed to mean not only dividends but also fruits of the corporation's Hacienda San Jose) is in full accord with Art. it is only fair that Erquiaga's obligation to deliver to Reynosa the legal interest earned by his money. 1385. 4. 1975 upon approval of Erquiaga's surety bond of P410. there should be simultaneous mutual restitution of the principal object of the contract to sell (3. 1968 until it was placed under receivership by the court on March 3. namely: the legal interest earned by Reynoso's P410. Jose L. in the same decision. .000 (or net P348. under paragraph (d) of the judgment. the decision of the Court of Appeals should be modified. as ordered in paragraph (a) of the final judgment. 1985 NATURE Appeal from the decision of the Court of First Instance of Rizal. and 6.000. together with their fruits. the balance of the judgment in favor of Reynoso would be only P348. 1957. with legal rate of interest. Upon payment of P348. to pay P500. as damages and attorney's fees.000 by this time) without first requiring Reynoso to account for the fruits of Erquiaga's hacienda which he allegedly squandered while it was in his possession from November 1968 up to March 3. has not returned the sum of P100.000 in favor of Reynoso.1968 and P31 0.000) as ordered in paragraph (c) of the decision.000 due from Reynoso under the decision) as the price paid by Reynoso for the shares of stock.000 plus interest.100 shares.920.As of the time the Court of Appeals rendered its decision on May 31. Reynoso has not returned 1.

" . stipulations in a contract come about after deliberate drafting by the parties thereto.920. condemnable in its lopsidedness and injurious in its effect which.Obligations and Contracts due and payable on the 19th day of each month.38 including interests.Article 1234 of the Civil Code which provides that: “If the obligation has been substantially performed in good faith. in essence.00 the plaintiffs-appellees had already paid the monthly installments for a period of almost nine (9) years. when their aggregate payment already amounted to P4. after having invested a big amount of money. instead of availing of their alleged right to rescind. the entire obligation would have been paid. 1966. To sanction the rescission made by the defendants-appellants will work injustice to the plaintiffs-appellees. Upon payment of the balance of P671.00 excluding the 7 percent interests. Hawaiian-Philippine Co. WON the contract partakes of a contract of adhesion and therefore must be strictly construed against the one who drafted it (defendants-appellants) HELD 1. "The general rule is that rescission of a contract will not be permitted for a slight or casual breach.00 plus 7% interest per annum. '(Paras. Seventh ed. of the said cancellation was denied by the defendants-appellants. are now sought to be deprived of the same thru the prayed application of a contract clever in its phraseology. v. ." Disposition Thus..The breach of the contract adverted to by the defendants-appellants is so slight and casual when we consider that apart from the initial downpayment of P392. 2. less damages suffered by the obligee. In other words. though the plaintiffs-appellees have been in arrears beyond the grace period mentioned in paragraph 6 of the contract. WHEREFORE. 80. Civil Code of the Philippines. 1. The defendantsappellants drafted and prepared the contract. 827) The question of whether a breach of a contract is substantial depends upon the attendant circumstances." . The decision appealed from is AFFIRMED with the modification that the plaintiffs-appellees should pay the balance of SIX HUNDRED SEVENTY-ONE PESOS AND SIXTY-SEVEN CENTAVOS (P671. . the defendantsappellants have waived and are now estopped from exercising their alleged right of rescission.The defendants-appellants argue that paragraph nine of the contract clearly allows the seller to waive the observance of paragraph 6 not merely once.920.00 and the plaintiffs-appellees have already paid an aggregate amount of P4. eager to acquire a lot upon which they could build a home. but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. realty taxes and incidental expenses for the registration and transfer of the land. Labitag times as he wishes. We agree with the plaintiffs-appellees. Insurance contracts. The plaintiffs' letter with their plea for reconsideration.On December 7. 47 Phil. the instant petition is DENIED for lack of merit. and in its entirety is most unfair to the buyers.920. bills of lading. It was offered to them on a "take it or leave it" basis. p. . The plaintiffs-appellees. Javier. it is likewise true that under paragraph 12 the seller is obligated to transfer the title to the buyer upon payment of the P3. the obligor may recovers though there had been a strict and complete fulfillment. .38.. YES. The plaintiffs-appellees filed Civil Case No. 1999 . We agree with the plaintiffs-appellees that when the defendants-appellants.533. since the principal obligation under the contract is only P3. Inc.38.M. The contract to sell entered into by the parties has some characteristics of a contract of adhesion. Such contracts are called contracts of adhesion. CFI rendered a ruling favor of the plaintiffs-appellees prompting Calasanz spouses to appeal.67 without any interests thereon. 8943 with the Court of First Instance of Rizal. We agree with the observation of the lower court to the effect that: "Although the primary object of selling subdivided lots is business.00 price sale. NO.. We agree with the observation of the plaintiffs-appellees to the effect that "the terms of a contract must be interpreted against the party who drafted the same. ISSUES 1. WON the contract to sell has been automatically and validly cancelled by the defendants-appellants Calasanz spouses 2. they found out that they have already paid the total amount of P4. the defendants-appellants wrote the plaintiffs-appellees a letter requesting the remittance of past due accounts.)" (Italics supplied) . Furthermore. On January 28. but for as many A2010 page 55 Prof. usually a corporation.Also militates against the unilateral act of the defendants-appellants in cancelling the contract. the defendants-appellants accepted and received delayed installment payments from the plaintiffs-appellees.533. affixed their signatures and assented to the terms and conditions of the contract. July 6. contracts of sale of lots on the installment plan fall into this category. it cannot be denied that this subdivision is likewise purposely done to afford those landless. Vol. because the only participation of the party is the signing of his signature or his 'adhesion' thereto. (See J. the defendants-appellants cancelled the said contract because the plaintiffs-appellees failed to meet subsequent payments. The defendants-appellants' contention is without merit. The contract to sell. have accepted and received delayed payments of installments. On numerous occasions. must be construed against the party causing it. although the principal obligation was only P3.While it is true that paragraph 2 of the contract obligated the plaintiffs-appellees to pay the defendants-appellants the sum of P3. Seventh Judicial District Branch X to compel the defendants-appellants to execute in their favor the final deed of sale alleging inter alia that after computing all subsequent payments for the land in question.533. there are certain contracts almost all the provisions of which have been drafted only by one party. the plaintiffs-appellees had already paid an aggregate amount of P4.67) without any interests. "x x x (W)hile generally. . (Song Fo & Co. in only a short time. 1967. The attorney's fees are justified. . the courts should only order the payment of the few remaining installments but not uphold the cancellation of the contract. being a contract of adhesion.920. v. 31 SCRA 829) It would unjustly enrich the defendantsappellants.38. low income group people of realizing their dream of a little parcel of land which they can really call their own. 821. ONG V COURT OF APPEALS YNARES-SANTIAGO. especially where such interpretation will help effect justice to buyers who.533. They had no opportunity to question nor change any of the terms of the agreement. Tuazon and Co. the defendants-appellants must immediately execute the final deed of sale in favor of the plaintiffs-appellees and execute the necessary transfer documents as provided in paragraph 12 of the contract. The plaintiffs appellees paid the monthly installments until July 1966. yet.

.Petitioner Jaime Ong and respondent spouses Miguel K. . petitioner paid respondent spouses the sum of P103.The trial court rendered a decision. while the case was still pending with the trial court. in return. ownership is. but not because of a breach on the part of petitioner for failure to complete payment of the purchase price. out of the P496.000.Petitioner promised to replace the checks but failed to do so. In affirming the decision of the trial court. petitioner only managed to dole out no more than P393. This promise to sell was subject to the fulfillment of the suspensive condition of full payment of the purchase price by the petitioner.400. casual or serious. executed an "Agreement of Purchase and Sale" respecting two parcels of land situated at Barrio Puri. on September 2.00 petitioner issued four (4) post-dated Metro Bank checks payable to respondent spouses. When presented for payment. NO. petitioner deposited sums of money with the Bank of Philippine Islands (BPI).Pursuant to the contract they executed. In a contract of sale. should have paid. Rescission of reciprocal obligations under Article 1191 of the New Civil Code should be distinguished from rescission of contracts under Article 1383. These prompted the respondent spouses to ask for a writ of preliminary injunction.60. . as distinguished from a contract of sale.499.Respondents in the case at bar bound themselves to deliver a deed of absolute sale and clean title covering the two parcels of land upon full payment by the buyer of the purchase price of P2. the Court of Appeals noted that the failure of petitioner to completely pay the purchase price is a substantial breach of his obligation which entitles the private respondents to rescind their contract under Article 1191 of the New Civil Code.Petitioner Ong took possession of the subject parcels of land together with the piggery. Subsequently. The trial court granted the application and enjoined petitioner from introducing improvements on the properties except for repairs. .” the original term which was used in the old Civil Code. they filed a complaint for rescission of contract and recovery of properties with damages. records show that the parties never even intended to novate their previous agreement. in accordance with their stipulation that petitioner pay the loan of respondents with BPI. Jaime Ong be set aside .500. . Robles and Alejandra Robles. was “resolution.000. . in this instance. NO. . while in a contract to sell.Respondent spouses. reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. ricemill.The "Agreement of Purchase and Sale" shows that it is in the nature of a contract to sell. It must be stressed that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with an obligation.Later.000. . building. Quezon.” Resolution is a principal action which is based on breach of a party. Failure to pay. affirmed the decision of the Regional Trial Court of Lucena City.The contract entered into by the parties in the case at bar does not fall under any of those mentioned by Article 1381. however. by agreement.While Article 1191 uses the term “rescission. To make matters worse.Obligations and Contracts NATURE Petition for review on certiorari from the judgment rendered by the Court of Appeals which. the failure of which is not a breach.Petitioner appealed to the Court of Appeals. Petitioner.To answer for his balance of P1. residential house and other improvements thereon. the instant petition. the payment of the purchase price is a positive suspensive condition. except as to the award of exemplary damages. Contrary to petitioner's claim. however. Labitag ISSUES 1.When the bank threatened to foreclose the respondent spouses' mortgage. .Petitioner. Hence.00. setting aside the "Agreement of Purchase and Sale" entered into by herein petitioner and private respondent spouses FACTS .411.Novation is never presumed. He. . failed to complete payment of the purchase price. with the knowledge and conformity of petitioner. while rescission under Article 1383 is a subsidiary action limited to cases of rescission for lesion under Article 1381 of the New Civil Code. 1985. A2010 page 56 Prof. Hence. . Their demand was left unheeded. which petitioner. . so. the title to the property passes to the vendee upon the delivery of the thing sold. which expressly enumerates the rescissible contracts. The non-fulfillment of the condition of full payment rendered the contract to sell ineffective and without force and effect.00 to pay off their outstanding obligation with said bank. . Article 1383 is inapplicable. the checks were dishonored due to insufficient funds. it must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable incompatibility between the old and the new obligation. . In a contract to sell. 2. the agreement of the parties may be set aside. which affirmed the decision of the RTC but deleted the award of exemplary damages. from which the article was based. Consequently. WON the contract entered into by the parties may be validly rescinded under Article 1191 of the New Civil Code 2. his failure to do so brought about a situation which prevented the obligation of respondent spouses to convey title from acquiring an obligatory force. voluntarily gave the spouses authority to operate the rice mill. petitioner introduced major improvements on the subject properties by constructing a complete fence made of hollow blocks and expanding the piggery. ordering that the contract entered into by plaintiff spouses and the defendant.679. WON the parties had novated their original contract as to the time and manner of payment HELD 1. sent petitioner a demand letter asking for the return of the properties.00 loan of respondent spouses with the Bank of the Philippine Islands.91 by depositing it with the United Coconut Planters Bank. . however. San Antonio. Rather. but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. Branch 60. continued to be in possession of the two parcels of land while private respondents were forced to use the rice mill for residential purposes. . they sold three transformers of the rice mill worth P51. is not even a breach but merely an event which prevents the vendor's obligation to convey title from acquiring binding force.Article 1191 of the New Civil Code refers to rescission applicable to reciprocal obligations.

and (4) there must be the validity of the new contract. (2) it was not opened with the bank agreed upon. 1983. Inc.. otherwise a case will be filed against them. not only did RJH Trading fail to open. making or indorsing of the irrevocable and unconditional letter of credit. In short. it is set to expire on a specific date and it stipulates certain conditions with respect to shipment. and not a contract of sale. This is denied by VSC which alleges that on May 23. What obtains in the case at bar is a mere contract to sell or promise to sell. the obligation of VSC to sell did not arise. -In the instant case. 1983 at the Bank of the Philippine Islands main office in Ayala.e. 1993 NATURE Petition for review on certiorari to set aside CA decision in favor of RJH Trading in an action for specific performance and damages against Visayan Sawmill Company (VSC) and Ang Tay FACTS -1 May 1983: RJH Trading and VSC entered into a sale involving scrap iron subject subject to the condition that RJH Trading will open a letter of credit in the amount of P250k in favor of VSC on or before May 15. 3. 26 May 1983: VSC received a letter advice from BPI Dumaguete City Branch dated May 26. they sent a telegram to RJH Trading cancelling the contract of sale because of failure of the latter to comply with the conditions thereof. it also violated certain stipulations of the agreement: (1) it was not opened.In order for novation to take place. while exemplary damages may only be awarded if defendants acted in a wanton. Labitag iron as well as other pieces of machinery can no longer be found on the premises of the corporation. -Consequently. but that the transmittal was delayed. VSC demanded the fulfillment of the suspensive condition and eventually cancelled the contract. reckless. the concurrence of the following requisites is indispensable: (1) there must be a previous valid obligation. 24 May 1983: RJH Trading informed VSC by telegram that the letter of credit was opened May 12. the refusal of the petitioners to deliver the scrap iron was founded on the non-fulfillment by the private respondent of a suspensive condition. for it is without recourse. WON the "Purchase and Sale of Scrap Iron" contract entered into by both parties is a contract to sell (promise to sell) or a contact of sale 2. -VSC’s obligation to sell is unequivocally subject to a positive suspensive condition. In reply to those telegrams. Disposition The decision rendered by the Court of Appeals was AFFIRMED with the MODIFICATION that respondent spouses were ordered to return to petitioner the sum of P48. 1983. it therefore cannot be compelled by specific performance to comply with its prestation. fraudulent. 19 July 1983: RJH Trading sent a series of telegrams stating that the case filed against him by Pursuelo had been dismissed and demanding that VSC comply with the deed of sale. There was to be no actual sale until the opening. as it did in this case. There is no evidence of bad faith. The permission or consent in par6 of the agreement cannot be construed as delivery of the scrap iron. The subsequent acts of the parties hardly demonstrate their intent to dissolve the old obligation as a consideration for the emergence of the new one. and (3) it is not irrevocable and unconditional. NONE. VISAYAN SAWMILL COMPANY. 1983 to the effect that on that date a letter of credit was opened in favor of petitioner Ang Tay c/o Visayan Sawmill Co..Obligations and Contracts . such an obligation had not yet arisen. in view of the RJH Trading’s failure to comply within the positive suspensive condition. WON moral and exemplary damages should lie HELD 1. This is evidenced by a contract entitled "Purchase and Sale of Scrap Iron" duly signed by both parties. VSC’s lawyer informed RJH Trading’s lawyer that VSC is unwilling to continue with the sale due to RJH Trading's failure to comply with essential preconditions of the contract. INC. Moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. -17 May 1983: RJH Trading sent laborers to dig and gather scrap iron at the VSC’s premises. -In the instant case. WON there was delivery of the scrap iron subject of the sale 3. (2) there must be an agreement of the parties concerned to a new contract. moral damages may be recovered if defendants acted fraudulently and in bad faith. NO. i.00 in addition to the amounts already awarded. In contracts. made or indorsed by RJH Trading but by a corporation which is not a party to the contract. In the instant case. proceeding with such endeavor until May 30 when VSC allegedly directed the laborers to desist from pursuing the work in view of an alleged case filed against RJH Trading by a certain Alberto Pursuelo. -RJH Trading was not placed in possession of and control over the scrap iron.680. V CA DAVIDE. NCC is premised on an existing obligation to deliver the subject of the contract. A2010 page 57 Prof. -Since what obtains in the case at bar is a mere promise to sell. Article 1191 of the Civil Code does not apply. The writ of attachment was returned unserved because the VSC was no longer in operation and also because the scrap . March 3.The aforesaid requisites are not found in the case at bench. VSC agreed to deliver the scrap iron only upon payment of the purchase price by means of an irrevocable and unconditional letter of credit. on the contrary. pursuant to Article 1597 of the Civil Code. ISSUES 1. . the contract. 2. 29 July 1983: RJH Trading filed an action for specific performance and damages with a petition for preliminary attachment. drawn on ARMACO-MARSTEEL ALLOY CORPORATION and set to expire on 24 July 1983. make or indorse an irrevocable and unconditional letter of credit on or before 15 May 1983. The contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery. -the obligation imposed in Article 1497. VSC may totally rescind. the failure of the RJH TRading to comply with the positive suspensive condition cannot even be considered a breach – casual or serious – but simply an event that prevented the obligation of VSC to convey title from acquiring binding force. RJH Trading’s making or indorsing of an irrevocable and unconditional letter of credit. Indeed. (3) there must be the extinguishment of the old contract. oppressive or malevolent manner.

Costs against the private respondent. the contract reached the stage of perfection. WON RTC had jurisdiction over the case 2. in case one of the obligors should not comply with what is incumbent upon him. (Deiparine’s counsel is even held in contempt of court for changing the wording of the relevant provision in the law.” . and Deiparine bound himself to erect the building in strict accordance to the plans and specifications.The spouses then filed in the RTC for rescission of the construction contract and for damages. The breach of the contract was not substantial and therefore petitioners were not justified in law to rescind the agreement. manifesting no objection thereto but even sending 18 or 20 people to start the operation.1191 CC provides that: “The power to rewind obligations is implied in reciprocal ones. Carungay suggested core testing (a more reliable test of safety and strength).Spouses Carungay entered into an agreement with Deiparine for the construction of a 3-storey dormitory. the breach caused by Deiparine's SEPARATE OPINION ROMERO [ dissent] -the agreement in question is a contract of sale. and the building was found to be structurally defective. there is no Philippine Construction Development Board in existence. thus impairing the strength and safety of the building. -From the time the seller gave access to the buyer to enter his premises. However. DEIPARINE. the eleven-day delay must be deemed a casual breach which cannot justify a rescission. the parties agreed to conduct cylinder tests to ascertain compliance with safety standards. if the latter should become impossible. He may also seek rescission. .Clearly. .: a delay in payment for 20 days was not a violation of an essential condition of the contract which would warrant rescission for non-performance. The memorandum was ignored. The violation of reciprocity between the parties. The Carungays agreed to pay Php970K. .Obligations and Contracts Disposition Petition granted. the construction contract falls squarely under the coverage of Art. 1 on leave. existed and discharges the obligations created thereunder. After several conferences. -Song Fo and Co. -When the parties entered into the contract entitled "Purchase and Sale of Scrap Iron" on May 1. -Dignos v.1191 because it imposes upon Deiparine the obligation to build the structure and upon the Carungays the obligation to pay for the project upon its completion. . Hawaiian-Philippine Co. Art. v. the non-payment of the price is a resolutory condition which extinguishes the transaction that.1191 is not predicated on economic prejudice to one of the parties but on breach of faith by one of them that violates the reciprocity between them. and thus does not have jurisdiction over private construction contracts. . which is correctible by judicial rescission. The court shall decree the rescission claimed. Voting 8 concur. -In every contract which contains reciprocal obligations. he agreed to it and even promised that should the structure fail the test. the minimum acceptable compressive strength of the building was set at 3. A2010 page 58 Prof. there being a meeting of the minds upon the object which is the subject matter of the contract and the price which is the consideration. 1983.) 2. ISSUES 1. Court of Appeals: Absent a proviso in the contract that the title to the property is reserved in the vendor until full payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within the fixed period. The core test was conducted. he would shoulder the test expenses. CA decision reversed. WON rescission is the proper remedy HELD 1. Particularly for reciprocal obligations. and although Deiparine was relunctant at first. Deiparine alleged that RTC did not have jurisdiction for construction contracts are now cognizable by the Philippine Construction Development Board. RTC declared the contract rescinded. In the instant case. 5 disssent. possibly to avoid additional expenses so as to avoid reduction in profits. April 23. -That payment of the price in any form was not yet effected is immaterial to the transfer of the right of ownership. with the payment of damages in either case. concrete mixture.The injured party may choose between the fulfillment and the rescission of the obligation. unless there be just cause authorizing the fixing of a period. Yes.000 psi (pounds per square inch). CA affirmed RTC. for a time. to wit. Labitag The spouses even issued a memorandum complaining that the construction works were faulty and done haphazardly mainly due to lax supervision coupled with inexperienced and unqualified staff.The facts show that Deiparine deliberately deviated from the specifications of the Carungays (changing the minimum strength. the contract is bereft of any suggestion that time was of the essence. 1993 NATURE Petition for review of decision of CA FACTS . the transaction is an absolute contract of sale and not a contract to sell. V CA CRUZ. making it appear that the PDCB had jurisdiction over the instant case. Civil Case dismissed. In the General Conditions and Specifications document. he has placed the goods in the control and possession of the vendee and delivery is effected. etc. and ordered Deiparine to reimburse the spouses for the core testing and restore the premises to their former condition before the construction began. There is however. JR. a Philippine Domestic Construction Board (PDCB). 2 no part. but this body has jurisdiction to settle claims and disputes in the implementation of PUBLIC construction contracts (only). the right to rescind is always implied under Article 1191 of the Civil Code in case one of the parties fails to comply with his obligations. In a contract of sale. even after he has chosen fulfillment. Yes. Firstly.). the Carungays found out that Deiparine was deviating from the plans and specifications.Art. Deiparine to have forfeited his expenses in the construction. His breach of duty constituted a substantial violation of the contract.

or Palao could sell to Iringin an equivalent portion of the land. 1985. Palao sent a letter to Iringan stating that he would not accept any further payment considering that Iringan failed to comply with his obligation to pay full amount of second installment.200—geodetic engineer’s fee. 2. even when he knew that the reason for selling the lot was for Palao to needed to raise money to pay his SSS loan.Palao replied that Iringan’s standing obligation had reached P61. The party entitled to rescind should apply to the court for a decree of rescission. with payment of damages in either case. The injured party may choose between the fulfillment and the rescission of the obligation. • P500—attorney’s fee.The right to resolve reciprocal obligations is deemed implied in case one of the obligors shall fail to comply with what is incumbent upon him. hence the remedy for Palao was for collection of the balance of the purchase price and not rescission. Labitag 1. WON the contract of sale was validly rescinded. located in Poblacion of Tuguegarao. 1985 private respondent Antonio Palao sold to petitioner Alfonso Iringan an undivided portion of Lot No. Even if the right to rescind is made available to the injured party. • Interest on P53. 1) Iringan knew Palao’s reason for selling the property.Obligations and Contracts failure to follow the stipulated plans and specifications. 992 of the Tuguegarao Cadastre. the vendee may pay xxx as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. he complied with the requirement of the law for judicial decree of rescission in stating that its purpose is: 1) To compel appellants to formalize in public document. can still be. ISSUES . . in case one of the obligors should not comply with what is incumbent upon him. WON the award of moral and exemplary damages is proper. ART. even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place. Disposition Decision affirmed. . In the sale of immovable property. The phrase “even though” emphasizes that when no stipulation is found on automatic rescission. The power to rescind obligations is implied in reciprocal ones. .That a judicial or notarial act is necessary before one party can unilaterally effect a rescission. A2010 page 59 Prof. The court shall decree the rescission claimed xxx. their mutual agreement of revocation and rescission. when private respondent filed an action for Judicial Confirmation of Rescission and Damages before RTC. Petitioner’s Claim . He may also seek rescission. FACTS . whether or not automatic rescission has been stipulated. Ratio The award of moral and exemplary damages is proper. On July 18. 2) Petitioner refused to formally execute an instrument showing their mutual agreement to rescind the contract of sale. Ratio The contract of sale between the parties as far as the prescriptive period applies.A judicial and notarial act is necessary before a valid rescission can take place. c) P145K on or before December 31. and vendor acknowledges having received the amount. Iringan in effect agreed to it and had the legal effect of a mutually agreed rescission. .Palao declared he was not amenable to the reimbursements claimed by Iringan. September 26. the judicial or notarial requirement still applies. . . But the right must be invoked judicially.RTC ruled in favor of Palao and affirmed the rescission of the contract. 2006 \ NATURE Petition assailing decision of Court of Appeals.On March 22. even when it was Iringan who breached the terms of their contract. even after he has chosen fulfillment. 1985. validly rescinded.Art 1592 “refers to a demand that the vendor makes upon the vendee for the latter to agree to the resolution of the obligation and to create no obstacle to this contractual mode of extinguishing obligations. Iringan replied that they were not opposing the revocation of the Deed of Sale. Iringan then proposed that the P50K which he had paid Palao be reimbursed. 1191. The operative act is the decree of the court.600 representing payment of arrears for rentals from October 1985 to March 1989.When second payment was due. 1985. HELD 1. In addition they declared that they had always been ready and willing to comply with their obligations to Palao. the obligation is not ipso facto erased by the failure of the other party to comply with what is incumbent upon him. . payable as follows: a) P10K upon execution of this instrument. . leaving Palao desperate to find other sources of funds to pay off the loan. and still he did not pay Palao. b) P140K on or before April 30. Respondent’s Comment . but asked for the reimbursement of the ff: • P50K –cash received. 2) To have judicial confirmation. • P3. if the latter should become impossible. IRINGAN V COURT OF APPEALS QUISIMBING.That no rescission was effected simply by virtue of the letter sent by respondent stating that he considered the contract of sale rescinded.The right to rescind is vested by law on the obligee and since petitioner did not oppose the intent to rescind the contract.700 . Reasoning Petitioner claimed he was ready to pay but never actually paid respondent. Parties executed a Deed of Sale on same date with the purchase price of P295K.However. Iringan paid only P40K. has given the Carungay spouses the right to rescind or cancel the contract.” (Manresa) . 2. .On August 20. Reasoning .Spouses Iringan alleged that the contract of sale was a consummated contract.Art 1592 requires the rescinding party to serve judicial or notarial notice of his intent to resolve the contract. ART. 1985. 1592.

Early part of July 1943 – defendant Araneta Inc. ISSUE 1. WON the CA erred in ruling that the 58 sq. it is still feasible. it did not. given that there is already a case filed by the State in favor of the petitioner and the heirs of her husband there is no need to pass upon the right of respondents to the registration of the subject land under their names. such title could only be modified. 17. Petitioner also did not give any demand for the remaining balance. . 1191 gives the right to rescind on the violation of the reciprocity LACHICA V ARANETA PAREDES.000 with the downpayment of Php. Naguiat paid the downpayment of two thousand and subsequently paid another one-thousand. 1949 FACTS . NO. 3.July 12. accompanied by Flores.Eulalio Mistica owned a parcel of land in Meycauayan. no other payment was given thereafter the said payment in 1980. 20.Rizal Investment Corp (RIC. this was rejected by Araneta) 1) to purchase property for P 18. There is no necessity to ask for the payment of 58 sq.The Kasulatan was a Contract of Sale therefore absolute in nature given that there is neither a stipulation in the deed that title to the property sold is reserved to the seller until the full payment of the price nor a stipulation giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.5k 3) the balance to be paid anytime bet now and w/in 90 days after the peace of treaty bet warring nations . 1943 (morning) – Sadang submitted to Jose Araneta (president of defendant corp) a letter of the same date addressed by RIC to the defendant. On 5 April 1979 they entered into a contract to sell a portion of the lot that contains around 200 sq. importunately included in the title. December 11. VDA. that with a bigger dp and w the fastest mode of settlement) 1) purchase price: P20k 2) dp: P7. product of negotiations) 1) Purchase price: P20k 2) P8k of purchase price to be paid in cash . YES. it was a mistake. . Bulacan. Eulalio died in 1986. DE MISTICA V NAGUIAT PANGANIBAN. 2. 2. ctg a proposal of the buyer: PROPOSAL II (Exhibit F. offered for sale a parcel of land with improvements thereon (TCT No. containing a proposal of the buyer: PROPOSAL I: (Exhibit E. 1191 of the Civil Code in their ruling that there is no Breach of Contract regardless of the lapse of the stipulated period for Naguiat to pay 2. Labitag between parties brought about by the breach of faith by one of them. Petitioner also refused to accept the payment at the time of her husband’s funeral. The present case shows that it is not given that the 12 percent interest is in place for late payment. WON the CA erred in applying Art. or canceled in direct proceedings in accordance with law. With regards to the additional 58 sq. 2003 NATURE Petition for review on certiorari of the decision and resolution of the Court of Appeals FACTS . 14841.500 3) the balance to be paid anytime bet now and within 90 days after the peace of treaty bet warring nations .The title is merely an evidence of an indefeasible and incontrovertible title to the party in favor of the person whose name appears therein. 1943 (afternoon) – Sadang submitted another proposalto Jose Araneta addressed by RIC to the defendant.000. m.First week of July 1943 – RIC’s fieldman Navarro informed Sadang of the offer to sell the property by the defendant . meters.000 and the rest of the balance of Php. However. A2010 page 60 Prof. it was said that payment was offered during the funeral of Eulalio but was not accepted by his wife. altered.000 2) with a downpayment of P 7. signed by Araneta in behalf of the defendant corp (delivered to Sadang. Land Records of Manila) . however. payment was for the said land is the only remedy for petitioner. It was more of an afterthought to evade the consequence of the breach. 1943. Naguiat responded that there was no breach of contract and that he got hold of the land through the Free Patent Title duly awarded to him by the Bureau of lands making it indefeasible and incontrovertible. In 1991 the wife of the late Eulalio filed for a complaint for rescission for the failure of Naguiat to pay the remaining balance of Php.Obligations and Contracts 3) Petitioner did not substantiate by clear and convincing proof that he was ready and willing to pay respondent. Judgment was served by the CA disallowing rescission saying that the contract did not have a resolutory term and that it was highlighted by the option of paying 12 percent interest if the respondent Naguiat so chooses.July 12.000 to be paid within ten (10) years.after further negotiations a letter addressed to RIC.Such ruling allows a collateral attack on the certificate of title.m.July 14. It is allowed only is the breach is substantial and fundamental. NO. a portion of it was leased by Bernardino Naguiat sometime during 1970. RIC president and mgr) RIC letter (Exhibit A. A written document was signed by both parties acknowledging the sale for the amount of Php. . Hence it is not determinable in the present civil case. However. Araneta told Sadang to return after 2 days – he wanted to consider other offers and to select amongst them. Art. WON rescission is no longer feasible due to the certificate of title issued in favor of Naguiat 3. where plaintiff Sadang was at that time the Sales Manager) acted as defendant’s agent in the sale of such property . August 19. 18. portion in question is covered by a certificate of title in the names of respondents reconveyance and thus is no longer feasible and proper HELD 1. Also. meters that was taken by Naguiat the CA held that since it is already included in the title then it was no longer feasible to reconvey.

While the RIC letter may be a skeleton of the contract. 1943 (noon): DEED OF SALE with MORTGAGE (Exhibit C) 1) parties: a) VENDEE–MORTGAGOR: plaintiff Lachica with concurrence of husband Sadang b) VENDOR– MORTGAGEE: Gregorio Araneta. 1944 (on account of principal) P73.80 on P5k (March 16 – Dec 30. . d) Interest.Proposal I (Exhibit E). tendered to Araneta the sum of P7. 1944) stating that she acknowledges her being “forced to assume an oblication which I could now very well pay” . Inc 2) conditions: a) form and manner of the payment of the P12k balance (as stated in RIC letter. and RIC Letter (Exhibit A) were merely among the steps taken in the transactions leading to the formulation of the Deed of Sale with Mortgage . 1944 – plaintiff Sadang went to Araneta to pay the entire balance (including interest) and to ask the cancellation of the mortgage but Araneta refused to accept the tender of the payment then made . 1943 (deposit) P7k – upon execution of deed of sale with mortgage P80 – Aug 16 (interest) P80 – Sep 16 (interest) P80 – Oct 18 (interest) P80 – Nov 15 (interest) P80 – Dec 16 (interest) P1k – Jan 15. it should be reduced into a public document sufficient in form. 1944. 8) And the same will bear an interest of 8% per annum. the whole balance shall automatically become due and payable and the vendor shall have the right to foreclose the mortgage in its entrirety . WON TC erred in holding that the plaintiffs made a valid tender of payment to defendant – NO 3. so theat as of Sept 15. 1945 (enclosing PNB check No. either for capital or interest. 1944) . 31.99 – Aug 31 (interest) .060. 1944) and P320 on P4k (Dec 31.33 – Feb 19 (interest) P73.April 12. while not paid. 31. 9) Said interest to be paid in advance” . 37255-K for P73. 1943 – pursuant ot par 7 of the provisions of the RIC letter. returning the check covering the payment because it is not in accord with what was stated in the contract.April 1944 – Lachica wrote Araneta another letter asking for the computations to be made for the period April 15. 1944 – Atty Quisumbing. 31.33 to cover the payment of interests on P11k for March 16 – April 15.Sept 5.Obligations and Contracts 3) 12k of purchase price to be paid in installments: 4) 1k on or before Dec.Payments by plaintiff to defendant: P1k – July 15. 1944 with the Manila CFI by way of consignation. . Exhibit A). 1945). Pres. 1945 (date of maturity) – NO 2.July 16. 1945 7) “this same property will be mortgaged to us to guarantee the unpaid balance. Araneta wrote to Lachica. shall be paid liquidated and accumulated monthly and added to the capital until the vendee has brought payments up-to-date (periods of payment agreed for the benefit of both vendor and vendee) e) Shoud the vendee be in default in payment of any amount due. 1943 5) 1k on or before Dec.Atty Salazar gave notice of plaintiffs’ intention to consign the sum of P7. c) Interest payable in advance within the first 5 days of each month. Labitag .060. verbal negotiations. WON TC erred in holding that the plaintiffs had a right to pay the remaining principal of P6k (balance of theor obligation) before Dec 31.Lachica returned said check to defendant (april 12. 1944 – counsel for plaintiffs notified the defendant in writing of the fact of consignation ISSUES 1. so that it may be recorded in the corresponding .Defendant corp thereafter applied the P5k sum to the payment of indebtedness of the plaintiff.Sept 11.Anent the P5k (April 10. which interest represents P317.July 15. 1944 – Dec 31. Plaintiffs did not appeal form the TC findings that the Deed of Sale with Mortgage is the contract that defines the duties and obligations of the parties. A2010 page 61 Prof. 1944 6) 10k (balance) on or before Dec. 1945) but Araneta reasoned that his non-acceptance was due to the payments in accordance with the terns of the deed of sale with mortgage. we will also charge you the interest in accordance with the terms of the contract.33 – Apr 13 (interest) P146.061 on Sept 6. WON TC erred in dismissing defendant’s counterclaim – NO HELD 1. in behalf of the plaintiffs.Sept 6. which the defendant would have earned were the payments made on Dec 31. plaintiffs deposited with defendant corp a sum of P1k “as good faith money” .03 in satisfaction of the balance of the mortgage indebtedness (including interests not yet due.33 – Mar 15 (interest) P5k – Apr 10 (on account of principal) P73.03 as he did in effect deposit the sum of P7. 1944 – Araneta wrote back to Lachica stating that “besides the interest you have to pay us for the balance of P6k at the rate of 8% per annum. and received payments on interest charges. plaintiff’s account with the defendant under the mortgage contract was P6k unpaid balance of the principal .Sept 5. . 1944 – Dec 31.33 – Jan 15 (interest) P73. b) P12k balance shall bear interest of 8% per annum. 1944 afternoon – Sadang said Atty Salazar to intervene in the case but Araneta persisted in his denial . 1944) payment.66 – Jun 17 (interest) P219. Proposal II (Exhibit F). and at the same time presented the complaint .

To uphold defendants’ claim would be virtually compelling an obligor to assume an obligation later when he offers to. such as the interests.The construction by plaintiffs as to the terms of the agreement should prevail (“When the terms of an agreement have been intended in a different sense by the different parties to it. is true under normal circumstances. then the parties should not complain .It is however reasonable to conclude that although they read the contents of the Deed of Sale with Mortgage (Ex C) due to the mistaken belief that the RIC letter (Ex A) was reproduced in toto in the Deed of Sale with Mortgage.Because at the execution of the contract.Contract does not prohibit if payment is done before due dates . the materiality of this cannot be seen in the present issues . considering that Sadang was a USAFFE captain and that he was a licensed real estate man and manager of RIC.The parties could not have contemplated payments of the last installments on Dec.We believe that the plaintiffs had read the deed of sale with mortgage before signing it. Javellana) . .Mutual benefit has been interpreted to consist of the time granted a debtor to find means to comply with his obligation. how many persons stamp their signatures on documents because of the representations of people who command great respect. insertion of the equally technical clause “these periods of payment have been agreed for the benefit of both vendor and vendee” .The testimony of the defendant’s attorney also attested to the fact that plaintiffs first read the said document before it was signed. . .All that may be conceded for the RIC letter is that it may explain the intention of the parties in having entered into the contract of the deed of sale with mortgage -did Sadang and Lachica sign the deed of sale with mortgage without reading the contents thereof?-no. 1945. .The plaintiffs (as revealed by records) understood these terms as conveying the simple meaning which they plainly express that these installments might be paid on or before the due dates .” (Art 1127. made at.Plaintiffs might not have noticed the change. executed during the Japanese occupation. unless from its tenor or other circumstances it should appear that the term was established for the benefit of one or the other.The law should not be so interpreted as to compel a debtor to remain so. 1944/December 31. and the attorney who prepared it did A2010 page 62 Prof. when he is in a position to release himself .As in the RIC letter (Ex A). -was the RIC letter novated by the formal deed of sale with mortgage?-yes but this is immaterial.It is by legal presumption that a person takes ordinary care and precaution of his business. how much more to an ordinary layman. or before the time of the execution of that contract are to be considered as merged and integrated in the same written instrument. accruing to the latter by reason of the fixed term (inferred from the SC decision on Villasenor v. for in fact. or if they had. and the courts can not alter them because they work a hardship . CC) . 1943/December 31. and all agreements verbal or written. they did not expect such depreciation of currency as would render the interest on a loan barely sufficient to cover the depreciation of the military notes . discharge it earlier . is the denial of the creditor of the benefits. and could very well.This proposition was accepted by the plaintiffs as shown by the fact that they had deposited the sum of 1k with the defendant corporation as “good faith money” .Deed of Sale with Mortgage: “these periods of payment have been agreed for the benefit of the vendor and vendee” .Obligations and Contracts office of the register of deeds.While diligence and erudiation were displayed by plaintiffs counsel in their dissertation on the question of novation. 1945 and the placing of that date as the maturity date of the last installment of 10k constitutes a mere coincidence . .The fact that the Americans were already in the Islands on December 31. 31.A term is foxed and “it is presumed to have been established for the benefit of the creditor as well as that of the debtor. that sense to prevail against either party in which he supposed the other understood it.If such depreciation occurred and the performance of the obligation had become more burdensome in its operation than was anticipated. for the purposes of transfer under the Torrens system . they might not have attached much importance to it . Labitag not explain or call the attention of the plaintiffs to the changes made and effect of such changes .If to trained legalists.The real benefit thereto was foreseen and contemplated by the parties .The rule is to the effect that the benefit which would be derived by the creditor from the fixing of a term for the performance of an obligation to pay money is the stipulated interest for the prescribed term.In the realm of reality.Defendant alleges that the payment must be made on the date specified and not before . unassisted by a lawyer in the execution of a contract who had not been apprised of such clause by the attorney who had prepared the Deed of Sale with Mortgage . the plaintiffs did not have intervention in the preparation of the Deed of Sale with Mortgage. 1945” .The only impediment to a debtor making payment before the term is fixed. the benefit which it was to derive consisted of the receipt of the last installment of 10k in good Philippine money and not in Japanese military notes .”) Such payment may be made on or before the date specified. .There is a case where plaintiffs construed the contract according to the way they understood it contrary to the construction made by defendant because it did not make its position clear to the other party “on or before December 31.But Deed of Sale with Mortgage. such terms had caused a great divergence of opinions. . all of the terms of both exhibits are the same except:-the omission of the word “or before” in the Deed of Sale with Mortgage for the time of the payment. in good Philippine currency . and the fruits of such interest accruing to the creditor .The rights of the parties must be measured by the contract which they themselves made.Theory of Integration of Jural Acts-a written contract merges all prior and contemporaneous negotiations in connection with the same subject. faith and truth in their fellow beings .The contentions of the appellant (Araneta et al) are not well-taken .

instead of an offer of payment . that apellees did not introduce to show that the president of the appellant corp to whom the alleged tender was made was not shown so as to have given him the opportunity to object. considering its purchase power during the Japanese occupation . 30. he did not day when . .Benefit which defendant (Araneta) wanted to reap by the insertion of the disputed clause. and 2) payment was made under protest . 1945 (stipulated date).the defendant meant that besides the interest that would have to be paid for the balance of 6k at the rate of 8% per annum.It does not necessarily imply with appellees’ expectation to receive his back pay as a USAFFE after the liberation of the Philippines that he would have agreed to a prohibition of payment before due dates expected back pay was merely in the nature of a guaranty or inducement that even if the worst should happen. . they would honor it.Deed of Sale with Mortgage Acceleration Clause: in the event of defaults in the payment of any amount due. and the parties fixed purposely this particular date for the payment of the last installment of 10k.Obligations and Contracts .By the mere fact of the drawing of the check.Payment by check has been generally so recognized as acceptable in business transactions that it has been held that omissions to make objection to a check as tender of payment is regarded as waiver of right to demand payment in money .Non-observance of this duty would mislead the debtor and might inflict a loss which could be avoided if the creditor had objected to the form and character of the tender . and negotiable instruments.It is ordinarily required of one to whom payment is offered in the form of check that he make his objection at the time. which could be easily turned into an engine of oppression that a tender of payment especially where it involves the maturing of obligations not then due (as in this case).To afford the debtor an opportunity to secure the specific money which the law prescribes shall be accepted in payment of debts . they would pay the amount thereof to the holder .The refusal of the defendant to follow this construction on Sept.Allegation. 1944 . more than anything else in the letter of April 12. many remarked that it was sooner than expected . few would prophesy in whose favor the world war would end. runs counter to the facts of the case as found by the TC . Appellant did not refuse payment by check as tendered.If the president had not seen the check. was the payment of the interest. 1943.500 a month which was not big enough. would not have agreed to a stipulation which would prohibit them from paying. the American liberation would be here.Contentions of appellant were not tenable . “it would be a dangerous rule. or on account of the medium in which the payment was made. the whole balance shall automatically become due and payable. and the vendor shall have the right the foreclosure the mortgage in its entirety . we cannot escape the conclusion derived from the clause itself that the payments may be made by the vendee before the dates stated in the contract . . the defendant shall also charge the interest in accordance with the terms of the contract which interest represents: P317.This was one contingency which said plaintiffs would have naturally desired to avoid. be made in good time and that the grounds for objection must be specified.It could not have been probable that plaintiffs would agree to prohibition of payment A2010 page 63 Prof. either for capital or interest.Conditions when Deed was executed (July 16. or if dishonored. 31. he could not have refused the tender of payment . could not be made by check where no question was raised as to the value of the check tendered .Even if it were true that the appellees could not be sure of their ability to pay during the Japanese occupation.It would be presumptuous to say that on Dec. he would still be able to pay the obligation the appellees’ offers to buy (Proposals I and II) provides for the settlement of the balance: “at any time between now and within 90 days after the signing of the peace treaty between the “warring nations” this indicates the spirit guiding the parties then was the desire to permit the plaintiffs to pay within a specific period.While the acceleration clause is a standard one contained in most mortgage deeds. Labitag . to the offer of a check.General rule: an objection to tender must.Where the great bilk of business is transacted through the medium of checks. 1944) P320 on P4k (Dec. 31. since it appears that their income was only P2.Appellees were precisely looking for investments and not for obligations ‘plaintiff Sadang was then engaged in real estate business Sadang’s wife was engaged in jewelry business . since failure to do so would have made the balance due and payable . and that an objection to a tender on one ground is waiver of all other objections which could have been made at that time. and when it would end .80 on P5k (March 16-Dec.1. 1944 (the balance of 6k and the interests of the unexpired period was tendered to it) was because the Japanese notes had been greatly depreciated .Defendant credited the plaintiffs with the sum of 5k notwithstanding that: 1) the acceptance of the payment was made under protest. the plaintiffs engaged that on die presentment. 1945) . even if they had the money with which to pay the same .40 Japanese military notes) and at the time.When MacArthur promised return. 5. as any businessman of ordinary foresight. but because it believed that it could not be forced to accept the payment prior to the date specified in the contract. when Japanese invaders were lords of the pacific) were comparatively normal (Ballantine schedule: 1 war peso = P. 1945 . on a specific date 2. was not rebutted by the appellant upon which the burden of proving that ther were no funds in the bank fails .Presumption that they have the sufficient funds in bank to cover the amount of said check.Were it not for the great naval battle at the Sibuyan Sea.The mortgage loan is payable in several installments . 1944-Dec.With the Deed containing an acceleration clause. they. it could practically be sure that the plaintiffs would pay the installments on time. for insufficiency of funds in the bank. drafts. 31. the wr would have been prolonged for another year more or at least beyond Dec. to be available to the creditor.When Americans landed in Leyte on October 1944.

to May 5.880 in Japanese military notes in full payment of his indebtedness to Syjuco. Ponce de Leon filed a complaint consigning the amount so deposited to Syjuco. it was expressly agreed upon that plaintiff shall pay the loans "within one year from May 5.The amount tendered included not only the interest up to the time of the tender. 1948.880. October 31. 1944. at the time of payment above fixed it is the legal tender for public and private debts. 1951 NATURE This is an appeal from a decision of the Court of First Instance of Manila absolving defendant Santiago Syjuco. . Disposition The judgment appealed from is affirmed. payable as follows: (a) P2. . .On several occasions in October.130 as interest thereon from August 6. however. 1948. Ponce de Leon obtained a loan from Santiago Syjuco.670 in Japanese Military notes and. this assignment of error is made as a mere formality. . with costs against the defendant-appellant.The overdraft account was granted by the Bank to Ponce de Leon in good faith. . Ponce de Leon filed a petition for the reconstitution of Transfer Certificates of Title Nos. .On July 31. Ratio . Inc. Ponce de Leon obtained an additional loan from Syjuco in the amount of P16. . Ponce de Leon tendered to Syjuco the amount of P254. the payment of said note except within the aforementioned period. 1948.000 in Japanese Military Notes.300. . payable in advance for the first year. . WON the plaintiff is justified in accelerating the payment of the obligation because he was willing to pay the interests due up to the date of its maturity 2.Syjuco prayed that the mortgage executed by Ponce de Leon in favor of the Bank be declared null and void. with costs against the plaintiff. Ponce de Leon mortgaged in favor of Syjuco the parcels of land which he agreed to purchase from the Bank. A2010 page 64 Prof. . Jose Ponce de Leon.On May 6.To secure the payment of said obligation. . a deed of absolute sale of the aforementioned parcels of land. payable within one (1) year from May 5.Ponce de Leon also wrote to Syjuco a letter tendering the payment of his indebtedness.In the 2 promissory notes. Negros Occidental. .670 in 10 annual amortizations. on the same date. 3) In view of the positive resolution of the second issue. . Ponce de Leon obtained an overdraft account from the Bank in an amount not exceeding P135.And as stated. 1949.630 upon the execution of the said deed. as state by the appellant. 1936 the Bank executed a contract to sell the said properties to the plaintiff.The deed of sale executed by the Bank in favor of Ponce de Leon and the deed of mortgage executed by Ponce de Leon in favor of Syjuco were registered in the Office of the Register of Deeds. the president reasoned tat his non-acceptance was due to his opinion that such payment was not in accordance with the terms of the deed of sale. peso for peso in the coin or currency of the Government of the Philippines that. of the complaint and condemning the plaintiff to pay to said defendant the sum of P18. .Obligations and Contracts . 1944. 1948. Philippine currency.On May 15. with interests at the rate of 6% per annum. was the owner of 2 parcels of land known as Lots 871 and 872 of the Murcia Cadastre. Ponce de Leon explained that he wanted to settle his obligations because as a member of the guerilla forces he was being hunted by the Japanese and he was afraid of getting caught and killed. . 1944. 1944. NO.It was also provided in said promissory note that the promisor (Ponce de Leon) could not pay. 1944. Ponce de Leon paid the Bank of the balance of the purchase price amounting to P23. said Bank not being aware of the mortgage which Ponce de Leon had executed in favor of Syjuco and the said Bank believing that the said properties had no lien or encumbrance. with interest thereon at the rate of 6% per annum from May 6. 1944. . . . which he may obtain from the Bank under the aforementioned overdraft account. and semi-annually in advance during the succeeding years".On May 5. 1949.On March 9. Philippine National Bank. WON the consignation made by the plaintiff is valid in the light of the law and the stipulations agreed upon in the two promissory notes signed by the plaintiff HELD 1. . 1949. the total price of P26. Labitag . ISSUES 1. the Bank executed in favor of Ponce de Leon.The appellee.During the trial.130 with interest at the legal rate from May 6. 1946.. Inc. refused to accept such repeated tenders.000 as principal and the further sum of P5.000 in Japanese Military notes and executed in the latter's favor a promissory note of the same tenor as the one had previously executed. in the amount of P200. or a total of P23. including interests up to May 5. dismissal of counterclaim was fully justified Moreover. 1946.The Court ordered the reconstitution of said titles. .In view of Syjuco's refusal to accept the payment tendered by Ponce de Leon. . INC. FACTS .On November 4. and the payee (Syjuco) could not demand.130. the first amortization to fall due one year after the execution of the said contract. and (b) the balance P23. BAUTISTA. .000. the latter deposited with the Clerk of Court P254. until said amount is paid in full. .The lower court absolved Syjuco from Ponce de Leon's complaint and condemned Ponce de Leon to pay Syjuco the total amount of P23.On August 16. . until fully paid.Ponce de Leon executed a mortgage of the two parcels of land covered by the reconstituted Transfer Certificates of Title in favor of the said Bank to secure the payment of any amount.Syjuco claimed that Ponce de Leon had violated the conditions of the mortgage which Ponce de Leon had executed in its favor. but also all the interest up to May 5. .Syjuco. 17175 and 17176 in the name of the Bank. PONCE DE LEON V SYJUCO.

More importantly. . under the same terms and conditions.In order that consignation may be effective. or A2010 page 65 Prof. the period above set forth having been established for the mutual benefit of the debtor and creditor. the presumption is that the same is deemed constituted in favor of both the creditor and the debtor unless from its tenor or from other circumstances it appears that the period has been established for the benefit of either one of them (Art. 5 January 1992." -Petitioner then constructed a building and paid the required monthly rental of P200. For July and August 1991. failed to give previous notice thereof to the person interested in the performance of the obligation. the loans except within the period above mentioned.Obligations and Contracts . counsel for private respondents wrote petitioner reminding her that the contract expired on 1 June 1994 and demanding that she pay the rentals in arrears. the debtor must first comply with certain requirements prescribed by law. (3) that previous notice of the consignation have been given to the person interested in the performance of the obligation (Art. Civil Code).It may be argued that the creditor has nothing to lose but everything to gain by the acceleration of payment of the obligation because the debtor has offered to pay all the interests up to the date it would become due. however. Civil Code). 877. NO. 1127. . it appears that at least two of the requirements have not been complied with.Here no such exception or circumstance exists. as amended.000 for July and August 1991. 31 May 1992. 1178. the debtor has no right to accelerate the time of payment even if the premature tender included an offer to pay principal and interest in full.58 effective January 1992 pursuant to the provisions of the Rent Control Law. which was renewable for another ten years. and. Under Republic Act No. because the obligation was to be paid within one year after May 5. BUCE V CA DAVIDE. . that private respondents be ordered to accept the rentals in accordance with the lease contract and to respect the lease of fifteen years. (4) that the amount due was placed at the disposal of the court (Art 1178.During the pendency of the controversy. while it is admitted a debt existed. it contemplates a mutual agreement between the parties.Under the law. . The lease contract was for a period of fifteen years to commence on 1 June 1979 and to end on 1 June 1994 "subject to renewal for another ten (10) years. Civil Code). . (2) that the consignation of the obligation had been made bacause the creditor to whom tender of payment was made refused to accept it. did not have the effect of relieving him of his obligation. the debtor must first comply with certain requirements. . 1177.The plaintiff. or that the creditor by fixing a period protects himself against sudden decline in the purchasing power of the currency loaned specially at a time when there are many factors that influence the fluctuation of the currency.000 as monthly rental. 1176. and the filing of the complaint to compel its acceptance on the part of the creditor can be considered sufficient notice of the consignation to the creditor. Civil Code).500 for the rest of the period or . .In the instant case.RTC declared the lease contract automatically renewed for ten years and considered as evidence thereof (a) the stipulations in the contract giving the lessee the right to construct buildings and improvements and (b) the filing by petitioner of the complaint almost one year before the expiration of the initial term of fifteen years. Reasoning .There are other reasons why this cannot be done.576. petitioner paid private respondents P1.And that.000. Labitag because he was absent for incapacitated. Private respondents refused to accept the same. . 1948. private respondents' counsel wrote petitioner informing her of the increase in the rent to P1. the obligation was not yet due and demandable when the money was consigned. Petitioner. Civil Code). . . therefore. It then fixed the monthly rent at P400 from 1 June 1990 to 1 June 1994. Moreover. . and 2 January 1993 for only P400 each. One of them is that the creditor may want to keep his money invested safely instead of having it in his hands. and the latter not to demand the payment of.000 from 1 June 1994 until 1 June 1999. the former binds himself to pay.5810 per month. Reasoning In order that cogsignation may be effective. 5 December 1991. .Petitioner leased a 56-square meter parcel of land.But this argument loses force if we consider that the payment of interests is not the only reason why a creditor cannot be forced to accept payment contrary to the stipulation. 2. private respondents countered that petitioner had already paid the monthly rent of P1. or because several persons claimed to be entitled to receive the amount due (Art. Private respondents. FACTS . rather. in a monetary obligation contracted with a period. that the consignation was made because of the refusal of the creditor to accept it. May 12.The failure of these two requirements is enough ground to render the consignation ineffective. the phrase in the lease contract authorizing renewal for another ten years does not mean automatic renewal. rental payments should already be P1.In their Answer. P1. and P1. 5 November 1991. The consignation is invalid. nevertheless. before making the consignation with the clerk of the court. . they were justified in refusing the checks for P400 that petitioner tendered. . hence. Ratio . . at the rate of P200 a month.On 6 December 1991. and (5) that after the consignation had been made the person interested was notified thereof (Art. tendered checks dated 5 October 1991.576. 2000 NATURE Petition to review the decision of the CA.The consignation was made before this period matured.Petitioner filed with the RTC of Manila a complaint for specific performance with prayer for consignation. The debtor must show (1) that there was a debt due. later demanded a gradual increase in the rental until it reached P400 in 1985.Unless the creditor consents. which then amounted to P33.

. However. neither was it stated that the option was given for the benefit of herein petitioner. 514. May 31. Thus. HELD 1.. Neither did they file with the proper Metropolitan Trial Court an unlawful detainer suit against petitioner after the expiration of the lease contact.Rules of interpretation: the literal meaning of the stipulations shall control if the terms of the contract are clear and leave no doubt upon the intention of the contracting parties. M. absent language showing that the term was deliberately set for the benefit of the lessee or lessor alone. seeking to compel the latter to comply with their obligation and/or to pay damages in the event they failed or refused to perform the obligation.Obligations and Contracts from 1 June 2000 to 1 June 2004. was unable to finish the construction of the street in the NE side because a certain third party.C. 1950. sold a portion of its land in Sta.On May 7. they cannot be compelled to execute a new contract when the old contract terminated on 1 June 1994. . .Fernandez v. pursuant to the Fernandez ruling and Article 1196 of the Civil Code. The decision of the CA is REVERSED insofar as it ordered the petitioner to immediately vacate the leased premises. must be principally considered. the period must be deemed to have been agreed upon for the benefit of both parties. ARANETA V PHILIPPINE SUGAR ESTATES DEVT. Q. Neither the filing of the complaint a year before the expiration of the 15-year term nor private respondents' acceptance of the increased rentals has any bearing on the intention of the parties regarding renewal. J.*The phrase "subject to renewal for another ten (10) years" is unclear on whether the parties contemplated an automatic renewal or extension of the term. Defendant GAI opposed said motion.After the lease terminated on 1 June 1994 without any agreement for renewal being reached. (GAI) for P 430. to Philippine Sugar Estates Development (PSED) Co. petitioner became subject to ejectment from the premises. PSED moved for a reconsideration praying that the court fix a period within which defendants will comply with their obligation to construct the streets in question. . CO. A2010 page 66 Prof. who has been physically occupying a middle part thereof. Manuel Abundo. to ascertain the true intention of the parties. and ordered petitioner to immediately vacate the leased premises on the ground that the contract expired on 1 June 1994 without being renewed and to pay the rental arrearages at the rate of P1. Moreover. thus: In a reciprocal contract like a lease. the parties stipulated that the buyer will build the Sto. the issues agreed upon by the parties to be resolved during the pre-trial were the correct interpretation of the contract and the validity of private respondents' refusal to accept petitioner's payment of P400 as monthly rental.The buyer PSED finished the construction of the church but the seller. . .Court of Appeals reversed the decision of the RTC.Both defendants answered the complaint with GAI setting up the principal defense that the action was premature since its obligation to construct the streets in question was without a definite period which needs to be fixed first by the court in a proper suit for that purpose before a complaint for specific performance will prosper. to the filing by the private respondents of an action for the recovery of possession of the subject property. It was not specifically indicated who may exercise the option to renew. Since the private respondents were not amenable to a renewal. It is the owner-lessor's prerogative to terminate the lease at its expiration. . Ltd. through Gregorio Araneta Inc. who may exercise the same or for whose benefit it was stipulated. YES . 1958. the period of the lease contract is deemed to have been set for the benefit of both parties. Neither was it raised by private respondents on appeal. T he Court of Appeals went beyond the bounds of its authority when after interpreting the questioned provision of the lease contract in favor of the private respondents it proceeded to order petitioner to vacate the subject premises.000 monthly. however. It must be noted. if the terms of the agreement are ambiguous resort is made to contract interpretation which is the determination of the meaning attached to written or spoken words that make the contract. maintaining that plaintiff's complaint did not expressly or impliedly allege and pray for the fixing of a period to comply with its obligation and that the evidence presented at the trial was insufficient to warrant the fixing of such a period. NO. P400 and finally P1. or just an option to renew the contract. subsequent or contemporaneous. It must be recalled that the filing of the complaint was even spawned by private respondents' refusal to accept the payment of monthly rental in the amount of only P400. and GAI in CFI Manila. that private respondents did not include in their Answer with Counterclaim a prayer for the restoration of possession of the leased premises. M. Disposition Petition is partly GRANTED. reasoning that the continuous increase of rent from P200 to P250 then P300. and if what exists is the latter. Labitag 2. Renewal of the contract may be had only upon their mutual agreement or at the will of both of them. Mesa Heights Subdivision. ISSUES 1. however.000 caused "an inevitable novation of their contract.After the lower court dismissed the complaint. WON the parties intended an automatic renewal of the lease contract when they agreed that the lease shall be for a period of fifteen years "subject to renewal for another ten (10) years." 2." . CA is applicable to the case at bar.On July 28. their actions. Tuason & Co. without prejudice. -There is nothing in the stipulations in the contract and the parties' actuation that shows that the parties intended an automatic renewal or extension of the term of the contract. 1967 NATURE Review by certiorari FACTS . . Hence this petition.. Also. refused to vacate the same. PSED filed a complaint against J. Tuason & Co.The Court of Appeals denied petitioner's motion for reconsideration. GAI. The issue of possession of the leased premises was not among the issues agreed upon by the parties or threshed out before the court a quo. WON CA erred in ordering the petitioner to vacate the land upon expiration of the lease contract.. REYES. . Inc. In their contract of purchase and sale. Domingo Church and the seller will construct streets on the NE and NW and SW sides of the land. The fact that the lessee was allowed to introduce improvements on the property is not indicative of the intention of the lessors to automatically extend the contract.

NW and SW sides of the land sold to plaintiff so that the same would be a block surrounded by streets on all four sides. YNCHAUSTI V YULO ARELLANO. setting a period of 2 years from finality of judgment to comply with the obligation. a notarial document whereby all admitted their indebtedness to Inchausti & Company in the sum of P203. It does not lie within them to fix the period of the performance of the obligation.Gregorio Yulo.27 and. as well as to cure all the defects which might prevent the inscription of the said instrument in the registry of property and finally to extend by the necessary formalities the mortgage over the remaining three-ninths . Gregorio. after finding that the proven facts warrant the fixing of such a period. the complaint not having sought that the court should set a period. Teodoro.The contract shows that the parties were fully aware that the land described was occupied by squatters.” Reasoning . they must have realized that the duration of the suits to be brought would not be under their control nor could the same be determined in advance. Of these children Concepcion and Jose were minors. . lorchas.In no case can it be logically held that the intervention of the court to fix the period for performance was warranted. obligating themselves to make a formal inventory and to describe in due form all the said properties. they especially mortgaged an undivided six-ninth of their 38 rural properties. Francisco. the court could not proceed to do so unless the complaint was first amended. Yulo continuing their current account with Inchausti & Company until said balance amounted to P200. . their remaining urban properties. 1908. the balance of a current account opened by the firm of Inchausti & Company with Teodoro Yulo and after his death continued with his widow and children.On July 16. and Carmen.” The court must then proceed to the second step. and Jose Yulo y Regalado. hence this petition for certiorari ISSUE WON the trial court and the CA erred in setting the date for the performance of the contract HELD The decision of the CA. . Abundo. for himself and in representation of his brothers Pedro.” All that the trial court's amended decision says is that “the proven facts precisely warrant the fixing of such a period. 1904. 1960. Manuel. . Gregoria Regalado. FACTS . The time for the performance of the obligations of petitioner Gregorio Araneta. Inc. there remaining of the marriage the following legitimate children: Pedro. in order to secure the same with interest thereon at 10% per annum. The court must first determine that “the obligation does not fix a period” (or that the period is made to depend upon the will of the debtor). however.The case was brought to the CA by GAI and the same rendered a decision affirming that of the lower court’s. Teodoro Yulo died testate and for the execution of the provisions of his will he had appointed as administrators his widow and five of his sons. this very indefiniteness is what explains why the agreement did not specify any exact periods or dates of performance. rendered judgment giving defendant GAI. and decide what period was “probably contemplated by the parties. Mariano. the lower court amended its previous decision and. a property owner of Iloilo. 1914 NATURE Suit for the recovery of a certain sum of money. GAI now resorted to the SC. for the setting of the date of performance at any other time than that of the eviction of the squatters occupying the land in question. The trial court appears to have pulled the two-year period set in its decision out of thin air.Teodoro Yulo.221. a period of Two (2) Years from notice within which to comply with its obligation under the contract: to construct streets on the NE. “but from the nature and the circumstances it can be inferred that a period was intended.” which is insufficient to explain how the twoyear period given to petitioner herein was arrived at. It follows that there is no justification in law. who died on October 22d of the following year. whose principal representative is Gregorio Yulo. As the parties must have known that they could not take the law into their own hands and must resort to legal processes in evicting the squatters. had been borrowing money from the firm of Inchausti & Company under specific conditions. still the amended decision is defective in that no basis is stated to support the conclusion that the period should be set at two years after finality of the judgment. Mariano. that it lay within the Court's power to fix the period of performance. Ratio Article 1197 is predicated on the absence of any period fixed by the parties and it involves a two-step process.000 upon which the creditor firm tried to obtain security for the payment of the money. for the original decision is clear that the complaint proceeded on the theory that the period for performance had elapsed already.Granting. Concepción. for even on the assumption that the court should have found that no reasonable time or no period at all had been fixed (the trial court's amended decision nowhere declared any such fact) still. and family credits which were listed.Obligations and Contracts . The last paragraph of Article 1197 is clear that the period can not be set arbitrarily. these children preserved the same relations under the name of Hijos de T. was still pending in the CA when its decision in this case was rendered. while Teodoro was mentally incompetent. no circumstances are mentioned to support it. the case against one of the squatters. The A2010 page 67 Prof. affirming that of the CFI is legally untenable. Carmen.CA objected to this conclusion that it would render the date of performance indefinite. However. The law expressly prescribes that “the courts shall determine such period as may under the circumstance have been probably contemplated by the parties. Disposition decision appealed from is reversed. fixed at the date that all the squatters on affected areas are finally evicted. executed on June 26. He thus left a widow. March 25. both the trial court and the CA committed reversible error. His widow and children held the conjugal property in common and at the death of Gregoria. Manuel. as contended by the petitioner GAI. 1903. In addition. Francisco.On April 9. and in not so holding. that the contract had been breached and defendant was already answerable in damages. . for the exploitation and cultivation of his numerous haciendas in the province of Negros Occidental. Labitag conclusion is thus forced that the parties must have intended to defer the performance of the obligations under the contract until the squatters were duly evicted. Gregorio Yulo being one of the latter. .

1909. sentencing the latter to pay the total amount of the obligation acknowledged by them in the instrument of August 12. was novated by that of May 12. the first of P20. that in the instrument of August 12.Obligations and Contracts part of all the property and rights belonging to their other brothers.On January 11. and in their own behalf Pedro Yulo. Reasoning This was surely the purpose in demanding that the obligation contracted should be solidary having in mind the principle of law that. entered into with the six debtors who assumed the payment of P253. the incompetent Teodoro. with the understanding that if they should deem it convenient for their interests. second.On July 10. except the last. Francisco Yulo. .944.On May 12. WON the plaintiff can sue Gregorio Yulo alone. [Traitors!] ." it being expressly agreed "that if any of the partial payments specified in the foregoing clause be not paid at its maturity.The Yulos did not pay the first installment of the obligation. the interest is likewise reduced for them to 6% per annum. 1914. Labitag remains unpaid. 1911.The default in payment of any of the installments or the noncompliance of any of the other obligations will result in the maturity of all the said installments. pending the present suit. . and the rest of P30. 1999. Inchausti & Co.The CFI of Iloilo decided the case "in favor of the defendant without prejudice to the plaintiff's bringing within the proper time another suit for his proportional part of the joint debt. we have received an abstract of our current account with your important firm.445.42. 1910.On March 27.Stipulated in addition: Inchausti & Co. Yulo answered a letter of the firm of Inchausti & Company in these terms: "With your favor of the 2d inst. there being other obligors 2. Manuel. from March 15.On August 12. that the instrument of August 12. and proceed to collect the same together with the interest for the delay above stipulated through all legal means. 1909. 1911. brothers and sisters. ratified all the contents of the prior document of June 26.12. second. the creditor can bring its action in toto against any one of them. Yulo expressed its conformity by means of a letter of the 19th of the same month and year. third. the latter being of age at the time. that an accumulation of interest had taken place and that compound interest was asked for in Philippine currency at par with Mexican. Pedro Yulo. . by their brother Mariano Yulo y Regalado who resides in Bacolod. for himself and in representation of his brother Manuel Yulo. fourth and finally. 1911.Among other clauses. "when the obligation is constituted as a conjoint and solidary obligation each one of the debtors is bound to perform in full the undertaking which is the subject matter of such obligation. and they will procure by all legal means and in the least time possible a judgment in their favor against Gregorio and Pedro. may consider the total obligation due and demandable. and that the plaintiff pay the costs. they shall lose the right to make use of the period granted to them for the payment of the debt or the part thereof which A2010 page 68 Prof. in accordance with the instrument of May 12. the proroguing of the obligation and the extension of the time for payment." .All the obligations will be understood as having been contracted in solidum by all the Yulos.The instrument shall be confirmed and ratified in all its parts.000. 1908. Gregorio Yulo answered the complaint and alleged as defenses: first. and the minors Concepcion and Jose. Gregorio Yulo." that "if during two consecutive years the partial payments agreed upon be not made.42 which they obligated themselves to pay. who can make use of their rights to demand and obtain the immediate payment of their credit without any further extension or delay. Yes.445. Gregorio Yulo in representation of Hijos de T. neither of which was complied with. Regarding this conformity a new document evidencing the mortgage credit was formalized. Carmen Yulo. 1909. 1911.42 4. without the necessity of demand until its complete payment.445. . . in five installments at the rate of P50. within the present week. 1919. . the debt is reduced for them to P225. and that Messrs. third.445. that with regard to the same debt claims were presented before the commissioners in the special proceedings over the inheritances of Teodoro Yulo and Gregoria Regalado. continuing successively on the 30th of each June until the last payment on June 30. the installments are increased to 8. should include in their suit brought in the CFI of Iloilo against Gregorio Yulo. . and Carmen Yulo y Regalado executed in favor of Inchausti & Co. and Concepcion Yulo. 1909.76.000. Francisco and Carmen Yulo. WON the contract with the three obligors constitutes a novation of that of August 12. 1909. Ratio The debtors having obligated themselves in solidum." On July 17. in the proceedings of the said case.445." 2. executed by Manuel.863. against Gregorio Yulo for the payment of the balance of P253. brought an ordinary action in the CFI of Iloilo. his brother and joint co-obligee. If in the negative.This instrument was neither ratified nor confirmed by Mariano Yulo. they expressly stipulated the following: . and the other ratified and confirmed by the other brother Mariano Yulo. Inchausti & Co. and Carmen Yulo may appoint an attorney to cooperate with the lawyers of Inchausti & Co. .000. severally and jointly acknowledged and admitted their indebtedness to Inchausti & Company for the net amount of P253. . this being P53. Ratio Solidarity may exist even though the debtors are not bound in the same manner and for the same periods and under the same conditions. with which we desire to express our entire conformity as also with the balance in your favor of P271. with interest at 10% per annum." ISSUES 1. 1911. 1909. Francisco. WON plaintiff lost this right by the fact of its having agreed with the other obligors in the reduction of the debt. No.000 each on the same date of each successive year until the total obligation shall be finally and satisfactorily paid on June 30. Francisco. may exercise at once all the rights and actions in order to obtain the immediate and total payment of our debt. Manuel. on that date aggregating to P42. another notarial instrument in recognition of the debt and the obligation of payment in the following terms: "First. beginning on June 30. Inchausti & Company informed Hijos de T. 1911. beginning June 30. .42. . WON it has any effect in the action brought and in this present suit HELD 1. two conditions were agreed one of which ought to be approved by the CFI. 1911 3. though later they were dismissed. otherwise it will not be binding on Inchausti & Co. the amount of the said partial payment together with its interest shall bear interest at the rate of 15% per annum from the date of said maturity. Yulo of the reduction of the said balance to P253.42 with interest at 10% per annum. and Inchausti & Co. with which balance Hijos de T. closed on the 31st of last December.

1909. So ordered.500. INC. LAFARGE CEMENT PHLIPPINES. When the suit was brought on March 27. Q-00-41103] . There exist no incompatibility between the old and the new obligation.petitioners moved to dismiss the complaint on the grounds of forum-shopping .84 from the purchase price to be deposited in an interest-bearing account in Citibank NY for payment to APT . But as regards Francisco. with the interest stipulated in the instrument of May 12. by virtue of the remission granted to the three of the solidary debtors in this instrument. contracted later.Obligations and Contracts Reasoning Even though the creditor may have stipulated with some of the solidary debtors diverse installments and conditions. Ratio An obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified. and not having been paid. CCC filed w/ the RTC of QC a “Complaint w/ Application for Preliminary Attachment” against petitioners [CC No. The part of the debt for which these three are responsible is three-sixths of P225. expressly and clearly stated that the said obligation of Gregorio Yulo to pay the P253. did with its debtors Manuel. and in consequence. P112. should such efficacy not likewise be recognized concerning the maturity of the same? If Francisco. Yes. does not constitute a novation of the former one of August 12. No. 1912. Against the propriety and legality of a judgment against Gregorio Yulo for this sum. 3. independently of the resolutory condition which gave the creditor the right to demand the immediate payment of the whole debt upon the expiration of the stipulated term of one week allowed to secure from Mariano Yulo the ratification and confirmation of the contract of August 12. was to mature on June 30. and Carmen had been included in the suit. 1911. Ratio Before the performance of the condition. 1909. far from expressly declaring that the obligation of the three who executed it substitutes the former signed by Gregorio Yulo and the other debtors. 1911. Consequently. [Total amount and amount due and demandable. has not novated that of August 12. it is necessary that it should be so expressly declared or that the old and the new be incompatible in all points. as in this case. which is implied in the last special defense set up in the answer of the defendant Gregorio Yulo be made available to him in this proceeding? Gregorio Yulo cannot allege as a defense to the action that it is A2010 page 69 Prof. and without doubt the defense would have prospered. CCC were respondents in a pending case against Asset Privatization Trust (APT) [GR No. Disposition We therefore sentence the defendant Gregorio Yulo to pay the plaintiff Inchausti & Co. Labitag premature. fearing foreclosure. the first installment of the obligation had already matured as of June 30. 1911. This exception or personal defense of Francisco.petitioners allegedly refused to pay APT.445. none of the installments payable under their obligation. had as yet matured. without any special finding as to costs. they being in identical condition as he. they could have alleged the defense of the nonmaturity of the installments since the first installment did not mature until June 30. the remission of any part of the debt made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others. 1911. and Carmen Yulo through the instrument of May 12.000. and Carmen Yulo. 1912. we do not think that there was any reason or argument offered which sustains an opinion that for the present it is not proper to order him to pay all or part of the debt. (LCLC) agreed to purchase respondent Continental Cement Corporation (CCC). these three parties would cooperate in order that the action against Gregorio Yulo might prosper. It is always necessary to state that it is the intention of the contracting parties to extinguish the former obligation by the new one. 1909. 4. because he has been benefited by the remission made by the plaintiff to three of his co-debtors. Manuel. At the time. He cannot be ordered to pay the P253. and for this reason the action will be only as to the P112. or before the execution of a term which affects one debtor alone. 1909. Manuel. Inchausti & Co. Reasoning Although the contract of May 12. cannot be recovered but only that stated in the contract of May 12. and the instrument of May 12. 1911.42 sued for exists. or more concretely. with respect to the defendant Gregorio Yulo: First.8/11/98: in a Letter of Intent (LOI). petitioner Lafarge—on behalf of its affiliates including Petitioner Luzon Continental Land Corp. proceedings may be had against him or against any of the others for the remainder which may be already demandable but the conditional obligation or that which has not yet matured cannot be demanded from any one of them. 1909 is broken.42. stipulating that the suit must continue its course and.445. Cannot this defense of the pre-maturity of the action. nevertheless not all of it can now be demanded of him. the debt is reduced to 225. by changing only the term of payment and adding other obligations not incompatible with the old one. 1911. if necessary.000 pesos. The first payment. because in order that an obligation may be extinguished by another which substitutes it. from the time that it was claimed. and Carmen Yulo "as to that part of the debt for which they were responsible" can be set up by Gregorio Yulo as a partial defense to the action. the amount stated in the contract of August 12. according to the express agreement of the parties. November 23.500. V CONTINENTAL CEMENT CORPORATION PANGANIBAN. for that part of it which pertained to his co-debtors is not yet due. Neither could he invoke a like exception for the shares of his solidary co-debtors Pedro and Concepcion Yulo. Reasoning The contract of May 12. respectively.42 claimed from him in the suit here. this does not lead to the conclusion that the solidarity stipulated in the instrument of August 12. even acknowledging that the debt for which he is liable is P225.500. Manuel.] Ratio The obligation being solidary. Reasoning If the efficacy of the later instrument over the former touching the amount of the debt had been recognized. a state of affairs which not only prevents any action against the persons who were granted the term which has not yet matured. with respect to the other debtors who executed this contract.445. the three-sixths part of the debt which forms the subject matter of the suit. 1911. 2004 FACTS .020. 1910. but also against the other solidary debtors who being ordered to pay could not now sue for a contribution. as already stated. 119712] . Francisco.000 or P112. 1911. it has affected that contract and the outcome of the suit brought against Gregorio Yulo alone for the sum of P253.under clause 2 of the SPA the parties allegedly agreed to retain P117. and the legal interest on this interest due. The judgment appealed from is reversed. so that Gregorio Yulo may claim that.846. 5. the whole debt had become mature. to wit. from March 15. the object of the action.10/21/98: both parties entered into a Sale and Purchase Agreement (SPA) .

despite his active participation in the trial. WON the RTC gravely erred in ruling that (a) petitioners’ counterclaims against Respondents Lim and Mariano are not compulsory. Court of Appeals is inapplicable here. filed an action for replevin against the sps Sugapay. Nevertheless. making them indispensable parties . They still had a post surety bond w/c they couldn’t claim w/o the Agreement. a sum of P100M each for moral damages is prayed for . who wasn’t a party to the original action. no records show that Lim and Mariano are aware of the counterclaims or that they actively participated in the proceeding.the RTC dismissed petitioners’ counterclaims since the counterclaims against Lim and Mariano were not compulsory. its majority stockholder Gregory Lim. (b) Sapugay v.” . later discovering Mobil and its manager. and the Counterclaims violated procedural rules on the proper joinder of causes of action . A1222 of the CC provides: 2. could be impleaded in the counterclaim . . and its corporate secretary Anthony Mariano. the court cannot be said to have treated CCC’s motion to dismiss as having been filed on their behalf 1(c) CCC claims that while the original complaint was a suit for specific performance based on a contract. Will substantially the same evidence support or refute plaintiff’s claim/counterclaim? 4. Cardenas. WON the RTC gravely erred in refusing to rule that Respondent CCC has no personality to move to dismiss petitioners’ compulsory counterclaims on Respondents Lim and Mariano’s behalf.in Sagupay. praying for the sums of P2.Obligations and Contracts .respondent CCC contends that as a corporation with a separate legal personality. intended all along to award the agreement to Island Air Product Corp.to avoid being in default. and (c) petitioners violated the rule on joinder of causes of action. A2010 page 70 Prof. absent the compulsory counterclaim rule? 3. Lim and Mariano were responsible for making the bad faith decisions and causing the plaintiff to file this baseless suit and procure an unwarranted Writ of Attachment 2. HELD 1.petitioners allege that the Writ of Attachment was procured in bad faith . P100M as moral damages and P5M as atty’s fees and costs each . and adopted as his answer the allegations in the complaint. the counterclaim was based on tortuous acts of the respondents. while those against Lim and Mariano are based solely on tort does not negate the solidary nature of their liablility -petitioners’ assertion that CCC cannot move to dismiss the counterclaims on the grounds that pertain solely to its individual co-debtors cannot be given credence. Obligations arising from tort.The court then examined petitioners’ basis for their allegations using these criteria: 1. For damage to the reputations of defendants.” 2. Labitag Lim and Mariano should pay P5M each for counsel fees and litigation costs. are always solidary. are issues of fact and law raised by the claim and by the counterclaim largely the same? Would res judicata bar a subsequent suit on defendant’s claim. P100M as exemplary damages. The sps failed to keep their end of a Dealership Agreement. 1(b) In the Sugapay case. Fed of United Namarco Dist. and is deemed to have submitted to the TC’s jurisdiction.they are generally allowed to facilitate the disposition of the whole controversy in a single action .the Court held that new parties may be brought to the action to accord complete relief to all in a single action and to avert a multiplicity of suits . They are also the plaintiff’s co-joint tortfeasors in the commission of complained acts and as such are jointly and solidarily liable 3. . Is there any logical relation b/w the claim and counterclaim? . 1(a) Sec 6 Rule 6 of the Rules of Civil Procedure states: “(A counterclaim is) any claim which a defending party may have against an opposing party” .a counterclaim is permissive if it is not necessarily connected w/ the subject matter of the opposing party’s claim and may be filed in a separate case . the Court however points out that the inclusion of the co-defendants is not premised on the assumption of CCC’s financial ability but on the allegations of fraud and bad faith against them. petitioners filed their Answer and Compulsory Counterclaims ad Cautelam against Respondent CCC.compulsory counterclaims must be set up in the same action or be barred forever NAMARCO v. lays down the criteria to determine counterclaim type: 1. Hence the Court considered his apparent acquiescence.a positive answer to all four would indicate it is compulsory . Art 1207 of the Civil Code provides that obligations are generally considered joint unless expressly stated or when the nature of the obligation requires solidarity. the RTC clarified that it impleaded the two. -the fact that liability sought against CCC is for specific performance and tort. even if CCC was included then ISSUES 1.in the instant case. Cardenas was furnished w/ a copy of the Answer w/ Counterclaim but he did not respond. So unlike in Sagupay. violating the rule on joinder of causes of action as stated in S5 Rule 2 and S6 Rule 3 of the Rules of Civil Procedure -these rules are founded on practicality—dismissing the counterclaim for damages would likely only lead to a separate case re-filing it. the Sapugay ruling wasn’t applicable. Sec 12 Rule 6 of the Rules of Court state that “only upon service of summons can the TC obtain jurisdiction over them. they answered with a counterclaim alleging the plaintiff refused to give them gas. it has the juridical capacity to indemnify petitioners even w/o Lim and Mariano.an issue raised was whether Cardenas.a counterclaim is compulsory if it arises out of the transaction or occurrence of the subject matter . the two are indispensable parties 2.since the alleged damages suffered by the defendants were a consequence of petiitioners’ actions. however.acting for MFR. Respondent Mobil Phils. the requisites for compulsory counterclaim are met. the TC admitted an error in pronouncing the counterclaim was against Lim and Mariano only.7M as actual damages.

which appears to have matured at that time. . On December 11. 1908. entered an order refusing to grant Jaucian's petition. . leads us to conclude that it was not a final order. the administrator has a right to require that Roman Jaucian produce a . JAUCIAN V QUEROL STREET. . 1909. Labitag judgment for his claim against Lino Dayandante. The simple affidavit of the principal debtor that he had no property except P100 worth of property which he has ceded to the creditor is not sufficient for the court to order the surety to pay the debt of the principal.Upon these facts Jaucian prayed the court for an order directing the administrator of the Rogero estate to pay him the principal sum plus its interest.Acting upon the suggestions contained in this order Jaucian brought an action against Dayandante and recovered a judgment against him for the full amount of the obligation evidenced by the document of October 24.CFI held that: "Hermenegilda Rogero having been simply surety for Lino Dayandante. however. Hermenegilda Rogero brought an action in the Court of First Instance of Albay against Jaucian. 1914. NO . asking that the document in question be cancelled as to her upon the ground that her signature was obtained by means of fraud. unless expressly adopted by Lim and Mariano. 1914. ISSUES 1. but was returned by the sheriff wholly unsatisfied.While the case was pending in the Supreme Court. . 1912. and the deceased as a surety only liable for such deficiency as might result after the exhaustion of the assets of the principal coöbligor.In October. 1914. On March 24. . Execution was issued upon this judgment. October 5." . Francisco Querol was named administrator. was not binding upon him or any other judge by whom he might be succeeded.CFI. the reasons upon which he based his denial of the petition. It was contended that the court. and (b). 1908. the judge a quo entered an order denying the rehearing and setting forth at length. after hearing argument. and the complete insolvency of Dayandante (note: 1918 pa ito kaya mahal na ang P100). by the deceased.In November. Jaucian entered an appearance in the estate proceedings.Obligations and Contracts “With respect to (defenses) w/c personally belong to the others.332. is that no appeal from it having been taken. 1913. 1914. . by. 1914. WON the order of April 13. counsel for Jaucian filed another petition in the proceedings upon the estate of Hermenegilda Rogero. which contained statements of what the court intended to do when the petition should be renewed. the Supreme Court rendered its decision reversing the judgment of the trial court and holding that the disputed claim was valid. On November 25. by way of cross-complaint. and this failure the court regarded as a complete bar to the granting of the petition at that time. and therefore it was not appealable. 1914. and a committee was appointed to pass upon claims against the estate. . the failure of her coöbligor Dayandante. 1914 is final and hence appealable 2. Jaucian. in which they averred. (a solidary debtor) may avail himself thereof as regards that part of the debt for w/c the latter are responsible.This committee made its report on September 3. but as clearly appears from the instrument itself both debtors bound themselves jointly and severally to the creditor . that Dayandante was insolvent. . Hermenegilda Rogero died and the administrator of her estate was substituted as the party plaintiff and appellee. in order that the said administrator may be subrogated to the rights of Jaucian against Dayandante.In effect. To this ruling the appellant excepted and moved for a rehearing.On October 28. the motion has no force and effect as to them Disposition Wherefore. though she was only a surety for Lino Dayadante HELD 1.” -the filing of CCC of a motion to dismiss on grounds pertaining to its individual debtors is allowed -however. . upon the grounds last stated.In his answer to the complaint. except P100 received from him in March. Lino Dayandante and Hermenegilda Rogero executed a private writing in which they acknowledged themselves to be indebted to Roman Jaucian in the sum of P13. The court of origin is ordered to take cognizance of the counterclaims and to cause the service of summons on Lim and Mariano A2010 page 71 Prof.' then the claim of Jaucian against the estate will be ordered paid or any balance that may be due to him. . proceedings were had in the Court of First Instance of Albay for the administration of the estate of Hermenegilda Rogero. . 1908. When this action shall have been taken against Lino Dayandante and an execution returned 'no effects.The court made no order requiring the appellee to make any payment whatever. and that part of the opinion. the petition is granted and the assailed orders reversed. namely. its order of April 13.The pivotal fact upon which the order was based was the failure of appellant to show that he had exhausted his remedy against Dayandante. .33. 1914. . it held that whatever rights Jaucian might have against the estate of Rogero were subject to the performance of a condition precedent. Rogero to pay the appellant the amount demanded by him. or about a year and a half after the filing of the report of the committee on claims against the Rogero estate. and renewed the prayer of the original petition. dated April 13.There is nothing in the terms of the obligation itself to show that the relation between the two debtors was that of principal and surety. no property of the judgment debtor having been found. The contention with regard to the order of April 13. asked for judgment against the plaintiff for the amount due upon the obligation. WON Hermenegilda Rogero’s liability was that of principal.During the pendency of the appeal. and filed with the court a petition in which he averred the execution of the document of October. in refusing to order the administrator of the estate of Hermenegilda. it lacks the requisite authority to file this motion on the behalf of Lim and Mariano—thus. to pay any part of the debt. .The court regarded Dayandante as the principal debtor. had "admitted the claim" of Dayadante that he had no property left.In this court the appellant contends that the trial judge erred (a) in refusing to give effect to the order made by the CFI. . upon which the order was based. it became final.An examination of the order in question.Hermenegilda Rogero signed this document in the capacity of surety for Lino Dayandante. that he should first exhaust this remedy against Dayandante. 1918 FACTS .

Art 1822: “By security a person binds himself to pay or perform for a third person in case the latter should fail to do so. same Code). . and if the claim had been duly presented to the committee for allowance it should have been allowed. the obligation is apportionable among the debtors.Obligations and Contracts ." . it is not unusual for the parties to a common law contract to stipulate that the debtors shall be "jointly and severally" liable. was originally taken by the author. the provisions of section fourth. 1914. and therefore was not appealable. and it shall be allowed by the committee as if the contract had been with him alone or the judgment against him alone.In other words. . required no action by the administrator at that time. The sense of the word "joint. it is the surety who is dead. The claims instituted against one shall not be an obstacle for those that may be later presented against the others. Labitag This article declares in effect that. just as if the contract had been with her alone. that the obligation of the principal to indemnify the surety arises (art." .It is quite clear from what we have stated that the order of April 13. of this book shall be observed. If the surety binds himself jointly with the principal debtor." though even this word does not express the meaning of the English with entire fidelity. 1914.The force of this expression is to enable the creditor to sue any one of the debtors or all together at pleasure. is rendered by the Spanish word "mancomunadamente.In the common law system there is no conception of obligation corresponding to the divisible joint obligation contemplated in article 1138 of the Civil Code.There is no force. and the only legal peculiarity worthy of remark concerning the "joint" contract at common law is that the creditor is required to sue all the debtors at once. every obligation in which there are numerous debtors--we here ignore plurality of creditors-shall be considered divided into as many parts as there are debtors. it would have been rejected and that the decision of the committee would have been sustained by the CFI. in our judgment.The joint contract of the common law is and always has been a solidary obligation so far as the extent of the debtor's liability is concerned. chapter third." This is incorrect. was nevertheless bound jointly and severally with him in the obligation. was liable absolutely for the whole obligation. and either of them dies. as its judgment was not final. where the principal debtor is dead. the following provisions of the Old Civil Code are here pertinent: . 1839. that the circumstance that a liability is subsidiary. his estate shall be liable therefor. . under section 698 of the Code of Civil Procedure. Her position so far as the creditor was concerned was exactly the same as if she had been the principal debtor. or compiler. In the case before us. and in case of the simple joint contract neither debtor can be required to satisfy more than his aliquot part.We therefore conclude that no rights were conferred by the said order of April 13.To avoid the inconvenience of this procedural requirement and to permit the creditor in a joint contract to do what the creditor in a solidary obligation can do under article 1144 of the Civil Code. title first. unless he himself satisfies the obligation in whole or in part upon which both are bound. . . that is. It is at this moment. and that it did not preclude the administrator from making opposition to the petition of the appellant when it was renewed. YES . of our Code of Civil Procedure from the statutes of the State of Vermont. Civil Code). in his appeal from the decision in the cancellation suit. 2. the sense of the English word "joint." . under section 703." as here used. endeavored to obtain judgment on his crosscomplaint.The only concrete illustration of a contingent claim given in section 746 of the Code of Civil Procedure is the case where a person is liable as surety for the deceased.Furthermore. and each part shall be deemed to be the distinct obligation of one of the respective debtors.Bearing in mind that the deceased Hermenegilda Rogero." in the cases contemplated in section 746.Art 1144: "A creditor may sue any of the joint and several (solidarios) debtors or all of them simultaneously.It is possible that "contingency. it should be explained. and even assuming that if the claim had been presented to the committee for allowance.Hermenegilda Rogero.In the common law system every debtor in a joint obligation is liable in solidum for the whole. the death of the debtor would probably have required the discontinuance of the action presented by crosscomplaint or counterclaim. as long as it does not appear that the debt has been collected in full. A2010 page 72 Prof. . . • . and the word "joint" is. and not before. 1838.In the official Spanish translation of the Code of Civil Procedure. though surety for Lino Dayandante. The fact that the lower court had declared the document void was not conclusive." as used in two places in the section above quoted. In the illustration put in section 746-where the principal debtor is dead and the surety is the party preferring the claim against the estate of the deceased-it is obvious that the surety has no claim against the estate of the principal debtor.Art 1831: "This application can not take place… ….Art 1830: "The surety can not be compelled to pay a creditor until application has been previously made of all the property of the debtor. . . If he has jointly bound himself with the debtor " .The foregoing articles of the Civil Code make it clear that Hermenegilda Rogero was liable absolutely and unconditionally for the full amount of the obligation without any right to demand the exhaustion of the property of the principal debtor previous to its payment." . if not otherwise expressly determined. But the estate shall have the right to recover contribution from the other joint debtor. the rights of the creditor could have been protected by an appeal from that decision. was not final. It may be. . may depend upon other facts than those which relate to the creation or inception of liability. which provides: • "When two or more persons are indebted on a joint contract. in the contention that the pendency of the suit was a bar to the presentation of the claim against the estate.The absolute character of the claim and the duty of the committee to have allowed it in full as such against the estate of Hermenegilda Rogero had it been opportunely presented and found to be a valid claim is further established by section 698 of the Code of Civil Procedure. . . and by virtue of such payment the surety is subrogated in all the rights which the creditor had against the debtor (art. therefore. even had Jaucian. would be more properly translated in Spanish by the word "solidaria. and her estate after her death. . for instance. • The section quoted. here used in the sense which attaches to it in the common law. or upon a judgment founded on a joint contract.

This defense may be availed only by the debtor. the deposit will be annulled. unless it was made against his express will. . One who makes the payment may recover from the debtor. despite repeated demands. the amounts due were payable only to him under the second agreement.Anduiza claims that the payment made by Madrid was without his knowledge or consent and that RFC did not accept such payment. On October 10. for the contract price of P137. as the 2nd Party. o The bank cannot invoke the provision that the payor may opnly recover from the debtor insofar as the payment has been beneficial to him. or. whether approved by the debtor or not. where the debtor is liable in solidum and without postponement of execution. . ISSUES WON one of the two solidary creditors may sue by himself alone for the recovery of amounts due to both of them without joining the other creditor as a co-plaintiff. jointly and severally bound themselves to construct a house for private respondents Francisco and Manuelita Saligo. . The motion was initially denied but was subsequently reconsidered and granted by the trial court.50 representing the amount still due from her and her husband. to release the properties mortgaged to RFC. he offered to pay for Anduiza’s indebtedness. When Estelito Madrid.Madrid then is entitled to pay the obligation irrespective of Anduiza’s will or the bank. the Agricultural and Industrial Bank (now RFC) refused to cancel his mortgage. Madrid then instituted an action with the CFI to declare that Anduiza’s indebtedness of P16. to Nicencio Tan Quiombing. It is enough to say that where. . . learned this. 1983. 1984. with an interest rate of 6%. as in the case now before us.The payments were not made against the objection of either Anduiza or Madrid.Rather than file the amended complaint. The bank as a creditor had no other right than to exact payment. In the latter case. contending that Biscocho was an indispensable party and therefore should have been included as a co-plaintiff. The complaint was dismissed. QUIOMBING V CA CRUZ.Art 1158 of the Spanish CC states that payment can be made by any person. 1984. the liability is not contingent but absolute. On October 9. For the debtor to avail of this defense.00. Moreover. August 30. but without prejudice to the filing of an amended complaint to include the other solidary creditor as a co-plaintiff. ISSUE WON Madrid’s payment should be accepted HELD YES. Payments are to be paid in 10 years in annual installments. Ratio YES. They also claim that they only held Madrid’s payment as deposit pending proof of approval by Anduiza and that if Anduiza refused to approve. . Quiombing filed a complaint for recovery of the said amount. he impliedly acquiesced therin.363. He paid P10000 on Oct 23.On November 19. . where Biscocho was not mentioned at all. HELD 1. liability extends unconditionally to the entire amount stated in the obligation. Manuelita Saligo signed a promissory note for P1 25. May 14. he can recover only in so far as the payment was beneficial to him. but the CA reversed. in other words. whereby Nicencio Tan Quiombing and Dante Biscocho. Disposition Decision affirmed RFC V CA CONCEPCION.425.17. . . 1990 NATURE PETITION to review the decision of the Court of Appeals FACTS . he must oppose the payments before or at the time the same were made. as the 1st Party.Anduiza and Cano failed to pay the yearly amortizations that fall due on October 1942 and 1943.940.The trial court rendered in favor of RFC.1986.This case stemmed from a "Construction and Service Agreement"1 concluded on August 30. who temporarily lived in Anduiza’s house during the Japanese occupation. . 1951. Instead of filing an answer. which the private respondents had acknowledged and promised to pay but had not. but upon this point it is unnecessary to express an opinion. 1954 FACTS . where he argued that as a solidary creditor he could act by himself alone in the enforcement of his claim against the private respondents.17 has been paid.1984. The essence of active solidarity consists in the authority of each . A2010 page 73 Prof. for he joined Madrid in his appeal from the decision of the CFI. which the latter agreed to pay. Jesus Anduiza and Quintana Cano executed a promissory note binding themselves to jointly and severally pay the Agricultural and Industrial Bank P13800. payable on or before December 31. 1987. Quiombing and Manuelita Saligo entered into a second written agreement under which the latter acknowledged the completion of the house and undertook to pay the balance of the contract price in the manner prescribed in the said second agreement. the decision of the trial court denying appellant's petition and his motion for a new trial was correct and must be affirmed. 1944. makes a claim contingent within the meaning of said section.Two consequences flow from the foregoing: o Good or bad faith is immaterial to the issue.Alleging that Anduiza failed to pay.Similarly. plus charges and interests. the defendants moved to dismiss the complaint on February 4. Labitag . and condemning Anduiza to pay him P16. .RFC replied that the loan was not due and demandable in Oct 1944. 425.On October 31.Obligations and Contracts and the execution has to be postponed after judgment is obtained until the exhaustion of the assets of the person or entity primarily liable. Although Anduiza later on questioned such payments. Quiombing chose to appeal the order of dismissal to the respondent court. Disposition For the reasons stated. the receipts issued by the bank acknowledging said payments without qualification belie its alleged objection thereto.

payment should be made to him. it must be observed that the complaint having been filed by the petitioner. . would be a useless formality.On his argument that since the complaint against Naybe was dismissed.He also said that the promissory note should be declared bull and void also on the grounds that: o The promissory note was signed outside the premises of the bank o The loan was incurred only for the purpose of buying a chainsaw worth 5thousand.The stated points are factual. fraud must be established by clear and convincing evidence.RTC ordered Inciong to pay Phil. He affixed his signature thereto but in one copy. . but only mutual representation. much less a renunciation of rights. His liability resulted from the promissory note (P50. pursuant to Article 1214. There is a difference between a solidary codebtor. judicial or extrajudicial. payment of the judgment debt to the complainant will be considered payment to the other solidary creditor even if the latter was not a party to the suit. Disposition Petition granted.as a general rule.In his answer. notes and other instruments of a similar nature are not subject to be varied or contradicted by parol or extrinsic evidence . In the affidavit. which should be determined in the lower court not in this court . fraud and misrepresentation that he was made liable for the amount of P50.PBC sent telegrams demanding payment and a final letter demand through registered mail . who is a co-maker in the promissory note. While a guarantor may bind himself solidarily with the principal debtor. petitioner Inciong alleged that he was persuaded by Campos to act as a co-maker in the said loan in order to go into the falcate log operations business . he supports the allegation that they were induced to sign the promissory note on the belief that it was only for P5. 3. which disposed of Civil Case No. .The choice is left to the solidary creditor to determine against whom he will enforce collection. PBC filed a complaint for collection of the money against the 3 obligors. A2010 page 74 Prof.A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation. but not anything which may be prejudicial to the latter. The later. However. whatever amount is awarded against the debtor must be paid exclusively to him. has been made by any one of them. it was by trickery.Because the promissory note involved in this case expressly states that the three signatories therein are jointly and severally liable. Suing for the recovery of the contract price is certainly a useful act that Quiombing could do by himself alone.000) w/c he signed w/ Rene Naybe and Gregorio Pantanosas on Feb. but if any demand. any one. Biscocho may later claim his share thereof. Decision set aside.(Tolentino) explains: "A guarantor who binds himself in solidum with the principal debtor under the provisions of the second paragraph does not become a solidary co-debtor to all intents and purposes. . bills. retains all the other rights. but that decision is for him alone to make. Labitag . 1983 .The due date expired w/o the promissors having paid their obligation . petitioner was in the right direction towards proving that he agreed to a loan of P5k only.Petitioner alleged further that five (5) copies of a blank promissory note were brought to him by Campos at his office. and vice versa. 1983 holding themselves jointly and severally liable to private respondent PBC.Annexed to the present petition is a copy of an affidavit executed by Gregorio Pantanosas. Reasoning The question of who should sue the private respondents was a personal issue between Quiombing and Biscocho in which the spouses Saligo had no right to interfere. when Quiombing was competent to sue by himself alone. Each one of the solidary creditors may do whatever may be useful to the others. outside of the liability he assumes to pay the debt before the property of the principal debtor has been exhausted. Full satisfaction of a judgment obtained against them by Quiombing would discharge their obligation to Biscocho. 10507 for collection of a sum of money and damages FACTS . the liability of a guarantor is different from that of a solidary debtor . he indicated that he bound himself only for the amount of P5. Naybe was already in Saudi Arabia Petitioners' Claim .000. there is no merger. who have absolutely nothing to do with this matter. Mere preponderance of evidence is not adequate . Inclusion of Biscocho as a coplaintiff. Parenthetically.Since both obligors did not respond. that petitioner signed the promissory note as a solidary co-maker and not as a guarantor." If Quiombing eventually collects the amount due from the solidary debtors.00.Only the summon addressed to Inciong was served bec.By alleging fraud in his answer. June 26. It did not matter who as between them filed the complaint because the private respondents were liable to either of the two as a solidary creditor for the full amount of the debt. his should be dismissed as well: It is to be noted. Bank of Communications (PBC) P50. Thus. 1996 NATURE A petition for review on certiorari of the decision of the Court of Appeals affirming that of the Regional Trial Court of Misamis Oriental. even a new chain saw would cost only P27k o Petitioner and Pantanosas were not present during the time the loan was released ISSUE WON the promissory note should be declared null and void HELD No .000 w/ interest. Ratio . actions and benefits which pertain to him by INCIONG V COURT OF APPEALS ROMERO. with the resulting obligation of paying every one what belongs to him. however. and a fiador in solidum (surely). This provision states that "the debtor may pay any of the solidary creditors. The promissory note was due on May 5. some or all of them may be proceeded against for the entire obligation . It will affect only the petitioner as the other solidary creditor and not the private respondents.000.00. and each creditor is entitled to demand the whole obligation. As far as they are concerned.000.Obligations and Contracts creditor to claim and enforce the rights of all.

§21 of the 1964 Rules of Court which is now amended and reads: . Placido Alipio. 1987. §2 which states: “…When the marriage is dissolved by the death of the husband or wife. the claim must be made in the proceedings for the liquidation and settlement of the conjugal property.Obligations and Contracts reason of the fiansa.” . the community property shall be inventoried. 1990. she may be sued for the whole debt and it would be . Each of the four sublessees signed the contract. the presumption is that the obligation is joint so that each of the debtors is liable only for a proportionate part of the debt. The stipulated amount of rent was P485. .This ruling was reaffirmed in the recent case of Ventura v. Hermosa. in case of his death. for the remaining period of his lease.Petitioner filed a motion for reconsideration but it was also denied.600. express or implied. Manuel Co was also named defendant in the complaint… the remaining defendants cannot avoid the action by claiming that the death of one of the parties to the contract has totally extinguished their obligation”. it shall not be dismissed but shall instead be allowed to continue until entry of final judgment. if husband and wife bound themselves jointly and severally. does not apply where there are other defendants against whom the action should be maintained as mentioned in Climaco v. David. the court stated that “. 1988. In the alternative. title 1. or whether such claim must be filed in proceedings for the settlement of the estate of the decedent HELD NO.00 and P185. A2010 page 75 Prof. while a solidary co-debtor has no other rights than those bestowed upon him in Section 4.As held in Calma v. The proper action should be in the form of a claim to be filed in the testate or intestate proceedings of the deceased spouse. with the second installment falling due on June 30.when there are two or more debtors in one and the same obligation. the powers of administration of the surviving spouse ceases and is passed to the administrator appointed by the court having jurisdiction over the settlement of estate proceedings. the creditor may bring his action in toto against any of the debtors obligated in solidum. .5 hectare fishpond in Barito. an obligation entered into by the husband and wife is chargeable against ALIPIO V COURT OF APPEALS MENDOZA. after the death of either of the spouses. §21 which deals with dismissals of collection suits because of the death of the defendant during the pendency of the case and the subsequent procedure to be undertaken by the plaintiff. The lease was for a period of five years ending on September 12. their conjugal partnership was automatically dissolved[9] and debts chargeable against it are to be paid in the settlement of estate proceedings in accordance with Rule 73. Instead. .The rule that an action for recovery of money.” . Ratio We hold that a creditor cannot sue the surviving spouse of a decedent in an ordinary proceeding for the collection of a sum of money chargeable against the conjugal partnership and that the proper remedy is for him to file a claim in the settlement of estate of the decedent.When the action is for the recovery of money arising from contract.00. when the obligation is a solidary one.00. and the debts thereof paid.Petitioner's husband died on December 1. . 1988.000. Indeed. September 29. despite demand. CA also denied appeal stating: . On June 19. the surviving spouse is not even a de facto administrator such that conveyances made by him of any property belonging to the partnership prior to the liquidation of the mass of conjugal partnership property is void . file this case against petitioner. when the law so provides or when the nature of the obligation so requires. 2000 FACTS . Inc. debt or interest thereon must be dismissed when the defendant dies before final judgment in the regional trial court. had passed away on December 1. to the spouses Placido and Purita Alipio and the spouses Bienvenido and Remedios Manuel. Tañedo. Under the law and well settled jurisprudence.[2] She based her action on Rule 3.Trial court denied motion on the ground that since petitioner was herself a party to the sublease contract. Thus. hence this appeal. ISSUE WON a creditor can sue the surviving spouse for the collection of a debt which is owed by the conjugal partnership of gains. administered. Militante wherein it was stated that “the conjugal partnership terminates upon the death of either spouse. Chapter 3. .600. he subleased the fishpond. and liquidated. payable in two installments of P300. Book IV of the Civil Code. Siy Uy wherein the court stated that “the deceased Siy Uy was not the only defendant. 1989. . v. he prayed for the recission of the sublease contract should the defendants fail to pay the balance.The first installment was duly paid but only a portion of the second was paid leaving a balance of P50. and the defendant dies before entry of final judgment in the court in which the action was pending at the time of such death. . her liability is independent of and separate from her husband's. no complaint for the collection of indebtedness chargeable against the conjugal partnership can be brought against the surviving spouse. in the testate or intestate proceedings of the deceased spouse. . Labitag error to hold that the claim against her as well as the claim against her husband should be made in the decedent's estate. Where a complaint is brought against the surviving spouse for the recovery of an indebtedness chargeable against said conjugal [partnership]. she could be independently impleaded in the suit together with the Manuel spouses and that the death of her husband merely resulted in his exclusion from the case. This was also the case in Imperial Insurance. The issue to be resolved is whether private respondent can. any judgment obtained thereby is void. Under the law. Bataan. This case thus falls outside of the ambit of Rule 3. 1989.It must be noted that for marriages governed by the rules of conjugal partnership of gains. the Alipios' obligation (and also that of the Manuels) is one which is chargeable against their conjugal partnership.600. When petitioner's husband died.” Furthermore. A favorable judgment obtained by the plaintiff therein shall be enforced in the manner especially provided in these Rules for prosecuting claims against the estate of a deceased person. In the said case.Respondent Romeo Jaring[1] was the lessee of a 14. in the first place. the Court said that the cases cited by the CA were based on facts different from the case at hand. more than ten months before private respondent filed the collection suit in the trial court on October 13. Purita Alipio on the other hand moved to dismiss the case on the ground that her husband. Mabuco. the balance remained unpaid thus Jaring sued for the collection of such amount. There is a solidarily liability only when the obligation expressly so states. The reason for this is that upon the death of one spouse.

Obligations and Contracts
their conjugal partnership and it is the partnership which is primarily bound for its repayment. Thus, when the spouses are sued for the enforcement of an obligation entered into by them, they are being impleaded in their capacity as representatives of the conjugal partnership and not as independent debtors such that the concept of joint or solidary liability, as between them, does not apply Disposition complaint against petitioner is dismissed without prejudice to the filing of a claim by private respondent in the proceedings for the settlement of estate of Placido Alipio for the collection of the share of the Alipio spouses in the unpaid balance of the rent in the amount of P25,300.00.”

A2010 page 76 Prof. Labitag
- March 28, 1963 - CFI sentenced EIC to pay the MDC P1,500, with interest at 12% from the time of filing of the complaint until the amount was fully paid, and to pay attorney's fees of P500, and the proportionate part of the costs and EIC is to be reimbursed by Andal. MDC appealed directly to SC. ISSUES 1. WON the reduction in liability for breach in the undertaking is valid 2. WON partial performance by Carlos can be considered partial performance by Andal HELD 1. YES - CFI noted that reducing liability from P12,000 (as stipulated in the bond) to P1,500 that > While no building has actually been constructed before the target date which is March 31, 1961, it is also a fact that even before that date the entire area was already fenced with a stone wall and building materials were also stocked in the premises which are clear indicia of the owner's desire to construct his house with the least possible delay > incontrovertible testimony of Juan Carlos is that by the end of April 1961, he had finished very much more than the required 50% stipulated in the contract of sale TF there was only really a little delay - MDC argues that Andal became liable for full amount of his bond upon his failure to build a house within the two-year period and that the trial court was without authority to reduce Andal's liability on the basis of Carlos' construction of a house a month after the stipulated period because there was no privity of contract between Carlos and the Makati Development Corporation. But, to begin with, the so-called "special condition" in the deed of sale is in reality an obligation — to build a house at least 50% of which must be finished within 2 years, inserting a penal clause to secure the performance of this obligation. - While in obligations with a penal sanction the penalty takes the place of damages and the payment of interest in case of non-compliance and that the obligee is entitled to recover upon the breach of the obligation without the need of proving damages, it is true that a mitigation of the obligor's liability is allowed under A1229 CC: The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. - General Ins. & Surety Corp. vs. Republic cannot be invoked for the forfeiture of the full amount of the bond because unlike this case there was in that case no performance at all of any part of the obligation to secure the payment of salaries to teachers - Partial performance or irregular compliance with the provisions in a contract for special indemnification in the event of failure to comply with its terms, courts will rigidly apply the doctrine of strict construction against the enforcement in its entirety of the indemnification, where it is clear from the contract that the amount or character of the indemnity is fixed without regard to the probable damages which might be anticipated as a result of a breach of the terms of the contract, or, in other words, where the indemnity provided for is essentially a mere penalty having for its object the enforcement of compliance with the contract

MAKATI DEVELOPMENT CORP. V EMPIRE INSURANCE CO. CASTRO; June 30, 1967
NATURE Appeal from CFI Rizal FACTS - March 31, 1959, the Makati Development Corporation sold to Rodolfo P. Andal a lot, with an area of 1,589 square meters, in the Urdaneta Village, Makati, Rizal, for P55,615 - so-called "special condition" contained in the deed of sale provides that > vendee/s shall commence the construction and complete at least 50% of residence on the property within two (2) years from March 31, 1959 to the satisfaction of the vendor > in the event of failure to do so, the bond which the vendee/s has delivered to the vendor in the sum of P11,123.00 and evidenced by a cash bond receipt dated April 10, 1959 will be forfeited in favor of the vendor by the mere fact of failure of the vendee/s to comply with this special condition > to insure faithful compliance with this "condition," Andal gave a surety bond on April 10, 1959 wherein he, as principal, and the Empire Insurance Company, as surety, jointly and severally, undertook to pay the MDC the sum of P12,000 in case Andal failed to comply with his obligation under the deed of sale - January 18, 1960 - Andal did not build his house and instead sold the lot to Juan Carlos - April 3, 1961 - neither Andal nor Juan Carlos built a house on the lot within the stipulated period, the MDC, three days after the lapse of the two-year period, sent a notice of claim to the EIC advising Andal's failure to comply with his undertaking. - May 22, 1961 - Demand for the payment of P12,000 was refused and MDC filed a complaint in CFI Rizal against the Empire Insurance Co. to recover on the bond in the full amount, plus attorney's fees - EIC filed answer with a third-party complaint against Andal and asked that the complaint be dismissed or, in the event of a judgment in favor of the MDC, judgment be rendered ordering Andal to pay the EIC whatever amount it maybe ordered to pay the MDC plus interest at 12%, from the date of the filing of the complaint until said amount was fully reimbursed and attorney's fees. - Andal admitted the execution of the bond but alleged that the "special condition" was contrary to law, morals and public policy. Also, Juan Carlos had started construction of a house on the lot.

Obligations and Contracts
- penal clause in this case was inserted not to indemnify MDC for any damage it might suffer as a result of a breach of the contract but rather to compel performance of the so-called "special condition" and thus encourage home building among lot owners in the Urdaneta Village 2. YES - In Insular Gov't. vs. Amechazurra where SC allowed mitigation of liability even if recovery of the firearms was made possible through the efforts of third parties (the Constabulary) Disposition Decision appealed from is affirmed

A2010 page 77 Prof. Labitag
Trial Court’s Ruling (1) gave little weight to the petitioner’s contention that the loan was merely for the accommodation of Wilson Lucmen for the reason that the defense propounded was not credible in itself. (2) assuming, that the petitioner did not personally benefit from the said loan, he should have filed a third party complaint against Wilson Lucmen, but he did not. (3) in fact, Tan offered to settle his loan obligation with respondent CCP thrice. (4) he may not avoid his liability to pay his obligation under the promissory note, which he must comply with in good faith pursuant to Article 1159 of the New Civil Code. (5) he is estopped from denying his liability or loan obligation to the private respondent. CA’s Ruling - His liability cannot be modified on account of partial or irregular performance because there is none. His offer or tender of payment cannot be deemed as a partial or irregular performance of the contract, not a single centavo appears to have been paid by the defendant. Petitioners' Claim - If penalty is to be awarded, he is asking for the non-imposition of interest on the surcharges because the compounding of interest on surcharges is not provided in the promissory note. HE also contests the computation whereby the interest, surcharge and the principal were added together and that on the total sum interest was imposed. - There is no basis in law for the charging of interest on the surcharges for the reason that the New Civil Code is devoid of any provision allowing the imposition of interest on surcharges. - His obligation to pay the interest and surcharge should have been suspended because this obligation has become conditional, which consists of whether the petitioner’s request for condonation of interest and surcharge would be recommended by the Commission on Audit and the Office of the President to the House of Representatives for approval. Since the condition has not happened due to respondent’s reneging on its promise, his liability to pay the interest and surcharge on the loan has not arisen. ISSUES 1. WON there are contractual and legal bases for the imposition of the penalty 2. WON interest may accrue on the penalty or compensatory interest without violating Art. 19591 of NCC 3. WON the penalty should be reduced pursuant to Art. 12292 4. WON imposition of interest should be suspended for the period of time that respondent failed to assist petitioner in applying for relief of liability through COA and Office of the President 5. WON CA erred in not deleting award of attorney’s fees and in reducing penalties HELD 1. YES
1

TAN V COURT OF APPEALS DE LEON, JR; October 19, 2001
NATURE Petition for review on certiorari of a decision of the CA FACTS - On May 14, 1978 and July 6, 1978, petitioner Antonio TAN obtained two (2) loans from respondent Cultural Center of the Philippines (CCP), each in the principal amount of Two Million Pesos. This is evidenced by 2 promissory notes with maturity dates on May 14, 1979 and July 6, 1979. - TAN defaulted but after a few partial payments, he had the loans restructured by CCP. TAN executed a promissory note on Aug 31, 1979 in the amount of P3,411,421.32 payable in 5 installments. He failed to pay any installment, the last one falling due on December 31, 1980. - In a letter dated Jan 26, 1982, petitioner requested and proposed to CCP a mode of paying the restructured loan, i.e., (a) 20% of the principal amount of the loan upon CCP’s conformity to the proposal; and (b) the balance on the principal obligation payable in 36 equal monthly installments until fully paid. - Oct 20, 1983 – TAN again sent a letter to CCP requesting for a moratorium on his loan obligation until the following year allegedly due to a substantial deduction in the volume of his business and on account of the peso devaluation. No favorable response was made to these letters. - Instead, CCP wrote TAN a letter dated May 30, 1984 demanding full payment of the petitioner’s restructured loan (as of April 30, 1984 amounted to P6,088,735.03 within 10 days from receipt of the letter. - Aug 29, 1984 – CCP filed in the RTC of Manila a complaint for collection of a sum of money. TAN interposed the defense that he merely accommodated a friend, Wilson Lucmen, who allegedly asked for his help to obtain a loan from CCP and he has not been able to locate Lucmen. While the case was pending in the trial court, the petitioner filed a Manifestation wherein he proposed to settle his indebtedness to respondent CCP by proposing to make a down payment of P140,000.00 and to issue 12 checks every beginning of the year to cover installment payments for one year, and every year thereafter until the balance is fully paid. However, respondent CCP did not agree to the petitioner’s proposals and so the trial of the case ensued. - On May 8, 1991, the trial court ruled against Tan, ordering him to pay CCP the amount of P7,996,314.67, representing his outstanding account as of August 28, 1986, with the corresponding stipulated interest and charges, until fully paid, plus attorney’s fees in an amount equivalent to 25% of said outstanding account, plus P50,000.00, as exemplary damages.

Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest. However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal, shall earn new interest.
2

Art. 1229: “The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may be also be reduced by the courts if it is iniquitous or unconscionable.”

Obligations and Contracts
Article 1226 of the New Civil Code provides that: “In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code.” Reasoning The promissory note expressly provides for the imposition of both interest and penalties in case of default on the part of the petitioner in the payment of the restructured loan. - The stipulated 14% per annum interest charge until full payment of the loan constitutes the monetary interest on the note and is allowed under Article 1956 of the New Civil Code. The stipulated 2% per month penalty is in the form of penalty charge which is separate and distinct from the monetary interest on the principal. - The penalty charge of two percent (2%) per month in the case at bar began to accrue from the time of default by the petitioner. The penalty charge is also called penalty or compensatory interest. 2. YES Since penalty clauses can be in the form of penalty or compensatory interest, the compounding of the penalty or compensatory interest is allowed pursuant to Art. 1959. Reasoning First, there is an express stipulation in the promissory note permitting the compounding of interest. Second, Article 2212 of the NCC provides that “Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.” In this case, interest began to run on the penalty interest upon the filing of the complaint in court. 3. YES - The continued monthly accrual of the 2% penalty charge on the total amount due is “unconscionable” inasmuch as it is compounded monthly. (But it shall not be reduced to 10% of the unpaid balance as the petitioner contends) Reasoning Considering petitioner’s several partial payments and the fact he is liable under the note for 21 years since his default in 1980, it is equitable to reduce the penalty charge to a straight 12% per annum on the total amount due starting Aug 28, 1986 (the date of the last Statement of Account) - Also considered were petitioner’s offers to enter into a compromise for the settlement of his debt by presenting proposed payment schemes to CCP. This showed his good faith despite difficulty in complying with his loan obligation due to his financial problems. 4. NO Reasoning It was the primary responsibility of petitioner to inform the Commission on Audit and the Office of the President of his application for condonation of interest and surcharge. - Also, the letter dated Sept 28, 1988 alleged to have been sent by the CCP to the petitioner is not part of the formally offered documentary evidence of either party in the trial court. It also does not contain any categorical agreement on the part of respondent CCP that the payment of the interest and surcharge on the loan is deemed suspended while his appeal for condonation of the interest and surcharge was being processed. 5. NO

A2010 page 78 Prof. Labitag
- The appellate court ruled correctly and justly in reducing the trial court’s award of twenty-five percent (25%) attorney’s fees to five percent (5%) of the total amount due. Disposition Decision appealed from is AFFIRMED with MODIFICATION in that the penalty charge of two percent (2%) per month on the total amount due, compounded monthly, is hereby reduced to a straight twelve percent (12%) per annum starting from August 28, 1986.

COUNTRY BANKERS INSURANCE V CA MEDIALDEA; September 9, 1991
NATURE Petition for certiorari to review the decision of the Court of Appeals. FACTS - The CA affirmed the RTC’s decision, to wit: “WHEREFORE, THE COMPLAINT OF THE PLAINTIFF Enrique F. Sy is dismissed, and on the counterclaim of the defendant O. Ventanilla Enterprises Corporation, judgment is hereby rendered: ‘1. Declaring as lawful, the cancellation and termination of the Lease Agreement (Exh. A) and the defendant’s re-entry and repossession of the Avenue, Broadway and Capitol theaters under lease on February 11, 1980; ‘2. Declaring as lawful, the forfeiture clause under paragraph 12 of the said Lease Agreement, and confirming the forfeiture of the plaintiff’s remaining cash deposit of P290,000.00 in favor of the defendant thereunder, as of February 11, 1980; ‘3. Ordering the plaintiff to pay the defendant the sum of P289,534.78, representing arrears in rentals, unremitted amounts for amusement tax delinquency and accrued interest thereon, with further interest on said amounts at the rate of 12% per annum (per lease agreement) from December 1, 1980 until the same is fully paid; ‘4. Ordering the plaintiff to pay the defendant the amount of P100,000.00, representing the P10,000 portion of the monthly lease rental which were not deducted from the cash deposit of the plaintiff from February to November, 1980, with interest thereon at the rate of 12% per annum on each of the said monthly amounts of P10,000.00 from the time the same became due until it is paid; ‘5. Ordering the plaintiff to pay the defendant through the injunction bond, the sum of P100,000.00, representing the P10,000.00 monthly increase in rentals which the defendant failed to realize from February to November 1980 resulting from the injunction, with legal interest thereon from the finality of this decision until fully paid; ‘6. Ordering the plaintiff to pay the defendant the sum equivalent to ten per centum (10%) of the above-mentioned amounts of P289,534.78, P100,000.00 and P100,000.00, as and for attorney’s fees; and ‘7. Ordering the plaintiff to pay the costs.’” -Respondent Oscar Ventanilla Enterprises Corporation (OVEC), as lessor, and the petitioner Enrique F. Sy, as lessee entered into a lease agreement over the Avenue, Broadway and Capitol Theaters and the land on which they are situated in Cabanatuan City. The term of the lease was for six years from June 13, 1977 to June 12, 1983. After more than two years of operation of the theaters, the lessor OVEC

1977 and the balance on December 13. . Los Baños..000 a day because of his failure to go thru the contracts with movie and booking companies for the showing of movies.000. and consultation and advice during construction relative to the work. (f)Aurelia's Building at Mabina. dated February 10. good customs. and P31.000. A. Luz and Associates. Rizal. A2010 page 79 Prof. Manila.000. 1980 in pursuance with their lease contract and their supplemental letter-agreement. Sy regained possession of the theaters. (d)Menzi Building at Ayala Blvd. The services included design computation and sketches. (c)General Milling Corporation Flour Mill at Opon. appellee rendered engineering services to appellant in the following projects: (a)Fil-American Life Insurance Building at Legaspi City.Obligations and Contracts made demands for the repossession of the said leased properties in view of Sy’s arrears in monthly rentals and non-payment of amusement taxes.000. 1980 were sent to Sy demanding payment of the arrears in rentals and amusement tax delinquency. Manila.Sy filed the present action for reformation of the lease agreement.On November 17.000.000 per month in additional rental during the ten months of injunction period. Manila. . public order or policy. ISSUE WON respondent is unjustly enriched at the expense of petitioners HELD NO. Makati. Quezon City) in its Civil Case No. (h)Arthur Young's residence at Forbes Park. P300.00 for electrical cost of OVEC’s “illegal connection” in the Capitol theater.Finally. the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance. Sy suffered damages at the rate of P5. Hence. a licensed architect. OVEC took possession thereof in the morning of February 11. . .Sy alleged that the amount of deposit—P600. . OVEC had the three theaters padlocked with the use of force. In the case at bar.00 supposed damage suffered by OVEC from opportunity cost. Research Center. . the penalty cannot substitute for the P100.In pursuance to their latter agreement. Pursuant to said agreement. of the Court of First Instance of Rizal (Branch V. bill of quantities and cost estimate. whereby the former was to render engineering design services to the latter for fees. a licensed civil engineer doing business under the firm name of O.A. JULY 31.000. letters of demand dated January 7. Ermita. Sy reduced his arrears in rental. Disposition ACCORDINGLY. Q-6561 FACTS . The latter demand was with the warning that OVEC will repossess the theaters on February 11. doing business under the firm name of AJ. 1988 and the resolution dated September 21.Sy sought to recover from OVEC the sums of P100. 1970 NATURE Appeal from the decision. Respondents' Counterclaim . Petitioners' Claim . 1979. entered into an agreement with appellant Luz. P48. 1980 and February 3. OVRC became authorized to enter and possess the theaters as well as to terminate said agreement so the balance of deposits given by Sy had thus become forfeited.00 of which was to be paid on June 13. 1988. in obligations with a penal clause.00 for every month that the possession and operation of the theaters remain with Sy. 1980. It represents the P10. On August 8.00.00 for repairs in the Broadway theater. 1959. Sy prayed for the issuance of a restraining order/ preliminary injunction to enjoin OVEC from entering and taking possession of the theaters upon Sy’s filing of a P500. and . Consequently.OVEC would be losing P50.It is also alleged that on February 11. Kalalo and Associates. However. (g)Far East Bank's Office at Fil-American Life Insurance Building at Isaac Peral. there are exceptions: 1) when there is a stipulation to the contrary 2) when the obligor is sued fro refusal to pay the agreed penalty 3) when the obligor is guilty of fraud Reasoning The forfeiture clause in the lease agreement would not unjustly enrich OVEC at expense of Sy and CBISCO—contrary to law. appellee Kalalo. Laguna. finding no merit in the grounds relied upon by petitioners in their petition. contract drawing and technical specifications of all engineering phases of the project designed by O. 1980 followed by an order to issue a writ of preliminary injunction.00 despite the fact that Sy had been deducting amounts from his monthly rental with the obligation to remit said deductions to the city government. And by virtue of a restraining order dated February 12. However. (i) L & S Building at Dewey Blvd. Cebu. .00 for attorney’s fees. A penal clause is an accessory obligation which the parties attach to a principal obligation for the purpose of insuring the performance thereof by imposing on the debtor a special prestation (generally consisting in the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled. Rizal. KALALO V LUZ ZALDIVAR.000. damages and injunction.000. Thus. (b)Fil-American Life Insurance Building at Iloilo City.By reason of Sy’s violation of the lease agreement. morals. and as aresult.. he was allowed to continue operating the leased premises upon his conformity to certain conditions imposed by the latter in a supplemental agreement dated August 13. 1977— was too big. as stipulated in the agreement.OVEC incurred P500.000.00 for electrical cost of OVEC’s “illegal connection” in the Broadway theater and for damages suffered by SY as a result of each connection. Ernita. the same is hereby DENIED and the decision dated June 15. 1979. Labitag Ratio As a general rule. Kalalo and Associates. Makati. both of the respondent Court of Appeals are AFFIRMED. (e)International Rice Research Institute.00 bond supplied by Country Bankers Insurance Corporation (CBISCO). 1990.00 as agreed upon. But notwithstanding the said demands and warnings Sy failed to pay the abovementioned amounts in full. OVEC and Sy had a conference and by reason of Sy’s request for reconsideration. the accrued amusement liability tax had accumulated to 84. it must be applied against the injunction bond. 1967. and OVEC assured him that said forfeiture will not come to pass.

the indemnity to be allowed should be expressed in Philippine currency at the rate of exchange at the time of judgment rather than at the rate of exchange prevailing on the date of defendant's breach. Manila.000. INC.) and P100. and if not. 1967 on the ground that the appeal involves purely questions of law.29.000.00 as moral damages. where this Court held that even if the obligation assumed by the defendant was to pay the plaintiff a sum of money expressed in American currency.000. Inc. and also for attorney's fees and expenses of litigation. . Philippines.204.Aug 7. admissions and/or silence.Inasmuch as the pleadings showed that the appellee's right to certain fees for services rendered was not denied. of New York.323.000 (U.00 at the free market rate of exchange at the time of payment.000. in the third cause of action he claimed P55. upon agreement of the parties. Bataan. and for attorney's fees of P10. attorney's fees and expenses of litigation.) as his fee in the International Research Institute Project which was 20% of the $140. 1960. The Commissioner rendered a report which. states that the amount due to appellee was $28. Inc. or after the enactment of RA No. 529 which requires payment at the prevailing rate of exchange when the obligation was incurred cannot be applied. Inc. 1976 NATURE Certified by CA in its Resolution of May 8.On August 10. .000. as shipper. V MACONDRAY & CO.. In the first cause of action.00 that was paid to appellant. which were consigned to Winthrop-Stearns. that appellee's claim regarding the Menzi project was premature because appellant had not yet been paid for said project. and in the fourth cause of action he claimed P25.00.In his answer. the only question being the assessment of the proper fees and the balance due to appellee after deducting the admitted payments made by appellant. accrued on August 25. Appellant also set up a counterclaim for actual and moral damages for such amount as the court may deem fair to assess. the latter to be converted into the Philippine currency on the basis of the current rate of exchange at the time of the payment of this judgment. Payment in dollars is prohibited by Republic Act (RA) No.Barber Steamship Lines. .00. . Appellant set up affirmative and special defenses. but averred that some of appellee's services were not in accordance with the agreement and appellee's claims were not justified by the services actually rendered.00.25.08. thus leaving a balance of only P10. appellee alleged that for services rendered in connection with the different projects therein mentioned there was due him fees in sums consisting of $28.000. 1962 appellant sent appellee a check for said amount.000.00. 1950.21 had been paid.Obligations and Contracts (j)Stanvac Refinery Service Building at Limay.00 to be converted into the Philippine currency on the basis of the current rate of exchange at the time of payment of this judgment. alleging that appellee had no cause of action. as alleged in the first cause of action. RA No. containing four causes of action. In the case now before Us the obligation of appellant to pay appellee the 20% of $140. ST. OC173766 dated June 23.000. less the sum of P69. and that appellee's services were not complete or were performed in violation of the agreement and/or otherwise unsatisfactory. The logical conclusion.00. RA No. with arrival notice in Manila to consignee Winthrop-Stearns.08 instead of the amount claimed by the appellee. SS "Tai Ping" arrived at the Port of Manila and discharged its . shipped aboard the SS "Tai Ping". PAUL FIRE & MARINE INSURANCE CO. is that the rate of exchange should be that prevailing at the time of payment.565. . 1962.539. 529. Paul Fire & Marine Insurance Company under its insurance Special Policy No. therefore. as certified to by the Central Bank of the Philippines. and P51. excluding interests. A2010 page 80 Prof. as certified to by the Central Bank of the Philippines.46.On December 11. Philippines. agent of Wilhelmsen.00 and the balance of P30.91 and $28. of which sums only P69. of which P69. thus leaving unpaid the $28. third and fourth causes of action. appellee filed a complaint against appellant. 1960 ..475. according to appellant. representations.861. Inc.000.21 had already been paid. Said fees. 1962 appellant sent appellee a resume of fees due to the latter. Velasco & Co. Appellant denied liability for any damage claimed by appellee to have suffered. In the second cause of action. according to which the total engineering fee asked by appellee for services rendered amounted to P116. 529 does not provide for the rate of exchange for the payment of obligation incurred after the enactment of said Act.00. authorized the case to be heard before a Commissioner. On June 14. The trial court did not err when it held that herein appellant should pay appellee $28.46 which was already paid by the appellant. and that the aggregate amount actually due to appellee was only P80.00 (U. 34. ANTONIO. that appellee was in estoppel because of certain acts. March 25. On May 18. owned and operated by Wilhelm Wilhelmsen. . It follows that the provision of RA No. thus leaving a balance due in the amount of P59.539.S. amounted to P10.S. 218 cartons and drums of drugs and medicine. appellant should pay the appellee the equivalent in pesos of the $28. in resume.861. as alleged in the second.. appellee claimed P17. Inc. the trial court. Winthrop Products.000.The shipment was insured by the shipper against loss and/or damage with the St. 529 which provides that if the obligation was incurred prior to the enactment of the Act and require payment in a particular kind of coin or currency other than the Philippine currency the same shall be discharged in Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred... Manila.565.475.June 29. in the name of Winthrop Products.00 from which sum was to be deducted the previous payments made in the amount of P57. which led appellant to believe certain facts to exist and to act upon said facts.00 as actual damages. Labitag ISSUE WON payment of the amount due to the appellee in dollars is legally permissible. 1961. 529 was enacted on June 16. issued Bill of Lading No. or the sum of $28. The trial court ruled in favor of Kalalo by ordering Luz to pay him the sum of P51. 1961. appellee sent to appellant a statement of account to which was attached an itemized statement of defendant-appellant's account.000. FACTS . appellant admitted that appellee rendered engineering services.336. Disposition Therefore.881.00 as consequential and moral damages. with the freight prepaid. 1960. at what rate of exchange it should be paid in pesos HELD NO. This view finds support in the ruling of this Court in the case of Engel vs. which appellee refused to accept as full payment of the balance of the fees due him.000.91 for the other projects.000.

and (b) has been fairly and freely agreed upon. value of the goods which were lost or damaged 2. as subrogee of the rights of the shipper and/or consignee.I. as insurer.I. a suit by the insurer as subrogee necessarily is subject to like limitations and restrictions. 28993 of the Register of Deeds of Quezon City Prior to the alleged sale. 2.134. and that the exchange rate on the date of the judgment.14 and P653. Inc. Inc. The obligation of the carrier to pay for the damage commenced on the date it failed to deliver the shipment in good condition to the consignee. . herein private respondents A. the said property. . 1960 is $226. should have been applied by the lower court.) claim against the carrier (Macondray & Co.67 representing the C.F.Aug 5. Plaintiff’s Claims . located at corner Retiro and Cadiz Streets. through respondent Valencia. and Wilhelm Wilhelmsen to pay to the plaintiff.Consignee filed its claim with the insurer. Defendants’ Comments . The trial court committed no error in adopting the aforesaid rate of exchange.They countered that their liability is limited to the C. and covered by Transfer Certificate of Title No.53. the obligation of the defendantsappellees was established as of the date of discharge. had been mortgaged by her to the Associated Banking Corporation After the alleged sale.I. The C. is untenable. plus costs. This limitation of the carrier's liability is sanctioned by the freedom of the contracting parties to establish such stipulations.00. it should be reimbursed for its dollar payments at the rate of exchange on the date of the judgment and not on the date of the loss or damage. petitioner Myron C. together with several other parcels of land likewise owned by Angela M. value of the damaged drum and cartons of medicine with the carrier and the Manila Port Service. The insurance company paid to consignee the insured value of the lost and damaged goods. Angela M. which were in bad order condition.46. but before the title to the subject property had been released. including other expenses in connection therewith. Since the right of the assured. value of the goods.The plaintiff-appellant..U. hence the rate of exchange should be based on the rate existing on that date.. 1965. acting as attorney-in-fact of Angela M.F. Butte.The purpose of the bill of lading is to provide for the rights and liabilities of the parties in reference to the contract to carry. after paying the claim of the insured for damages under the insurance. Stearns.. The peso equivalent was based by the consignee on the exchange rate of P2. instituted with the CFI Manila the present action against the defendants for the recovery of $1.015 to $1. Inc. As subrogee. Butte. in Philippine Currency. defendants appellees are not insurers of the goods and as such they should not be made to pay the insured value. the costs to be borne by all the said defendants.00. Manila value of the goods which were lost or damaged. terms. Paul Fire & Marine Insurance Co. is valid and binding. Labitag . The shipment was complete and in good order with the exception of one (1) drum and several cartons. jointly and severally. it can recover only the amount that is recoverable by the latter. the liability of the carrier to the consignee is limited to the C.37 and $324. Papa. 1960. In this case.67 representing the C. is subrogated merely to the rights of the assured.I. ISSUES 1. Inc. morals. Whether the insurer who has paid the claim in dollars to the consignee should be reimbursed in its peso equivalent on the date of discharge of the cargo or on the date of the decision HELD 1. The stipulation in the bill of lading limiting the common carrier's liability to the value of the goods appearing in the bill. respectively.Plaintiff-appellant argues that. with legal interest from the filing of the complaint until fully paid. good customs and public policy.109. La Loma. . unless the shipper or owner declares a greater value. in the total amount of $1. with legal interest thereon from the filing of the complaint until fully paid. according to the claim of the consignee dated September 26. August 7. it should be entitled to recover from defendants-appellees the amount of $1. YES A2010 page 81 Prof. provided it is (a) reasonable and just under the circumstances. or conditions as they may deem convenient.00 which was the rate existing at that time. A stipulation fixing or limiting the sum that may be recovered from the carrier on the loss or deterioration of the goods is valid. 1965 lower court rendered judgment ordering defendants Macondray & Co. Inc. Wilhelm Wilhelmsen) and the arrastre operators (Manila Port Service and Manila Railroad Company) was only for the sum of 1. St. 1998 FACTS In June 1982.I. value of the goods as per contract of sea carriage embodied in the bill of lading.67. jointly and severally. . pursuant to contract of sea carriage embodied in the bill of lading. Barber Steamship Lines. clauses. P809. Barber Steamship Lines. Quezon City. P300.. St. in case of loss or damage to the goods.134.3 or P456.Mar 10.90 for every US$1. filed a complaint for specific performance against herein petitioner Myron C. in his capacity as administrator of the Testate Estate of one Angela M. and Felix Peñarroyo. Paul Fire & Marine Insurance Co.F.F.134. value of the loss and damage sustained by the shipment which was the amount awarded by the lower court to the plaintiffappellant.. Inc. Valencia and Co.Obligations and Contracts shipment into the custody of Manila Port Service. and not the value of the currency at the time the lower court rendered its decision on March 10. the liabilities of the defendants-appellees with respect to the lost or damaged shipments are expressly limited to the C.46 which it actually paid to the consignee and which represents the value of the lost and damaged shipment as well as other legitimate expenses such as the duties and cost of survey of said shipment. 1961. with costs against the plaintiffappellant.F. which was P3. sold to respondent Peñarroyo.Consignee filed the corresponding claim in the amount of P1. Butte The complaint alleged that on 15 June 1973. as subrogee of the consignee. consisting of 286. is limited or restricted by the provisions in the bill of lading.. Papa.F.I. . and defendants Manila Railroad Company and Manila Port Service to pay to plaintiff. that the consignee's (Winthro. both refused to pay such claim. However. Butte passed away .60 square meters. Disposition Appealed decision is affirmed. a parcel of land.e. The contention of the plaintiff-appellant that because of extraordinary inflation. PAPA V VALENCIA KAPUNAN.109. i.46. WON in case of loss or damage. provided they are not contrary to law.

Should this not be possible. At the trial. Jr. and therefore. Jr." On petitioner's claim that he cannot be held personally liable as he had acted merely as attorney-in-fact of the owner. Parpana (now deceased). He maintained that what said respondents had actually paid was only the amount of P5. likewise. Butte and should have been filed in Special Proceedings No.00 for and as attorney's fees and litigation expenses. in fact. especially since the payment by check was not denied by defendantappellant (herein petitioner) who. likewise. the trial court rendered a decision: 1. in his Answer.000. that the case amounted to a claim against the Estate of Angela M. however. herein private respondent Delfin Jao was allowed to intervene in the case For his part. affirming with modification the trial court's decision In affirming the trial court's decision. inscribed on 18 January 1977 The complaint further alleged that it was only upon the release of the title to the property.. said defendant is ordered to pay to plaintiff Felix Peñarroyo the sum of P45. Ordering defendant to pay plaintiffs the amount of P5. 3. appealed the above decision. Butte.00) given by respondents Valencia and Peñarroyo in payment of the full purchase price of the subject lot. and that. alleging among others that the sale was never "consummated" as he did not encash the check (in the amount of P40. the presumption is that the check was encashed. PE. Ordering defendant to execute a Deed of Absolute Sale in favor of plaintiff Felix Peñarroyo covering the property in question and to deliver peaceful A2010 page 82 Prof. Butte Finally. . ISSUES 1.000. He contends that such .00 plus legal interest of 12% from August 23.500. Respondent Reyes spouses. respondent Peñarroyo caused the annotation on the title of an adverse claim as evidenced by Entry No.00. Butte. Labitag possession and enjoyment of the said property to the said plaintiff. herein petitioner had been collecting monthly rentals in the amount of P800. Allowing defendant to redeem from third-party defendants and ordering the latter to allow the former to redeem the property in question. 1980 2. 1973 4. that the complaint did not state a cause of action. 1973 3. . plaintiff Felix Peñarroyo is ordered to pay intervenor the sum of P5. as special administrator of the Estate of Ramon Papa. are indispensable parties HELD 1. respondents Valencia and Peñarroyo filed a complaint for specific performance In his Answer.. Upon his motion. upon the latter's payment to the former of the balance of the purchase price of P71. spouses Arsenio B. sometime in April 1977. According to respondent court. if as alleged in the complaint. 28993 in his possession. the bank refused to release it unless and until all the mortgaged properties of the late Angela M.000. for which respondents should be held liable. that the real property in interest was the Testate Estate of Angela M.000. the Court of Appeals rendered a decision. which motion was denied by respondent Court of Appeals. free from any liens and encumbrances. Butte and the estate of Ramon Papa. WON the decision of the CA cancelled the assignment of the subject property rights in favor of the estate of Ramon Papa. for any reason not attributable to defendant. knowing that said property had already been sold to private respondents on 15 June 1973 Despite repeated demands from said respondents.00 plus legal interest of 12% thereon from January 2.00 and issued receipts therefor. All the other parties only submitted documentary proof.000.00 from the tenants of the property. respondent Peñarroyo testified in court that petitioner Papa had received the amount of P45.000. claimed that he could not recall in detail the transaction which allegedly occurred in 1973. Ordering plaintiff Felix Peñarroyo to execute and deliver to intervenor a deed of absolute sale over the same property. On 29 June 1987. Jr. their appeal was dismissed because of failure to file their appellants' brief On 27 January 1992. by paying the sum of P14. Parpana. respondent court held that such contention is without merit Petitioner filed a motion for reconsideration of the above decision. Butte. there was no evidence at all that petitioner did not. that he could not be held personally liable as he signed the deed merely as attorney-in-fact of said Angela M. He contended. Jr. Should this not be possible. that he did not have TCT No.000. WON the sale in question was consummated 2. petitioner refused and failed to deliver the title to the property Thereupon. the sale was not consummated. filed a third-party complaint against herein private respondents. respondent court held that contrary to petitioner's claim that he did not encash the aforesaid check. On the other hand. that respondents Valencia and Peñarroyo discovered that the mortgage rights of the bank had been assigned to one Tomas L.Petitioner argues that respondent Court of Appeals erred in concluding that the alleged sale of the subject property had been consummated.6118/T-28993. YES.Obligations and Contracts Despite representations made by herein respondents to the bank to release the title to the property sold to respondent Peñarroyo.000. WON the estate of Angela M.00 (in cash) as earnest money. which should have been joined as a party defendant. merely alleged that he "can no longer recall the transaction which is supposed to have happened 10 years ago. A-17910 before the Probate Court in Quezon City. Angela M. the property had been assigned to Tomas L. encash said check. as special administrator of the Estate of Ramon Papa. as administrator of the Testate Estate of Angela M. said estate should be impleaded Petitioner. Reyes and Amanda Santos Respondent Reyes spouses in their Answer raised the defense of prescription of petitioner's right to redeem the property. petitioner. on 12 April 1977 That since then. However. Butte were also redeemed In order to protect his rights and interests over the property. only respondent Peñarroyo testified. petitioner asseverated that as a result of the filing of the case. Petitioner appealed the aforesaid decision of the trial court to the Court of Appeals.000. petitioner admitted that the lot had been mortgaged to the Associated Banking Corporation.00 plus legal interest of 12% from June 15. he was compelled to hire the services of counsel for a fee of P20.

he even waived the presentation of oral evidence. . What is certain is that despite the said assignment of mortgage rights.November 16. The acceptance of a cheek implies an undertaking of due diligence in presenting it for payment. its delivery never produced the effect of payment. . the presumption is that the check had been encashed. may sue or be sued without joining the party for whose benefit the action is presented or defended. and Forty Thousand Pesos (P40.Granting that petitioner had never encashed the check. NO.Obligations and Contracts a conclusion is based on the erroneous presumption that the check (in the amount of P40. Representative parties. 1970 . Disposition CA decision affirmed. INC V COURT OF APPEALS. a common carrier engaged in the business of transporting passengers by air for compensation. Butte. 1970. in part. in payment of the purchase price of the subject lot. Tomas. which provides. an indispensable party without whom. As already stated.Adelina Bagadiong and Rosario Sto.. Petitioner insists that he never cashed said check. Papa the amounts of Five Thousand Pesos (P5. an executor or administrator may sue or be sued without joining the party for whose benefit the action is presented or defended. . pursuant to Art. Petitioner himself admits having received said amounts. 1970. it will be held to operate as actual payment of the debt or obligation for which it was given. payment will be deemed effected and the obligation for which the check was given as conditional payment will be discharged. NO. but the court may. no final determination of the action can be had. his failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay. . Assuming arguendo that the mortgage rights of the Associated Citizens Bank had been assigned to the estate of Ramon Papa. August 13.00) in check on 15 June 1973. . and granting that the assigned mortgage rights validly exist and constitute a lien on the property.they went back to PAL Naga City branch station and paid the fare for two round trip tickets. for Naga-Manila flight on November 26.While it is true that the delivery of a check produces the effect of payment only when it is cashed. except when through the fault of the creditor. the drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused. they checked in at the Pili airport counter of PAL and there the latter's agent or employees got the tickets of the plaintiffs allegedly for the purpose of issuing to them a boarding pass . thus: Sec. The cause of action for specific performance which respondents Valencia and Peñarroyo have against petitioner is different from the cause of action which the estate of Ramon Papa. or 45 minutes before the scheduled departure time of the Naga-Manila flight. 28993 of Angela M. a guardian. . 1970 were expressly confirmed by the Naga City branch station. a perusal of the original records of the case would show that there is nothing there that could shed light on the transactions leading to the said assignment of rights. executor or administrator. 1249 of the Civil Code. nor is there any evidence on record of the conditions under which said mortgage rights were assigned. The payee of a check would be a creditor under this provision and if its nonpayment is caused by his negligence. . 1990 NATURE Certiorari FACTS . Whatever prior and subsisting mortgage rights the estate of Ramon Papa. been held that if no presentment is made at all. ." After more than ten (10) years from the payment in part by cash and in part by check. but they were not given back their tickets and were not allowed by PAL' s agent or employees to board the plane . STO.November 24. and if he from whom it is received sustains loss by want of such diligence. their luggage was loaded to the plane.With regard to the alleged assignment of mortgage rights. Jr. Jr. Petitioner's assertion that he never encashed the aforesaid check is not substantiated and is at odds with his statement in his answer that "he can no longer recall the transaction which is supposed to have happened 10 years ago. the instrument is impaired.000. This is in harmony with Article 1249 of the Civil Code under which payment by way of check or other negotiable instrument is conditioned on its being cashed. likewise.Considering that respondents Valencia and Peñarroyo had fulfilled their part of the contract of sale by delivering the payment of the purchase price.PAL (Naga City branch station). the rule is otherwise if the debtor is prejudiced by the creditor's unreasonable delay in presentment. has over the property may still be enforced regardless of the change in ownership thereof. or a party authorized by statute. TOMAS REGALADO. Butte and the peaceful possession and enjoyment of the lot in question 2.000. said respondents. Labitag enforce such lien.Under Section 3 of Rule 3 of the Rules of Court. therefore.A trustee of an express trust. . 1249 of the Civil Code. the title to the subject property has remained in the name of the late Angela M.00) in cash on 24 May 1973. made reservations with. They were not only issued their round trips tickets. It has. citing Art. Jr. and having issued receipts therefor.A few minutes before departure time. Indeed. 3. that payment by checks shall produce the effect of payment only when they have been cashed or when through the fault of the creditor they have been impaired.At 3 PM of November 26. order such beneficiary to be made a party. and. An agent acting in his own name and for the benefit of an undisclosed principal may sue or be sued without joining the principal except when the contract involves things belonging to the principal.000.It is an undisputed fact that respondents Valencia and Peñarroyo had given petitioner Myron C. may have to enforce whatever rights or liens it has on the property by reason of its being an alleged assignee of the bank's rights of mortgage. had the right to compel petitioner to deliver to them the owner's duplicate of TCT No. but also their reservation in PAL's 3:40 pm Naga-Manila flight on November 26. Jr.. the estate may file the appropriate action to A2010 page 83 Prof. at any stage of the proceedings. . respondent Court of Appeals has found that the conditions under which said mortgage rights of the bank were assigned are not clear.00) had been cashed. 3.Neither is the estate of Ramon Papa. such being the case. PHILIPPINE AIRLINES. 1970. and bought 2 plane tickets from.

He was assured by the PAL employees that his reservation for the flight was confirmed . . Reasoning . Borjal (branch supervisor) not recklessly took a chance on the two overbooked passengers (Gov. of her own volition. 1970. .PAL’s defense: o that due to the cancellation of a morning flight from Virac. in spite of their complaint.(This is another case consolidated with above case) November 24. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. As noted by the CA. 1970.On the third issue: SC finds it without merit.On the last issue: CA precisely resolved said issue by modifying the decision of the lower court.About 3 minutes before departure of Flight 296. there can be no question that the entitlement to moral damages having been established. Santos checked in at the Pili airport counter and there the PAL employees asked for his ticket.A contract to transport passengers is quite different in kind and degree from any other contractual relation.TC.CA." o it was necessitated by reason of safety and/or compliance with applicable laws regulations.on appeal it affirmed with modifications said decision of the lower court. CA-> the failure of PAL to accommodate private respondents was not the result of an honest mistake. . and the same are valid grounds for refusal to carry plaintiffs in accordance with its Domestic Passenger Tariff No. PAL’ s agent or employees at the Naga City branch station just returned their fares. the two companions of the Governor refused to deplane despite repeated pleas and entreaties of its employees o unable to persuade the 2 Virac passengers to deplane in Naga and "compelled by a reasonable and well-grounded fear that an untoward incident may ensue should the two (2) be forced to leave the aircraft.After the plane had taken off from the Pili airport with their luggage. Rule 8[a]) which is incorporated by reference into the conditions of carriage as expressly provided for in plaintiffs plane tickets. and exemplary damages may be awarded even though not so expressly pleaded in the complaint nor proved . allegedly for the purpose of issuing to him a boarding pass .He and his brother failed to close the contract to supply shrimps.On first and second issue: SC finds no error in awarding moral and exemplary damages to respondents. in a MR. exemplary damages may be awarded.At 2 PM of November 29. . WON a trial court. WON moral damages could be awarded to a passenger when the failure of the carrier to accommodate the passenger resulted from unlawful acts of third parties against the carrier's personnel 2.Moral damages are recoverable in a breach of contract of carriage where the air carrier through its agents acted fraudulently or in bad faith. awarded moral. Affirmed decision on MR. WON respondents are entitled to exemplary damages when there is no sufficient evidence to show. actual and exemplary damages and legal interest to the complainants in both cases. A2010 page 84 Prof.Ladislao Santos. 1 hr and 40 minutes before the departure of Flight 296. because of the relation which an air-carrier with the public. may increase the damages it awarded in the original decision to an amount drastically over that it initially found to be warranted and significantly more than claimed by plaintiffs themselves HELD . . The TC and the CA are in agreement that PAL through its agents acted in bad faith in "bumping off" private respondents. its employees at its Virac station were constrained "to allow the Governor to take Flight 296R together with several companions" with the assurance of the Governor that two (2) of his companions would deplane in Naga.00 as attorney's fees. WON a passenger in a contract of air transportation can validly claim damages when she could have taken the flight had she not instead opted. o that on the representations of Gov Alberto of Catanduanes. . some of its passengers for said flight took Flight 296R. ISSUES 1. therefore. . 1970. to give her confirmed seat to another passenger who was accommodated by the carrier in her place 4. 2 (Section A. 1970.there was a breach of contract. or orders. and o the error of its employees was an honest mistake or constitutes excusable negligence. This whole incident could have been avoided had Mr. awarding each respondent instead an aggregate amount of P30. oppressive or malevolent conduct by the carrier 3. And this.00 as moral and exemplary damages. . and neither the appellate court nor the trial court found facts showing reckless.In both cases the appellees alleged that there is a breach of contract and asked for moral damages. informing him that there was no more seat available and he could not ride on that flight to Manila . and her inability to take the flight was the consequence of the wrongful act of PAL's employees for which it has to answer. plus P6. Such sacrifice was not voluntary on her part. bought a plane ticket at the branch station of defendant in Naga City for Flight 296 from Naga to Manila scheduled on the afternoon of November 26. because it was on December 1. because its employees knew and were aware that what they were doing was wrong. the ticket was returned to him by a PAL employee. The contract of air carriage.000. Labitag . However. the act of respondent Bagadiong was motivated solely by her concern for her son who also risked being denied accommodation but who was then returning to school in Manila.000." its employee "had to act in a manner dictated by the circumstances and by reasons of safety both of the passenger and the aircraft and crew.Obligations and Contracts . one of those in the cancelled morning flight. The award of moral and exemplary damages in an aggregate amount may not be the usual way of awarding said damages. because he had an appointment with an eye specialist for medical treatment of his eye and he and his brother were "to close a contract they entered into to supply shrimps to some restaurants and market vendors in Manila . that on arrival in Naga. Alberto and Mayor Antonio) in getting confirmed reservations in Naga.It was very important and urgent for him to be in Manila on the afternoon of November 26. 1970 that he was finally able to reach Manila by train. . The PAL employees knowingly and deliberately disregarded the rights of the plaintiffs to board the plane and take Flight 296R by virtue of their being holders of tickets duly issued and paid for with confirmed reservations on Flight 296R.The employees of PAL acted rudely and discourteously to his embarrassment in the presence of so many people who were at the airport at that time .

The surety company also contended that the action is premature. 1962. 1960 provided among others.68 and due in July. 1958 and the Contract of Conditional Purchase and Sale of Reparations Goods executed Feb 12. but set up a cross-claim against UNIVERSAL for reimbursement of whatever amount of money it may have to pay the plaintiff by reason of the complaint. ISSUES 1. . WON the TC erred in not awarding the surety company premiums on the performance bonds REPARATIONS COMMISSION V UNIVERSAL DEEP. In case of breach in bad faith of a contract of carriage. respectively.597. . A2010 page 85 Prof... 1962. A performance bond in the amount of P54. Hence. Labitag Surety & Fidelity Co.Universal was awarded 6 trawl boats by the Reparations Commission as end-user of reparation goods. The third-party defendant Pablo S.. In the contract for the purchase and sale of the last 2 boats.777. Sarmiento denied personal liability claiming that he signed the indemnity agreements in question in his capacity as acting general manager of UNIVERSAL.. is untenable. However. Inc. and for the collection of accumulated and unpaid premiums on the bonds with interest thereon.UNIVERSAL claims that there is an obscurity in the terms of the contracts in question which were caused by the plaintiff as to the amounts and due dates of the first installments which should have been first fixed before a creditor can demand its payment from the debtor. The statement attributed to Governor Alberto and/or the mayors.SEA FISHING CORPORATION CONCEPCION. Sarmiento. and an indemnity agreement was executed by UNIVERSAL in favor of the surety company.57. was submitted.500. 1978 NATURE Appeal from the decision of the Court of First Instance FACTS . To constitute a caso fortuito that would exempt a person from responsibility. The alleged fortuitous event. The operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of the passengers. which it may sustain or incur as a consequence of having become a surety upon the performance bond . 1961 and October 17. 1959 provided for a similar stipulation on the schedule of payments. . 1959 with contract dated Nov 25.84 and the due date of is payment is May 8.565.501. 1962.642. Inc. UNIVERSAL claimed that the amounts of money sought to be collected are not yet due and demandable. is not independent of the will of PAL as the obligor but was caused by the very act of its agents in allowing the governor and the mayor to board Flight 296R in excess of the number of passengers allotted to them and with full knowledge that the said flight for Manila was fully booked. award of damages is in order. 1961. and forming a part of. . WON the first installments under the 3 contracts of conditional purchase and sale were already due and demandable when the complaint was filed 2.77 and due in July. if ever it was.. In the case of the 3 rd and 4th boats. the surety company filed a third-party complaint against Pablo S. the balance shall be paid in the manner herein stated as shown in the Schedule of Payments". .. 1960 with a similar schedule of 10 equal yearly installments. respectively. constitutes caso fortuito. a performance bond in the amount of P53. that "if we cannot board the plane there will be something that will happen.On August 10.The delivery of the last 2 boats were covered by a contract for the Utilization of Reparation Goods executed by the parties on February 12.. was executed in favor of the Reparations Commission. is N/A in this case. the trial court rendered the judgment stated. They were provincial and municipal executives with a common duty to maintain peace and order and to prevent the commission of crimes. A corresponding indemnity agreement was executed to indemnify the surety company for any damage. Inc.00 and P57. one of the indemnitors in the indemnity agreements. To guarantee the compliance with the obligations under said contract. etc. The Schedule of Payment attached to. The fear spoken of by witness Azuela is speculative. including interest. the first installments are P68. was not of such a serious character and imminent as to create fear of greater injury in the minds of the PAL employees if they would not allow Governor Alberto and the mayors to remain in the plane which was then scheduled to fly to Manila. . The impossibility of their being accommodated was necessarily forseeable. (b) it must be either unforseeable or inevitable. issued by the Manila Surety & Fidelity Co. After appropriate proceedings and upon the preceding facts. with UNIVERSAL as principal and the Manila . and the due dates of payment are October 17. With leave of courts first obtained. the amount of the first of the succeeding itemized installments is P56.Obligations and Contracts generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees naturally could give ground for an action for damages.The next 2 boats were delivered April 20. it is essential that (a) the event must be independent of the will of the obligor.6 and indemnity agreement was executed in favor of the surety company in consideration of the said bond. loss charges. In answer. These were delivered 2 at a time.One essential characteristic of a fortuitous event is that it was independent of the will of the obligor or of his employees.77. A performance bond in the amount of P68. (c) its occurrence renders it impossible for the obligor to fulfill his obligation in a normal manner. and (d) the obligor must be free from any participation in the aggravation of the injury resulting to the obligee or creditor. the amounts indicated as first installments are P54.The contention of PAL that was due to the unlawful acts of third persons and. that "the first installment representing 10% of the amount… shall be paid within 24 months from the date of complete delivery thereof. this appeal. The threat. the contract for the purchase and sale of the first 2 boats which states that the amount of first installment is P53.777.643. Disposition CA’s decision is AFFIRMED in toto." is vague.00 issued by the Manila Surety & Fidelity Co. It is difficult to believe that Governor Alberto and the mayors would make any threat or intimidation to keep their seats in the plane. June 27.20 and the due date is May 8.500. 1961 and P72. fanciful and remote. was also submitted to guarantee the faithful compliance with the obligations set forth in the contract.The first 2 boats were delivered Nov 20. 1962.00. as surety. supposedly consisting of the unlawful acts of Gov Alberto and Mayor Antonio. the Reparations Commission instituted the present action against UNIVERSAL and the surety company to recover various amounts of money due under these contracts.

NO . Respondent on July 6." is but the first of the ten (10) equal yearly installments of the balance of the purchase price. and July 1992. petitioner filed an action for injunction and damages seeking to enjoin respondent from disturbing his possession of the leased property. which is also claimed to be a "first installment.The 24 months fixed by the law for the payment of the 'first' installment are the very dates stated in the aforementioned schedules for the payment of the respective '1st' installments. 1962. 3. Also due and demanded from UNIVERSAL were the first of the ten (10) equal yearly installments on the balance of the purchase price of the first 2 boats as well as the second pair of boats. which in this case is the full and faithful compliance with the terms of the contract of conditional purchase and sale of reparations goods. while the second fell due on July 31. .Art 1254 is not applicable. June..Petitioner tried to pay on a daily basis the rental beginning August 25. The first accrued on May 8.Hence the appeal. Besides acknowledgment. PACULDO V REGALADO PARDO. Reasoning He signed the indemnity agreement twice – the first in his capacity as acting general manager and second in his individual capacity. YES Ratio The obligation of UNIVERSAL to pay the first installments on the purchase price of the six (6) reparations vessels was already due and demandable when the present action was commenced on August 10. YES . 1994. petitioner. Disposition WHEREFORE.Nereo Paculdo. Quezon City on December 27. 1962. ISSUE WON the petitioner was truly in arrears in the payment of the rentals on the subject property at the time of the filing of the complaint for ejectment HELD NO.On April 22. .The petitioner failed to pay rentals for the wet market property for May. 1992 but the petitioner refused to accept the same. Labitag pay the Manila Surety & Fidelity Co. respondent. 1991 up to December 31 .642. the debt which is the most onerous to the debtor shall be deemed to have been satisfied . WON Pablo Sarmiento is liable having executed the indemnity agreements in his capacity as acting general manager of universal HELD 1. . 1993. On January 31. The premium is the consideration for furnishing the bonds and the obligation to pay the same subsists for as long as the liability of the surety shall exist. the case for ejectment was re-filed with the MTC. petitioner nevertheless filed a petition for review with the Court of Appeals alledging among others that portions of his payments to respondents were applied to his other obligations.Despite having completely turned over the leased property.it in favor of the surety company.Another letter was sent by the respondent on July 17.Universal should award the premiums to the surety company. 1961. and the Buyer must have been aware of this fact. 1992. the amount of P7. the parties expressly agreed that the first installment representing 10% of the purchase price or P53. The CA found for the respondent when it ruled that petitioner consented to the respondent’s application of payment to the petitioner’s other obligations.Obligations and Contracts 3. wrote demand letter to petitioner for payment of the due rent with advise that if payment is not received within fifteen days the lease contract will be cancelled. 1990.On top of this lease contract. Inc. 2. What is more. the MTC ruled in favor of Regalado and ordered the petitioner and all persons claiming right under him to vacate the leased premises and to pay the respondent the back rentals beginning July 1992. 2000 NATURE APPEAL via certiorari from a decision of the CA on ejectment case FACTS . Reasoning The payment of premiums on the bonds to the surety company had been expressly undertaken by UNIVERSAL in the indemnity agreements executed by . .84 shall be paid within 24 months from the date of complete delivery of the vessel or on May 8. Appellants shall pay proportionate costs. Where there is no imputation of payment made by either the debtor or creditor. They cannot be made applicable to a person whose obligation as a mere surety is both contingent and singular. Fairview Park. The amount of P56. This order was appealed to the RTC which subsequently affirmed the MTC decision en toto. the Commission had no authority to agree that the 1st installment shall be paid on any later date.251. stated that Pablo Sarmiento for himself and in behalf of Universal personally appeared before the notary and acknowledged that the document is his own free and voluntary act and deed. .478 square meter property with a wet market building located along Don Mariano Marcos Avenue. . and the balance to be paid in ten (10) equal yearly installments.597. 1962. .He is liable. the judgment appealed from is hereby affirmed with the modification that the UNIVERSAL Deep-Sea Fishing Corporation is further ordered to 3 A2010 page 86 Prof. 1992 reiterating demand for payment and for the petitioner to vacate the premises. . Reasoning In the contract concerning the first 2 boats. 2015. entered into a lease contract over a 16. in view of said legal provision.. Lease period is for 25 years beginning January 1. petitioner also leased from respondent eleven other properties and purchased from the same respondent eight units of heavy equipment and vehicles. The ejectment case was however withdrawn five days later on the ground that certain details included therein had been omitted and must be re-computed. Reasoning The rules contained in Articles 1252 to 1254 of the Civil Code apply to a person owing several debts of the same kind to a single creditor. and Bonifacio Regalado. .42 for the premiums and documentary stamps on the performance bonds.On August 20. YES .20 due on May 8. WON the court erred in not applying the down payment to the guaranteed indebtedness applying Art 12543 4.1962. 4. On the same day the respondent filed an ejectment case against the petitioner.

.on CESSION: Article 1255 contemplates the existence of two or more creditors and involves the assignment of all the debtor's property. so that the execution of the Deed of Conditional Sale in favor of Caperal was void 4. . The parties admitted that the assignment was by way of security for the payment of the loans. . WON the assignment of leasehold rights was a mortgage contract.CUBA filed complaint against DBP and Caperal .Plaintiff CUBA is a grantee of a Fishpond Lease Agreement from the Government.a and thereafter. as well as the Assignment of Leasehold Rights executed by Caperal in favor of DBP. . 12 of the deed of assignment constituted pactum commissionrum. Labitag defendant Caperal. then executed a Deed of Conditional Sale of the Leasehold Rights in favor of plaintiff CUBA over the same fishpond. not amounting to novation. ISSUES 1. and (4) the deed of conditional sale between DBP and Caperal.067. and the assignment of leasehold rights executed by Caperal in favor of DBP.Defendant DBP thereafter sent a Notice of Rescission thru Notarial Act which CUBA received. and being in its essence a mortgage.000. It then ordered DBP to turn over possession of the property to Caperal as lawful holder of the leasehold rights and to pay CUBA the following amounts: (a) P1. but in the case only DBP is the creditor . WON the award for the damages were correctly awarded 5. (3) the Deed of Conditional Sale in favor of CUBA. and therefore the awarding of exemplary damages and attorney’s fees HELD 1. as was held by the trial court 3. . plaintiff CUBA promised to make certain payments as stated in temporary Arrangement. were also void and ineffective. P100. WON condition no.In the negotiation for repurchase.There was no clear assent from the petitioner to the change in the manner of application of payment.on DATION: The assignment. is but a security and not a satisfaction of indebtedness. cession under Art. advertised the public bidding to dispose of the property.000 as attorney's fees. defendant DBP appropriated the leasehold Rights of plaintiff CUBA over the fishpond in question. 2083. being in its essence a mortgage.00as moral damages.CA: declared valid the ff: (1) the act of DBP in appropriating Cuba's leasehold rights and interest under Fishpond Lease Agreement No. P50.Plaintiff failed to pay her loan on the scheduled dates in accordance with the terms of the Promissory Notes. and the assignment merely served as security for the loans covered by the promissory notes. ..Obligations and Contracts . . both could stand together.000. .500 as actual damages.CUBA obtained from DBP three separate loans totalling P335. (3) the deed of conditional sale between CUBA and DBP. which DBP accepted. and thereafter executed a Deed of Conditional Sale in favor of defendant Agripina Caperal.RTC: sided with CUBA.on NOVATION: the said assignment merely complemented or supplemented the notes. 1255 of Civil Code. each of which was covered by a promissory note and as security for said loans. WON the act of DBP of appropriating CUBA’s leasehold rights was violative of Art. CUBA executed two Deeds of Assignment of her Leasehold Rights. was but a security and not a satisfaction of indebtedness so not Dation as defined in Article 1254 2.00 for exemplary damages. The silence of the petitioner with regard the request of the respondent with regard the application of the rental did not mean that he consented thereto.000. NO DBP V CA DAVIDE. holding that (1) DBP's taking possession and ownership of the property without foreclosure was plainly violative of Article 2088 of the Civil Code. . the law provided that no payment shall be made to a debt not yet due (Article 1252 of the Civil Code) and that payment must be first applied to the debt most onerous to the debtor (Article 1254 of the Civil Code). the notarial rescission of such sale. 12 of the Assignment of Leasehold Rights is void for being a clear case of pactum commissorium expressly prohibited and declared null and void by Article 2088 of the Civil Code.00 for actual damages.000 as moral damages. P50. whether judicial or extra-judicial. the Fishpond Lease Agreement in favor of Caperal.00 for attorney's fees. and P50.Assuming further that petitioner did not choose the obligation to be first satisfied. Ratio An assignment to guarantee an obligation is in effect a mortgage. . . January 5.532. plaintiff CUBA addressed two letters (offers to repurchase the fishpond) to the Manager DBP.The decision of the CA was a misappreciation of the facts and of the law.2 WON the award for moral damages was correctly awarded.000. defendant Caperal was awarded Fishpond Lease Agreement by the Ministry of Agriculture and Food. A2010 page 87 Prof.After the Deed of Conditional Sale was executed in favor of plaintiff CUBA. The obligation to pay a sum of money remained. (2) the deeds of assignment executed by Cuba in favor of DBP. Reasoning The stipulations of the deeds of assignment constantly referred to the contract as a mortgage contract.75 representing the amounts paid by defendant Agripina Caperal to defendant Development Bank of the Philippines under their Deed of Conditional Sale. the assignment of leasehold rights was a mortgage contract. YES. awarding P1. a new Fishpond Lease Agreement was issued by the Ministry of Agriculture and Food in favor of plaintiff CUBA but CUBA failed to pay the amortizations stipulated in the Deed of Conditional Sale and entered with the DBP a temporary arrangement whereby in consideration for the deferment of the Notarial Rescission of Deed of Conditional Sale. 2088 of the Civil Code.610. and ordering DBP to reimburse and pay to defendant Agripina Caperal P1. 1254 2.Without foreclosure proceedings.1 WON the award for actual damages was correctly awarded 5. . and the Deed of Conditional Sale in favor of . WON CUBA is estopped from questioning DBP’s act of appropriation 5.067.500. defendant DBP took possession of the Leasehold Rights of the fishpond in question. giving the respondent the right to apply the payments to the other obligations of the petitioner. 1998 NATURE Consolidated petition for review of the decision of the Court of Appeals FACTS . and that DBP should have just conducted a foreclosure proceeding. (2) condition no. P100. nor a Dation under Art.

3.247. -The provision is a standard condition in mortgage contracts and is in conformity with Article 2087 of the Civil Code. due and payable on the first day of each month starting December 1971 through and inclusive September 1.On October 30. should therefore be set aside. being contrary to Article 2088 of the Civil Code and to public policy. . January 30.000 should likewise be awarded by way of example or correction for the public good. CUBA did not bring to the attention of DBP the alleged loss. NO Ratio Estoppel cannot give validity to an act that is prohibited by law or against public policy Reasoning The appropriation of the leasehold rights.000. . which authorizes the mortgagee to foreclose the mortgage and alienate the mortgaged property for the payment of the principal obligation. 4.000 to P25. however it did not conduct any. 1971.000 is in order. the exemplary damages. Case is REMANDED to the trial court for the reception of the income statement of DBP. YES Ratio Even in cases where foreclosure proceedings were had. and interests in the promissory note and chattel mortgage by virtue of a Deed of Assignment. purchased from Alexander Lim a 1969 Chevorlet for P55.. Labitag Agriculture and Natural Resources that it had "foreclosed the mortgage. Thereafter. and to apply the proceeds to the payment of the loan.000.70 for thirty-four months. under the terms and conditions of the promissory note.Such claim for "losses of property.036. To validate these acts would open the floodgates to circumvention of Article 2088 of the Civil Code.80 payable.247. and CUBA even admitted that the loss was due to the fraudulent acts of her fishpond workers. There being an award of exemplary damages.From 1979 until after the filing of her complaint in court in May 1985. title. Reasoning Other than the testimony of CUBA and her caretaker." an award of moral damages in the amount of P50. among other things. as well as the subsequent acts emanating from DBP's appropriation of the leasehold rights.000. and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period. CV No.000 to P50. 26535 is hereby REVERSED. at a monthly installment of P1.80 with a down payment of P20. 15 With more reason that the sale of property given as security for the payment of a debt be set aside if there was no prior foreclosure proceeding.R. Acetylene to Alexander Lim was financed by Filinvest such that Lim became fully paid. from P50. 3135. attorney's fees are also recoverable. all its rights. as amended. but must be proved with reasonable degree of certainty. Appellant. and by reducing the amounts of moral damages from P100. except as to the award of P50. the 25 May 1994 Decision of the Court of Appeals in CAG. Filinvest Credit Corporation. Disposition WHEREFORE. and the attorney's fees. which return shall be in full satisfaction of its indebtedness pursuant to Article 1484 of the New Civil Code. 5. and interests on the aforesaid promissory note and chattel mortgage which. 5. Inc. receipts presented). The alleged loss could have been a mere afterthought or subterfuge to justify her claim for actual damages. and issued a new permit in favor of CUBA.000 to P20. as well as its false representation to the then Ministry of A2010 page 88 Prof.DBP knew that foreclosure proceedings were necessary.000 as moral damages. the Bureau of Fisheries canceled CUBA's original lease permit. which is hereby sustained. 1974 with 12 % interest per annum on each unpaid installment. in effect.Obligations and Contracts Ratio To have a pactum commissiorum. the appellant executed a chattel mortgage over vehicle in favor of Lim. the following elements must be present: (1) there should be a property mortgaged by way of security for the payment of the principal obligation. and attorney's fees in the amount equivalent to 25% of the total of the outstanding unpaid amount. Reasoning Article 2088 of the Civil Code forbids a creditor from appropriating. cannot be deemed validated by estoppel. INC. Branch 54. The 31 January 1990 Decision of the Regional Trial Court of Pangasinan. 12 of the deed of assignment constituted pactum commissorium and the award of actual damages. 1971. title. 1982 NATURE Appeal from the decision of the Court of First Instance of Manila FACTS . general-manager advised Filinvest of its decision to return the mortgaged property. this Court had not hesitated to nullify the consequent auction sale for failure to comply with the requirements laid down by law. . but reduced Reasoning DBP's act of appropriating CUBA's leasehold rights which was contrary to law and public policy. to sell or otherwise dispose of the said real rights. thru its asst. 12 merely provided for the appointment of DBP as attorney-in-fact with authority. the payment of the unpaid balance owed by Phil. was therefore speculative. FILINVEST CREDIT CORP. On November 2. Alexander Lim assigned to the Filinvest Finance Corporation all his rights.Exemplary or corrective damages in the amount of P25. The Development Bank of the Philippines is hereby ordered to render an accounting of the income derived from the operation of the fishpond in question. Cuba. . there was no proof as to the existence of those items which were allegedly damaged before DBP took over the fishpond in question (no inventory. and for the determination of each party's financial obligation to one another." having been made before knowledge of the alleged actual loss. In view of the false representation of DBP that it had already foreclosed the mortgage. the thing given as security for the payment of a debt. DE CASTRO.00 and the balance of P35. A-1574 is MODIFIED setting aside the finding that condition no. Filinvest then sent a demand letter for the aforesaid amount in full in addition to stipulated interest and charges or return the mortgaged property to be remitted at Filinvest’s office within five days from date of the letter during office hours.2 YES. As security for the payment. from P100. V PHILIPPINE ACETYLENE CO. in case of default by CUBA. as a consequence of its merger with the Credit and Development Corporation assigned to the new corporation.1 NO Ratio Actual or compensatory damages cannot be presumed. 5. the Philippine Acetylene Co.000. the Filinvest Finance Corporation. Reasoning Condition no. Said acts which were predicated on such false representation. approved the deed of conditional sale. Phil Acetylene had defaulted in the payment of nine successive installments. in Civil Case No. such as Act No. The car was returned . as well as the statement of the account of Lydia P. or disposing of.

NO Ratio The mere return of the mortgaged motor vehicle by the mortgagor. object certain. Filinvest requested the appellant to update its account by paying the installments in arrears and accruing interest in the amount of P4. In any case. payment for which is to be charged against the debtor's debt. 5247. Reasoning Dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of obligation. Assuming that the return of the property did not extinguish its obligation. Reasoning There is a specific provision in the Deed of Sale that the Lim warrants the sale of the car to be free from liens and encumbrances. If at all. be it sale or innovation to have the effect of totally extinguishing the debt or obligation. express or implied of the true intention of the parties. In its modern concept. HELD 1. title and interest. 1973 and confirmed to by Filinvest's vice-president. may not be said to be without remedy under the law.122. On May 8. the essential elements of a contract of sale. as juridically contemplated by dacion en pago. and acceptance by him. In dacion en pago. that foreclosure of the chattel mortgage was impractical. In the absence of clear consent of appellee to the proferred special mode of payment. consent. The evidence on the record fails to show that Filinvest consented.. 1973. as such is the essence of assignment of credit. as mortgagee. The undertaking really partakes in one sense of the nature of sale. Labitag mortgaged motor vehicle took place. It is the fact of foreclosure and actual sale of the mortgaged chattel that bar the recovery by the vendor of any balance of the purchaser's outstanding obligation not satisfied by the sale 2. to the mortgagee. it was nonetheless justified in refusing payment since Filinvest is not entitled to recover the same due to the breach of warranty committed by Lim.Obligations and Contracts to the Filinvest together with the document "Voluntary Surrender with Special Power of Attorney To Sell" executed by appellant on March 12. SEPARATE OPINION ABAD SANTOS [ concur] The document indicated that the appellee was to foreclose the chattel mortgage. and Singh. The fact that the mortgaged motor vehicle was delivered to him does not necessarily mean that ownership thereof. what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale. 1985 NATURE Petition for the reversal of the decision of the respondent appeal appellate court which dismissed the petition to annul and set aside the orders of the Court of First Instance of Rizal. offsets or defenses that may be interposed by the debtor at the time of the assignment.21 on or before April 9.P and to restrain the respondents from enforcing the same FACTS . does not constitute dation in payment or dacion en pago in the absence. it had the right which it exercised to abandon the chattel mortgage and demand fulfillment of the obligation. that is. destruction. Filinvest offered to deliver back the motor vehicle to the appellant but the latter refused to accept it. Filinvest wrote a letter to appellant informing the latter that Filinvest cannot sell the car as there were unpaid taxes worth P70. the ownership of the mortgaged property never left the mortgagor. as SELLER. As such. so Filinvest instituted an action for collection of a sum of money with damages in this petition. or defenses that may be availed of. or its being rendered valueless if left in the hands of the appellant. WON the warranty for the unpaid taxes on the mortgaged motor vehicle may be properly raised and imputed to or passed over to the appellee. When Filinvest accepted the assignment of credit from the Lim. the burden of the unpaid taxes should be borne by him. that the mere delivery to. of the mortgaged motor vehicle be construed as actual payment. there can be no transfer of ownership of the mortgaged motor vehicle from appellant to appellee. Respondent’s Comments .Filinvest has no cause of action against it since its obligation towards Filinvest was extinguished when in compliance with the demand letter. namely. The surrender of the car to the appellee was a mere preparatory act for its sale in a foreclosure of the chattel mortgage. Since as earlier shown. 1973. and cause or consideration must be present. July 23. without negligence on its part. NO Ratio The unpaid taxes on the vehicle is a burden on the property and must be borne by the owner.". in any case. On April 4. but definitely not against appellee to whom were transferred only rights. merely wanted to secure possession to forestall the loss. the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. for it is quite possible that appellee. DE GUZMAN V COURT OF APPEALS CONCEPCION. the Phil Acetylene Co.The de Guzman et al. fraudulent transfer of the vehicle to third persons. dismissing the petitioners' appeal in Civil Case No. Disposition The judgment appealed from is hereby affirmed in toto with costs against defendant-appellant.00 on the car. After the appellee discovered. ISSUES 1. as BUYER. the herein appellant. was transferred from appellant to appellee. it returned the mortgaged property. such counterclaims. or at least intended. executed a Contract to Sell covering two parcels of land owned by the petitioners located at Pasay City . the herein appellee. as a special mode of payment. offsets or defenses shall not prejudice the FILINVEST FINANCE CORPORATION and I (Alexander Lim) further warrant and hold the said corporation free and harmless from any such claims. Filinvest is also not guilty of estoppel since it never accepted the mortgaged car in full satisfaction of the debt. offsets. common consent is an essential prerequisite. Pasay City Branch. the creditor is really buying the thing or property of the debtor. while the debt is considered as the purchase price. WON the return of the mortgaged motor vehicle to Filinvest by totally extinguished and/or cancelled Phil Acetylene’s obligation 2. who. only transfer of possession of the A2010 page 89 Prof. more specifically dation in payment or dacion en pago. there is a specific agreement that Lim continued to be bound by the warranties he had given to Filinvest and that if it appears subsequently that "there are such counterclaims.232. 1973.

v. January 30. he informed Singh that he had no authority to receive and accept payment. she shall have only until January 27. 1978. and a copy of the power of attorney executed by Gestuvo in favor of de Guzman. the aforesaid Contract to Sell dated February 17.000. 1972) of respondent judge denying petitioner’s motion to withdraw sum of P3. in which case plaintiff shall produce receipt of the same at the same time and place 6. 1971 shall be deemed rescinded and plaintiff agrees to voluntarily surrender and vacate the same without further notice or demand.On January 28. . Not later than December 18. it being a Saturday. The blame lies with the petitioners.000 with the cashier of the Office of the Clerk of the Court of First Instance of Rizal.Singh had substantially complied with the terms and conditions of the compromise agreement. . January 28. INC. TLG INTERNATIONAL CONTINENTAL ENTERPRISING. That payment of either amounts above-stated shall take place at CFI Rizal Branch 3 at 10:00 a.the case was an action for declaratory relief involving the rights of Bearcon as lessee of the premises of the defendants in that case. . 1977.640 on or before February 17. which shall be treated as complete and final payment of the consideration in the contract to sell 2. there was substantial compliance with the terms and conditions of the compromise agreement.Sigh should pay the balance of the purchase price of P133. their respective claims and counterclaims as embodied in the Complaint and Answer. to complete the payment of the purchase price of P250. 1978 within which to pay the total amount of P250. claiming that Singh had failed to abide by the terms of the compromise agreement and pay the amount specified in their compromise agreement within the period stipulated. . October 31. 1971. They were informed that the petitioner Pilar de Guzman would arrive late in the afternoon. as it is hereby DISMISSED. Disposition WHEREFORE. in her eagerness to settle her obligation. 1972 and July 30.She said that petitioners committed a breach of contract. . Immediately upon receipt of either amount within the periods so contemplated.In Oct. Petitioners denied the request.750. But. but. he invited Singh and her companions to the house of the petitioners to effect payment. to deposit the balance of the purchase price.Trial court approved the compromise agreement submitted by the parties wherein they agreed on the following: 1. Her failure to deliver to the petitioners the full amount on January 27. Only the petitioners' counsel appeared later. Singh asked the petitioners to furnish her with a statement of account of the balance due.000 and in case of failure to do so. Singh. on the next working day. . consented and waited for the call which did not come and unwittingly let the period lapse.Singh opposed the motion.Obligations and Contracts . But.Petitioners claimed that the complaint failed to state a cause of action.CFI directed the petitioners to immediately execute the necessary documents.Both parties waive and abandon. that she would be informed as soon as the petitioners arrived. by reason hereof.Two days before the said date. and admitted its “Complaint in Intervention” in the case of Bearcon Trading Co. That defendants would temporarily desist from enforcing their right or possession over the properties involved herein until January 27. however. . . CA affirmed. Pasay City Branch. But.. . Respondent judge granted petitioner’s “Motion To Intervene”. Monday. Should plaintiff fail to pay either of the amounts within the period herein stipulated. transferring to private respondent the title to the properties. that the balance due was already pre-determined in the contract. 1978 unless payment has been earlier made. 5. So. . January 27. plaintiff will pay defendants the total amount of P240. Juan Fabella Et Al . .000.Since the deposit of the balance of the purchase price was made in good faith and that the failure of Singh to deposit the purchase price on the date specified was due to the petitioners who also make no claim that they had sustained damages because of the two days delay. that the petitioners have no obligation to furnish Singh with copies of the documents requested. Singh was assured. .Singh filed a complaint for specific performance with damages against the petitioners before the CFI of Rizal. V FLORES ANTONIO. as agreed upon in their compromise agreement. 1972 NATURE Petition for certiorari to set aside orders (of June 23. With costs against the petitioners. 1978 was not her fault. the petitioners filed a motion for the issuance of a writ of execution. saying that she had complied with the terms and conditions of the compromise agreement and asked the court to direct the petitioners to comply with the court's decision and execute the necessary documents to effect the transfer of ownership of the two parcels of land to her. copies of the certificates of title covering the two parcels of land subject of the sale. Inc. Instead. defendants undertake to immediately execute the necessary legal instruments to transfer to plaintiff the title to the parcels of land 3. The record shows that Singh went to the sala of Judge Bautista on the appointed day to make payment. 1978. Pasay City Branch. 1975. The temporary restraining order heretofore issued is LIFTED and SET ASIDE. and that Singh's failure to pay the balance of the purchase price on the date specified had caused the contract to expire and become ineffective without necessity of notice or of any judicial declaration to that effect.00 deposited by it by way of consignation FACTS . the petitioners were not there either. the petitioners were not there to receive it. Singh deposited the amount of P30. A2010 page 90 Prof. the cashier was not there to receive it. 5. the petition should be. but this shall not be construed as an abandonment or waiver of its causes of action 4. Labitag ISSUE WON Singh had complied with the terms of the compromise agreement HELD YES. Singh went to the office of the Clerk of the Court of First Instance of Rizal. 1978. 1978.m.The next day. Friday. and had also acted unfairly and in manifest bad faith for which they should be held liable for damages.

Flores paid P50. defendant (Flores) hereby waives his right to appeal to (from) the Order of Rescission and the Writ of Execution which the Court shall render in accordance with the stipulations herein provided for.550.Oct.00 upon the execution of the deed.” Disposition WHEREFORE. This demand included not only the installment due on June 30. 1979. 1980.000 pesos monthly rental beginning Dec 5. 1972: petitioner filed Motion to withdraw the sums it deposited.May. 2. petitioner filed a Motion for Writ of Execution alleging that Flores failed to pay the installment due on June 1980 and that since June 1980 he had failed to pay the monthly rental of P1.As agreed upon. petitioner filed a complaint for the rescission of the deed of conditional sale due to the failure of Flores to pay the balance due on May 31. 1980.71 on or before Oct 31. 1980. until the full purchase price was paid.On Feb 28. McLaughlin and private respondent Ramon Flores entered into a contract of conditional sale of real property.TC granted the motion for writ of execution.71. 1979 until the obligation is duly paid. and b) the court order the payment of P1. A2010 page 91 Prof. 1980. or a declaration was made by the court approving such consignation.Dismissal rendered the consignation ineffectual . . MCLAUGHLIN V COURT OF APPEALS FERIA.On Oct 15.450. .059. to protect its rights as such sub-lessee.00 back rentals since June 1980 and the eviction of private respondent. the parties submitted a Compromise Agreement on the basis of which the court rendered a decision on Jan 22.The case was dismissed before the amount deposited was either accepted by the creditor. petitioner Luisa F.000. 1977. by way of rentals.000.00 upon the signing of the agreement and he also paid an "escalation cost" of P25. 1980. . .Because of the admission of the “Complaint In Intervention”.00 payable as follows: a) P26. for the use of the said property . 1972: respondent denied the motion and the motion for consideration ISSUE WON Respondent could authorize the withdrawal of the deposits considering that according to Respondent. and b) the balance of P69.On Oct 30. allowing the obligation to remain in force”. the Court “has not ordered the intervenor to make any deposit in connection” with the case HELD Yes. 1980 and Dec 31. 1980. McLaughlin wrote to private respondent demanding that he pay the balance of P69. praying that the complain.On Nov 7.00. Petitioner prayed that a) the deed of conditional sale of real property be declared rescinded with forfeiture of all payments as liquidated damages. the debtor may withdraw the thing or the sum deposited.the court a quo dismissed both the complaint and the complaint in intervention . .71 . the orders dated June 23. . Ratio A court shall have the authority to authorize the withdrawal of a deposit. 1971: defendants in the case filed an “Omnibus Motion”.000. October 10. In said compromise agreement. Flores acknowledged his indebtedness to petitioner under the deed of conditional sale in the amount of P119. . private respondent agreed to pay P1. 1977. The parties also agreed that the balance shall bear interest at the rate of 1% per month to commence from Dec 1. 1980.00 to be paid not later than May 31. 1986 .On June 19. because the order which dismissed the case without a resolution left the intervenor “without any recourse but to apply for authority to withdraw the amount and turn over the same to the defendants in accordance with the understanding arrived at between the parties hereto”. and b) the balance of P113. as well as the Complaint In Intervention be dismissed. -"That in the event of execution all payments made by defendant (private respondent) will be forfeited in favor of the plaintiff (petitioner) as liquidated damages.On Dec 27.000.Deposit was made and officially receipted by the Clerk of Court . 1976. .Under paragraph 3 of the Compromise Agreement. Respondent Judge had the authority to authorize the withdrawal of the deposits.750 with the CFI. 1979. 1972 subject of the petition for certiorari are hereby set aside and Respondent directed to grant the withdrawal of the deposit in accordance with the foregoing.00. . when the intervenor made the deposit as a consequence of the admission by the Court of its “Complaint In Intervention”. 1980 but also the installment due on Dec 31. 1977.000.June 23 and July 15.050.059. . 20. Labitag NATURE Appeal by certiorari from the decision of the Court of Appeals FACTS .Obligations and Contracts .059. Paragraph 1 of the deed of conditional sale fixed the total purchase price of P140.00 upon signing of the agreement. petitioner deposited P3. the money remained under the control and jurisdiction of the court and the former could not recover it without an express order of restitution. to make a consignation of the monthly rentals as it didn’t know who was lawfully entitled to receive payments of the monthly rentals.Petitioner intervened as sub-lessee of Bearcon over the property.000.In general.the Respondent should have allowed withdrawal.71 in two equal installments on June 30. In such eventuality. . . . . Art.Purpose: 1. 1972 and July 15." .Repondent’s claim that it had no authority since it “has not ordered intervenor to make” the deposit ignores the fact that the deposit was made because of the admission of its “Complaint in Intervention” .From the moment the money was deposited. Reasoning . 1260: Before the creditor has accepted the consignation.Paragraphs 6 and 7 of the Compromise Agreement further state: -"That the parties are agreed that in the event the defendant (Flores) fails to comply with his obligations herein provided. or before a judicial declaration that the consignation has been properly made. and the parties agreed that said amount would be payable as follows: a) P50. Flores sent a letter to petitioner signifying his willingness and intention to pay the full balance of P69. the plaintiff (Mclaughlin) will be entitled to the issuance of a writ of execution rescinding the Deed of Conditional Sale of Real Property.

" .71 on or before October 31.The tender made by private respondent of a certified bank manager's check payable to petitioner was a valid tender of payment. if rejected.71 in full payment of his obligation. A2010 page 92 Prof. that is.059.Section 4 of RA No. Tender of payment may be extrajudicial.550. equivalent to the actual production and tender of the money.059. 1981 until full payment.00 (P148. particularly after private respondent had tendered the amount of P76. The certified check covered not only the balance of the purchase price in the amount of P69.126.059. the seller may cancel the contract after thirty days from receipt by the buyer of the notice of the cancellation or the demand for rescission of the contract by a notarial act.71.71 (b) Private respondent ordered to pay petitioner the rentals in arrears of P1. YES . within the thirty-day period granted by R. and (c) Petitioner ordered to execute a deed of absolute sale in favor of private respondent over the real property upon full payment of the amounts . Tender is the antecedent of consignation. WON contract should be rescinded 2. while consignation is necessarily judicial. . Rule 130 of the Revised Rules of Court provides that: "An offer in writing to pay a particular sum of money or to deliver a written instrument or specific property is. instrument. therefore.Private respondent had substantially complied with the terms and conditions of the compromise agreement. Militante: "Tender of payment must be distinguished from consignation." . 1980. 1980 (P7.Obligations and Contracts . .6552. Upon full payment of the amount of P76. his obligation was not paid and he is liable in addition for the payment of the monthly rental of P1.71 together with his motion for reconsideration on November 17. or property.059. 1983 NATURE Petition to review the decision of the Court of First Instance of Cebu . although private respondent had made a valid tender of payment which preserved his rights as a vendee in the contract of conditional sale of real property. Considering petitioner's motion for execution filed on November 7. and Article 1258 provides that consignation shall be made by depositing the thing (or sum) due at the disposal of the judicial authority and that the interested parties shall also be notified thereof. ISSUES 1. The Manager's Check tendered by private respondent on November 17. . excluding the monthly rentals paid.A. it must first be announced to the persons interested in the fulfillment of the obligation. Article 1257 provides that in order that the consignation of the thing (or sum) due may release the obligor.059.SC agrees with the CA that it would be inequitable to cancel the contract of conditional sale and to have the amount of P101. the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due.000.However. 1980 was.Inasmuch as petitioner did not accept the aforesaid amount. Since private respondent did not deposit said amount with the court. and that consignation alone shall produce the same effect in the five cases enumerated therein. petitioner could cancel the contract after 30 days from receipt by private respondent of the notice of cancellation.00 from January 1. petitioner could cancel the contract of conditional sale after 30 days from receipt by private respondent of said motion. if the creditor to whom tender of payment has been made refuses without just cause to accept it.Although private respondent had preserved his rights as a vendee in the contract of conditional sale of real property by a timely valid tender of payment of the balance of his obligation which was not accepted by petitioner.A. NO .97 according to private respondent in his brief) already paid by him under said contract. but also the arrears in the rental payments from June to December. private respondent shall be entitled to a deed of absolute sale in his favor of the real property in question. . respondent did not follow it with a consignation or deposit of the sum due with the court.CA held that the Song Fo v Hawaian Ruling is applicable in the case at bar – Recission will not be permitted for slight breach of contract.000. Disposition. an act preparatory to the consignation. 6552 which took effect on Sept14. which is the principal. If the buyer fails to pay the installments due at the expiration of the grace period. 1972 provides as follows: "In case where less than two years of installments were paid.00 a month from Jan 1.71 he attempted to pay to the petitioner but the petitioner did not accept (even though the 30-day period provided by R. Private respondent's tender of payment of the amount of P76. it was incumbent on private respondent to deposit the same with the court in order to be released from responsibility.Petitioner demanded payment of the balance of P69. 6552 has not yet expired) HELD 1.71. WON respondent is liable for the P76. forfeited in favor of petitioner. Section 49. SOCO V MILITANTE GUERRERO. . in accordance with paragraph 3 of the Compromise Agreement. and from which are derived the immediate consequences which the debtor desires or seeks to obtain. June 28. 2. the debtor shall be released from responsibility by the consignation of the thing or sum due. 1980 was subsequently cancelled and converted into cash.059.000. he remains liable for the payment of his obligation because of his failure to deposit the amount due with the court.According to Article 1256 (Civil Code).059. 1980 as a notice of cancellation. but the cash was not deposited with the court.71 and the rentals in arrears. Decision of the CA AFFIRMED w/ the modifications: (a) Petitioner ordered to accept from private respondent the Metrobank Cashier's Check in the amount of P76.059. Labitag . and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation.00) or a total of P76.Soco vs. 1981 until said obligation is duly paid.

if no prompt objection to said payment is made the fact that in previous years payment in check was accepted does not place its creditor in estoppel from requiring the debtor to pay his obligation in cash. Article 1178. tender of a check to pay for an obligation is not a valid tender of payment thereof. Article 1176.Obligations and Contracts FACTS . Despite this explanation.Soon after Soco learned that Francisco sub-leased a portion of the building to NACIDA. (a) that there was a debt due. . Cebu City.Pursuant to his letter dated February 7. 1977 (informing Soco that Francisco has consigned rental payment for May and June. It merely proves rental deposit for the particular month of November. . That these articles must be accorded a mandatory construction is clearly evident from the very language of the codal provisions themselves which require absolute compliance with the essential requisites therein provided. . August. Articles 1256 to 1261. This request of Francisco was complied with by Comtrust in its letter dated June 4. While payment in check by the debtor may be acceptable as valid. Cebu Branch requesting the latter to issue checks to Soco in the amount of Php 840.Soco was informed of the deposits made to the Clerk of Court through a letter of Atty.000. 1975. Evidently. Article 1177. The November. NO . or because he was absent or incapacitated. pay the plaintiff’s attorney’s fee.The City Court of Cebu ruled that the consignation was not valid and ordered Francisco to vacate immediately the leased premises. the letter proved Francisco’s payment for November. pay for damages and incidental litigation expenses and pay the costs. 1978 as deposited in the Clerk of Court). (b) that the consignation of the obligation had been made because the creditor to whom tender of payment was made refused to accept it. Labitag . 1979. 1975. 1977 as shown in Debit Memorandum issued by Comtrust. This the lessee failed to do. the latter felt that she was on the losing end so she tried to look for ways and means to terminate the contract. Francisco noticed that Soco did not anymore send her collector for the payment of rentals and at times there were payments made but no receipts were issued. 1973 whereby Soco leased her commercial building and lot situated at Manalili Street.Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment. there is no factual basis for the lower court’s finding that the lessee had tendered payment of the monthly rentals. (d) that the amount due was placed at the disposal of the court. Francisco wrote the Vice-President of Comtrust. -She was further notified of these payments by consignation in the letter of Atty.00 which is much higher than what Francisco was paying to Soco. the debtor must first comply with certain requirements prescribed by laws. Menchavez dated November 28.For a consignation to be valid.On May 13. 1977 to the Clerk of Court of City Court of Cebu) as well as in the answer of Francisco in Civil Case R-16261.00 every 10th of the month.00 every 10th of each month and to deduct the full amount and service fee from his current account. new Civil Code.In view of the alleged non-payment of rental of the leased premises from May.The June and July. or because several persons claimed to be entitled to receive the amount due. This situation prompted Francisco to write Soco. (WON lessee made a valid tender of payment) 2. 1978 and no other. 1977 letters may be proof of tender of payment but only for the months they refer to. sent a letter dated November 23.00 for a period of 10 years renewable for another 10 years at the option of the lessee. July and August rentals but Francisco did not pay for the reason that he had no funds available at that time. Thus. the letter dated February 7. 1979. 1977 up to the time the complaint for eviction was filed on January 8. at a monthly rental of more than Php 3. (e) that after the consignation had been made the person interested was notified thereof. Francisco paid his monthly rentals to Soco by issuing checks of the Commercial Bank and Trust Company where he had a checking account. its essential requisites must be complied with fully and strictly in accordance with the law. . (c) that previous notice of the consignation had been given to the person interested in the performance of the obligation. The debtor must show. 1979. 2. obviously for payment of his monthly rentals. Francisco through his lawyer informed Soco and her lawyer that all payments of rental due her were in fact paid by Commercial Bank and Trust Company through the Clerk of Court of the City Court of Cebu. Hence. Pampio Abarientos dated June 9. . . WON the consignation of the rentals was valid HELD 1 YES (NO) . 1975 which the latter received. June.Sometime later. ISSUES 1. July. . . to Francisco for a monthly rental of Php 800. it was the lessee’s duty to send someone to get the cashier’s check from the bank and logically.Soco alleged that she personally demanded form Francisco the May. 1978 letter likewise is not a proof of tender of payment for the said month. the lessee has the obligation to make and tender the check to the lessor. . pay the rentals due. They are not proof of tender of payment of other or subsequent monthly rentals. this appeal. In order that consignation may be effective. 1978 (answer to Soco’s letter alleging non-payment.In answer to this letter.” . Article 1178. It must be noted that the letter also requested said bank to notify them every time the check is ready so they may send somebody to get it. .Soco and Francisco entered a contract of lease on January 17.Furthermore.Failure in any of these requirements is enough ground to . thru his bank. A2010 page 93 Prof. WON the lessee failed to pay the monthly rentals beginning May. 1978 to Francisco serving notice to the latter “to vacate the premises leased.The Court of First Instance reversed this judgment and found the consignation to be valid. 1977 (requesting Soco to claim the rental payment from Francisco’s office otherwise the latter would be constrained to make a consignation) and July 6. 1977. . citing the lessee’s letter requesting the bank to issue checks in favor of Soco in the amount of Php840. the Commercial Bank and Trust Company issued checks in favor of Soco representing payments for monthly rentals for the months of May. Soco filed this instant case of Illegal Detainer on January 8. .These payments in checks were received because Soco admitted that prior to May 1977 defendant Francisco had been religiously paying the rental. 1975. June. through her lawyer.This allegation of Soco was denied by Francisco because per his instructions. Soco. . These payments are further bolstered by the certification issued by Comtrust dated October 29. .Tender of payment must be made in lawful currency.

since it does not dispose of the case with finality but leaves something still to be done. that the balance indebtedness of the defendants in favor of the plaintiff is the amount of P5. May 8. 1962 plaintiff filed a motion for partial judgment on the pleadings with respect to the amount of P5.Indeed.In the case at bar. modifying their previous request for judicial deposit.Hence.000. admitted the said claim of P5. that in view of the admission of the defendants of the same it is fitting and proper that the said amount of P5. (d) the respondent failed to prove actual deposit or consignation of the monthly rentals except the two cashier’s checks previously mentioned. 1962. the consignation as payment is void. 6796. 1962 the lower court ordered the defendants to deposit said amount to the Clerk of Court . (b) respondent lessee failed to prove the first notice to the lessor prior to consignation. Furthermore. he surely has the right to refuse to make the deposit in the first place .If the debtor has such right of withdrawal. (a) tender of payment of the monthly rentals to the lesser except that indicated in the June. in their "Opposition" signified their willingness to deposit the requested amount provided that the complaint be dismissed and that they be absolved of all other liabilities. plaintiff filed a "Motion for Deposit" which stated: 1.If he refuses he may not be compelled to do so. The lessee should give a notice of consignation of each deposit every monthly rental. a proceeding to foreclose a real estate mortgage earlier executed by defendants to plaintiff in consideration of a P5. it is pointed out. and hence is unappealable. in their answer. (c) respondent lessee likewise failed to prove the second notice. They would thus premise their willingness to deposit said amount upon the condition that the plaintiff will cancel the mortgage above-mentioned . that is after consignation has been made.00 loan which the former had allegedly failed to pay. in effect denying them and reiterating its previous order . These debit memorandums are merely internal banking practices or office procedures involving the bank and its depositor which is not binding upon a third person such as the lessor. . . .Obligations and Contracts render a consignation ineffective. .Whether or not to deposit at all the amount of an admitted indebtedness. The official receipts are the best proof of actual consignation.The court. respondent Francisco failed to prove the following requisites of a valid consignation. Labitag .106.The remedy.00 was actually secured by a real estate mortgage. What is important is whether the checks were picked up by the lessee as per the arrangement. without notice first announced to the persons interested in the fulfillment of the obligation. wherein the lessee shall pick up the check issued by the bank to tender the same to the lessor.106. 1977 letter (tender of payment already discussed above). expenses and costs. 1963 the lower court resolved both motions. committed grave abuse of discretion amounting to excess of jurisdiction. .Defendants. except payment referred to in the June. this appeal ISSUES Procedural WON the order is unappealable Substantive WON the court below acted with authority and in the judicious exercise of its discretion in ordering the defendants to make the deposit but without the condition they had stated HELD Procedural Plaintiff-appellant maintains that the order is interlocutory. . and the creditor must fall back on the proper coercive processes provided by law to secure or satisfy his credit. Not a single copy of the official receipts issued by the Clerk of Court was presented at the trial of the case to prove actual deposit or consignation. The court also found that the tenant only made the deposits due in court two years later and after the filing of the complaint for illegal detainer.00 3. during the pendency of Civil Case No. should have been by petition for certiorari but this Court sees fit to disregard technicalities and treat this appeal as such a petition and consider it on the merits Substantive .Defendants moved to reconsider the order of November 26.Cristina Sotto (plaintiff-appellee) and Hernani Mijares along with other individuals (defendants-appellants). the law says that "before the creditor has accepted the consignation or before a judicial declaration that the consignation has been properly made. which had already been granted .From the viewpoint of the debtor a deposit such as the one involved here is in the nature of consignation. or to do so under certain conditions.106. The lessee must give prior notice of consignation for each monthly rental.On March 20. 1969 NATURE Appeal from the order of the CFI of Negros Occidental FACTS . allowing the obligation to remain in force. the debtor may withdraw the thing or the sum deposited. explaining that through oversight they failed to allege in their "Opposition" that the sum of P5.On November 26. The bank did not send notice to Soco that checks will be deposited and have actually been deposited in consignation with the Clerk of Court because no instructions were given by its depositor. Disposition The order appealed from is set aside SOTTO V MIJARES MAKALINTAL. that defendants.00 2. and consignation is a facultative remedy which he may or may not avail of.00. The debit memorandums presented as evidence does not prove payment of rentals or deposits in court.106.On November 28.106. were parties to a contract . is a right which belongs to the debtor exclusively . as by attachment.00 be deposited in the Office of the Clerk of Court of this province or to deliver the same to the plaintiff and/or her counsel. 1977 letter. to the lessor except the consignation referred to in the May and June cashier’s check.On November 13. judgment and execution . in issuing the order complained of. The lessee failed to prove that he complied with the arrangement A2010 page 94 Prof.

Respondent paid petitioner the amount of P600.000. in addition to the interest of 18% per annum on the P600.887.375. The priority of tendering payment is to attempt to make a private settlement before proceeding to the solemnities of consignation. however.500. however.563. in consideration of the amount of Fifteen Million Four Hundred Eighty Seven Thousand Five Hundred Pesos (P15. mandamus. Makati.000. The Sandiganbayan ruled that the PCGG gravely abused its discretion.487.He twice tendered to respondent. .000. In 1986. 1994) in the form of a check but said counsel refused to accept the same (1st-via messenger.87. dishonored. Labitag extinguishes the obligation. Sahijwani a lot containing 1. Petitioner's Claims .530. he returned to respondent the latter's P600. Tender on the otherhand is the antecedent of conmsignation.00 option/reservation fee plus 18% interest per annum computed from December 3. 2nd-via DHL) Because of these refusals. North Forbes Park.000.00 option/reservation fee. The Sandiganbayan set a hearing for the declaration and MPCP through a special appearance filed its comment.000. WON Sandiganbayan has a jurisdiction to accept the consignation HELD 1. In compliance with their agreement. YES .Pursuant to an "Agreement And Undertaking". The acceptance negates the said rescission. advances.92 payable over 28 years with it totaling P38. PIMECO prayed for a declaration that it was not bound by the said payment.00). properties. insurance.000. Refusal due to the said rescission of contract is untenable since MPCP accepted annual amortizations or rentals. through his counsel. The Petition for relief on the other hand was dismissed since the P5 M already covered part of the P7. MPCPs appearance in the courts in the Civil Case alreadr created the said jurisdiction PABUGAIS V SAHIJWANI YNARES-SANTIAGO. he wrote a letter saying saying that he is consigning the amount tendered with the RTC Makati City. 1993 to August 3. the amount of P672.036. A case was filed in the Sandiganbayan for a Writ of Preliminary Injunction stating that the transfer of PIMECO to MPCP will result in the dissipation of assets and that the PCGG commited a grave abuse of authority in its termination of the lease-purchase agreement. This gave rise to this petition for certiorari. He averred that there was no valid tender of payment because no check was tendered and the computation of the amount to be tendered was insufficient. PCGG sequestered all the assets. .000. it is unjustified. ISSUES 1. because petitioner verbally promised to pay 3% monthly interest and 25% attorney's fees as penalty for default. MPCP filed for a Motion for Reconsideration that was denied.00 option/reservation fee.239 square meters located at Jacaranda Street. The Sandiganbayan issued the writ of preliminary injunction. Tender of payment maybe extrajudicial while consigning is necessarily judicial. and taxes from PIMECO. ISSUES .269. June 22. WON MPCPs refusal to accept the payment was unjustified 2. since the PCGG management took over the plant and presented the danger of making PIMECO in default in the payment of the rentals to MPCP for three annual installments and causing the cancellation.21 previously unpaid rentals thus making it moot and academic. MPCP wrote a letter of rescission of the lease-purchase agreement on ther ground of non-payment of non-payment of rentals of more than P. Metro Manila. YES. PIMECO asked for declaratory relief and remedies. 2001 NATURE Special Civil Action FACTS Meat Packing Corporation of the Philippines (MPCP) is a corporation wholly owned by the GSIS the MPCP entered an Agreement with the Philippine Integrated Meat at the rate of P1. The Sandiganbayan ruled that MPCP should accept the P5 M payment made by the PCGG. FACTS . The parties further agreed that failure on the part of respondent to pay the balance of the purchase price entitles petitioner to forfeit the P600. while non-delivery by the latter of the necessary documents obliges him to return to respondent the said option/reservation fee with interest at 18% per annum.789.2. simultaneous with delivery of the owner's duplicate Transfer Certificate of Title in respondent's name the Deed of Absolute Sale.Admitted that his office received petitioner's letter but claimed that no check was appended thereto. and records of PIMECO which included the meat packing plant and the lease-purchase agreement.Petitioner failed to deliver the required documents. which is the principal.70.The voluntary appearance in court and its submission to its authority or by service of summons gives the courts jurisdiction over the person.00 for the year 1986.00 option/reservation fee by way of Far East Bank & Trust Company which was. Both tender and consignation validly made produces the effect of payment and A2010 page 95 Prof. and prohibition. 2004 NATURE Petition for review on certiorari of the decision of Court of Appeals which set aside the Decision of the Regional Trial Court of Makati. petitioner Teddy G. it also continued to conduct its hearings regarding the validity of the turn-over of the meat packing plant to GSIS. agreed to sell to respondent Dave P.Obligations and Contracts MEAT PACKING CORPORATION OF THE PHILIPPINES V SANDIGANBAYAN YNARES-SANTIAGO. Respondent's Claims .The Sandiganbayan already approved the consignation by the PCGG wherein consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment. It stated that it has paid rentals from 1981-1985 and prior to the sequestration it was able to pay MPCP P846.00 (representing the P600.00 to be paid within 60 days from the execution of the contract. February 23. the Certificate of Non-Tax Delinquency on real estate taxes and Clearance on Payment of Association Dues. an act preparatory to the consignation.00 as option/reservation fee and the balance of P14. and it generally requiresa a prior tendser of payment. and from which are derived the immediate consequences which the debtor desires or seeks to obtain.515. Pabugais.500. 2.900. PCGG paid MPCP two checks amounting to P5 M.

(4) the amount due was placed at the disposal of the court. Reasoning a. renewable for 5 years or other period at the option of the Lessee under the same terms and conditions. revise contract.000 starting on the 3rd year.000 starting on the 2nd year.TERMS OF PAYMENT . However. (3) previous notice of the consignation had been given to the person interested in the performance of the obligation. PNCC V COURT OF APPEALS DAVIDE. or because several persons claimed to be entitled to receive the amount due or because the title to the obligation has been lost. Reasoning a. the consignation is valid.Obligations and Contracts 1. the complaint seeks not release from contract but that the court modify the terms and conditions.The lease contract executed by petitioner and private respondents Raymundos on November 18. reads in part as follows: 1. Disposition Resolution is reversed and certiorari is granted. P24.000. 2. The first annual rent of P240. . 1997 NATURE . the debtor may ask the judge to order the cancellation of the obligation” b. Labitag OCCEÑA V COURT OF APPEALS TEEHANKEE.00 option/reservation fee stated in the default clause of the "Agreement And Undertaking" was agreed upon by the parties. Petitioner failed to manifest his intention to comply with the "Agreement And Undertaking" by delivering the necessary documents and the lot subject of the sale to respondent in exchange for the amount deposited. (2) the consignation of the obligation had been made because the creditor to whom tender of payment was made refused to accept it. and (5) after the consignation had been made the person interested was notified thereof. FACTS .Tropical Homes filed complaint for modification of terms and conditions of its subdivision contract with petitioners due to increase in price of oil w/c are not w/in control.The rent stipulated shall be paid yearly in advance. 1985.000. It provides that “Once the consignation has been duly made.Petition for review on certiorari. which has the effect of extinguishing petitioner's obligation. Article 1260 is not applicable here.USE OF LEASED PROPERTY . 1976 NATURE Appeal from resolution of CA FACTS . sleeping quarters and canteen/mess hall. . modify. WON the petitioner can withdraw the amount consigned as a matter of right HELD 1. A2010 page 96 Prof. to be increased yearly by 5% based on the agreed monthly rate of P20. or because he was absent or incapacitated. . P22. NO. May 5. c.Release could have been granted. 4. The amount tendered is sufficient since it appears that only the interest of 18% per annum on the P600.If there is a valid tender of payment in an amount sufficient to extinguish the obligation. Accdg to them. b. Respondent's prayer in his answer that the amount consigned be awarded to him is equivalent to an acceptance of the consignation.Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment.000.000 starting on the 4th year. .000 starting on the 5th year 3.TERM OF LEASE .5 years.Withdrawal of the money consigned would enrich petitioner and unjustly prejudice respondent.monthly rate of P20.Property shall be used as the site. is AFFIRMED.000. Modification has no basis in law. petitioner's tender of payment in the form of manager's check is valid even though it is not a legal tender since he did not object to the form.They are invoking Art 1267 of Civil Code w/c states that a positive right is created in favor of obligor to be released fr performance when its performance has become so difficult as to be manifestly beyond the contemplation of the parties ISSUE WON the ground cited justifies modification of the subdivision contract HELD NO . it will result in situation where defendants would be unjustly enriched at expense of plaintiff. October 29. YES . 2. grounds and premises of a rock crushing plant and field office.00 as follows: P21.00 shall be due and payable upon the execution of this Agreement and the succeeding annual rents shall be payable every 12 months thereafter during the effectivity of this Agreement. . Disposition The instant petition for review is DENIED and the petitioner's obligation to respondent under paragraph 5 of the "Agreement And Undertaking" as having been extinguished.Requisites of an effective consignation: (1) there was a debt due. . P23.Court does not have authority to remake. commencing on the date of issuance of the industrial clearance by the Ministry of Human Settlements (MHS).RATE OF RENT . WON there was a valid consignation 2.

.00 representing the rent for two years is excessive. It then expressed its intention to terminate the contract. 1986 when the Industrial Permit was issued by the MHS up to February 7. . . considering that PNCC did not benefit from the property HELD 1. the obligor may also be released therefrom. 1986 when the Industrial Permit was issued by the MHS up to February 7. kindly indicate your conformity hereto by affixing your signature on the space provided below.Moreover.000 which represented the rentals for two years.This Agreement may be terminated by mutual agreement of the parties.On 16 January 1986.000. . hence. They insisted on the performance of petitioner's obligation and reiterated their demand for the payment of the first annual rental. One exception is laid down in Article 1266 of the Civil Code. 1985. WON the award of P492. and obligations arising therefrom have the force of law between the parties and should be compiled with in good faith. petitioner could have simply told private respondents that its obligation to pay rentals has not yet arisen because the Temporary Use Permit is not the industrial clearance contemplated by them. WON Article 1266 and the principle of rebus sic stantibus apply to this case 4. which would endanger the security of contractual relations. an absolute application of the principle of rebus sic stantibus. They also assured the latter that they had already stopped considering the proposals of other aggregates plants to lease the property because of the existing contract with petitioner. NO . In view thereof.issuance of industrial clearance .000 and costs. WON the suspensive condition -issuance of an industrial clearance. petitioner cannot successfully take refuge in the said article. 1.On 7 January 1986. otherwise. which provides: When the service has become so difficult as to be manifestly beyond the contemplation of the parties. which enunciates the doctrine of unforeseen events. it is not covered within the scope of Article 1266. as well as technical.Petitioner argued that under paragraph 1 of the lease contract.On 19 May 1986.has been fulfilled 3.The principle of rebus sic stantibus neither fits in with the facts of the case. petitioner failed to state specifically the circumstances brought about by 'the abrupt change in the political climate in the country" except the alleged prevailing uncertainties in government policies on infrastructure projects. petitioner recognized its obligation to pay rentals counted from the date the permit was issued. 1986.Petitioner objected to private respondents' claim and argued that it was "only obligated to pay the amount of P20. The obligation to pay rentals or deliver the thing in a contract of lease falls within the prestation "to give". plus attorney's fees in the amount of P20.’ However.1986 until the amount was fully paid. YES . which reads: 'The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.The fundamental rule that contracts. the CA affirmed the trial court’s decision. It is therefore only in . as it had decided to cancel or discontinue with the rock crushing project "due to financial. it did not have to solicit the conformity of private respondents to the termination of the contract for the simple reason that no juridical relation was created because of the non-fulfillment of the condition.000. counted from January 7. the reason of petitioner in discontinuing with its project and in consequently cancelling the lease contract was "financial as well as technical difficulties.TERMINATION OF LEASE . However.” If petitioner thought otherwise. the Lessee shall vacate the Leased Property at its expense. we would like to terminate our Lease Contract dated 18 November. difficulties.has already been fulfilled and that the lease contract has become operative. 3. counted from January 7. for the said permit requires that a clearance from the National Production Control Commission be first secured.The Temporary Use Permit is not the industrial clearance referred to in the contract.Private respondents refused to accede to petitioner's request for the pretermination of the lease contract. 1986 when the Notice of Termination was served on your clients”. The parties to the contract must be presumed to have assumed the risks of unfavorable developments. The Industrial Permit mentioned in the said letter could only refer to the Temporary Use Permit issued by the MHS January 7. Under this theory. the trial court rendered a decision ordering petitioner to pay private respondents the amount of P492.000. is not. since it is applicable only to obligations "to do. Instead. the unforeseen event and causes mentioned by petitioner are not the legal or physical impossibilities contemplated in the said article. petitioner obtained from the MHS a Temporary Use Permit for the proposed rock crushing project. Besides. 2. At any rate.00 as rental payments for the one-month period of lease. Should you agree to the mutual termination of our Lease Contract. In its letter dated 24 April 1986. And it can be gleaned from this letter that petitioner has considered the permit as industrial clearance.Obligations and Contracts xxx xxx xxx 11. bind both contracting parties. 1986 when the Notice of Termination was served on private respondents. petitioner is estopped from claiming that the Temporary Use Permit was not the industrial clearance contemplated in the contract. however.00 as rental payments for the one-month period of the lease. .Aside from the letter mentioned in no. petitioner states: A2010 page 97 Prof. and not from the date of signing of the contract. This theory is said to be the basis of Article 1267 of the Civil Code. . in whole or in part." . ." not the alleged insufficiency of the Temporary Use Permit. it can be deduced from another letter by petitioner that the suspensive condition . with legal interest from January 7. payment of rental would commence on the date of the issuance of an industrial clearance by the MHS. and once these conditions cease to exist. Upon the termination or expiration of the period of lease without the same being renewed. the parties stipulate in the light of certain prevailing conditions.On 12 April 1989. ISSUES 1. once perfected. WON the Temporary Use Permit is the Industrial Clearance referred to in the contract 2. Labitag “We wish to reiterate PNCC Management's previous stand that it is only obligated to pay your clients the amount of P20." and not to obligations "to give". NO . the contract also ceases to exist. private respondents instituted an action against petitioner for Specific Performance with Damages. recognizes exceptions.000 which was due and payable upon the execution of the contract. The letter states: “Please be advised of PNCC Management's decision to cancel or discontinue with the rock crushing project due to financial as well as technical difficulties. private respondents wrote petitioner requesting payment of the first annual rental in the amount of P240. This article. . .Upon appeal by petitioner. valid for 2 years unless sooner revoked by MHS.

The private respondent sent two demand letters to petitioners. proposing to settle their obligation.88. petitioners claimed that they had fully paid their obligation to private respondent. in the alternative. dated July 3.000. 1985. 1 1/2% monthly service charge.Anent petitioner's alleged poor financial condition.000.” . broken down as follows: Principal P295. They unquestionably suffered pecuniary losses because of their inability to use the leased premises. i. under Art. The damage or prejudice to private respondents is beyond dispute. obligations. a new loan agreement was entered into by the parties containing identical provisions as the first one. Art.Obligations and Contracts absolutely exceptional changes of circumstances that equity demands assistance for the debtor. there allegedly was condonation). NO . The cause or essential purpose in a contract of lease is the use or enjoyment of a thing. the parties in this case entered into a Loan Agreement with Assumption of Solidary Liability whereby petitioners were given a loan of P500. 1999 FACTS . 2% monthly penalty.e. penalties. except as to the annual interest which was increased to 14% and the service charge which was reduced to 1% per annum.000.00 by private respondent.00 evidenced by two promissory notes. and 10% attorney’s fees. as of July 31. receipt of which was acknowledged by Destajo. the motive or particular purpose of a party in entering into a contract does not affect the validity nor existence of the contract. Petitioners subsequently obtained a second IGLF loan of P300. they are entitled to indemnification for damages. through its counsel. 1986. The contract provided for the payment of 12% annual interest. . private respondent.146. A2010 page 98 Prof. They later wrote private respondent a letter. the same will not invalidate the contract.00 Penalties 254..146. that it would reduce the penalty charges up to P140. For this purpose. On July 2. par. The non-use of the permit and the non-entry into the property subject of the lease contract were both imputable to petitioner and cannot. The temporary permit was valid for two years but was automatically revoked because of its nonuse within one year from its issuance.On May 10. par. to use the leased premises as a site of a rock crushing plant. are considered movable property. . computed as of July 31. dated September 4. 3 provides that the donation and acceptance of a movable. amounted to P266.47.” ISSUE WON petitioners are liable for the payment of the penalties and service charges on their loan which. 4. 2 of the Civil Code provides that express condonation must comply with the forms of donation. . during which the latter agreed to waive the penalties and service charges (in short.001.469. less the earlier payment of P50. petitioners’ total liability to private respondent was P727. 748.00.As of July 31. ." PNCC entered into the contract of lease with private respondents with open eyes of the deteriorating conditions of the country. replied with a counter-offer. 1986.47 Interest 165.The amount of P410.000. therefore.000. Petitioners added that this fact of full payment is reflected in the voucher accompanying the Pilipinas Bank check they issued. seeking payment of the balance of P266.47) and the interest (P165.326. Denominated the first Industrial Guarantee and Loan Fund (IGLF). The deed of chattel mortgage was amended correspondingly. They contended that some time after receiving private respondent’s letter of July 2. In the YAM V COURT OF APPEALS MENDOZA. met with Carlos Sobrepeñas. . 1985. petitioner Victor Yam and his wife. 1270.00. dated June 18. and the award of P492. 1986.24 The exception does not apply here.854.854. . Elena Yam.00.88 HELD YES .On May 17.146.35. February 11. 1981 and September 30.385.00.This Court cannot subscribe to the argument that the abrupt change in the political climate of the country after the EDSA Revolution and its poor financial condition "rendered the performance of the lease contract impractical and inimical to the corporate survival of the petitioner. On November 4.000. 1981. The corresponding voucher for the check bears the following notation: “full payment of IGLF LOAN. an exception is when the realization of such motive or particular purpose has been made a condition upon which the contract is made to depend. 1986. be taken advantage of in order to evade or lessen petitioner's monetary obligation. As petitioners did not respond. 1986. 1.854.Art.47 by means of a Pilipinas Bank check.Petitioner cannot be heard to complain that the award is excessive. par. .000 is fair and just under the circumstances of the case.With regard to the non-materialization of petitioner's particular purpose in entering into the contract of lease.On this date. This is the reason why according to them they only paid P410.55 Service Charges 11. otherwise the same shall be void. for the foreclosure of the mortgaged machineries.000.47 was the sum of the principal (P295. Thus.88 plus interests. respectively. in accordance with Article 1659 of the Civil Code.00 on the second loan. As a general principle. Labitag private respondent was placed under receivership by the Central Bank and Ricardo Lirio and Cristina Destajo were appointed as receiver and in-house examiner. president of respondent corporation.001. and service charges or. provided petitioners can pay their obligation on or before July 30.00) less the partial payment of P50. petitioners paid P410. 1979. By April 2. actually referring to credits. petitioners made a partial payment of P50. nor does it constitute a defense to an action for specific performance.469. Mere pecuniary inability to fulfill an engagement does not discharge a contractual obligation. the loan was secured by a chattel mortgage on the printing machinery in petitioners’ establishment.00. the value of which exceeds P5. 1986. provided petitioners paid the principal and interest. must be made in writing. Disposition Petition is DENIED. 1986 (concerning the conditional offer to reduce their penalty charges). namely. private respondent filed this case in the Regional Trial Court of Metro Manila for the collection of P266. which bore the notation “full payment of IGLF loan. 1986 and September 25.385.In their Answer. 417.000. 1986. the same will neither release petitioner from the binding effect of the contract of lease.35 . petitioners had paid their first loan of P500.33 TOTAL P 727. 1986.820. In this connection.

it being a "trust fund for the benefit of the lawyer. compensation cannot extend to unliquidated. That judgment became final. Compensation takes place when two persons.000.In 1961 the latter filed an ejectment case against the former. de Leon filed before CFI Manila a complaint for the collection of the said accounts including accrued interest thereon in the amount of P 661. Such credit. which he had offered to but was refused by the plaintiff. and at the same time demanded the rents in arrears at the old rate in the aggregate amount of P4." the sum of P500 could not be the subject of legal compensation. are not present in the instant case. it is undisputed that the alleged agreement to condone P266. [3] that the two debts be due.00. but upon appeal the CFI.320. ISSUE WON the award for attorney’s fees may be the subject of legal compensation HELD YES .000. in their own right. and ordered the plaintiff to pay the defendant the sum of P500 as attorney's fees. HELD Ratio Compensation is not proper where the claim of the person asserting the setoff against the other is not clear nor liquidated.The award for attorney's fees is made in favor of the litigant. Davao City. namely. 1279). May 21.200 as unrealized profit for a supposed commission that Silahis should have received from de Leon for the sale of sprockets made directly to Dole Philippines. The plaintiff obtained a favorable judgment in the municipal court. 1989 NATURE Petition for certiorari to review the decision of IAC disallowing Silahis Marketing Corporation’s counterclaim for commission to partially offset the claim against it of Gregorio de Leon (doing business under the name and style of Mark Industrial Sales) for the purchase price of certain merchandise." . Labitag Disposition The judgment of the Court of Appeals was reversed. Costs against respondent. Civil Code) and that each one of them must be bound principally and at the same time be a principal creditor of the other (Art.00.Silahis admitted the allegations insofar as the invoices were concerned but presented a debit memo for P 22.320 for unpaid rents. Inc without coursing the same through Silahis. which would have to be turned over by the client to his counsel.In the opinion of said Court. 1969 FACTS . . holding that although "respondent Ong is indebted to the petitioner for unpaid rentals in an amount of more than P4. not of his counsel. A2010 page 99 Prof. and that he be at the same time a principal creditor of the other.00 plus costs of litigation.On various dates in Oct-Dec 1975. It is the litigant. . SILAHIS MARKETING CORP V IAC FERNAN. . reversed the judgment and dismissed the complaint.000. the requisites of legal compensation. . disputed claim existing from breach of contract.03 and attorney's fees of P 5. [2] that both debts consist in a sum of money. Quite obviously it would be unjust to compel petitioner to pay his debt for P500 when admittedly his creditor is indebted to him for more than P4. ISSUE WON de Leon is liable to Silahis for the commission or margin for the direct sale which the former concluded and consummated with Dole Philippines. corresponding to a period from August 1961 to October 1963.Ong Wan Sieng was a tenant in certain premises owned by Gan Tion. are creditors and debtors to each other.The appellate court accepted the petition but eventually decided for the respondent. claiming that Ong Wan Sieng was indebted to him in the sum of P4. since the real creditor with respect to the sum of P500 was the defendant's counsel. at P180 a month.Gan Tion went on certiorari to the Court of Appeals. . GAN TION V COURT OF APPEALS MAKALINTAL. it is necessary: [1] that each one of the obligors be bound principally. may properly be the subject of legal compensation. and the writ of execution issued by the CFI of Manila is set aside. . Disposition the decision of the Court of Appeals is AFFIRMED.Obligations and Contracts case at bar. and also of the same quality if the latter has been stated. or if the things due are consumable. Defendant denied the allegation and said that the agreed monthly rental was only P160. and to have the corresponding amount cancelled from its account with de Leon. 1963 Gan Tion served notice on Ong Wan Sieng that he was increasing the rent to P180 a month. alleging nonpayment of rents for August and September of that year. or P360 altogether. IAC set aside the RTC decision and dismissed herein Silahis’ counterclaim for lack of factual or legal basis.75 payable within 30days from date of the covering invoices. Borden International.213. not his counsel. that the parties must be creditors and debtors of each other in their own right (Art. . December 7.On October 10. . who is the judgment creditor and who may enforce the judgment by execution. Allegedly due to Silahis' failure to pay its account upon maturity despite repeated demands. where he pleaded legal compensation.88 of the second IGLF loan was not reduced in writing. and is justified by way of indemnity for damages recoverable by the former in the cases enumerated in Article 2208 of the Civil Code. effective November 1st. they be of the same kind.146. 1278. De Leon sold and delivered to Silahis various items of merchandise in the aggregate amount of P22. FACTS . Article 1279 of the Civil Code provides that: “In order that compensation may be proper. Silahis also claim that it is entitled to return the stainless steel screen which was found defective by its client.RTC confirmed the liability of Silahis for the claim of de Leon but at the same time ordered that it be partially offset by Silahis' counterclaim as contained in the debit memo for unrealized profit and commission. Inc in violation of their usual practice.Ong Wan Sieng was able to obtain a writ of execution of the judgment for attorney's fees in his favor.

Labitag 1. but CA reversed and ordered BPI to credit the amount to Reyes’ account. 1991). [5] that over neither of them there be any retention or controversy. The US treasury requested BPI for a refund. 1990 (when he closed the account) that his co-depositor. Article 1279 states that in order that compensation may be proper. YES Ratio: Compensation shall take place when two persons. Reyes assured the bank and verbally authorized them to debit from his joint account the amount in the warrant. a depositor. Reyes deposited the check in the joint account with the grandmother. RTC dismissed for lack of cause of action. and also of the same quality if the latter has been stated. he was informed that the treasury check was the subject of a claim of Citibank. Disposition Decision (of CA) is set aside and judgment of RTC is reinstated.Obligations and Contracts 100 [4] that they be liquidated and demandable. The debit memo is not a binding contract since it was not signed by de Leon nor was there any mention therein of any commitment by the latter to pay any commission to the former involving the subject sale of sprockets. and when he did. 1996 NATURE Petition for review of decision of CA FACTS . 2. He concealed from BPI the death of his grandmother. Inc. compensation takes effect by operation of law. it was proven that he indeed gave his verbal authorization. By his acts. Worse. is still living (note: in joint “and/or” accounts. Disposition Decision affirmed. in their own right.Reyes maintained two joint “and/or” accounts in BPI Cubao branch: one with his wife and another with his grandmother. private respondent has stripped himself of credibility. . FACTS . the last US Treasury Warrant was dishonored as it was discovered that it was issued 3 days after the (pensioned) grandmother died. The obligors bound principally are at the same time creditors of each other. Reyes received an urgent telegram requesting him to contact the bank. Few days later. or if the things due are consumable. He filed suit for damages. But whether de Leon is liable to pay Silahis a 20% margin or commission on the subject sale to Dole Philippines. They are not claimed by a third person.” He claimed that because of the debit. WON Reyes gave a verbal authorization to transfer funds from the joint account with his wife 2. even though the creditors and debtors are not aware of the compensation. and demandable. A US Treasury Warrant dated January 1. BPI stands as a debtor of Reyes. Reasoning: Article 1290 of the Civil Code provides that “when all the requisites mentioned in Article 1279 are present. .” Legal compensation operates even against the will of the interested parties and even without the consent of them. he declared under the penalties of perjury in the withdrawal slip dated March 8. Reasoning Silahis admits the validity of its outstanding accounts with de Leon. Treasury Warrant which the latter illegally transferred to his joint account. A month later. (4) That they be liquidated and demandable. demanded from BPI restitution of the debited amount. Reyes’ claim that he gave no such authorization was uncorroborated and he does not inspire credence for his previous fraudulent acts. Almost a year later (January 16. The debts involved consist of a sum of money. WON legal compensation was proper in this case (legal compensation was alleged by the bank in the appeal) HELD PHILIPPINE NATIONAL BANK V COURT OF APPEALS PANGANIBAN. July 24. depositors sign in the deposit slip a statement that has the effect of “I certify that my co-depositor is still alive”). (2) That both debts consist in a sum of money. MARCH 29. is vigorously disputed. commenced by third persons and communicated in due time to the debtor. At the same time. Also. liquidated. 1989 without the knowledge of the US Treasury. 1990). (3) That the two debts be due. BPI V REYES PUNO.2 months after (March 8.The grandmother died on December 28. ISSUES 1. it is necessary: (1) That each one of the obligors be bound principally. (5) That over neither of them there be any retention or controversy. Inc. 1990 was still sent to her in the amount of $377 (P10. Reyes closed the joint account with his grandmother and transferred the funds to the joint account with his wife. He normally deposits US Treasury warrants payable to the order of his grandmother (as a monthly pension) in the latter joint “and/or” account. -There is no evidence on record from which it can be inferred that there was any agreement between Silahis and de Leon prohibiting the latter from selling directly to Dole Philippines. Reyes went to the bank with his lawyer and “surprisingly. The US Veterans Administration Office in Manila conditionally cleared the check and sent the same to the US for further clearing. 1996 NATURE Appeal assailing the petition of Court of Appeals affirming decision of Regional Trial Court. said bank is the creditor of Reyes with respect to the dishonored U.556). . are creditors and debtors of each other.The elements of legal compensation are all present in the case at bar.S. They are due. and extinguishes both debts to the concurrent amount. knew she was no longer entitled to receive pension and yet still deposited the warrant received after the death. they be of the same kind. A2010 page Prof. commenced by third persons and communicated in due time to the debtor. YES Ratio: There was verbal authorization as it was proven by preponderance of evidence Reasoning: Based on the testimony of the bank manager and the assistant bank manager. he failed to withdraw his money when he needed them. This circumstance prevents legal compensation from taking place. and that he be at the same time a principal creditor of the other.

1973-1974 and 1974-1975 under a crop loan financing scheme.The Supreme Court regarded this as a clever ploy to validate an improper act of PNB with the possible intention of using this case as a precedent for similar acts of interception in the future. They are debtor-creditor only with respect to the double payments under a quasicontract (ART 2154 Civil Code. 2. Reasoning While it may be concluded that Lapez owes PNB the equivalent of the sums of $5. and eventually to be deposited to the account of an individual who owes money to PNB. 1 where the relationship between PNB and Lapez depends on the obligation. . it will also erode the trust and confidence of the international banking community in the banking system of the country. having Lapez as beneficiary. it is necessary: 1. Withal the telegraphic money transfer.11 supposed to be remitted to another bank is not only improper. 4. . notwithstanding the Decision saying that it could not be done. .) No. That both debts consists in a sum of money xxx. .11. That each one of the obligors be bound principally. hence there is no need for petitioner bank to actually return the amount. have the right to intercept funds being coursed through it by its foreign counterpart for transmittal and deposit to the account of an individual. That over neither of them there be and retention or controversy. but are trustee-beneficiary as to the fund transfer of $2. commenced by third persons and communicated in due time to the debtor. In 1973-1974. .627. ISSUE WON a local bank. The following crop year. The decree further authorized PNB to finance PHILEX's purchases.Obligations and Contracts 101 .627. the Department of Trade and Industry. The set-off or compensation against the double payments is not in accordance with law.Exercising his law-making powers under Martial Law. 579 2 in November. 1974.Plaintiff demanded upon PNB for remittance of the equivalent of $2. overhead expenses and liabilities had been deducted. and apply said funds to certain obligations owed to it by the said individual HELD Ratio PNB was is obligated to pay Lapez the amount of US $2.11 or its peso equivalent.00 per picul..44.36 of which were assigned for export. . That they be liquidated and demandable.23 and $5.The Mirasols are sugarland owners and planters. . Court ordered PNB to return the intercepted amount to said individual who in turn was found by CA to be indebted to PNB. with interest at the legal rate.PNB applied/ appropriated the amounts of $2. 3. 25.38 erroneously credited to his account. For this PNB demanded upon the plaintiff for refund the double credits erroneously made on plaintiff’s account. 3.885.The deduction of P43. February 1.11 by means of a letter.679. 4. as creditor and the Citibank as debtor.The amount stated in the telegraphic money transfer is to be credited in Lapez’s account with Citibank. and presupposes a creditor-debtor relationship between the A2010 page Prof.According to the theory of PNB: 1. as with PNB and National Commercial Bank of Jedah. The price and quantity was determined by the Sugar Quota Administration.340.It would have been different had the telex advice from NCB of Jeddah been for deposit to plaintiff’s account with the defendant bank (it was for Lapez’s account in Citibank).885. Under said scheme. 5.100 piculs of sugar. after commissions. First remittance was made by the NCB of Jedah for the benefit of Ramon Lapez (petitioner) to be credited at his account at Citibank Greenhills.38 from remittances of the plaintiff’s principal abroad.08 piculs 1 of sugar. The Chattel Mortgage empowered PNB as the petitioners' attorney-in-fact to negotiate and to sell the latter's sugar in both domestic and export markets and to apply the proceeds to the payment of their obligations to it.38 amounting to an aggregate amount of P87. and a Real Estate Mortgage in favor of PNB. Finally. Therefore there must now be legal compensation of the amounts each owes the other. a Chattel Mortgage on Standing Crops. .627. pour autrui – a stipulation in facor of a third person.430. the Mirasols signed Credit Agreements. second was from Libya and was intended to be deposited at the plaintiff’s account with PNB. 830-2410 was doubly credited with the equivalents of $5. then President Ferdinand Marcos issued Presidential Decree (P.23 and $5. their acreage planted to the same crop was lower.662. Labitag plaintiff. the decree directed that whatever profit PHILEX might realize from sales of sugar abroad was to be remitted to a special fund of the national government. 1279: In order that compensation may prosper. Lapez is obliged to return the double-credits). 2001 FACTS . The decree authorized private respondent Philippine Exchange Co. . All that PNB can do is transmit the telegraphic money transfer to Citibank so that the amount can be promptly credited to Lapez’s account with the same bank. no such creditor-debtor relationship could have been created between the plaintiff and defendant.58 was made by PNB not without the knowledge and consent of the plaintiff who was issued a receipt by PNB. except for no. MIRASOL V CA QUISUMBING. by the Office of the President.11 and P34. and that he be at the same time a principal creditor of the other.627. . Inc. That the two debts are due.11 requisites 2 through 5 are present. the defendant’s actuation in intercepting the amount of $2.Private respondent Philippine National Bank (PNB) financed the Mirasols' sugar production venture for crop years.D. Finally. and finally. (PHILEX) to purchase sugar allocated for export to the United States and to other foreign markets.696. PNB. for transmittal to another bank. Code of Civil Procedure ART. The government offices and entities tasked by existing laws and administrative regulations to oversee the sugar export pegged the purchase price of export sugar in crop years 1973-1974 and 1974-1975 at P180. yielding 65.179. while acting as local correspondent bank. they produced 70. one in November 1980 and the other in January 1981 when the plaintiff’s account No. CA ruled that petitioner bank could not do a shortcut and simply intercept funds coursed through it. 2.627.501.In the case of $2. the petitioner ends up in the same position as when it first took the improper and unwarranted shortcut when it intercepted the transfer.There were two instances in the past.40 piculs marked for export.627. .380. with 23.

the Court of Appeals did not err in holding that lack of the required notice made it improper for the trial court to pass upon the constitutional validity of the questioned presidential decrees. international or executive agreement. For legal compensation to take place.78.410. if properly liquidated. Believing that the proceeds of their sugar sales to PNB. the requirements set forth in Articles 1278 and 1279 of the Civil Code must be present. 1977. without having to rule on the constitutionality of P. "As to the second set of accounts. the foreclosure was invalid and of no effect. since the mortgages were already fully discharged. 1982. YES. We are offered (sic) PNB the amount of FIFTEEN MILLION NINE HUNDRED SIXTY FOUR THOUSAND TWO HUNDRED FIFTY TWO PESOS and NINETY THREE Centavos (Ps15. p.93. Pivotal issue: In this case. 2. the balance of outstanding sugar crop and other loans owed by petitioners to PNB stood at P15. WON the Trial Court has jurisdiction to declare a statute unconstitutional without notice to the Solicitor General where the parties have agreed to submit such issue for the resolution of the Trial Court (whether it was proper for the trial court to have exercised judicial review) 2.Petitioners continued to ask PNB to account for the proceeds of the sale of their export sugar for crop years 1973-1974 and 1974-1975.00 by way of dacion en pago. p. It is also averred that they agreed to the dacion only by virtue of a martial law Arrest. The Court of Appeals correctly ruled that PNB's obligation to render A2010 page Prof. PNB proposed. 3. petitioners continued to avail of other loans from PNB and to make unfunded withdrawals from their current accounts with said bank. In other words. insisting that said proceeds. ISSUES 1. Nor did the trial court ever require him to appear in person or by a representative or to file any pleading or memorandum on the constitutionality of the assailed decree.410. .00) (PNB's Brief. treaty." 25 . To resolve the third issue. 16) On the question of how much the PNB lent the Mirasols for crop years 1973-1974 and 1974-1975. Thus we cannot rule on the constitutionality of P. 3. pp.551.D. No. 579. PNB and PHILEX are separate juridical persons and there is no reason to pierce the veil of corporate personality.D.466. order. the requisite that the constitutionality of the law in question be the very lis mota of the case is absent. PNB then asked petitioners to settle their due and demandable accounts. . WON the Honorable Court of Appeals committed manifest error in upholding the validity of the foreclosure on petitioners property and in upholding the validity of the dacion en pago in this case.93) but this is the alleged balance the Mirasols owe PNB covering the years 1975 to 1982. PNB ignored the request. PNB remained adamant in its stance that under P. PNB still had a deficiency claim of P12. Search. No. No. but in all Regional Trial Courts. it being undisputed that PNB acted as petitioners' agent. The account relative to the Mirasol's current account Numbers 5186 and 5177 involving the amount of THREE MILLION FOUR HUNDRED THOUSAND Pesos (P3.252. . the PNB foreclosed the Mirasols' mortgaged properties realizing therefrom in 1982 THREE MILLION FOUR HUNDRED THIRTEEN THOUSAND Pesos (P3. presidential decree. the evidence recited by the lower court in its decision was deficient.We note." 4.513. Both existed by virtue of separate organic acts. The Constitution vests the power of judicial review or the power to declare a law. (PNB's Brief.964. WON PD 579 and subsequent issuances 7 thereof are unconstitutional.466.000. 579. 5. No. petitioners asked PNB for an accounting of the proceeds of the sale of their export sugar. 16-17). Despite demands. The governing law should be the law on agency. however. the PNB itself having acquired the properties as the highest bidder. WON the Honorable Court of Appeals committed manifest error in not applying the doctrine of piercing the corporate veil between respondents PNB and PHILEX. 26 Petitioners nonetheless insist that the same can be offset by the unliquidated amounts owed them by PNB for crop years 1973-74 and 1974-75. namely: "1. Petitioners submit that PHILEX was a wholly-owned subsidiary of PNB prior to the latter's privatization. The present case was instituted primarily for accounting and specific performance. HELD 1. 17) HTSaEC "In regard to the first set of accounts. Hence. the appellate court found that there were two sets of accounts between petitioners and PNB. Petitioners' argument has no basis in law. These crop loans and similar obligations were secured by real estate mortgages over several properties of the Mirasols and chattel mortgages over standing crops. Meanwhile. On the fourth issue.00) PNB claims against the Mirasols. WON the Honorable Court of Appeals committed manifest error in not awarding damages to petitioners grounds relied upon the allowance of the petition. . Petitioners insist that the loans granted them by PNB from 1975 to 1982 had been fully paid by virtue of legal compensation. there was nothing to account since under said law. were more than enough to pay their obligations. all earnings from the export sales of sugar pertained to the National Government and were subject to the disposition of the President of the Philippines for public purposes. conveyed to PNB real properties valued at P1.93.On August 10.000. The accounts relative to the loan financing scheme entered into by the Mirasols with PNB (PNB's Brief. 579. which is applicable to PNB's intransigence in refusing to give an accounting. 14725. Both the lower court and the appellate court found that the Mirasols admitted that they were indebted to PNB in the sum stated in the latter's counterclaim. or regulation not only in this Court. They had separate operations and different purposes and powers. if properly accounted for.347. instruction. could offset their outstanding obligations with the bank. which can be determined.D. 579. and Seizure Order (ASSO). a dacion en pago scheme by which the Mirasols conveyed to PNB pieces of property valued at ONE MILLION FOUR HUNDRED TEN THOUSAND FOUR HUNDRED SIXTY-SIX Pesos (Ps1. the Mirasols failed to settle said due and demandable accounts. In fact there is nothing in P. PNB then proceeded to extrajudicially foreclose the mortgaged properties. petitioners ask us to apply the doctrine of piercing the veil of corporate fiction with respect to PNB and PHILEX. ordinance.Obligations and Contracts 102 . besides the proceeds from PNB's sale of sugar (involving the defendant PHILEX in relation to the export portion of the stock). Hence. 4. petitioners on August 4. "2.00).Petitioners now claim that the dacion en pago and the foreclosure of their mortgaged properties were void for want of consideration. As a result of these demands for payment.413. Labitag an accounting is an issue.964. Said articles read as follows: . After applying the proceeds of the auction sale of the mortgaged realties. the Solicitor General was never notified about Civil Case No.D.400.252. that the appellate court made the following finding of fact: "1.PNB continued to finance the sugar production of the Mirasols for crop years 1975-1976 and 1976-1977. and the Mirasols accepted. leaving an unpaid overdrawn account of P1.We find petitioners' arguments unpersuasive.252.

5111 were the defendants in Civil Case No. who are the plaintiffs in Civil Case No. 1976 FACTS . Absent such showing. Labitag . and that the Decision in Civil Case No. neither PNB nor PHILEX could retain any difference claimed by the Mirasols in the price of sugar sold by the two firms.As a result. misrepresentation and concealment of the true facts of the . .Gabriel failed to pay. and vice-versa. as the same cannot be deemed liquidated. incompatibility arises. DORMITORIO V FERNANDEZ FERNANDO.D. (4) That they be liquidated and demandable. Petitioner obtained writs of execution.Thus. compensation cannot take place where one claim. . August 21.Gabriel pleaded with Millar to release the jeep under a chattel mortgage where the former. 5111 shall not be enforced and executed anymore. 1965. to secure payment of the judgment debt..Implied novation requires clear proof of complete incompatibility between two obligations. and also of the same quality if the latter has been stated. That by means of fraud. 1971 NATURE Petition for review on certiorari to review the decision of the Court of Appeals holding that the mortgage obligation superseded. and that he be at the same time a principal creditor of the other. 6553.Second." In the present case.Obligations and Contracts 103 "ARTICLE 1278. is still the subject of litigation. A2010 page Prof. neither of the parties are mutually creditors and debtors of each other. "ARTICLE 1279 In order that compensation may be proper. petitioners have failed to show malice or bad faith 32 on the part of PNB in failing to render an accounting. 579. 5111 and Civil Case No. 579 prescribed where the profits from the sales are to be paid. Under P. 6553 are the same except that the plaintiffs in Civil Case No.95 to P1. not liquidated damages Chattel agreement clearly shows purpose as solely to secure the satisfaction of the then existing liability. it was agreed by defendant spouses Dormitorio. Inc. Compensation shall take place when two persons. . commenced by third persons and communicated in due time to the debtor. judgment debt. or if the things due are consumable. MILLAR V CA CASTRO. they be of the same kind. in their own right.That in the "Agreed Stipulation of Facts" in Civil Case No.." . the balance of the proceeds of sugar trading operations for every crop year shall be set aside by the Philippine Exchange Company. April 30.700 in two installments on fixed dates . Sheriff levied on property of respondent for execution sale.95 .The parties Lazalita and spouses Dormitorio in Civil Case No. mortgaged the jeep in favor of Millar. it is necessary: (1) That each one of the obligors be bound principally. CV 38607 AFFIRMED. No. such changes do not effectuate any substantial incompatibility between the 2.Where the new obligation merely reiterates the old obligation. The same applies to attorney’s fees and costs of suit Disposition Petition is DENIED and the assailed decision of the respondent court in CA-G. (3) That the two debts are due.700 Stipulates mode of payment in 2 installments while orig contract doesn’t Obligates Gabriel to pay liquidated damages in case of his default Secured the obligation. as correctly found by the Court of Appeals. The test is WON two oblig can stand together.746.. In the instant case. (5) That over neither of them there be any retention or controversy. No. unsecured SC Gabriel made partial payments between rendition of judgment and execution of chattel mortgage Stipulation for payment under chattel mortgage serves only as specific method for extinguishments Amount was paid as attorney’s fees. If they cannot. 5111 that the defendant Serafin Lazalita should be reimbursed for his expenses in transferring his house to another Lot to be assigned to him by the Municipality of Victorias. moral damages cannot be awarded.R. are creditors and debtors of each other." . to wit: "SECTION 7 .746. . the judgment debt FACTS . After deducting its commission of two and one-half (2-1/2%) percent of gross sales.Petitioner moved for the issuance of a writ of execution . Disposition The decision of CA of implied novation is set aside. 6553 which was the basis of the Honorable Court judgment dated February 12. . and the second oblig novates the first. holding that subsequent agreement of the parties impliedly novated the judgment obligation ISSUE WON the subsequent agreement of the parties as embodied in the deed of chattel mortgage impliedly novated the judgment obligation HELD NO Ratio CA – the chattel mortgage: Limits principal oblig from P1.The chattel mortgage provided payment of P1. (2) That both debts consist in a sum of money. sheriff seized Gabriel’s jeep . as in the instant case.Gabriel filed motion for suspension of the execution sale on the ground of satisfaction of payment by implied novation.The law requires no specific form. P.CA decided for Gabriel. 5. Reasoning .Petitioner Millar obtained a favorable judgment from CFI condemning Antonio Gabriel to ay P1. "there was nothing with which PNB was supposed to have off-set Mirasols' admitted indebtedness. . as profits which shall be paid to a special fund of the National Government subject to the disposition of the President for public purposes. through implied novation.D. set-off or compensation cannot take place between the parties because: First. .

Lot No. or pay back Lazalita the amount necessary and just for plaintiff to acquire another lot for his residence. from the defendant Municipality of Victorias. and which said "Agreed Stipulation of Facts" was the basis for the judgment of the Honorable Court dated February 12. Labitag Municipality of Victorias is willing to amicably settle the case. to said Dormitorio. to Lazalita.. because of the value of his permanent improvements and building introduced or constructed on Lot No. this petition must be dismissed. Block 16. to vacate the land and to pay a monthly rental of P20. Jose F. up to the present. brought a suit against the plaintiff Lazalita. .00. the Court of First Instance of Negros Occidental. Lazalita.The “Agreed Stipulation of Facts” states: “The Municipality of Victorias.Obligations and Contracts 104 case. for there is a later decision expressly superseding the earlier one relied upon on which the writ of execution thereafter set aside was based.. Road known as "Jover Street" and that the lot presently occupied by him. it is plain that in no case were the subsequent arrangements entered into with any unqualified intention to discard or replace the judgment in favor of the plaintiff-appellee. Block 16 of the subdivision plan of Victorias. ISSUE WON Judge Fernandez committed a grave abuse of discretion when he ordered to set aside the writ of execution based on the “Agreed Stipulation of Facts” entered into by the plaintiffs and defendants in Civil Case No. by giving the plaintiff another lot. after judgment has become final. no substitution of obligations could possibly take place. it was contended that a lower court decision was novated by subsequent agreement of the parties. the plaintiffs were able to mislead the Honorable Court. was placed in possession of the said Lot No. a private Land Surveyor.00 to P25. Acuña. the spouses Agustin Dormitorio and Leoncia D. are saleable at present. valued at P5. and joined the Dormitorios. Reyes: "Appellants understood and expressly agreed to be bound by this condition. the original purchase price of the land. he had occupied by same. bought by the spouses Dormitorio from the Municipality of Victorias. they have purchased from the defendant Municipality of Victorias. 1961 in the above-entitled case which is no longer enforceable. arrived at as the result of a compromise between the same parties. was issued him by the Register of Deeds. Presided over by Hon. That the present fair market value of residential lots in the Poblacion of Victorias. which building and improvements. by the persons designated by the Municipality to take charge of the sale of said lots to the people. On December 12. 6553. In Santos v. Fernandez. 1958. B. have far exceed then.. Nonetheless. Block 16 payable in installment and in the year 1958. ascertained to be that. is supposed to be the lot No. About the year 1955. it was not granted. and on such other basis just and equitable." Respondent Judge granted the relief prayed for and set aside the writ of execution.:" . ranges between P15. evidenced by the agreed stipulation of facts. 1961 is still enforceable and executory. and executory by virtue of the "Agreed Stipulation of Facts" entered into by the Plaintiffs and Defendants in Civil Case No. have not taken actual possession of the land.000. in view of the conclusion reached by him that such later decision. is the owner of several parcels of lands which were consolidated and subdivided into small lots for sale to the inhabitants thereof. was hired by the Municipality of Victorias. Dormitorio. was converted into the new Municipal.00. rendered judgment in that case No. thru an Ex-Parte Motion to issue by mistake an Order for the issuance of a Writ of Execution by making this Honorable Court believe that the Decision of September 5. Lazalita had been in full and peaceful possession of the said land.. there has not been a change in the location thereof.There was no grave abuse of discretion when Judge Fernandez set aside the writ of execution. when they stipulated that "they will voluntarily deliver and surrender possession of the premises to the plaintiff in such event" . Branch V. 1. without special pronouncement of costs. upon full payment by plaintiff Lazalita of the purchase price of the land.. bought from the Municipality of Victorias. on the basis of the foregoing agreed stipulation of facts. That the A2010 page Prof. 5111.00 per square meter and the lots in controversy. ordering the plaintiff herein Lazalita. 1948.. He had no choice on the matter. L.The parties did respectfully pray "that judgment be rendered by this Honorable Court. the spouses Dormitorio. now registered in plaintiff's name. who tried to settle the matter between the parties — Dormitorio and Lazalita. 2. brought this present action. As noted at the outset. for as explained by the ponente.Insofar as pertinent. and it was found out that the Lot sold by the Municipality of Victorias. . if they could open their newly proposed subdivision. That was made even more evident in the answer to the petition filed by respondents. and he introduced permanent and valuable improvements thereon and built a house of strong materials. Hence. Justice J. was clear proof of an animus novandi and thus superseded the previous judgment which as a result of an ex parte motion was mistakenly ordered executed. as formal parties." So it was granted in the disposition portion of such decision: "[Wherefore]. now before this Honorable Court. 2. and for the expenses of transferring his present residential house thereto. 6553 HELD NO ." When. facts and circumstances transpire which render its execution impossible or unjust. and so. a) What was done by respondent Judge in setting aside the writ of execution in Civil Case No." . T-23098 covering the property. availing of the said discovery. 1965. judgment is hereby rendered in accordance with the above-mentioned Agreed Stipulation of Facts. 1. purchased also.00 per square meter. in favor of Dormitorio. the assailed order is worded thus: "That the above-mentioned order of Execution to be set aside is based on the decision of the Honorable Court dated September 5.. and without such intent or animus novandi. a deed of definite sale was executed in his favor by the then Municipal Mayor Montinola of Victorias and thereafter a Certificate of Title No. having failed to appeal from said judgment in Civil Case No. the spouses Dormitorio. until about eight continuous years thereafter. Lazalita. at P20. Later. as described in the Certificate of Title covering the property. up to the present. It must have been the realization by petitioners that certiorari certainly did not lie that led to their not only failing to make an attempt at a refutation of what was asserted in the answer but also failing to appear at the hearing when this case was set for oral argument. and from the time. for Ejectment and the conflict between them was made known to the office of the Municipal Mayor and the Council of Victorias. very lot purchased by Dormitorio from the defendant Municipality of Victorias. their lot known as Lot 2. de la Riva. . besides his Attorney's fees. However. however. From February 7. Serafin Lazalita. the interested party may ask the court to modify or alter the judgment to harmonize the same with justice and the facts" Molina v. against the Municipality of Victorias. Block 16. 5111 of this Honorable Court. . The present case is far stronger. Implicit in this Court's ruling is that such a plea would merit approval if indeed that was what the parties intended. 5111 finds support in the applicable authorities.

. Jarabe. but the rules contained in Arts. Inc. their undertaking will automatically be null and void. plus legal interest thereon from the date of the judicial demand. 3. The appellee did not protest nor object when it accepted the payment of P 5.On the same date. the appellee started this suit in the Municipal Court of Manila to enforce the collection. Inc. does not constitute a novation. 1959. Under the circumstances. paid to the appellee the sum of P 5. the appellee demanded from the appellants the payment of P 655. knowing its incompleteness or irregularity. 4. Labitag case directly to the Supreme Court for appeal. The mere fact that the creditor receives a guaranty or accepts payments from a third person who has agreed to assume the obligation. and the Luzon Surety Co.000 on account of the purchase price of the lot.000 because it knew that that was the complete amount undertaken by the surety as appearing in the contract. however. c) There is no merit likewise to the point raised by petitioners that they were not informed by respondent Judge of the petition by private respondent to set aside the writ of execution. until the whole amount is fully paid. HELD 1. when the obligation of the appellants became due and demandable. by implication. 1235 When the obligee accepts the performance. ordering the latter to pay jointly and severally the appellee the sum of P 655. In the instant case. his liability is confined to such obligation. executed a bond wherein the Surety will undertake the compliance with the obligation to pay the amount of P 5.89. Inc. He is to be commended. The lower court erred in not finding and declaring that their obligation in favor of the plaintiff-appellee was totally extinguished by payment and/or condonation. or that the will to novate appears by express agreement of the parties or in acts of similar import. Reasoning An obligation to pay a sum of money is not novated. That is a well-settled doctrine. not condemned.000. the obligation is deemed fully complied with. That was to act in accordance with law. payment of the principal shall not be deemed to have been made until interests have been covered. The lower court erred in not finding and declaring that the promissory note they executed in favor of the plaintiff-appellee was novated when the plaintiff-appellee unqualifiedly accepted the surety bond which merely guaranteed payment of the principal in the sum of P5.) a parcel of land in Quezon City. That was to free the order from the alleged infirmity. 1966 NATURE Appeal from a judgment of the CFI of Manila FACTS . appellants appealed to the CFI of Manila. 1957.Obligations and Contracts 105 b) Nor can it be denied that as the later decision in Civil Case No.It is very clear in the promissory note that the principal obligation is the balance of the purchase price of P 5.89. the payment of interest in the amount of P 655. it needs to be established that the old and new contracts are incompatible in all points. refused. the Luzon Surety Co. So they did. and in not finding and declaring that said plaintiffappellee waived or condoned the said interests. Petitioner’s claims 1. beyond the terms of his contract. The appellants brought the . in a new instrument wherein the old is ratified.On June 20. 7. the appellants executed a promissory note on Jan.89 which is the alleged accumulated interests on the principal of P 5. 2. it had the effect of res judicata. A2010 page Prof. NO . . Inc. with interest thereon at the legal rate. In the surety bond. 15 The parties were. Their complaint was that they were not heard. 1252 to 1254 of the Civil Code apply to a person owing several debts of the same kind of a single creditor. The order granting such petition was the subject of a motion for reconsideration. they were quite successful. Appellants are relying on Article 1253 of the Civil Code. . set matters right. To be sustained. the appellants and the Luzon Surety Co. therefore. WON there was a novation and/or modification of the obligation of the appellants in favor of the appellee when appellee accepted without reservation the subsequent agreement set forth in the surety bond 2. NO . the surety bond is not a new and separate contract but an accessory of the promissory note. 1958. They were given the opportunity to file a motion for reconsideration. Because of an unpaid balance of P 5. and to pay the costs. The liability of a surety is not extended. At first. ISSUES 1. Disposition Petition for certiorari is dismissed. 1253 If the debt produces interest.000 (the unpaid balance of the purchase price of the parcel of land) within 60 days from Jan. Petitioners then cannot be heard to claim that they were denied procedural due process. 1957. 000. The motion for reconsideration was thereafter denied. and the creditor can still enforce the obligation against the original debtor. the date of the filing of the complaint. 5. and without expressing any protest or objection.00 as attorney's fees. There was thus an element of bad faith when petitioners did try to evade its terms. There are later decisions to the same effect. undertook to pay this amount. from Nov.000 amounted to a waiver or condonation on its part. He set aside the writ of execution. WON the appellee’s unqualified acceptance of payment made by the Luzon Surety Co. Inc. the sum of P100. They cannot be made applicable to a person whose obligation as a mere surety is both contingent and singular.On Feb. Respondent Judge. 10. Not satisfied.89. by changing only the terms of payment and adding other obligations not incompatible with the old one or wherein the old contract is merely supplemented by the new one. The lower court erred in concluding as a fact from the pleadings that the plaintiffappellee demanded. upon being duly informed. 6553 was the result of a compromise. Art. 2. Inc. bound by it. This was made clear in Salazar v. 1958.The rule is settled that novation by presumption has never been favored. It is for the same reason that the appellee cannot apply a part of the P 5. of P 5. the failure to give notice to petitioners had been cured. They base their claims on Arts. December 17. and he is MAGDALENA ESTATES INC v RODRIGUEZ REGALA. Subsequently. when there is no agreement that the first debtor shall be released from responsibility. The CFI rendered a decision ordering the defendants-appellants to pay jointly and severally to the plaintiff -appellee the sum of P 655. It was also stated that the Surety shall be notified in writing within 10 days from moment of default otherwise.000 as payment for the accrued interest. the Luzon Surety Co.Appellants (Antonio and Herminia Rodriguez) bought from the appellee Magdalena Estates. Due to the refusal of the appellants to pay the said interest. the said court rendered judgment in favor of the appellee and against the appellants.000.000. 1235 and 1253 of the Civil Code: Art.

2 (d) of the Revised Penal Code.. A2010 page Prof. With respect to the remaining P43 million. Eleazar had the payment stopped. a domestic corporation engaged in credit financing. a domestic enterprise engaged in real estate development. Ritz Mansion International Corporation (BERMIC).On February 2. Inc. including government securities . Besides. However.After investigation.053.000. petitioner seeking the nullification of either of the two resolutions of the respondent Secretary of Justice filed a petition for certiorari.126.Obligations and Contracts 106 entitled to have all payments made applied exclusively to said application and to no other.151.00 from Eurotrust. Eurotrust delivered to AFP-MBAI treasury notes amounting to P73 million. Her motion for reconsideration was likewise denied in a Resolution 5 dated June 27.Office of the City Prosecutor of Quezon City issued a resolution recommending the filing of an information against Reyes for violation of BP 22 and estafa.Elsa Reyes is the president of Eurotrust Capital Corporation (EUROTRUST). . . Eurotrust offered to sell to AFP-MBAI various marketable securities.Reyes filed a petition for review of the said resolution with respondent Secretary of Justice contending that novation did not take place.72. The latter dismissed the petition on the ground that only resolutions of the prosecutors dismissing criminal complaints are cognizable for review by the Department of Justice. . The other respondent.637.At the time of the pendency of the cases filed by Elsa Reyes against Graciela Eleazar.Meanwhile. No.Reyes filed a petition for review with respondent Secretary of Justice. Bermic wrote to Eurotrust to hold the amounts "in constructive trust" for the real owners. . is the president of B.. 1992 which sustained the Provincial Prosecutor's decision dismissing petitioner's complaints against respondent Eleazar for violation of B. Instead it delivered 21 postdated checks in favor of AFP-MBAI which were dishonored upon presentment for payment. a total of 21 transactions were entered into between Eurotrust and AFP-MBAI.000.The first Department of Justice Resolution dated January 23. Inasmuch as the appellee cannot protest for non-payment of the interest when it accepted the amount of P5.Eurotrust and Bermic entered into a loan agreement.The Secretary of Justice dismissed the petition holding that "the novation of the loan agreement prevents the rise of any incipient criminal liability since the novation had the effect of canceling the checks and rendering without effect the subsequent dishonor of the already cancelled checks. Hence. From February 1990 to September 1990. Labitag AFP-MBAI. 1994. denied and dismissed her petition.11 and a check of P1-million. is a corporation duly organized primarily to perform welfare services for the Armed Forces of the Philippines. prompting Reyes to file against her several criminal complaints for violation of B.E. However. her checks issued in favor of Eurotrust were dishonored. and not mandatory. by buying from it government securities. Bermic issued 21 postdated checks to cover payments of the loan packages. nor apply a part of that amount as payment for the interest. Bermic negotiated with AFP-MBAI and DECS-IMC and made payments to the latter. the same were dishonored by the drawee bank. AFP-MBAI filed with the Office of the City Prosecutor of Quezon City a complaint for violation of BP 22 and estafa against Elsa Reyes. after deducting this partial payment. the representatives of Eurotrust and Bermic agreed that Bermic would directly settle its obligations with the real owners of the fundAFP-MBAI and DECS-IMC. respondent AFP-MBAI which invested its funds with Eurotrust. But Reyes continued to collect on the other postdated checks dated April 17 to June 28. Rizal Commercial Banking Corporation (RCBC). . extinguishing any criminal liability on the part of Eleazar. Disposition The judgment appealed from is affirmed with costs against appellants. In turn. prohibition and mandamus with the respondent court which. we cannot now say that there was a waiver or condonation on the interest due. In fact. the same was paid when Eurotrust assigned its Participation Certificates to AFPMBAI.80 to finance the construction of the latter's Ritz Condominium and Gold Business Park.P. 92-926. . Despite Eurotrust's notices and repeated demands to pay. 22 and estafa ruled that the contract of loan between petitioner and respondent Eleazar had been novated when they agreed that respondent Eleazar should settle her firm's (BERMIC) loan obligations directly with AFP-MBAI and DECS-IMC instead of REYES V SECRETARY OF JUSTICE 1996 FACTS . Eurotrust failed to return the said treasury notes. Pursuant to the said contract. (AFP-MBAI). the former borrowed the same securities but failed to return them to AFP-MBAI. when those checks were presented for payment. Eurotrust extended to Bermic P216. Graciela Eleazar later learned that Elsa Reyes continued to collect on the postdated checks issued by her (Eleazar) contrary to their agreement. the amounts of P73 million treasury notes with interest and P35.Reyes interposed the defense of novation and insisted that AFP-MBAI's claim of unreturned P73 million worth of government securities has been satisfied upon her payment of P30 million. due to stop payment order made by Graciela Eleazar. Art.711. Hence. 1991. Armed Forces of the Philippines Mutual Benefit Asso. 1991. .72 have remained unpaid.P. the Office of the Provincial Prosecutor of Rizal issued a resolution dismissing the complaints filed by Elsa Reyes against Graciela Eleazar on the ground that when the latter assumed the obligation of Reyes to .. . Bermic paid AFP-MBAI P31. this present petition. . AFP-MBAI lodged a separate complaint for estafa and a violation of BP 22 against Elsa Reyes with the office of the city prosecutor of Quezon City docketed as I. however. 1995.000 from the Luzon Surety Co. .AFP-MBAI decided to purchase several securities amounting to P120. . ." .However.151. Inc. Graciela Eleazar. So. it constituted novation. Eurotrust fraudulently borrowed all those treasury notes from the AFP-MBAI for purposes of verification with the Central Bank. Despite AFP-MBAI's repeated demands. However.On February 15. Eleazar failed to make good the dishonored checks. private respondent. 1253 of the Civil Code is merely directory. Consequently. conducted its own investigation and found that after Eurotrust delivered to AFP-MBAI the securities it purchased. Between August 1989 and September 1990. and that the amounts paid by AFP-MBAI to Eurotrust for those securities were in turn lent by Elsa Reyes to Bermic and others. Pursuant to this understanding. 4th paragraph.637. Upon her counsel's advise.S. Eurotrust nonetheless made partial payment to AFPMBAI amounting to P35. 22 and estafa under Article 315.

. Inc. The foregoing elements are found wanting in the case at bar. PAGRICO submitted Surety Bond No. It is essentially an agreement between petitioner and respondent Eleazar only. Liu signed both as President of PACOCO and in his individual and personal capacity. R & B Surety brought suit against Joseph Cochingyan.In consideration of R & B Surety's issuance of the Surety Bond. two identical indemnity agreements were entered into with R & B Surety: (a) one agreement dated 23 December 1963 was executed by the Catholic Church Mart (CM and by petitioner Joseph Cochingyan. PAGRICO and R & B Surety bound themselves jointly and severally to comply with the "terms and conditions of the advance line [of credit] established by the [PNB]. c) there must be the extinguishment of the old contract. Villanueva for reimbursement of the payments made by it to the PNB and for a discharge of its liability to the PNB under the Surety Bond. .The fact that respondent Eleazar made payments to AFP-MBAI and the latter accepted them does not ipso facto result in novation. the debtor and the new creditor. No new agreement for substitution of creditor war forged among the parties concerned which would take the place of the preceding contract. Villanueva signed both as Manager of PAGRICO and in his personal and individual capacity. b) there must be an agreement of the parties concerned to a new contract.000 (the "Principal Obligation"). . issued by R & B Surety and Insurance Co. charges or other legal costs incident to collection of the obligation [of R & B Surety]" under the Surety Bond. and Jose K. the indemnitors bound themselves jointly and severally to R & B Surety to pay an annual premium of P5. directly paid her obligations to AFP-MBAI. In compliance with this requirement.A thorough examination of the records shows that no hard evidence was presented which would expressly and unequivocably demonstrate the intention of respondent AFP-MBAI to release petitioner from her obligation to pay under the contract of sale of securities. 1995. and (b) another agreement dated 24 December 1963 was executed by PAGRICO. 4765. failed to comply with its Principal Obligation to the PNB.Nothing therein that would evince that respondent AFP-MBAI agreed to substitute for the petitioner as the new creditor of respondent Eleazar in the contract of loan. Jr. It is a rule that novation by substitution of debtor must always be made with the consent of the creditor. finding no reversible error in the decision appealed from dated May 12. PAGRICO. falling within the exclusive appellate jurisdiction of the SC.000 evidenced by detailed vouchers and receipts. FACTS .When PAGRICO. Villanueva and Liu Tua Beh in the CFI of Manila.In November 1963. Pacific Copra Export Inc. It is a new contractual relation based on the mutual agreement among all the necessary parties. The Surety Bond also provided that R & B Surety's liability was not to be limited to the principal sum of P400. June 30. (ii) was executed so that R & B Surety could show that it was complying with the regulations of the Insurance Commission concerning bonding companies.000 to P800. therefore. Inc.000.. Disposition ACCORDINGLY. the latter signed not only as President of CCM but also in his personal and individual capacity. This finding was affirmed by the respondent court which pointed out that "the first contract was novated in the sense that there was a substitution of creditor" 6 when respondent Eleazar." . .103.Joseph Cochingyan. There was no mention whatsoever of AFP-MBAI's consent to the new agreement between petitioner and respondent Eleazar much less an indication of AFP-MBAI's intention to be the substitute creditor in the loan contract. when there is clearly no agreement to release petitioner from her responsibility. there is no novation if no new contract was executed by the parties. Villanueva and Liu Tua Beh. Mr. representing the increment in its line of credit. PAGRICO had to give a good and sufficient bond in the amount of P400. the PNB demanded payment from R & B Surety of the sum of P400. A2010 page Prof. The mere circumstance of AFP-MBAI receiving payments from respondent Eleazar who acquiesced to assume the obligation of petitioner under the contract of sale of securities. Hence. . Jr. Labitag CONCHINGYAN V R & B SURETY & INSURANCE FELICIANO. There must be an express intention to novate — animus novandi.1987 NATURE Certified to the SC by the CA as one involving only questions of law and.The consent of the creditor to a novation by change of debtor is as indispensable as the creditor's consent in conventional subrogation in order that a novation shall legally take place. Jr. . . Pacific Agricultural Suppliers. It is evident that the two letters merely gave respondent Eleazar an authority to directly settle the obligation of petitioner to AFP-MBAI and DECS-IMC. the concurrence of the following requisites is indispensable: a) there must be a previous valid obligation. with the Philippine National Bank (PNB). in his answer maintained that the Indemnity Agreement he executed in favor of R & B Surety: (i) did not expess the true intent of the parties thereto in that he had been asked by R & B Surety to execute the Indemnity Agreement merely in order to make it appear that R & B Surety had complied with the requirements of the PNB that credit lines be secured. . Mr.000.000." PNB had the right under the Surety Bond to proceed directly against R & B Surety "without the necessity of first exhausting the assets" of the principal obligor. (PAGRICO) applied for and was granted an increase in its line of credit from P400. Under both indemnity agreements. (iii) that R & B Surety had assured him . ("R & B Surety") in the specified amount in favor of the PNB.Novation by substitution of creditor requires an agreement among the three parties concerned — the original creditor. Jr. does not constitute novation. The absence of a new contract extinguishing the old one destroys any possibility of novation by conventional subrogation .05 and "for the faithful compliance of the terms and conditions set forth in said SURETY BOND for a period beginning x x x x until the same is CANCELLED and/or DISCHARGED.Last three essential requisites of novation are wanting in the instant case. Under the terms of the Surety Bond. R & B Surety made a series of payments to PNB by virtue of that demand totaling P70. ISSUE WON novation took place in the instant case HELD NO Ratio In order that a novation can take place. Jose K. Jose K. the same is hereby AFFIRMED in all respects. . but would also include "accrued interest" on the said amount "plus all expenses.Obligations and Contracts 107 settling it with petitioner Reyes. and d) there must be the validity of the new contract. Novation is never presumed. with the agreement of Reyes.R & B Surety in turn sent formal demand letters to petitioners Joseph Cochingyan.(PACOCO).. To secure PNB's approval. When petitioners failed to heed its demands.

in favor of the BENEFICIARY in connection with the application of PAGRICO for an advance line of P400. and (3) the PNB as beneficiary.000 to P800. and (iv) that the filing of the complaint was premature.. . (i) he had executed the Indemnity Agreement in favor of R & B Surety only "for accomodation purposes" and that it did not express their true intention. [war veterans?] x x x This agreement shall not in any manner release the R & B and CONSOLACION from their respective liabilities under the bonds mentioned above. undertook to pay the Principal Obligation of PAGRICO to the PNB.300. so far as the record goes. therefore. NO Ratio Novation is never presumed: it must be established either by the discharge of the old debt by the express terms of the new agreement. the petitioners appealed to the CA which certified the case to the SC as one raising only questions of law. as in this case. the parties to the new obligation expressly recognize the continuing existence and validity of the old one. Novation may also be both objective and subjective (mixed) at the same time. second-tier parties so far as the PNB was concerned. as Trustor[s]. the TRUSTOR has guaranteed a bond in the amount of P400. where.000) plus interest. the BENEFICIARY has demanded compliance by the R & B and the CONSOLACION of their respective obligations under the aforesaid bonds. by novation. ISSUES A2010 page Prof. . Jr.Obligations and Contracts 108 that the execution of the agreement was a mere formality and that he was to be considered a stranger to the transaction between the PNB and R & B Surety. . Inc. extinguished the obligations of the petitioners under the Indemnity Agreements 2. and (iv) that R & B Surety was estopped from enforcing the Indemnity Agreement as against him. no novation occurs and the third person who has assumed the obligation of the debtor becomes merely a co-debtor or surety or a cosurety. Reasoning Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which terminates it. remained simply indemnitors bound to R & B . The Trust Agreement expressly provides for the continuing subsistence of that obligation by stipulating that "the Trust Agreement] shall not in any manner release" R & B Surety from its obligation under the Surety Bond. or that the new obligation be on every point incompatible with the old one. 1963. Villanueva claimed in his answer that. WON the filing of this complaint was premature since the PNB had not yet filed a suit against R & B Surety for the forfeiture of its Surety Bond HELD 1. (ii) that the Principal Obligation of PAGRICO to the PNB secured by the Surety Bond had already been assumed by CCM by virtue of a Trust Agreement entered into with the PNB. (2) Tomas Besa.000 issued by R & B Surety at the instance of PAGRICO on December 21. 'WHEREAS. as Trustee. there can be no novation. It is essential that the old debtor be released from the obligation. Reasoning The petitioner-indemnitors are.000. respectively.Jose K.000 without interest from the net profits arising from the procurement of reparations consumer goods made thru the allocation of WARVETS. Labitag 1. and by reason of said default. WON the Trust Agreement extended the term of the Surety Bond so as to release petitioners from their obligation as indemnitors thereof as they did not give their consent to the execution of the Trust Agreement 3. the PAGRICO and the PACOCO have defaulted in the payment of their respective obligations in favor of the BENEFICIARY guaranteed by the bonds issued by the R & B and the CONSOLACION. in turn. (CONSOLACION) in the amount of P900. bound to comply with his obligation under the indemnity agreements aforementioned executed by him in favor of R & B and the CONSOLACION. NO Ratio Any extension of time granted by a creditor to any of the first-tier obligors could not prejudice the second-tier parties. The petitioners. or by subrogating a third person to the rights of the creditor.The CFI of Manila rendered a decision in favor of R & B Surety. or by substituting a new debtor in place of the old one. a showing of complete incompatibility between the old and the new obligation (and nothing else) would sustain a finding of novation by implication. he is willing as he hereby agrees to pay the obligations of said companies in favor of the BENEFICIARY in the total amount of P1.The Trust Agreement referred to by both petitioners was executed on 28 December 1965 (two years after the Surety Bond and the Indemnity Agreements were executed) between: (1) Jose and Susana Cochingyan.000 in favor of the BENEFICIARY to secure certain credit facilities extended by the BENEFICIARY to the PACOCO. (iii) that his obligation under the Indemnity Agreement was thereby extinguished by novation arising from the change of debtor under the Principal Obligation. as it were. If objective novation is to take place. in other words. respectively and in order to forestall impending suits by the BENEFICIARY against said companies. where CCM represented by Joseph Cochingyan. Absent an unequivocal declaration of extinguishment of a pre-existing obligation.. Novation by the change of either the person of the debtor or of the creditor is described as subjective (or personal) novation. But where. and the third person or new debtor take his place in the new relation.If subjective novation by a change in the person of the debtor is to occur.an obligation is extinguished and a new one is created in lieu thereof. or by the acts of the parties whose intention to dissolve the old obligation as a consideration of the emergence of the new one must be clearly discernible. doing business under the name and style of the Catholic Church Mart. the obligation of R & B Surety to the PNB under the Surety Bond which. . represented by Joseph Cochingyan. Neither can the petitioners anchor their defense on implied novation. in pertinent part. The record is bereft of any indication that the petitionersindemnitors ever in fact became co-sureties of R & B Surety vis-a-vis the PNB.Not satisfied with the decision of the trial court. the TRUSTOR is. 2. Sr. If the old debtor is not released. ordering the defendants to pay the total amount of the liability (P400. 'WHEREAS. it is not enough that the juridical relation between the parties to the original contract is extended to a third person. Jr. a dual purpose is achieved . as follows: 'WHEREAS. the TRUSTOR has also guaranteed a bond issued by the Consolacion Insurance & Surety Co. The Trust Agreement provided. unpaid premiums and attorney’s fees. WON the Trust Agreement had extinguished.. In both objective and subjective novation. it is imperative that the new obligation expressly declare that the old obligation is thereby extinguished. the parties expressly negated the lapsing of the old obligation. considering that R & B Surety filed the case against him as indemnitor although the PNB had not yet proceeded against R & B Surety to enforce the latter's liability under the Surety Bond. Novation through a change of the object or principal conditions of an existing obligation is referred to as objective (or real) novation. 'WHEREAS. . either by changing its object or principal conditions. a PNB official.

had reopened. 1. 1993 FACTS . In its desire to keep Tropical as a tenant. such that PNB could not have directly demanded payment of the Principal Obligation from the petitioners. renewable for a like period upon the mutual agreement of both parties.Obligations and Contracts 109 Surety but not to PNB. the current rate was too high considering its other branches paid rent below the normal 1. Accordingly.000 for the last 4 years. Mrs. a Mr. 1980. Tropical’s last counter-offer was not accepted and Broadway urged them to pay immediately to minimize the 2% penalty on delayed payments. which is a matter that should be mutually agreed upon. Broadway extended the P100. reducing the rental agreement until able to pay.000 or 2% of their monthly sales whichever was higher up to the end of the 3rd year of the contract.31% of its actual sales. Tropical wrote to Broadway stating that Tropical’s rental payments were equal to 7. which terminates it. Dona Juana Rodriguez Ave. 1982 novated the Nov.56 square meters was to be returned by the next month. Broadway offered a counter- .In a letter dated Jan. an area of 466. ISSUE WON the letter-agreement dated April 20. (a major thoroughfare adjacent to Broadway) due to a road expansion project.000 effective Jan.000 rent increase to July of the same year. The basic rent will be increased to P140. Also.On Nov. and fixing the monthly rentals to the reduced area of the leased premises. which was based merely on Tropical’s sales projections of P120. R & B Surety was entitled to proceed against petitioners not only for the partial payments already made but for the full amount owed by PAGRICO to the PNB. The rental provision provides: .042. 1980 and succeeding payments to be made without necessity of the services of a collector w/in the 1st 5 dayss of the month. 3. 28. 1981 to Feb. the CA affirmed the decision. On appeal. petitioner Broadway Centrum Condominium Corporation (Broadway) and private respondent Tropical Hut Food Market. she demanded the payment for their back accounts amounting to P100. to P100. declaring the Nov. 1980 HELD NO . The present suit is therefore not premature despite the fact that the PNB has not instituted any action against R & B Surety for the collection of its matured obligation under the Surety Bond. 1983.No problems were experienced on the first year but on the following year. Tropical proposed to reduce the rent to P50. 1980 to Jan. 1. we do not see how Article 2079 of the Civil Code-which provides in part that "[a]n extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the guaranty" -could apply in the instant case.000 on April 1993 until further notice. Broadway informed Tropical that the concession could no longer be extended and. . 28. arguing that they sustained losses as well. reiterating that the provisional agreement was not an amendment to the contract and was done merely in assistance. Gue of Tropical argued that Broadway cannot arbitrarily and unilaterally increase rent . A week later. Disposition Petitioners' appeal is DENIED for lack of merit and the decision of the trial court is AFFIRMED in toto. 1981.000 during the first 3 years allowing 2 months grace period on rental for renovation from Dec. Mrs. in a contract of indemnity against liability. Mr. NO Ratio Indemnity Agreements are contracts of indemnification not only against actual loss but against liability as well. to be repaid spread over the last 6 months of the years only if a target 15% of sales is achieved. whichever was higher. On May 5.000 a day (which it obviously did not meet). 1.000 to which Tropical reacted by filing a supplemental complaint with the TC raising WON the agreement dated April 20. The 1st payment is to be made in advance on or before Dec. either by changing its object or principal BROADWAY CENTRUM CONDOMINIUM CORP.The lessee agrees to pay the lessor a basic monthly rental of P120. . (Tropical) executed a contract of lease. increased rent gradually from P80. . Orosa responded with dismay. Inc. 1983. Tropical continued renegotiating but was turned down. 4. Again. 1.000 for a limited period of 4 months. The court judged in favor of Tropical.000 during the next 3 years then P165. While in a contract of indemnity against loss an indemnitor will not be liable until the person to be indemnified makes payment or sustains loss. 31. Que of Tropical appealed to Broadway to maintain the provisional rates until sales increased.Novation is the extinguishment of an obligation by the substitution with a subsequent one. Tropical filed a complaint before the RTC of QC seeking a restraining order or preliminary injunction to prevent Broadway from invoking Sec 5 of the contract and asking the court to decree that the provisional agreement be implemented while Tropical’s sales remain low. Broadway increased rent to P140. Broadway responded stating that Tropical’s financial trouble was within the control of its management and offered several suggestions to improve sales. agreed to lease a 3. On the same day. Reasoning Petitioners are indemnitors of R & B Surety against both payments to and liability for payments to the PNB. Thus. INC FELICIANO. July 5. A2010 page Prof. it was emphasized that said agreement was not an amendment to the contract. 1991. The proposal emphasized that any reduction in rent was merely a temporary suspension of the original rate and was not an amendment thereto. In the meantime. . as lessor. 1980 lease contract.Officers of both parties met and it was found that Tropical’s low sales was a result of the temporary closure of Dona Juana Rodriguez Ave. making the writ of preliminary injunction permanent.000. Broadway’s president. 1983.Months later. stating that the reduction of the leased space constituted valuable consideration for reduction of rental while Tropical’s sales remained low. Labitag proposal consisting of a conditional reduction of the rental by P20. Orosa was aware of this and finally made formal the provisional and temporary agreement to reduce the monthly fees to 2% of Tropical’s gross receipts or P60. V TROPICAL HUT FOOD MARKET. but Broadway refused.5% of sales. Pending the case. 1980 contract partially novated/modified by the provisional agreement. Broadway. the indemnitor's liability arises as soon as the liability of the person to be indemnified has arisen without regard to whether or not he has suffered actual loss.000 lest paragraph 5 of the contract be implemented.19 square meter portion of the Broadway Centrum Commercial Complex for 10 years from Feb. in light of the cessation of its business constraints. 1982 had novated the Contract of Lease dated Nov 28.

CBLI continued having trouble meeting its obligations to Delta. Tropical’s complaint is dismissed and is hereby required to pay the ff rental rates: 1.00 per month from 1 February 1984 to 1 February 1987. Delta executed a Deed of Sale assigning to SIHI 5 of the 16 promissory notes from CBLI At the time of assignment. the will to novate must appear by express agreement of both parties. to cover its overdue obligations under the promissory notes. . 30 1987 of CA and the Decision dated 14 March 1985 of the TC are hereby REVERSED and SET ASIDE. Novation is never presumed. private respondent Tropical shall pay to petitioner Broadway attorney's fees in the amount of ten percent (10%) (and not twenty percent [20%] as specified in Section 33 of the Contract of lease) of the total amount due and payable to petitioner Broadway under this Decision.On Dec 28. 1980 Contract of Lease is. . CBLI filed a complaint for injunction at CFI Rizal. Moreover.The CA’s finding that the surrender of the 466. the Petition for Review on Certiorari is hereby given due course. Following this. Broadway reduced rent by 50% while the portion of the leased space was reduced only by 15%.A. CBLI and its president executed 16 promissory notes in favor of Delta. . pursuant to the Memorandum of Agreement. contending that the compromise agreement was in full settlement of all its obligations to Delta including its obligations under the promissory notes. Diesel Buses and 2 units of M. . 2. . 1981.a. P160.A. private respondent.314M payable in 60 monthly installments with interest at 14% per annum (p.When CBLI defaulted on all payments due. and stipulating daily remittance instead of the previously agreed monthly remittance of payments.In Dec. SIHI subsequently sent a demand letter to CBLI requiring CBLI to remit the payments due on the 5 promissory notes directly to it. 4.1M inclusive of interest at 14% p. Labitag Conversion Engines from Delta. The restructuring agreement provided for a new schedule of payments of CBLI’s past due installments. CBLI [a] promised to pay Delta or order. Consequently. In due time.In view of Delta’s petition and motion for execution per the judgment of compromise.000. SIHI was able to attach and physically take CALIFORNIA BUS LINE V STATE INVESTMENT QUISUMBING.In April 1979 to May 1980. To secure the payment of the 35 buses. Inc. the loan agreements were restructured under a Memorandum of Agreement dated March 1982. Also. Delta obligated itself to pay a fixed monthly amortization of P0. .a). 1984. hereby equitably REDUCED to 10% per annum computed from accrual of such rentals as above specified until fully paid. Delta executed a Continuing Deed of Assignment of Receivables in favor of SIHI as security for the payment of its obligations to SIHI per the credit agreements. and the comment filed by the private respondent Tropical is hereby treated as its answer and the Decision dated Jan. In case of default. A2010 page Prof. it entered into a restructuring agreement with Delta in Oct. Pasay City. purchased on installment basis 35 units of M.000. RTC granted Delta’s prayer on account of the fraudulent disposition by CBLI of its assets.The court found that Tropical’s theory that Broadway had agreed to maintain the reduced rent so long as sales stayed low was merely an afterthought.00 per month from 1 February 1987 to 31 January 1991.00 per month from 1 January 1983 up to 30 June 1983. P80. 1985.000. CBLI and Delta also increased the interest rate to 16%. or by subrogating a 3 rd person to the rights of the creditor.Thereafter. hence no presumption can be made that the returned space was a consideration for the reduction in rent. SIHI agreed to extend a credit line to Delta for P25M in 3 separate credit agreements. P2. . month from 1 July 1983 up to 31 January 1984. SIHI filed a complaint against CBLI in RTC Manila.N. . Diesel . petitioner California Bus Lines.00 per. Delta Motors Corporation (Delta) applied for financial assistance from respondent State Investment House.On Dec 26. CBLI vehemently refused to pay SIHI the value of the 5 promissory notes. Inc. Delta and CBLI entered into a compromise agreement in July 1984. rent was not specified on a per square meter basis. Delta filed a petition for extrajudicial foreclosure of chattel mortgages pursuant to its compromise agreement with CBLI. In view of Delta’s failure to pay. In addition.In Sept. negotiations before the execution of the letter-agreement indicated clearly that they were negotiating a temporary/provisional reduction and Tropical itself proposed a change only up to the end of the 3rd year. Delta eventually became indebted to SIHI. (SIHI). (CBLI).Obligations and Contracts 110 conditions or by substituting a new debtor. 1980 made it clear that the provisional agreement was not an alteration or waiver of the Lease Contract itself. these 5 promissory notes had a total value P16.N. Delta would have the authority to take over the management and operations of CBLI until CBLI remitted and/or updated CBLI’s past due account. This prompted Delta to threaten CBLI with the enforcement of the management takeover clause. Orosa repeatedly stressed that the provisions were not amendments and were merely offered as an assistance. . . Mrs. . Over the course of the grueling renegotiations.a. Clearly. a domestic corporation engaged in the business of quasi-banking. CBLI replied informing SIHI that Delta had taken over its management and operations. Delta filed amended answer with applications for issuance of a writ of preliminary mandatory injunction to enforce the management takeover clause and a writ of preliminary attachment over the buses it sold to CBLI.In 1979. extending the period to pay.000.1983. 2003 NATURE Petition for Review on certiorari of a decision of the CA FACTS . Disposition Wherefore.The notarized lease of contract of Nov. to collect on the 5 promissory notes with interest at 14% p. RTC Pasay approved this compromise agreement. 1981.The penalty of 2% per month on unpaid rentals specified in Sec 5 of the Nov. [c] executed chattel mortgages over the 35 buses in Delta’s favor. P140. CBLI agreed that Delta would exercise its right to extrajudicially foreclose on the chattel mortgages over the 35 bus units. and 4. Broadway’s constant emphasis that the “provisional and temporary agreement should not be interpreted as amendment to the contract” meant that it could terminate the reduced concessional rates at any time without the consent of Tropical. Costs against. (now RTC Pasay City). SIHI also prayed for the issuance of a writ of preliminary attachment against the properties of CBLI. . . 1984. P100. the RTC Manila granted SIHI’s application for preliminary attachment on Jan.56 square meters by Tropical constituted valuable consideration doesn’t hold. Delta then filed in the RTC Pasay a motion for execution of the judgment based on the compromise agreement which was granted. [b] promised to pay the holder of the said notes 25% of the amount due on the same as attorney’s fees and expenses of collection.4M to SIHI and to discount with SIHI P8M worth of receivables with the understanding that SIHI shall apply the proceeds against Delta’s overdue accounts. 3. December 11.

pursuant to the Jan. [b] Express and Implied Novation. the change would be merely modificatory in nature and insufficient to extinguish the original obligation. WON the Restructuring Agreement between CBLI and Delta novated the 5 promissory notes Delta assigned to respondent SIHI 2. . 1988. or subrogating a third person in the rights of the creditor. DEC 8. RTC held that the restructuring agreement between Delta and CBLI novated the 5 promissory notes. For novation to take place. acting on CBLI’s motion to quash the writ of preliminary attachment. the sheriff of Manila. such as its object. SIHI filed an urgent ex-parte motion to amend this order claiming that its new counsel made a mistake in the list of buses in the Motion to Sell it had earlier filed.92M. RTC ruled that the best interest of the parties might be better served by denying further sales of the buses and to go direct to the trial of the case on the merits. It directed SIHI to return the 16 buses or to pay CBLI P4M representing the value of the seized buses. The restructuring agreement between Delta and CBLI executed shows that the parties did not expressly stipulate that the restructuring agreement novated the promissory notes.a. (3) the extinguishment of the old obligation. Delta’s limited authority to collect for SIHI stipulated in the Sept. WON the Compromise Agreement between Delta and CBLI superseded and/or discharged the subject 5 promissory notes HELD 1. NO Ratio An agreement subsequently executed between a seller and a buyer that provides for a different schedule and manner of payment. CBLI. or by substituting the person of the debtor. attesting to the fact that Delta bought 14 of the 35 buses for P3. Reasoning [a] Novation Defined and its Requisites. or where the new contract merely supplements the old one 2. with interest at 12% p. at the time Delta assigned the 5 promissory notes to SIHI. Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which terminates the first. and adds other obligations not incompatible with the old ones. 1986. SIHI explained that 14 of the buses listed had already been sold to Delta on April 2. they are incompatible and the latter obligation novates the first. The second is implied novation. On April 7. SIHI assailed the discharge of the writ before the IAC (now Court of Appeals) CA granted SIHI’s petition in and ruled that the writ of preliminary attachment issued by RTC Manila should stay. requires a special power of attorney. Judgment discharged CBLI from liability on the 5 promissory notes. GARCIA V LLAMAS PANGANIBAN. it is merely modificatory when the old obligation subsists to the extent it remains compatible with the amendatory agreement. however. SIHI appealed to the Court of Appeals. 3. The incompatibility must take place in any of the essential elements of the obligation.CBLI opposed SIHI’s motion to allow the sale of the 16 buses. Hence this appeal. It is extinctive when an old obligation is terminated by the creation of A2010 page Prof. Furthermore. On May 3. 1989. the notes were already merged in the restructuring agreement and cannot be enforced against CBLI. to discharge the writ of preliminary attachment. . NO Ratio A compromise agreement determines the rights and obligations of only the parties to it. SIHI’s motion was granted on Dec. otherwise. may either be extinctive or modificatory. 1987. There are 2 ways which could indicate the presence of novation and thus produce the effect of extinguishing an obligation by another which substitutes the same. RTC also favorably ruled on CBLI’s compulsory counterclaim. namely. An authority to compromise. (2) an agreement of all parties concerned to a new contract. [c] In this case. ISSUES 1. 1987. when the old and the new obligations are incompatible on every point.Obligations and Contracts 111 possession of 32 buses belonging to CBLI. Novation. SIHI as the new creditor of CBLI in the subject promissory notes. which is not present in this case. in its broad concept. 1987. cause or principal conditions thereof. yet it readily agreed to the foreclosure Disposition CA ruling affirmed. 1985 Order of the RTC of Pasay. (1) a previous valid obligation. RTC Manila denied SIHI’s urgent motion to allow the sale of the 16 buses listed in its motion to amend. 1987. Absent an unequivocal declaration of extinguishment of the preexisting obligation. knew of the assignment and Delta’s lack of authority to compromise the subject notes. and (4) the birth of a valid new obligation. CA reversed RTC ruling. by virtue of the Jan. either by changing the object or principal conditions. 4 essential requisites have to be met. The first is when novation has been explicitly or expressly stated and declared in unequivocal terms. sold the same 14 buses at public auction in partial satisfaction of the judgment SIHI obtained against Delta. changes only the terms of payment. Deed of Sale cannot be construed to include the power to compromise CBLI’s obligations in the said promissory notes. the attendant facts do not make out a case of novation. our review of its terms yields no incompatibility between the promissory notes and the restructuring agreement. The test of incompatibility is whether the 2 obligations can stand together. Order of RTC of Manila. obligation is not novated by an instrument that expressly recognizes the old. Labitag a new obligation that takes the place of the former. by express provision of Article 1878 of the Civil Code. each one having its independent existence. 2003 . 3. Delta had no more right to compromise the same. 13.Meanwhile. If they cannot. in turn. Reasoning: [a] Having previously assigned the 5 promissory notes to SIHI. [b] The assignment of the 5 notes operated to create a separate and independent obligation on the part of CBLI to SIHI. 1985. And since there was a previous revocation of Delta’s authority to collect for SIHI. Delta was no longer SIHI’s collecting agent. Furthermore. . 1985 Order of RTC of Pasay. Corollarily. CBLI is ordered to pay SIHI the value of the 5 promissory notes less the proceeds from the sale of the attached 16 buses. changes that breed incompatibility must be essential in nature and not merely incidental. the same court resolved in Jan. However. by virtue of the writ of execution dated March 27.RTC and CA Ruling. distinct and separate from CBLI’s obligations to Delta.SIHI moved to sell the 16 buses of CBLI which had previously been attached by the sheriff pursuant to the Jan 4. 1987. In Nov. and that 2 of the buses listed had been released to a third party. to restructure the mode of payments by the buyer so that it could settle its outstanding obligation in spite of its delinquency in payment is not novation. nor cover the rights of. the sheriff of Pasay City conducted a public auction and issued a certificate of sheriff’s sale to Delta on April 2. . only a showing of complete incompatibility between the old and the new obligation would sustain a finding of novation by implication. 16. hence. However. the compromise agreement itself provided that it covered the rights and obligations only of Delta and CBLI and that it did not refer to. 1985.

Under Article 29 of Act 2031. Verily. ISSUES 1. or specific denials or affirmative defenses are set forth in the answer. Petitioner Romeo Garcia and Eduardo de Jesus borrowed P400. like the check. petitioner would be liable for the promissory note. alternatively. the obligation incurred by him and petitioner was joint and several.On Dec.A summary judgment is a procedural device designed for the prompt disposition of actions in which the pleadings raise only a legal. in any event. He then filed for the recovery of said amount. 1999 NATURE Appeal from decision of CA finding petitioner guilty of estafa FACTS . 23 1996. A2010 page Prof. and that the obligation was extinguished by either payment or novation.00 loan. less the amount of P120. the law requires that the creditor expressly consent to the substitution of a new debtor. . NO . and on the other. depositions or admissions . petitioner brought the buyers to meet Aurelia who agreed to accept payment in installments. The parties did not unequivocally declare that the old obligation had been extinguished by the issuance and the acceptance of the check. He also claims that the respondent acted in bad faith in instituting the case. it must be noted that for novation to be valid and legal.The CA affirmed the trial court’s ruling regarding Garcia. first. Petitioner claims that the contract between herself and Aurelia was effectively novated when the latter agreed to accept payment in installments directly from the buyers ISSUE .00 representing the principal amount plus 5% interest thereon per month from January 23. Novation is never presumed. Won the CA was correct in treating the case as a summary judgement HELD 1.which had been intended to extinguish the obligation -. the check had been issued precisely to answer for the obligation. they executed a promissory note wherein they bound themselves jointly and severally to pay the loan on or before 23 January 1997 with a 5% interest per month .000. Respondent’s acceptance of the check did not serve to make De Jesus the sole debtor because. disavowal or qualification. and it happened on some occasions that the buyers were unable to pay in full. and that. and. the P40. issue regarding any material fact. since the respondent has agreed to accept the benefits de Jesus would receive for his retirement. According to the CA. YES . the check -. He cannot avail of the Negotiable Instrument’s Law’s provisions on the liabilities and defenses of an accommodation party.Respondent however said that the said check has bounced .Neither could the payment of interests change the terms and conditions of the obligation. As the CA correctly observed.The prosecution claimed that petitioner asked for more time to sell the items but failed to conclude any sale.Petitioner’s Answer apparently raised several issues -. these are not factual issues requiring trial. and.00 representing interests already paid by x x x de Jesus. Labitag . On the one hand. still. the note evidences the loan obligation. the latter knew the former to be only an accommodation part 3. the check answers for it. he received only P360. .00. ordering petitioner and de jesus to pay P400. IT ruled that no novation has taken place respondent accepted the check from De Jesus. Disposition Petition denied QUINTO V PEOPLE VITUG. an accommodation party is liable for the instrument to a holder for value even if. . The respondent nonetheless filed the instant case while his retirement was being processed.000. was totally in accord with the terms thereof. or that the check would take the place of the note. .Also unmeritorious is petitioner’s argument that the obligation was novated by the substitution of debtors. facts are asserted in the complaint regarding which there is yet no admission. .Moreover. However.that he signed the promissory note allegedly as a mere accommodation party.The defense proffered that petitioner had sold several pieces of jewelry for Aurelia. When this happened. After 6 months. since he was a joint and solidary obligor of the loan 2. despite the repeated demands by the respondent. There is no incompatibility between the promissory note and the check. the issuance of the check and respondent’s acceptance thereof novated or superseded the note.000. 1997 until the same shall have been fully paid. On the same day.De Jesus in his answer said that out of the supposed P400.Petitioner Leonida Quinto received in trust several pieces of jewelry from Aurelia Cariaga with a total value of P36. Such payment was already provided for in the promissory note and. Consequently. since this is not a negotiable instrument. the two can stand together.000 from Respondent Dionisio Llamas. . at the time of its taking. In order to change the person of the debtor. He claims to have paid P120. second. not a genuine. WON there was novation in the obligation 2.000. WON the defense that petitioner was only an accommodation party had any basis 3.The loan was not paid. the old one must be expressly released from the obligation. but the issues are fictitious as shown by the pleadings.000 with the purpose of selling the same on a commission basis and with the express obligation to turn over the proceeds of sale thereof or to return the jewelry within 5 days if not sold . the check was issued precisely to pay for the loan that was covered by the promissory note jointly and severally undertaken by petitioner and De Jesus. Even granting arguendo that the NIL was applicable.000. that he is relieved from any liability arising from the note inasmuch as the loan had been paid by de Jesus by means of a check dated 17 April 1997.Obligations and Contracts 112 FACTS . April 14.The petitioner’s reasoning is untenable.The trial court found in favor of the respondent. Garcia averred that he assumed no liability under the promissory note because he signed it merely as an accommodation party for de Jesus.000 of the debt.bounced upon its presentment. Aurelia sent a demand letter for the return of the items which petitioner ignored. and the third person or new debtor must assume the former’s place in the relation. NO novation took place. .De Jesus also is not a third person to the obligation.00 having been advance interest thereon for two months.

If they cannot. WON such agreement (MOA) was perfected HELD 1. Gatmaitan who was a reputable banker and investment . He felt that he had a right to collect on the basis of the promissory note regardless of the outcome of Gatmaitan's recovery efforts.In line w/ this agreement.150.The subject Memorandum of Agreement expressly requires the consent of AngloAsean to the subrogation and the two failed to obtain such. cause or principal conditions thereof. It is a conventional subrogation.Doubtless. The incompatibility must take place in any of the essential elements of the obligation. and Prudential Life Plan. Gatmaitan In order to effectuate and formalize their respective commitments.Obligations and Contracts 113 WON there was novation of the contract HELD NO. which third party is admittedly Anglo-Asean Bank.Licaros then filed a complaint to the RTC. Inc. However. they executed a notarized MEMORANDUM OF AGREEMENT on July 29. the change would be merely modificatory in nature and insufficient to extinguish the original obligation.000 without interest as material consideration for the full settlement of his money claims from ANGLO-ASEAN BANK. a Filipino businessman. they are incompatible and the latter obligation novates the first. There was really no substitution of debtors since private complainant merely acquiesced to the payment but did not give her consent to enter into a new contract. however.Fearing that he might not get back nay of his investments. however. in July 1996. Because of Gatmaitan’s inability to collect. did not accede to these demands. Gatmaitan executed a NON-NEGOTIABLE PROMISSORY NOTE WITH ASSIGNMENT OF CASH DIVIDENDS in favor of Licaros. Labitag manager. Ratio Novation is never presumed. financial and investment consultancy services to various firms and corporations both here and abroad.Enticed by the lucrative prospects of doing business with Anglo-Asean. . The fact alone that the creditor receives guaranty or accepts payments from a third party who has agreed to assume the obligation does not constitute an extinctive novation absent an agreement that the first debtor shall be released from responsibility. the parties herein have come to an agreement on the nature. ISSUE Whether the memorandum of Agreement between petitioner and respondent is one of assignment of credit or one of conventional subrogation. And it is basic in the interpretation of contracts that the intention of the parties must be the one pursued 2. there is simply no sense for them to have stipulated in their agreement that the same is conditioned on the “express conformity” thereto of Anglo-Asean Bank. must appear by express agreement of the parties. . But the appellate court reversed the decision. There are two ways which could indicate the presence of novation and thereby produce the effect of extinguishing an obligation by another which substitutes the same.So willing to help. demanding payment of the latter’s obligations under the promissory note. Inc. Had the intention been merely to confer on appellant the status of a mere “assignee” of appellee’s credit. The test of incompatibility is whether or not the two obligations can stand together. to wit: “WHEREAS. addressed successive demand letters to Gatmaitan. Gatmatian promises to pay Abelardo an amount of P3. . otherwise. . Gatmaitan. Abelardo Licaros. . Licaros. this overseas fund investment was not exactly what he envisioned it to be  He encountered difficulties in retrieving his interests/profits and even his very investment. 2001 NATURE A petition for review on certiorari under Rule 45 of the Rules of Court. thought differently. FACTS . hence this petition. thru counsel. In the promissory note. August 9. each one having its independent existence. That they did so only accentuates their intention to treat the agreement as one of conventional subrogation. the absence of such conformity on the part of Anglo-Asean.Gatmaitan then tried to claim the S150. changes that breed incompatibility must be essential in nature and not merely accidental. he did not bother anymore to make good his promise to pay Licaros the amount stated in his promissory note. He had been extending managerial. decided to make a fund placement with said bank sometime in the 1980’s. As a security for the payment of this promissory note. The second is when the old and the new obligations are incompatible on every point. .Thus. Europe and the United States for the purpose of maximizing the returns on those investments. NO .’88 .That Gatmaitan and Licaros had intended to treat their agreement as one of conventional subrogation is plainly borne by a stipulation in their Memorandum of Agreement. The changes alluded to by petitioner consists only in the manner of payment. form and extent of their mutual prestations which they now record herein with the express conformity of the third parties concerned” (emphasis supplied). The first is when novation has been explicitly stated and declared in unequivocal terms. whether totally or partially. Its business consists primarily in receiving fund placements by way of deposits from institutions and individual investors from different parts of the world and thereafter investing such deposits in money market placements and potentially profitable capital ventures in Hongkong. . RTC ruled in favor of Licaros. such as its object. Gatmaitan voluntarily offered to assume the payment of AngloAsean’s indebtedness to Licaros subject to certain terms and conditions.000 from Anglo-Asean. Licaros. or by their acts that are too clear and unequivocal to be mistaken. Corollarily. which is thereby made a party to the same Memorandum of Agreement. They said they will look into the matter but nothing was heard from the bank since. Decision affirmed A2010 page Prof. prevented the LICARIOS V GATMAITAN GONZAGA-REYES. and the animus novandi.The Anglo-Asean Bank and Trust Limited (Anglo-Asean)  is a private bank registered and organized to do business under the laws of the Republic of Vanuatu but not in the Philippines. he iaasiged 70% of all cash dividends from his shares of stock in the Prudential Life Realty. Licaros decided to seek the counsel of Antonio P. Disposition Petition dismissed. .

subject to the condition that upon payment by Philguanrantee of said amount. such that a new obligation will be perfectly valid. the amount of P3. 2000 and its Resolution dated April 7. even without the phrase “personal capacity. Reasoning Under the Negotiable Instruments Law. Disposition WHEREFORE.621. In compliance with its contract of “Guarantee” in favor of Philtrust. who substitutes him in all his rights. Instances of legal subrogation are those provided in Article 1302 of the Civil Code. are not equivalent to proof under our Rules of Court. when unsubstantiated by evidence. the debtor’s consent is necessary. The nullity of an old obligation may be cured by subrogation. In the former. the instant petition is DENIED and the Decision of the Court of Appeals dated February 10. . September 23. A2010 page Prof. The assignment may be done gratuitously or onerously. Ratio assignment of credit  has been defined as the process of transferring the right of the assignor to the assignee who would then have the right to proceed against the debtor. Conventional subrogation. whereby petitioners Peter Roxas and Astro Electronics Corp. the assignment has an effect similar to that of a sale. 2. Roxas’ acquiescence is not necessary for subrogation to take place because the instant case is one of the legal subrogation that occurs by operation of law.” Roxas will still be primarily liable as a joint and several debtor under the notes considering that his intention to be liable as such is manifested by the fact that he affixed his signature on each of the promissory notes twice which necessarily would imply that he is undertaking the obligation in two different capacities. then Metro Manila. It may either be legal or conventional. promising that they will pay to the order of the payee or any holder according to its tenor.On appeal. Labitag Philguarantee filed against Astro and Roxas a complaint for sum of money with the RTC of Makati. despite demands. as President of Astro and in his personal capacity.Philguarantee guaranteed in favor of Philtrust the payment of 70% of Astro’s loan. Subsequently. jointly and severally. the consent of the debtor is needed in the subrogation of a third person to the rights of a creditor. it is subrogated to the rights of Philtrust to demand for and collect payment from both Roxas and Astro since it already paid the value of 70% of roxas and Astro Electronics Corp. YES Ratio Philguarantee has all the right to proceed against petitioner. assignment refers to the same right which passes from one person to another.The fact that Anglo-Asean Bank did not give such consent rendered the agreement inoperative considering that.Obligations and Contracts 114 agreement from becoming effective. Legal subrogation is that which takes place without agreement but by operation of law because of certain acts. however. persons who write their names on the face of promissory notes are makers. Roxas became a co-maker of the promissory notes and cannot escape any liability arising from it. ISSUES 1. Conventional subrogation is that which takes place by agreement of parties. V PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORP. and ASTRO ELECTRONICS CORP. on the other hand. It may either be legal or conventional.Portions of his signatures covered portions of the typewritten words “personal capacity” indicating with certainty that the typewritten words were already existing at the time Roxas affixed his signatures thus demolishing his claim that the typewritten words were just inserted after he signed the promissory notes. as previously discussed. . Distinctions: “Under our Code. who substitutes him in all his rights. Bare allegations. in the latter it is not required. 2003 NATURE Petition for review on certiorari under Rule 45 of the Rules of Court of the decision of the Court of Appeals affirming the decision of the RTC of Makati. alleging that he merely signed the same in blank and the phrases “in his personal capacity” and “in his official capacity” were fraudulently inserted without his knowledge. then portions of the typewritten words would have covered portions of his signatures. the Court of Appeals affirmed the RTC decision agreeing with the trial court that Roxas failed to explain satisfactorily why he had to sign twice in the contract and therefore the presumption that private transactions have been fair and regular must be sustained Respondent’s Comment .As a result of Astro’s failure to pay its loan obligations. On the other hand. YES Ratio In signing his name aside from being the President of Astro. and not vice versa.Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting to P3M with interest and secured by three promissory notes. but the nullity of an obligation is not remedied by the assignment of the creditor’s right to another. Thus. . documentary or otherwise. as President of Astro and as surety. AUSTRIA-MARTINEZ. . Reasoning Subrogation is the transfer of all the rights of the creditor to a third person. WON Roxas should be jointly & severally liable (solidary) with Astro for the sum awarded by the RTC 2. If what he claims is true. Philguarantee paid 70% of the guaranteed loan to Philtrust. official and personal. subrogation  has been defined as the transfer of all the rights of the creditor to a third person. in which case. is that which takes place by agreement of the parties.’s loan obligation. conventional subrogation is not identical to assignment of credit. Roxas also signed a Continuing Surety ship Agreement in favor of Philtrust Bank.187.It devolves upon Roxas to overcome the presumptions that private transactions are presumed to be fair and regular and that a person takes ordinary care of his concerns. much less from being a source of any cause of action for the signatories thereto.Roxas disclaims any liability on the instruments. In each of these promissory notes. Subrogation extinguishes the obligation and gives rise to a new one. (Astro) were ordered to pay respondent Philippine Export and Foreign Loan Guarantee Corporation (Philguarantee). Legal subrogation is that which takes place without agreement but by operation of law because of certain acts.52 with interests and costs FACTS . 2000 are hereby AFFIRMED. it shall be proportionally subrogated to the rights of Philtrust against Astro. . it appears that petitioner Roxas signed twice. . WON Philguarantee has the right to proceed against petitioners HELD 1. .

after manifesting that he was not seeking any relief against the personal funds of petitioner GSIS. Upon accomplishing and completing his undertaking under the contract. Pending resolution of this motion. no motion for reconsideration or notice of appeal was filed by both QRSI and the petitioner. . Valencia demanded payment from QRSI. as guarantor.In its Order of 10 July 1986. monies or interests belonging to QRSI in its possession or control. Armando Diaz. that it has no credits. 4 was joined as movant with Valencia. .19). a plaintiff in a separate collection suit against both the petitioner and QRSI.The petitioner thus filed on 18 September 1986 with the Court of Appeals a petition for certiorari and prohibition to set aside the aforesaid Orders of 5 July 1985. . became the transferee of all the rights of Philtrust as against Roxas and Astro because the “guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor. Labitag . petitioner filed a motion for the reconsideration of the 22 May 1986 Order and on 16 June 1986.In its Decision promulgated on 17 April 1986. Bacoor. however. No evidence was offered by both the petitioner and QRSI. the same is hereby AFFIRMED in toto.” Disposition WHEREFORE. the trial court issued an order directing the petitioner to comply with the writ of execution and instructing Mr. During the trial of the case. Thereupon.On 10 November 1982. pending payment of the said claim of plaintiff. "defendant GSIS shall not be personally liable for the obligation of QRSI" — because the following portion of the trial court's decision: "3. Valencia. it filed a Notice of Appeal Ad Cautelam from the Orders of 5 July 1985 and 22 May 1986. however. Cavite. respondent Valencia filed a petition to cite petitioner in contempt of court for the latter's failure to comply with the writ of execution. Requiring defendant GSIS to hold whatever amounts it has granted to. comprising some four hundred ninety-three (4. 1993 FACTS . the trial court ruled that the petitioner was holding funds for QRSI. BCV-78-33.Thereafter.261.On 9 June 1986. and to deliver same to plaintiff by way of payment of the aforecited amount ordered recovered by plaintiff. Valencia then filed the complaint in the aforementioned Civil Case No. . . Acting on said motion. Inc. except. the trial court ordered Mr. to appear and testify in accordance with Sections 38 to 40.On 5 December 1983. defendants are ordered to respect and satisfy the contractor's lien in favor of the plaintiff as provided for by law." constitutes: ". Despite repeated demands. Assistant General Manager for Loans and Investments of the GSIS. Diaz to appear on 26 November 1982. Said decision imposes an obligation on GSIS which GSIS has acquiesced to do by its failure to appeal therefrom. Valencia filed a motion for execution pending appeal. R. It is distinctly made clear that defendant GSIS shall not be personally liable for the said obligation of co-defendant Queen's Row.In its 5 July 1985 Order. On 15 November 1982. petitioner partially paid respondent Valencia on 26 November 1982 the amount of ONE HUNDRED FIFTY FOUR THOUSAND FOUR HUNDRED SEVENTY SIX and 14/100 PESOS (P154. . a final or definitive judgment on the merits from which the party adversely affected can make an appeal. Rule 39 of the Rules of Court.Several years back. finding no error with the decision of the Court of Appeals dated December 10. Espiritu. notices of garnishment were served by the Sheriff upon the petitioner and the Philippine National Bank (PNB). January 29.493) housing units. Although the motion was granted by the trial court. petitioner filed an Urgent Motion for Reconsideration of the 15 November 1982 Order. retained and obtained for defendant Queen's Row.14) out of the retained funds held for the account of QRSI. Consequently. situated at Molino.Obligations and Contracts 115 without need of the debtor’s knowledge. Valeriano M. another alias writ of execution was issued by the trial court. With the permission of the trial judge. the Court of Appeals dismissed the aforesaid petition principally on the ground that the trial court's Decision of 2 March 1982 "has long become final" as neither QRSI nor the herein petitioner had moved for its reconsideration or appealed therefrom within the reglementary period. as herein aboveordered.476. . Further. the trial court denied the aforesaid motion for reconsideration. the same to be credited as payment made by defendant Queen's Row.Pursuant to said project agreement. An answer to the Sheriff's notice was submitted by the latter stating that the GSIS is not a debtor of QRSI. Actually." and that: GSIS V COURT OF APPEALS DAVIDE. It considered as "inexcusable" petitioner's contention — that it did not need to appeal the decision because according to the trial court. . these units were to be sold to GSIS members in accordance with the System's housing program. 1998. A2010 page Prof. and that it is in fact the biggest creditor of QRSI whose outstanding account as of 9 December 1983 stood at FIFTY EIGHT MILLION TWO HUNDRED SIXTY ONE THOUSAND SEVEN HUNDRED SEVENTY THREE and 19/100 PESOS (58. the Queen's Row Subdivision.773. a certain Mr. On 13 June 1986. QRSI entered into a construction contract with private respondent Valencia involving various phases of land development in the said subdivision. the trial court again issued an alias writ of execution. . Philguarantee. . it thus directed the petitioner to pay both Valencia and Valeriano Espiritu the amount adjudged and covered by the writs of execution after deducting the payments previously made. an action for a sum of money with prayer for the issuance of a writ of preliminary attachment. the claim that QRSI is obligated to the GSIS was not established by evidence during the trial of the case. . 22 May 1986 and 10 July 1986.Petitioner's motion for reconsideration of the said order was denied by the trial court in its Order of 22 May 1986 on the ground that. the writs issued as a consequence thereof were returned unsatisfied. proceeded to present his evidence. private respondent Valencia filed a Motion for Examination of Debtors of the Judgment Debtor. . on 20 October 1983. as well as the alias writ of execution of 9 June 1986 and the Notices of Garnishment of 10 June 1986. QRSI refused to pay. . It thereafter filed its motion to quash the alias writ of execution.On 25 March 1982. The case was docketed as CA-G. (QRSI) entered into a construction project agreement with the Government Service Insurance System (GSIS) by virtue of which the latter agreed to extend a financing loan to the former for the construction and development of a residential subdivision. 09956. No. respondent Sheriff served upon the petitioner a notice of garnished upon all monies and credits belonging to QRSI which were under the control and possession of the petitioner. inter alia.

the bolt at the end of the derrick boom broke. the legal compensation invoked by the GSIS whereby there would be compensation as between GSIS and Queen's Row was waived by the fact that GSIS made partial payments to Valencia. Gulf & Pacific Company to discharge the said locomotive boilers from the said steamship. the other still remained below on the other side. The boiler was damaged and brought back to Europe for repair which cost P22. The boiler was too long to clear the hatch in this position. No. the challenged decision has not only become final and executory but has in fact been partially executed by virtue of the payment on November 26. Code).Thereafter. as should have been done at first.The judge of the Court of First Instance gave judgment in favor of the plaintiff against the Atlantic Company. As pointed out by the respondent. The contract to convey imports the duty to convey and deliver safely and securely with reference to the degree of care which. WON the Atlantic Company is directly liable to the plaintiff. entered into a contract with the Atlantic. The obligation to transport the boiler necessarily involves the duty to convey and deliver it in a proper condition according to its nature. The respondent court correctly applied PD 1594 on government infrastructure contracts regarding progress payments and the withholding of retention money everytime a certain percentage of the work is completed by the respondent and they have been sold by the GSIS to its members. are required by law and custom applicable to the case. while the Atlantic Company has appealed from the judgment against it. On 7 June 1990. The tackle and equipment of the steamship Alicante .And as pointed out by the private respondent in its Comment to the petition. Labitag being insufficient to discharge said locomotive boilers from the ship to the shore. and interests belonging to QRSI and therefore it obliged itself to pay the latter's obligation to Valencia as in fact. 87980.759. In the Resolution of 27 November 1989. in the performance of this service the Atlantic Company was no more than a servant or employee of the MANILA RAILROAD CO. this Court denied the petition because of the petitioner's failure to show that the appellate court's decision is not supported by substantial evidence and that the conclusions therein are contrary to law and jurisprudence.Obligations and Contracts 116 "Consequently. 1258. it in effect admitted that indeed it has in its possession or control credits. the Compañia Trasatlántica. when GSIS conformed to the decision and allowed it to attain finality. p. a rivet near the head of the boiler was caught under the edge of the hatch. The sling was again adjusted to the boiler but instead of being placed near the middle it was now slung nearer one of the ends. 343. for the consequences of the omission of the care necessary to the. YES . custom. Such being the contract of the Steamship Company. Civ. 1982.29. . and the law (art. October 26. petitioner came to this Court by way of a petition for review under Rule 45 of the Rules of Court. the Steamship Company is liable to the plaintiff for the injury done to the boiler while it was being discharged from the ship. An opposition thereto was filed by the petitioner contesting only the amount due and payable. as the trial court held. The plaintiff has appealed from the action of the court in failing to give judgment against the Steamship Company. WON the Atlantic Company is liable to be made to respond to the steamship company for the amount the latter may be required to pay to the plaintiff for the damage done 3. WON the Steamship Company is liable to the plaintiff by reason of having delivered the boiler in question in a damaged condition 2.476. The fact or payment meanwhile also constitutes as (sic) a waiver of the legal compensation being invoked by petitioner GSIS.Unsatisfied with the said decision. In the effort of the Atlantic. and after one end of the boiler had emerged on one side of the hatch. the trial court issued an order. The Argument that Queen's Row owes GSIS certain sums of money was rejected by the two courts below because it was never raised during the trial and no evidence was presented on the matter. This Court stated: "A careful review of the petition shows that it has no merit. R.677. but as it was being brought up. particularly the interests imposed therein. . A2010 page Prof.The motion to reconsider this Resolution was denied with finality in the Resolution of 15 January 1990." . the case was docketed as G. HELD 1. Ibid) on November 26.Under the contract for transportation from England to Manila. The boiler was again lifted. monies. The weight on the crane was thus increased by a strain estimated at fifteen tons with the result that the cable of the sling parted and the boiler fell to the bottom of the ship's hold. The decision of the respondent Regional Trial Court had long become final before the appeal to the Court of Appeals was made." . under articles 1103 and 1104 of the Civil Code. said company is necessarily liable. The argument of the petitioner that a separate action should be filed by the private respondent against GSIS was correctly rejected because the GSIS was a party to the case from the very start. proper performance of its obligation. respondent Valencia moved for the issuance of an alias writ or execution for the amount of FIVE MILLION SEVEN HUNDRED FIFTY NINE THOUSAND SIX HUNDRED SEVENTY SEVEN and 97/100 PESOS (P5. 1982 by GSIS pursuant to a writ of execution issued against it out of its retentions. In preparing to hoist the first boiler the sling was unfortunately adjusted near the middle of the boiler. Gulf & Pacific Company by virtue of the terms of which the latter company agreed to discharge the said locomotive boilers from the said steamship Alicante by using its (Atlantiic) tackle and equipment for that purpose.97). and again the boiler fell. ISSUES 1. V COMPANIA TRANSATLANTICA STREET. under the circumstances.14 (Annexes "A" and "B". but absolved the Steamship Company from the complaint. 141. Nor does the Steamship Company escape liability by reason of the fact that it employed a competent independent contractor to discharge the boilers. and it was thus raised nearly in a horizontal position. 1918 NATURE Appeal from a judgment of the Court of the First Instance of Manila FACTS -The Manila Railroad Company purchased two locomotive boilers in Europe and contracted with the Compañia Trasatlántica to transport the same to Manila by its steamship named Alicante. and conformably with good faith. . The duty to carry and to carry safely is all one. The Atlantic Company sent out its crane in charge of foreman Leyden. When the boiler had been gotten into this position and was being hoisted still further. it did make a partial payment thereto in the amount of P154.

00 provided for by the Contract to Encarnacion until her death in January 1990 and thereafter. but the Steamship Company was notified that the service would only be rendered upon the distinct understanding that the. affirming in toto the January 4. . that by the terms of the engagement in accordance with which the Atlantic Company agreed to render the service. and secondly. one to whom the contracting party had committed the performance of the contract.Petition for review on certiorari seeking reversal of December 5. as owner.00 as moral damages. and it has never yet been held that the failure to comply with a contractual obligation can be excused by showing that such delinquency was due to the negligence of.January 10. it may take actual possession of the premises > the lease shall be for a period of six years. . Bartolome.May 8. via registered mail. renewable for another six years.00 as attorney’s fees. 1990 – DKC served upon Victor.000. a lot in front of one of the textile plants of DKC Holdings Corp.00 for the next six years.April 23.000. to-wit. in the name of Victor Bartolome and deposited therein the P15. which was agricultural riceland.January 4.000.000.Petitioner’s Claim CA erred in Ruling that: 1. 2. 1990 .000.RTC Valenzuela dismissed the complaint and ordered petitioner to pay Victor P30.000. and a potential warehouse site. > in case DKC chose to lease the property.The Atlantic Company is liable to the Steamship Company for the damages brought upon the latter by the failure of the Atlantic Company to use due care in discharging the boiler.000. notice that it was exercising its option to lease the property. was subject to a Contract of Lease with Option to Buy between DKC and Encarnacion Bartolome which option must be exercised within a period of two years counted from the signing of the Contract > DKC to pay P3. first.The defense of the Atlantic Company comprises two contentions. Cubao. however. the duty to exercise due care in the accomplishment of the work.". P500. A2010 page Prof.00 as actual damages.00 for the first six years and P18. against the Atlantic Company to recover the damages sustained by the former. and the monthly rental fee shall be P15.00 as rent for the month of March but Victor refused to accept the tendered rental fee and to surrender possession of the property to DKC . including the subject lot. YES .Victor executed an Affidavit of Self-Adjudication over all the properties of Encarnacion. April 5. Court held that every contract for the prestation of service has an inseparable implicit obligation. et al.000.00 a month as consideration for the reservation of its option and within the two-year period > DKC shall serve formal written notice upon Encarnacion Bartolome of its desire to exercise its option.000. . Valenzuela originally owned by Victor Bartolome’s deceased mother. 1990 – DKC filed complaint for specific performance and damages against Victor and the Register of Deeds and prayed for > surrender and delivery of possession of the subject land in accordance with the Contract terms > surrender of title for registration and annotation thereon of the Contract > payment of P500. Victor U. being the sole heir of Encarnacion. 2000 NATURE .00 as attorney’s fees. that the AtIantic Company should be absolved under the last paragraph of article 1903 of the Civil Code. NO . Atlantic Company would not be responsible for damage . .000.As to the first defense.As to the second defense.00 as attorney’s fees . V CA YNARES-SANTIAGO. he refused to accept these payments . Encarnacion Bartolome. inasmuch as it had used due care in the selection of the employee whose negligent act caused the damage in question.000.00 rental fee for March as well as P6.DKC thus opened a savings account with the China Banking Corporation.Atlantic agreed to lift the boilers out of the Alicante. only accepting the required fees. notice of option must be served by DKC upon Encarnacion Bartolome personally 3. .If there had been no contract of any sort between the Atlantic Company and the Steamship Company. The rights of the plaintiff can only be made effective through the Compañia Trasatlántica de Barcelona with whom the contract of affreightment was made. refused to register or annotate or even enter it in the day book or primary register . tendering the amount of P15.021 sq mtr parcel of land in Malinta.CA affirmed the decision in toto . 1993 . for forty-five years and questioned the jurisdiction of the lower court over the property and invoked the Comprehensive Agrarian Reform Law to protect his rights that would be affected by the dispute between the original parties to the case .00 reservation fees for February and March . .Obligations and Contracts 117 Steamship Company. 1993 Decision of RTC Valenzuela which dismissed the civil case and ordered petitioner to pay P30. P500. an action could have been maintained by the Railroad Company.The Railroad Company can have no right of action to recover damages from the Atlantic Company for the wrongful act which constituted the violation of said contract.00 as exemplary damages and P300. 3.DKC regularly paid the monthly P3. coursed its payment to Victor Bartolome.000. provision on the notice to exercise option was not transmissible 2. .DKC also tried to register and annotate the Contract on the title of Victor to the property but the Register of Deeds. in case of renewal . regardless of the fact that the damage was caused by the negligence of an employee who was qualified for the work and who had been chosen by the Atlantic Company with due care.March 16.March 14. Labitag FACTS . the Court held that the obligation of the Atlantic Company was created by contract. 1988 – a 14. and no reservation whereby the person rendering the services seeks to escape from the consequences of a violation of this obligation can be viewed with favor. But there was a contract. and the defense of due diligence of a father could only be used in cases where negligence arises in the absence of an agreement.000. all risk incident to the discharge of the boilers was assumed by the Steamship Company. 1990 . contract was one-sided and onerous in favor of DKC DKC HOLDINGS CORP. 1994 Decision of the CA entitled "DKC Holdings Corporation vs.Andres Lanozo claimed that he is a tenant-tiller of the subject property. as upon other later occasions.

Nature of Intransmissible Rights as explained by Arturo Tolentino Among contracts which are intransmissible are those which are purely personal. Victor Bartolome was liable to DKC Holdings for attorney’s fees ISSUES 1. WON DKC Holdings had complied with its obligations under the contract and with the requisites to exercise its option HELD 1.heirs cannot escape the legal consequence of a transaction entered into by their predecessor-in-interest because they have inherited the property subject to the liability affecting their common ancestor. which is a property right and death of a party does not excuse nonperformance of a contract which involves a property right. the heirs can be compelled to execute the proper deed for reconveyance . taste. the agreement is of a personal nature. Labitag exercise by the latter of its option to lease the same may very well be performed by her heir Victor.there is neither contractual stipulation nor legal provision making the rights and obligations under the contract intransmissible. Respondent Register of Deeds is ordered to register and annotate the subject Contract of Lease with Option to Buy at the back of Transfer Certificate of Title upon submission by DKC of a copy thereof to his office. It binds her sole heir. Here. for the months of March to July 30. either by provision of law. and the lawyer. December 4. . by its terms. where the client in a contract for professional services of a lawyer died.Contracts to perform personal acts which cannot be as well performed by others are discharged by the death of the promissor. > 1903. the lawyer was limited to a recovery on the basis of quantum meruit. The Decision of the Court of Appeals and RTC Valenzuela are both SET ASIDE and a new one rendered ordering private respondent Victor Bartolome to: (a) surrender and deliver possession of that parcel of land by way of lease to petitioner and to perform all obligations of his predecessor-in-interest. but constitute a charge against his estate. Thus. integrity. Encarnacion Bartolome. it was held that the contract could not be enforced against the minors. . except those for February and March. NO. except in case where the rights and obligations arising from the contract are not transmissible by their nature. existence of a registered tenancy was fatal to the validity of the contract 5. . their assigns and heirs. where the service or act is of such a character that it may as well be performed by another.00 monthly rental fee on the subject property by depositing the same in China Bank Savings Account in the name of Victor as the sole heir of Encarnacion Bartolome. . 1990. or by stipulation or by provision of law. transmissible. shows that performance by others was contemplated. He assumed all the obligations of the lessor under the lease contract. skill. GUTIERREZ HERMANOS V ORENSE TORRES. . or a total of 5 months. it was held that "(H)e who contracts does so for himself and his heirs. 1990 were admitted by Victor . such as in cases of partnerships and agency. Here the subject matter is also a lease. predecessor was duty-bound to reconvey land to another. and at his death the reconveyance had not been made. such as those requiring special personal qualifications of the obligor. well within the two-year period for it to exercise its option Disposition Instant Petition for Review is GRANTED. and the rights and obligations thereunder pass to the personal representatives of the deceased. 1990. the payment by DKC of the reservation fees during the two-year period within which it had the option to lease or purchase the property is not disputed and it was also proper to address notice to exercise option to Victor as heir of Encarnacion. (b) surrender and deliver his copy of Transfer Certificate of Title to Register of Deeds for registration and annotation thereon of the subject Contract of Lease with Option to Buy. leaving minor heirs.In American jurisprudence (W)here acts stipulated in a contract require the exercise of special knowledge. WON Contract of Lease with Option to Buy entered into by the late Encarnacion Bartolome with DKC Holdings was terminated upon her death 2. Court of Appeals where Raymundo alleged that he is not privy to the lease contract.In Parañaque Kings Enterprises vs.payment of such reservation fees. and terminates on the death of the party who is required to render such service . instead of presenting his claim for professional services under the contract to the probate court. by virtue of his purchase. (c) pay costs of suit. moreover. And he received benefits in the form of rental payments. Victor. death does not terminate the contract or excuse nonperformance. 2. experience.General Rule: heirs are bound by contracts entered into by their predecessors-ininterest Exception: when the rights and obligations arising therefrom are not transmissible by (1) their nature (2) stipulation or (3) provision of law . The heir is not liable beyond the value of the property he received from the decedent. or other personal qualification of one or both parties. It may also be stated that contracts for the payment of money debts are not transmitted to the heirs of a party. no personal act is required from the late Encarnacion Bartolome and the obligation of Encarnacion in the contract to deliver possession of the subject property to petitioner upon the A2010 page Prof. by their nature. . Conversely. 1914 NATURE . despite the refusal of Victor to turn over the subject property > informed other party of its intention to exercise its option to lease through its letter dated Match 12. substituted the minors as parties for his client.A1311 CC provides Contracts take effect only between the parties.000. the nature of the rights and obligations are.Obligations and Contracts 118 4.DKC followed the requirements by > paying the P15. SC ruled he is nevertheless a proper party because he stepped into the shoes of the owner-lessor of the land as. even after her demise. not being the lessor nor the lessee referred to therein. judgment." > 1952. under the subject Contract of Lease with Option to Buy. ability. genius. YES. or by the very nature of the obligations arising therefrom. discretion. or where the contract.

Petitioners' Claim . But Orense refused to do so. 1911. power of agency upon his nephew Duran. when ORENSE was called as a witness. while testifying as a witness at the trial of Duran for estafa. WON Orense is bound by Duran’s act of selling plaintiff’s property 2. ISSUES A2010 page Prof. 1907. . . Gutierrez Hermanos then charged DURAN with estafa. Respondents' Comments . the defendant refused to deliver the property to the purchaser. who accepted it in the same way by selling the said property. YES Ratio Even if the sale of the property was null and void in the beginning.Gutierrez Hermanos had not entered into possession of the purchased property. As they are a full ratification of the acts executed by his nephew Jose Duran. he admitted that he consented to Duran’s selling of property under right of redemption. it is not just nor is it permissible for him afterward to deny that admission. and since his ownership was recorded in the property registry.Obligations and Contracts 119 Appeal from a judgment of CFI Albay ruling in favor of plaintiff FACTS . because the authority which Orense may have given to Duran to make the said contract of sale is not shown to have been in writing and signed by Orense. and that defendant be ordered to execute in the plaintiff's behalf the said instrument of transfer and conveyance of the property and of all the right. Reasoning The contract of sale of the said property contained in the notarial instrument of Feb 14. . .Facts in the complaint did not constitute a cause of action. interest. 1941 NATURE Petition for review on certiorari. . . pursuant to article 1313 of the Civil Code. the right of action for nullification that could have been brought became legally extinguished from the moment the contract was validly confirmed and ratified. for having represented himself in the said deed of sale to be the absolute owner of the land.During that trial. and with the nipa roof erected) situated in the pueblo of Guinobatan. Orense. 1709.Jose DURAN. virtually confirms and ratifies the sale of his property effected by his nephew.” .Feb 14. and so he should be compelled to execute the said deed by an express order of the court. A contract executed in the name of another by one who has neither his authorization nor legal representation shall be void.500 for the said property. This meets the requirements of the law and legally excuses the lack of written authority. it became perfectly valid and cured of the defect of nullity it bore at its execution by the owner’s confirmation of the said contract of sale and consent to its execution. or at least implied. 1913 – Gutierrez Hermanos then filed a complaint in the CFI Albay against Engracio ORENSE. Disposition Judgment appealed from is affirmed. WON contract of sale is valid HELD 1.The sworn statement made by the defendant. Albay. and he did not intentionally and deliberately perform any act such as might have induced the plaintiff company to believe that Duran was empowered and authorized by the defendant. (Civil Code. they produce the effects of an express power of agency. all plaintiff had to do was demand of Orense to execute in legal form a deed of conveyance.He had not executed any written power of attorney nor given any verbal authority to Jose DURAN to sell the property to Gutierrez Hermanos. because of its continued occupancy by ORENSE and DURAN by virtue of a contract of lease executed by the plaintiff to Duran. . Duran. this was conclusive against the plaintiff. 2. arts.His knowledge of the sale was acquired long after the execution of the contract of sale between Duran and Gutierrez Hermanos.Mar 5. . .After the lapse of the four years stipulated for the redemption. nor pay any sum for the losses and damages occasioned by the sale. it follows that the defendant conferred verbal. GABRIEL V MONTE DE PIEDAD LAUREL. a nephew of Orense. who gave P1. YES Ratio It having been proven at the trial that he gave his consent to the said sale. . . In order to perfect the title to the said property. executed by Jose Duran. Because of this.He is the lawful owner of the property claimed in the complaint. title and share which the defendant has.If the defendant Orense acknowledged and admitted under oath that he had consented to Jose Duran's selling the property in litigation to Gutierrez Hermanos. The principal must therefore fulfill all the obligations contracted by the agent. remedies all defects which the contract may have contained from the moment of its execution.500 and that the vendor Duran reserved to himself the right to repurchase it for the same price within a period of four years. is alleged to be invalid. 1710 and 1727) Reasoning Article 1259 of the Civil Code prescribes: "No one can contract in the name of another without being authorized by him or without his legal representation according to law. Duran had been occupying the said property since February 14. was publicly and freely confirmed and ratified by ORENSE. Also. null and void under the provisions of par 5 of sec 335 of the Code of Civil Procedure.Jose DURAN is notoriously insolvent and cannot reimburse the plaintiff company for the price of the sale which he received. pursuant to article 1309 of the Code. This property has been recorded in the new property registry in his name. the court acquitted DURAN for charge of estafa. executed before a notary a public instrument that he sold and conveyed to the plaintiff company the said property for P1. 1911.Also.ORENSE is the owner a parcel of land (with masonry house. 1907 . unless it should be ratified by the person in whose name it was executed before being revoked by the other contracting party. to the prejudice of the purchaser. April 14. who acted within the scope of his authority.Plaintiff prays that the land and improvements be declared as belonging legitimately and exclusively to him. without any justifiable cause or reason. But record shows that he gave his consent as proven in his own sworn testimony. . and. . and refused to pay the rental notwithstanding the demand made upon him at the rate of P30 per month. Labitag 1.The instrument of sale of the property. effective up to February 14.

In absence of express legislation or constitutional prohibition. xxxxxxxxx 6. and 3) that due to the criminal and the present case.Respondents then commenced training in Pakistan. the petitioner alleged 1) that the payments made by him were made through deceit and consisted of P300 monthly deductions to his salary. roughly one year and four months prior to the expiration of the contracts of employment. denied all specifications therein and also denied under oath the genuineness of the execution of the alleged chattel mortgage attached thereto. and only the Courts of Karachi. OPLE FELICIANO. or contravenes some established interests of society. has a tendency to injure the public. The contracts provided in pertinent portion as follows: "5. PIA reserves the right to terminate this agreement at any time by giving the EMPLOYEE notice in writing in advance one month before the intended termination or in lieu thereof.000. After several unfruitful attempts at conciliation. Disposition The petition is hereby dismissed and the judgment sought to be reviewed is affirmed. 1990 NATURE Petition for certiorari to review the order of the Minister of Labor FACTS . must find that the contract as to the consideration or thing to be done. a foreign corporation licensed to do business in the Philippines.00 ISSUE WON the provisions of the chattel mortgage are contrary to law. Labitag admitted liability is a good consideration for a promise.345. PAKISTAN INTERNATIONAL AIRLINES CORPORATION v. He alleged that 1) the chattel mortgage was part of a scheme by respondent to cover for losses incurred in its pawnshop department. Pakistan shall have the jurisdiction to consider any matter arising out of or under this agreement.On 2 August 1980. by paying the EMPLOYEE wages equivalent to one month's salary. APPLICABLE LAW: This agreement shall be construed and governed under and by the laws of Pakistan. . petitioner Pakistan International Airlines Corporation (PIA). The fact that the bargain is a hard one will not deprive it of its validity. the petitioner alleged 1) that the chattel mortgage was entered into by E. 2) that he was induced. with costs against the petitioner. PIA sent separate letters both dated 1 August 1980 to private respondents Farrales and Mamasig advising both that their services as flight attendants would be terminated "effective 1 September 1980. xxxxxxxxx 10. in his answer. The PIA . or tends clearly to undermine the security of individual rights. with 6% interest from said date (paid by installments of P300/month). A preexisting A2010 page Prof. against PIA with the then Ministry of Labor and Employment (MOLE). DURATION OF EMPLOYMENTAND PENALTY This agreement is for a period of three years. As to petitioner’s contention that the chattel mortgage lacks consideration. September 28. is against the public good. without being authorized to do so by the latter. one with private respondent Farrales and the other with private respondent Mamasig. it was already established that it was executed voluntarily by the him to guarantee deficiencies resulting from his erroneous appraisal of the jewels. executed in Manila two separate contracts of employment. 2) that he received P356." .On 9 September 1980. conformably to clause 6 (b) of the employment agreement [they had] executed with [PIA].By way of counterclaim. .07. a court. floating and changeable in connotation.Petitioner was a jewel appraiser in the pawnshop of Monte de Piedad from 1913 to May 1933. . they began discharging their job functions as flight attendants. . Neither does it contravene the policy of the law nor the established interests of the society.To recover balance of P11. .Petitioner.25 a month as expert appraiser and that he was separated arbitrarily at the end of May 1933 from plaintiff entity without lawful cause and one month notice and plaintiff failed to pay him his salaries for May and June 1933. and 4) that the chattel mortgage was null and void ab initio. Marco for and in behalf of Monte de Piedad. The freedom of contract is both a constitutional and statutory right and to uphold this right. and courts will look to the substance and not to the mere form of the transaction. After their training period. A contract is to be judged by its character. Monte de Piedad filed a civil case against petitioner. 2) a criminal action had been instituted against him where said chattel mortgage was presented but he was acquitted therein. or is inconsistent with sound policy and good morals.On 2 December 1978. TERMINATION xxxxxxxxx Notwithstanding anything to contrary as herein provided.On December 1932. whether of personal liability or of private property. in accordance with law. through false representation.Obligations and Contracts 120 FACTS . The contract at bar does not militate against the public good. courts should move with all the necessary caution and prudence in holding contracts void. amounting to toP14. he executed a chattel mortgage to secure the payment of deficiencies caused by his erroneous appraisal of jewels pawned to the appellee. in order to declare a contract void as against public policy. Petitioners' Claim . 3) that the chattel mortgage was based upon all nonexisting subject matter and nonexisting consideration. and 3) the said acquittal was a bar to the civil case. to sign said mortgage against his will. but can be extended by the mutual consent of the parties. Reasoning The term “public policy” is vague and uncertain in meaning. with base station in Manila and flying assignments to different parts of the Middle East and Europe. both parties were ordered to submit their position papers and evidence supporting their respective positions. he suffered damages and losses both materially and in his reputation in the amount of at least P15. .By way of cross-complaint.75 of aforementioned sum.679. private respondents Farrales and Mamasig jointly instituted a complaint for illegal dismissal and non-payment of company benefits and bonuses. morals and public policy rendering it ineffective and the principal obligation secured by it void HELD Ratio Courts should not rashly extend the rule which holds that a contract is void as against public policy.

and hence refused to give effect to said paragraph 5. The Order stated that 1) private respondents had attained the status of regular employees after they had rendered more than a year of continued service.-The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties. Security of Tenure. of our Civil Code is that the contracting parties may establish such stipulations as they may deem convenient. or upon evidence aliunde of the intent to evade. . and payment of a bonus to each of the private respondents equivalent to their one-month salary... These Articles are as follows: "Art. Article 281. whether such service is continuous or broken. 280. especially provisions A2010 page Prof. Put a little differently. It is thus necessary to appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable Philippine law and regulations. . the fixed period of three years specified in paragraph 5 will be seen to have been effectively neutralized by the provisions of paragraph 6 of that agreement. "to pay each of the complainants [private respondents] their salaries corresponding to the unexpired portion of the contract[s] [of employment] x ''. etc.Obligations and Contracts 121 submitted its position paper. an absolute principle. shall be considered as regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. . MOLE. Inc. was illegal and entitled private respondents to reinstatement with full backwages. in effect held that paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the Labor Code as they existed at the time the contract of employment was entered into. 3) the dismissal. while paragraph 6 provided that. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time his reinstatement. adopted the findings of fact and conclusions of the Regional Director and affirmed the latter's award save for the portion thereof giving PIA the option. the Court reached the conclusion that a contract providing for employment with a fixed period was not necessarily unlawful. in lieu of reinstatement.On appeal.Examining the provisions of paragraphs 5 and 6 of the employment agreement between PIA and private respondents. .. The rule in Article 1306. et al. et al. good customs. After an extensive examination of the history and development of Articles 280 and 281. notwithstanding any other provision in the contract. be respected since a contract is the law between the parties. . The law relating to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other.In the instant Petition for Certiorari. PIA assails the award of the Regional Director and the Order of the Deputy Minister for having been issued in disregard and in violation of Petitioner's rights under the employment contracts with private respondents. however. the governing principle is that parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. and that PIA personnel at the Manila International Airport had been discreetly warned by customs officials to advise private respondents to discontinue that practice. in lieu of such notice. we consider that those provisions must be read together and when so read. in an Order dated 12 August 1982. in the alternative. and there claimed that both private respondents were habitually absent and bringing in from abroad sizeable quantities of "personal effects".In Brent School. ." Thus. Labitag relating to matters affected with public policy. This indication must ordinarily rest upon some aspect of the agreement other than the mere specification of a fixed term of the employment agreement. 2) the stipulation limiting the period of the employment contract to three years was null and void as violative of the provisions of the Labor Code and its implementing rules and regulations on regular and casual employment and. the Court had occasion to examine in detail the question of whether employment for a fixed term has been outlawed under the above quoted provisions of the Labor Code. ISSUE WON the principle of party autonomy in contracts is absolute HELD NO . PIA further claimed that the services of both private respondents were terminated pursuant to the provisions of the employment contract. of course. Regional Director Estrella ordered the reinstatement of private respondents with full backwages or. PIA had the right to terminate the employment agreement at any time by giving one-month's notice to the employee or. Jr. morals. extendible by agreement between the parties.In his Order dated 22 January 1981.Both the Labor Arbiter and the Deputy Minister.'' (Italics supplied) . the payment to them of the amounts equivalent to their salaries for the remainder of the fixed three-year period of their employment contracts.-In cases of regular employment. any employee who has rendered at least one year of service. PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents Farrales and Mamasig. counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of applicable law.A contract freely entered into should. are deemed written into the contract. The principle of party autonomy in contracts is not. "provided they are not contrary to law. arguing that its relationship with them was governed by the provisions of its contract rather than by the general provisions of the Labor Code. Leogardo. Regular and Casual Employment. the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. Paragraph 5 of that contract set a term of three years for that relationship. one-month's salary. the payment to private respondent Mamasig of an amount equivalent to the value of a round trip ticket Manila-USA-Manila. Hon. v. that. except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.An employment shall be deemed to be casual if it is not covered by the preceding paragraph: provided. an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer. public order or public policy. MOLE. The critical consideration is the presence or absence of a substantial indication that the period specified in an employment agreement was designed to circumvent the security of tenure of regular employees which is provided for in Articles 280 and 281 of the Labor Code. having been carried out without the requisite clearance from the MOLE. Deputy Minister. but no evidence.. Paragraph 6 in effect took back from the employee . Ronaldo Zamora.

Cui graduated from Abad Santos University. I hereby waive my right to transfer to another school without having refunded to the University (defendant) the equivalent of my scholarship cash. All the above contracts point to the Philippine courts and administrative agencies as a proper forum for the resolution of contractual disputes between the parties. full or partial.Obligations and Contracts 122 the fixed three-year period ostensibly granted by paragraph 5 by rendering such period in effect a facultative one at the option of the employer PIA. "3 Several complaints have actually been received from students who have enjoyed scholarships.. for scholastic merit. to the effect that they could not transfer to other schools since their credentials would not be released unless they would pay the fees corresponding to the period of the scholarships.Before the school year 1948-1949 Cui took up a preparatory law course in Arellano University. and in any event. is P1. which reads in part: "1.Since his uncle.87. specifying the Karachi courts as the sole venue for the settlement of disputes between the contracting parties. . on the one hand. FACTS .Plaintiff. . the Court considers that paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of private respondents even during the limited period of three years. at any time and for any cause satisfactory to itself. brother of the mother of plaintiff. secondly. We have already pointed out that that relationship is much affected with public interest and that the otherwise applicable Philippine laws and regulations cannot be rendered illusory by the parties agreeing upon some other law to govern their relationship. … some schools offer full or partial scholarships to deserving students…." . From Cui’s first semester of his first year law up to and including the first semester of his last year in Arellano. May 30. . for insufficiency of proof thereon. Cui left Arellano University and enrolled for the last semester of his fourth year law in Abad Santos. during all the time he was studying law in Arellano University. . although a foreign corporation. and thus to escape completely the thrust of Articles 280 and 281 of the Labor Code. . .Cui enrolled for the last semester of his law studies in the defendant university but failed to pay his tuition fees. which was refunded to him. so that his semestral tuition fees were returned to him after the end of each semester. Such inducements … should be encouraged.Before being awarded scholarship grants. was the dean of the College of Law and legal counsel of the defendant university. Capistrano. Pakistan". unless refund were made. Where the Bureau believes that the right of the student to transfer is being denied on this ground. it was also performed here. he applied to take the bar examinations. (Sgd. … such scholarships are merited and earned. to a one-month period. "so that the case may be presented to the court CUI V ARELLANO UNIVERSITY CONCEPCION. with costs against the plaintiff. upon the other: the contract was not only executed in the Philippines. lastly. and even recommended to said Bureau that it issue a written order directing the defendant to release said transcript of record. 1961 NATURE Appeal by plaintiff Emeterio Cui from a decision of the Court of First Instance of Manila.Neither may PIA invoke the second clause of paragraph 10.PIA cannot take refuge in paragraph 10 of its employment agreement which specifies. the petitioner PIA did not undertake to plead and prove the contents of Pakistan law on the matter.033. The first clause of paragraph 10 cannot be invoked to prevent the application of Philippine labor laws and regulations to the subject matter of this case. paragraph 10 of the employment agreement cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by Philippine law.) EMETERIO CUI'. 38. private respondents are Philippine citizens and residents. severed his connection with Arellano University and has accepted the deanship and chancellorship of the College of Law of Abad Santos University. while petitioner. This notwithstanding. lays the venue for settlement of any dispute arising out of or in connection with the agreement "only [in] courts of Karachi. Labitag . The Bureau of Private Schools upheld the position taken by the plaintiff and so advised the defendant. and dismissing defendant's counterclaim. The amount in tuition and other fees corresponding to these scholarships should not be subsequently charged to the recipient students when they decide to quit school or to transfer to another institution…. firstly.87. Finally. Francisco R. A2010 page Prof. it must therefore be presumed that the applicable provisions of the law of Pakistan are the same as the applicable provisions of Philippine law. or even less by simply paying the employee a month's salary. Cui was made to sign the following contract.e. ." . During all the school years in which plaintiff was studying law in defendant law college. "2.033. Under these circumstances. the law of Pakistan as the applicable law of the agreement and.033. private respondents were based in the Philippines in between their assigned flights to the Middle East and Europe. Dean Capistrano. For PIA claims to be authorized to shorten that term. . is licensed to do business (and actually doing business) and hence resident in the Philippines.Cui asked the Bureau of Private Schools to pass upon the issue on his right to secure the transcript of his record in Arellano University. after which he enrolled in the College of Law of said university starting school year 1948-1949. without being required to refund P1. i. the employeremployee relationship between petitioner PIA and private respondents. Even a cursory scrutiny of the relevant circumstances of this case will show the multiple and substantive contacts between Philippine law and Philippine courts. and the relationship between the parties. Arellano University refused to issue transcript of record. the total amount of tuition fees he paid.Aug 16. Because the net effect of paragraphs 5 and 6 of the agreement here involved is to render the employment of private respondents Farrales and Mamasig basically employment at the pleasure of PIA. 1949. He petitioned Arellano University to provide him his transcript of records. The defendant refused until after Cui had paid back the P1. the Director of Private Schools issued Memorandum No. covenant and agreement: 'In consideration of the scholarship granted to me by the University.Plaintiff took up his law studies in the defendant university up to and including the first semester of the fourth year. series of 1949. absolving defendant Arellano University from plaintiff's complaint. at least partially. it reserves the right to authorize such transfer.After graduating from Abad Santos University. But to stipulate the condition that such scholarships are good only if the students concerned continue in the same school nullifies the principle of merit in the award of these scholarships. was awarded scholarship grants.87.

In order to declare a contract void as against public policy. inasmuch as respondent Insurance . 1966 NATURE Special Civil Action For Declaratory Relief FACTS .Morals. Thus conceived it is not only inconsistent with sound policy but also good morals. . is valid HELD NO.Plaintiff delivered to the defendant a written agreement for signature of the said Marcel Juaneza attesting that the defendant’s said client recognized the plaintiff’s ownership of the land and that she would not oppose the plaintiff’s application for registration . a court must find that the contract as to consideration or the thing to be done.On August 14. with interest thereon at the legal rate from September 1.Plaintiff on his part complied with the agreement . March 3. A consideration is illicit when it is contrary to law and good morals.The defendant has not returned to the plaintiff the said written agreement notwithstanding the demands of the latter ISSUE WON the agreement between the plaintiff and the defendant had valid stipulations HELD NO It was contrary to public policy. Disposition The decision appealed from is reversed. It says in part: . . the defendant agreed that the plaintiff should obtain a Torrens title to the said land during the next term of the court and that defendant’s client Marcel Juaneza would not oppose the application for registration to be filed by the said applicant provided that the plaintiff would ask the prosecuting attorney to dismiss the said proceedings filed against Marcela Juaneza and Alejandro Castro for the crime of theft . and dismissing defendant's counterclaim.Defendant is a procurador judicial in the law office of the Attorney John Bordman and is duly authorized by the court to practice in justice of the peace courts of the Province of Iloilo Defendant represented Marcela Juaneza in the justice of the peace court of Iloilo in the proceeding for theft prosecuted by the plaintiff Ignacio Arroyo FILIPINAS COMPAÑIA DE SEGUROS. Article 1255.39 non-life insurance companies instituted this action in the CFI of Manila. ET AL. not to keep outstanding students in school to bolsters prestige. as defined by Manresa. provided they are not in contravention of law. and another one shall be entered sentencing the defendant to pay to the plaintiff the sum of P1. . A2010 page Prof. V MANDANAS CONCEPCION.Contracts without consideration or with an illicit one have no effect whatsoever.The contracting parties may make the agreement and establish the clauses and conditions which they may deem advisable. or tends clearly to undermine the security of individual rights. and that the memorandum above-referred to is null and void. of which they are members. 1951. . Article 1275. The stipulation in question is contrary to public policy and hence.The practice of awarding scholarships to attract students and keep them in school is not good customs nor has it received some kind of social and practical confirmation except in some private institutions as in Arellano University. or is inconsistent with sound policy and good morals.Both plaintiff and defendant are residents of the municipality of Iloilo . null and void. s. . CC: . Furthermore.The Court’s decision was mainly a quotation of the letter of Bureau of Private Schools. or public order. CC: . date of the institution of this case. as well as the costs. (Gabriel vs. The SC affirmed the decision of the trial judge dismissing the complaint on the ground of the illegality of the consideration of the alleged contract. morals.Obligations and Contracts 123 for judicial action". 38. June 20. for a pecuniary or other valuable consideration.033. scholarships award is a business scheme designed to increase the business potential of an educational institution. 1917 FACTS . 1914. ARROYO V BERWIN CARSON. which is a direct violation of our Memorandum and an open challenge to the authority of the Director of Private Schools because the contract was repugnant to sound morality and civic honesty. is good customs. Cui was thus constrained to pay P1. to secure a declaration of legality of Article 22 of the Constitution of the Philippine Rating Bureau. ISSUE WON the provision of the contract between plaintiff and defendant.87.033.In exchange. 1954.Scholarships are awarded in recognition of merit. the defendant requested the plaintiff to agree to dismiss the said criminal proceeding and stipulated with the plaintiff that his client Marcela Juaniza would recognize the plaintiff’s ownership in the land situated on Calle San Juan of the municipality of Iloilo where his said client ordered the cane cut.87. whereby Cui waived his right to transfer to another school without refunding to the latter the equivalent of his scholarships in cash. the defendant did not comply with the agreement . An agreement by the owner of stolen goods to stifle the prosecution of the person charged with the theft. contravenes some established interest of society. Monte de Piedad) . which land and which cut cane are referred to in the cuase for theft. in order that he could take the bar examinations in 1953.If Arellano University understood clearly the real essence of scholarships and the motives which prompted the Bureau to issue Memorandum No. is manifestly contrary to public policy and the due administration of justice. it should have not entered into a contract of waiver with Cui on September 10. In the understanding of that university. which the Court held as correctly argued.Defendant claims that the provisions of its contract with plaintiff are valid and binding. those generally accepted principles of morality which have received some kind of social and practical confirmation. 1949. Labitag .

likewise. members of the Bureau "agree not to represent nor to effect reinsurance with. (Ollendorf vs. that rate-making is actually dependent very much on statistics.) Disposition The decision appealed from should be. that much of the work of the Bureau has to do with rate-making and policy-wording. 1960. .Subsequently.. Abrahamson and Red Line Transportation Co. whatever the Bureau may do in the matter of rate-fixing is not decisive insofar as the public is concerned. null and void. nor to accept reinsurance from any company. which cannot be expected from non-members of the Bureau. 77). also. 1954. licensed to do business in the Philippines not a member in good standing of the Bureau". said Bureau members must. share in the rather appreciable expenses entailed in compiling the aforementioned data and in analyzing the same . and submitted with its application a copy of said Constitution. ISSUE WON the purpose or effect of Art 22 of the Constitution of the Philippine Rating Bureau is illegal as a combination in restraint of trade HELD “Nothing is unlawful. 38 Phil. and that. thereafter. and hence. unreasonable.. of modern authority. whether. respondent's office issued to the Bureau the license applied for. that. .During all this time. there are sufficient foreign reinsurance companies operating in the Philippines from which non-members of the Bureau may secure reinsurance. If the contract is reasonably necessary to protect the interest of the parties. Besides. that this information cannot be compiled without full cooperation on the part of the companies concerned. rather than by any fixed rule. although. 54.is. because the intense competition between the great number of non-life insurance companies operating in the Philippines is conducive to unethical practices. incidentally it may discourage. xxx xxx xxx . or is not. without costs... that it assailed its validity. it may be lawfully observed and enforced. oftentimes taking the form of underrating. which have tables of mortality to guide them in the fixing of rates. is to make the test whether the restraint is reasonably necessary for the protection of the contracting parties. respondent's office did not question. in April.Hence this appeal by respondent Insurance Commissioner. that. several years ago. Bachrach Motor Co.The purpose of said Article 22 is not to eliminate competition. A2010 page Prof.In said Article 22. and that such restrictions may be upheld when not contrary to the public welfare and not greater than is necessary to afford a fair and reasonable protection to the party in whose favor it is imposed. . in the following language: . 54. the contract is. 54. 585. no such guides. otherwise. as yet. that to achieve this purpose it is highly desirable to have cooperative action between said companies in the compilation of their total experience in the business. or contrary to public policy either in the objectives thus sought to be attained by the Bureau. under the particular circumstances of the case and the nature of the particular contract involved in it. to determine the rates or premiums that should be charged in insuring every type of risk. whether there is reinsurance or not. 20 other non-life insurance companies. Labitag aforementioned Article 22 does not affect the public at all. over which the latter has no control. certifying not only that it had complied with the requirements of Circular No. It was not until March 11.. the Bureau applied for and was granted yearly the requisite license to operate in accordance with the provisions of its Constitution. non-life insurance companies have. unlike life insurance companies. public interest and welfare are not involved and the restraint is not only reasonably necessary for the protection of the contracting parties but will not affect the public interest or service. eliminate unfair competition. . it will be upheld. for no insurance company in the Philippines may charge a rate of premium that has not been approved by the Insurance Commissioner as per Circular No. . hence.. This view was reiterated in Ollendorf vs.Obligations and Contracts 124 Commissioner (who regulates the business concerned and of the transactions involved therein) assails its validity upon the ground that it constitutes an illegal or undue restraint of trade. Bachrach Motor Co. body.The test on whether a given agreement constitutes an unlawful machination or a combination in restraint of trade: Ferrazini vs. so that the Bureau could determine more accurately the proper rate of premium to be charged from the insured. but to promote ethical practices among non-life insurance companies. that. the liability of the insurer in favor of the insured is the same.The test of validity is whether under the particular circumstances of the case and considering the nature of the particular contract involved. he would urge the amendment of the law so that appropriate measures could be taken therefore by his office. What is more. and so the said provision is illegal as a combination in restraint of trade according to Mandanas. On April 28. the very Insurance Commissioner had indicated to the Bureau the necessity of doing something to combat underrating. members of said Bureau were allowed to intervene in support of the petition. Gsell. or in the consequences of the accomplishment thereof. Salvador Estrada’s (Chairman of the Bureau) testimony4 shows that the limitation upon reinsurance contained in the 4 He declared that the purpose of Article 22 is to maintain a high degree or standard of ethical practice. vs. in addition to submitting information about their respective experience. the Bureau applied for the license required therein.CFI.The general tendency. Abrahamson. the legality of Article 22. or in the means availed of to achieve said objectives. which in itself is eventually injurious to the public. as it is hereby AFFIRMED. for. accordingly. or unreasonable.” . likewise. but. hence. 1954. or immoral. (Red Line Transportation Co.) . (67 Phil. non-life insurance companies need an adequate record of losses and premium collections that will enable them to determine the amount of risk involved in each type of risk and. that the license empowered it "to engage in the making of rates or policy conditions to be used by insurance companies in the Philippines".rendered judgment declaring that the aforementioned Article 22 is neither contrary to law nor against public policy. but impliedly acknowledged. through underrating.In compliance with the aforementioned Circular No. vs. . so that insurance companies may earn and maintain the respect of the public. .Subsequent to the filing of the petition. Reasoning . who insists that the Article in question constitutes an illegal or undue restraint of trade and. we believe.we adopt the modern rule that the validity of restraints upon trade or employment is to be determined by the intrinsic reasonableness of the restriction in each case. for. or underwriter.

There revealed a subtle intention of the creditor to acquire the property given as security for the loan.March 8. . especially where the same would not only be disadvantageous to petitioner but would also unjustly enrich respondents considering the inadequate consideration (P200. A2010 page Prof.500.10 . when defendants deposited the amount with the Office of the City Treasurer.000 with the City Treasurer of QC on August 10. HELD 1. and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period. . The sale of the collateral is an obligation with a suspensive condition.February 28. Reasoning We note the eagerness of respondents to acquire the property given as collateral to guarantee the loan.Although the contract has the force of law. 1987 – Norma Rosel entered into a loan agreement with Natalia Bustamante and her late husband Ismael. which the latter refused to accept. Disposition WHEREFORE.January 20. We REVERSE the decision of the Court of Appeals DIZON V GABORRO GUERRERO. which is not contrary to law. They contend that the agreement between the parties was not a sale with right of repurchase. WON the stipulation in the loan contract was valid and enforceable. .000.00. 1989 – petitioners tendered payment of the loan to respondents. public order or public policy. 1998. It is dependent upon the happening of an event.The petitioner filed a motion for reconsideration of the denial alleging that the real intention of the parties to the loan was to put up the collateral as guarantee similar to an equitable mortgage according to Article 1602 of the Civil Code.March 5. we GRANT petitioner's motion for reconsideration and SET ASIDE the Court's resolution of February 9. 1996 – CA reversed the ruling of the RTC . The principal loan and the interest taken together amounted to P152. QC with the principal loan and interest to be paid as down payment. the respondent was given the right to purchase the property or apartment for P200. 1990 – petitioner filed in the RTC a petition for consignation and deposited P153.July 8. The Bustamantes refused to sell and requested for extension of time and offered to sell another residential lot in Proj 8. .000 for a period of 2 years conted from March 1. Rosel proposed to buy the land at the set price in the loan agreement.000.March 4. provided they are not contrary to law. November 29.00) for a 70 square meter property. insisting that petitioner sell to them the collateral of the loan. morals. terms and conditions as they may deem convenient.00.00. ISSUES 1. 2. 1997 – Court required respondents to comment on the petition.500.000 inclusive of the borrowed money and interest.March 1. public order.000 with a second 5 The contracting parties may establish such stipulations. WON petitioner failed to pay the loan at its maturity date 2. 1990 . the petitioner did not fail to pay the loan. It also ordered the defendants to pay the loan with interest at 18% per annum commencing on March 2. Rosel refused to extend the payment of the loan and to accept the other lot offered as it was occupied by squatters and that the Bustamantes were not the owners of the land but were mere land developers entitled to the subdivision shares or commission if and when they developed at least ½ of the subdivision area. the stipulation in the loan is void as it constitutes pactum commisorium.58 hectares which were mortgaged to DBP as security for a loan amounting to P38. NO. respondents do not have the right to demand fulfillment of petitioner's obligation. The contract indicated that the Bustamantes wanted to borrow P100. 1989 up to and until August 10. which the respondents filed February 27. 1990 – the respondents filed with the RTC of QC for specific performance with consignation against petitioner and her spouse . 1990 – respondents sent a demand letter asking petitioner to sell the collateral pursuant to the option to buy in the loan agreement. 1990. Reasoning The petitioner tendered payment to settle the loan which respondents refused to accept.00 and 18% interest per annum thereon. . Since the event did not occur.Obligations and Contracts 125 BUSTAMANTE V ROSEL PARDO.TC denied the plaintiff’s prayer for the defendants’ execution of the Deed of Sale to convey the collateral in the plaintiffs’ favor. Respondents considered the principal loan of P100. 2002 NATURE Petition for review on certiorari of the decision of the CA FACTS . respondents consigned the amount of P47. without which the obligation to sell does not arise. NO. which amounted to P52. 1987 with an interest of 18% per annum. .Jose Dizon owned three parcels of land totaling 130. . 1999 NATURE Petition for review on certiorari to annul the decision of CA reversiong and setting aside the decision of the RTC of QC FACTS .000. insisting on petitioner’s signing of a prepared deed of absolute sale of the collateral.Respondents filed an opposition to petitioner's motion for reconsideration. which is embraced in the concept of pactum commissorium. but a loan with interest at 18% per annum for a period of two years and if petitioner fails to pay. or public policy . . leaving a balance of P 47. In the event that the borrowers fail to pay. Labitag . 1998 – SC resolved to deny the petition on the ground that there was no reversible error in the decision of the CA in ordering the execution of the necessary deed of sale in conformity with the stipulated agreement.Elements of pactum commissorium: (1) there should be a property mortgaged by way of security for the payment of the principal obligation. good customs.When petitioner refused to sell the collateral and barangay conciliation failed. . the lender has the option to buy or purchase the collateral for P200.When the loan was about to mature.500.February 9. an exception is Art 13065.500. clauses. good customs.00 with the trial court.00. morals. This was guaranteed by a collateral 79 sqm parcel of land inclusive of the apartment built on it.

nor any other person having any estate or interest thereon. wrote a letter to Gaborro offering to reimburse him of what he paid to the bnks contending the the transaction entered between them was one of antichresis. through his lawyer. hen or encumbrance of any kind whatsoever affecting said land. the Court set the application for hearing. there having been a meeting of the minds of the parties to a contract. GUERRERO. 1959.After due notice and publication.Alfredo Garborro.. . and that the applicants knew of this arrangement and the . was the source of contention in this case (Spanish text). Dizon failed to pay the amortizations to DBP causing the latter to foreclose on the mortgage. who was initially interested in leasing the properties as they were then idle.Exhibit O-1 embodied in the deed of extrajudicial partition (Exhibit O). it being admitted that the consideration mentioned in the agreement was not actually paid.91.91 which represented the total principal amounts due to both the DBP and PNB. and Angel Encarnacion acquired their respective shares of the land thru purchase from the original heirs. ISSUE WON the original agreement may be properly reformed HELD YES . 1964. Upon application of the applicants.On July 5.Obligations and Contracts 126 mortgage lien in favor of PNB to secure another indebtedness amounting to P93. . that to the best of the knowledge and belief. 1961. . on one hand and from Asuncion Florentino on the other. The application alleged among other things that the applicants are the common and pro-indiviso owners in fee simple of the said land with the improvements existing thereon. Gaborro took possession f the properties and wrote a letter to DBP advising them of his purchase of the property of Dizon and offering to pay the obligations under the same terms and conditions within ten years. Ilocos Sur. the Clerk of Court was commissioned and authorized to receive the evidence of the applicants and ordered to submit the same for the Court's proper resolution. As the mortgage was already foreclosed by DBP. Dizon also executed an assignment of his right of redemption and assumption of obligation in favor of Gaborro. Dacquel. As A2010 page Prof.When Gaborro did not agree. It was a mistake for the parties to execute the deed of sale with assumption of mortgage & the option to purchase real estate. Dizon.Upon execution of the documents. DBP and Gaborro executed a Deed of Conditional sale over the propertied for P136. 1960.831. Jesus. In addition. . September 30. The only legal effect is with regard the option Deed which granted Petitioner the right to recover the properties upon reimbursing Gaborro the sums of money the he may have paid to both the DBP and PNB as amortization on the mortgage. Hence these must be reformed in accordance with the intention and legal righs and obligations of the parties. Caridad.Mistake is a ground for the reformation of an instrument when.On May 22. there is no mortgage. FLORENTINO V ENCARNACION. reservation at in expectancy. In addition.The Deed of Sale with Assumption cannot be considered as a real and unconditional sale of the parcels of land on the grounds that there was no money consideration. . Besides. which was opposed by the former. all surnamed Singson. met with Dizon sometime prior to October 6. It should likewise be mentioned that the consideration for the sale is also the same amount as the loans outstanding to both DBP and PNB. payble 20% downpayment and the balance over ten years. The Bank agreed provided only that the initial payment be 20% of the loan amount. Florentino wanted to include Exhibit O-1 on the title but the Encarnacions opposed and subsequently withdrawn their application on their shares. Instead. Arciaga. .The findings of the trial court and the Court of Appeals that the true intention of the parties is that Gaborro will assume and pay the indebtness of Dizon and in return Gaborro shall enjoy possession. FACTS . legal or equitable. the propert in question at the time of the execution of the said instrument was already sold by auction to DBP. Labitag noted by the SC. . the agreement is one of those innominate contracts under Article 1307 of the Civil Code ehereby the petitioner and respondent agree “to give and to do” certain rights and obligations respecting the lands and the mortgage debts of the petitioner which would be acceptable to the bank but partaking of the nature of the antichresis. the parties executed anoher agreement which granted Dizon the option to repurchase the properties at the price of P131. the petitioners-appellants and the petitioners-appelleed filed with CFI an application for the registration under Act 496 of a parcel of agricultural land located at Cabugao.95. their true intention is not expressed in the instrument purporting to embody the agreement. Dizon himself executed a deed of sale in favor of DBP on November 12. Doña Encarnacion Florentino. Accordingly.090. they entered into a deed of sale with assumption of mortgage conveyed ownership of the properties to Gaborro. which states that with respect to the land situated in Barrio Lubong. enjoyment and the use of the properties until Dizon fully reimbursed him of the amounts paid to the said financial institutions. The said lots were sold subsequently to DBP through an auction conducted by the sheriff. SR. J. 1959 which deed was recorded in the office of the Register of Deeds on October 6. Only the Director of Lands filed an opposition but was later withdrawn so an order of general default was issued. that said applicants had acquired the aforesaid land thru and by inheritance from their predecessors in interest. Cabugao. the leasing project was abandoned. Ilocos Sur. 1977 NATURE APPEAL from the decision of the Court of First Instance of Ilocos Sur.831. Dizon filed suit alleging that the documents xecuted did not express the true intention and agreement between the parties and as the real agreement was not for an absolute deed of sale but for an equitable mortgage or conveyance by way of security for the reimbursement or refund by Dizon to Gaborro of any and all sums which the latter may have paid on account of the debts from both DBP and PNB. remainder. the fruits thereof shall serve to defray the religious expenses. . Dizon executed a deed of sale in favor of DBP through an auction. their aunt. Lourdes and Dolores.The Court after hearing the motion for withdrawal and the opposition issued an order and for the purpose of ascertaining and implifying that the products of the land made subject matter of this land registration case had been used in answering for the payment of expenses for the religious functions specified in the Deed of Extrajudicial Partition which was no registered in the office of the Register of Deeds from time immemorial.

. but the court modified in highlighting that the donee Church has not showed its clear acceptance of the donation. 3. of the contract. WON the lower court erred in holding that rule that the petitioners-appellants are not the real parties in interest. -Valid stipulation pour autrui: it must be the purpose and intent of the stipulating parties to benefit the third person. Jose Florentino. alleging that such is litigable only in an ordinary action and not proper in a land registration proceeding. and such third person may A2010 page Prof. Ratio The contract must bind both parties. was not signed by Angel Encarnacion or Salvador Encarnacion.The petitioners-appellants filed their Reply to the Opposition reiterating their previous arguments. based on the principles (1) that obligation wising from contracts have the force of law between the contracting parties. neither of whom acted as agent of the third person.1 YES The court should have found the other co-owners to be bound by the extrajudicial partition. hence the same must bind the contracting parties thereto and its validity or compliance cannot be left to the will of one of them . Reasoning The stipulation (Exhibit O-1) is part of an extrajudicial partition (Exh.CFI: The self-imposed arrangement in favor of the Church is a simple donation. and (3) neither of the contracting parties bears the legal representation or authorization of third party. Manuel Arce. is binding only on the applicants Miguel Florentino. Jr. That no such obligation exists may in some degree assist in determining whether the parties intended to benefit a third person. does not extend to cases involving issues properly litigable in other independent suits or ordinary civil actions Reasoning The peculiarity of the exceptions is based not alone on the fact that Land Registration Courts are likewise the same Courts of First Instance. and which stipulation is merely a part of a contract entered into by the parties. YES Ratio That one of the parties to a contract pour autrui is entitled to bring an action for its enforcement or to prevent its breach is too clear to need any extensive discussion.The Motion for Reconsideration and of New Trial was denied for lack of merit. . but the Church 3. Jr. -The evidence on record shows that the true intent of the parties is to confer a direct and material benefit upon the Church. WON the lower court as a registration court erred in passing upon the merits of the encumbrance (Exhibit O-1) as the same was never put to issue and as the question involved is an adjudication of rights of the parties HELD 1. As a rule. Victorino Florentino. We find that the Church accepted (implicitly) the stipulation in its favor before it is sought to be revoked by some of the coowners.1 WON the lower court erred in finding and concluding that the encumbrance or religious expenses embodied in Exhibit O. Upon the other hand. Antonio Florentino. Jr. (2) that the favorable stipulation should not be conditioned or compensated by any kind of obligation whatever. Rosario Encarnacion de Florentino. NO Ratio The otherwise rigid rule that the jurisdiction of the Land Registration Court. it is axiomatic that contracts are enforceable against the parties and their privies. and Angel Encarnacion had not made any oral or written grant at all so the court allowed the religious expenses to be made and entered on the undivided shares. YES The court erred in concluding that the stipulation is just an arrangement stipulation. except that of Salvador Encarnacion. but is void since the donee has not accepted the donation and Salvador Encarnacion. and also attacking the jurisdiction of the registration court to pass upon the validity or invalidity of the agreement Exhibit O-1. WON the lower own erred in concluding that the stipulation embodied in Exhibit O on religious expenses is just an arrangement stipulation. Ratio Being subsequent purchasers. not the petitionersappellants ISSUES 1. or grant revocable at the unilateral option of the co-owners 1. -Requisites: (1) that the stipulation in favor of a third person should be a part. 1. the extrajudicial partition between the co-heirs. Reasoning The annotation of Exhibit O-1 on the face of the title to be issued in this case is merely a guarantee of the continued enforcement and fulfillment of the beneficial stipulation. They are also shown to have knowledge of Exhibit O-1 as they had admitted in a Deed of Real Mortgage executed by them. The intention of the parties may be disclosed by their contract. Here. to which is repugnant to have one party bound by the contract leaving the other free therefrom. It matters not whether the stipulation is in the nature of a gift or whether there is an obligation owing from the promise to the third person. not the whole. (2) Full opportunity given to the parties in the presentation of their . Remedios Encarnacion and Severina Encarnacion 2. 1947. Labitag demand its fulfillment provided that he communicates his acceptance to the obligor before it is revoked. O) duly agreed and signed by the parties. Salvador Encarnacion. and is the real party of this case. the law does not provide when the third person must make his acceptance. Reasoning The co-owners are shown to have given their conformity to such agreement when they kept their peace in 1962 and 1963. 2. being special and limited in character and proceedings thereon summary in nature.Obligations and Contracts 127 Deed of Extrajudicial Partition of August 24.The said stipulation is a stipulation pour autrui. It cannot be revoked unilaterally. and Angel Encarnacion. .." . such third person has all the time until the stipulation is revoked. that the contract involved contained a stipulation pour autrui amplifies this settled rule only in the sense that the third person for whose benefit the contract was entered into may also demand its fulfillment provided he had communicated his acceptance thereof to the obligor before the stipulation in his favor is revoked. there is no time limit. they are privies or successors in interest. Sr. and (2) that them must be mutuality between the parties band on their essential equality. interests and participations of all the applicants in this case. having already bought their respective shares of the subject land but did not question the enforcement of the agreement as against them. and it is not sufficient that the third person may be incidentally benefited by the stipulation.While a stipulation in favor of a third person has no binding effect in itself before its acceptance by the party favored. A stipulation pour autrui is a stipulation in favor of a third person conferring a clear and deliberate favor upon him. but also the following premises: (1) Mutual consent of the parties or their acquiescence in submitting the aforesaid issues for determination by the court in the registration proceedings.

1962. one to be appointed in writing by each of the parties within one calendar month after having CONSTANTINO V ESPIRITU DIZON. arbitrators or umpire of the amount of the Company's liability hereunder if disputed shall be first obtained. issued in favor of the Manila Yellow Taxicab Co. one of which is found in the second paragraph of Art. To require that it be remanded to the lower own for another proceeding under its general jurisdiction is not in consonance with our avowed policy of speedy justice. but the Company did not accept it. before the stipulation in his favor has been revoked by the contracting parties. to the decision of two arbitrators. A2010 page Prof. The policy in question provides. Disposition Decision appealed from is affirmed. by way of compromise. 1. likewise.00. without the assistance of the Insured. 1968 NATURE Appeal from a decision of the Court of First Instance of Manila FACTS . or made any reference to arbitration. 1. since they could have maintained this action themselves. Under these conditions. 1971 NATURE . Labitag been required in writing so to do by either of the parties and in case of disagreement between the arbitrators.000. The test for determining whether there has been a waiver in a particular case is as follows: "Any conduct of the parties inconsistent with the notion that they treated the arbitration provision as in effect. the Coquias. this appeal by the Company. The trial court rendered a decision sentencing the Company to pay to the plaintiffs the sum of P4. the enforcement of which may be demanded by a third party for whose benefit it was made. ‘indemnify his personal representatives. 1961 to Dec. The Insured filed therefor a claim for P5.. Hence. which contends that plaintiffs have no cause of action because: 1) the Coquias have no contractual relation with the Company. this characteristic being made more manifest by the fact that the deceased driver. conductor and/or inspector who is riding in the motor vehicle insured at the time of accident or injury. May 31. The Fieldmen’s Insurance Co. 1962. INC. to the decision of an umpire who shall have been appointed in writing by the arbitrators before entering on the reference and the costs of and incident to the reference shall be dealt with in the Award. CONCEPCION. The Insured rejected the same and made a counter-offer for P4.00. driver of one of the taxi cabs covered by said policy. that the Company ‘will indemnify any authorized driver who is driving the motor vehicle’ of the Insured and. The second defense cannot stand because none of the parties invoked this section. which were deducted from his weekly commissions.000. the Insured and the parents of Carlito. 10. this rule is subject to exceptions.00 and the costs. in the event of death of said driver. COQUIA V FIELDMEN’ S INSURANCE CO. may amount to a waiver thereof and estop the party charged with such conduct from claiming its benefits". N-310 is affirmed but modified to allow the annotation of Exhibit O-1 as an encumbrance on the face of the title to be finally issued in favor of all the applicants (herein appellants and herein appellees) in the registration proceedings below. -Also. (3) Consideration by the court that the evidence already of record is sufficient and adequate for rendering a decision upon these issues.’ Thus.Obligations and Contracts 128 respective sides of the issues and of the evidence in support thereto.On Dec. November 29. only parties to a contract may bring an action based thereon. and.” ISSUE WON the Coquias have cause of action HELD YES Ratio If a contract should contain some stipulation in favor of a third person. he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. and 2) the Insured has not complied with the provisions of the policy concerning arbitration based on Sec 17 of the policy reading: “If any difference or dispute shall arise with respect to the amount of the Company's liability under this Policy. Reasoning Although in general. although not a party to the contract. the same shall be referred to the decision of a single arbitrator to be agreed upon by both parties or failing such agreement of a single arbitrator. the Coquias – who. the Company shall. 1. the decision of the Court of First Instance of Ilocos Sur in Land Registration Case No. inter alia. covering the period from Dec. or any conduct which might be reasonably construed as showing that they did not intend to avail themselves of such provision. the policy is typical of contracts pour autrui. And it is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this Policy that the award by such arbitrator.000. it goes without saying that they could and did properly join the latter in filing the complaint hereon. Their aforementioned acts or omissions had the effect of a waiver of their respective right to demand an arbitration. This is but a restatement of a well-known principle concerning contracts pour autrui. admittedly are the sole heirs of the deceased – have a direct cause of action against the Company. the case has been languishing in our courts for thirteen long years. Carlito Coquia. during the negotiations preceding the institution of the present case. It was stipulated in said policy that the “Company will indemnify the Insured in the event of accident against all sums which the Insured will become legally liable to pay for the death or bodily injury to any fare-paying passenger including the driver.00 to which the Company replied with an offer to pay P2. finally brought this action against the Company to collect the proceeds of the aforementioned policy.” On Feb. 1311 of the Civil Code of the Philippines. 1961.000. as a result of a vehicular accident in Pangasinan. paid fifty percent of the premiums. Disposition IN VIEW OF THE FOREGOING. a common carrier accident insurance policy. Because of the failure of the Company and the Insured to agree with respect to the amount to be paid to the heirs of the driver. was killed.

the beneficiary of the alleged trust.Petitioner alleged it wrote private respondent that further delay in delivering the balance would greatly prejudice petitioner . Constantino.O..Obligations and Contracts 129 Direct appeal on a question of law taken by Pastor B.Thus.20/ream July: 575 reams at P307. was about five years of age).TCT No. 80 lbs. still unborn at the time of the conveyance .The contract contained a stipulation pour autrui amplifies this settled rule only in the sense that the third person for whose benefit the contract was entered into may also demand its fulfillment provided he had communicated his acceptance thereof to the obligor before the stipulation in his favor is revoked. another by November. reversing the judgment of the RTC in an action for recovery of sum of money filed by private respondent against petitioner FACTS . the beneficiary (who. Constantino. . and the last one by November.. TCT No. and to pay attorney's fees in the sum of P2. INTEGRATED PACKAGING CORP V CA. .The trial court dismissed the complaint. 1978. entitled "Pastor B. was not included as party-plaintiff. 1979: respondent had delivered to petitioner 1. be before the court and the latter's adjudication would be complete and binding upon them..That one of the parties to a contract is entitled to bring an action for its enforcement or to prevent its breach is too clear to need any extensive discussion. one for specific performance. Jr. with the understanding that Espiritu would hold the properties in trust for their illegitimate son.Espiritu mortgaged said properties to the Republic Savings Bank of Manila twice to secure payment of two loans. . and that appellant's action was. 32744 was issued by the Register of Deeds of Rizal in the name of appellee Herminia Espiritu.000. 1980 – July.000.000.May 5.Petitioner had difficulties paying . short grain) under the following schedule: May and June 1978: 450 reams at P290/ream August and September: 450 reams at P290/ream January 1979: 575 reams at P307. 5924. 1 volume by November. 2 sides basis. Jr. WON the contract in question is not enforceable by action by reason of the provisions of the Statute of Frauds HELD 1.20/ream March: 575 reams at P307. one of P3.101. as a result. . ISSUES 1. Jr. 1978: petitioner entered into contract with Philacor to print 3 volumes of books. .June 7. .July 30.Constantino argued that the Statute of Frauds does not apply to trustee . ." FACTS .The complaint then prayed for the issuance of a writ of preliminary injunction restraining Espiritu and her agents or representatives from further alienating or disposing of the properties.450 reams of printing paper (coated.097 reams out of the 3. at the filing of said complaint.It appearing that the amended complaint submitted by appellant to the tower court impleaded the beneficiary under the contract as a party co-plaintiff. of parties: materials were to be paid w/in 30-90 days from delivery . INC. 20714 in the name of plaintiff was partially cancelled and in lieu thereof. it seems A2010 page Prof. 1980. and that thereafter she offered them for sale.P. . 1981: respondent delivered various quantities amounting to P766. it being clear upon the facts alleged in the amended complaint that the contract between the parties had already been partially performed by the execution of the deed of sale.000. Constantino from an order of the Court of First Instance of Rizal denying his motion for the admission of his amended complaint in Civil Case No.Petitioner made partial payments of P97. June 8.June.00 and the other of P2. in effect. 1978: Petitioner and private respondent executed an order agreement: respondent bound itself to deliver 3. with costs. Pastor Constantino.ANCHOR PAPER CO.Espiritu moved to dismiss the complaint on the ground that it stated no cause of action because Pastor Constantino.The contract between him and appellee was a contract pour autrui.200. 1994.00. the two-storey house and four (4) subdivision lots in the name of Pastor B. 2000 NATURE Petition to review the CA decision of April 20. WON the contract of sale entered into between appellant and appellee was subject to the agreement that appellee would hold the properties in trust for their unborn child 2.20/ream S.450.Constantino had by a fictitious deed of absolute sale conveyed to Espiritu for a consideration of P8. and for judgment ordering her to execute a deed of absolute sale of said properties in favor of Pastor B. . and on the further ground that cause of action was unenforceable under the Statute of Frauds. 2. Constantino vs. married to Honorata Geukeko. YES The contention that the contract in question is not enforceable by action by reason of the provisions of the Statute of Frauds does not appear to be unquestionable. the action brought below being only for the enforcement of another phase thereof. Herminia Espiritu.00.70. . .00.20/ream October: 575 at P307. Philacor demanded compensation from petitioner for the delay and damage suffered . 1979. Labitag clear that the three parties concerned therewith would. the execution by appellee of a deed of conveyance in favor of the beneficiary thereunder. namely.00 applied to its back accounts -Petitioner entered into additional printing contract with Philacor but unfortunately failed to comply with its contract .Respondent made a formal demand for petitioner to settle the outstanding account . This is a question of fact that appellee may raise in her answer for the lower court to determine after trial. QUISUMBING. although couched in the form of a deed of absolute sale. FIL.

1981: respondent filed with RTC a collection suit against petitioner for the sum of P766. 1983. W. 1919 NATURE Appeal from judgment of CFI Manila FACTS . or the buyer neglects or refuses without just cause to take delivery of or pay for one or more installments. it was petitioner which breached the agreement as it failed to pay on time the materials delivered by private respondent. DAYWALT V LA CORP DE LOS PADRES AGUSTINOS RECOLETOS STREET. a tract of land situated in the barrio of Mangarin. alleging that petitioner made additional purchases of printing paper on credit amounting to P94. Costs against petitioner.000 and the area of the land enclosed in the boundaries is 452 hectares and a fraction . but in the course of the proceedings in the registration of the land.70 2. the unpaid purchase price of printing paper bought by petitioner on credit . On the contrary. Disposition The instant petition is DENIED.Obligations and Contracts 130 .July 5. hence petitioner suffered damages and failed to realize expected profits.101. The paper specified in the order agreement between petitioner and private respondent are markedly different from the paper involved in the contracts of petitioner with Philacor. petitioner should pay respondent P763. petitioner suffered dislocation of contracts as a result of respondent’s failure: awarded moral damages . Respondent appellate court correctly ruled that private respondent did not violate the order agreement. as found a quo petitioner’s evidence failed to establish that it had paid for the printing paper covered by the delivery invoices on time.CA reversed and set aside decision. it depends in each case on the terms of the contract and the circumstances of the case.August 14.101.In 1902.respondent submitted a supplemental complaint. to the Hongkong and Shanghai Bank in Manila.It was agreed that a deed should be executed as soon as the title is perfected in the proceedings of the Court of Land Registration and a Torrens title procured therefore in Endencia’s name . 2. to be forwarded to the Crocker National Bank in San Francisco. the parties entered into another agreement. 1983 and May 13. This demand relates to contracts with Philacor dated April 12. A2010 page Prof. which was short of 2. (art.70. replacing the old.The second contract was not immediately carried into effect for the reason that the Torrens certificate was not yet obtainable . The decision of the Court of Appeals is AFFIRMED.30 from the sale 3. NO Ratio When there is a contract of sale of goods to be delivered by stated installments. [iii] the court of appeals erred in concluding that petitioner is not entitled to damages against private respondent.324.The parties made a new contract with a view to carrying their original agreement into effect. even if he is aware of such contract and has acted with knowledge thereof.The price is P4. but the Torrens certificate was not issued until later . [ii] the court of appeals erred in concluding that respondent is not liable for petitioner’s breach of contract with philacor.324. Reasoning The order agreement entered into by petitioner and private respondent has not been shown as having a direct bearing on the contracts of petitioner with Philacor. it was found by official survey that the area of the tract inclosed in the boundaries stated in the contract was about . . and it cannot favor or prejudice a third person. February 4. in total disregard of their agreement. 1583) Reasoning In this case. 1981. 1990: Trial court: 1. Ordered petitioner to pay respondent P763. Counterclaim: that private respondent was able to deliver only 1. MIndoro . 1984. which is clearly made long after private respondent had filed its complaint on August 14.A decree recognizing the right of Endencia as owner was entered in said court in August 1906.30 compensatory damages and moral damages Petitioners' Claim [I] the court of appeals erred in concluding that private respondent did not violate the order agreement.875 reams. WON private respondent violated the order agreement 2.Petitioner denied the allegations of complaint.100 . petitioner could have sold books to Philacor and realized a profit of P790. Consequently. private respondent has the right to cease making further delivery. giving rise to a claim for compensation but not to a right to treat the whole contract as broken. Bulalacaoose. WON private respondent is liable for petitioner’s breach of contract with Philacor HELD 1. petitioner’s claim meritorious: if not for the delay of private respondent to deliver printing paper. The demand made by Philacor upon petitioner for the latter to comply with its printing contract is dated February 15. which are to be separately paid for. executed a contract where she obligated herself to convey to Geo. and that their complaint was prematurely filed . and the seller makes defective deliveries in respect of one or more installments. upon receiving the Torrens title. Labitag 2.The Torrens certificate was in time issued to Teodorica Endencia. 1. whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract. deleted the P790. said agreement bound Endencia to deliver the land. this new contract was executed in the form of deed of conveyance and is dated 16 Aug 1906 . Daywalt. hence the private respondent did not violate the order agreement. that private respondent failed to deliver despite demand therefore. which were entered into by petitioner after private respondent filed the instant case. Teodorica Endencia. an unmarried woman Mindoro.On Oct 3 1908. NO Ratio Aforesaid contracts could not affect third persons like private respondent because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it. or whether the breach is severable.101.200. where it was to be delivered to the plaintiff upon payment of a balance of P3. ISSUES Substantive 1.097 reams.70. and that petitioner refused to pay its outstanding obligation.

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1,248 hectares instead of 452 hectares as stated in the contract. Due to this, Endencia became reluctant to transfer the whole tract to the purchaser Daywalt; this led to litigation which upon appeal to the SC, Daywalt obtained a decree for specific performance; such decree appears to have become finally effective in early 1914 - The defendant, La Corporacion de los Padres Recoletos, is a religious corporation. The corporation was was at this time the owner of an estate in Mindoro known as the San Jose Estate and also of a property immediately adjacent to the land which Endencia had sold to Daywalt - Its representative, Fr. Sanz, had long been well acquainted with Endencia and exerted over her an influence and ascendency due to his religious character as well as to the personal friendship which existed between them; and Endencia was accustomed to seek, and was given the advice of Father Sanz and other members of his order - Fr Sanz was aware of the contract of 1902 (1st contract to sell); Sanz and the other members also knew about the 2nd contract executed in 1903 - When the Torrens certificate was finally issued in 1909 in favor of Endencia, she delivered it for safekeeping to the defendant corporation, and it was then taken to Manila where it remained in the custody and under the control of P. Juan Labarga - When La Corporation sold the San Jose Estate in 1909, some 2,368 head of cattle were removed to the estate of the corporation immediately adjacent to the property which the plaintiff had purchased from Teodorica Endencia - As Teodorica still retained possession of said property Father Sanz entered into an arrangement with her where large numbers of cattle belonging to the defendant corporation were pastured upon said land during a period extending from June 1, 1909, to May 1, 1914 - Daywalt sought to recover from corporation P24,000 as damages for the use and occupation of the land by reason of pasturing the cattle during the said period - TC fixed damages at P2,497 - Plaintiff appealed for higher damages; defendant did not question the fact of awarding damages per se in the first cause of action - Plaintiff, in a 2nd cause of action, also sought to recover from defendant P500,000, as damages on the ground that said corporation, for its own selfish purposes, unlawfully induced Endencia to refrain from the performance of her contract for the sale of the land in question and to withhold delivery to the plaintiff of the Torrens title, and further, maliciously and without reasonable cause, maintained her in her defense to the action of specific performance which was finally decided in favor of the plaintiff in this court - Plaintiff claimed that in 1911, he, as the owner of the land which he bought from Endencia entered into a contract with S. B. Wakefield, of San Francisco, for the sale and disposal of said lands to a sugar growing and milling enterprise, the successful launching of which depended on the ability of Daywalt to get possession of the land and the Torrens certificate of title, however, the Torrens title was still in Labarga’s hands, the latter having refused to turn said title over to Endencia; thus, the contract could not be consummated - Plaintiff alleged that, by interfering in the performance of the contract in question and obstructing the plaintiff in his efforts to secure the certificate of title to the land, the defendant corporation made itself a co-participant with Teodorica Endencia in the breach of said contract ISSUES

A2010 page Prof. Labitag
1. WON damages in the 1st cause of action should be increased 2. WON La Corporation who is not a party to the contract of sale of land will be liable for the damages by colluding with the vendor and maintaining her in the effort to resist an action for specific performance HELD 1. NO -The trial court estimated the rental value of the land for grazing purposes at 50 centavos per hectare per annum, and roughly adopted the period of four years as the time for which compensation at that rate should be made. -The SC is of the opinion that the damages assessed are sufficient to compensate the plaintiff for the use and occupation of the land during the whole time it was used -There is evidence in the record strongly tending to show that the wrongful use of the land by the defendant was not continuous throughout the year but was confined mostly to the season when the forage obtainable on the land of the defendant was not sufficient to maintain its cattle, for which reason it became necessary to allow them to go over to pasture on the land in question 2. NO -To our mind a fair conclusion on this feature of the case is that Fr Juan Labarga and his associates believed in good faith that the contract could not be enforced and that Endencia would be wronged if it should be carried into effect -Whatever may be the character of the liability which a stranger to a contract may incur by advising or assisting one of the parties to evade performance, there is one proposition upon which all must agree. This is that the stranger cannot become more extensively liable in damages for the nonperformance of the contract than the party in whose behalf he intermeddles. To hold the stranger liable for damages in excess of those that could be recovered against the immediate party to the contract would lead to results at once grotesque and unjust. -The defendant’s liability cannot exceed Endencia’s (the principal of the contract) (Court proceeds to determine Endencia’s liability-- the damages laid under the second cause of action in the complaint could not be recovered from her, first, because the damages in question are special damages which were not within contemplation of the parties when the contract was made, and secondly, because said damages are too remote to be the subject of recovery) -Plaintiff relies on English and US decisions which have ruled that a person who is a stranger to a contract may, by an unjustifiable interference in the performance thereof, render himself liable for the damages consequent upon non-performance, as recognized in Gilchrist v Cuddy -Upon the said authorities it is enough if the wrongdoer having knowledge of the existence of the contract relation in bad faith sets about to break it up. Whether his motive is to benefit himself or gratify his spite by working mischief to the employer is immaterial -If a party enters into contract to go for another upon a journey to a remote and unhealthful climate, and a third person with a bona fide purpose of benefiting the one who is under contract to go dissuades him from the step, no action will lie. But if the advice is not disinterested and the persuasion is used for "the indirect purpose of benefiting the defendant at the expense of the plaintiff," the intermedler is liable if his advice is taken and the contract broken -No question can be made as to the liability of one who interferes with a contract existing between others by means which under known legal canons can be

Obligations and Contracts 132
denominated an unlawful means. Thus, if performance is prevented by force, intimidation, coercion, or threats, or by false or defamatory statements, or by nuisance or riot, the person using such unlawful means is under all the authorities liable for the damage which ensues -Article 1902 of the Civil Code declares that any person who by an act or omission characterized by fault or negligence, causes damage to another shall be liable for the damage so done. The SC takes the rule to mean that a person is liable for damage done to another by any culpable act; and by "culpable act" we mean any act which is blameworthy when judged by accepted legal standards. Nevertheless, it must be admitted that the codes and jurisprudence of the civil law furnish a somewhat uncongenial field in which to propagate the idea that a stranger to a contract may be sued for the breach thereof -Article 1257 of the Civil Code declares that contracts are binding only between the parties and their privies. In conformity with this it has been held that a stranger to a contract has no right of action for the nonfulfillment of the contract except in the case especially contemplated in the second paragraph of the same article -If the two antagonistic ideas which we have just brought into juxtaposition are capable of reconciliation, the process must be accomplished by distinguishing clearly between the right of action arising from the improper interference with the contract by a stranger thereto, considered as an independent act generative of civil liability, and the right of action ex- contractu against a party to the contract resulting from the breach thereof

A2010 page Prof. Labitag
-DCCSI acceded to petitioner’s request -Private respondents filed a petition for injunction, pressing for the nullification of the lease contracts between DCCSI and petitioner. They also claimed damages. -Trial Court ruled in favor of respondents -CA affirmed ISSUES 1. WON So Ping Bun is guilty of tortuous interference of contract 2. WON So Ping Bun should be liable for attorney’s fees HELD 1. YES Ratio There is tort interference when during the existence of a valid contract, a third person, to whom the existence of such contract is known, interferes without legal justification or excuse. Reasoning A duty which the law of torts is concerned with is respect for the property of others, and a cause of action ex delicto may be predicated upon an unlawful interference by one person of the enjoyment by the other of his private property. -This may pertain to a situation where a third person induces a party to renege on or violate his undertaking under a contract. -In the case at bar, petitioner’s Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, and as a result petitioner deprived respondent corporation of the latter’s property right. Clearly, and as correctly viewed by the appellate court, the three elements of tort interference, (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of contract; and (3) interference of the third person is without legal justification or excuse, are present in the instant case. -In Gilchrist vs. Cuddy, the court held that where there was no malice in the interference of a contract, and the impulse behind one’s conduct lies in a proper business interest rather than in wrongful motives, a party cannot be a malicious interferer. -In the instant case, though petitioner took interest in the property of respondent corporation and benefited from it, nothing on record imputes deliberate wrongful motives or malice on him. -Section 1314 of the Civil Code categorically provides that, “Any third person who induces another to violate his contract shall be liable for damages to the other contracting party” -Lack of malice, however, precludes damages. But it does not relieve petitioner of the legal liability for entering into contracts and causing breach of existing ones. The respondent appellate court correctly confirmed the permanent injunction and nullification of the lease contracts between DCCSI and Trendsetter Marketing, without awarding damages. 2. YES Ratio When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest, the recovery of attorney’s fees is allowed. Reasoning Art. 2208 of the Civil Code reads: In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

SO PING BUN V CA QUISUMBING; September 21, 1999
NATURE Petition for review on certiorari of a decision of the Court of Appeals FACTS - In 1963, Tek Hua Trading Co, through its managing partner, So Pek Giok, entered into lease agreements with lessor Dee C. Chuan & Sons Inc. (DCCSI) - Subjects of four (4) lease contracts were premises located at Nos. 930, 930-Int., 924-B and 924-C, Soler Street, Binondo, Manila which Tek Hua used as storage space for its textiles -The contracts each had a one-year term. They provided that should the lessee continue to occupy the premises after the term, the lease shall be on a month-tomonth basis. - When the contracts expired, the parties did not renew the contracts, but Tek Hua continued to occupy the premises -In 1976, Tek Hua Trading Co. was dissolved. Later, the original members of Tek Hua Trading Co. including Manuel C. Tiong, formed Tek Hua Enterprising Corp., herein respondent corporation. - When So Pek Giok, managing partner of Tek Hua Trading, died in 1986, So Pek Giok’s grandson, petitioner So Ping Bun, occupied the warehouse for his own textile business, Trendsetter Marketing -On March 1, 1991, private respondent Tiong, president of Tek Hua Enterprising Corp sent a letter to petitioner So Ping Bun asking him to vacate the premises -Petitioner refused to vacate and instead, on March 4, 1992, petitioner requested formal contracts of lease with DCCSI in favor of Trendsetter Marketing

Obligations and Contracts 133
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest -The court has consistently held that the award of considerable damages should have clear factual and legal bases - Considering that the respondent corporation’s lease contract, at the time when the cause of action accrued, ran only on a month-to-month basis whence before it was on a yearly basis, the reduced amount of attorney’s fees ordered by the Court of Appeals is still exorbitant in the light of prevailing jurisprudence. Consequently, the amount of two hundred thousand (P200,000.00) awarded by respondent appellate court should be reduced to one hundred thousand (P100,000.00) pesos as the reasonable award for attorney’s fees in favor of private respondent corporation. Disposition The petition is DENIED. The assailed Decision and Resolution of the Court of Appeals are hereby AFFIRMED, with MODIFICATION that the award of attorney’s fees is reduced from two hundred thousand (P200,000.00) to one hundred thousand (P100,000.00) pesos.

A2010 page Prof. Labitag
2. YES - The fact that the defendant was to ask for nothing in exchange for the travel thus making the repair the only exchange that is expected. Disposition The petitioner is not obliged to buy the yacht but is ordered to pay for the repairs done.

MALBAROSA V COURT OF APPEALS CALLEJO; April 30, 2003
NATURE Petition for review on certiorari of the decision of the CA. FACTS - The petitioner Salvador Malbarosa was the president and general manager of Philtectic Corporation and an officer of other corporations belonging to the SEADC group of companies. SEADC assigned to him a 1982 model Mitsubishi Gallant Super Saloon car and was also issued membership certificates in the Architectural Center, Inc. - On January 8, 1990, Malabarosa tendered his resignation from all his positions in the SEADC group of companies and reiterating his request for the payment of his incentive compensation for 1989 which is approximately P395,000.00 according to him. - SEADC, through its President Louis Da Costa, accepted his resignation and entitled him to an incentive amounting to P251,057.67, which was lower than Malbarosa's expectation. It is to be satisfied by transferring to him the car assigned to him, which estimated fair market value is P220,000.00 and the membership share of SEADC subsidiary, Tradestar International Inc. in the Architectural Center, Inc. amounting to P60,000.00. - The respondent prepared the letter-offer dated march 14, 1990 and required Malbarosa to affix his conformity on the space provided therefor and the date thereof on the right bottom position of the letter. - On March 16, 1990, Da Costa met with the petitioner and handed to him the original copy of the letter-offer for his consideration but he refused to sign it, instead said that he will review the offer first. More than two weeks have passed and Da Costa never heard feedback from Malbarosa. Thus he decided to finally withdraw his offer on April 3, 1996. However, Malbarosa transmitted the copy of the signed Letter-offer to respondent on April 7, 1996 and he alleged that he has affixed his signature on it since March 28, 1996 but failed to communicate his acceptance immediately. Procedure - Due to petitioner's refusal to return the vehicle after April 3, 1996, the respondent filed a complaint for recovery of personal property with replevin, with damages and atty's fee. - RTC – issued a writ of replevin - CA – affirmed RTC's decision ISSUES 1. WON there was a valid acceptance on Malbarosa's part of the March 14, 1990 Letter-offer of the respondent

ROSENSTOCK V BURKE AVANCENA; September 26, 1924

NATURE Appeal from the Judgment of the CFI of Manila FACTS - Burke owned a yacht known as Bronzewing. Elser, the plaintiff, negotiated for the purchase of the yacht. The plan of Elser was to create a yacht club and sell it afterwards for P120,000. P20,00 to be retained by Elser and P100,000 to be paid to Burke. Elser requested that a voyage be down to the south using the said yacht for purposes of advertising and creating opportunities for the sale. However, the yacht needed some repairs for the voyage thus making the plaintiff pay for such repair. Elser never accepted the offer for the purchase rather requested that the engine should replaced thus asking for a loan of P20, 000. After a talk with the bank manager Mr. Avery, they agreed that the yacht was to be sold to Elser for the amount of P80,000. Elser agreed but stated in the letter that he is in a position to entertain the purchase of the said yacht. The case focuses on the recovery of the money used to repair the yacht in the amount of P6,139.28 that is asked by Elser. The trial court ruled in favor of Elser and asked Burke to pay for P6,139.28 with legal interest of 6 percent per annum as well as the Cooper Company the sume of P1,730.84 with legal interest of 6 per cent. The plaintiff is then asked to comply with the conditions stated in the letter. Hence this appeal coming from the plaintiff. ISSUUES 1. WON the contract is valid and binding against the plaintiff 2. WON plaintiff is required to pay for the repairs of the yacht HELD 1. NO - The court looked at the intent of the plaintiff in using the language. Instead of using clear and simple words such as I offer to purchase, I want to purchase, or I am in the position to purchase he used the word entertain which implies that he is in a position to deliberate whether or not he would purchase such yacht. It is a mere invitation that is discretionary upon him.

V COURT OF APPEALS BELLOSILLO.cause of the obligation .293. these were imposed on the performance of the obligation rather than on the perfection of the contract. The reply of petitioner Purefoods is the acceptance/rejection of the offers. FEMSCO also made arrangements w/ its principal and started by purchasing materials. Acceptance can be withdrawn or revoked before it is made known to offeror. Purefoods awarded the project and entered into contract with Jardine w/c was not one of the bidders.Obligations and Contracts 134 2. MONARK and ADVANCE POWER) submitted bid proposals and gave bid bonds equivalent to 5% of their respective bids. The bid proposals/quotations of the bidders are the offers. JARDINE DAVIES INC. the controversy lies in the consent (whether there was acceptance). WON there was an effective withdrawal by the respondent of said Letter-offer HELD 1. . manifests its knowledge that FEMSCO consented to the offer.Even granting that the letter of Purefoods is just a conditional counter-offer. FEMSCO protested and sought a meeting. acceptance must be made known to the offeror. While the letter enumerated “basic terms and conditions”. Purefoods confirmed the award of contract to FEMSCO. . FEMSCO sued them both.A bidding for supply and installation of generators was held.841. June 14. not to mention its return of the Bidder’s Bond.00) w/c Purefoods acknowledged in a letter.However. 2. YES . unconditional and without variance of any sort from the offer © must be made known to the offeror (d) must be made in the manner prescribed by the offeror Reasoning Malabarosa communicated his acceptance only after the knowledge of revocation or withdrawal of his offer. Purefoods unilaterally cancelled the award. to the fulfillment of a prestation to give. FEMSCO’s submission of bond and insurance was implied acceptance. Acceptance may be express or implied. These two things are different. Out of 8 prospective bidders who attended pre-bidding conference. 1972 NATURE .object/subject matter of the contract . SANCHEZ V RIGOS CONCEPCION. WON there existed a perfected contract bet Purefoods and FEMSCO 2. Disposition Decision of the CA is AFFIRMED. He should have transmitted his conformity while the offer was subsisting. While failure to comply w/ CONDITION ON PERFECTION OF CONTRACT results in failure of a contract. . Contracts are perfected by mere consent. . acceptance by the offeree of the offer made by the offeror. It binds the parties and has the force of law between them. FEMSCO submitted the required performance bond (P1.The similarity in the design submitted to Purefoods by both Jardine and FEMCO and the tender of a lower quotation by Jardine are insufficient to show that Jardine induced Purefoods to violate contract with FEMSCO. (2) object certain which is the subject matter of the contract (3) cause of the obligation which is established In this case.187. 3 bidders (FEMSCO. failure to comply w/ CONDITION ON PERFORMANCE OF THE OBLIGATION merely gives other party options and/or remedies. as required. Labitag . NO . ISSUES 1. 2. or not to do. there is no contract as Malbarosa failed to meet the requirements of a valid acceptance to wit: (a) may be express or implied (b) must be absolute. The time given to him was long enough. . . Purefoods on the other hand returned FEMSCO’s Bidder’s Bond (P1M) as requested. YES . 2000 NATURE Action for specific performance FACTS .consent of the parties .Purefoods’ letter to FEMSCO constituted acceptance. to do.Requisites of contract: .Controversy started in 1992 at height of power crisis.137. .In this case. Petitioner Pure Foods Corp decided to install 2 1500 KW generators in food processing plant in Marikina. and acknowledgment by Purefoods.FEMSCO wrote to Purefoods and Jardine. but its letters unheeded.Contract: juridical convention manifested in legal form. For a contract to arise.Art 1326 of Civil Code applies: Advertisements for bidders are simply invitations to make proposals. NO. June 19. WON there is showing that Jardine induced/connived with Purefoods to violate Purefoods’ contract with FEMSCO HELD 1. or reciprocally. Before the matter could be resolved. A2010 page Prof.Implicit in the authority given to Philtectic Corporation to demand for and recover from the petitioner the subject car and to institute the appropriate action against him to recover possession of the car is the authority to withdraw the respondent's Letter-offer. by virtue of w/c one or more persons bind themselves in favor of another or others.Article 1318 of CC says that “There is no contract unless the following requisites concur: (1) consent of the contracting parties. .In a letter.90) and contractor’s all-risk insurance policy (P6.

The case is dependent on A1479 of the Civil Code which states that: “An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. INC. this was not alleged by Sanchez. 1995 NATURE . 1988. the option shall be cancelled and 50% of the option money to be forfeited in our favor and we will refund the remaining 50% of said option money upon the sale of said property to a third party.A1354 applies to contracts in general whereas A1479 refers to sales in particular (specifically to a unilateral promise to buy and sell). INC. the promisor is not bound by his promise and may." Subsequently.510. later jurisprudence states that A1354 and A1479 have no differences and can actually be harmonized.By virtue of the document executed. 2. INC.Petition for review on certiorari of the judgment of the Court of Appeals. . if the same is not supported by any consideration. there must be a concurrence of a condition. The sum of P50. All expenses including the corresponding capital gains tax.Obligations and Contracts 135 . of the subject property is P2. a "Confirmatory Extrajudicial Partition Agreement" was executed by the Jimenezes. 1963 – Sanchez deposited the amount in the Court of First Instance in Nueva Ecija . even if accepted. . . while the western portion was allocated to private respondents. however. the option shall be terminated .Feb.Considering. Sanchez made several attempts to pay P1. situated in Barrio Culasi. Reasoning .Within the said period.The lower court relied on A1354.Despite this differences.the western portion of the property from private respondents.00. to pay said balance in accordance with paragraph 2 . an "Exclusive Option to Purchase" was executed between petitioner and private respondents. wherein the eastern portion of the subject lot. . and expenses for the registration of the deed of sale in the Registry of Deeds are for the account of ADELFA PROPERTIES. Jose and Dominador Jimenez. In this case.For the unilateral promise to be binding.855 sqm. . Pending notice of its withdrawal.Private respondent Rosario Jimenez-Castañeda and Salud Jimenez and their brothers.Within two years from the said date. The promise cannot compel the promisor to comply with the promise unless there is the existence of that distinct consideration. a petition for the re-issuance of a new owner's copy of said certificate of title was filed in court through Atty.April 3. Metro Manila. cost of documentary stamps are for the account of the VENDORS. ISSUE WON a promise to buy and sell existed between the parties involved HELD YES Ratio An accepted unilateral promise' can only have a binding effect if supported by a consideration.655 sqm.150. 1961 – Sanchez and Rigos executed an instrument called “Option to Purchase” . withdraw it.Rigos stated that there was indeed the absence of that consideration which Sanchez did not oppose . . 1989.Rigos committed to sell to Sanchez a parcel of land in Nueva Ecija for the sum of P1. V COURT OF APPEALS REGALADO. if accepted..Thus the promise contained in the contract is reciprocally demandable. making A1479 the controlling provision. which means that the option can still be withdrawn. to herein petitioner pursuant to a "Kasulatan sa Bilihan ng Lupa. In case of default on the part of ADELFA PROPERTIES. with an area of 8. Petitioners’ Claim . Since there may be no valid contract without a cause or consideration.00 to Rigos but Rigos rejected these payments . FACTS . Bayani L. his accepted promise partakes. results in a perfected contract of sale. that the owner's copy of the TCTcertificate of title issued to respondent Salud Jimenez had been lost. was adjudicated to Jose and Dominador Jimenez. were the registered co-owners of a parcel of land consisting of 17.The contract is a unilateral promise to sell. specifically the eastern portion thereof. that it be supported by a consideration distinct from price.The contract was unsupported by any valuable consideration and is thus null and void when viewed in the light of the Civil Code. 3. . Rigos had agreed and committed to sell the property and he. Accordingly.Rigos committed to sell the property to Sanchez but the document does not state that the promise or undertaking is supported by consideration distinct from the price stipulated. January 25.March 12. 1989.Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals FACTS .710 sqm. agreed and committed to buy. Labitag . 28. in turn.150 to be paid on or before November 30.Thereafter.” . The selling price of said 8. .856. Respondents’ Comments . ADELFA PROPERTIES. . . as an option money shall be credited as partial payment upon the consummation of the sale and the balance in the sum of P2.806.510. Las Piñas.000 which the private respondents received from ADELFA PROPERTIES. of the nature of an offer to sell which. Jose and Dominador Jimenez sold their share consisting of onehalf of said parcel of land. if Sanchez shall not exercise his right to buy the property. The Supreme Court however makes the following notes with regard to the use of that provision vis-à-vis A1479: A2010 page Prof. It is not a contract to buy and sell. under the following terms and conditions: 1. on November 25. . 1964 – Rigos ordered by the lower court to accept the payments of Sanchez and to execute in Sanchez’s favor the deed of conveyance for the property. 4.On July 28. accordingly.The document drawn between Rigos and Sanchez does not require Sanchez to purchase the property. however. INC. petitioner expressed interest in buying .

petitioner informed private respondents that it would hold payment of the full purchase price and suggested that private respondents settle the case with their nephews and nieces. With the absence of such a stipulation. Said appellate court similarly upheld the validity of the deed of conditional sale executed by private respondents in favor of intervenor Emylene Chua. Inc. . Thus. a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price. Atty. . whereas in a contract to sell. title is retained by the vendor until the full payment of the price.The trial court rendered judgment holding that the agreement entered into by the parties was merely an option contract. petitioner caused to be annotated on the title of the lot its option contract with private respondents. .The parties never intended to transfer ownership to petitioner except upon full payment of the purchase price. . be ordered to return the owner's duplicate certificate of title.500.Emylene Chua. The trial court then directed the cancellation of the exclusive option to purchase.000. private respondents' counsel sent a letter to petitioner enclosing therein a check for P25. declared the sale to intervenor Emylene Chua as valid and binding. adding that "x x x if possible. In a contract of sale. does not mention that petitioner is obliged to return possession or ownership of the property as a consequence of nonpayment. although November 30. In turn.000 to P300. WON there was a valid suspension of payment of the purchase price by said petitioner. and that the annotation of the option contract on the TCT be cancelled. the title passes to the vendee upon the delivery of the thing sold. YES. therefore.029. This was rejected by private respondents. and ordered petitioner to pay damages and attorney's fees to private respondents. . Thus. and the legal effects thereof on the contractual relations of the parties HELD 1. Eventually. petitioner caused to be annotated anew on the TCT the exclusive option to purchase. but not to an option contract which it opined was the nature of the document subject of the case at bar. in a letter dated November 29. on February 28. hence private respondents filed a civil case in the RTC of Pasay City for annulment of contract with damages. whereas in a contract to sell. Atty. On the same day. Bernardo until he turned it over to petitioner Adelfa Properties. WON the "Exclusive Option to Purchase" executed between petitioner Adelfa Properties.On February 23. 1989. among others. Inc. 1990. such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. we will be waiting for you and said plaintiffs at our office up to 7:00 p. it may legally be inferred . of which P1.On December 7.m. and to inform the latter that they were cancelling the transaction. rather than a contract of sale 2. although it provided for automatic rescission of the contract and partial forfeiture of the amount already paid in case of default. that the suspension of payment constituted an imposition of a condition which was actually a counter-offer amounting to a rejection of the option. There is no stipulation anent reversion or reconveyance of the property to herein private respondents in the event that petitioner does not comply with its obligation.Obligations and Contracts 136 Bernardo. nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. the exclusive option to purchase.000 representing the refund of 50% of the option money paid under the exclusive option to purchase. .On April 16. . for annulment of the deed of sale in favor of Household Corporation and recovery of ownership of the property covered .In a contract of sale. that the exclusive option to purchase be declared null and void. together with a copy of a complaint filed by the nephews and nieces of private respondents against the latter. Bernardo. Private respondents then requested petitioner to return the owner's duplicate copy of the certificate of title of respondent Salud Jimenez. 1990. . and this was also rejected by the latter. who acted as private respondents' counsel. filed a complaint in intervention. Bernardo wrote private respondents on the same matter but this time reducing the amount from P500.1989. but the eastern portion thereof which was the subject of the sale between petitioner and the brothers Jose and Dominador Jimenez. Bernardo offered to pay the purchase price provided that P500. Petitioner failed to surrender the certificate of title. petitioner was willing to pay the purchase price. ." .On December 14. the subsequent purchaser of the lot. This was ignored by private respondents. in his capacity as petitioner's counsel. herein petitioner. it received summons on November 29. by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. Respondent Salud Jimenez refused to heed the suggestion of petitioner and attributed the suspension of payment-of the purchase price to "lack of word of honor. ISSUES 1. Jose and Dominador Jimenez. and private respondents is a contract to sell. the RTC of Makati dismissed civil case. and that Article 1590 of the Civil Code on suspension of payments applies only to a contract of sale or a contract to sell. 1989 is a holiday. was A2010 page Prof. with the balance to be paid upon the transfer of title to the specified one-half portion. On December 22. Labitag tantamount to a rejection of the option. It likewise ruled that petitioner could not validly suspend payment in favor of private respondents on the ground that the vindicatory action filed by the latter's kin did not involve the western portion of the land covered by the contract between petitioner and private respondents." Another letter of the same tenor and of even date was sent by petitioner to Jose and Dominador Jimenez.As a consequence. .On July 27. and petitioner in the RTC of Makati. that defendant. 1990. with costs. 1990. 1989.250. praying. . although there is a provision on the remedies available to the parties in case of breach. the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded. a new owner's copy of the certificate of title was issued but it remained in the possession of Atty. and declaring that the suspension of payment by herein petitioner constituted a counter-offer which.Before petitioner could make payment. Firstly. private respondents sent Francisca Jimenez to see Atty. and he requested that the corresponding deed of absolute sale be executed. 1989. and its contract of said with Jose and Dominador Jimenez. private respondents executed a Deed of Conditional Sale in favor of Emylene Chua over the same parcel of land for P3.000 be deducted therefrom for the settlement of the civil case. Bernardo wrote private respondents informing the latter that in view of the dismissal of the case against them.000 was paid to private respondents on said date. Atty. 1989.On appeal. the Court of Appeals affirmed in toto the decision of the court a quo and held that the failure of petitioner to pay the purchase price within the period agreed upon was tantamount to an election by petitioner not to buy the property.

Labitag sell his land. are perfected by mere consent. . Bernardo. Normally." . We have no reason not to believe this explanation of private respondents. In fact it was even indicative of a desire by petitioner to immediately comply therewith. In the case of private respondents. although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror. A contract of sale. Private respondents agreed to the counter-offer made by petitioner. transfer. since the minds of the contracting parties meet in the terms of the agreement.Obligations and Contracts 137 that the parties never intended to transfer ownership to the petitioner prior to completion of payment of the purchase price.The title of a contract does not necessarily determine its true nature. or agree to transfer. under the law. It is also sometimes called an "unaccepted offer. properly speaking. to which petitioner agreed.000. but is merely a contract by which the owner of property gives the optionee the right or privilege of accepting the offer and buying the property on certain terms. it remained in the possession of petitioner's counsel. After the title was reconstituted. An option. and the option is at an end. but merely secures the privilege to buy. aside from the fact that such contention was never refuted or contradicted by petitioner. the price of the property. is a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time. and expenses for the registration of the deed of sale in the Registry of Deeds are for the account of Adelfa Properties. it was petitioner's counsel. involves a meeting of minds between two persons whereby one binds himself. aside from the consideration for the offer. The offer and the acceptance are concurrent. Bernardo had possession of the title only because he was their counsel in the petition for reconstitution. the so-called exclusive option to purchase was prepared by petitioner and was subsequently signed by private respondents. The offer must be certain and the acceptance absolute. or which gives to the owner of the property the right to sell or demand a sale. The exclusive option to purchase is not contained in a public instrument the execution of which would have been considered equivalent to delivery. or any interest or right in the subject matter. while the acceptance thereof was absolute and without any condition or qualification. as may be gleaned from petitioner's letter dated April 16. 1990 wherein it informed private respondents that it "is now ready and willing to pay you simultaneously with the execution of the corresponding deed of absolute sale. . It states the terms and conditions on which the owner is willing to A2010 page Prof. At the time petitioner made its offer. it has not been shown that there was delivery of the property. private respondents suggested that their transfer certificate of title be first reconstituted. the right or privilege to buy at the election or option of the other party. The fact that the document under discussion is entitled "Exclusive Option to Purchase" is not controlling where the text thereof shows that it is a contract to sell. to give something or to render some service. with respect to the other.A perusal of the contract in this case readily shows that there is indeed a concurrence of petitioner's offer to buy and private respondents' acceptance thereof. who assisted private respondents in filing a petition for reconstitution. However. by reason of which the original terms of the contract continued to be enforceable.It cannot be gainsaid that the offer to buy a specific piece of land was definite and certain. certain terms and conditions. that the parties really intended to execute a contract to sell. conduct. fixes definitely the relative rights and obligations of both parties at the time of its execution.806. It is not a sale of property but a sale of the right to purchase. He does not sell his land. is bolstered by the fact that the deed of absolute sale would have been issued only upon the payment of the balance of the purchase price." Hence. and the accepted offer thereupon becomes a valid and binding contract. on the other hand.150 to be paid on or before November 30. As a result. At any rate. or words of a party recognizing the existence of the contract of sale. he does not then agree to sell it.Secondly.The distinction between an "option" and a contract of sale is that an option is an unaccepted offer. made to herein petitioner. physical possession of the property at any given time. . Thus. or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell.856. or in compliance with. . . they actually refused to concur in said offer of petitioner. private respondents explained that there was really no intention on their part to deliver the title to herein petitioner with the purpose of transferring ownership to it. Contracts. and does not vest. . except that it was being prevented . The rule is that except where a formal acceptance is so required. in general. No other significance could be given to such acts than that they were meant to finalize and perfect the transaction. with the balance of P2. As a matter of fact. acceptance may be shown by the acts. Inc. It is true that after the reconstitution of private respondents' certificate of title.Moreover. but he does sell something. or under." An option is not of itself a purchase. Bayani L. the parties agreed that petitioner would pay either in cash or manager's check the amount of P2. a contract like a contract to sell. and may be shown by acts.On the other hand. but. The parties even went beyond the basic requirements of the law by stipulating that "all expenses including the corresponding capital gains tax. It is simply a contract by which the owner of property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. actual or constructive. any new offer by a party becomes binding only when it is accepted by the other. he must give notice to the other party. Bernardo.There already existed a perfected contract between the parties at the time the alleged counter-offer was made. there was nothing left to be done except the performance of the respective obligations of the parties. . If the holder does so elect. 1989. a contract. Bayani L. conduct. cost of documentary stamps are for the account of the vendors. it later offered to make a down payment of P50.The records also show that private respondents accepted the offer of petitioner to buy their property under the terms of their contract. and not a contract of sale. If an acceptance is not made within the time fixed. Neither did petitioner take actual. . Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option. 1989. such possession by the vendee is to be understood as a delivery. and the terms of payment was clear and well-defined. They claim that Atty. . thereby creating a perfected contract to sell between them. which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. any title to. it may be made either in a formal or an informal manner.The agreement as to the object. the same cannot be considered a counteroffer for the simple reason that petitioner's sole purpose was to settle the civil case in order that it could already comply with its obligation. Petitioner was supposed to pay the same on November 25. if the holder elects to accept them within the time limited. that is. who thereafter delivered the same to herein petitioner. Until acceptance. it is not. Atty. Atty. as used in the law on sales. Thus.150 for the lot. the owner is no longer bound by his offer.

1990 that petitioner. Asiain and Jalandoni happening to meet on one of the days of May. is not considered a valid tender of payment. Asiain said to Jalandoni that he was willing to sell a portion of his hacienda for the sum of P55. At most that was merely a notice to pay. that is.Luis Asiain. as in fact it has failed to do so up to the present time. -The test in determining whether a contract is a "contract of sale or purchase" or a mere "option" is whether or not the agreement could be specifically enforced. . Labitag deed of absolute sale. it is easily discernible that. no inference can be drawn from that suggestion given by petitioner that it was totally abandoning the original contract. October 23. and the validity of the suspension of payment notwithstanding. Had private respondents chosen to enforce the contract.As early as February 28. the defendant-appellee. 1990. although the complaint prayed for the annulment only of the contract of sale executed between petitioner and the Jimenez brothers. containing about 106 hectares. is the owner of another hacienda adjoining that of Asiain. the records bear out the fact that aside from the lackadaisical manner with which petitioner treated private respondents' letter of cancellation. But then.150. evidently petitioner had no intention to take any legal action to compel specific performance from the former. and. therefore.At a glance. not merely the exercise of a privilege or a right. wrote private respondents expressing its willingness to pay the balance of the purchase price upon the execution of the corresponding deed of absolute sale. . private respondents were demanding or exacting fulfillment of the obligation from herein petitioner. Unfortunately. performance or payment may be effected not by tender of payment alone but by both tender and consignation. redeem or repurchase) rather than the discharge of an obligation. it already knew of the dismissal of the civil case. . The rule is different in case of an option contract or in legal redemption or in a sale with right to repurchase. judicial action for rescission of a contract is not necessary where the contract provides for automatic rescission in case of breach. 1920. it failed to reply thereto or protest against it. it believed in good faith. the initiative of instituting suit was transferred from the rescinder to the defaulter by virtue of the automatic rescission clause in the contract. Its silence thereon suggests an admission of the veracity and validity of private respondents' claim. 1923 FACTS . There was no proper tender of payment nor consignation in this case as required by law. YES. In other words. Such being the case. Consequently. definite and certain.806. a mere tender of payment is not sufficient. or even to deposit the money with the trial court when this case was originally filed therein. Besides. With the arrival of the period agreed upon by the parties. ASIAIN V JALANDONI MALCOLM. affirming that it contained between 25 . A contract to sell. Benjamin Jalandoni.Obligations and Contracts 138 from doing so because of the filing of the civil case which. involves the performance of an obligation. petitioner no longer had the right to suspend payment after the disturbance ceased with the dismissal of the civil case filed against it. the fact that the contract to sell had been validly rescinded by private respondents . compliance with which could legally and definitely be demanded from petitioner as a consequence. it utterly failed to seriously seek redress from the court for the enforcement of its alleged rights under the contract." Furthermore. .More importantly. petitioner's failure to duly effect the consignation of the purchase price after the disturbance had ceased. it has been effectively estopped from seeking the affirmative relief it now desires but which it had theretofore disdained. . Article 1592 of the Civil Code which requires rescission either by judicial action or notarial act is not applicable to a contract to sell. By such cavalier disregard. 1990 when petitioner caused its exclusive option to be annotated anew on the certificate of title. Furthermore. Province of Occidental Negros. secondarily. not merely to exercise an option or a right to buy the property. Necessarily. The reason of "lack of word of honor" is to us a clear indication that private respondents considered petitioner already bound by its obligation to pay the balance of the consideration. petitioner was justified in suspending payment of the balance of the purchase price by reason of the aforesaid vindicatory action filed against it. elected to resort to and did announce the rescission of the contract through its letter to petitioner dated July 27. The assurance made by private respondents that petitioner did not have to worry about the case because it was pure and simple harassment is not the kind of guaranty contemplated under the exceptive clause in Article 1590 wherein the vendor is bound to make payment even with the existence of a vindicatory action if the vendee should give a security for the return of the price. Asiain indicated the tract of land in question. If private respondents had not taken the initiative of filing a civil case. wherein consignation is not necessary because these cases involve an exercise of a right or privilege (to buy. petitioner failed to seasonably make payment. It is consignation which is essential in order to extinguish petitioner's obligation to pay the balance of the purchase price.In the case at bar. its obligation to pay the balance again arose and resumed after it received notice of such dismissal. In addition. hence tender of payment would be sufficient to preserve the right or privilege. as in the case before us. rendered compliance improbable at that time. to compel private respondents to deliver the property and execute the A2010 page Prof. they could have specifically compelled petitioner to pay the balance of P2.Be that as it may. This is because the provisions on consignation are not applicable when there is no obligation to pay. it will be noted that the failure of petitioner to pay the balance of the purchase price within the agreed period was attributed by private respondents to "lack of word of honor" on the part of the former. through its counsel. .000. and consequently binding and enforceable. The mere sending of a letter by the vendee expressing the intention to pay.By reason of petitioner's failure to comply with its obligation. With a wave of his hand. In effect. it was only on April 16. the plaintiffs therein were claiming to be coowners of the entire parcel of land and not only of a portion thereof nor did their claim pertain exclusively to the eastern half adjudicated to the Jimenez brothers. without the accompanying payment. petitioner was supposed to comply with the obligation incumbent upon it to perform. the plaintiff-appellant in this case. There is no doubt that the obligation of petitioner to pay the purchase price is specific. is the owner of the hacienda known as "Maria" situated in the municipality of La Carlota. it has been shown that although petitioner was duly furnished and did receive a written notice of rescission which specified the grounds therefor. the private respondents may no longer be compelled to sell and deliver the subject property to petitioner for two reasons. as in the contract involved in the present controversy.Furthermore. However. This is distinctly made manifest in the contract itself as an integral stipulation. private respondents. the same likewise prayed for the recovery of therein plaintiffs share in that parcel of land. That written notice of rescission is deemed sufficient under the circumstances. 2.

he may be entitled to relief from the technical or legal effect of his contract.' And relief will be granted when the mistake is so material that if the truth had been known to the parties the sale would not have been made. The apparent conflict and discrepancies in the adjudicated eases involving mistakes as to quantity arise not from a denial of or a failure to recognize the general principle.. declared null the document of purchase and its related memorandum.000 with legal interest from July 12. this transaction. by name or description. with an indemnity of P15. in a contract of sale the quantity of the realty to be conveyed is indicated by a unit of area. nor has he otherwise impaired the equity resulting from the mistake. page 1250. then he will lose all such amount as may have been paid in advance on account of. .600 annually as damages. more or less land should be conveyed than was in the contemplation of the seller to part with or the purchaser to receive. As has been said.Obligations and Contracts 139 and 30 hectares. through gross and palpable mistake. however. In a well-reasoned decision. a marked excess or deficiency in the quantity stipulated for is a ground for avoiding the contract. and that the crop of sugar cane then planted would produce not less than 2. will not be granted as a general rule where it appears that the parties intended a contract of hazard. not in any way occasioned or concealed by conduct of the purchaser. and that he recover from the plaintiff the sum of P3.. without special finding as to the costs. It has also been held that where there is a very great difference between the actual and the estimated quantity of acres of land sold in gross. the amount of the land and of the crop was overestimated. Asiain wrote Jalandoni a letter assuring the latter of the accuracy of his assessment of the area and the amount of sugar it could produce and that in case it turned out to be inaccurate. however. the injured party would be entitled to relief in like manner as he would be for an injury produced by a similar cause in a contract of any other species. he would be willing to compensate for it. and the transaction is bona fide. inducing a sale thereof at a smaller price than he would. as by the acre. Asiain and Jalandoni having met at Iloilo. the contract is not for the sale of a specific quantity of land. "Where.' or 'about. Reasoning A comparative study of the American authorities throws considerable light on the situation. Judge of First Instance. According to this survey. Relief. or with the description.The plaintiff contends that in the case of Irureta Goyena vs.' does not thereby ipso-facto take all risk of quantity in the tract. the rule announced in the syllabus is: "An agreement to purchase a certain specified lot of land at a certain specified price is obligatory and enforceable regardless of the fact that its area is less than that mentioned in the contract. and 22 centiares.000. whether it be executed or only executory. 54 ares. both parties act obviously under a mistake which it is the duty of a court of equity to correct." is found the following: "If. leaving a balance unpaid of P25. Tambunting ([1902].000 as penalty. ordered the Jalandoni to turn over to the plaintiff the tract of land and the certificate of title No. To recover the sum of P25. When opportunity offered. NO Ratio Mutual mistake of the contracting parties to a sale in regard to the subjectmatter of the sale which is so material as to go to the essence of the contract. ordered the Asiain to return to the defendant the sum of P30. fix a sum in gross. and it has been held that a mistake on the part of the vendor of a town lot sold by description as to number on the plat. . but from the difficulty of its practical application in particular eases in determining the questions . but not as to boundaries. the parcel in question contained an area of 18 hectares. constitutes no ground for the rescission of the contract. and absolved the Asiain from the countercomplaint. Jalandoni did two things. Since it is very difficult." ISSUE 1.Once in possession of the land. 490). In volume 39 Cyc. relief may be granted on the ground of gross mistake. have asked had he been cognizant of its size.A mutual mistake as to the quantity of the land sold may afford ground for equitable relief. Jalandoni remained a doubting Thomas and was continually suggesting that. he secured the certificate of title of Asiain and procured a surveyor to survey the land.Of the purchase price of P55. that the contract be annulled. in July of the same year. in his opinion. but for the sale of a particular tract. A2010 page Prof. He had the sugar cane ground in La Carlota Sugar Central with the result that it gave an output of 800 piculs and 28 cates of centrifugal sugar. the purchaser shall have the right to collect from said vendor all such amount as may have been advanced on account of this sale. . During all of the period of negotiations. or designated lot or parcel. HELD 1. will not generally entitle the purchaser to compensation. But it is well settled that a purchaser of land. And when it is evident that there has been a gross mistake as to quantity. a mutual mistake as to quantity. As a result. as where the sale is a sale in gross and not by acreage or quantity as a basis for the price." . by which it was asked that he be absolved from the complaint. . and is not ground for rescission. when it is sold in gross. 468. WON the lower court erred in nullifying the document of purchase and its related memorandum on the ground of mutual mistake under the Civil Code and thereafter restoring the parties to their original position. WON the stipulation “more or less” saves the contract from being declared null and void. and the complaining party has not been guilty of any fraud or culpable negligence. under the subject "Vendor and Purchaser.Sometime later. Jalandoni had paid P30. is a ground for relief and rescission. In case it is the purchaser who should withdraw from the contract of sale. to ascertain the quantity of a tract with perfect accuracy. if. the parties executed the another agreement reaffirming their previous agreement and that in case the vendor should withdraw from the contract and desist from signing the document of final sale. an answer and a countercomplaint were interposed by the defendant.000 from Jalandoni or to obtain the certificate of title and the rent from him. Labitag 2. a slight excess or deficiency does not affect the validity of the contract. 1920. they prepared and signed the memorandum-agreement where Asiain spouses promised to sell to Jalandoni parcels of land containing “25 hectares more or less” and producing an estimated crop of 2000 piculs. as to its area or dimensions. absolved Jalandoni from the payment of P25. if not impossible. both parties to return whatever they had received. But as Jalandoni remained doubtful as to the extent of the land and as to the amount of the crop on it. To the complaint.000. .EXCEPTION TO MUTUAL MISTAKE.000. 'more-or less.000. the Honorable Eduardo Gutierrez David. If the difference between the real and the represented quantity is very great.000 piculs of sugar. 1 Phil. It is from said judgment that the plaintiff has appealed. Asiain on his part always gave assurances in conformity with the letter which he had written intended to convince Jalandoni that the latter was in error in his opinion. action was begun by Asiain in the Court of First Instance of Occidental Negros.

words in designating quantity covers only a reasonable excess or deficiency. So ordered. The mistake with A2010 page Prof. the efficient cause of the concoction. the reference was made only for the purpose of description. that they did not contemplate or intend to risk more than the usual rates of excess or deficit in similar cases. from extraneous circumstances of locality. the agreement is inoperative and void. The use of this phrase in designating quantity covers only a reasonable excess or deficiency. or than such as might reasonably be calculated on as within the range of ordinary contingency. 15516. Such words may indeed relieve from exactness but not from gross deficiency. a large deficit. The mistake of fact as disclosed not alone by the terms of the contract but by the attendant circumstances. are always important. 2) and 15684 (parcel no. which are parcel no. It is not exactly a case of over reaching on the plaintiff's part. THEIS V COURT OF APPEALS HERMOSISIMA. whether executed or executory. 3. 15515 and TCT no. The use of "more or less" or similar. 15684 but by TCT No. as it is sometimes expressed. an unreasonable surplus or deficit may entitle the injured party to equitable relief. 15684 is a vacant lot denominated as parcel no. (2) where the sale is of a specific tract by name or description. is. at the option of the purchaser. and it is said that although this general rule may not carry into effect the real intention of the parties. Ratio The use of "more or less" or similar. as commonly agreed to. 3. (1) sales strictly and essentially by the tract. Disposition The ultimate result is to put the parties back in exactly their respective positions before they became involved in the negotiations and before accomplishment of the agreement. and locality of the land. and to obtain judgment against the defendant for that amount. Specific performance of the contract can therefore not be allowed at the instance of the vendor. Reasoning The memorandum-agreement between Asiain and Jalandoni contains the phrase "more or less. 1997 FACTS . NO. the value. . For the purpose of determining whether relief shall be granted the courts have divided the cases into two general classes: (1) Where the sale is of a specific quantity which is usually denominated a sale by the acre. the law. or how much it might exceed or fall short of that which was mentioned in the contract. (4) sales which. are in fact sales by the acre. an infallible criterion in each caw for its determination. and generally decisive. but is more nearly akin to a bilateral mistake for which relief should be granted. which it is proper to consider in order to throw light upon the intention of the parties. extent. Adjacent to parcel no.The apparent conflict and discrepancies in the adjudicated cases arise not from a denial of or a failure Ito recognize the general principles. Contracts belonging to either of the two first mentioned classes. From an early date courts of equity under their general jurisdiction to grant relief on the ground of mistake have in case of a mistake in the estimation of the acreage in the tract sold and conveyed interposed their aid to grant relief to the vendor where there was a large surplus over the estimated acreage. it is rescindable. we reach the following conclusions: This was not a contract of hazard. may be summarized as follows: A vendee of land when it is sold in gross or with the description "more or less" does not thereby ipso facto take all risk of quantity in the land. or of misrepresentation and deception.Obligations and Contracts 140 whether the contract was one of hazard as to quantity or not and whether the variance is unreasonable. without reference in the negotiation or in the consideration to any designated or estimated quantity of acres. should not be modified by the chancellor when there has been no fraud. parcel no. and under such circumstances or in such a manner as to show that the parties intended to risk the contingency of quantity. and the principles of equity. But in sales of either the third or fourth kind. The conduct of the parties. the date of the contract. though technically deemed and denominated sales in gross. value. added to a statement of quantity. with costs against the appellant. and the conduct and conversations of the parties. can only be considered as covering inconsiderable or small differences one way or the other. Labitag reference to the subject-matter of the contract is such that. whatever it might be. remained idle. Judgment is affirmed. These principles. I). 3. This was the decision of the trial judge and we think that decision conforms to the facts. and to the purchaser where there was. each case must depend on its own peculiar circumstances and surroundings. though a supposed quantity by estimation is mentioned or referred to in the contract. the price. . private respondent constructed a two-storey house on parcel no. words in designating quantity covers only a reasonable excess or deficiency and that when a vendee of land enters into a contract of sale with the vendor with the description "more or less. by his conduct. price. In other words. * * * " "Sales in gross for the purpose of equitable relief may be divided into various subordinate classifications. The relative extent of the surplus or deficit -cannot furnish." he does not thereby ipso facto take all risk of quantity in the land. .In a survey conducted in 1985. All three parcels of land are situated in Tagaytay City. Without such mistake the agreement would not have been made and since this is true. 4. or of fraud. time. and do not in themselves determine the character of the sale as one in gross or by the acre. It is calculated to prevent litigation. (3) sales in which it is evident. . * * * " . 2. waived or forfeited his equity. but a court of equity will not interfere on account of either a surplus or a deficiency where it is clear that the parties intend a contract of hazard. was erroneously indicated to be covered not by TCT No. It was a sale in gross in which there was a mutual mistake as to the quantity of land sold and as to the amount of the standing crop. and so understood by the parties. February 12. 2.In 1985.Respondent Calsons Development Corporation is the owner of three (3) adjacent parcels of land covered by Transfer Certificate of Title (TCT) Nos. per se. without prejudice to the right of the plaintiff to establish in this action in the lower court the amount of the rent of the land pursuant to the terms of the complaint during the time the land was in the possession of the defendant.Coordinating more closely the law and the facts in the instant case. (2) sales of the like in which. 3. 15516 (parcel no. The lots covered by TCT No. where the two-storey house stands. and other nameless circumstances. . unless he has. 1 and parcel no."The rule denying relief in ease of a deficit or an excess is frequently applied in equity as well as at law. which is usually called a sale in gross. 15515 (parcel no." It is the general view that this phrase or others of like import. but each case must be considered with reference not only to that but its other peculiar circumstances. which is the lot covered by TCT No.

Luzvilla. .When the petitioners went to Tagaytay to look over the vacant lots and to plan the construction of their house thereon. They refused to yield to reason and insisted on taking parcel no.Private respondent obviously committed an honest mistake in selling parcel no. 1 and 2 covered by TCT Nos. FACTS -10 December 1973: Filomena Almirol de Sevilla died intestate leaving 8 children: William(†). Verily. Petitioners still refused. 1390 of the New Civil Code provides: “The following contracts are voidable or annullable. Respondent court. . violence.Petitioners insisted that they wanted parcel no. such mistake invalidated its consent and as such. . sold parcel no. In order that mistake may invalidate consent. 4 instead (which was not owned by private respondent) and covered by TCT Nos. intimidation. 4. 3.Tolentino explains that the concept of error in this article must include both ignorance. 4 to the petitioners falls within the second type. or to those conditions which have principally moved one or both parties to enter into the contract. respectively. private respondent offered parcel nos. 1331.On October 26. in his own behalf and in behalf of her siblings (heirs of Filomena). 1 or 2. The mistake committed by the private respondent in selling parcel no. Rosa. 4 in the first place. executed a Deed of Extra-judicial Partition of the 1/3 share of Honorata Almirol to the heirs of Filomena and to Felisa. .The trial court rendered judgment in favor of private respondent. . . Costs against the petitioner. . Felipe. she executed a last will and testament (25Nov1985) devising her ½ share in subject lot to the spouses Leopoldo Sevilla and Belen Leyson. or a belief in the existence of some circumstance. HEIRS OF WILLIAM SEVILLA V SEVILLA YNARES-SANTIAGO. . However. or undue influence. . 2003 NATURE Petition for certiorari to review CA decision affirming in toto RTC (Dipolog City) decision declaring. unaware of the mistake. or reimbursement of the purchase price in double amount. it should refer to the substance of the thing which is the object of the contract.Petitioners adamantly rejected the good faith offer. . and Jimmy(†). respectively. private respondent could not have possibly sold the same to them for it did not own parcel no. Labitag discovered. there is a lack of full and correct knowledge about the thing. it immediately offered two other vacant lots to the petitioners or to reimburse them with twice the amount paid.To remedy the mistake. 4 was owned by another person. Maria(†). annulment of the deed of sale is proper. Leopoldo. who attended to the needs of the three women. did not find the appeal meritorious and accordingly affirmed the trial court decision. 1 and 2) were mistakenly surveyed to be located on parcel no. private respondent. 2 and 3 covered by TCT Nos.Clearly. 4 that private respondent sold to them. Disposition Petition was DISMISSED and the decision of the Court of Appeals AFFIRMED. and mistake properly speaking.Respondent court correctly affirmed the findings and conclusions of the trial court in annulling the deed of sale as the former are supported by evidence and the latter are in accordance with existing law and jurisprudence. 1986: Felisa Almirol and Peter Sevilla. which is the absence of knowledge with respect to a thing. together with their nephew Leopoldo Sevilla and his family." "Art. April 30. 3. covered by TCT No. or fraud. in addition to parcel no. Peter. 4 to petitioners. while the two idle lands (parcel nos.” . covered by TCT No.Such refusal of petitioners prompted private respondent to make another offer.Private respondent was then compelled to file an action for annulment of deed of sale and reconveyance of the properties. fraud. 4. they discovered that parcel no. The estate includes (a) three parcels of land (forming part of conjugal properties with late husband) and (b) another parcel co-owned with her sisters Honorata and Felisa (both single and without issue) where commercial and residential buildings have been erected. however. Leopoldo. . fact.Art. . The good faith of the private respondent is evident in the fact that when the mistake was A2010 page Prof. which in reality does not exist. intimidation. 155864 and upon which a two-storey house stands. which is the idle lot adjacent to parcel no.Sept 3. HELD YES. Leopoldo accepted such in the same document.Before Felisa’s death. petitioners sought its reversal from respondent Court of Appeals. Later." . it is quite impossible for said private respondent to sell the lot in question as the same is not owned by it. as these two were precisely the two vacant lots which private respondent owned and intended to sell when it entered into the transaction with petitioners. inter alia. Court of Appeals: "A contract may be annulled where the consent of one of the contracting parties was procured by mistake. . undue influence. . they lived in the house of Filomena. 15515 and 15516. As correctly noted by the Court of Appeals. violence.Obligations and Contracts 141 15515. The requested titles were left unsigned by the Register of Deeds of Dipolog City. even though there may have been no damage to the contracting parties: (2) Those where the consent is vitiated by mistake. 19 87. the return of an amount double the price paid by petitioners. Thereafter. They also discovered that the lots actually sold to them were parcel nos. 15516. Peter and Luzvilla Sevilla obtained the cancellation of the old title of the subject lot and the issuance of new titles to Felisa and the heirs of Filomena. the questioned Deed of Donation Inter Vivos valid and binding on the parties. her 1/3 undivided share in the said parcel was transmitted to Felisa and the heirs of Filomena (½ share each). 15516 and 15684. 2.Aggrieved by the decision of the trial court. ISSUE WON the Deed of Sale may be annulled on the ground of consent given through mistake. and persisted in claiming that it was parcel no. 15516 and 15684.During the lifetime of Felisa and Honorata. 4 to defendants-appellants which plaintiff-appellee tried to remedy by offering defendants-appellants instead his Parcels Nos. . or event. . there was honest mistake on the part of plaintiff-appellee in the sale of Parcel No. In both cases. which is a wrong conception about said thing. Felisa executed another document “Donation Inter Vivos” (8Aug1986) ceding to Leopoldo her ½ undivided share in subject lot. .As enunciated in the case of Mariano vs. When Honorata died intestate.

The Deed of Extra-judicial Partition is void ab initio and not merely unenforceable. 2. the donee becomes the absolute owner of the property donated. Reasoning -Factual findings of the trial court. (1) that Felisa was of sound mind at the time of the execution of the assailed deeds. The self-serving testimony of the petitioners are vague on what acts of Leopoldo Sevilla constituted fraud and undue influence and on how these acts vitiated the consent of Felisa Almirol. WON its execution was attended by fraud 2. I suppose it was by mistake).Obligations and Contracts 142 pending submission by Peter Sevilla of a Special Power of Attorney authorizing him to represent his siblings (the other heirs of Filomena). & the heirs of William. -A donation inter vivos is immediately operative and final. having previously donated the same to Leopoldo who accepted the donation in the same deed. clear and convincing evidence. (having inherited half of Honorata’s share) she was already the owner of 1/2 undivided portion of the lot in question. CA affirmed. or was ignorant or in financial distress. There is UNDUE INFLUENCE when a person takes improper advantage of his power over the will of another. depriving the latter of a reasonable freedom of choice. Accounting. Petitioners’ Claim (1) that the Deed of Donation is tainted with fraud because Felisa (81 y/o) was seriously ill and of unsound mind at the time of the execution thereof. YES Ratio Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it.CA decision affirmed with modifications. family. between Leopoldo on one hand. and services rendered in the past. Disposition ½ shall go to Leopoldo by virtue of the deed of donation. Ratio Legal consent presupposes capacity. There is nothing in the record that discloses even an attempt by petitioners to rebut said declaration of the notary public. spiritual and other relations between the parties. NO . she was no longer the owner of the ½ undivided portion of the questioned lot. the latter’s presumed consent to the contract prevails. Labitag confidential. must prove. he would not have agreed to. This ½ share is considered a present property which she can validly dispose of at the time of the execution of the deed of donation. the other is induced to enter into a contract which. it results in an effective transfer of title over the property from the donor to the donee and the donation is perfected from the moment the donor knows of the acceptance by the donee. DUMASUG V MODELO TORRES.21 June 1990: Felipe. that she freely and voluntarily ceded her undivided share in the questioned lot in consideration of Leopoldo’s and his family’s love. Reasoning At the time Felisa executed the deed of extra-judicial partition dividing the share of her deceased sister Honarata between her and the heirs of Filomena. WON the Donation Inter Vivos executed by Felisa Almirol in favor of Leopoldo Sevilla is valid 1a. -Ei incumbit probatio qui dicit. As a mode of acquiring ownership. The Deed of Extra-judicial Partition is declared void. if affirmed by the Court of Appeals. 1a. she was of sound mind and could talk sensibly. non qui negat. and (2) that the Deed of Extra-judicial Partition is void because it was executed without their knowledge and consent. The conjugal property (3lots) was equally divided among the 8 heirs. Court of Appeals). The notary public who notarized the Deed of Donation testified that Felisa confirmed to him her intention to donate her share in the questioned lot to Leopoldo. following the rules on intestate succession. Felisa. an agreement of the parties is essential. Damages. MFR denied. (2) they were willing to have the other properties of Filomena partitioned among her heirs in accordance with the law on intestate succession. And once a donation is accepted. and the name of Rosa Sevilla is ordered included in the disposition portion of the trial court’s judgment. The lower courts correctly found out that neither fraud nor undue influence can be inferred from the circumstances alleged by the petitioners. Dipolog City RTC Ruling . Jimmy & Maria filed the instant case against Leopoldo. . -Fraud and undue influence that vitiated a party’s consent must be established by full. with prayer for Receivership and for Partition of the properties of the late Filomena Almirol de Sevilla. affection. Peter and Luzvilla for annulment of the Deed of Donation and the Deed of Extrajudicial Partition. and the 7 heirs on the other (Rosa’s name was omitted. and the attendance of a vice of consent renders the donation voidable. and Honorata was divided equally into two. March 16. Like any other contract. -Felisa did not possess the capacity to give consent to or execute the deed of partition inasmuch as she was neither the owner nor the authorized representative of Leopoldo to whom she previously transmitted ownership of her share. ISSUES 1. while the other half shall be divided equally among the heirs of Filomena Almirol de Sevilla including Leopoldo Sevilla. -Petitioners failed to show proof why Felisa should be held incapable of exercising sufficient judgment in ceding her share to respondent Leopoldo. Respondents' Comments There was no fraud or undue pressure in the execution of the questioned documents. There is said to be no consent. without them. WON the Deed of Extrajudicial Partition is valid HELD 1. NO Ratio There is FRAUD when. are entitled to great respect. . Reasoning At the time Felisa executed the deed of donation. and consequently. otherwise. no contract when the agreement is entered into by one in behalf of another who has never given him authorization therefor unless he has by law a right to represent the latter (Delos Reyes v. through the insidious words or machinations of one of the contracting parties. He stressed that though the donor was old. Rosa. The lot owned by Filomena. Certain circumstances are considered: the A2010 page Prof.upheld the validity of the Deed of Donation and declared the Deed of Extra-judicial Partition unenforceable (for lack of the req’d SPA). 1916 . or the fact that the person alleged to have been unduly influenced was suffering from mental weakness. He who asserts. not he who denies.

Reasoning The error (in consent) invalidates the contract. CFI ruled in her favor. It is undeniable that she was deceived in order to obtain her consent.Andrea Dumasug cannot write (no mention if she can read). On April 10.87 and P46. father of Maxima Hemedes and Enrique D. pursuant to the resolutory condition in the deed of donation executed in her favor. and the right to appropriate the constructions since Asia Brewery is a builder in bad faith. 1964. and of no value or effect. Laguna. . and she was most probably influenced by Enrique D. 1947 Jose Hemedes executed a document entitled “Donation Inter Vivos with Resolutory Conditions. However. . ordering Modelo to restore the animal and the lands.Dumasug then filed in the CFI a petition to declare null and void and of no effect the document/ contract allegedly entered into by her and Modelo. she authenticated with her mark. at the same time denying the conveyance made to Maxima. applicable. 3 months after the execution of the document..Respondent (Modelo): the lands and animal were payment from Dumasug for debts incurred by her on several occasions. Modelo appealed.773 sq. R&B sent Asia Brewery a letter informing of its ownership.On February 28. Thus. ISSUES HEMEDES V COURT OF APPEALS GONZAGA-REYES. in exchange of P333. and pay the costs of the suit. with the annotation that Justa Kausapin shall have the usufructuary rights over the parcel of land described during her lifetime or widowhood.On February 22. property shall revert to any of the children or their heirs of the DONOR expressly designated by the DONEE. Hemedes. Article 1303 of the Civil Code is therefore. 1981 Kausapin executed an affidavit affirming the conveyance of the property in favor of Enrique. Since Maxima failed to redeem the property within the redemption period. Hemedes to execute the "Kasunduan" in his favor. the instrument is null and void for lack of consent Ratio The consent given in this case was a consent given by mistake. and a certificate of sale was issued in its favor. pay any loss and damages to Dumasug. as provided in Article 1265 and 1266 of the Civil Code.Obligations and Contracts 143 NATURE Appeal from judgment of CFI Cebu FACTS . as it goes into the very substance of the thing which is the subject matter of the contract. Justa Kausapin. Cabuyao. .On March 22. with an area of 21. thus the document is null and void. Maxima also wrote a letter wherein she asserted that she is the rightful owner of the subject property. . R&B Insurance extrajudicially foreclosed the mortgage since Maxima Hemedes failed to pay the loan even after it became due in August 2. 1999 NATURE Petitions for review on certiorari of a decision and resolution of the Court of Appeals. Apparently.Original Certificate of Title was issued in the name of Maxima Hemedes. Modelo persuaded Dumasug to affix her mark (since she didn’t know how to write) on a document. and notified Dumasug that she had conveyed to him through a deed of absolute sale the said properties. .The deed of conveyance in favor of Maxima Hemedes was in English and that it was not explained to Justa Kausapin. Hemedes. The consent given by plaintiff being null and void." Disposition Judgment Affirmed . FACTS . Labitag .R & B Insurance claims that Maxima Hemedes and her husband constituted a real estate mortgage over the subject property in its favor to serve as security for a loan which they obtained in the amount of P6k. the document is consequently also null. Modelo took possession of Dumasug’s carabao and two parcels of land. A2010 page Prof. void. The land was sold at a public auction with R&B Insurance as the highest bidder. she would neither have accepted nor authenticated it by her mark. which prescribes that: "when the nullity of an obligation has been declared. constructed two warehouses. Respondents’ Comments .Dominium leased the property to Asia Brewery.Pursuant to the first condition. 1971 whereby she transferred the same land to her stepson Enrique D.Despite earlier conveyance. . Had she understood the contents of the said document.The controversy involves a question of ownership over an unregistered parcel of land.Maxima Hemedes argues that Justa Kausapin's affidavit should not be given any credence since she is obviously a biased witness as it has been shown that she is dependent upon Enrique D. Upon learning of said constructions. m. in the amounts of P101. October 8. . identified as Lot 6. subject to the following: Upon death or marriage of the DONEE. of her own free will. Maxima Hemedes failed to discharge her burden. the document provided that Dumasug. “xxx” . who even before the signing of the contract of lease. to show that the terms thereof were fully explained to Justa Kausapin. 1960 a “Deed of Conveyance of Unregistered Real Property by Reversion” conveying to Maxima Hemedes the subject property. originally owned by the late Jose Hemedes.49 received from Modelo. pursuant to Article 1332 of the Civil Code. 1979 Enrique sold the property to Dominium Realty and Construction Corporation. and the value with its interest. Hemedes for her daily subsistence. the contracting parties shall restore to each other the things which have been the object of the contract with their fruits. 1968. plan PSU-111331. . situated in Sala. R&B executed an Affidavit of Consolidation and acquired TCT in its name. agreed to convey to Modelo the properties. falsely and maliciously making her believe that it contained an engagement on the part of Dumasug to pay Modelo a certain sum of money to pay for the expenses of an earlier lawsuit wherein Modelo gave “advice” to Dumasug . in favor of his 3rd wife. Petitioner’s Claim .” where he conveyed ownership over the subject land. Kausapin executed on September 27. The document is of no value whatever for the reason that it is not the one which.77 (money used as attorney’s fees and traveling expenses in the earlier suit) ISSUE WON the instrument of purchase of two parcels of land and the work animal is null and void HELD YES. Kausapin executed a “Kasunduan” on May 27.

Article 1330 A contract where consent is given through mistake. Although it is a well-established rule that the matter of credibility lies within the province of the trial court. may alienate it. which states: When one of the parties is unable to read. . 2. under Article 712. after a perfect and binding contract has been executed between the parties.Even assuming in gratia argumenti that R & B Insurance was obligated to look beyond the certificate of title and investigate the title of its mortgagor.is a well-settled principle that where innocent third persons rely upon the correctness of a certificate of title and acquire rights over the property. effectively transferred ownership over the property? 2. An innocent purchaser for value is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim of another person. and even destroy the same. . through insidious words or machinations of one of the contracting parties. the other is induced to enter into a contract which. it should refer to the substance of the thing which is the object of the contract. SEPARATE OPINION VITUG [ concur] . . Reasoning If. the alleged defect must be conclusively proven. Labitag ." i. . Ratio A party to a contract cannot just evade compliance with his contractual obligations by the simple expedient of denying the execution of such contract. Which of the two conveyances by Justa Kausapin.A donation would not be legally feasible if the donor has neither ownership nor real right that he can transmit to the donee. public respondent's reliance upon Justa Kausapin's repudiation of the deed of conveyance is misplaced for there are strong indications that she is a biased witness.The Opinion will have far-searching ramifications on settled doctrines concerning the finality and conclusiveness of the factual findings of the trial court in view of its . Fraud. and ultimately. since the validity and fulfillment of contracts cannot be left to the will of one of the contracting parties. it would not have discovered any better rights in favor of private respondents. on the other hand.. suffering from worsening physical infirmities and completely dependent upon her stepson Enrique D. Hemedes for support. the Torrens system. Unlike an ordinary contract. such rule does not apply when the witness' credibility has been put in serious doubt. which has been overlooked or the significance of which has been misinterpreted. Otherwise. Hemedes is null and void for the purported object thereof did not exist at the time of the transfer. would be impaired for everyone dealing with registered property would still have to inquire at every instance whether the title has been regularly or irregularly issued. or do anything which may be prejudicial to the usufructuary. transform. Reasoning Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance.Public respondent was in error when it sustained the trial court's decision to nullify the "Deed of Conveyance of Unregistered Real Property by Reversion" for failure of Maxima Hemedes to comply with article 1332 of the Civil Code. but all the contracts he may enter into as such usufructuary shall terminate upon the expiration of the usufruct.Moreover. or to those conditions which have principally moved one or both parties to enter into the contract. Enrique D. Justa Kausapin was already 80 years old.e.Article 744 of the Civil Code states that the "donation of the same thing to two or more different donees shall be governed by the provisions concerning the sale of the same thing to two or more persons. or alienate his right of usufruct. and the second in favor of Enrique Hemedes.it is a well-established principle that every person dealing with registered land may safely rely on the correctness of the certificate of title issued and the law will in no way oblige him to go behind the certificate to determine the condition of the property. the first in favor of Maxima Hemedes. It would be an ineffecacious process if the donor would have nothing to convey at the time it is made. without them. as if so saying that there can be a case of "double donations" to different donees with opposing interest. even by a gratuitous title. by Article 1544 of the same Code. or fraud is voidable. and mistake or fraud is alleged. As we have already stated earlier. industrial and civil fruits of the property and may personally enjoy the thing in usufruct. public confidence in the certificate of title. The owner of the property maintains the jus disponendi or the power to alienate. . the court cannot just disregard such rights. the person enforcing the contract must show that the terms thereof have been fully explained to the former. . Disposition The donation in favor of Enrique D. such contract is a nullity as its subject matter was inexistent. A donation once perfected would deny the valid execution of a subsequent inconsistent donation (unles perhaps if the prior donation has provided a suspensive condition which still pends when the later donation is made). lease it to another. . This right is embodied in the Civil Code. The trial court found that Justa Kausapin was dependent upon Enrique D. undue influence. MELO [concur] . or if the contract is in a language not understood by him. which provides that the owner of property the usufruct of which is held by another.Clearly. although he cannot alter the property's form or substance. it occurs to one of them to allege some defect therein as a reason for annulling it.In order that mistake may invalidate consent. he would not have agreed to. HELD 1. a donation. such as when there appears on the record some fact or circumstance of weight and influence. WON R&B Insurance should be considered an innocent purchaser of the land in question. only the jus utendi and jus fruendi over the property is transferred to the usufructuary.Obligations and Contracts 144 1. Hemedes and Dominium base their claims to the property upon the "Kasunduan" allegedly executed by Justa Kausapin in favor of Enrique Hemedes. It is apparent that Enrique could easily have influenced his aging stepmother to donate the subject property to him. having already been transferred to Maxima Hemedes. is present when. still. intimidation. Ratio The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima Hemedes' OCT does not impose upon R & B Insurance the obligation to investigate the validity of its mortgagor's title. violence. in relation to Article 725 of the Civil Code is also a mode of acquiring and transmitting ownership and other real rights by an act of liberality whereby a person disposes gratuitously that ownership or real right in favor of another who accepts it. The usufructuary is entitled to all the natural. A2010 page Prof. Hemedes for financial assistance. encumber.

which is the final arbiter of questions of fact. now petitioners. respondent’s title to the property was cancelled and in lieu thereof. petitioner Miguel Katipunan. Sr. He was shocked when his sister Agueda Katipunan-Savellano told him that the Balguma brothers sent a letter to the lessees of the apartment informing them that they are the new owners. Balguma. .00.500. Labitag Leopoldo Balguma. MAXIMA failed to introduce sufficient evidence that would purportedly show that the deed of conveyance was explained to Justa Kausapin before the latter allegedly affixed her thumbmark. represented by their father Atty. involving the subject property for a consideration of P187. a language not known to Justa Kausapin. 2002 NATURE Petition for review on certiorari assailing the Decision of the Court of Appeals which set aside the Decision of the Regional Trial Court (RTC) of Manila.On March 10. holding that respondent failed to prove his causes of action since he admitted that: (1) he obtained loans from the Balgumas.Respondent Braulio Katipunan. much less did they pay a single centavo in real estate taxes. 109193 of the Registry of Deeds of Manila. now petitioners) convinced him to work abroad. one could just as easily ascribe these to Maxima. The court likewise granted respondent’s motion to appoint Agueda Savellano as his guardian ad litem. thus it is possible that he did not understand the consequences of his action.There are other indications which led this Court to believe that neither defendant Maxima Hemedes nor defendant R & B INSURANCE consider themselves the owner of the property in question. as shown by the medical report of Dr. . 1987. Jr.00 as full satisfaction of his claim. Agueda Savellano. . not only from respondent Enrique Hemedes. but also from Maxima Hemedes. started collecting rentals from the lessees of the apartments. conspired with one another in taking advantage of his ignorance.“All these conditions are present in the case at bar. who are both her stepchildren. which document turned out to be a Deed of Absolute Sale. brothers Edgardo and Leopoldo.Court of Appeals reversed ISSUE WON the consent of Braulio Katipunan. Both of these claimants never declared themselves as owners of the property for tax purposes. assisted by his brother. petitioners denied the allegations in the complaint. FACTS . in Civil Case No. Atty. MAXIMA admitted the entire document was written in English. Manila. 1985. 1986.that mere relationship of a witness to a party does not discredit his testimony in court.MAXIMA failed to repudiate the allegation of Justa Kausapin disclaiming knowledge of her having executed such a deed. and that he filed the complaint because his sister. January 30. Atty. paid him P2. the trial court was convinced that respondent did not sign the motions to dismiss voluntarily because of his poor comprehension. that he also knew that the Balguma brothers have been collecting the rentals since December.The trial court set the case for pre-trial.The trial court dismissed the complaint. and that the parties have reached an amicable settlement after Atty. Balguma. In January.” . Jr. By virtue of the said sale.He averred that his brother Miguel. . . whom we are asked to disbelieve on the basis merely of her recorded testimony without the benefit of the advantage that the trial court had. The apartment units are occupied by lessees. he claimed that the defendants. 168394 was registered and issued in the names of the Balguma brothers. then still alive.. 1985 but that he has not objected or confronted them. disregarding in the process another longestablished rule . and (3) he acknowledged selling the property and that he stopped collecting the rentals. . Affiant disowned the alleged 'Deed of Conveyance of Unregistered Real Property by Reversion" invoked by defendant Maxima Hemedes. (co-defendants). . Branch 28. Yet. The lot is registered in his name under TCT No.In their answer. Sr. A2010 page Prof. that she never allowed her to use the land as security or collateral for loan. 87-39891.Obligations and Contracts 145 unique advantage of being able to observe at first-hand the demeanor and deportment of witnesses. a complaint for annulment of the Deed of Absolute Sale. Through insidious words and machinations. respondent. respondent filed with the RTC of Manila. Annette Revilla.On December 29. and especially when such findings of facts are affirmed by the Court of Appeals. .000. alleging that respondent was aware of the contents of the Deed of Absolute Sale and that he received the consideration involved.. Balguma and Inocencio Valdez (defendants therein.Twice respondent moved to dismiss his complaint (which were granted) on the grounds that he was actually instigated by his sister to file the same. San Miguel. They even brought him to the NBI and other government offices for the purpose of securing clearances and other documents which later turned out to be falsified. they made him sign a document purportedly a contract of employment.It must be remembered that Justa Kausapin had a legal right to such financial assistance. If one must impute improper motives in favor of Enrique. TCT No. Justa Kausapin claimed that it was only during the hearing conducted on 07 December 1981 that she first caught glimpse of the deed of conveyance She therefore could not have possibly affixed her thumbmark on said document. Jr. and I have grave reservation about the propriety of setting aside time-tested principles in favor of a finding that hinges principally on the credibility of a single witness. Respondent further alleged that he did not receive the consideration stated in the contract. a Resident Psychiatrist at the Philippine General Hospital. (2) he signed the Deed of Absolute Sale.The trial court noted that respondent was not assisted by counsel in signing the said motions. . . (co-petitioners). Jr. 87-39891 for annulment of a Deed of Absolute Sale. Consequently. whether as owner or mortgagor. docketed as Civil Case No. . . with evident bad faith. Finally. urged him to do so. and expressly stated that she never granted any right over the property to Maxima Hemedes. in the sale of his property was vitiated rendering the Deed of Absolute sale voidable KATIPUNAN V KATIPUNAN SANDOVAL-GUTIERREZ. Branch 21.. he being only a third grader. is the owner of a 203 square meter lot and a five-door apartment constructed thereon located at 385-F Matienza St. In granting his motions for reconsideration. entered into a Deed of Absolute Sale with brothers Edgardo Balguma and Leopoldo Balguma.MAXIMA failed to comply with the requirements laid down by Article 1332 of the Civil Code. were able to register the title to the property in their names. .

as a matter of law. The important thing is that she believed and accepted their judgment and acted upon it. The question is not did she make a mistake. Contracts are also valid even though they are entered into by one of the parties without hope of advantage or profit. such contract is binding and enforceable. (4) undue influence.A contract whereby reparation is made by one party for injuries which he has willfully inflicted upon another is one which from its nature is entered into reluctantly by the party making the reparation. It is however necessary to distinguish between real duress and the motive which is present when one gives his consent reluctantly. It is of no consequence here whether. and the Hongkong and Shanghai Bank as settlement of their claims against her and her husband who in order to escape criminal charges had escaped to Macao. it was impossible for him to understand the contents of the contract written in English and embellished in legal jargon. representations were made to her by the defendants and concurred in by her lawyers. his ignorance and weakness made him most vulnerable to the deceitful cajoling and intimidation of petitioners.Under the contract.The circumstances surrounding the execution of the contract manifest a vitiated consent on the part of respondent. facts of which she was fully informed. Balguma. except when he has been benefited by the things or price received by him. Article 1399 provides that when the defect of the contract consists in the incapacity of one of the parties. Respondent signed the deed without the remotest idea of what it was. He makes the contract of reparation with extreme reluctance and only by the compelling force of the punishment threatened. In the other.Obligations and Contracts 146 HELD YES . A2010 page Prof. she had all to gain and nothing tolose. mental weakness or other handicap. . then the restitution of the property and its fruits to respondent is just and proper. Thus. and (5) fraud. fraud. A contract is valid even though one of the parties entered into it against his wishes and desired or even against his better judgment. . she had all to lose and nothing to gain. placed him not only at a hopelessly disadvantageous position visà-vis petitioners to enter into a contract. but if she refused. Balguma.In order that this contract can be annulled it must be shown that the plaintiff never gave her consent to the execution thereof. her husband must either spend the rest of his life in Macao or be criminally prosecuted. The argument this presented to her by her attorneys addressed itself to judgment and not to fear. the civil suit against herself and her husband would be dismissed and the criminal charges against the latter withdrawn. . Labitag . This meeting of the minds speaks of the intent of the parties in entering into the contract respecting the subject matter and the consideration thereof. If appealed to reason and not to passion.From the opinions of her attorneys as they were presented to her upon facts assumed by all to be true. However. February 19. a territory no covered by any extradition treaty. or intimidation is not void ab initio but only voidable and is binding upon the parties unless annulled by proper Court action. object.It was established at the trial that during the period of negotiation. she agreed to a conveyance of several properties to Aldecoa & Co. As an exception however to the principle of mutual restitution. It bears stressing that he reached only grade three. she would lose her property to save her husband. Nevertheless. if prosecuted therefore. her husband had been guilty of embezzlement and misappropriation in the management of the business of Aldecoa & Co. but did she consent. they deprived him of a reasonable freedom of choice. the SC did not see how she could reasonably have reached a conclusion other than that which she did reach. like respondent herein. the incapacitated person is not obliged to make any restitution. she would lose her property and her husband. which would invalidate the contract HELD . (3) intimidation.It is disputed that the attorneys for the plaintiff in this case advised her that. civil or criminal. It was his brother Miguel who negotiated with Atty. and price in money or its equivalent. they did not explain to him the nature and contents of the document. he would be convicted. In other words. the elements of a contract of sale are consent. 1986 up to the time the property shall have been returned to the latter. MARTINEZ V HSBC MORELAND. coupled with his mental affliction. The effect of annulment is to restore the parties to the status quo ante insofar as legally and equitably possible-. she would have been deprived of her alleged interests in the properties mentioned in the manner described and advised by her attorneys. whereas in refusing to sign said agreement. Thus. . His lack of education. . We give substance to this mandate. In the one case. Worse. Undue influence was exerted upon him by his brother Miguel and Inocencio Valdez (petitioners) and Atty. consent may be vitiated by any of the following: (a) mistake. The argument went ot her financial interests as well as to those of the defendants. Thus.A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake. . Petitioners should turn over to respondent all the amounts they received starting January. It spoke to her own interests as much as to those of her husband. He is confronted with a situation in which he finds the necessity of making the reparation or of taking the consequences. and that. but virtually rendered him incapable of giving rational consent. of his unlawful acts. under the advice of her counsel. from the facts which they had before them.Article 24 of the Civil Code enjoins courts to be vigilant for the protection of a party to a contract who is placed at a disadvantage on account of his ignorance. Under Article 1330 of the Civil Code. 1910 NATURE An action to annul a contract on the ground that plaintiff's consent thereto was obtained under duress FACTS . the situation was so presented to her that it was evident that in signng the agreement.A contract of sale is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. The presence of any of these vices renders the contract voidable. To be sure. ISSUE WON there was duress. in their judgment. since the Deed of Absolute Sale between respondent and the Balguma brothers is voidable and hereby annulled. (2) violence. too.this much is dictated by Article 1398 of the Civil Code. It asked her to be moved by common sense and not by love of family. It spoke to her business judgment as well as to her wifely affections. that if she assented to the requirements of the defendants.

now indorsed to Hill.There is deceit when by words or insidious machinations on the part of one of the contracting parties. that is. .With regard to the P8. that Tuason was to pay Marquez a total of P14. he announced to the Public Utility Commissioner his intention to give up the franchise.Franco is not one contracting party with regard to Veloso as the other.000. Labitag signed the blank sheet of paper thinking it was for the P8.Hill brought the present suit to recover the P4. July 24.319 with the stipulated interest. The rights of this company passed to Crisanto Marquez at a sheriff's sale on September 10. . with the result that on February 28. 1923 NATURE Petition to review the decision of the CFI. mother and former guardian of said children .Defendant Veloso and Domingo Franco jointly and severally executed a promissory note in the amount of P6.On March 5. when she TUASON V MARQUEZ MALCOLM. for goods to be received by the former’s company. what is natural and logical is that Veloso would have refused to execute her obligation to Levering in the first instance (i. the other is induced to execute a contract which without them he would not have made.Veloso answered that her debt was to Ricablanca in her own right.The judgment of the court below was affirmed with cost against the appellant. a franchise for thirty-five years was granted the Lucena Electric Company. Reasoning . .400.400 within sixty days. .e. gave an option to Antonio Tuason for the purchase of the plant for P14.000) as she did reject it in 1912 saying she did not consider herself in debt to the minors.000. the owner of the electric light plan of Lucena Tayabas.Therefore.Obligations and Contracts 147 not was she wrongly advised. Veloso alleged that she discovered that the former apparently used her signature to execute the contract with Michael & Co.000 was already paid.Promissory note was indorsed to Plaintiff Hill. the consideration for the debt. nor exempt Veloso from the obligation incurred.501. . and as they had not received any kind of goods whatever from said firm. who paid P5. It was likewise proven that La Cooperativa belonged to the defendant. 1921. But. . from March 20. she alleges that she has no transaction with Michael & Co. . . Marquez became disgusted with the business. within a year. The company seems never to have functioned very efficiently either at that time or at any other time. brother of Crisanto Marquez. Disposition Judgment appealed from is reversed against defendant Veloso ordering the payment of the P4. Tuason. On the date last mentioned. of securing the payment of the goods sold to the La Cooperativa. but was she coerced. La Cooperativa Filipina . FACTS . but was she under duress.57 for the property.During the pendency of the suit initiated by Hill.Tuason being once in possession of the electric light plant.Franco could be as a third person inducing deceit.It is of no importance whether La Cooperativa exclusively belonged to Veloso or Franco.400.319 on behalf of Michael & Co. . . The purchaser at said sale was Gregorio Marquez. prior to the accomplishment of the contract. 1915 NATURE Appeal from a judgment of the CFI absolving defendants from the complaint FACTS . . . the second installment has not been paid. Evidently.Upon Franco’s death.It has been fully proven that the goods. . . HILL V VELOSO ARELLANO.From the whole case SC was of the opinion that the finding of the court below that the plaintiff executed the contract in suit of her own free will and choice and not from duress is fully sustained by the evidence.000. 1919. ISSUE WON the promissory note is binding on the defendants HELD NO Ratio There is no other signed document than the promissory note presented with the intention. November 3. called Sucesores del Lucena Electric. were received by La Cooperativa. Disposition .319 balance. there is no reason for making one of the parties suffer for the consequences of the act of a third person in whom the other contracting party may have reposed an imprudent confidence.The new guardian is one Levering.000 for the benefit of the minor children of one Ricablanca.The agreement was. and that the goods came from Michael & Co. on its being signed. P12. . The first installment was paid subsequent to the sixty-day period.Veloso alleged that she was deceived by Franco into signing a blank sheet of paper by saying that it was for a promissory note to be executed by Veloso for P8. Levering commenced proceedings to recover the P8. The option was taken advantage of by Mariano S. Crisanto Marquez. They are both but one single contracting party in a relation with or against Michael & Co. nor with the plaintiff. that is. but to their mother. A2010 page Prof. And the facts constituting the consideration for the contract contained in the promissory note are fully proven. the property was sold under execution by reason of a judgment. as appears from the constant complaint of the municipal authorities of Lucena. not was she wise.Goods were proven to have been delivered to La Cooperativa . . and the remainder. P2. and not in her capacity as guardian of her minor children. 1921. it was run under the management of the Consolidated Electric Company for about sixteen months. to whom Veloso thought the obligation was due as guardian of the estate of the minor children.Deceit alleged could not annul the consent of the contracting parties to the promissory note.P2. the obligation being joint. to July 19. . 1922. 1921.It appears that originally in either 1913 or 1914. .

The answer and crosscomplaint of the defendant asked for a dismissal of the action and for an allowance of a total of P12. Indeed.240.Tuason and his outfit were permitted to operate the company pursuant to a special license which was to continue until they obtained a new franchise. Labitag NATURE Consolidated petitions for review on certiorari FACTS . After payment thereof. Manuel sold the land to Rosario Rayandayan and Carmen Arceño (herein respondents) in a Deed of Absolute Sale with Assumption of Mortgage for P250K. an Assignment of Mortgage was entered into between Halsema and The Bank in consideration of the total indebtedness of Manuel Behis.In the complaint filed in the CFI of Manila.Because of non-compliance with their MOA. . the Public Utility Commissioner took action and declared cancelled the franchise acquired by Crisanto Marquez from the Lucena Electric Light. . . merely renewed a previous inventory of the property. on account of the misrepresentation and fraud perpetrated by the defendant in selling an electric light plan with a franchise. . .Obligations and Contracts 148 . The case was submitted on an agreed statement of facts in relation with certain telegrams of record.Pursuant to their two contracts with Manuel Behis. with legal interest from August 1. MARIA V CA GONZAGA-REYES. A2010 page Prof. which amounted to a renovation of the entire plant. and to the payment of the balance of P200K under new terms with a new mortgage to be executed by the private respondents over the same land. following a knowledge of what was expected by the Government. 1986.There is no proof of fraud on the part of the defendant and find the plaintiff is estopped to press his action. HELD . Disposition Judgment is affirmed. and following the execution sale. 1921. 1985. together with Manuel Behis executed another Agreement embodying the real consideration of the sale of the land in the sum of P2. Judgment was rendered. 1986. for a total of P37. Cristina Behis was mortgaged in favor of the Bank in a real estate mortgage as security for loans. defendant. medical and burial expenses until he died on June 21. to give its consent to the transfer of title to the private respondents. The innocent non-disclosure of a fact does not effect the formation of the contract or operate to discharge the parties from their agreement. he bestirred himself to secure what damages he could from the defendant only after the venture had proved disastrous and only after the property had passed into the hands of a third party. and P240 represented rent which the plaintiff was expected to pay the defendant. 1922. 5. and (3) execute a new mortgage with plaintiffs for the balance of P200K over the same land. Subsequently. Rayandayan and Arceño instituted an action for specific performance. asked for judgment against Crisanto Marquez. (2) reversed and set aside the finding of the trial court on the bad faith of Rayandayan and Arceño in concealing the real purchase price of the land sold to them by Manuel Behis during RURAL BANK OF STA.7.A parcel of land of about 49. September 14.The Bank failed to comply with its obligation and on Jan. therefore.On July 28. absolving the defendant from the complaint and permitting the defendant to recover from the plaintiff P12.On March 29. Instead of the bank foreclosing immediately for non-payment of the delinquent account. Rayandayan and Arceño negotiated with the principal stockholder of the Bank. .The equitable doctrine termed with questionable propriety "estoppel by laches. Tuason.On Jan. plaintiffs were only able to pay under P300K (which included hospitalization. the Bank consented to the substitution of respondents as mortgage debtors in place of Manuel Behis in a Memorandum of Agreement between private respondents and the Bank with restructured and liberalized terms for the payment of the mortgage debt. The P12." has particular applicability to the facts before us. The plaintiff operated the electric light plant for about sixteen months without question. subsequent to the accomplishment of the contract. 2. the franchise was then in force and either party could easily have ascertained its status by applying at the office of the Public Utility Commissioner. It was then.4M to be paid in installments with P10K paid upon signing and in case of default in the installments. This deed bore the signature of his wife which he took upon himself to sign. A judgment was rendered declaring that the deed of sale with assumption of mortgage be taken together valid until annulled or cancelled. 1985). that Tuason conceived the idea of bringing action against Marquez for a rescission of the contract. Manuel Behis shall have legal recourse to the portions of the land equivalent to the unpaid balance of the amounts in installments. .The plaintiff claims in effect that the contract should be rescinded and that he should be allowed his damages. Engr. . the plaintiff.50 from the plaintiff.Thereafter. (2) give its consent for the transfer of title in the their name. ISSUE WON the sale may be rescinded on the ground of misrepresentation and fraud. The title to the land remained in the name of Manuel Behis however. when the defendant had already given up his rights to that franchise.4M for the sale of the property to the former.654. Inexcusable delay in asserting a right and acquiescene in existing conditions are a bar to legal action. Ice & Water Company. petitioner Bank agreed to receive only a partial payment of P 143K by installment on specified dates. the Court of Appeals in its assailed decision: (1) affirmed the validity of the Memorandum of Agreement between parties thereto. the bank agreed to release the mortgage of Manuel Behis. Rayandayan and Arceño. declaration of nullity and/or annulment of assignment of mortgage and damages on Sept.969 m2 registered in the name of Manuel Behis and his wife. . 1999 .The contract in making mention of the property of the electric light company. Rayandayan and Arceño did not show to the bank the Agreement with Manuel Behis providing for the real consideration of P2.000 of this judgment represented the amount still due on the contract. . .On the same day. which prompted respondents to demand that the Bank comply with its obligation under the Memorandum of Agreement to (1) release the mortgage of Manuel Behis. As well as declaring the MOA as annulled due to the fraud of Rayandayan & Arceño. . The new franchise was finally granted by the Public Utility Commissioner with certain conditions. that is. he made the first payment on the contract without protest. was not the determining cause of the purchase. .In sum. 1986. The franchise.400. Edilberto Natividad for the assumption of the indebtedness of Manuel Behis and the subsequent release of the mortgage on the property by the bank.

1921.The plaintiff here claims the sum of P22. (4) dismissed the counterclaim for damages by the bank and deleted the portion on the set-off of damages due between the bank on the one hand. the property remains as security for the payment of the indebtedness. but alleges in defense: (a) That the plaintiff knowing that the second parcels of land he sold had an area of 60 hectares. Under the term of the Memorandum of Agreement. and litigation expenses. Reasoning Petitioner Bank does not question the actual damages awarded to private respondents in the amount of P 229. the widow of the mortgagor Manuel Behis that her signature on the deed of absolute sale with assumption of mortgage was forged. in failing to disclose the real consideration of the sale between them and Manuel Behis . ordered the defendant to pay the plaintiff the sum of P19. Labitag 2. failed to pay the P10. she is entitled to a reduction in the price of the two parcels in proportion to the area lacking which ought to be reduced to P38. neither did she pay the remaining P12.000.Obligations and Contracts 149 negotiations with the bank on the assumption of the mortgage debt. WON the private respondents’ withholding of material information from petitioner Bank would render their Memorandum of Agreement (MOA) voidable on the ground that its consent to enter the agreement was vitiated by fraud 2. Torrens title to the second parcel was issued and forthwith delivered by the vendor to the vendee who. . Disposition petition is denied & decision of the CA is affirmed AZARRAGA V GAY VILLAMOR.000 to the vendor when the contract was signed. the bank's security remained unimpaired . following article 1471 of the Civil Code. or P2. It is well-settled that a party who does not appeal from a decision of the lower court may not obtain any affirmative relief from the appellate court other than what he has obtained from the lower court. . 1921 on the sum of P7.135 but only the moral damages. having found no fraud when the parties agreed to the lump sum for the two parcels of land described in the deed Exhibit A. P20.000. A2010 page Prof. and. private respondents Rayandayan and Arceño had no duty.000 . of counterclaim only after it was sued. the bank entered into said agreement in order to effect payment on the indebtedness of Manuel Behis . Whether it was P 250.400.000 for the two parcels of land.January 17.000 as agreed. (3) modified the trial court's finding as to the damages due Rayandayan and Arceño from the bank by adding P229. by itself. NO We cannot see how the omission or concealment of the real purchase price could have induced the bank into giving its consent to the agreement.000 one year after the delivery of the Torrens title to the second parcel. and from April 30. If fact. P10. 000 or P 2. does not constitute fraud. by misrepresentation lead the defendant to believe that said second parcel contained 98 hectares. or that the bank would not have otherwise given its consent had it known of the real purchase price Ratio The kind of fraud that will vitiate a contract are those insidious words or machinations resorted to by one of the contracting parties to induce the other to enter into a contract which without them he would not have agreed to. Thus. and thus made it appear in the deed of sale and induced the vendee to bind herself to pay the price of P47.00 but because of the information given by Cristina Behis. To all intents and purposes. paid him P20. the bank admits that no damages has been suffered by it. until full payment of the amounts claimed. 1922.000 one year after having received the Torrens title to the second parcel. and therefore did not act in bad faith. however. The vendor delivered the Torrens title to the first parcel to the vendee who. premised on the same non-disclosure of the real purchase price of the sale so as to preclude their entitlement to damages must necessarily be resolved in the negative. . petitioner bank does not and can not even allege that the agreement was operating to its disadvantage. to which price the defendant would not have bound herself had she known that the real area of the second parcel was 60 hectares.000 upon delivery by the vendor to the purchaser of the Torrens title to the first parcel described in the deed of sale.000. and from April 1922 on the sum of P12.000. The fraud must be the determining cause of the contract. should not be of importance to the bank. the plaintiff sold two parcels of lands to the defendant for the lump sum of P47. . even if delayed.400. Verily. Reasoning The consideration for the purchase of the land between Manuel Behis and herein private respondents Rayandayan and Arceño could not have been the determining cause for the petitioner bank to enter into the memorandum of agreement. silence or concealment. December 29. with legal interest from the month of April 1921 on the sum of P10. .Indeed. .Defendant admits that she purchased the two parcels of land referred to by plaintiff. the alleged nullity of the Memorandum of Agreement. unless there is a special duty to disclose certain facts.000.000. or must have caused the consent to be given. As petitioner Bank did not appeal from the decision of the trial court.The vendee paid P5.The conditions of the payment were: P5.300. in case of default of payment.000 at the time of signing the contract Exhibit A. atty’s fees.135. 1928 FACTS . consequently. WON the SC should modify the damages awarded by the lower court HELD 1. and Rayandayan and Arceño on the other ISSUES 1. on the sum of P12.000. payable in installments.000 upon delivery by the vendor to the purchaser of Torrens title to the second parcel. . It initially claimed that the sale with assumption of mortgage was invalid not because of the concealment of the real consideration of P2. the bank security remained unimpaired regardless of the consideration of the sale.400.The lower court. and lastly the sum of P12. or unless according to good faith and the usages of commerce the communication should be made.000.00 as actual damages. exemplary damages.300 with legal interest at 8 per cent per annum from April 30.In addition. NO The Court may no longer examine the amounts awarded by the trial court and affirmed by the appellate court.00 as stated in the Agreement. the Bank’s imputation of bad faith to private respondents.00 as stated in Exhibit A. Thus.000. which he represented contained an area of no less than 200 hectares.The bank had other means and opportunity of verifying the financial capacity of private respondents and cannot avoid the contract on the ground that they were kept in the dark as to the financial capacity by the non-disclosure of the purchase price. As correctly pointed out by respondent court.1339 of the Civil Code. Exhibit 15.Pursuant to Art.The bank received payments due under the Memorandum of Agreement. pursuant to the agreement. whether the consideration of the sale with assumption of mortgage was P250.000. In the month of March 1921.

she eventually decided not to continue paying the amortizations because the house was flooded again on July 18. and 30. Assertions concerning the property which is the subject of a contract of sale. situated at Commonwealth Village in Quezon City. independently of its number or measure.Obligations and Contracts 150 ISSUE WON there was fraud in the circumstances leading to the agreement in the contract HELD NO . She asked that the agreement be annulled and her payments . But if. and Trinidad shall vacate the property peacefully.More so.000 as earnest money and entered into the possession of the house. the court said: The law allows considerable latitude to seller's statements. and even if he did make such false representations as are now imputed to him by the defendant. They signed the Contract of Conditional Sale on August 8.She did not complain of the difference in the area of said second parcel until the year 1926. .". In the case of Songco vs. 1972. We have just learned the reason for the regulation.From all this.000 with a down payment of P17. for the lump sum of P47.The defendant had ample opportunity to appraise herself of the condition of the land which she purchased. petitioner. and the vendor does nothing to prevent such investigation from being as complete as the former might wish.On March 29. and must take the consequences of his own imprudence. approached Vicente J. the consideration of the contract is the object sold. December 3. . Thus assured. A man who relies upon such an affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his property does so at his peril. are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no grund from omitting to make inquires. and experience teaches that it as exceedingly risky to accept it at its face value. is the number of such units. . the purchaser cannot later allege that the vendor made false representations to him. She talked to Francisco who told her everything had been fixed and the house would never be flooded again. .On January 10.000 payable partly in cash and partly in installments. and the thing to be delivered is a determinate object. 17. when the purchaser proceeds to make investigations by himself. A2010 page Prof. the first one containing 102 hectares.1969. 1973.500 to complete the down payment. and any and all sums paid shall be considered rents and liquidated damages for the breach. she gave him P12.Trinidad paid the installment for 1970 and 1971 on time but asked Francisco for an extension of 60 days to pay the third installment due on July 1. Labitag . it follows that the provisions of article 1471 concerning the delivery of determinate objects had to be materially different from those governing the delivery of things sold a price per unit of measure or number. She heard from her new neighbors that two buyers had previously vacated the property because it was subject to flooding. Laureta Trinidad."One who contracts for the purchase of real estate in reliance on the representations and statements of the vendor as to its character and value.As the hectares were paid due to a lump sum and not based of a defined unit of measure – if the sale was made for a price per unit of measure or number. In case of the sale of real estate for a lump sum and not at the rate of a specified price for each unit of measure. the thing purchased as determined by the stipulated number of units. 254). when it is a single realty as when it is two or more.1969. the thing as determined by the stipulated boundaries.500. . Sellner (37 Phil. Upon her return from the US on October 11. or in regard to its qualities and characteristics. 67 ares and 32 centares. and has had the means and opportunity of verifying such statements. which has been called in law a determinate object. or dealer's talk. The balance was to be paid in 5 equal annual installments not later than July 1 of each year at 12% interest per annum. bearing in mind that the Code has rightly considered an object as determinate for the purposes now treated.There is no evidence of record that the plaintiff made representation to the defendant as to the area of said second parcel. 1972. and the plaintiff did nothing to prevent her from making such investigation as she deemed fit. . Trinidad inspected the house and lot and examined a vicinity map which indicated drainage canals along the property. Said two parcels are defind by means of the boundaries given in the instrument. so long as they are sold for a single price constituting a lump sum and not for a specified amount per unit of measure or number. it appears that by the contract Exhibit A. The consideration of the contract.The Contract of Conditional Sale contains a *condition that should Trinidad fail to make any of the payments the contract shall be considered automatically rescinded and cancelled without the necessity of notice or of any judicial declaration to that effect. 1471. the sale was made for a lump sum. 21. cannot avoid the contract on the ground that they were false or exaggerated. or. 1972. she wrote the City Engineer's office of QC and requested an inspection to determine the cause of the flooding. Trinidad filed her complaint against Francisco alleging that she was induced to enter into the contract of sale because of his misrepresentations." . the waters rising to as high as five feet on July 21. Therefore. the case falls within the provision of article 1471 of the Civil Code. . the parties agreed to the sale of two parcels of land. its greater or lesser area cannot influence the increase or decrease of the price agreed upon. TRINIDAD V IAC CRUZ. . and the second one containing about 98 hectares. Sellner. and not the number of units it contains. The finding of City Engineer Pantaleon P. but after he has visited and examined it for himself. Trinidad paid Francisco P5. Tabora was that "the lot is low and is a narrowed portion of the creek. and as was said in Songco vs. Francisco was willing to sell. if you wish. The house was Bungalow No. the latter accepted such representations at her own risk and she is the only one responsible for the consqunces of her inexcusable credulousness.The reason for the regulation is clear and no doubts can arise from its application. 1991 NATURE Petition for review on certiorari FACTS . Francisco and offered to buy the property. supra. the consideration of the contract with respect to the vendee. The price is determined with relation to it. which reads as follows: ART. The purchase price was P70. However.Sometime in early 1969.. there shall be no increase or decrease of the price even if the area be found to be more or less than that stated in the contract. hence. on the other hand. It is concerned with determinate objects.

Disposition Appealed decision is AFFIRMED with modification. it is also curious that notwithstanding the said floods.000 and P10. in addition. use miserable judgment. it was the petitioner who admittedly approached the private respondent. or dealer's talk. Assuming that he did make such representations. relieve him from one-sided contracts.First. the commission of what the law knows as an actionable wrong before the courts are authorized to lay hold of the situation and remedy it. "since 1969 said lot had been under floods of about one (1) foot deep. What we see here is a bad bargain. the Court feels that the stipulation [see condition in facts] should not be strictly enforced. it is assumed that she made her appraisal of the property not with the untrained eye of the ordinary prospective buyer but with the experience and even expertise of the licensed real estate broker that she was. . including the drainage canals indicated in the vicinity map that was furnished her. Villa: “Courts cannot follow one every stop of his life and extricate him from bad bargains. the petitioner had full opportunity to inspect the premises. Courts cannot constitute themselves guardians of persons who are not legally incompetent. for which she now claims reimbursement from the private respondent. Assertions concerning the property.Fifth. Francisco himself denied having made the alleged assurance. She also demanded the actual cost of the losses she had suffered as a result of the floods. before she entered into the contract of conditional sale. 1972. December 4. Sellner wished to mill his cane at a sugar central in nearby . two of whom. the defendant George Sellner. Men may do foolish things. she is deemed to have accepted them at her own risk and must therefore be responsible for the consequences of her careless credulousness. .Second. While we may commiserate with the petitioner for a purchase that has proved unwise.” The fraud alleged by the petitioner has not been satisfactorily established to call for the annulment of the contract. Pampanga adjacent to another sugar farm owned by plaintiff Lamberto Songco. . the floods were fortuitous events not imputable to him. To make her forfeit the payments already made by her and at the same time return the property to the private respondents for standing up to what she considered her right would. 1915. it was because she felt she had the right to do so. There must be.In Dec. cannot avoid the contract on the ground that they were false and exaggerated.Fourth. Regarding Trinidad’s refusal to continue paying the amortizations. or in regard to its qualities and characteristics. . Francisco died and was eventually substituted by his heirs. If she minimized the presence of the drainage canals. but because he has been defeated or overcome illegally. a violation of law.000 attorney's fees. . ."' and despite the floods of September and November 1970. 1917 FACTS . not an illegal transaction vitiated by fraud.Francisco denied the charge of misrepresentation and stressed that Trinidad had thoroughly inspected the property before she decided to buy it. the petitioner still "made annexes and decorations on the house. Kelemen. protect him from unwise investments. Notwithstanding the obvious condition of the property. filed their own joint memorandum. Trinidad J. and lose money by them-indeed. plus damages.Seventh. in default in the payment of the remaining amortizations in the sense contemplated in the contract. subject of a contract of sale. Courts operate not because one person has been defeated or overcome by another. Labitag in the world. including attorney's fees.Pendente lite. The claimed creek was a drainage lot. was the owner of a sugar farm at FloridaBlanca. together with the actual expenses she had incurred for the "annexes and decorations" she had made on the house. until the actual vacation of the property by the plaintiff. she still decided to buy it. and must take the consequences of his own imprudence. and the floods complained of were not uncommon in the village and indeed even in the Greater Manila area if not the entire Luzon. ISSUE WON there was misrepresentation on the part of Francisco to justify the rescission of the sale and the award of damages to the petitioner HELD NO Ratio One who contracts for the purchase of real estate in reliance on the representations and statements of the vendor as to its character and value. the petitioner paid the 1970 and 1971 amortizations even if.Sixth. to justify the rescission of the contract. are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no ground for omitting to make inquiries." all of a permanent nature. This finding is based on the following considerations. . in our view. A man who relies upon such affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his property does so at his peril. . . but not for that alone can the law intervene and restore. If she asked for the annulment of the contract and the refund to her of the payments she had already made. Francisco and Rosario F. according to her Complaint. Reasoning It has not been satisfactorily established that Francisco inveigled the petitioner through false representation to buy the subject property. we can only echo what Mr.Obligations and Contracts 151 refunded to her. who never advertised the property nor offered it for sale to her. strictly speaking. or annul the effects of foolish acts. Justice demands that we moderate the harsh effects of the stipulation.Third. as the petitioner contends. Justice Moreland observed in Vales v. moral and exemplary damages in the sum of P200. we cannot say that the petitioner was. Vicente J. she cannot say she was not forewarned of the possibility that the place might be flooded. all they have A2010 page Prof. He also claimed litigation expenses. but after he has visited and examined it for himself and has had the means and opportunity of verifying such statements. In any event. be unfair and unconscionable. make ridiculous contracts. she has only her own negligence to blame. He asked for the rescission of the contract and the forfeiture of the payments made by the plaintiff plus monthly rentals with interest of P700 for the property from July 2. The supposed previous owners were not presented as witnesses and neither were the neighbors. The law allows considerable latitude to seller's statements. and experience teaches that it is exceedingly risky to accept it at its face value. there is no evidence except her own testimony that two previous owners of the property had vacated because of the floods and that Francisco assured her that the have would not be flooded again. seeing that the lot was depressed and there was a drainage lot abutting it. SONGCO V SELLNER STREET. Given such circumstances.

de Villa Abrille the sum of P10. on October 30. probability or expectation are not actionable deceits and cannot void a contract. Although Songco had grossly exaggerated his estimate.Rodolfo and Guillermo Braganza. 1917 NATURE Appeal from a judgment of the Court of First Instance Bulacan FACTS . judgment. The note. the court finds that Sellner is still bound to pay the price stipulated. A2010 page Prof. 1944 P70. NO . December 1. They promised to pay him P10. Using expert knowledge to take advantage of the ignorance of another may be grounds for relief. and they made the same manifestation before the notary public when the document was prepared. and thus damages were awarded to him equal to the cost of procuring the dissolution of the attachment. thus. the court finds Sellner’s relative inexperience lacking.017. when they pretend to have already reached their majority. these minors stated that they were of legal age at the time they executed and signed it. the plaintiff cannot be held accountable for such complications leading to said damages. plus 2 % per annum. The damages were remote and speculative. Petition dismissed. claiming that the attachment caused a creditor to withhold credit. ISSUES 1. BRAGANZA V VILLA ABRILLE CONCEPCION.000. forcing him to sell sugar at lower prices and losing money. Sellner found out that the central was going to mill Songco’s cane and decided to buy it and run his own cane at the same time the latter’s cane was to be milled. two years after the cessation of the present hostilities or as soon as International Exchange has been established in the Philippines". Sellner also desired to get a right of way over Songco’s land for converting his own cane to the central.The defendant denied all allegations of the complaint. Labitag TORRES. 1954 NATURE Petition for review of the Court of Appeal's decision FACTS . with costs against the appellant. ISSUE WON the minors Domingo and Josefa misrepresented themselves in the sale of the real estate thus making the deed of sale valid HELD YES . I. received from Villa Abrille. further asserting by way of special defense that the defendant obtained the note by means of fraudulent representations. Matters of opinion. WON plaintiff is guilty of false representation HELD 1.An incident to the action was that the plaintiffs sued out an attachment against the defendant on the ground that he was disposing of his property in fraud of his creditors. while in fact they have not. May 14. and they cannot be permitted afterwards to excuse themselves from compliance with the obligation assumed by them or seek their annulment. was admitted in court as evidence. Jurisprudence dictates that one may not rely on a vendor’s misrepresentations as to the value of his goods if that person is given an ample opportunity to investigate/examine the goods.Songco estimated that his cane would produce 3. 1944 MERCADO V ESPIRITU . 2. In the deed of sale. Furthermore.Under Sec 103 of the Code of Civil Procedure. This was refuted upon a showing that defendant had not attempted to convey away his property. on which the action was brought. . however. an action was instituted to recover the 3rd for which a judgment was rendered in favor of the plaintiff and to which defendant has appealed. paying for two. however. The trial court ordered them solidarily to pay Fernando F. The defendant assigns error to the court’s refusal to award further damages. Villa Abrille sued them. Disposition CFI ruling affirmed.000 piculs of sugar but instead produced 2. The answer to the effect that the note was procured by fraudulent representation is actually an admission of its genuineness and due execution since it seeks to avoid the instrument on a ground not affecting either. is valid. effected by minors who have already passed the ages of puberty and adolescence and are near the adult age. . 18 and 19 years old.Obligations and Contracts 152 Dinalupijan but the owners of the mill would not promise to take it.Rodolfo and Guillermo claimed to have received P40. He bought the cane for an agreed sum of P12. This doctrine is entirely in accord with the provisions of our law on estoppel. They also claim that they were minors when they signed the promissory note. Disposition From what has been said it follows that the judgment of the court below must be affirmed. Payment was not made. WON the court erred in admitting the note as evidence even though its genuineness and due execution were not proven 2. NO .The annulment of a deed of sale regarding parcels of land was sought on the ground that the two of the four parties (Domingo Mercado and Josefa Mercado) thereto were minors (under the Civil Code).000 plus 2 % interest from October 30. as a loan.000 in Japanese war notes.000 and executed 3 promissory notes of P4. the defendant admits the note’s execution in his answer. it is necessary that the genuineness and due execution of a written instrument be specifically denied by the defendant under oath before such an issue is raised.000 only. respectively on the date the instrument was executed.The courts have laid down the rule that the sale of real estate.000 "in legal currency of the P. .

plaintiff delivered to defendants. it seemed that the relationship between the widow and her stepchildren had turned for the worse.From the minors' failure to disclose their minority in the same promissory note they signed. . Article 1305 and 1306 of the Civil Code then in force apply rigorously the rule in pari delicto non oritur actio. the above-named widow.37. the fraud must be actual and not constructure. Among the properties listed as conjugal were the two parcels of land in Bulacan.00. the Rodriguez children executed another document granting unto the widow lifetime usufruct over one-third of the fishpond which they received as hereditary share in the estate of Domingo Rodriguez. Concepcion Calderon. YES Ratio Duress being merely a vice or defect of consent. NO RODRIGUEZ V RODRIGUEZ REYES.Obligations and Contracts 153 ISSUE WON the minors are liable for the said loan HELD NO . 1953. At about this time. And appellant is clearly as guilty as her husband in the attempt to evade the legal interdiction. should such properties be adjudicated as belonging to the conjugal partnership. for the sum of P2. the original title were cancelled and TCT Nos. 1340) Disposition Decision reversed A2010 page Prof.However. by her execution (with the other heirs) of the extrajudicial settlement of estate. Juan and Ana. the widow appeared to . that the conveyances of the properties from plaintiff to her daughter and then to the conjugal partnership of plaintiff and her husband are both without consideration. 1934.500. Doming Rodriguez died intestate. Under date of January 24.On May 28.Prior to her marriage to Rodriguez. sent a letter of demand to the widow for payment thereof. . On March 16. 1929. 1961. surnamed Rodriguez. Then in a contract dated December 15. Thus. named Geronimo. 1962. when she failed to deliver to them the balance of the earnings of the fishponds. she contended that she would claim for her share. WON plaintiff’s cause of action has prescribed 4. .On October 12. as surviving widow of 1/5 of the properties in controversy. Jose and Mauricio. Concepcion Felix appeared to have executed a deed of sale conveying ownership of the aforesaid properties to her daughter. petitioner filed the present action in the CFI of Manila.976. 4. were divided among the heirs. 13815 and 13816 were issued in the names of the spouses Domingo Rodriguez and Concepcion Felix. together with another piece of property. 28 years after the intimidation is claimed to have occurred. WON the conveyances of title are void ab initio HELD 1. denying all recovery to the guilty parties inter se. WON plaintiff is estopped from questioning the transfer of properties 3. and no less than 9 years after the supposed culprit died in 1953.161. and the present action was instituted only in 1962. 1962. as income of the properties from 1953 to 1961. 1954. July 31. Esmeragdo and Mauricio and grandchildren Oscar. 1962. her stepchildren endorsed the matter to their lawyer who. NO Ratio In contracts invalidated by illegal subject matter or illegal causa. a widower with four children by a previous marriage. Jose. The action to declare null and void the deeds of transfer of plaintiff's properties to the conjugal partnership was based on the alleged employment or exercise by plaintiff’s deceased husband of force and pressure on her. 1934. the total amount of P56. she entered into a series of subsequent transactions with respondents that confirmed the contracts that she now tries to set aside. on May 16. an action based upon it must be brought within four years after it has ceased.000. Concepcion Calderon. 2. who had predeceased him. they are not entirely absolved from monetary responsibility. There was ratification or confirmation by the plaintiff of the transfer of her property. Labitag have leased from the Rodriguez children and grandchildren the fishpond for a period of 5 years commencing August 16. it does not follow as a legal proposition. They had no juridical duty to disclose their inability. contracted a second marriage on June 20. as a consequence of which. 3. consisting of one-half of the properties allegedly belonging to the conjugal partnership. Concepcion Felix. the action for rescission of the deed of extrajudicial settlement should have been filed within 4 years from its execution. They shall make restitution to the extent that they have profited by the money they received. in the amount of P3. with Domingo Rodriguez.On March 6. petitioner was not the proper party to plead lack of consideration to avoid the transfers On top of it. As alternative cause of action. which grant was accepted by petitioner. children of a son. Likewise. on the false assumption that the said properties had become conjugal by reason of the execution of the deeds of transfer in 1934. Esmeragdo. 1967 NATURE Appeal from a judgment of the CFI FACTS . that laboring under the same false assumption. for an annual rental of P7.Concepcion Felix. however. which. survived by the widow. 1953. WON plaintiff can recover the illegally donated properties 2. all surnamed Rodriguez. that they will not be permitted thereafter to assert it.58.00 which the latter in turn appeared to have transferred to her mother and stepfather by means of a document dated January 27. .In order to hold infant liable. (Art. It has been held that his mere silence when making a contract as to age does not constitute a fraud which can be made the basis of an action of deceit . his children Geronimo. children and grandchildren of the deceased entered into an extrajudicial settlement of his (Domingo's) estate. widow of the late Don Felipe Calderon and with whom she had one living child. Both deeds were registered in the Office of the Register of Deeds of Bulacan on January 29. Concepcion Felix was the registered owner of 2 fishponds. 1934. Bulacan. . YES Ratio Having taken part in the questioned transactions. ISSUES 1. that plaintiff participated in the extrajudicial settlement of estate (of the deceased Domingo Rodriguez) and in other subsequent deeds or instruments involving the properties in dispute.

000. he had thought of allowing Rafael to make the application for him.00. T-36714 so that he can have the counter deed of sale in favor registered in his .So Federico’s counsel filed a case in the CFI.00 is recited in the deed itself. contrary to the allegations of plaintiff and her witness. .000. But appellant contends that the sale by her to her daughter.The late Rafael insisted that the sale to him of his uncle's property was in fact a "dacion en pago" in satisfaction of Federico's unpaid attorney's fees. was simulated and without consideration. which appears thereon as paid. SUNTAY V CA HERMOSISIMA.For purposes of circumvention.00) . But such claim cannot prosper. through attorney-in-fact Don Manuel Elizalde. the consideration set forth is P3. (P20.500. Elizalde was an American national who owned a house and lot (2. that it was the result of a fair and regular private transaction. CA reversed trial court’s decision FACTS . she. except that it must yield to the evidence adduced. thereby vesting a half interest in Rodriguez. Federico was also liquid enough to pay him. . He did not even tell Federico that he considered such to be his fee. executed by Rafael in favor of Federico. infer prima facie the transaction's validity. that there was sufficient consideration for the contract 45 and.Federico applied as a miller-contractor of the then National Rice and Com Corporation (NARIC). It was notarized by Atty. for and in consideration of P20. December 19. then the appellant and her daughter must have intended the two conveyances to be real and effective. on May 22. Since in each conveyance the buyer became obligated to pay a definite price in money. But it was disapproved because at that time he was tied up w/ several unpaid loans. a warehouse and other improvements. The trial court upheld the validity and genuineness of the deed of sale executed by Federico in favor of Rafael.Obligations and Contracts 154 Ratio Although the two documents were executed for the purpose of converting plaintiff's separate properties into conjugal assets of the marriage with Domingo Rodriguez. . the price of P2. CV No. such undertakings constituted in themselves actual causa or consideration for the conveyance of the fishponds. circumstances: > the 2 instruments were executed closely one after the other > the close relationship bet.Less than three months after this conveyance. . It has been observed that fraud is generally accompanied by trust. Flores. and the subsequent sale by the latter to appellant and her late husband were done for the purpose of converting the property from paraphernal to conjugal.000) > Rafael also never assumed ownership nor did eh gather any benefit. and evading the prohibition against donations from one spouse to another during coverture. (it was not dated.500. . Herminio V. It could not be found in the notarial register as well . A2010 page Prof. has in fact never been paid by the purchaser to the vendor two veritable legal presumptions: first. FACTS . Considering the ff.000.000.Federico through his new counsel requested that Rafael have TCT No. 08179 is hereby AFFIRMED IN TOTO. entered into a Deed of Sale over the property in favor of Parex Realty . His application was prepared by his nephew lawyer Rafael Suntay.CA ruled the same. He owned a 5. second. BUT it then reversed itself upon petition and said that the first Deed of Sale was a mere accommodation arrangement executed without any consideration and therefore a simulated contract of sale. but it ruled that the counter-deed.118 square-meter land in Bulacan. BLANCO V QUASHA YNARES-SANTIAGO. .During her lifetime. In the first transaction. null and void ab initio. On it was a rica mill.500 sqm) in Forbes Park. not notarized and above all it has no consideration because plaintiff did not pay defendant the consideration of the sale in the sum of P20. Rafael sold it back to Federico for the same amount of P20. interdependence and intimacy between the late Rafael and Federico is an unmistakable token of simulation. Disposition WHEREFORE.Federico Suntay is a wealthy land owner and rice miller from Bulacan. Labitag . Makati.00 conveyed to Rafael said parcel of land with all its existing structures. the parties >the value and location of the property purportedly sold . for appellant could not intend to keep the ownership of the fishponds and at the same time vest half of them in her husband. 1993 in CA-G. the said document was not the said deed of sale but a certain "real estate mortgage of a parcel of land to secure a loan of P3.Federico claims that the sale was merely fictitious/simulated and has been executed only for purposes of accommodation. November 17. 1999 NATURE Petition for review on certiorari.Mary Ruth C.However. the Amended Decision promulgated by the Court of Appeals on December 15.R. . in the second. .00 in favor of the Hagonoy Rural Bank. hence. Ratio A contract of purchase and sale is void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price. If this is true. Rafael prepared an absolute deed of sale whereby Federico.46 These presumptions if shown to hold.Rafael Suntay on the other hand insists that the transaction was a veritable sale. But the request was turned down. The characteristic of simulation is the fact that the apparent contract is not really desired or intended to produce legal effects or in any way alter the juridical situation of the parties. ISSUE WON the deed of sale executed in favor of Rafael Suntay was valid HELD NO Reasoning The history and relationship of trust.All circumstances point to the conclusion that such was simulated transaction.1995 NATURE Petition for Review on Certiorari of the Amended Decision of respondent Court of Appeals and of its Resolution denying petitioner's motion for reconsideration. . 1975. That the prices were not paid does not make the sales inexistent for want of causa. the consent of the parties thereto was voluntary.

To do so..34 which. private agricultural lands in the Philippines and that all other rights acquired by them under said amendment will expire on 3 July 1974. . . save in cases of hereditary succession. citizens of the United States and corporations and business enterprises owned or controlled by them can not acquire and own. Cirilo F. 1974 with the following incorporators. and deny the existence of any compromise agreement between the parties. ISSUES 1. 1975.34. namely.In order to determine whether or not the sale-lease-back agreement is simulated. Justice Barcelona. is to pass upon a factual issue. The findings of the Court of Appeals are binding and conclusive on us.that the sale-lease-back agreement was valid. . Barcelona -for completion of records -for decision (raffled on 7-1696) and promised a formal written reply. 1974.By virtue of the sale.The petitioner's curiosity was thereby aroused because after 7-16-96 there was a non-adjudicatory Resolution dated 20 November 1996 of Justice Ricardo P. The rental payments shall be credited to and applied in reduction of the agreed yearly installments of the purchase price of the property.The petitioner wrote the Clerk of the Court of Appeals as to why there was still no ponente to adjudicate the case notwithstanding that one was ordered re-raffled two years before. 3.000. Parex executed a Contract of Lease4 with Mary Ruth C.Parex. the conclusion of the appellate court is more in accord with the documents on record. William H. Minerva Gonzaga-Reyes and Demetrio G. Labitag . Hence. Galvez with none of the two concurring Justices being Barcelona.R. Jr. namely.having been obtained from information supposedly relayed first by a Court of Appeals clerk to petitioner's messenger. the petitioner caused his messenger to follow-up the said promised formal written reply. . when computed. Fernando Viloria went to Justice Barcelona's office. petitioner prayed that the land be reconveyed to the estate of Elizalde. Presidential Decree No. there is a need to look into the true intent or agreement of the parties. informing him that Elizalde left property (the subject of this case) . 4. Atty. Asperilla. 1975 .083. Ancheta. Asperilla. .Mary Ruth Elizalde executed a Confirmation and Ratification of the Deed of Sale.Court of Appeals set aside the appealed judgment and dismissed petitioner's action for reconveyance. Jr. Simultaneously with the execution of the contract of sale. the CA through Justice Barcelona promulgated the assailed Resolution Respondents’ Comment . . On March 26.000. simultaneously with the execution of the Deed of Sale.Petitioner J. Barcelona. A2010 page Prof. who was handling the legal affairs of the other heirs. Quasha. pleading circumstances which allegedly show attempts on the part of the Quasha Law Firm to influence Mr. 1974. however. Hence. the reconveyance of the title to the property to the estate of Mary Ruth Elizalde or. was registered with the Securities and Exchange Commission on May 10. respondents rushed the organization and incorporation of Parex.Consequently. and Edgardo F. Viloria of the private respondents' Quasha law firm in the company of Manuel Barcelona who is the brother of Justice Barcelona was in the office of Justice Barcelona on 16 January 1998. 1990. Alonzo Q. Sundiam. According to petitioner. especially. she continued to pay the Forbes Park Association dues.3 . 1990.000.Regional Trial Court rendered judgment in favor of the plaintiff and against the defendants declaring the sale executed by Elizalde in favor of Parex to be fictitious and simulated. . Elizalde. Quasha12 which held that “under the 'Parity Amendment' to our Constitution. one day after respondents filed their opposition.Petitioner further alleges that the parties.Obligations and Contracts 155 Corporation (Parex). Despite the transfer of title. the title was issued in the name of Parex Realty Corporation on May 27.In his motion for the inhibition of the above-named Court of Appeals Justices. and claims that petitioner's allegations to this effect are double hearsay-. Peña and Nolasco.13” . petitioner alleges the following circumstances: 1. arguing that she did not receive a single centavo from the transactions. Esq.Petitioner alleged that the sale of the property by Elizalde to Parex was absolutely simulated and fictitious and. whereby the same parcel of land was leased to the latter for a term of twenty five (25) years for a monthly rental of P2. in order to circumvent the effects of this Court's ruling in Republic v. Blanco. NO .. Justices Ramon A.08 a year.—denied by CA for being patently groundless and without basis in fact and law. on behalf of some heirs of Mary Ruth Elizalde.00 commencing on May 22. 471 was issued limiting the duration of leases of private lands to aliens to 25 years renewable for another 25 years. therefore. 1975 and ending on May 22. However. Ancheta. at one such on 20 January 1998 said messenger was informed by a clerk of Justice Barcelona's Office that Atty.Petitioner filed a motion for reconsideration with motion for the inhibition of all three members of the appellate court's Fourth Division. 1999. . or P25. special administrator of the estate of Elizalde demanded from respondents. Daisy P. -Respondents deny that Atty. Fernando F.083. and the realty taxes on the property during the term of the lease until her demise in 1990. Demetria.00 in a year.petition must be dismissed because it raises questions of fact and not of law. to assign all shares of Parex to said estate. R. in the alternative.A clerk of the Court of Appeals handwrote thereon as follows: J. for and in consideration of the amount of P625. WON the sale-lease-back is simulated 2. null and void.Petitioner further alleges that a few months before July 3. Manuel. . sent a letter to Peter Wohlfeiler. the individual stockholders and directors of Parex. through their respective counsel. Respondents ignored. the individual respondents herein. garbage fees. WON there was influence peddling HELD 1. Galvez J.Also on May 22. namely. have entered into a compromise agreement and that petitioner had moved that the CA call the parties to a preliminary conference. then by the messenger to petitioner. the alleged sale was executed upon advice of Elizalde's lawyers.000. . totals P25.Elizalde passed away on March 1. however. petitioner posits that the Quasha law firm caused Elizalde to simulate a sale of her land to Parex. On May 24. Arce of the law firm of Quasha.00 payable in twenty-five (25) equal annual installments of P25. Delfin A. 2. Parex and Elizalde entered into a lease contract whereby Parex leased back to Elizalde the same land for a period of 25 years at a monthly rental of P2. a function that is not within the province of this Court.

we affirm the appealed decision of the Court of Appeals in toto and dismiss the instant petition. the petition is DISMISSED. Reasoning To begin with. Parex obligated itself to pay a price certain for the property. she would give to the heirs and legatees or the beneficiaries (plaintiffs) named in the will of her husband.Obligations and Contracts 156 . It is not its function to examine and determine the weight of the evidence supporting the assailed decision . when the parties conceal their true agreement. His first marriage was with Marta Cruz. The court also declared that Exhibit "A" is not a will because it does not comply with the requisites for the execution of a will. the defendants were able to prove that the deed of sale executed by Elizalde in favor of Parex is a valid and binding contract which transferred ownership of the property to the said corporation. good customs. Mary Ruth Elizalde. and that the parties intended to be bound by the deed of sale and for it to produce legal effects. claim that it is neither a trust agreement nor a compromise agreement. de Blas and requesting that the said properties so promised be adjudicated to the plaintiffs. The former takes place when the parties do not intend to be bound at all. public order. and an accounting of the fruits and proceeds thereof from the time of the death of his first wife. as in fact she did.It is purely speculative and unfounded. A relative simulation. therefore.The Court finds nothing wrong with the arrangement stated in the contract for the same is not contrary to law. when it does not prejudice a third person and is not intended for any purpose contrary to law. Disposition To recapitulate. by giving. Exhibit "A". in answer.This action was instituted by plaintiffs against the administratrix of the estate of Maxima Santos. The requisites of a contract of sale have been complied with. yet payment was effected between the vendee and the vendor by mutual arrangement. promising. or public policy.We are not prepared to delve into the motive of Elizalde in transferring the land only and not the house thereon. Being based on incompetent evidence. the ownership of the subject property. . this Court is not a trier of facts. and that the action to recover the same has prescribed. which provides as follows: "Compromise is a contract by which each of the parties in interest. That. Maria and Lazaro’s children are plaintiffs herein. morals. Fourth. public order or public policy binds the parties to their real agreement. Lazaro laft 3 legitimate children. Ti should be noted that when Marta Cruz died.Court of Appeals based its ruling on the following factual findings: First. Elizalde decided to transfer. is a question of fact. Plaintiffs-appellants argue before the Court that Exhibit "A" is both a trust agreement and a contract in the nature of a compromise to avoid litigation. Elizalde never contested the sale of the property. A2010 page Prof.Both the court below in its decision and the appellees in their brief before us. for the convenience of both parties. Second. with the obligation of conveying. it is imperative that we look into the true intention of the parties. rather than the correct interpretation of the written stipulations in the contracts. ISSUE WON plaintiffs can make a claim for half of the properties received by Maxima Santos after the death of Simeon Blas HELD YES Ratio The principal basis for the plaintiffs' action in the case at bar is the document Exhibit "A". argue vehemently that the heirs of Simeon Blas and his wife Marta Cruz can no longer make any claim for the unliquidated conjugal properties acquired during said first marriage. NO . Eulalia left children namely Maria. therefore. Defendants-appellees. The characteristic of simulation is the fact that the apparent contract is not really desired nor intended to produce legal effects nor in any way alter the juridical situation of the parties. . in force at the time of the execution of Exhibit "A". March 29. but rather. to secure a judicial declaration that one-half of the properties left by said Maxima Santos Vda. Marta and Lazaro. inasmuch as that involves a factual question. Accordingly. A week before the death of Simeon Blas. it is anchored on evidence that can only be characterized as double hearsay. the charge does not merit the attention of this Court. Moreover. They had 3 children only one of whom.Trial court held that said Exhibit "A" has not created any right in favor of plaintiffs which can serve as a basis of the complaint. he executed a will which stated that half of their property (with Maxima) is the share of his wife. To resolve the issue of whether or not the sale-lease-back was simulated. appears to be the compromise defined in Article 1809 of the Civil Code of Spain. An absolutely simulated or fictitious contract is void.Simeon Blas married twice. that neither can it be considered as a valid and enforceable contract for lack of consideration and because it deals with future inheritance. Third. never contested the cancellation of Certificate of Title." The agreement or promise that Maxima Santos makes in Exhibit "A" is to hold onehalf of her said share in the conjugal assets in trust for the heirs and legatees of her husband in his will.another document (exibit A) was executed by Maxima Santos which states that one-half of her share of the properties left to her by her husband. we find that the Court of Appeals committed no reversible error to warrant this appeal. the same to such of his heirs or legatees as she may choose in her last will and testament. 2. morals. again.WHEREFORE. The Court finds that the preparation and execution of Exhibit "A" was ordered by Simeon Blas evidently to prevent his heirs by his first marriage from contesting his will and demanding liquidation of the conjugal properties acquired during his -first marriage. during her lifetime. . 1961 NATURE Appeal from a judgement of the Court of the First Instance of Rizal FACTS . therefore. . Although no actual exchange of money was made. .Simulation of a contract may be absolute or relative. the latter. BLAS V SANTOS LABRADOR. . or retaining something avoids the provocation of a suit or terminates one which has already been instituted. the vendee. nor could it be considered as a donation.By preponderance of evidence. because the same were already included in the mass of properties constituting the estate of the deceased Simeon Blas and in the adjudications made by virtue of his will. . there was no liquidation of the couple’s property. Labitag Simeon Blas contracted another marriage with Maxima Santos when Marta Cruz died. good customs. Under Exhibit "A".

1936. But the main ground upon which plaintiffs base their present action is the document Exhibit "A". which properties are stated or declared to be conjugal properties in the will of the husband. The properties mentioned were even included by Maxima in the inventory of her husband’s property.” . which Simeon Blas declares in his testament as belonging to his wife as her share in the conjugal partnership. 1978. 1992.October 20.June 7.Sps Ricardo Tanedo presented “Deed of Revocation of a Deed of Sale” dated March 12. Teresita Barera (private respondents) whereby in consideration of P1. 1980 of Lazaro to his daughter. Ricardo Tañedo." To us future inheritance is any property or right not in existence or capable of determination at the time of the contract. FACTS . It may be added that plaintiffsappellants did not question the validity of the project of partition precisely because of the promise made by Maxima Santos in the compromise Exhibit "A". It is an obligation or promise made by the maker to transmit one-half of her share in the conjugal properties acquired with her husband. administratrix of the estate of Maxima Santos.January 13. Lazaro executed a sworn statement which virtually repudiated the contents of the Deed of Revocation of a Deed of Sale and the Deed of Sale in favor of the Sps Ricardo Tanedo. because it is her share in the conjugal assets. 1981 was valid and that its registration in good faith Petitioners Claim TC committed errors in 1. concluding that the Contract of Sale of October 20. 1982 – Sps Ricardo Tanedo recorded the Deed of Sale in their favor in the Registry of Deeds .February 28.Petitioners also presented in evidence (1) a private writing purportedly prepared and signed by Matias dated December 28. . Matias. The properties subject of the contract Exhibit "A" are well-defined properties. Carmela. 1980 conveying to his ten children his allotted portion under the extrajudicial partition executed by the heirs of Matias . A2010 page Prof. 1996 NATURE Petition for review on certiorari under Rule 45 of the Rules of Court to set aside and reverse the Decision of the Court of Appeals on September 26. Disposition The defendant-appellee. to give to his (Lazaro’s) children all the property he would inherit from the latter (3) a letter dated January 1. 1981 . upon her death.” .after the case was filed.00. and that it was a lawyer who induced him to execute a deed of sale in favor of his children after giving him five pes