ILLUSTRATIVE CASES: 1.

Acknowledgment signed by one of the debtors of a document is conditioned

upon the same being signed by all the debtors.

Facts: By agreement of C and D, the separate debts of the brothers A, B, and C to D were liquidated and
consolidated into only one obligation in a promissory note signed by C who acknowledged his
indebtedness. D signed the note on condition that C would obtain the signatures of A and B thereby
creating a joint obligation against the three. C never secured their signatures until his death. In an action
against A and B by D to recover their respective shares in the indebtedness, A and B contended that
since their signatures were not affixed to the document, D was bound to acknowledge it as a credit only
against C who signed it.

Issue: Is D bound to acknowledge the document as a credit only against C?

Held: No. The contract contained reciprocal obligations (see Art. 1169, last par.) which were to be
fulfilled by each of the signers, that is, on the part of C to secure signatures of A and B to the instrument,
and then on the part of D, to recognize it as a joint obligation of A, B, and C covering their indebtedness
to him. Until C obtained the signatures of A and B, D was not in any way bound to acknowledge it as
anything more than an executory contract containing a condition precedent which was to be performed
by C before D’s obligation was due. Mere continued silence on his part could signify nothing until the
signatures of A and B had been secured. (Martinez vs. Cavives, 25 Phil. 581 [1913].)

2. ILLUSTRATIVE CASE: Requirement for application of rules concerning joint and solidary obligations.
Facts: It appears that A, lessee of a lot, is the owner of a building under receivership; that the rentals on
the building collected by B, receiver, belong to A; that B is a mere custodian of the funds thus collected
and held by him; that the judgment in favor of C, lessor, against B, ordering him to pay the rentals in
question jointly and severally with A, merely enforces an obligation of A, to whom said funds belong,
and that the liability of B under the said judgment is nothing but the very same liability of A. B raised the
propriety of his inclusion as defendant with A in the action by C for the recovery of unpaid rentals on the
lot. He argued that he was not a party to the contract of lease, and neither the same, nor the nature of
the contract, nor the law, made him solidarily liable with A for the rentals.

Issue: Are the rules concerning joint obligations and solidary obligations applicable?

Held: No. Said rules require a plurality of subjects (creditors, debtors, or both) and have no application
when there is only one creditor and one debtor, even if payment of the debt is to be made by several
individuals representing one and the same interest or debtor. The argument of B is predicated upon the
wrong theory that he, as receiver, represents an interest completely distinct and separate from that of A.
(Abella vs. G.K. Co., Bun Kim and Q. Carpio, 100 Phil. 1019 [1957].)

3. Sale of vessel is conditioned upon proof that seller is, in fact, owner of property.

Facts: S, owner, and B, purchaser, agreed upon the sale of a vessel provided that the title papers to the
same were in proper form. The title was in the name of another and S promised to perfect his title to
the vessel. Before compliance by S with the condition exacted by B, and while the vessel was in S’s
possession, it sank due to a severe storm.

Issue: Is B under obligation to pay the price of the vessel?

Held: No. The sale of the vessel was not perfected, because of the non-compliance by S of a condition
precedent to its perfection, to wit: the production of the proper papers showing that he was, in fact, the
owner of the vessel in question. Consequently, the loss of the vessel must be borne by S, the owner, and
not by B who only intended to purchase it and was unable to do so because of failure of S to comply
with the said condition. Article 1262 is not applicable. (Roman vs. Grimalt, 6 Phil. 96 [1906]; see
Borromeo vs. Franco, 5 Phil. 49 [1905], infra.)

4. Condition claimed was not contemplated by the parties.

Facts: B obliged himself to pay S the balance of the purchase price of a subdivision lot within two years
from the completion by S of the roads therein. S brought suit to foreclose the real estate mortgage
executed by B to secure the payment of the unpaid price, for failure of B to pay the mortgage
indebtedness notwithstanding the completion of the roads, a condition for the payment of the same. B
contends that the roads are not yet completed in the technical, legal sense, because the final say or
acceptance by the Capital City Planning Commission of Quezon City had not yet been secured.

Issue: Is this contention of B tenable?

Held: No. This contention is inordinately technical and also devoid of merit. There is nothing at all in the
ordinance (No. 2969 of Quezon City) which makes the acceptance by the said agency a condition
precedent before a street may be considered constructed. Such condition was not within the
contemplation of the parties. (Enriquez vs. Ramos, 73 SCRA 116 [1976].)

5. Sale is subject to two conditions and only one is fulfilled.

Facts: S sold to B a parcel of land subject to the condition that B makes a down payment of P100,000.00
and that the Government accepts the bid of S to purchase Government property. B made the down
payment which was accepted by S. However, the Government did not accept the bid of S.

Issue: Having accepted the down payment, is S bound to sell?

Held: No. Acceptance by S of the part payment of P100,000.00 shows that the sale was conditionally
consummated or partly executed subject to the acceptance of S’s bid by the Government. The non-
acceptance of S’s bid is in the nature of a negative resolutory condition. (see Villonco Realty Co. vs.
Bormacheco, Inc., 65 SCRA 352 [1975].)

6. Vendor seeks rescission of sale for violation by vendee of restriction imposed in contract of sale
between vendor and previous owner (fi rst vendor).

Facts: The contract of sale of three (3) lots between S (PHHC) and B provided that only construction
exclusively for “residential purposes” shall be built on the property, terms thereof to be binding upon
the successors and assignees of the respective parties. Subsequently, B sold two (2) lots to Meralco
which established a sub-station within the property. Because of the “severe noise” from the sub-station,
B fi led a complaint for the rescission of the sale.

Issue: Has B the right of action against Meralco for violation of the restriction imposed in the contract
between S and B?
Held: No. It is S which has the right of action against any assignee of B. S cannot rescind the contract
between B and Meralco because it was not a party to it. S’s redress would be to directly “seek
cancellation of the title of Meralco, and to repossess the property” as provided in its contract with B.
(Manila Electric Company vs. Court of Appeals, 114 SCRA 173 [1982].)

7. ILLUSTRATIVE CASES: Validity of stipulation in a contract of employment that grant of bonus shall
depend upon the discretion of the board of directors.

Facts: On the basis of the stipulation inserted in the contract of employment that E would be entitled to
such further amount in the way of bonus as the board of directors might see fi t to grant, E contends
that he is entitled to a bonus to be fixed by the court as a reasonable participation in the increased profi
ts of the factory under his care.

Issue: What is the legal effect of the stipulation?

Held: A promise of this character creates a legal obligation binding upon the promissor, although in its
actual results it may not infrequently prove to be illusory. Such promise is not nugatory, under Article
1182, as embodying a condition dependent exclusively upon the will of the obligor. Nor can it be held
invalid under Article 1308 which declares that the validity and performance of a contract cannot be left
to the will of one of the contracting parties.

The uncertainty of the amount to be paid by way of bonus is also no obstacle to the validity of the
contract (see Article 1349.) since the contract itself specifi es the manner in which the amount payable is
to be determined, namely by the exercise of the judgment and discretion of the employer. (Liebnow vs.
Phil. Vegetable Oil Co., 39 Phil. 60 [1918].)

8. ILLUSTRATIVE CASES: Validity of stipulation in a contract of employment that a contract may be

cancelled by the employer in case of non-arrival within a certain period of a specifi c machinery for a
contemplated factory

Facts: R contracted the services of E as superintendent of an oil factory which the former contemplated
establishing. At the time this agreement was made, the machinery for the contemplated factory had not
been acquired. A provision in the contract is as follows: “It is understood and agreed that should the
machinery to be installed in the said factory fail, for any reason, to arrive in the City of Manila, within a
period of six months from date hereof, this contract may be cancelled by the party of the second part (R)
at its option, such cancellation, however, not to occur before the expiration of six months.” The
machinery did not arrive.

Issue: Is the condition obnoxious to the fi rst sentence contained in Article 1182?

Held: No. The condition is valid even though it is made to depend upon the will of the obligor (R) as it is
resolutory in nature. R would be liable even in the absence of proof showing that the non-arrival was
due to some cause not having its origin in R’s own act or will if he were under a positive obligation to
cause the machinery to arrive. The contract, however, expresses no such positive obligation. (Taylor vs.
Uy Tieng, 43 Phil. 873 [1922].)
9. ILLUSTRATIVE CASE: The court dismissed a collection suit upon the death of one of the solidary
debtors, holding that the claim should be pursued against the estate of the deceased.

Facts: Before the collection suit fi led by B (bank), creditor, against the joint and solidary debtors could
be decided, A, one of the debtors dies. After having been informed of the death, the court issued an
order dismissing the case, citing Section 6, Rule 86 of the Rules of Court which provides: “Solidary
obligation of decedent. — Where the obligation of the decedent is solidary with another debtor, the
claim shall be fi led against the decedent as if he were the only debtor, without prejudice to the right of
the estate to recover contribution from the other debtor. In a joint obligation of the decedent, the claim
shall be confi ned to the portion belonging to him.”

Issue: Is the dismissal of the case correct?

Held: No. A cursory perusal of the cited provision reveals that nothing therein prevents a solidary
creditor from proceeding against the surviving solidary debtors. Said provision merely sets up the
procedure in enforcing collection in case a creditor chooses to pursue his claim against the estate of the
deceased solidary debtor. To require the solidary creditor to proceed against the estate, making it a
condition precedent for any collection action against the surviving debtor to prosper, would deprive him
of his substantative rights provided by Article 1216, “to proceed against any one of the solidary debtors
or some or all of them simultaneously.” The choice is undoubtedly left to the solidary creditor. (Phil.
National Bank vs. Asuncion, 80 SCRA 321 [1977].)

10.