109 REYES
Art. 1177: Subsidiary remedies of the creditor
Agcaoili vs. GSIS
FACTS: In this case, appellant GSIS approved an application of
the appellee Agcaoli for the purchase of a house and lot in the
GSIS Housing Project at Nangka, Marikina, subject to the
condition that the latter should forthwith occupy the house, a
condition that Agcaoli tried to fulfill but could not because the
house was absolutely uninhabitable. However, Agcaoli ask a
homeless friend, a certain Villanueva, to stay in the premises as
some sort of watchman, pending completion of the construction of
the house.
Agcaoli after paying the first installment and other fees, having
thereafter refused to make further payment of other stipulated
installments until GSIS had made the house habitable; and
appellant having refused to do so, opting instead to cancel the
award and demanded the vacation by Agcaoli of the premises; and
the latter having sued the GSIS in the Court of First Instance of
Manila for specific performance with damages and having
obtained a favorable judgment, the cases was appealed by the
GSIS.
ISSUE: Whether Agcaoli is entitled for specific performance with
damages.
RULING: Yes. There was then a perfected contract of sale
between the parties; there had been a meeting of minds upon the
purchase by Agcaoli of a determinate house and lot from GSIS at
a definite price which is payable in amortizations and from that
moment the parties acquired the right to reciprocally demand
performance. It was, to be sure, the duty of the GSIS, as seller, to
deliver the thing soled in a condition suitable for its enjoyment by
the buyer, in other words to deliver the house subject of the
contract in a reasonably livable state. This it failed to do.
Since GSIS failed to fulfill its obligation, and was not willing to put
the house in a habitable state, it cannot invoke Agcaoli’s
suspension of payment as cause to cancel the contract between
them. In recipient obligation, neither party incur in delay of the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. Nor may the GSIS
succeed in justifying its cancellation of the award by the claim that
Agcaoli had not complied with the condition of occupying the
house within three (3) days. The record shows that Agcaoli did try
to fulfill the condition.
CASE NO. 110 - SABTALUH
SUBSIDIARY REMEDIES OF CREDITOR Civil Code provides that "creditors, after having pursued the
GOLDSTAR MINING CO VS JIMENA
property in possession of the debtor to satisfy their claims, may
exercise all the rights and bring all the actions of the latter (debtor)
FACTS:
for the same purpose, save those which are inherent in his person;
Ananias Isaac Lincallo bound himself in writing to turn to Victor
they may also impugn the acts which the debtor may have done to
Jimena one-half (1/2) of the proceeds from all mining claims that
defraud them.
he would purchase with the money to be advanced by the latter.
Eventually the mining rights over part of the claims were assigned
by Lincallo to Gold Star Mining Co., Inc., As early as August, 1939 Salinas- 111. Oria v. McMcking
and down to September, 1952, Jimena repeatedly apprised Gold FACTS:
Star Mining Co., Inc. of his interests over the mining claims,
Gutierrez Hermanos brought two actions Oria Hermanos & Co. for
however they ignored Jimena's demands. Acknowledging the recovery of sum of money. Subsequent to the beginning of the
Jimena's contractual claim, Lincallo off and on promised to settle above actions, the members of the company of Oria Hermanos &
Co., dissolved their relations and entered into liquidation. Tomas
his obligations. however, he did not only fail to settle his accounts Oria y Balbas, as managing partner in liquidation, acting for
with Jimena but transferred his 45% share in the royalties due himself and on behalf of his other coowners entered into a contract
with the plaintiff in this case, Manuel Orio Gonzales, which said
from Gold Star Mining Co., Inc., to one Gregorio Tolentino. Jimena contract was for the purpose of selling and transferring to the
commenced a suit against Lincallo and gold star mining for plaintiff in this action all of the property of which the said Oria
Hermanos & Co. was owner. Among the goods transferred by this
recovery of his advances and his one-half share in the royalties. instrument was the steamship Serantes, which is the subject of
Goldstar contends that there is no privity of contract between them litigation. One of the actions instituted by Hermanos was decided
by the court in his favor and subsequently, the execution was
and Jimena thus Jimena cannot implead them. issued thereon and placed in the hands of the sheriff. The sheriff
immediately demanded that Tomas Oria y Balbas, as liquidator of
the firm of Oria Hermanos & Co. make payment of the said
ISSUE: Whether or not there Jimena cannot implead Gold star. judgment, to which he replied that there were no funds with which
to pay the same. Thereupon the sheriff levied upon the said
steamer Serantes, took possession of the same, and announced it
RULING: for sale at public auction. Three days before the sale, the plaintiff
No. While there exists no privity of contract between them, the in this action presented to the sheriff a written statement claiming
to be the owner of the said steamship, and to have the right of
common subject-matter supplies the juridical link. Lincallo, in possession of the same by reason of the sale to him by Oria
transferring the mining claims to Gold Star without disclosing that Hermanos & Co. of all of the property belonging to said company,
including the said steamer Serantes.
Jimena was a co-owner acted as Jimena's agent with respect to
Jimena's share of the claims. the evidence overwhelmingly
established that Jimena made prewar and postwar demands upon ISSUE: Whether or not the sale between Oria Hermanos & Co.
and Manuel Orio Gonzales was valid.
Gold Star for the payment of his 1/2 share of the royalties but all in
vain so he (Jimena) was constrained to implead Gold Star RULING:
because it refused to recognize his right. Article 1177, of the new In determining whether or not a certain conveyance is fraudulent
the question in every case is whether the conveyance was a bona
fide transaction or a trick and contrivance to defeat creditors, or
whether it conserves to the debtor a special right. It is not sufficient
that it is founded on good consideration or is made with bona fide
intent: it must have both elements. If defective in either of these
particulars, although good between the parties, it is voidable as to
creditors. The rule is universal both at law and in equity that
whatever fraud creates justice will destroy. The test as to whether
or not a conveyance is fraudulent is, does it prejudice the rights of
creditors.
The case at bar presents every one of the badges of fraud. Tested
by the inquiry, does the sale prejudice the rights of the creditors,
the result is clear. The sale in the form in which it was made
leaves the creditors substantially without recourse. The property of
the company is gone, its income is gone, the business itself is
likely to fail, the property is being dissipated, and is depreciating in
value. As a result, even if the claims of the creditors should live
twelve years and the creditors themselves wait that long, it more
than likely that nothing would be found to satisfy their claim at the
end of the long wait.
112. SALVADOR
Equatorial Realty Devt. Inc. & Carmelo & Bauermann Inc. v.
Mayfair Theater Inc.
Art 1177
Facts: Mayfair’s right of first refusal in the case before us is
embodied in an express covenant in the lease contracts between it
as lessee and Carmelo as lessor, hence the right created is one
springing from contract. Such right also established a correlative
obligation on the part of Carmelo to give or deliver to Mayfair a
formal offer of sale of the property in the event Carmelo decides to
sell it. The decision to sell was eventually made. But instead of
giving or tendering to Mayfair the proper offer to sell, Carmelo
gave it to its now co-petitioner, Equatorial, with whom it eventually
perfected and consummated, on July 30, 1978, an absolute sale of
the property, doing so within the period of effectivity of Mayfair’s
right of first refusal. Less than two months later, or in September
1978, with the lease still in full force, Mayfair filed the present suit.
[Equatorial - the one whom Carmelo sold the leased property
Mayfair - the one who leased the property with an option to buy
and sell]
Issue: Whether Mayfair can bring Art 1177 in action.
Ruling: Mayfair had, therefore, the right to impugn the sale in
question by way of accion pauliana under the last clause of Art.
1177, aforequoted, because the sale was an act done by the FACTS;
debtor to defraud him of his right to acquire the property.
Rescission was also available under par. 3, Art. 1381. By the
same token, the status of a defrauded creditor can, and should, be
granted to Mayfair, for it certainly had substantial interests that
were prejudiced by the sale of the subject property to petitioner
Equatorial in open violation of Mayfair’s right of first refusal under
its existing contracts with Carmelo.
Case 113- Tan
Article 1177: Subsidiary Remedies of the Creditor
Siguan vs. Lim
Facts: On August 1990, Rosa Lim issued 2 checks with the total
amount of Php 550,000 to Maria Siguan. However, the checks
were dishonored for the reason account closed. After demands to
make good the checks proved futile, a criminal case for violation of
BP 22 was filed by the petitioner. On July 1991, a Deed of
Donation conveying parcels of land and purportedly executed by
Siguan on August 1989 in favor of her children was registered. On
June 1993, petitioner filed an accion pauliana against respondent
and her children to rescind the questioned Deed of Donation. She
alleges that respondent and her children conspired to fraudulently
transfer all her real property to her children in bad faith and in
fraud of creditors, including her. The CA denied the rescission.
Issue: Whether the accion pauliana is proper?
Ruling: No. For this action to prosper, the following requisites
must be present: (1) the plaintiff asking for rescission has a credit
prior to the alienation, although demandable later; (2) the debtor
has made a subsequent contract conveying a patrimonial benefit
to a third person; (3) the creditor has no other legal remedy to
satisfy his claim; (4) the act being impugned is fraudulent; (5) the
third person who received the property conveyed, if it is by
onerous title, has been an accomplice in the fraud. Since the
donation was done prior to the issuance of the checks and no
collusion was found between the parties, the petition to rescind is
denied.
116. ROMERO V CA - BAIRD
Petitioner Virgilio R. Romero, a civil engineer, was
engaged in the business of production, manufacture and
exportation of perlite filter aids, permalite insulation and processed
perlite ore. In 1988, petitioner and his foreign partners decided to
put up a central warehouse in Metro Manila on a land area of
approximately 2,000 square meters. A day or so after the
announcement, Alfonso Flores and his wife, accompanied by a
broker, offered a parcel of land measuring 1,952 square meters.
Located in Barangay San Dionisio, Parañaque, Metro Manila. in
the name of private respondent Enriqueta Chua vda. de Ongsiong.
Petitioner visited the property and, except for the presence of
squatters in the area, he found the place suitable for a central
warehouse. Later, the Flores spouses called on petitioner with a
proposal that should he advance the amount of P50,000.00 which
could be used in taking up an ejectment case against the
squatters, private respondent would agree to sell the property for
only P800.00 per square meter. Petitioner expressed his
concurrence. On 09 June 1988, a contract, denominated "Deed of
Conditional Sale," was executed between petitioner and private
respondent. Pursuant to the agreement, private respondent filed a
complaint for ejectment against Melchor Musa and 29 other
squatter families with the MTC of Parañaque. A few months later,
or on 21 February 1989, judgment was rendered ordering the
defendants to vacate the premises. The decision was handed
down beyond the 60-day period stipulated in the contract. The writ
of execution of the judgment was issued, still later, on 30 March
1989.In a letter, dated 07 April 1989, private respondent sought to
return the P50,000.00 she received from petitioner since, she said,
she could not "get rid of the squatters" A few days later, private
respondent, prompted by petitioner's continued refusal to accept
the return of the P50,000.00 advance payment, filed with the RTC
for rescission of the deed of "conditional" sale, plus damages, and
for the consignation of P50,000.00 cash.
ISSUE; Whether the vendor could demand the rescission of a
contract for the sale of a parcel of land for a cause traceable to his
own failure to have the squatters on the subject property 
RULING;
No, private respondent's action for rescission is not
warranted. She is not the injured party. The right of resolution of a
party to an obligation under Article 1191 of the Civil Code is
predicated on a breach of faith by the other party that violates the
reciprocity between them. It is private respondent who has failed in
her obligation under the contract. Petitioner did not breach the
agreement.

118. CHUA 1179-1190
ALLIED FORCES WORKER UNION V.COMPANIA MARITIMA
FACTS: MARITIMA is a local corporation engaged in the shipping
business. Teves is its branch manager in the port of Iligan City.
And AFWU is duly registered legitimate labor organization with
225 members.
Maritima, through Teves, entered into a contract with
AFWU
1. That the Compañia MARITIMA hereby engage the
services of the Allied Free Workers' Union to do and perform all
the work of stevedoring and arrastre services of all its vessels or
boats calling in the port of Iligan City
4. That this CONTRACT is good and valid for a period of
one (1) month from August 12, 1952, but same may be renewed
by agreement of the parties; however Compañia MARITIMA
reserves the right to revoke this CONTRACT even before the
expiration of the term, if and when the Allied Free Workers' Union
fails to render good service.
MARITIMA informed AFWU of the termination of the
contract because of the inefficient service rendered by the latter
which had adversely affected its business. Upon the instance of
AFWU, MARITIMA found itself charged before the Industrial Court
of unfair labor practices. MARITIMA answered, again denying the
employer-employee relationship between the parties.
ISSUE: Whether there is an employer-employee relationship
between MARITIMA and AFWU
RULING: No, The court a quo held that under the contract, AFWU
was an independent contractor of MARITIMA. The clear
implication of the decision of the Supreme Court is that if the
defendant has no power of control which, according to the
Supreme Court, is the "most important element" there is no
employer-employee relationship.
MAIN POINT : 'In determining the existence of employer-
employee relationship, the following elements are generally
considered, namely: (1) the selection and engagement of the
employees; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employee's conduct
119-Cruz
Art. 117-1190
Osmena v Rama
14 Phil 99, September 9, 1909
Facts: Rama entered into a contract with Osmena for a sum of
money with a stipulated condition that in the event that the former
will not be able to pay the amount borrowed, she will sell to the
said Osmeña all the sugar that she will harvest and as a
guarantee, pledge as security all of her present and future
property, and as special security the house with tile roof and
ground floor of stone in which she is currently residing. The
following year, defendant contracted an additional loan from
petitioner. However, even before the said loans can be paid,
Osmena died. As a consequence, the said contractual agreements
became properties of one of his heirs. When the stipulated
payment period came, defendant was not able to pay for said
obligation. This prompted the heir, herein plaintiff, to file a case in
the Court of First Instance demanding for the execution and
delivery of said contracts. After hearing the evidence presented by
both parties, the Court of First Instance rendered a decision in a
favor of the plaintiff. Dissatisfied with the decision, the defendants
appealed.
Issue: Whether the condition that herein defendant relied upon the
payment of the obligation is valid and would thereby preclude her
from payment.
Ruling: No. If that statement found in her acknowledgment of the
indebtedness should be regarded as a condition, it was a condition
which depended upon her exclusive will, and is therefore, void.
(Art.1115, Civil Code.) The acknowledgment, therefore, was an
absolute acknowledgment of the obligation and was sufficient to
prevent the statute of limitation from barring the action upon the
original contract. A condition imposed upon a contract by the
promisor, the performance of which depends upon his exclusive
will, is void, in accordance with the provisions of article 1115 of the
Civil Code.
120 DARLUCIO
TRILLANA v. QUEZON COLLEGE
FACTS:
Damasa Crisostomo subscribed 200 shares of capital stock with a
par value of P100 each through a letter sent to the Board of
Trustees of the Quezon College, enclosed with the letter are a sum
of money as her initial payment and her assurance of full payment
after she harvested fish. On October 26, 1948, Damasa
Crisostomo passed away. As no payment appears to have been
made on the subscription mentioned in the foregoing letter, the
Quezon College, Inc. presented a claim before the CFI of Bulacan
in her testate proceeding, for the collection of the sum of P20,000,
representing the value of the subscription to the capital stock of the
Quezon College, Inc. which was then opposed by the administrator
of the estate.
ISSUE: Whether or not the condition entered into by both parties
are valid
RULING:
No. In view of proposal of Damasa to pay value of subscription
after he has harvested fish is a condition obviously dependent
upon her sole will and therefore void. Art. 1182. When the
fulfillment of the condition depends upon the sole will of the debtor,
the conditional obligation shall be void.
121 Flores
Rustan Pulp and Paper Mills v IAC
Facts
The petitioner Rustan had developed a pulp and paper mill and the
respondent was Lluch who was a holder of a forest product
licences, the respondent had requested from the petitioner a
supply of raw materials in a contract of supply. The contract of
supply did not only pertain to Rustan but also to other third party
suppliers who had the virtue and qualifications of appropriate
government authority or has the license to sell or dispose of pulp
wood. Afterwards, a contract of sale conducted by the respondent
to the petitioner was constructed where the petitioner was to pay
P30 per cubic meter of pulp wood raw materials to the buyer’s
plant. A few stipulations were made in the contract was that the
buyer has the option to buy from other sellers who had the virtue
and qualifications of appropriate government authority or has the
license to sell or dispose of pulp wood. However, the buyer is
prohibited from buying pulp wood that has originated from the
seller’s lumber and or firewood concession. The buyer has the
right to stop the delivery of raw materials from the seller when the
raw materials have been necessarily provided with sufficient notice
to the seller.
A conflict was raised when the petitioner’s machinery had major
defects which caused the delivers of raw materials to be delayed.
The petitioners had recommend to go in business with other
sellers such as a Japanese seller, who was later on informed to
stop deliveries. The respondent had shown intention to clarify
whether there was a stoppage of delivery or termination of
contract. Even with this ambiguity, the respondent party had
agreed to continue the deliveries with other suppliers. A complaint
for breach of contract was later on filed but dismissed. The
petitioner’s defense from the complaint filed was the nature of the
liability, the propriety of the stoppage and the feasibility of
awarding damages.
Issue: Whether or not the stoppage of deliveries of raw materials
from behalf of the petitioner constituted a breach of contract.
Ruling:
Affirmative, the stoppage of deliveries of raw material on behalf of
the petitioner had constituted a breach of contract. As stipulated by
the agreement, the seller is to stop deliveries to the respondent
only when the deliveries of raw materials from seller have been
necessarily provided with sufficient notice to the seller. Although
the petitioner had claimed to have hindrances to supply the
respondent with raw materials, the petitioner had still agreed to
deliver the raw materials and later on stop the deliveries. The
actions done on behalf of the petitioner had therefore caused a
breach upon delay and the petitioner was unable to fulfil the Vicente Singson Encarnacion, owner of the house Legarda Street,
obligation stipulated. Manila, some six years ago leased said house to Jacinta Baldomar
and her son, Lefrado Fernando, upon a month-to-month basis for
122 GENON the monthly rental of P35. Of the same year Encarnacion notified
Arts. 1179-1190 defendants to vacate the house, because needed it for his offices.
Taylor vs. Uy Tieng
Despite this demand, defendants insisted on continuing their
FACTS: occupancy.
Uy Tieng, defendant, employed taylor, plaintiff, for two years as
the oil mill superintendent. Written in the contract that the The original action was lodged with the municipal court of Manila
machinery to be installed in the factory fail and to not arrive in and reached the Court of First Instance of Manila upon appeal,
manila within 6 months, this contract can be cancelled by the defendants filed therein a motion to dismiss.
defendant. The machinery failed to arrived in manila within 6
months. Because the defendant saw that the oil business no ISSUE:
longer promised large returns. After 6 months the defendant
decided to revoke the contract and notified the plaintiff of his W/N the lease contract was for an indefinite period of time hence
discharge. Plaintiff sued the defendant for the commission he would entitle the defendants the occupancy of the property in
would have received under the contract. The plaintiff also stated question as long as they pay rentals.
that the defendants voluntarily prevented the arrival of the said
agreement, and under article 1186 of the Civil Code, the condition RULING:
should be considered fulfilled.
Within the meaning of article 1256 of the Civil Code, since the
ISSUE: Whether or not the defendant is liable for the salary the
continuance and fulfillment of the contract would then depend
plaintiff lost under the contract.
solely and exclusively upon their free and uncontrolled choice
RULING: between continuing paying the rentals or not, completely depriving
No. Because according to the terms agreed upon the defendant the owner of all say in the matter. If this defense were to be
has the right to cancel the contract. Article 1186 is not applicable allowed, so long as defendants elected to continue the lease by
because it only supposes a case where the obligor is the one who continuing the payment of the rentals, the owner would never be
prevented the fulfillment of the obligation, not the oblige. able to discontinue it; conversely, although the owner should
A condition at once facultative and resolutory may be valid even desire the lease to continue, the lessees could effectively thwart
though the condition is made to depend upon the will of the his purpose if they should prefer to terminate the contract by the
obligor. In the case ate bar, the defendants were under a positive simple expedient of stopping payment of the rentals. This, of
obligation to cause the machinery to arrive in Manila, they would of course, is prohibited by the aforesaid article of the Civil Code.
course be liable, in the absence of affirmative proof showing that
the non-arrival of the machinery was due to some cause not Lao lim VS CA
having its origin in their own act or will.
FACTS:
Records show that Francisco Lim, entered into a contract of lease
with Benito Dy for a period of 3 years, from 1976 to 1979. After the
123. HALID stipulated term expired the respondent refused to leave the
premises, so Francisco Lim filed an ejectment suit against Benito
ENCARNACION VS. BALDOMAR Dy. This case was then taken over by a judicially approved
compromise agreement which provides an automatic increase in
rent of 20% every 3 years. On 1985 Dy, informed Lim of his
intention to renew the lease up to 1988, Lim did not agree to the
FACTS: renewal.
In 1987 another ejectment suit was filed by Lim after the failure of
Dy to vacate the premises. It was dismissed by the RTC and later
affirmed by the CA for the following reasons: (1) the stipulation in
the compromise agreement which allows the lessee (Benito Dy) to
stay on the premises as long as he needs it and can pay rents is
valid, being a resolutory condition, and therefore beyond the ambit
of art 1308 of the NCC; and (2) the compromise agreement has
the effect of res judicata.
ISSUE:
Whether the stipulation in the compromise agreement which
allows the lessee to stay on the premises as long as he needs it
and can pay rents is valid?
RULING:
No, since the stipulation “for as long as the defendant needed the
premises and can meet and pay said increases” is a purely
potestative condition because it leaves the effectivity and
enjoyment of leasehold rights to the sole and exclusive will of the
lessee.
The continuance, effectivity, and fulfillment of a contract of lease
cannot be made to depend exclusively upon the free and
uncontrolled choice of the lessee between continuing payment of
the rentals or not, completely depriving the owner of any say in the
matter. Mutuality does not obtain in such a contract of lease and
no equality exists between the lessor and the lessee.
127. LIM
Smith Bell vs. Sotelo Matti
Facts: Plaintiff corporation undertook to sell and deliver equipment
for Mr. Sotelo but no definite dates were fixed for the delivery. The
periods were couched in ambiguous terms such as “within 3 or 4
months”, “in the month of September or as soon as possible”, and
“approximate delivery with 90 days-This is not guaranteed.” When
the goods arrived, Mr. Sotelo refused to receive them and to pay
the prices. Mr. Sotelo then sued for damages because of the delay
suffered.
Issue: Whether Smith Bell incurred delay in the delivery of goods
to Sotelo
Ruling: No, it did not incur delay. It was a time of the world war
and the SC regarded the obligation as conditional in light of the
circumstances.
When the delivery was subject to a condition the fulfillment of
which depended not only upon the effort of the herein plaintiff, but
upon the will of third persons who could in no way be compelled to
fulfill .the condition. In cases like this, which are not expressly
provided for, but impliedly covered, by the Civil Code, the obligor
will be deemed to have sufficiently performed his part of the
obligation, if he has done all that was in his power, even if the
condition has not been fulfilled in reality. When the contract
provides for delivery 'as soon as possible' the seller is entitled to a
reasonable time, in view of all the circumstances, such as the
necessities of manufacture, or of putting the goods in condition for
delivery. The term does not mean immediately or that the seller
must stop all his other work and devote himself to that particular
order. But the seller must nevertheless act with all reasonable
diligence or without unreasonable delay. It has been held that a
requirement that the shipment of goods should be the 'earliest
possible' must be construed as meaning that the goods should be
sent as soon as the seller could possibly send them, and that it
signified rather more than that the goods should be sent within a
reasonable time.
The record shows, as we have stated, that the plaintiff did all
within its power to have the machinery arrive at Manila as soon as
possible, and immediately upon its arrival it notified the purchaser
of the fact and offered to deliver it to him. Taking these
circumstances into account, we hold that the said machinery was
brought to Manila by the plaintiff within a reasonable time.
Therefore, the plaintiff has not been guilty of any delay in the
fulfillment of its obligation, and, consequently, it could not have
incurred any of the liabilities mentioned by the intervenor in its
counterclaim or set-off.
128. MACAPUGAY
Naga Telephone Co., Inc. v. CA
Facts:
Naga Telephone Company (NATELCO) entered into a contract
with Camarines Sur II Electric Cooperative (CASURECO) for the
use of the latter’s electric light post in the operation of the former’s
telephone service in Naga City. In return, NATELCO will be
providing for the free use of its 10 telephone connections to
CASURECO whereas the latter will allow the use of its electric
light posts as long as the former needs. The contract will terminate
when CASURECO is forced to stop, abandon operation and
remove light posts. After 10 years, CASURECO filed for
reformation of contract with damages against NATELCO for not
conforming to the guidelines of the National Electrification
Administration of reasonable compensation for the use of posts. It
alleged that the compensation is P10 per post but a post now cost
as much as P2630.00; that NATELCO used 319 electric light posts
and refused to pay; and that it provided poor telephone servicing.
In response, NATELCO contested that there is no cause of action
for the reformation of contract; that the contract is barred by
prescription; that the utilization could not have cause deterioration
because the electric light posts have been used for 11 years; and
that value of expenses have been equal to the value of the
telephone lines. The trial court ruled that the contract should be
reformed by ordering NATELCO to pay CASURECO
compensation for the use of their posts in Naga City, while the
latter is also ordered to pay the monthly bills for the use of
telephones. NATELCO has to pay for electric posts at a rate of
P10 per post from January 1989. The contract eventually became
unfair due to the increase in volume of NATELCO’s subscribers
without the increase of telephone connections which are free of
charge to CASURECO. In reformation of contract, they cannot
make another contract but abolish the inequities. Said contract
does not mention the use of posts outside Naga City, therefore
should be reformed to include provision for the use of posts
outside the area. CA affirmed the decision of the trial court for
different grounds such as applicability of Article 1267 and the
contract has potestative condition, thus void.
Issue: (1) Whether Article 267 is applicable in the case at bar.
(2) Whether the filing of reformation of contract prescribed.
(3) Whether the contract has potestative condition.
Ruling:
(1) Yes. Article 1267 is applicable. The provision states “when the
service has become so difficult as to be manifestly beyond
the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part.” The foregoing speaks
of service (meaning performance of the obligation) w/c has
become so difficult. It doesn’t require that the contract be for future
service w/future unusual change. Rather, it speaks of unforeseen
events or the discredited theory of rebus sic stantibus in public
international law wherein parties stipulate in the light of certain
prevailing conditions & once these conditions cease to exist the
contract also ceases. Equity & good faith demand that when basis
of the contract disappears, the prejudiced party has a right to relief.
Parties are released from their correlative obligations under the
contract. But taking into account the possible consequences of
merely releasing the parties from the contract, the SC decided to
uphold the trial court ruling, the payment for use of post and the
phone lines, so as not disrupt the basic & essential services being
rendered by both companies and to avoid unjust enrichment by
NATELCO at the expense of CASURECO.
(2) No. In reformation of contracts, what is reformed is not the
contract itself, but the instrument embodying the contract. It follows
that whether the contract is disadvantageous or not is irrelevant to
reformation and therefore, cannot be an element in the
determination of the period for prescription of the action to reform.
Cause of action has not yet prescribed since Art. 1144 provides
that an action upon a written contract must be brought w/in 10yrs
from the time the right of cause of action accrues. In this case,
cause of action arose when CASURECO asked its counsel to
review the contract which was in 1982-83. The case was filed in
1989, thus, 10 yrs has not lapsed.
(3) No. Conditions do not depend solely on the will of either party.
CA, in ruling that the term/period of the contract is potestaive,
overlooked the condition that the contract will be terminated when
CASURECO will be forced to stop, abandon its operation as a
public service & it becomes necessary to remove the electric light
post. They are actually casual conditions w/c depend on chance,
hazard or will of a 3rd person. The contract is subject to mixed
conditions w/c don’t invalidate the contract stipulations.
129 MUSA
Hermosa v. Langora
Facts:
Epifanio Longara filed a claim against the estate of Fernando
Hermosa, Sr. for money owed to him by the deceased. He alleged
that the advances were made "on condition that their payment
should be made by Fernando Hermosa, Sr. as soon as he receive
funds derived from the sale of his property in Spain." Upon
Hermosa's death, the property was sold and the money sent to the
estate in the Philippines.
Luz Hermosa, an heir of the deceased, contended on appeal that
the obligation contracted by the intestate was subject to a
condition exclusively dependent upon the will of the debtor
(a condicion potestativa) and therefore null and void. The Court of
Appeals held that the condition was not entirely potestative. It
further ruled that the payment of the advances did not become due
until the administratrix received the money from the buyer of the
property. Hence this appeal.
Issues:
Is the condition exclusively dependent upon the will of the debtor ISSUE: Whether there was a perfected sale of Lot 4, with the
and therefore null and void? reduced area, to the respondents which they can enforce against
PHHC via action for specific performance.
Ruling:
NO. The condition upon which the payment of the debt depended RULING: No. There was no perfected sale of Lot 4 as it was
on, "as soon as he (intestate) receive funds derived from the sale conditionally or contingently awarded to the respondents subject to
of his property in Spain," is a condition that does not depend the approvals of the city council and valuation committee and
exclusively upon the will of the debtor, but also upon other higher authorities. When the plan with the area of Lot 4 reduced to
circumstances beyond his power or control. Upon review by the 2,608.7 square meters was approved, the Mendozas should have
Court of Appeals, the condition implies that the intestate had manifested in writing their acceptance of the award for the
already decided to sell his house, or at least that he had made his purchase of Lot 4 just to show that they were still interested in its
creditors believe that he had done so, and that all that we needed purchase although the area was reduced and to obviate any doubt
to make his obligation (to pay his indebtedness) demandable is on the matter. They did not do so. The PHHC board of directors
that the sale be consummated and the price thereof remitted to the acted within its rights in withdrawing the tentative award. “The
islands. It is evident, therefore, that the condition of the obligation contract of sale is perfected at the moment there is a meeting of
was not purely protestative—i.e., depending exclusively upon the minds upon the thing which is the object of the contract and upon
will of the intestate—but a mixed one, depending partly upon the the price. From that moment, the parties may reciprocally demand
will of intestate and partly upon chance. The condition is, besides, performance, subject to the law governing the form of contracts.”
a suspensive condition, upon the happening of which the (Art. 1475, Civil Code). Under the facts of this case, we cannot say
obligation to pay is made dependent. And upon the happening of there was a meeting of minds on the purchase of Lot 4 with an
the condition, the debt became immediately due and demandable. area of 2,608.7 square meters at P 21 a square meter. Decision
reversed.
130. OCENA
People's Homesite and Housing Corporation v. CA (GR No. L- 131 REYES
61623, December 26, 1984) Arts. 1179-1190
Javier vs. CA
FACTS: Resolution No. 513 of the People’s Homesite & Housing
Corp. (PHHC) board of directors awarded to respondent Spouses FACTS: Leonardo Tiro is a holder of an ordinary timber license
Rizalino and Adelaida Mendoza, subject to the Quezon City covering 2,535 hectares in the town of Medina, Misamis Oriental.
Council’s approval of the Consolidation Subdivison Plan, Lot 4, On February 15, 1966 he executed a "Deed of Assignment” in
containing 4, 182.2 sq.m. at a price of P 21 per sq.m. and that favour of Jose Javier and Estrella Javier to assign, transfer and
such award is subject to the approval of the OEC (PHHC) convey his shares of stocks in the Timberwealth Corporation in the
Valuation Committee and higher authorities. The city council total amount of P120, 000.00 in which P20, 000.00 shall be paid
disapproved the plan with due notice sent to the respondents. A upon signing of the contract and the balance of P100, 000.00 shall
revised plan which included Lot 4 with reduced area of 2,608.7 be paid in P10, 000.00 every shipment of export logs actually
was, however, approved by the same. The PHHC board recalled produced from the forest concession. At the time the said deed of
all awards of lots to persons who failed to pay deposit or down assignment was executed, Tiro had a pending application for an
payment including the respondents. The board’s Resolution No. additional forest concession southwest of and adjoining the area of
218 officially withdrew the tentative award of Lot 4 from the the concession subject of the deed of assignment. Hence, on
respondents and re-awarded said lot jointly and in equal shares to February 28, 1966, Tiro and Javier entered into another
5 awardees who all made the initial deposit. Corresponding deeds "Agreement" which stipulates that in the event of the approval of
of sale were executed in their favor and the subdivision was the additional concession, the former’s rights shall be transferred
approved by the city council and Bureau of Lands. Respondents to the latter in consideration for the sum of P30, 000.00.
filed the instant action for specific performance and damages for
the reconsideration of the withdrawal and cancellation of the re- On November 18, 1966, Tiro’s forest concession was renewed up
award. The trial court sustained the withdrawal while the public to May 12, 1967, but since the concession consisted of only 2,535
respondent Court of Appeals reversed hence, this petition. hectares, he was therein informed that he is given until May 12,
1967 to form an organization such as a cooperative, partnership or
corporation with other adjoining licensees so as to have a total
holding area of 20,000.00. On April 10, 1967, Javier, now acting as and interests over the lot and bungalow thereon. On September 8, Building Co. over 3 parcels of land with improvements in Manila
timber license holders by virtue of the deed of assignment, entered 1985, Daniel Jovellanos died. Private respondent Annette H. City for P1M. Maritime paid P50, 000.00 upon execution. The
into a Forest Consolidation Agreement with other ordinary timber Jovellanos claimed in the lower court that the foretasted property balance was to be paid in monthly instalments of P10, 000.00 at
license holders. was acquired by her deceased husband while their marriage was 5% interest per annum (later lowered to P5, 000.00 at 5.5%
still subsisting, by virtue of the deed of absolute sale dated interest per annum). The parties further agreed that: a. If Maritime
On July 16, 1968, for failure of Javier to pay the balance due under January 8, 1975 executed by Philamlife in favor of her husband defaults, the contract would be annulled at Myers’ option; b. All
the two deeds of assignment, Tiro filed an action against and should form part of the conjugal partnership of the second payments already made shall be forfeited; and c. Myers shall have
petitioners. Javier contends that Tiro failed to fulfill his contractual marriage. Petitioners, on the other hand, contend that the property the right to re-enter the property and take possession. Moreover, if
obligations and the conditions for the enforceability of the were acquired by their parents during the existence of the first Maritime refuses to peacefully deliver the possession of the
obligations did not materialize. Tiro then replied that the deed of marriage under their lease and conditional sale agreement with properties subject of this contract to the Myers in case of
assignment did not only transfer his shares of stocks but his rights Philamlife of September 2, 1955. rescission, a suit should be brought in court by the Myers to seek
and interest in the logging concession. judicial declaration of rescission. Unfortunately, Maritime failed to
ISSUE: Whether or not Daniel has the right of ownership over the pay the installment for March 1961, for which the Vice-President,
ISSUE: Whether the agreement of February 28, 1966 is null and property under the lease and conditional sale agreement. George Schedler,of the Maritime Building Co., Inc., wrote a letter
void for non-fulfillment of the conditions stated therein. to the President of Myers, Mr. C. Parsons, requesting for a
moratorium on the monthly payment of the installments until the
RULING:
RULING: No. Under the New Civil Code, when a contract is end of the year 1961, for the reason that the said company was
subject to a suspensive condition, its birth or effectivity can take encountering difficulties in connection with the operation of the
place only if and when the event which constitutes the condition No. The contract entered into by Daniel and Philamlife is a "Lease warehouse business. Consequently, on May 1961, Myers made a
happens or is fulfilled. If the suspensive condition does not take and Conditional Sale Agreement” as lessee-vendee, Daniel had demand upon Maritime for the unpaid installments; also, Myers
place, the parties would stand as if the conditional obligation had only the right of possession over the property. In a lease advised Maritime of the cancellation of the Deed of Conditional
never existed. agreement, the lessor transfers merely the temporary use and Sale and demanded the return of the property, holding Maritime
enjoyment of the thing leased. The right of Daniel to the property liable for rentals at P10, 000.00 monthly. Myers thereafter
In the case at bar, the efficacy of said deed of assignment is under the contract with Philamlife was merely an inchoate and demanded from its lessee, Luzon Brokerage, to avoid paying to
subject to the condition that the application of private respondent expectant right which would ripen into a vested right only upon his the wrong party, filed an action for interpleader. After the filing of
for an additional area for forest concession be approved by the acquisition of ownership which, as foretasted, was contingent upon this action, the Myers Building Co., Inc. in its answer filed a cross-
Bureau of Forestry. Since Tiro did not obtain that approval, said his full payment of the rentals and compliance with all his claim against the Maritime Building Co., Inc. praying for the
deed produces no effect. Hence, Javier cannot be held liable. contractual obligations thereunder. A vested right as an immediate confirmation of its right to cancel the said contract.
fixed right of present and future enjoyment. It is to be distinguished
from a right that is expectant or contingent. It is a right which is
fixed, unalterable, absolute, complete and unconditional to the ISSUE: Whether Myers Co. can extrajudicially cancel the
CASE NO. 132 – SABTALUH exercise of which no obstacle exists, and which is perfect in itself conditional Deed of Conditional sale.
ARTICLE 1179 - 1190 and not dependent upon a contingency. Thus, for a property right
JOVELLANOS VS. CA to be vested, there must be a transition from the potential or
contingent to the actual, and the proprietary interest must have RULING:
attached to a thing; it must have become fixed or established and
FACTS: is no longer open to doubt or controversy.
Yes. However, the court ruled that In seeking to ouster
In 1955, Daniel Jovellanos and Philamlife entered into a contract Maritime for failure to pay the price as agreed upon, Myers was not
denominated as a lease and conditional sale agreement over Lot rescinding (or more properly, resolving) the contract, but precisely
8, Block 3 of the latter's Quezon City Community Development enforcing it according to its express terms. In its suit Myers was
Project, including a bungalow thereon. At that time, Daniel not seeking restitution to it of the ownership of the thing sold (since
Salinas- 133. Luzon Brokerage Co. Inc v. Maritime Building
Jovellanos was married to Leonor Dizon, with whom he had three it was never disposed of), such restoration being the logical
Co. Inc
children, the petitioners herein. Leonor Dizon died and later Daniel consequence of the fulfillment of a resolutory condition, express or
married private respondent Annette H. with whom he begot two implied (article 1190); neither was it seeking a declaration that its
children, her herein co-respondents. With the lease amounts FACTS: obligation to sell was extinguished. What is sought was a judicial
having been paid, Philamlife executed to Daniel Jovellanos a deed declaration that because the suspensive condition (full and
of absolute sale and, on the next day, the latter donated to herein On April 30, 1949, the defendant Myers Building Co. punctual payment) had not been fulfilled, its obligation to sell to
petitioners her daughter from the first marriage all his rights, title entered into a Deed of Conditional Sale, in favor of Maritime Maritime never arose or never became effective and, therefore, it
(Myers) was entitled to repossess the property object of the Facts: Petitioners are the children of the late Trinidad Quijada. Lease/Purchase insofar as the terms and conditions are
contract, possession being a mere incident to its right of Trinidad and her 3 siblings executed a conditional donation of a 2- concerned. The defendant Gonzales paid the P2,500.00 per
ownership. hectare parcel of land to provincial high school in Talacogon, hectare of P15,000.00 annual rental on the half-portion of the
Agusan De Sur. The condition being that it be used solely and property covered by Transfer Certificate of Title No. 12111 in
exclusively as part of the proposed campus. 6 years thereafter, accordance with the second provision of the Contract of
Trinidad sold the 2 parcels of land to Regalado Montejar. The 2 nd Lease/Purchase and thereafter took possession of the property,
sale of 1 hectare did not have a written agreement but was validly The defendant Gonzales did not, however, exercise his option to
134. SALVADOR shown to have been purchased through receipts of payment. The purchase the property immediately after the expiration of the one-
Parks v. Province of Tarlac heirs of Trinidad, who at that time was already dead, filed a year lease on November 30, 1984. He remained in possession of
Art 1177 complaint for forcible entry against Mondejar, which complaint was the property without paying the purchase price provided for in the
dismissed. The proposed provincial high school having failed to Contract of Lease/Purchase and without paying any further rentals
Facts: George L. Parks bought the land which is the subject materialize, the Sangguniang Bayan of Talacogon enacted a thereon. A letter was sent by one of the plaintiffs-heirs Ricardo
matter of the litigation from Concepcion Cirer and James Hill, who, resolution reverting the two 2 hectares of land donated back to the Cruz to the defendant Gonzales informing him of the lessors'
several years ago, prior to the sale, had donated the land to the donors. decision to rescind the Contract of Lease/Purchase due to a
municipality of Tarlac subject to the condition that it will be used breach thereof committed by the defendant. The letter also served
absolutely and exclusively for the erection of a central school and as a demand on the defendant to vacate the premises within 10
a public park, the work to commence within a period of six months days from receipt of said letter
from the date of ratification of the donation by the parties. Issue: Whether the sale was valid because Trinidad had
recovered the parcel of land?
ISSUE; Whether par 9 of the conract was a condition precedent to
George L. Parks, alleging that the conditions of the donation had
the obligation to purchase
not been complied with and invoking the sale of this parcel of land
made by Concepcion Cirer and James Hill in his favor, brought this
action against the Province of Tarlac, the municipality of Tarlac, Ruling: Yes. In the doctrine of resolutory condition provided under RULING;
Concepcion Cirer and James Hill and prayed that he be declared Article 1181, So long as the resolutory condition subsists and is
the absolute owner entitled to the possession of this parcel, that capable of fulfillment, the donation remains effective and the Yes, ninth clause required respondents to obtain a
the transfer of the same by the municipality of Tarlac to the donee continues to be the owner subject only to the rights of the separate and distinct TCT in their names and not in the name of
Province of Tarlac be annulled, and the transfer certificate issued donor or his successors-in-interest under the deed of donation. petitioner, it logically follows that such undertaking was a condition
to the Province of Tarlac cancelled. However, it was made clear through a letter sent by the precedent to the latter's obligation to purchase and pay for the
municipality that it could not build the school. Therefore, the sale land. Put differently, petitioner's obligation to purchase the land is
Issue: Whether Parks has a right of action to recover parcel of made by Trinidad was valid. a conditional one and is governed by Article 1181 of the Civil
land on the ground that the condition imposed is suspensive. Code. The Court has held that "[w]hen the obligation assumed by
a party to a contract is expressly subjected to a condition, the
Ruling: NO, the condition that it is a condition precedent is obligation cannot be enforced against him unless the condition is
erroneous. When a condition is imposed, the compliance of which 139. Gonzales Vs. Heirs of Cruz complied with." Furthermore, "[t]he obligatory force of a conditional
cannot be effected except when the right is deemed acquired, obligation is subordinated to the happening of a future and
such condition cannot be a condition precedent. In the present FACTS; uncertain event, so that if that event does not take place, the
case, the condition that a public school be erected and a public parties would stand as if the conditional obligation had never
park made on the donated land, work on the same to commence On December 1, 1983, Paula Año Cruz together with the existed."In this case, the obligation of the petitioner to buy the land
within six months from the date of the ratification of the donations plaintiffs heirs of Thomas and Paula Cruz, entered into a Contract cannot be enforced unless respondents comply with the
by the parties, could not be complied with except after giving effect of Lease/Purchase with the defendant, Felix L. Gonzales, the sole suspensive condition that they acquire first a separate and distinct
to the donation. The condition, therefore, was a condition proprietor and manager of Felgon Farms, of a half-portion of a TCT in their names. The suspensive condition not having been
subsequent. "parcel of land containing an area 12 hectares, more or less, and fulfilled, then the obligation of the petitioner to purchase the land
Case 135- Tan an accretion of 2 hectares. The contract of Lease/Purchase has not arisen.
Article 1179-1190 contains the following provisions: 9. The LESSORS hereby commit
Quijada vs. CA themselves and shall undertake to obtain a separate and distinct 141. CHUA 1179-1190
T.C.T. over the herein leased portion to the LESSEE within a
reasonable period of time which shall not in any case exceed 4 VISAYAN SAWMILL V. CA
years, after which a new Contract shall be executed by the herein
parties which shall be the same in all respects with this Contract of
FACTS: On May 1, 1983, RJH Trading (respondent) and Visayan
Sawmill Company (VSC petitioner) entered into a sale involving
scrap iron located at VSC’s stockyard at Negros Oriental, subject
to the condition that RJH will open a Letter of Credit (LOC) of
P250,000 in favor of VSC on or before May 15, 1983. This is
evidenced by a contract entitled `Purchase and Sale of Scrap Iron’
duly signed by both parties. On May 17, 1983, RJH through his
men started to dig and gather and scrap iron at the VSC’s
premises, proceeding until May 30 when VSC allegedly directed
RJH’s men to desist from pursuing the work in view of an alleged
case filed against RJH by Alberto Pursuelo. VSC denied this,
alleging that on May 23, 1983, they sent a telegram to RJH
cancelling the contract of sale because of the failure of the latter to
comply with the conditions thereof. On May 24, 1983, RJH
informed VSC that the LOC was opened May 12, 1983 at BPI
main office in Ayala, but then the transmittal was delayed.
On May 26, 1983, VSC received a letter advice from BPI
Dumaguete stating that an irrevocable domestic LOC P250,000
was opened in favor of Ang Tay c/o VSC on account of Armaco-
Armsteel Alloy Corporation. On July 19, 1983, RJH Trading sent a
series of telegrams stating that the case filed against him by
Pursuelo had been dismissed and demanding that VSC comply
with the deed of sale, otherwise a case will be filed against them.
On July 20, 1983, VSC informed RJH that they were unwilling to
continue with the sale due to RJH’s failure to comply with essential
pre-conditions of the contract. On July 29, 1983, RJH filed the
complaint, praying for judgment ordering VSC to comply with the
contract by delivering to him the scrap iron subject thereof. VSC
insisted that the cancellation of the contract was justified because
of RJH’s noncompliance with essential pre-conditions. The RTC
ruled in RJH’s favor. The CA affirmed. Hence, this appeal.
ISSUE:
Whether or not the reasons or grounds for cancelling the
contract valid and justified.
RULING:
Yes. The reasons or grounds for cancelling the contract
are valid and justified. Both the trial court and the public
respondent erred in the appreciation of the nature of the
transaction between the petitioner corporation and the private
respondent. To this Court’s mind, what obtains in the case at bar is
a mere contract to sell or promise to sell, and not a contract of
sale.
In this case, there was to be no actual sale until the
opening, making or indorsing of the irrevocable and unconditional
LOC. Since what obtains here is a mere promise to sell, RJH’s
failure to comply with the positive suspensive condition cannot
even be considered a breach casual or serious but simply an
event that prevented the obligation of petitioner corporation to
convey title from acquiring binding force. Consequently, the
obligation of the petitioner corporation to sell did not arise; it
therefore cannot be compelled by specific performance to comply
with its prestation. In short, Article 1191 of the Civil Code does not
apply; on the contrary, pursuant to Article 1597 of the Civil Code,
the petitioner corporation may totally rescind, as it did in this case,
the contract.
142-Cruz
Art. 1179-1190
Escano v CA
G.R. No. L-47207, September 25, 1980
Facts: Ten lots were sold by Mamerto Escano, Inc. to the
Republic for use by the Civil Aeronautics Administration (CAA)
subject to the resolutory condition that when the CAA would no
longer use the lots as part of the airport, then the title thereto
would revert to the seller upon reimbursement of the sale price
without interest. That condition was annotated on the title issued to
the Republic of the Philippines. On the premise that the mentioned
resolutory condition had already been fulfilled (because of the
operation of a new airport) , the petitioners (successors to the right
to repurchase the lots) made a written tender to the CAA of the
repurchase price. The Directory of Civil Aviation rejected the
tender reasoning that the Airport was still being used for general
aviation. Petitioners sued CAA for the reconveyance of the ten
lots. CA affirmed the trial court’s judgment allowing the repurchase
but imposed conditions on the reconveyance (as similar to General
Campo’s lots which was decided in a previous case), a matter
which was not raised in the pleadings.
Issue: Whether the CA erred in imposing conditions not agreed
upon in the deed of sale
Ruling: Yes. The contract is the law between the parties thereto.
The contract of sale between the petitioner’s predecessors-in-
interest and the Government is the law between them. Had they
intended that the conditions imposed in the resale of General
Campo’s lots in should likewise be imposed in the resale to the
reversionary owners of the ten lots, they could have easily made a
stipulation to that effect in the deed of sale.
The fact that the contract of sale does not mention those
conditions means that they were never within the contemplation of
the parties. The CA in imposing those conditions, made a new
contract for them. In fact, the second condition “that the
repurchasers shall allow the CAA to continue using the property
repurchased for airfield purposes, until such time as the airport
operation is finally transferred to Mactan Airport” nullifies the
reversion or resolutory condition and negatives the trial court’s
findings that the subject Airport of the contract had ceased to be
operational and that it had been replaced by the new Airport.
143 DARLUCIO
BALURAN V. NAVARRO
FACTS:
Baluran and Paraiso (ancestor of Obedencio) entered into a
contract which they called barter, but in fact stipulated that they
would only transfer the material possession of their respective
properties to each other. Thus, Baluran will be allowed to construct
a residential house on the land of Paraiso while Paraiso is entitled
to reap the fruits of the riceland of Baluran. The contract prohibited
them from alienating the properties of the other and contained a
stipulation that should the heirs of Paraiso desire to re-possess the
residential lot, Baluran is obliged to return the lot. Indeed, years
after, Obedencio (grandchild of Paraiso) acquired the ownership of
the residential lot from his mother and demanded that Baluran, Q. Garcia for abuse of discretion and seeking to no longer uphold Spouses Eusebio de Castro and Martina Rieta, now both
who was in possession, vacate. Baluran now counters that the the extinguish of his last rank. An investigation was conducted by deceased, executed a deed of donation in favor of therein
barter already transferred ownership. the President of UP and The Honorable Carlos P. Romulo to defendant Roman Catholic Archbishop of Manila covering a parcel
of land.The deed of donation allegedly provides that the donee
review Magtibay’s case and scholastic record.
ISSUE: shall not dispose or sell the property within a period of one
Whether or not the contract was usufruct hundred (100) years from the execution of the deed of donation,
The scholastic record had shown that Magtibay had received
otherwise a violation of such condition would render ipso facto null
RULING: 37.2% in subject proficiency and 0 % in aptitude and an and void the deed of donation and the property would revert to the
Yes. First, the contract is what the law defines it to be and not attendance of 26% which would make the total of his final grade in estate of the donors.
what the parties call it. It is very clear that what the parties MS-42 63%. The passing score needed of Magtibay was 70%.
exchanged was not ownership, but merely material possession or The President of UP had issued a memorandum dismissing the On June 30, 1980, while still within the prohibitive period to
the right to enjoy the thing. complaint and request re-enrollment of Magtibay to the same dispose of the property, petitioner Roman Catholic Bishop of Imus,
subject. Magtibay had then petitioned a mandamus and quo executed a deed of absolute sale of the property subject of the
Now, because it is usufruct, the law allows the parties to stipulate donation in favor of petitioners Florencio and Soledad C. Ignao in
warranto with prayer for preliminary mandatory injunction against
the conditions including the manner of its extinguishment. In this consideration of the sum of P114,000.00. Thus, on On November
case, it was subject to a resolutory condition which is in case the Garcia for the prayer to be reinstated in his former rank and to be 29, 1984 private respondents filed a complaint for nullification of
heir of Paraiso (a third party) desires to repossess the property. included in the list of graduating students. deed of donation, rescission of contract and reconveyance of real
Upon the happening of the condition, the contract is extinguished. property with damages against petitioners. Respondent’s defene
Therefore, Baluran must return the land to Obedencia. But since Issue: Whether the courts may review the exercise of discretion of was petitioner was already in delay. They claimed that petitioner
Art. 579 allows the usufructuary to remove improvements he a public officer on matters in which it was his duty to act. abandoned the project on 16 July 1988. Respondents further
made, Baluran may remove the house he constructed. One last alleged that certain portions of the construction work did not
point. At the time of this case, the Obedencias were also in Ruling: conform to the specifications agreed upon by the parties.
possession of the riceland of Baluran. Although it was not proper The trial court ruled in favor of petitioner. The trial court held that
to decide the issue of possession in this case, the Court No, the court cannot review the exercise of discretion of a public petitioner was justified in abandoning its construction of the
nevertheless decided on the matter and order the Obedencias to officer on matters in which it was his duty to act by a writ of project. The Court of Appeals reversed the decision of the trial
vacate the property inasmuch as there was an extinguishment of a mandamus. The law imposes that a public officer’s right and duty court but faulted respondent for the trial court’s failure to
reciprocal obligations and rights. The manner of terminating the to exercise judgement is done based on how he is required to act. correspondingly reduce the amount recoverable by petitioner.
right of usufruct may be stipulated by the parties such as in this Hence, this petition.
case, the happening of a resolutory condition. The judgement of the public officer shall be exercised and not the
court’s. ISSUE: Whether the action for rescission should be granted.

In the case at bar, the situation unfolded upon Magtibay was done RULING:
on the basis of failing a necessary subject needed to graduate. No. Nonetheless, we find that although the action filed by private
Although an institution of learning is bound upon a contractual respondents may not be dismissed by reason of prescription, the
144 Flores obligation to provided students a fair opportunity to complete the same should be dismissed on the ground that private respondents
course that he wishes to pursue, the contractual obligation on the have no cause of action against petitioners. The cause of action of
Magtibay v Garcia private respondents is based on the alleged breach by petitioners
part of the student is forfeited when the student commits a serious
of the resolutory condition in the deed of donation that the property
Facts breach of discipline or fails to maintain the academic standard. donated should not be sold within a period of one hundred (100)
Therefore, in light of Magtibay’s failure in the necessary course the years from the date of execution of the deed of donation. Said
Lt. Col. Santiago Q. Garcia, the Commander of the, U.P. ROTC obligation rendered from the school is no longer necessary as to condition, in our opinion, constitutes an undue restriction on the
Cadet Corps, issued General Orders No. 23 which extinguished permitting Magtibay to graduate. rights arising from ownership of petitioners and is, therefore,
Arleo E. Magtibay of the rank of cadet colonel and as battalion contrary to public policy.Donation, as a mode of acquiring
ownership, results in an effective transfer of title over the property
commander of the lst BCT of the U.P. Cadet Corps and was 145 GENON
Arts. 1179-1190 from the donor to the donee. Once a donation is accepted, the
excluded from those who would graduate in the class of the ROTC donee becomes the absolute owner of the property donated.
Roman Catholic Archbishop of Manila vs CA
Advance Course for flunking MS-42, a necessary subject for the Although the donor may impose certain conditions in the deed of
completion of the Advance Course. Magtibay had filed to the FACTS: donation, the same must not be contrary to law, morals, good
President of UP an administrative case against Lt. Col. Santiago customs, public order and public policy. The condition imposed in
the deed of donation in the case before us constitutes a patently FACTS:
unreasonable and undue restriction on the right of the donee to In 1939, late Don Ramon Lopez, Sr. executed a deed of donation On 18 May 1981 TABANGAO leased the lots to Shell Gas
dispose of the property donated, which right is an indispensable in favor of Central Philippines University (CPU) of a parcel of land Philippines, Inc., (SHELL), which immediately started the
attribute of ownership. Such a prohibition against alienation, in construction thereon of a Liquefied Petroleum Gas Terminal
with the conditionsthat the land shall be exclusively use for the
order to be valid, must not be perpetual or for an unreasonable Project, an approved zone export enterprise of the Export
period of time.. establishment of and use of a medical college; that CPU shall not Processing Zone. TABANGAO is the real estate arm of
146. HALID sell, transfer or convey to any third party or any way the land; that SHELL.Two (2) days prior to the expiration of the 20-month period,
the said land shall be called “Ramon Lopez Campus” specifically on 31 December 1982, the BABASAS asked
TAYLOR vs. UY TIENG PIAO TABANGAO for an indefinite extension within which to deliver
However in 1989, the respondents who are heirs of Don Ramon clean title over the lots. They asked that TABANGAO continue
filed an action for annulment of donation, re-conveyance and paying monthly interest of P20,648.43 starting January 1983 on
the ground that Civil Case no. 519 and Petition No. 373 had not
damages against CPU alleging that since 1939 has not complied
FACTS: been resolved with finality in their favor. TABANGAO refused the
with the conditions of the donation and that the University request. In retaliation the BABASAS executed a notarized
Taylor contracted his services to Tan Liuan and Co., as negotiated with National Housing Authority (NHA) to exchange the unilateral rescission dated 28 February 1983 to which TABANGAO
superintendent of an oil factory for a period of two years; and with donated land with another land. responded by reminding the BABASAS that they were the ones
salary rate of P600 per month during the first year and P700 per who did not comply with their contractual obligation to deliver clean
titles within the stipulated 20-month period, hence, had no right to
month during the second, with electric light and water for domestic ISSUE:
rescind their contract. The BABASAS insisted on the unilateral
consumption, and a residence to live in, or in lieu thereof P60 per Whether or not all the rights of the done are deemed lost and rescission and demanded the SHELL vacate the lots.
month. The machinery did not arrive in the city of Manila within the extinguished because of the non-fulfillment of the conditions?
six months succeeding the making of the contract. The defendants Issue: Whether BABASAS can rescind the contract
communicated in writing to the plaintiff that they had decided to RULING:
rescind the contract. Yes. Under Article 1181, on conditional obligations, the acquisition Ruling: No. Clearly then, the BABASAS' act of unilaterally
of rights as well the extinguishment or loss of those already rescinding their contract with TABANGAO is unwarranted. The
ISSUE: acquired shall depend upon the happening of the event which failure of petitioners to deliver clean titles within twenty (20)
constitutes the condition. Thus, when a person donates land to months from the signing of the contract merely gives TABANGAO
Whether or not the plantiff Whether or not the plantiff recover another on the condition that the latter would build upon the land a the option to either refuse to proceed with the sale of to waive the
condition in consonance with Art. 1545 of the New Civil Code.
damages covering salary and perquisites due and to become due school is such a resolutory one. The donation had to be valid
Besides, it would be the height of inequity to allow the BABASAS
under the contract. before the fulfillment of the condition. If there was no fulfillment to rescind their contract of sale with TABANGAO by invoking as a
with the condition such as what obtains in the instant case, the ground therefor their own failure to deliver the titles over the lots
RULING: within the stipulated period.
donation may be revoked & all rights which the donee may have
The defendants were under a positive obligation to cause the acquired shall be deemed lost & extinguished. A deed of sale is absolute in nature although denominated a
machinery to arrive in Manila, they would of course be liable, in the “conditional sale” absent such stipulations. In such cases,
absence of affirmative proof showing that the nonarrival of the ownership of the thing sold passes to the vendee upon the
machinery was due to some cause not having its origin in their 150.LIM constructive or actual delivery thereof
Babasa Spouses vs CA
own act or will. The contract, however, expresses no such positive
obligation, and its existence cannot be implied in the fact of Facts: On 11 April 1981 a contract of "Conditional Sale of 151. MACAPUGAY
stipulation, defining the conditions under which the defendants can
Registered Lands" was executed between the spouses Vivencio Bacolod Murcia Milling Co. Inc. v. CA
cancel the contract. and Elena Babasa as vendors and Tabangao Realty, Inc.
(TABANGAO) as a vendee over three (3) parcels of land, Lots
Therefore, the plantiff can claim P360 for damages but not the Nos. 17827-A, 17827-B and 17827-C, situated in Brgy. Libjo, Facts: Petitioner BMMC, owner and operator of the sugar central
salary Batangas City. It was expressly stipulated that TABANGAO would in Bacolod City, and Alonso Gatuslao, registered planter of the
have the absolute and unconditional right to take immediate Bacolod-Murcia Mill District, executed an “Extension and
Central Philippines University VS CA possession of the lots as well as introduce any improvements Modification of Milling Contract” in 1957 and registered in 1962.
thereon. For 45 years, the petitioner has transported sugar cane from the
plantation to its mill through its cane cars and railroad track
system. When the Hacienda Helvetia owners’ milling contracts
with the petitioner expired, the corresponding right-of-way granted
to it also expired. Through the mediation of the President of the
Philippines, the Angela Estate and the Gonzaga Estate agreed
with the petitioner to allow the use of the railroad tracks passing
through the said hacienda for a period of 1967-1968 milling
season only. Due the non-renewal of the right-of-way contract with
Angela Estates, the petitioner was unable to transport the sugar
canes of Alonso Gatuslao or of AIDSISA. Gatuslao on various
dates requested transportation facilities from the petitioner to no
avail, thereby making him to file a case for breach of contract and
asked for rescission of contract and damages. Petitioner argued
that the inability to use its railways system is due to force majeure
and in order to comply they hired private trucks as movers of to
haul the sugar canes. Gatuslao/AIDSISA, seriously believing that
the petitioner is particularly unable to transport and mill their sugar
canes, opted to use trucks provided by Bacolod-Murcia
Agricultural Cooperative Marketing Association, Inc. (BM-ACMA).
Further, its inability to do so in effect rescinds the milling
contract. Thus, the petitioner also filed a complaint against
AIDSISA and BM-ACMA seeking specific performance of milling
contract. It alleged that Gatuslao/AIDSISA violated the contract by
hiring the services of BM-ACMA. The two complaints were
consolidated for joint trial and CFI rendered judgment rescinding
the milling contract and damages of Php2,625 and Php5,000
attorney’s fees. CA affirmed the CFI decision.  to declare a contract void in its inception and to put an end to it as
Issue: Whether the termination of BMMC’s right of way over the
Hacienda Helvetia caused by the expiration of its amended milling
contracts with its landowners is a fortuitous event or force majeure
which will exempt BMMC from fulfillment of its contractual
obligations.
Ruling:
No. The terms of the milling contracts were clear and undoubtedly
there was no reason for BMMC to expect otherwise. The closure
of any portion of the railroad track, not necessarily in the hacienda
Helvetica but in any of the properties whose owners decided not to
renew their milling contracts with the Central upon their expiration,
was foreseeable and inevitable. Despite its awareness that the
conventional contract of lease would expire in crop year 1964-
1965 and that refusal on the part of any one of the landowners to
renew their milling contracts and the corresponding use of the right
of way on their lands would render impossible compliance of its
commitments, BMMC took a calculated risk that all the landowners
would renew their contracts. The closure of the railway lines was
not an act of God nor it constitute force majeure. The requisites of
force majeure are (1) breach is independent of the will of the
obligor; (2) event is unforeseeable or unavoidable; and 3) the
event renders the fulfilment of the obligation impossible. Herein, it
was due to the termination of the contractual relationships of the
parties, for which BMMC is charged with knowledge. Owners of
the hacienda Helvetica notified BMMC as far back as August 1965
of its intention not to allow the passage of the railway system thru
its land after the aforesaid crop year. Adequate measures should
have been adopted by BMMC to forestall such paralyzations but
the records show none. On the otherhand, Bacolod-Murcia
Agricultural Cooperative Marketing Association, Inc. (BM-ACMA)
cannot be faulted for organizing itself to take care of the needs of
its members. Definitely, it was organized at that time when
petitioner could not assure the planters that it could definitely haul
and mill their canes. The signing of the milling contract between
AIDSISA and BM-ACMA on was a matter of self-preservation
inasmuch as the sugarcanes were already matured and the
planters had crop loans to pay, thus, further delay would mean
tremendous losses.
The requisites of force majeure: (a) breach is
independent of the will of obligor. (b) Event is unforeseeable or
unavoidable, (c) and
the event renders the fulfillment of obligation impossible.
152 MUSA
Huibonhoa vs. CA
Facts:
Florencia Huibonhoa entered into a memorandum of agreement
with the siblings Lim, Gojocco and Chua, stating that she will lease
from them three (3) adjacent commercial lots in Binondo, Manila. A
contract of lease was thereafter executed between the parties,
where such lease over the lots shall last for fifteen (15) years
commencing on July 1, 1983 and renewable upon agreement of
the parties. During the construction of the building which later
became known as Poulex Merchandise Center, former Senator
Benigno Aquino, Jr. was assassinated. The incident must have
affected the country’s political and economic stability. The
consequent hoarding of construction materials and increase in
interest rates allegedly affected adversely the construction of the
building such that Huibonhoa failed to complete the same within
the stipulated eight-month period from July 1, 1983. The
construction was completed only in September 1984 or seven (7)
months later. Under the contract, Huibonhoa was supposed to
start paying rental in March 1984 but she failed to do so.
Consequently, the Gojoccos made several verbal demands upon
Huibonhoa for the payment of rental arrearages and, for her to
vacate the leased premises. However, Huibonhoa brought an
action for reformation of the contract alleging that their true
intention as to when the monthly rental would accrue was not
expressed due to mistake or accident, averring that by reason of
such, the lease contract failed to provide that should an
unforeseen event dramatically increase the cost of construction,
the monthly rental would be reduced and the term of the lease
would be extended for such duration as may be fair and equitable
to both the lessor and the lessee. On July 30, 1990, the
Metropolitan Trial Court of Manila came out with a decision in favor
of plaintiffs Severino Gojocco and Loreta Gojocco Chua and
against Florencia T. Huibonhoa. It ordered Huibonhoa to vacate
the lots. On February 14, 1991, the Regional Trial Court of Manila,
Branch 55, reversed the decision of the Metropolitan Trial Court
and ordered the dismissal of the complaint based primarily on its
finding that the suit is intrinsically and inherently an action for
cancellation of lease or rescission of contract.
ISSUE:
Whether or not the contract is terminated or rescinded.
RULING:
The court denied the reformation of contract and upheld the
ejectment case to which the contract is terminated. By the
allegations of the complaint, the Gojoccos aim was to cancel or
terminate the contract because they sought its partial enforcement
in praying for rental arrearages. There is a distinction in law
between cancellation of a contract and its rescission. To rescind is
though it never were. It is not merely to terminate it and release
parties from further obligations to each other but to abrogate it
from the beginning and restore the parties to relative positions
which they would have occupied had no contract ever been made.
Termination of a contract is congruent with an action for unlawful
detainer. The termination or cancellation of a contract would
necessarily entail enforcement of its terms prior to the declaration
of its cancellation in the same way that before a lessee is ejected
under a lease contract, he has to fulfill his obligations thereunder
that had accrued prior to his ejectment. However, termination of a
contract need not undergo judicial intervention. The parties
themselves may exercise such option. Only upon disagreement
between the parties as to how it should be undertaken may the
parties resort to courts.
153. OCENA
Vda. De Mistica v. Naguiat (GR No. 137909, December 11,
2003)
FACTS: Predecessor-in-interest of Petitioner and herein
Defendants entered into a contract to sell in which the latter prayed
the initial payment and undertake to pay the remaining by
installment within 10 years subject to 12% interest per annum.
Petitioner filed a complaint for rescission alleging failure and petitioners should pay the purchase price balance of P1.8 million entrusted the owners copy of TCT No. T-50.668 (M) to Mariano to
refusal of Defendants to pay the balance constitutes a violation of to private respondents in case the request to assume the guarantee compliance with the Kasunduan. On February 18, 1993,
the contract which entitles her to rescind the same. Petitioner mortgage would be disapproved. Thus, on December 15, 1986, respondents filed a complaint in the RTC of Malolos, asking that
argues that period for performance of obligation cannot be when petitioners received notice of the bank's disapproval of their the Kasunduan  be rescinded for failure of the Riveras to comply
extended to 10 years because to do so would convert the application to assume respondents' mortgage, they should have with its conditions, with damages. They also sought the annulment
obligation to purely potestative. paid the balance of the P1.8 million loan. Instead of doing so, of the Deed of Absolute Sale on the ground of fraud, claiming
petitioners sent a letter to private respondents offering to make Fidela never intended to sell the land and she was made to signed
ISSUE: Whether petitioner may rescind the contract. such payment only upon the fulfillment of certain conditions not the three documents on the mistaken belief that she was merely
originally agreed upon in the contract of sale. Such conditional signing copies of the Kasunduan. Petitioners also filed a
RULING: Under Art. 1191 of Civil Code, the right to rescind an offer to pay cannot take the place of actual payment as would counterclaim asking for moral and exemplary damages and the
obligation is predicated on violation between parties brought about discharge the obligation of a buyer under a contract of sale. payment of attorney’s fees and costs of suit.
by breach of faith by one of them. Rescission, however, is allowed
only when the breach is substantial and fundamental to the In a contract of sale, the seller obligates itself to transfer the ISSUE:
fulfillment of the obligation. In this case, no substantial breach – in ownership of and deliver a determinate thing, and the buyer to pay
the Kasulatan, it was stipulated that payment could be made even a price certain in money or its equivalent. Private respondents had Whether or not the kasunduan may be rescind?
after 10 years from execution of contract, provided they will pay already performed their obligation through the execution of the
the 12% interest. Civil Code prohibits purely potestative, Deed of Sale, which effectively transferred ownership of the RULING:
suspensive, conditional obligation that depend on the whims of the property to petitioner through constructive delivery. Prior physical Yes. A careful reading of the Kasunduan reveals that it is in the
debtor. Nowhere in the deed that payment of purchase price is delivery or possession is not legally required, and the execution of nature of a contract to sell, as distinguished from a contract of
dependent whether respondents want to pay it or not, the fact that the Deed of Sale is deemed equivalent to delivery. Petitioners, on sale. The non-fulfillment of the condition rendered the contract to
they already made partial payment shows that parties intended to the other hand, did not perform their correlative obligation of sell ineffective and without force and effect. It must be stressed
be bound by the Kasulatan. paying the contract price in the manner agreed upon. Worse, they that the breach contemplated in Article 1191 of the New Civil Code
wanted private respondents to perform obligations beyond those is the obligor’s failure to comply with an obligation already extant,
stipulated in the contract before fulfilling their own obligation to pay not a failure of a condition to render binding that
154 REYES the full purchase price. obligation.52 Failure to pay, in this instance, is not even a breach
Arts. 1179-1190 but an event that prevents the vendor’s obligation to convey title
Velarde vs. CA from acquiring binding force.53 Hence, the agreement of the
parties in the instant case may be set aside, but not because of a
CASE NO. 155 - SABTALUH
FACTS: David Raymundo executed a Deed of Sale with breach on the part of petitioners for failure to complete payment of
RIVERA VS. DEL ROSARIO
Assumption of Mortgage, with a balance of P1.8 million, in favor of the second installment. Rather, their failure to do so prevented the
ARTICLE 1191
the spouses Velarde. Pursuant to said agreements, spouses obligation of respondents to convey title from acquiring an
Velarde paid the bank (BPI) for three (3) months until they were obligatory force
FACTS
advised that the Application for Assumption of Mortgage was
On May 16, 1983, Oscar, Rosita, Violeta, Enrique Jr., Juanito, and
denied. This prompted them not to make any further payment.
Eloisa Del Rosario, executed a Special Power of Attorney in favor
Raymundo wrote to the spouses informing the non-fulfillment of Salinas- 156. Ayson-Simon v. Adamos and Feria
of their mother and co-respondent, Fidela, authorizing her to sell,
the obligations. The spouses thru counsel responded that they are
lease, mortgage, transfer and convey their rights over Lot No.
willing to pay in cash the balance subject to several conditions. FACTS:
1083-C. Subsequently, Fidela borrowed P250,000 from Mariano
Raymundo sent a notarial notice of cancellation/rescission of the
Rivera in the early part of 1987. To secure the loan, she and
Deed of Sale. The spouses filed a complaint which was On December 13, 1943, Nicolas Adamos and Vicente
Mariano Rivera agreed to execute a deed of real estate
consequently dismissed by an outgoing judge but was reversed by Feria, defendants-appellants herein, purchased two lots forming
mortgage and an agreement to sell the land.  Consequently, on
the assuming judge in their Motion for Reconsideration. The Court part of the Piedad Estate in Quezon City. The successors-in-
March 9, 1987, Mariano went to his lawyer to have three
of Appeals reinstated the decision to dismiss. interest of the latter filed Civil Case No. 174 in the then Court of
documents drafted: The Deed of Real Estate Mortgage,
a Kasunduan  (Agreement to Sell), and a Deed of Absolute Sale. First Instance of Quezon City for annulment of the sale and the
ISSUE: Whether there is a breach of contract that would entitle its cancellation of Transfer Certificate of Title, which had been issued
The Kasunduan provided that the children of Mariano Rivera, the
rescission. to defendants-appellants by virtue of the disputed sale. On
petitioners, would purchase the lot, to be paid in three installments.
Mariano returned to the office of his lawyer bringing with him the December 18, 1963, the Court rendered a Decision annulling the
RULING: Yes. Petitioners did not merely stop paying the mortgage sale, cancelling TCT 69475, and authorizing the issuance of a new
signed documents. Fidela inadvertently affixed her signature on all
obligations; they also failed to pay the balance of the purchase title in favor of Porciuncula’s successors-in-interest. The said
the three documents in the office of Atty. Barangan.  Fidela
price. As admitted by both parties, their agreement mandated that
judgment was affirmed by the Appellate Court and had attained
finality. In the meantime, during the pendency of the above-
mentioned case, defendants-appellants sold to Generosa Ayson
Simon the lots in question. Due to the failure of defendants-
appellants to comply with their commitment to have the subdivision
plan of the lots approved and to deliver to deliver the titles and
possession to Generosa, the latter filed suit for specific
performance. As a result of the sale of the lot to said defendants
appellants being null and void, there is impossibility that they can
comply with their commitment to Generosa, the latter then seek
the rescission of the contract plus damages.
The defendants-appellants contend that Generosa’s action had
prescribed, considering that she had only four years from May 29,
1946 to rescind the transaction.
ISSUE: Whether the action to rescind the obligation has
prescribed.
RULING:
No. The Supreme Court ruled that according to Article
1191 of the Civil Code provides that an injured party may also
seek rescission if the fulfillment should have become impossible.
The cause of action to claim rescission arises when the fulfillment
of the obligation became impossible when the court declared that
the sale was null and void. The Generosa cannot be assailed on
the ground that she slept on her rights.
157. SALVADOR
Magdalena Estate v. Myrick
Art 1191
Facts: Magdalena Estate, Inc., sold to Louis J. Myrick lots Nos. 28
and 29 of Block 1, Parcel 9 of the San Juan Subdivision, San
Juan, Rizal, their contract of sale No. SJ-639 (Exhibits B and 1)
providing that the price of P7,953 shall be payable in 120 equal
monthly installments of P96.39 each on the 2nd day of every
month beginning the date of execution of the agreement.
The petitioner cancelled the contract, advised the respondent that
he has been relieved of his obligations thereunder, and led said
respondent to believe it so and act upon such belief, the petitioner
may not be allowed, in the language of section 333 of the Code of
Civil Procedure in any litigation arising out of such act, to falsify it.
Issue: Whether the cancellation of the contract is a valid remedy their standing as religious leaders to maliciously advise her not to
in case performance is not obliged by the debtor. continue with the sale. The damages ordinarily recoverable against
a vendor for failure to deliver land which he has contracted to
Ruling: NO, the claim of the petitioner that it has the right to forfeit deliver is the value of the use and occupation of the land for the
said sums in its favor is untenable. Under article 1124 of the Civil time during which it is wrongfully withheld.
Code, however, he may choose between demanding the fulfillment
of the contract or its resolution. These remedies are alternative 161. Song Fo V hawaian Philippine Company – Baird
and not cumulative, and the petitioner in this case, having elected
to cancel the contract, cannot avail himself of the other remedy of FACTS;
exacting performance.
Song Fo & Company, plaintiff, presented a complaint with
As a consequence of the resolution, the parties should be two causes of action for breach of contract against the Hawaiian-
restored, as far as practicable, to their original situation (Po Pauco Philippine Co., defendant, in which judgment was asked for
v. Siguenza, supra) which can be approximated only by ordering, P70,369.50, with legal interest, and costs. In an amended answer
as we do now, the return of the things which were the object of the
and cross-complaint, the defendant set up the special defense that
contract, with their fruits and of the price, with its interest (article
1295, Civil Code), computed from the date of the institution of the since the plaintiff had defaulted in the payment for the molasses
action. delivered to it by the defendant under the contract between the
Case 158- Tan parties, the latter was compelled to cancel and rescind the said
Article 1191 contract.  "Regarding the payment for our molasses, Mr. Song Fo
Daywalt vs. P.P. Agustinos gave us to understand that you would pay us at the end of each
month for molasses delivered to you." Song Fo however failed to
pay within the time agreed upon.
Facts: Teoderica Endencia obligated herself to convey to Geo
Daywalt a tract of land. The deed should be executed as soon as
the tittle of the land is perfected. There was a decree recognizing
Teoderica as the owner of land, but the Torrens certificate was not ISSUE;
issued until later. There was a development of Endecia’s land as
the Torrens title was issued and in view of this development she Whether the appellant could legally rescind the contract
became reluctant to transfer the whole tract of land asserting that
she never intended to sell the large amount of land and that she RULING;
was misinformed from 452 hectares to actually being 1,248
No. However. The terms of payment fixed by the parties
hectares. After the Torrens title was issued to Teoderica she gave
it to La Corporacion P.P. Agustinos Recolectos for safekeeping in are controlling. The time of payment stipulated for in the contract
which they did so. As Teodorica still retained possession of said should be treated as of the essence of the contract. Theoretically,
property, Father Sanz of the corporation raised large numbers of agreeable to certain conditions which could easily be imagined, the
cattle in the land.
Hawaiian-Philippine Co. would have had the right to rescind the
contract because of the breach of Song Fo & Company. But
actually, there is here present no outstanding fact which would
Issue: Whether a 3rd party in the obligation can be liable for legally sanction the rescission of the contract by the Hawaiian-
damages? Philippine Co.We rule that the appellant had no legal right to
rescind the contract of sale because of the failure of Song Fo &
Company to pay for the molasses within the time agreed upon by
Ruling: Yes. Members of the defendant’s corporation, in advising the parties.  The general rule is that rescission will not be permitted
and prompting Endencia not to comply with the contract of sale, for a slight or casual breach of the contract, but only for such
were actuated by improper and malicious motives. It was shown breaches as are so substantial and fundamental as to defeat the
that the priests used their close relationship with Endencia and
object of the parties in making the agreement. A delay in payment
for a small quantity of molasses for some twenty days is not such
a violation of an essential condition of the contract was warrants
rescission for non-performance. Not only this, but the Hawaiian-
Philippine Co. waived this condition when it arose by accepting
payment of the overdue accounts and continuing with the contract.
Thereafter, Song Fo & Company was not in default in payment so
that the Hawaiian-Philippine co. had in reality no excuse for writing
its letter of April 2, 1923, cancelling the contract.
163. CHUA art 1191
UFC V. CA
FACTS:
In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula
for the manufacture of a food seasoning (sauce) popularly known
as MAFRAN sauce. The plaintiff registered his trademark in his
name as owner and inventor with the Bureau of Patents. The
plaintiff secured the financial assistance of Tirso T. Reyes who,
after a series of negotiations, formed with others defendant
Universal Food Corporation eventually leading to the execution on
May 11, 1960 of the aforequoted "Bill of Assignment" (Exhibit A or
1).
On May 31, 1960, Magdalo Francisco entered into contract with
UFC stipulating among other things that he be the Chief Chemist
and Second Vice-President of UFC and shall have absolute
control and supervision over the laboratory assistants and
personnel and in the purchase and safekeeping of the chemicals
used in the preparation of said Mafran sauce and that said
positions are permanent in nature.
In line with the terms and conditions of the Bill of Assignment,
Magdalo Francisco was appointed Chief Chemist with a salary of
P300.00 a month. Magdalo Francisco kept the formula of the
Mafran sauce secret to himself. Thereafter, however, due to the
alleged scarcity and high prices of raw materials, on November 28,
1960, Secretary-Treasurer Ciriaco L. de Guzman of UFC issued a
Memorandum duly approved by the President and General
Manager Tirso T. Reyes that only Supervisor Ricardo Francisco
should be retained in the factory and that the salary of plaintiff
Magdalo V. Francisco, Sr., should be stopped for the time being
until the corporation should resume its operation. On December 3,
1960, President and General Manager Tirso T. Reyes, issued a
memorandum to Francisco ordering him to report to the factory
and produce "Mafran Sauce" at the rate of not less than 100 cases
a day so as to cope with the orders of the corporation's various
distributors and dealers, and with instructions to take only the
necessary daily employees without employing permanent
employees. Again, on December 6, 1961, another memorandum
was issued by the same President and General Manager
instructing the Assistant Chief Chemist Ricardo Francisco, to recall
all
daily employees who are connected in the production of Mafran
Sauce and also some additional daily employees for the
production of Porky Pops. On December 29, 1960, another
memorandum was issued by the President and General Manager
instructing Ricardo Francisco, as Chief Chemist, and Porfirio
Zarraga, as Acting Superintendent, to produce Mafran Sauce and
Porky Pops in full swing starting January 2, 1961 with further
instructions to hire daily laborers in order to cope with the full blast
operation. Magdalo V. Francisco, Sr. received his salary as Chief
Chemist in the amount of P300.00 a month only until his services
were terminated on November 30, 1960. On January 9 and 16,
1961, UFC, acting thru its President and General Manager,
authorized Porfirio Zarraga and Paula de Bacula to look for a
buyer of the corporation including its trademarks, formula and
assets at a price of not less than P300,000.00. Due to these
successive memoranda, without plaintiff Magdalo V. Francisco, Sr.
being recalled back to work, he filed the present action on
February 14, 1961. Then in a letter dated March 20, 1961, UFC
requested said plaintiff to report for duty, but the latter declined the
request because the present action was already filed in court.
ISSUES:
Was petitioner’s contention that Magdalo Francisco is not entitled
to rescission valid?
RULING:
No. Petitioner’s contention that Magdalo Francisco’s
petition for rescission should be denied because under Article
1383 of the Civil Code of the Philippines rescission can not be
demanded except when the party suffering damage has no other
legal means to
obtain reparation, was of no merit because “it is predicated on a
failure to distinguish between a rescission for breach of contract
under Article 1191 of the Civil Code and a rescission by reason of
lesion or economic prejudice, under Article 1381, et seq.” This was
a case of reciprocal obligation. Article 1191 may be scanned
without disclosing anywhere that the action for rescission
thereunder was subordinated to anything other than the culpable
breach of his obligations by the defendant. Hence, the reparation
of damages for the breach was purely secondary. Simply put,
unlike Art. 1383, Art. 1191 allows both the rescission and the
payment for damages. Rescission is not given to the
party as a last resort, hence, it is not subsidiary in nature.
MAIN POINT: The general rule is that rescission of a contract will
not be permitted for a slight or casual breach, but only for such
substantial and fundamental breach as would defeat the very
object of the parties in making the agreement. The question of
whether a breach of a contract is substantial depends upon the
attendant circumstances. The petitioner contends that rescission of
the Bill of Assignment should be denied, because under article
1383, rescission is a subsidiary remedy which cannot be instituted
except when the party suffering damage has no other legal means
to obtain reparation for the same. However, in this case the
dismissal of the respondent patentee Magdalo V. Francisco, Sr. as
the permanent chief chemist of the corporation is a fundamental
and substantial breach of the Bill of Assignment. He was
dismissed without any fault or negligence on his part. Thus, apart
from the legal principle that the option to demand performance or
ask for rescission of a contract belongs to the injured party, 14 the
fact remains that the respondents-appellees had no alternative but
to file the present action for rescission and damages.
164-Cruz
 Art. 1191 FACTS:
UNLAD v Dragon et als. On March 28, 1965, petitioner Palay, Inc., through its President,
Albert Onstott executed in favor of private respondent, Nazario
G.R. No. 149338, July 28, 2008 Dumpit, a Contract to Sell a parcel of Land owned by said
corporation. The contract expressly provided for automatic
extrajudicial rescission upon default in payment of any monthly
installment after the lapse of 90 days from the expiration of the
Facts: The parties in this case entered in a Memorandum of grace period of one month, without need of notice and with
Agreement (MoA) that petitioner will invest in additional stocks forfeiture of all installments paid.
worth P4.8M and pay up immediately P1.2M for said subscription
while the respondents shall transfer control and management over Respondent Dumpit paid the down payment and several
the Rural Bank to petitioner’s resources. The respondents installments, but failed to pay the balance. On May 10, 1973, or
complied with their obligation but the petitioners did not, thus almost six (6) years later, private respondent wrote petitioner
respondents filed a complaint for rescission of the agreement and offering to update all his overdue accounts with interest, and
seeking its written consent to the assignment of his rights to a
the return of control and management of the Rural Bank from
certain Lourdes Dizon. However, petitioners informed respondent
petitioners to respondents, plus damages. that his Contract to Sell had long been rescinded pursuant to
paragraph 6 of the contract, and that the lot had already been
resold.
ever subject to scrutiny and review by the proper court. If the other
party denies that rescission is justified it is free to resort to judicial
action in its own behalf, and bring the matter to court. Then, should
the court, after due hearing, decide that the resolution of the
contract was not warranted, the responsible party will be
sentenced to damages; in the contrary case, the resolution will be
affirmed, and the consequent indemnity awarded to the party
prejudiced.
In other words, the party who deems the contract violated may
consider it resolved or rescinded, and act accordingly, without
previous court action, but it proceeds at its own risk. For it is only
the final judgment of the corresponding court that will conclusively
and finally settle whether the action taken was or was not correct
in law. But the law definitely does not require that the contracting
party who believes itself injured must first file suit and wait for a
judgment before taking extrajudicial steps to protect its interest.
Otherwise, the party injured by the other’s breach will have to
passively sit and watch its damages accumulate during the
pendency of the suit until the final judgment of rescission is
rendered when the law itself requires that he should exercise due
diligence to minimize its own damages.

Issue: Whether the rescission of the MoA between the parties is
proper
Ruling: Yes, the MoA between the parties can be rescinded
pursuant to Article 1191 of the Civil Code. Since petitioner failed to
comply with what is incumbent upon him, the respondent can ask
for rescission of the MoA on such ground. Clearly, the petitioners
failed to fulfill their end of the agreement, and thus, there was just
cause for rescission. With the contract, thus rescinded, the parties
must be restored to the original state, that is, before they entered
into the MoA.
165 DARLUCIO
PALAY INC. v. CLAVE
Respondent filed a letter complaint with the National Housing
Authority (NHA) for reconveyance with an alternative prayer for
refund. NHA finds the rescission void in the absence of either
judicial or notarial demand, ordered Palay, Inc. and Alberto Onstott
in his capacity as President of the corporation, jointly and
severally, to refund immediately to Nazario Dumpit. Petitioners
appealed but subsequently denied for lack of merit. Thus, the
present petition.
ISSUE:
Whether or not demand is necessary to rescind a contract
regardless of the express stipulation in the contract that demand is
not needed.
RULING:
No. that judicial action for the rescission of a contract is not
necessary where the contract provides that it may be revoked and
cancelled for violation of any of its terms and conditions. However,
even in the cited cases, there was at least a written notice sent to
the defaulter informing him of the rescission. As stressed in
University of the Philippines vs. Walfrido de los Angeles which
held that the act of a party in treating a contract as cancelled or
resolved in account of infractions by the other contracting party
must be made known to the other and is always provisional being
Moreover, there was no waiver on the part of the private
respondent of his right to be notified under paragraph 6 of the
contract since it was a contract of adhesion, a standard form of
petitioner corporation, and private respondent had no freedom to
stipulate. Finally, it is a matter of public policy to protect buyers of
real estate on instalment payments against onerous and
oppressive conditions. Waiver of notice is one such onerous and
oppressive condition to buyers of real estate on instalment
payments.
166 Flores
Laperal v Solid Homes
Facts
The FGSDC is the predecessor-in-interest of the petitioner FGGCI
and the other petitioner is Oliverio Laperal. Laperal had entered
into a Development and Management Agreement with the
respondent Solid Homes who was a registered subdivision
developer. The agreement had involved parcels of land owned by
Laperal and FGSDC. The terms and conditions stipulated that
Solid Homes is to convert at its own expense the parcel of lands
into a first-class residential subdivision by which they will receive
45% of the lot titles of the saleable area in the entire project.
Afterwards, the President and the General Manager of Solid
Homes requested Laperal to furnish Solid Homes with duplicated
Torrens titles on the subject land to accommodate the processing
of the application with the HSRC. Laperal did not comply. The
previous agreement was later on cancelled by the parties but
revised the agreement to where Solid Homes are not to be to
owners of the subject property. The revised agreement had
included an addendum by which in case of default or termination
of the contract that there will be a forefeiture of all advances made
and a remittances of proceeds of reservations and sales.
There was a delay for the license to sell the subject property on
behalf of the respondent to where the petitioners had insisted on
the payment of P1million to the respondent. The petitioners had
served notices of rescission to vacate the subject property and
forfeit the possession to them. The respondent refused and
contended that such happenings occurred from the petitioner’s
failure to deliver the duplicates of the owner’s title. The respondent
issued a complaint upon this and a prayer for the revision of the
revised agreements.
The interveners in this case was the Southridge Village
Homeowner’s Association filed a complaint-in-intervention praying
that the rights and preferential status of its members, who have
been occupying some of the completed units in the subdivision
project should be respected by the principal litigants whom may
later be adjudged as the prevailing party.
Issue: Whether or not the default of the terms and conditions
stipulated by the Revised Agreement and Addendum should
demand the forfeiture of the subject property and payment by Solid
Homes.
Ruling:
No, the default of the terms and conditions stipulated by the ISSUE: Whether petitioner can validly collect from respondent the
Revised Agreement and Addendum should not demand the remaining balance of the total contract price.
forfeiture of the subject property and payment by Solid Homes.
RULING:
The petitioners are obliged to returned the subject property to the
NO. Petitioner, on the other hand, was behind schedule in its
respondents by virtue of Article 1385 but the respondent is liable to construction work because the project should be fully operational
pay an equivalent amount in liquidated damages as stated in the by April 1988. To remedy the situation, the 16 May 1988 letter
Addendum. fixed a period for the completion of the other structures of the
project, except the office building. Petitioner was given a month to
167 GENON finish this portion of the project and the records show that it was
Arts. 1179-1190 aware of this deadline. At the same time, the 16 May 1988 letter
EK Lee Steel Works vs Manila Castor Oil Corp. specified the amounts still payable to petitioner conditioned upon
the accomplishment of certain portions of the project. There is no
FACTS: doubt that petitioner failed to comply with its undertaking to
Ek Lee Steel Works Corporation (petitioner) is engaged in the complete the project, except the office building, on 15 June 1988.
construction business while Manila Castor Oil Corporation Consequently, respondent’s obligation to pay the P200,000 did not
(respondent) claims to be a pioneer in the castor oil industry with arise. Respondent could not be considered in delay when it failed
Romy Lim (Lim) as its President. Respondent contracted petitioner to pay petitioner at that time.
for the construction of respondent’s castor oil plant and office 168. HALID
complex in Sasa, Davao City. Petitioner agreed to undertake the
construction. Petitioner alleged that respondent verbally agreed to DEIPARINE v. CA
have another building (Building II-Warehouse) constructed on the
project site worth P349,249.25. Respondent denied the existence
of this contract because it never approved such contract.
Therefore, petitioner discontinued its construction of Building II- FACTS:
Warehouse after finishing its foundation and two side walls.
Petitioner submitted a Statement of Account to respondent The spouses Carungay entered into an agreement with Ernesto
showing respondent’s accumulated payables totaling P764,466.5 Deiparine, Jr., for the construction of a three-story dormitory in
Respondent paid P500,000 as shown in a letter of even date. In
strict accordance to (sic) plans and specifications. The Carungays
the same letter, respondent promised to pay certain amounts
thereafter upon the completion of specific portions of the project. agreed to pay, inclusive of contractor's fee. Nicanor Trinidad, Jr., a
civil engineer, was designated with powers of inspection and
On 5 July 1988, respondent paid petitioner P70,000. Petitioner
allegedly demanded payment of respondent’s remaining balance, coordination with the contractor.
but to no avail. Hence, petitioner stopped its construction in the
project site. Petitioner filed a collection suit against respondent and The parties conducted cylinder tests by Geo-Testing International
Lim, with an application for a writ of preliminary attachment. and the building was structurally defective. Carungay filed
complaint with the Regional Trial Court of Cebu for the rescission
Respondent’s defene was petitioner was already in delay. They of the construction contract and for damages. Deiparine moved to
claimed that petitioner abandoned the project on 16 July 1988.
dismiss,
Respondents further alleged that certain portions of the
construction work did not conform to the specifications agreed
ISSUE:
upon by the parties.
The trial court ruled in favor of petitioner. The trial court held that
Whether or not there is a breach of contract and subject for the
petitioner was justified in abandoning its construction of the
project. The Court of Appeals reversed the decision of the trial rescission of the construction contract and for damages.
court but faulted respondent for the trial court’s failure to
correspondingly reduce the amount recoverable by petitioner. RULING:
Hence, this petition.
Yes. The construction contract fails squarely because it imposes case one of the obligors shall fail to comply with what is incumbent ISSUE: whether the Contract to Sell was rescinded, under the
upon Deiparine the obligation to build the structure and upon the upon him. But that right must be invoked judicially. The same automatic rescission clause contained therein.
Carungays the obligation to pay for the project upon its article also provides: The Court shall decree the resolution
demanded, unless there should be grounds, which justify the
completion.
allowance of a term for the performance of the obligation. This
requirement has been retained in the third paragraph of Article HELD: In case the rescission is found unjustified under the
"Art. 1191 states: The power to rescind obligations is implied in
1191, which states that the court shall decree the rescission circumstances, still in the instant case there is a clear waiver of the
reciprocal ones, in case one of the obligors should not comply with claimed, unless there be just cause authorizing the fixing of a
what is incumbent upon him. stipulated right of "automatic rescission," as evidenced by the
period.
many extensions granted private respondents by the petitioner. In
Iringan v. Court of Appeals all these extensions, the petitioner never called attention to the
172.LIM proviso on "automatic rescission." The assailed decision is
FACTS: Pilipinas Bank vs IAC June 30, 1987 affirmed.
Private respondent Antonio Palao sold to petitioner Alfonso
Iringan, an undivided portion of Lot No. 992 of the Tuguegarao FACTS: Hacienda Benito, Inc. as vendor, and private 173. MACAPUGAY
Cadastre. The parties executed a Deed of Sale on the same date Heirs of Escanlar v. CA
respondents, as vendees executed Contract to Sell No. over a
with the purchase price of P295,000.00,payable as follows:(a)
P10,000.00 upon the execution of this instrument ;(b) P140,000.00 parcel of land on monthly installments subject to the condition:
Facts: Spouses Guillermo Nombre and Victoriana Cari-an died
on or before April 30, 1985;(c) P145,000.00 on or before “The contract shall be considered automatically rescinded and
without a child. Nombre’s heirs include his nephews and
December 31, 1985. cancelled and of no further force and effect upon failure of the grandnephews. Two parcels of land formed part of the estate of
vendee to pay when due, three or more consecutive installments Nombre and Cari-an. Private respondents, heirs of Cari-an
When the second payment was due, Iringan paid only P40,000. as stipulated therein or to comply with any of the terms and executed a Deed of Sale in favor of petitioners Pedro Escanlar and
Thus, Palao sent a letter to Iringan stating that he considered the conditions thereof…” Francisco Holgado. The latter paid P50,000.00 as a form of down
contract as rescinded and that he would not accept any further payment from total price of P225,000.00, but was unable to pay
payment considering that Iringan failed to comply with his the remaining balance. Being former lessees, petitioners continued
During the contract, petitioner sent series of notices to private
obligation to pay the full amount of the second installment. Iringan in possession of the said lots, and continued to pay rent.
replied that he is not opposing the revocation of the Deed of Sale respondents (PR) for thei latter’s balances/arrearages. From time Thereafter, private respondents later sold the aforementioned lots
but asked for the reimbursement of the cash received; geodetic to time, PR partially complied with this and requested for to Chua spouses. The former then filed an action for cancellation
engineers fee; attorneys fee;(d) the current. In response, Palao extensions. On May 19, 1970, the petitioner, for the last time, of sale against petitioners for failure to pay the remaining balance.
sent a letter dated January 10, 1986 to Atty. Aquino, stating that reminded the PR to pay their balance. After more than two years, However, petitioners already sold their rights and interests over the
he was not amenable to the reimbursements claimed by Iringan. PR sent a letter expressing their desire to settle their desire to fully lots to Jayme, and turned over the possession. RTC of
settle their obligation. On March 27, 1974, petitioner wrote a letter Himamaylan took cognizance of Special Proceeding ruled that the
On February 21, 1989, Iringan, proposed that the P50,000 which sale to petitioners was nullified since all the properties of the estate
to PR , informing them that the contract to sell had been
he had already paid Palao be reimbursed or Palao could sell to had been transferred and titled to in the name of the Chua
him, an equivalent portion of land. Palao instead wrote Iringan that rescinded. PR filed Complaint for Specific Performance with spouses. On appeal, CA affirmed, the questioned deed of sale
the latter’s standing obligation had reached P61,600, representing Damages to compel petitioner to execute a deed of sale. (one with petitioners) is a contract to sell because it shall become
payment of arrears for rentals from October 1985 up to March effective only upon approval by the probate court and upon full
1989. The parties failed to arrive at an agreement. On July 1, After trial, the lower court rendered a decision in PR’s favor, payment of the purchase price. 
1991, Palao filed a Complaint for Judicial Confirmation of holding that petitioner could not rescind the contract to sell,
Rescission of Contract and Damages against Iringan. because: (a) petitioner waived the automatic rescission clause by Issue: Whether the sale was a contract to sell and therefore,
accepting payment and by sending letters advising private private respondents may rescind the contract the moment the
ISSUE: respondents of the balances due, thus, looking forward to buyer fails to pay.
Whether or not the contract of sale was validly rescinded
receiving payments thereon. Said decision was affirmed on
appeal. Hence, this Petition For Review on Certiorari, Ruling: No. In contracts to sell, ownership is retained by the seller
RULING: and is not to pass until the full payment of the price. Such payment
No, even if Article 1191 were applicable, petitioner would still not is a positive suspensive condition, the failure of which is not a
be entitled to automatic rescission. In Escueta v. Pando, the court breach of contract but simply an event that prevented the
ruled that under Article 1124 (now Article 1191) of the Civil Code, obligation of the vendor to convey title from acquiring binding
the right to resolve reciprocal obligations, is deemed implied in force.To illustrate, although a deed of conditional sale is
denominated as such, absent a proviso that title to the property period). There is an indefinite period of time for employment There is thus sufficient legal basis for plaintiff's rescission suit, now
sold is reserved in the vendor until full payment of the purchase agreed upon by and between petitioners and the private before this Court on appeal, to set aside the auction sale of Uy
price nor a stipulation giving the vendor the right to unilaterally respondent, subject only to the resolutory period agreed upon Tina's properties, the debtor being the same petitioner in the
rescind the contract the moment the vendee fails to pay within a which may end the indeterminate period of employment, namely aforementioned certiorari proceeding, in favor of defendant PNB,
fixed period, by its nature, it shall be declared a deed of absolute — voluntary resignation on the part of private respondent insofar as it would adversely affect 4 specific items subject to prior
sale. Whereas in a contract of sale, the non-payment of the price Alcantara or termination of employment at the option of petitioner attachment lien secured by plaintiff, included in the very same
is a resolutory condition which extinguishes the transaction that, Lirag Textile Mills, but for a “valid cause or causes. order of execution issued 5 years after the finality of the judgment
for a time, existed and discharges the obligations created but within such period counted from the time it could executed and
thereunder. The remedy of an unpaid seller in a contract of sale is It necessarily follows that if the petitioner-employer Lirag Textile enforced. So the lower court held. We affirm, but subject to
to seek either specific performance or rescission. In the case at Mills terminates the employment without a “valid cause or causes,” modification. Tan Ching Ji filed a complaint for the rescission of an
bar, the 1978 sale of rights, interests and participation as to 1/2 it committed a breach of the contract of employment executed by auction sale of certain properties of Uy Tina in favor of defendant,
portion pro indiviso of the two subject lots is a contract of sale for and between the parties. now appellant PNB. It was shown in such complaint that in a civil
the following reasons: First, private respondents as sellers did not case, for the recovery of the sum of money, he obtained a first lien
reserve unto themselves the ownership of the property until full A "period" has been defined "as a space of time which has an upon the properties of defendant Uy Tina by means of writs of
payment of the unpaid balance of P225,000.00. Second, there is influence on obligation as a result of a juridical act, and either attachment duly issued by the CFI and that subsequently he
no stipulation giving the sellers the right to unilaterally rescind thesuspends their demandableness or produces their obtained a judgment in his favor in the sum of P23,000.00. In
contract the moment the buyer fails to pay within the fixed extinguishment." Obligations with a period are those whose another civil case filed against the same debtor, PNB was awarded
period. Prior to the sale, petitioners were in possession of the consequences are subjected in one way or another to the the sum of P8,772.76. It then sued out a writ of execution and
subject property as lessees. Upon sale to them of the rights, expiration of said period or term. Article 1193 of the Civil Code caused to be levied upon and sold at public auction the very same
interests and participation as to the 1/2 portion  pro indiviso, they provides that “obligations with a resolutory period take effect at properties already attached by plaintiff. The decision in the suit
remained in possession, not in concept of lessees anymore but as once, but terminate upon arrival of the day certain. A day certain is between plaintiff and Uy Tina as noted above, the sum of
owners now through symbolic delivery known as traditio brevi understood to be that which must necessarily come, although it P23,000.00 to plaintiff, but upon agreement of the parties
manu.Under Article 1477 of the Civil Code, the ownership of the may not be known when.” The Supreme Court has no doubt that defendant Uy Tina was given a period of 6 years within which to
thing sold is acquired by the vendee upon actual or constructive the "indefinite period" of employment expressly agreed upon by pay, during which time he could hold and enjoy the fruits of such
delivery thereof. and between the parties in this case is really a resolutory period properties. The judgment debt, however, remained unsatisfied and
because the employment is bound to terminate on a future "day it was not there was an order for execution based on such
174 MUSA certain" such as the employee's resignation or employer's judgment. In the meanwhile, the very same property, subject of the
Lirag Textile Mills vs CA termination of employment upon a valid cause or causes, like attachment, had been acquired by PNB in an execution sale
death of the employee or termination of employer's corporate resulting from a judgment in its favor in a suit filed by it against the
Facts: existence, although it may not be known when. Petitioner Lirag same debtor for the amount of P8,772.76. The principal legal
Petitioners Lirag Textile Mills, Inc. and Private Respondent Textile Mills, Inc. violated the contract of employment with private question on which appellant PNB would seek a reversal of the
Cristan Alcantara entered into a contract with a stipulation that the respondent Alcantara when the former terminated his services aforesaid decision is the nullity of an order of execution upon mere
latter’s tenure of employment, per defendant Lirag Textile Mills, without a valid cause. The act was attended with bad faith and motion filed after 5 years from the date it became final. Its appeal
Inc.'s aletter of May 9, 1960 was to be 'for an indefinite period, deceit because said petitioner made false allegations of a is doomed to failure. Such a contention was categorically rejected.
unless sooner terminated by reason of voluntary resignation or by supposed valid cause.
virtue of a valid cause or causes'. Later on, Alcantara was Tan Ching Ji vs. Campua Uy Tina, the parties executed a
dismissed without cause in violation of the contract of employment 175. OCENA compromise agreement, which was submitted to and approved by
Tan Ching Ji v. Mapalo (GR No. L-21933, February 22, 1971) the Court in its decision dated February 4, 1954. Under that
agreement the defendant obligated himself to pay plaintiff the sum
ISSUE: FACTS: The answer to the pivotal legal issue in this appeal on a of P23,000.00 'without interest, within a period of 6 years from date
Whether or not such stipulation is a resolutory condition question of law from a judgment of the CFI of Cotabato is supplied hereof. It was also stipulated that certain properties which had
and hence the dismissal is invalid. by Uy Tina v. Avila, a certiorari proceeding with the petitioner, the been attached as security would not be released until full payment
debtor, seeking to quash a writ of execution in favor of one of the and that the defendant 'during the period of 6 years, shall hold and
Ruling: respondents, Tan Ching Ji, plaintiff-appellee in this case. The fully enjoy the fruits of said properties. After the six-year period had
YES. As could be clearly seen from the stipulation of facts unequivocal holding is that the 5 year period under Rule 39, expired, Tan Ching Ji filed a motion for execution. The motion was
between the parties, the contract of employment was for an Section 6 as to when a judgment may be executed on motion is to granted. Campua Uy Tina moved to reconsider, announcing in his
indefinite period as it shall continue without ending, subject to a be counted not from the date, "the judgment became final in the motion that he was going to file an ordinary action to enjoin the
resolutory period, unless sooner terminated by reason of voluntary sense that no appeal therefrom could be taken, but when it enforcement of the decision. The court denied the MR. He then
resignation or by virtue of a valid cause or causes (the resolutory became executory in the sense that it could already be enforced." invoked "Rule 39, Section 6, which provides that a judgment may
be executed on motion within 5 years from the date of its entry,
and that after the lapse of such time and before it is barred by the
statute of limitations, a judgment may be enforced by action. The
contention is that since the decision approving the compromise
agreement was rendered on February 4, 1954, it could no longer
be executed by mere motion when respondent, plaintiff below,
moved for that purpose on September 20, 1960, more than five
years having then elapsed.
ISSUE: Whether defendant, petitioner here, can be compelled to
comply with his obligation under the judgment and, upon failure to ISSUE: Whether the obligation of Fonacier and his sureties to pay
do so, could his properties be levied upon, at any time within 6 Gaite became due and demandable when the former failed to
years from the rendition of the judgment on February 4, 1954? renew the surety bond.
RULING: He was given that period within which to pay. His
obligation was one with a term and the term was indubitably for his
benefit, as shown by the fact that the obligation carried no interest
liability and that in the meantime he continued in possession and
enjoyment of the properties which were under attachment for
purposes of security. Under Article 1193 of the Civil Code an
obligation with a term is demandable only when the term expires.
Had respondent demanded payment from petitioner before the
expiration of the term given to him, he could very well have
refused to pay on the ground that his obligation had not yet
become due. A writ of execution would have been as futile. Since
such writ could only have been effectively issued as futile. Since
such writ could only have been effectively issued after the lapse of
6 years from February 4, 1954, respondent court committed
neither error nor abuse of discretion when he did issue it upon
motion on August 14, 1962 pursuant to Rule 39, Section 6."
175 REYES
Article 1193
Gaite vs. Fonacier
FACTS: Isabelo Fonacier decided to revoke the authority granted
by him to Fernando Gaite to exploit and develop the mining claims,
and the latter assented thereto subject to certain conditions. As a
result, a document was executed wherein Gaite transferred to
Fonacier, for the consideration of P20,000.00, plus 10% of the
royalties that Fonacier would receive from the mining claims, all
his rights and interests on all the roads, improvements, and
facilities in or outside said claims, the right to use the business
name “Larap Iron Mines” and its goodwill, and all the records and
documents relative to the mines. In the same document, he
transferred to Fonacier all his rights and interests over the iron ore,
in consideration of the sum of P75,000.00, P10,000.00 of which
was paid upon the signing of the agreement, and the balance of
P65,000.00 will be paid from and out of the first letter of credit
covering the first shipment of iron ores and of the first amount Ayala agreed to offer these lots for sale to the spouses at the
derived from the local sale of iron ore. To secure the payment of prevailing price at the time of purchase. After the execution of the
the said balance of P65,000.00, Fonacier promised to execute in MOA, Ayala caused the suspension of work on Village 1 of the
favor of Gaite a surety bond, and pursuant to the promise. project. Ayala then received a letter from Lancer General Builder
Corp. in which the latter was claiming a certain amount as
In the subsequent year, Fonacier failed to renew the bond to subcontractor. G.P. Construction not being able to reach an
sureties. Gaite filed the present complaint against them in the CFI amicable settlement with Lancer, Lancer sued G.P. Construction,
of Manila for the payment of the P65,000.00 balance of the price of Conduit and Ayala in the court. G.P. Construction and Lancer both
the ore, consequential damages, and attorney’s fees. tried to enjoin Ayala from undertaking the development of the
property. The suit was terminated only on 1987. Taking the
position that Ayala was obligated to sell the 4 lots adjacent to the
"Retained Area" within 3 years from the date of the MOA, the
Vasquez spouses sent several "reminder" letters of the
approaching so-called deadline. However, no demand after 1984,
RULING: Yes. The provision in the contract was not a condition was ever made by the Vasquez spouses for Ayala to sell the 4
but a only a suspensive period or term to the payment of the lots. On the contrary, one of the letters signed by their authorized
balance of P65,000.00. What characterizes a conditional obligation agent categorically stated that they expected development of
is the fact that its efficacy or obligatory force (as distinguished from
Phase 1 to be completed 3 years from the settlement of the legal
its demandability) is subordinated to the happening of a future and problems with the previous contractor. By early 1990, Ayala
uncertain event; so that if the suspensive condition does not take finished the development of the vicinity. The 4 lots were then
place, the parties would stand as if the conditional obligation had offered to be sold to the Vasquez spouses at the prevailing price in
never existed. That the parties to the contract did not intend any 1990. This was rejected by the Vasquez spouses who wanted to
such state of things to prevail. There is no uncertainty that the pay at 1984 prices, thereby leading to the suit below.
payment will have to be made sooner or later; what is
undetermined is merely the exact date at which it will be made. By ISSUE: Whether Ayala Corp. has delayed performance of an
the very terms of the contract, therefore, the existence of the obligation
obligation to pay is recognized; only its maturity or demandability is
deferred. The defendant loses the right of the period when it failed RULING:
to renew the surety according to Article 1198 of the Civil Code.
No, Ayala Corporation cannot be said to have delayed
performance of the obligation. 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. However, no such
Salinas- 179. Vasquez v. Ayala Corp. day certain was fixed in the MOA. Petitioners, therefore, cannot
demand performance after the three (3) year period fixed by the
FACTS: MOA for the development of the first phase of the property since
this is not the same period contemplated for the development of
On April 23, 1981, spouses Vasquez entered into a MOA the subject lots. Since the MOA does not specify a period for the
with Ayala Corp. with Ayala buying from the Vazquez spouses all development of the subject lots, petitioners should have petitioned
of the latter's shares of stock in Conduit Development, Inc. The the court to fix the period in accordance with Article 1197 of the
main asset was a property in Ayala Alabang which was then being Civil Code. As no such action was filed by petitioners, their
developed by Conduit under a development plan where the land complaint for specific performance was premature, the obligation
was divided into Villages 1, 2 and 3. The development was then not being demandable at that point.
being undertaken by G.P. Construction and Development Corp. 179. SALVADOR
Under the MOA, Ayala was to develop the entire property, less Macasaet v. Macasaet
what was defined as the "Retained Area". This "Retained Area" Art 1193
was to be retained by the Vazquez spouses. The area to be
developed by Ayala was called the "Remaining Area". In this Facts: The present case involves a dispute between parents and
"Remaining Area" were 4 lots adjacent to the "Retained Area" and children. The children were invited by the parents to occupy the
latters two lots, out of parental love and a desire to foster family
solidarity. Unfortunately, an unresolved conflict terminated this
situation. Out of pique, the parents asked them to vacate the
premises. Thus, the children lost their right to remain on the
property. They have the right, however, to be indemnified for the
useful improvements that they constructed thereon in good faith
and with the consent of the parents.
Petitioners allege that they cannot be ejected from the lots,
because respondents based their Complaint regarding the
nonpayment of rentals on a verbal lease agreement, which the
latter failed to prove.29 Petitioners contend that the lower courts
erred in using another ground (tolerance of possession) to eject
them.
Issue: Whether the ejectment suit is proper though there was no
given proper condition and period as to the length of stay of the
children in the lot.
Ruling: YES, this Court has consistently held that those who
occupy the land of another at the latter’s tolerance or permission,
without any contract between them, are necessarily bound by an
implied promise that the occupants will vacate the property upon
demand. A summary action for ejectment is the proper remedy to
enforce this implied obligation. The unlawful deprivation or
withholding of possession is to be counted from the date of the
demand to vacate. To repeat, when Vicente and Rosario invited
their children to use the lots, they did so out of parental love and a
desire for solidarity expected from Filipino parents. No period was
intended by the parties. Their mere failure to fix the duration of
their agreement does not necessarily justify or authorize the courts
to do so.
Article 1197, however, applies to a situation in which the parties
intended a period. Such qualification cannot be inferred from the
facts of the present case. Based on respondents reasons for
gratuitously allowing petitioners to use the lots, it can be safely
concluded that the agreement subsisted as long as the parents
and the children mutually benefited from the arrangement.
Effectively, there is a resolutory condition in such an agreement.
Thus, when a change in the condition existing between the parties
occurs -- like a change of ownership, necessity, death of either
party or unresolved conflict or animosity -- the agreement may be
deemed terminated. Having been based on parental love, the
agreement would end upon the dissipation of the affection. When
persistent conflict and animosity overtook the love and solidarity
between the parents and the children, the purpose of the
agreement ceased.
of the increase in the rent to P1,576.58 effective January 1992
Case 180- Tan pursuant to the provisions of the Rent Control Law.  Petitioner,
Article 1193 however, tendered checks for only P400 each, payable to Jose
Eleizegui vs. Manila Lawn Tennis Club Tiongco as administrator. As might be expected, private
respondents refused to accept the same. On 9 August 1993,
petitioner filed with the RTC of Manila a complaint for specific
performance with prayer for consignation. She prayed that private
Facts: A contract of lease was executed over a piece of land respondents be ordered to accept the rentals in accordance with
owned by the petitioners Eleizegui to the Manila Lawn Tennis the lease contract and to respect the lease of fifteen years, which
Club, an English association for a fixed consideration of Php 25 was renewable for another ten years, at the rate of P200 a
per month and the end of the lease was stipulated that the contract month.In their Answer, private respondents countered that
of lease would last until the respondent cannot anymore pay the petitioner had already paid the monthly rent of P1,000 for July and
monthly rent. Under the contract, the tenant can make August 1991. Under RA No. 877, rental payments should already
improvements deemed desirable for the comfort and amusement be P1,576.58  per month; hence, they were justified in refusing the
of its members. Petitioners terminated the lease right on the first checks for P400 that petitioner tendered. Moreover, the phrase in
month. The defendant is in the belief that there can be no other the lease contract authorizing renewal for another ten years does
mode of terminating the lease than by its own will, as what they not mean automatic renewal; rather, it contemplates a mutual
believe has been stipulated. agreement between the parties. During the pendency, counsel for
private respondents wrote petitioner reminding her that the
contract expired on 1 June 1994 and demanding that she pay the
rentals in arrears, which then amounted to P33,000.On 29 August
Issue: Whether there was an agreed upon duration of the lease?
1995, the RTC declared the lease contract automatically renewed
for ten years On appeal, the Court of Appeals reversed the
decision of the RTC, and ordered petitioner to immediately vacate
Ruling: Yes. The parties have agreed upon a term. The contract the leased premises on the ground that the contract expired on 1
should not be understood as one stipulated as a life tenancy, and June 1994 without being renewed and to pay the rental arrearages
still less as a perpetual lease since the terms of the contract at the rate of P1,000 monthly. 
express nothing to this effect. Moreover, being a lease, then it
must be for a determinate period. By its very nature it must be ISSUE; whether the parties intended an automatic renewal of the
temporary, just as by reason of its nature, an emphyteusis must be lease contract
perpetual, or for an unlimited period. Therefore, the contract of
lease still subsists. RULING; No, it was not specifically indicated who may exercise
the option to renew, neither was it stated that the option was given
for the benefit of herein petitioner. Thus, pursuant to the
Fernandez ruling and Article 1196 of the Civil Code, the period of
184. BUCE V CA -BAIRD the lease contract is deemed to have been set for the benefit of
both parties. Renewal of the contract may be had only upon their
FACTS; Petitioner leased a 56-square meter parcel of land mutual agreement or at the will of both of them. Since the private
located at 2068 Quirino Avenue, Pandacan, Manila. The lease respondents were not amenable to a renewal, they cannot be
contract was for a period of fifteen years to commence on 1 June compelled to execute a new contract when the old contract
1979 and to end on 1 June 1994 "subject to renewal for another terminated on 1 June 1994. It is the owner-lessor's prerogative to
ten 10 years, under the same terms and conditions." Petitioner terminate the lease at its expiration. The continuance, effectivity
then constructed a building and paid the required monthly rental of and fulfillment of a contract of lease cannot be made to depend
P200. Private respondents, through their administrator Jose exclusively upon the free and uncontrolled choice of the lessee
Tiongco, later demanded a gradual increase in the rental until it between continuing the payment of the rentals or not, completely
reached P400 in 1985. For July and August 1991, petitioner paid depriving the owner of any say in the matter. Mutuality does not
private respondents P1,000 as monthly rental. On 6 December obtain in such a contract of lease and no equality exists between
1991, private respondents' counsel wrote petitioner informing her
the lessor and the lessee since the life of the contract would be
dictated solely by the lessee.  thirty (30) days in advance. As a rule, the method of terminating a
187-Cruz
Art. 1191
Home Development Mutual Fund v CA
G.R. No. 118972, April 3, 1998
effect that written notice of termination should be served at least
contract is primarily determined by the stipulation of the parties.
Thus, the requirements of contracts as to notice—as to the time of
giving, form, and manner of service thereof—must be strictly
observed because “In an obligation where a period is designated,
it is presumed to have been established for the benefit of both the
contracting parties.” Thus, the unilateral termination of the contract
in question by the herein petitioners is violative of the principle of
mutuality of contracts ordained in Art. 1308 of the New Civil Code.

Facts: Petitioner, represented by its senior vice-president, entered

into a consultancy agreement with CONVIR and Associates by
virtue of which the latter obligated it to render medical services to
the employees of the petitioner. The contract is stipulated to be
effective for one year and provides that either party may terminate
the contract so as long as the other party is given a written notice
at least 30 days in advance. Fifteen days before the 1-year
effectivity of the contract expires, CONVIR wrote to petitioner’s
Deputy CEO, who was the officer-in-charge, to inform that they are
assuming from petitioner’s silence that subject Agreement was
renewed for the succeeding period (for a 2 nd year). Seven days
after, petitioner notified CONVIR of the termination of the contract
in question upon its expiration in the coming week but such letter-
reply was only received by the private respondents 9 days after
the date the contract was supposed to expire. CONVIR filed a
complaint averring that the sudden and unexpected termination of
the Consultancy Agreement did not conform to the 30 day
advance notice requirement.

Issue: Did petitioners comply with their contractual obligation in

good faith when they served the requisite written notice to private
respondents 9 days after the expiration of the agreement

Ruling: No. As a rule, the method of terminating a contract is

primarily determined by the stipulation of the parties, thus the
requirements of contracts as to notice—as to the time of giving,
form, and manner of service thereof—must be strictly observed.—
The second clause of the contractual provision in dispute is to the