Pamintuan vs. CA 94 SCRA 556 Facts: Jose Valeriano commenced a civil case against Pedro D.

Pamintuan, to eject him from a property of Valerians. In due course, said court rendered judgment sentencing Pamintuan to vacate said property and to pay a sum of money for its use, plus attorney's fees and costs. Soon later, however, Pamintuan reoccupied the property, allegedly by force. After appropriate proceedings, Pamintuan was, accordingly, adjudged guilty of contempt of court, and sentenced accordingly. Subsequently, on motion of Valeriano, the Municipal Judge ordered the issuance of an alias writ of execution directing the Sheriff to eject Pamintuan once more and to collect from him the amount of the money judgment. Therefore an appeal by certiorari from a decision of the Court of Appeals Pamintuan's prayed that 1. The defendants from proceeding with the said order of the Municipal Court ordering the herein plaintiff to vacate within four (4) days. 2. After trial making the injunction above-mentioned permanent and ordering the defendant not to eject the herein plaintiff without first filing a suit for ejectment based on the new contract created into between the herein plaintiff and the herein defendant; and3. Other relief that may be found just and equitable under the premises; Hon. Juan P. Enriquez, Judge, rendered judgment dismissing Pamintuan's complaint and sentencing him to pay P500 to Valeriano as attorney's fees and costs, and dissolving the writ of preliminary injunction aforementioned, as well as sentencing Pamintuan and his surety to pay Valeriano P500, as damages for the issuance of said writ. Pamintuan thereupon filed with the Court of Appeals a petition However, the Court of Appeals rendered a decision sustaining the view of Judge Barcelona and, consequently, dismissing Pamintuan's petition for certiorari and mandamus. A reconsideration of this decision of the Court of Appeals having been denied, Pamintuan now seeks a review thereof by certiorari. Issue: Whether or not the Court gravely abuse its discretion in resolving the case base on the nature of the case of action set forth. Held: Yes, Pamintuan merely relied in his complaint, upon a contract he allegedly had with Valeriano, after the rendition of the decision of the municipal court and the partial execution thereof, whereby Valeriano had agreed to re-let and to sell the property in question to Pamintuan.The complain stated that it was "for set forth in Pamintuan's complain was actually one for injunction and so was the prayer in the said pleading regardless of whether or not the relief he should have applied for was certiorari so that he had 30days from the notice to asail on the said decision. The complaint could be considered as one either of injuction or of certiorari. MINDANAO TERMINAL AND BROKERAGESERVICE, INC.versus -PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE & CO., INC G.R. No. 162467 May 8, 2009 Tinga, J.: FACTS:Del Monte Philippines, Inc. contractedpetitioner Mindanao Terminal and BrokerageService, Inc., a stevedoring company, to loadand stow a shipment of 146,288 cartons of fresh green Philippine bananas and 15,202cartons of fresh pineapples belonging to DelMonte Fresh Produce International, Inc. into thecargo hold of the vessel M/V Mistrau . Thevessel was docked at the port of Davao Cityand the goods were to be transported by it tothe port of Inchon, Korea in favor of consignee Taegu Industries, Inc. Del Monte Produceinsured the shipment under an "open cargopolicy" with private respondent PhoenixAssurance Company of New York , a non-lifeinsurance company, and private respondentMcGee & Co. Inc. (McGee), the underwritingmanager/agent of Phoenix. The vessel set sail from the port of Davao Cityand arrived at the port of Inchon, Korea. It

wasthen discovered upon discharge that some of the cargo was in bad condition. The MarineCargo Damage Surveyor of Incok Loss andAverage Adjuster of Korea, through itsrepresentative Byeong Yong Ahn (Byeong),surveyed the extent of the damage of theshipment. In a survey report, it was stated that16,069 cartons of the banana shipment and2,185 cartons of the pineapple shipment wereso damaged that they no longer hadcommercial value.Mindanao Terminal loaded and stowed thecargoes aboard the M/V Mistrau . The vessel setsail from the port of Davao City and arrived atthe port of Inchon, Korea. It was thendiscovered upon discharge that some of thecargo was in bad condition.Del Monte Produce filed a claim under the opencargo policy for the damages to its shipment.McGees Marine Claims Insurance Adjusterevaluated the claim and recommended thatpayment in the amount of $210,266.43 bemade. Phoenix and McGee instituted an actionfor damages against Mindanao TerminalAfter trial, the RTC held that the onlyparticipation of Mindanao Terminal was to loadthe cargoes on board the M/V Mistrau underthe direction and supervision of the shipsofficers, who would not have accepted thecargoes on board the vessel and signed theforemans report unless they were properlyarranged and tightly secured to withstandvoyage across the open seas. Accordingly,Mindanao Terminal cannot be held liable forwhatever happened to the cargoes after it hadloaded and stowed them. Moreover, citing thesurvey report, it was found by the RTC that thecargoes were damaged on account of atyphoon which M/V Mistrau had encounteredduring the voyage. It was further held thatPhoenix and McGee had no cause of actionagainst Mindanao Terminal because the latter,whose services were contracted by Del Monte,a distinct corporation from Del Monte Produce,had no contract with the assured Del MonteProduce. The RTC dismissed the complaint andawarded the counterclaim of Mindanao Terminal in the amount of P83,945.80 as actualdamages and P100,000.00 as attorneys fees.ISSUE:Whether or not Phoenix and McGeehave a cause of action and whether Mindanao Terminal is liable for not having exercisedextraordinary diligence in the transport andstorage of the cargo.RULING:No, in the present case, Mindanao Terminal, as a stevedore, was only chargedwith the loading and stowing of the cargoesfrom the pier to the ships cargo hold; it wasnever the custodian of the shipment of DelMonte Produce. A stevedore is not a commoncarrier for it does not transport goods orpassengers; it is not akin to a warehousemanfor it does not store goods for profit. **Phoenix and McGee appealed to the Court of Appeals. The appellate court reversed and set aside the decision The same court ordered Mindanao Terminal to pay Phoenix and McGee"the total amount of $210,265.45 plus legalinterest from the filing of the complaint untilfully paid and attorneys fees of 20% of theclaim." It sustained Phoenixs and McGeesargument that the damage in the cargoes wasthe result of improper stowage by MindanaoTerminal.** Mindanao Terminal filed a motion for reconsideration, which the Court of Appealsdenied in its 26 February 2004 resolution.Hence, the present petition for review Agcaoili vs GSIS 1988 (Art 1169; Compensatio Morae; pg 109) Facts: In 1964, plaintiff Agcaoili applied with the defendant GSIS to purchase a house and lot in Marikina. In the following year in a letter, respondent approved petitioners application with the advise to occupy the said house immediately and failure to occupy the same from the receipt of the notice, plaintiffs application shall be considered disapproved and will be awarded to another applicant. Plaintif lost no time in occupying the house. However, he could not stay in it and had to leave the following day because the house was nothing more than a shell, in such a state of incompleteness that civilized occupation was not possible. Agcaoili did however

ask a homeless friend, a certain Villanueva, to stay in the premises as some sort of watchman, pending completion of the construction of the house. Agcaoili thereafter complained to the GSIS, to no avail. The GSIS asked Agcaoili to pay the monthly amortizations and other fees. Agcaoili paid the first monthly installment and the incidental fees, 3 but refused to make further payments until and unless the GSIS completed the housing unit. What the GSIS did was to cancel the award and require Agcaoili to vacate the premises. 4 Agcaoili reacted by instituting suit in the Court of First Instance of Manila for specific performance and damages. The CFI ruled in favor of Agcaoili declaring the cancellation of the award illegal and viod and ordering GSIS to respect and enforce the aforesaid award, and to complete the house in question to make the same habitable and authorizing GSIS to collect the monthly amortization only after said house shall have been completed. Hence this present appeal. GSIS argued the following: 1. Agcaoili had no right to suspend payment of amortizations on account of the incompleteness of his housing unit, since said unit had been sold in the condition and state of completion then existing ... (and) he is deemed to have accepted the same in the condition he found it when he accepted the award. 2. Perfection of the contract of sale between it and Agcaoili being conditioned upon the latters immediate occupancy of the house subject thereof, and the latter having failed to comply with the condition, no contract ever came into existence between them. Issues: 1. Whether or not Agcaoli may suspend payment of amortization on account of the incompleteness of his housing unit, since said unit had been sold in the condition and state of completion then existing ... (and) he is deemed to have accepted the same in the condition he found it when he accepted the award? Whether or not there was a valid contract of sale between Agcaoili and GSIS? 2. Whether or not Agcaolili repudiated his contract with GSIS? Held: On the first issue, Yes, because Art. 1169 of the Civil Code provides that in reciprocal obligations, 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. Certainly, the prestation of the contract which was ratified upon approval of GSIS (presupposing the meeting of the minds of GSIS and Agcaoli) is the house and lot, on the condition that the house should be habitable. Thus: There was then a perfected contract of sale between the parties; there had been a meeting of the minds upon the purchase by Agcaoili of a determinate house and lot in the GSIS Housing Project at Nangka Marikina, Rizal at a definite price payable in amortizations at P31.56 per month, and from that moment the parties acquired the right to reciprocally demand performance. There would be no sense to require the awardee to immediately occupy and live in a shell of a house, a structure consisting only of four walls with openings, and a roof, and to theorize, as the GSIS does, that this was what was intended by the parties, since the contract did not clearly impose upon it the obligation to deliver a habitable house, is to advocate an absurdity, the creation of an unfair situation. By any objective interpretation of its terms, the contract can only be understood as imposing on the GSIS an obligation to deliver to Agcaoili a reasonably habitable dwelling in return for his undertaking to pay the stipulated price. Since GSIS did not fulfill that obligation, and was not willing to put the house in habitable state, it cannot invoke Agcaoilis suspension of payment of amortizations as cause to cancel the contract between them. It is axiomatic that (i)n reciprocal obligations, 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. 15

Office of the Government Corporate Counsel for defendantappellant.

NARVASA, J.: The appellant Government Service Insurance System, (GSIS, for short) having approved the application of the appellee Agcaoili for the purchase of a house and lot in the GSIS Housing Project at Nangka Marikina, Rizal, subject to the condition that the latter should forthwith occupy the house, a condition that Agacoili tried to fulfill but could not for the reason that the house was absolutely uninhabitable; Agcaoili, after paying the first installment and other fees, having thereafter refused to make further payment of other stipulated installments until GSIS had made the house habitable; and appellant having refused to do so, opting instead to cancel the award and demand the vacation by Agcaoili of the premises; and Agcaoili having sued the GSIS in the Court of First Instance of Manila for specific performance with damages and having obtained a favorable judgment, the case was appealled to this Court by the GSIS. Its appeal must fail. The essential facts are not in dispute. Approval of Agcaoili's aforementioned application for purchase 1 was contained in a letter 2 addressed to Agcaoili and signed by GSIS Manager Archimedes Villanueva in behalf of the Chairman-General Manager, reading as follows: Please be informed that your application to purchase a house and lot in our GSIS Housing Project at Nangka, Marikina, Rizal, has been approved by this Office. Lot No. 26, Block No. (48) 2, together with the housing unit constructed thereon, has been allocated to you. You are, therefore, advised to occupy the said house immediately. If you fail to occupy the same within three (3) days from receipt of this notice, your application shall be considered automatically disapproved and the said house and lot will be awarded to another applicant. Agcaoili lost no time in occupying the house. He could not stay in it, however, and had to leave the very next day, because the house was nothing more than a shell, in such a state of incompleteness that civilized occupation was not possible: ceiling, stairs, double walling, lighting facilities, water connection, bathroom, toilet kitchen, drainage, were inexistent. Agcaoili did however ask a homeless friend, a certain Villanueva, to stay in the premises as some sort of watchman, pending completion of the construction of the house. Agcaoili thereafter complained to the GSIS, to no avail. The GSIS asked Agcaoili to pay the monthly amortizations and other fees. Agcaoili paid the first monthly installment and the incidental fees, 3 but refused to make further payments until and unless the GSIS completed the housing unit. What the GSIS did was to cancel the award and require Agcaoili to vacate the premises. 4 Agcaoili reacted by instituting suit in the Court of First Instance of Manila for specific performance and damages. 5 Pending the action, a written protest was lodged by other awardees of housing units in the same subdivision, regarding the failure of the System to complete construction of their own houses. 6 Judgment was in due course rendered , 7 on the basis of the evidence adduced by Agcaoili only, the GSIS having opted to dispense with presentation of its own proofs. The judgment was in Agcaoili's favor and contained the following dispositions, 8 to wit: 1) Declaring the cancellation of the award (of a house and lot) in favor of plaintiff (Mariano Agcaoili) illegal and void; 2) Ordering the defendant (GSIS) to respect and enforce the aforesaid award to the plaintiff relative to Lot No. 26, Block No. (48) 2 of the Government Service Insurance System (GSIS) low cost housing project at Nangka Marikina, Rizal; 3) Ordering the defendant to complete the house in question so as to make the same habitable and authorizing it (defendant) to collect the monthly amortization thereon only after said house shall have been completed under the terms and conditions mentioned in Exhibit A ;and 4) Ordering the defendant to pay P100.00 as damages and P300.00 as and for attorney's fees, and costs.

G.R. No. L-30056 August 30, 1988 MARCELO AGCAOILI, plaintiff-appellee vs. GOVERNMENT SERVICE INSURANCE SYSTEM, defendantappellant. Artemio L. Agcaoili for plaintiff-appellee.

Appellant GSIS would have this Court reverse this judgment on the argument that? 1) Agcaoili had no right to suspend payment of amortizations on account of the incompleteness of his housing unit, since said unit had been sold "in the condition and state of completion then existing ... (and) he is deemed to have accepted the same in the condition he found it when he accepted the award;" and assuming indefiniteness of the contract in this regard, such circumstance precludes a judgment for specific performance. 9 2) Perfection of the contract of sale between it and Agcaoili being conditioned upon the latter's immediate occupancy of the house subject thereof, and the latter having failed to comply with the condition, no contract ever came into existence between them ; 10 3) Agcaoili's act of placing his homeless friend, Villanueva, in possession, "without the prior or subsequent knowledge or consent of the defendant (GSIS)" operated as a repudiation by Agcaoili of the award and a deprivation of the GSIS at the same time of the reasonable rental value of the property. 11 Agcaoili's offer to buy from GSIS was contained in a printed form drawn up by the latter, entitled "Application to Purchase a House and/or Lot." Agcaoili filled up the form, signed it, and submitted it. 12 The acceptance of the application was also set out in a form (mimeographed) also prepared by the GSIS. As already mentioned, this form sent to Agcaoili, duly filled up, advised him of the approval of his "application to purchase a house and lot in our GSIS Housing Project at NANGKA, MARIKINA, RIZAL," and that "Lot No. 26, Block No. (48) 2, together with the housing unit constructed thereon, has been allocated to you." Neither the application form nor the acceptance or approval form of the GSIS ? nor the notice to commence payment of a monthly amortizations, which again refers to "the house and lot awarded" ? contained any hint that the house was incomplete, and was being sold "as is," i.e., in whatever state of completion it might be at the time. On the other hand, the condition explicitly imposed on Agcaoili ? "to occupy the said house immediately," or in any case within three (3) days from notice, otherwise his "application shall be considered automatically disapproved and the said house and lot will be awarded to another applicant" ? would imply that construction of the house was more or less complete, and it was by reasonable standards, habitable, and that indeed, the awardee should stay and live in it; it could not be interpreted as meaning that the awardee would occupy it in the sense of a pioneer or settler in a rude wilderness, making do with whatever he found available in the envirornment. There was then a perfected contract of sale between the parties; there had been a meeting of the minds upon the purchase by Agcaoili of a determinate house and lot in the GSIS Housing Project at Nangka Marikina, Rizal at a definite price payable in amortizations at P31.56 per month, and from that moment the parties acquired the right to reciprocally demand performance. 13 It was, to be sure, the duty of the GSIS, as seller, to deliver the thing sold in a condition suitable for its enjoyment by the buyer for the purpose contemplated , 14 in other words, to deliver the house subject of the contract in a reasonably livable state. This it failed to do. It sold a house to Agcaoili, and required him to immediately occupy it under pain of cancellation of the sale. Under the circumstances there can hardly be any doubt that the house contemplated was one that could be occupied for purposes of residence in reasonable comfort and convenience. There would be no sense to require the awardee to immediately occupy and live in a shell of a house, a structure consisting only of four walls with openings, and a roof, and to theorize, as the GSIS does, that this was what was intended by the parties, since the contract did not clearly impose upon it the obligation to deliver a habitable house, is to advocate an absurdity, the creation of an unfair situation. By any objective interpretation of its terms, the contract can only be understood as imposing on the GSIS an obligation to deliver to Agcaoili a reasonably habitable dwelling in return for his undertaking to pay the stipulated price. Since GSIS did not fulfill that obligation, and was not willing to put the house in habitable state, it cannot invoke Agcaoili's suspension of payment of amortizations as cause to cancel the contract between them. It is axiomatic that "(i)n reciprocal obligations, 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." 15 Nor may the GSIS succeed in justifying its cancellation of the award to Agcaoili by the claim that the latter had not complied with the condition of occupying the house within three (3) days. The record shows that Agcaoili did try to fulfill the condition; he did try

to occupy the house but found it to be so uninhabitable that he had to leave it the following day. He did however leave a friend in the structure, who being homeless and hence willing to accept shelter even of the most rudimentary sort, agreed to stay therein and look after it. Thus the argument that Agcaoili breached the agreement by failing to occupy the house, and by allowing another person to stay in it without the consent of the GSIS, must be rejected as devoid of merit. Finally, the GSIS should not be heard to say that the agreement between it and Agcaoili is silent, or imprecise as to its exact prestation Blame for the imprecision cannot be imputed to Agcaoili; it was after all the GSIS which caused the contract to come into being by its written acceptance of Agcaoili's offer to purchase, that offer being contained in a printed form supplied by the GSIS. Said appellant having caused the ambiguity of which it would now make capital, the question of interpretation arising therefrom, should be resolved against it. It will not do, however, to dispose of the controversy by simply declaring that the contract between the parties had not been validly cancelled and was therefore still in force, and that Agcaoili could not be compelled by the GSIS to pay the stipulated price of the house and lot subject of the contract until and unless it had first completed construction of the house. This would leave the contract hanging or in suspended animation, as it were, Agcaoili unwilling to pay unless the house were first completed, and the GSIS averse to completing construction, which is precisely what has been the state of affairs between the parties for more than twenty (20) years now. On the other hand, assuming it to be feasible to still finish the construction of the house at this time, to compel the GSIS to do so so that Agcaoili's prestation to pay the price might in turn be demanded, without modifying the price therefor, would not be quite fair. The cost to the GSIS of completion of construction at present prices would make the stipulated price disproportionate, unrealistic. The situation calls for the exercise by this Court of its equity jurisdiction, to the end that it may render complete justice to both parties. As we . . reaffirmed in Air Manila, Inc. vs. Court of Industrial Relations (83 SCRA 579, 589 [1978]). "(E)quity as the complement of legal jurisdiction seeks to reach and do complete justice where courts of law, through the inflexibility of their rules and want of power to adapt their judgments to the special circumstances of cases, are incompetent so to do. Equity regards the spirit of and not the letter, the intent and not the form, the substance rather than the circumstance, as it is variously expressed by different courts... " 16 In this case, the Court can not require specific performance of the contract in question according to its literal terms, as this would result in inequity. The prevailing rule is that in decreeing specific performance equity requires 17 ? ... not only that the contract be just and equitable in its provisions, but that the consequences of specific performance likewise be equitable and just. The general rule is that this equitable relief will not be granted if, under the circumstances of the case, the result of the specific enforcement of the contract would be harsh, inequitable, oppressive, or result in an unconscionable advantage to the plaintiff . . In the exercise of its equity jurisdiction, the Court may adjust the rights of parties in accordance with the circumstances obtaining at the time of rendition of judgment, when these are significantly different from those existing at the time of generation of those rights. The Court is not restricted to an adjustment of the rights of the parties as they existed when suit was brought, but will give relief appropriate to events occuring ending the suit. 18 While equitable jurisdiction is generally to be determined with reference to the situation existing at the time the suit is filed, the relief to be accorded by the decree is governed by the conditions which are shown to exist at the time of making thereof, and not by the circumstances attending the inception of the litigation. In making up the final decree in an equity suit the judge may rightly consider matters arising after suit was brought. Therefore, as a general rule, equity will administer such relief as the nature, rights, facts and exigencies of the case demand at the close of the trial or at the time of the making of the decree. 19 That adjustment is entirely consistent with the Civil Law principle that in the exercise of rights a person must act with justice, give

everyone his due, and observe honesty and good faith. 20 Adjustment of rights has been held to be particularly applicable when there has been a depreciation of currency. Depreciation of the currency or other medium of payment contracted for has frequently been held to justify the court in withholding specific performance or at least conditioning it upon payment of the actual value of the property contracted for. Thus, in an action for the specific performance of a real estate contract, it has been held that where the currency in which the plaintiff had contracted to pay had greatly depreciated before enforcement was sought, the relief would be denied unless the complaint would undertake to pay the equitable value of the land. (Willard & Tayloe [U.S.] 8 Wall 557,19 L. Ed 501; Doughdrill v. Edwards, 59 Ala 424) 21 In determining the precise relief to give, the Court will "balance the equities" or the respective interests of the parties, and take account of the relative hardship that one relief or another may occasion to them .22 The completion of the unfinished house so that it may be put into habitable condition, as one form of relief to the plaintiff Agcaoili, no longer appears to be a feasible option in view of the not inconsiderable time that has already elapsed. That would require an adjustment of the price of the subject of the sale to conform to present prices of construction materials and labor. It is more in keeping with the realities of the situation, and with equitable norms, to simply require payment for the land on which the house stands, and for the house itself, in its unfinished state, as of the time of the contract. In fact, this is an alternative relief proposed by Agcaoili himself, i.e., "that judgment issue . . (o)rdering the defendant (GSIS) to execute a deed of sale that would embody and provide for a reasonable amortization of payment on the basis of the present actual unfinished and uncompleted condition, worth and value of the said house. 23 ARRIETA VS. NARIC(1964) 10 SCRA 79 FACTS: Paz Arrieta was awarded by NARIC the contract of delivery of 20,000 metric tons of Burmese rice at $203 per metric ton. On the other hand, the corporation committed itself to pay for the imported rice by means of an irrevocable, confimed, and assignable letter of credit in US currency in favor of Arrieta or supplier in Burma immediately. However, the corporation took the first step to open a letter of credit a full month from the execution of the contract only July 30, 1952. On the same day, Arrieta advised the corporation of the extreme necessity for the immediate opening of the letter of credit since she had by then made a tender to her supplier in Ragoon Burma. Consequently, the credit instrument applied for was opened only on September 8, 1952, since the corporation was not in financial capacity to pay the 50% marginal cash deposit when the credit instrument was approved on August 4, 1952. As a result of the delay, the allocation of Arrieta was cancelled and the 5% deposit, approximately Php 200,000, was forfeited. Arrieta tried to restore the cancelled Burmese rice allocation, but failed. Arrieta then instead offered to substitute Thailand rice to NARIC, communicating that such was a solution which should be beneficial for both parties. However, the corporation rejected the substitution. Hence, Arrieta sent a letter to the corporation, demanding for the compensation for the damages caused her. ISSUE: 1. Was the failure to open immediately the letter of credit in dispute amounted to a breach of the contract for which the corporation should be held liable? 2. Was there any waiver on the part of Arrieta? 3. Whether NARIC can be held liable for damages? RULING: 1. Yes. It was clear from the records that the sole and principal reason for the cancellation of the allocation contracted by Arrieta in Ragoon, Burma was the failure of the letter of credit to be opened. The failure, therefore, was the immediate cause for the consequent damage which resulted. It was clear from the records that the delay in the opening of the letter of credit was due to the inability of the corporation to meet the condition imposed by the bank for the granting the same.

Furthermore, the liability of the corporation stemmed not alone from failure or inability to satisfy the requirements of the bank, but its culpability arose from is willful and deliberate assumption of contractual obligations even as it was well aware of its financial incapacity to undertake the prestation. Under Article 1170, those who in the performance of their obligation are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable in damages. The terms in any manner contravene the tenor thereof includes any illicit act which impairs the strict and faithful fulfillment of the obligation, or every kind or defective performance. In general also, every debtor who fails in the performance of his obligation is bound to indemnify for the losses and damages caused thereby. The payment for damages or the award to be given should be converted into the Philippine peso at the rate of exchange prevailing at the time the obligation was incurred pursuant to RA 527. 2. No. The subsequent offer to substitute the Thailand rice for the originally contracted Burmese did not constitute a waiver. Waivers are not presumed. It must be clearly and convincingly shown either by express stipulations or acts admitting no other reasonable explanation. In this case, no such intent to waive had been established. 3. Yes, NARIC is liable for damages. Under the Civil Code, Art. 1170 makes those who contravene the tenor liable for damages. In the case at bar, NARIC was obviously not in the financial position to shoulder the expenses of importing rice when it entered into the contract, hence, there was a delay. That being the case, they are liable for the damages incurred by the petitioners. Telefast vs. Castro 158 SCRA 445 (1988) FACTS: Respondents contracted the services of petitioner Telefast, which is a telegram company. The respondents sent a telegram to the children of the deceased in the U.S. with the purpose of informing them that their mother had already passed and that she would be interred soon. The telegram never reached its destination. The respondents are seeking for actual and moral damages. ISSUE/S: Whether or not petitioner is liable for actual and moral damages. HELD/RATIO: Yes, the petitioner can be held liable for actual and moral damages. Under the Civil Code, Art. 1170 states that those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages. Moreover, Art. 2176 states that whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Regarding moral damages, Art. 2217 states that Moral damages include physical suffering, mental, anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate results of the defendants wrongful act or omission. In the case at bar, the wrongful act of the petitioner is the proximate cause of the moral damage. G.R. No. 71049 May 29, 1987 On 2 November 1956, Consolacion Bravo-Castro wife of plaintiff Ignacio Castro, Sr. and mother of the other plaintiffs, passed away in Lingayen, Pangasinan. On the same day, her daughter Sofia C. Crouch, who was then vacationing in the Philippines, addressed a telegram to plaintiff Ignacio Castro, Sr. at 685 Wanda, Scottsburg, Indiana, U.S.A., 47170 announcing Consolacion's death. The telegram was accepted by the defendant in its Dagupan office, for transmission, after payment of the required fees or charges. The telegram never reached its addressee. Consolacion was interred with only her daughter Sofia in attendance. Neither the husband nor any of the other children of the deceased, then all residing in the United States, returned for the burial. When Sofia returned to the United States, she discovered that the wire she had caused the defendant to send, had not been received. She and the other plaintiffs thereupon brought action for damages arising from defendant's breach of contract. The case was filed in the Court of First Instance of Pangasinan and docketed therein as Civil Case No. 15356. The only defense of the defendant was that it was unable to transmit the telegram because of "technical and atmospheric factors beyond its control." 1 No

evidence appears on record that defendant ever made any attempt to advise the plaintiff Sofia C. Crouch as to why it could not transmit the telegram. The Court of First Instance of Pangasinan, after trial, ordered the defendant (now petitioner) to pay the plaintiffs (now private respondents) damages, as follows, with interest at 6% per annum: Defendant is also ordered to pay P5,000.00 attorney's fees, exemplary damages in the amount of P1,000.00 to each of the plaintiffs and costs. 2 On appeal by petitioner, the Intermediate Appellate Court affirmed the trial court's decision but eliminated the award of P16,000.00 as compensatory damages to Sofia C. Crouch and the award of P1,000.00 to each of the private respondents as exemplary damages. The award of P20,000.00 as moral damages to each of Sofia C. Crouch, Ignacio Castro, Jr. and Esmeralda C. Floro was also reduced to P120,000. 00 for each. 3 Petitioner appeals from the judgment of the appellate court, contending that the award of moral damages should be eliminated as defendant's negligent act was not motivated by "fraud, malice or recklessness." In other words, under petitioner's theory, it can only be held liable for P 31.92, the fee or charges paid by Sofia C. Crouch for the telegram that was never sent to the addressee thereof. Petitioner's contention is without merit. Art. 1170 of the Civil Code provides that "those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages." Art. 2176 also provides that "whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done." In the case at bar, petitioner and private respondent Sofia C. Crouch entered into a contract whereby, for a fee, petitioner undertook to send said private respondent's message overseas by telegram. This, petitioner did not do, despite performance by said private respondent of her obligation by paying the required charges. Petitioner was therefore guilty of contravening its obligation to said private respondent and is thus liable for damages. This liability is not limited to actual or quantified damages. To sustain petitioner's contrary position in this regard would result in an inequitous situation where petitioner will only be held liable for the actual cost of a telegram fixed thirty (30) years ago. We find Art. 2217 of the Civil Code applicable to the case at bar. It states: "Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate results of the defendant's wrongful act or omission." (Emphasis supplied). Here, petitioner's act or omission, which amounted to gross negligence, was precisely the cause of the suffering private respondents had to undergo. As the appellate court properly observed: [Who] can seriously dispute the shock, the mental anguish and the sorrow that the overseas children must have suffered upon learning of the death of their mother after she had already been interred, without being given the opportunity to even make a choice on whether they wanted to pay her their last respects? There is no doubt that these emotional sufferings were proximately caused by appellant's omission and substantive law provides for the justification for the award of moral damages. 4 We also sustain the trial court's award of P16,000.00 as compensatory damages to Sofia C. Crouch representing the expenses she incurred when she came to the Philippines from the United States to testify before the trial court. Had petitioner not been remiss in performing its obligation, there would have been no need for this suit or for Mrs. Crouch's testimony. The award of exemplary damages by the trial court is likewise justified and, therefore, sustained in the amount of P1,000.00 for each of the private respondents, as a warning to all telegram companies to observe due diligence in transmitting the messages of their customers.

JIMENEZ, vs. CITY APPELLATE COURT

OF

MANILA

and

INTERMEDIATE

FACTS: The evidence of the plaintiff (petitioner herein) shows that in the morning of August 15, 1974 he, together with his neighbors, went to Sta. Ana public market to buy "bagoong" at the time when the public market was flooded with ankle deep rainwater. After purchasing the "bagoong" he turned around to return home but he stepped on an uncovered opening which could not be seen because of the dirty rainwater, causing a dirty and rusty four- inch nail, stuck inside the uncovered opening, to pierce the left leg of plaintiff-petitioner penetrating to a depth of about one and a half inches. After administering first aid treatment at a nearby drugstore, his companions helped him hobble home. He felt ill and developed fever and he had to be carried to Dr. Juanita Mascardo. Despite the medicine administered to him by the latter, his left leg swelled with great pain. He was then rushed to the Veterans Memorial Hospital where he had to be confined for twenty (20) days due to high fever and severe pain. Upon his discharge from the hospital, he had to walk around with crutches for fifteen (15) days. His injury prevented him from attending to the school buses he is operating. As a result, he had to engage the services of one Bienvenido Valdez to supervise his business for an aggregate compensation of nine hundred pesos (P900.00). (Decision, AC-G.R. CV No. 01387, Rollo, pp. 13-20). Petitioner sued for damages the City of Manila and the Asiatic Integrated Corporation under whose administration the Sta. Ana Public Market had been placed by virtue of a Management and Operating Contract (Rollo, p. 47). The lone assignment of error raised in this petition is on whether or not the Intermediate Appellate Court erred in not ruling that respondent City of Manila should be jointly and severally liable with Asiatic Integrated Corporation for the injuries petitioner suffered. As correctly found by the Intermediate Appellate Court, there is no doubt that the plaintiff suffered injuries when he fell into a drainage opening without any cover in the Sta. Ana Public Market. Defendants do not deny that plaintiff was in fact injured although the Asiatic Integrated Corporation tries to minimize the extent of the injuries, claiming that it was only a small puncture and that as a war veteran, plaintiff's hospitalization at the War Veteran's Hospital was free. Respondent City of Manila maintains that it cannot be held liable for the injuries sustained by the petitioner because under the Management and Operating Contract, Asiatic Integrated Corporation assumed all responsibility for damages which may be suffered by third persons for any cause attributable to it. It has also been argued that the City of Manila cannot be held liable under Article 1, Section 4 of Republic Act No. 409 as amended (Revised Charter of Manila) which provides: The City shall not be liable or held for damages or injuries to persons or property arising from the failure of the Mayor, the Municipal Board, or any other City Officer, to enforce the provisions of this chapter, or any other law or ordinance, or from negligence of said Mayor, Municipal Board, or any other officers while enforcing or attempting to enforce said provisions. This issue has been laid to rest in the case of City of Manila v. Teotico (22 SCRA 269-272 [1968]) where the Supreme Court squarely ruled that Republic Act No. 409 establishes a general rule regulating the liability of the City of Manila for "damages or injury to persons or property arising from the failure of city officers" to enforce the provisions of said Act, "or any other law or ordinance or from negligence" of the City "Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said provisions." Upon the other hand, Article 2189 of the Civil Code of the Philippines which provides that: Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by any person by reason of defective conditions of roads, streets, bridges, public buildings and other public works under their control or supervision. constitutes a particular prescription making "provinces, cities and municipalities ... liable for damages for the death of, or injury suffered by any person by reason" ? specifically ? "of the defective condition of roads, streets, bridges, public buildings, and other

public works under their control or supervision." In other words, Art. 1, sec. 4, R.A. No. 409 refers to liability arising from negligence, in general, regardless of the object, thereof, while Article 2189 of the Civil Code governs liability due to "defective streets, public buildings and other public works" in particular and is therefore decisive on this specific case. In the same suit, the Supreme Court clarified further that under Article 2189 of the Civil Code, it is not necessary for the liability therein established to attach, that the defective public works belong to the province, city or municipality from which responsibility is exacted. What said article requires is that the province, city or municipality has either "control or supervision" over the public building in question. In the case at bar, there is no question that the Sta. Ana Public Market, despite the Management and Operating Contract between respondent City and Asiatic Integrated Corporation remained under the control of the former. For one thing, said contract is explicit in this regard, when it provides: II That immediately after the execution of this contract, the SECOND PARTY shall start the painting, cleaning, sanitizing and repair of the public markets and talipapas and within ninety (90) days thereof, the SECOND PARTY shall submit a program of improvement, development, rehabilitation and reconstruction of the city public markets and talipapas subject to prior approval of the FIRST PARTY. (Rollo, p. 44) xxx xxx xxx VI That all present personnel of the City public markets and talipapas shall be retained by the SECOND PARTY as long as their services remain satisfactory and they shall be extended the same rights and privileges as heretofore enjoyed by them. Provided, however, that the SECOND PARTY shall have the right, subject to prior approval of the FIRST PARTY to discharge any of the present employees for cause. (Rollo, p. 45). VII That the SECOND PARTY may from time to time be required by the FIRST PARTY, or his duly authorized representative or representatives, to report, on the activities and operation of the City public markets and talipapas and the facilities and conveniences installed therein, particularly as to their cost of construction, operation and maintenance in connection with the stipulations contained in this Contract. (lbid) The fact of supervision and control of the City over subject public market was admitted by Mayor Ramon Bagatsing in his letter to Secretary of Finance Cesar Virata which reads: These cases arose from the controversy over the Management and Operating Contract entered into on December 28, 1972 by and between the City of Manila and the Asiatic Integrated Corporation, whereby in consideration of a fixed service fee, the City hired the services of the said corporation to undertake the physical management, maintenance, rehabilitation and development of the City's public markets and' Talipapas' subject to the control and supervision of the City. xxx xxx xxx It is believed that there is nothing incongruous in the exercise of these powers vis-a-vis the existence of the contract, inasmuch as the City retains the power of supervision and control over its public markets and talipapas under the terms of the contract. (Exhibit "7A") (Emphasis supplied.) (Rollo, p. 75). In fact, the City of Manila employed a market master for the Sta. Ana Public Market whose primary duty is to take direct supervision and control of that particular market, more specifically, to check the safety of the place for the public. Finally, Section 30 (g) of the Local Tax Code as amended, provides: The treasurer shall exercise direct and immediate supervision administration and control over public markets and the personnel thereof, including those whose duties concern the maintenance

and upkeep of the market and ordinances and other pertinent rules and regulations. (Emphasis supplied.) (Rollo, p. 76) The contention of respondent City of Manila that petitioner should not have ventured to go to Sta. Ana Public Market during a stormy weather is indeed untenable. As observed by respondent Court of Appeals, it is an error for the trial court to attribute the negligence to herein petitioner. More specifically stated, the findings of appellate court are as follows: ... The trial court even chastised the plaintiff for going to market on a rainy day just to buy bagoong. A customer in a store has the right to assume that the owner will comply with his duty to keep the premises safe for customers. If he ventures to the store on the basis of such assumption and is injured because the owner did not comply with his duty, no negligence can be imputed to the customer. (Decision, AC-G. R. CV No. 01387, Rollo, p. 19). As a defense against liability on the basis of a quasi-delict, one must have exercised the diligence of a good father of a family. (Art. 1173 of the Civil Code). There is no argument that it is the duty of the City of Manila to exercise reasonable care to keep the public market reasonably safe for people frequenting the place for their marketing needs. While it may be conceded that the fulfillment of such duties is extremely difficult during storms and floods, it must however, be admitted that ordinary precautions could have been taken during good weather to minimize the dangers to life and limb under those difficult circumstances. For instance, the drainage hole could have been placed under the stalls instead of on the passage ways. Even more important is the fact, that the City should have seen to it that the openings were covered. Sadly, the evidence indicates that long before petitioner fell into the opening, it was already uncovered, and five (5) months after the incident happened, the opening was still uncovered. (Rollo, pp. 57; 59). Moreover, while there are findings that during floods the vendors remove the iron grills to hasten the flow of water (Decision, AC-G.R. CV No. 0 1387; Rollo, p. 17), there is no showing that such practice has ever been prohibited, much less penalized by the City of Manila. Neither was it shown that any sign had been placed thereabouts to warn passersby of the impending danger. To recapitulate, it appears evident that the City of Manila is likewise liable for damages under Article 2189 of the Civil Code, respondent City having retained control and supervision over the Sta. Ana Public Market and as tort-feasor under Article 2176 of the Civil Code on quasi-delicts Petitioner had the right to assume that there were no openings in the middle of the passageways and if any, that they were adequately covered. Had the opening been covered, petitioner could not have fallen into it. Thus the negligence of the City of Manila is the proximate cause of the injury suffered, the City is therefore liable for the injury suffered by the peti- 4 petitioner. Respondent City of Manila and Asiatic Integrated Corporation being joint tort-feasors are solidarily liable under Article 2194 of the Civil Code. PREMISES CONSIDERED, the decision of the Court of Appeals is hereby MODIFIED, making the City of Manila and the Asiatic Integrated Corporation solidarily liable to pay the plaintiff P221.90 actual medical expenses, P900.00 for the amount paid for the operation and management of the school bus, P20,000.00 as moral damages due to pain, sufferings and sleepless nights and P10,000.00 as attorney's fees. SO ORDERED. Juan Nakpil & Sons vs. CA 144 SCRA 597 (1986) FACTS: The Philippine Bar Association entered into a contract with United Construction Inc. (UCI), wherein the latter would construct a building in consideration for a sum. The plans and specifications for the building were made by petitioners Juan Nakpil & Sons. After two years of completion, the building collapsed after a strong earthquake with a magnitude of 7.3 occurred. The Philippine Bar Association filed this case to recover damages from UCI, who in turn filed a case against Nakpil & Sons. ISSUE/S: Whether there is any liability and who shall be liable.

HELD: Both United Construction Inc. and Nakpil & Sons are liable for damages. It was established that the two were negligent when they constructed the building. UCI made substantial deviations from the plans and specifications, and they failed to observe the requiste workmanship in the construction as well as to exercise the requisite degree of supervision; while Nakpil & Sons were found to have inadequacies or defects in the plans and specifications prepared by them. Under the Civil Code, Art. 1723 makes engineers and architects liable for 15 years for any buildings that they have constructed. In Art. 1174, there is no liability where a force majeure causes damage to an obligation. However, under Art. 1170, any negligence on the part of the obligor makes him liable for damages. UNIVERSAL FOOD CORPORATION VS. CA 33 SCRA 1 FACTS: This is a petition for certiorari by the UFC against the CA decision of February 13, 1968 declaring the BILL OF ASSIGNMENT rescinded, ordering UFC to return to Magdalo Francisco his Mafran sauce trademark and to pay his monthly salary of P300.00 from Dec. 1, 1960 until the return to him of said trademark and formula. In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula for the manufacture of a food seasoning (sauce) derived from banana fruits popularly known as MAFRAN sauce. It was used commercially since 1942, and in the same year plaintiff registered his trademark in his name as owner and inventor with the Bureau of Patents. However, due to lack of sufficient capital to finance the expansion of the business, in 1960, said plaintiff secured the financial assistance of Tirso T. Reyes who, after a series of negotiations, formed with others defendant Universal Food Corporation eventually leading to the execution on May 11, 1960 of the aforequoted "Bill of Assignment" (Exhibit A or 1). On May 31, 1960, Magdalo Francisco entered into contract with UFC stipulating among other things that he be the Chief Chemist and Second Vice-President of UFC and shall have absolute control and supervision over the laboratory assistants and personnel and in the purchase and safekeeping of the chemicals used in the preparation of said Mafran sauce and that said positions are permanent in nature. In line with the terms and conditions of the Bill of Assignment, Magdalo Francisco was appointed Chief Chemist with a salary of P300.00 a month. Magdalo Francisco kept the formula of the Mafran sauce secret to himself. Thereafter, however, due to the alleged scarcity and high prices of raw materials, on November 28, 1960, Secretary-Treasurer Ciriaco L. de Guzman of UFC issued a Memorandum duly approved by the President and General Manager Tirso T. Reyes that only Supervisor Ricardo Francisco should be retained in the factory and that the salary of plaintiff Magdalo V. Francisco, Sr., should be stopped for the time being until the corporation should resume its operation. On December 3, 1960, President and General Manager Tirso T. Reyes, issued a memorandum to Victoriano Francisco ordering him to report to the factory and produce "Mafran Sauce" at the rate of not less than 100 cases a day so as to cope with the orders of the corporation's various distributors and dealers, and with instructions to take only the necessary daily employees without employing permanent employees. Again, on December 6, 1961, another memorandum was issued by the same President and General Manager instructing the Assistant Chief Chemist Ricardo Francisco, to recall all daily employees who are connected in the production of Mafran Sauce and also some additional daily employees for the production of Porky Pops. On December 29, 1960, another memorandum was issued by the President and General Manager instructing Ricardo Francisco, as Chief Chemist, and Porfirio Zarraga, as Acting Superintendent, to produce Mafran Sauce and Porky Pops in full swing starting January 2, 1961 with further instructions to hire daily laborers in order to cope with the full blast operation. Magdalo V. Francisco, Sr. received his salary as Chief Chemist in the amount of P300.00 a month only until his services were terminated on November 30, 1960. On January 9 and 16, 1961, UFC, acting thru its President and General Manager, authorized Porfirio Zarraga and Paula de Bacula to look for a buyer of the corporation including its trademarks, formula and assets at a price of not less than P300,000.00. Due to these successive memoranda, without plaintiff Magdalo V. Francisco, Sr. being recalled back to work, he filed the present action on February 14, 1961. Then in a letter dated March 20, 1961, UFC requested said plaintiff to report for duty, but the latter declined the request because the present action was already filed in court.

ISSUES: 1. Was the Bill of Assignment really one that involves transfer of the formula for Mafran sauce itself? 2. Was petitioners contention that Magdalo Francisco is not entitled to rescission valid? RULING: 1. No. Certain provisions of the bill would lead one to believe that the formula itself was transferred. To quote, the respondent patentee "assign, transfer and convey all its property rights and interest over said Mafran trademark and formula for MAFRAN SAUCE unto the Party of the Second Part," and the last paragraph states that such "assignment, transfer and conveyance is absolute and irrevocable (and) in no case shall the PARTY OF THE First Part ask, demand or sue for the surrender of its rights and interest over said MAFRAN trademark and mafran formula." However, a perceptive analysis of the entire instrument and the language employed therein would lead one to the conclusion that what was actually ceded and transferred was only the use of the Mafran sauce formula. This was the precise intention of the parties. The SC had the following reasons to back up the above conclusion. First, royalty was paid by UFC to Magdalo Francisco. Second, the formula of said Mafran sauce was never disclosed to anybody else. Third, the Bill acknowledged the fact that upon dissolution of said Corporation, the patentee rights and interests of said trademark shall automatically revert back to Magdalo Francisco. Fourth, paragraph 3 of the Bill declared only the transfer of the use of the Mafran sauce and not the formula itself which was admitted by UFC in its answer. Fifth, the facts of the case undeniably show that what was transferred was only the use. Finally, our Civil Code allows only the least transmission of right, hence, what better way is there to show the least transmission of right of the transfer of the use of the transfer of the formula itself. 2. No. Petitioners contention that Magdalo Franciscos petition for rescission should be denied because under Article 1383 of the Civil Code of the Philippines rescission can not be demanded except when the party suffering damage has no other legal means to obtain reparation, was of no merit because it is predicated on a failure to distinguish between a rescission for breach of contract under Article 1191 of the Civil Code and a rescission by reason of lesion or economic prejudice, under Article 1381, et seq. This was a case of reciprocal obligation. Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder was subordinated to anything other than the culpable breach of his obligations by the defendant. Hence, the reparation of damages for the breach was purely secondary. Simply put, unlike Art. 1383, Art. 1191 allows both the rescission and the payment for damages. Rescission is not given to the party as a last resort, hence, it is not subsidiary in nature.

MAGDALENA ESTATE VS. MYRICK 71 PHIL. 346

FACTS: Magdalena Estate, Inc. sold to Louis Myrick lots No. 28 and 29 of Block 1, Parcel 9 of the San Juan Subdivision, San Juan, Rizal. Their contract of sale provides that the Price of P7,953 shall be payable in 120 equal monthly installments of P96.39 each on the second day of every month beginning the date of execution of the agreement. In pursuance of said agreement, the vendee made several payments amounting to P2,596.08, the last being due and unpaid was that of May 2, 1930. By reason of this, the vendor, through its president, notified the vendee that, in view of his inability to comply with the terms of their contract, said agreement had been cancelled, relieving him of any further obligation thereunder, and that all amounts paid by him had been forfeited in favor of the vendor. To this communication, the vendee did not reply, and it appears likewise that the vendor thereafter did not require him to make any further disbursements on account of the purchase price. ISSUE: Was the purchase petitioner authorized price to forfeit the paid?

RULING: No. The contract of sale contains no provision authorizing the vendor, in the event of failure of the vendee to continue in the payment of the stipulated monthly installments, to retain the amounts paid to him on account of the purchase price. The claim therefore, of the petitioner that it has the right to forfeit said sums in its favor is untenable. Under Article 1124 of the Civil Code, however, he may choose between demanding the fulfillment of the contract or its resolution. These remedies are alternative and not cumulative, and the petitioner in this case, having elected to cancel the contract cannot avail himself of the other remedy of exacting performance. As a consequence of the resolution, the parties should be restored, as far as practicable, to their original situation which can be approximated only be ordering the return of the things which were the object of the contract, with their fruits and of the price, with its interest, computed from the date of institution of the action.

cancellation thereof, even without court intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of the contract.

ZULUETA VS. MARIANO 111 SCRA 206 FACTS: Petitioner Zulueta was the owner of a house and lot in Antonio Subdivision, Pasig Rizal, while private respondent is a movie director. They entered into a Contract to Sell the said property of petitioner for P75,000 payable in 20 years with respondent buyer assuming to pay a down payment of P5,000 and a monthly installment of P630 payable in advance before the 5th day of the corresponding month, starting with December, 1964. One of their stipulations was that upon failure of the buyer to fulfill any of the conditions being stipulated, the buyer automatically and irrevocably authorizes owner to recover extrajudicially, physical possession of the land, building and other improvements, which were the subject of the said contract, and to take possession also extra-judicially whatever personal properties may be found within the aforesaid premises from the date of said failure to answer for whatever unfulfilled monetary obligations buyer may have with owner. Demand was also waived. On the allegation that private respondent failed to comply with the monthly amortizations stipulated in the contract, despite demands to pay and to vacate the premises, and that thereby the contract was converted into one of lease, petitioner commenced an Ejectment suit against respondent before the Municipal Court of Pasig, praying that judgment be rendered ordering respondent to 1) vacate the premises; 2) pay petitioner the sum of P11, 751.30 representing respondents balance owing as of May, 1966; 3) pay petitioner the sum of P630 every month after May, 1966, and costs. Private respondent contended that the Municipal Court had no jurisdiction over the nature of the action as it involved the interpretation and/or rescission of the contract. ISSUE: Was the action before the Municipal Court essentially one for rescission or annulment of a contract? RULING: Yes. According to the Supreme Court, ...proof of violation is a condition precedent to resolution or rescission. It is only when the violation has been established that the contract can be declared resolved or rescinded. Upon such rescission in turn, hinges a pronouncement that possession of the realty has become unlawful. The Supreme Court, in Nera vs. Vacante (3 SCRA 505), also said, A violation by a party of any of the stipulations of a contract on agreement to sell real property would entitle the other party to resolved or rescind it. Also, according to the book of Tolentino, Civil Code of the Phil., Vol. IV, 1962 ed. P. 168, citing Magdalena Estate vs. Myrick, 71 Phil. 344 (1941), extra-judicial rescission has legal effect when the parties does not oppose it. If it is objected to, judicial determination of the issue is still necessary. With regards to the jurisdictions of inferior courts, the Supreme Court said that the CFI correctly ruled that the Municipal Court had no jurisdiction over the case and correctly dismissed the appeal. However, the CFI erred in assuming original jurisdiction, in the face of the objection interposed by petitioner. Section 11, Rule 40, leaves no room for doubt on this point. Section 11 of Rule 40: Section 11. Lack of jurisdiction. A case tried by an inferior court without jurisdiction over the subject matter shall be dismissed on appeal by the Court of First Instance. But instead of dismissing the case, the Court of First Instance may try the case on the merits, if the parties therein file their pleadings and go to trial without any objection to such jurisdiction.

UNIVERSITY OF THE PHILIPPINES VS. DE LOS ANGELES 35 SCRA 102 FACTS: On November 2, 1960, UP and ALUMCO entered into a logging agreement whereby the latter was granted exclusive authority to cut, collect and remove timber from the Land Grant for a period starting from the date of agreement to December 31, 1965, extendible for a period of 5 years by mutual agreement. On December 8, 1964, ALUMCO incurred an unpaid account of P219,362.94. Despite repeated demands, ALUMCO still failed to pay, so UP sent a notice to rescind the logging agreement. On the other hand, ALUMCO executed an instrument entitled Acknowledgment of Debt and Proposed Manner of Payments. It was approved by the president of UP, which stipulated the following: 3. In the event that the payments called for are not sufficient to liquidate the foregoing indebtedness, the balance outstanding after the said payments have been applied shall be paid by the debtor in full no later than June 30, 1965. 5. In the event that the debtor fails to comply with any of its promises, the Debtor agrees without reservation that Creditor shall have the right to consider the Logging Agreement rescinded, without the necessity of any judicial suit ALUMCO continued its logging operations, but again incurred an unpaid account. On July 19,1965, UP informed ALUMCO that it had, as of that date, considered rescinded and of no further legal effect the logging agreement, and that UP had already taken steps to have another concessionaire take over the logging operation. ALUMCO filed a petition to enjoin UP from conducting the bidding. The lower court ruled in favor of ALUMCO, hence, this appeal. ISSUE: Can petitioner UP treat its contract with ALUMCO rescinded, and may disregard the same before any judicial pronouncement to that effect? RULING: Yes. In the first place, UP and ALUMCO had expressly stipulated that upon default by the debtor, UP has the right and the power to consider the Logging Agreement of December 2, 1960 as rescinded without the necessity of any judicial suit. As to such special stipulation and in connection with Article 1191 of the Civil Code, the Supreme Court, stated in Froilan vs. Pan Oriental Shipping Co: There is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause

PALAY, INC. vs. CLAVE

Facts: Palay, Inc., through its President, AlbertOnstott executed in favor of Nazario Dumpit, aContract to Sell a parcel of Land of the CrestviewHeights Subdivision in Antipolo, Rizal, owned by said corporation. The sale price was P23,300.00 with 9%interest per annum, payable with a downpayment of P4,660.00 and monthly installments of P246.42 until fully paid. Paragraph 6 of the contract provided forautomatic extrajudicial rescission upon default inpayment of any monthly installment after the lapseof 90 days from the expiration of the grace period of one month, without need of notice and with forfeiture of all installments paid. Dumpit paid the downpayment and several installments amounting to P13,722.50. The last payment was made on December 5, 1967 for installments up to September 1967.Almost 6 years later, Dumpit wrote petitioner offeringto update all his overdue accounts with interest, and seeking its written consent to the assignment of his rights to a certain Lourdes Dizon. Replying petitioners informed respondent that his Contract toSell had long been rescinded pursuant to paragraph6 of the contract, and that the lot had already been resold. Dumpit questioned the validity of the rescission of the contract with the NHA. NHA found the rescission void in the absence of either judicial ornotarial demand, ordered Palay, Inc. and AlbertoOnstott in his capacity as President of the corporation, jointly and severally, to refund immediately to Nazario Dumpit the amount of P13,722.50 . Issue: WON Onstott, as the President, should be solidarily liable with Palay Inc to refund theamountHeld: No. Only Palay Inc should refund the payment made by Dumpit It is important to note that even though there has-been a stipulation of automatic rescission of the contract in case of default of payment of installments, still, a notice should be given. This was not done in the case at bar. It is basic that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as when as from that of any other legal entity to which it may be related. As a general rule, a corporation may not be made to answer for acts or liabilities of its stockholders or those of the legal entities to which it may be connected and vice versa. However, the veil of corporate fiction may be pierced when it is used as a shield to further an end subversive of justice; or for purposes that could not have been intended by the law that created it; or to defeat public convenience, justify wrong, protect fraud, or defend crime or to perpetuate fraud or confuse legitimate issues; or to circumvent the law or perpetuate deception; or as an alter ego, adjunct or business conduit for the sole benefit of the stockholders. We find no badges of fraud on petitioners' part. Theyhad literally relied, albeit mistakenly, on paragraph 6of its contract with private respondent when it rescinded the contract to sell extrajudicially and had sold it to a third person. In this case, petitioner Onstott was made liable because he was then the President of the corporationand he was the controlling stockholder. No sufficient proof exists on record that said petitioner used the corporation to defraud private respondent. Hecannot, therefore, be made personally liable just because he "appears to be the controlling stockholder". Mere ownership by a single stockholderor by another corporation is not of itself sufficient ground for disregarding the separate corporate personality. ANGELES VS. CALASANZ 135 SCRA 323 FACTS: On December 19, 1957, defendants-appellants Ursula Torres Calasanz and plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta, Rizal for the amount of P3,920.00 plus 7% interest per annum. The plaintiffs-appellees made a downpayment of P392.00 upon the execution of the contract. They promised to pay the balance in monthly installments of P41.20 until fully paid, the installment being due and payable on the 19th day of each month. The plaintiffs-appellees paid the monthly installments until July 1966, when their aggregate payment already amounted to P4,533.38. On December 7, 1966, the defendants-appellants wrote the plantiffs-appellees a letter requesting the remittance of past due accounts. On January 28, 1967, the defendants-appellants cancelled the said contract because the plaintiffs failed to meet subsequent payments. The plaintiffs letter with their plea for reconsideration of the said cancellation was denied by the defendants. The plaintiffs-appellees filed a case before the Court of First Instance to compel the defendant to execute in their favor the final deed of sale alleging inter alia that after computing all subsequent payments for the land in question, they found out that they have already paid the total amount including interests, realty taxes and incidental expenses. The defendants alleged in their answer that the plaintiffs violated par. 6 of the contract to sell when they failed and refused to pay and/or offer to pay monthly installments corresponding to the month of August, 1966 for more than 5 months, thereby constraining the defendants to cancel the said contract. The Court of First Instance rendered judgment in favor of the plaintiffs, hence this appeal. ISSUE: Has the Contract to Sell been automatically and validly cancelled by the defendants-appellants? RULING: No. While it is true that par.2 of the contract obligated the plaintiffs-appellees to pay the defendants the sum of P3,920 plus 7% interest per annum, it is likewise true that under par 12 the seller is obligated to transfer the title to the buyer upon payment of the said price. The contract to sell, being a contract of adhesion, must be construed against the party causing it. The Supreme Court agree with the observation of plaintiffsappellees to the effect that the terms of a contract must be interpreted against the party who drafted the same, especially where such interpretation will help effect justice to buyers who, after having invested a big amount of money, are now sought to be deprived of the same thru the prayed application of a contract clever in its phraseology, condemnable in its lopsidedness and injurious in its effect which, in essence, and its entirety is most unfair to the buyers. Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffs-appellees have already paid an aggregate amount of P4,533.38, the courts should only order the payment of the few remaining installments but not uphold the cancellation of the contract. Upon payment of the balance of P671.67 without any interest thereon, the defendant must immediately execute the final deed of sale in favor of the plaintiffs and execute the necessary transfer of documents, as provided in par.12 of the contract.

the

BOYSAW VS. INTERPHIL PROMOTIONS 148 SCRA 635 FACTS: Solomon Boysaw and his then Manager, Willie Ketchum, signed with Interphil Promotions, Inc. represented by Lope Sarreal, Sr., a contract to engage Gabriel "Flash" Elorde in a boxing contest for the junior lightweight championship of the world. It was stipulated that the bout would be held at the Rizal Memorial Stadium in Manila on September 30, 1961 or not later than thirty [30] days thereafter should a postponement be mutually agreed upon, and that Boysaw would not, prior to the date of the boxing contest,

engage in any other such contest without the written consent of Interphil Promotions, Inc. However, before September 30, 1961, Boysaw entered into a nontitle bout on June 19, 1961 and without consent from Interphil, Ketchum assigned to Amado Araneta the managerial rights over Boysaw. Amado Araneta in turn transferred the earlier acquired managerial rights to Alfredo again without the consent from Interphil. Yulo thereafter informed Interphil Boysaws readiness to comply with the boxing contract of May 1, 1961. The GAB after a series of conferences of both parties scheduled the ElordeBoysaw fight on November 4, 1961. Yulo refused to accept the charge in the fight date even after Sarreal offered to advance the fight date to October 28, 1961. However, he changed his mind and decided to accept the fight date on November 4, 1961. While an Elorde-Boysaw fight was eventually staged, the fight contemplated in the May 1, 1961 boxing contract never materialized. As a result, Yulo and Boysaw sued Interphil for damages allegedly due to the latters refusal to honor their commitments under the boxing contract of May 1, 1961. ISSUES: 1. 2. Was there a violation of the fight contract of May 1, 1961? In reciprocal obligations, who has the power to rescind?

accepting payment and by sending letters advising private respondents of the balances due, thus, looking forward to receiving payments thereon. Said decision was affirmed on appeal. Hence, this Petition For Review on Certiorari, ISSUE: whether or not the Contract to Sell was rescinded, under the automatic rescission clause contained therein. HELD: In case the rescission is found unjustified under the circumstances, still in the instant case there is a clear waiver of the stipulated right of "automatic rescission," as evidenced by the many extensions granted private respondents by the petitioner. In all these extensions, the petitioner never called attention to the proviso on "automatic rescission." The assailed decision is affirmed. Article 1192 Central Bank vs. CA 139 SCRA 46 Facts: Island Savings Bank upon favorable recommendation of its legal department approved the loan application for P80,000.00 of Sulpicio Tolentino, who as a security loan executed on the same day a real estate mortgage over his 100 hectare land. The approved loan application called for a lump sum P80,000.00 loan repayable in semi-annual installments for a period of 3years with 12% interest. A mere P17,000.00 was made by the Bank. Tolentino and his wife Editha signed the promissory note for P17,000.00 at 12% interest payable within 3years fromthe date of execution of the contract at semi-annual installments. The Bank, thru its Vice President and Treasurer promised repeatedly the release of the P63,000.00 balance. The Monetary Board of the Central Bank after finding Island Savings Bank was suffering liquidity problem issued Resolution which prohibits the Bank from doing business in Philippines and instructed the Acting Superintendent Bank to take charge. Tolentino filed a petition with the Court of first Instance of Agusan but the court rendered its decision against petitioner while the Court of Appeal modified the said decision affirming on the dismissal of Tolentinos petition. Hence, this petition for review is instituted. Issue: Whether or not the action of Tolentinos petition would prosper. Held: Yes, Island Savings Bank was in default in not fulfilling the reciprocal obligation under the loan agreement. Tolentino under Article 1191 of the Civil Code may choose between specific performance or recission with damages in either case. But since Island Savings Bank is now prohibited from doing further business by Monetary Board Resolution, it cannot be granted said specific performance in favor of Tolentino. Rescission is the only alternative left. The rescission is only for the balance of 63,000.00 balance of 80,000.00 loan. The promissory note gave rise to Tolentinos reciprocal obligation to pay 17,000.00. His failure to pay overdue amortization under the promissory note made him a party in default. Meanwhile, Art.1192 of the Civil Code provides that in case both parties have committed a breach in their reciprocal obligation the liability of the first infraction shall be equitable tempered by the court. Thus, the liability of Island Savings Bank for damages is offset by the liability of Tolentino in the form of penalties and sub charges for not paying his debts. Art. 1935: xxx if any compensation is to be paid by him who acquires the use, the contract ceases to be a commodatum. DELIVERY - perfects the contract Central Bank of the Philippines v. CA, 139 SCRA 46 (1985) Tolentino made a loan from Island Savings Bank secured by a mortgage. The Bank did not release the whole amount but only a portion thereof. Later, the Bank experienced liquidity problems and the Monetary Board of Central Bank prohibited it from making new loans and much later, from doing business in the Philippines. Thereafter, the Acting Superintendent of Central Bank took charge of its assets. Upon expiration of the loan term, the Bank filed extrajudicial foreclosure of the mortgage. Was there a perfected contract of loan when only a portion of the amount was delivered? The Supreme Court held that there was only partial delivery. As such, the contract is deemed perfect only in so far as what has been delivered. The mortgage cannot be entirely foreclosed, except for up to the amount of the actual amount released, but the Bank can recover the interest of the partial loan. Tolentino cannot

RULING: 1. Yes. On the issue pertaining to the violation of the May 1, 1961 fight contract, the evidence established that the contract was violated by appellant Boysaw himself when, without the approval or consent of Interphil, he fought Louis Avila on June 19, 1961 in Las Vegas Nevada. Appellant Yulo admitted this fact during the trial. Another violation of the contract in question was the assignment and transfer, first to J. Amado Araneta, and subsequently, to appellant Yulo, Jr., of the managerial rights over Boysaw without the knowledge or consent of Interphil. 2. The power to rescind obligations is implied, in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. There is no doubt that the contract in question gave rise to reciprocal obligations. "Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other"The power to rescind is given to the injured party. "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, or recover damages by reason of his own breach " On the validity of the fight postponement, the violations of the terms of the original contract by appellants vested the appellees with the right to rescind and repudiate such contract altogether. That they sought to seek an adjustment of one particular covenant of the contract, is under the circumstances, within the appellee's rights. Pilipinas Bank vs IAC June 30, 1987 FACTS: Hacienda Benito, Inc. as vendor, and private respondents, as vendees executed Contract to Sell No. over a parcel of land on monthly installments subject to the condition: The contract shall be considered automatically rescinded and cancelled and of no further force and effect upon failure of the vendee to pay when due, three or more consecutive installments as stipulated therein or to comply with any of the terms and conditions thereof During the contract, petitioner sent series of notices to private respondents (PR) for thei latters balances/arrearages. From time to time, PR partially complied with this and requested for extensions. On May 19, 1970, the petitioner, for the last time, reminded the PR to pay their balance. After more than two years, PR sent a letter expressing their desire to settle their desire to fully settle their obligation. On March 27, 1974, petitioner wrote a letter to PR , informing them that the contract to sell had been rescinded. PR filed Complaint for Specific Performance with Damages to compel petitioner to execute a deed of sale. After trial, the lower court rendered a decision in PRs favor, holding that petitioner could not rescind the contract to sell, because: (a) petitioner waived the automatic rescission clause by

10

anymore demand the remaining amount of the loan from the Bank because he defaulted on his payment. His liability offsets the liability of the Bank to him. SAURA VS. DBP G.R. No. L-24968 April 27, 1972 FACTS: Plaintiff Saura, Inc. applied to the Rehabilitation Finance Corporation (RFC), before its conversion into DBP, for an industrial loan of P500,000.00, to be used as follows: P250,000.00 for the construction of a factory building (for the manufacture of jute sacks); P240,900.00 to pay the balance of the purchase price of the jute mill machinery and equipment; and P9,100.00 as additional working capital. It was also stated in the loan, among others, that China Engineers, Ltd. will be one of the joint signatories of the loan, and Saura, Inc. will use local raw materials in the manufacture of jute sacks. Saura, Inc. had already purchased the jute mill machinery on the strength of the letter of credit extended by Prudential Bank and Trust Co. At first, China Engineers, Ltd. did not want to sign the said contract and instead Saura, Inc. suggested that in lieu of that, Saura, Inc. will put up a bond of Php123,500.00, equivalent to China Engineers, Ltd.s subscription. But later on, agreed to sign the contract. However, RFC reduced the said loan from Php500,000.00 to Php300,000.00 despite the formal execution of the loan agreement. Then, China Engineers, Ltd. withdrew its signature to the said loan. Thereafter, Saura, Inc. demanded the release of the originally approved loan of Php500,000.00 and China Engineers, Ltd. will reinstate its signature to the said loan. RFC agreed but the loan was subject to the condition that Saura, Inc. will get the necessary certification from Department of Agriculture and Natural Resources that there will be enough supply of raw materials and will there be an increase of production of the said raw materials in its vicinity. Saura, Inc. was not able to get the necessary certification and instead requested to release the loan as follows: (1) P250,000.00 for the payment of the receipt for jute mill machineries with Prudential Bank &Trust Company , (2) P182,413.91 for the purchase of materials and equipment per attached list to enable the jute mill to operate 182,413.91, (3) P67,586.09 for raw materials and labor {(a) P25,000.00 to be released on the opening of the letter of credit for raw jute for $25,000.00, (b) P25,000.00 to be released upon arrival of raw jute, and (c) P17,586.09 to be released as soon as the mill is ready to operate.} RFC, afterward, denied such request which prompted Saura, Inc. to execute a deed of cancellation of the mortgage. Due to Saura, Inc.s failure to proceed with the said loan with RFC, Prudential Bank and Trust Co. sued them for their failure to pay its obligation with said bank. After almost nine years, Saura, Inc. filed a suit alleging that owing to RFCs failure to release the proceeds of the said loan thereby preventing them from paying their obligation in regards to the jute mill project. The trial court rendered judgment for the plaintiff. Hence this petition. ISSUE: Was there a perfected contract between Saura, Inc. and RFC? RULING: Yes. However, when RFC turned down the request in its letter, the negotiations which had been going on for the implementation of the agreement reached an impasse. Saura, Inc. obviously was in no position to comply with RFC's conditions. So instead of doing so and insisting that the loan be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled. The action thus taken by both parties was in the nature of mutual desistance, what Manresa terms "mutuo disenso", which is a mode of extinguishing obligations. It is a concept that derives from the principle that since mutual agreement can create a contract, mutual disagreement by the parties can cause its extinguishment. The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest against any alleged breach of contract by RFC, or even point out that the latter's stand was legally unjustified. Its request for cancellation of the mortgage carried no reservation of whatever rights it believed it might have against RFC for the latter's non-compliance. It was nine years after the loan agreement had been cancelled at its own request, that Saura, Inc. brought this action for damages. All these circumstances demonstrate beyond doubt that the said agreement had been extinguished by mutual desistance, and that on the initiative of the plaintiff-appellee itself. J.M. TUASON & CO., INC. VS. JAVIER G.R. NO. L-28569 February 27, 1970

FACTS: On September 7, 1954, petitioner J.M. Tuason & Co., Inc. entered a contract to sell with respondent Ligaya Javier a parcel of land known as Lot No. 28, Block No. 356, PSD 30328, of the Sta. Mesa Heights Subdivision for the sum of Php3,691.20 with 10% interest per annum; Php396.12 will be payable upon execution of the contract, and an installment of Php43.92 monthly for a period of ten (10) years. It was further stipulated in the contract, particularly the sixth paragraph, that upon failure of respondent to pay the monthly installment, she is given a one month grace period to pay such installment together with the monthly installment falling on the said grace period. Furthermore, failure to pay both monthly installments, respondent will pay an additional 10% interest. And after 90 days from the end of the grace period, petitioner can rescind the contract, the payments made by respondent will be considered as rentals. Upon the execution of the contract, respondent religiously paid the monthly installment until January 5, 1962. Respondent, however, was unable to the pay the monthly installments within the grace period which petitioner, subsequently, sent a letter to respondent on May 22, 1964 that the contract has been rescinded and asked the respondent to vacate the said land. So, upon failure of respondent to vacate the said land, petitioner filed an action to the Court of First Instance of Rizal for the rescission of the contract. The CFI rendered a decision in favor of respondent in applying Article 1592 of the New Civil Code. Hence, petitioner made an appeal to the Supreme Court alleging that since Article 1592 of the New Civil applies only to contracts of sale and not in contracts to sell. ISSUE: Did the CFI erroneously apply Article 1592 of the New Civil Code? RULING: Yes. Regardless, however, of the propriety of applying Article 1592, petitioner has not been denied substantial justice under Article 1234 of the New Civil Code. In this connection, respondent religiously satisfied the monthly installments for almost eight (8) years or up to January 5, 1962. It has been shown that respondent had already paid Php4,134.08 as of January 5, 1962 which is beyond the stipulated amount of Php3,691.20. Also, respondent has offered to pay all installments overdue including the stipulated interest, attorneys fees and the costs which the CFI accordingly sentenced respondent to pay such installment, interest, fees and costs. Thus, petitioner will be able recover everything that was due thereto. Under these circumstances, the SC feel that, in the interest of justice and equity, the decision appealed from may be upheld upon the authority of Article 1234 of the New Civil Code. LEGARDA VS. SALDAA G.R. No. L-26578, January 28, 1974 FACTS: Saldaa had entered into two written contracts with Legarda, a subdivision owner, whereby Legarda agreed to sell to him two of his lots for 1,500 per lot, payable over a span of 10 years on 120 monthly installments with 10% interest per annum. Saldaa paid for eight consecutive years but did not make any further payments due to Legardas failure to make the necessary improvement on the said lot which was promised by their representative, the said Mr. Cenon. Saldaa already paid a total of Php3,582.06. The statement of account shows that Saldaa paid Php1,682.28 of the principal and Php1,889.78 for the interest. It did not distinguish which of the two said lots was paid. Petitioner, then, rescinded the contract based on the stipulation of the contract that payments made by respondent shall be considered as rentals and any improvements made shall be forfeited in favor of the petitioner. The lower court ruled sustaining petitioners cancellation of contract. So respondent appealed and judgment was reversed in favor of the respondent ordering petitioners to deliver to plaintiff one of the two lots at the choice of the defendant and execute the deed of conveyance. Hence this petition. ISSUE: Was the cancellation of the sale of contract valid? RULING: No, even though it was stipulated that failure to complete the payment would result to the cancellation of the contract, it was still not valid. As clearly shown in the statement of account, Saldaa was able to pay one of the two said lots. Under Article 1234 of the New Civil Code, if the obligation has been substantially performed

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in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee. Hence, under the authority of Article 1234 of the New Civil Code, Saladaa is entitled to one of the two lots of his choice and the interest paid shall be forfeited in favor of the petitioners. LEGARDA VS. SALDAA G.R. No. L-26578, January 28, 1974 FACTS: Saldaa had entered into two written contracts with Legarda, a subdivision owner, whereby Legarda agreed to sell to him two of his lots for 1,500 per lot, payable over a span of 10 years on 120 monthly installments with 10% interest per annum. Saldaa paid for eight consecutive years but did not make any further payments due to Legardas failure to make the necessary improvement on the said lot which was promised by their representative, the said Mr. Cenon. Saldaa already paid a total of Php3,582.06. The statement of account shows that Saldaa paid Php1,682.28 of the principal and Php1,889.78 for the interest. It did not distinguish which of the two said lots was paid. Petitioner, then, rescinded the contract based on the stipulation of the contract that payments made by respondent shall be considered as rentals and any improvements made shall be forfeited in favor of the petitioner. The lower court ruled sustaining petitioners cancellation of contract. So respondent appealed and judgment was reversed in favor of the respondent ordering petitioners to deliver to plaintiff one of the two lots at the choice of the defendant and execute the deed of conveyance. Hence this petition. ISSUE: Was the cancellation of the sale of contract valid? RULING: No, even though it was stipulated that failure to complete the payment would result to the cancellation of the contract, it was still not valid. As clearly shown in the statement of account, Saldaa was able to pay one of the two said lots. Under Article 1234 of the New Civil Code, if the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee. Hence, under the authority of Article 1234 of the New Civil Code, Saladaa is entitled to one of the two lots of his choice and the interest paid shall be forfeited in favor of the petitioners LEGARDA v SALDANA FACTS: Saldana entered into a contract with Legarda Hermanos. Legarda agreed to sell 2 equal lots for P1,500each, payable in 120 equal installments over a period of10 years at 10% per annum. Saldana paid 95 of the 120installments over 8 years, which was recorded in hisaccount with Legarda, but without stating as to which lots the payments were made. The said account stated that Saldana still owed 1,311.72 for the 2 lots, althoughhe had already pain more the P1,500, the value of onelot.After 5 years, Saldana contacted Legardo Hermanosstating that he was interested in building a house on thelots, however, he was prevented from doing such because Hermanos failed to introduce the stipulated improvements on the subdivision (roads to his lots). Hefurther indicated his intentions to continue his payments.In his reply, Legarda Hermanos said that since Saldana failed to complete the 120 payments in time, as they have previously stipulated, all the amounts paid,together with the improvements on the premises havebeen considered as rents paid and as payment fordamages. Furthermore, the sale was cancelled.Saldana then filed an action demanding the delivery ofthe 2 lots and for the execution of the correspondingdeed of conveyance after payment of the outstanding balance.Subsequently, Legarda Hermanos partitioned the subdivision among the brothers and sisters, and the twolots were among those allotted to Jose Legarda (co-respondent).The lower court sustained Legarda Hermanoscancellation of the contracts and dismissed Saldanas complaint. The CA eventually reversed this.The CA ordered Legarda Hermanos to deliver toSaldana one of the two lots, at his option. Furthermore, Hermanos was told to execute the deed of conveyance. ISSUE: Should the claim of Hermanos Legarda be upheld?He claims that the payment should be considered asrent and that the sale should be cancelled? No. HELD: The SC applied the principles of equity and justice, as correctly held by the CA. considering that Saldana had already paid the total sum of P3, 582.06including interests, which is even more than the value ofthe two lots. And even if the sum applied to the principal alone were to be considered, which was of the total ofP1,682.28, the same was already more than the value of one lot,

which is P1,500.00. The only balance due on both lots was P1,317.72, which was even less than thevalue of one lot. By this, the court ruled that Saldana had already paid for at least one lot. And he is given the choice as to which one. Even considering that Saldana as having defaulted after February 1956, when he suspended payments after the 95th installment, he had as of the already paid byway of principal (P1,682.28) more than the full value of one lot (P1,500.00). Furthermore, regardless of the propriety of applying Article 1592 thereto, Legarda Hermanos was not denied substantial justice. According to ART. 1234, If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee, and that in the interest of justice and equity, the decision appealed from may be upheld upon the authority of ART. 1234. Azcona v. Jamandre 127 SCRA 828 Facts Guillermo Azcona leased 80 hectares out of his 150 hectare share in Hacienda Sta. Fe in NegrosOccidental to Cirilo Jamandre. The agreed yearly rental was P7200 and the term was for 3agricultural years beginning 1960. On March 30, 1960, when the first annual rent was due,petitioner was not able to deliver possession of the leased property thus he waived payment of that rental. Respondent only entered the premises on October 26, 1960 after paying P7000, whichwas acknowledged by the petitioner in the receipt. On April 6, 1961, the petitioner notifiedrespondent that the contract of lease was deemed cancelled for violation of the conditions of thecontract. Earlier, in fact, the respondent had been ousted from the possession of the 60 hectaresof the leased premises and let with only 20 hectares of the original area. Issues Whether or not the lease contract is deemed cancelled upon failure of the respondent to: 1. Attach the parcelary plan identifying the exact area subject of the contract 2. Secure approval of PNB of said contract 3. Pay the rentals Ruling Parcelary Plan The correct view is that there was an agreed subject-matter, although it was not expressly defined because the plan was not annexed and never approved. There was still an ascertainable object because the leased premises were sufficiently delineated and identified. Failure to attach the plan was imputable to the petitioner himself because he was supposed to prepare the said plan. Nevertheless, the identification of the lease area rendered the plan unnecessary and its absence did not nullify the agreement. PNB Approval Petitioners claim that such possession was not delivered because the approval of by the PNB had not materialized due to respondent's neglect. Respondent was negotiating the loan with PNB but the contract does not state upon whom fell the obligation to secure the approval. Payment of Rent. Petitioner contends that the payment of P7000, which was short of P200, was a violation of the agreement thus the contract should be deemed cancelled. But the petitioner unqualifiedly accepted the amount. The absence of any mention of the discrepancy in the receipt nor any protest or demand to collect the remaining balance, means that petitioner acknowledged the amount as the full payment for the rent. The SC affirms the decision of the CA and petition is denied.Note: The CA held that the amount of P200 had been condoned but the SC viewed it as a mere reduction of the stipulated rental in consideration of the withdrawal from the leased premises where the petitioner intended to graze his cattle. Relevant Articles/ Jurisprudence Art 1235 When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with. KALALO VS. LUZ GR 27782 July 31, 1970 FACTS: On November 17, 1959, Octavio A. Kalalo (appellee) entered into an agreement with Alfredo J . Luz (appellant) whereby the former was to render engineering design services to the latter for fees, as stipulated in the agreement. Pursuant to said agreement, appellee rendered engineering services to appellant.

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On December 11, 1961, appellee sent to appellant a statement of account, to which was attached an itemized statement of defendant-appellant's account, according to which the total engineering fee asked by appellee for services rendered amounted to P116,565.00 from which sum was to be deducted the previous payments made in the amount of P57,000.00, thus leaving a balance due in the amount of P59,565.00. On May 18, 1962 appellant sent appellee a resume of fees due to the latter. Said fees, according to appellant. amounted to P10,861.08 instead of the amount claimed by the appellee. On June 14, 1962 appellant sent appellee a check for said amount, which appellee refused to accept as full payment of the balance of the fees due him. The appellant further contended that the appellees services were not complete or were performed in violation of the agreement and otherwise unsatisfactory. In order to settle the dispute, and upon agreement of the parties, the trial court authorized the case to be heard before a Commissioner. The Commissioner rendered a report which, in resume, states that the amount due to appellee was $28,000.00 (U.S.) as his fee in the International Research Institute Project which was twenty percent (20%) of the $140,000.00 that was paid to appellant, and P51,539.91 for the other projects, less the sum of P69,475.46 which was already paid by the appellant. ISSUES: 1. Was the recommendation in the Report that the payment of the amount due to Kalalo in dollars legally permissible? 2. If not, what rate of exchange should it be in pesos? RULING: 1. No. Under the agreement,Kalalo was entitled to 20% of $140,000.00, or the amount of $28,000.00. Kalalo, however, cannot oblige the appellant to pay him in dollars, even if appellant himself had received his fee for the IRRI project in dollars. This payment in dollars is prohibited by Republic Act 529 which was enacted on June 16, 1950. 2. Under Republic Act 529, if the obligation was incurred prior to the enactment of the Act and require payment in a particular kind of coin or currency other than the Philippine currency the same shall be discharged in Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred.Republic Act 529 does not provide for the rate of exchange for the payment of obligation incurred after the enactment of said Act. The logical Conclusion, therefore, is that the rate of exchange should be that prevailing at the time of payment for such contracts. NEW PACIFIC TIMBER & SUPPLY CO. INC. VS. SENERIS 10 SCRA 686 FACTS: Petitioner, New Pacific Timber & Supply Co. Inc. was the defendant in a complaint for collection of money filed by private respondent, Ricardo A. Tong. In this complaint, respondent Judge rendered a compromise judgment based on the amicable settlement entered by the parties wherein petitioner will pay to private respondent P54,500.00 at 6% interest per annum and P6,000.00 as attorneys fee of which P5,000.00 has been paid. Upon failure of the petitioner to pay the judgment obligation, a writ of execution worth P63,130.00 was issued levied on the personal properties of the petitioner. Before the date of the auction sale, petitioner deposited with the Clerk of Court in his capacity as the Ex-Officio Sheriff P50,000.00 in Cashiers Check of the Equitable Banking Corporation and P13,130.00 in cash for a total of P63,130.00. Private respondent refused to accept the check and the cash and requested for the auction sale to proceed. The properties were sold for P50,000.00 to the highest bidder with a deficiency of P13,130.00. Petitioner subsequently filed an ex-parte motion for issuance of certificate of satisfaction of judgment which was denied by the respondent Judge. Hence this present petition, alleging that the respondent Judge capriciously and whimsically abused his discretion in not granting the requested motion for the reason that the judgment obligation was fully satisfied before the auction sale with the deposit made by the petitioner to the ExOfficio Sheriff. In upholding the refusal of the private respondent to accept the check, the respondent Judge cited Article 1249 of the New Civil Code which provides that payments of debts shall be made in the currency which is the legal tender of the Philippines and Section 63 of the Central Bank Act which provides that checks representing deposit money do not have legal tender power. In sustaining the contention of the private respondent to refuse the acceptance of the cash, the respondent Judge cited Article 1248 of the New Civil Code which provides that creditor cannot be

compelled to accept partial payment unless there is an express stipulation to the contrary. ISSUE: Can the check be considered a valid payment of the judgment obligation? RULING: Yes. It is to be emphasized that it is a well-known and accepted practice in the business sector that a Cashiers Check is deemed cash. Moreover, since the check has been certified by the drawee bank, this certification implies that the check is sufficiently funded in the drawee bank and the funds will be applied whenever the check is presented for payment. The object of certifying a check is to enable the holder to use it as money. When the holder procures the check to be certified, it operates as an assignment of a part of the funds to the creditors. Hence, the exception provided in Section 63 of the Central Bank Act which states that checks which have been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash the amount equal to that which is credited to his account. The Cashiers Check and the cash are valid payment of the obligation of the petitioner. The private respondent has no valid reason to refuse the acceptance of the check and cash as full payment of the obligation. Roman Catholic Bishop of Malolos v. IAC (1990) FACTS: July 7, 1971: A contract over the land was executed between the Roman Catholic Bishop of Malolos (bishop) as vendor and the through its then president, Mr. Carlos F. Robes, as vendee, stipulating for a downpayment of P23,930 and the balance of P100,000 plus 12% interest per annum to be paid within 4 years from execution of the contract. The contract likewise provides for cancellation, forfeiture of previous payments, and reconveyance of the land in case of failure to pay within the period March 12, 1973: private respondent, through its new president, Atty. Adalia Francisco, addressed a letter 6 to Father Vasquez, parish priest of San Jose Del Monte, Bulacan, requesting to be furnished with a copy of the subject contract and the supporting documents July 17, 1975: after the expiration of the stipulated period for payment, Atty. Francisco wrote the formal request that her company be allowed to pay the principal amount of P100,000 in 3 equal installments of 6 months each with the 1st installment and the accrued interest of P24,000 to be paid immediately upon approval July 29, 1975: Bishop through its counsel, Atty. Carmelo Fernandez, formally denied the request but granted a grace period of 5 days from the receipt of the denial to pay the total balance of P124,000 August 4, 1975: private respondent, through its president, Atty. Francisco, wrote the counsel of the petitioner requesting an extension of 30 days from to fully settle its account. - denied RTC: favored Bishop declaring the down payment as forfeited ISSUE: W/N there is tender of payment by issuance of a certified check HELD: NO. RTC reinstated. Tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the formers obligation and demanding that the latter accept the same. tender of payment cannot be presumed by a mere inference from surrounding circumstances sheer proof of sufficient available funds to meet more than the total obligation within the grace period - NOT sufficient On the contrary, the respondent court finds itself remiss in overlooking or taking lightly the more important findings of fact made by the trial court which are entitled to great weight on appeal

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and should be accorded full consideration and respect and should not be disturbed unless for strong and cogent reasons certified personal check which is not legal tender nor the currency stipulated, and therefore, can not constitute valid tender of payment Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment Tibajia vs. CA, 1993 Facts: A suit for collection of sum of money was ruled in favor of Eden Tan and against thespouses Norberto Jr. and Carmen Tibajia. After the decision was made final, Tan filed amotion for execution and levied upon the garnished funds which were deposited by thespouses with the cashier of the Regional Trial Court of Pasig. The spouses, however,delivered to the deputy sheriff the total money judgment in the form of Cashiers Check (P262,750) and Cash (P135,733.70). Tan refused the payment and insisted upon thegarnished funds to satisfy the judgment obligation. The spouses filed a motion to lift thewrit of execution on the ground that the judgment debt had already been paid. The motionwas denied. Issue: Whether the spouses have satisfied the judgment obligation after the delivery of the cashiers check and cash to the deputy sheriff. Held: A check, whether a managers check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refusedreceipt by the obligee or creditor (Philippine Airlines vs. Court of Appeals; Roman CatholicBishop of Malolos vs. Intermediate Appellate Court). The court is not, by decision,sanctioning the use of a check for the payment of obligations over the objection of thecreditor (Fortunado vs. Court of Appeals) Facts: Case 54863 was a suit for collection of a sum of money filed by Eden Tan against the Tibajia spouses (Norberto Jr. and Carmen). A writ of attachment was issued by the trial court on 17 August 1987 and on 17 September 1987, the Deputy Sheriff filed a return stating that a deposit made by the Tibajia spouses in the RTC Kalookan City in the amount of P442,750.00 in another case, had been garnished by him. On 10 March 1988, the RTC, Branch 151 of Pasig, Metro Manila rendered its decision in Civil Case 54863 in favor of Tan, ordering the Tibajia spouses to pay her an amount in excess of P300,000.00. On appeal, the Court of Appeals modified the decision by reducing the award of moral and exemplary damages. The decision having become final, Tanfiled the corresponding motion for execution and thereafter, the garnished funds which by then were on deposit with the cashier of the RTC Pasig, Metro Manila, were levied upon. On 14 December 1990, the Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima the total money judgment in the form of Cashier's Check (P262,750.00) and Cash (P135,733.70). Tan, refused to accept the payment made by the Tibajia spouses and instead insisted that the garnished funds deposited with the cashier of the RTC Pasig be withdrawn to satisfy the judgment obligation. On 15 January 1991, the spouses filed a motion to lift the writ of executionon the ground that the judgment debt had already been paid. On 29 January 1991, the motion was denied by the trial court on the ground that payment in cashier's check is not payment in legal tender and that payment was made by a third party other than thedefendant. A motion for reconsideration was denied on 8 February 1991.Thereafter, the spouses Tibajia filed a petition for certiorari, prohibition and injunction in the Court of Appeals (CA GR SP 24164).The appellate court dismissed the petition on 24 April 1991 holding that payment by cashier's check is not payment in legal tender as required by RA 529. The motion for reconsideration was denied on 27 May 1991. Hence, the petition for review. Held: The Supreme Court denied the petition, and affirmed the appealed decision, with costs against the spouses.1. Article 1249 of the Civil Code Article 1249 of the Civil Code provides The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in

the currency which is legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they havebeen cashed, or when through the fault of the creditor they have been impaired. In the meantime, the action derived from theoriginal obligation shall be held in abeyance."

CIVIL LAW:CONTRACTS; EXTRAORDINARY INFLATION It is only when an extraordinary inflation supervenes that the law affords the parties a relief in contractual obligations.Art. 1250 of the Civil Code provides that in case an extraordinary 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 the payment, unless there is an agreement to the contrary. In Filipino Pipe and Foundry Corporation v. NAWASA, the Court explained extraordinary inflation thus: Extraordinary inflation exists when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value of said currency, and such decrease or increase could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation. (Tolentino, Commentaries and Jurisprudence on the Civil Code, Vol. IV, p. 284.) Commissioner of Public Highways vs. Burgos Commissioner of Public Highways, petitioner, vs. Hon. Francisco P. Burgos, in his capacity as Judge of the Court of First Instance of Cebu City, Branch II, and Victor Amigable, respondents. March 31, 1980 De Castro, J: Facts: On 1924, the government took private respondent Victor Amigable's land for road-right-of-way purpose. On 1959, Amigable filed in the Court of First Instance a complaint to recover the ownership and possession of the land and for damages for the alleged illegal occupation of the land by the government (entitled Victor Amigable vs. Nicolas Cuenco, in his capacity as Commissioner of Public Highways and Republic of the Philippines). Amigable's complaint was dismissed on the grounds that the land was either donated or sold by its owners to enhance its value, and that in any case, the right of the owner to recover the value of said property was already barred by estoppel and the statute of limitations. Also, the non-suability of the government was invoked. In the hearing, the government proved that the price of the property at the time of taking was P2.37 per square meter. Amigable, on the other hand, presented a newspaper showing that the price was P6.775. The public respondent Judge ruled in favor of Amigable and directed the Republic of the Philippines to pay Amigable the value of the property taken with interest at 6% and the attorney's fees. Issue: 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 private respondent Amigable for the property taken. Held: Not applicable. Ratio: Article 1250 of the NCC provides that the value of currency at the time of the establishment of the obligation shall be the basis of payment which would be the value of peso at the time of taking of the property when the obligation of the government to pay arises. It is only when there is an agreement that the inflation will make the value of currency at the time of payment, not at the time of the establishment, the basis for payment. The correct amount of compensation would be P14,615.79 at P2.37 per square meter, not P49,459.34, and 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. COMMISSIONER VS. BURGOS G.R. No. L-36706 March 31, 1980 FACTS: Private Respondent Victoria Amigable is an owner of a parcel of land in Cebu City that was taken by the Government sometime in 1924 for road-right-of-way purpose. In 1959, private respondent filed a complaint to recover ownership and possession of the said

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land, damages for illegal occupation of the Government of the same said land and Php5,000.00 for attorneys fees. Petitionerdefendant, in its answer, alleged that the above-mentioned land was either donated or sold by its owners to the province of Cebu, also private respondent is already barred by estoppel and statute of limitations, and invoked the non-suitability of the Government. Based on the allegations of the petitioner-defendant, the trial court rendered a decision for the petitioner-defendant. However, on appeal to the Supreme Court, the Court reversed the decision and remanded the case to the court of origin for the determination of the compensation to be made to private respondent and attorneys fees. During the hearing for the determination of the compensation, the Government proved the value of the land through the certification issued by the Bureau of Records Management that the value of the said land was only Php2.37 per square meter. On the other hand, private respondent presented a newspaper clipping of Manila Times showing that the value of peso was Php6.775 to a dollar during the middle of 1972. Upon consideration, the trial court rendered a decision directing the Government to pay private respondent Php49,459.34 for the value of the land with 6% interest per annum and 10% attorneys fees of the total amount due, totaling to Php214,356.75. Thereafter, the Solicitor General, representing the Government, appealed to the Supreme Court contending that the trial court erred in applying Article 1250 in the case at bar. ISSUE: Should Article 1250 be applied in determining the compensation for the disputed land? RULING: No. It is clear that Article 1250 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. 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. 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. 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. FILINVEST CREDIT vs. PHILIPPINE ACETYLENE G.R. No. L-50449 January 30, 1982 FACTS: Philippine Acetylene Co. purchased from Alexander Lim a motor vehicle described as Chevorlet 1969 model for P55K to be paid in installments. As security for the payment of said promissory note, the appellant executed a chattel mortgage over the same motor vehicle in favor of said Alexander Lim. Then, Lim assigned to the Filinvest all his rights, title, and interests in the promissory note and chattel mortgage by virtue of a Deed of Assignment. Phil Acetylene defaulted in the payment of nine successive installments. Filinvest sent a demand letter. Replying thereto, Phil Acetylene wrote back of its desire to return the mortgaged property, which return shall be in full satisfaction of its indebtedness. So the vehicle was returned to the Filinvest together with the document Voluntary Surrender with Special Power of Attorney To Sell. Filinvest failed to sell the motor vehicle as there were unpaid taxes on the said vehicle. Filinvest requested the appellant to update its account by paying the installments in arrears and accruing interest. Filinvest offered to deliver back the

motor vehicle to the appellant but the latter refused to accept it, so appellee instituted an action for collection of a sum of money with damages. Phil Acetylenes defense: The delivery of the motor vehicle to Filinvest extinguished its money obligation as it amounted to a dation in payment. Assuming arguendo that the return did not extinguish, it was justified in refusing payment since the appellee is not entitled to recover the same due to the breach of warranty committed by the original vendor-assignor Alexander Lim. ISSUE: W/N there was dation in payment that extinguished Phil Acetylenes obligation? NO. HELD: The mere return of the mortgaged motor vehicle by the mortgagor does not constitute dation in payment in the absence, express or implied of the true intention of the parties. Dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of obligation. In dacion, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtors debt. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. In any case, common consent is an essential prerequisite, be it sale or innovation to have the effect of totally extinguishing the debt or obligation. The evidence on the record fails to show that the Filinvest consented, or at least intended, that the mere delivery to, and acceptance by him, of the mortgaged motor vehicle be construed as actual payment, more specifically dation in payment or dacion en pago. The fact that the mortgaged motor vehicle was delivered to him does not necessarily mean that ownership thereof, as juridically contemplated by dacion en pago, was transferred from appellant to appellee. In the absence of clear consent of appellee to the proferred special mode of payment, there can be no transfer of ownership of the mortgaged motor vehicle from appellant to appellee. If at all, only transfer of possession of the mortgaged motor vehicle took place, for it is quite possible that appellee, as mortgagee, merely wanted to secure possession to forestall the loss, destruction, fraudulent transfer of the vehicle to third persons, or its being rendered valueless if left in the hands of the appellant. As to the strength of the Voluntary Surrender with Special Power of Attorney To Sell, it only authorized Filinvest to look for a buyer and sell the vehicle in behalf of the appellant who retains ownership thereof, and to apply the proceeds of the sale to the mortgage indebtedness, with the undertaking of the appellant to pay the difference, if any, between the selling price and the mortgage obligation. Filinvest in essence was constituted as a mere agent to sell the motor vehicle which was delivered not as its property. If it were, he would have full power of disposition of the property, not only to sell it. Article 1245 Citizens Surety and Insurance Company vs. CA G.R. No. L-48958 Facts: On December 4, 1959, the petitioner issued two surety bonds to the defendant to ensurethe compliance of the latter while he entered a transaction with Singer Sewing Machine Co.The respondent also put up collaterals such as his lumber stock worth P400,000 and a secondreal estate mortgage to reimburse the cost paid by the petitioner in case that the respondentwill not comply to the agreement. The respondent failed to comply with his obligations toSinger Sewing Machine Co. and the petitioner paid payments as a result of non-compliance of the respondent. The respondent failed to reimburse the petitioner due to the losses heencountered thereby the petitioner filed a claim of the sum of the money against the estate of the respondent. Respondent opposed the money claim by stating that the surety bonds and theindemnity agreements had been extinguished by the execution of the deed of assignment.Thus, after the trial, the lower declared that the collateral is jointly and severally liable to the petitioner, hereby, requiring respondent to pay the required amount with 10%

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interest per annum. The decision of the lower court was reversed by the Court of Appeals when therespondent appealed. Issue: Whether or not administrators obligation under the surety bonds agreements had beenextinguished through execution of the deed of assignment. Held: Obligation under the surety bonds had not been extinguished by reason on the executionof deed of assignment. The deed of assignment was intended as a collateral security for the issuance of two (2) surety bonds by the petitioner towards respondent as evidenced by thelatters subsequent acts. These are partial payments made by respondent after the executionthe deed of assignment to pay his indebtedness. Moreover, with the execution of the secondmortgage by respondent, it follows that there is no extinguishment of obligation sinceindemnity bonds still existed by virtue of its execution.Thus, upon the failure of the respondent to comply with its obligation under the contract if sale of goods towards Singer Sewing Machine Co., the petitioner is still adequately protected by the lumber collateral which worth P400,000, more than enough to guaranty the obligations.Here, the Supreme Court dismissed the appeal and money claim by the petitioner. Soco vs. Hon. Militante, et al. June 28, 1983 [GRN 58961 June 28, 1983] FACTS: The plaintiff-appellee-Soco (lessor) and the defendantappellant-Francisco (lessee) entered into a contract of lease on for commercial building and lot for a monthly rental of P800.00 for a period of 10 years renewable for another 10 years at the option of the lessee. One time, Francisco noticed that Soco did not anymore send her collector for the payment of rentals and at times there were payments made but no receipts were issued. Soon after Soco learned that Francisco sub-leased a portion of the building to NACIDA, at a monthly rental of more than P3,000.00 which is definitely very much higher than what Francisco was paying to Soco under the Contract of Lease, the latter felt that she was on the losing end of the lease agreement so she tried to look for ways and means to terminate the contract. Taking into account the factual background setting of this case, the Court holds that there was in fact a tender of payment of the rentals made by Francisco to Soco through Comtrust and since these payments were not accepted by Soco evidently because of her intention to evict Francisco, by all means, Francisco was impelled to deposit the rentals with the Clerk of Court of the City Court of Cebu, Soco was notified of this deposit. She was further notified of these payments by consignation. The City Court declared the payments of rentals valid and effective. ISSUE: Whether or not the consignation was valid and effective. HELD: In order that consignation may be effective, the debtor must first comply with certain requirements prescribed by law. The debtor must show (1) that there was a debt due; (2) that the consignation of the obligation had been made because the creditor to whom tender payment was made refused to accept it, or because he was absent or incapacitated, or because several persons claimed to be entitled to receive the amount due (Art. 1176, Civil Code); (3) that previous notice of the consignation had been given to the person interested in the performance of the obligation (Art. 1177, Civil Code); (4) that the amount due was placed at the disposal of the court (Art. 1178, Civil Code); and (5) that after the consignation had been made the person interested was notified thereof (Art. 1178, Civil Code). Failure in any of these requirements is enough ground to render a consignation ineffective. SC ruled that the essential requisites of a valid consignation must be complied with fully and strictly in accordance with the law, as Articles 1256 to 1261, New Civil Code say. Substantial compliance is not enough for that would render only a directory construction to the law. The use of the words "shall" and "must" which are imperative, operating to impose a duty which may be enforced, positively indicate that all the essential requisites of a valid consignation must be complied with. The Civil Code Articles expressly and explicitly direct what must be essentially done in order that consignation shall be valid and effectual, as the law provides in Art 1257, 1258, 1249. SC held that the respondent lessee has utterly failed to prove the requisites of a valid consignation. PEOPLE vs.NATIVIDAD FRANKLIN G.R. No. L-21507 June 7, 1971

FACTS: Appeal taken by the Asian Surety & Insurance Company, Inc. from the decision of the Court of First Instance of Pampanga dated April 17, 1963, forfeiting the bail bond posted by it for the provisional release of Natividad Franklin, the accused in Criminal Case No. 4300 of said court, as well as from the latter's orders denying the surety company's motion for a reductions of bail, and its motion for reconsideration thereof. It appears that an information filed with the Justice of the Peace Court of Angeles, Pampanga, docketed as Criminal Case No. 5536, Natividad Franklin was charged with estafa. Upon a bail bond posted by the Asian Surety & Insurance Company, Inc. in the amount of P2,000.00, she was released from custody. After the preliminary investigation of the case, the Justice of the Peace Court elevated it to the Court of First Instance of Pampanga where the Provincial Fiscal filed the corresponding information against the accused. The Court of First Instance then set her arraignment on July 14, 1962, on which date she failed to appear, but the court postponed the arraignment to July 28 of the same year upon motion of counsel for the surety company. The accused failed to appear again, for which reason the court ordered her arrest and required the surety company to show cause why the bail bond posted by it should not be forfeited. On September 25, 1962, the court granted the surety company a period of thirty days within which to produce and surrender the accused, with the warning that upon its failure to do so the bail bond posted by it would be forfeited. On October 25, 1962 the surety company filed a motion praying for an extension of thirty days within which to produce the body of the accused and to show cause why its bail bond should not be forfeited. As not withstanding the extension granted the surety company failed to produce the accused again, the court had no other alternative but to render the judgment of forfeiture. Subsequently, the surety company filed a motion for a reduction of bail alleging that the reason for its inability to produce and surrender the accused to the court was the fact that the Philippine Government had allowed her to leave the country and proceed to the United States on February 27, 1962. The reason thus given not being to the satisfaction of the court, the motion for reduction of bail was denied. The surety company's motion for reconsideration was also denied by the lower court on May 27, 1963, although it stated in its order that it would consider the matter of reducing the bail bond "upon production of the accused." The surety company never complied with this condition. ISSUE: Appellant now contends that the lower court should have released it from all liability under the bail bond posted by it because its failure to produce and surrender the accused was due to the negligence of the Philippine Government itself in issuing a passport to said accused, thereby enabling her to leave the country. In support of this contention the provisions of Article 1266 of the New Civil Code are invoked. HELD: Appellant's contention is untenable. The abovementioned legal provision does not apply to its case, because the same speaks of the relation between a debtor and a creditor, which does not exist in the case of a surety upon a bail bond, on the one hand, and the State, on the other. In U.S. vs. Bonoan, et al., 22 Phil., p. 1, We held that: The rights and liabilities of sureties on a recognizance or bail bond are, in many respects, different from those of sureties on ordinary bonds or commercial contracts. The former can discharge themselves from liability by surrendering their principal; the latter, as a general rule, can only be released by payment of the debt or performance of the act stipulated. In the more recent case of Uy Tuising, 61 Phil. 404, We also held that:By the mere fact that a person binds himself as surety for the accused, he takes charge of, and absolutely becomes responsible for the latter's custody, and under such circumstances it is incumbent upon him, or rather, it is his inevitable obligation not merely a right, to keep the accused at all times under his surveillance, inasmuch as the authority emanating from his character as surety is no more nor less than the Government's authority to hold the said accused under preventive imprisonment. In allowing the accused Eugenio Uy Tuising to leave the jurisdiction of the Philippines, the appellee necessarily ran the risk of violating and in fact it clearly violated the terms of its bail bonds because it failed to produce the said accused when on January 15, 1932, it was required to do so. Undoubtedly, the result of the obligation assumed by the appellee to hold the accused at all

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times to the orders and processes of the lower court was to prohibit said accused from leaving the jurisdiction of the Philippines because, otherwise, said orders and processes would be nugatory and inasmuch as the jurisdiction of the court from which they issued does not extend beyond that of the Philippines, they would have no binding force outside of said jurisdiction. It is clear, therefore, that in the eyes of the law a surety becomes the legal custodian and jailer of the accused, thereby assuming the obligation to keep the latter at all times under his surveillance, and to produce and surrender him to the court upon the latter's demand. That the accused in this case was able to secure a Philippine passport which enabled her to go to the United States was, in fact, due to the surety company's fault because it was its duty to do everything and take all steps necessary to prevent that departure. This could have been accomplished by seasonably informing the Department of Foreign Affairs and other agencies of the government of the fact that the accused for whose provisional liberty it had posted a bail bond was facing a criminal charge in a particular court of the country. Had the surety company done this, there can be no doubt that no Philippine passport would have been issued to Natividad Franklin. UPON ALL THE FOREGOING, the decision appealed from is affirmed in all its parts, with costs. LAURO IMMACULATA vs. HON. PEDRO C. NAVARRO G.R. No. L-42230 April 15, 1988 PARAS, J.: Petitioner's Motion for Reconsideration of Our decision dated November 26, 1986 asks Us to consider a point inadvertently missed by the Court the matter of legal redemption of a parcel of land previously obtained by petitioner Lauro Immaculata thru a free patent. The reconsideration of this issue is hereby GRANTED. While res judicata may bar questions on the validity of the sale in view of alleged insanity and intimidation (and this point is no longer pressed by counsel for the petitioner) still the question of the right of legal redemption has remained unresolved. Be it noted that in an action (Civil Case No. 20968) filed on March 24, 1975 before the defunct Court of First Instance of Rizal, petitioner presented an alternative cause of action or prayer just in case the validity of the sale would be sustained. And this alternative cause of action or prayer is to allow petitioner to legally redeem the property. We hereby grant said alternative cause of action or prayer. While the sale was originally executed sometime in December, 1969, it was only on February 3, 1974 when, as prayed for 1 by private respondent, and as ordered by the court a quo, a "deed of conveyance" was formally executed. Since offer to redeem was made on March 24, 1975, this was clearly within the five-year period of legal redemption allowed by the Public Land Act (See Abuan v. Garcia, 14 SCRA 759, 761). The allegation that the offer to redeem was not sincere, because there was no consignation of the amount in Court is devoid of merit. The right to redeem is a RIGHT, not an obligation, therefore, there is no consignation required (De Jesus v. Garcia, C.A. 47 O.G. 2406; Resales v. Reyes, 25 Phil. 495, Vda. de Quirino v. Palarca, L-28269, Aug. 16, 1969) to preserve the right to redeem (Villegas v. Capistrano, 9 Phil. 416). WHEREFORE, as prayed for by the petitioner Lauro Immaculata (represented by his wife, Amparo Velasco, as Guardian ad litem) the decision of this Court dated November 26, 1986 is hereby MODIFIED, and the case is remanded to the court a quo for it to accept payment or consignation 2 (in connection with the legal redemption which We are hereby allowing the petitioner to do) by the herein petitioner of whatever he received from respondent at the time the transaction was made. OCCENA v JABSON (digest) October 29, 1976 Tropical Homes Inc. agreed to develop a subdivision on the land owned by Jesus and Efigenia Occea, wherein Tropical Homes would be paid only 40% of the sale of the subdivision lots. Tropical Homes seeks revision of the contract on the Basis of Art 1267 of the Civil Code (CC). They are asking for modification of the terms and conditions of the subdivision contract, due to increase in costs. Art. 1267 CC: When the service has become so difficult as

to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. Held: The CC authorizes the release of an obligor when the service has become so difficult as to be manifestly beyond the contemplation of the parties but does not authorize the Courts to modify or revise the subdivision contract between the parties or to fix a different sharing ratio from that contractually stipulated with the force of law.Tropical Homes complaint for modification of the contract has no basis in law and must be dismissed. JESUS V. OCCENA and EFIGENIA C. OCCENA vs.HON. RAMON V. JABSON, G.R. L-44349 Oct.29, 1976 The Court reverses the CA appealed resolution. The Civil Code authorizes the release of an obligor when the service has become so difficult as to be manifestly beyond the contemplation of the parties but does not authorize the courts to modify or revise the subdivision contract between the parties or fix a different sharing ratio from that contractually stipulated with the force of law between the parties. Private respondent's complaint for modification of the contract manifestly has no basis in law and must therefore be dismissed for failure to state a cause of action. On February 25, 1975 private respondent Tropical Homes, Inc. filed a complaint for modification of the terms and conditions of its subdivision contract with petitioners (landowners of a 55,330 square meter parcel of land in Davao City), making the allegations:"That due to the increase in price of oil .. and not within the remotest contemplation of the parties at the time said agreement was entered into and to such a degree that the conditions and factors which formed the original basis of said contract, have been totally changed; 'That further performance by the plaintiff under the contract will result in situation where defendants would be unustly enriched at the expense of the plaintiff; Under the subdivision contract, respondent "guaranteed (petitioners as landowners) as the latter's fixed and sole share and participation an amount equivalent to forty (40%) percent of all cash receipts from the sale of the subdivision lots" The petition must be granted. While respondent court correctly cited in its decision the Code Commission's report giving the rationale for Article 1267 of the Civil Code, to wit;The general rule is that impossibility of performance releases the obligor. However, it is submitted that when the service has become so difficult as to be manifestly beyond the contemplation of the parties, the court should be authorized to release the obligor in whole or in part. The intention of the parties should govern and if it appears that the service turns out to be so difficult as have been beyond their contemplation, it would be doing violence to that intention to hold the obligor still responsible. ... It misapplied the same to respondent's complaint. If respondent's complaint were to be released from having to comply with the subdivision contract, assuming it could show at the trial that the service undertaken contractually by it had "become so difficult as to be manifestly beyond the contemplation of the parties", then respondent court's upholding of respondet's complaint and dismissal of the petition would be justifiable under the cited codal article. Without said article, respondent would remain bound by its contract under the theretofore prevailing doctrine that performance therewith is ot excused "by the fact that the contract turns out to be hard and improvident, unprofitable, or unespectedly burdensome", 3 since in case a party desires to be excuse from performance in the event of such contingencies arising, it is his duty to provide threfor in the contract. But respondent's complaint seeks not release from the subdivision contract but that the court "render judgment I modifying the terms and Conditions of the Contract by fixing the proper shares that should pertain to the herein parties out of the gross proceed., from the sales of subdivided lots of subject subdivision". The cited article does not grant the courts this authority to remake, modify or revise the contract or to fix the division of shares between the parties as contractually stipulated with the force of law between the parties, so as to substitute its own terms for those covenanted by the partiesthemselves. Respondent's complaint for modification of contract manifestly has no basis in law and therefore states no cause of action. Under the particular allegations of respondent's complaint and the circumstances therein averred, the courts cannot even in equity grant the relief sought. A final procedural note. Respondent cites the general rule that an erroneous order denying a motion to dismiss is interlocutory and should not be corrected by certiorari but by appeal in due course. This case however manifestly falls within the recognized exception that certiorari will lie when appeal would not prove to be a speedy

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and adequate remedy.' Where the remedy of appeal would not, as in this case, promptly relieve petitioners from the injurious effects of the patently erroneous order maintaining respondent's baseless action and compelling petitioners needlessly to go through a protracted trial and clogging the court dockets by one more futile case, certiorari will issue as the plain, speedy and adequate remedy of an aggrieved party. ACCORDINGLY, the resolution of respondent appellate court is reversed and the petition for certiorari is granted and private respondent's complaint in the lower court is ordered dismissed for failure to state a sufficient cause of action. With costs in all instances against private respondent.

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