OBLIGATIONS amount to substantial breach because

RECISSION it was stipulated in their agreement

Fidela Del Castillo Vda. De Mistica
(petitioner) v. Sps. Bernardino Naguiat
and Maria Paulina Gerona-Naguiat
(respondents)
G.R. No. 137909. December 11, 2003.
FACTS:
 Eulalio Mistica entered into a contract
to sell with respondent Bernardino
Naguiat over a portion of lot
containing an area of 200 square
meters.
 Pursuant to their agreement,
respondent gave a down payment of
P2,000.00 out of the full purchase
price of P20,000.00.
 On February 7, 1980, respondent
made another payment of P1,000.00
and after that no other payment was
made.
 Eulalio died sometime in 1986.
 Petitioner Fidela Del Castillo Vda. De
Mistica, Eulalio's widow, filed with the
trial court a complaint for rescission
of the contract to sell alleging that the
failure of respondents to pay the
balance of the purchase price
constitutes a violation of the contract
which entitles her to rescind the
same.
that payment could still be made even
after ten years from the execution of
the contract, provided that the vendee
paid 12 percent interest.
 The Court also held that the issuance
of a certificate of title in favor of
respondents does not determine
whether petitioner is entitled to
rescission because the title serves
merely as evidence of an indefeasible
and incontrovertible title to the
property in favor of the person whose
name appears therein.
 The Court also upheld the appellate
court in holding that the propriety of
the issuance of the title in the names
of respondents is an issue not
determinable in the proceedings at
bar because a certificate of title
cannot be subject to collateral attack
and can only be altered, modified or
canceled in a direct proceedings in
accordance with law.
Doctrine:
Rescission is allowed only where the
breach is substantial and fundamental to
the fulfillment of the obligation

ISSUE:
RELEVANT RULING:
 The trial court dismissed the complaint
and ordered respondents to pay the
balance of the purchase price.
 On appeal, the Court of Appeals
likewise disallowed rescission of the
contract holding that the conclusion of
the ten-year period was not a
resolutory term because the contract
stipulated that payment could still be
made if respondents failed to pay
within the term. The Court further
ruled that rescission would be unjust
because respondents had already
transferred the land title to their
names. Hence, the present petition. (Do
we still need this? The lower court and
CA decisions?)
 According to the Court, rescission is
allowed only where the breach is
substantial and fundamental to the
fulfillment of the obligation.
 In the present case, the failure of
respondents to pay the balance of the
purchase price within ten years from
the execution of the deed did not

OBLIGATIONS
PRIZE CONTEST
Julio De La Rosa (plaintiff-appellant) v.
The Bank of the Philippine Islands
(defendant-appellant)
G.R. No. 22359. November 28, 1924.
FACTS:
 Defendant bank started a contest of
designs and plans for the construction
of a building, announcing that the
prizes would be awarded not later
than on November 30, 1921
 The plaintiff took part in said contest,
having performed work and incurred
expenses for that purpose
 The said bank refrained from naming
judges and awarding the prizes in
accordance with the conditions
stipulated.
 The plaintiff prays that judgment be
rendered in his favor for the sum of
P30,000 as damages, with legal
interest and the costs.
the designs were on the way to New
York where they were sent to a
technical committee. This committee,
was appointed by the defendant bank
for the study and determination of the
designs presented and entitled to the
prizes advertised, and which
rendered its report and awarded the
prizes in accordance with the rules
and conditions of the contract, except
in regard to the date of such award of
prizes which, as we have found, is not
essential to the contract in question
 The defendant bank was not in
default. We find the plaintiff has no
cause of action in this case.
Doctrine:
One who advertises a prize contest is
bound to comply with its conditions so
long as the offer is not withdrawn.

ISSUE: Whether or not the defendant bank

was in default in not awarding the prizes on
November 30, 1921.

RELEVANT RULING:
 The defendant bank cannot be held to
have been in default through the mere
lapse of time. For this judicial or
extrajudicial demand was necessary
for the performance of the obligation,
and it was not alleged here, nor does
it appear that before bringing this
action the plaintiff had ever
demanded it from the defendant bank
in any manner whatsoever. The
defendant bank, therefore, was not in
default.
 One who advertises a prize contest is
bound to comply with its conditions
so long as the offer is not withdrawn.
But, in the instant case the date set for
the award of prizes was not the
principal inducement in establishing
the obligation. The bank cannot be
declared in default by the mere lapse
of time. A judicial or an extrajudicial
demand was necessary for this.
 The plaintiff's allegation that the
defendant bank abstained from
continuing the contest was not
proven. On the contrary, it was
proved, and so stated in the decision
appealed from, that during the trial of
this case in the Court of First Instance

OBLIGATIONS
DEMAND/CONTRACT OF SALE OF
PERSONAL PROPERTY
Sps. Deo Agner and Maricon Agner
(petitioners) v. BPI Family Savings Bank,
Inc. (respondent)
G.R. No. 182963. June 3, 2013.
FACTS:
 Petitioners spouses Deo Agner and
Maricon Agner executed a Promissory
Note with Chattel Mortgage in favor of
Citimotors, Inc.
 The contract provides, among others,
that: for receiving the amount of
Php834,768.00, petitioners shall pay
Php17,391.00 every 15th day of each
succeeding month until fully paid; the
loan is secured by a 2001 Mitsubishi
Adventure Super Sport; and an
interest of 6% per month shall be
imposed for failure to pay each
installment on or before the stated
due date.
 Citimotors, Inc. assigned all its rights,
title and interests to ABN AMRO
Savings Bank, Inc. (ABN AMRO),
which, likewise assigned the same to
respondent BPI Family Savings Bank,
Inc.
 For failure to pay four successive
installments from May 15, 2002 to
August 15, 2002, respondent, through
counsel, sent to petitioners a demand
letter declaring the entire obligation
as due and demandable and requiring
to pay Php576,664.04, or surrender
the mortgaged vehicle immediately
upon receiving the letter.
 As the demand was left unheeded,
respondent filed an action for
Replevin and Damages before the
Manila Regional Trial Court (RTC). A
writ of replevin was issued. Despite
this, the subject vehicle was not
seized. Trial on the merits ensued
ISSUE 1: Whether the petitioners cannot be
considered to have defaulted in payment for
lack of competent proof that they received
the demand letter. (Topic: Demand; Article
1169)
RELEVANT RULING:
 Records bear that both verbal and
written demands were in fact made
by respondent prior to the institution
of the case against petitioners.
 Even assuming, for argument's sake,
that no demand letter was sent by
respondent, there is really no need for
it because petitioners legally waived
the necessity of notice or demand in
the Promissory Note with Chattel
Mortgage, which they voluntarily and
knowingly signed in favor of
respondent's predecessor-in-interest.
 The Civil Code in Article 1169
provides that one incurs in delay or is
in default from the time the obligor
demands the fulfillment of the
obligation from the obligee. However,
the law expressly provides that
demand is not necessary under
certain circumstances, and one of
these circumstances is when the
parties expressly waive demand.
Hence, since the co-signors expressly
waived demand in the promissory
notes, demand was unnecessary for
them to be in default
ISSUE 2: Whether respondent's remedy of
resorting to both actions of replevin and
collection of sum of money is contrary to the
provision of Article 1484. (Topic: Contract of
Sale of Personal Property; Article 1484)
RELEVANT RULING:
 There is no violation of Article 1484
of the Civil Code. The vehicle subject
matter of this case was never
recovered and delivered to
respondent despite the issuance of a
writ of replevin. As there was no
seizure that transpired, it cannot be
said that petitioners were deprived of
the use and enjoyment of the
mortgaged vehicle or that respondent
pursued, commenced or concluded its
actual foreclosure.
 The trial court, therefore, rightfully
granted the alternative prayer for
sum of money, which is equivalent to
the remedy of exacting fulfillment the
obligation." Certainly, there is no
double recovery or unjust enrichment
30 to speak of.
 All the foregoing notwithstanding, We
are of the opinion that the interest of
6% per month should be equitably
reduced to one percent (1%) per
month or twelve percent (12%) per
annum, to be reckoned from May 16,
2002 until full payment and with the
remaining outstanding balance of
 their car loan as of May 15, 2002 as
the base amount.
OBLIGATIONS
PRESCRIPTION
Khe Hong Cheng, alias Felix Khe, Sandra
Joy Khe and Ray Steven Khe (petitioners)
v. CA Hon. Teofilo Guadiz, RTC 147, Makati
City and Philam Insurance Co. Inc.
(respondents)
G.R. No. 144169. March 28, 2001
FACTS:
 Petitioner Khe Hong Cheng, alias Felix
Khe, is the owner of Butuan Shipping
Lines.
 The Philippine Agricultural Trading
Corporation shipped on board the
vessel M/V PRINCE ERIC, owned by
petitioner Khe Hong Cheng, 3,400
bags of copra at Masbate, to Dipolog
City.
 The said shipment of copra was
covered by a marine insurance policy
issued by American Home Insurance
Company (respondent Philam's
assured).
 M/V PRINCE ERIC sank resulting in
the total loss of the shipment. Because
of the loss, the insurer, American
Home, paid the of value of the copra.
 American Home instituted the case in
(RTC) of Makati to recover the money
paid to the consignee, based on
breach of contract of carriage.
 While the case was still pending,
petitioner executed deeds of
donations of parcels of land in favor of
his children, herein co-petitioners
Sandra and Ray.
 Respondent Philam filed a complaint
for the rescission of the deeds of
donation executed by petitioner in
favor of his children and for the
nullification of their titles.
Respondent alleged, inter alia, that
petitioner executed the aforesaid
deeds in fraud of his creditors,
including respondent Philam.
 Petitioners subsequently moved for
its dismissal on the ground that the
action had already prescribed.
ISSUE: Whether the action to rescind the
donations has already prescribed
RELEVANT RULING:
 Article 1389 of the Civil Code simply
provides that, "The action to claim
rescission must be commenced within
four years." Since this provision of law
is silent as to when the prescriptive
period would commence, the general
rule, i.e, from the moment the cause of
action accrues, therefore, applies.
 Petitioner Khe Hong Cheng had
executed the deeds of donation in
favor of his children on December 27,
1989, the complaint against petitioner
was still pending before the trial
court.
 Respondent Philam had no inkling, at
the time, that the trial court's
judgment would be in its favor and
further, that such judgment would not
be satisfied due to the deeds of
donation executed by petitioner Khe
Hong Cheng during the pendency of
the case.
 Had respondent Philam filed his
complaint on December 27, 1989,
such complaint would have been
dismissed for being premature. Not
only were all other legal remedies for
the enforcement of respondent
Philam's claims not yet exhausted at
the time the deeds of donation were
executed and registered. Respondent
Philam would also not have been able
to prove then that petitioner Khe
Hong Cheng had no more property
other than those covered by the
subject deeds to satisfy a favorable
judgment by the trial court.
 It bears stressing that petitioner Khe
Hong Cheng even expressly declared
and represented that he had reserved
to himself property sufficient to
answer for his debts
 Respondent Philam only learned
about the unlawful conveyances made
by petitioner Khe Hong Cheng in
January 1997. There they found that
he no longer had any properties in his
name.
 It was only then that respondent
Philam's action for rescission of the
deeds of donation accrued because
then it could be said that respondent
Philam had exhausted all legal means
to satisfy the trial court's judgment in
its favor.
 Since respondent Philam filed its
complaint for accion pauliana against
petitioners on February 25, 1997,
barely a month from its discovery that
petitioner Khe Hong Cheng had no
other property to satisfy the judgment
 award against him, its action for
rescission of the subject deeds clearly
had not yet prescribed.
DOCTRINE: Article 1389 of the Civil Code
simply provides that, "The action to claim
rescission must be commenced within four
years."
OBLIGATIONS
PRESCRIPTION
George L. Parks (plaintiff-appellant) v.
Tarlac, Municipality of Tarlac, Concepcion
Cirer, and James Hill, her husband
(defendants-appellees)
G.R. No. 24190. July 13, 1926
FACTS:
 Concepcion Cirer and James Hill, the
owners of the land, donated it to the
municipality of Tarlac under certain
conditions specified in the public
document
 The donation was accepted which was
later registered in the name of the
donee, the municipality of Tarlac.
 Concepcion Cirer and James Hill sold
this parcel to the herein plaintiff
George L. Parks.
 The plaintiff, George L. Parks, alleged
that the conditions of the donation
had not been complied with and
invoking the sale of this parcel in his
favor and prayed that he be declared
the absolute owner entitled to the
possession of the land.
 The condition refers that the parcels
donated was to be used for the
erection of a central school and public
park, the work to commence within
the period of six months from the date
of the ratification by the parties of the
document evidencing the donation.
 The appellant also contends that not
having been complied with, even
supposing that it was not a condition
precedent but subsequent, the non-
compliance 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.
ISSUE: Whether the period for bringing an
action for the revocation of the donation has
prescribed.
RELEVANT RULING:
 The law itself recognizes the
prescriptibility of the action for the
revocation of a donation, providing a
special period of five years for the
revocation by the subsequent birth of
children (art. 646, Civil Code), and
one year for their revocation by
reason of ingratitude.
 If no special period is provided for the
prescription of the action for
revocation for non-compliance of the
conditions of the donation (art. 647,
Civil Code), it is because in this
respect the donation is considered
onerous and is governed by the law of
contracts and the general rules of
prescription. 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 on 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. The
period for bringing an action for the
revocation of the donation has indeed
prescribed
DOCTRINE: Prescription of the action for
revocation for non-compliance of the
conditions of the donation, since donation is
onerous and is governed by the law or
contracts and the general rules of
prescription, under the laws in force (sec. 43,
Code of Civ. Proc.) the period of prescription
of this class of action is ten years.
 ISSUE: Whether the defendant Rama is Liable
to the plaintiff Osmena
RELEVANT RULING:

 The defendant Rama is liable. It was

suggested during the discussion of the
case in this court that, in the
acknowledgment above quoted of the
indebtedness made by the defendant,
she imposed the condition that she
would pay the obligation if she sold
her house.
 If that statement found in her
acknowledgment of the indebtedness
should be regarded as a condition, it
OBLIGATIONS
was a condition which depended
CONDITIONAL PROMISE TO PAY
upon her exclusive will, and is,
Tomas Osmeña (plaintiff-appellee) v.
therefore, void. (Art. 1115, Civil
Cenona Rama (defendant-appellant)
Code.)
G.R. No. 4437. September 9, 1909
 The acknowledgment, therefore, was
FACTS: an absolute acknowledgment of the
obligation and was sufficient to
 November 15, 1890, a contract was
prevent the statute of limitation from
executed wherein Doñ a Cenona Rama,
barring the action upon the original
have received from Don Victoriano
contract.
Osmeñ a P200 cash which will be paid
in at the price ruling on the day of
DOCTRINE: A condition imposed upon a
delivering the sugar into his
contract by the promisor, the performance of
warehouses
which depends upon his exclusive will, is
 October 27, 1891 a contract wherein
void, in accordance with the provisions of
Dona Cenona asked for a further loan
article 1115 of the Civil Code.
and have received from Don
Victoriano Osmeñ a the sum of P70,
P50 loaned to Don Evaristo Peñ ares,
which were to be paid in sugar was
executed.
 Sometime after the execution of the
contracts, the said Victoriano Osmeñ a
died.
 The above contracts became the
property of one of his heirs, Agustina
Rafols which was later ceded to the
present plaintiff.
 March 15, 1902, the plaintiff
presented the contracts to the
defendant for payment and she
acknowledged her responsibility
upon said contracts by an
indorsement that she hereby promise,
in the presence of two witnesses, that,
if the house of strong materials in
which she live in Pagina is sold, she
will pay the indebtedness to Don
Tomas Osmeñ a as set forth in a
document
 The defendant not having paid the
amount due on said contracts; the
plaintiff commenced the action in the
Court of First Instance of Province of
Cebu.