UNIVERSITY OF THE PHILIPPINES vs. WALFRIDO DE LOS ANGELES, in his
:
capacity as JUDGE of the COURT OF FIRST INSTANCE IN QUEZON CITY, et al.,
G.R. No. L-28602 September 29, 1970
REYES, J.B.L., J.:
FACTS: On November 2, 1960, UP and ALUMCO entered a logging agreement
whereby the latter was granted exclusive authority to cut, collect and remove
timber from the Land Grant for a period starting from the date of agreement to
December 31, 1965, extendible for a period of 5 years by mutual agreement.
On December 8, 1964, ALUMCO incurred an unpaid account of P219,362.94.
Despite repeated demands, ALUMCO still failed to pay, so UP sent a notice to
rescind the logging agreement. On the other hand, ALUMCO executed an
instrument entitled “Acknowledgment of Debt and Proposed Manner of
Payments. It was approved by the president of UP, which stipulated the
following:
If the payments called for are not sufficient to liquidate the foregoing
indebtedness, the balance outstanding after the said payments have been
applied shall be paid by the debtor in full no later than June 30, 1965.5. If the
debtor fails to comply with any of its promises, the Debtor agrees without
reservation that Creditor shall have the right to consider the Logging Agreement
rescinded, without the necessity of any judicial suit… ALUMCO continued its
logging operations, but again incurred an unpaid account. On July 19,1965, UP
informed ALUMCO that it had, as of that date, considered rescinded and of no
further legal effect the logging agreement, and that UP had already taken steps
to have another concessionaire take over the logging operation.
ALUMCO filed a petition to enjoin UP from conducting the bidding. The lower
court ruled in favor of ALUMCO, hence, this appeal.
ISSUE: Can petitioner UP treat its contract with ALUMCO rescinded, and may
disregard the same before any judicial pronouncement to that effect?
RULING: Yes. In the first place, UP and ALUMCO had expressly stipulated that
upon default by the debtor, UP has the right and the power to consider the
Logging Agreement of December 2, 1960 as rescinded without the necessity of
any judicial suit. As to such special stipulation and in connection with Article
1191 of the Civil Code, the Supreme Court, stated in Froilan vs. Pan Oriental
Shipping Co:
“There is nothing in the law that prohibits the parties from entering into
agreement that violation of the terms of the contract would cause cancellation
thereof, even without court intervention. In other words, it is not always
necessary for the injured party to resort to court for rescission of the contract.”
GLORIA M. DE ERQUIAGA vs. HON. COURT OF APPEALS
G.R. No. 47206 September 27, 1989
GRINO-AQUINO, J.
FACTS:
a) Petitioner’s Arguments (De Erquiaga, et al. – Win)
- Filed a case against Respondent to rescind their contract to sell with
Respondent of the 3 100 shares of Petitioner in the Erquiaga Development
Corporation
-Argued that Respondent failed to pay the balance of P561,321.70 as provided
in the promissory notes he delivered to Erquiaga pursuant to paragraph 3,
subparagraph (c) of the contract to sell
-Argued that the decision of the CA, insofar as it requires payment plus interest
without first awaiting Respondent’s accounting of the fruits thereof, violates the
law of the case and Article 1385 of the Civil Code and is iniquitous
-Appealed to SC the decision of CA
b) Respondent’s Arguments (CA, Reynoso, et al. – Lost)
-CA promulgated a decision requiring Petitioner to return to the Respondents
the sum of P410,000, as already paid by Respondent to Petitioner, plus interest,
without first awaiting Respondent’s accounting of the fruits thereof
ISSUE: Whether the decision of CA, insofar as it requires payment by Petitioner
to Respondent plus interest without first awaiting Respondent’s accounting of
the fruits thereof, is valid.
RULING: NO. The decision of CA is invalid. The payment of said interest by
Petitioner should await Respondent’s accounting of the fruits received by him
from the Hacienda San Jose. The appeal is granted.
ART. 1385. Rescission creates the obligation to return the things which were the
object of the contract, together with their fruits, and the price with its interest;
consequently, it can be carried out only when he who demands rescission can
return whatever he may be obliged to restore.
Neither shall rescission take place when the things which are the object of the
contract are legally in the possession of third persons who did not act in bad
faith.
In this case, indemnity for damages may be demanded from the person causing
the loss.
In this case, the Hacienda San Jose and 1,500 shares of stock have already been
returned to Erquiaga. Therefore, upon the conveyance to him of the remaining
1,600 shares, Erquiaga (or his heirs) should return to Reynoso the price of
P410,000 which the latter paid for those shares. Pursuant to the rescission
decreed in the final judgment, there should be simultaneous mutual restitution
of the principal object of the contract to sell (3,100 shares) and of the
consideration paid (P410,000). This should not await the mutual restitution of
the fruits, namely: the legal interest earned by Reynoso's P410,000 while in the
possession of Erquiaga and its counterpart: the fruits of Hacienda San Jose
which Reynoso received from the time the hacienda was delivered to him on
November 4,1968 until it was placed under receivership by the court on March
3, 1975.
However, since Reynoso has not yet given an accounting of those fruits, it is
only fair that Erquiaga's obligation to deliver to Reynoso the legal interest earned
by his money, should await the rendition and approval of his accounting. To this
extent, the decision of the Court of Appeals should be modified. For it would be
inequitable and oppressive to require Erquiaga to pay the legal interest earned
by Reynoso's P410,000 since 1968 or for the past 20 years (amounting to over
P400,000 by this time) without first requiring Reynoso to account for the fruits
of Erquiaga's hacienda which he allegedly squandered while it was in his
possession from November 1968 up to March 3, 1975.
Thus, the decision of CA is invalid. The payment of said interest by Petitioner
should await Respondent’s accounting of the fruits received by him from the
Hacienda San Jose. The appeal is granted
BUENAVENTURA ANGELES, ET AL., vs. URSULA TORRES CALASANZ, ET AL.,
G.R. No. L-42283 March 18, 1985
GUTIERREZ, JR., J.:
FACTS: On December 19, 1957, defendants-appellants Ursula Torres Calasanz
and plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered a
contract to sell a piece of land located in Cainta, Rizal for P3,920.00 plus 7%
interest per annum. The plaintiffs-appellees made a down payment of P392.00
upon the execution of the contract. They promised to pay the balance in monthly
installments of P41.20 until fully paid, the installment being due and payable on
the 19th day of each month. The plaintiffs-appellees paid the monthly
installments until July 1966, when their aggregate payment already amounted
to P4,533.38.
On December 7, 1966, the defendants-appellants wrote the plantiffs-appellees
a letter requesting the remittance of past due accounts. On January 28, 1967,
the defendants-appellants cancelled the said contract because the plaintiffs
failed to meet subsequent payments. The plaintiffs’ letter with their plea for
reconsideration of the said cancellation was denied by the defendants.
The plaintiffs-appellees filed a case before the Court of First Instance to compel
the defendant to execute in their favor the final deed of sale alleging inter alia
that after computing all subsequent payments for the land in question, they
found out that they have already paid the total amount including interests, realty
taxes and incidental expenses. The defendants alleged in their answer that the
plaintiffs violated par. 6 of the contract to sell when they failed and refused to
pay and/or offer to pay monthly installments corresponding to the month of
August, 1966 for more than 5 months, thereby constraining the defendants to
cancel the said contract.
The Court of First Instance rendered judgment in favor of the plaintiffs, hence
this appeal.
ISSUE: Whether or not the Contract to Sell been automatically and
validly cancelled by the defendants-appellants?
RULING: No. While it is true that par.2 of the contract obligated the plaintiffs-
appellees to pay the defendants the sum of P3,920 plus 7% interest per annum,
it is likewise true that under par 12 the seller is obligated to transfer the title to
the buyer upon payment of the said price.
The contract to sell, being a contract of adhesion, must be construed against
the party causing it. The Supreme Court agree with the observation of the
plaintiffs-appellees to the effect that the terms of a contract must be interpreted
against the party who drafted the same, especially where such interpretation
will help effect justice to buyers who, after having invested a big amount of
money, are now sought to be deprived of the same thru the prayed application
of a contract clever in its phraseology, condemnable in its lopsidedness and
injurious in its effect which, in essence, and its entirety is most unfair to the
buyers.
Thus, since the principal obligation under the contract is only P3,920.00 and the
plaintiffs-appellees have already paid an aggregate amount of P4,533.38, the
courts should only order the payment of the few remaining installments but not
uphold the cancellation of the contract. Upon payment of the balance of P671.67
without any interest thereon, the defendant must immediately execute the final
deed of sale in favor of the plaintiffs and execute the necessary transfer of
documents, as provided in par.12 of the contract.
EDWARD C. ONG vs. THE COURT OF APPEALS AND THE PEOPLE OF THE
PHILIPPINES
G.R. No. 119858. April 29, 2003
CARPIO, J.:
FACTS: On May 10, 1983, petitioner Jaime Ong, on the one hand, and
respondent spouses Miguel K. Robles and Alejandra Robles, on the other hand,
executed an “Agreement of Purchase and Sale” respecting two parcels of land
situated at Barrio Puri, San Antonio, Quezon.
On May 15, 1983, petitioner Ong took possession of the subject parcels of land
together with the piggery, building, rice mill, residential house and other
improvements thereon.
Pursuant to the contract they executed, petitioner paid respondent spouses the
sum of P103,499.912 by depositing it with the United Coconut Planters Bank.
Subsequently, petitioner deposited sums of money with the Bank of Philippine
Islands (BPI),3 in accordance with their stipulation that petitioner pay the loan
of respondents with BPI.
To answer for his balance of P1,400,000.00 petitioner issued four (4) post-dated
Metro Bank checks Ong vs. Court of Appeals, 310 SCRA 1, G.R. No. 97347 July
6, 1999
When presented for payment, however, the checks were dishonored due to
insufficient funds. Petitioner promised to replace the checks but failed to do so.
To make matters worse, out of the P496,500.00 loan of respondent spouses
with the Bank of the Philippine Islands, which petitioner, as per agreement,
should have paid, petitioner only managed to dole out no more than
P393,679.60. When the bank threatened to foreclose the respondent spouses’
mortgage, they sold three transformers of the rice mill worth P51,411.00 to pay
off their outstanding obligation with said bank, with the knowledge and
conformity of petitioner.
Petitioner, in return, voluntarily gave the spouses authority to operate the rice
mill.9 He, however, continued to be in possession of the two parcels of land
while private respondents were forced to use the rice mill for residential
purposes.
On August 2, 1985, respondent spouses, through counsel, sent petitioner a
demand letter asking for the return of the properties. Their demand was left
unheeded, so, on September 2, 1985, they filed with the Regional Trial Court of
Lucena City, Branch 60, a complaint for rescission of contract and recovery of
properties with damages. Ong vs. Court of Appeals, 310 SCRA 1, G.R. No. 97347
July 6, 1999
themselves to deliver a deed of absolute sale and clean title covering the two
parcels of land upon full payment by the buyer of the purchase price of
P2,000,000.00. This promise to sell was subject to the fulfillment of the
suspensive condition of full payment of the purchase price by the petitioner.
Petitioner, however, failed to complete payment of the purchase price. The non-
fulfillment of the condition of full payment rendered the contract to sell
ineffective and without force and effect. It must be stressed that the breach
contemplated in Article 1191 of the New Civil Code is the obligor’s failure to
comply with an obligation already extant, not a failure of a condition to render
binding that obligation. Failure to pay, in this instance, is not even a breach but
merely an event which prevents the vendor’s obligation to convey title from
acquiring binding force. Hence, the agreement of the parties in the case at bench
may be set aside, but not because of a breach on the part of petitioner for failure
to complete payment of the purchase price. Rather, his failure to do so brought
about a situation which prevented the obligation of respondent spouses to
convey title from acquiring an obligatory force.

In affirming the decision of the trial court, the Court of Appeals noted that the
failure of petitioner to completely pay the purchase price is a substantial breach
of his obligation which entitles the private respondents to rescind their contract
under Article 1191 of the New Civil Code. Ong vs. Court of Appeals, 310 SCRA
1, G.R. No. 97347 July 6, 1999

Issue: (1) Whether the contract entered by the parties may be validly rescinded
under Article 1191 of the New Civil Code; and (2) Whether the parties had
novated their original contract as to the time and manner of payment.

Ruling: Petitioner contends that Article 1191 of the New Civil Code is not
applicable since he has already paid respondent spouses a considerable sum and
has therefore substantially complied with his obligation. He cites Article 1383
instead, to the effect that where specific performance is available as a remedy,
rescission may not be resorted to.

A discussion of the aforesaid articles is in order.

Rescission, as contemplated in Articles 1380, et seq., of the New Civil Code, is

a remedy granted by law to the contracting parties and even to third persons,
to secure the reparation of damages caused to them by a contract, even if this
should be valid, by restoration of things to their condition now prior to the
celebration of the contract.14 It implies a contract, which even if initially valid,
produces a lesion or a pecuniary damage to someone.

The breach contemplated in Article 1191 of the New Civil Code is the obligor’s
failure to comply with an obligation already extant, not a failure of a condition
to render binding that obligation. —Respondents in the case at bar bound