CHAPTER 3 PURE AND CONDITIONAL OBLIGATIONS

Classification of obligation 1. Pure

2. Conditional
3. with a term
4. alternative
5. joint
6. solidary or several or in solidum
7. divisible
8. indivisible
9. with a penal clause

Other classes of obligations 1. unilateral and bilateral

2. determinate and indeterminate
impliedly admitted by the CC 3. legal, conventional, and penal

ART 1179 PURE AND CONDITIONAL OBLIGATIONS

Digested provision Every obligation whose performance does not depend upon
● Future or uncertain event; OR
● Past event
- Unknown to the parties
● Demandable at once

Every obligation which contains a resolutory condition

● Demandable
● Without prejudice to the effects of the happening of the event

Pure obligations ● No terms or conditions upon which depends the fulfillment of the obligation
● Demandable
● Nothing to exempt debtor from compliance
● When the period originally given has been cancelled by mutual agreement or non-fulfillment resolves the period stipulated
● A demand note is a pure obligation
 No suspensive condition or period

Conditional obligations ● Subject to condition

● Every future or uncertain event that an obligation is made to depend
● Futurity and uncertainty must concur as characteristics of the event
● Future AND uncertain events not future OR uncertain events
● Event which is uncertain but must necessarily happen is not a condition (with a term)
● The uncertainty of an event is wanting when the event is past or present
 Tolentino said that it cannot be a condition, rather it can be the basis of the contract

Classification of conditions CLASSIFICATION 1 (acquisition or extinguishment of rights)

● Suspensive  fulfillment of the condition results to the acquisition of rights arising from the obligation
● Resolutory fulfillment of the condition results to the extinguishment of rights from the obligation

CLASSIFICATION 2 (will of parties or 3rd persons)

● Postative  fulfillment of the condition depends upon the will of a party to the obligation
● Casual  fulfillment of the condition depends chance and/or will of a 3rd person
● Mixed  fulfillment of the condition depends party upon the will of a party to the obligation and partly to chance and/or will of a 3 rd person

CLASSFICATION 3 (capable of realization)

● Possible  Condition is capable of realization according to nature, law, good policy, or good customs
● Impossible  condition is not capable of realization
 CLASSIFICATION 4 (act or omission)
● Positive  condition involves performance of an act
● Negative  condition involves omission of an act

CLASSIFICATION 5 (partial realization)

● Divisible  condition is susceptible of partial realization
● Indivisible  condition is not susceptible of partial realization

CLASSIFICATION 6 (several conditions)

● Conjuctive  there are several conditions and all of which must be realized
● Alternative  there are several conditions but only one of which must be realized

CLASSIFICATION 7 (express or implied)

● Express  condition is expressly stated
● Implied  condition is tacit
●
CASE DOCTRINE
 No collection date indicated = demandable
HSBC v SPOUSES BROQUEZA (PURE  No date of payment in the promissory note, hence HSBC can demand immediate payment
OBLIGATION)
FACTS
 Petitioners
 employees of HSBC and are also members of HSBC Staff Retirement Plan
 obtained loans for their car and appliance (loan paid through salary deduction)
 terminated after HSBC and employee dispute
 Due to dismissal, they were unable to pay the monthly amortization to their loans
 HSBC demanded them to pay but they failed to do so
 Accounts of petitioners were delinquent
 MeTC and RTC  in favor of HSBC
 CA  in favor of petitioners

RULING
 Reversed the CA decision
 No date of payment at the promissory note
 “on or before UNTIL FULLY PAID”

CASE
GONZALES v HEIRS OF CRUZ
(DEFINITION OF CONDITION &
FUTURE AND UNCERTAIN)
DOCTRINE
 Condition
 every future or uncertain event upon which an obligation or provision is made to happen
FACTS
 Paula Cruz et al. entered into a contract of lease/purchase with Gonzales.
 Petitioner took possession of the land after paying the annual rental on the half portion of the property
 However, did not exercise option to purchase property after expiration of 1 year lease
 Despite this, he remained in possession
 Due to non-payment, letters were sent by the respondents to the petitioner however, the latter still refused
 Respondents alleged breach of contract of lease/purchase; also filed recovery of possession
 RTC ruled in favor of petitioner
 REASONS
 Respondents failed to notify petitioner
 Cannot rescind contract of purchase because there was a condition precedent which the respondents failed to fulfill
 PAR 9. Lessors shall obtain a separate and distinct TCT over the leased portion to the lessee within 4 years
 Reversed by CA
 Transfer of title cannot be considered as a condition precedent to the payment of the agreed purchased price

RULING
  Respondents cannot rescind contract of sale because they have not cause the transfer of TCT (condition precendent to petitioner’s obligation)
 Only after the title is assured may the obligation to buy the land and pay be enforced

ART 1180 PURE AND CONDITIONAL OBLIGATIONS

Digested provision Debtor binds himself to pay
 His means permit him to do so
 Obligation shall be deemed to be one with a period
- Subject to the provisions of ART 1197

Court to fix period  Creditor should fix a period for the payment of the obligation
 An immediate action to enforce obligation, without period having been previously fixed, would be premature

ART 1181 SUSPENSIVE AND RESOLUTORY CONDITIONS

Digested provision Conditional obligations
 Acquisition of rights
 Extinguishment or loss of those already acquired
- depend upon the happening of the event which constitutes the condition

Suspensive and resolutory  Suspensive

 Condition precedent
conditions  If condition happens  then right/obligation arises
 Birth of the obligation is suspended until fulfillment of the condition
 Example
 If A obligates himself to pay B 100,000 pesos if he marries C, the condition is suspensive in character. In such case, B cannot get the
100,000 pesos unless he marries C.

 Resolutory
 Condition subsequent
 If condition happens  the rights/obligation are extinguished
 Example
 If a person donates land to the City of Manila subject to the condition that the City shall transform it into a public park within 1 year, the
City’s failure to transform the land into a public park extinguishes its rights over it.

If condition does not happen  Suspensive

 The conditional creditor loses all hope of becoming a real creditor
 Loses power to exercise actions mentioned in ART 1188

 Resolutory
 Creditor’s rights become absolute

CASE Topic: Determining between obligations with suspensive conditions and obligations with terms.
GAITE v FONACIER (SUSPENSIVE Facts:
OR RESOLUTORY) 1. Fonacier was the owner of 11 iron lode mineral claims.
2. Fonacier executed a “Deed of Assignment” wherein Gaite was appointed as his attorney-in-fact with powers enter into contract with any individual
or juridical person for exploration and development of mining claims for a royalty of Php 0.50 per ton of ore to be extracted.
3. Gaite began mining operations and eventually extracted approximately 24,000 metric tons of iron ore.
4. Fonacier decided to revoke the authority he granted Gaite, to which Gaite agreed but subject to conditions. Gaite agreed to transfer all his rights
over the 24000 tons of iron ore for Php 75,000, Php10,000 of which was paid upon the signing of the agreement. In regards to the remaining
Php65,000, Gaite insisted on a surety bond to be executed between the two.
 5. The surety bond was executed on December 8, 1954 wherein the Php65,000 was to be paid with the condition that the sum of money will be paid
when there had been an actual sale of iron ore by the company for an amount of not less than Php65,000 and that the liability of the surety
company would expire automatically on December 8,1955.
6. On December 8, 1955 neither sale of the iron ore nor the payment to Gaite had been made. Thus the present petition.
7. Procedural Facts:
a. Gaite petitioned in CFI, which rendered judgement in favor of Gaite.

Issues:
1. WON the lower court erred in holding that the obligation of Fonacier to pay Gaite is one with A PERIOD AND NOT A SUSPENSIVE CONDITION, and
that the term expired on December 8, 1955 (Revelant) Yes
2. WON lower court erred in holding that there were only 10,954.5 tons in stockpiles of iron ore sold by appellee Gaite to Fonacier. No

Held:
Lower court affirmed.

Ratio:
First issue: Obligation with suspensive conditions vs. Obligations with terms
1. The court held that the obligation above was one with a term not a suspensive condition. Four arguments why:
a. The words of the contract show no uncertainty that payment will have to be made. Conditional obligations are based on uncertain
future events.
b. Gaite’s actions in securing a surety bond show that he had no intention to leave his compensation uncertain.
c. To support Fonacier’s version of the obligation would leave the payment at the discretion of the debtor, which would render the
conditional obligation void.
d. “The Greater Reciprocity of Interest” principle states that in cases wherein there is doubt as to the intention of the parties regarding a
suspensive period or condition, it is assumed that the version with the greatest reciprocity of interests is followed.
2. Therefore it was a obligation with a term not a condition and payment is demandable, as the term had expired.

Second Issue: Did the lower court err in holding that 10,954.5 tons in stockpiles of iron ore sold by appellee Gaite to Fonacier. – NO

ART 1182 POTESTATIVE, CASUAL, AND MIXED OBLIGATIONS

Digested provision Fulfillment of a condition
 Depends upon the solve will of the debtor
- Conditional obligation is void
 Depends upon chance or upon the will of a 3rd person
- Obligation shall take effect
 In conformity with the code

Definition and examples Potestative condition

 Depends upon the will of either one of the contracting parties
 Power of one of the parties to realize or prevent
 Kinds
 Simple potestative
 Presupposes not only a manifestation of will but also realization of an external act
 Purely potestative
 Depends solely and exclusively upon the will of either one of the parties
 Destroys the efficacy of the legal tie

Casual condition
 Depends exclusively upon chance
 Dependent upon the will of a 3rd person

Mixed condition
  Depends upon the will of the contracting parties and other circumstances

Effect potestative condition If potestative condition depends…

 Exclusively upon the will of the creditor = condition and obligation is valid
 Jurado said that the law is silent on this condition, but it is undeniable that it cannot have the effect of nullifying obligation
 Creditor is interested upon the fulfillment of the obligation
 Only through such fulfillment can the obligation be effective
 exclusively upon the will of the debtor = condition and obligation is void
 partly on the will of the debtor and y partly upon chance or will of a 3 rd party = conditional obligation is valid

In cases falling under this provision

 condition is void
 whole obligation is void

Conditional obligation shall be void

 if it is subject to potestative condition whose fulfillment depends exclusively upon the will of the debtor
 sanctioning obligations which are illusory

Precept contained in the 1st sentence of ART 1182 is applicable only to suspensive condition (condition fulfilled  right/obligation arises)
 if the condition is resolutory and potestative at the same time = obligation and condition is valid
 even if fulfillment of the obligation is based upon the exclusive will of the obligor
 natural because the obligor has the interest of fulfilling the condition
 only through which he can acquire rights

Mixed conditions If third person cannot carry out the condition and the obligor has done all in his power to comply with the obligation
 the other party may be ordered to comply with his part of the contract

CASE TOPIC:
ii. Rules governing resolutory conditions
LIM v CA B. Potestative, Casual or Mixed (Art. 1182)

RELEVANT PROVISION/TERMS:
Art. 1182, NCC.

When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon
the will of a third person, the obligation shall take effect in conformity with the provisions of this Code.
Potestative Condition- speaks of fulfillment of an obligation that rests solely upon the will of the debtor. Potestative conditions do not create obligations at
all, impose no duty on the parties, and for this reason are invalid as clauses in a contract. An obligation which is subject to a suspensive potestative condition
is void and non-demandable, even though written into a contract or agreement.

ISSUE/S WITH RATIO:

1. W/N the stipulation in the compromise agreement “for as long as the defendant needed the premises and can meet and pay said increases” valid? NO.
[relevant to our topic]

The disputed stipulation which allows the lessee to stay on the premises as long as he needs it and can pay rents is a purely potestative condition because it
leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee.

Pursuant to Art. 1182 of the New Civil Code, conditional obligations whose fulfillment depends upon the sole will of the debtor shall be void. The continuance,
effectivity and fulfillment of a contract of lease cannot be made to depend exclusively upon the free and uncontrolled choice of the lessee completely
depriving the owner of any say in the matter.
● In a reciprocal contract like a lease, the period of the lease must be deemed to have been agreed upon for the benefit of both parties.
● The clause "for as long as defendant needs the premises and can meet and pay the rents" is not an independent stipulation but subject to the
option for renewal upon agreement of both parties.
 In Encarnacion vs. Baldomar, et al., the Court ruled that in an action for ejectment, the defense of lessees that the contract of lease authorized them to continue
occupying the premises as long as they paid the rents is untenable, because it would leave to the lessees the sole power to determine whether the lease
should continue or not.
● If this defense were to be allowed, so long as the lessees elected to continue the lease by continuing the payment of the rentals, the owner would
never be able to discontinue it.
● In such a contract of lease, mutuality is not obtain and no equality exists between the lessor and the lessee since the life of the contract is dictated
solely by the lessee.

SC: Even assuming that the clause "for as long as the defendant needed the premises and can meet and pay, said increases" gives the lessee an option to
renew the lease, the stipulation has to be construed as providing for but one renewal or extension and, therefore, was satisfied when the lease was renewed
in 1982 for another three years.
● A general covenant to renew is satisfied by one renewal and will not be construed to confer the right to more than one renewal unless provision
is clearly and expressly made for further renewals.

2. W/N an action for ejectment is barred by res judicata? NO.

The respondent court erred in holding that the action for ejectment is barred by res judicata. While it is true that a compromise agreement has the effect of
res judicata, this doctrine does not apply in the present case since it is lacks the fourth requisite for a judgment to be a bar to a subsequent case: (1) it must
be a final judgment, (2) the court which rendered it had jurisdiction over the subject matter and the parties, (3) it must be a judgment on the merits.(4)
there must be identity between the two cases as to parties, subject matter and cause of action is lacking.
● The subject matter in the first ejectment case is the original lease contract in 1978 while the subject matter in the case at bar is the lease created
in 1982 under the terms provided in the subsequent compromise agreement.
● There is also no identity in the causes of action. In the case at bar, the delict or the wrong in the first case is different from that in the second, and
the evidence that will establish the cause of action in the former will not suffice to support and establish that in the latter.

MATERIAL FACTS:
Lim entered into a contract of lease with Dy for a period of 3 years (1976-1979) but after the stipulated term expired, Dy refused to vacate the premises of
Lim’s property.
● Lim filed an ejectment suit in the City Court of Manila, which was terminated after a judicially approved compromise agreement of the parties,
providing in part:
“3. That the term of the lease shall be renewed every three years retroacting from October 1979 to October 1982; after which the abovenamed
rental shall be raised automatically by 20% every three years for as long as defendant needed the premises and can meet and pay the said
increases, the defendant to give notice of his intent to renew sixty (60) days before the expiration of the term;”
● By reason of said agreement the lease continued from 1979-1982, then 1982-1985.

April 17, 1985: Lim advised Dy that he will no longer renew the contract upon its expiry on October.
● Dy informed Lim of his intention to renew the contract for another term (1985-1988), to which Lim replied that he does not agree to a renewal
of contract upon its expiration on October.

Because of Dy’s refusal to vacate his premises, Lim filed another ejectment suit at the Manila MTC
● The civil case was rejected by the Manila MTC, then RTC and then CA on the grounds that (1) the stipulation in the compromise agreement which,
in its formulation, allows the lessee to stay on the premises as long as he needs it and can pay rents is valid, and (2) that their earlier compromise
agreement has the effect of res judicata.

HELD:
The CA Decision is REVERSED AND SET ASIDE. Benito Dy is ordered to immediately vacate and return the possession of the premises and pay the monthly
rentals due thereon in accordance with the compromise agreement until he actually vacated the same. Judgment is immediately executory.

CASE Summary:
NATELCO and CASURECO II entered into a contract (Exhibit A) that
NAGA TELEPHONE v CA 1) NATELCO will provide 10 telephone connections for CASURECO II
2) In exchange, NATELCO will use electric light posts of CASURECO II
After 10 years, NATELCO sought to reform the contract stating that it is too one-sided, favoring NATELCO because the cables strung on the posts have become
heavier, and to achieve equity from rising costs, the contract needs to be reformed.
NATELCO claimed that this is a purely potestative condition, making it invalid:
That the term or period of this contract shall be as long as the party of the first part has need for the electric light posts of the party of the second part it
being understood that this contract shall terminate when for any reason whatsoever, the party of the second part is forced to stop, abandoned [sic] its
operation as a public service and it becomes necessary to remove the electric light post.

The trial court and CA affirmed the reformation to compensate both sides, but NATELCO was trying to make the initial contract void, claiming that it is purely
potestative. The SC held that the conditions of the contract are to be interpreted as a mixed provision, thus, making the contract still valid -- applying the
directive of the trial court to make each company compensate the other fairly.

TOPIC:
2. Kinds of conditional obligations
b. Potestative, Casual or Mixed

Potestative: if fulfillment of the condition depends on the will of one of the parties
Conditional obligation becomes → void

Casual: if the fulfillment of the condition depends upon chance or the will of third persons (not the will of any of the contracting parties)

Mixed: if the fulfillment of the condition depends upon the will of one of the contracting parties and other circumstances, including the will of third persons
→ depends on chance, hazard, or the will of a third person

LAWS/PROVISIONS:
From Sir’s Outline:
Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance
or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code. (1115)

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.

Rationale:
> general rule: impossibility of performance releases the obligor
> when the service becomes so difficult (beyond contemplation of the parties), the court should be authorized to release the obligor in whole or in part
> intention of the parties should govern
> it would be violence to that intention to hold the obligor still responsible
*fair and square consideration underscores the legal precept

FACTS:
> CA applied Art 1267 in favor of CASURECO II
> NATELCO insists that the complaint should have been dismissed for failure to state a cause of action

Causes of action of private respondents:

1) Rate of P10 per post per month
Increasing number of subscribers (more wires attached to the posts)
2) 319 posts in towns of Pili, Canaman, Magaro and Milaor, Camarines Sur (outside Naga City) - without any contract covering it
Rising costs now P2,630 per electric post
→ Inequitable
3) poor servicing by petitioners of 10 telephone units
Demanding damages from inconvenience amounting to P100, 000

“Equity demands a certain economic equilibrium between the prestation and the counter-prestation, and does not permit the unlimited
impoverishment of one party for the benefit of the other by the excessive rigidity of the principle of the obligatory force of contracts.” (IV Tolentino,
Civil Code of the Philippines)
 ISSUE:
W/N the decision of CA, to reform the initial agreement into making each company compensate one another, applying Art 1267 in favor of the electric
power company CASURECO II, is valid?

JUDGMENT:
YES. The contract is subject to mixed conditions, that is, they depend partly on the will of the debtor and partly on chance, hazard or the will of a third
person, which do not invalidate the aforementioned provision.

Court explains that

Part 1: Potestative Conditions
That the term or period of this contract shall be as long as the party of the first part (petitioner) has need for the electric light posts of the party of the second
part (private respondent)

Part 2: Casual Conditions

it being understood that this contract shall terminate when for any reason whatsoever, the party of the second part (private respondent) is forced to stop,
abandoned (sic) its operation as a public service and it becomes necessary to remove the electric light post (sic)

The ff. Actions required by the trial court were affirmed:

1) NATELCO to pay CASURECO II for the use of its posts in Naga City and in the towns of Milaor, Canaman, Magarao and Pili, Camarines Sur and in other
places where petitioners use private respondent's posts, the sum of ten (P10.00) pesos per post, per month, beginning January, 1989;
and
2) CASURECO II to pay NATELCO the monthly dues of all its telephones at the same rate being paid by the public beginning January, 1989.

In relation to Art. 1267, the Court emphasized that in this case, they cannot simply release the parties from the contract:

“We have to take into account the possible consequences of merely releasing the parties therefrom: petitioners will remove the telephone
wires/cables in the posts of private respondent, resulting in disruption of their service to the public; while private respondent, in consonance
with the contract will return all the telephone units to petitioners, causing prejudice to its business. We shall not allow such eventuality. “

Lim v CA
in a contract of lease wherein the parties agreed that the lessee could stay on the leased premises "for as long as the defendant needed the premises and can
meet and pay said increases"
-- > invalid: a purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee
→ not the same for the current case, since NATELCO and CASURECO II entered into a mixed conditional obligation contract

Other topics covered by the case:

In reformation of contracts, what is reformed is not the contract itself, but the instrument embodying the contract. It follows that whether the contract is
disadvantageous or not is irrelevant to reformation and therefore, cannot be an element in the determination of the period for prescription of the action to
reform.

Prescription
Article 1144 of the New Civil Code provides, inter alia, that an action upon a written contract must be brought within ten (10) years from the time the right
of action accrues. Clearly, the ten (10) years period is to be reckoned from the time the right of action accrues which is not necessarily the date of execution
of the contract. As correctly ruled by respondent court (CA), private respondents right of action arose sometime during the latter part of 1982 or in 1983
when according to Atty. Luis General, Jr. x x x, he was asked by (private respondents) Board of Directors to study said contract as it already appeared
disadvantageous to (private respondent) (p. 31, tsn, May 8, 1989). Private respondents cause of action to ask for reformation of said contract should thus
be considered to have arisen only in 1982 or 1983, and from 1982 to January 2, 1989 when the complaint in this case was filed, ten (10) years had not yet
elapsed.

RUSTAN PULP v IAC Facts:

● Petitioner Rustan established a pulp and paper mill
● Respondent Lluch transmitted a letter to petitioner Rustan for the supply of raw materials by the former to the latter
● Rustan suggested in reply that the contract to supply is not exclusive because Rustan shall have the option to buy from other qualified and
authorized suppliers
 ● Lluch agreed to sell, and Rustan Pulp and Paper Mill, Inc. undertook to pay the price of P30.00 per cubic meter of pulp wood raw materials to be
delivered at the buyer's plant
● Stipulations (3):
○ (1) Rustan shall have the option to buy from other sellers;
○ (2) Lluch has the priority to supply the pulp wood materials requirement of Rustan; and
○ (3) Rustan shall have the right to stop delivery by Lluch when the supply of the raw materials is sufficient until when needed again, as
long as Lluch is given sufficient notice.
● The machinery line of Rustan had major defects while deliveries of the raw materials piled up, so the Japanese supplier of the machinery
recommended the stoppage of the deliveries
● The suppliers were informed, but Rustan Pulp still kept accepting Lluch’s deliveries

ISSUE:
W/N Rustan Pulp and Paper Mills may legally exercise the right of stoppage should there be a glut of raw materials at its plant. NO.

HELD:
● A purely potestative imposition (like herein petitioners having the option to stop deliveries based solely on their will) must be “obliterated from
the face of the contract without affecting the rest of the stipulations considering that the condition relates to the fulfillment of an already existing
obligation and not to its inception”
● Petitioners assert that the letter of notice only meant for a temporary suspension of deliveries, but the contract itself “speaks loudly about
petitioners' prerogative”
● The condition attached to it which is dependent exclusively on the petitioners’ will gives this Court no alternative but to treat the controversial
stipulation as inoperative (1306, NCC)
○ The nature of the suspension itself is again conditioned upon petitioner's determination of the sufficiency of supplies at the plant
● The fact that Rustan Pulp still kept accepting Lluch’s deliveries doesn’t absolve the petitioners of their liability

ART 1183 IMPOSSIBLE OBLIGATIONS

Digested provision Impossible conditions
PAR 1
 contrary to good customs or public policy AND prohibited by law
- annul the obligation
 which depends on them
 divisible
- part which is not affected by the impossible or unlawful condition = valid
PAR 2
 Condition not to do an impossible thing
- Considered as not agreed upon

Impossible conditions Impossibility

 Physical
 Contrary to the law of nature
 Juridical
 Contrary to law, morals, good customs, and public policy
 Not only when the act is prohibited by law
 Certain essential rights which are necessary for the free development of human activity

Illicit conditions In order to be considered as an illicit condition:

 Must consist of an act or fact for one of the parties
  Illicit character not determined by the act itself but its effect
 Criterion is subjective
Scope Only annul obligation if conditions are positive and suspensive
 If negative, it is only considered as not written, and is converted into a pure obligation

Applies only to contracts

 Cannot apply to
 Simple and remuneratory obligations
 Testamentary dispositions

Time of impossibility Must be at the time of the creation of the obligation

 Supervening impossibility does not affect the existence of obligation
 On the same principle, when obligation is already impossible when constituted, it will remain void even if such condition became subsequently
possible
 Unless the parties later agree again
CASE SUMMARY: Two parties, the Heirs of Severina San Miguel and Dominador, et al entered into a compromise after some negotiations and problems faced with
ownership of 2 lots. In the compromise (kasunduan), it was agreed that Severina’s heirs will sell the subject lots to Dominador, et al for P1.5 million,
HEIRS OF SAN MIGUEL v CA conditioned upon the purchase of another lot for another P300,000. Severina’s heirs refused to transfer ownership of the 2 lots to Dominador, et al because
the purchase of the P300,000 lot wasn’t done. It was found that Severina’s heirs did not have a valid claim to the additional lot, hence making the condition
impossible to have been done. The Court orders Severina’s heirs to make the transfer of the lots, since it has been paid for and just struck off the additional
condition because of Article 1183.

TOPIC: Impossible Condition

TOPIC IN DISCUSSION
The condition of purchasing a lot which the party does not have ownership over is impossible, rendering the condition impossible and annulled. However,
the remaining obligation of the purchase of the original two lots remains valid.

MATERIAL FACTS
· The case involves claims to ownership over 2 parcels of land (Lots 1 and 2) in Panapan, Bacoor, Cavite
· Parties constantly fought one another for the land, involving a tug-of-war between possession over the certificate of title of the land
· On August 6, 1993, Severina’s heirs decided not to pursue anymore, instead they entered into a compromise with Dominador, et al.
· According to the compromise:
o Severina’s heirs will sell lots to Dominador, et al. for P1.5M
o After payment, they will deliver Transfer Certificate of Title No. T-223511
o This delivery is conditioned upon the purchase of another lot for an additional P300,000
§ Must be paid within 2 months from the compromise, if not, compromise will be void
· Dominador, et al. filed with RTC praying that Severina’s heirs deliver the certificate of title to them
· Severina’s heirs opposed, saying that the payment of P300,000 had not been done within 2 months

WHY THE COURT SAID WHAT IT SAID (ISSUE)

W/N Dominador, et al. may be compelled to pay the three hundred thousand pesos as agreed upon in the compromise, despite Severina’s heirs’ lack of
evidence of ownership over the parcel of land.

WHAT IS IT SAYING ABOUT THE TOPIC (RATIO)

· Dominador, et al cannot be compelled to pay the P300,000 which was stipulated in the compromise as a prerequisite for the release of the certificate of
title
· Severina’s heirs lacked evidence of ownership over the said parcel of land
o It was even shown that a cetain Emiliano Eugenio holds a tax declaration over the said land in his name
o Tax declarations and receipts can be strong evidence of ownership of land
o Severina’s heirs had nothing to counter this document
· Freedom to stipulate and binding effect of contracts cannot be a way to circumvent the situation of their lack of ownership over the land
o Law is still deemed written into every contract, limiting and governing relations between parties
· Vendor must have a right to transfer the ownership at the time it is delivered (Article 1459)
o Not necessary that vendor owns the land at perfection of contract
o But they must possess title at the time of delivery
· Severina’s heirs are not in a position to transfer title
 o Paying the P300,000 will unjustly enrich Severina’s heirs
· The delivery of the certificate of title cannot be predicated on this impossible condition
· Non-payment of the P300,000 is not a valid justification for refusal to deliver certificate of title
· Therefore, Severina’s heirs are bound to deliver the certificate of title covering lots because Dominador, et al have paid for those lots.

ART 1184 POSITIVE OBLIGATION

Digested provision Condition that some event happen at a determinate time
 Extinguish obligation as soon as the time expires OR
 If it becomes indubitable that the event will not take place

Example A person should pay a sum of money subject to the condition that a certain person shall arrive at a designated place in one year
 Obligation will be extinguished
 One year passes and he does not arrive OR
 Such person dies in the lapse of one year

Where no period stated Second paragraph of ART 1185 shall rule

 Based on the intention of the parties
 Time that which the parties have probably contemplated

CASE WHAT IT IS SAYING ABOUT THE TOPIC

DOCTRINE; Rule for Mixed Conditional Obligation – if the Condition is not fulfilled BUT the obligor did EVERYTHING IN HIS POWER TO DO SO, the
INT’L HOTEL CORP v JOAQUIN, JR. condition is fulfilled

WHY THE COURT SAID WHAT IT SAID

With that doctrine, the Court ruled that the fulfillment of Joaquin Jr.’s obligation, which is to secure a foreign loan, did not solely depend on his
capacity/will. The other party had to agree and the DBM, in the case at bar, must also agree to deny the original guaranty regarding Joaquin Jr.’s original
suggestion.

HOW THE ISSUE AROSE:

Joaquin Jr. presented himself and his services to secure a foreign loan for the IHC. The company Joaquin Jr. recommended (Materials Handling
Corporation) was not able to deliver the loan. Weston International was the other suggestion of Joquin Jr., which unfortunately failed because the DBP
refused to cancel the original guaranty. Due to Joaquin Jr.’s perceived failure to comply with the obligation, President Bautista of the IHC revoked the
shares of stock of Joaquin Jr.as future payment and refused to pay what he demanded for his completed past services.

FACTS

1. Respondent Francisco Joaquin submitted a proposal to the Board of Directors of the International Hotel Corporation for him to render technical
assistance in securing a foreign loan for the construction of a hotel, to be guaranteed by DBP. The proposal encompassed 9 phases and the board
approved phase 1 to phase 6 of the same.
2. After IHC submitted its application to DBP, Joaquin wrote IHC to request payment of his fees amounting to P500, 000 for the services that he had
provided and would be providing to IHC in relation to the hotel project. He also intimidated his amenability to receive shares of stock instead of cash.
3. Stockholders of IHC met and granted Joaquin’s request, allowing payment for Joaquin and Rafael Suarez.
4. Afterwards, Joaquin recommended that the BOD consider Materials Handling Corporation based on the more beneficial terms it had offered. It was
accepted. Negotiations with Materials Handling Corporation and with its principal, Barnes ensued. While the negotiations were ongoing, Joaquin and
Jose Valero met with another financier, Weston to explore possible financing. When Barnes failed to deliver the needed loan, IHC informed DBP that it
would submit Weston for DBP’s consideration
5. IHC entered into an agreement with Weston but DBP denied the application.
6. Due to Joaquin’s failure to secure the needed loan, IHC cancelled the 17, 000 shares of stock previously issued to Joaquin as payment for their services.
7. Joaquin and Suarez commenced action for specific performance, annulment, damages and injunction by a complaint in the RTC. Joaquin avers that they
had failed to meet their obligation because 
IHC’s president and his son intervened and negotiated with Barnes instead of Weston.
8. RTC held IHC liable. CA affirmed IHC’s liability.
 ISSUES and RULING:

W/N IHC voluntarily prevented Joaquin from complying with his obligations: NO

W/N IHC is liable: YES, under the rule on constructive fulfilment of a mixed conditional obligation

ART 1185 NEGATIVE OBLIGATION

Digested provision condition that some event will not happen at a determinate time
PAR 1
 Render the obligation effective
- Time indicated elapsed
- Evident that event cannot concur

PAR 2
 No time fixed
- Condition deemed fulfilled at such time as may have probably been contemplated
 Bearing in mind nature of obligation

Example Obligation to deliver a piece of land to X subject to the condition that he shall not marry within two years
 Obligation shall become effective and land shall be delivered to X
 2 years expired without X having married
 X enters priesthood before 2 years expired

ART 1186 CONSTRUCTIVE FULFILLMENT

Digested provision Condition shall be deemed fulfilled
 Obligor voluntarily prevents its fulfillment

Constructive fulfillment Enunciates doctrine of constructive fulfillment of suspensive conditions

 Not applicable to resolutory conditions
 Obligor must have prevented the oblige from complying with the condition
 Must be voluntary or willful

Intent to prevent compliance Where the act of the debtor did not have for its purpose the prevention of fulfillment of the condition
 Will not fall under scope of article

In exercise of a right If debtor acts pursuant to a right

 Obligation not deemed fulfilled

ART 1187 RETROACTIVE EFFECT

Digested provision Effects of conditional obligation to give once condition has been fulfilled
PAR 1
 Retroact to the day of the constitution of the obligation
 Obligation imposes reciprocal prestations
- Fruits and interests during pendency of condition
 Mutually compensated
 Unilateral obligation
- Debtor appropriate the fruits and interests received
 Unless the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was
different

Retroactivity of obligation
Contracts of creditor
Fruits and interests
ART 1188
Digested provision
Preservation of creditor’s rights
ART 1189
Digested provision
PAR 2
 Obligations to do and not do
- Court shall determine
 Retroactive effect of the condition that has been complied with
Effects of the happening of suspensive conditions
 Between the creation of the conditional obligation and the fulfillment of the suspensive condition
 Right during that period is a mere expectancy
 Creditor cannot enforce obligation
 Moment the suspensive condition happens
 Obligation becomes effective and enforceable
 Debtor may be legally compelled
 Cause of action accrues
 Period of prescription computed from that moment
 Retroact to the moment when such obligation was constituted or created
 Condition is only accidental and not an essential element of the obligation
 A fiction is created
 Binding tie of the conditional obligation is produced from the time of its perfection, not from the happening of the condition
If the creditor, before the happening of the condition, has already disposed of his expected right
 Happening of the suspensive condition makes effective the act performed pendente conditione
Law does not require the delivery or payment of the fruits or interest accruing before the happening of the suspensive condition
 Not within the principle of retroactivity
If unilateral
 Fruits received by the debtor before the happening of the condition are kept by him and are not delivered upon fulfillment of the condition
 Debtor does not receive anything from the creditor in a unilateral obligation
RIGHT OF THE CREDITOR TO PRESERVE HIS RIGHT
The creditor may, before the fulfillment of the condition
 Bring appropriate actions for the preservation of his right
The debtor may recover
 what he has paid by mistake during the same time
 in case of suspensive condition
Objects of creditor’s rights
 loss or deterioration of things
 by enjoining or restraining acts of alienation or destruction by the debtor himself or by 3rd persons
 prevent concealment of debtor’s properties
 debtor’s properties is a guaranty in case of non-performance of obligation
 demand security if debtor becomes insolvent
 compel acknowledgment
 debtor’s signature on a private document OR
 execution of the proper public documents for registration to affect 3 rd persons
 register deed of sale or mortgages evidencing contract
 set aside fraudulent alienations
 interrupt period of prescription
IN CASE OF IMPROVEMENT, LOSS OR DETERIORATION DURING PENDENCY OF CONDITION
Rule observed in case of the improvement, loss, or deterioration of the thing during pendency
 conditions imposed with the intention of suspending the efficacy of an obligation to give
1. lost without fault of debtor  obligation extinguished
 2. lost through fault of debtor  obliged to pay damages
 lost  perishes, goes out of commerce, or disappears (existence unknown or cannot be discovered)
3. deteriorates without fault of debtor  impairment borne by creditor
4. deteriorates through fault of debtor  creditor may choose between: a) rescission and b) fulfillment; indemnity for damages in either case
5. improved by its nature or time  inure to the benefit of the creditor
6. improved at the expense of the creditor  no other right than that granted to the usufructuary

Scope Applies only to obligations to deliver a determinate or specific thing

 also only applies when suspensive condition is fulfilled

Improvement Anything added to, incorporated in, or attached to the thing

If caused by nature or time

 inured to the benefit of the creditor
 conformity with the principle of retroactivity of the effects of conditional obligations
if at the expense of the debtor
 same rights as usufructuary
 improvement may be removed by the debtor without damage to the thing die
If debtor cause deterioration to the thing, which he also improved at his expense
 value of the improvements may be set off against the damages for deteriorations

ART 1190 RULES GOVERNING RESOLUTORY CONDITIONS

Digested provision Conditions have for their purpose the extinguishment of an obligation to give
 the parties upon fulfillment of conditions
- return to each other what they have received
 in case of loss, deterioration or improvement
- provisions of the previous article, with respect to the debtor, shall be applied to the party who is bound to return
 obligations to do and not to do
- provisions of 2nd paragraph of ART 1187
 regards to the effect of extinguishment

Rights of 3rd persons Party entitled to restitution

 cannot sue 3rd person for recovery by accion reinvindicatoria
 because 3rd person is no longer the owner
 does not automatically revest ownership to party entitled to restitution
 only a personal right which he can enforce

Fruits and interests Since all vestiges of obligation must be wiped out
 duty of restitution also applied to fruits and interests

CASE TOPIC FOR WHICH IT IS ASSIGNED

Article 1190.
MCIAA v TUDTUD When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall
return to each other what they have received.
In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding
article shall be applied to the party who is bound to return.
As for the obligations to do and not to do, the provisions of the second paragraph of Article 1187 shall be observed as regards the effect of the
extinguishment of the obligation. (1123)
WHAT IT IS SAYING ABOUT THE TOPIC
The rights and duties between the MCIAA and Tudtud et al are governed by Article 1190 of the Civil Code which provides: When the conditions
have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfilment of said conditions, shall return to each other what they
have received.
WHY THE COURT SAID WHAT IT SAID
 Tudtud et al.’s witness respondent Justiniano Borga declared that the original owners did not oppose the expropriation of the lot upon the
assurance of the NAC that they would reacquire it if it is no longer needed by the airport. The condition for the extinguishment of an obligation to give had
been met so article 1190 will apply.

HOW THE ISSUE AROSE

The National Airports Corporation (NAC) filed a complaint for expropriation in order to expand the Cebu Lahug Airport. It sought to acquire, by
negotiated sale or expropriation, several lots adjoining the then existing airport which included the parcels of land owned by the predecessors-in-interest
of respondents Benjamin Tudtud et al. NAC assured the owners that they would reacquire the land if it is no longer needed by the airport. The Court of First
Instance of Cebu granted the expropriation.
No structures related to the operation of the Cebu Lahug Airport were constructed on the land expropriated. Respondent Lydia Adlawan (Lydia),
acting as attorney-in-fact of the original owners, sent a letter to the general manager of the petitioner Mactan Cebu International Airport Authority (MCIAA),
the new owner of the lot and demanded to repurchase the lot at the same price paid at the time of the taking, without interest.

ISSUE
W/N Tudtud et al. are entitled for the reconveyance of the land expropriated – YES

HELD
The condition for the extinguishment of an obligation to give had been met (no structures related to the operation of the Cebu Lahug Airport were
constructed on the land expropriated) so article 1190 will apply.

WHEREFORE, the petition is, in light of the foregoing disquisition, DENIED. The
May 8, 2006 Decision of the Court of Appeals affirming that of Branch 20 of the Cebu City Regional Trial Court is AFFIRMED with MODIFICATION as follows:

1. Respondents are ORDERED to return to the MCIAA the just compensation they received for the expropriation of Lot No. 988 plus legal interest in
the case of default, to be computed from the time the MCIAA complies with its obligation to reconvey Lot No. 988 to them;
2. Respondents are ORDERED to pay the MCIAA the necessary expenses it incurred in sustaining Lot No. 988 and the onetary value of its services to
the extent that respondents were benefited thereby;
3. The MCIAA is ENTITLED to keep whatever fruits and income it may have obtained from Lot No. 988; and
4. Respondents are also ENTITLED to keep whatever interests the amounts they received as just compensation may have earned in the meantime,
as well as the appreciation in value of Lot No. 988 which is a natural consequence of nature and time;

The case is REMANDED to Branch 20 the Regional Trial Court of Cebu City only for the purpose of receiving evidence on the amounts that respondents will
have to pay to the MCIAA in accordance with this Court's decision.

OTHER CONCEPTS
Fee Simple - one in which the owner is entitled to the entire property, with unconditional power of disposition during one's life, and descending to one's
heirs and legal representatives upon one's death intestate. Such estate is unlimited as to duration, disposition, and descendibility.
The abandonment of the particular public use or purpose for which the property was taken is not a ground for the recovery of the expropriated lot by the
previous owner, the title of the selling or donating expropriating agency being one in fee simple.

Separate Opinion: Velasco, Jr., J., concurring

Fery v. Municipality of Cabanatuan be revisited as the principles thereat expounded were based on American jurisprudence and may no longer be
appropriate considering the ensuing inequity such application entails. Fery was decided not under the aegis of any of the Philippine Constitutions uniformly
decreeing that private property shall not be taken forpublic use without just compensation.

ART 1191 IMPLIED POWER TO RESCIND

Digested provision power to rescind obligation is implied in reciprocal ones
 one of the obligors should not comply
 injured party
- choose between fulfillment and rescission of obligation, with payment of damages in either case
- may also seek rescission even after choosing fulfillment
 if it becomes possible
 court shall decree the rescission claimed
- unless there be just cause authoring the fixing of the period
  without prejudice to the rights of 3 rd persons who acquired the thing
- in accordance with ART 1385 and 1388 and the mortgage law

Recriprocal obligations Only applies to reciprocal obligations

Reciprocity arises from identity of cause

 each party is creditor and debtor of the other

Declaration of rescission The rescission may take place by the declaration of the injured party

Rescission is a power
 does not require previous declaration of rescission by the courts
 However, the injured party cannot by himself resolve the obligation
 Injured party should still apply to the court for a decree of rescission or resolution
 If obligation has not yet been performed
 Extrajudicial rescission of the party who is willing to perform will suffice
 If the injured party has already performed
 Ask for judicial declaration

Effect of rescission Duty

 Only duty of the defendant is to restore what he had received from the plaintiff with legal interest. The party who was asking for the rescission should
also do the same.

Alternative remedies Two remedies

 Rescission of contract
 Performance of the obligation
 Alternative
 Injured party cannot have both
 However, where the performance become impossible, rescission with damages to the injured party is proper although the latter sought
specific performance
 So long as there has been no judgment declaring rescission, the creditor may change his mind and seek for performance

Express resolutory condition Parties in bilateral contract may stipulate that if one of them does not comply with the obligation, the contract shall be automatically resolved

ART 1192 BREACH OF OBLIGATION

Digested provision In case both parties committed a breach of obligation
 Liability of first infractor
- Equitably tempered by the court
 If it cannot be determined which of the parties first violated the contract
- Contract shall be extinguished
- Each shall bear his own damages