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SELEGNA MANAGEMENT VS UNITED COCONUT

foreclosure went on on some of the properties in Antipolo. Angeles claimed


they were not given by UCPB any clear accounting on these.

Mortgage Default Mora Solvendi Extrajudicial Foreclosure Right of


Creditor

The case was re-raffled anew in another RTC which later reinstated the
injunction. UCPB filed an appeal with the CA. The CA affirmed the RTC.

On September 19, 1995, spouses Edgardo and Zenaida Angeles and

UCPB filed for reconsideration which was eventually granted.

Selegna Mgmt. acquired a P70 Million loan from UCPB. As security for the
loan, Angeles executed a real estate mortgage of their properties in

In the main, Angeles averred that they have a clear right to injunction based

Muntinlupa, Antipolo, Las Pias, Quezon and some condo units in Makati.

on the fact that UCPB never explained how the loan went up to P132 M; that

They also executed a promissory note in favor of UCPB. Later, Angeles

UCPB refused to give them a detailed accounting of the partial foreclosure

increased the loan amount to P103 Million with a 21% interest rate per

and that they gave a P10 M payment which prevented the determination of

annum which was to mature on March 26, 1999.

the maturity of the obligation.

UCPB and Angeles agreed in their Credit Agreement that failure to pay any

ISSUE: Whether or not Angeles has a right to forestall the foreclosure.

availment of the accommodation or interest or any sum due constitutes a


default in payment which would render the loan amount immediately due in

HELD: No. Angeles is clearly in default per provisions laid down in their

full (this is the Acceleration Clause).

Credit Agreement with UCPB which is the binding law between the parties. In
fact, the parties stipulated in their credit agreements, mortgage contracts and

Eventually, in 1999, Angeles went into default and their loan ballooned to

promissory notes that respondent was authorized to foreclose on the

P132 M. UCPB sent them demand letters. In response, Angeles paid about

mortgages, in case of a default by petitioners. That this authority was granted

P10 M in interest at the same time they asked for a 60 day period to

is not disputed.

restructure the loan.


There are three requisites necessary for a finding of default. First, the
UCPB accepted the P10 M payment but was unsatisfied hence they filed for

obligation is demandable and liquidated; second, the debtor delays

extrajudicial foreclosure. Angeles filed for a TRO to forestall the foreclosure. It

performance; third, the creditor judicially or extrajudicially requires the

was not granted because they failed to show any irreparable damage that

debtors performance. All three were present in this case.

may be caused them by reason of the foreclosure. Upon Motion for


Reconsideration, Angeles petition was granted but was later lifted. The

The 1st requisite is present notwithstanding a detailed accounting of the


partially foreclosed properties. A debt is liquidated when the amount is known

[G.R. No. 176868 : July 26, 2010]


NACHURA, J.:

or is determinable by inspection of the terms and conditions of the relevant


promissory notes and related documentation. Failure to furnish a debtor a

FACTS:

detailed statement of account does not ipso facto result in an unliquidated

In the first quarter of 1998, petitioner, Solar Harvest, Inc., entered into an
agreement with Davao Corrugated Carton Corporation, for the purchase of
corrugated carton boxes, specifically designed for petitioner's business of
exporting fresh bananas, at US$1.10 each. The agreement was not reduced
into writing. To get the production underway, petitioner deposited, on March
31, 1998, US$40,150.00 in respondent's US Dollar Savings Account with
Westmont Bank, as full payment for the ordered boxes.

obligation.
It is in fact clear from the agreement of the parties that when the payment is
accelerated due to an event of default, the penalty charge shall be based on
the total principal amount outstanding, to be computed from the date of
acceleration until the obligation is paid in full. Their Credit Agreement even
provides for the application of payments. It appears from the agreements that
the amount of total obligation is known or, at the very least, determinable.

Solar Harvests allegations and evidence:

Despite full payment, it did not receive any boxes. It made repeated
follow-ups but respondent only showed samples, and promised to
deliver the boxes 30 days from completion, as they had agreed.

Because of the nondelivery of the boxes, its transaction with China


Zero Food for the delivery of bananas to China did not push through.

Thus, on January 3, 2001, petitioner wrote a demand letter for


reimbursement of the amount paid. Eventually, it filed a complaint for
sum of money (refund of the $40k) and damages against
respondent.

Petitioner also claims that the agreement was that it would be


respondent who would deliver the boxes to TADECO (Tagum
Agricultural Dvpt Corp; one who delivered the bananas to be put on
the boxes)

During the trial, sole witness Que, the representative of Solar


Harvest, testified that when he visited respondents factory, he saw
that the boxes had no print of petitioners logo. He followed up the
order a few months later, yet respondent said it had full production,
thus promised that the production of the order would be rushed. He
told respondent that it should indeed rush because the need for the
boxes was urgent. Thereafter, he asked his partner, Alfred Ong, to

Further, in the Real Estate Mortgage agreement between the parties (in the
Event of Default clause), Angeles granted UCPB the right to extrajudicially
foreclose the properties mortgaged which secured the loan/obligation.

SOLAR HARVEST, INC.


VS.
DAVAO CORRUGATED CARTON CORPORATION
--- Even in reciprocal obligations, if the period for the fulfillment of the
obligation is fixed, demand upon the obligee is still necessary before the
obligor can be considered in default and before a cause of action for
rescission will accrue.

cancel the order because it was already too late for them to meet
their commitment to ship the bananas to China.

During cross-examination, Que admitted that he was not the one


who personally placed the order to Jamie Tan (president of
respondent); and that he did not give authority to respondent to
deliver the boxes to TADECO because he claims that the same were
not yet complete.

them; that his company finished production of the 36,500 boxes on


April 3, 1998; that petitioner made a second order of 24,000 boxes;
that the agreement was for respondent to produce the boxes and for
petitioner to pick them up from the warehouse.

Que denied that Solar Harvest made an additional order of 24k


boxes

He also said that the reason why petitioner did not pick up the boxes
was that the ship that was to carry the bananas did not arrive; that
during the last visit of Que, he asked him to withdraw the boxes
immediately because they were occupying a big space in his plant,
but they, instead, told him to sell the cartons as rejects. He was able
to sell 5,000 boxes at P20.00 each for a total of P100,000.00. Que
then told him to apply the said amount to the unpaid balance.

Davao Corrugated Cartons allegations and evidence:

As early as April 3, 1998, it had already completed production of the


36,500 boxes;

Petitioner made an additional order of 24k boxes, out of which, 14k


had been completed without waiting for petitioner's payment.

Petitioner was to pick up the boxes at the factory as agreed upon,


but petitioner failed to do so.

Oct. 1998, petitioner's representative, Bobby Que (Que), went to the


factory and saw that the boxes were ready for pick up.

Feb. 1999, Que visited the factory again and supposedly advised
respondent to sell the boxes as rejects to recoup the cost of the
unpaid 14,000 boxes, because petitioner's transaction to ship
bananas to China did not materialize.

As counterclaim, respondent prayed that judgment be rendered


ordering petitioner to pay the $15.4k for the additional 24k boxes,
storage fee at P60 per sq.m. for every month from April 1998 as the
boxes were occupying warehouse space, plus interest, moral and
exemplary damages, attorney's fees, and costs of the suit.

(RTC) ruled that respondent did not commit any breach of faith that would
justify rescission of the contract and the consequent reimbursement of the
amount paid by petitioner. The RTC said that respondent was able to produce
the ordered boxes but petitioner failed to obtain possession thereof because
its ship did not arrive. It also dismissed respondents counterclaim for lack of
merit.
CA affirmed the RTC decision. According to the CA, it was unthinkable that,
over a period of more than two years, petitioner did not even demand for the
delivery of the boxes. The CA added that even assuming that the agreement
was for respondent to deliver the boxes, respondent would not be liable for
breach of contract as petitioner had not yet demanded from it the delivery of
the boxes.
ISSUE:
WON there was default on the part of Davao Corrugated Carton to deliver the
boxes and thus make it liable for breach of contract to Solar Harvest

May Solar Harvest be allowed to rescind the contract?

During the trial, it presented Estanislao who testified that he met


Que in Davao to inspect the boxes and the latter got samples of

HELD: None, thus, Solar Harvest cannot demand for the refund of its
payment, which in essence is actually a claim for rescission.
Based on Art. 1191, in reciprocal obligations, the right to rescind a contract
arises once the other party defaults in the performance of his obligation. In
determining when default occurs, Art. 1191 should be taken in conjunction
with Art. 1169 which provides as to when delay is incurred.

In reciprocal obligations, as in a contract of sale, thegeneral rule is that the


fulfillment of the parties' respective obligations should be simultaneous.
Hence, no demand is generally necessary because, once a party fulfills his
obligation and the other party does not fulfill his, the latter automatically
incurs in delay. But when different dates for performance of the obligations
are fixed, the default for each obligation must be determined by the rules
given in the first paragraph of Art. 1169, that is, the other party would incur in
delay only from the moment the other party demands fulfillment of the
former's obligation. Thus, even in reciprocal obligations, if the period for the
fulfillment of the obligation is fixed, demand upon the obligee is still necessary
before the obligor can be considered in default and before a cause of action
for rescission will accrue.
Evident from the records and even from the allegations in the complaint was
the lack of demand by petitioner upon respondent to fulfill its obligation to
manufacture and deliver the boxes. The Complaint only alleged that petitioner
made a "follow-up" upon respondent, which, however, would not qualify as a
demand for the fulfillment of the obligation. Note is taken of the fact that, with
respect to their claim for reimbursement, the Complaint alleged and the
witness testified that a demand letter was sent to respondent. Without a
previous demand for the fulfillment of the obligation, petitioner would not have
a cause of action for rescission against respondent as the latter would not yet
be considered in breach of its contractual obligation.

circumstances would show thatrespondent was not guilty of breach of


contract.
The existence of a breach of contract is a factual matter. As correctly
observed by the CA, there is ample showing that the boxes had already been
manufactured by respondent. Que's absolute assertion that the boxes were
not manufactured is implausible and suspicious. We note that respondent's
counsel manifested during trial, that his client was willing to shoulder
expenses for a representative of the court to visit the plant and see the
boxes. Even in its Comment to this petition, respondent prays that petitioner
be ordered to remove the boxes from its factory site, which could only mean
that the boxes are, up to the present, still in respondent's premises.
We also believe that the agreement between the parties was for petitioner to
pick up the boxes from respondent's warehouse, contrary to petitioner's
allegation. Thus, it was due to petitioner's fault that the boxes were not
delivered to TADECO. Petitioner had the burden to prove that the agreement
was, in fact, for respondent to deliver the boxes within 30 days from payment,
as alleged in the Complaint. It failed to do so. Its sole witness, Que, was not
even competent to testify on the terms of the agreement because he did not
personally place the order with Tan. Moreover, assuming that respondent was
obliged to deliver the boxes, it could not have complied with such obligation
because as admitted by Que, he did not give respondent the authority to
deliver the boxes to TADECO
Surely, without such authority, TADECO would not have allowed respondent
to deposit the boxes within its premises.
In sum, the Court finds that petitioner failed to establish a cause of action for
rescission, the evidence having shown that respondent did not commit any
breach of its contractual obligation. As previously stated, the subject boxes
are still within respondent's premises. To put a rest to this dispute, we
therefore relieve respondent from the burden of having to keep the boxes
within its premises and, consequently, give it the right to dispose of them,
after petitioner is given 30 days within which to remove them from the
premises.

Even assuming that a demand had been previously made before filing the
present case, petitioner's claim for reimbursement would still fail, as the