INTERNATIONAL HOTEL

CORPORATION v. FRANCISCO B.
JOAQUIN, GR No. 158361, 2013-04-10
Facts:
On February 1, 1969, respondent
Francisco B. Joaquin, Jr. submitted a
proposal to
International Hotel Corporation (IHC)
for him to render technical assistance
in securing a foreign loan for the
construction of a hotel, to be
guaranteed by the
Development Bank of the Philippines
(DBP).
The proposal encompassed nine
phases, namely: (1) the preparation
of a new project study; (2) the
settlement of the unregistered
mortgage prior to the submission of
the application for guaranty for...
processing by DBP; (3) the
preparation of papers necessary to
the application for guaranty; (4) the
securing of a foreign financier for the
project; (5) the securing of the
approval of the DBP Board of
Governors; (6) the actual follow up of
the application with DBP[3]; (7) the
overall coordination in implementing
the projections of the project study;
(8) the preparation of the staff for
actual hotel operations; and (9) the
actual hotel operations.
On July 11, 1969, shortly after
submitting the application to DBP,
Joaquin wrote to IHC to request the
payment of his fees in the amount of
P500,000.00 for the services that he
had provided and would be providing
to IHC in relation to the hotel project
that were outside the... scope of the
technical proposal.
On July 11, 1969, the stockholders of
IHC met and granted Joaquin's
request, allowing the payment for
both Joaquin and Rafael Suarez for
their services in implementing the
proposal.
On June 20, 1970, Joaquin presented
to the IHC... the results of his
negotiations with potential foreign
financiers.
recommended... consider
Materials Handling Corporation based
on the more beneficial terms it had
offered. His recommendation was
accepted.
Negotiations with Materials Handling
Corporation and, later on, with its
principal, Barnes International
(Barnes), ensued.
While the negotiations with Barnes
were ongoing, Joaquin and Jose
Valero, the Executive Director of  IHC,
met with another financier, the
Weston
International Corporation (Weston), to
explore possible financing.[11] When
Barnes failed to deliver the needed
loan, IHC informed DBP that it would
submit Weston for DBP's
consideration.[12] As a result, DBP
cancelled its previous... guaranty
through a letter dated December 6,
1971.
Due to Joaquin's failure to secure the
needed loan, IHC,... canceled the
17,000 shares of stock previously
issued to Joaquin and Suarez as
payment for their services. The latter
requested a reconsideration of the
cancellation, but their request was...
rejected.
The complaint alleged that the
cancellation of the shares had been
illegal, and had deprived them of...
their right to participate in the
meetings and elections held by IHC;
that Barnes had been recommended
by IHC President Bautista, not by
Joaquin; that they had failed to meet
their obligation because President
Bautista and his son had intervened
and negotiated with Barnes... instead
of Weston; that DBP had canceled the
guaranty because Barnes had failed
to release the loan; and that IHC had
agreed to compensate their services
with 17,000 shares of the common
stock plus cash of P1,000,000.00.
IHC... the RTC held IHC liable
pursuant to the second paragraph of
Article 1284 of the Civil Code
The RTC found that Joaquin and
Suarez had failed to meet their
obligations when IHC had chosen to
negotiate with Barnes rather than
with Weston, the financier that
Joaquin had recommended... on
November 8, 2002, the CA concurred
with the RTC, upholding IHC's liability
under Article 1186 of the Civil Code. It
ruled that in the context of Article
1234 of the Civil Code, Joaquin had
substantially performed his...
obligations and had become entitled
to be paid for his services; and that
the issuance of the shares of stock
was ultra vires for having been issued
as consideration for future services.
Issues:
Article 1186 and Article 1234 of the
Civil Code cannot... be the source of
IHC's obligation to pay respondents
Ruling:
IHC's argument is meritorious.
Article 1186 of the Civil Code reads:
Article 1186. The condition shall be
deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
This provision refers to the
constructive fulfillment of a
suspensive condition,[32] whose
application calls for two requisites,
namely: (a) the intent of the obligor
to prevent the fulfillment of the
condition, and (b) the actual
prevention... of the fulfillment. Mere
intention of the debtor to prevent the 
happening of the condition, or to
place ineffective obstacles to its
compliance, without actually
preventing the fulfillment, is
insufficient.
Article 1234. If the obligation has
been substantially performed in good
faith, the obligor may recover as
though there had been a strict and
complete fulfillment, less damages
suffered by the obligee.
It is well to note that Article 1234
applies only when an obligor admits
breaching the contract[35] after
honestly and faithfully performing all
the material elements thereof except
for some technical aspects that cause
no serious harm to the... obligee.[36]
IHC correctly submits that the
provision refers to an omission or
deviation that is slight, or technical
and unimportant, and does not affect
the real purpose of the contract.
ESGUERRA V. VILLANUEVA
Facts

Appeal from a decision of the Court of

First Instance of Pangasinan.

Esguerra executed a lease in favor of

de Guzman in Esguerra-Gueco
Building in Dagupan City. Beginning
July 1961. However, de Guzman failed
to pay his rentals for February to
August 1962, and de Guzman’s
mother executed a promissory note.
However, the mother failed to comply
with the same.

A suit then commence, however, it

was settled through a compromise
agreement. PhP 2,260 was paid which
represented a substantial amount of
the debt originally owed, albeit late in
compliance with the compromise
agreement. However, the Esguerras
contented their receipt was not
tantamount to the acceptance of the
fulfillment of the obligation.

Issue

Whether the de Guzmans have

complied with the obligation fully. 

Held

The verb, “accept” as used in Article

1235 means to take as “satisfactory
or sufficient” or “to give assent to” or
to “agree” to incomplete or partial
performance. The Esguerras did not
assent to the payment.

The law does not require that the

objection of the creditor be made in a
particular manner or at any particular
time. The acts of the creditor binds
his acceptance or assent to the
fulfillment of the obligation.

ESGUERRA v VILLANUEVA
Petitioner Esguerra and respondent
de Guzman entered into acontract
whereby Esguerra leased to de
Guzman a portion of hisbuilding for a
term of 10 years beginning from July
12 1961 for amonthly rental of P300
up to July 11 1962 and P400
thereafter. DeGuzman failed to pay
the rental from February to August
1962aggregating P1800, in addition
to the sum of P300 (purchase priceof
equipment bought by him from the
Esguerras. Because of
this,respondent’s mother, Segunda
de Guzman executed in favor of
theesguerras a promissory note for
P2,100 (P1000 due on August 121962
and P1100 not later than Augus 31
1962, upon default of thefirst
installment, the entire value becomes
due and demandable).De Guzman
failed to pay.
Barons Marketing Corp vs Court
of Appeals and Phelp Dodge Phils
Inc [G. R. No. 126486. February 9,
1998] 286 SCRA 96 Case Digest

Concept:
Article 1248. Unless there is an
express stipulation to that
effect, the creditor cannot be
compelled partially to receive the
prestation in which the
obligation consists. Neither may
the
debtor be required to make
partial payments.
However, when the debt is in
part liquidated and in
part unliquidated, the creditor
may demand and the debtor
may effect the payment of the
former without waiting for the
 liquidation of the latter.
Facts:
·         August 31, 1973. Phelps Dodge
appointed Barons Marketing as one of
its dealers of electrical wires and
cables effective Sept. 1, 1973.
Defendant was given 60 days credit
for its purchases of Phelps Dodge’s
electrical products
·         Barons Marketing purchased, on
credit, from Phelps Dodge’s electrical
wires and cable in the total amount of
P4,102,483.30. This was then sold to
MERALCO, Baron Mktg being the
accredited supplier of the electrical
requirements of MERALCO.
·         Under the sales invoices issued
by Phelps Dodge to Barons Mktg for
the subject purchases, it is stipulated
that interest at 12% on the amount of
atty’s fees and collection. Baron’s
Mktg paid P300,000 out of its total
purchases leaving an unpaid account
of P3,802,478.20. Phelps Dodge
wrote Barons Mktg demanding
payment of its outstanding
obligations due Phelps Dodge. Baron
Mktg responded by requesting if it
could pay its outstanding account in
monthly installments of P500,000
 plus 1%interest per month until full
payment, this request was rejected
and Phelps Dodge demanded full
payment
·         Phelps Dodge then filed a
complaint before the Pasig Trial Court
for the recovery of P3,802,478.20 and
it also prayed to be awarded with
attorney’s fee  at the rate of 25% of
the amount demanded, exemplary
damages in the amount of P100,000,
the expenses of litigation and the
costs of suit.
·         The court ruled in favor of Phelps
Dodge with the exemplary damages
of P10,000 and recovery of
P3,108,000
·         Both parties appealed. Phelps
Dodge claimed that court should have
awarded the sum of P3,802,478.20. It
also said that the amount awarded
was a result of a typographical error.
·         Barons Mktg claimed that Phelps
Dodge’s claim for damages is a result
of “creditor’s abuse” and it also
claimed that Phelps Dodge failed to
prove its cause of action against it.
·         CoA ruled in favor of Phelps
Dodge with the correct amount but
 only with the 5% for the Atty’s fee. No
costs.
·         Barons Mktg then alleged that the
Coa erred its decision

Issue: W/ON private respondent is

guilty of abuse of right

Held: No. a creditor cannot be

considered in delay if he refuses to
accept partial performance because,
unless otherwise provided by law or
stipulated by the parties, a creditor
cannot be compelled to accept
partial performance; however, if good
faith necessitates acceptance or if the
creditor abuses his right in not
accepting, the creditor will incur in
delay if he does not accept such
partial performance.

Spouses Publico v. Bautista | GR

No. 174096 | July 20, 2010
Facts
 Spouses Publico (Divina Publico
and Jose Publico) obtained a loan
 from Teresita Bautista which was
secured by a REM over a real
property covered by TCT T-
244828.
 The REM provides that the loan
would bear interest and penalties
to would be paid within one-and-
a-half years, failing which the
mortgaged property would be
sold pursuant to Act. 3135. Sps.
Publico surrendered the TCT to
Bautista.
 Sps. Publico borrowed from
Bautista the copy of the title in
order to re-mortgage the
property to secure another loan
the proceeds of which would be
used to pay Bautista.
 Sps. Publico then obtained a loan
from Hiyas Bank the amount of
Php. 200,000.00 to pay their
obligation to Bautista evidenced
by the document named
Pagpapatunay. Sps. Publico failed
to pay their obligations. Bautista
feared that Hiyas Bank might
foreclose the mortgage and
offered to pay the obligations of
the spouses covered by the REM.
 In the presence of Jose Publico,
 Bautista settled the spouse’s
obligation with the bank.
However, despite demands the
spouses still failed to pay their
obligation with Bautista.
 Bautista filed a complaint for
foreclosure of mortgage with the
RTC of Bulacan. RTC rendered a
judgment against the spouses
which was affirmed by CA.
 Spouses opposed the decision
and held that the mortgage had
been cancelled and discharged
not only by the Pagpapatunay
but also by Bautista’s act of
paying their debt with Hiyas
Bank to thus make respondent
the subrogee of the bank. To
petitioners, the remedy of
Bautista is to sue for collection
of sum of money, and not the
foreclosure of mortgage.
 Bautista counters that the
Pagpapatunay did not take the
place of the Kasulatan (which
was the promissory note
covering the loan obligation)
since she merely allowed the
spouses to remortgage the
property.
Issue
W/N the proper remedy for
Bautista is an action for
collection of sum of money and
not foreclosure of mortgage
Held
Supreme Court held that the
Pagpapatunay is not a new obligation
which could have extinguished the
Kasulatan since the condition of the
payment set out in the Pagpapatunay
was never fulfilled. The trial court
found that no competent evidence
was introduced, except the bare
assertion of Divinia, to prove their
payment of the obligation or that
they complied with the conditions set
out in the Pagpapatunay.
The Spouses cannot also deny their
indebtedness to Bautista on the basis
of Art. 1236 since the payment
advanced by Bautista on their behalf
redounded to their benefit and Divina
never objected to it.
Lastly, Spouses claim that they were
deprived of the equity of
redemption when the trial court
failed to state the period within which
they could redeem. CA, however, did
specify a period of ninety (90) days
from finality of judgment to pay the
adjudged amount. This is in
consonance with the period
mentioned by Section 2, Rule 68 of
the 1997 Rules of Civil Procedure.
While the trial court did not use the
phrase entry of judgment as the
reckoning point for the redemption
period, the Rules provide that the
date of finality of the judgment shall
be deemed to be the date of its entry.
Spouses can therefore exercise
their equity of redemption within
the period provided they do so
before the foreclosure sale is
confirmed by the trial court.

ABELARDO VALARAO, GLORIOSA

VALARAO AND CARLOS VALARAO,
PETITIONERS, VS. COURT OF
APPEALS AND MEDEN A.
ARELLANO. 
Article 1592 of the Civil Code applies
only to contracts of sale, and not to
contracts to sell or conditional sales
where title passes to the vendee only
upon full payment of the purchase
price. Furthermore, in order to
enforce the automatic forfeiture
clause in a deed of conditional sale,
the vendors have the burden of
proving a contractual breach on the
part of the vendee.
Facts:

"On September 4, 1987, spouses

Abelardo and Gloriosa Valarao, thru
their son Carlos Valarao as their
attorney-in-fact, sold to [Private
Respondent] Meden Arellano under a
Deed of Conditional Sale a parcel of
land situated in the District of
Diliman, Q.C., covered by TCT No.
152879 with an area of 1,504 square
meters, for the sum of THREE
MILLION TWO HUNDRED TWENTY
FIVE THOUSAND PESOS
(P3,225,000.00) payable under a
schedule of payment stated therein.

"In the same Deed of Conditional

Sale, the [private respondent] vendee
obligated herself to encumber by way
of real estate mortgage in favor of
[petitioners] vendors her separate
piece of property with the condition
that upon full payment of the balance
of P2,225,000.00, the said mortgage
shall become null and void and
without further force and effect.
"It was further stipulated upon that
should the vendee fail to pay three
(3) successive monthly installments
or any one year-end lump sum
payment within the period stipulated,
the sale shall be considered
automatically rescinded without the
necessity of judicial action and all
payments made by the vendee shall
be forfeited in favor of the vendors by
way of rental for the use and
occupancy of the property and as
liquidated damages. All
improvements introduced by the
vendee to the property shall belong
to the vendors without any right of
reimb
‘ursement.
"[Private respondent] appellant
alleged that as of September , 1990,
she had already paid the amount of
[t]wo [m]illion [t]wenty-[e]ight
[t]housand (P2,028,000.00) [p]esos,
although she admitted having failed
to pay the installments due in
October and November, 1990.
Petitioner, however, [had] tried to pay
the installments due [in] the said
months, including the amount due
[in] the month of December, 1990 on
December 30 and 31, 1990, but was
turned down by the vendors-
[petitioners] thru their maid, Mary
Gonzales, who refused to accept the
payment offered. [Private
respondent] maintains that on
previous occasions, the same maid
was the one who [had] received
payments tendered by her. It appears
that Mary Gonzales refused to receive
payment allegedly on orders of her
employers who were not at home.

"[Private respondent] then reported

the matter to, and sought the help of,
the local barangay officials. Efforts to
settle the controversy before the
barangay proved unavailing as
vendors-[petitioners] never appeared
in the meetings arranged by the
barangay lupon.

"[Private respondent] tried to get in

touch with [petitioners] over the
phone and was able to talk with
[Petitioner] Gloriosa Valarao who told
her that she [would] no longer accept
the payments being offered and that
[private respondent] should instead
confer with her lawyer, a certain Atty.
Tuazon. When all her efforts to make
payment were unsuccessful, [private
respondent] sought judicial action by
filing this petition for consignation on
January 4, 1991.

"On the other hand, vendors-

[petitioners], thru counsel, sent
[private respondent] a letter dated 4
January 1991 notifying her that they
were enforcing the provision on
automatic rescission as a
consequence of which the Deed of
Conditional Sale [was deemed] null
and void, and xxx all payments made,
as well as the improvements
introduced on the property, [were]
thereby forfeited. The letter also
made a formal demand on the
[private respondent] to vacate the
property should she not heed the
demand of [petitioners] to sign a
contract of lease for her continued
stay in the property .
Issues:
I.whether the requirement of a
judicial demand or a notarial act has
been fulfilled.
"II Whether the automatic forfeiture
clause is valid and binding between
the parties."

"III Whether the action for

consignation may prosper without
actual deposit [in court] of the
amount due xxx [so as] to produce
the effect of payment."
Ruling:

1.
Art. 1592 of the new Civil Code (Art.
1504 of the old Civil Code) requiring
demand by suit or notarial act in case
the vendor of realty wants to rescind
does not apply to a contract to sell or
promise to sell, where title remains
with the vendor until" full payment of
the price.
In the present case, the Deed of
Conditional Sale is of the same nature
as a saleoninstallment or a contract
to sell, which is not covered by Article
1592.
Petitioners-vendors unmistakably
reserved for themselves the title to
the property until full payment of the
purchase price by the vendee.
Clearly, the agreement was not a
deed of sale, but more in the nature
of a contract to sell or of a sale on
installments.[13] Even after the
execution of the Deed of Conditional
Sale, the Torrens Certificate of Title
remained with and in the name of the
vendors.

II.
As a general rule, a contract is the
law between the parties.[15] Thus,
"from the moment the contract is
perfected, the parties are bound not
only to the fulfillment of what has
been expressly stipulated but also to
all consequences which, according to
their nature, may be in keeping with
good faith, usage and law."[16] Also,
"the stipulations of the contract being
the law between the parties, courts
have no alternative but to enforce
them as they were agreed [upon] and
written, there being no law or public
policy against the stipulated forfeiture
of payments already
made."[17]However, it must be shown
that private respondent-vendee failed
to perform her obligation, thereby
giving petitioners-vendors the right to
demand the enforcement of the
contract.

We concede the validity of the

automatic forfeiture clause, which
deems any previous payments
forfeited and the contract
automatically rescinded upon the
failure of the vendee to pay three
successive monthly installments or
any one yearend lump sum payment.
However, petitioners failed to prove
the conditions that would warrant the
implementation of this clause.

It is clear that petitioners were not

justified in refusing to accept the
tender of payment made by private
respondent on December 30 and 31,
1990. Had they accepted it on either
of said dates, she would have paid all
three monthly installments due. In
other words, there was no deliberate
failure on her part to meet her
responsibility to pay.[18] The Court
takes note of her willingness and
persistence to do so, and, petitioners
cannot now say otherwise. The fact
is: they refused to accept her
payment and thus have no reason to
demand the enforcement of the
automatic forfeiture clause. They
cannot be rewarded for their own
misdeed.

Because their maid had received

monthly payments in the past,[19] it is
futile for petitioners to insist now that
she could not have accepted the
aforementioned tender of payment,
on the ground that she did not have a
special power of attorney to do so.
Clearly, they are estopped from
denying that she had such authority.
Under Article 1241 of the Civil Code,
payment through a third person is
valid "[I]f by the creditor's conduct,
the debtor has been led to believe
that the third person had authority to
receive the payment."

III.
It would be inequitable to allow the
forfeiture of the amount of more than
two million pesos already paid by
private respondent, a sum which
constitutes two thirds of the total
consideration. Because she did make
a tender of payment which was
unjustifiably refused, we hold that
petitioners cannot enforce the
automatic forfeiture clause of the
contract.