BOYSAW v.

INTERPHIL PROMOTIONS Chairman, to honor their commitments under the boxing contract of May
G.R. No. 172505 | 1 OCTOBER 2014 1,1961.


Doctrine: Issue/s: Whether or not there was a violation of the fight contract of May 1,1961;
The power to rescind obligations is implied, in reciprocal ones, in case one of the and if there was, who was guilty of such violation.
obligors should not comply with what is incumbent upon him.
Held: Yes. Boysaw and Yulo, Jr.

Facts: Ruling:
The evidence established that the contract was violated by appellant Boysaw
 Solomon Boysaw and his then Manage, Willie Ketchum, signed with
himself when, without the approval or consent of Interphil, he fought Louis Avila on
Interphil Promotions, Inc. represented by Lope Sarreal, Sr., a contract to
engage Gabriel "Flash" Elorde in a boxing contest for the junior lightweight June 19, 1961 in Las Vegas, Nevada.
championship of the world.
There is no doubt that the contract in question gave rise to reciprocal obligations.
 It was stipulated that the bout would be held at the Rizal Memorial
"Reciprocal obligations are those which arise from the same cause, and in which
Stadium in Manila on September 30, 1961 or not later than thirty [30] days
thereafter should a postponement be mutually agreed upon, and that each party is a debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are to be performed
Boysaw would not, prior to the date of the boxing contest, engage in any
simultaneously, so that the performance of one is conditioned upon the
other such contest without the written consent of Interphil Promotions,
Inc. simultaneous fulfillment of the other."
 June 19, 1961, Boysaw fought and defeated Louis Avila in a ten-round non
The power to rescind is given to the injured party. "Where the plaintiff is the party
title bout held in Las Vegas, Nevada, U.S.A.
who did not perform the undertaking which he was bound by the terms of the
 On July 2, 1961, Ketchum, on his own behalf and on behalf of his associate
Frank Ruskay, assigned to J. Amado Araneta the managerial rights over agreement to perform, he is not entitled to insist upon the performance of the
contract by the defendant, or recover damages by reason of his own breach.
Solomon Boysaw.
 On September 1, 1961, J. Amado Araneta assigned to Alfredo J. Yulo, Jr.
Another violation – The assignments, from Ketchum to Araneta, and from Araneta
the managerial rights over Boysaw.
 Sarreal wrote a letter to the Games and Amusement Board [GAB] to Yulo, were in fact novations of the original contract which, to be valid, should
have been consented to by Interphil. Under the law when a contract is unlawfully
expressing concern over reports that there had been a switch of managers
novated by an applicable and unilateral substitution of the obligor by another, the
in the case of Boysaw, of which he had not been formally notified, and
requesting that Boysaw be called to an inquiry to clarify the situation. aggrieved creditor is not bound to deal with the substitute.
 The GAB called a series of conferences of the parties concerned
The refusal of appellants to accept a postponement without any other reason but
culminating in the issuance of its decision to schedule the Elorde-Boysaw
the implementation of the terms of the original boxing contract entirely overlooks
fight for November 4, 1961.
 Yulo, Jr. refused to accept the change in the fight date, maintaining his the fact that by virtue of the violations they have committed of the terms thereof,
they have forfeited any right to its enforcement.
refusal even after Sarreal on September 26, 1961, offered to advance the
fight date to October 28, 1961 which was within the 30-day period of
The violations of the terms of the original contract by appellants vested the
allowable postponements provided in the principal boxing contract of May
1, 1961. appellees with the right to rescind and repudiate such contract altogether. That
they sought to seek an adjustment of one particular covenant of the contract, is
 Boysaw and Yulo, Jr. sued Interphil, Sarreal, Sr. and Manuel Nieto, Jr. in the
under the circumstances, within the appellee's rights.
CFI of Rizal [Quezon City Branch] for damages allegedly occasioned by the
refusal of Interphil and Sarreal, aided and abetted by Nieto, Jr., then GAB
  The party who deems the contract violated may consider it resolved
or rescinded, and act accordingly, without previous court action, but
Title: UNIVERSITY OF THE PHILIPPINES V. DE LOS ANGELES - #21 it proceeds at its own risk. For it is only the final judgment of the
Doctrine: corresponding court that will conclusively and finally settle whether
But the law definitely does not require that the contracting party who the action taken was or was not correct in law.
believes itself injured must first file suit and wait for a judgment before  But the law definitely does not require that the contracting party
taking extrajudicial steps to protect its interest. who believes itself injured must first file suit and wait for a judgment
before taking extrajudicial steps to protect its interest. Otherwise, the
Facts: party injured by the other's breach will have to passively sit and
 A Land Grant was segregated from the public domain and given as watch its damages accumulate during the pendency of the suit until
an endowment to UP, an institution of higher learning, to be the final judgment of rescission is rendered when the law itself
operated and developed for the purpose of raising additional income requires that he should exercise due diligence to minimize its own
for its support damages (Civil Code, Article 2203).
 UP and ALUMCO entered into a logging agreement under which
the latter was granted exclusive authority to cut, collect and remove
timber from the Land Grant, in consideration of payment to UP of
royalties, forest fees, etc.
 That ALUMCO cut and removed timber therefrom but, as of 8
December 1964, it had incurred an unpaid account of P219,362.94,
which, despite repeated demands, it had failed to pay; that after it
had received notice that UP would rescind or terminate the logging
agreement, ALUMCO executed an instrument, entitled
"Acknowledgment of Debt and Proposed Manner of Payments,"
 ALUMCO continued its logging operations, but again incurred an
unpaid account, for the period from 9 December 1964 to 15 July 1965,
in the amount of P61,133.74, in addition to the indebtedness that it
had previously acknowledged.
 Petitioner UP informed respondent ALUMCO that it had, as of that
date, considered as rescinded and of no further legal effect the
logging agreement that they had entered in 1960

Issue:
WON petitioner U.P. can treat its contract with ALUMCO rescinded, and
may disregard the same before any judicial pronouncement to that effect. –
YES

Held:
 UP and ALUMCO had expressly stipulated in the "Acknowledgment
of Debt and Proposed Manner of Payments" that, upon default by
the debtor ALUMCO, the creditor (UP) has "the right and the power
to consider, the Logging Agreement dated 2 December 1960 as
rescinded without the necessity of any judicial suit."
VDA. DE MISTICA v. SPS NAGUIAT In the present case, the failure of respondents to pay the balance of the purchase
G.R. No. 137909 | 11 DECEMBER 2003 price within ten years from the execution of the Deed did not amount to a
Topic: Rescission; Ponente: J. Panganiban substantial breach. In the Kasulatan, it was stipulated that payment could be made
even after ten years from the execution of the Contract, provided the vendee paid
12 percent interest.
Doctrine: Under Article 1191, the right to rescind an obligation is predicated on the
violation of the reciprocity between parties, brought about by a breach of faith by Moreover, it is undisputed that during the ten-year period, petitioner and her
one of them. Rescission, however, is allowed only where the breach is substantial deceased husband never made any demand for the balance of the purchase price.
and fundamental to the fulfillment of the obligation. Petitioner even refused the payment tendered by respondents during her husbands
funeral, thus showing that she was not exactly blameless for the lapse of the ten-
year period. Had she accepted the tender, payment would have been made well
within the agreed period.
Facts:
 Eulalio Mistica, petitioner’s predecessor-in-interest, was the owner of a
parcel of land which was leased to respondent Naguiat.
 Eulalio entered into a contract to sell with Naguiat reduced to writing
which had a provision stating that in case the latter fails to pay within 10
years, there will be an additional 12% interest rate every year until the
purchase price has been paid.
 After making partial payments, Naguiat eventually failed to make any
further payment. Eulalio also passed away.
 Vda de Mistica then filed a complaint for rescission alleging that Naguiat’s
failure to pay the balance constitutes a violation of the contract which
entitled her to rescind it.
 Naguiat argues that it cannot be rescinded because the contract clearly
says that in case of failure to pay the balance, a yearly interest of 12% is
imposed. Further, he even offered to pay the balance during Eulalio’s wake
which petitioner refused.
 Lower courts disallowed rescission because Naguiat did not breach the
contract of sale.

Issue/s: W/N petitioner is entitled to rescind the contract

Held: No. Petition denied.

Ruling:
The transaction between Mistica and respondent was a contract of sale. In such
contract, the remedy of the unpaid seller is either specific performance or
rescission. Under Article 1191, the right to rescind an obligation is predicated on the
violation of the reciprocity between parties, brought about by a breach of faith by
one of them. Rescission, however, is allowed only where the breach is substantial
and fundamental to the fulfillment of the obligation.
23. FIL- ESTATE GOLF AND DEVELOPMENT, INC. (FEGDI) AND FIL-ESTATE LAND, Hills.
INC. (FELI) V. VERTEX
Issue/s:
G.R. No. 123456 | 25 DECEMBER 2018| J. Brion| Mendoza Whether the delay in the issuance of a stock certificate can be considered a
substantial breach as to warrant rescission of the contract of sale.

Doctrine: Mutual restitution is required in cases involving rescission under Article
1191 of the Civil Code. Such restitution is necessary to bring back the parties to
their original situation prior to the inception of the contract.
Held: YES
Ruling:
1. Mutual restitution is required in cases involving rescission under Article 1191 of
the Civil Code. Such restitution is necessary to bring back the parties to their
original situation prior to the inception of the contract.

Accordingly, the amount paid to FEGDI by reason of the sale should be returned to
Facts:
Vertex. On the amount of damages, the CA is correct in not awarding damages since
 FEGDI was the developer of the Forest Hills Golf and Country Club (Forest
Hills) and, in consideration for its financing support and construction Vertex failed to prove by sufficient evidence that it suffered actual damage due to
the delay in the issuance of the certificate of stock.
efforts, was issued several shares of stock of Forest Hills.
 FEGDI sold, on installment, to RS Asuncion Construction Corporation
2. Physical delivery is necessary to transfer ownership of stocks. A sale of shares
(RSACC) one Class “C” Common Share of Forest Hills for P1M.
of stock, physical delivery of a stock certificate is one of the essential requisites
 Prior to the full payment of the purchase price, RSACC sold the said Share
for the transfer of ownership of the stocks purchased.
to Respondent Vertex Sales and Trading, Inc. (Vertex). RSACC advised
FEGDI of the sale to Vertex and FEGDI, in turn, instructed Forest Hills to
In this case, Vertex fully paid the purchase price by 1999 but the stock certificate
recognize Vertex as a shareholder.
was only delivered on 2002 after Vertex filed an action for rescission against FEGDI.
 Despite Vertex’s full payment, the share remained in the name of FEGDI.
Vertex wrote FEDGI a letter demanding the issuance of a stock certificate
Under these facts, FEGDI clearly failed to deliver the stock certificates, representing
in its name.
the shares of stock purchased by Vertex, within a reasonable time from the point
 As the demand went unheeded, Vertex filed a Complaint for Rescission
the shares should have been delivered.
with Damages and Attachment against FEGDI, FELI and Forest Hills. It
averred that the petitioners defaulted in their obligation as sellers when
This was a substantial breach of their contract that entitles Vertex the right to
they failed and refused to issue the stock certificate covering the subject
rescind the sale under Article 1191 of the Civil Code. It is not entirely correct to say
share despite repeated demands based on Article 1191 of the New Civil
that a sale had already been consummated as Vertex already enjoyed the rights a
Code.
shareholder can exercise. The enjoyment of these rights cannot suffice where the
 RTC: Dismissed the complaint. It ruled that delay in the issuance of stock
law, by its express terms, requires a specific form to transfer ownership.
certificates does not warrant rescission of the contract as this constituted a
mere casual or slight breach. It also observed that notwithstanding the
delay in the issuance of the stock certificate, the sale had already been
consummated.
 CA: Reversed the RTC and rescinded the sale of the share. There can be no
valid transfer of shares where there is no delivery of the stock certificate. It
considered the prolonged issuance of the stock certificate a substantial
breach that served as basis for Vertex to rescind the sale.
 FEGDI: argued that the delay cannot be considered a substantial breach
because Vertex was unequivocally recognized as a shareholder of Forest

26. Swire Realty v. Jayne Yu,G.R. No. AUTHOR: S A Y O
207133, March 09, 2015 Notes:
G.R. NO. DATE
TOPIC:
PONENTE:
CASE LAW/ DOCTRINE: Article 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing
of a period.
This is understood to be without prejudice to the rights of third persons who have acquired
the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.
EMERGENCY RECIT:
FACTS:
Respondent Jayne Yu and petitioner Swire Realty Development Corporation entered into a
Contract to Sell covering one residential condominium unit for the total contract price of
P7,519,371.80, payable in equal monthly installments.
Respondent paid the full purchase price of P7,519,371.80 for the unit while making a down
payment of P20,000.00 for the parking lot. However, notwithstanding full payment of the
contract price, petitioner failed to complete and deliver the subject unit on time.
This prompted respondent to file a Complaint for Rescission of Contract with Damages
before the HLURB ENCRFO. (Field Office)
HLURB ENCRFO: rescission is not permitted for slight or casual breach of the contract but
only for such breaches as are substantial and fundamental as to defeat the object of the
parties in making the agreement
HLURB Board of Commissioners reversed:
We find merit in the appeal. The report on the ocular inspection conducted on the subject
condominium project and subject unit shows that the amenities under the approved plan
have not yet been provided as of May 3, 2002, and that the subject unit has not been
delivered to [respondent] as of August 28, 2002, which is beyond the period of development
of December 1999 under the license to sell. The delay in the completion of the project as well
as of the delay in the delivery of the unit are breaches of statutory and contractual
obligations which entitles [respondent] to rescind the contract, demand a refund and
payment of damages
The case went up to the CA- SC
ISSUE(S): WON Rescission should be permitted- YES
RATIO:
Basic is the rule that the right of rescission of a party to an obligation under Article 1191 of
the Civil Code is predicated on a breach of faith by the other party who violates the
reciprocity between them. The breach contemplated in the said provision is the obligor’s
failure to comply with an existing obligation. When the obligor cannot comply with what is
incumbent upon it, the obligee may seek rescission and, in the absence of any just cause for
the court to determine the period of compliance, the court shall decree the rescission.
In the instant case, the CA aptly found that the completion date of the condominium unit
was November 1998 pursuant to License No. 97-12-3202 dated November 2, 1997 but was
extended to December 1999 as per License to Sell No. 99-05-3401 dated May 8, 1999.
However, at the time of the ocular inspection conducted by the HLURB ENCRFO, the unit was
not yet completely finished as the kitchen cabinets and fixtures were not yet installed and
the agreed amenities were not yet available.
The report on the ocular inspection conducted on the subject condominium project and
subject unit shows that the amenities under the approved plan have not yet been provided
as of May 3, 2002, and that the subject unit has not been delivered to respondent as of
August 28, 2002, which is beyond the period of development of December 1999 under the
license to sell. Incontrovertibly, petitioner had incurred delay in the performance of its
obligation amounting to breach of contract as it failed to finish and deliver the unit to
respondent within the stipulated period. The delay in the completion of the project as well as
of the delay in the delivery of the unit are breaches of statutory and contractual obligations
which entitle respondent to rescind the contract, demand a refund and payment of damages.
27 Fong v. Dueñas AUTHOR: TIGLAO
[G.R. No. 185592 | 15 June 2015] NOTES:
TOPIC: Effects of Fraud;
Rescission
PONENTE: J. Brion
CASE LAW/ DOCTRINE:
Rescission has the effect of "unmaking a contract, or its undoing from the
beginning, and not merely its termination." Hence, rescission creates the
obligation to return the object of the contract.
FACTS:
 Duenas and Fong entered into a verbal joint venture agreement to
incorporate Alliance Holdings. They agreed that they would
contribute for its capitalization amounting to 65 million pesos in
equal parts.
 Fong, in wanting to ensure that the shares of Duenas’ corporations
actually amount to 32.5 million sought for the submission of his
financial documents. Duenas, however, did not comply.
 Due to this serious doubt, Fong decided to inform Duenas via letter
to limit his total contribution to 5 Million.
 Fong was convinced that Duenas would no longer honor his
obligations for the joint venture; hence, he inform Duenas that he
would like to cancel it and he sought for the refund of his 5 Million.
 Duenas informed Fong that he cannot return the 5 Million because he
used it to defray business expenses with his two other corporations.
 Fong wrote a final letter of demand and for Duenas’ failure to pay,
he filed a complaint for collection of a sum of money and damages
with the RTC. RTC ruled in favor of Fong. CA reversed.
ISSUE(S): W/N Fong can validly rescind the joint venture agreement
HELD: YES. Petition granted.
RATIO:
An examination of Fong’s complaint shows that although it was labeled as an
action for a sum of money and damages, it was actually a complaint for
rescission. Fong’s allegations primarily pertained to his cancellation of their
verbal agreement because Dueñas failed to perform his obligations to provide
verifiable documents on the valuation of the Danton’s and Bakcom’s shares,
and to incorporate the proposed corporation. These allegations clearly show
that what Fong sought was the joint venture agreement’s rescission.
As a contractual remedy, rescission is available when one of the parties
substantially fails to do what he has obligated himself to perform. It aims to
address the breach of faith and the violation of reciprocity between two
parties in a contract. Under Article 1191 of the Civil Code, the right of
rescission is inherent in reciprocal obligations.
The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him. Fong and
Dueñas’ execution of a joint venture agreement created between them
reciprocal obligations that must be performed in order to fully consummate
the contract and achieve the purpose for which it was entered into.
Rescission has the effect of "unmaking a contract, or its undoing from the
beginning, and not merely its termination." Hence, rescission creates the
obligation to return the object of the contract. It can be carried out only when
the one who demands rescission can return whatever he may be obliged to
restore. To rescind is to declare a contract void at its inception and to put an
end to it as though it never was. It is not merely to terminate it and release
the parties from further obligations to each other, but to abrogate it from the
beginning and restore the parties to their relative positions as if no contract
has been made.
Accordingly, when a decree for rescission is handed down, it is the duty of
the court to require both parties to surrender that which they have
respectively received and to place each other as far as practicable in his
original situation.
Fong’s prayer for the return of his contribution did not automatically convert
the action to a complaint for a sum of money. The mutual restitution of the
parties’ original contributions is only a necessary consequence of their
agreement’s rescission. Rescission under Art. 1191 is applicable in the
present case.
28.) Ascano-Cupino vs. Pacific Rehouse Corp
G.R. No. 205113, August 26, 2015
Doctrine:
•Art. 1191 of the Civil Code provides that: “The power to rescind obligations is
implied in reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him.”
•The injured party may choose between fulfillment and the rescission of the
obligation, with payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.
Facts:
 On Oct 1, 1994 Petitioners and their sister( The Ascanos) entered into a
Deed of Conditional Sale with Pacific Rehouse Corporation (Pacific). The
latter obliged itself to purchase from the Ascanos a parcel of land with an
area of 59,753 square meters located in General Trias, Cavite for
P5,975,300.
 Following the terms of the Deed of Conditional Sale, Pacific paid a down
payment of P1,792,590 leaving a balance of P4,182,710, to be paid upon
the fulfillment of certain conditions, namely:
1.) the completion of all documents necessary for the transfer of the
certificate of title of the land;
2.) the vendors (the Ascanos) shall guarantee removal of the tenants,
squatters and other occupants on the land, with the disturbance
compensation to said tenants to be paid by vendors; and
3.) submission by vendors to Pacific of the Affidavit of Non-Tenancy and
the land operation transfer documents.
 On Nov 1994, Petiioners asked for an additional 600k to be deducted from
the purchase price, which Pacific paud.
 In 1995, Petioners asked for another 1m again, deductible from the
purchase price, purportedly used to fulfill the conditions in the Deed.
Pacific paid the amount.
 On Feb 13, 1995,Petioners submitted to Pacific a Barangay Agrarian Reorm
Council Certification stating that the property was untenanted, and
informed Pacific that the other necessary documents were already being
processed.
 However, the following momth, Petitioners failed to submit said
documents despite demands from Pacific. Instead they informed pacific
that they wanted to rescind the contract and refusd to accept Pacific’s
tender of affitional payments amounting to P1,005,180.
 In the latter part of March 1995, Pacific through Fortuno, opened a savings
account with the Capitol Bank of General Trias Cavite, in the names of
petitioners, depositiin in said account the amount of 1,005,180. Pacific
informed Petitioners of the deposit and that Pacific were authorized to
withdraw the same at their convenience.
 After, Pacific learned that petitioners were negotiation the sale of the
property with other buyers allegedly for a higher consideration – Pacific
then effected an annotation of an adverse claim on the property’s title.
 Pacific made several demands on petitioners to fulfill their obligations
under the deed. Instead of heading the demands, Petitioners through Atty.
Fojas began negotiation with Pacific for the Rescission of the deed of
Conditional sale.
 On Feb 1999, Pacific made another demand on Petitioners to fulfill their
obligations under the Deed of Conditional Sale or to return all payments it
had already made plus legal interest. Petitioners continued to ignore the
demand.
On Sep 1999, Pacific filed a complaint for Cancellation of Contract, Sum of
Money and Damages in the RTC Trece Marteres, However, before pre-trial
Pacific discovered that Petitioners withdrew the amount from the Capitol
Bank Of General Trias.
 In view of that action, Pacific amended its complaint chainging its cause of
action from Cancellation to Specific Performance.
 Petitioners alleged that it was Pacific that defaulted in its payment. They
maintained that the real purchase price they agreed upon was P200 per
square meter, or a total of P11,950,600, and that allegedly the much lower
amount stated in the Deed of Conditional Sale was put there at Pacific's
request in order to lower the taxes they would need to pay.
 The RTC ruled for the cancellation of the contract and ordering defendants
(Ascanos) to return the amount of Two Million Six Hundred Two Thousand
(P2,602,000.00) Pesos to the plaintiff; while Plaintiff is hereby ordered to
pay defendants who incurred the following in defending their rights.
1.) The amount of One Hundred Fifty Thousand (P150,000.00) Pesos as
damages;
2.) The amount of One Hundred Thousand (P100,000.00) Pesos as
attorney's fees; and
3.) The litigation expenses.
 The CA granted the Appeal by Pacific and held that the Trial Court was
wrong in deciding the case on the basis of the original complaint rather
than the amended complaint which changed the cause of action from
Cancellation of Contract to Specific Performance to which the RTC allowed
with leave.
 The CA also held that rescission was not warranted in this case. It ruled
that petitioners "were clearly the ones who failed in their obligation under
the contract."28 Pacific then is the injured party entitled to choose
between rescission of the contract and fulfillment of the obligation. Pacific
 chose the latter, as stated in their Amended Complaint for specific faithfully fulfilled his obligation or is ready and willing to perform his
performance obligation."
 From the foregoing, it is clear that Pacific is the injured party, entitled to
Issue/s: Whether or not Specific Performance is warranted at the case at Bar. elect between rescinding of the contract and exacting fulfillment of the
obligation. It has opted for the remedy of specific performance, as
Held: Yes. Lorem ipsum dolor sit amet. embodied in its Amended Complaint.
 Moreover, rescission must not be allowed in favor of petitioners, since
Ruling: they themselves failed to perform their obligations under the Deed of
 Pacific's obligations are: (1) to pay the down payment of P1,892,590, which Conditional Sale.
it did; and (2) to pay the balance of the purchase price "upon completion  Pacific, therefore, has a balance of P1,577,530 to be paid upon the
by the VENDORS of the pertinent documents that are necessary fulfillment by petitioners of their obligations under the Deed of Conditional
 for the transfer of the Transfer Certificate of Title of the above mentioned Sale. Thereafter, petitioners are to execute the Deed of Absolute Sale in
parcel of land unto the VENDEE[.]" On the other hand, the Ascanos favor of Pacific and deliver all the necessary documents to consummate
undertook the following: (1) to furnish Pacific with all "pertinent the sale
documents that are necessary for the transfer of the Transfer Certificate of
Title" to the subject property; (2) to guarantee removal of tenants and
shoulder the full amount of the tenants' disturbance compensation; and
(3) to furnish Pacific the certificate of non-tenancy and land operation
transfer document
 Art. 1191 of the Civil Code provides that: “The power to rescind
obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him.”
 The injured party may choose between fulfillment and the rescission of
the obligation, with payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
 The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period. This is understood to be without
prejudice to the rights of third persons who have acquired the thing, in
accordance with Articles 1385 and 1388 and the Mortgage Law.
 As previously discussed, the Deed of Conditional Sale clearly spells out the
obligations of each party. Based on the allegations of the parties and the
findings of the lower courts, Pacific has already partially fulfilled its
obligation while petitioners have not.
 The obligation of petitioners under the Deed of Conditional Sale is to
"guarantee removal of tenants" and not merely to pay disturbance
compensation. It is an undertaking specifically given to petitioners under
the Deed of Conditional Sale, considering that Pacific is not yet the owner
of the property and will have no personality to evict the property's present
occupants. Petitioners failed to fulfill this obligation, as well as the
obligation to deliver the necessary documents to complete the sale. As
previously held by the Court, "the injured party is the party who has

29 GUTIERREZ V. GUTIERREZ
G.R. No. 34840 | 23 SEPTEMBER 1931
Topic: Effects of Negligence| Ponente: Malcolm | Author: Acido
Doctrine: The owner of an automobile, who maintains it for the general use of his
family is liable for its negligent operation by one of his children, whom he
designates or permits to run it, where the car is occupied and being used at the
time of the injury for the pleasure of other members of the owner's family than the
child driving it.
Facts:
1. On February 2, 1930, a passenger truck and an automobile of private
ownership collided while attempting to pass each other on the Talon
bridge on the Manila South Road in the municipality of Las Piñas, Province
of Rizal.
2. Passenger Truck: (route San Pablo Laguna to Manila)
Driver – Abelardo Velasco
Owner – Saturnino Cortez. Blames the automobile for the accident.
Plaintiff Narciso Gutierrez was a passenger who suffered a fractured leg.
Blames both parties for the accident (car + truck)
3. Automobile:
Driver – Bonifacio Gutierrez, a lad 18 years old, son of the owner of the
vehicle
Owner – Mr. & Mrs. Manuel Gutierrez. Blames the truck for the accident.
4. At the time of the collision, the father was not in the car, but the mother,
together with several other members of the Gutierrez family, seven in all,
were accommodated therein.
accident. The guaranty given by the father at the time the son was granted
a license to operate motor vehicles made the father responsible for the
acts of his son. Based on these facts, pursuant to the provisions of article
1903 of the Civil Code, the father alone and not the minor or the mother,
would be liable for the damages caused by the minor.
3. We are dealing with the civil law liability of parties for obligations which
arise from fault or negligence. At the same time, we believe that, as has
been done in other cases, we can take cognizance of the common law rule
on the same subject. In the United States, it is uniformly held that the head
of a house, the owner of an automobile, who maintains it for the general
use of his family is liable for its negligent operation by one of his children,
whom he designates or permits to run it, where the car is occupied and
being used at the time of the injury for the pleasure of other members of
the owner's family than the child driving it.
4. The liability of Saturnino Cortez, the owner of the truck, and of his
chauffeur Abelardo Velasco rests on a different basis, namely, that of
contract which, we think, has been sufficiently demonstrated by the
allegations of the complaint, not controverted, and the evidence. The
reason for this conclusion reaches to the findings of the trial court
concerning the position of the truck on the bridge, the speed in operating
the machine, and the lack of care employed by the chauffeur.
5. The defendants Velasco and Cortez further contend that there existed
contributory negligence on the part of the plaintiff, consisting principally of
his keeping his foot outside the truck, which occasioned his injury. In this
connection, it is sufficient to state that, aside from the fact that the
defense of contributory negligence was not pleaded, the evidence bearing
out this theory of the case is contradictory in the extreme and leads us far
afield into speculative matters.

Issue: Whether the owner of the automobile is liable for negligence for the acts of
the driver, who is his minor child.

Held: Yes.

Ruling:
1. It is conceded that the collision was caused by negligence pure and simple.
The difference between the parties is that, while the plaintiff blames both
sets of defendants, the owner of the passenger truck blames the
automobile, and the owner of the automobile, in turn, blames the truck.
2. The youth Bonifacio was an incompetent chauffeur, that he was driving at
an excessive rate of speed, and that, on approaching the bridge and the
truck, he lost his head and so contributed by his negligence to the
30 VASQUEZ V. DE BORJA
No. 48930
 | 23 FEBRUARY 1944
Topic: Effects of Negligence| Ponente: Ozaeta | Author: Castro
Doctrine: The fact that the corporation, acting thru Vazquez as its manager, was
guilty of negligence in the fulfilment of the contract, did not make Vazquez
principally or even subsidiarily liable for such negligence. Since it was the
corporation's contract, its nonfulfilment, whether due to negligence or fault or to
any other cause, made the corporation and not its agent liable.
Facts:
5. Francisco De Borja entered into a contract of sale with Natividad-Vasquez
Sabani Development Co., Inc. (NVSD) wherein the latter obligated
themselves to deliver 4,000 cavans of palay for P8,400 to the former.
6. At the time of the transaction, Antonio Vasquez was the acting manager
and president of NVSD.
7. Due to the failure of NVSD to deliver the balance of 1,512 cavans or its
value, De Borja sued Vasquez and the treasurer of of NVSD for damages.
Vasquez denied entering into the contract in his individual and personal
capacity.
8. The trial court found Vasquez guilty of negligence in the performance of
the contract and held him personally liable on that account.
Issue: Whether Vasquez is liable for negligence
Held: No.
Ruling:
1. The CFI and the CA both erred in holding Vazquez liable for negligence.
They have manifestly failed to distinguish a contractual from an extra-
contractual obligation, or an obligation arising from contract from an
obligation arising from culpa aquiliana. The fault and negligence referred
to in articles 1101-1104 of the Civil Code are those incidental to the
fulfilment or non-fulfilment of a contractual obligation; while the fault or
negligence referred to in article 1902 is the culpa aquiliana of the civil law,
homologous but not identical to tort of the common law, which gives rise
to an obligation independently of any contract.
2. The fact that the corporation, acting thru Vazquez as its manager, was
guilty of negligence in the fulfilment of the contract, did not make Vazquez
principally or even subsidiarily liable for such negligence. Since it was the
corporation's contract, its nonfulfilment, whether due to negligence or
fault or to any other cause, made the corporation and not its agent liable.
3. On the other hand, if independently of the contract Vazquez by his fault or
negligence caused damage to the plaintiff, he would be liable to the latter
under article 1902 of the Civil Code. But then the plaintiff's cause of action
should be based on culpa aquiliana and not on the contract alleged in his
complaint herein; and Vazquez' liability would be principal and not merely
subsidiary, as the Court of Appeals has erroneously held. No such cause of
action was alleged in the complaint or tried by express or implied consent
of the parties by virtue of section 4 of Rule 17. Hence the trial court had no
jurisdiction over the issue and could not adjudicate upon it.
Dissenting Opinion (Paras, J):
De Borja is entitled to judgment against Vasquez. The latter, as acting president and
manager of Natividad-Vazquez Sabani Development Co., Inc., and with full
knowledge of the then insolvent status of his company, agreed to sell to the
plaintiff 4,000 cavans of palay. Notwithstanding the receipt from the plaintiff of the
full purchase price, the defendant delivered only 2,488 cavans and failed and
refused to deliver the remaining 1,512 cavans and failed and refused to deliver the
remaining 1,512 cavans and a quantity of empty sacks, or their value. Such failure
resulted, according to the Court of First Instance of Manila and the Court of
Appeals, from his fault or negligence.
31 Federal Builders v Foundation Specialists, G.R. No. 194507, September 8, 2014 defendant’s failure to deliver the needed cement in accordance with their
PERALTA, J. agreement. The diaphragm wall had likewise been concrete tested and
TOPIC: Effects of Negligence was found to have conformed with the required design strength.
 contrary to the allegations of FBI, FSI had indeed completed its assigned
DOCTRINE: In the absence of any record to otherwise prove FSI’s neglect in the obligations, with the exception of certain assigned tasks, which was due to
fulfilment of its obligations under the contract, this Court shall refrain from the failure of FBI to fulfil its end of the bargain.
reversing the findings of the courts below, which are fully supported by and  It can similarly be deduced that the defects FBI complained of, such as the
deducible from, the evidence on record. Indeed, FBI failed to present any evidence misaligned diaphragm wall and the erroneous location of the rebar dowels,
to justify its refusal to pay FSI for the works it was contracted to perform. were not only anticipated by the parties, having stipulated alternative
plans to remedy the same, but more importantly, are also attributable to
the very actions of FBI. Accordingly, considering that the alleged defects in
FACTS: FSI’s contracted works were not so much due to the fault or negligence of
 Federal Builders, Inc. (FBI) entered into an agreement with Foundation the FSI, but were satisfactorily proven to be caused by FBI’s own acts, FBI’s
Specialists, Inc. (FSI) whereby the latter, as subcontractor, undertook the claim of ₱8,582,756.29 representing the cost of the measures it undertook
construction of the diaphragm wall, capping beam, and guide walls of the to rectify the alleged defects must necessarily fail. In fact, as the lower
Trafalgar Plaza located at Salcedo Village, Makati City (the Project), for a court noted, at the time when FBI had evaluated FSI’s works, it did not
total contract price of Seven Million Four Hundred Thousand Pesos categorically pose any objection
(₱7,400,000.00). Under the agreement, FBI was to pay a downpayment
equivalent to twenty percent (20%) of the contract price and the balance,
through a progress billing every fifteen (15) days, payable not later than
one (1) week from presentation of the billing.
 On January 9, 1992, FSI filed a complaint for Sum of Money against FBI
before the RTC of Makati City seeking to collect the amount of One Million
Six Hundred Thirty-Five Thousand Two Hundred Seventy-Eight Pesos and
Ninety-One Centavos (₱1,635,278.91), representing Billings No. 3 and 4,
with accrued interest from August 1, 1991 plus moral and exemplary
damages with attorney’s fees. In its complaint,FSI alleged that FBI refused
to pay said amount despite demand and itscompletion of ninety-seven
percent (97%) of the contracted works.
 In its Answer with Counterclaim, FBI claimed that FSI completed only
eighty-five percent (85%) of the contracted works, failing to finish the
diaphragm wall and component works in accordance with the plans and
specifications and abandoning the jobsite. FBI maintains that because of
FSI’s inadequacy, its schedule in finishing the Project has been delayed
resulting in the Project owner’s deferment of its own progress billings. It
further interposed counterclaims for amounts it spent for the remedial
works on the alleged defects in FSI’s work.

ISSUE: W/N FBI should pay

HELD: Yes
RULING:
 Plaintiff had finished the construction of the guide wall and diaphragm wall
but had not yet constructed the capping beam as of April 22, 1991 for
32 SSS v MOONWALK
GR No. 73345 | April 7, 1993 | CAMPOS JR. | DELFIN
TOPIC: DELAY (MORA)
DOCTRINE:
Art. 1169. Those obliged to deliver or to do something incur in delay from the time
the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation.
There are only three instances when demand is not necessary to render the obligor
in default which are:
(1) When the obligation or the law expressly so declares;
(2) When from the nature and the circumstances of the obligation it appears
that the designation of the time when the thing is to be delivered or the
service is to be rendered was a controlling motive for the establishment of
the contract; or
(3) When the demand would be useless, as when the obligor has rendered it
beyond his power to perform.
EMERGENCY RECIT: (short case)
FACTS:
1. SSS filed a complaint against Moonwalk Development and Housing Corp
(Moonwalk) alleging Moonwalk failed to compute the 12% interest on the
delated payments of their loan resulting to unpaid balance due.
2. The loan was for P30M, Moonwalk made a total payment of P23,657,901.84 for
the principal plus about P15M based on the statement of account issued by
SSS.
3. After settlement, SSS issued a release of mortgage for moonwalk but later sent
them a letter claiming that they made an honest mistake in releasing the
defendant and that they still have balance due because of unpaid penalties.
4. The trial court dismissed the complaint stating the obligation is already
extinguished through the payment of Moonwalk and SSS’s subsequent
cancellation of the REM.
ISSUE/S:
1. WON Moonwalk is still liable for the unpaid penalties even after the
extinguishment of the principal obligation? - NO
HELD:
 Penalty is demandable in case of non-performance or late performance of the
main obligation. In order that the penalty may arise there must be a breach of
the obligation either by total or partial non-fulfillment or there is non-
fulfillment or delay. There is no mora or delay unless there is a demand.
 There is default when:
(1) the obligation is demandable and already liquidated;
(2) the debtor delays performance; and
(3) the creditor requires the performance judicially and extrajudicially.
 During the period when the principal obligation was still subsisting, although
there were late amortizations there was no demand made by the creditor SSS,
for the payment of the penalty. Therefore, up to the time of the letter sent by
SSS there was no demand for the payment of the penalty, hence Moonwalk
was never in delay.
 Penalty is an accessory obligation that cannot exist without the principal
obligation. Upon the payment of Moonwalk of the P15M and the release
issued, the principal obligation was extinguished and together with it the penal
clause. The demand letter made after was ineffective as there was nothing to
demand anymore.
 The case also does not fall within any of the established exceptions where
demand is not necessary. Mere delinquency in payment does not mean delay
in legal concept (default).
33 Rivera v Spouses Chua G.R. No. 184458 January 14, 2015
Ponente: Perez
Topic: Delay
Author: Enriquez
Doctrine: There are four instances when demand is not necessary to constitute the
debtor in default: (1) when there is an express stipulation to that effect; (2) where
the law so provides; (3) when the period is the controlling motive or the principal
inducement for the creation of the obligation; and (4) where demand would be
useless. In the first two paragraphs, it is not sufficient that the law or obligation
fixes a date for performance; it must further state expressly that after the period
lapses, default will commence.
Facts:
1. The parties were friends of long standing having known each other since 1973.
2. Rivera obtained a loan from the Spouses Chua evidenced by a promissory note
wherein they agreed that failure on Rivera’s part to pay the amount of 120k on
Dec. 31, 1995; the latter will pay 5% interest monthly from the date of default
until the entire obligation is fully paid.
3. Almost 3 years from the date of payment, Rivera issued 2 checks which were
dishonored for the reason “account closed.”
4. Despite repeated demands, Rivera refused to pay. Thus, Sps. Chua filed a
collection case.
5. MeTC, RTC and CA ruled in favor of Spouses Chua.
6. Rivera argued that even assuming the validity of the promissory note, demand
was still necessary in order to charge him liable thereunder. Rivera argues that
it was grave error on the part of the CA to apply Section 70 of the Negotiable
Instruments Law (NIL).
 The Promissory Note is unequivocal about the date when the obligation falls
due and becomes demandable—31 December 1995. As of 1 January 1996,
Rivera had already incurred in delay when he failed to pay the amount of
₱120,000.00 due to the Spouses Chua on 31 December 1995 under the
Promissory Note.
 There are four instances when demand is not necessary to constitute the
debtor in default: (1) when there is an express stipulation to that effect; (2)
where the law so provides; (3) when the period is the controlling motive or the
principal inducement for the creation of the obligation; and (4) where demand
would be useless. In the first two paragraphs, it is not sufficient that the law or
obligation fixes a date for performance; it must further state expressly that
after the period lapses, default will commence.
 In this case, the date of default under the Promissory Note is 1 January 1996,
the day following 31 December 1995, the due date of the obligation. On that
date, Rivera became liable for the stipulated interest which the Promissory
Note says is equivalent to 5% a month. In sum, until 31 December 1995,
demand was not necessary before Rivera could be held liable for the principal
amount of ₱120,000.00. Thereafter, on 1 January 1996, upon default, Rivera
became liable to pay the Spouses Chua damages, in the form of stipulated
interest.

Issue/Held: Whether the CA erred in holding that demand is not necessary and in
applying the Negotiable Instruments Law (NIL)? No. Petition DENIED.

Ratio:
 The SC agreed that the subject promissory note is not a negotiable instrument
and the provisions of the NIL do not apply to this case.
 The Promissory Note in this case is made out to specific persons, herein
respondents, the Spouses Chua, and not to order or to bearer, or to the order
of the Spouses Chua as payees. However, even if Rivera’s Promissory Note is
not a negotiable instrument and therefore outside the coverage of Section 70
of the NIL, Rivera is still liable under the terms of the Promissory Note that he
issued.
34 Maybank Philippines, Inc. (Formerly PNB-Republic Bank v. Tarrosa
G.R. No. 213014 | October 14, 2015
Doctrine:
The In order that the debtor may be in default, it is necessary that: (a) the
obligation be demandable and already liquidated; (b) the debtor delays
performance; and (c) the creditor requires the performance judicially or
extrajudicially, unless demand is not necessary (express stipulation, provided by
law, time is of the essence, or demand is useless).
it is only when demand to pay is unnecessary in case of the
aforementioned circumstances, or when required, such demand is made and
subsequently refused that the mortgagor can be considered in default and the
mortgagee obtains the right to file an action to collect the debt or foreclose the
mortgage.
Facts:
 December 15, 1980 – Sps. Tarrosa obtained from then PNB-Republic Bank,
now petitioner Maybank Philippines, Inc. (Maybank), a loan in the amount
of P91,000.00. The loan was secured by a Real Estate Mortgage.
 After paying the said loan, or sometime in March 1983, Sps. Tarrosa
obtained another loan from Maybank in the amount of P60,000.00.
Payable in March 11, 1984.
 Sps. Tarrosa failed to settle the second loan upon maturity.
 Sps. Tarrosa received a Final Demand Letter 12 dated March 4, 1998 from
Maybank requiring them to settle their outstanding loan in the aggregate
amount of P564,579.91, inclusive of principal, interests, and penalty
charges. They offered to pay a lesser amount, which Maybank refused.
 June 25, 1998 – Maybank commenced extrajudicial foreclosure
proceedings.
 The subject property was eventually sold in a public auction sale for a total
bid price of P600,000.00, to the highest bidder, Philmay Property, Inc.
(PPI).
 Sps. Tarrosa filed a complaint for declaration of nullity and invalidity of the
foreclosure of real estate and of public auction sale proceedings and
damages with prayer for preliminary injunction.
 RTC and CA held that Maybank was barred by laches
Issue/s: Whether Maybank’s right to foreclose the real estate mortgage over the
subject property was barred by prescription.
Held: No.
Ruling:
An action to enforce a right arising from a mortgage should be enforced
within ten (10) years from the time the right of action accrues, i.e., when the
mortgagor defaults in the payment of his obligation to the mortgagee; otherwise, it
will be barred by prescription and the mortgagee will lose his rights under the
mortgage.
However, mere delinquency in payment does not necessarily mean delay
in the legal concept. To be in default is different from mere delay in the
grammatical sense, because it involves the beginning of a special condition or status
which has its own peculiar effects or results.
In order that the debtor may be in default, it is necessary that: (a) the
obligation be demandable and already liquidated; (b) the debtor delays
performance; and (c) the creditor requires the performance judicially or
extrajudicially, unless demand is not necessary (express stipulation, provided by
law, time is of the essence, or demand is useless).
it is only when demand to pay is unnecessary in case of the
aforementioned circumstances, or when required, such demand is made and
subsequently refused that the mortgagor can be considered in default and the
mortgagee obtains the right to file an action to collect the debt or foreclose the
mortgage.
*RTC and CA: Demand is unneccesary in this case – paragraph 5 of the
REM:
In the event that the Mortgagor herein should fail or refuse to pay any of the sums
of money secured by this mortgage, or any part thereof, in accordance with the
terms and conditions herein set forth, or should he/it fail to perform any of the
conditions stipulated herein, then and in any such case, the Mortgagee shall have
the right, at its election to foreclose this mortgage - provision merely articulated
Maybank’s right to elect foreclosure upon Sps. Tarrosa’s failure or refusal to comply
with the obligation secured, which is one of the rights duly accorded to mortgagees
in a similar situation. No way did it affect the general parameters of default,
particularly the need of prior demand under Article 116941of the Civil Code.
In the absence of showing that demand is unnecessary for the loan obligation to
become due and demandable, Maybank’s right to foreclose the real estate
mortgage accrued only after the lapse of the period indicated in its final demand
letter for Sps. Tarrosa to pay, i.e., after the lapse of five (5) days from receipt of
the final demand letter dated March 4, 1998.
35. Abella v. Francisco 1. SC affirmed the decision of the CFI that the fact that the plaintiff had failed to pay
G.R. No. 32336| 20 DECEMBER 1930| BRION the price of the lots within the stipulated time; and that since the contract between
Topic: Mora Solvendi plaintiff and defendant was an option for the purchase of the lots , time was an
essential element in it.
Doctrine: In the case, it has been admitted that the plaintiff did not offer to complete the
Having agreed that the selling would be paid not later than December, 1928, payment until January 9, 1929.
extendible 15 days after and in view of the fact that the vendor executed said In holding that the period was an essential element of the transaction between
contract in order to pay off with the proceeds thereof certain obligations which fell plaintiff and defendant, the trial court considered that the contract in question was
due in the same month of December, it is held that the time fixed for the payment an option for the purchase of the lots, and that in an agreement of this nature the
of the selling price was essential in the transaction, and, therefore, the vendor, period is deemed essential.
under article 1124 of the Civil Code, is entitled to resolve the contract for failure to 2. The opinion of the court is divided upon the question of whether the agreement
pay the price within the time specified. was an option or a sale, but even supposing it was a sale, the court holds that time
was an essential element in the transaction. The defendant wanted to sell those
lots to the plaintiff in order to pay off certain obligations which fell due in the
Facts: month of December, 1928.
 Guillermo Francisco(Defendant) purchased lots of the Tala Estate (subject- The time fixed for the payment of the price was therefore essential for the
lots) from the government on installment but he was in delay on defendant, and this view is borne out by his letter to his representative Mabanta
payments.
 instructing him to consider the contract rescinded if the price was not completed in
 Then, he signed a document stating that he received P500 from Julio time.
Abella(Plaintiff) for subject lots. And the balance being due on/before Dec. In accordance with Art. 1124 of the Civil Code, the defendant is entitled to resolve
15, 1928, extendible up to 15 days after. the contract for failure to pay the price within the time specified.
 - On Dec. 27, 1928, Defendant, who was in Cebu, gave a power of attorney
to Roman Mabanta and instructed him to inform the Plaintiff that upon
failure of paying the remainder of the selling price, the option would be
considered cancelled and he will return the amount paid by the
Plaintiff(P915.31).
 Mabanta notified the Plaintiff that he was willing to execute the proper
deed of sale upon payment of the balance due. Plaintiff asked for a few
days’ time but Mabanta, following instructions given to him by the
defendant only gave him until 15 days after Dec.15.
 -Plaintiff failed to pay remaining balance on Jan. 5 but attempted to do so
on Jan. 9. Mabanta refused to accept it and instead returned by check the
sum of P915.31.
 Plaintiff brought this action to compel the Defendant to execute the deed
of sale of the lots in question upon receipt of the balance of the price.
 CFI ruled in favor of Francisco.

Issue/s:
Whether Defendant-Francisco may rescind the contract in view of the delay in
payment of Abella?
Held: YES

Ruling:
36 SANTOS VENTURA HOCORMA FOUNDATION, INC. v. SANTOS
G.R. No. 153004; 05 November 2004
Topic: Kinds of delay; mora solvendi | Ponente: Quisumbing, J. | Author:
Pagcaliwagan
Doctrine: In order for the debtor to be in default, it is necessary that the following
requisites be present: (1) that the obligation be demandable and already liquidated;
(2) that the debtor delays performance; and (3) that the creditor requires the
performance judicially or extrajudicially.
Emergency Recit: Santos and SVHFI executed a Compromise Agreement on October
26, 1990 to end their pending litigations. SVHFI paid P1.5M to Santos, leaving a
balance of P13M. On September 30, 1991, the RTC issued a Decision approving the
compromise agreement. On October 28, 1992, Santos sent a demand letter to
SVHFI.
Facts:
 Santos and Santos Ventura Hocorma Foundation, Inc. (SVHFI) were the
parties in several cases.
 October 26, 1990 – They executed a Compromise Agreement which
amicably ended all their pending litigations.
 In compliance with the Compromise Agreement, Santos moved for the
dismissal of the civil cases and caused the lifting of the notices of lis
pendens on the real properties involved. While SVHFI, paid P1.5M to
Santos, leaving a balance of P13M.
 SVHFI sold to Development Exchange Livelihood Corporation 2 real
properties (previously subjects of lispendens). Thus, Santos sent a letter to
SVHFI demanding the payment of the remaining P13M, which was ignored.
 September 30, 1991 – RTC issued a Decision approving the compromise
agreement.
 October 28, 1992 – Santos sent another letter to petitioner inquiring when
it would pay the balance of P13M. There was no response from SVHFI.
Issue/s: WON there is delay on the part SVHFI in paying the balance of P13M.
Held: Yes. SVHFI is liable for damages for the delay in the performance of its
obligation.
Ruling:
 The two-year period must be counted from October 26, 1990, the date of
execution of the compromise agreement, and not on the judicial approval
of the compromise agreement on September 30, 1991. When respondents
wrote a demand letter to petitioner on October 28, 1992, the obligation
was already due and demandable. When the petitioner failed to pay its
due obligation after the demand was made, it incurred delay.
 Delay as used in this article is synonymous to default or mora which means
delay in the fulfillment of obligations. It is the non-fulfillment of the
obligation with respect to time.
 In order for the debtor to be in default, it is necessary that the following
requisites be present: (1) that the obligation be demandable and already
liquidated; (2) that the debtor delays performance; and (3) that the
creditor requires the performance judicially or extrajudicially.
 In the case at bar, the obligation was already due and demandable after
the lapse of the two-year period from the execution of the contract. The
two-year period ended on October 26, 1992. When the respondents gave a
demand letter on October 28, 1992, to the petitioner, the obligation was
already due and demandable. Furthermore, the obligation is liquidated
because the debtor knows precisely how much he is to pay and when he is
to pay it.
 The second requisite is also present. Petitioner delayed in the
performance. It was able to fully settle its outstanding balance only on
February 8, 1995, which is more than two years after the extra-judicial
demand. Moreover, it filed several motions and elevated adverse
resolutions to the appellate court to hinder the execution of a final and
executory judgment, and further delay the fulfillment of its obligation.
 Third, the demand letter sent to the petitioner on October 28, 1992, was in
accordance with an extra-judicial demand contemplated by law.
37. Dr. Daniel Vasquez, Luisa Vasquez v. Ayala Corporation
G.R. No. 149734; 19 November 2004
Topic: mora solvendi | Ponente: J. Tinga | Author: Pineda
Doctrine: No delay without demand.
In order that the debtor may be in default it is necessary that the following
requisites be present: (1) that the obligation be demandable and already liquidated;
(2) that the debtor delays performance; and (3) that the creditor requires the
performance judicially or extrajudicially.
Facts:
 In 1981, Sps. Vasquez and Ayala entered into a Memorandum of
Agreement (MOA) wherein Ayala would buy Sps’ Vasquez’ shares of stock
in Conduit. The main asset of Conduit is a 49.9ha property in Ayala Alabang
Village (AAV) which was being developed into Don Vicente Village.
 Under the MOA, Ayala was to develop the entire property (“Remaining
Area”) less 18736 sqm (“Retained Area”) which was to be retained by Sps.
Vasquez. The MOA provided: “The BUYER hereby commits that it will
develop the 'Remaining Property' into a first class residential subdivision of
the same class as its New Alabang Subdivision, and that it intends to
complete the first phase under its amended development plan within
three (3) years from the date of this Agreement”
 The MOA provided that Ayala agrees to give Sps. Vasquez a first option to
purchase four developed lots next to the “Retained Area” at the
“prevailing market price at the time of the purchase” within three years
from the signing of the MOA.
 Sps. Vasquez started sending several “reminder” letters to Ayala,
reminding Ayala that the latter was obligated to sell the four lots within
three years from the date of the MOA. However, in 1984 when the three
years lapsed, Sps. Vasquez failed to make any demand to Ayala for the
latter to sell the four lots. By 1990, Ayala finished the development of the
four lots. Ayala offered the four lots for sale to Sps. Vasquez at the
prevailing price in 1990. Sps. Vasquez rejected the offer, as they argued
that the proper price is that in 1984.
 Sps. Vasquez filed a case for specific performance. Ayala argued that Sps.
Vasquez had no right, as they allegedly breached certain warranties given
that there were unpaid credits to GP Construction.
 CFI rendered judgment in favor of Sps. Vasquez, ordering Ayala to sell the
four lots at P460 per sqm (1984 prices). CFI did not find any breach of
warranties. CFI found that Ayala was in delay as Ayala was under an
obligation to develop and sell the four lots in question within three years
from the date of the MOA.
 Ayala filed an appeal. CA found that there was no delay as Sps. Vasquez
never made a demand for Ayala to sell the lots. Sps. Vasquez simply sent
reminder letters, and requested Ayala to send updates.
Issue/s: W/N Ayala was in delay in the development and sale of the four lots (mora
solvendi)
Held: No. There was no delay, in the absence of a day certain and in the absence of
a demand. As there was no delay, the price of the four lots should be that In 1990
when Sps. Vasquez first demanded for the sale of the lots.
Ruling:
 In order that the debtor may be in default it is necessary that the following
requisites be present: (1) that the obligation be demandable and already
liquidated; (2) that the debtor delays performance; and (3) that the
creditor requires the performance judicially or extrajudicially.
 Under Article 1193 of the Civil Code, obligations for whose fulfillment a day
certain has been fixed shall be demandable only when that day comes.
o No such day certain was fixed in the MOA. Since the MOA does
not specify a period for the development of the subject lots, Sps.
Vasquez should have petitioned the court to fix the period in
accordance with Article 1197 of the Civil Code.
o As no such action was filed by petitioners, their complaint for
specific performance was premature, the obligation not being
demandable at that point. Accordingly, Ayala Corporation cannot
likewise be said to have delayed performance of the obligation.
 Even assuming that the MOA imposes an obligation on Ayala Corporation
to develop the subject lots within three (3) years from date thereof, Ayala
Corporation could still not be held to have been in delay since no demand
was made by petitioners for the performance of its obligation.
o The letters sent by Sps. Vasquez were mere reminders and not
categorical demands to perform.
#38 Agner v BPI Issue/s:
G.R. No. 182963, June 3, 2013 WON demand was necessary- NO, because of the stipulation in the contract
Topic: Delay (Mora Solvendi)| Ponente: J. Peralta| Author: S A Y O WON petitioners are in delay- YES

Doctrine: The Civil Code in Article 1169 provides that one incurs in delay or is in
default from the time the obligor demands the fulfillment of the obligation from the
obligee. However, the law expressly provides that demand is not necessary under
certain circumstances, and one of these circumstances is when the parties expressly
waive demand. Hence, since the co-signors expressly waived demand in the
promissory notes, demand was unnecessary for them to be in default.
Facts:
1. Spouses Agner executed a Promissory Note with Chattel Mortgage in favor
of Citimotors, Inc.
2. Contents of contract: for receiving the amount of Php834, 768.00,
petitioners shall pay Php 17,391.00 every 15th day of each succeeding
month until fully paid; the loan is secured by a 2001 Mitsubishi Adventure
Super Sport; and an interest of 6% per month shall be imposed for failure
to pay each installment on or before the stated due date.
Held:
As to the second issue, records bear that both verbal and written demands were in
fact made by respondent prior to the institution of the case against petitioners.
Even assuming, for argument’s sake, that no demand letter was sent by respondent,
there is really no need for it because petitioners legally waived the necessity of
notice or demand in the Promissory Note with Chattel Mortgage, which they
voluntarily and knowingly signed in favor of respondent’s predecessor-in-interest.
Said contract expressly stipulates:
In case of my/our failure to pay when due and payable, any sum
which I/We are obliged to pay under this note and/or any other
obligation which I/We or any of us may now or in the future owe
to the holder of this note or to any other party whether as
principal or guarantor x x x then the entire sum outstanding under
this note shall, without prior notice or demand, immediately
become due and payable. (Emphasis and underscoring supplied)

3. There were subsequent transfer of rights with respect to the P/N as

Citimotors assigned to ABN AMRO Savings Bank, Inc. (ABN AMRO), which
likewise assigned the same to respondent BPI Family Savings Bank, Inc.

4. For failure to pay four successive installments, respondent sent to

petitioners a demand letter dated declaring the entire obligation as due
and demandable and requiring to pay Php576,664.04, or surrender the
mortgaged vehicle immediately upon receiving the letter.

5. As the demand was left unheeded, respondent filed on October 4, 2002 an

action for Replevin and Damages before the Manila Regional Trial Court
(RTC).- granted by RTC
6. CA affirmed.
39 CABANTING v. BPI FAMILY SAVINGS BANK obligor demands the fulfillment of the obligation from the obligee.
G.R. No. 201927; 17 February 2016 However, the law expressly provides that demand is not necessary under
Topic: Mora Solvendi| Ponente: J. Peralta | Author: Tiglao certain circumstances, and one of these circumstances is when the parties
expressly waive demand.
 Article 1169 allows a party to waive the need for notice and demand.
Doctrine: As similarly ruled in Agner v. BPI Family Savings Bank, a provision on Petitioners’ argument that their liability cannot be deemed due and
waiver of notice or demand has been recognized as legal and valid. Article 1169 payable for lack of proof of demand must be struck down.
provides that one incurs in delay or is in default from the time the obligor demands
the fulfillment of the obligation from the obligee. However, the law expressly N.B. Here is the stipulation in the PN which effectively waived the need for
provides that demand is not necessary under certain circumstances, and one of notice.
these circumstances is when the parties expressly waive demand.
"[i]n case of my/our [petitioners'] failure to pay when due and payable, any
sum which I/We x x x or any of us may now or in the future owe to the
holder of this note x x x then the entire sum outstanding under this note
Facts:
shall immediately become due and payable without the necessity of notice
1. Petitioners bought on installment basis from Diamond Motors Corporation
or demand which I/We hereby waive."
a car, wherein they executed and delivered to Diamond Motors a PN with
Chattel Mortgage which contained a stipulation waiving the necessity of
notice and demand to make the obligation due and payable.
2. Petitioners solidarily obligated themselves to pay Diamond Motors. On the
day of the execution of the document, Diamond Motors, with notice to
petitioners, executed a Deed of Assignment, thereby assigning to BPI
Family Savings Bank all its rights, title, and interest to the PN with Chattel
Mortgage.
3. BPI filed a Complaint against petitioners for Replevin praying that
petitioners pay the unpaid portion of the vehicle’s purchase price.
4. Petitioners allege that they sold the car to Victor Abalos, with the
agreement that Abalos shall assume the obligation to pay the remaining
installments.
5. RTC: Ruled against petitioners.
6. CA Ruling: Ruled that no prior demand was necessary to make petitioners’
obligation due and payable because they have effectively waived it under
the PN.

Issue: W/N petitioners are bound by the stipulation in the PN waiving the necessity
of notice and demand to make the obligation due and payable – YES

Held/Ruling:
 Petitioners are bound by the stipulation in the PN with Chattel Mortgage
waiving the necessity of notice and demand to make the obligation due
and payable.
 As similarly ruled in Agner v. BPI Family Savings Bank, a provision on
waiver of notice or demand has been recognized as legal and valid. Article
1169 provides that one incurs in delay or is in default from the time the
40. Claudina vda. De Villaruel et al. vs. Manila Motor Co and Arturo Colmenares
G.R. No. L-10394 December 13, 1958
Topic: Mora accipiendi| Ponente: JBL REYES| Author: Valera
Doctrine: The lessor' insistence upon collecting the occupation rentals for 1942-
1945 was unwarranted in law. Hence, their refusal to accept the current rentals
without qualification placed them in default (mora creditoris or accipiendi) with the
result that thereafter, they had to bear all supervening risks of accidental injury or
destruction of the leased premises
Emergency Recit: The parties here were in a lease agreement for 5 years but
during the Japanese occupation the lessee Manila motor, was disposed. Now after
Manila Motors were reinstated in their occupancy. They are now being asked to
pay for rentals during the Japanese occupation. The defendant Manila motors
tendered payment of their current month rentals but Plaintiffs refused until it was
agreed upon that they are reserving their right to collect the rents in arrears
Plaintiffs filed a case against them but during the pendency of the cases, the
properties were razed in a fire. The SC held that since the act of the Plaintiffs in
refusing to accept the money tendered for the current rents it put them in Mora
accipiendi and the plaintiffs must bear the loss of the properties.
Facts:
 On May 1940, The plaintiffs Villaruel and defendant Manila Motor Co.
Entered into a Lease agreement for 3 properties for a term of 5 years to
commence from the time that the properties were delivered and placed at
the disposal of the lessee. The contact was renewable for an additional
period of 5 years.
 The leased premises were placed in the possession of the lessee on the Oct
31, 1940 from which date the period of the lease started to run.
 Manila Motor’s occupation and payment of rentals continued until the
Japanese occupation Of Bacolod. Where the enemy forces held and used
the properties leased as part of their quarters from June 1 1942 – March
29 1945 ousting the lessee therefrom. No payment of rental were made at
any time during that period
 After the liberation of the city in 1945, the American Forces occupied the
same until Oct 31, 1945. The monthly rentals were paid by the Americans
during that time, with the same rate that Manila Motors pay.
 After the Americans gave up the occupancy of the premises, Manila
Motors decided to exercise their option to renew the contract for the
additional period of 5 years. And the parties agreed that the 7 mos
occupancy by the Americans would not be counted as part of the new 5
year term
 However, before resuming the collection of Rentals Dr. Villaruel consulted
Atty. Hilado on whether they had the right to collect from the defendant
rentals corresponding to the time during the Japanese forces had
occupation of the properties. After being advised that they had such right
Dr. Villaruel demanded payment thereof, but Manila Motors refused to
pay. Thus Dr Villaruel gave notice seeking the rescission of the contract and
the payment of rentals from June 1 1942- March 31, 1945.
 This was rejected by Manila motors in a letter Dated July 27. 1946.
 On the same month representatives of Manila Motors offered to pay the
amount of 1 month rent for that month, However Dr. Villaruel expressed
willingness to accept the tendered amount provided that his acceptance
should be understood to be without prejudice to their demand for the
rescission of the contract and for increased rentals until their building were
returned tot them Later, Dr. Villaruel indicated his willing ness to limit the
condition of his acceptance to be that neither the lessee nor the lessors
admit the contention of the other by mere fact of payment.
 As no accord could still be reached, no payment was thereafter tendered
until the end of Nov 1946. On Dec 4 Manila Motor remitted to Dr. Villaruel
the sum of 350php for this payment. Dr. Villaruel issued a receipt that it
was w/o prejudice to their demand for rents in arrears and for the
rescission of the contract of lease.
 After it had become evident that the parties could not settle their case.
The lessors commenced a case against Manila Motor. During the pendency
of the case a fire razed the properties leased.
 Because of the fire, Plaintiffs demanded reimbursement from Manila
Motor but after being refused they filed a supplemental complaint to
include the recovery of the value of the burned buildings
 Manila motor filed their amended answer and also moved for the dismissal
of the action’s 1st and seconf cause of action invoking the Debt
Moratorium that was then in force. The dismissal was granted by the trial
court but hearing was set as regards the 3rd cause of of action.
 However in a subsequent decision the trial court reversed its earlier finding
and ruled in favor of the plaintiffs.
Issue/s:
1. whether the defendant-appellant Manila Motor Co., Inc. should be held
liable for the rentals of the premises leased corresponding to the lapse of
time that they were occupied as quarters or barracks by the invading
Japanese army,
2. whether said appellant was placed in default by its refusal to comply with
the demand to pay such rents.
Held: No. On both.

Ruling: (Ratio focused only on 2nd issue)
1.
 Under their civil code Art 1560 excuses the lessee if there was trespass
under color of title. In the case at bar the Japanese occupation was
considered a trespass under color of title( pertubacion de
derecho.)Because for under generally accepted principles of
international law. A belligerent occupant may quarter its troops in
private land
 We are thus forced to conclude that in evicting the lessee, Manila
Motor Co., Inc. from the leased buildings and occupying the same as
quarters for troops, the Japanese authorities acted pursuant to a right
recognized by international and domestic law. Its act of dispossession,
therefore, did not constitute perturbacion de hecho but aperturbacion
de derecho for which the lessors Villaruel (and not the appellants
lessees) were liable (Art. 1560, supra) and for the consequences of
which said lessors must respond, since the result of the disturbance
was the deprivation of the lessee of the peaceful use and enjoyment
of the property leased. Wherefore, the latter's corresponding
obligation to pay rentals ceased during such deprivation.
2.
 The lessors accepted payment of current rentals from October 1945 to
June 1946. It was only in July 1946 that they insisted upon collecting
also the 1942-1945 rents, and refused to accept further payments
tendered by the lessee unless their right to collect the occupation
rental was recognized
 or reserved. After refusing the rents from July to November 1946,
unless the lessee recognized their right to occupation rentals, the
appellees (lessors) demanded rescission of the contract and a rental of
P1,740 monthly in lieu of the stipulated P350 per month
 Clearly, then, the lessor' insistence upon collecting the occupation
rentals for 1942-1945 was unwarranted in law. Hence, their refusal to
accept the current rentals without qualification placed them in default
(mora creditoris or accipiendi) with the result that thereafter, they had
to bear all supervening risks of accidental injury or destruction of the
leased premises. While not expressly declared by the Code of 1889,
this result is clearly inferable from the nature and effects of mora, and
from Articles 1185, 1452
- ART. 1185. When the obligation to deliver a certain and
determinate thing arises from the commission of a crime or
misdemeanor the obligor shall not be exempted from the
payment of its value, whatever the cause of its loss may have
been, unless, having offered the thing to the person entitled to
receive it, the latter should have refused without reason to accept
it.
- Art. 1452. . If fungible things should be sold for a price fixed with
relation to weight, number, or measure, they shall not be at the
purchaser's risk until they have been weighed, counted, or
measured, unless the purchaser should be in default.
- ART. 1589. If the person who contracted to do the work bound
himself to furnish the materials, he shall bear the loss in case of
the destruction of the work before it is delivered, unless its
acceptance has been delayed by the default of the other party.
 the parties and the trial court have all proceeded and discussed the
issues taking for granted that thed estruction of the leased buildings
was purely fortuitous. We see no reason for departing from that
assumption and further prolonging this litigation.. That the lessee and
sublessee did not consign or deposit in court the rentals tendered to
and improperly rejected by the lessors, did not render the debtor
liable for default (mora solvendi) nor answerable for fortuitous events
 the only effect of the failure to consign the rentals in court was that
the obligation to pay them subsisted (P.N.B. vs. Relativo, 92 Phil., 203)
and the lessee remained liable for the amount of the unpaid contract
rent, corresponding to the period from July to November, 1946; it
being undisputed that, from December 1946 up to March 2, 1948,
when the commercial buildings were burned, the defendants-
appellants have paid the contract rentals at the rate of P350 per
month. But the failure to consign did not
 eradicate the default (mora) of the lessors nor the risk of loss that lay
upon them.
Courts rulings:
>That the insistence of the lessors to collect such rentals was unwarranted;
> That the lessors were not justified in refusing to accept the tender of current
rentals unless the lessee should recognize their right to the rents corresponding to
the period that the lessee was not in possession;
>That by their improper refusal to accept the current rents tendered by the
lessee, the lessors incurred in default (mora) and they must shoulder the
subsequent accidental loss of the premises leased
> That the mora of the lessors was not cured by the failure of the lessee to make
the consignation of the rejected payments, but the lessee remained obligated to
pay the amounts tendered and not consigned by it in court.
41 EMILIA TENGCO v. CA and BENJAMIN CIFRA JR.
G.R. No. L-49852 October 19, 1989 Issue: Whether Cifra was guilty of mora accipiendi.
Topic: Mora accipiendi | Ponente: Padilla, J. | Author: Acido
Held: No. Petition denied

Doctrine: The ownership of the property had been transferred to the private Ruling:
respondent and the person to whom payment was offered had no authority to 1. Under the circumstances, the refusal to accept the proffered rentals is not
accept payment. The petitioner should have tendered payment of the rentals to the without justification. The ownership of the property had been transferred
private respondent and if that was not possible, she should have consigned such to the private respondent and the person to whom payment was offered
rentals in court. had no authority to accept payment.
2. It should be noted that the contract of lease between the petitioner and
Lutgarda Cifra, the former owner of the land, was not in writing and,
Facts: hence, unrecorded. The Court has held that a contract of lease executed by
1. Sometime in 1942, petitioner Emilia Tengco entered into a verbal lease the vendor, unless recorded, ceases to have effect when the property is
agreement with Lutgarda Cifra over the premises in question which sold, in the absence of a contrary agreement.
belonged to the latter. The rentals were collected from her residence by 3. The petitioner cannot claim ignorance of the transfer of ownership of the
the lessor's collector who went to her house to demand and collect property because, by her own account, Aurora Recto and Cifra, at various
payment from time to time, with no fixed frequency times, had informed her of their respective claims to ownership of the
2. Sometime in 1974, the lessor's collector stopped going to the petitioner's property occupied by the petitioner. The petitioner should have tendered
residence to collect her rentals, as she had done in the past. Tengco waited payment of the rentals to the private respondent and if that was not
for the collector to come but the latter never showed up again. Since no possible, she should have consigned such rentals in court.
demand for payment was made upon her, Tengco decided to keep the
money until the collector comes again to demand and collect payment.
3. Sometime in May 1976, petitioner received a letter from Aurora C. Recto,
sister of private respondent Benjamin Cifra, informing her that Cifra was
the owner of the property in question, and was offering the same for sale.
4. In August 1977, petitioner received another letter, this time from Cifra,
demanding the surrender of the possession of the premises in question,
also claiming to be the owner of the property. Upon receipt of this letter,
petitioner forthwith went to the residence of the collector, another sister
of Cifra to whom she had been paying her rentals, and there tendered
payment but this was refused without any justification.
5. On September 16, 1976, Cifra filed an action for unlawful detainer to evict
the petitioner from the premises in Navotas, Metro Manila, for her alleged
failure to comply with the terms and conditions of the lease contract by
failing and refusing to pay the stipulated rentals despite repeated
demands.
6. Tengco admits that she is a lessee on the premises in question and that she
had been in default in the payment of the rentals thereon since February,
1974 allegedly because of the refusal of the collector to accept her tender
of payment. However, she claims that the lease agreement was not with
private respondent, but with his mother.
7. Trial court and CA ruled against Tengco.
42 CENTRAL BANK V. COURT OF APPEALS
No. L-45710
 | 03 OCTOBER 1985
Topic: Compensatio morae| Ponente: Makasiar, C.J. | Author: Castro
Doctrine: Where the bank failed to release the entire approved loan, but the
borrower also failed to pay the partial loan release he got after it fell due, both are
in default and their respective liability for damages shall be offset equitably,
exclusive of the interest due on the overdue loan portion. Article 1192 of the Civil
Code provides that in case both parties have committed a breach of their reciprocal
obligations, the liability of the first infractor shall be equitably tempered by the
courts.
Facts:
9. In 1965, Island Savings Bank approved the loan application for P80,000.00
of Sulpicio Tolentino, who, as a security for the loan, executed a real estate
mortgage over his 100-hectare land.
10. A partial release of P17,000.00 was made by the Bank and in turn,
Tolentino signed a promissory note for P17,000.00 with 12% interest,
payable within 3 years from 1965.
11. The Bank failed to release the remaining P63,000.00 despite repeated
demands and the Central Bank, after declaring the bank to be insolvent,
instructed the Acting Superintendent of Banks to take charge of its assets.
12. In 1968, due to the non-payment of the P 17,000.00 covered by the
promissory note, the bank filed an application for the extra-judicial
foreclosure of the real estate mortgage. On the other hand, Tolentino filed
a petition for injunction, specific performance or rescission and damages
for the bank’s failure to deliver the P63,000.00.
Issue: Who is guilty of delay?
Held: Both parties. There is compensation morae in this case.
Ruling:
1. When Island Savings Bank and Sulpicio M. Tolentino entered into an
P80,000.00 loan agreement on April 28, 1965, they undertook reciprocal
obligations. The promise of Sulpicio M. Tolentino to pay was the
consideration for the obligation of Island Savings Bank to furnish the
P80,000.00 loan. When Sulpicio M. Tolentino executed a real estate
mortgage on April 28, 1965, he signified his willingness to pay the
P80,000.00 loan. From such date, the obligation of Island Savings Bank to
furnish the P80,000.00 loan accrued. Thus, the Bank's delay in furnishing
the entire loan started on April 28, 1965, and lasted for a period of 3 years
or when the Monetary Board of the Central Bank issued Resolution No.
967 on June 14, 1968, which prohibited Island Savings Bank from doing
further business. Such prohibition made it legally impossible for Island
Savings Bank to furnish the P63,000.00 balance of the P80,000.00 loan.
2. The promissory note gave rise to Sulpicio M. Tolentino's reciprocal
obligation to pay the P17,000.00 loan when it falls due. His failure to pay
the overdue amortizations under the promissory note made him a party in
default, hence not entitled to rescission (Article 1191 of the Civil Code). If
there is a right to rescind the promissory note, it shall belong to the
aggrieved party, that is, Island Savings Bank. If Tolentino had not signed a
promissory note setting the date for payment of P17,000.00 within 3 years,
he would be entitled to ask for rescission of the entire loan because he
cannot possibly be in default as there was no date for him to perform his
reciprocal obligation to pay.
3. Since both parties were in default in the performance of their respective
reciprocal obligations, that is, Island Savings Bank failed to comply with its
obligation to furnish the entire loan and Sulpicio M. Tolentino failed to
comply with his obligation to pay his P17,000.00 debt within 3 years as
stipulated, they are both liable for damages. Article 1192 of the Civil Code
provides that in case both parties have committed a breach of their
reciprocal obligations, the liability of the first infractor shall be equitably
tempered by the courts. WE rule that the liability of Island Savings Bank for
damages in not furnishing the entire loan is offset by the liability of Sulpicio
M. Tolentino for damages, in the form of penalties and surcharges, for not
paying his overdue P17,000.00 debt. The liability of Sulpicio M. Tolentino
for interest on his P17,000.00 debt shall not be included in offsetting the
liabilities of both parties. Since Sulpicio M. Tolentino derived some benefit
for his use of the P17,000.00, it is just that he should account for the
interest thereon.
4. The real estate mortgage of Sulpicio M. Tolentino cannot be entirely
foreclosed to satisfy his P17,000.00 debt. Since Island Savings Bank failed
to furnish the P63,000.00 balance of the P80,000.00 loan, the real estate
mortgage of Sulpicio M. Tolentino became unenforceable to such extent.
43 Nakpil v CA, L-47851, October 3, 1986
PARAS, J.
TOPIC: Fortuitous event
DOCTRINE: To exempt the obligor from liability under Article 1174 of the Civil Code,
for a breach of an obligation due to an "act of God," the following must concur: (a)
the cause of the breach of the obligation must be independent of the will of the
debtor; (b) the event must be either unforseeable or unavoidable; (c) the event
must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and (d) the debtor must be free from any participation in, or
aggravation of the injury to the creditor.
FACTS:
 The plaintiff, Philippine Bar Association, a civic-non-profit association,
incorporated under the Corporation Law, decided to construct an office
building on its 840 square meters lot located at the comer of Aduana and
Arzobispo Streets, Intramuros, Manila. The construction was undertaken
by the United Construction, Inc. on an "administration" basis, on the
suggestion of Juan J. Carlos, the president and general manager of said
corporation. The proposal was approved by plaintiff's board of directors
and signed by its president Roman Ozaeta, a third-party defendant in this
case. The plans and specifications for the building were prepared by the
other third-party defendants Juan F. Nakpil & Sons. The building was
completed in June, 1966.
 In the early morning of August 2, 1968 an unusually strong earthquake hit
Manila and its environs and the building in question sustained major
damage. The front columns of the building buckled, causing the building to
tilt forward dangerously. The tenants vacated the building in view of its
precarious condition. As a temporary remedial measure, the building was
shored up by United Construction, Inc. at the cost of P13,661.28.
 On November 29, 1968, the plaintiff commenced this action for the
recovery of damages arising from the partial collapse of the building
against United Construction, Inc. and its President and General Manager
Juan J. Carlos as defendants. Plaintiff alleges that the collapse of the
building was accused by defects in the construction, the failure of the
contractors to follow plans and specifications and violations by the
defendants of the terms of the contract.
 Defendants in turn filed a third-party complaint against the architects who
prepared the plans and specifications, alleging in essence that the collapse
of the building was due to the defects in the said plans and specifications.
 The Commissioner eventually submitted his report on September 25, 1970
with the findings that while the damage sustained by the PBA building was
caused directly by the August 2, 1968 earthquake whose magnitude was
estimated at 7.3 they were also caused by the defects in the plans and
specifications prepared by the third-party defendants' architects,
deviations from said plans and specifications by the defendant contractors
and failure of the latter to observe the requisite workmanship in the
construction of the building and of the contractors, architects and even the
owners to exercise the requisite degree of supervision in the construction
of subject building.
 Because of another earthquake on April 7, 1970, the trial court after the
needed consultations, authorized the total demolition of the building
ISSUE: W/N the defendants are liable for the damage
HELD: Yes
RULING:
 There is no dispute that the earthquake of August 2, 1968 is a fortuitous
event or an act of God.
 if upon the happening of a fortuitous event or an act of God, there concurs
a corresponding fraud, negligence, delay or violation or contravention in
any manner of the tenor of the obligation as provided for in Article 1170 of
the Civil Code, which results in loss or damage, the obligor cannot escape
liability.
 Thus it has been held that when the negligence of a person concurs with
an act of God in producing a loss, such person is not exempt from liability
by showing that the immediate cause of the damage was the act of God.
 The negligence of the defendant and the third-party defendants
petitioners was established beyond dispute both in the lower court and in
the Intermediate Appellate Court. Defendant United Construction Co., Inc.
was found to have made substantial deviations from the plans and
specifications. and to have failed to observe the requisite workmanship in
the construction as well as to exercise the requisite degree of supervision;
while the third-party defendants were found to have inadequacies or
defects in the plans and specifications prepared by them. As correctly
assessed by both courts, the defects in the construction and in the plans
and specifications were the proximate causes that rendered the PBA
building unable to withstand the earthquake of August 2, 1968. For this
reason the defendant and third-party defendants cannot claim exemption
from liability.
 The records show that the lower court spared no effort in arriving at the
correct appreciation of facts by the referral of technical issues to a
Commissioner chosen by the parties whose findings and conclusions
remained convincingly unrebutted by the intervenors/amicus curiae who
were allowed to intervene in the Supreme Court.
 In any event, the relevant and logical observations of the trial court as
affirmed by the Court of Appeals that "while it is not possible to state with
certainty that the building would not have collapsed were those defects
not present, the fact remains that several buildings in the same area
withstood the earthquake to which the building of the plaintiff was
similarly subjected," cannot be ignored.
44 FIL ESTATE PROPERTIES INC V SPS RONQUILLO 5. Petitioners appealed with OP and CA which were both denied. They claim that
GR No. 185798 | January 13, 2014 | PEREZ the 1997 Asian financial crisis that caused the delay befalling the real estate
industry constitutes as a fortuitous event.
TOPIC: FORTUITOUS EVENT; NCC 1174
ISSUE/S:

DOCTRINE:
Requisites of Fortuitous Event:
(a) the cause of the breach of the obligation must be independent of
the will of the debtor;
(b) the event must be either unforeseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner; and,
(d) the debtor must be free from any participation in or aggravation of
the injury to the creditor.
WON Asian financial crisis constitute a fortuitous event which would justify delay by
petitioners in the performance of their contractual obligation? - NO
HELD:
 The Court in the ase of Fil Estate v Spouses Go stated that the Asian financial
crisis is not an instance of caso fortuito. This case has the same factual milieu as
the instant case, which involves the same company but a different
condominium project.

 The company’s failure to develop the condominium project despite substantial

EMERGENCY RECIT: (short case) payment of the contract price amounts to breach of their obligation.

FACTS:  A real estate enterprise engaged in the pre-selling of condominium units is

1. Petitioner Fil Estate Properties Inc is the owner and developer of Central Park
Place Tower, its co petitioner Fil Estate Network is its authorized marketing
agent. Sps Ronquillo and Maria Ronquillo bought a condominium from them
for P5.1M.
2. The Ronquillos executed a Reservation application agreement, agreeing to
deposit P200K as reservation fee. They paid the down payment and monthly
amortizations.
concededly a master in projections on commodities and currency movements
and business risks. The fluctuating movement of the Philippine peso in the
foreign exchange market and currency exchange rate is an everyday
occurrence. Thus the 1997 Asian financial crisis cannot be held as unforeseen
and beyond the control of a business corporation that will amount to a
fortuitous event justifying the delay of the construction project.

3. Upon learning that the construction has topped, the also stopped paying the
monthly amortization and demanded full refund of the amount they already
paid. Fil Estate refused so they filed a complaint for refund and damages before
HLURB.

4. The HLURB ordered Fil Estate Properties and Fil Estate Network solidary jointly
and severally liable. The Arbiter considered petitioners’ failure to develop the
condominium project as a substantial breach of their obligation which entitles
respondent to seek for rescission with payment of damages and that economic
hardship is not an excuse for contractual and legal delay.
45 Cheng et.al. v CA and Philam Insurance
G.R. No. 144169; 28 March 2001
Topic: Remedies of Creditors, Accion Pauliana | Ponente: J. Kapunan | Author:
Enriquez
Doctrine: 1) That the plaintiff asking for rescission has a credit prior to, the
alienation, although demandable later; 2) That the debtor has made a subsequent
contract conveying a patrimonial benefit to a third person; 3) That the creditor has
no other legal remedy to satisfy his claim, but would benefit by rescission of the
conveyance to the third person; 4) That the act being impugned is fraudulent; 5)
That the third person who received the property conveyed, if by onerous title, has
been an accomplice in the fraud.
Facts:
1. Petitioner Cheng is the owner of Butuan Shipping Lines. PH Agri Trading Corp.
shipped on board the vessel of Cheng 3,400 bags of copra. The said shipment is
covered by a marine insurance policy issued by American Home Insurance
Company (respondent Philam's assured).
2. However, it sank. Because of the loss, the insurer, American Home, paid the
amount of P354,000.00 (the value of the copra) to the consignee.
3. Having been subrogated into the rights of the consignee, American Home
instituted a Civil Case to recover the money paid to the consignee, based on
breach of contract of carriage. While the case was still pending or on 1989,
Cheng executed deeds of donations of parcels of land in favor of his children,
herein co-petitioners.
4. On Dec. 1993, the RTC ruled against Cheng and a writ of execution was
granted. When the sheriff, accompanied by counsel of respondent Philam,
went to Butuan City on Jan. 1997, to enforce the alias writ of execution, they
discovered that petitioner Khe Hong Cheng no longer had any property and
that he had conveyed the subject properties to his children.
5. Thus, Philam filed a complaint for the rescission of the deeds of donation. It
alleged that Cheng executed the aforesaid deeds in fraud of his creditors,
including respondent Philam.
6. Cheng filed a MTD on the ground that the action had already prescribed. They
posited that the registration of the deeds of donation on December 27, 1989
constituted constructive notice and since the complaint a quo was filed only on
February 25, 1997, or more than four (4) years after said registration, the
action was already barred by prescription.
7. RTC and CA ruled against Cheng. Hence, this petition.
Issue/Held: When did the four (4) year prescriptive period as provided for in Article
1389 of the Civil Code for respondent Philam to file its action for rescission of the
subject deeds of donation commence to run? From the moment the cause of action
accrues. Petition DENIED.
Ratio:
 Article 1389 of the Civil Code simply provides that, "The action to claim
rescission must be commenced within four years." Since this provision of law is
silent as to when the prescriptive period would commence, the general rule,
i.e., from the moment the cause of action accrues, therefore, applies (Art.
1150).
 Article 1383 of the Civil Code provides as follows:
Art. 1383. An action for rescission is subsidiary; it cannot be instituted
except when the party suffering damage has no other legal means to
obtain reparation for the same.
 It is thus apparent that an action to rescind or an accion pauliana must be of
last resort, availed of only after all other legal remedies have been exhausted
and have been proven futile. For an accion pauliana to accrue, the following
requisites must concur: (SEE DOCTRINE)
 To count the 4 year prescriptive period to rescind an allegedly fraudulent
contract from the date of registration of the conveyance with the Register of
Deeds, as alleged by the Cheng, would run counter to Article 1383 as well as
settled jurisprudence. It would likewise violate the third requisite.
 An accion pauliana thus presupposes the following: 1) A judgment; 2) the
issuance by the trial court of a writ of execution for the satisfaction of the
judgment, and 3) the failure of the sheriff to enforce and satisfy the judgment
of the court. It requires that the creditor has exhausted the property of the
debtor: The date of the decision of the trial court is immaterial. What is
important is that the credit of the plaintiff antedates that of the fraudulent
alienation by the debtor of his property. After all, the decision of the trial court
against the debtor will retroact to the time when the debtor became indebted
to the creditor.
 Even if respondent Philam was aware, as of December 27, 1989, that petitioner
Khe Hong Cheng had executed the deeds of donation in favor of his children,
the complaint against Butuan Shipping Lines and/or petitioner Khe Hong Cheng
was still pending before the trial court.
 Had respondent Philam filed his complaint on December 27, 1989, such
complaint would have been dismissed for being premature. Not only were all
other legal remedies for the enforcement of respondent Philam's claims not yet
exhausted at the time the needs of donation were executed and registered.
Respondent Philam would also not have been able to prove then that
petitioner Khe Hong Cheng had no more property.
 debt, there can neither be injury nor fraud. While it is necessary that the credit of
the plaintiff in the accion pauliana must exist prior to the fraudulent alienation, the
46 SIGUAN v. LIM date of the judgment enforcing it is immaterial. Even if the judgment be subsequent
G.R. No. 134685 | November 19, 1999 to the alienation, it is merely declaratory, with retroactive effect to the date when
the credit was constituted.

Doctrine: The Court was not convinced with the allegation of Siguan that the questioned deed
The general rule is that rescission requires the existence of creditors at the time of was antedated to make it appear that it was made prior to Siguan’s credit. Notably,
the alleged fraudulent alienation, and this must be proved as one of the bases of that deed is a public document, it having been acknowledged before a notary
the judicial pronouncement setting aside the contract. public. As such, it is evidence of the fact which gave rise to its execution and of its
date.
The fact that the questioned Deed was registered only on 2 July 1991 is not enough
Facts: to overcome the presumption as to the truthfulness of the statement of the date in
the questioned deed, which is 10 August 1989.
 August 1990 – Lim issued two Metrobank checks in the sums of P300,000
Accion Pauliana
and P241,668, respectively, payable to “cash.” Upon presentment by
Siguan with the drawee bank, the checks were dishonored for the reason Requisites In this case
“account closed.” Demands to make good the checks proved futile. the plaintiff asking for rescission has a Claim against Lim – August 1990
 A criminal case for violation of Batas Pambansa Blg. 22 was filed against credit prior to the alienation, although Alienation – August 1989
Lim. RTC Cebu convicted him as charged. The case is pending for review demandable later
before the SC. the debtor has made a subsequent Claim against Lim – August 1990
 * It also appears that on July 1990, Lim was convicted of estafa but contract conveying a patrimonial Alienation – August 1989
eventually acquitted by SC but maintained the civil liability. benefit to a third person
 July 2, 1991 – a Deed of Donation4conveying the following parcels of land Even assuming arguendo that petitioner became a creditor of LIM prior to the
and purportedly executed by LIM on August 10, 1989 in favor of her celebration of the contract of donation
children, Linde, Ingrid and Neil, was registered with the Office of the the creditor has no other legal remedy The term “subsidiary remedy” has
Register of Deeds of Cebu City. to satisfy his claim been defined as “the exhaustion of all
 Siguan filed an accion pauliana against Lim and her children to rescind the remedies by the prejudiced creditor to
questioned Deed of Donation and to declare as null and void the new collect claims due him before
transfer certificates of title issued for the lots covered by the questioned rescission is resorted to.”
Deed. Petitioner neither alleged nor proved
 RTC ordered the recision but it was reversed by the CA that she did so
the act being impugned is fraudulent For presumption of fraud to apply, it
Issue/s: Whether the questioned Deed of Donation was made in fraud of petitioner must be established that the donor did
and, therefore, rescissible. not leave adequate properties which
creditors might have recourse for the
Held: No. Claim against LIM was constituted only in August 1990, or a year after the collection of their credits existing
questioned alienation. Thus, the first two requisites for the rescission of contracts before the execution of the donation.
are absent.
It was not sufficiently established that
Ruling: the properties left behind by LIM were
The general rule is that rescission requires the existence of creditors at the time of not sufficient to cover her debts
the alleged fraudulent alienation, and this must be proved as one of the bases of existing before the donation was made
the judicial pronouncement setting aside the contract. Without any prior existing the third person who received the
property conveyed, if it is by onerous
title, has been an accomplice in the
fraud

*Just in case:
With regard to estafa case:
Only the creditor who brought the action for rescission can benefit from the
rescission; those who are strangers to the action cannot benefit from its effects.
And the revocation is only to the extent of the plaintiff creditor’s unsatisfied credit;
as to the excess, the alienation is maintained. Thus, petitioner cannot invoke the
credit of Suarez to justify rescission of the subject deed of donation

Badges of Fraud (Not Exclusive)

1. The fact that the consideration of the conveyance is fictitious or is
inadequate;
2. A transfer made by a debtor after suit has begun and while it is pending
against him;
3. A sale upon credit by an insolvent debtor;
4. Evidence of large indebtedness or complete insolvency;
5. The transfer of all or nearly all of his property by a debtor, especially when
he is insolvent or greatly embarrassed financially;
6. The fact that the transfer is made between father and son, when there are
present other of the above circumstances; and
7. The failure of the vendee to take exclusive possession of all the property