plaintiff-appellee defendant-appellant appellee - one against whom an appeal is taken.

appellant - one who appeals a court decision Villaroel v Estrada ... when a debt is already barred by prescription, it cannot be enforced by the creditor. But a new contract recognizing and assuming the prescribed debt would be valid and enforceable. Where, therefore, a party acknowledges the correctness of a debt and promises to pay it after the same has prescribed and with full knowledge of the prescription he thereby waives the benefit of prescription. Fisher v Robb that the promise made by an organizer of a dog racing course to a stockholder to return to him certain amounts paid by the latter in satisfaction of his subscription upon the belief of said organizer that he was morally responsible because of the failure of the enterprise, is not the consideration rquired by article 1261 of the Civil Code as an essential element for the legal existence of an onerous contract which would bind the promisor to comply with his promise. moral obligation unconnected with any legal obligation, perfect or imperfect, or with the receipt of benefit by the promisor of a material or pecuniary nature will not furnish a consideration for an executory promise

novation - the act of either replacing an obligation to perform with a new obligation, or replacing a party to an agreement with a new party. ratification - the confirmation or adoption of an act that has already been performed. A principal can, for example, ratify something that has been done on his or her behalf by another individual who assumed the authority to act in the capacity of an agent. Quasi-delicts BARREDO VS. GARCIA Legal Doctrine: Plaintiffs are free to choose on which of the two remedies to recover damages they will take. Facts: At about half past one in the morning of May 3, 1936, on the road between Malabon and Navotas, Province of Rizal, there was a head-on collision between a taxi of the Malate Taxicab driven by Pedro Fontanilla and a carretela guided by Pedro Dimapalis. The carretela was overturned, and one of its passengers, 16-year-old boy Faustino Garcia, suffered injuries from which he died two days later. A criminal action was filed against Fontanilla in the Court of First Instance of Rizal, and he was convicted. The court in the criminal case granted the petition that the right to bring a separate civil action be reserved. The Court of Appeals affirmed the sentence of the lower court in the criminal case. Severino Garcia and Timotea Almario, parents of the deceased on March 7, 1939, brought an action in the Court of First Instance of Manila against Fausto Barredo as the sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla. On July 8, 1939, the Court of First Instance of Manila awarded damages in favor of the plaintiffs for P2,000 plus legal interest from the date of the complaint. This decision was modified by the Court of Appeals by reducing the damages to P1,000 with legal interest from the time the action was instituted. It is undisputed that Fontanilla's negligence was the cause of the mishap, as he was driving on the wrong side of the road, and at high speed. As to Barredo's responsibility, the Court of Appeals found: In fact it is shown he was careless in employing Fontanilla who had been caught several times for violation of the Automobile Law

and speeding (Exhibit A) - violation which appeared in the records of the Bureau of Public Works available to be public and to himself. Therefore, he must indemnify plaintiffs under the provisions of article 1903 of the Civil Code. Main theory of Barredo is that his liability is governed by the Revised Penal Code; hence, his liability is only subsidiary, and as there has been no civil action against Pedro Fontanilla, the person criminally liable, Barredo cannot be held responsible in the case. Respondents assert that the Court of Appeals holds that the Barredo is being sued for his failure to exercise all the diligence of a good father of a family in the selection and supervision of Pedro Fontanilla to prevent damages suffered by the respondents.

Issue: Whether the Garcia and Almario may bring a separate civil action against Fausto Barredo, thus making him primarily and directly, responsible under article 1903 of the Civil Code as an employer of Pedro Fontanilla. Held/Ratio: Yes. The same negligent act causing damages may produce civil liability arising from a crime under article 100 of the Revised Penal Code, or create an action for cuasi-delito or culpa extracontractual under articles 1902-1910 of the Civil Code. Some of the differences between crimes under the Penal Code and the culpa aquiliana or cuasi-delito under the Civil Code are: 1. That crimes affect the public interest, while cuasi-delitos are only of private concern. 2. That, the Penal Code punishes or corrects the criminal act, while the Civil Code, by means of indemnification, merely repairs the damage. 3. That delicts are not as broad as quasi-delicts, because the former are punished only if there is a penal law clearly covering them, while the latter, cuasi-delitos, include all acts in which "any kind of fault or negligence intervenes." However, it should be noted that not all violations of the penal law produce civil responsibility, such as begging in contravention of ordinances, violation of the game laws, infraction of the rules of traffic when nobody is hurt. An employer is, under article 1903 of the Civil Code, primarily and directly responsible for the negligent acts of his employee. In the present case, the taxi driver was found guilty of criminal negligence, so that if he had even sued for his civil responsibility arising from the crime, he would have been held primarily liable for civil damages, and Barredo would have been held subsidiarily liable for the same. But the plaintiffs are directly suing Barredo, on his primary responsibility because of his own presumed negligence which he did not overcome under article 1903. Thus, there were two liabilities of Barredo: first, the subsidiary one because of the civil liability of the taxi driver arising from the latter's criminal negligence; and, second, Barredo's primary liability as an employer under article 1903. The plaintiffs were free to choose which course to take, and they preferred the second remedy. In so doing, they were acting within their rights. It might be observed in passing, that the plaintiff choose the more expeditious and effective method of relief, because Fontanilla was either in prison, or had just been released, and besides, he was probably without property which might be seized in enforcing any judgment against him for damages.

MENDOZA VS. ARRIETA Legal Doctrines: 1. Actions based on quasi-delict may proceed independently of the criminal proceedings. 2. No reservation of civil action in a criminal case is required. (according to Justice Barredo) an independent civil action is substantive in character and is not within the power of the Supreme Court to supersede. Rule 111 of ROC is a procedural law which cannot amend a substantive law, such as CC Art. 32, 33, 34 do not provide for the reservation of a separate civil action. 3. The same negligent act may produce either a civil liability arising from a crime under the Penal Code, or a separate responsibility for fault or negligence under the Civil Code.

Facts: A three way vehicular accident occurred along McArthur Highway, Marilao, Bulacan on October 22, 1969 around 4:00pm. Collision involved a Mercedes Benz, a private jeep, and a gravel and sand Truck. Benz owned and driven by Mendoza (petitioner) Jeep owned by driven Salazar Truck owned by Timbol, driven by Montoya Two separate Criminal actions were filed against Rodolfo Salazar and Freddie Montoya. Criminal case against Montoya was for causing damage to the jeep owned by Salazar in the amount of P1, 604. Criminal case against Salazar was for causing damage to the Mercedes Benz of Mendoza. Note: Mendoza was not a party in the case against Montoya In the joint trial Mendoza testified that the jeep overtook the truck, swerved to the left going towards the poblacion of Marilao, and hit his car. And that before the impact, Salazar had jumped from the jeep and that he was not aware that Salazars jeep was bumped from behind by the truck. Montoya adopted the version of Mendoza. Salazar tried to show that, after overtaking the truck, he flashed a signal indicating his intention to turn left towards the poblacion but was stopped at the intersection by a policeman who was directing traffic, that while he was at a stop position, his jeep was bumped by the truck causing him to be thrown out of the jeep of, which then swerved to the left and hit Mendozas car. Trial Court rendered judgment which absolved jeep-owner-driver Salazar of any liability, civil and criminal in view that the collision between the jeep and the car was the result of the jeep being bumped by the truck. Trial Court did not award damages to Mendoza as he was not a complainant against the truckdriver but only against jeep-driver Mendoza.

Breach of Obligation a.) Concept SONG FO & COMPANY VS. HAWAIIAN PHILIPPINE CO. Legal Doctrine: Rescission will be permitted for a substantial breach of the contract and, at the case at bar, the court ruled that Hawaiian-Philippine Co. did not have the right to rescind the contract of sale, since failure of Song Fo & Co. to pay for the molasses did not violate an essential condition of the contract. Facts: Song Fo & Company, plaintiff, presented before the CFI of Iloilo a complaint with two causes of action for breach of contract against the Hawaiian-Philippine Co., defendant, in which judgment was asked for P70,369.50, with legal interest, and costs. Hawaiian-Philippine Co. set up the special defense that since the Song Fo & Co. had defaulted in the payment for the molasses delivered to it by the defendant under the contract between the parties, the latter was compelled to cancel and rescind the said contract. The judgment of the trial court condemned the defendant to pay to the plaintiff a total of P35,317.93. Hence, this appeal. Issues: 1.) Did the defendant agree to sell to the plaintiff 400,000 gallons of molasses or 300,000 gallons of molasses? 2.) Had the Hawaiian-Philippine Co. the right to rescind the contract of sale made with Song Fo & Company? Held/Ratio: 1.) The defendant agreed to sell to the plaintiff 300, 000 gallons of molasses. The Hawaiian-Philippine Co. also believed it possible to accommodate Song Fo & Company by supplying the latter company

with an extra 100,000 gallons. But the language used with reference to the additional 100,000 gallons was not a definite promise. Still less did it constitute an obligation. 2.) The defendant had no right to rescind the contract of sale made with the plaintiff. In Exhibit F, the Court finds that the defendant had an understanding with the plaintiff that the latter, Song Fo & Co. would pay the former at the end of each month for molasses delivered. In Exhibit G, the Court likewise finds that Song Fo & Co understood the things in Exhibit F and accepted all the arrangements therein presented. Song Fo & Company should have paid for the molasses delivered in December, 1922, and for which accounts were received by it on January 5, 1923, not later than January 31 of that year. Instead, payment was not made until February 20, 1923. All the rest of the molasses was paid for either on time or ahead of time. It is on the basis of this that the defendant gave notice of the termination of the contract and rescission of the same. The general rule is that rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement. A delay in payment for a small quantity of molasses for some twenty days is not such a violation of an essential condition of the contract. The Hawaiian-Philippine Co. also waived this condition when it arose by accepting payment of the overdue accounts and continuing with the contract. Dispositive: We rule that the appellant had no legal right to rescind the contract of sale because of the failure of Song Fo & Company to pay for the molasses within the time agreed upon by the parties. VELARDE, ET AL. VS. CA Legal Doctrine: Rescission will be permitted for a substantial breach of the contract and, in this case, rescission pursuant to Art 1191 was justified because the breach committed by the petitioners was not so much their nonpayment of the mortgage obligations but their nonperformance of their reciprocal obligation to pay the purchase price under the contract of sale. Facts: David Raymundo [herein private respondent] is the absolute and registered owner of a parcel of land, together with the house and other improvements thereon. Defendant George Raymundo [herein private respondent] is Davids father who negotiated with plaintiffs Avelina and Mariano Velarde [herein petitioners] for the sale of said property, which was, however, under lease. David Raymundo, as vendor, executed a Deed of Sale with Assumption of Mortgage in favor of Avelina Velarde, as vendee, with the following terms and conditions: That David sells the land and house with improvements to the Velardes in consideration of Php800,000.00 That the parcel of land was mortgaged by David to BPI to secure the payment of a loan of Php1,800,000.00 That the Velardes hereby assume to pay the mortgage obligations of P1, 800,000.00 in favor of BPI. Avelina then executed an Undertaking in favor of David Raymundo stipulating that: She paid David the sum of Php800,000.00 and assumed the mortgage obligations with BPI as per the Deed of Sale with Assumption of Mortgage While her application for the assumption of the mortgage obligations is pending with the bank, she would pay the mortgage obligation in the name of David until such time when her application is approved In the event she violated the terms, the downpayment of Php 800,000.00 plus all payments made on the mortgage loan shall be forfeited in favor of David. After the execution of the sale, the Velardes paid the mortgage obligation with the bank for three months until the plaintiffs were advised that the Application for Assumption of Mortgage with BPI was not approved. This prompted the plaintiffs not to make any further payment. Defendants, thru counsel, wrote to the plaintiffs informing the latter that their non-payment to the mortgage bank constitute[d] non-performance of their obligation.

Plaintiffs responded saying that they are willing to pay the balance in cash not later than January 21, 1987 granted some conditions. Defendants, on the other hand, sent plaintiffs a notarial notice of cancellation/rescission of the intended sale of the subject property allegedly due to the latters failure to comply with the terms and conditions of the Deed of Sale with Assumption of Mortgage and the Undertaking. The Velardes filed a Complaint against the defendants for specific performance, nullity of cancellation, writ of possession and damages.

Issues: 1. Whether or not the non-payment of the mortgage obligation of the Velardes resulted in a breach of contract? 2. Whether or not the rescission of the contract by the Raymundos was justified? Held/Ratio: 1. Yes, the non-payment of the mortgage obligation of the Velardes resulted in a breach of contract. Petitioners contend that their nonpayment of private respondents mortgage obligation did not constitute a breach of contract, considering that their request to assume the obligation had been disapproved by the mortgage bank. Accordingly, payment of the monthly amortizations ceased to be their obligation but they are still mandated to pay the purchase price balance of P1.8 million to private respondents in case the request to assume the mortgage would be disapproved. As admitted by both parties, their agreement provided this mandate. Thus when petitioners received notice of the banks disapproval of their application to assume respondents mortgage, they should have paid the balance of the P1.8 million loan. Instead of doing so, petitioners sent a letter to private respondents offering to make such payment only upon the fulfillment of certain conditions not originally agreed upon in the contract of sale. Such conditional offer to pay cannot take the place of actual payment as would discharge the obligation of a buyer under a contract of sale. Moreover, in a contract of sale, private respondents had already performed their obligation through the execution of the Deed of Sale, which effectively transferred ownership of the property to petitioner through constructive delivery. Petitioners, on the other hand, did not perform their correlative obligation of paying the contract price in the manner agreed upon. Worse, they wanted private respondents to perform obligations beyond those stipulated in the contract before fulfilling their own obligation to pay the full purchase price. 2. Petitioners also contend that the rescission of the contract was not justified since they signified their willingness to pay the entire obligation. But the breach committed by petitioners was not that they didnt pay their mortgage obligations. Rather, it was their nonperformance of their reciprocal obligation to pay the purchase price under the contract of sale. The power to rescind the contract is based on Art. 1191 of the CC which provides 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 injured party may choose between fulfillment and the rescission of the obligation... The Velardes violated the very essence of reciprocity in the contract of sale, a violation that consequently gave rise to private respondents right to rescind the same. Dispositive: The assailed CA Decision is hereby AFFIRMED with the MODIFICATION that private respondents are ordered to return to petitioners the amount of P874, 150, which the latter paid as a consequence of the rescinded contract. ANGELES VS. CALASANZ

Legal Doctrine: Where one party chooses to accept delayed payments although such are in violation of the contract, they are estopped from exercising their right of rescission. Facts: In 1957 Calasanz and Angeles entered into a contract to sell a piece of land on instalment for P3, 920 plus 7% annual interest. Angeles paid the monthly instalments until July 1966, where the aggregate payment already reached P4, 533.38. On numerous occasions, Calasanz accepted and received delayed instalment payments from Angeles. On December 1966,

Calasanz wrote Angeles requesting the remittance of past due accounts. On January 1967, Calasanz cancelled the contract because Angles failed to meet subsequent payments. Angeless letter for reconsideration was denied by Calasanz. Angeles et al. filed a civil case to compel Calasanz, et al. to execute in their favor the final deed of sale, alleging that after computations, all subsequent payments for the land have already been paid totally, including interest, realty taxes, etc. Defendants Calasanz et al. allege that plaintiffs violated the contract when they failed to pay the monthly instalments on time. The lower court ruled in favor of Angeles, et al.

Issue: Whether the contract had been validly rescinded by Calasanz. Held: NO. Lower court decision affirmed with modification. Ratio: Rescission of a contract will not be permitted for a slight or casual breach, as in this case (the plaintiffs had already paid the aggregate amount of P4, 533.38). To sanction the rescission made by Calasanz, et al. would unjustly enrich them (Calasanz, et al.). Also, in reciprocal obligations, either party has the right to rescind the contract upon failure of the other to perform his/her obligation assumed thereunder. When Calasanz, instead of availing their alleged right to rescind, accepted and received delayed payments of instalments, they are now estopped from exercising their right of rescission. Finally, since the contract to sell is a contract of adhesion*, it must be construed against the party causing it. Thus, the cancellation will not be upheld. Nevertheless, Angeles is ordered to pay the balance without interest. contract of adhesion: a contract that heavily restricts one party while leaving the other free; implies inequality in bargaining power DELTA MOTOR CO. V. GENUINO Facts: Petitioner Delta Motor Corporation is a corporation duly organized and existing under Philippine laws. private respondents are the owners of an iceplant and cold storage private respondents made initial payments on both contracts for the first contract, P13,200.00 and, for the second, P2,700.00 for a total sum of P15,900.00 on July 28, 1972 There was a non-performance of the agreed contract from both parties: the non-delivery of the iron pipes by Delta; the non-payment of the subsequent installments by the Genuinos; and the non-execution by the Genuinos of the promissory note called for by the first contract. sometime in July 1972 Delta offered to deliver the iron pipes but the Genuinos did not accept the offer because the the ice plant building where the pipes were to be installed was not yet finished. Almost three years later, on April 15, 1975 respondents asked Delta to deliver the iron pipes within thirty (30) days from its receipt of the request. At the same time private respondents manifested their preparedness to pay the second installment on both contracts upon notice of Delta's readiness to deliver. Delta countered that the black iron pipes cannot be delivered on the prices quoted as of July 1972. The company called the attention of the Genuinos to the stipulation in their two (2) contracts that the quoted prices were good only within thirty (30) days from date of offer. Genuinos rejected the new quoted prices and instead filed a complaint for specific performance with damages seeking to compel Delta to deliver the pipes. Delta, in its answer prayed for rescission of the contracts pursuant to Art. 1191 of the New Civil Code.

RTC: 1. Declaring the contracts, Annexes "A" and "C" of the complaint rescinded; 2. Ordering defendant to refund to plaintiffs the sum of P15,900.00 delivered by the latter as downpayments on the aforesaid contracts; 3. Ordering plaintiffs to pay defendant the sum of P10,000.00 as attorney's fees; and, 4. To pay the costs of suit. CA: reversed RTC and ordered private respondents to make the payments specified in "Terms of Payment (b)" and Delta should immediately commence delivery of the black iron pipes.* 1. As Delta was the one who prepared the contracts and admittedly, it had knowledge of the fact that the black iron pipes would be used by the Genuinos in their cold storage plant which was then undergoing construction and therefore, would require sometime before the Genuinos would require delivery, Delta should have included in said contracts a deadline for delivery but it did not. As a matter of fact neither did it insist on delivery when the Genuinos refused to accept its offer of delivery. 2. Delta's refusal to make delivery in 1975 unless the Genuinos pay a price very much higher than the prices it previously quoted would mean an amendment of the contracts. It would be too unfair for the plaintiffs if they will be made to bear the increase in prices of the black iron pipes when they had already paid quite an amount for said items and defendant had made use of the advance payments. That would be unjust enrichment on the part of the defendant at the expense of the plaintiffs and is considered an abominable business practice. Decision: CA ruling is affirmed Ratio: power to rescind under Art. 1191 is not absolute. "[T]he 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, being ever subject to scrutiny and review by the proper court." [University of the Phils. v. De los Angeles Delta made no manifestation whatsoever that it had opted to rescind its contracts with f-he Genuinos. It only raised rescission as a defense when it was sued for specific performance by private respondents. it would be highly inequitable for petitioner Delta to rescind the two (2) contracts considering the fact that not only does it have in its possession and ownership the black iron pipes, but also the P15,900.00 down payments private respondents have paid. And if petitioner Delta claims the right to rescission, at the very least, it should have offered to return the P15,900.00 down payments (Art. 1385 CC) Delta cannot ask for increased prices based on the price offer stipulation in the contracts and in the increase in the cost of goods. The moment private respondents accepted the offer of Delta, the contract of sale between them was perfected and neither party could change the terms thereof. VERMEN REALTY CO. V. CA & SENECO HARDWARE CO. Fact:

respondent paid P110,151.75 and delivered construction materials worth P219,727.00 but petitioner only gave one condo unit petitioner claimed that respondent had not yet paid anything to purchase the 2nd condo unit that's why the petitioner had it leased to another tenant

RTC: CA:

respondent filed a complaint against the petitioner for recission of the Offsetting Agreement against petitioner and alleging that petitioner has stopped issuing purchase orders of construction materials, without a valid reason, resulting in the stoppage of deliveries of construction materials ordered the respondent to pay the balance of P27,848.25 of the 1st condo unit

Issue: w/n the circumstances of the case warrant the recission of the offsetting agreement as prayed for by the respondent Decision: Petition is denied in favor of the defendant Ratio: the provisions of the Offsetting Agreement are reciprocal in nature In reciprocal obligations, the performance of one is conditioned on the simultaneous fulfillment of the other obligation Article 1191 of the Civil Code provides the remedy of rescission in (more appropriately, the term is "resolution") in case of reciprocal obligations, where one of the obligors fails to comply with that is incumbent upon him. general rule is that rescission of a contract will not be permitted for a slight or causal breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in executing the agreement. private respondent did not fail to fulfill its obligation in the Offsetting Agreement. The discontinuance of delivery of construction materials to petitioner stemmed from the failure of petitioner to send purchase orders to private respondent. b.) Modes of Breach Delay or mora i. mora solvendi CETUS DEVELOPMENT, INC. VS. COURT OF APPEALS Facts: Respondents Navalta et al were lessees of the premises originally owned bySusana Realty. They would pay on a month-to-month basis to a collector who would come every month to collect the rent. The premises were later sold to Cetus Development and the respondents continued paying their monthly rentals to a collector sent by the petitioner. For a period of three months (July, Aug, Sept), however, no collector came and thus the respondents could not pay. On October, the petitioner sent a letter to the respondents demanding that they vacate the premises and pay the back rentals for the 3 months. Respondents then paid the back rentals as well as subsequent monthly rentals which were all accepted by petitioner but without prejudice to the filing of an ejectment suit. Petitioner filed for respondents ejectment but respondents counter that their non-payment was due to petitioners failure to send a collector. Issue:

W/N there is a cause for ejectment due to respondents supposed failure to pay during the 3 months.

Held: There is no cause for ejectment because there is no failure to pay on the part of the respondents. CA is affirmed in denying ejectment suit. Ratio: In order to file an ejectment suit, there must be 1. A failure to pay or to comply with the conditions agreed upon and 2. Demand both to pay or comply and vacate. However, there is no failure to pay on the part of the respondents for the 3 months because, as a general rule, default in the fulfillment of an obligation exists only when the creditor demands payment at the time of maturity or at any time thereafter.1 (from Art 1169) The petitioner has failed to prove that their agreement with respondents falls under the exceptions where demand is required: a.) when law declares as such, b.) when it can be inferred from the essence of the contract, c.) when demand would be useless. Demand can also come in any form, provided it can be proved by the creditor. But the petitioner in this case has failed to prove that demand was made, more so since no collector was sent during the 3 months. It could not therefore be said that the respondents were in delay of payment rentals. Moreover, when petitioner actually made the demand (in the form of the letter), respondents lost no time in making payment, which the petitioner accepted. Therefore, petitioner cannot ask for respondents ejectment because there is no right on his part to rescind the contract of lease. SVHF VS. SANTOS Legal Doctrine: When the one fails to pay its due obligation after the demand was made, it incurred delay. Facts: SVHF and Ernesto Santos entered into a Compromise Agreement on Oct. 26, 1990: a. SVHF will pay P14.5M to Santos and the latter will drop the civil cases against the former and lift the various notices of lis pendens on the real properties of SVHF. P14.5M breakdown: a. P1.5M immediately upon the execution of the agreement b. P13.5M in one lump or installments (at the discretion of SVHF) not later than 2 years from the execution of the agreement. If SVHF does not pay the whole or has a balance, the payment shall be in the form of real properties mentioned. SVHF paid P1.5M, Santos dropped the civil cases. SVHF sold two properties previously subject of lis pendens but did not pay Santos despite the latters letter of demand. Sept. 30, 1991: Agreement was approved by the court. Oct. 28, 1992: Santos sent a letter again to SVHF but to no avail. Santos filed (RTC) a writ of execution of the agreement dated Sept. 30, 1991. Granted. March 19, 1993: The sheriff levied the properties Auctions were made on Nov. 22, 1994 (Mabalacat property sold for P12M) and Feb. 8, 1995 (Bacold City property sold). Riverland, Inc. was the highest bidder in both auctions. Santos and Riverland filed a Complaint for Declaratory Relief and Damages and prays to recover LEGAL INTEREST on the obligations, among others, since the P13M obligation became due on Oct. 26, 1992 but SVHF paid only the P12M++ on Nov. 22, 1994. Issue: W/N Santos and Riverland are entitled to legal interest. Held: They are entitled to legal interest. Ratio: Art. 1169 of the NCC: 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.

Art. 1170 of the NCC The compromise agreement as a consensual contract became binding between the parties upon its execution and not upon its court approval. The two-year period must be counted from October 26, 1990, the date of execution of the compromise agreement, and not on the judicial approval of the compromise agreement on September 30, 1991. Delay was incurred when the petitioner failed to pay its due obligation after the demand was made. Delay as used in the case 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.

Requisites: 1. That the obligation be demandable and already liquidated -The obligation was already due and demandable when Santos gave a letter to SVHF on October 28, 1992. Furthermore, the obligation is liquidated because the debtor knows precisely how much he is to pay and when he is to pay it. 2. That the debtor delays performance -SVHF was able to fully settle its outstanding balance only on February 8, 1995. 3. That the creditor requires the performance judicially or extra-judicially. -The demand letter sent to the petitioner on October 28, 1992, was in accordance with an extrajudicial demand contemplated by law. When the debtor knows the amount and period when he is to pay, interest as damages is generally allowed as a matter of right. Santos has been deprived of funds to which he is entitled by virtue of their compromise agreement. The goal of compensation requires that the complainant be compensated for the loss of use of those funds. This compensation is in the form of interest. In the absence of agreement (such as in this case), the legal rate of interest shall prevail. The legal interest for loan as forbearance of money is 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

VASQUEZ VS. AYALA CORPORATION Legal Doctrine: There is no delay or default when no demand is made or when the obligation is not demandable Facts: Vasquez spouses entered into MOA with Ayala because Ayala will buy from the Vasquez spouses (shares of stock in the Company, Conduit, which has a main asset of 49.9 hectares in Ayala Alabang, which was being developed by Conduit) MOA: Ayala develops entire property (called remaining area) except for retained area which was to be retained by Vasquez spouses; Ayala develops remaining area into first class subdivision within 3 years; Ayala agrees to give Vasquez spouses a first option to purchase four developed lots next to the retained area at prevailing market price; the representations and warranties of the Vasquez spouses are true at the time of the Closing; Company shall have no obligation to any party except billings payable to GP Construction & Devt Corp; the Company has no liabilities of any nature; Vasquez spouses do not know of any basis for assertion against Company as at closing or any liability of any nature; Company not engaged in any or a party in or threatened with any legal action before any court; no default or breach exists in the part of the company. After execution of MOA, Ayala received letter from Del Rosario (Lancer Builder Corp.) claiming that he was claiming the money as subcontractor of GP Construction. Lancer sued GP, Conduit, and Ayala Issues:

1. W/N Vasquez spouses breached their warranties under the MOA when they failed to disclose Lancer claim 2. W/N there was delay or default 3. Whether theres an option contract or right of first refusal Held: 1. Petitioners did not violate the foregoing warranties 2. There was no default or delay 3. There is a mere right of first refusal Ratio: 1. Exchanges of communication show that Vasquez spouses substantially apprised Ayala of Lancer claim and reminded Ayala of such. Petitioners gave this information to Ayala because latter intimated a desire to break contract of Conduit with GP. Ayalas letter shows that they had knowledge of Lancer claim before its acquisition of Conduit. Ayala came to know of such before Closing of MOA and MOA states phrases except as disclosed to Ayala on or before the Closing. Hence, petitioners warranty that Conduit is not engaged, a party to, or threatened with legal action is qualified by Ayalas actual knowledge of Lancer claim before the Closing. 2. The Court of Appeals ruled that there was no delay as petitioners never made a demand for Ayala Corporation to sell the subject lots to them. According to the appellate court, what petitioners sent were mere reminder letters the last of which was dated prior to April 23, 1984 when the obligation was not yet demandable. The Supreme Court says: In order that there may be default the obligation must be demandable and liquidated, and the debtor delays in performance, and the creditor requires performance judicially or extrajudicially. Under Art. 1193 of Civil Code, obligations with a fixed day of fulfillment shall be demandable upon that day. But the MOA did not specify such day. Petitioners cant demand performance after 3 year period fixed by MOA since this is not the same period contemplated in the land development. The petitioners should have asked the court to fix a period in order for it to be demandable and so that their claim will not be considered premature. 3. It is only a right of first refusal and not an option contract because the price is not specified. The phrase at prevailing market price connotes no definite period wherein Ayala is bound to reserve subject lots to exercise privilege to purchase. ABELLA VS. FRANCISCO Legal Doctrine: Time is of the essence. (In an agreement of this nature [option for purchase of lots] the period is deemed essential.) Facts: Guillermo FRANCISCO bought, on installment, lots 937 to 945 of the Tala Estates in Rizal from the Government for which he was in arrears. On 31 October 1928, he received P500 as payment for said lots from Julio ABELLA. The total area of the lots was about 221 hectares and sold at a rate of P100/ha. The balance was due on or before 15 December 1928, extendible 15 days thereafter. Abella proposed the sale of the land to George Sellner from which he received P10,000 on 29 December 1928. But before he made the sale to Sellner, Abella made his second payment of P415.31 on 13 November 1928 upon Franciscos demand. On 27 December, Francisco authorized (power of attorney) Roman MABANTA to sign in his behalf the necessary documents for the transfer of the lots to Abella. At the same time, Mabanta was instructed to inform Abella that should he fail to pay the remainder of the selling price, the option of purchase would be considered cancelled and the P915.31 already delivered will be returned. Mabanta gave Abella up to 5 January 1929 to pay the remaining balance which Abella was unable to comply with. On 9 January, he tried to pay the balance but Mabanta refused to accept the payment, informed him that the contract was already rescinded, and returned the P915.31. Thus this action to compel Francisco to execute the deed of sale of the lots.

Issue: Whether or not Abellas failure to pay the remaining balance within the deadline given merited the rescission of the contract. (YES) Held/Ratio: The SC, in affirming the CFIs decision, held that since the contract was an option for the purchase of the lots, time was deemed an essential element in the transaction. Furthermore, since Francisco had certain obligations to pay by December 1928, time was essential for him as evinced by his instruction to Mabanta to consider the contract rescinded if Abella failed to pay in time. In accordance with CC1124, Francisco was entitled to resolve the contract for failure to pay the price within the time specified. ii. mora accipiendi VDA. DE VILLARUEL VS. MANILA MOTORS Facts: Manila Motors and Villaruel entered into a contract whereby the former agreed to convey by lease to the latter some premises. The term of lease is 5 years. The premises were invaded by the Japanese and then the American occupied the same building. The occupants paid the same rate as the Manila Motors after which they have vacated the premises. Manila Motors renewed the contract for an additional 5 yrs. Villaruel, as per his lawyers advise, demanded for rental from Manila Motors for the period when the Japanese and the Americans occupied the premises. The premises were set on fire, the reason unknown. Issue: Whether or not Villaruel has power to demand rentals and recover the same due to default. Held: They cannot demand rentals Ratio: Art. 1554 of CC of Spain states the duties of a lessor. a. deliver to the lessee the subject matter b. make thereon, during the lease, all repairs necessary and maintain serviceable condition c. maintain lessee in peaceful enjoyment of lease. Art.1560, lessor shall not be liable for any act of mere disturbance of 3rd person but lessee would have direct action against trespassers. No lessee would agree to pay rent for premises he could not enjoy. iii. compensation morae

CENTRAL BANK VS. CA Background: Tolentino and Island Savings bank entered into a contract involving a loan by the former, who mortgaged his land. The bank was unable to furnish the entire loan, Tolentino was unable to pay the principal and interests of the initial amount given; their actions offset the damages one could claim from the other. Since there was no obligation for Tolentino to pay the entire 80,000, the Bank could only enforce the debt on the property corresponding to his 17,000 debt. Facts: Apr 1965: Island Savings Bank approved the loan of Sulpicio Tolentino for 80,000, with the latters 100-ha property as security. The amount plus interest was to be paid within 3 years. Only 17,000 of the entire amount was released, for which Tolentino signed a promissory note. Aug 1965: The Bank was prohibited from engaging in new transactions Jun 1968: It was prohibited from doing any further business due to its insolvency. Aug 1968: The Bank filed for foreclosure of Tolentinos property due to his non- payment.

Jan 1969: Tolentino filed for injunction, damages and specific performance (release of the 63,000 balance) of the Bank, or for the same to rescind the real estate mortgage CFI: dismissed petition for specific performance ordered Tolentino to pay for 17 debt, allowed foreclosure CA: affirmed dismissal, Bank cannot collect 17k debt nor foreclose the mortgage Issue/s: 1. What is the bank liable for? 2. What is Tolentino liable for? 3. Could the mortgage be foreclosed? Held/ Ratio: 1. The Bank is in default for its inability to fulfill its obligation under the loan agreement, for which specific performance or rescission with damages would be required. The initial prohibition against new transactions was not a bar to its release of the balance of the loan; however, as the Bank has also been prohibited against all transactions, only rescission is available. But since Sulpicio is reciprocally in default for his non-payment of the partial loan released, for which he signed a promissory note and therefore created an obligation separate from the initial loan, the Bank is liable for nothing. 2. Tolentino is liable for the amount released to him, plus the interests corresponding to such debt. Had he not signed a promissory note for the 17,000 released, rescission plus damages could have been available to him, since his obligation to pay would not have begun since the Bank had not complied with its obligation to furnish the entire amount. 3. Yes, but not entirely. The property could only be held liable for the amount of debt incurred by Tolentino. The mortgage is only enforceable in proportion to the Banks compliance with its obligation. As the 17,000 debt corresponds to only 21.25% of the total loan, 21.25% of the 100-ha property could be foreclosed. Fraud or dolo (dolo incidente and dolo causante) WOODHOUSE V. HALILI Legal Doctrine: In order for fraud to vitiate consent it should be the causal not just the incidental inducement of the making of the contract. Facts: Pertinent provisions of written agreement entered into by the parties state that they shall organize a partnership for the bottling & distribution of Mission softdrinks where: Woodhouse(plaintiff) shall: 1. be the industrial manager 2. be in charge of operations & development of bottling plant 3. secure the franchise 4. receive 30 % of the net profits Halili (defendant) shall: 1. provide the capital 2. decide on matters of general policies regarding the business Prior to formal agreement, plaintiff requested Missions Dry Corporation (L.A.), in order that he may close the deal with defendant, that the right to bottle and distribute be granted him (plaintiff) for a limited time under the condition that it will finally be transferred to the corporation. Pursuant for this request, plaintiff was given "a thirty-days" option on exclusive bottling and distribution rights for the Philippines. Dec 3, 1947: contract signed.

Dec 10, 1947: franchise agreement was entered into the Mission Dry Corp. and Halili and/or Woodhouse, it granted HALILI (defendant) the exclusive right, license and authority to produce, bottle, distribute and sell Mission Beverages in the Phils When bottling plant was already in operation, plaintiff demanded that the partnership papers be executed. Nothing definite was coming. Defendant refused to give allowance to Woodhouse. A settlement was first attempted & since none could be arrived at, the present action was instituted. Defendant counter-argued that there was FALSE REPRESENTATION on the part of the plaintiff in claiming that he was the owner or was about to be the owner of an exclusive bottling franchise when in fact he was not. The franchise was given to the defendant himself during their transaction with Mission Dry Corp in the US. Thus the plaintiff failed in carrying out his undertakings by failing to contribute the franchise into the partnership. Issue/s: 1. W/N defendant had falsely represented that he held an exclusive franchise to bottle Mission beverages. 2. W/N such false representation/fraud annuls the agreement to form a partnership. 3. W/N agreement be carried out or executed. Held/Ratio: 1. YES. There was representation on the part of the plaintiff i.e., that he was the holder of the exclusive franchise. It was improbable ad incredible for Woodhouse to have disclosed that (1) he had the OPTION to the exclusive franchise for 30 days and (2) that the said option has already EXPIRED at the time of the signing the formal agreement. Either could have had his bargaining power and authority destroyed an probably lost the deal itself. Moreover in par. 3 of the contract: xxx and the manager is ready and willing to allow the capitalists (defendant) to use the exclusive contract xxx and par 11 of the agreement in the event of the dissolution or termination of the partnershipthe franchise from Mission Dry Corp shall be reassigned to the manager. Thus the defendant was led to believe that the plaintiff had the franchise. 2. NO. It does not amount to fraud that will vitiate the contract. So contract is not null and void. Fraud can be either of the ff: a. Causal fraud (dolo causante): resulting to the annulment of the contract. b. Incidental fraud (dolo incidente): renders the party who employs fraud liable for damages In order for fraud to vitiate consent it should be the causal not just the incidental inducement of the making of the contract. In this case Woodhouse was guilty of a false representation but this was not the causal consideration or the principal inducement that led Halili to enter into the partnership agreement. But the alleged possession of the rights to the franchise induced the defendant to give 30% of the net profit to plaintiff when plaintiff has minimal knowledge pertaining to bottling (thus incidental fraud). 3. NO. The defendant may not be compelled against his will to carry out the agreement nor execute the partnership papers. Under the Spanish Civil Code, the defendant has an obligation to do, not to give. The law recognizes the individual's freedom or liberty to do an act he has promised to do, or not to do it, as he pleases. It falls within what Spanish commentators call a very personal act (acto personalismo), of which courts may not compel compliance, as it is considered an act of violence to do so. Note: Damages = plaintiff's share of 15 per cent of the net profits shall continue to be paid while defendant uses the franchise from the Mission Dry Corporation.

GERALDEZ V. CA Legal Doctrine: Dolo causante are deceptions or misrepresentations without which a party would not have entered into the contract, while dolo incidente is of minor character, without which a party will still enter the contract. Facts: Petitioner, with her sister, availed of a 22-day tour of Europe for US$2,990 (equivalent to Php190,000 during 1989) offered by private respondent. Out of four, she chose the tour package denominated as Volare 3 with the following features, above all: a. European Tour Manager knowledgeable and experienced in European destinations (accompanied by a Filipino Tour Escort) b. First-class hotel accommodations c. Trip to the UGC Leather Factory as one of the main highlights of the tour. However, no European Tour Manager appeared in the entirety of the tour but in its stead is a first-timer Filipino lady tour guide- first time as in first time in performing the duties and responsibilities of a tour guide in Europe, thus lacking in experience and expertise in said trade. They were booked and lodged to two-, three-, or four-star hotels far off the way of the tour itinerary and with substandard (with respect to first-class hotels in Manila and in Europe) amenities. Some even lack towels and soaps. Also, the trip to the UGC Leather Factory was a flop which cannot be considered a tour at all. They arrived too late when the place was already closed and the tourists could no longer avail of the discounted merchandise as promised by private respondent. These happenings, especially the UGC Leather Factory fiasco brought respondent anxiety and distress.

Issue: WON private respondent is guilty of causal fraud (dolo causante) or incidental fraud (dolo incidente). Held: Yes. CA decision SET ASIDE. Moral and exemplary damages and attorneys fees awarded to petitioner. Nominal damages deleted. Ratio: Under dolo causante or causal fraud (in NCC Art. 1338) are deceptions or misrepresentations of a party to a contract without which the other party/parties would not have entered into the contract. The fraud was employed in order to secure the consent of the defrauded party, thus existing before and during creation of the contract. The fraud itself is the essential source of the consent. Its effects are nullity of the contract and indemnification of damages. On the other hand, dolo incidente or incidental fraud (in NCC Arts. 1170 and 1344) is of minor character, without which the other party will still enter the contract. The fraud refers only to some particular or accident of the obligation. Since the fraud did not vitiate consent of the party while entering in the contract, said contract is valid. The party who committed dolo incidente is liable for damages as well. Private respondent committed fraud in the inducement (or dolo causante), with promising the attendance of a European tour manager that would take care of her and her sister during the entirety of the tour. The other breaches of contract committed by private respondent, whether considered as dolo causante or dolo incidente, likewise will bring about to said respondent the obligation to pay moral and exemplary damages.