Bayla vs Silang Traffic Co

Facts

1. Petitioner (subscriber) entered into an agreement with respondent (seller) regarding the
purchase of fifteen (15) shares of capital stock by the former from the latter for the sum of
P1,500.00.
2. Said agreement has with it certain terms and conditions, among which are cases where the
subscriber shall fail to pay the installments or to perform the conditions or if said shares[shall be
attached or levied upon by creditors of the subscriber, said shares are to be automatically
reverted to the seller and the payments already made are to be forfeited in favor of the seller.
3. On or before July 31, 1937, petitioners failed to pay the installment due that day resulting for
the automatic forfeiture of the payments they already made.
4. On the other hand, on August1, 1937, the respondent corporation issued a resolution was
authorizing the refund of the installments already paid by their subscribers. Said resolution was
issued by respondent for the purpose of terminating the pending civil case involving the validity
of the shares in question which was subsequently dismissed. Based on the said resolution, the
petitioners instituted an action for the recovery of the sum of money which they have paid
severally to the corporation.
5. The corporation set up a defense stating that said resolution was no longer applicable to the
petitioners since their shares was already reverted in favor of the seller due to their failure to
pay on the due date long before the resolution was issued. Moreover, another resolution was
issued by the corporation on August 22, 2937 revoking and cancelling the earlier resolution.
6. The trial court issued an order against the petitioners; and on appeal, the CA affirmed the
decision of the trial court with some modifications as to the cancellation of the petitioner’s
subscription which was reversed by said appellate court.
7. Hence, an appeal by both parties for certiorari.

Issue

1. WON the said contract is a subscription or a sale of stock

2. WON under the contract between the parties the failure of the purchaser to pay any of the
quarterly installments on the purchase price automatically give rise to the forfeitures of the
amount already paid and the reversions of the shares to the corporation
3. WON the resolution of August 1, 1937 is valid.

Held

1. Judgment against the defendant.

Rationalization

1. Whether a particular contract is a subscription or a sale of stock is a matter of construction and

depends upon its terms and the intention of the parties. It should be noted that the agreement
entered into by the parties in this case is entitled “Agreement for Installment Sales of Shares in
the Silang Traffic Company, Inc.”
 It also appears that in the civil case which was earlier dismissed, the CFI mentioned the right of
the corporation to sell the shares of stock to the person named in the resolution, including the
petitioner, was impugned by the petitioners in the said case, who claimed a preferred right to
buy said shares. This shows that said contract is simply a contract of purchase and sale. A
purchase is an independent agreement between individual and the corporation to buy shares of
stock from it at a stipulated price; different from that of a subscription which is a mutual
agreement of the subscribers to take and pay for the stock of the corporation.

2. The contract here involved provides that if the purchaser fails to pay any of the instalments
when due, the shares of stock which are the object of the sale are to revert to the seller and the
payments already made are to be forfeited in favor of said seller. The seller, through its board of
directors, annulled a previous resolution rescinding the sale and declared the forfeiture of the
payments already made and the reversion of the shares of stock to the corporation. Held: That
such forfeiture was ineffective. The contract did not expressly provide that the failure of the
purchaser to pay any instalment would give rise to forfeiture and cancellation without the
necessity of any demand from the seller; and under article 1100 of the Civil Code (now Article
1169) persons obliged to deliver or do something are not in default until the moment the
creditor demands of them judicially or extrajudicially the fulfilment of their obligation, unless
a. the obligation or the law expressly provides that demand shall not be necessary in order
that default may arise, or
b. by reason of the nature and circumstances of the obligation it shall appear that the
designation of the time at which the thing was to be delivered or the service rendered
was the principal inducement to the creation of the obligation.

3. As to the third issue, the resolution which was made for the good of the corporation and for the
termination of the civil case benefited other petitioners. It would be an unjust discrimination to
deny the same benefit to the herein petitioners.
Aerospace Chemical Industries, Inc vs CA and Philippine Phosphate Fertilizer Corp.

Facts

1. On June 27, 1986, petitioner Aerospace Industries, Inc. purchased five hundred metric tons of
sulfuric acid from private respondent Philippine Phosphate Fertilizer Corporation.
2. Petitioner agreed to secure the means of transport to pick-up the sulfuric acid from private
respondents' loadports in Basay, Negros Oriental and Sangi, Cebu.
3. On October 3, 1986, petitioner paid the purchased price of 500 MT of sulfuric acid. Then, it
chartered M/T Sultan Kayumanggi to carry the agreed volumes of freight from designated
loading areas.
4. But the vessel was able to withdraw a partial amount of sulfuric acid from Basay and Sangi
because it tilted. And later, it sank with a total amount of 227.51 MT of sulfuric acid on board.
5. Petitioner sent a demand letter to private respondent for delivery of the 272.49 MT of sulfuric
acid.
6. Petitioner then filed a complaint against private respondent for specific performance and/or
damages before the Regional Trial Court of Pasig.
7. The private respondent filed an answer with counterclaim and alleged that it was the petitioner
which was remiss in the performance of its obligation in arranging the shipping requirements of
its purchases and, hence, should pay damages.
8. Petitioner prevailed in the trial court.
9. However, on appeal, the Court of Appeals reversed the decision of the trial court and instead
found petitioner guilty of delay and therefore, liable for damages.
10. Hence, this petition.

Issue

1. Did the respondent court err in holding that the petitioner committed breach of contract,
considering that:
a. the petitioner allegedly paid the full value of its purchases, yet received only a portion of
said purchases?
b. petitioner and private respondent allegedly had also agreed for the purchase and supply
of an additional 227.519 MT of sulfuric acid, hence prior delay, if any, had been waived?
2. Did the respondent court err in awarding damages to private respondent?
3. Should expenses for the storage and preservation of the purchased fungible goods, namely
sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil Code?

Ruling

1. No, CA did not err in absolving the private respondent from liability.

Petitioner, as the buyer, was obligated under the contract to undertake the shipping
requirements of the cargo from the private respondent's loadports to the petitioner's
designated warehouse. It was petitioner which chartered M/T Sultan Kayumanggi. The vessel
 was petitioner's agent. When it failed to comply with the necessary loading conditions of sulfuric
acid, it was incumbent upon petitioner to immediately replace M/T Sultan Kayumanggi with
another sea worthy vessel.

Where there has been breach of contract by the buyer, the seller has a right of action for
damages. Following this rule, a cause of action of the seller for damages may arise where the
buyer refuses to remove the goods, such that buyer has to remove them. Article 1170 of Civil
Code provides: "Those who in the performance of their obligations are guilty of fraud,
negligence, or delay and those who in any manner contravene the tenor thereof, are liable for
damages."

2. No, respondent court did not err in awarding damages to private respondent.

Where there has been breach of contract by the buyer, the seller has a right of action for
damages. Following this rule, a cause of action of the seller for damages may arise where the
buyer refuses to remove the goods, such that buyer has to remove them. Article 1170 of Civil
Code provides: "Those who in the performance of their obligations are guilty of fraud,
negligence, or delay and those who in any manner contravene the tenor thereof, are liable for
damages."

Delay begins from the time the obligee judicially or extrajudicially demands from the obligor the
performance of the obligation. Art. 1169 states: "Art. 1169. Those obliged to deliver or to do
something incur in delay from the time the obligee judicially or extrajudicially demands from
them the fulfillment of their obligation." In order that the debtor may be in default, it is
necessary that the following requisites be present:
(1) that the obligation be demandable and already liquidated;
(2) that the debtor delays performance; and
(3) that the creditor requires the performance judicially or extrajudicially.

Records reveal that a tanker ship had to pick up sulfuric acid in Basay, then proceed to get the
remaining stocks in Sangi, Cebu. A period of three days appears to us reasonable for a vessel to
travel between Basay and Sangi. Logically, the computation of damages arising from the
shipping delay would then have to be from December 15, 1986, given said reasonable period
after the December 12th letter. More important, private respondent was forced to vacate Basay
wharf only on December 15th. Its Basay expenses incurred before December 15, 1986, were
necessary and regular business expenses for which the petitioner should not be obliged to
pay. AaID

3. No, Article 1504 is not applicable.

The general rule that before delivery, the risk of loss is borne by the seller who is still the owner,
is not applicable in this case because petitioner had incurred delay in the performance of its
obligation. Article 1504 of the Civil Code clearly states: "Unless otherwise agreed, the goods
remain at the seller's risk until the ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual
delivery has made or not except that: . . . (2) Where actual delivery had been delayed through
the fault of either the buyer or seller the goods are at the risk of the party at fault.

As pointed out earlier, petitioner is guilty of delay, after private respondent made the necessary
extrajudicial demand by requiring petitioner to lift the cargo at its designated loadports. When
petitioner failed to comply with its obligations under the contract it became liable for its
shortcomings. Petitioner is indubitably liable for proven damages.
Binalbagan Tech and Hermilio Nava vs CA and private respondents

Facts

1. Luis Pontabella is the deceased owner of the lots in this dispute.

2. His judicial administratrix Angeline Puentevella sold them to Raul Javellana with the condition
that the vendee-promisee would not transfer his rights to said lots without the express consent
of Puentevella and that in case of the cancellation of the contract by reason of the violation of
any of the terms thereof, all payments therefor made and all improvements introduced on the
property shall pertain to the promissor and shall be considered as rentals for the use and
occupation thereof. LLphil
3. Javellana paid to pay the installments for a period of 5 years.
4. Puentevella filed case for rescission of contract and recovery for possession of lots plus damages
from Javellana and Southern Negros Colleges who had actual possession of the lots.
5. Lower court ruled in favour of Puentevella and execution was levied on October 27, 1965.
6. On December 29, 1965, the plaintiffs filed their 3rd party claim based on an alleged Deed of Sale
executed in their favor by spouses Jose and Lolita Lopez, thus Puentevella was constrained to
assert physical possession of the premises to counteract the fictitious and unenforceable claim
of herein plaintiffs.
7. On January 3, 1966, a case for injunction and damages was filed and trial court issued an ex-
parte writ of preliminary injunction which was dissolved by the CA pending the resolution of the
civil case. Thus, defendant Puentevella was restored to the possession of the lots and buildings
subject of this case.

8. On May 11, 1967, private respondents, through Angelina P. Echaus, in her capacity as Judicial
Administrator of the intestate estate of Luis B. Puentevella, executed a Contract to Sell and a
Deed of Sale of forty-two subdivision lots within the Phib-Khik Subdivision of the Puentebella
family, conveying and transferring said lots to petitioner Binalbagan Tech., Inc. (hereinafter
referred to as Binalbagan). In turn Binalbagan, through its president, petitioner Hermilio J.
Nava (hereinafter referred to as Nava), executed an Acknowledgment of Debt with Mortgage
Agreement, mortgaging said lots in favor of the estate of Puentebella.
9. Upon the transfer to Binalbagan of titles to the 42 subdivision lots, said petitioner took
possession of the lots and the building and improvements thereon. Binalbagan started
operating a school on the property from 1967 when the titles and possession of the lots were
transferred to it.
10. However, plaintiffs filed a petition for review with the Supreme Court which issued a restraining
order against the sale of the properties claimed by the spouses-plaintiffs.
11. When the Supreme Court dissolved the aforesaid injunction issued by the Court of Appeals,
possession of the building and other property was taken from petitioner Binalbagan and given
to the third-party claimants, the de la Cruz spouses. Petitioner Binalbagan transferred its school
to another location. On Appeal, petitioner was restored to the possession of the subdivision lots
on May 31, 1982. It will be noted that petitioner was not in possession of the lots from 1974 to
May 31, 1982.
 12. After petitioner Binalbagan was again placed in possession of the subdivision lots, private
respondent Angelina Echaus demanded payment from petitioner Binalbagan for the subdivision
lots, enclosing in the letter of demand a statement of account as of September 1982 showing a
total amount due of P367,509.93, representing the price of the land and accrued interest as of
that date.
13. As petitioner Binalbagan failed to effect payment, private respondent Angelina P. Echaus filed
on October 8, 1982 Civil Case No. 1354 of the Regional Trial Court of the Sixth Judicial Region
stationed in Himamaylan, Negros Occidental against petitioners for recovery of title and
damages. An amended complaint was filed by private respondent Angelina P. Echaus by
including her mother, brothers, and sisters as co-plaintiffs, which was admitted by the trial court
on March 18, 1983.
14. Hence this petition.

Issues

1. Whether private respondents' cause of action in Civil Case No. 1354 is barred by prescription.

Ruling

1. No, it is not.

A party to a contract cannot demand performance of the other party's obligations unless he is in
a position to comply with his own obligations. Similarly, the right to rescind a contract can be
demanded only if a party thereto is ready, willing and able to comply with his own obligations
thereunder.

In a contract of sale, the vendor is bound to transfer the ownership of and deliver, as well as
warrant, the thing which is the object of the sale (Art. 1495, Civil Code); he warrants that the
buyer shall, from the time ownership is passed, have and enjoy the legal and peaceful
possession of the thing —

ARTICLE 1547.
In a contract of sale, unless a contrary intention appears, there is:
(1) An implied warranty on the part of the seller that he has a right to sell the
thing at the time when the ownership is to pass, and that the buyer shall
from that time have and enjoy the legal and peaceful possession of the
thing.

As afore-stated, petitioner was evicted from the subject subdivision lots in 1974 by virtue of a
court order in Civil Case No. 293 and reinstated to the possession thereof only in 1982. During
the period, therefore, from 1974 to 1982, seller private respondent Angelina Echaus' warranty
against eviction given to buyer petitioner was breached though, admittedly, through no fault
of her own. It follows that during that period, 1974 to 1982, private respondent Echaus was
not in a legal position to demand compliance of the prestation of petitioner to pay the price of
said subdivision lots. In short, her right to demand payment was suspended during that
period, 1974-1982.

The prescriptive period within which to institute an action upon a written contract is ten years
(Art. 1144, Civil Code). The cause of action of private respondent Echaus is based on the deed
of sale aforementioned. The deed of sale whereby private respondent Echaus transferred
ownership of the subdivision lots was executed on May 11, 1967. She filed Civil Case No. 1354
for recovery of title and damages only on October 8, 1982. From May 11, 1967 to October 8,
1982, more than fifteen (15) years elapsed. Seemingly, the 10-year prescriptive period had
expired before she brought her action to recover title.

However, the period 1974 to 1982 should be deducted in computing the prescriptive period
for the reason that, as above discussed, from 1974 to 1982, private respondent Echaus was
not in a legal position to initiate action against petitioner since as aforestated, through no
fault of hers, her warranty against eviction was breached. In the case of Daniel vs. Garlitos, it
was held that a court order deferring action on the execution of judgment suspended the
running of the 5-year period for execution of a judgment. Here the execution of the judgment
in Civil Case No. 7435 was stopped by the writ of preliminary injunction issued in Civil Case No.
293. It was only when Civil Case No. 293 was dismissed that the writ of execution in Civil Case
Na. 7435 could be implemented and petitioner Binalbagan restored to the possession of the
subject lots.

Deducting eight years (1974 to 1982) from the period 1967 to 1982, only seven years elapsed.
Consequently, Civil Case No. 1354 was filed within the 10-year prescriptive period. Working
against petitioner's position too is the principle against unjust enrichment which would
certainly be the result if petitioner is allowed to own the 42 lots without full payment thereof.
Agcaoili vs GSIS

Facts

1. In this case, appellant GSIS approved an application of the appellee Agcaoli for the purchase of a
house and lot in the GSIS Housing Project at Nangka, Marikina, subject to the condition that the
latter should forthwith occupy the house, a condition that Agcaoli tried to fulfill but could not
because the house was absolutely uninhabitable - ceiling, stairs, double walling, lighting
facilities, water connection, bathroom, toilet, kitchen, drainage, were inexistent
2. However, Agcaoli ask a homeless friend, a certain Villanueva, to stay in the premises as some
sort of watchman, pending completion of the construction of the house.
3. Petitioner paid the 1st installment and the other fees but refused to make further payments until
GSIS makes the house habitable. GSIS refused to do so and opted to cancel the award and
demanded that petitioner vacate the said premised.
4. Petitioner filed action for specific performance with damages against GSIS. Other awardees of
the housing units in the same subdivision also lodged a written protest against GSIS. TC ruled in
petitioner’s favour.
5. Hence this petition

Issue

1. Whether or not Agcaoli is entitled for specific performance with damages.

Ruling

1. Yes, Agcaoilo is entitles to such. Appeal of GSIS must fail.

An agreement for the sale of a house and lot on installments stipulating that the buyer must
occupy the house within a specified period under pain of cancellation if he failed to do so, must
be construed as imposing on the seller the obligation to deliver a reasonably habitable dwelling
place, one that is in a condition suitable for its enjoyment by the buyer for the purpose
contemplated. The seller's delivery of a mere shell of a house consisting of four walls, openings
and a roof is a breach of said obligation which prevents him from cancelling the sale on the
ground of the purchaser's suspension of payment of the amortizations that the latter had
undertaken to pay, it being axiomatic that "in reciprocal obligations, neither party incurs in delay
if the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him." (Art. 1169, last paragraph, Civil Code)

The party to a contract who is responsible for alleged imprecision or ambiguity in its terms will
not be permitted to make capital of such imprecision or ambiguity; the question of
interpretation arising therefrom should be resolved against it.

Where specific performance according to the literal terms of a contract would result in inequity
by reason of the circumstances obtaining at the time of judgment being significantly different
from those existing at the generation of the rights litigated, the Court may exercise its equity
jurisdiction to adjust those rights and, in determining the precise relief to be given, "balance the
equities" or the respective interests of the parties and take account of the relative hardship that
one form of relief or another may occasion to them.
Bricktown Development Corporation vs Amor Tierra Development Corporation and CA

Facts

1. Bricktown Development Corporation, represented by its President and co- petitioner Mariano Z.
Velarde, executed two Contracts to Sell in favor of Amor
2. Tierra Development Corporation, represented in these acts by its Vice-President, Moises G.
Petilla, covering a total of 96 residential lots at the Multinational Village Subdivision, La Huerta,
Parañaque, Metro Manila.
3. The total price of P21,639,875.00 was stipulated to be paid by private respondent in such
amounts and maturity dates, as follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30
June 1981; P4,729,906.25 on 31 December 1981; and the balance of P11,500,000.00 to be paid
by means of an assumption by private respondent of petitioner corporation's mortgage liability
to the Philippine Savings Bank or, alternately, to be made payable in cash. On date, March 31,
1981, the parties executed a Supplemental Agreement, providing that private respondent would
additionally pay to petitioner corporation the amounts of P55,364.68, or 21% interest on the
balance of down payment for the period from 31 March to 30 June 1981, and of P390,369.37
representing interest paid by petitioner corporation to the Philippine Savings Bank in updating
the bank loan for the period from 01 February to 31 March 1981.
4. Private respondent was only able to pay petitioner corporation the sum of P1,334,443.21.
However, the parties continued to negotiate for a possible modification of their agreement, but
nothing conclusive happened. And on October 12, 1981, petitioner’s counsel sent private
respondent a “Notice of Cancellation of Contract” because of the latter’s failure to pay the
agreed amount.
5. Several months later, private respondent’s counsel, demanded the refund of private
respondent's various payments to petitioner corporation, allegedly "amounting to
P2,455,497.71," with interest within fifteen days from receipt of said letter, or, in lieu of a cash
payment, to assign to private respondent an equivalent number of unencumbered lots at the
same price fixed in the contracts. When the demand was not heeded, Amor Tierra filed an
action with the court a quo which rendered a decision in its favor. The decision of the lower
court was affirmed in toto by the Court of Appeals.
6. Hence, this petition.

Issue

1. Whether or not the contract was properly rescinded?

2. Whether or not Bricktown properly forfeited the payments of Amor Tierra?

Ruling

1. The contract between Bricktown and Amor Tierra was validly rescinded because of the failure of
the latter to pay the agreed amounts stipulated in the contract on the proper date even after
the sixty-days grace period. Furthermore, the records showed that private respondent
corporation paid less than the amount agreed upon. The Supreme Court also added that such
cancellation must be respected. It may also be noteworthy to add that in a contract to sell, the
 non-payment of the purchase price can prevent the obligation to convey title from acquiring any
obligatory force.

2. On the second issue, the Supreme Court ruled that since the private respondent did not actually
possessed the property under the contract, the petitioner is then ordered to return to private
respondent the amount remitted. However, to adjudge any interest payment by petitioners on
the amount to be thus refunded, private respondent should not be allowed to totally free itself
from its own breach.

IMPORTANT

1. YES, Bricktown acted well within its right, in accordance with the agreement. Admittedly, the
terms of payment agreed upon by the parties were not met by Amor Tierra. Of a total selling
price of P21M, Amor Tierra was only able to remit the sum of P1.3M which was even short of
the stipulated initial payment of P2.2M. No additional payments, it would seem, were made. A
notice of cancellation was ultimately made months after the lapse of the contracted grace
period.

Paragraph 15 of the Contracts to Sell provided thusly:

“Should the PURCHASER fail to pay when due any of the installments mentioned
in stipulation No. 1 above, the OWNER shall grant the purchaser a sixty (60)-day
grace period within which to pay the amount/s due, and should the PURCHASER
still fail to pay the due amount/s within the 60-day grace period, the
PURCHASER shall have the right to ex-parte cancel or rescind this contract,
provided, however, that the actual cancellation or rescission shall take effect
only after the lapse of thirty (30) days from the date of receipt by the
PURCHASER of the notice of cancellation of this contract or the demand for its
rescission by a notarial act, and thereafter, the OWNER shall have the right to
resell the lot/s subject hereof to another buyer and all payments made,
together with all improvements introduced on the aforementioned lot/s shall be
forfeited in favor of the OWNER as liquidated damages, and in this connection,
the PURCHASER obligates itself to peacefully vacate the aforesaid lot/s without
necessity of notice or demand by the OWNER.”

2. A grace period is a right, not an obligation, of the debtor. Whenunconditionally conferred, such
as in this case, the grace period is effective without further need of demand either calling for the
payment of the obligation or for honoring the right.

The grace period must not be likened to an obligation, the non-payment of which, under Article
1169 of the Civil Code, would generally still require judicial or extrajudicial demand before
"default" can be said to arise.
 Verily, in the case at bench, the sixty-day grace period under the terms of the contracts to sell
became ipso facto operative from the moment the due payments were not met at their stated
maturities. On this score, the provisions of Article 1169 of the Civil Code would find no relevance
whatsoever. The cancellation of the contracts to sell by petitioner corporation accords with the
contractual covenants of the parties, and such cancellation must be respected. It may be
noteworthy to add that in a contract to sell, the non-payment of the purchase price (which is
normally the condition for the final sale) can prevent the obligation to convey title from
acquiring any obligatory force.

3. The forfeiture of the payments thus far remitted under the cancelled contracts in question,
given the factual findings of both the trial court and the appellate court, must be viewed
differently.

4. Petitioners do not deny the fact that there has indeed been a constant dialogue between the
parties during the period of their juridical relation. In fine, while we must conclude that
petitioner corporation still acted within its legal right to declare the contracts to sell rescinded
or cancelled, considering, nevertheless, the peculiar circumstances found to be extant by the
trial court, confirmed by the Court of Appeals, it would be unconscionable, in our view, to
likewise sanction the forfeiture by petitioner corporation of payments made to it by private
respondent. Indeed, in the opening statement of this ponencia, we have intimated that the
relationship between parties in any contract must always be characterized and punctuated by
good faith and fair dealing. Judging from what the courts below have said, petitioners did fall
well behind that standard. We do not find it equitable, however, to adjudge any interest
payment by petitioners on the amount to be thus refunded, computed from judicial demand,
for, indeed, private respondent should not be allowed to totally free itself from its own breach.
Enriquez vs Ramos

Facts

1. Plaintiffs-appellants averred that on November 24, 1958 they sold to the defendant-appellee
Socorro A. Ramos 20 subdivision lots in Quezon City for the sum of P235,056 of which only
P35,056 had been paid. The balance of P200,000 was to be liquidated within two years from the
date of the execution of the deed of sale, with interest at six percent for the first year and
twelve percent thereafter until fully paid. To secure the payment of that balance, the
defendant-appellee executed in the same document a deed of mortgage in favor of the vendors
on several parcels of land variously situated in Quezon City, Pampanga and Bulacan. The deed of
mortgage embodies certain stipulations which the plaintiffs-appellants invoked, thus:

"During the term and existence of this mortgage, the Mortgagor shall duly pay
and discharge, at her expense, and on their maturity, all lawful taxes or
assessments levied or assessed upon the mortgaged property; in default thereof
the Mortgagee may pay and discharge such taxes or assessments and insure the
security of the property, and any and all sums so paid by the Mortgagee shall be
repayable on demand with interest at 6% per annum and be a lien on the
property herein mortgaged.

"If for any reason the mortgage cannot be registered, then the whole obligation
shall immediately become due and demandable.

"In the event that the Mortgagor should fail to pay the amount secured by this
mortgage or any part thereof in accordance with the terms and conditions
herein set forth, or should she fail to perform any of the conditions stipulated
herein, the Mortgagee shall have the right . . . to foreclose this mortgage
extrajudicially, and to that end the Mortgage is hereby appointed the attorney-
in-fact of the Mortgagor, with full power of substitution, to enter upon and take
possession of the mortgaged property without the order of any court or any
authority other than that herein granted, and to sell and dispose of the same to
the highest bidder at public auction after the publication of notice, in
accordance with the provisions of Act No. 3135 of the Philippine Legislature, as
amended."

2. In a Civil Case L-18077, SC ruled that the actual price of the lots sold to the defendant-appellee
was only P185,056 instead of P235,056, and that only if and when the roads shall have been
constructed pursuant to the ordinances of Quezon City "may the period of two years specified in
the contract begin to run.
3. The plaintiffs-appellants charged on May 4, 1963 before the Court of First Instance of Rizal
(Quezon City) that the defendant-appellee has not yet paid the sum of P200,000 despite the fact
that the roads on the questioned lots were completed on May 9, 1960; that the mortgage on
the Bulacan property has not yet been registered; and that the realty taxes corresponding to the
years 1959 to 1963 on the mortgaged lots had not been paid.
 4. The defendant-appellee admits that she has not paid the realty taxes and has not registered the
mortgage on the Bulacan property, but argues that in L-18077 these matters were considered
minor ones and also sufficiently explained by her, invoking the rule of res judicata. The
defendant-appellee likewise does not dispute her non-payment of the sum of P200,000; she
contends, however, that the roads have not yet been completed in accordance with Ordinance
No. 2969 of Quezon City.

Issue

1. WON there was notice of completion and demand for payment?

Ruling

1. Yes, there is.

Rationalization

1. The filing of the case below is sufficient notice to the defendant-appellee of the completion of
the roads in question and of the plaintiffs-appellants' desire to be paid the purchase price of the
questioned lots. The effect of such demand retroacts to the day of the constitution of the
defendant-appellee's obligation. Thus, Article 1187 provides that "The effects of a conditional
obligation to give, once the condition has been fulfilled, shall retroact to the day of the
constitution of the obligation. . . ." The contracted obligation of the defendant-appellee under
the facts of the case at bar was to pay the balance of P200,000 within two years from the date
the roads in question are completed.
Leano vs CA

Facts

1. Private respondent Hermogenes Fernando, as vendor, and petitioner Carmelita Leaño, as

vendee, executed a contract to sell involving a piece of land, Lot No. 876-B, with an area of 431
square meters, located at Sto. Cristo, Baliuag, Bulacan. In the contract, Carmelita Leaño bound
herself to pay Hermogenes Fernando the sum of one hundred seven thousand seven hundred
and fifty pesos (P107,750.00) as the total purchase price of the lot. After the execution of the
contract, Carmelita Leaño made several payments in lump sum. Thereafter, she constructed a
house on the lot valued at P800,000.00.
2. The trial court, however, rendered a decision in an ejectment case earlier filed by respondent
Fernando ordering petitioner Leaño to vacate the premises and to pay P250.00 per month by
way of compensation for the use and occupation of the property from May 27, 1991 until she
vacated the premises. Petitioner Leaño filed with the Regional Trial Court of Malolos, Bulacan, a
complaint for specific performance with preliminary injunction.
3. The trial court rendered a decision ordering petitioner to pay to the defendant the sum of
P103,090.70 corresponding to her outstanding obligations under the contract to sell consisting
of the principal of said obligation together with the interest and surcharges due thereon as of
February 28, 1994, plus interest thereon at the rate of 18% per annum. Respondent Fernando
filed a motion for reconsideration. The trial court increased the amount of P103,090.70 to
P183,687.00. According to the trial court, the transaction between the parties was an absolute
sale, making petitioner Leaño the owner of the lot upon actual and constructive delivery
thereof. Respondent Fernando, the seller, was divested of ownership and cannot recover the
same unless the contract is rescinded pursuant to Article 1592 of the Civil Code which requires a
judicial or notarial demand. Since there had been no rescission, petitioner Leaño, as the owner
in possession of the property, cannot be evicted.
4. In time, petitioner Leaño appealed the decision to the Court of Appeals. The Court of
Appeals promulgated a decision affirming that of the Regional Trial Court in toto.
Petitioner Leaño filed a motion for reconsideration. The Court of Appeals denied the motion.
5. Hence, the present petition.

Issue

1. Whether or not the transaction was an absolute and not a conditional sale?
2. Whether or not there was proper cancellation of the contract to sell?
3. Whether or not there was delay on the petitioner’s part in the payment of the monthly
amortization?

Ruling

1. NO, the transaction was not an absolute sale; rather, it was a conditional sale. The very
intention of the parties was to reserve the ownership of the land in the seller (Fernando) until
the buyer has paid the total purchase price. First, the contract to sell makes the sale, cession
and conveyance “subject to conditions” set forth on the contract. Second, what was transferred
 was possession and not ownership. Finally, the land is covered by the Torrens title, the act of
registration of the deed of sale was the operative act that could transfer ownership over the lot.
No deed could be registered in the case at bar since as stipulated in the contract, such deed
shall be executed upon completion of payment by Leaño.

In a contract to sell real property on installments, full payment of the purchase price is a positive
suspensive condition and the failure of the payment is not a breach but rather shall be an event
that will prevent the obligation of the seller to convey the title from acquiring any obligatory
force. The transfer of ownership and title would occur after full payment of the price.

In the case at bar, Leaño did not pay the installments after April 1, 1989, which prevented the
obligation of Fernando to convey the property. It brought into effect the cancellation provision
of the contract. Article 1592 of the Civil Code is inapplicable in the case at bar. But the
provisions of RA 6552 (The Realty Installment Buyer Protection Act) governs the case at bar
which recognizes the right of the seller to cancel the contract upon non-payment of an
installment by the buyer.

2. NO, there was no proper cancellation of the contract to sell.

Leaño did not pay the installments after April 1, 1989, which prevented the obligation of
Fernando to convey the property. It brought into effect the cancellation provision of the
contract. Nevertheless, what is controlling is not Article 1592 of the Civil Code but the
provisions of RA 6552 (The Realty Installment Buyer Protection Act) which recognizes not only
the right of the seller to cancel the contract upon non-payment off an installment by the buyer
but also rights of the buyer in case of cancellation.

Although the ejectment case operated as the notice of cancellation required under the
provisions of RA 6552, petitioner was not given the cash surrender value of the payments that
she made; hence, there was no actual cancellation of the contract.

Consequently, petitioner Leaño may still reinstate the contract by updating the account during
the grace period and before actual cancellation.

3. YES, there was delay on the petitioner’s part to pay the monthly amortizations. Article 1169 of
the Civil Code provides that in reciprocal obligations, neither party incurs in delay if the other
does not comply or is not ready to comply in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfills his obligation, delay by the other begins.

In the case at bar, respondent Fernando performed his part of the obligation by allowing
petitioner Leaño to continue in possession and use of the property. Clearly, when
petitioner Leaño did not pay the monthly amortizations in accordance with the terms of the
contract, she was in delay and liable for damages. The Court, however, upheld the trial court in
holding that the default committed by petitioner Leaño in respect of the obligation could be
compensated by the interest and surcharges imposed upon her under the contract in question.
Lee vs De Guzman, JR

Facts

1. On November 8, 1983, a free-lance salesman of respondent Motorcars, Inc., (then Delta Motors
Corporation) named Arsenio Tumibay signed in behalf of Domingo Tupaz its Branch Manager in
Makati, a price quotation (Exhibit "A") and delivered to petitioner Alex B. Lee for the sale of one
(1) unit Toyota Corolla Liftback, 1983 model, with the quoted price of P149,700.00 plus
miscellaneous expenses of P10,033.00. On the same date, petitioner Lee as customer, signed
the vehicle sales order (Exhibit "C") The delivery of the subject vehicle was within the month of
November, 1983.
2. In view of such order, petitioner Lee deposited the amount of P1,000.00 on November 10, 1983
as required in the aforesaid price quotation, to which Tumibay wrote petitioner the information
that the Motorcars Inc., had acknowledged receipt of the delivery receipt for petitioner.
Thereupon, on December 15, 1983, petitioner's counsel, Atty. Doroteo A. Dadal, wrote Mr.
Nicolas O. Carranceja, Jr., Executive Vice-President of Motorcars, demanding for delivery of the
said Toyota car. The respondent car company replied on December 19, 1983, through its
counsel Atty. Benjamin S. Benito, that due to the sudden change of prices by the car
manufacturer, they had decided to exercise the option contained in the vehicle sales order
which stated:

"Whenever deposits are made by customers for vehicles, parts and services
ordered, the sales for such vehicles, parts or services shall be at the option of
Motorcars, Inc., and refund of the deposits shall be made upon request and
without undue delay should such option be exercised."

3. The respondent car company thus offered to refund petitioner's deposit of P1,000.00.
4. Petitioner filed action for specific performance but TC ruled in private respondent's favor.
5. Petitioner appealed to CA. CA reversed TC's decision ruling that there was a perfected contract
of sale, and that there was the undisputed signature of one Mr. Domingo Tapas, the branch
manager of Motorcars and ordered awarded specific performance plus damages.
6. Responded appealed to SC. SC confirmed CA's decision in toto and case was remanded to TC.
7. Petitioner filed a Motion for Writ of Execution. Private Respondent filed Motion to Quash Writ
of Execution on the ground that Delta Motors Corporation has closed shop. Motion to quash
was eventually denied and an alias writ of execution was filed and respondent company
continued to defy such order.
8. After some back and forth including a motion for contempt, respondent judge ruled in favor of
private respondent.
9. Hence the petition.

Issue
 1. WON there was breach of contract?

Ruling

1. The Court takes notice of the fact that as alleged in the Comment and Memorandum of
respondent company and contained in the questioned order, which is not disputed by the
petitioner, that while the Motion for Contempt was pending before the respondent trial court,
petitioner indicated his willingness to accept a second-hand car but failed to show its availability
as the classified ads refer to 1984 Models and could not be said that they are the same models
as what appears in Exhibit "C", the sales order. In addition, respondent car company even
offered the amount of P20,000 as a gesture to buy peace.

2. It is the contention of the petitioner that the obligation is not impossible for the 1983 Toyota
cars are still available in the market today. It is however the contention of respondent company
that the obligation is impossible for the car manufacturer had closed shop and no longer
manufacturing 1983 models of Toyota much less deliver the car specified in Exhibit "C".

3. The question is, should respondent Motorcars be made liable to fulfill a seemingly impossible
obligation?

4. It is well-settled that when after a judgment has become final and executory, facts and
circumstances transpire which render its execution impossible or unjust, the interested party
may ask a competent court to stay its execution or prevent its enforcement.

5. Unfortunately it is not possible for Motorcars to comply with the writ of execution since
admittedly, the then Delta Motors who manufactured 1983 models of Toyota Liftback had
already closed shop, but be this as it may, there is no question that indeed there was a
perfected contract of sale between petitioner Lee and private respondent Motorcars pursuant
to this Court's (through the Third Division) resolution dated August 31, 1987.

6. The relief left for petitioner Lee is that found under Article 1170 of the Civil Code which
provides: "Those who in the performance of their obligations are guilty of fraud, negligence or
delay, and those who in any manner contravene the tenor thereof, are liable for damages."
Vermen Realty vs CA

Facts

1. Under the conditions of the so-called “Offsetting Agreement”, Vermen Realty (the first party in
the contract) and Seneca Hardware (the second party) were under a reciprocal obligation.
Seneca Hardware shall deliver to Vermen Realty construction materials worth P552,000.00.
2. Vermen Realty's obligation under the agreement is threefold:
a. he shall pay Seneca Hardware P276,000.00 in cash;
b. he shall deliver possession of units 601 and 602, Phase I, Vermen Pines Condominiums
(with total value of P276,000.00) to Seneca Hardware;
c. upon completion of Vermen Pines Condominiums Phase II, Seneca Hardware shall be
given option to transfer to similar units therein.
3. As found by the appellate court and admitted by both parties, Seneca Hardware had paid
Vermen Realty the amount of P110,151.75, and at the same time delivered construction
materials worth P219,727.00. Pending completion of Phase II of the Vermen Pines
Condominiums, Vermen Realty delivered to Seneca Hardware units 601 and 602 at Phase I of
the Vermen Pines Condominiums (Rollo, p. 28). In 1982, the Vermen Realty repossessed unit
602. As a consequence of the repossession, the officers of the Seneca Hardware corporation had
to rent another unit for their use when they went to Baguio on April 8, 1982.
4. In its reply the Vermen Realty corporation averred that Room 602 was leased to another tenant
because Seneca Hardware corporation had not paid anything for purchase of the condominium
unit. Vermen Realty corporation demanded payment of P27,848.25 representing the balance of
the purchase price of Room 601.
5. On June 21, 1985, Seneca Hardware filed a complaint with the Regional Trial Court of Quezon
City (Branch 92) for rescission of the Offsetting Agreement with damages. In said complaint,
Seneca Hardware alleged that Vermen Realty Vermen Realty Corporation had stopped issuing
purchase orders of construction materials after April, 1982, without valid reason, thus resulting
in the stoppage of deliveries of construction materials on its (Seneca Hardware) part, in violation
of the Offsetting Agreement.
6. After conducting hearings, the trial court rendered a decision dismissing the complaint and
ordering the plaintiff (Seneca Hardware in this petition) to pay defendant (Vermen Realty in this
petition) on its counterclaim in the amount of P27,848.25 representing the balance due on the
purchase price of condominium unit 601.
7. On appeal, respondent court reversed the trial court's decision as adverted to above.
8. Hence this petition

Issue

1. Do the circumstances of the case warrant rescission of the Offsetting Agreement as prayed for
by Seneca Hardware?
Ruling

1. Yes. The Court ruled in favor of Seneca Hardware.

There is no controversy that the provisions of the Offsetting Agreement are reciprocal in nature.
Reciprocal obligations are those created or established at the same time, out of the same cause, and
which results in a mutual relationship of creditor and debtor between parties.

In reciprocal obligations, the performance of one is conditioned on the simultaneous fulfillment of the
other obligation. Under the agreement, Seneca Hardware shall deliver to Vermen Realty construction
materials. Vermen Realty's obligation under the agreement is three-fold:

a. he shall pay Seneca Hardware P276,000.00 in cash;

b. he shall deliver possession of units 601 and 602, Phase I, Vermen Pines Condominiums
(with total value of P276,000.00) to Seneca Hardware;
c. upon completion of Vermen Pines Condominiums Phase II, Seneca Hardware shall be
given option to transfer to similar units therein.

Article 1191 of the Civil Code provides the remedy of rescission in (more appropriately, the term is
"resolution") in case of reciprocal obligations, where one of the obligors fails to comply with what is
incumbent upon him.

In the case at bar, Vermen Realty argues that it was Seneca Hardware who failed to perform its
obligation in the Offsetting Agreement. Seneca Hardware, on the other hand, points out that the subject
of the Offsetting Agreement is Phase II of the Vermen Pines Condominiums. It alleges that since
construction of Phase II of the Vermen Pines Condominiums has failed to begin it has reason to move for
rescission of the Offsetting Agreement, as it cannot forever wait for the delivery of the condominium
units to it.

It is evident from the facts of the case that Seneca Hardware did not fail to fulfill its obligation in the
Offsetting Agreement. The discontinuance of delivery of construction materials to Vermen Realty
stemmed from the failure of Vermen Realty to send purchase orders to Seneca Hardware.

The impossibility of fulfillment of the obligation on the part of Vermen Realty necessitates resolution of
the contract for indeed, the non-fulfillment of the obligation aforementioned constitutes substantial
breach of the Offsetting Agreement.

Article 1191, NCC

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.

The injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if
the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with Articles 1385 and 1388 and the Mortgage Law.
Heirs of Luis Bacus vs CA and Spouses Duray

Facts

2. In the contract of lease of agricultural land executed between Luis Bacus and Faustino Duray, an
option to buy clause was included.
3. Later, Luis died and the Duray spouses informed the heirs of Luis their willingness to exercise
their option to buy the property under the option to buy clause.
4. Petitioners refused to sell the property, prompting Duray to file a complaint for specific
performance.
5. The heirs of Luis, however, asserted that the Durays had failed to pay the purchase price of the
land before the expiration of the contract. Hence, with the expiration of the contract, the option
to buy had also expired.
6. RTC ruled in favor of private respondents. Petitioners appealed to CA who denied such appeal.
7. Hence this petition.

Issue

1. WON petitioners can be compelled to sell the disputed property by virtue of the non-fulfillment
of the obligation under the option contract of the private respondents.

Ruling

1. Yes, petitioners can be compelled to sell the disputed property

Rationalization

1. Obligations under an option to buy are reciprocal obligations. The performance of one
obligation is conditioned on the simultaneous fulfillment of the other obligation. In other words,
in an option to buy, the payment of the purchase price by the creditor is contingent upon the
execution and delivery of deed of sale by the debtor. In this case, when private respondents
opted to buy the property, their obligation was to advise petitioners of their decision and their
readiness to pay the price. They were not yet obliged to make actual payment. Only upon
petitioners' actual execution and delivery of the deed of sale were they required to pay. The
latter was contingent upon the former.
2. In Nietes vs. Court of Appeals, 46 SCRA 654 (1972), we held that notice of the creditor's decision
to exercise his option to buy need not be coupled with actual payment of the price, so long as
this is delivered to the owner of the property upon performance of his part of the agreement.
Consequently, since the obligation was not yet due, consignation in court of the purchase price
 was not yet required. Consignation is the act of depositing the thing due with the court or
judicial authorities whenever the creditor cannot accept or refuses to accept payment and it
generally requires a prior tender of payment. In instances, where no debt is due and owing,
consignation is not proper. Therefore, petitioners' contention that private respondents failed to
comply with their obligation under the option to buy because they failed to actually deliver the
purchase price or consign it in court before the contract expired and before they execute a
deed, has no leg to stand on.
3. Private respondents did not incur in delay when they did not yet deliver payment nor make a
consignation before the expiration of the contract. In reciprocal obligations, neither party incurs
in delay if the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him. Only from the moment one of the parties fulfills his obligation, does delay
by the other begin. In this case, private respondents, communicated to petitioners their
intention to buy the property and they were at that time undertaking to meet their obligation
before the expiration of the contract. However, petitioners refused to execute the deed of sale
and it was their demand to private respondents to first deliver the money before they would
execute the same which prompted private respondents to institute a case for specific
performance. Later, after the case had been submitted for decision but before the trial court
rendered its decision, private respondents issued a cashier's check in petitioners' favor
purportedly to bolster their claim that they were ready to pay the purchase price. The trial court
considered this in private respondents' favor and we believe that it rightly did so, because at the
time the check was issued, petitioners had not yet executed a deed of sale nor expressed
readiness to do so. Accordingly, as there was no compliance yet with what was incumbent upon
petitioners under the option to buy, private respondents had not incurred in delay when the
cashier's check was issued even after the contract expired.