Gaite vs.

Fonacier
No. L-11827. July 31, 1961.
PLAINTIFF-APPELLEE: FERNANDO A. GAITE
DEFENDANTS-APPELLANTS: ISABELO FONACIER, GEORGE KRAKOWER,
LARAP MINES &SMELTING CO., INC., SEGUNDINA VIVAS, FRANCISCO
DANTE, PACIFICO ESCANDOR AND FERNANDO TY
All the defendants except Francisco Dante set up the uniform defense that the
obligation sued upon by Gaite was subject to a condition that the amount of
P65,000.00 would be payable out of the first letter of credit covering the first shipment
of iron ore and/or the first amount derived from the local sale of the iron ore by the
Larap Mines & Smelting Co., Inc.; that up to the time of the filing of the complaint, no
sale of the iron ore had been made, hence the condition had not yet been fulfilled;
and that consequently, the obligation was not yet due and demandable.

DOCTRINE/LAW: Conditional Obligation Art 1181 and 1198
FACTS:
Fonacier constituted and appointed plaintiffappellee Fernando A. Gaite as his true
and lawful attorney-in-fact to enter into a contract with any individual or juridical
person for the exploration and development of the mining claims. For some reason or
another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite to
exploit and develop the mining claims in question.
“Revocation of Power of Attorney and Contract” was executed on December 8, 1954:
“7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F. Fonacier all his
rights and interests over the 24,000 tons of iron ore, more or less, above-referred to
together with all his rights and interests to operate the mine in consideration of the sum of
SEVENTY-FIVE THOUSAND PESOS (P75,000.00) which the latter binds to pay as follows:
1. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing of this
agreement.
2. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be paid from
and out of the first letter of credit covering the first shipment of iron ores and/or
the first amount derived from the local sale of iron ore made by the Larap Mines
& Smelting Co., Inc., its assigns, administrators, or successors in interest.”
Gaite refused to sign said Exhibit “A” unless another bond underwritten by a bonding
company was put up by defendants to secure the payment of the P65,000.00 balance
of the price of the iron ore in the stockpiles in the mining claims. Hence, a second
bond, also dated December 8, 1954 (Exhibit “B”), was executed by the same parties
to the first bond Exhibit “A-1”. It provided that the liability of the surety company would
attach only when there had been an actual sale of iron ore by the Larap Mines &
Smelting Co. for an amount of not less than P65,000.00, and that, furthermore, the
liability of said surety company would automatically expire on December 8, 1955
Up to December 8, 1955, when the bond Exhibit “B” expired with respect to the Far
Eastern Surety and Insurance Company, no sale of the approximately 24,000 tons of
iron ore had been made by the Larap Mines & Smelting Co., Inc., nor had the
P65,000.00 balance of the price of said ore been paid to Gaite by Fonacier and his
sureties payment of said amount, on the theory that they had lost right to make use of
the period given them when their bond, Exhibit “B” automatically expired.
ISSUE: Whether or not the obligation of Fonacier and his sureties to pay Gaite
P65,000.00 become due and demandable when the defendants failed to renew
the surety bond underwritten by the Far Eastern Surety and Insurance Co., Inc.
(Exhibit “B”), which expired on December 8, 1955
HELD:
We find the court below to be legally correct in holding that the shipment or local sale
of the iron ore is not a condition precedent (or suspensive) to the payment of the
balance of P65,000.00, but was only a suspensive period or term. What characterizes
a conditional obligation is the fact that its efficacy or obligatory force (as distinguished
from its demandability) is subordinated to the happening of a future and uncertain
event; so that if the suspensive condition does not take place, the parties would stand
as if the conditional obligation had never existed.
Assuming that there could be doubt whether by the wording of the contract the parties
intended a suspensive condition or a suspensive period (dies ad quem) for the
payment of the P65,000.00, the rules of interpretation would incline the scales in favor
of “the greater reciprocity of interests”, since sale is essentially onerous. The Civil
Code of the Philippines, Article 1378, paragraph 1, in fine, provides:
“if the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity
of interests.”
and there can be no question that greater reciprocity obtains if the buyer’s obligation
is deemed to be actually existing, with only its maturity (due date) postponed or
deferred, that if such obligation were viewed as nonexistent or not binding until the
ore was sold.
We agree with the court below that the appellants have forfeited the right to compel
Gaite to wait for the sale of the ore before receiving payment of the balance of
P65,000.00, because of their failure to renew the bond of the Far Eastern Surety
Company or else replace it with an equivalent guarantee. The expiration of the
bonding company’s undertaking on December 8, 1955 substantially reduced the
security of the vendor’s rights as creditor for the unpaid P65,000.00, a security that
Gaite considered essential and upon which he had insisted when he executed the
deed of sale of the ore to Fonacier (Exhibit “A”). The case squarely comes under
paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines:
(2) When he does not furnish to the creditor the guaranties or securities which he has
promised.
 (3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory.”

There is no merit in appellants’ argument that Gaite’s acceptance of the surety

company’s bond with full knowledge that on its face it would automatically expire
within one year was a waiver of its renewal after the expiration date. No such waiver
could have been intended, for Gaite stood to lose and had nothing to gain barely; and
if there was any, it could be rationally explained only if the appellants had agreed to
sell the ore and pay Gaite before the surety company’s bond expired on December 8,
1955.
 Gonzales vs. Heirs of Thomas and Paula Cruz
G.R. No. 131784. September 16, 1999 | Conditional Obligation Art 1181
FACTS:
Heirs of Thomas and Paula Cruz, entered into a Contract of Lease/ Purchase with the
defendant, Felix L. Gonzales of a half-portion of a ‘parcel of land containing an area
of 12 hectares, more or less, and an accretion of 2 hectares, more or less, situated in
Rodriguez Town, Province of Rizal’ The contract of Lease/Purchase contains the
following provisions:
1. The terms of this Contract is for a period of one year upon the signing thereof. After
the period of this Contract, the LESSEE shall purchase the property on the
agreeable price of One Million Pesos (P1,000,000.00) payable within Two (2) Years
period with an interest of 12% per annum subject to the devalued amount of the
Philippine Peso, according to the following schedule of payment: Upon the execution
of the Deed of Sale 50%—and thereafter 25% every six (6) months thereafter, payable
within the first ten (10) days of the beginning of each period of six (6) months.
‘2. The LESSEE shall pay by way of annual rental an amount equivalent to Two
Thousand Five Hundred (P2,500.00) Pesos per hectare, upon the signing of this
contract on Dec. 1, 1983.
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‘9. The LESSORS hereby commit themselves and shall undertake to obtain a
separate and distinct T.C.T. over the herein leased portion to the LESSEE within
a reasonable period of time which shall not in any case exceed four (4) years,
after which a new Contract shall be executed by the herein parties which shall be the
same in all respects with this Contract of Lease/Purchase insofar as the terms and
conditions are concerned.
The defendant Gonzales did not, however, exercise his option to purchase the
property immediately after the expiration of the one-year lease on November 30, 1984
and remained in possession thereof without paying further rentals.
A letter was sent by one of the plaintiffs-heirs Ricardo Cruz to the defendant Gonzales
informing him of the lessors’ decision to rescind the Contract of Lease/Purchase due
to a breach thereof committed by the defendant. The letter also served as a demand
on the defendant to vacate the premises within 10 days from receipt of said letter.
Final demand letter to vacate the premises was sent by the remaining lessors who
are also the heirs of the deceased lessor Paula Cruz, through their counsel on August
24, 1987 which the defendant Gonzales received but did not heed.
ISSUES:
1. Whether or not paragraph 9 of the contract is a condition precedent before
the defendant is to pay the down payment;
2. Whether or not plaintiffs can rescind the Contract of Lease/Purchase; and
3. Whether or not plaintiffs can terminate the Contract of Lease.
HELD:
Interpretation of Paragraph Nine
In its first paragraph, the disputed agreement provides that petitioner shall lease the
property for one year, after which he “shall purchase” it. Paragraph nine, on the other
hand, requires herein respondents to obtain a separate and distinct Transfer
Certificate of Title (TCT) over the property.
Alleging that petitioner has not purchased the property after the lapse of one year,
respondents seek to rescind the Contract and to recover the property. Petitioner, on
the other hand, argues that he could not be compelled to purchase the property,
because respondents have not complied with paragraph nine, which obligates them
to obtain a separate and distinct title in their names.
Basic is the rule in the interpretation of contracts that if some stipulation therein
should admit of several meanings, it shall be understood as bearing that import most
adequate to render it effectual. Considering the antecedents of the ownership of the
disputed lot, it appears that petitioner’s interpretation renders clause nine most
effectual. This was necessary to enable them to show their ownership of the
stipulated portion of the land and their concomitant right to dispose of it. Absent any
title in their names, they could not have sold the disputed parcel of land.
Ninth Clause Was a Condition Precedent
Because the ninth clause required respondents to obtain a separate and distinct TCT
in their names and not in the name of petitioner, it logically follows that such
undertaking was a condition precedent to the latter’s obligation to purchase and pay
for the land. Put differently, petitioner’s obligation to purchase the land is a conditional
one and is governed by Article 1181 of the Civil Code.
“When the consent of a party to a contract is given subject to the fulfillment of a
suspensive condition, the contract is not perfected unless that condition is first
complied with.” The Court has held that “[w]hen the obligation assumed by a party to
a contract is expressly subjected to a condition, the obligation cannot be enforced
against him unless the condition is complied with.
In this case, the obligation of the petitioner to buy the land cannot be enforced unless
respondents comply with the suspensive condition that they acquire first a separate
and distinct TCT in their names. The suspensive condition not having been fulfilled,
then the obligation of the petitioner to purchase the land has not arisen.
Respondents Cannot Rescind the Contract
In the same vein, respondents cannot rescind the contract, because they have not
caused the transfer of the TCT to their names, which is a condition precedent to
petitioner’s obligation. This Court has held that “there can be no rescission (or more
properly, resolution) of an obligation as yet non-existent, because the suspensive
condition has not happened.”
 Coronel vs. Court of Appeals
G.R. No. 103577. October 7, 1996
FACTS:
On January 19, 1985, Romulo Coronel, et al. (Coronels) executed a document
entitled “Receipt of Down Payment” in favor of plaintiff Ramona Patricia Alcaraz
(Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 — Total amount
50,000.00 — Down payment
P1,190,000.00 — Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of
Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No.
119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father,
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down
payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the
deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay
the balance of the P1,190,000.00.
On the same date (January 15, 1985), Concepcion D. Alcaraz, mother of Ramona,
paid the down payment of Fifty Thousand. On February 6, 1985, the property
originally registered in the name of the Coronel’s father was transferred in their
names under TCT No. 327043.
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag for One Million Five Hundred Eighty
Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand
(P300,000.00) Pesos.
For this reason, Coronels canceled and rescinded the contract with Ramona by
depositing the down payment paid by Concepcion in the bank in trust for Ramona
Patricia Alcaraz.
On February 22, 1985, Concepcion, et al., filed a complaint for specific performance
against the Coronels and caused the annotation of a notice of lis pendens at the back
of TCT No. 327403
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject
property in favor of Catalina.
RTC rendered a decision in favor of the Alcaraz, ordering the Coronels to execute a
deed of sale to the Alcaraz and for the latter to pay the balance of P1,190,000.
ISSUE: Whether the Receipt of Downpayment serves as a conditional contract
of sale or a contract to sell.
HELD: Contract of sale subject to a suspensive condition
When the “Receipt of Down Payment” is considered in its entirety, it becomes more
manifest that there was a clear intent on the part of petitioners to transfer title to the
buyer, but since the transfer certificate of title was still in the name of petitioner’s
father, they could not fully effect such transfer although the buyer was then willing and
able to immediately pay the purchase price. Therefore, petitioners-sellers undertook
upon receipt of the down payment from private respondent Ramona P. Alcaraz, to
cause the issuance of a new certificate of title in their names from that of their father,
after which, they promised to present said title, now in their names, to the latter and to
execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein
made no express reservation of owner ship or title to the subject parcel of land.
Furthermore, the circumstance which prevented the parties from entering into an
absolute contract of sale pertained to the sellers themselves (the certificate of title
was not in their names) and not the full payment of the purchase price.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely
promise to sell the property to private respondent upon the fulfillment of the
suspensive condition. On the contrary, having already agreed to sell the subject
property, they undertook to have the certificate of title changed to their names and
immediately thereafter, to execute the written deed of absolute sale.
What is clearly established by the plain language of the subject document is that
when the said “Receipt of Down Payment” was prepared and signed by petitioners
Romulo A. Coronel, et al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate of
title from the name of petitioners’ father, Constancio P. Coronel, to their names.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to
the case at bench. Thus.
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price. From that
moment, the parties may reciprocally demand performance, subject to the provisions
of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening of
the event which constitutes the condition.
Hence, the respective obligations of the parties under the contract of sale became
mutually demandable, that is, petitioners, as sellers, were obliged to present the
transfer certificate of title already in their names to private respondent Ramona, the
buyer, and to immediately execute the deed of absolute sale, while the buyer on her
part, was obliged to forthwith pay the balance of the purchase price amounting to
P1,190,000.00.
 Parks vs. Province of Tarlac
No. 24190. July 13, 1926
FACTS:
On October 18, 1910, Concepcion Cirer and James Hill, the owners of parcel of land
No. 2 referred to in the complaint, donated it perpetually to the municipality of Tarlac,
Province of Tarlac, under certain conditions specified in the public document in which
they made this donation. The donation was accepted by Mr. Santiago de Jesus in the
same document on behalf of the municipal council of Tarlac of which he was the
municipal president. The parcel thus donated was later registered in the name of the
donee, the municipality of Tarlac.
On January 15, 1921, Concepcion Cirer and James Hill sold this parcel to the herein
plaintiff George L. Parks.
Consequently, when the sale was made Concepcion, Cirer and James Hill were no
longer the owners of this parcel and could not have sold it to the plaintiff, nor could
the latter have acquired it from them.
The appellant also contends that, in any event, the condition not having been
complied with, even supposing that it was not a condition precedent but subsequent,
the noncompliance thereof is sufficient cause for the revocation of the donation. This
is correct. But the period for bringing an action for the revocation of the donation has
prescribed. Under the laws in force (sec. 43, Code of Civ. Proc.), the period of
prescription of this class of action is ten years. The action for the revocation of the
donation for this cause arose or April 19, 1911, that is, six months after the ratification
of the instrument of donation of October 18, 1910. The complaint in this action was
presented July 5, 1924, more than ten years after this cause accrued.

On August 24, 1923, the municipality of Tarlac transferred the parcel to the Province
of Tarlac which, by reason of this transfer, applied for and obtained the registration
thereof in its name, the corresponding certificate of title having been issued to it.

George L. Parks, alleging that the conditions of the donation had not been complied
with and invoking the sale of this parcel of land made by Concepcion Cirer and James
Hill in his favor, brought this action against the Province of Tarlac, the municipality of
Tarlac.

ISSUE: Whether Parks can ask for the rescission of the donation?

HELD: The plaintiff has no right of action

The condition imposed that one of the parcels donated was to be used absolutely and
exclusively for the erection of a central school and the other for a public park, the
work to commence in both cases within the period of six months from the date of the
ratification by the parties of the document evidencing the donation. It is true that this
condition has not been complied with. The allegation, however, that it is a condition
precedent is erroneous. The characteristic of a condition precedent is that the
acquisition of the right is not effected while said condition is not complied with or is not
deemed complied with. Consequently, when a condition is imposed, the compliance
of which cannot be effected except when the right is deemed acquired, such condition
cannot be a condition precedent

It is true that the donation might have been revoked for the causes, if any, provided
by the law, but the fact is that it was not revoked when Concepcion Cirer and James
Hill made the sale of this parcel to the plaintiff. Even supposing that causes existed
for the revocation of this donation, still, it was necessary, in order to consider it
revoked, either that the revocation had been consented to by the donee, the
municipality of Tarlac, or that it had been judicially decreed.
 Central Philippine University vs. Court of Appeals
G.R. No. 112127. July 17, 1995
FACTS:
Sometime in 1939, the late Don Ramon Lopez, Sr., who was then a member of the
Board of Trustees of the Central Philippine College (now Central Philippine University
[CPU]), executed a deed of donation in favor of the latter of a parcel of land, for which
Transfer Certificate of Title No. T-3910-A was issued in the name of the donee CPU
with the following annotations copied from the deed of donation—
1. The land described shall be utilized by the CPU exclusively for the
establishment and use of a medical college with all its buildings as part of
the curriculum;
2. The said college shall not sell, transfer or convey to any third party nor in
any way encumber said land;
3. The said land shall be called “RAMON LOPEZ CAMPUS,” and the said
college shall be under obligation to erect a cornerstone bearing that name.
Any net income from the land or any of its parks shall be put in a fund to be
known as the “RAMON LOPEZ CAMPUS FUND” to be used for
improvements of said campus and erection of a building thereon.”
On 31 May 1989, private respondents, who are the heirs of Don Ramon Lopez, Sr.,
filed an action for annulment of donation, reconveyance and damages against CPU
alleging that since 1939 up to the time the action was filed the latter had not complied
with the conditions of the donation. Private respondents also argued that petitioner
had in fact negotiated with the National Housing Authority (NHA) to exchange the
donated property with another land owned by the latter.
Petitioner claims that the right for action to rescind the contract has prescribed.
On 31 May 1991, the trial court held that petitioner failed to comply with the conditions
of the donation and declared it null and void. The court a quo further directed
petitioner to execute a deed of reconveyance of the property in favor of the heirs of
the donor.
Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the
annotations at the back of petitioner’s certificate of title were resolutory conditions
breach of which should terminate the rights of the done thus making the donation
revocable.
ISSUE: Whether the conditions in the donation was a resolutory condition?
HELD:
Under Art. 1181 of the Civil Code, on conditional obligations, the acquisition of rights,
as well as the extinguishment or loss of those already acquired, shall depend upon
the happening of the event which constitutes the condition. Thus, when a person
donates land to another on the condition that the latter would build upon the land a
school, the condition imposed was not a condition precedent or a suspensive
condition but a resolutory one. It is not correct to say that the schoolhouse had to be
constructed before the donation became effective, that is, before the donee could
become the owner of the land, otherwise, it would be invading the property rights of
the donor. The donation had to be valid before the fulfillment of the condition.
If there was no fulfillment or compliance with the condition, such as what obtains in
the instant case, the donation may now be revoked and all rights which the donee
may have acquired under it shall be deemed lost and extinguished.
The claim of petitioner that prescription bars the instant action of private respondents
is unavailing. The time from which the cause of action accrued for the revocation of
the donation and recovery of the property donated cannot be specifically determined
in the instant case. A cause of action arises when that which should have been done
is not done, or that which should not have been done is done. In cases where there is
no special provision for such computation, recourse must be had to the rule that the
period must be counted from the day on which the corresponding action could have
been instituted. It is the legal possibility of bringing the action which determines the
starting point for the computation of the period. In this case, the starting point begins
with the expiration of a reasonable period and opportunity for petitioner to fulfill what
has been charged upon it by the donor.
Thus, when the obligation does not fix a period but from its nature and circumstances
it can be inferred that a period was intended, the general rule provided in Art. 1197 of
the Civil Code applies, which provides that the courts may fix the duration thereof
because the fulfillment of the obligation itself cannot be demanded until after the court
has fixed the period for compliance therewith and such period has arrived. This
general rule however cannot be applied considering the different set of circumstances
existing in the instant case. More than a reasonable period of fifty (50) years has
already been allowed petitioner to avail of the opportunity to comply with the condition
even if it be burdensome, to make the donation in its favor forever valid. But,
unfortunately, it failed to do so. Hence, there is no more need to fix the duration of a
term of the obligation when such procedure would be a mere technicality and
formality and would serve no purpose than to delay or lead to an unnecessary and
expensive multiplication of suits.
Petitioner has slept on its obligation for an unreasonable length of time. Hence, it is
only just and equitable now to declare the subject donation already ineffective and, for
all purposes, revoked so that petitioner as donee should now return the donated
property to the heirs of the donor, private respondents herein, by means of
reconveyance.
 Quijada vs. Court of Appeals
G.R. No. 126444. December 4, 1998
FACTS:
Petitioners are the children of the late Trinidad Quijada. Trinidad was one of the heirs
of the late Pedro Corvera and inherited from the latter the two-hectare parcel of land
subject of the case, situated in the barrio of Talacogon, Agusan del Sur. On April 5,
1956, Trinidad Quijada together with her sisters Leonila Corvera Vda. de Sequeña
and Paz Corvera Cabiltes and brother Epapiadito Corvera executed a conditional
deed of donation in favor of the Municipality of Talacogon, the condition being that the
parcel of
land shall be used solely and exclusively as part of the campus of the proposed
provincial high school in Talacogon. Apparently, Trinidad remained in possession of
the parcel of land despite the donation. On July 29, 1962, Trinidad sold one (1)
hectare of the subject parcel of land to defendant-appellant Regalado Mondejar.
Subsequently, Trinidad verbally sold the remaining one (1) hectare to (respondent)
Regalado Mondejar without the benefit of a written deed of sale and evidenced solely
by receipts of payment. In 1980, the heirs of Trinidad, who at that time was already
dead, filed a complaint for forcible entry. In 1987, the proposed provincial high school
having failed to materialize, the Sangguniang Bayan of the municipality of Talacogon
enacted a resolution reverting the two (2) hectares of land donated back to the
donors.
Regalado Mondejar sold portions of the land to (respondents) Fernando Bautista,
Rodolfo Goloran, Efren Guden and Ernesto Goloran.
In the petitioners alleged that their deceased mother never sold, conveyed,
transferred or disposed of the property in question to any person or entity much less
to Mondejar save the donation made to the Municipality of Talacogon in 1956; that at
the time of the alleged sale to Mondejar by Trinidad Quijada, the land still belongs to
the Municipality of Talacogon, hence, the supposed sale is null and void.
ISSUE: Whether the donated land will revert back to the donor for not complying with
the resolutory condition?
HELD:
The donation made on April 5, 1956 by Trinidad Quijada and her brother and sisters
was subject to the condition that the donated property shall be “used solely and
exclusively as a part of the campus of the proposed Provincial High School in
Talacogon.”8 The donation further provides that should “the proposed Provincial High
School be discontinued or if the same shall be opened but for some reason or
another, the same may in the future be closed” the donated property shall
automatically revert to the donor.
When the Municipality’s acceptance of the donation was made known to the donor,
the former became the new owner of the donated property. Accordingly, ownership is
immediately transferred to the latter and that ownership will only revert to the donor if
the resolutory condition is not fulfilled.
In this case, that resolutory condition is the construction of the school. It has been
ruled that when a person donates land to another on the condition that the latter
would build upon the land a school, the condition imposed is not a condition
precedent or a suspensive condition but a resolutory one. (CPU vs. CA)
Trinidad could not have sold the lots since she had earlier transferred ownership
thereof by virtue of the deed of donation. So long as the resolutory condition subsists
and is capable of fulfillment, the donation remains effective and the donee continues
to be the owner subject only to the rights of the donor or his successors-in-interest
under the deed of donation.
Since no period was imposed by the donor on when must the donee comply with the
condition, the latter remains the owner so long as he has tried to comply with the
condition within a reasonable period. Such period, however, became irrelevant herein
when the donee-Municipality manifested through a resolution that it cannot comply
with the condition of building a school and the same was made known to the donor.
Only then—when the non-fulfillment of the resolutory condition was brought to the
donor’s knowledge —that ownership of the donated property reverted to the donor as
provided in the automatic reversion clause of the deed of donation.
The donor may have an inchoate interest in the donated property during the time that
ownership of the land has not reverted to her. Such inchoate interest may be the
subject of contracts including a contract of sale. In this case, however, what the donor
sold was the land itself which she no longer owns. It would have been different if the
donor-seller sold her interests over the property under the deed of donation which is
subject to the possibility of reversion of ownership arising from the non-fulfillment of
the resolutory condition.
Sale, being a consensual contract, is perfected by mere consent, which is manifested
the moment there is a meeting of the minds as to the offer and acceptance thereof on
three (3) elements: subject matter, price and terms of payment of the price.
Ownership by the seller on the thing sold at the time of the perfection of the contract
of sale is not an element for its perfection. What the law requires is that the seller has
the right to transfer ownership at the time the thing sold is delivered. Hence, the sale
of Trinidad was valid.
 Lao Lim vs. Court of Appeals
G.R. No. 87047. October 31, 1990
FACTS:
The records show that private respondent entered into a contract of lease with
petitioner for a period of three (3) years, that is, from 1976 to 1979. After the
stipulated term expired, private respondent refused to vacate the premises, hence,
petitioner filed an ejectment suit against the former in the City Court of Manila. The
case was terminated by a judicially approved compromise agreement of the parties
providing in part:
“3. That the term of the lease shall be renewed every three years retroacting from
October 1979 to October 1982; after which the abovenamed rental shall be raised
automatically by 20% every three years for as long as defendant needed the premises
and can meet and pay the said increases, the defendant to give notice of his intent to
renew sixty (60) days before the expiration of the term;” (emphasis implied)
By reason of said compromise agreement the lease continued from 1979 to 1982,
then from 1982 to 1985. On April 17, 1985, petitioner advised private respondent that
he would no longer renew the contract effective October, 1985.3 However, on August
5, 1985, private respondent informed petitioner in writing of his intention to renew the
contract of lease for another term, commencing November, 1985 to October, 1988. In
reply to said letter, petitioner advised private respondent that he did not agree to a
renewal of the lease contract upon its expiration in October, 1985.
MTC dismissed the complaint on the grounds that (1) the lease contract has not
expired, being a continuous one the period whereof depended upon the lessee’s
need for the premises and his ability to pay the rents. RTC affirmed the decision of
MTC.
It should also not be overlooked that said condition is not resolutory in nature
because it is not a condition that terminates the lease contract. The lease contract is
for a definite period of three (3) years upon the expiration of which the lease
automatically terminates.
The invalidity of a condition in a lease contract similar to the one at bar has been
resolved in Encarnacion vs. Baldomar, et al., where we ruled that in an action for
ejectment, the defense interposed by the lessees that the contract of lease authorized
them to continue occupying the premises as long as they paid the rents is untenable,
because it would leave to the lessees the sole power to determine whether the lease
should continue or not.
The continuance, effectivity and fulfillment of a contract of lease cannot be made to
depend exclusively upon the free and uncontrolled choice of the lessee between
continuing the payment of the rentals or not, completely depriving the owner of any
say in the matter. Mutuality does not obtain in such a contract of lease and no
equality exists between the lessor and the lessee since the life of the contract is
dictated solely by the lessee.
WHEREFORE, the decision of respondent Court of Appeals is REVERSED and SET
ASIDE. Private respondent is hereby ordered to immediately vacate and return the
possession of the leased premises subject of the present action to petitioner and to
pay the monthly rentals due thereon in accordance with the compromise agreement
until he shall have actually vacated the same.

As stated at the outset, respondent Court of Appeals affirmed in full said decision of
the Regional Trial Court and held that (1) the stipulation in the compromise
agreement which, in its formulation, allows the lessee to stay on the premises as long
as he needs it and can pay rents is valid, being a resolutory condition and, therefore,
beyond the ambit of Article 1308 of the Civil Code.

ISSUE: Whether the stipulation “for as long as defendant needed the premises and
can meet and pay the said increases” is a resolutory condition?

HELD:
Contrary to the ruling of respondent court, the disputed stipulation “for as long as the
defendant needed the premises and can meet and pay said increases” is a purely
potestative condition because it leaves the effectivity and enjoyment of leasehold
rights to the sole and exclusive will of the lessee. It is likewise a suspensive condition
because the renewal of the lease, which gives rise to a new lease, depends upon
said condition.
 Naga Telephone Co., Inc. vs. Court of Appeals
G.R. No. 107112. February 24, 1994
FACTS:
With the enactment of the New Civil Code, a new provision was included therein,
namely, Article 1267 which provides:
“When the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may also be released therefrom, in whole or
in part.”

Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering

local as well as long distance telephone service in Naga City while private respondent
Camarines Sur II Electric Cooperative, Inc. (CASURECO II) is a private corporation
established for the purpose of operating an electric power service in the same city.

On November 1, 1977, the parties entered into a contract for the use by petitioners in
the operation of its telephone service the electric light posts of private respondent in
Naga City. In consideration therefor, petitioners agreed to install, free of charge, ten
(10) telephone connections for the use by private respondent in the following places:
3 Units—The Main Office of (private respondent);
2 Units—The Warehouse of (private respondent);
1 Unit—The Sub-Station of (private respondent) at Concepcion Pequeña;
1 Unit—The Residence of (private respondent’s) President;
1 Unit—The Residence of (private respondent’s) Acting General Manager; &
2 Units—To be determined by the General Manager.”
Said contract also provided:
“(a) That the term or period of this contract shall be as long as the party of the first part
has need for the electric light posts of the party of the second part it being understood
that this contract shall terminate when for any reason whatsoever, the party of the
second part is forced to stop, abandoned [sic] its operation as a public service and it
becomes necessary to remove the electric lightpost;”

On January 2, 1989 with the Regional Trial Court of Naga City against petitioners for
reformation of the contract with damages, on the ground that it is too one-sided in
favor of petitioners.
 Boysaw v. Interphil Promotions, 148 SCRA 365 (1987)
On May 1, 1961, Solomon Boysaw and his then Manager, Willie Ketchum, signed
with Interphil Promotions, Inc. represented by Lope Sarreal, Sr., a contract to engage
Gabriel "Flash" Elorde in a boxing contest for the junior lightweight championship of
the world.
As a result of the foregoing occurrences, on October 12, 1961, Boysaw and Yulo, Jr.
sued Interphil, Sarreal, Sr. and Manuel Nieto, Jr. for damages allegedly occasioned
by the refusal of Interphil and Sarreal, aided and abetted by Nieto, Jr., then GAB
Chairman, to honor their commitments under the boxing contract of May 1, 1961.
ISSUE: Whether Boysaw can ask for damages for the breach of contract of Interphil?

It was stipulated that the bout would be held at the Rizal Memorial Stadium in Manila
on September 30, 1961 or not later than thirty [30] days thereafter should a
postponement be mutually agreed upon, and that Boysaw would not, prior to the date
of the boxing contest, engage in any other such contest without the written consent of
Interphil Promotions, Inc.
On June 19, 1961, Boysaw fought and defeated Louis Avila in a ten-round non-title
bout held in Las Vegas, Nevada, U.S.A.
On July 2, 1961, Ketchum on his own behalf and on behalf of his associate Frank
Ruskay, assigned to J. Amado Araneta the managerial rights over Solomon Boysaw.
Presumably in preparation for his engagement with Interphil, Solomon Boysaw arrived
in the Philippines on July 31, 1961.
HELD:
On the issue pertaining to the violation of the May 1, 1961 fight contract, the evidence
established that the contract was violated by appellant Boysaw himself when, without
the approval or consent of Interphil, he fought Louis Avila on June 19, 1961 in Las
Vegas Nevada. Appellant Yulo admitted this fact during the trial. While the contract
imposed no penalty for such violation, this does not grant any of the parties the
unbridled liberty to breach it with impunity. Our law on contracts recognizes the
principle that actionable injury inheres in every contractual breach. Thus:
Those who in the performance of their obligations are guilty of fraud, negligence or
delay, and those who in any manner contravene the terms thereof, are liable for
damages. [Art. 1170, Civil Code].
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. [Part 1, Art. 1191, Civil
Code].

On September 1, 1961, J. Amado Araneta assigned to Alfredo J. Yulo, Jr. the

managerial rights over Boysaw that he earlier acquired from Ketchum and Ruskay. Another violation of the contract in question was the assignment and transfer, first to
The next day, September 2, 1961, Boysaw wrote Lope Sarreal, Sr. informing him of J. Amado Araneta, and subsequently, to appellant Yulo, Jr., of the managerial rights
his arrival and presence in the Philippines. over Boysaw without the knowledge or consent of Interphil. Under the law when a
contract is unlawfully novated by an applicable and unilateral substitution of the
obligor by another, the aggrieved creditor is not bound to deal with the substitute.
On September 5, 1961, Alfredo Yulo, Jr. wrote to Sarreal informing him of his
acquisition of the managerial rights over Boysaw.
The refusal of appellants to accept a postponement without any other reason but the
implementation of the terms of the original boxing contract entirely overlooks the fact
The Games and Amusement Board (GAB) called a series of conferences of the
that by virtue of the violations they have committed of the terms thereof, they have
parties concerned culminating in the issuance of its decision to schedule the Elorde- forfeited any right to its enforcement.
Boysaw fight for November 4, 1961. Yulo, Jr. refused to accept the change in the fight
date, maintaining his refusal even after Sarreal on September 26, 1961, offered to
On the validity of the fight postponement, the violations of the terms of the original
advance the fight date to October 28, 1961 which was within the 30-day period of
contract by appellants vested the appellees with the right to rescind and repudiate
allowable postponements provided in the principal boxing contract of May 1, 1961. such contract altogether. That they sought to seek an adjustment of one particular
covenant of the contract, is under the circumstances, within the appellee's rights.
Early in October 1961, Yulo, Jr. exchanged communications with one Mamerto Besa,
a local boxing promoter, for a possible promotion of the projected Elorde-Boysaw title
bout. In one of such communications dated October 6, 1961, Yulo informed Besa that
he was willing to approve the fight date of November 4,1961 provided the same was
promoted by Besa.

While an Elorde-Boysaw fight was eventually staged, the fight contemplated in the
May 1, 1961 boxing contract never materialized.
 Lachica v. Araneta, 47 OG No. 11, 5699, August 4, 1949
On September 24, 1953, the heirs of the late Gregorio Lachica filed an action in the Court of
First Instance of La Union against Fermin Ducusin praying that they be declared owners of a
parcel of land known as Lot No. 1895 of the Rosario cadastre situated in Rosario, La Union.
Fermin Ducusin, in his answer, claimed that he is the owner of the land by virtue of a homestead
patent issued to him by the Bureau of Lands. He set up a counterclaim for damages and
attorneys’ fees.
In due time, the Director of Lands was made a party defendant and, by way of answer, reiterated
the claim of Ducusin that he was granted a homestead patent for the land on March 11, 1953
and, therefore, the latter should be considered as the owner thereof. And considering that the
complaint of plaintiffs on the basis of the averments contained therein does not state a cause of
action, the Director of Lands filed a motion to dismiss.
Plaintiffs filed a written opposition to this motion, while defendant Ducusin submitted a
memorandum fully justifying the motion of the Director of Lands. And after considering the
averments and arguments contained in the pleadings of both parties, the court, on September 1,
1956, rendered decision dismissing the case with costs, but "without prejudice to the right of the
herein plaintiffs to present their petition or protest with the competent administrative authorities
under the executive department." Hence this appeal.
It appears that the lot in question was the subject of a cadastral proceeding had in the Court of
First Instance of La Union in 1918 wherein Gregorio Lachica, father of plaintiffs herein, filed an
answer claiming to be the owner of said lot. Because of the failure of Lachica to press his claim,
said lot was declared public land.
On February 2, 1947, Fermin Ducusin filed with the Bureau of Lands a homestead application
for the lot in question which after a corresponding investigation was approved and given due
course on October 19, 1949. On June 16, 1952, the Director of Lands, after having been
satisfied that Ducusin had complied with the requirements of the law, caused the issuance of a
patent for the land applied for and, accordingly, on March 11, 1953 Patent No. V-15483 was
issued to him by the Secretary of Agriculture and Natural Resources. And on May 23, 1953, the
Director of Lands transmitted this patent to the Register of Deeds for the issuance of the
corresponding certificate of title in accordance with Section 122 of Act No. 496. It also appears
that Gregorio Lachica also applied for the same lot with the Bureau of Lands but because he
was found not to have occupied it nor introduced any improvement thereon, his claim was
dismissed.
Appellants now claim that Fermin Ducusin has acted in bad faith in that he succeeded in
obtaining a patent for the land in question through fraud by alleging that said lot was not
occupied when in fact it was under the possession of the predecessor-in-interest of appellants.
Appellants also invoke in their favor the curative provision of Republic Act No. 931 which took
effect on June 20, 1953.
The claim that Fermin Ducusin obtained a homestead patent for the lot in question through fraud
cannot be entertained. It appears that Gregorio Lachica, predecessor-in-interest of appellants,
has applied for this same lot with the Bureau of Lands but that, after the corresponding
investigation, his claim was disregarded, it having been proven that he had failed to comply with
the requirements of the law regarding occupation and cultivation. It also appears that the lot was
adjudicated to Ducusin because he succeeded in proving that he had occupied and cultivated
the same as required by law. If Lachica’s claim as to fraud were true he should have proven it
when he was informed of the claim of Ducusin before the Director of Lands but he failed to do
so. And if he is not satisfied with the decision of this official, his recourse was to appeal to the
Secretary of Agriculture and Natural Resources. This he also failed to do and for such failure he
cannot now come to court for the reddress of a grievance which comes exclusively under the
jurisdiction of the Bureau of Lands. As this Court well said: "If plaintiffs were aggrieved by the
action or decision of the Director of Lands, their remedy was to appeal to the Secretary of
Agriculture and Commerce. But it does not appear that they have done so. It does not even
appear that they have pursued their protest to its conclusion in the Bureau of Lands itself. having
failed to exhaust their remedy in the administrative branch of the government, plaintiffs cannot
now seek relief in the courts of justice." (Eloy Miguel, Et Al., v. Anacleta M. Vda. de Reyes, Et
Al., 93 Phil., 542).
The claim of appellants that they can file their action in court under the curative provisions of
Republic Act No. 931 cannot also be entertained. It is true that this Act grants to a person who
has been deprived of the possession of a parcel of land which has been the object of a cadastral
proceeding because of his failure to claim the same within the period established by law the right
within five years after the approval of said Act to petition for a reopening of the proceedings
wherein said land was declared part of the public domain, but said privilege is only granted to a
person who has been unable to file a claim in court for some justifiable reason and when the
land has not as yet been alienated or disposed of by the government. This clearly appears in
Section 1 of Republic Act No. 931 which provides:jgc:chanrobles.com.ph
"SECTION 1. All persons claiming title to parcels of land that have been the object of cadastral
proceedings, who at the time of the survey were in actual possession of the same, but for some
justifiable reason had been unable to file their claim in the proper court during the time limit
established by law, in case such parcels of land, on account of their failure to file such claims,
have been, or are about to be declared land of the public domain, by virtue of judicial
proceedings instituted within the forty years next preceding the approval of this Act, are hereby
granted the right within five years after the date on which this Act shall take effect, to petition for
a reopening of the judicial proceedings under the provisions of Act Numbered Twenty-two
hundred and fifty-nine, as amended, only with respect to such of said parcels of land as have not
been alienated, reserved, leased, granted, or otherwise provisionally or permanently disposed of
by the Government, and the competent Court of First Instance, upon receiving such petition,
shall notify the Government, through the Solicitor General, and if after hearing the parties, said
court shall find that all conditions herein established have been complied with, and, that all
taxes, interests and penalties thereof have been paid from the time when land tax should have
been collected until the day when the motion is presented, it shall order said judicial proceedings
reopened as if no action has been taken on such parcels." (Italics supplied.)
Here it appears that the predecessor-in-interest of appellants has filed in due time a claim for the
lot in the cadastral proceedings which were instituted for the registration thereof in 1918 but that
he has failed to press his claim therefor and as a result the lot was declared a public land. It also
appears that when this action was instituted the government had already issued a patent for this
lot to Fermin Ducusin which was registered in his name by the Register of Deeds in accordance
with the Public Land Act. Evidently, the provisions of Republic Act No. 931 cannot now be
invoked by appellants.
Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.