ROWENA R.

CABAS
Obligations and Contracts
G.R. No. 193723. July 20, 2011
General Milling Corporation, plaintiff-appellant.

vs.
Spouses Librado and Remedios Ramos, defendants-appellees.

FACTS OF THE CASE:

Plaintiff and defendant spouses entered into a Growers
Contract (GC) where the former is bound to supply boiler
chickens to the latter to be raised in the latters land. The
contract came with a Deed of Real Estate Mortgage over the
conjugal property of the spouses to guarantee full compliance.
Spouses failed to settle its obligation alleging that they
suffered business losses because of the negligence of General
Milling Corporation and its violation of the contract. Plaintiffs
counsel notified the spouses that they will institute foreclosure
proceedings on the mortgaged property and filed a petition for
Extrajudicial Foreclosure of Mortgage. On June 10, 1997 the
property was foreclosed and sold at a public auction to GMC
after the required posting and publication. The spouses filed a
complaint for Annulment and/or Declaration of Nullity of the
Extrajudicial Foreclosure Sale with Damages.
The trial court held in favor of the spouses that the Deed
of Real Estate Mortgage was valid and that the action of the
plaintiff was premature because the formers obligation is not
yet due. The Court of Appeals affirmed the ruling of the trial
court citing that the spouses were not yet in default when the
action was filed.

Plaintiff questioned the ruling of the Court of Appeals in

holding that no demand was made as it claimed that the March
31, 1997 letter is tantamount to a demand.
ISSUE:
1. Whether or not there was sufficient demand.
RULING:

No. the Supreme Court held that the contract carries no such
provision on demand not being necessary for delay to exist
therefore, the plaintiff should have first made a demand on the
spouses before proceeding to foreclose the Real Estate
Mortgage. It affirmed the Court of Appeals observation that
the plaintiff did not make a demand on the spouses and held
that there was no provision in the deed allowing the plaintiff to
extrajudicially foreclose the mortgage without need of
demand. It cited the case of Development Bank of the
Philippines vs. Licuanan (G.R. No. 150097, February 26,
2007) where, (t)he 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 the petitioner was premature. Foreclosure is
valid only when the debtor is in default in the payment of his
obligation.
Article 1169 of the Civil Code states that: 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, demand by the creditor shall not be necessary

in order that delay may exist:
(1)
(2)

(3)

When the obligation or the law expressly so declares; or

When from the nature and 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
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.