bVELOSO, RALPH NIO LIBAGO

OBLIGATIONS AND CONTRACTS

BLOCK C

CASE Nos: 8, 91, 174, 257, and 340.

8. Vda de Rigonan v. Derecho, GR 159571, July 15, 2005
91. Reliance Commodities v. IAC, 332 SCRA 299
174. PNCC v. CA, 272 SCRA 183
257. Ouano v. C.A., 211 SCRA 740
340. Yoshizaki v. Joey Training Center, 702 SCRA 631 [2013]

Case Num: 91. Reliance Commodities v. IAC, 332 SCRA 299

RELIANCE COMMODITIES, INC. and THE PROVINCIAL SHERIFF OF NUEVA ECIJA,
petitioners, vs. INTERMEDIATE APPELLATE COURT, MARVIN PAEZ and ROSA VALINO,
respondents [G.R. No. 74729. May 31, 2000]
NATURE OF ACTION:
An appeal to set aside the decision and declared both the Deed and Addendum null and void.
FACTS:
April 19, 1972. Plaintiff Marvin Paez entered into contract with Samuel Chuason, president and
general manager of defendant Reliance Commodities, Inc. whereby the latter agreed to provide
the former with funds and equipment for the operation of the manganese mining claims of Daniel
Garde located in Malinas, Gabaldon, Nueva Ecija. On June 1, 1972, Samuel Chuason and
Marvin Paez entered into another agreement called "Addendum to Operating Agreement". In the
said agreement, it provides that the plaintiff, Marvin Paez must segregate the Manganese Ores
into two (2) classes with Reliance commodities, also giving Marvin Paez a sum of P 8,300.00 as
a cash advance to hire labourers, purchase tools and stock food supplies. The heavy equipment
was provided by Paez. On July 28, 1972, plaintiffs Marvin Paez and his wife Rosa Valino
executed a deed of first real estate mortgage on their property in favour of defendant Reliance
Commodities, Inc. as security for more cash advances needed to sustain the mining operation,
amounting to P25, 030.00.
Disagreements rose between the Paez and the petitioner with regards to the said cash advances.
The petitioner wanted to recover the tools back, but could not do so for the labourers hired by
Paez refused to return the said tools due to the fact that they have not been given yet their wages.
The petitioner gave the plaintiff Paez, as sum P 800.00 to pay for their salaries and extrajudicially foreclosed the mortgage executed by Paez and his wife. Paez then filed an action for
preliminary injunction to the stop the sheriff from proceeding with the auction sale, also
annulling the Deed of First Real Estate Mortgage and the Addendum and directing the petitioner
to make further cash advances in the amount of P75, 000.00 plus sum for damages.
Judgement was ruled in favour of the petitioners, dismissing the complaint and ordering the
plaintiff, Paez to pay for the cash advances which amounted up to P 41, 130.00 included the
interest rate of 12% per annum from the date of receipt, attorneys fees, and issuing a restraining
order for the auction sale set aside upon failure to pay.

ISSUE:
Whether or not the Intermediate Appellate Court erred in finding that the petitioner, not the
respondent have cause for the rescission of the contracts and in ruling that rescission was not
available in rescission of contracts under Article 1191 of the Civil Code.
RULING:
WHEREFORE, the Court GRANTS the petition for review on certiorari, and reverses the
decision of the Intermediate Appellate Court. The court revives and affirms the decision of the
trial court, with the modification that the sum to be restituted to petitioner Reliance
Commodities, Inc. shall earn legal interest only from the finality of this decision until fully paid.
No Costs.
RATIO DECIDENDI:
Under the agreement of petitioner Reliance Commodities, Inc. with respondent Mervin Paez, the
former was to pay Paez P70.00 for every ton of manganese ores delivered with a grade of 40% to
46% or over. Payment was to be made upon delivery of the ores at the stockpile yard at
Gabaldon, Nueva Ecija. Petitioner Reliance was to advance the expenses of mining and hauling
as they were incurred every fifteen (15) days, and that advances made were deductible from the
agreed consideration of P70.00 per ton. Petitioner made cash advances to respondent Paez
totalling P41, 130.00 and also turned over to him three (3) heavy equipment for use in the mining
operation. On the other hand, respondent Paez failed to make even a single delivery of
manganese ores to the stockpile yard at Gabaldon. In fact, there was no mining operation at all.
Consequently, petitioner rescinded the contracts. Contrary to the ruling of the appellate court, in
reciprocal obligations, the power to rescind or resolve is given to the injured party. More, the
rescission of the contracts requires the parties to restore to each other what they have received by
reason of the contracts. The rescission has the effect of abrogating the contracts in all parts.

Case Num: 174. PNCC v. CA, 272 SCRA 183

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION petitioner, vs. COURT OF
APPEALS, MA. TERESA S. RAYMUNDO-ABARRA, JOSE S. RAYMUNDO, ANTONIO S.
RAYMUNDO, RENE S. RAYMUNDO, and AMADOR S. RAYMUNDO, respondents.
[G.R. No. 116896. May 5, 1997]
NATURE OF ACTION:
Petition for review on certiorari has its roots in Civil Case No. 53444, which was sparked by the
petitioner's refusal to pay the rentals as stipulated in the contract of lease on an undivided portion
of 30,000 square meters of a parcel of land owned by the private respondents.
FACTS:
November 18, 1975, a contract of lease of a parcel of land was executed between private
respondents and petitioner, where the land was owned by the former. The terms and conditions of
the said contract of lease are as follows.
A. The lease shall be a period of five (5) years, which commences on the date of issuance of
the industrial clearance by the Ministry of Human Settlements, and renewable upon at the
option of the lessee under the terms and conditions.
B. A monthly rent of P 20, 000.00 which shall be increased yearly by five per centum (5%).
C. The said rent shall be paid annually in advance
D. The property shall be used as the site, grounds and premises of a rock crushing plant and
field office, sleeping quarters and canteen/mess hall.
January 7, 1986. The petitioner obtained the permit from the Ministry of Human Settlements,
which is valid for two (2) years unless revoked by the latter. Nine (9) days later, private
respondents write the petitioner, requesting the payment of the first annual rental. The petitioner
refused, averring that the payment of the said rental should commence on the date of the issuance
of the industrial clearance, not on the date when the contract was signed. The petitioner then
expressed its intention to terminate the contract and the cancellation of the project due to
financial and technical difficulties. The petitioner also contended that it was only obligated to
pay the initial P20, 000.00 as a rental for one month of the said land lease. This prompted the
private respondent to file an action before the RTC Br. 160 against the petitioner for specific
performance with damages. RTC Br. 160 rendered its decision in favour of the private
respondent, ordering petitioner to pay the private respondents the amount of P492, 000.00 which
represented the rentals for two years, with legal interest from 7 January 1986 until the amount
was fully paid, plus attorney's fees in the amount of P20, 000.00 and costs. Petitioner then
appealed to the Court of Appeals alleging that the trial court erred in ordering it to pay the private
respondent the amount of P492, 000.00 and in denying it the right to be heard.

ISSUE:
Whether or not the petitioner may invoke Article 1267 of the New Civil Code and avail of its
benefits?
RULING:
WHEREFORE, the instant petition is DENIED and the challenged decision of the Court of
Appeals is AFFIRMED in toto.
RATIO DECIDENDI:
ART. 1267. 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.
This article, which enunciates the doctrine of unforeseen events, is not, however, an absolute
application of the principle of rebus sic stantibus, which would endanger the security of
contractual relations. The parties to the contract must be presumed to have assumed the risks of
unfavorable developments. It is therefore only in absolutely exceptional changes of
circumstances that equity demands assistance for the debtor.

Case Num: 257. Ouano v. C.A., 211 SCRA 740

ALFREDO M. OUANO, petitioner, vs. COURT OF APPEALS, and HEIRS OF JULIETA M.
OUANO, respondents. [G.R. No. 129279. March 4, 2003]
NATURE OF ACTION:
A petition for review on certiorari against the decision and resolution of the Court of Appeals on
CA-GR CV No. 33499 affirming the decision of the Regional Trial Court of Cebu, Branch 19, in
Civil Case No. CEB-596, which set aside the extrajudicial foreclosure proceedings involving
respondents properties.
FACTS:
June 8, 1987. Respondent Julieta Ouano, now deceased obtained a loan from the Philippine
National Bank, amounting to P 104, 280.00. As a collateral for the said loan, Julieta executed a
mortgage over two parcels of land located in Mandaue City, Cebu. Ouano did not comply with
her obligation, where subsequently, the Philippine National Bank filed a petition for extrajudicial
foreclosure with the city sheriff.
On November 4, 1980, the sheriff prepared a notice of sale setting the date of public auction of
the two parcels of land. He caused the notice to be published in the Cebu Daily Times, a
newspaper of general circulation in Mandaue City. He likewise posted copies thereof in public
places in Mandaue City and in the place where the properties are located. However, the sale as
scheduled and published did not take place as the parties, on four separate dates, executed
Agreements to Postpone Sale. These Agreements were addressed to the sheriff, requesting the
latter to defer the auction sale to another date at the same time and place, "without any further
republication of the Notice. The sale was moved to other dates yet postponed, due to the reason
that no sale were made. In all these postponements, no new notice of sale was issued, nor was
there any republication or reposting of notice for the rescheduled dates. But finally on May 29,
1981, the sheriff conducted the auction sale, awarding two parcels of land to Philippine National
Bank, the sole bidder of the auction. At the sum of P 195,510.50, the sheriff executed a
Certificate of Sale. The failure of Julieta to redeem the properties within a one year period from
the registration of sale, Philippine National Bank, consolidated its title and conveyed the
properties to herein petitioner Alfredo Ouano, the brother of Julieta, under a Deed of Promise to
sell payable in five years.
On March 28, 1983, Julieta sent demand letters to PNB and petitioner, pointing out irregularities
in the foreclosure sale. Julieta filed a complaint with the Regional Trial Court (RTC) for the
nullification of the foreclosure sale. The Regional Trial Court of Cebu rendered a decision in
favour of Julieta, holding that the lack of republication rendered the foreclosure sale void. The
RTC decision was appealed to the CA, where it affirmed the trial courts decision, on the same

ground that there was no compliance with the mandatory requirements of posting and publication
of notice of sale.
ISSUE:
Whether or not the requirements of Act No. 3135 were complied with in the May 29, 1981
foreclosure sale.
RULING:
WHEREFORE, premises considered, the Decision dated February 17, 1997 in CA-G.R. CV No.
33499 and the Resolution therein dated April 15, 1997 are AFFIRMED. No costs
RATIO DECIDENDI:
The principal object of a notice of sale in a foreclosure of mortgage is not so much to notify the
mortgagor as to inform the public generally of the nature and condition of the property to be
sold, and of the time, place, and terms of the sale. Notices are given to secure bidders and
prevent a sacrifice of the property. Clearly, the statutory requirements of posting and publication
are mandated, not for the mortgagors benefit, but for the public or third persons. In fact, personal
notice to the mortgagor in extrajudicial foreclosure proceedings is not even necessary, unless
stipulated. As such, it is imbued with public policy considerations and any waiver thereon would
be inconsistent with the intent and letter of Act No. 3135.
Publication, therefore, is required to give the foreclosure sale a reasonably wide publicity such
that those interested might attend the public sale. To allow the parties to waive this jurisdictional
requirement would result in converting into a private sale what ought to be a public auction.

Case Num: 340. Yoshizaki v. Joey Training Center, 702 SCRA 631 [2013]
SALLY YOSHIZAKI, Petitioner, vs. JOY TRAINING CENTER OF AURORA, INC.,
Respondent. [G.R. No. 174978]
NATURE OF ACTION:
Petition for review on certiorari 1 filed by petitioner Sally Yoshizaki to challenge the February
14, 2006 Decision2 and the October 3, 2006 Resolution3 of the Court of Appeals (CA) in CAG.R. CV No. 83773.
FACTS:
Spouses Richard and Linda Johnson were members in the Joy Trainings Board of trustees who
sold the real properties, a Wrangler Jeep, and other personal properties to spouses Yoshio and
Sally Yoshizaki. The respondent Joy Training Center of Aurora Inc. Represented by its acting
Chairperson, Reuben Rubio, instituted an action for the cancellation of sales and damages,
averring that the Johnsons was without the requisite authority from Joy Trainings Board of
Directors. The Regional Trial Court of Aurora ruled in favour of the spouses Yoshizaki. Where
the RTC ruled its decision based on the fact that Joy Training Center Inc. owned the real
properties and its board of directors authorized the Johnsons to dispose/sell those properties. The
RTC recognized that there were only five (5) actual members of the board of trustees, a majority
of the board which validly authorized the said sale. The RTC also rules that the sale of the
personal properties in question was valid due to the fact that those properties are registered under
the Johnsons name. The Court of Appeals reversed its ruling with respect to the sale of real
properties, ruling that the resolution is void because it was not appropriated by a majority of the
board of trustees.
ISSUES:
Whether or not there was a contract of agency to sell the real properties between Joy Training
and the spouses Johnson.
RULING:
WHEREFORE, premises considered, the assailed Decision dated February 14, 2006 and
Resolution dated October 3, 2006 of the Court of Appeals are hereby AFFIRMED and the
petition is hereby DENIED for lack of merit.
RATIO DECIDENDI:
The Supreme Court ruled that there was no contract of agency between Joy Training and the
spouses Richard and Linda Johnson to sell the land with its improvements. Article 1868 of the
New Civil Code defines a contract of agency as a contract whereby a person binds himself to
render some service or to do something in representation or on behalf of another, with the

consent or authority of the latter. It may be express, or implied from the acts of the principal,
from his silence or lack of action, or his failure to repudiate the agency, knowing that another
person is acting on his behalf without authority. The evidence that was presented in this case was
not substantial enough to convince the Supreme Court of the existence of the contract of agency
to sell the real properties.

8. Vda de Rigonan v. Derecho, GR 159571, July 15, 2005

DELFINA Vda. de RIGONAN and Spouses VALERIO LAUDE and VISMINDA
LAUDE, petitioners, vs. ZOROASTER DERECHO Representing the Heirs of RUBEN
DERECHO, ABEL DERECHO, HILARION DERECHO, NUNELA D. PASAOL, EFRAIM
DERECHO, NOEL DERECHO, CORAZON D. OCARIZA Representing the Heirs of Marcial
Derecho, LANDILINO D. PRIETO Representing the Heirs of Pilar D. Prieto, JUSTA D.
BUENO, ADA D. MAPA, EMMANUEL DERECHO, POMPOSO DERECHO Representing the
Heirs of Apolinar Derecho, VICENTE D. RIGONAN, RUFA D.JAYME Representing the Heirs
of Gerardo Derecho, MARDONIO D. HERMOSILLA Representing the Heirs of Oliva D.
Hermosilla,respondents. [G.R. No. 159571. July 15, 2005]
NATURE OF ACTION: