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Patente vs.

Promissory note did not expressly provide for a period of whenpayment shall be made (Application of Art. 1180 /
Courts may fix a period of payment if
the obligation, though period is not expressly stipulated, is deemed to be one with aperiod)Ramon Omega owes
Salud Patente PHP 1,600 as shown in a promissory note whichreads as follows:
Villalba, Leyte, August 24, 1949.
This is to acknowledge receipt of the sum of One Thousand SixHundred Pesos (P1, 600) from Health Patent,
Filipino citizen, of age,single, Also a resident of Villalba, Leyte, like myself, as myindebtedness to her. I am going to
pay debt to her, her heirs, Assignsand successors, in the said sum of P1, 600 in Philippine currency, assoon as
possible or as soon as I have money.This debt is not covered by any security Because of the intimaterelations of my
family to her.This sum covers my previous indebtedness to her which i received fromher on May 4, 1947 and
previous thereto.I hereby certify That I have to pay This whole indebtedness to her,before I exercise my right of
repurchase of an agricultural land, situatedin Tag-alang, Villalba, Leyte, bearing Tax No. 2662, que I sold to her
under a covenant retro sale.
The Judge issued a ruling ordering the payment of the debt within the period of fourmonths from the date of its
enactment, with costs. At the hearing of the case in the Court of First Instance of Leyte, to which
this case wastaken on appeal, both parties had made an agreement to read as follows:
That, upon the face of the promissory note in question, it is apparent
That term is not fixed therein definite and that its performance is left tothe will of the debtordefendant.
Whether or not the Judge of Villalba, Leyte had jurisdiction to take cognizance of thepresent case and to fix a definite
term for the payment of the indebtedness in questionby the defendant?HELD:Yes.

Art. 1180. When the debtor binds himself to pay when his means permit him to doso, the obligation shall
be deemed to be one with a period, subject to theprovisions of article 1197.
According to the agreement of facts submitted by the parties, the question to be solvedis the
following:If the term of payment has been left to the will of the debtor, does the condition ofpayment
"as soon as possible or as soon as I have money"
nullify the condition?Court held that when the deadline for payment of an obligation
is left to the sole will ofthe debtor
resulting in the annullment of the condition
does not make it into a pureobligation.The obligation is deemed with a period or term
. The two promissory notes show that theplaintiff intended to grant the defendant a period within which to pay his
debts underthe condition that the debtor will
pay as soon as possible or as soon as I havemoney. Since there is an implied intention for the plaintiff to give the
defendant aperiod for payment, though it wasnt expressly stipulated in the promissory note, it
does not make the obligation pure wherein the obligation to pay is immediatelydemandable.
Remedy for creditor when no definite period is fixed
As the promissory notes do not fix this period, it is for the court to fix the same.
Thecreditor cannot immediately demand for payment.
Creditor's recourse in such a case is to go to court to demand the fixing of the term

Araneta vs. Philippine Sugar Estates Development Co., Ltd. [G.R. No. L-22558, May 31,
Post under case digests, Civil Law at Tuesday, February 21, 2012 Posted by Schizophrenic
Facts: J. M. Tuason & Co., Inc. is the owner of a land, known as the Sta. Mesa Heights
Subdivision, and covered by a Torrens title in its name. On July 1950, through Gregorio Araneta,
Inc, JM, sod a portion thereof to herein respondent to Philippine Sugar Estates Development
Co., Ltd. The parties stipulated, among in the contract of purchase and sale with mortgage, that
the buyer will build on the said parcel land the Sto. Domingo Church and Convent. While the
seller for its part will construct streets on the NE and NW and SW sides of the land herein
Respondent was able to finish his obligation. However, herein petitioner was unable to finish the
construction of the NE side because a third-party physically occupies the middle part thereof,
refused to vacate the same; hence Respondent filed a complaint against petitioner seeking to
compel Araneta to comply with the obligation, and/or to pay damages in the event they failed or
refused to perform said obligation.
Defendants in said complaint argued that the action was premature since the 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. The lower court dismissed the plaintiffs complaint. Motion to
reconsider was prayed, and that the court fix a period within which petitioner in said case can
comply in the construction of the streets.
The Lower Court issued a order granting the motion for reconsideration and amended its
previous decision, prompting defendant Araneta to reconsider but this was denied
thus appealingin the Court of Appeals. The Appellate Court declared the fixing of the period was
within the pleadings and affirmed the Lower Courts decision, hence this petition for Certiorari.
Issue: Whether or not the fixing of the period of the Lower Court was valid and justified base on
the pleadings, the facts of the case, pursuant to Article 1197
Held: NO, there was no justification in law for the setting of the performance at any other time
than that of the eviction of the squatters occupying the land in question. And the Trial Court and

The Appellate Court were found to have committed a reversible error. Decision appealed is
reversed and the time for the performance of the obligation is fixed at the date that all the
squatters on affected areas are finally evicted from the area.
The fixing of a period by the courts under Article 1197 of the Civil Code of the Philippines is
sought to be justified on the basis that petitioner (defendant below) placed the absence of a
period in issue by pleading in its answer that the contract with respondent Philippine Sugar
Estates Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within
which to comply with its obligation to construct and complete the streets" was found legally
Neither of the courts below seems to have noticed that, on the hypothesis stated, what the
answer put in issue was not whether the court should fix the time of performance, but whether
or not the parties agreed that the petitioner should have reasonable time to perform its part of
the bargain.
If the contract so provided, then there was a period fixed, a "reasonable time;" and all that the
court should have done was to determine if that reasonable time had already elapsed when suit
was filed if it had passed, then the court should declare that petitioner had breached the
contract, as averred in the complaint, and fix the resulting damages.
On the other hand, if the reasonable time had not yet elapsed, the court perforce was bound to
dismiss the action for being premature. But in no case can it be logically held that under the plea
above quoted, the intervention of the court to fix the period for performance was warranted, for
Article 1197 is precisely predicated on the absence of any period fixed by the parties.
Even on the assumption that the court should have found that no reasonable time or no period
at all had been fixed (and the trial court's amended decision nowhere declared any such fact)
still, the complaint not having sought that the Court should set a period, the court could
not proceed to do so unless the complaint in as first amended; for the original decision is clear
that the complaint proceeded on the theory that the period for performance had already
elapsed, that the contract had been breached and defendant was already answerable in

Granting, however, that it lay within the Court's power to fix the period of performance, 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. The list paragraph of Article 1197 is
clear that the period cannot be set arbitrarily. The law expressly prescribes that the Court
shall determine such period as may under the circumstances been probably contemplated by
the parties.
Article 1197 of the Civil Code involves a two-step process. 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)," but from the nature and the circumstances it can be inferred that a period was
intended". Once settled, the Court must proceed to the second step, and decide what period
was "probably contemplated by the parties" So that the Court cannot fix a period merely
because in its opinion it is or should be reasonable, but must set the time that the parties are
shown to have intended. As the record stands, the trial Court appears to have pulled the twoyear period set in its decision out of thin air, since no circumstances are mentioned to support it.
Plainly, this is not warranted by the Civil Code.
In this connection, the contract shows that the parties were fully aware that the land described
therein was occupied by squatters, because the fact is expressly mentioned therein. The
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, as contended by the
petitioner Gregorio Araneta, Inc.

Gaite v. Fonacier
Gaite was appointed by Fonacier as attorney-in-fact to contract any party for
the exploration and development of mining claims. Gaite executed a deed of
assignment in favor of a single proprietorship owned by him. For some

reasons, Fonacier revoked the agency, which was acceded to by Gaite, subject
to certain conditions, one of which being the transfer of ores extracted from
the mineral claims for P75,000, of which P10,000 has already been paid upon
signing of the agreement and the balance to be paid from the first letter of
credit for the first local sale of the iron ores. To secure payment, Fonacier
delivered a surety agreement with Larap Mines and some of its stockholders,
and another one with Far Eastern Insurance. When the second surety
agreement expired with no sale being made on the ores, Gaite demanded the
P65,000 balance. Defendants contended that the payment was subject to the
condition that the ores will be sold.
(1) Whether the sale is conditional or one with a period
(2) Whether there were insufficient tons of ores
(1) The shipment or local sale of the iron ore is not a condition precedent (or
suspensive) to the payment of the balance of P65,000.00, but was only a
suspensive period or term. 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; so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed.
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),but each
party anticipates performance by the other from the very start. While in a sale
the obligation of one party can be lawfully subordinated to an uncertain event,
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,emptio spei), it
is not in the usual course of business to do so; hence, the contingent character
of the obligation must clearly appear. Nothing is found in the record to
evidence that Gaite desired or assumed to run the risk of losing his right over
the ore without getting paid for it, or that Fonacier understood that Gaite
assumed any such risk. This is proved by the fact that Gaite insisted on a bond
a to guarantee payment of the P65,000.00, an not only upon a bond by
Fonacier, the Larap Mines & Smelting Co., and the company's stockholders,
but also on one by a surety company; 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 P65,000.00.
The appellant have forfeited the right court below that the appellants have
forfeited the right to compel Gaite to wait for the sale of the ore before
receiving payment of the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or else replace it with an
equivalent guarantee. The expiration of the bonding company's undertaking
on December 8, 1955 substantially reduced the security of the vendor's rights
as creditor for the unpaid P65,000.00, a security that Gaite considered
essential and upon which he had insisted when he executed the deed of sale of
the ore to Fonacier.
(2) The sale between the parties is a sale of a specific mass or 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, nor was the price of
P75,000,00 agreed upon by the parties based upon any such measurement.
(see Art. 1480, second par., New Civil Code). The subject matter of the sale is,
therefore, a determinate object, the mass, and not the actual number of units
or tons contained therein, 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,
notwithstanding that the quantity delivered is less than the amount estimated
by them.


93 Phil. 383

Damasa Crisostomo wrote a letter to the Quezon College, Inc. for the subscription of
shares of stock of the said college wherein payment was to be made through money she was
going to generate from fishing. However, she died and as no payment appears to have been
made on the subscription mentioned in the foregoing letter, the Quezon College, Inc. presented
a claim before the Court of First Instance in her testate proceeding, for the collection of the said
sum of money. The claim was dismissed by the trial court on the ground that the subscription in
question was neither registered in nor authorized by the Securities and Exchange Commission.
From this order the Quezon College, Inc. appealed.

Was Damasa Crisostomo liable for the claim made by Quezon Colleges, Inc?

No. The application sent by Damasa Crisostomo to the Quezon College, Inc. was
written on a general form indicating that an applicant will enclose an amount as initial payment
and will pay the balance in accordance with law and the rules or regulations of the College. In
the letter actually sent by Damasa Crisostomo, she not only did not enclose any initial payment,
but stated that "babayaran kong lahat pagkatapos na ako ay makapagpahuli ng isda." The
acceptance of Quezon College, Inc. was essential, because it would be unfair to immediately
obligate the Quezon College, Inc. under Damasa's promise to pay the price of the subscription
after she had caused fish to be caught. In other words, the relation between Damasa
Crisostomo and the Quezon College, Inc. had only thus reached the preliminary stage whereby
the latter offered its stock for subscription on the terms stated in the form letter, and Damasa
applied for subscription fixing her own plan of payment, a relation in the absence, as in the
present case of acceptance by the Quezon College, Inc. of the counter offer of Damasa
Crisostomo, that had not ripened into an enforceable contract.
The need for express acceptance on the part of the Quezon College, Inc. imperative, in
view of the proposal of Damasa Crisostomo to pay the value of the subscription after she had
harvested fish, a condition obviously dependent upon her sole will and, therefore, facultative in
nature, rendering the obligation void, under article 1115 of the old Civil Code (1182 of NCC).


14 PHIL. 99

On November 15, 1890, defendant Rama executed and delivered to Victoriano Osmea
a contract. The contract stipulates that Rama received from Victoriano the sum of P200 which
defendant will pay Victoriano Osmea in sugar and pay also an interest at a rate of half a
cuartillo per month. Defendant promise that he well sell to Mr. Osmea all the sugar that he may
harvest and as a guarantee pledge as a security all his present and future property and as
special security his house in Pagina.
On October 27, 1891, defendant executed another contract with Victoriano Osmea
which states that defendant asked for a loan amounting to P70, P50 of which defendant loaned
to Don Peares, which they will pay in sugar.
Sometime after the execution and delivery of the above contracts, Victoriano died. In the
settlement and division of the property of his estate the above contracts became the property of
one of his heirs, Agustina Rafols. Later, Agustina Rafols ceded to the present plaintiff Tomas
Osmea all of her right and interest in said contracts.
On March 15, 1902, plaintiff presented the contracts to the defendant for payment and
she acknowledged her responsibility upon said contracts by an endorsement which stipulates:
On this date I hereby promise,that if the house of strong materials in which I live in Pagina is
sold, I will pay my indebtedness to Don Tomas Osmea as set forth in this document.
The defendant not having paid the amount due on said contracts, the plaintiff filed an
action before the CFI of Cebu. The lower court rendered judgment in favor of the plaintiff for the
sum of P200 with interest. From this judgment the defendant appealed.


Is the endorsement made by defendant Rama for payment of said obligation valid?
No.It was suggested during the discussion of the case in this court that, in the
acknowledgment above quoted 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.


35 SCRA 102
On November 2, 1960, UP and ALUMCO entered
into a logging agreement whereby the latter was granted
exclusive authority to cut, collect and remove timber from
the Land Grant for a period starting from the date of
agreement to December 31, 1965, extendible for a period of
5 years by mutual agreement.
On December 8, 1964, ALUMCO incurred an
unpaid account of P219,362.94. Despite repeated
demands, ALUMCO still failed to pay, so UP sent a notice
to rescind the logging agreement. On the other hand,
ALUMCO executed an instrument entitled
Acknowledgment of Debt and Proposed Manner of
Payments. It was approved by the president of UP, which
stipulated the following:
3. In the event that the payments called for are not
sufficient to liquidate the foregoing indebtedness,
the balance outstanding after the said payments
have been applied shall be paid by the debtor in
full no later than June 30, 1965.

5. In the event that the debtor fails to comply with

any of its promises, the Debtor agrees without
reservation that Creditor shall have the right to
consider the Logging Agreement rescinded,
without the necessity of any judicial suit
ALUMCO continued its logging operations, but
again incurred an unpaid account. On July 19,1965, UP
informed ALUMCO that it had, as of that date, considered
rescinded and of no further legal effect the logging
agreement, and that UP had already taken steps to have
another concessionaire take over the logging operation.
ALUMCO filed a petition to enjoin UP from conducting the
bidding. The lower court ruled in favor of ALUMCO,
hence, this appeal.
Can petitioner UP treat its contract with ALUMCO
rescinded, and may disregard the same before any judicial
pronouncement to that effect?
Yes. In the first place, UP and ALUMCO had
expressly stipulated that upon default by the debtor, UP
has the right and the power to consider the Logging
Agreement of December 2, 1960 as rescinded without the necessity of any judicial
suit. As to such special stipulation
and in connection with Article 1191 of the Civil Code, the
Supreme Court, stated in Froilan vs. Pan Oriental Shipping
There is nothing in the law that prohibits the
parties from entering into agreement that violation
of the terms of the contract would cause
cancellation thereof, even without court
intervention. In other words, it is not always
necessary for the injured party to resort to court
for rescission of the contract.


96 SCRA 741

Sometime in 1964, plaintiff and defendant entered into an agreement of sale covering Lots 1, 2
and 9, Block 1, of said property, payable in 120 equal monthly installments at the rate of P16.00,
P15.00 per square meter, respectively. In accordance with said agreement, defendant paid to
plaintiff the sum of P150.00 as deposit and the further sum of P740.56 to complete the payment
of four monthly installments covering the months of July, August, September, and October,
On January 24, 1955, defendant requested plaintiff that he be allowed to abandon and
substitute Lots 1, 2 and 9, the subject with Lots 4 and 12, Block 2 of the Rockville Subdivision,
which are corner lots, to which request plaintiff graciously acceded. The evidence discloses that
defendant proposed to plaintiff modification of their previous contract to sell because he found it
quite difficult to pay the monthly installments on the three lots, and besides the two lots he had
chosen were better lots, being corner lots. In addition, it was agreed that the purchase price of
these two lots would be at the uniform rate of P17.00 per square meter payable in 120 equal
monthly installments, with interest at 8% annually on the balance unpaid. Pursuant to this new
agreement, defendant occupied and possessed Lots 4 and 12, and enclosed them, including
the portion where his house now stands, with barbed wires and adobe walls. However, aside
from the deposit of P150.00 and the amount of P740.56, which were paid under their previous
agreement, defendant failed to make any further payment on account of the agreed monthly
installments for the two lots in dispute, under the new contract to sell. Plaintiff demanded upon
defendant not only to pay the stipulated monthly installments in arrears, but also to make up-todate his payments, but defendant refused to comply with plaintiff's demands.
On or about November 3, 1957, plaintiff demanded upon defendant to vacate the lots in
question and to pay the reasonable rentals thereon at the rate of P60.00 per month from
August, 1955. On January 22, 1960, petitioner Felipe C, Roque filed the complaint against
defendant Nicanor Lapuz for rescission and cancellation of the agreement of sale between them
involving the two lots in question and prayed that judgment be rendered ordering the rescission
and cancellation of the agreement of sale, the defendant to vacate the two parcels of land and
remove his house therefrom and to pay to the plaintiff the reasonable rental thereof at the rate
of P60.00 a month from August 1955 until such time as he shall have vacated the premises, and
to pay the sum of P2,000.00 as attorney's fees, costs of the suit and award such other relief or
remedy as may be deemed just and equitable in the premises.
The Court of Appeals rendered its decision that the defendant Nicanor Lapuz is granted a
period of ninety (90) days from entry hereof within which to pay the balance. Hence, this


Can private respondent be entitled to the Benefits of the third paragraph of Article 1191, New
Civil Code, for the fixing of period

No. Respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC
Having been in default and acted in bad faith, he is not entitled to the new period of 90 days
from entry of judgment within which to pay petitioner the balance of P11,434.44 with interest due
on the purchase price of P12,325.00 for the two lots. To allow and grant respondent an
additional period for him to pay the balance of the purchase price, which balance is about 92%
of the agreed price, would be tantamount to excusing his bad faith and sanctioning the
deliberate infringement of a contractual obligation that is repugnant and contrary to the stability,
security and obligatory force of contracts. Moreover, respondent's failure to pay the succeeding
116 monthly installments after paying only 4 monthly installments is a substantial and material
breach on his part, not merely casual, which takes the case out of the application of the benefits
of pa paragraph 3, Art. 1191, N.C.C.
Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of
damages which the trial court and the appellate court, in the latter's original decision, granted in
the form of rental at the rate of P60.00 per month from August, 1955 until respondent shall have
actually vacated the premises, plus P2,000.00 as attorney's fees. The Court affirmed the same
to be fair and reasonable. The Court also sustained the right of the petitioner to the possession
of the land, ordering thereby respondent to vacate the same and remove his house therefrom.


148 SCRA 635


Solomon Boysaw and his then Manager, Willie Ketchum, signed with Interphil Promotions, Inc.
represented by Lope Sarreal, Sr., a contract to engage Gabriel "Flash" Elorde in a boxing
contest for the junior lightweight championship of the world. It was stipulated that the bout would
be held at the Rizal Memorial Stadium in Manila on September 30, 1961 or not later than thirty
[30] days thereafter should a postponement be mutually agreed upon, and that Boysaw would
not, prior to the date of the boxing contest, engage in any other such contest without the written
consent of Interphil Promotions, Inc.
However, before September 30, 1961, Boysaw entered into a non-title bout on June 19, 1961
and without consent from Interphil, Ketchum assigned to Amado Araneta the managerial rights
over Boysaw. Amado Araneta in turn transferred the earlier acquired managerial rights to
again without the consent from Interphil. Yulo thereafter informed Interphil Boysaws
readiness to comply with the boxing contract of May 1, 1961. The GAB after a series of
conferences of both parties scheduled the Elorde-Boysaw fight on November 4, 1961. Yulo
refused to accept the charge in the fight date even after Sarreal offered to advance the fight
date to October 28, 1961. However, he changed his mind and decided to accept the fight date
on November 4, 1961. While an Elorde-Boysaw fight was eventually staged, the fight
contemplated in the May 1, 1961 boxing contract never materialized.
As a result, Yulo and Boysaw sued Interphil for damages allegedly due to the latters refusal to
honor their commitments under the boxing contract of May 1, 1961.

1. Was there a violation of the fight contract of May 1, 1961?
2. In reciprocal obligations, who has the power to rescind?

1. Yes. On the issue pertaining to the violation of the May 1, 1961 fight contract, the evidence
established that the contract was violated by appellant Boysaw himself when, without the
approval or consent of Interphil, he fought Louis Avila on June 19, 1961 in Las Vegas Nevada.
Appellant Yulo admitted this fact during the trial. Another violation of the contract in question
was the assignment and transfer, first to J. Amado Araneta, and subsequently, to appellant Yulo,
Jr., of the managerial rights over Boysaw without the knowledge or consent of Interphil.
2. 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. There is no doubt that the contract in

question gave rise to reciprocal obligations. "Reciprocal obligations are those which arise from
the same cause, and in which each party is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the other. They are to be performed
simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment
of the other"The power to rescind is given to the injured party. "Where the plaintiff is the party
who did not perform the undertaking which he was bound by the terms of the agreement to
perform 4 he is not entitled to insist upon the performance of the contract by the defendant, or
recover damages by reason of his own breach "
On the validity of the fight postponement, the violations of the terms of the original contract by
appellants vested the appellees with the right to rescind and repudiate such contract altogether.
That they sought to seek an adjustment of one particular covenant of the contract, is under the
circumstances, within the appellee's rights.


G.R. NO. L-39378 AUGUST 28, 1984
Defendants, Nicolas Adamos and Vicente Feria,
purchased two lots forming part of the Piedad Estate in
Quezon City, from Juan Porciuncula. Thereafter, the
successors-in-interest of the latter filed Civil Case No. 174
for annulment of the sale and the cancellation of TCT No.
69475, which had been issued to defendants-appellants by
virtue of the disputed sale. The Court rendered a Decision
annulling the saleThe said judgment was affirmed by the
Appellate Court and had attained finality.
Meanwhile, during the pendency of the case above,
defendants sold the said two lots to Petitioner Generosa
Ayson-Simon for Php3,800.00 plus Php800.00 for
facilitating the issuance of the new titles in favor of
petitioner. Due to the failure of the defendants to deliver
the said lots, petitioner filed a civil case for specific
performance. The trial court rendered judgment to
petitioners favor. However, defendants could not deliver
the said lots because the CA had already annulled the sale
of the two lots in Civil Case No. 174. Thus, petitioner filed

another civil case for the rescission of the contract.

Defendants were contending that petitioner cannot choose
to rescind the contract since petitioner chose for specific
performance of the obligation. Also, even though
petitioner can choose to rescind the contract, it would not
be possible, because it has already prescribed.
1. Can petitioner choose to rescind the contract even after choosing for the specific
performance of the obligation?
2. Had the option to rescind the contract prescribed?
1. Yes. The rule that the injured party can
only choose between fulfillment and rescission of the
obligation, and cannot have both, applies when the
obligation is possible of fulfillment. If, as in this case, the
fulfillment has become impossible, Article 1191 allows the injured party to seek
rescission even after he has chosen
2. No. Article 1191 of the Civil Code provides
that the injured party may also seek rescission, if the
fulfillment should become impossible. The cause of action
to claim rescission arises when the fulfillment of the
obligation became impossible when the Court of First
Instance of Quezon City in Civil Case No. 174 declared the
sale of the land to defendants by Juan Porciuncula a
complete nullity and ordered the cancellation of Transfer
Certificate of Title No. 69475 issued to them. Since the two
lots sold to plaintiff by defendants form part of the land
involved in Civil Case No. 174, it became impossible for
defendants to secure and deliver the titles to and the
possession of the lots to plaintiff. But plaintiff had to wait
for the finality of the decision in Civil Case No. 174,
According to the certification of the clerk of the Court of
First Instance of Quezon City (Exhibit "E-2"), the decision
in Civil Case No. 174 became final and executory "as per

entry of Judgment dated May 3, 1967 of the Court of

Appeals." The action for rescission must be commenced
within four years from that date, May 3, 1967. Since the
complaint for rescission was filed on August 16, 1968, the
four year period within which the action must be
commenced had not expired.

G.R. No. L-12277

December 29, 1959

BENITO ORIT, plaintiff-appellee,

BALDROGAN COMPANY, LTD., defendant-appellant.
Gonzales and Gutierrez for appellee.
Restituto B. Roman for appellant.

On 22 November 1955 the plaintiff brought an action in the Court of First Instance of
Camarines Norte to collect from the defendant the sum of P5.000, the balance of an
account due to export logs purchased by the latter from the former, P1,500 as attorney's
fee, P3,000 as moral damages, P2,000 as exemplary damages and costs, and to obtain
any other just and equitable relief (civil No. 750). On 7 January 1956 the defendant filed
an answer. On 25 September 1956 the parties, assisted by their respective counsel,
entered into a stipulation of facts and submitted it to Court. Te terms of the stipulation
That the defendant admits in open court its obligation to the plaintiff in the
amount of FIVE THOUSAND PESOS (P5,000.00) Philippine Currency, plus
interest thereon from December 8, 1955 and costs;

That the parties mutually agreed to submit to the Court a fixed date when the
defendant should pay the plaintiff the above obligations, the submission of which
date is hereby mutually agreed to be up to not later than November 6,1956;
That for failure of the parties to submit to the Court the agreed date of payment
on November 6, 1956, they mutually agreed that the Court shall have the full
power to fix a reasonable time when the defendant should pay, and a judgment
therefor shall issue based upon this stipulation of facts.
The parties failed to submit to the Court the date when the defendant had to pay its debt
to the plaintiff. On 6 November 1956 the plaintiff filed an ex-parte motion praying that
judgment be rendered upon the stipulation of facts and that the Court fix the time in
which the defendant should pay the sum due to the plaintiff. On 28 November 1956 the
Court rendered judgment as prayed for ordering defendant to pay the plaintiff within
thirty days from receipt of notice of judgment the sum of P5,000 with legal interest
thereon from 8 December 1955 until fully paid and to pay the costs. On 21 January
1957 the Court denied the defendant's motion for reconsideration dated 12 January
1957. The defendant has appealed.
The appellant admits that it owes the appellee the sum of P5,000. Under the second
paragraph of the stipulation of facts, they agreed to set a date for the appellant to pay
the appellee, they agreed to set a date for the appellant to pay the appellee, to be
submitted to the Court not later that 6 November 1956 and under the third paragraph of
the same stipulation, should they fail to set a date for payment on 6 November 1956,
the Court may set a reasonable time for the appellant to pay the appellee. As they paid
to set a date for payment and submit it to the Court on motion on the appellee, the Court
rendered judgment upon the stipulation of facts and ordered the appellant to pay the
appellee within thirty days from receipt of notice of judgment. The judgment rendered by
the Court was but in pursuance of the compromise agreement embodied in the
stipulation of facts entered freely and voluntarily by the parties with the assistance of
their respective counsel. The appellant cannot now claim and complain that the period
fixed by the Court is unreasonable.
Citing article 1196 of the new Civil Code in support of its appeal, which provides that:
Wherever in an obligation a period is designated, it is presumed to have been
established for the benefit of both the creditor and the debtor, unless from the
tenor of the same or other circumstances it should appear that the period has
been established in favor of one or of the other;

the appellant claims that the period of thirty days fixed by the Court rebounded to the
benefit only of the creditor, the appellee, and not mutually to the creditor and the debtor.
In its brief, the appellant prays that it be granted at least a year within which to pay the
The article cited by the appellant cannot be applied to the case at bar where the parties
entered into a compromise agreement ending a controversy and authorizing the Court
to fix a reasonable time within which the appellant should pay its debt to the appellee, if
they fail to agree upon a date for payment and submit it to the Court. It applies where
the parties to a contract themselves have fixed a period.
The appeal interposed by the appellant is manifestly to delay but not to evade payment
of its debt. Nothing has been agreed upon by the parties in their stipulation on that
contingency. Hence the collection or recovery of the sums of P1,800 as attorney's fee,
P3,000 as moral damages and P2,000 as exemplary damages sought by the appellee
in its motion dated 6 May 1957 filed in this Court cannot be granted.
The judgment appealed from is affirmed, with treble costs against the appellant.



TEODORO LABAYEN, plaintiffs-appellants,
RESPONDENT: TALISAY-SILAY CO., defendantappellee
The plaintiffs on or before August 27 1928,
were the undivided owners of the hacienda
known as Dos Hermanos, situated in the
municipality of Talisay, August1929, the
plaintiffs and the defendant entered into a
milling contract. Planter who signs this

contract, states and guarantees to the Central

that he is the absolute owner of the following
parcel of land, situated in the Municipality of
Talisay,the plantation or the plantations
and one thousand two hundred twenty-nine
and (1327)planters.
The sugar central shall construct and shall
thereafter make needed for the conservation in
good dcondition. It shall provide the said
railway with locomotives or motors and
wagons in sufficient number to expedite the
transportation of sugar cane, sugar, fertilizer
and goods aforementioned, and it shall
likewise construct a branch of the railway
connecting the principal line, factory and
warehouses and the aforementioned pier, and
it shall also conveniently equip with switches
or otherwise the yard of the factory near the
sugar mill. All the steam locomotives shall be
provided with spark arresters. The railway shall
consist of a line or way conveniently and
properly designated so that, as far as possible,
all the planters may deprive equal benefits
therefrom; the right of way for the principal
line of the railway shall be three and one-half
(3) meters wide on each side measuring from
the center of the line, and the branches,
deviations, and curves shall be more if
The Central shall have the right to refuse the
sugar cane which is unclean, sour or burned. In
case of delivery of sugar cane not sufficiently
clean or cutoff.Tthe Central shall make a
certain per cent reduction from its weight
subject to the determination of the Central and
the Committee of Planters; and in case of

disagreement on this matter, to determine the

exact amount to be deducted from the weight
of all the sugar cane in question, and the
expenses occasioned by said cleaning shall be
charged against the
delinquentplanter.The burned sugar cane, after
twenty-four (24) hours from the time of
burning, shall be accepted by the Central only
upon special agreement between the Central
and the Committee of Planters, who shall fix
the conditions whereby the same should be
milled and the sugar divided.
that the defendant, in violation of the milling
contract, did not construct the railway until a
convenient place on the hacienda Dos
Hermanos, as a result of which the sugar cane
produced during the said agricultural years
were not brought to and milled by the
defendants central; that for this reason the
plaintiffs suffered a loss amounting to P28,620
for the recovery of which they brought civil
case No. 3789 of the Court of First Instance of
Occidental Negros; that in said case judgment
was rendered absolving the defendant and
sentencing the plaintiffs, upon the defendants
counterclaim, to pay the latter the sum of
P12,114; that the said judgment was appealed,
judgment in favor of the defendant in said case
and on foreclosure of the mortgage of the
hacienda Dos Hermanos, the sheriff sold the
same at public auction and adjudicated it in
favor of the defendant; that immediately after
it became the owner of the hacienda, the
defendant constructed the railway,it had
maintained was impossible to construct due to
the curves and grades found on the hacienda,
thereby showing that the defense which it put
up to this effect was false

andfraudulent.that as a result of the judgments

fraudulently obtained by the defendant, the
plaintiffs have suffered damages in the sum of
P70,000. As second cause of action of the
amended complaint the following facts were
alleged: that in the milling contract, through
the false representations of the officers of the
defendant, the latter induced the plaintiffs to
empower it to obtain a loan from any
institution and to secure it by the mortgage of
the hacienda Dos Hermanos, promising to give
the plaintiffs a bonus after the loan had been
paid and the mortgage released; that the
plaintiffs have been informed, and so allege in
their amended complaint, that the defendant,
armed with said power, obtained a loan from a
bank which it guaranteed by the hacienda Dos
Hermanos and that, notwithstanding the
payment and release of the mortgage, the
defendant has refused and still refuses to pay
them the offered bonus to be later determined
at the trial.


Whether defendant is guilty of fraud by

failure to construct railways system?.


Article 1348 Impossible thing or services

cannot be the object of contracts.


1. The foreclosure of the mortgage of the

hacienda Dos Hermanos, the sheriff sold the
same at public auction and adjudicated it in
favor of the defendant was affirmed, resulted
from counter claim, upon which the hacienda
was in default.
2. The defendant did not construct the railway
because the land of the hacienda was very
rugged and the curves and grades made the

construction thereof impossible.

3. According to the allegations of the
amended complaint the fraud consisted in the
perjury committed by the witnesses for the
defendant who stated that the railway was not
constructed on the hacienda Dos Hermanos
because on the land were found curves and
grades which made its construction materially
impossible. This was the special defense put
up by the defendant in that case and was the
question submitted to the court and the latter
resolved it in

Rivera vs. Del Rosario

by Maki
G.R. No. 144934 January 15, 2004
Del Rosario is the registered owners of Lot No. 1083-C, a parcel of land situated at
Lolomboy, Bulacan.
Fidela del Rosario borrowed P250,000 from Mariano Rivera in the early part of 1987.
To secure the loan, she and Mariano Rivera agreed to execute a deed of real estate
mortgage and an agreement to sell the land. Consequently, Mariano drafted the
Deed of Real Estate Mortgage, a Kasunduan (Agreement to Sell), and a Deed of
Absolute Sale.

The Kasunduan provided the Riveras would purchase the lot for P2.1M. There were 3
o 250 K upon the signing of the Kasunduan
o 750K on August 31, 1987
o 1.1M on December 31, 1987.
The Deed of Absolute Sale would be executed only after the second installment is
paid and a postdated check for the last installment is deposited with Fidela.
Although Fidela intended to sign only the Kasunduan & the real estate mortgage,
she inadvertently affixed her signature on all 3 documents.
Rivera failed to complete the payment in the 2nd installment.
Respondents filed a complaint asking for the rescission of Kasunduan for failure of
Riveras to comply with its conditions. They also sought the annulment of the deed
of absolute sale on the ground of fraud & the reconveyance of the entire property.
Petitioners say that there can be no rescission because in accordance with Article
1383, the del Rosarios must show that there were no other legal means available to
obtain reparation other than to file a case for rescission.
NB: Nieto was the tenant of the property. When the Riveras showed to Nieto that
they were the new owners, he desisted from vacating the property. The Riveras
agreed to give him a small piece of the land in question.
The RTC declared the deed of absolute sale as null and void. The CA modified the
RTCs decision insofar as it deemed the portion pertaining to Nieto as valid.
WON the contract entered into between the parties may be rescinded based on Art
1191? NO
WON the deed of absolute sale is null and void in its entirety as opposed to the CAs
decision of validity pertaining to Nietos share? YES, VOID IN ITS ENTIRETY
The Kasunduan reveals that it is in the nature of a contract to sell, as distinguished
from a contract of sale. In a contract of sale, the title to the property passes to the
vendee upon the delivery of the thing sold; while in a contract to sell, ownership is,
by agreement, reserved in the vendor and is not to pass to the vendee until full
payment of the purchase price. In a contract to sell, the payment of the purchase
price is a positive suspensive condition, the failure of which is not a breach, casual

or serious, but a situation that prevents the obligation of the vendor to convey title
from acquiring an obligatory force.
Respondents bound themselves to deliver a deed of absolute sale and clean title
after petitioners have made the second installment. This promise to sell was subject
to the fulfillment of the suspensive condition. Petitioners however failed to complete
payment of the second installment. The non-fulfillment of the condition rendered
the contract to sell ineffective and without force and effect. It must be stressed that
the breach contemplated in Article 1191 of the New Civil Code is the obligors failure
to comply with an obligation already extant, not a failure of a condition to render
binding that obligation. Failure to pay, in this instance, is not even a breach but an
event that prevents the vendors obligation to convey title from acquiring binding
force. Hence, the agreement of the parties in the instant case may be set aside, but
not because of a breach on the part of petitioners for failure to complete payment of
the second installment. Rather, their failure to do so prevented the obligation of
respondents to convey title from acquiring an obligatory force.
While Article 1191 uses the term rescission, the original term used in Article 1124 of
the old Civil Code, from which Article 1191 was based, was resolution.46 Resolution
is a principal action that is based on breach of a party, while rescission under Article
1383 is a subsidiary action limited to cases of rescission for lesion under Article
1381 of the New Civil Code.


G.R. No. L-23893

March 23, 1926

MANUEL RIOS and PACIENCIA REYES, plaintiffs-appellants,

JACINTO, defendants-appellees.
Vicente Sotto for appellants.
Camus Delgado for appellees.

This action was instituted in the Court of First Instance of the City of Manila by Manuel
Rios and wife, Paciencia Reyes, for the purpose of recovering the sum of P23,300, with
legal interest, and costs, as damages alleged to have been incurred by the plaintiffs by
reason of breach of a contract of lease. The defendants named in the complaint are the
firm of Jacinto, Palma y Hermanos, S. C., as lessee, in the same firm. Upon hearing the
cause the trial court absolved the defendants from the complaint and the plaintiffs
No transcript of the oral testimony appears in the record, with the result that our view of
the case will be limited to the questions of law arising upon the facts found by the trial
court, in connection with the letter (Exhibit K) referred to in the opinion.
It appears that by contract dated September 1, 1920, the plaintiffs, as owners of a
parcel of land on Gagalangin Street, Tondo District, Manila, let the same, with the
improvements thereon, to the firm of Jacinto, Palma y Hermanos, S. C., for the term of
fifteen years at a monthly rental of P400 payable in advance during the first ten days of
each month. Among the provisions contained in this contract we note clause 9, which is
to the effect that the terms and conditions of the contract shall be obligatory upon and
redound to the benefit of the persons composing the lessee firm, their heirs executors,
administrators, successors and assigns, as well as the successors and assigns of the
lessors. The lessee entered upon the possession of the leased premises upon the date
above stated; and the payment of the agreed rental was continued until November and
December of the year 1923, for which months the rent fell into arrears.
Meanwhile several successive reorganizations of the lessee firm had been effected as
follows: The first lessee, Jacinto, Palma y Hermanos, S. C., was succeeded by the firm
of P. & F. Jacinto, and the latter in turn by the firm of Palma Brothers & Co., Ltd., to be
itself again succeeded by Palma & Co,. a corporation. The plaintiffs were informed of
these changes in the personality of the lessee and, as the trial court found, acquiesced
In view of the default in the payment of the monthly rental for the months of November
and December, 1923, Mr. Gregorio Araneta, as attorney for Manuel Rios, addressed a
letter, on December 27, 1923, to Rafael Palma, as partner in the original firm and its
former manager. In the course of this letter the writer asked Mr. Palma, in case the
lessee could not continue to pay the rent, to return the property at once to Rios, "without
prejudice to ulterior responsibility for damages for breach of contract." The writer added
that Rios desired prompt action in the matter and that he must have possession of the
property on or before the 29th of the month, otherwise he would be compelled to begin
a detainer suit.

In response to this demand the occupant, Palma Bros. & Co., Ltd., or Palma & Co., or
whoever had actual possession, vacated the premises on December 29, giving
notification to the plaintiff Manuel Rios, who at once assumed possession. We gather
from the record that the rent for November and December, 1923, has subsequently
been paid; but the premises appear to have been entirely vacant during the months of
January and February, 1924, and for this period no compensation has been paid to the
plaintiffs by any one. Beginning with March, 1924, the property was let by the plaintiffs
for a term of three years, renewable for another three, to the firm of Walter A. Smith Co.,
Inc., upon the best terms then procurable in the market, which was at a monthly rental
of P250.
In this court the plaintiffs, as appellants, have assigned error among other things, to the
failure of the trial court to give judgment for the sum of P800, the stipulated rent for
January and February, 1924, and for the further sum of P22,500, being the difference
between the amount which the lessee had agreed to pay during the twelve years that
the lease was to run from the time when the plaintiffs resumed possession and the
amount which, during the same period, the plaintiffs would obtain from the new-lessee,
or others, at the rate of P150 a month.
The firm of Jacinto, Palma y Hermanos, S. C., allowed a default judgment to be entered
in this case for its failure to answer, but the individual defendants interposed an answer
relying upon two special defenses which will be examined in turn. It is first claimed that
the original lessee and the partners in that concern were discharged by a novation of
the original contract whereby the lessee was changed and new debtor substituted for
the original debtor. We are of the opinion that there is no merit in this defense and that
the facts found by the trial court are not sufficient in law to show a discharge of the
parties liable upon the original lease. What appears to have occurred, and what the
court found, was that the plaintiff Rios said that it was all right when told of the
successive changes in the personality of the lessee, and he seems to have been
content to receive the monthly rent from anybody who wanted to pay it.
But by preference to clause 9 of the contract, it will be seen that the lessors really had
no choice in their attitude to these changes. It was there stipulated that the provisions of
the lease should be obligatory upon and redound to the benefit not only of the persons
composing the lessee firm but their assigns. The transfer of the lease was therefore
anticipated in the lease and stipulated for, and the lessors had no right to complain as
the leased premises passed from one entity to another. The contract, however, does not
stipulate that the original lessee should be discharged by any such assignment, and an
agreement to this effect cannot be implied from the mere forced acquiescence of the
lessors in the transfer of the lease. Under article 1204 of the Civil Code the only
stipulation where a novation having the effect of extinguishing a prior obligation will be

implied, in the absence of express stipulation, is where the new and old obligations are
incompatible in every respect. In the case under consideration the new obligation
assumed by the successive entities taking over the lease was not all incompatible with
the continued liability of the original lessee. It is very common thing in business affairs
for a stranger to a contract to assume its obligation; ad while this may have the effect of
adding to the number of persons liable, it by no means necessarily implies the
extinguishment of the liability of the first debtor. (Michigan Stove Co. vs. A. H. Walker &
Co., 150 Iowa, 363; Ann. Cas. 1912D, 505; Testate Estate of Mota vs. Serra, 47 Phil.,
The second ground of defense to the action is, in the opinion of the majority of the
members of the court, of a more meritorious character. This defense is planted upon the
fact that after the default occurred in the payment of rent for the months of November
and December, 1923, the lessors voluntarily, and upon their own demand, resumed
possession of the premises. It is insisted for the defense that this relieved the original
lessee and all other persons liable upon the lease from any liability for future rent and
therefore from any liability for damages that may have accrued, or might accrue, to the
lessors during the remainder of the term of the lease. The situation is one that must be
considered in the light of certain provisions of the Civil Code, to which attention will be
In article 1124 of the Civil Code it is declared that an obligation may be resolved if one
of the obligors fails to comply with that which is incumbent upon him; and it is declared
that the person prejudiced may elect between exacting the fulfillment of the obligation
(specific performance) and its resolution, with compensation for damage and payment
of interest in either case. This general principle is substantially reproduced in the special
provisions of the Civil Code dealing with the rights and obligations of lessor and
lessees. In the first paragraph of article 1555 it is declared to be the duty of the lessee
to pay the price of the lease in the manner agreed upon. In article 1556 the failure of the
lessee to comply with this obligation is declared to be ground for the rescission of the
contract and the recovery of damages, or the latter only, leaving the contract in force. It
will thus be seen that the lessor is permitted to elect between the two remedies of (1)
rescissions, or resolution, with damages and (2) specific performance, with damages. It
will be noted that he is not entitled to pursue both of these inconsistent remedies; and
slight advertence to the logic of the situation will teach us that, in estimating the
damages to be awarded in case of rescission, those elements of damages only can be
admitted that are compatible with the idea of rescission; and of course in estimating the
damages to be awarded in the case lessor elects for specific performance only those
elements of damages can be admitted with are compatible with the conception of
specific performance. It follows that damages which would only be consistent with the

conception of specific performance cannot be awarded in an action where rescission is

In the case before us the lessors clearly elected to resolve or rescind the contract. Now
it is an inseparable incident of resolution or rescission that the parties are bound to
restore to each other the thing which has been the subject matter of the contract,
precisely as in the situation where a decree of nullity is granted. In the common case of
the resolution of a contract of sale for failure of the purchaser to pay the stipulated price,
the seller is entitled to be restored to the possession of the thing sold, if it has already
been delivered. But he cannot have both the thing sold and the price which was agreed
to be paid, for the resolution of the contract has the effect of destroying the obligation to
pay the price. Similarly, in the case of the resolution, or rescission, of a contract of
lease, the lessor is entitled to be restored to the possession of the leased premises, but
he cannot have both the possession of the leased premises for the remainder of the
term and the rent which the other party had contracted to pay. The termination of the
lease has the effect of destroying the obligation to pay rent for the future.
The damages or indemnity conceded in case of resolution by article 1124 and the
damages conceded by article 1556 in the case of the rescission of a lease have
reference to the damages for the default which gave rise to the right to terminate the
lease. In a case of the kind now before us it would cover rent in arrears and damage
done by the lessee to the leased premises or other special damages in particular cases
resulting from nonperformance of the lessee's obligation. By no reasonable
interpretation of these provisions can the indemnity or damages be understood as
extending the rent for the future, inasmuch as the termination of the lease abrogated
liability for future rent.
It is interesting to observe that the very point under consideration was passed upon by
the creators of the Civil Code, while that work was in progress of making; and the
manner in which the articles which we have been discussing are expressed
demonstrates an intention to eliminate damages in lieu of future rent when the lessor
elects to rescind. In this connection it appears that the Project of the Civil Code of 1851
expressly declared, in article 1840, that if the contract of lease should be resolved for
default of the lessee, he should be required, in addition to other damages inflicted upon
the lessor, to pay the agreed rental for the whole period of time that might elapse until
another lease should be made. This provision was not incorporated in the ultimate Civil
Code; and this is a good indication that the authors of the Code thought it unwise to
place this liability upon the lessee. (10 Manresa, 2nd ed., 546.)
The jurisprudence of the common law will be found to be in harmony with the conclusion
reached above; for the situation with which we are confronted is that which is called in

the common law a surrender, and by the consensus of authority a surrender has the
effect of abrogating the liability of the lessee for future rent. (35 C. J., 1095; 16 R. C. L.,
973.) We are not unmindful of the fact that American and English decisions contain
authority to the effect that when a lessee abandons the leased premises and the lessor
resumes possession for the protection of his property, the obligations of the lease still
remain in force; and the lessor has a right, if he so elects, to hold the lessee responsible
under his contract until the termination of the lease. But this doctrine is properly
confined to cases of abandonment by the lessee, and the damages there awarded are
in effect given in lieu of specific performance. In the case before us there was no
abandonment by the lessee, and in the intervention of the lessor to resume possession
was purely voluntary.
At first blush it might appear that the case would perhaps be affected by the reservation
contained in the demand of plaintiffs' attorney for the surrender of the premises, in
which he stated that the demand was without prejudice to ulterior responsibility for
damages. But a moment's reflection ought to show that the right of action here reserved
must be understood as having reference to such damages as might be recoverable in
law, consistently with the election of the plaintiffs to rescind the contract.
From what has been said it follows that the judgment absolving the defendants from the
complaint must be affirmed; and it is ordered, with costs against the appellants.


April 1, 1954, Grace Park Engineering, Inc., and Mohamad Ali Dimaporo entered into a Contract
for the Sale of Cassava Flour and Starch Processing Machinery and Equipment (Exh.
A) 2 whereby the corporation agreed to sell and install, for the consideration of P52,000.00, a cassava
flour and starch processing machinery and equipment specifically described therein at Dimaporo's place
in Karomatan Lanao Mill Site, within a period of 70 working days from the date of signing of the contract.
It was agreed that P5,750.00 shall be paid upon signing of the contract; P10,000.00 shall be paid within
30 days from the date of the signing of the contract but before machinery and equipment is loaded at
Manila Harbor and P36,750.00 shall be payable in 12 monthly installments as provided in the contract.

during the course of installation of said machinery and equipment, Dimaporo failed to
comply with his obligations specified in par. 6 of said contract, so much so that the
Corporation was forced to provide the necessary materials and labor and advance
whatever expenses had been made for that purpose with previous knowledge and
consent given by Dimaporo because the latter was short of funds during that time.
It took the Corporation one (1) year and three (3) months to install the said machinery
and equipment, after which, it demanded from Dimaporo complete payment of the
balance due and for all expenses made in advance arising from the supply of materials
and labor which Dimaporo failed to provide on time. Dimaporo refused to pay on the
ground that the balance of P36,750.00 never became due and demandable because of
the Corporation's failure to complete the installation of the machinery and equipment
within the stipulated period and place the same in satisfactory running conditions as
guaranteed by it in the contract.

In case both parties have committed a breach of the obligation, the liability
of the first infractor should be equitably tempered by the Courts. If it
cannot be determined which of the parties first violated the contract, the
same should be deemed extinguished, and each shall bear his own
From the judgment of the Court below, Dimaporo directly appealed to this Court
imputing seven (7) assignments of errors committed by the trial court, which may be
synthesized into four (4) main issues:
a) whether he was guilty of breach of contract.
b) whether he was liable to return the machinery and equipment subject matter of the
c) whether he was liable to pay appellee Corporation the amount of P19,628.93 with
d) whether he was entitled to the award of damages in his favor.
The findings of fact of the trial court that both appellant Dimaporo and appellee corporation have
committed a breach of obligation are fully supported by the evidence on record. As We have
stated, We are not in a position to disturb the same. Therefore, it correctly applied Article 1192
of the New Civil Code to the effect that in case both parties have committed a breach of
obligation and it cannot be determined who was the first infractor, the contract shall be deemed

extinguished and each shall bear his/its own damages. Consequently, the trial court committed
no reversible error when it ordered appellee corporation to pay appellant the amount of
P15,570.00 representing partial payment of the purchase price of the machinery and equipment.
This is but a consequence of the decree of rescission granted by the trial court. Neither did it
commit any error when it refused to grant any interest on the aforesaid amount of P15,570.00.
This is also but a consequence of the enunciated rule that each party should bear his/its own
damages. For the same reasons, We hold that although appellant is liable to pay the amount of
P19,628.93 which appellee corporation had spent by way of advances with which to purchase
the necessary materials and supplies, however, he is not liable to pay interest thereon at the
rate of 6% per annum until full payment of the same, as held by the lower court. Otherwise, to
hold so would be in conflict with the above-mentioned rule that each party must bear his/its own


The plaintiff brought this action in the court below to foreclose a mortgage for
8,000 pesos upon certain land in the Province of Leyte. A demurrer to the complaint
was overruled, but to the order overruling it the defendant did not except. The
defendant answered, alleging that the document, the basis of the plaintiff's claim,
was executed through error on his part and through fraud on the part of the
plaintiff. A trial was had and judgment was entered for the plaintiff as prayed for in
its complaint. The defendant moved for a new trial on the ground that the decision
was not justified by the evidence, this motion was denied, to its denial the
defendant excepted, and he has brought the case here for
review.chanroblesvirtualawlibrary chanrobles virtual law library
Upon the questions of fact raised by the answer, the findings of the court below are
sustained by the evidence, in no event they can be said to be plainly and manifestly
against the weight of the evidence. Those findings include a finding that there was
no fraud on the part of the plaintiff, no mistake on the part of the defendant, and
that there was a sufficient consideration for the contract, As has been said, there
was in the case to support all of these
conclusions.chanroblesvirtualawlibrary chanrobles virtual law library
Upon one point, however, we think that the judgment was erroneous. The contract
send upon was executed on the 11th day of June, 1901. By terms thereof the
defendant promised to pay the plaintiff 8,000 pesos as follows: 500 pesos on the

30th of June, 1901, and the remainder at the rate of 100 pesos a month, payable
on the 30th day of each month, until the entire 8,000 pesos was paid. The
defendant paid 400 pesos and no more.chanroblesvirtualawlibrary chanrobles
virtual law library
This suit was commenced on the 12th day of June, 1903. There was no provision in
the contract by which, upon failure to pay one installment of the debt, the whole
debt should thereupon become at once payable. We are of the opinion that the
obligation can be enforced in this action for only the amount due and payable on
the 12th day of June, 1903.chanroblesvirtualawlibrary chanrobles virtual law library
The court below gave no credit for the payment of 400 pesos admitted by the
complaint to have been received by the plaintiff. It is allowed interest upon the
entire debt from the 1st day of July, 1901. The contract does not provide for the
payment of any interest. There is no provision in it declaring expressly that the
failure to pay when due should put the debtor in default. There was therefore no
default which would make him liable for interest until a demand was made. (Civil
Code, art. 1100; Manresa, Com. on Civil Code, vol 8, p. 56.) The transaction did not
constitute a mercantile loan and article 316 of the Code of Commerce is not
applicable. There was no evidence any demand prior to the presentation of the
complaint. The plaintiff is therefore entitled to interest only from the
commencement of the action.chanroblesvirtualawlibrary chanrobles virtual law
The judgment is set aside and the case is remanded to the court below with
directions to determine the amount due in accordance with the views hereinbefore
expressed and to enter judgment for such amount. No costs will be allowed to
either party in this court. So ordered.

G.R. No. L-12692

chanroble svirtualawlibrary

chanroble s

January 30, 1960

COSMIC LUMBER COMPANY, INC., plaintiff-appellee,

GAPITA MANAOIS, defendant-appellant.
Primicias and Del Castillo for appellee.
Jose Rivera for appellant.

The defendants appeal from a judgment of the Court of First Instance of Pangasinan,
Fourth Branch, ordering her to pay the plaintiff the sum of P4,147.74, lawful interest
thereon from 24 March 1954 when the original complaint was by the Court of Appeals to
this Court for it involves only a question of law.
As agreed upon by the parties, the facts are: On different dates from 10 November 1952
to 30 June 1953 the appellant bought, took delivery and received from the appellee
hardware goods, lumber and construction materials valued at the total sum of
P12,127.57 (par. 1, stipulation of facts; Exhibits A to Z; AA to OO), and from 4 November
1952 to 10 March 1954 the appellant paid the appellee the total sum of P6,979.83 which
the latter credited to the former's account (par. 3, stipulation of facts; Exhibits PP, PP-1,
QQ, QQ-1 to QQ-2). On 23 December 1954, after the original complaint had been filed
by the appellee ( 24 March 1954), the appellant paid the appellee the sum on P1,000
which the latter also credited to the former's account (par. 6, stipulation of facts), thereby
reducing her total indebtedness to P4, 147.74.
The appellant does not deny that she received the wares and materials listed in the
invoices (Exhibits A to Z and AA to OO), and that she is still indebted to the appellee in
the sum of P4,147.74. At the hearing of the case on 4 June 1956, her counsel withdrew
the objection (filed earlier during the day) to the items listed in some of the invoices
(Minutes of the session of 4 June 1956). However, she argues that as no time for
payment was stipulated or fixed and from the nature and the circumstances of the
obligation it could be inferred that a period was intended, the Court should fix the period
for payment pursuant to article 1197 of the new Civil Code.
The parties entered into a contract of sale on credit. In the invoices (Exhibit A to Z and
AA to OO) of the wares and material sold and delivered to the appellant, the words
"credit sales" appear and it is stated that
All civil actions on this contract shall be instituted in the courts of the City of
Dagupan and it is hereby agreed that all may/or purchases from this Company
are payable in the said City of Dagupan. It is agreed that if this bill is not paid
within . . . days from date hereof I/we will pay interest at the rate of 10 percentum
per annum on all overdue accounts. The buyer hereby agrees to pay and all
attorney's fees and court costs should the seller institute legal action. Goods
travel at buyer's risk. No claim of whatsoever nature will be considered after 24
hours from date of delivery.

The parties intended to fix a period for payment of the appellant's obligation but failed to
do so. Under article 1197 of the new Civil Code, the Court may fix it. Taking into
consideration that from 10 November 1952, the first sale, and 30 June 1953, the last
sale, to the present, more than six and nearly seven years already have elapsed, the
appellant who does not deny her obligation must be ordered to pay the appellee the
amount she still owes it within fifteen (15) days from the date the judgment shall have
become final.
With the slight modification just mentioned, the judgment appealed from is affirmed, with
costs against the appellant.


On March 17, 1975, the petitioner and her brother Celedonio Calilap constituted a
real estate mortgage over two parcels of land covered by Transfer Certificate of
Title (TCT) No. T-164117 and TCT No.T-160929, both of the Registry of Deeds of
Bulacan, to secure the performance of their loan obligation with respondent
Development Bank of the Philippines (DBP).[3] With the principal obligation being
ultimately unpaid, DBP foreclosed the mortgage. The mortgaged parcels of land
were then sold to DBP as the highest bidder. The one-year redemption period
expired on September 1, 1981.




Appeal under Rule 45 is
limited to questions of law only

The petitioners submissions, that her testimonial evidence sufficiently

established the facts behind the execution of the deed of conditional sale, and that
she had not fully understood the terms contained in the deed of conditional sale,
involved questions of fact, for the consideration and resolution of them would
definitely require the appreciation of evidence. As such, her petition for review is
dismissible for raising factual issues. Under Rule 45 of the Rules of Court, only
questions of law may be the proper subject of an appeal in this Court. The version
of Section 1 of Rule 45 in force at the time the petitioner commenced her present
recourse on April 28, 2003 expressly so stated, to wit:
Section 1. Filing of petition with Supreme Court. A party desiring to
appeal by certiorari from a judgment or final order or resolution of the
Court of Appeals, the Sandiganbayan, the Regional Trial Court or other
courts whenever authorized by law, may file with the Supreme Court a
verified petition for review on certiorari. The petition shall raise only
questions of law which must be distinctly set forth. (1a, 2a) (emphasis

To be sure, we have not lacked in reminding that in exercising its power of

review the Court is not a trier of facts and does not normally undertake the reexamination of the evidence presented by the contending parties during the trial of
the case. For that reason, the findings of facts of the CA are conclusive and binding
on the Court.
It is true that the Court has recognized several exceptions, in which it has
undertaken the review and re-appreciation of the evidence. Among the exceptions
have been: (a) when the findings of the CA are grounded entirely on speculation,
surmises or conjectures; (b) when the inference made by the CA is manifestly
mistaken, absurd or impossible; (c) when there is grave abuse of discretion on the
part of the CA; (d) when the judgment of the CA is based on a misapprehension of
facts; (e) when the findings of facts of the CA are conflicting; (f) when the CA, in
making its findings, went beyond the issues of the case, or its findings are contrary
to the admissions of both the appellant and the appellee; (g) when the findings of
the CA are contrary to those of the trial court; (h) when the findings of the CA are

conclusions without citation of specific evidence on which they are based; (i) when
the facts set forth in the petition as well as in the petitioners main and reply briefs
are not disputed by the respondent; (j) when the findings of fact of the CA are
premised on the supposed absence of evidence and contradicted by the evidence on
record; and (k) when the CA manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would justify a different
Although the petitioner submits that the CA made findings of fact not
supported by the evidence on record, this case does not fall under any of the
recognized exceptions. Her claim that she had established the circumstances to
prove her having been misled into signing the deed of conditional sale was
unfounded, for the findings of fact of the CA rested on the records, as the following
excerpt from the assailed decision of the CA indicates:
Appellant would like this Court to believe that she was misled by
appellee DBPs representatives into signing the Deed of Conditional Sale
even if her original intention was to buy back only one of the properties,
i.e., that which was covered by TCT No. T-164117. However, a closer
scrutiny of the evidence on record reveals that aside from her bare
allegations as to the circumstances leading to the signing of said
Deed of Conditional Sale, the appellant has not presented other
evidence, testimonial or documentary, to support or corroborate her
claims. On the other hand, appellee DBP has presented the letter dated
August 31, 1982 signed by appellant herself and addressed to the
Manager of the Acquired Assets Management Department of the
appellee DBP, expressing her intentions to buy back her foreclosed
properties. In fact, she offered therein to pay a total of P157,000.00
for the two properties with P55,500.00 to be advanced by her as
deposit and the balance to be paid in five (5) years under a quarterly
amortization plan. Said letter has not been categorically denied by
the appellant as during her testimony she merely feigned any
recollections of its content. Moreover, it is well-settled that bad faith
cannot be presumed and must be established by clear and convincing
evidence.[34] (emphasis supplied)

The petitioner apparently relied solely on her bare testimony to establish her
allegation of having been misled, and did not present other evidence for the
purpose. She seemingly forgot that, firstly, her bare allegation of having been

misled was not tantamount to proof, and that, secondly, she, as the party alleging a
disputed fact, carried the burden of proving her allegation. [35] In other words,
her main duty was to establish her allegation by preponderance of evidence,
because her failure to do so would result in her defeat. [36] Alas, she did not
discharge her burden.
On the other hand, the records contained clear indicia of her real
intention vis--vis her reacquisition of the two foreclosed properties. The letters and
telegrams she had dispatched to DBP expressed the singular intention to
repurchase both lots, not just the one covered by TCT No. 164711. That intention
even became more evident and more definite when she set down the payment
terms for the repurchase of both lots in her letter of August 31, 1982. Given all
these, the CA rightly concluded that her written communications to DBP had
revealed her earnest desire to re-acquire both foreclosed properties.
Article 1332 of the Civil Code
did not apply to the petitioner

The petitioner would have us consider that she had not given her full consent to the
deed of conditional sale on account of her lack of legal and technical knowledge.
In effect, she pleads for the application of Article 1332 of the Civil Code, which
Article 1332. When one of the parties is unable to read, or if the contract
is in a language not understood by him, and mistake or fraud is alleged,
the person enforcing the contract must show that the terms thereof have
been fully explained to the former.

We cannot accede to the petitioners plea.

The pertinent terms of the deed of conditional sale read:

NOW THEREFORE for and in consideration of the foregoing premises

and for the total sum of ONE HUNDRED FIFTY SEVEN THOUSAND
PESOS (P157,000.00), Philippine Currency, to be fully paid as
hereinafter set forth, the VENDOR agrees to convey by way of sale and
the VENDEE agrees to buy the above stated properties covered by TCT
Nos. T-160929 and T-164117, more particularly described at the back
hereof under the following terms and conditions:
That the downpayment shall be P55,500 and the balance
of P101,500 to be paid in five (5) years on the quarterly
amortization plan at 15% interest per annum the first
amortization of P7,304.15 shall be due and payable 3 mos. from
the date of execution of the Deed of Conditional Sale and all
subsequent amortizations shall be due and payable every three
(3) months thereafter;
That if the vendee fails to sign the sale document within 15
days from date of receipt of our notice of approval of the offer,
the approval hereof shall be deemed automatically revoked and
the deposit forfeited in accordance with the rules and regulations
of the Bank.
The Vendee/s may pay the whole or part of the account under
this contract at anytime during the term hereof; provided,
however, that if the vendee/s is in default in the payment of at
least six monthly amortizations, if payable monthly; two
quarterly amortizations, if payable quarterly; one semi-annual
and annual amortization if payable semi-annually and annually,
the Vendor may, in its option, declare the whole account due and
The title to the real estate property and all improvements
thereon shall remain in the name of the vendor until after the
purchase price, advances and interest shall have been fully paid.
The Vendee/s agrees that in the event of his failure to pay the
amortizations or installments as herein provided for, the contract
shall, at the option of the Vendor, be deemed and considered
annulled, and he shall forfeit, and by these presents, hereby
waives whatever right he might have acquired to the said
property. The Vendor shall then be at liberty to dispose of same
as if this contract has never been made; and in the event of such

annulment, all sums of money paid under the contract shall be

considered and treated as rentals for the use of the property, and
the Vendee/s waives all rights to ask or demand the return
thereof and he further agrees to vacate peacefully and quietly
said property, hereby waiving in favor of the Vendor whatever
expenses he may have incurred in the property in the form of
improvement or under any concept, without any right to
reimbursement whatsoever.
It is hereby agreed, covenanted and stipulated by and
between the parties hereto that should the Vendor decide to
rescind this contract in view of the failure of the Vendee/s to pay
the amortization/installments, when due, or otherwise fail/s to
comply with any of the terms and conditions herein stipulated,
and the Vendee/s refuse/s to peacefully deliver the possession of
the property hereinbove mentioned to the Vendor, thereby
obliging the Vendor to file suit in court with the view to taking
possession thereof, the Vendee/s hereby agree/s to pay all the
expenses of the suit incident thereto, all the damages that may be
incurred thereby, as well as attorneys fees which it is hereby
agreed, shall be 10% of the total amount due and outstanding,
but in no case shall it be less than P100.00.[37]

It is quite notable that the petitioner did not specify which of the stipulations of the
deed of conditional sale she had difficulty or deficiency in understanding. Her
generalized averment of having been misled should, therefore, be brushed aside as
nothing but a last attempt to salvage a hopeless position. Our impression is that the
stipulations of the deed of conditional sale were simply worded and plain enough
for even one with a slight knowledge of English to easily understand.
The petitioner was not illiterate. She had appeared to the trial court to be
educated, its cogent observation of her as lettered (supra, at p. 7 hereof) being
based on how she had composed her correspondences to DBP. Her testimony also
revealed that she had no difficulty understanding English, as the following excerpt

Q : Mrs. Witness, last time you identified the document, captioned as

Deed of Conditional Sale which was executed last January 21,
1983, it was read in English language, correct?
A : Yes, sir.
Q : And, could you testify in this Court without in need of
A : Yes, sir.
Q : So, you are aware or comfortable with the English language?
A : Yes, sir.[38]

Nor was the petitioners ignorance of the true nature of the deed of conditional sale
probably true. By her own admission, she had asked the bank officer why she had
been made to sign a deed of conditional sale instead of an absolute sale, which in
itself reflected her full discernment of the matters subject of her dealings with
DBP, to wit:
Q : Now, before you signed this Deed of Conditional Sale sometime
on January 21, 1983, did you read this document?
A : Yes, your Honor, and I even told the officer of the Bank, that why
it should be a Deed of Probitional Sale when in fact it should
be a Deed of Absolute Sale because I paid already the full
amount of P55,500.00 for the property covered by TCT No.
164117 and they told me that after a few amortizations on the
other property, they are going to release the property which was
paid in full but did not push through, Your Honor.[39]

understand written and spoken English, the language in which the terms of the
contract she signed had been written.
Clearly, Article 1332 of the Civil Code does not apply to the petitioner.
According to Lim v. Court of Appeals,[40] the provision came into being because a

sizeable percentage of the countrys populace had comprised of illiterates, and the
documents at the time had been written either in English or Spanish, viz:
In calibrating the credibility of the witnesses on this issue, we take
our mandate from Article 1332 of the Civil Code which provides: When
one of the parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person enforcing
the contract must show that the terms thereof have been fully explained
to the former. This substantive law came into being due to the finding
of the Code Commission that there is still a fairly large number of
illiterates in this country, and documents are usually drawn up in
English or Spanish. It is also in accord with our state policy of
promoting social justice. It also supplements Article 24 of the Civil
Code which calls on court to be vigilant in the protection of the
rights of those who are disadvantaged in life.[41] (Emphasis supplied)

DBP validly exercised its right to rescind the
deed of conditional sale upon the petitioners default

The petitioner argues that despite the right to rescind due to nonpayment being
stipulated in the deed of conditional sale, DBP could not exercise its right because
her nonpayment of an obligation constituted only a slight or casual breach that did
not warrant rescission. Moreover, she posits that Article 1191 [42] of the Civil
Code empowers the court to fix the period within which the obligor may comply
with the obligation.
The petitioners argument lacks persuasion.
Firstly, a contract is the law between the parties. Absent any allegation and
proof that the contract is contrary to law, morals, good customs, public order or
public policy, it should be complied with in good faith .[43] As such, the petitioner,
being one of the parties in the deed of conditional sale, could not be allowed to
conveniently renounce the stipulations that she had knowingly and freely agreed

Secondly, the issue of whether or not DBP validly exercised the right to
rescind is a factual one that the RTC and the CA already passed upon and
determined. The Court, which is not a trier of facts, adopts their findings, and
sustains the exercise by DBP of its right to rescind following the petitioners failure
to pay her six monthly amortizations, and after her being given due notice of the
notarial rescission.[44] As a consequence of the valid rescission, DBP had the legal
right to thereafter sell the property to a person other than the petitioner, like Cruz.
In turn, Cruz could validly sell the property to Cabantog and Trinidad, which he
And, thirdly, Article 1191 of the Civil Code did not prohibit the parties from
entering into an agreement whereby a violation of the terms of the contract would
result to its cancellation. In Pangilinan v. Court of Appeals,[45] the Court upheld the
vendors right in a contract to sell to extrajudicially cancel the contract upon failure
of the vendee to pay the installments and even to retain the sums already paid,
[Article 1191 of the Civil Code] makes it available to the injured party
alternative remedies such as the power to rescind or enforce fulfillment
of the contract, with damages in either case if the obligor does not
comply with what is incumbent upon him. There is nothing in this law
which prohibits the parties from entering into an agreement that a
violation of the terms of the contract would cause its cancellation
even without court intervention. The rationale for the foregoing is
that in contracts providing for automatic revocation, judicial
intervention is necessary not for purposes of obtaining a judicial
declaration rescinding a contract already deemed rescinded by
virtue of an agreement providing for rescission even without judicial
intervention, but in order to determine whether or not the rescission
was proper. Where such propriety is sustained, the decision of the
court will be merely declaratory of the revocation, but it is not itself
the revocatory act. Moreover, the vendors right in contracts to sell
with reserved title to extrajudicially cancel the sale upon failure of
the vendee to pay the stipulated installments and retain the sums
and installments already received has long been recognized by the
well-established doctrine of 39 years standing. The validity of the

stipulation in the contract providing for automatic rescission upon

non-payment cannot be doubted. It is in the nature of an agreement
granting a party the right to rescind a contract unilaterally in case
of breach without need of going to court. Thus, rescission under
Article 1191 was inevitable due to petitioners failure to pay the
stipulated price within the original period fixed in the agreement.

ACCORDINGLY, the petition for review is DENIED for lack of merit, and the
decision of the Court of Appeals promulgated on June 21, 2002 is AFFIRMED.


The Facts and the Case
On December 11, 1996 petitioner Pilipino Telephone Corporation (Piltel)
expressed its willingness, on purely best effort, to buy in 1997 from respondent
Radiomarine Network, Inc. (Smartnet) 300,000 units of various brands of cellular
phones and accessories (Motorola, Mitsubishi, and Ericsson).[1]
On the following day, December 12, 1996, Piltel agreed to sell to Smartnet a
3,500-square meter lot,[2] known as the Valgoson Property, in Makati City for P560
million. Smartnet agreed to pay Piltel P180 million as down payment with the
balance of P380 million to be partly set off against the obligations that Piltel was to
incur from its projected purchase of cellular phones and accessories from
Smartnet. Smartnet agreed to settle any unpaid portion of the purchase price of the
land after the set off on or about April 30, 1997.
The contract to sell between the parties provides:
The total consideration of FIVE HUNDRED SIXTY MILLION
PESOS (P560,000,000.00) shall be paid by the VENDEE [Smartnet],
without the need of any demand, to the VENDOR [Piltel] in the
following manner:

(a) a downpayment in the amount of ONE HUNDRED EIGHTY

MILLION (P180,000,000.00) PESOS, to be paid on or before December
28, 1996;
(b) Any and all outstanding payables which the VENDOR [Piltel]
owes to the VENDEE [Smartnet] in consideration of the cellular phone
units and accessories ordered by the VENDOR [Piltel] and delivered by
the VENDEE [Smartnet] between the initial downpayment date i.e.
December 28, 1996 and April 30, 1997, shall be credited to the
VENDEE [Smartnet] as additional payment of the purchase price.
(c) The remaining balance, after deducting (a) and (b) above, shall
be paid on or about April 30, 1997. It is expressly understood however,
that the VENDOR [Piltel] shall submit to the VENDEE [Smartnet], on
or about April 20, 1997, a Statement of Account updating the deliveries
of cellular phones and its outstanding amount in order that the VENDEE
[Smartnet] can prepare the final payment. In this way, the amount of
final payment shall be made to the VENDOR [Piltel] on or before April
30, 1997. Should the VENDOR [Piltel] be delayed in the submission of
the said Statement on the stipulated date, the date of payment of the
remaining balance shall be automatically adjusted for a period equivalent
to the number of days by which the VENDOR [Piltel] is delayed in the
submission thereof.[3]
The parties also agreed on a rescission and forfeiture clause [4] which
provided that, if Smartnet fails to pay the full price of the land within the stipulated
period and within five days after receipt of a notice of delinquency, it would
automatically forfeit to Piltel 10% of the P180 million down payment or P18
million and the contract shall be without force and effect.

Smartnet failed to pay the P380 million balance of the purchase price on or
about the date it fell due. On December 19, 1997 Piltel returned P50 million to
Smartnet, a portion of the P180 million down payment that it received. Smartnet
later requested Piltel for the return of the remaining P130 million but the latter
failed to do so.[5]
On December 1, 1999 Smartnet filed a complaint[6] against Piltel for
rescission of their contract to sell involving the Valgoson Property or its partial
specific performance before the Regional Trial Court (RTC) [7] of Makati City in

Civil Case 99-2041. Smartnet alleged, among other things, that it withheld
payment of the balance of the purchase price of the subject property because Piltel
reneged on its commitment to purchase from Smartnet 300,000 units of cellular
phones and accessories.
Smartnet asked the court to (a) order Piltel to convey to Smartnet at least
32% interest in the Valgoson Property, representing the value of its down payment
of P180 million or, in the alternative, order Piltel to return to Smartnet its P180
million down payment plus interest; (b) order Piltel to pay
Smartnet P81,300,764.96, representing the value of the 300,000 units of various
cellular phones which it acquired pursuant to Piltels commitment to buy them but
which commitment Piltel disregarded, plus interest, as actual and compensatory
damages; and (c) order Piltel to pay Smartnet P500,000.00 in attorneys fees.
In its answer with counterclaims,[8] Piltel claimed that the agreement to
purchase cellular phones and accessories was not part of its contract with Smartnet
for the sale of the Valgoson Property and that Piltel committed to buy equipment
from Smartnet only on a best effort basis. For this reason, Piltel pointed out,
Smartnet did not have the power to rescind the contract to sell the Valgoson
Property and, hence, cannot invoke that contracts rescission and forfeiture
clause. Piltel sought full payment by Smartnet of the purchase price for the
Valgoson Property, moral damages, exemplary damages, and litigation expenses.
On October 3, 2000 Smartnet filed a motion for partial summary
judgment[9] for the return of the down payment it paid Piltel. The RTC granted the
motion on November 13, 2000[10] and ordered Piltel to return the P180 million
down payment that it received less the forfeited amount of P18 million and the
cash advance of P50 million or a net of P112 million, with interest at 6% per
annum from the time of the extrajudicial demand on it on October 20, 1998 until
finality of the judgment and an additional 12% legal interest after the judgment
becomes final and executory until the same is satisfied. Piltel filed a motion for
reconsideration which the RTC denied for lack of merit on January 30, 2001.

On March 15, 2001 Smartnet filed a manifestation and motion, withdrawing

its two remaining causes of action and praying for the issuance of a writ of
execution. On March 20, 2001 it filed an alternative motion for execution pending
appeal of the RTCs partial decision.
On April 4, 2001 Piltel filed with the Court of Appeals (CA) [11] a special civil
action for certiorari with application for a temporary restraining order and a writ of
preliminary injunction. Piltel alleged that the RTC presiding judge, Reinato G.
Quilala, gravely abused his discretion when he issued a partial summary judgment
in the case and denied Piltels motion for reconsideration. But the CA dismissed the
petition, prompting Piltel to challenge such dismissal before this Court in G.R.
Meantime, on April 23, 2001 the RTC granted (a) Smartnets motion to
withdraw its remaining causes of action and (b) its motion for execution pending
appeal.[12] Consequently, a writ of execution was issued on April 24, 2001.
On April 25, 2001 Piltel filed a notice of appeal to the CA from the judgment
of November 13, 2000 and from the April 23, 2001 Order that allowed execution
pending appeal. The appeal to the CA was docketed as CA-G.R. CV 71805.
On April 26, 2001 Piltel filed with the RTC a motion to defer execution
pending appeal upon the posting of a supersedeas bond. The RTC denied the
motion. Piltel filed a motion for reconsideration but the court denied it on August
14, 2001[13] and directed Piltel to pay 12% interest on the judgment amount from
April 23, 2001, when it allowed the execution pending appeal.Piltel filed a
supplemental notice of appeal to the CA from this last order.
On June 11, 2003 the CA dismissed Piltels appeal in CA-G.R. CV 71805.
The appellate court held that the RTC did not err when it granted summary
judgment since there were no genuine issues involved in the case. The CA said that

Smartnets failure to pay the balance of the purchase price ipso facto avoids the
contract to sell. With the denial of its motion for reconsideration, [15]Piltel filed this
petition under Rule 45 of the Rules of Court.
Meantime, the Court in G.R. 152092[16] denied Piltels petition on August 4,
2010. The Court affirmed the CAs ruling in CA-G.R. SP 64155 that appeal, and
not certiorari, is the proper remedy. Moreover, it held that Piltel committed forum
shopping when it filed a petition for certiorari and a notice of appeal to assail the
same resolutions and orders of the RTC.
With the denial of G.R. 152092, the Court is now left with this petition
assailing the CAs dismissal of Piltels appeal in CA-G.R. CV 71805.
The Issue Presented
The core issue for resolution is whether or not there are genuine issues of
fact to be tried in this case.
The Courts Ruling
A genuine issue of fact is that which requires the presentation of evidence, as
distinguished from a sham, fictitious, contrived or false issue. When the facts as
pleaded appear uncontested or undisputed, then there is no real or genuine
issue. Summary judgment is proper in such a case.[17]
Here, Piltel contends that summary judgment is out of place because the
parties raise factual issues of fraud and breach of contract. Although their contract
has a built-in rescission and forfeiture clause, this becomes operative only upon the
occurrence of the following conditions: 1) Piltel sends a Statement of Account to
Smartnet; 2) Smartnet fails to pay within 10 days from receipt of the statement; 3)

Piltel sends a Notice of Delinquency to Smartnet; and 4) Smartnet fails to pay

within five days from receipt of the notice.
The rescission and forfeiture clause thus reads:
In case the VENDEE fails to fully pay, within the stipulated
period, the balance of the total consideration under Article 2(c) of this
Contract to Sell, the VENDOR shall send a notice of delinquency to the
VENDEE. Failure on the part of the VENDEE to pay within five (5)
days from receipt of said notice, ten (10%) percent of the downpayment
or EIGHTEEN MILLION PESOS (P18,000,000.00) PESOS, Philippine
Currency shall automatically be forfeited in favor of the VENDOR and
the Contract to Sell shall be without force and effect. [18]

Notably, however, both Piltel and Smartnet admit that they entered into a
contract to sell covering the Valgoson Property; that Smartnet agreed to pay
Piltel P560 million for it, with a down payment of P180 million; and that Smartnet
failed to pay the balance of the purchase price on or about April 30, 1997.
With these common admissions, it is clear that there are no genuine issues of
fact as to the existence and nature of the contract to sell as well as Smartnets
failure to pay the balance of the purchase price within the agreed period. Thus, the
RTC was correct in skipping trial and deciding the case through a summary
judgment based on the undisputed facts.
Smartnets allegations respecting fraud and breach of contract referred to
what appears to be Piltels non-binding promise to buy cellular phones and
accessories from Smartnet. These are matters independent of the parties agreement
concerning Piltels sale of the Valgoson Property to Smartnet. The contract to sell of
such property was not legally linked or made dependent on the aborted cellular
phone deal between the parties. Indeed, Smartnet dropped with leave of court its
causes of action relating to such deal.

All that matters is that since Smartnet failed to pay the balance of the
purchase price, automatic rescission set in and this placed Piltel under an
obligation to return the down payment it received, less the portion that it forfeited
due to Smartnets default.Consequently, it is but proper for Piltel to fully abide by
such obligation. Piltel cannot avoid rescission since it in fact partially abided by
rescissions consequences when it returned to Smartnet on December 19,
1997 a P50 million portion of the down payment it received.
By returning part of the down payment, it is clear that Piltel recognized that
the contract to sell the Valgoson Property had reached the point of automatic
rescission. Piltel is, therefore, in estoppel to deny rescission based on a claim that it
had not yet sent a statement of account or a notice of delinquency to Smartnet
regarding the latters default. Such statement of account and notice of delinquency
had become academic.
Piltel argues that Smartnet cannot, as a defaulting buyer, rescind the contract
to sell between them by the simple act of refusing to pay. But, Smartnets
nonpayment of the full price of the property was not an act of rescission. It was but
an event that rendered the contract to sell without force and effect. In a contract to
sell, the prospective seller binds himself to part with his property only upon
fulfillment of the condition agreed, in this case, the payment in full of the purchase
price. If this condition is not fulfilled, the seller is then released from his obligation
to sell.
As the Court said in Heirs of Cayetano Pangan and Consuelo Pangan v.
Perreras,[19] the payment of the purchase price in a contract to sell is a positive
suspensive condition, the failure of which is not a breach but a situation that results
in the cancellation of the contract. Strictly speaking, therefore, there can be no
rescission or resolution of an obligation that is still non-existent due to the nonhappening of the suspensive condition.[20]

Likewise, a cause of action for specific performance does not arise where the
contract to sell has been cancelled due to nonpayment of the purchase price.
Smartnet obviously cannot demand title to the Valgoson Property because it did
not pay the purchase price in full. For its part, Piltel also cannot insist on full
payment since Smartnets failure to pay resulted in the cancellation of the contract
to sell. Indeed, in the case of Ayala Life Assurance, Inc. v. Ray Burton Devt. Corp.,
the Court rejected the sellers demand for full payment and instead ordered it to
refund to the buyer all sums previously paid. The order to refund is correct based
on the principle that no one should unjustly enrich himself at the expense of
Lastly, the Court sustains the CAs imposition of 12% interest pursuant to our
ruling in Eastern Shipping Lines, Inc. v. Court of Appeals.[24]