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COURTESY OF SU LAW 2011

ANG 238 YU ASUNCION VS. SCRA COURT OF APPEALS 602

FACTS: On July 29, 1987, a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng and Jose Tan before the Regional Trial Court of Manila. The plaintiffs were tenants or lessees of residential and commercial spaces owned by defendants in Binondo, Manila. On several conditions defendants informed the plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same. During negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter of offer of P5-million. Plaintiff thereafter asked the defendants to put their offer in writing to which the defendants acceded. In reply to defendants letter, plaintiffs wrote, asking that they specify the terms and conditions of the offer to sell. When the plaintiffs did not receive any reply, they sent another letter with the same request.Since defendants failed to specify the terms and conditions of the offer to sell and because of information received that the defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. The court dismissed the complaint on the ground that the parties did not agree upon the terms and conditions of the proposed sale, hence, there was no contact of sale at all. On November 15, 1990, the Cu Unjieng spouses executed a Deed of Sale transferring the property in question to Buen Realty and Development Corporation. Buen Realty, as the new owner of the subject property, wrote to the lessees demanding the latter to vacate the premises. In its reply, it stated that Buen Realty and Development Corporation brought the property subject to the notice of lis pendens.

ISSUE:

Can Buen Realty be bound by the writ of execution by virtue of the notice of lis pendens?

RULING: No.An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is upon the concurrence of the essential elements thereof, viz: (a) the vinculum juris or juridical tie which is the efficient cause established by the various sources of obligations; (b) the object which is the prestation or conduct, required to observed; and (c) the subject-persons who, viewed demandability of the obligation are the active (oblige) and the passive (obligor) subjects. Among the sources of an obligation is a contract (Art. 1157), which is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, to which the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees. The registration of lis pendens must be independently addressed in appropriate proceedings.Therefore, Buen Realty cannot be held subject to the writ of execution issued by the respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.

SAGRADA 91

ORDEN

vs.

NATIONAL PHIL.

COCONUT

CORPORATION 503

FACTS: Plaintiff Sagrada Orden owned a piece of real property in Pandacan, Manila. During the Japanese occupation, the land was acquired by a Japanese corporation Taiwan Tekkoshho. After the liberation, the Alien Property Custodian of the United States took possession, control, and custody of the real property. During the year 1946, the property was occupied by the Copra Export Management Company under the custodianship agreement with United States Alien Property Custodian, and when it vacated, the property was occupied by defendant National

Coconut Corporation. Sagrada Orden made claim to the property before the Alien Property Custodian of the United States but was denied. So plaintiff brought an action in court to annul the sale of property of Taiwan Tekkosho, and recover its possession. The case did not come for trial because the parties presented a joint petition in which it is claimed by Sagrada Orden that the sale in favor of Taiwan Tekkosho was null and void because it was executed under threats, duress, and intimidation, and that the title be re-issued to Sagrada Orden. The court rendered judgment releasing the defendant from liability, but reversing to the plaintiff the right to recover from the defendant reasonable rentals for the use and occupation of the premises. The present action to recover the reasonable rentals from August 1946, the date when defendant began to occupy, to the date it vacated it. The defendant did not contest its liability for the rentals at the rate of P3, 000 per month from February 28, 1949, but resisted the claim therefore prior to that date. Defendant contends that it occupied the property in good faith, under no obligation to pay rentals for the use and occupation. Judgment rendered for the plaintiff to recover from the defendant the sum of P3, 000 a month, from August, 1946, to the date the defendant vacates the premises. Thus this appeal made by defendant.

ISSUE: Can the defendant company be held liable to pay rentals from August 1946 to the date it vacated?

RULING: No. If defendant-appellant is liable at all, its obligations, must arise from any of the four sources of obligations, namely, law, contract or quasi-contract, crime, or negligence. Defendantappellant is not guilty of any offense at all, because it entered the premises and occupied it with the permission of the entity which had the legal control and administration thereof, the Alien Property Administration. Neither was there any negligence on its part. There was also no privity between the Alien Property Custodian and the Taiwan Tekkosho, which had secured the possession of the property from the plaintiff-appellee by the use of duress, such that the Alien Property Custodian or its permittee (defendant-appellant) may be held responsible for the supposed illegality of the occupation of the property by the said Taiwan Tekkosho. The Alien Property Administration had the control and administration of the property not as successor to the interests of the enemy holder of the title, the Taiwan Tekkosho. Neither is it a trustee of the former owner, the plaintiff-appellee herein, but a trustee of then Government of the United States, in its own right, to the exclusion of, and against the claim or title of, the enemy owner. From August, 1946, when defendant-appellant took possession, to the late of judgment on February 28, 1948, Alien Property Administration had the absolute control of the property as trustee of the Government of the United States, with power to dispose of it by sale or otherwise, as though it were the absolute owner. Therefore, even if defendant-appellant were liable to the Alien Property Administration for rentals, these would not accrue to the benefit of the plaintiffappellee, the owner, but to the United States Government.

PE 195

VS

INTERMEDIATE SCRA

APPELLATE

COURT 137

FACTS: Plaintiff spouses Francisco and Anita Pe entered into a contract to sell their 5 parcels of land. These parcels of land were mortgaged with different banking institutions. Lots Nos. 40 and 41 were mortgaged to the Philippine Veterans Bank (PVB) for P351,162.59; Lots Nos. 42 and 45 were mortgaged to the Development Bank of the Philippines (DBP) for P189,322.49; and Lot No. 47 to Philippine Commercial and Industrial Bank (PCIB) for P57,000. On September 20, 1976, the plaintiffs executed a contract to sell. The plaintiffs were paid the total amount of 351,162.59 to PVB for lots 40 and 41. On the same date, they executed in favor of Domingo Sy a deed of sale over Lots Nos. 42 and 45 after payment by the latter of the former's account with the DBP in the amount of P189,322.49. Consequently, a contract to sell and a corresponding deed of sale covering Lot No. 47 were prepared but the deed did not materialize as the buyers offer of P49,454.92, as payment for Lot No. 47, was rejected by the Pe spouses, the latter insisted on the full payment of their obligation with the (PCIB) in the amount of P383,615.97 and P620,000 as the alleged consideration stipulated in the Contract to Sell. Pe allege that the consideration of the Contract to Sell was P1,544,161.05 and not P620,000.

ISSUE: Was the contention of the plaintiffs valid?

RULING: No. The words of the Contract to Sell were clear and left no doubt upon the true intention of the contracting parties. The condition laid down in paragraph (2) of the contract did not provide for an additional consideration, but only for the manner in which the consideration was to be applied. It clearly provided that payment shall be applied to petitioners' obligations with the bank where the respective properties were mortgaged, and upon their release, petitioners shall execute the final deed of sale. The subsequent acts of the parties conformed with this condition. Thus, the parties should be bound by such written contract. It should also be noted that at the time of the execution of the Contract to Sell, the total obligation due to the PCIB as regards Lot No. 47 was only P 99,374.89. The rise of the same obligation to P383,615.96 was brought about by subsequent loans the petitioners obtained with the same bank for which the tractor and an "Offset Discharrow" were given as additional security. Contracts are respected as the law between the contracting parties. The parties may establish such stipulations, clauses, terms and conditions as they may want to include. As long as such agreements are not contrary to law, morals, good customs, public policy or public order,

they LEUNG G.R.

shall BEN No.

have VS.

the P. L-13602

force J. April

of O'BRIEN

law

between.

6,

1918

FACTS: An action was instituted in the Court of First Instance of the city of Manila by P. J. O'Brien to recover the sum of P15,000 alleged to have been lost by Leung Ben to P.J. OBrien in a series of gambling, banking and percentage games conducted during the two or three months prior to the institution of the suit. In Leung Bens verified complaint, OBrien asked for an attachment against the property of Leung Ben on the ground that the latter was about to depart from the Philippine Islands with intent to defraud his creditors. This attachment was issued, and acting under that authority, the sheriff attached the sum of P15,000 which had been deposited by the OBrien with the International Banking Corporation. Leung Bien filed a motion to quash the attachment, which was dismissed by the court. Hence this application for a writ of certiorari, the purpose of which was to quash an attachment issued from the Court of First Instance of the City of Manila.

ISSUE: Was the statutory obligation to restore money won at gaming an obligation arising from "contract, express or implied?"

RULING: Yes.Upon general principles, recognized both in the civil and common law, money lost in gaming and voluntarily paid by the loser to the winner cannot, in the absence of statute, be recovered in a civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several forms of gambling, contains numerous provisions recognizing the right to recover money lost in gambling or in playing certain games. The original complaint filed in the Court of First Instance was not clear as to the particular section of Act No. 1757 under which the action was brought, but was alleged that the money was lost at gambling, banking, and percentage game in which the defendant was a banker. It must therefore be assumed that the action was based upon the right of recovery given in section 7 of said Act, which declared that an action may be brought against the banker by any person losing money at a banking or percentage game. It was observed that according to the Civil Code obligations are supposed to be derived either from (1) the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or (4) acts in which some sort ob lame or negligence is present. This enumeration of sources of obligations

and the obligation imposed by law are different types. The obligations which in the Code are indicated as quasi-contracts, as well as those arising ex lege, are in the common la system, merged into the category of obligations imposed by law, and all are denominated implied contracts. In the case under consideration, the duty of O Brien to refund the money which he won from the Leung Ben at gaming was a duty imposed by statute. It therefore arose ex lege. Furthermore, it was a duty to return a certain sum which had passed from OBrien to Leung Ben. By all the criteria which the common law supplies, this a duty in the nature of debt and is properly classified as an implied contract. It was well- settled by the English authorities that money lost in gambling or by lottery, if recoverable at all, can be recovered by the loser in an action of indebitatus assumpsit for money had and received. This meant that in the common law the duty to return money won in this way was an implied contract, or quasi-contract. The phase in question should be interpreted in such a way as to include all obligations, whether arising from consent or ex lege, because that was equivalent to eliminating all distinction between the first and the fifth paragraphs by practically striking out the first two lines of paragraph one. The Legislature had deliberately established this distinction, and while we may be unable to see any reason why it should have been made, it was our duty to apply and interpret the law, and we were not authorized under the guise of interpretation to virtually repeal part of the statute. Nor can it be said that the relations between the parties litigant constitute a quasi-contract. In the first place, quasi- contracts are "lawful and purely voluntary acts by which the authors thereof become obligated in favor of a third person. . . ." The act which gave rise to the obligation ex lege relied upon by Leung Ben in the court below is illicit an unlawful gambling game. In the second place, the first paragraph of section 412 of the Code of Civil Procedure does not authorize an attachment in actions arising out of quasi contracts, but only in actions arising out of contract, express or implied. SAGRADA 91 ORDEN VS. NATIONAL SCRA COCONUT CORPORATION 503

FACTS: Petitioner, Sagrada Orden owned a land which was acquired by a Japanese corporation during the Japanese military occupation. After the liberation, the Alien Property Custodian took possession, control and custody of the land. The Copra Export Management Company occupied the property and when it vacated, the respondent, National Coconut Corporation occupied it through the representation made by the Philippine Government to the Alien Property Custodian. The property was returned to Sagrada Orden upon judgment that the contract of sale of the property in favor of the Japanese corporation was null and void and upon payment of the consideration it received for the property to the Philippine Alien Property Administration. Sagrada Orden was also given the right to recover from National Coconut Corporation reasonable rentals for the use and occupation of the premises. Sagrada Orden filed an action to recover rentals from National Coconut Corporation

from the time it used and occupied the premises. National Coconut Corporation claimed that it was willing to pay only from the time the property was returned to Sagrada Orden and not before, for it occupied the property in good faith, under no obligation to pay the rentals.

ISSUE: Was National Coconut Corporation liable for rentals prior to the date the property was returned to Sagrada Orden?

RULING: No. National Coconut Corporation was not liable for the rentals prior to the date the property was returned to Sagrada Orden. For National Coconut Corporation to be liable, its obligation must arise from the law, contract or quasi- contract, crime or negligence as provided by Article 1157 of the Civil Code which was taken from Article 1089 of the old Civil Code. As none of these sources were present, National Coconut Corporation cannot be held liable. There was also no express agreement between the entity which had legal control and administration of the property and the National Coconut Corporation for the latter to pay rentals on the property so there was no obligation. PELAYO 12 VS. Phil. LAURON 453

FACTS: On November 23, 1906, a physician named Arturo Pelayo filed a complaint against Marelo Lauron and Juana Abellana. On the night of October 13th of the same year, the plaintiff was called to render medical assistance to the defendants daughter-in-law, who was about to gie birth. After the consultation of Dr. Escao, it was deemed that the operation was going to be difficult for child birth, but regardless, Dr. Pelayo proceeded with the job of operating on the subject and also removed the afterbirth. The operation went on until morning, and on the same day, visited several times and billed the defendants the just amount of P500 for the services rendered to which defendants refused to pay. In answer to the complaint, counsel for the defendants denied all of the allegation and alleged as a special defense, that their daughter-in-law had died in consequence of the said childbirth, that when she was alive she lived with her husband independently and in a separate house without any relation whatever with them, and that, if on the day when she gave birth she was in the house of the defendants, her stay their was accidental and due to fortuitous circumstances. Therefore, he prayed that the defendants be absolved of the complaint with costs against the plaintiff.

ISSUE: Can the defendants be held liable to pay for the obligation?

RULING: No. According to article 1089 of the Civil Code, obligations are created by law, by contracts, by quasi-contracts, and by illicit acts and omissions or by those in which any kind of fault or negligence occurs. Obligations arising from law are not presumed. Those expressly determined in the code or in special laws, etc., are the only demandable ones. Obligations arising from contracts have legal force between the contracting parties and must be fulfilled in accordance with their stipulations. (Arts. 1090 and 1091.) The rendering of medical assistance in case of illness was comprised among the mutual obligations to which the spouses were bound by way of mutual support. (Arts. 142 and 143.) If every obligation consists in giving, doing or not doing something (art. 1088), and spouses were mutually bound to support each other, there can be no question but that, when either of them by reason of illness should be in need of medical assistance, the other was under the unavoidable obligation to furnish the necessary services of a physician in order that health may be restored, and he or she may be freed from the sickness by which life is jeopardized. The party bound to furnish such support was therefore liable for all expenses, including the fees of the medical expert for his professional services. In the face of the above legal precepts, it was unquestionable that the person bound to pay the fees due to the plaintiff for the professional services that he rendered to the daughter-in-law of the defendants during her childbirth, was the husband of the patient and not her father and motherin-law of the defendants herein.

DIANA 93

VS.

BATANGAS Phil

TRANSPORTATION,

CO. 391

FACTS: On June 21, 1945, Truck No. 14 belonging to the defendant Batangas Transportation, Co. driven by Vivencio Bristol ran into a ditch at Bay, Laguna resulting in the death of Florenio Diana and other passengers. Plaintiffs were the heirs of Diana. Bristol was charged and convicted of multiple homicide through reckless imprudence where he was ordered to indemnify

the heirs of the deceased in the amount of Php 2,000. When the decision became final, a writ of execution was issued in order that the indemnity may be , but the sheriff filed a return stating that the accused had no visible leviable property. The present case (civil case No. 9221) was started when defendant failed to pay the indemnity under its subsidiary liability under article 103 of the Revised Penal Code. Defendant filed a motion to dismiss on the ground that there was another action pending between the same parties for the same cause (civil case No. 8023) in which the same plaintiffs sought to recover from the same defendant the amount of P4,500 as damages resulting from the death of Florenio Diana, who died while on board a truck of defendant due to the negligent act (culpa aquiliana) of the driver Vivencio Bristol. Plaintiffs filed a written opposition to the motion to dismiss. The lower court, having found the motion well founded, dismissed the complaint, without special pronouncement as to costs, and their motion for reconsideration having been denied, plaintiffs took the present appeal.

ISSUE: Did the lower court correctly dismiss the complaint on the sole ground that there was action pending between the same parties for the same cause?

another

RULING: No. The present case (civil case No. 9221) stemmed from a criminal case in which the driver of the defendant was found guilty of multiple homicide through reckless imprudence and was ordered to pay an indemnity of P2,000 for which the defendant was made subsidiarily liable under article 103 of the Revised Penal Code. While the other case (civil case No. 8023) was an action for damages based on culpa aquiliana which underlies the civil liability predicated on articles 1902 to 1910 of the old Civil Code. These two cases involved two different remedies. As this court aptly said: "A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code, with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. * * *. A distinction exists between the civil liability arising from a crime and the responsibility for cuasi-delictos or culpa extra-contractual. The same negligent act causing damages may produce civil liability arising from a crime under article 100 of the Revised Penal Code, or create an action for cuasi-delito or culpa extra-contractual under articles 1902-1910 of the Civil Code. It was a mistake to say that the present action should be dismissed, because of the pendency of another action between the same parties involving the same cause. Evidently, both cases involved different causes of action. FAUSTO 73 BARREDO VS. SEVERINO GARCIA AND TIMOTEA ALAMARIO 607

PHIL.

FACTS: On the road between Malabon and Navotas, Province of Rizal, there was a head-on collision between a taxi of the Malate Taxicab driven by Pedro Fontanilla and a carretela guided by Pedro Dimapalis. The carretela was overturned, and one of its passengers, 16-year-old boy Faustino Garcia, suffered injuries from which he died two days later. A criminal action was filed against Fontanilla in the Court of First Instance of Rizal, where he was convicted and sentenced acoordingly. The court in the criminal case granted the petition that the right to bring a separate civil action be reserved. The respondents, Severino Garcia and Timotea Almario, parents of the deceased on March 7, 1939, brought an action in the Court of First Instance of Manila against the petitioner Fausto Barredo as the sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla. The Court of First Instance of Manila awarded damages in favor of the respondents for P2,000 plus legal interest from the date of the complaint, which was modified by the Court of Appeals by reducing the damages to P1,000 with legal interest from the time the action was instituted. It was undisputed that Fontanillas negligence was the cause of the mishap, as he was driving on the wrong side of the road, and at high speed. As to Barredo's responsibility, the Court of Appeals found that there was proof that Barredo as employer exercised the diligence of a good father of a family to prevent damage. In fact, it was shown he was careless in employing Fontanilla, who had been caught several times for violation of the Automobile Law and speeding. Defendant contended that his liability was governed by the Revised Penal Code, according to which his responsibility was only secondary, but no civil action had been brought against the taxi driver.

ISSUE: May the plaintiffs bring a separate civil action against Fausto Barredo, thus making him primarily and directly responsible under article 1903 of the Civil Code as an employer of Pedro Fontanilla?

RULING: Yes. Authorities support the proposition that a quasi-delict or "culpa aquiliana " is a separate legal institution under the Civil Code with a substantivity all its own, and individuality that is entirely apart and independent from delict or crime. Upon this principle and on the wording and spirit of article 1903 of the Civil Code, the primary and direct responsibility of employers may be safely anchored. It will thus be seen that while the terms of articles 1902 of the Civil Code seem to be broad enough to cover the driver's negligence in the instant case, nevertheless article 1093 limits cuasi-delitos to acts or omissions "not punishable by law." But inasmuch as article 365 of the Revised Penal Code punishes not only reckless but even simple imprudence or negligence, the fault or negligence under article 1902 of the Civil Code has apparently been crowded out. It is this overlapping that makes the "confusion worse confounded." However, a closer study shows

that such a concurrence of scope in regard to negligent acts does not destroy the distinction between the civil liability arising from a crime and the responsibility for cuasi-delitos or culpa extra-contractual. The same negligent act causing damages may produce civil liability arising from a crime under article 100 of the Revised Penal Code, or create an action for cuasi-delito or culpa extra-contractual under articles 1902-1910( 2176, 2180- NCC) of the Civil Code.

GASHEM GR

SHOOKAT 97336

BAKSH

VS

CA February

AND

MARILOU 19,

T.

GONZALES 1993

FACTS: Gashem Shookat Baksh, an Iranian citizen, was an exchange student taking medical course at the Lyceum Northwestern College in Dagupan City. Private respondent, Marilou Gonzales on the other hand, was an employee at Mabuhay Luncheonette, a high school graduate and of good moral character and reputation duly respected in her community. The two met at a party on August 3, 1986 and later on became inseparable lovers. Not long after, Baksh proposed to marry Marilou which she willingly accepted. Even before their engagement, Baksh and private respondent were already living together. In the course of their cohabitation, Baksh attitude towards her changed. She was maltreated. As a result, private respondent decided to leave. Thereafter, she filed a complaint against Baksh who renounced their marriage agreement and asked her not to live with him anymore, because he was already married to someone living in Bacolod.

ISSUE: Was private respondent entitled to damages?

RULING: Yes. Article 2176 of the Civil Code, which defines a quasi-delict thus:

"Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the

provisions

of

this

Chapter."

limited to negligent acts or omissions and excludes the notion of willfulness or intent. Quasidelict, known in Spanish legal treatises as culpa aquiliana, is a civil law concept while torts is an Anglo-American or common law concept. Torts is much broader than culpa aquiliana because it includes not only negligence, but international criminal acts as well such as assault and battery, false imprisonment and deceit. In the general scheme of the Philippine legal system envisioned by the Commission responsible for drafting the New Civil Code, intentional and malicious acts, with certain exceptions, are to be governed by the Revised Penal Code, while negligent acts or omissions are to be covered by Article 2176 of the Civil Code. DIANA 93 VS. BATANGAS PHIL TRANSPORTATION, CO. 391

FACTS: On June 21, 1945, Truck No. 14 belonging to the defendant Batangas Transportation, Co. driven by Vivencio Bristol ran into a ditch at Bay, Laguna resulting in the death of Florenio Diana and other passengers. Plaintiffs are the heirs of Diana. Bristol was charged and convicted of multiple homicide through reckless imprudence where he was ordered to indemnify the heirs of the deceased in the amount of Php 2,000. When the decision became final, a writ of execution was issued in order that the indemnity may be satisfied but the sheriff filed a return stating that the accused had no visible leviable property. The present case (civil case No. 9221) was started when defendant failed to pay the indemnity under its subsidiary liability under article 103 of the Revised Penal Code. Defendant filed a motion to dismiss on the ground that there was another action pending between the same parties for the same cause (civil case No. 8023) in which the same plaintiffs sought to recover from the same defendant the amount of P4,500 as damages resulting from the death of Florenio Diana, who died while on board a truck of defendant due to the negligent act (culpa aquiliana) of the driver Vivencio Bristol. Plaintiffs filed a written opposition to the motion to dismiss. The lower court, having found the motion well founded, dismissed the complaint, without special pronouncement as to costs; and their motion for reconsideration having been denied, plaintiffs took the present appeal.

ISSUE: Was the lower court correct in dismissing the complaint on the sole ground that there was another action pending between the same parties for same cause under Rule 8, section 1(d) of the Rules of Court?

RULING:

No. Rule 8, section 1 (d) allows the dismissal of a case on the ground that "there is another action pending between the same parties for the same cause." But where the present case stems from a criminal case in which the river of the defendant was found guilty of multiple homicide through reckless imprudence and was ordered to pay an indemnity of P2,000 for which the defendant was made subsidiarily liable under article 103 of the Revised Penal Code, while the other case (civil case No. 8023) was an action for damages based on culpa aquiliana which underlies the civil liability predicated on articles 1902 to 1910 of the old Civil Code, the two cases involved two different remedies and the present case should not be dismissed. "A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code, with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. * * *. A distinction exists between the civil liability arising from a crime and the responsibility for cuasi-delictos or culpa extra-contractual. The same negligent act causing damages may produce civil liability arising from a crime under article 100 of the Revised Penal Code, or create an action for cuasi-delito or culpa extra-contractual under articles 1902-1910 of the Civil Code.

VALENZUELA 253 SCRA

VS.

CA 303

FACTS: A case was filed by Ma. Lourdes Valenzuela, which was an action to recover damages based on quasi-delict, for serious physical injuries sustained in a vehicular accident on June 24, 1990. During the accident, Valenzuelas left leg was severed up to the middle of her thigh, with only some skin and muscle connected to the rest of the body so she had to be amputated. She was confined in the hospital for twenty days and was eventually fitted with an artificial leg. The lower court found Richard Li, the person driving the Mitsubishi Lancer, guilty of gross negligence and liable for damages under 2176 of the Civil Code. Alexander Commercial Inc., Lis employer, was also found jointly and severally liable. Upon appeal, CA agreed with the decision of the lower court regarding the liability of Li. However, CA absolved the liability of Alexander Commercial Inc. CA also reduced the claim for moral damages. Hence, both parties assailed the respondent courts decision by filing two separate petitions.

ISSUE:

Should

Alexander

Commercial

Inc.

be

held

jointly

and

severally

liable?

RULING: Yes. The Court agreed with the CA that the relationship of the employer and employee was not based on the principle of respondent superior, which held the master liable for acts of the servant, but that of pater familias, in which the liability ultimately fell upon the employer for his failure to exercise the diligence of a good father of the family in the selection and supervision of his employees. Under the concept of pater familias embodied by Article 2180, the employer may be relieved from any liability upon showing that he exercised the diligence of a good father of the family. Once the evidence is introduced showing that the employer exercised the required amount of care, half of the employers burden is overcome. However, the question of diligent supervision depends on the circumstances of employment. In the instant case, Li, as an Assistant Manager of the company, admitted that his functions did not require him to scrupulously keep normal office hours as he performs social and work-related functions. The service car assigned to Li, therefore, enabled both to put up the front of a highly successful entity, increasing the latters goodwill before its clientele. It also facilitated meeting between Li and its clients by providing the former with a convenient mode of travel. Assuming that he really came from his officemates place as Li claimed, the same could give rise to speculation that he and his officemate had just been from a work-related function, or they were together to discuss sales and other work related strategies. Moreover, Alexander Commercial Inc. had not demonstrated to the satisfaction of the court that it exercised the care and diligence of a good father of the family in entrusting its company car to Li. No allegations were made as to whether or not the company took the steps necessary to determine or ascertain the driving proficiency and history of Li to whom it gave full and unlimited use of a company car. Not having been able to overcome the burden of demonstrating that should be absolved of liability for entrusting its company car to Li, said company based on the principle of bonus pater familias, ought to be jointly and severally liable with Li for the injuries sustained by Valenzuela during the accident. Thus, the decision of the CA was modified with the effect of reinstating the decision of RTC.

the

MANILA 38

RAILROAD

CO.

VS. Phil

COMPANIA

TRANSATLANTICA 875

FACTS: SS/Alicante, belonging to Compania Transatlantica de Barcelona was transporting two

locomotive boilers for the Manila Railroad Company. The equipment of the ship for discharging the heavy cargo was not strong enough to handle the boilers. Compania Transatlantica contracted the services of Atlantic gulf and Pacific Co., which had the best equipment to lift the boilers out of the ships hold. When Alicante arrived in Manila, Atlantic company sent out its floating crane under the charge of one Leyden. When the first boiler was being hoisted out of the ships hold, the boiler could not be brought out because the sling was not properly placed and the head of the boiler was caught under the edge of the hatch. The weight on the crane was increased by a strain estimated at 15 tons with the result that the cable of the sling broke and the boiler fell to the bottom of the ships hold. The sling was again adjusted and the boiler was again lifted but as it was being brought up the bolt at the end of the derrick broke and the boiler fell again. The boiler was so badly damaged that it had to be shipped back to England to be rebuilt. The damages suffered by Manila Railroad amounted to P23,343.29. Manila Railroad then filed an action against the Streamship Company to recover said damages. The Steamship Company caused Atlantic Company to be brought as co-defendant arguing that Atlantic Company as an independent contractor, who had undertaken to discharge the boilers had become responsible for the damage. The Court of First Instance decided in favor of Manila Railroad, the plaintiff, against Atlantic Company and absolved the Steamship Company. Manila Railroad appealed from the decision because the Steamship Company was not held liable also. Atlantic Company also appealed from the judgment against it.

ISSUES: 1. Was the Steamship Company liable to Manila Railroad for delivering the boiler in a damaged condition? 2. Was Atlantic Company liable to the Steamship Company for the amount it may be required to pay the plaintiff?

1. Was Atlantic Company directly liable to plaintiff as held by the trial court?

RULING: There was a contractual relation between the Steamship Company and Manila Railroad. There was also a contractual relation between the Steamship Company and Atlantic. But there was no contractual relation between the Railroad Company and Atlantic Company. There was no question that the Steamship Company was liable to Manila Railroad as it had the obligation to transport the boiler in a proper manner safe and securely under the circumstances required by law and customs. The Steamship Company cannot escape liability simply because it employed a competent independent contractor to discharge the boiler. Atlantic Company claimed that it was not liable, because it had employed all the diligence of a good father of a family and proper care in the selection of Leyden. Said argument was not tenable, because said defense was not applicable to negligence arising in the course of the

performance of a contractual obligation. The same can be said with respect to the liability of Atlantic Company upon its contract with the Steamship Company. There was a distinction between negligence in the performance of a contractual obligation (culpa contractual) and negligence considered as an independent source of obligation (culpa aquiliana). Atlantic Company wasis liable to the Steamship Company for the damage brought upon the latter by the failure of Atlantic Company to use due care in discharging the boiler, regardless of the fact that the damage was caused by the negligence of an employee who was qualified for the work, duly chose with due care. Since there was no contract between the Railroad Company and Atlantic Company, Railroad Company can had no right of action to recover damages from Atlantic Company for the wrongful act which constituted the violation of the contract. The rights of Manila Railroad can only be made effective through the Steamship Company with whom the contract of affreightment was made. MARANAN 20 VS SCRA PEREZ 412

FACTS: Rogelio Corachea, a passenger in a taxicab owned and operated by Pascual Perez, was stabbed and killed by the driver, Simeon Valenzuela. Valenzuela was found guilty for homicide by the Court of First Instance and was sentenced to suffer Imprisonment and to indemnify the heirs of the deceased in the sum of P6000. While pending appeal, mother of deceased filed an action in the Court of First Instance of Batangas to recover damages from Perez and Valenzuela. Defendant Perez claimed that the death was a caso fortuito for which the carrier was not liable. The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages against defendant Perez. The claim against defendant Valenzuela was dismissed. From this ruling, both plaintiff and defendant Perez appealed to this Court, the former asking for more damages and the latter insisting on non-liability. Defendant-appellant relied solely on the ruling enunciated in Gillaco vs. Manila Railroad Co. that the carrier is under no absolute liability for assaults of its employees upon the passengers.

ISSUE: Was the contention of the defendant valid?

RULING: No. The attendant facts and controlling law of that case and the one at bar were very different. In the Gillaco case, the passenger was killed outside the scope and the course of duty of the

guilty employee. The Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose upon common carriers absolute liability for the safety of passengers against willful assaults or negligent acts committed by their employees. The death of the passenger in the Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105 of the old Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code of the Philippines but both articles clearly remove from their exempting effect the case where the law expressly provides for liability in spite of the occurrence of force majeure. The Civil Code provisions on the subject of Common Carriers are new and were taken from Anglo-American Law. The basis of the carrier's liability for assaults on passengers committed by its drivers rested either on the doctrine of respondent superior or the principle that it was the carrier's implied duty to transport the passenger safely. Under the second view, upheld by the majority and also by the later cases, it was enough that the assault happens within the course of the employee's duty. It was no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders. The carrier's liability here was absolute in the sense that it practically secured the passengers from assaults committed by its own employees.

REPUBLIC 21

VS.

LUZON SCRA

STEVEDORING

CORPORATION 279

FACTS: In the early afternoon of August 17, 1960, barge L-1892, owned by the Luzon Stevedoring Corporation was being towed down the Pasig River by two tugboats when the barge rammed against one of the wooden piles of the Nagtahan bailey bridge, smashing the posts and causing the bridge to list. The river, at the time, was swollen and the current swift, on account of the heavy downpour in Manila and the surrounding provinces on August 15 and 16, 1960. The Republic of the Philippines sued Luzon Stevedoring for actual and consequential damage caused by its employees, amounting to P200,000. Defendant Corporation disclaimed liability on the grounds that it had exercised due diligence in the selection and supervision of its employees that the damages to the bridge were caused by force majeure, that plaintiff has no capacity to sue, and that the Nagtahan bailey bridge is an obstruction to navigation. After due trial, the court rendered judgment on June 11, 1963, holding the defendant liable for the damage caused by its employees and ordering it to pay plaintiff the actual cost of the repair of the Nagtahan bailey bridge which amounted to P192,561.72, with legal interest from the date of the filing of the complaint.

ISSUE: Was the collision of appellant's barge with the supports or piers of the Nagtahan bridge

caused

by

fortuitous

event

or

force

majeure?

RULING: Yes. Considering that the Nagtahan bridge was an immovable and stationary object and uncontrovertedly provided with adequate openings for the passage of water craft, including barges like of appellant's, it was undeniable that the unusual event that the barge, exclusively controlled by appellant, rammed the bridge supports raises a presumption of negligence on the part of appellant or its employees manning the barge or the tugs that towed it. For in the ordinary course of events, such a thing will not happen if proper care is used. In Anglo American Jurisprudence, the inference arises by what is known as the "res ipsa loquitur" rule The appellant strongly stressed the precautions taken by it on the day in question: that it assigned two of its most powerful tugboats to tow down river its barge L-1892; that it assigned to the task the more competent and experienced among its patrons, had the towlines, engines and equipment double-checked and inspected' that it instructed its patrons to take extra precautions; and concludes that it had done all it was called to do, and that the accident, therefore, should be held due to force majeure or fortuitous event. These very precautions, however, completely destroyed the appellant's defense. For caso fortuito or force majeure (which in law are identical in so far as they exempt an obligor from liability) by definition, are extraordinary events not foreseeable or avoidable, "events that could not be foreseen, or which, though foreseen, were inevitable" (Art. 1174, Civ. Code of the Philippines). It was, therefore, not enough that the event should not have been foreseen or anticipated, as was commonly believed but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening was not impossibility to foresee the same. The very measures adopted by appellant prove that the possibility of danger was not only foreseeable, but actually foreseen, and was not caso fortuito.

TRILLANA 93

VS

QUEZON Phil.

COLLEGE,

INC. 383

FACTS: Damasa Crisostomo wrote a letter to the Quezon College, Inc. for the subscription of shares of stock of the said college wherein payment was to be made through money she was going to generate from fishing. However, she died and 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 Court of First Instance in her testate proceeding, for the collection of the said sum of money. The claim was dismissed by the trial court on the ground that the subscription in question was neither registered in nor authorized by the Securities and Exchange Commission. From this order the Quezon College, Inc. appealed.

ISSUE: Was Damasa Crisostomo liable for the claim made by Quezon Colleges, Inc?

RULING: No. The application sent by Damasa Crisostomo to the Quezon College, Inc. was written on a general form indicating that an applicant will enclose an amount as initial payment and will pay the balance in accordance with law and the rules or regulations of the College. In the letter actually sent by Damasa Crisostomo, she not only did not enclose any initial payment, but stated that "babayaran kong lahat pagkatapos na ako ay makapagpahuli ng isda." The acceptance of Quezon College, Inc. was essential, because it would be unfair to immediately obligate the Quezon College, Inc. under Damasa's promise to pay the price of the subscription after she had caused fish to be caught. In other words, the relation between Damasa Crisostomo and the Quezon College, Inc. had only thus reached the preliminary stage whereby the latter offered its stock for subscription on the terms stated in the form letter, and Damasa applied for subscription fixing her own plan of payment, a relation in the absence, as in the present case of acceptance by the Quezon College, Inc. of the counter offer of Damasa Crisostomo, that had not ripened into an enforceable contract. The need for express acceptance on the part of the Quezon College, Inc. imperative, in view of the proposal of Damasa Crisostomo to pay the value of the subscription after she had harvested fish, a condition obviously dependent upon her sole will and, therefore, facultative in nature, rendering the obligation void, under article 1115 of the old Civil Code (1182 of NCC). PNB 197 VS SCRA PINEDA 1

FACTS: In 1963, the Arroyo Spouses, obtained a loan of P580,000.00 from petitioner bank to purchase 60% of the subscribed capital stock and thereby acquire the controlling interest of private respondent Tayabas Cement Company, Inc. (TCC). As security for said loan, the spouses Arroyo executed a real estate mortgage over a parcel of land known as the La Vista property. TCC filed with petitioner bank an application and agreement for the establishment of an eight (8) year deferred letter of credit (L/C) for $7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. of Tokyo, Japan, to cover the importation of a cement plant machinery and equipment. Upon approval of said application, the Arroyo spouses executed a Surety Agreement dated August 5, 1964 3 and Covenant dated August 6, 1964 to secure the loan. The imported cement plant machinery and equipment arrived from Japan and were released to TCC under a trust receipt agreement. Subsequently, Toyo Menka Kaisha, Ltd. made

the corresponding drawings against the L/C as scheduled, but TCC failed to remit and/or pay the corresponding amount covered by the drawings. Thus, pursuant to the agreement, PNB repossessed the imported machinery and equipment for failure of TCC to settle its obligations under the L/C. On July 18, 1975, PNB filed a petition for extra-judicial foreclosure of the real estate mortgage over the La Vista property as well as the mortgaged properties located at Isabela, Negros Occidental and covered by OCT No. RT 1615. At the auction sale, PNB was the highest bidder with a bid price of P1,000,001.00. However, when said property was about to be awarded to PNB, the representative of the mortgagorspouses objected and demanded from the PNB the difference between the bid price of P1,000,001.00 and the indebtedness of P499,060.25 of the Arroyo spouses on their personal account. It was the contention of the spouses Arroyo's representative that the foreclosure proceedings referred only to the personal account of the mortgagor spouses without reference to the account of TCC.

ISSUE: Was TCC's liability extinguished by the repossession of PNB of the imported cement machinery and equipment?

plant

HELD: No. PNB's possession of the subject machinery and equipment being precisely as a form of security for the advances given to TCC under the Letter of Credit, said possession by itself cannot be considered payment of the secured loan. Payment would legally result only after PNB had foreclosed on said securities, sold the same, and applied the proceeds thereof to TCC's loan obligation. Mere possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself. Neither can said repossession amount to dacion en pago. Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. As aforesaid, the repossession of the machinery and equipment in question was merely to secure the payment of TCC's loan obligation and not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago was ever accomplished.

JOSE 38

CANGCO

VS PHIL.

MANILA

RAILROAD 768

FACTS: Cangco, herein plaintiff, was an employee of the defendant in this case, Manila Railroad Company. Upon the occasion in question, plaintiff was returning home by train from his daily labors. As the train drew up to the station, plaintiff arose from his seat. As the train slowed down, plaintiff stepped off, but one or both of his feet came in contact with a sack of watermelons. As a result, his feet slipped from under him and he fell violently on the platform. The accident occurred between 7-8 oclock on a dark night as the railroad station was lighted dimly, objects on the platform were difficult to discern especially to a person emerging from a lighted car. Plaintiff sued the defendant company for damages. The latter interposed the defense that the direct and proximate cause of the injury suffered by the plaintiff was his own contributory negligence in failing to wait until the train had come to a complete stop before alighting.

ISSUE: Should Manila Railroad be held liable?

RULING: Yes. The Supreme Court reversed the decision of the lower court holding that it was important to note that the foundation of the legal liability of the defendant was the contract of carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to exercise due care in its performance. That was to say, its liability was direct and immediate, differing essentially, in legal viewpoint from that presumptive responsibility for the negligence of its servants, imposed by article 1903 of the Civil Code, which can be rebutted by proof of the exercise of due care in their selection and supervision. Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but only to extra-contractual obligations, or to use the technical form of expression, that article relates only to culpa aquiliana and not to culpa contractual. Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly points out this distinction, which was also recognized by this Court in its decision in the case of Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa clearly points out the difference between "culpa, substantive and independent, which of itself constitutes the source of an obligation between persons not formerly connected by any legal tie" and culpa considered as an accident in the performance of an obligation already existing . . . ." On the railroad companys defense of contributory negligence on the part of Cangco, the Court held that the plaintiff was ignorant of the fact that the obstruction which was caused by the sacks of melds piled on the platform existed. Moreover, the place was dark or dimly lighted.

Thus, there was failure on the part of the defendant to afford to its passengers facilities for safe egress from its trains.

NIETES 46

VS SCRA

CA 654

FACTS: On October 19, 1959, Dr. Pablo Garcia and Aquilino Nietes entered into a "Contract of Lease with Option to Buy." Dr. Garcia (lessor) is the owner of the Angeles Educational Institute which is the subject of the lease. the stipulates, among others, the manner of payment, that the lese will be for a period of 5 years, and the option to buy agreement for a price of P100,000.00 within the period of the lease. Nietes was able to pay P 24,757.00 plus P5200.00 of which Dr. Garcia issued receipts. However, Dr. Garcia sent a letter to Nietes expressing his desire to rescind the contract. Nietes on the other hand contended that he has not violated any provision on the contract and thus, expressed his desire to buy the land and building. A year after, Nietes paid the balance of P 84,860.00 of the purchase price of the property. He then demanded Dr. Garcia for specific performance to execute a deed of absolute sale of the leased property in his (Nietes) favor.

ISSUE: Can Nietes still exercise his option to buy the land and building?

RULING: Yes. The contract didoes not say that Nietes had to pay the stipulated price of P100,000 before exercising his option to buy the property in question. Accordingly, said option is governed by Art 1169, the general principles on obligations, pursuant to which: In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. In the case of an option to buy, the creditor may validly and effectively exercise his right by merely advising the debtor of the former's decision to buy and expressing his readiness to pay the stipulated price, provided that the same is available and actually delivered to the debtor

upon execution and delivery by him of the corresponding deed of sale. Unless and until the debtor shall have done this the creditor is not and cannot be in default in the discharge of his obligation to pay.In other words, notice of the creditor's decision to exercise his option to buy need not be coupled with actual payment of the price, so long as this is delivered to the owner of the property upon performance of his part of the agreement. UNIVERSAL 33 FOOD CORPORATION SCRA VS. CA 1

FACTS: This is a petition for certiorari by the UFC against the CA decision of February 13, 1968 declaring the BILL OF ASSIGNMENT rescinded, ordering UFC to return to Magdalo Francisco his Mafran sauce trademark and to pay his monthly salary of P300.00 from Dec. 1, 1960 until the return to him of said trademark and formula. In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula for the manufacture of a food seasoning (sauce) derived from banana fruits popularly known as MAFRAN sauce. It was used commercially since 1942, and in the same year plaintiff registered his trademark in his name as owner and inventor with the Bureau of Patents. However, due to lack of sufficient capital to finance the expansion of the business, in 1960, said 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 Victoriano 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: 1. Was the Bill of Assignment really one that involves transfer of the formula for Mafran sauce itself? 2. Was petitioners contention that Magdalo Francisco is not entitled to rescission valid?

RULING: 1. No. Certain provisions of the bill would lead one to believe that the formula itself was transferred. To quote, the respondent patentee "assign, transfer and convey all its property rights and interest over said Mafran trademark and formula for MAFRAN SAUCE unto the Party of the Second Part," and the last paragraph states that such "assignment, transfer and conveyance is absolute and irrevocable (and) in no case shall the PARTY OF THE First Part ask, demand or sue for the surrender of its rights and interest over said MAFRAN trademark and mafran formula." However, a perceptive analysis of the entire instrument and the language employed thereinwould lead one to the conclusion that what was actually ceded and transferred was only the use of the Mafran sauce formula. This was the precise intention of the parties. The SC had the following reasons to back up the above conclusion. First, royalty was paid by UFC to Magdalo Francisco. Second, the formula of said Mafran sauce was never disclosed to anybody else. Third, the Bill acknowledged the fact that upon dissolution of said Corporation, the patentee rights and interests of said trademark shall automatically revert back to Magdalo Francisco. Fourth, paragraph 3 of the Bill declared only the transfer of the use of the Mafran sauce and not the formula itself which was admitted by UFC in its answer. Fifth, the facts of the case undeniably show that what was transferred was only the use. Finally, our Civil Code allows only the least transmission of right, hence, what better way is there to show the least transmission of right of the transfer of the use of the transfer of the formula itself. 2. No. Petitioners contention that Magdalo Franciscos 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. ZULUETA VS. MARIANO111 SCRA 206

FACTS: Petitioner Zulueta was the owner of a house and lot in Antonio Subdivision, Pasig Rizal, while private respondent is a movie director. They entered into a Contract to Sell the said property of petitioner for P75,000 payable in 20 years with respondent buyer assuming to pay a down payment of P5,000 and a monthly installment of P630 payable in advance before the 5th day of the corresponding month, starting with December, 1964. One of their stipulations was that upon failure of the buyer to fulfill any of the conditions being stipulated, the buyer automatically and irrevocably authorizes owner to recover extrajudicially, physical possession of the land, building and other improvements, which were the subject of the said contract, and to take possession also extra-judicially whatever personal properties may be found within the aforesaid premises from the date of said failure to answer for whatever unfulfilled monetary obligations buyer may have with owner. Demand was also waived. On the allegation that private respondent failed to comply with the monthly amortizations stipulated in the contract, despite demands to pay and to vacate the premises, and that thereby the contract was converted into one of lease, petitioner commenced an Ejectment suit against respondent before the Municipal Court of Pasig, praying that judgment be rendered ordering respondent to 1) vacate the premises; 2) pay petitioner the sum of P11, 751.30 representing respondents balance owing as of May, 1966; 3) pay petitioner the sum of P630 every month after May, 1966, and costs. Private respondent contended that the Municipal Court had no jurisdiction over the nature of the action as it involved the interpretation and/or rescission of the contract.

ISSUE: Was the action before the Municipal Court essentially one for rescission or annulment of contract?

RULING: Yes. According to the Supreme Court, ...proof of violation is a condition precedent to

resolution or rescission. It is only when the violation has been established that the contract can be declared resolved or rescinded. Upon such rescission in turn, hinges a pronouncement that possession of the realty has become unlawful. The Supreme Court, in Nera vs. Vacante (3 SCRA 505), also said, A violation by a party of any of the stipulations of a contract on agreement to sell real property would entitle the other party to resolved or rescind it. Also, according to the book of Tolentino, Civil Code of the Phil., Vol. IV, 1962 ed. P. 168, citing Magdalena Estate vs. Myrick, 71 Phil. 344 (1941), extra-judicial rescission has legal effect when the parties does not oppose it. If it is objected to, judicial determination of the issue is still necessary. With regards to the jurisdictions of inferior courts, the Supreme Court said that the CFI correctly ruled that the Municipal Court had no jurisdiction over the case and correctly dismissed the appeal. However, the CFI erred in assuming original jurisdiction, in the face of the objection interposed by petitioner. Section 11, Rule 40, leaves no room for doubt on this point.

Section

11

of

Rule

40:

Section 11. Lack of jurisdiction. A case tried by an inferior court without jurisdiction over the subject matter shall be dismissed on appeal by the Court of First Instance. But instead of dismissing the case, the Court of First Instance may try the case on the merits, if the parties therein file their pleadings and go to trial without any objection to such jurisdiction.

AYSON-SIMON G.R. NO.

VS. L-39378

ADAMOS AUGUST

AND 28,

FERIA 1984

FACTS: Defendants, Nicolas Adamos and Vicente Feria, purchased two lots forming part of the Piedad Estate in Quezon City, from Juan Porciuncula. Thereafter, the successors-in-interest of the latter filed Civil Case No. 174 for annulment of the sale and the cancellation of TCT No. 69475, which had been issued to defendants-appellants by virtue of the disputed sale. The Court rendered a Decision annulling the saleThe said judgment was affirmed by the Appellate Court and had attained finality. Meanwhile, during the pendency of the case above, defendants sold the said two lots to Petitioner Generosa Ayson-Simon for Php3,800.00 plus Php800.00 for facilitating the issuance of the new titles in favor of petitioner. Due to the failure of the defendants to deliver the said lots, petitioner filed a civil case for specific performance. The trial court rendered judgment to petitioners favor. However, defendants could not deliver the said lots because the CA had already annulled the sale of the two lots in Civil Case No. 174. Thus, petitioner filed another civil case for the rescission of the contract. Defendants were contending that petitioner cannot choose to rescind the contract since petitioner chose for specific performance of the obligation. Also, even though petitioner can choose to rescind the contract, it would not be possible,

because

it

has

already

prescribed.

ISSUES: 1. Can petitioner choose to rescind the contract even after choosing for the specific performance of the obligation?

1. Had the option to rescind the contract prescribed?

RULING: 1. Yes. The rule that the injured party can only choose between fulfillment and rescission of the obligation, and cannot have both, applies when the obligation is possible of fulfillment. If, as in this case, the fulfillment has become impossible, Article 1191 allows the injured party to seek rescission even after he has chosen fulfillment. 2. No. Article 1191 of the Civil Code provides that the injured party may also seek rescission, if the fulfillment should become impossible. The cause of action to claim rescission arises when the fulfillment of the obligation became impossible when the Court of First Instance of Quezon City in Civil Case No. 174 declared the sale of the land to defendants by Juan Porciuncula a complete nullity and ordered the cancellation of Transfer Certificate of Title No. 69475 issued to them. Since the two lots sold to plaintiff by defendants form part of the land involved in Civil Case No. 174, it became impossible for defendants to secure and deliver the titles to and the possession of the lots to plaintiff. But plaintiff had to wait for the finality of the decision in Civil Case No. 174, According to the certification of the clerk of the Court of First Instance of Quezon City (Exhibit "E-2"), the decision in Civil Case No. 174 became final and executory "as per entry of Judgment dated May 3, 1967 of the Court of Appeals." The action for rescission must be commenced within four years from that date, May 3, 1967. Since the complaint for rescission was filed on August 16, 1968, the four year period within which the action must be commenced had not expired.

SINGSON 77

ENCARNACION PHIL

VS.

BALDOMAR 470

FACTS: Vicente Singson Encarnacion leased his house to Jacinta Baldomar and her son, Lefrando Fernando upon a month-to-month basis. After Manila was liberated in the last war, Singson Encarnacio notified Baldomar and her son Fernando to vacate the house because he needed it for his office as a result of the destruction of the building where he had his office before. Despite

the

demand,

the

Baldomar

and

Fernando

continued

their

occupancy.

The defense of Baldomar and Fernando was that the contract with Singson Encarnacion authorized them to continue occupancy indefinitely while they should faithfully fulfill their obligation with respect to payment of rentals. Singson Encarnacion contended that the lease had always and since the beginning been upon a month-to-month basis.

ISSUE: Was it tenable for Singson Encarnacion to discontinue the lease of Baldomar and her son?

RULING: The continuance and fulfillment of the contract of lease cannot be made to depend solely and exclusively upon the free and uncontrolled choice of the lessees between continuing paying the rentals or not, completely depriving the owner of all say in the matter. The defense of Baldomar and Fernando would leave to the sole and exclusive will of one of the contracting parties the validity and fulfillment of the contract of lease, within the meaning of Article 1256 of the Civil Code. For if this were allowed, so long as the lessee elected to continue the lease by continuing the payment of the rentals the owner would never be able to discontinue the lease; conversely, although the owner should desire the lease to continue, the lessee could effectively thwart his purpose if he should prefer to terminate the contract by the simple expedient of stopping payment of the rentals. PHILIPPINE 1967 BANKING CORPORATION VS. 12 LUI SHE

SEPTEMBER

FACTS: Justina Santos y Canon Faustino and her sister Lorenza were the owners in common of a piece of land in Manila. The sisters lived in one of the houses, while Wong Heng, a Chinese, lived with his family in the restaurant. Wong had been a long-time lessee of a portion of the property, having a monthly rental of P2,620. On September 22, 1957 Justina Santos became the owner of the entire property as her sister died with no other heir. Then already well advanced in years, being at the time 90 years old, blind, crippled and an invalid, she was left with no other relative to live with, but she was taken cared of by Wong. "In grateful acknowledgment of the personal services of the Lessee to her," Justina Santos

executed on November 15, 1957, a contract of lease in favor of Wong, covering the portion then already leased to him and another portion fronting Florentino Torres street. The lease was for 50 years, although the lessee was given the right to withdraw at any time from the agreement; the monthly rental was P3,120. Ten days later (November 25), the contract was amended so as to make it cover the entire property, including the portion on which the house of Justina Santos stood, at an additional monthly rental of P360. On December 21 she executed contract giving Wong the option to buy the leased premises for P120,000, payable within ten years at a monthly installment of P1,000. The option was conditioned on his obtaining Philippine citizenship, a petition for which was then pending in the Court of First Instance of Rizal. On November 18, 1958 she executed two other contracts, one extending the term of the lease to 99 years, and another fixing the term of the option at 50 years. Both contracts are written in Tagalog. In two wills executed on August 24 and 29, 1959, she bade her legatees to respect the contracts she had entered into with Wong, but in a codicil of a later date (November 4, 1959) she appears to have a change of heart. Claiming that the various contracts were made by her because of machinations and inducements practised by him, she now directed her executor to secure the annulment of the contracts. Both parties however died, Wong Heng on October 21, 1962 and Justina Santos on December 28, 1964. Wong was substituted by his wife, Lui She, the other defendant in this case, While Justina Santos was substituted by the Philippine Banking Corporation. Justina Santos maintained now reiterated by the Philippine Banking Corporation that the lease contract should have been annulled along with the four other contracts because it lacks mutuality, among others Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this agreement." It is claimed that this stipulation offends article 1308 of the Civil Code which provides that "the contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them."

ISSUES: 1. (OBLICON ISSUE) Was the insertion in the contract of a resolutory condition, permitting the cancellation of the contract by one of the parties, valid? 2. (RELATED, but Consitutional Issue) Was the contract between Wong (Lui She) and Justina Santos (Phil. Banking) enforceable?

RULING: 1. Yes. In the early case of Taylor vs. Uy Tiong Piao, the Supreme Court said:

Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment to the insertion in a contract for personal service of a resolutory condition permitting the cancellation of

the contract by one of the parties. Such a stipulation, as can be readily seen, does not make either the validity or the fulfillment of the contract dependent upon the will of the party to whom is conceded the privilege of cancellation; for where the contracting parties have agreed that such option shall exist, the exercise of the option is as much in the fulfillment of the contract as any other act which may have been the subject of agreement. Indeed, the cancellation of a contract in accordance with conditions agreed upon beforehand is fulfillment Further, in the case at bar, the right of the lessee to continue the lease or to terminate it was so circumscribed by the term of the contract that it cannot be said that the continuance of the lease depends upon his will. At any rate, even if no term had been fixed in the agreement, this case would at most justify the fixing of a period but not the annulment of the contract. 2. No. The contract of lease, as in this case, cannot be sustained. However, to be sure, a lease to an alien for a reasonable period was valid, so was an option giving an alien the right to buy real property on condition that he is granted Philippine citizenship. But if an alien was given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it became clear that the arrangement was a virtual transfer of ownership whereby the owner divested himself in stages not only of the right to enjoy the land (jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to dispose of it (jus disponendi) rights the sum total of which make up ownership. It was just as if today the possession is transferred, tomorrow, the use, the next day, the disposition, and so on, until ultimately all the rights of which ownership is made up are consolidated in an alien. And yet this was just exactly what the parties in this case did within this pace of one year, with the result that Justina Santos' ownership of her property was reduced to a hollow concept. If this can be done, then the Constitutional ban against alien landholding in the Philippines, is indeed in grave peril. The contracts in question are annulled and set aside; the land subject-matter of the contracts was ordered returned to the estate of Justina Santos as represented by the Philippine Banking Corporation.

ROMERO G.R.

VS.

COURT No.

OF

APPEALS 107207

FACTS: Petitioner Virgilio R. Romero 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. Alfonso Flores and his wife, accompanied by a broker, offered a parcel of land measuring 1,952 square meters. 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 the squatter families. 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" on the lot. Atty. Sergio A.F. Apostol, counsel for petitioner, in his reply of 17 April 1989, refused the tender 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 Regional Trial Court of Makati, Branch 133, Civil Case No. 89-4394 for rescission of the deed of "conditional" sale, plus damages, and for the consignation of P50,000.00 cash. The Regional Trial Court of Makatirendered its decision holding that private respondent had no right to rescind the contract since it was she who "violated her obligation to eject the squatters from the subject property" and that petitioner, being the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the agreement. The court ruled that the provisions in the contract relating to (a) the return/reimbursement of the P50,000.00 if the vendor were to fail in her obligation to free the property from squatters within the stipulated period or (b), upon the other hand, the sum's forfeiture by the vendor if the vendee were to fail in paying the agreed purchase price, amounted to "penalty clauses". Private respondent appealed to the Court of Appeals who opined that the contract entered into by the parties was subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the non-occurrence of which resulted in the failure of the object of the contract; that private respondent substantially complied with her obligation to evict the squatters; that it was petitioner who was not ready to pay the purchase price and fulfill his part of the contract, and that the provision requiring a mandatory return/reimbursement of the P50,000.00 in case private respondent would fail to eject the squatters within the 60-day period was not a penal clause.

ISSUE: May the vendor 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 evicted within the contractually-stipulated period?

RULING: No. From the moment the contract was perfected, the parties were bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. Under the agreement, private respondent was obligated to evict the squatters on the property. The ejectment of the squatters was a condition the operative act of which sets into motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private respondent's failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code.This option clearly belonged to petitioner and not to private respondent. The Court shared the opinion of the appellate court that the undertaking required of private respondent does not constitute a "potestative condition dependent solely on his will" that might, otherwise, be void in accordance with Article 1182 of the Civil Codebut a "mixed" condition "dependent not on the will of the vendor alone but also of third persons like the squatters and government agencies and personnel concerned."The Court had hastened to add, however, that where the so-called "potestative condition" was imposed not on the birth of the obligation, but on its fulfillment, only the obligation was avoided, leaving unaffected the obligation itself. In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows the obligee to choose between proceeding with the agreement or waiving the performance of the condition. It is this provision which is the pertinent rule in the case at bench. Here, evidently, petitioner had waived the performance of the condition imposed on private respondent to free the property from squatters. In any case, private respondent's action for rescission was not warranted. She was not the injured party.The right of resolution of a party to an obligation under Article 1191 of the Civil Code was predicated on a breach of faith by the other party that violates the reciprocity between them.It was private respondent who has failed in her obligation under the contract. Petitioner did not breach the agreement. He had agreed, in fact, to shoulder the expenses of the execution of the judgment in the ejectment case and to make arrangements with the sheriff to effect such execution. In his letter of 23 June 1989, counsel for petitioner has tendered payment and demanded forthwith the execution of the deed of absolute sale. Parenthetically, this offer to pay, having been made prior to the demand for rescission, assuming for the sake of argument that such a demand was proper under Article 1592of the Civil Code, would likewise suffice to defeat private respondent's prerogative to rescind thereunder.

CLAUDINA 104

VDA.

DE

VILLARUEL,

ET

AL.

VS.

MANILA

MOTOR

CO.,

INC. 926

PHIL.

FACTS: On May 31, 1940, the plaintiffs Villaruel and defendant Manila Motor Co. Inc. entered into a contract whereby the defendant agreed to lease plaintiffs building premises. On October 31, 1940, the leased premises were placed in the possession of the defendant until the invasion of 1941. The Japanese military occupied and used the property leased as part of their quarters from June, 1942 to March, 1945, in which no payment of rentals were made. Upon the liberation of the said city, the American forces occupied the same buildings that were vacated by the Japanese. When the United States gave up the occupancy of the premises, defendant decided to exercise their option to renew the contract, in which they agreed. However, before resuming the collection of rentals, Dr. Alfredo Villaruel upon advice demanded payment of rentals corresponding to the time the Japanese military occupied the leased premises, but the defendant refused to pay. As a result plaintiff gave notice seeking the rescission of the contract and the payment of rentals from June, 1942 to March, 1945; this was rejected by the defendant. Despite the fact the defendant under new branch manager paid to plaintiff the sum of P350 for the rent, the plaintiff still demanded for rents in arrears and for the rescission of the contract of lease. The plaintiff commenced an action before the CFC of Neg. Occidental against defendant company. During the pendency of the case, the leased building was burned down. Because of the occurrence, plaintiffs demanded reimbursement from the defendants, but having been refused, they filed a supplemental complaint to include a 3rd cause of action, the recovery of the value of the burned building. The trial court rendered judgment in favor of the plaintiff. Hence the defendants appeal.

ISSUE: Is Manila Motor Co. Inc. liable for the loss of the leased premises?

RULING: No. Clearly, the lessor's insistence upon collecting the occupation rentals for 1942-1945 was unwarranted in law. Hence, their refusal to accept the current rentals without qualification placed them in default (mora creditoris or accipiendi) with the result that thereafter, they had to bear all supervening risks of accidental injury or destruction of the leased premises. While not expressly declared by the Code of 1889, this result is clearly inferable from the nature and effects of mora. In other words, the only effect of the failure to consign the rentals in court was that the obligation to pay them subsisted and the lessee remained liable for the amount of the unpaid contract rent, corresponding to the period from July to November, 1946; it being undisputed

that, from December 1946 up to March 2, 1948, when the commercial buildings were burned, the defendants-appellants have paid the contract rentals at the rate of P350 per month. But the failure to consign did not eradicate the default (mora) of the lessors nor the risk of loss that lay upon them.

MANILA 2

TRADING SCRA

SUPPLY

CO. 549

VS.

MEDINA (1961)

FACTS: Mariano Medina had an account prior to May 7, 1956 with Manila Trading and Supply Co. with an amount of P60,000 for which Medina executed a promissory note. The note provided that upon failure to pay the installments, the remaining amount will immediately become due and payable at the option of the holder of the note with 33.33% amount due for attorneys fees and expenses of collection. On January 8, 1957, Manila Trading & Co. filed a complaint against Medina for failure to pay installments from September 1956 to January 7, 1957. Medina filed an answer admitting allegations but said the 33.33% for attorneys fees were exorbitant and unconscionable. He pleaded that on January 24, 1957, an additional P4,000 was paid so that he will not be sued and allowed to pay the balance. Upon petition of plaintiff, a writ of attachment was issued and levied upon eleven of defendant's buses. His counterclaim was damages for the loss of his earnings. Plaintiff denied the defense and counterclaim. Plaintiff provided evidence of 21 payments made by defendant from June 6, 1956 to Jan. 21, 1957. The defendant testified that he has 10 other payments with receipts but the dates and serial numbers are unclear for it was eaten by anay. Defendant claims that his payment on Jan. 1957 gives rise to the presumption that prior installments have been paid.

ISSUE: Are the presented receipts genuine to raise the presumption that prior installments were paid?

RULING: No. Appellant avers that the genuine receipts dated January, 1957 raise the presumption that prior installments were paid. This might be true if such receipts recited that they were issued for the installments corresponding to the month of January, 1957; but nowhere does that fact appear. And even if such recital had been made, the resulting presumption would only be prima facie, and the evidence before us is clear that the payments made do not correspond to the installments falling due on the dates of the genuine receipts.

As pointed out by the trial court, it is highly suspicious that these receipts should be mutilated precisely at the places where the serial numbers and the year of issue must appear, while the receipts for intervening payments recognized by the plaintiff remained intact. In addition, the numbers that Medina attributed to them are not in sequence. It is difficult to believe that a trading company should issue receipts numbered at random, since it would make auditing control impossible. AUSTRIA 39 VS. COURT SCRA OF APPEALS 527

FACTS: Maria G. Abad received from Guillermo Austria a pendant with diamonds to be sold on a commission basis or to be returned on demand. While walking home, the purse containing the jewelry and cash was snatched by two men. A complaint of the incident was filed in the Court of First Instance against certain persons. Abad failed to return the jewelry or pay for its value despite demands made by Austria. Austria brought an action against the Abad spouses for the recovery of the pendant or of its value and damages. Abad spouses set up the defense that the alleged robbery had extinguished their obligation.

ISSUE: Should the Abad spouse be held liable for the loss of the pendant?

RULING: No. The Court ruled that the exempting provision of Article 1174 of the Civil Code is applicable in the case. It is a recognized jurisdiction that to constitute a caso fortuito that would exempt a person from responsibility, it is necessary that the event must be independent of the human will or of the obligors will; the occurrence must render it impossible for the debtor to fulfill the obligation in a normal manner; and that the obligor must be free of participation in, or aggravation of, the injury to the creditor. To avail of the exemption granted, it is not necessary that the persons responsible for the event should be found or punished. It is sufficient that to unforeseeable event which is the robbery took place without concurrent fault or negligence on the part of the obligor which can be proven by preponderant evidence. It was held that the act of Maria Abad in walking home alone carrying the jewelry was not negligent for at that time the incidence of crimes was not high. VICTORIAS PLANTERS ASS., INC., ET AL. VS. VICTORIAS MILLING CO., INC.

G.R.

No.

L-6648

July

25,

1955

FACTS: The petitioners Victorias Planters Association, Inc. and North Negros Planters Association, Inc. and thr respondent Victorias Milling Co., Inc entered into a milling contract whereby they stipulated a 30-year period within which the sugar cane produced by the petitioner would be milled by the respondent central. The parties also stipulated that in the event of force majuere, the contract shall be deemed suspended during this period. The petitioner failed to deliver the sugar cane during the four years of the Japanese occupation and the two years after liberation when the mill was being rebuilt or a total of six years.

ISSUE: Can the petitioners be compelled to deliver sugar cane for six more years after the expiration of the 30-year period to make up for what they failed to deliver to the respondent?

RULING: No. Fortuitous event relieves the obligor from fulfilling the contractual obligation under Article 1174 of the Civil Code. The stipulation in the contract that in the event of force majeure the contract shall be deemed suspended during the said period does not mean that the happening of any of those events stops the running of the period agreed upon. It only relieves the parties from the fulfillment of their respective obligations during that time- the petitioner from delivering the sugar cane and the respondent central from milling. In order that the respondent central may be entitled to demand from the petitioner the fulfillment of their part in the contracts, the latter must have been able to perform it but failed or refused to do so and not when they were prevented by force majeure such as war. To require the petitioners to deliver the sugar cane which they failed to deliver during the six years is to demand from them the fulfillment of an obligation, which was impossible of performance during the time it became due. Nemo tenetur ed impossibilia. The respondent central not being entitled to demand from the petitioners the performance of the latters part of the contracts under those circumstances cannot later on demand its fulfillment. The performance of what the law has written off cannot be demanded and required. The prayer that the petitioners be compelled to deliver sugar cannot for six years more to make up for what they failed to deliver, the fulfillment of which was impossible, of granted, would in effect be an extension of the terms of the contracts entered into by and between the parties. BRIONES GR 23559 VS October 4, CAMMAYO 1971

FACTS: Aurelio G. Briones filed an action in the Municipal Court of Manila against Primitivo, Nicasio, Pedro, Hilario and Artemio, all surnamed Cammayo, to recover from them, jointly and severally, the amount of P1,500.00, plus damages, attorney's fees and costs of suit. Defendants executed the real estate mortgage as security for the loan of P1,200.00 given to Primitivo P. Cammayo upon the usurious agreement that defendant pays to the plaintiff, out of the alleged loan of P1,500.00 (which includes as interest the sum of P300.00) for one year. Although the mortgage contract was executed for securing the payment of P1,500.00 for a period of one year, without interest, the truth and the real fact is that plaintiff delivered to the defendant Primitivo P. Cammayo only the sum of P1,200.00 and withheld the sum of P300.00 which was intended as advance interest for one year. On account of said loan of P1,200.00, defendant Primitivo P. Cammayo paid to the plaintiff during the period from October 1955 to July 1956 the total sum of P330.00 which plaintiff, illegally and unlawfully refused to acknowledge as part payment of the account but as in interest of the said loan for an extension of another term of one year.

ISSUE: Can Briones recover the amount of P1,500.00?

RULING: Loan is valid but usurious interest is void. Creditor has the right to recover his capital by judicial action. To discourage stipulations on usurious interest, said stipulations are treated as wholly void, so that the loan becomes one without stipulation as to payment of interest. It should not, however, be interpreted to mean forfeiture even of the principal, for this would unjustly enrich the borrower at the expense of the lender. Furthermore, penal sanctions are available against a usurious lender, as a further deterrence to usury. In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract (Article 1350, Civil Code), is not illegal. The illegality lies only as to the prestation to pay the stipulated interest; hence, being separable, the latter only should be deemed void, since it is the only one that is illegal.

Barrredo,

J.,

concurring

The Usury law is clear that he may recover only all interests, including of course, the legal part thereof, with legal interests from the date of judicial demand, without maintaining that he can

also

recover

the

principal

he

has

already

paid

to

the

lender.

Castro

Fernando,

and

Conception,

JJ.,

dissenting

In a contract which is tainted with usury, that is, with a stipulation (whether written or unwritten) to pay usurious interest, the prestation to pay such interest is an integral part of the cause of the contract. It is also the controlling cause, for a usurer lends his money not just to have it returned but indeed, to acquire in coordinate gain. Article l957, which declares the contract itself not merely the stipulation to pay usurious interest -- void, necessarily regards the prestation to pay usurious interest as an integral part of the cause, making it illegal.

GAITE 2

VS. SCRA

FONACIER 381

FACTS: By a Deed of Assignment, Isabelo Foncier, owner and/or holder, either by himself or in a representative capacity, of 11 iron lode mineral claims, known as the Dawahan Group, constituted and appointed Fernando Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for the exploration and development of the mining claims aforementioned on a royalty basis of not less than P.50 per ton of ore that might be extracted therefrom. For some reason or another, Isabelo Foncier decided to revoke the authority granted by him to Gaite to exploit and develop the mining claims in question, and Gaite assented thereto subject to certain conditions. One of these conditions is that he is to transfer to Fonacier all his right and interests over the 24,00 tons of iron ore, more or less that he had already extracted from the mineral claims, in consideration of the sum of P75,000, P10,000 of which is paid upon the signing of the agreement, and the balance of P65,000 will be paid from and out of the first letter of credit covering the first shipment of iron ores and of the first amount derived from the local sale of iron ore made the Larap Mines & Smelting Co. Inc., its assigns, administrators, or successors in interests. To secure the payment of the said balance of P65,000.00, Fonacier promised to execute in favor of Gaite a surety bond, and pursuant to the promise, Fonacier delivered to Gaite a surety bond dated December 8, 1954 with himself (Fonacier) as principal and the Larap Mines and

Smelting Co. and its stockholders George Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty as sureties. Gaite testified, however, that when this bond was presented to him by Fonacier together with the "Revocation of Power of Attorney and Contract", on December 8, 1954, he refused to sign unless another bond under written by a bonding company was put up by defendants to secure the payment of the P65,000.00 balance of their price of the iron ore in the stockpiles in the mining claims. Hence, a second bond, also dated December 8, 1954,was executed by the same parties to the first bond Exhibit "A-1", with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the surety company would attach only when there had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less then P65,000.00, and that, furthermore, the liability of said surety company would automatically expire on December 8, 1955. Both bonds were attached to the "Revocation of Power of Attorney and Contract", and made integral parts thereof. When Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed the present complaint against them in the Court of First Instance of Manila (Civil Case No. 29310) for the payment of the P65,000.00 balance of the price of the ore, consequential damages, and attorney's fees. All the defendants except Francisco Dante set up the uniform defense that the obligation sued upon by Gaite was subject to a condition that the amount of P65,000.00 would be payable out of the first letter of credit covering the first shipment of iron ore and/or the first amount derived from the local sale of the iron ore by the Larap Mines & Smelting Co., Inc.; that up to the time of the filing of the complaint, no sale of the iron ore had been made, hence the condition had not yet been fulfilled; and that consequently, the obligation was not yet due and demandable.

ISSUE: Is the obligation of Fonacier one with a period or term and not one with a suspensive condition, and that the term expired on December 8, 1955?

RULING: Yes. The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the balance of P65,000.00, but was only a suspensive period or term. What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The appellant have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65,000.00, because of their failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. The expiration of the bonding company's undertaking on December 8, 1955 substantially reduced the security of the vendor's rights as creditor for the unpaid P65,000.00, a security that Gaite considered essential and upon which he had insisted when he executed the deed of sale of the ore to

Fonacier (Exhibit "A"). The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines: "ART. (1) 1198. The debtor shall . lose every right to make . use of the period: .

(2) When he does not furnish to the creditor the guaranties or securities which he has promised. (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through fortuitous event they disappear, unless he immediately gives new ones equally satisfactory. Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the securities given to the creditor (appellee Gaite), unless immediately renewed or replaced. There is no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full knowledge that on its face it would automatically expire within one year was a waiver of its renewal after the expiration date. No such waiver could have been intended, for Gaite stood to lose and had nothing to gain barely; and if there was any, it could be rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the surety company's bond expired on December 8, 1955. But in the latter case the defendants-appellants' obligation to pay became absolute after one year from the transfer of the ore to Fonacier by virtue of the deed Exhibit "A." PARKS 49 VS PROVINCE PHIL. OF TARLAC 142

FACTS: Concepcion Cirer and James Hill, owners of a parcel of land, donated it perpetually to the municipality of Tarlac under certain conditions specified in the public document in which they made said donation. On January 15, 1921, said donors sold the same land to George Parks. On August 24, 1923, the donee transferred the lot to the Province of Tarlac which obtained the registration thereof in its name. Subsequently, Parks brought this action against the Province of Tarlac with the prayer that he be declared absolute owner of the land.

ISSUE: Does plaintiff have a right of action?

RULING: No. The appellant contends that a condition precedent having been imposed in the donation and the same not having been complied with, the donation never became effective. The appellant refers to the condition imposed that one of the parcels donated was to be used absolutely and exclusively for the erection of a central school and the other for a public park, the work to commence in both cases within the period of 6 months from the date of the ratification by the parties of the document evidencing the donation. It is true that this condition has not been complied with. This allegation, however, that this is a condition precedent is erroneous. The characteristic of a condition precedent is that the acquisition of the right is not effected while said condition is not complied with or is not deemed complied with. Meanwhile nothing is acquired, such condition cannot be a condition precedent. In the present case the condition that a public school be erected and a public park made of the donated land, work on the same to commence within 6 months from date of the ratification of the donation by the parties, could not be complied with except after giving effect to the donation. The donee could not do any work on the donated land if the donation had not really been effected, because it would be an invasion of anothers title, for the land would have continued to belong to donor so long as the condition imposed was not complied with. SONGCUAN 191 VS. INTERMEDIATE APPELLATE SCRA COURT, ALVIAR and PINLAC 28

FACTS: Victoriano Alviar was the owner of two parcels of land located at San Fernando, La Union. On the land stands a building owned by his son, Mariano, and his wife, Belen. On September 29, 1966, the Alviars sold these realties to Saturnino Songcuan for P34,026.09. They further agreed that the Alviars will have the right of redemption within 10 years from the date of signing of the instrument, and further stipulated in P.S. that in the event of repurchase by the Alviars, Songcuan shall have the right of lease for a period of 25 years for the premises actually occupied by Songcuan. Sometime in March, 1969 the mentioned building was razed by fire and Songcuan erected another at his own expense. When the Alviars wanted to repurchase, Songcuan refused to sell back to the Alviars the properties because the latter was tendering only the price of P34,026.00 whereas Songcuan wanted reimbursement for the cost of the building he erected and also for the cost of the registration of the realties. On July 29, 1977, the then Court of First Instance of La Union rendered its decision decreeing that the Alviars had the right to repurchase, giving them one (1) year, 10 months and 18 days from the finality of this decision (Ong Chua v. CARR, 53 Phil. 975) or within the period of 30 days from finality of this decision as provided for under Art. 1606 of the New Civil Code; the Alviars pay Songcuan the cost of improvements in putting up the building. Songcuan advanced the grounds that the Alviars had forfeited their right to repurchase the subject premises for having failed to exercise it within thirty days from the finality of the decision

citing the third paragraph of Article 1606 of the Civil Code, and that the right of the Alviars to repurchase may be rescinded under Article 1191 of the Civil Code.

ISSUES: 1. Whether or not the Alviars had forfeited their right to repurchase, or whether the right may be rescinded under the grounds advanced by Songcuan. 2. How much area is Songcuan entitled to lease? The trial court, awarded Songcuan the whole premises, based on the "P.S. (Additional Condition)" which speaks of "the premises actually occupied by [Songcuan]."

RULING: 1. The Court found merit in Songcuan's argument that the Alviars had forfeited their right to repurchase the subject premises for having failed to exercise it within thirty days from the finality of the decision citing the third paragraph of Article 1606 of the Civil Code. It is noted that the final decision, which became final on March 9, 1981, gave the Alviars two alternative periods within which to exercise the right to repurchase either within 30 days as prescribed in Article 1606, or within 1 year, 10 months and 18 days from March 9, 1981, . . . Accordingly, whichever of the alternative periods the Alviars may avail of, would still constitute a valid exercise of their right. The Court did not agree that the right of the Alviars to repurchase may be rescinded under Article 1191 of the Civil Code. Songcuan asserts that the October 10, 1966 contract he entered into with the Alviars created a reciprocal obligation between them for him to reconvey the subject premises and for the Alviars to lease the realties to him and the refusal of the latter to fulfill their obligation giving him the right, under Article 1191, to rescind "the right of [the Alviars] to repurchase" the realties. Although the parties are each obligor and obligee of the other, their corresponding obligation can hardly be called reciprocal. In reciprocal obligations the obligation of one is a resolutory condition of the obligation of the other, the non-fulfillment of which entitles the other party to rescind the contract. In the case at bar, there are two separate and distinct obligations, each independent of the other. The obligation of Songcuan to reconvey the property is not dependent on the obligation of the Alviars to lease the premises to the former. The obligation of the Alviars is not an essential part of the contract. In other words, the obligation of the Alviars to lease to Songcuan the subject premises arises only after the latter had reconveyed the realties to them. 2. The P.S. clause refers to the area Songcuan was actually occupying and not to what he constructively may possess as the owner of the premises at the time of the execution of the October 10, 1966 contract. Further, as pointed out by private respondents, there was no need to present any evidence as to the area Songcuan was actually occupying since at the pre-trial conference in the trial court, Songcuan had admitted that he was occupying only one-third of the single story Alviar building.

ARAAS 127

VS. SCRA

TUTAAN 828

FACTS:

On May 3, 1971 the lower court declared that Petitioner Luisa Quijencio (and by her spouse Jose Araas) was the owner of 400 shares including the stock dividends that accrued to said shares, of respondent Universal Textile Mills, Inc. (UTEX) as defendant and Gene Manuel and B. R. Castaeda as co-defendants, and subsequently ordered UTEX to cancel said certificates and issue new ones in the name of Plaintiff and to deliver all dividends appertaining to the same, whether in cash or in stocks. UTEX filed a motion for clarification whether the phrase to deliver to her all dividends appertaining to the same, whether in cash or in stocks meant dividends properly pertaining to plaintiffs after the courts declaration of plaintiff ownership of said 400 shares of stock. Defendant UTEX has always maintained it would rightfully abide by whatever decision may be rendered since such would be the logical consequence after the ruling in respect to the rightful ownership of said shares of stock. The motion was granted which ruled against UTEX, ordering it to pay plaintiff the cash dividends, which accrued to the stocks in question after rendition of its current decision excluding cash dividends already paid to Gene Manuel and B. R. Castaeda which accrued before its decision. UTEX alleged that the cash dividends had already been paid thereby absolving it from payment thereof.

ISSUE: Was the contention of UTEX, alleging that the cash dividends of stock had already been and thereby absolving it from any further payment, valid?

paid

RULING: No. The final and executory judgment against UTEX declared petitioners as the owners of the questioned UTEX shares of stock against its co-defendants. It was further made clear in the motion for clarification that all dividends accruing to the said shares after the rendition of the decision of Aug. 7, 1971 rightfully belonged to petitioners. If UTEX nevertheless chose to pay the wrong parties, notwithstanding its full knowledge and understanding of the final judgment, it was still liable to pay the petitioners as the lawful

declared

owners

of

the

questions

shares

of

stocks.

The burden of recovering the supposed payment of the cash dividends made by UTEX to the wrong parties Castaeda and Manuel falls upon itself by its own action and cannot be passed by it to the petitioner as the innocent parties. It is elementary that payment made by a judgment debtor to a wrong party cannot extinguish the judgment obligation of such debtor to its creditor.

MAGDALENA 71

ESTATE PHIL.

VS.

MYRICK 346

FACTS:

Magdalena Estate, Inc. sold to Louis Myrick lots No. 28 and 29 of Block 1, Parcel 9 of the San Juan Subdivision, San Juan, Rizal. Their contract of sale provides that the Price of P7,953 shall be payable in 120 equal monthly installments of P96.39 each on the second day of every month beginning the date of execution of the agreement. In pursuance of said agreement, the vendee made several payments amounting to P2,596.08, the last being due and unpaid was that of May 2, 1930. By reason of this, the vendor, through its president, notified the vendee that, in view of his inability to comply with the terms of their contract, said agreement had been cancelled, relieving him of any further obligation thereunder, and that all amounts paid by him had been forfeited in favor of the vendor. To this communication, the vendee did not reply, and it appears likewise that the vendor thereafter did not require him to make any further disbursements on account of the purchase price.

ISSUE: Was the petitioner authorized to forfeit the purchase price paid?

RULING:

No. The contract of sale contains no provision authorizing the vendor, in the event of failure of the vendee to continue in the payment of the stipulated monthly installments, to retain the amounts paid to him on account of the purchase price. The claim therefore, of the petitioner that it has the right to forfeit said sums in its favor is untenable. Under Article 1124 of the Civil

Code, however, he may choose between demanding the fulfillment of the contract or its resolution. These remedies are alternative and not cumulative, and the petitioner in this case, having elected to cancel the contract cannot avail himself of the other remedy of exacting performance. As a consequence of the resolution, the parties should be restored, as far as practicable, to their original situation which can be approximated only be ordering the return of the things which were the object of the contract, with their fruits and of the price, with its interest, computed from the date of institution of the action. FILINVEST 111 CREDIT CORP. VS. PHIL. ACETYLANE, CO., INC. 421

SCRA

FACTS:

On October 30, 1971, the Phil. Acetylane Co., Inc., defendant appellant, purchased from Alexander Lim a 1969 Chevrolet for P55,247.80 with a down payment of P20,000 which is payable under the terms of the promissory note at a monthly installment of P1,036.70 for thirty four months, due and payable every first day of each month starting December 1971 through September 1, 1974 with 12% per annum on each unpaid installment. As security for the payment of said note, the appellant executed a chattel mortgage over the same in favor of Lim. On November 2, 1971, Lim assigned to Filinvest Finance Corporation all his rights, title, and interests in the promissory note and chattel mortgage by virtue of a Deed of Assignment. Appellant failed to comply with the terms and conditions set forth in the promissory note and chattel mortgage since it has defaulted for nine successive installments. Appellee wrote a letter to appellant demanding to remit in full the unpaid payments or to return the mortgage vehicle. In its reply, appellant wrote back advising of its decision to return the mortgage property, which return shall be in full satisfaction of its indebtedness pursuant to Article 1484 of the NCC. Accordingly, the mortgaged vehicle was returned to the appellee together with the document Voluntary Surrender with Special Power of Attorney to Sell executed by the appellant and confirmed to by appellees vice-president. On May 8, 1973, appellee, in a letter offered to deliver back the motor vehicle to the appellant since they cannot sell it because of the unpaid taxes amounting to P70,122 but appellant refused to accept it, so appellee instituted an action for the collection of sum of money with damages.

ISSUES: 1. Does the mere delivery of the mortgaged vehicle by the mortgagor to the mortgagee transfer of ownership? (Simply: Was there dation in payment)? 2. May the unpaid taxes be passed over to the appellee?

mean

RULING:

1. No. Mere delivery of the mortgaged vehicle by mortgagor does not mean transfer of ownership to mortgagee without its consent under the principle of dacion en pago. What is transferred is merely possession of property. The evidence on the record fails to show that the mortgagee, herein appellee, consented, or at lease intended that the mere delivery and acceptance by him, of the mortgaged motor vehicle be construed as actual payment, more specifically dation in payment or dacion en pago. The fact that the motor vehicle was delivered to him does not necessarily mean that ownership thereof, as juridically contemplated by dacion en pago, was transferred to appellee. Under the law, the delivery of possession of the mortgaged property to the appellee can only operate to extinguish appellants liability if the appellee had actually cause the foreclosure sale of the mortgaged property when it recovered possession thereof. Fact of foreclosure and actual sale of the mortgaged chattel bars recovery by the vendor of the balance of purchasers outstanding obligation not satisfied by the sale. 2. No. It must be noted that the unpaid taxes on the motor vehicle is a burden on the property. Since the ownership of the mortgaged property never left the mortgagor, herein appellant, the burden of the unpaid taxes should be borne by him, who in any case, may not be said to be without remedy under the law, but definitely not against the appellee to whom were transferred only rights, title and interest, as such is the essence of such credit. IMPERIAL 133 SCRA INSURANCE 317, INC. November VS. 21, DAVID 1984

FACTS: Felicisimo V. Reyers and his wife Emilia T. David, herein defendant-appellant, executed 2 indemnity agreements in favor of appellee The Imperial Insurance Inc, jointly and severally to assure indemnification of the latter of whatever liability it may incur in connection with its posting the security bonds to lift the attachments in 2 civil cases instituted for the amount of P60, 000 and P40,000, for the benefit of Felicisimo V. Reyes. The spouses jointly and severally, executed another indemnity agreement in favor of appellee to assure indemnification of the latter under a homestead bond for the sum of P7, 500.00 it had executed jointly and severally with them in favor of the Development Bank of the Philippines. Felicisimo later died and Special Proceedings entitled In the Matter of the Intestate Estate of Felicisimo V. Reyes, commenced. His wife qualified and took her oath of office as the administratix of the said intestate estate.

Meanwhile, judgment was rendered in the two Civil Cases against the spouses. Appellee made demands on Emilia David to pay the amounts of P60,000 and P40, 000 under the surety bonds and arrears in premiums thereon. A motion to dismiss was filed by the appellant on the ground the plaintiffs cause of action, if there be any, have been barred for its failure to file its claims against the estate of the deceased Felicisimo V. Reyes in due time. She contends that appellees claim should have been presented according to Rule 86 of the Revised Rules of Court and its failure to do so operates to bar its claim forever. After trial, the court rendered judgment against the herein appellant Emilia T. David.

ISSUE: Can the creditor choose to proceed against the surviving solidary debtor instead of bringing an action in accordance with Rule 86 (sec. 5) of the Revised Rules of Court?

RULING: Yes. Under the law and well-settled jurisprudence, when the obligation is a solidary one, the creditor may bring his action in toto against any of the debtors obligated in solidum. In the case at bar, appellant signed a joint and several obligation with her husband in favor of herein appellee; as a consequence, the latter may demand from either of them the whole obligation. As distinguished from a joint obligation where each of the debtor is entitled only for a proportionate part of the debt and the creditor is entitled only to a proportionate part of the credit, in a solidary obligation the creditor may enforce the entire obligation against one of the debtors. Moreover, in the case of Philippine International Surety vs. Gonzales, Where the obligation assumed by several persons is joint and several, each of the debtors is answerable for the whole obligation with the right to seek contribution from his co-debtors. Article 1216 of the Civil Code also states that, The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. There is nothing improper, as held in Manila Surety & Fidelity Co. vs. Villarama, in the creditors filing of an action against the surviving solidary debtor alone, instead of instituting a proceeding for the settlement of the deceased debtor wherein his claim would be filed.

LIM

VS.

PEOPLE

133

SCRA

333

FACTS: On January 10, 1966, appellant Lourdes Valerion Lim who is a businesswoman went to the house of Maria Ayroso and proposed to sell Ayrosos tobacco consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the overprice for which she could sell the tobacco. This agreement was made in the presence of the plaintiffs sister, Salud Bantug. Salvador Bantug drew the document which apprised of a certification that appellant had received from Ayroso the amount of 615 kilos of leaf tobacco to be sold at P1.30 per kilo. It is also stated there that the proceeds in the amount of P799.50 will be given to Ayroso as soon as it was sold. It was signed by the appellant and witnessed by the complainants sister Salud Bantug and the latters maid Genoveva Ruiz. The appellant that time was bringing jeep, and the tobacco was simply loaded in the jeep. However, of the total value of P799.50, the appellant had paid to Ayroso only P240.00 and this was paid on three different times. As no further amount was paid, complainant Ayroso filed a complaint against appellant Lim for estafa. Judgment was rendered against appellant. In this petition for review on certiorari, appellant claimed that the obligation does not fix a period and that the court should fix the duration thereof pursuant to Article 1197 of the Civil Code.

ISSUE: Is appellants contention, saying that Article 1197 applies, correct?

RULING: No. It is clear in the agreement that the proceeds of the sale of the tobacco should be turned over to the complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as the tobacco was disposed of. The agreement constituted her as an agent with the obligation to return the tobacco if the same was not sold. The fact that appellant received the tobacco and the proceeds to be given to complainant as soon as it was sold, strongly negates transfer of ownership of the goods to the appellant. Furthermore, where a person obliged himself to pay to another the proceeds of the latters tobacco as soon as they are disposed of, a period exists for payment of the obligation and, therefore, Article 1197 does not apply. The receipt, therefore, should be considered as a contract of agency to sell the subject tobacco between the appellant and complainant. COMMISSIONER G.R. No. L-36706 VS. March 31, BURGOS 1980

FACTS: Private Respondent Victoria Amigable is an owner of a parcel of land in Cebu City that was taken by the Government sometime in 1924 for road-right-of-way purpose. In 1959, private respondent filed a complaint to recover ownership and possession of the said land, damages for illegal occupation of the Government of the same said land and P5,000.00 for attorneys fees. Petitioner-defendant, in its answer, alleged that the above-mentioned land was either donated or sold by its owners to the province of Cebu, also private respondent is already barred by estoppel and statute of limitations, and invoked the non-suitability of the Government. The trial court rendered a decision for the petitioner-defendant which was reversed by the Supreme Court and remanded the case for the determination of the compensation to be made to private respondent. During the hearing for the determination of the compensation, the Government proved the value of the land through the certification issued by the Bureau of Records Management that the value of the said land was only P2.37 per square meter. On the other hand, private respondent presented a newspaper clipping of Manila Times showing that the value of peso was P6.775 to a dollar during the middle of 1972. Upon consideration, the trial court rendered a decision directing the Government to pay private respondent P49,459.34 for the value of the land with 6% interest per annum and 10% attorneys fees of the total amount due, totaling to P214,356.75. Thereafter, the Solicitor General, representing the Government, appealed to the Supreme Court contending that the trial court erred in applying Article 1250 in the case at bar.

ISSUE: Should Article 1250 be applied in determining the compensation for the disputed land?

RULING: No. It is clear that Article 1250 applies only to cases where a contract or agreement is involved. It does not apply where the obligation to pay arises from law, independent of contract. The taking of private property by the Government in the exercise of its power of eminent domain does not give rise to a contractual obligation. Moreover, the law as quoted clearly provides that the value of the currency at the time of the establishment of the obligation shall be the basis of payment which, in cases of expropriation, would be the value of the peso at the time of the taking of the property when the obligation of the Government to pay arises. 12 It is only when there is an "agreement to the contrary" that the extraordinary inflation will make the value of the currency at the time of payment, not at the time of the establishment of the obligation, the basis for payment. In other words, an agreement is needed for the effects of an extraordinary inflation to be taken into account to alter the value of the currency at the time of the establishment of the obligation which, as a rule, is always the determinative element, to be varied by agreement that would find reason only in the supervention of extraordinary inflation or deflation.

The correct amount of compensation due private respondent for the taking of her land for a public purpose would be not P49,459.34, as fixed by the respondent court, but only P14,615.79 at P2.37 per square meter, the actual value of the land of 6,167 square meters when it was taken in 1924.

AYSON-SIMON G.R. No.

VS. L-39378

ADAMOS August

AND 28,

FERIA 1984

FACTS: Defendants, Nicolas Adamos and Vicente Feria, purchased two lots forming part of the Piedad Estate in Quezon City, from Juan Porciuncula. Thereafter, the successors-in-interest of the latter filed Civil Case No. 174 for annulment of the sale and the cancellation of TCT No. 69475, which had been issued to defendants-appellants by virtue of the disputed sale. The Court rendered a Decision annulling the saleThe said judgment was affirmed by the Appellate Court and had attained finality. Meanwhile, during the pendency of the case above, defendants sold the said two lots to Petitioner Generosa Ayson-Simon for Php3,800.00 plus Php800.00 for facilitating the issuance of the new titles in favor of petitioner. Due to the failure of the defendants to deliver the said lots, petitioner filed a civil case for specific performance. The trial court rendered judgment to petitioners favor. However, defendants could not deliver the said lots because the CA had already annulled the sale of the two lots in Civil Case No. 174. Thus, petitioner filed another civil case for the rescission of the contract. Defendants are contending that petitioner cannot choose to rescind the contract since petitioner chose for specific performance of the obligation. Also, even though petitioner can choose to rescind the contract, it would not be possible because it has already prescribed.

ISSUES: 1. Can petitioner choose to rescind the contract even after choosing for the specific of the option to rescind the the contract obligation? prescribed?

performance 2. Has

RULING: 1. Yes. The rule that the injured party can only choose between fulfillment and rescission of the obligation, and cannot have both, applies when the obligation is possible of fulfillment. If, as

in this case, the fulfillment has become impossible, Article 1191 allows the injured party to seek rescission even after he has chosen fulfillment. 2. No. Article 1191 of the Civil Code provides that the injured party may also seek rescission, if the fulfillment should become impossible. The cause of action to claim rescission arises when the fulfillment of the obligation became impossible when the Court of First Instance of Quezon City in Civil Case No. 174 declared the sale of the land to defendants by Juan Porciuncula a complete nullity and ordered the cancellation of Transfer Certificate of Title No. 69475 issued to them. Since the two lots sold to plaintiff by defendants form part of the land involved in Civil Case No. 174, it became impossible for defendants to secure and deliver the titles to and the possession of the lots to plaintiff. But plaintiff had to wait for the finality of the decision in Civil Case No. 174, According to the certification of the clerk of the Court of First Instance of Quezon City, the decision in Civil Case No. 174 became final and executory "as per entry of Judgment dated May 3, 1967 of the Court of Appeals." The action for rescission must be commenced within four years from that date, May 3, 1967. Since the complaint for rescission was filed on August 16, 1968, the four year period within which the action must be commenced had not expired.

CORONEL GR No. 103577

VS. October 7,

CA 1996

FACTS: On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as Coronels) executed a document entitled "Receipt of Down Payment" in favor of Ramona Patricia Alcaraz (hereinafter referred to as Ramona). The condons appurtenant to the sale are the following:

1. Ramonaiti will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of the document; 2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment; 3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos. On the same date, Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos. On February 6, 1985, the property originally registered in the name of the Coronels' father was transferred in their names under TCT No. 327043.

On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos. For this reason, Coronels canceled and rescinded the contract with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. On February 22, 1985, Concepcion filed a complaint for specific performance against Coronels.

the

On June 5, 1985, a new title over the subject property was issued in the name of Catalina.

ISSUES:

1. Was the agreement with Ramona and the Coronels a contract of sale or a contract to
sell?

2. Was the contract between the parties subject to a condition?

RULING: 1. The agreement between the parties was a contract of sale. The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land in the Receipt of Downpayment. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. 2. Yes. The parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners' father, Constancio P. Coronel, to their names. The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985. Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the "Receipt of Down Payment." Since the condition contemplated by the parties which is the issuance of a certificate of

title in petitioners' names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. JAVIER G.R. No. L-48194 VS. March 15, CA 1990

FACTS: Private respondent Leonardo Tiro is a holder of an ordinary timber license issued by the Bureau of Forestry covering 2,535 hectares in the town of Medina, Misamis Oriental. On February 15, 1966 he executed a "Deed of Assignment" in favor of petitioners Jose M. Javier and Estrella F. Javier to assign, transfer and convey his shares of stocks in Timberwealth Corporation in consideration of the sum of Php120,000.00 in which the Php20,000.00 shall be paid upon signing of the said contract and the balance of Php100,000.00 shall be paid in Php10,000.00 for every shipment of export log actually actually produced from the forest concession. At the time the said deed of assignment was executed, private respondent had pending application for an additional 2,000 hectares of forest concession. Hence, private respondent made another agreement on February 28, 1966 with petitioners that in the event that his application will be approved, his rights to the additional forest concession shall be transferred to petitioners in consideration of the sum of Php30,000.00. On November 18, 1966, private respondent was informed that his forest concession was renewed but since the area is only 2,535 hectares, he was ordered to form an organization with adjoining licensees so as to have a total holding area of 20,000 hectares, otherwise, his license will not be renewed. Consequently, petitioners, now acting as timber license holders by virtue of the deed of assignment executed by private respondent in their favor, entered into a Forest Consolidation Agreement. Thereafter, private respondent filed a civil case for the failure of petitioners to pay the balance of the two deeds of assignment. In petitioners answer, they contend that private respondent failed his contractual obligations and the conditions for the enforceability of the obligations did not materialize. Private respondent, then, replied that the deed of assignment did not only transfer his shares of stocks but his rights and interest in the logging concession. Thereafter, the trial court rendered judgment for the petitioners; however, on appeal to the Court of Appeals, the trial courts decision was reversed. Hence this petition.

ISSUES:

1. Was the deed of assignment dated February 15, 1966 null and void? 2. Was the agreement of February 28, 1966 null and void?

RULING: 1. No. As found by the Court of Appeals, the true cause or consideration of said deed was the transfer of the forest concession of private respondent to petitioners for P120,000.00. Also, the contemporaneous and subsequent acts of petitioners and private respondent reveal that the cause stated in the questioned deed of assignment is false. It is settled that the previous and simultaneous and subsequent acts of the parties are properly cognizable indica of their true intention. Where the parties to a contract have given it a practical construction by their conduct as by acts in partial performance, such construction may be considered by the court in construing the contract, determining its meaning and ascertaining the mutual intention of the parties at the time of contracting. The parties' practical construction of their contract has been characterized as a clue or index to, or as evidence of, their intention or meaning and as an important, significant, convincing, persuasive, or influential factor in determining the proper construction of the agreement. The deed of assignment of February 15, 1966 is a relatively simulated contract which states a false cause or consideration, or one where the parties conceal their true agreement. A contract with a false consideration is not null and void per se. Under Article 1346 of the Civil Code, a relatively simulated contract, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. 2. Yes. The efficacy of said deed of assignment is subject to the condition that the application of private respondent for an additional area for forest concession be approved by the Bureau of Forestry. Since private respondent did not obtain that approval, said deed produces no effect. When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the event which constitutes the condition happens or is fulfilled. If the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The said agreement is a bilateral contract which gave rise to reciprocal obligations, that is, the obligation of private respondent to transfer his rights in the forest concession over the additional area and, on the other hand, the obligation of petitioners to pay P30,000.00. The demandability of the obligation of one party depends upon the fulfillment of the obligation of the other. In this case, the failure of private respondent to comply with his obligation negates his right to demand performance from petitioners. Delivery and payment in a contract of sale are so interrelated and intertwined with each other that without delivery of the goods there is no corresponding obligation to pay. The two complement each other. Moreover, under the second paragraph of Article 1461 of the Civil Code, the efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. In this case, since private respondent never acquired any right over the additional area for failure to secure the approval of the Bureau of Forestry, the agreement executed therefore, which had for its object the transfer of said right to petitioners, never became effective or enforceable.

TAYAG

VS.

CA219

SCRA

480

FACTS: The heirs of Juan Galicia brought an action for breach of the conditions on the deed of

conveyance executed by Juan Galicia in favor of private respondent, Albrigido Leyvaunder the following terms: P3,000.00 is HEREBY acknowledged to have been paid upon the execution of this agreement; P10,000.00 shall be paid within ten days from and after the execution of this agreement; P10,000.00 represents the VENDORS' indebtedness with the Philippine Veterans Bank which is hereby assumed by the VENDEE; and P27,000.00 shall be paid within one year from and after the execution of this instrument. There is no dispute that the sum of P3,000.00 listed as first installment was received by Juan Galicia, Sr. According to petitioners, of the P10,000.00 to be paid within ten days from execution of the instrument, only P9,707.00 was tendered to, and received by, them on numerous occasions from May 29, 1975, up to November 3, 1979. Concerning private respondent's assumption of the vendors' obligation to the Philippine Veterans Bank, the vendee paid only the sum of P6,926.41 while the difference the indebtedness came from Celerina Labuguin. Petitioners asserted that the P27,000.00 was not paid to them. Because of the apprehension that the heirs of Juan Galicia, Sr. are disavowing the contract inked by their predecessor, private respondent filed the complaint for specific performance. The trial court upheld private respondent's theory on the basis of constructive fulfillment under Article 1186 and estoppel through acceptance of piecemeal payments in line with Article 1235 of the Civil Code. Anent the P10,000.00 specified as second installment, the lower court counted against the vendors the candid statement of Josefina Tayag who and made the admission that the check issued as payment thereof was nonetheless paid on a staggered basis when the check was dishonored. Regarding the third condition, the trial court noted that plaintiff below paid more than P6,000.00 to the Philippine Veterans Bank but Celerina Labuguin, the sister and co-vendor of Juan Galicia, Sr. paid P3,778.77 which circumstance was construed to be a ploy under Article 1186 "for the purpose of withdrawing the title to the lot". The acceptance by petitioners of the various payments even beyond the periods agreed upon, was perceived by the lower court as tantamount to faithful performance of the obligation pursuant to Article 1235 of the Civil Code. Furthermore, the trial court noted that private respondent consigned P18,520.00, an amount sufficient to offset the remaining balance, leaving the sum of P1,315.00 to be credited to private respondent.

ISSUE: Were the conditions of the instrument performed by private respondent as vendee?

RULING:

YES. There is no doubt that the second installment was actually paid to the heirs of Juan Galicia, Sr. due to Josefina Tayag's admission in judicio that the sum of P10,000.00 was fully liquidated. It is thus erroneous for petitioners to suppose that "the evidence in the records do not support this conclusion" Insofar as the third item of the contract is concerned, it may be recalled that respondent court

applied Article 1186 of the Civil Code on constructive fulfillment which petitioners claim should not have been appreciated because they are the obligees while the proviso in point speaks of the obligor. But, petitioners must concede that in a reciprocal obligation like a contract of purchase, both parties are mutually obligors and also obliges, and any of the contracting parties may, upon non-fulfillment by the other privy of his part of the prestation, rescind the contract or seek fulfillment (Article 1191, Civil Code). In short, it is puerile for petitioners to say that they are the only obligees under the contract since they are also bound as obligors to respect the stipulation in permitting private respondent to assume the loan with the Philippine Veterans Bank which petitioners impeded when they paid the balance of said loan. As vendors, they are supposed to execute the final deed of sale upon full payment of the balance as determined hereafter.

JACINTO 209

VS SCRA

KAPARAZ 246

FACTS: Petitioners, Oscar and Librada Franco-Jacinto and private respondents entered into an agreement under which the private respondents agreed to sell and convey to petitioners a six hundred (600) square meter lot located in Matiao, Mati, Davao Oriental, a total consideration of P1,800.00. Down payment of P800.00 was paid upon execution of the Agreement. The balance of P1, 000.00 was to be paid by petitioners on installment at the rate of P100.00 a month to the Development Bank of the Philippines (DBP) to be applied to private respondents' loan accounts. Upon the execution of the agreement, petitioners paid the down payment of P800.00. As to the P1, 000.00 which was to be paid directly to the DBP, petitioners claim that they had even made an excess payment of P100.00. In view of the refusal of private respondents to execute the deed of sale, petitioners filed against them a complaint for specific performance with the then Court of First Instance of Davao Oriental. In their Answer, private respondents alleged that the sale did not materialize because of the failure of petitioners to fulfill their promise to make timely payments as a result of such failure; private respondents failed to secure the release of the mortgage on the property. They then prayed for the dismissal of the case and a declaration that the agreement is null and void. The lower court rendered judgment in favor of the petitioners; however it was reversed by the court of appeals. The respondent Court was of the opinion that petitioners had not fully discharged their obligation under the agreement considering that their last payments were several months delayed beyond the date/s agreed upon by the parties and that the delay in the payments was not a slight breach. Unable to accept the verdict made, petitioner commenced petition to the SC.

ISSUE: 1. Is it a contract of sale?

2.

Can

private

respondent

be

compelled

to

execute

the

deed

of

sale?

RULING: 1. Yes. In a contract of sale, ownership is retained by the seller and is not to pass until full payment of the price. Such payment is a positive suspensive condition the failure of which is not a breach, casual or serious, but simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. In such a situation, to argue that there was only a casual breach is to proceed from the assumption that the contract is one of absolute sale, where non-payment is a resolutory question. There can be no rescission or resolution of an obligation as yet non-existent, because the suspensive condition did not happen. 2. Yes. The delay incurred by petitioners was but a casual or slight breach of the agreement, which did not defeat the object of the parties in entering into the agreement. A mere casual breach does not justify rescission. The prompt payment of the monthly amortizations of the unpaid balance of P1,000.00 was not a condition precedent to the execution of the final deed of sale. Besides, petitioners had already paid P1,400.00 of the total consideration of P1,800.00, or exactly 77.77% of the purchase price within the period stipulated. Moreover, they had in fact overpaid the private respondents by P100.00. Accordingly, We rule that rescission of the agreement was not available to private respondents.

DUCUSIN 122

VS.

COURT SCRA

OF

APPEALS 280

FACTS: On February 20, 1975, petitioner Agapito Ducusin leased to private respondent, Virgilio S. Baliola and his wife a one-door apartment unit. Under the contract of lease, with pertinent stipulations one of which states that the term of this contract shall be in a month to month basis commencing on February 19,1975 until terminated by the lessor on the ground that his children need the premises for their own use or residence or upon any ground provided for in accordance with law; The Baliola spouses occupied the apartment for almost two (2) years, paying its rentals when on January 18, 1977, petitioner Ducusin sent a "Notice to Terminate Lease Contract" to private respondents Baliolas terminating the lease and giving them until March 15, 1977 within which to vacate the premises for the reason that his two children were

getting married and will need the apartment for their own use and residence. A second letter dated February 14, 1977 was thereafter sent by Ducusin to respondents Baliolas making an inquiry on any action the latter had taken on the previous notice to terminate the lease contract To which respondents gave no reply. On April 14, 1977, petitioner filed an action for ejectment against the Baliola spouses and the lower courted decided in their favor on the ground that the "defendants' contract with the plaintiff has already terminated with the notice of termination sent by the plaintiff to the defendants on the ground that he needs the premises for his own children." The lessees, went to the Court of Appeals on a petition for review among others "(2) that the respondent CFI of Manila erred in finding that the need of the premises a quo by the private respondents has been sufficiently proven by them and legally entitle them to judicially eject the petitioners from the premises; The CA upheld the lower court decision but as to the issue: whether the need of the immediate members of the family of the lessor of the leased premises has been established by a preponderance of evidence, the respondent court ruled against the lessor Ducusin. Hence this appeal to the SC.

ISSUE: Is the termination valid in accordance to Article 1182 of the Civil Code?

RULING: Art. 1182 states that When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code. ... The resolutory condition in the contract of lease re: the need of the lessor's children of the leased premises is not a condition the happening of which is dependent solely upon the will of the lessor. The happening of the condition depends upon the will of a third person the lessor's children. Whenever the latter require the use of the leased premises for their own needs, then the contract of lease shall be deemed terminated. The validity of the said condition as agreed upon by the parties stands. We likewise conclude that the intention to use the leased premises as the residence of Ducusin Jr. has been satisfactorily and sufficiently proved by clear, strong, and substantial evidence found in the records of the case. Generally, the findings of fact by the Court of Appeals are deemed accepted as the basis for review of the appellate court's decision. But this rule is not without exception such as shown in the case before Us where the Court of Appeals reversed the findings of fact made by the trial court (the City Court of Manila) and also the Court of First Instance, by excluding evidence supposedly hearsay when they are not pursuant to the rules of evidence, by ignoring evidence on record that are competent, clear and substantial and by misapprehending the facts, thereby making manifest the commission of grave abuse of discretion on the part of the respondent appellate court and so warrants and justifies a review not only of the law but also the facts. PARKS 49 VS PROVINCE Phil OF TARLAC 142

FACTS: Concepcion Cirer and James Hill, the owners of parcel of land No. 2 referred to in the complaint, donated it perpetually to the municipality of Tarlac, Province of Tarlac, under certain conditions specified in the public document in which they made this donation. The donation was accepted by Mr. Santiago de Jesus in the same document on behalf of the municipal council of Tarlac of which he was the municipal president. On January 15, 1921, Concepcion Cirer and James Hill sold this parcel of land to the herein plaintiff George L. Parks. On August 24, 1923, the municipality of Tarlac transferred the parcel to the Province of Tarlac. The plaintiff, George L. Parks, alleging that the conditions of the donation had not been complied with and invoking the sale of this parcel of land, brought this action against the Province of Tarlac, the municipality of Tarlac, Concepcion Cirer and James Hill and prayed that he be declared the absolute owner entitled to the possession of this parcel, that the transfer of certificate issued to the Province of Tarlac cancelled.

ISSUES: 1. 2. Were Does the conditions Parks specified have a in the right donation over the not complied? land?

George

subject

RULING: 1. The appellant refers to the condition imposed that one of the parcels donated was to be used absolutely and exclusively for the erection of a central school and the other for a public park, the work to commence in both cases within the period of six months from the date of the ratification by the parties of the document evidencing the donation. It is true that this condition has not been complied with. The allegation, however, that it is a condition precedent is erroneous. The characteristic of a condition precedent is that the acquisition of the right is not effected while said condition is not complied with or is not deemed complied with. Meanwhile nothing is acquired and there is only an expectancy of right. Consequently, when a condition is imposed, the compliance of which cannot be effected except when the right is deemed acquired, such condition cannot be a condition precedent. In the present case the condition that a public school be erected and a public park made of the donated land, work on the same to commence within six months from the date of the ratification of the donation by the parties, could not be complied with except after giving effect to the donation. The donee could not do any work on the donated land if the donation had not really been effected, because it would be an invasion of another's title, for the land would have continued to belong to the donor so long as the condition imposed was not complied with. 2. No. The plaintiff has no right of action. If he has any, it is only by virtue of the sale of this parcel made by Concepcion Cirer and James Hill in his favor on January 15, 1921, but that sale

cannot have any effect. This parcel having been donated by Concepcion Cirer and James Hill to the municipality of Tarlac, which donation was accepted by the latter, the title to the property was transferred to the municipality of Tarlac. It is true that the donation might have been revoked for the causes, if any, provided by the law, but the fact is that it was not revoked when Concepcion Cirer and James Hill made the sale of this parcel to the plaintiff. Even supposing that causes existed for the revocation of this donation, still, it was necessary, in order to consider it revoked, either that the revocation had been consented to by the donee, the municipality of Tarlac, or that it had been judicially decreed. None of these circumstances existed when Concepcion Cirer and James Hill sold this parcel to the plaintiff. Consequently, when the sale was made Concepcion Cirer and James Hill were no longer the owners of this parcel and could not have sold it to the plaintiff, nor could the latter have acquired it from them. RUSTAN PULP & PAPER MILLS, INC. VS. IAC and ILIGAN DIVERSIFIED PROJECTS, INC 214 SCRA 665

FACTS: Sometime in 1966, petitioner Rustan established a pulp and paper mill in Baloi, Lanao del Norte. On March 20, 1967, respondent Romeo Lluch, who is a holder of a forest products license and Iligan Diversified Projects, Inc. transmitted a letter to petitioner Rustan for the supply of raw materials by the former to the latter. In response, petitioner Rustan proposed in the letter reply that the contract to supply is not exclusive because Rustan shall have the option to buy from other qualified suppliers. The prefatory business proposals culminated in the execution, during the month of April 1968, of a contract of sale whereby Romeo Lluch agreed to sell and Rustan Pulp undertook to pay the price of P30.00 per cubic meter of pulp wood materials to be delivered at the buyers plant in Baloi, Lanao del Norte. But during the test run of the pulp mill, the machinery line thereat had major defects while deliveries of the raw materials piled up. The suppliers were then informed to stop deliveries and the letter of similar advice was sent by petitioner to private respondent. Private respondent then clarified whether the stoppage of delivery or termination of contract was intended, but the query was not answered by petitioner. Despite to that, Lluch and other suppliers resumed deliveries which were still accepted by petitioner. On January 23, 1969, the complaint for contractual breach was filed by private respondent but was dismissed. Petitioner relied on Article 1267 of the Civil Code to defend their position. However, on appeal to the then IAC, the judgment was rendered directing petitioners to pay private respondents, jointly and severally, hence, this appeal for review of the decision of the then IAC.

ISSUE: Was the right of stoppage exercised by Rustan pulp indicative of a breach of contract?

RULING: Yes. It was indeed inconsistent for petitioners to have sent the letters calling for suspension and yet, they in effect disregarded their own advice by accepting the deliveries from the suppliers, and so they cannot rely on Article 1267 of the Civil Code. There is no doubt that the contract speaks loudly about petitioner Rustan Pulps prerogative but what diminishes the legal efficacy of such right is the condition attached to it which is independent exclusively on their will. Paragraph 7 of the contract is purely potestative imposition and must be obliterated from the face of the contract without affecting the rest of stipulations. It would also be unjust for the court a quo to rule that the contract of sale be temporarily suspended until Rustan are ready to accept deliveries from the appellants. This would make the resumption of the contract purely dependent on the will of one of the party-the appellees, and they could always claim, as they did in the instant case, that they have more than sufficient supply of pulp wood when in fact they have been accepting the same from other sources. Article 1182 of the Civil Code states that, When the fulfillment of the condition depends upon the solve will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon will of a third person, the obligation shall take effect in conformity with the provisions of this Code. Furthermore, in line with petitioners contention, being the President and Manager of the Corporation, they cannot be made liable to pay damages because they merely represent the interest of Rustan Pulp. This is contemplated by Article 1897 of the New Civil Code where agents are directly responsible are absent and wanting. Only petitioner Rustan Pulp and Paper Mills should pay moral damages and attorneys fees.

LUZ 49

HERMOSA

AND

FERNANDO

HERMOSA OG

VS.

EPIFANIO

LONGARA 4287

FACTS: This is an appeal by way of certiorari against a decision of the Court of Appeals, approving certain claims presented by Epifanio Longara against the intestate estate of Fernando Hermosa, Sr. The claims are of three kinds, namely P2, 341 representing credit advances made to the intestate from 1932 to 1944; P12, 924. 12 made to his Francisco Hermosa and P3, 772 made to his grandson, Fernando Hermosa , Jr. The claimant presented evidence and CA, in accordance therewith, that the intestate had asked for the said credit advances for himself and for the members of his family on condition that their payment should be made from he sale of his property in Spain claimant had testified without opposition that the credit advances were to be payable as soon as Fernando Hermosa, Sr.s property in Spain was sold and he received money derived from the sale.

ISSUE:

Is

the

obligation

condition

potestiva?

RULING: No.The obligation does not depend exclusively upon the will of the debtor, but also upon other circumstances beyond his power or control. If the condition were if he decides to sell his house, or if he likes to pay the sums advanced, or any other conditions of similar import implying that upon him alone payment would depend, the condition would be potestiva, dependent upon his will or discretion. The condition implies that the obligor had already decided to sell his house, or at least that he made his creditors believe that he had done so, and that all that was needed to make his obligation demandable is that the sale be consummated and the price thereof remitted to the island. The condition of the obligation was not purely potestative one, depending exclusively upon the will of the obligor but a mixed one, depending partly upon the will of the obligor and partly upon chance, i.e., the presence of a buyer of the property for the price under the conditions desired by the obligor. The obligation is clearly governed by the second sentence of Article 1115 of the old Civil Code. The conditions is, besides, a suspensive condition, upon the happening of which the obligation to pay is made dependent. And upon the happening of the condition, the debt became immediately due and demandable.

TOMAS 14

OSMEA

VS. PHIL.

CENONA

RAMA 99

FACTS: On November 15, 1890, defendant Rama executed and delivered to Victoriano Osmea a contract. The contract stipulates that Rama received from Victoriano the sum of P200 which defendant will pay Victoriano Osmea in sugar and pay also an interest at a rate of half a cuartillo per month. Defendant promise that he well sell to Mr. Osmea all the sugar that he may harvest and as a guarantee pledge as a security all his present and future property and as special security his house in Pagina. On October 27, 1891, defendant executed another contract with Victoriano Osmea which states that defendant asked for a loan amounting to P70, P50 of which defendant loaned to Don Peares, which they will pay in sugar. Sometime after the execution and delivery of the above contracts, Victoriano died. In the settlement and division of the property of his estate the above contracts became the property of one of his heirs, Agustina Rafols. Later, Agustina Rafols ceded to the present plaintiff Tomas Osmea all of her right and interest in said contracts. On March 15, 1902, plaintiff presented the contracts to the defendant for payment and she acknowledged her responsibility upon said contracts by an endorsement which stipulates: On this date I hereby promise,that if the house of strong materials in which I live in Pagina is

sold, I will pay my indebtedness to Don Tomas Osmea as set forth in this document. The defendant not having paid the amount due on said contracts, the plaintiff filed an action before the CFI of Cebu. The lower court rendered judgment in favor of the plaintiff for the sum of P200 with interest. From this judgment the defendant appealed.

ISSUE:

Is the endorsement made by defendant Rama for payment of said obligation valid?

RULING: No.It was suggested during the discussion of the case in this court that, in the acknowledgment above quoted of the indebtedness made by the defendant, she imposed the condition that she would pay the obligation if she sold her house. 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.

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