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100 Landmark Cases in Oblicon - First 10

100 Landmark Cases in Oblicon - First 10

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Published by Stef Macapagal
First 10 of the 100 Landmark Cases in Obligations and Contracts
First 10 of the 100 Landmark Cases in Obligations and Contracts

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05/12/2014

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100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS

By Atty. Enrique V. dela Cruz, Jr.

201 1

Marcelo Agcaoili v. GSIS (GR No. L-30056, 30 August 1988) [Narvasa, J.] Facts: Marcelo Agcaoili applied for the purchase of a house and lot in the GSIS Housing Project at Nangka, Marikina, Rizal. GSIS approved the said application, subject to the condition that Agcaoili should occupy the house. However, Agcaoili could not occupy the same because the house was absolutely uninhabitable. Agcaoili then refused to make further payments until GSIS made the house habitable, but GSIS instead cancelled the award and demanded Agcaoili and his family’s vacation of the premises. Agcaoili sued GSIS for specific performance with damages. The CFI of Manila ruled in Agcaoili’s favor on the basis of the evidence adduced only by Agcaoili, the GSIS having opted to dispense with presentation of its own proofs. GSIS appealed to the Supreme Court. Issue: W/N the perfection of the contract between Agcaoili and GSIS was conditioned upon the former’s immediate occupancy of the house. Ruling: NO. There was already a perfected contract of sale between the parties; there had been a meeting of the minds upon the purchase by Agcaoili of a determinate house and lot in the GSIS Housing Project at Nangka, Marikina, Rizal at a definite price payable in amortizations at P31.56 per month, and from that moment the parties acquired the right to reciprocally demand performance. It was, to be sure, the duty of the GSIS, as seller, to deliver the thing sold in a condition suitable for its enjoyment by the buyer for the purpose contemplated, in other words, to deliver the house subject of the contract in a reasonably livable state. This it failed to do. It sold a house to Agcaoili and required him to immediately occupy it under pain of cancellation of the sale. Under the circumstances there can hardly be any doubt that the house contemplated was one that could be occupied for purposes of residence in reasonable comfort and convenience. There would be no sense to require the awardee to immediately occupy and live in a shell of a house, a structure consisting only of four walls with openings, and a roof; and to theorize, as the GSIS does, that this was what was intended by the parties, since the contract did not clearly impose upon it the obligation to deliver a habitable house, is to advocate an absurdity, the creation of an unfair situation. By any objective interpretation of its terms, the contract can only be understood as imposing on the GSIS an obligation to deliver to Agcaoili a reasonably habitable dwelling in return for his undertaking to pay the stipulated price. Since GSIS did not fulfill that obligation, and was not willing to put the house in habitable state, it cannot invoke Agcaoili’s suspension of payment of amortizations as cause to cancel the contract between them. It is axiomatic that “in reciprocal obligations, 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. Nor may the GSIS succeed in justifying its cancellation of the award to Agcaoili by the claim that the latter had not complied with the condition of occupying the house within three days. The record shows that Agcaoili did try to fulfill the condition; he did try to occupy the house but found it to be so uninhabitable that he had to leave it the following day. He did however leave a friend in the structure, who being homeless and hence willing to accept shelter even of the most rudimentary sort, agreed to stay therein and look after it. Thus the argument that Agcaoili breached the agreement by failing to occupy the house, and by allowing another person to stay in it without the consent of the GSIS, must be rejected as devoid of merit. Finally, the GSIS should not be heard to say that the agreement between it and Agcaoili is silent, or imprecise as to its exact prestation. Blame for the imprecision cannot be imputed to Agcaoili; it was after all the GSIS which caused the contract to come into being by its written acceptance of Agcaoili’s offer to purchase, that offer being contained in a printed form supplied by the GSIS. Said appellant having caused the ambiguity of which it would now make capital, the question of interpretation arising therefrom, should be resolved against it. It will not do, however, to dispose of the controversy by simply declaring that the contract between the parties had not been validly cancelled and was therefore still in force, and that Agcaoili could not be compelled by the GSIS to pay the stipulated price of the house and lot subject of the contract until and unless it had first completed construction of the house. This would leave the contract hanging or in suspended animation, as it were, Agcaoili unwilling to pay unless the house were first completed, and the GSIS averse to completing construction, which is precisely what has been the state of affairs between the parties for more than 20 years now. On the other hand, assuming it to be feasible to still finish the construction of the house at this time, to compel the GSIS to do so, so that Agcaoili’s prestation to pay the price might in turn be demanded, without modifying the price therefor, would not be quite fair. The cost to the GSIS of completion of construction at present prices would make the stipulated price disproportionate, unrealistic. In determining the precise relief to give, the Court will “balance the

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000.000. The Coronels then made a written contract of downpayment. and Floraida Almonte inherited a property from their deceased father. Annette Coronel. oppressive. Concepcion Alcaraz.000. That would require and adjustment of the price of the subject of the sale to conform to present prices of construction materials and labor. when these are significantly different from those existing at the time of generation of those rights. the relief to be accorded by the decree is governed by the conditions which are shown to exist at the time of making thereof. who left for the United States of America. dela Cruz. The Coronels subsequently executed a Deed of Absolute Sale over the subject property in favor of Catalina Mabanag.00. They entered into a contract of sale with Ramona Alcaraz. the Court may adjust the rights of the parties in accordance with the circumstances obtaining at the time of rendition of the judgment. give everyone his due. and for the house itself.00.00. However. Adjustment of rights has been held to be particularly applicable when there has been a depreciation of currency. Ramona Alcaraz would pay the balance of P1. to pay the agreed purchase price. The Court of Appeals affirmed the trial court’s decision. Florida Tupper. embodying the same terms as that of their agreement.00. facts. inequitable. Ramona’s mother. Alarico Coronel.00 in the bank “in trust for Ramona Alcaraz. 7 October 1996) [Melo. or result in an unconscionable advantage to the plaintiff. upon delivery of the said document. While equitable jurisdiction is generally to be determined with reference to the situation existing at the time the suit is filed. The trial court ruled in favor of the Alcarazes and ordered the Coronels to execute a Deed of Absolute Sale in favor of the Alcarazes and the Alcarazes. and exigencies of the case demand at the close of the trial or at the time of the making of the decree. That adjustment is entirely consistent with the Civil Law principle that in the exercise of rights a person must act with justice. • • Romulo Coronel v. It is more in keeping with the realities of the situation. The Coronels insisted that the contract of downpayment was a mere executory contract to sell. as one form of relief to Agcaoili. J. paid the down payment of P50.” The Alcarazes subsequently filed a complaint for specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of the property’s TCT. Issue: W/N the contract of down payment embodied a perfected contract of sale. • The prevailing rule is that in decreeing specific performance. said contract could not possibly ripen into a contract of absolute sale.000. CA (GR No. and a new TCT was issued to the latter.] Facts: Romulo Coronel. and take account of the relative hardship that one relief or another may occasion to them. instead of selling it to Ramona. under the circumstances of the case. and observe honesty and good faith.000. The property was subsequently registered in the names of the Coronels. In the exercise of its equity jurisdiction. in its unfinished state.190.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty. and because of the absence of Ramona Alcaraz. The Coronels then canceled and rescinded their contract with Ramona by depositing the down payment of P50. equity requires not only that the contract be just and equitable in its provisions. and not by the circumstances attending the inception of the litigation. the result of the specific enforcement of the contract would be harsh. and was ordered to deliver possession of the property to the Alcarazes. In making up the final decree in an equity suit the judge may rightly consider matters arising after suit was brought. but that the consequences of specific performance likewise be equitable and just.000. rights. It also declared that the TCT issued in the name of Catalina Mabanag was canceled and without force and effect. equity will administer such relief as the nature. The general rule is that this equitable relief will not be granted if. and immediately after having the title registered in their names.580. subject to certain suspensive conditions. as of the time of the contract. Catalina Mabanag also caused the annotation of a notice of adverse claim covering the same property. no longer appears to be a feasible option in view of the not inconsiderable time that has already elapsed. Ruling: YES. There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer who intends to buy the property in installment by withholding ownership over the 2 . and with equitable norms. Annabelle Gonzales. Therefore. they sold it to a certain Catalina Mabanag for 1. wherein they bound themselves to transfer the title of the property to their names upon the buyer’s payment of P50. On the same date of the making of the contract. 201 1 equities” or the respective interests of the parties.00 after Mabanag paid P300. The completion of the unfinished house so that it may be put into habitable condition. as a general rule. to simply require payment for the land on which the house stands. Cielito Coronel. Enrique V. 103577. Jr.

Jr. that the transfer certificate of title was then still in the name of their father. In a conditional contract of sale. there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. had the impediment which prevented. for instance. after compliance by the buyer with certain terms and conditions. Therefore. Finally. may be sued for damages by the intending buyer. 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. Under the established facts and circumstances of the case. Enrique V. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. Furthermore. a third person buying such property despite the fulfillment of a suspensive condition such as the full payment of the purchase price. It was more expedient to first effect the change in the certificate of title as to bear their names. promised to sell the property to the latter. Moreover. unlike in a contract to sell. since the suspensive condition of effecting the transfer of the certificate of title in the name of the sellers had already been fulfilled. the first buyer may seek reconveyance of the property subject of the sale. the sale becomes absolute and this will definitely affect the seller’s title thereto. What may be perceived from the respective undertakings of the parties to the contract is that the Coronels had already agreed to sell the house and lot they inherited from their father. It just happened. the agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. if there had been previous delivery of the subject property. of course. had the certificate of title been in the names of the sellers at that time. having already agreed to sell the subject property. What is clearly established by the plain language of the subject document is that when it was prepared and signed by the Coronels. When the Coronels declared in the said “Receipt of Down Payment” that they “received from Miss Ramona Alcaraz… the sum of fifty thousand pesos purchase price of our inherited house and lot…in the total amount of P1. the parties did not merely enter into a contract to sell where the sellers. however. the Coronels did not merely promise to sell the property to Ramona Alcaraz upon the fulfillment of the suspensive condition. consummation of which is subject only to the successful transfer of the certificate of title from the name of the Coronels’ father. What the seller agrees or obliges himself to do is 3 . • A contract to sell may not be considered a contract of sale because the prospective seller explicitly reserves the transfer of title to the prospective buyer. as in the case at bench. completely willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order. There is no double sale in such case. on that same date. as it were. the Court may safely presume that. It is essential to distinguish between a contract to sell and a conditional contract of sale especially in cases where the subject property is sold by the owner not to the party the seller contracted with. to theirs.000. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller’s title per se. meaning.” Judgment appealed from affirmed. the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event.00” without any reservation of title until full payment of the entire purchase price. As soon as the new certificate of title is issued in their names. they undertook to have the certificate of title changed to their names and immediately thereafter. the parties had agreed to a conditional contract of sale. but to a third person. 201 1 property until the buyer effects full payment therefor. dela Cruz. in the contract entered into the case at bar. which the sellers unequivocally committed themselves to do as evidenced by the “Receipt of Down Payment.240. the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. usually the full payment of the purchase price. Such second buyer of the property who may have had actual or constructive knowledge of such defect in the seller’s title. Thus. In case a title is issued to the second buyer. so to speak. It was the sellers who. however. Such second buyer cannot defeat the first buyer’s title. In a contract to sell. In fact.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty. to execute the written deed of absolute sale. or at least was charged with the obligation to discover such defect. there being no previous sale of the property. the natural and ordinary idea conveyed is that they sold their property. cannot be a registrant in good faith. That is why they undertook to cause the issuance of a new certificate of title in their names upon the receipt of the down payment. but the latter. the seller’s ownership or title to the property is automatically transferred to the buyer such that. cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. the seller will no longer have any title to transfer to any third person. the execution of a contract of absolute sale. the conditional contract of sale between the parties became obligatory. upon the fulfillment of the suspensive condition. the sellers were the ones were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. On the contrary. the Coronels were committed to immediately execute the deed of absolute sale.

replied that she had yet to verify if the store had pending deliveries that afternoon because if there were. stronger in right). to await the delivery. • Ignacio Barzaga v. knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register. the nonfulfillment of which prevents the obligation to sell from arising and thus. The RTC ruled against Alviar and ordered him to pay Barzaga a refund of the purchase price of the materials. the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition. and was not finished on the 24th. Cavite. Jr. Barzaga wrote Alviar. Marina Boncales agreed to deliver the items at the designated time. Enrique V. and place. 1990. Alviar did not respond. In other words the full payment of the purchase price partakes of a suspensive condition. When he returned to Alviar’s hardware store. by 8:00 that same morning since his hired workers were already at the burial site and time was of the essence. Barzaga returned to Alviar’s hardware to follow up his purchase of the construction materials. Barzaga left thereafter. ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. On the other hand. Barzaga again inquired at the store about the non-delivery of the materials. Barzaga purchased the materials and paid in full. darkness was already setting in and he had already dismissed his workers. Conversely. The Court of Appeals reversed the lower court’s decision and ruled that there was no contractual commitment as to the exact time of delivery since this was not indicated in the invoice receipts covering the sale. because in a conditional contract of sale. CA (GR No. Boncales answered in the same manner as before. the perfection of the contract is completely abated. He told the store employees that the materials he was buying would have to be delivered at the Memorial Cemetery in Dasmariñas. litigation expenses. despite his impassioned pleas. J. Subsequently. if the suspensive condition is fulfilled. Thus. However. If the suspensive condition is not fulfilled. since his knowledge taints his registration with bad faith. Barzaga appeals. Alviar asserted that legal delay could not be validly ascribed to him because no specific time of delivery was agreed upon between them. Barzaga became extremely upset and decided to dismiss his laborers for the day. Issue: W/N Alviar incurred in delay. With this assurance. Distressed that Alviar’s employees were not the least concerned. Barzaga decided to cancel his transaction with the store and look for construction materials elsewhere. he went to the hardware store of Angelito Alviar to inquire about the availability of certain materials to be used in the construction for his wife’s niche. Barzaga returned to the hardware to inquire about the delay. 4 . By 10:00 am. and attorney’s fees. as originally intended by Barzaga’s wife. He pointed out that the invoices evidencing the sale did not contain any stipulation as to the exact time of delivery and that assuming that the materials were not delivered within the period desired by Barzaga. He also asked if the materials could be delivered at once. Marina Boncales. dela Cruz. Thereafter he joined his workers at the cemetery. After hours of waiting. although it is conditioned upon the happening of a contingent event which may or may not occur. potior jure (first in time. the prospective seller’s obligation to sell by entering into a contract of sale with the prospective buyer becomes demandable. When the delivery still did not arrive at 9:00 am. Knowledge by the first buyer of the second sale cannot defeat the first buyer’s rights except when the second buyer first registers in good faith the second sale.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty. he set out to arrange for her internment on the 24th of the same month. 201 1 to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. The governing principle is prius tempore. Alviar’s storekeeper. then all subsequent purchases would have to be delivered the following day. At 7:00 the following morning. Although he was able to buy materials from another store. 12 February 1997) [Bellosillo. which was only a kilometer away. On the 21st.] Facts: Ignacio Barzaga’s wife died on the 19th of December. Barzaga then sued Alviar before the RTC. such that if there had already been previous delivery of the property subject of the sale to the buyer. upon the fulfillment of the suspensive condition. demanding recompense for the damage he suffered. Pursuant to his wife’s wishes. the niche was only started on the 23rd. the contract of sale is thereby perfected. he saw the delivery truck already there but the materials he purchased were still not ready to be loaded. • In a conditional contract of sale. date. the first element of consent is present. moral damages. the delivery truck suffered a flat tire on the way to the store to pick up the materials. Barzaga again rejoined his workers. ownership is retained by the prospective seller without further remedies by the prospective buyer. Boncales assured him that as soon as the delivery truck arrived the materials would be brought to the cemetery in no time. temperate damages. 115129. He then proceeded to the police station and lodged a complaint against Alviar and had this entered in the police blotter.

In fact. Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from liability) by definition. therefore. Ruling: NO. The mere difficulty to foresee the happening is not impossibility to see the same. The river. J. rammed the bridge supports raises a presumption of negligence on the part of the corporation or its employees manning the barge or tugs that towed it. It could not be ready for the scheduled burial of Barzaga’s wife. Although the corporation strongly stresses the precautions taken by it on the day in question: that it assigned two of its most powerful tugboats to tow down its river barge L-1892. For in the ordinary course of events. and that the Nagtahan bailey bridge is an obstruction to navigation. In their contract of purchase and sale. including barges like of the corporation’s. With this in mind Barzaga decided to buy the construction materials the following morning after he was assured of immediate delivery according to his time frame. Petition granted. engines. “events that could not be foreseen. Jr. exclusively controlled by the corporation. storekeeper Boncales admitted that it was her custom not to indicate the time of delivery whenever she prepared invoices. The corporation appealed directly to the Supreme Court. dela Cruz. The appellate court appears to have belittled Barzaga’s submission that under the prevailing circumstances. ordering the corporation to pay the actual cost of repair of the Nagtahan bailey bridge. the payment of the purchase price. Enrique V. and that the accident should be held due to force majeure or fortuitous event. and concludes that it had done all it was called to do. otherwise. it is undeniable that the unusual event that the barge. This case is clearly one of non-performance of a reciprocal obligation. not enough that the event should not have been foreseen or anticipated. voluntarily entered into a situation involving obvious danger. it was no longer necessary to indicate in the invoices the exact time the purchased items were brought to the cemetery. J. When Luzon Stevedoring Corporation was sued by the Republic. delay would attach.. But he was told by the shopkeeper that if there were still deliveries to be made that afternoon. that the damages to the bridge were caused by force majeure. Consequently. Barzaga had already complied fully with what was required of him as a purchaser.” It is.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty. had the towlines. there was a specific time agreed upon for the delivery of the materials to the cemetery. barge L-1892. time was of the essence in the delivery of the materials to the grave site. owned by the Luzon Stevedoring Corporation. as is commonly believed. This undoubtedly prolonged the wake.. i. when the barge rammed against one of the wooden poles of the Nagtahan bailey bridge. in addition to the fact that work at the cemetery had to be put off on Christmas day. or which. 201 1 Ruling: YES. CA decision reversed and set aside. Republic v. his order would be delivered the following day. though foreseen.B. Luzon Stevedoring Corporation (GR No. but it must be one impossible to foresee or to avoid. Considering that the Nagtahan bridge was an immovable and stationary object and uncontrovertedly provided with adequate openings for the passage of water craft. The corporation. that it instructed its patrons to take extra precautions. at that time. Barzaga went to Alviar’s store on 21 December precisely to inquire the materials he intended to purchase could be delivered immediately. these very precautions completely destroy appellant’s defense. it therefore assumed the risk. was swollen and the current swift.e. smashing the posts and causing the bridge to list. However. are extraordinary events not foreseeable or avoidable. was being towed down the Pasig River by tugboats “Bangus” and “Barbero” also belonging to the same corporation.L. Barzaga’s assertion is anchored on solid ground. were inevitable. such a thing does not happen if proper care is used. Contrary to the appellate court’s factual determination. on account of the heavy downpour of Manila and the surrounding provinces on 15 and 16 August 1960. 29 September 1967) [Reyes. Issue: W/N the collision of the corporation’s barge with the supports of the Nagtahan bailey bridge was in law caused by fortuitous event or force majeure. and cannot 5 . The lower court ruled in favor of the Republic. The argument that the invoices never indicated a specific delivery time must fail in the face of the positive verbal commitment of Alviar’s storekeeper. Alviar’s delay in the delivery of the construction materials wasted so much time that construction of the tomb could start only on the 23rd. The niche had to be constructed at the very least on the 22nd of December considering that it would take about 2 days to finish the job if the internment was to take place on the 24th of the month. knowing and appreciating the perils posed by the swollen stream and its swift current. It was incumbent upon Alviar to immediately fulfill his obligation to deliver the goods. L-21749. that it assigned to the task the more competent and experienced among its patrons.] Facts: In the early afternoon of 17 August 1960. and equipment double-checked and inspected. the said corporation disclaimed liability on the grounds that it had exercised due diligence in the selection and supervision of its employees.

Issue: W/N an act of God—an unusually strong earthquake—which caused the failure of the PBA building. The PBA alleges that the collapse was due to the defects in the construction. delay. or violation or contravention in any manner of the tenor of the obligation as provided for in Article 1170 of the NCC. Enrique V. Manila. United Construction then filed a third-party complaint against the architects who prepared the plans and specifications. if upon the happening of a fortuitous event or an act of God. L-47851. Ruling: NO. and the Philippine Institute of Architects filed with the Court a motion to intervene as amicus curiae. the Association of Civil Engineers. while the non-technical matters were tried by the Court. The technical matters were referred to Commissioner Andres O. CA (GR Nos. Juan F. and its president and general manager Juan J. J. Inc. reiterated his conclusion that the defects in the plans and specifications indeed existed. (b) the event must be either unforeseeable or unavoidable. 201 1 shed responsibility merely because the precautions it adopted turned out to be insufficient. the Commissioner submitted its report with the findings that while the damage sustained by the PBA building was caused directly by the 1968 earthquake. the obligor cannot escape liability.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty. Using the same authorities availed of by the amicus curiae. and (d) the debtor must be free from any participation in. The PBA then commenced an action for the recovery of damages arising from the partial collapse of the building against United Construction. the lower court’s decision is affirmed. and L-47896. they were also caused by the defects in the plans and specifications prepared by the architects. In the early morning of 2 August 1968. dela Cruz. The amicus curiae gave the opinion that the plans and specifications of the Nakpils were not defective. Carlos. and United Construction shored up the building as a temporary remedial measure. Inc. which results in loss or damage. Wherefore. the failure of the contractors to follow plans and specifications and violations by the construction company of the terms of the contract. L-47863..” the following must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor. There is no dispute that the earthquake of 2 August 1968 is a fortuitous event or an act of God. 3 October 1986) [Paras. for a breach of an obligation due to an “act of God. an unusually strong earthquake hit Manila and the PBA building sustained major damage. Meanwhile. causing the building to tilt forward dangerously. exempts from liability parties who are otherwise liable because of their negligence. The construction was completed in June 1966. (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner. and the said building was demolished by the buyer of the said damaged building. The tenants vacated the building in view of its precarious condition. The applicable law governing the rights and liabilities of the parties herein is Article 1723 of the New Civil Code. three more earthquakes in 1970 caused further damage to the property. But the Commissioner. They proposed to present a position paper on the liability of architects when a building collapses and to submit likewise a critical analysis with computations on the divergent views on the design and plans as submitted by the experts procured by the parties. Thus. Nakpil & Sons. for the latter to construct the former’s planned office building in Intramuros. or aggravation of the injury to the creditor. there concurs a corresponding fraud. when asked to comment. United Construction Co. deviations from said plans and specifications by the contractors. The United Architects of the Philippines. the Commissioner added that even if it can be proved that the defects in construction alone (and not in the plans and design) caused the damage to the building. However. Subsequently. negligence. the lower court committed no error in holding it negligent in not suspending operations and in holding it liable for the damages caused. Nakpil & Sons to pay for damages. and the failure of the latter to observe the requisite workmanship in the construction of the building and of the contractors and architects to exercise the requisite degree of supervision in the construction of subject building. which should exempt them from responsibility. Nakpil & Sons v. The front columns of the building buckled. Hizon. Jr. still the deficiency in the original design and lack of specific provisions against torsion in the original plans and the overload on the ground floor columns certainly contributed to the damage which occurred. The plans and specifications of the building were prepared by Juan F. Hence.] Facts: The Philippine Bar Association entered into a contract with United Construction. and the Nakpils maintained that it was an act of God that caused the failure of the building. the CA increased the monetary award while affirming the other parts of the decision. to exempt the obligor from liability under 1174 of the New Civil Code. On appeal. Inc. 6 . The lower court then ruled in favor of the PBA and ordered United Construction Corporation and Juan F. The issues were then divided into technical and non-technical matters.

L-24190. The negligence of United and Nakpil were established beyond dispute both in the lower court and in the appellate court. As correctly assessed by both courts. alleging that the conditions of the donation had not been complied with. For this reason they cannot claim exemption from liability. work on the same to commence within six months from the date of the ratification of the donation of the parties. which applied for and obtained the registration thereof in its name. Although the condition to build a central school and a public park were never complied with. the compliance of which cannot be effected except when the right is deemed acquired. the whole occurrence is thereby humanized. but the fact is that it was not revoked when Cirer and Hill made the sale of the parcel of land to Parks. United was found to have made substantial deviations from the plans and specifications and to have failed to observe the requisite workmanship in the construction as well as to exercise the requisite degree of supervision. Issue: W/N the non-completion of the conditions imposed by the donors made the donation invalid. In 1923. Consequently. But the period for bringing an action for the revocation of the donation has prescribed. The donee could not do any work on the donated land if the donation had not really been effected. and by virtue of the spouses’ sale of the said parcel of land to him. the same spouses sold the same parcel of land to George L. still. it was necessary. The law itself recognizes the prescriptibility of the action for the revocation of a donation. in any event. Parks. when a condition is imposed. the donation never became effective. Jr. and removed from the rules applicable to the acts of God. such condition cannot be a condition precedent.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty. 201 1 The relevant and logical observations of the trial court as affirmed by the Court of Appeals that “while it is not possible to state with certainty that the building would not have collapsed were those defects not present. the non-compliance thereof is sufficient cause for the revocation of the donation. Cirer and Hill were no longer the owners of the said parcel of land and could not have sold it to Parks. could not be complied with except after giving effect to the donation. • The principle embodied in the act of God doctrine strictly requires that the act must be one occasioned exclusively by the violence of nature and all human agencies are to be excluded from creating or entering into the cause of the mischief. if any. for the land would have continued to belong to the donor so long as the condition imposed was not complied with. dela Cruz. the condition not having been complied with. provided by law. to be paid solidarily by United and Nakpil. the cause of which is to be considered. In the present case the condition that a public school be erected and a public park made of the donated land. Parks also contends that. When the effect. Parks brought an action against the Province of Tarlac. while Nakpil were found to have inadequacies or defects in the plans and specifications prepared by them. providing a special period of 7 .] Facts: Concepcion Cirer and James Hill. The lower court dismissed his complaint. donated the same perpetually to the Province of Tarlac in 1910. with the condition that a certain portion of the said lot was to be used absolutely and exclusively for the erection of a central school and the other for a public park. Even supposing that causes existed for the revocation of this donation. None of these circumstances existed when Cirer and Hill sold the parcel of land to Parks. While it is true that the donation may be revoked for the causes. either that the revocation had been consented to by the donee (the municipality of Tarlac). Parks further claims that a condition precedent had been imposed on the donation and the same had never been complied with. The characteristic of a condition precedent is that the acquisition of the right is not effected while said condition is not complied with. the fact remains that several buildings in the same area withstood the earthquake to which the building of the PBA was similarly subjected. 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 of 2 August 1968. spouses and owners of a parcel of land. Province of Tarlac (GR No. or failure to act. Consequently. prayed that he be declared as the absolute owner of the same and the registration of the land to the Province of Tarlac be cancelled. Ruling: NO. However.” cannot be ignored. because it would be an invasion of another’s title. even supposing it was not a condition precedent but subsequent. Meanwhile nothing is acquired and there is only an expectancy of right. C. the Municipality of Tarlac transferred the parcel to the Province of Tarlac. Enrique V. George L. This is correct. This contention has no merit. 13 July 1926) [Avanceña. as it were. The donation was accepted by the municipal president of the municipal council of Tarlac. nor could the latter have acquired it from them. it cannot be considered as a condition precedent. whether it be from active intervention or neglect. George L.J. the work to commence in both cases within the period of six months from the date of ratification by the parties of the document evidencing the donation. in order to consider it revoked. Decision appealed from modified to increase damages to be paid to PBA. thus. when the sale was made. is found to be in part the result of the participation of man. or that it had been judicially decreed. In 1921. Parks v.

the donation must be for an onerous consideration. The CA then reversed the decision of the lower court and remanded the case to the said court for the determination of the time within which CPU should comply with the first condition annotated in the certificate of title. The condition imposed by the donor depended on the exclusive will of the donee as to when this condition shall be fulfilled. or conveyed to any third party. Remedios Franco. If no special period is provided for the prescription of the action for revocation for noncompliance of the conditions of the donation. If there was no fulfillment or compliance with the condition. that the land shall not be sold. 201 1 five years for the revocation by the subsequent birth of children. the late Don Ramon Lopez. 2. when a person donates land to another on the condition that the latter would build upon the land a school. CPU had not complied with the conditions of the donation. When CPU accepted the donation. it is because in this respect the donation is considered onerous and is governed by the law of contracts and the general rules of prescription. Since the time within which the condition should be fulfilled depended upon the exclusive will of CPU. The action for the revocation of the donation arose in 1911. and 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. de Lopez. It was also alleged that CPU had negotiated with the National Housing Authority to exchange the donated property with another land owned by the latter. Wherefore. 112127.. J. such as what obtains in the instant case. It is not correct to say that the schoolhouse had to be constructed before the donation became effective. Under the law in force. that is. CA (GR No. The lower court held that CPU failed to comply with the conditions of the donation and deemed it null and void. otherwise it would be invading the property rights of the donor. the period of prescription of this class of action is ten years. on conditional obligations. CPU cannot be considered as having failed to comply with its part of the bargain. and that the land shall be called “Ramon Lopez Campus” and that the school shall erect a cornerstone bearing that name. NO. and Remarene Lopez filed an action for annulment of donation. W/N the action of the private respondents has already been barred by prescription. for its part. it bound itself to comply with the condition thereof. 17 July 1995) [Bellosillo. transfer. case is dismissed and judgment appealed from is affirmed. Jr. with the conditions that the land shall be used exclusively for the establishment and use of a medical college with all its buildings as part of the curriculum. the donor did not fix a period within which the condition must be fulfilled. YES. who was a member of the Board of Trustees of the Central Philippine College (now Central Philippine University). the donation may now be revoked and all rights which the donee may have acquired under it shall be deemed lost and extinguished. that is. hence.] Facts: Sometime in 1939. Francisco Lopez. six months after the ratification of the instrument of donation. Central Philippine University v. CPU. reconveyance and damages against CPU alleging that since 1939. the condition imposed was not a condition precedent or a suspensive condition but a resolutory one. before the donee could become owner of the land. until a period was fixed for the fulfillment of the condition. Enrique V. CPU appealed to the Court of Appeals. executed a deed of donation in favor of the said school a parcel of land. Sr. the acquisition of rights. transferred. or convey it to any third party. Thus. shall depend upon the happening of the event which constitutes the condition. Cecilia Vda. and one year for the revocation by reason of ingratitude. The donation had to be valid before the fulfillment of the condition. up to the time the action was filed. Where Don Ramon Lopez donated the subject parcel of land to CPU but imposed an obligation upon the latter to establish a medical college thereon. argued that the right of private respondents to file the action had already prescribed. In 1989. or in any way encumbered. non-compliance of which would render the donation revocable. CPU appealed. which found that while the first condition mandated CPU to utilize the donated property for the establishment of a medical school. dela Cruz. Redan Lopez. annotated at the back of the land’s TCT. more than ten years after this cause accrued. and that it did not sell. Issues and Ruling: 1. W/N the annotations in the CPU’s TCT are onerous obligations and are resolutory conditions of the donation which must be fulfilled.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty. The complaint in this action was presented in 1924. 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 8 . as well as the extinguishment or loss of those already acquired. Under Article 1181 of the Civil Code.

charges. will not be further renewed. According to their contract. when a donation imposes a burden equivalent to the value of the donation. The establishment of the medical college as the condition of the donation in the present case is one such prestation. it is decided that CPU slept on its obligation for an unreasonable length of time and it is only just and equitable to declare the subject donation ineffective.000 hectares of forest concession to the spouses for an additional Php30. 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.00 upon approval and transfer of the said timber license to Timberwealth. for all purposes revoked. J.00 shall be paid Php10. When the law and the deed of donation speaks of “conditions” of a donation. • Onerous donation: one executed for a valuable consideration which is considered the equivalent of the donation itself. as the Civil Code would define a conditional obligation. The conditions imposed by the donor upon the donee are the very obligations of the donation—to build the medical college and use the property for the purposes specified in the deed of donation.00 shall be paid upon signing the contract. which provides that the courts may fix the duration thereof because the fulfillment of the obligation itself cannot be demanded until after the court has fixed the period for compliance therewith and such period has arrived. his timber license. dela Cruz. A gratuitous contract should be resolved in favor of the least transmission of rights and interests. 15 March 1990) [Regalado. When the obligation does not fix a period but from its nature and circumstances it can be inferred that a period was intended. CPU should return the donated property to the heirs of the donor by means of reconveyance. existence. which held an ordinary timber license covering 2. » » Javier v. along with other ordinary timber license holders in Misamis Oriental. quite obviously. Davide. onerous. the donation is. CA (GR No. there is no more need to fix the duration of the 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. while the remaining Php100. otherwise. Wherefore. In the present case. The spouses then incorporated the North Mindanao Timber Corporation. It is very clear that those obligations are unconditional.] Facts: For Php120. Moreover. Although the general rule is that the fulfillment of the obligation cannot be demanded until after the court has fixed the period for compliance therewith and such period has arrived.g.. J. » The discussion on conditional obligations is unnecessary. L-48194.000.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty.” A modal donation is one in which the donor imposes a prestation upon the donee. instructing him to form an organization with other adjoining licensees so as to have a total holding area of not less than 20.000 hectares of contiguous and compact territory. Jr. Tiro then transferred another 2. Jr.000. Leonardo Tiro assigned to spouses Jose and Estrella Javier his stocks in Timberwealth Corporation. Php20. that cannot be applied in this case because more than a reasonable period of 50 years had already been allowed CPU to avail of the opportunity to comply with the condition even if it be burdensome.00.000. but is more properly called a “modal donation. 201 1 contract which was the deed of donation. There is no conditional obligation to speak of in this case. which shall be expiring in May 1967.535 hectares in Misamis Oriental. the Acting Director of Forestry wrote to Tiro. Enrique V. e. what are referred to are actually the obligations.000. performance. • • Dissenting Opinion. or burdens imposed by the donor upon the donee and which would characterize the donation as onerous. and. or extinguishment of which is not dependent on any future or uncertain event or past and unknown event. By the end of the said year.00 every shipment of export logs actually produced from the forest concession of Timberwealth Corporation.. the general rule provided in Article 1197 of the Civil Code applies. the fulfillment. the time from which the cause of action accrued for the revocation of the donation and recovery of the property donated cannot be specifically determined in the instant case. to make the donation in its favor forever valid. 9 . Since it failed to do so.000. Subsequently. in 1966.

586. for the following reasons: (a) Both parties. Santos v. If the suspensive condition does not take place. the spouses cannot be held liable thereon because its efficacy was subject to the condition that the application of Tiro for an additional area for a forest concession be approved by the Bureau of Forestry. The parties’ practical construction of their contract has been characterized as a clue to. A contract with a false consideration is not null and void per se. that the conditions for the enforceability of the obligations of the parties failed to materialize. In 1984. and. 2. a relatively simulated contract. The spouses countered that the contracts were null and void because Tiro failed to comply with his contractual obligations. the second agreement between the parties is deemed without force and effect and the amount of Php30. (b) In their subsequent agreement. dismissing Tiro’s complaint. when it does not prejudice a third person and is not intended for any purpose contrary to law. good customs.15 due under the two deeds of assignment. It is settled that the previous and simultaneous and subsequent acts of the parties are properly cognizable indica of their true intention. 120820. (c) The spouses Javier. Where the parties to a contract have given it a practical construction by their conduct as by acts in partial performance. further. persuasive. 1 August 2000) [Quisumbing. or influential factor in determining the proper construction of the agreement. However. They then set up a counterclaim for the Php55. or as evidence of. at the time of the execution of the deed of assignment knew that the Timberwealth Corporation stated therein was non-existent. and his application was then pending in the Bureau of Forestry for approval.000. convincing. after the execution of the deed of assignment.00 which matured on 16 June 1987. or one where the parties conceal their true agreement. the deed produced no effect.00 that they had already paid Tiro. W/N the first deed of assignment is null and void for total absence of consideration. The aforesaid contemporaneous and subsequent acts of the spouses and Tiro reveal that the cause stated in the questioned deed of assignment is false. its birth or effectivity can take place only if and when the event which constitutes the condition happens or is fulfilled. J.138. the said decision is affirmed. (d) The spouses entered into a Forest Consolidation Agreement with other holders of forest concessions on the strength of the questioned deed of assignment. In all other respects.00. significant. their intention or meaning and as an important. public order or public policy binds the parties to their real agreement. CA (GR No. On appeal. morals.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty. determining its meaning and ascertaining the mutual intention of the parties at the time of contracting. Enrique V. Issues and Ruling: 1. which area he had applied for. Wherefore. When a contract is subject to a suspensive condition. Jr. assumed the operation of the logging concessions of Tiro. The second agreement is a relatively simulated contract which states a false cause or consideration. The true cause or consideration of the said deed of assignment was the transfer of Tiro’s concession to the spouses Javier for Php120. the parties would stand as if the conditional obligation had never existed. 201 1 In 1968. In that same year.] Facts: Spouses Fortunato and Rosalinda Santos were the owners of a house and lot which was mortgaged with the Rural Bank of Salinas to secure a loan of Php150. dela Cruz. NO. the bank sent the spouses Santos a 10 .00 is ordered to be deducted from the sum awarded by the Court of Appeals. such construction may be considered by the court in construing the contract. Rosalinda met Carmen Caseda and became close friends with her. Under Article 1346 of the Civil Code.000. W/N the second agreement is null and void for non-fulfillment of the conditions therein. NO. Since Tiro was unable to obtain the same. the Court of Appeals reversed the lower court and ordered the spouses to pay Tiro the entire amount that he was praying for. Tiro conveyed to the spouses his inchoate right over a forest concession covering an additional area for his existing forest concession. Tiro sued the spouses for failure to pay the balance of Php83.000. The lower court resolved the case in favor of the spouses. Sps.

696. (2) the real estate taxes. for failure of the Santoses to execute the final deed of conveyance over the property. Carmen paid the real estate taxes on the property for 1981-1984. Thus. which was the maturity date of the loan. The foregoing circumstances categorically and clearly show that no valid transfer of ownership was made by the Santoses to the Casedas. seeing that the Casedas lacked the means to pay the remaining installments and/or amortization of the loan. it follows that the appellate court erred when it decreed that a judicial rescission of said agreement was necessary. They then entered into an agreement with a document that reads: Received the amount of Php54. thus negating their right to demand specific performance. Carmen and her husband. This prompted the Casedas to file a civil case with the Makati RTC. In February 1989. In a contract of sale. which they then leased out. The bank’s cancellation and discharge of the mortgage was also made in favor of Rosalinda Santos. They also paid in installments. saying that rescission was not justified in this case and allowed the Caseda spouses a period of 90 days within which to pay the balance of the agreed purchase price.000. the vendor remains the owner for as long as the vendee has not fully complied with the condition of paying the purchase price. (Sgd. Jr. The lower court also stated that they cannot claim reimbursement of the paid partial payment to the Santoses. Php81. the Santoses. Rosalinda offered to sell the house and lot to Carmen. Note further that although the parties had agreed that the Casedas would assume the mortgage. agreed. stating that they were unable to pay the Santoses the full purchase price of the house. 201 1 letter demanding payment of Php16. all amortization payments made by Carmen Caseda to the bank were in the name of Rosalinda Santos. The trial court dismissed the Casedas’ complaint. notwithstanding the fact that the Casedas first took then lost possession of the disputed house and lot. Ruling: CONTRACT TO SELL. On the other hand. In a contract to sell. However. Issue: Whether the subject transaction is not a contract of absolute sale but a mere oral contract to sell in which case a judicial demand for rescission is not applicable. In a contract to sell.) Rosalinda Santos – owner The other terms and conditions that the parties agreed upon were for the Caseda spouses to pay: (1) the balance of the mortgage loan with the Rural Bank amounting to Php135.00 as a partial payment of Mrs. Carmen Caseda to the amount of Php350. unless the contract of sale is rescinded and set aside. the Santoses were demanding a higher price because of the real estate boom in Metro Manila.84 in unpaid interest and other charges. however. Failure to pay the price agreed upon is not a mere breach.18. Carmen Caseda sold her fishpond in Batangas and offered to pay the balance of the purchase price of the house and lot. All these payments were made in the name of Rosalinda Santos.) Carmen Caseda – direct buyer (Sgd. the assailed decision of the Court of Appeals is reversed and set aside. dela Cruz. Rosalinda Santos. but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force.00. Enrique V. She also settled the electric bills from December 1988 to July 1989. If the vendor should eject the vendee for failure to meet the condition precedent. (3) the electric and water bills. the payment of the purchase price is a positive suspensive condition.915.385. In contracts to sell.00 house and lot that is own by Mrs. The Santoses then collected the rentals from the tenants. casual or serious. Wherefore. ownership is reserved by the vendor and is not to pass until full payment of the purchase price. 11 . The records clearly show that. Upon payment of the initial Php54. In March 1990. their agreement cannot be deemed a contract of sale. he is enforcing the contract and not rescinding it. the Casedas immediately took possession of the property.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty.100. The effects in law are not identical. The agreement between Rosalinda Santos and Carmen Caseda is a contract to sell. Since they had no funds. and (4) the balance of the cash price to be paid not later than 16 June 1987. the Court of Appeals reversed this ruling. This is because there was no rescission to speak of in the first place. the title to the property has remained always in the name of Rosalinda Santos. The Court is far from persuaded that there was a transfer of ownership simultaneously with the delivery of the property purportedly sold. In January 1989. the vendor has lost ownership of the thing sold and cannot recover it. Absent this essential element.84 of the mortgage loan. This is entirely different from the situation in a contract of sale.000. repossessed the property. where non-payment of the purchase price is a negative resolutory condition. After inspecting the property. Mariano.

Megaworld. J. Megaworld Globus Asia and Mila Tanseco entered into a Contract to Buy and Sell a condominium unit at a pre-selling project. as thus prayed for. However. the suspensive condition of full payment of the purchase price not having occurred to trigger the obligation to convey title. on appeal. in 2002. A real estate enterprise engaged in the pre-selling of condominium units is concededly a master in projections on commodities and currency movements. HLURB and the HLURB Board of Commissioners. she filed a complaint with the Housing and Land Use Regulatory Board for rescission of contract. dismissed Tanseco’s complaint for lack of cause of action. Tanseco is. with an additional grace period of 6 months within which to complete the project and the units. with the balance of around Php2M to be paid on 31 October 1998. which granted her petition. The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday occurrence. As for Megaworld’s argument that Tanseco’s claim is considered barred by laches on account of her belated demand. pointing out that none of the excepted causes of delay existed. the stipulated delivery date of the unit. of the contract is thus the correct remedy in the premises. which was concededly beyond its control. 9 October 2009) [Carpio Morales. not rescission. leaving the unpaid balance pending delivery of the unit. The Court cannot generalize the 1997 Asian financial crisis to be unforeseeable and beyond the control of a business corporation. Tanseco paid all installments up to January 1998. both finding that Megaworld had effected delivery by the notice of turnover before Tanseco made a demand. there being no force majeure to warrant the application of the 30 April 1999 alternative date.100 LANDMARK CASES IN OBLIGATIONS AND CONTRACTS By Atty. Three years later. Additionally. that in view of Megaworld’s failure to deliver the unit on time. Tanseco replied through counsel. The appellate court held that under Article 1169 of the Civil Code. or 30 April 1999. Finally. Issue: W/ N Megaworld is liable for delay. which stated that the construction shall be completed and the unit will be delivered not later than 31 October 1998. Tanseco would pay the balance within seven days from the receipt of a notice of turnover. Enrique V. Because Megaworld did not heed her demands. 201 1 Megaworld Globus Asia v. 181206. by notice informed Tanseco that the unit was ready for inspection preparatory to delivery. not an instance of caso fortuito. Jr. 12 . and then 12% per annum from the time the judgment becomes final and executory. Tanseco appealed to the CA. hence. it does not lie too. dela Cruz.] Facts: In 1995. cancellation. that the delay should be reckoned from 31 October 1998. maintained that the delay was attributable to the 1997 Asian financial crisis. Laches is a creation of equity and its application is controlled by equitable considerations. and that specific performance could not be ordered in lieu of rescission as the right to choose the remedy belongs to the aggrieved party. and damages. no judicial or extrajudicial demand is needed to put the obligor in default if the contract states the date when the obligation should be performed. whereas Megaworld reneged on its obligation to deliver within the stipulated period. entitled to reimbursement the total amount she paid Megaworld. the last day of the six-month grace period. Megaworld. since Article 1191 of the Civil Code does not apply to a contract to buy and sell. as well as business risks. The purchase price was around Php16M. with interest at 12% per annum from 30 April 1999. Megaworld failed to deliver the unit within the stipulated period of 31 October 1998. provided that if the construction is completed earlier. Megaworld’s excuse for delay does not thus lie. the contract contained a construction schedule. at an interest rate of 6% per annum accruing from the date of demand. A circumspect weighing of equitable considerations thus tilts the scale of justice in favor of Tanseco. It bears noting that Tanseco religiously paid all the installments due up to January 1998. on the other hand. refund of payment. she was demanding the return of the Php14M representing the total installment payment she had made. that time was of the essence because Tanseco relied on Megaworld’s promise of timely delivery when she agreed to part with her money. Tanseco (GR No. Ruling: YES.

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