NAKPIL & SONS v.

CA

The defendant bank rejected the plaintiff's claim for compensation for his damaged
stamps collection, so, the plaintiff instituted an action for damages against the
defendant bank.

The trial court ordered respondent bank to pay for damages but it refused to do so
relying on the provisions of Rules and Regulations Governing the Lease of Safe
Deposit Boxes which states the liability of the Bank by reason of the lease, is limited to
the exercise of the diligence to prevent the opening of the safe by any person other
than the Renter, his authorized agent or legal representative;

The Court of Appeals reversed the decision of the trial court, hence absolving
respondent from any liability.

To be exempt from liability due to an act of God, the engineer/architect/contractor must not have
been negligent in the construction of the building.
FACTS:
Private respondents Philippine Bar Association (PBA) a non-profit organization formed under
the corporation law decided to put up a building in Intramuros, Manila. Hired to plan the
specifications of the building were Juan Nakpil & Sons, while United Construction was hired to
construct it. The proposal was approved by the Board of Directors and signed by the President,
Ramon Ozaeta. The building was completed in 1966.
In 1968, there was an unusually strong earthquake which caused the building heavy damage,
which led the building to tilt forward, leading the tenants to vacate the premises. United
Construction took remedial measures to sustain the building.
PBA filed a suit for damages against United Construction, but United Construction subsequently
filed a suit against Nakpil and Sons, alleging defects in the plans and specifications.
Technical Issues in the case were referred to Mr. Hizon, as a court appointed Commissioner.
PBA moved for the demolition of the building, but was opposed. PBA eventually paid for the
demolition after the building suffered more damages in 1970 due to previous earthquakes. The
Commissioner found that there were deviations in the specifications and plans, as well as
defects in the construction of the building.
ISSUE:
Whether or not an act of God (fortuitous event) exempts from liability parties who would
otherwise be due to negligence?
HELD:
Art. 1723 dictates that the engineer/architect and contractor are liable for damages should the
building collapse within 15 years from completion.
Art. 1174 of the NCC, however, states that no person shall be responsible for events, which
could not be foreseen. But to be exempt from liability due to an act of God, the ff must occur:
1) cause of breach must be independent of the will of the debtor
2) event must be unforeseeable or unavoidable
3) event must be such that it would render it impossible for the debtor to fulfill the obligation
4) debtor must be free from any participation or aggravation of the industry to the creditor.
In the case at bar, although the damage was ultimately caused by the earthquake which was an
act of God, the defects in the construction, as well as the deviations in the specifications and
plans aggravated the damage, and lessened the preventive measures that the building would
otherwise have had.

Sia vs. Court of Appeals,, 222 SCRA 24 (1993)

Facts:

Pursuant to a Lease Agreement, Luzan Sia placed in the Security Bank and Trust
Companys safety deposit box his stamps collection.

The said safety deposit box was at the bottom or at the lowest level of the safety
deposit boxes of the defendant bank.

During the floods that took place in 1985 and 1986, floodwater entered into the
defendant bank's premises, seeped into the safety deposit box leased by the plaintiff
and caused, according to the plaintiff, damage to his stamps collection.

ISSUE:
Is the bank liable for damages caused by fortuitous events such as floods?
RULING:

In the recent case CA Agro-Industrial Development Corp. vs. Court of Appeals, 13 this Court
explicitly rejected the contention that a contract for the use of a safety deposit box is a
contract of lease governed by Title VII, Book IV of the Civil Code. Nor did We fully
subscribe to the view that it is a contract of deposit to be strictly governed by the Civil Code
provision on deposit; 14 it is, as We declared, a special kind of deposit.

Public respondent postulates that SBTC cannot be held responsible for the destruction or
loss of the stamp collection because the flooding was a fortuitous event and there was no
showing of SBTC's participation in the aggravation of the loss or injury. It states:
Article 1174 of the Civil Code 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.'

Unfortunately, however, the public respondent failed to consider that in the

instant case, as correctly held by the trial court, SBTC was guilty of negligence. The facts
constituting negligence are enumerated in the petition and have been summarized in
thisponencia. SBTC's negligence aggravated the injury or damage to the stamp collection.
SBTC was aware of the floods of 1985 and 1986; it also knew that the floodwaters inundated the
room where Safe Deposit Box No. 54 was located. In view thereof, it should have lost no time in
notifying the petitioner in order that the box could have been opened to retrieve the stamps, thus
saving the same from further deterioration and loss. In this respect, it failed to exercise the
reasonable care and prudence expected of a good father of a family, thereby becoming a party
to the aggravation of the injury or loss. Accordingly, the aforementioned fourth characteristic
of a fortuitous event is absent Article 1170 of the Civil Code, which reads:
Those who in the performance of their obligation are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable for damages,

thus comes to the succor of the petitioner. The destruction or loss of the stamp collection which
was, in the language of the trial court, the "product of 27 years of patience and
diligence" 21 caused the petitioner pecuniary loss; hence, he must be compensated therefor.

NOTE:
In relation to contracts, a "caso fortuito" prevents (sic) 18 the following essential characteristics:
(1) the cause of the unforeseen ands 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 one debtor to fulfill his obligation
in a normal manner; and
(4) the obligor must be free from any participation in the aggravation of the injury resulting to the
creditor."

Tanguilig vs. CAwindmill na nasira sa wind.

A case involving proper interpretation of
contract. JMI Engr and GM proposed to resp
Vicente to construct windmilling system for him.
They agreed on the construction for P60K. P30K
DP and P15K installment. Vincente didnt pay the
remaining P15K bec he paid it to SPGMI who
constructed the deep well to which the windmill
would be attached. And even assuming that he
owes pet P15K, it should have been offset by the
collapse after a strong wind.
Issue: a. WON agreement to construct windmill
included in the installation of a deep well.
b. WON the pet is under the obligation to
reconstruct the windmill.
Held: a. No. It was not included in the
agreement. Intention of the parties must be
accorded primordial consideration and in case of
doubt, contemporaneous and subsequent acts
shall be principally considered.
b. Yes. Pet claimed there is a strong wind but
this is actually necessary for the windmill to
turn. It was just newly constructed, it should
have not collapsed.
Non-fulfillment: Payment of last installment.

DIOQUINO V. LAUREANO
G.R. No. L-25906 May 28, 1970
FACTS:

Attorney Pedro Dioquino is the owner of a car. He

went to the office of the MVO, Masbate, to register the
same where he met the defendant Federico Laureano, a
patrol officer of said MVO office. Dioquino 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 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
plaintiff's driver and with Laureano as the sole passenger
was stoned by some 'mischievous boys,' and its windshield
was broken. Laureano chased the boys and he was able to
catch one of them. The plaintiff and Laureano with the boy
returned to the P.C. barracks and the father of the boy was
called, but no satisfactory arrangements were made about
the damage to the windshield.
It was likewise noted in the decision now on
appeal: "The defendant Federico 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. So he did not want to take any action and after delaying the
settlement, after perhaps
consulting a lawyer, the defendant Federico Laureano
refused to pay the windshield himself and challenged that
the case be brought to court for judicial adjudication.
There is no question that the plaintiff tried to convince the
defendant Federico Laureano just to pay the value of the
windshield and he even came to the extent of asking the
wife to convince her husband to settle the matter amicably
but the defendant Federico Laureano refused to make any
settlement, clinging [to] the belief that he could not be held
liable because a minor child threw a stone accidentally on
the windshield and therefore, the same was due to force
majeure."
ISSUE:
Is Federico Laureano liable for the payment of the
windshield of Atty Dioquino?
RULING:
No. The law being what it is, such a belief on the
part of defendant Federico Laureano was justified. The
express language of Art. 1174 of the present Civil Code
which is a restatement of Art. 1105 of the Old Civil Code,
except for the addition of the nature of an obligation
requiring the assumption of risk, compels such a
conclusion. It reads thus: "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." Even under the old Civil
Code then, as stressed by us in the first decision dating
back to 1908, in an opinion by Justice Mapa, the rule was
well-settled that in the absence of a legal provision or an
express covenant, "no one should be held to account
for fortuitous cases." Its basis, as Justice Moreland
stressed, is the Roman law principle major casus est,

cui humana infirmitas resistere non potest.

Authorities of repute are in agreement, more specifically
concerning an obligation arising from contract "that some
extraordinary circumstance independent of the will of the
obligor, or of his employees, is an essential element of a
caso fortuito." If it could be shown that such indeed was
the case, liability is ruled out. There is no requirement of
"diligence beyond what human care and foresight can
provide."
The error committed by the lower court in holding
defendant Federico Laureano liable appears to be thus
obvious. Its own findings of fact repel the motion that he
should be made to respond in damages to the plaintiff for
the broken windshield. What happened was clearly
unforeseen. It was a fortuitous event resulting in a loss
which must be borne by the owner of the car. It was
misled, apparently, by the inclusion of the exemption from
the operation of such a provision of a party assuming the
risk, considering the nature of the obligation undertaken.
A more careful analysis would have led the lower court to a
different and correct interpretation. The very wording of
the law dispels any doubt that what is therein
contemplated is the resulting liability even if caused by a
fortuitous event where the party charged may be
considered as having assumed the risk incident in the
nature of the obligation to be performed. It would be an
affront, not only to the logic but to the realities of the
situation, if in the light of what transpired, as found by the
lower court, defendant Federico Laureano could be held as
bound to assume a risk of this nature. There was no such
obligation on his part.
The decision of the lower court of November 2, 1965
insofar as it orders defendant Federico Laureano to pay
plaintiff the amount of P30,000.00 as damages plus the
payment of costs, is hereby reversed. It is affirmed insofar
as it dismissed the case against the other two defendants, Juanita Laureano and Aida de
Laureano, and declared that
no moral damages should be awarded the parties.

REPUBLIC VS. LUZON STEVEDORING CORPORATION21 SCRA 279

FACTS:
In the early afternoon of August 17, 1960, barge L1892, 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:
Considering that the Nagtahan bridge was an
immovable and stationary object and uncontrovertedly
provided with adequate openings for the passage of water
craft, including barges like of appellant's, it was undeniable
that the unusual event that the barge, exclusively
controlled by appellant, rammed the bridge supports raises
a presumption of negligence on the part of appellant or its
employees manning the barge or the tugs that towed it. For
in the ordinary course of events, such a thing will not
happen if proper care is used. In Anglo American
Jurisprudence, the inference arises by what is known as
the "res ipsa loquitur" rule
The appellant strongly stressed the precautions
taken by it on the day in question: that it assigned two of
its most powerful tugboats to tow down river its barge L1892; that it assigned to the task the more competent and
experienced among its patrons, had the towlines, engines
and equipment double-checked and inspected' that it instructed its patrons to take extra
precautions; and
concludes that it had done all it was called to do, and that
the accident, therefore, should be held due to force
majeure or fortuitous event.
These very precautions, however, completely
destroyed the appellant's defense. For caso fortuito or
force majeure (which in law are identical in so far as they
exempt an obligor from liability) by definition, are
extraordinary events not foreseeable or avoidable, "events
that could not be foreseen, or which, though foreseen, were
inevitable" (Art. 1174, Civ. Code of the Philippines). It was,
therefore, not enough that the event should not have been
foreseen or anticipated, as was commonly believed but it
must be one impossible to foresee or to avoid. The mere
difficulty to foresee the happening was not impossibility to
foresee the same. The very measures adopted by appellant
prove that the possibility of danger was not only
foreseeable, but actually foreseen, and was not caso
fortuito.
Otherwise stated, the appellant, Luzon Stevedoring Corporation, knowing and appreciating the
perils posed by the swollen stream and its swift current, voluntarily entered into a situation

involving obvious danger; it therefore assured the risk, and can not shed responsibility merely
because the precautions it adopted turned out to be insufficient. Hence, the lower Court
committed no error in holding it negligent in not suspending operations and in holding it liable for
the damages caused.
It avails the appellant naught to argue that the dolphins, like the bridge, were improperly
located. Even if true, these circumstances would merely emphasize the need of even higher
degree of care on appellant's part in the situation involved in the present case. The appellant,
whose barges and tugs travel up and down the river everyday, could not safely ignore the
danger posed by these allegedly improper constructions that had been erected, and in place, for
years.

National Power Corporation vs. CA

Facts: On Nov. 4, 1967, a typhoon called Welming hit Central Luzon passing through
NAPOCORs Angat Hydro-Electric Project Dam in Bulacan. The water level had reach the
danger height of 212 meters above sea level and abruptly opened the spillway gates. This action
by NAPOCOR had an extraordinary large volume of water rushed and hit the installations and
construction works of ECI (Engineering Construction, Inc.) a contractor of NAWASA for its tunnel
in Bulacan. The negligent manner of opening the spillway gates by NAPOCOR had washed
away, lost or destroyed ECIs facilities and structures. NAPOCOR alleged that the destruction
and loss was due to force majeure. (superior or greater force)
Issue: WON NAPOCOR is liable for the destruction.
Ruling: Petition Dismissed
Ratio: NAPOCOR cannot escape liability because its negligence was the proximate cause of
the loss and damage even though the typhoon was an act of God. It was undoubtly negligent
when it only opened the spillway gates at the height of typhoon Welming when it knew very
well that it was safer to open it gradually. To be exempt from liability, NAPOCOR must be free
from any previous negligence.
AGUSTINA LIQUETTE TAN, petitioner,
vs.
COURT OF APPEALS AND SPS. MARIANO SINGSON and VISITACION
SINGSON, respondents.
FACTS:

The evidence shows that defendants-appellants spouses (private respondents herein)

are the owners of a house and lot in Baguio City, and which were then for sale. On
June 14, 1984, plaintiff-appellee together with her agent went to see said spouses at
their residence regarding the property. After appellants had shown appellee around
the house and had conversation about the encumbrances and/or liens on the property,
the parties finally agreed on the price of Pl,800,000.00, with appellee to advance
earnest money of P200,000.00 to enable appellants to secure the cancellation of the
mortgage and lien annotated on the title of the property and the balance of the price to
be paid by appellee on June 21, 1984. Forthwith, appellee handed to appellants a
check for P200,000.00
On June 25, 1984, appellee accompanied by her daughter Corazon and her lawyer,
Atty. Vicente Quitoriano, went to Baguio City to inquire about the status of the property
and appellants told her that the Development Bank of the Philippines was taking some
time processing their payments and preparing the deed of cancellation of the
mortgage. On that occasion, the parties agreed on an extension of two (2) weeks for
the execution of the deed of sale.
Immediately, upon execution by the DBP of the deed of cancellation of mortgage of
July 9, 1984, appellants tried to contact appellee and/or her daughter Corazon to
come to Baguio City for the formal execution of the deed of sale, but to no avail.

Instead, appellants received a telegram from Atty. Quitoriano cancelling the sale and
demanding the return of the P200,000.00 earnest money.

Petitioners maintain that since private respondents were not prepared to convey the
title to the subject property on the date agreed upon in view of the various liens and
encumbrances thereon, the former are entitled to rescind the contract pursuant to
Article 1191 of the Civil Code which states:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one
of the obligors should not comply with what is incumbent upon him.

ISSUE: WON petitioner can validly rescind her contract to buy the land from respondents.
RULING:
The power to rescind obligations is implied in reciprocal ones in case one of the obligors should
not comply with what is incumbent upon him is clear from a reading of the Civil Code provisions.
However, it is equally settled that, in the absence of a stipulation to the contrary, this
power must be invoked judicially; it cannot be exercised solely on a party's own judgment that
the other has committed a breach of the obligation. Where there is nothing in the contract
empowering the petitioner to rescind it without resort to the courts, the petitioner's action in
unilaterally terminating the contract in this case is unjustified.
In this case, as to the lot covered by TCT No. T-13826, it is true that as of June 25, 1984, the
date set for the execution of the final deed of sale, the mortgage lien in favor of DBP annotated
in the title has not yet been cancelled as it took DBP some time in processing the papers relative
thereto. However, just a few days after, or on July 12, 1984, the cancellation of the DBP
mortgage was entered by the Register of Deeds and duly noted on the title. Time not being of
the essence in the agreement, a slight delay on the part of the private respondents in the
performance of their obligation, is not sufficient ground for the resolution of the agreement
[Biando and Espanto v. Embestro and Bardaje, 105 Phil. 1164 (1959)], more so when the delay
was not totally attributable to them.
As to the notice of levy and execution annotated on TCT No. T-13826, a request to lift the same
had already been filed with the Register of Deeds and duly noted on the title (Original Records,
p. 95]. The fact that said notice had not yet been cancelled by the Register of Deeds as of June
25, 1984 cannot prejudice the sellers who must be deemed to have substantially complied with
their obligation. The rule in this jurisdiction is that where the fulfillment of the condition (in a
conditional obligation) does not depend on the will of the obligor, but on that of a third person,
the obligor's part of the contract is complied with, if he does an that is in his power and it then
becomes incumbent upon the other contracting party to comply with the terms of the contract
[Article 1182, Civil Code; Smith Bell and Co. v. Sotelo Matti, 44 Phil. 874 (1922)].

Velarde, et.al. vs. CA [361 SCRA 56 GR No. 108346. July 11, 2001]
Facts:
David Raymundo (private respondent) is the absolute and registered owner of a parcel of land,
located at 1918 Kamias St., Dasmarias Village Makati, together with the house and other
improvements, which was under lease. It was negotiated by Davids father with plaintiffs Avelina
and Mariano Velarde (petitioners). A Deed of Sale with Assumption of Mortgage was executed in
favor of the plaintiffs. Part of the consideration of the sale was the vendees assumption to pay
the mortgage obligations of the property sold in the amount of P 1,800,000.00 in favor of the
Bank of the Philippine Islands. And while their application for the assumption of the mortgage

obligations is not yet approved by the mortgagee bank, they have agreed to pay the mortgage
obligations on the property with the bank in the name of Mr. David Raymundo. It was further
stated that in the event Velardes violate any of the terms and conditions of the said Deed of
Real Estate Mortgage, they agree that the downpayment P800,000.00, plus all the payments
made with the BPI on the mortgage loan, shall be forfeited in Favor of Mr. Raymundo, as and by
way of liquidated damages, w/out necessity of notice or any judicial declaration to that effect,
and Mr. Raymundo shall resume total and complete ownership and possession of the property,
and the same shall be deemed automatically cancelled, signed by the Velardes.
Pursuant to said agreements, plaintiffs paid BPI the monthly interest loan for three months but
stopped in paying the mortgage when informed that their application for the assumption of
mortgage was not approved. The defendants through a counsel, wrote plaintiffs informing the
latter that their non-payment to the mortgagee bank constituted non-performance of their
obligation and the cancellation and rescission of the intended sale. And after two days, the
plaintiffs responded and advised the vendor that he is willing to pay provided that Mr.
Raymundo: (1) delivers actual possession of the property to them not later than January 15,
1987 for their occupancy (2) causes the release of title and mortgage from the BPI and make the
title available and free from any liens and encumbrances (3) executes an absolute deed of sale
in their favor free from any liens and encumbrances not later than Jan. 21, 1987.
The RTC of Makati dismissed the complaint of the petitioners against Mr. Raymundo for specific
performance, nullity of cancellation, writ of possession and damages. However, their Motion for
Reconsideration was granted and the Court instructed petitioners to pay the balance of P 1.8
million to private respondent who, in turn were ordered to execute a deed of absolute sale and to
surrender possession of the disputed property to petitioners.

On December 13, 1943, Nicolas Adamos and Vicente Feria defendants-appellants herein
purchased two lots from Juan Porciuncula. Porciunculas successor in interest sought for the
annulment and cancellation of the sale which the court a quo favorably ruled.

In the meantime during the pendency of the above mentioned case, defendants-appellants sold
to Generosa Ayson Simon the lots in question. Due to the failure of defendants appellants to
comply with their commitment to have the subdivision plan of the lots approved and to deliver to
deliver the titles and possession to Generosa, the latter filed suit for specific performance. As a
result of the sale of the lot to said defendants sppellants being null and void, there is impossibity
that they can comply with their commitment to Generosa, the latter then seek the rescission of
the contract plus damages.

The defendants-appellants contend that Generosas action had prescribed, considering that she
had only four years from May 29, 1946 to rescind the transaction.
ISSUE:

Upon the appeal of the private respondent to the CA, the court upheld the earlier decision of the
RTC regarding the validity of the rescission made by private respondents.

Whether or not the action to rescind the obligation has prescribed.

Issue:
Whether the rescission of contract made by the private respondent is valid.

HELD:

Held:
There is a breach of contract because the petitioners did not merely stopped paying the
mortgage obligations but they also failed to pay the balance purchase price. Their conditional
offer to Mr. Raymundo cannot take the place of actual payment as would discharge the
obligation of the buyer under contract of sale.
Mr. Raymundos source of right to rescind the contract is Art. 1191 of the Civil Code predicated
on a breach of faith by the other party who violates the reciprocity between them. Moreover, the
new obligations as preconditions to the performance of the petitioners own obligation were
repudiation of an existing obligation, which was legally due and demandable under the contract
of sale.
The breach committed by the petitioners was the non-performance of a reciprocal obligation.
The mutual restitution is required to bring back the parties to their original situation prior to the
inception of the contract. The initial payment and the mortgage payments advanced by
petitioners should be returned by private respondents, lest the latter unjustly enriched at the
expense of the other. Rescission creates the obligation to return the obligation of contract. To
rescind, is to declare a contract void at its inception and to put an end to it as though it never
was.
The decision of the CA is affirmed with modification that private respondents are ordered to
return to petitioners, the amount they have received in advanced payment.

Ayson vs. Adamos

FACTS:

Article 1191 of the Civil Code provides that an injured party may also seek rescission if the
fulfillment should have become impossible. The cause of action to claim rescission arises when
the fulfillment of the obligation became imppossible when the court declared that the sale was
null and void. The Generosa cannot be assailed on the ground that she slept on her rights.
Article 1191 of the Civil Code provides that the injured party may also seek rescission, if the
fulfillment should become impossible. The cause of action to claim rescission arises when the
fulfillment of the obligation became impossible when the Court of First Instance of Quezon City
in Civil Case No. 174 declared the sale of the land to defendants by Juan Porciuncula a
complete nullity and ordered the cancellation of Transfer Certificate of Title No. 69475 issued to
them. Since the two lots sold to plaintiff by defendants form part of the land involved in Civil
Case No. 174, it became impossible for defendants to secure and deliver the titles to and the
possession of the lots to plaintiff. But plaintiff had to wait for the finality of the decision in Civil
Case No. 174, According to the certification of the clerk of the Court of First Instance of Quezon
City (Exhibit "E-2"), the decision in Civil Case No. 174 became final and executory "as per entry
of Judgment dated May 3, 1967 of the Court of Appeals." The action for rescission must be
commenced within four years from that date, May 3, 1967. Since the complaint for rescission
was filed on August 16, 1968, the four year period within which the action must be commenced
had not expired.
Defendants have the obligation to return to plaintiff the amount of P7,600.00 representing the
purchase price of the two lots, and the amount of P800.00 which they received from plaintiff to
expedite the issuance of titles but which they could not secure by reason of the decision in Civil

Case No. 174. Defendant has to pay interest at the legal rate on the amount of P7,600.00 from
May 29, 1946, when they received the amount upon the execution of the deeds of sale, and
legal interest on the P800.00 from August 1, 1966, when they received the same from plaintiff.

UNIVERSITY OF THE PHILIPPINES VS. DE LOS ANGELES 35 SCRA 102

FACTS:
On November 2, 1960, UP and ALUMCO entered
into a logging agreement whereby the latter was granted
exclusive authority to cut, collect and remove timber from
the Land Grant for a period starting from the date of
agreement to December 31, 1965, extendible for a period of
5 years by mutual agreement.
On December 8, 1964, ALUMCO incurred an
unpaid account of P219,362.94. Despite repeated
demands, ALUMCO still failed to pay, so UP sent a notice
to rescind the logging agreement. On the other hand,
ALUMCO executed an instrument entitled
Acknowledgment of Debt and Proposed Manner of
Payments. It was approved by the president of UP, which
stipulated the following:
3. In the event that the payments called for are not
sufficient to liquidate the foregoing indebtedness,
the balance outstanding after the said payments
have been applied shall be paid by the debtor in
full no later than June 30, 1965.
5. In the event that the debtor fails to comply with
any of its promises, the Debtor agrees without
reservation that Creditor shall have the right to
consider the Logging Agreement rescinded,
without the necessity of any judicial suit
ALUMCO continued its logging operations, but
again incurred an unpaid account. On July 19,1965, UP
informed ALUMCO that it had, as of that date, considered
rescinded and of no further legal effect the logging
agreement, and that UP had already taken steps to have
another concessionaire take over the logging operation.
ALUMCO filed a petition to enjoin UP from conducting the
bidding. The lower court ruled in favor of ALUMCO,
hence, this appeal.
ISSUE:
Can petitioner UP treat its contract with ALUMCO
rescinded, and may disregard the same before any judicial
pronouncement to that effect?
RULING:
Yes. In the first place, UP and ALUMCO had
expressly stipulated that upon default by the debtor, UP
has the right and the power to consider the Logging
Agreement of December 2, 1960 as rescinded without the necessity of any judicial suit. As to
such special stipulation
and in connection with Article 1191 of the Civil Code, the
Supreme Court, stated in Froilan vs. Pan Oriental Shipping
Co:

There is nothing in the law that prohibits the

parties from entering into agreement that violation
of the terms of the contract would cause
cancellation thereof, even without court
intervention. In other words, it is not always
necessary for the injured party to resort to court
for rescission of the contract.

DE LUNA vs Judge ABRIGO

FACTS:
De Luna donated a portion of a 75 sq. m. lot to the Luzonian University Foundation. The
donation was embodied in a Deed of Donation Intervivos and was subject to certain terms and
conditions. In case of violation or non-compliance, the property would automatically revert to the
donor. When the Foundation failed to comply with the conditions, de Luna revived the said
donation by executing a Revival of Donation Intervivos with the following terms and conditions:
1) The Donee shall construct on the land and at its expense a Chapel, Nursery, and
Kindergarten School to be named after St. Veronica
2) Construction shall start immediately and must be at least 70% completed three years from the
date of the Deed unless the Donor grants extensions
3) Automatic reversion in case of violation
The Foundation accepted and the donation was registered and annotated in the TCT. By a Deed
of Segregation, the foundation was issued a TCT for area the lot donated while the remaining
area was retained by the De Luna.
The children and only heirs of the late De Luna (died after the donation) filed a complaint with
the RTC for the cancellation of the donation on the ground that the terms were violated. The
Foundation defended itself by saying that it had partially and substantially complied with the
conditions and that the donor granted it an indefinite extension of time to complete construction..
It also invoked the affirmative
defense of prescription of action and prayed for the dismissal of the complaint.
RTC = dismissed the case on the grounds of prescription.
ISSUES:
1. Whether the action prescribes in 4 years (based on art. 764 NCC-judicial decree of revocation
of the donation) or in 10 years (based on art. 1144 enforcement of a written contract)
2. Whether or not the conditions set forth by the petitioner is valid and is compliance with
the law.
RULING:
1.
An onerous donation is one that is subject to burdens, charges or future services equal (or
more) in value than that of the thing donated. Since the deed of donation executed by the
petitioner in this case is subject to certain condition, it is deemed as onerous one. It is a settled
rule that donations with an onerous cause are governed not by the law on donations but by the
rules on contracts. Hence, The Supreme Court ruled that rules on contracts and the general
rules on prescription and not the rules on donations are applicable in the case at bar

Article 764 of the New Civil Code, actions for the revocation of a donation must be brought
within four (4) years from the non-compliance of the conditions of the donation. However, it is
Our opinion that said article does not apply to onerous donations in view of the specific provision
of Article 733 providing that onerous donations are governed by the rules on
contracts.

2.

2. Yes, Valid. Under Article 1306 of the New Civil Code, the parties to a contract have the right
"to establish such stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order or public policy.
Revival of Donation Intervivos, has provided that "violation of any of the conditions (herein) shall
cause the automatic reversion of the donated area to the donor, his heirs, without the need of
executing any other document for that purpose and without obligation on the part of the
DONOR". Said stipulation not being contrary to law, morals, good customs, public order or public
policy, is valid and binding upon the foundation who voluntarily consented thereto.
The validity of the stipulation in the contract providing for the automatic reversion of the donated
property to the donor upon non-compliance cannot be doubted. It is in the nature of an
agreement granting a party the right to rescind a contract unilaterally in case of breach, without
need of going to court. Upon the happening of the resolutory condition of non-compliance with
the conditions of the contract, the donation is automatically revoked without need of a judicial
declaration to that effect.
Petition GRANTED.

G.R. Nos. L-17858-9

Palay Inc vs Clave

FACTS:
In 1965, Palay Inc., through its President Onstott, executed in favor of Dumpit (respondent) a
Contract to Sell a parcel of land in Antipolo, Rizal. The sale was for P23,300 with 9% interest
p.a., payable with a downpayment of P4,660 and monthly installments ofP246.42 until fully paid.
Par. 6 of the contract provided for automatic extrajudicial rescission upon default in payment of
any monthly installment after the lapse of90 days from the expiration of the grace period of a
month, without need of notice and forfeiture of all installments paid. Dumpit was able to pay the
dp and several installments amounting to P13,722.50, with the last payment made on Dec. 5,
1967 for installments up toSept. 1967.In 1973, Dumpit requested Palay Inc to update his
overdue accounts and sought its permission to assign his rights to Dizon. However, Palay
informed him that his Contract to Sell had long been rescinded pursuant toPar. 6 and that the lot
had already been resold. Dumpit filed a complaint with the NHA for reconveyance with an
alternative prayer for refund.NHA ruled in favor of Dumpit, stating that the rescission is void for
lack of either judicial or notarial demand. Office of the President affirmed.
ISSUES:
W/N notice or demand may be dispensed with by stipulation in a contract to sell2.
W/N Palay should be liable for the refund of the installment payments made by Dumpit
HELD:
1. NO. Although a judicial action for rescission of a contract is not necessary where the
contract provides for its revocation and cancellation for violation of any of its terms and
condition, jurisprudence has shown that atleast, there was a written notice sent to the
defaulter informing him of the rescission. Par. 6 cannot be considered a waiver of Dumpit's
right to be notified because it was a contract of adhesion. A waiver must be certain and
unequivocal and intelligently made; such waiver follows only where the liberty of choice
has been fully accorded. Moreover, the indispensability of notice of cancellation to the
buyer is protected under RA 6551. It is a matter of public policy to protect the buyers of
real estate on installment payments against onerous and oppressive conditions. Waiver of
notice is one such onerous and oppressive condition to buyers of realestate on installment
payments.

YES. As a consequence of the rescission of the contract, right to the lot should be restored
to Dumpit or the same should be replaced by another acceptable lot. However, considering
that the lot had been resoldto a third person, Dumpit is entitled to refund of the installments
paid plus legal interest of 12%.

July 18, 1962

MANUEL S. CAMUS, petitioner,

vs.
PRICE, INC., respondent.
Antecedent:
On March 30, 1951, Manuel S. Camus and Price, Inc. entered into a contract of lease, the
pertinent terms which read:
1. That the said party of the first part/Lessor (Manuel S. Camus) hereby grants,
demise and let unto the said part of the second part/Lessee (Price, Inc.), for lawful
business purposes, all that certain strong material building with the lot an parcel of
land, with an area of 1,700 square meters, situated, lying, and being at No. 60 C.
Arellano Street, Malabon, Rizal, covered as Lots Nos. 15 and 16, Block No. 1,
Tambobong Estate Psd-11759 of the Rural Progress Administration, to have and to
hold the same for the full term of ten (10) years fro April 1, 1951 to March 31, 1960,
inclusive, at the monthly rental of P300.00, Philippine Currency, for the abovementioned building, to be paid without the necessity of express demand therefor on
the 1st five (5) days of each ensuing month the residence of the first part/Lessor at
Malabon, Rizal; and also at the monthly rental of One Hundred Pesos (P100.00)
Philippine Currency, for the use of the leased premises, payable beginning when the
construction of the factory is already finished, and likewise payable at the time and
place aforementioned;
2. That the party of the second part/Lessee, shall have or cause to erect, build or
construct a Factory building and Warehouse of strong materials appropriate to
or in furtherance of the business of the party of the second part/Lesee, on the
said lot, the plan as to the form and size and other specifications thereof being
subject to the joint approval of both parties concerned, at the expense of the party of
the second part/Lessee; and that the buildings thereon constructed shall be
insured with a competent insurance Company by the party of the second part/Lessee,
in an amount equal to the insurable interest of the party of the first part/Lessor, in the
sum of at least Fifty Thousand Pesos (P50,000.00) Philippine Currency, for himself,
his heirs and/or administrators as his beneficiary; and that the insured buildings
(Factory building and Warehouse) hereinbefore mentioned shall not automatically
become, without cost, the property of the first part/Lessor, immediately upon the
termination of this contract;
xxx

xxx

xxx

5. That the party of the first part/Lessor likewise covenants and agrees to cause or
make the necessary filling, at his sole expense, within a year from the signing of this
contract, the vacant portion of the lot along the river with an area of about 500 square
meters to increase its elevation and enable, the party of the second part/Lessee, to
facilitate or make use of the whole lot; as well as to construct building or causeto erect

the necessary concrete stone walls provided with barbed wires on top thereof and all
expenses incurred or to be incurred incident to the filling as well as to the construction,
building and erection of the stone walls, one (1) meter high, with barbed wire to be
borne solely by the party of the first part/Lessor,
xxx

xxx

xxx

14. Provided, always, that in case of a breach of any of the covenants on the part of
the party of the second part/Lessee, herein contained, the party of the first
part/Lessor, may while the default shall continue, and notwithstanding any
waiver of any prior breach of conditions, without notice or demand, enter upon
the premises, and thereby terminate this lease and may thereupon expel and
remove the party of the second part/Lessee;
15. That it is still furthermore agreed that, in case of court litigation by virtue of nonpayment of the agreed rents or any other breach of this contract on the part of the
party of the second part/Lessee, the party of the first part/Lessor, shall be entitled to
collect P1,000.00 as liquidated damages and P500.00 as attorney's fees, exclusive of
costs legally taxable. (Emphasis supplied).
On January 19, 1954, the Lessee instituted Civil Case No. 2582 of the Court of First Instance of
Rizal against the Lessor, for specific performance, damages and extension of the period of the
lease, allegedly due to the latter's failure to comply with the aforequoted provisions of paragraph
6 of the contract. Three days later, or on January 22, 1954, the Lessor, in turn, filed in the Justice
of the Peace Court of Malabon an action for unlawful detainer (ejectment) against the Lessee
(Civil Case No. 1159), allegedly by reason of said defendant's non-payment of rentals since
February 16, 1953.
On February 10, 1954, the Justice of the Peace Court rendered a decision in the ejectment
case, in favor of the Lessor, ordering the Lessee to vacate the premises and pay the plaintiff
Lessor rentals in arrears amounting to 4,600.00 and the sum of P400.00 a month until it finally
delivers possession of the property to the Lessor; liquidated damages in the sum of P1,000.00;
attorney's fees for P500.00, and costs.
The Lessee appealed to the Court of First Instance of Rizal, filing therein a cash bond to cover
the amounts adjudged by the Justice of the Peace Court, as well as current rentals. The Lessor
then filed a motion for execution of the decision appealed from, which was opposed by the
Lessee. As the Court of First Instance grants said motion for execution, the Lessee instituted
certiorari proceedings in this Court (G.R. No. L-8253).
In issuing the writ of certiorari prayed for therein,1 the ground that the CFI Judge committed a
grave abuse of discretion in issuing an order for the execution of the decision of the Justice of
the Peace Court despite the "strong equities in favor of Price (Lessee) and the dubious legality
or propriety of the decision of the justice of the peace court", this Court said:
In their answer, respondents (Camus, et al.) admit some of the allegations of the
petition and deny other allegations thereof. Among other things, they, moreover, allege
that the obligations of Camus, under the contract of lease, are independent of those of
Price; that the filling and construction provided in said contract, have "already been
totally" completed; and that the order of July 24, 1954, and the writ of execution were
duly issued, for Price had failed, either to pay, or to deposit, the amount of the rentals
for April, May and June, 1954.

At the outset, it should be noted that the very pictures submitted by respondents, as
Annexes 9 and 10 to their answer, dated October 11, 1954, show that the stone wall
constructed by Camus is of "adobe," and has no barbed wire fence, whereas the
contract of lease provides for concrete stone walls . . . with barbed wire." Furthermore,
although the portion of the leased property reproduced in Annex 9 appears to have
been filled, there is evidence (which has not been contradicted) to the effect that the
elevation of said portion is lower by 40 centimeters than the average elevation of said
property (see Annex L). Moreover, the pictures Annexes M, N, and O, taken on
February 16, 1954, reveal that said portion was then unfilled and even under water.
Anyhow, it is not even claimed that said filling and construction had been completed
within the year, which expired on March 20, 1952, stipulated in the contract of lease.
In fact, the answer filed by respondents before this Court impliedly admits the failure
of Camus to make the filing and construction within said period. . . . .
At any rate, there is prima facie, if not strong evidence that Camus had not complied
with some of his obligations under the contract of lease, and that this breach of
contract dates back to March 20, 1952, or about eleven (11) months prior to the
alleged default of Price in the payment of rentals (or from February 16, 1953). . . . .
It was then held that the obligations of the parties in the contract being reciprocal, the Lessee did
not incur in delay until the Lessor complies with what was incumbent upon him, applying Article
1169 of the Civil Code.
After the case was remanded to the lower court for further proceedings, the 2 cases Civil
Cases Nos. 2582 (for specific performance filed by Price, Inc.) and 2650 (for unlawful detainer,
by Camus) were tried jointly, during which the parties adduced evidence in support of their
respective allegations. Later, the trial court rendered judgement ordering (1) the cancellation and
return of the bond to the Lessee (Price, Inc.); (2) said Lessee to insure the factory building and
warehouse for P50,000.00 within 1 month; and (3) the Lessor Camus to fill up the low portion of
the leased premises and enclose the part along the river with concrete stone walls topped by
barbed wire, within 6 months, and pay the costs. The term of the lease was also fixed for 9
years, from compliance by the Lessor of his aforementioned obligation.
Only the Lessor, Manuel Camus, appealed to the Court of Appeals.
The Case:
In its decision of September 14, 1960, the Court of Appeals, passing upon the respective
obligations of the parties under the contract, stated:
. . ., it was proved that the lot along the Malabon River, obviously an accretion of lots
Nos. 15 and 16, was declared for tax purposes by Ricardo, now represented by his
widow, Rosario Sevilla Vda. de Camus, on March 12, 1951 (Tax Declaration No.
10202), and he had been paying taxes therefor as follows: for 1948, 1949, 1950 and
1951 paid on March 15, 1951, for 1952 on March 26, 1952, for 1953 on March 30,
1953, for 1954 on March 17, 1954, and for 1955 on March 30, 1955) (Exh. 14-B). This
shows that prior to March 20, 1951, when the contract of lease was executed, and
prior to the filing of Civil Case No. 2582 by appellee (Price, Inc.) against appellant
(Camus), Ricardo had already been claiming the possession, if not the ownership, of
the lot bordering the river, which had accumulated by gradual accretion a total area of
1,425 square meters, the same having been determined even prior to the execution of
the contract of lease as shown in the tax declaration issued March 12, 1952. . . . .

. . . . Nevertheless, we cannot sustain appellant's contention that the 500 square

meters which he obligated himself to fill up and construct a fence should be inside the
boundaries of lots Nos. 15 and 16, irrespective of the vacant space therein because
paragraph 5 of the contract of lease is clear that said portion of 500 square meters is
along the Malabon River. This portion is separate and distinct from the 1,700 (should
be 1,761) square meters of land leased under paragraph 1 of said contract. Still, it is
unreasonable to conclude that appellant intended to include the entire area of 1,425
square meters along the river, nor that he only miscalculated the exact area thereof,
as the land he leased to appellee. Under the stated facts, we, therefore, hold that
appellant, with the apparent conformity of Sy Suan, referred in paragraph 5 of the
contract of lease to only a portion of 500 square meters of the entire area containing
1,425 square meters, and that he bound himself to fill up said portion at his expense
and to enclose with a one-meter high stone wall and barbed wire on top within a
period of one year from March 20, 1951.
To require appellant, as the lower court held, to finish filling up the entire area
bordering the Malabon River and to surround it with a concrete wall throughout the
river bank, would seem unfair to said appellant and contrary to the true intention of the
parties in the contract of lease, the principal reason being that the entire area of the lot
along the river is undisputedly 1,425 square meters, and not only 500 square meters
as stipulated in paragraph 5 of the contract. Besides, it is illogical to allow appellee to
utilize more than 500 square meters. Neither would it be just to compel appellant to
incur expenses in filling up and building a fence for more than 500 square meters,
even if appellee allegedly planned to build a "hot-room" and "cool-room." However, in
failing to fill up 500 square meters of the vacant lot along the Malabon River, appellant
just the same violated the contract.
. . . . Although we subscribe to the view that reciprocal obligations are embodied in the
contract of lease, yet, we cannot see our way clear that it was appellant who first
committed the breach thereof. Undoubtedly, appellee did not insure the factory
building and warehouse. Sy Suan's testimony on this point that he tried to insure but
the premiums charged were too high on account of the absence of a stone wall along
the river bank, is unmeritorious. When asked, he could not even mention the name of
the insurance company he approached, much less the amount of premiums allegedly
charged.
Moreover, upon failure of appellee to pay rentals, appellant wrote it a letter on January
4, 1954. The question of filling up the vacant lot along the river in accordance with
paragraph 5 of the contract of lease was brought up by appellee only in its letter of
reply dated January 11, 1954. As things stand, in so far as the third issue is
concerned, we cannot really determine who between the parties was actually the first
who violated the contract. What we see is, that the parties are in pari delicto. . . . .
Based on the foregoing findings, the Court of Appeals declared the contract extinguished, but
the parties were made to bear their own losses. (Art. 1192, Civil Code). However, as the Lessee
was found to be in continued possession of the properties and in operation of its business during
the pendency of the case, it was ordered to compensate the Lessor in the sum of P200.00 a
month from February 16, 1953 until it vacated the premises. Furthermore, the lifetime of the
contract, having expired on March 31, 1960, the factory building and the warehouse were
declared to have automatically become the properties of the Lessor.
From said decision, both parties appealed to this Court.

The Lessor, as appellant (in Nos. L-17858-59), contends that the Court of Appeals erred in not
finding the Lessee Price, Inc. as the first violator of the contract, and in requiring the latter to pay
him only the amount of P200.00 a month for the use and occupation of the properties from
February 16, 1953 until the same are finally vacated.
In its appeal (Nos. L-17865-66), the Lessee, on the other hand, maintains that the Court of
Appeals erred in not declaring the Lessor as the first to have committed the breach of the
agreement; in requiring said lessee to compensate Camus in the amount of P200.00 a month
notwithstanding its finding that the parties are in pari delicto, and must suffer their own damages;
and holding the lease to have terminated as of March 31, 1960.
From the factual findings of the Court of Appeals heretofore quoted, which we are not here to
review, it appears that the strip of land, with an area of 1,425 square meters, was not originally
part of lots 15 and 16 subject of the contract; that the Lessor actually started the fining in and
fencing of a portion of 500 square meters thereof, as undertaken by him, but did not completely
comply therewith, the fence being only of adobe stone without barbed wires, and the filling being
40 centimeters lower than the elevation of the lot under lease; that, on the other hand,
notwithstanding the completion of the factory building and warehouse, the Lessee, in his turn,
failed to secure insurance therefor as stipulated; that the Lessee, likewise, defaulted in the
payment of the rentals as of February 16, 1953; and that the Lessor's failure to comply with its
obligation could not be the cause of the Lessee's non-fulfillment of its commitments under the
contract. With these established facts, the conclusion reached by the Court of Appeals, that the
parties are in pari delicto is not without foundation or justification.
Although in the incidental case G.R. No. L-8253, this Court in effect declared the Lessor
Camus prima facie to be the first to be the first to commit a breach of the agreement, it may be
pointed out that in making such pronouncement, only the matter of the Lessee's default in the
payment of rentals was considered. Upon the continuation of the proceedings, however, it was
established, as so found by the Court of Appeals, that the Lessee also failed to cover the
buildings in September, 1951, with insurance in violation of the specific terms of the contract. As
a matter of fact, until the instant case were filed, no such insurance was drawn on the aforesaid
factory building and warehouse.
Upon the other hand, while it may be true that the duty imposed on the Lessor under the
contract, to increase the elevation of the low portion of the lot and erect thereon a concrete
stone wall topped with barbed wire was provided only to "facilitate or make use (by the Lessee)
of the whole lot" allegedly a subordinate and collateral condition of the contract it is not
herein denied that such condition was not complied with by the Lessor. And this obligation
matured in March, 1952. Even assuming, therefore, that the Lessee's obligation to insure the
building arose after the completion of the construction of the buildings in September, 1951, as
the Lessor also defaulted in the performance of his corresponding duty, it can not really be
determined with definiteness who of the parties committed the first infraction of the terms of the
contract. Under the circumstances, the conclusion reached by the Court of Appeals, that the
parties are actually in pari delicto, must be sustained, and the contract deemed extinguished,
with the parties suffering their respective losses.
Considering, however, that the Lessor was (and must still be) in continuous occupancy of the
premises during the pendency of the case, conducting, and operating, its business therein as
usual and profiting thereby, whereas the Lessor was not only deprived of the possession of his
property but also of the rentals therefore since February 16, 1953, said Lessee must be required
to compensate the Lessor for such occupancy. The Lessor, on the other hand, as a result of the
termination of the lease, will acquire the buildings of the Lessee which were constructed on the
leased premises. Under the circumstances of the case, we find the decision of the Court of
Appeals directing the payment by Price, Inc. of the sum of P200.00 per month from February 16,
1953, until it vacates the premises, to be in accord with justice.

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