LAFARGE CEMENT PHILIPPINES v.

CONTINENTAL CEMENT
CORPORATION, GR No. 155173, 2004-11-23
Facts:
petitioners filed their Answer and Compulsory Counterclaims ad Cautelam
before the trial court in Civil Case No. Q-00-41103.
Petitioners alleged that CCC, through Lim and Mariano, had filed the
"baseless" Complaint in Civil Case No. Q-00-41103 and procured the Writ of
Attachment in bad faith.
petitioners prayed... that both Lim and Mariano be held "jointly and solidarily"
liable with Respondent CCC.
On behalf of Lim and Mariano who had yet to file any responsive pleading,
CCC moved to dismiss petitioners' compulsory counterclaims on grounds that
essentially constituted the very issues for resolution in the instant Petition.
Gregory T. Lim and Anthony A. Mariano were the persons responsible for
making the bad faith decisions for, and causing plaintiff to file this baseless
suit
Gregory T. Lim was motivated by his personal interests as one of the owners
Anthony A. Mariano was motivated by his sense of personal loyalty to
Gregory T. Lim,... both Gregory T. Lim and Anthony A. Mariano are the
plaintiff's co-joint tortfeasors
In their Answer with Counterclaim, petitioners alleged that after incurring
expenses in anticipation of the Dealership Agreement, they requested the
plaintiff to allow them to get gas, but that it had refused. 
It claimed that they still had to post a surety bond... the bonding companies
required a copy of the Dealership Agreement, which respondent continued to
withhold from them.  Later, petitioners discovered that respondent and its
manager, Ricardo P. Cardenas, had intended all... along to award the
dealership to Island Air Product Corporation.
petitioners impleaded in the counterclaim Mobil Philippines and its manager --
Ricardo P. Cardenas -- as defendants.  They prayed that judgment be
rendered, holding both jointly and severally liable
Issues:
counterclaims against Respondents Lim and Mariano are not compulsory;
Ruling:
allegations show that petitioners' counterclaims for damages were the result
of respondents' (Lim and Mariano) act of filing the Complaint and securing the
Writ of Attachment in bad faith.
using the "compelling test of compulsoriness," we find that, clearly, the
recovery of petitioners' counterclaims is contingent upon the case filed by
respondents; thus, conducting separate trials thereon will result in a
substantial duplication of the time and effort... of the court and the parties.
Sapugay v. Court of Appeals finds application
Principles:
The only limitations to this principle are (1) that the court should have
jurisdiction over the subject matter of the counterclaim, and
(2) that it could acquire jurisdiction over third parties whose presence is
essential
A counterclaim may either be permissive or compulsory.  It is permissive "if it
does not arise out of or is not necessarily connected with the subject matter of
the opposing party's claim."
A counterclaim is compulsory when its object "arises out of or is necessarily
connected with the transaction or occurrence constituting the subject matter of
the opposing party's claim and does not require for its adjudication the
presence of third parties of whom the court... cannot acquire jurisdiction."...
criteria to determine... whether a counterclaim is compulsory or permissive: 1)
Are issues of fact and law raised by the claim and by the counterclaim largely
the same? 2) Would res judicata bar a subsequent suit on defendant's claim,
absent the compulsory counterclaim rule? 3) Will substantially... the same
evidence support or refute plaintiff's claim as well as defendant's
counterclaim? 4) Is there any logical relation between the claim and the
counterclaim? A positive answer to all four questions would indicate that the
counterclaim is compulsory.
"compelling test of compulsoriness" characterizes a counterclaim as
compulsory if there should exist a "logical relationship"... between the main
claim and the counterclaim.
conducting separate trials of the respective claims of the parties would entail
substantial duplication of time and effort by the parties and the court; when
the multiple claims involve the... same factual and legal issues; or when the
claims are offshoots of the same basic controversy
Since the counterclaim for damages is compulsory, it must be set up in the
same action; otherwise, it would be barred forever.

FELIPE AGONCILLO, and his wife, MARCELA MARIÑO, plaintiff-appellees,

vs.
CRISANTO JAVIER, administrator of the estate of the late Anastasio Alano.
FLORENCIO ALANO and JOSE ALANO, defendants-appellants.
G.R. No. L-12611
FACTS:
On the twenty-seventh day of February, 1904, Anastasio Alano, Jose Alano,
and Florencio Alano solemnly promise to pay Marcela Mariño within one year
the sum of P 2, 730.50
To secure the payment of their debt they mortgage the house and lot, in case
of insolvency by virtue of these presents the said house and lot to Da.
Marcela Mariño, transferring to her all our rights to the ownership and
possession of the lot; and if the said property upon appraisal at the time of the
maturity of this obligation should not be of sufficient value to cover the total
amount of this indebtedness.
In 1908, Anastasio Alano paid only P 200 and no other payment was received
from the Alanos.
In 1912, Anastasio Alano died intestate. Crisanto Javier was named as the
administrator of Anastasio Alano’s estate.
On March 17, 1916, the plaintiffs filed the complaint in this action against
Javier, as administrator of the estate of Anastasio Alano and against Florencio
Alano and Jose Alano.
The defendants answered denying generally the facts alleged in the
complaint, and setting up, as special defenses that
1.any cause of action which plaintiff might have had against the estate of
Anastasio Alano has been barred by failure of the plaintiff to present her claim
to the committee on claims for allowance;
2.that the document upon which plaintiff relies does not constitute a valid
mortgage; and
3.that as to all of the defendants, the action is barred by the general statute of
limitations.
Agoncillo averred that the payment of P200.00 by Anastasio Alano in 1908
has tolled the running of the prescriptive period hence his civil action in 1916
is still within the 10 year prescriptive period.
ISSUE:
WON the agreement that the defendant-appellant, at the maturity of the debt,
will pay the sum of the money lent by the appellees or will transfer the rights
to the ownership and possession of the house and lot, is valid
HELD
The agreement was valid because it is simply an alternative obligation, which
is expressly allowed by law. The agreement of the house and lot as collateral
to pay the debt at its maturity is valid. It is undertaking that if debt is not paid
in money, it will be paid in another way.
The liability of the defendant as to the conveyance of the house and lot was
conditional, being dependent upon their failure to pay the debt in money. It
must follow therefore that if the action to recover the debt was prescribed, the
action to compel a conveyance of the house and lot is likewise barred, as the
agreement to make such conveyance was not an independent principal
undertaking, but merely a subsidiary alternative pact relating to the method by
which the debt must be paid.
The judgment of the lower court is reversed and the action is dismissed as to
all the defendants. No costs will be allowed.

INCHAUSTI VS. YULO

Held: 

The contract of May 12, 1911 does not constitute a novation of the former one of Aug.12,
1909, with respect to the other debtors who executed this contract. First, “in order that an
obligation may be extinguished by another which substitutes it, it is necessary that it
should be so expressly declared or that the old and the new be incompatible in all
points(art. 1292). It is always necessary to state that it is the intentionof the contracting
parties to extinguish the former obligation by the new one.” The obligation to pay a sum
of money is not novated in a new instrument wherein the old is ratified, by changing only
the term of payment and adding other obligations not incompatible with the old one.

The obligation being solidary, the remission of any part of the debt made by a creditor in
favor of one or more of the solidary debtors necessarily benefits the others, and therefore
there can be no doubt that, in accordance with the provision of Art. 1215, 1222, the
defendant has the right to enjoy the benefits of the partial remission. At present judgment
can be rendered only as to P112,500.

Facts: This suit is brought for the recovery of a certain sum of money, the balance of a
current account opened by the firm of Inchausti & Company with Teodor Yulo and after
his death continued by Gregorio Yulo as principal representative of his children. On
Aug.12, 1909, Gregorio Yulo, in representation of his 3 siblings, executed a notarial
instrument, ratifying all the contents of the prior document of Jan.26, 1908, severally and
joint acknowledged their indebtedness for P253,445.42, 10 % per annum, 5 installments.
Plaintiff brought an action againsta Gregorio for the payment of the said balance due. But
on May 12, 1911, 3 siblings executed another instrument in recognition of the debt,
reduced to P225,000, interest reduced to 6% per annum, installments increased to 8.

Quiombing v. CA
G.R. No. 93010, 30 August 1990

FACTS:

On August 30, 1983, Nicencio Tan Quiombing and Dante Biscocho, as the First Party,
jointly and severally bound themselves in a “Construction and Service Agreement” to
construct a house for private respondents Francisco and Manuelita Saligo, as the
Second Party, for the contract price of P137,940.00, which the latter agreed to pay. On
October 10, 1984, Quiombing and Manuelita Saligo entered into a second written
agreement under which the latter acknowledged the completion of the house and
undertook to pay the balance of the contract price in the manner prescribed in the said
second agreement. On November 19, 1984, Manuelita Saligo signed a promissory note
for P125,363.50 representing the amount still due from her and her husband, payable on
or before December 31, 1984, to Nicencio Tan Quiombing.

On October 9, 1986, Quiombing filed a complaint for recovery of the said amount, plus
charges and interests, which the private respondents had acknowledged and promised to
pay but had not, despite repeated demands. Instead of filing an answer, the defendants
moved to dismiss the complaint on February 4, 1987, contending that Biscocho was an
indispensable party and therefore should have been included as a co-plaintiff.

ISSUE:
Whether or not Biscocho is an indispensable party in the case.

RULING:
Article 1212 of the Civil Code provides:

Each one of the solidary creditors may do whatever may be useful to the others, but not
anything which may be prejudice to the latter. Suing for the recovery of the contract price
is certainly a useful act that Quiombing could do by himself alone.

A joint obligation is one in which each of the debtors is liable only for a proportionate part
of the debt, and each creditor is entitled only to a proportionate part of the credit. A
solidary obligation is one in which each debtor is liable for the entire obligation, and each
creditor is entitled to demand the whole obligation. Hence, in the former, each creditor
can recover only his share of the obligation, and each debtor can be made to pay only his
part; whereas, in the latter, each creditor may enforce the entire obligation, and each
debtor may be obliged to pay it in full.

The essence of active solidarity consists in the authority of each creditor to claim and
enforce the rights of all, with the resulting obligation of paying every one what belongs to
him; there is no merger, much less a renunciation of rights, but only mutual
representation.

The question of who should sue the private respondents was a personal issue between
Quiombing and Biscocho in which the spouses Saligo had no right to interfere. It did not
matter who as between them filed the complaint because the private respondents were
liable to either of the two as a solidary creditor for the full amount of the debt. Full
satisfaction of a judgment obtained against them by Quiombing would discharge their
obligation to Biscocho, and vice versa; hence, it was not necessary for both Quiombing
and Biscocho to file the complaint. Inclusion of Biscocho as a co-plaintiff, when
Quiombing was competent to sue by himself alone, would be a useless formality.

Parenthetically, it must be observed that the complaint having been filed by the petitioner,
whatever amount is awarded against the debtor must be paid exclusively to him,
pursuant to Article 1214. This provision states that “the debtor may pay any of the
solidary creditors; but if any demand, judicial or extrajudicial, has been made by any one
of them, payment should be made to him.

If Quiombing eventually collects the amount due from the solidary debtors, Biscocho may
later claim his share thereof, but that decision is for him alone to make. It will affect only
the petitioner as the other solidary creditor and not the private respondents, who have
absolutely nothing to do with this matter. As far as they are concerned, payment of the
judgment debt to the complainant will be considered payment to the other solidary
creditor even if the latter was not a party to the suit.

Although he signed the original Construction and Service Agreement, Biscocho need not
be included as a co-plaintiff in the complaint filed by the petitioner against the private
respondents. Quiombing as solidary creditor can by himself alone enforce payment of the
construction costs by the private respondents and as a solidary debtor may by himself
alone be held liable for any possible breach of contract that may be proved by the private
respondents. In either case, the participation of Biscocho is not at all necessary, much
less indispensable.

 * Case digest by Paula Bianca E.Eguia, LLB-1, Andres Bonifacio Law School, SY 2017-2018

Inciong v. CA
G.R. No. 96405, 26 June 1996
FACTS:
In February 1983, Rene Naybe took out a loan from Philippine Bank of
Communications (PBC) in the amount of P50k. For that he executed a
promissory note in the same amount. Naybe was able to convince Baldomero
Inciong, Jr. and Gregorio Pantanosas to co-sign with him as co-makers. The
promissory note went due and it was left unpaid. PBC demanded payment
from the three but still no payment was made. PBC then sue the three but
PBC later released Pantanosas from its obligations. Naybe left for Saudi
Arabia hence can’t be issued summons and the complaint against him was
subsequently dropped. Inciong was left to face the suit. He argued that that
since the complaint against Naybe was dropped, and that Pantanosas was
released from his obligations, he too should have been released.a
ISSUE:
Whether or not Inciong should be held liable.
RULING:
Yes. Inciong is considering himself as a guarantor in the promissory note. And
he was basing his argument based on Article 2080 of the Civil Code which
provides that guarantors are released from their obligations if the creditors
shall release their debtors. It is to be noted however that Inciong did not sign
the promissory note as a guarantor. He signed it as a solidary co-maker.
A guarantor who binds himself in solidum with the principal debtor does not
become a solidary co-debtor to all intents and purposes. There is a difference
between a solidary co-debtor and a fiador in solidum (surety). The latter,
outside of the liability he assumes to pay the debt before the property of the
principal debtor has been exhausted, retains all the other rights, actions and
benefits which pertain to him by reason of the fiansa; while a solidary co-
debtor has no other rights than those bestowed upon him.
Because the promissory note involved in this case expressly states that the
three signatories therein are jointly and severally liable, any one, some or all
of them may be proceeded against for the entire obligation.  The choice is left
to the solidary creditor (PBC) to determine against whom he will enforce
collection.  Consequently, the dismissal of the case against Pontanosas may
not be deemed as having discharged Inciong from liability as well. As regards
Naybe, suffice it to say that the court never acquired jurisdiction over him.
Inciong, therefore, may only have recourse against his co-makers, as
provided by law.
* Case digest by Aisha Mie Faith M. Fernandez,  LLB-1, Andres Bonifacio
Law School, SY 2017-2018

Vigilla v. Phil. College of Criminology, Inc.

G.R. No. 200094, 10 June 2013
FACTS:
The petitioners work for the Philippine College of Criminology Inc. (PCCr) as
janitors, janitress, and supervisor in its maintenance department. The
petitioners were made to understand by the respondent PCCr that they are
under the Metropolitan Building Services, Inc. (MBMSI) which is a corporation
engaged in providing janitorial services. PCCr terminated the services of
MBMSI on 2009 which resulted in the dismissal of the petitioners. An illegal
dismissal complaint was then filed against PCCr by the petitioners contending
that it is their real employer and not MBMSI. Subsequently, the PCCr
submitted to the Labor Arbiter waivers, releases, and quitclaims that were
executed by the petitioners in favor to MBMSI.
The Labor Arbiter and NLRC ruled in favor of the petitioner, however upon
filing the petition for review on certiorari before the Court of Appeals, the CA
ruled that the quitclaims, releases, and waivers executed by the petitioners in
favor to MBMSI redounds to the benefit of PCCr by virtue of solidary liability
under Article 1217 of the New Civil Code. The petitioners contend that under
Article 106 of the Labor Code a labor-only contractor’s liability is not solidary
as it is the employer who should be directly responsible to the supplied
worker.
ISSUE:
Whether or not the quitclaims, releases, and waivers executed by the
petitioners in favor to MBMSI redounds to the benefit of PCCr?
RULING:
Yes. The Supreme Court held that the basis of the solidary liability of the
principal with those engaged in labor-only contracting is the last paragraph of
Article 106 of the Labor Code that provides, “In such cases of labor-only
contracting, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.”
It also pointed out D.O. No. 18-A, s. 2011 section 27 providing for the effects
of labor-only contracting “where upon the finding by competent authority of
labor-only contracting shall render the principal jointly and severally liable with
the contractor to the latter’s employees, in the same manner and extent that
the principal is liable to employees directly hired by him/her, as provided in
Article 106 of the Labor Code.”
Hence, the PCCr’s solidary liability was already expunged by virtue of the
releases, waivers and quitclaims executed by the petitioners in favor of
MBMSI by virtue of Article 1217 of the Civil Code providing that “payment
made by one of the solidary debtors extinguishes the obligation.”
* Case digest by Kristine Camille Gahuman,  LLB-1, Andres Bonifacio Law
School, SY 2017-2018

Diamond Builders v. Country Bankers

G.R. No. 171820, 13 December 2007
FACTS:
Rogelio Acidre (sole proprietor of Diamond Builders) was sued by Marceliano
Borja for breach of his obligation to construct a residential and commercial
building.
Rogelio entered into a compromise agreement with Borja.
Rogelio in order to secure himself entered into surety bond with Country
Bankers. Under the Surety Bond, Rogelio and his spouse and other
petitioners, in this case, signed an indemnity agreement consenting to their
joint and several liabilities to Country Bankers should the surety bond be
executed uponRogelio violates the compromise agreement.
A writ of execution was issued against Country Bankers for violation of
Rogelio to the compromise agreement.
Country bankers paid the surety bond and ask for reimbursement from
petitioners. Petitioners refused to pay. Country bankers filed a complaint
about the sum of money against petitioners.
ISSUE:
W/N Country Bankers is entitled to reimbursement?
RULING:
YES.  Art. 1217 of the Civil Code recognizes the right of reimbursement from
a co-debtor (principal co-debtor in case of suretyship) in favor of one who paid
the surety.
Only payments made after the obligation has prescribed or became illegal
shall not entitle a solidary debtor for reimbursement (in accordance with Art.
1218).
 * Case digest by Immanuel Y. Granada,  LLB-1, Andres Bonifacio Law
School, SY 2017-2018

Alipio v. CA
G.R. No. 134100, 29 September 2000
FACTS:
(1) Respondent Romeo Jaring was the lessee of a 14.5 hectare fishpond in
Barito, Mabuco, Hermosa, Bataan. The lease was for a period of five years
ending on September 12, 1990. On June 19, 1987, he subleased the
fishpond, for the remaining period of his lease, to the spouses Placido and
Purita Alipio and the Manuel Spouses.
(2) The sublessees only satisfied a portion thereof, leaving an unpaid balance
of P50,600.00.
(3) Purita Alipio moved to dismiss the case on the ground that her husband,
Placido Alipio, had passed away on December 1, 1988.
RTC: Surviving spouse should pay. The trial court denied petitioner’s motion
on the ground that since petitioner was herself a party to the sublease
contract, she could be independently impleaded in the suit together with the
Manuel spouses and that the death of her husband merely resulted in his
exclusion from the case.
CA: Surviving spouse should pay. It is noted that all the defendants, including
the deceased, were signatories to the contract of sub-lease. The remaining
defendants cannot avoid the action by claiming that the death of one of the
parties to the contract has totally extinguished their obligation.
 ISSUE:
 (1) Whether a creditor can sue the surviving spouse for the collection of a
debt which is owed by the conjugal partnership of gains, or
(2) Whether such claim must be filed in proceedings for the settlement of the
estate of the decedent.
RULING:
  (1) Surviving spouse is not liable. The conjugal partnership of gains is liable.
It is clear that Climaco had a cause of action against the persons named as
defendants therein. It was, however, a cause of action for the recovery of
damages, that is, a sum of money and the corresponding action is,
unfortunately, one that does not survive upon the death of the defendant, in
accordance with the provisions of Section 21, Rule 3 of the Rules of Court. 
As held in Calma v. Tañedo, after the death of either of the spouses, no
complaint about the collection of indebtedness chargeable against the
conjugal partnership
can be brought against the surviving spouse. Instead, the claim must be made
in the proceedings for the liquidation and settlement of the conjugal property.
The reason for this is that upon the death of one spouse, the powers of
administration of the surviving spouse ceases and is passed to the
administrator appointed by the court having jurisdiction over the settlement of
estate proceedings. Indeed, the surviving spouse is not even a de facto
administrator such that conveyances made by him of any property belonging
to the partnership prior to the liquidation of the mass of conjugal partnership
property is void.  the inventory of the Alipios’ conjugal property is necessary
before any claim chargeable against it can be paid. Needless to say, such
power exclusively pertains to the court having jurisdiction over the settlement
of the decedent’s estate and not to any other court.
(2) The obligation is joint. Indeed, if from the law or the nature or the wording
of the obligation the contrary does not appear, an obligation is presumed to be
only joint, i.e., the debt is divided into as many equal shares as there are
debtors, each debt being considered distinct from one another. Clearly, the
liability of the sublessees is merely joint. Since the obligation of the Manuel
and Alipio spouses is chargeable against their respective conjugal
partnerships, the unpaid balance of P50,600.00 should be divided into two so
that each couple is liable to pay the amount of P25,300.00.
* Case digest by  Leizel O. Lagare, LLB-1, Andres Bonifacio Law School, SY
2017-2018

Capalla v. COMELEC
G.R. No. 201112, 23 October 2012
FACTS:
The Comelec and Smartmatic-TIM entered into a Contract for the Provision of
an Automated Election System for the May 10, 2010 Synchronized National
and Local Elections (AES Contract) which is a Contract of Lease with Option
to Purchase (OTP) the goods listed therein consisting of the Precinct Count
Optical Scan (PCOS), both software and hardware. The Comelec opted not to
exercise the same except for 920 units of PCOS machines. Subsequently, the
Comelec issued Resolution resolving to seriously consider exercising the OTP
subject to certain conditions. It issued another Resolution resolving to
exercise the OTP in accordance with the AES Contract.Later, the COMELEC
issued Resolution resolving to accept Smartmatic-TIM’s offer to extend the
period to exercise the OTP.  The agreement on the Extension of the OTP
under the AES Contract (Extension Agreement) was eventually signed.
Finally, it issued Resolution resolving to approve the Deed of Sale between
the Comelec and Smartmatic-TIM to purchase the latter’s PCOS machines to
be used in the upcoming elections. The Deed of Sale was forthwith executed.
ISSUE:
Whether or not assailed resolutions and transactions entered are valid.
 RULING:
Yes. The SC decided in favor of respondents and placed a stamp of validity
on the assailed resolutions and transactions entered into. Based on the AES
Contract, the Court sustained the parties’ right to amend the same by
extending the option period. Considering that the performance security had
not been released to Smartmatic-TIM, the contract was still effective which
can still be amended by the mutual agreement of the parties, such
amendment being reduced in writing. To be sure, the option contract is
embodied in the AES Contract whereby the Comelec was given the right to
decide whether or not to buy the subject goods listed therein under the terms
and conditions also agreed upon by the parties.
Clearly, under the AES Contract, the Comelec was given until December 31,
2010 within which to exercise the OTP the subject goods listed therein
including the PCOS machines. The option was, however, not exercised within
said period. But the parties later entered into an extension agreement giving
the Comelec until March 31, 2012 within which to exercise it. With the
extension of the period, the Comelec validly exercised the option and
eventually entered into a contract of sale of the subject goods. The extension
of the option period, the subsequent exercise thereof, and the eventual
execution of the Deed of Sale became the subjects of the petitions
challenging their validity in light of the contractual stipulations of respondents
and the provisions of RA 9184.
As the Court simply held in the assailed decision that the moment the
performance security is released, the contract would have ceased to exist.
However, since it is without prejudice to the surviving provisions of the
contract, the warranty provision and the period of the option to purchase
survive even after the release of the performance security. While these
surviving provisions may have different terms, in no way can we then consider
the provision on the OTP separate from the main contract of lease such that it
cannot be amended under Article 19. Thus, not only the option and warranty
provisions survive but the entire contract as well. In light of the contractual
provisions, the SC sustained the amendment of the option period.
* Case digest by Vera L.Nataa, LLB-1, Andres Bonifacio Law School, SY
2017-2018

Makati Dev’t Corp. v. Empire Insurance Co.

G.R. No. L-21780, 30 June 1967
FACTS:
 On March 31, 1959, the Makati Development Corporation sold to Rodolfo P.
Andal a lot. A so-called “special condition” contained in the deed of sale
provides that “the VENDEE/S shall commence the construction and complete
at least 50% of his/her/their/its residence on the property within two (2) years
to the satisfaction of the VENDOR and, in the event of his/her/their/its failure
to do so will be forfeited in favor of the VENDOR by the mere fact of failure of
the VENDEE/S to comply with this special condition.” To ensure faithful
compliance with this “condition,” Andal gave a surety bond the sum of
P12,000 in case Andal failed to comply with his obligation under the deed of
sale.
Andal did not build his house; instead, he sold the lot to Juan Carlos. As
neither Andal nor Juan Carlos built a house on the lot within the stipulated
period, the Makati Development Corporation, sent a notice of claim to the
Empire Insurance Co. advising it of Andal’s failure to comply with his
undertaking. Demand for the payment was refused, whereupon the Makati
Development Corporation filed a complaint against the Empire Insurance Co.
to recover on the bond in the full amount, plus attorney’s fees. In due time, the
Empire Insurance Co. filed its answer with a third-party complaint against
Andal. 
ISSUE:
WHETHER OR NOT Andal is entitled to pay the surety bond of Php12,000 as
a penal sanction.
RULING:
No. The so-called “special condition” in the deed of sale is, in reality, an
obligation1 — to build a house at least 50 percent of which must be finished
within two years. It was to secure the performance of this obligation that a
penal clause was inserted. Here the trial court found that Juan Carlos had
finished more than 50 percent of his house or barely a month after the
expiration of the stipulated period. There was, therefore, a partial performance
of the obligation within the meaning and intendment of article 1229. The penal
clause, in this case, was inserted not to indemnify the Makati Development
Corporation for any damage it might suffer as a result of a breach of the
contract but rather compel performance of the so-called “special condition”
and thus encourage home building among lot owners in the Urdaneta Village.
Considering that a house had been built shortly after the period stipulated, the
substantial, if tardy, performance of the obligation, having in view the purpose
of the penal clause, fully justified the trial court in reducing the penalty.
The stipulation, in this case, to commence the construction and complete at
least 50 percent of the vendee’s house within two years cannot be construed
as imposing a strictly personal obligation on Andal. To adopt such a
construction would be to limit Andal’s right to dispose of the lot. There is
nothing in the deed of sale restricting Andal’s right to sell the lot at least within
the two-year period and we think it plain that a reading of such a limitation on
one of the rights of ownership must rest on more explicit language in the
contract. It cannot be left to mere inference.
* Case digest by Prince Dave C. Santiago, LLB-1, Andres Bonifacio Law
School, SY 2017-2018

Country Bankers Insurance v. CA

G.R. No. 85161, 9 September 1991
FACTS:
Sy (petitioner) leased theaters owned by Oscar Ventanilla Enterprises
Corporation (OVEC) (respondent). Despite numerous demands and a
supplemental agreement, Petitioner failed to pay the monthly rentals and
amusement taxes as stipulated in their contract. Respondent thereafter
repossessed said properties in accordance with their written agreement. Sy
filed to enjoin said action of OVEC.
ISSUE:
WON the repossession is valid.
RULING:
Yes. The repossession is valid as the same constitutes a penal clause.
Article 1226 of the Civil Code provides that as a general rule, in obligations
with a penal clause, the penalty shall substitute the indemnity for damages
and the payment of interests in case of non-compliance.
There is no merit in petitioners’ argument that the forfeiture clause stipulated
in the lease agreement would unjustly enrich the respondent at the expense
of petitioners is contrary to law, morals, good customs, public order or public
policy. A provision which calls for the forfeiture of the remaining deposit still in
the possession of the lessor, without prejudice to any other obligation still
owing, in the event of the termination or cancellation of the agreement by
reason of the lessee’s violation of any of the terms and conditions of the
agreement is a penal clause that may be validly entered into. The petition is
denied.
* Case digest by Ariel M. Acopiado, LLB-1, Andres Bonifacio Law School, SY
2017-2018