11/4/2019

OBLIGATIONS AND CONTRACTS

(Recent Cases)

ATTY. MYRA ANGELI A. GALLARDO-BATUNGBAKAL

JOINT AND SOLIDARY

OBLIGATIONS

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MANLAR RICE MILL, INC. vs. LOURDES L. DEYTO and

JENNELITTA DEYTO ANG
G.r. No. 191189, January 29, 2014

NOTA BENE: Well entrenched is the rule that

solidary obligation cannot be lightly
inferred. There is a solidary liability only
when the obligation expressly so states,
when the law so provides or when the
nature of the obligation so requires.

Facts:
Jennelita Deyto, Ang and Manlar Rice Mill, Inc.
(Manlar) entered into a rice supply agreement
where Ang was the purchaser and Manlar was
the seller. Ang issued 9 post-dated checks from
her personal checking account. Said checks,
however, bounced. Manlar made oral and
written demands upon Deyto and Ang. Said
demands were unheeded. Deyto informed
Manlar that Ang could no longer be found.
Manlar filed a case for a sum of money
against Deyto and Ang before the RTC of
Quezon City. Manlar contended that Deyto and
Ang were solidarily liable under the contract.

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Deyto claimed that she had nothing to

do with the contract between Manlar and
Ang. She also argued that impleading her
in the case was a “desperate strategy” to
recover from her since Ang absconded.

ISSUE: W/N DEYTO CAN BE

HELD SOLIDARILY LIABLE WITH
ANG
HELD: No, Deyto could not be held solidarily liable
with Ang. The Supreme Court found Manlar’s
allegations that Deyto guaranteed Ang’s checks
and that she consented to be held solidarily liable
hardly credible. Pua, Manlar’s Sales Manager,
admitted that this was not in writing and in fact
was just a verbal assurance.
The SC, said, “Well entrenched is the rule that
solidary obligation cannot be lightly inferred.
There is solidary liability only when the obligation
expressly so states, when the law so provides or
when the nature of the obligation so requires.”

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EXTINGUISHMENT OF
OBLIGATION

Payment or performance

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Luzon Development Bank vs.

Angeles Catherine Enriquez,
G.R. no. 168646, January 12,
2011
NOTA BENE: Dacion en pago extinguishes the
obligation to the extent of the value of the thing
delivered, either as agreed upon by the parties or
as may be proved, unless the parties by
agreement, express or implied, or by their silence,
consider the thing as equivalent to the obligation,
in which case the obligation is totally extinguished.

Facts:
Delta is a domestic corporation engaged in the
real estate business where it develops and sells real
estate properties. It obtained a loan of P4M from
the Luzon Development Bank or the LDB. The loan
was secured with a Real Estate Mortgage (REM) on
Delta’s properties including Lot 4. However, Delta
failed to obtain prior clearance with the HLURB
which was necessary for the REM to be valid.
Later, Delta entered into a Contract To Sell with
Enriquez over Lot 4. The purchase price was
P614,950.00, and Enriquez paid a down payment of
P114,950.00. Later, Delta defaulted payment on
the loan. Thus, instead of foreclosure of the REM,
Delta agreed to dation in payment (dacion en
pago) including Lot 4.

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ISSUE: W/N THE SUBJECT PROPERTY OF A

CONTRACT TO SELL CAN BE SUBJECT TO
DACION EN PAGO WITH A THIRD PARTY
HELD: Yes, the subject property of a Contract To Sell can
be subject to dacion en pago with another party.
The contract between Delta and Enriquez was a
Contract To Sell. In a contract to sell, ownership is not
transferred to the buyer until there is full payment of the
purchase price. Here, Delta and LDB contended that
being a contract to sell, ownership would only be
transferred upon full payment of the purchase price. And
prior to payment, Delta may still subject the same as a
security for a loan obtained and eventually to dacion en
pago. Since the contract to sell did not transfer ownership
to Enriquez, Delta could validly transfer the ownership (as it
did) to another person (LDB).
However, note that contracts to sell involving
subdivision lots afford protection to buyers (PD 957). Upon
full payment of the purchase price, the LDB must deliver to
Enriquez a clean title over the subject property.

ISSUE: W/N THE DACION EN PAGO

EXTINGUISHED THE OBLIGATION

HELD: Yes, the dacion en pago extinguished the obligation.

Like in all contracts, the intention of the parties to the dation
in payment is paramount and controlling. The contractual
intention determines whether the property subject of the
dation will be considered as the full equivalent of the debt
and will therefore serve as full satisfaction for the debt. The
dation in payment extinguishes the obligation to the extent
of the value of the thing delivered, either as agreed upon
by the parties or as may be proved, unless the parties by
agreement, express or implied, or by their silence, consider
the thing as equivalent to the obligation, in which case the
obligation is totally extinguished.

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Moldex Realty, Inc. vs. Flora A.

Saberon,
G.R. no. 176289, April 8, 2013

NOTA BENE: The lack of license to sell or

the failure on the part of the subdivision
developer to register the contract to sell or
deed of conveyance with the Register of
Deeds does not result to the nullification or
invalidation of the contract to sell it
entered into with a buyer. The contract to
sell remains valid and subsisting.

facts:

Flora Saberon entered into a Contract To Sell

with Moldex Realty, Inc. involving a parcel of land
in Dasmarinas, Cavite. Flora opted to pay on an
installment basis and paid from 1992 to 1996.
However, Flora subsequently defaulted on her
payments. Hence, Moldex sent Flora a notarized
Notice of Cancellation of the Contract To Sell. On
the other hand, Flora filed before the Housing and
Land Use Regulatory Board (HLURB) a complaint
for the annulment of the contract to sell asking for
recovery of the payments she had made with
interests, damages, and the cancellation of
Moldex’s license to sell.

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Flora contended that Moldex was in bad

faith when it bloated her unpaid balance.
She also alleged that the Contract To Sell
was void from the beginning as Moldex
entered in the Contract To Sell without the
necessary license to sell. Further, she
alleged that Moldex violated PD 957
because Moldex did not register the
Contract To Sell in the Registry of Deeds.

Issue: w/n the contract to sell

remains valid and binding
HELD: “The lack of a certificate of registration and a license
to sell on the part of the subdivision developer does not
result to the nullification or invalidation of the contract to
sell it entered into with a buyer. The contract to sell remains
valid and subsisting. In said case, the Court upheld the
validity of the contract to sell notwithstanding the violations
of the developer of the provisions of PD 957. We held that
nothing in PD 957 provides for the nullity of the contract
validly entered into in cases of violation of any of its
provisions such as the lack of a license to sell.
Thus, the contract to sell entered into between Flora
and Moldex remains valid despite the lack of license to sell
on the part of the latter at the time the contract was
entered into.

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Moreover, Flora claims that the contract she

entered into with Moldex is void because the
latter’s failure to register the contract to
sell/document conveyance with the Register of
Deeds, is in violation of Section 17 of PD 957.
However, just like in Section 5 which did not
penalize the lack of a license to sell with the
nullification of the contract, Section 17 similarly did
not mention that the developer’s or Moldex’s
failure to register the contract to sell or deed of
conveyance with the Register of Deeds resulted to
the nullification or invalidity of the said contract or
deed.”

VOID CONTRACTS

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Luz S. Nicolas vs. Leonora C. Mariano,

G.R. No. 201070, August 1, 2016

NOTA BENE: When both parties are

in pari-delicto or in equal fault, none
of them may expect positive relief
from the courts in the interpretation
of their agreement, instead, they
shall be left as they were at the time
the case was filed.

Facts:

Leonora Mariano is a grantee of a parcel of land from

the NHA. The grant is subject to a mortgage inscribed on
the dorsal side of TCT No. C-44249 and further subject to a
proviso, proscribing any transfer or encumbrance of said
parcel of land.
On January 28, 1998, Leonora obtained a loan from Luz
Nicolas. To secure said loan, she executed a deed of
mortgage covering half of the portion of the land. She
defaulted in payment. Hence, parties entered into a
second mortgage denominated as Sanglaan ng Lupa at
Bahay where Leonora mortgaged the subject parcel of
land AND the improvements thereon, i.e. a five door
apartment. Loenora again defaulted in payment. Hence,
Leonora and Luz executed a Deed of Absolute Sale.

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Issue: W/N the mortgages and the

deed of absolute sale are valid
 HELD: No, the mortgages and the Deed of Absolute
Sale are invalid/void.
Leonora entered into the mortgages and the
absolute sale despite the fact that she was not the
owner of the subject property. As said earlier,
Leonora failed to pay the entire purchase price.
Hence, despite the fact that the TCT was in her name,
she was still not the rightful owner of the property. Not
being the owner of the property, she should not have
entered into such contracts. Also, Luz was not a
buyer in good faith. The fact that only a photocopy
of the title was given to her should have put her on
notice. She should have exercised due diligence.

“…both parties herein are not in

good faith; they are deemed in pari
delicto or in equal fault, and for this,
“[n]either one may expect positive
relief from courts of justice in the
interpretation of their contract. The
courts will leave them as they were at
the time the case was filed.”

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SPECIFIC PERFORMANCE
vs.
RESCISSION
HONORLITA ASCANO-CUPINO AND FLAVIANA ASCANO-
COLOCADO vs. PACIFIC REHOUSE CORPORATION, August 26,
2015

Facts: The Ascanos entered into a Conditional Sale

with Pacific Rehouse Corporation (Pacific) involving
59,753 square meters located in General Trias,
Cavite for P5,975,300.00.

 Under the contract, the Seller Ascanos

must do the following: 1) complete all
documents necessary for the transfer of
the certificate of title of the land; 2)
guarantee removal of the tenants,
squatters, and other occupants on the
land, and payment of disturbance
compensation to said persons; and 3)
submit an Affidavit of Non-Tenancy and
land operation transfer documents to the
Buyer (Pacific).

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The Buyer gave a down payment of P1,792,590.00

leaving a balance of P4,182,710 to be paid
upon fulfillment of the aforementioned
conditions.

The Ascanos failed to fulfill all its obligations, asked

for rescission of the contract, and refused to
accept Pacific’s tender of additional payment
amounting P1,005,180. Pacific then opened a
Savings Account in the name of the petitioners,
depositing therein the said amount. Pacific
informed the Ascanos that they were authorized
to withdraw the same at their convenience.

As the Ascanos refused to comply with their

obligations, Pacific filed a Complaint for
Cancellation of Contract, Sum of Money, and
Damages before the RTC of Trece Martirez. But
before the pre-trial, Pacific learned that the
Ascanos had withdrawn the deposited money.

The Ascanos alleged that there was an Addendum

to Deed of Conditional Sale providing that full
payment of the balance shall be made within six
(6) months from date of the Deed of Conditional
Sale, otherwise, in case of default, the sale shall
be automatically cancelled. Return of all
payments shall be made minus the disturbance
fee given to the occupants of the land.

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 Pacific refused to recognize the addendum as

it was not signed by its authorized signatory. A
person from Pacific merely signed the same as
a witness.

 Subsequently, Pacific amended its pleading

and changed its cause of action to that of
specific performance. Its Amended
Complaint was with leave of court.

Issue: W/N the Court of Appeals erred in reversing

the decision of the RTC that ordered rescission
of the contract.

Held: No. The CA did not err in ordering specific

performance instead of rescission. The SC ruled
that the RTC erred in basing its decision on the
original complaint of Pacific asking for
cancellation of the contract. An amended
complaint supersedes the original complaint.
Hence, the decision on the case should be
based on the cause of action stated in the
amended complaint.

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According to the SC, “the injured party is the

party who has faithfully fulfilled his obligation or
is ready and willing to perform his obligation.”
Pacific was adjudged to be the aggrieved
party who had the right to elect between
rescinding the contract and exacting fulfillment
of obligation. Pacific chose to ask for specific
performance, as stated in the Amended
Complaint.

Further, Petitioners cannot be allowed rescission

as they themselves failed to perform their
obligation under the Conditional Sale.

DEMAND and DELAY

RODRIGO RIVERA vs. SPOUSES SALVADOR AND VIOLETA CHUA,
G.R. No. 184458, January 14, 2015

Facts: The spouses Chua were engaged in the

business of lending money. Rivera was the
kumpadre of spouses who was able to solicit a loan
from the Chuas in the amount of Php 120,000.00

Rivera issued a promissory note to cover the

obligation. He likewise issued checks that bounced.
Despite repeated demands, Rivera was unable to
pay the obligation.

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The spouses Chua averred that Rivera was unable to

pay. As his defense, Rivera claimed that no
demand was made.

Issue: W/N a demand is necessary for delay to exist.

Held: In this case, the demand is no longer

necessary. Art. 1169 provides the general rule that
demand is necessary to incur delay. However, the
same provision provides circumstances where
demand is not necessary for delay to exist such as
when the obligation or law so declares.

Note that the demand by the creditor shall not be

necessary when the obligation or the law
expressly so declares. In this case, the promissory
note specifically provides that failure on the part
of Rivera to pay the obligation will make him
liable for interest rate of 5% interest monthly. To
quote:

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“It is agreed and understood that

failure on my part to pay the
amount of (P120,000.00) One
Hundred Twenty Thousand Pesos
on December 31, 1995. (sic) I
agree to pay the sum equivalent
to FIVE PERCENT interest monthly
from the date of default until the
entire obligation is fully paid for.

The SC sided with spouses Chua

and held that demand was no
longer necessary in this case.
The Promissory note indicated
that demand was no longer
necessary in case of failure to
pay the sum promised.

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ASSIGNMENT OF CREDIT
FORT BONIFACIO DEVELOPMENT CORPORATION vs.
VALENTIN L. FONG, G.R. NO. 209370, March 28,
2015

Facts: Fort Bonifacio Development Corporation

(FBDC) contracted with MS Maxco Company,
Inc for the execution of the structural and partial
architectural works of a condominium project in
Taguig City. The construction agreement was
embodied in the Trade Contract.

The Trade Contract allowed FBDC to hire the

services of other contractors to rectify errors
committed by MS Maxco by reason of
negligence, act, omission, or default. Further, the
Trade Contract, allowed FBDC to deduct or set off
any amount from the contract price in such
cases. Thus, when MS Maxco incurred delays and
failed to comply with its obligations, FBDC took
over and hired other contractors to complete the
construction. Corrective measures were done.
FBDC then deducted the costs for repairs
amounting to P11,567,779.12 from MS Maxco’s
retention money.

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The contract between FBDC and MS Maxco ,

provided that MS Maxco could not assign its rights,
obligations, or liabilities under the contract to any
person without the written consent of FBDC.

Later, FBDC received a letter from the counsel of Fong

informing the corporation that MS Maxco assigned
the amount of P1,577,115.90 to Fong as payment.
Said amount was supposed to be taken from the
retention money with FBDC.

 FBDC acknowledged the 5% retention money of

MS Maxco but claimed that said retention money
was not yet due and demandable. Further, it
contended that the same was already garnished
by the other creditors of MS Maxco.

 Later, FBDC informed Fong that the rectification of

the defects in the construction project and the
garnishment made by the other creditors left
nothing of the retention money.

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 Given the foregoing, Fong sued FBDC for

payment of the P1,577,115.90 with legal interest,
costs of suit, and litigation expenses.

Issue: W/N FBDC was liable for the amount of

P1,577,115.90 with legal interest, costs of suit,
and litigation expenses.

Held: FBDC is not liable.

Rationale:
Under the law on assignment, when a person
assigns his credit to another person, the latter
(assignee) is deemed subrogated to the rights
and obligations of the former. Here, by virtue of
the Deed of Assignment, Fong is deemed
subrogated to the rights and obligations of the
assignor MS Maxco. Note that Fong could not
have greater rights than that of the assignor.

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The SC held that MS Maxco could not assign or

transfer any of its rights, obligations, or liabilities
under the Trade Contract without the written
consent of FBDC as provided in the Trade
Contract. Thus, the right to recover the
aforementioned amount rested with MS Maxco
and not with Fong.

BEST OF LUCK!
GO ACE THE
BAR!

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