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Intestate of Presbitero vs CA Leandro Canoso (Art.

1234, Substantial Performance in goodfaith)


Facts:
On 19 August 1981, Ricardo Presbitero, Sr. entered into two (2) written contracts with private
respondent Leonardo Caoso. In the first, entitled "Conformity of Agreement,"3Presbitero
retained the services of the later to negotiate with the Land Bank of the Philippines (LBP) and the
Ministry of Agrarian Reform (MAR) in Cotabato City for the sale, under a voluntary offer
arrangement, of Hacienda Maria which comprises some 270 hectares of land located at Balogo,
Pigcawayan, North Cotabato and which is owned by the former. The hacienda had been placed
under Operation Land Transfer pursuant to Presidential Decree No. 27. The private respondent
bound himself "to finish the processing and submission of documents with in (sic) the period of
One hundred (sic) Twenty Days (120 days) to Manila, by the Land Bank of the Philippines and
Ministry of Agrarian Reform Cotabato City and shall be subjected to the delay of the approval of
the DBP additional loan negotiated by RICARDO P. PRESBITERO in Bacolod City . . . ." In the second
contract, denominated as a "Contract of Service,"4Presbitero bound himself to compensate the
private respondent "for his efforts, services and other related expenses in making the necessary
follow up (sic) of the preparation, production of pertinent documents required," and "to effect the
recovery of the proceed (sic) of the land transfer payment from the Land Bank of the Philippines,"
in an amount equivalent to "Twenty Five per cent (25%) of the gross total sales of my properties
described above which is (sic) subject of Operation Land Transfer."
When his claim was finally approved, Presbitero sent two (2) letters to the LBP concerning the
release of a part of the proceeds to the private respondent. The first letter, dated 16 May 1983 and
addressed to the LBP President,5requested that the "amount equivalent to Seventeen and One
Half (17 1/2%) per cent be released in the name of Leonardo Caoso, proportionate to (sic) cash
and Land Bank Bonds, on every releases (sic) until the final release of the claim." The second,
dated 14 June 1983,6made reference to the LBP's letter of 6 June 1983 and requested that he
(Presbitero) be notified in writing upon receipt; the latter also informed the LBP that he will
"personally release the cash and bonds to Mr. Caoso due to advances made by him during the
processing of the documents." However, when a part of the proceeds was released, the private
respondent was not given his share as agreed upon. Hence, the latter filed a complaint against
Presbitero before the RTC of Cotabato City which was docketed as Civil Case No. 68 and assigned
to Branch 15 of the said court.
Petitioner contends that the respondent Court erred in declaring that the terms and conditions of
the contract were complied with. As provided thereunder, the private respondent was to submit
all requirements needed by the DAR and the LBP for the land transfer to effect the payment
thereof from the LBP. This was to be completed within a stipulated period of 120 days. In failing to
comply with the said stipulation, the private respondent acquired no right to be compensated.
Issue: W/N that CAOSO is entitled for compensation

Ruling:
No error was committed by the appellate and trial courts in concluding that the private
respondent complied with the terms and conditions of the contracts. This is supported by the
evidence, both testimonial and documentary, presented by the private respondent during trial
before the lower court. Moreover, Presbitero's letter to the LBP authorizing the release of a
portion of the proceeds to the private respondent reinforces the latter's position that he had
actually complied with the terms and conditions of the contract. It upholding the trial court's
decision, the Court of Appeals emphasized:
In the case at bar, no substantial breach was committed by the private respondent sufficient
enough to warrant a rescission. From all indications, private respondent was able to perform his
obligation; this conclusion follows in the wake of the approval of the claim. Under Article 1234 of
the New Civil Code, if the obligation has been substantially performed in good faith, the obligor
(private respondent) may recover as though there had been a strict and complete fulfillment, less
damages suffered by the obligee (Presbitero). Moreover, when the obligee accepts the
performance, as what happened in this case, knowing its incompleteness or irregularity, and
without expressing a protest or objection, the obligation is deemed fully complied
with.40Finally, to allow Presbitero to rescind the contract would not only violate the well-settled
rule on mutuality of contracts which provides that the validity or compliance of a contract
cannot be left to the will of one of the contracting parties41 but would also work an injustice to
the rights of the private respondent who has already performed his obligation pursuant to their
agreement. Presbitero's correlative obligation must perforce be also fulfilled. There is no evidence
to indicate that the private respondent was remise or negligent in the performance of his
obligation. Neither was there any evidence presented to show that it was through Presbitero's
own efforts that this claim with the LBP was approved.