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BATCH 2
Fortuitous Events, 1174
Maranan vs. Perez, 20 SCRA 412 (1967)
Facts:
Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and
operated by Pascual Perez when he was stabbed and killed by the driver, Simeon
Valenzuela.
The driver was found guilty and prosecuted for homicide in the Court of First Instance of
Batangas. He was sentenced to suffer imprisonment and to indemnify the heirs of the
deceased in the sum of P6,000. The conviction was taken to the Court of Appeals.
While appeal was pending, Antonia Maranan, Rogelio's mother, filed an action in the
Court of First Instance of Batangas to recover damages from Perez and Valenzuela.
Defendants asserted that the deceased was killed in self-defense, since he first
assaulted the driver by stabbing him from behind. Defendant Perez further claimed that
the death was a caso fortuito for which the carrier was not liable.
The court ruled out in favor of the plaintiff and awarded her P3,000 as damages against
defendant Perez whereas the claim against defendant Valenzuela was dismissed. From
this ruling, both plaintiff and defendant Perez appealed before the Supreme Court, the
former asking for more damages and the latter insisting on non-liability. Subsequently,
the Court of Appeals affirmed the judgment of conviction earlier mentioned.
Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila Railroad
Co., 97 Phil. 884, that the carrier is under no absolute liability for assaults of its
employees upon the passengers.
Issue:
Was the contention of the defendant-appellant valid?
Ruling:
No. The attendant facts and controlling law of that case and the one at bar are very
different however. In the Gillaco case, the passenger was killed outside the scope and
the course of duty of the guilty employee. In other words, the killing of the passenger
here took place in the course of duty of the guilty employee and when the employee
was acting within the scope of his duties.
Moreover, 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 wilful 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. Unlike the old Civil Code, the
new Civil Code of the Philippines expressly makes the common carrier liable for
intentional assaults committed by its employees upon its passengers, by the wording of
Art. 1759.

Lawyers Cooperative vs. Tabora, 13 SCRA 762

Facts:
1. Tabora bought from plaintiff one complete set of American Jurisprudence (48
volumes) total price of 1,675.50php + cost of freight 6.90php = 1,682.40php
2. Partial payment of 300php was given. Books were duly delivered at Tabora's law
office3. A sudden fire caught the locality where Tabora's office was and burned the
purchased books along with important documents 4. Company, as a token of good will,
sent Tabora free of charge volumes 75,76,77,&785. Tabora failed to pay monthly
installments (balance was still 1,382.40php). Company demanded payment of
installments due. 6. So present action: recovery of the balance of the obligation plus
25% amount due as liquidated damages 7. Tabora's defense: force majeure, so he
could not be held responsible for the loss. He opt for the complaint to be dismissed, and
he be awarded 15,000php moral damages8. The court after due hearing,ordered the
defendant to pay balance plus the 25% amount due as liquidated damages9. Defendant
took case to Court of Appeals10. It was provided in the contract: "title to and ownership

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of the books shall remain with the seller until the purchase price have been fully paid.
Loss or damage to the books after delivery to the buyer shall be borne by the buyer." 11.
The obligation does not refer to a determinate thing, but is monetary in nature, and the
obligor bound himself to assume the loss after the delivery of the goods to him.
Issue:
Whether it is justifiable to have the defendant-appellant responsible for the loss
occurred through a fortuitous event
Ruling:
Under Art. 1174, except in cases expressly specified by the law or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the assumption of
risk, no person shall be responsible for those events which could not be foreseen, or
which, though foreseen, were inevitable, appellant's defense of force majeure is valid
and should not be made to pay any damages also bec his denial to pay the balance of
the account is not due to bad faith as it is only a result of misapprehension. Under the
law on damages a debtor should not be made to pay liquidated damages in absence of
bad faith.
Decision of court was modified, eliminating the portion which refers to liquidated
damages. The rule exempting obligor from liability when loss is due to a fortuitous event
only holds true when the obligation consists in delivery of a determinate thing, not when
it is of a pecuniary nature.

Dioquino vs. Laureano, 33 SCRA 65 (1970)

FACTS:
The case originates from the use by defendant Federico Laureano of the car owned by
plaintiff Pedro Dioquino.
Dioquino, a practicing lawyer of Masbate, went to the office of the MVO, Masbate, to
register his car. He requested Laureano to introduce him to one of the clerks in the
MVO Office who could facilitate the registration of his car and the request was
graciously attended to. Laureano rode on the car of Atty. Dioquino on his way to the
P.C. Barracks at Masbate. While about to reach their destination, the car driven by
Dioquino's driver with Laureano as the sole passenger was stoned by some
mischievous boys, and its windshield was broken.
Laureano refused to file any charges against the boy and his parents because he
thought that the stone-throwing was merely accidental and that it was due to force
majeure. Dioquino tried to convince Laureano to pay the value of the windshield, and he
even asked the wife to convince her husband to settle the matter amicably. But
Laureano refused to make any settlement.
Included as defendants in the action filed were the wife and father of Laureano.
The lower court judged in favor of Dioquino, the judgment however going only against
Laureano. His spouse and his father were absolved.
ISSUES:
(1) Whether or not there was fortuitous event and Laureano is liable to pay for
damages.
(2) Whether or not the Dioquino is liable for damages for including Laureanos wife and
father.
RULING:
(1) There was fortuitous event and Laureano is not liable to pay damages.
The express language of Art. 1174 of the present Civil Code states that "Except in cases
expressly specified by the law, or when it is otherwise declared by stipulation, or when
the nature of the obligation requires the assumption of risk, no person shall be
responsible for those events which could not be, foreseen, or which, though foreseen
were inevitable." The throwing of the stone by the child was clearly unforeseen or if
foreseen, was inevitable. Hence, the law being what it is, such a belief on the part of
defendant Laureano was justified and he shall not be held liable for the damages
caused to the car. The decision of the lower court is reversed.

(2) No moral damages should be awarded to the other defendants. Mistaken as

Dioquino apparently was, it cannot be concluded that he was prompted solely by the
desire to inflict needless and unjustified vexation on them. Considering the equities of
the situation, Dioquino having suffered a pecuniary loss which, while resulting from a
fortuitous event, perhaps would not have occurred at all had not Laureano borrowed his
car, the Court feels that Dioquino is not to be penalized further by his mistaken view of
the law in including them in his complaint.

Austria vs. CA, 39 SCRA 527

FACTS:
Maria Abad received from Guillermo Austria a pendant with diamonds to be sold on a
commission basis or to be returned on demand. In 1961, 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 (CFI) 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.
The CFI rendered judgment for Austria, ordering the Abad spouses, jointly and
severally, to pay to the former the cost of the jewelry with legal interest plus attorneys
fees. It was held that Abad was guilty of negligence, and such did not free her from
liability for damages. The defendants went to the Court of Appeals (CA) and there
secured a reversal of judgment. The CA declared defendants not responsible for the
loss of the jewelry on account of a fortuitous event, and relieved them from liability for
damages to the owner.
Hence, the present petition. Petitioner contend that for robbery to fall under the
category of a fortuitous event and relieve the obligor from his obligation under a
contract, there ought to be a prior finding on the guilt of the persons responsible
therefor.
ISSUES:
(1) Should Abad be held liable for the loss of the pendant?
(2) In a contract of agency (consignment of goods for sale), is it necessary that there be
a prior conviction for robbery before the loss of the article shall exempt the consignee
from liability for such loss?
RULING:
(1) 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 (a) the event must be
independent of the human will or of the obligors will; (b) the occurrence must render it
impossible for the debtor to fulfill the obligation in a normal manner; and that (c) 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 the 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.
(2) No. The emphasis of the exempting provision of Article 1174 of the Civil Code is on
the events, not on the agents or factors responsible for them. Establishing the
unforeseeable event, the robbery in this case, can be done by preponderant evidence.
To require the prior conviction of the culprits in the criminal case in order to establish the
robbery as a fact, would be to demand proof beyond reasonable doubt to prove a fact in
a civil case.

Austria vs. CA 2
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.

Republic vs. Luzon Stevedoring, 21 SCRA 279 (1967)

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,

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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 doublechecked 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.

Lasam vs. Smith, 45 Phil. 657 (1967)

Facts: Franklin Smith (defendant) owns a public garage in San Fernando, La Union, and
is engaged in the business of carrying passengers for hire from one point to another in
the Province of La Union and the surrounding provinces. On February 1918, husband
and wife Honorio Lasam (plaintiffs) hired the defendants transport services to convey
them from San Fernando to Currimao, Ilocos Norte. On leaving San Fernando, the
automobile was operated by a licensed chauffeur, but after having reached the town of
San Juan, the chauffeur allowed his assistant to drive the car. The assistant held no
drivers license, but had some experience in driving, and with the exception of some
slight engine trouble, the car functioned well until after the crossing of the Abra River,
when, according to the witnesses for the plaintiffs, defects developed in the steering
gear so as to make accurate steering possible, and after zigzagging for a distance the
car left the road and went down a steep embankment. The automobile was overturned,
Mr. Lasam escaped with a few contusions and a dislocated rib, but his wife, received
serious injuries, among which was a compound fracture of one of the bones in her left
wrist. She also suffered a nervous breakdown from which she has not fully recovered
until at the time of the trial. Plaintiffs filed a complaint about a year and a half thereafter
on the grounds of defects in the automobile and of the incompetence and negligence of
the chauffeur. The court held that there was a breach of the contract of carriage which
was not due to fortuitous events and that, therefore the defendant was liable in
damages.
Issue:
Whether the court was correct in judging that the breach of contract of carriage was not
due to any fortuitous event?
Ruling:
Yes, it was correct that there was a breach of contract of carriage as held by the trial
court; when the plaintiffs hired the defendant to convey them from one place to another,
the latter is bound to fulfill such contract of carriage and safely and securely bring them
to their destination, and that his failure to do so makes him liable for damages except if
there are fortuitous events as mentioned in Article 1105 of the Civil Code. However, as
far as the facts show, the accident was caused either by defects in the automobile or
else through the negligence of the cars driver. As illustrated, the essential element of
extraordinary circumstances independent of the will of the obligor, or of his employees is
not present to this case, hence, it shall not be considered fortuitous. It is not suggested

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that the accident in question was due to an act of God or to adverse road conditions
which could have been foreseen. Clearly, such cases are not fortuitous in nature, and
that the defendant is liable for damages incurred by the plaintiffs.
Lasam vs. Smith 2
Facts: The defendant was the owner of a public garage in the town of San Fernando, La
Union, and engaged in the business of carrying passengers for hire from one point to
another in the Province of La Union and the surrounding provinces. Defendant
undertook to convey the plaintiffs from San Fernando to Currimao, Ilocos Norte, in a
Ford automobile. On leaving San Fernando, the automobile was operated by a licensed
chauffeur, but after having reached the town of San Juan, the chauffeur allowed his
assistant, Bueno, to drive the car. Bueno held no drivers license, but had some
experience in driving.
The car functioned well until after the crossing of the Abra River in Tagudin, when,
according to the testimony of the witnesses for the plaintiffs, defects developed in the
steering gear so as to make accurate steering impossible, and after zigzagging for a
distance of about half kilometer, the car left the road and went down a steep
embankment. The automobile was overturned and the plaintiffs pinned down under it.
Mr. Lasam escaped with a few contusions and a dislocated rib, but his wife, Joaquina,
received serious injuries, among which was a compound fracture of one of the bones in
her left wrist. She also suffered nervous breakdown from which she has not fully
recovered at the time of trial.
The complaint was filed about a year and a half after and alleges that the accident was
due to defects in the automobile as well as to the incompetence and negligence of the
chauffeur.
The trial court held, however, that the cause of action rests on the defendants breach of
the contract of carriage and that, consequently, articles 1101-1107 of the Civil Code, and
not article 1903, are applicable. The court further found that the breach of contract was
not due to fortuitous events and that, therefore the defendant was liable in damages.
Issue: Is the cause of the accident a fortuitous event, thus extinguishing defendants
liability?
Ruling: No. Article 1174 provides Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be responsible for those events which
could not be foreseen, or which, though foreseen, were inevitable. The following
characteristic must be considered: (1) The cause of the unforeseen and unexpected
occurrence, or of the failure of the debtor to comply with his obligation, must be
independent of the human will. (2) It must be impossible to foresee the event which
constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid. (3)
The occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner. And (4) the obligor (debtor) must be free from any
participation in the aggravation of the injury resulting to the creditor."
Some extraordinary circumstances independent of the will of the obligor, or of his
employees, is an essential element of a caso fortuito. In the present case, this element
is lacking. It is not suggested that the accident in question was due to an act of God or
to adverse road conditions which could have been foreseen. As far as the record shows,
the accident was caused either by defects in the automobile or else through the
negligence of its driver. That is not a caso fortuito.

Victorias Planters Assn. vs. Victorias Milling Co., 97 Phil. 318

(1955)
FACTS:
Victoria Planters Association Inc. and North Negros Planters Association, Inc are the

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petitioners of this case, against respondent Victorias Milling Corporation. Both
petitioners entered into a contract with Victorias Milling Co., stipulating that sugar cane
produced by petitioners would be milled by the respondent in a 30-year period. But due
to the Japanese occupation, considering the war that happened, the petitioners was not
able to deliver the thing promised (sugar cane) in a contract with the respondents for six
years. The failure to do so was because of force majeure.
ISSUE:
Whether petitioner is obliged to deliver the sugar cane for six more years after the
expiration of the 30-year period to make up for their failure to deliver to the respondent?
RULING:
No. The milling contracts executed between the petitioners and the respondent expired
and terminated upon the lapse of the said 30-year period, and that respondent
corporation is not entitled to claim any extension of or addition to the said 30 year term
or period of said milling contracts by virtue of an equivalent to 6 years of the last war
and reconstruction of its central, during which there was no planting and/or milling. The
reason the planters failed to deliver the sugar cane was the war or fortuitous event. The
appellant ceased to run its mill for the same cause. Fortuitous event relieves the obligor
from fulfilling the contractual obligation under Article 1174 of the Civil Code. 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. The
fulfillment prayed upon by the respondents was impossible of performance.

Usurious Transactions, 1175; 1413

Angel Warehousing vs. Chelda, 23 SCRA 19
FACTS:
Plaintiff corporation filed suit in the Court of FirstInstance of Manila on May 29, 1964
against the partnership Chelda Enterprises and David Syjueco, its capitalist partner, for
recovery of alleged unpaid loans in the total amount of P20,880.00, with legal interest
from the filing of the complaint, plus attorney's fees of P5,000.00.
Alleging that post dated checks issued by defendants to pay said account were
dishonored, that defendants' industrial partner, Chellaram I. Mohinani, had
left the country, and that defendants have removed or disposed of their property, or are
about to do so, with intent to defraud their creditors, preliminary attachment
was also sought.
Answering, defendants averred that they obtained four loans from plaintiff in the total
amount of P26,500.00, of which P5,620.00 had been paid, leaving a balance of
P20,880.00; that plaintiff charged and deducted from the loan usurious interests
thereon, at rates of 2% and 2.5% per month, and, consequently, plaintiff has no cause
of action against defendants and should not be permitted to recover under the law. A
counterclaim for P2,000.00 attorney's fees was interposed.
Plaintiff filed on June 25, 1964 an answer to the counterclaim, specifically denying
under oath the allegations of usury.
ISSUE: In a loan with usurious interest, may the creditor recover the principal of the
loan?
RULING:
Great reliance is made by appellants on Art. 1411 of the New Civil Code which states:
Art. 1411. When the nullity proceeds from the illegality of the cause or object of the
contract, and the act constitutescriminal offense, both parties being in pari delicto, they
shall have no action against each other, and both shall be prosecuted. Moreover, the
provisions of the Penal Code relative to the disposal of effects or instruments of a crime
shall be applicable to the things or the price of the contract.
This rule shall be applicable when only one of the parties is guilty; but the innocent one
may claim what he has given, and shall not be bound to comply with his promise.
The Supreme Court do not agree with such reasoning. Article 1411 of the New Civil
Code is not new; it is the same as Article 1305 of the Old Civil Code. Therefore, said
provision is no warrant for departing from previous interpretation that, as provided in the

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Usury Law (Act No.2655, as amended), a loan with usurious interest is not totally void
only as to the interest.
True, as stated in Article 1411 of the New Civil Code, the rule of pari delicto applies
where a contract's nullity proceeds from illegality of the cause or object of said contract.
However, appellants fail to consider that a contract of loan with usurious interest
consists of principal and accessory stipulations; the principal one is to pay the debt; the
accessory stipulation is to pay interest thereon. And said two stipulations are divisible in
the sense that the former can still stand without the latter. Article 1273, Civil Code,
attests to this: "The renunciation of the principal debt shall extinguish the accessory
obligations; but the
waiver of the latter shall leave the former in force."

Briones vs. Camayo, 41 SCRA 404

Facts: Aurelio G. Briones (plaintiff) filed an action against defendants Primitivo, Nicasio,
Pedro, Hilario and Artemio, all surnamed Cammayo, to recover from them, jointly and
severelly, the amount of P1,500.00, plus damages, attorneys fees and costs of suit.
Defendants answered the complaint with specific denials and complaints. Defendants
executed the real estate mortgage as security for the loan of P1,200.00 given to
Primitivo Cammayo upon the usurious agreement that defendant pays to the plaintiff,
out of the alleged loan of P1,500.00 (interest 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 only the sum of P1,200.00 and withheld the sum of P300.00 which was
intended as advance interest for one year. With said loan of P1,200.00, defendant paid
to the plaintiff during the period of October 1955 to July 1956 the sum of P330.00 which
plaintiff, illegally and unlawfully refused to acknowledge as partial payment of the
account but as an interest of said loan for an extension of another term of one year.
Issue:
Will the plaintiff have the right to recover from the defendant the total amount of
P1,500.00?
Ruling:
No. The loan is valid but usurious interest is void. Plaintiff has the right to recover his
capital by judicial action. To discourage stipulations on usurious interest, said
stipulations are treated as 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 amount, for this would unjustly enrich the defendant at the expense of the
plaintiff. Moreover, 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, 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.
Briones vs. Cammayo 2
G.R. No. L-23559 October 4, 1971
Facts:
On February 22, 1962, Aurelio G. Briones filed an action in the Municipal Court of
Manila against the Cammayos, 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
upon a usurious agreement, that the plaintiff reserve and secure, out of the alleged loan
of P1,500.00 as interest the sum of P300.00 for one year. That 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

9
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.
That 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 refuse 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:
Is the creditor entitled to collect from the debtor the amount representing the principal
obligation of the loan?
Whether or not he is entitled to collect usurious interests.
Ruling:
Yes. In a contract of loan with usurious interest consists of principal and accessory
stipulations; the principal one is to pay the debt; the accessory stipulation is to pay
interest thereon. And said two stipulations are divisible in the sense that the former can
still stand without the latter. Article 1420 of the New Civil Code provides in this regard:
"In case of a divisible contract, if the illegal terms can be separated from the legal ones,
the latter may be enforced."
Article1273, Civil Code, attests to this: "The renunciation of the principal debt shall
extinguish the accessory obligations; but the waiver of the latter shall leave the former in
force."
No. 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.
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. 1 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 is a new provision in the Civil Code, provides as follows: "Contracts and
stipulations, under any cloak or device whatever, intended to circumvent the laws
against usury shall be void. The borrower may recover in accordance with the laws on
usury." This article which declares the contract itself next merely the stipulation
interest void, necessarily regards the prestation to pay usurious interest as an
integral part of the cause, making it illegal.
Barredo, J., concurring:
Article 1957 of the Civil Code declares that all usurious contracts and stipulations are
void, this is nothing new, for such has been the law even under the Usury Law before
the Civil Code went into effect, and, moreover, it is evident that the Civil Code itself
yields to the Usury Law when it comes to the question of how much of the loan and
interests paid by the borrower may be recovered by him, and the Usury Law is clear that
he may recover only all the interests, including, of course, the legal part thereof, with
legal interest from the date of judicial demand, without maintaining that he can also
recover the principal he has already paid to the lender.

Presumptions, 1176
Manila Trading Supply Co. vs. Medina, 2 SCRA 549 (1961)
Facts:

10
Prior to May 7, 1956, the defendant-appellant Mariano Medina had certain accounts
with appellee, Manila Trading & Supply CO. These accounts were on said date
consolidated into a total balance due of P60,000.00, for which Medina executed a
promissory note for Sixty Thousand Pesos (P60,000.00), with interest at 12% per
annum, payable in monthly installments of P4,000.00 plus interest. The note provided
that upon failure to pay any of the installments "the whole sum remaining then unpaid
will immediately become due and payable, at the option of the holder of this note",
together with 33-1/3% of the amount due for attorney's fees and expenses of collection,
in addition to the costs of the suit.
On January 8, 1957, the payee Manila Trading & Supply Co. filed a complaint against
appellant Medina in the Court of First Instance of Manila, claiming that the said debtor
had failed to meet the installments due on the note for the months of September, 1956
up to and including January 7, 1957. Medina further pleaded, by way of defense, that he
was induced to pay P4,000.00 additional on January 24, 1957 upon promise that he
would not be sued, and that he would be allowed to pay the balance. By way of
counterclaim, Medina asked for damages due to lost earnings of the trucks attached, at
the rate of P900.00 per day.
Plaintiff provided evidence, which showed that from June 6, 1956 to January 21, 1957,
defendants had made twenty-one payments totalling P24,311.34 of which P4,413.76
corresponded to interest and the balance (P19,982.15) to the principal. 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
give rise to the presumption that prior installments have been paid.
Issue: Whether the presented receipts are 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.
Manila Trading v. Medina 2
Facts:
Defendant-appellant Mariano Medina had certain accounts payable with appellee
Manila Trading & Supply Co. After said accounts were consolidated, he had a total
balance outstanding of P60, 000.00 of which he executed a promissory note stipulating
an interest of 12% per annum, payable in monthly installments of P4, 000.00 plus
interest. Further, it was stipulated that his failure to comply with the terms makes his
account due and demandable with attorneys fees, collection expenses and the cost of
the suit.Appellee filed a complaint against appellant for failing to comply with his
promissory note and a writ of attachment was issued and levied upon his eleven buses.
Appellant pleaded, partly admitting his lapse but counterclaimed for damages for the
loss of income when his buses were attached. He showed receipts of payment however
the appellee found it hard to consolidate the mutilated receipts with their records.
Issue:Does the presentation of receipt of a subsequent payment presume the payment
of prior installments?
Ruling:Receipts of payment should recite that they are issued for the installments
corresponding to the month in question. But even if such recital had been made, the
resulting presumption would only be prima facie.

11

Different Kinds of Obligations

Pure and Conditional Obligations, 1179
Pure obligation
Galar vs. Isasi, 47 O.G.6241
FACTS:
Luis Galar borrowed Php 15,000 from Juan Isasi for which the former drew two
promissory notes. As a payment, Galar paid to PNB on behalf of Aberri Inc., which was
controlled by Isasi and his wife, the outstanding balance of Php 15,848.90. In turn, PNB
cancelled the indebtedness of Aberri Inc., released the mortgage that had been
constituted, and delivered the title to Galar. Upon notifying Isasi of the payment made,
Isasi refused to recognize the payment of Galar to PNB. Hence the attorney of Galar
advised Isasi that they would consign in the court the sum of Php 20,000, representing
the face value of the promissory notes. They then filed a case in the court to declare the
promissory
notes
paid
and
discharged.
Isasi, on the other hand, tendered the sum of Php 15,848.90 paid by Galar to
the PNB for the account and in the name of Aberri Inc. Upon refusal by Galar, Isasi, on
behalf of the company, consigned the amount in the CFI of Manila and filed a complaint,
praying that Galar be ordered to restore to Aberri Inc. all documents relative to the
obligation formerly due to the PNB and to reimburse the amount paid by Galar to the
bank
be
considered
cancelled
in
view
of
the
consignation.

ISSUE:
1. Can Luis Galar legally pay the debt without awaiting the demand on the part of
Isasi?
2. Should Galars payment of the debt of Aberri Inc. to the bank be set off against the
notes?

RULING:
1. Yes. A demand note was subject neither to suspensive condition nor a suspensive
period. The demand was not a condition precedent since the effectivity and binding
effect of the note does not depend upon the making of the demand. The note was
binding even before the demand is made. Neither did the note constitute an implied
suspensive period since there was nothing to prevent the creditor for making demand at
any time. It follows, therefore, that the demand note was strictly a pure obligation as
defined in Article 1179. The periods of 15 and 30 days after demand stipulated in the
promissory notes could have no other purpose but to protect the debtor by giving him
sufficient time to raise money to meet the demand. The period being solely for the
debtors protection and benefit, the debtor could renounce it validly at any time. Galar
was lawfully entitled to make payment even if no demand had yet been made by Isasi.
2. Yes. The payment of Galar of the indebtedness of Aberri Inc to the PNB redounded to
the benefit of Isasi who had absolute control of said corporation. Thus, said payment
was valid and discharged the obligation, even if such payment was not authorized by
Isasi or Aberri Inc., for which Galar had the right to demand reimbursement for the
amount paid. However, such reimbursement was unnecessary. Such reimbursement
was extinguished by its total absorption in the larger amount due from Galar to Isasi.
The consignation, therefore, of Isasi was invalid since it no longer had any obligation

12
towards Galar. On the other hand, the balance of Php 4,151.10 due and owing from
Galar to Isasi was extinguished upon the consignation of Galar in the court the sum of
Php 20,000.

Conditional obligations
Classification of conditions
Gaite vs. Fonacer, 2 SCRA 381
FACTS:
Fonacier was a holder of mineral claims. Gaite was appointed by Fonacier as attorneyin-fact to contract any party for the exploration and development of mining claims. Gaite
executed a deed of assignment in favor of Larap Iron Mines, a single proprietorship
owned by him. For some reasons, Fonacier revoked the agency, which was acceded to
by Gaite, subject to certain conditions. Gaite transferred to Fonacier all his rights and
interests on all the roads, improvements and facilities in the said claims, the right to use
the business name Larap Iron Mines, and all the records relative to the mines. Gaite
also transferred to Fonacier all his rights and interests over the 24,000 tons of iron ores,
more or less, extracted from the mineral claims for P75,000, of which P10,000 has
already been paid upon signing of the agreement and the balance of P65,000 to be paid
from the first letter of credit for the first local sale of the iron ores. To secure payment,
Fonacier delivered a surety agreement with Larap Mines and some of its stockholders,
and another one with Far Eastern Insurance. When the second surety agreement
expired with no sale being made on the ores, Gaite demanded the P65,000 balance.
Defendants contended that the payment was subject to the condition that the ores will
be sold.
ISSUES:
(1) Whether the sale is conditional or one with a period
(2)
Whether
there
were
insufficient

tons

of

ores

RULING:
(1) The sale is one with a period or term. 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, 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. In the case, there is no uncertainty that the payment will have to be
made sooner or later; what is undetermined is merely the exact date at which it will be
made. By the very terms of the contract, therefore, the existence of the obligation to
pay is recognized; only its maturity or demandability is deferred.
A contract of sale is normally commutative and onerous: not only does each one of the
parties assume a correlative obligation (the seller to deliver and transfer ownership of
the thing sold and the buyer to pay the price), but each party anticipates performance by
the other from the very start. While in a sale the obligation of one party can be lawfully
subordinated to an uncertain event, so that the other understands that he assumes the
risk of receiving nothing for what he gives, it is not in the usual course of business to do
so; hence, the contingent character of the obligation must clearly appear. Nothing is
found in the record to evidence that Gaite desired or assumed to run the risk of losing
his right over the ore without getting paid for it, or that Fonacier understood that Gaite
assumed any such risk. This is proved by the fact that Gaite insisted on a bond a to
guarantee payment of the P65,000, and not only upon a bond by Fonacier, the Larap
Mines & Smelting Co., and the company's stockholders, but also on one by a surety
company; and the fact that appellants did put up such bonds indicates that they
admitted the definite existence of their obligation to pay the balance of P65,000.

13

The appellants have forfeited the right to compel Gaite to wait for the sale of the ore
before receiving payment of the balance of P65,000, because of their failure to renew
the bond of the Far Eastern Insurance 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, a security that Gaite considered essential and upon which he had insisted
when he executed the deed of sale of the ore to Fonacier. The obligation became due
and demandable under Article 1198 of the New Civil Code.
(2) The sale between the parties is a sale of a specific mass or iron ore because no
provision was made in their contract for the measuring or weighing of the ore sold in
order to complete or perfect the sale, nor was the price of P75,000 agreed upon by the
parties based upon any such measurement. The subject matter of the sale is,
therefore, a determinate object, the mass, and not the actual number of units or tons
contained therein, so that all that was required of the seller Gaite was to deliver in good
faith to his buyer all of the ore found in the mass, notwithstanding that the quantity
delivered is less than the amount estimated by them.
FACTS:
Fonacier - Owner and/or holder (defendant), either by himself or in a representative
capacity, of 11 iron lode mineral claims, known as the Dawahan Group. Foncier decided
to revoke the authority granted by him to Gaite to exploit and develop the mining claims
in question. He promised to execute a surety in favor of Gaite dated Dec. 8, 1954. But
Fonacier and his sureties failed to pay as demanded by Gaite.
Gaite- 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. Gaite
assented thereto, subject to certain conditions, the decision that Fonacier decided upon
the revoking of the authority granted to him by Gaite.
o Conditions: 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. Another is a bond underwritten by a bonding
company together with the Revocation of Power of Attorney, this being put up by
defendants to secure the payment of P65,000.00, and the liability of said surety
company will expire on Dec. 8,1955
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.
ISSUE:
Is Fonacier and his sureties obliged to pay P65, 000.00 to plaintiff when in fact they
failed to renew the surety bond which expired on Dec. 8, 1955?
HELD:
Yes. The obligation of defendants to pay plaintiff, as promised, was not complied.Hence
it became due and demandable under Article 1198 of the New Civil Code. The case
squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the
Philippines:
"ART. 1198. The debtor shall lose every right to make use of the period:
(1) . . .
(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.

14

Pay vs. vda de Palanca, 57 SCRA 618 (1974)

FACTS:
The late Justo Palanca and Rosa Gonzales Vda. De Carlos Palanca entered into a
promise to pay with George Pay on January 30, 1952 which promissory note states For
value received from time to time since 1947, we jointly and severally promise to pay to
Mr. George Pay at his office at the China Banking Corporation the sum of twenty six
thousand nine hundred pesos with interest of 12% per annum upon receipt by either of
the undersigned of cash payment from the Estate of Don Carlos Palanca or upon
demand.
The petition was filed on August 26, 1967 asking the surviving spouse of Justo Palanca
to interpose as administratix. As there was refusal on the part of Segundina de Palanca
to act as adminitratix; they claim that the property no longer belonged to the debtor and
that Mr. Pays action has already prescribed, hence, this appeal.
ISSUE:

Had

George

Pays

action

really

prescribed?

RULING:
Yes. Under Art 1179 of the Civil Code every obligation whose performance does not
depend upon a future or uncertain event, or upon a past event unknown to the parties is
demandable at once. Furthermore, under the discussion by Tolentino, the above
promissory note falls under pure obligation because for a contract to fall under
conditional obligation, the condition must be future and uncertain. The debtors being
the heirs of Don Carlos Palanca, the receiving of the mentioned condition was not
uncertain. The obligation being pure obligation was demandable at once.
Being demandable at once, the actionable period of George Pay started to commence
the very moment the contract was executed. Hence, Art 1144 of the Civil Code which
states that one has to bring his action upon a written contract from the right to do so
accrues within ten years applies. Fifteen years was then much too late.

Parks vs. Province of Tarlac, 49 Phil 142 (1976) Cariaso,

Lagura
Songcuan vs. IAC, (191 SCRA28)
FACTS:
Victoriano Alviar was the owner of two parcels of land located at San Fernando, La
Union. On the land stands a building owned bu his son, Mariano, and his wife, Belen.
On September 29, 1966, the Alviars sold these relaties to Saturnino Songcuan for P
34,026.09.
They further agreed that the Alviars will have the right of redemption within 10 years
from the date of signing og 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 becaus 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

15
decreeing that the Alviars had the right to repurchase, giving then 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 the 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 of 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 occupies 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. 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.

Coronel vs. CA, GR No. 103577, October 7, 1996

Facts:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. executed a

16
document entitled Receipt of Down Payment in favor of plaintiff Ramona Patricia
Alcaraz.
Clearly, the conditions appurtenant to the sale are the following:
Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon
execution of the document aforestated;
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;
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 (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz, mother
of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos. Thereafter,
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
intervenor-appellant Catalina B. Mabanag 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. However, on February 22, 1985, Concepcion, et. al., filed a complaint
for a specific performance against the Coronels and caused the annotation of a notice
of lis pendens at the back of TCT No. 327403.
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering
the same property with the Registry of Deeds of Quezon City. Subsequently, on April 25,
1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor
of Catalina. Thus, on June 5, 1985, a new title over the subject property was issued in
the name of the latter under TCT No. 351582.
Issue:
Was the agreement between Ramona and the Coronels a contract to sell or a
conditional contract of sale?
Ruling:
A contract to sell may be defined as a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property despite delivery thereof
to the prospective buyer, binds himself to sell the said property exclusively to the
prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of
the purchase price.
As evidenced by the document denominated as Receipt of Down Payment the parties
entered into a contract of sale subject to the suspensive condition. 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.
Coronel vs. CA 2
Facts:
In 1985, Coronel executed a document entitled "Receipt of Down Payment" in favor of
Alcaraz for P50,000 down payment of P1.24M as purchase price for an inherited house
and lot promising to execute a deed of absolute sale as soon as it has been transferred
in their name. The balance of P1.19M is due upon the execution of the deed. When title
to the property was finally transferred to their names, the Coronels sold the property to
Mabanag for P1.58M after she paid P300K down payment. Because of this, they
cancelled and rescinded the contract with Alcaraz by returning the P50,00 down
payment. Alcaraz filed a complaint for specific performance against the Coronels and

17
cause the annotation of a notice of lis pendens on the TCT. Mabanag, on the other
hand, caused the annotation of a notice of adverse claim with the Register of Deeds.
However, the Coronels executed a Deed of Absolute Sale in favor Mabanag. RTC ruled
in favor of Alcaraz. CA affirmed.
Issue: Whether the receipt of down payment serves a contract to sell or a conditional
contract of sale
Ruling: No. The agreement could not have been a contract to sell because the sellers
made no express reservation of ownership or title to the subject parcel of land.
Furthermore, the circumstance, which prevented the parties from entering into an
absolute contract of sale, pertained to the sellers themselves (the certificate of title was
not in their names) and not the full payment of the purchase price. Under the
established facts and circumstances of the case, had the certificate of title been in the
names of petitioners-sellers at that time, there would have been no reason why an
absolute contract of sale could not have been executed and consummated right there
and then. Moreover, unlike in a contract to sell, petitioners did not merely promise to sell
the property to private respondent upon the fulfillment of the suspensive condition. On
the contrary, having already agreed to sell the subject property, they undertook to have
the certificate of title changed to their names and immediately thereafter, to execute the
written deed of absolute sale. What is clearly established by the plain language of the
subject document is that when the said Receipt of Down Payment was prepared and
signed by petitioners, the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the success full transfer of the certificate of
title from the name of petitioners father to their names. The suspensive condition was
fulfilled on 6 February 1985 and thus, the conditional contract of sale between the
parties 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.

Javier vs. CA, 183 SCRA 171 (1990)

Facts:
On February 15, 1966 private respondent Leonardo Tiro 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 Timber wealth 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 produced from the forest concession. At that time
the said deed of assignment was executed, Trio had a pending application of an
additional forest concession. Upon agreement, dated Feb. 28, 1966, he then transferred
his rights to the defendants of the additional forest concession shall be transferred to
petitioners in consideration of the sum of Php30, 000.00. However, 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. On July 16, 1968, for failure of
petitioners to pay the balance due under the two deeds of assignment, private
respondent filed an action against petitioners based on the contracts. 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

18
trial courts decision was reversed. Hence, this petition.
ISSUE:
1. Was the deed of assignment dated February 15, 1966 null and void?
2. Was the agreement of February 28, 1966 null and void?
HELD:
1. Yes. Since plaintiff-appelants forest concessions were consolidated or merged with
those of the other timber license holders by appelles voluntary act under the Forest
Consolidation Agreement approved by the Bureau of Forestry, then the unpaid balance
became due and demandable. Under Art. 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. No. the Court of appeals agreed with petitioners that they cannot be held liable
thereon. 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. The failure of Leonardo Tiro to comply with his
obligation negates his right to demand performance from petitioners. 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 private respondent never acquired any right over the additional
area for failure to secure the approval of Bureau of Forestry, the agreement executed
therefore, which had for its object the transfer of said right to petitioners, never became
effective or enforceable.
Javier vs. CA 2
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 October 15, 1966, private respondent executed a "Deed of Assignment" in
favor of herein petitioner, Jose Javier.
At the time of the said deed of assignment was executed, private respondent had a
pending application, dated October 21, 1965. On November 18, 1966, the Acting
Director of Forestry wrote private respondent that his forest concession was renewed up
to May 12, 1967 and must form an organization such as partnership so as to hold an
area of not less than 20,000 hectares of contiguous and compact territory and an
aggragate allowable annual cut of not less than 25,000 cubic meter, otherwise, his
license will not be further renewed.
Consequently, petitioner Javier entered into a Forest Consolidation Agreement with
other ordinary timber license holders of Misamis Oriental, and was approved by the
Director of Forestry.
On July 16, 1968, private respondent filed an action against petitioner for failure of
paying him the balance under the two deeds of assignment. Petitioner filed their answer
admitting the due execution of contracts but interposing the special defense of nullity of
the agreement since private respondent failed to comply with his contractual obligations
and that the conditions for the enforceability of the obligations of the parties failed to
materialize. Private respondent replied refuting the defense of nullity of the contracts
and said that what were actually transferred and assigned to the petitioner were their
rights and interest in a logging concession.
After due trial, the lower court rendered judgment in favor of the petitioner. Respondent
Court of Appeals then reversed the decision, hence this petition.
Issue:
Is the petitioner liable for the payment of the balance due under the two deeds of
assignment?
Held:
No. 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.
As to the alleged nillity of the agreement, the court agreed that petitioners cannot be

19
held liable for the failure to pay the balance. The efficacy of the said deed of
assignments is subject to the condition that the application of private respondent for an
additonal area for forest concession be approved by the Bureau of Forestry. Since
privatre respondent did not obtain that approval, said deed produces no effect. The
parties stand as if the condition obligation had never existed.

Tayag vs. CA, 219 SCRA 480 (1993)

Facts:
The deed of conveyance executed on May 28, 1975 by Juan Galicia, Sr., prior to his
demise in 1979, and Celerina Labuguin, in favor of Albrigido Leyva involving the
undivided one-half portion of a piece of land situated at Poblacion, Guimba, Nueva Ecija
for the sum of P50,000.00 under the following terms:
1. The sum of PESOS: THREE THOUSAND (P3,000.00) is HEREBY acknowledged to
have been paid upon the execution of this agreement;
2. The sum of PESOS: TEN THOUSAND (P10,000.00) shall be paid within ten (10)
days from and after the execution of this agreement;
3. The sum of PESOS: TEN THOUSAND (P10,000.00) represents the VENDORS'
indebtedness with the Philippine Veterans Bank which is hereby assumed by the
VENDEE; and
4. The balance of PESOS: TWENTY SEVEN THOUSAND (P27,000.00.) shall be paid
within one (1) year from and after the execution of this instrument.
Leyva filed a suit for specific performance account of the herein petitioners' reluctance
to abide by the covenant. Petitioners allege that Leyva failed to pay his dues and
therefore they are rescinding the deed of conveyance. 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 Leyva's
assumption of the vendors' obligation to the Philippine Veterans Bank, he paid only the
sum of P6,926.41 while the difference the indebtedness came from Celerina Labuguin.
Moreover, petitioners asserted that not a single centavo of the P27,000.00 representing
the remaining balance was paid to them.
Issue:
Whether the CA is correct in applying Art 1186.
Ruling:
Yes. 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 obligees, 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

20
determined hereafter.
Issue:
Whether the contract can be rescinded on the ground that the full consideration of the
agreement to sell was not paid by Leyva.
Ruling:
No. The Court held that Both the trial and appellate courts were correct in sustaining the
claim of private respondent anchored on estoppel or waiver by acceptance of delayed
payments under Article 1235 of the Civil Code in that:
When the obligee accepts the performance, knowing its incompleteness or irregularity,
and without expressing any protest or objection, the obligation is deemed fully complied
with.
considering that the heirs of Juan Galicia, Sr. accommodated private respondent by
accepting the latter's delayed payments not only beyond the grace periods but also
during the pendency of the case for specific performance. Indeed, the right to rescind is
not absolute and will not be granted where there has been substantial compliance by
partial payments. By and large, petitioners' actuation is susceptible of but one
construction that they are now estopped from reneging from their commitment on
account of acceptance of benefits arising from overdue accounts of private respondent.

Kinds of Conditional obligations; suspensive & resolutory, 1181

Jacinto vs. Kaparaz, 209 SCRA 246 (1992)
Facts: On March 11, 1966, petitioners and respondents entered into an agreement
under which the private respondents agreed to sell and convey to petitioners a portion
consisting of six hundred sq. meters of land located in Matiao, Mati, Davao Oriental for
a total consideration of P1,800.00. A downpayment of P800.00 was paid by the
petitioners upon execution of the Agreement. The balance of P1,000.00 was to be paid
on installment at the rate of P100.00 a month to the DBP, to be applied to private
respondent's loan accounts.
Petitioners filed against the respondents a complaint for specific performance for refusal
to execute the deed of sale. Respondents filed their answer alleging that the sale did
not materialize because of the failure of the petitioners to fulfill their promise to make
timely payments on the stipulated price to the DBP; that as a result of failure, private
respondents failed to secure the release of the mortgage on the property. They prayed
for the dismissal of the case and a declaration that the agreement is null and void.
After due trial, the trial court rendered a decision in favor of the petitioners. The Court of
Appeals reversed the decision of the trial court, hence this petition.
Issue: What is the natue of their agreement? Can the private respondent rescind the
agreement?
Held: Vital to the resolution of the controversy is the determination of the true nature of
the agreement, that is, whether it was a contract of sale (resolutory) or a contract to sell
(suspensive). In the latter case, ownership is retained by the seller and is not passed
until full payment of the price. Such payment is a positive suspensive conditon, 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. On the other hand,
in a contract of sale, the non-payment of the price is a resolutory condition, the remedy
of the seller is to exact fulfillment or to rescind the contract.
According to the court, this case has all the earmarks of a contract of sale, therefore, is
in the nature of resolutory condition. It was found out that the possesion of the portion
sold was immediately delivered to the petitioners, hence, the petitioners were granted
the right to enjoy all the improvements therein effective from the date of the execution of
the agreement. The respondent unqualifiedly bound themselves to execute the final

21
deed of sale "as soon as the settlement or the partition of the estate of the deceased
Narcisa R. Kaparaz shall have been consummated and effected, but not later than
March 31, 1967" and only after full payment of the unpaid portion of the purchase price.
In which case, the respondent may either demand specific performance from petitioner,
or rescind the contract.
However, considering that the portion of land is an immovable property, it is worthy to
note that, likewise, the contract is governed by Article 1592 of the Civil Code, that is,
"...even though it may have been stipulated that upon failure to pay the price at the time
agreed upon the rescission of the contract shall of right take place, the vendee may pay,
even after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicial or by a notarial act..." In this case,
there was non-compliance with the requirements prescribed in the said provision. It was
not controverted that private respondents had neither filed an action for specific
performance nor demanded the rescission of the agreement either judicially or by a
notarial act before the filing of the complaint. Hence, the mere casual breach does not
justify the rescission of the agreement. The court ruled that rescission of the agreement
was not available to the private respondent.

Lichauco vs. Figueras Hermanos, 7 Phil. 339 Cariaso, Roa

Ducusin vs. CA, 122 SCRA 280 (1983)
Facts: Petitioner Agapito Ducusin leased to respondent Virgilio Baliola and his wife a
one-door apartment unit. The lease contract stipulates the term which shall be in a
month to month basis commencing on February 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. Baliola spouses occupied the
apartment for almost 2 years, paying rentals promptly. Then on January 1977, petitioner
sent a Notice to Terminate Lease Contract to Baliolas terminating the lease and giving
them until March 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 residence. A
second letter was thereafter sent by the petitioner to respondents making an inquiry on
any action the latter had taken on the notice previously sent which respondents gave no
reply. Petitioner then filed an action for ejectment against the Baliola spouses and the
lower court decided in favor of Ducusin on the ground that the Baliolas contract with the
Ducusin has already terminated with the notice of termination sent by the latter on the
reason that he needs the premises for his own children. The lessees went to the Court
of Appeals on a petition for review among others 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 Supreme Court.
Issue:
Is the termination of the lease contract of the Baliola spouses valid?
Ruling:
Yes. The condition in the contract of lease which states, the need of the lessors
children of the leased premises, is not a condition the happening of which is solely
dependent upon the will of the lessor. The happening of the condition depends upon the
will of a third person, the lessors 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 in
force. In conclusion, the intention to use the leased premises as the residence of
Ducusin children has been satisfactorily and sufficiently proved by clear, strong, and
substantial evidence found in the records of the case.
Ducusin vs. Court of Appeals 2

22

Facts: On February 20, 1975, petitioner Agapito Ducusin leased to private respondent,
Virgilio Baliola, a one-door apartment unit, with the condition 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."
On January 18, 1977, petitioner sent a "Notice to Terminate Lease Contract" to
respondents, terminating the lease and giving them until March 15, 1977, within which
to vacate the premises for the reason that that petitioner's children were getting married
and will need the apartment for their own use and residence. A second letter was sent
inquiring on any action made by respondent regarding the termination of the lease of
contract, but respondent did not reply to the notice, and instead, wrote a letter to the
Secretary of National Defense reporting that petitioner was with intent on evicting them
from the leased premises. So petitioner filed an action alleging that the apartment
complex was constructed for the use and residence of his children, if and when they
decide to marry and live independently. The respondent, on the other hand, claimed that
the ejectment suit "is a well-planned scheme to rid the defendants and family out of their
apartment, and circumvent the law prohibiting raising the rental of apartments and
houses."
The trial court rendered a decision in favor of petitioner Ducusin on the ground that the
contract has already terminated with the notice of termination. Respondent appealed to
the Court of first instance, but the same was affirmed. Respondent appealed again with
the Court of Appeals, this time, the decision was reversed, hence this petition.
Issue: Is the condition stipulated in the contract of lease valid as to terminate the same?
Held: Yes, the court ruled: where a lease contract expressly stipulates that the lessor
may terminate the lease when his children shall need the same, such a condition is
valid, as happaning of the condition depends not on the lessor but on a third party. The
resolutory condition in the contract of lease regarding 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 condition is dependent 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.

Parks vs. Province of Tarlac, supra

Protestative, Casual and Mixed Conditions, 1182
Rustan Pulp vs. IAC, 214 SCRA 662 (1992)
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

23
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.

Hermosa vs. Logara 49 OG 4287

SUMMARY:
A debtor promised to pay a loan on condition "as soon as he receive funds derived from
the sale of his property in Spain." The debtor died and the estate sold the said property
and receive the funds from the sale. The creditor is demanding payment from the
estate.
FACTS:
Epifanio Longara filed a claim against the estate of Fernando Hermosa, Sr. for money
owed to him by the deceased. He alleged that the advances were made "on condition
that their payment should be made by Fernando Hermosa, Sr. as soon as he receive
funds derived from the sale of his property in Spain." Upon Hermosa's death, the
property was sold and the money was sent to the estate in the Philippines.
Hermosa (wife/administratrix) contended on appeal that the obligation contracted by the
intestate was subject to a condition exclusively dependent upon the will of the debtor (a

24
condicion potestativa) and therefore null and void, in accordance with Article 1115 of the
old Civil Code. The Court of Appeals held that the condition was not entirely potestative.
It further ruled that the payment of the advances did not become due until the
administratrix received the money from the buyer of the property.
ISSUE:
Is the condition "as soon as he receives funds from the sale of his property in Spain"
valid?
RULING:
Yes. The condition upon which the payment of the debt depended on, "as soon as he
(intestate) receive funds derived from the sale of his property in Spain," is a condition
that does not depend exclusively upon the will of the debtor, but also upon other
circumstances beyond his power or control.
The condition implies that the intestate had already decided to sell his house, or at least
that he had made his creditors believe that he had done so, and that all that we needed
to make his obligation (to pay his indebtedness) demandable is that the sale be
consummated and the price thereof remitted to the islands. It is evident, therefore, that
the condition of the obligation was not purely protestativei.e., depending exclusively
upon the will of the intestatebut a mixed one, depending partly upon the will of
intestate and partly upon chance. The obligation is clearly governed by the second
sentence of Article 1115 of the old Civil Code.
The condition 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.
Hermosa v. Logara 2.
Facts:
Court of Appeals, fourth division, approving certain claims presented by Epifanio M.
Longara against the testate estate of Fernando Hermosa, Sr. The claims are of three
kinds, namely, P2,341.41 representing credit advances made to the intestate from 1932
to 1944, P12,924.12 made to his son Francisco Hermosa, and P3,772 made to his
grandson, Fernando Hermosa, Jr. from 1945 to 1947, after the death of the intestate,
which occurred in December, 1944. The claimant presented evidence and the Court of
Appeals found, 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 by Fernando Hermosa, Sr. as soon as he receive funds derived from
the 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 receive money derived from the sale." The Court of Appeals held
that payment of the advances did not become due until the administratrix received the
sum of P20,000 from the buyer of the property.
Issue: Whether the obligation contracted by the intestate was subject to a condition
exclusively dependent upon the will of the debtor and therefore null and void.
Ruling: No. The obligation contracted is 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.

Osmena vs. Rama, 14 Phil. 99 (1909)

FACTS: On the 15th of November 1890, Cenona Rama exeecuted a contract to
Victoriano Osmena, which states that she owes Osmena the sum of 200 pesos, which
she will pay in sugar plus interest. As a guarantee, Rama pledged as a security all her

25
present and future property and as a special security her house in which she lives.
On the 27th of October 1891, another contract was executed, for further loan amounting
to 70 pesos, wherein she loaned 50 pesos to Penares, leaving her only 20 pesos.
Osmena died sometime after the execution and delivery of the said contract. After the
settlement and division of his estate, the said contract became the property of Agustina
Rafols, his heir. On the 15th of March 1902, the plaintiff presented the contracts to
defendant for payment and she acknowledged her responsibility, thus, executing
another contract promising the plaintiff to pay, if her house is sold.
On the 26th of June, 1906, the defendant failed to pay her obligations, the plaintiff filed
a complaint in court. The defendant answered by filing a general denial and setting up a
special defense of prescription. After the hearing of evidence, the court rendered its
judgment in favor of the plaintiff. Ordering the defendant to pay 200 pesos plus interests
and 20 pesos plus interests on both at the rate of 18 3/4 per annum.
The defendant appealed.
ISSUE: Whether or not the lower court erred in its judgment, as the appellant alleges,
there's insufficiency of evidences to support its findings.
RULING: No. The acknowledgment of the indebtedness made by the defendant, she
imposed the condition that she would pay the obligation if she sold her home. If the
statement found in the acknowledgment of the indebtedness should be regarded as a
condition, it was a condition which depended upon her exclusive will and is therefore
void. 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.

Trillana vs. Quezon Colleges, 93 Phil. 383 (1953)

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 would 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. However, this claim was
opposed by the administrator of the estate (herein petitioner). 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 there any valid contract between Damasa Crisostomo and Quezon College?
Ruling: No. First there was absence of acceptance on the part of Quezon College. It is
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 generating money
from fishing. In other words, the relation between Damasa Crisostomo and the Quezon
College, Inc. had only thus reached the preliminary stage whereby the Q. College
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.
Secondly, granting that the college had accepted the condition, the obligation would still
be void in accordance with Art. 1182 of the Code, since the fulfillment of the condition
depends exclusively upon the will of the obligor.
________________

26
Art. 1182 When the fulfillment of the condition depends upon the sole will of the debtor,
the conditional obligation shall be void. If it depends upon chance or upon the will of a
third person, the obligation shall take effect in conformity with the provisions of this
Code. (1115)

Romero vs. CA, supra

Naga Telephone vs. CA, 230 SCRA 351 (1994)
FACTS:
Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering
local as well as long distance telephone service in Naga City while private respondent
Camarines Sur II Electric Cooperative, Inc. (CASURECO II). NATELCO entered into a
contract with CASURECO II. In said contract the parties agreed for the use by
petitioners in the operation of its telephone service the electric light posts of private
respondent in Naga City. In consideration therefore, petitioners agreed to install, free of
charge, ten (10) telephone connections for the use by private respondent After the
contract had been enforced for over ten (10) years, private respondent filed on January
2, 1989 with the Regional Trial Court of Naga City against petitioners for reformation of
the contract with damages, on the ground that it is too one-sided in favor of petitioners.
As second cause of action, private respondent alleged that starting with the year 1981,
petitioners have used 319 posts in the towns of Pili, Canaman, Magarao and Milaor,
Camarines Sur, all outside Naga City, without any contract with it; that at the rate of
P10.00 per post, petitioners should pay private respondent for the use thereof the total
amount of P267,960.00 from 1981 up to the filing of its complaint; and that petitioners
had refused to pay private respondent said amount despite demands. And as third
cause of action, private respondent complained about the poor servicing by petitioners
of the ten (10) telephone units which had caused it great inconvenience and damages
to the tune of not less than P100,000.00.
In petitioners' answer to the first cause of action, they averred that it should be
dismissed because (1) it does not sufficiently state a cause of action for reformation of
contract; (2) it is barred by prescription, the same having been filed more than ten (10)
years after the execution of the contract; and (3) it is barred by estoppel, since private
respondent seeks to enforce the contract in the same action. Regarding the second
cause of action, petitioners claimed that private respondent had asked for telephone
lines in areas outside Naga City for which its posts were used by them. And with respect
to the third cause of action, petitioners claimed, that their telephone service had been
categorized by the National Telecommunication Corporation as "very high" and of
"superior quality." During the trial, the court found, as regards private respondent's first
cause of action, that while the contract appeared to be fair to both parties when it was
entered into by them during the first year of private respondent's operation and when its
Board of Directors did not yet have any experience in that business, it had become
disadvantageous and unfair to private respondent because of subsequent events and
conditions, particularly the increase in the volume of the subscribers of petitioners for
more than ten (10) years without the corresponding increase in the number of telephone
connections to private respondent free of charge. The trial court concluded that while in
an action for reformation of contract, it cannot make another contract for the parties, it
can, however, for \reasons of justice and equity, order that the contract be reformed to
abolish the inequities therein. As regards the second cause of action, the trial court held
that for reason of equity, the contract should be reformed by including therein the
provision that for the use of private respondent's posts outside Naga City, petitioners
should pay a monthly rental of P10.00 per post, the payment to start on the date this
case was filed, or on January 2, 1989, and private respondent should also pay
petitioners the monthly dues on its telephone connections located outside Naga City
beginning January, 1989. And with respect to private respondent's third cause of action,
the trial court found the claim not sufficiently proved. Petitioners appealed to respondent
Court of Appeals. In the decision dated May 28, 1992, respondent court affirmed the
decision of the trial court, but based on different grounds to wit: (1) that Article 1267 of
the New Civil Code is applicable and (2) that the contract was subject to a potestative

27
condition which rendered said condition void.
ISSUE:
Whether the said contract is in a potestative condition that would make it null or void?
HELD:
Yes. The Court of Appeals denied the petition. They stated that a potestative condition is
a condition, the fulfillment of which depends upon the sole will of the debtor, in which
case, the conditional obligation is void. Based on this definition, respondent court's
finding that the provision in the contract, is a potestative condition, to wit:
(a) That the term or period of this contract shall be as long as the
party of the first part (petitioner) has need for the electric light
posts of the party of the second part (private respondent) . . ..
is correct. However, it must have overlooked the other conditions in the same
provision, to wit:
. . . it being understood that this contract shall terminate when for any reason
whatsoever, the party of the second part (private respondent) is forced to stop,
abandoned its operation as a public service and it becomes necessary to remove the
electric light post; which are casual conditions since they depend on chance, hazard, or
the will of a third person. In sum, the contract is subject to mixed conditions, that is, they
depend partly on the will of the debtor and partly on chance, hazard or the will of a third
person, which do not invalidate the aforementioned provision.

Smith Bell and Co vs. Sotelo Matti, 44 Phil. 847

Facts:
One August 1918, Smithbell and Co. and Mr. Vicente Sotelo entered into
contracts where Smithbell obligated to sell, and Mr. Sotelo to purchase the
following:
1. Two steel tanks, for Php21,000 to be shipped from NY to Manila within 3 or 4
months
2. Two expellers for Php25,000 each to be shipped from San Francisco in
September 1918, or as soon as possible
3. Two electric motors at Php2,000 each, the delivery of which states:
Approximate delivery within 90 days. This is not guaranteed.
Date of arrival of the orders:
1. Tanks April 27, 1919
2. Expellers October 26, 1918
3. Motors- February 27, 1919
Smithbell and Co. notified Mr. Sotelo of the arrival of these goods, but he refused
to receive them and pay the prices stipulated.
Smithbell and Co. brought an action against Mr. Sotelo.
Mr. Sotelo, and the intervenor, Manila Oil Refining and By-Products Co., denied
Smithbells allegations as to the shipment of the goods and their arrival at Manila,
the notification to Mr. Sotelo, and his refusal to receive them and pay their price.
Mr. Sotelo made the contracts as a manager of Manila Oil Refining and By
Products Co. Inc., which Smithbell knew, and that it was only in May 1919 that
Smithbell notified Manila Oil that the tanks had arrived, and that the motors and
expellers arrived incomplete and past the due date. As a consequence of the
delay, they suffered damages, as it was supposed to be used to manufacture
coconut oil.
The court below absolved Mr. Sotelo from the complaint insofar as the tanks and
electric motors were concerned, but ordered them to receive the expellers and
pay Smithbell the sum of Php50,000, the price of the goods plus legal interest
from July 26, 1919 and costs.
Both parties appeal from this judgment.
Issue: What period was fixed for the delivery of the goods? Did the plaintiff incur delay
in the delivery of goods?

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Ruling:
In all these contracts, there is a final clause as follows:
The sellers are not responsible for delays caused by fires, riots on land or the
sea, strikes or other causes known as force majeure entirely beyond the control
of the sellers or their representatives.
Under these stipulations, it cannot be said that any definite date was fixed for the
delivery of the goods. From the record, it appears that the contracts were executed at
the time of the world war when there existed rigid restrictions on the export from the US;
hence, clauses were inserted in the contracts, regarding Government regulations,
railroading embargoes, lack of vessel space, the exigencies of the requirements of the
US Govt. At the time of the execution of the contracts, the parties were not unmindful of
the contingency of the US Govt not allowing the export of the goods.
We cannot conclude that the term which parties attempted to fix is so uncertain that one
cannot just tell WON those items could be brought to Manila. The obligation must be
regarded as conditional. The delivery was subject to a condition that the fulfillment of
which depended not only upon the effort of the plaintiff, but upon the will of third persons
who could in no way be compelled to fulfill the condition.
It is sufficiently proven in the record that the plaintiff has made all the efforts it could
possibly be expected to make under the circumstances, to bring the goods in question
to Manila, as soon as possible. It is obvious that Smithbell has complied with its
obligation.
When the time of delivery is not fixed in the contract, time is regarded as unessential. In
such cases, the delivery must be made within a reasonable time. Reasonable time for
the delivery of the goods by the seller is to be determined by circumstances attending
the particular transactions. WON the delivery of the machinery in question was offered
to the defendant within a reasonable time, is a question to be determined by the court.
Smithbell has not been guilty of any delay in the fulfillment of its obligation.

Rescission in Reciprocal Obligations, 1191-1192

Unilateral vs. Bilateral Obligations
Concept and Definition of Reciprocal Obligation
Borromeo vs. Franco, 5 Phil. 49
Facts:
On April 29, 1902, Jose Franco et al agreed to sell their properties to petitioner Julian
Borromeo. They executed a contract, of which stipulations were, among others, 1. That
petitioner was given six months to arrange and complete the documents and papers
relating to the said property; and 2. That the sellers did not guarantee the title or the
promise to sell.
The petitioner failed to comply the conditions set in their contract and the defendants
decided not to sell the property to him anymore. The petitioner filed a complaint to
compel the defendants to do otherwise.
Issue:
Does failure to comply with any stipulations or clauses provided for in the contract
immediately cancel the obligation of the seller and buyer to perfect their agreement?
Ruling:
No. The agreement on the part of the purchaser to complete the title papers to the said
property within the six months allowed him for this purpose in clause C of the
agreement is not a condition subsequent of the obligation to sell, but a mere incidental

29
stipulation which the parties saw fit to include in the agreement. By virtue of the
provisions of Article 1255 of the Civil Code which gives to every person the right to
freely contract, the parties to the aforesaid agreement could have stipulated, among
other things, what they actually stipulated in clause C. That stipulation is not contrary to
law, public morals or public policy. But a failure to comply with such a stipulation and the
fact that the purchaser was unable to complete his title papers to the property in
question do not preclude the performance of the sale which the purchaser now
demands.
Borromeo vs. Franco 2
Facts:
The Francos have agreed to sell their property of two frame houses, with nipa roofs built
upon lots to the Borromeo with a condition that the latter is hereby given six months
from the date of the execution of the instrument to arrange and complete the documents
and papers relating to the said property.
On the 7th day of January, the plaintiff filed a complaint in the Court of First Instance
compelling the defendant to sell to him the property in question under the terms of the
agreement. Moreover, the plaintiff had already taken some judicial and extra-judicial
steps and defrayed the necessary expenses for the completion of the papers and other
documents relating to the property though he had been unable to complete them. Thus,
the defendant refused to sell the property to him alleging that he had not completed the
documents in question.
Issue: Whether the plaintiff can demand the fulfillment of the obligation from the
defendant?
Ruling:
Yes. Article 1451 of the Civil Code provides as follows: A promise to sell or buy, there
being an agreement as to the thing and price, gives a right to the contracting parties to
mutually demand the fulfillment of the contract.
Whenever the promise to purchase and sell can not be fulfilled, the provisions relating
to obligations and contracts of this book shall be observed by the vendor and by the
vendee, as the case may be.
An agreement on the part of the purchaser to perfect the title papers to a certain
property within a certain time is not a condition subsequent or essential of the obligation
to sell but an incidental undertaking not contrary to law or public policy, and his failure to
comply therewith is not a bar to the sale agreed upon, the performance of which the
purchaser insists upon.