oblicon digests MAGDALENA ESTATE VS. MYRICK 71 PHIL. 346 FACTS: Magdalena Estate, Inc.

sold to Louis Myrick lots No. 28 and 29 of Block 1, Parcel 9 of the San Juan Subdivision, San Juan, Rizal. Their contract of sale provides that the Price of P7,953 shall be payable in 120 equal monthly installments of P96.39 each on the second day of every month beginning the date of execution of the agreement. In pursuance of said agreement, the vendee made several payments amounting to P2,596.08, the last being due and unpaid was that of May 2, 1930. By reason of this, the vendor, through its president, notified the vendee that, in view of his inability to comply with the terms of their contract, said agreement had been cancelled, relieving him of any further obligation thereunder, and that all amounts paid by him had been forfeited in favor of the vendor. To this communication, the vendee did not reply, and it appears likewise that the vendor thereafter did not require him to make any further disbursements on account of the purchase price. ISSUE: Was the petitioner authorized to forfeit the purchase price paid? RULING: No. The contract of sale contains no provision authorizing the vendor, in the event of failure of the vendee to continue in the payment of the stipulated monthly installments, to retain the amounts paid to him on account of the purchase price. The claim therefore, of the petitioner that it has the right to forfeit said sums in its favor is untenable. Under Article 1124 of the Civil Code, however, he may choose between demanding the fulfillment of the contract or its resolution. These remedies are alternative

and not cumulative, and the petitioner in this case, having elected to cancel the contract cannot avail himself of the other remedy of exacting performance. As a consequence of the resolution, the parties should be restored, as far as practicable, to their original situation which can be approximated only be ordering the return of the things which were the object of the contract, with their fruits and of the price, with its interest, computed from the date of institution of the action. UNIVERSAL FOOD CORPORATION VS. CA 33 SCRA 1 FACTS: This is a petition for certiorari by the UFC against the CA decision of February 13, 1968 declaring the BILL OF ASSIGNMENT rescinded, ordering UFC to return to Magdalo Francisco his Mafran sauce trademark and to pay his monthly salary of P300.00 from Dec. 1, 1960 until the return to him of said trademark and formula. In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula for the manufacture of a food seasoning (sauce) derived from banana fruits popularly known as MAFRAN sauce. It was used commercially since 1942, and in the same year plaintiff registered his trademark in his name as owner and inventor with the Bureau of Patents. However, due to lack of sufficient capital to finance the expansion of the business, in 1960, said plaintiff secured the financial assistance of Tirso T. Reyes who, after a series of negotiations, formed with others defendant Universal Food Corporation eventually leading to the execution on May 11, 1960 of the aforequoted "Bill of Assignment" (Exhibit A or 1). On May 31, 1960, Magdalo Francisco entered into contract with UFC stipulating among other things that he be the Chief Chemist and Second Vice-President of UFC and shall have absolute control and supervision over the laboratory assistants and personnel and in the purchase

and safekeeping of the chemicals used in the preparation of said Mafran sauce and that said positions are permanent in nature. In line with the terms and conditions of the Bill of Assignment, Magdalo Francisco was appointed Chief Chemist with a salary of P300.00 a month. Magdalo Francisco kept the formula of the Mafran sauce secret to himself. Thereafter, however, due to the alleged scarcity and high prices of raw materials, on November 28, 1960, Secretary-Treasurer Ciriaco L. de Guzman of UFC issued a Memorandum duly approved by the President and General Manager Tirso T. Reyes that only Supervisor Ricardo Francisco should be retained in the factory and that the salary of plaintiff Magdalo V. Francisco, Sr., should be stopped for the time being until the corporation should resume its operation. On December 3, 1960, President and General Manager Tirso T. Reyes, issued a memorandum to Victoriano Francisco ordering him to report to the factory and produce "Mafran Sauce" at the rate of not less than 100 cases a day so as to cope with the orders of the corporation's various distributors and dealers, and with instructions to take only the necessary daily employees without employing permanent employees. Again, on December 6, 1961, another memorandum was issued by the same President and General Manager instructing the Assistant Chief Chemist Ricardo Francisco, to recall all daily employees who are connected in the production of Mafran Sauce and also some additional daily employees for the production of Porky Pops. On December 29, 1960, another memorandum was issued by the President and General Manager instructing Ricardo Francisco, as Chief Chemist, and Porfirio Zarraga, as Acting Superintendent, to produce Mafran Sauce and Porky Pops in full swing starting January 2, 1961 with further instructions to hire daily laborers in order to cope with the full blast operation. Magdalo V. Francisco, Sr. received his salary as Chief Chemist in the amount of P300.00 a month only until his services were terminated on November 30, 1960. On January 9 and 16, 1961, UFC, acting thru its President and

the formula of said Mafran . transfer and conveyance is absolute and irrevocable (and) in no case shall the PARTY OF THE First Part ask. This was the precise intention of the parties. being recalled back to work.000. First. transfer and convey all its property rights and interest over said Mafran trademark and formula for MAFRAN SAUCE unto the Party of the Second Part. Was the Bill of Assignment really one that involves transfer of the formula for Mafran sauce itself? 2. ISSUES: 1." and the last paragraph states that such "assignment. Was petitioner’s contention that Magdalo Francisco is not entitled to rescission valid? RULING: 1. formula and assets at a price of not less than P300. 1961. Francisco. Then in a letter dated March 20. Sr. 1961. No. Due to these successive memoranda. a perceptive analysis of the entire instrument and the language employed therein would lead one to the conclusion that what was actually ceded and transferred was only the use of the Mafran sauce formula. demand or sue for the surrender of its rights and interest over said MAFRAN trademark and mafran formula. UFC requested said plaintiff to report for duty.‖ The SC had the following reasons to back up the above conclusion. Certain provisions of the bill would lead one to believe that the formula itself was transferred. Second. without plaintiff Magdalo V. royalty was paid by UFC to Magdalo Francisco." ―However. but the latter declined the request because the present action was already filed in court.00. ―the respondent patentee "assign. he filed the present action on February 14. authorized Porfirio Zarraga and Paula de Bacula to look for a buyer of the corporation including its trademarks.General Manager. To quote.

it is not subsidiary in nature. Art. Simply put. 1960. Finally. paragraph 3 of the Bill declared only the transfer of the use of the Mafran sauce and not the formula itself which was admitted by UFC in its answer. the reparation of damages for the breach was purely secondary. Third. Fifth. Hence.sauce was never disclosed to anybody else. was of no merit because ―it is predicated on a failure to distinguish between a rescission for breach of contract under Article 1191 of the Civil Code and a rescission by reason of lesion or economic prejudice. the facts of the case undeniably show that what was transferred was only the use. collect and remove timber from . DE LOS ANGELES 35 SCRA 102 FACTS: On November 2. et seq. hence. Fourth. Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder was subordinated to anything other than the culpable breach of his obligations by the defendant. UNIVERSITY OF THE PHILIPPINES VS. under Article 1381.‖ This was a case of reciprocal obligation. 1383. UP and ALUMCO entered into a logging agreement whereby the latter was granted exclusive authority to cut. No. what better way is there to show the least transmission of right of the transfer of the use of the transfer of the formula itself. our Civil Code allows only ―the least transmission of right. 1191 allows both the rescission and the payment for damages. Petitioner’s contention that Magdalo Francisco’s petition for rescission should be denied because under Article 1383 of the Civil Code of the Philippines rescission can not be demanded except when the party suffering damage has no other legal means to obtain reparation. hence. the Bill acknowledged the fact that upon dissolution of said Corporation. Rescission is not given to the party as a last resort. the patentee rights and interests of said trademark shall automatically revert back to Magdalo Francisco.‖ 2. unlike Art.

1964. On the other hand. ALUMCO still failed to pay.362. hence. ISSUE: Can petitioner UP treat its contract with ALUMCO rescinded. ALUMCO incurred an unpaid account of P219. which stipulated the following: 3. but again incurred an unpaid account. considered rescinded and of no further legal effect the logging agreement. In the event that the debtor fails to comply with any of its promises.94. On July 19. ALUMCO executed an instrument entitled ―Acknowledgment of Debt and Proposed Manner of Payments. It was approved by the president of UP. The lower court ruled in favor of ALUMCO. 5. UP informed ALUMCO that it had.the Land Grant for a period starting from the date of agreement to December 31. UP and ALUMCO had expressly stipulated that upon default by the debtor. In the first place. ALUMCO filed a petition to enjoin UP from conducting the bidding. In the event that the payments called for are not sufficient to liquidate the foregoing indebtedness. Despite repeated demands.1965. so UP sent a notice to rescind the logging agreement. extendible for a period of 5 years by mutual agreement. as of that date. the balance outstanding after the said payments have been applied shall be paid by the debtor in full no later than June 30. this appeal. and that UP had already taken steps to have another concessionaire take over the logging operation. without the necessity of any judicial suit… ALUMCO continued its logging operations. the Debtor agrees without reservation that Creditor shall have the right to consider the Logging Agreement rescinded. 1965. and may disregard the same before any judicial pronouncement to that effect? RULING: Yes. 1965. UP . On December 8.

Rizal for the amount of P3. CALASANZ 135 SCRA 323 FACTS: On December 19. The plaintiffs’ letter with their plea for reconsideration of the said cancellation was denied by the defendants. On December 7. the Supreme Court. it is not always necessary for the injured party to resort to court for rescission of the contract. In other words. stated in Froilan vs.00 plus 7% interest per annum.‖ ANGELES VS. As to such special stipulation and in connection with Article 1191 of the Civil Code. 1960 as rescinded without the necessity of any judicial suit.920. 1966. the installment being due and payable on the 19th day of each month. On January 28.533. the defendants-appellants wrote the plantiffs-appellees a letter requesting the remittance of past due accounts. when their aggregate payment already amounted to P4. 1957.38. defendants-appellants Ursula Torres Calasanz and plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta. Pan Oriental Shipping Co: ―There is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof.00 upon the execution of the contract.20 until fully paid. even without court intervention. 1967. The plaintiffs-appellees filed a case before the . The plaintiffs-appellees paid the monthly installments until July 1966.has the right and the power to consider the Logging Agreement of December 2. the defendants-appellants cancelled the said contract because the plaintiffs failed to meet subsequent payments. They promised to pay the balance in monthly installments of P41. The plaintiffs-appellees made a downpayment of P392.

6 of the contract to sell when they failed and refused to pay and/or offer to pay monthly installments corresponding to the month of August. after having invested a big amount of money.2 of the contract obligated the plaintiffs-appellees to pay the defendants the sum of P3. hence this appeal. 1966 for more than 5 months. are now sought to be deprived of the same thru the prayed application of a contract clever in its phraseology. in essence. condemnable in its lopsidedness and injurious in its effect which. Thus. While it is true that par. and its entirety is most unfair to the buyers. it is likewise true that under par 12 the seller is obligated to transfer the title to the buyer upon payment of the said price. The defendants alleged in their answer that the plaintiffs violated par. being a contract of adhesion. realty taxes and incidental expenses. The Supreme Court agree with the observation of the plaintiffsappellees to the effect that the terms of a contract must be interpreted against the party who drafted the same.Court of First Instance to compel the defendant to execute in their favor the final deed of sale alleging inter alia that after computing all subsequent payments for the land in question. must be construed against the party causing it. thereby constraining the defendants to cancel the said contract.920 plus 7% interest per annum. especially where such interpretation will help effect justice to buyers who. The Court of First Instance rendered judgment in favor of the plaintiffs. since the principal obligation under the . ISSUE: Has the Contract to Sell been automatically and validly cancelled by the defendants-appellants? RULING: No. The contract to sell. they found out that they have already paid the total amount including interests.

67 without any interest thereon.On April 4. that the interest of the Alien Property Custodian be cancelled.533. 1949 to recover its equipment form the property and vacate the premise . and that NACOCO be given until February 28.Sagrada Orden (plaintiff) files claims on the property with the Court of First Instance of Manila and against the Philippine Alien Property Administrator . the defendant must immediately execute the final deed of sale in favor of the plaintiffs and execute the necessary transfer of documents. the Copra Export Management Company occupied the property under custodianship agreement with the United States Alien Property Custodian . when the Copra Export Management Co.CFI: the defendant (Philippine Alien Property Administrator) and the intervenor (RP) are released from any liability but the plaintiff may reserve the right to recover from NACOCO reasonable rentals for the use and occupation of the premises . 503 (1952) Nature: appeal from judgment of CFI of Manila Facts and Background of the Case .In the same year. as provided in par. Manila) for Php140K . Taiwan Tekkosho (Japanese corporation) acquired the plaintiff’s property (land with warehouse in Pandacan.38. occupied it next . the courts should only order the payment of the few remaining installments but not uphold the cancellation of the contract. vacated the property.the judgment is appealed to the SC .Plaintiff petitions that the sale of the property to Taiwan Tekkosho should be declared null and void as it was executed under duress. Sagrada Orden vs. Upon payment of the balance of P671.12 of the contract. 1942. the defendant.920.On Jan 4.000/month as reasonable rental from August 1946 (date when NACOCO occupied property) to the date NACOCO vacates the premises .The sale of the property to the Taiwan Takkesho was declared void and the plaintiff was given the right to recover Php3. 1946. after the liberation. the US took control and custody of the aforementioned enemy’s land under Sect 12 of the Trading with the Enemy Act .contract is only P3.The Republic of the Philippines is allowed to intervene . the National Coconut Corporation (NACOCO). Nacoco 91 Phil. during the Japanese occupation.In August 1946.00 and the plaintiffs-appellees have already paid an aggregate amount of P4.

There was no contract of rental b/w them and Taiwan Takkesho. crime. entered into. Sagrada Orden Vs Nacoco –Kinuha ng Hapon ang lupa. Action to recover parcel of land owned by P. and quasi-delicts. and there was no contract. There were no laws or an express agreement between the defendant or the Alien Property Custodian with the plaintiff regarding payment of rent. Issue: WON defendant is liable to Sagrada and must pay the rentals. or negligence (Art 1089. implied or otherwise. costs against the plaintiff Ratio Obligations can only arise from four sources: law. NACOCO entered possession of the property from the Alien Property Custodian without any expectation of liability for its use. 1949 was reversed. contracts. NACOCO did not commit any negligence or offense. that can be used as basis for claiming rent on the property before the plaintiff obtained the judgment annulling the sale to Taiwan Takkesho. The property was acquired by the Alien Property Administrator through law (Trading with the Enemy Act) on the seizure of alien property and not as a successor to the interests of the latter. and then because of Japanese war was acquired by other parties.Legal Issues 1. WON the defendant is liable to pay rent for occupying the property in question Judgment 1. . contracts or quasi-contracts. felonies (acts or omissions punished by law). Important Notes Article 1157 of the New Civil Code states that there are 5 sources of obligations: laws. and def then leased a part of the land. Spanish Civil Code). quasi-contracts. The plaintiff has no right to claim rent from NACOCO. then possessed by the US govt thru its custodian then possessed by the defendant without agreement with the US or with the plaintiff. The CFI’s decision that the defendant should pay rent from August 1946 to February 28.

Source: Laws. rendered service to daughter-in-law then demanded P500 from def. in-laws 1906-Pelayo complained against Lauron and Abella.000 alleged to have been lost by O’Brien to Leung Ben in a series of gambling. recognized both in the civil and common law. 142 and 143 or Family Code. money lost in gambling and voluntary paid by the loser to the winner cannot. not to plaintiff but to US govt. Held: Yes. Lauron –husband vs. But defendant not liable for rentals bec no express agreement bet the APA and Nacoco. Existence of implied agreement is contrary to the circumstances.Held: No. Held: No. Art. Those expressly determined in the Code or in special laws are the only demandable ones. Pelayo vs. be . Upon general principles. in the absence of statute. Pelayo a doctor. Leung Ben vs. If liable at all must arise from any of the four sources of obligations. Issue: WON Lauron is liable. O’Brien . Rendering medical assistance. Husband liable. Source: Contract. But there was none.Gambling O’ Brien filed an action in the court of CFGI of Manila to recover from Leung Ben the sum of P15. mutual oblig. APA was a trustee of the US and if def liable. Family Code. Oblig not presumed. banking and percentage games: Issue: WON O’Brien can recover the money from Leung Ben.

and the costs of action. 1945. BAUTISTA ANGELO.R. No.500 as damages. Plaintiffs are the heirs of one Florenio Diana. It must therefore be assumed that the action of plaintiff was based upon the right to recovery given by section 7 of said Act. But Act. L-4920 June 29. Zosimo D. The appeal was originally taken to the Court of Appeals but the case was certified to this court on the ground that it poses merely a question of law. Gibbs. he was ordered to indemnify the heirs of the deceased in the amount of P2. driven by Vivencio Bristol. Phil Comm and Civil Code. G. 1948 (civil case No. the truck ran into a ditch at Bay. . On June 21.: The present appeal stems from a case originally instituted in the Court of First Instance of Laguna wherein plaintiffs seek to recover from defendant as a party subsidiarily liable for the crime committed by an employee in the discharge of his duty the sum of P2. which declares that an action may be brought against the banker by any person losing money at a banking or percentage game. which defines and penalized different forms of gambling contains numerous provisions recognizing the right to recover money lost in gambling. vs. Comm. 14. The present case was started when defendant failed to pay the indemnity under its subsidiary liability under article 103 of the Revised Penal Code. 1953 FRANCISCO DIANA and SOLEDAD DIANA. J.recovered in a civil action. among other things. Source: Law. Gibbs. while Florenio Diana was riding in Truck No. defendant-appellee. Subsequently.. plaintiffs-appellants. Chuidian and Quasha for appellee. BATANGAS TRANSPORTATION CO. resulting in the death of Florenio Diana and other passengers. Vivencio Bristol was charged and convicted of multiple homicide through reckless imprudence wherein. Laguna. No. plus legal interest. 1757 of the Phil. a writ of execution was issued in order that the indemnity may be satisfied but the sheriff filed a return stating that the accused had no visible leviable property. Tanalega for appellants. a former employee of the defendant. When the decision became final.000. belonging to the defendant. The complaint was filed on October 19. 9221).

8023 of the Court of First Instance of Laguna) in which the same plaintiffs herein sought to recover from the same defendant the amount of P4." [I Moran. In both cases. (2) identity of rights asserted and relief prayed for. (1952). with a substantivity all its own.500 as damages resulting from the death of Florenio Diana who died while on board a truck of defendant due to the negligent act of the driver Vivencio Bristol. while the other case (civil case No.On December 13. This first action was predicated on culpa aquiliana. 1949. amount to res adjudicata in the action under consideration. As this court aptly said: "A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code. * * *. a different consideration should be made. These two cases involve two different remedies. 1948. 8023) is an action for damages based on culpa aquiliana which underlies the civil liability predicated on articles 1902 to 1910 of the old Civil Code. or at least such as representing the same interest in both actions. having found the motion well founded. section 1 (d) which allows the dismissal of a case on the ground that "there is another action pending between the same parties for the same cause. On February 3. commenting on this ground. defendant filed a motion to dis.000 for which the defendant is made subsidiarily liable under article 103 of the Revised Penal Code. regardless of which party is successful. the plaintiffs and the defendant are the same. There is no doubt with regard to the identity of parties. the relief being found on the same facts. section 1(d) of the Rules of Court. the lower court. plaintiffs took the present appeal. dismissed the complaint. On December 16. 168. there must be between the action under consideration and the other action. 1948. The only question to be determined is whether the lower court correctly dismissed the complaint on the sole ground that there was another action pending between the same parties for the same cause under Rule 8. With regard to the identity of reliefs prayed for. The determination of this issue hinges on the proper interpretation of Rule 8." Former Justice Moran. (1) identity of parties. without special pronouncement as to costs. and (3) the identity on the two preceding particulars should be such that any judgment which may be rendered on the other action will. It should be noted that the present case (civil case No. and individuality that is entirely apart and independent from a delict or crime. says: "In order that this ground may be invoked. p. plaintiffs filed a written opposition to the motion to dismiss.].miss on the ground that there was another action pending between the same parties for the same cause (civil case No. A distinction exists between the civil liability arising from a crime and the responsibility for cuasi-delictos or culpa . and their motion for reconsideration having been denied. 9221) stems from a criminal case in which the driver of the defendant was found guilty of multiple homicide through reckless imprudence and was ordered to pay an indemnity of P2. Comments on the Rules of Court.

extra-contractual. Jugo. by means of indemnification. 2. In fact. the order appealed from is reversed and the case is hereby remanded to the lower court for further proceedings. after the conviction of defendant's employee. Garcia and Al. while cuasi-delitos are only of private concern. 3. To deprive them now of this remedy. No. And this is what plaintiffs have done. merely repairs the damage. this distinction was stressed. for such negligence is punishable by law. What plaintiffs should have done was to institute an action under article 103 of the Revised Penal Code (CA-G. because the former are punished only if there is a penal law clearly covering them. (P.R. include all acts in which 'any kind of fault or negligence intervenes. It was there said that the negligent act committed by defendant's employee is not a quasi crime. 73 Phil. 1. which injustice it is our duty to prevent. Paras. Bengzon. Tuason. which involve two different remedies.. when the Court of Appeals dismissed the action based on culpa aquiliana (civil case No. JJ.ages may produce civil liability arising from a crime under article 100 of the Revised Penal Code. 611. No pronouncement as to costs. The same negligent act causing dam.J. Padilla. Considering the distinguishing characteristics of the two cases. would be to deprive them altogether of the indemnity to which they are entitled by law and by a court decision.). 8023). while the Civil Code. In other words. supra.. section 1(d) of the Rules of Court.. That crimes affect the public interest. consequently. while the latter. both cases involve different causes of action. or create an action for cuasi-delito or culpa extra-contractual under articles 1902-1910 of the Civil Code (Barredo vs. . cuasi-delitos.mario. 3632-R). The other differences pointed out between crimes and culpa aquiliana are:. Montemayor. 607). it is a mistake to say that the present action should be dismissed because of the pendency of another action between the same parties involving the same cause. Evidently. Pablo. That delicts are not as broad as quasi-delicts. That. it can hardly be said that there is identity of reliefs in both actions as to make the present case fall under the operation of Rule 8. C. the Penal Code punishes or corrects the criminal act. and Labrador. concur. Wherefore.

Assailed. 26345 setting aside and declaring without force and effect the orders of execution of the trial court.. in Civil Case No. Manila in Civil Case No. dated 30 August 1991 and 27 September 1991. that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded. 1986 asking that they specify the terms and conditions of the offer to sell. defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same. THE HON. 1994 ANG YU ASUNCION. 87-41058. Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5million. 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong. hence. they sent another letter dated January 28. that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants described as Nos. Manila. After the issues were joined. that during the negotiations. 109125 December 2. that in reply to defendant's letter. Rose Cu Unjieng and Jose Tan before the Regional Trial Court. 87-41058. that since defendants failed to specify the terms and conditions of the offer to sell and because of information received that defendants were about to sell the property. et al. respondents. that on several occasions before October 9. Branch 31. alleging.R. SP No. there was no . is the decision of the Court of Appeals. dated 04 December 1991. 1986. The antecedents are recited in good detail by the appellate court thusly: On July 29.R.G. petitioners. among others. defendants filed a motion for summary judgment which was granted by the lower court. 630-638 Ongpin Street. Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of cause of action. in this petition for review. that when plaintiffs did not receive any reply. against Bobby Cu Unjieng. ARTHUR GO AND KEH TIONG. in CA-G. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION. plaintiffs wrote them on October 24. The trial court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties did not agree upon the terms and conditions of the proposed sale. that they have occupied said spaces since 1935 and have been religiously paying the rental and complying with all the conditions of the lease contract. vs. 1987 with the same request. plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. No. Binondo.

Courts may render summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law (Garcia vs. however. the lower court ruled that should the defendants subsequently offer their property for sale at a price of P11-million or below. Aggrieved by the decision. CV No. 1990. Court of Appeals. Appellants' demand for actual. Chua and concurred in by Justices Vicente V. We find no reason not to grant the same right of first refusal to herein appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos. WHEREFORE. there was no meeting of the minds between the parties concerning the sale of the property. The Supreme Court denied the appeal on May 6. plaintiffs will have the right of first refusal. the Cu Unjieng spouses executed a Deed of Sale (Annex D. Petition).contract of sale at all. 176 SCRA 815). In a decision promulgated on September 21. 21123. 1991 "for insufficiency in form and substances" (Annex H. Absent such requirement. CV No. the claim for specific performance will not lie. the decision of the court a quo is legally justifiable. Summary judgment for defendants was properly granted. this Court affirmed with modification the lower court's judgment. 1990 (penned by Justice Segundino G. No pronouncement as to costs. considering the mercurial and uncertain forces in our market economy today. Mendoza and Fernando A. while CA-G. Nonetheless.R.R. but subject to the following modification: The court a quo in the aforestated decision gave the plaintiffs-appellants the right of first refusal only if the property is sold for a purchase price of Eleven Million pesos or lower. otherwise. On November 15. the judgment appealed from is hereby AFFIRMED. 21123 was pending consideration by this Court. SO ORDERED. Thus the dispositive portion of the decision states: WHEREFORE. The decision of this Court was brought to the Supreme Court by petition for review on certiorari. then the plaintiffs has the option to purchase the property or of first refusal. moral and exemplary damages will likewise fail as there exists no justifiable ground for its award. defendants need not offer the property to the plaintiffs if the purchase price is higher than Eleven Million Pesos. All requisites obtaining. Santiago). judgment is hereby rendered in favor of the defendants and against the plaintiffs summarily dismissing the complaint subject to the aforementioned condition that if the defendants subsequently decide to offer their property for sale for a purchase price of Eleven Million Pesos or lower. plaintiffs appealed to this Court in CA-G. SO ORDERED. holding: In resume. finding the appeal unmeritorious. Petition) transferring the property in question to herein petitioner Buen Realty and .

000. 1991 of the Decision in Civil Case No.R. Antonio Albano. On August 30. administrators or assigns.R. It is the observation of the Court that this property in dispute was the subject of the Notice of Lis Pendens and that the modified decision of this Court promulgated by the Court of Appeals which had become final to the effect that should the defendants decide to offer the property for sale for a price of P11 Million or lower. petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the latter vacate the premises. the VENDORS hereby sells. 195816 was issued in the name of petitioner on December 3. his heirs. CV No. stating that the aforesaid modified decision had already become final and executory.000. 105254/T-881 in the name of the Cu Unjiengs. TCT No. transfers and conveys for and in favor of the VENDEE. 21123. registration fees for the transfer of title in his favor and other expenses incidental to the sale of abovedescribed property including capital gains tax and accrued real estate taxes. Petition) quoted as follows: Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. 87-41058 as modified by the Court of Appeals in CA-G. there was an Entry of Judgment by the Supreme Court as of June 6. The gist of the motion is that the Decision of the Court dated September 21. the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the notice of lis pendens regarding Civil Case No. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15. in lieu thereof. TCT No. That the VENDEE shall pay the Documentary Stamp Tax. 1990. No. executors. Vicente Sison and Atty. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and. . The lessees filed a Motion for Execution dated August 27. 1991 in G. had now become final and executory. 1991. the above-described property with all the improvements found therein including all the rights and interest in the said property free from all liens and encumbrances of whatever nature.Development Corporation. 1991. 87-41058 annotated on TCT No. As a consequence of the sale. subject to the following terms and conditions: 1. CV-21123. As a consequence.R. Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. except the pending ejectment proceeding. Anacleto Magno respectively were duly notified in today's consideration of the motion as evidenced by the rubber stamp and signatures upon the copy of the Motion for Execution. On July 1. 1991. L-97276.00). receipt of which in full is hereby acknowledged. 2. and elevated to the Supreme Court upon the petition for review and that the same was denied by the highest tribunal in its resolution dated May 6. 1991. 1990 as modified by the Court of Appeals in its decision in CA G. respondent Judge issued an order (Annex A. On July 16.

On September 22. the dispositive portion of which reads: WHEREFORE. the same right of first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos or more. a purchase option and a contract to sell. We affirm the decision of the appellate court. In this petition for review on certiorari. Keh Tiong and Arthur Go. On the same day.and considering the mercurial and uncertain forces in our market economy today. the appellate court. SO ORDERED. . WHEREFORE. is hereby set aside as having been executed in bad faith. we might point out some fundamental precepts that may find some relevance to this discussion. carried over on TCT No. Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of plaintiffs' right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer. Keh Tiong and Arthur Go for the consideration of P15. September 27. to cancel and set aside the title already issued in favor of Buen Realty Corporation which was previously executed between the latter and defendants and to register the new title in favor of the aforesaid plaintiffs Ang Yu Asuncion. 1991 respondent Judge issued another order. 195816 issued in the name of Buen Realty. defendants are hereby ordered to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion.000. Petition) was issued. 1991 the corresponding writ of execution (Annex C. at the time of the latter's purchase of the property on 15 November 1991 from the Cu Unjiengs. petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of the notice of lis pendens.00 and ordering the Register of Deeds of the City of Manila. SO ORDERED. 1 On 04 December 1991. All previous transactions involving the same property notwithstanding the issuance of another title to Buen Realty Corporation. A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal. on appeal to it by private respondent. set aside and declared without force and effect the above questioned orders of the court a quo. For ready reference. let there be Writ of Execution issue in the above-entitled case directing the Deputy Sheriff Ramon Enriquez of this Court to implement said Writ of Execution ordering the defendants among others to comply with the aforesaid Order of this Court within a period of one (1) week from receipt of this Order and for defendants to execute the necessary Deed of Sale of the property in litigation in favor of the plaintiffs Ang Yu Asuncion.000.

A contract undergoes various stages that include its negotiation or preparation. A contract which is consensual as to perfection is so established upon a mere meeting of minds. with respect to the other. In a solemn contract. the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force. as an independent source of obligation. its perfection and. in addition to the above. Civil Code). to deliver and to transfer ownership of a thing or right to another. Civil Code). In sales. which is a meeting of minds between two persons whereby one binds himself. 1157. to give something or to render some service (Art. required to be observed (to give. quasi-contracts. 1156.An obligation is a juridical necessity to give. When the sale is not absolute but conditional. such as in a donation of real property. serve as a binding juridical relation. i. viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the various sources of obligations (law. the delivery of the object of the agreement. A contract of sale may be absolute or conditional. is essential in order to make the act valid. Civil Code). 1305. Among the sources of an obligation is a contract (Art. viewed from the demandability of the obligation. obligates himself. and the other to pay therefor a price certain in money or its equivalent. for a price certain. the contract is perfected when a person. The perfection of the contract takes place upon the concurrence of the essential elements thereof. called the seller. contracts. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing. to do or not to do).e. to do or not to do (Art. are the active (obligee) and the passive (obligor) subjects. over which the latter agrees. Article 1458 of the Civil Code provides: Art. called the buyer. the full payment of the purchase price). particularly. it cannot. The stage of consummation begins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof. the concurrence of offer and acceptance. Until the contract is perfected. the prescribed form being thereby an essential element thereof. to which the topic for discussion about the case at bench belongs.. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected). A contract which requires. on the object and on the cause thereof. Court of Appeals (158 SCRA 375). its consummation. finally. . as in a pledge or commodatum. and (c) the subject-persons who. 1458. is commonly referred to as a real contract. The obligation is constituted upon the concurrence of the essential elements thereof. 2 In Dignos vs. delicts and quasi-delicts). such as in a "Contract to Sell" where invariably the ownership of the thing sold is retained until the fulfillment of a positive suspensive condition (normally. (b) the object which is the prestation or conduct. compliance with certain formalities prescribed by law.

at this stage. . An imperfect promise (policitacion) is merely an offer. as long as the object is made determinate and the price is fixed. by communicating that withdrawal to the offeree (see Art.we have said that. by the execution of a public document) of the property sold. .g. and compliance therewith may accordingly be exacted. i. 1545.. and in sales. 5 An accepted unilateral promise which specifies the thing to be sold and the price to be paid. at any time prior to the perfection of the contract. or. 8 Let us elucidate a little. This contract is legally binding. although denominated a "Deed of Conditional Sale. the following rules generally govern: (1) If the period is not itself founded upon or supported by a consideration. Once the option is exercised timely. are not considered binding commitments. such as by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs." a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated. Where the condition is imposed upon the perfection of the contract itself.. 1479. the offer is accepted before a breach of the option. it conforms with the second paragraph of Article 1479 of the Civil Code. Thus. 7 The optionee has the right. 1324. is what may properly be termed a perfected contract of option. The offer.. a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. if an acceptance has been made. Ownership will then be transferred to the buyer upon actual or constructive delivery (e. however. either negotiating party may stop the negotiation. may be withdrawn. the withdrawal is effective immediately after its manifestation. e. (1451a) 6 Observe. see . Civil Code. until or unless the price is paid. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. A negotiation is formally initiated by an offer. the other party may either waive the condition or refuse to proceed with the sale (Art.g. before the offeror's coming to know of such fact.e. Where a period is given to the offeree within which to accept the offer. Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. can be obligatory on the parties. to buy. Arias. Civil Code). These relations. 43 Phil. . that the option is not the contract of sale itself. the offeror is still free and has the right to withdraw the offer before its acceptance. the failure of the condition would prevent such perfection. but not the obligation. 4 An unconditional mutual promise to buy and sell. 270). when coupled with a valuable consideration distinct and separate from the price. viz: Art. 3 If the condition is imposed on the obligation of a party which is not fulfilled. until a contract is perfected.

it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code.. care should be taken of the real nature of the consideration given. the main contract could be deemed perfected. would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms. If. including the price. however. in fact. In the law on sales. act with justice. a contract of "option" is deemed perfected. understood in its normal concept. it has been intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee. however. aforequoted. Civil Code. In these cases. Civil Code). Remolado. renders himself liable for damages for breach of the option." (2) If the period has a separate consideration. 97 Phil. 1482. and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. Rural Bank of Parañaque. give everyone his due. holding that this rule is applicable to a unilateral promise to sell under Art. vs. Inc. and observe honesty and good faith. among other laws of general application. however. in the exercise of his rights and in the performance of his duties. 10 a clear certainty on both the object and the cause or consideration of the envisioned contract. while the object might be made determinate. in fact. 1319. 948. . The right to withdraw. 1479. Prior thereto. Kroll & Co. Atlantic Gulf. that obviously are yet to be later firmed up. see also Art. 249. Sanchez vs. otherwise. 45 SCRA 368).also Atkins. a similar instance would be an "earnest money" in a contract of sale that can evidence its perfection (Art. the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optioneeofferee. and it would be a breach of that contract to withdraw the offer during the agreed period. per se be brought within the purview of an option under the second paragraph of Article 1479. vs. for if. among other things. however. In a right of first refusal. 135 SCRA 409. the pertinent scattered provisions of the Civil Code on human conduct. must not be exercised whimsically or arbitrarily. Neither can the right of first refusal. 102 Phil. The optioner-offeror. it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by. it could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must. the exercise of the right. Rigos. An option or an offer would require. The option. Cua. is an independent contract by itself. the so-called "right of first refusal" is an innovative juridical relation. modifying the previous decision in South Western Sugar vs. Needless to point out. or possibly of an offer under Article 1319 9 of the same Code. the latter may not sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of perfection.

As already stated. in any case. 87-41058. or the cancellation of title in the name of petitioner (Limpin vs. The Court of Appeals. the questioned writ of execution is in variance with the decision of the trial court as modified by this Court.R. since there is none to execute. be considered bound to respect the registration of the lis pendens in Civil Case No. the remedy is not a writ of execution on the judgment. 11 It is not to say. 87-41058. Furthermore. or the fixing of the price of the sale. however. given. IAC. CV-21123. The consequence of such a declaration entails no more than what has heretofore been said. its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence. It is likewise quite obvious to us that the decision in Civil Case No. has acted in good faith or bad faith and whether or not it should. has merely accorded a "right of first refusal" in favor of petitioners. CA. De Guzman vs. not having been impleaded in Civil Case No. 87-41058. there was nothing in said decision 13 that decreed the execution of a deed of sale between the Cu Unjiengs and respondent lessees. later affirmed in CA-G. Pastor vs. such as already intimated above. Buen Realty. Pamantasan ng Lungsod ng Maynila vs. like here. nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. as it is here so conveyed to us. whether private respondent Buen Realty Development Corporation. In fine. petitioners are aggrieved by the failure of private respondents to honor the right of first refusal. . an unjustified disregard thereof. 147 SCRA 516. let alone ousted from the ownership and possession of the property. CA. IAC. without first being duly afforded its day in court. 122 SCRA 885).Even on the premise that such right of first refusal has been decreed under a final judgment. the circumstances expressed in Article 19 12 of the Civil Code. 87-41058 are matters that must be independently addressed in appropriate proceedings. that the right of first refusal would be inconsequential for. the alleged purchaser of the property. 137 SCRA 730. if. but an action for damages in a proper forum for the purpose. The final judgment in Civil Case No. can warrant a recovery for damages. it must be stressed. We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the terms of the judgment in Civil Case No. in this regard. cannot be held subject to the writ of execution issued by respondent Judge. 87-41058 could not have decreed at the time the execution of any deed of sale between the Cu Unjiengs and petitioners. for instance. has observed: Finally. 143 SCRA 311.

The Court rendered a Decision annulling the saleThe said judgment was affirmed by the Appellate Court and had attained finality.00 plus Php800. Had the option to rescind the contract prescribed? RULING: 1. Nicolas Adamos and Vicente Feria. 174. 1984 FACTS: Defendants.800.R. defendants sold the said two lots to Petitioner Generosa Ayson-Simon for Php3. purchased two lots forming part of the Piedad Estate in Quezon City. Defendants were contending that petitioner cannot choose to rescind the contract since petitioner chose for specific performance of the obligation. petitioner filed a civil case for specific performance. However. Due to the failure of the defendants to deliver the said lots.AYSON-SIMON VS. Can petitioner choose to rescind the contract even after choosing for the specific performance of the obligation? 2. even though petitioner can choose to rescind the contract. Thus. Meanwhile.00 for facilitating the issuance of the new titles in favor of petitioner. defendants could not deliver the said lots because the CA had already annulled the sale of the two lots in Civil Case No. it would not be possible. during the pendency of the case above. the successors-in-interest of the latter filed Civil Case No. Also. from Juan Porciuncula. ISSUES: 1. Thereafter. ADAMOS AND FERIA G. which had been issued to defendants-appellants by virtue of the disputed sale. Yes. 69475. L-39378 AUGUST 28. because it has already prescribed. 174 for annulment of the sale and the cancellation of TCT No. NO. The rule that the injured party can only choose between fulfillment and rescission of the . The trial court rendered judgment to petitioner’s favor. petitioner filed another civil case for the rescission of the contract.

69475 issued to them. The cause of action to claim rescission arises when the fulfillment of the obligation became impossible when the Court of First Instance of Quezon City in Civil Case No. 20 SCRA 330 FACTS: J. the decision in Civil Case No. the four year period within which the action must be commenced had not expired. Since the two lots sold to plaintiff by defendants form part of the land involved in Civil Case No.. Article 1191 of the Civil Code provides that the injured party may also seek rescission. 1967 of the Court of Appeals. Article 1191 allows the injured party to seek rescission even after he has chosen fulfillment. May 3. But plaintiff had to wait for the finality of the decision in Civil Case No.obligation. Inc. applies when the obligation is possible of fulfillment. No. M. is the owner of a big tract land situated in Quezon City. the fulfillment has become impossible. 2. According to the certification of the clerk of the Court of First Instance of Quezon City (Exhibit "E-2"). among in the contract of . as in this case. SUGAR ESTATES DEVELOPMENT CO. Since the complaint for rescission was filed on August 16. If." The action for rescission must be commenced within four years from that date. Tuason & Co. and on July 28.] sold a portion thereof to Philippine Sugar Estates Development Co. The parties stipulated. 174 declared the sale of the land to defendants by Juan Porciuncula a complete nullity and ordered the cancellation of Transfer Certificate of Title No. 174. 174. 174 became final and executory "as per entry of Judgment dated May 3. it became impossible for defendants to secure and deliver the titles to and the possession of the lots to plaintiff. 1968. 1950. and cannot have both. Inc.. ARANETA VS PHIL. [through Gregorio Araneta. 1967. if the fulfillment should become impossible. Ltd.

refused to vacate the same. The fixing of a period by the courts under Article 1197 of the Civil Code of the Philippines is sought to be justified on the basis that petitioner (defendant below) placed the absence of a period in issue by pleading in its answer that the contract with respondent Philippine Sugar Estates Development Co. gave petitioner Gregorio Araneta.purchase and sale with mortgage. a period of two (2) years from notice hereof. Inc. The lower court and the appellate court ruled in favor of Phil. Inc." . and gave defendant Gregorio Araneta. Annex "A".. resorted to a petition for review by certiorari to this Court. within which to comply with its obligation under the contract.. Gregorio Araneta. seeking to compel the latter to comply with their obligation. 1958. which began constructing the streets. Inc. Lt. who has been physically occupying a middle part thereof. But the seller. Ltd. Philippine Sugar Estates Development Co. ISSUES: Was there a period fixed? RULING: Yes.. Sugar estates. Domingo Church and Convent while the seller for its part will construct streets.. Tuason & Co. by the name of Manuel Abundo. Inc.. Inc. that the buyer will build on the said parcel land the Sto. On May 7.. and instance. and/or to pay damages in the event they failed or refused to perform said obligation. Both buyer and seller know of the presence of squatters that may hamper the construction of the streets by the seller. "reasonable time within which to comply with its obligation to construct and complete the streets. M. Gregorio Araneta. as stipulated in the above-mentioned deed of sale. filed its complaint against J. is unable to finish the construction of the street in the Northeast side because a certain third-party.

par. the Court can not fix a period merely because in its opinion it is or should be reasonable. pars. a "reasonable time. but must set the time that the parties are shown to have intended.‖ It must be recalled that Article 1197 of the Civil Code involves a two-step process. still the amended decision is defective in that no basis is stated to support the conclusion that the period should be set at two years after finality of the judgment. then the court should declare that petitioner had breached the contract. since no circumstances are mentioned to support . This preliminary point settled. The law expressly prescribes that ―the Court shall determine such period as may under the circumstances been probably contemplated by the parties. that it lay within the Court's power to fix the period of performance. 1197. The Court must first determine that "the obligation does not fix a period" (or that the period is made to depend upon the will of the debtor).. Was it within the powers of the lower court to set the performance of the obligation in two years time? NO. the Court must then proceed to the second step. then there was a period fixed. As the record stands. Granting. the trial Court appears to have pulled the two-year period set in its decision out of thin air. the court could not proceed to do so unless the complaint included it as first amended. So that. The list paragraph of Article 1197 is clear that the period can not be set arbitrarily." and all that the court should have done was to determine if that reasonable time had already elapsed when suit was filed if it had passed." but from the nature and the circumstances it can be inferred that a period was intended" (Art. and decide what period was "probably contemplated by the parties" (Do. 3). however.If the contract so provided. the complaint not having sought that the Court should set a period. 1 and 2). Even on the assumption that the court should have found that no reasonable time or no period at all had been fixed (and the trial court's amended decision nowhere declared any such fact) still. ultimately.

Yet. Singson Encarnacion contended that the lease had always and since the beginning been upon a month-tomonth basis. and this very indefiniteness is what explains why the agreement did not specify any exact periods or dates of performance. Plainly. this is not warranted by the Civil Code. ISSUE: Was it tenable for Singson Encarnacion to discontinue the lease of Baldomar and her son? RULING: The continuance and fulfillment of the contract of lease cannot be made to depend solely and exclusively upon the free and uncontrolled choice of the lessees between continuing paying the rentals or not.it. Singson Encarnacio notified Baldomar and her son Fernando to vacate the house because he needed it for his office as a result of the destruction of the building where he had his office before. Does ―reasonable time‖ mean that the date of performance would be indefinite? The Court of Appeals objected to this conclusion that it would render the date of performance indefinite. the circumstances admit no other reasonable view. Lefrando Fernando upon a month-to-month basis. Despite the demand. After Manila was liberated in the last war. BALDOMAR 77 PHIL 470 FACTS: Vicente Singson Encarnacion leased his house to Jacinta Baldomar and her son. completely depriving . SINGSON ENCARNACION VS. the Baldomar and Fernando continued their occupancy. The defense of Baldomar and Fernando was that the contract with Singson Encarnacion authorized them to continue occupancy indefinitely while they should faithfully fulfill their obligation with respect to payment of rentals.

and while the witnesses. the value of certain policies of fire insurance. within the meaning of Article 1256 of the Civil Code. Century (kf) The Court of First Instance of Iloilo rendered a judgment in favor of the plaintiff. its effect is to make the obligation of the insurance company an alternative one. the plaintiff in the instant case. Upon .the owner of all say in the matter. stating which of the two prestations he is disposed to fulfill.000. so long as the lessee elected to continue the lease by continuing the payment of the rentals the owner would never be able to discontinue the lease. Ong vs. the insurance company in this case. that is to say. that is. and now insists that the same must be modified and that it must be permitted to rebuild the house burnt. the lessee could effectively thwart his purpose if he should prefer to terminate the contract by the simple expedient of stopping payment of the rentals. with legal interest thereon from February 28. and that the appellant be relieved from the payment of the sum in which said building was insured. although the owner should desire the lease to continue. when declared proper by a competent court. with the costs. It must be noted that in alternative obligations. and only after said notice shall the election take legal effect when consented by the creditor. The object of this notice is to give the creditor. conversely. 1923. for the reason that the new house would be smaller and of materials of lower kind than those employed in the construction of the house destroyed. If this clause of the policies is valid. opportunity to express his consent. and although the house may be smaller. in accordance with article 1133 of the Civil Code. the record shows that the appellant company did not give a formal notice of its election to rebuild. For if this were allowed. the debtor. it may rebuild the house burnt. subject to the alignment of the street where the building was erected. yet it would be sufficient indemnity to the insured for the actual loss suffered by him. or rebuild it. In the instance case. sentencing the defendant company to pay him the sum of P45. yet the plaintiff did not give his assent to the proposition. speak of the proposed reconstruction of the house destroyed. The appellant contends that under clause 14 of the conditions of the policies. Cedrun and Cacho. that it may either pay the insured value of house. or to impugn the election made by the debtor. or if impugned by the latter. The defense of Baldomar and Fernando would leave to the sole and exclusive will of one of the contracting parties the validity and fulfillment of the contract of lease. The defendant company appealed from this judgment. until payment. must notify the creditor of his election.

COURT OF APPEALS G. L-55138 FACTS: Petitioner Ernesto V. The other defendants were Offshore Catertrade. the lower court rendered its Decision based on the compromise agreement. that the Plaintiff agrees to reduce its total claim of P117. as well as unjust. private respondent Antonio So moved for the reconsideration and/or modification of the aforesaid Order of execution and prayed instead for the "execution of the decision in its entirety against all defendants.00 and defendants agree to acknowledge the validity of such claim and further bind themselves to initially pay out of the total indebtedness of P110. 1980.this point the trial judge very aptly says in his decision: "It would be an imposition unequitable.498.00 on or before December 24. the balance of P55. without offering him an additional indemnity for the difference in size between the two house. which circumstances were taken into account when the insurance applied for by the plaintiff was accepted by the defendant. among others. which stipulates. Ronquillo was one of four (4) defendants for the collection of the sum of P117.000. Johnny Tan and Pilar Tan. to compel the plaintiff to accept the rebuilding of a smaller house than the one burnt.98 plus attorney's fees and costs. or before June 30. On December 13.00 the amount of P55. Upon the defendant’s default. 1979. herein private respondent (then plaintiff) filed a Motion for Execution.498.000." Election alleged by the appellant to rebuild the house burnt instead of paying the value of the insurance is improper. .000. But on January 22.00. 1979. RONQUILLO VS. Inc.95 to only P110.R. 1980. jointly and severally. No. Ronquillo and another defendant Pilar Tan offered to pay their shares of the 55..000 already due. with a lower kind of materials than those of said house.000. defendants individually and jointly agree to pay within a period of six months from January 1980.

In this regard. the credit or debt shall be presumed to be divided into as many equal shares as there are creditors and debtors. or when the law or the nature of the obligation requires solidarity. Article 1207 and 1208 of the Civil Code provides "Art." Clearly then. or the nature or the wording of the obligation to which the preceding article refers the contrary does not appear. If from the law. the defendants obligated themselves to pay their obligation "individually and jointly. The concurrence of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand. was it merely joint. by the express term of the compromise agreement.Petitioner opposed the said motion arguing that under the decision of the lower court being executed which has already become final. Art. ISSUE: What is the nature of the liability of the defendants (including petitioner)." The term "individually" has the same meaning as . consequently each defendant is obliged to pay only his own pro-rata or 1/4 of the amount due and payable. the credits or debts being considered distinct from one another. 1208. the liability of the four (4) defendants was not expressly declared to be solidary. or that each one of the latter is bound to render. or was it several or solidary? RULING: SOLIDARY. entire compliance with the prestation. 1207. subject to the Rules of Court governing the multiplicity of suits. There is a solidary liability only when the obligation expressly so states.

"distinctively". respectively or "severally". after instituting a collection suit based on contract against some or all of them and. the court retains jurisdiction to continue the proceedings and decide the case in respect of the surviving defendants. some or all of its solidary debtors under Article 1216 of the Civil Code — ART. "separately".. the claim shall be filed against the decedent as if he were the only debtor. as he deems fit or convenient for the protection of his interests. A cursory perusal of Section 6. PNB vs. The appellant assails the order of dismissal. in PNB vs. the claim shall be confined to the portion belonging to him. The obligation in the case at bar being described as "individually and jointly". Similarly. An agreement to be "individually liable" undoubtedly creates a several obligation. during its pendency. and if. Rule 86 of the . the death of one defendant deprives the court of jurisdiction to proceed with the case against the surviving defendants."collectively". 6. so long as the debt has not been fully collected. 1216. invoking its right of recourse against one. Asuncion. Independent Planters Association (kf) Appeal by PNB from the Order of the defunct Court of First Instance of Manila dismissing PNB's complaint against several solidary debtors for the collection of a sum of money on the ground that one of the defendants (Ceferino Valencia) died during the pendency of the case (i. after the plaintiff had presented its evidence) and therefore the complaint.e. ISSUE: whether in an action for collection of a sum of money based on contract against all the solidary debtors. without prejudice to the right of the estate to recover contribution from the other debtor.— the obligation of the decedent is solidary with another debtor. some or all of his solidary debtors. being a money claim based on contract. the same is therefore enforceable against one of the numerous obligors. Solidary obligation of decedent. In a joint obligation of the decedent. HELD: It is now settled that the quoted Article 1216 grants the creditor the substantive right to seek satisfaction of his credit from one. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. should be prosecuted in the testate or intestate proceeding for the settlement of the estate of the deceased defendant pursuant to Section 6 of Rule 86 of the Rules of Court which reads: SEC. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others. and a "several obligation" is one by which one individual binds himself to perform the whole obligation. one of the defendants dies.

herein defendant-appellant. Reyers and his wife Emilia T.Revised Rules of Court reveals that nothing therein prevents a creditor from proceeding against the surviving solidary debtors.00 it had executed jointly and severally with them in favor of the Development Bank of the Philippines.' The choice is undoubtedly left to the solidary. he (the creditor) may. debtor. . Section 6. The spouses jointly and severally. Reyes. for the benefit of Felicisimo V. if he so chooses. David. 1984 FACTS: Felicisimo V. executed another indemnity agreement in favor of appellee to assure indemnification of the latter under a homestead bond for the sum of P7. 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. while the latter.‖ commenced. substantive. Reyes. DAVID 133 SCRA 317. jointly and severally to assure indemnification of the latter of whatever liability it may incur in connection with its posting the security bonds to lift the attachments in 2 civil cases instituted for the amount of P60. VS. Rule 86 of the Revised Rules of Court cannot be made to prevail over Article 1216 of the New Civil Code. 000 and P40. executed 2 indemnity agreements in favor of appellee The Imperial Insurance Inc. It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. the former being merely procedural. 500.000. proceed against the surviving solidary debtors without necessity of filing a claim in the estate of the deceased debtors. . November 21. His wife qualified and took her oath of office as the administratix of the said intestate . Said provision gives the creditor the right to 'proceed against anyone of the solidary debtors or some or all of them simultaneously. It is not mandatory for him to have the case dismissed against the surviving debtors and file its claim in the estate of the deceased solidary debtor . creditor to determine against whom he will enforce collection. IMPERIAL INSURANCE INC. Felicisimo later died and Special Proceedings entitled ―In the Matter of the Intestate Estate of Felicisimo V. In case of the death of one of the solidary debtors.

‖ Article 1216 of the Civil Code also states that. appellant signed a joint and several obligation with her husband in favor of herein appellee.estate. have been barred for its failure to file its claims against the estate of the deceased Felicisimo V. Moreover. Under the law and well-settled jurisprudence. As distinguished from a joint obligation where each of the debtor is entitled only for a proportionate part of the debt and the creditor is entitled only to a proportionate part of the credit. 000 under the surety bonds and arrears in premiums thereon. 5) of the Revised Rules of Court? RULING: Yes. judgment was rendered in the two Civil Cases against the spouses. the creditor may bring his action in toto against any of the debtors obligated in solidum. each of the debtors is answerable for the whole obligation with the right to seek contribution from his co-debtors. ―The creditor . in the case of Philippine International Surety vs. A motion to dismiss was filed by the appellant on the ground the plaintiff’s cause of action. In the case at bar. After trial. the latter may demand from either of them the whole obligation. in a solidary obligation the creditor may enforce the entire obligation against one of the debtors.000 and P40. David. if there be any. as a consequence. Gonzales. the court rendered judgment against the herein appellant Emilia T. ―Where the obligation assumed by several persons is joint and several. Appellee made demands on Emilia David to pay the amounts of P60. She contends that appellee’s claim should have been presented according to Rule 86 of the Revised Rules of Court and its failure to do so operates to bar its claim forever. when the obligation is a solidary one. Reyes in due time. Meanwhile. ISSUE: Can the creditor choose to proceed against the surviving solidary debtor instead of bringing an action in accordance with Rule 86 (sec.

together with many others. we do not construe or interpret this law.. ISSUE: Did the court erred in the construction of the contract? HELD: "As for us. The learned trial court decided the case in favor of the defendant upon the ground that the intention of the parties as it appeared from the contract in question was to the effect that the agreement should be good and continue only until the corporation reached a sound financial basis. It does not need it. Edgar & Co. Inc. agreed to take over the business. By applying the law. in our judgment. McCullough & Co. including the plaintiff and the defendant. The first and fundamental duty of courts. as held in Manila Surety & Fidelity Co. instead of instituting a proceeding for the settlement of the deceased debtor wherein his claim would be filed. or otherwise dispose of any part of their present holdings of stock in said John R. Notwithstanding this contract the defendant Fox sold his stock in the said corporation to E. a strong competitor of the said John R. found itself in such condition financially that its creditors. engaged in the retail book and stationery business. Villarama. Lambert vs. incorporate it and accept stock therein in payment of their respective credits. McCullough of the firm of E. in the creditor’s filing of an action against the surviving solidary debtor alone. Either party violating this agreement shall pay to the other the sum of one thousand (P1. and that that event having occurred some time before the expiration of the year mentioned in the contract. is to apply the .. the purpose for which the contract was made and had been fulfilled and the defendant accordingly discharged of his obligation thereunder. vs.000) pesos as liquidated damages. transfer. transfer. Fox 26 phil 588 (kf) This is an action brought to recover a penalty prescribed on a contract as punishment for the breach thereof. Inc. of Manila. Edgar & Co. We apply it. we conserve both provisions for the benefit of litigants. A few days after the incorporation was completed plaintiff and defendant entered into the following agreement: xxx the undersigned mutually and reciprocally agree not to sell. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others. Edgar & Co. so long as the debt has not been fully collected. C. Early in 1911 the firm known as John R. or other disposition be obtained. unless previous consent in writing to such sale.‖ There is nothing improper. The complaint was dismissed upon the merits. C.. till after one year from the date hereof.may proceed against any one of the solidary debtors or some or all of them simultaneously.

140... and is reasonable as to the length of time of the suspension. The judgment is reversed. Gsell vs. The majority of the law need no interpretation or construction. The suspension of the power to sell has a beneficial purpose. is to avoid such necessity. ELEIZEGUI VS MANILA LAWN TENNIS CLUB . and if there were more application and less construction.000. there would be more stability in the law. It is the rule that parties who are competent to contract may make such agreements within the limitations of the law and public policy as they desire. We do not here undertake to discuss the limitations to the power to suspend the right of alienation of stock. limiting ourselves to the statement that the suspension in this particular case is legal and valid. articles 1152. Hoffmeister.. so far as legal results are concerned. In such case the court is authorized to reduce the penalty to the extent of the benefits received by the party enforcing the penalty. What reason can give for refusing to follow the plain words of the men who made the contract? We see none. Whatever the object was in specifying the year. results in the protection of the corporation as well as of the individual parties to the contract. Palacios vs. They require only application. 16 Phil. it was their agreement that the contract should last a year and it was their judgment and conviction that their purposes would not be subversed in any less time." In the case at bar the parties expressly stipulated that the contract should last one year. Indeed one of the primary purposes in fixing a penalty or in liquidating damages. Fornow vs. and that the courts will enforce them according to their terms. They are the very last functions which a court should exercise. the case remanded with instructions to enter a judgment in favor of the plaintiff and against the defendant for P1. No reason is shown for saying that it shall last only nine months. Rep. 1153. 1154. there is no difference between a penalty and liquidated damages. Municipality of Cavite. without costs in this instance. and 1155. 33. In either case the party to whom payment is to be made is entitled to recover the sum stipulated without the necessity of proving damages. In this jurisdiction penalties provided in contracts of this character are enforced . Rep. Construction and interpretation come only after it has been demonstrated that application is impossible or inadequate without them.law.) The only case recognized by the Civil Code in which the court is authorized to intervene for the purpose of reducing a penalty stipulated in the contract is when the principal obligation has been partly or irregularly fulfilled and the court can see that the person demanding the penalty has received the benefit of such or irregular performance. 12 Phil. Rep. 1. and more people would know what the law is. with interest. Koch. In this jurisdiction. 6 Phil. (Civil Code.

967 FACTS: This suit concerns the lease of a piece of land for a fixed consideration and to endure at the will of the lessee. . . The first theory is that which has prevailed in the judgment below." . the law which was in force at the time the contract was entered into (January 25. undoubtedly considers that it is governed by the article relied upon by the plaintiffs. 1890). on the contrary." And such is the theory maintained by the plaintiffs. . . makes it dependent upon the will of the lessee. By the contract of lease the lessee is expressly authorized to make improvements upon the land. in giving to this notice the effect of terminating the lease.G. by making fills. . With respect to the term of the lease the present question has arisen. may terminate the lease so stipulated. upon one month's notice given to the lessee. as appears from the language in which the basis of the decision is expressed: "The court is of the opinion that the contract of lease was terminated by the notice given by the plaintiff on August 28 of last year . in accordance with which the right is reversed to the courts to fix the duration of the term. it is understood to be for years when an annual rental has been fixed. by erecting buildings of both permanent and temporary character." The second clause of the contract provides as follows: "The rent of the said land is fixed at 25 pesos per month. .R. The judge. laying pipes. which expressly rests upon article 1581 of the Civil Code. for months when the rent is monthly. another which. who. as stipulated. which is of the following tenor: "When the term has not been fixed for the lease. In its decision three theories have been presented: One which makes the duration depend upon the will of the lessor. and the third. and making such other improvements as might be considered desirable for the comfort and amusement of the members.

Williamson. the lessors assumed by the contract entered into. If this were so. who takes it on lease . agreed upon in the contract in question? RULING: Yes. . so far as pertaining to the issues. . without altering in the slightest degree the conditions of this contract. even though the estate be sold. . or that. are the following: "First. . notwithstanding these clauses. for all the time the members of the said club may desire to use it . with the force of law. article 1581. . . in connection with article 1569. it can not be said that there is no stipulation with respect to the duration of the lease. a duration. can be applied. The obligations which. They lease the above-described land to Mr. it would be necessary to hold that the lessors spoke in vain that their words are to be disregarded a claim which can not be advanced by the plaintiffs nor upheld by any court without citing the law which detracts all legal force from such words or despoils them of their literal sense. Third. ." In view of these clauses. . . . the owners of the land undertake to maintain the club as tenant as long as the latter shall see fit. .ISSUE: Was there a conventional term.

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