Republic of the Philippines Supreme Court Manila

As culled from the assailed decision dated December 5, 2000 of the Court of Appeals (CA), and from the Court s decision promulgated on October 7, 1996 in G.R. No. 103577,[2] the following are the antecedent facts.
[1]

FIRST DIVISION On January 19, 1985, Romulo A. Coronel, Alarico A. Coronel, Annette A. Coronel, CATALINA BALAIS-MABANAG, assisted by her husband, ELEUTERIO MABANAG, Petitioner, G.R. No. 153142 Present: CARPIO
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Annabelle C. Gonzales, Floraida C. Tupper, and Cielito A. Coronel (Coronels) executed a document entitled receipt of down payment, stipulating that they received from respondent Ramona Patricia Alcaraz (Ramona), through Ramona s mother, respondent Concepcion D. Alcaraz (Concepcion), the sum of P50,000.00 as downpayment on the total purchase price of P1,240,000.00 for their inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City.

- versus -

MORALES, Acting Chairperson, LEONARDO-DE CASTRO, ** PERALTA, BERSAMIN, and *** ABAD, JJ. Promulgated:

March 29, 2010 x-----------------------------------------------------------------------------------------x D ECI S I O N

THE REGISTER OF DEEDS OF QUEZON CITY, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, Respondents.

The receipt of down payment contained other stipulations, as follows: We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title immediately upon our receipt of the down payment above-stated. On our presentation of the TCT already in our name, we will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the [3] P1,190,000.00.

BERSAMIN, J.:

The issue of citizenship of the registered owner of land cannot anymore be raised to forestall the execution of a final and executory judgment where the objecting party had the opportunity to raise the issue prior to the finality of the judgment. The time for assailing the capacity of the winning party to acquire the land was during the trial, not during the execution of a final decision. On February 6, 1985, the property originally registered in the name of the Coronels father (Constancio P. Coronel) was transferred in the name of the Coronels under Transfer Certificate of Title (TCT) No. 327043 of the Registry of Deeds of Quezon City. On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to the petitioner for the higher price of P1,580,000.00 after the latter delivered an initial sum of P300,000.00. For this reason, the Coronels rescinded their contract with Ramona by Antecedents depositing her downpayment of P50,000.00 in the bank in trust for Ramona Patricia Alcaraz.

On February 22, 1985, Concepcion, through one Gloria P. Noel as her attorney-in-fact, filed a complaint for specific performance and damages in her own name in the Regional Trial Court (RTC) in Quezon City against the Coronels, docketed as Civil Case No. Q44134.
[4]

Concepcion subsequently caused the annotation of a notice of lis pendens on TCT No.

331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby cancelled and declared to be without any force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject property, and deliver possession thereof to plaintiff. Plaintiffs claim for damages and attorney s fees, as well as the counterclaims of defendants and intervenors are hereby dismissed. No pronouncement as to costs. So Ordered.

327403.

On April 2, 1985, the petitioner had a notice of adverse claim annotated on TCT No. 327403 in the Registry of Deeds of Quezon City. Upon denial of the motion for reconsideration, the Coronels and the petitioner interposed an appeal to the CA, which promulgated a judgment on December 16, 1991, fully On April 25, 1985, the Coronels executed a deed of absolute sale in favor of the petitioner. upholding the decision of the RTC.

On June 5, 1985, TCT No. 351582 was issued in the name of the petitioner.

Thus, the petitioner and the Coronels appealed the CA judgment to this Court (G.R. No. 103577), which affirmed the CA on October 7, 1996.

It is relevant to mention that on May 24, 1985 the petitioner moved to have her answer in intervention admitted in Civil Case No. Q-44134. Her intervention was allowed on May 31, 1985.
[6] [5]

Thereafter, the decision of the RTC became final and executory.

Acting on the respondents motion for execution, the RTC issued a writ of Earlier, on May 19, 1986, Concepcion sought leave of court to amend the complaint for the purpose of impleading Ramona as a co-plaintiff. The amended complaint naming both Concepcion and Ramona as plaintiffs was attached to the motion. On June 25, 1986, the amended complaint was admitted.
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execution on October 1, 1997. However, the petitioner and the Coronels filed their motion to stay execution and supplemental motion for reconsideration, which the RTC denied on March 10, 1998.

Upon failure of the petitioner and the Coronels to comply with the writ of On March 1, 1989, the RTC rendered its decision,
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disposing:

execution, the RTC approved the respondents motion for appointment of suitable person to execute deed, etc., and ordered on April 8, 1998 the Branch Clerk of the RTC, Branch 83,

WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon, free from all liens and encumbrances, and once accomplished, to immediately deliver said document of sale to plaintiffs, and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No.

Quezon City, to execute the deed of absolute sale in favor of Ramona in lieu of the defendants (i.e., the petitioner and the Coronels).

On May 19, 1998, the petitioner and the Coronels filed in the CA a petition for certiorari assailing the RTC s orders of October 1, 1997 and March 10, 1998, but the CA dismissed the petition on July 30, 1998. Hence, this appeal, in which the petitioner submits that the CA erred in sustaining the On August 21, 1998, the petitioner and the Coronels presented their motion for reconsideration in the CA. registration by the Registrar of Deeds of the deed of absolute sale despite the lack of indication of the citizenship of the buyer of the subject property; and in sustaining the order of the RTC directing the Branch Clerk of Court to execute the deed of absolute salewithout first requiring On September 2, 1998, the RTC held in abeyance the respondents motion reiterating previous motion to resolve respondents motion, whereby the respondents sought an order to direct the petitioner to surrender her TCT No. 331582, and the Registrar of Deeds of Quezon City to cancel the petitioner s copy of said TCT for her failure to comply with the earlier order for her to surrender the TCT to the Registrar of Deeds pending resolution by the CA of the petitioner s motion for reconsideration. The petition lacks merit. A Res judicata barred petitioner s objection the defendants to execute the deed of absolute sale as required by the decision. Ruling Issues

Ultimately, on September 30, 1998, the CA denied the petitioner s motion for reconsideration. In the complaint dated February 22, 1985, respondent Concepcion, as plaintiff, categorically averred that she was a Filipino citizen. The petitioner thus appealed to the Court, which denied her petition for review for being filed out of time. The Court also denied the petitioner s motion for
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The petitioner did not deny or disprove

the averment of Filipino citizenship during the trial and on appeal. The petitioner did not also advert to the issue of citizenship after the complaint was amended in order to implead Ramona as a co-plaintiff, despite the petitioner s opportunity to do so.

reconsiderationon April 21, 1999.

Thereafter, the respondents moved in the RTC for the resolution of their pending motion. After the RTC granted the respondents pending motion on July 29, 1999, the petitioner filed a motion for reconsideration against such order, but the RTC denied her motion on September 23, 1999.

Yet, now, when the final decision of the RTC is already being implemented, the petitioner would thwart the execution by assailing the directive of the RTC for the Branch Clerk of Court to execute the deed of absolute sale and by blocking the registration of the deed of absolute sale in the Registry of Deeds of Quezon City, on the ground that Ramona was disqualified from owning land in the Philippines.

Following the denial of her motion for reconsideration, the petitioner commenced a special civil action of certiorari in the CA to assail the RTC s action (C.A.-G.R. SP No. 55576). However, the CA dismissed her petition through its decision dated December 5, 2000, Rollo, pp. 61-69, and denied her motion for reconsideration on April 16, 2002.
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The petitioner s move was outrightly unwarranted.

the Court catalogued such recourses taken for the petitioner herein in A. Concepcion Alvarez. Arnold V. the parties and their counsel are enjoined to present all available defenses and objections in order that the matter in issue can finally be laid to rest in an appropriate contest before the court. docketed as G.C. Estrella T. defeat. the decision sought to be executed has already gained finality. with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto. Rule 9 of the Rules of Court. It is fundamental that the judgment or final order is. the attorney of the petitioner. It is the State. was incapacitated to purchase the subject property due to the limitations embodied in the 1987 Constitution. and the same issues binds the partiesnot only as to every matter offered and received to sustain or defeat their claims or demands. No. indeed. No. conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding. Catalina Balais-Mabanag. Defenses and objections not pleaded. which has the legal personality and the authority to question the qualification of Ramona Alcaraz to own rural or urban land. The endlessness of litigation can give rise to added costs for the parties. As held by the Supreme Court.[14] this Court had the occasion to hold that a judgment involving the same parties. In the first place. Second: The petitioner cannot now insist that the RTC did not settle the question of the respondents qualifications to own land due to non-citizenship. assisted by her husband Eleuterio Mabanag v.[13] Thus. Without the rule. the court shall dismiss the claim. The prospect of a protracted litigation between the parties annuls the very rationale of every litigation to attain justice. at the latest. In fact. However. being a foreign national. Estrada. p. and can surely contribute to the unwarranted clogging of court dockets. [16] as follows: 1. the same facts. that there is another action pending between the same parties for the same cause. entitled Foronda v.R. et al. SP No. (2a) any other admissible matter that might have been offered for that purpose and all other matters that could have been adjudged in that case. there must be an end to litigation. there will be no end to a litigation. We find the trial court s stand on the matter to be legally unassailable. v. prohibition and mandamus with prayer for temporary restraining order and/or writ of preliminary injunction filed with the CA. The petition was denied. excess or lack of jurisdiction in issuing and/or refusing to stay the execution of its decision. Third: The present recourse has not been the only one taken by the petitioner and her counsel to assail the qualification of Ramona to acquire and own the subject property.R. before the finality of the RTC judgment. Guerrero. Layug. docketed as CA-G. Hon. 2001 by Ricardo A. Guerrero. 65-66). in Gabuya v. with the CA ratiocinating as follows: We are not impressed. borne by necessity. 135820: A special civil action for certiorari. Foronda (an attorney-in-fact of the respondents) against Atty. The respondent put forth the argument that Ramona Patricia Alcaraz. litigating for the same thing and under the same title and in the same capacity. 47710: In every action. al. on the ground that the respondent judge committed grave abuse of discretion. because the dissatisfied litigant may simply raise new or additional issues in order to prevent. pursuant to Section 1. to wit: Section 1. et al. Catalina Balais-Mabanag. but also as to . et. 5469. or delay the implementation of an already final and executory judgment. The petitioner was thereby deemed to have waived the objection. 2. Verily. Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived.First: The petitioner did not raise any issue against Ramona s qualifications to own land in the Philippines during the trial or. [15] an administrative case for disbarment commenced on June 29. or that the action is barred by a prior judgment or by statute of limitations. when a court s judgment or order becomes final and executory it is the ministerial duty of the trial court to issue a writ of execution to enforce its judgment (Rollo. In the second place. The rule is a wise and tested one. when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter. petitioner is not the proper party to question the qualification or eligibility of Ramona Alcaraz. through the Office of the Solicitor General.

Estrella Estrada. Catalina Balais-Mabanag. SP No. The petition was denied for having been filed out of time. In its Order dated July 9. prior to that between petitioners and Catalina B. 3.R. 1999. The CA dismissed the petition on December 5. the court dismissed the case on the grounds of res judicata and forum shopping. questioning the order of the RTC in Civil Case No. the court issued an order dated January 16. 2002 dismissing the complaint finding that the decision in Civil Case No. and pointed out the following: a) On December 5. 1985. 103577 upheld the RTC and the CA when it ruled on October 7. Q-44134 had already been turned over to complainant as attorney-in-fact of defendants Alcarazes. Guerrero on behalf of Catalina Balais-Mabanag on February 1. Hon. Concepcion D. 65783 (Annex 12. SP No. Q-9731268: A complaint for Declaration of Inability to Acquire Real Property and Damages filed in the RTC QC. No. 75911: Appeal filed by Atty. Spouses Eleuterio & Catalina Mabanag v. perfected on February 6. No. ruled: Thus the sale of the subject parcel of land between petitioners and Romana P. Q-01-43396 for Annulment of Title and Deed of Absolute Sale and Damages was dismissed by RTC QC. 7. 2000. Emelita L Mariano. docketed as CA-G. docketed as CA-G. Branch 83. Alcaraz.This petition was filed by the respondent on behalf of his clients asking the Supreme Court to review the decision of the CA dismissing the petition for injunction in CA-G. 1996. assisted by her husband. Emelita L. and the motion for reconsideration therefrom was denied with finality on April 21. docketed as Civil Case No. 47710. assisted by her husband. 1996 that the sale of the subject land between Alcaraz and the Coronels was perfected before the sale between Mabanag and the Coronels.R.[ ] Obviously. was correctly upheld by both the lower courts below. SP No. Guerrero on behalf of Catalina Balais-Mabanag.R. the Twelfth Division of the CA had already affirmed the decision of the RTC that the authority of the Register of Deeds was confined only to the determination of whether all the requisites for registration are complied with. The subsequent motion for reconsideration filed by the respondent on behalf of his clients was denied on June 18. 2000 with the final note. etc. Emelita L Mariano. Eleuterio Mabanag v. they tried to prevent the execution by disqualifying the herein defendant Alcaraz 4. The CA dismissed the petition on June 14. The RTC observed that for failure of the plaintiffs in this case to get a favorable decision from the earlier case. The Register of Deeds of Quezon City.R. 2002. 2003 after Civil Case No. Catalina Balais-Mabanag. CV No. 47710. c) The Third Division of the Supreme Court in G. Alcaraz and Ramona Patricia-Alcarazdocketed as CA-G. Eleuterio Mabanag v. 2001. Alcaraz and Ramona P. Alcaraz. the RTC denied the injunction prayed for for failure of the plaintiff to make at least a prima facie showing of a right to the issuance of the writ. Mabanag on February 18. v. SP No. Q-01-43396: An action for Annulment of Title and Deed of Absolute Sale and Damages with Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction. Catalina Balais-Mabanag. even by the highest court of the land . 2001. 1985. 55576: A special civil action for certiorari. Alcaraz. 5. Acting on the defendant s Special and Affirmative Defenses and Motion to Dismiss.R.R. Concepcion D. Comment) A special civil action for certiorari and prohibition with prayer for temporary restraining order and/or writ of preliminary injunction filed by Atty. et al. 1999. et al. ordering Balais-Mabanag to surrender the owner s duplicate copy of TCT No. assisted by her husband. Alcaraz and Ramona P. Ramona Patricia Alcaraz and the Register of Deeds for Quezon City docketed as Civil Case No. directly or indirectly. In its Order dated March 20. to wit: The Supreme Court Third Division as well as in G.R. Catalina Balais-Mabanag. Branch 80. Concepcion D. To authorize the Register of Deeds to determine whether Ramona Alcaraz was qualified to own real property in the Philippineswas to clothe the Register of Deeds with judicial powers that only courts could exercise. acting on the injunctive aspect of the case. b) The issue as to whether Ramona Alcaraz was qualified to own real property had been passed upon by the Third Division of the CA in CA-G. Q-44134. the lower court s judgment has become final and executory as per Entry of Judgment issued by the Supreme Court. 103577. 331582 to the Alcarazes. Mariano et al. 6. on October 7. Eleuterio Mabanag v. It is axiomatic that final and executory judgment can no longer be attacked by any of the parties or be modified.

identity of the subject matter. should be conclusive upon the parties and those in privity with them in law or estate. and leading to his suspension from the practice of law for two years. be permitted to litigate the same issue more than once. exercising reasonable diligence.Under the doctrine of res judicata. a final judgment or decree on the All the aforestated recourses have had the uniform result of sustaining the right of Ramona to acquire the property. and identity of cause of action. the following requisites must concur: (a) the former judgment must be final. might have brought forward at the time. or even accident. may attack the title of an alien transferee of land. [22] B Petitioner lacked the capacity to institute suit The guiding principle of the doctrine of res judicata was formulated by Vice Chancellor Wigram in an English case circa 1843. so long as it remains For res judicata to bar the institution of a subsequent action. the decision that voids or annuls their right of ownership over the subject land will not inure to the benefit of the petitioner. the court requires the parties to that litigation to bring forward their whole case. it is nonetheless correct to hold that only the Government. which warranted a finding against Atty. and of adjudication by. 185. not only to points which the court was actually required by the parties to form an opinion and pronounce a judgment. and which the parties. and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest. and to avoid stale litigations as well as to enable the defendant to know the extent of the claims being made arising out of the same single incident. Although the law does not categorically state that only the Government. not against any individual. (c) it must be a judgment on the merits. The plea of res judicata applies. only because they have. and that in the event that the transferee is adjudged to be not a Filipino citizen. [21] The foundation principle upon which the doctrine rests is that the parties ought not to Such result fully affirms that the petitioner s objection is now barred by res judicata. even assuming that Ramona was legally disqualified from owning the subject property. but which was not brought forward. but to every point which properly belonged to the subject of litigation. the affected property reverts to the State.[19] It should also be pointed out that the petitioner was not the proper party to challenge Ramona s qualifications to acquire land. thus: xxx that where a given matter becomes the subject of litigation in. [23] the Solicitor General or his representative shall institute escheat proceedings against its violators. Batas Pambansa Blg. The purpose of the doctrine is two-fold to prevent Herein. (b) it must have been rendered by a court having jurisdiction of the subject matter and the parties. 185. except in special cases. a court of competent jurisdiction. through the Solicitor General. [20] . Instead. The doctrine is also known as estoppel per rem judicatam and involves both cause of action estoppel and issue estoppel. therefore. [17] merits rendered by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits and on all points and matters determined in the previous suit. Under Section 7. omitted part of their case. from negligence. through the Solicitor General. [18] unreversed. inadvertence. not to the previous owner or any other individual. This limitation is based on the fact that the violation is committed against the State. unnecessary proceedings involving expenses to the parties and wastage of the court s time which could be used by others. has the personality to file a case challenging the capacity of a person to acquire or to own land based on non-citizenship. Guerrero of resorting to forum shopping. that when a right or fact has been judicially tried and determined by a court of competent jurisdiction. and (d) there must be between the first and second actions identity of parties. the subject property will be escheated in favor of the State in accordance with Batas Pambansa Blg.

to delay the inevitable execution of the judgment warranted the RTC s directing the Branch Clerk of Court execute the deed of absolute sale to implement the judgment. or. and to maintain only such actions as appear to him to be just and are consistent with truth and honor. Execution of judgments for specific act. In filing multiple petitions before various courts concerning the same subject matter. [24] and that her non-compliance then justified the RTC s order to the Branch Clerk of Court to execute the deed of absolute sale to implement the final judgment rendered in G. An important factor in determining the existence of forum shopping is the vexation caused to the courts and the parties-litigants by the filing of similar cases to claim substantially the same reliefs. a lawyer has the duty to assist in the speedy and efficient administration of justice. We note that while lawyers owe their entire devotion to the interest of their clients and zeal in the defense of their client s right. which shall have the force and effect of a conveyance executed in due form of law. and is enjoined from unduly delaying a case by impeding execution of a judgment or by misusing court processes. or when he institutes two or more actions or proceedings grounded on the same cause to increase the chances of obtaining a favorable decision. Such filing of multiple petitions constitutes abuse of the Court s processes and improper conduct that tends to impede. either simultaneously or successively. vesting title. In A. bound to exert every effort to assist in the speedy and efficient administration of justice. or to deliver deeds or other documents. the deed of absolute sale executed by the Branch Clerk of Court to implement the judgment was void. the respondent violated Canon 12 of the Code of Professional Responsibility. If a judgment directs a party who execute a conveyance of land or personal property. it should not be at the expense of truth and the administration of justice. been clearly established that in filing such numerous petitions in behalf of his client. (10a) Indeed. while a lawyer owes fidelity to the cause of his client. No. 5469. as a result of an adverse opinion in one forum. which provides that a lawyer shall exert every effort and consider it his duty to assist in the speedy and efficient . thus. The fact that the petitioner and her counsel maneuvered to thwart. hence. or other specific acts. obstruct and degrade the administration of justice and will be punished as contempt of court. the court in lieu of directing a conveyance thereof may be an order divest the title of any party and vest it in others. the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done shall have like effect as if done by the party. If real or personal property is situated within the Philippines. delivery of deeds. they should not forget that they are. Needless to add. [25] the Court observed as follows: We do not agree. R. and a demand for her compliance be first made. the respondent thereby engaged in forum shopping. and the party fails to comply within the time specified. It has. the lawyer who files such multiple or repetitious petitions (which obviously delays the execution of a final and executory judgment) subjects himself to disciplinary action for incompetence (for not knowing any better) or for willful violation of his duties as an attorney to act with all good fidelity to the courts.C Deed of absolute sale executed by Branch Clerk of Court was valid D A Word of Caution The petitioner contends that the RTC did not see to it that the writ of execution be first served on her. first and foremost. No. at least. The CA found that it was the petitioner who did not comply with the notice of the sheriff of the implementation of the judgment through the writ of execution. (a) Conveyance. The essence of forum shopping is the filing of multiple suits involving the same parties for the same cause of action. officers of the court. Under the Code of Professional Responsibility. The RTC s effort to implement the judgment could not be stymied by the petitioner s deliberate refusal to comply with the judgment. for the purpose of obtaining a favorable judgment. 103577. to wit: Section 10. It exists when. which move of the trial court was precisely authorized by Rule 39 of the Rules of Court.C. or to perform any other specific act in connection therewith. Such deliberate refusal called for the RTC to order the Branch Clerk of Court to execute the deed of absolute sale in favor of Ramona. a party seeks a favorable opinion in another.

as well as a lawyer s mandate to delay no man for money or malice. 2000 promulgated in C.04 of the Code. Costs to be paid by the petitioner. and the decision dated December 5. Thus. 55576 is affirmed. SP No.administration of justice. this decision becomes a good occasion to warn both the petitioner and her attorney that another attempt by them to revive the issue of Ramona s lack of qualification to own the land will be swiftly and condignly sanctioned. WHEREFORE. but also to the petitioner as the client whom he represented. The Court reminds that its foregoing observations on the deleterious effects of forum shopping did not apply only to Atty. Guerrero.A.-G.02 and Rule 12. the petition for review on certiorari is denied. . He also violated Rule 12.R.

But the period for bringing an action for the revocation of the donation has prescribed. The complaint in this action was presented July 5. So ordered. such condition cannot be a condition precedent. 1921. 1926 Concepcion Cirer and James Hill made the sale of this parcel to the plaintiff. PROVINCE OF TARLAC. when a condition is imposed. Meanwhile nothing is acquired and there is only an expectancy of right. The lower court dismissed the complaint. Concepcion Cirer and James Hill sold this parcel to the herein plaintiff George L. in order to consider it revoked. the owners of parcel of land No. Jos. it is only by virtue of the sale of this parcel made by Concepcion Cirer and James Hill in his favor on January 15.defendants-appellees. It is true that the donation might have been revoked for the causes. This parcel having been donated by Concepcion Cirer and James Hill to the municipality of Tarlac. Even supposing that causes existed for the revocation of this donation. the compliance of which cannot be effected except when the right is deemed acquired. and JAMES HILL. the municipality of Tarlac. Under the law in force (sec. The parcel thus donated was later registered in the name of the donee. 646. 1921. the corresponding certificate of title having been issued to it. No. The allegation. The donation was accepted by Mr. brought this action against the Province of Tarlac. CONCEPCION CIRER. Parks. however. L-24190 July 13. still. the non-compliance thereof is sufficient cause for the revocation of the donation. and one year for the revocation by reason of ingratitude. The action for the revocation of the donation for this cause arose on April 19.Republic of the Philippines SUPREME COURT Manila EN BANC G. by reason of this transfer. That this action is prescriptible. The donee could not do any work on the donated land if the donation had not really been effected. it was necessary. the municipality of Tarlac. Code of Civ. Consequently. but that sale cannot have any effect. in any event. her husband. J. the condition not having been complied with. or that it had been judicially decreed. but the fact is that it was not revoked when . On January 15. more than ten years after this cause accrued. Wolfson for appellant. donated it perpetually to the municipality of Tarlac. that is six months after the ratification of the instrument of donation of October 18. It is true that this condition has not been complied with. and the transfer certificate issued to the Province of Tarlac cancelled. providing a special period of five years for the revocation by the subsequent birth of children (art. 1910. Provincial Fiscal Lopez de Jesus for the Province and Municipality of Tarlac. Parks. if any. with the costs against the appellant. that the transfer of the same by the municipality of Tarlac to the Province of Tarlac be annulled. AVANCEÑA. Proc. the work to commence in both cases within the period of six months from the date of the ratification by the partes of the document evidencing the donation. C. Consequently. 1923. But the appellant contends that a condition precedent having been imposed in the donation and the same not having been complied with. that it is a condition precedent is erroneous. 1911.) the period of prescription of this class of action is ten years. there is no doubt. provided by the law. If he has any. George L. the municipality of Tarlac transferred the parcel to the Province of Tarlac which. The appellant refers to the condition imposed that one of the parcels donated was to be used absolutely and exclusively for the erection of a central school and the other for a public park. 647. even supposing that it was not a condition precedent but subsequent. the donation never became effective. 1924. alleging that the conditions of the donation had not been complied with and invoking the sale of this parcel of land made by Concepcion Cirer and James Hill in his favor. Civil Code). when the sale was made Concepcion Cirer and James Hill were no longer the owners of this parcel and could not have sold it to the plaintiff. the municipality of Tarlac. because it would be an invasion of another's title. On August 24. 1910. Civil Code). work on the same to commence within six months from the date of the ratification of the donation by the parties. N. By virtue of the foregoing. If no special period is provided for the prescription of the action for revocation for noncompliance of the conditions of the donation (art. PARKS. under certain conditions specified in the public document in which they made this donation. The appellant also contends that. We find no merit in this contention. None of these circumstances existed when Concepcion Cirer and James Hill sold this parcel to the plaintiff. Santiago de Jesus in the same document on behalf of the municipal council of Tarlac of which he was the municipal president. applied for and obtained the registration thereof in its name. This is correct. The plaintiff. it is because in this respect the donation is considered onerous and is governed by the law of contracts and the general rules of prescription. the judgment appealed from is affirmed. 2 referred to in the complaint.R. Province of Tarlac. the law itself recognizes the prescriptibility of the action for the revocation of a donation.: On October 18. plaintiff-appellant. GEORGE L. The characteristic of a condition precedent is that the acquisition of the right is not effected while said condition is not complied with or is not deemed complied with. for the land would have continued to belong to the donor so long as the condition imposed was not complied with. MUNICIPALITY OF TARLAC. 43. nor could the latter have acquired it from them. could not be complied with except after giving effect to the donation. There is no legal provision which excludes this class of action from the statute of limitations. The plaintiff has no right of action. In the present case the condition that a public school be erected and a public park made of the donated land. And not only this. No appearance for the other appellees. Concepcion Cirer and James Hill and prayed that he be declared the absolute owner entitled to the possession of this parcel. Concepcion Cirer and James Hill. the title to the property was transferred to the municipality of Tarlac. either that the revocation had been consented to by the donee. which donation was accepted by the latter. vs.

Sr. J. private respondents herein. 2. where Don Ramon Lopez donated the subject parcel of land to petitioner but imposed an obligation upon the latter to establish a medical college thereon. The court a quo further directed petitioner to execute a deed of the reconveyance of the property in favor of the heirs of the donor. that it did not sell. and the said college shall be under obligation to erect a cornerstone bearing that name. LOPEZ. 3174-B. for which Transfer Certificate of Title No. (b) in holding that the issue of prescription does not deserve "disquisition. transfer or convey it to any third party. construct a children's playground and open streets on the land was considered an onerous 3 donation.." and. The appellate court also found that while the first condition mandated petitioner to utilize the donated property for the establishment of a medical school. 3. who are the heirs of Don Ramon Lopez. petitioner. that it did not violate any of the conditions in the deed of donation because it never used the donated property for any other purpose than that for which it was intended. one executed for a valuable consideration which is considered the equivalent of the donation itself. until a period was fixed for the fulfillment of the condition. A clear perusal of the conditions set forth in the deed of donation executed by Don Ramon Lopez. the donor did not fix a period within which the condition must be fulfilled. respondents. 112127 July 17. The said land shall be called "RAMON LOPEZ CAMPUS".: CENTRAL PHILIPPINE UNIVERSITY filed this petition for review on certiorari of the decision of the Court of Appeals which reversed that of the Regional Trial Court of Iloilo City directing petitioner to reconvey to private respondents the property donated to it by their predecessorin-interest. filed an action for annulment of donation.. who was then a member of the Board of Trustees of the Central Philippine College (now Central Philippine University [CPU]). Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the annotations at the back of petitioner's certificate of title were resolutory conditions breach of which should terminate the rights of the donee thus making the donation revocable. FRANCISCO N. No. 1995 CENTRAL PHILIPPINE UNIVERSITY. 3174-B-1 of the subdivision plan Psd-1144. the appellate court rendered its decision reversing the appealed decision and remanding the case to the court of origin for the determination of the time within which petitioner should comply with the first condition annotated in the certificate of title. executed a deed of donation in favor of the latter of a parcel of land identified as Lot No. gives us no alternative but to conclude that his donation was onerous. G. A gift of land to the City of Manila requiring the latter to erect schools. the trial court held that petitioner failed to comply with the conditions of the donation and declared it null and void. DE LOPEZ. The land described shall be utilized by the CPU exclusively for the establishment and use of a medical college with all its buildings as part of the curriculum.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION On 31 May 1989. Private respondents also argued that petitioner had in fact negotiated with the National Housing Authority (NHA) to exchange the donated property with another land owned by the latter.g. In its answer petitioner alleged that the right of private respondents to file the action had prescribed. . reconveyance and damages against CPU alleging that since 1939 up to the time the action was filed the latter had not complied with the conditions of the donation. and. REDAN LOPEZ AND REMARENE LOPEZ. BELLOSILLO. On 31 May 1991. The said college shall not sell. vs. Thus. COURT OF APPEALS. e. hence.. T-3910-A was issued in the name of the donee CPU with the following annotations copied from the deed of donation 1. then a portion of Lot No. namely. CECILIA P. the late Don Ramon Lopez. petitioner could not be considered as having failed to comply with its part of the bargain. Similarly. when a donation imposes a burden equivalent to the value of the donation. REMEDIOS FRANCO.. Petitioner now alleges that the Court of Appeals erred: (a) in holding that the quoted annotations in the certificate of title of petitioner are onerous obligations and resolutory conditions of the donation which must be fulfilled non-compliance of which would render the donation revocable. We find it difficult to sustain the petition. (c) in remanding the case to the trial court for the fixing of the period within which 2 petitioner would establish a medical college. Sr. Any net income from the land or any of its parks shall be put in a fund to be known as the "RAMON LOPEZ CAMPUS FUND" to be used for improvements 1 of said campus and erection of a building thereon. transfer or convey to any third party nor in any way encumber said land.R. the donation must be for an onerous consideration. VDA. Sometime in 1939. private respondents. Sr.

. to make the donation in its favor forever valid. revoked so that petitioner as donee should now return the donated property to the heirs of the donor. Since the time within which the condition should be fulfilled depended upon the exclusive will of the petitioner. private respondents herein. since the questioned deed of donation herein is basically a gratuitous one. Quiason and Kapunan.. it has been held that its absolute acceptance and the acknowledgment of its obligation provided in the deed of donation were sufficient to prevent the statute of limitations from barring the action of private respondents upon the original contract which was the deed of 6 donation. there is no more obstacle for the court to decree the rescission claimed. the decision of the Regional Trial Court of Iloilo. 1197 of the Civil Code applies. I beg to disagree. This general rule however cannot be applied considering the different set of circumstances existing in the instant case. JJ. Thus. Consequently. of 31 May 1991 is REINSTATED and AFFIRMED. Hence. petitioner is directed to reconvey to private respondents Lot No. In cases where there is no special provision for such computation. the donation may now be revoked and all rights which the donee may have acquired under it shall be deemed lost and extinguished. Separate Opinions DAVIDE. the time from which the cause of action accrued for the revocation of the donation and recovery of the property donated cannot be specifically determined in the instant case. 1181 of the Civil Code. J. before the donee could become the owner of the land. the condition imposed was not a condition precedent or a suspensive condition but a resolutory one. by means of reconveyance. there is no more need to fix the duration of a term of the obligation when such procedure would be a mere technicality and formality and would serve no purpose than to 9 delay or lead to an unnecessary and expensive multiplication of suits. for all purposes. In this case. SO ORDERED. or that which 7 should not have been done is done. shall depend upon the happening of the event which constitutes the condition. and the decision of the Court of Appeals of 18 June 1993 is accordingly MODIFIED. recourse must be had to the rule that the period must be counted from the day on which the corresponding action could have been instituted. A cause of action arises when that which should have been done is not done. Moreover. on conditional obligations. doubts referring to incidental circumstances of a gratuitous contract should be resolved in favor of the 10 least transmission of rights and interests. T3910-A within thirty (30) days from the finality of this judgment. 4 It is not correct to say that the schoolhouse had to be constructed before the donation became effective. petitioner has failed to comply with its obligation as donee. the building of a medical school upon the land donated. But. when one of the obligors cannot comply with what is incumbent upon him. which provides that the courts may fix the duration thereof because the fulfillment of the obligation itself cannot be demanded until after the court has fixed the period for compliance therewith and such period has arrived. Petitioner has slept on its obligation for an unreasonable length of time. Costs against petitioner. WHEREFORE. that is. Beyond that. the general rule provided in Art. such as what obtains in the instant case.. The period of time for the establishment of a medical college and the necessary buildings and improvements on the property cannot be quantified in a specific number of years because of the presence of several factors and circumstances involved in the erection of an educational institution. concur. The donation had to be valid before the fulfillment of the condition. when a person donates land to another on the condition that the latter would build upon the land a school. Br. building requirements and property restrictions which are beyond the control of the donee. In the absence of any just cause for the court to determine the period of the compliance. the acquisition of rights. If there was no fulfillment or compliance with the condition. . 8 I agree with the view in the majority opinion that the donation in question is onerous considering the conditions imposed by the donor on the donee which created reciprocal obligations upon both parties. the starting point begins with the expiration of a reasonable period and opportunity for petitioner to fulfill what has been charged upon it by the donor. The claim of petitioner that prescription bars the instant action of private respondents is unavailing. Finally. 1191 of the Civil Code. unfortunately. the obligee may seek rescission and the court shall decree the same unless there is just cause authorizing the fixing of a period. It is the legal possibility of bringing the action which determines the starting point for the computation of the period. otherwise. When petitioner accepted the donation. it bound itself to comply with the condition thereof. Moreover. it would be invading the property 5 rights of the donor. dissenting: Thus. i. 3174-B-1 of the subdivision plan Psd-1144 covered by Transfer Certificate of Title No. The condition imposed by the donor. Records are clear and facts are undisputed that since the execution of the deed of donation up to the time of filing of the instant action. it is only just and equitable now to declare the subject donation already ineffective and.. JR. Hence. as well as the extinguishment or loss of those already acquired. More than a reasonable period of fifty (50) years has already been allowed petitioner to avail of the opportunity to comply with the condition even if it be burdensome.Under Art. 34.e. depended upon the exclusive will of the donee as to when this condition shall be fulfilled. when the obligation does not fix a period but from its nature and circumstances it can be inferred that a period was intended. such as government laws and regulations pertaining to education. it failed to do so. under Art.

A more careful reading of this Court's decision would reveal that nowhere did we say. In one part. It seems that the "conditions" imposed by the donor and as the word is used in the law of donations is confused with "conditions" as used in the law of obligations. In Barretto vs. give us no alternative but to conclude that his donation was onerous. (emphasis supplied) Yet. It is incorrect to say that the "conditions" of the donation there or in the present case are resolutory conditions because. It speaks of a contract for a sum of money where the debtor herself imposed a condition which will determine when she will fulfill her obligation to pay the creditor. It is also important to fix the duration or period for the performance of the conditions/obligations in the donation in resolving the petitioner's claim that prescription has already barred the present action. There is a need to fix the duration of the time within which the conditions imposed are to be fulfilled. that would mean that upon fulfillment of the conditions. charges or burdens imposed by the donor upon the donee and which would characterize the donation as onerous. Sr. the fulfillment. since the questioned deed of donation herein is basically a gratuitous one. thus. are the obligations imposed by the donor. The conditions/obligations imposed by the donor herein are subject to a period. Reliance on the case of Parks vs. making the fulfillment of her obligation dependent upon her will. still finds 5 application in the present case. the conditions imposed by Don Ramon Lopez upon the donee are the very obligations of the donation to build the medical college and use the property for the purposes specified in the deed of donation. has no fixed period in which the condition should be fulfilled. Tolentino. I disagree once more with the ruling of the majority that the action of the petitioners is not barred by the statute of limitations. Third. Don Ramon Lopez could not have intended his property to remain idle for a long period of time when in fact. 1 (emphasis supplied) Clearly then. 3 . e. Thus. The pertinent portion thereof reads: Finally. it can be inferred that a period was contemplated by the donor. the provisions of what is now Article 1197 (then Article 1128) are applicable and it is the duty of the court to fix a suitable time for its fulfillment. for the courts to determine. performance. is a 4 resolutory condition. to wit: The word "conditions" in this article does not refer to uncertain events on which the birth or extinguishment of a juridical relation depends. the rights already acquired will be extinguished. but in its broadest sense. City of Manila. he specifically burdened the donee with the obligation to set up a medical college therein and thus put his property to good use. What that reasonable time is. Indeed. however. doubts referring to incidental circumstances of a gratuitous contract should be resolved in favor of the least transmission of rights and interest . There is no conditional obligation to speak of in this case.. (emphasis supplied) Second. but it is more properly called a "modal donation. In fact. Although it is admitted that the fulfillment of the conditions/obligations of the present donation may be dependent on the will of the donee as to when it will comply therewith. quite obviously. It is believed that the donee was not meant to and does not have absolute control over the time within which it will perform its obligations. from the nature and circumstances of the conditions/obligations of the present donation. It must still do so within a reasonable time. Arturo M.g. Obviously. The conditions imposed by the donor Don Ramon Lopez determines neither the existence nor the extinguishment of the obligations of the donor and the donee with respect to the donation. though. when the law and the deed of donation speaks of "conditions" of a donation. applying Article 1181 of the Civil Code. as the Civil Code would define a conditional 2 obligation. under the circumstances. . It is used. I cannot subscribe to the view that the provisions of Article 1197 cannot be applied here. for the reasons stated above. although made almost 90 years ago. whether explicitly or impliedly. the discussion on conditional obligations is unnecessary. when a donation imposes a burden equivalent to the value of the donation . states clearly the context within which the term "conditions" is used in the law of donations. In his annotation of Article 764 of the Civil Code on Donations. A clear perusal of the conditions set forth in the deed of donation executed by Don Ramon Lopez. which also has a condition imposed to build a school and a public park upon the property donated. In the present case. onerous.First of all. but is used in the vulgar sense of obligations or charges imposed by the donor on the donee. on page 4 it states: We find it difficult to sustain the petition. It is very clear that those obligations are unconditional. . Rama. one executed for a valuable consideration which is considered the equivalent of the donation itself. existence or extinguishment of which is not dependent on any future or uncertain event or past and unknown event. . what are referred to are actually the obligations. it is more accurate to state that the conditions here are not resolutory conditions but. the rights of the donee as such will be extinguished and the donation will be revoked. What the majority opinion probably had in mind was that the conditions are resolutory because if they are notcomplied with. What we have here. may I point out an inconsistency in the majority opinion's description of the donation in question. To my mind. There is misplaced reliance 6 again on a previous decision of this Court in Osmeña vs.. in the last paragraph of page 8 it states that the donation is basically a gratuitous one. we said that when the contract of donation. that the donation in that case. The establishment of the medical college as the condition of the donation in the present case is one such prestation. is not a contract for a sum of money but a donation where the donee has not imposed any conditions on the fulfillment of its obligations. Province of Tarlac as cited on page 5 of the majority opinion is erroneous in so far as the latter stated that the condition in Parks is a resolutory one and applied this to the present case. the donation is. citing the well-known civilists such as Castan. as the one involved therein. Thus. That case does not speak of a deed of donation as erroneously quoted and cited by the majority opinion. . not in its technical or strict legal sense. and Colin & Capitant. that could not have been the intention of the parties." A modal donation is one in which the donor imposes a prestation upon the donee. . this did not arise out of a condition which the donee itself imposed. it says that the donation in question is onerous. Perez Gonzalez and Alguer. I draw this conclusion based on our previous ruling which.

may apply. there is no doubt. In the light of the above. on this point. 647. dissents . the rules on contracts and the general rules on prescription and not the rules on donations are applicable in the case at bar. . and that is for the courts to do as reposed upon them by Article 1197. [that] this action [for the revocation of the donation] is prescriptible.the mere fact that there is no time fixed as to when the conditions of the donation are to be fulfilled does not ipso facto mean that the statute of limitations will not apply anymore and the action to revoke the donation becomes imprescriptible. I register my dissent. 764]. Accordingly. But we must not lose sight of the fact that it is still a donation for which this Court itself applied the pertinent law to resolve situations such as this. As to when this exactly is remains to be determined. 763]. from the expiration of the time within which the donee must comply with the conditions/obligations of the donation. actions for the revocation of a donation must be brought within four (4) years from the non-compliance of the conditions of the donation. For the reasons expressed above. in De Luna v. the decision of the Court of Appeals must be upheld. except its ruling that the conditions of the donation are resolutory. That the action to revoke the donation can still prescribe has been the pronouncement of this Court as early as 1926 in the case of Parks which. It refers to the prescription of an action upon a written contract. by reason of ingratitude. There is no legal provision which excludes this class of action from the statute of limitations. If no special period is provided for the prescription of the action for revocation for noncompliance of the conditions of the donation [Art. now Art. More recently. However. And not only this. and that is. Admittedly. . providing a special period of [four] years for the revocation by the subsequent birth of children [Art. Abrigo. being one involving a contract. the law itself recognizes the prescriptibility of the action for the revocation of a donation.. it is Our opinion that said article does not apply to onerous donations in view of the specific provision of Article 733 providing that onerous donations are governed by the rules on contracts. Padilla. and . which is what the deed of an onerous donation is. J. the donation now in question is an onerous donation and is governed by the law on contracts (Article 733) and the case of Osmeña. 8 this Court reiterated the ruling in Parks and said that: It is true that under Article 764 of the New Civil Code. 646. There. now Art. finds relevance in this case. it is because in this respect the donation is considered onerous and is 7 governed by the law of contracts and the general rules of prescription. The prescriptive period is ten years from the time the cause of action accrues. this Court said. The law applied in both cases is Article 1144(1).

DEMETRIO QUIJADA. C) of the two-hectare parcel of land subject of the case in favor of the Municipality of Talacogon. the Sangguniang Bayan of the municipality of Talacogon enacted a resolution reverting the two (2) hectares of land donated back to the donors (Exh. recovery of possession and ownership of parcels of land with claim for attorney's fees and damages. 4. December 4.00 representing attorney's fees. 5) ordering the Defendants to pay Plaintiffs. the supposed sale is null and void. EULALIO QUIJADA. 1962. 2) ordering any person acting in Defendants' behalf to vacate and restore the peaceful possession of the land in question to Plaintiffs. viewed from the above perceptions. secondly.SECOND DIVISION [G. REYNELDA QUIJADA. Rollo. 3) ordering the cancellation of the Deed of Sale executed by the late Trinidad Quijada in favor of Defendant Regalado Mondejar as well as the Deeds of Sale/Relinquishments executed by Mondejar in favor of the other Defendants. conveyed. On April 5. Talacogon. 1209 in the name of Trinidad Quijada. On July 29. and WARLITO QUIJADA. 126444. RODULFO GOLORAN. Trinidad sold one (1) hectare of the subject parcel of land to defendant-appellant Regalado Mondejar (Exh. de Sequeña and Paz Corvera Cabiltes and brother Epapiadito Corvera executed a conditional deed of donation (Exh. In 1987. DECISION MARTINEZ. transferred or disposed of the property in question to any person or entity much less to Regalado Mondejar save the donation made to the Municipality of Talacogon in 1956. p. . 8). As affirmative and/or special defense. 41). F). Efren Guden (Exh. J. in their answer claimed that the land in dispute was sold to Regalado Mondejar. 5). CRESENTE QUIJADA. the proposed provincial high school having failed to materialize. CELSO ABISO. filed a complaint against private respondents for quieting of title. ALBERTO ASIS." The dispositive portion of the trial court's decision reads: "WHEREFORE. the heirs of Trinidad. In 1980. No. SEGUNDINO RAS. 39) and. that at the time of the alleged sale to Regalado Mondejar by Trinidad Quijada. jointly and severally. COURT OF APPEALS. Trinidad verbally sold the remaining one (1) hectare to defendant-appellant (respondent) Regalado Mondejar without the benefit of a written deed of sale and evidenced solely by receipts of payment. p. the scale of justice having tilted in favor of the plaintiffs.00 as expenses of litigation. Rollo. vs. Trinidad was one of the heirs of the late Pedro Corvera and inherited from the latter the two-hectare parcel of land subject of the case. 1967 and 1968. petitioners. plaintiffs-appellees (petitioners) filed this action against defendants-appellants (respondents). and NESTOR MAGUINSAY. "The court a quo rendered judgment in favor of plaintiffs-appellees (petitioners): firstly because 'Trinidad Quijada had no legal title or right to sell the land to defendant Mondejar in 1962. and 7) ordering Defendants to pay the sum of P30. respondents. the same not being hers to dispose of because ownership belongs to the Municipality of Talacogon' (Decision. dismissed for failure to prosecute (Exh. as heirs of the late Trinidad Quijada. Rodolfo Goloran (Exh. the amount of P10.000.000. de Quijada. who at that time was already dead. the land still belongs to the Municipality of Talacogon. D). ERNESTO GOLORAN. 1). "Defendants-appellants (respondents). the one (1) hectare on July 29. FERNANDO BAUTISTA. that the deed of sale executed by Trinidad Quijada in favor of Mondejar did not carry with it the conformity and acquiescence of her children. REGALADO MONDEJAR. on the other hand. Apparently. ANTONIO MACASERO. ELIUTERIA QUIJADA. ALFONSO QUIJADA. 7) and Ernesto Goloran (Exh. 6) ordering Defendants to pays the amount of P8. judgment is. p. Trinidad Quijada together with her sisters Leonila Corvera Vda. In the meantime.00 representing moral damages. defendants-appellants (respondents) alleged that plaintiffs' action is barred by laches or has prescribed. which is materially the same as that found by the trial court: "Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda. Subsequently. filed a complaint for forcible entry (Exh. 1962. 6. defendant-appellant (respondent) Regalado Mondejar sold portions of the land to defendants-appellants (respondents) Fernando Bautista (Exh.R. situated in the barrio of San Agustin. which complaint was.000. plaintiffs-appellees (petitioners) alleged that their deceased mother never sold. The suit was premised on the following facts found by the Court of Appeals. 1998] "On July 5. p. more so that she was already 63 years old at the time. 1966. 1956.: Petitioners. 6). E) against defendant-appellant (respondent) Regalado Mondejar. Agusan del Sur. and a [1] widow (Decision. 1988. as it is hereby rendered: 1) ordering the Defendants to return and vacate the two (2) hectares of land to Plaintiffs as described in Tax Declaration No. and the remaining one (1) hectare on installment basis until fully paid. however. In the complaint. the condition being that the parcel of land shall be used solely and exclusively as part of the campus of the proposed provincial high school in Talacogon. hence. Trinidad remained in possession of the parcel of land despite the donation. 4) ordering Defendants to remove their improvements constructed on the questioned lot.

SO ORDERED."[2] On appeal, the Court of Appeals reversed and set aside the judgment a quo ruling that the sale made by Trinidad Quijada to respondent Mondejar was valid as the4 former retained an inchoate interest on the lots by virtue of the automatic reversion clause in the deed of donation.[4] Thereafter, petitioners filed a motion for reconsideration. When the CA denied [5] their motion, petitioners instituted a petition for review to this Court arguing principally that the sale of the subject property made by Trinidad Quijada to respondent Mondejar is void, considering that at that time, ownership was already transferred to the Municipality of Talacogon. On the contrary, private respondents contend that the sale was valid, that they are [6] buyers in good faith, and that petitioners' case is barred by laches. We affirm the decision of the respondent court. The donation made on April 5, 1956 by Trinidad Quijada and her brother and sisters was subject to the condition that the donated property shall be "used solely and exclusively as a part of the campus of the proposed Provincial High School in Talacogon."[8] The donation further provides that should "the proposed Provincial High School be discontinued or if the same shall be opened but for some reason or another, the same may in the future be closed" the donated property shall automatically revert to the donor.[9] Such condition, not being contrary to law, morals, good customs, public order or public policy was validly imposed in the [10] donation. When the Municipality's acceptance of the donation was made known to the donor, the former became the new owner of the donated property -- donation being a mode of acquiring [11] and transmitting ownership - notwithstanding the condition imposed by the donee. The donation is perfected once the acceptance by the donee is made known to the donor.[12] Accordingly, ownership is immediately transferred to the latter and that ownership will only revert to the donor if the resolutory condition is not fulfilled. In this case, that resolutory condition is the construction of the school. It has been ruled that when a person donates land to another on the condition that the latter would build upon the land a school, the condition imposed is not a condition precedent or a suspensive condition [13] but a resolutory one. Thus, at the time of the sales made in 1962 towards 1968, the alleged seller (Trinidad) could not have sold the lots since she had earlier transferred ownership thereof by virtue of the deed of donation. So long as the resolutory condition subsists and is capable of fulfillment, the donation remains effective and the donee continues to be the owner subject only to the rights of the donor or his successors-in-interest under the deed of donation. Since no period was imposed by the donor on when must the donee comply with the condition, the latter remains the owner so long as he has tried to comply with the condition within a reasonable period. Such period, however, became irrelevant herein when the doneeMunicipality manifested through a resolution that it cannot comply with the condition of building a school and the same was made known to the donor. Only then - when the nonfulfillment of the resolutory condition was brought to the donor's knowledge - that ownership of the donated property reverted to the donor as provided in the automatic reversion clause of the deed of donation. The donor may have an inchoate interest in the donated property during the time that ownership of the land has not reverted to her. Such inchoate interest may be the subject of contracts including a contract of sale. In this case, however, what the donor sold was the land
[7] [3]

itself which she no longer owns. It would have been different if the donor-seller sold her interests over the property under the deed of donation which is subject to the possibility of reversion of ownership arising from the non-fulfillment of the resolutory condition. As to laches, petitioners' action is not yet barred thereby. Laches presupposes failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due [14] diligence, could or should have been done earlier; "it is negligence or omission to assert a right within a reasonable time, thus, giving rise to a presumption that the party entitled to [15] assert it either has abandoned or declined to assert it." Its essential elements of: a) Conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation complained of; b) Delay in asserting complainant's right after he had knowledge of the defendant's conduct and after he has an opportunity to sue; c) Lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and, d) Injury or prejudice to the defendant in the event relief is accorded to the [16] complainant." are absent in this case. Petitioners' cause of action to quiet title commenced only when the property reverted to the donor and/or his successors-in-interest in 1987. Certainly, when the suit was initiated the following year, it cannot be said that petitioners had slept on their rights for a long time. The 1960's sales made by Trinidad Quijada cannot be the reckoning point as to when petitioners' cause of action arose. They had no interest over the property at that time except under the deed of donation to which private respondents were not privy. Moreover, petitioners had previously filed an ejectment suit against private respondents only that it did not prosper on a technicality. Be that at it may, there is one thing which militates against the claim of petitioners. Sale, being a consensual contract, is perfected by mere consent, which is manifested the moment [17] there is a meeting of the minds as to the offer and acceptance thereof on three (3) elements: subject matter, price and terms of payment of the price.[18] ownership by the seller on the thing sold at the time of the perfection of the contract of sale is not an element for its perfection. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered.[19] Perfection per se does not transfer ownership which occurs upon the actual or constructive delivery of the thing sold.[20] A perfected contract of sale cannot be challenged on the ground of non-ownership on the part of the seller at the time of its perfection; hence, the sale is still valid. The consummation, however, of the perfected contract is another matter. It occurs upon the constructive or actual delivery of the subject matter to the buyer when the seller or her successors-in-interest subsequently acquires ownership thereof. Such circumstance happened in this case when petitioners -- who are Trinidad Quijada's heirs and successors-in-interest -became the owners of the subject property upon the reversion of the ownership of the land to them. Consequently, ownership is transferred to respondent Mondejar ands those who claim their right from him. Article 1434 of the New Civil Code supports the ruling that the seller's [21] "title passes by operation of law to the buyer." This rule applies not only when the subject

matter of the contract of sale is goods, property.[23]

[22]

but also to other kinds of property, including real

There is also no merit in petitioners' contention that since the lots were owned by the municipality at the time of the sale, they were outside the commerce of men under Article 1409 (4) of the NCC;[24] thus, the contract involving the same is inexistent and void from the beginning. However, nowhere in Article 1409 (4) is it provided that the properties of a [25] municipality, whether it be those for public use or its patrimonial property are outside the commerce of men. Besides, the lots in this case were conditionally owned by the municipality. To rule that the donated properties are outside the commerce of men would render nugatory the unchallenged reasonableness and justness of the condition which the donor has the right to impose as owner thereof. Moreover, the objects referred to as outsides the commerce of man are those which cannot be appropriated, such as the open seas and the heavenly bodies. With respect to the trial court s award of attorney s fees, litigation expenses and moral damages, there is neither factual nor legal basis thereof. Attorney s fees and expenses of litigation cannot, following the general rule in Article 2208 of the New Civil Code, be recovered in this case, there being no stipulation to that effect and the case does not fall under any of the exceptions.[26] It cannot be said that private respondents had compelled petitioners to litigate with third persons. Neither can it be ruled that the former acted in gross and evident bad faith in refusing to satisfy the latter s claims considering that private respondents were under an honest belief that they have a legal right over the property by virtue of the deed of sale. Moral damages cannot likewise be justified as none of the circumstances enumerated [28] [27] under Articles 2219 and 2220 of the New Civil Code concur in this case. WHEREFORE, by virtue of the foregoing, the assailed decision of the Court of Appeals is AFFIRMED. SO ORDERED. Melo (Acting Chairman), Puno, and Mendoza, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 87047 October 31, 1990 FRANCISCO LAO LIM, petitioner, vs. COURT OF APPEALS and BENITO VILLAVICENCIO DY, respondents. Gener E. Asuncion for petitioner. Natividad T. Perez for private respondent.

On January 15, 1986, because of private respondent's refusal to vacate the premises, petitioner filed another ejectment suit, this time with the Metropolitan Trial Court of Manila in Civil Case No. 114659-CV. In its decision of September 24, 1987, said court dismissed the complaint on the grounds that (1) the lease contract has not expired, being a continuous one the period whereof depended upon the lessee's need for the premises and his ability to pay the rents; and (2) the compromise agreement entered into in the aforesaid Civil Case No. 051063-CV constitutes res judicata to the case before it. 6 Petitioner appealed to the Regional Trial Court of Manila which, in its decision of January 28, 1988 in Civil Case No. 87-42719, affirmed the decision of the lower court. 7 As stated at the outset, respondent Court of Appeals affirmed in full said decision of the Regional Trial Court and held that (1) the stipulation in the compromise agreement which, in its formulation, allows the lessee to stay on the premises as long as he needs it and can pay rents is valid, being a resolutory condition and, therefore, beyond the ambit of Article 1308 of the Civil Code; and (2) that a compromise has the effect of res judicata. 8 Petitioner's motion for reconsideration having been denied by respondent Court of Appeals, this present petition is now before us. We find the same to be meritorious.

REGALADO, J.: Respondent Court of Appeals having affirmed in toto on June 30, 1988 in CA-G.R. SP No. 1 13925, the decision of the Regional Trial Court of Manila, Branch XLVI in Civil Case No. 8742719, entitled "Francisco Lao Lim vs. Benito Villavicencio Dy," petitioner seeks the reversal of such affirmance in the instant petition. The records show that private respondent entered into a contract of lease with petitioner for a period of three (3) years, that is, from 1976 to 1979. After the stipulated term expired, private respondent refused to vacate the premises, hence, petitioner filed an ejectment suit against the former in the City Court of Manila, docketed therein as Civil Case No. 051063-CV. The case was terminated by a judicially approved compromise agreement of the parties providing in part: 3. That the term of the lease shall be renewed every three years retroacting from October 1979 to October 1982; after which the abovenamed rental shall be raised automatically by 20% every three years for as long as defendant needed the premises and can meet and pay the said increases, the defendant to give notice of his intent to renew sixty (60) days before 2 the expiration of the term; By reason of said compromise agreement the lease continued from 1979 to 1982, then from 1982 to 1985. On April 17, 1985, petitioner advised private respondent that he would no longer 3 renew the contract effective October, 1985. However, on August 5, 1985, private respondent informed petitioner in writing of his intention to renew the contract of lease for another term, 4 commencing November, 1985 to October, 1988. In reply to said letter, petitioner advised private respondent that he did not agree to a renewal of the lease contract upon its expiration in October, 1985. 5 Contrary to the ruling of respondent court, the disputed stipulation "for as long as the defendant needed the premises and can meet and pay said increases" is a purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee. It is likewise a suspensive condition because the renewal of the lease, which gives rise to a new lease, depends upon said condition. It should be noted that a renewal constitutes a new contract of lease although with the same terms and conditions as those in the expired lease. It should also not be overlooked that said condition is not resolutory in nature because it is not a condition that terminates the lease contract. The lease contract is for a definite period of three (3) years upon the expiration of which the lease automatically terminates. The invalidity of a condition in a lease contract similar to the one at bar has been resolved in Encarnacion vs. Baldomar, et al. 9 where we ruled that in an action for ejectment, the defense interposed by the lessees that the contract of lease authorized them to continue occupying the premises as long as they paid the rents is untenable, because it would leave to the lessees the sole power to determine whether the lease should continue or not. As stated therein, "(i)f this defense were to be allowed, so long as defendants elected to continue the lease by continuing the payment of the rentals, the owner would never be able to discontinue it; conversely, although the owner should desire the lease to continue, the lessees could effectively thwart his purpose if they should prefer to terminate the contract by the simple expedient of stopping payment of the rentals. This, of course, is prohibited by the aforesaid article of the Civil Code. (8 Manresa, 3rd ed., pp. 626, 627; Cuyugan vs. Santos, 34 Phil. 100.) The continuance, effectivity and fulfillment of a contract of lease cannot be made to depend exclusively upon the free and uncontrolled choice of the lessee between continuing the payment of the rentals or not, completely depriving the owner of any say in the matter.

. A general covenant to renew is satisfied by one renewal and will not be construed to confer the right to more than 16 one renewal unless provision is clearly and expressly made for further renewals. 10 Where the instrument is susceptible of two interpretations.Mutuality does not obtain in such a contract of lease and no equality exists between the lessor and the lessee since the life of the contract is dictated solely by the lessee. Although there is identity of parties. therefore." This is in clear contrast to the case at bar wherein. In said case. is actually to the effect that the last portion thereof. to support its holding that respondent lessee can legally stay on the premises for as long as he needs it and can pay the rents. In an age like that we live in. The test generally applied to determine the identity of causes of action is to consider the identity of facts essential to their maintenance. 17 The case of Buccat vs. or to the lessor alone for that matter. the same will be construed as providing for but one renewal or extension and. perpetual leases are not favored in law. The compromise agreement should be understood as bearing that import which is most adequate to render it effectual. 19 subject matter and cause of action. was satisfied when the lease was renewed in 1982 for another three (3) years. one which will make it invalid and illegal and another which will make it valid and legal. The longer the period the more clearly unreasonable such a presumption would be. The subject matter in the first ejectment case is the original lease contract while the subject matter in the case at bar is the lease created under the terms provided in the subsequent compromise agreement. 18 relied upon by responddent court. very specific language is necessary to show an intent to grant a unilateral faculty to extend or renew a contract of lease to the lessee alone. 13 A portion in a lease giving the lessee and his assignee the right to perpetual renewals is not favored by the courts. Dispo et al. It is elementary that for a judgment to be a bar to a subsequent case. the delict or the wrong in the first case is different from that in the second. (2) the court which rendered it had jurisdiction over the subject matter and the parties. We hold that the above-quoted rulings in Koh v. or 20 whether the same evidence would sustain both causes of action. 15 In addition. A contrary interpretation will result in a situation where the continuation and effectivity of the contract will depend only upon the will of the lessee." thereby requiring the mutual agreement of the parties. absent language showing that the term was deliberately set for the benefit of the lessee or lessor alone. and (4) there must be identity between the two cases as to parties. otherwise there is nothing to renew. the fourth requisite is lacking. 11 Moreover. the latter interpretation should be adopted. we agree with petitioner that respondent court erred in holding that the action for ejectment is barred by res judicata. But that presumption cannot reasonably be indulged in casually in an era of rapid economic change. In the case at bar. Koh and Cruz in effect rested upon such a presumption. and the clause "for as long as defendant needs the premises and can meet and pay the rents" is not an independent stipulation but is controlled by said fixed term and the option for renewal upon agreement of both parties. is not in point. to repeat. and a lease will be construed as not making 14 such a provision unless it does so clearly. Leases which may have been intended to be renewable in perpetuity will nevertheless be construed as importing but one renewal if there is any uncertainty in that regard. Alberto should be and are overruled. said increases" gives private respondent an option to renew the lease. the period of the lease must be deemed to have been agreed upon for the benefit of both parties. the contract of lease should be and is hereby construed as providing for a definite period of three (3) years and that the automatic increase of the rentals by twenty percent (20%) will take effect only if the parties decide to renew the lease. We are not aware of any presumption in law that the term of a lease is designed for the benefit of the lessee alone. is subject to the first portion of said paragraph that "the term of the lease shall be renewed every three (3) years. Resultantly. the lease is fixed at a period of three (3) years although subject to renewal upon agreement of the parties. marked by. The interpretation made by respondent court cannot. in violation of Article 1308 of the Civil Code and the aforesaid doctrine in Encarnacion. While it is true that a compromise agreement has the effect of res judicata this doctrine does not apply in the present case. be upheld. volatile costs of living and fluctuations in the value of the domestic currency. but the rentals now stipulated shall be subject to review every after ten (10) years by mutual agreement of the parties. there could not be a renewal if said lease did not expire. unless by plain and unambiguous terms the parties have expressed such 12 intention. among other things. As we have further emphasized: It is also important to bear in mind that in a reciprocal contract like a lease. (3) it must be a judgment on the merits. Ongsiaco and Cruz v. In the case at bar. and the evidence that will support and establish the cause of action in the former will not suffice to support and establish that in the latter. and the rule of construction is well settled that a covenant for renewal or for an additional term should not be held to create a right to repeated grants in perpetuity. The lease executed in 1978 is one thing. even assuming that the clause "for as long as the defendant needed the premises and can meet and pay. in the causes of action. There is also no identity. therefore. read and interpreted in its entirety. there is no identity of subject matter and cause of action. The stipulation provides for a renewal of the lease every three (3) years. which gives the private respondent sixty (60) days before the expiration of the term the right to give notice of his intent to renew. (1) it must be a final judgment. A lease will not be construed to create a right to perpetual renewals unless the language employed indicates dearly and unambiguously that it was the intention and purpose of the parties to do so. the lease contract provides for an indefinite period since it merely stipulates "(t)hat the lease contract shall remain in full force and effect as long as the land will serve the purpose for which it is intended as a school site of the National Business Institute. On the second issue. Paragraph 3 of the compromise agreement. The use of the word "renew" and the designation of the period of three (3) years clearly confirm that the contract of lease is limited to a specific period and that it is not a continuing lease.. the lease constituted in 1982 by the compromise agreement is another. nor are covenants for continued renewals tending to create a perpetuity.

Private respondent is hereby ordered to immediately vacate and return the possession of the leased premises subject of the present action to petitioner and to pay the monthly rentals due thereon in accordance with the compromise agreement until he shall have actually vacated the same.. which necessarily requires a different set of evidence. as it did only settle. 1985 under the compromise agreement. any cause of action that arises from the application or violation of the compromise agreement cannot be said to have been settled in said first case. Paras. the first case. Melencio-Herrera (Chairperson).In the first ejectment case. as it could not. It did not. . Concur. the decision of respondent Court of Appeals is REVERSED and SET ASIDE. This judgment is immediately executory. The compromise agreement was meant to settle. SO ORDERED. While the compromise agreement may be res judicata as far as the cause of action and issues in the first ejectment case is concerned. 1978. In the present case. the cause of action is a similar refusal but with respect to the lease which expired in October. WHEREFORE. Padilla and Sarmiento. like the present case which was founded on the expiration of the lease in 1985. The fact that the compromise agreement was judicially approved does not foreclose any cause of action arising from a violation of the terms thereof. cover any cause of action that might arise thereafter. the cause of action was private respondent's refusal to comply with the lease contract which expired on December 31. JJ.

this time with the Metropolitan Trial Court of Manila in Civil Case No. in its decision of January 28. This. and (2) the compromise agreement entered into in the aforesaid Civil Case No. after which the abovenamed rental shall be raised automatically by 20% every three years for as long as defendant needed the premises and can meet and pay the said increases. being a resolutory condition and. In its decision of September 24. 8742719. private respondent informed petitioner in writing of his intention to renew the contract of lease for another term. J. On April 17. of course. allows the lessee to stay on the premises as long as he needs it and can pay rents is valid. 1985. 1988. 7 As stated at the outset. private respondent refused to vacate the premises. the owner would never be able to discontinue it. 1987. 1985. 114659-CV. 100. respondent Court of Appeals affirmed in full said decision of the Regional Trial Court and held that (1) the stipulation in the compromise agreement which. 1985.R. on August 5. from 1976 to 1979. That the term of the lease shall be renewed every three years retroacting from October 1979 to October 1982. therefore. said court dismissed the complaint on the grounds that (1) the lease contract has not expired. Baldomar. although the owner should desire the lease to continue. Branch XLVI in Civil Case No. completely depriving the owner of any say in the matter. 1990 FRANCISCO LAO LIM. "(i)f this defense were to be allowed. Perez for private respondent. It should also not be overlooked that said condition is not resolutory in nature because it is not a condition that terminates the lease contract. this present petition is now before us. 8 Petitioner's motion for reconsideration having been denied by respondent Court of Appeals. . On January 15. 627. the decision of the Regional Trial Court of Manila. Santos. because it would leave to the lessees the sole power to determine whether the lease should continue or not. hence. that is. 87047 October 31. After the stipulated term expired. 3rd ed. and (2) that a compromise has the effect of res judicata. the disputed stipulation "for as long as the defendant needed the premises and can meet and pay said increases" is a purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee. 051063-CV. As stated therein. 6 Petitioner appealed to the Regional Trial Court of Manila which.) The continuance. 626. petitioner filed another ejectment suit. The records show that private respondent entered into a contract of lease with petitioner for a period of three (3) years. 1985. the defense interposed by the lessees that the contract of lease authorized them to continue occupying the premises as long as they paid the rents is untenable. 1986. effectivity and fulfillment of a contract of lease cannot be made to depend exclusively upon the free and uncontrolled choice of the lessee between continuing the payment of the rentals or not. 1 13925. Natividad T. (8 Manresa. affirmed the decision of the lower court. depends upon said condition.R. petitioner. then from 1982 to 1985. being a continuous one the period whereof depended upon the lessee's need for the premises and his ability to pay the rents. However. so long as defendants elected to continue the lease by continuing the payment of the rentals. in its formulation. 1988 in CA-G. In reply to said letter. Cuyugan vs. et al. COURT OF APPEALS and BENITO VILLAVICENCIO DY. conversely. By reason of said compromise agreement the lease continued from 1979 to 1982. which gives rise to a new lease. 1988 in Civil Case No..: Respondent Court of Appeals having affirmed in toto on June 30. The lease contract is for a definite period of three (3) years upon the expiration of which the lease automatically terminates. Asuncion for petitioner.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. 9 where we ruled that in an action for ejectment. the lessees could effectively thwart his purpose if they should prefer to terminate the contract by the simple expedient of stopping payment of the rentals. because of private respondent's refusal to vacate the premises. SP No." petitioner seeks the reversal of such affirmance in the instant petition. petitioner filed an ejectment suit against the former in the City Court of Manila. Benito Villavicencio Dy. We find the same to be meritorious. The case was terminated by a judicially approved compromise agreement of the parties providing in part: 3. the defendant to give notice of his intent to renew sixty (60) days before 2 the expiration of the term. 5 Contrary to the ruling of respondent court. respondents. 4 commencing November. Gener E. vs. It should be noted that a renewal constitutes a new contract of lease although with the same terms and conditions as those in the expired lease. petitioner advised private respondent that he would no longer 3 renew the contract effective October. No. entitled "Francisco Lao Lim vs. The invalidity of a condition in a lease contract similar to the one at bar has been resolved in Encarnacion vs. 1985 to October. docketed therein as Civil Case No. pp. petitioner advised private respondent that he did not agree to a renewal of the lease contract upon its expiration in October. 051063-CV constitutes res judicata to the case before it. 87-42719. is prohibited by the aforesaid article of the Civil Code. 34 Phil. It is likewise a suspensive condition because the renewal of the lease. REGALADO. beyond the ambit of Article 1308 of the Civil Code.

the delict or the wrong in the first case is different from that in the second. While it is true that a compromise agreement has the effect of res judicata this doctrine does not apply in the present case. and (4) there must be identity between the two cases as to parties. 19 subject matter and cause of action. be upheld. It is elementary that for a judgment to be a bar to a subsequent case. (1) it must be a final judgment. Ongsiaco and Cruz v. In an age like that we live in. very specific language is necessary to show an intent to grant a unilateral faculty to extend or renew a contract of lease to the lessee alone. but the rentals now stipulated shall be subject to review every after ten (10) years by mutual agreement of the parties. is not in point." thereby requiring the mutual agreement of the parties. A general covenant to renew is satisfied by one renewal and will not be construed to confer the right to more than 16 one renewal unless provision is clearly and expressly made for further renewals. and the clause "for as long as defendant needs the premises and can meet and pay the rents" is not an independent stipulation but is controlled by said fixed term and the option for renewal upon agreement of both parties. .. there could not be a renewal if said lease did not expire. the lease is fixed at a period of three (3) years although subject to renewal upon agreement of the parties. The subject matter in the first ejectment case is the original lease contract while the subject matter in the case at bar is the lease created under the terms provided in the subsequent compromise agreement." This is in clear contrast to the case at bar wherein. one which will make it invalid and illegal and another which will make it valid and legal. in violation of Article 1308 of the Civil Code and the aforesaid doctrine in Encarnacion. read and interpreted in its entirety. therefore. Dispo et al. or to the lessor alone for that matter. we agree with petitioner that respondent court erred in holding that the action for ejectment is barred by res judicata. We are not aware of any presumption in law that the term of a lease is designed for the benefit of the lessee alone. (2) the court which rendered it had jurisdiction over the subject matter and the parties. Although there is identity of parties. The compromise agreement should be understood as bearing that import which is most adequate to render it effectual. otherwise there is nothing to renew. The interpretation made by respondent court cannot. The lease executed in 1978 is one thing. even assuming that the clause "for as long as the defendant needed the premises and can meet and pay. 18 relied upon by responddent court. Alberto should be and are overruled. A lease will not be construed to create a right to perpetual renewals unless the language employed indicates dearly and unambiguously that it was the intention and purpose of the parties to do so. nor are covenants for continued renewals tending to create a perpetuity. to repeat. In the case at bar.Mutuality does not obtain in such a contract of lease and no equality exists between the lessor and the lessee since the life of the contract is dictated solely by the lessee. The test generally applied to determine the identity of causes of action is to consider the identity of facts essential to their maintenance. The longer the period the more clearly unreasonable such a presumption would be. is actually to the effect that the last portion thereof. A contrary interpretation will result in a situation where the continuation and effectivity of the contract will depend only upon the will of the lessee. volatile costs of living and fluctuations in the value of the domestic currency. and a lease will be construed as not making 14 such a provision unless it does so clearly. There is also no identity. 17 The case of Buccat vs. the lease constituted in 1982 by the compromise agreement is another. absent language showing that the term was deliberately set for the benefit of the lessee or lessor alone. But that presumption cannot reasonably be indulged in casually in an era of rapid economic change. The stipulation provides for a renewal of the lease every three (3) years. among other things. and the rule of construction is well settled that a covenant for renewal or for an additional term should not be held to create a right to repeated grants in perpetuity. the lease contract provides for an indefinite period since it merely stipulates "(t)hat the lease contract shall remain in full force and effect as long as the land will serve the purpose for which it is intended as a school site of the National Business Institute. there is no identity of subject matter and cause of action. Resultantly. the contract of lease should be and is hereby construed as providing for a definite period of three (3) years and that the automatic increase of the rentals by twenty percent (20%) will take effect only if the parties decide to renew the lease. 13 A portion in a lease giving the lessee and his assignee the right to perpetual renewals is not favored by the courts. In said case. the period of the lease must be deemed to have been agreed upon for the benefit of both parties. Paragraph 3 of the compromise agreement. the fourth requisite is lacking. was satisfied when the lease was renewed in 1982 for another three (3) years. and the evidence that will support and establish the cause of action in the former will not suffice to support and establish that in the latter. perpetual leases are not favored in law. In the case at bar. said increases" gives private respondent an option to renew the lease. Leases which may have been intended to be renewable in perpetuity will nevertheless be construed as importing but one renewal if there is any uncertainty in that regard. 11 Moreover. As we have further emphasized: It is also important to bear in mind that in a reciprocal contract like a lease. We hold that the above-quoted rulings in Koh v. On the second issue. the same will be construed as providing for but one renewal or extension and. unless by plain and unambiguous terms the parties have expressed such 12 intention. which gives the private respondent sixty (60) days before the expiration of the term the right to give notice of his intent to renew. is subject to the first portion of said paragraph that "the term of the lease shall be renewed every three (3) years. 10 Where the instrument is susceptible of two interpretations. 15 In addition. in the causes of action. The use of the word "renew" and the designation of the period of three (3) years clearly confirm that the contract of lease is limited to a specific period and that it is not a continuing lease. to support its holding that respondent lessee can legally stay on the premises for as long as he needs it and can pay the rents. therefore. or 20 whether the same evidence would sustain both causes of action. marked by. (3) it must be a judgment on the merits. the latter interpretation should be adopted. Koh and Cruz in effect rested upon such a presumption.

While the compromise agreement may be res judicata as far as the cause of action and issues in the first ejectment case is concerned. Paras. The compromise agreement was meant to settle. Melencio-Herrera (Chairperson). WHEREFORE. In the present case. SO ORDERED. It did not. Private respondent is hereby ordered to immediately vacate and return the possession of the leased premises subject of the present action to petitioner and to pay the monthly rentals due thereon in accordance with the compromise agreement until he shall have actually vacated the same. . as it did only settle. the cause of action is a similar refusal but with respect to the lease which expired in October. cover any cause of action that might arise thereafter.. the first case. 1978. Concur. the decision of respondent Court of Appeals is REVERSED and SET ASIDE. any cause of action that arises from the application or violation of the compromise agreement cannot be said to have been settled in said first case. which necessarily requires a different set of evidence. like the present case which was founded on the expiration of the lease in 1985. the cause of action was private respondent's refusal to comply with the lease contract which expired on December 31. 1985 under the compromise agreement. JJ. Padilla and Sarmiento. The fact that the compromise agreement was judicially approved does not foreclose any cause of action arising from a violation of the terms thereof.In the first ejectment case. This judgment is immediately executory. as it could not.

R. including interest. . October 27. showing the amount outstanding at the end of each June. the said Agustina Rafols ceded to the present plaintiff all of her right and interest in said contracts. and Evaristo Peñares. On this date I have asked for further loan and have received from Don Victoriano Osmeña the sum of seventy pesos in cash. P50 Doña Cenona Rama. at the price ruling on the day of delivering the sugar into his warehouse. 1891. EN BANC Witnesses: FAUSTO PEÑALOSA. 20 P70 DECISION September 9. a balance shall be struck. On the 15th day of March. J. 1902 the plaintiff presented the contracts to the defendant for payment and she acknowledged her responsibility upon said contracts by an indorsement upon them in the following language: EXHIBIT C CEBU. Later. 1902. in proof whereof. FRANCISCO MEDALLE.Republic of the Philippines SUPREME COURT Manila he shall be entitled to make claim against me at the expiration of the term stated in this document. J. No. the defendant executed and delivered to the said Victoriano Osmeña the following contract: EXHIBIT B CEBU. Some time after the execution and delivery of the above contracts. H. the said Victoriano Osmeña died. On the 27th day of October. 4437 TOMAS OSMEÑA. pledge as security all of my present and future property. plaintiff-appellee. have received from Don Victoriano Osmeña the sum of two hundred pesos in cash which I will pay in sugar in the month of January or February of the coming year. a resident of this city. CEBU. and as a guarantee. In the settlement and division of the property of his estate the above contracts became the property of one of his estate the above contracts became the property of one of his heirs. November 15. I further promise that I will sell to the said Señor Osmeña all the sugar that I may harvest. together with the interest mentioned above. I sign this document. defendant-appellant. which we will pay in sugar in the month of January of the coming year according to the former conditions. (Signed) CENON RAMA. and I will pay him interest at the rate of half a cuartillo per month on each peso. and such as may be outstanding against me shall be considered as capital which I will always pay in sugar. Received I. Doña Cenona Rama. 1909 G. and as special security the house with tile roof and ground floor of stone in which I live in Pagina. and of legal age. (Signed) CENONA RAMA. and if I can not pay in full. 1890. the date does not appear. Johnson. beginning on this date until the day of the settlement. the defendant herein executed and delivered to Victoriano Osmeña the following contract: EXHIBIT A P200. fifty pesos of which I have loaned to Don Evaristo Peñares. Agustina Rafols. March 15. vs. Filemon Sotto for appellant. Junquera for appellee. 1890.00. 1891. CENONA RAMA.: It appears from the record that upon the 15th day of November. From Don Evaristo Peñares.

from all of the evidence adduced during the trial. The defendant not having paid the amount due on said contracts. We are satisfied. 1891. commenced the present action in the Court of First Instance of the Province of Cebu. The defendant answered by filing a general denial and setting up the special defense of prescription. 1906.On this date I hereby promise. 1115. 1890. and the only witness produced during the trial was the plaintiff himself. The defendant did not offer any proof whatever in the lower court.. If that statement found in her acknowledgment of the indebtedness should be regarded as a condition. was an absolute acknowledgment of the obligation and was sufficient to prevent the statute of limitation from barring the action upon the original contract. Carson. The lower court found that P50 of the P70 mentioned in Exhibit B had been borrowed by the defendant. that the judgment of the lower court should be affirmed. the plaintiff. the demand for payment. JJ. and Moreland. she imposed the condition that she would pay the obligation if she sold her house. C. . It was suggested during the discussion of the case in this court that. but by one Evaristo Peñares. J. I will pay my indebtedness to Don Tomas Osmeña as set forth in this document. the lower court rendered a judgment in favor of the plaintiff and against the defendant for the sum of P200 with interest at the rate of 18 3/4 per cent per annum. and the failure to pay on the part of the defendant. The complaint filed in said cause alleged the execution and delivery of the above contracts. concur. . it was a condition which depended upon her exclusive will. void.. from the 15th day of November. (Signed) CENONA RAMA. (Art. and the prayer for a judgment for the amount due on the said contracts. that if the house of strong materials in which I live in Pagina is sold. The case was finally brought on to trial in the Court of First Instance. upon the 26th day of June. therefore the defendant had no responsibility for the payment of the said P50. from the 27th day of October. Civil Code. The appellant alleges that the proof adduced during the trial of the cause was not sufficient to support the findings of the lower court. in the acknowledgment above quoted of the indebtedness made by the defendant. and is therefore. until the said sums were paid. in the presence of two witness. So ordered. therefore.) The acknowledgment. From this judgment the defendant appealed. Arellano. After hearing the evidence adduced during the trial. Torres. and for the sum of P20 with interest at the rate of 18 3/4 per cent per annum. The only questions raised by the appellant were questions of fact.

from 1945 to 1947. Jacinto R. As to the fact that the suspensive condition took place after the death of the debtor. P12. Without such a buyer the sale could not be carried out or the proceeds thereof sent to the islands. Sr. Chan for petitioners. EPIFANIO M. depending exclusively upon the will of the intestate. The claims are of three kinds. mainly that of the presence of a buyer. there were still other conditions that had no concur to effect the sale. Had the advances been made without intention of demanding their payment later. Sr. as administratrix of the Intestate Estate of Fernando Hermosa. LABRADOR. upon the happening of which the obligation to pay is made dependent. Regularity of the advances and the close relationship between the intestate and the claimant also support this conclusion.41 representing credit advances made to the intestate from 1932 to 1944.The will to sell on the part of the intestate was. The case of Osmeña vs. the very wife of the claimant. and that all that we needed to make his obligation (to pay his indebtedness) demandable is that the sale be consummated and the price thereof remitted to the islands. but also upon other circumstances beyond his power or control. The claimant presented evidence and the Court of Appeals found. Manuel O.341. . 126). i. in accordance with article 1115 of the old Civil Code. vs." The Court of Appeals held that payment of the advances did not become due until the administratrix received the sum of P20.'s property in Spain was sold and he receive money derived from the sale. L-5267 October 27. That there was really a promise made by the intestate to pay for the credit advances maybe implied from the fact that the receipts thereof had been preserved. old Civil Code). namely. "as soon as he (intestate) receive funds derived from the sale of his property in Spain. (14 Phil. besides. and this is the fact that the sale was not effected in the lifetime of the debtor (the intestate). depending partly upon the will of intestate and partly upon chance. the condition would be or would have been deemed or considered complied with (article 1119. able and willing to purchase the property under the conditions demanded by the intestate. as to conditional obligations: 1a La obligacion contractual afectada por condicion suspensiva. as soon as he receive funds derived from the sale of his property in Spain. JR. 119). Note that if the intestate would prevent or would have prevented the consummation of the sale voluntarily.772 made to his grandson. . that the intestate had asked for the said credit advances for himself and for the members of his family "on condition that their payment should be made by Fernando Hermosa. the presence of a buyer of the property for the price and under the conditions desired by the intestate. If the condition were "if he decides to sell his house.924.: This is an appeal by way of certiorari against a decision of the Court of Appeals. and the same was paid for subsequently. P2.R. One other point needs to be considered. ready.. We have examined this case and we find that the supposed ruling was merely an assumption and the same was not the actual ruling of the case. after the death of the intestate. . therefore sent to the islands. 8 Manresa. Upon authorization of the probate court in October. who says. It is evident. Sr." or "if he likes to pay the sums advanced. 1944. among other things. The Claim was filed on October 2. in accordance therewith. Jr. Sr. that the condition of the obligation was not a purely protestative one. (Article 1114. On this last circumstance we must bear in mind that the Court of Appeals found no evidence to show that the claim was the product of a collusion or connivance between the administratrix and the claimant. Fernando Hermosa. or presumed legally to exist." or any other condition of similar import implying that upon him (the debtor) alone payment would depend. LONGARA. fourth division. And upon the happening of the condition. old Civil Code. and that advances were made more than ten years before the sale. the debt became immediately due and demandable. but after his death and by his administrator. al tiempo de lacelebracion de este. we supported in our conclusion that the same is immaterial by Sanchez Roman. It is contended on this appeal that the obligation contracted by the intestate was subject to a condition exclusively dependent upon the will of the debtor (a condicion potestativa) and therefore null and void. 1947. approving certain claims presented by Epifanio M. But in addition of the sale to him (the intestate-vendor). Longara against the testate estate of Fernando Hermosa. although the price and other conditions thereof were still within his discretion and final approval. J. It is evident. and FERNANDO HERMOSA. a suspensive condition. no es exigible hasta que se cumpla la condicion. . the condition would be protestativa. Bohol for respondent. therefore. 99) is cited to support appellants contention. said receipts would not have been preserved. this court seems to have filed that a promise to pay an indebtedness "if a house of strong materials is sold" is an obligation the performance of which depended on the will of the debtor. The condition is..000 from the buyer of the property." Claimant had testified without opposition that the credit advances were to be "payable as soon as Fernando Hermosa. No. petitioners.e. which occurred in December. A careful consideration of the condition upon which payment of the sums advanced was made to depend. Rama.. In this case. The obligation is clearly governed by the second sentence of article 1115 of the old Civil Code (8 Manresa. dependent exclusively upon his will or discretion. or at least that he had made his creditors believe that he had done so.12 made to his son Francisco Hermosa. 2 a El cumplimiento de la condicion suspensiva retrotae los efectos del acto juridico originario de la obligacion a que aquella afecta. but a mixed one.Republic of the Philippines SUPREME COURT Manila EN BANC G. therefore. 1948. respondent. present in fact. In the form that the condition was found by the Court of Appeals however the condition implies that the intestate had already decided to sell his house. 1953 LUZ HERMOSA. and P3." discloses the fact that the condition in question does not depend exclusively upon the will of the debtor.

old Civil Code).. in the absence of any contract setting forth the minimum or maximum terms which would be acceptable to the debtor. it is immaterial whether or not he had already decided to sell his house. One last contention of the appellant is that the claims are barred by the statute of non-claims. That part of the decision allowing this group of claims. First because the obligation to furnish support is personal and is extinguished upon the death of the person obliged to give support(article 150. Sr. it is for the court to fix the same. In the case at bar. Jugo.942. We are. As the promissory notes do not affix this period. as already stated. This is of no moment. because it is very obvious that the matter of the sale of the house rested on the sole will of the debtor. Sr. Under the condition imposed by Fernando Hermosa. Sr. (Citing cases. became either immediately demandable or payable within a term to be fixed by the court. being. In the case of Gonzales vs. and making said advances "payable as soon as Fernando Hermosa. concur. My answer is in the affirmative. amounting to P3. although the effects of both are the same. to make any sale.. subject to the rules of prescription. unaffected by any outside consideration or influence. should have been allowed. Sr. Bengzon.772. Padilla. and second because upon the death of a principal (the intestate in this case). (4 Sanchez Roman. no solo tiene lugar cuando el cumplimiento de la condicion se verifica en vida de los contrayentes. the same would be potestative. The judgment appealed from is hereby affirmed in so far as it approves the claims of appellee in the amounts of P2.12. As the condition above referred to is null and void. In fact no sale was effected during his lifetime. the terms are still subject to the sale judgment if not whims and caprice of Fernando Hermosa. It is also contended that the third group of claims. 371). on date the money became available here hence the action to recover the advances has not yet prescribed. for two obvious reasons. such that if such conditions presented themselves the debtor would be bound to proceed with the sale. p. since there is no pretence that acceptable conditions of the sale had been made the subject of an agreement. Montemayor. this court already held as follows: We hold that the two promissory notes are governed by article 1128 because under the terms thereof the plaintiff intended to grant the defendant a period within which to pay his debts. We find merit in this contention. The majority admit that if the condition were "if he decides to sell his house" or "if he likes to pay the sums advanced.. as I cannot see any substantial difference.) As the obligation retroacts to the date when the contract was entered into.341 and P12. que tambien se produce cuando aquel se realiza despues de la muerte de estos.e. like other civil actions. The above considerations dispose of the most important questions raised on this appeal. 122) (Emphasis supplied. Reyes. therefore. Sr. old Civil Code). Even if authorization to furnish necessaries to his grandson may have been given. but dissent therefrom insofar as it affirms the appealed judgment approving appellee's other claims.772. as soon as he receives funds derived from . Separate Opinions PARAS.. and cite the presence of a buyer. credits furnished the intestate's grandson after his (intestate's) death in 1944. Sr. and reversed as to that of P3. JJ. within the meaning of the statute of limitations. the sale of his property in Spain. i. ready." condicion potestativa and therefore null and void in accordance with article 1115 of the old Civil Code. De Jose (66 Phil. Tuason. which has already elapsed from the execution of the promissory notes until the filing of the action on June 1.) The action to ask the court to fix the period has already prescribed in accordance with section 43 (1) of the Code of Civil Procedure. the action to recover the same only accrued. C. the debt resulting from the advances made to Fernando Hermosa. 1934.772 should be reversed.'s property in Spain was sold and he received money derived from the sale. The action which should be brought in accordance with articles 1128 is different from the action for the recovery of the amount of the notes.. The principal question is whether the stipulation to pay the advances "on condition that their payment should be made by Fernando Hermosa. and Bautista Angelo. J.3 a La referida retroaccion. The majority also contend that the condition in question depended on other factors than the sole will of the debtor. his agent's authority or authorization is deemed terminated (article 1732. 369. I think a mere play or words is invoked. without authority under our rules to consider this issue at this stage of the proceedings. In both cases the action has prescribed after the lapse of ten years. all amounts advanced from the time of the agreement became due. concurring and dissenting: I concur in the majority decision insofar as it reverses the appealed judgment allowing the claim for P3. because. able and willing to purchase the property. Without costs. As the obligation to pay became due and demandable only when the house was sold and the proceeds received in the islands. nobody could legally compel Fernando Hermosa. upon the happening of the suspensive condition. This period of prescription is ten years. this authorization could not be made to extend after his death. It does not appear from the record that this question was ever raised in any of the courts below.

. this contract may be cancelled by the party of the second part at its option. Such a stipulation. nor is there any lack of equality between the persons contracting. the defendants communicated in writing to the plaintiff the fact that they had decided to rescind the contract. for where the contracting parties have agreed that such option shall exist. Says he: "It is entirely licit to leave fulfillment to the will of either of the parties in the negative form of rescission. in the first months of 1919. does not make either the validity or the fulfillment of the contract dependent upon the will of the party to whom is conceded the privilege of cancellation. At any rate on June 28. while the defendant Uy Tieng Piao appeals on the ground that he is not liable at all. without technicality or circumvention. The case for the plaintiff proceeds on the idea that the stipulation above quoted. with electric light and water for domestic consumption. to arrive in the city of Manila within a period of six months from date hereof. vol. though ten expellers had been ordered from the United States. The machinery above referred to did not arrive in the city of Manila within the six months succeeding the making of the contract. however. or in lieu thereof P60 per month. giving to the defendants the right to cancel the contract upon the contingency of the nonarrival of the machinery in Manila within six months. 1922 defendants.. defendant-appellant. either cancelled the order for the machinery from choice or were unable to supply the capital necessary to finance the project.: This case comes by appeal from the Court of First Instance of the city of Manila. and to article 1119. the cancellation of a contract in accordance with conditions agreed upon beforehands is fulfillment. vs. for in such supposed case neither is the article infringed. It appears that on December 12. 1919. 8. which says that a condition shall be deemed fulfilled if the obligor intentially impedes its fulfillment. At the time this agreement was made the machinery for the contemplated factory had not been acquired. which is to the effect that the validity and fulfillment of contracts cannot be left to the will of one of the contracting parties. for any reason. It will be noted that the language conferring the right of cancellation upon the defendants is broad enough to cover any case of the nonarrival of the machinery. must be understood as applicable only in those cases where such nonarrival is due to causes not having their origin in the will or act of the defendants. In this connection. seeing that the oil business no longer promised large returns. and in this sense it is believed that the parties to the contract must have understood it. Uy TIENG PIAO." (Manresa. as damages for breach of contract. covering salary and perquisites due and to become due under the contract. The judgment having been heretofore affirmed by us in a brief opinion. Upon this point it is our opinion that the language used in the stipulation should be given effect in its ordinary sense. we note that the commentator Manresa has the following observation with respect to article 1256 of the Civil Code. and it is urged that the right to cancel cannot be admitted unless the defendants affirmatively show that the failure of the machinery to arrive was due to causes of that character. The plaintiff appeals on the ground that the amount of damages awarded is inadequate. J. we now avail ourselves of the occasion of the filing of a motion to rehear by the attorneys for the plaintiff to modify the judgment in a slight measure and to state more fully the reasons underlying our decision. effective June 30th then current. In this connection the plaintiff relies on article 1256 of the Civil Code. the plaintiff contracted his services to Tan Liuan and Co. The plaintiff thereupon instituted this action to recover damages in the amount of P13. the supplying of electrical energy. such cancellation.net M.). The period of the contract extended over two years from the date mentioned. as superintendent of an oil factory which the latter contemplated establishing in this city. and among the stipulations inserted in the contract with the plaintiff was a provision to the following effect: It is understood and agreed that should the machinery to be installed in the said factory fail. in a case where the court awarded to the plaintiff the sum of P300.R. TAYLOR. nor was other equipment necessary for the establishment of the factory at any time provided by the defendants. a case frequent in certain contracts (the letting of service for hire. D.000. No.defendants. and the salary was to be at the rate of P600 per month during the first year and P700 per month during the second. p. Indeed." It must follow of necessity that the defendants had the right to cancel the contract in the contingency that occurred. availing themselves in part of the option given in the clause above quoted. since they remain with the same faculties in respect to fulfillment. 610. but a preponderance of the evidence is to the effect that the . not to occur before the expiration of such six months.Republic of the Philippines SUPREME COURT Manila EN BANC G.) 1awph!l. UY TIENG PIAO and TAN LIUAN. plaintiff-appellant. and that it did not have its origin in their own act or volition. The reason for this does not appear with certainty. STREET. L-16109 October 2. Article 1256 of the Civil Code in our opinion creates no impediment to the insertion in a contract for personal service of a resolutory condition permitting the cancellation of the contract by one of the parties. due to whatever cause. the exercise of the option is as much in the fulfillment of the contract as any other act which may have been the subject of agreement. upon which date he was discharged. etc. 1918. as can be readily seen. as delays caused by strikes or unfavorable conditions of transporting by land or sea. 2d ed. and the stress in the expression "for any reason" should evidently fall upon the word "any. and a residence to live in. unless some clear and sufficient reason can be adduced for limiting the operation of the words conferring the right of cancellation. doing business under the firm name and style of Tan Liuan & Company.

Undoubtedly one of the consequences of this stipulation was that the employers were left in a position where they could dominate the contingency. or if he should not be permitted to act in that capacity for a stated period. If it were apparent. In the same contract it was stipulated that if "for any reason" Hardaker should not be given that position. involving per se a breach of the implied terms of the contract. 267) cited by the appellant Taylor. Upon this we will merely say that the conclusion stated by the trial court in the next to the last paragraph of the decision with respect to the liability of this appellant in our opinion in conformity with the law and facts. This amount the plaintiff is clearly entitled to recover.. and with costs. but it must be remembered that he evidently has in mind the suspensive condition. is obnoxious to the first sentence contained in article 1115 and renders the whole obligation void (vol. the validity of which is recognized in article 1113 of the Civil Code. The judgment appealed from will be modified by declaring that the defendants shall pay to the plaintiff the sum of P360. and as thus modified the judgment will be affirmed with interest from November 4.." and the familiar maxim was cited that no man shall take advantage of his own wrong. The result of the case must have been the same from whatever point of view. 8. or could be demonstrated. to mean "for any reason not having its origin in the will or acts of the defendants. and it is insisted in his behalf that he was not bound by the act of Tan Liuan as manager of Tan Liuan and Co. JJ. and an assumption underlying the provision is that the obligor prevents the obligee from performing some act which the obligee is entitled to perform as a condition precedent to the exaction of what is due to him.. p. p. the idea being that the court should adjust its interpretation of said clause to the supposed precepts of article 1256. to which position it was understood he was to be appointed. that the defendants were under a positive obligation to cause the machinery to arrive in Manila. in employing the plaintiff. In Spanish jurisprudence a condition like that here under discussion is designated by Manresa a facultative condition (vol. the trial judge evidently overlooked the item of P60. Such an act must be considered unwarranted and unlawful. 131). because the argument for the restrictive interpretation evidently proceeds on the assumption that the clause in question is illegal in so far as it purports to concede to the defendants the broad right to cancel the contract upon nonarrival of the machinery due to any cause. and the result was about the same as if they had been given an unqualified option to dispense with the services of the plaintiff at the end of six months. though superficially somewhat analogous. It was held that Hall was released from the obligation to do the things that he had agreed to perform. 1919. Hardaker failed to render efficient service and was discharged. certain things would be done by Hall. Villamor. appealed from the judgment holding him liable as a member of the firm of Tan Liuan and Co. and the argument to the contrary apparently suffers from the logical defect of assuming the very point at issue.. there is nothing in article 1256 which makes it necessary for us to warp the language used by the parties from its natural meaning and thereby in legal effect to restrict the words "for any reason." as used in the contract. Some of the judges appear to have thought that the case turned on the meaning of the phrase "for any reason. 1919. Said article can have no application to the resolutory condition. such as is contemplated in article 1115. Hardaker (61 Fla. defining the conditions under which the defendants can cancel the contract. and its existence cannot be implied in the fact of stipulation. however. Johns and Romualdez. like that involved in this case. a condition at once facultative and resolutory may be valid even though the condition is made to depend upon the will of the obligor. But it will be said that the question is not so much one concerning the legality of the clause referred to as one concerning the interpretation of the resolutory clause as written. The case of Hall vs. who is sued as a partner with Tan Liuan. Araullo. The contract. In the present case there was no breach of contract by the defendants." To impose this interpretation upon those words would in our opinion constitute an unjustifiable invasion of the power of the parties to establish the terms which they deem advisable. concur. in the absence of affirmative proof showing that the nonarrival of the machinery was due to some cause not having its origin in their own act or will. 611).J. So ordered. expresses no such positive obligation. instead of P300. . Upon this point what has already been said must suffice. Malcolm. as provided in section 510 of the Code of Civil Procedure. Johnson. Upon being installed in the position aforesaid. but in assessing the damages due for the six-month period. facultative as to the debtor. 8. and the debate returns again to the point whether in a contract for the prestation of service it is lawful for the parties to insert a provision giving to the employer the power to cancel the contract in a contingency which may be dominated by himself. As we view the case. is lawfully within the control of the obligor. But this circumstance does not make the stipulation illegal. which represents commutation of house rent for the month of June. We note that Uy Tieng Piao. That statement is no doubt correct in the sense intended by the learned author. a right which is expressed in article 1255 of the Civil Code and constitutes one of the most fundamental conceptions of contract right enshrined in the Code. by restricting its operation exclusively to cases where the nonarrival of the machinery may be due to extraneous causes not referable to the will or act of the defendants. specified in the plaintiff's fourth assignment of error. The view already expressed with regard to the legality and interpretation of the clause under consideration disposes in a great measure of the argument of the appellant in so far as the same is based on article 1119 of the Civil Code. In that case one Hardaker had contracted to render competent and efficient service as manager of a corporation. Ostrand. is not precisely in point. In other words. Our conclusion is that the Court of First Instance committed no error in rejecting the plaintiff's claim in so far as damages are sought for the period subsequent to the expiration of the first six months. in addition to the P300 awarded in the court below. they would of course be liable. as allowed by the lower court. as there was an admitted failure on the part of Hardaker to render competent service. Avanceña. This provision supposes a case where the obligor intentionally impedes the fulfillment of a condition which would entitle the obligee to exact performance from the obligor. and we gather from his comment on articles 1115 and 1119 of the Civil Code that a condition. C. The article can have no application to an external contingency which. But even when the question is viewed in this aspect their result is the same.

ROMUALDEZ. the notification to the defendant. vs. . to be shipped at San Francisco within the month of September /18. Sotelo. Mr. that it notified the intervenor that said tanks had arrived. BELL & CO. they also allege that. or a number of causes may act to entirely vitiate the indication of shipment as stated. alleging as special defense that Mr. the exigencies of the requirement of the United States Government.. and two electric motors at the price of two thousand pesos (P2. two steel tanks. J.000) each." Both parties appeal from this judgment. . alleged that the expellers and the motors were in good condition. with reference to the expellers. it must be held guilty of delay and liable for the consequences thereof. then it is entitled to the relief prayed for. the defendant. Mr. of the arrival of these goods. Bill of Exceptions. 1918. entered into contracts whereby the former obligated itself to sell. among other facts. 1919. which were to be shipped from San Francisco in the month of September. The plaintiff corporation notified the defendant. Sotelo refused to receive them and to pay the prices stipulated. each assigning several errors in the findings of the lower court. If it has.00). or as soon as possible. Ross and Lawrence and Ewald E. To solve this question. time of shipment being merely an indication of what we hope to accomplish.. L-16570 March 9. (Amended complaint. pages 16-30. and the good condition of the expellers and the motors. ordering them to "receive the aforesaid expellers and pay the plaintiff the sum of fifty thousand pesos (P50.) the following appears: SMITH." The tanks arrived at Manila on the 27th of April. 1918. Mr.. or as soon as possible. its obligation to bring the goods in question to Manila. As regards the tanks.91) for the nondelivery of the tanks. the plaintiff has fulfilled. and the intervenor. the plaintiff corporation and the defendant. defendant-appellant. with legal interest thereon from July 26." As a counterclaim or set-off. 1922 plaintiff. alleging.R. the latter's refusal to receive them and pay their price. under the contracts entered into and the circumstances established in the record. Inc which fact was known to the . for the total price of twenty-one thousand pesos (P21. the contracts A and B (pages 61 and 62 of the record) are similar. the intervenor suffered damages in the sums of one hundred sixteen thousand seven hundred eighty-three pesos and ninety-one centavos (P116. and that "it was only in May. the price of the said goods. And in the contract relative to the motors (Exhibit D. Ramon Sotelo for defendant-appellant. Vicente Sotelo.250) on account of the expellers and the motors not having arrived in due time. In other words. page 64. it is necessary to determine what period was fixed for the delivery of the goods. the motors and the expellers having arrived incomplete and long after the date stipulated. the order is accepted on the basis of shipment at Mill's convenience. Two Anderson oil expellers . and costs. VICENTE SOTELO MATTI. Inc. the Manila Oil Refining and By-Products Co. hereinbelow more particularly described. Selph for plaintiff-appellant. and in both of them we find this clause: To be delivered within 3 or 4 months The promise or indication of shipment carries with it absolutely no obligation on our part Government regulations. denied the plaintiff's allegations as to the shipment of these goods and their arrival at Manila." two expellers at the price of twenty five thousand pesos (P25. 1919: the expellers on the 26th of October. but rendered judgment against them. plaintiff-appellant. The plaintiff brought suit against the defendant.000). and the motors on the 27th of February. LTD. in due time. rec. and asked instructions from him as to the delivery thereof.) In their answer. The plaintiff.000) each. . Sotelo. that it immediately notified the defendant of the arrival of the goods. which the intervenor intended to use in the manufacture of cocoanut oil. The case having been tried. the same to be shipped from New York and delivered at Manila "within three or four months... further. 1919.783. and the latter to purchase from it. The principal point at issue in this case is whether or not.Republic of the Philippines SUPREME COURT Manila EN BANC G. otherwise. as to the delivery of which stipulation was made. No. but Mr. and that the defendant refused to receive any of them and to pay their price. Sotelo had made the contracts in question as manager of the intervenor. based on four separate causes of action. This is not guaranteed. railroad embargoes. Sotelo. the following stipulation appears: The following articles. couched in these words: "Approximate delivery within ninety days. the court below absolved the defendants from the complaint insofar as the tanks and the electric motors were concerned. as a consequence of the plaintiff's delay in making delivery of the goods. Mr.: In August. 1918. the Manila Oil Refining and ByProducts Co. and twenty-one thousand two hundred and fifty pesos (P21. 1919. In the contract Exhibit C (page 63 of the record). lack of vessel space.

(33) That in the execution and sales thereunder. H. This sale is subject to our being able to obtain Priority Certificate. as well as railroad." but that period was subject to the contingencies referred to in a subsequent clause. those articles could be brought to Manila or not." or Law 12. A day certain is understood to be one which must necessarily arrive. and the Code being thus silent. the contract says "within the month of September. This performance. From the record it appears that these contracts were executed at the time of the world war when there existed rigid restrictions on the export from the United States of articles like the machinery in question.Approximate delivery within ninety days. 1871. At the time of the execution of the contracts. and Aureno Belisario as his only heirs. That when the fulfillment of the conditions does not depend on the will of the obligor.) And as the export of the machinery in question was. it is noted that "this is not guaranteed. is not contrary to the law of contracts. "Approximate delivery within ninety days. Considering these contracts in the light of the civil law. was entitled to enforce performance of the obligation. which is fictitious not real is not expressly authorized by the Code. As to the tanks. 1918. but it is neither disallowed. the parties were not unmindful of the contingency of the United States Government not allowing the export of the goods. transportation was difficult. (referring to pure and conditional obligations). the following doctrine is laid down: Second. the obligations must be regarded as conditional. in which C. when in the said finding of the lower court. the obligor's part of the contract is complied withalf Belisario not having exercised his right of repurchase reserved in the sale of Basilio Borja mentioned in paragraph (13) hereof. the exigencies of the requirements of the United States Government. 1125.) The decisions referred to by Mr. 8. vol. In cases like this. Under these stipulations. as stated in the contract." but to this is added "or as soon as possible. but on that of a third person who can in no way be compelled to carry it out. Eugenio. Addison. Obligations for the performance of which a day certain has been fixed shall be demandable only when the day arrives. That when the fulfillment of the condition does not depend on the will of the obligor. regarding "Government regulations. the obligation is conditional and shall be governed by the rules of the next preceding section. by the Civil Code. which fact was known to the parties. then the delivery was subject to a condition the fulfillment of which depended not only upon the effort of the herein plaintiff. Tit. Book 10. the obligor will be deemed to have sufficiently performed his part of the obligation. (Manresa's commentaries on the Civil Code [1907]. even though its date be unknown. or to Law 1. subject to the rules and regulations. 14. vol. strikes or other causes known as "Force Majeure" entirely beyond the control of the sellers or their representatives. Vitaliana. Civ. (32) The Maximo Belisario left a widow. and February 23." with respect to the motors. This is not guaranteed." but right after this. the affidavit of Basilio Borja for the consolidacion de dominio was presented for record in the registry of deeds and recorded in the registry on the same date. and maritime. If that is the case. it cannot be said that any definite date was fixed for the delivery of the goods. page 132. as a matter of fact." in connection with the tanks and "Priority Certificate. Code. who can in no way be compelled to carry it out. Tit. the judgment of the said court. and it is found by the lower court that the obligor has done all in his power to comply with the obligation. of the "Novísima Recopilación. as well as to railroad embargoes. I. of Partida 5. 11. In all these contracts. the agreement was that the delivery was to be made "within 3 or 4 months. If the uncertainty should consist in the arrival or non-arrival of the day. we cannot but conclude that the term which the parties attempted to fix is so uncertain that one cannot tell just whether. hence clauses were inserted in the contracts. In such cases. which are not expressly provided for. but on that of a third person. no law or precedent is alleged to have been violated. as we think it is. McClure appears as the judgment creditor. With regard to the expellers. In the former it is held: First. subject to the United State Government requirements. but upon the will of third persons who could in no way be compelled to fulfill the condition. riots on land or on the sea. lack of vessel space. but impliedly covered. subject to the United States Government requirements and also subject to confirmation of manufactures. nor of the fact that the other foreseen circumstances therein stated might prevent it. the opponent Adelina Ferrer and three minor children.) In the second decision. even if the condition has not been fulfilled in reality. ordering the other party to comply with his part of the contract. railroad embargoes. Manresa are those rendered by the supreme court of Spain on November 19. contingent upon the sellers obtaining certificate of priority and permission of the United States Government. who ." The oral evidence falls short of fixing such period. (Jurisprudencia Civil published by the directors of the Revista General de Legislacion y Jurisprudencia [1866]. if he has done all that was in his power. he was represented by the opponent Peter W. which limits itself only to declare valid those conditions and the obligation thereby affected." And with reference to the motors. the contract contains this expression. (Art. the decisions prior to the Civil Code have held that the obligee having done all that was in his power. there is a final clause as follows: The sellers are not responsible for delays caused by fires. 1896. the old view can be maintained as a doctrine. page 656.

499. but has acquired no title through the redemption. If there are newspaper published in the province in both the Spanish and English languages. we think. if redemption be not made. 3. and said Director of Lands shall have full control and custody thereof to lease or sell the same or any portion thereof in the same manner as other public lands are leased or sold: Provided. The appellant Addison repurchased under the final proviso of the section quoted and was allowed to do so as the successor in interest of the original owner under the execution sale above discussed. he is entitled to reimbursement for the money paid for the redemption of the land. at any time before a sale or contract of sale has been made by the director of Lands to a third party. . for the same period. we find that in cases Nos. this court held that if a sheriff sells without the notice prescribe by the Code of Civil Procedure induced thereto by the judgment creditor and the purchaser at the sale is the judgment creditor. In case such redemption be not made within the time above specified the Government of the Philippine Islands shall have an absolute. the provincial treasurer shall immediately notify the Director of Lands of the forfeiture and furnish him with a description of the property. 435 and 450 the hours advertised were from 9:00 in the morning until 4.. As will be seen from the foregoing statement of facts. * * * * * * * In case No. be disposed of in comparatively few words. by paying therefore the whole sum due thereon at the time of ejectment together with a penalty of ten per centum . and also where the property is to be sold. supra. he rest his title (1) on the sales under the executions issued in cases Nos. The correct notice was published twice in a local newspaper. 4. who also took charged of the publication of such notices. In the last case the sale was advertised for the hours of from 8:30 in the morning until 4:30 in the afternoon. the first publication being made only fourteen days before the date of the sale. 454. . . as follows: 1. In case No. it is self-evident that notices of the sales mentioned were not given as prescribed by the statute and taking into consideration that in connection with these sales the appellant Addison was either the judgment creditor or else occupied a position analogous to that of a judgment creditor. considering the character and condition of the property. in violation of section 457 of the Code of Civil Procedure. or his legal representative. . 2. however. . As we have seen. The newspaper is a weekly periodical published every Saturday afternoon. * * * * * * * Examining the record. and (2) on a purchase from the Director of Lands after the land in question had been forfeited to the Government for non-payment of taxes under Act No. This must now be regarded as the settled doctrine in this jurisdiction whatever the rule may be elsewhere. the date was changed to October 14th. 808). 1791 pertinent to the purchase or repurchase of land confiscated for nonpayment of taxes are found in section 19 of the Act and read: . in some newspaper published or having general circulation in the province. That the original owner. indefeasible title to said real property. for such time as may be reasonable. 1916. notice thereof must be given. Comparing the requirements of section 454. the sales must be held invalid. Before the sale of property on execution. 435. Bartolome and Germann & Co. (38 Phil. with interest. In cases Nos. The conveyance or reconveyance of the land from the Director of Lands is equally invalid. It appears affirmatively from the evidence in the present case that there is a newspaper published in the province where the sale in question took place and that the assessed valuation of the property disposed of at each sale exceeded P400. The claims of the opponent-appellant Addison have been very fully and ably argued by his counsel but may. 454 there were only two publications of the notice in a newspaper. but upon discovering that October 15th was a Sunday. the notice first published gave the date of the sale as October 15th. In cases of real property. 1791. was therefore not the successor of the original owner and could only have obtained a valid conveyance of such titles as the Government might have by following the procedure prescribed by the Public Land Act for the sale of public lands. there were also only two publications. and in one published in the English language:Provided. for twenty days in three public places of the municipality or city where the property is situated. and 499 of the court of the justice of the peace of Dagupan with the priority of inscription of the last two sales in the registry of deeds. In the case of Campomanes vs. The sheriff's sales under the execution mentioned are fatally defective for what of sufficient publication of the notice of sale. 435 and 450 the sales took place on October 14. by posing written notice of the time and place of the sale in three public places of the municipality or city where the sale is to take place. the first of which was made thirteen days before the sale. the sale is absolutely void and not title passes. In all of the cases the notices of the sale were prepared by the judgment creditor or his agent. Section 454 of the Code of civil Procedure reads in part as follows: SEC. and publishing a copy thereof once a week. . That such publication in a newspaper will not be required when the assessed valuation of the property does not exceed four hundred pesos. with what was actually done. then a like publication for a like period shall be made in one newspaper published in the Spanish language. the date of the sale itself. The provisions of Act No. 450. shall have the right to repurchase the entire amount of his said real property. if there be one. In case of perishable property. he acquired no rights under these sales. by posting a similar notice particularly describing the property. Upon the expiration of the said ninety days.prepared and had charge of publication of the notices of the various sales and that in none of the sales was the notice published more than twice in a newspaper. the first publication was made on October 7th and the second and last on October 14th. 454.30 in the afternoon.

. and the defendant Mr. and Johns. C. 1919. Vicente Sotelo Matti. the expellers and the motors in question. Malcolm. So ordered. Avanceña. JJ. Villamor. The opposition of Adelina Ferrer must also be overruled.The question of the priority of the record of the sheriff's sales over that of the sale from Belisario to Borja is extensively argued in the briefs. Johnson.. void sheriff's or execution sales cannot be validated through inscription in the Mortgage Law registry. the date of the filing of the complaint. Ostrand.000). concur. Araullo.J. and to pay the plaintiff the sum of ninety-six thousand pesos (P96. sentenced to accept and receive from the plaintiff the tanks. until fully paid. Street. and the costs of both instances. She maintained that the land in question was community property of the marriage of Eulalio Belisario and Paula Ira: that upon the death of Paula Ira inealed from is modified. but from our point of view is of no importance.. with legal interest thereon from July 17.

Lano del Norte. .00 as moral damages and P15. among other things. 1967. that BUYER shall not buy from any other seller whose pulp woods being sold shall have been established to have emanated from the SELLER'S lumber and/or firewood concession. That BUYER shall have the option to buy from other SELLERS who are equally qualified and holders of appropriate government authority or license to sell or dispose. WHICH WAS PROMPTED BY SERIOUS AND UNFORESEEN DEFECTS IN THE MILL. (pages 8-9.. Quetulio-Losa.. petitioner Rustan proposed. IN AWARDING MORAL DAMAGES AND ATTORNEY'S FEES IN THE ABSENCE OF FRAUD OR BAD FAITH. WAS NOT IN THE LAWFUL EXERCISE OF ITS RIGHTS UNDER THE CONTRACT OF SALE. On appeal to the then Intermediate Appellate Court. Jr. Presiding Justice Ramon G. J. xxx xxx xxx G. Inc.00 per cubic meter of pulp wood raw materials to be delivered at the buyer's plant in Baloi. And that SELLER has the priority to supply the pulp wood materials requirement of the BUYER. . petitioner Rustan established a pulp and paper mill in Baloi. Rollo) The generative facts of the controversy. who is a holder of a forest products license. THE INTERMEDIATE APPELLATE COURT and ILIGAN DIVERSIFIED PROJECTS. . Petition. . Petition.: When petitioners informed herein private respondents to stop the delivery of pulp wood supplied by the latter pursuant to a contract of sale between them. IN HOLDING PERSONALLY LIABLE UNDER THE CONTRACT OF SALE PETITIONER TANTOCO WHO SIGNED MERELY AS REPRESENTATIVE OF PETITIONER RUSTAN. A. 1968. . recommended the acceptance of deliveries from other suppliers of the pulp wood materials for which the corresponding deliveries were made. (page 18. it is argued that the Appellate Court erred. with Justices Caguioa. .. INC. during the month of April. that the SELLER is given sufficient notice. concurring. are fairly simple. as gathered from the pleadings. modified the judgment by directing herein petitioners to pay private respondents. That the BUYER shall have the right to stop delivery of the said raw materials by the seller covered by this contract when supply of the same shall become sufficient until such time when need for said raw materials shall have become necessarily provided. vs.R. These prefatory business proposals culminated in the execution. Lluch agreed to sell. the technical staff of Rustan Pulp and Paper Mills. AND PETITIONER VERGARA WHO DID NOT SIGN AT ALL. But during the test run of the pulp mill.00 as attorney's fees (pages 48-58. which prompted the Japanese supplier of the machinery to recommend the stoppage of the . SR. ROMEO A. Rollo). and 7. Rollo).Republic of the Philippines SUPREME COURT Manila THIRD DIVISION C. LLUCH and ROBERTO G. in the letter-reply: 2. IN HOLDING THAT PETITIONER RUSTAN'S DECISION TO SUSPEND TAKING DELIVERY OF PULP WOOD FROM RESPONDENT LLUCH. . who spoke for the First Civil Cases Division. Petition. of a contract of sale whereby Romeo A. . INC. however.000. private respondents sued for breach of their covenant. page 24. . and Luciano. In response thereto. respondent Lluch. 1992 RUSTAN PULP & PAPER MILLS. Inc. No.000.. Lanao del Norte. undertook to pay the price of P30. B. Gaviola. transmitted a letter to petitioner Rustan for the supply of raw materials by the former to the latter. . page 20. and ROMEO S. . On March 20. the machinery line thereat had major defects while deliveries of the raw materials piled up. In the petition at bar. petitioners. . TANTOCO. VERGARA. The court of origin dismissed the complaint but at the same time enjoined petitioners to respect the contract of sale if circumstances warrant the full operation in a commercial scale of petitioners' Baloi plant and to continue accepting and paying for deliveries of pulp wood products from Romeo Lluch (page 14. 70789 October 19. MELO. and Rustan Pulp and Paper Mill. Rollo) In the installation of the plant facilities. pages 14-15. Sometime in 1966. the sum of P30. respondents. jointly and severally. BORROMEO. Of pertinent significance to the issue at hand are the following stipulations in the bilateral undertaking: 3. That the contract to supply is not exclusive because Rustan shall have the option to buy from other suppliers who are qualified and holder of appropriate government authority or license to sell and dispose pulp wood. BIENVENIDO R.

by allowing them to deliver all its stockpiles of cut wood" (Decision. More so. By: DR.. it accommodated all its suppliers of raw materials. "D" shows that defendants were terminating the contract of sale (Exh. Respondent Court found it ironic that petitioners had to exercise the prerogative regarding the stoppage of deliveries via the letter addressed to Iligan Diversified Project. Fermin Villanueva and Pacasum even after September 30. First. but the query was not answered by petitioners. if We consider that appellee is a new company and could not therefore afford to absorb more losses than it already allegedly incurred by the consequent defects in the machineries. the complaint for contractual breach was filed which. This alleged ambiguity notwithstanding. Lluch Dear Mr. or that they are unable to go into full commercial operation or that their machineries are defective or even that the pulp wood materials coming from appellants are sub-standard. RUSTAN PULP AND PAPER MILLS. was dismissed. relative to the nature of liability. i. Lluch: This is to inform you that the supply of raw materials to us has become sufficient and we will not be needing further delivery from you. Second. The fact that appellees were buying and accepting pulp wood materials from other sources other than the appellants even after September 30. Furthermore. The letter of September 30. and refusing any future or further delivery whether on the ground that they had sufficient supply of pulp wood materials or that appellants cannot meet the standard of quality of pulp wood materials that Rustan needs or that there were defects in appellees' machineries resulting in an inability to continue full commercial operations. Salem Usman. Vergara and Romeo Lluch. on September 30. 1968. respondent Court clarified the eleven errors assigned below by herein petitioners and it seems that petitioners were quite satisfied with the Appellate Court's in seriatim response since petitioners trimmed down their discourse before this Court to three basic matters. INC. page 202. please stop delivery thirty (30) days from today. are ready to accept deliveries from appellants. In the process of discussing the merits of the appeal interposed therefrom. because as appellee Rustan itself claimed "if the plant could not be operated on a commercial scale. 1968. Romeo Lluch." Inconsistent because this kind of "concern" or "accommodation" is not usual or consistent with ordinary business practice considering that this would mean adequate losses to the company. Iligan City Attention: Mr. it would be unjust for the court a quo to rule that the contract of sale be temporarily suspended until Rustan. Record on Appeal) to be both illogical and inconsistent. On January 23. Lluch and the other suppliers resumed deliveries after the series of talks between Romeo S. . and the feasibility of awarding moral damages including attorney's fees. VERGARA Resident Manager Private respondent Romeo Lluch sought to clarify the tenor of the letter as to whether stoppage of delivery or termination of the contract of sale was intended. the propriety of the stoppage. there is evidence on record that appellees have been accepting deliveries of pulp wood materials from other sources. 1968 belies that they have more than sufficient supply of pulp wood materials. 1968 Iligan Diversified Projects. We cannot accept the reasons given by appellees as to why they were stopping deliveries of pulp wood materials. Inc. "A"). The suppliers were informed to stop deliveries and the letter of similar advice sent by petitioners to private respondents reads: September 30. as earlier noted. . Inc. . Clearly therefore. Exh.e. this is a breach of the contract entered into by and between appellees and appellants which warrants the intervention of this Court. and they could always . We find it preposterous for a business company like the appellee to accumulate stockpiles of cut wood even after its letter to appellants dated September 30. xxx xxx xxx . Petitioner's paradoxial stance portrayed in this manner: . . As per the terms of our contract. This would make the resumption of the contract purely dependent on the will of one party the appellees. 1968 stopping the deliveries because the supply of raw materials has become sufficient. it would then be illogical for defendant Rustan to continue accepting deliveries of raw materials. 1969.deliveries. Lastly. 1968. 1968 because petitioners never really stopped accepting deliveries from private respondents until December 23. et al. We likewise find the court a quo's finding that "even with one predicament in which defendant Rustan found itself wherein commercial operation was delayed. including plaintiff. Very truly yours. ROMEO S. Illogical. Romeo A.

as aforesaid. 1968 is completely immaterial. 873. Revised Rules of Court). 1968 sent to private respondents is well within the right of stoppage guaranteed to them by paragraph 7 of the contract of sale which was construed by petitioners to be a temporary suspension of deliveries. Page 160). Gutierrez. Inc. through Justice Street. a truism in legal jurisprudence that a condition which is both potestative (or facultative) and resolutory may be valid. because petitioners continued accepting deliveries from the suppliers. said in Taylor vs. Davide. It is. petitioners opted to open the plant to greater loss. SO ORDERED. first of all. even though the saving clause is left to the will of the obligor like what this Court.. as they did in the instant case." (Page 202.. Decision. Uy Tieng Piao and Tan Liuan (43 Phil. Rollo). Rule 131. one that was not agreed upon by the parties.. Altruism may be a noble gesture but petitioners' stance in this respect hardly inspires belief for such an excuse is inconsistent with a normal business enterprise which takes ordinary care of its concern in cutting down on expenses (Section 3. the decision appealed from is hereby MODIFIED in the sense that only petitioner Rustan Pulp and Paper Mills is ordered to pay moral damages and attorney's fees as awarded by respondent Court. Pages 55-57.claim. cannot be made liable thereunder in his individual capacity in the absence of stipulation to that effect due to the personality of the corporation being separate and distinct from the person composing it (Bangued Generale Belge vs. Page 55. Rollo). 164). New Civil Code). they in effect disregarded their own advice by accepting the deliveries from the suppliers. concur. The demeanor of petitioners along this line was sought to be justified as an act of generous accommodation. Inc. while Romeo S. The two exceptions contemplated by Article 1897 of the New Civil Code where agents are directly responsible are absent and wanting. A purely potestative imposition of this character must be obliterated from the face of the contract without affecting the rest of the stipulations considering that the condition relates to the fulfillment of an already existing obligation and not to its inception (Civil Code Annotated. it would then be illogical for defendant Rustan to continue accepting deliveries of raw materials. In support of the second ground for allowance of the petition. WHEREFORE. Added to this. We feel that there is cogent basis for private respondent's apprehension on the illusory resumption of deliveries inasmuch as the prerogative suggests a condition solely dependent upon the will of petitioners. by Padilla. petitioners are of the impression that the letter dated September 30. on whether Rustan Pulp and Paper Mills may legally exercise the right of stoppage should there be a glut of raw materials at its plant. Page 40. And because of this precept. It is for this same reason that We are not inclined to follow the interpretation of petitioners that the suspension of delivery was merely temporary since the nature of the suspension itself is again conditioned upon petitioner's determination of the sufficiency of supplies at the plant. which allowed a condition for unilateral cancellation of the contract when the machinery to be installed on the factory did not arrive in Manila. Record on Appeal. Jr. subject to redelivery when the need arises as determined likewise by petitioners. Volume 4. of course. On this score. Neither are We prepared to accept petitioners' exculpation grounded on frustration of the commercial object under Article 1267 of the New Civil Code. 1987 Edition. 84 Phil. Jr. Rollo) The matter of Tantoco's and Vergara's joint and several liability as a result of the alleged breach of the contract is dependent.. Walter Bull and Co. is certainly inappropriate for application to the case at hand because the factual milieu in the legal tussle dissected by Justice Street conveys that the proviso relates to the birth of the undertaking and not to the fulfillment of an existing obligation. There is no doubt that the contract speaks loudly about petitioners' prerogative but what diminishes the legal efficacy of such right is the condition attached to it which. page 152). JJ. It was indeed incongruous for petitioners to have sent the letters calling for suspension and yet. thus compounding the costs by accepting additional supply to the stockpile. Decision. the court a quo was imposing a new condition in the contract. by Tolentino. Page 8. We have to agree with petitioners' citation of authority to the effect that the President and Manager of a corporation who entered into and signed a contract in his official capacity. (d). Petition. 1991 edition. Verily. the petitioner's action when they acknowledged that "if the plant could not be operated on a commercial scale. This conduct will estop petitioners from claiming that the breakdown of the machinery line was an extraordinary obstacle to their compliance to the prestation. Volume 4. is dependent exclusively on their will for which reason. But the conclusion drawn from the Taylor case. Petitioners can stop delivery of pulp wood from private respondents if the supply at the plant is sufficient as ascertained by petitioners. which entailed greater loss to them and "was not motivated by the usual businessman's obsession with profit" (Page 34. and Romero. (Pages B-10. We have no alternative but to treat the controversial stipulation as inoperative (Article 1306. that they have more than sufficient supply of pulp wood when in fact they have been accepting the same from other sources. 879. . cited in Commentaries and Jurisprudence on the Civil Code. Bidin. Knowing fully well that they will encounter difficulty in producing output because of the defective machinery line. And insofar as the express discretion on the part of petitioners is concerned regarding the right of stoppage. Vergara was not privy to the contract of sale. Vergara's supposed non-participation in the contract of sale although he signed the letter dated September 30. This is Our simple understanding of the literal import of paragraph 7 of the obligation in question. Petitioners argue next that Tantoco and Vergara should not have been adjudged to pay moral damages and attorney's fees because Tantoco merely represented the interest of Rustan Pulp and Paper Mills.

00 per square meter. No. Province of Rizal.000 square meters. DE ONGSIONG. of Legal age. the VENDEE. hereinafter referred to as the VENDEE: W I T N E S S E T H : That G. On 09 June 1988. subject to the following terms and conditions: 1. ROMERO. That the sum of FIFTY THOUSAND PESOS (P50.511. 1988 by and between: ENRIQUETA CHUA VDA. vs. Alfonso Flores and his wife. widow. permalite insulation and processed perlite ore. Municipality of Parañaque. the VENDOR agrees to sell to the VENDEE. 361402 issued by the Registry of Deeds of Pasig and more particularly described as follows: xxx xxx xxx WHEREAS. of legal age. Parañaque. respondents. Philippine Currency. de Ongsiong. a civil engineer. for (sic) has offered to buy a parcel of land and the VENDOR has accepted the offer. HON.00) ONLY shall be paid 45 days after the removal of all squatters from the above described property. located in Barrio San Dionisio. more or less.00) ONLY." was executed between petitioner and private respondent. hereinafter referred to as the VENDOR.000. THEREFORE. he found the place suitable for a central warehouse..00) ONLY Philippine Currency. denominated "Deed of Conditional Sale. 1995 VIRGILIO R.000. petitioner and his foreign partners decided to put up a central warehouse in Metro Manila on a land area of approximately 2. titles and interest in and to the property mentioned in the FIRST WHEREAS CLAUSE. assign. the lot was covered by TCT No. 361402 in the name of private respondent Enriqueta Chua vda. payable by VENDEE to in to (sic) manner set forth. and residing at 110 San Miguel St.600. the Flores spouses called on petitioner with a proposal that should he advance the amount of P50. except for the presence of squatters in the area. private respondent would agree to sell the property for only P800. VITUG. successors. Plainview Subd. Metro Manila.952) SQUARE METERS.00 which could be used in taking up an ejectment case against the squatters. COURT OF APPEALS and ENRIQUETA CHUA VDA. Quezon City. married to Severina L. The project was made known to several freelance real estate brokers. accompanied by a broker.R. .: The parties pose this question: May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause traceable to his own failure to have the squatters on the subject property evicted within the contractually-stipulated period? Petitioner Virgilio R. Filipino and residing at 105 Simoun St. Petitioner visited the property and. the VENDOR is the owner of One (1) parcel of land with a total area of ONE THOUSAND NINE HUNDRED FIFTY TWO (1. DE ONGSIONG. In 1988. The simplydrawn contract read: DEED OF CONDITIONAL SALE KNOW ALL MEN BY THESE PRESENTS: WHEREAS. J. for and in consideration of the sum of ONE MILLION FIVE HUNDRED SIXTY ONE THOUSAND SIX HUNDRED PESOS (P1. executors.. is to be paid upon signing and execution of this instrument. The balance of the purchase price in the amount of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1.952 square meters. manufacture and exportation of perlite filter aids. a contract. covered by TCT No.561. Metro Manila. was engaged in the business of production. Romero. petitioner. 107207 November 23. Mandaluyong Metro Manila. Lat. Petitioner expressed his concurrence. all her rights.. their heirs. subject to the terms and conditions hereinafter stipulated: NOW. Philippines this 9th day of June.Republic of the Philippines SUPREME COURT Manila THIRD DIVISION This Contract. 2. made and executed in the Municipality of Makati. A day or so after the announcement. Located in Barangay San Dionisio. Filipino. -andVIRGILIO R. ROMERO. Later. administrators. offered a parcel of land measuring 1.600.

" On 23 June 1989. assurances and such other fees and expenses as may be necessary to transfer the title to the name of the VENDEE shall be for the account of the VENDEE while capital gains tax shall be paid by the VENDOR. refused the tender and stated:. Upon full payment of the overall purchase price as aforesaid. counsel for private respondent.600. Ongsiong is precluded from rejecting its binding effects relying upon her inability to eject the squatters from the premises of subject property during the agreed period. it is now possible to eject the squatters from the premises of the subject property. she said. VENDOR without necessity of demand shall immediately sign. Acting favorably on the request.000. Our client believes that with the exercise of reasonable diligence considering the favorable decision rendered by the Court and the writ of execution issued pursuant thereto. Atty.) (Sgd. the court suspended the enforcement of the writ of execution accordingly. On 08 June 1989. she could not "get rid of the squatters" on the lot. judgment was rendered ordering the defendants to vacate the premises. DE ONGSIONG Vendee Vendor SIGNED IN THE PRESENCE OF: (Sgd. Expenses for the registration such as registration fees.F. . private respondent filed a complaint for ejectment (Civil Case No. IN WITNESS WHEREOF.00.) (Sgd. in his reply of 17 April 1989. still later.600. asked the Metropolitan Trial Court of Parañaque for a grace period of 45 days from 21 April 1989 within which to relocate and transfer the squatter families. private respondent sought to return the P50.000. Apostol wrote back to explain: The contract of sale between the parties was perfected from the very moment that there was a meeting of the minds of the parties upon the subject lot and the price in the amount of P1. Cruz 1 Pursuant to the agreement. Apostol. Jr. covenanted and stipulated by and between the parties hereto that if after 60 days from the date of the signing of this contract the VENDOR shall not be able to remove the squatters from the property being purchased.. provided. Philippines on this 9th day of June. or on 21 February 1989. That in the event that the VENDEE shall not be able to pay the VENDOR the balance of the purchase price of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1. He 6 added that private respondent had "decided to retain the property. Ongsiong Jack M. for which reason.000. A few months later. on 30 March 1989. Ms. advised Atty. Apostol reminded private respondent on the expiry of the 45-day grace period and his client's willingness to "underwrite the expenses for the execution of the judgment and ejectment of the occupants. In a letter. Atty. transfer fee.00 from petitioner."5 In his letter of 19 June 1989. acknowledged (sic) and deliver the corresponding deed of absolute sale in favor of the VENDEE free from all liens and encumbrances and all Real Estate taxes are all paid and updated. the FIFTY THOUSAND PESOS (P50. Atty. ROMERO ENRIQUETA CHUA VDA. Moreover. Atty.00) ONLY after 45 days from written notification to the VENDEE of the removal of the squatters from the property being purchased.3. Suffice it to state that. in behalf of private respondent. the downpayment made by the buyer shall be returned/reimbursed by the VENDOR to the VENDEE. through its Regional Director for Luzon. the parties hereunto signed those (sic) presents in the City of Makati MM. Joaquin Yuseco. forthwith received and acknowledged 2 3 a check for P50. he proposes that he shall take it upon himself to eject the squatters.) Rowena C. the Presidential Commission for the Urban Poor ("PCUD"). The decision was handed down beyond the 60-day period (expiring 09 August 1988) stipulated in the contract. 1988. the provision of the Deed of Conditional Sale do not grant her the option or prerogative to rescind the contract and to retain the property should she fail to comply with the obligation she has assumed under the Alfonso Flores. that expenses which shall be incurred by reason thereof shall be chargeable to 4 the purchase price of the land. Meanwhile. Viloria.511.561. Apostol that the Deed of Conditional Sale had been rendered null and void by virtue of his client's failure to evict the squatters from the premises within the agreed 60-day period. It is hereby agreed. (Sgd. Farley O. The writ of execution of the judgment was issued. the contract had already been partially fulfilled and executed upon receipt of the downpayment of your client. 7579) against Melchor Musa and 29 other squatter families with the Metropolitan Trial Court of Parañaque.00 she received from petitioner since.) VIRGILIO R. execute.00) previously paid as downpayment shall be forfeited in favor of the VENDOR. counsel for petitioner. documentary stamp. Sergio A. dated 07 April 1989.

ses. 7579 on motion of private respondent but the squatters apparently still stayed on. we refer you to our letters addressed to your client dated April 17. however. Besides. the failure of such condition would prevent the juridical relation itself from coming into existence. 1990). A perfected contract of sale may either be absolute or conditional 12 depending on whether the agreement is devoid of.00 cash. and that the provision requiring a mandatory return/reimbursement of the P50. If the condition is imposed on an obligation of a party which is not complied with.000.00 if the vendor were to fail in her obligation to free the property from squatters within the stipulated period or (b). 1989. If she were really afraid of the squatters. any condition imposed on the passing of title of the thing to be conveyed or on theobligation of a party thereto. reimbursement of the downpayment.000. upon the other hand. private respondent. she did not even report to the police the alleged phone threats from the squatters. under the circumstances. The court ruled that the provisions in the contract relating to (a) the return/reimbursement of the P50. i. amounted to "penalty clauses". on 26 June 1990. your client has not complied with her obligation under their contract in good faith. Precisely. was the party who could. Private respondent appealed to the Court of Appeals. tsn. For example. may be treated as absolute in nature. the Regional Trial Court of Makati 8 rendered decision holding that private respondent had no right to rescind the contract since it was she who "violated her obligation to eject the squatters from the subject property" and that petitioner. Branch 133. Where.00 advance payment. the non-occurrence of which resulted in the failure of the object of the contract. 13 In determining the real character of the contract. a perusal of the terms and conditions of the contract clearly shows that the right to rescind the contract and to demand the return/reimbursement of the downpayment is granted to our client for his protection. the Metropolitan Trial Court issued an alias writ of execution in Civil Case No. Civil Case No.00 remittance made by petitioner. in fine. center on the nature of the contract adverted to and the P50. No pronouncement as to costs. accordingly. Jan. On 29 May 1992. and a new one entered declaring the contract of conditional sale dated June 9. Back to Civil Case No. WHEREFORE. Notably.000.000. Furthermore. it concluded. the sum's forfeiture by the vendor if the vendee were to fail in paying the agreed purchase price. Moreover. Please consider this letter as a tender of payment to your client and a demand to execute the absolute Deed of Sale.000.. the appellate court rendered its decision. 1989. the ejectment of the squatters from the land. It is undeniable that Ms. 3. under Article 1191 of the Civil Code. Civil Code). a deed of sale. 6) in the ejectment suit which was almost two months after she filed the complaint before this Court on June 27. the so-called squatter 9 factor is simply factuitous (sic). the title given to it by the parties is not as much significant as its substance. prompted by petitioner's continued refusal to accept the return of the P50. Militating against her profession of good faith is plaintiffs conduct which is not in accord with the rules of fair play and justice. the condition is imposed upon the perfection of the contract itself. of course. on 25 August 1989. filed with the Regional Trial Court of Makati. namely: (1) he (sic) is afraid of the squatters. 1989 (Exh. the other party may either refuse to proceed or waive said condition (Art. Instead. although denominated as a deed of conditional sale. our client is the injured party. our client had opted to take it upon himself to eject the squatters from the premises.e. Ongsiong deliberately refused to exert efforts to eject the squatters from the premises of the subject property and her decision to retain the property was brought about by the sudden increase in the value of realties in the surrounding areas. Undoubtedly.00 which was deposited in the 11 court below. 89-4394. To the mind of the Court. 7 A few days later (or on 27 June 1989).10 It opined that the contract entered into by the parties was subject to a resolutory condition. or subject to. that private respondent substantially complied with her obligation to evict the squatters. and (2) she has spent so much to eject them from the premises (p. 1988 cancelled and ordering the defendant-appellee to accept the return of the downpayment in the amount of P50. it is basic under the law on contracts that the power to rescind is given to the injured party.00 in case private respondent would fail to eject the squatters within the 60-day period was not a penal clause. 89-4394 for rescission of the deed of "conditional" sale. Meanwhile. Failing to obtain a reconsideration.000.contract. she caused the issuance of an alias writ of execution on August 25. of availing himself of the power to rescind the contract and demand the return. The court added: This Court is not convinced of the ground relied upon by the plaintiff in seeking the rescission. the decision appealed from is REVERSED and SET ASIDE. then she should not have pursued the issuance of an alias writ of execution. plus damages. and for the consignation of P50. dismissed the complaint and ordered. rescind the agreement. that it was petitioner who was not ready to pay the purchase price and fulfill his part of the contract. Thus. When ownership is retained until the fulfillment of a positive condition the breach of the condition will simply prevent the duty to convey title from acquiring an obligatory force. In fact. instead. 1989 and June 8. 1545. if title to the property sold is not . being the injured party. petitioner filed this petition for review on certiorari raising issues that. The lower court. private respondent to eject or cause the ejectment of the squatters from the property and to execute the absolute deed of conveyance upon payment of the full purchase price by petitioner. 6.

to shoulder the expenses of the execution of the judgment in the ejectment case and to make arrangements with the sheriff to effect such execution. in fact. the demandability of the reciprocal prestation of the other party. i. private respondent is obligated to evict the squatters on the property. Parañaque. otherwise. since.e. in the case before us. neither may petitioner demand its reimbursement from private respondent nor may private respondent subject it to forfeiture. JJ. on the basis of our foregoing conclusions. Romero. may be in keeping with good faith. concur. the matter has ceased to be an issue. The reciprocal obligations referred to would normally be.000.00 payable "45 days after the removal of all squatters from the above described property.600. and another is entered ordering petitioner to pay private respondent the balance of the purchase price and the latter to execute the deed of absolute sale in favor of petitioner. Feliciano. Parenthetically. It would be futile to challenge the agreement here in question as not being a duly perfected contract. the payment of the agreed purchase price and. in the case of vendee. SO ORDERED. as the case may be. This option clearly belongs to petitioner and not to private respondent." From the moment the contract is perfected. In his letter of 23 June 1989. of which P50. We share the opinion of the appellate court that the undertaking required of private respondent does not constitute a "potestative condition dependent solely on his will" that might. this offer to pay. leaving unaffected the obligation itself. Melo and Panganiban. 14 The term "condition" in the context of a perfected contract of sale pertains. In any case. the questioned decision of the Court of Appeals is hereby REVERSED AND SET ASIDE. Here. It is this provision which is the pertinent rule in the case at bench. that where the so-called "potestative condition" is imposed not on the birth of the obligation but on its fulfillment. WHEREFORE.600. Petitioner did not breach the agreement. according to their nature. Private respondent's failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance 16 with Article 1545 of the Civil Code. 361402 of the Registry of Deeds for Pasig and therein technically described. assuming for the sake of 23 argument that such a demand is proper under Article 1592 of the Civil Code. the fulfillment of certain express warranties (which.000.00 was to be paid upon the execution of the document of sale and the balance of P1.. A sale is at once perfected when a person (the seller) obligates himself. Suffice it to say that petitioner having opted to proceed with the sale." We must hasten to add. would likewise suffice to defeat private respondent's prerogative to rescind thereunder. The ejectment of the squatters is a condition the operative act of which sets into motion the period of compliance by petitioner of his own obligation. . evidently. Article 1545 of the Civil Code. aforementioned. was specifically identified to be a 1. usage and law. 21 The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between 22 them. Rizal. in reality. 19 In contracts of sale particularly. covered by Transfer Certificate of Title No. to pay the balance of the purchase price.00. of the prescribed condition. There is no need to still belabor the question of whether the P50.511. The purchase price was fixed at P1. having been made prior to the demand for rescission. in the case at bench is the timely eviction of the squatters on the property).561. for a price certain. allows the obligee to choose between proceeding with the agreement or waiving the performance of the condition.reserved in the vendor or if the vendor is not granted the right to unilaterally rescind the contract predicated on the fulfillment or non-fulfillment. however. counsel for petitioner has tendered payment and demanded forthwith the execution of the deed of absolute sale. to the compliance by one party of an undertaking the fulfillment of which would beckon. petitioner has waived the performance of the condition imposed on private respondent to free 20 the property from squatters.. It is private respondent who has failed in her obligation under the contract.00 advance payment is reimbursable to petitioner or forfeitable by private respondent. private respondent's action for rescission is not warranted. She is not the injured party. only the obligation is avoided. be void in accordance with Article 1182 of the Civil Code 17 but a "mixed" condition "dependent not on the will of the vendor alone but also of third persons like the 18 squatters and government agencies and personnel concerned. the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which. in the case of the vendor.952-square meter lot in San Dionisio. to deliver and to transfer ownership of a specified thing or right to another (the buyer) 15 over which the latter agrees. Under the agreement. in turn. The object of the sale. No costs. He has agreed.

executed a deed of donation in favor of therein defendant Roman Catholic Archbishop of Manila covering a parcel of land (Lot No. 1980 in the name of said petitioner spouses. petitioners. rendered a decision in favor of private respondents. Ignao filed a motion to dismiss based on the grounds that (1) herein private respondents. The deed of donation allegedly provides that the donee shall not dispose or sell the property within a period of one hundred (100) years from the execution of the deed of donation. and the third ground being that the cause of action has prescribed. Imus. rescission of contract and reconveyance of real property with damages against petitioners Florencio and Soledad C. IGNAO. Cavite dismissing Civil Case No. 1985. Joselito R. Ignao and the Roman Catholic Bishop of Imus. On November 29. 115990 was issued by the Register of Deeds of Cavite on November 15. It is further alleged that on or about June 30. Ignao. IGNAO. Ignao in consideration of the sum of P114. Transfer Certificate of Title No. respondents.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. 095-84 therein. 5 Private respondents thereafter appealed to the Court of Appeals raising the issues on (a) whether or not the action for rescission of contracts (deed of donation and deed of sale) has prescribed. represented by MARINA RIETA GRANADOS and THERESA RIETA TOLENTINO. HON. On December 19. Cavite and which was docketed as Civil Case No. Severino C.:p These two petitions for review on certiorari seek to overturn the decision of the Court of 2 Appeals in CA-G. the Roman Catholic Archbishop of Manila likewise filed a motion to dismiss on the ground that he is not a real party in interest and. therefore. Dolorfino and Dominguez Law Offices for Sps. In their complaint. have no legal capacity to sue. and (2) the complaint states no cause of action.000. petitioner Roman Catholic Bishop of Imus also filed a motion to dismiss on three (3) grounds. now both deceased. 00. private respondents as plaintiffs. more or less. filed a complaint for nullification of deed of donation. 1 . On January 9. 1984. 1980. as plaintiffs therein. 3 Branch XX. as well as the order of said respondent court denying petitioner's motions for the reconsideration of its aforesaid decision. After private respondents had filed their oppositions to the said motions to dismiss and the petitioners had countered with their respective replies. THE ROMAN CATHOLIC BISHOP OF IMUS. THE ESTATE OF DECEASED SPOUSES EUSEBIO DE CASTRO and MARTINA RIETA. 1985. J. 1984. Cavite. vs. together with the Roman Catholic Archbishop of Manila. and (b) whether or not the dismissal of the action for rescission of contracts (deed of donation and deed of sale) on the ground of prescription carries with it the dismissal of the 6 main action for reconveyance of real property. and while still within the prohibitive period to dispose of the property. petitioners Florencio Ignao and Soledad C. 1962. THE ESTATE OF DECEASED SPOUSES EUSEBIO DE CASTRO and MARTINA RIETA. On December 23. Dominguez for petitioner Roman Catholic Bishop of Imus. G. located at Kawit.R. Cadastral Survey of Kawit). HON. with the following dispositive portion: 4 REGALADO. What transpired thereafter is narrated by respondent court in its assailed decision. Cavite. the first two (2) grounds of which were identical to that of the motion to dismiss filed by the Ignao spouses. Cavite. with rejoinders thereto by private respondents. 1991 THE ROMAN CATHOLIC ARCHBISHOP OF MANILA. private respondents alleged that on August 23. Enriquez for private respondents.R. 626. THE ROMAN CATHOLIC BISHOP OF IMUS. otherwise a violation of such condition would render ipso facto null and void the deed of donation and the property would revert to the estate of the donors. No. holding that the action has not yet prescibed. the spouses Eusebio de Castro and Martina Rieta. COURT OF APPEALS. COURT OF APPEALS. 095-84. and the SPOUSES FLORENCIO IGNAO and SOLEDAD C. vs. 77450 June 19. CV No. 1984. 1991 THE ROMAN CATHOLIC ARCHBISHOP OF MANILA. in whose administration all properties within the province of Cavite owned by the Archdiocese of Manila was allegedly transferred on April 26. No. respondent Court of Appeals. respondents. and the SPOUSES FLORENCIO IGNAO and SOLEDAD C. before the Regional Trial Court. containing an area of 964 square meters. the trial court issued an order dated January 31. petitioners. 1986. the complaint does not state a cause of action against him. 77425 June 19. As a consequence of the sale. 1930. 05456 which reversed and set aside the order of the Regional Trial Court of Imus. represented by MARINA RIETA GRANADOS and THERESA RIETA TOLENTINO. dismissing the complaint on the ground that the cause of action has prescribed. petitioner Roman Catholic Bishop of Imus.R. executed a deed of absolute sale of the property subject of the donation in favor of petitioners Florencio and Soledad C. On December 17.

7 Petitioners Ignao and the Roman Catholic Bishop of Imus then filed their separate motions for reconsideration which were denied by respondent Court of Appeals in its resolution dated 8 February 6. Book III on donations. we are of the opinion that. the rules on contract and the general rules on prescription should apply. terms and conditions not contrary to law. We do not agree. said Title III does not have an explicit provision on the matter of a donation with a resolutory condition and which is subject to an express provision that the same shall be considered ipso factorevoked upon the breach of said resolutory condition imposed in the deed therefor. et al. respondent court relied on the rule that a judicial action for rescission of a contract is not necessary where the contract provides that it may be revoked and 10 cancelled for violation of any of its terms and conditions. as in this case. WE are of the opinion that there would be no legal necessity anymore to have the donation judicially declared null and void for the reason that the very deed of donation itself declares it so. hence a judicial declaration revoking the same is not necessary. hence. morals. the same should be dismissed on the ground that private respondents have no cause of action against petitioners. we find that although the action filed by private respondents may not be dismissed by reason of prescription. since the donation in the case at bar is also subject to the same rules because of its provision on automatic revocation upon the violation of a resolutory condition. While what was the subject of that case was an onerous donation which. public order or public policy. the decision of the court will be merely declaratory of the revocation. the same is not applicable in the case at bar. . It is the contention of petitioners that the cause of action of herein private respondents has already prescribed. Where such propriety is sustained. No Costs. but we see no reason why the same should not apply to the donation in the present case. under Article 733 of the Civil Code is governed by the rules on contracts. the Court of Appeals committed no error in holding that the cause of action of herein private respondents has not yet prescribed since an action to enforce 15 a written contract prescribes in ten (10) years. Since Article 1306 of said Code authorizes the parties to a contract to establish such stipulations. 095-84 is hereby ordered REINSTATED and REMANDED to the lower court for further proceedings. Now. when the donee fails to comply with any of the conditions which the former imposed upon the latter. Nonetheless. the filing of these appeals by certiorari. clauses. The suppletory application of the foregoing doctrinal rulings to the present controversy is consequently justified. judicial intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded by virtue of an agreement providing for rescission even without judicial intervention. vs. the Order of January 31. The deed of donation involved herein expressly provides for automatic reversion of the property donated in case of violation of the condition therein. as is the case of the deed presently in question. is valid subject to the determination of the propriety of the rescission sought. Article 732 of the Civil Code provides that donationsinter vivos shall be governed by the general provisions on contracts and obligations in all that is not determined in Title III. from parity of reasons said pronouncements in De Luna pertinently apply. It called attention to the holding that there is nothing in the law that prohibits the parties from entering into an agreement that a violation of the terms of the contract would cause its cancellation even without court intervention. but in order to determine whether or not the rescission was 14 proper. good customs. It is our view that Article 764 was intended to provide a judicial remedy in case of non-fulfillment or contravention of conditions specified in the deed of donation if and when the parties have not agreed on the automatic revocation of such donation upon the occurrence of the contingency contemplated therein. It reiterated the doctrine that a judicial action is proper only when 12 there is absence of a special provision granting the power of cancellation.Abrigo. et al. the donation is automatically revoked without need of a judicial declaration to that effect. The rationale for the foregoing is that in contracts providing for automatic revocation. then the phrase reading "would render ipso facto null and 9 void"would not appear in the deed of donation. expressly provides for automatic revocation and reversion of the property donated. that stipulation of the parties providing for automatic revocation of the deed of donation." and that "(t)his action shall prescribe after four years from the non-compliance with the condition. When a deed of donation. Although it is true that under Article 764 of the Civil Code an action for the revocation of a donation must be brought within four (4) years from the non-compliance of the conditions of the donation. The validity of such a stipulation in the deed of donation providing for the automatic reversion of the donated property to the donor upon non-compliance of the condition was upheld in the 13 recent case of De Luna. and may be exercised against the donee's heirs. For where (sic) it otherwise and that the donors and the donee contemplated a court action during the execution of the deed of donation to have the donation judicially rescinded or declared null and void should the condition be violated. As aptly stated by the Court of Appeals: By the very express provision in the deed of donation itself that the violation of the condition thereof would render ipso facto null and void the deed of donation. but it is not in itself the revocatory act. and not Article 764 of the Civil Code. invoking Article 764 of the Civil Code which provides that "(t)he donation shall be revoked at the instance of the donor. In support of its aforesaid position. 1987. That is not the situation in the case at bar. 1985 dismissing appellants' complaint is SET ASIDE and Civil Case No. without need of going to court. may be transmitted to the heirs of the donor. and that it is not always necessary for the injured party to resort to court for 11 rescission of the contract. It is true that the aforesaid rules were applied to the contracts involved therein.WHEREFORE. upon the happening of the resolutory condition or non-compliance with the conditions of the contract. at the very least. without prior judicial action for that purpose. On the foregoing ratiocinations. and that. It was held therein that said stipulation is in the nature of an agreement granting a party the right to rescind a contract unilaterally in case of breach.

At the same time. concur. In the case at bar.. as is generally the case of donations. Consequently. It will readily be noted that the provision in the deed of donation against alienation of the land for one hundred (100) years was the very basis for the action to nullify the deed of d donation. the deed of sale supposedly constitutive of the cause of action for the nullification of the deed of donation is not in truth violative of the latter hence. both on the issue of prescription. but such oversight or inaction does not prevent this Court from passing upon and resolving the same. The condition imposed in the deed of donation in the case before us constitutes a patently unreasonable and undue restriction on the right of the donee to dispose of the property donated. therefore. being an unreasonable emasculation and denial of an integral attribute of ownership. Once a donation is accepted. in order to be valid. it is ineluctably related to petitioner's aforesaid assignment of error since both issues are grounded on and refer to the very same provision. it was likewise the controverted fundament of the motion to dismiss the case a quo. would not be subserved by the remand of the case. Donation. Padilla. we hold that the prohibition in the deed of donation against the alienation of the property for an entire century. such as where the ends of justice. This Court is clothed with ample authority to review matters. for lack of cause of action. While the issue of the validity of the same provision was not squarely raised. took no part. has resolved actions on the merits instead of remanding them to the trial court for further proceedings.. absent said proscription. 19 The aforestated considerations obtain in and apply to the present case with respect to the matter of the validity of the resolutory condition in question. morals. or upon which the determination of the question properly assigned is dependent. must not be perpetual or for an unreasonable period of time. Cavite. the regulatory arm of the law is or must be interposed to prevent an unreasonable departure from the normative policy expressed in the aforesaid Articles 494 and 870 of the Code. Certain provisions of the Civil Code illustrative of the aforesaid policy may be considered applicable by analogy. SO ORDERED. in our opinion. Melencio-Herrera and Paras. will be considered by the appellate court notwithstanding the failure to assign it as error. No reliance may accordingly be placed on said prohibitory paragraph in the deed of donation. being an act of liberality.The cause of action of private respondents is based on the alleged breach by petitioners of the resolutory condition in the deed of donation that the property donated should not be sold within a period of one hundred (100) years from the date of execution of the deed of donation. in the public interest and for the expeditious administration of justice. On many occasions. 18 Additionally. JJ. as a mode of acquiring ownership. It may be argued that the validity of such prohibitory provision in the deed of donation was not specifically put in issue in the pleadings of the parties. a donor or testator may prohibit partition for a period which shall not exceed twenty (20) years. the same must not be contrary to law. the Court. good customs. declares that the dispositions of the testator declaring all or part of the estate inalienable for more than twenty (20) years are void. we have laid down the rule that the remand of the case to the lower court for further reception of evidence is not necessary where the Court is in a position to resolve the dispute based on the records before it. J. Such a prohibition against alienation. J. That ruling of respondent court interpreting said provision was assigned as an error in the present petition. For that reason. the case for private respondents must fail. The net result is that. should be declared as an illegal or impossible condition within the contemplation of Article 727 of the Civil Code. in the main. Article 870. . constitutes an undue restriction on the rights arising from ownership of petitioners and is. Imus. as specifically stated in said statutory provision.. That may be true. Sarmiento. Said condition. Under the third paragraph of Article 494. results in an effective transfer of title over the property from the donor to the donee. Although the donor may impose certain conditions in the deed of donation. It is significant that the provisions therein regarding a testator also necessarily involve. even if they are not assigned as errors on appeal. on its part. public order and public policy. is on leave. if it finds that their consideration is necessary in arriving at a just decision of 16 the case: Thus. the imposition of an unreasonable period of prohibition to alienate the property should be deemed anathema to the basic and actual intent of either the donor or testator. such condition shall be considered as not imposed. Branch XX. 095-84 of the Regional Trial Court. which right is an indispensable attribute of ownership. the donee becomes the absolute owner of the property donated. the judgment of respondent court is SET ASIDE and another judgment is hereby rendered DISMISSING Civil Case No. contrary to public policy. the devolution of property by gratuitous title hence. we have held that an unassigned error closely related to an error properly 17 assigned. which motion was sustained by the trial court and set aside by respondent court. WHEREFORE.

respondent. DE LIMBAGA. for the expropriation of Lots Nos. EBORA. ARBON. CV No. MARIA LUISA ROTEA-VILLEGAS. R-1881. and Mactan-Cebu International Airport Authority v. docketed as CA-G. R-1881 was unconditional so that the rights 17 gained therefrom by respondent MCIAA were indicative of ownership in fee simple. In the main. When the civil case was pending. ROSALINDA R. The trial court opined that the expropriation became illegal or functus officio when 16 the purpose for which it was intended was no longer there. and Lot No.nét On 20 December 2001 the Court of Appeals reversed the assailed Decision on the ground that the judgment of condemnation in Civil Case No. CORAZON ROTEA. represented by his heirs LIZBETH ROTEA and ELEPETH ROTEA. 64456. petitioners. BERNARDA R. Lahug Airport 8 ceased operations as the Mactan Airport was opened for incoming and outgoing flights.14 On 12 April 1999 the trial court found merit in the claims of petitioners and granted them the right to repurchase the properties at the amount pegged as just compensation in Civil Case No. 916 and 920 above described among other parcels of land for the proposed expansion of Lahug Airport. ELIA R. 916 and 920. 916 and 920.13 The Department of Public Works and Highways (DPWH) also sought to intervene in the civil case claiming that it leased in good faith Lot No. ARQUISOLA. FE R. the certificates of title for these parcels of land were issued in the name of the Republic of the Philippines under TCT No. vs. Thereafter. SUELA.00 for Lot No. 58692 for Lot No. which under RA 6958 (1990) were subsequently transferred in favor of respondent MCIAA. BERNARDA R. Lots Nos. Court of Appeals19 which is allegedly stare decisis to the instant case to prevent the 5 HEIRS OF TIMOTEO MORENO and MARIA ROTEA.R.355 square meters under TCT No. EDJEC. 916 and 920 which had been expropriated for the extension of Lahug Airport were not utilized. ROTEA. refused the offer because the payment was perceived to be way below the market 4 price. 916 and 920 and other subject realties. MCIAA did not object to petitioners evidence establishing these allegations. the government assured them that they could repurchase their lands once Lahug Airport was closed or its operations transferred to Mactan Airport. 916 and 920. The 18 appellate court cited Fery v. Enchuan filed a Motion for Transfer of Interest alleging that he acquired through deeds of assignment the rights of some of herein petitioners over Lots Nos. docketed as Civil Case No. including the owners of Lots Nos. one Richard E. LUIS ROTEA. are the successors-ininterest of the former registered owners of two (2) parcels of land situated in Lahug. ALFREDO R.291. J. R-1881 condemning Lots Nos. Respondent MCIAA appealed the Decision of the trial court to the Court of Appeals. ROTEA. docketed as Civil Case No.: THE HEIRS OF TIMOTEO MORENO AND MARIA ROTEA. 920 from the predecessor agencies of respondent MCIAA and that it built thereon its Regional Equipment Services and its Region 7 Office. On 29 December 1961 the trial court promulgated its Decision in Civil Case No. 2003 compensation.9 In fact. 916 and 920 and other lots for public use upon payment of just .R. 920. namely: ESPERANZA R. On 16 April 1952.. VDA. and ROLANDO R. VIRGINIA R. 920 consisting of 3. JORGE ROTEA. as the negotiations for the purchase of the lots necessary for the expansion and improvement of Lahug Airport irredeemably broke down.2 To entice the landowners to cede their properties. ANGELES VDA. petitioners wrote then President Fidel V. Ramos and the airport manager begging them for the exercise of their alleged right to repurchase Lots Nos. 916 and 920. 916 and P9. Hence. represented by his heir ROLANDO R.1ªvvphi1. 916 and TCT No. petitioners herein. petitioners averred that they had been convinced by the officers of the predecessor agency of respondent MCIAA not to oppose the expropriation proceedings since in the future they could repurchase the properties if the airport expansion would not push through. RUBY C. designated as Lot No. DE RENACIA. R-1881 but subject to the alleged property rights of Richard E. the Civil Aeronautics Administration as the successor agency of the National Airport Corporation filed a complaint with the Court of First Instance of Cebu. RT-7544 (107) T1 13695. ROTEA.3 Some of the landowners executed deeds of sale with right of repurchase in favor of the government but many others. CEB-20015. Municpality of Cabanatuan which held that mere deviation from the public purpose for which the power of eminent domain was exercised does not justify the reversion of the property to its former owners. 156273 October 15. On 11 March 1997 petitioners filed a complaint for reconveyance and damages with RTC of Cebu City against respondent MCIAA to compel the repurchase of Lots Nos. Petitioners predecessors were paidP7.065. Cebu City.7 At the end of 1991. ROTEA. 916 and 920 herein mentioned. In 1949 the National Airport Corporation as the predecessor agency of respondent MactanCebu International Airport Authority (MCIAA) wanted to acquire Lots Nos. No appeal was taken from the Decision on Lots Nos.11 Their 12 pleas were not heeded. CARIDAD ROTEA. RT-7543 (106) T13694. represented by his heir JENNIFER ROTEA. no expansion of Lahug Airport was undertaken by MCIAA and its predecessors10 in-interest.00 for Lot No. 916 and 920 to MCIAA. ROTEA JR. or soon after the transfer of Lots Nos. Enchuan and the leasehold of 15 DPWH. No. 916 with an area of 2. MACTAN . 920 with consequential damages by way of legal interest from 16 November 1947. DECISION BELLOSILLO.CEBU INTERNATIONAL AIRPORT AUTHORITY.097 square meters under TCT No.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. and the judgment of 6 condemnation became final and executory. 58691 for Lot No.

which define the rights and obligations of landowners whose properties were expropriated when the public purpose for which eminent domain was exercised no longer subsists. it returns to the former owner. when the purpose is terminated or abandoned the former owner reacquires the property so expropriated. According to respondent MCIAA "there is only one instance when expropriated land may be repurchased by its previous owners. the Court of Appeals erred in holding that the evidence presented by CHIONGBIAN was admissible x x x x Aside from being inadmissible under the provisions of the Statute of Frauds. 941 through parol evidence. Court of Appeals. [the] testimonies are also inadmissible for being hearsay in nature x x x x29 We adhere to the principles enunciated in Fery and in Mactan-Cebu International Airport Authority." Respondent asserts that the Decision in Civil Case No. review. there exists an undeniable historical narrative that the predecessors of respondent MCIAA had suggested to the landowners of the properties covered by the Lahug Airport expansion scheme that they could repurchase their properties at the termination of the airport s venture. no repurchase could be validly exercised. other landowners held out and waited for the exercise of eminent domain to take its course until finally coming to terms with respondent s predecessors that they would not appeal nor block further the judgment of condemnation if 25 the same right of repurchase was extended to them. of course. A handful failed to prove that they acted on such assurance when they parted with the ownership of their lands. Court 22 of Appeals from the instant case in that the landowners in the MCIAA case offered inadmissible evidence to show their entitlement to a right of repurchase. and do not overrule them. whether it be the State. respondent MCIAA clings to our decisions in Fery v. Court of Appeals. then. They also differentiate Mactan-Cebu International Airport Authority v. then. of course. this petition for Petitioners argue that Fery v. Moreover. If x x x land is expropriated for a public street and the expropriation is granted upon condition that the city can only use it for a public street. CHIONGBIAN cannot rely on the ruling in Mactan-Cebu International Airport vs. we declared that the government acquires only such rights in expropriated parcels of land as may be allowed by the character of its title over the properties If x x x land is expropriated for a particular purpose. particularly our ruling as regards the properties of respondent Chiongbian in Mactan-Cebu International Airport Authority. while in the instant case we have preponderant proof as found by the trial court of the existence of the right of repurchase in favor of petitioners. Municpality of Cabanatuan and Mactan-Cebu International Airport Authority v. if the decision of expropriation itself provides [the] condition for such repurchase. unless there is some statutory provision to the contrary x x x x If. and the public use may be abandoned. Chiongbian put forth inadmissible and inconclusive evidence.26 In resolving this dispute. There was no condition imposed to the effect that the lot would return to CHIONGBIAN or that CHIONGBIAN had a right to repurchase the same if the purpose for which it was expropriated is ended or abandoned or if the property was to be used other than as the Lahug Airport. On the other hand. while petitioners herein offered evidence based on personal knowledge for which reason MCIAA did not object and thus waived whatever objection it might have had to the admissibility thereof. or any reversion to the former owner x x x x28 In Mactan-Cebu International Airport Authority. Court of Appeals. On 28 November 2002 reconsideration of the Decision was denied. then. for to do so would unsettle as to her properties the judgment of condemnation in the eminent domain proceedings. the former owner retains no rights in the land. In Fery. R1881. without any impairment of the estate or title acquired.23 Some acted on 24 this assurance and sold their properties. R-1881 is absolute and without conditions. R-1881 validating our discernment that the expropriation by the predecessors of respondent was ordered under the running impression that Lahug Airport would continue in operation - . the land becomes the absolute property of the expropriator. To begin with. Nonetheless the weight of their import. unconditionally. with the condition that when that purpose is ended or abandoned the property shall return to its former owner. Municpality of Cabanatuan and Mactan-Cebu International Airport Authority v. 941 in fee simple to the Republic of the Philippines. thus. petitioners allege that their right to equal protection of the laws would be infringed if some landowners are given the right to repurchase their former properties even as they are denied the exercise of such prerogative. respondent MCIAA has brought to our attention a significant and telling portion in the Decision in Civil Case No. This Court did not allow her to adduce evidence of her claim. Finally. which was cited in 27 the recent case of Reyes v. We also held therein that Chiongbian s evidence was both inadmissible and lacking in probative value The terms of the judgment are clear and unequivocal and grant title to Lot No. when the city abandons its use as a public street. we must reckon with the rulings of this Court in Fery v. 21 Hence. Said case did not involve expropriation proceedings but a contract of sale x x x x To permit CHIONGBIAN to prove the existence of a compromise settlement which she claims to have entered into with the Republic of the Philippines prior to the rendition of judgment in the expropriation case would result in a modification of the judgment of a court which has long become final and executory x x x x And even assuming for the sake of argument that CHIONGBIAN could prove the existence of the alleged written agreement acknowledging her right to repurchase Lot No. either by the exercise of eminent domain or by purchase. upon the contrary. respondent Chiongbian sought to enforce an alleged right of repurchase over her properties that had been expropriated in Civil Case No. the decree of expropriation gives to the entity a fee simple title. or the land may be devoted to a different use. must be commensurate to the facts that were established therein as distinguished from those extant in the case at bar. Court of Appeals wherein the presentation of parol evidence was allowed to prove the existence of a written agreement containing the right to repurchase. and that is. a province. however. or municipality. Municpality of Cabanatuan does not apply to the case at bar since what was involved therein was the "right of reversion" and not the "right of repurchase" which they are invoking.exercise of the right of repurchase as the former dealt with a parcel of land similarly 20 expropriated under Civil Case No. This is a difficult case calling for a difficult but just solution. and in that case the non-user does not have the effect of defeating the title acquired by the expropriation proceedings x x x x When land has been acquired for public use in fee simple. of course. R-1881.

Court of Appeals33 but within the principles enunciated in Fery as mentioned earlier. the government can be compelled by petitioners to reconvey the parcels of land to them. and while the inclusion of this pronouncement in the judgment of condemnation would have been ideal. in light of the discussion above. one that is akin37 to the implied trust referred to in Art. no evidence was adduced to show how soon is the Mactan Airport to be placed in operation and whether the Lahug Airport will be closed immediately thereafter. 63 Phil. Mactan-Cebu International Airport Authority36 is correct in stating that one would not find an express statement in the Decision in Civil Case No." In the case at bar. 916 and 920 as between the State and their former owners.As for the public purpose of the expropriation proceeding. when supplied. On the contrary. the attendance in the case at bar of standing admissible evidence validating the claim of petitioners as well as the portions above-quoted of the Decision in the expropriation case volunteered no less than by respondent itself. the Court will presume that the Lahug Airport will continue to be in operation (emphasis supplied). wherein this Court allowed a judgment that had become final and executory to be "clarified" by supplying a word which had been inadvertently omitted and which. petitioners herein." This omission notwithstanding. Paredes. he may demand the reconveyance of the property to him. such precision is not absolutely necessary nor is it fatal to the cause of petitioners herein. otherwise. it does not take away the actual usefulness and importance of the Lahug Airport: it is handling the air traffic both civilian and military. in effect changed the literal import of the original phraseology x x x x This is so because. these meaningful statements in the body of the Decision warrant the conclusion that the expropriated properties would remain to be so until it was confirmed that Lahug Airport was no longer "in operation. supra. in the first place. the admission of petitioners during the pre-trial of Civil Case No. no specific portion thereof should be resorted to but the same must be considered in its entirety. et al." This inference further implies two (2) things: (a) after the Lahug Airport ceased its undertaking as such and the expropriated lots were not being used for any airport expansion project. 916 and 920 does not prejudice petitioners interests. Hence x x x the decision of the court below should be taken as a whole and considered in its entirety to get the true meaning and intent of any particular portion thereof x x x x Neither is this Court inclined to confine itself to a reading of the said fallo literally.. This is as it should be not only because the admission concerns a legal conclusion fiercely debated by the parties32 but more so since respondent was truly the absolute owner of the realties until it was apparent that Lahug Airport had stopped doing business.301awphi1. De Los Angeles34 we ruled This Court has promulgated many cases x x x wherein it was held that a judgment must not be read separately but in connection with the other portions of the decision of which it forms a part. Although Mactan Airport is being constructed.35 We now resolve to harmonize the respective rights of the State and petitioners to the expropriated Lots Nos. to get the true intent and meaning of a decision. Philippine Veterans Board. If the fulfillment of the obligation is offered by the grantor when it becomes due. the judgment portion of a decision should be interpreted and construed in harmony with the ratio decidendi thereof x x x x As stated in the case of Policarpio vs. To sum up what we have said so far. petitioners would be denied the use of their properties upon a state of affairs that was not conceived nor contemplated when the expropriation was authorized. R-1881 to the effect that "the [condemned] lot would return to [the landowner] or that [the landowner] had a right to repurchase the same if the purpose for which it was expropriated is ended or abandoned or if the property was to be used other than as the Lahug Airport. it cannot now be doubted. Hence. vs. et al. the trial court in its Decision chose not to do so but instead prefixed its finding of public purpose upon its understanding that "Lahug Airport will continue to be in operation. there should be no doubt that our present reading of the fallo of the Decision in Civil Case No. R-1881 so as to include the statements in the body thereof afore-quoted is sanctioned by the rule that a final and executory judgment may nonetheless be "clarified" by reference to other portions of the decision of which it forms a part. et al.. 916 and 920. the return or repurchase of the condemned properties of petitioners could be readily justified as the manifest legal effect or consequence of the trial court s underlying presumption that "Lahug Airport will continue to be in operation" when it granted the complaint for eminent domain and the airport discontinued its activities." Verily. (b) the foregoing unmistakable declarations in the body of the Decision should merge with and become an intrinsic part of the fallo thereof which under the premises is clearly inadequate since the dispositive portion is not in accord with the findings as contained in the body 31 thereof. petitioners conveyed Lots Nos.nét While the trial court in Civil Case No. takes this case away from the ambit of Mactan-Cebu International Airport Authority v. Although the symmetry between the instant case and the situation contemplated by Art. a trust by virtue of law is established. In Republic v. Significantly. as explained by an expert on the law of trusts: "The only problem of great importance in the field of constructive trusts is to decide whether in the numerous and varying fact situations presented to the courts there is a wrongful holding of property and hence a threatened unjust enrichment of the . The Court cannot substitute its judgment for those of the said departments or agencies. "If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee. For. 1454 is not perfect. must be equitably adjusted. and. the rights vis-à-vis the expropriated Lots Nos. R-1881 could have simply acknowledged the presence of public purpose for the exercise of eminent domain regardless of the survival of Lahug Airport. the fallo or dispositive portion thereof must be correlated with the body of such final decision x x x x [I]f an amendment may be allowed after a decision has already become final x x x such amendment may consist x x x either in the x x x interpretation of an ambiguous phrase therein in relation to the body of the decision which gives it life. 916 and 920 to the government with the latter obliging itself to use the realties for the expansion of Lahug Airport. failing to keep its bargain. The predicament of petitioners involves a constructive trust. CEB-20015 for reconveyance and damages that respondent MCIAA was the absolute owner of Lots Nos. 1454 of the Civil Code. if an already final judgment can still be amended to supply an omission committed through oversight. 91-92. In addition. In the absence of such showing. the provision is undoubtedly applicable. Then. From it aircrafts fly to Mindanao and Visayas and pass thru it on their flights to the North and Manila. this simply means that in the construction or interpretation of an already final decision. 87. It is up to the other departments of the Government to determine said matters.. No doubt. a resolution or ruling may and does appear in other parts of the decision and not merely in the fallo thereof x x x x The foregoing pronouncements find support in the case of Locsin.

respondent MCIAA as representative of the State is obliged to reconvey Lots Nos."41 Accordingly.00 for attorney s fees and P15. medium or schedule of payment. in the same way that petitioners need not account for the interests that the amounts they received as just compensation may have earned in the meantime. we delete the award of P60.000. the law considers the fruits and interests as the equivalent of each other. 916 and 920. in this case. respondent MCIAA and petitioners over Lots Nos. Consequently. DPWH. the court will exercise its discretion in deciding what acts are required of the plaintiff-beneficiary as conditions precedent to obtaining such decree and has the obligation to reimburse the trustee the consideration received from the 42 latter just as the plaintiff-beneficiary would if he proceeded on the theory of rescission. If after the period of three hundred sixty five (365) days or the lapse of the compromise scheme or schedule of payment such amount owed is not settled.. the "wronged party seeking the aid of a court of equity in establishing a constructive trust must himself do equity. if petitioners do not want to appropriate such improvements or respondent does not choose to sell them. except: (1) When exemplary damages are awarded. petitioners as if they were plaintiff-beneficiaries of a constructive trust must restore to respondent MCIAA what they received as just compensation for the expropriation of Lots Nos. upon the fulfillment of said conditions. if 38 any. i.39 In constructive trusts. shall return to each other what they have received x x x x In case of the loss. "When the conditions have for their purpose the extinguishment of an obligation to give.nét (6) In actions for legal support. as in the present case. unless the parties herein stipulate and agree upon a different scheme. 916 and P9.defendant. with respect to the debtor." the creditor being the person who stands to receive something as a result of the process of restitution. are echoed in Art. as the disposition of these properties is governed by existing contracts and relevant provisions of law. and the monetary value of his services in managing the property to the extent that plaintiff-beneficiary 43 will secure a benefit from his acts. In other words.e. or by time. leasehold right of DPWH. (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's valid and demandable claim. i. Finally. petitioners as creditors do not have to settle as part of the process of restitution the appreciation in value of Lots Nos." Constructive trusts are fictions of equity which are bound by no unyielding formula when they are used by courts as devices to remedy any situation in which the holder of the legal title may not in good conscience retain the beneficial interest. In the good judgment of the court. In return.40 Of course.P7. 916 and 920 in Civil Case No. cannot be recovered. As for the improvements that respondent MCIAA may have made on Lots Nos. the right of repurchase of petitioners and the obligation of respondent MCIAA to reconvey Lots Nos. attorney's fees and expenses of litigation. "If the thing is improved by its nature.. 920 with consequential damages by way of legal interest from 16 November 1947. the provisions which. The rule on awards of attorney s fees and litigation expenses is found in Art. As a matter of justice and 44 convenience. the parties. i. Petitioners need not also pay for improvements introduced by third parties. It is not sound public policy to set a premium upon the right to litigate where such right is exercised in good faith. other than judicial costs. 916 and 920. 2208 of the Civil Code In the absence of stipulation. laborers and skilled workers. ..e. the arrangement is temporary and passive in which the trustee s sole duty is to transfer the title and possession over the property to the plaintiff-beneficiary.00 for Lot No. the improvements would have to be removed without any obligation on the part of petitioners to pay any compensation to respondent MCIAA for whatever it may have tangibly introduced 45 therein. 916 and 920 which is the natural consequence of nature and time. petitioners must pay respondent their prevailing free market price in case petitioners opt to buy them and respondent decides to sell. (3) In criminal cases of malicious prosecution against the plaintiff.000. are laid down in the preceding article shall be applied to the party who is bound to return x x x x" Hence. albeit the decision to resist the claim is 46 erroneous. 916 and 920 and/or the latter s improvements as set forth herein shall be deemed forfeited and the ownership of those parcels of land shall vest absolutely upon respondent MCIAA. 1190 of the Civil Code.1awphi1.065. his fixed costs for improvements thereon. The government however may keep whatever income or fruits it may have obtained from the parcels of land. 1189 of the Civil Code. the trustee may also be paid the necessary expenses he may have incurred in sustaining the property. deterioration or improvement of the thing. The medium of compensation for the restitution shall be ready money or cash payable within a period of three hundred sixty five (365) days from the date that the amount to be returned by petitioners is determined with finality.e. Petitioners must likewise pay respondent MCIAA the necessary expenses it may have incurred in sustaining the properties and the monetary value of its services in managing them to the extent that petitioners will be benefited thereby.00 for Lot No.291.00 for litigation expenses in favor of petitioners as decreed in the assailed Decision of 12 April 1999 of the trial court. (7) In actions for the recovery of wages of household helpers. 916 and 920 to petitioners who shall hold the same subject to existing liens thereon. the improvement shall inure to the benefit of the creditor x x x. (4) In case of a clearly unfounded civil action or proceeding against the plaintiff. Under Art. The rights and obligations between the constructive trustee and the beneficiary. (2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interests. R-1881.

this exception must be understood to mean those where the defenses are so untenable as to amount to gross and evident bad faith. Bernarda R. considering the established absence of any stipulation regarding attorney s fees.. Ruby C. Jorge Rotea. the right of repurchase of petitioners and the obligation of respondent MCIAA to so reconvey Lots Nos. 2208 intends to retain the award of attorney s fees as the exception in our law and the general rule remains that attorney s fees are not recoverable in the absence of a stipulation thereto. 916 and P9. otherwise. The Decision of RTC-Br. Arquisola. Cebu City. Lot No.291.00 for Lot No. and the value of the prevailing free market price of the improvements built thereon by respondent MCIAA. Bernarda R. Fe R. (b) ORDERING petitioner Heirs of Timoteo Moreno and Maria Rotea TO PAY respondent MCIAA what the former received as just compensation for the expropriation of Lots Nos. as well as the prevailing free market price of the improvements built thereon by respondent MCIAA. demands a factual. Rotea. Elia R. respondent MCIAA SHALL REMOVE these improvements WITHOUT ANY OBLIGATION on the part of petitioners to pay any compensation to respondent MCIAA for them. if petitioners do not want to appropriate such improvements. . 920 consisting of 3.e. Virginia R. WHEREFORE. Rotea. As noted in Mirasol v. 2208. De Renacia. allows attorney s fees in cases of clearly unfounded civil actions.e.097 square meters in Lahug. In the case at bar. 2208. Petitioners must likewise PAY respondent MCIAA the necessary expenses that the latter may have incurred in sustaining the properties and the monetary value of its services in managing the properties to the extent that petitioners will secure a benefit from such acts. The Decision of the Court of Appeals in CA-G. 19 of Cebu City dated 12 April 1999 in Civil Case No. The records of the instant case do not disclose any proof presented by petitioners to substantiate that the actuations of respondent MCIAA were clearly unfounded or purely for the purpose of harassment. CEB-20015 is MODIFIED IN PART by (a) ORDERING respondent Mactan-Cebu International Airport Authority (MCIAA) TO RECONVEY to petitioner Heirs of Timoteo Moreno and Maria Rotea. if any and desired to be bought and sold by the parties. securing the immediate execution of this Decision under the premises.(8) In actions for indemnity under workmen's compensation and employer's liability laws. otherwise. (10) When at least double judicial costs are awarded. (11). Corazon Rotea. Rotea. 916 and 920. in the same way that petitioners need not account for the interests that the amounts they received as just compensation may have earned in the meantime. Art. Angeles Vda. the attorney's fees and expenses of litigation must be reasonable. (9) In a separate civil action to recover civil liability arising from a crime. represented 47 by his heir Rolando R. Caridad Rotea.R.. 916 with an area of 2.00 for Lot No. legal or equitable justification that would bring the case within the exception and justify the grant of such award. i. par. Alfredo R. Luis Rotea. unless the parties herein stipulate a different scheme or schedule of payment. P7. 916 and 920 in Civil Case No. in ready money or cash PAYABLE within a period of three hundred sixty five (365) days from the date that the amount under letter (b) above is determined with finality. Rotea. The exercise of judicial discretion in the award of attorney s fees under Art. if any. and Rolando R. 19 of Cebu City for purposes of determining the amount of compensation for Lots Nos. otherwise. Edjec. While Art. DPWH. (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. 916 and 920 and/or the improvements shall be DEEMED FORFEITED and the ownership of those parcels of land shall VEST ABSOLUTELY upon respondent MCIAA. Respondent MCIAA however may keep whatever income or fruits it may have obtained from the parcels of land. Rosalinda R. after the period of three hundred sixty five (365) days or the lapse of the compromise scheme or schedule of payment and the amount so payable is not settled. if any and desired to be bought and sold by the parties. Evidence must be presented to the court as to the facts and circumstances constituting the alleged bad faith. the award of attorney s fees is not justified where there is no proof other than the bare statement of harassment that a party to be so adjudged had acted in bad faith. represented by his heirs. which shall be governed by existing contracts and relevant provisions of law.355 square meters and Lot No. CV No. 920 with consequential damages by way of legal interest from 16 November 1947. represented by his heir Jennifer Rotea. In all cases. namely: Lizbeth Rotea and Elepeth Rotea. par. (c) ORDERING respondent MCIAA TO CONVEY to petitioners the improvements it may have built on Lots Nos.. or if respondent does not choose to sell them. the trial court cannot base its award on any of the exceptions enumerated in Art. namely: Esperanza R. De la Cruz. 916 and 920 to be paid by petitioners as mandated in letter (b) hereof. (d) ORDERING petitioners TO PAY the amount so determined under letter (b) of this dispositive portion as consideration for the reconveyance of Lots Nos. i. in which case petitioners SHALL PAY for these improvements at the prevailing free market price. the instant Petition for Review is GRANTED. 916 and 920. neither does the trial court make any finding to that effect in its appealed Decision. (4). and in general. Arbon.065. R-1881. 64456 dated 20 December 2001 and its Resolution of 28 November 2002 denying reconsideration of the Decision are REVERSED and SET ASIDE. Vda De Limbaga. 2208. but excluding those that were introduced by third parties. Suela. Ebora. Rotea Jr. with all the improvements thereon evolving through nature or time. (e) REMANDING the instant case to RTC-Br. Maria Luisa Rotea-Villegas.

Quisumbing. 916 and 920.. JJ. SO ORDERED. No costs. and Tinga. This Decision is without prejudice to the claim of intervenor one Richard E.(f) ORDERING petitioners to respect the right of the Department of Public Works and Highways to its lease contract until the expiration of the lease period.00 for litigation expenses against respondent MCIAA and in favor of petitioners.00 for attorney s fees and P15. . concur. Callejo. Enchuan on his allegation that he acquired through deeds of assignment the rights of some of herein petitioners over Lots Nos. Austria-Martinez.000. and (g) DELETING the award of P60.000.

000.P. 1981. 1975. L. for the reconsideration of the Resolution of this Court. Jose V. 1975. Amador Santiago. and collected approximately P800.00 monthly.INSURANCE SYSTEM. denying due course to this Petition for Review on certiorari for lack of merit. Damages. 1971.775 square meters.P. As security therefore. No. as the highest bidder. and (3) substitute the Paranaque property with his own within a period of six (6) months. 1975. up to March. Marcelo redeemed the properties from the GSIS by paying it the sum of P3.766. COURT OF APPEALS. updated the account.000. and the other located at Buendia Avenue.50 to the GSIS. and ordering an payments made by petitioner to Leviste forfeited in favor of the latter pursuant to their contract providing for automatic forfeiture "in the event of failure to comply with any of the conditions contained therein. 1969. L.00. particularly the payment of the scheduled amortizations. 1975. It was further stipulated in the Contract to Sell that "failure to comply with any of the conditions contained therein. Marcelo. 1974. GOVERNMENT SERVICE IN.688. RESOLUTION For his part. JOSE T. on November 20. petitioner requested the GSIS for the restructuring of the mortgage obligation because of his own arrearages in the payment of the amortizations." Petitioner took possession of the Buendia property.311. Leviste needed the Parañque Property as it had sold the same and suit had been filed against it for its recovery. . one located at Parañaque (the Parañaque Property). Leviste & Co. An application for foreclosure was thereafter filed by the GSIS with the Provincial Sheriff of Rizal. 1981. 1971.: Before the Court is petitioner's Motion. the Buendia Property for the amount of P3. after which. On June 2. petitioner remitted a total of only P300. 1984. Herrera. Apparently. 1975. 1977. it could not act on his request unless he first made proper substitution of property.50. Leviste undertook to arrange for the conformity of the GSIS to petitioner's assumption of the obligation. MARCELO. 1985 JOSE V. petitioner instituted suit against Leviste before the Court of First Instance of Rizal for "Injunction.P. the foreclosed properties were sold at public auction and a Certificate of Sale in favor of the GSIS. 1975. the Court required the parties to submit simultaneously concise memoranda in amplification of their oral arguments. for short) had obtained a loan from the Government Service Insurance System (GSIS) in the amount of P1. REGISTER OF DEEDS OF RIZAL and THE HON. On May 13.50." MELENCIO-HERRERA. Benjamin Aquino for respondent J. Leviste assigned its right to redeem both foreclosed properties to respondent Jose Marcelo..00 from December. Briefly. Later. LEVISTE & CO. L-55744 February 28. On November 3. INC. J. There was no requirement by the GSIS for the execution of a final deed of sale by Leviste in favor of petitioner. petitioner wrote the GSIS (Exhibit "V") informing the latter of his right to redeem the foreclosed properties and asking that he be allowed to do so in installments. Leviste sold to Petitioner. received rentals of P21.854. Jr.94 for which he was issued a certificate of redemption.00 to the GSIS. On May 6. and paid 20% thereof to the GSIS. (2) assume Leviste's indebtedness of P1854. GSIS sent notice to Leviste of its intention to foreclose the mortgaged properties by reason of default in the payment of amortizations." On December 20. The Paranaque property was turned over by Marcelo to Leviste upon payment by the latter of approximately P250. was issued.00 as disclosed at the hearing. 1973. petitioner vs. (Leviste.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. the GSIS had not favorably acted thereon. On March 3. The Motion for Reconsideration was set for oral argument on June 13. The conditions were that petitioner would: (1) pay Leviste P11. However. All parties have complied with the Court's directive. On April 15. together with the 3-story building thereon (the Buendia Property). particularly the payment of the scheduled amortizations on the dates herein specified shall render this contract automatically cancelled and any and all payments made shall be forfeited in favor of the vendor and deemed as rental and/or liquidated damages.T. PROVINCIAL SHERIFF OF RIZAL. with an area of approximately 2.232. the antecedent facts may be summarized as follows: On June 10. Jr. Jr. the Trial Court rendered its Decision discussing petitioner's Complaint for lack of basis in fact and in law. HERRERA. Leviste mortgaged two (2) lots.000..895.000. Leviste & Co.R.311.respondents. dated July 3.750. for respondent L. Inc. Makati. (Marcelo for brevity).. and on February 15. dated April 1. GSIS replied that as a matter of policy.000. and Cancellation of Annotation.

000.750.688.On appeal.00 he had paid to Leviste. we resolve to deny reconsideration upon the following considerations: 1.854.000.00. but he did not. and (c) Not making an earnest effort to redeem the property as a possible redemptioner.00..895.750. and (3) that he would substitute the Parañaque property with his own within a period of six months. "nowhere in the letter (of the GSIS) was mentioned that a final deed of sale must first be executed and presented before the assumption may be considered." ACCORDINGLY. It can be inferred from the antecedent facts that respondent Leviste & Co. Separate Opinions Petitioner seeks reconsideration essentially on the contention that affirmance of the Appellate Court's Decision would result in patent injustice as he would not only forfeit the Buendia Property to Marcelo. Said respondent had paid to GSIS the amount P 3. For if it was really the intention of GSIS.688. It cannot be validly said that petitioner had fully complied with all the conditions of his contract with Leviste. (b) Not paying off the mortgage debt when GSIS decided to foreclose. P. The record established further that appellant did not redeem the property. 1 Reconsideration sought by petitioner was met with denial by respondent Appellate Court. Leviste undertook that it would arrange for the conformity of the GSIS to Herrera's assumption of its mortgage obligation. (a) Not having been able to submit collateral to GSIS in substitution of the Paranaque Property. was not in a financial position to redeem the foreclosed property and there was no assurance that appellant would redeem the property within the period. That loss is attributable to his fault in: TEEHANKEE. On the other hand. all he had received was P 1. with an area of 2. or on November 3. one located at Paranaque and the other located at Buendia Avenue. the Appellate Court affirmed the judgment in toto. Considering the grounds of petitioner's Motion for Reconsideration. In this situation. Leviste had secured a loan from the Government Service Insurance System in the amount of P1. and that Leviste as well the GSIS and Marcelo would be benefiting at petitioner's expense. Herrera.311.311. but would also lose the amount of P1. less the rentals he had received when in possession of the Buendia Property.775 square meters and the building and other improvements thereon (covered by TCT No. which he paid to Leviste and the GSIS. 3.. he was not able to substitute the Parañaque Property with another collateral for the GSIS loan.00 paid to him by petitioner. (Leviste) was guilty of bad faith and of violating the terms and conditions of its Contract to Sell with petitioner Jose V.895.688. Makati. but to assign the right of redemption to a person willing and capable to assume the same. Likewise. appellee has no other alternative. appellant could have preserved and protected whatever right he may have to the property by tendering the redemption price to Marcelo. As hereinbefore stated.895. 1976.000. (a) The GSIS has not benefited in any way at the expense of petitioner. which was the consideration petitioner would have paid to Leviste had his contract been consummated. which is not far below the sum of P 3.854. He had up to February 24. if only to protect his interest in the said property. 2. (c) Leviste had neither profited at the expense of petitioner. mortgaging two parcels of land.50 to the GSIS. plus P 300.. as stated by the Court of Appeals. It is quite true that petitioner had lost the P 1. 1969. the requirement of Deed of Sale should have been stated in its letter.766. On June 10. respectively. Hence.00.311. Inc. with interest thereon at 12% per annum.688. (2) that he would pay Leviste the balance of P1. Herrera agreed that (1) he would assume Leviste's indebtedness of P1. What it received.50.000.00 he had paid to GSIS. when the equity to redeem was assigned. plus P 1.50 from GSIS less amounts he had paid. J. dissenting: I vote to grant petitioner's motion for reconsideration of the Court's earlier Resolution denying the petition and instead to grant the relief sought therein by petitioner. 9811 of the Registry of Deeds of the Province of Rizal). Moreover.232. Leviste sold to Herrera the Buendia property for the sum of P3. petitioner's Motion for Reconsideration is hereby denied.50 and P300. that it would result in the unjust enrichment of Leviste. . for the grounds and considerations hereinafter stated.94. .. SO ORDERED.. by way of redemption from respondent Marcelo. For Losing his Buendia Property. (b) Neither has Marcelo benefited at the expense of petitioner. was the mortgage loan it had extended plus interest and sundry charges. stating in part: It is to be noted that appellee L. Leviste and Co.50 within two (2) years from the date of the contract.895. 1971. the total of which is substantially a reasonable value of the Buendia Property. the instant Petition seeking review by certiorari before this instance. we denied the Petition for lack of merit. For one thing.854. Later. the arguments adduced during the oral argument and in the parties' respective Memoranda. to do so. Inc.

Cavestany then requested Leviste to execute the final deed of sale for submission to the GSIS but Leviste refused. Herrera was ousted from the property in dispute. Marcelo and eventually.688.000.00 to the GSIS. On March 3. He immediately wrote an urgent appeal to the GSIS reminding the GSIS that he had already paid in full the principal of P1. Mr. In spite of the fact that . Herrera took possession of the Buendia property and received the monthly rentals of around P21. Herrera came to know about it only on January 17. 1971. The trial court dismissed the complaint for alleged lack of basis in fact and in law. Herrera's motion for reconsideration. suggesting that this was necessary for "further actions" to be taken on the assumption of mortgage. "(T)he condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. 1981. The GSIS required Herrera to submit papers to support his assumption of the mortgage until finally he was informed that the assumption could not be approved until Herrera could submit a final deed of sale (the original contract being merely a contract to sell or a conditional sale) and that he has no personality to represent Leviste in connection with the restructuring of the mortgage. About the first week of December. alleging as an excuse Herrera's failure to assume the mortgage (which Leviste itself had blocked). 11 of the Contract to Sell. Nonetheless. as borne out by the events. particularly the payment of the scheduled amortization on the dates herein specified shall render this contract automatically cancelled and any and all payments made shall be forfeited in favor of the vendor and deemed as rental and/or unliquidated damages. On May 13. But obviously because of selfish and self-serving motives and designs. 1971. Leviste made no effort to assist and arrange for Herrera's assumption of its mortgage obligation. which Herrera did not know at the time of the sale. Meanwhile. 1984. and thereby prevent fulfillment of the remaining condition for Herrera's assumption of its mortgage obligation with GSIS.00. which was heard and argued before the Court on June 13. The contract expressly obligated Leviste to work out with the GSIS Herrera's assumption of the mortgage. to follow it up with the GSIS. the latter sent his administrator. thus: Can respondent Leviste lawfully refuse to issue a final deed of sale to the petitioner even after it had already received full payment of what was due it under the Contract to Sell? Can respondent Leviste lawfully refuse to comply with its obligation under the Contract to Sell to secure the conformity of respondent GSIS to the assumption of the mortgage obligation by petitioner? Can respondent Leviste automatically cancel the Contract to Sell and forfeit all the sums paid by petitioner thereunder when respondent Leviste was the one that voluntarily prevented the petitioner from fulfilling his obligations under the Contract to Sell and by otherwise making it legally or physically impossible for the petitioner to fulfill such obligations? Can respondent Leviste lawfully assign its equity of redemption over the Buendia property to respondent Marcelo. after receiving full payment of the stipulated amount." The motion for reconsideration should be granted and the petition granted to obviate a carriage of justice. Herrera reiterated the main issues. Herrera filed the petition for review on certiorari which was denied by this Court in a minute resolution dated April 1. credited against Leviste's account. damages and cancellation of annotation. Herrera notified GSIS of the Contract to Sell executed by Leviste providing for his assumption of Leviste's mortgage obligation. Upon full payment. 1974 by the GSIS of its intention to foreclose the mortgage. Leviste (notwithstanding its having received full payment of P1. There was constructive fulfillment on Herrera's part of his obligations under the Contract and under Article 1186 of the Civil Code. Herrera remitted a total of P300. and can the latter's redemption of said property from respondent GSIS be considered lawful? Can respondent Leviste be lawfully awarded damages and attorney's fees in the instant case? Leviste patently had no justification to refuse to execute the final deed of sale to Herrera. Herrera was prevented from fulfilling the condition of assuming the GSIS mortgage because of Leviste's own non-compliance with its obligation of securing the consent of GSIS thereto.00 to the GSIS and asked that the foreclosure be held in abeyance pending efforts to settle Leviste's account which Leviste had undertaken to have Herrera assume. But nevertheless. The Manager of the Collection Department even suggested to Cavestany to continue the payments as a gesture of good faith.000. When no action was taken thereon by the GSIS and Leviste failed to take any action to facilitate the assumption of the mortgage by Herrera. Herrera filed a complaint against Leviste before the Court of First Instance of Rizal for injunction. While it is true that under paragraph No. 1975. On December 20. Hence.895. Leviste alone was notified on June 21.895.688. Leviste continued to receive payments from Herrera under the Contract to Sell. 1975. the GSIS proceeded with the auction sale and itself bidded for the property. the GSIS received payments from Herrera for the account of Leviste. Unknown to Herrera. 1975. Herrera appealed to the Court of Appeals which affirmed the lower court's decision and denied reconsideration.1981. Isidro Cavestany. In the course thereof. which it had expressly undertaken to secure from GSIS. and ordered all payments made by Herrera forfeited in favor of Leviste. On January 23.000.The parties further stipulated that "failure to comply with any of the conditions contained therein. Cavestany found that Leviste was in arrears in its amortization payments for 14 months. failure to comply with any of the conditions therein enumerated would render the contract automatically cancelled and all the sums paid by petitioner forfeited.50 from Herrera) yet sold for undisclosed amount and considerations the equity of redemption (which in justice and equity pertained to Herrera) to its co-respondent Jose T.50 to Leviste and P300.

Officially inform respondent GSIS about its execution of the Contract to Sell and officially request GSIS to approve petitioner's assumption of its mortgage obligation. 3. "E".688.895. "H".000. "F". neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. But Leviste refused to execute such final deed of sale notwithstanding that he had been paid by Herrera the full amount of P1. subject to the condition stated in the contract. even if subject to certain conditions. as it could not point to any definitive step that it had actually undertaken. Respondent Leviste could also have formally complained to petitioner or even respondent GSIS about petitioner's alleged nonfulfillment of his obligations under the Contract to Sell. Leviste refused to execute the final deed of sale in favor of Herrera as required by GSIS. The GSIS. 2. If petitioner had indeed failed to comply with his obligations under the Contract to Sell. in this regard. it virtually prevented Herrera from complying with his obligation to assume the GSIS mortgage and Leviste cannot now in equity and justice insist on rescission of the contract because of Herrera's failure which Leviste itself had brought about. Why did respondent Leviste keep quiet and allow respondent GSIS to continue receiving said payments? It must be noted that Petitioner made the following payments to respondent GSIS. 1975 [Exh. in turn." But notwithstanding its having received the full amount due it. 5. 4. it was expressly undertaken by Leviste that "the assumption of mortgage shall be arranged and conformity thereto by GSIS obtained by the Vendor with the full cooperation of the Vendee. 22. "G". and for this reason. Under par. Instead. is still the registered . respondent Leviste could not readily answer. GSIS had declined to entertain the same for lack of the final deed of sale. that "(I)n reciprocal obligations.50 due to him and what was left was Leviste's outstanding mortgage indebtedness to GSIS. when asked repeatedly by this Honorable Court what definitive steps it took to arrange and secure such conformity of respondent GSIS." Leviste's non-compliance with its own undertaking which prevented Herrera from assuming the GSIS mortgage bars it from invoking the rescission clause. stating in a letter to Herrera that We wish to inform you that we cannot go on processing your papers in view of the fact that as of this date L.895.00). for the account of respondent Leviste: 100.000. or advise respondent GSIS not to receive any more payments from petitioner made in its name.000. 52 Phil. "I". The situation is analogous to that contemplated in Article 1266 of the Civil Code which provides that "(T)he debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor . notwithstanding Herrera's payment on account thereof directly to it of some P300. GSIS without notice to Herrera foreclose the mortgage and completely shut off Herrera-even from his right of redemption as Leviste's vendee. or the other party.00 May 24. Thus. (Labayen vs. which refused to deal with him without such final deed of sale from Leviste. "J". issue a final Deed of Sale.000. Officially inform respondent GSIS that petitioner had already paid to it the full amount due under the Contract to Sell. 440). From the moment one of the parties fulfills his obligation.000. Indeed. 4 of the Contract to Sell. Article 1169 of the Civil Code expressly provides. during the period covering the years 1972 and 1973. delay by the other begins. 1974 50. "Leviste has clearly not complied with (its) obligation. contrary to his contractual obligation) to have Herrera assume the mortgage obligation. If a party charges himself with an obligation possible to be performed." As documented by Herrera in his memorandum in amplification of oral argument (Record. 000.688. 1974 50. Indeed. 1974 50. Leviste did not fulfill the essential condition required by GSIS for Herrera's assumption of the mortgage the execution by Leviste of the final deed of sale.00 1973 50. he must abide by it unless performance is rendered impossible by the act of God. 314-315). Leviste and Co. By Leviste's unjustifiable act. then why did respondent Leviste continue receiving payments from petitioner? It must be noted that respondent Leviste was paid the full amount of the consideration (P1. Herrera was verily squeezed in this pincer movement Herrera could not assume Leviste's mortgage obligation and restructure the same with GSIS which refused to recognize and deal with him without a final deed of sale from Leviste.00 Nov. if respondent Leviste was acting in good faith and was sincere in complying with its obligation. P. Even as to the restructuring of Leviste's mortgage obligation which Herrera had requested (since Leviste's documented arrearages before the execution of the contract amounted to around P800. The substitution of Leviste's Paranaque property with Herrera's own property as additional security for Leviste's indebtedness could not be worked out and agreed upon by Herrera with GSIS.00 May 10. it could have at least done the following: 1. "K".00 Jan.50) due to it on installment basis. 1974 (Exhs.000. the last of which was on July 2.895. it was willing to transfer the title of the Buendia property to the petitioner."'Y"] From the above. refused (abetted by Leviste's absolute non-cooperation. and "L").Herrera had already paid Leviste the full amount of P1.. the law.50. pp. but also it was the one that prevented the petitioner from fulfilling his obligation under said contract. it will be seen that respondent Leviste not only was the one that clearly failed to comply with its obligations under the Contract to Sell.688. Talisay Silay Milling Co.00 and the more than sufficient security in its favor of the Buendia property alone. and for this purpose.

50. Herrera was still in material possession of the property then. (2) P300. main Resolution). and (5) moreover. " after laying the premise that Justice Makasiar makes the pertinent suggestion that the DBP restructure the account of Mirang. unless they were in extremis and violated its own settled policy of giving due preference to the owner and vendee Herrera of redeeming and/or reacquiring the foreclosed property.688. notwithstanding the offer of Herrera as Leviste's vendee and successor to redeem the property within the period of redemption.000.232. are incompetent to do so. Like Justice Makasiar. there appears to be no insuperable obstacle to the DBP restructuring the account of Mirang. Mirang. Inc. hence. as it is variously expressed by different courts. It is not too late in the day in this. As the late Chief Justice Castro stated in his separate opinion in DBP vs. which it had already sold to and had been fully paid by. (6) The total stranger Marcelo was allowed to redeem the property. the principal amount directly paid to it by Herrera.000.2 million were declared forfeited. for it was thereby discharged and relieved entirely of its said mortgage debt of P3. Herrera in the agreed amount of P1. "(E)quity as the complement of legal jurisdiction seeks to reach and do complete justice where courts of law. that he had already paid in full the principal amount to Leviste and P300. (3) It did not inform Herrera of its intention to foreclose the property knowing that Herrera had purchased the same and hence had the right to redeem the property as Leviste's vendee. Court of Appeals (G. Marcelo. 4. This constitutes unjust enrichment at the expense of Herrera whose payments to Leviste and the GSIS. Marcelo knew of the Contract to Sell with Herrera at the time the equity was assigned to him by Leviste. in the denial of moral justice. the substance rather than the circumstance.1984) notwithstanding that the debtor in "evident good faith" had incurred in delay in discharging its obligations to another government agency. CIR.766.' " Herrera is entitled to the relief sought by him under these basic principles of law. notwithstanding the letter-appeal of Herrera. No. attorney's fees against Herrera for seeking the just vindication in court of his rights. as was Herrera's right in law and equity. the Government Service Insurance System. and the Social Security System) have restructured accounts of debtor Considering the inordinate appreciation of land values everywhere. Nov. our compassionate society for the DBP to do so. (4) It proceeded with the auction sale. the intent and not the form. nominal damages and P75.94 at the loss of only the Buendia property. The unkindest blow is that the Court has upheld even the award of P5. and (7) It departed from the established policy of government financial institutions of allowing the restructuring of debtor's mortgage accounts. Basic principles of justice and equity cry out against such unjust enrichment and inequity. which had shown "clear procrastination and indecision" in seeking afterwards to reject the payments made and cancel the previous authorization it had given for the sale of the debtor's attached real property. 29. the amount paid by Herrera to GSIS for Leviste's arrearages the Parañaque property. vs. through the inflexibility of their rules and want of power to adapt their judgments to the special circumstances of cases.(NEDA) vs. in taking notice of such policy and urging the DBP to extend such assistance to the hapless respondent debtor therein.000. as was extended by this Court under analogous circumstances to the debtor in its recent decision in Republic of the Phil. GSIS foreclosed the mortgage for Leviste's total outstanding indebtedness to GSIS in the sum of P3. Respondent Marcelo was equally not in good faith when he purchased the equity of redemption. (Exhibit 0. totalling almost P2. (2) It accepted payments from Herrera for the account of Leviste.00. the NEDA. I personally know that the DBP and similar Government financial institutions (the Philippine National Bank.R. this was a total gain to Leviste. (4) the undisclosed proceeds of the sale of equity of redemption to Marcelo (in effect a double payment to Leviste for the same property). justice and equity.895.232.688.000. In iniquitous automatic rescission of the contract be sustained. which was returned to him by Marcelo. underscoring supplied) It also appears that respondent GSIS inexplicably did not sympathize with the plight of Herrera (brought about by Leviste itself) as may be seen by the following circumstances: (1) It required Herrera to submit supporting papers which led him to believe that the assumption of the mortgage would be properly acted upon. . "(I)t is well remember that uncompromising or mechanical application of the letter of the law has resulted not infrequently. 'Equity regards the spirit and not the letter. and returned the Paranaque property to Leviste. not only to enable him to pay his indebtedness in easy terms over a period of years but as well to make available additional funds to be utilized by him in the development of his 18-½-hectare land.50. Moreover. 52774. 83 SCRA 579.895.00 to the GSIS and asking that he be given a chance to settle Leviste's account. As we held in Air Manila. (5) It allowed and recognized the sale of equity of redemption to a total stranger. we cannot entertain your request.94 (pp.owner of the mortgaged property.766.66 SCRA 141. notwithstanding its knowledge and that Herrera was directly making payments to it on account of Leviste's mortgage indebtedness. 2. Leviste would be unjustly enriched by (1) P1.

Did the defendant agree to sell to the plaintiff 400. Yours very truly.317. 1922. Song Fo. 23769 September 16. It is found principally in the documents.: In the court of First Instance of Iloilo. P. and we stated we believe that this is possible and will do our best to let you have these extra 100. with legal interest from the date of the presentation of the complaint. IV. Song Fo also asked if we could supply him with another 100.000.000 gallons of molasses? The trial court found the former amount to be correct. in which judgment was asked for P70. defendant-appellant. February and March or in other words.I. Regarding the payment for our molasses. The lower court erred in rendering judgment in favor of the appellee and not in favor of the appellant in accordance with the prayer of its answer and cross-complaint. The contract of the parties is in writing. defendant. plaintiff. December 13. Mr. Occ. The lower court erred in denying appellant's motion for a new trial. The case was submitted for decision on a stipulation of facts and the exhibits therein mentioned. Mr. . MALCOLM. HAWAIIAN-PHILIPPINE COMPANY BY R. SONG FO AND CO. III. and not only 300.R. This letter reads: December 16th. Exhibits F and G. HAWAIIAN-PHILIPPINE CO. J. Song Fo & Company. gallons of molasses. Hilado and Hilado. The lower court erred in finding that appellant had agreed to sell to the appellee 400. Ross. Lawrence and Selph and Antonio T. In this court it has made the following assignment of errors: "I.000 gallons of molasses or 300. II. altho it interfere with the shipping of our own and planters sugars to Iloilo. for appellant. The First mentioned exhibit is a letter addressed by the administrator of the Hawaiian-Philippine Co. 1922 SONG FO & COMPANY. Iloilo. with legal interest. The judgment of the trial court condemned the defendant to pay to the plaintiff a total of P35. the defendant set up the special defense that since the plaintiff had defaulted in the payment for the molasses delivered to it by the defendant under the contract between the parties. 1922. P. NEGROS.000 gallons in all.000 gallons of molasses. 1923. Hoping that this is satisfactory and awaiting your answer regarding this matter. vs. making 400. HAWAIIAN PHILIPPINE CO. plaintiff-appellee.000.." The specified errors raise three questions which we will consider in the order suggested by the appellant.Republic of the Philippines SUPREME COURT Manila EN BANC G. the latter was compelled to cancel and rescind the said contract. we wish to state as follows: He agreed to the delivery of 300. 1925 Messrs. along with the 300. Gurrea and Muller for appellee. SILAY.000. Arroyo.000 gallons during each of the milling months.000 gallons during the next year the same to be taken by you before November 1st. It reads: DEAR SIRS: Confirming our conversation we had today with your Mr.. OCC. From the judgment of the Court of First Instance the defendant only has appealed. while we are grinding. and we agreed with him that we would to the best of our ability. we remain. and costs. The lower court erred in finding that the appellant rescinded without sufficient cause the contract for the sale of molasses executed by it and the appellee.369. and with costs. and the same to start after the completion of our grinding season. to Song Fo & Company on December 13. But we believe we can let you have 25. Exhibit G is the answer of the manager of Song Fo & Company to the Hawaiian-Philippine Co. Jr.000 gallons of molasses at the same price as last year under the same condition. The appellant contends that the smaller amount was the basis of the agreement.93. No. altho we are somewhat handicapped. In an amended answer and cross-complaint.. 1.. Silay. Messrs. Neg. Song Fo gave us to understand that you would pay us at the end of each month for molasses delivered to you. 1922. Iloilo. presented a complaint with two causes of action for breach of contract against the Hawaiian-Philippine Co. C. who visited this Central. He requested if possible to let you have molasses during January.. Carrascoso.50. on December 16. PITCAIRN Administrator.I.

gave as the reason for the rescission.16 206. to Song Fo & Company on April 2. you were to meet our accounts upon presentation and at each delivery. and date of payment. the breach by Song Fo & Company of this condition: "You will recall that under the arrangements made for taking our molasses. (a) Price.16 206. is the allegation of plaintiff in its . Jan. 20 Do 1922 Dec.16 206. Song Heng. the parties have agree on a table showing the date of delivery of the molasses. Barnes & Co. and in order to make the contract clear. Barnes & Co. 1923. from Warner. The Hawaiian-Philippine Co. also believed it possible to accommodate Song Fo & Company by supplying the latter company with an extra 100. Song Fo the one who visited your Central. 29 1923 206.16 206. it is simply that the defendant did not consider itself obliged to deliver to the plaintiff molasses in any amount. 1923. The table mentioned is as follows: Date of receipt of account by plaintiff 1923 P206. Yours very truly. as per our new arrangements.. Had the Hawaiian-Philippine Co. If Exhibit T relied upon by the trial court shows anything. gave notice of the termination of the contract.000 gallons was not a definite promise. mentions "payment on presentation of bills for each delivery.16 206. the representative and the manager of Messrs. to Song Fo & Company dated April 2. to Song Fo & Company.000 gallons of molasses. a letter written by the manager of Song Fo & Company on October 17. another letter from Warner.16 Jan. 18 Dec. 29 Account and date thereof Date of payment 1923 Feb. Still less did it constitute an obligation. 5 Mar. a letter of March 28. as per our new arrangements. 2/23 do do Mar. we regret to hear that you mentioned Mr. the agent of the Hawaiian-Philippine Co.000 gallons. 1923. the appellant Yes. 20/23 Mar. 9/23 Mar. 12 Feb." In connection with the portion of the contract having reference to the payment for the molasses. Turning to Exhibit F. Mr." Exhibit O. is of a similar tenor.16 Dec. we hereby quote below our old contract as amended. we note this sentence: "Regarding the payment for our molasses. Exhibit A. 24 Mar. But the language used with reference to the additional 100.000 gallons of molasses. Song Fo (Mr. Song Heng) gave us to understand that you would pay us at the end of each month for molasses delivered to you. at 2 cents per gallon delivered at the central. we hereby quote below our old contract as amended. Ltd. by which the HawaiianPhilippine Co. to song Fo & Company of 300. we confirm all the arrangements you have stated and in order to make the contract clear. and understood all their contents.DEAR SIRS: We are in receipt of your favours dated the 9th and the 13th inst. 12/23 do do Mar." In Exhibit G. This service to be restricted to one trip for the six tanks. 7 or 8 do do do Apr. we find Song Fo & Company stating that they understand the contents of Exhibit F. In connection to yours of the 13th inst. Exhibit P. 31 Do Do Do Apr. the date of receipt of account by plaintiff. 1922. agreed to deliver to Song Fo & Company 300. Feb." Exhibit G is silent on the point. 31/23 do Mar. 2. The Hawaiian-Philippine Co. but it was not for he was Mr. 26/22 Jan. and that they confirm all the arrangements you have stated. a communication sent direct by the Hawaiian-Philippine Co.. 16 Mar. the right to rescind the contract of sale made with Song Fo & Company? The trial judge answers No. Exhibit F speaks of payments "at the end of each month. 3/23 Jan. 27 Mar. 5 do Date of delivery (b) All handling charges and expenses at the central and at the dock at Mambaguid for our account. (a) Price. We agree with appellant that the above quoted correspondence is susceptible of but one interpretation. expressly mentions an understanding between the parties of a contract for P300.." Not far removed from this statement. We sustain appellant's point of view on the first question and rule that the contract between the parties provided for the delivery by the Hawaiian-Philippine Co.000 gallons of molasses.16 206. (c) For services of one locomotive and flat cars necessary for our six tanks at the rate of P48 for the round trip dock to central and central to dock. 5 SONG FO & COMPANY By __________________________ Manager. Exhibit M. On the other hand. the amount and date thereof. With reference to the contents of your letter dated the 13th inst. 19 Do Do Some doubt has risen as to when Song Fo & Company was expected to make payments for the molasses delivered.16 206. Ltd. at 2 cents per gallon delivered at the central. Song Fo & Co.

In other words. 1923. of a contract imprudently breached by the Hawaiian-Philippine Co. it we may dignify it as such. This leaves 244. In the second place.006 gallons of molasses were delivered by the defendant to the plaintiff before the breach. been called as a witness.000 and on the second cause of action in no amount.. with legal interest form October 2. Without special finding as to costs in either instance. not a proven fact. Song Fo & Company should have paid for the molasses delivered in December. As to this amount. concur. As to what items up the more than P14. All the rest of the molasses was paid for either on time or ahead of time. Theoretically.000 gallons of molasses. the testimony which Mr. Not only this. The time of payment stipulated for in the contract should be treated as of the essence of the contract. we have no means of knowing. and for which accounts were received by it on January 5. not later than January 31 of that year. there is here present no outstanding fact which would legally sanction the rescission of the contract by the Hawaiian-Philippine Co. . Inc. Inza [1922]. what is the measure of damages? We again turn to the facts as agreed upon by the parties. As this is the same price specified in the contract between the plaintiff and the defendant.000. Three hundred thousand gallons of molasses was the total of the agreement. until payment. 1922. So 244. and the Central Victorias Milling Company. The second cause of action relates to lost profits on account of the breach of the contract. The first cause of action of the plaintiff is based on the greater expense to which it was put in being compelled to secure molasses from other sources. Avanceña. Agreeable to the foregoing. As the conditions existing at the central of the Hawaiian-Philippine Co. Song Fo & Company was not in default in payment so that the Hawaiian-Philippine co. Ostrand. would have had the right to rescind the contract because of the breach of Song Fo & Company. if the contract of December 13. had in reality no excuse for writing its letter of April 2.000 of alleged lost profits. Villamor. The general rule is that rescission will not be permitted for a slight or casual breach of the contract. the plaintiff had to pay the Central Victorias Milling company one and one-half centavos a gallon more for the molasses than it would have had to pay the Hawaiian-Philippine Co. but the Hawaiian-Philippine Co. But actually. this statement falls far short of presenting proof on which to make a finding as to damages.. a reasonable deduction is that Song Fo & Company was to pay the Hawaiian-Philippine Co. or what not. whether loss of sales or loss of customers. of a contract for 300. at three and one-half centavos per gallon. (Warner.. Under this hypothesis.994 gallons of molasses undelivered which the plaintiff had to purchase in the open market. And lastly.. Street. at the end of each month upon presentation accounts. On the basis first. Inc. We rule that the plaintiff is entitled to recover damages from the defendant for breach of contract on the first cause of action in the amount of P3.J..000 gallons just mentioned leaves as a result 144. the judgment appealed from shall be modified and the plaintiff shall have and recover from the defendant the sum of P3. as we have seen. Song Heng. the plaintiff admits that it could have secured it and more from the Central Victorias Milling Company. 1922.000 gallons of molasses were secured from the Central North Negros Sugar Co. Indisputably." Resolving such ambiguity as exists and having in mind ordinary business practice. Song Heng taken the witness-stand and made the statement attributed to him. Johns. 1923. Translated into pesos and centavos. Appellant's assignments of error are accordingly found to be well taken in part and not well taken in part.948. may have been different than those found at the Central North Negros Sugar Co.. the testimony of the witness Song Heng. Romualdez and Villa-Real. 3. In the first place.994 gallons minus the 100. which we have found to be unsustainable. The only evidence in the record on this question is the stipulation of counsel to the effect that had Mr. 100. Barnes & Co. the manager of Song Fo & Company. A delay in payment for a small quantity of molasses for some twenty days is not such a violation of an essential condition of the contract was warrants rescission for non-performance. upon presentation of accounts at the end of each month.complaint that "plaintiff agreed to pay defendant. 43 Phil. had Mr. JJ. 1923. Thereafter. As expressly conceded by the plaintiff at page 25 of its brief. we would concede under the first cause of action in round figures P3. 1923. waived this condition when it arose by accepting payment of the overdue accounts and continuing with the contract.43. C. but only for such breaches as are so substantial and fundamental as to defeat the object of the parties in making the agreement. cancelling the contract. had been fulfilled by the defendant.) We rule that the appellant had no legal right to rescind the contract of sale because of the failure of Song Fo & Company to pay for the molasses within the time agreed upon by the parties. the Hawaiian-Philippine Co. 505. Instead.174... and as not alone through the delay but through expenses of transportation and incidental expenses. and the fact that it is a part of the stipulation by counsel does not change this result.91. The terms of payment fixed by the parties are controlling. the plaintiff may have been put to greater cost in making the purchase of the molasses in the open market. Song Heng would have given undoubtedly would follow the same line of thought as found in the decision of the trial court. he would have testified that the plaintiff would have realized a profit of P14. vs. is a mere conclusion. and second. As conceded by the plaintiff. it would have been insufficient proof of the allegations of the complaint.994 gallons. at two centavos a gallon. 55. We sustain the finding of the trial judge in this respect. Johnson. agreeable to certain conditions which could easily be imagined. payment was not made until February 20.000. the plaintiff accordingly suffered no material loss in having to make this purchase. it is so ordered. this meant a loss to the plaintiff of approximately P2.

00.E. YULO. P33." which. maintaining his refusal even after Sarreal on September 26. among others. Solomon Boysaw and his then Manager.S. Yulo. a contract to engage Gabriel "Flash" Elorde in a boxing contest for the junior lightweight championship of the world. 1961.. Solomon Boysaw arrived in the Philippines on July 31. L-22590 March 20. Amado Araneta assigned to Alfredo J. and MANUEL NIETO. [pp. Jr.A. The GAB called a series of conferences of the parties concerned culminating in the issuance of its decision to schedule the Elorde-Boysaw fight for November 4. Sr. JR. Alfredo Yulo. t..Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G..R.00 as attorney's fees. Interphil signed Gabriel "Flash" Elorde to a similar agreement. informing him of his arrival and presence in the Philippines. 1961. Jr.000. defendantsappellees. Nevada. Inc. Inc. On September 1. ordered them to jointly and severally pay defendantappellee Manuel Nieto. 1961. No. Jr. The USA National Boxing Association which has supervisory control of all world title fights approved the date set by the GAB Yulo. On the same date. 1961 or not later than thirty [30] days thereafter should a postponement be . and defendant-appellee Lope Sarreal. the total sum of P25. a local boxing promoter. On June 19. 1961. Jr.: This is an appeal interposed by Solomon Boysaw and Alfredo Yulo. of which he had not been formally notified. In one of such communications dated October 6. The next day.n. JR. 1961 which was within the 30-day period of allowable postponements provided in the principal boxing contract of May 1. 1963 and other rulings and orders of the then Court of First Instance [CFI] of Rizal.. The antecedent facts of the case are as follows: On May 1. INC. On July 2. from the decision dated July 25. Amado Araneta the managerial rights over Solomon Boysaw. Del Rosario & Associates for defendant-appellee M. 1961. plaintiffs-appellants. Branch V in Civil Case No.. engage in any other such contest without the written consent of Interphil Promotions.. offered to advance the fight date to October 28. P250.369. and Manuel Nieto. vs. Jr. that is. Yulo informed Besa that he was willing to approve the fight date of November 4. SR. and requesting that Boysaw be called to an inquiry to clarify the situation. exchanged communications with one Mamerto Besa. prior to the date of the boxing contest. the fight contemplated in the May 1. Inc. 1987 SOLOMON BOYSAW and ALFREDO M. A. 1961. V.00 as attorney's fees.. signed with Interphil Promotions. J. Boysaw wrote Lope Sarreal.00 as unrealized profits. the defendants-appellees Interphil Promotions. Nieto.1961 provided the same was promoted by Besa. 1961. 26-27. Early in October 1961. and that Boysaw would not.R. Sr. 1961. Jr. represented by Lope Sarreal. on behalf of Interphil Sarreal wrote a letter to the Games and Amusement Board [GAB] expressing concern over reports that there had been a switch of managers in the case of Boysaw. Q-5063. Felipe Torres and Associates for plaintiffs-appellants. Naravasa & Pol Tiglao.. to engage Boysaw in a title fight at the Rizal Memorial Stadium on September 30. broken down into P20. 1961. the additional amount of P20.00 as moral damages and P5. Ketchum on his own behalf and on behalf of his associate Frank Ruskay.. 1961. Sr. Sr. While an Elorde-Boysaw fight was eventually staged. J.000.000. session of March 14. Inc.000. 1961. for a possible promotion of the projected Elorde-Boysaw title bout.000.. Plaintiffs versus Interphil Promotions. 1961 boxing contract never materialized.00 as moral damages aside from costs. Presumably in preparation for his engagement with Interphil. Boysaw fought and defeated Louis Avila in a ten-round non-title bout held in Las Vegas. assigned to J. 1961.. a supplemental agreement on certain details not covered by the principal contract was entered into by Ketchum and Interphil. 1961. FERNAN. Willie Ketchum.000. the managerial rights over Boysaw that he earlier acquired from Ketchum and Ruskay. INTERPHIL PROMOTIONS.72 as actual damages and P5. It was stipulated that the bout would be held at the Rizal Memorial Stadium in Manila on September 30. Inc.. Jr. Sr. September 2. Yulo. Quezon City. 1963]. U. Yulo. 1961. On May 3. refused to accept the change in the fight date. RESOLUTION mutually agreed upon.s. Thereafter. for defendant-appellee Interphil Promotions. Lope Sarreal.. wrote to Sarreal informing him of his acquisition of the managerial rights over Boysaw and indicating his and Boysaw's readiness to comply with the boxing contract of May 1. On September 5. Defendants. and Lope Sarreal. Jr. Jr. entitled "Solomon Boysaw and Alfredo M. LOPE SARREAL. Jr.

as stipulated in the May 1. of the managerial rights over Boysaw without the knowledge or consent of Interphil. Civil Code]. They are to be performed simultaneously. to November 4. 1293. Whether or not the lower court erred in the refusing a postponement of the July 23. the evidence established that the contract was violated by appellant Boysaw himself when. plaintiff's counsel after asking the court's permission. 5. Our law on contracts recognizes the principle that actionable injury inheres in every contractual breach. p. but was granted as regards the disqualification of Atty. He was still abroad when.[Art. his counsel. Whether or not there was legal ground for the postponement of the fight date from September 1. The assignments. 2. "Reciprocal obligations are those which arise from the same cause. as having been committed by the lower court. 1961. 26-27. March 14. Jr. On the issue pertaining to the violation of the May 1. Another violation of the contract in question was the assignment and transfer. another postponement was granted by the lower court for July 23. Amado Araneta. [pp. [Art. sued Interphil. 1963 upon assurance of Boysaw's counsel that should Boysaw fail to appear on said date. Alfredo Berwin 48 Phil. the following principal issues can be deduced: 1. so that the performance of one is conditioned upon the simultaneous fulfillment of the other" [Tolentino. While the contract imposed no penalty for such violation. Whether or not the lower court erred in denying the appellant's motion for a new trial. IV. Civil Code]. The trial proceeded as scheduled on July 23.. Jr. 1963. Civil Code. and if there was. 1961. Jr. Art. Vol. On the first scheduled date of trial. who was guilty of such violation. in the CFI of Rizal [Quezon City Branch] for damages allegedly occasioned by the refusal of Interphil and Sarreal.. 1961. Thus: Those who in the performance of their obligations are guilty of fraud. this does not grant any of the parties the unbridled liberty to breach it with impunity. 3. should have been consented to by Interphil. 1961 boxing contract. There is no doubt that the contract in question gave rise to reciprocal obligations. Also: The power to rescind obligations is implied. From the errors assigned by the plaintiffs. may be made even without the knowledge or against the will of the latter. and in which each party is a debtor and a creditor of the other.1 The power to rescind is given to the injured party. first to J. on the ground that the latter had been sued in his personal capacity and. and those who in any manner contravene the terms thereof. emphasis supplied]. on the basis of the evidence adduced. plaintiff moved to disqualify Solicitor Jorge Coquia of the Solicitor General's Office and Atty. to appellant Yulo. Boysaw and Yulo. such that the obligation of one is dependent upon the obligation of the other.As a result of the foregoing occurrences. The case dragged into 1963 when sometime in the early part of said year. "Where the plaintiff is the party who did not perform the undertaking which he was bound by the terms of the agreement to perform 4 he is not entitled to insist upon the performance of the contract by the defendant. was not entitled to be represented by government counsel. [Part 1. The motion was denied. Edu. 1963. 1191. erred in awarding the appellees damages of the character and amount stated in the decision. without the approval or consent of Interphil.1961. Civil Code of the Philippines. 1963]. The motion was denied insofar as Solicitor General Coquia was concerned. hence. and subsequently. are liable for damages. then GAB Chairman. 175. took no further part in the proceedings.s. Emphasis supplied]. On or about July 16. 581. 4. therefore. on October 12.1961. Thus. to honor their commitments under the boxing contract of May 1. 1961 in Las Vegas Nevada. Jr. plaintiffs represented by a new counsel. aided and abetted by Nieto. pleading anew Boysaw's inability to return to the country on time. Appellant Yulo admitted this fact during the trial. or recover damages by reason of his own breach " [Seva vs. and from Araneta to Yulo. After the lower court rendered its judgment dismissing the plaintiffs' complaint. so was the motion for reconsideration filed by plaintiffs on July 22. this appeal taken directly to this Court by reason of the amount involved. 1963. the lower court reset the trial for June 20. When defendant's counsel was about to present their case. 1963 with plaintiff's case being deemed submitted after the plaintiffs declined to submit documentary evidence when they had no other witnesses to present. as alleged. 1963 trial. Whether or not there was a violation of the fight contract of May 1. Novation which consists in substituting a new debtor in the place of the original one. Jr. from Ketchum to Araneta. t. Whether or not the lower court. were in fact novations of the original contract which. he was scheduled to take the witness stand. negligence or delay. plaintiff Boysaw left the country without informing the court and. 1170. . 1963 trial. Sr. and Manuel Nieto. plaintiff's case would be deemed submitted on the evidence thus far presented. but not without the consent of the creditor. Sarreal. in case one of the obligors should not comply with what is incumbent upon him. filed an urgent motion for postponement of the July 23. 1963. in reciprocal ones. on May 13.. Romeo Edu of the GAB Legal Department from appearing for defendant Nieto. to be valid. The motion was denied. 1961 fight contract. Since Boysaw was still abroad on the later date.n. the plaintiffs moved for a new trial. he fought Louis Avila on June 19.

including the setting of dates thereof. 1963]. Civil Code of the Philippines. it being convinced that Boysaw did not leave without notice to the court or to his counsel. Jr. the lower court would have allowed the postponement of the trial. [pp. such clearances might have impelled the Court to grant the postponement prayed for by them had they been . p. really wanted to postpone the fight date owing to an injury that Elorde sustained in a recent bout. Jr. 1961 just to place it within the 30. The records do not support appellants' contention. have altered the results of the case. the absence of evidence to the contrary. The dismissal by the Court of said petition had laid this issue to rest. We uphold the appellees' contention that since all the rights on the matter rested with the appellees.. From the evidence. Under the law when a contract is unlawfully novated by an applicable and unilateral substitution of the obligor by another. the appellees offered to advance the November 4. the aggrieved creditor is not bound to deal with the substitute. We uphold the lower court's ruling that: The said documents [clearances] are not evidence to offset the evidence adduced during the hearing of the defendants.s. 1961 fight to October 28. it is clear that the appellees. warrants the full application of said presumption that the decision to set the Elorde-Boysaw fight on November 4. suffice it to say that the same issue had been raised before Us by appellants in a petition for certiorari and prohibition docketed as G. Also. Thus. As admitted by the counsel in their pleadings. 1961 was a GAB Board decision and not of Manuel Nieto. On the denial of appellant's motion for a new trial. whether in expromision or delegacion is an. the clearances are not even material to the issues raised. is such kind of evidence which has reference to the merits of the case. While the appellants concede to the GAB's authority to regulate boxing contests. within the appellee's rights. through a letter. 17. acceded to the "substitution" by Yulo of the original principal obligor. and the prior acquisition of such rights by Araneta were done without the consent of Interphil. then. It is the opinion of the Court that the 'newly discovered evidence' contemplated in Rule 37 of the Rules of Court. appellees cannot be deemed to have consented to such changes. is under the circumstances. In a show of accommodation. who is Ketchum. of such a nature and kind. alone. the violations of the terms of the original contract by appellants vested the appellees with the right to rescind and repudiate such contract altogether. upon which the motion for new trial was made to rest.s. advised Interphil on September 5. Vol. together with the obligations thereunder. That they sought to seek an adjustment of one particular covenant of the contract. the appellees were not reliably informed of the changes of managers. thereby arrogating to himself the prerogatives of the whole GAB Board. 32-42. 1961. [Tolentino. made the decision for postponement. Anent the lower court's refusal to postpone the July 23.That appellant Yulo. Appellant Yulo himself admitted that it was the GAB Board that set the questioned fight date. particularly the fight date is undeniable from the facts aforestated. the appellees' desire to postpone the fight date could neither be unlawful nor unreasonable. Such evidence cannot alter the result of the case even if admitted for they can only prove that Boysaw did not leave the country without notice to the court or his counsel.n.. . 44-49. Substitution of one debtor for another may delay or prevent the fulfillment of the obligation by reason of the inability or insolvency of the new debtor. Not being reliably informed. Boysaw's testimony upon his return would. [pp. we find that the lower court did not commit any reversible error. and appellants cannot now hope to resurrect the said issue in this appeal. 1963]. The logical presumption can only be that. In this case. No. if y enters into a contract with z.R. That the appellees had the justification to renegotiate the original contract. and appellants' claims. upon receipt of Yulo's letter. in a contract where x is the creditor and y is the debtor. 17. Under the circumstances. the creditor should agree to accept the substitution in order that it may be binding on him. In fact. instead of availing themselves of the options given to them by law of rescission or refusal to recognize the substitute obligor Yulo. X can still bring his action against y for performance of their contract or damages in case of breach. L-21506. The consent of the creditor to the change of debtors. 3611. IV. . The alleged newly discovered evidence. the GAB did not act arbitrarily in acceding to the appellee's request to reset the fight date to November 4. indispensable requirement .day limit of allowable postponements stipulated in the original boxing contract. It must be noted that appellant Yulo had earlier agreed to abide by the GAB ruling. it is their contention that only Manuel Nieto. but such transfer is not consented to or approved by x. consists merely of clearances which Boysaw secured from the clerk of court prior to his departure for abroad. There is no showing that Interphil. t.. it would alter the result of the judgment. under which he transfers to z all his rights under the first contract. Jan. to the enforcement of the contract hung entirely upon the former's pleasure and sufferance. that if it were presented. with Interphil's letter to the GAB expressing concern over reported managerial changes and requesting for clarification on the matter. they have forfeited any right to its enforcement. there is no novation. 1963 trial. The refusal of appellants to accept a postponement without any other reason but the implementation of the terms of the original boxing contract entirely overlooks the fact that by virtue of the violations they have committed of the terms thereof. On the validity of the fight postponement. if any. hence. 1961 of his acquisition of the managerial rights over Boysaw cannot change the fact that such acquisition.n. The argument of appellants is that if the clearances were admitted to support the motion for a new trial. t. We find the argument without merit because it confuses the evidence of the clearances and the testimony of Boysaw. Jan. it must be stated that one of the strongest presumptions of law is that official duty has been regularly performed. Jr.

Jr. except for the award of moral damages which is herein deleted. we find no reason to disturb the award of P250. they. Arevalo. The grant of moral damages is not subject to the whims and caprices of judges or courts. as such. 29.. For these the law taxes costs. The award of attorney's fees in the amount of P5. Record on Appeal]. slander or any other form of defamation. . it must be noted that because the appellants wilfully refused to participate in the final hearing and refused to present documentary evidence after they no longer had witnesses to present. We cite with approval appellee's contention that "the two qualities that ought to concur or dwell on each and every of evidence that is invoked as a ground for new trial in order to warrant the reopening .000. The law could not have meant to impose a penalty on the right to litigate.00 as and for unrealized profits to the appellees. The testimony of Boysaw cannot be considered newly discovered evidence for as appellees rightly contend. p. Paras. 309. SO ORDERED. al.. and cannot. The court's discretion in granting or refusing it is governed by reason and justice. 34 and 35. 13. in the matter of moral damages. 27. had he effect of sustaining such ruling of the court . and another P5. 27. jointly. . be arbitrarily considered as a case of malicious prosecution. The question of the denial of the postponement sought for by counsel for plaintiffs is a moot issue . Padilla. . L7748. such evidence has been in existence waiting only to be elicited from him by questioning. such litigant may be penalized for costs. The action herein brought by plaintiffs-appellants is based on a perceived breach committed by the defendants-appellees of the contract of May 1. the appellants contend that a conclusion or finding based upon the uncorroborated testimony of a lone witness cannot be sufficient. 2219. [Barreto vs. rape or other lascivious acts. 1961. Jr. 32. 5) Illegal or arbitrary detention or arrest. 8) Malicious prosecution. Aug. 2219 of the Civil Code. abduction. 3) Seduction. especially where such testimony has not been contradicted or rebutted. 21. Art. No. . Inc. and Lope Sarreal. the decision of the lower court is hereby affirmed. 2) Quasi-delict causing physical injuries. 4) Adultery or concubinage. JJ. by their own acts prevented themselves from objecting to or presenting proof contrary to those adduced for the appellees. 30. . 7) Libel. the law requires that his act be wrongful.000.presented on time. 26. Gutierrez.000.00 in favor of defendants-appellees Interphil Promotions. However." On the issue pertaining to the award of excessive damages. we are inclined to uphold the appellant's contention that the award is not sanctioned by law and well. concur. there is no rule requiring more than one witness or declaring that the testimony of a single witness will not suffice to establish facts. The denial of the petition for certiorari and prohibition filed by them. 296-297. No. [pp. 2219 of the Civil Code provides: Art. . et. cannot also be regarded as excessive considering the extent and nature of defensecounsels' services which involved legal work for sixteen [16] months. The award of moral damages in the instant case is not based on any of the cases enumerated in Art. Sr. In order that a person may be made liable to the payment of moral damages. 52 O.. the records bear sufficient evidence presented by appellees of actual damages which were neither objected to nor rebutted by appellants. On the actual damages awarded to appellees. On the award of actual damages to Interphil and Sarreal. again because they adamantly refused to participate in the court proceedings. The adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. Thus. Moral damages cannot be imposed on a party litigant although such litigant exercises it erroneously because if the action has been erroneously filed.] WHEREFORE. 9) Acts mentioned in Art.G. . 28.. 6) Illegal search. Bidin and Cortes.00 in favor of defendant-appellee Manuel Nieto. 10) Acts and actions referred to in Arts. 5818. Moral damages may be recovered in the following analogous cases: 1) A criminal offense resulting in physical injuries. 1956. We hold that in civil cases. inhered separately on two unrelated species of proof" which "creates a legal monstrosity that deserves no recognition..settled authorities. such right is so precious that moral damages may not be charged on those who may exercise it erroneously.

Fernandez for petitioner. which was approved by the president of UP. which was docketed as Civil Case No. that after it had received notice that UP would rescind or terminate the logging agreement. considered as rescinded and of no further legal effect the logging agreement that they had entered in 1960. petitioner UP informed respondent ALUMCO that it had. the logging contract was signed on 16 February 1966. dated 14 January 1967. situated at the Lubayat areas in the provinces of Laguna and Quezon. (or ALUMCO).L. it had incurred an unpaid account of P219.94. meantime. xxx xxx xxx 5. for the collection or payment of the herein before stated sums of money and alleging the facts hereinbefore specified. 9435. dated 25 February 1966. it had failed to pay. and the third order. J. As prayed for in the petition. and which stipulated the following: 3. Quisumbing for private respondents. and on 7 September 1965.00) by way of and for liquidated damages. REYES. etc. dated 12 December 1967. Inc. the second order. That before the issuance of the aforesaid preliminary injunction UP had taken steps to have another concessionaire take over the logging operation. for preliminary attachment and preliminary injunction restraining ALUMCO from continuing its logging operations in the Land Grant. enjoined UP from awarding logging rights over its timber concession (or Land Grant). et al. it prayed for and obtained an order. per its resolution on 9 February 1968.362.Republic of the Philippines SUPREME COURT Manila EN BANC G. that bidding was conducted. In the event that the payments called for in Nos. That on or about 2 November 1960. Amores and Special Counsel Perfecto V. 9435 of the Court of First Instance of Rizal (Quezon City). despite repeated demands. in consideration of payment to UP of royalties. and the CREDITOR shall be entitled as a matter of right to Fifty Thousand Pesos (P50. The first order. vs. adjudged UP in contempt of court.000. are sought to be annulled in this petition for certiorari and prohibition. 1970 UNIVERSITY OF THE PHILIPPINES. That on 19 July 1965. Inc. petitioner. in addition to the indebtedness that it had previously acknowledged. for a period starting from the date of the agreement to 31 December 1965.. a writ of preliminary injunction against the enforcement or implementation of the three (3) questioned orders was issued by this Court.R. Inc. entitled "Acknowledgment of Debt and Proposed Manner of Payments. filed by herein petitioner University of the Philippines (or UP) against the above-named respondent judge and the Associated Lumber Manufacturing Company.. that ALUMCO cut and removed timber therefrom but.74. respondents. pursuant to Act 3608. as of that date.B. No. The petition alleged the following: That the above-mentioned Land Grant was segregated from the public domain and given as an endowment to UP. forest fees. an institution of higher learning. in the amount of P61. UP filed a complaint against ALUMCO. ALUMCO had filed several motions to discharge the writs of attachment and preliminary injunction but were denied by the court. and the concession was awarded to Sta. UP and ALUMCO entered into a logging agreement under which the latter was granted exclusive authority.." dated 9 December 1964. and directed Sta.133. Clara Lumber Company. to cut. 1960 as rescinded without the necessity of any judicial suit. in his capacity as JUDGE of the COURT OF FIRST INSTANCE IN QUEZON CITY. That. Clara Lumber Company. collect and remove timber from the Land Grant. which. the DEBTOR agrees without reservation that the CREDITOR shall have the right and the power to consider the Logging Agreement dated December 2. Barredo. L-28602 September 29. Norberto J. for the period from 9 December 1964 to 15 July 1965. 1 and 2 of this paragraph are not sufficient to liquidate the foregoing indebtedness of the DEBTOR in favor of the CREDITOR. issued in its Civil Case No. to be operated and developed for the purpose of raising additional income for its support. together with other allegations. J.: Three (3) orders of the Court of First Instance of Rizal (Quezon City). extendible for a further period of five (5) years by mutual agreement. the balance outstanding after the said payments have been applied shall be paid by the DEBTOR in full no later than June 30. ALUMCO executed an instrument. WALFRIDO DE LOS ANGELES. by advertising an invitation to bid. 1965. as of 8 December 1964. In the event that the DEBTOR fails to comply with any of its promises or undertakings in this document. Office of the Solicitor General Antonio P. dated 30 September 1965. ALUMCO continued its logging operations. . but again incurred an unpaid account. Solicitor Augusto M. denied reconsideration of the order of contempt. to refrain from exercising logging rights or conducting logging operations on the concession..

as it had alleged in its second amended answer to the complaint in Civil Case No.That on 12 November 1965..P. In other words.. that respondent was permitted to cut logs in the middle of June 1965 but petitioner's supervisor stopped all logging operations on 15 July 1965. under its contract "to buy and sell" with said firm. the responsible party will be sentenced to damages. in not turning over management of ALUMCO. as stipulated in the "Acknowledgment of Debt and Proposed Manner of Payments" because the logs that it had cut turned out to be rotten and could not be sold to Sta. Except that it denied knowledge of the purpose of the Land Grant. even without court intervention. as already observed. on motion dated 12 April 1966 by ALUMCO and one Jose Rico. . on 27 November 1965. apparently sustained it (although the order expresses no specific findings in this regard). Inc. should the court. 1967 ed. We see no conflict between this ruling and the previous jurisprudence of this Court invoked by respondent declaring that judicial action is necessary for the resolution of a reciprocal obligation. anyway. could disregard ALUMCO's rights under the contract and treat the agreement as breached and of no force or effect. it must be understood that the act of party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional. Civil Law. the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages (Civil Code. The UP moved for reconsideration of the aforesaid order. 1 since in every case where the extrajudicial resolution is contested only the final award of the court of competent jurisdiction can conclusively settle whether the resolution was proper or not. Clara Lumber Company. Inc..not seven (7) years. In the first place. estoppel or prescription. decide that the resolution of the contract was not warranted. in an order dated 14 January 1967. enjoining UP from awarding logging rights over the concession to any other party. in the same order. respondent ALUMCO did not deny the foregoing allegations in the petition. in the contrary case. which maybe boiled down to: blaming its former general manager. We find that position untenable. was invalid. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. 9435. That. can treat its contract with ALUMCO rescinded. Cesar Guy. that UP's unilateral rescission of the logging contract. It is in this sense that judicial action will be necessary. In its answer. Then. however." As to such special stipulation. Pan Oriental Shipping Co. and in connection with Article 1191 of the Civil Code. UP and ALUMCO had expressly stipulated in the "Acknowledgment of Debt and Proposed Manner of Payments" that. in case of abuse or error by the rescinder the other party is not barred from questioning in court such abuse or error. unless attack thereon should become barred by acquiescence. without a court order. Article 2203). but it proceeds at its own risk. this Court stated in Froilan vs. the party who deems the contract violated may consider it resolved or rescinded. as without it. in issuing the injunction order of 25 February 1966. Of course. the extrajudicial resolution will remain contestable and subject to judicial invalidation. Clara Lumber Company. In other words. and the consequent indemnity awarded to the party prejudiced. on 25 February 1966. the creditor (UP) has "the right and the power to consider. Clara Lumber Company. ALUMCO filed a petition to enjoin petitioner University from conducting the bidding. Inc. which purpose. that petitioner's supervisor refused to allow respondent to cut new logs unless the logs previously cut during the management of Cesar Guy be first sold. and may disregard the same before any judicial pronouncement to that effect. page 140) but. it filed a second petition for preliminary injunction. The basic issue in this case is whether petitioner U. and bring the matter to court. upon default by the debtor ALUMCO.. That UP received the order of 25 February 1966 after it had concluded its contract with Sta. being ever subject to scrutiny and review by the proper court. is embodied in Act 3608 and. respondent judge issued the first of the questioned orders. and which contract was referred and annexed to the "Acknowledgment of Debt and Proposed Manner of Payments". the practical effect of the stipulation being merely to transfer to the defaulter the initiative of instituting suit. Vol. respondent corrected itself by stating that the period of the logging agreement is five (5) years . It reiterated.94. but the motion was denied on 12 December 1967. it is free to resort to judicial action in its own behalf. and.382. it is not always necessary for the injured party to resort to court for rescission of the contract. to refrain from exercising logging rights or conducting logging operations in the concession. Civil Code Anno. declared petitioner UP in contempt of court and. thereby rendering it unable to pay the sum of P219. L-11897. 31 October 1964. and said company had started logging operations. after due hearing. that it had made several offers to petitioner for respondent to resume logging operations but respondent received no reply. the resolution will be affirmed. that it is only after a final court decree declaring the contract rescinded for violation of its terms that U. the Logging Agreement dated 2 December 1960 as rescinded without the necessity of any judicial suit. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law.P. directed Sta. its defenses in the court below. IV. et al. instead of the rescinder. 12 SCRA 276: 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. Fears have been expressed that a stipulation providing for a unilateral rescission in case of breach of contract may render nugatory the general rule requiring judicial action (v.. If the other party denies that rescission is justified. without previous court action.. the court. Otherwise. therefore. and the lower court. conclusively known. and act accordingly. Footnote. that it failed to pursue the manner of payments. Padilla. Respondent ALUMCO contended.

. 897). entre otras. Such injunction.) (Emphasis supplied).B. en definitiva. and repeatedly denied its motions to lift the injunction. correctible by certiorari. segun el art. that the excuses offered in the second amended answer. fides non est servanda. una actitud o conducta persistente y rebelde de laadversa o la satisfaccion de lo pactado. in construing the effect of Article 1124 of the Spanish Civil Code (of which Article 1191 of our own Civil. WHEREFORE.J. must be set aside. has repeatedly held that. ademas. 106 Jur. por declaracion del acreedor. bien hecha la resolucion o por el contrario. Dizon. y 2. is on leave. Let the records be remanded for further proceedings conformably to this opinion. since appeal was not available or adequate. C. TS of Spain. it becomes plain that the acts of the court a quo in enjoining petitioner's measures to protect its interest without first receiving evidence on the issues tendered by the parties. Villamor and Makasiar. 3. were in grave abuse of discretion. de 4 Nov. inspiradas por el principio del Derecho intermedio. segun jurisprudencia de este Tribunal. 1958 y 22 Jun. cuando no opta por el cumplimientocon la indemnizacion de danos y perjuicios realmente causados. Civ. therefore. 0 Por la demanda de la perjudicada. and considering that the complaint of petitioner University made out a prima facie case of breach of contract and defaults in payment by respondent ALUMCO. (Sent. 16 November 1956. to the extent that the court below issued a writ of preliminary injunction stopping ALUMCO's logging operations. of the Tr. and the order of the respondent court of 25 February 1966. 1124 regula la resolucioncomo una "facultad" atribuida a la parte perjudicada por el incumplimiento del contrato. El articulo 1124 del Codigo Civil establece la facultad de resolver las obligaciones reciprocas para el caso de que uno de los obligados no cumpliese lo que le incumbe. and in subsequently refusing to dissolve the injunction.124.sin necesidad de una declaracion previa de los Tribunales. que puede ejercitarse. contenida en las Ss. granting the Associated Lumber Company's petition for injunction. siempre quese acredite. concur. the Supreme Court of Spain. recogido del Canonico. the writ of certiorari applied for is granted. J. 447). is hereby set aside. Code is practically a reproduction). puedetener lugar con eficacia" 1. and the rotten condition of the logs in private respondent's pond. JJ. el Art. o Por la declaracion de voluntad de la otra hecha extraprocesalmente. that it is not denied that the respondent company had profited from its operations previous to the agreement of 5 December 1964 ("Acknowledgment of Debt and Proposed Manner of Payment"). Castro. Fernando..In fact. ya en la via judicial. and considering that whatever prejudice may be suffered by respondent ALUMCO is susceptibility of compensation in damages. que si la declaracion de resolucion hecha por una de las partes se impugna por la otra. Sup. Reyes. Zaldivar. a reserva. (Ss. Teehankee. la cual tiene derecho do opcion entre exigir el cumplimientoo la resolucion de lo convenido. do not constitute on their face sufficient excuse for non- payment. For the reason that the order finding the petitioner UP in contempt of court has open appealed to the Court of Appeals. Barredo. facultad que. this Court abstains from making any pronouncement thereon. Makalintal. even without express provision conferring the power of cancellation upon one contracting party. fundada en el incumplimiento por una de las partes de su respectiva prestacion. Actg. surge immediatamente despuesque la otra parte incumplio su deber. definitivo o irreformable lo impida. 1959. que habran de declarar. Segun reiterada doctrina de esta Sala. interpretado por la jurisprudencia de esta Sala. which said respondent was in a better position to know when it executed the acknowledgment of indebtedness. La resolucion de los contratos sinalagmaticos. Jurisp. claro es. 1. queda aquella sometida el examen y sancion de los Tribunale.L. a resolution of reciprocal or synallagmatic contracts may be made extrajudicially unless successfully impugned in court. . of 10 April 1929. Aranzadi. In the light of the foregoing principles. such as the misconduct of its former manager Cesar Guy. no ajustada a Derecho. a un hecho obstativo que de un modoabsoluto. 1956.. de 12 mayo 1955 y 16 Nov. ya fuera de ella. of Spain. por el cual fragenti fidem. si no es impugnada en juicio luego con exito. and the case is pending therein. (Sent.

316. and ordering: (a) The defendant to return and reconvey to the plaintiff the 3. 1969. 1970. JR. Rollo).** After issues have been joined and after trial on the merits. as provided in the promissory notes he delivered to Erquiaga.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.100 paid up shares of stock of the Erquiaga Development Corporation which now stand in his name in the books of the corporation. EERNESTO . respondents. REYNOSO. Gonzales and Santiago de Erquiaga" (pp. and (d) its resolution of October 4.R. judgment is hereby rendered in favor of the plaintiff and against the defendant Jose L. the total price of the sale was later increased to P971. Rollo). 1977.100 paid-up shares of stock of the Erquiaga Development Corporation which owns the Hacienda San Jose in Irosin. the following developments occurred thereafter: GRINO-AQUINO. Feliciano S. EDNA REYNOSO. Reynoso was able to pay the total sum of P410. Assailed in this petition for review are: (a) the decision of the Court of Appeals dated May 31.500 shares in favor of Erquiaga as security for the balance of his obligation (p. Parades & Bausa for private respondents. 99. Reynoso to sell to the latter his 3.000 payable in installments on definite dates fixed in the contract but not later than November 30. 81-100.100 shares (or 100%) of Erquiaga Development Corporation for P900. DE ERQUIAGA.371. the only asset of the corporation (p. both have pleaded for a decision to end this case.100 paid up shares of stock of the Erquiaga Development Corporation to the defendant.1968. Rollo) became final and executory because none of the parties appealed. 1969. Rollo). Hon. On March 30. 212.Rollo). 75. denying the motion for reconsideration (p. Reynoso pledged 1.70 represented brokers' commission and interest (CFI Decision. 1977. 1972 of the trial court (pp. 275-290. Now. GONZALES.100 paid up shares of stock of the Erquiaga Development Corporation.000 to Erquiaga who thereupon transferred all his shares (3. in the Court of First Instance of Sorsogon. Lucero.70 payable on or before December 17. vs. JOSES V. Rollo). 1970. he entered into an Agreement with Jose L.: This is a case that began in the Court of First Instance of Sorsogon in 1970. Ampil. Reynoso and Erquiaga Development Corporation. private respondent Santiago de Erquiaga filed a complaint for rescission with preliminary injunction against Jose L. entitled "Africa Valdez Vda. Sorsogon (p. No. worn down by this attrital suit. SP 04811. 90. (b) The defendant to render a full accounting of the fruits he received by virtue of said 3. as provided in paragraph 3. not the least of which is the intransigence of the defeated party. FELICIANO S. pp. denying the motion to set aside the entry of judgment. 100. LOURDES REYNOSO. Branch I (Civil Case No. de Reynoso et al. Bausa. The delay in writing finis to this case is attributable to several factors. Because Reynoso failed to pay the second and third installments on time. 1968. As recited by the Court of Appeals in its decision under review. 1976. J. The difference of P71. . ERLINDA REYNOSO & EMILY REYNOSO. through counsel. on March 2. administratrix of the estate of the late SANTIAGO DE ERQUIAGA & HON. petitioners. (b) its resolution dated August 3. ordering entry of judgment (p. Agrava. Rollo).R. 1976 in CA-G. 100. However. 2446).100 paid-up shares) in Erquiaga Development Corporation to Reynoso. 298. Rollo). Santiago de Erquiaga was the owner of 100% or 3. On November 4. Gineta & Roxas for petitioners. SYLVIA REYNOSO. as well as to return said fruits received by him to plaintiff Santiago de Erquiaga. Reynoso failed to pay the balance of P561. Suarez. subparagraph (c) of the contract to sell. HON. 81. 1989 GLORIA M. Rollo). as well as the possession of the Hacienda San Jose. 79-106. pp. rescinding the sale of 3.321.371. Erquiaga. Reynoso. AFRICA VALDEZ VDA. formally informed Reynoso that he was rescinding the sale of his shares in the Erquiaga Development Corporation (CFI Decision. vs. CECILE REYNOSO. 47206 September 27. its execution has taken all of the past seventeen (17) years with the end nowhere in sight. Although the decision dated September 30.*** the dispositive portion of which reads as follows: In view of the foregoing. COURT OF APPEALS. So. 1972).. As of December 17. DE REYNOSO. the lower court rendered judgment (on September 30. (c) its resolution of August 24. No. 1968.70 on or before December 17.

00 as attorney's fees.100 shares of stocks but more particularly the products received by the defendant from the hacienda.100 shares of the capital stock of Erquiaga Development Corporation. (e) The defendant to pay the plaintiff the amount of P50.70 as of October 19. 1974 (Annex 3.1974. as urged by plaintiff. Id. Annex 1.000. Id.). 1973.) The parties did not appeal therefrom and it became final and executory. Petitioners' motion for reconsideration thereof was likewise denied by the Supreme Court on March 29. 1968. the decision has become final and executory. the Court finds merit in the contention of the plaintiff that the payment to the defendant of the total sum of P410. The hacienda and its natural fruits as represented by the shares of stock which the defendant received as manager and controlling stockholder of the Erquiaga Development Corporation can not be divorced from the certificates of stock in order to determine whether the defendant has correctly reported the income of the corporation or concealed part of it for his personal advantage.00 plus legal interest from December 17. It is hardly necessary for the Court to restate an obvious fact that on both legal and equitable grounds. pertinent portions of which reads: It will be noted that both parties having decided not to appeal.(c) The plaintiff to return to the defendant the amount of P100. 4-6. The reasons of the lower court for appointing a receiver 'were that the matter of accounting of the fruits received by defendant Reynoso as directed in the decision will take time.1975. Reynoso died and he was substituted by his surviving spouse Africa Valdez Vda.000. (Annex A-Petition. and there is danger that the Development Bank of the Philippines may institute foreclosure proceedings to the damage and prejudice of the plaintiff.00 plus the interest.' (p. (d) The defendant to pay the plaintiff as actual damages the amount of P12. 7. 1973. dated February 12.000. and the amount of P310.000. It is the sense of the court that the fruits referred to in the decision include not only the dividends received. that when such accounting is made and the accounting. dissolving the receivership and ordering the delivery of .00. 1973. if any. The hacienda and the products thereon produced constitute the physical assets of the Erquiaga Development Corporation represented by the shares of stock and it would be absurd to suppose that any accounting could be made by the defendant without necessarily taking into account the products received which could be the only basis for determining whether dividends are due or not on account of the investment. the Erquiaga Development Corporation and defendant Jose Reynoso are one and the same persons as far as the obligation to account for the products of the hacienda is concerned. Nevertheless. the Court of Appeals rendered judgment dismissing the petition with costs against the petitioners. ruling that said Order is valid and the respondent court did not commit any grave abuse of discretion in issuing the same (Annex 2.000. as party defendants. Answer. as contended by the plaintiff.).) In the same Order. Upon motion of Erquiaga. de Reynoso and children.00 plus legal interest from November 4. Indeed it is reasonable to suppose. defendant Jose L.' (pp. the CFI of Sorsogon issued an Order. should be held in abeyance pending rendition of the accounting by the defendant of the fruits received by him on account of the 3. on the 3. should refer not only to the dividends due from the shares of stock but to the products of the hacienda which is the only asset of the Erquiaga Development Corporation.000. until paid. On June 28. the CFI of Sorsogon appointed a receiver upon the filing of a bond in the amount of P100. On March 21.1968.) On April 26.510. The same may be said with respect to the sums due the plaintiff from the defendant for damages and attorney's fees. 1973. the CFI of Sorsogon issued an order. and (f) The defendant to pay the costs of this suit and expenses of litigation.00. Id. Petitioners brought the case up to the Supreme Court on a petition for review on certiorari which was denied by said tribunal in a Resolution dated February 5. that plaintiff Erquiaga has shown sufficient and justifiable ground for the appointment of a receiver in order to preserve the Hacienda which has obviously been mismanaged by the defendant to a point where the amortization of the loan with the Development Bank of the Philippines has been neglected and the arrears in payments have risen to the amount of P503. Defendants filed a petition for certiorari with a prayer for a writ of preliminary injunction seeking the annulment of the aforementioned Order of March 21. certain sums may be found due to the plaintiff from the defendant which may partially or entirely off set (sic) the amount adjudged against him in the decision. 1972.

prohibition and mandamus instituted by the substituted defendants. On March 3.) On May 31.00 bond submitted by Erquiaga and the possession. the Court of Appeals rendered judgment holding that: IN VIEW OF ALL THE FOREGOING.1975. the CFI of Sorsogon approved the P410. on the first count. (Annex J.000.600 shares of stock of the Erquiaga Development Corporation which are in their possession.281. On the second count. dated June 23. 1972 and the set-off therewith of the amount of P62. Should the defendants refuse or delay in delivering such shares of stock.00 as damages and attorney's fees in favor of herein private respondent are concerned. copy and photograph certain documents related to the accounting report (Annex B.00 under paragraphs (e) and (d) and costs of litigation under paragraph (f) of the judgment of September 30. and the writ of preliminary injunction heretofore issued is hereby made permanent only insofar as (1). Id. the filing of bond by said Erquiaga in the amount of P410.500 shares of stock in his name but also the 1. the issuance of writs prayed for in the petition are not warranted and therefore denied. the plaintiff may inform the court seasonably so that the proper action may be taken.1975. Rollo. as well as the issuance of a writ of execution against the defendants to pay the plaintiffs P62.000. (2) and (3) above are concerned.00 with interest as fully compensated by the fruits earned by the defendants from the property.000. (pp.the possession of the Hacienda San Jose to Erquiaga. In an Omnibus Motion. this court finds that the respondent court had acted with grave abuse of discretion or in excess of jurisdiction in issuing the assailed order of October 9.600 shares in the name and possession of the defendants. 1975. 1975 (Annex A.000. . 1976. dated October 9. management and control of the hacienda were turned over to Erquiaga (Annex C. dated July 25. is denied. Reynoso against the CFI of Sorsogon and (plaintiff) Santiago de Erquiaga.000. in view of the foregoing. Rule 39 of the Revised Rules of Court. Petition) insofar only as that part of the Order (1) giving private respondent voting rights on the 3. the defendants are directed (to deliver) to the plaintiff or his counsel within five (5) days from receipt of this order the 1. the prayer to strike out all expenses alleged[ly] incurred by the defendants in the production of the fruits of Hacienda San Jose and declaring the obligation of the plaintiff under paragraph (c) of the judgment to pay the defendant the sum of P410. (d) The members of the board and the officers who are elected are authorized to execute any and all contracts or agreements under such conditions as may be required by the Development Bank for the purpose of restructuring the loan of the Erquiaga Development Corporation with the said bank. 1972. the present petition for certiorari. The defendants are once more directed to comply with the order of February 12. pursuant to Section 10. should the defendants persist in their refusal or failure to comply with the order. 276. the plaintiff is authorized: (a) To call and hold a special meeting of the stockholders of the Erquiaga Development Corporation to elect the members of the Board of Directors. as prayed for. 1975. (b) In the said meeting the plaintiff is authorized to vote not only the 1. the dispositive portion of which reads: WHEREFORE. 1975.100 shares of stock of the Erquiaga Development Corporation without first divesting petitioners of their title thereto and ordering the registration of the same in the corporation books in the name of private respondent. Petitioners (Reynosos) filed their motion for reconsideration which the CFI of Sorsogon denied in an Order. (c) The question as to who shall be elected members of the Board of Directors and officers of the board is left to the discretion of the plaintiff. and over the objections interposed thereto by herein petitioners (Reynosos). As to all other matters involved in said Order of October 9. filed by Erquiaga. by answering the interrogatories propounded by counsel for the plaintiff and allowing said counsel or his representative to inspect.00 plus interests awarded in said final decision of September 30.).00 conditioned to the payment of whatever may be due to the substituted heirs of deceased defendant Reynoso (petitioners herein) after the approval of the accounting report submitted by Reynoso. copy and photograph the documents mentioned by the plaintiff during reasonable hours of any working day within twenty (20) days from receipt of this order. heirs of the deceased defendant Jose L. the CFI of Sorsogon issued an Order.) Hence. Petition).000. Petition).100 shares of stock in the amount of P410. Let writs of certiorari and prohibition issue against the aforesaid acts. (2) authorizing corporate meetings and election of members of the Board of Directors of said corporation and (3) refusing to order the reimbursement of the purchase price of the 3. Id. Said order further directed herein petitioners to allow counsel for Erquiaga to inspect. 1975 (Annex D.

in her petition for review. Rollo) a motion for reconsideration which the Court of Appeals denied on October 4. The Court of Appeals erred in ordering entry of its judgment. within five (5) days from receipt hereof. as the case may be. commanding the respondent Judge to order (1) the Clerk of Court of the CFI of Sorsogon to execute the necessary deed of conveyance to effect the transfer of ownership of the entire 3. Reynoso.000 plus interest. violates the law of the case and Article 1385 of the Civil Code.000. 2. 1968 and P310. The decision of the Court of Appeals requiring the petitioner to pay the private respondents the sum of P410.00 adjudged in favor of private respondent. out of the blue. 1977 ordering the Judgment Section of that Court to enter final judgment in the case (p.100 shares of stock of the Erquiaga Development Corporation to private respondent Santiago Erquiaga in case of failure of petitioners to comply with the Order of October 9. 1968. On October 28. and (2) authorizing Erquiaga to call a special meeting of the stockholders of the Erquiaga Development Corporation and to vote the . Reynoso has returned to Erquiaga only the pledged 1. II. we find that the Court of Appeals' decision is not yet final. 3. that: I. Rollo). instead of 3.Reynoso has not paid the sum of P50. We now address the petitioners' first and second assignments of error. 1977.600 shares of stock of the Erquiaga Development Corporation still in Reynoso's name and/or possession.) It may be seen from the foregoing narration of facts that as of the time the Court of Appeals rendered its decision on May 31. Without however giving them an ultimatum or setting a deadline for the submission of their compromise agreement. 1972 in Civil Case No. 316. After examining the records. as ordered in paragraph (a) of the final judgment. Rule 39 of the Rules of Court. III. and the petition was filed within the extension granted by this Court. let a writ of mandamus issue. 1977 (p. The petitioner alleges.FINALLY. 2448. . setting-off therewith the amount of P62. as ordered in paragraph (b) of the decision. 289-290. with legal interest from November 4. to issue a writ of execution ordering private respondent to pay petitioners the amount of P410. 1977 and filed on September 12. 317. with a view of putting an end to a much protracted litigation and for the best interest of the parties. After deliberating on the petition for review. Erquiaga has not returned the sum of P100.000 in favor of Reynoso. and 6.000 plus legal interest from December 17.100 shares. alters the final order dated February 12. in its resolution of December 13. 1975 insofar as the delivery of the 1. Rollo). The Court of Appeals erroneously applied the Corporation Law. 322.000 as attorney's fees to Erquiaga under paragraph (e) of the judgment. What the parties have not done yet are: 1. 7. and (2) upon delivery by petitioners or transfer by the Clerk of Court of said shares of stock to private respondent. Reynoso has not returned 1.500 shares of stock of the Erquiaga Development Corporation. and against petitioners' predecessor-in-interest. 2. Rollo) was proper. 4. The order of denial was received on October 14. Jose L. 1975 upon approval of Erquiaga's surety bond of P410.000) as ordered in paragraph (c) of the decision. Reynoso has not rendered a full accounting of the fruits he has received from Hacienda San Jose by virtue of the 3.1977 (p. 1976. 1977 (p. issued a resolution on August 24. Erquiaga filed in this Court a timely motion for extension of time to file a petition for review. Reynoso has not paid the judgment of Pl2. We address first the third assignment of error for it will be futile to discuss the first and second if.600 shares of stock to Erquiaga as ordered in paragraph (a. Reynoso has not paid the costs of suit and expenses of litigation as ordered in paragraph (f) of the final judgment. 1975 of the trial court. and is inequitous. 2446): 1. 1977 (p. (pp.000 paid by Reynoso on the sale. Erquiaga received the order on September 2. under paragraph (d) of the judgment. in accordance with the procedure in Section 10. The entry of judgment was improvident for the Court of Appeals. 1976 (now under review) only the following have been done by the parties in compliance with the final judgment in the main case (Civil Case No.100 shares of Erquiaga Development Corporation without having effected the transfer of those shares in his name in the corporate books. as damages and attorney's fees. We hold that the directive was precipitate and premature. and the entry of judgment which the Court of Appeals directed to be made in its resolution of August 24. after all.000. suspended the proceedings before it "pending the parties' settlement negotiations" as prayed for in their joint motion (p.100 shares of stock of the Erquiaga Development Corporation delivered to him under the sale. Rollo).600 shares of stock to private respondent is concerned.) of the decision. in the same decision. until paid (total: P410. Rollo. the decision complained of is already final. Neither did it err in annulling the trial court's order: (1) allowing Erquiaga to vote the 3. The Hacienda San Jose was returned to Erquiaga on March 3. 313. the Court of Appeals.00 plus interests in accordance with the final decision of September 30. 5. we find no reversible error in the Court of Appeals' decision directing the clerk of court of the trial court to execute a deed of conveyance to Erquiaga of the 1. Rollo). to give effect to all the foregoing. without first awaiting Reynoso's accounting of the fruits of the Hacienda San Jose. 316.000 as actual damages in favor of Erquiaga.

No. with legal rate of interest. without the pre-requisite registration of the shares in his name.000 by this time) without first requiring Reynoso to account for the fruits of Erquiaga's hacienda which he allegedly squandered while it was in his possession from November 1968 up to March 3. 838. (Corporation Code. The Corporation will be protected when it pays dividend to the registered owner despite a previous transfer of which it had no knowledge. since Reynoso has not yet given an accounting of those fruits. and the return by Reynoso of Erquiaga's 3. No pronouncement as to costs.000 while in the possession of Erquiaga and its counterpart: the fruits of Hacienda San Jose which Reynoso received from the time the hacienda was delivered to him on November 4.000 which should earn legal rate of interest after September 30.000 due from Reynoso under the decision) as the price paid by Reynoso for the shares of stock. cannot be effective as against the corporation. Pursuant to the rescission decreed in the final judgment. and to inform the corporation of any change in share ownership so that it can ascertain the persons entitled to the rights and subject to the liabilities of a stockholder.) The order of respondent Court directing Erquiaga to return the sum of P410. 1385 of the Civil Code which provides: ART. Notes and Selected cases by Campos & Lopez-Campos. 04811-SP is affirmed. 1385. and the price with its interest. To this extent. However.1968 until it was placed under receivership by the court on March 3. The payment of legal interest by Erquiaga to Reynoso on the price of P410. the unrecorded transferee cannot enjoy the status of a stockholder. consequently. Comments. Cruz. Narvasa. upon the conveyance to him of the remaining 1.. should await the rendition and approval of his accounting. Thus. The Hacienda San Jose and 1.1972.100 shares of stock of the Erquiaga Development Corporation should be computed as provided in the final judgment in Civil Case No. For it would be inequitable and oppressive to require Erquiaga to pay the legal interest earned by Reynoso's P410.1981 Edition. However.000 (or net P348. there should be simultaneous mutual restitution of the principal object of the contract to sell (3. Upon payment of P348. it is only fair that Erquiaga's obligation to deliver to Reynoso the legal interest earned by his money. the payment of said interest by Erquiaga should await Reynoso's accounting of the fruits received by him from the Hacienda San Jose. Therefore.R. the date of said judgment.100 shares with the fruits(construed to mean not only dividends but also fruits of the corporation's Hacienda San Jose) is in full accord with Art. . concur. the petition for review is granted. the decision of the Court of Appeals in CA-G. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.000 after deducting P62. 1975. 2446 up to September 30. Since Reynoso's judgment liability to Erquiaga for attorney's fees and damages in the total sum of P62.000 that Erquiaga is obligated to return to Reynoso. Gancayco and Medialdea. SO ORDERED.000 should be set off against the price of P410. Rescission creates the obligation to return the things which were the object of the contract. Erquiaga (or his heirs) should return to Reynoso the price of P410. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore.000 by Erquiaga to Reynoso.1972.3. the balance of the judgment in favor of Reynoso would be only P348.000 since 1968 or for the past 20 years (amounting to over P400. JJ. The purpose of registration therefore is two-fold.600 shares. namely: the legal interest earned by Reynoso's P410. 1975. Erquiaga's P410. This should not await the mutual restitution of the fruits. WHEREFORE.000).100 shares. to enable the transferee to exercise all the rights of a stockholder.100 shares) and of the consideration paid (P410. the decision of the Court of Appeals should be modified. It is a fundamental rule in Corporation Law (Section 35) that a stockholder acquires voting rights only when the shares of stock to be voted are registered in his name in the corporate books.000 which the latter paid for those shares. the transfer. indemnity for damages may be demanded from the person causing the loss. he cannot vote nor be voted for. In this case. the date of the judgment. In all other respects.500 shares of stock have already been returned to Erquiaga. together with their fruits. though valid between the parties.000 paid by Reynoso for Erquiaga's 3. p.000 surety bond shall be deemed cancelled. Until registration is accomplished. and he will not be entitled to dividends.

the defendants-appellants accepted and received delayed installment payments from the plaintiffs-appellees. GUTIERREZ. 1966 for more than five (5) months. On December 19. the Court of Appeals certified the case to us since only pure questions of law have been raised for appellate review. vs. The plaintiffs-appellees filed Civil Case No. ET AL. defendants-appellants Ursula Torres Calasanz and Tomas Calasanz and plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta. The plaintiffs' letter with their plea for reconsideration of the said cancellation was denied by the defendants-appellants. the defendants are ordered to execute a final Deed of Sale in favor of the plaintiffs and to pay the sum of P500. the defendants-appellants cancelled the said contract because the plaintiffs-appellees failed to meet subsequent payments. No. the then Court of Appeals certified the case to us considering that the appeal involves pure questions of law. to pay P500.00 AS ATTORNEY'S FEES. Consequently. Seventh Judicial District.. they found out that they have already paid the total amount of P4.. On January 28. Rizal for the amount of P3. As earlier stated.00 attorney's fees and costs. THE LOWER COURT ERRED IN ORDERING DEFENDANTS TO EXECUTE A FINAL DEED OF SALE IN FAVOR OF THE PLAINTIFF. the installments being due and payable on the 19th day of each month. ET AL. On numerous occasions. The dispositive portion of the decision reads: WHEREFORE.00 plus 7% interest per annum. when their aggregate payment already amounted to P4. URSULA TORRES CALASANZ.: This is an appeal from the decision of the Court of First Instance of Rizal. realty taxes and incidental expenses for the registration and transfer of the land. declaring the contract to sell as not having been validly cancelled and ordering the defendants-appellants to execute a final deed of sale in favor of the plaintiffsappellees.R. the defendants-appellants wrote the plaintiffs-appellees a letter requesting the remittance of past due accounts. On December 7. Third Assignment of Error THE LOWER COURT ERRED IN ORDERING DEFENDANTS TO PAY PLAINTIFFS THE SUM OF P500.38. 1957.920. The plaintiffs-appellees paid the monthly installments until July 1966. Branch X to compel the defendants-appellants to execute in their favor the final deed of sale alleging inter alia that after computing all subsequent payments for the .38 including interests.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. The plaintiffs-appellees made a downpayment of P392. J. based on the foregoing considerations.. 1985 BUENAVENTURA ANGELES. Branch X. 8943 with the Court of First Instance of Rizal. L-42283 March 18.00 by way of attorney's fees.20 until fully paid. Seventh Judicial District. A motion for reconsideration filed by the defendants-appellants was denied. JR. The defendants-appellants alleged in their answer that the complaint states no cause of action and that the plaintiffs-appellees violated paragraph six (6) of the contract to sell when they failed and refused to pay and/or offer to pay the monthly installments corresponding to the month of August. The defendants-appellants assigned the following alleged errors of the lower court: First Assignment of Error THE LOWER COURT ERRED IN NOT HOLDING THE CONTRACT TO SELL (ANNEX "A" OF COMPLIANCE) AS HAVING BEEN LEGALLY AND VALIDLY CANCELLED.533. plaintiffs-appellees. 1966. thereby constraining the defendantsappellants to cancel the said contract. The lower court rendered judgment in favor of the plaintiffs-appellees. 1967.00 upon the execution of the contract. Second Assignment of Error EVEN ASSUMING ARGUENDO THAT THE SAID CONTRACT TO SELL HAS NOT BEEN LEGALLY AND VALIDLY CANCELLED. defendants-appellants.533. the Court hereby renders judgment in favor of the plaintiffs and against the defendants declaring that the contract subject matter of the instant case was NOT VALIDLY cancelled by the defendants. They promised to pay the balance in monthly installments of P 41. land in question. Costs against the defendants. The facts being undisputed.

or any other payments herein agreed upon. the party of the FIRST PART may dispose of the parcel of land covered by this contract in favor of other persons. Commissioner of Customs. there is nothing in the law that prohibits the parties from entering into an agreement that violation of the terms of the contract would cause its cancellation even without court intervention (Froilan v. and cases cited therein) Resort to judicial action for rescission is obviously not contemplated . 1966 installment despite demands for more than four (4) months. In reciprocal obligations. to begin from the expiration of the month of grace herein mentioned. The defendants-appellants point to Jocson v. De los Angeles. the sellers have the right to declare the contract cancelled and of no effect. the party of the FIRST PART has the right to declare this contract cancelled and of no effect. he is granted a month of grace within which to make the retarded payment. it is understood. as if this contract had never been entered into. and the consequent indemnity awarded to the party prejudiced. in the contrary case. the rule that a judicial action for the rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions' (Lopez v. in case one of the obligors should not comply with what is incumbent upon him. it must be understood that the act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional. Capitol Subdivision (G. being ever subject to scrutiny and review by the proper court. and as payment for the damages suffered by failure of the party of the SECOND PART to fulfill his part of the agreement. 1955) where this Court upheld the right of the subdivision owner to automatically cancel a contract to sell on the strength of a provision or stipulation similar to paragraph 6 of the contract in this case. (35 SCRA 102) where we explained that: Of course. The rule that it is not always necessary for the injured party to resort to court for rescission of the contract when the contract itself provides that it may be rescinded for violation of its terms and conditions. The defendants-appellants submit that the contract was validly cancelled pursuant to paragraph six of the contract which provides: xxx xxx xxx SIXTH. that should the month of grace herein granted to the party of the SECOND PART expired. . They state that paragraph 6 of the contract to sell is contrary to law insofar as it provides that in case of specified breaches of its terms. The injured party may choose between the fulfillment and the rescission of the obligation. with the payment of damages in either case. L-6573. . shall be considered as rents paid for the use and occupation of the above mentioned premises. and the party of the SECOND PART hereby renounces all his right to demand or reclaim the return of the same and obliges himself to peacefully vacate the premises and deliver the same to the party of the FIRST PART. The validity of the stipulation can not be seriously disputed. In case the party of the SECOND PART fails to satisfy any monthly installments. after due hearing. xxx xxx xxx Article 1191 is explicit. because it granted the sellers an absolute and automatic right of rescission. they had the right to cancel the contract to sell under Article 1191 of the Civil Code of the Philippines. and bring the matter to court. either party the right to rescind the contract upon the failure of the other to perform the obligation assumed thereunder. et al. Co. an interest of 10% per annum will be charged on the amounts he should have paid. if the latter should become impossible. It is in the nature of a facultative resolutory condition which in many cases has been upheld by this Court. If the other party denies that rescission is justified. should the court. Court of Appeals. it is free to resort to judicial action in its own behalf. and as consequence thereof. Then.. The plaintiffs-appellees on the other hand contend that the Jocson ruling does not apply. February 28. 12 SCRA 276) Well settled is. and act accordingly. however. the party who deems the contract violated many consider it resolved or rescinded. In other words. No. In case of such cancellation of the contract. 37 SCRA 327. The defendantsappellants also argue that even in the absence of the aforequoted provision. that should a period of 90 days elapse. the responsible party will be sentenced to damages. (Emphasis supplied by appellant) xxx xxx xxx The defendants-appellants argue that the plaintiffs-appellees failed to pay the August.R. was qualified by this Court in University of the Philippines v. Pan Oriental Shipping. however. decide that the resolution of the contract was not warranted. even after he has chosen fulfillment. Article 1191 of the Civil Code on the rescission of reciprocal obligations provides: The power to rescind obligations is implied in reciprocal ones. He may also seek rescission.The main issue to be resolved is whether or not the contract to sell has been automatically and validly cancelled by the defendants-appellants. Moreover. it is understood further. the resolution will be affirmed. and the party of SECOND PART has not paid all the amounts he should have paid with the corresponding interest up to that date. (Ponce Enrile v. 29 SCRA 504). all the amounts paid in accordance with this agreement together with all the improvements made on the premises. together with the one corresponding to the said month of grace.. without previous court action. . without the payments corresponding to both months having been satisfied.

but for as many times as he wishes. Hospital de San Juan de Dios. It is in this sense that judicial action will be necessary. International Banking Corp.920. (Song Fo & Co. 1968). The breach of the contract adverted to by the defendants-appellants is so slight and casual when we consider that apart from the initial downpayment of P392. To sanction the rescission made by the defendants-appellants will work injustice to the plaintiffs. therefore. Republic v. because they failed to pay the August installment. less damages suffered by the obligee. Alikpala.00) when this contract is signed. as without it. the plaintiffsappellees had already paid an aggregate amount of P 4. (See J. it cannot be denied that this subdivision is likewise purposely done to afford those landless..00). as well as any other condonation that the party of the FIRST PART may give to the party of the SECOND PART with regards to the obligations of the latter.. (Corpus v. the extrajudicial resolution will remain contestable and subject to judicial invalidation. 821. L-23707 & L23720. Inc. Philippine Currency.appellees.. instead of availing of their alleged right to rescind. Perez & Co. That in consideration of the agreement of sale of the above described property. we held that: xxx xxx xxx . despite demand. from this date until the total payment of the price above stipulated. though the plaintiffs-appellees have been in arrears beyond the grace period mentioned in paragraph 6 of the contract. Article 1234 of the Civil Code which provides that: If the obligation has been substantially performed in good faith. Tuazon and Co. The defendants-appellants' contention is without merit. v. 631. plus interest at the rate of 7% per annum. have accepted and received delayed payments of installments. 820) since in every case where the extrajudicial resolution is contested only the final award of the court of competent jurisdiction can conclusively settle whether the resolution was proper or not. Furthermore. the obligor may recover as though there had been a strict and complete fulfillment. 17. unless attack thereon should become barred by acquiescence. low income group people of realizing their dream of a little parcel of land which they can really call their own. v. Hawaiian-Philippine Co. the defendants-appellants have waived and are now estopped from exercising their alleged right of rescission.533. also militates against the unilateral act of the defendants-appellants in cancelling the contract. We agree with the plaintiffs-appellees that when the defendants-appellants.. for more than four (4) months. 827) The question of whether a breach of a contract is substantial depends upon the attendant circumstances. the entire obligation would have been paid. The right to rescind the contract for non-performance of one of its stipulations.. and (b) The sum of FORTY ONE AND 20/100 ONLY (P4l. Javier. including interest.00 the plaintiffs-appellees had already paid the monthly installments for a period of almost nine (9) years. et al. Court of Appeals (33 SCRA 1) the Court stated that The general rule is that rescission of a contract will not be permitted for a slight or casual breach. yet. Hon. 37 Phil.20) on or before the 19th day of each month. The defendants-appellants cannot rely on paragraph 9 of the contract which provides: NINTH. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. In De Guzman v. The defendants-appellants argue that paragraph nine clearly allows the seller to waive the observance of paragraph 6 not merely once.but it proceeds at its own risk. . estoppel or prescription. 84 Phil. In other words. . InUniversal Food Corp. in only a short time. (Ocejo. We agree with the observation of the lower court to the effect that: Although the primary object of selling subdivided lots is business. the party of the SECOND PART obligates himself to pay to the party of the FIRST PART the Sum of THREE THOUSAND NINE HUNDRED TWENTY ONLY (P3.. in case of default or noncompliance by the party of the SECOND PART. Guieb (48 SCRA 68).. The defendants-appellants state that the plaintiffs-appellees violated Section two of the contract to sell which provides: SECOND. v.. is not absolute. Jan.-That whatever consideration of the party of the FIRST PART may concede to the party of the SECOND PART.920. .M. should not be interpreted as a renunciation on the part of the party of the FIRST PART of any right granted it by this contract. but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. et al. 31 SCRA 829) It would unjustly enrich the defendants-appellants. We see no conflict between this ruling and the previous jurisprudence of this Court invoked by respondent declaring that judicial action is necessary for the resolution of a reciprocal obligation. . v.. as not exacting a strict compliance with the conditions of paragraph 6 of this contract.00 excluding the 7 percent interests. although the principal obligation was only P 3.38. 47 Phil. as follows: (a) The amount of THREE HUNDRED NINETY TWO only (P392.

J. Teodoro de Guzman. a substantial portion of the said payments were applied to the interests since the contract specifically provides for a 7% interest per annum on the remaining balance. De la Fuente and Alampay. 1964 the full payment by appellees of all their arrearages. That once the payment of the sum of P3. Upon payment of the balance of P671. Melencio-Herrera. Vol.67 due from the plaintiffs-appellees. Seventh ed.38. took no part. are now sought to be deprived of the same thru the prayed application of a contract clever in its phraseology. contracts of sale of lots on the installment plan fall into this category. Civil Code of the Philippines. That in consideration of the agreement of sale of the above described property. the defendantsappellants must immediately execute the final deed of sale in favor of the plaintiffs-appellees and execute the necessary transfer documents as provided in paragraph 12 of the contract. The defendants-appellants rely on paragraph 2 of the contract which provides: SECOND. the defendants-appellants must now be compelled to execute the final deed of sale pursuant to paragraph 12 of the contract which provides: TWELFTH..920.920. JJ. The contract to sell entered into by the parties has some characteristics of a contract of adhesion. WHEREFORE. The attorney's fees are justified.. . SO ORDERED. .. it is understood. we held that: xxx xxx xxx . eager to acquire a lot upon which they could build a home. the party of the SECOND PART obligates himself to pay to the party of the FIRST PART the Sum of THREE THOUSAND NINE HUNDRED TWENTY ONLY (P 3. even took steps to cancel the option or to eject the appellees from the home-lot in question. neither they nor their predecessor. stipulations in a contract come about after deliberate drafting by the parties thereto. especially where such interpretation will help effect justice to buyers who. (W)hile generally.00).00 plus 7% interest per annum. it is admitted that the delayed payments were received without protest or qualification.67) without any interests.533. The defendants-appellants drafted and prepared the contract. On the contrary. since the principal obligation under the contract is only P3. appellants had already forfeited their right to invoke the above-quoted provision regarding the nullifying effect of the non-payment of six months rentals by appellees by their having accepted without qualification on July 21.. usually a corporation.00 price sale. We cannot but agree with the lower court that at the time appellees exercised their option. We agree with the plaintiffs-appellees. it is likewise true that under paragraph 12 the seller is obligated to transfer the title to the buyer upon payment of the P3.But defendants do not deny that in spite of the long arrearages.. however. Relova. the instant petition is DENIED for lack of merit. there are certain contracts almost all the provisions of which have been drafted only by one party. Teves (83 SCRA 36 1).) (Emphasis supplied) While it is true that paragraph 2 of the contract obligated the plaintiffs-appellees to pay the defendants-appellants the sum of P3.920. after having invested a big amount of money. concur.920. p. They submit that while it is true that the total monthly installments paid by the plaintiffs-appellees may have exceeded P3.00 and the plaintiffsappellees have already paid an aggregate amount of P4. (Paras. It was offered to them on a "take it or leave it" basis.38.67 without any interest thereon.920.. Costs against the defendants-appellants. Inc. We agree with the observation of the plaintiffs-appellees to the effect that "the terms of a contract must be interpreted against the party who drafted the same. the party to the FIRST PART will execute in favor of the party of the SECOND PART. being a contract of adhesion.533. because the only participation of the party is the signing of his signature or his "adhesion" thereto. v. the courts should only order the payment of the few remaining installments but not uphold the cancellation of the contract. plus interest at the rate of 7% per annum . 1. The defendants-appellants contend in the second assignment of error that the ledger of payments show a balance of P671. Philippine Currency. in essence. the total price of the sale is completed.920. Under these circumstances. . Plana. Closely related to the second assignment of error is the submission of the plaintiffs-appellees that the contract herein is a contract of adhesion. (Emphasis supplied) The plaintiffs-appellees on the other hand are firm in their submission that since they have already paid the defendants-appellants a total sum of P4. and in its entirety is most unfair to the buyers. They had no opportunity to question nor change any of the terms of the agreement. that au the expenses which may be incurred in the said transfer of title shall be paid by the party of the SECOND PART." Thus.00. bills of lading. affixed their signatures and assented to the terms and conditions of the contract. condemnable in its lopsidedness and injurious in its effect which. free from all hens and encumbrances other than those expressly provided in this contract. Such contracts are called contracts of adhesion. .. Insurance contracts. .. The decision appealed from is AFFIRMED with the modification that the plaintiffs-appellees should pay the balance of SIX HUNDRED SEVENTY ONE PESOS AND SIXTY-SEVEN CENTAVOS (P671. must be construed against the party causing it. Teehankee (Chairman). The plaintiffs-appellees. The contract to sell. the necessary deed or deeds to transfer to the latter the title of the parcel of land sold. In Sweet Lines. 80. . as above stated.00..

That for and in consideration of the agreed purchase price of TWO MILLION PESOS (P2. SPOUSES MIGUEL K. and every quarter thereafter. petitioner. operation. situated at Barangay Puri. That all payments due and payable under this contract shall be effected in the residence of theSELLERS located at Barangay Puri. Branch 60. Philippine currency. free and clear from all liens and encumbrances. That immediately upon the execution of this document. .00). . the mode and manner of payment is as follows: A. J.00).R. ROBLES.91 shall be paid. vs. shall be chargeable from the time deposit of the SELLERS with the aforesaid bank. San Antonio Quezon. 1983. That the sum of P496.10. on the other hand. 97347 July 6. The terms and conditions of the contract read:" 1. and the latter shall take over from the SELLER the possession. xxx xxx xxx 1 YNARES-SANTIAGO. as stipulated under the Certification of undertaking dated March 22.00) as verbally agreed by the parties. 1983 amounted to P537. the SELLERS shall deliver.499. and respondent spouses Miguel K. shall be broken down as follows: 1. by these presents promise to sell to said BUYER the two (2) parcels of agricultural land including the rice mill and the piggery which are the most notable improvements thereon.000. executed an "Agreement of Purchase and Sale" respecting two parcels of land situated at Barrio Puri. The initial payment of SIX HUNDRED THOUSAND PESOS (P600. 2.500. ROBLES and ALEJANDRO M. That upon the payment of the total purchase price by the BUYER the SELLERS bind themselves to deliver to the former a good and sufficient deed of sale and conveyance for the described two (2) parcels of land.09. affirmed the decision of the Regional Trial Court of Lucena City. B.: Before us is a petition for review on certiorari from the judgment rendered by the Court of Appeals which. .000.respondents.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. on the one hand.000. surrender and transfer possession of the said parcels of land including all the improvements that may be found thereon.500. No. 8585.310. petitioner Jaime Ong.09 shall be paid directly by the BUYER to the Bank of Philippine Islands to answer for the loan of the SELLERS which as of March 15.000. P103. the first to be due and payable on June 15.nêt On May 10. Quezon unless another place shall have been subsequently designated by both parties in writing.400. 2.1âwphi1. except as to the award of exemplary damages. 4.00) PESOS shall be paid by the BUYER to the SELLERS in four (4) equal quarterly installments of THREE HUNDRED FIFTY THOUSAND PESOS (P350. until the whole amount is fully paid. 1983. 1983. That the balance of ONE MILLION FOUR HUNDRED THOUSAND (P1. 1983. . Quezon. and as already paid by the BUYER to theSELLERS on March 22. THE HONORABLE COURT OF APPEALS. and for the interest that may accrued (sic) from March 15. 1999 JAIME G. to the BUYER. San Antonio. Robles and Alejandra Robles. setting aside the "Agreement of Purchase and Sale" entered into by herein petitioner and private respondent spouses in Civil Case No.000. provided however that the amount in excess of P496. 3. ONG. up to the time said obligation of theSELLERS with the said bank has been settled. San Antonio. 1983 and covered by a check of even date. control and management of the RICEMILL and PIGGERY found on the aforesaid parcels of land.

On August 2. in 9 return. et seq. In affirming the decision of the trial court. It implies a contract. the dispositive portion of which reads as follows: IN VIEW OF THE FOREGOING. Time and again. the findings of both the trial court and the appellate court on the matter coincide. 12 From this decision. to the effect that where specific performance is available as a remedy. The trial court granted the application and enjoined petitioner from introducing improvements on the properties except for repairs. There is no cogent reason shown that would justify the 13 court to discard the factual findings of the two courts below and to superimpose its own.411. 11 On June 1.91 2 by depositing it with the United Coconut Planters Bank. 1983. namely: Check No. should have paid.60. by restoration of things to 14 their condition at the moment prior to the celebration of the contract. 10 These prompted the respondent spouses to ask for a writ of preliminary injunction. petitioner appealed to the Court of Appeals. 1989 the trial court rendered a decision. out of the P496. Petitioner promised to replace the checks but failed to do so. and e) Ordering defendant Jaime Ong to pay the plaintiffs spouses Miguel K. judgment is hereby rendered: a) Ordering that the contract entered into by plaintiff spouses Miguel K. petitioner only managed to dole out no more than P393.500.400.679. 157708 dated June 15. produces a lesion or a pecuniary damage to someone.00 loan of respondent spouses with the Bank of the Philippine Islands. sent petitioner a demand letter asking for the return of the properties. Robles and Alejandro M. 3 in accordance with their stipulation that petitioner pay the loan of respondents with BPI. petitioner introduced major improvements on the subject properties by constructing a complete fence made of hollow blocks and expanding the piggery.51. He. At the outset. as per agreement.00 petitioner issued four (4) post-dated Metro Bank checks payable to respondent spouses in the amount of P350. adduced by the parties to an appeal. A discussion of the aforesaid articles is in order. they sold three transformers of the rice mill worth P51. so. Petitioner. He cites Article 1383 instead. 6 7 157710 dated December 15. 1983. the instant petition. is a remedy granted by law to the contracting parties and even to third persons. petitioner paid respondent spouses the sum of P103. particularly where. with the knowledge and conformity of petitioner. residential house and other improvements thereon. which petitioner. Robles and Alejandra Robles the sum of P20.On May 15. c) Ordering plaintiff spouses. 1985. the Court of Appeals noted that the failure of petitioner to completely pay the purchase price is a substantial breach of his obligation which entitles the private respondents to rescind their contract under Article 1191 of the New Civil Code. 4Check No. ricemill. as contemplated in Articles 1380. petitioner deposited sums of money with the Bank of Philippine Islands (BPI). 1985. we have stated that it is not the function of the Supreme Court to assess and evaluate all over again the evidence. 157709 dated September 15. Jaime Ong to deliver the two (2) parcels of land which are the subject matter of Exhibit "A" together with the improvements thereon to the spouses Miguel K. and (2) whether the parties had novated their original contract as to the time and manner of payment. . continued to be in possession of the two parcels of land while private respondents were forced to use the rice mill for residential purposes. voluntarily gave the spouses authority to operate the rice mill.000.00 each. Miguel Robles and Alejandra Robles to return to Jaime Ong the sum of P497. Rescission. Subsequently. a complaint for rescission of contract and recovery of properties with damages. 157711 dated March 15. respondent spouses. Robles and Alejandra M. Pursuant to the contract they executed. b) Ordering defendant. To make matters worse.179. When presented for payment. however.499. however. SO ORDERED.000. of the New Civil Code. d) Ordering defendant Jaime Ong to pay the plaintiffs the sum of P100.00 to pay off their outstanding 8 obligation with said bank. The only pertinent legal issues raised which are worthy of discussion are (1) whether the contract entered into by the parties may be validly rescinded under Article 1191 of the New Civil Code. building. Branch 60. they filed with the Regional Trial Court of Lucena City. through counsel. 5 Check No. 1984.00 as attorney's fees and litigation expenses. while the case was still pending with the trial court.0000. 15 which even if initially valid. such as in the case at bench. rescission may not be resorted to.00 as exemplary damages. the checks were dishonored due to insufficient funds. on September 2. Later." marked as Exhibit "A" set aside.. Robles. Petitioner contends that Article 1191 of the New Civil Code is not applicable since he has already paid respondent spouses a considerable sum and has therefore substantially complied with his obligation. to secure the reparation of damages caused to them by a contract. petitioner Ong took possession of the subject parcels of land together with the piggery. which affirmed the decision of the Regional Trial Court but deleted the award of exemplary damages. Jaime Ong captioned "Agreement of Purchase and Sale. Hence. testimonial and documentary. even if this should be valid. Robles and the defendant. 1983. Their demand was left unheeded. When the bank threatened to foreclose the respondent spouses' mortgage. it must be stated that the issues raised by the petitioner are generally factual in nature and were already passed upon by the Court of Appeals and the trial court. The motion of the plaintiff spouses Miguel K.000. To answer for his balance of P1. Roles and Alejandra Robles for the appointment of receivership is rendered moot and academic. 1983 and Check No.

Obviously. while in a contract to sell. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. was "resolution. and the continuous and regular withdrawals by respondent Miguel Robles of installment sums per vouchers (Exhs. Article 1292 of the New Civil Code states that. but not because of a breach on the part of petitioner for failure to complete payment of the purchase price. the contract entered into by the parties in the case at bar does not fall under any of those mentioned by Article 1381. however. casual or serious. Rescission of reciprocal obligations under Article 1191 of the New Civil Code should be distinguished from rescission of contracts under Article 1383. they are not entirely identical. While Article 1191 uses the term "rescission. Rather. if the latter suffer the lesion stated in the preceding number. Reciprocal obligations are those which arise from the same cause. It must be stressed that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with an obligation. "8" to "47") on the condition that these installments be credited to petitioner's account and deducted from the balance of the purchase price.00. however. is not even a breach but merely an event which prevents the vendor's obligation to convey title from 21 acquiring binding force. the take-over by the respondents of the custody and operation of the rice mill. the title to the property passes to the vendee upon the delivery of the thing sold. that the contract was novated as to the manner and time of payment. We are not persuaded. The non-fulfillment of the condition of full payment rendered the contract to sell ineffective and without force and effect. 17" Resolution is a principal action which is based on breach of a party. Article 1191 of the New Civil Code refers to rescission applicable to reciprocal obligations. 4. however. but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. Petitioner. the payment of the purchase price is a positive suspensive condition. it must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable 22 incompatibility between the old and the new obligation." the original term which was used in the old Civil Code. 3. Consequently." Novation is never presumed. and in which each party is a debtor and a creditor of the other. Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one fourth of the value of the things which are the object thereof. in this instance. All other contracts specially declared by law to be subject to rescission. 5. Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. or that the old and the new obligations be on every point incompatible with each other. from which the article was based. Although both presuppose contracts validly entered into and subsisting and both require mutual restitution when proper. Petitioner cites the following instances as proof that the contract was novated: the retrieval of the transformers from petitioner's custody and their sale by the respondents to MERALCO on the condition that the proceeds thereof be accounted for by the respondents and deducted from the price of the contract. May the contract entered into between the parties. In a contract of sale.On the other hand. Article 1383 is inapplicable. his failure to do so brought about a situation which prevented the obligation of respondent spouses to convey title from acquiring an obligatory force. Petitioner insists. ownership is. which expressly enumerates the following rescissible contracts: 1. In a contract to sell. as distinguished from a contract of sale. Hence. 20 Failure to pay.000. the failure of which is not a breach. reserved in the vendor and is not to pass to the vendee until 18 full payment of the purchase price.000. Those agreed upon in representation of absentees. it is imperative that it be so declared in unequivocal terms. 2. 19 Respondents in the case at bar bound themselves to deliver a deed of absolute sale and clean title covering the two parcels of land upon full payment by the buyer of the purchase price of P2. such that the obligation of one is 16 dependent upon the obligation of the other. failed to complete payment of the purchase price. by agreement. be rescinded based on Article 1191? A careful reading of the parties' "Agreement of Purchase and Sale" shows that it is in the nature of a contract to sell. . This promise to sell was subject to the fulfillment of the suspensive condition of full payment of the purchase price by the petitioner. the agreement of the parties in the case at bench may be set aside. Those undertaken in fraud of creditors when the latter cannot in any manner collect the claims due them. while rescission under Article 1383 is a subsidiary action limited to cases of rescission for lesion under Article 1381 of the New Civil Code. "In order that an obligation may be extinguished by another which substitutes the same.

however. Melo. We find that this is unsubstantiated by the evidenced on the record. petitioner apparently could not even raise the sum needed to forestall any action on the part of the bank. and Mrs. Robles by the 24 undersigned. He introduced the improvements on the premises knowing fully well that he has not paid the consideration of the contract in full and over the vigorous objections of respondent spouses. We repeat to the point of triteness. Jr. WHEREFORE. C. JJ. in fact. As regards the improvements introduced by petitioner to the premises and for which he claims reimbursement. Records further show that petitioner agreed to the sale of MERALCO transformers by private respondents to pay for the balance of their subsisting loan with the Bank of Philippine Islands. The same will be utilized as partial payment to existing loan with the Bank of Philippine Islands. Kapunan and Pardo.680.00 in addition to the amounts already awarded. although the parties agreed to credit the proceeds from the sale of the transformers to petitioner's obligation.00. petitioner introduced major improvements on the premises even while the case against him was pending before the trial court. he was supposed to reimburse the same later to respondent spouses. It is true that petitioner paid respondents small sums of money amounting to P48. shows that petitioner had a "little misunderstanding" with respondent spouses whom he was evidently trying to appease by authorizing them to continue temporarily with the operation of the rice mill. This can only mean that there was never an intention on the part of either of the parties to novate petitioner's manner of payment.nêt SO ORDERED. the decision rendered by the Court of Appeals is hereby AFFIRMED with the MODIFICATION that respondent spouses are ordered to return to petitioner the sum of P48. However. there must be an express intention to novate. the concurrence of the following requisites is indispensable: (1) there must be a previous valid obligation. (3) there must be the extinguishment of the old contract. The tenor of his letter dated August 12. The award of exemplary damages was correctly deleted by the Court of Appeals in as much as no moral. Miguel K.680. In order for novation to take place. liquidated or compensatory damages in addition to exemplary damages were awarded. agreed that part of the purchase price in the sum of P496. concur..1âwphi1. . and petitioner replied that these represented the interest of the principal 23 amount which he owed them. The subsequent acts of the parties hardly demonstrate their intent to dissolve the old obligation as a consideration for the emergence of the new one.60. Davide. Robles.Contrary to petitioner's claim. and Mrs.. Petitioner's letter of authorization reads: xxx xxx xxx Under this authority. (2) there must be an agreement of the parties concerned to a new contract. while petitioner might have wanted to novate the original agreement as to his manner of payment.00 would be directly deposited by petitioner to the Bank of Philippine Islands to answer for the loan of respondent spouses. It is also mutually understood that this payment to the Bank of Philippine Islands will be reimbursed to Mr. Petitioner contends that the parties verbally agreed to novate the manner of payment when respondent spouses proposed to operate the rice mill on the condition that they will account for its earnings. objected to by respondent spouses. temperate.679. Costs against petitioner. Moreover. Consequently.J. These installments were. it is mutually understood that whatever payment received from MERALCO as payment to the transfromers will be considered as partial payment of the undersigned's obligation to Mr. and (4) there must be the validity of the new contract. When the bank threatened to foreclose the properties. we see no reason to depart from the ruling of the trial court and the appellate court that petitioner is a builder in bad faith.500. novation is never presumed. 25 The aforesaid requisites are not found in the case at bench. in contravention of the manner of payment stipulated in their contract. Miguel K.. petitioner only managed to deposit P393. Clearly. 1984 to respondent spouses. [Emphasis supplied] It should be noted that while it was. he authorized respondent spouses to sell the three (3) transformers. records show that the parties never even intended to novate their previous agreement. the records are bereft of evidence that respondent spouses willingly agreed to modify their previous arrangement.

they said that they had always been ready and willing to comply with their obligations in accordance with said contract.00.on or before April 30. respondents. T-5790. J. In their Answer.: This petition assails the Decision dated April 30.attorney's fee.geodetic engineer's fee. T-5790.000.000 which he had already paid Palao be reimbursed8 or Palao could sell to Iringan. Palao filed a Complaint for Judicial Confirmation of Rescission of Contract and Damages against Iringan and his wife. 2001 (b) P3.R. 13 12 10 7 ALFONSO L. Aquino. Lasam. affirming the decision of the Regional Trial Court and deleting the award of attorney's fee. 992 of the Tuguegarao Cadastre. On August 20. Palao sent a letter dated January 10. the vendor acknowledges having received the said amount from the vendee as of this date. 1 . DELOS SANTOS. and to pay P50. now represented by anew counsel .00 as attorney's fee.000. On February 21.000.00 . Palao instead wrote Iringan that the latter's standing obligation had reached P61. IRINGAN. 129107 September 26.000. 1985. (b) Cancelling the adverse claim of the defendants annotated at the back of TCT No. Aquino.000.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.on or before December 31.11 the spouses alleged that the contract of sale was a consummated contract. payable as follows: (a) P10.000. ruled in favor of Palao and affirmed the rescission of the contract. 6 In response. Palao 4 sent a letter to Iringan stating that he considered the contract as rescinded and that he would not accept any further payment considering that Iringan failed to comply with his obligation to pay the full amount of the second installment. located at the Poblacion of Tuguegarao and covered by Transfer Certificate of Title No. 1986. private respondent Antonio Palao sold to petitioner Alfonso Iringan.000. SO ORDERED. 1992.R. 1985. and P50.5 replied that they were not opposing the revocation of the Deed of Sale but asked for the reimbursement of the following amounts: (a) P50. It disposed. The parties failed to arrive at an agreement. P10. The parties executed a Deed of Sale2 on the same date with the purchase price of P295.00 as reasonable compensation for use of the property minus 50% of the amount paid by them. petitioner.000. 1989. QUISUMBING. on July 18. No. (b) P140. an equivalent portion of the land.00 . 1985. (c) P500.upon the execution of this instrument. (c) P145.00. (d) Ordering the defendants to pay jointly and severally the sum of P100. FELISA P. Carmelo Z. Iringan paid only P40. Branch I. Iringan through his counsel Atty. (d) the current interest on P53.200. 1985. the remedy of Palao was for collection of the balance of the purchase price and not rescission.00 . 1991.00 . vs.600. and to pay the costs of suit.3 When the second payment was due.700. HON. CV No. proposed that the P50. and for this purpose. In a Decision dated September 25. (c) Ordering the defendants to vacate the premises. 9 representing payment of arrears for rentals from October 1985 up to March 1989.00 .cash received by you. stating that he was not amenable to the reimbursements claimed by Iringan. hence. represented by his Attorney-in-Fact. 39949. On March 22. 1985. WHEREFORE. Besides. an undivided portion of Lot No. Iringan. to Atty. On July 1. the Court finds that the evidence preponderates in favor of the plaintiff and against the defendants and judgment is hereby rendered as follows: (a) Affirming the rescission of the contract of sale. 1997 of the Court of Appeals in CA G. COURT OF APPEALS and ANTONIO PALAO.00 as moral damages.00 as exemplary damages. Hilarion L.000.00 .000. the Regional Trial Court of Cagayan.Atty. The facts of the case are based on the records. Thus.

"19 Clearly. Iringan avers in this petition that the Court of Appeals erred: 1. with payment of damages in either case. He may also seek rescission. Pando. This is understood to be without prejudice to the rights of third persons who have acquired the thing. InEscueta v. "refers to a demand that the vendor makes upon the vendee for the latter to agree to the resolution of the obligation and to create no obstacles to this contractual mode of extinguishing obligations.24 The operative act which produces the resolution of the contract is the 25 decree of the court and not the mere act of the vendor. in accordance with articles 1385 and 1388 and the Mortgage Law. particularly paragraphs 1 and 2 thereof. is deemed implied in case one of the obligors shall fail to comply with what is incumbent upon him. but is rather subjected to the stipulations agreed upon by the contracting parties and to the 18 provisions of article 1504 (now Article 1592) of the Civil Code. On the first issue. the judicial or notarial requirement still applies. the obligation is not ipso factoerased by the failure of the other party to comply with what is incumbent upon him. a judicial or notarial act is necessary before a valid rescission can take place.23 The right cannot be exercised solely on a party's own judgment that the other committed a breach of the obligation. Respondent Palao. Iringan in effect agreed to it and had the legal effect of a mutually agreed rescission. [Emphasis ours. even if the right to rescind is made available to the injured party. The same article also provides: "The Court shall decree the resolution demanded. petitioner contends that no rescission was effected simply by virtue of the 15 letter sent by respondent stating that he considered the contract of sale rescinded. and 2. we ruled that under Article 1124 (now Article 1191) of the Civil Code. even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place. even after the expiration of the period. the letter written by respondent declaring his intention to rescind did not operate to validly rescind the contract. even if Article 1191 were applicable. whether or not automatic rescission has been stipulated.As stated. however. as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. this petition for review. In the sale of immovable property." This requirement has been retained in the third paragraph of Article 1191. In holding that defendant was in bad faith for "resisting" rescission and was made 14 liable to pay moral and exemplary damages. Article 1592 of the Civil Code is the applicable provision regarding the sale of an immovable property. Petitioner asserts that a judicial or notarial act is necessary before one party can unilaterally effect a rescission. (Italics supplied) Article 1592 requires the rescinding party to serve judicial or notarial notice of his intent to 16 resolve the contract. the Court said that the requirement of then Article 1504. and (2) whether or not the award of moral and exemplary damages is proper. In the case of Villaruel v. Article 1592. petitioner would still not be entitled to 21 automatic rescission. The party entitled to rescind should apply to the court for a decree of rescission. unless there be just cause authorizing the fixing of a period. We find two issues for resolution: (1) whether or not the contract of sale was validly rescinded. The power to rescind obligations is implied in reciprocal ones. in our view when private respondent filed an action for 26 Judicial Confirmation of Rescission and Damages before the RTC. unless there should be grounds which justify the allowance of a term for the performance of the obligation.. In holding that the lower court did not err in affirming the rescission of the contract of sale. the vendee may pay. Article 1191. which states that "the court shall decree the rescission claimed. both the trial and appellate courts affirmed the validity of the alleged mutual agreement to rescind based on Article 1191 of the Civil Code. on the other hand. Notwithstanding the above.since the subject-matter of the sale in question is real property. The injured party may choose between the fulfillment and the rescission of the obligation. Tan King. It is to be noted that the law uses the phrase 20 "even though" emphasizing that when no stipulation is found on automatic rescission. even after he has chosen fulfillment. if the latter should become impossible. But in our view. it does not come strictly within the provisions of article 1124 (now Article 1191) of the Civil Code..17 we ruled in this wise. . he complied with the 22 . But that right must be invoked judicially." Citing Manresa. in case one of the obligors should not comply with what is incumbent upon him. the Court of Appeals affirmed the above decision. the court may not grant him a new term.] The court shall decree the rescission claimed. contends that the right to rescind is vested by law on the obligee and since petitioner did not oppose the intent to rescind the contract. After the demand. On the first issue. unless there be just cause authorizing the fixing of a period." Consequently. the right to resolve reciprocal obligations. Hence. Since a judicial or notarial act is required by law for a valid rescission to take place.

The suit was brought on July 1. First.31 This provision of law applies to rescissible contracts.. the petition is DENIED. petitioner claims that the Court of Appeals 38 erred in finding bad faith on his part when he resisted the rescission and claimed he was ready to pay but never actually paid respondent. the action should be deemed prescribed based on the provisions of Article 1389 of the Civil Code.petitioner adamantly refused to formally execute an instrument showing their mutual agreement to rescind the contract of sale. The complaint categorically stated that the purpose was 1) to compel appellants to formalize in a public document. or six years after the default. notwithstanding that he knew that appellee's 39 principal motivation for selling the lot was to raise money to pay his SSS loan. De Leon. JJ. petitioner knew respondent's reason for selling his property. that the "rescission" in Article 1381 is not akin to the term "rescission" in Article 1191 and Article 1592. The assailed decision dated April 30. 1997 of the Court of Appeals in CA G. can still be validly rescinded. or. the contract of sale between the parties as far as the prescriptive period applies. and/or 2) to have a judicial confirmation of the said revocation/rescission under terms and conditions fair. Bellosillo. Buena. at the very least. such fact was made known to petitioner during their negotiations 43 as well as in the letters sent to petitioner by Palao. Inc. Inc. which could have been reflected.. .. alternatively. proper and just for both parties. v. Second.1âwphi1. On the issue of moral and exemplary damages. The records do not support petitioner's claims.30 Petitioner contends that even if the filing of the case were considered the judicial act required. affirming the Regional Trial Court decision and deleting the award of attorney's fees. 39949.requirement of the law for judicial decree of rescission.29 we held that even a crossclaim found in the Answer could constitute a judicial demand for rescission that satisfies the requirement of the law..28 In Luzon Brokerage Co. We must stress however. It was filed within the period for rescission. if indeed one existed.. the action is a subsidiary one limited to cases of rescission for lesion as enumerated in 36 said article. Thus. We are more inclined to believe his claim of readiness to pay was an afterthought intended to evade the consequence of his breach. as enumerated and defined in Articles 33 34 1380 and 1381. Lastly. CV No. Jr. Petitioner 40 would have us reverse the said CA findings based on the exception that these findings were made on a misapprehension of facts. leaving private respondent desperate to find other sources of funds to payoff his loan. the rescission is a principal action which seeks the resolution or cancellation of the contract while in Article 1381.nêt 32 27 WHEREFORE. in a bank account in his name.35 In Articles 1191 and 1592. his allegation that he was ready and willing to pay respondent. As testified to by petitioner41 and in the deposition42 of respondent. is found in Article 1144. Mendoza. concur. Thus. the proper deposit made in court which could serve as a formal 44 tender of payment. notwithstanding that it was petitioner who plainly breached the terms of their contract when he did not pay the stipulated price on time. we find the award of moral and exemplary damages proper. There is no record to show the existence of such amount. petitioner did not substantiate by clear and convincing proof. per the records. 1991.R. The prescriptive period applicable to rescission under Articles 1191 and 1592. their mutual agreement of revocation and rescission. SO ORDERED. is hereby AFFIRMED. Maritime Building Co.37 which provides that the action upon a written contract should be brought within ten years from the time the right of action accrues. Costs against the petitioner.

the failure of the private respondent to comply with the positive suspensive condition cannot even be considered a breach casual or serious but simply an event that prevented the obligation of petitioner corporation to convey title from acquiring binding force. HIBIONADA. SYLLABUS 1. The former agreed to deliver the scrap iron only upon payment of the purchase price by means of an irrevocable and unconditional letter of credit. It cannot. on the contrary.. . this Court stated: "..'(3 Castan. THE HONORABLE COURT OF APPEALS and RJH TRADING. As such. It is elementary that.Republic of the Philippines SUPREME COURT Manila EN BANC conservativas. Otherwise stated. ID. fraudulent.e. The private respondent was not thereby placed in possession of and control over the scrap iron. diversion or amusements that will serve to obviate the moral suffering he has undergone. or has manifested his inability to perform his obligations. INC. the private respondent's opening. neither was it seeking a declaration that its obligation to sell was extinguished. No.. CASE AT BAR. possession being a mere incident to its right of ownership. We cannot even assume the conversion of the initial contract or promise to sell into a contract of sale by the petitioner corporation's alleged implied delivery of the scrap iron because its action and conduct in the premises do not support this conclusion. or has committed a breach thereof.. therefore. CIVIL LAW.. In short. Myers was not rescinding (or more properly. Inc. as it did in this case. at Cawitan. therefore.. be construed as delivery of the scrap iron in the sense that. the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. Judicial discretion granted to the Courts in the assessment of damages must always be exercised with balanced restraint and measured objectivity. petitioners. its obligation to sell to Maritime never arose or never became effective and. Original for private respondent. the petitioner corporation may totally rescind. be said that the herein petitioners had acted fraudulently and in bad faith or in a wanton. Maritime Building Co. The upshot of all these stipulations is that in seeking the ouster of Maritime for failure to pay the price as agreed upon. Saleto J. proprietor. as stated by Castan.. oppressive or malevolent manner. i. Inc." This permission or consent can. The petitioner corporation's obligation to sell is unequivocally subject to a positive suspensive condition. moral damages may be recovered if defendants acted fraudulently and in bad faith. Erames and Edilberto V. CONTRACTS. In Luzon Brokerage Co. In the instant case. Paragraph 6 of the Complaint reads: "6. Article 1191 of the Civil Code does not apply. p.. reckless. it was a mere accommodation to expedite the weighing and hauling of the iron in the event that the sale would materialize. vs. CONTRACT TO SELL. Indeed. the refusal of the petitioners to deliver the scrap iron was founded on the nonfulfillment by the private respondent of a suspensive condition. Thirdly. such restoration being the logical consequence of the fulfillment of a resolutory condition. vs. Book IV of the Civil Code. oppressive or malevolent manner. moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. it may not be amiss to remind Trial Courts to guard against the award of exhorbitant (sic) damages that are way out of proportion to the environmental circumstances of a case and which. (Also Puig Peña. express or implied (Article 1190). Negros Oriental to dig and gather the scrap iron and stock the same for weighing. by no stretch of the imagination. it therefore cannot be compelled by specific performance to comply with its prestation. 4. In the first place. -. but precisely enforcing it according to its express terms. Said Article provides: "ART. such an obligation had not yet arisen. REASONS THEREFOR. pursuant to Article 1597 of the Civil Code. The obligation of the petitioner corporation to sell did not arise. . and ANG TAY. In contracts. y el acreedor pierde todo derecho. it (Myers) was entitled to repossess the property object of the contract. 1983 Plaintiff with the consent of defendant Ang Tay sent his men to the stockyard of Visayan Sawmill Co. petitioners demanded the fulfillment of the suspensive condition and eventually cancelled the contract. while exemplary damages may only be awarded if defendants acted in a wanton. They are awarded only to enable the injured party to obtain means. In the second place. petitioners placed the private respondent in control and possession thereof.. time and again. MORAL DAMAGES. Since what obtains in the case at bar is a mere promise to sell. such as in the instant case. 7a Ed. incluso el de utilizar las medidas . reckless. What it sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been fulfilled. ID.. this Court has reduced or eliminated. 1993. the contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery.R. ID. represented by RAMON J. Thus.. 107). ID. In its suit Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of). Court of Appeals needs to be stressed anew: "At this juncture. the obligation imposed therein is premised on an existing obligation to deliver the subject of the contract. 113). March 3. Civ. EFFECT OF VENDEE'S FAILURE TO COMPLY WITH POSITIVE SUSPENSIVE CONDITION. and the buyer has repudiated the contract of sale. VISAYAN SAWMILL COMPANY. said Article 1497 falls under the Chapter Obligations of the Vendor. citing Article 1497 of the Civil Code. EXEMPLARY DAMAGES. respondents. What this Court stated in Inhelder Corp. as held by the public respondent. Inc.. Logronio for petitioners. therefore. T. DAMAGES. That on May 17. RESCISSION. in view of the private respondent's failure to comply with the positive suspensive condition earlier discussed. p. Sta.. there was to be no actual sale until the opening. vs. by reason of the defendant's G. la obligacion se tiene por no existente. making or indorsing of the irrevocable and unconditional letter of credit. VENDOR'S CONSENT TO DIGGING UP AND GATHERING OF SCRAP IRON NOT CONSTRUED AS DELIVERY THEREOF. thereunder. In the instant case. which is found in Title VI (Sales). 83851. indeed. Der. PURPOSE OF AWARD THEREOF. IN CASE AT BAR.. Catalina." For. IV (1)." 3. making or indorsing of an irrevocable and unconditional letter of credit. the contract.'b) Si la condicion suspensiva llega a faltar.'" 2. resolving) the contract. ID. ID. Where the goods have not been delivered to the buyer. Derecho Civil. 1597. Eugenio O.

DEFINED. the non-payment of the price is a resolutory condition which extinguishes the transaction that.. 4. CONTRACT OF SALE DISTINGUISHED FROM CONTRACT TO SELL. the seller sent a telegram dated December 19. L-6618. EFFECT OF NONPAYMENT OF PURCHASE PRICE. The Court. a provision in the contract regarding the mode of payment. and "should the Vendee fail to pay any of the monthly installments. such that in the event of nonpayment. EFFECT OF DELIVERY ON OWNERSHIP OF OBJECT OF CONTRACT. ID. since. ID. speaking through Justice Bengzon. or otherwise fail to comply with any of the terms and conditions herein stipulated. The phrase in the contract "on the following terms and conditions" is standard form which is not to be construed as imposing a condition. To do so would change the nature of most contracts of sale into contracts to sell. . ROMERO. existed and discharges the obligations created thereunder. HOW ACCOMPLISHED. held that because of the delay in the opening of the Letter of Credit." Article 1475 gives the significance of this mutual undertaking of the parties. but an event that prevented the seller's duty to transfer title to the object of the contract. From the time the seller gave access to the buyer to enter his premises. Stated differently.. the parties in Sycip were still undergoing the negotiation process. "the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. Under Article 1496 of the Civil Code.. NO. In contrast.. ID. WHEN PROVISION CONSIDERED A SUSPENSIVE CONDITION. "The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501. DISTINGUISHED FROM CASE AT BAR. the transaction is an absolute contract of sale and not a contract to sell. 1956. whether casual or substantial. in a contract of sale. like this case. NATIONAL COCONUT CORPORATION. Court of Appeals that. after the buyer offered to buy 2. then this Deed of Conditional Sale shall automatically and without any further formality. For according to Article 1497. the contract reached the stage of perfection. On the other hand. from that moment. the parties may reciprocally demand performance. CASE OF SYCIP V.. ID. delivery by the vendor and payment by the vendee. that the mere insertion of the price and the mode of payment among the terms and conditions of the agreement will not necessarily make it a contract to sell. The seller's qualified acceptance in Sycip served as a counter offer which prevented the contract from being perfected. CASE AT BAR." 3. . But in the contract to sell. and be transferred in the name of the Vendee only upon complete payment of the full price . like the requirement for the opening of the Letter of Credit in this case. there are no indicia in this case that can lead one to conclude that . ID. 2. when due. CASE AT BAR. Consequently.." It is apparent from a careful reading of Luzon Brokerage. for a time.R. that the Letter of Credit was opened.. subject to the provisions of the law governing the form of contracts. as well as the cases which preceded it and the subsequent ones applying its doctrines. Hence. absent a proviso in the contract that the title to the property is reserved in the vendor until full payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within the fixed period. Second. the full payment of the price is a positive suspensive condition. he has placed the goods in the control and possession of the vendee and delivery is effected. the seller retains ownership and the buyer's failure to pay cannot even be considered a breach. or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. There must be a manifest understanding that the agreement is in what may be referred to as "suspended animation" pending compliance with provisions regarding payment. after delivery of the object of the contract has been made. in a contract to sell. of the spiritual status quo ante. CIVIL LAW. Two factors distinguish Sycip from the case at bar. whether suspensive or resolutory. From that moment. ownership is not transferred upon delivery of property but upon full payment of the purchase price.e. 1946 to the buyer accepting the offer but on condition that the latter opens a Letter of Credit within 48 hours. i. . First. such as for instance.. In Sycip." 10 the Vendor (Myers) will execute and deliver to the Vendee a definite and absolute Deed of Sale upon full payment of the Vendee . become null and void. however." Such action or real delivery (traditio) is the act that transfers ownership. Only an absolute and unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract.. ID. Article 1458 of the Civil Code has this definition: "By a contract of sale. thus: "The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. It was not until December 26. The reservation of title to the object of the contract in the seller is one such manifestation. G. ." In such a contract to sell.. DELIVERY.. For a provision in the contract regarding the payment of the price to be considered a suspensive condition.. the absence of any of which will prevent the perfection of the contract from happening. it involves a failure to open on time the Letter of Credit required by the seller. APRIL 28. dissenting: 1. there being a meeting of the' minds upon the object which is the subject matter of the contract and the price which is the consideration. by reserving or withholding title to the goods until full payment by the buyer. "The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee. it must be emphasized that not every provision regarding payment should automatically be classified as a suspensive condition. ID. the Court found in Sycip that time was of the essence for the seller who was anxious to sell to other buyers should the offeror fail to open the Letter of Credit within the stipulated time. the parties must have made this clear in certain and unambiguous terms. the seller loses ownership and cannot recover the same unless the contract is rescinded. Worthy of mention before concluding is Sycip v. is not among the essential requirements of a contract of sale enumerated in Articles 1305 and 1474. 1983. within the limits of the possible. it has been decided in the case of Dignos v. when the parties entered into the contract entitled "Purchase and Sale of Scrap Iron" on May 1. and it must be proportional to the suffering inflicted. one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent. the obligation of the seller to deliver and transfer ownership never arises. CONTRACT OF SALE. manifesting no objection thereto but even sending 18 or 20 people to start the operation. Applying Article 1475 of the Civil Code. PROVISION IN CONTRACT REGARDING MODE OF PAYMENT NOT ESSENTIAL REQUISITE THEREOF. ID. in the sense of the happening of a future and uncertain event upon which an obligation is made to depend. ET AL. WHEN PERFECTED. National Coconut Corporation. 1946.culpable action. the parties may reciprocally demand performance of the obligations incumbent upon them. In a contract of sale. et al. This was a pivotal circumstance in the Luzon Brokerage case where the contract in question was replete with very explicit provisions such as the following: "Title to the properties subject of this contract remains with the Vendor and shall pass to. while there has already been a perfected contract of sale in the instant case. 5.. Its award is aimed at the restoration. the seller was not obliged to deliver the goods. J. Likewise.000 tons of copra." Thus.

RESCISSION UNDER ARTICLE 1191 OF THE CIVIL CODE.000.. In the instant case. On May 17.00. as attorney's fees. it is noted that petitioners allowed private respondents' men to dig and remove the scrap iron located in petitioners' premises between May 17. ID.00) Pesos as actual litis expenses. plaintiff-appellee through his man (sic). Metro Manila Shipments of about 500 MT of assorted steel scrap marine/heavy equipment expiring on July 24. The antecedent facts. the content of which is quited (sic) as follows: 'Please be advised that we have received today cable advise from our Head Office which reads as follows: 'Open today our irrevocable Domestic Letter of Credit No. and 5) The sum of Five Thousand (P5. they sent a telegram to plaintiff-appellee cancelling the contract of sale because of failure of the latter to comply with the conditions thereof. This.00 in favor of defendant-appellant corporation on or before May 15. OBLIGATIONS AND CONTRACTS. to wit: 1) The sum of Thirty-Four Thousand Five Hundred Eighty Three and 16/100 (P34. the contract is bereft of any suggestion that time was of the essence. Rescission will not be permitted for slight or casual breach of the contract. 1983 but. 1983 or eleven (11) days later that they did so. 15128. 1983. 1983.. v. Makati.00 favor ANG TAY c/o Visayan Sawmill Co.000. it was not until May 26. . summarized by the public respondent. 1983 the notice from the bank about the opening of the Letter of Credit. None of the alleged defects in the Letter of Credit would serve to defeat the object of the parties. Here.583. however." 2 The public respondent reduced the amount of moral damages to P25. 08807. DECISION DAVIDE. but then (sic) the transmittal was delayed.R. JR. 1983 at the Bank of the Philippine Islands main office in Ayala. Hence. an action for specific performance and damages. It is also significant to note that petitioners sent a telegram to private respondents on May 23. the decision of the Regional Trial Court (RTC) of Iloilo in Civil Case No. It is to be stressed that the purpose of the opening of a Letter of Credit is to effect payment. 1983 cancelling the contract.. Inc. 1983 until May 30. Hawaiian-Philippine Co. . is denied by defendants-appellants who allege that on May 23. This is evidenced by a contract entitled `Purchase and Sale of Scrap Iron' duly signed by both parties. the private respondents were supposed to open the Letter of Credit on May 15. 6. in the absence of any indication that the time was of the essence. it was held that a delay in payment for twenty (20) days was not a violation of an essential condition of the contract which would warrant rescission for non-performance.00) Pesos.-G. 1983. as exemplary damages.000. Dumaguete City. I am not convinced that the circumstances may be characterized as so substantial and fundamental as to defeat the object of the parties in making the agreement. On May 24. herein plaintiff-appellee and defendants-appellants entered into a sale involving scrap iron located at the stockyard of defendant-appellant corporation at Cawitan. as moral damages. judgment is hereby rendered in favor of plaintiff and against the defendants ordering the latter to pay jointly and severally plaintiff. Sta. are as follows: "On May 1. petitioners urge this Court to set aside the decision of public respondent Court of Appeals in C.. started to dig and gather and (sic) scrap iron at the defendant-appellant's (sic) premises. On the contrary. WHEN PROPER.16). CV No. J p: By this petition for review under Rule 45 of the Rules of Court. 3) The sum of Ten Thousand (P10.000. DELAY IN PAYMENT FOR TWENTY DAYS NOT CONSIDERED A SUBSTANTIAL BREACH OF CONTRACT. 1983 deadline for the opening of the Letter of Credit. plaintiff-appellee informed defendants-appellants by telegram that the letter of credit was opened May 12. defendants-appellants received a letter advice from the Dumaguete City Branch of the Bank of the Philippine Islands dated May 26. Is the eleven-day delay a substantial breach of the contract as could justify the rescission of the contract? In Song Fo and Co. 2) The sum of One Hundred Thousand (P100.000. On May 26. Negros Oriental Account of ARMACOMARSTEEL ALLOY CORPORATION 2nd Floor Alpap 1 Bldg.00) Pesos.000. petitioners claim that the breach is so substantial as to justify rescission . 140 Alfaro stp (sic) Salcedo Village. Catalina. 4) The sum of TWENTY Five Thousand (P25. subject to the condition that plaintiff-appellee will open a letter of credit in the amount of P250.000. This was before they had even received on May 26. 1983 without recourse at sight draft drawn on Armaco Marsteel Alloy Corporation accompanied by the following documents: Certificate of Acceptance by Armaco-Marsteel Alloy Corporation shipment from Dumaguete City to buyer's warehouse partial shipment allowed/transhipment (sic) not allowed'. CASE AT BAR. How could they have made a judgment on the materiality of the provisions of the Letter of Credit for purposes of rescinding the contract even before setting eyes on said document? To be sure.A. 1983 or beyond the May 15. filed by the herein private respondent against the petitioners.time was of the essence for petitioner as would make the eleven-day delay a fundamental breach of the contract.00) Pesos. proceeding with such endeavor until May 30 when defendants-appellants allegedly directed plaintiff-appellee's men to desist from pursuing the work in view of an alleged case filed against plaintiff-appellee by a certain Alberto Pursuelo. 1983. 1983. 01456-d fot (sic) P250.. The above-mentioned factors could not have prevented such payment. which affirmed with modification. as actual damages. 1 promulgated on 16 March 1988. in the contract. the eleven-day delay must be deemed a casual breach which cannot justify a rescission. The dispositive portion of the trial court's decision reads as follows: "IN VIEW OF THE ABOVE FINDINGS. . 1983. The right to rescind pursuant to Article 1191 is not absolute. 1983. Negros Oriental. in respect to the moral damages.

the rescission of the sale shall of right take place in the interest of the vendor. control and possession over the subject matter of the contract was given to plaintiff-appellee. 1983. On July 29. otherwise a case will be filed against them. there could be no delivery. Pando. In finding that defendants-appellants were not justified in cancelling the sale. On the second and third assignments of error. among which is the opening of an irrevocable and unconditional letter of credit not later than 15 May 1983. and were the reasons or grounds for cancelling valid and justified? 2. 2.A. moral and exemplary damages. defendants-appellants argue that under Articles 1593 and 1597 of the Civil Code. the defendant having surrendered the premises where the scraps (sic) were found for plaintiff's men to dig and gather." 3 In his complaint.-G. defendants-appellants maintain that their obligation to deliver cannot be completed until they furnish the cargo trucks to haul the weighed materials to the wharf. defendants-appellants argue that there was no delivery because the purchase document states that the seller agreed to sell and the buyer agreed to buy 'an undetermined quantity of scrap iron and junk which the seller will identify and designate. The writ of attachment was returned unserved because the defendant-appellant corporation was no longer in operation and also because the scrap iron as well as other pieces of machinery can no longer be found on the premises of the corporation. since no identification and designation was made. 311. these issues were subsequently embodied in the pre-trial order. if the vendee fails to tender the price at the time or period fixed or agreed. the buyer. when the defendants-appellants as the sellers allowed the buyer and his men to enter the corporation's premises and to dig-up the scrap iron. he further sought an award of actual. Petitioners appealed from said decision to the Court of Appeals which docketed the same as C. 4. The pieces of scrap iron then (sic) placed at the disposal of the buyer. as already (sic) stated. automatic rescission cannot take place because. while it is true that Article 1593 of the New Civil Code provides that with respect to movable property. 13 Phil.R. however. Delivery was therefore complete. to wit: "1. on July 20. 1983. by way of assigned errors. 4 In their Answer with Counterclaim. the intervention of the court is necessary to annul the contract. alleged that the trial court erred: "1. automatic rescission may take place by a mere notice to the buyer if the latter committed a breach of the contract of sale. the action being one to rescind judicially and where (sic) Article 1191.' In the case at bar." 7 Public respondent disposed of these assigned errors in this wise: "On the first error assigned. In not awarding damages to defendants-appellants. what are the grounds and reasons relied upon by the cancelling parties. 08807. delivery had already been made. in cases where there has already been delivery. In reply to those telegrams. The identification and designation by the seller does not complete delivery. subject matter of the contract between the parties in this case. plaintiff-appellee sent a series of telegrams stating that the case filed against him by Pursuelo had been dismissed and demanding that defendants-appellants comply with the deed of sale. dated May 1. The arguments are untenable. Pascual. automatic rescission is not allowed if the object sold has been delivered to the buyer (Guevarra vs. 5. In awarding damages to the plaintiff as against the defendants-appellants. In addition. 1983 executed by the parties cancelled and terminated before the Complaint was filed by anyone of the parties. defendants-appellants' lawyer. In not finding that plaintiff had not complied with the conditions in the contract of sale. Are the parties entitled to damages they respectively claim under the pleadings?" 6 On 29 November 1985. 3. petitioners. Was the contract entitled Purchase and Sale of Scrap Iron. There being already an implied delivery of the items. In finding that there was delivery of the scrap iron subject of the sale. CV No. if so. supra. On July 19. During the pre-trial of the case on 30 April 1984. thereby applies. 1983 informed plaintiffappellee's lawyer that defendant-appellant corporation is unwilling to continue with the sale due to plaintiff-appellee's failure to comply with essential pre-conditions of the contract. the dispositive portion of which was quoted earlier. the parties defined the issues to be resolved. the trial court rendered its judgment.' Thus. it is contended. As the lower court aptly stated: 'Respecting these allegations of the contending parties.For your information'. 5 petitioners insisted that the cancellation of the contract was justified because of private respondent's non-compliance with essential pre-conditions. Article 1497 of the Civil Code states: 'The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee. private respondent prayed for judgment ordering the petitioner corporation to comply with the contract by delivering to him the scrap iron subject thereof. And. as in fact they had dug and . plaintiff-appellee filed the complaint below with a petition for preliminary attachment. 76 Phil 256). Even if one were to grant that there was a breach of the contract by the buyer. In their Brief. attorney's fees and the costs of the suit. Escueta vs.

" xxx xxx xxx Sustaining the trial court on the issue of delivery. having appeared. a slight delay by one party in the performance of his obligation is not a sufficient ground for rescission of the agreement. either party has the right to rescind the contract upon failure of the other to perform the obligation assumed thereunder. in case one of the obligors should not comply with what is incumbent upon him. petitioners' right to rescind the agreement. Sta. entitled PURCHASE AND SALE OF SCRAP IRON. 37 Phi. should not have appeared to receive it. when it is placed in the control and possession of the vendee. 11 it ruled that rescission under Article 1191 of the Civil Code could only be done judicially.' In the case of Angeles vs. to wit: xxx xxx xxx Both the trial court and the public respondent erred in the appreciation of the nature of the transaction between the petitioner corporation and the private respondent. de Leon. if the latter should become impossible. and not a contract of sale. 'Where time is not of the essence of the agreement. with the payment of damages in either case." 8 Their motion to reconsider the said decision having been denied by public respondent in its Resolution of 4 May 1988. at the price of FIFTY CENTAVOS (P0. if the vendee. upon the expiration of the period fixed for the delivery of the thing.' (Taguda vs. The trial court further classified the breach committed by the private respondent as slight or casual. unless there be just cause authorizing the fixing of a period. what obtains in the case at bar is a mere contract to sell or promise to sell. concluded that Article 1593 of the Civil Code was inapplicable. and the BUYER agrees to buy. even after he has chosen fulfillment. With respect to movable property. Neg. Catalina. The power to rescind obligations is implied in reciprocal ones. To cover payment of the purchase price.' Thus. this Court finds the mere notice of resolution by the defendants untenable and not conclusive on the rights of the plaintiff (Ocejo Perez vs. In reciprocal obligations. Oriental. Weighing shall be done in the premises of the SELLER at Cawitan. Hawaiian Philippine Company. Of course. 12 the seller bound and promised itself to sell the scrap iron upon the fulfillment by the private respondent of his obligation to make or indorse an irrevocable and unconditional letter of credit in payment of the purchase price. the Supreme Court ruled: 'Article 1191 is explicit. make or indorse an irrevocable and unconditional letter of credit not later than May 15. public respondent cites Article 1497 of the Civil Code which provides: "ARTICLE 1497. The injured party may choose between the fulfillment and the rescission of the obligation. citing Guevarra vs. He may also seek rescission. Pascual 10 and Escueta vs. 821). BUYER will open. it must be understood that the right of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional. 722). an undetermined quantity of scrap iron and junk which the SELLER will identify and designate now at Cawitan. influenced by its view that there was an "implied delivery" of the object of the agreement. To this Court's mind. rescission in cases falling under Article 1191 of the Civil Code is always subject to review by the courts and cannot be considered final. 631). "Witnesseth: That the SELLER agrees to sell. he should not have tendered the price at the same time. the trial court ruled that rescission is improper because the breach was very slight and the delay in opening the letter of credit was only 11 days.gathered. Negros Oriental. The thing sold shall be understood as delivered. Int. unless a longer period has been stipulated for its payment. or. Catalina. 2. The trial court assumed that the transaction is a contract of sale and. Vda. thereby.' There is no need to discuss the fourth and fifth assigned errors since these are merely corollary to the first three assigned errors. Bank.50) per kilo on the following terms and conditions: 1. Calasanz (135 (1935) SCRA 323). being ever subject to scrutiny and review by the proper court. The court shall decree the rescission claimed. 132 SCRA (1984). foreclosing. Article 1593 of the Civil Code provides: "ARTICLE 1593. Likewise. it has been ruled that rescission cannot be sanctioned for a slight or casual breach (47 Phil. Equity and justice mandates (sic) that the vendor be given additional (sic) period to complete payment of the purchase price. There is merit in the instant petition." In the agreement in question. In the case at bar. 9 petitioners filed this petition reiterating the abovementioned assignment of errors. Pando. the rescission of the sale shall of right take place in the interest of the vendor. Sta." Article 1191 provides: "ARTICLE 1191. 1983 at the Consolidated Bank and . Its principal stipulation reads. as early as in the case of Song Fo vs.

but precisely enforcing it according to its express terms. Consequently. 107). neither was it seeking a declaration that its obligation to sell was extinguished. 13 this Court stated: " . and the public respondent was in agreement. there was to be no actual sale until the opening. be construed as delivery of the scrap iron in the sense that. making or indorsing of the irrevocable and unconditional letter of credit. for it is without recourse. private respondent may have sold the subject scrap iron to ARMACO-MARSTEEL ALLOY CORPORATION. The former agreed to deliver the scrap iron only upon payment of the purchase price by means of an irrevocable and unconditional letter of credit. Thus. Catalina. la obligacion se tiene por no existente. In Luzon Brokerage Co. to haul the weighed materials from Cawitan to the TSMC wharf at Sta.. Article 1191 of the Civil Code does not apply." (Emphasis supplied). it is set to expire on a specific date and it stipulates certain conditions with respect to shipment. (Also Puig Peña. petitioners placed the private respondent in control and possession thereof.Trust Company. p. but by a corporation which is not a party to the contract. loading and unloading shall be for the account of the BUYER.e.. Philippine Currency. Since what obtains in the case at bar is a mere promise to sell. said Article 1497 falls under the Chapter 15 Obligations of the Vendor. incluso el de utilizar las medidas conservativas. such an obligation had not yet arisen. In the first place. make or indorse an irrevocable and unconditional letter of credit on or before 15 May 1983 despite his earlier representation in his 24 May 1983 telegram that he had opened one on 12 May 1983. petitioners demanded the fulfillment of the suspensive condition and eventually cancelled the contract. drawn without recourse on ARMACO-MARSTEEL ALLOY CORPORATION and set to expire on 24 July 1983. it therefore cannot be compelled by specific performance to comply with its prestation. Indeed. Otherwise stated. at Cawitan. .. which is indisputably not in accordance with the stipulation in the contract signed by the parties on at least three (3) counts: (1) it was not opened. Inc. What it sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been fulfilled. Derecho Civil. the failure of the private respondent to comply with the positive suspensive condition cannot even be considered a breach casual or serious but simply an event that prevented the obligation of petitioner corporation to convey title from acquiring binding force. that there had been an implied delivery in this case of the subject scrap iron because on 17 May 1983. 3. That on May 17. The upshot of all these stipulations is that in seeking the ouster of Maritime for failure to pay the price as agreed upon. or otherwise assigned to it the contract with the petitioners. 7a Ed. therefore. Paragraph 6 of the Complaint reads: "6. Branch. IV (1). 1983 Plaintiff with the consent of defendant Ang Tay sent his men to the stockyard of Visayan Sawmill Co. Thirdly. therefore. express or implied (article 1190). as stated by Castan. The petitioner corporation's obligation to sell is unequivocally subject to a positive suspensive condition. Where the goods have not been delivered to the buyer. vs. it (Myers) was entitled to repossess the property object of the contract. the contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery. private respondent's men started digging up and gathering scrap iron within the petitioner's premises. Der. 113)'. In short.000. as held by the public respondent. the petitioner corporation may totally rescind. thereunder. or has manifested his inability to perform his obligations. Inc. All expenses for labor.. the obligation imposed therein is premised on an existing obligation to deliver the subject of the contract. not only did the private respondent fail to open. and (3) it is not irrevocable and unconditional. i. such restoration being the logical consequence of the fulfillment of a resolutory condition. the letter of advice received by the petitioner corporation on 26 May 1983 from the Bank of the Philippine Islands Dumaguete City branch explicitly makes reference to the opening on that date of a letter of credit in favor of petitioner Ang Tay c/o Visayan Sawmill Co. possession being a mere incident to its right of ownership. pursuant to Article 1597 of the Civil Code. 'b) Si la condicion suspensiva llega a faltar. Private respondent's complaint fails to disclose the sudden entry into the picture of this corporation. however." The trial court ruled. Maritime Building Co..00). making or indorsing of an irrevocable and unconditional letter of credit. the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. As such. The SELLER will furnish the BUYER free of charge at least three (3) cargo trucks with drivers. The private respondent was not thereby placed in possession of and control over the scrap iron. . Myers was not rescinding (or more properly. or has committed a breach thereof. The entry of these men was upon the private respondent's request. We cannot even assume the conversion of the initial contract or promise to sell into a contract of sale by the petitioner corporation's alleged implied delivery of the scrap iron because its action and conduct in the premises do not support this conclusion. citing Article 1497 of the Civil Code. . by no stretch of the imagination. its obligation to sell to Maritime never arose or never became effective and. resolving) the contract. Dumaguete City." 14 This permission or consent can. Civ. Catalina for loading on BUYER's barge.. In its suit Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of)." In the instant case. p. and the buyer has repudiated the contract of sale.' (3 Cast n. T. Said Article provides: "ARTICLE 1597.. y el acreedor pierde todo derecho. In all probability. Inc. Inc. In the instant case. In the second place. Sta. on the contrary. It is elementary that. which is found in Title VI (Sales). it was a mere accommodation to expedite the weighing and hauling of the iron in the event that the sale would materialize. Negros Oriental to dig and gather the scrap iron and stock the same for weighing. (2) it was not opened with the bank agreed upon. made or indorsed by the private respondent. Book IV of the Civil Code. the contract. in favor of the SELLER in the sum of TWO HUNDRED AND FIFTY THOUSAND PESOS (P250. as it did in this case. SELLER shall be entitled to a deduction of three percent (3%) per ton as rust allowance. in view of the private respondent's failure to comply with the positive suspensive condition earlier discussed. the obligation of the petitioner corporation to sell did not arise.. the private respondent's opening. 4.

xxx xxx xxx On May 17. . 1983. time and again. entered into a contract on May 1. Dumaguete City Branch. the workers of private respondents were allowed inside petitioner company's premises in order to gather the scrap iron..A. 3. moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. Padilla. by reason of the defendant's culpable action. to haul the weighed materials from Cawitan to the TSMC wharf at Sta. . The SELLER will furnish the BUYER free of charge at least three (3) cargo trucks with drivers. 17 In the instant case. Catalina. HIBIONADA. be said that the herein petitioners had acted fraudulently and in bad faith or in a wanton. Separate Opinions ROMERO. SELLER shall be entitled to a deduction of three percent (3%) per ton as rust allowance. All expenses for labor. C . 1983 at the Consolidated Bank and Trust Company. fraudulent. and RAMON J. To cover payment of the purchase price BUYER will open. of the spiritual status quo ante. Philippine currency. diversion or amusements that will serve to obviate the moral suffering he has undergone. such as in the instant case.. Hibionada. Costs against the private respondent. Cruz. In contracts. oppressive or malevolent manner. . 08807 is REVERSED and Civil Case No. Sta. made and executed at Dumaguete City. . No part. J . moral damages may be recovered if defendants acted fraudulently and in bad faith. Catalina.. hereinafter called the SELLER.. The contract. dissenting: I vote to dismiss the petition. J.All told.. CV No. this 1st day of May. 16 while exemplary damages may only be awarded if defendants acted in a wanton. On terminal leave.. witnesseth: That the SELLER agrees to sell. It cannot. at the price of FIFTY CENTAVOS (P. 2. INC. indeed.00). Weighing shall be done in the premises of the SELLER at Cawitan. This Court notes the palpably excessive and unconscionable moral and exemplary damages awarded by the trial court to the private respondent despite a clear absence of any legal and factual basis therefor. it may not be amiss to remind Trial Courts to guard against the award of exhorbitant (sic) damages that are way out of proportion to the environmental circumstances of a case and which. represented by private respondent Ramon J. the refusal of the petitioners to deliver the scrap iron was founded on the non-fulfillment by the private respondent of a suspensive condition. within the limits of the possible. therefore.. and it must be proportional to the suffering inflicted. The decision of public respondent Court of Appeals in C..000. Negros Oriental. JJ . on May 23. entitled "PURCHASE AND SALE OF SCRAP IRON." stated: This contract for the Purchase and Sale of Scrap Iron. However. . Narvasa. . JJ . the instant petition is GRANTED.50) per kilo on the following terms and conditions: 1. 15128 filed before the trial court was nothing more than the private respondent's preemptive action to beat the petitioners to the draw. Phil. SO ORDERED. loading and unloading shall be for the account of the BUYER. Judicial discretion granted to the Courts in the assessment of damages must always be exercised with balanced restraint and measured objectivity. an undetermined quantity of scrap iron and junk which the SELLER will identify and designate now at Cawitan. in favor of the SELLER in the sum of TWO HUNDRED AND FIFTY THOUSAND PESOS (P250. 1983 by and between: VISAYAN SAWMILL CO. Its award is aimed at the restoration. vs. Inc." For.. Civil Case No. Jr. One last point. hereinafter called the BUYER. 19 WHEREFORE. Visayan Sawmill Co. Bidin and Bellosillo. They are awarded only to enable the injured party to obtain means.-G. Court of Appeals 18 needs to be stressed anew: "At this juncture. Sta. 1983 with private respondent RJH Trading Co. 1983.J . 15128 of the Regional Trial Court of Iloilo is ordered DISMISSED.. Feliciano. Melo and Quiason. Negros Oriental.R.. Petitioner corporation. Catalina for loading on BUYER'S barge. Gutierrez. this Court has reduced or eliminated. petitioner company sent a telegram which stated: "RAMON HIBIONADA RJH TRADING 286 QUEZON STREET . concur. reckless. and the BUYER agrees to buy. 4. make or indorse an irrevocable and unconditional letter of credit not later than May 15. oppressive or malevolent manner. reckless. What this Court stated in Inhelder Corp.

the non-payment of the price is a resolutory condition which extinguishes the transaction that. he has placed the goods in the control and possession of the vendee and delivery is effected." 3 Such action or real delivery (traditio) is the act that transfers ownership. Article 1458 of the Civil Code has this definition: "By a contract of sale.." Subsequently. Ang Tay and informed him that the letter of credit was forthcoming and if it was possible for him (buyer) to start cutting and digging the scrap iron before the letter of credit arrives and the former (seller) manifested no objection. "The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee." 5 In such a contract to sell. manifesting no objection thereto but even sending 18 or 20 people to start the operation.e.. Petitioner.. was cited as authority on the assumption that subject contract is indeed a contract to sell but which will be shown herein as not quite accurate. RAMON HIBIONADA" On May 26.. private respondents filed a complaint for specific performance and damages with the Regional Trial Court (RTC) of Iloilo (Branch XXXV) which decided in favor of private respondents." That payment of the price in any form was not yet effected is immaterial to the transfer of the right of ownership. Under Article 1496 of the Civil Code. Inc. the full payment of the . v. INC. 1983. for a time. Maritime Co. it has arrived at the conclusion that herein contract is not a contract of sale but a contract to sell which is subject to a positive suspensive condition. "The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501. petitioners' counsel sent another telegram to private respondents stating that: "VISAYAN SAWMILL COMPANY UNWILLING TO CONTINUE SALE OF SCRAP IRON TO HIBIONADA DUE TO NON COMPLIANCE WITH ESSENTIAL PRE CONDITIONS" Consequently." 2 From the time the seller gave access to the buyer to enter his premises.. petitioner company received the following advice from the Dumaguete City Branch of The Bank of Philippine Islands: cdll "Opened today our Irrevocable Domestic Letter of Credit 2-01456-4 for P250. 1983 the following: "ANG TAY VISAYAN SAWMILL DUMAGUETE CITY LETTER OF CREDIT AMOUNTING P250. and he immediately sent 18 or 20 people to start the operation. 1983 BANK OF PI MAIN OFFICE AYALA AVENUE MAKATI METRO MANILA BUT TRANSMITTAL IS DELAYED PLEASE CONSIDER REASON WILL PERSONALLY FOLLOW-UP IN MANILA THANKS REGARDS.00 OPENED MAY 12. delivery by the vendor and payment by the vendee.000. Applying Article 1475 of the Civil Code. i. the present petition was filed. Inc. thus: "The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. The lengthy decision of Luzon Brokerage Co. Salcedo Village Makati Metro Manila Shipments of about 500 MT of assorted steel scrap marine/heavy equipment expiring on July 23. the obligation of petitioners to convey title did not arise. the parties may reciprocally demand performance of the obligations incumbent upon them.L. from that moment. one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent. Based on its appreciation of the contract in question. admits that "[b]efore the opening of the letter of credit. the opening of a letter of credit by private respondents. the contract reached the stage of perfection.000. Since the condition was not fulfilled. Finding the petition meritorious. 1983. buyer Ramon Hibionada went to Mr." Hibionada wired back on May 24. there being a meeting of the' minds upon the object which is the subject matter of the contract and the price which is the consideration. In a contract of sale. The RTC decision having been affirmed by the Court of Appeals. or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. when the parties entered into the contract entitled "Purchase and Sale of Scrap Iron" on May 1." Thus.ILOILO CITY DUE YOUR FAILURE TO COMPLY WITH CONDITIONS BEFORE DEADLINE OUR CONTRACT FOR PURCHASE SCRAP IRON CANCELLED VISAYAN SAWMILL CO.B. 4 On the other hand. Inc. 1 penned by Justice J. in its petition." Article 1475 gives the significance of this mutual undertaking of the parties.00 in favor ANG TAY c/o Visayan Sawmill Co. Reyes.. 1983 without recourse at slight draft drawn on ArmacoMarsteel Alloy Corporation accompanied by the following documents: Certificate of acceptance by Armaco-Marsteel Allow (sic) Corporation shipment from Dumaguete City to buyer's warehouse partial shipment allowed/transhipment not allowed. "the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. the distinction between a contract to sell and a contract of sale is crucial in this case. subject to the provisions of the law governing the form of contracts. 140 Alfaro st. the ponencia reversed the decision of the Court of Appeals. From that moment. the parties may reciprocally demand performance. i. For according to Article 1497.e. existed and discharges the obligations created thereunder. Evidently. Dumaguete City Negros Oriental Account of ARMACOMARSTEEL ALLOW (sic) CORPORATION 2nd Floor Alpap 1 Bldg.

like the requirement for the opening of the Letter of Credit in this case. Where the goods have not been delivered to the buyer.price is a positive suspensive condition. The agreement between the parties was a contract of sale and the "terms and conditions" embodied therein which are standard form. are clearly resolutory in nature. notwithstanding its conclusion that no contract of sale existed. Stated differently. although opened in favor of petitioners was made against the account of a certain Marsteel Alloy Corporation. it is even unnecessary to discuss the issue of delivery in relation to the right of rescission nor to rely on Article 1597. Rescission will not be permitted for slight or casual breach of the contract. in a contract of sale. as well as the cases which preceded it 13 and the subsequent ones applying its doctrines. the seller retains ownership and the buyer's failure to pay cannot even be considered a breach. 19 The right to rescind pursuant to Article 1191 is not absolute. contemporaneous and subsequent acts of the parties and the other relevant circumstances surrounding the case. it must be borne in mind that a provision in the contract regarding the mode of payment. when due. then this Deed of Conditional Sale shall automatically and without any further formality. It provides: "ARTICLE 1597. it has been decided in the case of Dignos v. the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. Hence. At the outset. thereunder. 9 This was a pivotal circumstance in the Luzon Brokerage case where the contract in question was replete with very explicit provisions such as the following: "Title to the properties subject of this contract remains with the Vendor and shall pass to. the obligation of the seller to deliver and transfer ownership never arises. nowhere in the contract did it state that the petitioners reserve title to the goods until private respondents have opened a letter of credit. the parties must have made this clear in certain and unambiguous terms." In this case. But in the contract to sell. the transaction is not a contract to sell but a contract of sale. it must be emphasized that not every provision regarding payment should automatically be classified as a suspensive condition. 1983 as stipulated in the contract but also because of the following factors: (1) the Letter of Credit. the seller loses ownership and cannot recover the same unless the contract is rescinded. 17 it is significant that in the telegram sent by petitioners to Hibionada on May 23. giving them control and possession of the goods. but an event that prevented the seller's duty to transfer title to the object of the contract." 12 It is apparent from a careful reading of Luzon Brokerage. absent a proviso in the contract that the title to the property is reserved in the vendor until full payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within the fixed period. whether casual or substantial.. which may be relevant in the determination of the nature and meaning of the contract. the breach of which may give either party the option to bring an action to rescind and/or seek damages. (2) the Letter of Credit referred to "assorted steel scrap" instead of "scrap iron and junk" as provided in the contract. 11 and "should the Vendee fail to pay any of the monthly installments. 18 In light of the provisions of the contract. by reserving or withholding title to the goods until full payment by the buyer. such as for instance. and be transferred in the name of the Vendee only upon complete payment of the full price . or otherwise fail to comply with any of the terms and conditions herein stipulated. ." 10 the Vendor (Myers) will execute and deliver to the Vendee a definite and absolute Deed of Sale upon full payment of the Vendee . petitioners claim that the breach is so substantial as to justify rescission. in a contract to sell. To do so would change the nature of most contracts of sale into contracts to sell." And in some of the pleadings in the course of this litigation. The reservation of title to the object of the contract in the seller is one such manifestation." (Emhasis supplied). 8 the absence of any of which will prevent the perfection of the contract from happening. . instead of private respondent's account. For a provision in the contract regarding the payment of the price to be considered a suspensive condition. In every contract which contains reciprocal obligations. 1983. proceeded to state that petitioner company may rescind the contract based on Article 1597 of the Civil Code which expressly applies only to a contract of sale. in the sense of the happening of a future and uncertain event upon which an obligation is made to depend. the determination of the nature of the contract does not settle the controversy. 20 Here. is not among the essential requirements of a contract of sale enumerated in Articles 1305 7 and 1474. Likewise. . A breach of the contract was committed and the rights and liabilities of the parties must be established. Court of Appeals 15 that. (4) no amount from the Letter . and the buyer has repudiated the contract of sale. . thus. the transaction is an absolute contract of sale and not a contract to sell. The phrase in the contract "on the following terms and conditions" is standard form which is not to be construed as imposing a condition. whether suspensive or resolutory. it stated that "DUE [TO] YOUR FAILURE TO COMPLY WITH CONDITIONS BEFORE DEADLINE OUR CONTRACT FOR PURCHASE SCRAP IRON CANCELLED. 6 Consequently. become null and void. However. At this juncture. or has committed a breach thereof. ownership is not transferred upon delivery of property but upon full payment of the purchase price. or has manifested his inability to perform his obligations. 16 In the instant case. not only because the Letter of Credit was not opened on May 15. as aforestated. after delivery of the object of the contract has been made. There must be a manifest understanding that the agreement is in what may be referred to as "suspended animation" pending compliance with provisions regarding payment. Examining the contemporaneous and subsequent conduct of the parties. such that in the event of non-payment. petitioners referred to the transaction as a contract of sale. Contrary to the conclusions arrived at in the ponencia.. The ponencia. it is evident that the stipulation for the buyer to open a Letter of Credit in order to cover the payment of the purchase price does not bear the marks of a suspensive condition. 14 that the mere insertion of the price and the mode of payment among the terms and conditions of the agreement will not necessarily make it a contract to sell. (3) the Letter of Credit placed the quantity of the goods at "500 MT" while the contract mentioned "an undetermined quantity of scrap iron and junk". Nor is there any provision declaring the contract as without effect until after the fulfillment of the condition regarding the opening of the letter of credit. the workers of private respondents were actually allowed to enter the petitioners' premises. The ponencia was then confronted with the issue of delivery since Article 1597 applies only "[w]here the goods have not yet been delivered. the right to rescind is always implied under Article 1191 of the Civil Code in case one of the parties fails to comply with his obligations.

. v. 1946. join Justice Romero's dissent. the seller sent a telegram dated December 19. in the contract. 1983 deadline for the opening of the Letter of Credit. in the absence of any indication that the time was of the essence. Nocon and Campos. that the Letter of Credit was opened. as well as holding that the breach of the contract was not substantial and. 21 None of the alleged defects in the Letter of Credit would serve to defeat the object of the parties. 23 since. both the trial court and the respondent Court of Appeals committed no reversible error in their appreciation of the agreement in question as a contract of sale and not a contract to sell. 1983 until May 30. the parties in Sycip were still undergoing the negotiation process. In Sycip. Griño-Aquino. On the contrary. 1983 the notice from the bank about the opening of the Letter of Credit. it is noted that petitioners allowed private respondents' men to dig and remove the scrap iron located in petitioners' premises between May 17.. Two factors distinguish Sycip from the case at bar. It is to be stressed that the purpose of the opening of a Letter of Credit is to effect payment. 1946 to the buyer accepting the offer but on condition that the latter opens a Letter of Credit within 48 hours. 22 it was held that a delay in payment for twenty (20) days was not a violation of an essential condition of the contract which would warrant rescission for non-performance. In sum. PREMISES CONSIDERED. 1983 but. it was not until May 26. held that because of the delay in the opening of the Letter of Credit. Hawaiian-Philippine Co. and (5) the Letter of Credit had an expiry date. the Petition must be DISMISSED and the decision of the Court of Appeals AFFIRMED. The Court. the contract is bereft of any suggestion that time was of the essence. the eleven-day delay must be deemed a casual breach which cannot justify a rescission. 1983 cancelling the contract. 1983 or eleven (11) days later that they did so. It was not until December 26. Regalado. the private respondents were supposed to open the Letter of Credit on May 15. It is also significant to note that petitioners sent a telegram to private respondents on May 23. In the instant case. Is the eleven-day delay a substantial breach of the contract as could justify the rescission of the contract? In Song Fo and Co. This was before they had even received on May 26. How could they have made a judgment on the materiality of the provisions of the Letter of Credit for purposes of rescinding the contract even before setting eyes on said document? To be sure. JJ . petitioners were not justified in law in rescinding the agreement. to my mind. Worthy of mention before concluding is Sycip v. Only an absolute and unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract.of Credit will be released unless accompanied by a Certificate of Acceptance. the Court found in Sycip that time was of the essence for the seller who was anxious to sell to other buyers should the offeror fail to open the Letter of Credit within the stipulated time. however. therefore. In contrast. The abovementioned factors could not have prevented such payment. like this case. the seller was not obliged to deliver the goods. Hence. Jr. et al. it involves a failure to open on time the Letter of Credit required by the seller. after the buyer offered to buy 2. National Coconut Corporation. speaking through Justice Bengzon. I am not convinced that the above circumstances may be characterized as so substantial and fundamental as to defeat the object of the parties in making the agreement. The seller's qualified acceptance in Sycip served as a counter offer which prevented the contract from being perfected. there are no indicia in this case that can lead one to conclude that time was of the essence for petitioner as would make the eleven-day delay a fundamental breach of the contract. .000 tons of copra. 24 Second. 1983 or beyond the May 15. while there has already been a perfected contract of sale in the instant case. First.

give everyone his due. is not predicated on economic prejudice to one of the parties but on breach of faith by one of them that violates the reciprocity between them. Trinidad sent him a document entitled General Conditions and Specifications which inter alia prescribed G. petitioner. upon which Deiparine relies. Jr. JR. THE HON. IN CASE OF BREACH OF CONSTRUCTION CONTRACT. Florido and Associates for respondents. His position is that the applicable rules are Articles 1385 and 1725 of the Civil Code . The adjudicatory powers of the Philippine Domestic Construction Board are meant to apply only to public construction contracts. substituting the word "the" for "public. It is a basic principle in human relations. and Deiparine bound himself to erect the building "in strict accordance to (sic) plans and specifications. NICANOR TRINIDAD. April 23. SAME CODE ARE NOT. THE PHILIPPINE DOMESTIC CONSTRUCTION BOARD HAS NO POWER TO ADJUDICATE A CASE FOR RESCISSION OF CONSTRUCTION CONTRACT. and observe honesty and good faith. 1715 AND 1727. Deiparine started the construction on September 1. The spouses Cesario and Teresita Carungay entered into an agreement with Ernesto Deiparine. the . . No. . The other applicable provisions are: Article 1714 . that "every person must. a civil engineer. has given the Carungay spouses the right to rescind or cancel the contract. 1385 AND 1725. act with justice. Gregorio B. 1191." Nicanor Trinidad. . which is used in two different contexts in the Civil Code.. there are what are called "rescissible contracts" which are enumerated in Article 1381 . but the private respondents demur. . for this contemplates a voluntary withdrawal by the owner without fault on the part of the contractor. ADMINISTRATIVE LAW. . For deliberately changing the language of the above-quoted paragraph 3. COUNSEL WHO TRIES TO MISLEAD THE COURT BY DELIBERATELY MISQUOTING THE LAW IS SUBJECT TO DISCIPLINE. 96643. rather than on adjudication and settlement. Article 1715 . 1714. 2 On November 6. Article 1385. . 4. The basic inquiry is whether the building subject of this litigation is safe enough for its future occupants. Gregorio B. on August 13.. inclusive of contractor's fee. 1993.00. . As for paragraph 5. . The petitioner challenges the application by the lower court of Article 1191 of the Civil Code in rescinding the construction agreement. Under the law on contracts. unlike Article 1385. Second. and even damages. the correct stress should be on the words "formulate and recommend. for the construction of a three-story dormitory in Cebu City. ID. was designated as the representative of the Carungay spouses. which states that "obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. . .000. Deiparine seems to be confused over the right of rescission. . with powers of inspection and coordination with the contractor. for the work he has already commenced. 1982. 19B2." which is all the body can do. SYLLABUS 1. acknowledged in Article 19 of the Civil Code. respondents. Article 1727 . vs. The construction contract falls squarely under the coverage of Article 1191 because it imposes upon Deiparine the obligation to build the structure and upon the Carungays the obligation to pay for the project upon its completion. Its power over private construction contracts is limited to the formulation and recommendation of rules and procedures for the adjudication and settlement of disputes involving such (private) contracts. CIVIL CODE ARE APPLICABLE. WHILE ARTICLES 1381.D." . 1982.. he purposely misquotes Section 6(b). J p: This case involves not only the factual issue of breach of contract and the legal questions of jurisdiction and rescission." DECISION CRUZ. CIVIL LAW. 1746 is clear. LEGAL AND JUDICIAL ETHICS. COURT OF APPEALS. They have been sustained by the trial court and the appellate court." The petitioner has ignored these exhortations and is therefore not entitled to the relief he seeks. The petitioner says it is. . . . Escasinas has committed contempt of this Court and shall be disciplined. Escasinas for petitioner. 1 The Carungays agreed to pay P970. the breach caused by Deiparine's failure to follow the stipulated plans and specifications. CESARIO CARUNGAY and ENGR. 2.. RESCISSION IS USED IN TWO DIFFERENT CONTEXTS IN THE CIVIL CODE. 3. 1159. ID. paragraph 3. ERNESTO DEIPARINE. On the contrary. Atty. Counsel is obviously trying to mislead the Court. who is therefore entitled to indemnity. he makes the wrong emphasis in paragraph 5.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION Carungays have been constrained to ask for judicial rescission because of the petitioner's failure to comply with the terms and conditions of their contract. to wit. It therefore has no jurisdiction over cases like the one at bar which remain cognizable by the regular courts of justice. The wording of P. The petitioner says they have all erred. Article 1725 cannot support the petitioner's position either. Jr. deals with the rescission of the contracts enumerated above. . . The violation of reciprocity between Deiparine and the Carungay spouses.R. There is no such voluntary withdrawal in the case at bar. which do not include the construction agreement in question . There is also a right of rescission under the law on obligations as granted in Article 1191. Article 1191. ." This admonition is reiterated in Article 1159. ARTICLES 19. in the performance of his duties. First. CONTRACTS.

The motion was denied in an order dated April 12. a Manila-based firm. Its power over private construction contracts is limited to the formulation and recommendation of rules and procedures for the adjudication and settlement of disputes involving such (private) contracts. the parties agreed to conduct cylinder tests to ascertain if the structure thus far built complied with safety standards. Carungay ordered Deiparine to first secure approval from him before pouring cement. b) condemning Deiparine to have forfeited his expenses in the construction in the same of P244.33 for the core testing. Among the functions of the PDCB under Section 6 of the decree are to: xxx xxx xxx 3." thus: 3. Formulate and recommend rules and procedures for the adjudication and settlement of claims and disputes in the implementation of contracts in private construction. d) ordering Deiparine to demolish and remove all the existing structures and restore the premises to their former condition before the construction began. petitioner Ernesto Deiparine. Second. On the basis of 3. He will lose again. .253. c) ordering Deiparine to reimburse to the spouses Carungay the sum of P15. formulate and adopt the necessary rules and regulations subject to the approval of the President: xxx xxx xxx 5.70. Bernad rendered judgment: a) declaring the construction agreement rescinded.3. or if the failure should exceed 10%. Jr. 8 His motion for reconsideration having been denied. 1746 created the Construction Industry Authority of the Philippines (CIAP) as the umbrella organization which shall exercise jurisdiction and supervision over certain administrative bodies acting as its implementing branches. the decision was affirmed in toto by the respondent court on August 14. 1746. Judge Juanito A. on twentyfour core samples. only three samples passed. P. 1982. which were now cognizable by the Philippine Construction Development Board pursuant to Presidential Decree No. (Emphasis supplied) Deiparine argues that the Philippine Construction Development Board (that is. .D. Carungay suggested core testing. His counsel is obviously trying to mislead the Court. After trial on the merits. 1990. Gregorio P. Adjudicate and settle claims and implementation of public construction contracts and for this purpose. prompting Carungay to send Deiparine another memorandum complaining that the "construction works are faulty and done haphazardly . The core testing was conducted by Geo-Testing International. all the samples failed. 7 On appeal. on the basis of 2. On September 25." The wording of P.000 psi. Deiparine moved to dismiss. Deiparine was reluctant at first but in the end agreed. First. paragraph 3. Adjudicate and settle claims and disputes in the implementation of the construction contracts and for this purpose.000 psi. The challenge to the jurisdiction of the trial court is untenable. otherwise. The implementing body in this case is the Philippine Domestic Construction Board (PDCB) and not the inexistent Philippine Construction Development Board as maintained by Deiparine. . He even promised that if the tests should show total failure. 6 This meant that the building was structurally defective. He invokes the above-mentioned functions to prove his point.104. thus impairing the strength and safety of the building. and on the basis of 2.500 psi. It therefore has no jurisdiction over cases like the one at bar which remain cognizable by the regular courts of justice. Formulate and recommend rules and procedures for the ADJUDICATION and SETTLEMENT of CLAIMS and DISPUTES in the implementation of CONTRACTS in PRIVATE CONSTRUCTIONS.00 as well as the costs of the suit. he would shoulder all expenses. has come to this Court to question once more the jurisdiction of the regular courts over the case and the power of the trial court to grant rescission.000 psi (pounds per square inch) as the minimum acceptable compressive strength of the building. inexperienced and unqualified staff. the spouses Carungay filed complaint with the Regional Trial Court of Cebu for the rescission of the construction contract and for damages. 4 This order was not heeded. . For deliberately changing the language of the abovequoted paragraph 3. the tests should be for the account of Carungay. the Philippine Domestic Construction Board) has exclusive jurisdiction to hear and try disputes arising from domestic constructions. mainly due to lax supervision coupled with . being allowed at the same time to take back with him all the construction materials belonging to him. nineteen samples failed.D. The adjudicatory powers of the Philippine Domestic Construction Board are meant to apply only to public construction contracts. 3 In the course of the construction. alleging that the court had no jurisdiction over construction contracts.000. (Emphasis ours). 1746 is clear. As for paragraph 5. After several conferences." 5 This memorandum was also ignored. he purposely misquotes Section 6(b). Trinidad reported to Cesario Carungay that Deiparine had been deviating from the plans and specifications. Atty. the correct stress should be on the words "formulate and recommend. he makes the wrong emphasis in paragraph 5. and e) ordering Deiparine to pay the Carungay spouses attorney's fees in the amount of P10. ." which is all the body can do. Escasinas has committed contempt of this Court and shall be disciplined. In view of this finding. thus: 5. rather than on "adjudication and settlement. substituting the word "the" for "public. formulate and adopt the necessary rules and regulations subject to the approval of the President. 1984.

14 It was after discovering that the specifications and the field memorandums were not being followed by Deiparine that Carungay insisted on the stress tests. Deiparine declared that when the contract was signed on August 13. and the price with its interest. which were also prepared by Trinidad. the petitioner's own project engineer. which was acceptable for dormitories. was not the supervising architect of the protect. Deiparine insists that the construction agreement does not specify any compressive strength for the structure nor does it require that the same be subjected to any kind of stress test. 1982. 16 It completely belies Deiparine's contention that no compressive strength of the dormitory was required. together with their fruits. Carungay requested core testing.On the issue of rescission. not for buildings.500 psi. that is. who was only a third year civil engineering student at the time. who had then not yet passed the board examinations. A cylinder test is done by taking samples from fresh concrete. 1:2:4.000 psi. including the General Conditions and Specifications. test or no test. (4) the use of mixed concrete reinforcements instead of hollow block reinforcements. the court erred in rescinding the contract. Deiparine also avers that the contract does not also require any kind of test to be done on the structure and that. which was for the petitioner's account. His breach of this duty constituted a substantial violation of the contract correctible by judicial rescission. 1982. The first "Specifications" are labeled as such and are but a general summary of the materials to be used in the construction. Deiparine actually instructed him and some of the other workers to ignore the specific orders or instructions of Carungay or Trinidad relative to the construction. There were actually two sets of specifications. was teaching fulltime at the University of San Jose-Recoletos. Consequently. placing them in a cylinder mold and allowing them to harden for a maximum of 28 days. Deiparine further argues that by following the concrete mixture indicated in the first specifications. 9 Most of these orders involved safety measures such as: (1) the use of two concrete vibrators in the pouring of all columns. since he did not breach any of his covenants under the agreement. insisting that the results of the cylinder test earlier made were conclusive enough to prove that the building was structurally sound. Parenthetically. he subjected the building to a cylinder test just to convince Carungay that the unfinished dormitory was structurally sound. Nilo Paglinawan. In his testimony. His position is that the applicable rules are Articles 1385 and 1725 of the Civil Code. and (5) securing the approval of the owner or his representative before any concrete-pouring so that it could be determined whether the cement mixture complied with safety standards. 15 Deiparine thus admitted that the plans and specifications referred to in the construction agreement were not the first Specifications but the General Conditions and Specifications submitted by Trinidad in November 1982. 17 Carungay was not satisfied with the results of the cylinder test because they were inconsistent and could easily be falsified by the simple expedient of replacing the samples with a good mixture although a different mixture had been used in the actual pouring. The core test is less prone to manipulation than the cylinder test because the samples in the former are taken from the building which is already standing. The petitioner challenges the application by the lower court of Article 1191 of the Civil Code in rescinding the construction agreement. Deiparine obviously wanted to avoid additional expenses which would reduce his profit. following which they are subjected to compression to determine if the cement mixture to be poured conforms to accepted standards in construction. he has not violated the agreement. Therefore. 12 that his understudy was Eduardo Martinez. although the construction had already begun two months earlier. it was understood that the plans and specifications would be given to him by Trinidad later. 13 and that the supposed project engineer. These were prepared by Trinidad prior to the execution of the contract for the purpose only of complying with the document requirements of the loan application of Cesario Carungay with the Development Bank of the Philippines. the structure would still attain a compressive strength of 2. What was the real reason for this refusal? After all. (3) the use of 12-mm reinforcement bars instead of 10-mm bars. The record shows that Deiparine commenced the construction soon after the signing of the contract. 10 that Pio Bonilla. unlike the cylinder test. Nevertheless. and had in fact entered the construction site only after November 4. This second set of specifications required a structural compressive strength of 3. are entitled "General Conditions and Specifications" and laid down in detail the requirements of the private respondent in the construction of his building. Article 1725 provides that in a contract for a piece of work: . (2) making PVC pipes well-capped to prevent concrete from setting inside them. Carungay would shoulder the expenses if the specimens passed the core test. consequently. 11 that the real supervisor of the construction was Eduardo-Logarta.000 psi prescribed in the General Conditions and Specifications was recommended for roads. it is not disputed that Deiparine is not a civil engineer or an architect but a master mariner and former ship captain. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. In so arguing. The only logical explanation would be that Deiparine was not sure that the core test would prove favorable to him. The other specifications. According to him. the 3. According to Eduardo Logarta. he is interpreting the two specifications together but applying only the first and rejecting the second. Article 1385 states: Rescission creates the obligation to return the things which were the object of the contract. a retainer of Deiparine Construction. We see no reason to disturb the factual finding of the courts below that Deiparine did not deal with the Carungays in good faith. beams and slabs. 18 Deiparine vehemently refused to go along with the core test. a more reliable procedure because the specimens obtained by extracting concrete from the hardened existing structure would determine its actual strength. even before Trinidad had submitted the contract documents.

if the latter suffer the lesion stated in the preceding number: (3) Those undertaken in fraud of creditors when the later cannot in any other manner collect the claims due them: (4) Those which refer to things under litigation if they have been entered into by the defendants without the knowledge and approval of the litigants or of competent judicial authority. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale. which do not include the construction agreement in question. in accordance with articles 1385 and 1388 and the Mortgage Law. He may also seek rescission. This was the provision the trial court and the respondent court correctly applied because it relates to contracts involving reciprocal obligations like the subject construction contract. that "every person must. The other applicable provisions are: Article 1714. The contractor shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. which states that "obligations arising from contracts have the force of law between the contracting parties . and damages. if the latter should become impossible. although it may have been commenced. and even damages. On the contrary. 19 The violation of reciprocity between Deiparine and the Carungay spouses. give everyone his due. acknowledged in Article 19 of the Civil Code. both parties later agreed in writing that the core test should be conducted. The injured party may choose between the fulfillment and the rescission of the obligation. for the work he has already commenced. is not predicated on economic prejudice to one of the. Article 1191. act with justice. There is also a right of rescission under the law on obligations as granted in Article 1191. with the payment of damages in either case. indemnifying the contractor for all the latter's expenses. If the contractor agrees to produce the work from material furnished by him. which is used in two different contexts in the Civil Code. (5) All other contracts specially declared by law to be subject to rescission. Article 1725 cannot support the petitioner's position either. Under the law on contracts. he shall deliver the thing produced to the employer and transfer dominion over the thing. and the usefulness which the owner may obtain therefrom. This is understood to be without prejudice to the rights of third persons who have acquired the thing. the breach caused by Deiparine's failure to follow the stipulated plans and specifications. to wit. unlike Article 1385. providing as follows: "Art. Article 1715. The power to rescind obligations is implied in reciprocal ones. upon which Deiparine relies. in case one of the obligors should not comply with what is incumbent upon him. Article 1727.The owner may withdraw at will from the construction of the work. conducting the test was the only manner by which the owner could determine if the contractor had been faithfully complying with his presentations under their agreement. The contractor is responsible for the work done by persons employed by him. the employer may require that the contractor remove the defect or execute another work. unless there be just cause authorizing the fixing of a period. Deiparine seems to be confused over the right of rescission. deals with the rescission of the contracts enumerated above. for this contemplates a voluntary withdrawal by the owner without fault on the part of the contractor. 1191. work. in the performance of his duties. Should the work be not of such quality. It is a basic principle in human relations. The court shall decree the rescission claimed. Furthermore. Article 1385. the Carungays have been constrained to ask for judicial rescission because of the petitioner's failure to comply with the terms and conditions of their contract. and observe honesty and good faith. who is therefore entitled to indemnity. The construction contract fails squarely under the coverage of Article 1191 because it imposes upon Deiparine the obligation to build the structure and upon the Carungays the obligation to pay for the project upon its completion. the employer may have the defect removed or another work executed. While it is true that the stress test was not required in any of the contract documents." This admonition is reiterated in Article 1159. has given the Carungay spouses the right to rescind or cancel the contract. When the structure failed under this test the Carungay spouses were left with no other recourse than to rescind their contract. at the contractor's cost. even after he has chosen fulfillment. (2) Those agreed upon in representation of absentees. If the contractor fails or refuses to comply with this obligation. there is no such voluntary withdrawal in the case at bar. there are what are called "rescissible contracts" which are enumerated in Article 1381 thus: (1) Those which are entered into by guardians whenever the wards who they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof. parties but on breach of faith by one of them that violates the reciprocity between them.

000. of P. with costs against the petitioner. Escasinas is hereby fined P1." The petitioner has ignored these exhortations and is therefore not entitled to the relief he seeks. paragraph 3. WHEREFORE. with the warning that repetition of a similar offense will be dealt with more severely. 1746. For deliberately changing the language of Section 6(b). .D.and should be complied with in good faith. the challenged decision is hereby AFFIRMED and the instant petition for review is DENIED.00. Gregorio B. Concur. No. Atty. It is so ordered.

while Dimaporo undertook to supply at his own expenses the building wherein shall be housed the machinery and equipment. vs. the Corporation guaranteed said machinery and equipment to process at least 6 tons of cassava flour and starch per 24-hour day operation. Dimaporo failed to comply with his obligations specified in par. Dimaporo. for the consideration of P52. foundation materials. applying article i 192 of the New Civil Code which provides: In case both parties have committed a breach of the obligation.00 representing the partial payment made to it by defendant for the purchase price of said machinery and 1 equipment. A). 1955 the Corporation brought an action against Dimaporo for rescission of the aforesaid contract after mutual restitution by the parties with provision for damages in its favor. and effective water system (par. and. After hearing on tile merit.* J. the liability of the first infractor should be equitably tempered by the Courts. 1981 GRACE PARK ENGINEERING CO. 1954. that during the course of installation of said machinery and equipment. P10. in his answer.93 with interest.: Appeal (prior to the effectivity of Republic Act No. and with the award of damages in his favor. It appears on record. Hence. Rescission of the contract was granted but held that parties should bear his/its own damages.00. to pay plaintiff the total amount of P19..00 shall be paid upon signing of the contract. on October 1.00 never became due and demandable because of the Corporation's failure to complete the installation of the machinery and equipment within the stipulated period and place the same in satisfactory running conditions as guaranteed by it in the contract.. Branch VI (in its Civil Case No. all premises considered.. judgment is hereby rendered declaring the rescission of the Contract for the Sale of Cassava Flour and Starch Processing Machinery and Equipment. No pronouncement as to damages and costs. after mutual restitution by the parties. and ordering mutual restitution by the parties.R. it demanded from Dimaporo complete payment of the balance due and for all expenses made in advance arising from the supply of materials and labor which Dimaporo failed to provide on time.000. however. In view of the foregoing considerations. 6 of the contract and plaintiff corporation liable for installing machinery and equipment that are basically defective and inadequate. INC. dated April 1.750. Dimaporo refused to pay on the ground that the balance of P36.628. plaintiff-appellee. a cassava flour and starch processing machinery and equipment specifically described therein at Dimaporo's place in Karomatan Lanao Mill Site. 6.750. the trial court found both parties having violated the terms and conditions of the contract. Defendant-Appellant Dimaporo questions the validity of the questioned decision in so far as said decision 1) orders him to return the cassava flour and starch processing machinery and equipment and 2) orders him to pay plaintiff-appellee Grace Park Engineering Co. 1954. 5440) by Mohamad Ali Dimaporo from a decision of the Court of First Instance of Rizal. the dispositive portion of which reads: WHEREFORE. thus leaving a balance of P36. Exh.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. defendant Dimaporo failing to comply with his obligations under par. laborers needed to complement the operation of the mill. No. In compliance with the agreement. DE CASTRO.750. Exh. Grace Park Engineering. and plaintiff to return to defendant the amount of P15.000. 6 of said contract. the signing of the contract but before machinery and equipment is loaded at Manila Harbor and P36. after which.750.00 shall be payable in 12 monthly installments as provided in the contract. and each shall bear his own damages. and Mohamad Ali Dimaporo entered into a Contract for the Sale of Cassava Flour and Starch Processing 2 Machinery and Equipment (Exh. It was agreed that P5. defendant to return to plaintiff the cassava flour and starch processing machinery and equipment and bear the transportation expenses thereof to the port of Cotabato. It took the Corporation one (1) year and three (3) months to install the said machinery and equipment. As to who was the first infractor in point of time. P19. food. A.00 shall be paid within 30 days from the date of . 3828).628. defendant-appellant.000.00 as agreed upon. so much so that the Corporation was forced to provide the necessary materials and labor and advance whatever expenses had been made for that purpose with previous knowledge and consent given by Dimaporo because the latter was short of funds during that time. but with provision for the payment by the Corporation of freight charges that may be incurred due to such restitution. defendant paid plaintiff the amounts of P5. A) whereby the corporation agreed to sell and install. Inc.750.00 and P10. MOHAMAD ALI DIMAPORO. the same should be deemed extinguished. likewise seeks the rescission of the contract. L-27482 September 10. The records disclose that on April 1.93 with interest thereon at the rate of 6% per annum from the date of filing of this complaint until full payment of the same.00. it was not determined by the trial court. plaintiff corporation to bear the freight charges thereof for its shipment to Manila.750. within a period of 70 working days from the date of signing of the contract. If it cannot be determined which of the parties first violated the contract.

8 of the contract. . to return the machinery and equipment. cannot be specifically delineated. together with their fruits." Even assuming that there is some degree of plausibility in appellant's position. when a contract is resolved or rescinded. Dimaporo directly appealed to this Court imputing seven (7) assignments of errors committed by the trial court. J-1. A. I-1. makes the following findings: From the entire evidence presented. Under Exh. defendant failed to comply with his obligations under the contract. As to who was the first infractor in point of time. more particularly with the provisions of par. not sustained by the terms of the contract or by the facts appearing in evidence. in its decision. A. and when a resolution is granted. 1954 (Exh. as defendant in the lower court.. a daily work progress report duly certified correct by defendant. Appellant Dimaporo maintained that he has not committed any breach of contract. particularly par. however. It is next argued for appellant Dimaporo. the hammer mill and flash drier were already commercially operated on December 11. .628." And according to the trial court. consequently. and points in his appellant's brief testimonial and documentary evidence in support of the same. since the machinery and equipment shipped by appellee corporation were never delivered to appellant. plaintiff's delay in the complete installation of 3 the machinery and equipment seems reasonable and understandable. MM-3). the "SELLER warrants that it will deliver all the machinery and equipment as agreed in par. Upon the other hand. Furthermore. They are entitled to great respect. "the delay of the completion of the installation as well as the incapacity of the mill to produce the desired amount of flour/starch as warranted by the plaintiff under the contract are attributable to defendant's non-compliance with his obligation to furnish food. It is true that under par. applied Article 1192 of the New Civil Code. he is deemed to have waived the right to 5 dispute any finding of fact made by the court below. still the lower court did not commit any error in ordering appellant to return the machinery and equipment to appellee corporation. b) whether he was liable to return the machinery and equipment subject matter of the contract. A. 6 To sustain appellant's contention that he is not liable for the return of machinery and equipment would be fundamentally contradicting the very notion of rescission. 4. he prayed for the rescission of the contract between him and the plaintiff and for mutual restitution by the parties. guaranteed to process at least 6 tons of cassava flour or starch per 24-hour day operation. Exh. the lower court having had the opportunity 4 of weighing carefully what was testified to and did so without oversight or neglect. KK LL NN-1).. enunciated the rule if both parties committed a breach of obligation. The foregoing is a conclusion of fact of the trial court. filed his Answer to the complaint of appellee corporation. The first paragraph of article 1385 of the New Civil Code provides: Rescission creates the obligation to return the things which were the object of the contract. MM. it appears that defendant had failed to comply with his obligations under the contract. under said circumstances. are generally binding on the Supreme Court. The party seeking resolution cannot ask "performance as to 7 part and resolution as to remainder. R. much less pay the transportation expenses thereof to the port of Cotabato. G-1. The rule is well-settled that factual findings of the trial court. it must also install the machinery and equipment in such a manner that they would produce at least 6 tons of cassava flour per 24 hours of operations so much so that until such machinery and equipment were installed and shown to be capable of producing at the warranted rate. it is clear that the obligation of the appellee did not end with the shipment of the machinery and equipment to the all site. Hence the rule that when a party appeals directly to this Court. The last two issues are both centered on the question of who is liable for the payment of damages and interests as a result of the breach of contract.From the judgment of the Court below. Exh. parties should bear his/its own damages. I. in resolving the issues.. that the trial court erred in ordering the return of the machinery and equipment subject matter of the contract to appellee corporation and maintained that although a rescission of the contract is in order.. c) whether he was liable to pay appellee Corporation the amount of P19. The trial court. This contention is in Our opinion. 6 thereof. CC. supported by substantial evidence. Exh. food. He was unable to furnish sufficient laborers needed to complete the operations of the mill. it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. he has no obligation. d) whether he was entitled to the award of damages in his favor. . 6 thereof that it was appellee Corporation who was guilty thereof. there could be no delivery of such machinery and equipment to appellant. by themselves.93 with interest. and the price with its interest. Hence. foundation materials and effective water systems (Exhs. The trial court find the following facts: "Both parties have failed to comply with what is respectively encumbent upon them to do. and the object of the contract is consequently defeated. it has the effect of abrogating the contract in all parts. materials. defective and inadequate. K. which may be synthesized into four (4) main issues: a) whether he was guilty of breach of contract. for when the former. that further scrutiny of the evidence shows that the machinery and equipment sold and installed by plaintiff were all along. A. the trial court. E Exh. it is the duty of the court to require the parties to surrender that which they have severally received and to place each as far as practicable in his original situation." However in said paragraph it was also stipulated that "this warranty of capacity shall be attained only when properly coordinated to the necessary manual labor required for the purpose. Exh. which as aforestated. This necessarily gives the impression that the installation of the mill has been completed in accordance with the contract and the subsequent failure of the project is due to defendant's fault. He contended that by reference to the contract. Taking into consideration defendant's failure to comply with this obligation. G. and water system. A.

to hold so would be in conflict with the above-mentioned rule that each party must bear his/its own damages. the trial court committed no reversible error when it ordered appellee corporation to pay appellant the amount of P15. the judgment appealed from is affirmed in all other respects.628.628. and that since the first infractor was the appellee's corporation. however. that appellee must be required to pay interests on the amount of P15. Inc. with the only modification that the sum of P19. Therefore. For the same reasons.570.93 should be offset by the damages that are due to him by reason of the violations by the appellee corporation of its obligation under the contract.570. without interest. damages should be paid by that party to the appellant. . that appellee corporation must return to appellant the amount of P15.628. therefore.00 representing the partial payment made by it to appellant for the purchase price of said machinery and equipment. As We have stated. he is not liable to pay interest thereon at the rate of 6% per annum until full payment of the same. The findings of fact of the trial court that both appellant Dimaporo and appellee corporation have committed a breach of obligation are fully supported by the evidence on record.93 be paid by appellant Dimaporo to appellee Grace Park Engineering. Consequently. the trial court ruled. however.00 representing partial payment of the purchase price of the machinery and equipment.628.00. made no pronouncement as to damages and costs. No pronouncement as to costs. We hold that although appellant is liable to pay the amount of P19.. as held by the lower court. Neither did it commit any error when it refused to grant any interest on the aforesaid amount of P15. But appellant would contend that the amount of P19. This is but a consequence of the decree of rescission granted by the trial court.00 since this amount paid has already been used by it.750.93 which the latter had spent by way of advances to the former with which to purchase the necessary materials and supplies at the rate of 6% per annum. it correctly applied Article 1192 of the New Civil Code to the effect that in case both parties have committed a breach of obligation and it cannot be determined who was the first infractor. PREMISES CONSIDERED. Otherwise. SO ORDERED. as aforestated in the dispositive portion.93 which appellee corporation had spent by way of advances with which to purchase the necessary materials and supplies. that appellant Dimaporo must pay appellee corporation the total amount of P19.Based on these findings. We are not in a position to disturb the same.750. The trial court. the contract shall be deemed extinguished and each shall bear his/its own damages. This is also but a consequence of the enunciated rule that each party should bear his/its own damages.

459. and for damages in the sum of P50. In the hearing held pursuant to the decision of the Supreme Court. was then required to file petitioner's brief and to serve copies thereof to the adverse parties. to make as basis of the determination of just compensation the price or value of the land at the time of the taking. L-26400.34 as the value of the property taken. entitled "Victoria Amigable vs. to the dollar.34 from the year 1924 up to the date of the decision. 3 The plaintiff appealed the decision to the Supreme Court where it was reversed. FRANCISCO P. 1980 COMMISSIONER OF PUBLIC HlGHWAYS. February 29. including attorney's fees. 10 1. R-5977 of the Court of First Instance of Cebu.R.000. The Solicitor General.R. defendants also invoking the non-suability of the Government.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. To this action of the respondent judge. to recover the value of said property was already barred by estoppel and the statute of limitations. Office of the Solicitor General for petitioner. which was P6. vs. of deeds of conveyance executed in 1924 or thereabouts. the right of the owner. the Government proved the value of the property at the time of the taking thereof in 1924 with certified copies. which as proven by the petitioner was P2. Sometime in 1924. J. Victoria Amigable. in his capacity as 1 Commissioner of Public Highway and Republic of the Philippines. The aforesaid decision of the respondent court is now the subject of the present petition for review by certiorari. plus costs of suit. Quirico del Mar & Domingo Antiquera for respondent. the Article provides: DE CASTRO. showing the price to be at P2. 5 2 .00. In a decision rendered on July 29. and that in any case.00. On February 6. The petition was given due course after respondents had filed their comment thereto. in determining due compensation to be paid for the property taken. the court which is now the public respondent in the instant petition.34 as the just compensation to be paid by the Government. 1974. and Victoria Amigable. The Supreme Court decision also directed that to determine just compensation for the land. the basis should be the price or value thereof at the time of the taking." 9 instead of a brief. 7 Petitioner's brief was duly filed on January 29. and came up with the sum of P49.410. 1972. The land had since become streets known as Mango Avenue and Gorordo Avenue in Cebu City. The complaint was docketed as Civil Case No. However. the plaintiff's complaint was dismissed on the grounds relied upon by the defendants therein. 8to which respondents filed only a "comment. in its decision in G. as counsel of petitioner. the Republic alleged. Nicolas Cuenca. against the landowner. Victoria Amigable presented newspaper clippings of the Manila Times showing the value of the peso to the dollar obtaining about the middle of 1972. of several parcels of land in the Banilad Friar Lands in which the property in question is located. The Solicitor General contends that in so doing. which was later amended on April 17. Gomez. Branch 11. and attorney's fees in the sum of P5. petitioner.44 representing interest at 6% on the principal amount of P49. L-36706 March 31.37 per square meter.000. 1959 to recover ownership and possession of the land. as private respondent. HON. plus P145. moral damages in the sum of P25. respondents.167 square meters. and the case was remanded to the court of origin for the determination of the compensation to be paid the plaintiff-appellant as 4 owner of the land. 1959 by Judge Amador E. For her part. among others. or a grand total of P214. Victoria Amigable filed in the Court of First Instance of Cebu a complaint. Article 1250 of the New Civil Code seems to be the only provision in our statutes which provides for payment of an obligation in an amount different from what has been agreed upon by the parties because of the supervention of extra-ordinary inflation or deflation.775 to a dollar.37 per square meter in 1924. issued by the Bureau of Records Management. BURGOS.459. applying Article 1250 of the New Civil Code.: Victoria Amigable is the owner of parcel of land situated in Cebu City with an area of 6.356. It is to be noted that respondent judge did consider the value of the property at the time of the taking. and considering that the value of the peso to the dollar during the hearing in 1972 was P6. In its answer. Thus.75.775 to a dollar.000. as proven by the evidence of the private respondent Victoria Amigable the Court fixed the value of the property at the deflated value of the peso in relation. plus attorney's fees of 10% of the 6 total amount due to Victoria Amigable. Republic of the Philippines. the Government took this land for road-right-of-way purpose. as required.459. rendered judgment on January 9. No. 1959. the respondent court violated the order of this Court. that the land was either donated or sold by its owners to the province of Cebu to enhance its value. the Solicitor General has taken exception. 1973 directing the Republic of the Philippines to pay Victoria Amigable the sum of P49. in his capacity as Judge of the Court of First Instance of Cebu City. No. filed by the Solicitor General as counsel of the petitioner. and the case was then considered submitted for decision. The issue of whether or not the provision of Article 1250 of the New Civil Code is applicable in determining the amount of compensation to be paid to respondent Victoria Amigable for the property taken is raised because the respondent court applied said Article by considering the value of the peso to the dollar at the time of hearing. Upon consideration of the evidence presented by both parties. if any.00 for the alleged illegal occupation of the land by the Government.

ART. 1250. In case extra-ordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary. It is clear that the foregoing provision applies only to cases where a contract or agreement is involved. It does not apply where the obligation to pay arises from law, independent of contract. The taking of private property by the Government in the exercise of its power of eminent domain does not give rise to a contractual obligation. We have expressed this view in the case of Velasco vs. Manila Electric Co., et al., L-19390, December 29, 1971. 11 Moreover, the law as quoted, clearly provides that the value of the currency at the time of the establishment of the obligation shall be the basis of payment which, in cases of expropriation, would be the value of the peso at the time of the taking of the property when the obligation of the Government to pay arises. 12 It is only when there is an "agreement to the contrary" that the extraordinary inflation will make the value of the currency at the time of payment, not at the time of the establishment of the obligation, the basis for payment. In other words, an agreement is needed for the effects of an extraordinary inflation to be taken into account to alter the value of the currency at the time of the establishment of the obligation which, as a rule, is always the determinative element, to be varied by agreement that would find reason only in the supervention of extraordinary inflation or deflation. We hold, therefore, that under the law, in the absence of any agreement to the contrary, even assuming that there has been an extraordinary inflation within the meaning of Article 1250 of the New Civil Code, a fact We decline to declare categorically, the value of the peso at the time of the establishment of the obligation, which in the instant case is when the property was taken possession of by the Government, must be considered for the purpose of determining just compensation. Obviously, there can be no "agreement to the contrary" to speak of because the obligation of the Government sought to be enforced in the present action does not originate from contract, but from law which, generally is not subject to the will of the parties. And there being no other legal provision cited which would justify a departure from the rule that just compensation is determined on the basis of the value of the property at the time of the taking thereof in expropriation by the Government, the value of the property as it is when the Government took possession of the land in question, not the increased value resulting from the passage of time which invariably brings unearned increment to landed properties, represents the true value to be paid as just compensation for the property taken. 13 In the present case, the unusually long delay of private respondent in bringing the present action-period of almost 25 years which a stricter application of the law on estoppel and the statute of limitations and prescription may have divested her of the rights she seeks on this action over the property in question, is an added circumstance militating against payment to her of an amount bigger-may three-fold more than the value of the property as should have been paid at the time of the taking. For conformably to the rule that one should take good care of his own concern, private respondent should have commenced proper action soon after she had been deprived of her right of ownership and possession over the land, a deprivation she knew was permanent in character, for the land was intended for, and had become, avenues in the City of Cebu. A penalty is always visited upon one for his inaction, neglect or laches in the assertion of his rights allegedly withheld from him, or otherwise transgressed upon by another.

From what has been said, the correct amount of compensation due private respondent for the taking of her land for a public purpose would be not P49,459.34, as fixed by the respondent court, but only P14,615.79 at P2.37 per square meter, the actual value of the land of 6,167 square meters when it was taken in 1924. The interest in the sum of P145,410.44 at the rate of 6% from 1924 up to the time respondent court rendered its decision, as was awarded by the said court should accordingly be reduced. In Our decision in G.R. No. L-26400, February 29, 1972, 14 We have said that Victoria Amigable is entitled to the legal interest on the price of the land from the time of the taking. This holding is however contested by the Solicitor General, citing the case of Raymunda S. Digsan vs. Auditor 15 General, et al., alleged to have a similar factual environment and involving the same issues, where this Court declared that the interest at the legal rate in favor of the landowner accrued not from the taking of the property in 1924 but from April 20, 1961 when the claim for compensation was filed with the Auditor General. Whether the ruling in the case cited is still the prevailing doctrine, what was said in the decision of this Court in the abovecited case involving the same on the instant matter, has become the "law of the case", no motion for its reconsideration having been filed by the Solicitor General before the decision became final. Accordingly, the interest to be paid private respondent, Victoria Amigable, shall commence from 1924, when the taking of the property took place, computed on the basis of P14,615.79, the value of the land when taken in said year 1924. 2. On the amount of attorney's fees to be paid private respondent, about which the Solicitor General has next taken issue with the respondent court because the latter fixed the same at P19,486.97, while in her complaint, respondent Amigable had asked for only P5,000.00, the amount as awarded by the respondent court, would be too exhorbitant based as it is, on the inflated value of the land. An attorney's fees of P5,000.00, which is the amount asked for by private respondent herself in her complaint, would be reasonable. WHEREFORE, the judgment appealed from is hereby reversed as to the basis in the determination of the price of the land taken as just compensation for its expropriation, which should be the value of the land at the time of the taking, in 1924. Accordingly, the same is hereby fixed at P14,615.79 at P2.37 per square meter, with interest thereon at 6% per annum, from the taking of the property in 1924, to be also paid by Government to private respondent, Victoria Amigable, until the amount due is fully paid, plus attorney's fees of P5,000.00. SO ORDERED. Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 73893 June 30, 1987 MARGARITA SURIA AND GRACIA R. JOVEN, petitioners, vs. HON. INTERMEDIATE APPELLATE COURT, HON. JOSE MAR GARCIA (Presiding Judge of the RTC of Laguna, Branch XXIV, Biñan, Laguna), and SPOUSES HERMINIO A. CRISPIN and NATIVIDAD C. CRISPIN,respondents. De Castro & Cagampang Law Offices for petitioners. Nelson A. Loyola for private respondents. RESOLUTION

4. That the defendants violated the terms and conditions of the contract by failing to pay the stipulated installments and in fact only one installment due in July 1975 (paid very late in the month of September, 1975) was made all the others remaining unsettled to the present time; 5. That repeated verbal and written demands were made by plaintiff upon the defendants for the payment of the installments, some of said written demands having been made on September 24, 1981, February 7, 1982, February 24, 1983, March 13, 1983, and April 12, 1983, but defendants for no justifiable reason failed to comply with the demands of plaintiffs; 6. x x x On November 14, 1983, petitioners filed their answer with counterclaim. On July 16, 1984, petitioners filed a motion to disniiss complaint, alleging that: 1. That plaintiffs are not entitled to the subsidiary remedy of rescission because of the presence of remedy of foreclosure in the Deed of Sale with Mortgage (Annex "A", Complaint); 2. That, assuming arguendo that rescission were a proper remedy, it is apparent in the face of the Complaint that the plaintiffs failed to comply with the requirements of law, hence the rescission was ineffective, illegal, null and void, and invalid. On July 26, 1984, private-respondents filed their opposition to the above motion. In the meantime, on August 6, 1984, petitioners formerly offered to pay private-respondents all the outstanding balance under the Deed of Sale with Mortgage, which offer was rejected by private respondents on August 7, 1984. On November 26, 1984, the respondent-Court denied the motion to dismiss. The order reads: Defendants through counsel filed a Second Motion to Dismiss dated July 24, 1984 based on an affirmative defense raised in their answer, that is, that the complaint fails to state a cause of action for rescission against defendants because (1) plaintiffs are not entitled to the subsidiary remedy of rescission because of the presence of the remedy of foreclosure in the Deed of Sale with Mortgage (Annex "A", Complaint) and (2) assuming arguendo that rescission were a proper remedy, it is apparent from the face of the Complaint that the plaintiffs failed to comply with the

GUTIERREZ, JR., J.: This is a petition for review on certiorari of the decision of the Court of Appeals dismissing for lack of merit the petition for certiorari filed therein. As factual background, we quote from the Court of Appeals' decision: The factual and procedural antecedents of this case may be briefly stated as follows: On June 20, 1983, private-respondents filed a complaint before the Regional Trial Court of Laguna, Branch XXIV, for rescission of contract and damages, alleging among others: 1. x x x 2. That on March 31, 1975, plaintiffs being the owners of a parcel of land situated at Barrio San Antonio, San Pedro, Laguna, entered into a contract denominated as DEED OF SALE WITH MORTGAGE, with herein defendants, a true copy of said contract (which is made an integral part hereof) is hereto attached as ANNEX ."A": 3. x x x

requirements of law, hence the rescission was ineffective, illegal, null and void, and invalid. After a careful perusal of the allegations of the complaint considered in the light of existing applicable law and jurisprudence touching on the matters in issue, and mindful of the settled rule that in a motion to dismiss grounded on lack of cause of action the allegations of the complaint must be assumed to be true, the Court finds and holds that the motion to dismiss dated July 24, 1984 filed by defendants lacks merit and therefore denied the same. SO ORDERED. On January 31, 1985, petitioners filed a motion for reconsideration to which private-respondents filed their opposition on February 11, 1985. On February 19, 1985, petitioners filed their reply. On March 13, 1985, the respondent-Court denied the motion for reconsideration. The order reads in part: xxx xxx xxx Perusing the grounds invoked by the defendants in their Motion for Reconsideration and Reply as well as the objections raised by plaintiffs in their opposition, and it appearing that in its Order dated November 26, 1984, the Court has sufficiently, althou (sic) succinctly stated its reason for denying the motion to dismiss dated July 16, 1984, that is, for lack of merit, the Court finds no overriding reason or justification from the grounds invoked in the said Motion for Reconsideration for it to reconsider, change, modify, or set aside its Order dated November 26, 1984. The Court still believes that the two (2) grounds invoked by defendants in their Motion to Dismiss dated July 16, 1984 are not meritorious when considered in the light of prevailing law and jurisprudence and the hypothetically admitted allegations of the complaint, and for that reason it denied the motion to dismiss in its said order of November 26, 1984. The instant Motion for Reconsideration is therefore denied for lack of merit. (Pp, 29-32, Rollo) The questions raised by petitioner are as follows: I IN A DEED OF SALE, WHICH IS COUPLED WITH A MORTGAGE TO SECURE PAYMENT OF THE BALANCE OF THE PURCHASE PRICE, MAY THE SELLER RESORT TO THE REMEDY OF RESCISSION UNDER ARTICLE 1191 OF THE CIVIL Otherwise stated,

CODE WHICH PROVIDES FOR THE SUBSIDIARY AND EQUITABLE REMEDY OF RESCISSION IN CASE OF BREACH OF RECIPROCAL OBLIGATIONS?

IS THE SUBSIDIARY AND EQUITABLE REMEDY OF RESCISSION AVAILABLE IN THE PRESENCE OF A REMEDY OF FORECLOSURE IN THE LIGHT OF THE EXPRESS PROVISION OF ARTICLE 1383 OF THE CIVIL CODE THAT: 'THE ACTION FOR RESCISSION IS SUBSIDIARY; IT CANNOT BE INSTITUTED EXCEPT WHEN THE PARTY SUFFERING DAMAGE HAS NO OTHER LEGAL MEANS TO OBTAIN REPARATION FOR THE SAME? xxx xxx xxx II MAY THE SELLER LEGALLY DEMAND RESCISSION OF THE DEED OF SALE WITH MORTGAGE WITHOUT OFFERING TO RESTORE TO THE BUYER WHAT HE HAS PAID, AS REQUIRED BY ARTICLE 1385, OR COMPLYING WITH THE REQUIREMENTS OF THE MACEDA LAW (REPUBLIC ACT 6552) GRANTING THE BUYER A GRACE PERIOD TO PAY WITHOUT INTEREST, AND, IN CASE OF CANCELLATION IN CASE THE BUYER STILL COULD NOT PAY WITHIN THE GRACE PERIOD, REQUIRING THE SELLER TO ORDER PAYMENT OF THE CASH SURRENDER VALUE BEFORE THE CANCELLATION MAY LEGALLY TAKE EFFECT (SEC. 3[b], LAST PAR., REP. ACT 6552)? The petition was denied in a minute resolution on June 13, 1986 but was given due course on September 29, 1986 on a motion for reconsideration. The petition is impressed with merit. The respondent court rejected the petitioners' reliance on paragraph (H) of the contract which grants to the vendors mortgagees the right to foreclose "in the event of the failure of the vendees-mortgagors to comply with any provisions of this mortgage." According to the appellate court, this stipulation merely recognizes the right of the vendors to foreclose and realize on the mortgage but does not preclude them from availing of other remedies under the law, such as rescission of contract and damages under Articles 1191 and 1170 of the Civil Code in relation to Republic Act No. 6552. The appellate court committed reversible error. As will be explained later, Art. 1191 on reciprocal obligations is not applicable under the facts of this case. Moreover, Art. 1383 of the Civil Code provides: The action for rescission is subsidiary; it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same.

we note that they have fully complied with their part of the reciprocal obligation. who in turn. and does not apply to cases under Article 1191. 251) where we Stated: At the outset it must be said that since the subject-matter of the sale in question is real property. the latter have accepted the mortgage as security for the obligation. This is understood to be without prejudice to the rights of third persons who have acquired the thing. According to the private respondents. is a specific provision found in the contract between the parties. Court of Appeals (33 SCRA 22) was cited by the appellate court.B. Reyes explained: xxx xxx xxx .. where the defendant makes good the damages caused. it does not come strictly within the provisions of article 1124 of the Civil Code. the applicable law is Article 1191 of the Civil Code which provides: The power to rescind obligations is implied in reciprocal ones.The concurring opinion of Justice J. The buyer. is obligated to pay a price certain in money or its equivalent (Art. they have already parted with the title as evidenced by the transfer certificate of title in the petitioners' name as of June 27. even after he has chosen fulfiument. In consideration of the petitioners'promise to pay on installment basis the sum they owe the respondents. In other words. From the respondents' own arguments. in case one of the obligors should not comply with what is incumbent upon him. (Art. In that case. considering the patent difference in causes and results of either action. The injured party may choose between the fulfilment and the rescission of the obligation." Hence. 1458. By the contract of sale. the cause of action is subordinated to the existence of that prejudice. that differentiated "resolution" for breach of stipulations from "rescission" by reason of lesion or damage. The petitioners are correct in citing this Court's ruling in Villaruel v. non est fides servanda. The "pacto comisorio" of "ley comisoria" is nothing more than a condition subsequent of the contract of purchase and sale. Justice J. But the terminological vagueness does not justify confusing one case with the other. with the payment of damages in either case. Hence. As a matter of fact.B. 1384. The rescission on account of breach of stipulations is not predicated on injury to economic interests of the party plaintiff but on the breach of faith by the defendant. It is already one of a mortgagor and a mortgagee. Reyes. As expressed in the old Latin aphorism: "Non servanti fidem. as earlier stated. fulfilled his end of the bargain when he executed the deed of mortgage. v. unlike the previous Spanish Civil Code of 1889.L. He may also seek rescission. if the latter should become impossible. therefore. the reparation of damages for the breach is purely secondary. Civil Code). unless there be just cause authorizing the fixing of a period. It is not a subsidiary action. The petitioners' breach of obligations is not with respect to the perfected contract of sale but in the obligations created by the mortgage contract. as expressly provided in Articles 1383 and 1384. Considered carefully. in the rescission by reason of lesion or economic prejudice. On the contrary. The remedy of rescission is not a principal action retaliatory in character but becomes a subsidiary one which by law is available only in the absence of any other legal remedy.. Foreclosure here is not only a remedy accorded by law but. This rescission is a principal action retaliatory in character. the relationship between the parties is no longer one of buyer and seller because the contract of sale has been perfected and consummated.L. 1975. in tum. but is rather subjected to the stipulations agreed upon by the contracting parties and to the provisions of Article 1504 of the Civil Code. the vendor obligates himself to transfer the ownership of and to deliver a determinate thing to the buyer. But the operation of these two articles is limited to the cases of rescission for lesion enumerated in Article 1381 of the Civil Code of the Philippines. There is no dispute that the parties entered into a contract of sale as distinguished from a contract to sell. because it is the raison d 'etre as well as the measure of the right to rescind. Civil Code). Tan King (43 Phil. and Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder is subordinated to anything other than the culpable breach of his obligations by the defendant.B. in accordance with articles 1385 and 1388 and the Mortgage Law. Reyes in Universal Food Corp. it being unjust that a party be held bound to fulfill his promises when the other violates his. it is the very condition subsequent that is always attached to all bilateral . different from that envisioned in the cited opinion of Justice J. The situation in this case is. It is probable that the petitioner's confusion arose from the defective technique of the new Code that terms both instances as "rescission" without distinctions between them. The court shall decree the rescission claimed. the action cannot be maintained or continued. The payments on an installment basis secured by the execution of a mortgage took the place of a cash payment.L. that violates the reciprocity between the parties.

International Banking Corporation (37 Phil. Article 1124 of the Civil Code. should have been one for the foreclosure of the mortgage. 255-256). failing which the respondents may resort to foreclosure. they are also to blame for trusting persons who could not or would not comply with their obligations in time. Neither is the doctrine enunciated in the case of Ocejo. volume 10. This agreement has the two-fold effect of acknowledging indisputably that the sale had been consummated. concur. no cause for the resolution of the sale as prayed for by the plaintiff. at all events. except that when applied to real property it is not within the scope of said article 1124. The Intermediate Appellate Court's decision dated November 8. in the contract of purchase and sale before us. Perez & Co.) Now. is the foreclosure of such mortgage. JJ. therefore. . 1975 until fully paid. 257) The petitioners have offered to pay au past due accounts. which plaintiff alleges to be applicable. Civil Code. WHEREFORE. v. 631). 1985 and February 28. 1986 are REVERSED and SET ASIDE. that is.000) such waiver being proved by the execution of the mortgage to guarantee the payment. because that principle has reference to the sale of personal property. and it is subordinate to the stipulations made by the contracting parties and to the provisions of the article on which we are now commenting" (article 1504). which is not the action brought in this case. and in accord therewith the vendor's adequate remedy. the petition is hereby GRANTED. (at p. in case of nonpayment. Bidin and Cortes.. the resolution of the sale in the event of failure to pay the one thousand pesos (P1. Padilla. His action. The petitioners are ordered to pay the balance of their indebtedness under the Deed of Absolute Sale with Mortgage with legal interests from the second installment due on October 24. SO ORDERED. as we have seen. is not applicable to this case. Considering the lower purchasing value of the peso in terms of prices of real estate today. the respondents are correct in stating they have suffered losses. second edition. so much so that the vendee was disposing of it by mortgaging it to the vendor. However.000) was guaranteed by the mortgage of the house that was sold. (Manresa. They could have foreclosed on the mortgage immediately when it fell due instead of waiting all these years while trying to enforce the wrong remedy. 1985 and the resolution dated December 6.obligations according to article 1124. Paras. xxx xxx xxx There is. the parties stipulated that the payment of the balance of one thousand pesos (P1. and of waiving the pacto comisorio. page 286. (at pp. Fernan (Chairman).

Syjuco's Segunda Contestacion Enmendada). L-3316 October 31. was the owner of two (2) parcels of land known as Lots 871 and 872 of the Murcia Cadastre. the Bank executed in favor of Ponce de Leon.880 in Japanese military notes in full payment of his indebtedness to Syjuco. refused to accept such repeated tenders. 1946. pp. On March 9. the latter deposited with the Clerk of Court. SANTIAGO SYJUCO. payable as follows: (a) P2. On July 31. in an order dated June 4.. Ponce de Leon obtained an additional loan from Syjuco in the amount of P16. payable within one (1) year from May 5. 1944. Inc. respectively. Transfer Certificate of Title Nos. plaintiff-appellant. On May 5. The facts of this case as reflected in the pleadings and the evidence. In compliance with said order. and (b) the balance P23.130 as interest thereon from August 6. Ponce de Leon also wrote to Syjuco a letter tendering the payment of his indebtedness. 1944. Jarencio for defendant and appellee. 17175 and 17176 in the name of the Bank and.: This is an appeal from a decision of the Court of First Instance of Manila absolving defendant Santiago Syjuco. 14-15). During the trial. 1944. The amount tendered included not only the interest up to the time of the tender.n. the first amortization to fall due one year after the execution of the said contract (See annex "A" Syjuco's Segunda Contestacion Enmendada). Ponce de Leon filed a petition in the Court of First Instance of Negros Occidental for the reconstitution of transfer Certificates of Titles Nos. Recto for plaintiff and appellant. he filed a complaint consigning the amount so deposited to Syjuco. and which for purposes of this decision are hereunder reproduced: The appellee. stripped of unnecessary details. BAUTISTA ANGELO. Inc. 1948. Jose D. To this complaint Syjuco filed his answer. of the complaint and condemning the plaintiff to pay to said defendant the sum of P18. pp. the Court ordered the reconstitution of said titles. 23-24) On several occasions in October. The mortgage in favor of Syjuco was annotated on the back of said certificates. The deed of sale executed by the Bank in favor of Ponce de Leon and the deed of mortgage executed by Ponce de Leon in favor of Syjuco were registered in the Office of the Register of Deeds of Negros Occidental and. INC. 1944.130. defendant-appellant. It was also provided in said promissory note that the promisor (Ponce de Leon) could not pay. 1948. 1951 mortgaged in favor of Syjuco the parcels of land which he agreed to purchase from the Bank (See Annex "B". on Appeal. J.R. 1949. Cortes and Claro M.) and No. hereinafter to be referred to a s Syjuco. more particularly described in Transfer Certificates of Titles Nos. Ponce de Leon paid the Bank of the balance of the purchase price amounting to P23. hereinafter to be referred to as the Bank. 1948. a deed of absolute sale of the aforementioned parcels of land (See Annex "F". 398 (P.000 in Japanese Military Notes. 1-17) On May 15. Ponce de Leon tendered to Syjuco the amount of P254.670 in ten (10) annual amortizations. No.. Ponce de Leon then filed with the Register of Deeds a copy of the deed of sale of the properties covered by the said certificates of title issued by the Bank in his (Ponce de Leon's) favor and the Register of Deeds cancelled the said JOSE PONCE DE LEON. or a total of P23. to May 5. in the amount of P200. 1944. with costs against the plaintiff. 17175 and 17176 in the name of the Bank were cancelled and Transfer Certificate of Title No. hereinafter to be referred to as Ponce de Leon. and the payee (Syjuco) could not demand. 1944.880 and. 1946. the Register of Deeds of Negros Occidental issued Certificates of Title Nos.R. defendant-appellee. Philippine currency.. the total price of P26. Ramon Diokno and Jose Diokno for defendant and appellant. In view of Syjuco's refusal to accept the payment tendered by Ponce de Leon. with interest thereon at the rate of 6% per annum from May 6.630 upon the execution of the said deed. 17176 and 17175. 1936 the Bank executed a contract to sell the said properties to the plaintiff. are well narrated in the brief submitted by counsel for the Philippine National Bank. 399 (P. Negros Occidental. The records of this case were destroyed as a result of the war and after the liberation the same were reconstituted (R. 1949. 1297-R and 1298-R in the names of the Bank. of First Instance of Manila the amount of P254.670 in Japanese Military notes and. Jose Ponce de Leon.s. On May 6. until said amount is paid in full.000 as principal and the further sum of P5.300. the payment of said note except within the aforementioned period. pp. on A. were issued in the name of Ponce de Leon. however.Republic of the Philippines SUPREME COURT Manila EN BANC G. Syjuco's Segunda Contectacion Enmendada). vs. including interests up to May 5. on November 4. respectively. on the same date. Ponce de Leon explained that he wanted to settle his obligations because as a member of the guerilla forces he was being hunted by the Japanese and he was afraid of getting caught and killed (t. Hilarion U. Ponce de Leon obtained a loan from Santiago Syjuco. as a consequence of such registration.R. To secure the payment of said obligation.000 in Japanese Military notes and executed in the latter's favor of promissory note of the same tenor as the one had previously executed (R. PHILIPPINE NATIONAL BANK. Syjuco. Ponce de Leon . but also all the interest up to May 5. Philippine National Bank.).

Notwithstanding said objection. 1949. One is for P200. 1949. the Bank filed its answer on October 29. 526-N and 527-N in favor of the said Bank to secure the payment of any amount which he may obtain from the Bank under aforementioned overdraft account. that the consignation was made because of the refusal of the creditor to accept it. the lower court ordered the inclusion of the Bank as a cross-defendant (R. on A. pp.. 1946. the former binds himself to pay. Thus. . on A. and as the defendant refused to accept the payment so tendered. 1948. and (4) did the lower court err in not passing on the question of priority between the mortgage claim of defendant Syjuco and that of the Philippine National Bank on the same set of properties on the ground that they are situated in a province different from that in which this action was brought? We will discuss these issues in the order in which they are propounded. and the filing of the complaint to compel its acceptance on the part of the creditor can be considered sufficient notice of the consignation to the creditor. or because he was absent for incapacitated. The principal questions to be determined in this appeal are: (1) Did the lower court err in not giving validity to the consignation made by the plaintiff of the principal and interest of his two promissory notes with the clerk of court?. however. These two loans appear in two promissory notes signed by the plaintiff which were couched in practically the same terms and conditions and were secured by two deeds of mortgage covering the same parcels of land. In order that cogsignation may be effective. and the latter not to demand the payment of. said Bank not being aware of the mortgage which Ponce de Leon had executed in favor of Syjuco during the Japanese occupation. 1176. before making the consignation with the clerk of the court. . in its "Tercera Reconvention". 1944. 1947 (R. 55-58).. peso for peso in the coin or currency of the Government of the Philippines that. and said Bank believing that the said properties had no lien or encumbrance appeared annotated on the reconstituted certificates of Title Nos. 32-53). (2) did the lower court err in reducing the principal and interest of said promissory notes to their just proportions using as a pattern the Ballantyne schedule in effecting the reduction?. In said promissory notes it was expressly agreed upon that plaintiff shall pay the loans "within one year from May 5. Civil Code). 1944. (R on A. on November 15. on A. and semi-annually in advance during the succeeding years". The said motion was denied by the lower court in its order dated October 7. The question now to be determined is. (3) that previous notice of the consignation have been given to the person interested in the performance of the obligation (Art. On August 16. plaintiff deposited the money with the clerk of court and brought this action to compel the defendant to accept it to relieve himself of further liability. The facts show that. pp. 1947 (R. 1297-R and 1298-R and issued in favor of Ponce de Leon Transfer Certificates of Title Nos. 59-60).Certificates of Title Nos. on A. it claimed that Ponce de Leon. pp. on A. it appears that at least two of the above requirements have not been complied with. until fully paid (R. On June 28. nevertheless. or thereabouts. (3) did the lower court err in disregarding the defense of moratorium set up by the plaintiff against the counterclaim of defendant Syjuco?. The overdraft account was granted by the Bank to Ponce de Leon in good faith. Civil Code). he binds himself to indemnify the other for the losses and damages. contrary to the stipulation above mentioned. and by subsequently mortgaging the said properties to the Bank as a guaranty for his overdraft account.000". it appears that plaintiff. had violated the conditions of the morgage which Ponce de Leon has executed in its favor during the Japanese occupation. Ponce de Leon objected to the inclusion of the Bank as a cross-defendant. which the parties hereby liquidate and fix at the amount of P200. Syjuco filed a second amended answer to Ponce de Leon's complaint and. 1. . payable in advance for the first year. or do anything which has for its purpose or effect an alteration or annulment of any of said stipulations. the period above set forth having been established for the mutual benefit of the debtor and creditor. pp. plaintiff offered to pay to the defendant not only the principal sum due on the two promissory notes but also all the interests which said principal sum may earn up to the dates of maturity of the two notes. pp. pp. at the time of payment above fixed it is the legal tender for public and private debts. pp.130 with interest at the legal rate from May 6..000 and. 48-50). 1946. on the same date. on A. 1177. the Bank filed a motion to drop on the ground that it had been misjoined and to dismiss on the ground that the venue was improperly laid and there is another action pending between the same parties for the same cause (R. the lower court rendered a decision absolving Syjuco from Ponce de Leon's complaint and condemning Ponce de Leon to pay Syjuco the total amount of P23. the loans except within the period above mentioned.000 obtained on May 5. (2) that the consignation of the obligation had been made bacause the creditor to whom tender of payment was made refused to accept it. Both Ponce de Leon and Syjuco file their appeal from this decision. On June 24. 101-106). with interests at the rate of 6% per annum. on A. (4) that the amount due was placed at the disposal of the court (Art 1178. It appears that plaintiff obtained from defendant Syjuco two loans in 944. by causing the Register of Deeds to have the said titles transferred in his (Ponce de Leon's name. by reconstituting the titles in the name of the Bank. Syjuco then prayed that the mortgage executed by Ponce de Leon in favor of the Bank be declared null and void. while it is admitted a debt existed. 1178. On September 28. And as corollary to have the above stipulations. Civil Code). In view of such denial. 1947. Civil Code). The debtor must show (1) that there was a debt due. he executed a mortgage of the two parcels of land covered by the reconstituted Transfer Certificates of Title Nos... 1944.000 obtained on July 31. and (5) that after the consignation had been made the person interested was notified thereof (Art. pp. and that. is the consignation made by the plaintiff valid in the light of the law and the stipulations agreed upon in the two promissory notes signed by the plaintiff? Our answer is in the negative. 95-100). 107-135). .. it was likewise agreed upon in the two deeds of mortgage that "if either party should attempt to annul or alter any of the stipulations of this deed or of the note which it secures. or because several persons claimed to be entitled to receive the amount due (Art. 65-75). (R. In the instant case. 526-N and 527-N (R.. Ponce de Leon obtained an overdraft account from the Bank in an amount not exceeding P135. and another for P16. the debtor must first comply with certain requirements prescribed by law. Endriga). 526-N and 527-N in the name of Ponce de Leon (See Testimony of Atty.

be modified. This is not the first time that this question has been raised.S. L-1830. Here no such exception or circumstance exists. should have passed upon this defense in the light of Executive Order No.000. Benito and Ocampo. but this argument loses force if we consider that the payment of interests is not the only reason why a creditor cannot be forced to accept payment contrary to the stipulation.000 in Japanese military notes on October 5. Tested by the law and authorities we have cited above. Another reason is that the creditor by fixing a period protects himself against sudden decline in the purchasing power of the currency loaned specially at a time when there are many factors that influence the fluctuation of the currency (Kemmerer on Money. 62 Phil. the terms agreed upon are clearer and more conclusive than the ones cited because the plaintiff agreed not only to pay the obligation within one year from May 5.L. Gomez et al. 630). 1945. The failure of these two requirements is enough ground to render the consignation ineffective. There are other reasons why this cannot be done. the aforementioned land may be redeemed sa ganito ding halaga (at the same price). in a monetary obligation contracted with a period. No. 269). 1945. 1946. The next question to be determined is whether the lower court erred in reducing the amount of the loans by applying the Ballantyne schedule. the presumption is that the same is deemed constituted in favor of both the creditor and the debtor unless from its tenor or from other circumstances it appears that the period has been established for the benefit of either one of them (Art.. leaving them open to obligations contracted during the Japanese occupation (Uy vs. The claim of counsel for the defendant that the moratorium orders cannot be invoked because they are unconstitutional cannot now be determined it appearing that it has been raised for the first time in this instance. 23 L. And it is not oppressive because it appears that plaintiff used a great portion of that money to pay his obligations during the Japanese occupation as shown by the fact that he settled his account with the Philippine National Bank and other accounts to the tune of P100. vs. On two previous occasions this Court had been called upon to rule on a similar question and has decided that when the creditor and the debtor have agreed on a term within which payment of the obligation should be paid and on the currency in which payment should be made.R. we find that the lower court erred in disregarding the defense of moratorium set up by the plaintiff against the counterclaim of the defendant on the sole ground that this defense was not raised by the plaintiff in his pleadings. Cord 14 Wis.000 in Japanese war notes". moral or public order. and in his motion to dismiss the counterclaim dated October 29. The Court further said. 352. that stipulation should be given force and effect unless it appears contrary to law. and the consignation was made before this period matured.) 403. And it cannot be contended that plaintiff is justified in accelerating the payment of the obligation because he was willing to pay the interests due up to the date of its maturity. was ordered by the Supreme Court to pay said sum after October 5.. 2. 84 Phil. This kind of agreement is permitted by law. by the very express provisions of the document evidencing the same. This can be gleaned from the stipulation about redemption. We find nothing immoral or unlawful in it" (Gomez vs. but it may be attributed to an honest belief that the term was not binding and not to a desire to modify the contract".failed to give previous notice thereof to the person interested in the performance of the obligation.. as already stated. Tabia Off.. unless the creditor consents. 137). 3. Thus. we agree to the following finding of the court a quo: "The attempt made by the plaintiff to pay the obligation before the arrival of the term fixed for the purpose may be wrong. Busuego. to be paid one year after..R. that is. December 1. 32. 1844. And all available authorities on the matter are agreed that. 62 Phil. because. 231). 9-10). It is a well known rule that this Court can only considera question of constitutionality when it has been raised by any of the parties in the lower court (Laperal vs. In another case. 1944. As the obligation in question has been contracted during enemy occupation the same is still covered by the moratorium orders. therefore. 342 in the sense of limiting the ban on obligations contracted before the outbreak of the war to creditors who have filed claims for reparations with the Philippine War Damage Commission. "The parties herein gambled and speculated on the date of the termination of the war and the liberation of the Philippines by America. Gaz. This must have been overlooked by the court. In this particular case. therefore. 1944. but also to pay peso for peso in the coin or currency of the Government that at the time of payment it is the legal tender for public and private debts. City of Manila. As regards the third question. 641. the Court held that the "phrase sa ganito ding halagameant the same price of P5.R. in Philippine currency (Roño vs. the conclusion is inescapable that the consignation made by the plaintiff is invalid and. This defense of moratorium was raised by plaintiff in his reply to the amended answer of the defendant dated August 1.A. because. The lower court. 1949). that said moratorium orders have already been modified by Republic Act No. It may be argued that the creditor has nothing to lose but everything to gain by the acceleration of payment of the obligation because the debtor has offered to pay all the interests up to the date it would become due. pp. wherein the parties executed a deed of sale with pacto de retro of a parcel of land for the sum of P5. in one case this Court said: "One who borrowed P4. G. 84 Phil.. (N. 890). As regards the penal clause contained in the two deeds of mortgage herein involved. One of them is that the creditor may want to keep his money invested safely instead of having it in his hands (Moore vs. but the defendant did not traverse that allegation nor raise the constitutionality of the moratorium orders in any of its pleadings filed in the lower court. see ruling of this Court in the recent case of Ilusorio vs. 1948. 1948. 1127. This penal clause should be strictly construed. particularly that portion to the effect that redemption could be effected not before the expiration of one year from June 24. therefore. It also appears that the obligation was not yet due and demandable when the money was consigned. . It would seem therefore clear that plaintiff has no other alternative than to pay the defendant his obligation peso for peso in the present currency as expressly agreed upon in the two promissory notes in question. after liberation. 83 Phil. however. The decision of the lower court on this point should. under the law. which suspended payment of all obligations contracted before March 10. 1946. Civil Code). An examination of the record shows that the plaintiff raised this question in his pleadings. did not have the effect of relieving him of his obligation. the debtor has no right to accelerate the time of payment even if the premature tender "included an offer to pay principal and interest in full" (17 A. the obligation was to be paid within one year after May 5. This stipulation is permitted by law because there is nothing immoral or improper in it. 866-867. We note..000 in Japanese military notes agreeing that within 30 days after the expiration of one year from June 24. in currency then prevailing. Kalaw Katigbak. Macondray and Co.

000 and on July 31. covered by Certificates of Titles Nos. representing the whole indebtedness plus all the interest from August 6. concur. to May 5. After securing the new titles in his name. as penalty agreed upon in the contract. Philippine currency. the Philippine National Bank was the owner of the lots Nos. G. In the ordinary course of things.. 1944. The trial court sentenced the plaintiff to pay Syjuco the total sum of P23. payable within one year from May 5. 19492. Moreover.000. it also appears that this same question of priority has already been threshed out and determined by the Court of First Instance of Negros Occidental in the cadastral proceedings covered the two lots in question wherein the court ordered the cancellation of the reconstituted titles issued in the name of the plaintiff and the reconstitution of the former titles copies of which were in the possession of defendant Syjuco.4. 872 and 871 of the Murcia Cadastre. Roño vs. Tabia. On the question whether a debtor can pay an indebtedness before the date of maturity provided corresponding interest is paid. both paragraphs 3 and 4 would practically be enforced. Feria. This order is now final because no appeal has been taken therefrom by any interested party. Tuason. let alone the fact that when the later mortgage was executed. obtained from the Court of First Instance of said province the 3 3 reconstitution of Transfer Certificate of Titles Nos. subject only to the requirement that the mortgage in favor of the Philippine National Bank be annotated on said new titles. From the foregoing facts. September 30. the plaintiff offered to pay the entire indebtedness plus all the interest up to the date of maturity. and Jugo. 339. August 5. plaintiff mortgaged these two lots to defendant Syjuco to guarantee the payment of two loans.000 and another for P16. the court declared valid the titles originally issued in the name of the plaintiff wherein the encumbrance in favor of the defendant Syjuco appears and declared invalid the reconstituted titles secured by plaintiff through fraud and misinterpretation. one for P200.. Reyes. Supp. No. 11. 46 Off. However. the decision appealed from should be modified in the sense of ordering the plaintiff to pay the defendant Syjuco the sum of P216. a loan is granted in consideration of interest. 1949. 1944. As the same question has been resolved in Ilusorio vs. p. value of two promissory notes. I said the following in Ilusorio vs. It is further ordered that should said amount. and when the Bank accepted as security the titles offered by the plaintiff without any further inquiry. but they were duly reconstituted after the liberation.000. 17175 and 17176 respectively. On said titles no encumbrance appears annotated. Upon Syjuco's refusal to accept the tendered payment. or no order for the execution thereof shall be issued. Gomez. the plaintiff deposited the amount with the clerk of the Court of First Instance of Manila and instituted the present action to compel Syjuco to accept payment. the Bank must have known. the Bank sold the two lots to the plaintiff and as a result Transfer Certificates of Titles Nos. Comments on the Rules of Court.130. the Bank should have taken the necessary precaution to inquire into the existence of any hidden transaction or encumbrance that might affect the property that was being offered in security such as the one existing in favor of the defendant. 19493. Separate Opinions PARAS. On May 5. 1944. Plaintiff taking advantage of the destruction of the records of the office of the Register of Deeds of Negros Occidental.000. I have to disagree with the majority in the case at bar. The records of the case were destroyed during the war. 47 Off. Then liberation came. and Gomez vs. From this judgment Syjuco has appealed..000. plaintiff obtained a loan from the Philippine National Bank for the sum of P135.. 201). 1936. the register of deeds issued transfer certificates of titles Nos. 526-N and 527-N in his name without informing the court of the encumbrance existing in favor of defendant Syjuco. With such warning.R. with interest thereon at the rate of 6% per annum from May 6. 1948. plus P200. computed according to the Ballantyne scale of values.000. it assumed the risk and the consequences resulting therefrom. until after the moratorium orders shall have been lifted. claiming his right to be paid the sum of P216. The majority of this Court sustains Syjuco's claim for P216. that there was a warning appearing in reconstituted titles that the same were subject to whatever encumbrance may exist which for one reason or another does not appear in said titles. Negros Occidental. In other words. 398 and 399 were issued in the name of the plaintiff. actual Philippine currency. a loan of P200. as required by a circular of the Department of Justice. C. therefore. it clearly appears that the mortgage executed in favor of the defendant Syjuco is prior in point of time and in point of registration to that executed in favor of the Philippine National Bank. another loan of P16. 2nd ed. 1949. the creditor would not lose any part of the stipulated interest. Gaz. with costs against the plaintiff. This question can be threshed out here regardless of venue because the counterclaim is but ancillary to the main case (1 Moran. Gaz.000 on the security of the property covered by said reconstituted titles. as in this case. In view of the foregoing. to No. in which I dissented." On November 15. Then he secured the cancellation of the titles last named and the issuance of Transfer Certificates of Titles Nos. The mortgage was registered in accordance with the law. together with the corresponding interests. May 31. and if by the early payment of the obligation. 1944.000. he pays the interest for the whole term of the mortgage. I hold that the mortgagor has the right to pay the indebtedness at any time within three years provided that. 1944. do not appear annotated thereon. but it was noted thereon that they would be subject to whatever claim may be filed by virtue of documents or instruments previously registered but which. JJ. 644. It cannot be alleged that the creditor herein. 17175 and 17176 and by virtue thereof. 1297-R and 1298-R in the name of the Philippine National Bank. The facts relative to the execution of the deed of mortgage in favor of the Philippine National Bank on the two lots in question are as follows: On March 9. no other alternative than to declare that the mortgage claim of the defendant Syjuco is entitled to priority over that of the Philippine National Bank. 19491. We have. L-822. dissenting: The plaintiff obtained from defendant Syjuco on May 5. this judgment shall be held in abeyance. Busuego. as it was its duty to find out. Busuego: In other words. for some reason. in addition to . be not paid within 90 days from the date this judgment in accordance with law.. until said amount is paid in full. On the same date. Bengzon.J.

and life annuities. as intimated in the testimony of Sinforosa A.000 for a loan of virtually fifty centavos? The Court of Appeals argued that the parties took equal risks. The payment of the loan has to be effected regardless of the result of the war. But this is true merely in theory." (Marquez et al. That a contract like the one in question is shocking to the conscience and therefore immoral becomes patent when we resort to the example of a borrower of P2. This would not be unusual. as the parties are still under the very environments that surrounded the execution of the contract. because while in the Roño case the amount of the loan is only P4. are covered by Title XII. the amount of P4. the contract of loan herein involved is clearly not dependent upon any uncertain event. merely because in his promissory note he agreed to pay after one year in pesos of the Philippine Currency. but. the borrower of P4. moreover. for the Japanese currency might have further diminished in value. truly speaking.000 just before the liberation. 1944. We readily acquiesce in the proposition that the contract is not contrary to law or public order. This defense was flatly overruled in the court of origin. Roño was on more or less on an equal footing with Gomez. supposing that the liberation had been delayed for more than one year. the circumstance still makes him a necessitous man that had to submit to the terms of his lender. Gomez which should have greater application and force. free men. and that the mighty forces of the Allies would soon.000 during the latter part of the Japanese Military occupation which. gambling and betting. It is to be remembered. contracts. But we are of the opinion that. Gomez. in the same ordinary practical terms. as found also by the Court of Appeals. wanted to have his money in the safekeeping of the debtor because the contract is one of the loan and not of deposit. that Roño informed them that he would use the money to purchase a jitney. it is against morals. for we are aware of no statute or public policy which prohibits a person from bringing about or causing his own financial reverses. as in fact they did.000: The principal defense set up by Roño in that the note is contrary to law. being compelled to pay the same in Philippine currency now when a kilo of sugar hardly costs P0. and the exaggerated way the promissory word is worded plainly shows that the latter must have thoroughly studied the transaction with Roño imposed the conditions evidenced therein to his one-sided advantage. Gaz. 895. I am hereinbelow reproducing at length what I stated in Roño vs. in ordinary practical terms. 897*. with the result that the Japanese war notes would accordingly become worthless. I may add the following observations contained in my dissenting opinion in Gomez vs. This is open to doubt. is now compelled to pay P4. The situation in which a borrower of P4. Roño was not entirely an ignorant man because he is a mechanic and knows English. in so far as knowledge of war events is concerned. if enforced to the letter. its obligations should have the force of law between the parties and must be performed in accordance with their stipulations (Art. 44 Off. Moreover. 164). The loan was granted on a definite date and has to be paid on a definite date. It is needless to say that borrowers are always at the mercy of unscrupulous money lenders. On the matter of requiring a loan obtained in Japanese war notes to be paid after the liberation in equivalent Philippine currency.000. At any rate. Santiago. and everybody was fighting for his survival. If the contract was entered into in times of peace.000 in actual Philippine currency which.000. to answer a present emergency. The Court of Appeals found that everybody was aware of the developments of the war outside of official propaganda and that. It may of course be opposed that Roño knowingly bound himself to his pact. At any rate. In other words.. We cannot believe. Civil Code). But when as in the case at bar. was a lawyer. 38 Phil. and the lender should protect himself against it by plain covenants.interest.. that the debt was being paid in the same currency loaned (Japanese money). Aleatory contracts. the borrower had to obtain a loan during war time. quoting Villa vs. in view of the inflated value of the Japanese war notes on October. Gomez might have been the loser and Roño the winner. Although. an aleatory contract involves the occurrence of an event which is uncertain or will happen at an indeterminate time. when a kilo of sugar already cost P2. The Court of Appeals held that the commitment of Cristobal Roño settle his indebtedness in the legal tender at the time of payment is not against the law. 1944. It is to be noted that. To this we would answer that Gomez would then be paid in the same currency that was borrowed and during the same war time when the loan was extended. Book IV. It follows that the contract now under consideration.000 could not possibly purchase a jitney. in the case at bar the debtor is being ordered to pay the large sum of P216. are grouped under insurance. our conscience and common sense demand that his acts be judged by compatible standards. morals or public order. vs. Jose L. Gomez). may be held equivalent to at least 100 cavanes of rice. under article 1790. Tabia: The majority also hold that the contract here in question is aleatory. even accepting the conjecture that said amount was invested by Roño in his business. of the Civil Code. seconded by the Court of Appeals. 157. 1944. could hardly purchase a cavan of rice. Both dates are certain. which is one of loan does not fall under any of those groups of aleatory contracts. will submit to any terms that the crafty may impose upon them. This means that all knew the bombings by the american air forces of various parts of the islands in September. "Neccesitous men are not. Where is the conscience of anyone who will collect P2. The judgment of the latter court is now before us upon appeal by certiorari of Cristobal Roño. when living conditions were abnormal and oppressive. . concentrate on and crush Japan. and expressly waived any postwar arraignment devaluating the amount borrowed in October. everything was uncertain. for the simple reason that. de Gomez (wife of Jose L. and of the decisive defeats of the Axis powers in Europe. pp. the contracts contemplated by the Code as being aleatory. 1091. Valencia. or those depending on chance. Said borrower is compelled to do so. The effect of inflation is one of the risks naturally incident to the money-lending business. since it was impossible to predict the exact time at which the Philippines would be liberated and that. the fact nevertheless remains that the lender. morals or public order.50.000 in Japanese war notes is made to pay the same amount in currency of the present Philippine Republic.

Defendant seeks the reconsideration of the decision on the following grounds: (1) the moratorium law has been erroneously applied in this case. (2) the limitation on the right to pay the loans as stipulated in the promissory notes was contrary to law and public order at the time the notes were executed. Spanish pesetas.870 between the value of the promissory notes in litigation calculated on the basis of the Ballantyne schedule and their value on the basis of one Japanese military peso constitutes an unjust enrichment (enriquecimiento torticero) unsupported by any true consideration. In view of this refusal. payable within one year from 5 May 1948.26 as found by the Court of Appeals.. and the stipulated interests up to the date of payment thereof. and cannot be sanctioned by this Court. 1952 xxx xxx xxx PADILLA. supra.. the purpose or aim of the loan is attained all to the advantage and benefit of the creditor. Indeed. In my considered opinion. concurs: October 1944. justice demands that the indebtedness be paid in actual Philippine currency at an equivalent amount determined in the Ballantyne schedule. It cannot be otherwise. No. a tender refused by the creditor. held that "what the debtor should pay is the value of the Japanese war notes in relation the peso of Philippine currency obtaining on the date when at the place where the obligation was incurred. and should be disregarded and deemed as not written in the contract. is contra bonos mores. in return for an indebtedness obtained in Japanese military notes equivalent in actual Philippine currency according to the Ballantyne schedule.870 constitutes defendant's winnings in gambling. and (3) the aforesaid difference of P192. since if the intention is merely to pay in legal tenders. To that I cannot give my assent. payable within the same period of time as the previous one. dissenting: I dissent. To compel the debtor after the moratorium shall have been removed to pay in the present currency the principal of the loan made in Japanese war notes which at the time of the loan had very little value or purchasing power.R. The exceptions mentioned in the Ballantyne schedule refers to contracts in which the obligation is payable by something other than legal tender. No. the majority in ** Hilado vs. then the creditor should be entitled at most to the sum awarded by the trial court. Santiago Syjuco. and cannot be recovered. decided on April 30.000 in Japanese war notes was made on 31 July 1944. unless the parties had agreed otherwise. Inc. An additional loan of P16. such as that of barring the debtor from paying the principal of the loan before the time agreed upon.880 in full payment of the principal of the loan and the stipulated interests up to 5 May 1948. the Philippine currency is the legal tender for all debts. The consignation made by the debtor should have been upheld. against public policy. because under section 1612 of the Revised Administrative Code. On different occasions in This concerns the motions for reconsideration filed both by plaintiff and defendant in G. The requirement that previous notice of consignation be made to the creditor was practically complied with by the deposit in court of the sum of money tendered and the filing of the complaint by the debtor against the creditor to compel the latter to accept the payment of the sum of money thus tendered and deposited. J. De la Costa et al. because to avoid litigation the creditor or any party interested in the fulfillment of the obligation may still accept the payment of the sum of money deposited after he receives the summons. I wish to emphasize that to require the herein respondent to pay the sum of P5.As the contract in question contemplated that the payment is to be made in the same currency that was loaned.R. L-3316. no express stipulation is necessary. In reiteration of my stand in the case of Roño vs. J. EXCERPTS FROM THE MINUTES OF MARCH 27. Pablo. the debtor tendered the sum of P254. (2) the decision has . A loan of P200. A loan of a sum of money is usually made for the purpose of earning interest. The cross-claim of the creditor should have been dismissed. or if the provisions as to consignation were not adhered to or complied with. Gomez. even if the debtor pays at the same time the stipulated interests accrued and to accrue up to the time agreed upon for the payment of the principal.000 actual Philippine currency. L-150. Plaintiff predicates his motion for reconsideration on the following grounds: (1) the difference of P192. in the absence of evidence as to such value. the debtor deposited the sum and filed a complaint in the competent court to compel the creditor to accept the sum thus tendered and deposited. 1949. G. The stipulated sum to be paid by the debtor as penalty or liquidated damages equal to the principal of the loan if payment thereof be made before the time agreed upon." This underscored clause undoubtedly contemplates an agreement to pay in a consideration other than legal tender of the Philippines. the appealed judgment should at most be affirmed. to only P790. The notice of consignation is superflous where a complaint is filed and the sum of money tendered for the payment of the principal of the loan and stipulated interests is deposited in court. and the parties are presumed never to have intended that said payment would be made in what has become valueless money. By the payment of the principal of the loan together with the stipulated interests accrued and to accrue up to the time agreed upon for the payment of the principal.000 in Japanese war notes was made on 5 May 1944. or the like. Jose Ponce de Leon vs. It does not appear in the case that any party other than the creditor was interested in the fulfillment of the obligation at the time the consignation was made. pounds sterling. is so shocking to the conscience of a fair-minded person that it will constitute a blot on the administration of justice in this Republic. such as gold dollars.. is unconscionable. The creditor should not be allowed to exact and impose unfair terms and conditions.

measured in terms of genuine currency. to May 5. According to his own admission." It should be stated here with a sense of finality that contracts of this nature are valid and are not contrary to law. to apply moratorium to interests without at the same time applying it to the principal is incongrous. never claimed that plaintiff did not invoke the moratorium law. and the defendant.erroneously condoned the interest stipulated from August 6. The stipulation in question does run counter to this injunction for it merely limits the time of payment of the obligation. We find nothing in this stipulation which may be said to be contrary to the law or public order prevailing at the time. has no merit. moral. 1944. Tabia. made use of the money in the light of his most pressing needs and made use of it for his personal enrichment. The main objective is to prevent that one may enrich himself at the expense of another. Gomez. and lack of cause. whose price is subject to fluctuation. Aug. It is claimed that the Court has erroneously applied the moratorium law because of the pretense that the plaintiff has failed to invoke it in his favor in the lower court. We find nothing immoral or unlawful in it. therefore. tomo 3. 1944. 1895).000. . at the time of delivery.. Nor is it fair and logical to conclude. these accounts reached a total of P105. pag. impoverishment on the part of the plaintiff. They merely contain an injunction that those notes should be accepted as legal tender in making payments of all kinds. (Castan. 46 Off. or sales of grain. 1949. as the law requires. And in Gomez vs. The military orders regarding the use and circulation of military notes do not contain any prohibition of this nature. wherein an obligation to restore the thing received arises (Art.130. as it was so understood by the defendant. May 31. 424). but the determining factor is the lack of cause or consideration. defendant is now estopped from claiming otherwise. This claim. The rest he used to promote his guerilla activities. which represents the value actually transferred from plaintiff to defendant. This is a venture in which both have speculated. and if plaintiff is made to pay to defendant P216. Here we find that the money given to the plaintiff in May and July. therefore. and not in connection with the principal. Supp. The transfer is usually made in accordance with law. We find nothing in the law or in the orders issued by the military authorities in force at the time the notes in controversy were executed that could prevent anyone from stipulating as to the time within which certain obligation is to be paid. it is fallacious now to claim that to make plaintiff return the money he made use of to advantage in the manner he stipulated constitutes an unjust enrichment on the part of the giver. defendants makes this claim for the first time in its motion for reconsideration.. This doctrine is sound. Example: payments received though not owing. Derecho Civil Español. It should be noted that one of the errors assigned by plaintiff in his brief that the lower court erred in finding that he did not invoke the benefits of said moratorium law in his pleadings. 1949. The civil code recognizes their validity (See article 1790 and Manresa's comment thereon) on a par with insurance policies and annuities". Gaz. 1951) 641.000. and that said law is unconstitutional. Surprisingly. And this being so. is a closed matter. that the transaction should be voided simply because the advantage has gone the other way. in genuine currency. especially if it is considered that. This being so. Claiming that the real value of the loan made by defendant to plaintiff in 1944. the difference between the actual value of the loan received by plaintiff and the value set in the decision is P192. It is based upon equity. The fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration. including interests. It may be viewed in the same light as insurance contracts. 5. and though not expressly recognized on our old Civil Code. If this situation is obtained. (Nov. We will first take up the grounds of the motion for reconsideration of the plaintiff. this Court also said: "This kind of agreement is permitted by law. 1950).870. equity steps in to protect the one prejudiced. be way above or below the sales price. after plaintiff had made use of the money to suit his purpose. and that while it is true that plaintiff has invoked the moratorium law he did so only in connection with his obligation to pay the interests and damages. sugar or other commodities to be delivered at some future date. was invested by him not only to pay his pre-war obligations but also those contracted by him during the Japanese occupation. in meeting this imputation. it is reflected in some of its provisions. Whether the stipulation in question involves a gambling transaction or not. 333 this Court said: "Our legislation has a word for these contracts: aleatory. Let us come to the motion for reconsideration of defendant. under pain of severe punishment for those who may infringe it. The elements of this doctrine are: enrichment on the part of the defendant. indebiti solutio. the winnings resulting therefrom should be prescribed. Gaz. or public order. is P34. if we view it in the light of its fundamental purpose. and as a consequence. It is claimed that this is an unjust enrichment which cannot be sanctioned in equity. but merely limited his argument to the contention that plaintiff cannot invoke it because he failed to prove that he is a war victim. 1949. But we doubt the application of this doctrine to the present case. and may. (Feb. We are of the opinion that the defense of moratorium set up by the plaintiff in the lower court applies both to the principal obligation as well as to the interests and damages. The claim that the speculation which limits the right to pay the loans within a certain period of time was contrary to the law and public order at the time the notes were executed is untenable. It may work one way of the other and as such both must abide by it. It is only now that the defendant makes the claim that plaintiff limited his objection to interests and damages. 47 Off. which is lack of cause or consideration. He. In Roño vs. This relation is considered by treatisers as a kind of quasicontract. with interests. and (3) the Court has erroneously absolved the plaintiff from his obligation under the penal clause.

All things considered. 1949.000. However. We find no reason to disturb the finding of this Court in so far as the penal clause is concerned. the decision appealed from should be modified in the sense of ordering the plaintiff to pay the defendant Syjuco the sum of P216. this finding should be maintained. until after the moratorium orders shall have been lifted. or from August 6. be not paid within ninety (90) days from the date this judgment becomes final. with costs against the plaintiff. the motion for reconsideration filed by the plaintiff is denied. The Chief Justice and Justices Pablo and Padilla dissented and voted also to let the case be set for hearing. the properties mortgaged should be sold at public auction. and with similar interest from May 6. this judgment shall be held in abeyance. However. . Philippine currency. up to May 5. 1949 until said amount is paid in full. 1944. 1944. The motion for reconsideration filed by the defendant is also denied. This should be corrected. value of two promissory notes. with interest thereon at the rate of 6 per cent per annum from August 6. the dispositive part of the decision rendered in this case should be modified as follows: In view of the foregoing. Wherefore. or no order for the execution thereof shall be issued. and the proceeds applied to the payment of this judgment in accordance with law. It is further ordered that should the amount of this judgment principal and interests.There is merit in the claim that the interests the plaintiff should pay on the obligation should be counted from the date plaintiff has ceased to pay said interests.

000.58 10 per month. It then fixed the monthly rent at P400 from 1 June 1990 to 1 June 1994. Hence this petition. private respondents' counsel wrote petitioner informing her of the increase in the rent to P1. TIONGCO.000 as monthly rental. Moreover. 877. P1. Under Republic Act No. through their administrator Jose Tiongco. 1979.58 effective January 1992 pursuant to the provisions of the Rent 3 4 Control Law." Petitioner then constructed a building and paid the required monthly rental of P200. the tender and acceptance of the increased rental of P1. respondents. counsel for private respondents wrote petitioner reminding her that the contract expired on 1 June 1994 and demanding that she pay the rentals in arrears. however.8 and 2 January 1993 9 for only P400 each. THE HONORABLE COURT OF APPEALS. the phrase in the contract "this lease shall be for a period of fifteen (15) years effective June 1. On 9 August 1993. petitioner.000 monthly.. JR. 5 December 1991. and P1. The stipulation allowing the construction of a building and other improvements and the fact that the complaint was filed a year before the expiration of the contract are not indicative of 1 automatic renewal. TIONGCO and ARACELI TIONGCO. Since private respondents were not agreeable to an extension. and ordered petitioner to immediately vacate the leased premises on the ground that the contract expired on 1 June 1994 without being renewed and to pay the rental arrearages at the rate of P1.: The basic issue in this petition is whether the parties intended an automatic renewal of the 1 lease contract when they agreed that the lease shall be for a period of fifteen years "subject to renewal for another ten (10) years. Manila. Additionally. the Court of Appeals reversed the decision of the RTC. On 6 December 1991. vs. As might be expected. reasoning that the continuous increase of rent from P200 to P250 then P300. they were justified in refusing the . The power to order the lessee to vacate the leased premises is lodged in another forum. private respondents refused to accept the same. BERNARDO C." Petitioner leased a 56-square meter parcel of land located at 2068 Quirino Avenue. thus. under the same terms and conditions. The lease contract was for a period of fifteen years to commence on 1 June 1979 and to end on 1 June 1994 "subject to renewal for another ten (10) years. hence. 6 5 January 1992. rather. which was docketed as Civil Case No. Private respondents. private respondents countered that petitioner had already paid the monthly rent of P1. 5 November 5 1991. DIONISIO TIONGCO and LUCILA TIONGCO. later demanded a gradual increase in the rental until it reached P400 in 1985. subject to renewal for another ten (10) years. which was renewable for another ten years.576. 136913 May 12. the phrase in the lease contract authorizing renewal for another ten years does not mean automatic renewal. which then amounted to P33. SPS. petitioner was estopped from claiming that the monthly rental is otherwise. 2000 ANITA C. Pandacan. The Court of Appeals denied petitioner's motion for reconsideration. and JOSE M. the RTC declared the lease contract automatically renewed for ten years and considered as evidence thereof (a) the stipulations in the contract giving the lessee the right to construct buildings and improvements and (b) the filing by petitioner of the complaint almost one year before the expiration of the initial term of fifteen years. Petitioner further maintains that the phrase "renewable for another ten years at the option of both parties" in the Fernandez case clearly indicated the intention of the parties to renew the DAVIDE. at the rate of P200 a month. It applied the ruling in Fernandez v. On 29 August 1995.J.500 for the rest of the period or from 1 June 2000 to 1 June 2004. 12 According to the Court of Appeals. under the same terms and conditions" is unclear as to who may exercise the option to renew. 9367135. She prayed that private respondents be ordered to accept the rentals in accordance with the lease contract and to respect the lease of fifteen years. as amended. During the pendency of the controversy. the original term of the lease ended on 1 June 1994.7 31 May 1992. it contemplates a mutual agreement between the parties. petitioner filed with the Regional Trial Court of Manila a complaint for specific performance with prayer for consignation. C." 11 On appeal.R.000 for July and August 1991. Private respondents' refusal to accept petitioner's checks for P400 was justified because although the original contract specified a monthly rental of P200. payable to Jose Tiongco as administrator.000 caused "an inevitable novation of their contract. checks for P400 that petitioner tendered. rental payments should already be P1. the Appellate Court went beyond the bounds of its authority because the case she filed before the RTC was for "Specific Performance" not unlawful detainer.576. In their Answer. Petitioner contends that by ordering her to vacate the premises. SPS. wellsettled is the rule that a court cannot award relief not prayed for in the complaint or compulsory counterclaim.000 novated the contract of lease.000 from 1 June 1994 until 1 June 1999. No. Petitioner. For July and August 1991. BUCE. P400 and finally P1. Court of Appeals that without a stipulation that the option to renew the lease is solely for the benefit of one party any renewal of a lease contract must be upon the agreement of the parties.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. petitioner paid 2 private respondents P1. tendered checks dated 5 October 1991. private respondents did not pray for the ejectment of petitioners from the leased premises in their Answer with Counterclaim.

neither was it stated that the option was given for the benefit of herein petitioner. subsequent or contemporaneous. but a clause providing for a renewal merely creates an obligation to execute a new lease contract for the additional term. or built on the property." The literal meaning of the stipulations shall control if the terms of the contract are clear and 14 leave no doubt upon the intention of the contracting parties. The continuance. We are not aware of any presumption in law that the term was deliberately set for the benefit of the lessee alone. the period must be deemed to have been agreed upon for the benefit of both parties. thus: [I]n a reciprocal contract like a lease. the renewal of a contract connotes the death of the old contract and the birth or emergence of a new one. absent language showing that the term was deliberately set for the 18 benefit of the lessee or lessor alone. Also. her filing of the complaint a year before the expiration of the initial 15-year term. 1979. Koh and Cruz in effect rested upon such a presumption. As renewal of the contract contemplates the cessation of the old contract. Neither the filing of the complaint a year before the expiration of the 15-year term nor private respondents' acceptance of the increased rentals has any bearing on the intention of the parties regarding renewal. private respondents aver that even if the original petition filed before the RTC was not for unlawful detainer. But that presumption cannot reasonably be indulged in casually in an era of rapid economic change. petitioner has no other reason to stay in the premises. The stipulation in the contract allowing the lessee to construct buildings and improvements. Now on the applicability of Fernandez v. or just an option to renew the contract. It must be recalled that the filing of the complaint was even spawned by private respondents' refusal to accept the payment of monthly rental in the amount of only P400. Even the RTC conceded that the issue of automatic renewal is debatable. Petitioner leased the property for the purpose of turning it into a commercial establishment and to which it has been transformed as Anita's Grocery and Store. A clause in a lease providing for an extension operates of its own force to create an additional term. To require another litigation would constitute multiplicity of suits. effectivity and fulfillment of a . Whereas in this case the contract states. under the same terms and conditions. In the case at bar. any renewal is out of the question. 16 The phrase "subject to renewal for another ten (10) years" is unclear on whether the parties contemplated an automatic renewal or extension of the term. pursuant to the Fernandez ruling and Article 1196 of the Civil Code. as agreed upon by the parties. private respondents' letter reminding petitioner of the expiration of the contract on 1 June 1994 and demanding payment of the rentals in arrears signifies that they are no longer interested in renewing the contract. must be principally considered. Considering the original 15-year duration of the contract. subject to renewal for another ten (10) years. among other things. we cannot completely disregard the pronouncement of this Court in that case. who may exercise the same or for whose benefit it was stipulated. It is the owner-lessor's prerogative 20 to terminate the lease at its expiration. their actions. to ascertain the true intention of the parties. Absent contrary stipulation in reciprocal contracts.contract only upon mutual agreement. subject to renewal for another ten (10) years. they cannot be compelled to execute a new contract when the old contract terminated on 1 June 1994. Also petitioner's refusal to pay the increased rental of P1. besides. Since the private respondents were not amenable to a renewal. the period of the lease contract is deemed to have been set for the benefit of both parties. marked by. added. The longer the period the more clearly unreasonable such a presumption would be. Private respondents argue that the alleged contemporaneous and subsequent acts do not determine the real intention of the parties as regards renewal of the lease contract. the order of the Court of Appeals requiring petitioner to vacate the premises is but a logical consequence of its finding that the lease contract had expired. There is no basis why Fernandez should not be applied to the case at bar. Generally. In this jurisdiction. hence. 17 There is nothing in the stipulations in the contract and the parties' actuation that shows that the parties intended an automatic renewal or extension of the term of the contract. structures would have necessarily been constructed. which in its previous state was an idle 56-square meter lot in the heart of Manila. On the other hand. However. and if what exists is the latter.000 as early as 1991 and private respondents' refusal to accept the P400 tendered constituted a disagreement on the rate of rental. The fact that the lessee was allowed to introduce improvements on the property is not indicative of the intention of the lessors to automatically extend the contract. and private respondents' acceptance of the increased rental are contemporaneous and subsequent acts that signify the intention of the parties to renew the contract. Had they intended an automatic renewal of the lease contract they would have agreed on a 25-year period instead. a fine delineation exists between renewal of the contract and extension of its period. "[T]his lease shall be for a period of fifteen (15) years effective June 1. the period of lease is deemed to be for the benefit of both parties. In an age like that we live in. 1979. very specific language is necessary to show an intent to grant a unilateral faculty to extend or renew a contract of lease to the lessee alone or to the lessor alone for that 19 matter. it was not specifically indicated who may exercise the option to renew. Although the factual scenario in that case with regard to the renewal option is slightly off-tangent to the case under consideration because the intention of the parties therein for future mutual agreement was clearly discernible in their contract. Thus. under the same terms and conditions. volatile costs of living and fluctuations in the value of domestic currency. The basic issue. then it is necessary that a new one be executed between the parties. Correlatively. is the correct interpretation of the contract provision "this lease shall be for a period of fifteen (15) years effective June 1." making this stipulation subject to interpretation with due regard to the contemporaneous and subsequent acts of the parties. if the terms of the agreement are ambiguous resort is made to contract interpretation which is the determination 15 of the meaning attached to written or spoken words that make the contract. Court of Appeals to the case at bar. Renewal of the contract may be had only upon their mutual agreement or at the will of both of them.

completely depriving the owner of any say in the matter. i.contract of lease cannot be made to depend exclusively upon the free and uncontrolled choice of the lessee between continuing the payment of the rentals or not. Neither was it raised by private respondents on appeal. 25 The issue of possession of the leased premises was not among the issues agreed upon by the parties or threshed out before the court a quo. SO ORDERED. 22 It must be noted. No costs. however. without prejudice. the instant petition is partly GRANTED. however. WHEREFORE. the Court of Appeals went beyond the 26 bounds of its authority when after interpreting the questioned provision of the lease contract in favor of the private respondents it proceeded to order petitioner to vacate the subject premises. After the lease terminated on 1 June 1994 without any agreement for renewal being reached. Neither did they file with the proper 2 Metropolitan Trial Court an unlawful detainer suit against petitioner after the expiration of the lease contact.. the correct interpretation of the contract. Moreover.e. that private respondents did not include in their Answer with Counterclaim a prayer for the restoration of possession of the leased premises. as correctly contended by the petitioner. to the filing by the private respondents of an action for the recovery of possession of the subject property. . Accordingly. 24 They later limited the issue to the first. petitioner became subject to ejectment from the premises. Mutuality does not obtain in such a contract of lease and no equality exists between the lessor and the lessee since the life of the contract would be 21 dictated solely by the lessee. the issues agreed upon by the parties to be resolved during the pre-trial were the correct interpretation of the contract and the validity of private respondents' refusal to accept petitioner's payment of P400 as monthly rental. The assailed decision of the Court of Appeals is REVERSED insofar as it ordered the petitioner to immediately vacate the leased premises.

LTD. No. to read as follows: WHEREFORE. an amendatory decision of the Court of First Instance of Manila.. Domingo Church and Convent while the seller for its part will Construct streets on the NE and NW and SW sides of the land herein sold so that the latter will be a block surrounded by streets on all four sides. but the seller. L-22558 May 31. Tuason & Co. seeking to compel the latter to comply with their obligation. Domingo Avenue) because a certain third-party. 1950. Inc.L.. maintaining that plaintiff's complaint did not expressly or impliedly allege and pray for the fixing of a period to comply with its obligation and that the evidence presented at the trial was insufficient to warrant the fixing of such a period. that the buyer will Build on the said parcel land the Sto. Inc. Inc. praying that the court fix a period within which defendants will comply with their obligation to construct the streets in question.. in its Civil Case No.. Tuason & Co. Mesa Heights Subdivision.Republic of the Philippines SUPREME COURT Manila EN BANC G.514.034.R.ñët Plaintiff moved to reconsider and modify the above decision.. Inc. 1960. judgment is hereby rendered giving defendant Gregorio Araneta. M. presented a motion to reconsider the above quoted order. in its CA-G. fixing of a period. otherwise known as the Sta.. On July 16. INC. In said appellate court. J. 1960. Ruling on the above contention. for the sum of P430. who has been physically occupying a middle part thereof. Inc. 1950." The buyer... 1960). on May 7. M. Inc..00. plaintiff opposed. i. Philippine Sugar Estates Development Co. Inc. it (Tuason & Co. hence. 1960. is the owner of a big tract land situated in Quezon City.. M. herein defendant has a reasonable time within which to comply with its obligations to construct and . THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO. J. Inc. the facts of this case are: J. to Philippine Sugar Estates Development Co. Inc. plaintiff.. Domingo Church and Convent. the lower court. Tuason & Co. Domingo Avenue. after finding that "the proven facts precisely warrants the fixing of such a period. by the name of Manuel Abundo. through Gregorio Araneta. itself squarely placed said issue by alleging in paragraph 7 of the affirmative defenses contained in its answer which reads GREGORIO ARANETA. Ltd... under the amendatory decision of July 16. and covered by a Torrens title in its name. Annex "A". the appellate court declared that the fixing of a period was within the pleadings and that there was no true change of theory after the submission of the case for decision since defendant-appellant Gregorio Araneta. The parties stipulated.4 square meters. No. which motion. Tuason and Co.1äwphï1. motion." As found by the Court of Appeals. within which to comply with its obligation under the contract. and instance. defendants. finished the construction of Sto. 7. Inc. affirming with modification. and/or to pay damages in the event they failed or refused to perform said obligation. On August 16." issued an order granting plaintiff's motion for reconsideration and amending the dispositive portion of the decision of May 31. refused to vacate the same. the lower court proceeded with the trial. and upon its termination. Under the Deed of Sale with Mortgage of July 28. vs. respondent. opposed said motion. the lower court denied defendant Gregorio Araneta.) sold a portion thereof with an area of 43. 1967 Both defendants J.: Petition for certiorari to review a judgment of the Court of Appeals. versus J. Inc's. upholding the defenses interposed by defendant Gregorio Araneta. M. and Gregorio Araneta. 28249-R. Inc. answered the complaint. and Gregorio Araneta. Ltd. was not justified by the pleadings and not supported by the facts submitted at the trial of the case in the court below and that the relief granted in effect allowed a change of theory after the submission of the case for decision. filed its complaint against J. Ltd. 36303. Inc. a period of two (2) years from notice hereof. entitled "Philippine Sugar Estates Development Co. it dismissed plaintiff's complaint (in a decision dated May 31.. contended mainly that the relief granted. and the street on the NE side shall be named "Sto. which began constructing the streets. Defendant Gregorio Araneta. Lt.R. REYES. 1958. among in the contract of purchase and sale with mortgage....e. is unable to finish the construction of the street in the Northeast side named (Sto. and the latter perfected its appeal Court of Appeals.. Philippine Sugar Estates Development Co.B. Inc. as stipulated in the above-mentioned deed of sale. 1960. more or less. Defendant Gregorio Araneta. Gregorio Araneta. The issues having been joined. defendant-appellant Gregorio Araneta.. the latter particularly setting up the principal defense that the action was premature since its obligation to construct the streets in question was without a definite period which needs to he fixed first by the court in a proper suit for that purpose before a complaint for specific performance will prosper. On July 28. petitioner.

As the record stands. . Inc. was still pending in the Court of Appeals when its decision in this case was rendered. as contended by the petitioner Gregorio Araneta. but must resort to legal processes in evicting the squatters. is hereby fixed at the date that all the squatters on affected areas are finally evicted therefrom. and decide what period was "probably contemplated by the parties" (Do. that under the circumstances. Inc. As the parties must have known that they could not take the law into their own hands. this is not warranted by the Civil Code." but from the nature and the circumstances it can be inferred that a period was intended" (Art. 124) says in this respect is that "the proven facts precisely warrant the fixing of such a period. 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). it is to be borne in mind that the contract shows that the parties were fully aware that the land described therein was occupied by squatters. Ltd. So that. the court could not proceed to do so unless the complaint in as first amended. Petitioner's Appendix B. Inc. and this very indefiniteness is what explains why the agreement did not specify any exact periods or dates of performance. for the original decision is clear that the complaint proceeded on the theory that the period for performance had already elapsed. but whether or not the parties agreed that the petitioner should have reasonable time to perform its part of the bargain. 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. on the hypothesis stated. Abundo. said reasonable time has not elapsed. On the other hand. both the trial Court and the Court of Appeals committed reversible error. defendant-appellant Gregorio Araneta.. the trial Court appears to have pulled the two-year period set in its decision out of thin air. NW and SW sides of the lot in question. This preliminary point settled. then the court should declare that petitioner had breached the contract. 12-13). however. on Appeal. Plainly. Inc. the Court can not fix a period merely because in its opinion it is or should be reasonable. resorted to a petition for review by certiorari to this Court. as averred in the complaint. It is not denied that the case against one of the squatters. Co. if the reasonable time had not yet elapsed. p. Ltd." Neither of the courts below seems to have noticed that. on Appeal. defendant is given two (2) years from the date of finality of this decision to comply with the obligation to construct streets on the NE. pars. but must set the time that the parties are shown to have intended. We agree with the petitioner that the decision of the Court of Appeals. and in not so holding. the decision appealed from is reversed. the Court must then proceed to the second step. 1963. All that the trial court's amended decision (Rec. what the answer put in issue was not whether the court should fix the time of performance. judgment affirmed and modified. 1 and 2). 1197. The list paragraph of Article 1197 is clear that the period can not be set arbitrarily. "reasonable time within which to comply with its obligation to construct and complete the streets. as a consequence. par. Disposing of the other issues raised by appellant which were ruled as not meritorious and which are not decisive in the resolution of the legal issues posed in the instant appeal before us.. affirming that of the Court of First Instance is legally untenable. 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. they must have realized that the duration of the suits to be brought would not be under their control nor could the same be determined in advance. In this connection. We gave it due course. said appellate court rendered its decision dated December 27. It must be recalled that Article 1197 of the Civil Code involves a two-step process. So ordered. the complaint not having sought that the Court should set a period. If the contract so provided. the court perforce was bound to dismiss the action for being premature.complete the streets on the NE. NW and SW sides of the land sold to plaintiff so that the same would be a block surrounded by streets on all four sides. The Court of Appeals objected to this conclusion that it would render the date of performance indefinite. a "reasonable time. It follows that there is no justification in law for the setting the date of performance at any other time than that of the eviction of the squatters occupying the land in question. since no circumstances are mentioned to support it. 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 there was a period fixed. and fix the resulting damages. that the contract had been breached and defendant was already answerable in damages. the circumstances admit no other reasonable view. 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." 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. In view of the foregoing. 3). the intervention of the court to fix the period for performance was warranted. the dispositive part of which reads IN VIEW WHEREOF. for Article 1197 is precisely predicated on the absence of any period fixed by the parties. Yet.. Unsuccessful in having the above decision reconsidered. Granting. pp. and the time for the performance of the obligations of petitioner Gregorio Araneta. ultimately. gave petitioner Gregorio Araneta. The conclusion is thus forced that the parties must have intended to defer the performance of the obligations under the contract until the squatters were duly evicted. Costs against respondent Philippine Sugar Estates Development. But in no case can it be logically held that under the plea above quoted. because the fact is expressly mentioned therein (Rec." a statement manifestly insufficient to explain how the two period given to petitioner herein was arrived at.

.. Agustin de Torres".: Appeal by plaintiffs Florencio..79 69.. over which J... Prior to March 16.. J. M.......... section d. Inc.... and will hereinafter be referred to collectively. were involved in Civil Cases Nos. Inc. undertook to pay them P1... 8th payment 1961 to be made 1 year after the date of the 7th payment ... then the first payment of P100..... The first payment shall be P100.. within a period of 60 days from the date of decision rendered in the foregoing cases..510. entitled "Florencio Deudor. et al......... located in Tatalon...... J....510.. therein.... Laurel Law Office for plaintiffs-appellants.. Inc........ Tuason & Co.. On March 16. the Deudors had caused the aforementioned land of about 50 "quiñones" to be subdivided into lots and that some of these lots.. INC... and provided further..... L-13768 May 30...... Tuason & Co.. proceed with the subdivision and sale of said 20 quiñones and likewise deliver the portions so sold to the buyers thereof. et al....201..510. Recto for defendant J..408... and..".... as follows: 1.. of the Compromise Agreement.............. The title of J... Q-177 and Q-187 of the Court of First Instance of Rizal...... M..... The Deudors..... title or interest they (the Deudors) had over said property.555......063...... J... Tuason & Co..............."..510. in the event that the DEUDORS fail to comply with the conditions set forth in clause 8.. covering a bigger tract and land.R... Inc. ceded and quitclaimed in its favor whatever right... from which the aggregate sum of P486.. aggregating approximately 30 "quiñones". these five (5) cases were designated in said agreement... entitled "Agripino Pascual vs. ET AL. M. Tuason & Co... Inc.. that if the DEUDORS FAIL TO DELIVER said 20 quiñones as above specified........000... Tuason & Co....... entitled "Macaria Fulgenio vs. Tuason & Co.74..... as the Deudors.... and Q-186... ET AL..... vs.50 69........ the possessory rights over which have not been sold by the DEUDORS to third persons.......50 69..... In Case No... over portions of said 50 "quiñones" was.50 69... 6th payment 1959 to be made 1 year after the date of the 5th payment .. as alleged owners and attorneys-in-fact of Santa Mesa Heights Subdivision........... Q-139.. vs.00 and shall be made within sixty (60) days from the date the decision rendered in the foregoing cases approving this compromise agreement becomes final.. Tuason and Co... 5th payment 1958 to be made 1 year after the date of the 4th payment .. 1953.. hereinafter referred to as appellants. J. Inc..... issued way back in 1914........ . Provided...... If the DEUDORS. Araneta and Araneta for defendant-appellee Gregorio Araneta. ....... and reannounced...50 68. Inc.... Pedro. or 225 hectares. defendants-appellees.. acknowledge edged therein the title. whose names are set forth in two lists attached. Tuason & Co... Tuason & Co...... Q-174..... T o t a l ... J. entitled "Apolonio Misericordia vs..... out of the total area of 50 quiñones involved herein in such manner that the OWNERS.66 P614.26 3rd payment 1956 to be made 1 year after the date of the 2nd payment ... 2........... 1961 would be deducted for certain purposes stated in the agreement...... M.. section d. However.. Q-135.50 69. that within said period the DEUDORS shall have effected the delivery to the OWNERS of at least 20 quiñones... who is referred to in the agreement as Owners in and to said land of 50 "quiñones".. M......... entitled "J.."....... 4th payment 1957 to be made 1 year after the date of the 3rd payment . 1958.. to said compromise agreement. the following shall be the form of payments to be made to the DEUDORS by the OWNERS. 7th payment 1960 to be made 1 year after the date of the 6th payment ..137. may without interruption..... Tuason & Co.... in consideration thereof. J..... CONCEPCION.... No... Inc... 1953.. from certain orders of the Court of First Instance of Rizal dated February 28.. Inc...... claimed a parcel of land of about 50 "quiñones"... also. of... plaintiffs-appellants....Republic of the Philippines SUPREME COURT Manila EN BANC G. by virtue of an original certificate of title.. Claro M....... and Gregorio Araneta &Co. M... J.. Q-135.00 mentioned in this paragraph shall not be made until after the delivery is effected..74 FLORENCIO DEUDOR..925.......295.. M.... Inc. to be paid in the manner and under the conditions set forth in clause 8.....79 99. vs.. Q-177. Tuason & Co. if they make delivery as herinafter set forth......000..... M.. J. P99. asserted ownership under the Land Registration Act.. as Annexes B and C.. Q-139.. It appears that prior to the institution of said cases.... J.408... the payments subsequent to that specified in the paragraph immediately preceding shall be made as follows: 2nd payment 1955 ...... should be able to deliver the peaceful and complete possession of the portion of the property occupied and possessed by the persons listed in Annex 'C' and who are not willing to continue with their contracts of purchase and such other persons who may later join the ones listed in said Annex 'C'.. M.. were sold to several persons.. including appellants herein.. subsection 2.510. TUASON & CO.. plaintiffs..".. 9th payment 1962 to be made 1 year after the date of the 8th payment . 1958 and January 10.. Inc.. Q-174.... thereby leaving a balance of P714. Quezon City...... in fee simple.......... M. Aniana and Maria Deudor..... Inc.. invoking title under an alleged "informacion posesoria".. M..... contested in said Civil Cases Nos.. Inc.. M..

If delivery is made after the 60-day period provided for above but before the expiration of one year from the date of the first payment. 1953. Inc. It should be understood. Tuason & Co. said title being binding and conclusive against the whole world.00. the amounts payable to the Deudors from the appellees may not be sufficient to satisfy the claims of the plaintiffs in said cases. when ever possible new contracts of purchase for said property at the current prices and terms specified by the OWNERS in their sales of lots known as 'Sta. under the supervision of this Court. no squatters or unauthorized persons shall settle or take possession or continue in possession of any portion of said property". Tuason & Co. filed another motion and "manifestation".50 69. and Gregorio Araneta. Q-1889 and Q-1890 of the Court of First Instance Quezon City. the DEUDORS shall receive as second payment the amount of P99. steps be taken.or the sum of P79. however.800. as follows. the amount of P99.79 one year after the date of such delivery. meanwhile.510. which.408. 1957. Accordingly. on February 28. 1957 these constructions . In either case. a decision the last two (2) paragraphs of which read: The parties and their respective attorneys have petitioned this Court that after rendition of judgment in the above entitled cases. 1956. that the implementation to be taken under the supervision of the Court will not and should not be construed and interpreted by the parties that it shall be in any way affect this decision on the merits rendered by the Court. to the effect that the number of illegal transactions on said area had increased to 165. with respect to said undelivered portion of 30 'quiñones' and to hold them liable for such damages as may result from their having granted permission to make additional constructions therein after March 16. several alleged purchasers from the Deudors.. to implement said 'Compromise Agreement'.66 P515. as it is hereby approved in its entirety and all the parties to the same are hereby enjoined to abide and comply faithfully and strictly with the terms and conditions set forth the said 'Compromise Agreement'.555. the appellees filed supplemental motion and "manifestation" praying that payment of said sum of P79. It is further ordered that the 'Compromise Agreement' be. On April 6. section d. decision is hereby rendered declaring.400. and that in the event of failure of the Deudors to comply with any of the obligations and conditions of the agreement.50 69.50 68. pertinent parts of which we quote: The attention of this Court has been called by the J.1956. having in its name a transfer certificate of title issued in accordance with the provisions of the Land Registration Act.00 to the Deudors "be withheld until after the additional 129 illegal constructions the 30 'quiñones' area shall have been removed".M. caused the agreement to be signed in Court. Tuason & Co. and that as of January 8. that "the possession of the land in question shall be turned over by the Deudors to the owners as herein provided and the former shall guarantee that during the pendency of the sale of said property.510. Soon later. was not delivered by the Deudors until January 14.the appellees deposited this amount in Court and at the same filed a "motion and counter-manifestation" inviting attention to the constructions existing on the undelivered portion of 30 "quiñones" and praying that the Deudors be ordered to remove such constructions regardless of whether the same existed on March 16. as it is hereby declared.510. not mentioned in the annexes attached to the Compromise Agreement. This compromise agreement was submitted for approval to the Court. the Deudors filed a motion praying that the appellees be required to pay them the balance of the agreed first installment after deducting said advance -.79 two years after the date of the first payment. against the Deudors and the appellees. and this was made possible only because the appellees had agreed to and did advance certain in sums to defray the expenses necessary therefor.M. be resolved and that the sum of P79. Inc.. . 1956. On or about April 13. Inc. therefore.800. the OWNERS shall have the right to suspend the payments aforementioned.50 69. the succeeding payments as hereinafter provided shall become due one year from the date of the payment immediately preceding. had instituted Civil Cases Nos. Subsequently. that appellees' aforementioned "motion and counter-manifestation" and "supplemental motion and manifestation" of April 13 and 27. No pronouncement as costs The portion of 20 "quiñones". If delivery is made after one year from the date of the first payment.800. and then rendered on April 10.. 1953". 1953. M.79 69. had that. is the absolute owner of the land involved in these cases. the Court issued an order. when the compromise Agreement was entered into.and in the interest of justice the Court grants this last mentioned petition. as well as "to comply strictly with their obligation to maintain the status quo.95 It was further stipulated in the agreement that "it shall be the joint and solidary obligation of the Deudors to make the buyers of the lots purportedly sold by them to recognize the title of the OWNERS over the property purportedly bought by them and to make them sign.50 69.00 be retained to answer for the claims of the alleged purchasers not mentioned in Annexes B and C of the Compromise Agreement. 3rd payment 4th payment 5th payment 6th payment 7th payment 8th payment 9th payment P 99. dated August 8. that. to the fact that the illegal constructions on the 30 quiñones.516. the DEUDORS shall receive as second payment. Inc. or on April 27. that J. in consequence of such cases. which constructions were made from and after the date of the Compromise Agreement are growing in number. subsection (1). J. 1956. mentioned in clause 8.408. 1956. after assuring itself that the parties understood the contents thereof.510. or were made after said date within fifteen (15) days. 1957. and praying. Mesa Heights Subdivision'". IN VIEW OF ALL THE FOREGOING.510.

M. Q-1799. therefore. Inc. Inc. IN VIEW OF ALL THE FOREGOING. This Court believes that it cannot decide the question now. Inc. Failure of the 'Deudors' to so deliver will have the effect of freeing the J. Q-1732. Tuason & Co. Laurel is of no moment. having in mind that more than 42 months have elapsed before the 20 quiñones were in fact delivered..totalled 215. and attached to the Compromise Agreement as Annexes 'B' and 'C'. Jesus Gamitan Cirilo del Rosario. and mostly through the effort of the J. and Gregorio Araneta.. and pursuant to par. have asked this Court to set a period of 15 days within which the 'Deudors' would deliver the possession of the remaining 30 quiñones unto the said companies. Under the Compromise Agreement. and Gregorio Araneta. It likewise takes cognizance of Civil Cases Nos. and Q-1932 filed against the Deudors and J. On April 4. and Gregorio Araneta. Tuason & Co.M. except such constructions by those persons who are mentioned in the Compromise Agreement as willing to continue in the purchase of the parcel of land which they may be occupying and who are willing to pay the price set by the Gregorio Araneta. Tuason & Co. for the delivery of said portion. Pedro Deudor. Gregorio Araneta. Inc. Macaria Fulgencio. these very houses within the 30 quiñones will afford very formidable stumbling blocks against further implementation of the Compromise Agreement. and the latter shall thereafter be entitled to possession of the 30 quiñones thru this Court's process. Inc. Florencio Deudor. Maria Deudor. these referred to collectively as the Deudors' are obligated. Annexes 'B' and 'C' to the Compromise Agreement. Tuason & Co. Tuason & Co. and Gregorio Araneta. J.. is understandable. The J.. stating that their failure to make delivery of the 30 "quiñones" was not due to their fault. This Court is of the opinion that a period of four (4) months from date hereof is more than ample time within which the 'Deudors' may comply with their obligations under the Compromise Agreement.. Ana Pascual. be so modified as to delete therefrom all references to the four-month period for the delivery of the 30 "quiñones" and to appellees' discharge from their obligation petitions under the compromise agreement.M.M. Counsel for the J.. 1957. Inc.. Aniana Deudor. the implementation of the Compromise Agreement can never be effected. and Gregorio Araneta. and/or to ATTORNEYS-ON-FACT FOR SANTA MESA HEIGHTS SUBDIVISION. Aurea Misericordia and Feliciano Misericordia.M. The impatience of the J. and Gregorio Araneta. It is. Tuason & Co. those referred to collectively as. 1953 the parties were enjoined to abide by and comply faithfully and strictly with the terms and conditions set forth in the Compromise Agreement'. therefore.M. Inc. that the period of four (4) months given them in the order of February 28. have also called the attention of this Court to the effect that there seem to be other persons who have allegedly bought lands from the 'Deudors' and who have submitted the corresponding Deeds of Sale to this Court but whose names have not been included in the lists submitted by the 'Deudors' to the attorneys of the J. Inc. 1956. and Gregorio Araneta. in possession of the said 30 quiñones. Failure on the part of the persons named in this paragraph to comply with said order. Donato Fajardo. Those referred to collectively as the 'Deudors' in the Compromise Agreement. and that the Deudors are themselves entitled to an order directed to the Sheriff for the delivery to the appellees of the litigated property. there does not appear to be any sincere or effective steps taken by any of those referred to collectively as the 'Deudors' in implementing the Compromise Agreement.M. and certainly the 60-day period so set could not reasonably be extended to four years. 1957. and they have so bound themselves. or without the Deudors' consent as claimed by Atty. Tuason & Co. Tuason & Co. 1957. hereby sets a period of four (4) months within which the 'Deudors' shall deliver possession of the entire 30 quiñones to the J.. The Compromise Agreement does not state any specified period within which the 'Deudors' have to definitely comply with their obligations. namely.. Inc. the Court cannot at the present time issue an order without a proper motion from the proper party. the 'Deudors' bound themselves to deliver possession of the land in question over to the Owners. Carlos Javier. Inc.. . and subject to its other terms and conditions. Inc. and Gregorio Araneta. Tuason & Co. the Court shall issue such writs.M. Q-1746.. Q-1733. is too short. and Gregorio Araneta. Inc. Inc. Inc. Inc.. rendered the aforementioned order premature. Tomas de la Cruz. considering that it is almost four years since the decision became final and yet the 'Deudors' have utterly failed to deliver the 30 quiñones.M. clear to this Court that unless the construction of houses is abated in some way.M. Tuason & Co. Tuason & Co. Inc. What is material and pertinent now is that these houses and the continued constructions of houses appear completely unabated and unless this is stopped by those who are supposed to be in possession of the land. Inc. and that the Sheriff be ordered "to clear the premises of said 30 'quiñones' of all persons unlawfully squatting on or occupying the same or portions thereof. for the same land should be charged against or deducted from whatever amount the 'Deudors' would receive from the J. from all its obligations under the Compromise Agreement and judgment. Inc. within a period of four (4) months from date hereof.. and other related cases." . the 'Deudors' claimed to have been in possession of the land. Inc. Up to the present time. Tuason & Co. orders and processes as may be necessary to place the J. Eustaquio Alquiros. Inc. Alberta Martinez. The Court has also in mind that the Compromise Agreement contemplated 60 days from date thereof for compliance therewith by the parties. The Court would like to call the attention of the parties to the fact that in its decision dated April 10. Inc. M. 9 of the same Compromise Agreement. Inc. Inc. and Gregorio Araneta. The Court likewise takes cognizance of the fact that there are presently pending cases wherein persons have filed complaints praying that the difference in the price fixed by the Gregorio Araneta. The Court. Agripino Pascual. .. As to those persons but whose names have not been included in the lists. . to deliver the clear and peaceful possession of the entire 50 quiñones to the OWNERS. are hereby ordered to clear and deliver the peaceful possession of the 30 quiñones to the J. that the pendency of the other cases mentioned in appellees' motion and manifestation dated August 8. but shall do so in cases properly brought up before it. Inc. Rufina Guerrero. and the Gregorio Araneta. Inc. Ambrosio Andaya. and praying that said order of February 28. Whether these constructions were made with the Deudors' permission as claimed by the J. Under paragraph 3 of the Compromise Agreement. Tuason & Co.M.M. the Deudors filed a motion for reconsideration.. Inc. Inc. but in accordance with Article 1197 of the new Civil Code this Court is authorized and empowered to set a period within which they shall fulfill and comply with all their obligation petitions.

civil actions other than those settled by said agreement and that being thus aware that appellants cannot deliver the 30 "quiñones" in question on account of said new civil actions. who were named individually in said motion. Thus. 1958. And this is why appellants contend that the order of February 28. Inc. insofar as contracts not fixing a period are concerned. and. to the extent that it remained unimplemented or executory.74 to the Deudors. 1958. against the herein appellees and appellants. .74. after the expiration of said period. the construction of houses by squatters within said area had continued so unabated that. On January 9. Appellants admit that the Compromise Agreement "failed to prove for a specific period within which the Deudors should deliver possession" of said 30 "quiñones". 1957 constitutes an amendment of the decision of April 10. said legal provision applies only if. (2) the lower court's lack of authority to decide in this case the issues raised in cases Q-1732. 1953. are erroneous. except upon the expectation of delivery of said area without unreasonable delay. the lower court denied the motion for reconsideration of the Deudors and granted said motion of Gregorio Araneta. and praying that an order be issued directing the Sheriff of Quezon City to place the appellees "in possession of the 30 'quiñones' subject to these cases. shows that the same was premature. dated January 21. despite the expiration of the period of four (4) months. it could not decide in this case the issues raised by a number of claimants. alleging. long after the same had become final and executory. With respect to the period fixed by the lower court for the delivery of said 30 "quiñones" and the effect of the failure to deliver the same within said period. 1957. Article 1197 is part and parcel of all obligations contemplated therein. as well as to cooperate with the appellees in pin-pointing the unoccupied and clear areas which they are ready to deliver and to join the appellees in the filing of appropriate suits for the ejectment of all persons unlawfully occupying portions of the remaining thirty (30) "quiñones" and/or handling negotiations directed to the same end. the last paragraph of Article 1197. this conclusion of the appellants is legally untenable. . Upon the other hand. said agreement is subject to the principle set forth in Article 1197 of the Civil Code of the Philippines. The courts shall also fix the duration of the period when it depends upon the will of the debtor. either to fix a period of four (4) months for the delivery of the thirty (30) "quiñones" in question. the agreement became. of an implied provision of the decision itself. . 1957. there were 341 constructions therein. Inc. the court merely enforces or carries out an implied stipulation in the contract in question. to implement the 'Compromise Agreement'" and that "in the interest of justice the Court grants this petition. dated January 10. In every case. There is no merit in this pretense. filed a motion. for the same approved the Compromise Agreement in toto and enjoined the parties "to abide and comply faithfully with the terms and conditions" thereof. 1953. 1957. and to release the appellees from further obligations under said agreement and (4) although the lower court held the appellees entitled to a process for the delivery of the 30 "quiñones" to them. in compliance with a writ of preliminary injunction issued by the Court of Appeals. the Courts shall determine such period as may under the circumstances have been probably contemplated by the parties. This order was amended by another one. (3) neither did the lower court had authority. and. Q-1746. said decision explicitly declares that "the parties and their respective attorneys have petitioned this Court that after rendition of judgment . incorporated in the decision. Inc. in fixing said period. owing to the failure of the Deudors to make said delivery. and of the decision of April 10. 1958. "it can be inferred that a period wasintended" by the parties thereto. of said decision. fixed in the order of February 28. now in the possession" of the Deudors. When the authority granted by this provision is exercised by courts. amount to an amendment of the decision of April 10. However. upon the ground that: (1) the lower court had no authority. not named in Annexes B and C of the Compromise Agreement. without the consent of the parties therein. amounted to an amendment of the Compromise Agreement. Q-1733. For this reason.. whenever a period is fixed pursuant to said Article. so that the application of said Article involved merely the enforcement of an implied stipulation of the parties to said agreement. the period cannot be changed by them. 1953.925. and that. as of August 12. that the Deudors had not delivered the aforementioned portion of 30 "Quiñones". which suspended the resolution of said motion to Gregorio Araneta. dated August 16. Article 1197 of our Civil Code is part of the Compromise Agreement. 1957. Q-1799 and Q-1932 thereof. they had no reason to agree on paying P614. the Court merely ascertains the will of the parties and gives effectthereto. but from its nature and the circumstances it can be inferred that a period was intended the courts may fix the duration thereof. in turn. should the Deudors fail to make delivery within said period." In other words. for. As a matter of fact. 1957. Once fixed by the courts. 1957 and January 10. Neither does the order of February 28. consequently. dated August 16. 1958. as stated by the lower court in its order of February 28. reading: If the obligation does not fix a period. the same do not amend or modify the obligation concerned. to set aside the Compromise Agreement. Thus appellants would seem to imply that the lower court had imposed upon them an obligation which is impossible of compliance because of "legal obstacles" to its performance. as pointed out above. and acquired the same force and effect as the latter. Accordingly.Gregorio Araneta. from the nature and circumstances surrounding the contract involved. who had instituted. Hence. it is clear from the nature of said agreement and the circumstances surrounding the same that a period was intended by the parties thereto. insofar as it fixed the aforementioned period and stated the effect of the failure to make delivery within the same. inter alia. ordains that "in every case. 1957. appellants herein filed a manifestation in which they offered to deliver to the appellees those portions of the 30 "quiñones" on which there are no actual occupants or squatters. or to declare that the appellees would be free from their obligations under the Compromise Agreement. By an order. as stated in its order of February 28. the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. accordingly. steps be taken . considering that the appellees had a Torrens title. for all intents and purposes. it denied appellants' petition for such process in favor of the same appellees. Appellants maintain that the orders of February 28. . the lower court still required them to make said delivery under penalty of forfeiting the right to collect P614." The Deudors insist that. In fact. Indeed. 1957. . 1957. it is urged that the order of February 28.925.

De Leon and Natividad. now in the possession of" appellants. Maria. rid to release the appellees from further obligations under said agreement. should be able to deliver the peaceful and complete possession" of the 30 "quiñones" in question. insofar as it still remained unimplemented or executory. with costs against herein appellants. J. Again.74. appellants say that they have as much right as appellees herein to the execution of the decision herein. Indeed otherwise. impliedly.M. and denied the motion for reconsideration filed by appellants on April 4. had only the right to suspend the stipulated payments. Florencio. who are neither parties in this proceeding nor bound by the aforementioned decision. With respect to appellants' claim to the effect that they offered to deliver "portions" of the land of 30 "quiñones" on which there are no actual occupants or squatters at present". the period within which delivery was to be made it sprang from the same agreement. Until delivery thereof. . 1953. the order of January 10.925. It should be noted. . Inc. says: It will be noted that under the agreement. appellants' right to comply with it was extinguised and the conditional obligation of the appellees to pay said sum was terminated (Article 1193. 1953. 1953.L. not from the order of February 28. admittedly. Bengzon. therefore. section d. however.74 was subject as a suspensive condition constituted a resolutory period. and. It is next urged. 1957. had put legal obstacles to said delivery. at most. In short. was. appellants represented therein that they were in possession of the land and in a position to make delivery thereof. In other words. however. and Gregorio Araneta. should be able to deliver the peaceful and complete possession" of said land of 30 "quiñones". took no part.M. In fact. The equitable. in clause 9 thereof. The parties clearly contemplated a full. because the therein sought was directed against appellants who process are bound by the decision of April 10. Inc.. into the aforementioned property. it follows that there is no occasion for the suspension of appellees' obligation to pay. and. that appellees would have the obligation to pay P614. the 'Deudors' are supposed to make delivery of the areas unconditionally. by instituting judicial proceedings. despite the compromise. and yet the lower court granted the letter's motion for a writ of execution thereof and denied a motion of the former to the same effect. pursuant to said Article 1197. under clause 8.925.74 only "if the Deudors . which. . given to the Deudors. from further obligation under the agreement of March 16. Reyes. 1957. the appellees.14 to the Deudors.. the appellees are bound to pay P614. It would have been improper for the lower court to grant appellants' squatters. appellants assert that it was improper for the lower court. Dizon. however. for they had no such obligation as yet. Because.J. Moreover. and the effectiveness of the obligation of the appellees to pay it. In any event. 30 'quiñones' from all persons unlawfully squatting on or occupying the same or portions thereof. in said decision for the delivery of the land of 30 "quiñones" to which their rightto collect P614. for the failure of the 'Deudors' to deliver the remaining 30 quiñones 4 years and 8 months after the execution and approval of the compromise agreement. solution of the problem is the setting aside of the compromise agreement of March 6. for such delivery was a suspensive condition upon the fulfillment of which the acquisition of the right of the Deudors to said P614. inasmuch as the period of four (4) months. as implemented by the court. appellants had assumed the risks concomitant with possible incursions by squatters or other unauthorized persons.74 only "if the Deudors . WHEREFORE. Lastly.. said paragraph is but a faithful statement of the law pertinent to the subject.B.concur. and Gregorio Araneta. in the proceedings for the enforcement of its decision of April 10. the orders appealed from are hereby affirmed.The obligation to deliver said 30 "quiñones" arose. all surnamed Deudor. is part of the agreement. Tuason & Co. are beyond the jurisdiction of the court in this case. hence. Padilla." It was proper for the lower court to grant appellees' motion. the registered owners of the and made it clear that they were agreeing to the settlement only because they wanted to obtain early possession of the whole property and the 'Deudors' through their counsels warranted hat such possession would be with J. in a year.925. 1958. The stipulation about suspension of payments referred to non-compliance by appellants of their obligations under the agreement otherthan the delivery of the 30 "quiñones". accordingly. suffice it to note that. the existence of other parties who. 1958. Civil Code of the Philippines). Barrera. Labrador. In fact in several of the conferences preceding the execution on he final compromise agreement. appellees had no obligation to pay it. depended. did not affect appellants' obligation to make it under the Compromise Agreement. to said sum.". to set aside the Compromise Agreement. Inc. Appellees' right to said delivery was not conditioned upon appellants' actual ability to make such delivery. When the same expired with said suspensive condition still unfulfilled. appellees would not have undertaken to pay P614.925. that the two (2) motions were identical. JJ. they guaranteed "that during the pendency of the sale" of the property in question. The above-quoted paragraph of said order of January 10. Inc.. that in case of appellants' failure to comply with any of their obligations under the Compromise Agreement. Since. Appellees prayed that an order be issued directing the Sheriff of Quezon City "to place them in possession of the 30 'quiñones' subject to these cases. C. if not the legal. Hence.. It is not true. in a matter of months or. Bautista Angelo. 1953 so far as it still remains unimplemented or executory.925. not partial fulfillment of said condition. 1957. said 30 "quiñones" have not been delivered. Aniana and Pedro. It is so ordered... whereas appellants' motion was to the effect that an order be issued "commanding the Sheriff to clear the premises of the. Paredes. . There is no excuse. justify the release of J. appellants had no right. Tuason & Co. . a mere exposition of some of the reasons why the lower court granted appellees motion of August 16. therefore. delivery of a portion thereof would not suffice for the acquisition appellants of the right to collect said sum or any part by thereof. subsection 2 of the Compromise Agreement. pursuant to clause 14 there of. however. J. from the fact that appellees were owners thereof and from the promise made by the Deudors in the Compromise Agreement. "no squatters or unauthorized persons shall settle or take possession of any portion of said property .. The failure to deliver and the continued mushrooming of houses in the area.

including Concepcion Yulo ratified all the contents of the prior document of June 26. and family credits which were listed. will be understood as having been contradicted in solidum by all of us. Fourth. as well as to cure all the defects which might prevent the inscription of the said instrument in the registry of property and finally to extend by the necessary formalities the aforesaid mortgage over the remaining three-ninths . obligating themselves to make a forma inventory and to describe in due form all the said properties.221. Ross and Block. concern us. 1910.445. Amici Curiae. Among other clauses. Gregorio Yulo. Yulo continuing their current account with Inchausti & Company in the best and most harmonious reciprocity until said balance amounted to two hundred thousand pesos. Third. Bruce. severally and jointly acknowledged and admitted their indebtedness to Inchausti & Company for the net amount of two hundred fifty-three thousand four hundred forty-five pesos and forty-two centavos (P253.000). Through this. Inchausti & Company informed Hijos de T. plaintiff-appellant. in the same manner that they would have so done at the maturity of the said installments. continuing successively on the 30th of each June until the last payment on June 30. No. while Teodoro was mentally incompetent. 1904. the Yulos. the Yulos. 1914 part of all the property and rights belonging to their other brothers. Manuel.27 and. whose principal representative is Gregorio Yulo. the balance of a current account opened by the firm of Inchausti & Company with Teodoro Yulo and after his death continued with his widow and children. defendant-appellee. Second. and Carmen. Of these children Concepcion and Jose were minors. their remaining urban properties. L-7721 March 25. the latter being of age at the time. Gregoria Regalado. for the exploitation and cultivation of his numerous haciendas in the province of Occidental Negros. by our brother Don Mariano Yulo y Regalado who resides in Bacolod. In for the payment of the disbursements of money which until that time it had been making in favor of its debtors. The default in payment of any of the installments established in clause 3. Teodoro Yulo. who died on October 22d of the following year. beginning June 30. for himself and in representation of his brother Manuel Yulo. ARELLANO. Concepcion. This instrument was neither ratified nor confirmed by Mariano Yulo. and in their own behalf Pedro Yulo. with interest at ten per cent per annum.42). these children preserved the same relations under the name of Hijos de T. had been borrowing money from the firm of Inchausti & Company under specific conditions. Francisco and Carmen Yulo.J. they especially mortgaged an undivided six-ninth of their thirty-eight rural properties. with which balance Hijos de T. Inchausti & Company who can make use of their rights to demand and obtain immediate payment of their credit without any further extension or delay. 1909. 1908. we have received an abstract of our current account with your important firm.42. we. the said persons. Inchausti & Company may exercise at once all the rights and actions which to them appertain in order to obtain the immediate and total payment of our debt. 1908. the Yulos. otherwise it will not be binding on Messrs. Hausserman. Teodoro. Manuel. will result in the maturity of all the said installments. At the death of their predecessor in interest. On August 12. He thus left a widow. Fifteenth. Mariano. Rohde and Wright for appellee. closed on the 31st of last December. and the minors Concepcion and Jose. Mariano. if they so deem expedient Messrs. Lawrence. his widow and children held the conjugal property in common and at the death of this said widow. a property owner of Iloilo.12. First. lorchas. and as a consequence thereof.42) which they obligated themselves to pay. except the last. GREGORIO YULO. 1908." On July 17. brothers and sisters. Carmen. Gregorio.863. Gregorio Yulo being one of the latter. 1903. On January 11.445.: This suit is brought for the recovery of a certain sum of money. Gregoria Regalado. All the obligations which by this. Cohn and Fisher for appellant. have assumed. executed the notarial instrument (Exhibit X)..R. Yulo answered a letter of the firm of Inchausti & Company in these terms: "With your favor of the 2d inst. On April 9. there remaining of the marriage the following legitimate children: Pedro. Gregorio Yulo in representation of Hijos de T. a notarial document (Exhibit S) whereby all admitted their indebtedness to Inchausti & Company in the sum of P203. Sixteenth. C. the incompetent Teodoro. in accordance with what we have agreed. Yulo of the reduction of the said balance to P253. 1909. in five installments at the rate of fifty thousand pesos (P50. Teodoro Yulo died testate and for the execution of the provisions of his will he had appointed as administrators his widow and five of his sons. Carmen Yulo. for Manuel. Teodoro Yulo. 1909. this being fifty-three thousand four hundred forty-five pesos and forty-two centavos (P53. Regarding this conformity a new document evidencing the mortgage credit was formalized. and Jose Yulo y Regalado. executed on June 26. within the present week. as well as by the document of June 26. in order to secure the same with interest thereon at 10 per cent per annum. or the noncompliance of any of the other obligations which by the present document and that of June 26. brothers and sisters.445. for himself and in representation of his brothers Pedro Francisco. 1908. Francisco Yulo. Yulo expressed its conformity by means of a letter of the 19th of the same month and year. vs.Republic of the Philippines SUPREME COURT Manila EN BANC G. 1914. they expressly stipulated the following: Fifth. Gregorio Yulo. with which we desire to express our entire conformity as also with the balance in your favor of P271. INCHAUSTI & CO. It is also agreed that this instrument shall be confirmed and ratified in all its parts. and Concepcion Yulo. Francisco.

the first of P20. the interest is likewise reduced for them to 6 percent per annum. as constituting a novation of that of August 12. 33). 1911. leaving Inchausti & Company at liberty. 1909. nine hundred forty-four pesos and seventy-six centavos (P42. 1909. 1911." (B. Matters being thus on July 10. of E. 1911.) And this is the only one which the Supreme Court has to solve by virtue of the assignments of errors alleged. Francisco and Carmen Yulo. "No one denies in this case.445. 1909. and Carmen Yulo y Regalado executed in favor Inchausti & Company another notarial instrument in recognition of the debt and obligation of payment in the following terms: "First. namely." that "if during two consecutive years the partial payments agreed upon be not made. 1909.445." the judge goes on. fourth and finally. that the instrument of August 12. the object of this action. and proceed to collect the same together with the interest for the delay above stipulated through all legal means. P253. sentencing the later to pay the total amount of the obligation acknowledged by them in the aforementioned instrument of August 12. brothers and sisters by way of compromise so that Inchausti & Company might. on March 27. without the necessity of demand until its complete payment. whether the plaintiff can sue Gregorio Yulo alone. the lack of the ratification and confirmance by Mariano Yulo being not to suspend but to resolve the contract. the installments are increase to eight. and the other ratified and confirmed by the other brother Mariano Yulo. first. Consequently. his brother and joint co-obligee." says the defendant.000 each on the same date of each successive year until the total obligation shall be finally and satisfactorily paid on June 30." (4th clause. and they will procure by all legal means and in the least time possible a judgment in their favor against the said Don Gregorio and Don Pedro. 1911." (B. whether it lost this right by the fact of its having agreed with the other obligors in the reduction of the debt. executed by Manuel. second. of E. there is no need of saying anything regarding the first three defenses of the answer. "it was really admitted that the plaintiff had a right to bring an action against Gregorio Yulo." says the trial judge. The Yulos. though later they were dismissed. by virtue of which the payments were extended. and that the same is owing" (Brief. That the court erred in considering the contract of May 12. and that Messrs. of E.000). 18).42" (B. that in the instrument of August 21. second. against Gregorio Yulo for the payment of the said balance due of two hundred fifty-three thousand. since after the present suit was brought. second. Sixth. did not pay the first installment of the obligation. Francisco. third . third. II.42) with interest at ten per cent per annum. "to make use of its rights to demand and obtain the immediate payment of its credit. and that the plaintiff pay the costs. "In the arguments of the attorneys.) Thus was it stipulated between Inchausti & Company and the said three Yulos. they shall lose the right to make use of the period granted to them for the payment of the debt or the part thereof which remains unpaid. pending the present suit. neither of which was complied with. two conditions were agreed one of which ought to be approved by the Court of First Instance. Therefore.. 1919. III. four hundred forty-five pesos and forty-two centavos P253. the amount of the said partial payment together with its interest shall bear interest at the rate of 15 per cent per annum from the date of said maturity. upon which the appellee still insists in his brief for this appeal. But. "The fact is admitted. from March 15. but the defendant says that the plaintiff has no right to sue him alone. That the court erred in rendering judgment in favor of the defendant. Ninth. And that the court erred n denying the motion for a new trial. brothers and sisters. and Doña Carmen Yulo may appoint an attorney to cooperate with the lawyers of Inchausti & Company in the proceedings of the said case. This (the judge concludes) is the only question brought up by the parties. nor regarding the lack of the signature of Mariano Yulo ratifying and confirming the instrument of August 12. if so. on May 12. on that date aggregating forty-two thousand. 1909. there being other obligors." it being expressly agreed "that if any of the partial payments specified in the foregoing clause be not paid at its maturity. Inchausti & Company brought an ordinary action in the Court of First Instance of Iloilo.. the plaintiff entered into a compromise with the other conjoint and solidary debtors. 1911. who executed the preceding instrument. Manuel. the same constituting a novation of the contract which gave him the same privileges that were given his conjoint and solidary codebtors. as stipulated. withdraw the claims pending in the special proceedings for the probate of the will of Don Teodoro Yulo and of the intestacy of Doña Gregoria Regalado stipulating expressly however in the sixth clause that "Inchausti & Company should include in their suit brought in the Court of First Instance of Iloilo against Don Gregorio Yulo.000. Don Manuel. as it did. although it will not be superfluous to state the doctrine that a condition. that is to say.76) Seventh. such as is contained in the sixteenth clause of the said contract (third point in the statement of facts). Gregorio Yulo answered the complaint and alleged as defenses. the effect of the failure of compliance with the said clause." The only question indicated in the decision of the inferior court involves. as one of the conjoint and solidary obligors in the contract of August 12. 1911. The Court of First Instance of Iloilo decided the case "in favor of the defendant without prejudice to the plaintiff's bringing within the proper time another suit for his proportional part of the joint debt. was novated by that of May 12. Inchausti & Company may consider the total obligation due and demandable. "that the plaintiff has not collected the debt. 1911. 1909. and the rest of P30. is by no means of suspensive but a resolutory condition. that an accumulation of interest had taken place and that compound interest was asked for the Philippine currency at par with Mexican. with the understanding that if they should deem it convenient for their interests. 21." Eighth. the result being the new contract of May 12.) The plaintiff appealed from this judgment by bill of exceptions and before this court made the following assignment of errors: I.944. these others: First. 19. the debt is reduce for them to two hundred twenty-five thousand pesos (P225. that with regard to the same debt claims were presented before the commissioners in the special proceedings over the inheritances of Teodoro Yulo and Gregoria Regalado. Don Francisco. 1911.Fifth. however. "that the estate of Teodoro Yulo or his heirs owe Inchausti & Company an amount of money. beginning on June 30. the proroguing of the obligation and the extension of the time for . Don Pedro Yulo.

whether it does have any effect at all in the action brought. Francisco. third. when the whole debt was not yet due nor even the first installment of the same respective the three aforesaid debtors." he says." (Civil Code. these three parties who executed the contract of May 12. 1909. par. there can also be no doubt that the contract of May 12." Wherefore we hold that although the contract of May 12. 1909. namely. would cooperate in order that the action against Gregorio Yulo might prosper (7th point in the statement of facts). inasmuch as this was surely its purpose in demanding that the obligation contracted in its favor should be solidary having in mind the principle of law that. 19. article 1145.000 pesos.42 which he had paid. 1911. has not novated that of August 12. and for the present we will merely reiterate the legal doctrine that an obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified.) And even though the creditor may have stipulated with some of the solidary debtors diverse installments and conditions. Manuel. it has affected that contract and the outcome of the suit brought against Gregorio Yulo alone for the sum of P253. 1911. Manuel and Carmen executed the instrument of May 12. to pay only 225. Code.42. considering that the plaintiff in its brief. With respect to the third. thus constituting a violation of Gregorio Yulo's right under such hypothesis. "when the obligation is constituted as a conjoint and solidary obligation each one of the debtors is bound to perform in full the undertaking which is the subject matter of such obligation. Francisco. because "in order that an obligation may be extinguished by another which substitutes it. June 30. the debtors having obligated themselves in solidum.) Whereby the second point is resolved. which fact the judge states in his decision. By the first instrument the maturity of the first installment was June 30. 1909. (Civ. and in this present suit. 2). "It is always necessary to state that it is the intention of the contracting parties to extinguish the former obligation by the new one" (Judgment in cassation. It would have been very just then to have absolved the solidary debtor who having to pay the debt in its entirety would not be able to demand contribution from his codebtors in order that they might reimburse him pro rata for the amount advanced for them by him. Francisco. as in this case. we are the first to realize that it benefits him with respect to the reduction of the amount of the debt.) This is a fact which this Supreme Court must hold as firmly established. 1909." (Ibid. corroborates the same in these words: "What effect. 1909 is broken." it says. stipulating that the suit must continue its course and. 1909). six executed the mortgage of August 12. 1909. with respect to the other debtors who executed this contract. 1911. it is necessary that it should be so expressly declared or that the old and the new be incompatible in all points" (Civil Code. Gregorio. cannot be recovered but only that stated in the contract of May 12. Of the nine children of T. 1909. Of those six children. with other undertakings concerning the execution of the judgment which might be rendered against Gregorio Yulo in this same suit. far from expressly declaring that the obligation of the three who executed it substitutes the former signed by Gregorio Yulo and the other debtors.445. articles 1137 and 1144. 1911. and Concepcion. Teodoro. 1911. and Jose have not taken part in these instruments and have not mortgaged their hereditary portions." (B. This result would have been a ponderous obstacle against the prospering of the suit as it had been brought. should such efficacy not likewise be recognized concerning the maturity of . 1911. Inchausti & Company did with its debtors Manuel. Francisco. Yulo named Mariano. 1912. or more concretely.445 pesos and 42 centavos of August 12.) With respect to the last point. Yulo. admitting a debt of P253. cited by the creditor itself. if not so. "the amount of the debt was reduced to P225. inasmuch as the three were not obligated by virtue of the instrument of May 12. 1911. this does not lead to the conclusion that the solidarity stipulated in the instrument of August 12. "could this contract have over the rights and obligations of the defendant Gregorio Yulo with respect to the plaintiff company? In the first place. (Judgments in cassation of June 28. of E. 1911. the defendant has the right to enjoy the benefits of the partial remission of the debt granted by the creditor. the remission of any part of the debt made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others. the creditor can bring its action in toto against any one of them. Second. and fourth. if necessary. Manuel. 1911. article 1204). "In this contract of May last. this debtor. The obligation being solidary. With respect to the first it cannot be doubted that. the subject matter of the suit. the following must be borne in mind: Facts. in accordance with the instrument of May 12. There exist no incompatibility between the old and the new obligation as will be demonstrated in the resolution of the last point. by changing only the term of payment and adding other obligations not incompatible with the old one.000 and the attorney of the plaintiff admits in his plea that Gregorio Yulo has a right to the benefit of this reduction. the action against Gregorio Yulo was already filed and judgment was pronounced on December 22. Pedro.445. in conformity with what is provided in article 1143 of the Civil Code. wherein was obtained a reduction of the capital to 225. with the interest of the amounts advanced at the rate of one-sixth part from each of his five codebtors. Carmen. in accordance with the provision of article 1143 of the Civil Code. and Carmen. 1910. and Fifth. First. 1909. The other children of T. 1911. the amount stated in the contract of August 12. could not recover from his joint debtors Francisco. If the efficacy of the later instrument over the former touching the amount of the debt had been recognized. whether this contract with the said three obligors constitutes a novation of that of August 12. entered into with the six debtors who assumed the payment of two hundred fifty-three thousand and some odd pesos. Manuel. and Carmen had in their favor as the maturity of the first installment of their debt.. Fourth. if he should pay all this sum. But such hypothesis must be put out of consideration by reason of the fact that occurred during the pendency of the action. by virtue of the remission granted to the three of the solidary debtors in this instrument. article 1140. In jure it would follow that by sentencing Gregorio Yulo to pay 253. and the instrument of May 12.445.payment. on March 27. on page 27. with respect to the defendant Gregorio Yulo: First. whereas by the second instrument. and Carmen Yulo through the instrument of May 12. as we already know the law provides that "solidarity may exist even though the debtors are not bound in the same manner and for the same periods and under the same conditions. Francisco. and in consequence thereof. expressly and clearly stated that the said obligation of Gregorio Yulo to pay the two hundred and fifty-three thousand and odd pesos sued for exists.000 pesos and of the interest to 6 per cent from the 15th of March of the same year of 1911. July 8.42 at 10 per cent per annum and mortgaging six-ninths of their hereditary properties. Third. 1911. and therefore there can be no doubt that. does not constitute a novation of the former one of August 12. of being reimbursed for the sum paid by him. Manuel. and Carmen their proportional parts of the P253. 1904 and of July 8.

independently of the resolutory condition which gave the creditor the right to demand the immediate payment of the whole debt upon the expiration of the stipulated term of one week allowed to secure from Mariano Yulo the ratification and confirmation of the contract of August 12. (Scaevola.000 pesos and this is eight installments none of which was due. 21 and 22. the latter can make use of such exceptions as are peculiarly personal to his own obligation." Gregorio Yulo cannot allege as a defense to the action that it is premature. and without the least doubt the defense would have prospered. and "consequently he decided the case in favor of the defendant. or before the execution of a term which affects one debtor alone proceedings may be had against him or against any of the others for the remainder which may be already demandable but the conditional obligation or that which has not yet matured cannot be demanded from any one of them. which is implied in the last special defense set up in the answer of the defendant Gregorio Yulo be made available to him in this proceeding? The following commentary on article 1140 of the Civil Code sufficiently answers this question: ". . When the suit was brought on March 27. (he says). was to mature on June 30. according to the opinion of the commentator of the Civil Code. This exception or personal defense of Francisco. inasmuch as they alleged them in connection with that part of the responsibility attaching in a special manner to the other. But as regards Francisco. to wit. but without falling into extravagances or monstrosities. the object of the action. the whole debt had become mature. The same author. so that Gregorio Yulo may claim that. Manuel. taken in that light. and Carmen Yulo "as to the part of the debt for which they were responsible" can be sent up by Gregorio Yulo as a partial defense to the action.500. according to the express agreement of the parties. and with the maturity of this installment. Manuel. Mucius Scaevola." (8 Manresa. 1911. Civil Code. from which we can safely set out. "The solidary debtor may utilize against the claims of the creditor of the defenses arising from the nature of the obligation and those which are personal to him. Manuel. and leaving in suspense the right to demand the payment of the remainder until the expiration of the term of the fulfillment of the condition.. .500. and for this reason the action will be only as to the P112.42. by recognizing in the creditor the power. even acknowledging that the debt for which he is liable is P225. demand the payment of his credit against the debtor not favored by any condition or extension of time.445.000. Civil Code. as already stated. "Without failing to proceed with juridical rigor. Sp. they might make use of those exceptions. saying. even though they are personal to the other. the three-sixths part of the debt which forms the subject matter of the suit. nevertheless not all of it can now be demanded of him. they could have alleged the defense of the nonmaturity of the installments since the first installment did not mature until June 30. . 1912. Neither could he invoke a like exception for the shares of his solidary codebtors Pedro and Concepcion Yulo. 19.) It has been said also by the trial judge in his decision that if a judgment be entered against Gregorio Yulo for the whole debt of P253.the same? If Francisco. Those personally pertaining to the others may be employed by him only with regard to the share of the debt for which the latter may be liable. inasmuch as they alleged they are personal to the other. 800 and 801. and Carmen Yulo that part of the amount which is owed by them because they are obliged to pay only 225. Against the propriety and legality of a judgment against Gregorio Yulo for this sum. for that part of it which pertained to his codebtors is not yet due. that the creditor may ofcourse. and consequently the defendant Gregorio Yulo may make use of it in accordance with article 1148 of the said Code. may be enforced. they being in identical condition as he. the first installment of the obligation had already matured of June 30. It may be so and yet.) . Gregorio Yulo could not be freed from making any payment whatever but only from the payment of that part of the debt which corresponds to his codebtors Francisco. favors this solution of the problem: There is a middle ground. and Carmen had been included in the suit. and Carmen. but also against the other solidary debtors who being ordered to pay could not now sue for a contribution. we do not think that there was any reason or argument offered which sustains an opinion that for the present it is not proper to order him to pay all or part of the debt. a state of affairs which not only prevents any action against the persons who were granted the term which has not yet matured. and if against the other debtors. How? By limiting the right of the creditor to the recovery of the amount owed by the debtors bound unconditionally or as to whom the obligation has matured. contracted later.000 or P112. Manuel. none of the installments payable under their obligation. Manuel. and the three would have been absolved from the suit. without prejudice to the plaintiff proceeding in due time against him for his proportional part of the joint debt. It has been said in the brief of the appellee that the prematurity of the action is one of the defenses derived from the nature of the obligation. The first payment. considering the case of the opposing contention of two solidary debtors as to one of whom the obligation is pure and unconditional and as to the other it is conditional and is not yet demandable. For this reason he was of the opinion that he (Gregorio Yulo) cannot be obliged to pay his part of the debt before the contract of May 12. upon the performance of the condition or the expiration of the term of claiming from any one or all of the debtors that part of the obligation affected by those conditions. But what then is the effect of solidarity? How can this restriction of right be reconciled with the duty imposed upon each one of the debtors to answer for the whole obligation? Simply this. had as yet matured. of E. Before the performance of the condition. 1911. The part of the debt for which these three are responsible is three-sixths of P225. 1909." And further on. to wit.) Article 1148 of the Civil Code. he cannot recover from Francisco. and comparing the disadvantages which must flow from holding that the obligation is demandable with these which must follow if the contrary view is adopted. the first not having been paid." (B. we believe that the solution of the difficulty is perfectly possible. 196. and Carmen Yulo. 1912. 1910. he decides the question as to whether the whole debt may be recovered or only that part unconditionally owing or which has already matured. which we believe improper if directed against the debtor affected by the condition or the term. Cannot this defense of the prematurity of the action. the effect would not be different from that already stated in this decision. Article 1148 confirms the rule which we now enunciate inasmuch as in case the total claim is made by one creditor.

and Carmen. any of the defenses which could have been made use of by Francisco.42 of the instrument of August 12. if anything. that is. 1911.000 pesos. said contract was executed before the trial of the action. Carson. Manuel.500. under the allegations of the amended answer.) Not only is there no reason for this." Certain it is that the trial court." that. to the extent that Gregorio Yulo has been able to make in his favor the defense of remission of part of the debt. Separate Opinions MORELAND. concur. as it was brought prematurely.. 1911. taking into consideration the conformity of the plaintiff and the provision of article 1143 of the Civil Code. One of these provisions was that the first payment need not be made until June 30. . as it cannot be enforced against the defendant except as to the three-sixths part which is what he can recover from his joint codebtors Francisco. 1912.500. neither is it possible to curtail the defendant's right of recovery from the signers of the instrument of May 12. must likewise be complied with in accordance with its tenor. the debt is reduced to 225. For these reasons I vote to affirm. in holding that this action was premature but might be brought in the time. without any special finding as to costs. between the plaintiff and Francisco. and nevertheless the obligation of the contract of May 12. 1911. and Araullo. thanks to the provision of article 1148. The judgment appealed from is reversed. because he has been benefited by the remission made by the plaintiff to three of his codebtors. in accordance with the legal principles already stated. which is contrary in all respects to the supposed novation.445. 1911. because it is a defense derived from the nature of the obligation. by obliging the parties who signed the contract to carry on the suit brought against Gregorio Yulo.000 of the instrument of May 12. which cannot be omitted without violating article 1091 of the Civil Code according to which "the obligations arising from contracts have the force of law between the contracting parties and must be complied with in accordance with the tenor of the same. and the legal interest on this interest due. it is no longer possible to sentence the defendant to pay the P253. with the interest stipulated in the instrument of May 12. 1911. Mucius Scaevola considers it "absurd. The defendant was entitled to all of the benefits of the contract of May 12. the creditor should be forced to await the realization of the condition (or the expiration of the term. have interposed. But. dissenting: In my judgment the action must be dismissed. it does not seem just. or Carmen if they had been the defendant. judgment can be rendered only as to the P112. as stated by the author. 1911. but. 1909. regarded the contract of August 12. and although this date was prior to the date of the second contract. In the third place. from the time that it was claimed judicially in accordance with article 1109 of the Civil Code. The contract of May 12. but it is absolutely impossible in law to sustain such supposed novation. as having been expressly novated. Consequently. Trent.But in the first place. The action was commenced on the 27t of March. for he was justly exonerated from the payment of that part of the debt corresponding to them by reason of there having been upheld in his favor the exception of an unmatured installment which pertains to them. has affected the action and the suit. The defendant Gregorio Yulo cannot be ordered to pay the P253. Manuel. and Carmen. Manuel. many times named above. neither repealed nor novated. the contract with Francisco. the 225. a date prior to the commencement of the action. So ordered. That being the case. 1911. 1911. so that although the said defendant was not party to the contract in question. 1909. there being a debtor who is unconditionally obligated as to when the debt has matured. yet because of the principle of solidarity he was benefited by it. In the second place. from March 15.42 claimed from him in the suit here..445. and Carmen. J. and some of the beneficial provisions therein contained were to produce their effects from March 15. We therefore sentence the defendant Gregorio Yulo to pay the plaintiff Inchausti & Company P112. 1911. at present. nothing was due the plaintiff at the time it sued and accordingly its action must be dismissed with costs. but the court would even fail to consider the special law of the contract. in my judgment. JJ. At the time of the trial the defendant could. Manuel.

chanroblespublishingcompanyIn his answer.00. On November 25. 1-88. JR.000. on November 14. No. under Sec. in the falcata logs operation business. Campos also intimated to him that Rene C. In the aforementioned decision of the lower court. it noted that the typewritten figure 50. Said due date expired without the promissors having paid their obligation. the same would have been merely collateral between him and Naybe and. the lower court reconsidered the dismissal order and required the sheriff to serve the summonses. the amount of FIFTY THOUSAND PESOS (P50. in its decision of August 31. On December 11. which disposed of Civil Case No. 1983.00 against the three obligors. Pio Tio denied having participated in the alleged business venture although he knew for a fact that the falcata logs operation was encouraged by the bank for its export potential. the Court denied the petition for failure of petitioner to comply with the Rules of Court and paragraph 2 of Circular No. Hence. and 6% per annum on the total amount due.00. 1984 private respondent also sent by registered . 1983 until fully paid. his supposed obligation in the amount of P5. private respondent sent petitioner telegrams demanding payment thereof. the Court ordered the entry of judgment in this case. private respondent filed on January 24. as well as the cross claim. petitioner filed a motion for leave to file a second motion for reconsideration which. 1996 COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS.00. The counterclaim. 10507 for collection of a sum of money and damages. Campos then persuaded petitioner to act as a comaker in the said loan. 1983 at 16% per annum until fully paid. on the witness stand. Meanwhile. Pio Tio had assured Naybe of the approval of a loan he would make with private respondent. is adjudged solidarily liable and ordered to pay to the plaintiff Philippine Bank of Communications. the lower court held that. On February 6. Since both obligors did not respond to the demands made. although Naybe had no money to buy the equipment. 5 (q) of Rule 131. the branch manager of private respondent in Cagayan de Oro City. Naybe was interested in the business and would contribute a chainsaw to the venture. 1986 a complaint for collection of the sum of P50. Rudy Campos. as follows: WHEREFORE. and to sufficiently show that respondent court had committed any reversible error in its questioned Decision. 96405 mail a final letter of demand to Rene C.clearly appears directly below the admitted signature of the petitioner in the promissory note. Naybe and Gregorio D. 1991. SO ORDERED. with interest thereon from May 5. 1983 and on June 8.. His motion for reconsideration of the said decision having been denied. only the summons addressed to petitioner was served as the sheriff learned that defendant Naybe had gone to Saudi Arabia. he indicated that he bound himself only for the amount of P5. as liquidated damages or penalty from May 5. Petitioner s liability resulted from the promissory note in the amount of P50. not binding upon the private respondent as creditor-bank. x---------------------------------------------------x DECISION ROMERO. Branch 18. -versusG. Thus. 1987. 1987. JR. Respondents. the lower court dismissed the case against defendant Pantanosas as prayed for by the private respondent herein. the latter s uncorroborated testimony on his limited liability cannot prevail over the presumed regularity and fairness of the transaction. J. the Court denied. 1991. are dismissed for lack of merit. Cagayan de Oro City branch. The lower court added that it was rather odd for petitioner to have indicated in a copy and not in the original. who told him that he was a partner of Pio Tio. He affixed his signature thereto but in one copy. fraud and misrepresentation that he was made liable for the amount of P50. The lower court also noted that petitioner was a holder of a Bachelor of Laws degree and a labor consultant who was supposed to take due care of his concerns. On January 27. Cagayan de Oro City. Consequently.000. Petitioner. plus 10% of the total amount due for expenses of litigation and attorney s fees.Thereafter. defendant BALDOMERO L.000. However. affirmed that of the lower court. He added that. he was approached by his friend. 1986. Pantanosas on February 3. holding themselves jointly and severally liable to private respondent Philippine Bank of Communications.R. Naybe. June 26. and that.SUPREME COURT SECOND DIVISION BALDOMERO INCIONG.000. 1983. 1991.000. petitioner alleged that sometime in January 1983.00 which he signed with Rene C.00 only. INCIONG. therefore. it was by trickery. Petitioner allegedly acceded but with the understanding that he would only be a co-maker for the loan of P5.000. even granting that said limited amount had actually been agreed upon. 1990. Finally. 1984.: This is a Petition for Review on Certiorari of the Decision of the Court of Appeals affirming that of the Regional Trial Court of Misamis Oriental. Petitioner alleged further that five (5) copies of a blank promissory note were brought to him by Campos at his office. he filed the instant petition for review on certiorari. in the Resolution of May 27. and to pay the costs. the complaint was dismissed for failure of the plaintiff to prosecute the case. His Motion for the Reconsideration of the denial of his Petition was likewise denied with finality in the Resolution of April 24.00). appealed the said decision to the Court of Appeals which. The promissory note was due on May 5. on January 9. In the same Resolution. of the promissory note.000.000.

000. are released from their obligation whenever by come act of the creditor. Nor is there merit in petitioner s assertion that since the promissory note is not a public deed with the formalities prescribed by law but a mere commercial paper which does not bear the signature ofattesting witnesses. however. The first paragraph of the parol evidence rule states: When the terms of an agreement have been reduced to writing.00. (b) the loan was incurred for the purpose of buying a second-hand chainsaw which cost only P5. Clearly. and against Pantanosas. petitioner filed a motion for leave to file a motion for clarification. together with interest at the rate of SIXTEEN (16) per cent per annum until fully paid. for value received. contrary to their agreement that the loan was only for the amount of P5. they cannot be subrogated to the rights.000. even though they be solidary. He cites as basis for his argument. parol evidence may overcome the contents of the promissory note. on August 7. fraud must be established by clear and convincing evidence. called the guarantor. 1988. It is to be noted. his co-maker. I/we. outside the premises of the bank. JOINTLY and SEVERALLY promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS as its office in the City of Cagayan de Oro. (f) petitioner and Judge Pantanosas were not present at the time the loan was released in contravention of the bank practice. It supports petitioner s allegation that they were induced to sign the promissory note no the belief that it was only for P5. However. Nonetheless. he asserted that he had attached Registry Receipt No. If a person binds himself solidarily with the principal debtor. Article 2080 of the Civil Code which provides that: The guarantors. especially because the dismissal of the case against Pantanosas was upon the motion of private respondent itself. Philippine Currency. the rule does not specify that the written agreement be a public document.. In such a case the contract is called a suretyship. between the parties and their successors in interest. a written contract need not by in any particular form. A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation. fail as it was evidenced only by his own uncorroborated and. Title I of this Book shall be observed. petitioner contends that in signing the promissory note. Finally. On the other hand. that it would be unsafe. Annexed to the petition is a copy of an affidavit executed on May 3. expectedly.) .00. petitioner was actually in the right direction towards proving that he and his co-makers agreed to a loan of P5.00 only considering that. and (g) notices of default are sent simultaneously and separately but no notice was validly sent to him. where a parol contemporaneous agreement was the inducing and moving cause of the written contract.00. the promissory note stated the amount of P50. or be signed by both parties. By alleging fraud in his answer. we fined the petition unmeritorious. notes and other instruments of a similar nature are not subject to be varied or contradicted by parol or extrinsic evidence. bills. the provisions of Section 4. Petitioner also argues that the dismissal of the complaint against Naybe. binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. it would have strengthened his claim that the promissory note did not reflect the correct amount of the loan. Article 2047 of the Civil Code states: By guaranty a person. 1991. an MTCC judge and petitioner s co-maker in the promissory note. that petitioner signed the promissory note as a solidary co-maker and not as a guarantor.00) Pesos.000.00.00. In the latter motion. petitioner may no longer be accorded the same opportunity in the abuse of discretion on the part of the court below. Jr. The affidavit is clearly intended to buttress petitioner s contention in the instant petition that the Court of Appeals should have declared the promissory note null and void on the following grounds: (a) the promissory note was signed in the office of Judge Pantanosas. the Court granted his prayer that his petition be given due course and reinstated the same. and preferences of the latter. 3268 to page 14 of the petition in compliance with Circular No. 1-88. when parties have expressed the terms of their contract in writing. not even being adequate. Petitioner is to be reminded of the basic rule that this Court is not a trier of facts. for the parol evidence rule to apply. This is patent even from the first sentence of the promissory note which states as follows: Ninety one (91) days after date.000. by Gregorio Pantanosas. (Emphasis supplied. (e) the loan had no collateral. (d) the loan was not approved by the board or credit committee which was the practice. What is required is that agreement be in writing as the rule is in fact founded on long experience that written evidence is so much more certain and accurate than that which rests in fleeting memory only. As a general rule.00. his consent was vitiated by fraud as.000. mortgages.Unfazed. it is considered as containing all the terms agreed upon and there can be.000.00. no evidence of such terms other than the content of the written agreement. at it exceeded P5. self-serving testimony. the principal debtor. Philippines the sum of FIFTY THOUSAND ONLY (P50. Chapter 3. The above-stated points are clearly factual. Had he presented Judge Pantanosas affidavit before the lower court. adding that it was Campos who caused the amount of the loan to be increased to P50. it may be shown by parol evidence. Petitioner s attempt to prove fraud must.000. and each creditor is entitled to demand the whole obligation.000. mere preponderance of evidence. therefore.500. (c) even a new chainsaw would cost only P27. Thus. constituted a release of his obligation. or after the rendition of the decision of the lower court. Thus. to admit weaker evidence to control and vary the stronger and to show that the parties intended a different contract from that expressed in the writing signed by them. Having lost the chance to fully ventilate his factual claims below.

. Chapter 3. the presumption is that obligation is joint so that each of the debtors is liable only for a proportionate part of the debt. Book IV of the Civil Code. when the law so provides or when the nature of the obligation so requires. Consequently. the instant Petition for Review on Certiorari is here DENIED and the questioned Decision of the Court of Appeals is AFFIRMED. The choice is left to the solidary creditor to determine against whom he will enforce collection. title I. retains all the other rights. WHEREFORE. and a fiador in solidum (surety). may only have recourse against his co-makers. as provided by law. SO ORDERED. Tolentino explains: A guarantor who binds himself in solidum with the principal debtor under the provisions of the second paragraph does not become a solidary co-debtor to all intents and purposes. some or all of them may be proceeded against for the entire obligation. therefore. actions and benefits which pertain to him by reason of rights than those bestowed upon him in Section 4. Section 4. Petitioner. 1207 thereof. There is a difference between a solidary co-debtor. the liability of a guarantor is different from that of a solidary debtor. suffice it to say that the court never acquired jurisdiction over him. As regards Nayve. Book IV of the Civil Code states the law on joint and several obligations.While a guarantor may bind himself solidarily with the principal debtor. Under Art. Costs against petitioner. There is a solidarily liability only when he obligation expressly so states. the dismissal of the case against Judge Pontanosas may not be deemed as having discharged petitioner from liability as well. Because the promissory note involved in this case expressly states that the three signatories therein are jointly and severally liable. The later. any one. when there are two or more debtors in one and the same obligation. Chapter 3. outside of the liability he assumes to pay the debt before the property of the principal debtor has been exhausted. Thus. Title I.

docketed as CV-42333.R. On 25 November 1982. and ALFREDO CHING. PBM's obligations stood at P7. In due time the imported goods arrived and were released. SO ORDERED (p. answer in the affirmative. On 14 October 1982. which RCBC opposed.1981 until fully paid. in whatever stage the same may have been.649. PBM filed a Petition for Suspension of Payments with the Securities and Exchange Commission. The facts: On 4 May 1979.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. Cayetano.000. a motion for extension to file said opposition having been earlier withdrawn. Alfredo Ching. Balgos & Perez for respondents. Between 8 September to 30 October 1980. dated 6 July 1982. the true intent and agreement of the parties was that the maturity dates of the trust receipts were to be extended at the end of the stipulated dates. RCBC opened the corresponding letters of credit and imported various goods for PBM's account. therefore. service charges and penalties from August 7. RCBC contended that respondents PBM and Ching had not denied their indebtedness to RCBC and. In an injunctive Order. declaring: WHEREFORE. were ordered suspended by the SEC in order to give the Commission the opportunity to pass upon the feasibility of any rehabilitation plans.08 inclusive of interest." On 23 September 1981. and b) P10. Less than a year later. the Appellate Court denied RCBC's Motion for Reconsideration.08. On 6 October 1988. 1981 on account of their liability in solidum arising from the trust receipts and comprehensive surety agreements plus such other additional amount by way of interest. PBM obligated itself. 2250. 192. to pay on demand for all draft(s) drawn under or purporting to be drawn under the credits. Reyes & Manalastas for petitioner. during the pendency of a rehabilitation proceeding. Through said applications. Alfredo Ching signed a 'Comprehensive Surety Agreement' with Rizal Commercial Banking Corporation (RCBC). 2250.000. among other things. No. a Motion for Summary Judgment in CV-42333. binding himself to jointly and severally guarantee the prompt payment of all PBM obligations owing RCBC in the aggregate sum of Forty Million (P40.649. On 4 December 1981 the Court issued an Order lifting the attachment upon their filing of a satisfactory counter-bond. a Writ of Preliminary Attachment was issued against the assets and properties of respondents PBM and Ching on the same day. respondents. Meanwhile. By way of special and affirmative defenses they alleged that "although the trust . Upon filing of a bond satisfactory to the Court. On appeal. as had been the customary practice of RCBC with PBM. SEC approved the revised rehabilitation plan and ordered its implementation. petitioner Bank in the negative. no genuine issue was raised in the pleadings. PHILIPPINE BLOOMING MILLS. All in all. MELENCIO-HERRERA. the CFI rendered such summary judgment** in RCBC's favor. INC.00) Pesos. petitioner. And on 26 April 1988. payment of all claims against the principal debtor bar or preclude the creditor from recovering from the surety? Respondents Philippine Blooming Mills (PBM) and its Surety. 1989 RIZAL COMMERCIAL BANKING CORPORATION. RCBC filed a Complaint for collection of said sum against respondents PBM and Alfredo Ching with the then Court of First Instance of Pasig.982.982. vs. or on 7 August 1981. PBM filed several applications for letters of credit with RCBC. PBM and Ching moved to discharge the attachment. set aside the lower Court Decision and ordered it to hold in abeyance the determination of the merits invoked in CV-42333 pending the outcome of SEC Case No. seeking at the same time its rehabilitation. receipts stipulate due dates. Everything being in order. Original Record). COURT OF APPEALS.00 as attorney's fees. respondent Court of Appeals. J. unopposed.*** ruling that it was precipitate and improper for the lower Court to have continued with the proceedings despite the SEC Order of suspension. to PBM who acknowledged receipt thereof through various trust receipts. service charges and penalties as of August 7. in trust. on 1 April 1982. Ponce Enrile.: Will a Securities and Exchange Commission (SEC) Order suspending. 85396 October 27. all actions for claims against PBM pending before any Court or tribunal. judgment is hereby rendered against the defendants (PBM and Ching) in favor of plaintiff (RCBC) ordering defendants to pay plaintiff jointly and severally the following: a) P7.000. With costs against the defendants. RCBC pursued its claims with the Trial Court and filed. docketed as SEC Case No.

as creditor. G.R." Nothing in said Order puts respondent Ching within its scope. obviously would have had a much earlier date than the maturity dates of the trust receipts and considering that the instant case was brought on August 7. The lower Court correctly found the case to be without any genuine issue of fact and ripe for summary judgment. 2042 to 2100 in the schedule (pages 2 and 3. that the pendency of SEC Case No. are SET ASIDE. Alfredo Ching. must necessarily benefit the Surety. the SEC injunctive Order is of no effect as far as the respondent Surety. liability therefor may not be restricted unless expressly so stated. the corporation under rehabilitation. Alfredo Ching. 1981.119 SCRA 485). Under the attendant facts and circumstances. 1981 at the earliest. nor the Agreement itself . Alfredo Ching cannot be held liable therefor. lacking consideration therefor notwithstanding (p. In fine. it is claimed. as a corporate officer. Philippine Blooming Mills and Alfredo Ching. It is basic that the parties are bound by the terms of their contract. WHEREFORE. No. That respondent Ching acted for and on behalf of respondent PBM as part of its usual corporate procedure is not supported by the evidence nor the pleadings on record. The obligation. 199-200. 29 December 1982. and that its right. or that each one of the latter is bound to render. In fine. granting its existence. which are grantees of a primary franchise and/or a license or permit issued by the government to operate in the Philippines.We can not give any additional meaning to the plain language of the subject agreement. That Agreement is bare of words imputing to respondent Ching any liability other than that of a Surety who binds himself to insure a debt in his personal capacity. RCBC avers that to hold the injunctive Order applicable to both respondents PBM and Ching is to deprive RCBC of its right to proceed against the Surety based on the latter's separate and independent undertaking. Paras. entire compliance with the prestation (Article 1207. it is usual for majority stockholders to act as co-signors with their respective corporations where promissory notes. Court of Appeals. be classified as a corporate act. demandable when the day comes (pp. Where an obligation expressly states a solidary liability. The judgment of the lower Court is hereby REINSTATED and made executory as far as respondent. when no such extension has ever been requested by defendants. The alleged agreement to extend. Court of Appeals (No. concur. Under Section 3 of P. dated 30 June 1988. It is too far fetched to rule that the Court will grant an extension of time to pay. Padilla. 902-A. 1989). the extent of a surety's liability is determined only by the clause of the contract of suretyship. we answer the question earlier posed in the negative. hence. the last of which was submitted on 27 July 1989. But it has not even been alleged by defendants that such representations were made by defendants. He can be sued separately to enforce his liability as Surety for PBM (Traders Royal Bank vs. complaint) shows that the maturity dates thereof vary from May 12. supervision and control only over corporations or associations. to proceed against respondent Ching. Suffice it to say that the summary judgment made by the lower Court offers an acceptable explanation finding respondents' obligation as matured and demandable. RCBC takes the position that the SEC injunctive Order pertains and affects only PBM. beyond the terms of the contract. It cannot be extended by implication. Respondents' bare allegation of customary extensions is not corroborated by any documentary evidence but remains plain self-serving assertions. it being clear therefrom that the rehabilitation receivers were limited "to tak(ing) custody and control over all the existing assets and property of PBM. Thus: The trust receipts from No. . 1981 at the latest and February 19. Original Record). 94. and its Resolution denying reconsideration thereof. Civil Code). this Petition for Review. PBM and Ching counter that the liabilities incurred by PBM were corporate in character and. there should have been. Moreover. That there exists a Comprehensive Surety Agreement between RCBC and respondent Ching is admitted. as Surety.. Costs against private respondents. et al. SO ORDERED. and that the liability of the Surety can not be more than what would remain after payment of all the obligations of the principal. is covered by Article 1193 of the Civil Code and hence. is concerned. He is charged as an original promissor by virtue of his primary obligation under the Suretyship Agreement. Respondent Ching's action may. which is the law between them. it is averred. Civil Code). 78412. is concerned. therefore. PBM and Ching allege a customary extension given by petitioner in PBM's favor. The SEC injunctive Order can not effect a suspension of payment of respondent Surety's due and demandable obligation. 2250 and the rendition of an Order therein on 26 April 1988 implementing respondent PBM's rehabilitation plan must necessarily benefit the Surety. Original Record). collaterals or guaranty or security agreements are involved. they continue. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously (Article 1216. as Surety. to say the least. JJ. as amended by P. which. There is no escaping the attendant liability that binds respondent Ching.Hence. inasmuch as payment of PBM obligations must be made pursuant to that plan. L-57957. and required the filing of Memoranda by the parties. To further avoid payment of their obligation. September 26.D. As held in Zenith Insurance Corporation vs. the Commission is given absolute jurisdiction. representation made prior to the maturity dates or at least on the dates of maturity thereof. the Decision of the Court of Appeals. dated 6 October 1988. to which we gave due course on 31 May 1989.D. Conversely. Neither can respondent Ching seek refuge behind the SEC injunctive Order. 1758. Sarmiento and Regalado. the concurrence of two or more creditors or two or more debtors in one and the same obligation implies that each one of the former has a right to demand. is not affected by said Order.

petitioners filed their Answer and Compulsory Counterclaims ad Cautelam before the trial court in Civil Case No. Accordingly. among others. through Lim and Mariano. Q-00-41103.000 each as attorney's fees plus costs of suit. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court. No. 2004 Inc. not just of its properties covered by the SPA with Lafarge but of several other properties as well. DECISION PANGANIBAN. Petitioners moved to dismiss the Complaint on the ground that it violated the prohibition on forum-shopping. This amount was to be deposited in an interest-bearing account in the First National City Bank of New York (Citibank) for payment to APT.700.by way of compulsory counterclaims against Respondent CCC. The decretal portion of the first assailed Order reads: "WHEREFORE. despite the subsequent finality of the Decision in GR No. In the meantime. Lim and Mr. The case was docketed as GR No. LIM and ANTHONY A.000 each as exemplary damages. the origins of the present controversy can be traced to the Letter of Intent (LOI) executed by both parties on August 11. 1 . Relying on this 5 Court's pronouncement in Sapugay v.84 -.000. the Complaint prayed. (c) P100. petitioners elevated the matter before the Court of Appeals in CA-GR SP No. At the time of the foregoing transactions.140. and (d) P5. the defendants' claims against Mr. However. Q-00-41103. CONTINENTAL OPERATING CORPORATION and PHILIP ROSEBERG. Mariano -. 119712.020. On behalf of Lim and Mariano who had yet to file any responsive pleading.the equivalent of US$2. had filed the "baseless" Complaint in Civil Case No. allegedly agreed to retain from the purchase price a portion of the contract price in the amount of P117.R. to avoid being in default and without prejudice to the outcome of their appeal. whereby Petitioner Lafarge Cement Philippines. In their Answer. petitioners allegedly refused to apply the sum to the payment to APT. CA. Q-00-41103. Q-00-41103 and procured the Writ of Attachment in bad faith. CONTINENTAL CEMENT CORPORATION. GREGORY T. 4 Mariano captioned as their counterclaims are dismissed. petitioners prayed that both Lim and Mariano be held "jointly and solidarily" liable with Respondent CCC. In anticipation of the liability that the High Tribunal might adjudge against CCC. 68688. and its corporate secretary Anthony A. the petitioner in GR No. under Clause 2 (c) of the SPA.000. its majority stockholder and president Gregory T. (b) P100. Court of Appeals and Continental Cement Corporation. Q-00-41103 in another action.000 each as actual damages. LUZON CONTINENTAL LAND CORPORATION. 2000.799. they denied the allegations in the Complaint.846. 2000 Order. CCC moved to dismiss petitioners' compulsory counterclaims on grounds that essentially constituted the very issues for resolution in the instant Petition. 1998. the plaintiff's motion to dismiss claims is granted. a "Complaint with Application for Preliminary Attachment" against petitioners. entitled Asset Privatization Trust (APT) v. On October 21. 1998. The Facts Briefly. 119712 in favor of the latter and the repeated instructions of Respondent CCC. After the trial court denied the Motion to Dismiss in its November 14. vs. Fearful that nonpayment to APT would result in the foreclosure. J. which involved the same parties and which was filed earlier before the International Chamber of Commerce. 119712.000 each as moral damages. INC. the parties. including Petitioner Luzon Continental Land Corporation (LCLC) -. both parties entered into a Sale and Purchase Agreement (SPA). CCC filed before the Regional Trial Court of Quezon City on June 20. LAFARGE CEMENT PHILIPPINES. Respondent CCC had allegedly made the same claim it was raising in Civil Case No.for the sums of (a) P2. petitioners.on behalf of its affiliates and other qualified entities.agreed to purchase the cement business of Respondent Continental Cement Corporation (CCC). 2002 Orders of the Regional Trial Court (RTC) of Quezon City (Branch 80) in Civil Case No. Inc. petitioners were well aware that CCC had a case pending with the Supreme Court. Docketed as Civil Case No. They prayed -.). (formerly Lafarge Philippines.Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. that petitioners be directed to pay the "APT Retained Amount" referred to in Clause 2 (c) of the SPA. Lim." The second challenged Order denied petitioners' Motion for Reconsideration. 2002 and the September 3. MARIANO. in the light of the foregoing as earlier stated. 155173 November 23.000. Petitioners alleged that CCC. (Lafarge) -.. seeking to nullify the 2 3 May 22.: May defendants in civil cases implead in their counterclaims persons who were not parties to the original complaints? This is the main question to be answered in this controversy. respondents.

.Ruling of the Trial Court On May 22. the Court will resolve the foregoing in reverse order. the RTC clarified that it was dismissing the counterclaim insofar as it impleaded Respondents Lim and Mariano. they would be barred forever. 2002. (ii) Sapugay v. Petitioners' Counterclaims Compulsory Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil Procedure as "any claim which a defending party may have against an opposing party. particularly in its pronouncement that their counterclaim had been pleaded against Lim and Mariano only. Mariano were the persons responsible for making the bad faith decisions for. petitioners raise the following issues for our consideration: "[a] Whether or not the RTC gravely erred in refusing to rule that Respondent CCC has no personality to move to dismiss petitioners' compulsory counterclaims on Respondents Lim and Mariano's behalf. and causing plaintiff to file this baseless suit and to procure an unwarranted writ of attachment. absent the compulsory counterclaim rule? 3) Will substantially the same evidence support or refute plaintiff's claim as well as defendant's counterclaim? 4) Is there any logical relation between the claim and the counterclaim? A positive answer to all four questions would indicate that the counterclaim is compulsory. Lim. such that the defendant's demand may be adjudged by a counterclaim rather "Gregory T. We shall now examine the nature of petitioners' counterclaims against respondents with the use of the foregoing parameters. Federation of United Namarco 13 Distributors laid down the following criteria to determine whether a counterclaim is compulsory or permissive: 1) Are issues of fact and law raised by the claim and by the counterclaim largely the same? 2) Would res judicata bar a subsequent suit on defendant's claim. 2002 -. and (iii) petitioners violated the rule on joinder of causes 9 of action. FGU Insurance Corporation. A counterclaim is compulsory when its object "arises out of or is necessarily connected with the transaction or occurrence constituting the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot 12 acquire jurisdiction. among which were the following: a) the counterclaims against Respondents Lim and Mariano were not compulsory. and (2) that it could acquire jurisdiction over third parties whose presence is essential for its adjudication." Unlike permissive counterclaims.admitted some errors in its May 22. "[b] Whether or not the RTC gravely erred in ruling that (i) petitioners' counterclaims against Respondents Lim and Mariano are not compulsory." They are generally allowed in order to avoid a multiplicity of suits and to facilitate the disposition of the whole controversy in a single action. the trial court -. The Court's Ruling The Petition is meritorious. the "compelling test of compulsoriness" characterizes a counterclaim as compulsory if there should exist a "logical relationship" between the main claim and the counterclaim. Lim and Anthony A. Adopted in Quintanilla v. notwithstanding their knowledge that plaintiff has no right to bring it or to secure the writ. Lim was motivated by his personal interests as one of the owners of plaintiff while Anthony A. or when the claims are offshoots of the same basic controversy between the parties. and c) petitioners' Answer with Counterclaims violated procedural rules on the proper joinder of causes of action. Mariano was motivated by his sense of personal loyalty to Gregory T. Hence this Petition. In taking such bad faith actions. when the multiple claims involve the same factual and legal issues. Gregory T. Petitioners base their counterclaim on the following allegations: 14 15 Issues In their Memorandum. the Regional Trial Court of Quezon City (Branch 80) dismissed petitioners' counterclaims for several reasons. There exists such a relationship when conducting separate trials of the respective claims of the parties would entail substantial duplication of time and effort by the parties and the court. It is permissive "if it does not arise out of or is not necessarily connected with the subject matter of the opposing party's claim."11 A permissive counterclaim is essentially an independent claim that may be filed separately in another case. Court of Appeals is inapplicable here. b) the ruling in Sapugay was not applicable. 2002 Order. However." For clarity and coherence. even if it included CCC. 8 than by an independent suit. otherwise. compulsory counterclaims should be set up in the same action.10 A counterclaim may either be permissive or compulsory. for which reason he disregarded the fact that plaintiff is without any valid cause. First Issue: Counterclaims and Joinder of Causes of Action.6 Acting on the Motion for Reconsideration filed by petitioners. CA and reiterated in Alday v. The only limitations to this principle are (1) that the court should have jurisdiction over the subject matter of the counterclaim. NAMARCO v.in an Amended 7 Order dated September 3.

Lim's and Anthony A." "The plaintiff's. Mariano should be held jointly and solidarily liable to the defendants for exemplary damages of P100 million each."Consequently. Mariano's actions have damaged the reputations of the defendants and they should be held jointly and solidarily liable to them for moral damages of P100 million each. thus. initially fixed at P200. Cardenas -. Gregory T. "In order to serve as an example for the public good and to deter similar baseless. we held as follows: "Petitioners' counterclaim for damages fulfills the necessary requisites of a compulsory counterclaim. bad faith litigation. However. it would be abated on the ground of litis pendentia. petitioners discovered that respondent and its manager. guarding fees. They are damages claimed to have been suffered by petitioners as a consequence of the action filed against them. It claimed that they still had to post a surety bond which. In Sapugay. they requested the plaintiff to allow them to get gas. Court of Appeals finds application in the present case. petitioners filed a "Motion to Declare Plaintiff and its Manager Ricardo P. Cardenas." we find that. Later. Gregory T. This is an additional factor that characterizes petitioners' counterclaim as compulsory. the court shall order them to be brought in as defendants. but that it had refused. Sapugay v." Among the issues raised in Sapugay was whether Cardenas. the recovery of petitioners' counterclaims is contingent upon the case filed by respondents. Cardenas in Default on Defendant's Counterclaim. 19 it would meet the same fate on the ground of res judicata. Ricardo P. it would be barred forever. In their Answer. who was not a party to the original action. xxx xxx xxx Moreover.000. otherwise. If it is filed concurrently with the main action but in a different proceeding. Court of Appeals Applicable to the Case at Bar Sapugay v. had intended all along to award the dealership to Island Air Product Corporation. In their Answer with Counterclaim. allegedly suffered by the creditor in consequence of the debtor's action. was later raised to P700. We disposed of this issue as follows: "A counterclaim is defined as any claim for money or other relief which a defending party may have against an opposing party. They prayed that judgment be rendered. which respondent continued to withhold from them. are also compulsory counterclaim barred by the dismissal of the debtor's action. After both Mobil and Cardenas failed to respond to their Answer to the Counterclaim. In that case.as defendants. Mobil. the general rule that a defendant cannot by a counterclaim bring into the action any claim against persons other than the plaintiff admits of an exception under Section 14. Respondent Mobil Philippines filed before the trial court of Pasig an action for replevin against Spouses Marino and Lina Joel Sapugay. The pronouncement in Papa vs. Lim and Anthony A. if jurisdiction over them can be obtained. might nevertheless be impleaded in the counterclaim. Rule 6 which provides that 'when the presence of parties other than those to the original action is required for the granting of complete relief in the determination of a counterclaim or cross-claim. it is the same evidence that sustains petitioners' counterclaim that will refute private respondent's own claim for damages. storage. otherwise. Bautista involved the issue of whether the counterclaim that sought moral. but in no case less than P5 million for each of them and for which plaintiff Gregory T. Banaag (17 SCRA 1081) (1966) is in point: "Compensatory. The spouses exerted all efforts to secure a bond." "Aside from the fact that petitioners' counterclaim for damages cannot be the subject of an independent action. Tiu Po v. Lim and Anthony A. the plaintiff. petitioners alleged that after incurring expenses in anticipation of the Dealership Agreement. petitioners would be precluded by the judgment from invoking the same in an independent action. moral and exemplary damages. They cannot be claimed in a subsequent action by the creditor against the debtor. As such they should be held jointly and solidarily liable as plaintiff's co-defendants to those compulsory counterclaims pursuant to the Supreme Court's decision in Sapugay v. both Gregory T. conducting separate trials thereon will result in a substantial duplication of the time and effort of the court and the parties. it must be set up in the same action. rental. "The plaintiff's. of Cardenas in petitioners' 20 counterclaim is sanctioned by the rules. in amounts to be proved at trial." 16 The above allegations show that petitioners' counterclaims for damages were the result of respondents' (Lim and Mariano) act of filing the Complaint and securing the Writ of Attachment 17 in bad faith.' The inclusion. holding both jointly and severally liable for pre-operation expenses. Mariano's bad faith filing of this baseless case has compelled the defendants to engage the services of counsel for a fee and to incur costs of litigation. using the "compelling test of compulsoriness. Mariano should be held jointly and solidarily liable. but the bonding companies required a copy of the Dealership Agreement. if filed subsequently.000. The Complaint arose from the supposed failure of the couple to keep their end of their Dealership Agreement. clearly. Gregory T. therefore. Lim and Anthony A. petitioners impleaded in the counterclaim Mobil Philippines and its manager -Ricardo P. Lim and Anthony A. and unrealized profit including damages. They have to be pleaded in the same action."18 . Since the counterclaim for damages is compulsory. actual and exemplary damages and attorney's fees against respondents on account of their "malicious and unfounded" complaint was compulsory. Mariano are the plaintiff's cojoint tortfeasors in the commission of the acts complained of in this answer and in the compulsory counterclaims pleaded below.

Only upon service of summons can the trial court obtain jurisdiction over them. based on the 24 alleged facts. as evidenced by his failure to make any objection despite his active participation in the proceedings. "By adopting as his answer the allegations in the complaint which seeks affirmative relief. much less participation in the proceedings. while a compulsory counterclaim may implead persons not parties to the original complaint. so that the said individual may not seek refuge therein. in alleging bad faith on the part of Lim and Mariano the counterclaims had in effect made them "indispensable parties" thereto. Nevertheless. Obviously. or officer. Court of Appeals. or defend crime. it was this ratiocination which led the trial court to deny the motion to declare Mobil and Cardenas in default. is a matter of defense that should be threshed out during the trial. leads us to the inescapable conclusion that the trial court treated the opposition as having been filed in behalf of both Mobil and Cardenas and that the latter had adopted as his answer the allegations raised in the complaint of Mobil. if jurisdiction over them can be obtained. Although it was only Mobil which filed an opposition to the motion to declare in default. It was held thus: "It is noteworthy that Cardenas did not file a motion to dismiss the counterclaim against him on the ground of lack of jurisdiction."21 We disagree." by directing that summons be served on them." Such factual circumstances are unavailing in the instant case. In Tramat Mercantile v. but may be held individually and personally liable for his or her actions. In this manner. or that they have actively participated in the proceedings involving them. These allegations may warrant the piercing of the veil of corporate fiction. IAC has stressed that while a corporation is an entity separate and distinct from its stockholders. whether or not "fraud" is extant under the 26 circumstances is an issue that must be established by convincing evidence. respondents argue that new parties cannot be included in a counterclaim. trustee.a defendant in a compulsory counterclaim need not file any responsive pleading. not to speak of the fact that as manager of Mobil he would necessarily be interested in the case and could readily have access to the records and the pleadings filed therein. The inclusion of a corporate officer or stockholder -. to "order [such impleaded parties] to be brought in as defendants. However. there is no debate on whether. This is because Respondent CCC as a corporation with a separate [legal personality] has the juridical capacity to indemnify petitioners even without Messrs. The records do not show that Respondents Lim and Mariano are either aware of the counterclaims filed against them. the Court gave due consideration to certain factual circumstances. the corporate fiction may be disregarded if "used to defeat public convenience. the fact that the trial court denied said motion. except when no complete relief can be had.Cardenas in Sapugay or Lim and Mariano in the instant case -." Thus. or in case of two corporations.The prerogative of bringing in new parties to the action at any stage before judgment is intended to accord complete relief to all of them in a single action and to avert a duplicity and even a multiplicity of suits thereby. In insisting on the inapplicability of Sapugay. circumstances may warrant the inclusion of the personal liability of a corporate director. However. therefore. v.is not premised on the assumption that the plaintiff corporation does not have the financial ability to answer for damages. Rather. While the Court does rule that the counterclaims against Respondent CCC's president and manager may be properly filed. Lim and Mariano are not necessary for petitioners to obtain complete relief from Respondent CCC as plaintiff in the lower court. however. this does not obtain in the instant case. The correct procedure in instances such as this is for the trial court. it is not a personal decision but rather that of the corporation as 25 represented by its board of directors. While it is a settled rule that the issue of jurisdiction may be raised even for the first time on appeal. Messrs. Cardenas was not unaware of said incidents and the proceedings therein as he testified and was present during trial. Furthermore. as it is deemed to have adopted the allegations in the complaint as its 23 22 answer -. such inclusion is based on the allegations of fraud and bad faith on the part of the corporate officer or stockholder. Lim and Mariano. protect fraud. Remo Jr. "the law will regard the corporation as an association of persons. the determination of whether both can in fact be held jointly and severally liable with respondent corporation is entirely another issue that should be ruled upon by the trial court.does not apply. Cardenas is deemed to have recognized the jurisdiction of the trial court over his person and submitted thereto. justify a wrong." In these instances. if the said individual is found guilty of bad faith or gross negligence in directing corporate affairs. but he did not file any responsive pleading to the counterclaim leveled against him. they can be properly appraised of and answer the charges against them. Cardenas was furnished a copy of the Answer with Counterclaim. Suability and liability are two distinct matters. it should only be the corporation that could properly be held liable. Lim and Mariano cannot be held personally liable [because their assailed acts] are within the powers granted to them by the proper board resolutions. per Section 12 of Rule 6 of the Rules of Court. will merge them into one. They add that "[i]n the present case. The filing of a responsive pleading is deemed a voluntary submission to the jurisdiction of the court. In Sapugay. the general rule -. both are clearly parties in interest to the counterclaim. Further. in blatant disregard of rudimentary due process requirements. A contrary ruling would result in mischievous consequences whereby a party may be indiscriminately impleaded as a defendant in a compulsory counterclaim. a new party impleaded by the plaintiff in a compulsory counterclaim cannot be considered to have automatically and unknowingly submitted to the jurisdiction of the court. in dismissing the counterclaims against the individual respondents. the Court held that generally." The foregoing assertion. Respondents further assert that "Messrs. such that it has to share its liability with individual defendants. and judgment rendered against it without its knowledge. He may not now be heard to repudiate or question 27 that jurisdiction. the . particularly the trial court's treatment of the Complaint as the Answer of Cardenas to the compulsory counterclaim and of his seeming acquiescence thereto. both as to Mobil and Cardenas on the ground that Mobil's complaint should be considered as the answer to petitioners' compulsory counterclaim.

except when otherwise expressly stated or when the law or the nature of the obligation requires solidarity.cannot be said to have treated Respondent CCC's Motion to Dismiss as having been filed on their behalf. cooperate in. which provides that obligations are generally considered joint. as many causes of action as he may have against an opposing party. Gregory T. Attorney's fees and costs of suit of at least P5 million each. However.00. This characterization finds basis in Article 1207 of the Civil Code. Mariano jointly and solidarily to pay defendant actual damages in the sum of at least P2. obligations arising from tort are. This objective is negated by insisting -. and "c. the counterclaim for damages was based on the tortuous acts of 28 respondents.000." petitioners prayed: "WHEREFORE." Thus. CCC cites Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Civil Procedure. subject to the following conditions: (a) The party joining the causes of action shall comply with the rules on joinder of parties. Exemplary damages of P100 million each. They fail to recognize the universal doctrine that each joint tort feasor is not only individually liable for the tort in which he participates. respondents' liability. "Joint" or "jointly" or "conjoint" means mancum or mancomunada or pro rata obligation. instigate. A party may in one pleading assert. it is imperative that they be joined therein. Rules on Permissive Joinder of Causes of Action or Parties Not Applicable Respondent CCC contends that petitioners' counterclaims violated the rule on joinder of causes of action." The foregoing procedural rules are founded on practicality and convenience. Respondents Lim and Mariano are real parties in interest to the compulsory counterclaim. petitioners' usage of the term "joint and solidary" is confusing and ambiguous. if proven. "b. advise. countenance." Moreover. as we have stated earlier. Permissive joinder of parties. They are each liable as principals. is solidary. LCLC. aid or abet the commission of a tort. only to have it possibly re-filed in a separate proceeding. Second Issue: CCC's Personality to Move to Dismiss the Compulsory Counterclaims Characterizing their counterclaim for damages against Respondents CCC. The ambiguity in petitioners' counterclaims notwithstanding. on the other hand. More important. Lim and Anthony A. In its Motion to Dismiss. "2. It argues that while the original Complaint was a suit for specific performance based on a contract."29 Obligations may be classified as either joint or solidary. which we quote: "Section 5. "solidary obligations" may be used interchangeably with "joint and several" or "several. encourage. by their nature. Gregory T.court a quo -. "3. in joining Lim and Mariano in the compulsory counterclaim. x x x "It may be stated as a general rule that joint tort feasors are all the persons who command. petitioners are being consistent with the solidary nature of the liability alleged therein. Ordering the plaintiff. except as otherwise provided in these Rules. We have assiduously maintained this legal principle as early as 1912 in Worcester v.30 in which we held: "x x x The difficulty in the contention of the appellants is that they fail to recognize that the basis of the present action is tort. but is also jointly liable with his tort feasors.that the compulsory counterclaim for damages be dismissed. Moral damages of P100 million each. but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest. Lim and Anthony A. or who approve of it after it is done.unlike in Sapugay -. it is respectfully prayed that after trial judgment be rendered: "1. Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. Ordering the plaintiff. severally. COC and Roseberg: "a. Dismissing the complaint in its entirety. x x x" Section 6. All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist whether jointly. Joinder of causes of action. may. promote. to the same extent and in the same manner as if they had performed the wrongful act themselves. They are meant to discourage duplicity and multiplicity of suits. Lim and Mariano as "joint and solidary. if done for their benefit. where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action.as the court a quo has done -. Mariano jointly and solidarily to pay the defendants LPI.700. always solidary. x x x . in the alternative or otherwise. Ocampo. Section 7 of Rule 3 provides: "Compulsory joinder of indispensable parties. Other reliefs just and equitable are likewise prayed for. or in the alternative. join as plaintiffs or be joined as defendants in one complaint.

No costs. Mariano. Lim and Anthony A. Mariano." In a "joint" obligation. The counterclaims may properly implead Respondents Gregory T. In cases filed by the creditor.is therefore allowed. such issues are deemed automatically joined. With respect to those which personally belong to the others. he may avail himself thereof only as regards that part of the debt for which the latter are responsible. the relationship between the active and the passive subjects is so close that each of them must comply with or demand the fulfillment of the whole 31 obligation. . And this is true even though they are charged jointly and severally. The persons injured may sue all of them or any number less than all. from circumstances personal to it. Respondent CCC or any of the three solidary debtors (CCC. Article 1222 of the Civil Code provides: "A solidary debtor may. by one of the joint tort feasors. and all together are jointly liable for the whole damage. except among themselves. the Motion to Dismiss the compulsory counterclaim filed by Respondent CCC has no force and effect as to them. Lim or Mariano) may include. nevertheless. avail itself of all defenses which are derived from the nature of the obligation and of those which are personal to him. The damages can not be apportioned among them. The act of Respondent CCC as a solidary debtor -. Thus. x x x "Of course the court during trial may find that some of the alleged tort feasors are liable and that others are not liable. Respondent CCC cannot be declared in default. x x x "A payment in full for the damage done. In summary." (Emphasis supplied). The fact that the liability sought against the CCC is for specific performance and tort.33 Counterclaims that are only for damages and attorney's fees and that arise from the filing of the complaint shall be considered as special defenses and need not be answered. Lim and Anthony A. or pertain to his own share. we make the following pronouncements: 1. unless expressly adopted by Lim and Mariano. it cannot file the same Motion on their behalf for the simple reason that it lacks the requisite authority to do so. each obligor answers only for a part of the whole liability."Joint tort feasors are jointly and severally liable for the tort which they commit. Mariano are compulsory. a solidary debtor may invoke defenses arising from the nature of the obligation. even if both were not parties in the original Complaint. for the purpose of each paying an aliquot part. the Petition is GRANTED and the assailed Orders REVERSED. However. Respondent CCC cannot move to 32 dismiss the counterclaims on grounds that pertain solely to its individual co-debtors. nor is it any excuse for him that his participation in the tort was insignificant as compared to that of the others. They cannot insist upon an apportionment. Summons must be served on Respondents Lim and Mariano before the trial court can obtain jurisdiction over them. while that sought against the individual respondents is based solely on tort does not negate the solidary nature of their liability for tortuous acts alleged in the counterclaims. The courts may release some for lack of evidence while condemning others of the alleged tort feasors. defenses available to their co-defendants. A corporation has a legal personality entirely separate and distinct from that of its officers and cannot act for and on their behalf. it did not pray that the counterclaim against it be dismissed. It is no defense for one sued alone. that the others who participated in the wrongful act are not joined with him as defendants. The counterclaims against Respondents CCC. 4. Each is liable for the whole damages caused by all. The release of one of the joint tort feasors by agreement generally operates to discharge all. without being so authorized. Be that as it may.34 CCC's Motion to Dismiss the Counterclaim on Behalf of Respondents Lim and Mariano Not Allowed While Respondent CCC can move to dismiss the counterclaims against it by raising grounds that pertain to individual defendants Lim and Mariano.that of filing a motion to dismiss the counterclaim on grounds that pertain only to its individual co-debtors -. Article 1211 of the Civil Code is explicit on this point: "Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. The court of origin is hereby ORDERED to take cognizance of the counterclaims pleaded in petitioners' Answer with Compulsory Counterclaims and to cause the service of summons on Respondents Gregory T. There can be but satisfaction. a perusal of its Motion to Dismiss the counterclaims shows that Respondent CCC filed it on behalf of Co-respondents Lim and Mariano. According to such assertion. Gregory T. x x x "Joint tort feasors are not liable pro rata. the same Motion cannot be deemed to have been filed on behalf of the said co-defendants. They are jointly and severally liable for the whole amount." The solidary character of respondents' alleged liability is precisely why credence cannot be given to petitioners' assertion. in a "solidary" or "joint and several" obligation. or even from those personal to its co-debtors. WHEREFORE. in actions filed by the creditor. 2. Jurisprudence teaches that if the issues raised in the compulsory counterclaim are so intertwined with the allegations in the complaint. Lim and Anthony A. 3. SO ORDERED. in a Motion to Dismiss. of course satisfies any claim which might exist against the others.

to March 24. On March 24. Its first clause is in the following words: We jointly and severally acknowledge our indebtedness in the sum of P13. Upon these facts Jaucian prayed the court for an order directing the administrator of the Rogero estate to pay him the principal sum of P13. because. Jaucian. but as clearly appears from the instrument itself both debtors bound themselves jointly and severally to the creditor.R. to pay any part of the debt. Section 746 et seq. During the pendency of the appeal.33. 1908) bearing interest at the rate of 10 per cent per annum to Roman Jaucian. As such he had full knowledge of the claim presented and was given an opportunity to make his defense. 1909. 1912. 1914.332. J.33. 1908. Province of Albay. 1914. asking that the document in question be canceled as to her upon the ground that her signature was obtained by means of fraud. and that the court was therefore without jurisdiction to entertain the demand of the claimant. appeared by his attorney and opposed the granting of the petition upon the grounds that the claim had never been presented to the committee on claims for allowance. of age. and he was made a party defendant to the action then pending in the Supreme Court. according to the decision of the ROMAN JAUCIAN.23 Philippine currency (a balance made October 23. against the state of Hermenegilda Rogero upon the facts hereinbelow stated. on March 30.332. Somersille for appellee.221. as interest thereon from October 24. plus P7. in which. 1908. Jaucian entered an appearance in the estate proceedings. 1914. and Francisco Querol was named administrator of the estate. as interest thereon from October 24. of the Code of Civil Procedure provides for the presentation of contingent claims. A copy of this petition was served upon the administrator of the estate. after reciting the facts substantially as above set forth. the Supreme Court rendered in its decision reversing the judgment of the trial court 1 and holding that the disputed claim was valid. Goddard & Lockwood for appellant. administrator of the intestate estate of the deceased Hermenegildo Rogero.Republic of the Philippines SUPREME COURT Manila EN BANC G. Lino Dayandante and Hermenegilda Rogero executed a private writing in which they acknowledged themselves to be indebted to Roman Jaucian in the sum of P13. The terms of this obligation are fully set out at page 38 of the bill of exceptions. On April 13. then sitting in the Court of First Instance of Albay. It is presumed that defense was made in the Supreme Court. On November 25. and there is nothing in the terms of the obligation itself to show that the relation between the two debtors was that of principal and surety. In November. by the deceased. and the complete insolvency of Dayandante.: This appeal by bill of exceptions was brought to reverse a judgment of the Court of First Instance of the Province of Albay whereby said court has refused to allow a claim in favor of the plaintiff.33. L-11307 October 5. asked for judgment against the plaintiff for the amount due upon the obligation. Jaucian did not assign as error the failure of the lower court to give him judgment on his cross-demand. 1908.66. While the case was pending in the Supreme Court. No contingent claim was filed before the commissioners by Roman Jaucian. and therefore the decision upon the appeal was limited to the issues concerning the validity of the document.332.221.defendant-appellee. the failure of her co-obligor Dayandante. Hermenegilda Rogero signed this document in the capacity of surety for Lino Dayandante. which appears to have matured at that time. This committee made its report on September 3. and a committee was appointed to pass upon claims against the estate. STREET. with interest on the principal sum from March 24. to March 24. who seems to have rested content with the action pending. with interest on the principal sum of P13. except P100 received from him in March. Roman Jaucian. Hermenegilda Rogero brought an action in the Court of First Instance of Albay against Jaucian. at 10 per cent per annum. 1913. FRANCISCO QUEROL. 1914. Francisco Querol was named administrator. or about a year and half after the filing of the report of the committee on claims against the Rogero estate. by was of cross-complaint. 1914. Albert E. who. from which judgment the defendant appealed to the Supreme Court.332. proceedings were had in the Court of First Instance of Albay for the administration of the estate of Hermenegilda Rogero. This claim is a contingent claim. plus P7. No. that more than eighteen months had passed since the filing of the report of the committee. he rendered his decision. In his appeal to this court. 1918 the Court of First Instance in favor of the plaintiff. 1914. 1908. Hermenegilda Rogero died and the administrator of her estate was substituted as the party plaintiff and appellee. and filed with the court a petition in which he averred the execution of the document of October. In October.66. against the estate. vs. plaintiff-appellant. Manly. 1914. Philippine Islands and married to Pilar Tell. A hearing was had upon the petition before the Honorable P. Moir. In his answer to the complaint. he said: During the pendency of that action (the cancellation suit) in the Supreme Court Hermenegilda Rogero died. until paid. Judgment was rendered in . a resident of the municipality of Ligao.M.

The court regarded Dayandante. entered an order refusing to grant Jaucian's petition." then the claim of Jaucian against the estate will be ordered paid or any balance that may be due to him. and the said defense having been made by the administrator. and that part of the opinion. had "admitted the claim. the court considers this a substantial compliance with the law. 1914. the administrator has a right to require that Roman Jaucian produce a judgment for his claim against Lino Dayandante." The petition was again opposed by the administrator of the estate upon the grounds (a) that the claim was not admitted by the order of April 13. 1914. and (b) in refusing to order the administrator of the estate of Hermenegilda Rogero to pay the appellant the amount demanded by him. the commissioners having long since made report. there is nothing in the law which says that his claim is barred or prescribed. 1914. We therefore conclude that no rights were conferred by the said order of April 13. he cannot now come into court and hide behind a technicality and say that the claim had not been presented to the commissioners and that. The object of presenting the claim to the commissioners is simply to allow them to pass on the claim and to give the administrator an opportunity to defend the estate against the claim. The court considers that paragraph (e) of the opposition is well-taken and that there must be legal action taken against Lino Dayandante to determine whether or not he is insolvent. and therefore was not appealable. which he has ceded to Roman Jaucian. contends that if a creditor holding a contingent claim does not see fit to avail himself of the privilege thus provided. that Dayandante was insolvent. no property of the judgment debtor having been found. if his claim becomes absolute within that period present it to the court for allowance. was not final. that the court had no jurisdiction to entertain it. His argument is that as section 746 of the Code of Civil Procedure provides that contingent claims "may be presented with the proof to the committee. under section 748 of the Code of Civil Procedure." On November 24.Supreme Court. In this court the appellant contends that the trial judge erred (a) in refusing to give effect to the order made by the Honorable P. and therefore it was not appealable. . the Honorable J. Hermenegilda Rogero was a surety of Lino Dayandante. 1914. was not reduced to judgment during the lifetime of said Hermenegilda Rogero. at any time within two years from the time allowed other creditors to present their claims. is that no appeal from it having been taken. it was barred. it became final. The pivotal fact upon which the order was based was the failure of appellant to show that he had exhausted his remedy against Dayandante. To this ruling the appellant excepted and moved for a rehearing. Appellant contends that his claim against the deceased was contingent. On October 28. the judge a quo entered an order denying the rehearing and setting forth at length. that as the claim had never been presented to the committee on claims. 1914. and renewed the prayer of the original petition. then sitting in the Court of First Instance of Albay. and that "the statement of the court with regard to the admissibility of the claim was mere dictum. it held that whatever rights Jaucian might have against the estate of Rogero were subject to the performance of a condition precedent. namely. and this failure the court regarded as a complete bar to the granting of the petition at that time.M. On the other hand counsel for appellee contends (1) that contingent claims like absolute claims are barred for nonpresentation to the committee but (2) that the claim in question was in reality an absolute claim and therefore indisputably barred. The court regarded Dayandante as the principal debtor. upon which the order was based. it is quite clear from what we have stated that the order of April 13. dated April 13. It was contended that the court." it follows that such presentation is optional. The contention with regard to the order of April 13. and that such creditor. This having been given by the administrator defending the suit in the Supreme Court. 1914. 1914. and that declaration under oath to the effect that he has no property except P100 worth of property. that the decision of the Supreme Court in the action brought by the deceased against Jaucian did not decide anything except that the document therein disputed was a valid instrument. In effect. upon the grounds last stated. may. and this credit is outlawed or prescribed. Appellant. 1914. Jenkins. On December 11. which occurred on August 2. however. These grounds were briefly. and that it did not preclude the administrator from making opposition to the petition of the appellant when it was renewed. was a mere contingent claim against the property of the said Hermenegilda Rogero. Execution was issued upon this judgment. by its order of April 13. Acting upon the suggestions contained in this order Jaucian brought an action against Dayandante and recovered a judgment against him for the full amount of the obligation evidenced by the document of October 24. after hearing argument. Hermenegilda Rogero having been simply surety for Lino Dayandante. required no action by the administrator at that time. The simple affidavit of the principal debtor that he had no property except P100 worth of property which he has ceded to the creditor is not sufficient for the court to order the surety to pay the debt of the principal. in order that the said administrator may be subrogated to the rights of Jaucian against Dayandante. is not sufficient. 1914. His theory is that the deceased was merely a surety of Dayandante. but was returned by the sheriff wholly unsatisfied. and that this court has no jurisdiction to consider this claim. When this action shall have been taken against Lino Dayandante and an execution returned "no effects. the reasons upon which he based his denial of the petition. in which they averred. was not binding upon him or any other judge by whom he might be succeeded. and the deceased as a surety only liable for such deficiency as might result after the exhaustion of the assets of the principal co-obligor. 1911. Moir. An examination of the order in question. Regardless of what may be our views with respect to the jurisdiction of the court to have granted the relief demanded by appellant in any event. and was not presented to the commissioners on claims during the period of six months from which they were appointed in this estate. which contained statements of what the court intended to do when the petition should be renewed. furthermore. The court made no order requiring the appellee to make any payment whatever. that he should first exhaust this remedy against Dayandante. leads us to conclude that it was not a final order." and (b) "that the said claim during the life and after the death of Hermenegilda Rogero. said commissioner having given due and lawful notice of their sessions and more than one year having expired since the report of the said commissioners. the claim cannot be referred to the commissioners and therefore the claim of Roman Jaucian is barred. counsel for Jaucian filed another petition in the proceedings upon the estate of Hermenegilda Rogero. 1908. C.

This article declares in effect that." as here used. In other words. and the word "joint" is. or compiler. and (2) mancomunidad solidaria. the obligation is apportionable among the debtors. of our Code of Civil Procedure from the statutes of the State of Vermont. Article 1831 provides: This application can not take place (1) . The section quoted. . Article 1144 of the same code provides: A creditor may sue any of the joint and several (solidarios) debtors or all of them simultaneously. The sense of the word "joint. In the common law system every debtor in a joint obligation is liable in solidum for the whole. every obligation in which there is no conception of obligation corresponding to the divisible joint obligation contemplated in article 1138 of the Civil Code. Now. Bearing in mind that the deceased Hermenegilda Rogero. the following provisions of law are here pertinent. his estate shall be liable therefor. is rendered by the Spanish word "mancomunadamente. The solidary obligation is. or upon a judgment founded on a joint contract. But the estate shall have the right to recover contribution from the other joint debtor. which term includes (1) mancomunidad simple. (2) If he has jointly bound himself with the debtor . every obligation in which there are numerous debtors we here ignore plurality of creditors shall be considered divided into as many parts as there are debtors. . To avoid the inconvenience of this procedural requirement and to permit the creditor in a joint contract to do what the creditor in a solidary obligation can do under article 1144 of the Civil Code. The absolute character of the claim and the duty of the committee to have allowed it is full as such against the estate of Hermenegilda Rogero had it been opportunely presented and found to be a valid claim is further established by section 698 of the Code of Civil Procedure. the provisions of section fourth. The claims instituted against one shall not be an obstacle for those that may be later presented against the others. merely a form of joint obligation. without attempting to draw the other debtors into intestate or testamentary proceedings. which provides: When two or more persons are indebted on a joint contract. here used in the sense which attaches to it in the common law. the sense of the English word "joint. It will thus be seen that the purpose of section 698 of the Code of Civil Procedure. arising from plurality of debtors or creditors. . as long as it does not appear that the debt has been collected in full. would be more properly translated in Spanish by the word "solidaria. and it shall be allowed by the committee as if the contract had been with him alone or the judgment against him alone. of this book shall be observed. "If the surety binds himself jointly with the principal debtor. . chapter third. In the official Spanish translation of the Code of Civil Procedure. The foregoing articles of the Civil Code make it clear that Hermenegilda Rogero was liable absolutely and unconditionally for the full amount of the obligation without any right to demand the exhaustion of the property of the principal debtor previous to its payment. Article 1830 of the same code provides: The surety can not be compelled to pay a creditor until application has been previously made of all the property of the debtor. therefore. and either of them dies. The joint contract of the common law is and always has been a solidary obligation so far as the extent of the debtor's liability is concerned. This article declares in effect that. In Spanish law the comprehensive and generic term by which to indicate multiplicity of obligation. In other words the Spanish system recognizes two species of multiple obligation. therefore. title first. if not otherwise expressly determined. if not otherwise expressly determined. . in the common law system there is no conception of obligation corresponding to the divisible joint obligation contemplated in article 1138 of the Civil Code. namely. is not to convert an apportionable joint obligation into a solidary joint obligation for the idea of the benefit of division is totally foreign to the common law system but to permit the creditor to proceed at once separately against the estate of the deceased debtor. was originally taken by the author. though surety for Lino Dayandante.The second contention takes logical precedence over the first and our view of its conclusiveness renders any consideration of the first point entirely unnecessary to a determination of the case. Article 1822 of the Civil Code provides: By security a person binds himself to pay or perform for a third person in case the latter should fail to do so. and the only legal peculiarity worthy of remark concerning the "joint" contract at common law is that the creditor is required to sue all the debtors at once. ormancomunidad properly such. it is not unusual for the parties to a common law contract to stipulate that the debtors shall be "jointly and severally" liable." as used in two places in the section above quoted." though even this word does not express the meaning of the English with entire fidelity. was nevertheless bound jointly and severally with him in the obligation. considered as a product of common law ideas. and in case of the simple joint contract neither debtor can be required to satisfy more than his aliquot part. and each part shall be deemed to be the distinct obligation of one of the respective debtors. . it should be explained. Her position so far as the creditor was concerned was exactly the same as if she had been the principal debtor. the apportionable joint obligation and the solidary joint obligation. The force of this expression is to enable the creditor to sue any one of the debtors or all together at pleasure. is mancomunidad." This is incorrect.

since French and Italian codes do not recognize the distinction of difference.. . Rep.. Appellant apparently takes the position that had his claim been filed during the pendency of the cancellation suit. endeavored to obtain judgment on his cross-complaint. note. The fact that the lower court had declared the document void was not conclusive. 351. 209. No such idea prevailed in the Roman law. (Law X. (Giorgi. . ambiguous as it may be to a reader indoctrinated with the ideas of the common law. or it is agreed among themselves that they shall be bound in some other manner. nor to determine the conditions under which contingent claims are barred. unless it is specified in the contract that each is bound in solidum. hold good where the word to be translated has reference to a multiple common law obligation. such as is contemplated in those sections. just expounded. Applying section 695 of the Code of Civil Procedure. to do or accomplish something. depend upon the idea to be conveyed. and this notwithstanding any customary law to the contrary. This is a very different situation from that presented in the concrete case now before us. however. of course." though it is not inaccurate here to use the compound expression "joint obligation.Manarang. This view of the law is contrary to the doctrine of the decision in the case of Hongkong & Shanghai Banking Corporation vs.. prepares us for a few words of comment upon the problem of translating the terms which we have been considering from English into Spanish or from Spanish into English. honorably shared with the Spanish American. This conception is a badge of honor to Spanish legislation. and if the claim had been duly presented to the committee for allowance it should have been allowed. 27 Phil. . In the Philippine Islands at least we must probably continue to tolerate the use of the English word "joint" as an approximate English equivalent. 77.. vs. . and we are of the opinion that. In Sharruf vs." In translating the Spanish word "mancomunada" into English a similar difficulty is presented. Novisima Recopilacion. & Co. As already observed the case is such as not to require the court to apply sections 746-749. and Ginainati (37 Phil. just as if the contact had been with her alone. that is. But a few words of comment may be added to show further that the solidary obligation upon which this proceeding is based is not a contingent claim. even had Jaucian. Santos vs. 213)." as conveying the full juridical sense of "obligacion mancomunada" and "obligacion solidaria. Span. 345. The Spanish word "solidary. Rep. ([1915]. The Spanish expression to be chosen as the equivalent of the English word "joint" must. as its judgment was not final. 34. in our judgment. and it must be remembered that the matter to be translated may be an enunciation either of a common law conception or of a civil law idea. as embodied respectively in the common law system and the Spanish Civil Code. it would have been met with the plea of another suit pending and that this plea would have been successful. tit.. The Latin phrasepro rata is a make shift. evidently resulting from the operation of a positive rule created by the lawgiver. Rep. the death of the debtor would probably have required the discontinuance of the action presented by the cross-complaint or counterclaim.) The foregoing exposition of the conflict between the juridical conceptions of liability incident to the multiple obligation. It was held that he meant "jointly" in the sense of "mancomunadamente. it would have been rejected and that the decision of the committee would have been sustained by the Court of First Instance. Enage and Yap Tico. this claim was an absolute claim. for this reason. Here it is necessary to render the word "joint" by the Spanish word "solidaria." respectively. under section 698 of the Code of Civil Procedure. while the benefit of division in the Spanish system is an illustration of the abnormal. unless he himself satisfies the obligation in whole or in part upon . 18 Phil. I. This mode of translation does not. where the principal debtor is dead. the rights of the creditor could have been protected by an appeal from that decision.. 11 Phil. a judge of one of the Courts of First Instance in these Islands rendered judgment in English declaring the defendants to be "jointly" liable. . 30 Phil. the claim was properly rejected by Judge Jenkins. where the surety is the person who is dead. of the Code of Civil Procedure. in his appeal from the decision in the cancellation suit.) Considered with reference to comparative jurisprudence." because the obligation upon which the judgment was based was apportionable under article 1138 of the Civil Code. Ortiga Bros. . Aldecoa & Co. the use of which is not to be commended. it is thereby to be understood that each is bound for one-half. book X. The only concrete illustration of a contingent claim given is section 746 is the case where a person is liable as surety for the deceased.) Furthermore. and it is not recognized either in the French or in the Italian system. liability in solidum appears to be the normal characteristic of the multiple obligation. under section 703. Rep. in the contention that the pendency of the suit instituted by the deceased for the cancellation of the document in which the obligation in question was recorded was a bar to the presentation of the claim against the estate. was liable absolutely for the whole obligation. Rep. p. inclusive. vol. There is no force. In the illustration put in section 746 where the principal debtor is dead and the surety is the party preferring the claim against the estate of the deceased it is obvious that the surety has no claim against the estate of the principal debtor. It is thus apparent that by the express and incontrovertible provisions both of the Civil Code and the Code of Civil Procedure. and her estate after her death. From what has been said it is clear that Hermenegilda Rogero. as in article 698 of the Code of Civil Procedure. between the two sorts of multiple obligation. This exceptional feature of the simple joint obligation in Spanish law dates from an early period. Tayabas Land Co. Theory of Obligations. I. copied from law promulgated at Madrid in 1488 by Henry IV. simply and not otherwise. 655). and even assuming that if the claim had been presented to the committee for allowance. 255.The idea of the benefit of division as a feature of the simple joint obligation appears to be a peculiar creation of Spanish jurisprudence. this court has frequently decided that such claims are barred if not presented to the committee in time (In re estate of Garcia Pascual. and the rule in question is expressed with simplicity and precision in a passage transcribed into the Novisima Recopilacion as follows: If two persons bind themselves by contract. ed.

so that the residue may be delivered to the persons entitled thereto without their being afterwards called upon to respond in actions for claims. concur. No costs will be allowed on this appeal. 27 Phil. obviously. Civil Code). which in fact may never become fixed at all. Araullo and Avanceña.. It is commonly termed the statute of non-claims and its purpose is to settle the affairs of the estate with dispatch. Separate Opinions MALCOLM and FISHER. 11 Phil. 1839. and not before. It is possible that "contingency. shall be barred from recovering such demand . which reads as follows: A person having a claim against a deceased person proper to be allowed by the committee.. in other words. exhibit his claim to the committee as provided in this chapter. Another simple illustration of a contingent liability is found in the case of the indorser of a contingent liability is found in the case of the indorser of a negotiable instrument. from which State the Philippine statute was taken. . JJ. after publication of the required notice. . For the reasons stated. what security have the distributees against the interruption of their possession? Under the system formerly in force here heirs might take the estate of their decedent unconditionally. 188. who is not liable until his liability is fixed by dishonor and notice. and that such creditor. if not presented to the committee in time. same code). Griswold [1871]. may depend upon other facts than those which relate to the creation or inception of liability." in the cases contemplated in section 746. vs. under the ordinary statute of limitations. His argument is that as section 746 of the Code of Civil Procedure provides that contingent claims "may be presented with the proof to the committee. or protest an notice. This clearly appears from the wording of section 695. where the debtor is liable in solidum and without postponement of execution. that if a creditor holding a contingent claim does not see fit to avail himself of the privilege thus provided." It follows that such presentation is optional. It may be. to claims against the estates of deceased persons. Enage and Yap Tico [1911]. and by virtue of such payment the surety is subrogated in all the rights which the creditor had against the debtor (art. Appellant contends that his claim against the deceased was contingent. (In re estate of Garcia Pascual [1908]. His theory is that the deceased was merely a surety of Dayandante. & Co. So ordered. in conformity with the requirements of law. must be filed before the committee on claims of said estate within the time limited by law for the operation of the committee. 345.. It is enough to say that where.which both are bound. who does not. C. to give the contingent claims status for allowance by the court.J. for instance. It is strictly confined. That absolute claims. It is at this moment. Briggs vs. 209. furthermore. Manarang ([1914]. or protest and notice. It must be quite obvious that every reason which can be adduced as justifying the policy of the law with regard to absolute claims applies with even greater force to contingent claims. were pointed out very clearly in the case of Santos vs. which is fact may never become fixed at all. concurring: The determination of the issues raised by this appeal requires a careful analysis of the provisions of the Code of Civil Procedure relating to the presentation and allowance of claims against the estates of deceased persons. liability extends unconditionally to the entire amount stated in the obligation.. 18 Phil. 34. The claims of all persons who assume the responsibility of a liability. counsel for appellee contends that "contingent claims. have not yet prescribed. may. Until this event happens there is a mere possibility of a liability is fixed by dishonor and notice. On the other hand. 43 Vt. This effect.. as in the case now before us.. The Estate of Thomas [1859]. that the obligation of the principal to indemnify the surety arises (art. and has been almost universally adopted as part of the probate law of the United States.) The effect of this statute is. the statute expressly provides that the failure to file them within the time named results in their complete extinction. makes a claim contingent within the meaning of said section. Johnson. in conformity with the requirements of law. Until this event happens there is a mere possibility of a liability. JJ. that the circumstance that a liability is subsidiary. In re estate of Reyes [1910]. 1838. 400 subject to certain exceptions in cases in which there has been a fraudulent concealment of assets. in the event of the death of the debtor. Ortiga Bros. if his claim becomes absolute within that period... 17 Phil.. are absolutely barred has frequently been decided by this court and by the Supreme Court of Vermont. under section 748 of the Code of Civil procedure. which. and the execution has to be postponed after judgment is obtained until the exhaustion of the assets of the person or entity primarily liable. present it to the court for allowance. 213)." As to absolute claims. like absolute claims. Arellano. against the estate of a deceased person. in which it was said: It cannot be questioned that this section supersedes the ordinary limitation of actions provided for in chapter 3 of the Code. but upon this point it is unnecessary to express an opinion. . contends . 32 Vt. there is nothing in the law which says that his claim is barred or prescribed. to curtail very materially the time allowed under the ordinary statute of limitations for the enforcement of a claim. when they become absolute. or. in its application. Ewing vs. The claims of all persons who assume the responsibility of mere guarantors in as against their principles of the same contingent character. Appellant. at any time within two years from the time allowed other creditors to present their claims. the liability is not contingent but absolute. otherwise the contingent claims are barred. 176. Unless there is a fixed and definite period after which all claims not made known are forever barred. and the reason for it. the decision of the trial court denying appellant's petition and his motion for a new trial was correct and must be affirmed. Torres.

Chio-Taysan [1908]. with the proof. that such contingent claim is valid. at any time within two years after the settlement and distribution of an estate in accordance with the provisions of either of the preceding sections of this chapter. if the estate is insolvent. absolute or contingent.) If such contingent claim becomes absolute and is presented to the court. prescription. While the statute does not say in so many words that all claims not presented within two years are barred. heir. or other such person. Section 597. sufficient to pay a portion equal to the dividend of the other creditors. 748. may compel the settlement of the estate in the courts in the manner hereinafter provided. It will be observed that the section last quoted does not distinguish between claims. But that system has been abolished (Suiliong & Co. We will now consider the effect of the failure to present a contingent claim against an estate undergoing judicial administration in which a committee on claims has been legally appointed and notice given to creditors to present their claims. so that he cannot alienate or discharge it free of such debts until and unless they are extinguished either by payment. or . heirs or other persons for the full period of two years after such distribution. unless his credit or lawful participation in the estate shall be paid. and the creditor may maintain an action against the distributees to recover his debt. or from proof exhibited to it. 21 Phil. (Sec. as amended by Act No. The court shall then appoint an administrator who may recover the assets of the estate for the purpose of paying such credit or lawful participation. if the estate retained by the executor or administrator is sufficient. this is accomplished by judicial administration. are presented to the committee it becomes their duty to report them to the court. It is thus to the interest of the heirs and devisees to have the property discharged of this indefinite liability as soon as possible." is satisfied that such contingent claim is valid. 2331.) If the court is satisfied from the report of the committee. If the claim matures within that time. As to the latter the committee has complete authority. as if presented for allowance before the committee had made its report. But as regards contingent claims. that established by section 596 of the Code of Civil Procedure. notwithstanding any transfer thereof that may have been made. The decision in this case definitely decided that all claims. Sy Conbieng ([1912]. 13). Ordinarily. vs. and its decisions.) If such contingent claim is allowed. or to the executor or administrator. 211). as amended. 12 Phil. within two years from the time limited for other creditors to present their claims. and there are no debts or the known debts have been paid. 749. as stated in the case cited. If the court. " by the operation of the statute of non-claim. the Code of Civil Procedure provides: If a person is liable as surety for the deceased. establishes a summary procedure applicable to estates not exceeding three thousand pesos. the executor or administrator may be required to retain in his possession sufficient assets to pay the claim. ..) The authority of the committee with respect to contingent claims differs materially from that which it exercise over absolute claims. or before others to be appointed. it may be allowed by the court if not disputed by the executor or administrator. when it become absolute. when all of them are of full age and legal capacity. if disputed. who shall state in their report that such claim was presented to them. when the same becomes absolute. (Sec. With respect to contingent claims. with the proof. shall be disposed of by the order of the court to the persons entitled to the same. . the property of the deceased comes to him "charged with the debts of the deceased. or if the assets retained in the hands of the executor or administrator are not exhausted in the payment of such claims. section 598. the committee does not in the first instance pass upon their validity. the creditor shall receive payment to the same extent as the other creditors. When such claims. it may order the executor or administrator to retain in his hands sufficient estate to pay such contingent claim. that there are debts outstanding against the estate which have not been paid. unless presented to the committee on claims within the time limited. or that an heir or other persons (sic) has been unduly deprived of his lawful participation in the estate. (Sec. namely. it may be proved before the committee already appointed. 747. the same may be presented. with interest. such assets. or enough to pay the creditor his proportionate share. are final. absolute and contingent.. and demand is made to the court for its . against an estate partitioned without judicial proceedings and without notice to creditors are barred and extinguished if not asserted within two years. or the residue of them. On the other hand. this procedure is compulsory as to all estates. under which the property of the deceased is distributed without the appointment of a committee on claims. But as it is clear that when an estate is distributed summarily by either of these methods creditors having just claims against the deceased may be overlooked. (Sec. unless an appeal is taken to the courts. "from the report of the committee" or from "the proofs exhibited to it. being then liable only to the extent of the value of their respective distributive shares.net But if it shall appear.in which event they were liable absolutely for all his debts. 746. and. with one exception. provides: 1awph!l. But if the claim is not established during the time limited in the preceding section. and such distributees and their estate shall be liable for such debts in proportion to the estate they have respectively received from the property of the deceased. It is equally firmly established by the express terms of section 695 and the decision by which it has been construed that absolute claims against the estates judicially administered are barred. that is the plain inference and it has been so construed by this court in the case of McMickingvs. or has other contingent claims against his estate which can not be proved as a debt before the committee. but the assets so distributed shall still remain subject to the liability of the claim when established. for that purpose. or with benefit of inventory. but limits to two years the time within which the holder of any claim against the deceased may assert it against the distributees. or. to the committee. and the heir is now not personally responsible as such for the debts of the deceased. The time during which the retained assets are to be held is two years from the time limited for other creditors to present their claims. which authorizes the distribution of the property of a deceased person by written agreement of the heirs. any creditor. and the real estate belonging to the deceased shall remain charged with the liability to creditors.

payment, the court may direct the administrator to pay it, but if he objects it must then be proved before the original committee or a new committee appointed for that purpose. The court in no event has authority to allow a disputed claim, originally contingent, and to require the administrator or executor to pay it, until it has been passed upon by the committee. If the claim does not become absolute within the two years the retained assets are delivered to the distributees and the estate is closed. If "such claim" matures after the two years the creditor may sue the distributees, who are liable in proportion to the share of the estate respectively received by them. In the light of these provisions, can it be maintained that a creditor holding a contingent claim may, at his option, refrain from presenting it to the committee, and after it becomes absolute, require its payment by the administrator if it has matured within the two years, or recover it from the distributees if it matures after that time? In other words, do section 748 and 749 refer to contingent claims in general, or only to contingent claims which have been presented to the committee pursuant to the provisions of section 746 and 747? If we hold that sections 748 and 749 are not limited by section 746 and 747, but are to be read as though those sections were non-existent, the result must be that the heirs and distributees of an estate can never be certain, until the expiration of the full term of the statute of limitations, that they may safely enjoy the property which has descended to them. For a period of indefinite duration in definite because of the uncertainty engendered y section 45 of the Code of Civil Procedure they must be exposed to the claims of unknown creditors of the deceased who may come forward to demand payment of claims which were contingent when the estate was distributed, but which have since become absolute. During that period of uncertainty the distributees will never know at what moment they may be called upon to pay over the whole amount received by them from the estate of the decedent. On the other hand, if we construe section 748 and 749 as being limited by the two preceding sections, and hold that only such contingent claims as have been presented to the committee may be recovered from the estate or the distributees, then the doubt and uncertainty will disappear. If no such contingent claims are presented to the committee they will be non-existent so far as the distributees are concerned. If such claims are proved, but do not become absolute within the two years, the distributees will know that their respective shares are subject to a contingent liability, definite in amount, and may govern themselves accordingly. In construing a statute it is proper to bear in mind the purpose of the legislature in enacting it, with a view of adopting, if possible, that interpretation which will accomplish rather than defeat the legislative intent. It will not be disputed that it must be assumed that the legislature desires certainty rather than uncertainty in the tenure of property transmitted by descent. As was said in the case of McMicking vs. Sy Conbieng ([1912], 21 Phil., 211): "It is the undisputed policy of every people which maintains the principle of private ownership of property that he who owns a thing shall not be deprived of its possession or use except for the most urgent and imperative reasons and then only so long as is necessary to make the rights which underlie those reasons effect." In the De Dios case ([1913], 24 Phil., 573, 576), it was said: "It is distinctly against the interest of justice and in direct opposition to the policy of the law to extend unduly the time within which the estate should be administered and thereby to keep the property from the possession and use of those who are entitled to it . . . ." It must be

equally contrary to the policy of the law to allow property which has passed by descent into other hands to be subject for an indefinite term to contingent claims of indefinite amount. It is true that in this particular case the demand was made within two years and while the assets, apparently, were still undistributed. Nevertheless, if the principle contended for by appellant be established, and creditors holding contingent claims against estates judicially administered may disregard the committee on claims entirely, then they may enforce such claims against the distributees after the estate is closed. Unless the time for the presentation of such claims is limited by the sections under consideration it is wholly unlimited, save by the general statute of prescription. Examining the statute in the light of these considerations we are of the opinion that the contention of the appellant cannot be sustained. Sections 748 and 749, in speaking of contingent claims which are demandable after they become absolute, against the administration or against the distributees, use the expression "such contingent claim." The use of the word "such" is, we think, clearly intended to limit the words "contingent claim" to the class referred to in the two proceeding sections that is, to such contingent claims as have been presented to the committee and reported to the court pursuant to the requirements of sections 746 and 747. As on most important questions, authorities both pro and con can be cited. For instance, in the case of McKeen vs. Waldron ([1879], 25 Minn., 466), the Supreme Court of Minnesota held, construing a similar statute, that contingent claims need not be presented to the committee and are not barred by the failure to do so; that by the failure to present a contingent claim, the creditor loses his rights to have assets retained by the executor or administrator, but if his claim becomes absolute, he may maintain an action against the distributees to recover such claim to the extent of the estate so distributed. But we do not consider the reasoning of this decision of controlling or even of persuasive authority as applied to our own statute. In interpreting its provisions we must take into consideration the object which the legislature had in view in enacting it. As stated by this court in the case of De Dios (24 Phil., 573): "The object of the law in fixing a definite period within which claims must be presented is to insure the speedy settling of the affairs of a deceased is to insure the speedy settling on the affairs of a deceased person and the early delivery of the property of the estate into the hands of the persons entitled to receive it." (See also Verdier vs. Roach [1892], 96 Cal., 467.) The affairs of a deceased person are not "speedily settled" if contingent claims, uncertain and indefinite, are left outstanding. An estate left in this precarious condition can hardly be said to be "settled" at all. We do not agree with the contention of appellant that the use of the word "may" in section 746 is to be construed as authorizing the holder of a contingent claim to disregard the existence of the committee without suffering any untoward consequences. He "may" present his contingent claim, if he desires to preserve his right to enforce it against the estate or the distributees, but if he does not he may not thereafter so assert it. With respect to the contention that the bar established by section 695 is limited to claims "proper to be allowed by the committee" our reply is that contingent claims fall within this definition equally with absolute claims. It is true that as long as they are contingent the

committee is not required to pass upon them finally, but merely to report them so that the court may make provision for their payment by directing the retention of assets. But if they become absolute after they have been so presented, unless admitted by the administrator or executor, they are to be proved before the committee, just as are other claims. We are of the opinion that the expression "proper to be allowed by the Committee," just as are other claims. We are of the opinion that the expression "proper to be allowed by the Committee," as limiting the word "claims" in section 695 is not intended to distinguish absolute claims from contingent claims, but to distinguish those which may in no event be passed upon the committee, because excluded by section 703, from those over which it has jurisdiction. There is no force, in our judgment by the deceased for the cancellation of the document in which the obligation in question was recorded was a bar to the presentation of the claim against the estate. The fact that the lower court had declared the document void was not conclusive, as its judgment was not final, and even assuming that if the claim had been presented to the committee for allowance, it would have been presented to the committee for allowance, it would have been rejected and that the decision of the committee would have been sustained by the Court of First Instance, the rights of the creditor could have been protected by an appeal from that decision. Appellant apparently takes the position that had his claim been filed during the pendency of the cancellation suit it would have been met with the plea of another suit pending and that plea would have been successful. This view of the law is contrary to the doctrine of the decision in the case of Hongkong & Shanghai Bank vs. Aldecoa & Co. ([1915]. 30 Phil., 255.) Furthermore, even had Jaucian, in his appeal from the decision in the cancellation suit, endeavored to obtain judgment on his cross-complaint, the death of the debtor would probably have required the discontinuance of the action presented by the crosscomplaint or counterclaim, under section 703. In the consideration of this appeal we have assumed that the claim is a contingent one. The document upon which it is based is not before us. Both parties, however, until the brief of appellee was filed, seem to have agreed that the deceased was a mere surety or, more strictly speaking, a guarantor for Dayandante, and that the claim against her was contingent. This being undeniable, and the cause having been tried upon a particular issue, accepted by the parties and the court, the appellate court should proceed upon the same theory. (Molina vs.Somes [1913], 24 Phil., 49; Limpangco Sons vs. Yangco Steamship Co. [1916], 34 Phil., 567; Agoncillo and Marinovs. Javier [1918], p. 424 ante.) Of course, it is quite obvious that if the claim was indeed absolute, as contended by appellee and as conceded in the main decision, the practical result would be the same, as there can be no doubt that all absolute claims not presented to the committee are barred by the express terms of section 695 of the Code of Civil Procedure, as heretofore construed by this court. (In re estate of Garcia Pascual, supra; Ortiga Bros. & Co. vs.Enage and Yap Tico, supra; Briggs vs. The Estate of Thomas, supra; Ewing vs. Griswold, supra; Estate of Reyes,supra; in connection with McMicking vs. Sy Conbieng, supra.) In view of these decisions additional argument is unnecessary. The main decision also contains a discussion of the subject of "apportionable joint obligations" and "solidary joint obligations." Here again it is only worthy of note that the terms " joint," "mancomunada," " jointly," "mancomunadamente," "jointly and severally," "solidariamente" (in solidum) have heretofore been authoritatively construed in the decisions

of this court and in decisions of the Supreme Court of Louisiana and the Supreme Court of the United States. The following cases can be noted: Sharruf vs. Tayabas Land Co. and Ginainati ([1918], 37 Phil. Rep., 655); Parot vs. Gemora ([1906], 7 Phil., 94); Pimentel vs. Gutierrez ([1909], 14 Phil., 49); Chinese Chamber of Commerce vs. Pua Te Ching ([1910], 16 Phil., 406); De Leon vs. Nepomuceno and De Jesus ([1917], 37 Phil. Rep., 180); Groves vs. Sentell ([1894], 153 U.S., 465); Adle vs. Metoyer ([1846], 1 La. Ann., 254); Ledoux & Co. vs. Rucker ([1850], 5 La. Ann., 500); Pecquet vs. Pecquet's Executor ([1865], 17 La. Ann., 467); Duggan vs.De Lizardi ([1843], 5 Robinson's Reports, 224); Commissioners of New Orleans Improvement & Banking Co. vs.The Citizen's Bank ([1845], 10 Robinson's Reports, 14). For example, in the decision first above cited (Sharruf vs.Tayabas Land Co. and Ginainati), we find the following: We agree with the appellant that this promissory note evidences a joint and not a joint and several obligation, but it appearing that the trial judge correctly rendered judgment holding the defendants "jointly" liable, there is no necessity for any modification of the terms of the judgment in that regard. Our decision in the case of De Leon vs. Nepomuceno and De Jesus (37 Phil. Rep., 180) should make it quite clear that in this jurisdiction at least, the word jointly when used by itself in a judgment rendered in English is equivalent to the word mancomunadamente, and that it is necessary to use the words "joint and several" in order to convey the idea expressed in the Spanish term solidariamente (in solidum); and further, that a contract, or a judgment based thereon, which fails to set forth that a particular obligation is "joint and several" must be taken to have in contemplation a "joint" (mancomunada), and not a "joint and several" (solidary) obligation. A similar distinction is made in the technical use of the English words "joint" and "joint and several" or "solidary" in Louisiana, doubtless under like historic influences to those which have resulted in this construction we have always given these terms. "A joint obligation under the law of Louisiana binds the parties thereto only for their proportion of the debt (La. Civ. Code, arts. 2080, 2086), whilst a solidary obligation, on the contrary, binds each of the obligators for the whole debt." (Groves vs. Sentell, 14 Sup. Ct., 898, 901; 153 U.S., 465; 38 L. Ed., 785.) We are of the opinion, therefore, that contingent claims not presented to the committee on claims within the time named for that purpose are barred. For the reasons stated, the decision of the trial court denying appellant's petition and his motion for a new trial was correct and should be affirmed.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-7185 August 31, 1955

The trial court allowed recovery from Dominguez, but absolved the RFC from the complaint. But on appeal, the Court of Appeals reversed that verdict, declared the judgment against Dominguez void for having been rendered after his exclusion from the case, and sentenced the RFC to pay plaintiff the amount claimed together with interests and costs. From this judgment the RFC has appealed to this Court. We find no merit in the appeal. While the amount sought to be recovered by plaintiff was originally owing from Dominguez, being the balance of the purchase price of the lot he had agreed to buy, the obligation of paying it to plaintiff has already been assumed by the RFC with no other condition than that title to the lot be first conveyed to Dominguez and RFC's mortgage lien thereon registered, and that condition has already been fulfilled. It is, however, contended for the RFC that its obligation to pay "has been modified, if not extinguished" by plaintiff's letter of September 20, 1948, which reads as follows: September 20, 1948 The R. F. C. Manila SIRS: In connection with your guarantee to pay us the balance of P3,086.98 of the account of Mr. Delfin Dominguez for the purchase of lot No. 15, block 7 of our Riverside Subdivision, which lot has been conveyed to him on the strength of your guaranty to us the said balance, we want to inform you that, at the request of Mr. Dominguez, we are agreeable to have that amount paid us at the second release of proceeds of his loan, which he informs us will be on or about October 15, 1948. Yours truly, REALTY INVESTMENTS, INC. C. M. HONSKINS & CO., INC. Managing Agents By: (Sgd.) A. B. Aquino President Passing upon the above contention, the Court of Appeals says: "As narrated in the statement of the case, both Dominguez and the appellee kept appellant ignorant on the terms and conditions of their agreement concerning the loan of P10,000 and of the manner that sum was to be released, and in such circumstances plaintiff's letter of September 20, 1948, cannot be construed in the manner contended by appellee and sustained by the court, for plaintiff merely said in substance and effect that it was agreeable to have the balance of P3,086.98 of the account of Delfin Dominguez paid to it 'at the second release of proceeds of his loan, which he

REHABILITATION FINANCE CORPORATION, petitioner, vs. COURT OF APPEALS and REALTY INVESTMENTS, INC., respondents. Sixto de la Costa and Jose M. Garcia for petitioner. Juan T. Chuidian for respondents. REYES, A., J.: On June 17, 1948, Delfin Dominguez signed a contract with Realty Investments, Inc., to purchase a registered lot belonging to the latter, making a down payment of P39.98 and promising to pay the balance of the stipulated price in 119 monthly installments. Some three months thereafter, to finance the improvement of a house Dominguez had built on the lot of Rehabilitation Finance Corporation hereafter called the RFC agreed to loan him P10,000 on the security of a mortgage upon said house and lot, and, at his instance, wrote Realty Investments a letter, dated September 17, 1948, requesting that the necessary documents for the transfer of title of the vendee be executed so that the same could be registered together with mortgage, this with the assurance that as soon as title to the lot had been issued in the name of Dominguez and the mortgage in favor of the RFC registered as first lien on the lot and the building thereon, the RFC would pay Realty Investments "the balance of the purchase price of the lot in the amount of P3,086.98." Complying with RFC's request and relying on its assurance of payment, Realty Investments, on the 20th of that same month, deeded over the lot to Dominguez "free of all liens and incumbrances" and thereafter the mortgage deed, which Dominguez had executed in favor of RFC three days before, was recorded in the Registry of Deeds for the City of Manila as first lien on the lot and the building thereon. It would appear that once the mortgage was registered, the RFC let Dominguez have P6,500 out of the proceeds of his loan, but that the remainder of the loan was never released because Dominguez defaulted in the payment of the amortizations due on the amount he had already received, and as a consequence the RFC foreclosed the mortgage, bought the mortgaged property in the foreclosure sale, and obtained title thereto upon failure of the mortgagor to exercise his right of redemption. Required to make good its promise to pay Realty Investments the balance of the purchase price of the lot, the RFC refused, and so Realty Investments commenced the present action in the Court of First Instance of Manila for the recovery of the said balance from either Delfin Dominguez or the RFC.

Ealdama bound the Rehabilitation Finance Corporation to pay the unpaid balance of the purchase price of the lot in question after title thereof was transferred in the name of Dominguez free from any incumbrance.' Defendant-appellee should know that it would be absurd for the plaintiff to waive appellee's guaranty contained in its letter of September 17. appellee's contention in this respect is most unfair and cannot be upheld by the courts of justice. It is true that plaintiff later expressed willingness to have the payment made at a later date. 1948. . Bengzon. and. But it is evident that this period of grace was granted by plaintiff in the belief that the information furnished by the buyer was true. B. J... Padilla. or if such release was to be subject to future developments. Lulled by that assurance. when so it was informed by the buyer "the second release of proceeds of his loan" would take place. wherein Governor E. It was the Rehabilitation Finance Corporation that induced plaintiff to issue title to the lot free from all encumbrances to Dominguez on its guaranty. If the Rehabilitation Finance Corporation was not to make any further release of funds on the loan. for payment. payment for which was guaranteed by the Rehabilitation Finance Corporation. plaintiff thereafter looked to the RFC. In view of the foregoing. Jugo. Under the circumstance of the case. and to inform appellant of the terms and conditions of the loan. would want to create uncertainty by making such payment dependent upon a contingency. RFC never made plaintiff know that said information was not correct. Labrador. and such assent should not be taken as willingness on its part to have the payment made only if and when there was to be second release of proceeds of the loan.(Dominguez) informs us will be on or about October 15. Montemayor. For this reason. already assured of payment by the RFC itself. and it cannot now without any fault of the plaintiff keep the lot in question and Dominguez' building without paying anything to the plaintiff. concur. It would be unreasonable to suppose that the creditor. Acting. JJ. 1948. 1948. but the officers of the appellee failed to do this. J. the decision appealed from is affirmed. appellant was not under any obligation of assuming Dominguez' right of redemption of the property foreclosed just to save said lot. it was the duty of the Rehabilitation Finance Corporation to answer the latter's letter of September 20. Plaintiff was induced to part with his title to a piece of real property upon RFC's assurance that it would itself pay the balance of the purchase price due from the purchaser after its mortgage lien thereon had been registered. instead of the purchase. In those circumstances. L. C." We are in accord with the above pronouncement. with costs against the RFC. we do not think it fair to construe plaintiff's letter to be anything more than a mere assent to a deferment of payment. as found by the Court of Appeals (and this finding is conclusive upon this Court). Concepcion and Reyes.

Bataan. however.00 and the costs of the suit. 1988. a cause of action for the recovery of damages. with the second installment falling due on June 30. he subleased the fishpond. de Agcaoili.00 plus attorney's fees in the amount of P10. The first installment was duly paid. The trial court and the Court of Appeals ruled in the affirmative. [G. a sum of money. Bataan.5 hectare fishpond in Barito. 1991. A favorable judgment obtained by the plaintiff therein shall be [1] . her liability is independent of and separate from her husband's. were signatories to the contract of sub-lease. Petitioner Purita Alipio moved to dismiss the case on the ground that her husband. §21 of the 1964 Rules of Court which then provided that "when the action is for recovery of money. Manuel Co was also named defendant in the complaint.600. Branch 5. unfortunately. J. David: We find no merit in this appeal. 1987.00. to the spouses Placido and Purita Alipio and the spouses Bienvenido and Remedios Manuel. the deceased Siy Uy was not the only defendant. she could be independently impleaded in the suit together with the Manuel spouses and that the death of her husband merely resulted in his exclusion [3] from the case. and the corresponding action is. if husband and wife bound themselves jointly and severally.(Underlining added) Moreover. 97). 1989. on October 13.00 and P185. debt or interest thereon must be dismissed when the defendant dies before final judgment in the regional trial court. Inc. in case of his death. Siy Uy. This is the teaching of Climaco v. Despite due demand. JARING. JARING. Petitioner appealed to the Court of Appeals on the ground that the trial court erred in [4] denying her motion to dismiss. It was. it is clear that Climaco had a cause of action against the persons named as defendants therein. (Agcaoili vs. For this reason. the sublessees failed to comply with their obligation. It held: The rule that an action for recovery of money.: The question for decision in this case is whether a creditor can sue the surviving spouse for the collection of a debt which is owed by the conjugal partnership of gains. the appellate court dismissed her appeal. xxxxxxxxx However. for the remaining period of his lease.600. Placido Alipio. Mabuco. Thus. it shall be dismissed to be prosecuted in the manner especially provided in these rules.600. Vda. does not apply where there are other defendants against whom the action should be maintained.SECOND DIVISION enforced in the manner especially provided in these Rules for prosecuting claims against the estate of a deceased person. one that does not survive upon the death of the defendant. vs. On June 19. 90 [5] Phil. Each of the four sublessees signed the contract. therefore. Hermosa. had passed away on December 1. it shall not be dismissed but shall instead be allowed to continue until entry of final judgment. private respondent sued the Alipio and Manuel spouses for the collection of the said amount before the Regional Trial Court. express or implied. payable in two installments of P300. it is noted that all the defendants. Rule 3 of the Rules of Court. when the obligation is a solidary one. petitioner. The facts are as follows: Respondent Romeo Jaring was the lessee of a 14. the sublessees only satisfied a portion thereof. On February 26. v.[2] She based her action on Rule 3. leaving an unpaid balance of P50. No. The remaining defendants cannot avoid the action by claiming that the death of one of the parties to the contract has totally extinguished their obligation as held in Imperial Insurance. The Manuel spouses failed to file their answer.respondents. the lower court rendered judgment after trial. the creditor may bring his action in toto against any of the debtors obligated in solidum. Under the law and well settled jurisprudence. including the deceased." This provision has been amended so that now Rule 3. We reverse. but of the second installment. §20 of the 1997 Rules of Civil Procedure provides: When the action is for the recovery of money arising from contract. The stipulated amount of rent was P485. or whether such claim must be filed in proceedings for the settlement of the estate of the decedent. he prayed for the rescission of the sublease contract should the defendants fail to pay the balance. 1990. they were declared in default. debt or interest thereon. In the alternative. wherein the Supreme Court held: Upon the facts alleged in the complaint.000.00. in accordance with the provisions of Section 21. 134100. 2000] PURITA ALIPIO. 1997. and the defendant dies before entry of final judgment in the court in which the action was pending at the time of such death. DECISION MENDOZA. she may be sued for the whole debt and it would be error to hold that the claim against her as well as the claim against her husband should be made in the decedent's estate. In its decision rendered on July 10. represented by his Attorney-In-Fact RAMON G. so that. September 29.000. ordering petitioner and the Manuel spouses to pay private respondent the unpaid balance of P50.R.00. Dinalupihan. The lease was for a period of five years ending on September 12. the order appealed from is erroneous insofar as it dismissed the case against Co. COURT OF APPEALS and ROMEO G. Obviously. 1989. that is. and the defendant dies before final judgment in the Court of First Instance. The trial court denied petitioner's motion on the ground that since petitioner was herself a party to the sublease contract.600.

there is no liquidation of the conjugal partnership. David. the Court ruled that since the spouses' liability was solidary. B. WHICH IS NOT APPLICABLE BECAUSE THE SPOUSES IN THIS CASE DID NOT BIND THEMSELVES JOINTLY AND SEVERALLY IN FAVOR OF RESPONDENT JARING. signed the sublease contract binding themselves to pay the amount of stipulated rent. the claim must be made in the proceedings for the liquidation and settlement of the conjugal property. .. in the cases where she may legally bind the partnership. For this reason. THE RESPONDENT COURT COMMITTED REVERSIBLE ERROR IN APPLYING IMPERIAL INSURANCE INC. Carlos Siy Uy and Manuel Co. Where a complaint is brought against the surviving spouse for the recovery of an indebtedness chargeable against said conjugal [partnership]. Thus. 1998. it was one which does not survive the death of defendant Uy. but it was denied on June 4. [10] . §2 which states: Where estate settled upon dissolution of marriage. ¾ When the marriage is dissolved by the death of the husband or wife. their conjugal partnership was automatically [9] dissolved and debts chargeable against it are to be paid in the settlement of estate proceedings in accordance with Rule 73. The proper action should be in the form of a claim to be filed in the testate or intestate proceedings of the deceased spouse. the filing of claim in the proceeding for the settlement of the decedent's estate. also for the same purpose. Climaco [16] [15] v. the spouses therein jointly and severally executed an indemnity agreement which became the basis of a collection suit filed against the wife after her husband had died. even after the death of one of the spouses. Hence this petition based on the following assignment of errors: A. §20 of the 1997 Rules of Civil Procedure now provides that the case will be allowed to continue until entry of final judgment. the conjugal partnership shall be liquidated in the testate or intestate proceedings of either. Petitioner and her late husband. file this case against petitioner. On appeal. And private respondent cannot be said to have no remedy. opposed the admission of the amended complaint on the ground that the death of her husband terminated their conjugal partnership and that the plaintiff's claim. First. This case thus falls outside of the ambit of Rule 3. . If both spouses have died. which was chargeable against the partnership. Instead.e. that the conjugal partnership continues. §21 which deals with dismissals of collection suits because of the death of the defendant during the pendency of the case and the subsequent procedure to be undertaken by the plaintiff. the conjugal partnership is liable for ¾ All debts and obligations contracted by the husband for the benefit of the conjugal partnership. the surviving spouse could be independently sued in an ordinary action for the enforcement of the entire obligation. no complaint for the collection of indebtedness chargeable against the conjugal partnership can be brought against the surviving spouse. if after thirty (30) days from his death.[8] When petitioner's husband died. the death of her husband did not preclude the plaintiff from filing an ordinary collection suit against her. Rule 3. the conjugal partnership terminates upon the death of either spouse. together with the Manuel spouses. Under Art. should be made in the proceedings for the settlement of his estate. This does not mean. 6. .[13] In that case. the Court reversed. . any judgment obtained thereby is void. petitioner failed to apply for administration or request that administration be granted to some other person. In many cases as in the instant one. administered. 1989. in the testate or intestate proceedings of the deceased spouse. DAVID. he may apply in court for letters of administration in his capacity as a principal creditor of the deceased . 1988.[7] The petition is meritorious. the defendants. v. . We hold that a creditor cannot sue the surviving spouse of a decedent in an ordinary proceeding for the collection of a sum of money chargeable against the conjugal partnership and that the proper remedy is for him to file a claim in the settlement of estate of the decedent. after the death of either of the spouses. the surviving spouse is not even a de facto administrator such that conveyances made by him of any property belonging to the partnership prior to the liquidation of the mass of conjugal partnership property is void. the community property shall be inventoried. 19 SCRA 858. the surviving wife was sued in an amended complaint for a sum of money based on an obligation allegedly contracted by her and her late husband. namely. Inc. Petitioner's husband died on December 1. and liquidated. which merely resulted in the dismissal of the case as to him but not as to the remaining defendant Manuel Co. IN SPITE OF THE FACT THAT THE PETITIONER WAS NOT SEEKING THE DISMISSAL OF THE CASE AGAINST REMAINING DEFENDANTS BUT ONLY WITH RESPECT TO THE CLAIM FOR PAYMENT AGAINST HER AND HER HUSBAND WHICH SHOULD BE PROSECUTED AS A MONEY CLAIM. the powers of administration of the surviving spouse ceases and is passed to the administrator appointed by the court having jurisdiction over the settlement of estate [11] proceedings. Siy Uy and Imperial Insurance. As already noted. The reason for this is that upon the death of one spouse. The defendant. that since the defendant was also a party to the obligation. who had earlier moved to dismiss the case. as the Court of Appeals did in this case. The issue to be resolved is whether private respondent can. were sued for damages for malicious prosecution. A favorable judgment obtained by the plaintiff therein will then be enforced in the manner especially provided in the Rules for prosecuting claims against the estate of a deceased person. are based on different sets of facts. In Climaco. and those contracted by the wife. Under Sec. holding that ¾ as correctly argued by petitioner.Petitioner filed a motion for reconsideration. With regard to the case of Imperial. THE RESPONDENT COURT COMMITTED REVERSIBLE ERROR IN APPLYING CLIMACO v. and the debts thereof paid. i. 161(1) of the Civil Code.[12] The ruling in Calma v. Under the law. Indeed. The trial court nevertheless admitted the complaint and ruled. Militante. 133 SCRA 317.[14] The cases relied upon by the Court of Appeals in support of its ruling. SIY UY. in the first place. the Alipios' obligation (and also that of the Manuels) is one which is chargeable against their conjugal partnership. [6] As held in Calma v. more than ten months before private respondent filed the collection suit in the trial court on October 13. Tañedo. however. Tañedo was reaffirmed in the recent case of Ventura v. apart from the fact the claim was not against any conjugal partnership. v. Rule 78 of the Revised Rules of Court.

The basis of their solidary liability is not the contract of lease or sublease but the fact that they have become joint [21] tortfeasors.600. aside from petitioner's lack of authority to represent their conjugal estate. crabs and related species thereon as well all fishing equipment.6000.00) PESOS. Private respondent does not cite any provision of law which provides that when there are two or more lessees. Clearly.00 should be divided into two so that each couple is liable to pay the amount of P25.300. The complaint against petitioner is dismissed without prejudice to the filing of a claim by private respondent in the proceedings for the settlement of estate of Placido Alipio for the collection of the share of the Alipio spouses in the unpaid balance of the rent in the amount of P25. an obligation is presumed to be only joint. or that each one of the latter is bound to render. each debt being considered distinct from one another.300. From the foregoing. Neither does petitioner contend that it is the nature of lease that when there are more than two lessees or sublessees their liability is solidary. That the total lease rental for the sub-leased fishpond for the entire period of three (3) years and two (2) months is FOUR HUNDRED EIGHT-FIVE THOUSAND SIX HUNDRED (P485. or in this case. 1990.600. the debt is divided into as many equal [20] shares as there are debtors.00. paraphernalia and accessories.e. One Hundred Eight-Five Thousand Six-Hundred (P185. There is a solidary liability only when the obligation expressly so estates. the unpaid balance sought to be collected by private respondent in his collection suit became due on June 30. i. sublessees. to wit: A.. Bellosillo. JJ. and De Leon. Bienvenido Manuel and Remedios Manuel are ordered to pay the amount of P25. his remedy is to file a claim against the Alipios in the proceeding for the settlement of the estate of petitioner's husband or. On the other hand. entire compliance with the prestations. the petition is GRANTED. the attorney's fees in the amount of P10. depending on whether petitioner's husband died intestate or testate. WHEREFORE.300. The trial court ordered petitioner and the Manuel spouses to pay private respondent the unpaid balance of the agreed rent in the amount of P50. or when the law or the nature of the obligation requires solidarity. Buena. Indeed. But even assuming the contrary to be true. the latter's obligation to pay the rent is solidary. 1207 of the Civil Code provides: The concurrence of two or more creditors or 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. such power exclusively pertains to the court having jurisdiction over the settlement of the decedent's estate and not to any other court. Since the obligation of the Manuel and Alipio spouses is chargeable against their respective conjugal partnerships. as will be discussed later. prawns. Three hundred thousand (P300. he can [18] file a petition either for the issuance of letters of administration or for the allowance of [19] will. (Chairman). the pertinent [22] portion of the contract involved in this case reads: 2.. it is clear that private respondent cannot maintain the present suit against petitioner. 1989.000. The said amount shall be paid to the Sub-Lessor by the Sub-Lessees in the following manner. if from the law or the nature or the wording of the obligation the contrary does not appear. concur. In connection with this. when the spouses are sued for the enforcement of an obligation entered into by them. is not solidary but rather merely joint. Needless to say. Art. Thus. there is no allegation that the sublessees refused to vacate the fishpond after the expiration of the term of the sublease. and B. the liability of the sublessees is merely joint.000.It must be noted that for marriages governed by the rules of conjugal partnership of gains.00 without specifying whether the amount is to be paid by them jointly or solidarily. . the unpaid balance ofP50. as between them. SO ORDERED. Indeed. long before the sublease expired on September 12. the inventory of the Alipios' conjugal property is necessary before any claim chargeable against it can be paid. Second. the nature of the obligation involved in this case. making Imperial still inapplicable to this case. In the case at bar.00. 1989. an obligation entered into by the husband and wife is chargeable against their conjugal [17] partnership and it is the partnership which is primarily bound for its repayment. if none has been commenced.00 and the costs of the suit. milkfishes. To be sure. Private respondent cannot short-circuit this procedure by lumping his claim against the Alipios with those against the Manuels considering that. does not apply.. Quisumbing. should the lessees or sublessees refuse to vacate the leased property after the expiration of the lease period and despite due demands by the lessor.600.00) Pesos upon signing this contract. Rather. Jr. they are being impleaded in their capacity as representatives of the conjugal partnership and not as independent debtors such that the concept of joint or solidary liability. they can be held jointly and severally liable to pay for the use of the property.00) Pesos to be paid on June 30. including all the improvements.00.

he had finished very much more than the required 50% stipulated in the contract of sale.1äwphï1. from the date of the filing of the complaint until said amount was fully reimbursed.123. as surety. to recover on the bond in the full amount. in the Urdaneta Village. 1961 against the Empire Insurance Co. the Makati Development Corporation. EMPIRE INSURANCE CO. plus attorney's fees. He averred that. Tomacruz and Ferrer for defendant-appellee Empire Insurance Company. vs. ANDAL. 1961 and that the trial court was without authority to reduce Andal's liability on the basis of Carlos' construction of a house a month after the stipulated period because there was no privity of contract between Carlos and the Makati Development Corporation. the Empire Insurance Co. to pay the Makati Development Corporation the amount of P1. sentencing the Empire Insurance Co. the so-called "special condition" in the deed of sale is in reality an obligation to build a house at least 50 per cent of which must be finished within two years. undertook to pay the Makati Development Corporation the sum of P12. jointly and severally. In due time.000 was refused. Inc. But the appellant argues that Andal became liable for the full amount of his bond upon his failure to build a house within the two-year period which expired on March 31. three days after the lapse of the two-year period. the court noted that While no building has actually been constructed before the target date which is March 31. and to pay attorney's fees in the amount of P500. 1959 will be forfeited in favor of the VENDOR by the mere fact of failure of the VENDEE/S to comply with this special condition. 1959. Juan Carlos had started construction of a house on the lot. third-party defendant-appellee. 1963. RODOLFO P. Andal a lot. Salvador J. on March 28. advising it of Andal's failure to comply with his undertaking.Republic of the Philippines SUPREME COURT Manila EN BANC G. instead he sold the lot to Juan Carlos on January 18. 1959 wherein he. Rizal. In short there was only really a little delay. as stipulated in the bond to P1. with an area of 1. for P55.500. that is. it is nonetheless true that in certain instances a mitigation of the obligor's liability is allowed. plus interest at 12%. 1960.ñët A so-called "special condition" contained in the deed of sale provides that "[T]he VENDEE/S shall commence the construction and complete at least 50% of his/her/their/its residence on the property within two (2) years from March 31. It asked that the complaint be dismissed or.500. No.00 and evidenced by a cash bond receipt dated April 10.: On March 31. 1967 Makati Development Corporation. In his answer. Makati. 1961. Lorayes for plaintiff-appellant Makati Development Corporation. whatever amount it maybe ordered to pay the While it is true that in obligations with a penal sanction the penalty takes the place of "damages and the payment of interest in case of non-compliance"2 and that the obligee is entitled to 3 recover upon the breach of the obligation without the need of proving damages. and the proportionate part of the costs. Hearing was held and. Andal should in turn pay the former the sum of P1. Andal did not build his house. Andal admitted the execution of the bond but alleged that the "special condition" in the deed of sale was contrary to law. L-21780 June 30.615. plaintiff-appellant.R. 1 MAKATI DEVELOPMENT CORPORATION. and the Empire Insurance Company. Crispin D.000 in case Andal failed to comply with his obligation under the deed of sale. Thus article 1229 of the Civil Code states: . whereupon the Makati Development Corporation filed a complaint in the Court of First Instance of Rizal on May 22. as principal. it is also a fact that even before that date the entire area was already fenced with a stone wall and building materials were also stocked in the premises which are clear indicia of the owner's desire to construct his house with the least possible delay. in the event of a judgment in favor of the Makati Development Corporation. As a matter of fact the incontrovertible testimony of Juan Carlos is to the effect that by the end of April 1961. and attorney's fees. As neither Andal nor Juan Carlos built a house on the lot within the stipulated period. The Makati Development Corporation appealed directly to this Court. the bond which the VENDEE/S has delivered to the VENDOR in the sum of P11. sent a notice of claim to the Empire Insurance Co. J. with interest at the rate of 12% from the time of the filing of the complaint until the amount was fully paid. the lower court rendered judgment." To insure faithful compliance with this "condition. at any rate. filed its answer with a third-party complaint against Andal. in the event of his/her/their/its failure to do so. morals and public policy.. It was to secure the performance of this obligation that a penal clause was inserted. 1959 to the satisfaction of the VENDOR and. Demand for the payment of P12. that judgment be rendered ordering Andal to pay the Empire Insurance Co.000. on April 3. Baizas and Associates for defendant-appellee Rodolfo Andal. In reducing Andal's liability for breach of his undertaking from P12.500 with interest at 12% from the time of the filing of the complaint to the time of payment and to pay attorney's fees in the sum of P500 and proportionate part of the costs.589 square meters. the Makati Development Corporation sold to Rodolfo P. To begin with. The court directed that in case the amount of the judgment was paid by the Empire Insurance Co. 1961. CASTRO. defendant-appellee.." Andal gave a surety bond on April 10.

The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. Here the trial court found that Juan Carlos had finished more than 50 per cent of his house by April, 1961, or barely a month after the expiration on March 31, 1961 of the stipulated period. There was therefore a partial performance of the obligation within the meaning and 4 intendment of article 1229. The case of General Ins. & Surety Corp. vs. Republic, G.R. L-13873, 5 Jan. 31, 1963 cannot be invoked as authority for the forfeiture of the full amount of the bond because unlike this case there was in that case no performance at all of any part of the obligation to secure the payment of salaries to teachers. Indeed, it has been held that where there has been partial or irregular compliance with the provisions in a contract for special indemnification in the event of failure to comply with its terms, courts will rigidly apply the doctrine of strict construction against the enforcement in its entirety of the indemnification, where it is clear from the contract that the amount or character of the indemnity is fixed without regard to the probable damages which might be anticipated as a result of a breach of the terms of the contract, or, in other words, where the indemnity provided for is essentially a 6 mere penalty having for its object the enforcement of compliance with the contract. The penal clause in this case was inserted not to indemnify the Makati Development Corporation for any damage it might suffer as a result of a breach of the contract but rather to compel performance of the so-called "special condition" and thus encourage home building among lot owners in the Urdaneta Village. Considering that a house had been built shortly after the period stipulated, the substantial, if tardy, performance of the obligation, having in view the purpose of the penal clause, fully justified the trial court in reducing the penalty. Still it is insisted that Carlos' construction of a house on the lot sold cannot be considered a partial performance of Andal's obligation because Carlos bears no contractual relation to the Makati Development Corporation. This case is in many respects analogous to Insular Gov't. vs. Amechazurra, 10 Phil. 637 (1908) where a similar claim was made by a party and rejected by this Court. There the defendant gave a bond for $800 to guarantee the return to the plaintiff of four firearms issued to him "on demand" of the Government. Three of the firearms were stolen from the defendant so that on demand of the Government he was able to produce only one. Subsequently the constabulary recovered two of the missing guns and the question was whether defendant was entitled to a mitigation of liability even if recovery of the firearms was made possible through the efforts of third parties (the Constabulary) This Court gave an affirmative answer. Indeed the stipulation in this case to commence the construction and complete at least 50 per cent of the vendee's house within two years cannot be construed as imposing a strictly personal obligation on Andal. To adopt such a construction would be to limit Andal's right to dispose of the lot. There is nothing in the deed of sale restricting Andal's right to sell the lot at least within the two-year period and we think it plain that a reading of such a limitation on one of the rights of ownership must rest on more explicit language in the contract. It cannot be left to mere inference.

Accordingly, the decision appealed from is affirmed, at appellant's cost. Concepcion, C.J., Reyes J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 116285 October 19, 2001

merely accommodated a friend, Wilson Lucmen, who allegedly asked for his help to obtain a loan from respondent CCP. Petitioner claimed that he has not been able to locate Wilson Lucmen. While the case was pending in the trial court, the petitioner filed a Manifestation wherein he proposed to settle his indebtedness to respondent CCP by proposing to make a down payment of One Hundred Forty Thousand Pesos (P140,000.00) and to issue twelve (12) checks every beginning of the year to cover installment payments for one year, and every year thereafter until the balance is fully paid. However, respondent CCP did not agree to the petitioner s proposals and so the trial of the case ensued. On May 8, 1991, the trial court rendered a decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant, ordering defendant to pay plaintiff, the amount of P7,996,314.67, representing defendant s outstanding account as of August 28, 1986, with the corresponding stipulated interest and charges thereof, until fully paid, plus attorney s fees in an amount equivalent to 25% of said outstanding account, plus P50,000.00, as exemplary damages, plus costs. Defendant s counterclaims are ordered dismissed, for lack of merit. SO ORDERED.
4

ANTONIO TAN, petitioner, vs. COURT OF APPEALS and the CULTURAL CENTER OF THE PHILIPPINES, respondents. DE LEON, JR., J.: Before us is a petition for review of the Decision dated August 31, 1993 and Resolution dated 3 July 13, 1994 of the Court of Appeals affirming the Decision dated May 8, 1991 of the Regional Trial Court (RTC) of Manila, Branch 27. The facts are as follows: On May 14, 1978 and July 6, 1978, petitioner Antonio Tan obtained two (2) loans each in the principal amount of Two Million Pesos (P2,000,000.00), or in the total principal amount of Four Million Pesos (P4,000,000.00) from respondent Cultural Center of the Philippines (CCP, for brevity) evidenced by two (2) promissory notes with maturity dates on May 14, 1979 and July 6, 1979, respectively. Petitioner defaulted but after a few partial payments he had the loans restructured by respondent CCP, and petitioner accordingly executed a promissory note (Exhibit "A") on August 31, 1979 in the amount of Three Million Four Hundred Eleven Thousand Four Hundred Twenty-One Pesos and Thirty-Two Centavos (P3,411,421.32) payable in five (5) installments. Petitioner Tan failed to pay any installment on the said restructured loan of Three Million Four Hundred Eleven Thousand Four Hundred Twenty-One Pesos and Thirty-Two Centavos (P3,411,421.32), the last installment falling due on December 31, 1980. In a letter dated January 26, 1982, petitioner requested and proposed to respondent CCP a mode of paying the restructured loan, i.e., (a) twenty percent (20%) of the principal amount of the loan upon the respondent giving its conformity to his proposal; and (b) the balance on the principal obligation payable in thirty-six (36) equal monthly installments until fully paid. On October 20, 1983, petitioner again sent a letter to respondent CCP requesting for a moratorium on his loan obligation until the following year allegedly due to a substantial deduction in the volume of his business and on account of the peso devaluation. No favorable response was made to said letters. Instead, respondent CCP, through counsel, wrote a letter dated May 30, 1984 to the petitioner demanding full payment, within ten (10) days from receipt of said letter, of the petitioner s restructured loan which as of April 30, 1984 amounted to Six Million Eighty-Eight Thousand Seven Hundred Thirty-Five Pesos and Three Centavos (P6,088,735.03). On August 29, 1984, respondent CCP filed in the RTC of Manila a complaint for collection of a sum of money, docketed as Civil Case No. 84-26363, against the petitioner after the latter failed to settle his said restructured loan obligation. The petitioner interposed the defense that he
1 2

The trial court gave five (5) reasons in ruling in favor of respondent CCP. First, it gave little weight to the petitioner s contention that the loan was merely for the accommodation of Wilson Lucmen for the reason that the defense propounded was not credible in itself. Second, assuming, arguendo, that the petitioner did not personally benefit from the said loan, he should have filed a third party complaint against Wilson Lucmen, the alleged accommodated party but he did not. Third, for three (3) times the petitioner offered to settle his loan obligation with respondent CCP. Fourth, petitioner may not avoid his liability to pay his obligation under the promissory note (Exh. "A") which he must comply with in good faith pursuant to Article 1159 of the New Civil Code. Fifth, petitioner is estopped from denying his liability or loan obligation to the private respondent. The petitioner appealed the decision of the trial court to the Court of Appeals insofar as it charged interest, surcharges, attorney s fees and exemplary damages against the petitioner. In his appeal, the petitioner asked for the reduction of the penalties and charges on his loan obligation. He abandoned his alleged defense in the trial court that he merely accommodated his friend, Wilson Lucmen, in obtaining the loan, and instead admitted the validity of the same. On August 31, 1993, the appellate court rendered a decision, the dispositive portion of which reads: WHEREFORE, with the foregoing modification, the judgment appealed from is hereby AFFIRMED. SO ORDERED.5

In affirming the decision of the trial court imposing surcharges and interest, the appellate court held that: We are unable to accept appellant s (petitioner s) claim for modification on the basis of alleged partial or irregular performance, there being none. Appellant s offer or tender of payment cannot be deemed as a partial or irregular performance of the contract, not a single centavo appears to have been paid by the defendant. However, the appellate court modified the decision of the trial court by deleting the award for exemplary damages and reducing the amount of awarded attorney s fees to five percent (5%), by ratiocinating as follows: Given the circumstances of the case, plus the fact that plaintiff was represented by a government lawyer, We believe the award of 25% as attorney s fees and P500,000.00 as exemplary damages is out of proportion to the actual damage caused by the nonperformance of the contract and is excessive, unconscionable and iniquitous. In a Resolution dated July 13, 1994, the appellate court denied the petitioner s motion for reconsideration of the said decision. Hence, this petition anchored on the following assigned errors: I THE HONORABLE COURT OF APPEALS COMMITTED A MISTAKE IN GIVING ITS IMPRIMATUR TO THE DECISION OF THE TRIAL COURT WHICH COMPOUNDED INTEREST ON SURCHARGES. II THE HONORABLE COURT OF APPEALS ERRED IN NOT SUSPENDING IMPOSITION OF INTEREST FOR THE PERIOD OF TIME THAT PRIVATE RESPONDENT HAS FAILED TO ASSIST PETITIONER IN APPLYING FOR RELIEF OF LIABILITY THROUGH THE COMMISSION ON AUDIT AND THE OFFICE OF THE PRESIDENT. III THE HONORABLE COURT OF APPEALS ERRED IN NOT DELETING AWARD OF ATTORNEY S FEES AND IN REDUCING PENALTIES. Significantly, the petitioner does not question his liability for his restructured loan under the promissory note marked Exhibit "A". The first question to be resolved in the case at bar is whether there are contractual and legal bases for the imposition of the penalty, interest on the penalty and attorney s fees.

The petitioner imputes error on the part of the appellate court in not totally eliminating the award of attorney s fees and in not reducing the penalties considering that the petitioner, contrary to the appellate court s findings, has allegedly made partial payments on the loan. And if penalty is to be awarded, the petitioner is asking for the non-imposition of interest on the surcharges inasmuch as the compounding of interest on surcharges is not provided in the promissory note marked Exhibit "A". The petitioner takes exception to the computation of the private respondent whereby the interest, surcharge and the principal were added together and that on the total sum interest was imposed. Petitioner also claims that there is no basis in law for the charging of interest on the surcharges for the reason that the New Civil Code is devoid of any provision allowing the imposition of interest on surcharges. We find no merit in the petitioner s contention. Article 1226 of the New Civil Code provides that: In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. In the case at bar, the promissory note (Exhibit "A") expressly provides for the imposition of both interest and penalties in case of default on the part of the petitioner in the payment of the 6 subject restructured loan. The pertinent portion of the promissory note (Exhibit "A") imposing interest and penalties provides that: For value received, I/We jointly and severally promise to pay to the CULTURAL CENTER OF THE PHILIPPINES at its office in Manila, the sum of THREE MILLION FOUR HUNDRED ELEVEN THOUSAND FOUR HUNDRED + PESOS (P3,411,421.32) Philippine Currency, xxx. xxx xxx xxx

With interest at the rate of FOURTEEN per cent (14%) per annum from the date hereof until paid. PLUS THREE PERCENT (3%) SERVICE CHARGE. In case of non-payment of this note at maturity/on demand or upon default of payment of any portion of it when due, I/We jointly and severally agree to pay additional penalty charges at the rate of TWO per cent (2%) per month on the total amount due until paid, payable and computed monthly. Default of payment of this note or any portion thereof when due shall render all other installments and all existing promissory notes made by us in favor of the CULTURAL CENTER OF THE PHILIPPINES immediately due and demandable. (Underscoring supplied) xxx xxx xxx

" In the instant case. QuotingEquitable Banking Corp. 1986. Liwanag. and in the absence of stipulation.The stipulated fourteen percent (14%) per annum interest charge until full payment of the loan constitutes the monetary interest on the note and is allowed under Article 1956 of the New 7 Civil Code. wherein we ruled that the imposition of interest on the damages from the filing of the complaint is unjust where the litigation was prolonged for twenty-five (25) years through no fault of the defendant. Hence. v. National Merchandising 12 Corporation. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. Thus."10 Therefore. the next issue to be resolved is whether interest may accrue on the penalty or compensatory interest without violating the provisions of Article 1959 of the New Civil Code.10 P7. petitioner contends that reduction of the penalty is justifiable pursuant to Article 1229 of the New Civil Code which provides that: "The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. According to the petitioner.9 the GSIS case went on to state that such a stipulation about payment of an additional interest rate partakes of the nature of a penalty clause which is sanctioned by law. more particularly under Article 2209 of the New Civil Code which provides that: If the obligation consists in the payment of a sum of money. there is no legal basis for the imposition of interest on the penalty charge for the reason that the law only allows imposition of interest on monetary interest but not the charging of interest on penalty.421." In the case at bar. Court of Appeals. 1986: Principal Interest Surcharge P2. the legal interest." Petitioner insists that the penalty should be reduced to ten 15 percent (10%) of the unpaid debt in accordance with Bachrach Motor Company v.454.167. any penalty interest not paid. The penalty charge is also called penalty or compensatory interest. 1983 to September 30. In Government Service Insurance System v. Thus. shall be the payment of the interest agreed upon.454. however. As of August 28. But as we have already explained.581. as in the case at bar. and as such the two are different and distinct from each other and may be demanded separately. the ruling in the said National Power Corporation (NPC) case is not applicable to the case at bar inasmuch as our ruling on the issue of interest in that NPC case was based on equitable considerations and on the fact that the said case lasted for twenty-five (25) years "through no fault of the defendant.561.67 The said statement of account also shows that the above amounts stated therein are net of the partial payments amounting to a total of Four Hundred Fifty-Two Thousand Five Hundred SixtyOne Pesos and Forty-Three Centavos (P452.996. the whole amount to bear interest at the maximum rate allowed by law. shall earn new interest.838. 1979. Inasmuch as the said stipulation on the compounding of interest has the force of law between the parties and does not appear to be inequitable or unjust. the monetary interest and the penalty interest.43) which were made during the period from 14 May 13. There is no doubt that the petitioner is liable for both the stipulated monetary interest and the stipulated penalty charge.411. interest due and unpaid shall not earn interest. the indemnity for damages.89 P4. . The fifth paragraph of the said promissory note provides that: "Any interest which may be due if not paid shall be added to the total amount when due and shall become part thereof. although the obligation may be silent upon this point. The principal amount of the promissory note (Exhibit "A") was Three Million Four Hundred Eleven Thousand Four Hundred Twenty-One Pesos and Thirty-Two Centavos (P3. there being no stipulation to the contrary. The private respondent s Statement of Account (marked Exhibits "C" to "C-2")13 shows the following breakdown of the petitioner s indebtedness as of August 28. the compounding of the penalty or compensatory interest is sanctioned by and allowed pursuant to the above-quoted provision of Article 1959 of the New Civil Code considering that: First. The petitioner now seeks the reduction of the penalty due to the said partial payments. On the other hand. Espiritu. Penalty on delinquent loans may take different forms. interest likewise began to run on the penalty interest upon the filing of the complaint in court by respondent CCP on August 29. the stipulated two percent (2%) per month penalty is in the form of penalty charge which is separate and distinct from the monetary interest on the principal of the loan. the penalty does not include the monetary interest. However.314. Article 2212 of the New Civil Code provides that "Interest due shall earn legal interest from the time it is judicially demanded. shall earn the legal interest of 11 twelve percent (12%) per annum. Even if there has been no performance.692.68 P 576. Second. penalty clauses can be in the form of penalty or compensatory interest.838. which as added principal. the principal amount of the said restructured loan has been reduced to Two Million Eight Hundred Thirty-Eight Thousand Four Hundred Fifty-Four Pesos and Sixty-Eight Centavos (P2. the contracting parties may by stipulation capitalize the interest due and unpaid. which provides that: Without prejudice to the provisions of Article 2212. Having clarified the same. However. 1983. He claims that since there is no law that allows imposition of interest on penalties. when due. and the debtor incurs in delay. the courts a quo did not err in ruling that the petitioner is bound to pay the interest on the total amount of the principal. which is six per cent per annum. The penalty charge of two percent (2%) per month in the case at bar began to accrue from the time of default by the petitioner. the penalties should not earn interest.32) when the loan was restructured on August 31. in the absence of express stipulation on the specific rate of interest. 1984. the said written stipulation should be respected.68). equity cannot be considered inasmuch as there is a contractual stipulation in the promissory note whereby the petitioner expressly agreed to the compounding of interest in case of failure on his part to pay the loan at maturity. there is an express stipulation in the promissory note (Exhibit "A") permitting the compounding of interest.8 this Court has ruled that the New Civil Code permits an agreement upon a penalty apart from the monetary interest. If the parties stipulate this kind of agreement. The petitioner seeks the elimination of the compounded interest imposed on the total amount based allegedly on the case of National Power Corporation v.

that the running of the interest and surcharge was not suspended by the private respondent s promise to assist the petitioners in applying for relief therefrom through the Commission on Audit and the Office of the President. that is dependent on a future and uncertain event which consists of whether the petitioner s request for condonation of interest and surcharge would be recommended by the Commission on Audit and the Office of the President to the House of Representatives for approval as . The said offers at compromise also showed his good faith despite difficulty in complying with his loan obligation due to his financial problems. is hereby reduced to a straight twelve percent (12%) per annum starting from August 28. until paid can indeed be justified under the said provision of Article 1229 of the New Civil Code. the private respondent correctly asserted that it was the primary responsibility of petitioner to inform the Commission on Audit and the Office of the President of his application for condonation of interest and surcharge. the appellate court ruled correctly and justly in reducing the trial court s award of twenty-five percent (25%) attorney s fees to five percent (5%) of the total amount due. WHEREFORE. Inasmuch as petitioner has made partial payments which showed his good faith. It is our view. the petitioner referred to the private respondent s letter16 dated September 28. 1445. Tan: xxx xxx xxx required under Section 36 of Presidential Decree No. Considering petitioner s several partial payments and the fact he is liable under the note for the two percent (2%) penalty charge per month on the total amount due. Bellosillo. The petitioner also imputes error on the part of the appellate court for not declaring the suspension of the running of the interest during that period when the respondent allegedly failed to assist the petitioner in applying for relief from liability. In this connection. 1986. Second. we are not unmindful of the respondent s long overdue deprivation of the use of its money collectible from the petitioner. we wish to inform you that the center will assist you in applying for relief of liability through the Commission on Audit and Office of the President xxx. the center will be accepting your proposed payment scheme with the downpayment of P160. Quisumbing. concur. 1986. the assailed Decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION in that the penalty charge of two percent (2%) per month on the total amount due." Besides. We also took into consideration the offers of the petitioner to enter into a compromise for the settlement of his debt by presenting proposed payment schemes to respondent CCP. (Chairman). On the issue of attorney s fees. However.00 xxx. Mendoza. the letter dated September 28. however. xxx xxx xxx The petitioner alleges that his obligation to pay the interest and surcharge should have been suspended because the obligation to pay such interest and surcharge has become conditional. Section 34 of the Rules of Court which provides that: "The court shall consider no evidence which has not been formally offered xxx. for twenty-one (21) years since his default in 1980. the date of the last Statement of Account (Exhibits "C" to "C-2").000. While your application is being processed and awaiting approval. compounded monthly. It was incumbent upon the petitioner to bring his administrative appeal for condonation of interest and penalty charges to the attention of the said government offices. and Buena. 1988 alleged to have been sent by the respondent CCP to the petitioner is not part of the formally offered documentary evidence of either party in the trial court. the said letter does not contain any categorical agreement on the part of respondent CCP that the payment of the interest and surcharge on the loan is deemed suspended while his appeal for condonation of the interest and surcharge was being processed. First.000. we find it fair and equitable to reduce the penalty charge to a straight twelve percent (12%) per annum on the total amount due starting August 28. In other words. a reduction of the penalty charge from two percent (2%) per month on the total amount due. This is the petitioner s contention. With reference to your appeal for condonation of interest and surcharge.There appears to be a justification for a reduction of the penalty charge but not necessarily to ten percent (10%) of the unpaid balance of the loan as suggested by petitioner.. we find the continued monthly accrual of the two percent (2%) penalty charge on the total amount due to be unconscionable inasmuch as the same appeared to have been compounded monthly. 1988 addressed to petitioner which partially reads: Dear Mr. That letter cannot be considered evidence pursuant to Rule 132. his liability to pay the interest and surcharge on the loan has not arisen. Since the condition has not happened allegedly due to the private respondent s reneging on its promise. With costs against the petitioner. SO ORDERED. JJ.00 and monthly remittances of P60. compounded monthly. compounded monthly.

R. 1979. the former was allowed to continue operating the leased premises upon his conformity to certain conditions imposed by the latter in a supplemental agreement dated August 13. representing the P10. the forfeiture clause under paragraph 12 of the Id Lease Agreement. representing the P10. the sum of P100. P100. Esteban C.000. entered into a lease agreement over the Avenue.91 as of December 31.534.00 from the time the same became due until it is paid.78. Sy's arrears in rental in the amount of P125. 1980. letters of demand dated January 7. Rollo) MEDIALDEA. 1980 and February 3. Broadway and Capital Theaters on February 11. projectors and accessories needed for showing the films or motion pictures. and on the counterclaim of the defendant O.000.00 portion of the monthly lease rental which were not deducted from the cash deposit of the plaintiff from February to November. 1980. Sy. COURT OF APPEALS and OSCAR VENTANILLA ENTERPRISES CORPORATION. Cabanatuan City. Ordering the plaintiff to pay the defendant the amount of P100. Branch XXV.000.455. as of February 11. 1979. 1977 and ending June 12.000. Declaring as lawful. After more than two (2) years of operation of the Avenue. 1980 until the same is fully paid. Hence. The term of the lease was for six (6) years commencing from June 13.00 monthly increase in rentals which the defendant failed to realize from February to November 1980 result from the injunction.R. OVEC padlocked the gates of the three theaters under lease and . On August 8. after the forfeiture of the said cash deposit on February 11. Ordering the plaintiff to pay the costs. 4. Broadway and Capitol theaters under lease on February 11. In pursuance of their latter agreement. the cancellation and termination of the Lease Agreement (Exh. as lessor.00 from his monthly rental with the obligation to remit the said deductions to the city government. No. with legal interest thereon from the finality of this decision until fully paid. 85161 September 9. 1980 in pursuance of the pertinent provisions of their lease contract of June 11. and 7. Ordering the plaintiff to pay to the defendant the sum equivalent to ten per centum (10%) of the above-mentioned amounts of P289. representing arrears in rentals.000. as and for attorney's fees. judgment is hereby rendered: 1. Broadway and Capitol Theaters. Manuel for petitioners. the complaint of the plaintiff Enrique F. petitioners. including their airconditioning systems.:p The antecedent facts of the case are as follows: Petitioners seek a review on certiorari of the decision of the Court of Appeals in CA-G. The latter demand was with warning that OVEC will re-enter and repossess the Avenue.1979. and the petitioner Enrique F.00.76 (as of July 31.00 in favor of the defendant thereunder. Broadway and Capitol Theaters and the land on which they are situated in Cabanatuan City.000. A) and the defendant's re-entry and repossession of the Avenue. 5. 1991 COUNTRY BANKERS INSURANCE CORPORATION and ENRIQUE SY.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. 1980.000. Oscar Ventanilla Enterprises Corporation" affirming in toto the decision of the Regional Trial Court. 1979) was reduced to P71. with further interest on said amounts at the rate of 12% per annum (per lease agreement) from December 1.00 and P100. But notwithstanding the said demands and warnings SY failed to pay the above-mentioned amounts in full Consequently. CV No. OVEC and Sy had a conference and by reason of Sy's request for reconsideration of OVECs demand for repossession of the three (3) theaters. 3. Respondent Oscar Ventanilla Enterprises Corporation (OVEC). and confirming the forfeiture of the plaintiffs remaining cash deposit of P290. the accrued amusement tax liability of the three (3) theaters to the City Government of Cabanatuan City had accumulated to P84. 6. 94-95. unremitted amounts for amusement tax delinquency and accrued interest thereon. However.028.78. J. 09504 "Enrique Sy and Country Bankers Insurance Corporation v.00. Ventanilla Enterprises Corporation.000. 1979. Sy is dismissed. as lessee. 2. Ordering the plaintiff to pay the defendant through the injunction bond.1983.534.00. respondents. 1980 were sent to Sy demanding payment of the arrears in rentals and amusement tax delinquency. 1977 and their supplemental letter-agreement of August 13. to wit: WHEREFORE. Declaring as lawful.000. (pp. the lessor OVEC made demands for the repossession of the said leased properties in view of the Sy's arrears in monthly rentals and non-payment of amusement taxes. Augusta Gatmaytan for OVEC. with interest thereon at the rate of 12% per annum on each of the said monthly amounts of P10.000. vs. 1980.00 despite the fact that Sy had been deducting the amount of P4. Ordering the plaintiff to pay the defendant the sum of P289.

It held that the provisions are fair and reasonable and therefore. it found that as of the end of November. Hence. Sy alleged that the amount of deposit P600.00 chargeable against the injunction bond posted by CBISCO which was soundly and amply justified by the trial court. it is alleged in the complaint that on February 11.000. it adjudged Sy to pay attorney's fees equivalent to 10% of the amounts above-mentioned. 1980. From this decision.000. The respondent Court of Appeals found no ambiguity in the provisions of the lease agreement. . when OVEC finally regained the possession of the three (3) theaters under lease. Sy regained possession and operation of the Avenue. 1980 or the total amount of P100. OVEC on the other hand.000.000.00 for attorney's service.000.000. By way of second cause of action.00 to P60.00 of which was to be paid on June 13. that by reason of Sy's violation of the terms of the subject lease agreement. The trial court arrived at the conclusions that Sy is not entitled to the reformation of the lease agreement. The trial court further concluded that Sy was not entitled to the writ of preliminary injunction issued in his favor after the commencement of the action and that the injunction bond filed by Sy is liable for whatever damages OVEC may have suffered by reason of the injunction. 1980. OVEC had the three theaters padlocked with the use of force. and that OVEC had assured him that said forfeiture will not come to pass. As fourth cause of action. 1980 followed by an order directing the issuance of a writ of preliminary injunction issued in said case. conditioned upon Sy's filing of a P500.000. it held that OVEC is entitled to recover the said damages in addition to the arrears in rentals and amusement tax delinquency of Sy and the accrued interest thereon.000.00 which Sy allegedly spent in making "major repairs" on Broadway Theater and the application of which to Sy's due rentals. 1980. Finally.00 a day. Sy's unpaid rentals and amusement tax liability amounted to P289.00 every month from February to November. (2) P48. filed the present action for reformation of the lease agreement. Sy and (CBISCO) appealed the decision in toto while OVEC appealed insofar as the decision failed to hold the injunction bond liable for an damages awarded by the trial court. B RESPONDENT COURT OF APPEALS CO D SERIOUS ERROR OF LAW AND GRAVE ABUSE OF DISCRETION IN NOT SETTING OFF THE P100. As first cause of action.000.000. The respondent Court likewise found no merit in OVECS appeal and held that the trial court did not err in not charging and holding the injunction bond posted by Sy liable for all the awards as the undertaking of CBISCO under the bond referred only to damages which OVEC may suffer as a result of the injunction. 1977 and the balance on December 13." It also affirmed the award to OVEC of the amount of P100.000. Broadway and Capital theaters. And by virtue of a restraining order dated February 12.00 bond supplied by Country Bankers Insurance Corporation (CBISCO).00 portion of the monthly lease rental was supposed to come from the remaining cash deposit of Sy but with the consequent forfeiture of the remaining cash deposit of P290.000.000. From the evidence presented.00 in view of the offer of one RTG Productions. Sy prayed for the issuance of a restraining order/preliminary injunction to enjoin OVEC and all persons employed by it from entering and taking possession of the three theaters. that OVEC would be losing P50.00 covering the cost of electrical current allegedly used by OVEC in its alleged "illegal connection" to Capitol Theater and (3) P31.000. In addition.78.00 also for the cost of electrical current allegedly used by OVEC for its alleged "illegal connection" to Broadway Theater and for damages suffered by Sy as a result of such connection.00 with interest on each amount of P10. Inc. damages and injunction late in the afternoon of the same day. The amount represents the supposed increase in rental from P50. 1977 was too big.000. Sy suffered damages at the rate of P5.took possession thereof in the morning of February 11. CBISCO and Sy filed this instant petition on the following grounds: A PRIVATE RESPONDENT SHOULD NOT BE ALLOWED TO UNJUSTLY ENRICH OR BE BENEFITTED AT THE EXPENSE OF THE PETITIONERS. 1980 by posting its men around the premises of the Id movie houses and preventing the lessee's employees from entering the same. Further.00 for every month that the possession and operation of said three theaters remain with Sy and that OVEC incurred P500. through his counsel. and that as a result. Under the third cause of action.000.000.00 every month from February to November. From this decision of the trial court.00 as agreed upon. On the counterclaim of OVEC the trial court found that the said lessor was deprived of the possession and enjoyment of the leased premises and also suffered damages as a result of the filing of the case by Sy and his violation of the terms and conditions of the lease agreement. Sy sought to recover from OVEC the sums of P100.000. there was no more cash deposit from which said amount could be deducted. in view of his failure to go thru the contracts he had entered into with movie and booking companies for the showing of movies at ABC.534. the trial court held Sy through the injunction bond liable to pay the sum of P10.00 REMAINING CASH DEPOSIT OF PETITIONER ENRIQUE SY. that the repossession of the leased premises by OVEC after the cancellation and termination of the lease was in accordance with the stipulation of the parties in the said agreement and the law applicable thereto and that the consequent forfeiture of Sy's cash deposit in favor of OVEC was clearly agreed upon by them in the lease agreement. This P10.00 from the time the same became due.000.000.000.00.00 SUPPOSED DAMAGE RESULTING FROM THE INJUNCTION AGAINST THE P290.00 a month. it held that Sy was under obligation to pay P10. It held that the cancellation or termination of the agreement prior to its expiration period is justified as it was brought about by Sy's own default in his compliance with the terms of the agreement and not "motivated by fraud or greed. alleged in its answer by way of counterclaims. OVEC became authorized to enter and possess the three theaters in question and to terminate said agreement and the balance of the deposits given by Sy to OVEC had thus become forfeited. P300. to lease the three theaters involved for P60. Sy. should be respected and enforced as the law between the parties.

New Civil Code.R. p. They are first. 101) Thus. v. .00 (P10. The undertaking assumed by CBISCO under subject injunction refers to "all such damages as such party may sustain by reason of the injunction if the Court should finally decide that the Plaintiff was/were not entitled thereto. for all legal purposes. and (c) the court has jurisdiction to entertain the claim (see Javier v.000. par. There is likewise no merit to the claim of petitioners that respondent Court committed serious error of law and grave abuse of discretion in not dismissing private respondent's counterclaim for failure to pay the necessary docket fee. 1987. We allowed the amendment of the complaint by specifying the amount of damages within a non-extendible period of five (5) days from notice and the re-assessment of the filing fees.R. the amount of P100.R. G. in obligations with a penal clause. 1. (Eduardo P. (b) they do not require for their adjudication the presence of third parties of whom the court cannot acquire jurisdiction. and third. was correctly made chargeable by the said court against the injunction bond posted by CBISCO. IV.J. finding no merit in the grounds relied upon by petitioners in their petition. Court of Appeals.00. No. morals. In the case at bar. OVEC's counterclaims are compulsory so no docket fees are required as the following circumstances are present: (a) they arise out of or are necessarily connected with the transaction or occurrence that is subject matter of the opposing party's claim. 149 SCRA 562 to the effect that all the proceedings held in connection with a case where the correct docket fees are not paid should be peremptorily be considered null and void because. second.000. ACCORDINGLY. which OVEC failed to realize for ten months from February to November.000. 1989." (Rollo. Nevertheless. May 7. the unmeritted amounts of the amusement tax delinquency. the penalty cannot substitute for the P100.. August 19. In such case. It should be remembered however. this Court took note of the fact that the assailed order of the trial court was issued prior to the resolution in the Manchester case and held that its strict application to the case at bar would therefore be unduly harsh. the purpose of the penalty is to punish the obligor. Rollo) We find no merit in petitioners' argument that the forfeiture clause stipulated in the lease agreement would unjustly enrich the respondent OVEC at the expense of Sy and CBISCO contrary to law. good customs.C RESPONDENT COURT OF APPEALS FURTHER COMMITTED SERIOUS ERROR OF LAW AND GRAVE ABUSE OF DISCRETION IN NOT DISMISSING PRIVATE RESPONDENTS COUNTER-CLAIM FOR FAILURE TO PAY THE NECESSARY DOCKET FEE. 1. Then. 1980 after the forfeiture of said cash deposit on February 11. there are exceptions to the rule that the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance with the principal obligation.000. when the obligor is sued for refusal to pay the agreed penalty. 1980) and attorney's fees which were all charged against Sy were correctly considered by the respondent Court as damages which OVEC sustained not as a result of the injunction. 171 SCRA 605). 79937-38. when the obligor is guilty of fraud (Article 1226.00 a month increase in rental from P50. 10. G. A provision which calls for the forfeiture of the remaining deposit still in the possession of the lessor. Comments and Cases on Civil Law. that in Davao Light and Power Co. G. February 3. public order or public policy. This supposed damage suffered by OVEC was the alleged P10. JJ.000. the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance.. 1988. 1989. which is an issue raised for the first time in this petition. Ltd. Narvasa (Chairman). This is specifically provided for in Article 1226. New Civil Code). Caguioa.000. Vol. the same is hereby DENIED and the decision dated June 15. Inc. without prejudice to any other obligation still owing by the lessee to the lessor. The arrears in rental. proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded (Article 1228. 1980 in the total sum of P100. the respondent Court correctly sustained the trial court in holding that the bond shall and may answer only for damages which OVEC may suffer as a result of the injunction. Whether the respective claims asserted by the parties arise out of the same contract or transaction within the limitation on counterclaims imposed by the statutes depends on a consideration of all the facts brought forth by the parties and on a determination of whether there is some legal or equitable relationship between the ground of recovery alleged in the counterclaim and the matters alleged as the cause of action by the plaintiff (80 C. inasmuch as the forfeiture clause provides that the deposit shall be deemed forfeited. (p. 164 SCRA 748. concur. 48). Petitioners rely on the rule in Manchester Development Corporation v.00 portions of each monthly rental which were not deducted from plaintiffs cash deposit from February to November. However. the obligee can recover from the obligor not only the penalty but also the damages resulting from the nonfulfillment or defective performance of the principal obligation. A penal clause is an accessory obligation which the parties attach to a principal obligation for the purpose of insuring the performance thereof by imposing on the debtor a special presentation (generally consisting in the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled. v. It is evident that in all said cases. par.R. 199-200) As a general rule. Cruz and Griño-Aquino.00 supposed damage resulting from the issuance of the injunction against the P290. Dinopol.S. Intermediate Appellate Court. it is clear that said counterclaims are compulsory. 75379. in the event of the termination or cancellation of the agreement by reason of the lessee's violation of any of the terms and conditions of the agreement is a penal clause that may be validly entered into. SO ORDERED. As the counterclaims of OVEC arise from or are necessarily connected with the facts alleged in the complaint for reformation of instrument of Sy. without prejudice to any other obligation still owing. 75195. This opportunity cost which was duly proven before the trial court.00).000. New Civil Code). 75919. Thus. We held that where the filing of the initiatory pleading is not accompanied by payment of the docket fee. pp.000. March 31. when there is a stipulation to the contrary.00 remaining cash deposit.00 to P60. Therefore. in Sun Insurance Office. 1988. G. the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglemen tary period. Asuncion. 1988 and the resolution dated September 21. 170 SCRA 274. the trial court never acquired jurisdiction over the case. First Edition. both of the respondent Court of Appeals are AFFIRMED.

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