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Bayla vs Silang Traffic Co

Facts 1. Petitioner (subscriber) entered into an agreement with respondent (seller) regarding the purchase of fifteen (15) shares of capital stock by the former from the latter for the sum of P1,500.00. 2. Said agreement has with it certain terms and conditions, among which are cases where the subscriber shall fail to pay the installments or to perform the conditions or if said shares[shall be attached or levied upon by creditors of the subscriber, said shares are to be automatically reverted to the seller and the payments already made are to be forfeited in favor of the seller. 3. On or before July 31, 1937, petitioners failed to pay the installment due that day resulting for the automatic forfeiture of the payments they already made. 4. On the other hand, on August1, 1937, the respondent corporation issued a resolution was authorizing the refund of the installments already paid by their subscribers. Said resolution was issued by respondent for the purpose of terminating the pending civil case involving the validity of the shares in question which was subsequently dismissed. Based on the said resolution, the petitioners instituted an action for the recovery of the sum of money which they have paid severally to the corporation. 5. The corporation set up a defense stating that said resolution was no longer applicable to the petitioners since their shares was already reverted in favor of the seller due to their failure to pay on the due date long before the resolution was issued. Moreover, another resolution was issued by the corporation on August 22, 2937 revoking and cancelling the earlier resolution. 6. The trial court issued an order against the petitioners; and on appeal, the CA affirmed the decision of the trial court with some modifications as to the cancellation of the petitioners subscription which was reversed by said appellate court. 7. Hence, an appeal by both parties for certiorari. Issue 1. WON the said contract is a subscription or a sale of stock 2. WON under the contract between the parties the failure of the purchaser to pay any of the quarterly installments on the purchase price automatically give rise to the forfeitures of the amount already paid and the reversions of the shares to the corporation 3. WON the resolution of August 1, 1937 is valid. Held 1. Judgment against the defendant. Rationalization 1. Whether a particular contract is a subscription or a sale of stock is a matter of construction and depends upon its terms and the intention of the parties. It should be noted that the agreement entered into by the parties in this case is entitled Agreement for Installment Sales of Shares in the Silang Traffic Company, Inc.

It also appears that in the civil case which was earlier dismissed, the CFI mentioned the right of the corporation to sell the shares of stock to the person named in the resolution, including the petitioner, was impugned by the petitioners in the said case, who claimed a preferred right to buy said shares. This shows that said contract is simply a contract of purchase and sale. A purchase is an independent agreement between individual and the corporation to buy shares of stock from it at a stipulated price; different from that of a subscription which is a mutual agreement of the subscribers to take and pay for the stock of the corporation. 2. The contract here involved provides that if the purchaser fails to pay any of the instalments when due, the shares of stock which are the object of the sale are to revert to the seller and the payments already made are to be forfeited in favor of said seller. The seller, through its board of directors, annulled a previous resolution rescinding the sale and declared the forfeiture of the payments already made and the reversion of the shares of stock to the corporation. Held: That such forfeiture was ineffective. The contract did not expressly provide that the failure of the purchaser to pay any instalment would give rise to forfeiture and cancellation without the necessity of any demand from the seller; and under article 1100 of the Civil Code (now Article 1169) persons obliged to deliver or do something are not in default until the moment the creditor demands of them judicially or extrajudicially the fulfilment of their obligation, unless a. the obligation or the law expressly provides that demand shall not be necessary in order that default may arise, or b. by reason of the nature and circumstances of the obligation it shall appear that the designation of the time at which the thing was to be delivered or the service rendered was the principal inducement to the creation of the obligation. 3. As to the third issue, the resolution which was made for the good of the corporation and for the termination of the civil case benefited other petitioners. It would be an unjust discrimination to deny the same benefit to the herein petitioners.

Aerospace Chemical Industries, Inc vs CA and Philippine Phosphate Fertilizer Corp.

Facts 1. On June 27, 1986, petitioner Aerospace Industries, Inc. purchased five hundred metric tons of sulfuric acid from private respondent Philippine Phosphate Fertilizer Corporation. 2. Petitioner agreed to secure the means of transport to pick-up the sulfuric acid from private respondents' loadports in Basay, Negros Oriental and Sangi, Cebu. 3. On October 3, 1986, petitioner paid the purchased price of 500 MT of sulfuric acid. Then, it chartered M/T Sultan Kayumanggi to carry the agreed volumes of freight from designated loading areas. 4. But the vessel was able to withdraw a partial amount of sulfuric acid from Basay and Sangi because it tilted. And later, it sank with a total amount of 227.51 MT of sulfuric acid on board. 5. Petitioner sent a demand letter to private respondent for delivery of the 272.49 MT of sulfuric acid. 6. Petitioner then filed a complaint against private respondent for specific performance and/or damages before the Regional Trial Court of Pasig. 7. The private respondent filed an answer with counterclaim and alleged that it was the petitioner which was remiss in the performance of its obligation in arranging the shipping requirements of its purchases and, hence, should pay damages. 8. Petitioner prevailed in the trial court. 9. However, on appeal, the Court of Appeals reversed the decision of the trial court and instead found petitioner guilty of delay and therefore, liable for damages. 10. Hence, this petition. Issue 1. Did the respondent court err in holding that the petitioner committed breach of contract, considering that: a. the petitioner allegedly paid the full value of its purchases, yet received only a portion of said purchases? b. petitioner and private respondent allegedly had also agreed for the purchase and supply of an additional 227.519 MT of sulfuric acid, hence prior delay, if any, had been waived? 2. Did the respondent court err in awarding damages to private respondent? 3. Should expenses for the storage and preservation of the purchased fungible goods, namely sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil Code? Ruling 1. No, CA did not err in absolving the private respondent from liability. Petitioner, as the buyer, was obligated under the contract to undertake the shipping requirements of the cargo from the private respondent's loadports to the petitioner's designated warehouse. It was petitioner which chartered M/T Sultan Kayumanggi. The vessel

was petitioner's agent. When it failed to comply with the necessary loading conditions of sulfuric acid, it was incumbent upon petitioner to immediately replace M/T Sultan Kayumanggi with another sea worthy vessel. Where there has been breach of contract by the buyer, the seller has a right of action for damages. Following this rule, a cause of action of the seller for damages may arise where the buyer refuses to remove the goods, such that buyer has to remove them. Article 1170 of Civil Code provides: "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." 2. No, respondent court did not err in awarding damages to private respondent. Where there has been breach of contract by the buyer, the seller has a right of action for damages. Following this rule, a cause of action of the seller for damages may arise where the buyer refuses to remove the goods, such that buyer has to remove them. Article 1170 of Civil Code provides: "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." Delay begins from the time the obligee judicially or extrajudicially demands from the obligor the performance of the obligation. Art. 1169 states: "Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation." In order that the debtor may be in default, it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially.

Records reveal that a tanker ship had to pick up sulfuric acid in Basay, then proceed to get the remaining stocks in Sangi, Cebu. A period of three days appears to us reasonable for a vessel to travel between Basay and Sangi. Logically, the computation of damages arising from the shipping delay would then have to be from December 15, 1986, given said reasonable period after the December 12th letter. More important, private respondent was forced to vacate Basay wharf only on December 15th. Its Basay expenses incurred before December 15, 1986, were necessary and regular business expenses for which the petitioner should not be obliged to pay. AaID

3. No, Article 1504 is not applicable. The general rule that before delivery, the risk of loss is borne by the seller who is still the owner, is not applicable in this case because petitioner had incurred delay in the performance of its obligation. Article 1504 of the Civil Code clearly states: "Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual

delivery has made or not except that: . . . (2) Where actual delivery had been delayed through the fault of either the buyer or seller the goods are at the risk of the party at fault.

As pointed out earlier, petitioner is guilty of delay, after private respondent made the necessary extrajudicial demand by requiring petitioner to lift the cargo at its designated loadports. When petitioner failed to comply with its obligations under the contract it became liable for its shortcomings. Petitioner is indubitably liable for proven damages.

Binalbagan Tech and Hermilio Nava vs CA and private respondents

Facts 1. Luis Pontabella is the deceased owner of the lots in this dispute. 2. His judicial administratrix Angeline Puentevella sold them to Raul Javellana with the condition that the vendee-promisee would not transfer his rights to said lots without the express consent of Puentevella and that in case of the cancellation of the contract by reason of the violation of any of the terms thereof, all payments therefor made and all improvements introduced on the property shall pertain to the promissor and shall be considered as rentals for the use and occupation thereof. LLphil 3. Javellana paid to pay the installments for a period of 5 years. 4. Puentevella filed case for rescission of contract and recovery for possession of lots plus damages from Javellana and Southern Negros Colleges who had actual possession of the lots. 5. Lower court ruled in favour of Puentevella and execution was levied on October 27, 1965. 6. On December 29, 1965, the plaintiffs filed their 3rd party claim based on an alleged Deed of Sale executed in their favor by spouses Jose and Lolita Lopez, thus Puentevella was constrained to assert physical possession of the premises to counteract the fictitious and unenforceable claim of herein plaintiffs. 7. On January 3, 1966, a case for injunction and damages was filed and trial court issued an exparte writ of preliminary injunction which was dissolved by the CA pending the resolution of the civil case. Thus, defendant Puentevella was restored to the possession of the lots and buildings subject of this case. 8. On May 11, 1967, private respondents, through Angelina P. Echaus, in her capacity as Judicial Administrator of the intestate estate of Luis B. Puentevella, executed a Contract to Sell and a Deed of Sale of forty-two subdivision lots within the Phib-Khik Subdivision of the Puentebella family, conveying and transferring said lots to petitioner Binalbagan Tech., Inc. (hereinafter referred to as Binalbagan). In turn Binalbagan, through its president, petitioner Hermilio J. Nava (hereinafter referred to as Nava), executed an Acknowledgment of Debt with Mortgage Agreement, mortgaging said lots in favor of the estate of Puentebella. 9. Upon the transfer to Binalbagan of titles to the 42 subdivision lots, said petitioner took possession of the lots and the building and improvements thereon. Binalbagan started operating a school on the property from 1967 when the titles and possession of the lots were transferred to it. 10. However, plaintiffs filed a petition for review with the Supreme Court which issued a restraining order against the sale of the properties claimed by the spouses-plaintiffs. 11. When the Supreme Court dissolved the aforesaid injunction issued by the Court of Appeals, possession of the building and other property was taken from petitioner Binalbagan and given to the third-party claimants, the de la Cruz spouses. Petitioner Binalbagan transferred its school to another location. On Appeal, petitioner was restored to the possession of the subdivision lots on May 31, 1982. It will be noted that petitioner was not in possession of the lots from 1974 to May 31, 1982.

12. After petitioner Binalbagan was again placed in possession of the subdivision lots, private respondent Angelina Echaus demanded payment from petitioner Binalbagan for the subdivision lots, enclosing in the letter of demand a statement of account as of September 1982 showing a total amount due of P367,509.93, representing the price of the land and accrued interest as of that date. 13. As petitioner Binalbagan failed to effect payment, private respondent Angelina P. Echaus filed on October 8, 1982 Civil Case No. 1354 of the Regional Trial Court of the Sixth Judicial Region stationed in Himamaylan, Negros Occidental against petitioners for recovery of title and damages. An amended complaint was filed by private respondent Angelina P. Echaus by including her mother, brothers, and sisters as co-plaintiffs, which was admitted by the trial court on March 18, 1983. 14. Hence this petition.

Issues 1. Whether private respondents' cause of action in Civil Case No. 1354 is barred by prescription.

Ruling 1. No, it is not. A party to a contract cannot demand performance of the other party's obligations unless he is in a position to comply with his own obligations. Similarly, the right to rescind a contract can be demanded only if a party thereto is ready, willing and able to comply with his own obligations thereunder. In a contract of sale, the vendor is bound to transfer the ownership of and deliver, as well as warrant, the thing which is the object of the sale (Art. 1495, Civil Code); he warrants that the buyer shall, from the time ownership is passed, have and enjoy the legal and peaceful possession of the thing ARTICLE 1547. In a contract of sale, unless a contrary intention appears, there is: (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing. As afore-stated, petitioner was evicted from the subject subdivision lots in 1974 by virtue of a court order in Civil Case No. 293 and reinstated to the possession thereof only in 1982. During the period, therefore, from 1974 to 1982, seller private respondent Angelina Echaus' warranty against eviction given to buyer petitioner was breached though, admittedly, through no fault of her own. It follows that during that period, 1974 to 1982, private respondent Echaus was

not in a legal position to demand compliance of the prestation of petitioner to pay the price of said subdivision lots. In short, her right to demand payment was suspended during that period, 1974-1982. The prescriptive period within which to institute an action upon a written contract is ten years (Art. 1144, Civil Code). The cause of action of private respondent Echaus is based on the deed of sale aforementioned. The deed of sale whereby private respondent Echaus transferred ownership of the subdivision lots was executed on May 11, 1967. She filed Civil Case No. 1354 for recovery of title and damages only on October 8, 1982. From May 11, 1967 to October 8, 1982, more than fifteen (15) years elapsed. Seemingly, the 10-year prescriptive period had expired before she brought her action to recover title. However, the period 1974 to 1982 should be deducted in computing the prescriptive period for the reason that, as above discussed, from 1974 to 1982, private respondent Echaus was not in a legal position to initiate action against petitioner since as aforestated, through no fault of hers, her warranty against eviction was breached. In the case of Daniel vs. Garlitos, it was held that a court order deferring action on the execution of judgment suspended the running of the 5-year period for execution of a judgment. Here the execution of the judgment in Civil Case No. 7435 was stopped by the writ of preliminary injunction issued in Civil Case No. 293. It was only when Civil Case No. 293 was dismissed that the writ of execution in Civil Case Na. 7435 could be implemented and petitioner Binalbagan restored to the possession of the subject lots. Deducting eight years (1974 to 1982) from the period 1967 to 1982, only seven years elapsed. Consequently, Civil Case No. 1354 was filed within the 10-year prescriptive period. Working against petitioner's position too is the principle against unjust enrichment which would certainly be the result if petitioner is allowed to own the 42 lots without full payment thereof.

Agcaoili vs GSIS Facts 1. In this case, appellant GSIS approved an application of the appellee Agcaoli for the purchase of a house and lot in the GSIS Housing Project at Nangka, Marikina, subject to the condition that the latter should forthwith occupy the house, a condition that Agcaoli tried to fulfill but could not because the house was absolutely uninhabitable - ceiling, stairs, double walling, lighting facilities, water connection, bathroom, toilet, kitchen, drainage, were inexistent 2. However, Agcaoli 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. 3. Petitioner paid the 1st installment and the other fees but refused to make further payments until GSIS makes the house habitable. GSIS refused to do so and opted to cancel the award and demanded that petitioner vacate the said premised. 4. Petitioner filed action for specific performance with damages against GSIS. Other awardees of the housing units in the same subdivision also lodged a written protest against GSIS. TC ruled in petitioners favour. 5. Hence this petition Issue 1. Whether or not Agcaoli is entitled for specific performance with damages. Ruling 1. Yes, Agcaoilo is entitles to such. Appeal of GSIS must fail. An agreement for the sale of a house and lot on installments stipulating that the buyer must occupy the house within a specified period under pain of cancellation if he failed to do so, must be construed as imposing on the seller the obligation to deliver a reasonably habitable dwelling place, one that is in a condition suitable for its enjoyment by the buyer for the purpose contemplated. The seller's delivery of a mere shell of a house consisting of four walls, openings and a roof is a breach of said obligation which prevents him from cancelling the sale on the ground of the purchaser's suspension of payment of the amortizations that the latter had undertaken to pay, it being axiomatic 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." (Art. 1169, last paragraph, Civil Code) The party to a contract who is responsible for alleged imprecision or ambiguity in its terms will not be permitted to make capital of such imprecision or ambiguity; the question of interpretation arising therefrom should be resolved against it. Where specific performance according to the literal terms of a contract would result in inequity by reason of the circumstances obtaining at the time of judgment being significantly different from those existing at the generation of the rights litigated, the Court may exercise its equity jurisdiction to adjust those rights and, in determining the precise relief to be given, "balance the equities" or the respective interests of the parties and take account of the relative hardship that one form of relief or another may occasion to them.

Bricktown Development Corporation vs Amor Tierra Development Corporation and CA

Facts 1. Bricktown Development Corporation, represented by its President and co- petitioner Mariano Z. Velarde, executed two Contracts to Sell in favor of Amor 2. Tierra Development Corporation, represented in these acts by its Vice-President, Moises G. Petilla, covering a total of 96 residential lots at the Multinational Village Subdivision, La Huerta, Paraaque, Metro Manila. 3. The total price of P21,639,875.00 was stipulated to be paid by private respondent in such amounts and maturity dates, as follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30 June 1981; P4,729,906.25 on 31 December 1981; and the balance of P11,500,000.00 to be paid by means of an assumption by private respondent of petitioner corporation's mortgage liability to the Philippine Savings Bank or, alternately, to be made payable in cash. On date, March 31, 1981, the parties executed a Supplemental Agreement, providing that private respondent would additionally pay to petitioner corporation the amounts of P55,364.68, or 21% interest on the balance of down payment for the period from 31 March to 30 June 1981, and of P390,369.37 representing interest paid by petitioner corporation to the Philippine Savings Bank in updating the bank loan for the period from 01 February to 31 March 1981. 4. Private respondent was only able to pay petitioner corporation the sum of P1,334,443.21. However, the parties continued to negotiate for a possible modification of their agreement, but nothing conclusive happened. And on October 12, 1981, petitioners counsel sent private respondent a Notice of Cancellation of Contract because of the latters failure to pay the agreed amount. 5. Several months later, private respondents counsel, demanded the refund of private respondent's various payments to petitioner corporation, allegedly "amounting to P2,455,497.71," with interest within fifteen days from receipt of said letter, or, in lieu of a cash payment, to assign to private respondent an equivalent number of unencumbered lots at the same price fixed in the contracts. When the demand was not heeded, Amor Tierra filed an action with the court a quo which rendered a decision in its favor. The decision of the lower court was affirmed in toto by the Court of Appeals. 6. Hence, this petition. Issue 1. Whether or not the contract was properly rescinded? 2. Whether or not Bricktown properly forfeited the payments of Amor Tierra? Ruling 1. The contract between Bricktown and Amor Tierra was validly rescinded because of the failure of the latter to pay the agreed amounts stipulated in the contract on the proper date even after the sixty-days grace period. Furthermore, the records showed that private respondent corporation paid less than the amount agreed upon. The Supreme Court also added that such cancellation must be respected. It may also be noteworthy to add that in a contract to sell, the

non-payment of the purchase price can prevent the obligation to convey title from acquiring any obligatory force. 2. On the second issue, the Supreme Court ruled that since the private respondent did not actually possessed the property under the contract, the petitioner is then ordered to return to private respondent the amount remitted. However, to adjudge any interest payment by petitioners on the amount to be thus refunded, private respondent should not be allowed to totally free itself from its own breach. IMPORTANT 1. YES, Bricktown acted well within its right, in accordance with the agreement. Admittedly, the terms of payment agreed upon by the parties were not met by Amor Tierra. Of a total selling price of P21M, Amor Tierra was only able to remit the sum of P1.3M which was even short of the stipulated initial payment of P2.2M. No additional payments, it would seem, were made. A notice of cancellation was ultimately made months after the lapse of the contracted grace period. Paragraph 15 of the Contracts to Sell provided thusly: Should the PURCHASER fail to pay when due any of the installments mentioned in stipulation No. 1 above, the OWNER shall grant the purchaser a sixty (60)-day grace period within which to pay the amount/s due, and should the PURCHASER still fail to pay the due amount/s within the 60-day grace period, the PURCHASER shall have the right to ex-parte cancel or rescind this contract, provided, however, that the actual cancellation or rescission shall take effect only after the lapse of thirty (30) days from the date of receipt by the PURCHASER of the notice of cancellation of this contract or the demand for its rescission by a notarial act, and thereafter, the OWNER shall have the right to resell the lot/s subject hereof to another buyer and all payments made, together with all improvements introduced on the aforementioned lot/s shall be forfeited in favor of the OWNER as liquidated damages, and in this connection, the PURCHASER obligates itself to peacefully vacate the aforesaid lot/s without necessity of notice or demand by the OWNER. 2. A grace period is a right, not an obligation, of the debtor. Whenunconditionally conferred, such as in this case, the grace period is effective without further need of demand either calling for the payment of the obligation or for honoring the right. The grace period must not be likened to an obligation, the non-payment of which, under Article 1169 of the Civil Code, would generally still require judicial or extrajudicial demand before "default" can be said to arise.

Verily, in the case at bench, the sixty-day grace period under the terms of the contracts to sell became ipso facto operative from the moment the due payments were not met at their stated maturities. On this score, the provisions of Article 1169 of the Civil Code would find no relevance whatsoever. The cancellation of the contracts to sell by petitioner corporation accords with the contractual covenants of the parties, and such cancellation must be respected. It may be noteworthy to add that in a contract to sell, the non-payment of the purchase price (which is normally the condition for the final sale) can prevent the obligation to convey title from acquiring any obligatory force. 3. The forfeiture of the payments thus far remitted under the cancelled contracts in question, given the factual findings of both the trial court and the appellate court, must be viewed differently. 4. Petitioners do not deny the fact that there has indeed been a constant dialogue between the parties during the period of their juridical relation. In fine, while we must conclude that petitioner corporation still acted within its legal right to declare the contracts to sell rescinded or cancelled, considering, nevertheless, the peculiar circumstances found to be extant by the trial court, confirmed by the Court of Appeals, it would be unconscionable, in our view, to likewise sanction the forfeiture by petitioner corporation of payments made to it by private respondent. Indeed, in the opening statement of this ponencia, we have intimated that the relationship between parties in any contract must always be characterized and punctuated by good faith and fair dealing. Judging from what the courts below have said, petitioners did fall well behind that standard. We do not find it equitable, however, to adjudge any interest payment by petitioners on the amount to be thus refunded, computed from judicial demand, for, indeed, private respondent should not be allowed to totally free itself from its own breach.

Enriquez vs Ramos

Facts 1. Plaintiffs-appellants averred that on November 24, 1958 they sold to the defendant-appellee Socorro A. Ramos 20 subdivision lots in Quezon City for the sum of P235,056 of which only P35,056 had been paid. The balance of P200,000 was to be liquidated within two years from the date of the execution of the deed of sale, with interest at six percent for the first year and twelve percent thereafter until fully paid. To secure the payment of that balance, the defendant-appellee executed in the same document a deed of mortgage in favor of the vendors on several parcels of land variously situated in Quezon City, Pampanga and Bulacan. The deed of mortgage embodies certain stipulations which the plaintiffs-appellants invoked, thus: "During the term and existence of this mortgage, the Mortgagor shall duly pay and discharge, at her expense, and on their maturity, all lawful taxes or assessments levied or assessed upon the mortgaged property; in default thereof the Mortgagee may pay and discharge such taxes or assessments and insure the security of the property, and any and all sums so paid by the Mortgagee shall be repayable on demand with interest at 6% per annum and be a lien on the property herein mortgaged. "If for any reason the mortgage cannot be registered, then the whole obligation shall immediately become due and demandable. "In the event that the Mortgagor should fail to pay the amount secured by this mortgage or any part thereof in accordance with the terms and conditions herein set forth, or should she fail to perform any of the conditions stipulated herein, the Mortgagee shall have the right . . . to foreclose this mortgage extrajudicially, and to that end the Mortgage is hereby appointed the attorneyin-fact of the Mortgagor, with full power of substitution, to enter upon and take possession of the mortgaged property without the order of any court or any authority other than that herein granted, and to sell and dispose of the same to the highest bidder at public auction after the publication of notice, in accordance with the provisions of Act No. 3135 of the Philippine Legislature, as amended." 2. In a Civil Case L-18077, SC ruled that the actual price of the lots sold to the defendant-appellee was only P185,056 instead of P235,056, and that only if and when the roads shall have been constructed pursuant to the ordinances of Quezon City "may the period of two years specified in the contract begin to run. 3. The plaintiffs-appellants charged on May 4, 1963 before the Court of First Instance of Rizal (Quezon City) that the defendant-appellee has not yet paid the sum of P200,000 despite the fact that the roads on the questioned lots were completed on May 9, 1960; that the mortgage on the Bulacan property has not yet been registered; and that the realty taxes corresponding to the years 1959 to 1963 on the mortgaged lots had not been paid.

4. The defendant-appellee admits that she has not paid the realty taxes and has not registered the mortgage on the Bulacan property, but argues that in L-18077 these matters were considered minor ones and also sufficiently explained by her, invoking the rule of res judicata. The defendant-appellee likewise does not dispute her non-payment of the sum of P200,000; she contends, however, that the roads have not yet been completed in accordance with Ordinance No. 2969 of Quezon City. Issue 1. WON there was notice of completion and demand for payment? Ruling 1. Yes, there is. Rationalization 1. The filing of the case below is sufficient notice to the defendant-appellee of the completion of the roads in question and of the plaintiffs-appellants' desire to be paid the purchase price of the questioned lots. The effect of such demand retroacts to the day of the constitution of the defendant-appellee's obligation. Thus, Article 1187 provides that "The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. . . ." The contracted obligation of the defendant-appellee under the facts of the case at bar was to pay the balance of P200,000 within two years from the date the roads in question are completed.

Leano vs CA

Facts 1. Private respondent Hermogenes Fernando, as vendor, and petitioner Carmelita Leao, as vendee, executed a contract to sell involving a piece of land, Lot No. 876-B, with an area of 431 square meters, located at Sto. Cristo, Baliuag, Bulacan. In the contract, Carmelita Leao bound herself to pay Hermogenes Fernando the sum of one hundred seven thousand seven hundred and fifty pesos (P107,750.00) as the total purchase price of the lot. After the execution of the contract, Carmelita Leao made several payments in lump sum. Thereafter, she constructed a house on the lot valued at P800,000.00. 2. The trial court, however, rendered a decision in an ejectment case earlier filed by respondent Fernando ordering petitioner Leao to vacate the premises and to pay P250.00 per month by way of compensation for the use and occupation of the property from May 27, 1991 until she vacated the premises. Petitioner Leao filed with the Regional Trial Court of Malolos, Bulacan, a complaint for specific performance with preliminary injunction. 3. The trial court rendered a decision ordering petitioner to pay to the defendant the sum of P103,090.70 corresponding to her outstanding obligations under the contract to sell consisting of the principal of said obligation together with the interest and surcharges due thereon as of February 28, 1994, plus interest thereon at the rate of 18% per annum. Respondent Fernando filed a motion for reconsideration. The trial court increased the amount of P103,090.70 to P183,687.00. According to the trial court, the transaction between the parties was an absolute sale, making petitioner Leao the owner of the lot upon actual and constructive delivery thereof. Respondent Fernando, the seller, was divested of ownership and cannot recover the same unless the contract is rescinded pursuant to Article 1592 of the Civil Code which requires a judicial or notarial demand. Since there had been no rescission, petitioner Leao, as the owner in possession of the property, cannot be evicted. 4. In time, petitioner Leao appealed the decision to the Court of Appeals. The Court of Appeals promulgated a decision affirming that of the Regional Trial Court in toto. Petitioner Leao filed a motion for reconsideration. The Court of Appeals denied the motion. 5. Hence, the present petition. Issue 1. Whether or not the transaction was an absolute and not a conditional sale? 2. Whether or not there was proper cancellation of the contract to sell? 3. Whether or not there was delay on the petitioners part in the payment of the monthly amortization? Ruling 1. NO, the transaction was not an absolute sale; rather, it was a conditional sale. The very intention of the parties was to reserve the ownership of the land in the seller (Fernando) until the buyer has paid the total purchase price. First, the contract to sell makes the sale, cession and conveyance subject to conditions set forth on the contract. Second, what was transferred

was possession and not ownership. Finally, the land is covered by the Torrens title, the act of registration of the deed of sale was the operative act that could transfer ownership over the lot. No deed could be registered in the case at bar since as stipulated in the contract, such deed shall be executed upon completion of payment by Leao. In a contract to sell real property on installments, full payment of the purchase price is a positive suspensive condition and the failure of the payment is not a breach but rather shall be an event that will prevent the obligation of the seller to convey the title from acquiring any obligatory force. The transfer of ownership and title would occur after full payment of the price. In the case at bar, Leao did not pay the installments after April 1, 1989, which prevented the obligation of Fernando to convey the property. It brought into effect the cancellation provision of the contract. Article 1592 of the Civil Code is inapplicable in the case at bar. But the provisions of RA 6552 (The Realty Installment Buyer Protection Act) governs the case at bar which recognizes the right of the seller to cancel the contract upon non-payment of an installment by the buyer. 2. NO, there was no proper cancellation of the contract to sell. Leao did not pay the installments after April 1, 1989, which prevented the obligation of Fernando to convey the property. It brought into effect the cancellation provision of the contract. Nevertheless, what is controlling is not Article 1592 of the Civil Code but the provisions of RA 6552 (The Realty Installment Buyer Protection Act) which recognizes not only the right of the seller to cancel the contract upon non-payment off an installment by the buyer but also rights of the buyer in case of cancellation. Although the ejectment case operated as the notice of cancellation required under the provisions of RA 6552, petitioner was not given the cash surrender value of the payments that she made; hence, there was no actual cancellation of the contract. Consequently, petitioner Leao may still reinstate the contract by updating the account during the grace period and before actual cancellation. 3. YES, there was delay on the petitioners part to pay the monthly amortizations. Article 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. From the moment one of the parties fulfills his obligation, delay by the other begins. In the case at bar, respondent Fernando performed his part of the obligation by allowing petitioner Leao to continue in possession and use of the property. Clearly, when petitioner Leao did not pay the monthly amortizations in accordance with the terms of the contract, she was in delay and liable for damages. The Court, however, upheld the trial court in holding that the default committed by petitioner Leao in respect of the obligation could be compensated by the interest and surcharges imposed upon her under the contract in question.

Lee vs De Guzman, JR

Facts 1. On November 8, 1983, a free-lance salesman of respondent Motorcars, Inc., (then Delta Motors Corporation) named Arsenio Tumibay signed in behalf of Domingo Tupaz its Branch Manager in Makati, a price quotation (Exhibit "A") and delivered to petitioner Alex B. Lee for the sale of one (1) unit Toyota Corolla Liftback, 1983 model, with the quoted price of P149,700.00 plus miscellaneous expenses of P10,033.00. On the same date, petitioner Lee as customer, signed the vehicle sales order (Exhibit "C") The delivery of the subject vehicle was within the month of November, 1983. 2. In view of such order, petitioner Lee deposited the amount of P1,000.00 on November 10, 1983 as required in the aforesaid price quotation, to which Tumibay wrote petitioner the information that the Motorcars Inc., had acknowledged receipt of the delivery receipt for petitioner. Thereupon, on December 15, 1983, petitioner's counsel, Atty. Doroteo A. Dadal, wrote Mr. Nicolas O. Carranceja, Jr., Executive Vice-President of Motorcars, demanding for delivery of the said Toyota car. The respondent car company replied on December 19, 1983, through its counsel Atty. Benjamin S. Benito, that due to the sudden change of prices by the car manufacturer, they had decided to exercise the option contained in the vehicle sales order which stated: "Whenever deposits are made by customers for vehicles, parts and services ordered, the sales for such vehicles, parts or services shall be at the option of Motorcars, Inc., and refund of the deposits shall be made upon request and without undue delay should such option be exercised." 3. The respondent car company thus offered to refund petitioner's deposit of P1,000.00. 4. Petitioner filed action for specific performance but TC ruled in private respondent's favor. 5. Petitioner appealed to CA. CA reversed TC's decision ruling that there was a perfected contract of sale, and that there was the undisputed signature of one Mr. Domingo Tapas, the branch manager of Motorcars and ordered awarded specific performance plus damages. 6. Responded appealed to SC. SC confirmed CA's decision in toto and case was remanded to TC. 7. Petitioner filed a Motion for Writ of Execution. Private Respondent filed Motion to Quash Writ of Execution on the ground that Delta Motors Corporation has closed shop. Motion to quash was eventually denied and an alias writ of execution was filed and respondent company continued to defy such order. 8. After some back and forth including a motion for contempt, respondent judge ruled in favor of private respondent. 9. Hence the petition. Issue

1. WON there was breach of contract?

Ruling 1. The Court takes notice of the fact that as alleged in the Comment and Memorandum of respondent company and contained in the questioned order, which is not disputed by the petitioner, that while the Motion for Contempt was pending before the respondent trial court, petitioner indicated his willingness to accept a second-hand car but failed to show its availability as the classified ads refer to 1984 Models and could not be said that they are the same models as what appears in Exhibit "C", the sales order. In addition, respondent car company even offered the amount of P20,000 as a gesture to buy peace. 2. It is the contention of the petitioner that the obligation is not impossible for the 1983 Toyota cars are still available in the market today. It is however the contention of respondent company that the obligation is impossible for the car manufacturer had closed shop and no longer manufacturing 1983 models of Toyota much less deliver the car specified in Exhibit "C". 3. The question is, should respondent Motorcars be made liable to fulfill a seemingly impossible obligation? 4. It is well-settled that when after a judgment has become final and executory, facts and circumstances transpire which render its execution impossible or unjust, the interested party may ask a competent court to stay its execution or prevent its enforcement. 5. Unfortunately it is not possible for Motorcars to comply with the writ of execution since admittedly, the then Delta Motors who manufactured 1983 models of Toyota Liftback had already closed shop, but be this as it may, there is no question that indeed there was a perfected contract of sale between petitioner Lee and private respondent Motorcars pursuant to this Court's (through the Third Division) resolution dated August 31, 1987. 6. The relief left for petitioner Lee is that found under Article 1170 of the Civil Code which provides: "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."

Vermen Realty vs CA

Facts 1. Under the conditions of the so-called Offsetting Agreement, Vermen Realty (the first party in the contract) and Seneca Hardware (the second party) were under a reciprocal obligation. Seneca Hardware shall deliver to Vermen Realty construction materials worth P552,000.00. 2. Vermen Realty's obligation under the agreement is threefold: a. he shall pay Seneca Hardware P276,000.00 in cash; b. he shall deliver possession of units 601 and 602, Phase I, Vermen Pines Condominiums (with total value of P276,000.00) to Seneca Hardware; c. upon completion of Vermen Pines Condominiums Phase II, Seneca Hardware shall be given option to transfer to similar units therein. 3. As found by the appellate court and admitted by both parties, Seneca Hardware had paid Vermen Realty the amount of P110,151.75, and at the same time delivered construction materials worth P219,727.00. Pending completion of Phase II of the Vermen Pines Condominiums, Vermen Realty delivered to Seneca Hardware units 601 and 602 at Phase I of the Vermen Pines Condominiums (Rollo, p. 28). In 1982, the Vermen Realty repossessed unit 602. As a consequence of the repossession, the officers of the Seneca Hardware corporation had to rent another unit for their use when they went to Baguio on April 8, 1982. 4. In its reply the Vermen Realty corporation averred that Room 602 was leased to another tenant because Seneca Hardware corporation had not paid anything for purchase of the condominium unit. Vermen Realty corporation demanded payment of P27,848.25 representing the balance of the purchase price of Room 601. 5. On June 21, 1985, Seneca Hardware filed a complaint with the Regional Trial Court of Quezon City (Branch 92) for rescission of the Offsetting Agreement with damages. In said complaint, Seneca Hardware alleged that Vermen Realty Vermen Realty Corporation had stopped issuing purchase orders of construction materials after April, 1982, without valid reason, thus resulting in the stoppage of deliveries of construction materials on its (Seneca Hardware) part, in violation of the Offsetting Agreement. 6. After conducting hearings, the trial court rendered a decision dismissing the complaint and ordering the plaintiff (Seneca Hardware in this petition) to pay defendant (Vermen Realty in this petition) on its counterclaim in the amount of P27,848.25 representing the balance due on the purchase price of condominium unit 601. 7. On appeal, respondent court reversed the trial court's decision as adverted to above. 8. Hence this petition

Issue 1. Do the circumstances of the case warrant rescission of the Offsetting Agreement as prayed for by Seneca Hardware?

Ruling 1. Yes. The Court ruled in favor of Seneca Hardware. There is no controversy that the provisions of the Offsetting Agreement are reciprocal in nature. Reciprocal obligations are those created or established at the same time, out of the same cause, and which results in a mutual relationship of creditor and debtor between parties. In reciprocal obligations, the performance of one is conditioned on the simultaneous fulfillment of the other obligation. Under the agreement, Seneca Hardware shall deliver to Vermen Realty construction materials. Vermen Realty's obligation under the agreement is three-fold: a. he shall pay Seneca Hardware P276,000.00 in cash; b. he shall deliver possession of units 601 and 602, Phase I, Vermen Pines Condominiums (with total value of P276,000.00) to Seneca Hardware; c. upon completion of Vermen Pines Condominiums Phase II, Seneca Hardware shall be given option to transfer to similar units therein. Article 1191 of the Civil Code provides the remedy of rescission in (more appropriately, the term is "resolution") in case of reciprocal obligations, where one of the obligors fails to comply with what is incumbent upon him. In the case at bar, Vermen Realty argues that it was Seneca Hardware who failed to perform its obligation in the Offsetting Agreement. Seneca Hardware, on the other hand, points out that the subject of the Offsetting Agreement is Phase II of the Vermen Pines Condominiums. It alleges that since construction of Phase II of the Vermen Pines Condominiums has failed to begin it has reason to move for rescission of the Offsetting Agreement, as it cannot forever wait for the delivery of the condominium units to it. It is evident from the facts of the case that Seneca Hardware did not fail to fulfill its obligation in the Offsetting Agreement. The discontinuance of delivery of construction materials to Vermen Realty stemmed from the failure of Vermen Realty to send purchase orders to Seneca Hardware. The impossibility of fulfillment of the obligation on the part of Vermen Realty necessitates resolution of the contract for indeed, the non-fulfillment of the obligation aforementioned constitutes substantial breach of the Offsetting Agreement.

Article 1191, NCC 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. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.

Heirs of Luis Bacus vs CA and Spouses Duray

Facts 2. In the contract of lease of agricultural land executed between Luis Bacus and Faustino Duray, an option to buy clause was included. 3. Later, Luis died and the Duray spouses informed the heirs of Luis their willingness to exercise their option to buy the property under the option to buy clause. 4. Petitioners refused to sell the property, prompting Duray to file a complaint for specific performance. 5. The heirs of Luis, however, asserted that the Durays had failed to pay the purchase price of the land before the expiration of the contract. Hence, with the expiration of the contract, the option to buy had also expired. 6. RTC ruled in favor of private respondents. Petitioners appealed to CA who denied such appeal. 7. Hence this petition.

Issue 1. WON petitioners can be compelled to sell the disputed property by virtue of the non-fulfillment of the obligation under the option contract of the private respondents.

Ruling 1. Yes, petitioners can be compelled to sell the disputed property

Rationalization 1. Obligations under an option to buy are reciprocal obligations. The performance of one obligation is conditioned on the simultaneous fulfillment of the other obligation. In other words, in an option to buy, the payment of the purchase price by the creditor is contingent upon the execution and delivery of deed of sale by the debtor. In this case, when private respondents opted to buy the property, their obligation was to advise petitioners of their decision and their readiness to pay the price. They were not yet obliged to make actual payment. Only upon petitioners' actual execution and delivery of the deed of sale were they required to pay. The latter was contingent upon the former. 2. In Nietes vs. Court of Appeals, 46 SCRA 654 (1972), we held that notice of the creditor's decision to exercise his option to buy need not be coupled with actual payment of the price, so long as this is delivered to the owner of the property upon performance of his part of the agreement. Consequently, since the obligation was not yet due, consignation in court of the purchase price

was not yet required. Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment. In instances, where no debt is due and owing, consignation is not proper. Therefore, petitioners' contention that private respondents failed to comply with their obligation under the option to buy because they failed to actually deliver the purchase price or consign it in court before the contract expired and before they execute a deed, has no leg to stand on. 3. Private respondents did not incur in delay when they did not yet deliver payment nor make a consignation before the expiration of the contract. 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. Only from the moment one of the parties fulfills his obligation, does delay by the other begin. In this case, private respondents, communicated to petitioners their intention to buy the property and they were at that time undertaking to meet their obligation before the expiration of the contract. However, petitioners refused to execute the deed of sale and it was their demand to private respondents to first deliver the money before they would execute the same which prompted private respondents to institute a case for specific performance. Later, after the case had been submitted for decision but before the trial court rendered its decision, private respondents issued a cashier's check in petitioners' favor purportedly to bolster their claim that they were ready to pay the purchase price. The trial court considered this in private respondents' favor and we believe that it rightly did so, because at the time the check was issued, petitioners had not yet executed a deed of sale nor expressed readiness to do so. Accordingly, as there was no compliance yet with what was incumbent upon petitioners under the option to buy, private respondents had not incurred in delay when the cashier's check was issued even after the contract expired.