KTA, BSA
Facts: S and B entered into a contract to sell, whereby B, after
making a down payment, was given the option to pay the
balance of the purchase price of a parcel of land. Later, S
“rejected the contract to sell’’ even before the arrival of the
period for the exercise of said option on the ground that the
terms and conditions of the contract are grossly
disadvantageous and highly prejudicial to his interest. S sent
two (2) checks to B in an apparent effort to return the down
payment. S contends that the complaint was prematurely fi led
because at the time of the institution of the complaint, B has
yet to exercise his option under the “Option of Buyer’’ clause
of the contract.
Issue: Has B a cause of action against S for prematurity?
Held:
Facts: X imported certain goods. The Collector of Customs
declared the goods forfeited in favor of the government and
ordered the sale thereof at public auction. The bid of Y was
approved, and the goods were awarded to him. Under the law,
X has the right to have the decision of the Collector of Customs
reviewed by the Commissioner of Customs, and from the
decision of the latter, to appeal to the Court of Tax Appeals
(Secs. 2313, 402, Tariff and Customs Code.), and from the
latter’s decision, to the Supreme Court. X will be prejudiced if
the sale is not set aside. (see Art. 1397.)
Issue: Is X liable to Y for damages from the consequent delay
in the delivery of the goods?
Held:
Facts: A judgment was rendered by a justice of the peace court
(now municipal court) in favor of X who brought an ejectment
suit against Y, the owner of the house built on the land of X. Z,
the deputy sheriff who executed the judgment, was obliged to
remove the house of Y from the land according to the usual
procedure in the action for ejectment.
Issue: Is Y entitled to indemnity arising from the destruction
of his house?
Held:
Facts: X, by virtue of having been sent for by B and C, attended
as physician and rendered professional services to a daughter-
in-law of B and C during a difficult and laborious childbirth.
Issue: Who is bound to pay the bill: B and C, the parents-in-
law of the patient, or the husband of the latter?
Held:
Facts: X, of legal age, bought two vessels from B, the purchase
price thereof being paid by C, X’s father. Subsequently,
differences arose between X and C. The latter brought action
to recover the vessels, he having paid the purchase price.
Issue: Is there any obligation on the part of X to transfer the
ownership of the vessel to C?
Held:
Facts: X verbally agrees to pay Y the balance of an account in
advance, notwithstanding the different stipulation of a prior
written agreement.
Issue: Is X bound to perform said obligation?
Held:
Facts: D borrowed from C money to be paid within a certain
period, under the agreement that, if D fails to pay at the
expiration of said period, the house and lot described in the
contract would be considered sold for the amount of the loan.
D failed to pay as promised. C brought action for the delivery
of the house and lot.
Issue: Are both contracts valid and, therefore, should be given
effect? Held:
1
Facts: D executed a promissory note in favor of C for the
purchase price of a truck sold by the latter. In the note, D
bound himself to pay an additional 25% as attorney’s fees in
the event of becoming it necessary for C to employ counsel to
enforce its collection.
Issue: Has the court the power to ignore the contract as to
attorney’s fees, considering that a contract has the force of law
between the contracting parties?
Held:
Facts: The contract between the parties (two big real estate
corporations) was a contract to sell or conditional with title
expressly reserved in S (seller) until the suspensive condition
of full and punctual payment of the full price by B (buyer) shall
have been met on pain of automatic cancellation of the
contract upon failure to pay any of the monthly installments.
B failed to pay the P5,000.00 monthly installments
notwithstanding that it was punctually collecting P10,000.00
monthly rentals from the lessee of the property.
Issue: The main issue posed by B is that there has been no
breach of contract by it; and assuming there was, S was not
entitled to rescind or resolve the contract without recoursing
to judicial process.
Held:
Facts: The terms and conditions of the Purchase Agreement
shows that the parties intended the repurchase of the
preferred shares in question on the respective dates to be an
absolute obligation made manifest by the fact that a surety
was required to see to it that the obligation is fulfilled in the
event of the corporation’s inability to do so. Defendant
corporation contends that it is beyond its power and
competence to redeem the preferred shares due to financial
reverses.
Issue: Can this contention serve as a legal justification for its
failure to perform its obligation under the agreement?
Held:
Facts: By virtue of an agreement between X and Y, X assisted
Y in improving a large tract of land which was later declared
by the court as belonging to C.
Issue: Has X the right to be reimbursed by Z for X’s services
and expenses on the ground that the improvements are being
used and enjoyed by Z?
Held:
Facts: X opened with B (bank) a domestic letter of credit (LC)
in favor of Y for the purchase from the latter of hydraulic
loaders. B paid Y for the equipment after the expiration of the
letter of credit. X refused to pay B claiming that there was
breach of contract by B which acted in bad faith in paying Y
knowing that Y delivered the loaders to X after the expiry date
of the subject LC. X offered to return the loaders to B which
refused to take possession three (3) years after X accepted
delivery, when B made a demand for payment.
Issue: Was it proper for B to pay the LC which had long
expired or been cancelled?
Held:
Facts: X, a tax-exempt cooperative store, paid taxes to the City
of Manila, believing that it was liable.
Issue: May X recover the payment?
Held:
Facts: X, an employee of Cebu City, sued certain officials of the
City for claim of backwages.

Issue: May the City of Cebu successfully recover the payment
later made by it to X on the ground that it was not made a party
to the case?
Held:
Facts: For the security of the Government, X Company (and
another company) became a surety on the official bond of W,
an employee of the Government for the sum of $15,000.00. W
defaulted in the amount of $8,900.00 and X Company paid the
Government the sum of $14,462.00. When W was
apprehended, he had on his person $750.00 which amount
was turned over to B, the Insular Treasurer.
Later, W signed a document transferring to T all his rights to
said $785.00 for professional services rendered by the latter
as attorney’s fee. B was duly notified of the transfer. X fi led an
action against W to recover the sum of $785.00 in partial
payment of the amount paid by X to the Government. T fi led a
complaint in intervention and claimed the money as his.
Issue: On the basis of these facts, will the complaint of T
prosper?
Held:
Facts: A delivered to B, a typewriter repairer, a portable
typewriter for routine cleaning and servicing. B was not able
to finish the job after some time despite repeated reminders
made by A. Finally, B returned the typewriter unrepaired,
some of the parts missing. A had the typewriter repaired by F
Business Machines, and the repair job cost him P58.75 for
labor or service and P31.10 for the missing parts or a total of
P89.85. The lower court rendered judgment ordering B to pay
only P31.10.
Issue: Is B liable also for P58.75, the cost of the service
expended in the repair?
Held:
Facts: As security for a loan, R executed a real estate mortgage
in favor of E. R bound himself to pay on time the taxes on the
mortgaged property; otherwise, the entire loan would become
due and payable. R failed to pay the taxes as stipulated. No
demand was made by E either in respect of the taxes or the
loan itself, the only notice given to R being the letter received
by him from E’s lawyer to the effect that he was taking the
necessary steps to foreclose the mortgage extrajudicially
because the taxes had not been paid. Acting on the foregoing
communication, R paid the back taxes complained of.
Issue: Did R incur in delay in the payment of the taxes and the
loan?
Held:
Facts: B obliged himself to pay S the balance of the purchase
price of a subdivision lot within two years from completion by
S of the roads in said subdivision. S brought action to foreclose
the real estate mortgage executed by B to secure the payment
of the unpaid price. B contends lack of previous notice of the
completion of the roads and the absence of a demand for
payment.
Issue: Is this contention of B tenable?
Held:
Facts: Petitioners CL (buyer) bound herself to pay HF (seller)
P107,750.00 as the total price of the lot purchased: P10,775
shall be paid at the signing of the contract as down payment,
the balance of P96,975 shall be paid within a period of 10
years at a monthly amortization of P1,747.30 to begin from
December 7, 1985 with interest at 18% per annum based on
the balance and corresponding penalty in case of default. CL
failed to pay the installments after April 1, 1989. She claims,
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KTA, BSA
however, that the 10-year period for the payment of the whole
purchase price has not yet elapsed.
Issue: Did CL incur in delay when she failed to pay the monthly
amortizations?
Held:
Facts: B (bank) started a contest of designs and plans for the
construction of a building, announcing that the prizes would
be awarded not later than November 30, 1921. C took part in
the contest, performing work and incurring expenses for that
purpose. B did not name judges and failed to award the prizes
on the date specified. C contended that the said date was the
principal inducement in the creation of the obligation, because
the current cost of concrete buildings at that time was fixed.
Issue: Was B in default in not awarding the prizes on
November 30, 1921?
Held:
Facts: S sold to B a piece of land owned by her in common with
the understanding that S was to procure the conveyance and
also the interests of her co-owners. B refused to make further
payments of the purchase price because of S’s failure to
procure that conveyance of the entire estate to B. After some
years, S became the owner of the whole estate. In view of its
increased value, S brought action for rescission.
Issue: Has S the right to rescind the contract on the ground
that B has failed to pay the purchase price?
Held:
Facts: S agreed to convey to B a 36% share in two parcels of
land upon payment of P35,000.00 and to authorize B to sell or
mortgage the said 36% interest for the purpose of raising the
P35,000.00 within 70 days from the date of the agreement. It
was stipulated that should B fail to pay the P35,000.00 within
the 70-day period fixed, S would automatically be the owner
of the 36% interest in the properties. B failed to pay the
P35,000.00 within the 70-day period. He alleges that his
inability was due to the refusal of S to grant the authority to
sell or mortgage the 36% of the properties.
Issue: Without the authority in question did the obligation of
B to pay S mature?
Held:
Facts: C, contractor, brought action to recover the actual costs
of the construction of the building of B, plus 12-1/2% for and
on account of his services and superintendence of the building,
as per contract. B alleged that through C’s negligence in the
construction of the building and the purchase of materials, B
suffered damages. B’s counterclaims are founded upon C’s
mistakes and errors of judgment in the employment of labor
and the purchase of materials.
Issue: Assuming that there were such mistakes or errors of
judgment, would C be liable for them under the contract?
Held:
Facts: S discharged a large shipment of potatoes belonging to
B into a lorcha which was then left for two days in the sun
tightly closed and without ventilation. As a result, the potatoes
rotted and became useless.
Issue: Is S liable for the loss?
Held:
Facts: R employed a young ignorant boy to do ordinary chores
in the performance of which he did not come in contact with
machinery. Without giving any previous warning, and over the
objections of the boy, the latter was ordered to assist in the
cleaning of a dangerous machine. His fingers were cut in the
machine.

Issue: Is R liable for damages?
Held:
Facts: X, engaged in the business of carrying passengers for
hire, undertook to convey B and C from one point to another
in an automobile. The automobile was operated by a licensed
chauffeur who later allowed his assistant who had no license
but had some experience in driving, to drive the car. Defects
developed in the steering gear and after zigzagging for a
distance, the car left the road and went down a deep
embankment. B and C suffered physical injuries.
Issue: Is X liable in damages?
Held:
Facts: T received trust funds which he deposited in a bank in
his personal account. Said trust funds were part of the funds
which were removed and confiscated by the military
authorities of the United States.
Issue: Is T liable to repay the money?
Held:
Facts: In an action for collection of a sum of money, X obtained
a preliminary attachment on three (3) carabaos of B. To secure
the release of the carabaos, C and D executed a bond
guaranteeing the delivery by B or in the event that he should
fail to do so, the payment of their value in case judgment
should be against B. The carabaos died of a prevailing disease
in the locality. Final judgment was rendered against B.
Issue: Are C and D liable for the value of the carabaos?
Held:
Facts: Petitioner spouses EH and RH contracted the services
of PVE, subsidiary of SD, Inc., for the betamax coverage of their
forthcoming wedding celebration scheduled in the morning of
October 11, 1986. The suit for breach of contract with
damages stemmed from the failure of PVE to record on video
petitioners’ wedding celebration allegedly due to the gross
negligence of its crew as well as the lack of supervision on the
part of the general manager of PVE. PVE disclaimed any
liability for the damaged videotape by invoking force majeure
or fortuitous event and asserted that a defective transistor
caused the breakdown in its videotape recorder. The defect
was discovered for the first time after the wedding reception
at the Manila Hotel.
Issue: Should PVE be exempt from liability on ground of
fortuitous event?
Held:
Fact: To secure a loan, R mortgaged a parcel of land to
Development Bank of the Phil. (formerly RFC). The plantation
for which the loan was obtained was attacked by mosaic
diseases by reason of which R was unable to pay the yearly
amortizations. The mortgage was foreclosed. The court
rendered a deficiency judgment against R.
Issue: Is R entitled to a reduction, if not exemption, from the
loan because of his inability to realize any income from the
abaca he planted?
Held:
Facts: X was issued a license for the possession of four fi
rearms for which he gave a bond. He failed to comply with the
terms of the bond, claiming that the failure was due to force
majeure, i.e., that his house was attacked by a band of robbers
who carried away three of them.
Issue: Is X relieved from responsibility upon the bond which
he had given for their return?
Held:
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Facts: In the contract, it is declared the duty of E, lessee, to
maintain the improvements of the hacienda in good condition
and to deliver them in the same state to R, lessor, upon the
termination of the lease.
Issue: Is E responsible for loss resulting from fortuitous
events?
Held:
Facts: A barge owned by LSC was being towed down the Pasig
river by two of its tugboats, when it rammed against one of the
wooden piles of the Nagtahan bailey bridge, smashing the
posts and causing the bridge to list. The river, at that time, was
swollen and the current swift, on account of the heavy
downpour for two days before. Sued by R (Republic of the
Philippines) for damages caused by its employees, LSC
disclaimed responsibility on the ground, among others, that
the damages caused to the bridge were caused by force
majeure or fortuitous event. LSC strongly stresses the
precautions taken by it on the day in question: that it assigned
two of its most powerful tugboats to tow the barge down the
river; that it assigned to the task the more competent and
experienced among its patrons; had the towliness, engines,
and equipment double-checked and inspected; that it
instructed its patrons to take extra-precautions; and
concludes it had done all it was called to do.
Issue: Whether or not the collision of LSC’s barge with the
supports or piers of the Nagtahan bridge was, in law, caused
by fortuitous event or force majeure?
Held:
Facts: B borrowed the car of L. While about to reach his
destination, the car driven by L’s driver and with B as the sole
passenger, was accidentally stoned by some “mischievous
boys” playing along the road and its windshield was broken.
Issue: Did B assume the risk of the car being stoned?
Held:
Facts: A (agent) received from P (principal) a pendant with
diamonds to be sold on commission basis, which A later on
failed to return because of a robbery committed upon her. P
brought action for the recovery of the pendant.
Issue: To avail of the exemption granted in Article 1174, is it
necessary that there be a prior finding of guilt of the person or
persons responsible for the robbery?
Held:
Facts: The share of W in the estate of her deceased husband,
including a real property, was sold by the deputy sheriff under
an execution issued on a judgment against W in favor of X. The
sheriff’s certifi cate of sale purported to convey not only the
real estate but all the shares, actions, or interest of any kind
which W might have in the estate of her deceased husband,
including usufructuary and conjugal rights. X contends that by
virtue of the sale he is entitled not only to appear as the owner
of the property in the proceedings for the settlement of her
deceased husband’s estate but also to exclude W from further
participation therein.
Issue: Did the sale subrogate X to all the rights of W in the
estate?
Held:
Facts: R (owner) leased his factory to E (lessee) for two (2)
years, giving the latter an option to buy said factory within the
same period. E assigned his right to X who communicated in
writing his desire to exercise the option to R who, however,
refused to execute the corresponding deed of sale alleging as
his reason the fact that the option was given to E and not to

any other person and E could not make the assignment
without his (R’s) consent and when E did it, he (R) withheld
his approval.
Issue: Under the contract and the law, is there any
impediment on the part of E to transfer his right under the
option?
Held:
Facts: By agreement of C and D, the separate debts of the
brothers A, B, and C to D were liquidated and consolidated into
only one obligation in a promissory note signed by C who
acknowledged his indebtedness. D signed the note on
condition that C would obtain the signatures of A and B
thereby creating a joint obligation against the three. C never
secured their signatures until his death. In an action against A
and B by D to recover their respective shares in the
indebtedness, A and B contended that since their signatures
were not affixed to the document, D was bound to
acknowledge it as a credit only against C who signed it.
Issue: Is D bound to acknowledge the document as a credit
only against C?
Held:
Facts: S, owner, and B, purchaser, agreed upon the sale of a
vessel provided that the title papers to the same were in
proper form. The title was in the name of another and S
promised to perfect his title to the vessel. Before compliance
by S with the condition exacted by B, and while the vessel was
in S’s possession, it sank due to a severe storm.
Issue: Is B under obligation to pay the price of the vessel?
Held:
Facts: B obliged himself to pay S the balance of the purchase
price of a subdivision lot within two years from the completion
by S of the roads therein. S brought suit to foreclose the real
estate mortgage executed by B to secure the payment of the
unpaid price, for failure of B to pay the mortgage indebtedness
notwithstanding the completion of the roads, a condition for
the payment of the same. B contends that the roads are not yet
completed in the technical, legal sense, because the final say or
acceptance by the Capital City Planning Commission of Quezon
City had not yet been secured.
Issue: Is this contention of B tenable?
Held:
Facts: R donated to T (Province of Tarlac) a parcel of land
subject to the condition that it was to be used for the erection
of a central school and a public park, the work to commence
within the period of six (6) months from the date of the
ratification by the parties of the deed of donation. The
donation was accepted by T and title to the property was
transferred to it. Subsequently, R sold the land to C. C claimed
that since the condition imposed was not complied with, there
was no donation.
Issue: Is the condition suspensive or subsequent?
Held:
Facts: S sold to B a parcel of land in consideration of the
obligation assumed by B to pay what the vendor (S) owed to
several parties mentioned in the deed; if S paid his debts, the
sale shall become inoperative and void, but that if B paid the
same debts by reason of S’s failure to do so, the sale made shall
become absolute and irrevocable automatically, without the
need of executing any other deed of conveyance. B paid the
debts of S. Upon presentation of the corresponding
instruments, the certificate of title issued in the name of S was
cancelled and a transfer certificate of title was issued in B’s
name.
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KTA, BSA
Issue: Is the contract one of equitable mortgage or a sale
subject to a resolutory condition?
Held:
Facts: The contract of sale of three (3) lots between S (PHHC)
and B provided that only construction exclusively for
“residential purposes” shall be built on the property, terms
thereof to be binding upon the successors and assignees of the
respective parties. Subsequently, B sold two (2) lots to
Meralco which established a sub-station within the property.
Because of the “severe noise” from the sub-station, B filed a
complaint for the rescission of the sale.
Issue: Has B the right of action against Meralco for violation of
the restriction imposed in the contract between S and B?
Held:
Facts: X bound itself to pay a certain amount daily for the use
of Y’s lorchas during the period that they should be in X’s
possession and control, subject to the condition that X would
succeed in securing the entire contract for lighterage from the
Government. Said contract embraced two services: emergency
and regular. X was able to secure only the emergency service,
the regular service having been awarded to another. After
using the lorchas, X immediately notified Y and tendered
payment corresponding to the days the lorchas were in use
pursuant to said emergency service. The payment was refused
by Y.
Issue: Is X liable for the days he did not use the lorchas while
they were in his control?
Held:
Facts: D, as principal, and S, as surety, executed a promissory
note in favor of C for the price of goods purchased by D from
C, “upon condition that D will pay over to C at the end of each
month all sums which he may receive from the sale of said
goods, and that in the contrary event, both (D and S) undertake
to pay to C such sums as D may fail to turn in as above stated.”
In an action by C to recover the amount of the promissory note,
C did not prove that he has not, in fact, received all the money
derived from the sale of the goods mentioned.
Issue: Is S liable on the note?
Held:
Facts: X agreed to advance P75,000.00 for the rehabilitation
of Y (mining Company) which had been completely destroyed
by flood, for which X was to receive a certain number of shares
of the unissued stocks thereof, it being stipulated that the
amount was to be paid to Y within six (6) months from the
execution of the contract, and that upon default of either party,
the obligation of the other shall be discharged. X failed to raise
the necessary funds. Y was able to secure the funds from other
sources. It was rehabilitated and profits were realized.
Issue: Is X entitled to a share of said profits and to the issuance
of shares of stock in accordance with the agreement?
Held:
Facts: S agreed to sell a parcel of land to B. Under the contract,
B was given a certain period within which to arrange and
complete the papers relating to the property. S refused to
proceed with the sale in view of the failure of B to complete
the title papers. B brought action for specific performance.
Issue: Is the agreement on the part of B to complete the title
papers a condition subsequent?
Held:
Facts: X, owner of a residential lot, executed an agreement
with Y under which X shall reap the fruits of the riceland of Y
while Y shall have the right to build his house on the lot of X,

subject to the condition that if any of the grandchildren of X
decides to build his or her house on the lot, Y shall be obliged
to return the same. Under the agreement, X and Y are
prohibited to encumber or alienate their respective properties
without the consent of the other. C, a grandchild of X, now
seeks to recover the property, claiming that he needs the same
for the construction of his house thereon.
Issue: Is C entitled to recover the lot?
Held:
Facts: PHHC (People’s Homesite and Housing Corp.), a
government instrumentality, sold a lot to B subject to the
resolutory condition that B “shall construct a residential house
on the lot within a period of one (1) year from the signing of
the contract, non-compliance with which shall result in the
contract being deemed annulled and cancelled.” B failed to
comply with the condition of the contract.
Issue: What is the effect of B’s non-compliance with the
resolutory condition of building a house?
Held:
Facts: S sold to B a parcel of land subject to the condition that
B makes a down payment of P100,000.00 and that the
Government accepts the bid of S to purchase Government
property. B made the down payment which was accepted by S.
However, the Government did not accept the bid of S.
Issue: Having accepted the down payment, is S bound to sell?
Held:
Facts: In the deed of donation executed by respondents
spouses, they imposed the condition that the 5,600 square
meter parcel of land should “be used exclusively and forever
for school purposes only.’’ This donation was accepted by the
District Supervisor of the Bureau of Public Schools through an
Affidavit of Acceptance and/or Confirmation of Donation. The
school building that was supposed to be allocated for the
donated parcel of land could not be released since the
government required that it be built upon a one (1) hectare
parcel of land. To remedy this predicament, the District
Supervisor and a lot owner entered into a deed of exchange
whereby the donated lot was exchanged with a bigger lot
owned by the latter. School buildings were constructed on the
new site.
Issue: In exchanging the donated lot with a bigger lot, did the
donee violate the condition in the donation?
Held:
Facts: On the basis of the stipulation inserted in the contract
of employment that E would be entitled to such further
amount in the way of bonus as the board of directors might see
fi t to grant, E contends that he is entitled to a bonus to be fixed
by the court as a reasonable participation in the increased
profits of the factory under his care.
Issue: What is the legal effect of the stipulation?
Held:
Facts: A deed of sale of a hacienda contains the following
stipulation: “as soon as D has paid his debts to B and C, or to
any other person or entity to whom D is in debt at present, or
shall in future become indebted on account of the exploitation
of the España Estate, D shall pay to E, the amount of
P20,000.00 according to the following terms. x x x.” E brought
action for the recovery of the purchase price, claiming that the
stipulation is void.
Issue: Does the payment of the purchase price by the vendee
(D) depends upon his will?
Held:
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KTA, BSA
Facts: S (seller) filed an action for specific performance of a
contract relating to the sale of a parcel of land with the
improvements existing thereon consisting of a residential
house. The contract stipulates that the balance of P39,000.00
will be paid as soon as the premises have been vacated by the
present occupants, with the further understanding that “the
buyer will take care for the present occupants to vacate the
place.” S contends that the contract is void because the
fulfillment of the condition stipulated depends upon the
exclusive will of the debtor.
Issue: Does the payment of the purchase price by the vendee
(B) depends upon his will?
Held:
Facts: S offered to sell his undivided share in a property
known as Crystal Arcade to B who accepted the offer. It was
agreed that the purchase price shall be paid by B after he has
obtained a loan from a bank or funds from other sources.
Issue: Is the fulfillment of the condition for payment
dependent upon B’s exclusive will?
Held:
Facts: Private respondent YF was contracted by petitioner
SBTC to construct the latter’s bank building in Davao City for
the price of P1,760,000. The construction was finished within
the contracted period but YF was compelled by a drastic
increase in the cost of construction materials to incur
expenses of about P300,000 on top of the original cost SBTC
had the increased cost evaluated and audited. When private
respondent demanded payment of P259,417.23, petitioner’s
YF’s Vice-President and the bank’s architectural consultant
were directed by the bank to verify and compute YF’s claims
of increased cost. A recommendation was then made to settle
YF’s claim for P200,000.00. Despite this recommendation and
several demands from private respondent, SBTC failed to
make payment. It denied authorizing anyone to make a
settlement of YF’s claim and likewise denied any liability
contending that the absence of a mutual agreement made YF’s
demand premature and baseless. It is not denied that private
respondent incurred additional expenses in constructing
petitioner bank’s building due to a drastic and unexpected
increase in construction cost. In fact, petitioner bank admitted
liability for increased cost when a recommendation was made
to settle private respondent’s claim for P200,000.00. YF’s
claim for the increased amount was adequately proven during
the trial by receipts, invoices and other supporting documents.
SBTC likewise denied any liability for the additional cost based
on Article IX of the building contract which states: “If at any
time prior to the completion of the work to be performed
hereunder, increase in prices of construction materials and/or
labor shall supervene through no fault on the part of the
contractor whatsoever or any act of the government and its
instrumentalities which directly or indirectly affects the
increase of the cost of the project. OWNER shall equitably
make the appropriate adjustment on mutual agreement of
both parties.’’ It argued that since there was no mutual
agreement between the parties, petitioners’ obligation to pay
amounts above the original contract price never materialized.
Issue: Is SBTC liable for the additional cost based on Article IX
of the building contract?
Held:
Facts: R contracted the services of E as superintendent of an
oil factory which the former contemplated establishing. At the
time this agreement was made, the machinery for the
contemplated factory had not been acquired. A provision in
the contract is as follows: “It is understood and agreed that
should the machinery to be installed in the said factory fail, for

any reason, to arrive in the City of Manila, within a period of
six months from date hereof, this contract may be cancelled by
the party of the second part (R) at its option, such cancellation,
however, not to occur before the expiration of six months.”
The machinery did not arrive.
Issue: Is the condition obnoxious to the first sentence
contained in Article 1182?
Held:
Facts: K Services began providing porters for the domestic
passenger terminal of the Manila (now Ninoy Aquino)
International Airport under a provisional permit that was
renewed until December 1984. Although the parties did not
review their contract for the succeeding year, K Services
continued as porterage contractor. K Services received a letter
from the then MIAA General Manager, the relevant portion of
which stated: “Due the certain administrative problems, that
are preventing us from taking over, please continue operating
said service until further notice from us.’’ K Services alleged
that it was initially hesitant to accept MIAA’s offer. However, it
continued to provide porters for Domestic Terminal I and
expanded its operations to cover Domestic Terminal II upon
the alleged verbal assurance of MIAA’s officers that MIAA’s
policy was to relinquish porterage operations to the private
sector. K Services likewise claimed that MIAA officers also
gave verbal assurance that K Services would not be replaced
with another porterage contractor without a public bidding in
which K Services could participate. On December 1, 1992, the
new General Manager gave written notice to K Services to
“wind up” its operations as “Management has decided to take
over the aforecited services at the Domestic Passenger
Terminals I and II.” K Services opposed the takeover. It fi led a
petition for prohibition with preliminary injunction.
Issue: Whether K Services was entitled to the writ of
preliminary injunction granted by the trial court.
Held:
Facts: D promised to pay C certain credit advances made to
him by C “as soon as he receives funds derived from the sale of
his property in Spain.” The will to sell on the part of the debtor
(intestate) was present in fact, or presumed legally to exist,
although the price and other conditions thereof were still
within his discretion and fi nal approval. But in addition to the
acceptability of the sale to him (obligor), there were still other
conditions that had to concur to effect the sales, mainly that of
the presence of a buyer, ready, able, and willing to purchase
the property under the conditions demanded by the vendor.
Without such a buyer the sale could not be carried out or the
proceeds thereof sent to the Philippines. The Court of Appeals
held that payment of the advances did not become due until
the administratix received the purchase price from the buyer
of the property.
Issue: Is the obligation subject to a condition exclusively
dependent upon the will of D?
Held:
Facts: Petitioner N, a telephone company, and private
respondent C, a private corporation, entered into a contract
for the use by the former in the operation of its telephone
service the electric light posts of the latter, in consideration to
the installation, free of charge, of ten (10) telephone
connections for the use of C in specified places. The contract
provides, inter alia: “(a) That the term or period of this
contract shall be as long as the party of the first part [N] has
need for the electric light posts of the party of the second part
[C] it being understood that this contract shall terminate when
for any reason whatsoever, the party of the second part is
forced to stop, abandoned [sic] its operation as a public service
6
KTA, BSA
and it becomes necessary to remove the electric light post
[sic];’’ Apart from applying Article 1267, the Court of Appeals
held the contract was subject to a potestative condition which
rendered the conditional obligation void. Regarding this issue,
N alleges that there is nothing purely potestative about the
prestations of either party because N’s permission for free use
of telephones is not made to depend purely on its will, neither
is C’s permission for free use of its posts dependent purely on
its will.
Held:
Facts: The contract of services provides that the contingent
fees of L (lawyer) shall be 2% of the share of (Mrs.) W in the
conjugal partnership between her and her husband, H. This
contract was made principally, in contemplation of a suit for
divorce that W intended to fi le and of the liquidation of the
conjugal partnership. With the purpose of defeating L’s claim
for attorney’s fees, W and H entered into an agreement.
Issue: Should the condition for the payment of attorneys’ fees
be deemed fulfilled?
Held:
Facts: Before the war, PLDT established a pension plan for its
employees by virtue of which an employee shall be entitled to
a life pension under certain conditions (i.e., age 50 and 20
years of service). After the liberation, because of war losses,
the Board of Directors of PLDT abolished the pension plan.
Beneficiaries to the pension plan brought action against PLDT
claiming monetary benefits due them under the plan.
Issue: Should the conditions imposed in the pension plan be
deemed fulfilled?
Held:
Facts: The surety bond requires the lessor (creditor) to report
to the surety any violation of the lease contract by the lessee
(debtor) within five (5) days, otherwise the bond will be null
and void. The lessee defaulted on November 5. The five-day
period to notify expired, therefore, on November 10. However,
the lessor received a copy of the bond from the surety only on
November 21 when the lessor learned of the existence of the
condition.
Issue: Is the surety absolved of its liability to the lessor?
Held:
Facts: S and B entered into a contract to sell a parcel of land
evidenced by a memorandum of agreement which stipulates,
inter alia, that S, vendor, reserves to herself ownership and
possession of the property until full payment of the purchase
price by B and that the balance thereof was payable within six
(6) months from the date S would notify B that the certificate
of title of the property could be transferred to B. Subsequently,
S executed a deed of absolute sale of the property in favor of T.
It appeared that S exerted efforts to register the property, and
B had no intention to buy the property and was only interested
in dealing with other buyers to make a profit. S even pleaded
with him several times to purchase the property, less the
expenses of registration, as there were other interested
buyers.
Issue: Is B entitled to recover the property in question from
T?
Held:
Facts: E (lessee) bound himself not to make any construction
upon the property leased without the permission of R (lessor),
and in case he should do so, “it shall be for the benefi t of the
property, without any right to ask for reimbursement for its
cost.” The parties did not expressly provide for rescission in
case of breach of this stipulation. Issue: Has R the right to ask

for the rescission of the contract of lease for violation of the
clause in question?
Held:
Facts: X brought action for the rescission of a contract of
partnership for failure of Y to contribute all the capital he had
bound himself to invest.
Issue: Does Article 1191 apply to contracts of partnership?
Held:
Facts: The above deed of sale grants to R, the vendor-
mortgagee, the right to foreclose in the event of the failure of
E, the vendee-mortgagor, to comply with any provision of the
mortgage. There is no dispute that the parties entered into a
contract of sale as distinguished from a contract to sell.
Issue: May R avail of the remedy of rescission under Article
1191 on reciprocal obligations?
Held:
Facts: For the exclusive right to publish a manuscript
containing commentaries on the Revised Penal Code written
by X, Y corporation agreed to pay X P30,000.00 payable in
eight (8) quarterly installments. The parties stipulated that
should Y fail to pay any of the installments due, the rest shall
be deemed due and payable whether there is judicial or
extrajudicial demand. For his part, X obligated himself to
deliver the manuscript to Y not later than December 31, 1948.
X claims that Y breached the contract when it failed to pay the
full amount of the installment for the first quarter. On the
other hand, Y contends that X failed to deliver to it the
manuscript on the date stipulated and for that reason it was
no longer under obligation to pay the unpaid balance of the
installments. It appeared that on December 16, 1948, X wrote
and delivered a letter advising Y that the manuscript subject
of the contract was then at its disposal, ready to go to the
printer should Y desire to publish it.
Issue: Had X performed his part of the contract?
Held:
Facts: Seven months after the issuance of petitioner A’s
personal accident insurance policy, respondent insurance
company unilaterally cancelled the same since company
records revealed that A failed to pay his premiums.
Respondent later offered to reinstate same policy it had
previously cancelled and even proposed to extend its lifetime
upon a finding that the cancellation was erroneous and that
the premiums were paid in full by A but were not remitted by
M, respondent’s branch manager who misappropriated the
same. An action for damages due to breach of contract was
instituted by A against respondent. It is petitioner-insured’s
submission that the fraudulent act of the manager of
respondent insurance company’s branch office in Baguio, in
misappropriating his premium payments is the proximate
cause of the cancellation of the insurance policy. A theorized
that act of signing and even sending the notice of cancellation
himself, notwithstanding his personal knowledge of
petitioner-insured’s full payment of premiums, further
reinforces the allegation of bad faith. Such fraudulent act
committed by M, argued A is attributable to respondent
insurance company, an artificial corporate being which can act
only through its officers or employees. M’s actuation,
concludes petitioner-insured, is, therefore, not separate and
distinct from that of respondent-insurance company, contrary
to the view held by the Court of Appeals. It must, therefore,
bear the consequences of the erroneous cancellation of subject
insurance policy caused by the non-remittance by its own
employee of the premiums paid. Subsequent reinstatement,
according to A, could not possibly absolve respondent
7
KTA, BSA
insurance company from liability, there being an obvious
breach of contract. After all, reasoned out A, damage had
already been inflicted on him and no amount of rectification
could remedy the same. Respondent insurance company, on
the other hand, argues that where reinstatement, the
equitable relief sought by A was granted at an opportune
moment, i.e., prior to the fi ling of the complaint, is left without
a cause of action on which to predicate his claim for damages.
Reinstatement, it further explained, effectively restored
petitioner insured to all his rights under the policy. Hence,
whatever cause of action there might have been against it, no
longer exists and the consequent award of damages ordered
by the lower court is unsustainable.
Issue: There are two issues for resolution in the case. First, did
the erroneous act of cancelling subject insurance policy
entitled A, insured, to payment of damages? And second, did
the subsequent act of reinstating the wrongfully cancelled
insurance policy by respondent insurance company, in an
effort to rectify such error obliterate whatever liability for
damages it may have to bear, thus absolving it therefrom.
Held:
Facts: S sold to B shares of stock of a corporation engaged in
tourism, without prior approval of the Ministry of Tourism as
required by its Rules and Regulations promulgated pursuant
to Presidential Decree No. 189 creating the former
Department of Tourism. The purpose of the requirement is to
ensure that only those persons and entities who are fi t and
responsible should engage in tour operation business.
Issue: Is the sale void ab initio or merely rescissible for lack of
the required approval?
Held:
Facts: Under the contract to sell, B obliged himself to pay S the
purchase price of the subject lots on an equal monthly
installment basis for a period of 10 years or 120 equal monthly
installments. After paying 4 monthly installments, B refused to
pay further installments, insisting that he had the option to
pay the purchase price any time in 10 years inspite of the
clearness and certainty of his agreement with S. “As a matter
of justice and equity,” the Court of Appeals granted B a period
within which to comply with his obligation, “considering that
the removal of his house [worth P45,000 erected on the land]
would amount to a virtual forfeiture of the value of the house.”
Issue: Is the benefit stated in Article 1191 (3rd par.)
applicable to B?
Held:
Facts: R, donor, gratuitously granted to E (Province of Cavite)
a portion of a fishery owned by R for the construction of a road
subject to the condition that E would fill up the space where to
build the road with mud taken from the higher portions of the
fishery so it would have the same level. E failed to fulfill the
condition of the grant. R brought action for the recovery of the
value of the portion of the fishery granted and damages
covering the cost of digging up the higher portion of the fishery
which E failed to perform.
Issue: Is R entitled to the damages claimed?
Held:
Facts: For non-compliance on the part of the debtors with the
terms of a mortgage contract, the court declared it resolved
and ordered them to pay the stipulated 12% interest and 10%
attorney’s fees. Issue: Under the law, is the allowance of the
full stipulated interest and attorney’s fees proper?
Held:

Facts: S brought action for recovery of a sum of money on a
contract, whereby S sold and B bought, his interest in a
partnership owned and operated by them. The records
disclosed that S, after the sale had been consummated,
improperly instituted an action for the dissolution of the
partnership and the distribution of its assets, and procured the
appointment of a receiver for the partnership property; and
that B vigorously opposed the appointment of the receiver and
secured his discharge and the dismissal of the complaint
praying for the dissolution of the partnership, by asserting his
rights to the whole property under the very contract the
enforcement of which he later on resisted.
Issue: Is B entitled to rescind the contract of sale?
Held:
Facts: B purchased from S two lots. On complaint of C, court
annulled the sale and ordered the issuance of a new title in
favor of C. In the meantime, B sold the lots to D who fi led a suit
for specifi c performance due to the failure of B to deliver the
title and possession to D. The judgment in favor of D, however,
could not be executed because of the judgment in another civil
case declaring the sale from S to B null and void.
Issue: May D still bring an action for rescission of the sale with
damages?
Held:
Facts: PHHC (People’s Homesite and Housing Corp., a
government instrumentality) awarded to B a lot owned by the
former pursuant to a conditional contract to sell “subject to the
standard resolutory conditions imposed upon grants of
similar nature, including the grantee’s undertaking to eject
trespassers, intruders or squatters on the land and to
construct a residential house on the lot and shall complete the
same within a period of one (1) year from the signing of this
contract . . . the non-compliance with which results in the
contract being deemed annulled and cancelled” and that the
said cancellation “shall become effective from the date written
notice thereof is sent by the PHHC to the applicant.” PHHC
approved the transfer of rights of B to C who continued paying
the installments on the purchase price of the land. D sought to
nullify the award of the lot in question to C claiming that, being
the occupant of the land, he had a preferential right to
purchase the same and that the award to B was null and void
because B failed to construct a house in the lot within the
period of one (1) year from the signing of the contract and,
therefore, B acquired no rights that could be transmitted to C.
The record does not show that PHHC ever notified B in writing
of the cancellation of the contract to sell.
Issue: In view of B’s failure to comply with the resolutory
condition of building a house, did he acquire any right that
could be transmitted to C?
Held:
Facts: X agreed to construct a house for Y, who was to furnish
the materials. Before the house was completed, it was
destroyed by a storm, a fortuitous event. Y brought action for
the recovery of a sum of money allegedly due on the building
contract. X counterclaimed for labor and materials furnished
by him. The evidence disclosed that each of the parties had
more or less failed to comply with his respective obligation.
The lower court balanced the failure of X and Y against each
other, and allowed judgment for X for the balance. Y appealed.
Issue: Did the lower court commit an error in not declaring
expressly that the parties are absolved from further liability?
Held:
KTA, BSA
Facts: S (corporation) and B entered into a contract whereby
S agreed to sell and install, for the consideration of P52,000.00,
a processing machinery and equipment at B’s place in Lanao
within a period of 70 working days from the date of the signing
of the contract. In compliance with the contract, B made a
partial payment of P15,750.00 leaving a balance of P36,750.00
which shall be payable in 12 monthly installments. Under
paragraph 6 of the contract, B undertook to supply the
building wherein shall be housed the machinery and
equipment, laborers, foundation materials, food, and effective
water system. During the installation of said machinery and
equipment, S 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 B
because the latter was short of funds during that time. It took
S one (1) year and three (3) months to complete the
installation. B refused to pay the balance due and all expenses
(P19,628.93) because of the failure of S to complete the
installation within the stipulated period and place the
machinery and equipment in satisfactory running conditions
as guaranteed by S in the contract. S brought an action against
B for rescission of the contract after mutual restitution by the
parties with provision for damages in its favor. B, in his
answer, likewise sought the rescission of the contract after
mutual restitution by the parties, but with provision for the
payment by S of freight charges that may be incurred due to
such restitution and with the award of damages in his favor. It
was established that both parties violated the terms and
conditions of the contract: B, by failing to comply with his
obligations under paragraph 6 of the contract, and S, by
installing machinery and equipment that were basically
defective and inadequate. It could not be determined,
however, as to who was the fi rst infractor in point of time. The
trial court granted rescission but held that the parties should
bear his/its own damages. Applying Article 1192, it ordered B
to return to S the machinery and equipment and bear the
transportation expense thereof to the port of Cotabato, S to
bear the freight charges thereof for its shipment to Manila, and
to pay S P19,628.93 with interest thereon at the rate of 6%
from the date of the fi ling of the complaint, and S to return the
partial payment of P15,750.00. It made no pronouncement as
to damages and costs.
Issue: Is the lower court’s decision correct?
Held: