OBLIGATIONS AND

CONTRACTS
ATTY. ALDEN FRANCIS C.
GONZALES
Article
1158;
Obligations
derived from law are not
presumed.
PELAYO vs. LAURON
According to Article 1089 of
the Old Civil Code (now 1157),
obligations are created by law, by
contracts, by quasi-contracts, by
illicit acts and omissions or by
those which any kind of fault or
negligence
occurs. Obligations
arising from law are not presumed.
Those expressly determined in the
Code or in special law, etc., are the
only demandable ones.
The rendering of medical
assistance in case of illness is
comprised among the mutual
obligations to which the spouses
are bound by way of mutual
support as provided by the law or
the Code. Consequently, the
obligation to pay the plaintiff for
the medical assistance rendered to

the defendants daughter-in-law

must be couched on the husband.
In the case at bar, the
obligation of the husband to
furnish
his
wife
in
the
indispensable
services
of
a
physician at such critical moments
is especially established by the law
and the compliance therewith is
unavoidable.

DELA CRUZ vs. NORTHERN

THEATRICAL ENT.
It would be to the interest of the
employer to give legal help to and
defend its employee in order to
show that the latter was not guilty
of any crime either deliberately or
through
negligence,
because
should the employee be finally
held criminally liable and he is
found
to
be
insolvent,
the
employer would be subsidiarily
liable. That is why, we repeat, it is
to the interest of the employer to
render legal assistance to its
employee.
But
we
are
not
prepared to say and to hold that
the giving of said legal assistance
to its employees is a legal
obligation. While it might yet and

possibly be regarded as a normal

obligation, it does not at present
count with the sanction of manmade laws.
If the employer is not legally
obliged to give, legal assistance to
its employee and provide him with
a lawyer, naturally said employee
may not recover the amount he
may have paid a lawyer hired by
him.
Article 1159; Contract is the law
between the parties.

NGEI
MULTI-PURPOSE
COOPERATIVE
INC.
vs.
FILIPINAS
PALMOIL
PLANTATION INC.
The
petitioners,
having
freely and willingly entered into
the Addendum with FPPI, cannot
and should not now be permitted
to renege on their compliance
under it, based on the supposition
that its terms are unconscionable.
The contract must bind both
contracting parties; its validity or
compliance cannot be left to the
will of one of them.

It is basic that a contract is

the law between the parties.
Obligations arising from contacts
have the force of law between
contracting parties and should be
complied with in good faith. Unless
the stipulations in a contract are
contrary to law, morals, good
customs, public order or public
policy, the same are binding as
between the parties.

Art1169: Default; Demand

GENERAL
MILLING
CORPORATION vs. RAMOS
There are three requisites
necessary for a finding of default.
First, the obligation is demandable
and liquidated; second, the debtor
delays performance; and third, the
creditor judicially or extrajudicially
requires the debtors performance.
According to the CA, GMC
did not make a demand on
Spouses
Ramos
but
merely
requested them to go to GMCs
office to discuss the settlement of
their account. In spite of the lack

of demand made on the spouses,

however, GMC proceeded with the
foreclosure proceedings. Neither
was there any provision in the
Deed of Real Estate Mortgage
allowing GMC to extrajudicially
foreclose the mortgage without
need of demand.
Indeed, Article 1169 of the
Civil Code on delay requires the
following:
Those obliged to deliver
or to do something incur in delay from
the time the obligee judicially or
extrajudicially demands from them the
fulfilment of their obligation.
However, the demand
by the creditor shall not be necessary
in order that delay may exist.
(1) When the obligation or the
law expressly so declares; x x x

As the contract in the

instant case carries no such
provision on demand not being
necessary for delay to exist, We
agree with the appellate court that
GMC should have first made a
demand on the spouses before
proceeding to foreclose the real
estate mortgage.

Development Bank of the

Philippines
v.
Licuanan
finds
application to the instant case:
The
issue
of
whether
demand was made before the
foreclosure
was
effected
is
essential. If demand was made
and
duly
received
by
the
respondents and the latter still did
not pay, then they were already in
default and foreclosure was proper.
However, if demand was not
made, then the loans had not yet
become due and demandable. This
meant that respondents had not
defaulted in their payments and
the foreclosure by petitioner was
premature. Foreclosure is valid
only when the debtor is in default
in the payment of his obligation.

SANTOS
VENTURA
HOCORMA FOUNDATION vs.
SANTOS
Article 1169 of the New Civil
Code provides:
Those obliged to deliver or
to do something incur in delay
from the time the obligee judicially
or extrajudicially demands from

them the fulfillment of their

obligation.
Delay as used in this article
is synonymous to default or mora
which
means
delay
in
the
fulfillment of obligations. It is the
non-fulfillment of the obligation
with respect to time.
In order for the debtor to be
in default, it is necessary that the
following requisites be present:
(1)
that
the
obligation
be
demandable
and
already
liquidated; (2) that the debtor
delays performance; and (3) that
the
creditor
requires
the
performance
judicially
or
extrajudicially.
In the case at bar, the
obligation was already due and
demandable after the lapse of the
two-year period from the execution
of the contract.
The two-year
period ended on October 26, 1992.
When the respondents gave a
demand letter on October 28,
1992, to the petitioner, the
obligation was already due and
demandable.
Furthermore, the
obligation is liquidated because
the debtor knows precisely how

much he is to pay and when he is

to pay it.
The second requisite is also
present. Petitioner delayed in the
performance. It was able to fully
settle its outstanding balance only
on February 8, 1995, which is more
than two years after the extrajudicial demand. Moreover, it filed
several motions and elevated
adverse
resolutions
to
the
appellate court to hinder the
execution of a final and executory
judgment, and further delay the
fulfillment of its obligation.
Third, the demand letter
sent to the petitioner on October
28, 1992, was in accordance with
an
extra-judicial
demand
contemplated by law.
Verily, the petitioner is liable
for damages for the delay in the
performance of its obligation.

SOLAR HARVEST, INC. vs.

DAVAO
CORRUGATED
CARTON CORPORATION
Art. 1169. Those obliged to
deliver or to do something incur in

delay from the time the obligee

judicially
or
extrajudicially
demands from them the fulfillment
of their obligation.
However, the demand by
the creditor shall not be necessary
in order that delay may exist:
(1) When the obligation or the law
expressly so declares; or
(2) When from the nature and the
circumstances of the obligation it
appears that the designation of
the time when the thing is to be
delivered or the service is to be
rendered was a controlling motive
for the establishment of the
contract; or
(3) When demand would be
useless, as when the obligor has
rendered it beyond his power to
perform.
In reciprocal obligations,
neither party incurs in delay if the
other does not comply or is not
ready to comply in a proper
manner with what is incumbent
upon him. From the moment one
of the parties fulfills his obligation,
delay by the other begins.

In reciprocal obligations, as
in a contract of sale, the general
rule is that the fulfillment of the
parties
respective
obligations
should be simultaneous. Hence,
no demand is generally necessary
because, once a party fulfills his
obligation and the other party
does not fulfill his, the latter
automatically incurs in delay. But
when
different
dates
for
performance of the obligations are
fixed, the
default
for
each
obligation must be determined by
the rules given in the first
paragraph of the present article,
that is, the other party would incur
in delay only from the moment the
other party demands fulfillment of
the formers obligation. Thus,
even in reciprocal obligations,
if the period for the fulfillment
of the obligation is fixed,
demand upon the obligee is
still necessary before the
obligor can be considered in
default and before a cause of
action
for
rescission
will
accrue.
Evident from the records
and even from the allegations in
the complaint was the lack of

demand
by
petitioner
upon
respondent to fulfill its obligation
to manufacture and deliver the
boxes. The Complaint only alleged
that petitioner made a follow-up
upon respondent, which, however,
would not qualify as a demand for
the fulfillment of the obligation.
Note is taken of the fact that, with
respect
to
their
claim
for
reimbursement, the Complaint
alleged and the witness testified
that a demand letter was sent to
respondent. Without a previous
demand for the fulfillment of the
obligation, petitioner would not
have a cause of action for
rescission against respondent as
the latter would not yet be
considered in breach of its
contractual obligation.
Even assuming that a
demand had been previously
made before filing the present
case,
petitioners
claim
for
reimbursement would still fail, as
the circumstances would show that
respondent was not guilty of
breach of contract.

SSS
vs.
MOONWALK
DEVELOPMENT & HOUSING
CORP.
In order that the debtor may
be in default it is necessary that
the following requisites be present:
(1)
that
the
obligation
be
demandable
and
already
liquidated; (2) that the debtor
delays performance; and (3) that
the
creditor
requires
the
performance
judicially
and
extrajudicially. Default generally
begins from the moment the
creditor demands the performance
of the obligation.
Nowhere in this case did it
appear that SSS demanded from
Moonwalk the payment of its
monthly amortizations. Neither did
it show that petitioner demanded
the payment of the stipulated
penalty upon the failure of
Moonwalk to meet its monthly
amortization. What the complaint
itself showed was that SSS tried to
enforce the obligation sometime in
September, 1977 by foreclosing
the
real
estate
mortgages
executed by Moonwalk in favor of
SSS. But this foreclosure did not

push through upon Moonwalk's

requests and promises to pay in
full. The next demand for payment
happened on October 1, 1979
when SSS issued a Statement of
Account to Moonwalk. And in
accordance with said statement,
Moonwalk paid its loan in full.
What is clear, therefore, is that
Moonwalk was never in default
because SSS never compelled
performance

CRUZ vs. GRUSPE

In the absence of a finding
by the lower courts that Gruspe
made a demand
prior to the filing of the complaint,
the interest cannot be computed
from November 15, 1999 because
until a demand has been made,
Cruz and Leonardo could not be
said to be in default. In order that
the debtor maybe in default, it is
necessary that the
following
requisites be present: (1)
that the obligation be demandable
and already liquidated; (2) that the
debtor delays performance; and
(3) that the creditor requires the
performance
judicially
and
extrajudicially. Default generally

begins from the moment the

creditor demands the performance
of the obligation. In this case,
demand could be considered to
have been made upon the filing of
the complaint on November 19,
1999, and it is only from this date
that the interest should be
computed.

LORENZO SHIPPING
vs. BJ MARTHEL INTL

CORP

We, therefore, hold that in

the subject contracts, time was not
of the essence. The delivery of the
cylinder liners on 20 April 1990
was made within a reasonable
period of time considering that
respondent had to place the order
for the cylinder liners with its
principal in Japan and that the
latter was, at that time, beset by
heavy volume of work.
There having been no failure
on the part of the respondent to
perform its obligation, the power
to
rescind
the
contract
is
unavailing to the petitioner. Article
1191 of the New Civil Code runs as
follows:
The
power
to
rescind
obligations is implied in reciprocal
ones, in case one of the obligors

should not comply with what is

incumbent upon him.
The law explicitly gives
either party the right to rescind
the contract only upon the failure
of the other to perform the
obligation assumed thereunder.
The act of a party in treating
a contract as cancelled or resolved
on account of infractions by the
other contracting party must be
made known to the other and is
always provisional.
The party who deems the
contract violated may consider it
resolved or rescinded, and act
accordingly, without previous court
action, but it proceeds at its own
risk. For it is only the final
judgment of the corresponding
court that will conclusively and
finally settle whether the action
taken was or was not correct in
law. But the law definitely does not
require that the contracting party
who believes itself injured must
first file suit and wait for a
judgment
before
taking
extrajudicial steps to protect its
interest. Otherwise, the party
injured by the other's breach will
have to passively sit and watch its
damages accumulate during the

pendency of the suit until the final

judgment of rescission is rendered
when the law itself requires that
he should exercise due diligence to
minimize its own damages.
Art.1170:
Malicious
Contravention of tenor

delay;

TELEFAST
COMMUNICATIONS/PHIL.
WIRELESS, INC. vs CASTRO,
SR.

Art. 1170 of the Civil Code

provides that "those who in the
performance of their obligations
are guilty of fraud, negligence or
delay, and those who in any
manner contravene the tenor
thereof, are liable for damages."
Art. 2176 also provides that
"whoever by act or omission
causes damage to another, there
being fault or negligence, is
obliged to pay for the damage
done."
The only defense of the
defendant was that it was unable
to transmit the telegram because
of "technical and atmospheric
factors beyond its control."
No
evidence appears on record that
defendant ever made any attempt
to advise the plaintiff Sofia C.

Crouch as to why it could not

transmit the telegram.
In the case at bar, petitioner
and private respondent Sofia C.
Crouch entered into a contract
whereby, for a fee, petitioner
undertook to send said private
respondent's message overseas by
telegram. This, petitioner did not
do, despite performance by said
private
respondent
of
her
obligation by paying the required
charges. Petitioner was therefore
guilty
of
contravening
its
obligation
to
said
private
respondent and is thus liable for
damages.

RCBC vs. CA

Article 1170 of the Civil

Code states that those who in the
performance of their obligations
are guilty of delay are liable for
damages.
The delay in the
performance of the obligation,
however, must be either malicious
or negligent. Thus, assuming that
private respondent was guilty of
delay in the payment of the value
of the unsigned check, private
respondent cannot be held liable
for damages.
There is no
imputation, much less evidence,
that private respondent acted with

malice or negligence in failing to

sign the check. Indeed, we agree
with the Court of Appeals' finding
that such omission was mere
"inadvertence" on the part of
private
respondent.
Toyota
salesperson
Jorge
Geronimo
testified that he even verified
whether private respondent had
signed all the checks and in fact
returned three or four unsigned
checks to him for signing
Art.1174; Fortuitous event

JUNTILLA vs. FONTANAR

In a legal sense and,

consequently, also in relation to
contracts, a caso fortuito presents
the
following
essential
characteristics: (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.
In the case at bar, the cause
of the unforeseen and unexpected
occurrence was not independent of
the human will. The accident was
caused
either
through
the
negligence of the driver or
because of mechanical defects in
the tire. Common carriers should
teach their drivers not to overload
their vehicles, not to exceed safe
and legal speed limits, and to
know the correct measures to take
when a tire blows up thus insuring
the safety of passengers at all
times.

a normal manner; and (d) the

debtor must be free from any
participation in, or aggravation of
the injury to the creditor.
Thus it has been held that
when the negligence of a person
concurs with an act of God in
producing a loss, such person is
not exempt from liability by
showing that the immediate cause
of the damage was the act of God.
To be exempt from liability for loss
because of an act of God, he must
be
free
from
any
previous
negligence or misconduct by which
that loss or damage may have
been occasioned.

NPC vs. CA

In order to exempt one from

liability in a fortuitous event, it is
necessary that one has committed
no negligence or misconduct that
may have occasioned the loss.
When the effect, is found to be
partly the result of a persons
participation whether by active
intervention, neglect or failure to
act, the whole occurrence is
humanized and removed from the
rules applicable to acts of God.

To exempt the obligor from

liability under Article 1174 of the
Civil Code, for a breach of an
obligation due to an act of God,
the following must concur: (A) the
cause of the breach of the
obligation must be independent of
the will of the debtor; (b) the event
must be either unforeseeable or
unavoidable; (c) the event must be
such as to render it impossible for
the debtor to fulfill his obligation in

MINDEX
MORILLO

RESOURCES

vs.

Petitioner
fell
short
of
ordinary diligence in safe guarding
the leased truck against the
accident, which could have been
avoided in the first place.

METRO
CONCAST
CORPORATION vs.
BANK

STEEL
ALLIED

Fortuitous
events
by
definition are extraordinary events
not foreseeable or avoidable. It is
therefore, not enough that the
event should not have been
foreseen or anticipated, as is
commonly believed but it must be
one impossible to foresee or to
avoid. The mere difficulty to
foresee the happening is not
impossibility to foresee the same.
To constitute a fortuitous event,
the following elements must
concur: (a) the cause of the
unforeseen
and
unexpected
occurrence or of the failure of the
debtor to comply with obligations
must be independent of human
will; (b) it must be impossible to
foresee the event that constitutes
the caso fortuito or, if it can be
foreseen, it must be impossible to
avoid; (c) the occurrence must be
such as

to render it impossible for the

debtor to fulfill obligations in a
normal manner; and, (d) the
obligor must be free from any
participation in the aggravation of
the injury or loss.
While it may be argued that
Peakstar' s breach of the MoA was
unforeseen by petitioners, the
same is clearly not impossible to
foresee or even an event which is
independent of human will. Neither
has it been shown that said
occurrence rendered it impossible
for petitioners to pay their loan
obligations to Allied Bank and
thus, negates the Formers force
majeure theory altogether. In any
case, as earlier stated, the
performance or breach of the MoA
bears
no
relation
to
the
performance or breach of the
subject loan transactions, they
being
separate
and
distinct
sources of obligation. The fact of
the matter is that petitioners' loan
obligations to Allied Bank remain
subsisting for the basic reason that
the former has not been able to
prove that the same had already
been paid or, in any way,
extinguished.
In
this
regard,
petitioners' liability, as adjudged

by the CA, must perforce stand.

Considering, however, that Allied
Bank's extra-judicial demand on
petitioners appears to have been
made only on December 10, 1998,
the computation of the applicable
interests and penalty charges
should be reckoned only from such
date.

Art.1175;
Interests
to
imposed on obligations
MACALINAO vs. BPI

be

The
interest
rate
and
penalty
charges
are
unconscionable and iniquitous at
36% per annum. The Supreme
Court held that the interest rate
and penalty charge of 3% per
month or the 36% per annum
should be reduced to 2% per
month or 24% per annum. In a
long line of cases decided by the
Supreme Court, it considered the
36% per annum to be excessive
and
unconscionable.
Citing
Article1229, in exercising this
power to determine what is
iniquitous and unconscionable;
courts
must
consider
the
circumstances of each case since
what may be iniquitous and
unconscionable in one maybe

totally just and equitable in

another. In the instant case,
Macalinao made partial payments
to BPI .Therefore, the interest rate
and penalty charge of 3% per
month or 36% per annum should
be reduced to 2% per month or
24% per annum.

SPOUSES SOLANGON vs.

SALAZAR
COMMONWEALTH
INSURANCE
CORP. vs. CA
Art.1180; Fixing of term

TIGLAO vs. MANILA

RAILROAD

Viewed in this light, that is,

the time to redeem defendants
promise to pay salary differentials,
after the exhaustion of what had
already been appropriated for that
purpose, really depended upon the
judgment of its board of directorsit not appearing that defendant
was bankrupt- the obligation to
pay the said salary differentials
may be considered as one with a
term whose duration has been left
to the will of the debtor, so that

pursuant to article 1128(art 1197

of the new), the duration of the
term may be fixed by the courts.
There
is something to
defendants contention that in
previous cases this Court has held
that the duration of the term
should be fixed in a separate
action for that express purpose.
However, the court held that since
the defendant does not claim hat if
a separate action were instituted
to fix the duration of the term of
its obligation, it could present
better proofs than those already
adduced in the present case. Such
separate action would, therefore,
be a mere formality and would
serve no purpose other than to
delay.

JAVIER vs. CA

Petitioners 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. When a contract is subject
to a suspensive condition, its birth

or effectivity can take place only if

and when the event which
constitutes the condition happens
or is fulfilled. If the suspensive
condition does not take place, the
parties would stand as if the
conditional obligation had never
existed.
The said agreement is a
bilateral contract which gave rise
to reciprocal obligations. The
demandability of the obligation of
one party depends upon the
fulfillment of the obligation of the
other. In this case, the failure of
private respondent to comply with
his obligation negates his right to
demand
performance
from
petitioners.
In this case, since private
respondent never acquired any
right over the additional area for
failure to secure the approval of
the Bureau of Forestry, the
agreement
executed
therefor,
which had for its object the
transfer of said right to petitioners,
never
became
effective
or
enforceable.

HEIRS OF PAULINO ATIENZA

vs. ESPIDOL

Regarding the right to

cancel the contract for nonpayment of an installment, there is
need to initially determine if what
the parties had was a contract of
sale or a contract to sell. In a
contract of sale, the title to the
property passes to the buyer upon
the delivery of the thing sold. In a
contract to sell, on the other hand,
the ownership is, by agreement,
retained by the seller and is not to
pass to the vendee until full
payment of the purchase price. In
the contract of sale, the buyers
non-payment of the price is a
negative resolutory condition; in
the contract to sell, the buyers full
payment of the price is a positive
suspensive
condition
to
the
coming
into
effect
of
the
agreement. In the first case, the
seller has lost and cannot recover
the ownership of the property
unless he takes action to set aside
the contract of sale. In the second
case, the title simply remains in
the seller if the buyer does not
comply
with
the
condition
precedent of making payment at
the time specified in the contract.
Here, it is quite evident that the
contract involved was one of a

contract to sell since the Atienzas,

as sellers, were to retain title of
ownership to the land until
respondent Espidol, the buyer, has
paid the agreed price.
Indeed,
there seems no question that the
parties understood this to be the
case.
Since Espidol failed to pay
the installment on a day certain
fixed in their agreement, the
Atienzas can afterwards validly
cancel and ignore the contract to
sell because their obligation to sell
under it did not arise. Since the
suspensive condition did not arise,
the parties stood as if the
conditional obligation had never
existed.
When Espidol failed to pay
within the period provided in their
agreement, the Atienzas were
relieved of any obligation to hold
the property in reserve for him.

CENTRAL PHIL. UNIVERSITY

vs. CA

Under Art. 1181 of the Civil

Code, on conditional obligations,
the acquisition of rights, as well as
the extinguishment or loss of
those already acquired, shall
depend upon the happening of the

event
which
constitutes
the
condition. Thus, when a person
donates land to another on the
condition that the latter would
build upon the land a school, the
condition imposed was not a
condition
precedent
or
a
suspensive
condition
but
a
resolutory one. It is not correct to
say that the schoolhouse had to be
constructed before the donation
became effective, otherwise, it
would be invading the property
rights of the donor. The donation
had to be valid before the
fulfillment of the condition. If there
was no fulfillment or compliance
with the condition, such as what
obtains in the instant case, the
donation may now be revoked and
all rights which the donee may
have acquired under it shall be
deemed lost and extinguished.
When the obligation does
not fix a period but from its nature
and circumstances it can be
inferred
that
a
period
was
intended,
the
general
rule
provided in Art. 1197 of the Civil
Code applies, which provides that
the courts may fix the duration
thereof because the fulfillment of
the obligation itself cannot be

demanded until after the court has

fixed the period for compliance
therewith and such period has
arrived.
This general rule however
cannot be applied considering the
different set of circumstances
existing in the instant case. More
than a reasonable period of fifty
(50) years has already been
allowed petitioner to avail of the
opportunity to comply with the
condition
even
if
it
be
burdensome, to make the donation
in its favor forever valid. But,
unfortunately, it failed to do so.
Hence, there is no more need to fix
the duration of a term of the
obligation when such procedure
would be a mere technicality and
formality and would serve no
purpose than to delay or lead to an
unnecessary
and
expensive
multiplication of suits.
Records are clear and facts
are undisputed that since the
execution of the deed of donation
up to the time of filing of the
instant action, petitioner has failed
to comply with its obligation as
donee. Petitioner has slept on its
obligation for an unreasonable
length of time. Hence, it is only

just and equitable now to declare

the subject donation already
ineffective and, for all purposes,
revoked so that petitioner as
donee should now return the
donated property to the heirs of
the donor, private respondents
herein, by means of reconveyance.

PARKS vs. PROVINCE OF

TARLAC
The characteristic of a
condition precedent is that the
acquisition of the right is not
effected while said condition is not
complied with or is not deemed
complied with. Meanwhile nothing
is acquired and there is only an
expectancy of right. Consequently,
when a condition is imposed, the
compliance of which cannot be
effected except when the right is
deemed acquired, such condition
cannot be a condition precedent.
In the present case the condition
that a public school be erected and
a public park made of the donated
land, work on the same to
commence within six months from
the date of the ratification of the
donation by the parties, could not
be complied with except after

giving effect to the donation. The

donee could not do any work on
the donated land if the donation
had not really been effected,
because it would be an invasion of
another's title, for the land would
have continued to belong to the
donor so long as the condition
imposed was not complied with.
The appellant also contends
that, in any event, the condition
not having been complied with,
even supposing that it was not a
condition
precedent
but
subsequent, the non-compliance
thereof is sufficient cause for the
revocation of the donation. This is
correct. But the period for bringing
an action for the revocation of the
donation has prescribed.
Art.1181;
Suspensive
resolutory condition

and

VDA. DE MISTICA vs.

NAGUIAT
In the present case, the
failure of respondents to pay the
balance of the purchase price
within
ten
years
from
the
execution of the Deed did not
amount to a substantial breach. In

the Kasulatan, it was stipulated

that payment could be made even
after ten years from the execution
of the Contract, provided the
vendee paid 12 percent interest.
The stipulations of the contract
constitute the law between the
parties; thus, courts have no
alternative but to enforce them as
agreed upon and written.
The Code prohibits purely
potestative,
suspensive,
conditional
obligations
that
depend on the whims of the
debtor, because such obligations
are usually not meant to be
fulfilled. Indeed, to allow the
fulfillment of conditions to depend
exclusively on the debtors will
would be to sanction illusory
obligations. The Kasulatan does
not allow such thing.
First,
nowhere is it stated in the Deed
that payment of the purchase
price is dependent upon whether
respondents want to pay it or not.
Second, the fact that they already
made partial payment thereof only
shows that the parties intended to
be bound by the Kasulatan.

TRILLANA vs. QUEZON

COLLEGE, INC.

In view of the proposal of

Damasa Crisostomo to pay the
value of the subscription after she
has harvested fish, a condition
obviously dependent upon her sole
will and, therefore, facultative in
nature, rendering the obligation
void, under article 1115 of the old
Civil Code which provides as
follows: "If the fulfillment of the
condition should depend upon the
exclusive will of the debtor, the
conditional obligation shall be
void. If it should depend upon
chance, or upon the will of a third
person,
the
obligation
shall
produce
all
its
effects
in
accordance with the provisions of
this code." It cannot be argued
that the condition solely is void,
because it would have served to
create the obligation to pay.

ROMERO vs. CA
The
parties
pose
this
question: May the vendor demand
the rescission of a contract for the
sale of a parcel of land for a cause
traceable to his own failure to
have the squatters on the subject
property
evicted
within
the
contractually-stipulated period?

The obligation to transfer

the land is not dependent upon the
ejectment of the squatters. Kahit
hindi sila ma-eject, the contract of
sale is still valid.
Under
the
agreement,
private respondent is obligated to
evict
the
squatters
on
the
property. The ejectment of the
squatters is a condition the
operative act of which sets into
motion the period of compliance
by petitioner of his own obligation,
i.e., to pay the balance of the
purchase
price.
Private
respondents failure to remove
the squatters from the property
within the stipulated period gives
petitioner the right to either refuse
to proceed with the agreement or
waive that condition in consonance
with Article 1545 of the Civil Code.
This option clearly belongs to
petitioner. We share the opinion of
the appellate court that the
undertaking required of private
respondent does not constitute a
potestative condition dependent
solely on his will that might,
otherwise, be void in accordance
with Article 1182 of the Civil Code
but
a
mixed
condition
dependent not on the will of the

vendor alone but also of third

persons like the squatters and
government
agencies
and
personnel concerned. We must
hasten to add, however, that
where the so-called potestative
condition is imposed not on the
birth of the obligation but on its
fulfillment, only the obligation is
avoided, leaving unaffected the
obligation itself.

SANTOS vs. CA
The agreement between the
parties is a contract to sell, it
follows that the appellate court
erred when it decreed that a
judicial
rescission
of
said
agreement was necessary. This is
because there was no rescission to
speak of in the first place. In a
contract to sell, title remains with
the vendor and does not pass on
to the vendee until the purchase
price is paid in full. Thus, in a
contract to sell, the payment of
the purchase price is a positive
suspensive condition. Failure to
pay the price agreed upon is not a
mere breach, casual or serious, but
a situation that prevents the
obligation of the vendor to convey

title from acquiring an obligatory

force. This is entirely different from
the situation in a contract of sale,
where non-payment of the price is
a negative resolutory condition.
The effects in law are not identical.
In a contract of sale, the vendor
has lost ownership of the thing
sold and cannot recover it, unless
the contract of sale is rescinded
and set aside. In a contract to sell,
however, the vendor remains the
owner for as long as the vendee
has not complied fully with the
condition of paying the purchase
price. If the vendor should eject
the vendee for failure to meet the
condition
precedent,
he
is
enforcing the contract and not
rescinding it. When the petitioners
in the instant case repossessed
the disputed house and lot for
failure of private respondents to
pay the purchase price in full, they
were merely enforcing the contract
and not rescinding it.
Art 1189: Suspensive Condition;
lost of the thing

Osmena III vs. SSS

Art 1191: Rescission of reciprocal
obligations

Villamar vs. Mangaoil

Article 1191 of the NCC is

clear that the power to rescind
obligations is implied in reciprocal
ones, in case one of the obligors
should not comply with what is
incumbent
upon
him.
The
respondent cannot be deprived of
his right to demand for rescission
in view of the petitioners failure to
abide with item nos. 2 and 3 of the
agreement. This remains true
notwithstanding the absence of
express
stipulations
in
the
agreement
indicating
the
consequences of breaches which
the parties may commit. To hold
otherwise would render Article
1191 of the NCC as useless.
Article 1498 of the NCC
generally considers the execution
of
a
public
instrument
as
constructive delivery by the seller
to the buyer of the property
subject of a contract of sale. The
case at bar, however, falls among
the exceptions to the foregoing
rule since a mere presumptive and
not conclusive delivery is created
as the respondent failed to take
material possession of the subject
property.

Further, even if we were to

assume for argument's sake that
the agreement entered into by the
contending
parties
does
not
require the delivery of the physical
possession of the subject property
from the mortgagors to the
respondent, still, the petitioner's
claim that her execution of an
absolute deed of sale was already
sufficient as it already amounted
to a constructive delivery of the
thing sold which Article 1498 of
the NCC allows, cannot stand.
Stated differently, as a
general rule, the execution of a
public instrument amounts to a
constructive delivery of the thing
subject of a contract of sale.
However, exceptions exist, among
which is when mere presumptive
and not conclusive delivery is
created in cases where the buyer
fails to take material possession of
the subject of sale. A person who
does not have actual possession of
the thing sold cannot transfer
constructive possession by the
execution and delivery of a public
instrument

Ayson-Simon vs. Adamos

The rule that the injured

party can only choose between
fulfillment and rescission of the
obligation, and cannot have both,
applies when the obligation is
possible of fulfillment. If, as in this
case, the fulfillment has become
impossible, Article 1191 3 allows
the injured party to seek rescission
even
after
he
has
chosen
fulfillment.
True it is that in Civil Case
No. 7275 the Court already
rendered a Decision in favor of
plaintiff, but since defendants
cannot fulfill their obligation to
deliver the titles to and possession
of the lots to plaintiff, the portion
of the decision requiring them to
fulfill their obligations is without
force and effect. Only that portion
relative to the payment of
damages
remains
in
the
dispositive part of the decision,
since in either case (fulfillment or
rescission) defendants may be
required to pay damages.
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.

Maglasang vs. Northwestern

University

Thus, petitioner stresses

that it was Northwestern that
breached the agreement when the

latter halted the installation of the

materials for the IBS, even if the
parties
had
contemplated
a
completed project to be evaluated
by CHED. However, as aptly
considered by the CA, respondent
could not just "sit still and wait for
such day that its accreditation may
not be granted by CHED due to the
apparent substandard equipment
installed in the bridge system.
The appellate court correctly
emphasized that, by that time,
both parties would have incurred
more costs for nothing.
By
way
of
negative
definition, a breach is considered
casual if it does not fundamentally
defeat the object of the parties in
entering into an agreement.
Given
that
petitioner,
without
justification,
supplied
substandard components for the
new IBS, it is thus clear that its
violation
was
not
merely
incidental, but directly related to
the essence of the agreement
pertaining to the installation of an
IBS compliant with the CHED and
IMO standards.

Mila Reyes vs. Victoria

Tuparan

Pagtalunan vs. Dela Cruz

Vda. De Manzano

R.A. No. 6552, otherwise

known as the "Realty Installment
Buyer Protection Act," recognizes
in conditional sales of all kinds of
real estate (industrial, commercial,
residential) the right of the seller
to cancel the contract upon nonpayment of an installment by the
buyer, which is simply an event
that prevents the obligation of the
vendor to convey title from
acquiring binding force. The Court
agrees with petitioner that the
cancellation of the Contract to Sell
may be done outside the court
particularly when the buyer agrees
to such cancellation.
However, the cancellation of
the contract by the seller must be
in accordance with Sec. 3 (b) of
R.A. No. 6552, which requires a
notarial act of rescission and the
refund to the buyer of the full
payment of the cash surrender
value of the payments on the
property. Actual cancellation of the
contract takes place after 30 days
from receipt by the buyer of the
notice of cancellation or the
demand for rescission of the
contract by a notarial act and upon

full payment of the cash surrender

value to the buyer.

Fabrigas vs. San Francisco

del Monte, Inc.

Given the nature of the

contract between petitioners and
Del Monte, the applicable legal
provision
on
the
mode
of
cancellation of Contract to Sell No.
2482-V is Section 4 and not
Section 3 of R.A. 6552. Section 4 is
applicable to instances where less
than two years installments were
paid. It reads:
SECTION 4. In case where less
than two years of installments
were paid, the seller shall give the
buyer a grace period of not less
than sixty days from the date the
installment became due.
If the buyer fails to pay the
installments due at the expiration
of the grace period, the seller may
cancel the contract after thirty
days from receipt by the buyer of
the notice of cancellation or the
demand for rescission of the
contract by a notarial act.
Thus, the cancellation of the
contract under Section 4 is a twostep process. First, the seller
should extend the buyer a grace

period of at least sixty (60) days

from the due date of the
installment. Second, at the end of
the grace period, the seller shall
furnish the buyer with a notice of
cancellation
or
demand
for
rescission through a notarial act,
effective thirty (30) days from the
buyers receipt thereof. It is worth
mentioning, of course, that a mere
notice or letter, short of a notarial
act, would not suffice.
Under this mode, novation
would have dual functionsone to
extinguish an existing obligation,
the other to substitute a new one
in its placerequiring a conflux of
four essential requisites: (1) a
previous valid obligation; (2) an
agreement of all parties concerned
to a new contract; (3) the
extinguishment
of
the
old
obligation; and (4) the birth of a
valid new obligation.
The test of incompatibility is
whether or not the two obligations
can stand together, each one
having its independent existence.
If
they
cannot,
they
are
incompatible
and
the
latter
obligation novates the first.[23]
The execution of Contract to Sell
No.
2491-V
created
new

obligations in lieu of those under

Contract to Sell No. 2482-V, which
are
already
considered
extinguished upon the execution of
the second contract. The two
contracts do not have independent
existence for to hold otherwise
would present an absurd situation
where the parties would be liable
under each contract having only
one subject matter.

debtors in one and the same

obligation does not imply that
each one of the former has a right
to demand, or that each one of the
latter is bound to render, entire
compliance with the prestation.
Then is a solidary liability only
when the obligation expressly so
states, or when the law or the
nature of the obligation requires
solidarity.

Communities Cagayan, Inc.

vs. Nanol

Art. 1208.
If from the law,or the
nature or the wording of the
obligation to which the preceding
article refers the contrary does not
appear, the credit or debt shall be
presumed to be divided into as
many equal shares as there are
creditors and debtors, the credits
or debts being considered distinct
from one another, subject to the
Rules of Court governing the
multiplicity of suits.
The decision of the lower
court based on the parties'
compromise agreement, provides:
1.
Plaintiff
agrees
to
reduce
its
total
claim
of
P117,498.95 to only P110,000.00
and
defendants
agree
to
acknowledge the validity of such
claim and further bind themselves

Art 1192: Both parties guilty of

violating the obligation

Central Bank vs. CA

Art 1207;
obligations

Joint

and

solidary

IMIDC vs. National Labor

Relations Commision
Ernesto Ronquillo vs. Court
of Appeals

What is the nature of the

liability of the defendants, was it
merely joint, or was it several or
solidary?
Art. 1207.
The
concurrence of two or more

to initially pay out of the total

indebtedness of P110,000.00, the
amount of P5,000.00 on or before
December 24, 1979, the balance
of
P55,000.00,
defendants
individually and jointly agree to
pay within a period of six months
from January 1980 or before June
30, 1980.
Clearly then, by the express
term
of
the
compromise
agreement and the decision based
upon it, the defendants obligated
themselves to pay their obligation
"individually and jointly".
The term "individually" has
the
same
meaning
as
"collectively",
"separately",
"distinctively",
respectively
or
"severally". An agreement to be
"individually liable" undoubtedly
creates a several obligation, and a
"several obligation is one by which
one individual binds himself to
perform the whole obligation.
In the case of Parot vs.
Gemora We therein ruled that "the
phrase juntos or separadamente or
in the promissory note is an
express statement making each of
the
persons
who
signed
it
individually liable for the payment
of the fun amount of the obligation

contained therein." Likewise in Un

Pak Leung vs. Negorra We held
that "in the absence of a finding of
facts that the defendants made
themselves individually liable for
the debt incurred they are each
liable only for one-half of said
amount
The obligation in the case at
bar
being
described
as
"individually and jointly", the same
is therefore enforceable against
one of the numerous obligors.
Art 1217;Recovery
payment

in

case

of

Republic Glass Corp. vs Qua

Payment of the entire obligation by

one or some of the solidary
debtors results in a corresponding
obligation of the other debtors to
reimburse the paying debtor.[30]
However, we agree with RGC and
Gervels contention that in this
case payment of the entire
obligation is not an essential
condition before they can seek
reimbursement from Qua. The
words of
the Agreements are
clear.

Therefore,
whether
the
solidary debtor has paid the
creditor, the other solidary debtors
should indemnify the former once
his liability becomes absolute.
However, in this case, the liability
of RGC, Gervel and Qua became
absolute
simultaneously
when
Ladtek defaulted in its loan
payment. As a result, RGC, Gervel
and Qua all became directly liable
at the same time to Metrobank
and PDCP. Thus, RGC and Gervel
cannot automatically claim for
indemnity from Qua because Qua
himself is liable directly to
Metrobank and PDCP.
If we allow RGC and Gervel
to
collect
from
Qua
his
proportionate share, then Qua
would pay much more than his
stipulated
liability
under
the
Agreements.
Since Qua would surely
exceed his proportionate share, he
would then recover from RGC and
Gervel the excess payment. This
situation is absurd and circuitous.
Contrary
to
RGC
and
Gervels claim, payment of any
amount will not automatically
result in reimbursement.
If a
solidary debtor pays the obligation

in
part,
he
can
recover
reimbursement
from
the
codebtors only in so far as his
payment exceeded his share in the
obligation.[33]
This is precisely
because if a solidary debtor pays
an
amount
equal
to
his
proportionate
share
in
the
obligation, then he in effect pays
only what is due from him. If the
debtor pays less than his share in
the obligation, he cannot demand
reimbursement
because
his
payment is less than his actual
debt.
RGC, Gervel and Quas total
obligation was P14,200,854.37
RGC and Gervel paid Metrobank P7
million Considering that RGC and
Gervel paid only P7 million out of
the
total
obligation
of
P14,200,854.37, which payment
was less than RGC and Gervels
combined shares in the obligation,
[38] it was clearly partial payment.
Moreover, if it were full payment,
then the obligation would have
been
extinguished.
Metrobank
would have also released Qua from
his obligation.
RGC and Gervel also made
partial
payment
to
PDCP
P1,730,543.55.

Since they only made partial

payments, RGC and Gervel should
clearly and convincingly show that
their payments to Metrobank and
PDCP exceeded their proportionate

shares in the obligations before

they can seek reimbursement from
Qua. This RGC and Gervel failed to
do. RGC and Gervel, in fact, never
claimed that their payments

exceeded their shares in the

obligations. Consequently, RGC
and Gervel cannot validly seek
reimbursement from Qua.